EDINBURGH-based Aegon UK’s chief executive, Mike Holliday-Williams, has hailed a strong performance by the investment platform business and said it does not need to do acquisitions to maintain growth in a sector which is attracting strong investor interest.
The UK business was the best-performing part of the Dutch-owned Aegon Group in the latest quarter on a key measure after benefitting from a big increase in the value of assets under administration on its platforms.
Noting that inflows net of withdrawals amounted to £9.2 billion, compared with net outflows of £3.7 billion in the fourth quarter of 2020, the parent group highlighted Aegon UK’s success with clients in markets such as workplace pensions.
Mr Holliday-Williams said Aegon UK has signed up a number of big new clients including banking giant Societe Generale along with small and medium sized businesses.
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The company has also made progress in the retail sector amid an improvement in investor sentiment following the market downturn triggered by the pandemic.
Mr Holliday-Williams said the company was reaping the rewards of the investment it has made in its platforms. He noted this has involved the company adding new products and harnessing the potential of digital technology to make them easier for people to use.
The resulting increase in revenues combined with effective cost control powered a 54 per cent increase in fourth quarter operating profits to €49 million (£41m), from €32 last time.
Asked how Aegon UK would maintain growth, Mr Holliday-Williams said the company would focus its efforts on getting its platforms performing even better amid strong demand for such technology.
“That’s where all the investment is going, there’s lots more we can do, lots more that people want,” said Mr Holliday-Williams, adding: “The market is growing.”
Growth in the market is being driven by factors such as the ageing of the UK population and the requirement for people to take more responsibility for saving for retirement. The introduction of auto-enrolment has led to a big increase in the number of people that belong to company schemes.
Investors have been quick to spot the potential of platforms businesses, resulting in a surge in mergers and acquisitions activity.
In December the former Standard Life Aberdeen, which is now called abrdn, agreed to buy the Interactive Investor business for £1.5bn.
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In August Edinburgh-based Nucleus Financial was acquired for £145m by private equity-backed James Hay, which faced competition for the deal from a range of other firms.
Aegon UK used acquisitions to grow in the platforms market under the leadership of former chief executive Adrian Grace, who was succeeded by Mr Holliday-Williams in 2020.
Mr Holliday-Williams said the company has no plans for any more acquisitions. He noted that Interactive Investor focused on the direct to consumer market. Aegon UK is focused on the advisor market.
Aegon UK is confident enough abouts its prospects to be recruiting more staff to support growth. It employs around 1,200 in Edinburgh currently.
Aegon UK became a significant player in the pensions business through the acquisition of Scottish Equitable in 1994.
It switched its focus from the sale of traditional pensions products to the provision of platforms under Mr Grace.
The company outsourced the administration of its UK pension book to Atos in 2018 under efforts to cuts costs.
In Aegon group’s results the UK is described as one of three core markets, along with the Netherlands and the USA. The Netherlands business grew fourth quarter operating profits by 16%. Operating profits fell in the Americas by 29%. They grew by 23% in the division that covers other countries including Spain and China.
Aegon UK benefited from £542m net workplace inflows and £9bn net inflows in respect of institutions such as asset managers in the latest quarter. It said: “The institutional business is low-margin and deposits can be lumpy.”
In the fourth quarter of 2020 Aegon UK recorded net workplace outflows of £486m which it said mainly resulted from the termination of a large, low-margin investment-only scheme. It recorded £2.7bn net institutional outflows.
The company noted retail net outflows fell to £38m in the latest quarter, from £310m in the same period of 2020. Its retail business comes via advisors.
Aegon UK added: “For Traditional products, net outflows amounted to £362m. This was in line with expectations, as a result of the gradual run-off of this book.”
Aegon UK benefited from £542m net workplace inflows and £9bn net inflows in respect of institutions such as asset managers. It said: “The institutional business is low-margin and deposits can be lumpy.”
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In the fourth quarter of 2020 Aegon UK recordedd net workplace outflows of £486m which it said mainly resulted from the termination of a large, low-margin investment-only scheme. It recorded £2.7bn net institutional outflows.
The company noted retail net outflows fell to £38m in the latest quarter, from £310m in the same period of 2020. Its retail business comes via advisors.
Aegon UK added: “For Traditional products, net outflows amounted to £362m. This was in line with expectations, as a result of the gradual run-off of this book.”
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