24th Oct 2007 07:05
Friends Provident PLC24 October 2007 24 October 2007 Friends Provident - third quarter sales update Life and pensions new business (on a PVNBP(1) basis) increased by 21% to £5,582million (2006: £4,629m) in the first nine months of 2007, and by 35% to £2,154million (2006: £1,597m) in the third quarter. UK life and pensions 9m highlights: • Total UK new business up 13% to £3,424 million (2006: £3,039m) • Group pensions up 22% to £1,988 million (2006: £1,633m) • Protection down 3% to £311 million (2006: £322m) • Annuities up 12% to £210 million (2006: £187m) • Investment down 25% to £401 million (2006: £532m) • Individual pensions (excluding DWP rebate premiums) up 68% to £387 million (2006: £230m) International life and pensions 9m highlights: • Total International new business up 36% to £2,158 million (2006: £1,590m) • Friends Provident International (FPI) up 38% to £875 million (2006: £635m) • Lombard up 34% to £1,283 million (2006: £955m) Ben Gunn, chief executive of Friends Provident Life and Pensions, said: "I am pleased to report strong sales overall for the third quarter. Our twoInternational businesses, FPI and Lombard, led the way with excellentperformances, and in the UK we achieved a strong group pensions result. "FPI's record third quarter sales were over double those of 2006 and the salesin the first nine months have already surpassed the full year record of £823mset last year. Lombard's sales are up by more than a third on last year,reflecting our ability to attract multi-million Euro cases, although the finalquarter remains key for this business. "In the UK, we are a major player in group pensions and our franchise continuedto grow with sales up by 22% this year so far. As expected, results inprotection and investment were subdued but held up well against the secondquarter. "We look forward to continuing to build our business in the UK and overseas.There are exciting additional opportunities presented by the proposed mergerwith Resolution to form Friends Financial, which we aim to pursue while meetingrate of return disciplines. The Board of Friends Provident has recommended thatshareholders vote in favour of the merger." - Ends - For further information, please contact: Nick Boakes Friends Provident plc +44 (0)845 641 7814Chris Ford Friends Provident plc +44 (0)845 641 7832Vanessa Neill Finsbury Limited +44 (0)20 7251 3801Alex Simmons Finsbury Limited +44 (0)20 7251 3801 Ref: H191 Notes to Editors: 1. New business is reported on the Present Value of New Business Premiums(PVNBP) basis, which represents new single premiums plus the expected presentvalue of new business regular premiums. A table detailing sales on an AnnualisedPremium Equivalent (APE) basis (annualised new regular premiums plus 10% ofsingle premiums) is at the back of this announcement. 2. Expected schedule of forthcoming events: Court Meeting* 11:00 am 5 November 2007 Friends Provident Extraordinary General Meeting* 11:15 am 5 November 2007 Payment of Interim dividend 23 November 2007 Merger Effective Date* 29 November 2007 * related to proposed merger of Friends Provident plc and Resolution plc 3. Certain statements contained in this announcement constitute 'forward-lookingstatements'. Such forward-looking statements involve risks, uncertainties andother factors, which may cause the actual results, performance or achievements,from time to time, of Friends Provident plc, its subsidiaries and subsidiaryundertakings or industry results to be materially different from any futureresults, performance or achievements expressed or implied by suchforward-looking statements. Such risks, uncertainties and other factors include, among others, adversechanges to laws or regulations; risks in respect of taxation; unforeseenliabilities from product reviews; asset shortfalls against product liabilities;changes in the general economic environment; levels and trends in mortality,morbidity and persistency; restrictions on access to product distributionchannels; increased competition; and the ability to attract and retainpersonnel. These forward-looking statements are made only as at the date of thisannouncement and, save where required in order to comply with the Listing Rules,there is no obligation on Friends Provident plc to update such forward-lookingstatements. About Friends Provident Friends Provident plc is the holding company of the Friends Provident Group ofcompanies and a member of the FTSE 100. With more than 2.5 million customers theGroup employs approximately 5,000 staff in its three core businesses: UK Life &Pensions, International Life & Pensions and Asset Management. Now in its 175th anniversary year, the business was founded on Quaker principlesand aimed to alleviate the hardship of families facing misfortune. FriendsProvident has embraced corporate governance and achieving high standards ofcorporate behaviour and accountability to both stakeholders and customers is atthe heart of our business. In 2001 the company established the grant-makingcharity The Friends Provident Foundation with the aim to encourage new ways ofthinking about how money can be used to solve a wide range of problems. For more information on Friends Provident including, photos, awards, fast facts,presentations, and media contacts please visit the media section atwww.friendsprovident.com/media Commentary and tables UK life and pensions New UK life and pensions business in the first nine months of 2007 increased by13% to £3,424 million (2006: £3,039m). Third quarter new business increased by15% to £1,167 million (2006: £1,019m). Life business New protection business over the first nine months was down 3% on 2006 at £311million (2006: £322m). Third quarter sales of £109 million (2006: £123m) were11% down on the strongest quarter of 2006, but slightly ahead of second quarter2007. Whilst the outlook for the protection market continues to be constrained,we expect at least to maintain our market share as a result of our strongservice-based proposition. To broaden our reach across the market, earlier inthe year we adjusted our pricing approach to achieve a more even weighting ofbusiness by case size. During this quarter we also initiated moves to counterpoor publicity for critical illness products, by demonstrating fairness ofclaims handling in cases where non-disclosure is an issue. Investment sales fell by 25% to £401m (2006: £532m), with third quarter sales inline with the second quarter, the result of the need to enhance our productrange. Our focus is thus on completing the revision of our product range tobetter compete with market leaders. We are developing new, more flexible bondproducts and the first of these has just been launched. These products aredesigned to meet customer needs more closely over a longer term, to help improvepersistency. We are also now re-establishing our products on key IFA investmentproduct panels but expect trading to remain subdued to the end of the year. Theeventual impact of recently announced proposals for capital gains tax is not yetclear. We are participating in discussions between the Association of BritishInsurers and the Treasury. We continue to expect our Wrap platform to be rolled out in a series of releasesthrough 2008 and 2009. The initial release, previously expected at the end of2007, is, however, more likely to be in the first quarter of 2008. Pensions business New group pensions business increased by 22% to £1,988 million (2006: £1,633m).New business in the third quarter, £690 million, was close to the level ofbusiness in the traditionally stronger second quarter. Activity in the marketremains healthy and we believe we are further increasing our share, as a resultof our reputation for market-leading customer service and the flexibility of ouroffering. We will launch a SIPP option for members of Group schemes in thefourth quarter to further enhance our offering. New individual pensions business increased by 68% to £387 million (2006: £230m),excluding DWP rebate premiums. After our relaunch of this proposition early in2005, sales have shown rapid growth as we have improved distributor awareness.We believe we are reaching a steady level of penetration in the IFA channel, sowe expect growth rates to moderate over time. DWP rebate premiums in the year todate are down 6% at £127 million (2006: £135m), in line with expectations. Annuity sales over nine months rose by 12% to £210 million (2006: £187m). Wehave made no change to our approach to this product, pricing appropriately forrisk and capturing vesting policies from our own book. International life and pensions New International life and pensions business increased 36% to £2,158 million(2006: £1,590). Third quarter sales were 71% higher than last year at £987million (2006: £578m). Friends Provident International (FPI)PVNBP by region 9m 2007 9m 2006 £m £mEurope (excluding UK) 176 138UK 146 99Asia 398 281Middle East 80 62Rest of World 75 55Total FPI 875 635 New FPI business increased by 38% for the nine months to September 30, withthird quarter sales up very strongly by 108% at £352 million (2006: £169m)albeit against a weak third quarter in 2006. The third quarter is typicallyquieter in most markets but this was a record quarter for FPI, and the £823million of sales in full year 2006 have already been exceeded. Sales were particularly strong in Asia, reflecting a special offer on regularsavings plans. The level of competition in the key Hong Kong market has remainedconsistently high through the year and activity continues to be healthy. The UAEfederal licence obtained at the end of the first half has supported sales growthin the Middle East. Progress has also been made in both Singapore, with theauthorisation of a second product, and with our German pensions offerings.Although both are relatively small contributors for FPI at this time, we believethey represent strong long-term opportunities. Given the strength in the year todate across all key markets, we remain positive about the outlook for the fourthquarter. As a consequence of the mix of business, we expect the margin to beslightly lower in the second half than was reported for the first half of theyear. Lombard International (Lombard)PVNBP by region 9m 2007 9m 2006 £m £mUK and Nordic 177 175Northern Europe 222 211Southern Europe 247 179Rest of World 17 30Total excluding large cases 663 595Large cases (greater than €10m) 620 360Total 1,283 955 Lombard has achieved 34% growth in new business to £1,283 million (2006: £955m),with third quarter sales up by 55% at £635 million (2006: 409m). The trends in geographical mix of business established in the first halfcontinued in the third quarter, with strong growth in Southern Europe, whichincludes Italy, France and Spain. The value of large cases written in the thirdquarter was up on last year, accounting for 48% of PVNBP for year to date,compared to 38% at the same stage of 2006. As the proportion of large casesincreases, Lombard's quarterly volumes may become somewhat more volatile infuture. We expect the established annual pattern of a strong final quarter to continue,with the fourth quarter typically accounting for up to half of business for theyear, subject to variation arising from timing of large cases and seasonalvariations in individual markets. Appendix: New business results Analysis of Life and Pensions New Business 9 months to 30 September 2007 vs 9 months to 30 September 2006 2007 2006 % Change Regular Single Regular Single Regular Single Prems Prems PVNBP Prems Prems PVNBP Prems Prems PVNBPUK Operations £m £m £m £m £m £m % % %----------- ------- -------- ------- ------- ------- ------ ------- ------ ------ LifeProtection 53.0 0.0 311 53.9 0.0 322 -2 n/a -3Investment 1.0 395.1 401 1.2 523.4 532 -17 -25 -25----------- ------- -------- ------- ------- ------- ------ ------- ------ ------ 54.0 395.1 712 55.1 523.4 854 -2 -25 -17----------- ------- -------- ------- ------- ------- ------ ------- ------ ------ PensionsIndividualPensions 18.9 301.5 387 11.2 178.7 230 69 69 68DWP Rebates 0.0 126.8 127 0.0 135.3 135 n/a -6 -6Group 322.8 596.5 1,988 267.4 455.9 1,633 21 31 22PensionsAnnuities 0.0 210.0 210 0.0 187.0 187 n/a 12 12----------- ------- -------- ------- ------- ------- ------ ------- ------ ------ 341.7 1,234.8 2,712 278.6 956.9 2,185 23 29 24----------- ------- -------- ------- ------- ------- ------ ------- ------ ----------------- ------- -------- ------- ------- ------- ------ ------- ------ ------UK Life and Pensions 395.7 1,629.9 3,424 333.7 1,480.3 3,039 19 10 13----------- ------- -------- ------- ------- ------- ------ ------- ------ ------ International OperationsLombard 0.0 1,283.0 1,283 0.0 955.0 955 n/a 34 34FriendsProvidentInternational 87.8 423.7 875 53.8 372.5 635 63 14 38----------- ------- -------- ------- ------- ------- ------ ------- ------ ------TotalInternationalLife andPensions 87.8 1,706.7 2,158 53.8 1,327.5 1,590 63 29 36----------- ------- -------- ------- ------- ------- ------ ------- ------ ----------------- ------- -------- ------- ------- ------- ------ ------- ------ ------Total GroupLife andPensions 483.5 3,336.6 5,582 387.5 2,807.8 4,629 25 19 21----------- ------- -------- ------- ------- ------- ------ ------- ------ ------ Effect of currency movements on PVNBP All amounts in currency other than sterling are translated into sterling at amonthly average exchange rate. The estimated new business assuming constantcurrency rates would be as follows: 9m 2006 9m 2007 (as reported) Change £m £m %------------------------ ------------- ---------- -------Lombard 1,299 955 36Friends Provident International 918 635 45------------------------ ------------- ---------- -------Total International Life and Pensions 2,217 1,590 39------------------------ ------------- ---------- ------- Analysis of Life and Pensions New Business 3 months to 30 September 2007 vs 3 months to 30 September 2006 Q3 2007 Q3 2006 % Change Regular Single Regular Single Regular Single Prems Prems PVNBP Prems Prems PVNBP Prems Prems PVNBPUK Operations £m £m £m £m £m £m % % %----------- ------- -------- ------- ------- ------- ------- ------- ------ ------ LifeProtection 18.4 0.0 109 19.6 0.0 123 -6 n/a -11Investment 0.2 131.8 133 0.3 165.2 168 -33 -20 -21----------- ------- -------- ------- ------- ------- ------- ------- ------ ------ 18.6 131.8 242 19.9 165.2 291 -7 -20 -17----------- ------- -------- ------- ------- ------- ------- ------- ------ ------ PensionsIndividualPensions 6.9 98.6 131 4.7 71.8 93 47 37 41DWP Rebates 0.0 39.5 40 0.0 100.9 101 n/a -61 -60Group 121.5 164.5 690 75.8 138.5 466 60 19 48PensionsAnnuities 0.0 63.8 64 0.0 68.0 68 n/a -6 -6----------- ------- -------- ------- ------- ------- ------- ------- ------ ------ 128.4 366.4 925 80.5 379.2 728 60 -3 27----------- ------- -------- ------- ------- ------- ------- ------- ------ ----------------- ------- -------- ------- ------- ------- ------- ------- ------ ------UK Life and Pensions 147.0 498.2 1,167 100.4 544.4 1,019 46 -8 15----------- ------- -------- ------- ------- ------- ------- ------- ------ ------ International OperationsLombard 0.0 634.9 635 0.0 409.0 409 n/a 55 55FriendsProvidentInternational 41.9 136.7 352 14.9 96.1 169 181 42 108 ----------- ------- -------- ------- ------- ------- ------- ------- ------ ------TotalInternationalLife andPensions 41.9 771.6 987 14.9 505.1 578 181 53 71----------- ------- -------- ------- ------- ------- ------- ------- ------ ------ ----------- ------- -------- ------- ------- ------- ------- ------- ------ ------Total GroupLife And Pensions 188.9 1,269.8 2,154 115.3 1,049.5 1,597 64 21 35----------- ------- -------- ------- ------- ------- ------- ------- ------ ------ Effect of currency movements on PVNBP All amounts in currency other than sterling are translated into sterling at amonthly average exchange rate. The estimated new business assuming constantcurrency rates would be as follows: Q3 2006 Q3 2007 (as reported) Change £m £m %------------------------ ------------- ---------- -------Lombard 643 409 57Friends Provident International 365 169 116------------------------ ------------- ---------- -------Total International Life and Pensions 1,008 578 74------------------------ ------------- ---------- ------- PVNBP by Operations 9 months to 30 September 2007 vs 9 months to 30 September 2006 9m 2007 9m 2006 £m % £m %-------------------- --------- -------- ------- --------UK 3,424 61 3,039 66-------------------- --------- -------- ------- --------Lombard 1,283 23 955 20FPI 875 16 635 14-------------------- --------- -------- ------- --------International 2,158 39 1,590 34-------------------- --------- -------- ------- ---------------------------- --------- -------- ------- --------Total 5,582 100 4,629 100-------------------- --------- -------- ------- -------- 3 months to 30 September 2007 vs 3 months to 30 September 2006 Q3 2007 Q3 2006 £m % £m %-------------------- --------- -------- ------- --------UK 1,167 54 1,019 64-------------------- --------- -------- ------- --------Lombard 635 30 409 25FPI 352 16 169 11-------------------- --------- -------- ------- --------International 987 46 578 36-------------------- --------- -------- ------- ---------------------------- --------- -------- ------- --------Total 2,154 100 1,597 100-------------------- --------- -------- ------- -------- PVNBP equals new single premiums plus the expected present value of new regularpremiums. Premium values are calculated on a consistent basis with the EEV contribution toprofits from new business. Start of period assumptions are used for the economicbasis and end of period assumptions are used for the operating basis. A riskfree rate is used to discount expected premiums in future years. The impact ofoperating assumption changes across a whole reporting period will normally bereflected in the PVNBP figures for the final quarter of the period that thebasis changes relate to. No change in operating assumptions will be reflected inthe PVNBP for the first and third quarters, when the contribution to profitsfrom new business is not published. All amounts in currency other than sterlingare translated into sterling at a monthly average exchange rate. In classifying new business premiums the following basis of recognition isadopted: • Single new business premiums consist of those contracts under which there is no expectation of continuing premiums being paid at regular intervals; • Regular new business premiums consist of those contracts under which there is an expectation of continuing premiums being paid at regular intervals, including repeated or recurrent single premiums where the level of premiums is defined, or where a regular pattern in the receipt of premiums has been established; • Non-contractual increments under existing group pensions schemes are classified as new business premiums; • Transfers between products where open market options are available are included as new business; and • Regular new business premiums are included on an annualised basis. Analysis of APE 9 months to 30 September 2007 vs 9 months to 30 September 2006 APE APE % 2007 2006 changeUK Operations £m £m %--------------------------- -------- -------- -------LifeProtection 53.0 53.9 -2Investment 40.6 53.5 -24--------------------------- -------- -------- ------- 93.6 107.4 -13--------------------------- -------- -------- -------PensionsIndividual Pensions 49.0 29.1 68DWP Rebates 12.7 13.5 -6Group Pensions 382.5 313.0 22Annuities 21.0 18.7 12--------------------------- -------- -------- ------- 465.2 374.3 24--------------------------- -------- -------- ---------------------------------- -------- -------- -------UK Life and Pensions 558.8 481.7 16--------------------------- -------- -------- -------International OperationsLombard 128.3 95.5 34Friends Provident International 130.1 91.1 43--------------------------- -------- -------- -------Total International Life and Pensions 258.4 186.6 38--------------------------- -------- -------- ---------------------------------- -------- -------- -------Total Group Life and Pensions 817.2 668.3 22--------------------------- -------- -------- ------- Analysis of APE 3 months to 30 September 2007 vs 3 months to 30 September 2006 Q3 APE APE % 2007 2006 changeUK Operations £m £m %--------------------------- -------- -------- -------LifeProtection 18.4 19.6 -6Investment 13.5 16.8 -20--------------------------- -------- -------- ------- 31.9 36.4 -12--------------------------- -------- -------- -------PensionsIndividual Pensions 16.7 11.9 40DWP Rebates 4.0 10.1 -60Group Pensions 138.0 89.6 54Annuities 6.4 6.8 -6--------------------------- -------- -------- ------- 165.1 118.4 39--------------------------- -------- -------- ---------------------------------- -------- -------- -------UK Life and Pensions 197.0 154.8 27--------------------------- -------- -------- -------International OperationsLombard 63.5 40.9 55Friends Provident International 55.5 24.5 127--------------------------- -------- -------- -------Total International Life and Pensions 119.0 65.4 82--------------------------- -------- -------- ---------------------------------- -------- -------- -------Total Group Life and Pensions 316.0 220.2 44--------------------------- -------- -------- ------- Annualised Premium Equivalent (APE) represents annualised new regular premiumsplus 10% of single premiums. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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