New blow to financial service sector as Aegon axes 150 jobs

SCOTLAND'S embattled financial services sector was dealt another blow last night as insurance giant Aegon announced plans to cut almost 150 jobs at its UK headquarters in Edinburgh.

Dutch-owned Aegon is to close its UK group risk division, which provides companies with insurance for employee benefit programmes.

The cuts – the latest in a string of redundancies at Aegon – come the day after The Scotsman revealed that 4,500 staff in Scottish financial services firms have recently been served with redundancy notices.

All 147 staff working in the division at the company's Edinburgh Park offices are to be made redundant as the insurance products are phased out over the next two years.

Earlier this year, Aegon announced it was to axe 100 specialist IT posts and 11 jobs in its marketing department – taking its Scottish headcount down to about 3,000.

In the announcement, issued in a report to the Dutch stock exchange last night, Aegon said the move was part of its "ongoing portfolio review" and was "consistent with its strategy to reallocate capital to businesses with higher growth and return prospects".

The insurer yesterday said that it hoped to redeploy as many of the workers as possible in areas where it hopes to expand, such as pensions and investment products.

It also insisted that the cuts were not related to the economic downturn, saying that the business was restructuring to focus on areas with higher growth and return prospects.

A spokeswoman explained: "All of the 147 roles in that division will be made redundant. However, that does not necessarily mean that there will be 147 job cuts. We hope that many of those staff will be redeployed to other areas where we are expanding."

She added that the closure of the division would increase future earnings and the value of new business as resources were focused on more profitable areas.

The group risk business provides group life, group critical illness and group income protection products bought by companies as part of their employee benefit packages – but Aegon said the division was not seen as a growth area. The group risk business generated just 2 per cent of Aegon's £1.2 billion new business turnover in 2008.

Aegis, the independent trade union that represents Aegon staff, said it would oppose compulsory redundancies.

Michael Gray, general secretary of Aegis, said: "We will work closely with the company to explore all opportunities to redeploy affected staff to other parts of the business."

Yesterday's announcement added that the group risk market was dominated by "a few large providers", adding that Aegon had "limited prospects to achieve sufficient economies of scale".

Aegon added that a 55 million (£47m) reserve fund, required by the Financial Services Authority to guarantee the group risk business, would be freed and gradually invested in the company's growth areas.