AEGON UK chief executive Adrian Grace has said the pensions and investments business has enjoyed its most successful year since he took charge in 2011 and underlined how satisfied its Dutch owners are with the firm.
After Aegon UK announced a 94 per cent increase in annual earnings to £109 million from £56m, Mr Grace said the group wants to replicate the model developed in the UK in other parts of the business.
The growth in profits at Aegon UK, a significant employer in Edinburgh, was driven by the company’s investment in platforms. These allow financial advisers to buy and manage investments on clients' behalf .
Noting he was in Holland this week, Mr Grace said: “They are very, very bullish about what we are doing in the UK.”
The lack of clarity about what Brexit will mean for the financial services industry has not reduced the group’s enthusiasm for the UK.
“Aegon as a group play for the long term and Britain is still a huge part of the European economy and will continue to be so,” said Mr Grace.
However, he indicated the UK business may be prepared to learn from Aegon’s US arm, which is out-sourcing the administration of millions of policies to Tata Consultancy Services.
“We are watching what happens in the US with considerable interest,” said Mr Grace, who is confident the firm has the right operating model in place for the time being.
He noted that Aegon UK is on a journey which has involved shifting its focus from the traditional pensions market to providing web-based platform services.
However, noting that pensions contracts tend to run for around 30 years, Mr Grace added: “In Scotland we have no plans to radically change what we are. There’s an experience in pensions here in Edinburgh which is very difficult to replace.”
Aegon employs around 2,240 people in Edinburgh including 286 in the Kames Capital-branded asset management arm.
The group noted its asset management arms in the UK and Holland have been consolidated under a single leadership team as it looks to remove duplication across the European business.
Mr Grace said the results for 2017 showed the company’s decision to invest heavily in the platforms market has paid off. Aegon UK bought the Cofunds business from Legal and General for £140m in 2016.
“It’s our belief that the platform market is about scale and efficiency we’ve taken huge strides in both areas over the last twelve months,” said Mr Grace.
He noted Aegon UK has increased platform assets under administration to £117bn at 31 December from less than £10bn at the end of the preceding year helped by the Cofunds acquisition and exceptional organic growth.
Integration work on Cofunds, and the Blackrock defined contribution platform Aegon also bought in 2016, is going to plan.
Mr Grace said the company expects to maintain strong growth in the platform market, around 50 per cent of which will come from acquisitions.
He observed: “The market has way too much capacity and will consolidate.”
Aegon UK has held talks with other potential targets.
Mr Grace is also confident about the prospects for organic growth. Growing numbers of people are saving for retirement following the introduction of auto-enrolment. However, noting concerns people could opt out when the contribution rate increases in April,amid pressure on household incomes, Mr Grace said: “Now’s the time for Government, industry and employers to work together to highlight the value of workplace pensions.”
Aegon group said fourth quarter earnings in the UK asset management business fell to €3 million (£2.7m) from €7m citing the weakening of the British pound and lower management fees, which were partly caused by a contract loss earlier in 2017.
It said asset management activities in the Netherlands and the UK were consolidated under a single leadership team from 1 January.
Aegon noted: “This will enable Aegon to achieve greater operational scalability, ensure best practices are better shared across regions, and reduce costs by removing duplication across the European region.”
The group increased annual underlying earnings before tax by around 10 per cent to €2.1bn from €1.9bn.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here