Friends Life has set aside £31m to help Sesame Bankhall Group meet its customer redress liabilities from a number of past business reviews, and has warned that compensation costs could even rise further in the coming years.
Friends Life’s results for the first half of this year reveal it has given a “letter of support” to Sesame Bankhall Group to help them meet its liabilities, but that “considerable uncertainty” remains over the final bill.
The results state: “A number of business reviews are currently being undertaken in these companies and provisions of £31m have been included in respect of customer redress.
“There is considerable uncertainty surrounding the outcome of these reviews, the number of future complaints and the associated costs for dealing with redress and complaint administration activities.
“Any costs arising from this are not expected to have a material adverse impact for the group.”
Sesame also posted an operating loss of £4m for the first half of this year. There is no mention in the results of the possible sale of the network, following widespread speculation.
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.
Meanwhile, Friends Life saw an operating profit before tax of £159m, despite the value of new business being down 24 per cent to £65m as “predicted trends continue” and the full impact of the Budget still to emerge.
Reporting also mentioned the disposal of its Lombard operating segment to Blackstone Group for £317m, due to “the limited strategic and operational synergies between Lombard and the rest of the group”.
Regulatory approval has been granted to increase the scale of the share buy-back to £317m, from the £261m announced in July, with this to be commenced once the sale has completed and proceeds received, the results said.
Elsewhere, the peak of auto-enrolment activity in the first half delivered 648 schemes with 108,000 net members, while growth in the protection business was up 21 per cent.
Andy Briggs, group chief executive, said: “We will focus on our existing mass affluent customers, who do not have an active independent financial adviser relationship and are unlikely to pay fees for IFA advice.
“Post Budget, these customers will have a much broader range of options and hence will have a greater need for guidance.”
