Pensions  

Partnership profits fall and DB boosts Just Retirement

Partnership profits fall and DB boosts Just Retirement

Partnership and Just Retirement have confirmed their merger will complete in early April, with separate interim results stating confidence in achieving at least £40m of cost savings.

Rodney Cook, Just Retirement’s group chief executive, said the merger provides a further source of earnings growth “and will enable us to drive significant cost efficiencies, underpinning our value-for-money products”.

Chris Gibson-Smith, chairman of Partnership and chairman designate of JRP Group, agreed that the merger strengthens the firm’s position “as a challenger to the traditional insurers in the defined benefit and retirement income markets”.

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As for the separate businesses’ performance, it was a more mixed picture.

Partnership reported total new business premiums of £631m for the year ended 31 December 2015, some 20 per cent below the 2014 result.

“Towards the end of the year, we saw an increase in market activity, and sales beginning to grow again, after the expected lull around the date the Pension Freedoms were introduced,” read the document.

Sales for the year continued to be affected by lower annuity market activity and sales when compared to the pre-2014 Budget position.

The second half of 2015 achieved sales of £152m, up 20 per cent from £128m in the first half.

Partnership’s sales of care annuities also decreased by 9 per cent to £69m, from £76m in 2014. The provider stated that it made some operational improvements which helped second half sales meet expectations.

“This market offers significant potential future opportunity, but continuing uncertainty surrounding the government’s care policy is acting as an inhibitor to growth,” it added.

Total operating profit in 2015 was £40m - down 38 per cent from £64m. Within this overall result, Partnership delivered new business operating profits of £11m - down from £39m in 2014, achieving a new business operating margin of 1.7 - from 4.9 per cent the previous year.

A business opportunity identified for both firms was the defined benefit de-risking market, with Partnership reporting its investment into infrastructure, pricing capability and sales capability being rewarded with the completion of 15 transactions last year - up from six in 2014 - resulting in sales of £277m - up from £247m the previous year.

David Richardson, chief financial officer of Partnership, said DB sales increased by 12 per cent in the year and represented almost 45 per cent of total sales. “Defined Benefit is a market with long term growth potential and where we have a sustainable competitive advantage,” he added.

Just Retirement saw a 2 per cent increase in annuity (or guaranteed income for life solutions) sales over the second half of 2015, which was eclipsed by a 98 per cent increase in sales of DB de-risking solutions, driving total new business sales up by half.

Overall DB sales stood at £701.2m for the half year to 31 December 2015, almost double the £354.7m sold in the half year to 31 December 2014.