Resolution’s Sales Drop as Firms Delay U.K. Pension Enrollment

Resolution Ltd., the insurance buyout firm founded by Clive Cowdery, said first-quarter revenue dropped as corporate clients delayed enrolling into pension plans as new legislation is implemented in the U.K.

Sales fell 17 percent to 242 million pounds ($375 million) in the first three months of the year, compared with the same period a year earlier, London-based Resolution said today in a statement. The value of new business increased 9 percent to 38 million pounds as the firm wrote more profitable policies.

After scrapping its initial acquisition strategy, Resolution is focused on generating cash from its three purchases -- Friends Provident, Axa U.K. Life and Bupa Health Assurance -- while building its pension business. The company is seeking to benefit from the U.K.’s auto-enrollment legislation, which compels firms to offer employees a pension plan.

“In the first quarter only the very largest pension schemes have auto enrolled,” Chief Executive Officer Andy Briggs said on a call with reporters. “We remain very confident that we will deliver significant growth in volumes and profits in our corporate benefits this year but that will come through in the second half.”

Sales of corporate pension plans dropped 25 percent to 109 million pounds in the first quarter, dragging down U.K. revenue 18 percent to 142 million pounds, Resolution said. Low prices and smaller pay rises for existing customers also crimped earnings at the division.

The results showed “progress in restructuring the business and delivering efficiency gains, but volumes were below consensus estimates,” Marcus Barnard, a London-based analyst at Oriel Securities Ltd. with a hold rating on the stock. “These figures are unlikely to drive the shares forward.”

Resolution fell 0.6 percent to 270.7 pence a share at 9:05 a.m. in London, valuing the firm at about 3.8 billion pounds.

The firm has a cash balance of 839 million pounds before the payment of a 200 million-pound second-half 2012 dividend, it said. Cash has been bolstered by the lower cost of writing new policies and cost cutting, Resolution said. The firm’s dividend is sustainable even as other insurers such as Aviva Plc and RSA Insurance Group Plc reduce their payouts to shareholders, Chief Financial Officer Tim Tookey said on the call.

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