Wynaendts points Aegon in direction of emerging markets

DUTCH insurance giant Aegon has announced plans to invest more heavily in fast-growing emerging markets and remains on track to slash £80 million out of costs in its UK business.

Alex Wynaendts, the chief executive, said he was "confident" the UK management team "will fully deliver on our plans".

He added that Aegon's businesses in eastern Europe, Asia and Latin America were "key growth regions".

He said: "We were particularly pleased by the strong growth new life sales achieved by Aegon's newer businesses in Central and Eastern Europe and Asia.

"Over time, these key growth regions, in addition to Latin America, will enable us to achieve a broader geographical balance given the substantial opportunity they present," said Wynaendts.

Aegon UK, based in Edinburgh, confirmed it had made 37m in cuts up to the end of March as it revealed a decline in underlying earnings in the first quarter of the year due to a 21m exceptional charge related to the expense of fixing bugs in its customer records.

The firm said it was on track to have repaid the majority of its customers back by the end of the year but admitted that it could face further additional charges.

Adrian Grace, chief executive of Aegon UK, said: "Earnings this quarter have been adversely affected by exceptional charges from our ongoing customer redress programme, which is on track to repay the majority of redress by the end of 2011.

"Our restructuring programme is also on track with 37m of our target 80m cost reductions already delivered by end March. It's essential that we achieve the right cost base for our business to be successful in the long term and we are on target to deliver the remainder of cost savings by the end of 2011."

New life sales for Aegon UK in the first quarter were down 10 per cent to 211m on the same quarter last year but the firm enjoyed an increase in group pension sales.

And although the firm is cutting costs, operating expenses in the quarter increased to 98m, driven mainly by the costs of fixing administration blunders as well as restructuring. Excluding these, operating expenses declined 4 per cent, Aegon said.

Net income for the UK business more than doubled to 46m, mainly due to investment performance and the fact there were no impairment charges - in the last quarter of 2010, Aegon UK incurred a 20m write down.

Aegon said that first-quarter profit rose 3 per cent, mostly because of fewer one-time charges, as underlying profitability declined.

The firm missed forecasts with a 7 per cent fall in first-quarter underlying pre-tax profit, hit by a €24m charge to take account of customers living longer than expected.