Resolution Ltd in bid to acquire Bupa Health Assurance Ltd

Resolution Ltd reported Friday it is planning to acquire Bupa Health Assurance Ltd. Resolution Health, based in Guernsey is a life insurance group while Bupa Health Insurance is as well a UK group risk and individual protection unit of private health care firm Bupa. Under the terms of the planned acquisition, Resolution Health will remit 102 million pounds for the takeover.

Confirming the sale plans, Bupa said in a statement that it will receive 165.15 million pounds for the sale of its unit Bupa Health. Resolution plans to make the investment through its surplus capital held by Friends Provident Holdings plc life operating businesses. Alex Child-Villiers, Resolution spokesman said the 165.15 million pound purchase price marks around 72 per cent of the expected embedded value for Resolution.

However, a financial structuring is expected to allow the release of around 86 million pounds of reserves following completion of the deal, he added. The move will subsequently permit an after tax release of around 63 million pounds, subsequently adding up the takeover price to the 102 million pounds. Currently, Bupa Health boasts over half a million clients and has an in-force annual premium income of around 150 million pounds, with last year’s turnover earnings pegging at 6.94 billion pounds.

The acquisition is still subject to regulatory approvals. For Resolution, the acquisition of Bupa Health marks a sign of progress in its UK Life Project as it stands to deliver a considerable, improved group risk proposition and a further reinforcing of Friend’s individual protection operations, said the firm in a statement. For Bupa, the sale is in line with the firm’s efforts to put more emphasis on its health care operations, inclusive of its health insurance products and services in the UK.

However, analysts believe the acquisition is strategically sensible as it increases the group's scale in protection and adds income protection capability. However, with Bupa Health’s small size, Resolution has some additional investments to undertake before hitting its targets. Resolution needs a large acquisition, approximately 2.8 billion pounds, to achieve its 10 billion pound embedded value target.

In any case, the acquisition of Bupa Health does not affect Resolution’s war chest, added analysts, as the proceeds are being funded from Friends Provident's life operating company. As of September, Resolution’s shareholder available cash resources were approximately 734 million pounds.

15 Oct 2010.