September 13, 2017 / 8:55 AM / in 9 months

UPDATE 1-Just Group first-half operating profit jumps 39 percent

By Emma Rumney

LONDON, Sept 13 (Reuters) - British annuity provider Just Group reported a 39 percent rise in first-half operating profit on Wednesday as new business profit more than doubled and cost savings helped drive margins higher.

The company, which specialises in annuities for people with reduced life expectancy, had adjusted operating profit of 67.2 million pounds ($89 million) in the six months ending June 30.

“We had a good start to the year,” Just Group Chief Executive Rodney Cook said. “We expect demand for lifetime mortgages to continue to grow as increasing numbers reach retirement with greater wealth invested in housing rather than pension assets.”

Just Group’s new business profit leapt 106 percent to 64 million pounds with a margin of 8.9 percent, above forecasts for closer to 7 percent.

“Although the first-half margin may normalise somewhat in the remainder of the year, a 2017 full-year margin above 8 percent seems increasingly likely,” Cook said.

At 66 million pounds, Just Group’s pre-tax profit was in line with expectations. The company raised its interim dividend by 6 percent to 1.17 pence.

The firm said it had already secured 260 million pounds in bulk annuity transactions, whereby it takes on the final salary pension liabilities from employers, in the third quarter.

The growth in the bulk annuity market in Britain comes as companies look to insulate themselves from exposure to pension schemes by getting insurers to take on the risk of part, or all, of their defined benefit or final salary schemes.

David Richardson, the company’s deputy CEO, told reporters the opportunities in the market were “very material”.

“There’s still nearly 2 trillion pounds of pension scheme liabilities effectively on the balance sheet of corporates in the UK, which haven’t been de-risked yet, so that points to a lot of future growth potential.”

Just Group’s share price was up 0.5 percent at 161.71 pence at 0844 GMT, outperforming a 0.5 percent fall in the FTSE mid-cap index.

The shares have already rallied 31 percent since mid-July, when the group reported strong sales and cost savings.

Barrie Cornes, analyst at Panmure Gordon & Co, said the stock’s valuation remained very attractive, reiterating the firm’s “buy” recommendation and 207 pence target price.

Formerly known as JRP, Just Group was forged from the merger of Just Retirement and Partnership Assurance in 2016. ($1 = 0.7527 pounds) (Reporting by Emma Rumney; editing by Carolyn Cohn and David Clarke)

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