Resolution group chairman John Tiner has made a pledge today to return £500 million to investors and focus on UK life operations only. In a statement issued today morning, the firm announced results of its work on the cash and capital position of Friends Life Group along with a resolution to return excess cash of £500 million to investors by 2012.
Starting June 8, Resolution will buyback shares worth £250 million to ensure better earnings for the shareholders in future. The remaining £250 million cash will be returned to shareholders by the first half of 2012. Previously announced cash and dividend targets will remain unchanged.
The company’s target for redistributable cash remains at £400 million after interest costs for the year 2011, a statement released by Resolution said. Under the proposed Solvency II norms, there is scope for further capital synergies and potential releases.
“Today we have set out our clear and transparent capital framework for the enlarged group”, said Mike Biggs, Chairman of Resolution Ltd.
“This, along with our strategy statements in February and our results in March have highlighted the strong value potential from the UK Life Project. We are pleased to demonstrate the delivery of this value through our cash returns announced today and from our strong dividend commitments”, he added.
Barclays Capital welcomed Resolution’s announcement. “(The move is) closely in-line with our expectations and very supportive of our positive view”, said Barclays in a statement.
Indicating that the stock is over valued, Barclays added: “At the current price to earnings ratio, we think the current price fails to capture a strong capital generation ability and therefore the potential for significant dividend growth and other ad hoc returns to shareholders, such as buybacks”.
Maintaining that there is scope for improvement, Barclays said: “The current £400m capital generation target looks unchallenging, and we expect upwards revision”.