.
"Wright’s biggest sectoral bet today is insurers, including Aviva, Just Group and Phoenix Group." |
The deals keep coming:- |
Two bits of news both favouring DB deals
1 Reeves may make it easier to use surpluses in schemes
2 WTW thinks improved funding levels means the UK market could hit 70bn in 2025
The only question is what margins the insurers will fill their boots. |
1jat - agree with your views on the alternative funding market, but a slight offsetting factor is that TPR seem to have a definitive view that smaller schemes should be de-risked at the earliest opportunity. JUST is better placed at the smaller end of the market with its ability to quote on multiple deals at once. |
The analysts should be adding 30p to their target price if they are looking one year out.
A year ago, I was looking for 150-160 at the 2024 annual results rising to 180-190 in a year’s time. This appears a reasonable outcome. We could see 300p by 2030.
The DB market is still looking strong, but there are growing thoughts about alternative funding arrangements that reduce the insurance company profit by returning some value to the scheme sponsor……;there are also thoughts that more schemes may run on themselves as they are in much stronger positions - but that might depend on HMT changing the rules to make it easier to get surplus out without penalty levels of tax. Overall the market is still looking a strong one for a good few years despite these competing propositional views. These sales values seem to imply that Just has developed a winning proposition. |
LONDON BROKER RATINGS:-RBC raises Just Group price target to 190 (175) pence - 'outperform' |
Yes - very strong sales numbers, the effect wont be significant on IFRS profits because they are really based on what is released from the Contract Service Margin. The effect will be seen in the growth of net assets. I expect they will add 30p or more from new business.
Need to look at the balance sheet sensitivities to see the effect of economic conditions, but they have continued to diversify assets and thereby desensitise the capital position to individual metrics like interest rates.
Looking forward to a strong set of numbers and a significant increase in the dividend (20%). |
Strong update - seemed to beat income forecasts quite significantly and strong guidance on NB strain. Presumably leaked yesterday pm …. |
Trading update for the year ending 31st December 2024 tomorrow. |
I was under the impression that higher yields reduce the value of a schemes liabilities and increase the affordability of a buyout.
Pension schemes that haven’t been bought out may not be fully funded, so an increase in bond yields will lead to a net benefit to their funding position. Wouldn’t it therefore lead to increased demand for DB? |
The other effect of higher interest rates is that schemes may find themselves even better fund than they were…..which may make more of them consider running on rather than transferring liabilities to an insurance company. If you can earn 5% risk free rather than buy out a deferred annuitant with a capped 2.5% increase pa why would you not hold on?
I suspect that after several years of steadily increasing participation we are going to see some abandoning the market and some consolidation. |
Peel Hunt cuts Just Group to 'add' (buy) - price target 170 pence
I wonder whether they have done the New Year broker call around or whether this is IM New Year revised positioning following last year's outperformance. |
 Down 10% in a couple of days, more diversified competitors (LGEN / MNG / PHNX) are down about 5%.
This does seem to be linked with the recent treasury auction, yields going remorsely high on UK Govt debt which is sinking the UK Fiscal position. Talk of more tax rises to pay more interest is not helping.
Does that mean much for Just? Interest rates being higher are a good thing as liabilities are discounted but this is countered by market losses on the value of existing bonds - but that passes through the CSM and is amortised over 20-30 years so there should not be much effect on the solvency position although TNAV will be down. As it is trading at such a discount to TNAV this is not a short term issue.
My view is - buy more if it falls into the 130s. In the past we have been provided a sales update at the end of January that sets the tone for the results. Sales for 2024 appear to have been strong including the 1.8bn deal they will look good. I have no reason to doubt the FY results will be equally good. |
gilt sell off. |
Does anyone have any insight into the last few days' performance? |
Broken clear again? Share price is now more than 100% up on a year ago and still looking strong. |
Touched 160 today…..a decade high.
The re-rating is progressing nicely….still some room for steadier gains over the next few years. |
Another broker increase and change of rec today:
Deutsche Bank raises Just Group to 'buy' (hold) - price target 170 (135) pence
That's 2 increases from Deutsche in a month
Suspect they must be ringing around the brokers pre-year end close period. |
I am expecting the dividend to grow by 15-20% for the next 5 years possibly with special dividends or buy backs for extras. They are adding about 30p of value to the business each year which will support future payouts for quite some time.
When the UK annuities market runs out of steam there will be consolidation and Just is likely to be put into a larger run off entity (eg Phoennix). |
Good volume today. |
150 easily passed |
Jefferies raises Just Group price target to 170 (165) pence - 'buy' |
This is from Bearbull in the IC last week. He holds Just in his income portfolio:
The one bright spot for the UK portion of the portfolio has been this year’s one home-grown addition – life insurer Just Group (JUST) – which is up 32 per cent since we bought it in early April.
To recap: Just was (and still is) benefiting from favourable actuarial shifts, rising in-force profits and strong (if capital-intensive) business growth. Demand from both pension trustees and individual savers for guaranteed retirement incomes is booming. And with each passing year since changing regulatory treatment of lifetime mortgages spooked markets, hitting Just’s shares and capital, investor confidence continues to grow.
This confidence might be of the ‘believe it when I see it’ variety. But Just isn’t short of operational momentum. Capital ratios and net asset values continue to build, while the drag from new business is moderate, or being managed with reinsurance. A freshly inked £1.8bn transaction to secure all benefits of G4S’s pension scheme – a record for Just – was both an example of the latter, and suggested the insurer has the balance sheet and commercial relationships to land big deals.
In April, I described the shares as a free hit on UK value, and so far the idea is working.
However, even though new business is boosting profits, the staggered release of capital, competing demands on cash and a low starting point for distributions mean it will take a few years before Just starts to deliver as an income stream. Although consensus dividend estimates look cautious against fast-rising profits, I’m not expecting much more than a 3 per cent yield against our purchase price in 2025. |
Testing 140 unfortunately! |
Register for real-time alerts, custom portfolio, and market movers
Hot Features
Premium
