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) |
| 2016* | 2.69 | 199 | 20.2 | 4.4 |
| 2017 | 1.89 | 181 | 16.7 | 3.72 |
| 2018 | 2.18 | -85.5 | -6.83 | nil |
| % change | +15 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *18-month period, following Just Retirement/Partnership merger | ||||
