A-Day boosts positive performance - AEGON UK first half results 2006
- First six months underlying earnings increase by 26% to £86m
- Value of new business increases by 61% to £53m
- First six months life and pensions new business increases by 55% to £499m
- A-Day boosts new business in pensions and annuities
Profits
AEGON UK’s underlying operating earnings for the first six months of 2006 were £86m, an increase of 26% on the same period in 2005. The increase in earnings reflects ongoing stockmarket levels and continued focus on expense management, new business mix and profitable new business growth.
The value of new business figure (VNB), which reflects the value attributed to new business volumes for AEGON UK for first half 2006 increased to £53m, a rise of 61% compared with one half of 2005 value of new business.
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 life assurance operations in the first half of 2006 increased by 55%, from £321m in first half 2005 to £499m. New business in the second quarter of 2006 rose by 59% to £282m compared with the second quarter 2005, making it a record quarter for new business volumes.
This trend reflects the impact of A-day on key product lines within AEGON’s Corporate and Individual business units. Financial planning activity post A-Day has led to an exceptional level of new pensions business during the second quarter, in both group and individual pensions, which has been achieved without changing AEGON’s existing pricing strategy. Group pensions new business rose by 61% to £212m API compared with the first half of 2005, while individual pensions new business rose 94% to £148m. This includes new business for Self Invested Personal Pensions (SIPPs), which more than doubled in the first half, with a rise of 139% to £71m API compared with last year.
AEGON has also achieved increased new business in non pensions areas, including individual protection, up 58% to £22m API for the first six months compared with 2005. AEGON UK’s annuities business, launched late last year, continues to build momentum, with new business up 27% to £22m API in the second quarter compared with quarter one 2006.
In asset management, retail new business is developing strongly, up 80% to £223m over the first six months compared with 2005, reflecting the continued outstanding performance of AEGON’s fixed income team.
AEGON UK chief executive Otto Thoresen says,
“AEGON UK’s financial performance over the first six months has been very strong. We have delivered a significant increase in earnings and importantly, the value of new business figure has risen sharply compared with last year.
“The second quarter saw exceptional volumes of new business, particularly in corporate and individual pensions. A proportion of this is a result of A-day and the changes businesses and individuals have made to their pension arrangements. We believe that AEGON UK’s reputation for technical expertise, and the support services we provided to IFAs, were powerful drivers in this respect. As part of this we have made important progress in the key growth area of SIPPs.
“At the same time, we are continuing to build on the level of non-pensions business, and we are gathering momentum in areas such as individual protection, onshore bonds and our growing annuities business.
“Strong financial performance is an essential part of the ongoing transformation of our organisation towards a more customer oriented approach. Our achievements in the first six months mean we are well positioned for further developments in the second half of the year.”
First six months 2006 results
1 January – 30 June 2006 v 1 January – 30 June 2005
AEGON UK Financial performance
| 2006 £m | 2005 £m | % +/- | |
|---|---|---|---|
| Underlying earnings | 86 | 68 | 26% |
| Value of new business | 53 | 33 | 61% |
Note VNB post tax and cost of solvency. 2005 figure represents one half of full year figures
AEGON UK New premium production (API is AP+1/10 SP)
| 2006 £m | 2005 £m | % +/- | |
|---|---|---|---|
| Annual premiums | 257 | 184 | 40% |
| Single premiums | 2417 | 1367 | 77% |
| API | 499 | 321 | 55% |
AEGON Asset Management off balance sheet production (SP)
| 2006£m | 2005 £m | % +/- | |
|---|---|---|---|
| Retail | 223 | 124 | 80% |
| Institutional | 306 | 545 | (44)% |
| Total | 529 | 669 | (21)% |
-Ends-
Notes to editors
- The reported earnings figure for the period excludes an exceptional charge of £11m relating to the acceleration of an incentive scheme in Positive Solutions.
- In May 2006, AEGON UK embarked on its first ever AEGON-branded advertising campaign, using a combination of national press and outdoor media to raise awareness of the group among business customers.
- In May 2006, AEGON UK confirmed its intention to enter the group annuities market, scheduled for the fourth quarter of this year.
- AEGON UK launched into the individual annuities market with an open market option product in the second half of 2005 and in January 2006 announced further investment in this market, creating 40 new jobs in its Edinburgh headquarters. 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 £45.2 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