Resolution’s Full-Year Profit Declines on Integration Costs

Resolution Ltd. (RSL), the insurance buyout firm founded by Clive Cowdery, said full-year profit fell 60 percent after the firm paid more for information technology as it integrated businesses.

Operating profit declined to 274 million pounds ($416 million) in 2012 from 681 million pounds a year earlier, the Guernsey, Channel Islands-based firm said today in a statement. That missed the 336 million-pound median estimate of 8 analysts surveyed by Bloomberg. The firm raised its full-year dividend by 6.3 percent.

Resolution is focusing on generating cash from its three purchases -- Friends Provident, Axa SA’s U.K. life insurance unit and Bupa Health Assurance Ltd. -- after abandoning its acquisition strategy. The firm seeks to pay its dividend using cash generated from its so-called back book unit, a pool of existing policies closed to new customers that expire over time, and grow by selling pensions to British companies.

“The group has made good operational and financial progress in 2012 and, importantly, sustainable free surplus has improved,” Chief Executive Officer-designate Andy Briggs said in the statement.

Cash generation rose 3 percent to 300 million pounds in 2012. The firm raised its full-year dividend to 21.14 pence a share and cancelled its scrip payout. The dividend is covered 117 percent by cash moved up to the parent company, Resolution said.

Integration Costs

The firm’s net loss widened to 41 million pounds in 2012, compared with 31 million pounds a year earlier. Resolution spent 124 million pounds on integrating its business units in 2012, compared with 133 million pounds the previous year. The firm also spent 76 million pounds relating to Solvency II regulations and 41 million pounds on outsourcing.

Resolution’s stock is down about a third since it was founded in 2008. The company’s initial strategy was hampered as equity markets rallied in 2009, making acquisitions more expensive.

Shareholders last week voted in favor of ending a governance arrangement where Resolution outsourced the management of the firm to a privately-held company named Resolution Operations LLP, also owned by Cowdery. The Financial Services Authority last year warned so-called externally managed companies may lose their right to a listing on the stock exchange if they fail to change their management structure.

To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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