United Kingdom
Report of the Executive board
“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.”
AEGON UK reported a 21% increase in its operating earnings before tax for 2007, mainly as a result of higher earnings from new business, particularly annuities, and an increase in fund-related charges.
Operating earnings before tax totaled GBP 186 million, up from GBP 154 million. Net income, meanwhile, was 16% higher at GBP 183 million. AEGON UK’s life and protection business reported a strong growth in operating earnings from its annuities operations, due in part to a one-off gain of GBP 21 million resulting from a transfer of a block in-force annuities during the year.
New life sales rose 12% in 2007 – the result of continued strong sales of pensions and annuities. Sales of pensions were up 8%, while sales of life and protection products overall gained 32%.
Full-year value of new business totaled GBP 157 million, up from GBP 124 million the year before thanks to increased sales. Margins also improved as AEGON UK’s internal rate of return rose to 13.0% in 2007, up from 12.2%.
|
Income by product segment
|
2007
|
2006
|
%
|
2007
|
2006
|
%
|
|
In GBP million
|
adjusted
|
to adjusted
|
In EUR million
|
adjusted
|
to adjusted
|
|
Life and protection
|
54
|
12
|
|
78
|
20
|
|
|
Pensions and asset management
|
138
|
145
|
(5)
|
202
|
211
|
(4)
|
|
Distribution
|
(7)
|
(4)
|
(75)
|
(10)
|
(6)
|
(67)
|
|
Share in net results of associates
|
1
|
1
|
0
|
1
|
1
|
0
|
|
Operating earnings before tax
|
186
|
154
|
21
|
271
|
226
|
20
|
|
Gains/(losses) on investments
|
(5)
|
11
|
(145)
|
(8)
|
16
|
(150)
|
|
Impairment charges
|
(3)
|
(1)
|
|
(4)
|
(1)
|
|
|
Other non-operating income/(charges) 1
|
5
|
61
|
(92)
|
8
|
90
|
(91)
|
|
Income before tax
|
183
|
225
|
(19)
|
267
|
331
|
(19)
|
|
Income tax attributable to policyholder return
|
(5)
|
(51)
|
90
|
(7)
|
(75)
|
91
|
|
Income before income tax on shareholders return
|
178
|
174
|
2
|
260
|
256
|
2
|
|
Income tax on shareholder return
|
5
|
(16)
|
131
|
7
|
(24)
|
129
|
|
Net income
|
183
|
158
|
16
|
267
|
232
|
15
|
|
|
|
|
|
|
|
|
|
Net operating earnings
|
188
|
141
|
33
|
275
|
206
|
33
|
|
Revenue generating investments
|
53,218
|
48,823
|
9
|
72,563
|
72,708
|
(0)
|
- Included in other non-operating income/(charges) are charges made to policyholders with respect to income tax.
There is an equal and opposite tax charge which is reported in the line Income tax attributable to policyholder return.
|
|
Exchange rate
Per 1 EUR
|
Weighted average
|
Year-end
|
|
2007
|
2006
|
2007
|
2006
|
|
GBP
|
0.6838
|
0.6809
|
0.7334
|
0.6715
|
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:
- Scottish Equitable (trading as AEGON Scottish Equitable)
- AEGON Asset Management UK
- Origen Financial Services
- Positive Solutions (Financial Services)
- HS Administrative Services
- Guardian Assurance
AEGON UK has three lines of business:
- Life and protection
- Pensions and asset management
- Distribution
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.
