The announcement that Royal London is to buy Aegon UK’s individual protection book will come as a relief to most advisers, the mutual’s boss has said.
Speaking to FTAdviser, Royal London’s group chief executive Barry O’Dwyer played down concerns advisers have raised about the impact the sale will have on competition in the UK protection market, instead saying most will have been relieved when they heard the news.
“I can understand why advisers would go there, although I think the first reaction of most advisers would be relief that it's gone to Royal London, because of the alternative buyers that could have bought this business.”
“There might have been several buyers who wouldn't have had the same commitment to the adviser channel that we do,” O’Dwyer added.
The move will see Aegon transfer its 400,000 individual protection clients to Royal London in 2024 following court approval, with the customers joining Royal London’s existing book of 900,000 clients.
Meanwhile, 40 Aegon UK staff have been informed that their jobs are at risk as a result of the book sale.
A spokesperson told FTAdviser yesterday: “We are supporting them through this difficult time. Impacted colleagues have been informed their roles are at risk and consultation with the appropriate unions is ongoing.”
Responding to the acquisition announcement, some advisers said it was no shock that Aegon has withdrawn from the individual protection market.
Samuel Mather-Holgate, IFA at Mather and Murray Financial, said: “It’s unsurprising Aegon have withdrawn from a very competitive market, of which they weren’t a big player.
“Their key business is in the platform investments space. Royal London have bought their back book, and as a firm with an excellent reputation for service, customers should see no negative impacts.”
He added: “It’s a negative for the protection market overall, as we like to see competition to drive ingenuity and competitive premiums for clients.”
Likewise, Scott Gallacher, director at financial planning firm Rowley Turton, said: “This is concerning for consumers as it reduces competition in the market which may result in fewer options for consumers and potentially higher costs. Additionally, reduced competition may result in reduced innovation in terms of product design and features.”
Acknowledging the concerns over competition and costs, Royal London’s O’Dwyer said: “I understand the point that no IFA is going to like the fact that there is lower choice going forward.
“What I would say though, is that the reason that [Aegon] made this decision is partly because this market is so competitive. And that it is really quite difficult to make money in this market.
“So the requirement for scale is such that smaller players are unlikely to succeed. And so in some ways, this is a normal market reaction to lower margins in consolidation.”
He added: “There still is a large and vibrant market. So I would hope and expect that it won't lead to any deterioration in competition or any poor deal for customers or advisers.”
O’Dwyer also confirmed that for the moment, Royal London has no further acquisition plans in the pipeline, although he said he is open to opportunities as they arise.
Elsewhere, Protection Guru founder and chief executive, Ian McKenna told FTAdviser the acquisition was “very disappointing to see”.
“It does make sense in the context of their stated objectives of focusing on the core workplace and retail savings channels,” McKenna said.
“Many protection advisers will see this as a significant loss of capacity. Aegon were great for writing large sums quickly, especially for business protection.
“AIG and Zurich will probably benefit significantly from their exit. While the policies are being transferred to a great company in Royal London, Aegon also had a great technical and sales team which hopefully Royal London will keep together as a specialist unit.”
jane.matthews@ft.com
