Fitch revises Aegon outlook down to ‘negative’

Fitch said pressure on the firm, which employs 2,000 staff at Edinburgh Park and another 400 throughout the UK, was bearing down on profitability as a result of pricing competition and low interest rates.

Fitch said Aegon’s earnings “may not improve to a level more commensurate with the insurer’s ratings over the next two to three years”.

The revision, a downgrade from ‘stable’, applies to the Netherlands-based parent company as well as the Edinburgh-based UK division.

Fitch said: “Aegon’s profitability is under pressure from pricing competition and low interest rates in its main markets and, despite management’s efforts, has not improved significantly and has been volatile in recent years.”

However, Fitch kept Aegon long-rating at A, Aegon UK is rated AA-, saying it reflects the group’s “very strong capital capital position”.

It adds: “The ratings continue to be underpinned by Aegon’s strong franchise and wide range of products and distribution channels. It is a leading player in its main markets – the US, the Netherlands and the UK – with top 10 positions in most of its chosen market segments.”

An Aegon group spokesman said: “Fitch changed the outlook, because Aegon’s operating performance is not meeting their criteria.

“This primarily relates to Aegon’s operating performance, as the return on equity failed to improve to above 7 per cent on Fitch’s metrics. We are taking action to improve our return on equity to 10 per cent by 2018.

“The change in outlook has no impact on our businesses.

Results published in November 2015 showed the UK business suffered a 12 per cent decline in underlying pre-tax earnings during the third quarter as the pension reforms continued to ravage its back book.