Just Retirement to take over rival for £668.5m

The firm’s boss, Rodney Cook, will become chief executive, while Steve Groves – his counterpart at Partnership – will step down when the tie-up completes.

The transaction is expected to result in Reigate-based Just Retirement’s shareholders owning about 60 per cent of the new group and Partnership Assurance’s shareholders 40 per cent. It values the ordinary share capital of Partnership Assurance at approximately £668.5m.

Together the businesses, which both specialise in selling medically underwritten annuities, will be able to speed up new product launches and be a stronger front in the retirement income market.

“It is the obvious way to adjust to the new world of annuities and pension freedom – costs have to be cut in line with falling revenues and this is a good way to do it”.

The newly merged business will continue to cut costs, targeting savings of £40 million a year.

Permira and Cinven, the largest shareholders in Just Retirement and Partnership respectively, have given their blessing to the deal.

A joint statement on the deal acknowledged the impact of the pension reforms on the two businesses. I see a potential further fall in annuity rates with less competition in the enhanced market.

Tom McPhail, head of pensions research at Hargreaves Lansdown, said that the retirement income market has changed fundamentally since the Budget of 2014.

Just Retirement and Partnership, the two insurers whose share prices were savaged by Chancellor George Osborne’s radical annuities overhaul, are to merge.

He added: “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”.

Analysts had mixed views: Canaccord Genuity upgraded Partnership to hold, from sell, while Panmure Gordon lowered its target price to 165p per share and downgraded its recommendation to hold, from buy. Shares in Just Retirement rose 1.6% to 202p.

The boards of Just Retirement and Partnership said they believe the merger will deliver “significant strategic and financial benefits” for the combined business.

Just Retirement and Partnership also plan to raise about £150m in fresh capital, “providing the financial flexibility to pursue future growth initiatives and product development”.