Swiss Life mulls bid for Friends Prov unit

By Clara Ferreira-Marques and Mathieu Robbins Reuters - Friday, May 9 05:48 pm

LONDON (Reuters) - Insurer Swiss Life is considering a bid for Lombard, the high-end insurance unit of Friends Provident , and is already conducting due diligence, sources familiar with the matter said on Friday.

Friends Provident, Britain's smallest bluechip life insurer, said in January it could sell Lombard -- just three years after buying the business -- as part of a root-and-branch strategy overhaul which could also see the group selling off its majority stake in asset manager F&C .

Friends Chairman Adrian Montague, who plans to slash costs and refocus on the insurer's core businesses, said last month he expected first-round bids for Lombard in May, with a view to selling by the time it reports interim results in early August.

"It is really at a very early stage. The non-binding (bids) are not due yet," one of the sources said on Friday.

The sources did not comment on other suitors currently studying Lombard's books.

Friends bought Luxembourg-based Lombard in 2005 for around 400 million pounds, including earnout clauses, to expand its international presence and its reach into the ultra high net worth market.

Some analysts have valued Lombard at over 700 million pounds, but bankers have been sceptical of Friends' ability to command a hefty premium in current market conditions. Lombard had a turbulent 2007, with sales dropping 38 percent in the fourth quarter, traditionally its strongest period.

"We definitely want to be number one in this market and we are on our way to get there, but I cannot comment on rumours," a spokesman for Swiss Life said.

Shares in Friends Provident recovered from earlier losses in line with a weak sector on Friday to close down 1 percent at 117.8p after the news. Swiss Life closed down 0.8 percent.

Friends has been in the throes of a strategy overhaul and facing questions about its future since it abandoned key growth targets last year and a planned 8.7 billion pound merger with rival Resolution fell through. It then ousted its chief executive and announced a major review.

Friends has since rejected approaches from U.S. buyout group J.C. Flowers, which finally withdrew its 3.5 billion pound cash takeover proposal last month after failing to bring the UK insurer to the negotiating table.

(Reporting by Clara Ferreira-Marques, Mathieu Robbins and Douwe Miedema; Editing by Stephen Weeks)

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