Resolution sets sights on another life venture

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The Independent Online

Resolution, the closed life fund operator, indicated it was back in the hunt for a major acquisition yesterday, saying it would be willing to call on the equity and bond markets to raise capital if the right opportunity arose.

The group, which has been knocking on the door of the FTSE 100 since its merger with Britannic last year, is believed to be among a handful of players eyeing up the £20bn of assets in the Scottish Provident and Scottish Mutual closed life funds, now owned by Santander Central Hispano. Other potential targets include the £10bn Abbey Life portfolio, owned by Lloyds TSB, and a handful of smaller closed life books.

The finance director Mike Biggs said the company could self-finance a deal of up to £300m and would not be afraid to raise new capital if it wanted to buy something larger.

The chairman Clive Cowdery hinted the group was also eyeing up loss-making life insurance companies which are still open to new business, with a view to shutting them down and consolidating them with their existing closed funds.

He added that accounting systems used by insurers often obscured true levels of profitability, saying there are now about 25 providers chasing just 12 million new policies a year. As a result, all but the largest insurers are struggling to raise enough new business, he said.

Paul Thompson, the group chief executive, stressed the company was prepared to hand money back to shareholdersthrough a share buy-back, if it could not find any suitable acquisitions which met its hurdle rates. "We've always been clear that if we can't fund suitable targets with suitable return on capital, we would return that to shareholders through means of a share buy-back," he said.

Publishing its first set of annual results since last year's merger, the company said it had seen a 6 per cent rise in its embedded value per share since 30 June 2005, slightly ahead of most analysts' expectations.

The group said it would pay a final dividend of 13.21p, taking the total to 19.81p - an increase of 11 per cent on last year. It added it plans to increase the dividend growth rate to 13 per cent a year between 2006 and 2009.

Having brought management of the former Royal & SunAlliance closed life book in house, robbing F&C Asset Management of the £20bn of assets, Resolution now has assets under management of £38bn.

Mr Thompson hinted the group was also looking for a partner to offer annuities to its with-profits pension customers, a business it runs itself. The Swiss insurer Zurich is a likely contender for the contract.

Mr Thompson said the group was also writing a small amount of additional business for its existing clients, such as protection, funeral services and general insurance, and was considering whether to create any formal ties with individual providers.

The shares fell 29p to 654.5 pence yesterday, giving the company a market value of £2.36bn. Analysts said the fall may have been caused by Mr Thompson's comments that a suitable acquisition may take longer than expected to find.

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