Just Retirement and Partnership Assurance Group are set to merge and will be rebranded as the JRP Group, in a move to capitalise on market changes since the at-retirement reforms.
The shock merger, announced this morning (11 August), will result in Just Retirement shareholders owning approximately 60 per cent of the combined group and Partnership shareholders owning approximately 40 per cent.
JRP will be lead by Just Retirement’s Rodney Cook as group chief executive, while Steve Groves, the current chief executive of Partnership, will step down as from his role once the merger is complete.
Both firms have been badly hit by last year’s bombshell Budget announcement, with the chancellor declaring that “no one will have to buy an annuity”.
Partnership’s results, published today, revealed that in the first six month of the year, new business sales of individually written annuities were £128m compared to £334m in the first half of last year.
Just Retirement’s results, published in May, showed that total annuities were down 15 per cent compared with the nine months ending 31 March 2014, to £874.6m. As expected, this was driven by weaker individually underwritten annuity volumes, down 59 per cent to £380.3m.
Just Retirement’s stock exchange announcement today said the merger will strengthen the “competitive position” of the combined group in the UK retirement income market, and is expected to lead to improved customer outcomes compared to the products currently offered by “larger incumbent insurers”.
It added that the merger will accelerate new product launches, which is of “critical importance” given the greater expectation of new products among customers following the pension freedoms.
Financially, the Just Retirement board expects the merger to result in pre-tax cost savings of at least £40m per annum, however it also expects one-off integration costs of £60m over two years.
To boost the stronger capital position, the combined group intends to raise equity capital amounting, in aggregate, to approximately £150m. Further details will be announced later.
The equity will support future growth initiatives and product development, amongst other things.
Based on the closing price of Just Retirement shares of 199 pence on the ‘last practicable date’, the merger represents an indicative value of 166p per Partnership share and values the entire issued and to be issued ordinary share capital of Partnership Assurance at approximately £668.5m.
Under the terms of the merger, Partnership shareholders will be entitled to receive for each share held, 0.834 new Just Retirement shares.
Tom Cross Brown, chairman of Just Retirement, said that the 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.”
donia.o’loughlin@ft.com
