Friends Life bullish on protection ahead of major regulatory changes

Provider says results for 2011 'show real intent'

Protection providers that are focused on quality as opposed to just price are in a better strategic position ahead of major regulatory changes that are set to impact the protection market later this year, Friends Life said today.

Speaking to Health Insurance following the release of financial results for 2011, Steve Payne, managing director for protection at the insurer, said he was pleased with increases in annual premium equivalent (APE) following the integration of the Friends Provident business with the AXA UK Life and Bupa Health Assurance businesses in 2010-2011.

Integration and the successful launch of the Friends Life Protect+ proposition last year helped group protection APE leap from £6m in 2010 to £22m in 2011 , while individual APE rose from £52m to £80m, Payne said.

While he added that the figures had to be considered in light of the contribution that the acquired businesses made to Friends Life’s results, Payne said that they nonetheless showed “real intent”.

Looking ahead, Payne said his organisation was well positioned ahead of significant regulatory changes that will affect the protection market.

The introduction of gender neutral pricing, life tax changes, Solvency II and the Retail Distribution Review will all pose challenges for insurers as price is predicted to rise across the board.

He said: “Our value not volume approach allows us to be well positioned. I’d rather be addressing those challenges as a quality not price player.”

While Friends Life would remain competitive, Payne said the organisation’s positioning at the “quality” end of the protection market gave it more room to manoeuvre, as it analysed business mix and price points to optimise performance and profitability during and after the changes.

This morning, Resolution, the acquisition vehicle which owns Friends Life, had announced a loss after tax of £31m.

However, operating profit was higher over the period at £681m last year from £275m in 2010, above the expectations of most analysts.

Resolution, which aims to make money for its backers by selling or floating its assets, said it would continue to look for exit options involving mergers and acquisitions.

But it added that it is working on a “self-managed” exit plan which could split its operations in two by early 2014 to maximise returns.

The “self-managed” option would see the creation of separately listed businesses: “OpenCo” which would consist of the UK “Go to Market” business units, the overseas businesses, Sesame Bankhall Group, and associated support businesses and “HeritageCo”, which would consist of the UK Heritage business and associated support businesses including Friends Life Investments, Friends Life’s listed debt and the UK pension fund.

comments powered by Disqus