UPDATE 3-Friends Q1 sales beat market expectations
(Adds further analyst, executive comments, shares)
LONDON, April 29 (Reuters) - Friends Provident FP.L, which rejected a takeover approach from U.S. buyout group J.C. Flowers this month, posted an 11 percent rise in first-quarter premiums on Tuesday, due to higher sales in its overseas units. Friends said it was making good progress on delivering its strategic review and that life and pensions new business totalled 247 million pounds ($490.3 million), on an annual premium equivalent basis, up from 223.2 million last year.
Analysts polled by the life insurer had on average forecast total life and pensions sales at just over 206 million pounds, in a range of 194.3 million to 223 million pounds.
Friends said its UK business saw sales dip 2 percent, hit by the impact of the weaker mortgage market on its protection business and by weaker savings sales, but the fall was more than offset by record quarterly sales at FPI, up 77 percent.
"The figures are strong, but the company also indicates that sales are going to slow down, so you can't extrapolate from the first quarter that this year will be good," said Raghu Hariharan, analyst at FPK.
The UK market remains tough, with new protection business down 12 percent, due to the slowdown in the housing market.
The protection market, one of Friends' core businesses, may fall by 10 to 15 percent this year, but could contract even more sharply if the UK housing market worsens, Benn Gun, the chief executive of its life and pension business told journalists.
It also expects its pension sales to fall this year, due to rising competition, its decision to end upfront commissions to win business and uncertainty over its future which has caused firms to shy away from it for their group pensions.
The surge in sales at Friends Provident International helped brighten the picture. It was driven by strong demand from Asia, the company said, where new business more than doubled to 32.5 million pounds.
Friends shares were up 2 percent at 119.6 pence at 0841 GMT, putting it among the top gainers in the FTSE100 .FTSEindex. Its shares have lost over a quarter of their value since the beginning of the year.
"The stock is no cheaper than Standard Life (SL.L) (and at less than a 10 percent discount to Aviva (AV.L)) and carries a lot more uncertainty in our view -- with no CEO at present, a higher dependence on UK protection and management admitting that over uncertainty over the businesses's ownership is damaging sales," said Lehman Brothers analyst Matt Lilley in a note.
DISPOSALS EXPECTED SOON
The company, which completed a root-and-branch strategy review earlier this year, said it had received "numerous expressions of interest" for the three wealth management businesses, Lombard, F&C (FCAM.L) and Pantheon Financial, that it had decided to put up for sale.
It expects to have made a decision on the sale of Pantheon Financial within 6 weeks and expects to receive first-round bids for Lombard next month, with a view to selling the business by the time Friends reports interim results in early August, executive chairman Adrian Montague told journalists.
Friends is working with the board of F&C to decide how to dispose of its majority interest in the fund manager, Montague said, adding it could give its F&C shares directly to Friends shareholders if it decided that was the best option.
Montague indicated there had not been any other serious interest in Friends other than from Flowers and justified his decision to snub the buyout firm's approach, saying its indicative offer of 150 pence per share "was way south of anything that needed a detailed engagement."
But Collins Stewart analyst Tim Young criticised the move. "The board was entirely wrong in rejecting the offer from Flowers. If a cash bid of 150p substantially undervalues the business, why is the share price at 117p?" (Reporting by Simon Challis and Clara Ferreira-Marques; Editing by Louise Ireland/Erica Billingham/Andrew Hurst)
