Friends Life Investments will be a 100 per cent owned subsidiary of Friends Life Group and be run by chief investment officer Mark Versey.
It will initially focus on fixed income assets but further investment classes may be added as the business expands.
The Group hopes its creation will enable the business to leverage its existing investment skills in investment strategy and asset liability management.
Andy Briggs, chief executive of Friends Life, said: “The launch of Friends Life Investments marks a significant development for our business.
The intention is for this new company to build on existing expertise across our business and is further evidence of our strategic focus in the UK.”
The firm also announced a partnership with IT consulting organisation Diligenta.
This will give Diligenta administration responsibility for most of Friends Life’s UK Heritage protection business.
Approximately 1,900 Friends Life jobs around the UK will transfer to Diligenta.
The partnership will be effective from the first quarter of 2012.
Phiroz Vandrevala, managing director and vice chairman of Diligenta, said: “Our unparalleled experience in the Life and Pension sector coupled with our unique platform capability enabled us to win this path breaking deal. This strategic partnership will allow Friends Life to focus on new opportunities in its corporate markets and grow its business.”