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Last updated: March 19, 2014 5:33 pm
Shares in Partnership Assurance, the specialist annuities provider which was floated in June, fell by more than half after George Osborne, chancellor, announced he was giving retirees more pension pot flexibility.
Partnership was the worst hit among annuity providers, falling 55 per cent to 143p, after the chancellor said he was removing the tax penalties that had previously pushed pensioners toward buying their products. Because Partnership sells non-standard annuities to retirees with lower life expectancies, its customers are among those most likely to take their pension pot in cash instead.
Shares in Just Retirement, which was floated in November were down more than 40 per cent following the Budget announcement and Legal & General’s shares were off 12 per cent.
Life insurers will have to innovate to thrive after Budget changes
Partnership, which announced its maiden full-year results as a public company on Wednesday morning, said its revenues were already under pressure following recent regulatory changes to the way that financial products and pensions are sold.
Even before the chancellor’s announcement, Partnership shares had fallen 7 per cent after the company said that its premiums from new business were 3 per cent lower at £1.26bn in the year to December.
The new UK ban on commission charges had “a deeper and longer impact on the retirement and care annuity markets than we foresaw”, the company said, adding that it expected total sales in the first quarter to be lower than the fourth quarter of 2013.
Total new business from sales of retirement products – by far the bulk of Partnership’s products – were flat at £1.16bn. “Behind the scenes” cost-cutting lifted pre-tax profits by 24 per cent to £83m, from £67m.
Partnership, which specialises in non-standard annuities for people in poorer health or who smoke, said the 2013 sales slowdown was in part due to tough comparisons with the prior year. Court rulings requiring the introduction of gender-neutral pricing at the start of 2013 had prompted many customers to move quickly to buy annuities before the rule change. Across the market, sales were down 18 per cent year on year.
Partnership Assurance must have wished it could turn back the clock – or leap forward to a happier moment – when George Osborne’s Budget speech destroyed half the group’s value in a single hour, writes Kate Burgess.
Sales of care annuities, specialist retirement income for those moving into a care home, slumped by 30 per cent from £94m to £66m over the year, due to the “significant” impact of a new regulatory regime, which banned advisers from receiving commission payments for sales.
In September last year, the Financial Times also revealed that Partnership was facing a threat of enforcement action from the UK regulator over a suspected breach of the commission ban.
Partnership said new business profitability had improved in the second half of the year, as it had maintained its pricing discipline and as it chose to “only to compete in those segments of the market offering attractive returns to shareholders”.
The group has proposed a maiden dividend of 3p per share, in line with the policy stated in its initial public offering.
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