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Panmure: Partnership & Just Retirement are now 'exceptional' buys

Panmure: Partnership & Just Retirement are now 'exceptional' buys

Panmure Gordon sees some 'exceptional' buy opportunities in life firms after the sector went into shock on George Osborne's pensions bombshell.

The chancellor's annual Budget saw the removal of the compulsion to buy an annuity.

Annuity provider share prices were hammered, with small caps Partnership Assurance sliding 55% and Just Retirement 42.4%.

In the blue chips L&G lost 8.4%, Standard Life 3.9% and Aviva 5.14%.

Panmure analysts Barrie Cornes and Keith Baird see the sell-off as a major overreaction.

'The abolition of compulsory annuity purchase is a massive change to the industry but we do not think that it means the end of annuity product sales,' the pair said in a note to clients.

'Whilst we think that there will be a reduction in the number of people buying an annuity, there will still be demand for the product, particularly given the increasing longevity of the population.'

They added: 'Share prices have been hit hard to the point where we think the market is assuming no new annuities will be written going forward. We think the product will still be acquired given the need to security of income in old age. 

'Being able to draw down an entire pension pot without a sizeable alternative income seems bizarre and lacking in forward thinking.'

The duo describes the opportunity in Just Retirement and Partnership as exceptional.

'Based on these asset values we believe that both Partnership and Just Retirement current share prices represent and exceptional buying opportunity and that the share price reaction has been an overeaction,' they said.

'The current valuations of both are close to assuming that no new business will be written, which we view as wrong. We note also that they both have highly valuable intellectual property that would be highly sought after and prized by their competitors.'

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