Friends Provident yesterday moved to reinvent itself as a niche provider of life cover and pensions as it paved the way for a sale of three non-core wealth management assets that are likely to fetch about £1.2 billion.

Friends also unveiled plans to cut 600 jobs, or 15 per cent of its payroll of 4,000, in a savings drive aimed at cutting operating and development costs by £60 million a year by 2009.

The company said it would maintain this year's dividend, at a cost of about £180 million, but that the payout next year would be halved.

The shares slid a tenth, to 139p, as investors learnt that full-year pre-tax profits will be almost obliterated, at just £20 million, after £509 million in 2006. The City also moved to rerate Friends in its new proposed form.

In what some analysts described as a mass “kitchen-sinking” exercise, Friends said that it would take charges totalling £440 million, including a £160 million hit as a result of customers dropping savings and investment products.

Sir Adrian Montague, the chairman of Friends, said: “We are pursuing a very different strategy. It's going to produce a very different group. It is self-supporting and self-funding. We are now living within our means.”

Sir Adrian unveiled the findings of a two-month review that he said “marked a turning point” in the direction of the insurer, once the UK's fourth-largest. The group and its advisers have been exploring all options since being jilted out of a merger deal with Resolution Life, the closed life funds group.

Friends found itself vulnerable last year amid questions over its ability to fund new business. Plans for a £500 million bond issue to raise funds have been formally abandoned in the light of the new strategy.

Although Friends did not declare for sale its 52 per cent stake in F&C Asset Management, the quoted fund manager, yesterday, it made clear that it was one of a number that “do not fit the revised strategy”.

Friends also said it is to discuss with the respective management teams the future of Lombard, its investment firm, and Pantheon, the financial adviser bought last year.

Alain Grisay, F&C's chief executive, said he would explore all options, including a management buyout.

Analysts said the strategic change was disappointing and that Friends remains vulnerable to a takeover.

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