Distribution Challenges

A Winning Strategy

Simon Clamp
 Agenda

• Changing Distribution

• Challenges Facing Providers

• Friends Provident Progress

• Friends Provident’s Winning Distribution Strategy

© 11 November 2004

UK Distribution Workshop - SC

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 Changing Distribution

© 11 November 2004

UK Distribution Workshop - SC

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 UK Market Changes
12000

10000 Other
8000 Post Retirement
£m Group Pensions
6000
APE Indiv. Pensions
4000 Investments
2000 Protection

0 Distribution model
2000 2001 2002 2003
12000

Product mix 10000

8000 Other
£m Direct
6000
APE Tied
4000 IFA
2000

0
2000 2001 2002 2003

Source : ABI © 11 November 2004

UK Distribution Workshop - SC

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 Future UK Distribution Landscape

SINGLE TIE MULTI-TIE IFA

MODERATE EARNERS
MASS AFFLUENT
HIGH NET WORTH

Source : Friends Provident © 11 November 2004

UK Distribution Workshop - SC

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 Future UK Distribution Landscape
MORTGAGE EBCs
BROKERS

PROTECTION
DC PENSION
SPECIALISTS
SPECIALISTS
SINGLE TIE MULTI-TIE IFA
REGIONAL
IFAs
RETAILERS
NATIONALS/NETWORKS

BANKS

MODERATE EARNERS
MASS AFFLUENT
HIGH NET WORTH
Source : Friends Provident © 11 November 2004

UK Distribution Workshop - SC

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 Future UK Distribution Landscape

Pre-depolarisation Depolarisation +12mths

100%
90% Single
Single tie
80% tie
70%
% of Multi-tie
market 60% variants
APE 50%
40%
Independent
30% Independent
20%
10%
0%
Source : Friends Provident © 11 November 2004

UK Distribution Workshop - SC

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 Challenges Facing
Providers

© 11 November 2004

UK Distribution Workshop - SC

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 Key Challenges for Providers

• Accessing and managing different routes to

market whilst maintaining / growing margins
• Building and retaining strong, mutually
beneficial distribution relationships
• Maintaining product and service focus
alongside operational flexibility
• Delivering quality service whilst cutting unit
costs is key
© 11 November 2004

UK Distribution Workshop - SC

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 Winning The Distribution Battle

• How important is current scale?

– Reality is capability to flex capacity
• Does a strong consumer brand matter?
– Reality is consumer seeking advice
– Growth of distributor brand
• Is the water-front provider a myth?
– Reality is strong proposition in key areas
– Coverage of every product not necessary
• Is there a requirement to take regulatory responsibility for
distribution?
– We believe for certain distribution models only
© 11 November 2004

UK Distribution Workshop - SC

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 Friends Provident
Progress

© 11 November 2004

UK Distribution Workshop - SC

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 FP Share UK IFA Life and Pensions Market

16%

14%

12%

10%
Group DC
Protection
8%
Investment
Total L&P
6%

4%

2%

0%
2001 2002 2003 2004 Q1 2004 Q2

Source : ABI (based on APE) © 11 November 2004

UK Distribution Workshop - SC

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 Growth in FP Market Share with Top Distributors
10%

9%

8%
Bankhall
Sesame
7% BBB
RIs
Tenet
Millfield Bankhall 7500
6%
Sesame 6550
BBB 1035
5%
Tenet 5500
Millfield 1890
4%
Sources : Bankhall, Financial Adviser
2002 2003 2004 H1

Source : Touchstone (based on number of cases) © 11 November 2004

UK Distribution Workshop - SC

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 FP Top 15 Distributors (Q4 2003 – Q3 2004)
Distributor Segment
1 Bankhall IFA service provider / network
2 Sesame IFA network
3 Watson Wyatt EBC
4 Countrywide Appointed representative
5 Millfield (post merger) National IFA
6 William M Mercer EBC Top 15 represent 57% of APE
7 Alexander Forbes Corporate IFA Top 100 represent 86% of APE
8 Tenet IFA network
9 Aon EBC
10 Sedgwicks National IFA
11 Skipton Fin. Serv. National IFA
12 Berkeley Berry Birch IFA network
13 Marsh Corporate IFA
14 Hargreaves Lansdowne National IFA
15 St James’s Place Distributor / product provider

© 11 November 2004

UK Distribution Workshop - SC

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 Company Achievements
Financial Adviser Awards

5 star award (AKG)

- 4 star (2003)
Life & Pension Gold Awards 2004
- Life Assurance
- Protection
- Health Insurance
- Online Life and Pensions
- Pensions
- Individual Pensions
- Group Pensions
Cover magazine 2004 winner for
- Income Protection and Critical Illness
Technology Awards
- Health Insurance Awards 2004 – Best Use of E-business
- Bankhall Awards 2004 – Technology Company of the Year
Other Awards
- Best Workplaces (26 th out of 50)
- Business in the Community Corporate Responsibility Index (22nd out of 100)

© 11 November 2004

UK Distribution Workshop - SC

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 Product Innovation
Broad product range

Innovation in 3 key areas

– Protection
• E-select
– Pensions
• Activ / open architecture
• Individual single premium Q1 2005
– Investments
• F&C
• Safeguard Optimiser
• Open architecture

Leading product propositions

© 11 November 2004

UK Distribution Workshop - SC

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 The IT Edge

Friends
Provident UK Provident
International Single
Scalable
Platform
London &
NM Financial
Manchester

FP has one core underlying system – a great competitive edge

© 11 November 2004

UK Distribution Workshop - SC

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 Distribution Deals

• Bankhall - preferred protection provider

• Sesame - preferred protection provider

• Lighthouse - preferred protection provider

• St James’s Place - preferred protection provider

+ preferred stakeholder provider

• THINC Group - sole provider for Term and Critical Illness

© 11 November 2004

UK Distribution Workshop - SC

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 Friends Provident’s
Winning Distribution
Strategy

© 11 November 2004

UK Distribution Workshop - SC

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 Winning Distribution Profitably

• Reduced unit costs through

– Increased volume with level costs
– Use of out-sourcing to provide scale at
reduced cost
– Re-engineered processes
– e-commerce and automation

• While growing a reputation for excellent service

Operational excellence
© 11 November 2004

UK Distribution Workshop - SC

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 Distribution Strategy

• Seek distribution deals

– With IFAs, building societies, providers
• Banks
– Deliver product and service solutions to banks
• Strategic partnerships with IFAs
– Investment in IFAs
• Tied mortgage advisers
– Friends Mortgage World
© 11 November 2004

UK Distribution Workshop - SC

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 Distribution Strategy
• Focused product range
– FP products cover majority of distributor revenue
• Scalability
– Out-sourcing and straight through processing to manage volume
• Bundled and unbundled group pensions platform capability
– EBCs want to deal with small number of providers with high quality
platforms and open architecture
– EBC client proposition focused on investment advice
• Service quality is key
• Technology a significant differentiator

Operational excellence will be our differentiator

© 11 November 2004

UK Distribution Workshop - SC

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 Case Study

An example of a successful agreement between a

product manufacturer and a distributor

Based on a quality product and service proposition

enabled by end to end e-commerce

FP key to SJP move to e-enabled processes

SJP now discussing expansion of proposition

© 11 November 2004

UK Distribution Workshop - SC

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 Case Study

• Individual and group stakeholder pensions

– Panel of 3
– Commenced July 2003

• Protection
– Panel of 5
– Commenced February 2004
– FP position 2nd

• Overall SJP 15th in FP’s “top 100” list

© 11 November 2004

UK Distribution Workshop - SC

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