Life insurer consolidation vehicle Resolution has increased its cost savings target from £143m to £160m by 2015, despite suffering problems migrating Axa’s IT systems which will cost the company around £35m.
Resolution, the company behind Friends Life, is also reviewing two “key” IT and systems migration programmes – a process which is expected to incur additional costs of “low tens of millions”.
In addition, the company expects outsourcing costs to increase by around £30m to £280m.
In its third quarter management statement, published this morning, Resolution says: “Whilst good progress has been made on completing the cost reduction programmes, the complexity arising from the migration of Axa IT systems is causing extra costs of completing the separation and integration projects.
“Firstly, known costs are now expected to be circa £35m higher than previously anticipated with the extra costs spread over the rest of 2012 and 2013.
“In addition, two key IT and systems migration programmes are being reviewed and, whilst the outcomes of these reviews are uncertain, additional costs of low tens of millions of pounds may be incurred over the next 12 months.
“Lastly, costs of the group’s outsourcing programme are expected to increase by circa £30m to circa £280m largely as a result of changes in the costs of terminating and transferring pre-existing contractual relationships, and the provision of IT platform development services to the international businesses.”
Resolution’s total UK sales for the first nine months of the year increased 9 per cent, from £547m to £598m. The total value of new UK business, the metric Resolution tends to focus on, increased 155 per cent, from £40m to £102m.