InvestmentsMar 24 2014

Managers assess annuity bombshell as insurers hit

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George Godber, co-manager of the CF Miton UK Value Opportunities fund, said: “It’s not a total destruction of the annuities market but I can see why the stockmarket has reacted like this. We will see some trimmings off revenue figures [for big insurers] but only 1-2 per cent, not massive cuts.

“It was a shock to the market but I don’t think it has permanently damaged the industry.”

Are bookmakers no longer a safe bet?

Outside of the life insurance sector, bookmakers such as William Hill and Ladbrokes also took a hit to their share prices last week as George Osborne announced a rise in the tax on fixed-odds betting machines to 25 per cent.

Shares in Ladbrokes fell 11.7 per cent on March 19, while William Hill’s stock fell 6.7 per cent after the announcement.

Miton’s George Godber said the sector had been hit “left, right and centre” by regulation and tax hikes, affecting the investment case for what used to be “very cash generative” businesses.

“It was an easy area for the government to go after,” the manager said. “There will be big downgrades.”

In contrast, bingo operators were given a boost, as duty was cut by half to 10 per cent, which Mr Osborne said would “protect jobs and protect communities”.

Fidelity Special Situations manager Alex Wright said his holding in Rank Group could benefit as it runs the Mecca brand of bingo halls. He said the tax cut would “help offset the structural decline we have seen in UK bingo halls in the past few years and will result in a meaningful pick-up in earnings”.