Just Group profits boosted by derisking defined benefit plans
- Just Group saw underlying operating profit jump 154% to £173m in the first half
- Sales of the company’s pension products rose by more than £1 billion to £1.9 billion
- The Surrey-based company entered into 35 defined benefit plans during the period
Just Group expects to exceed annual profit targets after the specialist insurer posted a 154 percent profit increase in the first half.
The pensions specialist told investors he was “very confident he will well outperform underlying corporate profit growth of more than 15 per cent this year, after profit in the first six months of 2023 was £173 million.”
Profits rose from £68 million a year earlier, beating analysts’ forecasts of £162 million.
Income from new businesses in the first half was supported by sales of the FTSE 250 company’s pension products, which rose by just over £1bn to £1.9bn.
Earnings outlook: Just Group told investors it was ‘very confident in comfortably outpacing’ underlying operating profit growth of more than 15 percent this year
Demand for its defined benefit plans, in which companies transfer some or all of their pension obligations, drove most of the expansion as interest rate hikes helped narrow or eliminate funding gaps.
The Surrey-based company completed 35 defined benefit transactions during the period, including the largest deal in its history, a £513 million full buy-in to the GKN Group Pension Scheme.
It also completed a £190m buy-in from the trustees of the Ibstock Pension Scheme, which Just has attributed to the rise in government bond yields in the wake of former Prime Minister Liz Truss’s controversial ‘mini-budget’ last September .
Higher interest rates also boosted returns from Just Group’s annuities division, which brought in £470 million in new business, up 54 per cent on the previous year.
The segment enjoyed its busiest six months since the decision in 2014 to allow Britons over the age of 55 to withdraw money from their defined contribution pool.
Just has increased its interim dividend by 15 percent 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 confident that we will well exceed our promise of 15 per cent earnings growth this year.
“Our DB business continues to grow and I am delighted that our retail business is growing again.
“We are growing sustainably and are exceptionally well positioned to continue to benefit from the positive drivers and favorable demographics supporting both of our major markets.”
Consultancy Lane, Clark, Peacock estimates that up to £60 billion in defined benefit transactions could take place this year, well above the pre-pandemic record of £44 billion in 2019.
It notes that around a fifth of the UK’s 5,000 group defined benefit plans are currently fully funded on an insurer buyout basis.
Just group shares were up 0.5 percent Tuesday morning at 82.4 pence and have grown about 7 percent over the past 12 months.