Friends Provident's flotation could see a dogfight between British banks
for control of the company.
The mutual is not thought to be robust enough to stand alone in a
competitive sector and would immediately become a possible takeover target
for banks wanting to enter or expand their bancassurance operations.
But analysts say UK bancassurance attempts have failed and they should
leave the sector well alone.
Tether & Greenwood insurance analyst Tim Young says bancassurance in the
UK has a dire performance record and banks should leave life and pensions
to the experts. He says: “A number of the retail banks, which seem to think
they have a god-given right to run people's pension money, may decide to
make a bid for Friends.
“Banks make sufficiently illogical business decisions all the time to
make such a move possible.”
Barclays and Abbey National have been touted as likely candidates waiting
to prey on Friends.
Barclays is still smarting following its failed bid for Scottish Widows
and Abbey National missed out on the Scot- tish Amicable deal.
Friends also faces a threat from the big insurers, with Axa known to be in
the market for a successful life operation.
But a minority of analysts believe that Friends still has a future as an
independent despite all the takeover talk.
Friends announced its demutualisation plans last week and says it will
float on the London Stock Exchange by the end of 2001. It has more than two
million policyholders and a total of 38bn in assets under management.
The Dorking-based company is determined to avoid carpetbagging. New
policyholders will be prevented from becoming members, with policies dated
May 4 or after not qualifying for windfalls.
KPMG insurance analyst John Jenkins says: “Friends Provident is a prime
candidate for a takeover. It is successful and small.”
Friends head of group communications Brian Wilkinson says: “Our success to
date may make us more attrac- tive but we intend to remain independent.”
Friends has decided to actively encourage companies it invests in to
behave more ethically. The life office, which has 15bn invested in its
equity portfolios, is taking the initiative in anticipation of Government
regulations which come into force in July. These will require institutional
shareholders to reveal the extent to which social, environmental and
ethical considerations are taken into account.