Acquisition

15 October 2010

For immediate release

Resolution Limited ("Resolution" or the "Company")

Acquisition of Bupa Health Assurance

Summary

Resolution announces the proposed acquisition of the entire issued share capital and business of Bupa Health Assurance Limited ("BHA") for a net consideration of approximately £102 million, funded from surplus capital held within Friends Provident Holdings (UK) plc's ("Friends") life operating businesses. The acquisition demonstrates further progress in Resolution's UK Life Project, delivering a significantly improved Group Risk proposition and a further strengthening of Friends's Individual Protection business.

The acquisition is also expected to deliver:

·; an attractive net acquisition price, expected to represent 62% of the estimated embedded value of BHA on a Resolution basis;

·; accretion to embedded value per share and IFRS earnings per share in year one; and

·; an attractive stand-alone internal rate of return ("IRR") based on net cash consideration, together with accretion to the overall IRR expected on the UK Life Project.

Transaction detail

BHA will be acquired by Friends Provident Life and Pensions Limited ("FPLP"), a subsidiary life company of Resolution. Key financial details in relation to the acquisition are:

·; the embedded value being acquired is estimated to be £228 million at completion on a Resolution basis;

·; the gross consideration to be paid for BHA is £165.15 million in cash, representing approximately 72% of the expected acquired embedded value on a Resolution basis, which will be funded from surplus capital held within FPLP;

·; financial structuring will allow the release of approximately £86 million of reserves (before tax) immediately following completion;

·; this will result in an immediate post-tax cash release of around £63m giving a net consideration of around £102 million, representing 62% of the post capital release embedded value of BHA of approximately £165 million; and

·; financial synergies are expected to result in the release of an additional £22 million of capital following a Part VII transfer of the BHA business in 2011.

Acquired businesses

The BHA Group Risk and Individual Protection businesses to be acquired from Bupa have established and profitable platforms. During the first 6 months of 2010, BHA wrote new business premiums (measured in Annual Premium Equivalent ("APE")) of £20 million. This new business would have had a value of £18 million before tax if written in a Friends company.

Friends has material market shares in both the corporate pensions and individual protection markets, but currently has only a modest position in the group income protection market. The addition of the BHA Group Risk business will allow Friends to offer a complete suite of group risk products (group life, group income protection, and group critical illness) to its supporting intermediaries alongside its corporate pension proposition. BHA Group Risk premiums were £9 million APE in the first 6 months of 2010 representing an 8% market share, compared with Friends's market share of 2% in the same period. The new business value of the Group Risk business written in the first 6 months of 2010 would have been £5 million before tax if written in a Friends company. 

BHA Individual Protection premiums were £11 million APE representing a 3% market share in the first 6 months of 2010, compared with AXA Sun Life and Friends's market shares of 6% and 5% respectively[i] over the same period. The new business value of the Individual Protection business written in the first 6 months of 2010 would have been £13 million before tax if written in a Friends company. As at 31 December 2009, BHA had gross assets of £309 million.

Integration with Friends

BHA will be run as a stand-alone business within the Friends group for a period of up to a year.

Following this initial period:

·; Friends's existing Group Income Protection business will be integrated into the acquired Group Risk business to form a strong position in this market; and

·; the acquired Individual Protection business will be integrated with the equivalent Friends businesses on a "best of breed" basis.

The integration of the BHA businesses and the existing Friends businesses is expected to result in expense synergies, incremental to those announced in relation to the acquisition of the AXA UK Life business. The quantum of potential expense synergies will be determined once the approach to integration has been settled and no allowance for expense synergies has been made in determining that the expected IRR on the acquisition exceeds Resolution's target returns.

Integration costs are expected to be approximately £3 million after tax, with the majority expected to be incurred in 2011.

Relationship with Bupa

In addition to the proposed acquisition of BHA, and in the context of Bupa's general review of its distribution arrangements, Friends and Bupa have agreed to explore ways in which Friends can introduce the Bupa private medical insurance product to its distribution channels and markets and Bupa can introduce the Friends insurance products to its distribution channels and markets.

Available shareholder cash

On 30 September, including cash raised at the time of the AXA transaction, Friends had available shareholder cash of around £434 million in holding companies (30 June 2010: £308 million). Additional shareholder cash held in Resolution holding companies was around £300 million (30 June 2010: £297 million), of which £75 million was utilised to pay the 2010 interim dividend on 8 October 2010. Therefore total shareholder cash available as at 30 September 2010 was around £734 million (30 June 2010: £605 million). This amount will not be reduced by the proposed transaction as the purchase price will be met from surplus capital held within the life operating business.

Commenting on the acquisition, Michael Biggs, Chairman of Resolution, said:

"This transaction is entirely consistent with Resolution's strategy. Both the terms of the transaction and the synergies to be gained from it will create value for shareholders. It will also enhance Friends's proposition as a focused and disciplined writer of new business in key product areas."

Commenting on the acquisition, Trevor Matthews, CEO of Friends, said:

"This acquisition will strengthen our Group Risk business product range and improve the profitability of our Individual Protection business. The BHA management team led by Steve Payne will bring additional highly valued expertise to the Friends team."

The acquisition is subject to the approval of change in control by the FSA and the Guernsey Financial Services Commission.

ENQUIRIES:

Investors / Analysts

Neil Wesley, Resolution Operations +44 (0)20 3372 2928

Media

Alex Child-Villers, Temple Bar Advisory +44 (0) 20 7002 1080

Media

There will be a conference call today for wire services at 7.45am (GMT) hosted by John Tiner, Chief Executive of Resolution Operations. Dial in telephone number: +44 (0)1452 555 566, Conference ID: 17675738.

Investors / Analysts

There will be a conference call for analysts and investors at 9am (GMT) hosted by John Tiner, Chief Executive of Resolution Operations. Dial in telephone number: +44 (0)1452 555 566, Conference ID: 17672905.

Notes to editors:

About BHA

BHA is a well-established provider of protection insurance in the UK, competing in both the Individual Protection and Group Risk markets. BHA, a wholly owned subsidiary of British United Provident Associated Limited ("Bupa"), was set up in 1994 to offer individual and group protection insurance to complement Bupa's core private medical insurance offering in the UK.

BHA distributes almost exclusively through the intermediated channel and has relationships with over 20,000 Independent Financial Advisers and the major Employee Benefit Consultants.

Industry Awards

The high quality of BHA's Individual Protection range is recognised in the industry. In recent years, BHA has won several awards and achieved top ratings for its Critical Illness product including:

- "5 Star Rating" from Defaqto (2009, 2010); and

- "5 Stars -online Proposition" from FT Adviser Online (2009);

At the recent Cover Excellence Awards 2010, Bupa Individual Protection won the Best Service Provider of the year.

About Resolution

Resolution's objective is to acquire businesses and provide the public markets with a series of restructuring opportunities in the financial services industry in the UK and Western Europe. Its current restructuring project is in the UK life and asset management sectors.

The Company's ordinary shares were admitted to the Official List and to trading on the main market of the London Stock Exchange in December 2008. The Company transferred to a Premium Listing as it completed its first acquisition, Friends Provident Group plc, on 4 November 2009 and is subject to those provisions of the Listing Rules that apply to overseas companies with a Premium Listing. The Company announced the completion of its second acquisition, the majority of the AXA UK life business, on 15 September 2010. 

A copy of this announcement is and will be available, subject to certain restrictions relating to persons resident in restricted jurisdictions, for inspection on RSL's website at www.resolution.gg.

For the avoidance of doubt any other information contained on RSL's website does not form part of this announcement.

Market share data

The Association of British Insurers market share data has been made available with the consent of both parties.