PROFITS at life and pensions group Aegon UK fell 23 per cent in the first quarter of this year, figures revealed yesterday.
Earnings were hit by a double whammy of general volatility and reluctant investors holding on to their cash until financial markets recover, according to Aegon UK chief executive Otto Thoresen.
Yet the performance of the UK business was in contras
t to a far more dismal one at its Netherlands-based parent company. Aegon NV revealed a 78 per cent drop in net profits, with earnings far below analysts' expectations. Aegon NV blamed the weak dollar and worsening business conditions in the US, where it owns insurer Transamerica.
Thoresen did not rule out job losses among Aegon UK's 4,500 UK staff but stressed that the firm's outlook was "pretty positive" due to baby boomers in their 50s and 60s driving demand for retirement income products. He said new products and sales channels meant Aegon UK would be in a good position when markets recovered.
Although the volume of new business was flat year on year, the value of new business grew 3 per cent to £39.8 million by selling more profitable products such as variable annuities. But operating earnings – a measure of profits that includes exposure to poorly-performing FSTE and bonds markets through Aegon's asset management business – were down by £9.7m to £34.3m.
When Aegon UK released its 2007 results in March, Thoresen said he expected a difficult year. But the magnitude of the slowdown reported this quarter was only expected "to a certain extent".
Thoresen said: "When the stockmarket falls, our earnings tend to fall. Comparing the same period last year the FTSE and bond markets are significantly lower."
New life and pensions business in Q1 was worth £288m, on a par with last year.
Business from corporate pensions was up 22 per cent while the group's relatively new business in annuities grew 13 per cent. Its distribution deal with Barclays signed last year also helped lead to 17 per cent growth at the protection business. Thoresen signalled there was "more to go for there".
Aegon's new US-style "hybrid" products, so-called variable annuity products that offer pensioners a guaranteed income while still retaining some access to investment markets, "continued to build momentum".
However, new business gains were offset by falling demand in some areas, including a 39 per cent drop in sales of retirement drawdown products. Thoresen said this was due in part to the effects of pension legislation, which boosted sales last year but has since calmed down.
Volume in Aegon's asset management business, which has both a retail and an institutional operation, fell 48 per cent.
Aegon NV reported net profits of 153m (£120m), down from 707m a year earlier.
The full article contains 470 words and appears in The Scotsman newspaper.
