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Resolution in talks to buy AXA’s UK life assurance arm for £2.75 billion

Insurance consolidator, Resolution Limited (LON:RSL) confirmed this morning that it was in talks to acquire most of AXA’s UK life assurance business for approximately £2.75 billion.  Due to the size of the transaction, under UK rules the acquisition is classified as a reverse takeover.

Resolution is looking to merge AXA’s life assurance business with its Friends Provident business. Resolution and Friends Provident merged in 2007 in an all share transaction.

The businesses to be acquired operate in protection, annuities, and group pensions.

"The Board of Resolution believes that the businesses are complementary and have a good operational fit, offering the opportunity to create one of the UK's largest providers of protection products and group pensions and accelerating Friends Provident's strategy in annuities,” the company stated this morning.  “The enlarged business would also have well-diversified distribution channels, through IFAs, direct sales, bancassurance and other sales partners.”

Resolution is planning to fund the deal through a £2 billion pre-emptive rights issue, bank debt and a £0.5 billion issuance of deferred consideration notes to AXA. 

The acquisitive insurance specialist expects to boost cash flow and ‘dividend prospects’ across the group, primarily due to cost synergies of the combined group. 

“Through its UK Life Project, Resolution is targeting the creation of a leading UK life assurance business with scale, market presence and a strong focus on generating sustainable cash-based returns for investors over the longer term.”