Aegon UK back in the black after £80m cut in annual costs

AEGON UK, the Edinburgh-based life and pensions company, has returned to profitability, though falling sales indicate a continuing tough climate.

Figures for the first quarter show the benefits of the structural reforms of the past two years which have taken £80 million in annual costs out of the British arm of the Dutch business.

Underlying earnings before tax came in at £25m against a £22m loss in the fourth quarter and £10m profit for the same quarter last year. Net income fell from £46m in 2011 to £39m, attributed to gains on investments last year.

Chief executive Adrian Grace said the return to profitability would provide foundations for growth this year as the business focuses on new opportunities thrown up through pensions reform.

“All the hard work is starting to pay off. We will be in good shape in the months ahead. I am a lot more optimistic,” he told The Scotsman.

However, he accepted that the return to profitability quarter-on-quarter was due at least in part to cost-cutting.

Sales of life policies were down 16 per cent to £178m year-on-year, but up 11 per cent on the fourth quarter.

But the turnaround at the operating level helped boost figures for the Dutch parent which reported a 59 per cent rise in first-quarter earnings, also helped by lower impairment charges.

Aegon does around two-thirds of its business in the US, where it is the owner of the Transamerica brand. It reported better US sales, but weaker earnings from operations as people live longer. Net profit was €521m (£418m), up from €327m in the same period a year ago.