Partnership Assurance Group, the UK-based writer of impaired annuities, listed on the stock exchange in June.
Annuity writers have traditionally made few distinctions between the anticipated life expectancy of retirees when pricing their policies. Partnership, however, using proprietary medical and mortality data dating back to 1995, has been able to offer better rates to those with impaired lives than are available elsewhere. Such a database provides competitive advantages.
In total, UK annuities are set to grow by roughly 15 per cent per year as baby-boomers hit retirement age and pension pots increase. Additionally, the government has placed greater emphasis on increasing the proportion of retirees shopping around for the best deal rather than using their own pension provider’s rates.
At present, roughly 40 per cent of retirees still do not take advantage of this flexibility. This should mean that the impaired annuity segment grows faster than the overall market. Partnership has secured long-term distribution arrangements with major advisory networks and pension providers, and is well placed to benefit from this trend.
The stock is currently trading on a price-to-earnings ratio of 17x which, in our opinion, fails to reflect the company’s strong reinsurance relationships, robust cashflow profile, and significant domestic and international opportunities.
Neil Veitch is fund manager of the SVM UK Opportunities fund