Friends makes £871m loss as investment sales dive 84%

Friends Provident made a loss of £871m during 2008 as individual pensions and protection sales plummeted, and new investment business was almost wiped out.

The group also failed to confirm a dividend amount for shareholders due to complications arising from the redistribution of F&C.

Friends Provident's IFRS underlying profit fell to £27m in 2008, down from £44m in 2007, though a £217m addition to corporate bond reserves brought the firm into loss-making territory. Non-underlying items made a loss of £681m.

Individual pensions business performed poorly, down 48% to £41m, though the firm says its decision not to offer unfunded commissions to advisers was to blame.

Group pensions sales also fell, down to £422m from £526m, though the firm did withdraw from the market during the middle of 2008, and gained 26 schemes upon its return in the final quarter.

Protection business fared badly, with group protection sales down 26% while individual new business fell 24% to £45m. Falling housing transactions, which are linked to sales of critical illness and life insurance, are blamed for falling protection sales.

Annuity sales held up relatively well, falling just 4% in 2008 to £26m. Friends Provident says it will continue to focus on providing annuities to existing pensions customers.

Investment business was particularly badly hit by the economic downturn, with sales falling from £51m in 2007 to just £8m last year, a fall of 84%.

Friends Provident says it can pay a dividend of 2.6p per share, but the need to create a new holding company to handle the redistribution of F&C to shareholders means a final dividend could not be confirmed today.

Commenting on today's results, CEO Trevor Matthews says: "The company is reorganised, the leadership team is strengthened, and operational momentum is building. We have taken significant costs out of the business, sharpening our competitive edge in the key markets we identified at the start of 2008.

"2009 will be a tough year for economies worldwide, but we will continue to enhance our product range and build a business primed to broaden our distribution and grow market share both in the UK and abroad."

Contact: John Bakie, Tel: 020 7484 9805, e-mail: John.Bakie@incisivemedia.com