Q&A: Friends Provident CEO on the company’s preliminary numbers

Friends Provident CEO Trevor Matthews

Friends Provident CEO Trevor Matthews

Q: You’re reporting a headline loss under IFRS of around £850m, but
there are a number of factors behind this. What exactly are we seeing

A: Yes, that is the bottom line loss, after you take into account absolutely
everything that’s gone on. I think, as everybody understands, 2008 has been a
remarkable year. Basically, this is a company that’s going through a turnaround
that’s going to take a couple of years. Despite that loss, we’re in a very
strong financial position at the present time and we’re resilient to future
changes, and we’re actually making some good progress.

Now, in that loss for last year, we’ve written down the value of our
investment in our subsidiary, F&C, because it’s quoted on the stock market
and the value of that has fallen.

We have had to allow for the fact that bond spreads have widened quite
considerably. We’ve actually been very conservative in the way we’ve handled
that. And we’ve made other changes that we believe are prudent. So we’ve adopted
a very conservative approach and that’s the result.

Q: But at the same time you’re reporting a huge increase in
underlying EEV profit. Why do the numbers under IFRS on the one hand and EEV on
the other seem to bear absolutely no relation to each other?

A: Well, they are trying to measure different things and I must admit they
are very confusing. That’s part of the challenge we have as an industry and as a
company, to get through about what’s really going on.

The EEV is a better measurement of what’s actually happened to the value of
the business during the year. And what that shows, pleasingly for us, is that
our underlying EEV profit has increased from a very low number 12 months ago to
about £420m last year, and we’re very pleased with that result.

Q: You’ve described Friends Provident as being in a turnaround
scenario. Are you happy with the progress that you’ve made so far?

A: Oh yes. This is a fine organisation. It’s been through a lot of trauma,
there’s no doubt about that ­ but underneath that it’s a very strong
organisation with a lot of potential.

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