Aegon expenses jump as platform acquisition bites

Aegon expenses jump as platform acquisition bites

Aegon has seen operating expenses rise 11 per cent in the last quarter as acquisition and integration cost of its platform made their mark.

The provider, which is headquartered in the Netherlands, saw the cost of doing business reach €404m (£359m) according to its Q4 results out today (15 February), as €25m (£22m) integration costs of Cofunds and BlackRock’s defined contribution (DC) business were factored in.

A further €18m (£16m) cost related to the sale of part of the annuity book to Rothesay in April 2016.

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The life company’s Europe business, which includes the UK, posted a pre-tax income of €393m (£350m) in the fourth quarter of the year but made a €4m (£3.6m) loss in the UK on pre-tax earnings of £22m.

Aegon's chief executive Adrian Grace (pictured) told FT Adviser the costs were in line with what was expected and the integration of both businesses was going according to plan.

In total, the firm had factored in £94m in restructuring costs - £80m for Cofunds and £14m for BlackRock's DC business - in 2017/18.

Cofunds would deliver recurring cost savings of £65m a year thereafter, Mr Grace said.

Inflows have already grown to a total of £117bn at the end of 2017 partly thanks to the merger with Cofunds in late 2016.

This increase was driven by a net inflow of £2.1bn, the upgrade of £1.5 bn in customer assets to the platform in the fourth quarter, and favorable equity markets, the firm said.

Since the start of the integration, close to £11bn of customer assets have been upgraded to the platform, of which £4.5bn were in 2017.

Aegon upgraded 79,000 customers from IPS to Aegon platform technology in December “without any disruption to trading” and subsequently saw increased use of the service on the new digital portal, it said.

The next phase of the integration will be to upgrade the institutional clients in the next few weeks and the main Cofunds retail book in May. 

Aegon said the process remained “on budget and on track” and it would continue to communicate with advisers about what to expect in the coming months.

Mr Grace said: “The business has transformed itself over the last few years. It’s our belief that the platform market is about scale and efficiency we’ve taken huge strides in both areas over the last twelve months. 

“In 2016 we added £7bn to the platform taking us to £13.4bn of assets. This year thanks to the Cofunds acquisition and exceptional organic growth we added over £15bn taking us to £117bn. 

“The strong performance of our overall business meant we delivered earnings of £22m in Q4 and we’ve also increased earnings by 94 per cent over the last twelve months taking us to £109m for the year.”