15 Dec 2009
Friends Provident CEO on future with Resolution

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Transcript excerpt:

The acquisition of Friends Provident by Resolution has now been completed. Acquisitions often bring change. That can raise questions. I hope we'll deal with those during this interview, but first of all, could you just explain who Resolution is?

I'm very happy with where we've got to in this transaction. I think the Resolution we're dealing with today is quite different to Resolution One. A lot of people would have memories of Resolution One, which was all about the acquisition and putting together of closed books of business, companies that were no longer open to new business.

The Resolution that we're involved with now is all about acting as a catalyst for consolidation in the open book market based here in the UK. So this is all about putting together active, open, vigorous writing of new business, companies here in the UK.

You talk about consolidation and acquisitions. So will Friends Provident become known as Resolution during this process? Will the name change? What's going to happen to the brand?

No, no. We've got no intention of changing any names. Resolution is the shareholder. It's Resolution plc that will be on the stock market, but the operating brand will continue to be Friends Provident and Friends Provident International and Lombard. No intention of changing those whatsoever.

But what about the spirit? Is the culture still very much Friends Provident nowadays?

Oh, absolutely. I mean, the values that have stood this company in good stead for a long, long period of time remain. We're very proud of our values. We're very proud of our people. We're very proud and happy with the service that we've been delivering. And that continues. That was one of the attractions; that's why we've been acquired.

Has the acquisition affected Friends Provident's financial strength in any way?

Basically, no. We are a very strong organisation financially , there's no doubt about that. If you like, we're a little bit stronger now because we're part of a Group which has got some cash sitting around. But our IGD surplus has remained strong throughout this whole very difficult period. So we're in very good shape from that point of view.

And is Friends Provident committed to its current product strategies?

Yes, we are. You've got to understand what's happened here is that this company has been taken over, but it's been taken over after Resolution has had a very good look at what we're doing, endorsed our current plans and strategies, likes our strategy at the moment of 'fix UK, build international'. That all makes a lot of sense.

We've just been through a business planning process, as any organisation does at this time of year, and we've got through that process very successfully. We have a plan now that's endorsed and approved by the shareholder. So, yes, we're in good shape from that point of view.

So why should distributors do you think continue to place business with Friends Provident?

I think there's an even stronger reason to do that today than there was six months ago, because our future is secure. We are now part of what is going to be a very important and growing and stronger Group in the future. There can be no more speculation about what's going to happen to us, whereas I would suggest there is quite a lot of speculation about quite a lot of other companies out there in the marketplace.

We will continue to provide the great service for which we're renowned, both here and overseas. We will continue to have the same people on the ground representing us, doing what I think is a very, very good job. We will continue to live the values that this company's been built on.

But do you expect Friends Provident to remain intact as it is, or for parts of it to be broken up or sold off?

You can't say nothing's ever going to happen. You can't sort of predict the future. What I do know is if we stick to the core areas that we're operating in at the moment, and we do those well, we've got a very good chance of keeping everything together for a long time into the future. And, in fact, growing and adding to it.

You've got to just sort of think what might happen here. Acquisition number two, acquisition number three - there will almost certainly be extra product lines that we're not operating in the UK at the moment because we have quite a strong niche strategy here in the UK. So I think the Group in future will be a larger, more diverse Group than it is today.

That's the UK, but internationally …?

Oh, no change to what we're doing. We've got a very strong international operation at the moment, both FPI and Lombard, don't forget. Both of those organisations are doing very well. Both of them have got good returns on capital, good, fast payback periods and plenty of growth opportunities. So, no change.

What credentials in the corporate market will Friends Provident have at the end of this restructuring project?

I think that's very exciting. We are doing a lot of stuff in the corporate market here in the UK. I think it's very significant that the date that we announced the transaction with Resolution, we also announced the development of our corporate platform.

The world's changing quite rapidly. We've got a fantastic opportunity here, I think, to lead and shape the corporate market in the UK by extending what we offer in the workplace to more than pensions. Offering ISAs in the UK, offering the opportunity to get into a group SIPP arrangement, share save, share incentive plans - a sort of smorgasbord approach in the workplace. I think that's going to be a very exciting future, and I think we're going to lead that path.

What kind of time span are we looking at here?

Oh, we're working on this right now. We're expecting to roll out the first component of the platform in the first quarter of 2010. That will be followed by more in the second quarter and the third quarter, and we'll continue. You know, we're starting a new journey and, I tell you, already people out there are watching us and seeing what we're doing and trying to keep up with us. It's very exciting.

So how will those corporate clients benefit, then, from the consolidation that's going on in the industry that you're a part of?

Well, they will benefit because they will be secure in the knowledge that we will continue to provide great service as we've done in the past, with good people, using the same systems and values that we've used in the past. And we're extending our offering. We're going to continue to invest in our existing platform, for which we continue to win great awards, and we're going to develop this corporate platform as well.

So that investment will continue?

Oh yes, absolutely. I mean, this is our lifeblood. This is our key business. This is our business. We're good at this stuff. We want to grow it. We want to develop it. And we want to expand it.

How does Resolution's acquisition of Friends Provident enhance your position and also your opportunities internationally?

I think it's very interesting internationally. I think it's very positive for our international operations, both Friends Provident International and Lombard. For a start, here in the home market in the UK, it means that we are more secure. Our future has been set. I mean, we are in good shape now. There's a lot of other companies out there where you can ask questions about that. That gives us a very secure base.

Resolution, the new owner, has endorsed the strategies that we have for our international operations, so I think that's very, very positive. So we're going to keep doing what we're doing. We like what we're doing. We love our international businesses. Resolution likes the international businesses. They are high return, fast payback, lots of growth potential. We'll do more of that.

So what does this acquisition mean for customers and intermediaries internationally?

I think it's positive for customers and it's positive for intermediaries. The intermediaries, to start with, can be confident that we know what we're doing. We're going to continue doing what we've done so well in the past in the future. And we'll do more of that.

The customers will be part of a bigger, stronger Group going forward. So I think it's positive all round.

In terms of that bigger, stronger Group, how would the acquisition of another company with an international business affect Friends Provident International?

Well, we're now getting into the sort of hypothetical stage. It depends on what acquisition number two is and what acquisition number three is, and what international bits and pieces they have. It may well be that we pick up some very interesting international properties in the process, which we would then look at bringing together with our existing FPI operation or perhaps even the Lombard operation. I think there is going to be a lot of change out there in the market. I guess my key message is that we are in very good shape. Our future has been set. It is more secure today than it was 12 months ago. So I think distributors, particularly, and customers, can be very confident when they deal with us.

How are you making customers aware of the takeover?

We actually went to a lot of trouble to attempt to get the message through to customers as we went through the takeover process. I don't know about you, but I get a lot of mail through my mailbox, and we understand customers or shareholders don't necessarily read or pay attention to what's going on. But we'll continue to do that.

We're trying to send out messages of reassurance in every way we can. We're making sure our people, our front-line people, know what's going on so they can convey messages to distributors, particularly, and to customers. And we'll continue to do that. We're putting things up on the websites, both here in the UK and overseas.

And will this acquisition affect customers' policies in any way? Will Resolution now manage customers' policies?

Oh, no, no, no, no. No, Friends Provident, Friends Provident International, Lombard - we will continue looking after the policies. We'll continue collecting the premiums, paying the claims, giving the great service that we've been known for in the past. Resolution is out there as the shareholder. We have to answer to our new shareholder, but we'll continue to run the business.

So you'll continue to make the payments to customers, such as pensions and that sort of thing? That won't change to Resolution?

Not at all. That's our job. That's our business. That's what Resolution has bought. They've bought a machine that does that very well, thank you very much.

And will there be any impact on your customers' investments, for instance? Can you make any guarantees about customers' policies and investments?

Nothing's changed, basically. Nothing's changed. This is the same organisation. We've technically got the same regulated entity here in the UK - that's the parent company. The regulator looks to the parent company in the UK, which is now a subsidiary of Resolution, and there's a lot of governance and controls around that. So customers are in a very strong position.

So, finally, how can you guarantee Friends Provident's excellent service levels won't decline?

What I would say to you is look what we've been through over the last 12 months here at this organisation. We have been through a very significant change, particularly in the UK. We have had to take a lot of expenses out of our organisation. Quite difficult. We've cut our costs in the UK by about 22 per cent over that period, and we have not dropped the ball at all as far as service is concerned.

So I say to you - and I say to anybody who asks this question quite strongly - look, we know about this stuff. We know about service. We know how important it is. We know that's our bread and butter. We've made massive changes here, but we haven't disturbed the service. We're not going to let anything else that happens in the future disturb the service either. So I think our customers and our partners can be very happy that we know what we're doing and we're going to continue to do it really well.

Trevor, thanks very much.

Thank you.

full transcript»

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