LONDON (ShareCast) - (Sharecast News) - Retirement services provider Just Group updated the market on its second quarter of trading on Wednesday, reporting that it remained focused on delivering capital self-sufficiency by 2022, while developing other strategic and business options to enhance shareholder value.
The London-listed firm said it had continued to make its business model more capital efficient during the first half by reducing new business volumes, and by focusing on less capital intensive areas, including interest-serviced mortgages and older borrowers.

It said those steps had ensured that it continued to achieve an attractive internal rate of return on shareholder capital invested in new business.

"We have closed our loss-making US care unit, are in the process of outsourcing our UK income drawdown service and we are working to end operating losses at HUB Group, our corporate solutions and distribution business," the board said in its statement.

"Together with further savings, including the rationalisation of our property footprint, these actions have already led to more than £10m of annualised cost reductions in our core businesses.

"In addition, we are working to establish the appropriate regulatory treatment of our pioneering no negative equity guarantee (NNEG) hedging transaction, in order to enable larger scale NNEG risk transfer, and we are exploring the scope to add to our existing longevity reinsurance programme."

Just Group said achieving organic capital generation by 2022 was the group's top priority.

It said that was already evident in the actions being taken, adding that it remained "on track".

As it stated at its annual general meeting, it said an increased focus on capital had already been introduced to short-term management incentive targets

Looking at its capital development in the first half, Just Group said that although it was increasing the capital efficiency of areas under management control, the economic environment remained "challenging".

"The group's capital strength remains satisfactory although falling risk free rates and house prices have both affected our solvency position, as indicated by our published sensitivities."

Fitch recently affirmed the firm's A+ (Strong) Insurer Financial Strength rating with a 'stable' outlook.

Just Group reported an increase in second quarter volumes, following a quiet first quarter.

The board said its focus on capital discipline was demonstrated by first half retirement income sales of £831m, which was 30% lower than in the prior year.

It explained that, without compromising its disciplined approach to pricing, it benefited from a "strong" recovery in the second quarter defined benefit de-risking volumes to £486m, compared to £26m of sales in the first quarter.

Guaranteed income for life sales of £288m for the first half maintained the first quarter run rate.

Overall, the company said it remained comfortable with its guidance that 2019 sales would be consistent with the run rate established in the second half of 2018.

"The message from our shareholders has been clear," said interim group chief executive David Richardson.

"We have good businesses in attractive markets, which are performing well commercially.

"However, we must reduce new business capital strain and achieve capital self-sufficiency by 2022."

Richardson said all of the firm's decisions were being made with that objective in mind.

"As we continue our constructive dialogue with the PRA, I am focused on adapting to the changing regulatory environment and putting the business on a surer footing for the future.

"Recently all of our Directors expressed their support by adding to their personal shareholdings."

Richardson said he was also "delighted" the company had appointed Andy Parsons as its new chief financial officer, and looked forward to him joining the group in January next year.

"The reaffirmation of our credit ratings by Fitch confirms our financial strength.

"All of this demonstrates the faith we and others have in our business."

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