FLG.L Share News (FLG)

Insurer Friends Life warned that measures in the UK government's Budget will hit its ability to achieve new business targets this year.Friends Life, formerly known as Resolution, said Chancellor George Osborne's decision to relax rules forcing people to buy annuities to fund their retirement would have longer-term implications for its business and the industry as a whole.Chief Executive Andy Briggs said neither the Budget nor recent regulatory and market developments would affect its short term ability to generate cash.But he added that the Budget changes would mean it would be unable to achieve a planned 10% per year growth in value of new business in 2014. He said it expected an overall group new business margin for 2014 broadly similar to the first quarter's."The Budget will impact on our ability to achieve our value of new business target this year," he said."We will develop flexible new retirement propositions and, together with continued growth in areas not affected by the Budget, this will enhance our ability to generate cash."Friends Life said the pension changes were expected to cut non-GAO individual annuity new business volumes by about 50-70% from 2013 levels.It said its immediate business following the announcement had been better than that, with 48% of potential customers proceeding with buying an annuity, 15% cancelling and 37% undecided.Briggs said the group's first quarter performance had been robust, driven by increased profitability and volumes in its protection and corporate benefits businesses, with net fund inflows into corporate benefits.The group's UK division value of new business was flat at £35m, with strong annual premium equivalent (APE) growth of 42% to £201m.It said its Heritage business was making good progress with a £12bn asset transfer to Schroders, talks about a potential sale of its Lombard business were ongoing, but the group's FPI business had taken a hit from tough markets for regular premium unit-linked insurance business throughout its regions. Shares in Friends Life fell 9.3p or 3.1% to 293.6p in early trading in London.PW