LONDON (AFX) - Friends Provident PLC turned in higher nine-month sales figures, with a strong performance in group pensions helping to offset weakness in mortgage-related protection insurance.

Friends, the UK's fourth-biggest listed life insurer, said total life and pensions new business for the nine months to Sept 30 came in at 425 mln stg on an annual premium equivalent basis, up 31 pct on 323 mln stg a year earlier.

Friends said sales of protection products had fallen 11 pct over the first nine months to 50 mln stg, weighed down by reduced activity in the housing market and intense price competition. Protection is a key market for Friends, accounting for about 15 pct of UK sales.

Ben Gunn, the head of Friends' Life and Pensions division, said he did not foresee any let-up in price competition for now, although he predicted that protection sales would benefit from new distribution arrangements coming on stream next year.

'Volume in the market generally is stable, but what we are seeing is a significant increase in competitive activity. We expect that to continue for all companies,' he told reporters.

The decline in protection sales was outweighed by strong growth in group pensions, which rose 27 pct to 159 mln stg, and by a 131 pct surge in international new business, to 125 mln stg.

The increase in overseas sales largely reflects a first contribution from Luxembourg-based life and wealth management group Lombard International, which Friends acquired in January this year.

Friends said it expected current trends in the UK market to continue, but predicted the contribution to profits from new business for 2005 as a whole would be up on the year thanks to strong international growth.

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