Life insurer Just Group has warned that new rules could push up the amount of capital it has to hold by another £130m.
The company has been hit by proposed changes to the way that equity release mortgages are treated by regulators. Just sells the mortgages to back the promises it has made to its life insurance customers.
The company’s shares dropped 10 per cent in London trading.
Just raised £375m of fresh capital earlier this year to cover the impact of the changes. It has also cut back on new business volumes and suspended its dividend.
Announcing first-half results on Wednesday, interim chief executive David Richardson said that Just had eased some of the strain on its balance sheet by signing reinsurance deals to pass some longevity risk on to other insurance companies.
“Capital is the group’s number one priority,” said Mr Richardson. “Whilst we have made significant progress in adapting our business model, as is evident from today’s results, the first half of 2019 has not been easy for our business or for shareholders, as we have faced economic and regulatory challenges.”
The company’s solvency ratio — a measure of capital available as a proportion of the minimum required — was 149 per cent at the end of the first half.
Nick Johnson, analyst at Numis, said: “Although capital risk remains in a heavily bearish house price scenario, we feel Just is now more in control of its capital position.”