United Kingdom
Report of the Executive board
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“In addition, we further expanded our distribution network during 2007, particularly through our partnership with Barclays Bank. Both these factors bode well for future profitability at AEGON UK. AEGON UK excels in its core markets – pensions, life insurance, investments and long-term savings products. We are constantly finding new and better ways of getting our products and services to our customers. It’s a recipe that has worked extremely well for us – and we have every reason to believe it will continue to do so in 2008.” OPERATING EARNINGS BEFORE TAX AEGON UK’s operating earnings rose 21% in 2007 to GBP 186 million as a result of higher earnings from new business, particularly annuities, and an increase in fund-related charges. Life and protection Operating earnings for the life and protection business totaled GBP 54 million in 2007, up from GBP 12 million the previous year. This significant increase was primarily the result of growth in AEGON UK’s annuity business, which included a one-off gain of GBP 21 million resulting from a transfer of a block of in-force annuities during the year. Pensions and asset management AEGON UK’s pensions and asset management business reported operating earnings of GBP 138 million in 2007, a decrease of 4% compared with 2006. Higher fund-related charges were offset by an increase in expenses during the year. The rise in expenses stemmed from the underlying growth of the business as well as additional investment and project costs.
Distribution In 2007, AEGON’s distribution business in the United Kingdom reported an operating loss of GBP 7 million, compared with a loss of GBP 4 million the year before. Earnings in 2007 included GBP 5 million in one-off additional incentive payments related to Positive Solutions. Net operating earnings Net operating earnings totaled GBP 188 million in 2007, an increase of 6% compared with the previous year after an adjustment for a one-off tax credit of GBP 38 million in 2007, resulting from a decision to lower UK corporation tax from 30% to 28% in April 2008. This led to a reduction of GBP 38 million in deferred tax liabilities recognized in the second quarter of 2007. Revenues Life insurance gross premiums amounted to GBP 7,393 million in 2007, up 18% compared with the previous year. Pension and asset management premiums increased by 15% to GBP 5,971 million, reflecting continued strong growth in pension sales, especially AEGON UK’s Retirement Control product. Life and protection premiums rose 31% to GBP 1,422 million due to an increase in sales of protection products and continued strong sales of single premium annuities. Commissions and expenses Total commissions and expenses rose 7% in 2007 to GBP 647 million. This increase reflected growth in operating expenses and higher commissions from growth in AEGON UK’s distribution businesses. Operating expenses rose, meanwhile, by 4% to GBP 391 million. The increase in operating expenses was mainly the result of growth in the underlying business as well as additional project and investment costs. Sales AEGON UK’s total new life sales increased by 12% to GBP 1,183 million - a result of continued strong sales of pensions and annuities. Sales of annuities, protection products and investment bonds represented 30% of total new life sales in 2007, a reflection of AEGON UK’s strategy of diversification. Sales of life and protection products totaled GBP 210 million, an increase of 32% from 2006. The increase was due to continued strong sales of annuities and a rise in sales of protection products. Sales of pensions increased by 8% in 2007 to GBP 973 million, driven by strong sales of individual pensions. Sales of retail mutual funds and managed assets increased by 12% compared with 2007, thanks mainly to strong sales of both retail funds and institutional business.
Background AEGON UK AEGON UK is a leading provider of life insurance and pensions and also has a strong presence in both the asset management and financial advice markets. With offices located in the United Kingdom and Ireland, AEGON UK has some two million customers, more than 4,900 employees and GBP 53 billion in revenue-generating assets under management. AEGON UK’s main offices are in four locations: Edinburgh, London, Lytham St. Anne’s and Dublin. Organizational structure AEGON UK is AEGON’s principal holding company in the United Kingdom. It was registered as a public limited company at the beginning of December 1998. AEGON UK’s leading operating subsidiaries are:
AEGON UK has three lines of business:
Sales and distribution AEGON UK’s principal means of distribution is through the intermediated financial advice channel, which is the main sales route for long-term savings and retirement products in the United Kingdom. In all, there are an estimated 35,000 registered financial advisors in the United Kingdom. These advisors may be classified as ‘single-tied’, ‘multi-tied’, ‘whole of market’ or ‘independent’, depending on whether they are either restricted in the number of providers they deal with or are free to advise on all available products. AEGON UK is also exploring new distribution opportunities, including agreements with banks and affinity partnerships with other potential distributors. Business overview Life and protection AEGON UK’s life businesses comprise primarily individual and group protection, as well as individual and bulk annuities. The protection business provides insurance on individual or groups of lives for major life events such as death, critical illness and total or permanent disability. Annuities are used to convert savings accumulated as part of a pension plan into a regular income throughout retirement. In 2007, the life and protection line of business accounted for approximately 29% of AEGON UK’s overall operating earnings before tax. Pensions and asset management Pensions and asset management constitute AEGON UK’s most important line of business. In 2007, it accounted for more than 75% of the company’s operating earnings before tax. AEGON UK provides a range of both personal and corporate pensions, as well as associated products and services. These include self-invested personal pensions and stakeholder pensions. In addition, AEGON UK offers a range of investment products, including offshore bonds and trusts. The company’s asset management business offers institutional and retail funds as well as managing a series of life and pension funds on behalf of AEGON UK. Distribution Through the company’s Origen and Positive Solutions businesses, AEGON UK also provides financial advice directly to both individuals and companies. Origen is a leading financial advice firm, with strong positions in both the corporate and high net worth individual markets. It promotes its services through a variety of different sales channels, including face-to-face, media and worksite marketing, as well as accessing customers through professional contacts with accountants and lawyers. Positive Solutions, meanwhile, is one of the largest and fastest-growing advisor networks in the United Kingdom. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
