Aegon blames the incoming Retail Distribution Review for a £4m profit hit, stating that the insurance industry is experiencing “adverse persistency”.
In its results for the third quarter of 2012 the insurer reported a £12m increase in its underlying earnings before tax, which reached £20m driven by a “strong improvement” in earnings from pensions as a result of cost reductions.
Earnings from the life sector remained level at £19m, partly driven by recurring charges for the Corporate Center of £1million, which offset the positive impact of cost reductions.
Earnings from pensions improved to £2m, mainly driven by the non-recurrence of extraordinary charges recorded in the previous year, and the “successful” implementation of the cost reduction program in Aegon’s UK business in the United Kingdom.
In a statement Aegon said: “These positive impacts were partly offset by a £4m negative effect from adverse persistency, which the UK insurance industry is experiencing in anticipation of the implementation of RDR. Aegon continues to invest in new propositions to position itself to capture future growth opportunities, which is expected to continue in coming quarters.”
The company’s operating expenses declined 30 per cent to £73m following the cost reduction programme.
New life sales declined 7 per cent to £163m compared to the third quarter of 2011, reflecting an expected reduction in pension sales. Platform sales increased as new advisors joined the Aegon Retirement Choices platform.
In addition, revenue-generating investments increased 4 per cent to £54bn, compared with the end of the second quarter 2012, primarily the result of higher equity markets and lower interest rates.
Alex Wynaendts, chief executive, said: “Although there are signs of gradually improving market conditions, there remains considerable uncertainty in the general economic environment.
“Consequently, we believe it is prudent and necessary to maintain a sufficient financial buffer while at the same time adhering to our strict risk and pricing discipline. The steps we are taking across our organization to get closer to our end customers, combined with the strength of our current position, give us full confidence in the prospects for our business going forward.”