Our businesses need to be as efficient as possible. We’ve made progress in this regard, but there’s more to be done. Our aim is to cut costs by €350 million by the end of 2018.
In the US, we've been through significant restructuring, simplifying our business, closing offices in California and Ohio and outsourcing administration of around 10 million insurance and annuity policies. Cost reductions are also underway in the Netherlands.
Being more efficient isn't just about cutting costs. We're also investing in new technologies, overhauling processes and organizing ourselves better, so we have a more customer-facing business. As part of our reorganization in the US, we've created new jobs in customer advice and digital. Ultimately, this strategy will allow us to price our products better, grow our business and return money to our shareholders. By the end of 2018, we want to increase return on equity from our businesses to 10%. We're also aiming to give back a total of €2.1 billion to Aegon shareholders – €1.7 billion in the form of dividends, and another €400 million they received as part of our 2016 share buy-back.
cost-cutting by end of 2018
increased return on equity from our businesses by end of 2018
back to Aegon shareholders by the end of 2018
How we repositioned our US and UK businesses
Over the past year, we've repositioned our businesses in the US and the UK. These changes have been disruptive at times, particularly for our employees. But, as a result, we're in a much stronger position; we can commit more resources to what's important: growing our businesses, and helping our customers save, plan and invest for the future.
Outsourcing in the US
In the US, we're outsourcing administration of our life, health, annuities and workplace businesses to Tata Consultancy Services (TCS)1; the agreement with TCS covers around 10 million policies. Outsourcing should save some $70 million a year (eventually rising to $100 million). The alternative – to update our own administration systems – would have proved too costly. TCS' know-how and use of technology should mean better, faster, more responsive customer service. As part of the agreement, TCS will offer jobs to 2,100 Transamerica employees, minimizing disruption. In some places, we'll be sharing office space. TCS will also site its North American headquarters in Cedar Rapids (Iowa), Transamerica's home city.
Acquisitions in the UK
In the UK, we sold off our annuities book, and made two important acquisitions: Cofunds and Blackrock's UK worksite pensions business. Together, these acquisitions brought £90 billion onto our UK investment platform, making it the biggest in the country. Through the platform, we're able to offer funds, savings products and pensions to customers, their employers and financial advisors. We're now working to upgrade our UK back-book – by converting pre-existing customers to newer, better products. With these changes, we've shifted Aegon UK from being an insurer to a long-term savings business; as a result, we're much better placed to benefit from forecast UK market growth2.
1 Our agreement with TCS was announced in January 2018. All figures refer to 2018 onwards.
2 Over the next few years, the UK investment platform market is expected to grow quickly. Research forecasts that, by 2021, the market will have surpassed £1.2 trillion (source: Fundscape five-year platform projections – January 2017, NMG adviser survey, Platforum).