Just bounces back as demand for annuities increases

It was an interesting year for life insurer and pensions de-risking specialist Just (JUST) as the company had to face down the chaos caused by the mini-Budget liability-driven investment (LDI) debacle in the final quarter of last year. Pleasingly, Just came through the experience unscathed and is now benefiting from rising interest rates generating business for its defined-benefit pensions de-risking business, as well as stimulating the first significant demand for retail annuities that the industry has seen in a decade. Certainly, the market took notice and the shares rose significantly on the day.

It was the defined-benefit segment that powered the results, with sales increasing by 33 per cent to £2.6bn, with a markedly higher tempo of transactions (56 compared with 29 in 2021). The rise in interest rates, which were happening before the Autumn mini-Budget, has shortened the timeline for companies looking to offload their defined-benefit liabilities onto the life insurance industry. “What might have been a five-year process has suddenly shortened to about a year, or as long as it takes to do the fact-checking and paperwork,” said chief executive David Richardson. This has created a near-term pipeline of biddable work of about £6bn, he added.

Demand in the personal annuities market will take some time to feed through. Sales here were 24 per cent lower at £520mn due to lower-value pension pots resulting in smaller case sizes. However, volatility, combined with higher rates, mean enquiries this year are already significantly higher, management said.

Together with a closing solvency ratio of 199 per cent, Just looks to be bouncing back from its LDI lows. RBC forecasts earnings per share for 2023 of 25.3p, giving a forward price/earnings ratio of just 3.5. There is plenty of scope for growth. Buy.

Last IC view: Buy, 76.2p, 9 Aug 2022