Resolution Ltd. (RSL) is changing its name to Friends Life Group Ltd. as founder Clive Cowdery steps down from the board, about 18 months after scrapping its targets and a strategy to grow by acquisitions.
The company posted a 59 percent increase in pretax operating profit to 436 million pounds ($724 million) in the 12 months to Dec. 31, the Guernsey, Channel Islands-based firm said in a statement today. The shares fell the most in 11 months as the value of new business missed some analysts’ estimates.
Resolution said it’s “appropriate” to move away from the restructuring brand conceived by Cowdery as an acquirer of policies closed to new customers. Chief Executive Officer Andy Briggs, named in 2012 to overhaul the business as that strategy changed, has looked to generate cash from the existing units and build the company’s pension offerings.
“It’s a good time to step away,” Cowdery, 50, said in an interview. “I do have some ambitions to do something else. There are quite a lot of opportunities in the closed life-insurance business in Europe and indeed some remain in U.K. assets.”
Briggs has looked to integrate its three units -- Friends Provident, Axa SA’s U.K. life insurance unit and Bupa Health Assurance Ltd. -- as the company adopted a new direction that focused on growth plus cash, a strategy favored by insurers Legal & General Group Plc (LGEN) and Aviva Plc. (AV/) The firm scrapped its return target and acquisitions plans in August 2012 as it reported lower earnings.
“We reached a significant turning point for the group in 2013 and are entering a new and exciting chapter,” Briggs said. “The restructuring of the business is now complete. We have a sustainable business with a profitable base for future growth.”
Briggs said Resolution is still in talks to sell Lombard, its European wealth manager, that began in November. It also owns other businesses including Sesame Bankhall Group, formed in 2009, and Friends Provident International.
Value of new business, a measure of future cash flow, rose 5 percent to 204 million pounds, missing some analysts’ estimates including Shore Capital’s Eamonn Flanagan and Barclay Plc’s Alan Devlin as new business at Lombard fell 44 percent.
“The issue for the group is that it now looks like any other open life company,” Flanagan wrote in an e-mailed note. “We remain unconvinced that its new business offering is yet up to the standard of many of its peers.”
The shares closed down 22 pence, or 5.9 percent, to 351 pence in London, the biggest decline since last April. The stock rallied 43 percent last year, outperforming the FTSE 350 Insurance Index. Even so, the shares are down about 9 percent since Cowdery took the company public in 2008, while the index has more than doubled.
Cowdery has since turned his attention to the North American life-insurance market with his first $600 million acquisition of a unit from Allstate Corp. in July. His Resolution Life unit raised an initial $2 billion from investors that includes U.S. insurers and pension funds.
He may set up a similar venture focused on the euro area in the second half of the year and said the name change on July 1 allows him to use the Resolution brand for other potential businesses.
Cowdery still owns about 8.5 million shares in Resolution valued at about 29.8 million pounds, according to data compiled by Bloomberg. Following his board departure, a partnership advisory committee has been formed to allow the owners, which still includes Cowdery’s Resolution Group, to share in the “future direction” of Friends Life.
John Tiner, a former head of Resolution’s management company and CEO of the Financial Services Authority, also stepped down from the board.
Briggs today declared a full-year dividend of 21.14 pence a share, unchanged from the previous year, which was covered 1.1 times by sustainable free surplus. The move to a progressive dividend would be considered when the cover exceeds 1.3 times, the insurer said.
The company has also announced Schroders Plc (SDR) will manage 12.2 billion pounds of equity and multi-asset funds from the fourth quarter of 2014. The remaining 2 billion pounds of fixed-income assets will be managed in house. F&C Asset Management Plc (FCAM), in a separate statement, said it had lost a Friends Life mandate with the funds due to be withdrawn at the end of 2014.
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