Retirement products provider Just Group has posted an underlying operating profit of £249m, a 19 per cent rise on the previous year. It said this was driven in part by increased new business profits.
However, in terms of its solvency capital position, the continued rise in interest rates in 2022 has resulted in what the firm called ‘an economic loss’, which saw Just post an overall International Financial Reporting Standard (IFRS) loss after tax of £232m for 2022. Just said its interest rate hedging programme, which protects consumers against rate changes, had produced profits while rates were falling in previous years.
The firm noted that: “The strength and resilience of our capital position and our disciplined pricing and risk selection ensures we are capital self-sufficient. This means we can fund our growth ambitions, reward shareholders with a growing dividend and maintain a high buffer of capital in what are uncertain times.”
Lifetime mortgage business
Its other companies, including the HUB group of businesses which comprises its later life advice arm, saw a loss of £15m in 2022, flat on the loss it reported in 2021.
Just internally funded six per cent more lifetime mortgage advances than it did in 2021, amounting to £519m. It said these were partially used to replace a higher level of early redemptions in its back book.
Looking ahead, Just Group said it would be “selective” with the mortgages it originates. It said lifetime mortgages were still an attractive asset class, but higher interest rates meant the capital charge attached to the no negative equity guarantee risk became “onerous”.
The capital charge is the return paid to investors.
The average loan to value (LTV) of its mortgage portfolio came to 37.3 per cent, slightly up from the previous year’s 36.1 per cent. Just said this reflected its “strength and resilience”.
Defined benefits driving growth
Just’s retirement business saw a 17 per cent rise in sales to £3.1bn, which was driven by a growth in defined benefit (DB) pension sales. These rose by a third to £2.6bn.
Its guaranteed income for life and care products saw sales of £564m during a year, 24 per cent fall on 2021.
The group also noted strong momentum in Q1 2023, including its largest DB transactions to date (£513m). It also highlighted a £6bn pipeline which means that the group ‘expects substantial DB sales growth in 2023.’
Just said rising interest rates were having a positive impact on these aspects of its business. It said the growth in these areas gave it the “confidence to deliver 15 per cent growth in underlying operating profit” per year on average over the medium term.
David Richardson, group chief executive, said: “This is a very strong set of results which continues to demonstrate our ability to generate profitable growth within a sustainable capital model. Over the last four years, our performance has consistently exceeded the commitments we have made.
“We have had a record start to the year with strong defined benefit volumes and a return to guaranteed income for life sales growth. We have significant long-term opportunity in both of the defined benefit and retail markets, driven by near and long-term structural growth drivers.
He added: “We have the capability and opportunities to achieve our ambitious growth plans so that we build substantial value for shareholders and fulfil our purpose to help more people achieve a better later life.”
