Cash flow boost for Resolution

That shift leaves Resolution - which was originally established to buy underperforming life operations - looking more like a conventional life assurer. The strategy seems to be paying off. In its full-year figures, Resolution revealed that £160m of cost savings had been achieved in the past three years even as cash flow grew rapidly. In fact, the sustainable free cash surplus (Resolution's own measure of cash) rose 10 per cent in 2013 to £331m, beating consensus analyst estimates by 3 per cent. That gives a dividend cover of 1.1 times, which is crucial because management will consider adopting a progressive dividend policy once the figure reaches 1.3 times. With cash generation in 2014 expected to be £40m higher than last year, that may not be such a distant prospect.

Meanwhile, growing demand for retirement products helped drive group operating profit up 59 per cent to £436m and boosted the value of new business (VNB) in the UK by 30 per cent, supported by a strong annuity performance. That beat market trends. Indeed, fourth-quarter annuity volumes for the market overall fell 30 per cent year on year - reflecting the rush to buy before gender neutral pricing was introduced - but Resolution saw its annuity VNB for the period remain roughly flat at £19m. Auto-enrolment, meanwhile, is helping to boost the corporate pension business: VNB here rose 24 per cent.

A weak international performance, however, pulled growth in overall group VNB down to 5 per cent. That was significantly due to the Lombard operation, where VNB slumped 44 per cent. The unit has been hit by tax and legislative changes in Belgium, but also by uncertainty following the news in November that Resolution's management may sell it.

Pending upgrades, RBC Capital Markets expects EPS of 34.9p for 2014 and embedded value of 423p.