REFILE-UPDATE 2-Resolution reorganises as M&A ambitions extinguished
* Founder Clive Cowdery to join board
* Shares up 4.2 percent, outperforming market
* H1 pretax operating profit 163 mln stg vs 176 mln consensus
LONDON, Aug 15 (Reuters) - Insurance buyout firm Resolution called a halt to takeovers and said it would scrap its complex board structure in an overhaul aimed at transforming the group from an aggressive acquisition vehicle into an ordinary life insurer.
As part of the revamp, Resolution will stop outsourcing acquisition activities to an external firm run by founder Clive Cowdery, and bring Cowdery onto its board of directors for the first time, it said on Wednesday.
The move pre-empts new rules flagged in January by the financial regulator which are expected to make such "externally-managed" firms ineligible for a premium stock market listing because they make key decision-makers unanswerable to investors.
The overhaul also reflects the weakness of financial markets since 2008, which has weighed on insurance valuations and made owners reluctant to sell, undermining Resolution's plan to buy, merge and sell underperforming life insurers.
"An entirely conventional company will be the end result of this, although we would hope to be more value-focused than the life insurance sector has exhibited over the last decade," Cowdery told reporters on a conference call.
"We started off in 2009 and in 2010 buying companies with the expectation that more would become available, but in markets as poor as this, people aren't selling."
Resolution also said it had abandoned its original plan to sell or float parts of its business.
The company, which has since 2008 spent 4.7 billion pounds ($7.37 billion) buying three life insurers including Friends Provident, will instead try to make money for its investors by improving the performance of its existing operations, Cowdery said.
Investors pushed Resolution's shares up 4.2 percent by 1055 GMT - the second best performer in a flat FTSE 100 - reflecting hopes the board reorganisation will salvage the insurer's premium listing, reserved for companies that meet the highest corporate governance standards.
Losing that status would have forced investment funds that track the British equity market to sell their shares in the group.
"The clarification of future direction is welcome and should remove a cloud from the share price," one of the company's ten biggest shareholders told Reuters, speaking on condition of anonymity.
The stock is still down 6 percent in the year to date, lagging an 18 percent increase in the Stoxx 600 European insurance index.
"The odds of a turnaround are stacked against them with a portfolio of weak companies with poor track records, and against a backdrop of rapidly changing regulation," Oriel Securities analyst Marcus Barnard wrote in a note.
"We can't see any sort of short-term catalyst to make us want to buy the shares."
Cowdery said his advisory business, Resolution Operations, was still looking at other potential consolidation projects outside the British life insurance sector, but declined to give details.
Cowdery, who delivered bumper returns from a first insurance buyout venture that sold itself to Pearl Group for 5 billion pounds in 2007, has previously said any other acquisition projects would be carried out separately from Resolution.
Resolution also said pretax operating profit for the first six months of 2012 slumped 58 percent to 163 million pounds, weighed by lower investment returns and a weaker performance from the group's international units.
Analysts had expected a profit of 176 million pounds, according to a company poll.
The company, which last month cancelled plans to distribute 250 million pounds to investors because of uncertain economic conditions, said its capital strength was "robust," and raised its interim dividend by 5 percent to 7.05 pence per share.
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