closer to tying the knot
Barring a last-minute counter-bid, the merger of the UK’s largest
specialist manager of in-force closed life insurance funds,
Resolution Life, and 175-year-old insurer Friends Provident is set
to occur in late November. The merger will, however, now be by way
of a court-sanctioned scheme of arrangement between Friends
Provident and Friends Provident shareholders, and not a scheme of
arrangement between Resolution and Resolution shareholders as
originally mooted when the merger was announced in July.
The merger thus becomes conditional upon the approval of a simple
majority of Resolution shareholders voting at Resolution’s
extraordinary general meeting in late October and a majority in
number representing 75 percent in value of those who vote at a
meeting of Friends Provident shareholders convened by order of the
court. The merged entity will be named Friends Financial Group plc
(FFG) and would be the UK’s third-largest provider of protection
products and fifth-largest life insurer overall.
Mike Biggs, Resolution’s group chief executive, said that while
changes to the mechanics of the merger would permit the transaction
to proceed without disruption, nothing would inhibit anyone from
making a competing offer for Friends Provident.
Resolution and Friends Provident have confirmed an earlier
announcement that merger benefits would amount to £100 million
($200 million) in annualised pre-tax cost savings and financial
synergies by the end of 2010. The merger is expected to be earnings
per share accretive on an European embedded value basis and
accretive to embedded value per share by 2009.
Resolution and Friends Provident also pointed to specific
strategies that they believe will deliver profitable new business
• Friends Provident’s existing annuity product being made available
to capture a share of about £900 million per annum of future
vesting pensions on Resolution’s books;
• greater penetration of the Abbey Bank bancassurance relationship;
• developing new business products under the Friends Provident
brand for Resolution’s 7 million customers.
Asset management will remain central to FFG’s strategy and it is
proposed that Resolution’s asset management unit will be combined
with Friends Provident’s unit, F&C Investments. F&C will
continue to be separately listed and majority owned by FFG. The two
units had a combined total of £165 billion of funds under
management as at 31 December 2006.