Specialist life insurer Just Retirement is confidently raising its dividend 67 per cent despite a 60 per cent pre-tax profits fall.

The Reigate-based company, which focuses on the retirement market as Britain’s second-largest equity release provider and sixth in the provision of annuities, increased total sales 12.8 per cent to £763.5 million in the year to June, with equity release sales showing 27 per cent growth to £159 million. Pre-tax profits fell by £17.5 million to £12 million by the IFRS accounting standard, a drop of £49.6 million under the even tighter new European Embedded Value convention.

Chief executive Mike Fuller says the proposed payout hike reflects AIM-quoted Just Retirement’s long-term confidence in a market predicted by consultant Watson Wyatt to grow by 20 per cent a year compound for the next five years. He points out that the value of new business after tax rose 1.9 per cent to £42 million, despite the erosion of consumer confidence in financial products caused by the credit crunch and looming recession, and argues that the company’s investment returns are significantly exceeding gilt yields, implying ‘substantial returns to come through in future years’.

‘We cautiously expect a flat year to June 2009’, concedes Fuller, but he suggests that longer-term prospects are bright. Just Retirement has half of the enhanced annuity market, where better-than-standard terms are available to policyholders with moderately life-shortening conditions such as asthma or a smoking habit, and also offers further enhanced ‘impaired life’ annuity terms to those with more serious conditions.

Fuller maintains that only 11 per cent of annuities are bought on enhanced terms, although ‘40 per cent of the people involved have medical conditions which would warrant them’. However, he suggests that plans by the Financial Services Authority shortly to oblige insurers to make annuity customers aware of enhanced terms could significantly increase the take-up.

Floated at 148p in 2006, Just Retirement shares hit 305p in 2007 before falling all the way to 64.75 last March. Now 119p, they are a long-term punt.

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Just Retirement	AIM	£183.18m	61.75p	0.00p
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