Just Group profits supercharged by defined benefit pension derisking

Just Group expects to surpass annual earnings targets after the specialist insurer posted a 154 per cent jump in profit for the first half.

The retirement specialist told investors it was ‘highly confident of comfortably exceeding’ underlying operating profit growth of over 15 per cent this year after earnings hit £173million for the first six months of 2023.

Profits soared from £68million a year earlier and beat analyst forecasts of £162million.

New business revenues in the first half were supported by sales of the FTSE 250 firm’s retirement income products soaring by just over £1billion to £1.9billion.

Profit outlook: Just Group told investors it was ‘highly confident of comfortably exceeding’ underlying operating profit growth of over 15 per cent this year

Demand for its defined benefit de-risking schemes, whereby companies transfer part or all of their pension obligations, drove most of the expansion as interest rate hikes helped narrow or eliminate funding gaps.

The Surrey-based firm completed 35 defined benefit transactions during the period, including the largest deal in its history, a £513million full scheme buy-in for the GKN Group Pension Scheme.

It also finalised a £190million buy-in transaction from the trustees of the Ibstock Pension Scheme, which Just has credited to the rise in gilt yields in the aftermath of former Prime Minister Liz Truss’s controversial ‘mini-budget’ last September.

Higher interest rates also boosted returns in Just Group’s retail annuity division, which wrote £470million of new business, up 54 per cent on the previous year.

The segment had its busiest six months since the 2014 decision to let Britons over 55 to make withdrawals from their defined-contribution pension pot.

Just has hiked its interim dividend by 15 per cent to 0.58 pence per share.

David Richardson, chief executive of Just Group, said: ‘We have delivered another impressive set of results, and we are highly confident that we will comfortably exceed our 15 per cent profit growth pledge this year.

‘Our DB business is going from strength to strength, and I am delighted that our retail business has returned to growth.

‘We are growing sustainably and are exceptionally well positioned to continue benefiting from the positive drivers and favourable demographics supporting both of our principal markets.’

Consultancy Lane, Clark, Peacock estimates that up to £60billion worth of defined benefit transactions could happen this year, far above the pre-pandemic record of £44billion in 2019.

It notes that about a fifth of the UK’s 5,000 corporate defined-benefit schemes are currently fully funded on an insurer buyout basis. 

Just Group shares were 0.5 per cent higher at 82.4p on Tuesday morning and have grown by approximately 7 per cent over the past 12 months.

This post first appeared on Dailymail.co.uk