JC Flowers and Friends Provident are set to meet to discuss the US private equity firm's plan for the British insurer after chairman, Sir Adrian Montague, called for clarity on a potential deal.

JC Flowers said today: “We would welcome a chance to meet as soon as possible to discuss our ideas.”

The private equity firm was responding to Sir Adrian's comments this morning that the insurer "would be prepared to discuss a formal approach if one was made to us".

The chairman made his statement as he revealed a £113 million annual loss compared to the previous year's £491 million profit.

Over two months ago, JC Flowers, which holds a 2.7 per cent stake in the insurer, said it may make a bid for Friends Provident, which is valued at just under £3 billion.

Sir Adrian said today: "All I can say is we have not had a formal approach from Flowers. The point is coming when the uncertainty is not good for anybody, so we would like to call on Flowers to make its position clear.”

Friends Provident , which ousted its chief executive Philip Moore in November following a failed merger with fellow insurer Resolution last year and issued a profits warning just over two months ago, also said today its finance director, Jim Smart, will leave over the summer.

Trevor Matthews, the insurer's new chief executive who has been poached from Standard Life, is due to start in late July.

The group said Mr Smart had planned to leave the company as part of the planned merger with Resolution but had agreed to stay on to oversee its strategic review.

At the time of its profit warning, the insurer indicated that underlying profits, which include assumptions for long-term investment returns and strip out acquisition costs, would be around £20 million. Today it revealed these had fallen to just £16 million compared with £509 million in 2006.

UK sales were up 15 per cent, driven by strong pensions growth, and 18 per cent overseas.

The company will pay a final dividend of 5.3p taking the total 2007 dividend to 8p, an increase of 2 per cent on 2006. However, it warned that future payouts would be lower.

Sir Adrian said:"We are fully focused on implementing the strategic review to gain the benefits from it swiftly and efficiently."

He said an update on progress can be expected at the time of interim results in August 2008.

The company has said it was looking at selling off its Lombard European wealth management business and its 52 per cent stake in fund manager F&C. However, it provided no update on these potential divestments today.

Shares in the insurer were up nearly 1 per cent to 119p in early trading.

Commenting on today's result, Tim Young, an insurance analyst with Collins Stewart, said the insurer was in "a parlous state".

"While we are positive on the outlook for the UK life and pensions industry, Friends Provident is poorly positioned in the market and is structurally unsound," Mr Young said. "The only lifeline would be Flowers' coming into buy."

However, he said it was unlikely Flowers would "pay the previously indicated 175p, let alone the 200-220p that many investors considered reasonable".

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