While falls in its protection business could be explained away by the sharp slowdown in the mortgage market - which generates more than 50 per cent of this division's sales - the drop in its core group pensions business was more alarming.
Friends blames this on an increasing number of companies not wanting to alter their pension arrangements before the wave of regulatory change sweeping the sector is over - a plausible excuse. However, it conceded that the next six months could also prove tough for its groups pensions business. Many advisers are telling company pension managers to steer clear of Friends until the merger between F&C and Isis, the company which invests Friends' clients' money, has bedded in.
Yet there remains plenty to be positive about at Friends. Having secured a good number of ties with financial adviser networks over the past six months, it is one of the better placed insurers to take advantage of "depolarisation", the new rules on where financial products can be sold. It hasn't yet signed up a big bank to sell its investment and pensions products, but it stands every chance of securing a deal over the coming months.
New revenue streams are also promised, as Lombard International, its recently acquired offshore business, begins to contribute - and as Friends launches a marketing push in individual pensions.
At 160p - a little more than 1.2 times its embedded value, the City's preferred valuation measure - Friends is not overpriced, and remains a worthy shareholding for existing investors. For those looking to get fresh exposure to the life insurance sector, however, stocks such as Legal & General and Prudential promise to perform better in the short-term.Reuse content