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Aegon UK earnings slump as pension freedoms ravage back book

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Aegon’s UK business has reported a 12 per cent decline in underlying pre-tax earnings during the third quarter as Chancellor George Osborne’s retirement reforms continue to ravage its back book.

The provider’s Q3 results, published this morning, reveal earnings dropped 12 per cent year-on-year, from £22m to £19m.

Earnings within the provider’s life business were down 43 per cent, from £18m to £10m, while pensions profits more than doubled, from £4m to £9m.

The pensions earnings figure includes a one-off gain of £10m “primarily related to policy adjustments”, the firm says. When this is stripped out pensions earnings also fell year-on-year.

The drop in life earnings has been attributed to “reserve strengthening and adverse claims experience for a total of £3m”. The firm was unable to confirm what these claims relate to at the time of writing.

Life sales slumped 30 per cent during the period, from £199m to £139m, as savers continue to shy away from purchasing traditional pension products.

In addition, Aegon says the introduction of the pension freedoms in April led to higher outflows from its back book in Q3.

“Aegon expects this trend to continue in the fourth quarter of 2015, albeit at lower levels than in the second and third quarters,” the firm says.

Fee revenues were down 10 per cent, from £112m in Q3 2014 to £101m this year. This drop came as a result of “lower fee margins”, Aegon says.

Meanwhile the firm’s platform saw net inflows of £900m during the period, although this was primarily as a result of upgrading existing customers rather than attracting new money. Aegon now has £5.3bn of assets on platform, up from £4.64bn at the end of the previous quarter.

Aegon UK chief executive Adrian Grace says: “Against a backdrop of ongoing regulatory pressures and a fall in equity markets we have a strong set of numbers for the third quarter with underlying earnings of £19m.

“Our platform is unique in its ability to serve people saving through an employer, through an adviser or a personal pension. Growth of the platform accelerated as planned for the year, as a further 47,000 new customers were added in the third quarter of 2015. The total number of customers on the platform increased to nearly 200,000.”

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