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Fitch downgrades Friends Provident after strategic review announced

Fitch Ratings has downgraded Friends Provident’s insurer financial strength rating to A from A plus and its long-term issuer default rating to A minus from A.

It has also changed the outlooks for both these ratings from stable to negative in response to Friends Provident’s announcement of its strategic review today.

Friends plans to reshape its UK operations by focusing on life and pensions business and its international business.

Fitch says it believes the life office’s proposals are generally sound but will probably result in a very significant reduction in the group’s scale and earnings diversification.

Friends is also planning to sell its 52 per cent stake in F&C and its high-net worth business Lombard and IFA wealth management firm Pantheon, but it will be retaining Sesame.

Fitch Insurance team associate director Alan Ng says: “While we believe the proposed strategy addresses the group’s cash flow concerns, the Negative Outlook reflects the significant uncertainty and substantial execution risks inherent in the plan.

“The new plans represent significant changes in strategy, including a reversal of the group’s development of a wrap platform and in our opinion, the likely disposal of recently acquired Independent Financial Advisers Pantheon Financial.”

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