Chief executive Alex Wynaendts says the UK business will cut costs by 25 per cent but will target what it describes as the growth market segments of at retirement and workplace savings.
But the insurer says it remains committed to paying commission on group pensions until 2012. It will also continue to develop its corporate wrap and sipp propositions to facilitate growth in what it described as its key markets of workplace savings and at retirement.
The announcement counters recent media reports that Aegon was planning to sell its UK operations, provoking speculation that they would be bought by Resolution. Aegon says it considered disposal and run-off of its UK business, but opted for restructure as the most profitable route.
Aegon plans to take out €80m out of its total €320m UK costs base by 2012. Wynaendts says this will result in some job losses.
It is looking for a buyer of its Transamerica Reinsurance business, and aims to redeploy capital in more profitable markets in Asia and Latin America.
Wyndaendts says the UK workplace savings and at retirement markets have a strong potential for growth in the years ahead, particularly in light of the continued trend among employers to move from defined
benefit to defined contribution pension plans in the United Kingdom.
But Aegon says it will withdraw from the bulk annuities market in the United Kingdom because current pricing conditions mean that this business does not meet its profitability targets. The company will however continue to invest in the UK personal private pensions market.
These measures are aimed at improving return on capital from 2.7 per cent in 2009 to between 8 and 10 per cent by 2014.
Aegon says repaying the remaining €2bn capital received from the Dutch government remains a priority.
Wynaendts says: “We have considered all possible options for our UK business, which included full disposal, run-off and restructure and we have come to the view that restructure is the best option. Full disposal would lead to large price write down and run-off prior to the Retail Distribution Review would increase erosion of value.
“At this point we are not announcing an exit from commission for pensions. We want to expand in the UK. We are committed to developing corporate wrap and Sipp and will be investing further in these areas.”
Brian Linn, general Secretary of Aegis, the union representing Aegon workers, says: “Whilst it’s reassuring that Aegon remains committed to the UK, the scale of change announced today has come as a blow to our members. At this point, we don’t have any details how these changes and cost savings can be achieved. We need to see a breakdown of the company’s proposals before we can assess the likely impact on our members.”
