Resolution is to split Friends Life’s operations between an open front book and a closed back book, Money Marketing understands.
An announcement is likely to be made as part of the firm’s interim results on August 16 with Friends Life executive director of strategy, capital and risk Evelyn Bourke set to run the closed life business.
Resolution chief executive John Tiner first floated the idea in February as one of a number of exit strategy options when it comes to concluding its life sector consolidation project. It is understood that Tiner and his team has now decided that the open/closed book split is the best route to take.
Speaking in the February market update conference call, Tiner said: “There is merit in looking at that because if you look at the financial characteristics you see a back end which has a very large cost base and a business which is running off and generating cash, whereas the front end of the business is out in the marketplace striving to win new business and increase the value of new business, but requires a lot of cost to be dedicated to it in comparison.
“We are exploring whether there are structural solutions that would be beneficial for shareholders in separating those two books.”
Andy Briggs was confirmed as Friends Life chief executive on June 1, replacing Trevor Matthews who will become Aviva’s chief executive later this year. Briggs will run the open book operation.
Following Resolution’s £1.86bn takeover of Friends Provident in August 2009, the management team were at pains to stress that Resolution had no plans to turn the firm into a closed book provider, following concerns from advisers about service levels.
In an interview with Money Marketing in August 2009 former Friends Provident chief executive Trevor Matthews said Resolution founder Clive Cowdery had no intention of turning Friends into a closed book operation. He said: “I do not think there is any doubt whatsoever over our future as an open life book.”
Resolution says the open/closed book plan is one of a number of options being considered.
Friends Life declined to comment.