Just waits for desserts

There was much to commend in the half-year results for annuities specialist Just (JUST), with shareholders benefiting from a further return to dividends, in a sign that the company’s organic capital generation is staying positive because of the improving outlook for interest rates. However, like most insurance peers, the company will see most of its business written in the second half, with forecasts for the defined benefit bulk annuity market weighted heavily towards the end of the year.

Sales of defined benefit de-risking schemes were up 3 per cent in the half to £574mn, with lifelong mortgages also performing well with revenues up 11 per cent to £274mn. However, the market rout did have an impact on annuity sales, which fell by a disappointing 14 per cent to £284mn after investment losses shrunk the size of pension pots.  

Chief executive David Richardson said: “Moving a DB (defined benefit) pension scheme’s liabilities can take months, but the forecasts are that £25bn of business will transact in the second half.” He added that many smaller schemes, in which Just tends to specialise, are looking to take advantage of rising interest rates by moving liabilities across at the point where the funding gap has started to narrow.  

With little inflation risk, Just’s performance is very solid, but the shares have still de-rated over the past 12 months. With broker RBC Capital Markets forecasts a price/earning ratio of just 3.7, the company still looks perversely undervalued. Buy.

Last IC View: Buy, 84.65p, 10 Mar 2022