- Stock falls sharply as turnaround underwhelms
- Founders Cowdery and Tiner step down
- Profits surge in 2013, dividend maintained
- Name to change to Friends Life Group
Insurance group Resolution Limited underwhelmed the market on Tuesday after marking the end of its three-year restructuring programme with a big jump in profits in 2013.
Resolution, which was set up as an insurance buyout and restructuring group in 2008, announced that two of its founders would step down amid a re-branding which will see it change its name to Friends Life Group.
Insurance mogul and former Chairman Clive Cowdery and fellow non-executive director and former FSA head John Tiner will not stand for re-election at the annual general meeting (AGM) in May. Now is the "right time" to leave given that it has completed its restructuring phase, the group said.
"There are no immediate plans to appoint further directors to replace Clive and John, and the composition of the board will continue to be considered as part of the general succession planning process," the company said.
Resolution, which is now a major player in the UK life insurance and pension market focused mainly on the retirement market and management of closed books, said it is "appropriate in this new phase to move away from a restructuring brand" and will look for shareholders to approve the name change at the AGM.
Total revenue was £10.99bn in 2013, down slightly from £11.10bn in 2012, however a slight fall in claims, benefits and expenses saw profit before tax from continuing operations surge to £369m, from £66m previously.
The completion of its capital optimisation programme, in which the business was re-organised into two UK life companies for closed and open business, is said to have driven efficiencies that helped sustainable free surplus (SFS) rise to £331m last year, up from £300m in 2012 and less than £100m before the restructuring in 2010. SFS is the expected investment return minus the investment in new business, excluding certain items.
Meanwhile, the value of new business, which was negative in 2010, totalled £204m last year, up 30% on 2012.
Despite the turnaround, the stock was down 5.1% at 354.1p in afternoon trade on Tuesday.
Analysts at Shore Capital, who kept their 'hold' rating on Resolution, said that the company's "issue" now is that it "looks like any other open life company in the sector and we remain unconvinced that its new business offering is yet up to the standard of many of its peers in terms of strength of distribution, product offering and quality".
The company maintained its full-year dividend at 21.14p per share, equal to a cash cost of £300m, but said it would consider increases once the SFS cover of the dividend exceeds 1.3 times, compared with 1.1 times currently.