Setting new standards - Friends Life

INTERNATIONAL LIFE & PENSIONS ASSET MANAGEMENT GROUP FINANCIAL PERFORMANCE CONCLUSIONS AND OUTLOOK
Our view of the market
Our international business is conducted across the globe, with specific emphasis
on four key regions: Asia, the Middle East, the UK and Continental Europe.
The business mix includes regular premium savings and protection plans,
alongside single premium savings, investment and estate-planning propositions.
Customers are attracted by our innovative solutions, wide-ranging investment
opportunities, the portability of the products and the long-term confidence of
strong currency investments.
Friends Provident International (FPI) – FPI has followed a deliberate strategy of
market diversification, ensuring that it does not limit itself to a single region or
jurisdiction. From its base in the Isle of Man, FPI operates in all the four
key regions, with a product mix that ranges from regular savings and protection
business to investment contracts, including highly personalised portfolio bonds.
Distribution partners are primarily Independent Financial Advisers. FPI has also actively
developed distribution relationships with a number of institutional partners. Asia remains
FPI’s largest generator of new business volumes, with the bulk of that business coming
from regular premium savings. The overall Hong Kong market grew strongly over the
first half of 2006 before slowing over the second half. FPI continues to be confident in,
and committed to, the region. The Continental European strategy centres on the
targeting of a small number of specifically selected territories, including the launch of a
series of personal pension products in Germany, alongside a German distribution partner.
Business from the Middle East has benefited from the establishment of a local presence.
The UK remains an exclusively single premium investment market with particular
emphasis on tax and estate planning.
2006 saw no lessening of market activity and competitiveness, with a number of
companies expressing a renewed interest in the Asian region, but we maintain a robust
position, based on strong relationships with distribution partners and a demonstrable
commitment to the market. The successful development of a new branch office in
Singapore, and the continuing demand for high quality wealth management solutions,
adds to our confidence.
Lombard – The provision of tailor-made financial and estate planning solutions for high
net worth individuals (HNWIs) and ultra HNWIs in Europe and beyond remains the focus
of the Lombard business. Lombard operates primarily across eight EU member states,
while continuing to explore new opportunities in other regions. Geographic diversification
is supported by a unique multi-jurisdictional expertise. This expertise is critical in meeting
the planning needs of many clients and the business needs of international private banks,
and has led to writing rapidly increasing volumes of new business.
Lombard’s approach is to partner with leading specialist advisers, which enables the
combining of Lombard’s financial expertise with the relationship and asset management
capability of the distribution partner. As the very large market for HNWI/ultra HNWI
continues to grow, so does the requirement for effective protection of private wealth.
Lombard has been able to increase its penetration of this market year-by-year and
intends to deepen this penetration further as the business develops.
The HNWI sector in particular continues to attract the attentions of governments
seeking to increase tax on private wealth. This intensifies the pressure on traditional
tax planning structures and offshore tax havens, and increases the relative attractions
of life assurance being used as a tax shelter and estate planning solution, such that
experts increasingly recognise life assurance as an important financial planning tool.
HNWI financial wealth forecast by region
2003–2010 estimated (Figures in trillions US$)
2010 44.6
Allowing for 6%pa global growth
2005 33.3
2004 30.7
2003 28.5
Annual growth rate 2005–2010 estimated
Africa 5.2%
Middle East 8.0%
Latin America 5.9%
Asia-Pacific 6.7%
North America 7.4%
Europe 3.7%
Source: Capgemini Lorenz curve analysis May 2006
Lombard competes through the provision of enhanced value-added services and
administration rather than on price. Competitors are mainly those that have established
subsidiaries in Luxembourg and Dublin, primarily to sell back to their home country
(although some are increasing their international diversification), and generally offer a
lower priced, less value-added service.
Friends Provident Annual Report & Accounts 2006 19