Friends Provident says it has only limited ability to smooth its with-profits fund, although it has argued that real benefits of these funds comes from asset diversification.
Independent Financial Advisers, however, claim that with-profits have little advantage over other types of investments, without the benefit of smoothing the ups and downs of returns over time.
Martin Jackson, Friends Provident Group Finance Director said that the company is without significant debt on its balance books and has capital to write new business, therefore, making it financially strong.
He did, however, accept that the current free asset ratios (the amount of their assets over liabilities) reflect a short term blip. Mr Jackson confirmed that the smoothing element of with-profits is likely to diminish and that the real benefits from with-profits come from having a widespread mix of investments.