CompaniesMar 27 2012

Resolution eyes Friends exit as it plans business split

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Life insurance consolidation vehicle Resolution has confirmed in its annual results that it is planning to split its open and closed business units into two independent companies by the end of 2013, creating two independent companies that will be separately exited.

Resolution said the move comes on the back of “making good progress in the UK” as it announced profits before tax of £681m in 2011, compared to £275m in 2010. It also reported an operating profit before tax of £517m, compared to £412m in 2010.

Subsidiary Friends Life has been re-aligning the majority of its resources to reflect the split between the UK Go to Market and Heritage businesses since the announcement of the creation of the Heritage business unit in August 2011, the company added.

Together with Resolutions Operations LLP, it is now putting in place a programme to re-align the majority of the remaining shared service and group functions to either OpenCo or HeritageCo over the next 18 months.

Resolution said that “detailed planning work” has commenced to ensure that the company is able to implement this plan by early 2014.

As part of this planning, consideration is being paid to the interests of current and future holders of Friends Life’s listed debt instruments, the company said, which would include ensuring each business retains only an appropriate level of gearing.

For Friends Life, ROL highlighted that a “number of options” exist for it to secure an exit, including: a cash sale together or in parts of the Friends Life business; a direct listing of Friends Life as a stand alone entity; separation of the UK open business from the UK back book leading to separate sales or listings; or merger with another life company.

It said: “We believe that the separation of OpenCo and HeritageCo will create two businesses which will be attractive to different groups of investors, both debt and equity, and will be able to adopt different strategies following exit from the Company.

“OpenCo will be a fit for purpose life company, playing in key markets in which it has competitive advantage and HeritageCo will adopt a UK closed life fund consolidation strategy following exit.”

Mike Biggs, chairman of Resolution Limited said: “2011 was an important year for Resolution Limited. It made significant progress driving value from the businesses acquired in its UK Life Project.

“The company is committed to returning surplus cash not required by the business to shareholders subject to market conditions and receiving the appropriate regulatory approvals.”