30th May 2007 10:30
Resolution PLC30 May 2007 30 May 2007 Resolution in strategic partnership with Capita Following the review of policy administration announced last year, Resolutionplc ("Resolution") has established a strategic partnership with Capita Group Plc("Capita"), which contributes Resolution's customer service and IT functions toa jointly designed servicing model. Through this partnership Resolution will invest £140 million over 4 years in aconsolidation of its separate customer services processes and informationtechnology to secure: • Continuing rollout of customer service enhancements • Significant 'de-risking' of the in-force cost base, through fixed per policy costs • A scaleable model with further reductions in policy unit costs from future acquisitions • Further synergy benefits, above those already announced This additional investment produces an internal rate of return of 13%. Over the last 3 years Resolution has grown to a group that serves some 7 millionpolicyholders and has been developing its strategic operating model designed tobalance the aims of strong financial and risk management, excellent customerservice, reduced cost that is variable with policy volumes and efficientscalability. Resolution has determined that a partnership which combinesin-house delivery of control and oversight functions, asset management andstrategic customer management, with outsource partners, for the delivery ofcustomer service and IT functions to Resolution's specification, is the mosteffective way of delivering this model. Resolution already successfully manages contracts with a number of outsourceparties, including Capita, for the provision of services to its policyholders.Capita will deliver core aspects of customer servicing and policy administrationto approximately 4.5 million policyholders, future new business customers and ITservices to Resolution. The partnership commits Capita to offer reduced unit costs as new policies arebrought into the model, giving Resolution certainty about future synergybenefits from new transactions. Staff Under the partnership around 2,000 Resolution staff, predominantly from CustomerServices and IT departments, based in Glasgow (1,550) and Birmingham (450) areto transfer to Capita with effect from 1 August 2007. After careful analysis, Resolution has concluded that it is not appropriate tomove any customer facing roles, voice contact or customer data to India. Anumber of other customer service and IT roles, will be moved to India over thenext three years. Over the same period, Capita intends to concentrateResolution's operations in Glasgow. As work is transferred offshore, Capita is confident that, with natural staffturnover and a significant proportion of staff being redeployed within itsexisting UK operations, the number of potential redundancies will be fewer than500 over a 3 year period. Customer service improvements Resolution is committed to continually improving customer service for itspolicyholders and Capita has an excellent reputation for providing high qualitycustomer service in the life sector. Resolution believes this partnership willdeliver improvements in service quality and quicker turnaround times for itspolicyholders. Rigorous targets for improving customer service quality andefficiency are an integral part of the contract. There will be no change to existing customers' policy terms and conditions,their premiums or the benefits they receive. Financials The investment of £140 million over a 4 year period will deliver: • A significant reduction in Resolution's long-term expense risk • Additional cost savings, averaging £20 million per annum from 2010 for the following 25 years. This represents a: - 13% internal rate of return on the investment - net present value, at a 7% discount rate, of £80 million pre-tax The cost savings are in addition to the previously announced £20 million perannum from the end of 2007 arising from the Britannic merger and £10 million perannum from the end of 2008 relating to the Abbey acquisition. Consistent withour previous announcements, we will also incur £9 million for the cost ofdelivering the final Britannic expense synergies, with a further £21 millionbeing incurred to deliver the Abbey expense synergies. Today's announcement will enhance Resolution's ability to achieve its targetreturn on embedded value of at least 10% per annum and completes the process ofpreparing Resolution for future strategic developments. Commenting on the transaction, Mike Biggs, Group Chief Executive said: "We are delighted to be partnering Capita with their excellent record inachieving high standards in customer service, IT delivery and support. Thispartnership will improve customer service and positions Resolution for thelarger scale consolidation opportunities we see ahead. We are working very closely with Capita to ensure that any redundancy impact onour staff is minimised." Enquiries: Analysts & investorsSteve Riley +44 (0)20 7489 4884 MediaTemple Bar AdvisoryAlex Child-Villiers +44 (0)7795 425 580 Notes to editors Additional information about the partnership with Capita The outsourcing partnership with Capita includes customers in the Phoenix LifeAssurance (former Abbey National Life), Scottish Mutual, Scottish Provident andPhoenix Life (former Britannic Assurance, Britannic Unit Linked Assurance,Britannic Retirement Solutions and Alba Life) funds. Services to Scottish Mutual International and Scottish Provident Internationalpolicyholders will continue to be operated by Resolution staff based in Dublin,Hong Kong and on the Isle of Man. Future new business customers include those purchasing Phoenix Life Assurance(former Abbey National Life) and Scottish Provident products. Resolution Asset Management is unaffected by the new arrangements. Background on Resolution Resolution is the largest specialist manager of UK in-force life funds. Resolution was formed on 6 September 2005 following the merger of BritannicGroup plc ("Britannic") and Resolution Life Group Limited ("RLG"). RLG was formed for the purpose of buying and managing closed life funds. Itacquired the Royal & Sun Alliance life companies in September 2004 for £850million and Swiss Life UK for £205 million in March 2005. Britannic itself had acquired the UK life operations of Allianz Cornhill inDecember 2004 for £115 million and the Century Group in March 2005 for £45million. Resolution completed the acquisition of the UK and offshore life insurancebusinesses of Abbey National plc on 1 September 2006. Resolution entered the FTSE 100 on 18 September 2006. Resolution is headquartered in London, with life divisions in Glasgow andWythall (Birmingham). Asset management is also based in Glasgow. At the end of2006, total staff numbers were approximately 3,500. Background on Capita Capita Group Plc is the UK's leading provider of integrated professional supportservice solutions. Capita Life and Pensions provide core administrative supportto a number of UK and overseas life and pensions companies, including US giantMet Life, The Children's Mutual, Lincoln Financial Group, Prudential and ZurichFinancial Services. Including the Resolution strategic partnership, Capita Life& Pensions will be responsible for administering 15 million policies by the endof this year. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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