Preliminary Results
September 19 2007 - 3:04AM
UK Regulatory
RNS Number:0776E
Just Retirement (Holdings) plc
19 September 2007
JUST RETIREMENT (HOLDINGS) PLC
("JUST RETIREMENT" OR "THE GROUP")
PRELIMINARY RESULTS
FOR THE YEAR ENDED 30 JUNE 2007
Just Retirement, the specialist UK life assurance group focusing on the
provision of financial services to those at or in retirement, today announces
its preliminary results for the year ended 30 June 2007.
HIGHLIGHTS
* Group new business sales of #676.8m, up 127%
* Value of new business of #40.3m, up 133%
* Embedded value of #143.2m, up 277%
* Maiden dividend declared of 0.6 pence per share
* Number one ranked provider of enhanced annuities and equity release
products
* Winner of the 'Best Life & Pensions Provider' award for service
* Launch of Just Retirement Solutions and real-time annuity service with the
Exchange
KEY FINANCIALS
#m (unaudited) Year ended Year ended % change
30 June 2007 30 June 2006
#m #m
Sale of Annuity Policies 551.6 252.6 118%
Equity Release Mortgage Advances 125.2 45.3 176%
Total Sales 676.8 297.9 127%
Value of New Business after tax (1) 40.3 17.3 133%
Embedded Value Profit after tax (1) 50.4 16.1 213%
Group Embedded Value (2) 143.2 38.0 277%
Group Operating Expenses (3) 30.2 16.0 89%
Group IFRS pre tax Profit 29.5 3.6 719%
EEV New Business Margin (1) 7.3% 6.8% n/a
Dividend per share (pence) 0.6p - n/a
(1) Life Company Results
(2) Includes net capital proceeds of #56m
(3) Excludes share-based payments
Mike Fuller, Chief Executive of Just Retirement, commented:
"I am delighted to be able to announce such a strong set of results in a year
during which much time and effort was spent on listing the company on AIM. The
results reveal a real momentum within our business, and show our propositions
are being embraced by intermediaries and consumers alike. As a mark of this
success, we are the number one ranked provider of enhanced annuities and equity
release products in the quarter ended June.
We are growing strongly in both of our core products, and are bringing through
new initiatives to broaden our reach. Our stated intention to enter the
impaired annuity space will shortly become a reality, and in addition we are
looking to expand our annuity offering further by applying our understanding of
mortality, pricing and underwriting to bring new groups of retirees better value
based on their individual circumstances. We are also looking to extend our
equity release distribution business, Just Retirement Solutions, into the
annuity market in the near future.
We continue to invest in training, development, processes and systems to
underpin this growth and maintain our market leading service, and are making
further investment into marketing and distribution to open up new opportunities
for sales growth.
The Board's confidence in the future has been reflected in the declaration of
our maiden dividend, and I expect a strong performance for the current year,
with ongoing sales growth and stable margins."
Enquiries
Just Retirement +44 (0)1737 233233
Mike Fuller, Chief Executive
Simon Thomas, Finance Director
Citigate Dewe Rogerson +44 (0)20 7638 9571
Michael Berkeley
Ged Brumby
Scott Fulton
Group Chief Executive's Review
Overview of results
In only the Group's third financial year since its formation and launch in
August 2004, it has delivered impressive results. The business generated total
sales of #676.8m for the year, up from #297.9m in the prior year, adding post
tax value of new business of #40.3m (up from #17.3m in the previous year). This
is against the background of significant operational developments: in
particular, the Group's successful IPO in December 2006, raising #56m of net new
capital to fund the Group's ambitious future growth plans.
Just Retirement Solutions, our distribution business, was launched in November
2006 - its first agreement was a three-year exclusive introducer arrangement
with SAGA for equity release business. The Group also launched its leading
real-time annuity service for intermediaries, in partnership with the Exchange,
and secured three major service achievements via the ABI, a major intermediary
group and the Financial Adviser industry awards.
Underlying the performance for the year, the Group has consciously further
enhanced the credit quality of the assets backing its business. The Group's
mortgage investments are of a high credit quality and written only on properties
where it has the first charge over the asset. Just Retirement continues to hold
high levels of liquidity and cash resources, and has no dependency on the
wholesale markets for funding.
The Board is delighted to be able to present these results, which further show
the Group's evolution into the trusted provider of financial solutions to those
at and in retirement.
Enhanced annuities
Sales of enhanced annuity policies during the year rose 118% to #551.6m (2006:
#252.6m), enabling the Group to maintain its position as the largest provider of
such solutions in the UK. This product accounted for 5% of the total #10.5bn
conventional annuity market during the period, a market which itself is forecast
to grow to #16.7bn by 2012 as demographic changes continue and changes in the
provision of pensions over the past two decades begin to feed through to demand.
The Group's ability to forge and nurture strong distribution relationships
across the intermediary sector is now enabling it to secure significant amounts
of annuity business from across the market. Our attention to service standards
and the ease with which intermediaries find transacting business with us is one
of Just Retirement's key differentiators in the annuity space.
With the 'baby boomer bulge' producing a rapid acceleration in the number of
retirees over the next ten years or so, and the significant switch in recent
years from defined benefit to defined contribution schemes, the annuity market
is expected to deliver double-digit annual growth for some time to come. Over
and above this, the market share achieved by enhanced annuity providers is
likely to increase substantially from its current level of around 9%, of which
the majority share is written through Just Retirement.
Following extensive lobbying, the Group is pleased to note the present joint
initiative by the Department of Work and Pensions and the FSA to address the
historic practical constraints on the use of the open market option, which
enables retirees to shop around for better terms. Just Retirement's recent
trade press activity - the "Campaign for Better Annuities" - has produced a
highly positive response with IFAs, with over 2,500 having responded to the
Group to date.
The Group is focussed on broadening its product reach, and will shortly commence
offering terms for annuitants with more serious medical impairments, to be
followed by pricing refinements in areas of the annuity market where the Group
is under-represented and has identified opportunities to leverage its
intellectual property in regard to underwriting.
Equity release
The Group's equity release propositions have had their first full financial year
in which to perform, having been fully launched to the market in October 2005.
As a result, sales of equity release mortgage advances grew to #125.2m, up 176%
(2006: #45.3m). For the final quarter of the Group's financial year Just
Retirement was the UK's number one equity release lender by volume based upon
data from SHIP, the equity release trade body. The Group's equity release
advances amounted to 10% of the total market for the year.
Just Retirement will be extending its equity release offering later in the year
to open up new opportunities for the Group, and is convinced that the Group's
funding methodology for equity release will enable it to gain further market
share against competitors dependent on external bank funding or securitisation.
Product developments, distribution and service
In order to satisfy the growing demand from the retirement segment of the
population, the Group has focused on new product development and distribution
initiatives. In particular, in order to help intermediaries undertake their own
business more efficiently and effectively, the Group has launched the first
real-time quotation service for enhanced annuities, working with the Exchange,
the leading portal provider for financial advisers. This service has now been
operating since November 2006 and now accounts for a material proportion of
intermediary business available for quote.
The Group launched Just Retirement Solutions in November 2006. This business
seeks to offer advice directly to consumers in the target retirement segment.
Just Retirement Solutions focuses on forming partnerships with existing
businesses who already deal with retired consumers and then marketing relevant
financial solutions to them. A three year arrangement with SAGA was signed in
November 2006, which gives their customers access to a unique equity release
advice service provided by the Group. To date over 2,000 SAGA customers have
used the service and the customer satisfaction feedback has been highly
positive.
The Group's focus on service quality was recognised during the year with the
winning of a second successive five star service award. In addition, Just
Retirement was voted Best Overall Provider in the Life & Pensions category at
the Financial Adviser Service Awards, voted for by intermediaries and thus
representing the views of customers that the Group deals with on a daily basis.
The Group continues to invest heavily in technology to further differentiate its
service offering, and has recently completed a further enhancement of all its
systems, enabling the Group to move quickly and flexibly in the light of
changing market conditions. Just Retirement's business planning is based on
creating long term cost efficiencies even relative to existing major providers,
in addition to the Group's service and trusted brand proposition.
Financial performance
The value of new life business after tax rose 133% to #40.3m (2006: #17.3m),
benefiting from the rapid growth in sales and a strong margin performance. As a
result, profit after tax on a European Embedded Value ("EEV") basis for the year
was #50.4m, representing year-on-year growth of 213% (2006: #16.1m). Within the
life business, the Group has reported an expense under-run of #1.8m as it has
outperformed the policy expense assumptions.
As mentioned above, the Group has made significant investment in service,
technology and marketing in order to strengthen its position and maintain
growth. Nevertheless, total operating expenses for the year were contained at
#30.2m (2006: #16.0m), representing growth of 89%, rising more slowly than sales
as the Group's operational leverage comes through.
The Group's IFRS balance sheet grew to #1.36bn during the year, predominantly
consisting of investments in corporate bonds to support annuity payments. The
Board monitors the quality of these investments carefully and has sought to
ensure that, in addition to careful matching of our underlying liabilities, the
risk of default on any given holding is at all times minimised.
Given its confidence in the Group's delivery over the medium term, the Board has
decided to recommend a maiden dividend of 0.6 pence per share, reflecting the
commitment made at the time of the IPO, combined with the Board's view of the
strength of the outlook for the Group.
Outlook
Just Retirement has a robust business model and operates in growing markets with
a differentiated product and service proposition. The Group believes that it is
well positioned for the future, particularly as regulatory initiatives such as
the FSA distribution review and Treating Customers Fairly (TCF) come to
fruition.
Accordingly, the Board is confident of the outlook for the current financial
year.
- ENDS -
Summarised Group EEV Income Statement for the year ended 30 June 2007
Year ended Year ended
30 June 2007 30 June 2006
#m #m
Operating profit from covered business 65.9 25.6
Operating loss of distribution company (3.1) -
Operating profit from other Group companies 0.5 -
Operating profit 63.3 25.6
Economic variance 4.2 (2.6)
Pre-trading costs from distribution company (1.1) -
IPO related share-based payments (4.1) (0.4)
Other adjustments (0.7) -
Profit before tax 61.6 22.6
Tax
- Covered business (19.7) (6.9)
- Other 2.3 -
Profit after tax 44.2 15.7
Earnings per share
Basic earnings per share (pence) 16.1 6.4
Diluted earnings per share (pence) 16.1 6.4
Group EEV Balance Sheet as at 30 June 2007
30 June 2007 30 June 2006
#m #m
Assets
Value of in force business 23.0 10.4
Intangible assets 0.9 0.1
Equipment 0.9 0.3
Loans secured by mortgages 174.0 50.6
Financial investments 701.4 307.5
Deferred tax assets 0.3 -
Reinsurance assets 471.1 204.8
Prepayments and accrued income 22.2 10.6
Insurance and other receivables 2.7 3.3
Cash and cash equivalents 1.4 3.5
Total assets 1,397.9 591.1
Equity 143.2 38.0
Liabilities
Insurance liabilities 761.8 332.8
Derivative financial instruments 0.2 -
Other provisions 10.4 5.1
Deposits received from reinsurers 471.1 203.4
Insurance and other payables 5.1 6.1
Accruals and deferred income 4.9 2.7
Current tax liabilities 1.2 3.0
Total liabilities 1,254.7 553.1
Total equity and liabilities 1,397.9 591.1
ANALYSIS OF EMBEDDED VALUE RETURN OF JUST RETIREMENT LIMITED
Year ended 30 June 2007
Shareholders' Value of Total Year ended
net assets in-force 30 June 2006
business
#m #m #m #m
Expected return on opening embedded value 1.6 1.9 3.5 1.4
Expected surplus from in-force business (0.9) 0.9 - -
New business contribution 42.9 16.0 58.9 25.2
Operating experience variance 6.6 (3.4) 3.2 (1.0)
Operating assumption changes (4.7) 5.0 0.3 -
Embedded value operating profit before tax 45.5 20.4 65.9 25.6
Economic variance 8.5 (4.3) 4.2 (2.6)
Embedded value profit before tax 54.0 16.1 70.1 23.0
Embedded value attributed tax (16.2) (4.9) (21.1) (6.9)
Impact of change in corporation tax rate - 1.4 1.4 -
Embedded value profit after tax 37.8 12.6 50.4 16.1
GROUP IFRS INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2007
Year to Year to
30 June 2007 30 June 2006
#m #m
Revenue
Gross premiums written 551.6 252.6
Outward reinsurance premiums (300.2) (142.7)
Net premium revenue earned 251.4 109.9
Net investment income 4.7 2.8
Total revenue 256.1 112.7
Other operating income 1.5 0.5
Expenses
Claims incurred
Claims paid
Gross amount (44.1) (15.2)
Reinsurers' share 25.3 8.6
(18.8) (6.6)
Change in insurance liabilities
Gross amount (425.4) (216.1)
Reinsurers' share 263.2 135.5
(162.2) (80.6)
Acquisition costs (11.8) (5.4)
Investment expenses and charges (0.4) (0.6)
Other operating expenses (34.9) (16.4)
Total claims and expenses (228.1) (109.6)
Profit before tax 29.5 3.6
Income tax (9.2) 1.6
Profit for the year attributable to equity holders of the parent 20.3 5.2
Earnings per share
Basic earnings per share (pence) 7.4 2.1
Diluted earnings per share (pence) 7.4 2.1
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2007
Year ended Share capital Share premium Accumulated profit Total
30 June 2007 /(loss)
#m #m #m #m
Balance at 1 July 2006 2.5 21.9 (4.6) 19.8
Profit for the year - - 20.3 20.3
Issue of shares - 56.2 - 56.2
Share-based payments - - 4.7 4.7
Excess tax relief on share-based - - 0.1 0.1
payments
Balance at 30 June 2007 2.5 78.1 20.5 101.1
Year ended Share capital Share premium Accumulated profit Total
30 June 2006 /(loss)
#m #m #m #m
Balance at 1 July 2005 2.5 21.8 (10.2) 14.1
Profit for the year - - 5.2 5.2
Own shares sold - 0.1 - 0.1
Share-based payments - - 0.4 0.4
Balance at 30 June 2006 2.5 21.9 (4.6) 19.8
GROUP IFRS BALANCE SHEET
AS AT 30 JUNE 2007
30 June 2007 30 June 2006
#m #m
Assets
Intangible assets 0.9 0.1
Equipment 0.9 0.3
Loans secured by mortgages 163.1 46.2
Financial investments 701.4 307.5
Deferred tax asset 2.3 3.5
Reinsurance assets 468.1 204.8
Prepayments and accrued income 22.2 10.6
Insurance and other receivables 2.7 3.3
Cash and cash equivalents 1.4 3.5
Total assets 1,363.0 579.8
Equity
Share capital 2.5 2.5
Share premium 78.1 21.9
Accumulated profit/(loss) 20.5 (4.6)
Total equity 101.1 19.8
Liabilities
Insurance liabilities 758.2 332.8
Derivative financial instrument 0.2 -
Other provisions 21.2 12.0
Deposits received from reinsurers 471.1 203.4
Insurance and other payables 5.1 6.1
Accruals and deferred income 4.9 2.7
Current tax liabilities 1.2 3.0
Total liabilities 1,261.9 560.0
Total equity and liabilities 1,363.0 579.8
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2007
Year ended Year ended
30 June 30 June
2007 2006
#m #m
Cash flows from operating activities
Profit before tax 29.5 3.6
Adjustments for:
Depreciation of equipment 0.4 0.3
Amortisation of computer software 0.2 0.1
Share-based payments 4.7 0.4
Interest income (35.0) (0.7)
Interest expense 16.0 5.1
Operating profit before changes in operating assets and 15.8 8.8
liabilities
Increase in loans secured by mortgages (112.0) (46.1)
Increase in financial investments (244.0) (179.7)
Increase in reinsurance assets (263.3) (135.5)
Increase in prepayments and accrued income (4.1) (6.5)
Decrease in insurance and other receivables 0.6 -
Increase in insurance liabilities 425.4 216.1
Increase in other provisions 9.2 7.0
Increase in deposits received from reinsurers 267.7 135.0
(Decrease)/increase in insurance and other payables (1.0) 4.4
(Decrease)/increase in other creditors (0.8) 0.5
Increase in accruals and deferred income 2.2 1.5
Cash generated from operations 95.7 5.5
Interest received 22.6 0.7
Interest paid (16.0) (5.1)
Taxation paid (8.7) -
Net cash from operating activities 93.6 1.1
Cash flows from investing activities
Acquisition of intangible assets (1.0) (0.1)
Acquisition of equipment (1.0) (0.4)
Net cash from investing activities (2.0) (0.5)
Cash flows from financing activities
Proceeds from the issue of ordinary shares 63.0 -
Expenses relating to the issue of ordinary shares (6.8) -
Sale of own shares - 0.1
Net cash from financing activities 56.2 0.1
Net increase in cash and cash equivalents 147.8 0.7
Cash and cash equivalents at 1 July 12.0 11.3
Cash and cash equivalents at 30 June 159.8 12.0
Note 1
Authorisation of financial statements and statement of compliance with
International Financial Reporting Standards
The preliminary announcement for the year ended 30 June 2007 has been prepared
in accordance with International Financial Reporting Standards as adopted by the
European Union at 30 June 2007.
The financial information contained in this preliminary announcement does not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985. It has, however, been extracted from the statutory accounts for the
year ended 30 June 2007 on which an unqualified report has been made by the
Company's auditors.
The 2006 statutory accounts have been filed with the Registrar of Companies.
The 2007 statutory accounts will be sent to shareholders in September 2007 and
will be filed with the Registrar of Companies following their adoption at the
forthcoming Annual General Meeting.
Company Number 5078978
This information is provided by RNS
The company news service from the London Stock Exchange
END
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