The Motley Fool

Just Group has leapt 20%. And I told you to buy it

Image source: Getty Images.

It’s a massive day for retirement advice specialists Just Group (LSE: JUST), whose share price is up almost 22% at time of writing, as fears of a regulatory clampdown on the equity release market prove overblown.

Just the job

The £942m FTSE 250-listed stock is a specialist in later life advice, offering retirement income products such as annuities, drawdown, and equity release lifetime mortgages.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Equity release has been the worry for investors since the summer, when the Bank of England’s regulatory arm, the Prudential Regulation Authority (PRA), issued a three-month consultation process on plans to introduce more stringent capital requirements for insurance companies, to ensure they hold sufficient capital to protect themselves against a future house price crash.

What a nerve

As I wrote in September, the Just share price plunged 30% as a result, as investors feared it might have to re-insure some of its book, issue debt, or raise equity as a result. I kept my nerve and hailed it a brave buy. Trading at just 5.7 times forecast earnings, with a prospective yield of 4.5% and chunky cover of 4.3, I’m glad I did!

I also wrote: “Dividends payouts are on hold for now, but will hopefully flow later. The lifetime mortgage issue seems very much in the price and, if you’re willing to gamble, the stock could fly if it finds a resolution.”

Regime change

It’s flying today after the PRA issued a policy statement stating that, as Just puts it, “transitional measures for technical provisions for pre-2016 business will be recognised over the remaining transitional period to 31 December 2031.” The new regime comes into force on 31 December 2019, giving the group breathing space to sort out its new capital structure. It has already aligned new business pricing with the anticipated capital requirements.

Management grabbed the opportunity to highlight the company’s recent strong performance, including a 44% increase in group retirement income sales during the nine months to 30 September. It said the £1.4bn merger with Partnership in 2016 has brought efficiency gains and pricing discipline, expanding new business margins from 3.3% in 2015 to 10.2% in the six months ending 30 June.

Group CEO Rodney Cook welcomed the greater clarity and said the regime is considerably less onerous for Just, particularly for older business. “The outcome is well within the range of what we have been planning for.”

Just in time

With equity release, pensioners raise capital against their homes, with the debt repaid when they die or go into care. A house price crash threatens insurers as they may get less back when they sell, but I always felt the risks were overstated. Just is now protected if the price of every house in its portfolio fell by 35% overnight and remained there indefinitely. Yes, house prices could fall that much, but like stock markets, they tend to recover over the years.

Just was a market darling once, and it is again today. The time to buy was when I tipped it in September (just sayin’) but it still looks an attractive income and growth stock to me. Just the ticket.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

harveyj has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.