Jefferies initiated coverage of Just Group on Monday with a ‘buy’ rating and 115p price target, saying the company was poised to benefit from the busiest bulk annuity market ever.
The bank said its initiation focuses on the key topics of capital generation, property exposure and the outlook for the bulk annuity market.
It noted that following the appointment of chief executive David Richardson in 2019, Just has taken a number of actions to bolster capital and reduce sensitivity to the UK property market.
“With the Solvency II ratio likely to be 195% at 2022F year-end and property sensitivities almost halved since 2019, we believe these actions have been implemented successfully,” it said. “Despite this, the market has given Just minimal credit for this, with the stock barely re-rating, from 0.42x T1 own funds in 2019 on average to just 0.45x T1 own funds now.”
In addition, Jefferies said the bulk annuity market was “ready for take-off”. It pointed out that the Pension Protection Fund has forecast that UK defined benefit pensions schemes are currently in a £375bn surplus position, representing an all-time high funding level for schemes.
“This sets up the bulk annuity market for a record year in 2023, with pension consultant LCP forecasting that the total number of deals could be as high as £60bn amongst just eight players. As a pure play annuity writer, Just has excellent exposure to this structural growth opportunity,” it said.
At 1135 GMT, the shares were up 5.7% at 76.91p.
