FLG.L Share News (FLG)

Although a reduction in individual annuities hit margins, Friend Life Group enjoyed rising assets under management (AUM) as its generated increased new business from its UK corporate pensions and protection businesses.Friend Life, the renamed Resolution, enjoyed 3% growth in sales volumes to £690m in the nine months to 30 September as corporate benefits business grew annual premium equivalent (APE) 14% to £465m and protection APE grew 11% to £70m.Strong demand from auto-enrolled pensions helped the corporate benefits arm deliver positive net fund flows of £0.6bn to drive AUM up 3% to £21.4bn.But the group's annuities business saw sales volumes fall 12%, though this was better than expectations and ahead of a market that declined 32% in the first half of 2014, thanks to "continued strong engagement with customers and the group's exposure to policies with valuable guarantees which remain attractive for customers".However, this resulted in a 24% fall to £94m in new business profits, which saw the present value of new business margins (PVNBP) cut to 2.4% compared to 3.1% at the same point a year ago.Chief executive Andy Briggs said: "Development of our new retirement proposition is on track, we have further enhanced our customer engagement, and I look forward with confidence to the launch of the new propositions and the new retail platform in April next year."I am also encouraged by the progress we are making in our international division, with the benefits of the roll out of the new platform and product and sales initiatives coming through."After a difficult first half, Friends Provident International reported lower nine month sales but APE in the third quarter of £32m was an improvement of more than a third on the run-rate of the first two quarters of the year, as sales initiatives and new products launched earlier in the year are generating profitable growth.Having completed the disposal of Lombard and begun an associated £317m share buyback, Briggs was confident Friend Life would continue to generate cash and make progress towards 1.3 times dividend cover.Broker Shore Capital still has axieties about the business due to the still-rumbling regulatory shifts in the industry and why it is developing a retail platform for an already crowded UK market."We remain concerned over the impact on the business model following the Budget changes to annuities, the 75-basis-point pricing cap on auto-enrolment default funds and the FCA review into legacy products across the industry."The income attractions remain considerable but uncertainties over its positioning in the market are likely to act as an overhang to the stock performance, in our view."