Friends Life saw profits before tax soar by 59 per cent last year despite it’s intermediary business, Sesame Bankhall, posting a £19m loss.
Today (18 March) the full impact of Sesame Bankhall’s past business was revealed when owner Friends Life stated the advisory business had posted a full year loss of £19m for 2013 as it was forced to set up a provision following a review of past business including pensions transfers.
Last year Sesame Limited was fined £6m by the Financial Conduct Authority for failing to ensure the advice it gave was suitable on Keydata recommendations and over broader systems and controls weaknesses.
The £6m figure was £2m more than the £4.1m trading profit the network reported for 2012. Sesame Bankhall Group increased its year-on-year profit by nearly £2m from 2011 to 2012.
Earlier this month FTAdviser revealed Sesame Bankhall Group was recruiting a team to telephone clients in order to check that advisers have followed a compliant sales process.
Friends Life did not address speculation of a Sesame sale, with bosses stating that a “strategic review” of Sesame Bankhall Group was still ongoing. There is speculation the “strategic review” will lead to a sale of the business.
Despite Sesame Bankhall’s losses, Friends Life’s UK division was able to post an operating profits before tax of £40m, an increased of £72m on the previous year.
New business strain improved by £35m, a fall of 97 per cent despite an 8 per cent increase in new business volumes.
Protection delivered £22m of this saving, by writing protection business on platforms and restructuring reinsurance arrangements in the year.
Whilst development costs reduced by £6m compared with 2012, there was investment in enhancing the protection proposition and the launch of the open market annuity product within retirement income.
Andy Briggs, group chief executive of Friends Life, said: “The restructuring of the business is now complete. We have a sustainable business with a profitable base for future growth.
“We operate in attractive growth markets, focused on managing legacy life and pension products, and capturing value in the fast-growing retirement provision market.
“We will continue to seek to maximise value from each part of the Group while retaining its focus on rigorous financial discipline. We remain focused on generating growth in both cash and returns while maintaining our strong capital base.”
Friends Life’s parent, Resolution unveiled plans to and the departure of Clive Cowdery and John Tiner from the board.
Instead of replacing the pair a partnership advisory committee is being formed to allow the company to share views regarding the future direction of the business.
Mr Tiner was chief executive of the Financial Services Authority from September 2003 to July 2007.
At the start of this year, sister newspaper Financial Adviser revealed Sesame Bankhall Group may have seen a failed management buyout.
Campbell Macpherson, a former human resources director of pre-merger Sesame from 2003 to 2006, said a failure to get financial backing for a management buyout of SBG from its owners Friends Life could have been the reason why chief executive George Higginson left the firm in January.
Mr Macpherson said: “I would assume that Mr Higginson’s departure could be down to a failed management buyout. It’s normal practice if this happens for those management figures to depart.”
