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## Overview 

In the United Kingdom, underlying earnings from AEGON’s businesses increased substantially in 2010. This was mainly the result of improved financial markets and business growth. Net income also improved, mainly due to a decrease in impairment charges. 

AEGON is taking significant steps to improve its return on capital in the United Kingdom. The company is on track to reduce costs by 25% in its life and pensions operation by the end of 2011, and is directing more resources to the key growth At Retirement and Workplace Savings markets, where AEGON has leading positions. The company has set a target for a reduction in operating expenses of GBP 80 to GBP 85 million annually, of this, savings of GBP 33 million had already been enacted by the end of 2010. 

## Underlying earnings before tax 

Underlying earnings from AEGON’s businesses in the United Kingdom increased 30% to GBP 61 million during 2010, as a result of growth of the business and improved financial markets. Earnings from the life business increased to GBP 60 million due to growth of the annuity book in previous periods and lower expenses following the closure of the employee benefits business. However, results from pensions declined to GBP 6 million. 

Benefits from further business growth and improved market conditions were more than offset by the transfer of asset management activities to AEGON Asset Management, higher deferred policy acquisition costs amortization and expenses relating to AEGON’s customer redress program. 

AEGON began to implement a program to identify and correct historical issues within its customer policy records in May 2009. The first priority has been to deal with issues that resulted in financial detriment to customers, and to return those affected to the financial position they would have been in had the issue not 

## Market positions United Kingdom 

# 3 Group pensions 

# 3 Individual pensions 

# 6 Annuities 

# 8 Individual protection 

occurred. The program to determine the full scope of customer redress continues. In 2010, AEGON UK received a fine of GBP 2.8 million from the FSA due to system and control failings, some of which have led to customer detriment. AEGON is on track to pay out the majority of the customer detriment by the end of 2011. 2010 results included a GBP 25 million customer redress charge (2009 GBP 38 million). 

## Net income 

Net income amounted to GBP 72 million for 2010, a significant improvement compared with GBP 8 million the previous year. Higher underlying earnings and significantly lower impairments during the year more than offset a decline in fair value item results and lower realized gains on investments. Net income in 2010 also benefitted from tax credits, in particular a GBP 25 million positive impact from the reduction of the corporate tax rate from 28% to 27% effective April, 1, 2011, with consequential impact on deferred taxes. 

## Operating expenses 

Operating expenses declined 6% during the year to GBP 390 million. The decline was mainly due to cost saving measures and the transfer of the asset management activities to AEGON Asset Management, partly offset by project-related costs and charges relating to the restructuring of AEGON’s operations in the United Kingdom, announced in June 2010. The restructuring aims to reduce costs by 25% in the life and pensions operations by the end of 2011. Further restructuring charges are expected. As already noted, a significant proportion of the targeted reduction was enacted 2010. 

## Sales and deposits 

Compared with the previous year, new life sales increased 1% to GBP 907 million. Higher sales of pensions and retirement products were offset by a planned decrease in sales of immediate annuities 

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