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Resolution plans deal for Axa's UK life insurance business
• Investment firm to raise £2bn from rights issue
• Deal will put firm among top three UK life insurers
Resolution, the investment firm led by Clive Cowdery, (pictured) is planning a deal for the UK life insurance business of Axa. Photograph: Rex Features Resolution, the investment firm led by Clive Cowdery, is closing in on a deal to buy the UK life insurance business of Axa, the French insurance firm, for £2.75bn.
The purchase will be financed through a £2bn rights issue, another £500m of notes provided by Axa, as well as bank debt, Resolution said. The company, formed 18 months ago to consolidate the UK life insurance market, already acquired Friends Provident for £1.9bn last year.
Resolution is looking at other market players as it aims to build an industry leader with £10bn worth of life insurance policies by 2013. The company then plans to spin the business off in the stock market, and move on to consolidating other industries.
Adding Axa's UK units would take Resolution's insurance policies under management to about £6.8bn, putting the company among the top three life insurance firms in Britain, competing with Norwich Union and Legal & General.
"The board of Resolution believes that the businesses are complementary and have a good operational fit, offering the opportunity to create one of the UK's largest providers of protection products," the company said in a statement.
The company expects the merger would lead to savings in sales, marketing, support and operations departments. Resolution aims to snap up the UK business of leading international insurers, such as Axa, that are turning their focus towards high-growth markets in Asia.
The French firm still plans to keep its wealth management and non-life insurance businesses in Britain.
Resolution was reported to have been in talks this year on buying the UK arm of Prudential, the insurance business which this month was forced to scrap its ambitious plans for a £24bn takeover of AIG's Asian business.
"The UK market has never been very profitable and successful for Axa as it lacks critical mass and faces very intense competition," CreditSights analysts said in a note to investors. "From a credit perspective, we can only be positive on Axa's intention to redeploy its capital to more profitable businesses."
James Shuck, an analyst at stockbroker Jefferies, said: "It leaves them well-placed to take advantage of assets as and when they come up for sale. It gives them more room for manoeuvre. They've got scope to do a €1bn to €3bn acquisition with no extra financing involved.
Resolution's boss, Cowdery, a former insurance salesman, amassed a personal fortune of more than £100m after the sale of the previous Resolution business to the Pearl Group for £5bn in 2008. He founded the company in 2003, with £500m of capital, to buy close-end life insurance funds, or policies that did not sign in new customers as the insurance providers want to exit the business or access the money. The venture gave investors annual returns of 28% in each of its five years of existence.
In 2009, Resolution posted net income of £1.16bn, compared with a £1m loss in 2008. This year, the firm's first-quarter turnover rose by 19% to £1.5bn.
Resolution, which was worth £1.4bn at the close of Friday's trading, suspended its shares before the announcement today. Axa rose 3.6% to €13.6 in Paris.
• Investment firm to raise £2bn from rights issue
• Deal will put firm among top three UK life insurers
Resolution, the investment firm led by Clive Cowdery, (pictured) is planning a deal for the UK life insurance business of Axa. Photograph: Rex Features Resolution, the investment firm led by Clive Cowdery, is closing in on a deal to buy the UK life insurance business of Axa, the French insurance firm, for £2.75bn.
The purchase will be financed through a £2bn rights issue, another £500m of notes provided by Axa, as well as bank debt, Resolution said. The company, formed 18 months ago to consolidate the UK life insurance market, already acquired Friends Provident for £1.9bn last year.
Resolution is looking at other market players as it aims to build an industry leader with £10bn worth of life insurance policies by 2013. The company then plans to spin the business off in the stock market, and move on to consolidating other industries.
Adding Axa's UK units would take Resolution's insurance policies under management to about £6.8bn, putting the company among the top three life insurance firms in Britain, competing with Norwich Union and Legal & General.
"The board of Resolution believes that the businesses are complementary and have a good operational fit, offering the opportunity to create one of the UK's largest providers of protection products," the company said in a statement.
The company expects the merger would lead to savings in sales, marketing, support and operations departments. Resolution aims to snap up the UK business of leading international insurers, such as Axa, that are turning their focus towards high-growth markets in Asia.
The French firm still plans to keep its wealth management and non-life insurance businesses in Britain.
Resolution was reported to have been in talks this year on buying the UK arm of Prudential, the insurance business which this month was forced to scrap its ambitious plans for a £24bn takeover of AIG's Asian business.
"The UK market has never been very profitable and successful for Axa as it lacks critical mass and faces very intense competition," CreditSights analysts said in a note to investors. "From a credit perspective, we can only be positive on Axa's intention to redeploy its capital to more profitable businesses."
James Shuck, an analyst at stockbroker Jefferies, said: "It leaves them well-placed to take advantage of assets as and when they come up for sale. It gives them more room for manoeuvre. They've got scope to do a €1bn to €3bn acquisition with no extra financing involved.
Resolution's boss, Cowdery, a former insurance salesman, amassed a personal fortune of more than £100m after the sale of the previous Resolution business to the Pearl Group for £5bn in 2008. He founded the company in 2003, with £500m of capital, to buy close-end life insurance funds, or policies that did not sign in new customers as the insurance providers want to exit the business or access the money. The venture gave investors annual returns of 28% in each of its five years of existence.
In 2009, Resolution posted net income of £1.16bn, compared with a £1m loss in 2008. This year, the firm's first-quarter turnover rose by 19% to £1.5bn.
Resolution, which was worth £1.4bn at the close of Friday's trading, suspended its shares before the announcement today. Axa rose 3.6% to €13.6 in Paris.
