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Resolution PLC (FLG)

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Wednesday 30 May, 2007

Resolution PLC

RSL partnership with Capita

Resolution PLC
30 May 2007



30 May 2007



                Resolution in strategic partnership with Capita


Following the review of policy administration announced last year, Resolution
plc ("Resolution") has established a strategic partnership with Capita Group Plc
("Capita"), which contributes Resolution's customer service and IT functions to
a jointly designed servicing model.



Through this partnership Resolution will invest £140 million over 4 years in a
consolidation of its separate customer services processes and information
technology 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 million
policyholders and has been developing its strategic operating model designed to
balance the aims of strong financial and risk management, excellent customer
service, reduced cost that is variable with policy volumes and efficient
scalability. Resolution has determined that a partnership which combines
in-house delivery of control and oversight functions, asset management and
strategic customer management, with outsource partners, for the delivery of
customer service and IT functions to Resolution's specification, is the most
effective way of delivering this model.



Resolution already successfully manages contracts with a number of outsource
parties, including Capita, for the provision of services to its policyholders.
Capita will deliver core aspects of customer servicing and policy administration
to approximately 4.5 million policyholders, future new business customers and IT
services to Resolution.



The partnership commits Capita to offer reduced unit costs as new policies are
brought into the model, giving Resolution certainty about future synergy
benefits from new transactions.



Staff



Under the partnership around 2,000 Resolution staff, predominantly from Customer
Services and IT departments, based in Glasgow (1,550) and Birmingham (450) are
to transfer to Capita with effect from 1 August 2007.



After careful analysis, Resolution has concluded that it is not appropriate to
move any customer facing roles, voice contact or customer data to India. A
number of other customer service and IT roles, will be moved to India over the
next three years. Over the same period, Capita intends to concentrate
Resolution's operations in Glasgow.



As work is transferred offshore, Capita is confident that, with natural staff
turnover and a significant proportion of staff being redeployed within its
existing UK operations, the number of potential redundancies will be fewer than
500 over a 3 year period.



Customer service improvements



Resolution is committed to continually improving customer service for its
policyholders and Capita has an excellent reputation for providing high quality
customer service in the life sector.  Resolution believes this partnership will
deliver improvements in service quality and quicker turnaround times for its
policyholders. Rigorous targets for improving customer service quality and
efficiency 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 per
annum from the end of 2007 arising from the Britannic merger and £10 million per
annum from the end of 2008 relating to the Abbey acquisition. Consistent with
our previous announcements, we will also incur £9 million for the cost of
delivering the final Britannic expense synergies, with a further £21 million
being incurred to deliver the Abbey expense synergies.



Today's announcement will enhance Resolution's ability to achieve its target
return on embedded value of at least 10% per annum and completes the process of
preparing 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 in
achieving high standards in customer service, IT delivery and support.  This
partnership will improve customer service and positions Resolution for the
larger scale consolidation opportunities we see ahead.



We are working very closely with Capita to ensure that any redundancy impact on
our staff is minimised."



Enquiries:



Analysts & investors
Steve Riley                  +44 (0)20 7489 4884



Media
Temple Bar Advisory
Alex 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 Life
Assurance (former Abbey National Life), Scottish Mutual, Scottish Provident and
Phoenix Life (former Britannic Assurance, Britannic Unit Linked Assurance,
Britannic Retirement Solutions and Alba Life) funds.



Services to Scottish Mutual International and Scottish Provident International
policyholders 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 Britannic
Group plc ("Britannic") and Resolution Life Group Limited ("RLG").

RLG was formed for the purpose of buying and managing closed life funds. It
acquired the Royal & Sun Alliance life companies in September 2004 for £850
million and Swiss Life UK for £205 million in March 2005.

Britannic itself had acquired the UK life operations of Allianz Cornhill in
December 2004 for £115 million and the Century Group in March 2005 for £45
million.

Resolution completed the acquisition of the UK and offshore life insurance
businesses 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 and
Wythall (Birmingham).  Asset management is also based in Glasgow.  At the end of
2006, total staff numbers were approximately 3,500.

Background on Capita

Capita Group Plc is the UK's leading provider of integrated professional support
service solutions.  Capita Life and Pensions provide core administrative support
to a number of UK and overseas life and pensions companies, including US giant
Met Life, The Children's Mutual, Lincoln Financial Group, Prudential and Zurich
Financial Services.  Including the Resolution strategic partnership, Capita Life
& Pensions will be responsible for administering 15 million policies by the end
of this year.




                      This information is provided by RNS
            The company news service from the London Stock Exchange