Compensation plunges Aegon to £22m loss in final quarter

The firm took a £52m hit in the three-month period to meet charges relating to the customer redress programme, taking the total paid out to clients of its Scottish Equitable subsidiary since May 2009 to £152m. Carrying out the programme cost a further £19m.

Aegon was fined £2.4m over the issue by the Financial Services Authority but the company said this latest charge would draw a line under the pay-outs programme.

It now wants it to mark a turning point in its fortunes following a troubled 2011 when the firm was forced to impose a 25 per cent cutback in costs, equal to £80m a year.

The target has now been reached, but at a cost of 1,100 jobs that have been axed or outsourced to buyers of non-core assets.

Aegon also announced yesterday that it has promoted Adrian Grace, chief executive of its UK operations, to its main management board in the Netherlands. He joined the company in February 2009 and succeeded Otto Thoresen in the top job last April.

Analysts say Grace’s appointment is recognition from his Dutch bosses of his success in meeting the cost-cutting targets and in forging a low-cost “wrap platform” with industry specialist Novia.

His focus is now on building momentum in the 50+ market and workplace savings. He sees good potential in the changes being introduced under pensions reform.

Grace said: “Aegon UK successfully tackled some major historical issues in 2011 and this has had a negative financial impact in the short term.

“Our 25 per cent cost-saving target has now been met and our customer redress programme is drawing to a close. Our platform proposition has been warmly received in the market. We are fully focused on the future and ensuring we take maximum advantage of the opportunities that lie ahead with the retail distribution review and pensions reform.”

Aegon UK now employs about 1,900 staff at its Edinburgh Park base, or 2,200 including the asset management business and European data centre.

The fourth-quarter loss, against a deficit of £6m in the corresponding period in 2010, was revealed in a statement which also showed new life and pensions sales for the UK business fell from £190m to £161m. Its distribution arms, Positive Solutions and Origen, reported a loss of £2m in the quarter.

The insurer also owns Transamerica and does the bulk of its business in the US. Group profits fell by 75 per cent in the fourth quarter, due mostly to poor investment results.

Net profit was €79m (£65.7m), down from €318m in the same period a year earlier. Investment gains were €49m, against €255m last time.

Aegon issued shares in 2011 and repaid the Dutch state for a 2008 bail-out. With that behind it, its underlying businesses are improving, said group chief executive Alex Wynaendts. Aegon plans to pay a dividend of €0.10 over the second half of 2011, its first since the bail-out.