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Good results - steady as she goes.
I'd reserve 'excellent' for another of my holdings that coincidentally reported today - CAPD
Dividend reinstated. Excellent news plus look at these brilliant numbers:
Retirement Income sales up 25% to £2.7bn
New business profits up 13% to £225m
Underlying operating profit up 9% to £210m
Underlying organic capital generation up 183% to £51m
It's been a while but we are back on track.
Good luck, Brighty
There is a dividend of 1p and a suggestion that the total 2022 dividend will be more than 1.5p
The capital position has improved to above 160%.
The market can be fickle but this is good news and I am hoping just will beat the market by some margin today and start a re-rating.
If there is a dividend it will likely be small but symbolic of recovery. The psychology of it should not be underestimated…..but if delayed another year it is not disastrous.
The business update flagged better capital generation….90p with the right messaging tomorrow. Fingers crossed.
Will JUST re introduce dividend payments when they announce their result on Thursday March 10 ?
They can't on the one hand say they are confident that they have knocked the business into shape but on the other come out with the usual "it would not be appropriate to recommend recommencing dividend payments " line.
I'm not wild about the sales either. But I think you're overlooking that the outstanding loan balance were £537m. On the face of it as well as the interest received to date, they have made a £150m profit here by writing these mortgages and selling them on to Rothesay. Which looks like nice work if you can get it.
"This is a capital transaction not a trade for profit. If it generates capital of 35m or more
Then the P&L effect is offset by the movement in reserves and the NAV will rise….."
We can agree it certainly isn't a trade for profit: "The sale will result in an IFRS net of tax loss of c£35m which includes the impact on the insurance liabilities resulting from the expected new asset mix."
The headline loss on the trade is actually £85M (£772M of value sold for £687M). The calculated IFRS net of tax loss of c£35m includes the impact on the insurance liabilities resulting from the expected new asset mix. Net Asset Value will not rise, it will diminish by an "expected" £35M.
Bone-headed regulation of insurance companies arising from the Gordon Brown era of financial incompetence does not help but I expect better of management. I bought into JUST seeing long-term value not short-term dividends, but that value is being sold cheaply to others - why?
A while back JUST advised it had never lost money on a single equity release contract. Now it sells a bundle of equity release contracts conservatively valued on an IFRS basis at £772M for £687M.
Meanwhile JUST is actively incurring heavy marketing, sales and administration costs to generate...... new equity release contract sales!
I for one will not be cheering when this management proclaims what a magnificent job they have done on our behalf and declares a 1p share dividend.
AceOfClubs
This is a capital transaction not a trade for profit. If it generates capital of 35m or more
Then the P&L effect is offset by the movement I n reserves and the NAV will rise…..
A more secure company needing less capital is what the regulator wants….the capital can be reinvested or paid as a dividend…..so not necessarily a bad thing.
Unfortunately more bad news for JUST shareholders - a further £35M loss created by management actions. Are there less risk assets than those backed by UK residential property? The third dumb move in 15 months.
"The impact of the sale on the Group's Solvency II capital ratio will be broadly neutral". Doh!
See: https://www.reuters.com/world/uk/britain-unlock-billions-pounds-by-easing-insurance-capital-rules-2022-02-21/
AceOfClubs
RNS this morning....
Just announces that it has completed the sale of a portfolio of LTM to Rothesay, with a current outstanding loan balance of £537m and an IFRS value as at 31 December 2021 of £772m. The LTM assets being sold form part of the investments used to back the insurance liabilities of the Group. The consideration is c£687m, payable in cash.
The proceeds received will be reinvested in a mixture of other fixed interest assets to back the insurance liabilities of the Group. The sale will result in an IFRS net of tax loss of c£35m which includes the impact on the insurance liabilities resulting from the expected new asset mix.
This is the third sale by the Group of an LTM portfolio over the last fifteen months and further reduces Just's exposure to UK residential property risk. This completes the Group's programme of LTM portfolio sales.
The Group will announce results for the year ending 31 December 2021 on 10 March 2022 and will update the market on its Solvency II position and reduced sensitivity to moves in the UK property market at that time. The impact of the sale on the Group's Solvency II capital ratio will be broadly neutral.
Just has been a regular disappointment….not all by its own hand as the regulator has moved against it, particularly in equity release mortgages.. after the regulator moved house prices have boomed so the risk of properties being in negative equity is much reduced. What we have now is a better balanced business.
The concern for several years has been capital adequacy, the return of the dividend will mark the end of regulatory concerns about this and allow a rerating of the shares. An increase in interest rates should be helpful too as long as the effect on housing is not too great.
People still need the products….
Re the sp I would not expect it to trade much higher than 70% of NAV. A takeover would be around NAV. That is still 140-150p, I hope decent results should bring this in a further 12-18m.
New to this group, but have an interest in insurers to balance out some of my more outlandish holdings (thank God).
I saw this in the Investors' Chronicle (3rd February 2022) - https://www.investorschronicle.co.uk/ideas/2022/02/03/just-a-matter-of-time/
Bull points
- Capital generation is stable
- Bulk annuities market is booming
- Discount makes it a takeover target
- Dividends slated to return
Bear points
- Key man risk
"When it releases results on 10 March, Just expects organic capital generation to have doubled to £18m, a year ahead of a key management target."
"... larger Just peer Phoenix Group recently closed deals worth £4bn in premiums in the second half of 2021. The insurer has also been exceptionally acquisitive over the past decade. This inevitably leads to speculation that Just could become a takeover target for a larger insurance group like Phoenix."
"... the downsides now for Just relate to whether it can keep its management team together. Having proven his worth in the top job after guiding the company through its reconstruction since 2019, chief executive David Richardson may decide at some point to take on a bigger challenge in the world of asset management. But, overall, the boss’s career prospects shouldn’t affect the basic foundations that have been laid during his tenure."
"Based on RBC Capital Markets’ forecasts for 2022, Just shares trade on 3.7 times earnings for 2022, during which time a return to dividends is expected. The discount to tangible net asset value (TNAV) is even more extreme; RBC expects TNAV to hit 214p a share by the end of 2022, compared with a share price that struggles to break into the 90p range. In other words, investors are buying at a 60 per cent discount to the group’s tangible worth."
I'm struggling to find the catch that would help explain such a low share price!
One of the most undervalued stocks in my portfolio currently. At half year, NAV was 199p I believe - I think we might be in the range of 225-250p hopefully given 25% increase in sales. Current sp is a joke!
Crazy cheap……
Heading for a PE of less than 5.
A rerating to 7.5 is a 50% uplift……will we see that and a sp of 135p?
The majority of life insurers are trading below IFRS and in JRs case a significant discount.
I think concerns over SII capital adequacy driven by Equity Release Mortgage and NNEG were biggest concerns here.
The increased volume of business at a lower capital strain indicate that JR may be over the worst.
I don’t understand why they have not been advertising their DB sales, a lack of news has led to them languishing in the 70-80s.
This update was truly excellent. I expect a strong run up to the results on 10 March and then we will see about a dividend…..personally I would like to see a clearer position, and I don’t want / need a dividend if it means they can deploy the cash with a 15-20% ROE.
Another step towards narrowing the gap to NAV.
Very strong ….. let’s see what the market thinks?
* Retirement Income sales up 25% to £2.7bn, of which Defined Benefit De-risking ("DB") sales were up 28% to £1.9bn.
* New business profits grew by a "low double digit" percentage, with lower new business strain. IFRS new business margins improved in H2 21, and are expected to be c.8.5% for the full year. Over one-third of DB sales are in the capital efficient deferred members segment and as a result, Solvency II new business capital strain for 2021 as a whole will be below 2% of premium.
* Underlying organic capital generation more than double the FY20 result, exceeding our 2022 target a year ahead of expectations.
A re-rate has been coming for a while. These are brilliant results today.
Good luck, Brighty
Rothesay is backing 11-40 year mortgages via Kensington.
Looks good to me. When I bought my house 30 years ago a 5y fix was 6.99%
The 3m chart is a little worrying 7 til you realise the sp has gone nowhere for 3m and then dipped a couple of %. Chart makes it look like a precipice
Rothesay said to be working with a major UK bank to issue long term fixed rate mortgages of 20-30yrs.
Advantage over Lifetime mortgages is there is no negative equity guarantee associated and regular repayment of interest and capital…..wonder why no one has thought of it before?
Bonds must be looking risky / little yield.
"Clearly the market is not in the mood for a further up rating without evidence of profitable growth and capital generation."
Why should it be? There are plenty of shares trading at well below NAV - Ageon NV trading at 36% of NAV makes a profit and pays a good dividend!
Clearly the market is not in the mood for a further up rating without evidence of profitable growth and capital generation.
The capital position has been improving hence I suspect the trigger will be dividends but management said their larger investors were happy with reinvestment in the business….so we have a stand off at present…..
A re-rate in the JUST share price is clearly coming: Net assets per share are 192p with a current share price of 92p. Good luck, Brighty