How many people tell the truth when insurers ask them uncomfortable questions? how much do you drink How often do you workout? How would you describe your general health?
While outright lies are risky and morally questionable, even the most sincere citizens tend to paint as rosy a picture of themselves as possible.
It’s all very different for Just Group customers. The company pioneered the sale of retirement products to savers who are ill or unhealthy or simply more forgiving than their peers.
Growing Profits: Just Group meets the retirement needs of savers, no matter how healthy their lifestyle
The Just Group asks potential policyholders up to 250 questions, calculates the life expectancy of each individual and offers pensions based on their calculations – a guaranteed annual income for life.
While that may sound macabre, it can yield significant profits, as Just Group offers rates that are up to 70 percent higher than the competition. And since the company has been around since 1995, it has amassed a massive database to back up its analysis.
This makes the Just Group the market leader in this area and reaches half a million customers, from fast food fans to the seriously ill.
CEO David Richardson, a slim 51-year-old, doesn’t just offer pensions to such people. Fitness is also among the customers and business is booming.
Interim results released last week showed group sales more than doubled year-on-year in the six months to 30 June, from £900,000 to £1.9 billion.
In individual pensions alone, Just Group had its busiest six months since Chancellor George Osborne enacted sweeping pension changes in 2014 – and turnover rose 54 per cent to £500m.
But Richardson has also built a fast-growing business in the so-called mass pension sector, with companies outsourcing onerous pension systems to specialist insurers. Here sales were up 149 percent at £1.4 billion.
It used to be common for companies to provide defined benefit pensions to their employees based on their salary and length of service. Today they are far less popular as most employers see them as an expensive liability.
However, as pension schemes have existed for years, the market is still huge, worth a total of around £1.4 trillion and providing benefits to almost 10 million workers and pensioners.
Most companies are interested in outsourcing these annuities to specialists and rising interest rates have made this far more affordable for them. Independent experts believe a record £60bn in transfers will be made this year and Just Group is benefiting from that.
Most insurers focus on large schemes valued in excess of £1billion apiece. Again, Just Group is a little different, specializing in schemes for small and medium-sized businesses, many of which are worth less than £10m each.
Competing insurers often shy away from this type of deal, but Just Group has developed clever technology to offer competitive deals to businesses of all sizes.
Smaller companies are often even more dependent on external support than large corporations. And there’s a lot more of it.
Around 3,700 performance-based schemes have assets of less than £100m, accounting for 72 per cent of the total. Their enthusiasm for transferring these assets to companies like Just Group is understandable. Operating retirement plans can be time-consuming and expensive.
By handing it over to specialists, companies can concentrate on their core business while ensuring compliance with pension commitments to employees and former employees.
With annuities back in vogue and companies increasingly interested in shedding costly pension liabilities, there is optimism for the future.
Operating profit rose 154 per cent to £173m in the first half of the year, momentum continued throughout the summer and David Richardson expects annual profit growth of 15 per cent over the coming years.
Interim dividends were increased 15 per cent to 0.58p and the group hopes to continue that trend. The brokers are projecting a total payout of 1.9p for 2023, rising to 2.1p next year and 2.3p the following year.
Midas Judgment: Just Group shares have had their ups and downs, but sentiment under David Richardson is upbeat — and rightly so. The company is making progress, winning new customers and delivering results. A period of sustained growth is on the cards and at 83p shares are a buy.
Traded on: Main Market / Ticker: JUST / Contact: justgroupplc.co.uk or Equiniti on 0371 384 2787
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