Aegon UK’s second quarter results have revealed earnings from both its life and pensions divisions stayed stable at £20m and £4m respectively, while net income declined to £55m due to lower realised gains.
This meant overall underlying earnings before tax in the second quarter amounted to £25m, with the pensions unit in particular hit by lower margins arising from declining fees.
The results stated that persistency deteriorated due to the at-retirement regulation, with Aegon expecting pension earnings in the second half of the year to face continued pressure from the scheme charge cap and freedoms regulation.
The document, published today (13 August), noted that the April changes resulted in higher outflows from the group’s back book in the second quarter, something it again expects to continue in the second half of 2015.
“Given that the ban on the active member discount and renewal commission will not be implemented before April 2016, the full impact of this regulation on underlying earnings before tax will not be seen before April 2016 as well,” it added.
Total new life sales were down 16 per cent to £190m, primarily driven by lower traditional pension production.
Fee revenues amounted to £111m, 2 per cent less than the second quarter of 2014, although fee revenues from the platform were up 56 per cent in the second quarter compared with the first quarter of 2015, due a strong increase in assets under administration.
Platform assets reached £4.6bn, following record net inflows of £1bn via a combination of new money coming in and the upgrading of existing customers.
The average policy size of new individual policies on the platform, including those of customers that have chosen to upgrade, is about £72,000 - more than double the amount for the traditional book of pensions and bonds.
Total assets under management for the drawdown product on the platform more than doubled in a year, up 18 per cent from the first quarter of this year.
Adrian Grace, Aegon UK’s chief executive, stated that the pensions industry has experienced huge changes in the last 12 months, something which continued into the second quarter.
“The business has risen to the challenge and the progress of the platform is particularly strong with AUM increasing 125 per cent in the first six months of the year compared to same period last year as the business focused on extending its digital proposition.”
Mr Grace also noted that protection insurance sales were up 11 per cent compared to this time last year, pointing out that the firm has won several new distribution deals.
Operating expenses declined 13 per cent to £66m, driven by the reduction of business transformation costs and cost reduction programs.
peter.walker@ft.com
