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Friends Life in Virgin Money protection tie-up as UK profits fall 6%

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Friends Life has reported a 6 per cent drop in its UK pre-tax profits during the first six months of 2013, from £137m last year to £129m this year.

Resolution, the life sector consolidation vehicle which established Friends Life, published its half-year results on Tuesday.

The company’s UK and Heritage divisions – which combine to form Friends Life’s UK operation – experienced an £8m drop in half-year profits.

Resolution says this came as a result of “principal reserving changes and one-off items”, including £5m relating to the FCA fine received by Sesame Bankhall in June.

The value of new business written by Friends Life increased 21 per cent year on year, from £67m to £81m, driven by a reduction in costs.

However, the provider’s sales fell 8 per cent, from £354m last year to £324m this year. Friends says this was partly due to a deliberate shift in strategy away from “high volume, low margin” corporate pensions business.

Friends Life has also announced a long-term protection distribution partnership with Virgin Money, starting in January 2014.

Resolution chief executive Andy Briggs says: “The strong performance announced today reflects the attractive strategic outlook of the group and has been led by the UK division where higher value of new business has been written at a lower cash cost.”

Syndaxi Chartered Financial Planners managing director Robert Reid says: “The risk when you cut costs as Friends has done is the service customers and advisers receive goes backwards.”

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