Why has the share dropped., page-16

The extension on CIPRs is disappointing (as are most outcomes originating from the randomness of politics), but:

1) It doesn’t preclude demand for annuities from growing, between now and the time when the CIPR framework becomes effective.

2) Even once the new framework is effective, the fact that trustees will have to offer annuity products does not mean that retirees will be obliged to buy them; therefore, the immediate impact of the CIPR implementation is hard to quantify.

3) There are several other factors that support increasing demand for annuities, irrespective of CIPR: ageing demographics, mandated superannuation inflows, under-allocation into fixed income, etc.

4) Even at constant annuity sales, the change in the maturity mix of the book (short-dated annuities rolling off and longer dates being sold) will alone be enough to drive above-average earnings growth for CGF, everything else being the same.

5) Future revenue growth from CIPRs wasn’t priced in to start with; in other words, CGF’s Life business alone, at its current rate of annuity sales, already justifies the current Market Cap and then some.

The fact that this sort of news managed to cause a -7.7% intraday swing, to me, is symptomatic of a market that has just lost the plot altogether.

IMHO & DYOR