Profits dip at Friends Provident as sale of Lombard unit stalls

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Friends Provident is finding itself struggling to sell its Lombard wealth management business, because potential buyers are having trouble raising cash in the credit crunch.

The insurer said yesterday that Lombard, valued at about £700m, had attracted interest from lots of bidders but that a deal was far from certain. Friends has already had to scrap the sale of its Pantheon intermediary business because of lack of deal funding.

Jim Smart, the outgoing finance director, said: "These are pretty tough times out there for funding deals. We are not saying that a sale [of Lombard] is certain, but it would still be the desired outcome. It is not a fire sale and we are happy to keep these businesses."

He added that the sale of a third asset, Friends' stake in fund manager F&C Asset Management was now making "good progress".

The sale process started in January after Friends said the businesses were not core operations. At the time, funding for deals was already hard to find.

Friends flagged the lack of progress on Lombard as it reported a 20 per cent drop in underlying pre-tax profit, to £211m. Sales fell 6 per cent, the overall figure hit by a 21 per cent fall in the UK, where Friends has withdrawn from unprofitable products and has suffered a drop in mortgage protection sales amid the housing market downturn.

Trevor Matthews, the new chief executive, said his first goal would be to get Friends back on panels for corporate pension business that had dried up when JC Flowers, the private equity group, was hovering over the company.

Flowers could return with another approach in two months under Takeover Panel rules. Mr Smart said the value of Friends' business is now 151p a share, compared with its 160p valuation in April when Flowers withdrew its 150p approach. The shares closed 4.9 per cent lower yesterday at 87.2p.