Friends Provident has blamed a "flat" protection market for a slip in profits.
The firm’s pre-tax underlying profit fell 3%, from £524m to £509m, in 2006 while its profit on a European Embedded Value (EEV) basis, an accounting system, was also down 34% to £398m.
Ben Gunn, chief executive of Friends Provident Life and Pensions, describes the protection market as “subdued”.
“Over the last 18 months the protection arena has been flat-lined,” he told IFAonline.
“The last time we [Friends Provident] spoke about this was last October and, at the time, we thought we might see 5% growth in the market.
“But we have seen no sign of that. We think it will be flat again throughout this year, and that it might possibly go down a bit.”
Philip Moore, group chief executive, adds: “Last year we announced a demanding 2008 target of £180m-£200m for new business profits, and although we remain committed to achieving this target, the product mix and, in particular the level of protection sales, which has been subdued in recent months, will be critical.
“It is early days but the prospects for a more challenging protection market will not be fully understood until later in 2007.”
Despite disappointing results, Gunn says the firm has a number of ideas on how to combat a static period.
“There are a couple of things we’re going to be doing in the group protection market, with group income protection and group life,” he says.
“With group income we have been growing our share from a small beginning and we expect that to continue and possibly accelerate.
“We haven’t had a presence in the group life area but we do intend to enter that later this year.
“With regards to individual protection there are two or three things we will be looking at. But we have got a strong proposition there already.”
Gunn also says the firm is in the process of find a replacement for former head of protection Ian Jefferies, who left the firm in mid-February.
“We will continue to look internally and externally for someone to replace Ian and we will make a decision within the next couple of months,” he says. “The person that replaces him will be somebody who will head up our protection proposition.”
Gunn says he is pleased with the firm’s asset management arm, F&C, which he says has recovered from a difficult 2006.
“It was a difficult time. We had some big contracts with Royal & SunAlliance but they got out of the life business by selling it to Resolution.
“Resolution then repatriated it from F&C back to Resolution but that was a total of £21bn that went out of F&C.
“It was also the case that investment performance had not been great either. But that has been largely turned around. It has improved significantly in the last eight months. We have got a recovery story from what was a pretty difficult patch.”
Despite the results, Friends Provident’s UK and International Life and Pensions new business had grown by over 40pc on last year’s total.
The contribution to the group’s overall profits from life and pensions new business amounted to £204m for the 12 month period to end of December 2006, up 42pc on last year as measured by EEV criteria.
Gunn says: “We are very pleased with the results as our actual volumes are up 30pc in the UK but our expenses are only up about 5pc.
“We have also increased our market share by 5.2pc, and we have been able to achieve all this because once we knew volumes were coming through, with the set up we have in place it means we can take on new business without incurring more expenses.”
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