In-the-red Friends to lose its top money man

Already without a chief executive after the ousting of Philip Moore and ahead of the arrival of Trevor Matthews from Standard Life, Friends revealed that Smart wanted to "pursue other opportunities".

Chairman Sir Adrian Montague admitted he was "very sorry to see him go". Smart insisted the decision should not be seen as a vote of no-confidence in the board or the business model.

But analysts say the insurer looks increasingly in limbo, with investors desperate for a decent takeover offer to improve the company's fortunes.

Friends has been around since 1832, when it was formed to alleviate the hardship of Quaker families, and this year must be the roughest of its 176 years. A merger with Resolution Life fell apart and rumours of a split at the top over strategy emerged.

Today Friends confirmed it made a loss of £113 million for the year to December, down from a profit of £491million 12 months ago. This was largely due to savers withdrawing money from products that have mostly performed well below those of rivals.

Richard Eagling of Moneyfacts said of Friends' investment performance: "Its with-profits endowment returns and with-profits personal pension payouts have both come bottom of our recent surveys. Customers invested into a balanced managed fund in its unit-linked personal pensions may have fared slightly better, although these are still less than the industry average."

The shares fared even worse, halving in a year. They rose 1.1p to 120.1p today.

American buyout group JC Flowers is sniffing around, but has not made a formal proposal. Sir Adrian today asked Flowers to come clean. "We call on them to make their position clear. If they have an offer to make, we will look at it," he said.

Friends said in January it would refocus on the life and pensions sector, selling wealth management unit Lombard and its 52% stake in F&C Asset Management. Sir Adrian said several parties had expressed an interest in buying these businesses and that the review was "proceeding well".

Friends is paying a total dividend this year of 8p a share, but shareholders will have to get used to lower payments when the company is downsized. Proceeds from the sale of Lombard and F&C will be returned to investors.

City analysts think Matthews, said not to have seen eye-to-eye with Standard Life boss Sandy Crombie, is a good appointment. A gregarious and ambitious Aussie, Matthews will now need to put finding a new finance chief at the top of his list of tasks.

Smart is not sure what he will do next. "It has been an eventful period in this company's development and I am now looking forward to a new challenge," he said.