U.S. News

Resolution 2006 Beats Forecasts, Eyes Acquisitions


Britain's Resolution beat market forecasts on Tuesday with an 18% rise in its embedded value at the end of 2006 and said it planned to boost its 2007 dividend, but would continue to look for acquisitions.

Life insurer Resolution, which has almost quadrupled in size in the past two years through acquisitions, triggered a slide in its share price last week when it said months of takeover talks with unidentified parties had ended, though it would continue to look at possible purchases and business ventures.

The group, which focuses on consolidating life funds which no longer write new business, on Tuesday confirmed it aimed to take part in the consolidation of the U.K. life sector but said it could return capital to shareholders if no adequate transactions were found.

In its first full-year results since it bought the life businesses of mortgage bank Abbey last year, Resolution said its embedded value -- a measure of worth which includes the present value of long-term business -- stood at 613 pence per share against a restated 519 pence per share at the end of December 2005.

Eight analysts polled by Reuters had expected, on average, EV per share at 586 pence.

The shares were seen opening up as much as 3% after the results, according to traders.

Its 2006 dividend met market expectations and the group's own target of a 15% rise to 19.92 pence per share, but the insurer said it would raise that by 38% to 27.5 pence in 2007, targeting 5% per annum increases after that.

The insurer's 2006 operating profit on a European embedded value basis (EEV) and before non-recurring items was 390.9 million pounds ($771.1 million). That includes six months' of operating profit from the Abbey businesses at 106.7 million.

It gave no proforma year-ago comparison. Six analysts polled by Reuters had forecast EEV operating profit in a range of 211 million to 380 million pounds. The company's own poll had produced a range of forecasts from 305 million to 381 million pounds.

"Resolution's 2006 results provide clear evidence of the effectiveness of our business model," Mike Biggs, Group Chief Executive of Resolution, said. "The strength of these results and the sustainability of returns going forward provide a strong platform for future growth."