Friends Provident rises 6% on solid sales figures

Friends Provident told shareholders yesterday it does not need to raise capital by issuing new shares as it posted solid sales for the first nine months of the year, but it may use its estimated £900m debt capacity to finance an asset management spending spree.

The group's new business was up 11 per cent to £274m over the first nine months of the year, using the industry standard measure for new business sales of adding regular premiums to one tenth of single premium sales. In the past three months, sales were up nearly 7 per cent to £91.9m. Sales of income protection products grew by 24 per cent in the first nine months of the year.

The headline figures were bolstered by a £5.6m contribution from the international business of Royal & SunAlliance, which it bought this year for £133m.

Keith Satchell, the chief executive, said Friends' increase in new business was "a strong performance against the backdrop of considerable market volatility and fragile investor confidence". The figures were ahead of expectations and provided a boost to the whole insurance sector. Shares in Friends closed up nearly 6 per cent at 133.5p, with Prudential up nearly 1 per cent at 458.5p and Aviva – which will report its nine-month figures tomorrow – up 0.4 per cent at 494p.

Roman Cizdyn, an analyst at Commerzbank, said: "These were a good set of figures and it is important to look at what Friends has in the pipeline. More sales growth will come through via the RSA businesses, as it will through the deal to distribute products through Countrywide Assured."

Martin Jackman, the finance director, said the business was well financed despite the stock market's difficulties. He indicated the company may turn to the debt market should it want to raise capital to finance growing the business, rather than a rights issue of shares.

"We are very comfortable with our capital position," said Mr Jackman. "We have a lot of flexibility on our balance sheet and have debt capacity. We do not need to raise capital."

Friends is looking at switching £500m of assets in its life fund that are inadmissible in solvency calculations to assets that will beef up its free asset ratio, which should put the company on the same standing as some of its larger rivals.

It bought the asset management arm of Royal & SunAlliance this year for £240m, bringing on board about £36bn of funds. Mr Jackman said the company was on the scout for more asset management buys.