RESOLUTION, the life insurance consolidator, yesterday said it had returned almost £100m of cash to shareholders and was on track to redistribute a further £400m in the next year after a successful first half.
Resolution said it made an underlying £189m profit in the first half, up from £151m in the first half of 2010, and also released a net £201m from its capital reserves, boosting total profits to £390m.
The group said it had hived off a portfolio of legacy closed-end products into a new unit called Heritage headed by Resolution’s chief commercial officer Evelyn Bourke.
The portfolio policies are no longer sold to new customers but highly cash generative and will be run off over time, while the remaining new business group, which sells retirement income, employee pensions and protection products to new customers, will continue under the Friends Life brand.
Berenberg Bank analyst Trevor Moss said the move could be a first step towards a sale of the heritage portfolio while leaving the new business book as a quoted entity. “The first step is to demonstrate the cash flow that runs off the back book,” he said.
The value of new business through Resolution’s Friends Life platform fell to £66m from £81m in the first half of the year as demand in the UK fell, but it said profitability was expected to improve as synergies are delivered.
Resolution said it delivered £100m of capital synergies so far towards its £235m target for 2011 and created £283m of distributable cash, leaving it likely to beat its full-year target of £400m.
Resolution, which combined life assets from Friends Provident, Axa UK and Bupa, is on track to return £250m to shareholders this year and £250m next year through share buybacks.