UPDATE 1-Insurer Resolution raises dividend despite profit drop

Tue Mar 26, 2013 7:34am EDT

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LONDON, March 26 (Reuters) - British life insurer Resolution raised its 2012 dividend despite reporting a weaker than expected profit due to a downturn at its international division.

Resolution, owner of pensions and investment firm Friends Life, made an operating profit of 274 million pounds ($416.02 million) last year, down from 681 million in 2011, and below the 321 million expected by analysts in a company poll.

The decline reflected a boost from accounting adjustments and outsourcing benefits in 2011 that did not recur last year.

Resolution was also hit in 2012 by a weaker performance from its international division, which sank to a 9 million pound operating loss from a 78 million pound profit the previous year due partly to the rising cost of minimum guaranteed returns on savings products sold in Germany.

Resolution still raised its total dividend 6.2 percent to 21.14 pence per share. Insurer dividends have been in focus since British rivals Aviva and RSA reduced their 2012 payouts.

Resolution shares were up 1.6 percent by 1110 GMT. The stock has risen 9 percent this year, outpacing a 1 percent gain for the wider European insurance sector.

Resolution was set up in 2008 by insurance entrepreneur Clive Cowdery to buy, merge and sell underperforming life insurers, but it failed to complete as many deals as hoped because falling share prices deterred owners from selling.

The company, which spent 4.7 billion pounds on three takeover deals, called a halt to acquisitions in August last year and said it would instead try to make money for its investors by wringing savings out of its existing assets.

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