Resolution Ltd., the insurance buyout firm founded by Clive Cowdery, plans to buy back 250 million pounds ($410 million) of shares, part of a plan to return 500 million pounds to investors over the next year.
Resolution will buy back stock on the open market from tomorrow, the Guernsey, Channel Islands-based company said in a statement today. A further 250 million pounds will be handed to shareholders in the first half of 2012, the firm said.
Resolution, Cowdery’s second merger vehicle by the same name, has purchased Friends Provident, Axa U.K. life and Bupa Health since 2009 and is merging the three life insurers before a planned sale by 2013. Chief Executive Officer John Tiner today said the firm won’t tap shareholders for more cash to fund future acquisitions.
“Resolution has fired the starting gun on what looks like an aggressive de-cumulation phase,” Kevin Ryan, a London-based analyst at Investec Plc with a “buy” rating on the stock, wrote in a note to clients today. “A sustained operating squeeze seems likely to be placed on the business to create an exemplary cash cow.”
The company plans to release 235 million pounds of capital from merging the three businesses this year, it said. That money will help to fund the second part of the return to shareholders. The firm will cut 400 employees this year to save 39 million pounds by the end of 2011.
Resolution’s plans to return cash won’t affect its dividend, which is “expected to increase accordingly,” Resolution said.
The stock rose 3 percent to 308.9 pence at 9 a.m. in London trading today for a market value of about 4.5 billion pounds. Resolution is the best-performing stock in the FTSE ASX Life Insurance Index over the last six months after saying in January it didn’t need to sell more shares to fund acquisitions to meet its targeted “mid-teens” returns for investors.
“There may be other transactions,” Tiner said today. “They just won’t involve the raising of new cash from shareholders,” he said.
Resolution’s holding company receives strategic advice from a separate firm named Resolution Operations, of which Cowdery is a partner. That firm will consider further restructuring projects in financial services, Tiner said today.
“Resolution Operations will continue to take to investors restructuring projects in other fields, that we’ve discussed before, that will be established through new vehicles,” Tiner said. “They won’t be executed through Resolution Ltd.”