Resolution flags interest in Aviva amid insurance sector shake-up

Resolution indicated yesterday that it might consider buying parts of Aviva if the giant insurer sold its main non-life operations to RSA.

The acquisition vehicle's bosses said they were on the lookout for more deals and that they expected to pick up an asset manager either separately or along with a life insurer.

When it was put to Jon Hack, Resolution's acquisition specialist, that Aviva had the right combination of life business and asset management that could potentially interest Resolution, he said of the insurer: "It does, most definitely."

Mr Hack de-clined to comment on specific deals and added that there were other life insurers with asset managers. "We get a lot of access to these organisations on the basis that we don't comment on them," he said.

Aviva turned down RSA's £5bn bid for most of its general insurance business last month but left the door open on Monday for its rival to come back with a higher offer. A deal with RSA could put Aviva under pressure to consider offers for its remaining operations in a shake-up of the sector.

Resolution was launched in 2008 by the financial entrepreneur Clive Cowdery to buy up and combine life insurers and run them more efficiently. The company has already bought Friends Provident and agreed to buy Axa's life business.

Mr Hack said: "The UK life market is in an ex-growth phase and has excess capacity. A sensible response is to look to consolidate to take out costs and increase returns. What you are seeing in the wider market is other people grappling with the same issues."

The purchase last year of Friends Provident swung Resolution to a £203m operating profit in the first six months of 2010 from a £7m loss a year earlier. Jim Newman, Resolution's finance director, said the results showed how financial discipline could boost performance and release cash from the UK life sector.

Friends Provident, Resolution's first acquisition, increased sales by 42 per cent and improved profitability and cash generation. Trevor Matthews, the chief executive of Friends Provident, said the £2.75bn Axa deal had boosted confidence at Friends Provident and with corporate customers.

"They now realise we are not only one of the survivors but one of the winners and it is important for us to take advantage of that," he said.

Mr Newman said Resolution was ready to do another deal soon if the right one was available. "Trevor's ambitions are significant and we are trying our best to satisfy them," he added. After paying an interim dividend of 5.46p a share, the company will have £605m of cash available to shareholders, up from £510m at the end of last year.

Resolution shares rose 3.4 per cent to close at 254.3p.