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Resolution abandons acquisitions vehicle

by Barbara Rudolph | Published August 15, 2012 at 2:37 PM

Resolution Ltd. on Wednesday, Aug. 15, unveiled a restructuring that will transform the firm, founded by U.K. entrepreneur Clive Cowdery, from a financial services consolidation vehicle into a simple life insurer.

"The company will no longer seek acquisitions ... and will continue to focus on securing maximum value from each part of the group," Resolution said in a statement.

The overhaul, which named Andy Briggs as CEO, cuts Resolution Ltd.'s ties with Resolution Operations LLP, a separate firm run by Cowdery, which had been handling acquisition activity. Under the new structure, Cowdery will join the board of Resolution Ltd.

"The operating agreement under which ROL has provided mergers and acquisitions, strategic and oversight services and skills to the company will end at the latest on 10 December 2013," Resolution said in a statement.

The shift reflects the fact that new rules by the Financial Services Authority, the U.K. financial regulator, are expected to make "externally managed" firms ineligible for a premium listing on the London Stock Exchange.

The move came as Resolution on Wednesday posted weaker-than-expected earnings, a 58% drop in first-half operating profit to £163 million ($255.7 million) from £390 million a year earlier. Resolution pointed to "lower expected investment returns on the in-force book, a disappointing performance in the international businesses partly offset by reduction in costs of new business."

Last year, Resolution posted a pretax loss of £268 million on revenue of £2.13 billion.

Based in Guernsey in the Channel Islands, Resolution listed on the LSE in December 2008, in the depths of the financial crisis, with a mandate to buy up life insurers and fund managers. Since then it has spent £4.7 billion buying three life insurers, including Friends Provident plc.

In March Resolution announced plans to split into two separately listed companies, with one open to new business and the other housing closed life funds and other assets, aiming to complete the break in 2014. Those plans were abandoned with the new restructuring.

Last month, the company canceled a planned £250 million capital return to shareholders, citing "a backdrop of heightened investment, economic and regulatory uncertainty."

As part of the management shake-up announced Wednesday, Tim Tookey will become CFO. Mike Biggs remains chairman.

Investors applauded the changes. Resolution shares closed Wednesday at 226.3 pence, up 6.3 pence, or 2.86%, giving the company a market capitalization of £3.06 billion.

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