Companies  

Bleak future for Origen?

The recent unexpected and immediate departure of Mike Kirsch, chief executive officer of Aegon’s national advisory network Origen Financial Services, adds further credence to the general market perception that the Dutch insurance and pensions giant is in the midst of the most radical overhaul of corporate strategy currently being undertaken by any firm in the sector.

In general terms, of course, his departure could be regarded as a fairly predictable consequence of Origen’s lacklustre performance in the past 12 months, and the fact that it has never been a profitable operation.

Idea

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Originally, say sources close to Aegon UK, the idea that underpinned Origen was that each of the original five IFAs that constituted the new firm would provide a specialist sales force to distribute products along specific product-lines.

In this way, the senior sales management in the UK believed that, with provider margins at that time under pressure, more profit could be made from buying into the fatter margins that they thought would be available in the distribution networks for some time to come.

However, this vision clearly did not manifest itself into reality, as Origen and Aegon’s other national IFA business, Positive Solutions, recorded a combined loss of £1.7m for Q1 this year (published on 8 August), a £1m loss in the same quarter of 2012, and zero earnings in Q4 last year.

However, full year accounts for the two distribution arms point to the majority of the losses having been accrued by Origen, with PosSol having reported profits before tax last year of £2.3m, wiping out a £0.4m loss in 2011.

Origen, meanwhile, reported a £2.9m loss for 2012, with income having fallen to £16.2m in the year, down from £17.6m in 2011, and the firm having set aside a further £1.9m towards a review of its systems and controls and the suitability of regulated advice given to clients, on top of money already put aside when the review began in 2011.

Origen is also bracing itself for the fallout from a case brought by the Financial Services Compensation Scheme regarding Keydata Investment Services to assess its potential liability after the scheme paid out to Origen customers who were advised on Keydata products.

In some ways, Mr Kirsch’s departure can be regarded in the same vein of collateral fallout from a newly refocused Aegon business strategy in the UK.

This new strategy, according to those close to Aegon in the UK, involves entirely exiting the lower-margin distribution business in the country, and instead refocusing all efforts on becoming the dominant supplier of pension-related products and services primarily for the workplace, and executed as much as possible over the Aegon Retirement Choices platform.

Indeed, as chief executive Adrian Grace underlined early this year: “In a post-RDR world we intend to focus on our market-leading platform, which is gaining traction at a remarkable rate, and on advancing digital solutions to better meet the savings and retirement needs of our customers in the workplace and those individuals approaching retirement.”

The first quarter’s results underlined an surge in demand for Aegon’s workplace savings and at-retirement propositions, according to Mr Grace, as new life sales rose by 37 per cent to £244m over the quarter year-on-year, which the provider attributed to the impact of auto-enrolment, and platform sales dramatically accelerating over the period.