Friends Life splits between open and closed business

16 August 2011 8:33 am | By Paul McMillan, Tom Selby

Friends Life is to split its operations between an open book and a closed book of business in a move that will see four million of the provider’s customers move into the closed book.

The move, revealed earlier this month by Money Marketing, will see director Evelyn Bourke run the new UK Heritage Business as chief commercial officer.

The UK Heritage business will run alongside Friends’ corporate benefits, protection and retirement income business units.

Friends Life chief executive Andy Briggs says the majority of the provider’s five to six million customers will move into the closed book. He has pledged to learn from the past in terms of the service standards they can expect. Advisers raised concerns in last week’s Money Marketing that service standards could slip due to the split.

Speaking to Money Marketing this morning, Briggs says: “Insurers have generally been pretty poor at meeting the ongoing needs of existing customers.

“Our intent here is to develop a distinct capability in doing this well, both from a customer perspective and in terms of the financial performance of the business. In reality one of the major drivers that we can influence in that part of the business is the retention of those customers, so servicing them well is absolutely critical.”

Briggs says the decision was not driven by Resolution exit options and the provider has “no plans” to sell-off the closed life book.

As a result of the split, the provider says a number of business lines are no longer being marketed and will be managed by the Heritage business alongside other legacy products.

The move comes as the provider announces its results for the first half of 2011 which saw profits before tax of £390m, compared to £151m in 2010, on an IFRS basis and £180m, compared to £180m in 2010 , on an MCEV basis. The firm has increased its dividend 18.5 per cent to 6.47p.

In the results, Resolution chief executive John Tiner  says the firm is on track to deliver its previously announced 2013 targets, including an exit strategy, without further acquisitions. The open/closed book split was one of a number of potential options floated by Resolution in February.

The firm says it expects strong growth in its corporate benefits proposition, with its corporate platform launching in the second half of this year.  It says the RDR should remove a major driver for advisers to rebroke business and so aid customer retention and that the removal of upfront commission should create more “rational” competition, re-opening the channel for Friends.

The provider says the “advice gap” likely to be caused by the RDR will expand opportunities for internal vesting propositions and for non-advised, simplified products.

It suggests the impact of the RDR on the protection market should be “neutral to slightly positive”.

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