The pre-tax underlying profit of Aegon UK halved to £9 million in Q2, 2011 as the firm paid £12 million in charges and incurred £6 million in administrative costs. The £18 million in excess costs were attributed to a redress scheme set up by the company to compensate the customers of its subsidiary, Scottish Equitable.
Scottish Equitable – an Aegon subsidiary – was ordered to pay £60 million to customers at the end of 2010 in compensation, and an additional £2.8 million in fines by the Financial Services Authority after the provider had admitted to deficiencies in administering policies.
The company’s UK distributions businesses, Origen and Positive Solutions, recorded a combined loss of £1 million in the second quarter, down from £2 million recorded in Q2, 2010. Aegon also spent £7 million in promoting pensions products during the quarter.
Sales for new business during the quarter also went down to £191 million from £263 million, recorded over the same period last year.
“This quarter’s results reflect the impact of the changes we are making in UK business as we reposition it for the future. We know that some of the issues we are tackling mean an adverse financial impact in the short-term but we also know they are changes that are essential in order to ensure our business is successful going forward,” said Adrian Grace, chief executive, Aegon UK.
“Earnings this quarter reflect the investment we have made in developing our plans to offer a new platform proposition for our chosen markets of “at retirement” and workplace savings markets alongside our existing product range. We expect to begin a phased roll out of the platform later this year. We’ve also seen the impact of anticipated exceptional charges from our ongoing customer redress programme, which is on track to repay the majority of redress by the end of 2011,” he added.
Net loss for the quarter was reported at £15 million, an improvement over £24 million it recorded in Q2, 2010.
The company is presently implementing a restructuring plan to cut £80 million in costs. “As we take the business forward, a key priority for us is to achieve the right cost base to operate our business competitively in the future. Our restructuring programme is on track with £58m of our target £80m cost reductions already delivered by the end of June. This is a challenging time but we are making progress in tackling the key issues and ensuring we are well positioned for future success,” said Mr. Grace.