Resolution dividend goes up despite the profits going down

Clive Cowdery's Resolution yesterday raised its dividend by more than 6 per cent despite full-year profits missing City expectations.

The company, which was set up by the colourful entrepreneur to consolidate UK life insurers, saw operating profits fall to £274m last year, compared to £681m in 2011 and analyst predictions of about £336m.

Resolution did however show signs that it is making good progress integrating the Friends Provident, Axa Life and Bupa Health businesses it has acquired since being founded in 2008. These are now collectively known as Friends Life.

The insurer said it generated £300m in cash from the division and won new business worth £194m, a 28 per cent year-on-year rise. This encouraged Resolution to pay a full-year dividend of 21.14p.

Its chief executive Andy Briggs said: "In terms of strategic outlook, we have scale businesses, which are driving delivery of our financial priorities.

"Secondly our dividend is clearly sustainable from cash generation and thirdly we're delivering strong growth in profitable new business, giving cash generation tomorrow."

Last year Resolution parted ways with its offshore sister company Resolution Operations, which ran parts of the group.

The company's complex structure had been criticised by some investors as well as the Financial Services Authority.

Kevin Ryan, an analyst at Investec, said: "Although the restructuring of the business would seem to be on the right track, we estimate that it will not be until 2015 that the cash buffer exceeds the company's targeted £400m and allows the dividend to increase further.

"The cash surplus generated in 2012 was £300m and this, in our view, is the key number. It is the cash generated that pays shareholder dividends and runs the business."

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