PROFITS at insurer Aegon UK have slumped 22 per cent as poorly performing equities hit the group's second-half results.
Aegon said underlying pretax earnings were down to £71.9 million from £92.6m in the same period last year.
Second-quarter results were in line with the half year, down 23 per cent from £48.6m to £37.6m.
Profits at Edinburgh-based Aegon UK ar
e weighted towards income from charges on stock market investments, held by customers in their pensions.
Mark Laidlaw, the company's finance director, said yesterday that stock market performance had a "direct impact" on the company's profits
"In the UK, our business is heavily dominated by unit-linked pensions," said Laidlaw. "Our income and our profit comes from charges on unit linked funds, which are invested in the stock market.
"The movement in profitability year on year is a result of the equity markets, which are down 7 per cent, so that has direct impact on the profit in the UK."
The group put a brave face on the results and hailed "good progress" in new business.
New life and pensions business in the UK grew 4 per cent to £630m "annual premium equivalent" (APE) in the first half, boosted by a 10 per cent increase in the second quarter.
Aegon's preferred key measure of profitability, "value of new business", rose by 16 per cent to £91m.
"We are very pleased," said Laidlaw. "We have made good progress on the first half 2008 results, and it has obviously been a challenging market."
Growth in new business was driven largely by the corporate pensions side, which is less sensitive to short-term volatility. Existing schemes grew 22 per cent while new schemes were up 35 per cent.
"The fact new schemes are up shows employers are taking commitments to staff very seriously and they see savings or pensions as an important part of employee culture," said Laidlaw.
Aegon UK's annuities business grew 17 per cent to £70m (APE), and its protection business grew 16 per cent to £26m.
Cash-strapped savers have put a £21m dent in the retail side of the asset management business.
Retail assets were down 12 per cent in the first half. Nevertheless, Aegon UK's institutional side enjoyed net inflows of new business – a relative rarity for asset managers.
Assets from new annuities and insurance boosted the asset management side by 9 per cent in the second quarter.
"We are very pleased with our asset management performance," said Laidlaw.
Otto Thoresen, chief executive of Aegon UK, said the year "brought challenges" but Aegon UK was " weathering the storm". He added: "We are in a strong position to move forward in the UK long-term savings market in the months ahead."
