FRIENDS LIFE GROUP LTD 
By
Resolution Ltd
("Resolution" or the "Company")
Comment on budget proposals
Resolution believes that the impact of the Chancellor's proposals for greater choice in pensions will be far-reaching and the implications will take time to be fully understood.
There is a negative implication for new business flows in the individual annuity market, as some people utilise the increased flexibility provided by the Chancellor's proposals. However, we believe that annuities will continue to be an important product for those who value the guaranteed income throughout increasingly long retirement periods.
Overall we see the proposals as a positive for the retirement savings market. The increased flexibility for savers means the attractiveness of placing additional contributions into a pension has now increased. As the number 2 player in workplace Defined Contribution ('DC') pensions with around 2 million DC pension customers overall (estimated to hold 1 in 7 policies in the market), and with positive operational leverage in our Corporate Benefits business, Friends Life is well placed to benefit from these changes.
As highlighted at our Strategy Update this week, we have 1 in 9 retiring DC pension customers, and we are already working on expanding our transition to retirement propositions, including guidance and a broader range of products and services for our customers as they approach retirement. We remain well positioned for this key, fast growing market segment.
In 2013 our UK Retirement Income business contributed £4 million to our Sustainable Free Surplus ('SFS') of £331 million; the IFRS operating profit contribution was £30 million out of £436 million for the Group. In addition the business contributed £83 million to Value of New Business within Group MCEV operating profit of £489 million. Guaranteed Annuity Options, which in the current low interest rate environment are likely to continue to offer good value for customers, represented about half of our annuity new business volumes in 2013.
We do not expect the changes announced today to have any impact on our Heritage business or our Group MCEV of £6,065 million (as at 31 December 2013). Furthermore, we reiterate our guidance on the estimated £39 million uplift in Expected Return (a key component of our SFS generation) for the combined UK and Heritage divisions in 2014.
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For more information contact:
Investors / Analysts Yana O'Sullivan, Resolution Limited | +44 (0)845 268 3116 |
Media James Henderson, Bell Pottinger Ben Woodford, Bell Pottinger Olly Scott, Bell Pottinger | +44 (0) 20 7861 3160 +44 (0) 20 7861 3917 +44 (0) 20 7861 3891 |
This announcement includes statements that are, or may be deemed to be, "forward-looking statements" with respect to Resolution, its subsidiary undertakings and their outlook, plans and current goals. In some cases, these forward-looking statements can be identified by the use of forward looking terminology, including the terms "targets", "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend upon circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. Resolution's actual performance, results of operations, internal rate of return, financial condition, liquidity, distributions to shareholders and the development of its acquisition, financing and restructuring and consolidation strategies may differ materially from the impression created by the forward-looking statements contained in this announcement. Forward-looking statements in this announcement are current only as of the date of this announcement. Resolution undertakes no obligation to update the forward-looking statement it may make. Nothing in this announcement should be construed as a profit forecast.
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