Resolution on target

So the drop in reported pre-tax profits doesn't really reveal the complete picture. True, total claims, benefits and expenses jumped from £1.74bn to £3.78bn, but much of this reflects integration costs and, in fact, gross earned premiums rose from £426m to £1.07bn, while fee and commission income was up from £323m to £410m. The group also notched up an impressive investment return of £2.58bn, more than double the previous first half.

Resolution remains on target to achieve targeted cost savings of £235m in the full year and an operating free cash surplus of £400m, having delivered £100m of capital synergies and £122m free cash generation in the first half. Management also confirmed that their attention will remain focused for now on the development of the UK Life project comprising the three acquisitions already made - Friends Provident, the AXA UK life business and Bupa Health Assurance. And plans have been announced to utilise excess cash to buy back £250m of the company's shares, of which £97m had been bought by mid-August. This does not affect plans to pay a final dividend double the interim payout, meaning that the shares have a current forward yield of 7.3 per cent.

The UK Life project is still being developed, and the full benefits of integration and cost synergies are not expected to come through fully until 2013. Key product lines will comprise corporate benefits, protection and retirement income, while steps have been taken to exit or scale back on less profitable lines such as individual pensions and investment bonds. Comparisons from last year on new business profits have been distorted by the AXA acquisition, but management expects profitability to rise significantly.

Finances remain in good shape, too, and, while the capital surplus over regulatory requirements fell from £2.3bn to £2bn, this was after a £350m dividend payout.

Analysts are currently reviewing their full-year estimates.

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