JRP Group expects margin to exceed 6% due to pricing and risk selection

Financial services firm JRP Group, which was formed by the merger of Just Retirement and Partnership in April last year, reported that its margin for 2016 will exceed 6%.

The FTSE 250 company said that its business margin for 2016 should grow more than expected and exceed 6%, up from 3.6% on a pro-forma basis from the previous year, due to pricing and risk selection, as well as on mortgage yields.

Pro forma sales, as if the merger had taken place on at the ginning of 2015, were up 2% for Guaranteed Income for Life, following post-pension freedoms and choice. The company said that its addressable market is expected to grow in 2017, boosted by growth in the open market.

While, pro forma defined benefit de-risking revenue fell 24%, following the high sales in the second half of 2015 ahead of the introduction of Solvency II, a European Union law that codifies and harmonises insurance regulation. However, pro forma defined benefit sales were up 37% compared to pro forma 2014 sales.

Lifetime Mortgage advances, on a pro forma basis, were down 6% due to lower defined benefit sales, but the company said that at 32%, Guaranteed Income for Life and defined benefit sales were ahead of its 25% target.

The run rate cost synergies due to the merger came in at £30m per annum from the £45m targeted by the end 2018, which was ahead of schedule and will contribute to profit margins for the 2017 financial year..

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 Guaranteed Income for Life market is continuing to stabilise, and we remain confident that, following further regulatory intervention by the Financial Conduct Authority, more Guaranteed Income for Life customers will shop around, rather than just taking their pension saving company's in-house offering. This means our addressable market for Guaranteed Income for Life should increase, and several pension companies are creating Guaranteed Income for Life panels on which we expect to feature.”

He said the company took advantage of favourable economic conditions in the first nine months of 2016 for Lifetime Mortgages and then intentionally managed back sales in the final quarter. The Lifetime Mortgage market grew by more than 30% in during the year, and remains attractive with favourable underlying dynamics.

Shares in JRP Group were up 2.59% to 150.40p at 0826 GMT.