Friends Provident reveals plans to cut costs

The board of Friends Provident has revealed a partial break-up and that it is to commit to a restructuring of its core UK business that is expected to cut at least £30 million from its annual cost base.

Chairman Sir Adrian Montague is expected to approve the de-merger of F&C Asset Management, which is 53% owned by Friends and the sale of its Brussels-based wealth management group Lombard International. The F&C stake is worth up to £500 million and Lombard up to £700 million.

In addition, it was revealed last week that private equity group, JC Flowers, was building a secret stake in Friends Provident, indicating that the group could launch a £4 billion takeover bid for the insurer

According to analysts, JC Flowers could launch a formal bid before Friends announces the results of its strategic review later this week. Britain’s fourth largest life insurer is trying to convince Flowers to increase its offer from 175p up to 200p a share which would value it at about £4.7 billion.

Friends has been in trouble since its £8.4 billion merger with Resolution collapsed last year. Resolution was eventually bought by Pearl.

Further details of Friends’ cost-cutting measures are expected later this week, but the company is understood to believe that it can save tens of millions of pounds by restructuring its principal UK operations. Sources close to the company say it is unlikely that Friends will sell the rest of its international operations.

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