Resolution Limited RSL Third Quarter 2012 Interim Management Statement

  Resolution Limited (RSL) - Third Quarter 2012 Interim Management Statement

RNS Number : 1670R
Resolution Limited
15 November 2012




                                                              15 November 2012

                              Resolution Limited

                              Third quarter 2012

                         Interim Management Statement

Highlights

· Continuation of the strategy of value maximisation and cash generation

· Successful  refinancing of  the  deferred consideration  notes  further 
de-risking cash flow to shareholders

· Final regulatory approval being sought for the intended sale of AmLife

· Strong operational  progress continues  in the UK  and clear  direction 
identified from strategic review of International

Summary

New business profitability continues to improve

· New business profitability has continued to improve as the Group  makes 
good progress towards delivery of the 2013 new business financial targets. The
value of  new  business ("VNB")  for  the nine  months  to 30  September  2012 
increased to £138 million  (30 September 2011: £95  million) and new  business 
cash strain  ("NBS") reduced  to  £(172) million  (30 September  2011:  £(239) 
million):

- Total UK VNB increased to £102 million (30 September 2011: £40  million) 
reflecting the  step change  made  to new  business  profitability of  the  UK 
businesses. Total UK NBS of £(87) million (30 September 2011: £(143)  million) 
continues the improving trend towards  the targeted £200 million reduction  by 
the end of 2013;

- FPI  (International  excluding Lombard)  continues  to reduce  the  risk 
profile of the business and remains focused on the generation of value  rather 
than volume with VNB of £24 million  (30 September 2011: £32 million) and  NBS 
of £(67) million (30 September 2011: £(78) million); and

- Lombard delivered £12 million of VNB in the period to date (30 September
2011: £23  million) reflecting  both the  challenging markets  and changes  in 
underlying product mix. NBS at £(18) million remains unchanged compared to the
same period in 2011.

· Friends Life Investments Limited ("FLI") added a further £3 billion  of 
fixed income assets to the £6 billion already recaptured in July 2012.

Target for cost reductions raised although higher expected costs to complete

· The  target for  UK cost  reductions has  been raised  to £160  million 
run-rate by end 2015 (previous target £143 million) and 78% of this total  has 
been secured. The majority of the increase  is expected to be achieved by  the 
end of 2013. Run-rate cost reductions achieved as at 30 September 2012 are £78
million (30 June 2012: £65 million from synergy programmes);

· Whilst good  progress has been  made on completing  the cost  reduction 
programmes, the complexity arising from the  migration from AXA IT systems  is 
causing extra costs  of completing  the separation  and integration  projects. 
Firstly, known  costs  are now  expected  to be  c.  £35 million  higher  than 
previously anticipated with the extra costs  spread over the rest of 2012  and 
2013. In  addition, two  key IT  and systems  migration programmes  are  being 
reviewed and, whilst the outcomes  of these reviews are uncertain,  additional 
costs of low  tens of  millions of  pounds may be  incurred over  the next  12 
months. Lastly, costs  of the  Group's outsourcing programme  are expected  to 
increase by c. £30 million to c.  £280 million largely as a result of  changes 
in  the  costs  of  terminating  and  transferring  pre-existing   contractual 
relationships, and the provision  of IT platform  development services to  the 
International businesses. Further details are provided in section 4.

Capital position remains robust

· The Group's capital position at  30 September 2012 remains robust  with 
Friends Life  Group's  ("FLG")  estimated  Insurance  Group  Capital  Adequacy 
("IGCA") surplus of £1.9  billion, representing a coverage  ratio of 202%  (30 
June 2012: £1.9 billion, coverage 204%). The stable surplus position  reflects 
the payment from  FLG of a  £100 million internal  dividend to the  Resolution 
holding companies, partially offset by the benefit of narrowing corporate bond
spreads in the period;

· On 8 November 2012, FLG successfully raised US$575 million of perpetual
reset subordinated notes with a coupon of 7.875%. This is enabling  Resolution 
Limited (or "the Company") to repay the remaining £363 million of medium  term 
funding from AXA Group, originally provided  on the acquisition of the AXA  UK 
Life Business, thereby  significantly improving  the cover  from ongoing  cash 
flow of the Group's ordinary dividend;

· Group available shareholder  cash held in  Resolution and Friends  Life 
holding companies totalled £621  million at 30 September  2012 (30 June  2012: 
£619 million) and is before the payment of the interim dividend to  Resolution 
Limited's shareholders on 5 October 2012; and

· Today's announcements are not expected to affect the Group's ability to
achieve  its  financial  targets   nor  have  any   impact  on  dividends   to 
shareholders.

International strategy

· Today, the  Group will hold  an investor presentation  setting out  the 
strategy  for  the  International   division,  comprising  Friends   Provident 
International ("FPI"), AmLife and Lombard following a thorough review that has
applied the  same  rigorous  financial  discipline employed  in  the  UK.  The 
International division will focus on attractive growth markets, where it has a
competitive advantage, and on returning cash to shareholders:

- FPI will refocus  around its two  core propositions serving  expatriates 
globally and affluent customers in key selected markets, principally Singapore
and Hong Kong. It will close to new business in markets that are unprofitable,
sub-scale or which do not fit with its new risk and value focused strategy. As
a result, the company is no longer accepting business from Japanese nationals;

- FPI's  OLAB  operations,  which principally  operate  in  Germany,  have 
performed poorly. The Group is conducting  a major review of the business  and 
is considering  restructuring options  in order  to improve  overall  business 
performance;

- As part of this  new approach, the Company  announced on 16 October  its 
intention to  sell its  30%  stake in  joint  venture, AmLife  Takaful  Berhad 
("AmLife"),  as  this  business  no  longer  fits  within  the   International 
division's strategy. Final regulatory approval is being sought and it is hoped
that the sale will be completed by the end of the year;

- Lombard will  continue its  existing strategy with  increasing focus  on 
Private Bank  distribution  in  Europe  and  will  explore  opportunities  for 
targeted expansion in high net worth markets in Asia;

- The International division as a whole will continue to target an IRR  of 
20% by the end  of 2013, although FPI  on its own is  now expected to  achieve 
IRRs more in line with the overall Group target of 15%;

- The International division remains  committed to remitting dividends  to 
the Group. FPI continues  to focus on its  original annual dividend target  of 
£20 million from 2013. As a result of sustained growth in administered  assets 
and  improved  cost  efficiency,  Lombard's  in-force  book  has  now  reached 
sufficient scale that sustainable dividends can start to be paid to the Group.
Lombard paid  its first  dividend of  £4 million  on 7  November 2012  and  is 
targeting aggregate dividends of  £37 million by spring  2015 and £30  million 
annually thereafter;

- The  Group estimates  that revisions  to actuarial  assumptions for  the 
division to reflect  the outcome  of the strategic  review and  to adjust  for 
recent business performance will result in a £50-£100 million reduction in the
division's MCEV, which was  £1.2 billion as  at 30 June 2012.  This is net  of 
likely positive changes of c. £45  million in Lombard's MCEV principally as  a 
result of its  successful expense reduction  programme launch. The  reductions 
largely relate to FPI's German business  - this business is performing  poorly 
and is  experiencing  reduced business  sales  volumes, expense  overruns  and 
rising embedded guarantee costs; and

- The proposed MCEV revisions exclude any adjustments which may arise from
the completion of the German business  restructuring review and also from  the 
decision to no longer accept business from Japanese nationals. The VIF of  the 
existing Japanese book at 30 June 2012 was c. £73 million. The final  position 
on these  impacts  will  be  determined  as  part  of  the  annual  review  of 
assumptions and included in the 2012 full year results.



Andy Briggs, Group  Chief Executive  Officer designate  said: "Overall,  these 
results  demonstrate  our  continued  momentum,  with  the  Group   delivering 
significantly improved new  business profitability despite  the challenges  in 
the wider economy. The capital position  remains robust and I am pleased  with 
the success  of our  recent debt  offering which  has enhanced  our  financial 
flexibility and further de-risked cash flow to shareholders.

We continue to make good progress implementing our strategy and are seeing the
benefits of this in the strong UK performance in the period.

In contrast, the performance of  our International division remains below  par 
as a  whole,  with the  continued  uncertainty  in Europe  and  other  markets 
weighing on overall performance. We have set out today the strategic direction
of these businesses and remain confident that we can, through a rigorous focus
on costs  and new  business profitability,  generate the  returns required  to 
contribute to the achievement of the Group's financial targets."

Enquiries:

Investors / analysts                                       

Neil Wesley, Resolution Operations LLP   +44 (0)20 3372 2928
Media                                                      

Alex Child-Villiers, Temple Bar Advisory +44 (0)7795 425 580



Forward-looking statements

This  announcement  may  contain  certain  "forward-looking  statements"  with 
respect to certain of the Company's  (and its subsidiaries) plans and  current 
goals and expectations  relating to future  financial condition,  performance, 
results, strategy and objectives. Statements containing the words  "believes", 
"intends", "expects",  "plans", "seeks",  "aims", "may",  "could",  "outlook", 
"estimates"  and   "anticipates",  and   words   of  similar   meanings,   are 
forward-looking statements. By  their nature,  all forward-looking  statements 
involve  risk   and  uncertainty.   Accordingly,   the  Company's   (and   its 
subsidiaries)  actual  future  financial   condition,  performance  or   other 
indicated  results  may  differ  materially   from  those  indicated  in   any 
forward-looking statement.

Any forward-looking statements contained in this announcement are made only as
of the  date  hereof.  Resolution  undertakes  no  obligation  to  update  the 
forward-looking  statements  contained  in  this  announcement  or  any  other 
forward-looking statements it may make.

No statement contained in  this announcement should be  construed as a  profit 
forecast.



Media

There will be a conference call today for wire services at 07.30 (BST)  hosted 
by Andy  Briggs. Dial  in telephone  numbers: UK  National 0800  694 0257,  UK 
Standard International +44 (0)1452 55 55 66 Conference ID: 60311761.



Analysts/Investors

A presentation to analysts will take place at 09:00 (GMT) at the Andaz  Hotel, 
40 Liverpool Street,  London, EC2M 7QN.  Dial in telephone  numbers: 0800  634 
5205, UK Standard International +44 (0) 208 817 9301, Conference ID: 9256990.



Financial calendar



Preliminary results 2012 26 March 2013



Overview





1. Friends Life Group New Business

The new  business results  reported here  include the  value of  new  business 
("VNB") and new business cash strain ("NBS") associated with the reported  new 
business volumes. These results  are presented on the  same basis as those  in 
the 2012 half year and 2011 full year results and there have been no operating
assumption changes made in the period to 30 September 2012. The normal  review 
of  assumptions,  notably  those  where  experience  is  diverging  from  that 
expected, will be conducted in advance of the 2012 full year result and, where
necessary, assumptions  updated  accordingly.  This review  will  include  the 
impact of the International division strategic review.



                           9 months     9 months Change   Half year  Full year
                               2012         2011               2012       2011
                                                      %
                                 £m           £m                 £m         £m
Value of new business
UK                               94           32    194          63         63
Heritage                          8            8      -           4        (4)
Total UK                        102           40    155          67         59
International                    24           32   (25)          18         40
Lombard                          12           23   (48)          12         52
Total International              36           55   (35)          30         92
Total Group                     138           95     45          97        151
New business cash
strain
UK                             (59)        (106)     44        (40)      (115)
Heritage                       (28)         (37)     24        (20)       (54)
Total UK                       (87)        (143)     39        (60)      (169)
International                  (67)         (78)     14        (48)       (89)
Lombard                        (18)         (18)      -        (12)       (20)
Total International            (85)         (96)     11        (60)      (109)
Total Group                   (172)        (239)     28       (120)      (278)
APE
UK                              513          425     21         354        564
Heritage                         85          122   (30)          60        157
Total UK                        598          547      9         414        721
International                   153          195   (22)         104        252
Lombard                         119          138   (14)          95        237
Total International             272          333   (18)         199        489
Total Group                     870          880    (1)         613      1,210



2012 has seen a step change in the new business performance of the Group  with 
the contribution of new business amounting  to £138 million in the nine  month 
period to 30  September 2012 (30  September 2011: £95  million). New  business 
strain has also been  reduced significantly with a  28% reduction compared  to 
the same period in 2011.

As reported previously, the improvement in Group new business performance  has 
been delivered through action  taken in the UK  business. The focusing of  new 
business on to  the target UK  platforms as well  as cost reductions,  through 
synergy delivery and the outsourcing arrangement, have ultimately improved the
value generated on new business at a significantly lower strain.

The International results continue  to reflect the changes  made to focus  the 
business on  value  rather  than  volume. Performance  in  the  period  to  30 
September 2012 shows a continuation of  the performance reported in the  first 
half of the year.

Lombard continues to be  affected by the  challenging markets with  conditions 
resulting  in  individuals   delaying  investment   decisions.  New   business 
profitability remains below 2011 levels with the changes in product mix,  from 
IFAs to  generally  lower  margin  but  more  stable  private  bank  business, 
reflected in the results.

2. Asset Management

As reported in the  2012 half year  results, FLI was launched  on 2 July  2012 
with £6 billion of recaptured fixed income assets. The immediate focus of this
business has been to recapture fixed income and cash assets backing  annuities 
and shareholder funds. As anticipated in the half year 2012 results, a further
£3 billion of  assets was  recaptured in  September 2012  taking assets  under 
management of  this business  to c.  £9 billion.  The Group  will continue  to 
assess and seek out opportunities to recapture further tranches of assets.

3. Cash & Capital Strength

The Group maintained a robust capital position in the third quarter with FLG's
estimated IGCA surplus of £1.9 billion  representing a coverage ratio of  202% 
consistent with that reported  at the half year  (30 June 2012: £1.9  billion, 
coverage 204%).  The surplus  reflects improvement  in investment  markets  in 
particular narrowing  of corporate  bond  spreads in  the third  quarter.  The 
benefit of  these improved  investment markets  has been  offset by  the  £100 
million interim dividend paid  by FLG to Resolution  holding companies at  the 
end of September.

On 8 November 2012, Friends Life Group plc successfully completed the issuance
of US$575 million perpetual reset subordinated notes with a coupon of  7.875%. 
From the proceeds, £200 million has been utilised to redeem the internal  Tier 
2  instrument  with  Resolution  whilst  a  further  £150  million  has   been 
transferred to the  Resolution holding  companies by  way of  a dividend.  The 
completion of this  transaction is  enabling Resolution Limited  to repay  the 
remaining £363  million of  medium  term funding  from AXA  Group,  originally 
provided on the  acquisition of  the AXA  UK Life  Business, that  was due  to 
amortise over the next six years. The incremental interest cost of the Group's
ongoing debt structure is c. £5 million pre-tax in 2013.

Available shareholder  cash within  the Resolution  and Friends  Life  holding 
companies totalled £621 million  at the end of  September 2012 (30 June  2012: 
£619 million). The movement in the period principally reflects the payment  of 
interest and financing  costs, net  of receipts  from life  companies, and  is 
before payment of the Company's interim  dividend of £98 million on 5  October 
2012 (comprising £43 million cash payment and £55 million scrip dividend).  It 
is also before  any increase in  net working capital  provisions required  for 
additional separation, integration and outsourcing project costs, as described
in section  4, and  before any  potential proceeds  from the  proposed  AmLife 
disposal, discussions about which are ongoing.

Furthermore and consistent  with previous  periods, the  balance of  available 
shareholder cash  does not  include surplus  generated in  the life  operating 
companies. This  is  only  reflected  annually  following  the  completion  of 
actuarial  valuations  and  declaration  of  full  year  dividends  by   these 
companies.

4. Cost reduction programmes

Good progress continues to be  made in completing the separation,  integration 
and outsourcing programmes. In addition, further opportunities for  delivering 
operating efficiencies and  cost reductions  have also been  identified. As  a 
result, the Group is increasing its target for run-rate cost reductions by £17
million to £160 million by the end of 2015 (target run rate for end 2013: £126
million). Against  the  increased  target, run-rate  cost  reductions  of  £78 
million have been achieved  at 30 September 2012  (30 June 2012: synergies  of 
£65 million achieved). Combined with the cost savings contractualised  through 
the Diligenta transaction, total secured savings amount to £125 million at  30 
September 2012 being 78% of the Group's increased target.

Despite the good progress on these programmes, the total costs of delivery are
expected to be higher than previously estimated, as explained below:

Separation and Integration

Since September 2010, the Group has  been engaged in a significant project  to 
separate the  acquired AXA  UK  Life Business  from  the AXA  Group's  systems 
infrastructure. In parallel, the  Group has worked  to integrate the  business 
and processes with those of the existing Friends Provident business.

As reported in our market update on  23 February 2011, the estimated costs  of 
completing these projects were £190 million with the possibility of them being
reduced by  a £26  million rebate  from AXA,  which was  contingent under  the 
original terms  of the  agreement. Due  to  the scale  and complexity  of  the 
separation project, for  both Friends Life  and AXA, it  is now believed  that 
this rebate  will not  be received.  As  a result,  and after  recognising  £8 
million of costs relating to the BHA separation project, total separation  and 
integration project costs were expected to amount to £198 million.

There remain  elements of  this  work that  are  proving more  challenging  to 
deliver than expected. As a consequence, the Group now expects costs to be  c. 
£35 million higher than originally estimated with the extra costs spread  over 
the rest  of  2012  and 2013.  These  relate  principally to  certain  IT  and 
integration programmes.

In addition, the  Group is addressing  complexities and necessary  remediation 
work,  arising  from   the  proposed  migration   from  AXA  systems   hosting 
environment. The programme is undertaking an extensive re-planning exercise to
evaluate the  options  and  minimise  any further  financial  impact  of  this 
significant infrastructure migration. As part of this reassessment, the timing
and impact  of  the  migration  from  AXA's  Embassy  customer  administration 
platform is  also  being reviewed.  In  line  with the  business's  desire  to 
minimise customer  impact  at a  time  when there  is  significant  regulatory 
change, and as reported in  the Group's 2012 half  year results, the Group  is 
now pursuing a longer term arrangement with AXA regarding the Embassy customer
administration platform and eventually migration strategies, or otherwise, are
being considered and evaluated. At this time, the Group is unable to  quantify 
the additional non-recurring costs to complete the overall migrations that are
covered  by  both  these  reviews  but  current  estimates  indicate  possible 
additional costs of low tens of million of pounds over the next 12 months.

Outsourcing

On 9 November 2011, the Group announced that it had entered into a substantial
outsourcing arrangement with  Diligenta. In  line with  the agreed  timetable, 
service commencement began on 1 March 2012 and good progress has been made  on 
the transformation of Customer Service and IT activities.

The cost  of  completing  this  transition  through  to  2015  was  originally 
estimated to be £250 million, with this reflecting the fixed price contractual
spend with Diligenta and  an estimate for internal  project spend and cost  of 
exiting existing  third  party  agreements. The  Group  has  since  reassessed 
expectations for the total project cost and  now expects these will be in  the 
region of £280million (including inflation).

The increase in total costs of £30 million will be incurred over the next  few 
years to 2015. It includes higher than expected costs of work being  completed 
in parallel  with  Diligenta  on  IT platform  development  services  for  the 
International business, amounting  to £7  million, which  arise following  the 
International strategic review  and are  likely to  be incurred  in 2013.  The 
remaining £23  million,  to  be  incurred  between  2013  and  2015,  includes 
revisions to  the costs  of supporting  Diligenta's transformation  of our  UK 
business activities, including  the terminating and  transfer of  pre-existing 
contractual arrangements with c. 60% of these costs expected to occur in 2014.
These costs are driven in part by the complexity attached to the separation of
the infrastructure and technology supporting  the business acquired from  AXA, 
referred to in the update on the separation and integration programme above.





APPENDIX 1

1. Introduction

Analysis of life and pensions new business

In classifying new  business premiums  the following basis  of recognition  is 
adopted:

· single  new business  premiums consist  of those  contracts  under 
which there is  no expectation of  continuing premiums being  paid at  regular 
intervals;

· regular new  business premiums  consist of  those contracts  under 
which there is  an expectation of  continuing premiums being  paid at  regular 
intervals, including repeated or recurrent single premiums where the level  of 
premiums is defined, or where a regular pattern in the receipt of premiums has
been established;

· non-contractual increments under  existing group pensions  schemes 
are classified as new business premiums;

· transfers between products where open market options are available
are included as new business; and

· regular new business premiums are included on an annualised basis.



2. Regular and single premiums

                          Regular premiums             Single premiums
                    9 months^(i) 9 months        9 months^(i) 9 months
                           2012    2011 Change        2012     2011 Change
                             £m      £m      %          £m       £m      %
Corporate Benefits           345      280     23          752      476     58
Protection                    65       72   (10)            -        -      -
Retirement Income              -        -      -          279      250     12
Heritage                      37       62   (40)          479      605   (21)
Total UK                     447      414      8        1,510    1,331     13
International                108      144   (25)          454      513   (12)
Lombard                        -        -      -        1,187    1,376   (14)
Total International          108      144   (25)        1,641    1,889   (13)
Total Group                  555      558    (1)        3,151    3,220    (2)

(i) Includes the trading results of  the acquired WLUK business, acquired  7 
November 2011.









                     Regular premiums   Single premiums
                    Q3^(i)   Q3        Q3^(i)   Q3
                     2012 2011 Change  2012 2011 Change
                       £m   £m      %    £m   £m      %
Corporate Benefits     111   95     17    173  135     28
Protection              22   22      -      -    -      -
Retirement Income        -    -      -     92   92      -
Heritage                11   23   (52)    139  123     13
Total UK               144  140      3    404  350     15
International           32   48   (33)    168  151     11
Lombard                  -    -      -    239  407   (41)
Total International     32   48   (33)    407  558   (27)
Total Group            176  188    (6)    811  908   (11)

(i) Includes the trading results of the acquired WLUK business, acquired 7
November 2011.

3. Group new business - APE

Annualised  Premium  Equivalent  ("APE")  represents  annualised  new  regular 
premiums plus 10% of single premiums.

                    9 months^(i) 9 months        Q3^(i)   Q3
                            2012     2011 Change   2012 2011 Change
                              £m       £m      %     £m   £m      %
Corporate Benefits           420      328     28    128  109     17
Protection                    65       72   (10)     22   22      -
Retirement Income             28       25     12      9    9      -
Heritage                      85      122   (30)     25   35   (29)
Total UK                     598      547      9    184  175      5
International                153      195   (22)     49   63   (22)
Lombard                      119      138   (14)     24   41   (41)
Total International          272      333   (18)     73  104   (30)
Total Group                  870      880    (1)    257  279    (8)

(i) Includes the trading results of  the acquired WLUK business, acquired  7 
November 2011.



Quarterly new business progression - APE

                                    Q1 2012
                    Q3 2012 Q2 2012
                         £m      £m      £m
Corporate Benefits      128     146     146
Protection               22      25      18
Retirement Income         9      10       9
Heritage                 25      36      24
Total UK                184     217     197
International            49      53      51
Lombard                  24      51      44
Total International      73     104      95
Total Group             257     321     292



International

                                      9 months 9 months
                                          2012     2011 Change
APE by region (actual exchange rates)       £m       £m      %
North Asia                                  48       83   (42)
South Asia                                  18       20   (10)
Middle East                                 34       34      -
Europe (Excl UK)                            17       22   (23)
UK                                          16       14     14
Rest of World                               16       17    (6)
Malaysia (AmLife)                            4        5   (20)
Total                                      153      195   (22)

Lombard

                                          9 months 9 months
                                              2012     2011 Change
APE by region (actual exchange rates)           £m       £m      %
UK and Nordic                                   38       33     15
Northern Europe                                 17       22   (23)
Southern Europe                                 54       63   (14)
Rest of World                                   10       20   (50)
Total including large cases                    119      138   (14)
Of which: Large cases (greater than €10m)       36       49   (27)
Total excluding large cases                     83       89    (7)





New business APE at constant exchange rates

All amounts in currency in the tables above other than Sterling are translated
into Sterling at a monthly  average exchange rate. Theestimated new  business 
assuming constant currency rates would be as follows:

              9 months 2012          9 months 2011 (as Change   Q3   Q3
                                             reported)        2012 2011 Change
                                                            %   £m   £m      %
International           152                        195   (22)   50   63   (21)
Lombard                 127                        138    (8)   26   41   (37)



4. New Business - Present value of new business premiums ("PVNBP")

PVNBP equals  new single  premiums  plus the  expected  present value  of  new 
regular premiums. Premium values are calculated ona consistent basis with the
EV contribution to profits from new business. Start of period assumptions  are 
used for the economic  basis and end  of period assumptions  are used for  the 
operating basis. A  risk-free rate is  used to discount  expected premiums  in 
future years.  The  impact of  operating  assumption changes  across  a  whole 
reporting period will normally be reflected in the PVNBP figures for the final
quarter of the period that the basis changes relate to. No change in operating
assumptions will be reflected in the  PVNBP for the first and third  quarters. 
All amounts in currency other than Sterling are translated into Sterling at  a 
monthly average exchange rate.

                    9 months^(i) 9 months           Q3    Q2    Q1
                            2012     2011 Change  2012  2012  2012
                              £m       £m      %    £m    £m    £m
Corporate Benefits         2,164    1,643     32   612   776   776
Protection                   423      441    (4)   141   164   118
Retirement Income            279      250     12    92    96    91
Heritage                     662      935   (29)   201   292   169
Total UK                   3,528    3,269      8 1,046 1,328 1,154
International              1,040    1,206   (14)   343   356   341
Lombard                    1,187    1,376   (14)   239   505   443
Total International        2,227    2,582   (14)   582   861   784
Total Group                5,755    5,851    (2) 1,628 2,189 1,938

(i) Includes the trading  results of the acquired  WLUK business, acquired  7 
November 2011.













5. UK new business



Summary



VNB                    9 months^(i) 9 months           Half year    Full year
                                                             2012         2011
                               2012     2011 Change
                                                               £m           £m
                                 £m       £m      %
    Corporate Benefits           14        3    367            10           15
    Protection                   44        2  2,100            28           16
    Retirement Income            36       27     33            25           32
    UK                           94       32    194            63           63
Heritage                          8        8      -             4          (4)
Total UK                        102       40    155            67           59
                                                                          

APE                             598      547      9           414          721





NBS                    9 months^(i) 2012 9 months       Half year   Full year
                                                                          2011
                                      £m     2011 Change      2012
                                                                            £m
                                               £m      %        £m
    Corporate Benefits              (47)     (53)     11      (32)        (51)
    Protection                      (32)     (63)     49      (23)        (77)
    Retirement Income                 20       10    100        15          13
    UK                              (59)    (106)     44      (40)       (115)
Heritage                            (28)     (37)     24      (20)        (54)
Total UK                            (87)    (143)     39      (60)       (169)

(i) Includes the  trading results  of the  acquired Friends  Life WL  Limited 
(known formerly as Winterthur  Life UK Limited  ("WLUK"), acquired 7  November 
2011.



The UK and Heritage businesses delivered VNB of £102 million in the period  to 
30 September 2012  in line with  the half year  performance and  significantly 
above the levels delivered in 2011. The improvement has been delivered  across 
the UK businesses where the contribution of new business has been enhanced  by 
the migration  of  new  business  to target  platforms  and  the  delivery  of 
operating cost synergies.

Total UK sales volumes (on an APE basis) have increased by 9% period on period
reflecting both good  Corporate Benefits  sales as  well as  the inclusion  of 
Friends Life WL Limited (known formerly as WLUK) results (WLUK was acquired on
7 November 2011).  Heritage sales, consistent  with previous periods,  reflect 
the action taken  to close  the investment bond  business as  well as  reduced 
pensions increments.

Notwithstanding the 9% increase in total UK sales volumes, new business strain
has been reduced by  £56 million, equivalent  to a 39%  reduction on the  same 
period  in  2011  (30  September  2011:  £143  million).  The  improvement  is 
consistent with the progress reported in the 2012 half year results and brings
the business closer to  achieving the targeted £200  million reduction in  new 
business cash strain by the end of 2013.





5.1 UK - Corporate Benefits



          2013 Full year 9 months 2012 9 months           Half year Full year
                  target                                        2012
                                    £m     2011 Change                    2011
                      £m                                          £m
                                             £m      %                      £m
VNB                   25            14        3    367            10        15
NBS                 (75)          (47)     (53)     11          (32)      (51)
APE                  n/a           420      328     28           291       440



Corporate Benefits' new business results continue to show an increase on prior
year with  value of  new business  totalling £14  million in  the first  three 
quarters of  2012 reflecting  the  higher sales  volumes  in addition  to  the 
benefit delivered by the Diligenta outsourcing deal.

New business cash strain  of £47 million, whilst  giving an implied full  year 
run-rate in excess  of the  2011 full  year result,  reflects increased  sales 
volumes in  the period  including  the introduction  of  the Friends  Life  WL 
Limited (known formerly as  WLUK) business. Sales volumes  of £420 million  in 
the first three quarters include £50 million from the Friends Life WL  Limited 
business but also reflect good sales on the target platforms.

In line with the half  year result, c. 80% of  new business is now written  on 
the NGP and My Money platforms. This proportion will be increased towards 100%
when the business written on  to the Embassy customer administration  platform 
is migrated. Following the decision to defer migration of the business written
on the Embassy customer administration platform, in line with client wishes to
not manage this alongside the beginning of auto-enrolment, Corporate  Benefits 
will concentrate on  ensuring readiness for  auto-enrolment for this  platform 
also.

Net fund inflows of £0.7 billion along with improvements in investment markets
in the period  have contributed  to increased Corporate  Benefits funds  under 
management of £17.4 billion (30 June 2012: £15.8 billion).

Corporate  Benefits  will  continue  the  development  and  promotion  of  the 
acclaimed My Money platform and is  focusing on the opportunities afforded  by 
regulatory  changes  including  auto-enrolment  and  the  Retail  Distribution 
Review.



5.2 UK - Protection



          2013 Full year 9 months 2012 9 months           Half year Full year
                  target                                        2012
                                    £m     2011 Change                    2011
                      £m                                          £m
                                             £m      %                      £m
VNB                   80          44        2  2,100            28        16
NBS                 (30)         (32)     (63)     49          (23)      (77)
APE                  n/a            65       72   (10)            44        92



Protection's new  business results  have continued  in line  with  performance 
during the first half of 2012, and are significantly ahead of the same  period 
in 2011. Migration  of new business  capability, with c.  80% of new  business 
written to the target platforms, has delivered improved value of new  business 
and reduced levels of new business strain.

Individual protection sales in the period to 30 September 2012 of £38  million 
APE show  the expected  reduction  in run-rate  against 2011,  reflecting  the 
decision to target value over volume, as evidenced in the VNB comparison.  The 
Protect+ proposition  is  now  a  year  old and  has  been  well  received  by 
distributors, winning two Cover Excellence awards in October. Group Risk sales
of £27 million APE continued the increase compared to 2011.

The Group  is making  satisfactory progress  migrating remaining  distribution 
partners to the target  platforms by the  end of 2012  with the completion  of 
this activity  supporting  the delivery  of  2013 targets.  Additionally,  the 
Protection business continues  to pursue profitable  growth, for example  from 
new business deals and  opportunities arising from  the regulatory changes  at 
end 2012.  The  focus remains  on  achieving  value through  product  mix  and 
managing profitability during continued subdued economic conditions.



5.3 UK - Retirement Income



          2013 Full year 9 months 2012 9 months           Half year Full year
                  target                                        2012
                                    £m     2011 Change                    2011
                      £m                                          £m
                                             £m      %                      £m
VNB                   50            36       27     33            25        32
NBS                  n/a            20       10    100            15        13
APE                  n/a            28       25     12            19        32



Retirement Income new business contributed £36 million of VNB in the period to
30 September 2012 exceeding  the full year 2011  contribution of £32  million. 
Cautious pricing in  response to uncertainty  in fixed income  markets in  the 
first half of 2012  resulted in unusually high  new business margins. While  a 
cautious pricing  approach remains  appropriate, falling  gilt yields  in  the 
third quarter resulted in a slight drop in the VNB run-rate as the natural lag
between market  movements  and  reactive  price  changes  temporarily  narrows 
annuity margins.

Sales volumes of £28 million  APE in the period  to 30 September 2012  reflect 
stable retention rates and  the acquisition of the  WLUK business in  November 
2011. At the end of the second quarter the group launched an enhanced  annuity 
product which made a small  contribution to sales in  the period in line  with 
our expectations at this stage. The  new enhanced product will continue to  be 
rolled out to Friends customers over the  second half of 2012 and is  expected 
to help to improve retention rates over 2013.

New business cash strain has also  benefited from the cautious pricing  levels 
and strong volumes over the period, resulting in a cash release of £20 million
compared to a full year contribution of £13 million in 2011.



5.4 Heritage



    9 months 2012 9 months       Half year 2012 Full year

               £m     2011 Change             £m      2011

                        £m      %                       £m
VNB             8        8      -              4       (4)
NBS          (28)     (37)     24           (20)      (54)
APE            85      122   (30)             60       157



The Heritage  business  specifically  focuses  on  those  products  no  longer 
actively marketed. Despite not actively seeking new business the Heritage book
delivers a significant  level of ongoing  incremental business written  across 
all product types. New  business value was better  than expected in the  third 
quarter of  2012 reflecting  the  level of  Department  of Work  and  Pensions 
("DWP") rebates in what is the final year of this business. VNB in the first 9
months of  2012  for  DWP  business  was  £13  million,  with  no  significant 
contribution expected in the final quarter of 2012.

As explained  in the  half year  results, the  most significant  steps of  the 
current phase  of the  capital optimisation  programme to  simplify the  legal 
structure of the business and remove capital inefficiencies are expected to be
completed by the end of 2012.

6. International (excluding Lombard)



    9 months 2012 9 months 2011        Half year 2012 Full year

               £m            £m Change             £m      2011

                                     %                       £m
VNB            24            32   (25)             18        40
NBS          (67)          (78)     14           (48)      (89)
APE           153           195   (22)            104       252

International's  trading  performance   continues  to  be   impacted  by   the 
challenging  economic  environment  and  higher  assumed  take  up  rates   of 
guarantees on  German pension  products, and  in line  with the  new  strategy 
reflects a continued focus on profitability rather than sales volume.

Overall, sales volumes are down  by 22% compared to  the same period in  2011, 
driven mainly by a significant reduction in regular premium business. This has
been due to maintenance  of pricing discipline  and increased controls  around 
business acceptance.  Single  premium business  is  below last  year  in  most 
regions due to reduced investor confidence, although the UK offshore  business 
has performed  above expectations.  Protection business  remains strong  as  a 
result of IFAs moving from savings to risk products.

VNB is down by 25% to £24 million, primarily as a result of the drop in  sales 
volumes. VNB margins  have improved  in 2012  due to  new product  structures, 
lower interest rates and an increase in higher margin protection business, but
have been offset by increased assumed  take up rates on German guarantees  and 
higher acquisition  costs from  increased new  business controls.  Whilst  VNB 
benefitted from selling a  higher proportion of  protection business, NBS  was 
14% lower than the same period in 2011. This is principally due to the reduced
volumes, but has increased relative to  premiums due to an increase in  higher 
strain protection products as well as negative economic impacts.

The business  will continue  its focus  on profitability  rather than  volume. 
Future improvements to trading performance are expected from the completion of
the roll out of new higher margin product structures and a review of the  cost 
base as  part  of the  strategic  review. The  roll  out of  the  new  product 
structures is complete in Singapore and the Middle East and awaits  regulatory 
approval in Hong Kong.



7. Lombard



    9 months 2012 9 months 2011        Half year 2012 Full Year

               £m            £m Change             £m      2011

                                     %                       £m
VNB            12            23   (48)             12        52
NBS          (18)          (18)      -           (12)      (20)
APE           119           138   (14)             95       237

Lombard's performance in the  first nine months of  2012 largely reflects  the 
challenging economic conditions, with macroeconomic instability, elections and
tax reforms  announced in  a number  of Lombard's  core markets  (e.g.  Spain, 
Italy, Belgium  and France)  generating  uncertainty. Against  this  backdrop, 
there remains  a lack  of momentum  in the  market with  clients and  partners 
reluctant to  make investment  decisions. In  particular, more  sophisticated, 
entrepreneurial  high  net   worth  individuals   are  delaying   investments, 
preferring to wait until proposed tax changes are on the statute books.

Value of new  business in the  first 9 months  of 2012 is  48% below the  same 
period  in  2011.  The  principal   drivers  of  this  reduced  new   business 
contribution have  been  lower  volumes  and product  mix  with  new  business 
continuing to be  increasingly sourced  from Private Banks  rather than  IFAs. 
Whilst the move towards Private Banks is likely to impact short-term  margins, 
especially as  distribution channels  mature, it  does have  the potential  to 
bring significantly wider market access and  more stable flows of business  in 
the future. The proportion  of new business originated  from Private Banks  in 
the first 9 months of 2012 was 44% (33% in the first 9 months of 2011).

New business strain  is in  line with  last year  despite a  reduction in  new 
business volumes as a result of Lombard's largely fixed acquisition cost base.

Results to  date reflect  Lombard's sales  and profit  profile, which  remains 
materially weighted towards the final quarter of the year with a largely fixed
cost base. As such, extrapolation of the nine month results is unlikely to  be 
indicative of the full year's results.

APPENDIX 2 - Shareholder exposure to higher risk European debts and banks



£m                      Total Spain Portugal Italy Ireland Greece
Sovereign debt              7     -        -     7       -      -
Corporate exposure        375   180        7   148      40      -
Total 30 September 2012   382   180        7   155      40      -
Total 30 June 2012        372   168        8   159      37      -



Shareholder exposure to bank debt securities

(£m)
                                                                   Shareholder
Seniority    Rating             UK Euro   USA France PIIGS^(i) ROW       total
Senior       AAA                15   95     -     15         -   3         128
             AA                 36   93    13      -         -  55         197
             A                 192    1   292      8         -  26         519
             BBB                 2    -     -      -        15   -          17
             Below BBB/NR        1    4     -      -         7   -          12
           Senior total      246  193   305     23        22  84         873
Secured      AAA               382    -     -     31        52  14         479
             AA                  9    -     -      -         -   -           9
             A                   4    -    11      -         -   -          15
             BBB                 -    -    13      -         -   -          13
             Below BBB/NR        -    -     -      -         -   -           -
             Secured total     395    -    24     31        52  14         516
Subordinated AA                  -    8     -      -         -  17          25
             A                 163   22    19     14         -  13         231
             BBB               222    -    46     20        40  28         356
             Below BBB/NR       71   20     -      -         -  12         103
             Subordinated
             total             456   50    65     34        40  70         715
Cash         Cash total        790  399   714    405         1 335       2,644
Grand total                  1,887  642 1,108    493       115 503       4,748

(i) Portugal, Ireland, Italy, Greece, Spain

(ii) The disclosure above excludes a £1.8 billion collateralised HSBC
Amortising Note set up as part of an annuity reinsurance transaction which
took effect 1 January 2007.



APPENDIX 3 - Update on Value Share

The partners  and employees  of the  Resolution Group  ("TRG"), which  is  the 
privately held advisory group of which ROL forms a part, are entitled to share
in the value created  from investments made  through the Company's  subsidiary 
undertaking, Resolution Holdco  No.1 LP  ("Holdco"), in  connection with  the 
acquisitions of  Friends Provident  Group plc  in 2009,  the majority  of  AXA 
S.A.'s  UK  life  business  in  2010   and  Bupa  Health  Assurance  in   2011 
(collectively, formerly known as the "UK Life Project" and which now form  the 
Friends Life Group).

The Value Share structure was established  at the time the Company was  formed 
and, in broad terms, entitles members of TRG to 10% of all distributions  made 
from Holdco  where  the  accumulated  value of  the  deployed  equity  capital 
contributed into Holdco (as  set out below), plus  an agreed return, has  been 
returned to the Company  or its shareholders,  or there has  been a change  of 
control of the Group.

At  30  September  2012  the  total  gross  equity  deployed  in  Holdco   was 
approximately £4,056 million and the accumulated value of net equity  deployed 
(at the agreed return of 4% per  annum and after allowing for £635 million  of 
capital returned  to  Resolution Limited  to  date) was  approximately  £3,795 
million, as shown below.

                          Equity deployed (£m)
Transaction                    RSL TRG   Total
Friends Provident^(i)      1,915.8 0.2 1,916.0
AXA UK Life Business^(ii)  2,139.8 0.2 2,140.0
BHA^(iii)                        -   -       -
Total                      4,055.6 0.4 4,056.0



Date                  Accumulated value of net Equity Deployed at 4% per annum
                                                                          (£m)
31 December 2009                                                         1,927
31 December 2010                                                         4,042
31 December 2011                                                         3,844
31 March 2012                                                            3,721
30 June 2012                                                             3,758
30 September 2012(iv)                                                    3,795



(i) See page 102 of Friends  Provident Group plc acquisition prospectus  for 
more details of equity deployed.

(ii) See page  89 of  AXA UK Life  Business acquisition  prospectus for  more 
details of equity deployed.

(iii) The acquisition of BHA was funded using existing FLG resources.

(iv) Since 30 September 2012, a further £80m has been distributed from Holdco,
leaving cash resources  of approximately £117m  at Resolution level  as at  14 
November 2012.





The rate used to calculate the "agreed return" (or accumulation rate) was  set 
at 4.0%  per annum  for an  initial three  year period  commencing 5  November 
2009. This rate is required, in accordance with the terms of the Value  Share 
arrangements, to be re-set  every three years  at the higher  of (i) 4.0%  per 
annum, and  (ii)  the gross  redemption  yield on  a  UK fixed  interest  gilt 
maturing approximately three  years after the  re-set date. Accordingly,  the 
rate used to calculate the agreed return was recently re-set at 4.0% per annum
for the three year period ending 5 November 2015.

Given that  Holdco is  the  Company's only  direct subsidiary  undertaking,  a 
mark-to-market valuation of the Value Share can be determined on any given day
by deducting the value of cash held at Resolution level from the market  value 
of Resolution, and then comparing the  result to the accumulated value of  the 
net equity deployed in  Holdco accumulated at the  agreed return (i.e. 4%  per 
annum).

Based on the accumulated  value of net  equity deployed and  the value of  the 
Company's net  assets as  at 30  September 2012,  the value  share would  have 
theoretically been "in the money" at a Resolution Limited share price of 278.1
pence at that  date. Therefore the  implied Value Share  at 30 September  2012 
(based on a closing share  price of 217.1 pence on  30 September) was nil  (30 
June 2012: nil).

Whether there is an implied value to the Value Share calculated on this  basis 
will vary day-to-day  depending, among  other things, on  the Company's  share 
price. In any event,  the implied value  of the Value Share  at any point  in 
time cannot provide an accurate guide  as to whether payments will  ultimately 
be made to TRG under the terms of the Value Share, as this will depend on  the 
distributions made to the Company by Holdco.



                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


QRTVZLFFLFFFFBF -0- Nov/15/2012 07:00 GMT