News Release

12 November 2009

Friends Provident - third quarter 2009 update

Turnaround continues with encouraging sales results

Highlights

• Strong estimated IGD surplus maintained at £0.9 billion as at 31 October 2009 after payment of dividend of £30 million.
• Sales (measured as APE¹) in the third quarter amounted to £183 million (Q2: £173 million, Q1: £149 million). Sales for the year to date were £505 million, compared to £701 million for the same period last year.
• Distribution capability to be further enhanced through new arrangements with Tesco Bank and Virgin Money.
• Expenses savings remain on target to deliver a UK expense base of £215 million in 2010.

Trevor Matthews, chief executive officer of the Friends Provident Group, said:

“We are making good progress with the turnaround of Friends Provident. This is an encouraging set of results.  We have delivered increased quarter-on-quarter sales across the board of UK corporate, UK protection and our International businesses.  We are fully focused on winning new business based on product and service capabilities that continue to attract awards and industry accolades.  In 2010 we will be moving forward with our corporate platform development.  We will be expanding our distribution, with new partnerships including Tesco Bank and Virgin Money coming on stream.”

New Business

Sales on an annual premium equivalent (APE) basis for the third quarter 2009 were £183 million maintaining a quarter on quarter increase throughout this year, both for total UK and overseas sales.  For the first nine months of the year, sales on the APE basis were £505 million, compared to £701 million for the same period last year, reflecting the difficult market conditions experienced by the life insurance industry and the actions taken by Friends Provident to improve margins.

UK Sales

UK corporate sales mainly relate to pensions business and at £81 million for the quarter on an APE basis are up £8 million on the second quarter of 2009 and £1 million on the third quarter of 2008.  The new business is derived mainly from increments on existing schemes as shown in the table below. The results have benefited from conversion of a significant amount of pipeline business but a number of new mandates have also been won.

Funds under management (including unit-linked individual and group pensions) were £9.1 billion at 30 September, up from £7.7 billion at 30 June with the benefit of a strong contribution from investment returns.

UK individual business at £24 million for the quarter on an APE basis is down £4 million on the preceding quarter. Protection business has shown a small increase throughout the year.  Friends Provident are looking to new distribution arrangements such as those recently announced with Tesco Bank and Virgin Money for future growth as well as to an improvement in the housing market. Friends Provident has increased its market share of the individual protection IFA market from 7% to 7.6% based on market data for this business in the second quarter.

International Sales

International business is written mainly through Friends Provident International (FPI) and Lombard. Both businesses have shown positive quarter on quarter sales growth this year but in aggregate new business at £209 million (FPI: £129 million, Lombard £75 million, AmLife £5 million) is down 24% compared to the year to date figures for 2008, all measured on an APE basis.

For FPI, quarter on quarter growth in 2009 is driven by sales in Asia, predominantly in Hong Kong where third quarter sales at £26 million were up £4 million on the second quarter. 

For Lombard, the international estate planning life assurer, business has been affected by volatile investment markets and their impact on client confidence. The number of large cases (each greater than 10 million Euros) is down by two thirds on a year to date basis. Furthermore, the German and Spanish markets have been adversely impacted by taxation related issues.  However, a number of markets have held up in the third quarter including Belgium, France and the UK (resident non-domiciled business). 

Lombard’s business is traditionally weighted towards the fourth quarter. Opportunities exist particularly in Italy where a recently announced tax amnesty is now in force, and the tax related issues in Germany have been clarified.

IFA Businesses

On 15 October, Sesame, FP’s wholly-owned IFA subsidiary, acquired the Bankhall Group.  This acquisition will increase FP’s distribution capability and position Sesame as the number one player in each of its chosen markets – IFA networks, IFA regulatory services and mortgage clubs.

Capital

As at 31 October 2009, Friends Provident maintained a strong IGD surplus estimated at £0.9 billion after payment of the £30 million interim dividend.  This has remained stable, notwithstanding the strong performance of equities over the period, to which shareholder funds have limited exposure.

During the last quarter, Moody’s, Standard & Poor’s and Fitch have reaffirmed their insurer financial strength ratings for Friends Provident Life & Pensions.  These remain in the A range for each of the three rating agencies.

- Ends -

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Notes to Editors

1. Headline new business figures are presented on the Annualised Premium Equivalent (APE) basis, representing annualised new regular premiums plus 10% of single premiums. The Present Value of New Business Premiums (PVNBP) basis represents new single premiums plus the expected present value of new business regular premiums.  Figures on both bases together with comparatives are shown in an appendix to this update.
2. We are holders of a large number of industry awards, showing continued recognition of the quality of our products and service.  These are listed in appendix 2 of this update.
3. This announcement contains certain forward-looking statements with respect to Friends Provident and its outlook.  These statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future.  There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts.  Nothing in this announcement should be construed as a profit forecast.
4. For more information on Friends Provident including, photos, awards, fast facts, presentations, and media contacts please visit the media section at www.friendsprovident.com/media