Resolution shelves £250m handout to investors

Resolution, which handed £250m to investors through share buybacks last year and had pledged another £250m in the first half of 2012, will update shareholders on its cash back plans by August at the latest, it said yesterday.

“The whole of Europe has been struck by severe headwinds in investment markets,” chief executive John Tiner said.

“What we’re doing in the first half of this year is to study whether that capital can continue to come back to shareholders bearing in mind market volatility.”

“We expect the news that Resolution is to delay confirming the return of £250m of surplus capital to weigh on near-term investor sentiment,” analysts at Barclays Capital wrote in a note.

Resolution, created to buy underperforming life insurers and merge them into a more profitable whole, has for the past year been focusing on cost savings and returning cash to investors rather than on fresh acquisitions.

The company yesterday reported a 2011 operating profit of £681m, up from £275m a year earlier, and ahead of the £602m expected by analysts in a company poll.

The improvement reflected a one-off boost from accounting adjustments and a deal last year to outsource many of its back-office functions.

The company, which aims to make money for its backers by selling or floating its merged life insurance operations, also said it would split the business into two by early 2014 to maximise potential returns.

Under the plan, Resolution will divide its operations into a standard life insurer open to new customers, and a ‘closed book’ of existing policies which will not take on new business and will be managed for cash.

The company will continue to look for alternative ways of allowing its backers to exit their investment, including mergers, it said.

Resolution, founded by entrepreneur Clive Cowdery, has bought Friends Provident, most of Axa’s British operations, and life insurer BHA, since launching in late 2008.

Shares in the group have fallen 10 per cent in the past year, lagging a 5 per cent drop for the Stoxx 600 European insurance share index.

n A subsidiary of China’s sovereign wealth fund yesterday signed a memorandum of understanding with Dublin’s debt agency to explore investment opportunities in Ireland, but gave little detail on what it might be interested in.

Europe has been courting countries with big foreign exchange reserves, such as China, to help prop up some of its indebted governments that have struggled to issue bonds as the eurozone’s debt crisis rumbles on.