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Pensions reforms causing more fall-out

Aegon boss Grace admits annuities division could be sold

AegonAegon, the Netherlands-headquartered pensions provider, is considering the sale of its struggling annuities business.

Chief executive of the Edinburgh based UK business Adrian Grace has told the 2,300 staff that the company remains committed to Britain but is looking at the future of its annuities portfolio.

In a memo, he said: “I would like to confirm that Aegon has a long-term commitment to the UK market.

“We have built a market-leading platform which continues to be the fastest-growing platform both by percentage and in terms of asset growth.

“We will continue to grow our platform both organically and through acquisition.

“As part of our on-going review of our portfolio of businesses, and our focus on drawdown and guaranteed products, we have initiated a review of our annuity portfolio in the UK.”

The company has officially offered no comment on speculation which emerged earlier today.

The introduction of the government’s pension reforms have had a profound effect on some insurers.

Aegon is said to have hired investment bank Citi to oversee a possible sale of its UK business that could generate “substantial proceeds” for the Dutch company.

It has been selling assets for some time. In November 2011 it offloaded the insurance business Guardian for £275 million to private equity firm Cinven. Two years ago it sold the IDA Positive Solution to Intrinsic.

It also parcelled up its asset management business as Kames Capital, leading to more speculation that this too would sold.

But the pensions reforms in April have changed the pensions landscape. In particular they removed the need for retirees to buy an annuity.

Insurers are now said to be in a phase of consolidation. Aviva acquired Friends Life earlier this year while Just Retirement and Partnership Assurance announced a merger directly as a result of the squeeze on annuities. The agreed all-share deal is worth £669 million.

Zurich is expected to launch a formal bid for RSA before the end of this month.

Aegon’s UK operation saw year-on-year pre-tax earnings drop 4% in the second quarter this year, from £26m to £25m, as new life sales plummeted 16%.

The insurer’s Q2 2015 results show new life business dropped from £226m to £190m, driven by “lower traditional pension production”.

The firm also warned of “continued pressure” on pension earnings resulting from the automatic enrolment charge cap and the new retirement flexibilities.

Aegon, based in The Hague, acquired Scottish Equitable in 1994 and phased out the brand in favour of Aegon UK. The company invested heavily in sponsoring British tennis, including the Queen’s Championships, to help raise its profile.

It has a payroll of about 2,000 in Edinburgh, making it one of the city’s biggest employers.

The company declined to comment on the latest speculation.

 

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