Market slide sparks 55% fall in Friends Provident new business

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Friends Provident, the recently floated life insurer, yesterday said difficult stock market conditions and market uncertainty about its own strength led to a 55 per cent fall in new business.

The company had already warned the market that sales were down in the first half of the year, which accounted for the period before its market flotation in July in one of the biggest initial public offerings this year.

The former mutual blamed unwillingness among brokers to direct business to Friends during the months that it was about to float and their preference for companies with higher credit ratings as reasons for the slump in sales.

New business, which was calculated on the industry standard annual premium equivalent basis, fell by slightly more than expected to £160m from £352m in the six months to 30 June.

The main area to be hit was the life side, which tumbled 40 per cent from the first half of last year to £45.8m. The company did better in drumming up new business on the pensions side, achieving a 52 per cent increase in group pensions sales.

Friends has carved itself out as a leading provider of stakeholder pensions. It agreed with rivals that take-up of stakeholders so far has been low, but pointed out that it has written stakeholder pension business which is seeing money being invested with the company. In contrast, many other insurers have signed companies up to provide their schemes to employees, but few have yielded any contributions yet.

Keith Satchell, chief executive of Friends, said: "There are no real surprises here. We have said that we expect new business to be stronger in the second half of the year, although we don't expect it to pick up to the same level as 2000."

Friends said it made an operating profit of £92m. It gave no comparative figure, partly because of different accounting rules applying in its former mutual status, but earnings looked to be down on last year. For 2000 as a whole, Friends made earnings of £214m, after a £117m one-off charge.

The company's shares fell 19.5p to 198.5p.