Clive Cowdery’s Resolution beats City expectations

Operating profits for the six months to 30 June were up by 17 per cent. Picture: Getty
Operating profits for the six months to 30 June were up by 17 per cent. Picture: Getty
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RESOLUTION, the vehicle set up by insurance veteran Clive Cowdery to consolidate the sector, spent much of yesterday’s session at the top of the FTSE 100 risers’ board after its half-year profits beat City forecasts.

Cost savings and a focus on higher-margin company pensions schemes helped push operating profits for the six months to 30 June up by 17 per cent to £191 million.

Analysts expect the firm to benefit in the second half of its financial year from the UK government’s auto-enrolment scheme – under which workers at big companies are automatically signed up for pensions unless they opt out – and from the retail distribution review (RDR).

The RDR came into force on 1 January and means independent financial advisers will now normally charge up-front fees.

Edinburgh-based Standard Life is also expected to reap more business through auto-enrolment and RDR.

Cowdery floated Resolution on the stock market in 2008 and took over Friends Provident in a £1.9 billion deal the following year. In 2010 he added both the majority of the AXA UK life insurance businesses for £2.8bn and paid £165m for Bupa’s health assurance arm.

All three have since been rebranded under the Friends Life Group (FLG) banner.

Resolution chairman Sir Malcolm Williamson, right, a former chair of Clydesdale Bank, said: “The heritage business, representing the majority of the existing books of business, continues to be the cash engine of the group.

“The UK division – which comprises the corporate benefits, protection and retirement income businesses – has made good progress towards financial targets reflecting ongoing operational improvements underpinned by improving efficiency of cash usage.”

“We also continue to deliver the targeted cost savings.”

Blair Stewart, an analyst at Bank of America Merrill Lynch, said: “The company has delivered another set of results without any adverse surprises and we expect these results to be taken well. Cost saves supported the growth in cash generation.”

Alan Devlin, an analyst at Barclays, noted: “There are two key takeaways – Resolution is making significant progress in reaching its £400m cash generation target, with annualised underlying cash generation of £314m, already more than covering the £300m cost of the dividend.”

RBC Capital Markets analyst Gordon Aitken added: “Resolution is at an inflection point. Management has now improved UK profit margins to a superior level than peers.

“We see the next task of driving higher volume through the more-efficient machine that has been built as more straightforward given FLG is positioned in the two high-growth products of corporate pensions and annuities.”

Resolution held its interim dividend at 7.05p. Shares closed up 5.8p or 1.8 per cent at 329.5p, having hit 342.4p earlier in the session, propelling it to the top of the blue-chip index.