COLUMN-A friend Friends can do without: Margaret Doyle

-- Margaret Doyle is a Reuters columnist. The opinions expressed are her own --

By Margaret Doyle

LONDON, July 13 (Reuters) - Clive Cowdery's approach to Friends Provident (FP.L) is so absurd that the real puzzle is why he thought it necessary to tell the world about it in the first place.

A cynic might suggest that the outside shareholders who put up 600 million pounds to back his Resolution (RSL.L) half a year ago are getting restive at the lack of action, and that this is Cowdery's signal that he's on the case.

It may not help much. Within minutes of Resolution's formal announcement, his proposal for a share swap was elegantly swatted aside by Adrian Montague, the Friends chairman.

Perhaps Cowdery hopes Friends' shareholders will remember how he delivered a 28 percent annual return from "old" Resolution, which was taken over by Hugh Osmond's rival Pearl group after a complicated, multiway, bid battle two years ago.

Perhaps he reckons that shareholders are so disillusioned after two previous, much higher, merger/takeover opportunities in the past couple of years were bungled.

Whatever, this offer of a paper swap shouldn't trouble the scorer. Friends shares are friendless, at around 53 percent of embedded value (a measure of the present value of future business in life companies), according to analysts at Keefe, Bruyette & Woods, compared to 80 percent and 90 percent levels elsewhere in the industry.

Yet Cowdery's success lay in buying closed life books that nobody else wanted, and turning them into attractive assets under management. Running a live life office is much harder.

Now Cowdery only has cash (little of which he's offering to Friends shareholders) so there are no other books with which to merge: Friends would stay subscale, and is losing market share. Furthermore, he is proposing that 10 percent of the upside from the deal would flow to his own management partnership.

In Montague and newish chief executive, Trevor Matthews, Friends' 750,000 shareholders can hope for better things. Montague sold British Energy dearly to the French. Matthews, formerly boss at Standard Life's UK and Ireland operations, has cut costs and got Friends back onto the "panel" of insurers offered by consulting actuaries.

Many of Friends' shareholders are also policyholders who acquired shares when the then mutual, founded by the Quakers, listed eight years ago. Their interests may not rank quite so high on Cowdery's list of priorities. (Author biography: [ID:nLQ86203]) (Editing by Martin Langfield )