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MM Profile: Steve Groves

Partnership’s chief executive believes the impaired annuity sector is the growth market for the future and says widespread adoption of risk-scoring will also benefit the company’s long-term care and equity-release business Interview by Rachael Adams

Partnership chief executive Steve Groves says his decision to become an actuary has paid off as a solid base for his career. “It turned out to be a really good grounding, as long as you stick to the basics. Actuaries can have problems when they get hung up on thinking there is a technical solution to every problem.”

After his training, Groves moved from Norwich Union to GE Life, which had just bought Stalwart Assurance. “Part of the attraction was going into a small business that had a big backer.”

GE Life’s position as one of the first writers of enhanced and impaired annuities was also a draw. “It seems ludicrous that if you apply for pet insurance you fill out a 15-page form but with an annuity you are asked about three questions, so going to a company that had started to do this looked attractive.”

But GE soon began preparing to make further acquisitions. “I felt our small business unit would get swallowed up, so I left.” There was a start-up being formed by some of Stalwart’s management team, which sealed the deal.

“Britannic Retirement Solutions offered the chance to be involved from the start. The upside of a start-up is you do not inherit past mistakes, the downside is that in a year’s time all the mistakes of the past are yours.”

After four years at Britannic, Groves moved to Swiss Re as Admin Re senior actuary. “I was interested in closed funds. The chance to be the first to build a consolidator was interesting but I did view it as short-term.”

The opportunity that would become Partnership did not start as a potential business opportunity.

“Someone told me there was a mutual organisation called Pafs that was running out of regulatory capital and needed help, and could I talk to their chief executive.
“When I met him, I realised the dataset was bigger than I realised. Pafs was the first business to underwrite annuities for people who were ill, so the data built more quickly. I thought: ’I am quite interested in this.’” Groves joined the business as chief finance officer and helped steer the company through demutualisation in 2005.

“The FSA said the last friendly society demutualisation was in 1912, so doing something that has not been done in living memory was pretty exciting.”

Partnership is now 20 times bigger than it was when it formed, with turnover going from £70m to £1bn a year and staff rising eightfold from 50 to 400.

But Partnership’s basic proposition has not changed. “Annuities are our bread and butter. Pafs wrote impaired life when everyone else was doing enhanced annuities, so we have the data there.”

The impaired annuity market is where Groves sees the future. “I think annuities will all become risk-scored. The bigger companies will find it easy to take high cholesterol and so on into account because there is a lot of data on how that affects longevity. They will find it harder to do complex conditions because we have all the data.”

He believes a risk-scoring system will also benefit Partnership’s other arms, long-term care and equity release. “Long-term care is impaired annuities on steroids and we do equity release on the basis of giving bigger loans to people with severe medical conditions. We want to keep our battle on the territory we win on.”

Another battle Groves is keen to fight this year is the open market option. “It is a bit of a disgrace. I would like to see a standardised pension passport so if someone wants to shop around they are not asked if they have a guaranteed annuity rate but they are asked if box 21 on their passport is ticked.”

He thinks we will see either legislation or increased Government pressure on the industry this year. Once the Omo is in place, Groves is confident that annuities will continue to flourish despite the popularity of drawdown.

“The risk with drawdown is pot exhaustion. The changes to the age 75 rule make this issue more important. If you stay in drawdown beyond 75, you have to accept your future income is going to fall. This industry does not need another scandal.”

He also hopes to see movement on long-term care. “I think we will see the signposting and national standardisation that Dilnot recommended but I thought the cap on care fees at £35,000 was a con because it did not include lodgings, which comprise the majority of care fees.

“I think Dilnot was genuine in his intentions of trying to help the people with assets just above the £23,000 threshold but I do not think we will see the cap as proposed.

Groves wants to see changes brought in to incentivise and reward those who take steps to insure against the likelihood of them needing long term care. “We think people who buy insurance contracts that guarantee to pay their care fees should have their disregard increased, with the Government kicking in at £50,000 rather than £23,000. This means people who do the right thing and save get something back.”

But the biggest issue for Groves this year is how to service mass-market clients under the RDR. “Some advisers will exit and those that remain will go up market. People no longer have banks to go to, as they are shutting advice arms, so the danger is that consumers will go self-directed.

“If people do not shop around they get a single-life annuity at a poor rate. Would it be worse if customers went to an IFA who said, ’We cannot service you at this level but for £150 we can tailor it a bit and get you the best rate’? The FSA’s need to give people a perfect solution may stop people getting any solution at all. That is the main thing I want to tackle.”

He would like to see change in Partnership’s other core markets. “I would like to see a sensible white paper on long-term care in April and increased awareness of equity release, both among consumers and advisers. I do not think these are too much to ask for.”

Born: Banbury 1975
Lives: West Sussex with wife and two children
Education: LSE, BSc Actuarial Science, three A levels, one AS level
Career history: 2005-present: chief finance officer, managing director then chief executive officer, Partnership; 2004-05: senior actuary in Admin Re at Swiss Re; 2000-03: head of actuarial services, Britannic Retirement Solutions; 1999-2000: product manager, GE Life; 1996-99: trainee actuary then investment actuary, Norwich Union
Likes: People who say what they think, people who do what they say, seeing concepts become successes
Dislikes: Procrastination, passive resistance, blaming others for failures
Drives: Range Rover Sport
Book: Brave New World by Aldous Huxley
Film: Leon
Album: Anything by The Stone Roses
Career ambition: To enjoy what I do and make a difference I think it is really unhealthy to focus on anything else!
Life ambition: Too many to list but at the moment I am trying to balance time at work, time with a young family and getting a half-marathon time below 1 hr 15 mins
If I wasn’t doing this I would be… A quantum physicist. I would have loved to have been a professional cricketer but was nowhere near good enough


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