Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Just Group, the UK life insurer, has said it will “substantially exceed” its full-year profit target following a surge in corporate pension deals, in the latest sign of thriving conditions in the market.
In half-year results on Tuesday, Just said its underlying operating profit had risen 44 per cent year on year to £249mn. That was driven by rising sales in its de-risking business, where companies pay it a premium to take over their pension obligations.
Analysts expect hundreds of billions of pounds of pension liabilities, and the assets backing them, to be transferred in the coming years from company balance sheets to insurers, as part of a reshaping of the UK’s retirement sector.
Just, which specialises in deals with smaller defined-benefit pension schemes, grew sales in this business by almost a third to £1.9bn, a record, as transactions jumped from 35 in the first half of last year to 55.
“The drivers behind this momentum remain and we expect a busy second half in 2024, and beyond, as we execute a pipeline of small, medium and larger transactions, while maintaining capital flexibility,” the group said.
Due to strong first-half performance, market conditions and a busy deal pipeline, Just said it now expected to “substantially exceed” previous guidance for the current financial year of doubling the £211mn statutory operating profit it made in 2021.
The company’s shares jumped 16 per cent in early trading in London.
The rise in corporate pension deals has created a key growth market for UK life insurers, which has been catalysed by a rise in interest rates closing the funding gaps for a swath of pension schemes — and making it possible for them to do a deal with an insurance company.
The Bank of England, which regulates the sector, called last year for insurers to “exercise moderation” in terms of their deal growth, and to bolster their risk management.
Just’s performance was further boosted by its sale of individual annuities, which have also benefited from higher interest rates — which increase the income retirees can expect from such retirement products — and from the UK’s new consumer duty regulations, which it said were encouraging advisers to suggest products with financial guarantees.
In the first half, the business sold £600mn of these guaranteed income products, up more than a quarter on the prior comparable period.
Chief executive David Richardson hailed the “strong momentum” in the business due to “structural growth in our chosen markets”.
Analysts at JPMorgan Cazenove said Just’s “earnings are set to grow at strong rates over the next few years, and likely above current consensus levels”.
Liberum increased its target price for the stock on the back of what it called an “excellent set of interim results, well above expectations that blows its previous guidance out of the water”.
Read the full article here