Just Retirement Group and Partnership Assurance Group are to merge to create JRP Group.
The boards of the two annuity providers have agreed on the terms of a recommended all-share merger. Just Retirement shareholders would own a 60% stake in JRP Group, with Partnership Assurance owning the remaining 40%.
In addition to financial synergies and enhanced prospects for growth in international markets, the merger aims to increase the combined group’s ability to develop and accelerate new product launches in the retirement income market in line with the increased demand generated by the pension freedoms.
The newly created company will be led by Rodney Cook (pictured) as group chief executive officer, David Richardson as deputy group chief executive officer and Simon Thomas as group finance director. Chris Gibson-Smith, current chairman of Partnership Assurance, will be chairman of the combined group, while Tom Cross Brown, current chairman of Just Retirement, will take up the role of deputy chairman of JRP Group.
Just Retirement’s Cross Brown said: “This transaction represents a unique opportunity to accelerate the existing strategy of both businesses. Our two businesses will be bigger, stronger and more efficient together, which we believe will allow us to deliver better returns to both policyholders and shareholders.”
Partnership Assurance’s Gibson-Smith added: “Both businesses have at their core a focus on using outstanding intellectual property and underwriting expertise to deliver better-value products and improved customer outcomes within defined benefit, UK retail retirement income and international markets.”
Tom McPhail, head of pensions research at Hargreaves Lansdown, said: “The retirement income market has changed fundamentally since the Budget of 2014.
“The majority of smaller pension pots are simply being cashed in, drawdown demand has increased significantly and, at the same time, the proportion of customers shopping around the market for the best annuity deals still isn’t increasing.
“Given these factors and the similarity of their business models and strategies, it is hardly surprising to see these two companies merging.”
John Baines, principal consultant in the risk settlement group at Aon Hewitt, added: “The medically underwritten bulk annuity market has become mainstream with close to £1 billion of business written in the past 18 months. With one of the main reasons for the proposed merger between Just Retirement and Partnership being a focus on growing in the defined benefit pension market, we don’t expect that this growth trend is likely to change.
“As with any merger, there is a risk of reduced competition driving up prices. However, in this case, that risk is likely to be mitigated by the new entrants that are poised to enter the market imminently, by the increased interest of traditional insurers in using medical data to sharpen their pricing, and also by the need to retain a competitive pricing basis relative to traditional insurers.”