Britannic Group is merging with Resolution Life in a deal worth around £1.8bn to the closed book life business firm and which will see Resolution bring its asset management in-house.
Acquisition-hungry Resolution Life this morning announced this merger should give the firm six million policies and £35bn of closed book life company assets under the Britannic merger, to give a combined embedded value of around £2.1bn.
Moreover, talk from Resolution’s chairman Clive Cowdrey suggests the group is keen to seek out yet more new acquisitions alongside plans to develop new third-party asset management and administration services.
This is the third such deal for Resolution Life in recent months, having recently acquired assets from Swiss Life and Canada Life, and follows the closure of Britannic to new with-profits business in 2003, to split the company’s assets as approximately 54% with-profits business, 21% unit-linked and 25% non-profit business.
In today’s announcement, Resolution says it has already received binding commitments to support the merger from 94% of Resolution ordinary shareholders, but under this new arrangement, Britannic shareholders will make up 54.5% of the ordinary shareholders once the firm is rebranded as Resolution plc.
Once the deal is approved later this year, the company will then look at refinancing its underlying debts worth approximately £780m by issuing new bonds worth around £300m, to reduce the company’s debt gearing from around 25% to 21.6%.
One such loser in the deal, however, is F&C, as Resolution will end its outsourcing deal with F&C and bring asset management in-house to Britannic’s Glasgow office from 2006 as part of a new venture into third-party services.
Making such major changes to the management – which also sees current Britannic chairman Malcolm Williamson become deputy chairman – of the company, along with its debt restructuring, is said to generate cost savings of around £20m but will not be noticeable until 2007.
Executive chairman Clive Cowdrey says priorities will be placed on programmes to improve policyholder service alongside the benefits targeted at shareholders.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Julie Henderson on 020 7968 4571 or email [email protected].IFAonline
Clarke replacing Balkham
'Deep-dive analysis of client behaviour'
Ways to mitigate April’s increases
The best equity income funds examined