Resolution adds fund management firms to its list of takeover targets

BUYOUT vehicle Resolution yesterday added fund managers to its list of potential targets as it revealed it made a profit in the first half of 2010.

The Clive Cowdery-led group said it would continue to target further deals in the insurance industry, following last year's 1.9 billion acquisition of Friends Provident and the addition of Axa's life assurance business in June. The next deal is expected in the middle of next year and the firm said yesterday that asset management companies were among its targets.

John Tiner, chief executive of Resolution Operations, said the firm would not be drawn on the details of specific acquisitions, with speculation swirling over the identity of the next target.

He said: "The company continues to target further life company acquisitions to both increase scale and build market leading positions in protection, workplace savings and annuities."

Resolution's UK life project aims to build a UK life and asset management giant worth 10 billion by 2013, with a view to a stock market listing.

Tiner, formerly chief executive of the Financial Services Authority, said the Axa deal had taken the project past its halfway stage.

The group is maintaining "dialogue with potential vendors" and is targeting the period through the to middle of next year for announcing a further acquisition.

Possible targets include Aviva, Edinburgh-based Aegon UK and Paternoster, the pensions buyout specialist.

Aviva rejected a 5bn bid from RSA for its general insurance business, dismissing the cash approach as "unacceptable", while Paternoster has been put up for sale.

Resolution, which has over 16bn in assets, will also look to add a UK-based asset management firm to its burgeoning portfolio, whether as a standalone acquisition or as part of an insurance company deal. The speculation over potential asset management targets seems certain to include Gartmore, after it reported a 10 per cent dip in assets under management for the six months to the end of June, following 1.7bn of outflows.

Adrian Lowcock, investment adviser at Bestinvest, said: "That industry is shaping up for a period of consolidation.

"Do not be surprised if the target is bigger than people expect."

Resolution posted a pre-tax profit of 139 million for the first six months of 2010, on an International Financial Reporting Standards basis, while the operating profit was 203m, up from a 7m loss in the same period in 2009. The improvement was driven by a recovery in profits at Friends Provident, which reported a 42 per cent rise in group wide sales in the first half to 458m, on an annual premium equivalent basis. UK sales were up 6 per cent, taking pre-tax profits to 157m, up from 29m last year.