Friends says the deal will generate potential annual cost savings initially of around £6 million a year, which are expected to increase over the term of the contract. The insurer outlined in its strategic review, in January 2008, its aim to make annual savings of £40m over a two-year period, from its operation cost base and to consider alternative sourcing strategies. It says the contract with IBM will assist in achieving further significant cost reductions by, among other things, increasing standardisation, implementing rigorous processes, using shared infrastructure and offshore resources.
Trevor Matthews, chief executive of Friends Provident says: “I am delighted to be entering into this contract with IBM at this very important time in the rebuilding programme for Friends Provident. This is a big step forward in achieving our targeted £40 million of annual cost savings by the end of 2009.
“The cost savings we will realise under this contract will help to make Friends Provident a leaner, fitter and more efficient business without compromising the market leading levels of service we are renowned for. By partnering with IBM, one of the world’s leading technology providers, we will gain access to the latest processing power and the expertise to improve our service and technology further. It sets us up very well for the future and is further evidence of the forward progress we are making.”
Friends has also signed an agreement with AMMB Holdings Berhad to take a 30 per cent stake in Malaysian insurer AmLife Insurance Berhad. Friends is paying £30m in cash, payable upon completion. Friends says this will give it a stake in a fast-growing business with excellent potential. AmAssurance has an established position in both agency and bank distribution in Malaysia.