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Aegon sales fall by 18% after commission cuts

Aegon saw life and pension business slump by 18 per cent in the first quarter in what chief executive Otto Thoresen called a “volatile market”.

The drop follows Norwich Union’s first-quarter fall of 15 per cent, reported earlier this month. Both companies were among the first to cut commission across their stakeholder pension ranges and this has broadly been blamed for the tail-off.

Thoresen says the market is continuing to be distorted by a few providers paying significantly higher commission on these product lines but he expects this to stabilise in the latter part of the year as economic reality forces those firms to cut commission.

Aegon still enjoyed a 62 per cent increase in earnings to 34m from 21m with gross margins on new business at 13.3 per cent.

Life and pension business volumes fell from 170m to 144m, with annual premiums down by 20 per cent and single premiums down by 14 per cent.

Thoresen says pension sales will be bolstered when Openwork, the former Zurich Advice Network with which Aegon brand Scott- ish Equitable has a single-tie pension arrangement, starts. This is expected to deliver significant volume growth by mid-2006 and other distribution deals are in the pipeline.

He says: “Last summer, we started making a lot of changes on our commission levels and pricing and we have seen a lot of volatility on life and pension volumes because not every provider has done this at the same time. We expect this volatility to reduce and a more stable market next year as the remaining providers follow suit.”

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