MIDAS SHARE TIPS: Earn healthy rewards from insurer Just Group

How many people tell the truth when insurers ask them tough questions? How much do you drink? How often do you exercise? How would you describe your general health?

While outright lies are risky, not to mention morally questionable, even the most sincere citizens tend to paint as rosy a picture of themselves as they possibly can.

For Just group customers, it’s all very different. The company was a pioneer in selling retirement products to savers who are sick, unhealthy or simply more indulgent than their peers.

Just Group asks potential policyholders up to 250 questions, determines individuals’ life expectancy and offers annuities – a guaranteed annual income for life – based on their calculations.

While this may sound macabre, it can yield hefty profits, with Just Group offering rates up to 70 percent higher than competitors. And since the company has been at it since 1995, it has accumulated a huge database to support its analysis.

This makes Just Group the market leader in this field, with nearly half a million customers, ranging from fast food enthusiasts to the seriously ill.

Chief executive David Richardson, a slim 51-year-old, doesn’t just offer annuities to such people. Customers are also fit and healthy, and business is booming.

Interim results, released last week, showed group sales more than doubled year on year, from £900m to £1.9bn in the six months to 30 June.

In individual annuities alone, Just Group experienced its busiest six months since Chancellor George Osborne made sweeping changes to pensions in 2014 – and turnover rose 54 per cent to £500m.

But Richardson has also built a fast-growing business in the so-called bulk annuity industry, where companies transfer loss-making retirement plans to specialty insurers. Here, sales were 149 percent higher at £1.4 billion.

It was once common practice for companies to award employees a defined benefit plan based on their salary and seniority. Today they are much less popular and most employers consider them an expensive obligation.

But because pension schemes have been around for years, the market is still huge, with a combined value of around £1.4 trillion and benefits for nearly 10 million workers and pensioners.

Most companies are eager to transfer these pensions to specialists and rising interest rates have made it much more affordable for them to do so. Independent experts suggest a record £60bn in transfers this year and Just Group is reaping the rewards.

Most insurers focus on large schemes, worth more than £1 billion each. Here again, Just Group is a little different, specializing in schemes for small and medium-sized businesses, many of which are valued at less than £10 million each.

Rival insurers often shy away from this kind of business, but Just Group has developed smart technology to offer competitive deals to companies of all sizes.

Small companies often need even more external support than large companies. And there are many more.

About 3,700 defined benefit plans have assets of less than £100 million, representing 72 per cent of the total number. Their enthusiasm to transfer these assets to companies like Just Group is understandable. Running pension plans can be time consuming and expensive.

By transferring them to specialists, companies can focus on their core activities and pension promises to employees and former employees can be fulfilled.

With annuities back in fashion and companies increasingly willing to pay off costly retirement obligations, there is optimism about the future.

Operating profit rose 154 per cent to £173m in the first half of the year, the momentum continued through the summer and David Richardson expects to deliver annual earnings growth of 15 per cent over the next few years.

Interim dividends have been increased by 15 percent to 0.58 pence and the group hopes to continue in that vein, with brokers recording a total payout of 1.9 pence for 2023, rising to 2.1 pence next year and 2, 3 pence the year after.

Midas judgment: Just group shares have had their ups and downs, but the mood under David Richardson is optimistic – and rightly so. The company is making progress, winning new customers and delivering results. A period of sustained growth is in sight and at 83 pence the shares are a bargain.

Traded on: Main Market / Ticker: JUST / Contact: justgroupplc.co.uk or Equiniti on 0371 384 2787