Friends Provident pre-tax profit dives 97%

Friends Provident, the ailing UK insurer, has revealed a pre-tax profit of £16m for 2007 – a whopping 97% down on 2006.

Profit declined from £509m in 2006 on a European Embedded Value basis.

Under EEV, an insurance company’s current worth is calculated according to future assumptions about certain rates, including mortality and investment performance, because of the long-term nature of insurance policies.

The news will no doubt strengthen recent takeover speculation about the company, which in the midst of a strategic review.

Private equity firm JC Flowers, which was one of the initial bidders for Northern Rock, is rumoured to be compiling a takeover bid for FP, having first raised interest the the company last May.

Sir Adrian Montague, executive chairman of FP, has said the firm would entertain a formal approach but claims that there has not yet been one by JC Flowers.

He says: “We are fully focused on implementing the strategic review to gain the benefits from it swiftly and efficiently. What will emerge is a self-financing, transparent and growing company built around its expertise in manufacturing and administering life and pensions products. “

Montague insists FP’s strong positions in the protection and pensions markets are the foundation of the firm’s UK business but he says his top priority is in profiting from the international markets through FP International.

He adds: “We look forward confidently to returning the company to profitable growth.

I am immensely proud of our own people for the way that they are sustaining the high levels of service that have become the hallmark of Friends Provident.”