AEGON UK chief executive Adrian Grace has insisted the life and pensions group has turned the corner after unveiling a sharp rise in profits.
Having overseen a cost-cutting exercise that led to about 1,200 job losses at the Edinburgh-based firm, Grace said he was “more excited about 2013 than any other year in business I can remember”.
Speaking to The Scotsman as the Dutch-owned group reported an underlying pre-tax profit of £85 million for 2012 – compared with just £5m a year earlier – Grace said: “There’s no doubt that we’re a far leaner and meaner organisation than we’ve ever been.”
The firm’s headcount stands at about 2,800, down from 4,000 two years ago, following a programme aimed at slashing its annual running bill by £80m. Operating expenses for the fourth quarter of 2012 fell 30 per cent to £69m, and the figures were also boosted by the end of compensation payments relating to past administration problems.
Aegon was fined £2.8m by the Financial Services Authority in 2010 for failings that led to customers’ investments being valued incorrectly, and has spent about £180m on customer redress. Grace said: “You can never say never, but the issues we identified have now been addressed. We hope we don’t find any more, but we have robust systems so things are spotted very early.”
Along with rivals such as Scottish Life and Prudential, Aegon had to adapt to comply with rules that banned the payment of commission to financial advisers at the turn of the year, and Grace said the ever-changing regulatory landscape was a major burden.
He added: “The changing government stance with regards to pensions is not helping the industry to define long-term solutions. Pension companies now need to be more flexible in their approach, using technology that can be changed rapidly.”
However, Grace said the firm was well-placed to grab a larger share of the pensions market after introducing new “platform” technology to help customers keep track of their investments online, and it was also poised to benefit from an industry upheaval that will compel employers to provide pension schemes for their staff.
He continued: “This is the most radical change the industry has seen in a generation, and we’ve been adapting the business under the bonnet to adapt to this new world.”
The group’s Positive Solutions and Origen financial advice businesses trimmed their losses to £2m, from £6m a year ago, and broke even in the final three months of the year.
The businesses are now headed by Rob Waller, the group’s former strategy director, who replaced Patrick Gale last month. Grace said: “It’s another part of the group that’s taken some time to work our way through, but we’re very positive about their future in their Aegon fold.”
Aegon’s five-year sponsorship deal with British Tennis, believed to be worth £25m, ends this year and Grace said the two parties were in talks about their next steps, adding: “No decisions have been made but we certainly won’t be embarking on anything other than British Tennis. For me, it’s a value for money debate, and I believe what we’ve done has benefited the game and us.”
Underlying profits at the firm’s Dutch parent company rose 29 per cent to €447m (£385.4m) in the fourth quarter.