Resolution Has First-Half Profit on Friends Provident

(Updates with analyst comment in third paragraph.)

By Kevin Crowley

Aug. 17 (Bloomberg) -- Resolution Ltd., the buyout firm founded by Clive Cowdery, posted a first-half profit after buying Friends Provident Plc.

Operating profit was 203 million pounds ($318 million), compared with a 7 million-pound loss a year earlier, the Guernsey, Channel Islands-based company said today in a statement. The 2009 half-year earnings excluded profit from Friends Provident, Resolution’s first acquisition, because the sale was completed in November.

“These seem to be a decent set of results showing a further recovery in operating profit from Friends Provident,” said Marcus Barnard, a London-based analyst at Oriel Securities Ltd. with a “buy” rating on the stock.

Resolution this month completed a 2.1 billion-pound share sale to raise funds to buy Axa SA’s U.K. life-insurance unit. The acquisition will bring the firm halfway through its plan to build a life insurer valued at about 10 billion pounds within the next two years. Resolution purchased Friends Provident for 1.9 billion pounds last year.

The stock rose 5.6 pence, or 2.3 percent, to 251.6 pence at 9:22 a.m. in London trading, valuing the firm at about 3.7 billion pounds.

Increase in Revenue

Net income was 33 million pounds, compared with a loss of 7 million pounds a year earlier. The company’s cash flow rose about 19 percent to 610 million pounds as it gained more revenue from existing policies at Friends Provident and was given permission to reduce the size of its reserves.

Resolution’s embedded value, a measure of future profit, is worth about 6 billion pounds, following the purchase of Axa’s U.K. life division, Chief Executive Officer John Tiner said on a conference call with reporters. The company plans to raise its embedded value to 10 billion pounds through acquisitions.

“We remain confident that we have the firepower to finance an acquisition that would get us to that level and also those acquisitions will be available to us,” he said.

Resolution’s next purchase may have an asset-management division, Tiner said. “We can see clear synergies from having an in-house asset-management capability,” he said. “That remains a target strategy for us.”

The insurer will pay a half-year dividend of 5.46 pence a share.