Two of the UK’s leading enhanced annuity specialists, Just Retirement Group plc (“Just Retirement”) and Partnership Assurance Group plc (“Partnership Assurance”), are to merge, forming JRP Group plc.
It is expected that Just Retirement Shareholders will own roughly 60% of the combined Group and Partnership Assurance Shareholders own some 40%.
JPR will be led by Rodney Cook as Group Chief Executive Officer. Reporting to Rodney Cook will be David Richardson as Deputy Group Chief Executive Officer and Simon Thomas as Group Finance Director. Chris Gibson-Smith will be the Chairman of the Combined Group while Tom Cross Brown will assume the role of Deputy Chairman.
Just Retirement and Partnership Assurance intend to raise equity capital of around £150 million.
Reasons given for the merger include ability to scale the business in attractive segments; to be able to become a consumer champion; to accelerate new product launches; to combine intellectual property; and, bring about more efficient distribution.
Financial benefits, says the company, should include the potential for synergy; greater high quality cash generation; and, an enhanced capital position.
The future strategy, says the new company, is to “…use its outstanding combined intellectual property and greater scale to accelerate the existing strategies of Just Retirement and Partnership Assurance, allowing the business to sustain its position in the rapidly developing retirement income market, generating improved outcomes for customers and strong returns for investors.”
It will also look to strengthen its position in the broader retirement income space fundamentally affected by regulatory change, acting as a disruptor to the larger incumbent insurers whilst continually innovating and developing new products.
Chairman of Partnership Assurance Chris Gibson-Smith, said: “I am delighted to announce the recommended all-share merger of Just Retirement and Partnership Assurance. Both businesses have at their core a focus on using outstanding intellectual property and underwriting expertise to deliver better value products and improved customer outcomes within defined benefit, UK retail retirement income and international markets.”
Chairman of Just Retirement Tom Cross Brown said: ”This transaction represents a unique opportunity to accelerate the existing strategy of both businesses. Our two businesses will be bigger, stronger and more efficient together, which we believe will allow us to deliver better returns to both policyholders and shareholders.”
Hargreaves Lansdown were one of the first to comment on the merger.
Head of Pensions Research Tom McPhail said: “The retirement income market has changed fundamentally since the Budget of 2014. The majority of smaller pension pots are simply being cashed in, drawdown demand has increased significantly and at the same time, the proportion of customers shopping around the market for the best annuity deals still isn’t increasing. Given these factors and the similarity of their business models and strategies, it is hardly surprising to see these two companies merging.
“This should not be seen as evidence of the death of annuities though. Investors still show a strong appetite for a secure retirement income for at least some of their pension pot and for those that do shop around on the open market, enhanced annuities now make up over 75% of all transactions.
“Just Retirement has the larger market share and its share price has proved more resilient since the Budget bombshell, though Partnership’s share of business has been increasing in recent months*. The two companies’ combined share currently makes up over 40% of the open market annuity business*. As highlighted in their announcement this morning, there is still considerable potential for enhanced annuity providers to add value to Defined Benefit scheme de-risking strategies.
“For existing annuity investors, this deal is likely to help dispel any concerns or uncertainty they may have had over the future of their annuity provider and the security of their retirement income.”