Aegon opens the year with Cofunds bounce

Edinburgh-based Aegon UK has reported a strong start to 2017 with first quarter figures boosted after the acquisition of investment business Cofunds went live in January.

Underlying earnings before tax at the Dutch insurer’s UK arm, which employs 2,000 staff at its Edinburgh Park UK headquarters, rose by 45 per cent to €33 million while the figure for the whole of Europe remained static at €169 million.

Aegon UK chief executive Adrian Grace said the result in the UK was “very straightforward” in that the division had seen “new business growth, had strong existing assets, controlled its costs and benefited from scale”.

“All those things came together to deliver the earnings where they were,” he said.

Thanks to the Cofunds acquisition Aegon had over £100 billion of assets invested across its two online trading services at the end of the quarter, with £86.8 billion invested mainly in ISAs via Cofunds and £15.2 billion invested in pensions via Aegon’s existing technology.

The combined gross inflows for the two platforms was £7.3 billion in the first quarter of this year.

This included £5.4 billion inflows into Cofunds and £1.9 billion inflows into the existing Aegon platform, according to a presentation.

Cofunds now has £87 billion of assets under administration, while Aegons’ platform has £15 billion of assets.

Mr Grace said record business flows were down to ‘strong market performance and resilient consumer confidence’ with pension freedoms continuing “to drive advice opportunities.”

Mr Grace said the figures demonstrated that Aegon’s decision to buy Cofunds from Legal & General in a £140 million deal last year had been a good one.

“We started this business five years ago because our old business model of life and pensions was running out of steam,” he said.

“As an individual you probably have a pension and multiple pension pots. The idea of a platform is that it not only provides a pension but ISAs, equities, exchange traded funds – the whole variety of longterm savings that individuals might want to buy are available in one place.

“Eighty per cent of the business on Aegon was pensions and 75 per cent of Cofunds was ISAs. The idea is that by offering one common platform you give customers choice in terms of their long-term savings aspirations.”

Aegon said it has set a target of finishing changes to the technology used by Cofunds in the second half of 2018, and the company expects to complete ‘replatforming’ Cofunds in the second half of next year.

In February analysts at RBC Capital suggested Aegon would need to spend £240 million to complete the technology project, but Aegon has disputed this.

Mr Grace said that Aegon expects to remain within its £80 million budget.

Mr Grace said that Aegon has not decided whether the institutional investors who bought funds via Cofunds in the platform’s early days would be migrated across or whether it would find another way of administering that business.

“For us, it’s about focusing our efforts on retail customers,” he said. “We’re committed to staying in the institutional market, it’s just finding the right place for them.”

Across the Aegon business as whole sales in the quarter rose by 11 per cent on the same period last year, from €3.6 billion to €3.9 billion, while underlying earnings before tax increased by six per cent to €488 million.