SHARES in insurance buyout vehicle Resolution slumped yesterday after the firm said it will have to pay an extra £35m as part of its purchase of AXA’s UK life insurance business.
Tim Tookey, chief financial officer, told City A.M.: “The AXA charge [relates to] some of the costs in the final stage of separation of IT systems. We have bought part of something and the cost of separating the very intricate IT systems is proving more costly than had first been envisaged.”
Resolution was set up to combine underperforming life insurers into a more profitable whole. However it now seems that the cost of integrating the companies will be higher than originally expected and this summer the company said it will no longer seek to make new acquisitions.
Chief executive designate Andy Briggs told City A.M. that his firm will instead attempt to increase profits from existing businesses: “We will be slimming down to focus on attractive growth markets. We’re focussed on building a robust low-risk capital business, driving cash generation and driving profitable new business growth.”
In addition to the costs relating to AXA’s IT system, the firm also said it would have to spend an additional £30m to change the terms of its agreement with outsourcer Diligenta.
New business profit for the nine months to 30 September rose 45 per cent to £138m, mainly thanks to growth at its UK division. The headline figure would have been even higher without a 25 per cent slump in international sales.