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Aegon upbeat as it posts £20m profits

AEGON UK chief executive Adrian Grace said he has sorted out the "mess" the life and pensions company was in as it posted a 150% rise in third quarter underlying pre-tax profit to £20 million, but he refused to rule out further job cuts.

PROMOTED: Chief executive Adrian Grace has overseen a major overhaul of Aegon UK. Picture: Julie Howden
PROMOTED: Chief executive Adrian Grace has overseen a major overhaul of Aegon UK. Picture: Julie Howden

Since joining, initially as business development director in 2009 before a series of promotions took him to the top job, Mr Grace has overseen a massive overhaul of the business, which has its roots in the Scottish Equitable Life Assurance Society formed in 1831.

Over the period, staff numbers have been slashed from 4500 to 2500, of whom 1900 work in its Edinburgh headquarters.

It has also focused its activities on the workplace savings and "at retirement" markets and dropped the Scottish Equitable monicker.

Mr Grace, who replaced Otto Thoresen as chief executive two years ago, said: "It is not often that you take a 170 year-old brand, you find it in a bit of a mess and you turn it around like this."

Aegon UK's surge in profits for the three months to September 30, was, he noted, down to cost cutting.

"It has been a really tough two to three years and we came out of it and we now see the fruit of our labours," he said.

"We are now a far leaner, meaner organisation."

The earnings boost came despite a £4m hit from "adverse persistency", as financial advisers switched client business to benefit from commission payments before the practice is banned next year.

"We just took the decision there were elements of business we are not prepared to write any more," Mr Grace said. "We are not prepared to sacrifice the long term for the short term."

Year-on-year, life and pension sales for the quarter were down 7% at £163m.

Going into 2013, the company's focus will be on boosting income, Mr Grace said.

"You cannot cut your way to long-term success," he said. "You have to build a business and you have to grow it."

But he refused to rule out future job cuts.

"Any company that tells you they are happy with the efficiency of their business is not telling you the truth. Every company wants to grow the top line and shrink the costs," he said. "Now, do we have any plans at this moment in time to shrink the plans further? No, we don't. But we will always seek efficiencies."

Aegon is regarded by many of those working for its rivals as having a traditional business model that could struggle when the retail distribution review banning commission payments and upping qualification standards is implemented in the new year.

But Mr Grace struck a bullish tone while admitting the firm had started at a disadvantage.

"Three years ago we were significantly behind the market. I described it as being in a 400 metre race but we were starting 100 metres behind everyone else."

He added: "As we come up to the last ten metres we are certainly in the running and vying for a decent position."

Aegon UK was under threat from a sale or wind-down by its Dutch parent two years ago.

Asked if the profit increase means it is now safe, Mr Grace said: "It is safe when we are performing. The UK business went through a period in the mid-2000s when it didn't perform.

"If we grow the business and if we keep the top line moving along, that is good news for the shareholder and they are going to want to keep investing in us.

"If those trends are reversed they are going to ask, 'Am I getting value for money?'"

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