Just Group surges as PRA delays decision on equity release mortgages

Shares in retirement products company Just Group surged as the Prudential Regulation Authority said it has delayed a decision on changing capital requirements for equity release mortgages.

The PRA said the implementation date for its equity release mortgage proposals - the consultation period for which closed on 30 September - will be delayed by at least a year.

It said in a statement on Thursday: "Based on feedback to the consultation, the PRA has decided that the implementation date will not be before 31 December 2019.

"The PRA is making this announcement now in order to clarify the position for insurers planning their year-end 2018 processes. The PRA is currently giving careful consideration to the consultation responses and the impact, if any, of the updated implementation date to the proposed phase-in period. The PRA will publish final policy and supervisory statements in due course."

The implementation date had been expected to be the end of December.

At 1400 BST, Just Group shares were up 12.3% at 83.50p, having risen to as high as 95p earlier in the day.

Just Group said in its interim results back in July that some of the proposals being put forward would result in a reduction in its regulatory capital position.

"The outcome will depend on the result of the consultation process. We, together with the industry, continue to work constructively with the PRA as part of the consultation and will update the market when appropriate," it said at the time.

RBC Capital Markets said the delay by the PRA shows that it is listening to the industry and experts and could mean that the regulator will soften its stance.

"The regulator appears to be reconsidering its most prudent scenario of removing transitional relief and requiring a 2% deferment rate. Our base case has always been a 1% deferment rate with no loss of transitionals, a scenario which only sees a dent to solvency ratios and certainly does not require rights issues," RBC said.

"Under the initial timescales, insurers would have had around one month to decide how to react, and implement these actions for 31 December 2018 year end accounting period. We view this as a very accelerated time scale which would not give sufficient time for insurers to fully explore their options. Therefore, an extension to 31 December 2019 is extremely positive, and will result in a more managed transition, which we expect will decrease the potential impact of the changes."