Just Group PLC (LON:JUST) has warned that it needs to improve its capital position as it reported a 30% drop in retirement income sales in the first half of the year as it focuses on “capital discipline”.
The specialist insurer benefited from a recovery in second-quarter defined benefit de-risking sales volumes to £486mln, compared to £26mln in the first quarter.
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Quarterly sales of its ‘Guaranteed Income for Life’ individual annuities were almost flat at £143mln versus £145mln in the preceding quarter.
Overall sales in the second quarter were 4% ahead of consensus expectations, but the shares still fell more than 7% to 50.15p on Wednesday morning.
Management’s focus on capital efficiency is centred around reducing new business volumes and focusing on less capital intensive areas, including interest-serviced mortgages and older borrowers.
Message is clear
David Richardson, who took over as interim chief executive after Rodney Cook stepped down with immediate effect at the end of April, said that while Just was a “good businesses in attractive markets” the message from shareholders was clear.
“We must reduce new business capital strain and achieve capital self-sufficiency by 2022,” he said. “All of our decisions are being made with this objective in mind.”
He said “constructive dialogue” was continuing with the financial regulator, he was focused on “adapting to the changing regulatory environment and putting the business on a surer footing for the future”.
More than £10mln of annualised costs have been taken out of the businesses with the closure of the loss-making US care unit, while it is in the process of outsourcing its UK income drawdown service and cutting operating losses at the corporate solutions and distribution business.
Broker Shore Capital said despite the sales improvement in the second quarter, “we expect investors will focus more on the comments around capital efficiency and cost reductions”.