View more on these topics

Just Retirement and Partnership to merge

Cook-Rodney.Just-Retirement.2013

Just Retirement and Partnership, the two insurers whose share prices were savaged by Chancellor George Osborne’s radical annuities overhaul, are to merge.

The deal, announced this morning on the London Stock Exchange, is expected to result in Just Retirement shareholders owning roughly 60 per cent of the combined business, with Partnership shareholders controlling the remaining 40 per cent. The merger will value Partnership at around £668.5m.

Partnership chief executive Steve Groves will step down on completion of the deal, with Just Retirement chief executive Rodney Cook set to take overall control of the combined businesses.

Why are they merging?

Just Retirement has split the perceived benefits of merging into two broad buckets: ‘strategic’ and ‘financial’.

Strategic benefits

Just Retirement cites five key strategic benefits resulting from the deal.

Firstly, it says the combined group’s larger capital base will allow it to take on more defined benefit de-risking business.

Secondly, the merger will “strengthen the competitive position” of the combined businesses relative to the more established UK insurers.

Thirdly, it is expected the merger will mean product development is accelerated as expertise and management teams are combined.

Fourthly, combining the firms’ mortality data and underwriting experience “will facilitate improved risk selection and greater reserving accuracy”. Essentially, this means it will be able to price products and allocate capital more effectively.

Finally, the “streamlining” of sales functions is expected to lead to a more efficient distribution model.

Financial benefits

Unsurprisingly, “synergy” is one of the main drivers behind the merger. The Just Retirement board expects to achieve savings of at least £40m a year by 2018 – although integration costs of £60m are likely to be incurred in the first two years.

The combined businesses will also generate more cash, Just Retirement says, supporting growth and, importantly, dividend payments to shareholders.

And the group’s capital position will be strengthened through a £150m capital raising exercise following the merger. This cash will be put to work pursuing “future growth initiatives and product development”.

In addition, the new insurer will look to spread its wings globally by offering “attractive products in new geographies”.

Recommended

Citizens-Advice-Bureau-CAB-500x320.jpg
2

Fraudsters target pension cash with investment cons

Pension fraudsters are increasingly using investment cons to target savers’ cash lump sums following Chancellor George Osborne’s retirement overhaul, a new survey suggests. A Citizens Advice survey of more than 460 local Citizens Advice managers, staff, volunteers and Pension Wise guiders found 40 per cent had spoken to individuals repeatedly targeted by scammers, while 10 […]

Mark-Dampier-700x450.jpg

Mark Dampier: Betting against the consensus on China

Fidelity China Special Situations has had a fair amount of bad publicity since its launch in 2010, much of which was poorly informed, in my view. My sympathy therefore to Dale Nicholls, who assumed management of the trust in April last year. However, he has risen to the challenge admirably and patient investors have been […]

taxes

Out from the long grass? An IT and NI merger

Those with a long memory will recall that at the start of the last parliamentary term George Osborne announced his intention to merge income tax (IT) and national insurance (NI).  Headline grabbing as the initiative was, the reality of the complexities, challenges and costs of such a move resulted in this idea being kicked into the political long grass.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Not entirely unsurprising from their business point of view, but potentially not so good for customers, due to reduced competition and range of rates available.

  2. And a takeover of an investment platform like Transact would be the best next tonic for the new group!

  3. This is indeed an interesting event and I think it makes perfect sense.

    Annuity firms have been having what I consider to be an unjustified hard time. The attack has been led by No.11 wishing to boost the tax take and a somewhat gullible press buying into all this talk of ‘freedom’. (Freedom to go broke?)

    Odd that clients who seem set against an annuity, but when asked if they would like a no risk, guaranteed income for life tend to grab your arm off.

    ‘Trashing the cash’ will remain popular for the feckless and insolvent. For the more sensible majority draw down will lose its shine once we have another market correction, which if the gurus are to be believed, will not be long in coming.

    Meanwhile this merger will hopefully enable the enlarged group to weather the storm until
    a. People come to their senses
    b. Annuity providers ‘sharpen their pencils’
    c. Interest rates rise.
    d. The Regulator starts a mis-selling review following complaints from those who end up with no retirement income apart from the State Pension.

  4. For clients after enhanced annuities, of which there are still a few (shock horror!) this will be a poor outcome as these two companies tend to out-quote the others who still offer this business, and then will improve their rates against each other to win the business. With no one really getting near to them apart from on the odd occasion, they’ll no longer have to compete with each other and thus clients will suffer from lack of competition. But, of course it makes sense for them both to do this for their reasons stated.

  5. Spot on Harry as always

Leave a comment