Just Group, a prominent UK life insurer, has announced that it anticipates “substantially exceeding” its full-year profit target following a significant increase in corporate pension deals. This news comes as the latest indication of the thriving conditions within the market. The company’s half-year results, released on Tuesday, revealed a 44 percent year-on-year rise in underlying operating profit, reaching £249 million. This impressive growth was primarily driven by surging sales in Just Group’s de-risking business, where companies pay a premium for the insurer to assume their pension obligations.
Industry analysts predict that in the coming years, hundreds of billions of pounds worth of pension liabilities and their backing assets will be transferred from company balance sheets to insurers. This shift is part of a broader restructuring of the UK’s retirement sector. Just Group, which focuses on deals with smaller defined-benefit pension schemes, experienced a nearly one-third increase in sales within this business, reaching a record £1.9 billion. The number of transactions also jumped from 35 in the first half of the previous year to 55 in the current period.
The group expressed confidence in maintaining this momentum, stating, “The drivers behind this momentum remain and we expect a busy second half in 2024, and beyond, as we execute a pipeline of small, medium, and larger transactions while maintaining capital flexibility.” Given the strong first-half performance, favourable market conditions, and a robust deal pipeline, Just Group now expects to “substantially exceed” its previous guidance for the current financial year. The company had initially aimed to double the £211 million statutory operating profit it achieved in 2021.
Just Group’s shares experienced a 16 percent surge in early trading in London following the announcement. The rise in corporate pension deals has emerged as a key growth market for UK life insurers, catalysed by increasing interest rates that have helped close funding gaps for numerous pension schemes, enabling them to strike deals with insurance companies.
The Bank of England, responsible for regulating the sector, called for insurers to exercise moderation in their deal growth and strengthen their risk management practices last year. Just Group’s performance also benefited from the sale of individual annuities, which have experienced a boost due to higher interest rates and the UK’s new consumer duty regulations. These regulations have encouraged advisers to recommend products with financial guarantees. In the first half, the business sold £600 million of these guaranteed income products, representing a more than 25 percent increase compared to the prior comparable period.
Chief executive David Richardson praised the “strong momentum” in the business, attributing it to “structural growth in our chosen markets.” Analysts at JPMorgan Cazenove noted that Just Group’s “earnings are set to grow at strong rates over the next few years, and likely above current consensus levels.” Panmure Liberum raised its target price for the stock, citing an “excellent set of interim results, well above expectations that blows its previous guidance out of the water.”
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