Hugh Osmond, the chief executive of Pearl Assurance, is poised to win the fierce £5 billion bid battle for Resolution, the closed-fund insurer, after Standard Life yesterday dramatically conceded defeat in the contest.

The Edinburgh-based insurer decided not to raise its cash-and-shares offer, given the turmoil on the stock market. As its current offer is worth less than Pearl’s, Standard Life is effectively pulling out of the contest.

Standard Life continued to argue that although it was confident of the merits of a takeover, a higher offer in the current market conditions would not have created sufficient value for its shareholders.

Sandy Crombie, the chief executive, said: “Obviously we are disappointed, but we never allowed ourselves to get carried away with this. I think if market conditions had been different we had the opportunity to win.”

The surprise move clears the way for Mr Osmond, the former Pizza-Express entrepreneur who now runs the Pearl closed-fund insurer, to land Resolution with his 720p-a-share cash offer. In a statement yesterday Pearl said: “Obviously it is very good news, and obviously we will be continuing with our offer.”

Industry experts said that although Standard Life’s decision could spark a rally in its share price, its board faced a fierce reaction from investors over why it had decided to switch away from its stategy of organic growth and bid for Resolution in the first place.

Standard Life had teamed up with Swiss Re, the world’s largest reinsurer, to gatecrash Resolution’s agreed merger with Friends Provident at the end of October. However, the value of the deal has tumbled from 716p per share to an uncompetitive 691p per Resolution share on the back of a collapse in Standard Life’s share price to levels not seen since its flotation last summer. Resolution shares closed on Friday at 723p.

Mr Osmond has consistently argued that the fall in Standard Life’s share price reflected its investors’ concerns about the group pushing ahead with the deal.

Analysts claim that the privately owned Pearl has persistently outmanoeuvred Standard Life during the past month. An hour after Standard Life’s bid in October, Pearl raised its own offer and built a blocking stake of 22 per cent of Resolution. This stake was eventually increased to 24 per cent.

Mr Crombie yesterday stopped short of praising Mr Osmond’s tactics, but he said that the entrepreneur had “played his cards”. Standard Life’s decision to withdraw from the bid battle was made at a board meeting yesterday. In a statement, Standard Life said that it did not expect its offer to be “implemented”.

Mr Crombie said the mood at the board meeting was “pragmatic”. He added: “There was an element of disappointment but pragmatic given the conditions were different.” He added: “We have an excellent story to tell and will continue to tell that story.”

Standard Life is understood to have considered a stake sale to Swiss Re as a way to raise cash to improve its offer.

Resolution issued a statement last night saying that it “continues to engage” with Pearl over its offer. Mr Osmond met Clive Cowdery, Resolution’s chief executive, for dinner last week. Insiders claim that the pair have a much better relationship than that portrayed in the media.

The Resolution board is expected to meet either today or tomorrow to decide whether to recommend the Pearl offer.

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