Resolution still seeks deals as Friends sales dip

LONDON (Reuters) - Insurance-focused takeover vehicle Resolution said it planned more deals as the sector remains ripe for consolidation, but reported weaker sales at Friends Provident, its first acquisition.

Resolution (RSL.L) is pursuing more takeovers as forthcoming regulatory changes made consolidation "both desirable and inevitable", the company said in a statement on Thursday.

Resolution chief executive John Tiner said news this week that European Union regulators may dilute proposed capital rules previously seen as one of the main catalysts for consolidation was unlikely to alter the group's plans.

"There's still a lot of work to do before we find out where we end up," Tiner told reporters on a conference call.

EU insurance regulatory body CEIOPS indicated this week that it may relax aspects of the proposed Solvency II capital regime for insurers which, as currently drafted, could force the British industry to raise a further 50 billion pounds in capital.

Resolution, founded by insurance entrepreneur Clive Cowdery, has previously said it aims to buy and merge at least two more insurers or asset managers before selling the enlarged company in 2012.

"Given the timescale and the ambition in the Resolution plan, we would expect an acquisition to be announced within the next 2-3 months," Oriel Securities analyst Marcus Barnard wrote in a note.

Market speculation regarding Resolution's next takeover has focused on the insurance units of part-nationalised lender Lloyds Banking Group (LLOY.L) as well as life insurer Legal & General (LGEN.L), whose shares rose 25 percent in a single week last month on bid talk.

Tiner declined to comment on which companies Resolution might try to buy, or on the timing of any deal.

Resolution shares were down 0.7 percent at 96.5 pence by 8:55 a.m., while the FTSE 100 share index was 0.2 percent higher.

The company, which raised 600 million pounds in its stock market flotation last year, said the 1.8 billion pounds cash-and-shares acquisition of Friends had left it with about 310 million pounds in cash.

Resolution also said it plans to pay a dividend of 2.72 pence per share for the second half of the year.

Friends Provident had sales of 505 million pounds in the first nine months of 2009, down from 701 million pounds in the same period last year, Resolution said.

(Reporting by Myles Neligan; Editing by Mike Nesbit)