Friends Life Group is the new name for Resolution - Old thread here




Friends Life Group Limited is a FTSE 100 listed company focused on providing financial security for over five million customers, with a heritage dating back over 200 years.

Our strategy is focused on helping customers to save for and achieve a good standard of living in retirement and on providing them with financial protection during their working lives.

The business is made up of three divisions:

A specialist Heritage division, looking after customers with products which are no longer actively marketed for new business. The heritage division also include Friends Life Investments, providing asset management services for Group businesses
The UK division, which provides core business lines of corporate benefits, retirement income and protection.
The International division, which provides savings, investment and protection products for expatriates and local nationals in Asia and the Middle East.
Friends Life has the expertise and experience to meet the changing needs of its customers as the life and pensions market continues to evolve. Friends Life is a sustainable business which supports its customers’ financial futures throughout all key life stages whilst creating value for shareholders by growing cash generation and generating returns.

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Friends Life Group Fundamentals

Canaccord Genuity has lifted its target price for insurance firm Friends Life from 340p to 400p and repeated its 'buy' call, saying that the £5.6bn takeover offer from rival Aviva is a "good price" for shareholders.

While they have lifted their target price to equal the possible offer, analysts said they see potential further upside from this level when more details about synergies from the deal are known

Bid for Friends Life by Aviva – it makes sense but should we buy Aviva shares?
By Robert Sutherland Smith | Monday 24 November 2014

The sheer scale of the proposed merger of Aviva (AV.) and Friends Live is a wonder to behold. It reminds us of the extraordinary degree of consolidation that has taken place in the life assurance industry over the last few decades.

The roll call of once thriving independent companies reads a little like the role of British battalions wiped out in the First World War; companies that once provided a lot of employment to a lot of people. The old Quaker Friends Life; Sun Life; The Commercial Union; General Accident, BUPA and no doubt many other names in the belly of the proposed new Leviathan to be rebranded I believe, the Friends Life Group.

It would be wonderful to think that it would also bring back the high ethical and trading standards of the Quaker founders in the nineteenth century but sadly, we cannot recreate the past. The proposed merger is also a testament to the maturity of the life business in the UK which reached a more corpse like condition as a result of the Chancellor’s decision to abandon the long established rule that pension savings were invested in Life company annuities

If this merger goes ahead it will bring the reported 16 million clients of the Friends Life Group into consolidation with the reported 31 million clients of Aviva; making at total 47 million customer base. Getting on for 80% or thereabouts of the total 60 million population of the UK though it has to be understood that many of those customers will be outside the UK; the Friends Life group has client contracts in 15 national territories outside the UK. The scales of economy, including lower unit costs of operation, that are ostensibly likely to be achieved in one go, if the deal is consummated, are pretty impressive. Moreover, as the Friends Life operating management is largely outsourced, it will probably reach the bottom line fairly quickly.

It is obvious that the older rationalization model of UK life industry has been undermined by the new regime on annuities; hence, the willingness to sell the Friends business at the right price and the willingness of Aviva to buy it. In that connection, if it is true that the bid value is some £5.6 billion, as reported, then the exit multiple appears to be 27 times Friend’s Life 2013 reported net profits of £204 million pounds. It is also a 13% premium to Friends Life last stated balance sheet net asset value. £4.9 billion (June 30th 2014). The mooted purchase price is also nearly 1.8 times reported revenue. So the business on those terms would not be sold cheaply - as one might expect. It is possible that another bidder might emerge but I assume that to be unlikely at this stage; though who knows.

Friend’s looks as though it has been run for cash generation. That will certainly help the newly enlarged company, if it comes into existence, to increase dividends; an important aim for Aviva. It will also be a stock that institutions are likely to want a full or fuller weighting in. But before we buy Aviva lets await a bit more detail, lets wait until the ink is dry on an agreement to merge!

hxxp://www.shareprophets.com/views/9147/bid-for-friends-life-by-aviva-it-makes-sense-but-should-we-buy-aviva-shares

Synergies from Aviva-Friends Life deal could be 'substantial', says The Share Centre
24 November 2014 16:04

The proposed tie-up between insurance groups Aviva and Friends Life Group could create "substantial synergies", according to The Share Centre, details of which still remain unknown.
The companies announced after the close on Friday that they had agreed on terms for a possible all-share combination. Friends Life shareholders would get 0.74 Aviva shares for each Friends Life share they own, valuing Friends Life at 398.9p per share or £5.6bn.

Sheridan Admans, investment research manager at The Share Centre, said: "Should the deal happen analysts believe synergies would be substantial, with Aviva's balance sheet benefiting as would its pensions and protection operations. Friends Life investors should benefit from improved growth prospects."

However, she warned that the merger is still "not a done deal".

"Friends Life investors may push for a higher premium or other interested parties may show their hand, however the latter is assumed to be unlikely given the size of the deal and the implication that may pose."

Due to the merger activity, The Share Centre has downgraded its rating on Aviva to 'hold' until more details are released, but said that any weakness in the share price might by a good entry point for potential investors given the positive long-term outlook.

Friends Life is also rated a 'hold'.

OFFER FOR FRIENDS LIFE GROUP LIMITED BY AVIVA PLC

RECOMMENDED ALL-SHARE ACQUISITION OF
FRIENDS LIFE GROUP LIMITED BY AVIVA PLC
Summary
· The Boards of Aviva and Friends Life are pleased to announce that they have reached agreement on the terms of a recommended all-share acquisition of Friends Life by Aviva.
· Under the terms of the Proposed Acquisition, holders of Friends Life Shares will receive 0.74 New Aviva Shares for each Friends Life Share they hold.
· Based on the Exchange Ratio and the Closing Price of Aviva and Friends Life shares as at 20 November 2014 (being the last business day prior to talks between Aviva and Friends Life being made public), the Proposed Acquisition, excluding the payment to RCAP in relation to the Value Share and Friends Life's proposed second interim dividend payment in respect of the 2014 financial year (each as described below), values each Friends Life Share at 394p and Friends Life's existing issued ordinary share capital at approximately £5.6 billion, representing a premium of:
- 15 per cent. to the Closing Price of 343p per Friends Life Share on 20 November 2014; and
- 27 per cent. to the average Closing Price of 310p per Friends Life Share for the three-month period ended 20 November 2014.
· Based on the Exchange Ratio and the Closing Price of Aviva as at 1 December 2014, the Proposed Acquisition values each Friends Life Share at 370p, which represents a premium of 8 per cent. to the closing price of 343p per Friends Life Share on 20 November 2014.
· In addition, assuming the Proposed Acquisition completes, Friends Life Shareholders who are on the Friends Life shareholder register at the Friends Life Record Date will also be entitled to receive, in place of Friends Life's 2014 final dividend, Friends Life's proposed second interim dividend of 24.1p per share, in respect of the 2014 financial year, resulting in a 2014 full year dividend of 31.15p per share. In the event that the Proposed Acquisition does not complete, Friends Life expects that its 2014 final dividend and therefore its 2014 full year dividend would be in line with Friends Life's 2013 final dividend and 2013 full year dividend, respectively. Friends Life Shareholders will have no entitlement to Aviva's proposed 2014 final dividend.
· The Proposed Acquisition would result in Friends Life Shareholders owning approximately 26 per cent. of the issued ordinary share capital of the Enlarged Aviva Group.
· The Proposed Acquisition accelerates Aviva's investment thesis of "cash flow plus growth" with a financial and strategic rationale that the board of Aviva believes creates a compelling opportunity for the Enlarged Aviva Group to create value for both sets of shareholders:
Financial
- Expected to generate approximately £0.6 billion incremental Holdco Excess Cash Flow per annum[1];
- Gives rise to a combined central liquidity position of £2.4 billion[2];
- Reduces "day 1" external debt leverage and S&P Leverage to a level consistent with an S&P AA rating, beyond Aviva's medium term objectives, with no requirement to further deleverage the Enlarged Aviva Group;
- Expected to generate approximately £225 million of run-rate annual cost synergies by the end of 2017, which Aviva has valued at approximately £1.8 billion[3]. Aviva believes these synergies will deliver substantial value and increase cash flow generation and expects significant additional value through capital, financial and revenue synergies over time; and
- Accelerates Aviva's expected dividend growth, with the intention, in the medium term, to move dividend cover to approximately 2x operating EPS on an IFRS basis.
Strategic
- Secures position as the leading insurance and savings business in the Enlarged Aviva Group's home market, with 16 million customers in the UK (prior to the deduction of overlapping customers);
- Increases scale in attractive segments of the UK Life market including leadership position in Corporate Pensions, Protection and At-Retirement;
- Opportunity for Aviva Investors to add up to approximately £70 billion[4] of Friends Life's UK assets under administration, increasing its AuM by up to 29 per cent., to up to approximately £309 billion[5];
- Brings 5 million current Friends Life customers to Aviva, who stand to benefit from being part of a stronger and more diversified group with a wider product range, and enables Aviva to accelerate its Digital First and True Customer Composite strategies;
- Adds significant scale to Aviva's existing UK Life back book, as well as a management team with the expertise to unlock further value from UK Life insurance back books; and
- Enables investment in the Enlarged Aviva Group's growth businesses.
· The Aviva Directors propose to pay a 2014 final dividend of 12.25p per share, representing a 30 per cent. increase on the 2013 final dividend per share, and resulting in a 2014 full year dividend of 18.1p per share. The Aviva Directors believe the Proposed Acquisition would be broadly neutral to Aviva's operating EPS once full run-rate synergies are achieved, expected by the end of 2017.
· The Aviva Directors believe the Proposed Acquisition brings together two successful management teams, combining Aviva's particular expertise in cost reduction and turnaround with Friends Life's expertise in business integration and back book management.
· Following the Proposed Acquisition, it is anticipated that, Andy Briggs, the current Group Chief Executive of Friends Life, will become Chief Executive Officer of Aviva UK Life and will join the board of Aviva as an Executive Director. Shortly after the Scheme becomes Effective, it is expected that Sir Malcolm Williamson, the current Chairman of Friends Life, will join the board of Aviva as Senior Independent Director and it is anticipated that a further Non-Executive Director of Friends Life will join the board of Aviva.
· The Exchange Ratio and implied premium have been agreed between Aviva and Friends Life having taken into account the impact of the Value Share and the consideration that will be due from Friends Life to RCAP under the terms of the Limited Partnership Agreement.
· At completion of the Proposed Acquisition, Friends Life is required to settle the Value Share in cash. The cash consideration payable to RCAP is expected by Friends Life to be approximately £220 million. However, under the terms of the Limited Partnership Agreement, RCAP can elect to receive the consideration in Friends Life Shares. If RCAP elects for shares, any Friends Life Shares would be acquired by Aviva immediately following completion of the Proposed Acquisition at the Exchange Ratio in connection with the proposed implementation of the Scheme.

more..

Hi - some advice please. I am lucky to hold some of these in my SIPP.

Current AV. share price 5.05x0.74=3.74

Value of FLG upon completion = 3.74 + 0.21 - financing cost of holding until share goes xd = say £3.89.

Current share price = 3.78


As mine are in my SIPP it's less about the financing cost and more about the opportunity cost so the gap between the transaction value and the current value is a bit larger.


Do people plan to hold this until the transaction completes, maybe hoping for another bid (seems unlikely), sell out on a decent rise in price of AV. or have you sold already

Thanks

Sold already this morning ,skinny seems to think you have to hold while april for the dividend on top of the 374p.

Being a short term trader and using derivatives I dont want to hold all that time. AND it might not go through.

Id seek other views aswel, good luck.

Hi CC - that was my initial take based on the FLG financial calendar, but as has been mentioned over the road, it may well all be concluded in this financial year - which would obviously make much more sense and be tidier.

I hold AV. & FLG in my SIPP and sold the FLG in my ISA last week @367.5p.

My plan currently is to hold until completion.

Thanks guys. I don't have a firm plan but I am minded to keep until completion but I'm struggling to understand exactly when the dividend would arrive as last year xd date was early April. I'm assuming if the transaction is brought forward to January then the dividend will be dragged forward to then but that's not 100% clear to me.

I am also minded if AV. were to drop to say 480 to buy some AV. at that point as a protection in case it falls through.

Just sold @405p - good luck to other holders.

Final Results

Results for the year ended 31 December 2014
Strong cash performance
· Sustainable free surplus £373 million, up 15% (2013: £325 million) and marginally ahead of guidance

· Continued strong performance in Corporate Benefits, positive net fund flows of £0.6 billion, taking assets under administration to £22.0 billion; significant improvement in underlying free surplus, up to £29 million (2013: £11 million)

· IFRS based operating profit before tax of £556 million, up 38% (2013: £402 million)

· MCEV operating profit before tax of £498 million, down 7% (2013: £535 million); mainly due to reduction in VNB

· Value of new business down £47 million to £132 million (including £32 million reduction in Retirement Income VNB) as predicted trends continue

Capital position robust
· Available shareholder assets £1,066 million

· IGCA(i) surplus £2.3 billion, coverage ratio 240%

· Economic capital surplus(i) £3.7 billion, coverage ratio 196%

· Full year dividend of 31.15 pence per share subject to completion of the Proposed Acquisition by Aviva plc (2013: 21.14 pence per share)(ii)

Business highlights
· Successful reallocation of £760 million of annuities from with-profits funds, resulting in a sustainable free surplus ("SFS") benefit of circa £7 million per annum from 2015

· Recapture of £1.6 billion of assets backing annuities in November, resulting in a SFS benefit of circa £13 million per annum from 2015

· Further reallocation of £665 million of annuities completed in the first quarter of 2015 resulting in a SFS benefit of circa £5 million per annum from 2015

· Friends Life has responded strongly to the legislative and regulatory changes to pensions and workplace savings:

· New individual customer platform My Savings on track to be launched in April 2015

· Developed a range of products and services to meet new regulatory requirements, including an income tool, investment risk appetite assessments, retirement planning and tax information and tools

· Invested in the creation of a Retirement Information Centre

· Annuity sales down only 15%, outperforming the market which is down 38%(iii)

· Efficient cost management, with operating expenses down a further 2% to £549 million

· Auto-enrolment activity, which peaked in the first half of 2014, has enrolled 957 schemes this year, contributing to a net increase in members of 169,000 in 2014

· Following the re-platforming of the new business, the International division is on track for re-platforming in-force business during 2015

· Successful sale of Lombard for £316 million, completed in October 2014


Proposed Acquisition of Friends Life Group Limited by Aviva plc
· All share acquisition:

· 0.74 new Aviva shares for each Friends Life Group share

· The proposed second interim dividend includes a 10 pence per share enhancement to the 2013 final dividend

· Value share(iv) will be settled

· Accelerates Friends Life's existing strategy, creating the UK's leading insurance, savings and asset management business:

· Creates the UK's largest back book(v) with the potential to release substantial capital synergies

· Leading market positions in corporate pensions and protection; and one in four retiring defined contribution pension customers(vi)

· Proven track record in the successful integration and delivery of cost savings

· Court and shareholder general meeting to be held on 26 March, completion expected in the second quarter of 2015

Small punt here, chart looking good and 24.1p div 10/04

So, Farewell, Friends Life
A short and sweet dalliance with a high yield stock and a very nice profit. Now, do I stick with AV., or sell and find a new home for the cash?