Shareholders in Just Group (JUST) are feeling the sting of the Prudential Regulation Authority’s (PRA) plans to implement tighter capital requirements for equity-release mortgages. The life insurer has raised £300m in tier one debt and £75m via a share placing to boost capital levels, and has also pulled its final dividend after already deferring the interim payment. The dividend will now be rebased to around a third of the 3.72p paid in 2017.
A change in mortality and property price assumptions put a £33.5m dent in the life insurer’s adjusted pre-tax profits, which dropped by 5 per cent to £210m. However, a 15 per cent rise in retirement income sales, together with a 2.2 percentage point improvement in new business margins at 11.2 per cent, meant new business operating profit rose 44 per cent to £244m. Bulk annuity sales led the way – up almost a third – offsetting a 4 per cent dip in individual annuity sales.
To reduce the capital strain of writing new business, management plans to marginally reduce the proportion of equity-release mortgages backing new business, as well as the duration and loan-to-value of those products. That is expected to lower this year’s new business margin by one percentage point.
City analysts were forecasting consensus adjusted earnings of 16.3p a share for 2019, according to Bloomberg.
|JUST GROUP (JUST)|
|ORD PRICE:||82p||MARKET VALUE:||£772m|
|TOUCH:||82-82.25p||12-MONTH HIGH:||159p||LOW: 69p|
|DIVIDEND YIELD:||NIL||PE RATIO:||NA|
|NET ASSET VALUE:||177p||SOLVENCY II RATIO:||136%|
|Year to 31 Dec||Gross written premiums (£bn)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
|*18-month period, following Just Retirement/Partnership merger|