Just Group PLC (LON:JUST) saw its shares drop on Tuesday after the specialist pensions provider warned that proposed changes to rules around lifetime mortgages could hit its capital position.
The warning took the shine off strong first half trading news from the FTSE 250-listed firm with total retirement products sales up 62% to £1.2bn, beating the consensus forecast for £930mln.
READ: Just Group posts record 35% rise in 2017 earnings
The company said the increase was driven by demand from companies seeking to offload liabilities from final salary pension schemes, with ‘defined benefit de-risking’ sales up 143% to £718mln in the six months to the end of June, beating the company-supplied consensus forecast of £487mln.
It added that sales of Guaranteed Income for Life products - individual annuities - to retail customers rose by 9% to £426mln, while lifetime mortgage sales increased by 36% to £313mln.
However, new rules put out for consultation this month by the Bank of England's Prudential Regulation Authority (PRA) would require pension providers to set aside more capital to protect against the potential risks posed by lifetime - or equity release - mortgages, which enable home-owners to borrow against the value of their property, a loan which is paid back when they die.
Just Group chief executive Rodney Cook said the PRA's proposed changes, if implemented, would result in a reduction in the firm’s regulatory capital position.
He added; “The outcome will depend on the result of the consultation process. We, together with the industry, continue to work constructively with the PRA as part of the consultation and will update the market when appropriate."
In mid-morning trading, Just Group shares were 7.7% lower at 114.8p.