Broker Panmure Gordon has named three stocks it believes are benefiting from the long-term trend of extended average life expectancy in the UK.
According to Office of National Statistics data, British women live 82.9 years, men 79.2 years. While the improvement curve has been flattening for a generation, thanks to conditions such as obesity, for example, the trend remains on the rise.
Panmure analyst Barrie Cornes says over the next 20 years, the UK population is forecast to grow 11.6% to 7.6m, which he thinks will have a profound impact on the spending patterns of the public and private sectors.
MINIMALLY INVASIVE MEDICINE TO CUT COSTS
Analyst Dr Julie Simmonds argues the higher costs of care for an ageing population with chronic diseases will lead to a change in treatment practices and benefit BTG (BTG).
BTG develops products that diagnose and treat conditions in a less invasive manner by pinpointing issues in the body, helping to reduce hospital stays and reducing costs.
The company’s interventional medicine division represents 45% of overall revenue and is growing at 20% per annum.
‘This is accelerating as the company benefits from its global sales infrastructure and the increasingly broad application of its products,’ comments Simmonds.
ORDER BOOK SET TO BOOST SALES
Funeral provider Dignity (DTY) is an obvious beneficiary if improvements in life expectancy slow down and the number of deaths rise.
Analyst Michael Donnelly says the firm’s order book for pre-arranged funerals is not valued into the share price and estimates it will provide over £1bn in future sales since few clients cancel.
‘This means that potentially over 20% of annual revenues on average will be effectively pre-contracted through the order book out to 2023,’ says Donnelly.
He also flags that Dignity has ‘ridden out large swings in mortality rates in recent years’.
SLOWDOWN IN LONGEVITY TO BENEFIT LIFE INSURER
Legal & General (LGEN) has the largest annuity book and is anticipated to benefit from slower improvements in life expectancy.
Last month, we revealed why unhealthy lifestyles, including smoking and obesity, are helping the insurer increase its profits.
Cornes previously hiked operating earnings per share forecasts by 20% and 14% in the year to 31 December 2017 and 2018 after Legal & General released £126m from reserves, which is likely to continue.
However, he believes the higher forecast could be ‘too conservative’ particularly in light of the company’s generous dividend yield.
