Friends Provident feels strong enough to turn down a £3.5 billion takeover bid from private equity house JC Flowers despite all its problems.

Without a chief executive until Trevor Matthews arrives from Standard Life in the summer, Friends has endured a terrible year.

It turned a profit of £491 million in 2006 into a loss of £113 million for 2007 and has faced scepticism from the City about its strategy and long-term future.

Today it confirmed that JC Flowers made an offer of 150p a share, but insists that this proposal "significantly under-values Friends Provident and its prospects and does not represent a basis for discussion".

JC Flowers, run by former Goldman Sachs banker Chris Flowers, has made several offers for Friends - at lower levels on each occasion.

Last year it tabled a bid at 175p a share, which Friends also rejected out of hand.

Friends entered a merger deal with Resolution Life before Christmas, but it quickly collapsed after better offers arrived for Resolution.

Chief executive Philip Moore was ousted in the fallout. Last month finance director Jim Smart said he would leave in August, giving Matthews an immediate hole to fill when he starts the new job.

Friends Provident shares have halved in the last year but gained today 4.4p to 124.5p.

The Friends' board, led by chairman Sir Adrian Montague, feels it cannot sell the company for less than 160p. It believes that any lower would be less than the insurer's embedded value - - or the long-term value of its policies.

However, so many customers have cashed in their policies due to poor investment performance that this embedded value is said by analysts to be in doubt.

Friends is looking to sell its stake in F&C Asset Management as well as subsidiaries Lombard and Pantheon Financial. Critics of the company say that pushing through this strategy before Matthews arrives will leave the new chief executive in an awkward position. Flowers could yet return with another bid. It has a near 3% stake in the insurer.

Friends is headquartered in London and employs 4,000 across the UK. It is cutting 600 of those jobs as part of its strategic review.