News Release

06 May 2010

Friends Provident - first quarter 2010 new business

International life businesses drive 19% year-on-year sales increase

Highlights

• Total sales of £178 million for the first quarter of 2010 (measured in APE*) are up 19% on the same period of 2009.
• International sales, excluding Lombard, of £57 million are up 49% on the first quarter of 2009 with improved sales across regions, notably Asia, where sales are up by 61% to £27m.
• Lombard sales have improved markedly on the same period in 2009, up 62% to £33 million.
• UK sales of £88 million show group pensions down 5%, individual protection down 4% and annuities up 37% year-on-year.
• The first phase of the Friends Provident Corporate Investment Platform was successfully launched at the end of the quarter.
• Estimated IGD surplus maintained at £1.0 billion at 30 April 2010 after the payment of a £65 million dividend to Resolution holdings (Guernsey) Limited (RHG).

*see note 1 in Notes to Editors

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

"I am pleased to report sales up by 19% overall in the first quarter of 2010.  Our International business is performing very well, especially in Asia and the Middle East where we are seeing some investor confidence return compared to early 2009.  In the UK, our key priorities are in individual protection and group pensions.  While we are working to drive forward our new tied distribution deals, individual protection sales have been constrained so far this year by the sluggish housing market.  In the UK group pensions market economic conditions mean that reported new business remains slow but we exceeded the £10 billion mark for funds on the platform in the first quarter and the launch of our Corporate Investment Platform means we are looking forward with confidence."

Life and Pensions New Business

Sales of new life and pensions business on an annualised premium basis (APE) for the first quarter of 2010 were £178 million, up 19% on the first quarter of 2009.  Within this overall result our International business (Friends Provident International Limited, overseas business written in the UK operating companies and our 30% stake in AmLife, the Malaysian joint venture) was up 49%, Lombard was up 62% and the UK down 3%.

International

International sales have maintained the momentum seen in 2009 with most regions performing well. March was a particularly strong month in Asia, up 61% year-on-year and accounting for half of International sales, with Middle East sales also beginning to gain ground. We have been actively developing bank distribution relationships in both of these markets.

Our commitment and growing prominence in the Middle East market has already been recognised in 2010 by a number of prestigious awards, including ‘Life Insurer of the Year' at the Gulf Insurance awards.

Our proposition in Germany has also shown strong first quarter growth, in a market that is beginning to stabilise. Following the acquisition of our distribution partner Financial Partners Business AG (fpb) at the end of December 2009, we are continuing to develop and expand our network of supporting brokers which we expect will contribute to future profitable growth.

AmLife, our Malaysian life insurance joint venture in which we have a 30% stake, has continued to perform strongly this quarter.  Friends Provident’s share of new business APE was £2.7 million, up from £1.1 million reported last year.

Lombard

New business in the first quarter of the year is traditionally limited, which is in contrast to the strong final quarter of 2009. Nevertheless first quarter sales of £33.0 million APE are significantly up on 2009 comparatives (£20.4 million) with stronger performances in Italy, UK Private Banks, Finland and Asia, which have all benefited from the completion of large cases.

UK

Market conditions within the UK life insurance industry remain difficult with little prospect of significant economic growth in the short term.  We have maintained pricing discipline and are focused on cash generation.  We are investing to maintain the competitive position of our key individual protection and group pensions businesses, while providing annuity policies for retiring pensions customers.

Group pensions sales were £66 million, down 5% on the first quarter of 2009.  Increments to existing schemes are the largest component of new APE but remain subdued due to the economic conditions. As previously noted, new scheme business in the first quarter was held back by the effect of being removed from a number of consultants’ panels at the time of the Resolution acquisition. These panel positions have since been reinstated.

Funds under management for unit-linked group and individual pensions on the New Generation Pensions platform at the end of March were £10.4 billion up from £9.7 billion at 31 December 2009.

At the end of March, Friends Provident announced the launch of the new Corporate Investment Platform (CIP). The CIP provides a platform for pension scheme trustees to manage their funds, giving them greater flexibility and simplifying the administration process. This platform showcases innovative technology and demonstrates our commitment to the corporate pensions market. Further phases of the platform are expected to be launched throughout 2010.

UK Individual sales mostly comprise annuities and individual protection. Annuity sales, up 37% year-on-year, are the principal driver of the 12% overall sales growth. A factor driving this growth is the one-off impact of customers aged between 50 and 55 wishing to retire before April 4th, when the regulations changed to increase the minimum early retirement age to 55.

The protection market reflects, in a large part, housing market turnover. It is our expectation that the UK market will remain challenging overall for the remainder of 2010.

Sesame Bankhall

As expected, Sesame Bankhall has traded profitably in the first quarter.  The integration of the Sesame and Bankhall operations is now largely complete, with new operating structures in place.

Capital

As at 30 April 2010 after taking into consideration the payment of the £65 million dividend to RHG, Friends Provident maintained a strong IGD surplus estimated at £1.0 billion (31 December 2009: £1.0 billion). Shareholder funds have limited exposure to equities and as a result the surplus was not affected by the performance of equity markets through the later part of 2009 and the first quarter of 2010.

Insurer financial strength ratings from each of the three rating agencies, Moody’s, Standard & Poor’s and Fitch remain in the A range.

- Ends -

View the full press release (PDF)

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