There is nothing like news of a deal to provide a shot in the arm for a beleaguered company's shares. For Partnership Assurance (PA.), an all-share merger with specialist annuity rival Just Retirement (JRG) seemed to be just what the doctor ordered, sending the shares shooting up 8 per cent as the market opened. But the optimism proved fleeting, and the shares finished the day flat.
A more considered diagnosis may have revealed that the patient is faring worse than feared. Partnership made a loss on new business of £2m in the first half, compared with an £18m profit in the comparable period last year and £39m over the course of 2014. As sales volumes have declined, costs reductions have not been sharp enough to mitigate this effect, especially since costs are skewed towards new business generation. At least there were signs of improvement, with individual annuity sales increasing by 37 per cent in the second quarter relative to the first - the first rise in four quarters. But the company cautioned of "significant uncertainty over the near-term level of annuity sales".
Despite a slow start to the bulk annuity market - which life insurers have relied on to offset the decline of individual annuities - management reiterated its target of selling £200m in bulk annuities this year. Just £68m was booked in the first half.
Analysts at Canaccord Genuity expect EPS of 7.4p for the full year, up from 4.7p in 2014.
| PARTNERSHIP ASSURANCE (PA.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 157.8p | MARKET VALUE: | £631m | |
| TOUCH: | 157-158.3p | 12-MONTH HIGH: | 170p | LOW: 85p |
| DIVIDEND YIELD: | 1% | PE RATIO: | 53 | |
| NET ASSET VALUE: | 151p* | EMBEDDED VALUE: | 147p | |
| Half-year to 30 Jun | Gross life premiums (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 385 | 15.0 | 3 | 0.5 |
| 2015 | 243 | 2.9 | 1 | 0.5 |
| % change | -37 | -80 | -67 | - |
Ex-div: 20 Aug Payment: 30 Oct *Includes intangible assets of £140m, or 35p a share | ||||
