Jobs threat in Resolution merger

By SIMON ENGLISH FOR MAILONLINE
Updated: 09:30 EST, 25 July 2007

Friends Provident and Resolution today unveiled an £8.5bn merger that promises to reshape Britain's insurance industry, but which also threatens hundreds of jobs.

Up to £100m of cost savings are expected by 2010, a number that is likely to alarm finance unions, though executives said no exact figures on job cuts could yet be given.

The all-share deal creates a new force in the sector, putting pressure on rivals such as Standard Life to cook up something similar.

The new company, called Friends Financial, will snap at the heels of Legal & General in terms of size and firepower. Analysts regard the merger as an elegant solution for both companies, giving Friends access to much-needed capital and Resolution a brand through which it can expand.

Resolution shareholders will get 3.25 new Friends Provident shares for each of their own shares and will own 50.9% of the merged business, which will have assets of £165bn, 10m customers and profits that are heading towards £1bn a year.

Resolution's Clive Cowdery and Mike Biggs will be chairman and chief executive while Friends Provident's Sir Adrian Montague and Philip Moore will be deputy chairman and deputy chief executive respectively.

Cowdery insisted there were important jobs for all four men to do, at least while the companies are being put together.

'The first thing is to deliver the merger benefits,' he said. 'Simultaneously, we do not want to lose one inch of the market momentum that Friends has got.'

He said the deal 'marks a turning point in the restructuring of the UK life industry' - a shake-up he can plausibly claim to have led.

'The end of the false-glory market came in 2003,' he said. 'At that point people believed you couldn't lose money selling an insurance policy. After that they believed you couldn't make money. We are halfway through a seven-year restructuring that will see the exiting of marginal players with large-scale companies making sustainable returns.'

Friends, floated in 2001, and was founded in 1832 by Quakers.

Finance chief is the goodbye guy - again

The first casualty in the fallout from the merger is Friends' finance director Jim Smart.

He joined the company last November and is already on his way out, just months after a rumoured fall-out with chief executive Philip Moore over strategy.

Moore had announced aggressive expansion plans, but Smart said the insurer lacked the capital to make the targets realistic. Moore was forced to backtrack. Smart was previously finance director at Boots, but lost out there after the chemist's merger with Alliance. He will have received handsome compensation then and can expect some more this time, but details are not yet known.

A spokesman said: 'Jim was fully involved in the strategic formulation of the merger. His intention is to leave the group once the merger is complete.'