37 ANNUAL REPORT 2010   OUR BUSINESSES  UNITED KINGDOM Market positions United Kingdom # 3 Group pensions # 3 Individual pensions  # 6 Annuities  # 8 Individual protection Overview  Net income Operating expenses Underlying earnings before tax Sales and deposits 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 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  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  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. 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. 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). SHARPENING OUR FOCUS