More than Just enough: JRP beats market expectations for margins and its own on costs
Shares in specialist insurer JRP Group jumped over four per cent on the news profit margins had beaten guidance and the group's merger with Partnership Assurance is delivering better than expected results.
The figures
New business numbers for the full year were down by 11 per cent at £2.4bn. The primary driver of this was a 24 per cent reduction in "defined benefit de-risking" – from £1.2bn to £943m – such a decrease was widely anticipated.
Guaranteed income for life sales increased by two per cent, from £763m to £778m.
But lifetime mortgage loans advanced slipped by six per cent from £598m to £559m.
Read more: JRP Group feeling positive off back of last set of pre-merger results
Why it's interesting
On the face of it the numbers look a little higgle-di-piggle-di for the group that has recently rebranded to just, er… Just.*
But the fall in revenues was because in 2015 many insurers were looking to flog policies from their books in advance of Solvency II regulations coming into force – this provided an ample stream of business for JRP.
Panmure Gordon's Barrie Cornes said: "Given the 11 per cent reduction in sales volumes (13 per cent in retirement), for us the key take away is that JRP is managing its margin better than investors are currently giving it credit for."
The other bit of good news is the merger between Just Retirement and Partnership Assurance is bedding in very nicely for the Reigate-based firm.
Read more: JRP Group makes London Stock Exchange debut
Savings of £30m have already been achieved by combining the firms. The company had hoped to save a total of £45m between the merger (April 2016) and the end of 2018.
"This is well ahead of schedule, and will contribute to profit margins in 2017," JRP concluded in a statement.
*Employees at JRP have highlighted to City PM many people do not realise Just's ethos is one of a "just" retirement, i.e. a fair one; not the fact it is "just" – i.e. the only – sector firm in which the firm operates.
What the company said
Chief executive Rodney Cook said:
The transformation of our business since the merger is more than delivering the expected benefits.
We have adapted the business rapidly in 2016 to the new regulatory environment. This will continue into 2017, with our primary focus on growing earnings by using our combined IP for better risk selection and by driving down costs.
The rapid progress achieved to date, including our ahead of schedule delivery of cost savings, confirms the benefits we saw in recommending the merger to shareholders in 2015.
What the analysts said
Panmure Gordon's Cornes added:
2016 sales were in line with expectations but the new business margin is now likely to exceed the previous six per cent expectation [margins were 3.6 per cent in 2015].
The main drivers for the improvement are annuity pricing, an improved mortgage environment and to a lesser extent merger cost savings.