Life insurer Resolution yesterday played down talk of a strategic split and said it continued to look at acquisitions and mergers, as it announced forecast-beating 2006 earnings and raised its dividend.
Life insurer Resolution yesterday played down talk of a strategic split and said it continued to look at acquisitions and mergers, as it announced forecast-beating 2006 earnings and raised its dividend.
Resolution, which has almost quadrupled in size in the past two years through acquisitions, triggered a slide in its share price last week when it announced the end of months of talks with unnamed parties that could have resulted in a bid for it, only days after revealing the shock departure of chief executive Paul Thompson.
In its first results since it last year bought the Abbey, Scottish Mutual and Scottish Provident life funds in a £3.6bn deal, virtually doubling its size and entering the FTSE-100, the insurer confirmed it was still looking at opportunities.
Chairman Clive Cowdery, Resolution's founder, commented: "The only thing that has terminated is that we are no longer in talks about a business combination that might lead to an offer for the company."
Gavin Stewart, who heads the asset management and life funds business in Glasgow, said: "We continue to be active in talking to people we also highlighted that we believe we can get a 10% return on embedded value without any further acquisitions."
The insurer, which had a capital surplus of £1.6bn at the end of 2006, said it could return cash to shareholders if no suitable deal was found.
Resolution said its embedded value - the new standard metric which puts a present value on long-term business - had risen from 519p to 613p, beating expectations, as did operating profit at £391m.
The company reported a £93.5m gain from the merger of seven of its life funds and a £61m gain from a change to regulatory reserving requirements.
Stewart said insurance business was up at Scottish Provident, seven out of 17 retail funds were currently in the top-performance quartile, and third-party new business was up threefold.
"We have seen a positive reaction from the staff in Glasgow, they are now part of a business with a focus on life assurance and investments rather than Abbey which had lots of things to think about," he said The dividend met the group's target of a 15% rise, at 19.92p. The insurer said it would raise that by 38% to 27.5p in 2007, targeting 5% increases after that, from a current 2% target.
Resolution began writing new business for the first time with the Abbey deal and the group said it would develop a strategy over 2007 to sell annuities to people whose pensions are in Resolution funds.
Mike Biggs, the group's newly-appointed chief executive, said: "It could be significant, not in 2007 but as we go forward we expect this to be a meaningful contribution to profits."
Raghu Hariharan, analyst at Fox-Pitt, Kelton said: "There was a perception at one time that a deal would take place every three or six months There's huge latent potential for deals to happen, but the gestation period for the deals is much longer than people had expected."
