Personal PensionNov 12 2015

Aegon fee revenues fall 10% on lower margins

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Aegon fee revenues fall 10% on lower margins

Aegon has reported UK fee revenues down 10 per cent to £101m compared with the third quarter of 2014, due to lower margins.

The group’s third quarter statement noted that fee revenues from the platform were up 81 per cent over the period though, backed by platform assets more than doubling to £5.3bn.

A further 47,000 new customers, including upgrades, were added to the platform in the third quarter, bringing the total number of customers on the platform to nearly 200,000.

Earnings for the life insurance business declined to £10m over the quarter though, something which Aegon blamed on reserve strengthening for Solvency II and adverse claims experience for a total of £3m.

Total new life sales were down 30 per cent to £139m, primarily due to lower demand for traditional pension products.

Revenue-generating investments also fell 4 per cent to £58bn during the third quarter, primarily driven by “negative market effects” and, to a lesser extent, by net outflows from the traditional pension book.

Earnings from the wider pensions business increased to £9m, including positive one-time items of £10m, primarily related to policy adjustments.

Excluding these gains, earnings declined, as expense reductions were more than offset by the fall in equity markets and lower fees arising from the implementation of the fee cap.

The statement explained that the pension freedoms led to higher outflows from Aegon’s back book in the third quarter, although the pace of outflows decreased. The group expects this trend to continue in the fourth quarter, albeit at lower levels than in the second and third quarters.

Operating expenses declined 24 per cent to £63m, driven by lower business transformation costs and cost reduction programs.

Adrian Grace, UK chief executive of Aegon, said against a backdrop of ongoing regulatory pressures and a fall in equity markets, these were a “strong set of numbers”, with underlying earnings of £19 million.

“Pension reforms have put the wind in the sales of further platform success with a surge in drawdown sales.

“Assets in drawdown have increased significantly with considerable growth continuing to push the value of assets up 15 per cent from the second quarter, taking total assets under management up an impressive 88 per cent for the year.

“We continue to innovate ahead of the competition and the recent launch of the first guarantee available from a platform, which serves retirees requirements for income certainty and flexibility, has proved immediately popular.”