Resolution's share price was making gains on Friday after Credit Suisse upgraded the stock from 'underperform' to 'neutral', saying that it sees a 'greater balance of risk and opportunity' ahead of the insurer's first-quarter update next week.

Credit Suisse expects Resolution to "soothe investor concerns" on May 7th regarding the recent political and regulatory developments in the UK life and savings market.

The bank said that the recent falls in the share price - down 20% over the last two months - were "rational" given a weak outlook for annuity sales following the Budget and uncertainty relating to a regulatory review of older polices. However, it believes that these issues "will provide a drag on growth rather than a destruction of current value".

"Accordingly, we expect a reassuring tone from Resolution management, with reiteration of near-term cash generation targets and high-level plans for positioning in the post-retirement market likely to play well with investors."

Nevertheless, Credit Suisse said it is still cautious on the company's organic growth outlook and see the prospect of a renewed focus on back-book consolidation as a potential concern given investors' aversion to complexity.

"However, given Resolution has confirmed that it is examining a sale of Lombard and opportunities for further evolution in group strategy and structure (e.g. a sale of FPI, break-up of Heritage and UK), we see the risk-reward ratio as balanced from a strategic perspective."

The bank has trimmed its forecasts slightly for the company and lowered its target price for the stock from 340p to 325p.

Shares were 1% higher at 300.6p by 10:19.

BC

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