JC FLOWERS has built a secret stake in Friends Provident, fuelling suggestions that the American private-equity group could launch a £4 billion takeover bid for the embattled insurer.

JC Flowers is understood to have taken a stake of about 1.7% in the past week. The move comes just 11 days before Friends is due to reveal the results of a strategic review on January 31.

Friends has been vulnerable to a bid since its £8.4 billion merger with Resolution, the closed life-funds group, collapsed in October after the deal was gate-crashed by rival Pearl Group.

JC Flowers has looked at buying Friends before. Last May, the American private-equity house, headed by former Goldman Sachs banker Christopher Flowers, trawled round insurers looking for partners to launch a joint bid of about £5 billion.

Flowers is understood to have held tentative talks with Axa of France, while AIG, Swiss Re and Zurich Financial Services were also contacted.

The American group is understood to have renewed its interest in Friends after it abandoned its attempt to rescue Northern Rock late last year.

Last night bankers said Friends is thought to have received two informal approaches about a bid. However, these have not progressed.

Friends has been in trouble for the past 10 months after the group was forced to admit in March that it would not meet ambitious new-business profit targets. Late last year the insurance company admitted it would need to raise £500m in a bond issue to fund its growth. F&C Asset Management, the listed fund manager 53% owned by Friends, also warned on profits.

The troubled insurer is also searching for a chief executive to replace Philip Moore, who was ousted last year.

The strategic review will lead to a sale of all or part of the group. Bankers believe Friends is likely to sell its stake in F&C, worth about £490m, which could plug its funding gap.

Lombard, the international arm for wealthy customers that is thought to be worth £700m, could also be auctioned. Parts of the protection business may be carved out and sold off to operators of closed funds.

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