Friends Life is outsourcing its heritage UK life business to Tata subsidiary Diligentia and launching an asset management arm.
Around 1,900 Friends Life staff will be transferred to Diligentia under Tupe regulations. Friends says service agreements require call centres to remain in the UK for all its customers and intermediaries.
The transfer will take place in the first quarter of 2012 and will result in Diligenta assuming administration responsibility for most of Friends Life’s UK Heritage protection business, individual pensions business and part of the corporate benefits business that is not currently outsourced.
Friends says this will allow it to focus on its new proposition developments, including the new workplace savings platform, within its core markets of corporate benefits, protection and retirement income. It says this will contribute to synergies saving the organisation up to £143m by the end of 2015.
It also announced the launch of Friends Life Investments – a new in-house asset management business – that will launch in the second half of 2012. The new business will initially be run by chief investment officer Mark Versey.
The initial focus of FLI will be on fixed income assets as Friends attempts to realise its target of becoming a top four player in the annuity market. But FLI will also be developed with a view to offering an in-house default fund for corporate pensions in future.
The announcements came as part of its Q3 results update, which showed UK sales amounting to £547m in the nine months to 30 September 2011, up from £316m for the same period a year earlier, reflecting both the increased scale of the UK business and incremental premium growth in existing corporate pension schemes.
The corporate benefits proposition has seen corporate pension sales totalling £367 million in the period to 30 September 2011.
But the provider also reported it had ’identified adverse persistency experience in relation to certain products’. It said some of this adverse persistency related to broker activity in the run-up to the introduction of the Retail Distribution Review impacting corporate benefits business in both the heritage AXA and Friends Provident business units.
Corporate benefits funds under management total £17.0 billion, with net fund inflows of £0.2 billion in the quarter taking year to date net inflows to £0.5 billion.
Friends said it was optimistic about the growth potential of the corporate benefits market with auto enrolment expected to significantly increase pension scheme membership, and the RDR expected to focus more business in its target market. In the longer term, the continued flow of money from defined benefit schemes to defined contribution and strong demographics are expected to fuel continued market growth, it added.
Andy Briggs, chief executive officer of Friends Life Group plc, says: “Today marks a significant step in the development of a sustainable long term business for Friends Life. We have reaffirmed our strategy for the UK, across our ’Go to Market’ businesses in protection, corporate benefits and retirement income, and our UK Heritage business unit. Our partnership with Diligenta will secure ongoing service enhancements, reduce the risks to our business and deliver increased cost synergies over time. Going forwards, our new in-house asset management business will bring further opportunities.
“The UK businesses have delivered a robust performance in the period and we remain committed to our core UK markets, having already launched new propositions for the protection market.”