EXTRA: Just Group Confident For Full Year Despite Lower Profit

LONDON (Alliance News) - Financial services company Just Group PLC said on Wednesday growth ...

Alliance News 13 September, 2017 | 3:59PM
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LONDON (Alliance News) - Financial services company Just Group PLC said on Wednesday growth throughout the first half of 2017 has given it confidence for a full-year margin above 8.0%, despite pretax profit being significantly lower compared to the first half of 2016 on a pro forma basis.

Just Group said the margin increase was achieved through pricing discipline, lower unit costs mainly driven by savings in synergies, and more efficient management of asset-liability.

Pretax profit for the six months to the end of June was GBP66.0 million, falling to less than half of the GBP158.1 million a year before, as the first half of 2016 had benefited from GBP144.6 million of "favourable investment and economic profit", which decreased to GBP31.0 million in the first half of 2017.

The prior-year figure represents the results of the group when it was known as Just Retirement Group for the entire period, plus three months' results of Partnership Assurance from its acquisition in April 2016 to June 30, 2016.

However Just Group's pretax operating profit increased by 39% to GBP67.2 million from GBP48.4 million, with a significant increase in business profitability, offset by increased reinsurance and finance costs.

Total new business sales on a pro forma basis also saw an increase to GBP975.0 million, up 3.0% from GBP948.7 million the prior year, including a significant 80% rise in sales of defined-benefit de-risking solutions to GBP295.6 million.

New business operating profit more than doubled on a pro forma basis to GBP64 million from GBP31 million, reflecting a 16% increase in retirement income new business volumes coupled with the margin increase from 5% to 8.9%.

Just Group declared an interim dividend of 1.17 pence per share, to be paid in November, up 6% from 1.10p year-on-year.

Just Group's Solvency II coverage ratio, a key measure of financial strength, was described as "stable" at 150% at the end of June. The group's economic capital ratio at June 30 was 214%.

One market the company expects to grow in particular is the guaranteed income for life market, driven by "demographics, individual customer defined benefit pension scheme transfers, and a continued growth in shopping around".

The defined benefit de-risking market is set for more rapid expansion, according to Just Group, as trustees seek to assure the benefits of their members.

Lifetime maximum prospects also remain positive, "as a property rich, but pension poor generation prepares to retire", the group said.

Chief Executive Rodney Cook said in a call to journalists the company is operating a business model which is "unique and quite simple" in the most attractive financial services growth market in the UK, with a competitive advantage based on powers to replicate intellectual property, diverse distribution and its mortgage origination capability.

It intends to manage capital carefully and will seek to drive growth by delivering the benefits of the merger with Partnership Life Assurance Co Ltd which was completed in April 2016.

"We have had a good start to the year and are executing our strategy to grow profits. Our careful risk selection is delivering margin expansion and demonstrating the value of our IP-led pricing approach," Cook said in a statement.

"This together with volume growth is delivering greater profits. Prospects remain favourable for our markets, with continued growth in shopping around for individual guaranteed income for life solutions, and a strong defined benefit de-risking outlook.

"We expect demand for lifetime mortgages to continue to grow as increasing numbers reach retirement with greater wealth invested in housing rather than pension assets.

"Although the first half margin may normalise somewhat in the remainder of the year, a 2017 full-year margin above 8% seems increasingly likely, given over GBP260 million of DB already transacted in the third quarter. We therefore look forward to the second half of the year with confidence."

Just Group shares were up 1.1% to 162.70 pence on Wednesday.

By Dayo Laniyan; dayolaniyan@alliancenews.com; Updated by George Collard; georgecollard@alliancenews.com

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Just Group PLC 138.40 GBX -0.93 -
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