The group said in the last half of 2021, it used its intellectual property to “positively disrupt” the lifetime mortgage market by introducing medical underwriting. It estimated that around six in 10 customers got a better deal by disclosing their medical conditions and lifestyle, meaning they were able to secure a lower rate or borrow more money.
It said: “We’ve made excellent progress helping financial intermediaries to adopt this new approach and over one in three of the quotation requests we received in the first half of 2022 used medical underwriting. This trend continues to advance higher.”
Just said it continued to be selective about the mortgages it originates and used its market insight and distribution to target certain sub-segments.
The average loan to value (LTV) of its mortgage portfolio was 35.6 per cent as of 30 June 2022, compared to 36.1 per cent at 31 December 2021. It said this reflected the strength and resilience of its geographically diverse portfolio which offsets the interest roll-up.
At a value of £5.9bn, lifetime mortgages account for 26 per cent of Just’s total financial investments following the completion of the third and final sale of its lifetime mortgage portfolio in February. In total, Just has disposed of £1.6bn of lifetime mortgages in an aim to reduce its exposure to house price movements.
In the first half of the year, higher numbers of borrowers redeeming early to refinance onto lower rates reduced the amount of lifetime mortgages on Just’s balance sheet.
The group reported a “negative operating experience” of £11m during the first half of the year because of this, as it reduced borrowers’ interest roll-up.
However, the redemption of these loans allowed the group to fund other investments and further diversify its portfolio.
In the first half of 2022, Just invested £466m in other illiquids, including infrastructure, private placements, social housing, commercial mortgages, ground rents and income strips.
Higher rates lead to losses
The group’s underlying operating profit rose by 15 per cent to £74m.
However, it reported an IFRS loss after tax of £226m, compared to a loss of £70m last year, which it attributed to the rising rate environment.
Just said its interest rate hedging programme, where borrowers swap a variable rate for a fixed rate, protected its capital position in the years that rates fell. Interest rate rises in 2022 have resulted in an “economic loss” for the group and it has since adjusted and reduced the level of interest rate hedging to move it to an economically neutral position and reduce its sensitivity to rate changes.
It said higher interest rates impacted the amount of capital available to release and changes in interest rates could affect the relative attractiveness of its retirement income products.
Exposure to this is mainly concentrated in the group’s investment portfolio, loans secured by mortgages and its insurance obligations.
The 140 basis point rise in long-term interest rates since the start of the year resulted in losses of £341m, Just said.
Just also signed its largest single defined benefit pension transaction to date at nearly £500m in July, which was its second defined benefit partnering transaction. Its defined benefit business also has a record pipeline of more than £5bn.
David Richardson, group chief executive, said: “This is a strong set of results which continues to demonstrate our ability to generate profitable growth within a sustainable capital model.
“There is a very favourable defined benefit market backdrop and we have a record pipeline of over £5bn. This together with our positive momentum, and supported by our strong capital position, give me confidence that we will achieve our growth ambitions in 2022 and beyond.
“We have a unique opportunity to build substantial value to shareholders and deliver our purpose to help more people achieve a better later life.”
