Aegon chief urges industry to promote pensions saving

Published on Thursday 6 November 2008 21:52

AEGON UK chief executive Otto Thoresen yesterday hit out at the pensions and savings industry saying it needed to do better at encouraging people to make adequate provision for their retirement.

The warning came as the Edinburgh-based company released third-quarter figures revealing small increases in the volume of new business and a 27 per cent slide in earnings due to the fall in the value of its assets.

Thoresen warned the next 12 months would be difficult but that the industry also needed to address longer-term issues as savers failed to grasp the need to save money for retirement.

"Undoubtedly the real challenge for the UK is the longer-term picture," he told The Scotsman. "Historically we have not been a nation that has saved for the future. The industry has to work at making it even more clear to people where the value add is, what the products they offer can do and encourage people to engage with us."

In its third-quarter results, Aegon UK reported new life and pensions business up 1 per cent on the same quarter last year to 303 million on the industry-standard API measure, despite poor market conditions. Although sales were up only slightly, the value of the business rose 13 per cent. Margins were improved on the back of increased sales of annuities – a more profitable part of the business Aegon has been focusing on for the last two or three years. Aegon said it experienced "record" sales of annuities in the third quarter, up 11 per cent to 49m on an API basis.

Nevertheless, profits over the nine months decreased by 27 per cent to 100m as stock markets played havoc with the value of its assets under management. At the same time Aegon's parent company in the Netherlands revealed a Q3 group net loss of 329m, just days after it was handed a 3 billion cash boost by the Dutch government.

Thoresen said the fall in stock markets was the biggest factor in Aegon UK's losses. Such impairments cost the whole group 384m during the quarter. However, the UK business did not contribute to further 400m "fair value" asset writedowns as its investments are not so-called "alternative investments" affected by the collapse of Lehman Brothers and Washington Mutual.

Thoresen said: "When stock markets fall our earning fall. When stock markets rise, earnings rise. The drivers for that are fairly clear."

Thoresen said the parent group's 3bn bail-out played relatively well with customers and made the UK business "well positioned to move forward".

"The confidence that capital position gives us will reflect itself in all sorts of ways in terms of how we develop our business from here," said Thoresen.

He does not expect the UK government to extend its own bail-out of financial services companies to insurance firms.