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Aegon takes £4m hit as RDR impacts business

by Rachael Revesz on Nov 08, 2012 at 08:02

Aegon takes £4m hit as RDR impacts business

Aegon’s earnings have taken a £4 million hit with the company blaming the retail distribution review (RDR) for a drop in business.

In its third quarter results, the life company reported its earnings were up by £20 million overall due to cost savings, but that this was partially offset by ‘adverse persistency’, meaning advisers were writing less business as they focussed on preparing for the RDR.

It said: ‘Positive impacts were partly offset by a £4 million negative effect from adverse persistency, which the UK insurance industry is experiencing in anticipation of the implementation of the RDR.’

The company also suffered a loss of £1 million through its distribution channels, national firms Positive Solutions and Origen.

Life sales were down 7% compared to the same quarter last year.

Aegon said this was in line with expectations, and added that platform sales were up due to new advisers using the Aegon Retirement Choice platform.

Operating expenses were reduced 30% this quarter, to £73 million. Aegon said that was due to the successful implementation of its cost reduction programme, launched in June 2010 and which targeted £80 million of annualised cost across the UK business.

Aegon UK chief executive Adrian Grace (pictured) said that the company had chosen to transform its product set ahead of the RDR, instead of 'tinkering' with existing products and overhauling its proposition. He added that the streamlining had helped cut costs.

'We are confident our actions put us at a competitive advantage to grow new business that is aligned to the new legislation and meet the ever evolving needs of our customers,' he said. 'We’re confident that is the right strategy and the key decisions we have taken will cement Aegon UK as a major force to be reckoned in the UK life and pensions industry over the long-term.'

16 comments so far. Why not have your say?

Andrew Beevers

Nov 08, 2012 at 08:27

If Aegon sorted out their terrible admin problems, maybe they would attract more business.

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Anitaki

Nov 08, 2012 at 08:59

I assume that ".............Aegon said that was due to the successful implementation of its cost reduction programme,.........." is "Newspeak" for firing people?

Trying to look ten years into the future, l see fewer providers and running their businesses with minimal staff numbers. I think that Aegon's new approach business model is probably the right one, but Aegon are not a popular company to do business with, and l suspect like so many other providers over the last 20 years, Aegon's name will be added to the long list of "The Disappeared"

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jeremy vine

Nov 08, 2012 at 09:09

me thinks they are hiding behind RDR for a reduction in profits, not that there products are poor! hopefully they bite the dust and disappear

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Christophe via mobile

Nov 08, 2012 at 09:13

Oh dear. As an ex Aegon employee the last comment saddens me 'Aegon are not a good company to do business with' - that used to be the opposite

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Bob Donaldson

Nov 08, 2012 at 09:35

RDR, FSCS Levy, reducing levels of business, greater competition, no control over the distribution channels is all taking its effect on insurance companies.

I think that we may well see some companies pull out of the UK altogether as their margins are ever reduced and costs rise.

Not only will RDR kill off many advisors it will also be the death of companies and the rise of more direct to client propositions where no advice is taken and finally clients will become responsible for their own ineptitude.

A once great industry is being killed of by death with a thousand cuts!

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paolo standerwick

Nov 08, 2012 at 09:41

Aegon over the years has produced some of the best, knowledgable and helpful employees in the industry. Their products may not be the cheapest but have been fair to clients, adviser and themselves. After all all, the 3 parties have to benefit.

However, regulatory bearocracy has killed their business just like all working within the industry. We have too much compliance to deal with and not enough focus on profitable business. Thanks to mis-regulations, compo etc, we have a dying business in the UK. Aegon is just a victim.

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Dave

Nov 08, 2012 at 10:44

I'd have thought that the main thing that has affected Aegon's new business figures is not being able to pay inflated levels of commission in order to attract business anymore.

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Teri Downes

Nov 08, 2012 at 11:07

@Cristophe,

Aegon has been going down hill since killing off the branch proposition and using touchstone to decide which IFA's to call on. Call Centre staff are never as knowledgeable as Branch staff to whom IFAs have face-to-face access - there is no accountability

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Martinifa

Nov 08, 2012 at 11:12

There is not a single business within financial services that at this time is not being affected by the regulator and RDR.

New terms of business for every agency account being arranged, new stationary, new software, new increased regulatory reporting requirements, interim FSA reports, increased levies, increased PI and the list goes on and on and on. The insult is that in March 2013 most of this will have to be done all over again for the new regulators. Three months later, what a waste of time and money.

The really sad point is that when there are next to no financial companies or advisers left, I can GUARANTEE the same people that have been paid a fortune organising this will be paid another small fortune to find out what went wrong.

I would write a book, but it would look too much like “Catch 22”, the similarities are frightening.

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paolo standerwick

Nov 08, 2012 at 11:14

@ Dave

Any inflated levels of commissions is totally in the hands of the IFA.......think about it!

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Ian Lees

Nov 08, 2012 at 11:40

When I transferred my Scottish Widows pension scheme to Scottish Equitable ( now Aegon ) the Trustees of both companies ( the company chief actuaries ) fiddled in the background - to steal part of my cash equivalent. I have reported this theft of my ppension to both companies - without success - to date . Scottish Widows used the enhanced Terms of Scottish Equitable ( i.e Aegon ) I negotiated with Aegon - to their advantage as part of their efforts to sort out the unsustainability of Scottish Widows pensions - and their insolvency - due to mis management. The fact Aegon has lost a furthe £ 4 million - means I might never recover my losses in pension in these Edinburgh based companies . . . . and with Aegon sponsoring tennis . . . .and scottish widows sponsoring awards at Langans . . . . would the money not be better spent looking after their clients . . . give such appalling returns and poor management ?

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Gordon Hay

Nov 08, 2012 at 11:50

Haven't used them for years as they are the one last surviving dinosaurs of old style insurance companies.

Appalling administraiton, huge inefficient legacy contracts, poor IFA communication - the one loss will be they have always been technically excellent.

They will not be a serious player post RDR so will soon become another Phoenix company

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l'ifa passeport en provenance de France

Nov 08, 2012 at 12:46

....................................takes ................. hit as RDR impacts business

start filling in the blanks

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Jonathan Kirby

Nov 08, 2012 at 13:42

Is it any wonder the UK economy is in the doldrums?

Outright Keynesian interference to stimulate the economy may be a step to far but when Government actions (via the FSA) actually damage it in such a way one wonders if anyone in Westminster knows anything at all about what is going on in the real world.

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Julian Stevens

Nov 09, 2012 at 09:13

Nothing to do with the company's disastrous foray into stakeholder then, or the way in which it shafted its once supportive IFA basey by unilaterally stakeholdering all the PP's already on its books? If you bite the hand that feeds you, that hand will be withdrawn and future business will be placed elsewhere. Once betrayed, those IFA's will never come back. It's the same sorry tale of what the likes of Aviva, Clerical Medical, Friends Provident and most of the other trad life offices have all brought upon themselves. All those names are fading into the dim and distant past. "A major force to be reckoned in the UK life and pensions industry "? Wishful thinking I suggest.

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Man of Kent

Nov 12, 2012 at 10:06

"...partially offset by ‘adverse persistency’, meaning advisers were writing less business as they focussed on preparing for the RDR."

This isn't what adverse persistency means - it means business is coming off their books and undoubtedly being re-written elsewhere. It's the logical consequence of turning over your supporters, as described above, and the die-back of policies with features such as labyrinthine charging structures which suggested you could actually get 117% allocation and continuing high commission rates.

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