Resolution's UK Life Project Update

23 February 2011

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

Resolution's UK Life Project on track to achieve target returns

Resolution is holding a presentation this morning to update analysts and investors on value creation in the UK Life Project and the acquisition balance sheet for the acquired AXA UK life business. The presentation will cover:

An update on the progress of the acquired businesses following a strategic review of the product propositions and businesses resulting in:

·; increased cost synergies from £75 million per annum before tax to £112 million per annum before tax by end 2013, with increased one-off implementation costs of £117 million;

·; a reduction in UK new business strain of approximately £200 million per annum by 2013 as a result of work on new product strategies;

·; expected cash dividends from the non UK businesses of at least £50 million per annum by 2014;

·; confirmation of the Company's confidence in achieving its distributable cash target ("DCT") of £400 million per annum at Friends Provident Holdings (UK) plc ("FPH") after interest costs from and including 2011 without reducing the MCEV of FPH;

·; focused product strategies based on the Company's ongoing commitment to prioritise value over volume, achieving a blended IRR on new business of at least 15%:

o Individual Protection targeting IRR of 20% by 2013

o Corporate Pensions targeting double digit IRRs by 2013

o Annuities targeting in excess of mid-teens IRRs by 2013; and

·; a targeted return on embedded value ("ROEV") of at least 10% per annum by 2013 on the FPH business as currently constituted.

An update on the acquisition and integration of the enlarged Friends Life business:

·; the gross MCEV for the acquired AXA UK life business as at 3 September 2010 was £3,498 million. Total consideration paid to the seller (net of external debt) therefore equates to 70.2% of the net MCEV of the acquired AXA UK life business at that date; and

·; the separation and integration activities are progressing well; transitional services are in place and running smoothly; Part VII transfers for the acquisition of Winterthur Life UK Limited ("WLUK") are on track, and the Friends Life brand will be launched at the end of March.

Resolution is confident that it will achieve its targeted mid-teen returns on the UK Life Project without further acquisitions. It will not contemplate acquisitions that would dilute the returns likely to emerge from the three acquisitions already made; there is therefore a high threshold for evaluating further acquisitions.

The Company and Resolution Operations LLP ("ROL") also recognise that shareholders do not currently wish to blend returns from the UK Life Project with those from other projects they may wish to support. The Company will update the market further on 24 March 2011 when it releases its preliminary results for the year ended 31 December 2010 on how best to achieve this.

Mike Biggs, Chairman of Resolution, said: "The Board is confident that the project will deliver its targeted mid-teens returns."

1. Acquisitions

The three acquisitions made by Resolution have a blended average acquisition price (net of external debt) of approximately 66.9% of net MCEV.

AXA acquisition balance sheet

Resolution has prepared its unaudited completion acquisition balance sheet for the acquired AXA UK life business as at 3 September 2010.

The unaudited IFRS equity attributable to ordinary shareholders of FPH as at 30 June 2010 was £3,126 million and the Company announces that unaudited IFRS equity attributable to ordinary shareholders for the acquired AXA UK life business as at 3 September 2010 was £3,607 million resulting in a gain on acquisition of £883 million.

The unaudited MCEV of FPH as at 30 June 2010 was £3,192 million. The MCEV for the acquired AXA UK life business as at 3 September 2010 was £3,498 million. The total consideration paid to the seller (net of external debt) therefore equates to 70.2% of the net MCEV of the acquired AXA UK life business as at 3 September 2010.

Details of both the IFRS and MCEV acquisition balance sheets are provided in the Appendix.

Bupa Health Assurance Limited

Resolution announced on 1 February 2011 that the acquisition of the entire issued share capital and business of Bupa Health Assurance Limited by Friends Provident Life and Pensions Limited ("FPLP"), one of the subsidiary life companies of Resolution, completed on 31 January 2011.

2. Development of Friends Life

Following the completion of the AXA UK life acquisition, Resolution undertook a strategic review of the enlarged Friends Life businesses. It sets out its conclusions below.

 Individual Protection

Friends Life will build on its market-leading positions in Critical Illness Cover and Income Protection; introduce simplified term assurance and 'over-50s' propositions; and further develop profitable distribution segments and exclusive partnerships. This improved product mix and focused distribution, along with sales and marketing synergies, and consolidating the new businesses onto a single platform will improve returns significantly.

The Company is targeting gross value of new business ("VNB") of £80 million, new business strain of £30 million per annum, a payback period of five years and an IRR of 20% by 2013.

Corporate Pensions

The current financial returns from Friends Life's Corporate Pensions business are unacceptably low. The market is evolving, and its structure from 2013 onwards is uncertain due to the retail distribution review and the introduction of auto-enrolment. Friends Life has the advantages of a comprehensive range of defined contribution solutions, an integrated online workplace savings platform and a full range of group risk products, as well as the scale and relationships to be a major and profitable player, but it is not prepared to write loss making new business in anticipation of future reward. It will reshape the sales and marketing teams into more focused distribution and selectively migrate schemes to the more efficient Friends Provident platform to improve returns on new business.

Friends Life expects to develop this product segment favouring value over volume with a significant improvement in VNB to £25 million, targeting a reduction in new business strain to £75 million and achieving a double-digit IRR by 2013.

Annuities

The enlarged Friends Life will have vesting pension claims in excess of £2 billion in 2011, growing steadily in subsequent years. Both Friends Provident and AXA have historically retained only a small proportion of their available vesting pension funds as annuity new business. This is in part because of under-investment in the expertise required to underwrite and manage annuity business profitably. Following completion of the strategic review of product propositions, Friends Life continues to believe that the pension annuity market is attractive and intends to build its own capability in annuity underwriting, credit management and longevity risk management; while not ruling out acquiring capability via a bolt-on transaction should the opportunity arise.

Friends Life's immediate objective in the annuity market is to retain a larger proportion of vesting pension funds, and will aim to raise its retention rates from 30% of vesting amounts (excluding tax-free cash) to at least 50% by 2013, and reach gross VNB from retained pensions of at least £50 million per annum.

As it has low exposure to longevity risk (as a result of past longevity risk hedging activity), and as the annuity market currently has attractive IRRs and VNB, Friends Life has appetite to write more annuity business than available from its vesting pensions, and so in due course, will examine options to enter the open market option (OMO) market.

Cost synergies

Resolution is confident of realising annualised cost synergies of £112 million before tax by end 2013, increased from £75 million announced at the time of the acquisition of the AXA UK life business. This increase follows extensive work on integration of the acquired businesses and includes additional synergies arising from work on product strategies and the acquisition of Bupa Health Assurance. The one-off costs to achieve these synergies are £117 million, increased from £74 million at the time of announcement.

Following a detailed analysis of execution plans, the Company has allowed for an additional £10 million of contingency costs on the original forecasted £57 million separation costs. This revised £67 million assumes FPH receives a £26 million rebate from AXA based on cost sharing provisions agreed at the time of the acquisition of the AXA UK life business. If, upon completion of the separation process, the costs of the AXA retained business are higher than the Company originally forecast, the Company will not receive some or all of this rebate.

Non UK businesses

Lombard and International have leading positions in high margin specialist markets and the Company is confident in the growth potential of both businesses.

Lombard continues to be a successful provider of estate management solutions to high net worth individuals via strong distribution partnerships internationally. It has made good progress in growing new business value whilst significantly improving the phasing of sales throughout the year, reducing the reliance on fourth quarter sales and maintaining its target IRR of over 20%. A strong focus on cash flow will result in cash dividends to the group, which are expected to grow and exceed £30 million per annum after 2013.

The International business incorporating Friends Provident International, the German overseas life business and AmLife, the Malaysian joint venture, continues to grow profitable new business, although margins are under pressure in a number of highly competitive markets. A product refresh commences in 2011, to ensure that the businesses maintain their profitable positions. As the book grows, the cash generation should improve and is expected to result in dividends to the group of at least £20 million per annum by 2013 while increasing its target IRR to over 20%.

Looking forward, Resolution expects the businesses to maintain and improve profitability which, along with the improved cash generation, should further enhance value to shareholders.

3. Cash

The Company remains confident of achieving its distributable cash target ("DCT") of generating £400 million per annum of cash at FPH. The DCT is the annual increase in available shareholder cash at FPH, after interest costs, which can be distributed to FPH's shareholders (currently Resolution Limited) without the MCEV of FPH reducing year on year.

The annual recurring increase in available shareholder cash comes from:

·; surplus emerging from in-force business; plus

·; required capital released as in-force business goes off the books; less

·; new business strain; less

·; solvency capital required to support new business; less

·; any investment in operating entities to maintain required capital.

Over time, the Company expects that the natural development of the UK business away from capital intensive products towards more capital-light business means that releases of required capital on in-force business will continue to exceed required capital for new business and contribute to sustainable generation of £400 million per annum for the foreseeable future.

As previously disclosed, over the next few years certain non-recurring contributions will also contribute to the DCT:

·; releases of capital in excess of required capital which is currently held within operating entities; and

·; capital released as a result of capital synergies.

However the Company expects, in due course, that a combination of lower new business strain (achieved through the revised product strategies), the expense synergies described above, and the increased cash generation of the non UK businesses will allow the DCT to be achieved without a contribution from these items.

The relative weight of each contributor to the increase in available shareholder cash at FPH will vary from year to year. However, irrespective of the sources of the cash, the maximum amount of such cash that can count towards the DCT in any year will be the total return on embedded value achieved in the year, calculated excluding investment variances and non recurring items such as integration costs. DCT is therefore effectively restricted to the amount that could be distributed without reducing the capital base of the Company.

4. Capital

Work on capital optimisation is progressing well. A proposed reorganisation of the group below FPH was approved by the FSA in January 2011 and is now being implemented. This will enable the establishment of all of the UK life companies under the ownership of the shareholder fund of FPLP, facilitating simplification of the currently complex structure of inherited internal loans and enhancing the Company's ability to achieve capital diversification benefits.

As part of these changes, FPH has become the issuer of all of the Friends Provident listed capital instruments. This has reduced the reporting requirements of Friends Provident Group plc ("FPG"), the subsidiary below FPH, and ensures that the reorganisation of entities to optimise capital below the FPH level does not disadvantage any group of capital instrument holders. Holders of FPH listed debt will now benefit from the operational cash flow of the whole FPH group. Following the reorganisation the Company will, in due course, replace the existing £400 million bridging finance facility with listed capital instruments issued by FPH.

The Part VII business transfer scheme required to move the portfolio of AXA Sun Life plc ("ASL") policies which Resolution has not acquired from ASL to a retained AXA life company is on track to complete in the second half of 2011, thereby allowing completion of the acquisition of Winterthur Life UK Limited before the end of 2011. Additionally, work is underway within Friends Life to deliver capital synergies by merging a number of the smaller acquired life companies into FPLP via a further Part VII business transfer scheme during the course of 2011.

The evaluation of the potential to transfer part of the re-attributed inherited estate ("RIE") in the ASL non-profit fund to the ASL shareholder fund is also well advanced. Any such funds transferred will be used to:

·; support the ASL non-profit and with-profits funds to the extent required by FPH's capital policies;

·; contribute to the generation of £400 million of DCT at FPH until such time as this becomes sustainable without such support; and

·; be available for general corporate purposes.

A further update on the potential transfer from the RIE will be given with the preliminary announcement of 2010 results and the impact on the overall capital and cash position will be explained more fully in the Company's presentation to investors in May.

5. Exit options

Resolution's objective is to complete the UK Life Project by returning the restructured and sustainable businesses to their natural long term owners. This could take several forms:

·; a cash sale, together or in parts, of the FPH businesses;

·; a direct listing of FPH as a standalone entity;

·; a separation of the UK open business from the UK back book leading to a separate sale or listings; or

·; a merger of FPH with another life company.

Given the considerable change that is likely in the financial services landscape in the coming years, and the changes in the FPH businesses as they are restructured and repositioned, the Company and ROL will keep the options for FPH under review, and aim for the options, or the combination of exit options, that will deliver the best overall returns on the project.

Financial calendar

24 March 2011 2010 full year results

May 2011 Financial, market and operational update for the enlarged Friends Life businessQ1 2011 IMS

18 May 2011 Annual General Meeting

16 August 2011 2011 Interim Results

15 November 2011 UK Life Project updateQ3 2011 IMS

There will be a conference call today for real-time media at 07:30 GMT, hosted by John Tiner and Jim Newman, respectively the CEO and CFO of Resolution Operations (+44 (0) 1452 555566 quoting 46733665).

An audio cast of the presentation and the presentation slides will be available on Resolution's website, www.resolution.gg.

Forward looking statements

This announcement includes statements that are, or may be deemed to be, "forward-looking statements" with respect to Resolution, its subsidiary undertakings and their outlook, plans and current goals. In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms "targets", "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend upon circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. Resolution's actual performance, results of operations, internal rate of return, financial condition, liquidity, distributions to shareholders and the development of its acquisition, financing and restructuring and consolidation strategies may differ materially from the impression created by the forward-looking statements contained in this document. Forward-looking statements in this document are current only as of the date of this announcement. Resolution undertakes no obligation to update the forward-looking statement it may make. Nothing in this announcement should be construed as a profit forecast.

Notes to Editors:

Resolution Limited

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 related asset management sectors (the "UK Life Project").

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 completed its second acquisition, the majority of the AXA UK life business, on 15 September 2010. On 31 January 2011, the Company completed its third acquisition, the shares and business of Bupa Health Assurance.

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

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

Resolution Operations LLP

ROL is a privately owned advisory and operating firm which provides services to Resolution. ROL is part of The Resolution Group that also includes Resolution Capital Limited and Resolution Financial Markets LLP. Resolution Capital Limited facilitated the creation and initial public offering of the Company. Resolution Financial Markets LLP undertakes for Resolution Operations LLP a range of activities that include working with investors to facilitate the direct placing of equity and debt with institutions. RSL is not part of The Resolution Group and the members of The Resolution Group do not form part of the RSL group.

ROL is acting for the Company and no one else in connection with the matters referred to in this announcement and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to such matters and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to any matters referred to in this announcement.

Appendix

The following financial information is unaudited.

IFRS acquisition balance sheet as at 3 September 2010 and gain on acquisition

*Note: Held for sale assets and liabilities relate to the proposed transfer of the GOF/TIP business under Part VII FSMA 2000 as set out in the sale and purchase agreement with AXA UK.

**Note: Transaction costs were £104 million in total of which £77 million is attributable to the cost of the equity raised and £27 million will be expensed.

MCEV acquisition balance sheet as at 3 September 2010

Reconciliation of equity attributable to ordinary shareholders on an IFRS basis to MCEV ("net worth reconciliation") as at 3 September 2010

Cash flow disclosures: restatement of shareholder resources

The Group has refined its definition of shareholder resources to align the metric with FSA reporting. Revised shareholder resources at 30 June 2010 are shown below:

The movement in free surplus for the life operating business for the six months ended 30 June 2010 is as follows:

(1) Comprised of £180 million dividend proposed to Group and £632 million working capital and other resources

(2) Comprised of £170 million dividend proposed to Group and £421 million working capital and other resources

Details of the reconciliation of shareholders net worth as previously published to revised shareholder resources is shown below. This is split between free surplus ("FS"), required capital ("RC") and, for non-covered business, required capital and inadmissible assets ("RC/ IA").

Notes on reclassification of shareholders net worth

1 The STICS and lower tier 2 subordinated debt issued by Friends Provident holding companies are allocated to life operating businesses on the basis that all obligations to make payments in respect of this debt are guaranteed by Friends Provident Life and Pensions Limited. In previous periods, these had been allocated to free surplus, but are now shown as deductions from required capital in line with the Group's application of MCEV guidance.

2 Reclassified FPMS items comprise net assets, including loans from holding companies, which are treated as inadmissible on a regulatory basis.

3 Reclassified Sesame items comprise inadmissible items such as intangible assets, recognition of capital requirements (for investment firms), net of intercompany loans.

4 A small number of items have been reclassified as free surplus to align this with local regulatory requirements, with corresponding adjustments to the VIF.

5 Other adjustments between free surplus and required capital/ inadmissible assets include reclassification of other distribution company assets as inadmissible.

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