AEGON UK delivers record growth in 2006
- Value of new business increases by 85% to £124m
- Operating earnings increase by 38% to £153m
- Life and pensions new business increases by 54% to £1,056m reaching record levels
- A-day boost to pensions and success in product diversification strategy
AEGON UK today announces record new business volumes and profitability for 2006, making it the group's most successful year to date. In addition to delivering strong growth, AEGON has put in place strategic developments that will enable the group to deliver future growth objectives.
Profits
AEGON UK’s value of new business figure, which reflects the value attributed to new business volumes and is a key measure of profitability, rose by 85% to £124m compared with 2005. This rise indicates an improvement in new business margins over the period. Operating earnings increased by 38% to £153m compared with 2005, reflecting profitable growth and buoyant stockmarkets.
New business
Based on the standard industry measure of new annual premiums plus one-tenth of new single premiums (API), new business for AEGON UK’s Individual and Corporate life and pensions businesses reached £1,056m, an increase of 54% compared with 2005, and a record year in new business volumes. New business volumes in the fourth quarter increased by 52% to £288m API, making it a record quarter. AEGON saw good growth in its core pension business but also continued success with its product diversification strategy.
A-Day prompted many people and business decision makers to restructure their existing pension arrangements, leading to a high level of activity across the market. AEGON benefited from the impact of A-Day as a net winner with strong positive cash flow into the business.
Individual pensions new business volumes rose by 104% compared with 2005 to £346m API. This reflects an increase of 140% in Self Invested Personal Pensions (SIPPs). Individual annuities, an important new market for AEGON, also benefited from the A-Day effect, up by 69% to £96m API.
Onshore bonds increased by 37% to £43m API and individual protection new business rose by 22% to £41m API.
AEGON’s Corporate Business also benefited from A-Day with group pensions new business up by 50% compared with 2005 to £420m API. This was achieved while maintaining a strong pricing discipline.
AEGON Asset Management saw continued momentum in the retail funds market, with new business volumes up 39% compared with 2005 to £434m, driven by ongoing excellent performance in fixed income.
AEGON UK chief executive Otto Thoresen said,
“In what was a strong year for the industry as a whole, AEGON has delivered an excellent performance which underlines our position as one of the premier league players in UK long term savings. We have achieved strong growth in earnings and value of new business, and outstanding new business growth across a profitable business mix.
“Our expertise in our core pensions business, and the systems we put in place prior to A-Day positioned us well to benefit from the increased activity in the market over the year. In addition, we have made important advances in the "at retirement" market, focusing on meeting the investment needs of the fifty-something 'baby boomer' segment. Our product diversification strategy is showing success and we have seen good growth in individual annuities, investment bonds and individual protection.
“AEGON has established a diverse and distinctive product range, designed to meet the changing needs of business customers as well as individuals. This means we are now very strongly positioned to push forward with our plans to extend our distribution reach and make our products available to a wider customer base. This will be one of our key development areas in the months ahead.”
Full year 2006 results
1 January – 31 December 2006 v 1 January – 31 December 2005
AEGON UK Financial performance
| 2006 £m | 2005 £m | % +/- | |
|---|---|---|---|
| Operating earnings | 153 | 111 | 38% |
| Value of new business | 124 | 67 | 85% |
Note VNB post tax and cost of solvency.
AEGON UK New premium production (API is AP+1/10 SP)
| Annual premiums | 490 | 368 | 33% |
|---|---|---|---|
| Single premiums | 5,656 | 3,185 | 78% |
| API | 1,056 | 687 | 54% |
AEGON Asset Management off balance sheet production (SP)
| Retail | 434 | 312 | 39% |
|---|---|---|---|
| Institutional | 374 | 720 | (48%) |
-Ends-
Notes to editors
- In September 2006, AEGON was the first insurer to offer a variable annuity style product in the UK market, with the launch of Five for Life, a lump sum investment product offering a guaranteed income for life, the ability to benefit from stock market growth and the potential for death benefits.
- In November 2006, AEGON entered the bulk annuity market offering the Secured Benefits Strategy – which offers SME pension scheme trustees a more flexible solution, in addition to offering a standard buy-out product.
- AEGON launched into the individual annuities market with an open market option product in late 2005 and in January 2006 announced further investment in this market. Previously it only offered annuity products to its own pension customers.
- AEGON UK has distribution agreements for life and pensions products with Openwork, St James’s Place, Thinc Destini, Lighthouse Group, Principality Building Society, Burns Anderson, Clarkson Hill, Tenet and Park Row.
- AEGON UK has assets under administration of £48.1 billion and employs around 4,000 staff. AEGON UK is part of the AEGON Group, which is one of the world’s largest listed insurers and has assets under management of £245 billion.
Lesley McPherson