Resolution stands out from the crowd to boost dividend

Michael Bow
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INSURER Resolution, which owns Friends Life, bucked the trend for slashing dividends among its peers by increasing the payout yesterday after a surprise boost to cash flow.

The group, formed by former owner Clive Cowdery in 2008, announced a 6.3 per cent hike in the full year payout to 21.1p after generating £300m of cash for 2012, beating consensus estimates for cash flow of £264m.

It comes after two other listed insurers, RSA and Aviva, were forced to slash dividends following poor trading, sending shares plummeting.

And there was further good news for investors after the company said it would scrap a scheme which diluted the impact of the high dividend for investors’ shares – known as a scrip option – in future.

“The group has made good operational and financial progress in 2012 and, importantly, sustainable free surplus has improved,” chief executive Andy Briggs said, “Our dividend is 117 per cent covered by cash up-streamed to Resolution holding companies.”

Despite the encouraging numbers, Resolution saw pre-tax operating profits fall for the year down to £274m from £681m in 2011 owing to a string of one-off boosts in 2011. This year’s figure was below consensus forecasts of £321m. The profits were hit by weaker performance in its international markets business, which recorded a £9m loss.