Resolution calls a halt to planned acquisitions

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The Independent Online

Resolution, the life assurance investment vehicle controlled by Clive Cowdery, has halted its acquisition programme after revealing it is "confident" of meeting its targets on returns without the need to go shopping again.

Resolution, which is domiciled in Guernsey, had previously vowed to acquire three major companies to create a British life insurance group with a "market-consistent embedded value" (MCEV) – a key measure in the sector – of up to £10bn by 2013. At this point, Resolution would seek to sell or float the new entity.

But the insurance group's two big purchases of life insurer Friends Provident and the majority of Axa UK's life assurance operations, as well as the bolt-on purchase of Bupa Health Assurance, give it an MCEV of less than £7bn.

Resolution defended its partial U-turn by noting that the acquired businesses would deliver costs savings before tax of £112m a year by the end of 2013, compared with its previous estimate of £75m.

It said: "Resolution is confident that it will achieve its targeted mid-teen returns on the UK Life Project without further acquisitions. It will not contemplate acquisitions that would dilute the returns likely to emerge from the three acquisitions already made; there is therefore a high threshold for evaluating further acquisitions."

People familiar with the situation said Resolution was not ruling out further acquisitions but potential prospects have to deliver very high rates of return. Resolution expects to deliver cash dividends from its non-UK businesses of £50m a year.

Resolution acquired Friends Provident for £1.9bn in 2009, Axa's UK life assurance operations in June, and Bupa's health assurance arm last month.

Mr Cowdery – who was made chairman of Resolution in September 2005, following the merger between Britannic Group and Resolution Life – spearheaded Resolution, raising £660m in a flotation in December 2008. He identified that the life assurance market was ripe for consolidation.

Shares in Resolution fell by 4.9p to 284.1p yesterday, giving it a market capitalisation of £4.14bn.

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