Aegon UK earnings up 13% to £22 million

Earnings from life insurance were up 5% to £18 million, while earnings from pensions increased to £4 million through investments in retirement solutions and enhancements to the workplace savings platform.

Net income declined to £20 million, as the third quarter of 2013 benefited from a one-time tax gain of £50 million due to a reduction in the corporate tax rate. Other charges included business transformation costs of £12 million in the third quarter of 2014, which were mostly related to restructuring and, to a lesser extent, the implementation of the upcoming pension fee cap. Aegon expects that the majority of the costs for implementing the fee cap will be booked in the fourth quarter of 2014.

The results also showed that the company gained 59,000 new customers in Q3. Through auto-enrollment, 97 new schemes were added in the third quarter. Around three quarters of Aegon’s existing schemes, in terms of assets under management, have implemented the auto-enrollment requirements so far in 2014.

The gross and net inflow on Aegon’s platform remained stable at £0.4 billion, while total assets on the platform grew strongly to £2.4 billion at the end of third quarter of 2014. The average policy size on the platform is approximately £64,000, more than double the amount for the traditional book of pensions and bonds.

Growth of platform assets is expected to accelerate in 2015, primarily driven by the upgrade of existing customers to the platform. Aegon first offered this opportunity to its customers this year, and expects significant flows to emerge in 2015 and beyond.

In the first quarter, the Department for Work and Pensions announced charge caps for auto-enrollment business, which are expected to come into effect from April 1, 2015 onwards. Aegon is currently working to implement the changes, but the majority of the work can only be executed once the legislation has been finalized. As such, uncertainty remains on the full impact of the upcoming DWP regulation on Aegon’s income statement and capital position. In line with its earlier statements, Aegon continues to estimate the impact of the DWP requirements on underlying earnings to be between £20 to 25 million on an annual basis.

Alex Wynaendts, CEO, said:

“Our earnings this quarter were significantly impacted by changes to our assumptions and updates to our actuarial models. Over the past year, as part of an ongoing commitment to deliver operational excellence, we have intensified efforts to review and enhance our models where necessary.

“At the same time, we are pleased to report another quarter of strong profitable sales growth across our businesses. The trust that new and existing customers place in Aegon is reflected in strong inflows in our asset management, variable annuity, mutual fund and retirement businesses, together with securing the largest ever buy-out contract in the Dutch pension market.

"Our continued commitment to optimizing our portfolio is demonstrated by the sale of our Canadian operations. While uncertainties due to the current regulatory environment persist, we remain focused on executing our strategy and achieving our long-term ambitions.”