Four years after being taken private by Avalon Acquisitions, Just Retirement (JRG) is planning to rejoin the UK stock market through an initial public offering aimed at institutional investors only. As well as a partial sale of existing ordinary shares, the company will also be raising £300m through the issue of new shares. A price range is expected to be announced within the next 10 days. In the year to June, underlying operating profits were up 15 per cent at £100m, and the group's European embedded value advanced 38 per cent to £503.9m.
Just Retirement is the UK's largest provider of individually underwritten annuities (IUAs) with around a third of the whole market. These so-called enhanced annuities offer better annuity rates than standard annuities because the underwriter takes into account a whole range of ailments and lifestyles that are calculated to shorten life expectancy. Typically these cover such conditions as diabetes but also reflect other circumstances such as smoking and alcohol consumption. Moreover, the group has a sophisticated database that allows it to set customer pricing more keenly than other market providers. And as part of the management risk policy, around two-thirds of the longevity risks on new IUA business is reinsured, while retaining the option to recapture profits if longevity turns out to be shorter than expected. This style of operation also reduces capital reserve requirements.
But the biggest challenge is encourage people reaching retirement to look around for the most attractive annuity rather than just accepting what is on offer from their current pension provider. Just Retirement estimates that only 21 per cent of annuitants take up an IUA, while around 60 per cent would be eligible for some form of medical or lifestyle enhancement. The company is also the second largest provider of lifetime mortgages, a form of equity release enabling pensioners to release some of the equity locked up in their houses.
