JR.

Changes to open up the annuity market should bring a long-term rise in market share for the pensions provider

by Tom Sieber

Regulatory changes could more than double the size of the annuity market available to Just Retirement (JR.:AIM), making the group a long-term buy.

At present only 46% of pension providers adhere to Financial Services Authority (FSA) rules mandating that companies inform customers of the opportunity to shop around for a better deal when they cash in their pensions. As Just Retirement, whose two core products are enhanced annuity policies and equity release schemes, only pick up customers at this juncture it is currently denied that opportunity with the other 54%.

However, as the FSA is set to introduce sanctions in December for companies that fail to come into line, that 46% figure should increase even if it does not become 100% overnight. On that basis the group is likely to have a greater share of a market that, according to consultants Watson Wyatt should grow from £11 billion in 2007 to £20 billion within the next three years.

At 112p the £336 million cap has fallen more than 40% since January’s profit warning. Recently released interims revealed underlying pre-tax profits of £66.4 million, against £65.6 million last year. Although chief executive Mike Fuller admitted business was likely to remain flat through to next year, in a display of confidence in its long-term prospects the company increased the dividend by 67% to 0.7p.

Shares says: Demographic changes and an improvement in the regulatory environment hold promise for Just Retirement. On a price earnings ratio of six, shares are worth picking up. Buy