600 jobs to go at Friends Provident

UK life and pensions group Friends Provident said today that it is to axe around 600 jobs as part of a group-wide overhaul and cost-cutting drive.

The insurer said the jobs would go throughout its core business in the UK and internationally by the end of 2009 as it seeks to save nearly £60m (€80m).

Friends Provident added that it will also look at outsourcing and is considering offloading parts of the firm, including its investment business F&C Asset Management, which is thought to be worth around £500m (€670m).

Excluding F&C Asset Management, the company employs almost 4,000 people.

The group - which named Standard Life's UK boss Trevor Matthews as its new chief executive earlier this week - announced the job losses as it revealed it would take a £160m (€214m) hit to profits as more customers cash in policies early.

It said the so-called “persistency” charge, combined with tough fourth- quarter trading, would see last year’s underlying profit before tax come in at around £300m (€402m), against £509m (€682m) in 2006.

This would be impacted further by accounting changes, which would see underlying pre-tax profits reduced to around £20m (27m), according to Friends Provident.

Today’s strategy rethink comes as the group faces takeover interest from US private equity firm JC Flowers, which recently confirmed it was considering an approach.

Friends Provident was left vulnerable after the collapse last November of its planned £8.6m (€11.5m) merger with closed life insurer Resolution, which was snapped up instead by rival Pearl.

The deal failure raised concerns that it would not have enough financing to fund expansion.

But the results of its strategy review suggest the group is putting its faith in a restructuring and partial break-up, which it is understood could raise more than £1bn (€1.3bn).

Jim Smart, chief financial officer at Friends Provident, said the plans would ensure the firm is “self-financing and well capitalised”.

He added: “The new strategy will reposition the group towards those areas where it has true competitive advantage, such as protection, pensions and international life and pensions markets.”

Friends Provident was founded in 1832.

It reported a 7% rise in UK new business for the three months to the end of last year, at £4.44bn (€5.9bn).

Shares dropped 7% in early trading after the trading and strategy news.