Just keeps on track

Just Group (JUST) results are never entirely straightforward and, at least on a reported level, seemed to show little progress. However, a headline loss was due to reverses on interest hedges as credit rates tightened during the half.

Dig further into the figures, and you’ll find the retirement product specialist generated £25m in organic capital (up from £3m in the first half of 2020) and is now well ahead of its target to double growth of this key measure by 2022, so ensuring the underlying stability of its Solvency II ratio.

The indirect effect of large cohorts of retiring baby boomers is that companies, with an estimated £2 trillion of total defined benefit (DB) pension liabilities on their balance sheets, are starting to move these risks into the insurance market. Just is a clear beneficiary of this trend as its key DB segment recorded a 20 per cent rise in gross premiums written to £554m, while the popularity of guaranteed income for life products ensured a 27 per cent rise in premiums to £330m.

But chief executive David Richardson has ruled out the return of dividends: “Our larger shareholders have said they are satisfied with the mid-teens return-on-capital we are generating at the moment.” He added that Just has built a niche in medically underwritten customers and was ahead of the rest of the market in this specialisation.

Despite these solid results, Just trades on six times’ Panmure Gordon’s earnings forecast for 2022. With evidence that cost control and capital generation are both ahead of expectations and, with the shares still trading at a big discount to net assets, there is room for growth. Buy.

Last IC View: Buy, 101p, 16 Mar 2021