Partnership Assurance - bruised and bandaged up

Partnership Assurance: You have to feel a bit sorry for Partnership Assurance. They set up a good model providing impaired life pension annuities, at a time when mainstream life assurers were applying a one quote fits all style approach and Partnership was set to become a key income stock for investors. Then George Osborne in the Budget announced wholesale changes to pension provision in the UK, with the classic individual annuity product rendered unattractive, to most pensioners, overnight. So, now, they are re-inventing themselves and their products. In these results new business premiums declined 35.2%, within which individual annuities declined by 43.4%, even though these results include the undisrupted pre-Budget first quarter. The company goes further and says that the individual annuities current sales are down over 50% year on year at present, but that it is ‘unclear whether sales will stabilise at this level’. The group has taken quick action to reduce their cost base, taking some 20% out, but job losses hits already shredded staff morale even further. Reassuringly, the embedded value of 136p per share supports the 126p share price and the economic capital surplus is healthy at £170m, with a debt free balance sheet. However the maiden interim dividend is just 0.5p, reflecting all the current uncertainties. The further comment is that the final dividend will be reviewed at the time of the Finals in early 2015. The adage that ‘what doesn’t kill you makes you stronger’ comes to mind, but there really seems no rush to get involved with Partnership shares just yet.

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about.