Aegon has reported strong underlying earnings, sales and value of new business, in its 2013 results - still, income dropped significantly in the previous financial year.

Aegon, the Hague-based financial services firm, has reported strong underlying earnings, sales and value of new business, in its results for the fourth quarter of 2013 - still, income dropped significantly in the previous financial year.

The firm, which encompasses asset and wealth management services, said its underlying earnings were up 7 per cent to €491 million ($672.5 million), driven by business growth, higher equity markets and one-off events.

“We achieved a strong set of underlying earnings, sales, and value of new business. Net income was impacted by fair value losses, mostly related to hedges to protect our capital position. Capital levels and cash flows remain strong, enabling us to continue to grow our business and enhance our ability to better serve our customers,” said chief executive Alex Wynaendts, when commenting on the results.

The results were however, also partly offset by unfavourable currency exchange rates. In addition, fair value items saw a loss of €260 million, due to the impact of rising equity markets and interest rates on hedging programmes, as well as the effect of tightening credit spreads on valuation of liabilities. To this end, the firm’s net income declined to €174 million, and its return on equity was down to 6.9 per cent.

In comparison, the firm continued to enjoy a high level of deposits which rose 15 per cent to €10.6 billion, thanks to variable annuities, pensions and asset management. In addition, the firm said it had seen new business increase to the value of €268 million, as a result of higher interest rates, increased sales volumes and continued management actions to improve margins.

Aegon UK outperforms
Notably, the group’s UK business saw strong platform growth, as assets reached £1.3 billion by the end of 2013. Overall the unit saw its income fall by £2 million due to business transformation costs, as the Aegon UK has invested millions in technology.

“We’ve now reported strong quarterly results for the past eight quarters. Our solutions are being well received with sales for the year up 13 per cent on the previous year. This year we will launch a technology based solution for the non-advised market, which will then be offered to our adviser partners so they can provide a solution that best meets their customer’s needs while also fitting with their post RDR business model,” said Adrian Grace, CEO of Aegon UK.

In this respect, new life sales returned to a normal level at £179 million, following exceptionally high pre-RDR sales levels in previous quarters; bringing full year new life sales up 13 per cent. Conversely, adverse persistency amounted to £4 million in the fourth quarter, which was driven by outflow from the individual non-platform business. In order to improve on this, Aegon said it will launch its self-service platform aimed at non-advised clients, in the first half of 2014.

As such, the Aegon group’s overall capital position remains strong as its holding excess capital increased to €2.2 billion, resulting in a proposed final dividend of €0.11 per share - an increase of 5 per cent compared to 2012.