Setting new standards - Friends Life

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ANNUAL REVIEW CHAIRMAN’S STATEMENT GROUP CHIEF EXECUTIVE’S REVIEW ABOUT THE FRIENDS PROVIDENT GROUP UK LIFE & PENSIONS How we are making our strategies work Seek out and capitalise on rewarding and well regulated markets Create and maintain strong and close relationships with our distribution partners to enhance sales opportunities 1 2 3 Differentiate ourselves with market leading service for our distribution partners and customers International clients value higher levels of service and quality solutions. We aim to find, and take advantage of, opportunities in international markets by combining our skills and infrastructure to provide profitable solutions and business propositions. 2006 Key points Friends Provident International • Opening of Singapore branch, and development of personal pension range with German distribution partner. • Successful launch of new protection product – International Protector. Lombard • Deepened penetration of existing markets and enhanced diversification of earnings by territory. • Capitalised on opportunities in Italy and Mexico. Our distribution partners are key to our continued business success. We seek to make our distribution partners feel confident in the knowledge that choosing us means they will receive top-quality service and innovative products. 2006 Key points Friends Provident International • Distribution partnerships established in several regions, including Middle East and Europe. • Bespoke products developed for distribution partners in a number of languages. Lombard • Increased penetration of existing partner relationships with a number of leading international and specialist private banks and professional advisers. • Opened new Swiss branch to enhance service to Swiss-based international private banks. We seek to differentiate ourselves from our competition by building trust and confidence with our intermediaries and customers. The standard of our service is therefore driven by our delivery of quality products and solutions in a professional manner. 2006 Key points Friends Provident International • Initiated life administration processes, based on successful Group model to drive efficiencies. • Lean Servicing techniques adopted across the International business. • Launch of quarterly broker survey to gain greater insight of distributors’ needs and requirements. Lombard • Enhanced provision of special product solutions and support services, for example, a new succession planning solution for German clients. • Continued surrender management initiatives and partner satisfaction surveys. 2007 Priorities Friends Provident International • Launch of full product range through Singapore branch – to include savings, investment and protection plans. • Explore and develop new market opportunities in Asia and Europe whilst building on successful steps already taken in the Middle East. Lombard • Consider potential new markets in Europe and beyond. 2007 Priorities Friends Provident International • Complete further relationship agreements with major strategic partners. • Continue to strengthen relationships with core distributors in all main regions. Lombard • Continue to develop and deepen existing partner relationships. • Progress development of Swiss office services to Swiss-based international private banks. • Further develop the concept of long term strategic partnerships. 2007 Priorities Friends Provident International • Realise full benefits of new life administration processes, allowing better targeting of service value. • Continue to quantitatively monitor our service performance to ensure standards are maintained. Lombard • Continue to develop innovative financial and estate planning solutions for wealthy individuals. • Invest in longer term research and development capability. Contribution from new business 2006 £96m 2005 £80m 2004 £20m This measures the profit that we make from writing new business and is discussed further on page 23. It is measured on the EEV basis. Figures for the years prior to 2004 are not comparable with the EEV basis. 2005 includes the impact of the acquisition of Lombard. Total International new business PVNBP 2006 £2,912m 2005 £2,205m 2004 £537m 2003 £510m This shows the amount of new business we have sold and is discussed further on page 22. It is measured on the PVNBP basis (2003 estimated). 2005 includes the impact of Lombard which was acquired in January 2005. Lombard Partner Satisfaction Survey Overall corporate satisfaction 2006 82% 2005 81% 2004 74% 2003 72% 20 Friends Provident Annual Report & Accounts 2006
INTERNATIONAL LIFE & PENSIONS ASSET MANAGEMENT GROUP FINANCIAL PERFORMANCE CONCLUSIONS AND OUTLOOK Key risks Use technology and e-commerce to enhance our service offering 4 5 We aim to exploit technology and, where appropriate, find further synergies with the UK business, using common platforms and tools to deliver efficient and effective processes. 2006 Key points Friends Provident International • Further development of Link Plus, Friends Provident International’s distributor Management Information system. • Launch of online enquiry service for all life-business distributors through extranet. Lombard • Continued to roll-out automated electronic links to our partners and custodian banks. 2007 Priorities Friends Provident International • Develop next phase of distributor and client online enquiry facilities. • Continue to develop ‘Internationalisation’ of all key processes, functions and systems. Lombard • Continue to develop automated electronic links with our partners and custodian banks. • Embark on a series of developments to further improve efficiency and risk management and enhance client and partner servicing. International operating expenses 2006 £63m PVNBP £2,912m 2005 £54m PVNBP £2,205m 2004 £21m PVNBP £537m 2003 £20m PVNBP £510m This shows how operating expenses (as defined on page 23) have increased at a significantly lower rate than the increase in PVNBP. The expense bars are drawn to a different scale to the PVNBP bars. Engage our people to maximise our performance Our people are critical to the successful running of our business and central to our ability to build relationships with intermediaries and customers. We therefore need to recruit and retain the appropriate highly skilled and motivated people. 2006 Key points Friends Provident International • Leading High Performance Teams programme introduced, to develop and motivate first-stage managers. • Introduced Moving Into Management for those entering management roles for the first time. Lombard Introduced coaching across key teams. • Improved range of management, business understanding, technical and general training available to these teams. 2007 Priorities Friends Provident International • Roll-out newly developed Executive Development training programme. • Develop and launch strategic programme of activities designed to put ‘People at the Centre of our Thinking’. Lombard • Review and enhance the organisational capability to meet longterm growth demands. • Invest in further recruitment, training and development infrastructures to maximise the performance of existing staff and attract quality new staff. Staff Engagement Index 2006 81% 2005 71% 2004 62% 2003 69% This shows the level of our International staff engagement as measured by our annual staff survey. Lombard’s participation commenced in 2006. 1 Regulation and/or fiscal change materially impact costs, capital requirements, distribution, regulatory responsibility or the market for products. The implementation of directives and other legislative changes is monitored, seeking to identify opportunities and ensure timely, compliant and cost effective solutions. Detailed analyses of the impact on distribution relationships and product offerings are undertaken to determine the required changes in distribution and product strategies. 2 Reliance on key territories, products or distribution partners for business. Diversification across territories, business lines and distribution partners allows us to take advantage of opportunities to secure business volumes and profitability and respond to regulatory and/or fiscal change and competitor activity. 3 Impact on profitability of changes to lapse rates. Particular sources of lapse risk are monitored, especially for large cases. A focus on service helps to maintain customer and partner satisfaction and prevent surrenders. Lapse management programmes seek to prevent surrenders, wherever practical (including identifying alternatives to surrender). 4 Expansions into new territories do not produce the expected results. We plan our entry into any new territory by looking at the expected business volumes and mix, dealing with high-calibre/reputation distribution partners, and considering the regulatory environment and requirements. Our emphasis is on business with strong margins supported by excellent customer service. 5 Mismatch of solutions and client expectations leads to poor persistency, complaints or damage to reputation. Due diligence on distribution partner firms, particularly in markets where regulation is lighter, helps ensure that business is written through financially sound and appropriately authorised and competent firms. Our strategy is to distribute through independent intermediaries who are authorised in their respective markets, but where introducers or agents are used there are clear agreements on the scope of their activities, and appropriate training and support programmes are developed. Friends Provident Annual Report & Accounts 2006 21
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Friends Provident plc Pixham End Do
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Setting new standards - Friends Life

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