Friends Provident, the life insurer, is abandoning the sale of Lombard, its wealth management arm, nine months after putting the business on the market.

The insurer also confirmed that it planned to hand its 52 per cent stake in F&C, the British asset manager, to its shareholders, with the distribution expected to complete by mid-2009.

Friends put Lombard and its F&C stake up for sale in January as part of a strategic overhaul triggered by the collapse of the group’s planned merger with rival Resolution. However, the sale stalled, with potential buyers struggling to finance offers as a result of the credit crunch.

Trevor Matthews, who took over as chief executive of the life insurer three months ago, said: "We received a number of proposals for Lombard but it is clear to me that we should not only retain but also develop this unique business.”

Friends paid about £400 million for Lombard in 2005 but it is thought that the offers received for the business were below that level.

Friends Provident shares climbed almost 6 per cent to 70.5p today.

The insurer said it was still talking to an unspecified number of potential buyers of its F&C stake, but that slumping financial markets had so far made an agreement on price impossible.

Mr Matthews said this morning that interested parties in F&C included some who had approached the company in the past few days.

Friends Provident could also become a takeover target itself as JC Flowers, the private equity group whose bid for the company was rejected earlier this year, is able to return with an offer for the group.

Mr Matthews, who joined the company in July from rival Standard Life, said he was focused on building a strong independent company.

He said: "I am very confident about the future. We are confident of achieving the cost reduction commitment we made at the start of this year, and confident too of reshaping the organisation to flourish both in the UK and increasingly overseas."

Friends Provident’s sales for the nine months to 30 September were down 14 per cent on the same period last year at £701 million. The drop in sales reflected a 24 per cent fall in UK sales, where Friends has quit some segments of the market since January to focus exclusively on protection and group pension products as part of its strategic overhaul.

The UK downturn was partly offset by Friends’ international division, where sales jumped 29 per cent.

Friends also reassured that its capital position was “strong”, with a capital surplus of £1 billion at October 30, unchanged from a previous update on its capital strength issued on October 10.

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