Resolution shares tumbled to the bottom of the stock-market movers today as the insurer unveiled plans to split the business in two by 2014.
Four years after it was founded to shake up the financial sector via acquisitions of perhaps struggling fund managers and insurers, Resolution now says it would be better in half.
Two new listed entities will be borne out of the company that now owns Friends Provident.
One will be an open business that tries to write new insurance policies and the other a “heritage” company, a “zombie” firm in the parlance not favoured by the industry.
Resolution reported results for 2011 a bit ahead of market expectations.
The operating profit of £681 million was boosted by one-off gains and the full year divi is up 10% to 19.89p. But the stock market’s initial reaction to the break-up plan was a raspberry. The shares fell 7%, 17.5p, to 257.3p.
“The relative weakness of the embedded value and the cash emerging from the business is now an issue,” said Kevin Ryan, analyst at Investec.
“This will inevitably make Resolution’s plans for selling or merging the underlying life businesses in order to provide shareholders with a profitable exit more difficult.”
Chief executive John Tiner thinks the new listed companies will be “attractive to different shareholders”.
On the arrival of solvency II regulations from Europe, he said: “It doesn’t keep me awake at night, but it is quite irritating that we don’t have the final rules when the target implementation date is only two years away.”
Resolution was set up by insurance entrepreneur Clive Cowdery.
