Partnership targets £1.4bn London float

Steve Groves tells James Waterson why the insurer is ready to go public

PARTNERSHIP Assurance, the life insurer for people who don’t expect to live for long, yesterday unveiled plans for the City’s biggest IPO of 2013, as chief executive Steve Groves told City A.M. that previous estimates of a £1bn valuation for his business were far too low.

“That figure dates back to last June and my expectation is that it will be significantly over £1bn,” Groves said. “The valuation will be decided by the markets, off a price to earnings ratio.”

Given that the company – which sells annuities to retirees with serious medical conditions or unhealthy lifestyles such as smokers – took advantage of yesterday’s launch to unveil a 42 per cent rise in year-end operating profits to £112.1m, his confidence looks justified.

Based on comparable industry valuations, the company could be worth as much as £1.4bn.

Groves’ interest in the valuation is understandable since he and other executives collectively own 20 per cent of the company. The former actuary from Oxfordshire personally stands to makes millions from the float. But although he has no plans to quit, the chief executive has yet to agree a deal to stay at the business for the long term: “I would expect to be locking up a material proportion of my stake for a period of time. [Leaving is] not my intention at the moment.”

Groves said private equity business Cinven, which paid £150m for the remaining 80 per cent of the company as part of a 2008 management buy-out, first began exploring the sale a year ago when the London IPO market was still in the doldrums.

“Private equity investments are typically over a three to five year period,” Groves explained. “We were keen to ensure orderly transition from private equity. The business was performing well and didn’t want to be distracted by a messy process. We resolved about a year ago to start preparing for an IPO and concluded we would be ready to go at some point in the current year.”

It’s a decision that must have been helped along by the appointment of London Stock Exchange chairman Chris Gibson-Smith, who was drafted in as chair last year to bulk up Partnership’s management team ahead of the float. Gibson-Smith yesterday called the move “a natural step” for the firm.

Partnership’s business model relies on 18 years of data collection that allows it to expertly judge life expectancy and offer higher guaranteed retirement income to people with impairments.

“Most of my clients know they have a medical condition that will affect life expectancy – typically they’ve had a stroke, heart attack, or cancer,” explained Groves.

“Whilst for us it’s an uncomfortable conversation, for them it’s something they came to terms with years ago. And we can offer them about 20 per cent more a year during retirement.”

Potential customers answer hundreds of detailed medical questions – “if you had diabetes we’d ask how you’re controlling it, when you were last hospitalised, what medication you’re on, when it was last changed,” says Groves – before their case is compared to past customers and they are made an offer.

Around 90 per cent of the company’s income comes from this specialist annuity market, with new business premiums growing by two-fifths to hit £1.26bn last year.

The fast growth has been driven by waves of baby boomers hitting retirement and the increased number of people buying annuities due to the move away from defined benefit to defined contribution schemes over recent decades. “The annuities market is growing at 10 per cent a year and will do so for around next five years. But the non-standard segment has shown a lot more rapid growth – 33 per cent a year.”

But even if this market slows down, Groves spies potential in the company’s secondary business, which offers to guarantee care home fees in return for a lump sum. Despite government plans to cap care fees at £85,000, he says “the vast majority of costs will still be met by individuals”.

Investors will hope his confidence is well placed.


LSE, Actuarial Science

2005-present Partnership Assurance
2004-05 Swiss Re
2000-03 Britannic Retirement Solutions
1999-2000 GE Life
1996-1999 Norwich Union




Bank of America Merrill Lynch (BoAML) and Morgan Stanley have been working on the Partnership IPO since last year, which is set to be the biggest London float since Direct Line resuscitated the market last autumn.

Bank of America Merrill Lynch’s team included Rupert Hume-Kendall (pictured), the prolific dealmaker who has recently advised on the flotation of Ruspetro, a sale of shares in Reckitt Benckiser and has provided strategic advice to 3i. Other members of the team include Henrietta Baldock, Andrew Tusa and Oliver Holbourn.

Meanwhile Morgan Stanley’s team includes former BoAML employee Matt Cannon, Ben Grindley and Joe Suddaby.

Evercore Partners have joined the work and deployed Andrew Sibbald, Nick Chapman and Robert Perry.

Public relations are being handled by Citigate team Michael Berkeley, Grant Ringshaw and Andrew Hey.