Friends Provident announces profit dip

15-08-2006

Friends Provident has announced a nine per cent drop in its first-half underlying profit, despite a growth in life and pensions sales and new business profits.

The life insurer said that its underlying profit before tax, on a European embedded value basis, was £247 million for the six months to June 30th, down from £272m a year ago, when profits were boosted by non-recurring accounting assumptions.

But the company said it remained confident of delivering "profitable long-term growth" following an increase in life and pensions sales.

Friends Provident said that total life and pensions sales across the group rose by 39 per cent over the first half to £3.03 billion, up from £2.18 billion in 2005.

In the UK, life and pensions new business profits soared by 51 per cent to £53 million, up from £35 million in 2005.

The overall margin for life and pension products also rose from 2.3 per cent to 2.6 per cent in the first half, despite a shift towards lower margin pension products.

Commenting, Friends Provident group chief executive Keith Satchell, stressed that the company had reported record profits in 2005 and said that the increase in new business profits across the company's life and pensions business demonstrated that 2006 had "started even more strongly".

"Friends Provident is now a major player in the UK market and well positioned for continued strong organic growth with considerable opportunities available," said Mr Satchell, who added that the company's international operations were "developing rapidly" in markets where the insurer had "barely scratched the surface".

Referring to the drop in underlying profits experienced by the group in the first half, Friends Provident group finance director Philip Moore said pre-tax profits were adversely affected by falls in the value of fixed interest investments and adjustment to the carrying value of management contracts at its asset management business F&C.

F&C, which is 52 per cent owned by Friends Provident, yesterday reported a dramatic increase in first half losses from £2.8 million to £29.1 million, but Mr Moore insisted that the business' underlying results "remained steady".

"Taking into account adjustments for the one-off positive variances and changes in 2005, our underlying profits are on an encouraging trend. Our primary aim remains to add to the value of the business," Mr Moore added.


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