THE RE TIREMENT SPECI ALIST
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HELPING
CUSTOMERS
THE JUST WAY
Just group PLC | Annual Report and accounts 2022
JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
OUR PURPOSE
WE HELP PEOPLE
ACHIEVE A BETTER
LATER LIFE
We believe that every decision we
make and every action we take
should help us fulfil our purpose.
INDIVIDUALS
We provide guaranteed income for life to deliver
security and peace of mind for our customers
and we provide regulated advice, guidance and
information services to help people make the
most of their pensions and other savings.
HOMEOWNERS
We provide the resources to improve the
later life of homeowners and their families.
PENSION SCHEME TRUSTEES
We provide improved security of income for
members of defined benefit pension schemes
by transferring the risk to Just.
COMPANIES
We provide advisory, technology and customer
services to help uK companies with retirement-
focused solutions to meet the needs of their
customers and clients in later life.
All Just Group plc regulatory announcements,
shareholder information and news releases
can be found on our Group website,
www.justgroupplc.co.uk
FOR MORE INFORMATION ABOUT
EACH OF OUR STAKEHOLDERS SEE PG.4
COLLEAGUES AND CULTURE
FEATURED STORIES
Investment case
Financial and operational highlights
chair’s statement
chief Executive officer’s statement
STRATEGIC REPORT
1 our purpose
2
3
4 At a glance
6
8
10 Market context
14 Business model
16 Strategic priorities
18 defined Benefit case study
20 KPIs
22 Business review
32 Sustainability and the environment
34 Sustainable investment strategy
36 Sustainability strategy: tcFd
disclosure framework
44 colleagues and culture
50 Relationship with stakeholders
52 Section 172 statement
57 non-financial information statement
60 Risk management
62 Principal risks and uncertainties
GOVERNANCE REPORT
66 chair’s introduction to Governance
68 Board of directors
72 Senior leadership
74 Governance in operation
83 nomination and Governance
committee Report
86 Group Audit committee Report
92 Group Risk and compliance
committee Report
95 directors’ Remuneration Report
115 directors’ Report
119 directors’ Responsibilities
FINANCIAL STATEMENTS
120 Independent Auditors’ Report
131 consolidated statement of comprehensive
income
132 consolidated statement of changes in equity
134 consolidated statement of financial position
135 consolidated statement of cash flows
136 notes to the consolidated
financial statements
184 Statement of changes in equity
of the company
185 Statement of financial position
of the company
186 Statement of cash flows of the company
187 notes to the company financial statements
190 Additional financial information
193 Information for shareholders
195 directors and advisers
196 Glossary and abbreviations
pg.18
CELEBRATING 10 YEARS
OF HELPING DEFINED
BENEFIT CUSTOMERS
pg.34
INVESTING THE JUST WAY
01
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
INVESTMENT CASE
SUSTAINABLE GROWTH,
INNOVATION AND
DELIVERY
deploying the capabilities of our highly effective new business
franchise to create value from leadership positions in attractive
and high-growth segments of the uK retirement income market.
WE HELP PEOPLE ACHIEVE A BETTER LATER LIFE
Just has a compelling, clear purpose, to help people achieve a better
later life by providing competitive products, financial advice, guidance
and services to those approaching, at and in-retirement.
READ MORE ON PG.5
SUSTAINABLE GROWTH – 15% GROWTH TARGET
our priority is to deliver profitable and sustainable growth. We are investing
the organic capital generated by the existing balance sheet to reward
shareholders by using our pricing discipline and risk selection to add value
through higher new business volumes at attractive margins to deliver
sustainable, profitable growth. our target is to deliver 15% growth in
underlying operating profit, on average, per annum over the medium term.
READ MORE ON PG.23
GROWING RETIREMENT MARKETS
As the population ages, our retirement markets grow. Whether
it is defined benefit schemes de-risking or individual retirees
seeking to turn their pension into a guaranteed income for life,
our markets have many years of growth ahead of them.
READ MORE ON PG.10
GROWING SHARE THROUGH
INNOVATION AND POSITIVE DISRUPTION
We increase share in these growing markets through constant
innovation – seeking to positively disrupt the markets where we
choose to participate. By delivering better outcomes for customers,
we can also deliver value for shareholders.
READ MORE ON PG.14
DELIVERY AND DISCIPLINE
We have developed a strong track record of delivering against our
commitments. In 2022 we grew underlying operating profit by
19%, exceeding our medium term target of 15%. over the last four
years we have consistently improved both the quality and resilience
of our capital base and in 2021, we achieved capital self-sufficiency
more than a year earlier than originally planned. our new business
franchise has delivered a strong financial performance and in 2022
our new business strain was again below our 2.5% target.
READ MORE ON PG.20
We are increasing organic capital
generation to fuel profitable and sustainable
growth so we may reward shareholders.
DAVID RICHARDSON
Group chief Executive officer
02
FINANCIAL AND OPERATIONAL HIGHLIGHTS
KEY PERFORMANCE INDICATORS
10.7%
RETURN ON EQUITY1
8.3% at 31 december 2021
£29m
UNDERLYING ORGANIC
CAPITAL GENERATION1
£51m at 31 december 2021
£3,131m
RETIREMENT INCOME SALES1
2021: £2,674m, up 17%
£336m
ADJUSTED OPERATING
PROFIT BEFORE TAX1
2021: £238m, up 41%
£2,178m
IFRS NET ASSETS
2021: £2,440m, down 11%
£249m
UNDERLYING OPERATING PROFIT1
2021: £210m, up 19%
£(317)m
IFRS LOSS BEFORE TAX
2021: £(21)m
199%
SOLVENCY II CAPITAL
COVERAGE RATIO (ESTIMATED)1,2
164% at 31 december 2021
£233m
NEW BUSINESS
OPERATING PROFIT1
2021: £225m, up 4%
£153m
MANAGEMENT EXPENSES1
2021: £147m, up 4%
FINANCIAL STRENGTH AND OTHER INDICATORS
A
A
FITCH INSURER FINANCIAL
STRENGTH RATING
for Just Retirement limited
(2021: A+)
FITCH ISSUER DEFAULT RATING
for Just Retirement limited
(2021: A)
AWARDED FURTHER RECOGNITION FOR OUTSTANDING SERVICE
PENSIONS AGE
FINANCIAL ADVISER:
5 Star service award
(Pension & Protection)
FINANCIAL ADVISER:
5 Star service award (Mortgages)
MORTGAGE SOLUTIONS
Best provider for adviser support,
training and development
1 Alternative performance measure (unaudited, see glossary for definition). underlying organic capital generation is reconciled to Solvency II excess own funds on page 27. Return on equity, new
business operating profit, management expenses, underlying operating profit, and adjusted operating profit are reconciled to IFRS profit before tax on pages 24 and 26.
Retirement Income sales are reconciled to gross premiums written in note 6 to the consolidated financial statements on page 149.
2 Solvency II capital coverage ratios as at 31 december 2021 and 31 december 2022 include a recalculation of transitional measures on technical provisions (“tMtP”) as at the respective dates.
03
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
AT A GLANCE
leaders in our markets. We positively
disrupt markets where we can become a leader
and deliver great outcomes for customers
so we may deliver value for shareholders.
WE ARE A SPECIALIST IN OUR CHOSEN
MARKETS, SERVING FOUR DISTINCT GROUPS…
TRUSTEES AND SCHEME SPONSORS:
PROVIDING MEMBER SECURITY AND
DE-RISKING PENSION LIABILITIES
defined benefit pension schemes de-risking
their liabilities by securing member benefits
with an insurance contract.
>£1 trillion
addressable market
INDIVIDUALS: PROVIDING
RETIREMENT INCOME
People who have built up pension
savings throughout their career and
want a guaranteed income, flexible
income or a combination in retirement.
>£1 trillion
market value of defined contribution
pension savings
HOMEOWNERS: ACCESSING
PROPERTY WEALTH
People aged 55+ who want to access
wealth locked up in their property.
>£3.5 trillion
Property wealth owned by people aged 55+
CORPORATE CLIENTS: SOLVING
PROBLEMS FOR COMPANIES
We develop scalable retirement-focused
solutions for banks, building societies, life
assurance companies, pension scheme
trustees, other corporate clients and for
their customers, clients and members.
retirement-focused
solutions
04
strategic report
GoVERnAncE
FInAncIAl StAtEMEntS
...WITH PRODUCTS AND SERVICES
Competitive position:
A leader
Developing
SERVICES
BENEFIT AND COMPETITIVE POSITION
marketed
products1
1 Reported in our
Insurance segment.
professional
services2
2 Reported in our
other segment.
DEFINED BENEFIT DE-RISKING SOLUTIONS
(“DB”)
Solutions for pension scheme trustees to reduce
the financial risks of operating pension schemes
and increase certainty that members’ pensions
will be paid in the future.
GUARANTEED INCOME FOR LIFE (“GIFL”)
A solution for individuals/couples who want the
security of knowing they will receive a guaranteed
income for life.
SECURE LIFETIME INCOME (“SLI”)
SlI is a tax-efficient solution for individuals who want
the security of knowing they will receive a guaranteed
income for life and the flexibility to make changes in the
early years of the plan.
CARE PLANS (“CP”)
A solution for people moving to residential care who
want the security of knowing a regular payment will
be made to the care provider for the rest of their life.
LIFETIME MORTGAGES (“LTM”)
Solutions designed for people who want to release
some of the value of their home.
Just’s innovative approach and underwriting expertise
in this segment delivers competitive prices for trustees.
By using our unrivalled intellectual property, Just provides
an individually tailored solution providing customers
typically with double-digit percentage increases in income
compared to standard products.
Just’s pioneering Secure lifetime Income product enables
customers to select a guaranteed income from within a
Self-Invested Personal Pension. this enables a customer to
manage and blend their total pension assets tax efficiently
within a single technology platform.
Just’s care Plans can be tailored to the individual and offer
a tax-efficient solution to making payments to residential
care providers.
By using our unrivalled intellectual property, Just provides
an individually tailored solution providing around six-in-ten
customers with a lower interest rate or a higher borrowing
amount compared to standard products. Just provides a
range of lifetime mortgages, enabling people to meet a
variety of needs in later life.
SERVICES
BENEFIT AND COMPETITIVE POSITION
HUB GROUP
our professional services and distribution businesses
delivering technology, broking and advice solutions for
corporate clients and pension schemes. We also provide
regulated financial advice on how people should use
pension, investment and savings, or release some of the
value from their homes.
+
Support for organisations wanting to deliver whole-of-
market shopping around services to source retirement
income products for their customers, employees or
pension scheme members. HuB Financial Solutions is
the uK’s largest GIfl broker.
HuB Financial Solutions offers an innovative approach
that provides affordable regulated advice to people
with modest pension savings. It also delivers
face-to-face nationwide advice at a time and place
to suit the client, and enables pension schemes to
deliver efficient and robust scheme-led defined
benefit transfer programmes.
+
Provides a range of business services tailored to the
needs of the organisation, ranging from consultancy
and software development to fully outsourced
customer service delivery and marketing services.
05
JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
CHAIR’S STATEMENT
HELPING CUSTOMERS
THE JUST WAY
We are providing certainty to our customers
in an uncertain world, delivering profitable and
sustainable growth to fulfil our purpose
and create value for shareholders.
JOHN HASTINGS-BASS
chair
ANNUAL GENERAL MEETING 2023
10.00 am
9 May 2023
at Just Group plc
1 Angel Lane
London
EC4R 3AB
06
our industry has an important role to play in helping the world transition
towards a sustainable environment and low carbon global economy. We are
making good progress developing our plan to become carbon net zero. You
can read our high level transition plan on our Group website and this year’s
Annual Report provides a better understanding of climate-related risks and
opportunities. our disclosures are consistent with those recommended by
the taskforce on climate-related Financial disclosures and you can read more
on pages 36 to 43.
Growing the Just Way is a theme our colleagues across the company are
active in shaping and the Board receives input from our colleagues. We are
on an exciting journey as a company, as an industry, as a country and as
individuals. You can read more about our sustainability strategy on page 36
and at justgroupplc.co.uk.
ENGAGEMENT WITH OUR STAKEHOLDERS
the Board engages directly and indirectly with our customers, shareholders,
colleagues, regulators, legislators, professional bodies and wider society
to promote the interests of our customers more broadly. We place great
importance on working effectively with these groups and actively seeking
their feedback.
We work hard to ensure our customers benefit from our services and our
shareholders receive the benefit of long-term value creation. throughout this
report you can read how the Board takes into consideration feedback from
the company’s stakeholders and how the Board, and colleagues from across
the Group, promote the success of the company.
PURPOSE DRIVEN
We are a purpose driven company. We fulfil our purpose by providing
competitive products, services, financial advice and guidance to help our
customers achieve security, certainty and provide them with peace of mind
in retirement. our purpose remains as relevant today as it did all those years
ago when we created it. It’s clear, authentic and it acts as a beacon for
colleagues across the entire Group to live our purpose every day.
OUTLOOK
there are strong structural drivers of growth which make our markets very
attractive, including demographics and the appetite of company directors
and pension trustees to transfer the risk of operating defined benefit pension
schemes to insurance companies.
We have focused our leadership team on driving long-term profitable growth.
the commercial outlook remains favourable for our Group.
on behalf of the Board, I would like to close by thanking david, his team and
all of our colleagues across the Group for their commitment to helping our
customers and doing such a great job. I’d also like to thank our business
partners who have trusted us to provide outstanding service to their clients.
We are helping our customers, building shareholder value through profitable
and sustainable growth, fulfilling our purpose and helping contribute to a
net zero economy. We are increasingly optimistic about the future.
I am pleased to introduce Just Group plc’s 2022
Annual Report. We have maintained our focus in
this period. We have delivered sustainable growth
of the business, help to more of our customers and
value for shareholders.
HELPING OUR CUSTOMERS
the challenging economic events in the uK and around the world are
having profound impacts on the lives of our customers and their families.
We help people achieve a better later life, this is our purpose, it’s why we
exist. In these uncertain times, our solutions provide reassuring certainty
to our customers. As the retirement specialist we are doing all we can,
during these difficult times to help our customers and their families.
our customers, existing and prospective, are at the heart of everything we
do at Just.
OVERVIEW
the primary focus of our Group in 2022 has been to capture profitable
growth opportunities to ensure we meet our medium term profit
growth pledge.
It has been a year of continued delivery, with successful strategic
execution, ongoing investment and continued growth. this has resulted
in a strong balance sheet and financial performance, with continued
business momentum.
the Group’s financial strength and performance is set out in detail in the
Business Review.
DIVIDEND
Given the Group’s performance and strong capital position, the Board has
recommended a final ordinary dividend of 1.23 pence per share, in line
with our ordinary dividend policy.
BOARD COMPOSITION AND GOVERNANCE
clare Spottiswoode Independent non-Executive director did not seek
re-election at last year’s AGM and stepped down from the Board on
10 May 2022. Steve Melcher, Independent non-Executive director retired
from the Board at the end of december. Paul Bishop, Independent
non-Executive director and Ian cormack, Senior Independent
director, will step down from the Board and not seek re-election at
this year’s AGM on 9 May 2023. I’d like to thank them for their long
service to Just Group and the predecessor companies. You can read
more about the directors of the company on pages 68 to 71.
I’d like to welcome Mary Phibbs as Independent non-Executive director,
who joined the Board on 5 January 2023. You can read her biography on
page 70.
I take great pride in leading the Board and the Group’s governance
function, and my introduction to the corporate Governance Report on
page 66 provides further information on our governance and decision
making processes. I would like to thank the entire Board for their
significant contribution, and look forward to working with them in 2023.
ACTING SUSTAINABLY
We were encouraged by the government’s consultation on the proposed
reforms of the Solvency II regime, published in november 2022. When
implemented these reforms could unlock billions of pounds of investment
from insurers into the uK economy and enable us to provide even more
competitive products to our customers.
07
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
CHIEF EXECUTIVE OFFICER’S STATEMENT
ACCELERATING
GROWTH
We exceeded the promises made over
the last four years and we are very
optimistic about the future.
£249m
UNDERLYING OPERATING PROFIT1
2021: £210m, up 19%
£3.1bn
RETIREMENT INCOME SALES1
2021: £2.7bn, up 17%
1 Alternative performance measure.
DAVID RICHARDSON
Group chief Executive officer
08
I’m pleased to present my chief Executive
officer’s Statement for 2022. We’ve delivered
a strong performance and have increased
confidence in meeting our pledge to grow
underlying operating profits over the medium
term by an average of 15% per annum.
RETIREMENT SALES GROWTH
Sales in 2022 were up 17% at £3.1bn. this was driven by growth in dB
sales, which were up 33% to £2.6bn (2021: £1.9bn). operationally, we
were exceptionally busy as we completed 56 dB transactions, almost
double the number in 2021 (2021: 29 transactions). the rise in interest
rates has improved pension scheme funding levels materially. As a result,
dB de-risking market volumes were boosted in the second half of 2022,
with that momentum carrying into 2023. our pipeline of dB business
is over £6bn and in March 2023 we announced our largest transaction
to date at £513m. We expect that our dB sales in 2023 will continue to
show substantial growth over the record levels achieved in 2022.
In our retail market, sales of GIfl and care products at £564m were 24%
lower than in 2021. In a year of falling investment markets and a competitive
environment, we maintained a disciplined approach to pricing and returns.
However rising interest rates has stimulated increased customer appetite
for guaranteed income solutions, boosting quotation volumes. this augers
well for a return to growth in 2023.
GROWING OUR DEFINED BENEFIT DE-RISKING BUSINESS
AND EXPANDING OUR INVESTMENTS IN TANDEM
during the year we were delighted to host two seminars for investors and
analysts to develop their understanding of our growth potential.
We showcased our investment capability and explained how the investment
strategy delivers competitive customer pricing and shareholder returns.
during 2022 our investments in other illiquids, including infrastructure,
private placements, social housing, commercial mortgages, ground rents
and income strips, amounted to over £1bn (2021: £615m). Growth will
continue in 2023 as we access the fast developing investment opportunities
in private debt markets through our partnerships with 15 external asset
managers. We were pleased with the government’s consultation response
to the proposed reforms of the Solvency II regime, published in november
2022. When implemented these reforms could unlock billions of pounds of
investment from insurers into the uK economy.
In our second seminar we highlighted the enormous growth potential in
our dB business.
the development of the dB risk transfer market is relatively immature.
to date, only 11% of total dB liabilities have been transferred from sponsors
to insurers. this is expected to accelerate in the coming years. Slowing
longevity increases and significant employer contributions have led to a
steady improvement in dB pension scheme funding levels, and in 2022,
this was boosted by rising interest rates. this is translating into more
schemes bringing forward their de-risking plans which will further
increase our addressable market.
We will drive growth by securing more larger transactions and by expanding
our leadership position in the smaller transaction size segment of the
dB market.
We are receiving increased enquiries from smaller schemes and to service
this demand efficiently we have developed a streamlined quotation service.
this service delivers updated quotes each month to over 120 small and
mid-sized schemes. In 2022 we completed 28 transactions that originated
from our streamlined service.
We have written almost 300 dB transactions since entering the market
in 2013 and through these, have gained significant pricing and deal
experience to now regularly quote on larger transactions. this is supported
by our stronger capital position and expanded panel of reinsurance
partners. combined with the strong outlook for the market in 2023, we
expect our participation in the larger deal segment to increase further.
CUSTOMERS AND OUR PURPOSE
As the chair mentioned in his statement, the challenging economic
events in the uK and the volatility in investment markets witnessed
by our customers in 2022 has created uncertainty and worry for many
who have investments in equities and fixed interest bonds. We provide
a guaranteed income for life to customers. this secure income is often
purchased to cover the essential expenditure of the household and in
these uncertain times, our solutions provide reassurance to customers.
As the retirement specialist we are doing what we can to help people.
We help them to discover whether they are entitled to State Benefits
and often uncover many missed benefits, that when secured, can make
a profound impact on their lives. We provide a range of professional
advice and guidance to help our customers. We can’t resolve all the
challenges faced by our customers, but we are helping where we are
able to do so and remain focused on living up to the purpose we set
out many years ago: we help people achieve a better later life.
SUSTAINABILITY
We achieve our goals responsibly and are committed to a sustainable
strategy that protects our communities and the planet we live on. I am very
proud that over the last three years we have reduced our operational carbon
intensity per employee by 81%, but the most material impact we can make
to reduce carbon emissions will be achieved through the decisions we take
with our £20bn investments portfolio (excluding derivatives and collateral).
during 2022, we invested in £279m of eligible green and social assets in
accordance with our Sustainability Bond Framework and we have now
completed our total £575m green and sustainability bond investment
commitments well ahead of schedule.
OUR PEOPLE
our Just culture is underpinned by our people who are passionate and
are committed to making a difference to the lives of those around them.
A key business priority is that all of our colleagues feel proud to work at Just.
the combination of our strong purpose and having highly engaged teams
working the ‘Just way’, is a competitive advantage which will help drive high
performance and our growth strategy.
I would like to thank my colleagues who once again rose to the challenge
in 2022, providing support and certainty to our customers when they needed
it most. our people have been energised and inspired by our commitment
to be a strong and sustainable purpose-led business for our customers,
our colleagues and our planet.
We have continued to maintain excellent levels of employee engagement,
with a key priority to build a diverse and inclusive workforce. Further
details on all our initiatives in this area can be found in the colleagues
and culture section.
FINANCIAL PERFORMANCE
underlying operating profit increased by 19% to £249m in 2022, helped by
improved in-force returns and lower financing costs.
our interest rate hedging programme has successfully protected our solvency
capital position during the years of falling interest rates. the continued rise in
interest rates in 2022 has resulted in an economic loss, which means we have
an overall IFRS loss after tax of £232m for 2022 (2021: £16m).
the strength and resilience of our capital position and our disciplined pricing
and risk selection ensures we are capital self-sufficient. this means we can
fund our growth ambitions, reward shareholders with a growing dividend
and maintain a high buffer of capital in what are uncertain times.
We will pay a final dividend of 1.23 pence per share, giving a total of
1.73 pence for the year – which represents 15% growth over last year’s
pro forma full year dividend.
IN CONCLUSION
We have never been stronger. We have the capability and opportunities
to achieve our ambitious growth plans so that we build substantial value
for shareholders and fulfil our purpose to help more people achieve a better
later life.
09
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
MARKET CONTEXT
HELPING CUSTOMERS
STRENGTHEN THEIR
FINANCIAL RESILIENCE
Structural drivers in our markets mean we
can grow profits sustainably while delivering
better outcomes for customers.
DEFINED BENEFIT DE-RISKING SOLUTIONS
defined benefit pension schemes often called final salary schemes, were
traditionally used in both the private and public sectors as an important
benefit for employees. the employer shared some responsibility for the
wellbeing of their former workers when they retired by providing a
guaranteed retirement income based on their earnings history and length
of employment. However, providing these guaranteed benefits became
expensive. Almost 90% of the uK’s defined benefit pension schemes are
now closed to new members and/or accrual of future benefits. continuing
to operate these schemes has become more onerous for employers.
the dB de-risking business has allowed these employers to alleviate the
financial and operational challenges of running these schemes through
passing responsibility for the schemes to insurers who can fully or partially
de-risk the employer’s defined benefit obligations.
defined benefit de-risking can occur via a Buy-in or Buy-out. In a Buy-in, the
pension scheme pays a premium to an insurance company to purchase an
income stream that matches its defined benefit obligations to some or all
of its members, but retains legal responsibility for those obligations. the risk
attached to that portion of the scheme is transferred to the insurer, with
schemes often de-risking over a period of time through multiple buy-in
tranches. An alternative is a Buy-out, where a pension scheme removes its
obligations by purchasing individual insurance policies to pay the benefits
of its members, who then become policyholders of the de-risking provider.
Subsequently, the pension scheme is wound down as the pension obligation
owed to each member has moved to the insurer.
the structural growth drivers for the
defined benefit de-risking market have
accelerated and the outlook for 2023
and beyond is exciting.
10
As of 31 March 2022, total uK defined benefit obligations owed by sponsors
were £2.1tn, or roughly the same size as the entire uK economy. there are
more than 5,100 defined benefit pension schemes in the uK. to date, we
estimate that only 11% of dB liabilities have been transferred to insurers via
de-risking transactions. over the period, March 2017-22, the funding level
of the schemes on a full buy out basis has steadily increased from 63%
to 79%, driven mainly by sponsor contributions.
CURRENT MARKET
2022 was a year of significant financial change for defined benefit
pension schemes which had a major impact on the dynamics of the bulk
annuity market.
We estimate that since March 2022, rising gilt yield further improved the
funding level of schemes to c.90% on average, with half of all schemes fully
funded or better. Whilst many larger schemes will have significant interest
rate hedging in place, all schemes benefit to a varying extent from rising
interest rates. As interest rates rise the value of the defined benefit liabilities
fall more than the value of the assets held against them, which closes the
funding gap. combined with improved pricing for longevity reinsurance and
widening credit spreads, Buy-out came into reach for an increasing number
of schemes. As a result, demand for de-risking increased, particularly in the
second half of 2022, with this strong momentum continuing into 2023.
In 2022 bulk annuity volumes are estimated to around £30bn for the
year (source: Just estimates), but with a continued shift towards full
scheme transactions.
COMPETITIVE FACTORS AND POTENTIAL ALTERNATIVE DE-RISKING SOLUTIONS
At present, there are eight providers of Buy-in and/or Buy-out transactions
in the uK defined benefit market. these providers focus on some or all
segments of the market according to their preferred transaction size, risk
appetite, asset origination or reinsurance arrangements. Following the
introduction of the Solvency II capital regime in 2016, longevity reinsurance
is widely used to reduce the capital requirements of writing bulk and
other annuities.
We are continuing to invest in our
proposition and service to reduce the
impact on scarce human resources
and eliminate process friction.
Heightened government, regulatory and fiduciary focus alongside
consumer activism has pushed environmental, social and governance
(“ESG”) considerations up the agenda for uK defined benefit pension
schemes. With new regulations for climate reporting introduced with
the Pensions Schemes Act 2021, more trustees considering de-risking
have sought assurance that ESG considerations underpin the asset
choices in insurers’ investment portfolios.
OUTLOOK
the structural growth drivers for the defined benefit de-risking market have
accelerated and the outlook for 2023 and beyond is exciting. the increase
in gilt yields has reduced the estimated liabilities of defined benefit pension
schemes and dramatically improved funding levels. Employee Benefit
consultants expect that this will translate into rising market volumes and
that demand will remain strong over the long term, with c.£600bn expected
to transact in the next decade, of which potentially more than £200bn
could transact in the three year 2023-25 period (source: lcP). Schemes who
ordinarily expected to be fully funded towards the middle of the decade have
been able to bring forward their de-risking plans.
Insurance capacity has kept pace with demand but the increased transaction
volumes forecast are likely to increase pressure on scarce human resources.
When selecting new business, insurers will triage the opportunities available
to them. As a result, small and medium size schemes targeting Buy-out must
have their governance, data and benefit specifications in good order to secure
insurer engagement. Just Group is continuing to invest in its proposition
and service to reduce the impact on scarce human resources and eliminate
process friction. this will increase the capacity to conduct more business.
89% OF DEFINED BENEFIT PENSION SCHEMES ARE CLOSED
89% of defined benefit pension schemes are closed
TO NEW MEMBERS AND INCREASINGLY TO FUTURE ACCRUAL (%)
to new members and increasingly to future accrual (%)
100
80
60
40
20
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
2018 2019 2020 2021 2022
Closed to new members (open to benefit accrual)
Closed to future accrual 2022
Source: The Purple Book 2021, PPF
DB DE-RISKING TRANSACTIONS (£BN)
DB De-risking transactions (£bn)
60
50
40
30
20
10
2011
2012
2013
2014
2015
2016
2017
2028
2019
2020
2021
Buy-in/Buy-out
Backbook acquisition
Forecast range
2022
(forecast)
Source: Just analysis, Hymans
In June 2020 the Pension Regulator (“tPR”) issued guidance for trustees
and sponsoring employers considering transacting with alternative defined
benefit de-risking solutions. Regulation by tPR is outside of the insurance
regime and so these new alternatives including dB consolidators would offer
reduced protection for members compared to a fully protected and PRA
regulated insurance solution. So far, only one dB consolidator, clara-Pensions,
has completed the tPR assessment process, however at the time of writing
have yet to transact. We welcome innovative solutions to the market, but
irrespective, we believe the scale of the market and strength of demand for
‘gold standard’ insurance solutions will mean that trustees and their
consultants will continue to prioritise the insurer pathway where possible.
WIDENING THE INVESTMENT OPPORTUNITY
Insurers cashflow match liabilities through the origination of a mix of
investment grade liquid and illiquid fixed income assets. to offer attractive
new business pricing, insurers must have strong capabilities to originate
high-yielding, medium and long duration illiquid assets. Illiquid assets
are split between the lifetime mortgages that we originate and manage
ourselves and other illiquid assets, which includes a diverse range of
investments such as infrastructure debt, private placements, commercial
real estate mortgages, ground rents and income strips. the government’s
consultation response to the proposed reforms of the Solvency II regime,
published in november 2022, when implemented will widen asset eligibility
criteria. this could unlock billions of pounds of investment from insurers into
the uK. Insurer long term capital is particularly suitable for investments to
decarbonise the economy, develop affordable and social housing, to make
improvements to infrastructure and to support the uK’s world class science
and research capabilities.
11
FINANCIAL STATEMENTSGOVERNANCEstrategic report
JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
MARKET CONTEXT continued
INDIVIDUAL RETIREMENT INCOME MARKET
Guaranteed Income for life (“GIfl”) products are bought by individual
customers to convert some or all of their accumulated pension savings into
a guaranteed lifetime retirement income. the solution provides people with
peace of mind from the security of knowing the income will continue to be
paid for as long as the customer and, where relevant, for as long as they or,
typically, their spouse, lives. In the uK, GIfl products traditionally offered an
income payable without reference to the individual’s health or lifestyle, and
were differentiated only by reference to a limited number of factors such as
age, premium size and, prior to 31 december 2012, gender.
An individually underwritten GIfl takes into account an individual’s medical
conditions, personal and lifestyle factors to determine their life expectancy.
People who are eligible and purchase an individually underwritten GIfl
typically achieve double-digit percentage increases in income compared
to purchasing a GIfl which is not individually underwritten.
CURRENT MARKET AND OUTLOOK
Pension customers are encouraged to compare the GIfl offer provided by
their existing pension company to those offered on what is the open or
external market. In March 2018 the Financial conduct Authority (“FcA”)
introduced rules requiring pension companies to provide customers with
a comparison to the best income available from the external market
alongside the quotation from the incumbent firm. these requirements were
subsequently strengthened and from January 2020 all firms are required to
provide a medically underwritten comparison where a customer is eligible.
this has provided new opportunities for Just Group as we compete in the
open market when these customers choose to shop around; this is our
addressable market as we do not have an existing base of pension savings
customers. the open market share of the total GIfl market for 2022 was
56.3% up from 54.2% in 2021 (source: Association of British Insurers (“ABI”)).
continuing developments are driving growth over the medium term in our
addressable market:
•
the structural drivers of growth in the retirement income market are
strong and assets accumulating in defined contribution (“dc”) pension
schemes are projected to increase consistently over the next decade. this
growth arises from an increase in the number of people joining workplace
pension schemes as a result of the successful state auto-enrolment policy
and the increase in contribution rates implemented in 2018;
• growth in dc pension assets also arises as companies close down final
•
salary or defined benefit pension schemes and offer their employees dc
pensions instead;
some people are transferring out of defined benefit pension schemes
into dc pension schemes to take advantage of Pension Freedoms. When
transferring, many people are choosing to secure a guaranteed income
for life, by using some of the transfer value to purchase an individually
underwritten GIfl;
• many life and pension companies are choosing to put in place broking
solutions to offer their pension savings customers access to the best
individually underwritten GIfl deals in the market. Some are choosing
to transfer their obligations to provide a guaranteed GIfl rate to their
customers to an alternative product provider or broking solution. this
grows our addressable market and provides customers with better
outcomes. our HuB group of companies is providing many of these
corporate services; and
following the rise in uK interest rates, the level of income on GIfl has
risen by around 50% in 2022. this has resulted in the volume of quotations
from financial intermediaries and their clients for guaranteed income
solutions to increase.
•
the number of individual retail customers transferring their pension benefits
into defined contribution pensions from their final salary (defined benefit)
pension has reduced significantly in the last few years. this reduction follows
a review and introduction of remediation measures by the FcA into the
quality of advice provided to individual retail customers exploring transferring
their benefits. A proportion of the proceeds from these transfers are used to
secure a guaranteed income by investing in a GIfl. this reduction in activity
will be a drag on the positive growth factors above.
In 2020 the FcA announced they intend to complete further work on the
suitability of advice and associated disclosure (known as “Assessing Suitability
Review 2”). the review aimed focus on initial and ongoing advice to consumers
taking an income in retirement. this work was paused. In January 2023 the
FcA announced their intention to complete a thematic review assessing the
advice consumers are receiving on meeting their income needs in retirement.
the review will start in Q1 2023 and the FcA aim to publish a report setting
out their findings in Q4 2023.
the FcA will have greater rule making powers under the future regulatory
framework legislation. they have already announced that, to get ready for
these changes, they intend to carry out a holistic review of the boundary
between advice and guidance. their aim is to understand where existing
regulation may carry a disproportionate burden, and to explore ideas to
reduce that burden, whilst continuing to provide the right level of consumer
protection. this may, over the medium term, result in more people receiving
help and guidance in how to use their pension savings, which may increase
the size of our addressable market.
LIFETIME MORTGAGES
A lifetime mortgage (“ltM”) allows homeowners to borrow money secured
against the equity in their home. the amount borrowed is repayable together
with accrued interest on the death of the last remaining homeowner or
their move into permanent residential care. this product can be used by
retirees to supplement savings, top up retirement income or to settle any
outstanding indebtedness.
the typical lifetime mortgage customer is around 70 years old, has a house
valued at around £345,000 and borrows 30% of the property value.
People are becoming increasingly positively disposed to accessing some of
the equity in their homes to improve the quality of their later lives or to help
their family. the compound annual growth rate of the lifetime mortgage
market between 2011 and 2022 was 21% and this has attracted new
providers to enter the market in the last few years.
Just Group is a leading product provider of lifetime mortgages. our HuB
Financial Solutions business is a leading distribution business providing
consumers with regulated advice on equity release solutions from across
the market.
CURRENT MARKET AND OUTLOOK
Just Group expects lifetime Mortgages to continue to provide an important,
but reducing proportion of the investments it uses to back its Retirement
Income new business liabilities. Homeowners aged over 55 are estimated
to own property wealth of over £3.5tn (source: onS). We estimate that the
existing industry loan book including interest is just £43.4bn. In october 2022,
following the September 23 uK Growth Plan announced by the chancellor,
a number of product providers adjusted and/or removed their products as
the markets faced a period of significant interest rate volatility. this reduced
the products available to customers. Since the november 2022 Autumn
Statement many providers have returned to the market and the number of
products available to customers has increased.
Just Group introduced medical underwriting into a niche segment of the
lifetime mortgage market some years ago and in 2021 extended it across the
Just for You mortgage range. We estimate by collecting medical information
and lifestyle factors from applicants, we are able to provide six-in-ten a lower
interest rate, or for those who need it, a higher borrowing amount. this
market disruption is revolutionising how lifetime mortgages are advised.
12
EXTERNAL GIFL MARKET (£M)
2,500
2,000
1,500
1,000
500
2015
2016
2017
2018
2019
2020
2021
2022
Source: Just analysis, ABI
LIFETIME MORTGAGE MARKET SIZE AND GROWTH RATE (£M)
Lifetime mortgage market size and growth rate (£m)
C A G R 2 0 . 9 %
6,000
5,000
4,000
3,000
2,000
1,000
2011
2012
2013
2014
2015
2016
2017 2018
2019
2020
2021
2022
Lump sum mortgage sales
New drawdown mortgages – initial advance
Existing drawdown mortgages – further advances
Source: Equity Release Council
NUMBER OF PEOPLE (MILLIONS) AGE 60+
Number of people (millions) age 60+
25
25.0%
26.2%
27.9%
28.9%
29.3%
30.7%
20
15
10
5
2022
2025
2030
2035
2040
2050
Source: Office for National Statistics
A LEADER IN UK LONG-TERM
CARE FINANCIAL SOLUTIONS FOR
22 years
Just is forecasting that the ltM market will experience a period of stagnation
and potential decline in 2023, as the market and consumer demand adjusts
to increased interest rates and the potential property market impacts of
increased inflation. We forecast the market will return to growth in 2024 and
will exceed the £6.2bn recorded in 2022. the primary drivers of growth are:
• households wanting to top up their retirement income to improve their,
or their family’s standard of living in later life;
•
• people with outstanding interest-only mortgages who are entering
retirement and require a solution to settle the debt with the existing
mortgage company;
strong demographic growth. the number of people aged 65 and over is
forecast to increase from around 13 million today to around 17 million by
2040; and
strong investment in advertising which results in people becoming aware
of ltMs, combined with people becoming more disposed to using some of
their housing equity.
•
In october 2020 the FcA wrote to chief Executive officers and board directors
of lifetime mortgage lenders and mortgage intermediaries. the FcA set out
their view of the key risks these firms pose to their consumers or the markets
in which they operate. they outlined their expectations of firms including how
firms should be mitigating these key risks. they described their supervisory
strategy and programme of work to ensure that firms are meeting the
regulators’ expectations and that any harms and risks of harm are being
remedied and/or mitigated.
the FcA stated they would be engaging with a number of firms across the
industry and that phase of work was due to conclude in May 2021. In June
2022 they wrote to firms providing an updated view of their expectations,
and key risks posed by firms in this sector and their supervisory plans.
LONG-TERM CARE SOLUTIONS
care Plans, or immediate needs annuities, are a form of purchased life
annuity. In exchange for an up-front premium, they provide a guaranteed
income for the life of the insured to help contribute to the cost of their care.
under current rules this income is tax free when paid directly to a registered
care provider, with care Plans available both to individuals entering care
facilities and receiving domiciliary support. As such, care Plans provide a form
of longevity insurance to an individual against the ongoing costs of receiving
care until their death.
% of UK
population
over age 60
on 7 September 2021, the uK Prime Minister announced plans to substantially
increase funding for health and social care over the period (2022-2025), to be
funded by a new tax, the Health and Social care levy. From october 2023,
the government had planned to introduce a new £86,000 cap on the amount
anyone in England will have to spend on their personal care over their
lifetime. the cap was to apply irrespective of a person’s age or income.
the government said that the publication of the november 2021 document
marked the start of a period of co-production of the statutory guidance with
the sector, building on draft regulations and guidance published in 2015.
It added that this would be followed by a public consultation early in 2022
with the intention that the final regulations and guidance will be published
in spring 2022.
In the november 2022 Autumn Statement, the government announced a
delay to the national rollout of social care charging reforms from october
2023 to october 2025.
CURRENT MARKET AND OUTLOOK
there is a substantial market for care in the uK. the drivers of the need
for care are strong because:
•
there are currently around 1.7 million people aged 85 or over in the
uK – this is the average age at which people go into care homes;
this is the fastest growing demographic cohort, with its number
expected to almost double over the next 25 years, suggesting a
rate in excess of 2.6%;
•
• 40% of all people in the uK aged 65 and over are estimated to have a
•
limiting long-standing illness, which may require care in the future; and
the recent focus on pressures within the care sector has highlighted the
need to plan for care, and any government reform will provide additional
focus on the limited number of solutions currently available.
13
FINANCIAL STATEMENTSGOVERNANCEstrategic report
JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
BUSINESS MODEL
our business model converts the growth opportunities
in our markets to deliver positive outcomes for
customers, shareholders and colleagues.
KEY CHARACTERISTICS OF OUR BUSINESS MODEL
Specialist
focus
Risk
Selection
Product
innovation
Cost
Discipline
Scalable
operating model
Focus on
organic capital
generation
HOW WE CREATE VALUE
WE CREATE VALUE FOR
We have created a sustainable business model that organically generates
capital to support growth. We assess the risks related to the policies we sell
and how much income we expect to provide to our customers. We charge
a margin on the initial amount received in exchange for accepting the risk
over the lifetime of the policy. We invest the margin and our customers’
pension savings in high quality assets, including the lifetime mortgages we
originate. this generates financial value whilst ensuring we are able to pay
policyholder pensions as they fall due.
GROWTH OPPORTUNITIES
We have a growing ageing population with evolving needs. the complexity
of retirement and therefore inertia amongst those approaching, at or
in-retirement provides us with significant opportunity to help more
customers achieve a better later life through the products and propositions
we offer via our multi-channel distribution strategy.
Each and every current and future retiree will have a unique set of
circumstances and be exposed to a number of risks.
their defined benefit pension scheme running into financial difficulty;
running out of money;
These risks include:
•
•
• being unable to plan their financial affairs;
• access to affordable financial advice;
•
increasing and uncertain care costs;
• not being able to achieve the lifestyle they had expected;
• being invested in inappropriate products and securities; and
•
inflation outpacing their savings.
our solutions service these needs, and our scalable and sustainable
business model is built to optimise value from those solutions.
14
SHAREHOLDERS
By managing our resources effectively, we generate returns in excess
of our cost of capital. We manage our capital conservatively and
are focused on increasing our underlying organic capital generation
to grow our business and service capital providers, enabling
sustainable dividends.
CUSTOMERS
We use our medical underwriting to fairly optimise the returns for
our customers. In addition, we strive to deliver the best experience
for our customers, making it as easy for them as possible to navigate
the complexities of later life planning and events. In addition, our
resilient business model ensures our customers can rely on us to pay
claims over the long term.
PARTNERS
Corporate clients: we create opportunities and solve problems
for companies using our scalable retirement-focused solutions.
Trustees and scheme sponsors: we provide member security
and de-risk pension liabilities.
COLLEAGUES
We develop, recognise and reward our colleagues to secure a skilled
and motivated team, with a focus on high-performance working.
ENVIRONMENT
We help the environment through how we operate and the
investment decisions we make, which align with our focused
sustainability strategy.
strategic report
RISK SELECTION
Selecting the right risks and pricing
our products appropriately
PrognoSys™ is our powerful proprietary tool
for individual medical underwriting that
drives pricing and reserving that allows the
Group to identify and price for the risks we
want and to improve customer outcomes.
And because we operate in attractive
markets that are growing, this further
allows us to be selective in the risks we
choose to write.
PRODUCTS AND SERVICES
our products
and services are
distributed via our
multi-channel model.
INVESTMENT STRATEGY
continuous evolution of our
investment strategy to generate
value for shareholders and better
value for customers
We invest in infrastructure loans, private
placements, commercial property mortgages
and social housing, as well as investment grade
fixed income securities such as government and
corporate bonds. We originate lifetime mortgages
to provide matching cash flows for longer duration
liabilities and to achieve a higher return than liquid
financial assets. Read about our sustainable
investment strategy in the “Sustainable
investment strategy” section.
15
INNOVATION
Innovatively utilising
reinsurance tools to
improve our capital
position
this includes:
• defined benefit de-risking
partnering model.
• Reinsurance options on new
and existing business.
• no-negative equity guarantee
hedge risk transfer solution.
FINANCIAL STATEMENTSGOVERNANCE JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
STRATEGIC PRIORITIES
our growth ambitions are underpinned by our
financial strength and the nearer term value
generated from our defined benefit business.
We continue to grow our business
sustainably to achieve our strategic
ambitions. We have maintained
our focus on capital whilst also
strengthening our focus on
transformation, customer, growth,
and innovation across the Group.
We are looking at more ways in
which we can help people in later
life during times of economic stress.
1.
GROW
SUSTAINABLY
2.
TRANSFORM
HOW WE WORK
FOCUS
continue to build profitable and sustainable
growth over the medium term to maximise
opportunities available to us and build
shareholder value through the operation
of a sustainable capital model and
proposition development.
FOCUS
We have foundations in place and continue to
streamline and automate our operations across
the business, evolving our workplace; making it
fit for the future and the customers and partners
we support.
2022 PROGRESS
• completion of the property related
management actions and exposure
materially reduced. We have improved
financial strength and resilience.
• We have the investment team, origination
capabilities and controls in place to deliver
£1bn+ pa of non-ltM illiquid origination to
support business growth.
2022 PROGRESS
• completion of our key deliverables in
retail digitisation and back office.
• creation of new technology capability
supports further development within
our process automation ambitions.
• We continue to evolve operations within
our business lines and functions to be
able to service our customers for the future.
• our medically underwritten lifetime
• our new london property supports our
prospective and current retail customers to
showcase business leadership and advisers
ambitions as well as employee engagement
mortgages are now a material business
segment and provide us with a competitive
advantage.
• Reflecting the progress made to improve
the resilience of the balance sheet, we are
broadly economically neutral on interest
rate movements up and down.
sustainability ambitions and has transformed
the hybrid working experience for our colleagues.
2023 FOCUS
• continue to take advantage of the multiple
growth opportunities available to us whilst
being capital generative and preserving
economic value.
2023 FOCUS
• continuation of our transformation initiatives
with a focus on enabling sufficient scalability
across the Group.
2023 FOCUS
2023 FOCUS
2023 FOCUS
• Grow our dB business, enhancing our
• Maturity of our customer experience
• continue to drive our purpose led culture.
propositions and scalability. Embed our
framework, setting new standards across the
Building and leading high performing teams
innovative retail solutions with our partners
Group. combining the efforts of regulatory
and developing our capabilities.
and intermediaries.
driven and strategic initiatives to add value for
the end customer and support our partners.
LINK TO ONGOING RISKS:
a
d
b
c
e
f
LINK TO ONGOING RISKS:
a
d
b
c
e
f
LINK TO RISK OUTLOOK:
1
6
4
2
3
5
7
16
LINK TO RISK OUTLOOK:
1
6
4
2
3
5
7
LINK TO ONGOING RISKS:
a
1
b
2
c
3
d
4
e
5
LINK TO RISK OUTLOOK:
f
6
7
LINK TO ONGOING RISKS:
a
1
b
2
c
3
d
4
e
5
LINK TO RISK OUTLOOK:
f
6
7
LINK TO ONGOING RISKS:
a
1
b
2
c
3
d
4
e
5
LINK TO RISK OUTLOOK:
f
6
7
PRINCIPAL RISKS AND UNCERTAINTIES
Ongoing risks:
A Market
B credit
C Insurance
D liquidity
E conduct and
operational
f Strategic
Risk outlook:
1 Political and regulatory
2 climate and
environmental, social
and governance (“ESG”)
3 cyber and technology
4 Insurance
5 Market
6 liquidity
7 Strategic
GROW THROUGH
INNOVATION
GET CLOSER TO
OUR CUSTOMERS
AND PARTNERS
BE PROUD TO
WORK AT JUST
FOCUS
FOCUS
FOCUS
develop our insight and evolve our customer
Invest in our propositions; enhancing our
Building a solid foundation to support the next
strategy to position our propositions to achieve
existing services to get closer to our customers
phase of our growth transformation.
long-term success.
and partners.
2022 PROGRESS
2022 PROGRESS
2022 PROGRESS
• We have executed and further established
• We have introduced customer and partner
• We are a signatory to the Association of
our dB partnering proposition through our
experience measures across the Group
British Insurer (“ABI”) Making Flexible
second deal.
enabling us to efficiently measure and track
Work charter, supporting flexible working,
• We have developed a single-tie Guaranteed
progress to ultimately improve the experience
diversity and inclusion in the workplace.
Annuity Rate proposition to support our
and interaction with Just.
• We successfully launched our
strategic partnerships in the marketplace.
• Building on the success of the first Just Group
sustainability story.
• We use customer research and user-centred
Vulnerable customer Awards, we hosted the
• our staff moved to a new london office,
design techniques to explore the needs of our
2022 Just Vulnerable customer Awards, to
further supporting our sustainability
determine how we might develop improved
who support vulnerable customers.
and wellbeing.
customer solutions that solve their needs. this
• over 12,000 intermediaries and other
• We have embedded a hybrid working
enhanced understanding will further support
colleagues have registered to use our
approach, supporting flexibility whilst
the intermediaries and partners we work with
‘consumer Vulnerability in later life’ online
ensuring colleagues stay connected.
through the innovative solutions we provide.
training module, identified by the Financial
• We have implemented our employee wellbeing
conduct Authority as an example of good
strategy incorporating a range of initiatives,
practice and supporting our purpose to help
with a particular focus on financial wellbeing.
people achieve a better later life.
strategic report
GROW
SUSTAINABLY
TRANSFORM
HOW WE WORK
FOCUS
FOCUS
continue to build profitable and sustainable
We have foundations in place and continue to
growth over the medium term to maximise
streamline and automate our operations across
opportunities available to us and build
the business, evolving our workplace; making it
shareholder value through the operation
fit for the future and the customers and partners
of a sustainable capital model and
we support.
proposition development.
2022 PROGRESS
2022 PROGRESS
• completion of the property related
• completion of our key deliverables in
management actions and exposure
retail digitisation and back office.
materially reduced. We have improved
• creation of new technology capability
financial strength and resilience.
supports further development within
• We have the investment team, origination
our process automation ambitions.
capabilities and controls in place to deliver
• We continue to evolve operations within
£1bn+ pa of non-ltM illiquid origination to
our business lines and functions to be
support business growth.
able to service our customers for the future.
• our medically underwritten lifetime
• our new london property supports our
mortgages are now a material business
sustainability ambitions and has transformed
segment and provide us with a competitive
the hybrid working experience for our colleagues.
advantage.
• Reflecting the progress made to improve
the resilience of the balance sheet, we are
broadly economically neutral on interest
rate movements up and down.
3.
GROW THROUGH
INNOVATION
4.
GET CLOSER TO
OUR CUSTOMERS
AND PARTNERS
5.
BE PROUD TO
WORK AT JUST
FOCUS
develop our insight and evolve our customer
strategy to position our propositions to achieve
long-term success.
FOCUS
Invest in our propositions; enhancing our
existing services to get closer to our customers
and partners.
FOCUS
Building a solid foundation to support the next
phase of our growth transformation.
2022 PROGRESS
• We have executed and further established
our dB partnering proposition through our
second deal.
• We have developed a single-tie Guaranteed
Annuity Rate proposition to support our
strategic partnerships in the marketplace.
• We use customer research and user-centred
design techniques to explore the needs of our
prospective and current retail customers to
determine how we might develop improved
customer solutions that solve their needs. this
enhanced understanding will further support
the intermediaries and partners we work with
through the innovative solutions we provide.
2022 PROGRESS
• We have introduced customer and partner
experience measures across the Group
enabling us to efficiently measure and track
progress to ultimately improve the experience
and interaction with Just.
• Building on the success of the first Just Group
Vulnerable customer Awards, we hosted the
2022 Just Vulnerable customer Awards, to
showcase business leadership and advisers
who support vulnerable customers.
• over 12,000 intermediaries and other
colleagues have registered to use our
‘consumer Vulnerability in later life’ online
training module, identified by the Financial
conduct Authority as an example of good
practice and supporting our purpose to help
people achieve a better later life.
2022 PROGRESS
• We are a signatory to the Association of
British Insurer (“ABI”) Making Flexible
Work charter, supporting flexible working,
diversity and inclusion in the workplace.
• We successfully launched our
sustainability story.
• our staff moved to a new london office,
further supporting our sustainability
ambitions as well as employee engagement
and wellbeing.
• We have embedded a hybrid working
approach, supporting flexibility whilst
ensuring colleagues stay connected.
• We have implemented our employee wellbeing
strategy incorporating a range of initiatives,
with a particular focus on financial wellbeing.
2023 FOCUS
2023 FOCUS
• continue to take advantage of the multiple
• continuation of our transformation initiatives
growth opportunities available to us whilst
with a focus on enabling sufficient scalability
being capital generative and preserving
across the Group.
economic value.
2023 FOCUS
• Grow our dB business, enhancing our
2023 FOCUS
• Maturity of our customer experience
propositions and scalability. Embed our
innovative retail solutions with our partners
and intermediaries.
framework, setting new standards across the
Group. combining the efforts of regulatory
driven and strategic initiatives to add value for
the end customer and support our partners.
2023 FOCUS
• continue to drive our purpose led culture.
Building and leading high performing teams
and developing our capabilities.
LINK TO ONGOING RISKS:
a
1
b
2
c
3
d
4
e
5
LINK TO RISK OUTLOOK:
f
6
7
LINK TO ONGOING RISKS:
a
1
b
2
c
3
d
4
e
5
LINK TO RISK OUTLOOK:
f
6
7
LINK TO ONGOING RISKS:
a
d
b
c
e
f
LINK TO ONGOING RISKS:
a
d
b
c
e
f
LINK TO ONGOING RISKS:
a
d
b
c
e
f
LINK TO RISK OUTLOOK:
1
6
4
2
3
5
7
LINK TO RISK OUTLOOK:
1
6
4
2
3
5
7
17
LINK TO RISK OUTLOOK:
1
6
4
2
3
5
7
FINANCIAL STATEMENTSGOVERNANCE JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
DEFINED BENEFIT DE-RISKING MARKET
CELEBRATING
10 YEARS OF HELPING
CUSTOMERS
I N G CUST
H E L
O
S
P
M
E
R
We launched our defined benefit
solutions business in 2013 and in this
short time we’ve come a long way.
TRANSACTIONS COMPLETED
292
£12.8bn
1-in-6
VALUE OF TRANSACTIONS
COMPLETED SINCE 2013
We’ve completed 1-in-6 of
the > 1,6001 transactions
completed since 2013
1 Includes Just estimate of
transactions for H2 2022.
18
We’ve established a strong reputation with pension
scheme trustees, sponsors and professional advisers
and established a leading position in the small and
medium transaction size segments of the market.
Although we’ve successfully completed over 290
transactions and invested £12.8bn of members’ pension
savings, in many ways we’re just getting into our stride.
We see significant untapped potential to grow our
business and extend our franchise into additional
segments of the market.
READ MORE IN THE MARKET SECTION
ENTERING THE MARKET – HELPING THE CUSTOMER THE JUST WAY
We’ve always had strong innovation credentials, right back to the day when
we launched the company. When we entered the defined benefit de-risking
market we used this innovation and underwriting expertise to create a point
of difference in the market.
When we designed our service we were very clear – the pension scheme
member must come first. We knew trustees would demand the best
outcome and service for their members. As the retirement specialist, we
had deep insight into the needs of customers and a strong track record in
delivering outstanding service. this forensic focus on the member has been
a major reason why trustees award new and repeat business to Just Group
and why we are confident in fulfilling our purpose.
THE EARLY YEARS AND CHANGING SHAPE OF THE MARKET
the majority of the business we completed in our earlier years was for
transactions known as a Buy-in. this is an insurance contract that pays a
guaranteed stream of income to the pension scheme trustees sufficient
to cover the liabilities of a defined group of members. these transactions
were for smaller pension schemes to cover the liabilities for members
whose pensions were already in payment. More recently, as pension
scheme funding has improved and pricing for deferred pensioners has
become more attractive, the market has moved towards full scheme
Buy-ins. these make up the majority of transactions we won during 2022.
AGILITY – ACCESSING A RANGE OF SOLUTIONS
We have to be agile and flexible to meet the needs of our customers and
stakeholders. Because we know two transactions are never the same –
we have developed a range of services and transaction structures.
one example is our partnering proposition that we have successfully used
to transact larger deals such as those we completed with the sponsors of
the AA and Barloworld pension schemes. through our portfolio of reinsurance
partners we utilised funded reinsurance arrangements and this enabled us
to optimise our use of capital with our ambition to grow sales.
CONTINUING TO INNOVATE
We’re never short of ideas at Just, we are always thinking how we can
disrupt markets to deliver better outcomes for our customers. one of
the main constraints in dB de-risking is human capital. of the 5,000 plus
defined benefit pension schemes in the uK, almost three quarters have
assets of less than £100m, and nearly 1,500 of these have assets less than
£10m. the key to increasing access for these smaller schemes to dB
de-risking, is to provide a very efficient solution.
Just is leading the way here through our innovative proprietary service.
We’ve developed and implemented a streamlined bulk quotation service.
Just | DB De-risking transaction values 2013-2022 (£m)
3,000
2,500
2,000
1,500
1,000
500
14,000
12,000
10,000
8,000
6,000
4,000
2,000
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Annual transactions (left axis)
Cumulative transactions (right axis)
It’s having a material impact in this space, and has really helped to establish
our franchise with our target audience.
We receive member and scheme data directly from the trustee, or employee
benefit consultant, and we agree a target price. our streamlined service then
monitors our pricing, and when it aligns with the target price, we quickly
execute using standard terms. to date, we have completed 61 transactions
using this service. Some of these are repeat business, but for many schemes,
this will be their first transaction with us.
FOCUSING ON THE MEMBER AND THE CLIENT GENERATES REPEAT BUSINESS
When we transact with a pension scheme – the transaction may be for a
small part of their overall scheme. their de-risking journey often consists of
a number of transactions over many years. We’ve developed a very strong
reputation with the schemes we’ve transacted with, for providing excellent
service, demonstrating flexibility, and investing in our relationship with them.
this in turn has translated into real commercial benefits, and the trustees of
these schemes often develop a preference for doing subsequent, or repeat
transactions with us.
We have completed 49 repeat transactions with our existing customers’,
and in the process we are building real franchise value. to bring that to
life, we’ve written £2.0bn of repeat transaction premiums. those customers
initial transactions were £2.3bn. this is a very strong endorsement from the
trustees of our service and the member experience we provide at Buy-out
when members become policyholders of Just Group.
INVESTING IN THE UK
the £12.8bn of dB premiums we’ve secured have been invested to ensure
we achieve the predictable cash flow required to pay the pensions of scheme
members. We’ve invested billions of pounds sustainably, across social
housing, utilities and infrastructure including offshore wind farms and solar.
these investments deliver value for pension scheme members and help to
support growth in the economy.
READ MORE ABOUT OUR INVESTMENTS ON PAGE 34
OUTLOOK
We are participating in a highly attractive market with long term growth
prospects. We have strong capabilities, an excellent reputation and a clear
strategy to achieve profitable growth. We are increasingly optimistic about
the future.
OUR DEVELOPMENTS
2013
First deal
2015
First repeat transaction
2018
First deal over £250m
2019
First dB partner deal
2020
deferred proposition
launched
2023
our largest dB transaction
£513m full scheme Buy-in
for one of the Melrose Group
pension schemes
19
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
KEY PERFORMANCE INDICATORS
the Board has adopted the following metrics,
which are considered to give an understanding
of the Group’s underlying performance drivers.
these measures are referred to as key
performance indicators (“KPIs”).
the Board keeps KPIs under review to ensure they continue to reflect the
Group’s priorities and strategic objectives.
the balance of KPIs across capital, sales, expenses, profit and net assets.
reflect the Group’s focus on monitoring and controlling its costs and
growing capital.
MEASURED AGAINST OUR STRATEGIC PRIORITIES
1. Grow sustainably
2. transform how we work
3. Grow through innovation
4. Get closer to our customers and partners
5. Be proud to work at Just
SEE PAGE 16 FOR OUR STRATEGIC PRIORITIES
1 Alternative performance measure. See glossary on page 196 for definition.
2 Solvency II capital coverage ratios as at 31 december 2021 and 31 december
2022 include a recalculation of transitional measures on technical provisions
(“tMtP”) as at the respective dates.
RETURN ON EQUITT1 – 10.7%
Return on equity is underlying operating profit after attributed tax for the
period expressed as a percentage of the average tangible net asset value
over the period, where tangible net asset value is IFRS total equity excluding
goodwill and other intangibles, net of tax, and excluding equity attributable
to tier 1 noteholders.
UNDERLYING OPERATING PROFIT1 – £249M
underlying operating profit is calculated in the same way as adjusted
operating profit before tax but excludes operating experience and
assumption changes.
2022
2021
2020
10.7
8.3
7.9
2022
2021
2020
249
210
193
LINK TO STRATEGIC PRIORITIES 1,3
LINK TO STRATEGIC PRIORITIES 1,3
UNDERLYING ORGANIC CAPITAL GENERATION/
(CONSUMPTION)1,2 – £29M
underlying organic capital generation/(consumption) is the net increase/
(decrease) in Solvency II excess own funds over the year, generated from
ongoing business activities, and includes surplus from in-force, net of new
business strain, cost overruns and other expenses and debt interest. It
excludes economic variances, regulatory adjustments, capital raising or
repayment and impact of management actions and other operating items.
the Board believes that this measure provides good insight into the ongoing
capital sustainability of the business.
2022
2021
2020
18
LINK TO STRATEGIC PRIORITIES 1,3
29
51
RETIREMENT INCOME SALES 1 – £3,131M
Retirement Income sales include dB, GIfl and care premiums written and
are a key measure of the Group’s performance in these core product areas.
Retirement Income sales are reconciled to IFRS gross premiums in note 6
to the consolidated financial statements.
2022
2021
2020
20
LINK TO STRATEGIC PRIORITIES 3,4
3,131
2,674
2,145
NEW BUSINESS OPERATING PROFIT1 – £233M
new business operating profit represents the profit generated from new
business written in the year after allowing for the establishment of prudent
reserves for future expected annuity payments and maintenance expenses
and for acquisition expenses. Acquisition expenses include the commission
and trading costs, plus overhead costs, associated with writing new business.
new business operating profit is reconciled to IFRS profit before tax in the
Business Review.
ADJUSTED OPERATING PROFIT
BEFORE TAX1 – £336M
Adjusted operating profit before tax is the sum of the new business
operating profit and in-force operating profit together with the impact
of one-off assumption changes, experience variances, results of
the other Group companies and financing costs. the Board believes
that adjusted operating profit, which excludes the effects of short-
term economic and investment changes, provides a better view
of the longer-term performance and development of the business
and aligns with the longer-term nature of the products. Adjusted
operating profit is reconciled to IFRS profit before tax on page 36.
2022
2021
2020
233
225
199
2022
2021
2020
336
238
239
LINK TO STRATEGIC PRIORITIES 1,3
LINK TO STRATEGIC PRIORITIES 1,3
IFRS (LOSS)/PROFIT BEFORE TAX – £(317)M
IFRS (loss)/profit before tax represents the (loss)/profit before tax attributable
to equity holders. the Group experienced investment and economic losses of
£639m in 2022 driven by £510m of losses from the increase in risk-free rates
during the period. the Group takes an active approach to hedging its interest
rate exposure. In the second half of 2021 and across 2022, as rates rose
and our solvency position strengthened, we gradually reduced the interest
rate hedging to a broadly economically neutral position. A reconciliation
of the operating profit to statutory IFRS results is shown on page 26 in the
Business Review.
MANAGEMENT EXPENSES1 – £153M
Management expenses are the business as usual costs incurred and include
all operational overheads. they are calculated as other operating expenses
excluding investment expenses and charges and reassurance management
fees, which are largely driven by strategic decisions, and amortisation of
acquired intangible assets as these relate to merger and acquisition activity.
the use of this metric provides the Board with a better view of the Group’s
cost base and how they support both development and transformation
and business as usual activities, ensuring that they are able to be carefully
monitored and controlled. other operating expenses continue to be a useful
measure alongside management expenses. Management expenses are
reconciled to IFRS other operating expenses in note 4 on page 147.
2022
(317)
2021
2020
(21)
2022
2021
2020
237
153
147
159
LINK TO STRATEGIC PRIORITIES 1,3
LINK TO STRATEGIC PRIORITIES 1,2
SOLVENCY II CAPITAL COVERAGE
RATIO2 – 199% (ESTIMATED)
Solvency II capital is the regulatory capital measure and is focused on by the
Board in capital planning and business planning. It expresses the regulatory
view of the available capital as a percentage of the required capital.
IFRS NET ASSETS – £2,178M
IFRS net assets represents the net assets attributable to equity holders.
2022
2021
2020
199
164
156
2022
2021
2020
2,178
2,440
2,490
LINK TO STRATEGIC PRIORITIES 1
LINK TO STRATEGIC PRIORITIES 1
21
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
BUSINESS REVIEW
STRONG AND
SUSTAINABLE GROWTH
our strong capital base and compelling proposition
in the market provide us with a solid foundation
to deliver ongoing sustainable growth.
ANDY PARSONS
Group chief Financial officer
22
£336m
ADJUSTED OPERATING
PROFIT BEFORE TAX
2021: £238m, up 41%
199%
SOLVENCY II CAPITAL
COVERAGE RATIO1
2021: 164%, up 35 percentage points
1.73p
DIVIDEND
Annualised 2021: 1.5 pence
per share, up 15%
the Group operates in attractive markets, with solid structural growth
drivers. By leveraging our strong capabilities, brand and reputation we are
well placed to take advantage of the expected boost in demand for our
products following the rise in long term interest rates during 2022. We will
continue to innovate, risk select and price with discipline, ensuring our
business model delivers long-term value for customers and shareholders.
the Business Review presents the results of the Group for the year ended
31 december 2022, including IFRS and unaudited Solvency II information.
the business continues to benefit from the strong positive progress achieved
in previous years, in particular, a transformed, low capital intensity new
business model, combined with a strengthened and increasingly resilient
capital base. After right sizing the cost base, we continue to maintain strong
cost discipline across the business and are investing to enable the business
to scale efficiently. We are also diversifying the asset portfolio backing our
customer commitments by originating an increasing proportion of illiquid
assets to back the new business in line with our investment strategy.
the dB business goes from strength to strength as the £5bn pipeline at the
half year stage translated into the strongest six months of dB sales on record
for Just. the drivers behind this momentum remain and we expect a very
busy 2023, as we execute on small, medium and larger transactions, while
maintaining pricing discipline and capital flexibility. the steep rise in interest
rates during 2022 has had a positive impact as it further reduces dB scheme
funding deficits, thereby making de-risking transactions more affordable.
Many schemes are already or approaching fully funded sooner than they had
expected, and hence able to accelerate their de-risking plans. Post year end,
in February 2023, we completed our largest transaction to date at £513m,
and have signed or are exclusive on a number of other medium sized deals.
In July, utilising our dB partnering model, we reinsured the investment as
well as longevity risks on just over half of a £484m transaction, our largest
deal of the year. After allowing for the upfront origination fee received from
our external reinsurance partner, this transaction created £24m of new
business profit and was in aggregate marginally capital generative for Just.
this capital light transaction is an example of our innovation – it increases our
participation in the above £100m transaction size segment, where we have
significant opportunity to grow, and generates upfront fee income to offset
new business capital strain. this type of transaction is repeatable, scalable
and provides optionality going forward, with employee benefit consultants
(“EBcs”) supportive as the external capital increases overall market capacity.
during 2022, underlying operating profit was £249m (2021: £210m), a rise
of 19%, ahead of our medium term annualised profit growth target. Rising
interest rates during 2022 boosted the return on surplus assets, thereby
increasing in-force operating profit, up 29% to £116m, while proactive
management of our debt profile in September 2021 and november 2022 has
materially reduced finance costs. Shareholder funded Retirement Income
sales2 of £3,131m were 17% higher than 2021, as a 33% increase in dB
business was offset by a 24% decline in GIfl/care volumes. new business
profit, which includes the dB partner origination fee, was up 4% at £233m
(2021: £225m), translating to a new business margin of 7.4% (2021: 8.4%)
on shareholder funded premiums. the higher interest rates that benefited
the in-force operating profit during the year, also reduces the size of each
individual dB transaction as well as reducing the new business margin.
the significant rise, of c.275bps in long term interest rates during 2022 also
led to IFRS losses of £510m from hedges used to protect the Solvency II
balance sheet. these hedges had produced profits as interest rates fell in
previous years. during the year, we actively reduced the level of interest rate
hedging as the capital position strengthened, with the sensitivity at year end
2022 now close to zero (c.£7m of IFRS profit for a 100 basis point increase in
long term rates compared to £526m loss at year end 2021). cumulatively
since 2018, we have incurred a net loss of £226m (pre-tax) on interest rate
hedging as profits when rates fell in 2019/2020 were more than offset by
losses incurred as rates rose more significantly over the past two years.
other economic variances included negatives from widening credit spreads
(£112m) and property growth experience (£22m), which at 2% for the year
was a little below our long term 3.3% annual growth assumption (2021:
3.3%). We also incurred a £95m loss on asset timing variance, which is
expected to reverse as we acquire the desired asset mix during the first
half of 2023 and a £49m loss from the third and final ltM portfolio sale in
February 2022. taken together, these investment and economic losses of
£639m, when combined with other items led to an overall loss after tax for
the year of £232m (2021: loss of £16m).
the Group’s Solvency II capital position strengthened significantly during the
year, increasing by 35 percentage points to 199% (31 december 2021: 164%1).
Rising rates drove most of the increase, by reducing the solvency capital
requirement (“ScR”) and risk margin, although this in turn leads to a smaller
unwind subsequently through in-force surplus. despite reduced unwind
of capital following the rise in rates, underlying organic capital generation
(“uocG”) during 2022 was robust at £29m (2021: £51m), marking three years
of positive underlying organic capital generation. Within this, capital strain
from writing new business increased to £60m, reflecting the significantly
higher volumes of business written during the year. new business strain at
1.9% of premium (2021: 1.5% of premium) is based on target asset mix, with
any timing differences taken as an investment variance. this low level of
new business strain is due to our continued focus on strong pricing discipline,
risk selection and business mix. Sustainable growth through a capital self-
sufficiency business model continues to be a central pillar of how we run the
business. Furthermore, management actions were £15m (2021: £16m) and
other, driven by a longevity assumption change, was £90m. When added
to the uocG this leads to a total of £134m of organic capital generation
(2021: £93m), which boosted the capital coverage ratio by 5 percentage
points. the solvency sensitivity to property was further reduced following
completion of our third and final planned ltM portfolio sale in February 2022,
and remains within risk appetite. no further portfolio sales are anticipated.
Recognising the resilience and strengthened financial position of the Group,
we recommenced dividends at FY 2021 and paid a £16m distribution to
shareholders during the year.
In 2023, as legislation is finalised within the Financial Services and Markets
bill, we expect further clarification from the PRA following HM treasury’s
announcement to reform Solvency II and introduce a new Regulatory
Framework for financial services following the uK’s exit from the European
union. the chancellor’s Autumn Statement in november very positively
outlined a 65% reduction in the risk margin (which will help to reduce
the size and volatility of the solvency balance sheet), measures to widen
eligibility criteria for matching adjustment assets, such as callable bonds or
assets with a construction phase where the commencement of cashflows
is not exactly certain, and no changes to the fundamental spread of the
matching adjustment, which remains a critical component of the Solvency
uK regulatory regime. We are very supportive of and keen to see swift
progress on the proposed reforms, which will better enable insurers to
support the economy and the government’s various agendas including
“levelling up”, decarbonisation and, increased investment in science and
technology. We await further detail on timing and implementation.
1 Solvency II capital coverage ratios as at 31 december 2021 and 31 december 2022 include a recalculation of tMtP as at the respective dates.
2 the retirement income sales included in this new business margin has been calculated based on the July dB partnering premium after deducting the dB partner share.
23
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
BUSINESS REVIEW continued
RETURN ON EQUITY
the return on equity in the year to 31 december 2022 was 10.7% (2021: 8.3%),
based on underlying operating profit after attributed tax of £202m (2021:
£170m) arising on average tangible net assets of £1,891m (2021: £2,048m).
tangible net assets are reconciled to IFRS total equity as follows:
IFRS total equity
less intangible assets
less tax on amortised intangible assets
less equity attributable to tier 1 noteholders
Tangible net assets
Return on equity
31 December
2022
£m
31 december
2021
£m
2,178
2,440
(104)
15
(322)
1,767
10.7%
(120)
17
(322)
2,015
8.3%
UNDERLYING OPERATING PROFIT AND ADJUSTED OPERATING PROFIT BEFORE TAX
underlying operating profit is the core performance metric on which we have
based our target 15% growth, per annum, on average, over the medium
term. underlying operating profit captures the performance and running
costs of the business including interest on the capital structure, but excludes
operating experience and assumption changes, which by their nature
are unpredictable and can vary substantially from period to period. 2022
underlying operating profit grew by 19% to £249m (2021: £210m), which is
a very solid start towards our medium term target, albeit year to year, the
trajectory may be influenced by timing differences in relation to larger
dB transactions.
new business operating profit
In-force operating profit
other Group companies’ operating
results
development expenditure
change
Reinsurance and finance costs
Underlying operating profit
operating experience and assumption
changes
Adjusted operating profit before tax1
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
change
%
233
116
(15)
(12)
(73)
249
87
336
225
90
(15)
(7)
(83)
210
28
238
4
29
–
71
(12)
19
211
41
1 new business operating profit is reconciled to IFRS loss (via adjusting operating profit before
tax) further in this Business Review.
New business operating profit
new business operating profit was up 4% at £233m for the year ended
31 december 2022 (2021: £225m), as shareholder funded Retirement
Income sales rose 17% to £3,131m (2021: £2,674m). the new business
margin achieved on Retirement Income sales during the period was lower
at 7.4% (2021: 8.4%). We are achieving similar spreads compared to the
prior year, however, due to higher interest rates, the new business profit
we recognise is now being discounted at a higher rate than the prior year,
and hence the margin is lower.
At this time, the outlook for the economy continues to evolve reflecting
geopolitical and other macro-economic concerns including the trajectory
of interest rates to reduce and control inflation, and associated slowing of
the uK and global economies. the key sensitivities of the Group’s capital and
financial position to future economic and demographic factors are set out
below and in notes 17 and 23 of the financial statements. We expect these
macro forces to have a negligible effect on the Group’s business model with
demand for our products boosted by higher interest rates. We have a low
strain new business model that is generating sufficient underlying capital to
fund our ambitious growth plans, whilst also paying a shareholder dividend
that is expected to grow over time.
ALTERNATIVE PERFORMANCE MEASURES AND KEY PERFORMANCE INDICATORS
Within the Business Review, the Group has presented a number of
alternative performance measures (“APMs”), which are used in addition to
IFRS statutory performance measures. the Board believes that the use of
APMs gives a more representative view of the underlying performance of
the Group. the APMs used by the Group are: return on equity, Retirement
Income sales, underlying organic capital generation, new business operating
profit, adjusted operating profit before tax, underlying operating profit,
management expenses, organic capital generation, in-force operating profit,
adjusted earnings and adjusted earnings per share. Further information
on our APMs can be found in the glossary, together with a reference to
where the APM has been reconciled to the nearest statutory equivalent.
the Board has also adopted a number of key performance indicators (“KPIs”),
which include certain APMs, and are considered to give an understanding
of the Group’s underlying performance drivers. KPIs are regularly reviewed
against the Group’s strategic objectives to ensure that we continue to
have the appropriate set of measures in place to assess and report on
our progress. In addition, the return on equity (target 10%) and adjusted
earnings per share calculations have been updated to be consistent with
the 15% medium term growth metric, based on underlying operating profit.
this reflects the Group’s focus on profitable and sustainable growth, and
provide a balance of KPIs across profit, sales, expenses, capital and net
assets. the Group’s KPIs are discussed in more detail on the following pages.
the Group’s KPIs are shown below:
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
Return on equity1
Retirement Income sales1
Underlying organic capital generation1
New business operating profit1
Adjusted operating profit before tax1
Underlying operating profit1
IFRS loss before tax
Management expenses1
10.7%
3,131
29
233
336
249
(317)
153
8.3% 2.4pp
2,674
17%
51
(43)%
225
238
210
(21)
147
4%
41%
19%
15x
4%
Solvency II capital coverage ratio2
IFRS net assets
31 December
2022
£m
199%
2,178
31 december
2021
£m change
164%
35pp
2,440
(11)%
1 Alternative performance measure, see glossary. the return on equity (target 10%)
calculation has been updated to be consistent with the 15% medium term growth metric.
2 Solvency II capital coverage ratios as at 31 december 2021 and 31 december 2022 include a
recalculation of tMtP as at the respective dates.
24
Management expenses
Management expenses have increased by 4% to £153m for the year ended
31 december 2022 (2021: £147m). Following the end of a formal three year
cost reduction programme in 2021, management expenses continue to be
contained. We have maintained a sharp focus on cost control, with selective
investment in the business, such as the Investments and dB functions as
we continue to build in-house capability to write larger dB transactions on
a more frequent basis, and investing in the HuB destination Retirement
business. Going forward, premium and business growth is expected to
outpace costs, thus further improving operational leverage.
In-force operating profit
In-force operating profit increased by 29% to £116m for the year ended
31 december 2022 (2021: £90m). Aside from the positive impact of credit
spread widening, the Group’s in-force operating profit also benefited from
the impact of rising rates, which has boosted the return on surplus assets.
Other Group companies’ operating results
the operating result for other Group companies was a loss of £15m (2021:
loss of £15m). these costs arise from the holding company, Just Group plc,
and the HuB group of businesses.
Development expenditure
development expenditure of £12m for the year ended 31 december
2022 (2021: £7m), mainly relates to product development, proposition
enhancement and new initiatives. It also includes preparations for the
new insurance accounting standard IFRS 17 and distribution improvements
such as online capability and digital access.
Reinsurance and finance costs
Finance costs have decreased by 12% to £73m (2021: £83m). these include
the coupon on the Group’s Restricted tier 1 notes, as well as the interest
payable on the Group’s tier 2 and tier 3 notes. the decrease for the period is
due to the opportunistic refinancing in September 2021 of the 2019 issued
Restricted tier 1 bond, with a new £325m Sustainability Restricted tier 1
bond. this discrete bond refinancing reduced the interest costs on the
Rt1 component of the capital structure by £12m pre-tax per annum, while
also lengthening the bond maturity to 2031. In november 2022, the Group
tendered for and cancelled £76m of 9% tier 2 debt due in 2026, which will
lead to additional interest savings in 2023 as the Group further optimises
its capital structure and debt profile.
during the first half of 2022, the Group entered into a new five year revolving
credit facility, with improved commercial terms. the facility has increased
from £200m to £300m, with flexibility for this to grow as the balance sheet
expands over time. this facility has not been drawn upon in 2022.
Operating experience and assumption changes
over the past two years, the Group has actively continued to assess the
potential impact of coVId-19 on longer term mortality and has increasingly
incorporated coVId-19 experience data and medical understanding into
our pricing and reserving assumptions, as it became available. As usual, the
Group carried out a full basis review in december 2022, and has updated its
longevity reserving using the cMI 2021 mortality tables (2021: cMI 2019) and
reviewing mortality rates experienced over the past three years. the Group
continues to allow for future improvements in long-term mortality, but
with nearer term mortality also reflecting the heightened mortality being
experienced post pandemic. our assessment of the long-term impact of
the pandemic on the population, including the health of those who have
recovered from the disease, the future efficacy of the various vaccines
and secondary impacts such as delayed diagnosis for other illnesses or
behavioural changes continues to evolve. However, these factors, combined
with the winter flu season, longer nHS waiting lists and inflation pressures
on incomes are undoubtedly contributing to continued elevated deaths
across the population, which we have sought to reflect in our year end
assumption. there were a number of very minor changes to the Group’s other
assumptions in 2022. Sensitivity analysis is shown in notes 17 and 23, which
sets out the impact on the IFRS results from changes to key assumptions,
including mortality and property.
overall, operating experience and assumption changes were £87m
(2021: £28m). the Group reported negative operating experience of £5m
in 2022 (2021: positive £33m), as positive annuitant mortality experience
and modelling adjustments were more than offset by increased early
redemptions within our ltM book, above our redemption assumption, as
customers took advantage of the competitive rates on offer to refinance
before rates rose and thus reducing interest roll-up. Assumption changes
resulted in a £92m release (2021: £5m strengthening), and were almost
entirely driven by the mortality assumption change, as per above.
Adjusted operating profit before tax
Adjusted operating profit before tax, was £336m (2021: £238m). Adjusted
operating profit before tax is the sum of underlying operating profit and
operating experience and assumption changes.
on a statutory IFRS basis, the Restricted tier 1 coupon is accounted for as
a distribution of capital, consistent with the classification of the Restricted
tier 1 notes as equity, but the coupon is included as a finance cost on an
adjusted operating profit basis.
RETIREMENT INCOME SALES
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
change
%
defined Benefit de-risking Solutions
(“dB”)
Guaranteed Income for life Solutions
(“GIfl”) and care Plans (“cP”)
Retirement Income sales
2,567
1,935
33
564
3,131
739
2,674
(24)
17
the structural growth drivers that underpin our markets are unchanged.
Shareholder funded Retirement Income sales for the year ended
31 december 2022 rose 17% to £3,131m (2021: £2,674m).
In early 2021, we expanded our proposition in the dB de-risking market
to meet fully the needs of schemes and trustees by adding dB deferred
capability, which enabled us to increase our access to the c.£1.5tn dB market
opportunity. Prior to 2022, scheme funding levels across the industry had
been steadily improving primarily due to increased contributions from
sponsors, and therefore more schemes were able to afford full scheme
de-risking and buyout (with deferreds) as opposed to pensioner only
de-risking. during 2022, rising interest rates accelerated the funding gap
closure, which means that more schemes will commence the process
to be “transaction ready” and hence bring business forward into the 2023
and medium term pipeline from ordinarily expecting to transact in the
second half of the decade. our efforts in 2021 were recognised by being
named “Risk Management Provider of the Year” at the Pensions Age awards
in February 2022.
Shareholder funded dB sales were £2,567m, an increase of 33%. Activity
levels were significantly ahead of the comparable period as we closed 56
transactions (2021: 29 transactions) aided by our proprietary bulk quotation
service and repeat business. this level of transaction activity is estimated
to reflect over a quarter of all transactions in the market – a very strong
endorsement of our dB new business franchise. In July, we completed a
£484m deal utilising our dB partnering model. Adding the £259m dB partner
premium to Just’s shareholder funded dB sales led to total dB market
volumes of £2,826m, up 46% on prior year.
We expect industry volumes for 2022 to be c.£30bn (2021: £27.7bn), and
therefore our market volume share to be close to 10%. our confidence in
substantial market growth in 2023 is underpinned by lane clark Peacock
(“lcP”) who anticipate that dB market volumes could exceed the record
£44bn achieved in 2019, while Willis towers Watson expect in excess of
£40bn of Buy-in/Buy-out dB transactions. our near term actively quoting
pipeline is over £6bn, and we expect a busy year with a greater number of
medium and large transaction opportunities coming to market. However, the
long-term growth opportunity is very substantial with lcP forecasting up to
£600bn of dB Buy-in and Buy-out transactions over the decade to 2032, as
funding deficits in the largest schemes are closed. Indeed, over the next
three years, more than £200bn could transact, similar to the amount that
transacted during the last decade. We will take advantage of this very strong
25
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
BUSINESS REVIEW continued
market backdrop through our low strain new business model, which enables
us to fund our ambitious growth plans through underlying organic capital
generation, and utilising various forms of reinsurance through dB partnering.
When combined with our proven ability to originate high quality illiquid
assets, shareholder capital invested in new business adds substantially to
increasing the existing shareholder value.
GIfl sales fell by 24% to £520m (2021: £688m), due to a competitive market
and a decrease in the value of pension pots, which resulted in smaller
case sizes. Falling equity and bond markets, and economic uncertainty
demonstrate to customers the importance and security of a guaranteed
income. We maintained pricing discipline and used our insight to select the
most profitable risks in a competitive market, while deploying the available
capital budget towards the heightened activity in the dB market. the rise in
long term interest rates has translated into increased customer rates which
has stimulated interest in guaranteed income relative to other forms of
retirement income. Year to date, quotation volumes are substantially higher
than 2022, which provides us with further optionality to deploy available
capital. We continue to invest in our distribution capability, with online
applications now available, which contributed towards our 18th consecutive
Five Stars at november’s Financial Advisor Service Awards. care sales were
down 14% at £44m (2021: £51m) and remain subdued due to customer
behaviour changes post pandemic, with a further delay to october 2025
in relation to proposed government initiatives on health and social
care funding.
Other new business sales
2022 internally funded lifetime mortgage advances were £519m (2021:
£488m), an increase of 6%, with these in part used to replace an increased
level of back book ltM early redemptions. Going forward, our target ltM
backing ratio for new business has been revised downwards to 10-15%.
Relative to the spreads available on other illiquid assets, ltMs remain an
attractive asset class, however, in a higher interest rate environment, the
capital charge attaching to the nnEG risk becomes onerous.
We continue to be selective in the mortgages we originate, as we use our
market insight and distribution to target certain sub-segments of the market.
during 2021, we introduced medical underwriting across the entire lifetime
mortgage range and also signed an exclusive distribution agreement with
Saga, both of which are contributing to increasing volumes within the mix.
Increased investment in ltM digital capabilities and proposition has been
well received by financial advisers.
ADJUSTED EARNINGS PER SHARE
Adjusted EPS (based on underlying operating profit after attributed tax) has
increased to 19.6 pence (2021: 16.4 pence).
Adjusted earnings (£m)
Weighted average number of shares (million)
Adjusted EPS1 (pence)
Year ended
31 December
2022
Year ended
31 december
2021
202
1,032
19.6
170
1,034
16.4
1 Alternative performance measure, see glossary for definition. the adjusted earning
calculation has been updated to be consistent with the 15% medium term growth metric,
based on underlying operating profit.
EARNINGS PER SHARE
Earnings (£m)
Weighted average number of shares (million)
EPS (pence)
1 Restated as explained in note 1.
Year ended
31 December
2022
Year ended
31 december
20211
(245)
1,032
(23.7)
(82)
1,034
(8.0)
RECONCILIATION OF OPERATING PROFIT TO STATUTORY IFRS RESULTS
the tables on the following pages present the Group’s results on a statutory
IFRS basis.
Adjusted operating profit before tax
non-recurring and project expenditure
Investment and economic losses
Interest adjustment to reflect IFRS accounting for
tier 1 notes as equity
Amortisation costs
IFRS loss before tax
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
336
(12)
(639)
16
(18)
(317)
238
(15)
(251)
25
(18)
(21)
Non-recurring and project expenditure
non-recurring and project expenditure was £12m for the year ended
31 december 2022 (2021: £15m). this included the business process
transformation and increasing efficiency by investing in automation and new
systems, across dB, retail and finance, which will lead to improved customer
service and long-term cost and control benefits. this also includes the
support for Group internal model updates and other items.
Investment and economic losses
change in interest rates
(Wider)/narrower credit spreads
Property growth experience
Sale of ltM portfolio
Asset timing variance
other
Investment and economic losses
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
(510)
(112)
(22)
(49)
(95)
149
(639)
(226)
57
56
(161)
51
(28)
(251)
Investment and economic losses for the year ended 31 december 2022 were
£639m (2021: £251m loss). losses from the increase in risk-free rates during
the period contributed £510m. the Group takes an active approach to
hedging its interest rate exposure. In the second half of 2021 and across
2022, as rates rose and our solvency position strengthened, we gradually
reduced the interest rate hedging to a broadly economically neutral position.
our modified approach will allow the solvency position to fluctuate as
interest rates move, but minimise the economic cost should rates rise further.
As noted above, the cumulative net interest rate loss from hedging the
Solvency II balance sheet since 2018 has been a net loss (pre-tax) of £226m.
Rising rates over the second half of 2022 helped the Solvency II capital
coverage ratio strengthen by a further 15 percentage points to 199%.
26
We also incurred a £95m loss on asset timing variance, largely on
investments backing new business completed in december, which is
expected to reverse as we lengthen the duration of our assets to achieve
the targeted asset mix during the first few months of 2023 and a £49m loss
from the third and final ltM portfolio sale in February 2022. other notable
economic variances include a refinement of lPI curve1 methodology (£49m)
and the lack of corporate bond defaults offset by wider credit spreads (loss
of £112m) and negative property growth experience (loss of £22m).
1 Insurance liabilities for inflation-linked products and inflation-linked assets require an
assumption for future expectations of inflation. these assumptions are derived using a mark
to model basis. this represents a change in approach since 31 december 2021 which utilised
market prices that are not actively traded.
Further details and sensitivities to changes in property assumptions are given
in notes 17 and 23 of the financial statements.
Amortisation of acquired intangibles
Amortisation of acquired intangibles for the year ended 31 december 2022
were £18m (2021: £18m), these mainly relate to the acquired in-force business
asset relating to Partnership Assurance Group plc, which is being amortised
over ten years in line with the expected run-off of the in-force business.
CAPITAL MANAGEMENT
Just Group plc estimated Solvency II capital position
the Group’s coverage ratio was estimated at 199% at 31 december 2022
after a formal recalculation of transitional measures on technical provisions
(“tMtP”), an increase of 35 percentage points, driven by the substantial rise
in interest rates in 2022 (31 december 2021: 164% after a formal biennial
recalculation of tMtP). the Solvency II capital coverage ratio is a key metric
and is considered to be one of the Group’s KPIs.
unaudited
own funds
Solvency capital Requirement
Excess own funds
Solvency coverage ratio1
31 December
2022
£m
31 december
2021
£m
2,757
(1,387)
1,370
199%
3,004
(1,836)
1,168
164%
1 Solvency II capital coverage ratios as at 31 december 2021 and 31 december 2022 include
a recalculation of tMtP as at the respective dates.
the Group has approval to apply the matching adjustment and tMtP in its
calculation of technical provisions and uses a combination of an internal
model and the standard formula to calculate its Group Solvency capital
Requirement (“ScR”).
Movement in excess own funds1
the table below analyses the movement in excess own funds, in the year
ended 31 december 2022.
unaudited
Excess own funds at 1 January
Operating
In-force surplus net of tMtP amortisation
new business strain2
Finance cost
Group and other costs
Underlying organic capital generation
Management actions and other items
Total organic capital generation3
Non-operating
dividend
Regulatory changes
Economic movements
2022
£m
1,168
2021
£m
1,076
174
(60)
(57)
(28)
29
105
134
(16)
–
117
191
(40)
(71)
(29)
51
42
93
–
(38)
56
Effect of tier 2 debt buyback (2022) and Rt1
refinancing (2021), net of costs
Excess own funds at 31 December
(33)
1,370
(19)
1,168
1 All figures are net of tax, and include a recalculation of tMtP as at the respective dates.
2 new business strain calculated based on pricing assumptions.
3 organic capital generation includes surplus from in-force, new business strain and other
expenses, interest and other operating items. It excludes economic variances, regulatory
changes, dividends and capital issuance.
Underlying organic capital generation
during 2022, we delivered £29m of underlying organic capital generation
(2021: £51m, 2020: £18m). the decrease was primarily due to the effect of
rising interest rates on the solvency balance sheet, which leads to a smaller
ScR and risk margin and hence unwind into the In-force surplus net of tMtP
amortisation, an increase in new business strain reflecting higher volumes
of new business, both offset by lower financing costs. the business continues
to deliver sufficient ongoing capital generation to support decisions on capital
deployment between profitable growth, providing returns to our capital
providers and further investment in the strategic growth of the business.
underlying organic capital generation continues to benefit from the ongoing
focus across the business on minimising new business capital strain. during
2022, new business strain increased by £20m to £60m, which represents
1.9% of new business premium (2021: 1.5%), well within our target of below
2.5% of premium. this outperformance was driven by continued pricing
discipline and risk selection, including dB deferred business and a greater
weighting towards small and medium transactions within the sales mix.
due to careful management of the capital budget in the first half of the year,
we deployed capital in the seasonally busier second half of the year. We expect
seasonality to be less pronounced in 2023, given that the dB market could
potentially be a record year as a result of scheme funding deficits closing
or being eliminated due to the rise in interest rates over the past 12 months.
In-force surplus after tMtP amortisation was down 9% to £174m, primarily
due to higher interest rates which reduces the amount of capital available
(via lower ScR and risk margin) to release and the cumulative effect of the
three ltM portfolio sales, which were more capital intensive than the assets
that replaced them. Group and other costs including development, non-
recurring and non-life costs were £28m (2021: £29m), reflecting strong cost
control. Finance costs at £57m (2021: £71m) were 20% lower reflecting a
reduced coupon on the Rt1 debt, after the opportunistic early re-financing of
that debt in September 2021. Interest costs will fall further in 2023 following
the £76m tier 2 debt tender completion in november 2022. Management
actions at £15m (2021: £16m) further augment underlying organic capital
generation and are combined with assumption changes including mortality
into management actions and other items, which contributed a total of
£105m to the capital surplus. Adding underlying organic capital generation
and management actions and other items led to a total of £134m from
organic capital generation, which added 5% to the capital coverage ratio.
27
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
BUSINESS REVIEW continued
Non-operating items
Within the surplus, property value movements led to a £18m negative due to
actual property price growth of c.2% (compared to our annual 3.3% long term
growth assumption) on our individually updated portfolio. other economic
movements included a positive £137m to the surplus as both the ScR (£436m)
and the own Funds (£299m) fell due to higher interest rates. this interest
rate movement led to a strengthening of the capital coverage ratio by 30
percentage points, with asset trading and various positive other economic
variances having minimal impact on the coverage ratio. this includes a lower
than anticipated impact from the third ltM portfolio sale as we reinvested
the proceeds in other illiquid assets and the positive impact from high
inflation indexation and no corporate bond defaults during the year. the
tier 2 debt buyback in november 2022 led to a £33m reduction in capital
surplus as the £76m nominal that was bought back was partially offset by
the release of capital tiering restrictions. In 2022, the Group recommenced
a shareholder dividend, which cost a total of £16m during the year.
Sensitivities to economic and other key metrics are shown in the table below.
Estimated Group Solvency II sensitivities1,5
Reconciliation of IFRS total equity to Solvency II own funds
unaudited
31 December
2022
£m
31 december
2021
£m
Shareholders’ net equity on IFRS basis
2,178
2,440
Goodwill
Intangibles
Solvency II risk margin
Solvency II tMtP1
other valuation differences and impact on
deferred tax
Ineligible items
Subordinated debt
Group adjustments
Solvency II own funds1
Solvency II SCR1
(34)
(70)
(456)
874
(304)
(50)
619
–
2,757
(1,387)
1,370
(34)
(86)
(759)
1,657
(987)
(3)
781
(5)
3,004
(1,836)
1,168
unaudited
%
£m
Solvency II excess own funds1
Solvency coverage ratio/excess own funds at
31 december 20222
-50 bps fall in interest rates (with tMtP
recalculation)
+50 bps increase in interest rates (with tMtP
recalculation)
+100 bps credit spreads (with tMtP recalculation)
credit quality step downgrade3
+10% ltM early redemption
-10% property values (with tMtP recalculation)4
-5% mortality
199
1,370
1 Solvency II capital coverage ratios as at 31 december 2021 and 31 december 2022 include
a recalculation of transitional measures on technical provisions (“tMtP”) as at the respective
dates.
(13)
13
8
(8)
1
(12)
(10)
(88)
79
31
(107)
13
(135)
(136)
Reconciliation from regulatory capital surplus to reported capital surplus
31 December
2022
£m
31 December
2022
%
31 december
2021
£m
31 december
2021
%
Regulatory capital
surplus
Notional
recalculation of TMTP
Reported capital
surplus
1,370
199
1,168
–
–
–
1,370
199
1,168
164
–
164
1 In all sensitivities the Effective Value test (“EVt”) deferment rate is allowed to change
subject to the minimum deferment rate floor of 2.0% as at 31 december 2022 (0.50%
as at 31 december 2021) except for the property sensitivity where the deferment rate is
maintained at the level consistent with base balance sheet.
2 Sensitivities are applied to the reported capital position which includes a tMtP recalculation.
3 credit migration stress covers the cost of an immediate big letter downgrade (e.g. AAA to
AA or A to BBB) on 10% of all assets where the capital treatment depends on a credit rating
(including corporate bonds, ground rents/income strips; but lifetime mortgage senior notes
are excluded). downgraded assets are assumed to be traded to their original credit rating, so
the impact is primarily a reduction in own Funds from the loss of value on downgrade. the
impact of the sensitivity will depend upon the market levels of spreads at the balance sheet.
4 After application of nnEG hedges.
5 the results do not include the impact of capital tiering restriction.
28
HIGHLIGHTS FROM CONDENSED CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
the table below presents the condensed consolidated statement of
comprehensive income for the Group, with key line item explanations.
Gross premiums written
Reinsurance premiums ceded
Net premium revenue
net investment expense
Fee and commission income
Share of results of associates
Total (expense)/revenue
net claims paid
change in insurance liabilities
change in investment contract liabilities
Acquisition costs
other operating expenses
Finance costs
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
3,391
(271)
3,120
(4,778)
14
(3)
(1,647)
(1,210)
2,935
3
(56)
(209)
(133)
2,676
(23)
2,653
(130)
16
–
2,539
(1,141)
(1,039)
(1)
(49)
(193)
(137)
Total claims and expenses
1,330
(2,560)
Loss before tax
Income tax
Loss after tax
(317)
85
(232)
(21)
5
(16)
Gross premiums written
Gross premiums written for the year ended 31 december 2022 were £3,391m,
an increase of 27% (2021: £2,676m). As discussed above, this reflects overall
higher new business premiums, as shareholder backed dB and dB partner
business combined led to a 46% increase in dB business offset by a 24%
reduction in GIfl/care business.
Reinsurance premiums ceded
Reinsurance premiums ceded (expense of £271m) has increased in 2022
as a result of reinsurance in relation to the Group’s dB partner transaction
mentioned above.
Net investment expense
net investment expense increased to £4,778m (2021: £130m). the main
components of net investment expense are interest earned and changes in
fair value of the Group’s corporate bond, mortgage and other fixed income
assets. there has been an increase in risk-free rates during the period, which
has resulted in unrealised losses in relation to assets held at fair value. We
closely match our assets and liabilities, hence fluctuations in interest rates
will cause similar movements on both sides of the IFRS balance sheet. We
also actively monitor and had hedged interest rate exposure to reduce the
effect of interest rate movements on the Solvency II capital position, but with
this creating IFRS losses as interest rates rose. We have progressively reduced
our hedging of the Solvency II interest rate exposure over the year and by the
end of 2022 were broadly economically neutral to interest rates up and down.
Net claims paid
net claims paid increased to £1,210m, (2021: £1,141m) reflecting the
continuing growth of the in-force book.
Change in insurance liabilities
change in insurance liabilities was £2,935m (2021: £(1,039)m). the increase
is principally due to an increase in the valuation interest rate due to the rise
in risk-free rates noted above.
Acquisition costs
Acquisition costs have increased to £56m (2021: £49m), driven by the 6%
increase in internally funded ltM origination.
Other operating expenses
other operating expenses have increased to £209m (2021: £193m) driven
by higher investment management fees due to our significantly increased
origination of illiquid assets, which have higher fees, but also diversify our
investments portfolio, support new business pricing and optimise back
book returns.
Finance costs
the Group’s overall finance costs decreased to £133m (2021: £137m). note
that the coupon on the Group’s Restricted tier 1 notes is recognised as a
capital distribution directly within equity and not within finance costs.
Income tax
Income tax for the year ended 31 december 2022 was a credit of £85m (2021:
credit of £5m). the effective tax rate of 27.0% (2021: 26.4%) is 8% higher than
the standard 19% corporation tax rate. this is due to the current year’s losses
being carried forward at 25% as opposed to the current tax rate of 19%.
HIGHLIGHTS FROM CONDENSED CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
the table below presents selected items from the condensed consolidated
statement of financial position, with key line item explanations below. the
information below is extracted from the statutory consolidated statement
of financial position.
31 December
2022
£m
31 december
2021
£m
Assets
Financial investments
Reinsurance assets
other assets
Total assets
Share capital and share premium
other reserves
Accumulated profit and other adjustments
Total equity attributable to ordinary
shareholders of Just Group plc
tier 1 notes
non-controlling interest
Total equity
Liabilities
Insurance liabilities
Reinsurance liabilities
other financial liabilities
Insurance and other payables
other liabilities
Total liabilities
Total equity and liabilities
23,477
2,287
1,350
27,114
199
948
711
1,858
322
(2)
24,682
2,808
858
28,348
199
948
973
2,120
322
(2)
2,178
2,440
18,333
21,813
306
5,250
263
784
24,936
27,114
275
2,866
93
861
25,908
28,348
Financial investments
during the year, financial investments decreased by £1.2bn to £23.5bn (2021:
£24.7bn). Accommodative central bank and fiscal stimulus during 2021 led
to credit spread narrowing, however, in 2022, various government asset
purchase programmes in response to the pandemic started to be gradually
unwound. At the same time, central banks raised base rates from their
historical low levels to counteract the effect of inflation. the interest rate
increases are predicted to cause a shallow recession in 2023 followed by a
gradual recovery, and this backdrop led to wider spreads during the year.
the effect of credit spread widening and increases in risk-free rates, both of
which reduce the value of the assets was partially offset by investment of the
Group’s new business premiums. the credit quality of the corporate bond
portfolio remains resilient, with 50% of the Group’s corporate bond and gilts
portfolio rated A or above (31 december 2021: 54%), with the reduction due
to lower government investments (see overleaf). Year to date, credit spreads
have narrowed as the uK and global economic outlook relative to forecasts
continues to improve. our diversified portfolio continues to increase by issuer
and is well balanced across a range of industry sectors and geographies.
29
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
BUSINESS REVIEW continued
Similar to 2021, credit rating agencies continue to maintain a cautious
approach. We continue to position the portfolio with a defensive bias,
and in 2022 have experienced ratings stability as 9% of the Group’s bond
portfolio was upgraded, offset by 8% being downgraded. the Group
continues to have very limited exposure to those sectors that are most
sensitive to structural change or macroeconomic conditions, such as auto
manufacturers, consumer (cyclical), basic materials, energy and real estate
(including REIts). the BBB-rated bonds are weighted towards the most
defensive sectors including utilities, communications & technology, and
infrastructure. Reflecting this bias, the Group has further increased its
infrastructure allocation and selectively added to utilities and commercial
ground rent & income strips investments, with some rotational changes
as in particular we reduced BBB exposure to communications & technology,
industrials, auto manufacturers and energy. Following a reclassification,
“Financial – other” now includes short and medium term illiquid assets
including SME lending, commodity trade finance and others.
during 2022, we originated £1,031m of long term other illiquid assets (2021:
£615m), via our roster of specialist asset managers, in addition to funding
£519m of lifetime mortgages (2021: £488m). our investments model
demonstrated its flexibility and capabilities as we achieved our target illiquid
new business backing ratio of c.50%. We have the flexibility to adjust the
asset class allocations, and in 2022, increased our origination of private
placements as credit spreads widened, mirroring the public markets. this
flexibility enables us to support new business pricing and optimise back
book return whilst maintaining strict credit underwriting. Entering 2022,
Government investments were elevated as the Group temporarily invested
excess cash, which was further added to by the third ltM portfolio sale in
February 2022. Excess cash and gilts were recycled into other corporate
bonds and illiquid assets during 2022 as opportunities arose.
At year end, the Group had ample liquidity. We continue to prudently manage
the balance sheet by hedging all foreign exchange and inflation exposure,
while managing interest rate, credit and nnEG risk. As previously mentioned,
and reflecting the strengthened capital position of the Group, the interest
rate hedging was neutralised during the second half of the year. the effect
of the hedging was to protect the solvency ratio, but caused economic losses
when rates rose and profits when rates fell. Without hedging, interest rate
movements will impact the solvency balance sheet, but not IFRS and
therefore, we expect that, in future, the IFRS result will be more closely
aligned to the operating performance of the business.
the loan-to-value ratio of the mortgage portfolio was 37.3% (31 december
2021: 36.1%), reflecting continued strength and resilience across our
geographically diversified portfolio, which offsets the interest roll-up. lifetime
mortgages at £5.3bn represent 26% of the investments portfolio and reflects
completion of the third and final ltM portfolio sale in February 2022. In total,
the Group has disposed of £1.6bn of lifetime mortgages as part of our
objective to reduce the sensitivity of the capital position to house price
movements, which at a 12% capital coverage ratio impact for an immediate
10% fall in uK house prices is at a level we are comfortable with. Further
portfolio sales are not envisaged as the property sensitivity is expected to be
contained within risk appetite through maintaining nnEG hedges on c.20%
of the portfolio and a new business backing ratio of 10-15%.
Other Illiquid assets and Environmental, Social and Governance investing
to achieve its optimal mix of assets backing new business, and to further
diversify its investments, the Group originates other illiquid assets including
infrastructure, real estate investments and private placements. Income
producing real estate investments such as ground rents and income strips
are typically much longer duration and hence the cash flow profile is very
beneficial, especially to match dB deferred liabilities.
to date, Just has invested £3.3bn in other illiquid assets, representing 16% of
the investments portfolio (excluding derivatives and collateral, 31 december
2021: 13%), as we make continued progress towards our 25% medium term
target, driven by new business backing. We have invested in our in-house
credit team as we have broadened our illiquid asset origination, and we work
very closely with our specialist asset managers on structuring to enhance our
security, with a right to veto on each asset. We anticipate that the upcoming
Solvency II reforms, when implemented, will increase the investment
opportunities available to us to provide long term capital that helps to
underpin uK economic growth and productivity. In particular, widening the
eligibility criteria for matching adjustment assets to include assets with a
construction phase where the commencement of cashflows is not exactly
certain is a very welcome development. We are pleased that these reforms
can provide support to insurance firms to fund the government’s various
agendas including increased investment in infrastructure, science and
research and decarbonising the economy.
Many of the other illiquids are invested in a range of ESG assets including
renewable energy, social housing and local authority loans. during 2022, we
invested a further £279m in eligible green and social assets (2021: £146m),
and have now completed our total £575m green and social asset allocation
commitment arising from the green and sustainability bonds issued in
october 2020 and September 2021 respectively. the allocations were spread
across 23 green and social investments comprising renewable energy, social
housing and green buildings. the Green/Sustainability bond full allocation
report is available on www.justgroupplc.co.uk/investors/esg.
the following table provides a breakdown by credit rating of financial
investments, including privately rated investments allocated to the
appropriate rating.
31 December
2022
£m
31 December
2022
%
31 december
2021
£m
31 december
2021
%
AAA1
AA1 and gilts
A2
BBB
BB or below
unrated/other
lifetime mortgages
Total2
1,939
1,986
5,968
6,500
455
1,363
5,306
23,517
8
8
25
28
2
6
23
100
2,448
3,194
4,384
6,500
388
414
7,423
24,751
10
13
18
26
1
2
30
100
1 Includes units held in liquidity funds.
2 Includes investment in trust which holds ground rent generating assets which are included
in investment properties in the IFRS consolidated statement of financial position.
30
Reinsurance assets and liabilities
Reinsurance assets decreased to £2.3bn at 31 december 2022 (2021: £2.8bn)
due to the increase in the valuation rate of interest over the period. Since
the introduction of Solvency II in 2016, the Group has increased its use of
reinsurance longevity swaps rather than quota share treaties for shareholder
funded business, albeit the dB partnering business is written via quota share.
Reinsurance liabilities relate to liability balances in respect of the Group’s
longevity swap arrangements.
Other assets
other assets increased to £1.4bn at 31 december 2022 (2021: £0.9bn).
these assets include cash, investment in associate, deferred tax assets,
insurance receivables and intangible assets.
Insurance liabilities
Insurance liabilities decreased to £18.3bn at 31 december 2022 (2021:
£21.8bn). the decrease in liabilities arose from the new business premiums
written during the year, which was more than offset by an increase to the
valuation rate of interest over the period.
Other financial liabilities
other financial liabilities increased to £5.3bn at 31 december 2022 (2021:
£2.9bn). these liabilities mainly relate to collateral deposits received from
reinsurers, together with derivative liabilities and other cash collateral
received. the increase from the prior year relates to higher amounts of
derivatives and collateral, given the market volatility.
Other liabilities
other liability balances decreased to £784m at 31 december 2022 (2021:
£861m) due to the £76m repayment of the tier 2 debt.
IFRS net assets
the Group’s total equity at 31 december 2022 was £2.2bn (2021: £2.4bn).
total equity includes the Restricted tier 1 notes of £322m (after issue costs)
issued by the Group in September 2021. Including negative effects of
Solvency II interest rate hedging on the IFRS results, total equity attributable
to ordinary shareholders decreased from £2,120m to £1,823m resulting in
net asset value per ordinary share of 179 pence (2021: 204 pence).
DIVIDENDS
In line with our stated policy to grow the dividend over time, the Board is
recommending a final dividend of 1.23 pence per share bringing the total
dividend for the year ended 31 december 2022 to 1.73 pence per share,
representing a 15% increase on the annualised dividend (2021: 1.0 pence,
recommenced dividend and represents a final dividend only).
ANDY PARSONS
Group chief Financial officer
the sector analysis of the Group’s financial investments portfolio is shown
below and continues to be well diversified across a variety of industry sectors.
31 December
2022
£m
31 December
2022
%
31 december
2021
£m
31 december
2021
%
Basic materials
communications and
technology
Auto manufacturers
consumer (staples
including healthcare)
consumer (cyclical)
Energy
Banks
Insurance
Financial – other
Real estate including
REIts
Government
Industrial
utilities
commercial
mortgages
Ground rents1
Infrastructure
other
Corporate/
government bond
total
lifetime mortgages
liquidity funds
270
1,327
250
1,012
142
535
1,120
607
956
437
1,596
622
2,266
584
291
1,811
42
13,868
5,306
1,174
1.3
6.5
1.2
5.1
0.7
2.6
5.5
3.0
4.7
2.1
7.8
3.1
11.0
2.9
1.4
9.0
0.2
68.1
26.1
5.8
264
1,430
319
1,174
187
633
1,192
845
481
661
2,415
920
2,302
678
263
1,474
38
15,276
7,423
1,311
1.1
6.0
1.3
4.8
0.8
2.6
11.3
3.5
2.0
2.8
10.1
1.2
9.6
2.8
1.1
6.1
0.2
63.6
30.9
5.5
Investments portfolio
20,348
100.0
24,010
100.0
derivatives and
collateral2
Total1
3,169
23,517
741
24,751
1 Includes direct ground rents and also an investment in a property unit trust which holds
ground rent generating assets which are included in investment properties in the IFRS
consolidated statement of financial position.
2 More than 99% of the derivative assets are comprised of interest rate swaps, foreign
exchange swaps to hedge the currency risk on non-GBP investments, and inflation swaps.
In addition, collateral in the form of corporate bonds and cash has been posted in relation
to the Group’s hedging activity. Further details are available in note 16 and note 28 of the
financial statements. derivatives are used to manage risks on the balance sheet, and we
seek to be economically neutral on interest rate, currency and inflation risks. the derivatives
and collateral total has increased primarily due to an increased number of positions as part
of our dynamic interest rate hedging strategy. Interest rate swap assets have accounted
for the vast majority of the increase, as they rose by £1,238m to £1,408m, while foreign
exchange swaps rose by £170m to £413m, and inflation swaps rose by £176m to £438m. In
relation to the interest rate, foreign exchange and inflation derivative assets, compensating
increases in the swap liability positions means that the overall swap exposure in relation
to these categories is limited to a net liability of £722m (2021: net asset £291m). Increased
collateral requirements from the hedging activity drove the increase in deposits with
credit institutions (2022: £908m, 2021: £53m), and is almost all in relation to interest rate
swaps. combining the 2022 net derivative liability and deposits held at credit institutions
(predominantly collateral) is a net asset of £186m (2021: net asset of £343m). other
swap assets and liabilities are negligible. In accordance with accounting standards these
derivatives are not offset. Given that the net asset/liability is not represented in the financial
investments total on the balance sheet, to aid comparability, the percentage of financial
investments does not include derivatives and collateral.
31
FINANCIAL STATEMENTSGOVERNANCEstrategic report
JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
SUSTAINABILITY AND THE ENVIRONMENT
TAKING STEPS TO A
FAIRER FUTURE
our sustainability strategy has three pillars: making a positive
impact, leaving a responsible footprint and creating a
fair world. You can discover more about our sustainability
story on our Group website justgroupplc.co.uk.
OUR COMMITMENT TOWARDS NET ZERO
SCOPE 1, 2 AND BUSINESS TRAVEL
Net Zero
by 2025
(Scope 1, 2 and business travel)
SCOPE 3
50%
reduction
by 2030
(includes all Scope 3 emissions
categories as per GHG protocol)
SCOPE 3
Net Zero
by 2050
(includes all Scope 3 emissions
categories as per GHG protocol)
OUR SUSTAINABILITY FOCUS IN 2022
our priority for 2022 was to complete the measurement of our baseline
and begin understanding our transition to net zero.
1,400
1,200
1,000
e
2
O
C
s
e
n
n
o
T
800
600
400
200
2019
2020
2021
2022
2023
2024
2025
Gas
Electricity (market)
Business travel
Plan
YOU CAN READ MORE ABOUT OUR TRANSITION TO NET ZERO ON OUR WEBSITE
32
LEAVING A RESPONSIBLE FOOTPRINT
We have reduced the carbon footprint of our operations by 78% since 2019
(market based) and the remaining carbon is from business travel, small
electricity emission and gas from our office in Reigate. during the year we
set carbon budgets to monitor travel and are looking at ways to reduce
the remaining carbon to net zero.
• We have joined net Zero Asset owners Alliance.
• committed to Science Based targets Initiative.
• And our recent london office move was gold SKA rated1.
1 the SKA rating is a Royal Institute of chartered Surveyors (“RIcS”) environmental
assessment method, benchmark and standard for non-domestic fit outs.
2 Renewable Energy Guarantees of origin (“REGo”).
91%
OF OUR PURCHASED ELECTRICITY
IS FROM RENEWABLE SOURCES
(REGO2 CERTIFIED)
561
NEW HABITS FORMED
BY EMPLOYEES TO
REDUCE THEIR FOOTPRINT
13%
REDUCTION IN MARKET BASED
BUILDINGS EMISSIONS IN 2022
8,108
SELF-DECLARED ACTIONS
TAKEN BY OUR COLLEAGUES
TO REDUCE THEIR IMPACT
ON CLIMATE CHANGE
MAKING A POSITIVE IMPACT
We understand we have a long way to go in investing more assets that
support a positive impact, like others we are on a journey to fulfil this goal.
• We became a member of carbon disclosure Project (“cdP”) to further
engage with our supply chain on their sustainability journey.
GHG EMISSIONS DATA
Emissions – tco2e1
Scope 1 (natural gas and fugitive gas)2
Scope 2 (purchased electricity location based)
• We are partnering with our asset managers to deliver positive outcomes.
Scope 3 (business travel)
Total emissions (location based)3
2022
111
205
138
454
2021
113
267
32
412
£575m
ELIGIBLE GREEN AND SOCIAL
COMMITMENT MET
Green t2 and sustainability Rt1
bond fully allocated during 2022
£750m
TARGET TO INVEST BY 2025
Invested in green and social assets
Intensity ratios
tco2e per gross tco2e2 written
tco2e2 per full time employee
Market based
location based
2022
0.08
0.22
2021
0.07
0.17
2022
0.13
0.38
2021
0.15
0.40
1 tonnes of carbon dioxide equivalent (“tco2e”).
2 Fugitive emissions are based on refrigerant gas escape from on-site chiller systems.
3 Increase in business travel post coVId-19 reflected in overall locations based increase.
CREATING A FAIR WORLD
creating a fair world is directly
influenced by the way we carry out
our business and also the way we
treat each other, namely colleagues,
customers, suppliers, or members of
society at large.
Just has become:
• a signatory to the Asset owner
diversity charter and joined the
charters working group.
• a member of Progress together.
• a member of GAIn insurance,
Autism, Insurance, Investment
and neurodiversity.
30%
OF SENIOR LEADERSHIP
ARE WOMEN, TARGET OF
33% BY DECEMBER 2023
£55k
DONATED TO CHARITY BY
THE BUSINESS AND OUR
COLLEAGUES IN 2022
44%
OF OUR BOARD ARE WOMEN
858
NUMBER OF HOURS
OF VOLUNTEERING
RECORDED IN 2022
18%
OF SENIOR LEADERSHIP
ARE FROM A BLACK, ASIAN
OR MINORITY ETHNIC
BACKGROUND, TARGET ALIGNED
WITH 2021 UK CENSUS DATA
SUSTAINALYTICS’ 2023
TOP-RATED ESG PERFORMER
Methodology We have used the GHG Protocol corporate Accounting and Reporting Standard (revised edition), and 2022 emission factors from the department for Business, Energy & Industrial
Strategy. the boundary of our emissions reporting is Financial control, comprising our directly owned and leased offices and building emissions and business travel under our control, including gas,
fugitive gas, electricity, car mileage, train travel and flights. We use both a financial emissions intensity metric (tonnes of co2e per £m gross premiums written) and an employee intensity metric
(tonnes of co2e per employee) to normalise our data and provide useful performance indicators. Eshcon ltd conduct an annual review of Just Group plc’s data collation and calculation processes
and provides verification of their GHG Emissions Statement. At present, carbon offsets do not form part of our carbon mitigation strategy. We are in the process of setting near and long-term
targets aligned with science based target 1.5 degrees trajectory.
33
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
SUSTAINABLE INVESTMENT STRATEGY
INVESTING
THE JUST WAY
Just has a compelling purpose: we help people
achieve a better later life, and this purpose
shapes our approach to how we invest.
INVESTMENT MODEL
our overall investment approach is driven by our ability to cashflow match
our liabilities with a mix of investment grade liquid and illiquid fixed income
assets through an enhanced “buy and maintain” strategy. our long-term
retirement income promises, which provide peace of mind and certainty
to our customers, are backed by long-term income producing assets, the
majority of which are managed in-house. on the illiquid side, these are split
between the lifetime mortgages that we originate and manage ourselves
and other illiquid assets, which includes a diverse range of investments
such as infrastructure debt, private placements, commercial real estate
mortgages, ground rents and income strips. We have built a panel of 15
specialist external asset managers, each carefully selected based on their
particular areas of expertise. the opportunities originated by the managers
are then assessed by our in-house investment team who select the most
suitable investments to pass through our internal screening process.
currently, the other illiquid assets account for £3.3bn or 16% of our £20.3bn
investment portfolio (excluding derivatives and collateral), but this is
expected to increase over time, as the proportion backing the new business
is higher than the in-force portfolio. In 2022, we originated over £1bn of
other illiquid assets in addition to over £0.5bn of lifetime mortgage to support
new business pricing and optimise back book returns
RESPONSIBLE INVESTMENT FRAMEWORK
Just developed a Responsible Investment Framework (“RIF”) in 2019, defining
how we integrate environmental, social and governance (“ESG”) factors into
the analysis and decision making processes. Since its implementation,
investment opportunities have been assessed to ensure they meet our
pre-defined criteria.
the RIF covers a range of sustainability issues, including climate change.
Within the framework, we adopt a principles-based approach seeking to
achieve four overarching objectives. these are to analyse and identify risks
and opportunities arising from Responsible Investment (“RI”) factors; engage
in frequent dialogue with external managers and providers; actively identify
and monitor our portfolio for investments not aligning with our RIF and take
action; and transparently disclose RI characteristics of our portfolio to
stakeholders. We also have a scoring system called purple, red, amber,
yellow, green (“PRAYG”), which assesses ESG risks associated with individual
investments. this ensures ESG factors, which also impact other risks
such as credit and market risks, are fully considered. We have set out our
commitment to stewardship activities and are actively involved in a number
of initiatives.
GREEN AND SOCIAL INVESTMENTS
the Sustainability Bond Framework (“Framework”), developed in 2020, was
enhanced in 2021 in line with the International capital Markets Association
Green, Social and Sustainability Bond Guidelines. the Framework has received
a second party opinion from Sustainalytics, recognising our environmental
and social credentials. Furthermore, a Green/Sustainability Bond Forum has
been established to approve asset allocations for any bonds issued by Just
Group using this Framework.
In September 2021, Just Group became the first uK and European insurer
to issue a Sustainability Restricted tier 1 bond. the Group has made a
commitment to invest the gross issuance proceeds of £325m in eligible
green and social assets. When combined with the 2020 Green tier 2 bond
commitment, the Group has committed to allocating a minimum of £575m
towards these eligible assets before September 2024.
By the end of 2022, we had completed the full £575m green/social asset
investment commitment spread across 23 green and social assets including
wind and solar investments in uK, uSA, Germany, Spain and chile, in addition
to uK social housing projects and green buildings . More information on this
can be found at justgroupplc.co.uk/investors/esg.
OUR PROGRESS OVER THE LAST 12 MONTHS
over the last 12 months, we joined a variety of initiatives aligned with our
corporate sustainability strategy focusing on climate change and diversity,
equity and inclusion (“dEI”). We have been working towards enhancing
our approach set out in the RIF, whilst continuing to originate new assets
within the investment portfolio in order to meet our new business needs.
Additionally, we have supplemented our existing ESG data provider, MScI, with
S&P to further enhance our analysis of ESG considerations and climate change
across the investment portfolio. Beyond this, we have continued to grow our
panel of specialist asset managers by selecting three new managers in 2022.
Even though we have completed our bond commitments, we expect to
continue increasing the Group’s exposure to green and social investments
in line with our overarching frameworks to deliver positive outcomes.
34
strategic report
In addition, a significant proportion of our investments are in lifetime
mortgages, which fulfil an important social purpose by helping people in later
life to release equity from their home to supplement their pension income.
Below is a summary of the external initiatives/organisations we are members
of that are supportive of our wider sustainability goals.
Initiative/Organisation
Description
united nations Principles
for Responsible Investing
(the “PRI”)
A signatory of the un Principles of Responsible
Investment (“unPRI”) since September 2018,
becoming the first uK asset owner to do so.
Association of British
Insurers (“ABI”)
Just is a member of the ABI and we aim to align
our climate objectives with the ABI roadmap,
actively engaging in a number of working groups.
Asset owners diversity
charter (“Aodc”)
Just joined the Aodc in 2022 as a signatory
and working group member, supporting with
developing the forward-looking strategy and
direction of this initiative.
Partnership for carbon
Accounting Financials
(“PcAF”)
Just has joined PcAF to aim to align with its
methodology for calculating proxy emissions
given the lack of available data in some sectors/
asset classes.
our investment approach will evolve further to adapt to changing
requirements. We plan to utilise our internal and external data sources,
working closely with our third-party data providers, to enhance our analysis
and underlying frameworks. In the coming year, we will continue enhancing
our transition plan, aligning with relevant standards and guidance, review
and improve the RIF including focusing on the implementation of
stewardship activities aligned with our broader RI objectives.
Enhancing our approach to climate risk management is a key priority to
ensure we can effectively manage these risks based on current available data
and scientific evidence. Improvements and updates to our broader strategy
will be continued throughout the year, including focusing on our stewardship
activities, which is vital to our forward looking plan. We are efficiently
concentrating our efforts on this ahead of our forthcoming ambition to
continuously improve and deliver transparency by committing to apply
to the uK Stewardship code in 2024. As a team, we are continuing to grow,
expanding not only the headcount of the team but the capabilities within it;
the number of members in the Investment team has almost doubled since
the end of 2021.
You can read more about our approach to managing climate change-related
risks in the next section of this report.
Dedicated ESG assets
(IFRS valuation basis)
31 Dec 2022
£m
31 Dec 2021
£m
net Zero Asset owners
Alliance (“nZAoA”)
Just joined this united nations convened
initiative to maintain best practices and to
align our decarbonisation commitments.
Renewable energy – wind
Renewable energy – solar
Financial Institutions
Focus Group for the net
Zero data Public utility
(“nZdPu”)
Just joined the nZdPu in 2022, a Glasgow financial
alliance for net zero led initiative focusing on
challenges and opportunities for financial
institutions in relation to climate-transition data.
local authority
Social housing – private
Green buildings
287
342
135
129
42
935
393
120
84
334
172
221
193
21
941
533
105
–
Eligible under Sustainability Bond Framework
Social housing – public
Emerging market social finance
other social assets
Total dedicated ESG assets
1,532
1,579
Bond portfolio
13,887
15,277
As % of total bond portfolio
11.0%
10.3%
uK Stewardship code
Science Based targets
Initiative (“SBti”)
In line with our ambition to continuously improve
and deliver transparency, we are committing to
apply to become a uK Stewardship code signatory
in 2024.
In 2022, Just signed up to the SBti and with our
formal transition to net zero plan now published,
we will be presenting our target to SBti for
official validation. SBti is a global movement of
companies committed to aligning their business
with the most ambitious target of the Paris
Agreement to limit the global average
temperature increase to 1.5ºc above pre-
industrial levels.
LOOKING TO THE FUTURE
In november 2022, following a consultation and feedback process involving
the PRA, industry firms, the ABI and HM treasury, the government
announced that it would amend certain features of the regulatory regime
for insurance firms, known as Solvency II. one of the HM treasury’s stated
objectives of this review was to support insurance firms to provide long-term
capital to underpin uK economic growth and productivity. the reforms,
when implemented are substantial and could unlock tens of billions of
pounds of investment from the sector into the uK economy, in particular
decarbonising the economy, affordable and social housing, infrastructure
improvements and investments to support the uK’s world class science
and research capabilities.
35
FINANCIAL STATEMENTSGOVERNANCE JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
SUSTAINABILITY STRATEGY: TCFD DISCLOSURE FRAMEWORK
Strategic overview
We have built our sustainability strategy around the united nations
Sustainable development Goals (“unSdGs”) and three guiding themes:
making a positive impact, leaving a responsible footprint and creating a
fair world. the strategy is aligned to the unSdGs where we believe we can
make the most difference and play our part in leaving a positive legacy to
the world.
last year Just made a commitment to reach net zero in its near term target,
own emissions (scope 1 and 2) by 2025 and all other emissions (scope 3) by
2050 with a 50% reduction in the latter emissions by 2030. this commitment
aims to align with the road map published by the Association of British
Insurers (“ABI”) in summer 2021 on behalf of the insurance industry. We have
since committed to the Science Based target Initiative and plan to submit our
targets by 2024.
our key strategic outcomes for 2022 were to understand our emissions
baseline and take steps towards planning our transition to net zero.
understanding our baseline enables robust reporting on our progress to
net zero. to do this we have improved the coverage of emissions across
scope 3 emissions by using third party data for actual and proxy emissions,
where necessary.
STRATEGY AND GOVERNANCE
the taskforce on climate-related Financial disclosures (“tcFd”) was
established by the Financial Stability Board to develop recommendations
to enable a better understanding of climate-related risks and opportunities.
the tcFd recommends that companies provide information about their
governance, strategy, risk management, metrics and targets in relation to
climate change. disclosures consistent with tcFd recommendations about
the potential implications of climate change for Just are included in this
report with the following exceptions:
Strategy recommendation disclosure (b): a methodology to model the
potential financial impacts of climate change on our illiquid credit portfolio
has not yet been established for the reasons stated in the section headed
“Illiquid investments.” We have carried out deeper analysis on the
investment portfolio, where information was available. to progress this
further, once a baseline has been established, we will undertake a larger
project in 2023.
Metrics and targets recommendation disclosure (b): We have made progress
towards better and more consistent data for the non-ltM and ltM portfolios,
based on reported data with a coverage of less than 100% to be expected.
For the remainder, we estimate from other available data.
Why climate change is important for Just
We are aware of the increasing need to protect our business from the effects
of climate change and to reduce the impact we have on the planet to
continue achieving our purpose. However, there are still many uncertainties
regarding how the impacts of climate change will develop, with future
government policy potentially playing a significant role. the potential climate
change impacts on Just are interconnected with other sustainability issues.
We recognise this is a journey and we plan to continue to work towards
limiting the effects of climate change.
MAKING A
POSITIVE
IMPACT
LEAVING A
RESPONSIBLE
FOOTPRINT
CREATING A
FAIR WORLD
36
the Group’s strategic priorities are aligned to growth and careful planning is needed to achieve
that growth without an undue impact on our transition to net zero. climate change and wider
sustainability issues are important considerations when making strategic decisions.
OUR PILLARS
OUR COMMITMENT
HOW WILL WE ACHIEVE OUR AMBITION?
FINANCIAL IMPACT
2023 FOCUS
LINK TO JUST’S
STRATEGIC PRIORITIES
LEAVING A
RESPONSIBLE
FOOTPRINT
Attain net zero in
our near term own
operations target
by 2025
Attain net zero in our
scope 3 emissions
by 2050
Protect our business
Invest responsibly
Increase our
green financing
opportunities
understand, measure and analyse
our baseline, then identify areas of
efficiencies and initiatives to enact
£1m estimated in
future costs to upgrade
the energy efficiency of
our office property
Increased momentum
for initiatives to net
zero
decarbonise our ltM and non-ltM
portfolios
Illustrative impacts
identified in risk
management section
continue to reduce business travel
and support our colleagues in finding
ways to reduce their own emissions
no financial impact
identified to date
transform the
way we work
Further enhance
scenario analysis for
transition planning and
risk management
Further education on
business travel impacts
and sustainable travel
Engage with our supply chain and
partners to understand their plans for
net zero and encourage reductions
£40,000 estimated in
future costs to obtain
data across the supply
chain
direct engagement
with supply chain
where possible
Get closer to our
customers and
partners
Grow in a sustainable way so Just
remains strong for future colleagues
and customers
continue to integrate environmental,
social and governance (“ESG”) factors
into our investment decisions
no financial impact
identified to date.
Embed sustainability
into business planning
no financial impact
identified to date.
continue enhancing
approach
Grow sustainably
look for further opportunities to fund
green and social assets
no financial impact
identified to date
develop and offer
sustainable products
Innovate to support our customers
and new customers by delivering
sustainable products
£50,000 estimated in
future costs to improve
energy efficiency data
across our portfolio
MAKING A
POSITIVE
IMPACT
Manage with good
governance
continue to integrate ESG factors
throughout our business and ensure
it is governed to a high standard
£20,000 in 2023
estimated for Board
training
Maintain employees’
awareness of
sustainability issues
Ensure data is well
managed and secure
continue good standards of data
privacy and control
no financial impact
identified to date
Maintain appropriate
internal controls
CREATING
A FAIR WORLD
Improve diversity
and inclusion
Build a diverse workforce
no financial impact
identified to date
Monitor and review
progress against
targets
Support the health
and wellbeing of
our colleagues
Maintain focus on the wellbeing of our
colleagues and encourage healthy
lifestyles and working practices
no financial impact
identified to date
Retain a positive and
supportive culture
Grow through
innovation
transform the
way we work
Be proud to work
at Just
continue allocating in
line with existing
targets
Further develop
propositions to support
our customers
Support our
customers (poverty,
income and housing)
continue to provide sound and helpful
advice and continue to provide
support to our charitable partners
no financial impact
identified to date
Increase awareness of
initiatives to support
Get closer to our
customers and
partners
37
FINANCIAL STATEMENTSGOVERNANCEstrategic report Executive Sponsor
for Sustainability
Group Executive
committee
JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
SUSTAINABILITY STRATEGY: TCFD DISCLOSURE FRAMEWORK continued
SUSTAINABILITY AND CLIMATE CHANGE GOVERNANCE
the Group Board is responsible for setting the Group’s Sustainability Strategy
and targets. the Group chief Executive officer (“cEo”) is responsible for
delivery of the sustainability strategy and associated emissions targets,
delegating responsibilities, as appropriate, to management and various
governance bodies shown in the table below. the Group chief Risk officer
(“GcRo”) has been appointed as the executive sponsor responsible for
sustainability and holds the designated Senior Management Function for
climate change.
the Group Board also has a Sustainability Sponsor responsible for ensuring
the Board is appropriately discussing sustainability matters including climate.
to improve the governance of sustainability matters the Board has agreed
that a section of the Group Executive committee and the Group Board
meetings will be dedicated to sustainability on a quarterly basis. our
governance structure is regularly reviewed to ensure it remains appropriate
for the business and ensures sustainability matters are given sufficient time
and debate at the appropriate level.
the frequency and level of oversight is listed in the table below:
FOCUS AREAS
FOCUS AREAS
FREQUENCY
CHAIR/OWNER
1.
Group Board
Sets sustainability strategy and targets.
Annual review
John Hastings-Bass
Receives updates on sustainability initiatives and activities.
Quarterly
Approval of the annual and half-yearly reports which include sustainability reporting.
Annual (and half-yearly
as appropriate)
Sustainability lead
(non-Executive director)
Responsible for championing sustainability at Board level.
Meets regularly with executive management to discuss sustainability initiatives and
emerging developments.
Group chief Executive
officer
Executing the sustainability strategy approved by the Group Board and delegating
responsibilities, as appropriate.
oversees and communicates sustainability initiatives to the business.
ongoing
Periodic
ongoing
ongoing
Mary Kerrigan
david Richardson
Alex duncan
oversees new sustainability initiatives including emissions reduction strategies.
Periodic
david Richardson
Monitors progress of ongoing sustainability initiatives.
oversees progress to reach diversity and inclusion targets.
Review of any proposed changes to diversity and inclusion targets.
tracks sustainability management information.
Quarterly
Monthly
Annual
Quarterly
6.
Group Audit committee
Review the appropriateness and clarity of climate-related disclosures and compliance
with financial reporting standards in the annual and half-yearly reports.
Annual (and half-yearly
as appropriate)
Paul Bishop
Group nomination and
Governance committee
considers sustainability as part of the skills gap analysis and any impact on
succession planning for future director appointments.
At least annually
John Hastings-Bass
Group Risk and
compliance committee
(“GRcc”)
9.
Group Executive Risk
committee
Receives an update on the status of various climate risk actions and any concerns
about the delivery of the actions.
As required
Kalpana Shah
oversees sustainability and climate-related risks in the Full Group oRSA and quarterly
oRSA updates.
Annual and quarterly
considers sustainability and climate-related risks within the Risk Appetite Framework. At least annually
considers the reports for GRcc (under 8 above) prior to submission.
As per 8 above
Alex duncan
10. Remuneration committee Formulates and monitors performance-related criteria for Executive directors and
Annual
Ian cormack
Senior Management which include relevant sustainability targets.
11.
JRl & PlAcl Investment
committees
Approval of the responsible investment framework, which forms part of the
investment framework.
Annual
Mary Kerrigan
oversight and review of ongoing adherence of investment activities to meet the
Group’s net zero commitment.
oversight and review of climate risks impacting the investment portfolio.
12.
JRMl Board
oversight of approach to reduce the emissions associated with ltMs to support net
zero commitments.
Quarterly
Quarterly
Quarterly
Michelle cracknell
oversight and review of climate risks impacting the residential property portfolio.
Annual
13. Green and Sustainability
Bond Forum
Reviews the assets invested in green and sustainable bonds and the pipeline for
future investment opportunities, and approves allocations.
Quarterly
Alex duncan
14.
15.
Sustainability Steering
committee
oversight of the implementation of various sustainability initiatives across the Group
and recommends items to the GEc and other committees as appropriate.
Monthly
Alex duncan
Sustainability Working
Group
Monitors the status of various sustainability initiatives and reports into the
Sustainability Steering committee.
Bi-weekly
Sustainability
Strategy Manager
38
2.
3.
4.
5.
7.
8.
RISKS AND OPPORTUNITIES
Summary of key opportunities
the opportunities to Just are emerging as we develop our Sustainability Strategy and undertake further work to assess our business with a sustainability lens.
OUR PILLARS
OPPORTUNITY
Group: the increased opportunity to influence and support the transition to net
zero by engaging with asset owners, managers, suppliers, policy makers and other
market initiatives. this would support a market wide transition which aligns with
broader net Zero commitments.
LINK TO JUST’S STRATEGIC PRIORITIES
Get closer to our customers
and partners
MAKING A
POSITIVE
IMPACT
CREATING
A FAIR WORLD
LEAVING A
RESPONSIBLE
FOOTPRINT
Lifetime Mortgage: there is an opportunity to provide more support to our
customers with the need increased due to higher than usual energy costs. this will
lead to an improvement of the EPc rating of our property portfolio, if successful.
Get closer to our customers
and partners
Retail: new products are emerging in the market that focus on responsible
investment themes such as climate change. We are considering how best to
further enhance our approach.
Get closer to our customers
and partners
Investments: Emerging technology and innovation are seen as potential
investment opportunities. new products available via external asset managers,
which focus more specifically on climate and sustainability objectives, represent
an opportunity to provide diversification across our investment portfolio.
Grow through innovation
Defined Benefit: opportunity to support a diversified client base of scheme
trustees in achieving their responsible investment and climate change goals.
Get closer to our customers
and partners
39
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
SUSTAINABILITY STRATEGY: TCFD DISCLOSURE FRAMEWORK continued
SUMMARY OF KEY RISKS
our climate risk assessment remains that our ltM and non-ltM portfolios are
the areas with the largest potential exposure to climate change-related
transition and physical risks. the nature of the key risks has not changed in
the reporting period but some areas have evolved as we move closer to our
net zero target in the absence of government policy change. the table below
shows key risks and whether there have been any changes in risk exposure.
RISK
IMPACT
TYPE
TIMESCALE
MITIGATION
More stringent energy
performance standards
– commercial and
residential property
Residential property
values may fall below the
level of the loan leading
to losses.
Increased impacts and
threats from flooding
and coastal erosion
Green investments
become difficult to
source or produce
lower yields
credit investments seen
as exposed to climate
risks lose market value
For residential and
commercial mortgages,
the borrower’s ability to
service and repay the
loan could be affected by
increased costs due to
physical risks.
unable to meet
Responsible Investment
Framework aims while
meeting investment
return needs.
IFRS balance sheet loss.
Income should continue
but with increased risk of
default if issuers cannot
refinance at an
affordable price.
targets for reduced
Scope 1 and 2 emissions
are missed by Just
Reputational damage
from failing to meet
stated commitments.
targets for reduced
Scope 3 emissions are
missed by Just
Reputational damage
due to failure to maintain
commitments.
transition
5-10 years
Fund EPc ratings for new ltM customers to
improve the energy performance data we hold.
Potential government assistance for property
owners’ energy improvement costs.
Seek ways of helping lifetime mortgage
borrowers to improve energy performance
standards.
consider energy performance ratings when
lending on ltMs.
Structure commercial loans to include key
performance indicators for energy efficiency
and other climate-related factors.
Potential government action to protect
populated areas.
Vary lending policy to avoid vulnerable
residential and commercial properties.
Physical
10 years+
2022 CHANGE/UPDATE
Risk increased due to a lack
of clarity on government
policy to reduce emissions
for residential properties.
no change to risk identified
transition
<5years
Increase the range of sources of origination for
potential investments. Availability of green
investments expected to continue to increase
due to government focus.
no change to risk identified
transition
<15 years
Reduce and avoid such investments in line with
the Responsible Investment Framework.
no change to risk identified
transition
<5years
commit and align with initiatives required to
reduce emissions.
no change to risk identified
transition
5-10 years
Pursue Responsible Investment Framework and
align with relevant external initiatives/guidance.
no change to risk identified
Monitor progress closely.
Enhance ltM proposition strategy to support
customers with energy efficiency improvements.
Engage with supply chain to reduce emissions.
Monitor progress closely.
40
FURTHER ANALYSIS OF KEY RISKS
NON-LTM PORTFOLIO RISKS:
our credit investments are held as long-term investments. Although the
value of the investments may be affected over time by the market’s view
of the borrower’s credit standing, it is the borrower’s ability to repay the
debt that affects us the most.
Transition risks: the companies to which we lend could face additional costs
due to the nature and rate of the transition or, as a result of substitutability,
assets could become stranded.
Physical risks: depending on the location, assets we are invested in may face
higher costs from extreme weather events or sustained asset damage and
business interruption due to impacts from longer duration physical impacts
of climate change.
Material increased costs to the borrower, as a result of climate change, may
affect their ability to meet their debt repayment obligations, increasing the
risk of default.
LTM PORTFOLIO RISKS
Just Group is exposed to property risk on the ltMs held on our IFRS balance
sheet. these ltMs are secured against residential properties located across
the uK. If the sale proceeds from the property are insufficient to repay the
accumulated loan balance on the death or entry into long-term care of the
customer, Just would suffer a loss due to the no-negative equity guarantee.
INSURANCE RISK
the Group’s primary insurance risk exposure is to longevity risk, through
products such as our Guaranteed Income for life product. In recent decades
life expectancy has improved due to medical advances and lifestyle changes,
which can be expected to continue. Most deaths in this country relate to
conditions such as heart disease and cancer, with air pollution contributing to
around 5% of all uK deaths. the overall impact of climate change on longevity
is likely to be secondary through lifestyle changes rather than direct.
Interacting factors, including government policy and individual lifestyle
choices, make it difficult to accurately predict how much climate change
could impact on longevity, but this can be expected to evolve gradually over
the years. the insurance risk exposures to climate change are highly
uncertain and have not yet been quantified in the Group’s risk scenarios,
therefore no explicit allowance is made. developments in this area will be
carefully monitored.
RISK MANAGEMENT
NON-LTM PORTFOLIO
our climate risk investment strategy is based on the following key tenets:
• understand the risks to our investments posed by climate change
•
take advantage of opportunities afforded by the transition to a lower
carbon economy
• engage in and influence change in the market to the extent that this is
efficient and possible
• decarbonise our portfolio in line with our Group commitments (more
information on our decarbonisation strategy can be found in our
transition plan).
our Responsible Investment Framework seeks to manage the risk exposure
arising from broader ESG risks, including climate change and is monitored
by the Investment committee. the Framework uses the following scoring
system (“PRAYG”):
• Purple – excluded: divestment and no new investment
• Red – restricted: no new investment
• Amber – watchlist: investment permitted but close monitoring required
• Yellow – neutral: investment permitted
• Green – positive impact: investment encouraged
All Just’s existing and prospective investments, where we have veto rights
in place are scored in this way to ensure a consistent and robust approach
is taken to assessing their ESG risks, including climate-related factors.
In the case of funds, where we do not have a veto right, a red, amber,
or green status is applied at the fund level.
LIQUID INVESTMENTS
In addition to assessing ESG risks, we have measured the climate Value at
Risk (“cVaR”) for our liquid corporate bond portfolio, where climate data is
readily available – around 72% coverage of the portfolio. this forms part of
our scenario analysis approach, where we have used projected pathways,
in line with the network for Greening the Financial Services (“nGFS”)
scenarios outlined later in this section.
41
ILLIQUID INVESTMENTS (COMMERCIAL MORTGAGES, INFRASTRUCTURE LOANS,
OTHER PRIVATE DEBT)
Assessing the risks to our illiquid investments is challenging due to the lack
of specific data as the borrowers are not subject to disclosure requirements.
We work alongside our asset managers to understand the most material ESG
risks (including climate-related physical and transition risks) inherent within
these investments.
We expect some of our illiquid assets to exhibit less transitional risk than
our liquid bond portfolio where these assets are linked to renewable
energy production and energy-efficient buildings. For real estate and other
infrastructure debt assets, given the illiquid nature of these investments,
the transition to net zero is expected to be the dominant risk with potential
costs associated with mitigation and adaptation.
WHAT PROGRESS HAVE WE MADE TO IMPROVE OUR BROADER CLIMATE RISK
MANAGEMENT ACROSS THE NON-LTM PORTFOLIO?
over the last 12 months, we have implemented a revised responsible
investment strategy to continue enhancing our approach, including
improving the management of climate-related risks. As such, we have:
• enhanced our engagement with our external asset managers to
understand their approach and commitments to achieving net zero
and our wider RI objectives;
–
joined the Partnership for carbon Accounting Financial (“PcAF”) –
to continue enhancing our approach to estimating our emissions,
where emissions data is unavailable;
–
– submitted a statement of intent to join the net zero Asset owner’s
Alliance – to continue aligning our decarbonisation strategy with a
recognised initiative; and
joined the Financial Institutions Focus Group for the net Zero data
Public utility – feeding into the climate data steering committee
run by Glasgow Financial Alliance for net Zero (“GFAnZ”);
strengthened the Group’s expertise and resources in responsible
investing; and
identified a data provider to help us estimate portfolio emissions, aiming
to apply principles of the PcAF methodology where possible.
•
•
LTM PORTFOLIO
our property underwriting assessments allow for existing flood and coastal
erosion risk. We are undertaking climate change scenario analysis to improve
our understanding of how our lending policy and underwriting approach
need to evolve to manage any future exposure to climate change risk.
METRICS AND TARGETS
the metrics below are used for our liquid corporate bond portfolio:
CLIMATE VALUE-AT-RISK (“CVAR”)
A risk metric which is an estimation of scenario-specific
valuation impact for transition and physical impacts,
at both an issuer and portfolio level.
WARMING POTENTIAL
An impact metric which gives a portfolio’s alignment
with future climate goals based on projected business
activities of invested companies.
CARBON FOOTPRINT
An impact metric that gives the GHG emissions
at an issuer and portfolio level.
the cVaR and warming potential metrics are purely illustrative as they project
far into the future based on assumptions about our existing investment
portfolio. the longer the time period that data is projected into the future,
the more uncertainty in the results. the carbon footprint metric reflects the
emissions of our current portfolio. We expect each of these metrics to reduce
as the composition of our investment portfolio changes over the years
through the application of our Responsible Investment Framework.
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
SUSTAINABILITY STRATEGY: TCFD DISCLOSURE FRAMEWORK continued
the metrics below are used for our LTM portfolio:
A summary of how Just has interpreted each scenario is provided below:
CARBON FOOTPRINT
the estimated carbon emissions of the lifetime mortgage
portfolios expressed as an average per uS$ million of
lifetime mortgage balance emissions.
PROPERTY VALUE AT RISK
A risk metric which estimates the potential reduction
in residential property values under different climate
scenarios arising from physical and transitional risks.
ENERGY PERFORMANCE
We monitor our portfolio distribution by EPc rating using
actual and estimated ratings to measure our exposure to
any introduction of minimum EPc standards.
the emissions calculation uses assumptions based on the EPc rating that
is held for the property, implied by the property postcode, or modelled
(available for all of our portfolio).
SCENARIO ANALYSIS
Background
Scenario analysis has been used to deepen our understanding of the risks
the Group faces over a long-term time horizon. Just’s climate scenarios
are anchored on two parts: property scenarios measured using the
Representative concentration Pathway (“RcP”) and the wider network for
Greening the Financial System (“nGFS”) climate scenarios. the latter was
applied across both the lifetime mortgages and the investment portfolio.
NGFS SCENARIOS
RISK PROFILE
ASSUMPTIONS
divergent net
Zero (“dnZ”)
Highest transition risks
of all, more acute in
consumer than
industrial sectors.
overall lowest physical
risk of the nGFS
scenarios.
net Zero 2050
(“nZ2050”)
Relatively low physical
risk combined with
relatively high
transition risk.
current
Policies (“Hot
House World”)
Moderate to severe
physical risks, but
relatively low
transition risks.
net zero reached by 2050 but with
higher costs due to divergence with
more stringent policies across all
sectors, primarily focusing in the
transportation and buildings sectors.
Availability of carbon dioxide removal
(“cdR”) technologies assumed to be
lower than for net Zero 2050. Emissions
are in line with a climate goal, giving at
least a 50% chance of limiting global
warming by the end of the century.
uK, uS, Eu and Japan reach net zero for
all greenhouse gases by 2050. china
makes progress in meeting its carbon
net zero pledge by 2060. this requires
immediate rigorous policies to be
introduced. cdR needed to reach this
goal, to be in line with sustainable
levels of bioenergy production. this
will result in net zero co2 emissions
by 2050.
Assumes only current implemented
policies are preserved leading to higher
physical risks. Emissions continue to
grow until 2080 leading to around
3 degrees of warming and irreversible
changes such as rising sea levels.
For 2022, Just’s base case scenario was amended to a divergent net Zero
(“dnZ”) scenario given current market conditions, where policy actions
appear to be changing due to general geopolitical tensions and the wider
implications of the war between ukraine and Russia. In the alternative
scenarios, the nationally determined contributions scenario was amended to
the current Policies scenario given it reflected the most extreme physical risk
scenario, where there is potential for more frequent extreme weather events.
We have taken a prudent approach by assessing the most extreme
transition/physical risk scenarios to understand the illustrative impacts
on the Group.
ENHANCEMENTS:
As part of the scenario analysis, we have further enhanced our approach in
the following ways:
1. Quantitative analysis
– Sector specific analysis to identify possible risk exposures using
the climate financial risk forum (“cFRF”) scenario tool and the
nGFS scenario explorer, with review by representatives from
business and risk areas.
2. data overlay
– MScI cVaR data for the selected nGFS scenarios was cross-referenced
with the outputs of the qualitative analysis.
disorderly
too little too late
overall, for material risk exposures possible management actions and
opportunities were noted.
divergent
net zero
(1.5 c)
As part of this process we considered the following factors:
transition
risk
Policy
the extent of policy action and potential movements in
carbon pricing.
technology the extent of investment into energy efficiency/low carbon
technologies/cdR.
Movements in capital expenditure to develop efficient/low
carbon products/services.
Regulation Potential changes in regulation across sectors/regions.
Market
Market demand for energy efficient/low carbon products
or services.
the impacts on productivity/availability from human and
natural capital.
legal
Potential exposure to legal action due to emerging
transition risks from policy/regulatory action.
Acute
Potential economic damages from extreme weather events.
chronic
Movements in GdP from physical risks with rising
temperatures over time.
net Zero
2050
(nZ2050)
current
Policies
w
o
l
low
orderly
Hot house world
Physical Risks
High
Physical
risk
Source: derived using the nGFS climate scenarios nGFS Scenarios Portal.
42
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g
H
i
k
s
i
r
l
a
n
o
i
t
i
s
n
a
r
T
GROUP ILLUSTRATIVE IMPACTS OF TRANSITION AND PHYSICAL RISK SCENARIOS,
PRE-MANAGEMENT ACTIONS
the results of our quantitative analysis relating to the non-ltM portfolio
and the ltM portfolio are shown in the table below. the metrics show the
illustrative impacts on our existing non-ltM portfolio if it were to remain
unchanged to 2070. the analysis assumes no changes in the investment
portfolio and does not consider the Group’s cash/cash equivalent holdings,
derivatives and reinsurance assets. As a result of our upcoming 2023 project
focussed on scenario analysis and further enhancing our internal capabilities,
for consistency we have retained the methodology and data from our
approach in 2021 with a view to enhancing these disclosures following on
from our 2023 project.
SUB-PORTFOLIO
DIVERGENT
NET ZERO 2050
NET ZERO 2050
CURRENT POLICIES
(HOT HOUSE WORLD)
liquid corporate Bonds1
-7.0% cVaR
-6.0% cVaR
-4.4% cVaR
ltMs2
3.6%
3.6%
0.2%
Results as at 1 31 december 2021 illustrative expected loss on 70% of the liquid investments of
the non-ltM portfolio, 2 31 december 2021 – estimated property value at risk.
this modelling suggests that transition risk may be a more material risk to
our non-ltM portfolio than physical risk. A 1.5°c temperature rise produces
higher impacts because the rate of decarbonisation is the greatest under
this scenario, leading to potential highest costs for the bond issuers. the
illustrative warming potential of the existing portfolio suggests the issuers’
emissions are aligned to warming the planet by 3.1°c by 2100 in a scenario
aimed at limiting global warming to 1.5°c.
Similarly, the modelling of the ltM portfolio shows that transition risk is likely
to be the most material risk. We estimate transition risk arising from the
introduction of minimum EPc standards (based on assumptions stated in
the climate Biennial Exploratory Scenario (“cBES”)) could lead to a 3.4%
reduction in property values under the net zero scenarios. this reduction
in property value would only affect Just in instances where it leads to the
property sale price being lower than the loan balance. We have not made
explicit allowance for transition risk within our reported numbers. the
estimated potential impact of transition risk on property values is based
on the uK government implementing a minimum EPc standard of c and
this has not been confirmed as a government policy yet.
Any impact would be incremental over a period of years as and when loans
become repayable following the customer’s death or entry into long-term
care. the impact may be mitigated by the extent to which government
softens the blow for homeowners through grants and subsidies.
our physical risk modelling estimates that they lead to at most a 0.2%
reduction in property values by 2080. of the physical risks to which we are
exposed, increased flood risk due to climate change is expected to have the
most material impact. Analysis suggests that our exposure to properties
classed as having a high flood risk could increase steadily from 0.3% now
to 1.5% by 2080 of properties backing our lifetime mortgages. under the
‘current Policies’ scenario, this could mean an additional 200 properties
exposed to high flood risk by 2080 out of a portfolio of 55,000 properties.
the projections suggest that a similar pattern of increasing risk of subsidence
over time due to climate change increasing the chances of lengthy periods
of drought. under the most severe scenario considered, about 100 more
properties could be exposed to subsidence by 2080. Analysis indicates that
our exposure to properties where coastal erosion is likely would remain
insignificant over the period to 2080.
the carbon footprint of the non-ltM portfolio and the ltMs is shown below:
YEAR
BUSINESS AREA
CARBON FOOTPRINT
COVERAGE
Investments
(tco2e/$m nominal invested)
lifetime Mortgage
(tco2e tonnes per annum)
2019
99.8%
2020
99.8%
2021
99.8%
2019
20202
2021
2022
100%1
95%
100%
Scope 1&2: 84
Scope 3: 407
Scope 1&2: 95
Scope 3: 372
Scope 1&2: 111
Scope 3: 377
23.2
13.1
14.2
1 c.60% of the ltM portfolio emissions is estimated each year.
2 2020 data not collected for ltM portfolio.
43
A combination of reported and estimated data has been used to calculate
the carbon footprint of the portfolio using nominal values; this includes our
third party data provider applying the principles under version one of the
Partnership for carbon Accounting Financials (“PcAF”). For asset classes where
no approach has yet been identified by PcAF, our third party data provider has
applied an appropriate approach that is similar to the PcAF framework. Where
data was not provided issuer data was overlaid for bonds that had already
matured in the portfolio and another unweighted sector average was applied
to remaining gaps to produce a full portfolio footprint. this covers c.30% of the
2019 data, c.25% of the 2020 data and c.27% of 2021 data. We acknowledge
there is double counting in producing the carbon footprint data and have
therefore split the data by scope of emissions. data could be subject to
change due to improvements in data quality going forward.
the carbon footprint of the non-ltM portfolio has been derived using a
combination of reported and estimated emissions data and supplied by
our third party data provider. It does not include cash/cash equivalents,
derivatives and reinsurance assets. It also uses a series of further estimations
based on the data on the portfolio to close the gaps in the dataset, where our
third party data provider was unable to provide information. the ltM portfolio
carbon footprint is calculated using the estimated emissions data based on the
EPc rating of the property on which the ltM is secured. For 34% of properties
we use the rating on the record and for 66% of properties, we use an estimated
rating. the contribution of an individual property to the carbon emissions of
the overall portfolio is based on the loan-to value ratio of the relevant ltM.
LIMITATIONS AND OUTCOMES
the scenario analysis shows that the Group’s primary exposure is to
transition risks based on both the dnZ scenario and nZ2050 scenario. the
dnZ scenario appears to have the most onerous financial impact to Just.
Whilst some conclusions can be drawn from our analysis, we recognise that
there are limitations to our approach as it is to a degree reliant on qualitative
analysis. there are also gaps in the data available, which means the analysis
may not reflect potential costs or impact across the entire portfolio. We will
continue enhancing our approach in the coming years to improve our
analysis of climate-related scenarios.
NON-LTM PORTFOLIO
Within the investment portfolio, as noted earlier, climate-related risk
exposures appear to be the most prevalent across a subset of sectors.
In our analysis we identified several potential management actions to
address these risks:
• Engage further with our external asset managers to identify climate
•
•
mitigation and adaptation investment opportunities.
Influence and engage to retrofit properties to upcoming regulatory
EPc standards (such as by providing more capital).
Invest more towards assets that are committed to or are aligned with
our net zero ambitions.
• Restrict or reduce exposure to climate laggards within individual sectors.
LTM PORTFOLIO
the government’s stated aim is for as many homes as possible to be
upgraded to an EPc rating of c by 2035 and it will consult on how this
could be achieved. other policy initiatives are expected with lenders being
expected to play their part in encouraging improved energy performance
among the properties on which they advance loans.
An estimated three-quarters of the residential properties underlying our
lifetime mortgage portfolio of our existing lifetime mortgages have an
energy rating below the government’s target of an EPc rating of c. the lower
the EPc rating, the more likely that the property’s value will be affected by
this transition risk. We have a process in place to collect the EPc rating for
all new Just branded mortgages.
WHAT ARE OUR FUTURE PLANS FOR THE CLIMATE RISK MANAGEMENT OF
THE NON-LTM AND LTM PORTFOLIOS?
We plan to:
•
identify another data provider to support with further analysis of
the physical and transitional climate-related risks
• enhance our approach to climate assessments of existing and
new investments to supplement our PRAYG scoring
• align our transition plan with external initiatives in line with our
commitments (i.e. SBti, nZAoA)
• enhance and further integrate an appropriate stewardship
strategy in support of climate change and our wider responsible
investment commitments
• embed climate change risk factors in our ltM lending decisions,
if possible using post code level risk ratings.
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
COLLEAGUES AND CULTURE
A PURPOSE-LED
CULTURE
2022 was a year in which our colleagues
once again rose to the challenge, providing
support and certainty to our customers
when they needed it most.
A key business priority is that all of our colleagues feel proud to work at Just.
the combination of our strong purpose and having highly engaged teams
working the Just way, is a competitive advantage which will help drive high
performance and our growth strategy.
Increasingly we have galvanised
our people around our
commitment of being a strong
and sustainable purpose-led
business for our customers, our
colleagues, our planet and
generations to come.
our Just culture is underpinned by
people who are passionate and are
committed to making a difference
to the lives of those around them.
…helped me to think about
me and the team – I now
have a better understanding
of my approach with others.
"Just Engage" colleague comment
44
THREE STRATEGIC PEOPLE PRIORITIES
during the year we have focused on three key strategic people priorities
to enable the delivery of the Group strategy:
01. ensuring we have the right people with the
right skills in the right place at the right time;
02. building well led, high performing and
healthy teams, supporting the delivery
of a great employee experience; and
03. driving a purpose-led culture of inclusion
and belonging, with diverse and talented
colleagues from different backgrounds
and experiences.
A TALENTED AND FLEXIBLE WORKFORCE
As a business our size and culture gives our people the opportunity to
make an impact to their careers whilst making a difference to the lives
of those around them. Having a growth mindset and supporting the
development of colleagues is fundamental to achieving our growth
strategy at Just. this ranges from professional leadership development
through to “lunch and learns” on our products, customers and markets
and piloting a new programme on habits and behaviours that strengthen
and sustain our culture and underpin an excellent customer experience.
other key support and development include:
• All colleagues having access to linkedIn learning with 88% of colleagues
engaging with the tool (higher than the level of engagement in other,
similar organisations) and they have viewed over 1,600 hours of content.
• Supporting the professional development of colleagues across the
business. For example, we sponsored and supported 53 actuarial students
with their Institute and Faculty of Actuaries exams. We have also utilised
our apprenticeship levy to support colleagues studying for a range of
qualifications across areas including data science, accountancy, project
management and AI.
• colleagues completing mandatory computer based training aligned
to regulatory requirements. this is in areas such as money laundering,
financial crime and data protection, as well as core training linked to
our purpose, brand and culture, including plain English modules and
unconscious bias training.
We recognise the important role that our people managers play in supporting
the delivery of a great employee experience and in particular we have:
• designed and rolled out a resource for people managers with
comprehensive materials and training to provide a one-stop-shop
to help them to lead high performing and healthy teams.
• Reviewed and redesigned our induction and onboarding process,
launching a new bi-monthly session called Just connect where new
joiners get the opportunity to meet our executive team and senior
leaders, hear about our customers, products, and services and meet
colleagues from across the business.
45
not many companies do this
kind of induction to new joiners
so well done to Just!
"Just CONNECT" colleague comment
We have continued investment in leadership and management
development, including:
• All executive team and senior leadership team (“Slt”) members completed
a 12 month programme delivered across four offsite sessions, focused on
strategy execution and how to build and sustain a culture of success.
• We refreshed our flagship people management programme – Just Engage
– and rolled this programme out to over 30 people managers throughout
the year. the programme focuses on core skills around self-awareness,
emotional intelligence and how to lead high performing teams.
• So far, over 50 managers have completed a 13 month management
development apprenticeship programme, leading to a level 5 certificate
in management and leadership through the chartered Management
Institute (“cMI”). this year, we also launched a new leadership
development programme designed for our current and future leaders.
13 colleagues are completing the programme which leads to a cMI level 7
award in strategic management and leadership practice, cMI chartered
fellow status and a professional qualification from Imperial college
business school.
Some colleague comments about the management development
apprenticeship programme include:
“Mentoring is brilliant and so is the course content”
“It is totally hitting the mark of what I expected to get out of the programme
and so much more in terms of developing my skills as a leader – I am applying
so much to my role here at Just as I am learning”
“Great content. Everything ties together with themes and the way the
learning is presented is logical. I can easily see what is required of me
by when to ensure I remain on track”
FINANCIAL STATEMENTSGOVERNANCEstrategic report
JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
COLLEAGUES AND CULTURE continued
I like that fellow colleagues are open to
sharing stories about mental health and
any personal experiences. Just offers
support for people to help with their
mental wellbeing.
Colleague comment from Peakon annual
engagement survey
HEALTHY INDIVIDUALS AND TEAMS
We care about the wellbeing of our people and we are committed to
ensuring that colleagues feel personally supported at Just. We continue
to recognise the role we play in supporting colleagues’ wellbeing
and we have an executive sponsor for wellbeing at Just. People have
different needs and we offer a range of activities and support around
mental, physical, social and financial wellbeing. We held focus groups
with colleagues from across the organisation to obtain qualitative data
regarding their wellbeing and ensure that our wellbeing strategy and
actions remain relevant and are driven by what colleagues need.
In light of the challenging external environment, over the last year
we have increased our focus on financial wellbeing and put in place
specific financial support for over 65% of uK based colleagues with
a one-off cost of living payment. this focused our support on those
individuals who are likely to be most negatively impacted financially by
inflation over the past year so that we can help to ease the challenges
of the winter period. We have also made interest free loans and
salary advances available to those requiring additional support.
We have a comprehensive range of benefits including a group personal
pension, group life assurance (both individual and partner), income
protection, critical illness cover, private medical insurance, health screening,
health cash plan, dental insurance, travel insurance, will writing, and access
to Headspace.
In addition this year we have:
•
Introduced an on-demand pay platform to provide colleagues with a
payroll savings scheme as well as a utility switching service, budgeting
tools and educational content.
• Provided colleagues with access to the Group’s financial wellness services,
destination Retirement and Pension Buddy to help them plan for a
financially secure future in later life. We also recognised Pension
Awareness day 2022 with the launch of Just’s retirement guide to improve
the experience of colleagues reaching retirement, as well as promoting
‘planning for your future’ webinars by our pension provider. We promoted
their sustainable investing webinars and ESG Hub to increase awareness
of how pensions are invested and which funds are ethical and sustainable.
• Recognised the link between financial and mental health with, tea and
•
talk, sessions arranged by our mental health first aiders. these were good
opportunities to promote the benefits available to all colleagues aligned
to Mental Health Awareness week.
Just talk sessions covering topics such as managing emotions and living
with loss. Just talk supports our work on vulnerability and how we can
support our customers more effectively. It’s a unique blend of factual
and practical advice on subjects that colleagues are interested to know
more about.
• launched a new benefit to support colleagues with caring responsibilities
to navigate the care market through partnering with My care consultant.
46
PURPOSE-LED CULTURE OF INCLUSION AND BELONGING
At the heart of our business is our purpose which is delivered through
diverse, talented colleagues from different backgrounds and experiences.
not only is having a diverse workforce the right thing to do, it helps us to
succeed, innovate and better serve our customers now and in the future.
our diversity, equity and inclusion (“dE&I”) strategy continues to drive
forward on all aspects of diversity and inclusion, with a current focus on five
key areas – gender, ethnicity, disability and neurodiversity, social mobility
and sexual orientation.
our progress against our dE&I strategy and targets is underpinned by a
range of initiatives which included:
• A series of open sessions called Just Perspectives hosted by our
executives. Attended by colleagues from across the business and
supported by our employee networks and dE&I champions, these
sessions covered a wide range of topics, including race, disability,
neurodiversity, lGBtQ+ and social mobility. these forums provided an
excellent way to engage colleagues across Just on our dE&I agenda
to build momentum to support progress.
• For the fourth year in a row we co-hosted a session as part of diveIn,
the festival for diversity and inclusion in the insurance industry.
Around 450 people attended the session which was focused on the
topic of menopause.
• 40 colleagues have taken part in the actuarial mentoring programme,
either as a mentor or a mentee, with ten mentees/mentors every year
since 2019. this programme is primarily designed to support the
development and retention of women within the actuarial profession.
A further 60 colleagues have taken part in the 30% club cross company
mentoring programme over the last few years, connecting female
talent with experienced mentors from outside of our company.
• We ran the second cohort of our executive sponsorship programme,
with 11 female colleagues matched with an executive sponsor at Just to
provide mentorship, advice and support for their development. Feedback
from this programme was excellent.
“the programme has really helped me to extend my networks and be able
to speak to senior people who I have never worked closely with before.”
Participant in the executive sponsorship programme
We completed a reciprocal mentoring programme with five colleagues
from Black, Asian and Minority Ethnic background mentoring with different
members of our executive team. this helped to raise the awareness and
understanding of our most senior leaders around race and ethnicity issues at
work as part of our commitment to the Race at Work charter. Again, feedback
from both mentors and mentees was excellent.
“I found our conversations really quite profound and quite moving – it’s
made me reflect a lot about connecting and thinking about their individual
circumstances rather than just thinking that’s a colleague. Very powerful.”
Participant in the reciprocal mentoring programme
• We participated in the 10,000 Black Interns programme, aimed at
creating opportunities for young Black talent with paid internships. one of
our interns posted on linkedIn: “It has been a remarkable experience at
Just. I have learnt a lot and I value all the connections made.” We will be
continuing our participation in the summer of 2023 and have signed up to
the newly launched 10,000 Able Interns initiative, designed to give
individuals with a disability a flying start to their careers.
• We are also now members of Progress together, a membership body
focused on improving socioeconomic diversity and inclusion at senior
levels within financial services. We took the important step this year of
collecting data from colleagues on their socioeconomic background to
inform our strategy and plan in this area.
• We are new members of GAIn, the Group for Autism, Insurance,
Investment and neurodiversity, reflecting our commitment to
championing neurodiversity within our business and industry
more broadly.
GENDER DIVERSITY
We have increased gender diversity at senior levels from 27% to 30% in 2022
and are on track to deliver against our "33 by 23" pledge as a signatory to the
Women in Finance charter that 33% of our senior leaders will be female by
2023. the percentage of women on our Board is now 44%. our gender pay
gap reduced between 2021 and 2022 from 34.4% to 31.0%. these figures
reflect an increasing proportion of women at senior levels in Just.
RACE DIVERSITY
As a signatory to the Race at Work charter, Giles offen, Group chief digital
Information officer, is our executive sponsor for Race. under his sponsorship,
we have publicly committed to increasing the percentage of senior leaders
from a Black, Asian or Minority Ethnic background to 15% by 2024, in line with
the percentage in the broader uK population. We are already at almost 18%.
We have also voluntarily published our ethnicity pay gap report alongside our
gender pay gap report.
DISABILITY
As a disabilities confident employer we are committed to taking action to
improve how we recruit, retain and develop disabled people. We also offer
mentoring and sponsorship opportunities to colleagues with disabilities and
have produced guidance and support for people managers on supporting
colleagues with disabilities. In addition to our membership of GAIn and
commitment to take part in the 10,000 Able interns programme in 2023,
we have also held a series of events for all colleagues this year focused on
different aspects of disabilities, including sessions on deafness, autism
and attention deficit hyperactivity disorder ("AdHd").
CLEAR AND REGULAR COMMUNICATION
underpinning our approach has been our continued recognition of the value
of clear and regular communication at all levels within our organisation. We
understand that this helps colleagues to join the dots between our purpose,
strategic priorities and their day to day roles. We have continued to hold
quarterly cEo-led town halls which are very successful and give colleagues
not only the opportunity to hear a business update but ask the leadership
team any questions they may have.
“the david Richardson town Halls are brilliant, he comes across really well
alongside the other executive team.”
colleague comment from Peakon annual engagement survey
Following on from the success of our conversations with the Board sessions
which we introduced in 2019, we have continued to give Board members and
colleagues the opportunity to connect, ask questions, and learn from one
another. topics have ranged from what colleagues value at Just and what
they would like to improve, through to the role of the Board in guiding our
organisation. We’ve also covered our approach to reward, specifically in
relation to how executive remuneration aligns with that of our colleagues
across the Group. You can read more about the approach of the Board
engaging with colleagues in the Section 172 statement.
GOOD LEVELS OF ENGAGEMENT
In September we introduced Peakon, a new tool to help us further understand
and support the engagement of colleagues. It has given us rich data on what
colleagues value about working at Just, and areas in which they think we
could make improvements. We received an 85% response rate to this first
survey, which in itself highlights that colleagues want to share their views
as they know we take action based on their feedback. We also received
over 12,000 comments on a whole range of topics, again, reiterating that
colleagues value the two-way listening culture we have in place.
“Just is a great company to work for, from support and development
opportunities as an employee but also for what we stand for as a company
and what we achieve for our customers. Proud to work for Just!”
colleague comment from the Peakon annual engagement survey
47
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
COLLEAGUES AND CULTURE continued
As a result of this first survey, we were pleased that the results showed we
have good levels of engagement, particularly excelling in the communication
of our strategy to our people. Moving forward, key areas that we are focused
on include improving our Reigate and Belfast office environments, and
you can read more about our new london office environment on page 33.
In particular we will continue to support colleagues with their wellbeing,
especially with the challenging external environment, and ensuring that
they have the right skills, development and support as we move through
a programme of organisational transformation.
“I know what our purpose and goals are as a team and how my work
contributes to achieving our objectives.”
colleague comment from Peakon annual engagement survey.
FEELING CONNECTED
during 2022 we successfully embedded our hybrid working approach which
is centred around the majority of colleagues spending a minimum of 40%
of their time working from an office. office working remains an important
part of the way we work at Just and allows our colleagues to take advantage
of the benefits of face to face collaboration, networking and socialising.
We emphasise to colleagues the importance of working from the office
with "purpose" and as a crucial way, we will maintain and further develop
our culture and drive our growth agenda. We have therefore taken the
opportunity to put in place a variety of in-person opportunities – from
early career networking events to our Just us Summer party.
JUST LIKE NEW – THE JUST POP-UP
As part of our focus on sustainability and building a greener business, in June
we held our first "Just like new" Pop-up shop at our Reigate office. colleagues
were invited to donate their good quality, second hand clothing which was
then put on display for other colleagues to take home. In the process we
raised valuable funds for Re-engage, our charity partner between 2018 and
2022, who are focused on tackling loneliness and social isolation of older
people. the event was such a success that we held a christmas Pop-up shop.
SUSTAINABILITY ESTIMATES FROM JUNE’S POP-UP SHOP
TOTAL ITEMS DONATED
(613 items of clothing and 224 accessories)
837
195
TOTAL ITEMS ‘SOLD’ ON THE DAY
(133 items of clothing and 62 accessories)
CO2 EMISSION SAVINGS (KG CO2E) (CLOTHING ITEMS ONLY)
47kg
TOTAL SAVINGS ON THE DAY
(equivalent to driving 117 miles
or charging 5,717 smartphones)
215kg
TOTAL SAVINGS BASED ON
ALL ITEMS DONATED
(equivalent to driving 534 miles
or charging 26,153 smartphones)
H20 SAVINGS (LITRES) (CLOTHING ITEMS ONLY)
37,240
TOTAL SAVINGS ON THE DAY
(equivalent to your daily water usage
for 264 days or taking 745 showers)
171,640
TOTAL SAVINGS BASED
ON ALL ITEMS DONATED
(equivalent to your daily water usage
for 1,217 days or taking 3,433 showers)
48
750
THE AVERAGE ATTENDANCE
AT THE TOWN HALLS
WAS APPROXIMATELY
750 COLLEAGUES
(2021: approximately 730)
86%
AT LEAST 86% (2021: 82%) OF
COLLEAGUES WHO RESPONDED
TO OUR INTERNAL PULSE
SURVEYS FELT THAT THE
TOWN HALLS WERE VALUABLE
90%
AT LEAST 90% (2021: 89%) OF
COLLEAGUES WHO RESPONDED
TO OUR INTERNAL PULSE SURVEYS
FELT INFORMED ABOUT WHAT
WAS HAPPENING IN OUR
ORGANISATION
93%
93% OF COLLEAGUES WHO
RESPONDED TO OUR SURVEY
AND JOINED DECEMBER’S TAKE
ON BOARD SESSION SAID THAT
THEY FOUND IT VALUABLE
GIVING SOMETHING BACK
Giving something back is extremely important to our people. As part of our
key priority of creating a fair world, we are committed to supporting our
local communities. At the end of 2022, we asked all colleagues to share their
suggestions for a new charity partner and to then vote on a shortlist. A key
criteria was that the charity aligned to our purpose of helping people achieve
a better later life.
We were delighted to announce towards the end of the year our new
partnership with Hourglass. the Hourglass mission is simple: end the harm,
abuse and exploitation of older people in the uK to create safer ageing and
a fairer society. Just as crucially, it is about empowering older people so
they can, where suitable, live their lives independently and fully trusting
those around them. the charity also aligns with our focus on supporting
vulnerable customers, which you can read more about in the non-financial
information statement.
As well as our corporate charity, colleagues continued to raise funds for
charities close to their hearts, and Just provides support by half-matching a
proportion of the funds raised. We also encouraged colleagues to take part
in a range of volunteering activities, including cleaning, painting, weeding,
digging, planting and potting at residential homes.
You can read more about our approach to Sustainability and our activities
in the Section 172 statement.
OUR JUST CULTURE
At the heart of our business is our Just culture which is our north Star.
How we do things is just as important as what we do. our leadership team
regularly share stories of the Just Way and how colleagues can bring our
company behaviours to life on a daily basis. In addition to local recognition
schemes, in 2022 we took the opportunity to bring together a number of
colleagues from across the business who had been nominated as great
role-models of the Just Way and our behaviours of being dynamic, for the
customer, always adapting and collaborative. We know that our colleagues
feel motivated by our purpose of helping people achieve a later life and
that through their work they can make a difference to the lives of those
around them.
I believe in our purpose, this is a
factor in my choice of working here.
Colleague comment from Peakon annual
engagement survey
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FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
RELATIONSHIPS WITH STAKEHOLDERS
OUR STAKEHOLDERS
HOW WE ENGAGE
WHAT MATTERS TO THEM
HOW WE ADDRESS THESE CHALLENGES
INDIVIDUALS/FINANCIAL ADVISERS
People approaching, at or in-retirement wanting
help with their retirement finances, and their
financial advisers.
• Engage directly when we provide regulated financial advice,
guidance and other forms of help and customer service.
• Engage indirectly via financial intermediaries and other
organisations such as pension schemes and corporates.
• Engage with research companies who collect the thoughts
and opinions of individuals. this helps the Board to understand
how Just is delivering its services and meeting the needs of our
target customers.
• Security and peace of mind that
Just will deliver its promises.
• Advice they can trust.
• Good value for money.
• Product differentiation.
• Quality of service delivered.
• Reputation of the company.
• Behave prudently and have strong, effective governance to ensure we always meet the promises we make to
our policyholders, and that due care and attention is given to customer outcomes.
• continued to invest in our colleagues and infrastructure to ensure we maintain our reputation for service design
and delivery, evidenced by our awards for outstanding service.
• differentiate our products offering unique features to customers such as our medically underwritten Just For
You lifetime Mortgage (“ltM”) which offers personalised terms for customers.
•
Further investment in our Just For You ltM automation initiative to enhance the ltM digital adviser services.
• offer destination Retirement, a financial planning service that provides tailor-made advice to individuals
approaching or transitioning into retirement after work.
PENSION SCHEME TRUSTEES/EMPLOYEE
BENEFIT CONSULTANTS
Individuals accountable for securing good
outcomes for pension scheme members
and clients.
COLLEAGUES
the team of colleagues at Just who deliver
outstanding service to customers and to
the people who support those that deliver
the services.
• convene industry events to bring together trustees, advisers
and subject matter experts to encourage dialogue and
share knowledge.
• Hold individual meetings to understand the specific challenges
facing pension scheme trustees.
• An insured solution that offers certainty
• ongoing development of strong asset sourcing capability that delivers pricing advantage.
for trustees and security for members.
• Selectively participate in bulk annuity tenders and deploy our innovative defined benefit partnering solution to
•
Financial strength and strong counterparty
preserve capital and help maintain our secure counterparty credentials.
credentials that deliver security for advisers,
• Regular attendance at client trustee Board meetings to update them on their Just Buy-in assets.
trustees and their members.
• Hosted a wide range of events to share knowledge.
• commission surveys and other research to listen to feedback
• Reputation of the company and service quality.
• offer a bulk quotation service to provide early visibility of insurer pricing.
from trustees and advisers.
• Access to the defined benefit de-risking market
for smaller transactions.
• Policyholder experience and service quality as
many schemes are targeting future buy-out
transactions.
• A secure asset portfolio with ESG and
sustainability at its heart.
• directly, day to day through line management and using a variety
•
the Group having a clear vision and purpose.
• cEo quarterly briefing sessions for all colleagues across the Group to reiterate Just’s purpose and provide a
of communication channels.
• Having the opportunity to grow and develop.
business update on key initiatives to deliver our strategic priorities and help people achieve a better later life.
• Gather feedback using a range of techniques such as structured
• diversity and inclusion initiatives.
• non-Executive director engagement with colleagues to bring their voice into the boardroom.
surveys and through more informal channels.
INVESTORS
the equity and debt investors who invest
the capital to finance the business.
• direct meetings with members of the Board.
• Shareholder communications.
• Annual General Meetings and results presentations.
REGULATORS
organisations who regulate the conduct
of firms and their financial stability.
• direct meetings with members of the Board and the
• Boards and senior management understand
• continued to respond to regulators in a timely and constructive manner and engage directly on any key
leadership team.
• Written responses to consultation documents.
• Participation in workshops directly with regulators and
via trade associations.
the regulatory objectives, and seek to ensure
regulatory matters.
good consumer outcomes are achieved and
Implemented material management actions to further reduce residential property exposure.
policyholder commitments are met.
• Active participation in policy development directly with regulators and via trade bodies.
• A culture that supports adherence to the spirit
timely preparation and filing of regulatory returns.
•
•
and the letter of regulatory rules and principles.
•
Foster open and transparent communications
with our regulators.
• Positive engagement to encourage effective
competition and consumer protection which
results in better customer outcomes.
SUPPLIERS
the companies providing the services, materials
and resources to enable Just to operate the
businesses in the Group.
COMMUNITY AND THE ENVIRONMENT
our peers, civic society and the later life financial
advice communities who we engage with and
the wider environment.
50
• ongoing direct communication through a variety of channels
to inform on workloads, challenges and potential innovations.
• Regular performance reviews enable all parties to understand
expectations and support each other to optimise delivery.
• Written feedback following each tender process to explain
the outcomes.
• collaborative relationships with open,
• our procurement and outsourcing policy ensures that tender processes are fair and transparent, and all
honest and transparent communications.
suppliers receive feedback on submissions. All suppliers are expected to adhere to relevant legislation and
•
Fair, transparent and objective process
and evaluation criteria when bidding for
relevant level of interaction with Just.
regulatory regimes, and to act ethically and with integrity. Risk-based profiling ensures all suppliers receive the
new business.
• clearly defined performance metrics are agreed with the supplier at the outset to measure ongoing success.
•
Fair payment terms which are consistently
• conflicts of interest checks at on-boarding, ensuring advantages are not gained through personal relationships.
met within deadlines.
• Partnership with charities supporting local communities and
• offer support and information to help
• offer helpful tips and guidance on topics relating to retirement on our customer website.
the environment.
• Engage with the financial advice community.
• Participate in sustainability initiatives.
individuals transition from work to retirement.
•
Initiatives to raise awareness in the financial advice community to support the needs of vulnerable customers.
• Providing support for vulnerable customers.
• Partnered with Hourglass, a national charity whose mission is to end the harm, abuse and exploitation of older
• Support fundraising efforts in local communities.
people in the uK.
•
leave a responsible footprint.
• continued to make progress to reach our carbon net zero targets.
• Partnered with Ecotree, a sustainable forestry management company, to plant trees, as one of our
sustainability initiatives.
• Wellbeing.
• Hybrid working.
credentials.
• Strong community and environmental
inclusive culture at Just.
• developing colleagues through in-role experience, coaching, mentoring, online learning and training.
• continued to make strong progress with respect to our commitment to build a diverse workforce and an
• offered support and guidance for our colleagues built around mental, physical, social and financial wellbeing.
• Embedded a hybrid way of working to encourage collaboration and innovation, and to sustain Just’s culture.
• Provided volunteering opportunities to make a positive impact in our local communities.
• communicated sustainability initiatives through Pawprint, an app to support colleagues to reduce their own
carbon footprint.
• Returns on investment.
• Held meetings with shareholders in 2022 to engage on Just’s performance and strategic developments, and to
• Assured regular interest payments and capital
discuss any issues or concerns.
protection.
• Seminars were held for investors and potential investors on Just’s defined Benefit de-risking strategy and the
• deliver a sustainable capital model.
Group’s investment strategy with webcasts published on our website.
• operate in a socially responsible and sustainable
•
Further refined our strategy with clear, specific goals driven by appropriate priorities including a target to
manner including greater diversity in the
achieve greater than 10% return on equity.
organisation.
• Payment of dividends to shareholders.
• continued focus and steps taken during the year to refresh the Board.
OUR STAKEHOLDERS
HOW WE ENGAGE
WHAT MATTERS TO THEM
HOW WE ADDRESS THESE CHALLENGES
the Board recognises that the long-term sustainable
success of Just is dependent on the way it engages
with our key stakeholders.
We recognise the role that each stakeholder group plays in our success and
our responsibilities towards them. Building strong stakeholder engagement
to understand their interests is essential. the table below describes our key
stakeholders and sets out how the Board and colleagues across the Group
engage with them. the principal decisions taken by the Board impacting
stakeholders are contained within the Section 172 report.
• Security and peace of mind that
Just will deliver its promises.
• Advice they can trust.
• Good value for money.
• Product differentiation.
• Quality of service delivered.
• Reputation of the company.
• An insured solution that offers certainty
for trustees and security for members.
Financial strength and strong counterparty
credentials that deliver security for advisers,
trustees and their members.
•
• Reputation of the company and service quality.
• Access to the defined benefit de-risking market
for smaller transactions.
• Policyholder experience and service quality as
many schemes are targeting future buy-out
transactions.
• A secure asset portfolio with ESG and
sustainability at its heart.
the Group having a clear vision and purpose.
•
• Having the opportunity to grow and develop.
• diversity and inclusion initiatives.
• Wellbeing.
• Hybrid working.
• Strong community and environmental
credentials.
• Behave prudently and have strong, effective governance to ensure we always meet the promises we make to
our policyholders, and that due care and attention is given to customer outcomes.
• continued to invest in our colleagues and infrastructure to ensure we maintain our reputation for service design
and delivery, evidenced by our awards for outstanding service.
• differentiate our products offering unique features to customers such as our medically underwritten Just For
You lifetime Mortgage (“ltM”) which offers personalised terms for customers.
Further investment in our Just For You ltM automation initiative to enhance the ltM digital adviser services.
•
• offer destination Retirement, a financial planning service that provides tailor-made advice to individuals
approaching or transitioning into retirement after work.
• ongoing development of strong asset sourcing capability that delivers pricing advantage.
• Selectively participate in bulk annuity tenders and deploy our innovative defined benefit partnering solution to
preserve capital and help maintain our secure counterparty credentials.
• Regular attendance at client trustee Board meetings to update them on their Just Buy-in assets.
• Hosted a wide range of events to share knowledge.
• offer a bulk quotation service to provide early visibility of insurer pricing.
• cEo quarterly briefing sessions for all colleagues across the Group to reiterate Just’s purpose and provide a
business update on key initiatives to deliver our strategic priorities and help people achieve a better later life.
• non-Executive director engagement with colleagues to bring their voice into the boardroom.
• developing colleagues through in-role experience, coaching, mentoring, online learning and training.
• continued to make strong progress with respect to our commitment to build a diverse workforce and an
inclusive culture at Just.
• offered support and guidance for our colleagues built around mental, physical, social and financial wellbeing.
• Embedded a hybrid way of working to encourage collaboration and innovation, and to sustain Just’s culture.
• Provided volunteering opportunities to make a positive impact in our local communities.
• communicated sustainability initiatives through Pawprint, an app to support colleagues to reduce their own
carbon footprint.
• direct meetings with members of the Board.
• Shareholder communications.
• Annual General Meetings and results presentations.
• Returns on investment.
• Assured regular interest payments and capital
• Held meetings with shareholders in 2022 to engage on Just’s performance and strategic developments, and to
discuss any issues or concerns.
protection.
• Seminars were held for investors and potential investors on Just’s defined Benefit de-risking strategy and the
INDIVIDUALS/FINANCIAL ADVISERS
People approaching, at or in-retirement wanting
help with their retirement finances, and their
financial advisers.
• Engage directly when we provide regulated financial advice,
guidance and other forms of help and customer service.
• Engage indirectly via financial intermediaries and other
organisations such as pension schemes and corporates.
• Engage with research companies who collect the thoughts
and opinions of individuals. this helps the Board to understand
how Just is delivering its services and meeting the needs of our
target customers.
PENSION SCHEME TRUSTEES/EMPLOYEE
BENEFIT CONSULTANTS
Individuals accountable for securing good
outcomes for pension scheme members
and clients.
• convene industry events to bring together trustees, advisers
and subject matter experts to encourage dialogue and
share knowledge.
• Hold individual meetings to understand the specific challenges
facing pension scheme trustees.
• commission surveys and other research to listen to feedback
from trustees and advisers.
• directly, day to day through line management and using a variety
of communication channels.
• Gather feedback using a range of techniques such as structured
surveys and through more informal channels.
the team of colleagues at Just who deliver
outstanding service to customers and to
the people who support those that deliver
COLLEAGUES
the services.
INVESTORS
the equity and debt investors who invest
the capital to finance the business.
REGULATORS
organisations who regulate the conduct
of firms and their financial stability.
• direct meetings with members of the Board and the
leadership team.
• Written responses to consultation documents.
• Participation in workshops directly with regulators and
via trade associations.
• Payment of dividends to shareholders.
• continued focus and steps taken during the year to refresh the Board.
• continued to respond to regulators in a timely and constructive manner and engage directly on any key
Group’s investment strategy with webcasts published on our website.
Further refined our strategy with clear, specific goals driven by appropriate priorities including a target to
achieve greater than 10% return on equity.
•
• Active participation in policy development directly with regulators and via trade bodies.
•
regulatory matters.
Implemented material management actions to further reduce residential property exposure.
• deliver a sustainable capital model.
• operate in a socially responsible and sustainable
•
timely preparation and filing of regulatory returns.
manner including greater diversity in the
organisation.
• Boards and senior management understand
the regulatory objectives, and seek to ensure
good consumer outcomes are achieved and
policyholder commitments are met.
• A culture that supports adherence to the spirit
and the letter of regulatory rules and principles.
Foster open and transparent communications
with our regulators.
•
• Positive engagement to encourage effective
competition and consumer protection which
results in better customer outcomes.
SUPPLIERS
the companies providing the services, materials
and resources to enable Just to operate the
businesses in the Group.
COMMUNITY AND THE ENVIRONMENT
our peers, civic society and the later life financial
advice communities who we engage with and
the wider environment.
• ongoing direct communication through a variety of channels
to inform on workloads, challenges and potential innovations.
• Regular performance reviews enable all parties to understand
expectations and support each other to optimise delivery.
• Written feedback following each tender process to explain
the outcomes.
• Partnership with charities supporting local communities and
the environment.
• Engage with the financial advice community.
• Participate in sustainability initiatives.
• collaborative relationships with open,
• our procurement and outsourcing policy ensures that tender processes are fair and transparent, and all
•
•
honest and transparent communications.
Fair, transparent and objective process
and evaluation criteria when bidding for
new business.
Fair payment terms which are consistently
met within deadlines.
• offer support and information to help
individuals transition from work to retirement.
• Providing support for vulnerable customers.
• Support fundraising efforts in local communities.
•
leave a responsible footprint.
suppliers receive feedback on submissions. All suppliers are expected to adhere to relevant legislation and
regulatory regimes, and to act ethically and with integrity. Risk-based profiling ensures all suppliers receive the
relevant level of interaction with Just.
• clearly defined performance metrics are agreed with the supplier at the outset to measure ongoing success.
• conflicts of interest checks at on-boarding, ensuring advantages are not gained through personal relationships.
• offer helpful tips and guidance on topics relating to retirement on our customer website.
Initiatives to raise awareness in the financial advice community to support the needs of vulnerable customers.
•
• Partnered with Hourglass, a national charity whose mission is to end the harm, abuse and exploitation of older
people in the uK.
• continued to make progress to reach our carbon net zero targets.
• Partnered with Ecotree, a sustainable forestry management company, to plant trees, as one of our
sustainability initiatives.
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FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
SECTION 172 STATEMENT
HOW THE DIRECTORS
MAKE DECISIONS
the Board has direct engagement principally with
our colleagues, shareholders, debt investors and
regulators, and is also kept fully appraised of the
material issues of other stakeholders through
reports from the Executive directors, senior
management and external advisers.
In our Relationships with stakeholders report, we outline the ways in which
we have engaged with key stakeholders, what matters to them and how we
have/are addressing these challenges. through stakeholder engagement, the
Board is able to understand the impact of its decisions on key stakeholders
and to ensure it keeps abreast of any significant developments in the market,
including the identification of emerging trends and risks, which need to be
factored into its strategy discussions and decision making.
DIRECTORS’ STATEMENT
the directors consider, both individually and collectively, that they have
acted in the way they consider, in good faith, would be most likely to promote
the long-term success of the company for the benefit of its members as a
whole, whilst having due regard to the matters set out in Section 172(1)(a)
to (f) of the companies Act 2006 in the decisions taken during the year being:
the likely consequences of any decision in the long term;
the interests of the company’s employees;
the need to foster the company’s business relationships with
suppliers, customers and others;
the impact of the company’s operations on the community
and the environment;
the desirability of the company maintaining a reputation for
high standards of business conduct; and
the need to act fairly between members of the company.
52
S172 FACTOR
LONG TERM
COLLEAGUES
BUSINESS
RELATIONSHIPS –
SUPPLIERS AND
CUSTOMERS
EXAMPLES OF MATTERS THE BOARD HAS REGARD TO
• company’s purpose
• Strategy
• Business model
• Risks including emerging risks
• Key stakeholders
• Regulatory framework
• colleague engagement
• diversity and inclusion
• Education and training
• Hybrid working
• Wellbeing
• Anti-bribery and anti-
corruption
• Modern slavery
• Responsible payment
practices
• Vulnerable customers
• consumer duty
the Board has regard to all our stakeholders when developing and executing our strategy.
our business model is reviewed at least annually taking into consideration our company’s
purpose, strategy, key stakeholders and emerging risks, and addressing the changing
regulatory environment.
Ensuring colleagues feel proud to work at Just, with good levels of engagement, strengthening
our talent, capabilities and inclusivity, and building well led, high performing and healthy teams
have been key strategic focus areas for the Board during 2022. our colleagues and culture
report details Just’s commitment to colleagues’ interests, diversity and inclusion, colleague
engagement, education and training, and wellbeing.
the Board is committed to fostering the company’s business relationships with suppliers,
customers and other stakeholders. the Relationships with stakeholders report outlines our
relationships with our principal suppliers and customers, as well as other stakeholders, and
how we engage, what matters to them and how we have addressed any challenges they
have raised with us. In 2022, our supplier contracts were updated to ensure suppliers are
committed to ethical business practice with regard to anti-money laundering, anti-bribery
and corruption, whistleblowing and anti-slavery and human trafficking laws.
For our suppliers we have a Procurement and outsourcing policy, ensuring tender processes
are fair and transparent and suppliers receive feedback on submissions.
Ensuring the fair treatment of vulnerable customers continues to be an important area of
focus for the Board. the Board is also responsible for the oversight of implementation plans
by relevant business areas to ensure the new FcA consumer duty requirements are met.
COMMUNITY AND
ENVIRONMENT
• community programme
• charity partnerships
• climate change and
environmental impact
• Sustainable investments
the Board recognises Just’s place in society and has reaffirmed the Group’s purpose of helping
people achieve a better later life. the Group continues to invest in community initiatives
through various programmes as summarised in the colleagues and culture report. Just also
encourages colleagues to take part in a range of volunteering activities that are aligned to
our purpose of helping people achieve a better later life.
HIGH STANDARDS
OF BUSINESS
CONDUCT
•
Just Group brand
• culture and values
• Awards and recognition
•
• Whistleblowing
Internal controls
INVESTORS
• Shareholder engagement
• General meetings
• Education initiatives
• dividend policy
Following the adoption of Just’s sustainability strategy by the Board, various initiatives are
being developed to deliver the Group’s sustainability ambitions, which includes leaving a
responsible footprint. the Sustainability strategy: tcFd disclosure framework report outlines
the Group’s sustainability strategy and how it aligns with Just’s strategic priorities.
We understand that the expectations and requirements of the society in which we operate
are set through legislation and regulation. We receive feedback from stakeholders including
our regulators, the PRA and FcA, as well as other relevant bodies. the Board listens actively
to stakeholders’ feedback and takes it into account when making judgements and
taking decisions.
our intention is to ensure that Just and our colleagues operate the business in an ethical and
responsible way. A healthy corporate culture is the cornerstone of high standards of business
conduct and governance. In 2022, key risk indicators were developed in relation to Just’s risk
culture. the Group Risk and compliance committee now receives biannual reports on risk
culture including key themes requiring further attention. Everything Just and our colleagues
do should be delivered sustainably and it is underpinned by clear behaviours of always
adapting, collaborative, dynamic and for the customer, which we collectively call the Just way.
the Board has overall responsibility for establishing and maintaining the Group’s systems of
internal control and for undertaking an annual review of the control systems in place to
ensure they are effective and fit for purpose.
the Group Audit committee reviews and approves Just’s whistleblowing policy annually. the
Group has a dedicated whistleblowing hotline and portal that allows colleagues who suspect
fraudulent, illegal or unethical behaviour by co-workers to report the matter through an
independent and confidential service.
We receive capital investment from shareholders and from debt investors. Without their
investment we would not be able to achieve our purpose. We maintain regular dialogue with
our shareholders, potential investors and research analysts to give them an opportunity to
learn more about Just’s strategic priorities, trading conditions and other factors affecting our
business. during the year we held seminars on our defined Benefit strategy and investment
strategy for analysts and investors. our Annual General Meeting provides another opportunity
for investors to meet with our directors. our Relationships with stakeholders report provides
an overview of the various ways in which we engage with our different investor groups.
Following a review of the dividend policy, the Board concluded to recommence dividend
payments in 2022.
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FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
SECTION 172 STATEMENT – EXAMPLES OF DECISIONS DURING THE YEAR
this report assesses how the directors have taken into consideration the company’s business
relationships with various key stakeholders. It also explores how the directors have engaged with
colleagues across the Group and how the principal decisions taken by the Board may impact them.
AREA OF DECISION
TRANSFORM
HOW WE WORK
MATTER CONSIDERED
WHAT WE DID
the Board considered
various initiatives to
support its strategic
priority to transform
how we work.
the Board considered and agreed the Group’s strategy execution plan for 2022
which included a strategic priority to sustainably transform how we work that
was supported by a set of key dependencies to deliver in 2022 and beyond. A key
dependency included delivering a defined Benefit modernisation roadmap. the
positive impact on our trustees' experience and enhancements to the quality of
our service have been key considerations for the defined Benefit modernisation
programme of activity.
the Board has also committed to invest in transformation and operational
improvements to enable the Group to create a business that can scale without
adding significant cost to support its sustainable growth ambitions. the directors
provided oversight on these initiatives and regular status updates were received
at Board and Board committee meetings.
during the year, our lease at the Minster Building in london came to an end. the
Board considered and approved entering into a lease at 1 Angel lane in london.
A key consideration was the design of the new office to improve the office
experience for colleagues and its low environmental footprint to support the
Group to reduce its carbon footprint.
S172 FACTOR/
KEY STAKEHOLDERS
Long term,
high standards
of business
conduct,
colleagues,
customers,
environment
COLLEAGUES
AND CULTURE
Based on the strategic
priority be proud to work at
Just, the Board considered
a programme of activity to
ensure it was engaged
on key developments
impacting colleagues and
culture, and that it had
opportunities to engage
with colleagues through
meaningful, regular
dialogue.
A key strategic focus area agreed by the Board was to embed Just’s culture and
establish a framework for measuring culture, which includes active management
of performance and promoting individual accountability. Key risk indicators
(“KRIs”) were developed in 2022 and the Group Risk and compliance committee
now receives biannual reports on the risk culture KRIs.
Colleagues
diversity and inclusion remains a key focus area for the directors both at Board
level and the wider workforce. the Board considered and supported key initiatives
for 2022 and beyond, which include offering reciprocal mentoring and cross-
company mentoring programmes, building succession plans that monitor
diversity and adjust if necessary, and using targeted recruitment channels to
widen our talent pools and build diverse shortlists, particularly in senior roles.
At Board level, the Board diversity policy was reviewed by the nomination and
Governance committee during the year and updated to reflect the listing Rules
requirement concerning diversity and inclusion requirements. In line with the
Board succession plan, the percentage of female directors currently stands at
44% and minority ethnic representation is 11%.
during the year, colleagues were invited to attend a series of engagement
sessions with non-Executive directors branded as “take on Board”. the
discussions were framed around various themes and topics including the role
of the Board, diversity and inclusion, culture and the alignment of Executive
directors’ remuneration with the wider workforce. At all sessions, colleagues had
the opportunity to provide feedback and ask questions on any matters of interest
to them to give the directors visibility of any hot topics which required the
attention of the Board. In addition to taking part in the engagement sessions, the
lead non-Executive directors responsible for seeking the views of our colleagues
and bringing them back to the Boardroom regularly engaged with the Group’s
chief People officer on colleagues, culture and wellbeing matters. A particular
focus area was the results of the annual engagement survey and the actions
to be taken based on the feedback received.
the Group chief Executive officer held a series of town halls during 2022 to
reiterate the Group’s purpose and strategic objectives, and to provide general
business updates. Feedback from colleagues on matters such as wellbeing,
hybrid working and job satisfaction was gathered through various means
including surveys and focus group sessions.
54
AREA OF DECISION
STRATEGY
MATTER CONSIDERED
WHAT WE DID
the Board considered
and refined the Group’s
strategy with clear, specific
goals driven by appropriate
priorities to be delivered
sustainably and following
the Just way.
Each year, the Board considers Just’s strategy and agrees on priorities and
goals for the year ahead and beyond. the Group remains focused on achieving
its growth ambitions, building a sustainable capital model and reaching its
environmental sustainability targets. the Board has agreed specific goals driven
by appropriate priorities to fulfil its purpose of helping people achieve a better
later life.
Key actions by the Group during the year included:
S172 FACTOR/
KEY STAKEHOLDERS
Long term,
investors and
customers
DIVIDEND
AND CAPITAL
MANAGEMENT
the Board considered
whether to recommend
the payment of dividends
taking into consideration
the key focus on delivering
profitable and sustainable
growth.
REMUNERATION the Remuneration
committee reviewed the
directors’ remuneration
policy
•
the sale of a portfolio of lifetime mortgages to further reduce the Group’s
exposure to uK residential property risk. It also reduces the sensitivity
of the solvency capital coverage ratio to movements in uK residential
property prices;
• expanding Just’s proposition in the defined benefit de-risking market to
fully meet the needs of deferred members of pension schemes;
• building a pipeline of companies for Just’s pioneering automated financial
advice and integrated retirement service, destination Retirement, to guide
and support customers who need help to structure their financial plans for
life after work;
• continued differentiation of lifetime mortgage propositions to offer increased
value to customers; and
• progressed plans to expand our Secure lifetime Income proposition onto an
additional investment platform in 2022.
the long term sustainability of the Group and the associated impact on investors
and customers were key considerations by the Board when determining the
Group's strategic priorities. Further information on the Group’s strategy can be
found in the Strategic priorities report.
Given the stronger capital position of the Group and its focus on delivering
profitable and sustainable growth while generating capital, the Board decided to
review the dividend policy and concluded to recommence dividend payments
from May 2022. As part of its deliberations on whether to declare a dividend
for the year ended 31 december 2021, the Board considered the ability of
the Group to continue to generate capital, the impact on its solvency capital
ratio, and its stakeholders’ views. After assessing affordability and taking into
consideration the impact on the Group’s solvency position, the Board also
declared an interim dividend of 0.5 pence per share which was paid to
shareholders in September 2022.
Just’s directors’ remuneration policy (the “Policy”) was last approved at the
2020 Annual General Meeting (“AGM”) and the current Policy has remained in
place for three years. In accordance with legislation, shareholders will be invited
to approve the new Policy at the 2023 AGM. on behalf of the Board, the
Remuneration committee conducted a review of the Policy during the year. As
part of the review, the directors took into consideration how the Policy aligned
with Just’s strategic objectives and emerging best practice. the Remuneration
committee chair also engaged with our largest shareholders to listen and reflect
on their views in early 2023 prior to finalising the proposed new Policy.
details of the proposed Policy changes can be found in the directors’
Remuneration report.
Investors
Investors
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FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
SECTION 172 STATEMENT – EXAMPLES OF DECISIONS DURING THE YEAR continued
MATTER CONSIDERED
AREA OF DECISION
SUSTAINABILITY the Board considered its
approach to sustainability
governance.
S172 FACTOR/
KEY STAKEHOLDERS
Community and
environment,
colleagues,
customers,
suppliers,
investors
WHAT WE DID
the Board receives regular updates on the Group’s sustainability initiatives
including updates on progress to reach the sustainability targets for the
Group’s operations to be carbon net zero by 2025 and its investments and
supply chain to be net zero by 2050, with a reduction of 50% by 2030 in line
with the Association of British Insurers (“ABI”) climate change roadmap.
In addition, the non-Executive lead on Sustainability regularly engages
with management in relation to our targets and wider sustainability trends.
during the year, the Board revisited its approach to sustainability governance
and considered the merits of establishing a Board Sustainability committee.
When considering its options, the directors took into consideration Just’s
strategic approach to sustainability, the expectations of various stakeholders
including shareholders, trustees and new business partners, regulatory
requirements and expectations, the approach taken by Just’s peers and
emerging best practice. As sustainability is an integral part of Just’s strategy
and underpins the way in which the Group operates and makes decisions, the
Board concluded that oversight should remain at Board level. It was agreed
that additional time would be allocated on the Board meeting agenda each
quarter to engage on sustainability matters. Additional training is being
provided to the directors in 2023 on sustainability matters. the approach will
be revisited regularly to reflect on evolving requirements and best practice.
In 2022, each of the Board committee’s terms of reference and Group policies
were reviewed and, where appropriate, specific responsibilities have been
included to consider climate change matters and the impact on the Group’s
targets. Board and committee papers now include information on the impact
of any proposals on the Group’s sustainability strategy.
the Group Risk and compliance committee on behalf of the Board, continues
to receive regular updates on actions taken to enhance climate-related
disclosures and to better understand the longer-term climate risks to the
Group’s investment and property portfolio, and to embed climate risk factors
in the risk management framework.
throughout the Annual Report you will find information on sustainability
initiatives and the steps taken by the Group to strengthen its sustainability
credentials.
PROCUREMENT
AND
OUTSOURCING
FINANCIAL
REPORTING
the Board considered
processes for procurement
and outsourcing
arrangements to prevent
modern slavery and
human trafficking in our
supply chain.
the Board considered the
requirements to comply
with IFRS 17, the new
insurance accounting
standard and the impact
on key stakeholders.
Just takes a zero tolerance approach to modern slavery and implements various
measures to prevent modern slavery and human trafficking in our supply chain
as covered in more detail in the Modern Slavery Statement approved by the
Board. the Modern Slavery Statement can be found on the company’s website.
our supplier contracts were updated during the year to ensure suppliers are
compliant with anti-slavery and human trafficking laws.
High standards
of business
conduct,
suppliers and
partners
the implementation of IFRS 17, the new insurance accounting standard, has been
one of the key focus areas for the directors during the year to ensure compliance
with the new requirements. the Group Audit committee has been responsible
for oversight of the progress to implement IFRS 17. Additional meetings were
held to specifically focus on this project. A key consideration was to ensure key
stakeholders including investors, regulators and the external auditor understood
the changes to financial reporting and the associated impact on the Group.
High standards
of business
conduct,
investors
56
NON-FINANCIAL INFORMATION STATEMENT
this statement sets out how we comply with the non-financial reporting requirements
set out in sections 414cA to 414cB of the companies Act 2006 and where you can find
further information on those matters in the Annual Report.
OUR BUSINESS MODEL
Just has a compelling, clear purpose, to help people achieve a better later
life by providing financial advice, guidance, competitive products and
services to those approaching, at or in-retirement. our business model is
centred around creating long-term value focusing on attractive segments
of the uK retirement income market. our priority is to convert the growth
opportunities in our markets to deliver positive outcomes for customers,
shareholders and colleagues. our business model sets out our growth
opportunities, how we create value and who we create value for.
NON-FINANCIAL KEY PERFORMANCE INDICATORS
the Board does not currently monitor any non-financial key performance
indicators, but it receives reports and management information
regarding key non-financial matters such as business change initiatives,
the investment programme, operational performance and colleague-
related matters. the discretionary bonus plan for colleagues uses
stretching financial and non-financial metrics to determine the bonus
pool which the Board and Remuneration committee review.
OUR NON-FINANCIAL POLICIES
We have non-financial policies which govern how we do business
and how we interact with our stakeholders to help ensure that we
have a positive impact and fulfil our purpose. our policies reflect our
commitment to act ethically and with integrity in all of our business
relationships. We are also mindful and focused on our financial and
capital position. this in turn enables us to protect our stakeholders
by growing the business sustainably. during 2022, the Group policy
framework was refreshed to ensure that all policies collectively
demonstrate how all core risks to the business are effectively controlled.
this table outlines Just’s key policies relating to anti-bribery and
anti-corruption, environmental and social matters, colleagues
and respect for human rights, which are in scope of the reporting
requirements contained in the companies Act 2006.
REPORTING REQUIREMENT AND JUST’S
MATERIAL AREAS OF IMPACT
ENVIRONMENTAL MATTERS
• delivering net zero targets
• Managing climate-related issues
• carbon performance, metrics
and targets
• Responsible resource use – water
and energy use, air emissions
COLLEAGUES
• culture and ethics
• Health and safety
•
Inclusion and diversity
• Rewards and benefits
• training and career development
RELEVANT POLICIES AND FRAMEWORKS
Sustainable investment framework
A framework used by our Investment team. Refer to our Sustainable investment strategy report.
Procurement and outsourcing policy
Ensures that high standards of honesty, impartiality and integrity are maintained in our business relationships.
It ensures that contractual arrangements with third parties are undertaken with due regard for the associated risks.
Board diversity policy
Refer to the nomination and Governance committee report.
Capacity and capability policy
Addresses the risk of insufficient employee numbers, lack of skills/capabilities or non-availability of required capabilities.
Fitness and propriety policy
Sets out a framework for appropriate processes and procedures to ensure compliance with the FcA’s Senior Managers
and certification Regime.
Group conduct and operational risk policy
Sets out the statement of principles for ensuring that the risk that decisions and behaviours lead to detrimental or poor
outcomes for customers and/or the risk of loss arising from failed or inadequate processes and systems, from people or
from external events are monitored, managed and reported.
Conduct risk framework
Sets out the framework of principles, systems and controls around the management of conduct risk by the Group and
encompasses regulatory requirements such as integrity, market conduct, customer interests, communication with
customers, skill, care and diligence, and conflicts of interest.
Conflicts of interest policy
Sets minimum standards and provides guidance to statutory directors and other personnel whose activities with
customers, colleagues and third parties may give rise to a conflict of interest or potential conflict of interest.
Whistleblowing policy
Sets out the framework to encourage colleagues to feel safe in raising any suspicions of wrongdoing to the attention of
the Board and senior management.
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FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
NON-FINANCIAL INFORMATION STATEMENT continued
REPORTING REQUIREMENT AND JUST’S
MATERIAL AREAS OF IMPACT
SOCIAL MATTERS
• delivering net zero targets
• Partnership with charities and
volunteering initiatives
• Supporting local communities
• Supporting vulnerable customers
• Responsible approach to tax
RESPECT FOR HUMAN RIGHTS
• Reinforcing an ethical business
culture
• Speaking up against wrongdoing
• Approach to human rights and
modern slavery
• Supporting vulnerable customers
RELEVANT POLICIES AND FRAMEWORKS
Sustainability strategy
Refer to our Sustainability strategy: tcFd disclosure framework.
Vulnerable customer policy
defines our approach to ensuring vulnerable customers receive consistently fair treatment across our Group and
experience outcomes as good as those of other customers.
Tax strategy
Summarises our approach to tax affairs. Available to view on our website at www.justgroupplc.co.uk.
Modern slavery statement
Sets out our policies and processes to combat modern slavery in all its forms. Available to view on our website at
www.justgroupplc.co.uk.
Data protection – personal information policy
Sets out a framework of high level controls and processes to enable the Group to safeguard personal data and manage
the risks of processing personal data to comply with regulatory requirements.
Group conduct and operational risk policy
Refer to “colleagues” above.
Conduct risk framework
Refer to “colleagues” above.
Vulnerable customer policy
Refer to “Social Matters” above.
Whistleblowing policy
Refer to “colleagues” above.
ANTI-BRIBERY AND ANTI-
CORRUPTION MATTERS
• Prevention of bribery and
corruption
Financial crime policy
Sets high level standards for the Group and colleagues to meet to manage the risks from financial crime. All colleagues
are trained to understand what constitutes financial crime, the regulatory requirements and their obligations.
Compliance policy
Sets out the Group’s approach to ensuring that it operates in compliance with the relevant laws and regulations.
Gifts and hospitality procedure
Sets out rules and guidance for all colleagues to follow to ensure that no undue influence has been applied to an
external organisation or anyone else dealing with the company, and that the company has not applied any undue
influence or is perceived to have unduly influenced a business decision.
Whistleblowing policy
Refer to “colleagues” above.
THE OUTCOME OF OUR POLICIES ON OUR MATERIAL AREAS OF IMPACT
ENVIRONMENTAL MATTERS
• the direct impact of our operations on the environment is relatively low
due to the hybrid ways of working from the office and at home. the Group
is uK based with a small operation in South Africa. the Board has set clear
and measurable sustainability targets for the Group’s operations to be net
zero by 2025 and its investments and supply chain to be net zero by 2050,
with a reduction of 50% by 2030 in line with the ABI’s climate change
roadmap. during the year, the Group reduced our office footprint in
support of the goal. A significant development was our move to new
premises in london in 2022. the building has won awards for its low
environmental footprint and our new office is carbon neutral.
• We continue to promote sustainable initiatives to our colleagues via
Pawprint, our sustainability partner and eco companion. Pawprint is an
app which will help us make more climate-friendly choices, and assist
in allowing us to measure, better understand and reduce our carbon
footprint at work.
• during the year, we embedded our hybrid working approach which is
centred around the majority of colleagues spending a minimum of 40%
of their time working from an office. this approach creates flexibility
for our colleagues and contributes towards a reduced office footprint.
• We are committed to promoting good corporate environmental practice
and have ISo 14001:2015 certification.
• the Group continued to invest the proceeds of the Green bond in eligible
green projects. Further information can be found in the Sustainable
investment strategy report.
Information on Just’s sustainability pillars including the steps we are
taking to leave a responsible footprint is set out in our Sustainability and
the environment report and the Sustainability strategy: tcFd disclosure
framework report.
•
• the company supports sustainable travel arrangements through a
number of initiatives, including a cycle to work scheme, and each Senior
Executive has a carbon budget which encourages the use of sustainable
modes of transport, where possible.
58
COLLEAGUES
• Strengthening our talent and capabilities, building well led, high
performing and healthy teams, and ensuring colleagues feel proud to
work at Just is a key strategic priority for us.
• the Group’s diversity and inclusion strategy continues to focus on five
areas: gender, ethnicity, disability and neurodiversity, social mobility
and sexual orientation. our progress against our diversity and inclusion
strategy and targets is underpinned by a range of initiatives, which
are outlined in our colleagues and culture report. the Board sponsor
for diversity and inclusion is the Group chief Executive officer.
• there is an active programme to improve Board diversity in accordance
with the Board diversity policy. Further information on this policy and the
steps taken to improve Board diversity can be found in the nomination
and Governance committee report.
• Gender diversity across senior roles has increased by three percentage
points to 30% and we remain on track to achieve our pledge as a signatory
to the Women in Finance charter that 33% of senior leaders will be female
by the end of 2023. our gender pay gap reduced from 34.4% in 2021 to
31.0% in 2022. Further details can be found in our gender pay gap report
on our website, www.justgroupplc.co.uk.
• As a signatory to the Race at Work charter, we have publicly committed
to increasing the percentage of senior leaders from a Black, Asian or
minority ethnic background to 15% by 2024, in line with the percentage in
the broader uK population. We are already at almost 18%. We have also
voluntarily published our ethnicity pay gap report alongside our gender
pay gap report.
• We continued to focus on providing a wide range of wellbeing support
and guidance for our colleagues built around mental, physical, social
and financial wellbeing, and we have an Executive sponsor for wellbeing.
In light of the challenging external environment, we have increased
our focus on financial wellbeing over the last year and provided specific
financial support for over 65% of uK based colleagues with a one-off cost
of living payment. Further information on our wellbeing initiatives can be
found in our colleagues and culture report.
• We have policies and provide training to help ensure that our colleagues
act ethically and do the right thing in the performance of their work.
our activities to help our colleagues feel proud to work at Just and our
compliance policies work together to help mitigate against colleagues
acting unethically.
• our whistleblowing policy, and our whistleblowing hotline, encourage
•
colleagues to report any wrongdoing. All such reports are fully investigated
and appropriate remedial actions are taken.
In 2022, we embedded our hybrid working approach, which supports our
belief that spending some time regularly in the office will help colleagues
to collaborate, innovate, learn from one another and network, as well as
sustaining the great culture we have built at Just.
SOCIAL MATTERS
• As part of our key priority of creating a fair world, we continue to support
our local communities and are committed to good corporate citizenship,
supporting charity and community initiatives which are relevant to our
business, colleagues, customers and other stakeholders. our colleagues
also benefit from participating in our social activities. during the year,
we appointed a new charity partner, Hourglass. Further details of the
charity can be found in our colleagues and culture report.
• We supported colleague fundraising (half matching their funds up
to £500). We also encouraged colleagues to take part in a range of
volunteering activities, including cleaning, painting and gardening
at residential homes.
• We provide helpful tips and guidance on our website, wearejust.co.uk,
on topics relating to retirement and the events that can impact finances
in retirement on matters such as inheritance tax and writing a will.
• For further information about our social activities and the impacts, see
our colleagues and culture report.
RESPECT FOR HUMAN RIGHTS
• While the Board considers that the risk of human rights violations is low,
we have implemented effective systems and controls to ensure slavery
and human trafficking is not taking place anywhere in our supply chains
or in any part of our business anywhere we operate. our Modern Slavery
Statement available on our Group website provides further information.
We conduct due diligence on potential suppliers, impose obligations on
those suppliers and monitor their compliance with those obligations.
• We have a responsibility to protect our customers’ privacy when
processing and using their data. We handle our customers’ sensitive
personal data and are aware of the importance that this is used
appropriately and is protected. All of our colleagues, including those who
are not customer facing, are trained on data protection, and internal
communications campaigns are used to remind staff of the importance
of data privacy. Rigorous steps are taken to ensure the security of all the
personal data we handle.
• Some of our customers may have additional or different needs and we
want to ensure that they receive a fair outcome with the appropriate
support being provided when needed. our Vulnerable customer policy
defines our approach to ensuring vulnerable customers receive
consistently fair treatment across our Group. Relevant training is provided
to colleagues to help them identify the characteristics of vulnerability and
provide appropriate support to our customers. our policies and processes
will be adapted if necessary, and where possible, to accommodate
specific customer needs.
ANTI-CORRUPTION AND ANTI-BRIBERY MATTERS
• We have a Financial crime policy which is a zero tolerance policy. this
policy helps us to prevent and detect financial crime.
• our gifts and hospitality procedure supports the financial crime policy, by
providing the rules and guidance to help prevent all colleagues receiving
or providing an undue influence over the making of a business decision.
• We have a comprehensive mandatory compliance training programme
which covers the above policy and procedure as well as other important
areas of compliance which all colleagues must complete on an annual
basis. completion is monitored by the compliance team and reported to
the Group Risk and compliance committee, with repeated failure to
complete the training being a disciplinary matter.
NON-FINANCIAL RISK MANAGEMENT
the Risk management report sets out our approach to risk management. our
approach enables all colleagues to take more effective business decisions
through a better understanding of risk. the Annual Report and Accounts sets
out our principal risks and uncertainties including non-financial risks and how
we mitigate those risks. the Group Risk and compliance committee (“GRcc”)
considers various non-financial risks. these include risks arising from people
and culture, operational processes, information security, conduct and
climate change. the aim is to prevent non-financial risks from materialising
and having a detrimental impact on our business (including our reputation),
our colleagues, our customers, our suppliers and other stakeholders.
our compliance team manages the Group’s Policy Framework, which was
refreshed in 2022. the revised framework comprises three Group policies
and underlying company policies. Each policy has a policy owner and an
executive sponsor, who review the policy at least annually and provide
an attestation as to its adherence and any material breaches. under the
new framework, the GRcc and Board will receive updated Group policies
with details of all underlying company policies established to address
each subordinate risk for approval together with an opinion from Risk
and compliance on the effectiveness of the risk management framework
and how this has been addressed through the Group policy framework.
Material breaches of policies are recorded in our risk management system
and escalated to the Group chief Risk officer. Any serious breaches
are reported to the GRcc or Board. this ongoing management of risks
highlighted by breaches enables the business to take necessary action to
mitigate the risk such as through training or improving a process or policy.
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FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
RISK MANAGEMENT
the Group’s enterprise-wide risk management
strategy is to enable all colleagues to take
more effective business decisions
through a better understanding of risk.
PURPOSE
the Group risk management framework supports management in making
decisions that balance the competing risks and rewards. this allows them to
generate value for shareholders, deliver appropriate outcomes for customers
and help our business partners and other stakeholders have confidence in us.
our approach to risk management is designed to ensure that our
understanding of risk underpins how we run the business.
RISK FRAMEWORK
our risk framework, owned by the Group Board, covers all aspects involved
in the successful management of risk, including governance, reporting
and policies. our appetite for different types of risk is embedded across
the business to create a culture of confident risk-taking. the framework
is continually developed to reflect our risk environment and emerging
best practice.
the framework has now been enhanced to facilitate the identification,
assessment and reporting of risks arising from climate change (“climate
risk”), with risk category definitions updated to integrate climate risk aspects.
A qualitative climate risk appetite has been added to the Group’s existing
high-level appetites, which include reputation and capital, recognising the
potential impacts of climate risk.
RISK EVALUATION AND REPORTING
We evaluate our principal and emerging risks to decide how best to manage
them within our risk appetite. Management regularly reviews its risks and
produces management information to provide assurance that material risks
in the business are being appropriately mitigated. the Risk function, led by
the Group chief Risk officer (“GcRo”), challenges the management team on
the effectiveness of its risk evaluation and mitigation. the GcRo provides
the Group Risk and compliance committee (“GRcc”) with his independent
assessment of the principal and emerging risks to the business.
company policies govern the exposure of risks to which the Group is exposed
and define the risk management activities to ensure these risks remain
within appetite. our policies have been updated to draw out any climate
specific considerations for risk management.
Financial risk modelling is used to assess the amount of each risk type
against our capital risk appetite. this modelling is principally aligned to our
regulatory capital metrics. the results of the modelling allow the Board to
understand the risks included in the Solvency capital Requirement (“ScR”)
and how they translate into regulatory capital needs. By applying stress and
scenario testing, we gain insights into how risks might impact the Group in
different circumstances.
EMBEDDING GOVERNANCE
VIA THREE LINES OF DEFENCE
1st LINE
BUSINESS OPERATIONS
the first level of the control environment
is the business operations which perform
day-to-day risk management activity.
RISK & CONTROL
• An established risk and control environment
60
strategic report
Quantification of the financial impact of climate risk is subject to significant
uncertainty. Risks arising from the transition to a lower carbon economy are
heavily dependent on government policy developments, social responses
to these developments and market trends. Just’s initial focus has been on
the implementation of strategies to reduce the likely exposure to this risk.
Just will continue to adapt its view of climate risk as more data and
methodologies emerge.
the aggregate exposure to climate risk is assessed against existing risk
appetites, with climate risk a factor to be considered in the management of
these risks. Risk appetite tolerances will be reviewed as further stress-testing
results become available.
OWN RISK AND SOLVENCY ASSESSMENT
the Group’s own Risk and Solvency Assessment (“oRSA”) process embeds
comprehensive risk reviews into our Group management activities. our
annual oRSA report is a key part of our business risk management cycle.
It summarises work carried out in assessing the Group’s risks related to its
strategy and business plan, supported by a variety of quantitative scenarios,
and integrates findings from recovery and run-off analysis. the report
provides an opinion on the viability and sustainability of the Group and
informs strategic decision making. updates are provided to the GRcc each
quarter, including factors such as key risk limit consumption as well as
conduct, and operational and market risk developments, to keep the Board
appraised of the Group’s evolving risk profile.
Reporting on climate risk is being integrated into the Group’s regular
reporting processes, which will evolve as the quantification of risk exposures
develops and key risk indicators (“KRIs”) are identified.
VIABILITY STATEMENT
the directors have carried out a robust assessment of the principal risks
facing the Group, including those that could threaten its business model,
future performance, solvency or liquidity, and make this assessment with
reference to the risk appetite of the Board and the processes and controls
in place to mitigate the principal risks and uncertainties as detailed in the
Strategic Report. Based on the assessment, the directors confirm that they
have a reasonable expectation that the Group will continue in operation and
meet its liabilities, as they fall due, over the next five years.
In making the viability assessment the Group considers the Group’s
business plan approved by the Board, the projected liquidity position of the
company and the Group, impacts of economic stresses, current financing
arrangements, contingent liabilities and a range of forecast scenarios with
differing levels of new business and associated additional capital
requirements to write anticipated levels of new business.
consistent with the Group’s going concern assessment, the resilience of the
Group’s solvency capital position is tested under a range of adverse scenarios
which considers the possible impacts on the Group’s business, including
stresses to uK residential property prices, house price inflation, the credit
quality of assets, mortality, and risk-free rates, together with a reduction in
new business levels. In addition, the results of extreme property stress tests
were considered, including a property price fall in excess of 40%. Eligible own
funds exceeded the minimum capital requirements in all stressed scenarios
described above. the scenarios considered are consistent with the going
concern assessment in the Financial Statements in the Annual Report.
the review also considers mitigating actions available to the Group should
a severe stress scenario occur, with the analysis considered by the Board
including those actions deemed to be more fully within the Group’s control.
Additionally, a scenario where the Group ceases to write new business
is considered. In particular, if adequate capital is not available to fund
continued writing of material levels of new business, the scope of the Group’s
business would change. In that case, even if the Group ceases to write new
business, the Group would still be viable, although as a Group managing its
existing book of business in run-off.
the directors note that the Group is subject to the Prudential Regulatory
Regime for Insurance Groups which monitors the Group’s compliance with
Solvency capital Requirements. A five year time frame has been selected for
this statement, although the Group, as with any insurance group, has
policyholder liabilities in excess of five years and therefore performs its
modelling and stress and scenario testing on time frames extending to the
expected settlement of these liabilities, with results reported in the Group’s
oRSA. Given the inherent uncertainty that increases as longer time frames
are considered, the directors consider five years to be an appropriate time
frame upon which they can report with a reasonable degree of confidence.
the directors have no reason to believe that the Group will not be viable over
a longer period.
2ND LINE
3rd LINE
OVERSIGHT FUNCTIONS
oversight functions in the company, such as Risk
Management, compliance and chief Actuary,
support the Board in setting risk appetite and
defining risk and compliance policy.
RISK & CONTROL
• oversight of the risk and control environment
Independent challenge and reporting on
•
the risk profile and conduct of the business
• Monitoring actions being taken to
mitigate risk
INDEPENDENT ASSURANCE
Internal Audit is the third line of defence,
offering independent challenge to the levels
of assurance provided by business operations
and oversight functions.
RISK & CONTROL
• Provide independent challenge and assurance
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FINANCIAL STATEMENTSGOVERNANCE JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
PRINCIPAL RISKS AND UNCERTAINTIES
STRATEGIC PRIORITIES
1. Grow sustainably
2. transform how we work
3. Grow through innovation
4. Get closer to our customers and partners
5. Be proud to work at Just
ONGOING PRINCIPAL RISKS
A material change was made to how the risks and uncertainties are presented in
this report. the first section summarises the Group’s ongoing core risks and how
they are managed in business as usual. the risk outlook section calls out the risk
subjects that are evolving and are of material importance from a Group perspective.
RISK
HOW WE MANAGE OR MITIGATE THE RISK
A
Market risk arises from changes in interest
rates, residential property prices, credit spreads,
inflation, and exchange rates, which affect, directly
or indirectly, the level and volatility of market
prices of assets and liabilities. the Group is not
exposed to any material levels of equity risk.
Some very limited equity risk exposure arises
from investment into credit funds which have a
mandate which allows preferred equity to be held.
STRATEGIC PRIORITIES 1, 3
B
Credit risk arises if another party fails
to perform its financial obligations to the
Group, including failing to perform them in
a timely manner.
STRATEGIC PRIORITIES 1, 3, 4
C
Insurance risk arises through exposure
to longevity, mortality, morbidity risks and
related factors such as levels of withdrawal
from lifetime mortgages and management
and administration expenses.
STRATEGIC PRIORITIES 1, 3, 4
Liquidity risk is the risk of insufficient suitable
D
assets available to meet the Group’s financial
obligations as they fall due.
STRATEGIC PRIORITIES 1, 3, 4
Conduct and operational risks arise from
E
inadequate internal processes, people and
systems, or external events including changes in
the regulatory environment. Such risks can result
in harm to our customers, the markets in which we
do business or our regulatory relationships as well
as direct or indirect loss, or reputational impacts.
STRATEGIC PRIORITIES 1, 2, 3, 4, 5
Strategic risk arises from the choices the
F
Group makes about the markets in which it
competes and the environment in which it
competes. these risks include the risk of
changes to regulation, competition, or social
changes which affect the desirability of the
Group’s products and services.
STRATEGIC PRIORITIES 1, 2, 3, 4, 5
• Premiums invested to match asset and liability cash flows as closely as practicable;
• Market risk exposures managed within pre-defined limits aligned to risk appetite for individual risks;
• Exposure managed using regulatory and economic metrics to achieve desired financial outcomes;
• Balance sheet managed by hedging exposures including currency and inflation where cost effective
to do so; and
Interest rate hedging is in place to manage Solvency II capital coverage and IFRS equity positions.
•
Investments are restricted to permitted asset classes and concentration limits;
•
• credit risk exposures monitored in line with credit risk framework, driving corrective action where required;
• External events that could impact credit markets are tracked continuously;
• credit risks from reinsurance balances mitigated by the reinsurer depositing back premiums ceded and
•
through collateral arrangements or recapture plans; and
the external fund managers we use are subject to Investment Management Agreements and additional
credit guidelines.
• controls maintained over insurance risks related to product development and pricing;
• Adherence to approved underwriting requirements;
• Medical information developed and used for pricing and reserving to assess longevity risk;
• Reinsurance used to reduce longevity risk, with oversight by Just of overall exposures and the
aggregate risk ceded;
• Group Board review and approval of assumptions used; and
• Regular monitoring, control and analysis of actual experience and expense levels.
• Stress and scenario testing and analysis: including collateral margin stresses, asset eligibility and
haircuts under stress;
• corporate collateral capacity to reduce liquidity demands and improve our liquidity stress resilience;
• Risk assessment reporting and risk event logs inform governance and enable effective oversight; and
• contingency funding plan maintained with funding options and process for determining actions.
•
Implementation of policies, controls, and mitigating activities to keep risks within appetite;
• GRcc oversight of risk status reports and any actions needed to bring risks back within appetite;
• Scenario-based assessment to establish the level of capital needed for conduct and operational risks;
• Monitoring conduct risk indicators and their underlying drivers prompting action to protect customers;
• Risk management training and other actions to embed regulatory changes; and
• Ensuring data subjects can exercise their GdPR rights including their right to be forgotten and subject
access requests to obtain their data held by Just.
•
•
the Group operates an annual strategic review cycle;
Information on the strategic environment, which includes both external market and economic factors
and those internal factors which affect our ability to maintain our competitiveness, is regularly analysed
to assess the impact on the Group’s business models;
• Engagement with industry bodies supports our information gathering; and
•
the Group responds to consultations through trade bodies where appropriate.
62
RISK OUTLOOK
HOW THIS RISK AFFECTS JUST
1
Political and regulatory
changes in regulation and/or
the political environment
can impact the Group’s
financial position and its
ability to conduct business.
the financial services
industry continues to see a
high level of regulatory
activity.
STRATEGIC PRIORITIES 1, 3, 4, 5
TREND
UNCERTAIN
2
Climate and ESG
climate change could impact
our financial position by
impacting the value of
residential properties in our
lifetime mortgage portfolio
and the yields and default
risk of our investment
portfolios. Just’s reputation
could also be affected by
missed emissions targets or
inadequate actions on
environmental issues.
STRATEGIC PRIORITIES 1, 2, 3, 4, 5
TREND
INCREASING
JUST’S EXPOSURE TO THE RISK
OUTLOOK AND HOW WE MANAGE OR MITIGATE THE RISK
HM treasury continues to review the future regulatory framework for financial
services, which includes the Solvency II review. Both reviews could impact the
amount of capital our businesses are required to hold. Matching Adjustment
and Risk Margin reform is of key importance to Just’s business model. the HM
treasury response in november 2022 set out the Government’s final reform
package for Solvency uK, including:
• a reduction in the Risk Margin;
• an enhancement in the Fundamental Spread risk sensitivity although its
underlying design will be unchanged; and
• a broadening of eligibility requirements for the Matching Adjustment, the
inclusion of assets with ‘highly predictable’ cash flows, and other changes
including increased flexibility in the associated processes.
the potential impact of the changes will not be fully understood until the
details of their implementation are known.
the FcA’s rules for a new consumer duty (PS22/9 published July 2022) will set
higher and clearer standards for consumer protection across financial services
and require firms to put customers’ needs first. Firms need to apply the duty to
new and existing products and services that are open to sale (or renewal) from
31 July 2023, and from 31 July 2024 to apply the duty to products and services
in closed books. Work is now progressing to implement within the timeframes
the plans approved by the Just Boards in october 2022.
new PRA and FcA regulations on operational resilience took effect in March 2022.
the Regulators expect firms to be operationally resilient to ensure customers are
not at a financial disadvantage or be placed at risk of financial harm. Firms must
identify its most important business services and set impact tolerances for each,
with regular scenario testing and an annual Self-Assessment for Board approval.
the change in insurance accounting standard to IFRS 17 due to be implemented
in 2023 will produce a different profit recognition profile to which market
participants will take time to adjust. We published an investor presentation in
February 2023 to brief investors on the changes resulting from IFRS 17 ahead of
full implementation.
Just is proactive in pursuing its sustainability responsibilities and recognises
the importance of its social purpose. We have set sustainability targets for our
operations to be carbon net zero by 2025 and for emissions from our investment
portfolio, properties on which lifetime mortgages are secured and supply chain
to be net zero by 2050, with a 50% reduction in these emissions by 2030.
Performance against these targets is being monitored and reported.
We will continue to develop stress testing capabilities to support the monitoring
of potential climate change impact on our investment and ltMs portfolios with a
particular focus on refining the quality of input data.
under Just’s Responsible Investment Framework, the environmental credentials
of bonds and illiquid investments are considered when new premium income is
invested. Risks arising from flooding, coastal erosion and subsidence are taken
into account in lifetime mortgage lending decisions.
the consideration of sustainability in investment decisions may restrict
investment choice and the yields available; it may also create new opportunities
to invest in assets that are perceived to be more sustainable.
Just monitors and assesses regulatory
developments on an ongoing basis. We seek to
actively participate in all regulatory initiatives which
may affect or provide future opportunities for the
Group. our aims are to implement any changes
required effectively and deliver better outcomes for
our customers and a competitive advantage for the
business. We develop our strategy by giving
consideration to planned political and regulatory
developments and allowing for contingencies should
outcomes differ from our expectations.
our tcFd disclosures (section “Sustainability
strategy: tcFd disclosure framework”) explains
how climate-related risks and opportunities are
embedded in Just’s governance, strategy and risk
management, with metrics to show the potential
financial impacts on the Group. the metrics reflect
the stress-testing capabilities developed to date to
assess the potential impact of climate risk on the
Group’s financial position.
the value of properties on which lifetime mortgages
are secured can be affected by:
(i) transition risk – such as potential government
policy changes related to the energy efficiency
of residential properties.
(ii) physical risks – such as increased flooding due
to severe rainfall, or more widespread subsidence
after extended droughts.
A shortfall in property sale price against the
outstanding mortgage could lead to a loss due to
the no-negative equity guarantee given to
customers. the lifetime mortgage lending policy will
be kept under review in light of climate risk and
adjustments made as required.
For corporate bond and illiquid investment portfolios,
the impact of climate risk on assets or business
models may affect the ability of corporate bond
issuers and commercial borrowers to service their
liabilities. Yields available from corporate bonds may
also be affected by any litigation or reputational
risks associated with the issuers’ environmental
policies or adherence to emissions targets.
63
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
PRINCIPAL RISKS AND UNCERTAINTIES continued
HOW THIS RISK AFFECTS JUST
JUST’S EXPOSURE TO THE RISK
OUTLOOK AND HOW WE MANAGE OR MITIGATE THE RISK
3
Cyber and technology
It systems are key to serving
customers and running the
business. these systems
may not operate as
expected or may be subject
to cyber-attack to steal or
misuse our data or for
financial gain. Any system
failure affecting the Group
could lead to costs and
disruption, adversely
affecting its business
and ability to serve its
customers, as well as
reputational damage.
STRATEGIC PRIORITIES 1, 2, 3, 4, 5
TREND
STABLE
4
Insurance risk
In the long-term, the rates
of mortality suffered by our
customers may differ from
the assumptions made when
we priced the contract.
STRATEGIC PRIORITIES 1, 3, 4
TREND
STABLE
our It systems are central to conducting
our business from delivering outstanding
customer service to the financial management
of the business. We maintain a framework of
operational resilience and disaster recovery
capabilities so that we can continue to operate
the business in adverse circumstances.
Protecting the personal information of our
customers and colleagues is a key priority. Internal
controls and our people are integral to protecting
the integrity of our systems, with our multi-layered
approach to information security supported by
training, embedded company policies
and governance.
We continue to invest in strategic technologies
to strengthen data security and overall resilience.
In 2022 we have made enhancements to network
architecture and implemented data centre
upgrades. our email system has been made more
resilient to malicious attacks, including emerging
types of ransomware.
A specialist Security operations centre monitors all
our externally facing infrastructure and services,
with threat analysis, incident management and
response capabilities. the Group’s cyber defences
are subject to regular external penetration tests to
drive enhancements to our technology
infrastructure.
the development of in-house systems and our
use of third-party systems is tightly controlled by
technical teams following established standards
and practices.
A high proportion of longevity risk on new business
Just writes is reinsured, with the exception of care
business for which the risk is retained in full. Most of
the financial exposure to the longevity risks that are
not reinsured relate to business written prior to 2016.
Reinsurance treaties include collateral to minimise
exposure in the event of a reinsurer default. Analysis
of collateral arrangements can be found in notes 27
and 29 of the Annual Report and Accounts.
Mortality experience continues to be volatile and
significantly above pre-pandemic levels.
the cyber threat to firms is expected to continue at a high level in the coming
years with evolving sophistication. We will continue to closely monitor evolving
external cyber threats to ensure our information security measures remain fit
for purpose.
2023 will see further investments in cyber-attack countermeasures, to enable
consistent delivery of required security standards. this will include the
replacement of the Security Incident Event Management tool to increase
security. other new technologies will be evaluated during the year. Just’s new
chief Information Security officer will implement a revised information security
team structure and approach.
Experience and insights emerging since mid-2021 indicate that coVId-19 and
the aftermath of the pandemic, will have a material and enduring impact on
mortality for existing and future policyholders. our current assumption about
these changes has been incorporated into Just’s pricing across our Retirement
Income and lifetime Mortgage products and will be updated as more
information becomes available.
64
HOW THIS RISK AFFECTS JUST
JUST’S EXPOSURE TO THE RISK
OUTLOOK AND HOW WE MANAGE OR MITIGATE THE RISK
5
Market and credit risk
Fluctuations in interest rates,
residential property values,
credit spreads, inflation and
currency may result, directly
or indirectly, in changes in
the level and volatility of
market prices of assets
and liabilities.
Investment credit risk is
a result of investing to
generate returns to meet our
obligations to policyholders.
Global factors have led to
high inflation, increased
interest rates and significant
volatility in financial markets
in 2022.
STRATEGIC PRIORITIES 1, 3, 4
TREND
INCREASING
6
Liquidity risk
Having sufficient liquidity
to meet our financial
obligations as they fall
due requires ongoing
management and the
availability of appropriate
liquidity cover. the liquidity
position is stressed in
extremely volatile conditions
such as those triggered by
the September 2022
“mini-budget.”
STRATEGIC PRIORITIES 1, 3, 4
TREND
INCREASING
7
Strategic risk
the choices we make about
the markets in which we
compete and the demand
for our product and service
offering may be affected
by external risks including
changes to regulation,
competition, or social
changes.
STRATEGIC PRIORITIES 1, 2, 3, 4, 5
TREND
STABLE
tightening fiscal and monetary policy are expected to weaken global growth
significantly in 2023, with a sustained recession possible in the uK. Financial
markets are likely to remain volatile during this period.
our investment assets may experience increased movements in downgrade
and/or default experience in 2023. Residential property price falls may increase
the Group’s exposure to the risk of shortfalls in expected repayments due to
no-negative equity guarantee within its portfolio of lifetime mortgages. Any
commercial property price falls would reduce the value of collateral held within
our commercial mortgage portfolio.
our balance sheet sensitivities to these risks can be found in note 17.
Financial market volatility leads to changes in the
level of market prices of assets and liabilities. our
business model and risk management framework
have been designed to remain robust against market
headwinds. our policy is to manage market risk
within pre-defined limits.
Investment in fixed income investments involves
default, credit rating downgrade and concentration
risks. other credit risk exposures arise due to the
potential default by counterparties we use to:
• provide reinsurance to manage longevity risk
and to fund new business.
• provide financial instruments to mitigate
interest rate and currency risk exposures.
• holding our cash balances.
All over-the-counter derivative transactions are
conducted under standardised International Swaps
and derivatives Association master agreements.
the Group has collateral agreements with relevant
counterparties under each master agreement.
credit risk on cash assets is managed by imposing
restrictions over the credit ratings of third parties
with whom cash is deposited.
Financial markets are expected to remain volatile into the foreseeable future
with an increased level of liquidity risk. At the same time (partly as a result of
the ldI crisis) Just is experiencing strong market demand for defined benefit
de-risking solutions from pension schemes.
Just’s use of derivative positions is planned to increase in proportion to its
planned growth. throughout any period of heightened volatility, Just maintains
robust liquidity stress testing and holds a high level of liquidity coverage above
stressed projections.
Regulation changes, such as Solvency II reform, have been agreed recently and
it is likely the Group’s own regulators will not make any significant change until
these have been embedded.
there is a risk that pension scheme regulation may change as a result of
schemes’ exposures.
demand for de-risking solutions is expected to remain stable.
Exposure to liquidity risk arises from:
•
short term cash flow volatility leading to
mismatches between cash flows from assets
and liabilities, particularly servicing collateral
requirements of financial derivatives and
reinsurance agreements;
the liquidation of assets to meet liabilities
during stressed market conditions;
•
• higher-than-expected funding requirements
on existing ltM contracts, lower redemptions
than expected; and
liquidity transferability risk across the Group.
•
Financial markets have experienced significant
volatility recently. Just was not directly affected by
the liability driven Investment (“ldI”) crisis
following September’s “mini-budget,” which
impacted defined benefit pension schemes
unprepared for the effect on many collateralised
derivative positions of a sudden increase in interest
rates. However, the market turmoil, including the fall
in the value of sterling, did create a sharp increase in
collateral calls for the Group, which were managed
through its liquidity risk framework.
Risks to the Group’s strategy arise from regulatory
change as the Group operates in regulated markets
and has partners and distributors who are
themselves regulated. Actions by regulators may
change the shape and scale of the market or alter
the attractiveness of markets.
changes in the nature or intensity of competition
may impact the Group and increase the risk the
business model is not able to be maintained.
the actions of our competitors may increase the
exposure to the risk from regulation should they fail
to maintain appropriate standards of prudence.
65
FINANCIAL STATEMENTSGOVERNANCEstrategic report JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
CHAIR’S INTRODUCTION TO GOVERNANCE
dear shareholders and other stakeholders,
on behalf of the Board of Just Group plc (the “Board”), I am pleased to present
the 2022 corporate Governance report.
this section of the Annual Report and Accounts explains how the Board
seeks to ensure that we have effective corporate governance and oversight
in place to help support the creation of long-term sustainable value for
our shareholders and broader stakeholders. As covered in the Governance
in operation report, I am pleased to advise that the Board considers
that, for the year under review, it has complied with the principles and
provisions of the uK corporate Governance code 2018 (the “code”).
STRATEGY AND PURPOSE
the Board has agreed on an effective corporate governance framework,
which includes the key mechanisms through which the Group sets its strategy
and objectives, monitors performance and considers risk management. Just
has a compelling, clear purpose, to help people achieve a better later life by
providing financial advice, guidance, competitive products and services to
those approaching, at, or in-retirement. our priority is to deliver sustainable
growth so that we can take advantage of the markets we operate in.
We work hard to ensure our customers benefit from our services and our
shareholders receive the benefit of long-term, sustainable value creation,
whilst also taking into consideration the needs of our other stakeholders
and the impact of our operations on the wider society and environment.
BOARD APPOINTMENTS
during the year, we continued to refresh the membership of the Board. Mary
Kerrigan and Mary Phibbs were appointed as non-Executive directors of Just
Group plc on 1 February 2022 and 5 January 2023 respectively. Paul Bishop
and Ian cormack will retire from the Board at the conclusion of the 2023
Annual General Meeting (“AGM”) on 9 May 2023.
From 9 May 2023, Mary Phibbs will be appointed as Senior Independent
director and chair of the Group, JRl and PlAcl Audit committees subject
to regulatory approval. She will also be appointed as a member of the
nomination and Governance committee and Market disclosure committee.
Michelle cracknell will take over as the chair of the Remuneration committee
subject to regulatory approval and Mary Kerrigan will be appointed as a
member of the Group, JRl and PlAcl Audit committees.
the nomination and Governance committee considered plans for the orderly
succession to both the Board and to members of the Group Executive
committee and the Group company Secretary during the year. It also
considered and recommended changes to the composition of various Board
committees and the Boards of some of our regulated subsidiary companies.
BOARD EVALUATION AND EFFECTIVENESS
Board evaluation is an important annual process and in 2022 we undertook
an internal evaluation. In 2023, the Board evaluation will be facilitated by an
external consultant.
Following the previous evaluation, we have:
•
introduced an agenda item to each meeting to give the directors an
opportunity to provide feedback to management on the quality of the
papers presented and whether the information was clear and concise;
reviewed our Board paper template and provided training to authors so
that the Board receives clear and concise information in a standardised
format with further information available in supplementary packs
if necessary:
•
• enhanced Board training with each Board committee chair being asked to
consider areas where their committee needs additional training. Various
training sessions have been scheduled for the year ahead; and
reviewed Board committee membership.
•
66
I am pleased to present the
Group’s corporate Governance
Report for 2022
JOHN HASTINGS-BASS
chair
contents
1.
chair’s introduction to governance
2.
Board of directors
Senior leadership
3.
4. Governance in operation
5. nomination and Governance committee report
6. Group Audit committee report
7.
8. directors’ Remuneration report
9. directors’ report
10. directors’ responsibilities
Group Risk and compliance committee report
REMUNERATION
the Board has delegated to the Remuneration committee responsibility
for the remuneration arrangements for the chair, Executive directors and
senior management. the Remuneration committee also reviews workforce
remuneration and related policies and the alignment of incentives and
rewards with the Group’s culture.
the directors’ Remuneration Policy was last approved at the 2020 AGM
and the current policy has remained in place for three years. In accordance
with legislation, we will submit a new policy for shareholder approval
at the upcoming AGM on 9 May 2023. the chair of the Remuneration
committee has consulted our major shareholders on our proposed renewal
of the directors’ Remuneration Policy who expressed broad consent with
the proposed Policy.
Further details on the proposed changes to the directors’ Remuneration
Policy and the work of the Remuneration committee can be found in the
directors’ Remuneration report.
ANNUAL GENERAL MEETING
I am pleased to confirm that the 2023 AGM will be held at 10.00 am on
9 May 2023 at 1 Angel lane, london Ec4R 3AB.
on behalf of the Board, I would like to thank shareholders for their continued
engagement and support. I would also like to thank our colleagues for their
continued commitment and dedication to Just and our purpose. the Board
and I look forward to engaging with our stakeholders in the year ahead.
JOHN HASTINGS-BASS
chair
6 March 2023
As part of the annual evaluation process, all non-Executive directors were
assessed as being independent and able to provide an effective contribution
to the Board. More information about the Board evaluation can be found in
the Governance in operation report.
SUSTAINABILITY
the Board has set a clear strategy in respect of sustainability for the Group
and the Group chief Executive officer is accountable for executing the
strategy to achieve those targets.
during the year, the Board considered its oversight of the sustainability
strategy and whether it would be appropriate to establish a separate Board
Sustainability committee. As sustainability is an integral part of our strategy
and underpins the way in which the Group operates and makes decisions, it
was concluded that the preferred approach was to enhance reporting to the
Board and allocate additional time on the agenda each quarter to engage on
sustainability matters. Further information on this decision can be found in
the Section 172 report. An overview of our approach towards sustainability
and climate change governance can be found in the Sustainability strategy:
tcFd disclosure framework report.
DIVERSITY AND INCLUSION
the Board has adopted a diversity policy and remains committed to
maintaining an appropriate balance of male and female directors, and
to ensure minority ethnic representation on the Board in line with the
recommendations from the Hampton-Alexander and Parker Reviews, and
the new listing Rule requirements. You can read more about our work in
relation to Board diversity and inclusion in the nomination and Governance
committee report.
I am pleased to report that as at the date of this report, the Group meets
the new listing Rule requirement that a minimum of 40% of the Board are
female and that at least one member of the Board is from a minority ethnic
background. Following the 2023 AGM when Paul Bishop and Ian cormack
retire from the Board, 57% of the Board will be women. the listing Rule target
that at least one of the senior Board positions (chair, Senior Independent
director, Group chief Executive officer or Group chief Financial officer) is a
woman will also be met following the appointment of Mary Phibbs as Senior
Independent director on 9 May 2023. the Board recognises the importance of
evolving the diversity of the Board in all respects to reflect our wider society
and to bring fresh perspectives and experience to help deliver Just’s strategic
objectives. this will remain a key priority for the Board over the coming years.
AUDIT
the introduction of accounting standard IFRS 17 represents significant
changes to insurance accounting and our Group Audit committee has been
highly engaged in overseeing the implementation of this standard. the Group
Audit committee has received regular updates and held in depth sessions to
ensure that they have the necessary information and insight to oversee this
important change. More information on the adoption of IFRS 17 can be found
in the Group Audit committee report.
67
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
BOARD OF DIRECTORS
NON-EXECUTIVE CHAIR
EXECUTIVE DIRECTORS
John Hastings-Bass
GROUP Chair
N RI
M
RE
david Richardson
Group Chief Executive Officer
M
Appointed: 13 August 2020 (3 years)
Appointed: 4 April 2016 (7 years)
CAREER AND EXPERIENCE
John brings over 35 years of business experience
in the insurance and reinsurance sectors and has
undertaken the role of chair in publicly quoted and
privately owned businesses. He currently holds
the role of chair of BMS Group, the private equity
backed global insurance broking group and, until
2017, was chair of publicly quoted novae Group plc.
John began his career in Hong Kong with Jardine
Matheson in 1976. He moved to london and was
latterly an Executive director of Jlt Group and
chief Executive officer of International Business
Group. He joined Arthur J. Gallagher in 2007
as chairman of International development,
leading the Asia Pacific business. In May 2007,
John was appointed as non-Executive director
of novae Group plc, later serving as chair from
May 2008 until october 2017. He was appointed
non-Executive chair of BMS Group in January
2015 and, in october 2022, he was appointed
chair of dale Management Agency limited.
John is a trustee of the landmark trust
and chair of its Audit committee.
CAREER AND EXPERIENCE
david was deputy Group chief Executive officer of
Just Group plc from April 2016 until his appointment
as Group chief Executive officer on 19 September
2019. He was Managing director of the uK corporate
Business from September 2019 until April 2022.
He was the Interim chief Financial officer of the
company from october 2018 until January 2020
and chief Finance officer of Partnership Assurance
Group plc from February 2013 until April 2016.
Previously, david was Group chief Actuary of
Phoenix Group, where he was responsible for
restructuring the group’s balance sheet and
overall capital management. Prior to this, david
worked in various senior roles at Swiss Re, across
both its Admin Re and traditional reinsurance
businesses. the roles included chief Actuary of
its life and Health business, Head of Products
for uK and South Africa, and Global Head of its
longevity Pricing teams. david commenced
his career at the actuarial consultancy firm,
tillinghast. david is a Fellow of the Institute and
Faculty of Actuaries and a cFA charter holder.
Andrew Parsons
(known as Andy Parsons)
Group Chief Financial Officer
Appointed: 1 January 2020 (3 years)
M
CAREER AND EXPERIENCE
Prior to his appointment as Group chief Financial
officer of Just Group plc, Andy was Group Finance
director at lV= from June 2017 until december
2019, having previously held executive positions
at several leading financial institutions including
Friends life, AXA and Zurich Financial Services.
His career in finance has spanned over 25 years,
with particular expertise in life and general
insurance. Prior to joining lV=, he held the roles
of finance director, divisional risk officer and
life, pensions and investment director for the
insurance business of lloyds Banking Group.
In June 2021, Andy was appointed as a non-
Executive director of RSA Insurance Group limited.
SKILLS AND COMPETENCIES
• Strong broad commercial skills in strategy,
mergers and acquisitions
• High level of competency managing customer
and financial adviser relationships through his
broking experience
SKILLS AND COMPETENCIES
• Extensive experience in life assurance,
pensions and financial services
• High level of competency in executive
leadership Strong understanding of the
markets the Group operates in
• Extensive experience in all aspects of
• Qualified Actuary
governance from 15 years as an independent
non-Executive director
SKILLS AND COMPETENCIES
• Extensive experience in financial services
and financial and executive leadership
• Strong understanding of the markets the
Group operates in
• chartered Accountant
Ian cormack
Senior Independent Director
Appointed: 4 April 2016 (7 years)
Paul Bishop
Independent
Non-Executive Director
Michelle cracknell
Independent
Non-Executive Director
Appointed: 4 April 2016 (7 years)
Appointed: 1 March 2020 (3 years)
CAREER AND EXPERIENCE
CAREER AND EXPERIENCE
CAREER AND EXPERIENCE
Ian has been an independent non-Executive
Paul has been an independent non-Executive
Michelle was chief Executive officer of the Pensions
director of Just Group plc since April 2016 and was
director of Just Group plc since April 2016.
Advisory Service between october 2013 and
appointed as its Senior Independent director on
He previously served as a non-Executive
december 2018. Prior to that, she held director roles
1 January 2022. Ian previously served as Senior
director of Partnership Assurance Group plc
in advice firms, providers and insurance companies.
Independent director for Partnership Assurance
from May 2014 until its merger with Just
Group plc from May 2013 until its merger with
Retirement Group plc in April 2016.
Just Retirement Group plc in April 2016.
In addition to Just Group, Michelle is a non-
Executive director and trustee of lloyds
Prior to his appointment, Paul spent the majority
Banking Group Pension Funds, chair of FIl
Prior to his appointment, Ian spent over 30 years at
of his career at KPMG and was a Partner from 1993
Wealth Management limited, non-Executive
citibank, latterly as uK country Head and co-Head
until the end of January 2014. He has specialised in
director of FIl Holdings limited and Financial
of the Global Financial Institutions Group. From
the insurance sector for over 30 years, particularly
Administration Services limited, and a non-
2000 to 2002, he was chief Executive officer of AIG
life insurance, and led KPMG’s insurance consulting
Executive director and chair of the Audit and
Europe. Ian has served as a non-Executive director
practice for much of his time as a Partner. Paul also
Risk committee of PensionBee Group plc.
on several Boards in the uK and overseas. Previous
spent 18 months on secondment at Standard life as
appointments include serving as Senior Independent
Head of Financial change in the period leading up
In February 2023 Michelle was appointed as a non-
director of Phoenix Group Holdings limited, chair
to its demutualisation and flotation. Previously, Paul
Executive director of the Board of Sport England.
of Maven Income & Growth Vct 4 plc and non-
served as a non-Executive director of Police Mutual
Executive director of Hastings Group Holdings plc
Assurance Society from 2017 to September 2020.
and the Broadstone Acquisition corporation.
Paul is currently a non-Executive director of the
Ian is currently a non-Executive director of
national House Building council and Zurich
natWest Holdings limited, national Westminster
Assurance limited.
Bank plc, the Royal Bank of Scotland plc,
ulster Bank limited and the Foundation for
Governance Research and Education.
SKILLS AND COMPETENCIES
SKILLS AND COMPETENCIES
SKILLS AND COMPETENCIES
• Extensive career within the financial services
• Strong experience of financial, accounting
• Extensive experience in later life benefits
• Broad knowledge and understanding of
• Highly competent in programme and
• Broad knowledge and understanding of
and internal control matters
and regulated financial services
and banking sector
remuneration issues
• Broad experience of engagement with major
• chartered Accountant
shareholders and regulators on remuneration
change management
remuneration issues
• Qualified Actuary
CURRENT OTHER LISTED DIRECTORSHIPS
none
CURRENT OTHER LISTED DIRECTORSHIPS
none
CURRENT OTHER LISTED DIRECTORSHIPS
none
CURRENT OTHER LISTED DIRECTORSHIPS
CURRENT OTHER LISTED DIRECTORSHIPS
CURRENT OTHER LISTED DIRECTORSHIPS
none
none
PensionBee Group plc
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited.
• director of HuB Financial Solutions limited
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
• director of Just Retirement Money limited
• director of Partnership Home loans limited
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
KEY INTERNAL DIRECTORSHIPS
• chair of Just Retirement Money limited
• chair of Partnership Home loans limited
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
• director of HuB Financial Solutions limited
68
PLC COMMITTEES
A
Group Audit committee
RI
M
Group Risk and compliance committee
Market disclosure committee
N
RE
nomination and Governance committee
Remuneration committee
committee chair
JRL AND PLACL COMMITTEES
I
Investment committees
A
Audit committees
committee chair
SENIOR INDEPENDENT DIRECTOR
NON-EXECUTIVE DIRECTORS
John Hastings-Bass
GROUP Chair
david Richardson
Group Chief Executive Officer
Appointed: 13 August 2020 (3 years)
Appointed: 4 April 2016 (7 years)
Andrew Parsons
(known as Andy Parsons)
Group Chief Financial Officer
Appointed: 1 January 2020 (3 years)
Ian cormack
Senior Independent Director
Appointed: 4 April 2016 (7 years)
RE
N
RI
M
Paul Bishop
Independent
Non-Executive Director
AA
N
RI
I
Michelle cracknell
Independent
Non-Executive Director
RE
N
Appointed: 4 April 2016 (7 years)
Appointed: 1 March 2020 (3 years)
CAREER AND EXPERIENCE
CAREER AND EXPERIENCE
CAREER AND EXPERIENCE
John brings over 35 years of business experience
david was deputy Group chief Executive officer of
Prior to his appointment as Group chief Financial
in the insurance and reinsurance sectors and has
Just Group plc from April 2016 until his appointment
officer of Just Group plc, Andy was Group Finance
undertaken the role of chair in publicly quoted and
as Group chief Executive officer on 19 September
director at lV= from June 2017 until december
privately owned businesses. He currently holds
2019. He was Managing director of the uK corporate
2019, having previously held executive positions
the role of chair of BMS Group, the private equity
Business from September 2019 until April 2022.
at several leading financial institutions including
backed global insurance broking group and, until
He was the Interim chief Financial officer of the
Friends life, AXA and Zurich Financial Services.
2017, was chair of publicly quoted novae Group plc.
company from october 2018 until January 2020
His career in finance has spanned over 25 years,
and chief Finance officer of Partnership Assurance
with particular expertise in life and general
John began his career in Hong Kong with Jardine
Group plc from February 2013 until April 2016.
insurance. Prior to joining lV=, he held the roles
Matheson in 1976. He moved to london and was
of finance director, divisional risk officer and
latterly an Executive director of Jlt Group and
Previously, david was Group chief Actuary of
life, pensions and investment director for the
chief Executive officer of International Business
Phoenix Group, where he was responsible for
insurance business of lloyds Banking Group.
Group. He joined Arthur J. Gallagher in 2007
restructuring the group’s balance sheet and
as chairman of International development,
overall capital management. Prior to this, david
In June 2021, Andy was appointed as a non-
leading the Asia Pacific business. In May 2007,
worked in various senior roles at Swiss Re, across
Executive director of RSA Insurance Group limited.
John was appointed as non-Executive director
both its Admin Re and traditional reinsurance
of novae Group plc, later serving as chair from
businesses. the roles included chief Actuary of
May 2008 until october 2017. He was appointed
its life and Health business, Head of Products
non-Executive chair of BMS Group in January
for uK and South Africa, and Global Head of its
2015 and, in october 2022, he was appointed
longevity Pricing teams. david commenced
chair of dale Management Agency limited.
his career at the actuarial consultancy firm,
John is a trustee of the landmark trust
Faculty of Actuaries and a cFA charter holder.
tillinghast. david is a Fellow of the Institute and
and chair of its Audit committee.
CAREER AND EXPERIENCE
Ian has been an independent non-Executive
director of Just Group plc since April 2016 and was
appointed as its Senior Independent director on
1 January 2022. Ian previously served as Senior
Independent director for Partnership Assurance
Group plc from May 2013 until its merger with
Just Retirement Group plc in April 2016.
Prior to his appointment, Ian spent over 30 years at
citibank, latterly as uK country Head and co-Head
of the Global Financial Institutions Group. From
2000 to 2002, he was chief Executive officer of AIG
Europe. Ian has served as a non-Executive director
on several Boards in the uK and overseas. Previous
appointments include serving as Senior Independent
director of Phoenix Group Holdings limited, chair
of Maven Income & Growth Vct 4 plc and non-
Executive director of Hastings Group Holdings plc
and the Broadstone Acquisition corporation.
Ian is currently a non-Executive director of
natWest Holdings limited, national Westminster
Bank plc, the Royal Bank of Scotland plc,
ulster Bank limited and the Foundation for
Governance Research and Education.
CAREER AND EXPERIENCE
Paul has been an independent non-Executive
director of Just Group plc since April 2016.
He previously served as a non-Executive
director of Partnership Assurance Group plc
from May 2014 until its merger with Just
Retirement Group plc in April 2016.
Prior to his appointment, Paul spent the majority
of his career at KPMG and was a Partner from 1993
until the end of January 2014. He has specialised in
the insurance sector for over 30 years, particularly
life insurance, and led KPMG’s insurance consulting
practice for much of his time as a Partner. Paul also
spent 18 months on secondment at Standard life as
Head of Financial change in the period leading up
to its demutualisation and flotation. Previously, Paul
served as a non-Executive director of Police Mutual
Assurance Society from 2017 to September 2020.
Paul is currently a non-Executive director of the
national House Building council and Zurich
Assurance limited.
CAREER AND EXPERIENCE
Michelle was chief Executive officer of the Pensions
Advisory Service between october 2013 and
december 2018. Prior to that, she held director roles
in advice firms, providers and insurance companies.
In addition to Just Group, Michelle is a non-
Executive director and trustee of lloyds
Banking Group Pension Funds, chair of FIl
Wealth Management limited, non-Executive
director of FIl Holdings limited and Financial
Administration Services limited, and a non-
Executive director and chair of the Audit and
Risk committee of PensionBee Group plc.
In February 2023 Michelle was appointed as a non-
Executive director of the Board of Sport England.
SKILLS AND COMPETENCIES
SKILLS AND COMPETENCIES
SKILLS AND COMPETENCIES
• Strong broad commercial skills in strategy,
• Extensive experience in life assurance,
• Extensive experience in financial services
SKILLS AND COMPETENCIES
• Extensive career within the financial services
SKILLS AND COMPETENCIES
• Strong experience of financial, accounting
mergers and acquisitions
pensions and financial services
and financial and executive leadership
and banking sector
and internal control matters
SKILLS AND COMPETENCIES
• Extensive experience in later life benefits
and regulated financial services
• High level of competency managing customer
• High level of competency in executive
• Strong understanding of the markets the
• Broad knowledge and understanding of
• Highly competent in programme and
• Broad knowledge and understanding of
and financial adviser relationships through his
leadership Strong understanding of the
broking experience
markets the Group operates in
Group operates in
• chartered Accountant
• Extensive experience in all aspects of
• Qualified Actuary
governance from 15 years as an independent
non-Executive director
remuneration issues
• Broad experience of engagement with major
shareholders and regulators on remuneration
change management
• chartered Accountant
remuneration issues
• Qualified Actuary
CURRENT OTHER LISTED DIRECTORSHIPS
CURRENT OTHER LISTED DIRECTORSHIPS
CURRENT OTHER LISTED DIRECTORSHIPS
none
none
none
CURRENT OTHER LISTED DIRECTORSHIPS
none
CURRENT OTHER LISTED DIRECTORSHIPS
none
CURRENT OTHER LISTED DIRECTORSHIPS
PensionBee Group plc
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited.
• director of HuB Financial Solutions limited
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
• director of Just Retirement Money limited
• director of Partnership Home loans limited
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
KEY INTERNAL DIRECTORSHIPS
• chair of Just Retirement Money limited
• chair of Partnership Home loans limited
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
• director of HuB Financial Solutions limited
69
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT
JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
BOARD OF DIRECTORS continued
NON-EXECUTIVE DIRECTORS continued
Mary Kerrigan
Independent Non-Executive
Director
I
Mary Phibbs
INDEPENDENT NON-EXECUTIVE
DIRECTOR
A
A
RI RE
Kalpana Shah
INDEPENDENT NON-EXECUTIVE
DIRECTOR
RI
A A
Appointed: 1 February 2022 (1 year)
Appointed: 5 January 2023 (2 months)
Appointed: 1 March 2021 (2 years)
CAREER AND EXPERIENCE
Mary was appointed as a non-Executive
director of Just Group plc on 1 February 2022.
She has been a non-Executive director of
Just Retirement limited and Partnership life
Assurance company limited, the Group’s life
company subsidiaries, since november 2019.
Mary has considerable experience in the pensions,
life insurance and investment industries, and
is a former partner of Willis towers Watson.
outside of Just Group, Mary is a non-Executive
director of new Ireland Assurance company plc
and chair of its Risk committee. She is also a non-
Executive director of Aegon Asset Management
uK plc, la Banque Postale Asset Management
limited, and companjon Services dAc. Mary also
is a member of the Independent Governance
committee of Prudential Assurance uK limited
and trustee of the london Irish centre.
SKILLS AND COMPETENCIES
• considerable experience in the pensions,
life insurance and investment industries
• Qualified Actuary
CAREER AND EXPERIENCE
Mary was appointed as a non-Executive director of
Just Group plc on 5 January 2023. She has more than
40 years of international business, risk management
and board experience in various countries.
Previous uK and overseas board experience
includes serving as a non-Executive director of
Morgan Stanley & co International plc, novae
Group plc, new day Group limited, and the charity
Bank limited. Mary has held senior positions at
Standard chartered Bank plc, AnZ Banking Group,
national Australia Bank, commonwealth Bank
of Australia, and Pricewaterhousecoopers.
Mary currently holds the role of chair of Virgin
Money unit trust Managers limited. She is a director
of canada Pension Plan Investment Board (cPP
Investments) and chair of its Risk committee.
Mary is a chartered Accountant and is a Fellow
of the Institute of chartered Accountants in
England and Wales and a Fellow of chartered
Accountants Australia and new Zealand.
SKILLS AND COMPETENCIES
• Extensive career in financial services including
retail and wholesale banking, insurance and
investment management sectors
• Strong experience of financial, accounting, risk
management and internal control matters
• chartered Accountant
CAREER AND EXPERIENCE
Kalpana brings over 30 years of business experience
in the insurance and investment industry, having
started her career at the london commodity
Exchange and moving into insurance as deputy to
the director of underwriting at Groupama Gan. She
was Group chief Actuary and a Partner at Hiscox
plc until 2016. Kalpana chaired and contributed to
working parties for the Bank of England, lloyd’s of
london and the Bermuda Monetary Authority.
Kalpana was elected to the governing body
of the Institute and Faculty of Actuaries in
2019 and was appointed as president-elect
in June 2022. She is also a senior liveryman
of the Worshipful company of Insurers.
In addition to Just Group, Kalpana is chair of
RiverStone Managing Agency limited, Senior
Independent director of RiverStone Insurance
(uK) limited, and non-Executive director of Asta
Managing Agency limited and Markel International.
SKILLS AND COMPETENCIES
• considerable experience in the actuarial
and insurance industry
• Qualified Actuary
John Perks
life companies’ chair
Appointed: 1 April 2021 (2 years)
Kathleen Byrne
(known as Kathy Byrne)
Independent Non-Executive Director
Appointed: 1 February 2022 (1 year)
CAREER AND EXPERIENCE
CAREER AND EXPERIENCE
John was appointed as chair of Just Retirement
Kathy has over 35 years’ experience in the
limited and Partnership life Assurance company
insurance industry and was previously chief
limited on 5 May 2021 following his appointment
Executive officer of the Metropolitan Police
as a non-Executive director on 1 April 2021.
Friendly Society. A qualified actuary, Kathy
started her career at consulting actuaries Hymans
John has significant experience in the life and
Robertson & co and was Managing director of
pensions industry, with over 30 years of experience
cardiff Pinnacle’s investment business unit. Prior
in the sector. He was previously chief Executive
to this she was their Group Actuarial director.
officer of Police Mutual and Managing director
of life & Pensions at lV=. Prior to that he held
Kathy has an MBA from Henley Management
senior roles at Prudential, AXA and Swiss life. At
college and has served on the Institute
lV=, John was a “friendly competitor” of the Just
and Faculty of Actuaries council.
Group in many of its product markets, in addition
to his role as chief Executive officer of its pension
Kathy is a co-founder and shareholder of
advice company, bringing important commercial
Alpasión Vineyard, Mendoza, where she held
and strategic perspectives to the Boards.
a non-Executive director role until 2020.
outside of Just Group, John provides consultancy
services to the pensions investment solutions
and administration company, Mobius life.
John is a Fellow of the Institute and Faculty
of Actuaries.
SKILLS AND COMPETENCIES
SKILLS AND COMPETENCIES
• considerable experience in the life and
• considerable experience in the insurance
pensions industry
and investment management industries
• Broad knowledge of the advice market
• Experience of providing strong innovation,
and risk management
• Qualified Actuary
marketing and product development
• Qualified Actuary
CURRENT OTHER LISTED DIRECTORSHIPS
none
CURRENT OTHER LISTED DIRECTORSHIPS
none
CURRENT OTHER LISTED DIRECTORSHIPS
none
CURRENT OTHER LISTED DIRECTORSHIPS
CURRENT OTHER LISTED DIRECTORSHIPS
none
none
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
• director of Just Retirement Money limited
• director of Partnership Home loans limited
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
KEY INTERNAL DIRECTORSHIPS
• chair of Just Retirement limited
• chair of Partnership life Assurance
company limited
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
• chair of HuB Financial Solutions limited
• director of Just Retirement Money limited
• director of Partnership Home loans limited
70
PLC COMMITTEES
A
Group Audit committee
RI
M
Group Risk and compliance committee
Market disclosure committee
N
RE
nomination and Governance committee
Remuneration committee
committee chair
JRL AND PLACL COMMITTEES
I
Investment committees
A
Audit committees
committee chair
NON PLC
INDEPENDENT NON-EXECUTIVE DIRECTORS
Mary Kerrigan
Independent Non-Executive
Director
Mary Phibbs
INDEPENDENT NON-EXECUTIVE
DIRECTOR
Kalpana Shah
INDEPENDENT NON-EXECUTIVE
DIRECTOR
Appointed: 1 February 2022 (1 year)
Appointed: 5 January 2023 (2 months)
Appointed: 1 March 2021 (2 years)
John Perks
life companies’ chair
Appointed: 1 April 2021 (2 years)
A
I
Kathleen Byrne
(known as Kathy Byrne)
Independent Non-Executive Director
Appointed: 1 February 2022 (1 year)
I
CAREER AND EXPERIENCE
CAREER AND EXPERIENCE
CAREER AND EXPERIENCE
Mary was appointed as a non-Executive
Mary was appointed as a non-Executive director of
Kalpana brings over 30 years of business experience
director of Just Group plc on 1 February 2022.
Just Group plc on 5 January 2023. She has more than
in the insurance and investment industry, having
She has been a non-Executive director of
40 years of international business, risk management
started her career at the london commodity
Just Retirement limited and Partnership life
and board experience in various countries.
Exchange and moving into insurance as deputy to
Assurance company limited, the Group’s life
the director of underwriting at Groupama Gan. She
company subsidiaries, since november 2019.
Previous uK and overseas board experience
was Group chief Actuary and a Partner at Hiscox
Mary has considerable experience in the pensions,
Morgan Stanley & co International plc, novae
working parties for the Bank of England, lloyd’s of
life insurance and investment industries, and
Group plc, new day Group limited, and the charity
london and the Bermuda Monetary Authority.
includes serving as a non-Executive director of
plc until 2016. Kalpana chaired and contributed to
is a former partner of Willis towers Watson.
Bank limited. Mary has held senior positions at
Standard chartered Bank plc, AnZ Banking Group,
Kalpana was elected to the governing body
outside of Just Group, Mary is a non-Executive
national Australia Bank, commonwealth Bank
of the Institute and Faculty of Actuaries in
director of new Ireland Assurance company plc
of Australia, and Pricewaterhousecoopers.
and chair of its Risk committee. She is also a non-
2019 and was appointed as president-elect
in June 2022. She is also a senior liveryman
Executive director of Aegon Asset Management
Mary currently holds the role of chair of Virgin
of the Worshipful company of Insurers.
uK plc, la Banque Postale Asset Management
Money unit trust Managers limited. She is a director
limited, and companjon Services dAc. Mary also
of canada Pension Plan Investment Board (cPP
In addition to Just Group, Kalpana is chair of
is a member of the Independent Governance
Investments) and chair of its Risk committee.
RiverStone Managing Agency limited, Senior
committee of Prudential Assurance uK limited
Independent director of RiverStone Insurance
and trustee of the london Irish centre.
Mary is a chartered Accountant and is a Fellow
(uK) limited, and non-Executive director of Asta
of the Institute of chartered Accountants in
Managing Agency limited and Markel International.
England and Wales and a Fellow of chartered
Accountants Australia and new Zealand.
CAREER AND EXPERIENCE
Kathy has over 35 years’ experience in the
insurance industry and was previously chief
Executive officer of the Metropolitan Police
Friendly Society. A qualified actuary, Kathy
started her career at consulting actuaries Hymans
Robertson & co and was Managing director of
cardiff Pinnacle’s investment business unit. Prior
to this she was their Group Actuarial director.
Kathy has an MBA from Henley Management
college and has served on the Institute
and Faculty of Actuaries council.
Kathy is a co-founder and shareholder of
Alpasión Vineyard, Mendoza, where she held
a non-Executive director role until 2020.
CAREER AND EXPERIENCE
John was appointed as chair of Just Retirement
limited and Partnership life Assurance company
limited on 5 May 2021 following his appointment
as a non-Executive director on 1 April 2021.
John has significant experience in the life and
pensions industry, with over 30 years of experience
in the sector. He was previously chief Executive
officer of Police Mutual and Managing director
of life & Pensions at lV=. Prior to that he held
senior roles at Prudential, AXA and Swiss life. At
lV=, John was a “friendly competitor” of the Just
Group in many of its product markets, in addition
to his role as chief Executive officer of its pension
advice company, bringing important commercial
and strategic perspectives to the Boards.
outside of Just Group, John provides consultancy
services to the pensions investment solutions
and administration company, Mobius life.
John is a Fellow of the Institute and Faculty
of Actuaries.
SKILLS AND COMPETENCIES
SKILLS AND COMPETENCIES
SKILLS AND COMPETENCIES
• considerable experience in the pensions,
life insurance and investment industries
• Qualified Actuary
• Extensive career in financial services including
• considerable experience in the actuarial
retail and wholesale banking, insurance and
and insurance industry
investment management sectors
• Qualified Actuary
• Strong experience of financial, accounting, risk
management and internal control matters
• chartered Accountant
SKILLS AND COMPETENCIES
• considerable experience in the life and
pensions industry
• Broad knowledge of the advice market
and risk management
• Qualified Actuary
SKILLS AND COMPETENCIES
• considerable experience in the insurance
and investment management industries
• Experience of providing strong innovation,
marketing and product development
• Qualified Actuary
CURRENT OTHER LISTED DIRECTORSHIPS
CURRENT OTHER LISTED DIRECTORSHIPS
CURRENT OTHER LISTED DIRECTORSHIPS
none
none
none
CURRENT OTHER LISTED DIRECTORSHIPS
none
CURRENT OTHER LISTED DIRECTORSHIPS
none
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
• director of Just Retirement Money limited
• director of Partnership Home loans limited
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
KEY INTERNAL DIRECTORSHIPS
• chair of Just Retirement limited
• chair of Partnership life Assurance
company limited
• chair of HuB Financial Solutions limited
KEY INTERNAL DIRECTORSHIPS
• director of Just Retirement limited
• director of Partnership life Assurance
company limited
• director of Just Retirement Money limited
• director of Partnership Home loans limited
71
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT
JUST GROUP PLC
| AnnuAl REPoRt And AccountS 2022
SENIOR LEADERSHIP
01. david Richardson
Group Chief Executive Officer
SEE DAVID’S BIOGRAPHY ON PG. 68
02. Andy Parsons
Group Chief Financial Officer
SEE ANDY’S BIOGRAPHY ON PG. 68
03. david cooper
Group Marketing and Distribution Director
Appointed: 4 April 2016
david joined Just Retirement Group in April 2006 as Marketing director and
his role changed to Group Marketing and distribution director in 2009. david
is also the chief Executive officer of the group of companies trading under
the HuB brand, which are subsidiaries of Just Group plc.
david has over 35 years’ experience working in financial services. He has
operated in a number of sectors including retail banking, general insurance,
personal credit, actuarial consulting and the retirement industry. He has
worked for a variety of large organisations including GE capital, centrica,
Bradford & Bingley and Hymans Robertson as well as much smaller growth
businesses such as Stalwart Assurance, the founder of enhanced annuities.
outside of Just, david is a non-Executive director of criterion tec Holdings
limited, a not-for-profit body that delivers professional standards and
governance services for the uK’s financial services industry.
04. Alex duncan
Group Chief Risk Officer
Appointed: 4 April 2016
Alex joined Just Retirement Group in September 2012 as Group chief Risk
officer. He is a Fellow of the Institute and Faculty of Actuaries and has over
30 years’ experience in the financial services industry covering many
disciplines, including reinsurance, consulting and banking. Prior to Just,
Alex spent eight years at old Mutual, where he held a number of positions,
including mergers and acquisitions, capital management and treasury.
05. Ellie Evans
Group Chief People Officer
Appointed: 31 October 2022
Ellie is responsible for the people agenda at Just and plays an active role
in delivering the Group’s strategy and fostering Just’s culture of inclusion
and performance.
Ellie has over 20 years of cross industry HR leadership experience in
operational, talent, learning, engagement, organisational design and
development roles.
Prior to Just, Ellie has worked at companies such as BAA plc, BP plc,
Volkswagen Group, ABF plc and most recently, BGl Group.
06. Paul Fulcher
GROUP CAPITAL MANAGEMENT AND INVESTMENT EXECUTIVE
Appointed: 1 February 2021
Paul is responsible for capital Management, Investments and Group
management of market, demographic and medical, pricing and
reinsurance risks.
Paul has over 30 years’ experience in the life insurance industry. Prior to
Just, Paul was a Principal at Milliman llP, a life and financial service
consulting firm. Before Milliman he spent six years working at nomura as
Managing director, leading their AlM Structuring and Insurance Solutions
team for Europe, the Middle East and Africa. Prior to nomura, he worked for
the Royal Bank of Scotland in their Global Markets business as Managing
director and Head of their Financial Institutions Risk Advisory team.
Paul is a Fellow of the Institute and Faculty of Actuaries.
07. Giles offen
Group Chief Digital Information Officer
Appointed: 4 April 2016
Giles is responsible for technology, transformation, change and It
Architecture as well as embedding modern methods of change delivery.
Prior to this, he was chief technology officer at Partnership Assurance
Group plc, which he joined in January 2014 to transform the company’s It
capability and change programmes. Giles has over 20 years of diverse
global experience which includes working at companies such as Reed
Elsevier, lexis nexis and cashplus.
08. Pretty Sagoo
Managing Director, Defined Benefit Solutions
Appointed: 11 April 2022
Pretty is responsible for the defined Benefit de-risking business.
Prior to Just, Pretty was Head of new Business and Pensions at Athora,
where she was responsible for developing the new business franchise to
support their organic growth targets. other previous roles include Head of
Pricing and Execution for the Pension Risk transfer business at legal and
General, and Head of Insurance and Pension Solutions at deutsche Bank.
outside of Just, Pretty is also a Pension Fund trustee for cardiff university
and chair of its Investment committee.
09. Paul turner
Managing Director, Retail
Appointed: 1 February 2016
Paul joined Just Retirement Group in August 2014 and is responsible for the
Group’s retail businesses in the uK and South Africa. Previously, Paul led
Just Group’s mortgage, corporate development and international divisions.
Prior to Just, he held various senior international roles at Swiss Re in Asia
and Australia. He has over 30 years’ insurance industry experience.
Paul is an Executive director of our life companies, Just Retirement limited
and Partnership life Assurance company limited. outside of Just, Paul is a
non-Executive director of EPPARG limited.
72
StRAtEGIc REPoRt
Governance
FInAncIAl StAtEMEntS
01.
02.
03.
04.
05.
06.
07.
08.
09.
73
JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
GOVERNANCE IN OPERATION
GOVERNANCE IN OPERATION
the Just Group plc Board (the “Board”) is committed to underpinning all of Just’s activities with the
highest standards of corporate governance to fulfil our purpose of helping people achieve a better
later life. this report sets out our governance framework and how we have applied the principles of
the uK corporate Governance code 2018 (the “code”).
OUR GOVERNANCE FRAMEWORK
the Board has set a governance framework as outlined below which is designed to embed strong governance and oversight processes and to
ensure compliance with the code. the governance framework covers the group of companies of which Just Group plc is the ultimate shareholder
(the “Group”). An overview of the governance arrangements in place for the subsidiary companies is provided at the end of this report under the
heading “Subsidiaries’ Governance”.
JUST GROUP PLC BOARD
• Purpose, values and strategy
• culture
• corporate structure and major transactions
• capital structure
• Business plan and budgets
• Business performance
• Financial statements and regulatory reports
• Sustainability strategy
• Governance and regulatory matters
• Risk appetite
• Group policies
• dividends
• Stakeholder engagement
• Shareholder communications
• Matters delegated to Board committees
• Matters delegated to Executive directors
BOARD
COMMITTEES
SUBSIDIARY
BOARD GOVERNANCE
GROUP CHIEF
EXECUTIVE OFFICER
GROUP AUDIT COMMITTEE
LIFE COMPANIES’ BOARDS – JRL AND PLACL
Internal controls
• Financial and Solvency II reporting
•
• External Audit
• Group Internal Audit
• tax strategy
• Whistleblowing
• Strategic developments
• Business plan and budgets
• Business performance and financial reporting
• Solvency II requirements
• Governance and regulatory oversight and
compliance
• day-to-day leadership of the Group
• Business strategy and business plan
implementation
• Managing risk and operating effective controls
• Matters delegated to Executive committees
• Matters delegated to senior executives
GROUP RISK AND COMPLIANCE COMMITTEE
LIFE COMPANIES’ AUDIT COMMITTEES
GROUP EXECUTIVE COMMITTEE
• Risk management and controls framework
• Solvency II compliance
• compliance and conduct risk
• Regulatory developments
Internal controls
• Financial and Solvency II reporting
•
• External Audit
• Group Internal Audit
NOMINATION AND GOVERNANCE COMMITTEE
LIFE COMPANIES’ INVESTMENT COMMITTEES
• Board appointments process
• Board effectiveness
• diversity and inclusion
• Succession planning
• corporate governance oversight
•
Investment strategy and framework
• Responsible investment framework
• Alignment of investment activities and
performance to the Group’s strategy
• External investment managers’ oversight
REMUNERATION COMMITTEE
OTHER SUBSIDIARIES
• directors’ remuneration policy
• Executive director remuneration
• Employee share schemes
• Strategic developments
• Business plan and budgets
• Business performance and financial reporting
• Governance and regulatory oversight
MARKET DISCLOSURE COMMITTEE
and compliance
Assists the Group chief Executive officer discharge
their duties. Key responsibilities include:
•
Implementing the strategy and business plan
set by the Board
• Executing plans to meet sustainability
commitments
• development and oversight of culture and
people initiatives
EXECUTIVE RISK COMMITTEE
Assists the Group chief Risk officer discharge
their duties. Key responsibilities include:
• oversight of effectiveness of the risk
management and control framework and
risk strategy
• oversight of principal and emerging risks
including climate risk and conduct risk
• oversight of regulatory compliance matters
Inside information
•
• Regulatory announcements
74
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE IN 2022
UK Corporate Governance Code 2018 Statement
the Board has considered and concluded that the company has been fully
compliant with the principles and provisions set out in the code. the Board
considers that it has complied with the provisions of the code during the year
and up to the date of the directors’ report as covered in more detail in the
sections below.
Stakeholder engagement
the Board engages with its stakeholders and shareholders in a variety of ways.
the Relationships with stakeholders and Section 172 reports set out how the
Board engages with and encourages participation from its key stakeholders
and the effect the engagement has had on the principal decisions taken by
the Board during the year.
Board leadership and Company purpose
• Role of the Board
• Purpose, strategy, culture and values
• conflicts of interest
• Stakeholder engagement
• Shareholder engagement
• Board activities
• Whistleblowing
Division of responsibilities
• Board balance and independence
• division of responsibilities of the Board
• Meeting attendance
• Board support
• director appointment terms
• commitment
Induction, training and development
Composition, succession and evaluation
• Board composition and succession planning
•
• diversity and inclusion
• Board and Board committee effectiveness review
• nomination and Governance committee report
Audit, risk and internal control
• Preparation of the Annual Report and Accounts
• Assessing emerging and principal risks
• Risk management and internal control systems
• Group Audit committee report
• Group Risk and compliance committee report
Remuneration
• directors’ Remuneration report
BOARD LEADERSHIP AND COMPANY PURPOSE
Role of the Board
the Board is responsible for the overall leadership of the company and
establishing the Group’s purpose, values, standards and strategy. the Board
promotes the long-term sustainable success of the company, generating
value for customers, shareholders, other stakeholders and wider society.
the matters reserved for the Board are documented and approved by the
Board. In 2022, there was a detailed review of the matters reserved for the
Board to ensure they continued to be in line with best practice. Each Board
committee has terms of reference which are approved by the Board annually.
the matters reserved for the Board and the main Board committees’ terms
of reference can be found at www.justgroupplc.co.uk.
Purpose, strategy, culture and values
the Board considered the longer term strategy of the Group and its
associated strategic goals and objectives at its annual strategy day during
the year. It also receives regular updates on the execution of the Group
strategy from the Group chief Executive officer. the Board monitors
culture and seeks to ensure that business practices and behaviours are
aligned with the Group’s purpose, strategy, culture and values. during
the year, it considered the results of the employee engagement survey
and the associated action plan to follow up on the feedback received.
An overview of the Group’s strategic priorities and business model which the
Board is responsible for setting is included in the Strategic report.
Conflicts of interest
A policy and process is in place to address possible conflicts of interest of
directors. Any relevant conflicts and potential conflicts with the interests of
the company that arise must be disclosed at the subsequent Board meeting
for consideration and, if appropriate, authorisation sought by Board members
in accordance with the company’s Articles of Association.
75
the colleagues and culture report outlines more information on our culture
and our approach to colleague engagement. during 2022, the “take on
Board” sessions enabled directors of the Board to speak to colleagues
directly on specific key topics that focused on encouraging employee
engagement. Further information on the Board engagement activities with
colleagues is included in the Section 172 report. during the year, the lead
non-Executive directors responsible for workforce engagement kept abreast
of colleagues, culture and wellbeing matters through engagement with
senior leadership and colleagues from various business areas.
Shareholder engagement
the Group maintained an open dialogue with its major institutional
shareholders and debt investors during 2022 through a programme of
meetings undertaken by the Group chief Executive officer, Group chief
Financial officer and the Investor Relations team. the chair also engaged
with shareholders during the year. Activity was through hybrid means
leading to greater efficiency of director time and increased accessibility
to capital providers. Equity-led roadshows were held in March and
August/September 2022, and management attended multiple investor
conferences throughout the year, where they met both debt and equity
investors. Management also provided broker and non-broker salesforce
briefings, and throughout the year, hosted ad hoc groups including a
“Simplifying Just” series, roundtable events and one-to-one meetings with
existing and prospective shareholders. to demonstrate the management
depth at Just, our investment and defined Benefit business leaders
hosted seminars for analysts and investors in June and november
respectively, which provided further insight into how we run our business
on a day to day basis, and the multiple opportunities available to us.
there was regular engagement with shareholders during 2022 as the Group
discussed a number of important issues including taking advantage of the
growth opportunities available, the investment strategy in particular illiquid
asset origination, capital management and allocation, the new insurance
accounting standard, IFRS 17, and its impact on the Group, and the regulatory
environment prior to and following the Solvency II reforms announced by the
chancellor in the november statement. other topics included people,
customers, culture and responsible investing.
the Investor Relations team provides the Executive directors with regular
analysis of shareholder movements, market and peer activity, in addition to
updates on share price performance. Analysts’ and brokers’ reports are made
available to all directors and the Board receives detailed feedback from our
corporate brokers following the results roadshow.
the ordinary shares are covered by nine analysts. the Investor Relations
team also maintains an open dialogue with non-covering analysts, banks,
brokers, credit analysts and other market participants. Fitch continues to
maintain their A/A+ credit ratings for members of the Group, and reaffirmed a
Stable outlook in november 2022.
during 2022, Just Group plc’s shares decreased by 2% to 81.6 pence,
compared with the FtSE 350 life insurance index which decreased by 5%.
the Senior Independent director is available for consultation with
shareholders if they have concerns which are inappropriate to raise with the
chair, Group chief Executive officer or other Executive directors.
our 2022 Annual General Meeting (“AGM”) was held on 10 May 2022 in our
Reigate office. Shareholders were given the opportunity to raise questions in
person at the AGM or via email in advance of the meeting. All resolutions
were passed with at least 95% of those voting supporting the resolutions.
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
GOVERNANCE IN OPERATION continued
Board activities
Set out below are the key focus areas of the Board during the year, their
alignment to our Group strategic priorities, and the decisions taken by
the Board.
GROUP STRATEGIC PRIORITIES
1. Grow sustainably
2. transform how we work
3. Grow through innovation
4. Get closer to our customers and partners
5. Be proud to work at Just
STRATEGY
• Held a Board strategy session to monitor progress against
the Group’s strategy, and to review and agree refinements
to it. the strategy session focused on environment, how to
remain commercially resilient within the Group’s key markets,
transformation and growth, and the future vision of the Group
• Reviewed and received regular updates on the delivery of the
2022 Group Strategy Execution Plan
• Reviewed the present and target states of the Group’s
1, 2, 3, 4, 5
business model
• Reviewed and agreed the Group’s return on equity and
sales targets
• Reviewed the Group plan for change and people initiatives
including updating our people engagement goal to be
more independently measurable
• Approved the sale of a portfolio of lifetime mortgages to further
• carried out in-depth reviews into each of the Group’s
reduce the Group’s exposure to uK residential property risk
business areas
Alignment to
strategic priorities
• throughout the year the Board received deep dive papers on
strategically important initiatives for the Group. this included
innovative products including Secure lifetime Income and
destination Retirement as well as the Group’s ambition on
defined Benefit solutions and transformation initiatives
SUSTAINABILITY
• considered and approved the proposed approach to ensure
appropriate governance and oversight of the Group’s
sustainability targets and associated initiatives
• Reviewed the progression against the “Be Proud to Work at Just”
and “transform the Way we Work” dependencies as part of the
Strategy Execution Plan
• considered and approved the Group’s first iteration of a net
• Monitored progress of various initiatives to reach our carbon net
zero transition plan
zero targets
2, 5
1
RISK MANAGEMENT AND REGULATION
• Material interaction with the Prudential Regulation Authority
(“PRA”) with regard to their annual review letter and various
approvals on applications including the credit risk major model
change application
• Approved the Group recovery plan
• Approved the Group run-off plan
• Received Group chief Risk officer reports on the Group’s capital
management initiatives and other material changes
FINANCIAL REPORTING AND CONTROLS AND DIVIDEND POLICY
• Reviewed the Group’s financial performance on an ongoing basis
and approved the Group’s half-year and annual financial results
• Monitored the Group’s capital and liquidity position
• Approved the Group’s own Risk and Solvency Assessment
(“oRSA”)
• Reviewed risks to the Group’s strategy and business plan
• Approved the self-assessment for operational resilience
• Engaged on the consumer duty implementation plans for the
various business areas
• Approved the Group’s business plan and forecast
• Reviewed and challenged reports provided by its committees on
1, 2, 3
• Reviewed the dividend policy and agreed to recommend a
final dividend to shareholders for the financial year ended
31 december 2021 and declared an interim dividend which
was paid to shareholders in September 2022
key financial-related matters including IFRS 17, the new insurance
accounting standard, and climate change disclosures
• Approved the Group Solvency and Financial condition Report
• Approved the Group Regular Supervisory Report
STRUCTURE AND CAPITAL
• Assessed the Group’s capital and liquidity requirements
including optimisation of its Solvency II capital structure
• Provided oversight of changes to improve the resilience
of the Group’s capital position to insurance, market and
counterparty risks
• continued to examine underlying capital generation
improvement measures
• Provided oversight of external and intra-Group financing
• Approved the proposed Group’s tender for £100m of
2026 tier 2 debt in november 2022
• Approved the renewal of the revolving credit facility
• Assessed the impact of interest rate exposure between IFRS
1
and the Solvency II balance sheets
• Approved the continuation of the purchase of shares in the
market through the Group’s Employee Benefit trust in order
to meet exercisable awards
• Approved shareholder resolutions in relation to the issue of
new shares and Restricted tier 1 (“Rt1”) capital for the
2023 AGM to create flexibility for the Group
76
Alignment to
strategic priorities
CORPORATE GOVERNANCE
• Received regular updates from Board committees, management
and external advisers on economic and regulatory developments,
and status updates on various projects including the finance and
retail transformation programmes and climate change project
• Reviewed and approved the terms of reference of the principal
• the chair engaged with shareholders in addition to the normal
1, 4, 5
cEo/cFo programme of meetings
• Appointed Mary Kerrigan as the director responsible for leading
sustainability matters following the retirement of Steve Melcher
• Approved the appointment of Michelle cracknell as the new Board
Board committees
consumer duty champion
• Reviewed and approved the Group Matters Reserved for the Board
• Reviewed and recommended the adoption of revised Articles of
Association to shareholders at the 2022 AGM
• Attended a series of workshops covering, amongst others, an
overview of the internal model, the new insurance accounting
standard IFRS 17, and climate risk
• Reviewed and approved updates to various Group policies and the
new Group Policy Framework
COLLEAGUES
• Significant focus given to the 2022 colleague engagement
• Held “take on Board” sessions throughout the year in both
2, 5
strategy and wellbeing programme, in addition to consideration
of the results of the first Peakon engagement survey
implemented in 2022 and how they will form part of the
engagement priorities for the Group’s people strategy
•
the uK and Belfast offices giving colleagues the opportunity
to engage with various non-Executive directors
Increased the percentage of women on the Board and made
progress against the Board’s commitment to improve diversity
at senior levels across Just
BOARD SUCCESSION PLANNING
• Significant focus was given to Board and executive succession
planning, and good progress was made in refreshing the Board
• Reaffirmed its commitment to Board, executive and senior
management diversity
• undertook an internally facilitated evaluation of the Board’s
effectiveness and the performance of its committees, the
chair and individual directors
1, 3, 5
Whistleblowing
the Group has a Whistleblowing policy which has been approved by the
Group Audit committee. colleagues across the Group are able to raise any
matters of concern through our dedicated and independent whistleblowing
hotline. Reports are sent anonymously to the Group company Secretary
who leads the review and response from the relevant areas of the business,
and raises the matters with the Group Audit committee chair, who is the
whistleblowing champion. the Group Audit committee has a regular agenda
item on whistleblowing, receiving updates on the operation of the policy and
any concerns raised.
77
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
GOVERNANCE IN OPERATION continued
DIVISION OF RESPONSIBILITIES
Board balance and independence
As at the date of this report there are nine members of the Board: the
chair (independent on appointment), two Executive and six non-Executive
directors (all of whom are considered independent). Ian cormack is the Senior
Independent director. the Board considers that the current mix of Executive
and non-Executive directors is appropriate, preventing the Board from being
too large and ensuring that the Board remains predominantly independent.
the code recommends that at least half the Board, excluding the chair,
should comprise non-Executive directors determined by the Board to be
independent in character and judgement and free from relationships or
circumstances which may affect, or could appear to affect, their judgement.
the Board is comprised of more than half (excluding the chair) non-Executive
directors, all of whom are independent in the manner required by the code.
Division of roles and responsibilities
the Board believes that documented roles and responsibilities for directors
including a clear division of key responsibilities between the chair and
the Group chief Executive officer, are essential elements in the Group’s
governance framework and facilitate the effective operation of the Board.
the following table provides an overview of key Executive and non-Executive
accountabilities, which support the integrity of the Board’s operations.
DEFINING BOARD RESPONSIBILITIES
Chair
Responsible for the effective leadership and governance of the Board but
takes no part in the day-to-day running of the business. Key responsibilities
include:
•
leading the Board effectively to ensure it is primarily focused on
strategy, performance, long-term value creation and accountability in
line with the Group’s purpose, values and culture;
• ensuring the Board determines the significant risks the Group is willing
•
to embrace in the implementation of its strategy;
leading the succession planning process (with the exception of his own
succession) and chairing the nomination and Governance committee;
• encouraging all directors to contribute fully to Board discussions and
decision making, and ensuring that there is constructive challenge on
major proposals;
fostering relationships within the Board and providing a sounding board
for the Group chief Executive officer on important business issues;
identifying development needs for the Board and individual directors;
leading the process for evaluating the performance of the Board, its
committees and individual directors; and
•
•
•
• ensuring effective communication with major shareholders, regulators,
and other stakeholders.
Senior Independent Director
• provides a sounding board for the chair;
•
•
serves as an intermediary for the other directors when necessary;
serves as an alternative channel of communication for shareholders
and other stakeholders; and
• meets annually with the non-Executive directors without the chair
being present to appraise the chair’s performance, and address any
other matters which the directors might wish to raise. conveys the
outcome of their discussions to the chair.
Independent Non-Executive Directors
• provide constructive challenge and scrutiny of the performance of
management;
• bring an external perspective, knowledge and experience to the Board;
• assist in the development of strategy and the decision-making process;
• promote the highest standards of integrity and governance; and
• meet at least twice per year without the Executive directors being
present.
Group Chief Executive Officer
Responsible for leadership of the Group’s business and managing it within
the authorities delegated by the Board. Key responsibilities include:
• proposing and developing the Group’s strategy and significant
commercial initiatives;
•
leading the executive team in the day-to-day running of the Group;
• ensuring the Group’s operations are in accordance with the business
plan approved by the Board, including the Board’s overall risk appetite,
the policies established by the Board, and applicable laws and
regulations;
representing the Group’s interests to external parties;
•
• maintaining dialogue with the chair on important business and
strategy issues;
recommending budgets and forecasts for Board approval;
•
• providing recommendations to the Remuneration committee on
remuneration strategy for Executive directors and other senior
management;
leading the communication programme with shareholders and
ensuring the appropriate and timely disclosure of information to the
stock market; and
leading and ensuring effective engagement with regulators.
•
•
Group Chief Financial Officer
• deputising for the Group chief Executive officer;
• proposing policy and action to support sound financial management;
•
• engaging with shareholders and other key stakeholders.
leading the Finance function; and
Company Secretary
•
compliance with Board procedures and supporting the chair;
• ensuring the Board receives high quality information in adequate
time and has appropriate resources;
• advising the Board on corporate governance developments;
• considers Board effectiveness in conjunction with the chair;
•
facilitating directors’ induction programmes and assisting with
professional development;
• providing advice, services and support to all directors; and
• organising the Annual General Meeting.
Designated Non-Executive Director Responsibilities
Consumer Duty Champion – supports the chair and Group chief Executive officer in ensuring that the consumer duty is raised in all relevant discussions
and that the Board is challenging management on how it is embedding the duty and focusing on consumer outcomes.
Employee Engagement Lead – gathers the views of colleagues through employee engagement and provides an employee voice in the Boardroom.
Sustainability Lead – championing sustainability matters at Board level.
Whistleblowing Champion – ensuring and overseeing the integrity, independence, and effectiveness of whistleblowing policies and procedures.
78
the Board has delegated responsibility for implementing the strategy and
business plans, and for managing risk and operating effective controls
across the Group to the Group chief Executive officer who is responsible
for the day-to-day leadership of the Group in accordance with the purpose,
values and culture set by the Board. the Group chief Executive officer
has established a committee of senior executives to assist him with
the discharge of the duties delegated to him by the Board (the “Group
Executive committee”).
the Group Executive committee is responsible for:
•
implementing the strategy set by the Board and recommending strategic
development to the Board;
• business risk management and the oversight of the implementation of
effective controls to manage and mitigate risks;
• executing plans to meet the sustainability commitments that the Board
has set;
recommending the business plan and budgets to the Board for approval;
•
• monitoring the Group’s performance;
•
implementing and oversight of approved policies and processes which
govern how we do business and how we interact with our stakeholders;
and
• development and oversight of initiatives to ensure people within the
organisation feel well led, managed and supported with opportunities
for development.
there is also an Executive Risk committee (“ERc”), chaired by the Group
chief Risk officer, which focuses on risk management across the Group.
John Hastings-Bass
Group chair
Ian cormack
Paul Bishop1
Michelle cracknell
Mary Kerrigan2
Steve Melcher3
Kalpana Shah
clare Spottiswoode4
david Richardson5
Andy Parsons
Additional meetings held
Senior Independent director
non-Executive director
non-Executive director
non-Executive director
non-Executive director
non-Executive director
non-Executive director
Executive director
Executive director
this includes oversight of risk appetite, risk controls, and regulatory and
compliance matters. the ERc reviews reports from management before
they are presented to the Group Risk and compliance committee.
Meeting attendance
the Board held seven scheduled Board meetings in 2022 and a meeting
to discuss strategy. All scheduled meetings were in person with facilities
for virtual attendance for those directors who could only attend remotely.
Various senior executives and external advisers were invited to attend
and present on various business development and governance matters,
as required.
Papers were circulated before each meeting to give the directors sufficient
opportunity to consider the issues to be discussed. In exceptional
circumstances where directors could not attend meetings, the directors had
the opportunity to provide comments and raise any concerns to the chair in
advance of the meeting. the Group company Secretary attended all Board
meetings and he, or his nominated deputy, attended all Board committee
meetings. Minutes and actions are documented, and circulated following
each meeting.
the table below sets out directors’ attendance at the scheduled Board and
Board committee meetings in 2022. Additional Board and Board committee
meetings were convened during the year to discuss ad hoc business
development, governance and regulatory matters. Mary Phibbs was
appointed on 5 January 2023 and is therefore not included in the table below.
Board
Group Audit
Remuneration
nomination and
Governance
Group Risk and
compliance
7/7
7/7
7/7
7/7
5/6
7/7
7/7
3/3
6/7
7/7
4
–
–
8/8
–
–
8/8
8/8
3/4
–
–
1
4/4
4/4
–
4/4
-
3/4
–
–
–
–
0
4/4
4/4
4/4
4/4
–
–
–
–
–
–
0
6/6
6/6
5/6
–
–
6/6
6/6
2/2
–
–
1
1 Paul Bishop was unable to attend the Group Risk and compliance committee meeting on 23 november 2022 due to prior commitments.
2 Mary Kerrigan was appointed as a director on 1 February 2022. She was unable to attend the Board meeting on 12 october 2022 due to prior commitments.
3 Steve Melcher retired as a director on 31 december 2022. He was unable to attend the Remuneration committee meeting on 23 February 2022 due to prior commitments.
4 clare Spottiswoode retired as a director at the conclusion of the 2023 AGM on 10 May 2022. She was unable to attend the Group Audit committee meeting on 6 April 2022 due to unforeseen
travel issues.
5 david Richardson was unable to attend the Board meeting on 12 october 2022 due to a family bereavement.
Board support
directors may seek independent professional advice at the company’s
expense where they consider it appropriate in relation to their duties.
All directors have access to the advice and services of the Group company
Secretary and the Group General counsel.
the role of the Group company Secretary is to support the chair and the
Board, which includes bringing all governance matters to the attention of
the Board and delivering a programme of Board and committee meetings,
training and senior management presentations to ensure that each director
has the information required in a timely manner to discharge their
statutory duties.
the directors must obtain approval from the Board prior to accepting any
additional external appointments.
Commitment
the non-Executive directors have made a significant contribution and
remain committed to ensuring the long-term sustainable success of the
business during 2022.
the nomination and Governance committee have assessed the time
commitment of the non-Executive directors to determine whether they have
sufficient time to fulfil their roles. After considering a recommendation from
the nomination and Governance committee, the Board concluded that the
non-Executive directors have sufficient time to fulfil their roles.
Non-Executive Directors appointment terms
non-Executive directors’ appointments are subject to review every three
years. their letters of appointment set out the expected time commitment.
the need for availability in exceptional circumstances is recognised. directors
are requested to inform the Board of any subsequent changes in their other
significant commitments and an indication of the time involved.
none of the non-Executive directors have too many other commitments
which would render them unable to devote sufficient time to the company’s
activities. the other directorships of the non-Executive directors are
set out in their biographies. none of the directors are appointed to a
FtSE 100 company.
79
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
GOVERNANCE IN OPERATION continued
COMPOSITION, SUCCESSION AND EVALUATION
Board composition and succession planning
As at the date of this report, the Board comprised the chair who was
independent when appointed as chair, two Executive directors and
six independent non-Executive directors, including the Senior
Independent director.
Biographical details of the directors of Just Group plc as at the date of
this report can be found on pages 68 to 70. A list of directors who have
served throughout the year up to the date of this report can be found in
the directors’ report.
the nomination and Governance committee regularly reviews Board
composition when considering succession planning. In line with best practice,
it includes a review of the tenure of directors. Further information regarding
succession planning is included in the nomination and Governance
committee report.
All directors’ appointments are subject to annual re-election by shareholders
and the reasons why their contribution is and continues to be important to
the company’s long-term sustainable success are set out in the explanatory
notes accompanying the resolutions. the Board is satisfied that there is the
right balance of skills and experience on the Board and its committees to
support the Group capture opportunities and deal with future challenges.
Composition of Board Committees
the main Board committees comprise independent non-Executive directors
of the company. the committee members were appointed to each
committee following review and recommendation by the nomination and
Governance committee and approval by the Board. At each scheduled Board
meeting the chairs of each committee report on the activities of preceding
committee meetings. the Group company Secretary supports the chairs of
all the committees and is available to provide corporate governance advice
to all directors.
Induction, training and development
upon her appointment to the Board, Mary Phibbs received a tailored
induction plan to gain a thorough understanding of the business, our
colleagues and culture, and her role as a non-Executive director. Mary
Kerrigan received a formal induction upon joining the JRl and PlAcl
Boards in november 2019.
Mary Phibbs received an induction pack comprising a broad range of
information including Board and committee papers, meeting minutes and
information on operational and financial performance, risk management and
internal controls frameworks, and key policies to provide an overview of the
business. Introductory meetings were held with each member of the Board
and Executive team, the Group company Secretary and key senior managers
across the Group. For the Board committees that Mary has been appointed
to, additional time was spent with the committee chair and relevant senior
managers covering key issues relevant to those committees.
Board and Board Committee effectiveness review
Evaluating Board effectiveness is crucial for the ongoing success of the Group,
ensuring it has the structure, processes, people and performance to deliver
the Group’s long term strategy. the Board undertakes a formal and rigorous
review to assess how it, its committees, the chair and individual directors
perform each year and implement any actions required to become a more
effective Board. In line with the code, the review is facilitated externally
every three years. the effectiveness review in 2022 was conducted internally,
and as performed in previous years, it also covered the regulated life
companies’ Boards.
Questionnaires were issued to every Board member in accordance with a
tailored agenda set by the chair with the assistance of the Group company
Secretary. the questionnaires sought input on a range of matters including:
composition, engagement with management, oversight of the Group’s
business areas and quality of papers. In addition, the Senior Independent
director formally appraised the chair’s performance through meetings with
the non-Executive directors.
the review concluded that the Board, its committees and individual directors
continue to operate effectively and demonstrate high levels of skills,
knowledge and experience across the Board and all Board committees.
levels of diversity continue to improve and the appointment of new directors
as part of the Board refreshment programme has brought new perspectives
to the Board in its discussions and decision making. Progress was found to
have been made on the actions agreed following the 2021 review, as
summarised in the table below.
Focus areas
from the 2021 review
Board succession
Maintaining the focus on
strategy, development and
identifying new business
opportunities
Action taken during 2022
Board succession was considered throughout the
year by the nomination and Governance committee,
aided by a clear succession plan which was updated
as the year progressed, and a capabilities matrix
on the non-Executive directors focusing on their
functional expertise and sectoral experience. As
discussed in greater detail in the nomination and
Governance committee report, clear progress has
been made on the refreshment of the Board with
further changes planned for later this year.
the Board received a much greater level of visibility
on both strategic initiatives and new business
opportunities throughout the year. Quarterly deep
dive Board sessions were held focusing on each of
the key business areas including defined Benefit and
Investments. At the Board’s annual strategy day in
october 2022, focus was given entirely on the Group’s
strategic direction and the initiatives in progress,
covering areas such as sustainability, transformation
and market opportunities. outcomes from the day
formed part of the quarterly strategy execution
reports brought to the Board with updates on the
progress being made across the business.
Executive succession planning is considered
throughout the year by the nomination and
Governance committee, supported by discussions
held at the Group Executive committee. Quarterly
reports on the activities of the nomination and
Governance committee are given by the chair to
the Board, focusing on areas including executive
succession. there has been continued investment in
leadership and development of both the executive
and senior leadership team, with a number of
mentoring programmes in place across the business.
Further details on talent development can be found
in the colleagues and culture report.
As part of the annual Board effectiveness review, the chair discusses with
each of the directors their training and development needs which are
reflected in their development plans. on an ongoing basis the company will
arrange for the directors to develop and update their skills, knowledge and
familiarity with the company in the areas mutually identified.
Increasing Board visibility
of the talent pipeline and
strengthening executive
succession planning
Diversity and inclusion
the Board remains committed to improving diversity in its membership.
While new appointments will be based on skill, experience and knowledge,
careful consideration will also be given to diversity in line with the Board
diversity policy. the Board continues to satisfy the diversity targets as set by
the Hampton-Alexander and Parker reviews. In accordance with the code
requirements, the Board believes that it has the appropriate balance of skills,
capabilities, expertise, diversity, independence and knowledge to enable it
and its committees to discharge their duties and responsibilities effectively.
80
REFLECTIVE SESSIONS
Reflective sessions are
held by the Board and
Board Committees.
• Standing agenda item to
consider meeting effectiveness
and quality of papers.
• Bi-annual discussion on the
survey findings at the Board
and GRCC.
• Key conclusions are collated
by Company Secretarial to
form an action plan.
BOARD EVALUATION
REVIEW OF BOARD PAPER TEMPLATES
Board and Board Committee paper templates are reviewed
at least annually.
• Key changes agreed in 2022 to facilitate more effective discussion
and decision-making were to request authors to:
– articulate key risks and assumptions clearly;
– document alternative options that had been discounted;
– outline any sustainability considerations;
–
–
restrict papers to up to six pages unless agreed otherwise; and
include any reference only material in supplementary packs.
PROGRESSION
Bi-annual surveys are conducted requesting Directors to comment
on meeting effectiveness and quality of papers.
• The surveys aim to identify what works well and what enhancements
are required to facilitate constructive discussions and meet
Directors’ expectations.
AUTHORS SESSION
Company Secretarial host
sessions for authors.
• The sessions provide an
opportunity to:
–
report on any changes
to the templates;
– highlight key feedback
from Directors; and
– address any questions
from authors.
Focus areas
from the 2021 review
Continuing to improve the
quality of the Board and
Committee papers
Action taken during 2022
Following recommendations from the 2021
effectiveness review, the chart above illustrates
the steps being taken. Further enhancements
are planned in 2023 and beyond.
Focus areas from the 2022 review
Proposed action for 2023
Board and Committee succession
planning
Management information
Training
Business development
For the Group Chair to review the
composition of the Board and
Committees including the number
of Non-Executive Directors
To focus on streamlining information
and the level of information provided
in Committee papers and to consider
the value of obtaining independent
views on specialist areas of focus.
To provide training on emerging
specialist areas of focus such as illiquid
asset classes.
For the Business Development team to
provide quarterly competitor analysis
and market share information to the
Board to support the wider Board deep
dive reviews.
The Group Company Secretary has devised an action plan which will be
owned by the Nomination and Governance Committee, with periodic
progress reports provided to the Board.
Nomination and Governance Committee
The principles of section 3 of the Code on composition, succession and
evaluation are applied in practice through the activities undertaken by the
Nomination and Governance Committee, to which the Board has delegated
responsibility. The Nomination and Governance Committee report sets out,
as required by provision 23 of the Code:
•
the responsibilities delegated to the Nomination and Governance
Committee;
the process used for appointments of Executive and Non-Executive
Directors;
the approach to succession planning;
the Board’s policy on diversity and inclusion; and
•
•
• diversity of senior management.
•
AUDIT, RISK AND INTERNAL CONTROL
Preparation of the Annual Report and Accounts
The Board takes care to present a fair, balanced and understandable
assessment of the Group’s position and prospects. The Board believes that
the Annual Report and Accounts are fair, balanced and understandable and
provide the information necessary for shareholders to assess the Group’s
position, performance, business model and strategy.
The going concern statement and a review of whether there are any material
uncertainties to the Group’s ability to continue to adopt the going concern
basis of accounting in respect of the Annual Report and Accounts is set out in
the Group Audit Committee Report and Directors’ Report. The Viability
Statement is on page 61.
Assessing emerging and principal risks
The Board determines the nature and extent of the risks that it is willing
to take to achieve its strategic objectives when setting its risk appetite
framework. The Directors assessed the emerging and principal risks facing
the Group, including risks that would impact its business model, future
performance, capital and liquidity constraints. A description of the principal
and emerging risks including the procedures in place to identify emerging
risks is covered in the section on principal risks and uncertainties.
Risk management and internal control systems
The Board, with the assistance of the Group Audit Committee and Group Risk
and Compliance Committee, and support from the Risk and Group Internal
Audit functions, as appropriate, monitored the Company’s risk management
and internal control systems that have been in place during the year, and
reviewed their effectiveness. The Group Internal Audit function provides an
independent and objective assurance of the adequacy and effectiveness of
the Group’s controls to the Group Audit Committee each year. Information
regarding this review is set out in the Group Audit Committee report.
Group Audit Committee
The Board has delegated responsibility for overseeing the financial reporting
(including climate-related assumptions and disclosures), internal audit,
external audit and the effectiveness of the internal controls to the Group
Audit Committee. The Group Audit Committee conducts a review of the
financial and non-financial statements to satisfy itself of the integrity of
the Annual Report and Accounts and reports its findings to the Board.
For information on the composition of the Group Audit Committee,
its responsibilities and its activities during the year, including those
activities required by provision 26 of the Code, please see the Group
Audit Committee report.
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JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
GOVERNANCE IN OPERATION continued
Group Risk and Compliance Committee
the Board has delegated responsibility for the oversight of the Group’s risk
management, including oversight of risk appetite and the risk management
framework, to the Group Risk and compliance committee. the committee is
also responsible for the oversight of compliance and regulatory matters.
Information regarding the management of risk can be found in the Group
Risk and compliance committee’s report.
For information on the composition of the Group Risk and compliance
committee, its responsibilities and its activities during the year, please see
the Group Risk and compliance committee report.
REMUNERATION
the Board has delegated oversight of remuneration policy and practices to
the Remuneration committee. the way in which the principles have been
applied during the year and the information required as set out in provision
41 of the code, including a description of how executive pay policy was
determined in accordance with provision 40 of the code, are included in the
directors’ Remuneration report.
SUBSIDIARIES’ GOVERNANCE
the effective governance of the wholly owned subsidiaries of the Group (the
“subsidiaries”) is of utmost importance to the Board to ensure its strategy,
purpose, values and culture flows across all its business areas. Given the
prominence of the regulated life companies (“life companies”) in the Group’s
business model, the Board holds its meetings on a nested basis with the
Boards of those companies. It also receives reports from its other regulated
entities, as appropriate, on their activities and any material issues or
concerns. the Group chief Executive officer reports on the performance
and key developments of the Group as a whole.
the Group Board committees oversee matters within their remit to the
extent relevant and necessary for the subsidiaries. during 2022, this included
the consideration and recommendation of changes to the composition of the
Boards of various regulated companies by the nomination and Governance
committee.
With the exception of Just Retirement limited (“JRl”) and Partnership life
Assurance company limited (“PlAcl”) who have established separate audit
committees and investment committees as outlined below, the regulated
companies have not established any separate Board committees as it is
more effective to manage any specific matters on a Group-wide basis.
the following provides an overview of the governance arrangements for our
uK regulated entities.
Regulated life companies
JRl and PlAcl are the Group’s life companies. JRl is the principal operating
company in the Group and, therefore, its activities also have a strategic
and material impact on the consolidated Group performance. the
principal activities of the life companies are the manufacture of Retirement
Income products.
Boards
operating the life companies’ Boards on a nested basis with the Board
ensures the Group’s strategy and governance are aligned and implemented
effectively. to ensure their independence in mindset and decision-making,
the JRl and PlAcl Boards have two independent non-Executive directors
who are not directors of Just Group plc, one of whom chairs the life
companies’ Boards. there is a separate section on the nested meeting
agendas on JRl and PlAcl specific matters to ensure time is allocated for
each Board to consider matters specific to each respective company.
the matters reserved for the JRl and PlAcl Boards have been documented
and approved by each Board. during 2022, there was a detailed review and
update to ensure the matters reserved for the JRl and PlAcl Boards
continued to be in line with best practice and aligned with the matters
reserved for the Board, where appropriate.
Board committees
Audit
the Boards of JRl and PlAcl have established independent subsidiary
audit committees to ensure effective oversight and to comply with relevant
regulatory requirements. the JRl and PlAcl Audit committees are mainly
held on a nested basis, together with the Group Audit committee. the
committees consider topics of mutual interest at the same time, but from
each committee’s perspective. time is also set aside for each committee
to consider matters relevant to its respective company. the JRl and PlAcl
Audit committees each comprise one independent non-Executive director
who is not a director of Just Group plc to ensure independent focus and good
governance. terms of reference, which set out the scope and responsibilities
of each committee have been reviewed and approved by the JRl and
PlAcl Boards. Further information on the activities of the JRl and PlAcl
Audit committees is available in the Group Audit committee report.
Investment
the Boards of JRl and PlAcl have delegated responsibility for oversight of
the investment activities within an investment management governance
framework to the JRl and PlAcl Investment committees.
Key responsibilities include:
•
recommending the investment framework, material changes to the
investment strategy and any major strategic initiatives to the JRl and
PlAcl Boards for approval;
• overseeing the alignment of investment activities and performance
to the Group’s strategy, including the Group’s targets for investments
to be carbon net zero by 2050 with an interim target of a reduction of
50% by 2030;
reviewing climate-related risks to the investment portfolio;
reviewing the performance of external investment managers and the
effectiveness of reporting procedures; and
•
•
• approving entry into investment management agreements and other
documentation within the remit of their terms of reference.
In addition to the scheduled quarterly meetings, the JRl and PlAcl
Investment committees now also meet biannually on a nested basis
with the Group Risk and compliance committee to consider investment
risk related matters.
the terms of reference, which set out the scope and responsibilities of
each committee have been reviewed and approved by the JRl and
PlAcl Boards.
Regulated distributor
HuB Financial Solutions limited specialises in the provision of integrated
financial retirement solutions and the distribution of products for the
at and in-retirement market. the Board comprises three non-Executive
directors and two Executive directors. there were four scheduled Board
meetings held during the year as well as a strategy day. the matters
reserved for the Board have been documented and approved by the Board.
Regulated lifetime mortgage providers
the principal activity of the regulated lifetime mortgage providers,
Just Retirement Money limited and Partnership Home loans
limited, is the origination and administration of loans secured by
residential mortgages. Each Board comprises three non-Executive
directors and two Executive directors. three scheduled Board
meetings were held during the year and an additional meeting was
held to consider the consumer duty implementation plan.
82
NOMINATION AND GOVERNANCE COMMITTEE REPORT
COMMITTEE ROLE
the nomination and Governance committee (the “committee”) is responsible
for regularly reviewing the structure, size and composition of the Board and
its committees, and where appropriate makes recommendations to the
Board for the orderly succession of Executive and non-Executive director
appointments. It oversees the refreshment of the Board and its committees,
and seeks to maintain an appropriate balance of skills, knowledge,
independence, experience and diversity, taking into account the Group’s
strategic priorities, its challenges and opportunities, all relevant corporate
governance standards, and associated guidance on Board composition.
the committee is also responsible for keeping under review compliance
with the uK corporate Governance code 2018 (the “code”), monitoring
emerging trends in, and consultations on, corporate governance matters,
considering the potential effect on the Group’s governance arrangements
and recommending any relevant changes to the Board, as appropriate,
on matters including the corporate governance framework of the Group.
It is responsible for overseeing the induction, training and continuous
professional development of the Group’s directors.
the full responsibilities of the committee are set out in its terms of reference,
which are reviewed annually and can be found at www.justgroupplc.co.uk.
REVIEW OF THE YEAR
the committee’s key priority during the year was succession planning
for the Board and its committees, including the orderly transition of the
Board as the longer serving non-Executive directors come to the end of
their term. Since September 2019, there have been significant changes
to the Board including my appointment as chair, david Richardson as
Group chief Executive officer and Andy Parsons as Group chief Financial
officer. the Board has also welcomed new non-Executive directors
as part of the succession plan to refresh the Board and said farewell
to longer serving directors over the past two years. the transition
of the Board and induction of new directors to ensure the smooth
running of Board activities will be a key focus for the year ahead.
the committee held four scheduled meetings during the year, which
focused on regular reports on succession planning, Board effectiveness
and a review of the non-Executive directors’ skills and capabilities.
the committee also considered and recommended for Board approval,
new director appointments. the Group chief Executive officer and chief
People officer were invited to attend the meetings during the year.
other Group executives and senior managers were invited to attend the
meetings to report, where appropriate, on their areas of responsibility.
the committee follows an annual rolling forward agenda with standing
items considered at each meeting in addition to any matters arising
and topical issues which the committee has decided to focus on. the
key focus areas for the year are covered in the sections below.
BOARD AND BOARD COMMITTEES’ COMPOSITION
the committee reviewed the composition and balance of the Board and Board
committees during the year. As part of this review, the committee considered:
• whether the balance between Executive and non-Executive directors
was appropriate;
• whether the structure, size and composition (including the balance of
skills, knowledge, independence, experience and diversity) of the Board
and membership of the Board committees were appropriate, taking into
consideration Board tenure;
the independence of non-Executive directors, considering the judgement,
thinking and constructive challenge that they demonstrate in meetings;
• whether the Board had appropriate skills and knowledge when considering
•
•
the Group’s sustainability strategy and its impact on the climate; and
the progress made on the diversity and inclusion plans for the Board and
compliance with the new listing Rule on diversity and inclusion.
I am pleased to present my report
on behalf of the nomination and
Governance committee for the
year ended 31 december 2022.
this report outlines the main
activities carried out by the
committee during the year.
JOHN HASTINGS-BASS
chair, nomination and Governance committee
COMMITTEE MEMBERSHIP
John Hastings-Bass
chair
Paul Bishop
Independent
non-Executive director
Ian Cormack
Senior Independent director
Michelle Cracknell
Independent
non-Executive director
committee meeting attendance can be found on page 79.
Biographies of committee members can be found on pages 68 to 70.
83
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
NOMINATION AND GOVERNANCE COMMITTEE REPORT continued
After taking into consideration the above factors as part of its review, the
committee was satisfied that the refreshing of the Board was progressing
well and that it will meet its diversity and inclusion targets in 2023.
Board changes
Mary Kerrigan was appointed as a non-Executive director on 1 February
2022. longer serving non-Executive directors clare Spottiswoode, who joined
the Board in 2013 and Steve Melcher who was appointed in 2015, retired as
directors on 10 May 2022 and 31 december 2022 respectively. Mary Phibbs
was appointed as a non-Executive director on 5 January 2023. External
search firm, teneo, which has no other connection to the company or any
director, was engaged to support the recruitment. Further details of our
recruitment process can be found later in the report. Paul Bishop and Ian
cormack have informed the Board of their intention not to seek re-election
at the 2023 AGM and therefore will retire as directors on 9 May 2023.
Board Committee changes
Following the retirement of Steve Melcher, Mary Phibbs was appointed to
the Group, JRl and PlAcl Audit committees, Group Risk and compliance
committee and Remuneration committee on 5 January 2023.
With effect from 9 May 2023, when Paul Bishop and Ian cormack retire,
Mary Phibbs will take over the role of chair of the Group, JRl and PlAcl
Audit committees subject to regulatory approval and Mary Kerrigan will be
appointed as a member of the respective Audit committees. Mary Phibbs
will also be appointed as a member of the nomination and Governance
committee and Market disclosure committee, and Michelle cracknell will take
over as chair of the Remuneration committee subject to regulatory approval.
Director designated responsibilities
Following the introduction of the new FcA consumer duty requirements,
Michelle cracknell has accepted the role of acting as the Just Group consumer
duty champion. Following the retirement of Steve Melcher, Mary Kerrigan is
now the non-Executive lead on Sustainability and Michelle cracknell is now
the sole non-Executive director responsible for employee engagement.
Non-Executive Director recruitment process
over the last few years, as some non-Executive directors have approached
their nine year tenure, the committee has recruited new non-Executive
directors for the company and the regulated life companies’ Boards.
In each case, a detailed description for the role is prepared, having
considered the particular skills, experience and background required. As part
of Board recruitment searches, an assessment of the balance of knowledge
and expertise needed to ensure the continued effective leadership of the
Group, and the development and oversight of strategy, purpose and culture,
is taken into consideration. In all of the recent searches for non-Executive
directors, external search firms with no other connection to the company
or any director, have been used to identify candidates. In identifying and
recommending candidates for appointment to the Board, the committee
considers candidates from a wide range of backgrounds, assessing them
on merit against objective criteria and with due regard for the benefits of
diversity on the Board.
once a shortlist has been prepared, interviews are held involving both
non-Executive and Executive directors. As part of the process the candidates’
other time commitments are reviewed to ensure that they have sufficient
time to dedicate to the Group. Following completion of the process and
subject to satisfactory reference checks, a recommendation is made to
the Board.
BOARD SKILLS, KNOWLEDGE AND EXPERIENCE
during the year, the committee reviewed the Board skills matrix and capability
gaps that had been identified and agreed on the areas of experience which
would be beneficial to the composition and balance of the Board. the Board
comprises individuals with significant financial services and actuarial
84
experience which continues to be valuable in supporting the complex issues
that can arise from the external regulatory environment. As the Group’s
strategy has evolved towards a greater focus on profitable and sustainable
growth, the committee recognises the importance of having relevant skills,
experience and capabilities within the Board to support Just in achieving its
strategic objectives and priorities. the committee has also added new metrics
to the Board skills matrix relating to sustainability and climate change to
ensure this is a consideration as part of future succession planning reviews.
A tailored induction programme was provided for Mary Phibbs in early
2023. to ensure that the directors maintain relevant skills and knowledge
of the Group, the training needs of the directors are reviewed regularly.
A comprehensive training programme is in place as covered in more detail
in the Governance in operation report.
SUCCESSION PLANNING
Board succession
the committee was very active in its consideration of non-Executive
director succession in 2022 and there has been good progress in refreshing
the Board with the recent appointments of Mary Kerrigan and Mary Phibbs
as non-Executive directors and the retirement of longer serving non-
Executive directors.
Senior Management succession
the committee regularly reviews succession plans for the Group Executive
committee and Group company Secretary to ensure they are orderly and
aligned with Just’s strategic objectives. As part of the review during the year,
the committee identified immediate emergency successors for critical roles
to mitigate risk events and candidates with a longer-term development
trajectory. the committee remained satisfied that the plans were
comprehensive and robust. there were several changes to the Senior
leadership team in 2022 including the appointments of Pretty Sagoo as
Managing director of defined Benefit Solutions and Ellie Evans as the Group’s
chief People officer.
DIVERSITY AND INCLUSION
the Board’s diversity and inclusion strategy reinforces our pledge to build
a culture at Just that has diversity and inclusion at its core. It outlines our
commitment to hiring and developing diverse talent at all levels of the
organisation. the Board’s diversity policy, which includes references to its
commitment to improve both the gender and ethnic diversity of the Board
BOARD TENURE1
0–1 years
1–3 years
1
5
3–5 years
0
5–7 years
7+ years
0
3
in line with the Hampton-Alexander and Parker Reviews, was reviewed during
the year and updated to reflect listing Rule 9.8.6 concerning diversity and
inclusion requirements.
the predecessor company, Partnership Assurance Group plc, pre-merger
and concluded that he continued to meet all independence and time
commitment expectations.
the committee assessed the new uK listing Rules effective in 2023 and
the associated impact on the composition of the Board. In particular, the
committee considered the requirements to ensure at least one of the
chair, Group chief Executive officer, Group chief Financial officer or Senior
Independent director is female, at least 40% of the Board are female
and that at least one director is from a minority ethnic background.
As at 31 december 2022, we already met one of the three targets and I am
pleased to report that, as at the date of this report, female representation on
the Board is 44% and we have minority ethnic representation on the Board.
Following the 2023 AGM, we will meet all of the new uK listing Rules
requirements when Mary Phibbs is appointed as the Senior Independent
director. Further information as required by listing Rule 9.8.6 on the diversity
of Group employees can be found in the directors’ report.
the committee fully supports Just’s commitment to all aspects of diversity,
including gender, race, sexuality and disability, and welcomes Just’s strong
progress with respect to gender diversity since signing up to the Women in
Finance charter.
EFFECTIVENESS
Board and Committee effectiveness
In accordance with the code, an internal annual evaluation of the
performance of the Board, Board committees and individual directors was
undertaken in 2022. the review concluded that the Board and its committees
were performing strongly and effectively. the Group company Secretary has
devised an action plan which will be owned by the committee to oversee
progress and provide periodic updates to the Board. Further information on
the evaluation process, conclusions and agreed actions can be found in the
Governance in operation report. In line with the three-yearly cycle, our
annual Board evaluation process will be externally facilitated in 2023.
Time commitment and independence
the expected time commitment of the Group chair and non-Executive
directors is agreed and set out in writing in their letters of Appointment.
As part of the annual review of director effectiveness, the committee
considered each non-Executive director’s time commitments and whether
they had sufficient time to carry out their roles.
In assessing the non-Executive directors’ independence, the committee
noted the code requirements, which states that serving more than nine
years is one circumstance that may impair independence. the committee
considered the continued appointment of Ian cormack noting his service on
After assessing each non-Executive director, the committee concluded
that they remain effective, independent and have sufficient time to fulfil
their roles.
the committee provided oversight of the annual fitness and proprietary
assessments of non-Executive directors and Senior Management of all Just
Group regulated entities including associated recommendations during the
year, and no concerns were identified.
DIRECTOR RE-ELECTION
the committee has considered the tenure and balance of skills,
knowledge and experience of the Board as well as taking into
consideration changes to the uK listing Rules. the committee and
the Board believes that the current composition of the Board is in the
best interests of our stakeholders, and that the directors continue to
challenge appropriately and act independently. In addition, the newly
appointed non-Executive directors bring a fresh perspective to Board
deliberations. consequently, with the exception of Paul Bishop and Ian
cormack, all directors will be standing for election and re-election to
serve on the Board to promote the long-term success of the company.
CORPORATE GOVERNANCE
the committee monitors emerging trends and requirements on governance
matters, and ongoing compliance with the code. during the year, the
committee assessed and concluded that the company complies with the
code. It also considered upcoming changes in the listing Rules requirements,
which aim to increase transparency for investors on the diversity of Boards
and executive management.
PRIORITIES FOR THE YEAR AHEAD
Following the upcoming changes to the Board composition detailed in this
report, the focus of the committee will change from refreshing the Board to
maximising the effectiveness of the Board’s governance structures including
its oversight of sustainability matters. In addition, diversity and inclusion
initiatives will continue to be a key focus area for the committee.
on behalf of the nomination and Governance committee
JOHN HASTINGS-BASS
chair, nomination and Governance committee
6 March 2023
Independence1
Ethnic Diversity1
Gender diversity1
Chair
Executive Directors
Non-Executive Directors
1
2
6
Asian
Black
Mixed
1
0
0
White
Other
8
0
Male
Female
5
4
1 As at March 2023.
85
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT
JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
GROUP AUDIT COMMITTEE REPORT
COMMITTEE ROLE
the Group Audit committee (the “committee”) is responsible for assisting the
Board in discharging its responsibility for the oversight of the Group’s financial
and solvency reporting and the effectiveness of the Group’s systems of
internal controls and related activities. the committee is also responsible for
the oversight of the work and effectiveness of Group Internal Audit and the
external auditor.
the committee regularly meets on a nested basis with the Audit committees
of the Group’s life companies, Just Retirement limited (“JRl”) and Partnership
life Assurance company limited (“PlAcl”) to ensure that there is adequate
co-operation and to enable the committees to discharge both their separate
and mutual responsibilities effectively. the committee also works closely
alongside other committees, in particular the Group Risk and compliance
committee (“GRcc”), with close cooperation between the chairs of these
committees. the chair of the committee is also a member of the GRcc. this
ensures that the audit work is focused on higher risk areas and the results of
internal and external audit work can be used to inform the work of the GRcc.
the full responsibilities of the committee are set out in the terms
of reference, which are reviewed annually and can be found at
www.justgroupplc.co.uk.
the effectiveness of the committee was reviewed as part of the annual
Board effectiveness review which took place in late 2022 and the Board
was satisfied with the committee’s performance.
COMMITTEE MEMBERSHIP AND MEETINGS
the committee currently comprises three independent non-Executive
directors. Its members bring a wide range of financial and commercial
expertise necessary to fulfil the committee’s duties including appropriate life
insurance accounting expertise. the Board is satisfied that the committee
chair has recent and relevant financial experience as required by the uK
corporate Governance code 2018 (the “code”). As a whole, the committee
has competence relevant to the sector in which the Group operates. Mary
Phibbs joined as a member of the committee with effect from 5 January 2023
and Steve Melcher retired as a director and member of the committee with
effect from close of business on 31 december 2022.
the committee held eight scheduled meetings during the year and one
additional meeting was also convened to discuss progress on the
implementation of IFRS 17. In addition to the members of the committee,
members of the executive and senior management teams attended the
meetings to submit reports in their areas of responsibility. other non-
Executive directors were also invited to attend and contributed to the
challenge and debate. the Group’s external auditor, Pricewaterhousecoopers
llP (“Pwc”), attended all meetings during the year. the committee regularly
set aside time at the beginning of meetings without management present.
It also met separately with the director of Group Internal Audit and the
external auditor without management being present during the year.
I am pleased to present my report
on behalf of the Group Audit
committee which outlines the main
activities and areas of focus during
the year.
PAUL BISHOP
chair, Group Audit committee
COMMITTEE MEMBERSHIP
Ian Cormack
Senior Independent director
John Hastings-Bass
chair of the Board
Mary Phibbs
Independent non-Executive
director
COMMITTEE MEMBERSHIP
Paul Bishop
chair
Kalpana Shah
Independent
non-Executive director
Mary Phibbs
Independent
non-Executive director
on 31 december 2022, Steve Melcher retired as a director and member of
the committee.
committee meeting attendance can be found on page [•].
Biographies of committee members can be found on pages [•] to [•].
committee meeting attendance can be found on page 79.
Biographies of committee members can be found on pages 68 to 70.
86
Financial Reporting Council (“FRC”) review of earnings per share (“EPS”)
reported in the Annual Report and Accounts for the year ended
31 December 2021
the committee reviewed and approved correspondence with the FRc
following the enquiry from the corporate Reporting Review team. A limited
scope review of the Group Annual Report and Accounts for the year ended
31 december 2021 was performed by the FRc in accordance with Part 2 of the
FRc corporate Reporting Review operating Procedures. the review covered
only those aspects of the Annual Report and Accounts that relate to
the application of IAS 33, ‘earnings per share’, and compliance with its
requirements. the outcome of the enquiry is that the Group has revisited
its application of IAS 33 relating to the treatment of the loss on redemption
of the Restricted tier 1 notes issued in 2019 and repurchased in 2021.
Accordingly the Group has restated the prior year balances relating to
earnings per share and diluted earnings per share. Further details are given
in note 1.
Accounting standards
no new accounting standards were introduced during 2022. the committee
increased its level of oversight on the progress of the project to implement
IFRS 17 and received regular status updates and training on the new
requirements, including a briefing on the transition impacts of IFRS 17 and
comparisons with the existing reporting basis. Subsequent to the training, the
methodology for IFRS 17 was reviewed by the committee. the committee
also reviewed the disclosures on the implementation and inclusion of IFRS 17
data in the Group Annual Report and Accounts and the architecture of Just’s
systems solution for computation of the new IFRS 17 accounting data.
Significant accounting judgements
the key areas of judgement considered by the committee in relation to the
31 december 2022 Group Annual Report and Accounts, and how these were
addressed, are set out in the table overleaf.
AREAS OF FOCUS
the committee follows an annual rolling forward agenda with standing items
considered at each meeting in addition to any matters arising and topical
business or financial items which the committee has decided to focus on.
Regular reporting is received from Internal Audit and the external auditor
as outlined later in this report.
Key areas of focus during the year are outlined below.
Financial reporting
In 2022 and to date in 2023, the committee:
•
•
reviewed the quality and acceptability of accounting policies and practices;
reviewed the appropriateness and clarity of the disclosures and
compliance with financial reporting standards and relevant financial and
governance reporting requirements including climate related disclosures
and IFRS 17;
reviewed material areas in which significant judgements have been
applied or there has been discussion with the external auditor;
reviewed the assumptions critical to assessing the value of assets and
liabilities, in particular insurance liabilities, lifetime mortgages and other
illiquid assets;
reviewed documentation prepared in support of the going concern basis
and longer-term viability assessment;
reviewed the IFRS operating profits of the Group for the year ended
31 december 2022;
reviewed the existing ten key performance indicators (“KPIs”) used by the
Group to assess its financial performance;
reviewed the alternative performance measures (“APMs”) used by the
Group and how these are disclosed within the Annual Report and
Accounts;
reviewed the 31 december 2022 Group Annual Report and Accounts and
the half-year financial statements to 30 June 2022;
•
•
•
•
•
•
•
• assessed whether the Group Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s performance, business
model and strategy and concluded that they are; and
• oversaw the preparation and review of the annual Group Solvency and
Financial condition Report (“SFcR”), the Group and Solo Regular
Supervisory Reports and the Annual Quantitative Reporting templates
prior to submission to the Prudential Regulation Authority (“PRA”).
to assist with the execution of their duties, the committee considered reports
from the Group chief Actuary. It also reviewed reports from the external
auditor on the outcomes of their half-year review and financial year end
audit. the committee encouraged the external auditor to display the
necessary professional scepticism its role requires throughout the year.
the committee was pleased to advise the Board that the judgements
and assumptions are appropriate and that the Group Annual Report and
Accounts are fair, balanced and understandable, and provide the necessary
information for shareholders to assess the Group’s position, prospects,
business model and strategy.
87
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
GROUP AUDIT COMMITTEE REPORT continued
SIGNIFICANT JUDGEMENTS
LONGEVITY
ASSUMPTIONS
LIFETIME
MORTGAGE
VALUATION
VALUATION OF
COMPLEX
INVESTMENTS
INVESTMENT IN
SUBSIDIARIES
CREDIT DEFAULT
ASSUMPTIONS
IFRS 17
INSURANCE
CONTRACTS NEW
ACCOUNTING
POLICY
DISCLOSURES
APPROACH
ACTION
the length of time the Group’s Retirement Income
customers and lifetime Mortgage (“ltM”) customers
will live, and therefore the projected cash flows for
Retirement Income and ltM assets, are key
assumptions when valuing the Group’s insurance
liabilities and ltMs.
the valuation of loans secured by residential mortgages
is determined using internal models which project
future cash flows expected to arise from each loan.
Future cash flows allow for assumptions relating to
future expenses, future mortality experience, voluntary
redemptions and repayment shortfalls on redemption
of the mortgages due to the no-negative equity
guarantee (“nnEG”) taking into account assumed future
house price growth. the asset is valued at loan amount
at issuance and assumes the spread above risk free rate
calculated as at that point in time remains fixed for the
lifetime of the loan.
longevity experience is a key area of focus for the Board and the
committee, and the Board receives regular reports on the actual against
the expected number of deaths and the likely causes, by condition, of any
positive or negative divergence as well as the output of industry studies.
the expected impact on future mortality rates over the short and long
term was considered. Mortality experience has been volatile and
significantly higher in aggregate than expected since March 2020 as a
result of the coVId-19 pandemic. Analysis indicates that the pandemic
will have enduring, direct and indirect influences on future mortality
experience. It was therefore considered appropriate to make explicit
allowance in the Group’s assumptions for the impact of the pandemic on
future mortality experience. the committee considered the deep dive
review carried out on the methodology and concluded it was appropriate.
the committee reviewed the key assumptions including detailed
analyses from management. Whilst there is additional short term
uncertainty over property valuation, there is no clear indication of longer
term effects. It was determined that the assumptions for property price
volatility and future house price growth should remain unchanged from
the 2021 year end.
the valuation of level 3 mark to model investments
include unobservable inputs. they can involve
significant judgement and utilise complex models. the
level of valuation uncertainty differs by asset class and
can be influenced by the illiquidity of the asset, the
nature of the unobservable inputs and the complexity
of the valuation model required. the largest illiquid
asset for the Group is ltMs and is disclosed above.
In 2022, the Group changed valuation of illiquid assets to be based
on internal models following the introduction of a new treasury
management system. Previously, valuations were from third party asset
managers. the committee reviewed management’s approach for
commercial mortgages and ground rents. A key consideration of the
valuation is the derivation of the spread over risk free rates with limited
market data available and significant illiquidity in these asset classes.
the committee approved management’s approach.
Just Group plc’s investment in subsidiary undertakings
is a significant asset and underpins the net equity
reported by Just Group plc in its individual Parent
company financial statements.
the Group’s policy is to hold investments at cost and
assess annually for indicators of impairment.
credit default assumptions are used to determine
the valuation rate of interest used in the calculation
of insurance contract liabilities. the Group’s asset
portfolio includes a material amount of illiquid assets.
For corporate bonds, credit default assumptions are
calculated taking into account both historical default
experience for each rating class and the current spread
on the asset. For ltMs it is captured using the expected
nnEG shortfalls. For other illiquid assets including
infrastructure and ground rents, credit default
assumptions are set to a proportion of the equivalent
corporate bond default allowance.
the 2022 financial statements include quantitative
and qualitative disclosures of transitioning to the new
standard. IFRS 17 represents a material change in
accounting for the Group in 2023 and accordingly the
estimated impact on transition has been disclosed in
note 1 to the financial statements.
88
the carrying value of this asset is assessed through the consideration of
the in-force and new business cash flows of the underlying subsidiary
companies. the committee reviews assessments, the recoverability of
the balances reported and appropriateness of accounting policies, as
part of its work on financial reporting. As part of the preparation of the
2022 Annual Report and Accounts, the committee considered whether
any of the investment in subsidiaries should be impaired. After reviewing
the recoverable amounts for the Group’s investments in subsidiaries, the
committee agreed with management’s assessment that no impairment
was required for any investments in subsidiaries.
the committee reviewed the key credit default assumptions used for
corporate bonds, ltMs and other illiquid classes, which were consistent
with 2021 reporting, and concluded that they should remain unchanged.
As noted under the heading ‘Accounting Standards’ the committee
held several sessions during the year on IFRS 17 training and reviewing
proposed methodologies. the committee reviewed the proposed
disclosures’ compliance with accounting standards (IAS 8). the
committee also considered the appropriateness of the qualitative and
quantitative disclosures and the range provided for the impact on the
opening balance sheet in the context of the progress of the
implementation project.
the committee confirms it has complied with the Statutory Audit Services
for large companies Market Investigation (Mandatory use of competitive
Process and Audit committee Responsibilities) order 2014, published by the
competition and Markets Authority on 26 September 2014. there are no
contractual obligations restricting the Group’s choice of external auditor.
Oversight
the committee is responsible for approving the terms of engagement of
the external auditor. throughout the year, the committee has reviewed
regular reports from the external auditor and has met with the lead audit
engagement partner without the presence of management, providing an
opportunity to raise any matters in confidence and for open dialogue. Private
meetings were also held with the lead audit engagement partner and the
chair of the committee on a regular basis.
In 2022 and to date in 2023, the committee:
•
•
•
•
reviewed the 2022 year end audit work plan including the scope of
the audit and the materiality levels adopted by the external auditor;
reviewed the recommendations made by the external auditor in their
internal control report and considered the adequacy of management’s
response;
received an update from the external auditor on their IFRS 17 audit
activities and findings on the key IFRS 17 methodology judgements;
reviewed the Group’s policy on the use of the external auditor for
non-audit work and concluded that further work commissioned during
the year was in compliance with the policy. It also evaluated: a) the
independence and objectivity of the external auditor having regard to
the report from the external auditor describing the general procedures
to safeguard independence and objectivity; b) the level, nature and
extent of non-audit services provided by the external auditor; c) whether
the external audit firm was the most suitable supplier of the non-audit
services; and d) the fees for the non-audit services, both individually and
in aggregate;
• agreed the terms of engagement and fees to be paid to the external
auditor for the audit of the 2022 Annual Report and Accounts; and
reviewed the external auditor’s explanation of how the significant risks
to accounts were addressed.
•
the committee considered the quality and effectiveness of the external
audit process. Its effectiveness is dependent on appropriate audit risk
identification at the start of the audit cycle. the committee receives a
detailed audit plan from Pwc, identifying its assessment of these key risks.
For the 2022 reporting period the key risks identified were in relation to
the valuation of insurance liabilities, the valuation of loans secured by
residential mortgages, recoverability of investment in subsidiaries, the
valuation of complex investments, credit default assumptions and the
inclusion of IAS 8 disclosures on the expected impact of the implementation
of IFRS 17. the significant judgements made in connection with these
risks are set out in the table on page 88. the committee challenged
the work conducted by the external auditor to test management’s
assumptions and estimates around these areas. the committee assesses
the effectiveness of the audit process in addressing these matters through
the reporting received from Pwc at the interim and year end. In addition,
the committee seeks feedback from management on the effectiveness
of the audit process. For the 2022 reporting period, management were
satisfied that there had been appropriate focus and challenge on the
primary areas of audit risk and assessed the quality of the audit process
to be good. the committee concurred with the view of management.
Alternative Performance Measures
the committee considered the APMs used by the Group and whether these
remained appropriate and useful measures. the committee reviewed the
disclosures in the Annual Report and Accounts in relation to the APMs used
by the Group and also considered compliance with the guidance on APMs set
out by the European Securities and Markets Authority.
Going concern
As part of the assessment of going concern and longer-term viability for
december 2022, the committee considered the impact of the current conflict
in ukraine and other uncertainties, which may impact the Group.
the committee also considered various risks in stressed scenarios for the
going concern assessment including the risks associated with capital
requirements to write anticipated levels of new business which form part
of the Group’s business plan; the projected liquidity position of the Group;
eligible own funds being in excess of minimum capital requirements in
stressed scenarios; further credit downgrades and property fall sensitivity;
interest rate sensitivity; the findings of the Group own Risk and Solvency
Assessment; and the risk of regulatory intervention. In addition to risks, the
committee considered the Group business plan approved by the Board in
november 2022 and the forecast regulatory solvency position calculated on
a Solvency II basis, which includes scenarios setting out possible adverse
trading and economic conditions as a result of macro economic and
geopolitical uncertainties.
Regulatory reporting oversight
the committee receives regular updates on the Group’s regulatory
reporting matters, including the oversight and preparation of the Group’s
annual SFcR. the committee also receives regular updates relating to
the ongoing publication by the Prudential Regulation Authority (“PRA”)
of supervisory statements that set out its expectations for certain aspects
of prudential regulation.
the committee has responsibility for overseeing the recalculation of
transitional Measures on technical Provisions (“tMtP”). the committee
reviewed and approved changes to the tMtP methodology for inclusion in
the SFcR at 31 december 2022 to reflect refinements in the methodology.
the implementation of Solvency II in practice has continued to evolve and is
expected to do so in the future. there was regular engagement with the PRA
on the changes proposed to the tMtP and other matters affecting reporting
during the year.
Finance transformation
during the year, the committee received reports on progress against
key milestones in the Group’s Finance transformation Programme. the
committee provided oversight on various workstreams, including the
replacement of the General ledger, implementation of the Financial
Reporting controls Framework, IFRS 17 implementation, and treasury
transformation and automation initiatives, which together, were designed
to enhance controls and create a scalable Finance function that delivers
increased value for the business.
EXTERNAL AUDIT
Appointment
the company’s external auditor is Pwc. Following a formal tender process
in 2019, Pwc was formally appointed as the company’s external auditor
by shareholders in 2020. the current lead audit engagement partner is
lee clarke who has just completed the third year of his five year term.
the committee is responsible for recommending to the Board the
appointment, reappointment and removal of the external auditor, taking into
account independence, effectiveness, lead partner rotation and any other
relevant factors, and oversees the tender process for new appointments.
Following recommendation by the committee, the Board intends to propose
the reappointment of Pwc as the company’s auditor at the 2023 Annual
General Meeting on 9 May 2023 to hold office until the conclusion of the next
general meeting at which accounts are laid before the company. It believes
the independence and objectivity of the external auditor and the
effectiveness of the audit process are safeguarded and remain strong.
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GROUP AUDIT COMMITTEE REPORT continued
RISK MANAGEMENT AND INTERNAL CONTROL
the committee has responsibility to keep under review the system of internal
financial controls that identify, assess, manage and monitor financial risks
and other internal controls. In doing so the Group operates a three lines of
defence model. the first line of defence is line management who devise and
operate the controls over the business. the second line functions are Risk
Management, Group compliance and Actuarial Assurance, which oversee the
first line, ensure that the systems of internal controls are sufficient and are
operated appropriately, and measure and report on risk to the GRcc. the third
line is Internal Audit, who provide independent assurance to the Board and
its committees that the first and second lines are operating appropriately.
the Group’s internal control systems comprise the following key features:
• clear and detailed matters reserved for the Board and terms of reference
for each of its committees;
• a clear organisational structure, with documented delegation of authority
from the Board to senior management;
• a Group policy framework, which sets out risk management and control
standards for the Group’s operations;
• defined procedures for the approval of major transactions and capital
allocation; and
• a Group Internal Audit function that provides independent and objective
assurance on the effectiveness of the Group’s risk management,
governance and internal control processes.
the Group has specific internal mechanisms that govern the financial
reporting process and the disclosure controls and procedures around the
approval of the Group’s financial statements. the results of the financial
disclosure process are reported to the committee to provide assurance that
the Annual Report and Accounts is fair, balanced, and understandable,
including the opportunity to challenge members of management and the
external auditor on the robustness of those processes.
It is the view of the committee that the Group’s system of risk management
and internal controls is currently appropriate to the Group’s needs.
Safeguarding independence and non-audit services
the independence of the external auditor is essential to the provision of
an objective opinion on the true and fair view presented in the financial
statements. Auditor independence and objectivity are safeguarded by
various control measures, including limiting the nature and value of
non-audit services performed by the external auditor and partner rotation
at least every five years.
the Group has a policy in relation to the provision of non-audit services by our
external auditor. All non-audit services provided by the external auditor are
subject to review and approval by the committee. the policy ensures that the
Group benefits from the cumulative knowledge and experience of its external
auditor while also ensuring that it maintains the same degree of objectivity
and independence. during the year, the value of audit services to the Group
was £3.7m (2021: £2.4m). the value of non-audit services during the year
amounted to £0.7m (2021: £0.7m), comprising:
Audit-related assurance services (audit of regulatory returns)
Audit-related assurance services (other services)
other assurance services
£m
0.5
0.2
–
the ratio of non-audit services to audit services fees was 1:5:3. non-audit
services of £0.5m were provided during 2022 in relation to the audit of the
Group’s Solvency II regulatory returns and a further £0.2m of non-audit
services were provided in relation to the review of the Group’s interim report.
non-audit services for 2022 were similar to the previous year. these
non-audit services are considered to be closely related to the work performed
by the external auditor of the Group and the committee determined that the
services provided would not impact the independence of the external auditor.
As part of the evaluation of the objectivity and independence of the external
auditor, the committee has received and reviewed written confirmation
that Pwc has performed their own assessment of independence within the
meaning of all uK regulatory and professional requirements and of the
objectivity of the audit engagement partner and audit staff and have also
concluded that the independence is not impaired by the nature of the
non-audit engagements undertaken during the year, the level of non-audit
fees charged or any other facts or circumstances.
the level of non-audit services offered reflects the external auditor’s
knowledge and understanding of the Group. the Group has also appointed
other accountancy firms to provide certain non-audit services in connection
with internal audit, governance, tax and regulatory advice, and with regard to
the implementation of IFRS 17. An analysis of auditor remuneration is shown
in note 4 to the consolidated financial statements. the committee has
approved Pwc’s remuneration and terms of engagement for 2022 and
remains satisfied with the audit quality and that Pwc continues to remain
independent and objective.
90
INTERNAL AUDIT
Group Internal Audit is an internal function that provides independent and
objective assurance to the committee that the Group’s risk management,
governance and internal control processes are operating effectively.
the committee considers and approves the Internal Audit plan annually,
which is constructed using a risk-based approach taking account of risk
assessments, input from senior management and previous external and
internal audit findings. Reports from the director of Group Internal Audit
include updates on audit activities, progress of the Internal Audit plan,
the results of any unsatisfactory audits, and the action plans to address
these areas. Monitoring and reviewing the scope, extent and effectiveness
of the activity of the Group Internal Audit team is regularly reviewed by
the committee.
WHISTLEBLOWING
the Group has a whistleblowing framework that is designed to enable
colleagues to raise concerns confidentially about conduct they consider
contrary to the Group’s values such as unsafe or unethical practices. Any
concerns can be reported directly to the Group company Secretary or by
contacting an external confidential dedicated telephone hotline or via a
secure web portal. the concern can be given anonymously. the committee
receives regular updates on any concerns identified and, where appropriate,
what action has been taken to address the issues raised.
the chair of the committee is the Group’s whistleblowing champion and
is responsible for ensuring and overseeing the integrity, independence,
autonomy and effectiveness of the Group’s policies and procedures on
whistleblowing including the Whistleblowing policy which is reviewed
annually.
In 2022, the committee:
• continued to oversee the Internal Audit function with the director of
•
Group Internal Audit reporting directly to the committee chair;
received an independent view of the effectiveness of the Internal control
Framework of the Group;
• oversaw the engagement of EY to work with the Internal Audit team on
on behalf of the Group Audit committee
PAUL BISHOP
chair, Group Audit committee
6 March 2023
•
•
the combined internal audit assurance work;
reviewed and approved the rolling 12 month internal audit plan ensuring
the alignment to the key risks of the business;
reviewed results from audits performed, including any unsatisfactory
audit findings and related actions plans;
reviewed open audit actions and monitored progress against them;
reviewed and approved the Internal Audit data Analytics Strategy;
•
•
• conducted an assessment of the Internal Audit function;
•
reviewed and approved the Internal Audit charter, which is available to
view on the Group’s website; and
reviewed and approved the Internal Audit calendar for 2022.
•
the committee regularly considers the resource requirements of the Internal
Audit team and oversees steps taken and any associated contingency plans
to ensure it remains adequately resourced. the committee remains satisfied
that it has the appropriate resources and the relevant skills and experience to
fulfil its role effectively.
the committee held private discussions with the director of Group Internal
Audit during the year. the committee chair also meets with the director of
Group Internal Audit regularly outside the formal committee process and is
accountable for the setting and appraisal of his objectives and performance
with input from the Group chief Executive officer. during the year, the
committee chair, in conjunction with the director of Group Internal Audit,
set key actions to continue to develop the Group Internal Audit function
regarding its effectiveness, impact and influence, and the committee
received updates on the status of these actions.
An External Quality Assessment (“EQA”) of Internal Audit is carried out every
three to five years, with the last one being undertaken at the end of 2019.
the EQA was completed by an independent firm which assessed the function
against the chartered Institute of Internal Auditors’ standards with an overall
rating of Generally conforms, which is the highest rating that can be
achieved. to provide ongoing assurance to senior management and the
committee, Group Internal Audit has developed its control framework to
undertake regular external assessments, which are supplementary to EQA.
the next EQA is scheduled to take place in 2023.
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GROUP RISK AND COMPLIANCE COMMITTEE REPORT
COMMITTEE ROLE
the Group Risk and compliance committee (the “committee”) is responsible
for assisting the Board in discharging its responsibility to maintain effective
systems of risk management, compliance and internal control throughout
the Group. the committee plays a key role in providing effective oversight
and challenge on the continued appropriateness and effectiveness of the risk
management and internal control framework and risk strategy, and of the
principal and emerging risks inherent in the business including climate risk
and conduct risk. the committee is also responsible for the oversight of
regulatory compliance matters.
the committee is responsible for considering the above matters from the
perspectives of Just Group plc (the “company”) and each of the Group’s life
companies, Just Retirement limited (“JRl”) and Partnership life Assurance
company limited (“PlAcl”), as well as from the perspective of any other
Group entity as appropriate. the committee works closely with other
committees, in particular the Group, JRl and PlAcl Audit committees, and
the JRl and PlAcl Investment committees. the cross membership between
Board committees promotes a good understanding of issues and efficient
communication.
the full responsibilities of the committee are set out in the terms of reference,
which are reviewed annually and can be found at www.justgroupplc.co.uk.
REVIEW OF THE YEAR
Six scheduled meetings and one unscheduled meeting were convened
during 2022. Four of the scheduled meetings focused on regular risk and
compliance reports and two meetings were to allow time to review a range of
risk and compliance matters and certain key risk documents. there was one
unscheduled meeting to consider risk preferences as part of the wider review
of the Group’s risk appetite framework. the chair of JRl and PlAcl, who is
not a member of the committee, was invited to attend the meetings and
contributed, at the invitation of the chair, to the challenge and debate. there
were standing invitations for the Group chief Executive officer, Group chief
Financial officer, Group chief Risk officer and director of Group Internal Audit
to attend the meetings during the year. other Group executives and senior
managers were invited to present on their areas of responsibility as required.
the committee chair regularly engages with the Group chief Risk officer
to ensure that all significant areas of risk are considered and that risk
management is embedded within the business. the effectiveness of
the committee was reviewed as part of the annual Board effectiveness
review which took place in late 2022 and the Board concluded that it was
satisfied with the committee’s performance. In addition, the committee
considers the quality of papers and effectiveness of its discussions as
a standing item at the end of each meeting and reviews the results
of a meeting effectiveness survey which is conducted biannually.
the committee follows an annual rolling forward agenda with various
standing items considered throughout the year in addition to other key focus
areas as outlined in more detail in the section below. A report from the Group
chief Risk officer is considered at each scheduled meeting. Group own Risk
and Solvency Assessment (“oRSA”) updates, compliance oversight reports
and regulatory development updates are received at least on a quarterly
basis or earlier if required. Various annual reports are considered by the
committee including the internal model validation report, annual money
laundering reporting officer’s report and an annual report from the Group
data Protection officer. the committee also approves the compliance
monitoring plan annually and any changes during the course of the year.
AREAS OF FOCUS
Key areas of focus during the year included the following matters.
I am pleased to present my report
on behalf of the Group Risk and
compliance committee which
outlines the main activities and
areas of focus during the year.
KALPANA SHAH
chair, Group Risk and compliance committee
COMMITTEE MEMBERSHIP
Kalpana Shah
chair
Paul Bishop
Independent non-Executive
director
Ian Cormack
Senior Independent director
John Hastings-Bass
chair of the Board
Mary Phibbs
Independent non-Executive
director
on 31 december 2022, Steve Melcher retired as a director and member
of the committee.
committee meeting attendance can be found on page 79.
Biographies of committee members can be found on pages 68 to 70.
92
MATTERS CONSIDERED
HOW THE COMMITTEE ADDRESSED THE MATTER
RISK MANAGEMENT, CONTROLS AND CULTURE
RISK
MANAGEMENT
AND CONTROLS
FRAMEWORK
the committee reviewed and approved the risk management plan for the year and ensured that the risk framework
continued to be developed in line with the business needs. the committee monitored the progress of various actions that had
been agreed following a review of risk management and control activities, and culture conducted in 2021 including an action
to further delineate the activities of Business operations (“1st line”) and oversight Functions (“2nd line”). the committee
now receives an annual report on the delineation of activities as well as a regular summary of risk opinions given by the
2nd line on work conducted by the 1st line requiring the attention of the Boards or Board committees.
Following a review of the controls framework in 2021, it was agreed by the committee that certain developments were
required to enhance and streamline processes. the committee received regular reports on activity to enhance the
documentation of the control environment over non-financial reporting core risks to ensure the Group’s activities continue
to evolve in line with leading practice. Separate updates on the approach to implementing the financial control reporting
framework were provided to the Group Audit committee during the year and there has been close engagement between
the chairs of both committees to ensure the approaches are aligned. In response to a request from the committee, Group
Internal Audit are reviewing the completeness and effectiveness of both the Financial Reporting and non-Financial Reporting
controls Framework as they develop and will report their findings to the committee including any concerns that require
further attention.
during the year, key risk indicators were developed in relation to Just’s risk culture following a review conducted in 2021.
the committee received the first of its new biannual reports on risk culture which includes management information on the
key risk indicators and observations from the Group Risk function. this facilitated a constructive discussion on the positive
developments and areas requiring more focus by the business in the year ahead. the committee also considered key findings
from the risk culture questions included in an annual survey to colleagues. this provided a useful insight for the committee as
to how our colleagues feel about Just’s risk culture and the survey highlighted key themes that required further attention. the
committee also reviewed findings from an in depth review of the process for risk event and breach reporting. the committee
was satisfied that, overall, there is a healthy risk culture to report risk events and breaches, and that processes are in place to
address any weaknesses identified as part of ongoing monitoring and oversight.
the oRSA is the ongoing process of identifying, measuring, monitoring, managing and reporting the risks to which the
Group is exposed and to assess the capital adequacy of the Group and its life companies. the committee considered and
recommended to the Group Board for subsequent approval, the annual oRSA report during the year, which provided a risk
review of the Group as at a specific date together with a forward-looking assessment of the key risks it faces. the committee
considered key themes which emerged from the analysis undertaken. this included understanding changes in the
macroeconomic regime and the associated impact on Just’s risk profile and business model, and capital, liquidity and human
factors that require continued focus to achieve the Group’s growth ambitions. the committee also received quarterly updates
on the Group’s evolving risk profile for review and discussion. Key areas of focus for the committee included the management
of operational and conduct risk, strategic risk and reputational risk. Further details of the Group’s principal risks can be found
in the Principal risks and uncertainties report.
Each year, the committee conducts in depth reviews of the Group’s recovery plan and run-off plan and the attendant risks.
As part of the review of the recovery plan in 2022, the committee considered whether the Group had credible and realistic
options to effect recovery in the event of a range of possible shocks, both short term and medium term, and impacting capital
and liquidity. When considering the key execution risks of the run-off Plan, the committee was supportive that the scenarios
had evolved to be more clearly aligned with the business plan and recovery plan. After consideration, the committee
recommended, and the Group Board subsequently approved, the recovery plan and run-off plan.
A comprehensive review of the risk appetite framework was undertaken in 2022 to ensure it continued to align with
developments in the Group’s strategy and business plan, risk preferences and regulatory capital model. there was extensive
engagement on the decision making framework and how to rank key risks for impact and likelihood during committee
workshops and meetings in the year. the directors considered the appropriateness of the risk appetites, against which the
business plan and strategy are assessed, and agreed on various changes which included updates to the overarching capital
risk appetite statement to better align it with the recovery plan and run-off plan. In addition, the committee agreed to change
the risk expression of “seek” to “prefer” and to change the risk preference for various lower level risks to reflect the director’s
discussions in the risk appetite workshops held during the year. the various changes were recommended by the committee
and subsequently approved by the Group Board. the committee agreed that further consideration should be given to the
interest rate risk appetite framework in early 2023 taking into consideration recent events in the macroeconomic environment
to determine whether any refinements are required.
during the year, the committee also considered options on the approach towards conduct risk management to ensure that it
continued to receive the appropriate level of focus within the wider risk management framework. It was concluded to rename
operational risk as conduct and operational risk and to update the risk definition and risk appetite statement to reflect the
addition of conduct risk as a core risk category. the recommended change was subsequently approved by the Group Board.
A proposal to convene nested meetings of the committee and the JRl and PlAcl Investment committees was considered
and approved by the respective committees during the year. the additional meetings commenced in January 2023 and will
be held biannually. the key purpose of the nested committee meetings is to review the key investment activities to ensure
they are in line with risk appetite and to oversee any proposed changes to risk frameworks that are impacted by investment
activities, and ensure they are effectively and efficiently challenged before being recommended for approval.
RISK CULTURE
ORSA
RECOVERY AND
RUN-OFF PLANS
RISK APPETITES
INVESTMENT RISK
OVERSIGHT
93
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GROUP RISK AND COMPLIANCE COMMITTEE REPORT continued
MATTERS CONSIDERED
HOW THE COMMITTEE ADDRESSED THE MATTER
OPERATIONAL RESILIENCE
OPERATIONAL
RESILIENCE
FRAMEWORK
CYBER SECURITY
SUSTAINABILITY
CLIMATE CHANGE
SOLVENCY II
INTERNAL MODEL
the committee considered a self-assessment including a scenario testing plan, which described Just’s operational resilience
at a specific date together with plans for remediation to be completed before March 2025 to meet defined regulatory
requirements for operational risk. As part of this review, the committee considered actions required to improve the business
continuity management programme, including further disaster recovery testing, and noted plans to improve resilience in 2022.
the committee received an update on work being carried out to enhance the Group’s information security strategy, including
cyber security, and steps being taken to attain an industry recognised accreditation for information security and audit. A key
focus for the year ahead is to enhance the governance and oversight of the Group’s information security strategy at Board
level. the committee met with the new chief Information Security officer which provided an opportunity to raise questions
and engage on various matters including the resilience of the current information security infrastructure, scenario testing and
cyber security developments.
during 2022, the committee continued to receive regular updates on various ongoing actions to further develop the Group’s
climate-related Financial disclosures and ensure that climate risk management is fully embedded in the Group’s governance
processes and day-to-day activities. the committee noted the progress on climate risk actions that had been made during
the year and discussed future actions and concerns in relation to their delivery. the committee considered potential
reputational risks on various matters including the governance framework. After consideration, the committee concluded
that although it was satisfied that the governance processes were appropriate, there should be a review of the governance
arrangements and reporting at Board level to determine whether there should be any enhancements to the governance and
oversight of sustainability matters including climate change. Further details can be found in the Section 172 report.
the committee received regular updates on the planned Internal Model developments in 2022 including any key risks to their
delivery. A key focus area for the committee was the review of a major model change application for submission to the PRA
for its approval. the application set out proposed changes to the credit risk module of the JRl internal model to ensure that
it continued to appropriately reflect the underlying risks to the Group and to align it with the latest regulatory expectations
and market practice. the committee recommended, and the Group Board subsequently approved, the major model change
application, which was approved by the PRA on 28 november 2022. the committee also considered a business case review
to move PlAcl from the standard formula to an internal model to align PlAcl’s capital model to the Group’s view of the
underlying risk to PlAcl. the committee assessed the options available for PlAcl and the associated risk implications, and
concluded that the move to an internal model should be a priority for the business in 2023.
COMPLIANCE, CONDUCT AND REGULATORY RISK
CONDUCT RISK
AND CONSUMER
DUTY
the committee regularly reviews and challenges management’s view of conduct risks across the Group. during the year,
the committee continued to provide oversight on the programme of work to update the conduct risk framework and related
policies to ensure that consumer outcomes are properly considered. the conduct risk dashboard presented to the committee
has evolved to include a number of new metrics and there will be further enhancements in 2023 to reflect the new consumer
duty requirements.
GROUP POLICY
FRAMEWORK
REGULATORY RISK
Following the publication of final rules and guidance on the new consumer duty by the FcA in 2022, the committee considered
the steps that need to be taken by Just to meet the new requirements, including the appointment of Michelle cracknell as
Just’s Board level consumer duty champion. Implementation plans were approved by the relevant Group entity Boards.
the committee engaged on a proposal to revise the Group Policy Framework to clearly articulate and demonstrate how
all core risks and underlying risks are identified, measured, monitored, managed and reported. the committee took into
consideration how the revised Group Policy Framework was aligned with the wider Risk Management Framework, the
governance and oversight arrangements, and the proposed approach to implementation. After consideration, the committee
recommended the proposal to the Group Board who subsequently approved it.
the committee receives regular updates on key regulatory developments relevant to the Group and the associated actions
being undertaken by management. during 2022, there continued to be a high level of regulatory activity as covered in more
detail in the Principal risks and uncertainties report.
on behalf of the Group Risk and compliance committee
KALPANA SHAH
chair, Group Risk and compliance committee
6 March 2023
94
DIRECTORS’ REMUNERATION REPORT
IFRS NET ASSETS
£2,178m
2021: £2,440m
UNDERLYING ORGANIC
CAPITAL GENERATION1
£29m
2021: £51m
UNDERLYING OPERATING
PROFIT BEFORE TAX1
£249m
2021: £238m
1 Alternate performance measure.
NEW BUSINESS PROFIT1
£233m
2021: £225m
IFRS LOSS
BEFORE TAX
£(317)m
2021: £(21)m
return on equity1
11%
2021: 8%
COMMITTEE ROLE AND MEMBERSHIP
Role
the Remuneration committee (the “committee”) determines the policy for
the remuneration, benefits, pension rights and compensation payments of
the chair, Executive directors, Senior Management and Solvency II identified
staff. the committee ensures that no director or employee is involved in
decision making on their own remuneration or is present in committee
meetings when their own remuneration is being decided.
the committee also reviews and recommends for approval by the Board
(and where required, the shareholders) the design of, and determine the
targets for, the operation of all share incentive plans, including all schemes
involving the grant of shares awards, in which Executive directors, Senior
Management and identified staff participate. For any such schemes or plans,
it determines each year whether the awards will be made, and if so, approves
the levels of participation in such schemes or plans by those individuals.
the full responsibilities of the committee are set out in the terms of reference,
which are reviewed annually and can be found at www.justgroupplc.co.uk.
STATEMENT FROM THE CHAIR OF THE REMUNERATION COMMITTEE
dear Shareholder
this year the business has faced a number of challenges as a result of an
uncertain macro economic climate, in particular the interplay between rising
interest rates to combat inflation and a fragile economy post coVId-19.
However, through strong leadership and culture, and a clear understanding
of our risks, we have delivered profitable and sustainable growth and helped
more of our customers achieve a better later life. our financial position has
never been stronger as a result of continued high delivery against stretching
objectives in 2022.
Sales in 2022 were up 17% to £3.1bn, driven by growth in dB sales which were
up 33% to £2.6bn. this was as a result of almost double the number of dB
transactions from 2021. underlying operating profit increased by 19% helped
by improved in-force returns and lower financing costs.
We achieved these financial results in an increasingly sustainable way and
reduced our market based buildings emissions by 13% (see the Sustainability
and environment section on page 33) and invested £279m of our investment
portfolio in eligible green and social assets.
Alongside the good progress being made on the financial business priorities,
the Group continued to enjoy excellent employee engagement levels as
reported in the colleagues and culture section, and positive progress on
building a diverse and inclusive workforce. In addition, we have received
well-deserved external recognition for products and service to customers
(see page 3 for details).
95
I am pleased to present the
Remuneration committee
Report for the year ended
31 december 2022.
IAN CORMACK
chair, Remuneration committee
MEMBERSHIP AND MEETINGS
Ian Cormack
chair
John Hastings-Bass
chair of the Board
Michelle Cracknell
Independent non-Executive
director
Mary Phibbs
Independent non-Executive
director
committee meeting attendance can be found on page 79.
Biographies of committee members can be found on pages 68 to 70.
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DIRECTORS’ REMUNERATION REPORT continued
We have continued to ensure Board members and colleagues have
opportunities to connect and share information throughout the year. the
sessions have covered multiple topics including the role of the Board in
guiding our organisation and our approach to reward, specifically how
executive remuneration aligns with that of our colleagues across the Group.
REMUNERATION COMMITTEE 2022
the committee is made up exclusively of Independent non-Executive
directors.
Base salaries
Salaries for Executive directors are reviewed with effect from 1 April each
year along with those of the overall employee population. As disclosed last
year, the Executive directors in post received a salary increase on 1 April 2022
of 2% for the cEo and 1.9% for the cFo, against an average increase received
by other employees (excluding promotions and joiners shortly prior to year
end) of 3.2%. due to rising living costs as a result of high inflation, a tiered
approach to the salary review was used, resulting in higher percentage
increases for those on lower salaries.
the terms of reference of the committee are available at www.justgroupplc.
co.uk/investors/shareholder-information/board-and-committee-
governance. the focus of the committee includes the remuneration strategy
and policy for the whole company as well as the Executive directors.
the key activities of the committee during the year included:
•
review and approval of the directors’ Remuneration Report and director’s
Remuneration Policy for 2023;
• approval of the grant of the 2022 awards and performance conditions
under the long term Incentive Plan (“ltIP”);
• approval of the grant of share options under the all-employee Sharesave
scheme (“SAYE”);
• assessment of the performance of the Executive directors against the
2022 corporate financial, non-financial and personal performance
outturns, in relation to their annual bonus, in the context of wider
company performance and approving the payments;
• approval of the list of colleagues with responsibilities categorised under
•
Solvency II and the treatment of their variable pay;
review and approval of bonus plans across the Group, where they are not
aligned to the Group Short term Incentive Plan (“StIP”) or the ltIP;
review and approval of the all employee remuneration policy for 2023;
review and approval of share schemes;
review of the company’s gender and ethnicity pay gap data; and
•
•
•
• monitoring the developments in the corporate governance environment
and investor expectations.
REMUNERATION IN 2022
At the company’s Annual General Meeting (“AGM”) in May 2020, a new
directors’ remuneration policy was approved with 89% of votes in favour and
an advisory vote on the directors’ Remuneration Report for the year ended
2021 was approved at the 2022 AGM with 89% of votes in favour and
continued to reflect the Group’s strategic priorities in 2022.
consistent with the approach adopted each year and as reported last year,
the committee considers the performance measures attached to the bonus
plan and to the ltIP to ensure they remain aligned with both our strategic
priorities and approach to risk mitigation. Accordingly, in 2022, the financial
measures within the scorecard for the Group StIP were changed to reflect the
focus on profitable and sustainable growth. changes were also made to the
measures in the ltIP by replacing the adjusted earnings per share (“EPS”)
measure with return on equity (“RoE”) aligned with the strategic KPIs being
used, and with the inclusion of an ESG measure. As such, the committee is
satisfied that the approach to reward continues to support the strategic
priorities of the business and aligns with company purpose and our values.
the Board approved a challenging business plan for 2022. the measures for
the StIP and ltIP were not adjusted during the year to take account of the
impact on the economic environment. despite these external challenges
david Richardson and his team have delivered a strong set of results in 2022,
demonstrated by the StIP outturn of 66.7% of maximum. this creates the
overall pool from which payments are made with individual allocations based
on personal performance.
96
In october 2022, one-off payments were made to over 65% of our uK based
colleagues to support with the cost of living. Employees with an annual base
salary of less than £50,000 received a one-off payment of £1,200 and those
with a salary of between £50,000 and £60,000 received a one-off payment of
£600. Further support in relation to salary advances and interest free loans
were also made available to employees facing financial hardship.
Pension
the Executive directors received cash payments in lieu of the company
pension of 10% of salary, aligned to the contribution available to the majority
of the wider workforce.
Short Term Incentive Plan
Page 105 details the targets and outcomes relating to 2022. For performance
in 2022 the committee approved awards for david Richardson and Andy
Parsons at 75% of maximum. these payments reflect their strong personal
performance and financial results, which in aggregate exceeded the
challenging business plan approved by the Board. no discretion was applied
to adjust the out-turn. the committee is satisfied that this level of bonus pay
out is reflective of the financial performance delivered and the significant
progress made against the company’s strategic objectives, balanced with the
significant external challenges.
no payments were made to past directors. Share options that were retained
post-termination and vested during the year to Rodney cook and Simon
thomas are disclosed later in the report
In line with the policy, 60% of the Executive directors’ StIP will be paid in cash
and 40% will be deferred into Just Group shares for three years under the
deferred Share Bonus Plan (“dSBP”).
the table below illustrates performance against the StIP performance
measures for 2022. the balanced scorecard approach determines the core
bonus opportunity through a basket of financial and strategic performance
measures, which is distributed to Executive directors against their
achievement of their personal objectives. details of key achievements are
provided on page 105.
Financial performance
measure
IFRS new
business profit
IFRS operating
profit
underlying organic
capital generation
Weighting
outturn
Achievement
40%
£233m
19.2%
Strategic performance
measure
Adjustment
20%
£336m
20.0%
customer
3.8%
40%
£29m
19.2%
People
4.6%
Aggregate Scores
corporate outturn
66.7%
Moderated outturn
66.7%
outturn
david Richardson
Andy Parsons
Award level
difference
75%
75%
+8.3%
+8.3%
Long Term Incentive Plan
In March 2022, awards under the ltIP were made to david Richardson and
Andy Parsons over shares worth 200% and 175% of base salary respectively.
these ltIP awards included underlying organic capital generation at a
weighting of 25%, total shareholder return (“tSR”) performance compared
with the constituents of the FtSE 250 at 30%, return on equity at 35% and
environmental, social and governance (“ESG”) performance for the remaining
10% of the ltIP.
the ltIP awards made in 2020 are due to vest in May 2023 with reference to
performance to 31 december 2022. the threshold tSR performance condition
was achieved at 71.5%, the adjusted EPS condition was achieved at 100%
and the capital self-sufficiency was achieved at 100%. therefore 93% of the
2020 ltIP awards will vest in May 2023.
the committee felt that outturns under the StIP and ltIP in respect of 2022
were appropriate and did not exercise discretion. In this regard, the
committee noted institutional shareholder guidelines have been updated to
ask for disclosure of the issues considered in allowing grants made in the
immediate aftermath of coVId to vest. the first lockdown started on
23 March 2020, which was the same date as the grant of the ltIP awards,
using a 5 day average price (consistent with past practice) of 52.42p. If the
Group had delayed the grant to the 5 dealing days following lockdown, it
would have been 51.60p and, therefore, not materially different.
the committee noted that:
• the price used was slightly less than 20% below the price used for the
2019 grant and was not, therefore, material within the various guidelines.
• the prior policy was to grant the cEo’s ltIP at 200% of salary and the
then new 2020 policy was a 150% grant level, which reflected the share
price at grant.
• compared with 2019 (and pre-covid) the financial performance to the
end of 2022 was at least consistent with the change in share price.
• the performance conditions had been set at an earlier meeting and were
not adjusted for coVId so continued to reflect our pre-coVId aspirations.
the performance achieved, therefore, reflects genuine out-performance
and there was no ‘windfall’ gain under the ltIP. In addition, the vesting
achieved was broadly consistent with the financial achievement
compared with the pre-coVId position.
Summary of remuneration for David Richardson in respect of 2022
variablE
deferred
55%
fixed
casH
28%
Salary
Benefits
Pension
(£’000)
609
24
61
411
274
STIP – cash
STIP – deferred
LTIP
1,088
variable
casH
17%
Summary of remuneration for Andy Parsons in respect of 2022
variablE
deferred
55%
fixed
casH
28%
variable
casH
17%
Salary
Benefits
Pension
STIP – cash
STIP – deferred
LTIP
(£’000)
423
23
42
286
190
757
97
IMPLEMENTATION OF THE REMUNERATION POLICY FOR 2023
For the reasons set out as part of the policy review, the committee considers
that the arrangements remain clear, simple, predictable, proportionate,
aligned to culture, values and purpose and mitigate risk, as required by
paragraph 40 of the corporate Governance code. this will be kept under
periodic review.
the committee agreed that both david Richardson and Andy Parsons would
receive a salary increase with effect from 1 April 2023 of 4.5%. this figure is
below those awarded to most colleagues with the salary increase budget
available for the general employee population eligible to be considered for
an increase sitting at 6%, with individual increases varying within a range,
depending on a number of factors. Similar to the approach taken in 2021, the
salary increase budget was set at different levels depending on employee
base salary. For employees on a base salary of £49,999 or less per annum, the
budget was 7%, for those with a salary of between £50,000 and £99,999 the
budget was 6% and those with a salary of over £100,000, the budget was 5%.
Having considered both external benchmark data and relative pay levels
across the company, the committee considers these increases to be
appropriate. the maximum StIP opportunity continues to be 150% of base
salary for Executive directors, subject to stretching corporate financial and
personal non-financial measures. the core bonus opportunity is determined
through a basket of financial and strategic performance measures and is
then distributed to Executive directors against their achievement of their
personal objectives.
In line with 2022, the committee anticipates making awards under the ltIP
over shares worth 200% of salary to david Richardson and 175% of salary
to Andy Parsons in 2023.
Performance will continue to be measured over a three year period.
the Policy allows the committee some discretion to make adjustments to
the performance conditions and weightings from year to year. For the ltIP
awards to be made in 2023, there have been some minor changes to the
conditions and their weightings. there will be four performance conditions
and the associated targets are disclosed on page 114. the committee has
approved the following changes:
• amending the condition from underlying organic capital generation to
organic capital generation (including management actions) and reducing
the weighting from 25% to 15% considering this condition to better reflect
our strategic priorities;
reducing the weighting for relative tSR from 30% to 25%
increasing the weighting for return on equity (“RoE”) from 35% to 45% to
reflect our increased focus on returns following the company’s return to
capital self-sufficiency; and
increasing the weighting for the ESG condition from 10% to 15% with
amended targets to include: net zero by 2025 and investment into
sustainable assets as per the 2022 measure.
•
•
•
As a result, the following performance conditions will apply to the 2023
ltIP award:
• organic capital generation 15%
• Relative tSR vs FtSE 250 (excluding investment trusts) 25%
• RoE 45%
• ESG 15%
this combination of conditions is felt to reflect the business strategy and
objectives over the next three year period.
For the 2023 StIP performance year, there have been some changes to reflect
the increasing focus of the Group on profitable growth. there will continue to
be three performance measures. the committee has approved the following:
leaving the IFRS new Business Profit measure and weighting unchanged
•
replacing IFRS operating Profit with underlying operating Profit and
•
increasing the weighting to 30%
replacing underlying organic capital Generation with new Business Strain
to ensure new business is written with low capital strain and hence low
capital consumption, ensuring continued strong internal rate of return
(“IRR”) for capital used to fund new business.
•
As a result of the above, the following performance measures will apply to
the 2023 StIP award:
•
IFRS new business profit 40%
• underlying operating profit 30%
• new business strain 30%
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
DIRECTORS’ REMUNERATION REPORT continued
these will continue to be subject to moderation by plus or minus 7.5%
of opportunity according to performance against each of the following
non-financial measures:
•
•
customer (customer experience)
People (engagement, belonging and gender diversity)
Chairman’s concluding comments
I hope you will agree that we have struck an appropriate balance between
retaining and motivating both the Executive directors and, indeed, the wider
workforce and aligning their interests with those of our shareholders and
other stakeholders.
the existing Policy was approved by shareholders at the 2020 AGM and
following three years of its use we are required to submit a new Policy for
shareholder approval at the 2023 AGM.
the 2020 Policy took account of the various developments in best practice
guidelines including the 2018 uK corporate Governance code. While the
business itself continues to evolve, the 2020 policy includes sufficient
flexibility to cater for these developments and the company adjusted the
ltIP grant levels last year and added ESG factors to the reward mix. Both of
these were permitted under the 2020 policy. While the choice of measures
will continue to evolve to reflect business priorities (including those outlined
in the previous section of this statement), no changes to the policy are
proposed for the 2023 policy.
Accordingly, no material changes to the policy are proposed.
I continue to make myself available to discuss these arrangements with key
stakeholders and welcome feedback.
I hope that you will support the resolutions at the AGM on each of the policy,
the annual report on remuneration and various resolutions renewing the
share plans which have now reached the end of their 10 year life.
DIRECTORS’ REMUNERATION POLICY
the directors’ Remuneration Policy sets out the Group’s remuneration policy
for its Executive and non-Executive directors. the Policy has been developed
taking into account the principles of the uK corporate Governance code,
guidelines from major investors and guidance from the uK regulators, the
Prudential Regulation Authority (“PRA”) and the Financial conduct Authority
(“FcA”), on best practice. the committee has regard to market data and to
internal relativities when considering the appropriateness of pay levels for its
Executive directors and members of the committee bring their own
experience and knowledge in considering any proposals.
COMPONENTS OF REMUNERATION
Executive Directors
Element
BASE
SALARY
Purpose and link to strategy
operation (including framework used to assess performance)
opportunity
Provides a competitive and
appropriate level of basic
fixed pay to help recruit
and retain directors of a
sufficiently high calibre.
Reflects an individual’s
experience, performance
and responsibilities within
the Group.
Set at a level which provides a fair reward for the role
and which is competitive amongst relevant peers.
normally reviewed annually with any changes taking
effect from 1 April.
Set taking into consideration individual and Group
performance, the responsibilities and accountabilities
of each role, the experience of each individual, his or
her marketability and the Group’s key dependencies
on the individual.
In normal circumstances, base salaries for
Executive directors will not increase by more
than the average increase for the broader
employee population.
More significant increases may be awarded
from time to time to recognise, for example,
development in role or a change in position
or responsibilities.
BENEFITS
Provides competitive,
appropriate and cost-
effective benefits.
Reference is also made to salary levels amongst
relevant insurance peers and other companies of
equivalent size and complexity.
the committee considers the impact of any basic
salary increase on the total remuneration package.
Each Executive director currently receives an annual
benefits allowance in lieu of a company car, private
medical insurance and other benefits. In addition,
each Executive director receives life assurance and
permanent health insurance.
the benefits provided may be subject to minor
amendment from time to time by the committee
within this Policy.
travel and/or relocation benefits (and any tax
thereon) may normally be paid up to a period of
12 months following the recruitment of a new
Executive director.
the benefits allowance is subject to an annual
cap of £20,000, although this may be subject
to minor amendment to reflect changes in
market rates.
the cost of the other insurance benefits
varies from year to year and there is no
prescribed maximum limit. However, the
committee monitors annually the overall cost
of the benefits provided to ensure that it
remains appropriate.
the cost of any travel and relocation benefits
will vary based on the particular circumstances
of the recruitment.
PENSION
Provides for retirement
planning, in line with the
provisions available to
the broader employee
population.
the Group operates a money purchase pension
scheme into which it contributes, having regard to
government limits on both annual amounts and
lifetime allowances.
the maximum company contribution (or cash
in lieu) is 10% of base salary. this is aligned to
the contribution available to the majority of
the workforce.
Where the annual or lifetime allowances are
exceeded, or in certain other circumstances, the
Group will pay cash in lieu of a company contribution.
this limit may change to reflect any changes
in the contributions available to the majority
of the workforce.
98
Element
Purpose and link to strategy
operation (including framework used to assess performance)
opportunity
SHORT TERM
INCENTIVE
PLAN (“STIP”)
Incentivises the execution
of annual goals by driving
and rewarding performance
against individual and
corporate targets.
compulsory deferral of a
proportion into Group
shares provides alignment
with shareholders.
LONG TERM
INCENTIVE
PLAN (“LTIP”)
Rewards the achievement
of sustained long-term
operational and strategic
performance and is
therefore aligned with the
delivery of value to
shareholders.
Facilitates share ownership
to provide further
alignment with
shareholders.
Granting of annual awards
aids retention.
SHARESAVE
(“SAYE”)
Encourages employee share
ownership and therefore
increases alignment with
shareholders.
SHARE
INCENTIVE
PLAN (“SIP”)
Encourages employee share
ownership and therefore
increases alignment with
shareholders.
the on-target bonus payable to Executive
directors is 75% of base salary, with 150%
of base salary the maximum payable.
the bonus payable at the minimum level of
performance varies from year to year and is
dependent on the degree of stretch and the
absolute level of budgeted profit.
dividends equivalents (which may assume
reinvestment of dividends) will accrue on dSBP
awards over the vesting period and be paid out
either as cash or as shares on vesting or later,
and in respect of the number of shares that
have vested.
the maximum annual opportunity is 250%
of base salary. However, in the normal course,
awards will be made to Executive directors over
shares with a face value of 200% and 175% of
base salary for the cEo and the cFo respectively.
dividends equivalents (which may assume
reinvestment of dividends) will accrue on ltIP
awards over the vesting period (and for any
portion of the holding period in respect of which
an award is left unexercised) and be paid out
either as cash or as shares on vesting or later,
in respect of the number of shares that
have vested.
the scheme is subject to the limit and rules set
by HMRc from time to time.
the scheme is subject to the limit and rules set
by HMRc from time to time.
Paid annually, any bonus under the StIP is
discretionary and subject to the achievement of
a combination of stretching corporate financial,
non-financial and personal performance measures.
the core bonus opportunity is determined through
a basket of financial performance measures, which
is then modified by the achievement of strategic
performance measures. It is then distributed to
Executive directors against achievement of their
personal objectives. While not expected in the normal
course, the committee retains the flexibility to pay
up to 20% of the maximum bonus opportunity based
on personal performance only.
40% (or such higher proportion as has been
determined by the committee) of any bonus earned
will be deferred into awards over shares under dSBP,
with awards normally vesting after a three year
period.
the committee has the discretion to adjust the
deferral percentage if required to comply with
future regulatory requirements relevant to the
insurance industry.
Malus and clawback apply to both the cash and
deferred elements of the StIP2.
Annual awards of performance shares1 normally vest
after three years subject to performance conditions
and continued service. Performance is normally
tested over a period of at least three financial years.
A post-vesting holding period is applied to Executive
directors. Executive directors are required to
retain the ltIP shares that vest (net of tax and
nIcs) for a period of two years. the two year holding
requirement will continue to apply if they leave
employment during either the vesting or holding
period.
Awards are normally subject to a combination of
conditions which may include financial and/or
strategic conditions and/or tSR relative to the
constituents of a relevant comparator index or
peer group.
the committee retains the flexibility to vary the
performance conditions and/or weightings for
future awards. However, the committee will consult
in advance with major shareholders prior to any
significant changes being made.
Malus and clawback apply to the ltIP2.
A tax-advantaged share scheme which the Executive
directors are eligible to participate as well as all of the
uK based employees.
Participants are allowed to save a maximum of £500
per month and acquire the company’s shares at a
discount of up to 20% of the market value at the date
of grant, within a six-month period following the
maturity of their savings contracts in either three or
five years.
A tax-advantaged share scheme which the Executive
directors are eligible to participate as well as all of the
uK based employees.
Free shares were awarded to the uK based employees
in 2016 and this scheme is not currently in operation.
99
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
DIRECTORS’ REMUNERATION REPORT continued
Element
Purpose and link to strategy
operation (including framework used to assess performance)
opportunity
SHAREHOLDING
GUIDELINES
Encourages Executive
directors to build a
meaningful shareholding in
the Group so as to further
align interests with
shareholders.
Each Executive director must build up and maintain
a shareholding in the Group equivalent to 200% of
base salary.
not applicable.
until the guideline is met, Executive directors are
required to retain 50% of any ltIP or dSBP awards
that vest (or are exercised), net of tax and nIcs.
For these purposes, deferred bonuses and shares
under the ltIP which have vested but are subject to a
holding period would count towards these guidelines.
the post cessation guideline is that, with the lower of
the holding on cessation or the full guideline applying
for two years. the post cessation guideline only
applies to awards granted after the last
Remuneration Policy was approved in May 2020.
Chair and Non-Executive Directors
Element
FEES
Purpose and link to strategy
operation (including framework used to assess performance)
opportunity
the company’s Articles of Association place a
limit on the aggregate fees of the non-Executive
directors of £1m per annum.
Any changes to fee levels are guided by the
general increase for the broader employee
population, but on occasions may need to
recognise, for example, changes in responsibility
and/or time commitments.
to attract and retain a
high-calibre chair and
non-Executive directors by
offering market-competitive
fee levels.
the chair is paid a single fixed fee. the non-Executive
directors are paid a basic fee, with additional fees
paid to the chairs of the main Board committees and
the Senior Independent director and other specific
roles including roles on subsidiary boards to reflect
their extra responsibilities.
In exceptional circumstances, additional fees may be
paid where the normal time commitment of the chair
or a non-Executive director is significantly exceeded
in any year.
Fees are reviewed periodically by the committee and
cEo for the chair, and by the chair and Executive
directors for the non-Executive directors.
Fees are set taking into consideration market levels
amongst relevant insurance peers and other
companies of equivalent size and complexity, the
time commitment and responsibilities of the role,
and to reflect the experience and expertise required.
the chair and the non-Executive directors are
entitled to the reimbursement of reasonable
business-related expenses (including any tax
thereon). they may also receive limited travel or
accommodation-related benefits (including any tax
thereon) in connection with their role as a director.
1 Awards may be structured as nil-cost options which will be exercisable until the tenth anniversary of the grant date.
2 the committee has the authority to apply a malus adjustment to all, or a portion of, an outstanding StIP or ltIP award in specific circumstances. the committee also has the authority to recover
(clawback) all, or a portion of, amounts already paid in specific circumstances and within a defined time frame. these provisions apply to both the cash and deferred elements of the StIP.
100
PERFORMANCE MEASURES
the performance measures applicable to the StIP and ltIP for 2023 are set
out on pages 113 and 114 respectively of this report. the measures are
considered each year to ensure they are appropriately aligned with any
evolution in the company’s strategy and priorities. the targets are set using a
number of reference points including, but not limited to, the Group’s business
plan and external market expectations of the company.
Internal appointments
In the case of an internal Executive director appointment, any variable pay
element awarded in respect of the prior role may be allowed to pay out
according to its terms and adjusted as relevant to take into account the
appointment. In addition, any other ongoing remuneration obligations
existing prior to appointment may continue, at the discretion of the
Remuneration committee.
Recruitment policy on appointment of a new Chair or
Non-Executive Director
For a new chair or non-Executive director the fee arrangement would be set
in accordance with the approved remuneration policy in force at that time.
DIRECTORS’ TERMS OF EMPLOYMENT AND LOSS OF OFFICE
Executive Director service agreements and notice periods
the Executive directors have entered into service agreements with an
indefinite term that may be terminated by either party on six months’ written
notice. contracts for new appointments will normally be terminable by either
party on a maximum of six months’ written notice. In certain circumstances
the notice period may be 12 months, reducing to six months within 18
months of appointment.
An Executive director’s service contract may be terminated summarily
without notice and without any further payment or compensation, except for
sums accrued up to the date of termination, if they are deemed to be guilty of
gross misconduct or for any other material breach of the obligations under
their employment contract.
the Group may suspend an Executive director or put them on a period of
garden leave during which they will be entitled to salary and benefits.
If the employment of an Executive director is terminated in other
circumstances, compensation is limited to base salary due for any unexpired
notice period and any amount assessed by the committee as representing
the value of other contractual benefits which would have been received
during the period. At the company’s discretion, a payment in lieu of notice
(“PIlon”) may be made. Such PIlon payments will normally be phased and
subject to mitigation. the Group may choose to continue providing some
benefits instead of paying a cash sum representing their cost.
Any statutory entitlements or sums to settle or compromise claims in
connection with a termination (including, at the discretion of the committee,
reimbursement for legal advice and provision of outplacement services)
would be paid as necessary.
Executive directors’ service contracts are available for inspection at the
Group’s registered office during normal business hours and will be available
for inspection at the AGM.
Chair and Non-Executive Director letters of appointment
All non-Executive directors have letters of appointment with the Group for
an initial period of three years, subject to annual re-election by the Group
at a general meeting. directors’ letters of appointment are available for
inspection at the registered office of the Group during normal business hours
and will be available for inspection at the AGM.
the chair’s appointment may be terminated by either party with six months’
notice. It may also be terminated at any time if he is removed as a director by
resolution at a general meeting or pursuant to the Articles, provided that in
such circumstances the Group will (except where the removal is by reason of
his misconduct) pay the chair an amount in lieu of his fees for the unexpired
portion of his notice period.
COMMITTEE DISCRETIONS
the committee operates the Group’s various incentive plans according to
their respective rules. to ensure the efficient operation and administration of
these plans, the committee retains discretion in relation to a number of
areas. consistent with market practice, these include (but are not limited to)
the following:
•
•
•
selecting the participants;
the timing of grant and/or payment;
the size of grants and/or payments (within the limits set out in the Policy
table above);
the extent of vesting based on the assessment of performance;
•
• determination of a “good leaver” and where relevant the extent of vesting
•
in the case of the share-based plans;
treatment in exceptional circumstances such as a change of control,
in which the committee would act in the best interests of the Group
and its shareholders;
• making the appropriate adjustments required in certain circumstances
(e.g. rights issues, corporate restructuring events, variation of capital
and special dividends);
• cash settling awards in exceptional circumstances; and
•
the annual review of performance measures, weightings and setting
targets for the discretionary incentive plans from year to year.
Any performance measures may be amended or substituted if one or more
events occur which cause the committee to reasonably consider that the
performance measures would not, without alteration, achieve their original
purpose. Any varied performance measure would not be materially less
difficult to satisfy in the circumstances.
REMUNERATION POLICY ON RECRUITMENT OR PROMOTION
Remuneration package on appointment
the ongoing remuneration package for a new Executive director would
be set in accordance with the terms of the Group’s shareholder-approved
remuneration policy at the time of appointment and the maximum limits
set out therein.
Salaries may be set at a below-market level initially with a view to increasing
them to the market rate, subject to individual performance and development
in the role, by making phased above-inflation increases.
Maximum opportunity under the incentive plans
currently, for an Executive director, StIP payments will not exceed 150% of
base salary and ltIP awards will not exceed 250% of base salary. this does
not include any arrangements to replace forfeited entitlements.
Where necessary, specific StIP and ltIP targets may be introduced for an
individual for the first year of appointment if it is appropriate to do so to
reflect the individual’s responsibilities and the point in the year at which
they joined the Board.
Payments beyond the remuneration policy
the committee retains flexibility to offer additional cash and/or share-based
awards on appointment to take account of remuneration or benefit
arrangements forfeited by an Executive director on leaving a previous
employer. If shares are used, such awards may be made under the terms of
the ltIP or as permitted under the listing Rules.
Such payments would take into account the nature of awards forfeited and
would reflect (as far as possible) performance conditions, attributed expected
value and the time over which they would have vested or been paid.
the committee may agree that the Group will meet certain relocation, legal,
tax equalisation and any other incidental expenses as appropriate, so as to
enable the recruitment of the best people, including those who need to
relocate. travel and/or relocation allowances may be paid for the first 12
months of an appointment, with discretion to extend to a maximum of 24
months in exceptional circumstances.
101
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
DIRECTORS’ REMUNERATION REPORT continued
the appointment of each non-Executive director may be terminated at any
time with immediate effect if he/she is removed as a director by resolution at
a general meeting, by giving one months’ notice, or pursuant to the Articles.
the non-Executive directors (other than the chair) are not entitled to receive
any compensation on termination of their appointment.
Paul Bishop
Ian cormack
Michelle cracknell
John Hastings-Bass
Mary Kerrigan
Mary Phibbs
Kalpana Shah
contract/letter of
appointment effective dates
4 April 2022
4 April 2022
1 March 2020
13 August 2020
1 February 2022
5 January 2023
1 March 2021
TREATMENT OF INCENTIVE PLANS ON LOSS OF OFFICE
In certain prescribed circumstances, such as death, ill-health, injury,
disability, redundancy, retirement with the consent of the committee,
the sale of the entity that employs him/her out of the Group, or any other
circumstances at the discretion of the committee, “good leaver” status
may be applied. In determining whether a departing Executive director
should be treated as a good leaver, the committee will take into account the
performance of the individual and the business unit/Group over the whole
period of employment and the reasons for the individual’s departure. In these
circumstances, the Executive director would still be subject to the minimum
shareholding requirements. none of the Executive directors are currently
participating in the SAYE or SIP.
Bad leaver
no awards made.
outstanding awards
may be retained or
forfeited at the
committee’s
discretion.
All awards will
normally lapse.
Incentive plan
Good leaver
STIP
DSBP
LTIP
the committee may, at its discretion,
pay a pro-rated bonus in respect of the
proportion of the financial year worked
(this may be wholly in cash and not
subject to deferral).
unvested awards will usually vest in
accordance with the normal vesting
timetable.
outstanding awards will vest at the
original vesting date to the extent that
the performance condition has been
satisfied and be reduced on a pro-rata
basis to reflect the period of time which
has elapsed between the grant date
and the date on which the participant
ceases to be employed by the Group.
the committee retains the discretion to
vest awards (and measure
performance accordingly) on cessation
and disapply time pro-rating; however,
it is envisaged that this would only be
applied in exceptional circumstances.
External Directorships
Executive directors are permitted to accept one external appointment with
the prior approval of the chair and where there is no impact on their role with
the Group. the Board will determine on a case-by-case basis whether the
Executive directors will be permitted to retain any fees arising from such
appointments, details of which will be provided in the Annual Report and
Accounts in the directors’ Remuneration Report.
Illustration of the 2023 Remuneration Policy
under the directors’ Remuneration Policy, a significant proportion of total
remuneration is linked to Group performance. the following charts illustrate
how the Executive directors’ total pay package varies under four different
performance scenarios:
• Minimum = fixed pay only (salary + benefits + pension allowance)
• on-target = fixed pay plus 50% pay out of the maximum StIP opportunity
(75% of salary) and 25% vesting under the ltIP (50% and 43.75% of salary
for the cEo and cFo respectively)
• Maximum = fixed pay plus maximum pay out of the StIP (150% of salary)
and maximum vesting under the ltIP (200% and 175% of salary for the
cEo and cFo respectively)
• Maximum + 50% growth = fixed pay plus maximum pay out of the StIP
(150% of salary), maximum vesting under the ltIP (200% and 175% of
salary for the cEo and cFo respectively) and 50% share price growth on
the ltIP
Minimum
On-target
Maximum
Maximum 50% growth
Group Chief Executive Officer
100%
48% 25% 20%
31%
21%
32%
43%
694
1,456
2,826
53%
3,435
27%
Remuneration
0
500
1,000
1,500
2,000
2,500
3,0 00
3,500
4,000
(£’000)
Fixed pay
STIP
LTIP
Group Chief Financial Officer
Minimum
On-target
100%
49% 26% 22%
Maximum
32%
34%
28%
Maximum 50% growth
19%
40%
50%
488
990
1,863
2,233
Remuneration
0
500
1,000
1,500
2,000
2,500
3,0 00
3,500
4,000
(£’000)
Fixed pay
STIP
LTIP
the treatment of outstanding awards on a takeover (or other corporate event
such as a demerger, delisting, special dividend or other event which, in the
opinion of the committee, may affect the current or future value of shares)
mirrors that set out above in relation to a good leaver (albeit with the vesting
period automatically ending on the date of the relevant event).
Alternatively, the committee may permit or, in the case of an internal
reorganisation or if the Board so determines, require both ltIP and dSBP
awards to be exchanged for equivalent awards which relate to shares in a
different company.
102
Consideration of employment conditions when setting executive pay
the committee seeks to ensure that the underlying principles, which form
the basis for decisions on Executive directors’ pay, are consistent with those
on which pay decisions for the rest of the workforce are taken. For example,
the committee takes into account the general salary increases for the
broader employee population when conducting the salary review for the
Executive directors.
However, there are some structural differences in the Executive directors’
Remuneration Policy compared to that for the broader employee base,
which the committee believes are necessary to reflect the differing levels of
seniority and responsibility. A greater weight is placed on performance-based
pay through the quantum and participation levels in incentive schemes. this
ensures the remuneration of the Executive directors is aligned with the
performance of the Group and therefore the interests of shareholders.
Colleague views
As part of the Board’s regular engagement with colleagues, Michelle
cracknell led a ‘conversation with the Board’ session for colleagues at which
Executive director remuneration and how it aligns with wider colleague pay
was discussed. this included discussion on the role of the Remuneration
committee in ensuring our incentive plans are driving appropriate behaviours
to provide the right outcomes for all stakeholders. colleagues were able to
ask questions throughout the session.
Shareholder views
the Group values and is committed to dialogue with its shareholders. the
committee will consider investor feedback and the voting results received in
relation to relevant AGM resolutions each year. In addition, the committee
will engage proactively with shareholders, and will ensure that shareholders
are consulted in advance where any material changes to the directors’
Remuneration Policy are proposed. In december 2022, we engaged with our
major shareholders and proxy voting agencies who expressed broad consent
with the Policy.
the committee is also kept well informed of the relevant guidelines and
publications of institutional investors, their representative bodies and
prominent proxy agencies, so understands developments in the views
across the wider investor community.
FACTORS CONSIDERED AS PART OF THE POLICY REVIEW
As part of the review process the committee considered a number of
different factors, including maintaining a link with the broader remuneration
framework to ensure consistency and common practice across the Group,
and in determining the overall levels of remuneration of the Executive
directors, the committee also pays due regard to pay and conditions
elsewhere in the organisation. In particular, the committee takes an active
role in approving the remuneration of senior executives, which covers eight
roles in addition to the Executive directors across the Group. the committee
also dedicates time, through a standing agenda item, to consider wider
workforce pay policies and pay structures throughout the Group and this
includes consideration of the number of incentive plans in operation, pension
provisions across the Group and the annual pay review process.
As set out in the uK corporate Governance code, the proposed Policy has
been viewed in the context of six factors:
• clarity – the proposed Policy has a clear objective; to enable the Group to
recruit, retain and motivate high-calibre individuals to deliver long-term
sustainable performance which benefits all stakeholders. the Policy itself
is in line with standard uK market practice, and represents an evolution of
the current Policy, so should be well understood by participants and
shareholders
• Simplicity – the Policy includes a standard annual bonus plan and a single
ltIP, so the incentive arrangements are considered easy to communicate.
Payments are made either in cash or via Just Group shares. no artificial or
complex structures are used to facilitate the operation of the incentive
plans. the rationale for each element of the Policy is clearly explained
in the Policy table and links to the overall company strategy
• Risk – relevant individual and plan limits prevent excessive outcomes
under the annual bonus or ltIP. Regular interaction with the Group
chief Risk officer ensures relevant risk implications are understood
when setting or assessing performance targets. comprehensive
clawback and malus provisions are in place across all incentive plans
and the committee’s ability to use its discretion to override formulaic
outcomes are considered important controls to prevent inappropriate
reward outcomes
• Predictability – the possible reward outcomes are quantified and reviewed
at the outset of the performance period. the “Illustration of 2023
Remuneration Policy”, clearly shows the potential scenarios of
performance and the resulting pay outcomes which could be expected
• Proportionality – incentives only pay out if strong performance has
been delivered by the Executive directors. the performance measures
used have a direct link to the KPIs of the business and there is a clear
separation between those used in the annual bonus and the ltIP. the
committee has the discretion to override formulaic outcomes if they are
deemed inappropriate in light of the wider performance of the company
and considering the experience of stakeholders
• Alignment to culture – incentive structures incentivise and reward
for strong performance in accordance with the company’s expected
behaviours and values; they do not reward for poor performance.
the Policy seeks to retain Executive directors to deliver long-term,
sustainable performance which benefits all stakeholders
103
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
DIRECTORS’ REMUNERATION REPORT continued
ANNUAL REPORT ON REMUNERATION
this report describes the remuneration for our Executive directors and non-Executive directors and sets out how the remuneration policy has been used and,
accordingly, the amounts paid relating to the year ended 31 december 2022.
the report has been prepared in accordance with the provisions of the companies Act 2006, the FcA’s listing Rules and the large and Medium-Sized
companies and Groups (Accounts and Reports) Regulations 2008, as amended. the report has also been prepared in line with the recommendations of the
uK corporate Governance code.
Various disclosures of the detailed information about the directors’ remuneration set out below have been audited by the Group’s independent auditor,
Pricewaterhousecoopers llP.
Total single figure of remuneration (audited)
Salary/fees
taxable Benefits
StIP
ltIP 2,3
Pension
other 4
total
total fixed
remuneration
total variable
remuneration
£’000
2022
2021
2022
20216
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
david Richardson
Andy Parsons
Paul Bishop
Ian cormack
Michelle cracknell
606
421
80
85
60
597
415
80
75
60
John Hastings-Bass 200
200
Mary Kerrigan5
Steve Melcher
Kalpana Shah1
clare Spottiswoode
69
75
80
22
–
75
50
60
30
26
27
25
685
476
–
–
1
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
716 1,088
177
498
757
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
61
42
60
42
–
– 2,470 1,577
296
604 2,018 1,584
680 1,779
897
480 1,532 1,104
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
691
486
80
85
61
80
75
60
80
85
61
80
75
60
201
200
201
200
69
75
80
22
–
75
50
60
69
75
80
22
–
75
50
60
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Kalpana Shah was appointed as a non-Executive director of the company with effect from 01 March 2021 and her remuneration for 2021 represents her fees from this date.
2 Awards made under the ltIP in the period and the respective values will be reported on vesting in the respective Annual Report on Remuneration section. the ltIP in respect of the period
1 January to 31 december 2022 includes the 2020 ltIP awards. the 2020 ltIP award was earned but did not vest during 2022. For the purposes of valuation, the 2020 ltIP has been estimated
based on a share price of £0.6850 (the average share price from 1 october to 31 december 2022). this estimate will be updated to reflect the actual valuation in next year’s report. the 2021
value has been updated to reflect the actual share price of £0.8010 at the time of vesting of david’s 2019 ltIP award, on 16 May 2022.
3 the estimate of value vesting under the 2020 ltIP shown in the 2022 column, represents vesting of 93% of maximum based on achievement of performance conditions. the share price used for
this estimate of £0.6850 (being the average share price from 1 october 2022 to 31 december 2022) represents an increase of 30.7% when measured against the share price at the time of grant
of £0.5242.
‘other’ relates to Buy-out awards negotiated as part of Andy Parsons’ joining and paid to him in 2021 and 2022. the 2021 value includes cash and shares released to him in 2021 together with
the value of his Award III, which has the same performance conditions as the 2019 ltIP and which vested on 16 May 2022 for nil consideration at a market price of £0.8045. the 2022 value
includes the 333,735 shares released to him on 31 March 2022, for nil consideration at a market price of £0.888114.
4
5. Mary Kerrigan was appointed as a non-Executive director of the company with effect from 01 February 2022 and her remuneration for 2022 represents her fees from this date.
6. the taxable benefits for 2021 have been re-stated to include various business expenses primarily relating to entertainment to conform with the treatment adopted for 2022.
2022 FIXED PAY (AUDITED)
Base salaries
david Richardson and Andy Parsons received a salary increase in 2022 of 2.0% and 1.9% respectively, increasing their salaries to £609,000 and £423,000
respectively. the salaries of the wider employee population were reviewed and increases were awarded selectively within a budget of 3.2%.
Benefits and pension
Benefits include an executive allowance for which the executives can purchase their own benefits, for example private medical cover. the company also
provides permanent health insurance, life assurance and biennial health screening benefits.
the Executive directors each received a cash payment in lieu of the company pension of 10% of salary, in line with the contribution rate offered to the majority
of the wider workforce.
Non-Executive Directors’ fees
the fees for the non-Executive directors in 2022 are as detailed in the table below. these remain unchanged from 2019 with the exception of the Board chair
fee which has reduced from £250,000 to £200,000:
£’000
Board chair
Basic fee
Additional fee for Senior Independent director
Additional fee for committee chair, Risk and Audit committees
Additional fee for committee chair, all other committees
the Board chair receives a single, all-inclusive fee for the role.
104
Fee
200
60
10
20
15
2022 EXECUTIVE DIRECTORS’ SHORT TERM INCENTIVE PLAN (AUDITED)
the 2022 bonus outturn was calculated on corporate financial performance measures, split across three measures, and moderated by non-financial
performance measures. the bonus is distributed on personal performance based on objectives agreed with the Remuneration committee each year. In line
with our policy, 40% of the 2022 StIP award will be deferred into nil cost options (dSBP), subject to continued employment and clawback/malus provisions.
david Richardson
Andy Parsons
Bonus (balanced scorecard)
75% of maximum
75% of maximum
cash StIP
(£’000)
deferred StIP
(£’000)
Estimated number
of shares deferred
under dSBP1
£411
£286
£274
£190
400,073
277,883
1 the estimated number of shares deferred under the dSBP were determined using the average closing share price between 1 october 2022 and 31 december 2022, being £0.6850. the actual
number of shares will be confirmed in the RnS at the time of grant and updated in next year’s directors’ Remuneration Report.
the performance outcome against the targets set for the 2022 StIP was as follows:
Core bonus (balanced scorecard)
IFRS new business profit
IFRS operating profit
underlying organic capital generation
total
Weighting
threshold (25%)
on-target (50%)
Maximum (100%)
Actual
% achieved
40%
20%
40%
£210m
£215m
£20m
£235m
£240m
£30m
£260m
£265m
£50m
£233m
£336m
£29m
19.2%
20%
19.2%
58.4%
the financial component of the pool is subject to adjustment of up to +/- 15% of potential based on various pre-set non-financial performance measures.
this is a change from 2021 where the non-financial performance measures could only decrease the pool by up to 15%.
As explained earlier in the report, the non-financial performance measures increased the financial outturn of 58.4% by 8.4% to achieve a final corporate
outturn of 66.7%. the bonus metrics lead to a pool setting the overall cost with individual allocations then determined by reference to personal objectives,
with individuals allocated up to 100% of their maximum. Both Executives were assessed to have outperformed against the on-target level, having each
successfully achieved an extensive range of stretching objectives set at the beginning of the year, including exceeding expectations on several of them,
with their personal outturns moderated to 75% (+8.3% compared to the formulaic pool) for both the cEo and cFo.
Risk consideration
the committee reviewed a comprehensive report from the Group chief Risk officer to ascertain that the Executive directors’ objectives had been fulfilled
within the risk appetite of the Group. In addition, the committee received feedback from the Group chief Risk officer that there were no material issues
to consider around regulatory breaches, customer outcomes or litigation that would prevent payment of any StIP award or trigger any malus provisions.
taking into account the risk assessment and the wider context in the year, including the experience of customers, employees and shareholders, the
committee was satisfied that the StIP awards should be paid.
Personal performance
Strategic personal objective
david Richardson
Enhance Just’s position in the dB market.
Increase the resilience and scalability of the business
model.
75%
Key achievements
the considerable expansion and transformation of the dB proposition has enabled Just to fully
participate in the market shift from Buy-in to Buy-out transactions. In addition, a competitive
advantage has been established at the smaller end of the market which is supporting profitable
growth.
2022 was a landmark year for the business through the achievement of £1bn invested in illiquid
assets. this achievement was delivered a year ahead of the original target. combined with the
increased scale of deferred dB business, david has built a more viable business model with less
reliance on ltMs. It will also allow the Group to target more ambitious growth for dB in the coming
years.
Strengthen the talent within the executive team to set the
business up to achieve its future ambitions.
two new hires into the executive team within 2022 has strengthened the team, signalling greater
ambition on building talent and a performance driven culture within the Group.
Maintain effective regulatory relationships.
constructive relationships maintained and reputation enhanced through strong delivery.
Strategic personal objective
Andy Parsons
75%
Key achievements
Achieve Group business plan targets (primarily measured
through StIP targets) and identify cost effective
opportunities to improve solvency and reduce risk.
deliver the finance division transformation programme to
build efficiency and effectiveness.
Andy has delivered strongly against the business plan targets, with the target for IFRS operating
profit significantly exceeded, despite the very volatile economic backdrop impacting the balance
sheet, hedging, financial dynamics and products. BAu costs were within budget despite
inflationary pressures and the capital ratio was close to 200% at the end of the year.
delivery on the finance transformation was very strong. Excellent progress was made on
implementing an overarching financial controls framework, and a new treasury system. the new
finance platform went live successfully in January 2023. the investment in this area will improve
reliability of data and strengthen financial processes and controls across the business.
Improve shareholder value through showcasing the value
and growth potential in the business, engaging with
analysts in particular to explain the transition to IFRS 17.
Very positive feedback from analysts and investors on the investments and dB seminars in Q2 and
Q4 with good progress made gaining support from analysts regarding their assessment of the
business as an investment opportunity. Encouraging initial progress has been made with a
number of potential new investors.
Maintain effective regulatory relationships.
constructive relationships maintained with regulators.
Support development of business capabilities to
strengthen and broaden dB de-risking market presence.
Business capabilities (investments, reinsurance, operations) enhanced to enable a stronger
presence in the dB de-risking market, reducing reliance on ltMs.
105
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
DIRECTORS’ REMUNERATION REPORT continued
VESTING OF LTIP AWARDS WITH A PERFORMANCE PERIOD ENDING IN 2022 (AUDITED)
2020 awards
the 2020 ltIP award performance period ended on 31 december 2022. the award is forecast to vest at 93% on 23 March 2023 based on earnings per share
growth, relative tSR performance and performance against capital self-sufficiency targets over the three year period ending 31 december 2022.
date of grant
type of award
david Richardson
23 March 2020
nil-cost options
Andy Parsons
23 March 2020
nil-cost options
number of
shares awarded
1,708,317
1,187,523
% vesting
93%
93%
dividend
equivalent due
number of shares
due to vest1
Value of shares
due to vest1
£23,831
£16,565
1,588,734
1,104,396
£1,088,282
£756,511
1 the value shown is based on the three month average share price to the year end, being £0.6850. this value will be trued up to reflect the actual share price at vesting in next year’s single total
figure table.
Summary of performance
condition
Weighting
target
Adjusted earnings per share growth1
25%
threshold: 2% p.a.
Vesting
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Relative tSR vs FtSE 250
25%
threshold: median
Maximum: 8% p.a. or above
Actual: 16.5% p.a.
100%
100%
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
capital self-sufficiency
25%
threshold: ScR of 145%
Maximum: upper quartile or above
Actual: Between median and uQ
100%
71.49%
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Maximum: ScR of 150% or above
Actual: 196%
100%
100%
capital self-sufficiency
25%
threshold: £80m organic capital generation
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Maximum: £230m organic capital generation 100%
total
–
–
Actual: £434m
100%
93%
1 Adjusted EPS is calculated as adjusted operating profit before tax divided by the weighted average number of shares in issue by the Group for the period.
consistent with past practice, the adjustment to the interest and number of shares reduced the reinsurance and bank financing costs by £8m, thereby
increasing operating profit to £345m and the number of shares to 1,007m, resulting in an adjusted EPS of 34.3 pence.
Buy-out awards
In line with the disclosure in the 2019 directors’ Remuneration Report, cash buy-out awards of £265,428 and £238,680, and share buy-out awards with a value
of £1,191,528 were granted to Andy Parsons on 20 March 2020 as three conditional share awards and the following were paid to him in 2022:
• the last tranche of award (I) and the second tranche of award (II) vested on 31 March 2022. A total of 333,735 shares were released to Andy for nil
consideration at a market price of £0.888114. 157,408 shares were sold to cover his tax liability and 176,327 shares were retained.
• the award (III) of 618,024 shares is subject to the same performance conditions applied to the 2019 ltIP grant based on EPS and tSR which were achieved
at 31.8%. consistent with past practice and the 2019 ltIP outturn, the adjustment to the interest and number of shares reduced the reinsurance and bank
financing costs by £16m, thereby increasing operating profit to £251m and the number of shares to 933m resulting in an adjusted EPS of 26.9p. 196,531
shares were therefore vested and released to Andy on 16 May 2022 for nil consideration at a market price of £0.8045. 95,161 shares were sold to cover his
tax liability and 101,370 shares were retained.
2022 LTIP AWARDS GRANTED (AUDITED)
the following awards were made to the Executive directors in 2022:
david Richardson
Andy Parsons
24 March 2022
24 March 2022
nil-cost options
£1,218,000 (200% of salary)
1,391,681
31 december 2024
nil-cost options
£740,250 (175% of salary)
845,806
31 december 2024
date of grant
type of award
Face value of award
number of shares1
End of performance period
1 the actual share price calculated as the average price over the five days preceding the grant was £0.8752.
106
Performance conditions and targets applying to the 2022 LTIP awards
condition
Weighting
target
underlying organic capital generation
25%
Below £90m
threshold: £90m
Vesting
0%
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Relative tSR vs FtSE 250
30%
Below median
Maximum: £130m
Median
100%
0%
25%
Return on equity
35%
Below 8% p.a.
threshold: 8% p.a.
upper quartile or above
100%
0%
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Between median and upper quartile
Between 25% and 100% on a straight-line basis
ESG – investment into sustainable assets over the
3 year period
10%
Below £300m
threshold £300
Maximum: 12% p.a. or above
100%
0%
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Maximum: £750m
100%
DIRECTORS’ BENEFICIAL SHAREHOLDINGS (AUDITED)
to align the interests of the Executive directors with shareholders, each Executive director must build up and maintain a shareholding in the Group equivalent
to 200% of base salary, in line with the Policy. until the guideline is met, Executive directors are required to retain 50% of any ltIP and dSBP share awards that
vest (and are exercised), net of tax and national insurance contributions (“nIcs”).
details of the directors’ interests in shares of the company are shown in the table below. Beneficially owned shares include shares owned outright by the
directors and their connected persons. For the purpose of calculating whether the shareholding guideline has been met, awards vested but not exercised and
awards unvested under the dSBP (detailed in the directors’ outstanding incentive scheme interests section following), net of tax and nIc, are included.
director
david Richardson2
Andy Parsons3
Paul Bishop
Ian cormack
Michelle cracknell
John Hastings-Bass
Mary Kerrigan4
Steve Melcher5
Mary Phibbs6
Kalpana Shah
clare Spottiswoode7
Beneficially
owned shares at
31 december 2022
1,399,276
577,629
36,754
130,000
59,000
210,200
61,715
154,439
–
–
20,000
Interest in share
awards – subject
to performance
conditions
Interest in share
awards – not
subject to
performance
conditions
4,059,702
2,700,460
1,156,649
651,970
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Interest in share
awards – vested
but unexercised
Shareholding
guideline
(% of salary)
Shareholding
guideline met1
(% of salary)
–
–
–
–
–
–
–
–
–
–
–
200%
200%
226%
149%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1 Based on the average closing price of £0.6850 between 1 october 2022 and 31 december 2022.
2 334,172 of david Richardson’s shares owned outright were financed by way of a company loan, of which £420k was outstanding as at 31 december 2022. this loan accrues interest at 4% p.a. and
will be repaid out of any sale proceeds on such shares. to the extent a shortfall remains, the company will write off the balance and settle any taxes due on a grossed-up basis.
3 Andy Parsons has not yet met the shareholding guideline of 200% with a current holding of 149%. until this is met, he retains 50% of any ltIP or dBSP awards, net of tax, and nIcs.
4 Mary Kerrigan was appointed to the Board on 1 February 2022 and her interests are shown at the date of appointment and at the date of signing the accounts.
5 Steve Melcher retired from the Board with effect from 31 december 2022. His share interest shown is as at the end of his appointment.
6 Mary Phibbs was appointed to the Board on 5 January 2023.
7 clare Spottiswoode stepped down from the Board with effect from 10 May 2022. Her share interest shown is as at the end of her appointment.
there have been no changes in the directors’ interests in shares in the company between the end of the 2022 financial year and the date of this Annual Report.
107
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
DIRECTORS’ REMUNERATION REPORT continued
DIRECTORS’ OUTSTANDING INCENTIVE SCHEME INTERESTS (AUDITED)
the below tables summarise the outstanding awards made to david Richardson and Andy Parsons. All awards under the ltIP schemes are granted under
options with performance conditions. Awards granted under the dSBP schemes are granted under options with no performance conditions.
the table below summarises the outstanding awards made to david Richardson:
Exercise
price
Interest as at
31/12/2021
Granted
in the year
dividend
shares
accumulating
at vesting
Vesting
in the year
lapsed
in the year
Exercised
in the year1
Interest as at
31/12/2022
Vesting date
Expiry date
date of grant
LTIP
24 Mar 2022
24 Mar 2021
23 Mar 2020
16 May 2019
28 Sep 2016
DSBP
24 Mar 2022
24 Mar 2021
23 Mar 2020
28 Mar 2019
–
–
–
–
–
–
–
–
–
1,391,681
24 Mar 2025
24 Mar 2032
959,704
24 Mar 2024
24 Mar 2031
1,708,317
23 Mar 2023
23 Mar 2030
220,872
473,695
220,872
3,030
–
–
16 May 2022
16 May 2029
28 Sep 2019
27 Sep 2026
nil
nil
nil
nil
nil
nil
nil
nil
nil
–
1,391,681
959,704
1,708,317
694,567
3,030
–
–
–
–
–
323,796
331,305
501,548
318,564
–
-
–
–
–
–
–
–
–
–
–
–
–
–
–
–
318,564
–
–
–
–
–
–
–
–
323,796
24 Mar 2025
24 Mar 2032
331,305
24 Mar 2024
24 Mar 2031
501,548
23 Mar 2023
23 Mar 2030
318,564
–
28 Mar 2022
28 Mar 2029
1 2016 ltIP, 2019 ltIP and dSBP were exercised on 8 december 2022 at a price of £0.7357.
the table below summarises the outstanding awards made to Andy Parsons:
Exercise
price
Interest as at
31/12/2021
Granted
in the year
dividend
shares
accumulating
at vesting
Vesting
in the year
lapsed
in the year
Released in
the year2
Interest as at
31/12/2022
Vesting date
Expiry date
nil
nil
nil
nil
nil
nil
nil
nil
–
845,806
667,131
1,187,523
–
–
–
225,084
216,757
123,606
420,258
618,024
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
123,606
210,129
196,531
–
–
–
–
–
–
–
421,493
–
–
–
–
–
845,806
667,131
24 Mar 2025
24 Mar 2032
24 Mar 2024
24 Mar 2031
1,187,523
23 Mar 2023
23 Mar 2030
225,084
216,757
24 Mar 2025
24 Mar 2032
24 Mar 2024
24 Mar 2031
123,606
210,129
196,531
nil
31 Mar 2020-22
210,129
31 Mar 2021-23
nil
16 May 2022
n/a
n/a
n/a
date of grant
LTIP
24 Mar 2022
24 Mar 2021
23 Mar 2020
DSBP
24 Mar 2022
24 Mar 2021
BUY-OUT AWARDS1
20 Mar 2020 (I)2
20 Mar 2020 (II3
20 Mar 2020 (III)4
1 As detailed in the 2019 directors’ Remuneration Report, Andy’s buy-out awards (20 March 2020 (I) and (II)) are conditional share awards with no performance conditions, whereby the company
will release the shares to Andy as soon as reasonably practicable after the vesting of the awards. Award 20 March 2020 (III) is a conditional share award with performance conditions.
2 the last tranche of the 2020 March (I) award vested on 31 March 2022 and 123,606 shares were released to Andy on such day for nil consideration at a market price of £0.888114. 58,299 shares
were sold to cover his tax liability and 65,307 shares were retained.
3 the second tranche of the 20 March 2020 (II) award vested on 31 March 2022 and 210,129 shares were released to Andy on such day for nil consideration and at a market price of £0.888114.
99,109 shares were sold to cover his tax liability and 110,020 shares were retained.
4 the 20 March 2020 (III) award is subject to the same performance conditions applied to the 2019 ltIP grant based on EPS and tSR which were achieved at 31.8%. 196,531 shares were therefore
vested and released to Andy on 16 May 2022 for nil consideration and at a market price of £0.8045. 95,161 shares were sold to cover his tax liability and 101,370 shares were retained.
Dilution
the company’s employee share plans operate within the dilution limits in the Investment Association principles of remuneration, of 10% under all share plans
and 5% under the executive share plans in any rolling ten-year period. Awards granted under the ltIP, dSBP and SAYE are satisfied by either using newly issued
shares or market purchased shares held in the employee benefit trust, however it is the intention of the company to use only market purchased shares to
satisfy future awards under ltIP and dSBP.
Should the decision be made to issue new shares to satisfy ltIP or dSBP in the future, the current dilution is 3.19% (10% in 10 years under the all shares plans)
and 1.94% (5% in 10 years under the executive share plans).
108
PAYMENTS FOR LOSS OF OFFICE (AUDITED)
no payments were made for loss of office to directors during 2022.
PAYMENTS TO PAST DIRECTORS (AUDITED)
Rodney Cook
Rodney stepped down from the Board in 2019 and the treatment of his awards granted under the ltIP and dSBP was disclosed in the 2019 annual report.
All of his awards vested prior to 2022 and he did not exercise any of those awards during 2022.
Simon Thomas
Simon stepped down from the Board in 2018 and the treatment of his awards granted under the ltIP and dSBP was disclosed in the 2018 annual report. All of
his awards vested prior to 2022. He exercised and sold all his 2016 ltIP of 6,504 shares on 1 April 2022 for nil consideration and at a market price of £0.904014.
SERVICE CONTRACTS AND LETTERS OF APPOINTMENT
Executive directors are on rolling service contracts with no fixed expiry date. the contract dates and notice periods for each Executive director are as follows:
david Richardson
Andy Parsons
date of contract
notice period by company
notice period by director
27 november 2019
1 January 2020
6 months
6 months
6 months
6 months
External appointments
Andy Parsons was appointed as a non-executive director of RSA Insurance Group limited on 1 June 2021 and retains the fees of £95,000 per annum.
STATEMENT OF VOTING AT THE ANNUAL GENERAL MEETING (UNAUDITED)
At the company’s 2022 AGM, shareholders were asked to vote on the directors’ Remuneration Report for the year ended 31 december 2021. the current
directors’ Remuneration Policy was put to shareholders at the 2020 AGM. the resolutions received significant votes in favour by shareholders and there were
no significant adverse votes in 2021 or 2022 as that term is envisaged in the corporate Governance code. the votes received were:
Resolution
Votes for
% of votes
Votes against
% of votes
Votes withheld
to approve the directors’ Remuneration Report (2022 AGM)
836,645,279
to approve the directors’ Remuneration Policy (2020 AGM)
782,674,741
98%
89%
17,059,622
92,145,984
2%
11%
76,503
70,000
EXTERNAL ASSISTANCE PROVIDED TO THE COMMITTEE
FIt Remuneration consultants (“FIt”) were approved by the committee and appointed as the independent adviser to the Remuneration committee on
24 August 2020, following a robust and competitive tender process. FIt have since been retained as the independent adviser to the Remuneration committee
and provide no additional services to the company. FIt has no other connection with the company or its directors. directors may serve on the remuneration
committee of other companies for which FIt acts as remuneration consultants. the committee regularly reviews and satisfies itself that all advice received
is objective and independent (through assessing the advice against their own experience and market knowledge), and fully addresses the issues under
consideration. FIt is a member of the Remuneration consultants Group and subscribes to its code of conduct.
Fees paid to FIt for services to the committee in 2022 were £0.1m and were charged on a time spent basis in accordance with the terms of engagement.
REMUNERATION FOR EMPLOYEES BELOW THE BOARD (UNAUDITED)
General remuneration policy
In setting Executives’ pay, the committee seeks to ensure that the underlying principles, which form the basis for decisions on Executive directors’ pay,
are consistent with those on which pay decisions for the rest of the workforce are taken. For example, the committee takes into account the general salary
increases for the broader employee population when conducting the salary review for the Executive directors. While there are distinct bonus arrangements
for certain business areas, 61% of the workforce (including the 2 Executive directors) participate in a common bonus plan (which led to an outturn of 66.7%
for 2022). Individual bonuses are then determined based on delivery against personal objectives. the Executive directors are subject to the same process as
other colleagues.
However, there are some structural differences in the Executive directors’ remuneration policy compared to that for the broader employee base, which the
committee believes are necessary to reflect the differing levels of seniority and responsibility. A greater weight is placed on performance-based pay through
the quantum and participation levels in incentive schemes. deferral is greater for Executive directors than for other regulated employees. this ensures the
remuneration of the Executive directors is aligned with the performance of the Group and therefore the interests of shareholders.
the remuneration policy for the wider Group is designed to attract, retain and motivate new and existing employees. It is in line with the sector in which
we operate and our overall total remuneration approach is to pay a market competitive level of remuneration that is structured to appropriately reward
employees, align them with the interests of our shareholders and customers, be compliant with Solvency II remunerations regulation and be relevant to
the markets/geographies in which we operate. We define total remuneration as base salary, annual incentive (StIP) and any benefits, for example pensions.
For those eligible to participate in the ltIP, this will also be included.
109
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
DIRECTORS’ REMUNERATION REPORT continued
Summary of the remuneration structure for employees below Executive Director
ELEMENT
BASE SALARY
BENEFITS
PENSION
SHORT TERM
INCENTIVE PLAN
(“STIP”)
LONG TERM INCENTIVE
PLAN (“LTIP”)
DEFERRED SHARE
BONUS PLAN (“DSBP”)
SHARESAVE (“SAYE”)
SHARE INCENTIVE
PLAN (“SIP”)
POLICY APPROACH
to attract and retain key employees we pay salaries which deliver market competitive total remuneration. We take into
account the following when determining the base salary: the size of the role and its scope, the required skills, knowledge
and experience, relevant pay in terms of the wider organisation and market comparative data. For 2022, the average
salary increase (excluding promotions and joiners shortly prior to year end) for all employees awarded in April 2022 was
3.2%. this is an average figure, with individual increases varying within a range depending on the factors above.
All employees participate in the permanent health insurance and life assurance schemes. they can choose to participate
in the private medical cover scheme and the health cash plan.
All employees are provided with the opportunity to participate in the Group defined contribution pension plan, with a
company contribution of up to 15% of salary for the executive team (excluding Executive directors) and 10% of salary
for Executive directors and all other employees. new members of the executive team are provided with a company
contribution of 10% of salary, in line with the wider workforce. Employees who have reached HMRc annual or lifetime
allowance limits can be paid a cash allowance in lieu of pension contributions.
Most of our employees participate in a discretionary bonus plan unless an alternative plan is in operation. this plan is
based on corporate performance and distributed based on personal performance based on objectives, behaviours in line
with our culture and conduct in the role. the Group also operates bonus plans for certain types of roles, for example sales,
based on objectives, behaviours in line with our culture and conduct in the role.
For regulated roles, for example in risk, audit or compliance roles, the financial performance may be replaced by
functional performance.
the Remuneration committee has the ultimate discretion on all incentive plans and these are reviewed on an annual
basis. Bonuses for all of the executive team who are not Board members and employees categorised under Solvency II
have an element of variable remuneration deferred into shares for three years.
Participation in the ltIP plan is for a small number of executives and key roles each year in recognition of the strategic
and critical roles that they hold in supporting the strategic direction of the business and delivering company performance.
In 2022, 54 individuals were granted awards under the ltIP.
the company operates a dSBP which provides the vehicle for the deferral of the StIP awards.
the company operates a SAYE which a tax-advantaged share scheme and is open to all uK based employees as well as
the Executive directors. Participants are allowed to save a maximum of £500 per month and acquire the company’s
shares at a discount of up to 20% of the market value at the date of grant, within a six-month period following the
maturity of their savings contracts in either three or five years.
the SIP is a tax-advantaged share scheme which all of the uK based employees are eligible to participate as well as the
Executive directors. Free shares were awarded to the uK based employees in 2016. this scheme is not currently in
operation but the company may choose to do so in the future.
110
TOTAL SHAREHOLDER RETURN (UNAUDITED)
Group’s share performance compared to the FTSE 250 Index
the company’s ordinary shares were admitted to trading on the premium section of the london Stock Exchange in november 2013. the following graph shows
a comparison of the Group’s total shareholder return (share price growth plus dividends paid) with that of the FtSE 250 Index (excluding investment trusts).
the Group has selected this index as it comprises companies of a comparable size and complexity across the period and provides a good indication of the
Group’s relative performance.
200
180
160
140
120
100
80
60
40
20
3
1
0
2
r
e
b
m
e
v
o
N
1
1
t
a
0
0
1
o
t
d
e
s
a
b
e
r
,
x
e
d
n
I
n
r
u
t
e
R
30/06/2014
30/06/2015
31/12/2016
31/12/2017
31/12/2018
31/12/2019
31/12/2020
31/12/2021
31/12/2022
Just Group
FTSE 250 (excluding investment trusts)
Total remuneration of the CEO during the same period (unaudited)
the total remuneration of the cEo over the last ten years is shown in the table below.
Year ended 30 June
Year ended 31 december
20192
20192
Rc
438
0%
dR
1,440
83.1%
2020
dR
1,541
85%
2021
dR
1,577
80%
2022
dR
2,470
75%
93%
chief Executive
2013
Rc
2014
Rc
2015
Rc
20161
Rc
2017
Rc
2018
Rc
total remuneration (£’000)
1,052
1,196
1,357
2,630
2,369
2,507
StIP (% of maximum)
ltIP (% of maximum)
86%
n/a
63%
n/a
89%
97.5%
95.0%
91.2%
n/a
39.5%
50.0%
50.0%
50.0%
50.0% 19.75%
31.8%
1 the year ended 31 december 2016 covered 18 months following the change of year end from 30 June. the total single figure of remuneration for the 12 month period ended 31 december 2016
was £1,870,000.
2 Rodney cook (“Rc”) stood down as cEo from 30 April 2019 and david Richardson (“dR”) assumed the role of cEo from this date (initially on an interim basis). the total single figure remuneration
for Rodney cook in 2019 represents four months to 30 April 2019 and the full vesting value of the 2017 ltIP and for david Richardson represents 8/12ths of his pay in 2019.
CEO pay ratio
this is the forth year in which Just Group has been required to publish its cEo pay ratio.
Year
2022
2021
2020
20192
Method1
option A
option A
option A
option A
25th percentile pay ratio
50th percentile pay ratio
75th percentile pay ratio
73 : 1
47 : 1
42 : 1
44 : 1
44 : 1
29 : 1
26 : 1
28 : 1
25 : 1
17 : 1
16 : 1
17 : 1
1 option A was selected as it provided a full picture of pay across the Group. the company determined the single figure remuneration for all uK employees on a FtE basis as at 31 december of the
relevant year and used this to identify the three employees who represent the 25th percentile, 50th percentile and 75th percentile by total pay. FtE remuneration was determined by reference to
pay across 260 working days per year over a 35 hour week. cases where employees were on maternity leave have been excluded as their remuneration in the year was not felt to be an accurate
reflection of their ordinary pay levels. this did not have a material impact on the ratios and so the committee is satisfied that the three individuals are reflective of the three percentiles.
2 the total pay and benefits for the role of cEo in 2019 was calculated using Rodney cook’s base salary, benefits and pension contributions for the four months to 30 April 2019 and
david Richardson’s base salary, benefits and pension contributions for the remainder of the year, full year 2019 annual bonus and 2017 ltIP award which vests based on performance to
31 december 2019.
the median pay ratio was fairly consistent between 2019 to 2021. the slight reduction between 2019 and 2020 was due to a reduction in cEo remuneration.
An increase was then seen in 2021 as a result of a reduction in management layers affecting the employee mix and reducing the average cost of total pay
for employees. the movement in the ratio between 2021 and 2022 is solely attributable to the vesting percentage of the 2020 ltIP at 93% being notably
higher than the vesting percentage of the 2019 ltIP at 31.8%. Had the 2020 ltIP vested at the same percentage as the 2019 ltIP, the ratio would have
decreased slightly.
111
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT
JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
DIRECTORS’ REMUNERATION REPORT continued
the table below shows the total pay and benefits and the salary component of this for the employees who sit at each of the three quartiles in 2022.
£’000
25th percentile
50th percentile
75th percentile
Group chief Executive
total pay and benefits
Salary component of total pay
34
56
100
2,463
25
45
72
606
the Group chief Executive officer was paid 44 times the median employee in 2022. the Remuneration committee is confident that this is consistent with the
pay, reward and progression policies for the company’s uK employees. the base salary and total remuneration for the cEo and the median representative
employee are competitively positioned within the relevant markets and reflect our remuneration structures which are effective in appropriately incentivising
and rewarding employees for both what they achieve, as well as how they do so, while having due regard to our risk appetite. Just provides competitive reward
and benefit packages to all employees ensuring pay is at or above the real living wage, while allowing for full participation in the pension arrangements.
We have a career progression framework for our operations teams providing incremental salary increases as they develop in role and gain new skills. Annual
benchmarking is conducted for all roles and corrective action taken where an individual is remunerated below the target level. our competitive pension
scheme provides for employer contributions of up to 10%. We have a comprehensive benefits package allowing employees to select benefits of value to them
and employees are invited to participate in the annual SAYE offering. the committee will continue to monitor the cEo pay ratio and gender pay gap statistics
as part of its overview of all employee pay.
Percentage annual change in remuneration of Directors and employees of Just Group plc (unaudited)
the table below shows the percentage change in salary, taxable benefits and StIP in respect of each director earned between 2020 and 2022, compared to
that for the average employee of the Group (on a per capita (FtE) basis).
the movement in the percentage change of benefits for Andy Parsons between 2020 and 2021 is due to his travel allowance being removed after his first 12
months of employment.
Average employee1
Executive directors
david Richardson
Andy Parsons
non-Executive directors
John Hastings-Bass2
Keith nicholson3
clare Spottiswoode3
Paul Bishop
Ian cormack
Steve Melcher5
Michelle cracknell
Kalpana Shah4
Percentage change between 2021 and 2022
Percentage change between 2020 and 2021
Base salary
Benefits
Annual bonus
Base salary
Benefits
Annual bonus
5.85%
1.51%
1.45%
0%
0%
0%
0%
0%
0%
0%
0%
1.06%
1.16%
1.01%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-2.80%
-4.37%
-4.44%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
2.5%
1%
0%
0%
0%
0%
0%
0%
0%
0%
n/a
2.2%
-2%
-51%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-7.4%
-6%
0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1 All permanent employees (excluding the Executive directors) of the Group in the uK who were in employment during 2020 and 2022 were selected as the most relevant comparator. this was
chosen as the listed company has no employees.
2 John Hastings-Bass joined Just Group with effect from 13 August 2020. In order to compare his remuneration year on year, his fees for 2020 have been adjusted to reflect a full year appointment
to the Board.
3 Keith nicholson retired as Senior Independent director from the Board on 31 december 2021 and clare Spottiswoode stepped down on 10 May 2022.
4 Kalpana Shah joined Just Group with effect from 1 March 2021. In order to compare her remuneration year on year, her fees for 2021 have been adjusted to reflect a full year appointment to
the Board.
5 Steve Melcher retired from the board on 31 december 2022.
Relative importance of spend on pay (unaudited)
the table below illustrates the relative importance of spend on pay compared to shareholder dividends paid.
total personnel costs (£m)
dividends paid (£m)
Year ended
31 December
2022
Year ended
31 december
2021
106.3
15.5
101.5
–
% difference
+4.7%
n/a
112
Implementation of the remuneration policy in 2023 for Executive Directors (unaudited)
BASE SALARY
• david Richardson, cEo: £636,500
• Andy Parsons, cFo: £442,000
david Richardson and Andy Parsons’ salaries increased by 4.5% from 1 April 2023, compared to 6% for the wider
workforce.
NON-EXECUTIVE
DIRECTORS FEES
£’000
Board chair
Basic fee
Additional fee for Senior Independent director
Additional fee for committee chair, Risk and Audit committees
Additional fee for committee chair, all other committees
Fee
200
60
10
20
15
BENEFITS AND
PENSIONS
SHORT TERM INCENTIVE
PLAN (“STIP”)
the Executive directors will receive a benefits allowance of £20,000 for 2023 and a company pension contribution or
cash in lieu of 10% of salary. All employees are enrolled into the company Group life Assurance and Group Income
Protection schemes.
Maximum StIP opportunity remains unchanged at 150% of salary for Executive directors. 50% of maximum will pay out
for on-target performance.
the core bonus for 2023 will be determined by a balanced scorecard of performance against financial and strategic
measures. the financial measures are:
• 40% based on IFRS new business profit measures – unchanged from 2022
• 30% based on underlying operating profit – replacing the 2022 measure of 20% based on IFRS operating profit
• 30% based on new business strain – replacing the 2022 measure of 40% based on underlying organic capital
generation.
the strategic measures, which can increase or decrease the bonus pool available (subject always to a maximum bonus
pool of 100%) are:
•
•
‘customer’ (customer experience)
‘People’ (engagement, belonging and gender diversity)
the core bonus is modified based on personal performance during the year. While not expected in the normal course,
the committee retains the flexibility to pay up to 200% of the maximum bonus opportunity based on personal
performance only.
the committee has chosen not to disclose in advance details of the StIP performance targets for the forthcoming year
as these include items which the committee considers commercially sensitive. An explanation of bonus pay outs and
performance achieved will be provided in next year’s Annual Report on remuneration.
40% of any bonus earned will be deferred for three years into awards over shares under the deferred Share Bonus Plan.
113
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
DIRECTORS’ REMUNERATION REPORT continued
LONG TERM
INCENTIVE PLAN
(“LTIP”)
Awards will be made over shares with a face value of 200% and 175% of salary in 2023 to the cEo and cFo respectively. the
awards made in 2023 will be subject to the conditions below, calculated over the three financial years to 31 december 2025,
and will be subject to a further two year post-vesting holding period.
Performance conditions and targets applying to the 2023 LTIP awards
condition
Weighting
target
organic capital generation
15%
Below £50m
threshold: £50m
Vesting
0%
25%
Between threshold and maximum
Between 25% and 100% on a
straight-line basis
Relative tSR vs FtSE 250,
excluding investment trusts
25%
Maximum: £200m
Below median
Median
100%
0%
25%
Between median and upper quartile
Between 25% and 100% on a
straight-line basis
Return on equity
45%
Below 8% p.a.
upper quartile or above
ESG – net zero by 2025 and
3 year investment into
sustainable assets
15%
threshold: 8% p.a.
Between threshold and maximum
Maximum: 12% p.a. or above
Failing to achieve net zero with 10%
offset/less than £330m invested in
sustainable assets
threshold: Achieving net zero with 10%
offset/£330m invested in sustainable
assets
Between threshold and maximum
100%
0%
25%
Between 25% and 100% on a
straight-line basis
100%
0%
25%
Between 25% and 100% on a
straight-line basis
Maximum: Achieving net zero with 8%
offset/£825m invested in sustainable
assets
100%
APPROVAL
this report was approved by the Board of directors on 6 March 2023 and signed on its behalf by:
IAN CORMACK
chair, Remuneration committee
6 March 2023
114
DIRECTORS’ REPORT
the directors present their report
for the financial year ended
31 december 2022.
Both the directors’ report and the Strategic report have been drawn up and
presented in accordance with, and in reliance upon, applicable English
company law. the liabilities of the directors in connection with those reports
shall be subject to the limitations and restrictions provided by such law.
Overseas branches
the company does not have any overseas branches within the meaning
of the companies Act 2006.
the Strategic report, the corporate Governance report and the directors’
Remuneration report include information that would otherwise be included
in the directors’ report.
Modern slavery
In compliance with section S4(1) of the Modern Slavery Act 2015, the Group
published its slavery and human trafficking statement online.
the Annual Report contains forward-looking statements, which are
not guarantees of future performance. Rather, they are based on
current views and assumptions and involve known and unknown
risks, uncertainties and other factors that may cause actual results
to differ from any future results or developments expressed in, or
implied by, the forward-looking statements. Each forward-looking
statement speaks only as of the date of that particular statement.
GOVERNANCE
Principal activities and performance
Just is a specialist uK financial services group focusing on attractive
segments of the uK retirement income market. Just Group plc (the
“company”) is a public company limited by shares and was incorporated in
England and Wales with the registered number 8568957. the company is a
holding company. details of the company’s subsidiaries are set out in note 35.
commentary on the Group’s performance in the financial year ended
31 december 2022 and likely future developments is included in the Strategic
report. our approach to stakeholder engagement, including our Section 172
statement, can also be found in the Strategic report.
Corporate governance statement
the FcA’s disclosure Guidance and transparency Rules require a corporate
governance statement in the directors’ report to include certain information.
You can find information that fulfils this requirement in this directors’ report,
the corporate Governance report, Board committee reports, and the
directors’ Remuneration report, all of which is incorporated in the directors’
report by reference.
Requirements under Listing Rule 9.8.4C
In accordance with listing Rule 9.8.4c, the table below sets out the location
of the information required to be disclosed, where applicable.
Information
Interest capitalised by the Group
Page number
not applicable
Publication of unaudited financial information
not applicable
long-term incentive schemes involving one
director only
not applicable
Waiver of emoluments by a director
not applicable
Waiver of any future emoluments by a director
not applicable
non pre-emptive issues of equity for cash
non pre-emptive issues of equity for cash in relation
to major subsidiary undertakings
not applicable
not applicable
Parent participation in a placing by a listed subsidiary not applicable
contracts of significance involving a director
not applicable
contracts of significance involving a controlling
shareholder
not applicable
Shareholder waivers of dividends
Share plans on page 117
Shareholder waivers of future dividends
Share plans on page 117
Agreements with controlling shareholders
not applicable
Articles of Association
the company may make amendments to the Articles of Association by way
of special resolution of the shareholders in accordance with the companies
Act. the company adopted new Articles of Association at its 2022 Annual
General Meeting on 10 May 2022. the latest Articles of Association can be
found on the company’s website at www.justgroupplc.co.uk/investors/
shareholder-information/board-and-committee-governance.
Business relationships
the Board is committed to foster the company’s business relationships with
suppliers, customers and other stakeholders. details on how the Board
engages with our principal suppliers and customers, as well as other
stakeholders can be found in the Relationship with stakeholders report.
GOING CONCERN AND VIABILITY STATEMENT
the directors are required to assess the prospects of the company and
the Group as a going concern over the next 12 months in accordance with
Provision 30 of the uK corporate Governance code 2018 (the “code”), and
also the longer-term viability of the Group in accordance with Provision 31
of the code.
the going concern and longer-term viability assessment includes the
consideration of the Group’s business plan approved by the Board; the
projected liquidity position of the company and the Group; on-going impacts
of economic stresses; current financing arrangements and contingent
liabilities; and a range of forecast scenarios with differing levels of new
business and associated additional capital requirements to write anticipated
levels of new business.
the Group and its regulated insurance subsidiaries are required to comply
with the requirements established by the Solvency II Framework, and to
measure and monitor its capital resources on this basis.
It is fundamental to the Group that the directors manage and monitor the
key risks the Group is exposed to, including longevity risk, property risk, credit
risk, and interest rate risk, so that it can protect policyholders and meet their
payments when due.
the resilience of the solvency capital position has been tested under a range
of adverse scenarios, which considers the possible impacts on the Group’s
business, including stresses to uK residential property prices, house price
inflation, the credit quality of assets, mortality and risk-free rates, together
with a reduction in new business levels. In addition, the results of extreme
property stress tests were considered, including a property price fall.
Furthermore, the directors note that in a scenario where the Group ceases to
write new business the going concern basis would continue to be applicable
while the Group continued to service in-force policies.
Having due regard to these matters and after making appropriate enquiries,
the directors confirm that they consider it appropriate to prepare the
financial statements on the going concern basis.
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FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
DIRECTORS’ REPORT continued
the Viability Statement as required by the code, has been undertaken for a
period of five years to align with the Group’s business planning. It is contained
within the Strategic report and can be found on page 61.
John Hastings-Bass, chair
THE BOARD
Directors
the directors who served during the year and up to the date of this report are
set out below.
•
• Paul Bishop
•
Ian cormack
• Michelle cracknell
• Mary Kerrigan
• Andrew Stephen Melcher (known as Steve Melcher) (retired on
31 december 2022)
• Andrew Parsons (known as Andy Parsons)
• Mary Phibbs (appointed on 5 January 2023)
• david Richardson
• Kalpana Shah
• clare Spottiswoode (retired on 10 May 2022)
the biographies of the directors in office as at the date of this report can be
found in the Governance section of the Annual Report. the rules governing
the appointment and retirement of directors are set out in the company’s
Articles of Association and all appointments are made in accordance with the
code. All current directors will retire and stand for election or re-election at
the 2023 Annual General Meeting (“AGM”) with the exception of Paul Bishop
and Ian cormack who have informed the Board of their intention to retire as
directors at the conclusion of the 2023 AGM on 9 May 2023.
Directors’ Powers
the Board is responsible for the management of the business of the company
and may exercise all powers of the company subject to the provisions of the
company’s Articles of Association and relevant legislation.
Directors’ insurance and indemnities
the directors and officers of the company benefit from an indemnity
provision in the company’s Articles of Association against any liability they
may incur in relation to the company’s affairs, subject to the provisions of the
companies Act 2006 as amended. Each director of the company benefits
from a deed of indemnity in respect of the costs of defending claims against
him or her and third party liabilities (the terms of which are in accordance
with the companies Act 2006 as amended). Such qualifying third party
indemnity provision remains in force at the date of this report. directors’ and
officers’ liability insurance cover was maintained throughout the year at the
company’s expense and remains in force at the date of this report.
Directors’ interests
the interests of directors and their connected persons in the ordinary shares
of the company as disclosed in accordance with the listing Rules of the
Financial conduct Authority (the “listing Rules”) are as set out in the
directors’ Remuneration report and details of the directors’ long-term
incentive awards are also set out on page 108.
Conflicts of interest
the Board has established procedures for the management of potential or
actual conflicts of interest of the directors in accordance with the companies
Act 2006 and the company’s Articles of Association. All directors are
responsible for notifying the Group company Secretary and declaring at each
Board meeting any new actual or potential conflicts of interest. the directors
are also responsible for declaring any existing conflicts of interest which are
relevant to transactions to be discussed at each Board meeting. none of the
directors had a material interest in any significant contract with the
company or with any Group undertaking during the year.
SHAREHOLDERS
Annual General Meeting
the company’s AGM in respect of the 2022 financial year will be held
at 10.00 am on tuesday 9 May 2023 at 1 Angel lane, london Ec4R 3AB.
More information about the 2023 AGM can be found in the notice of
Meeting which will be made available to shareholders separately.
Results and dividends
the financial statements set out the results of the Group for the year ended
31 december 2022 and are shown on pages 129 to 133.
the Board is recommending a final dividend for the year ended 31 december
2022 of 1.23 pence per ordinary share (2021: 1.0 pence). Subject to approval
by shareholders at the company’s 2023 AGM, the company will pay the final
dividend on 17 May 2023 to shareholders on the register of members at the
close of business on 14 April 2023.
the final dividend resolution provides that the Board may cancel the dividend
and, therefore, payment of the dividend at any time before payment, if it
considers it necessary to do so for regulatory capital purposes. You can find
detailed explanations about this in the notice of Meeting for the 2023 AGM.
SHARE CAPITAL
Ordinary share capital
As at 31 december 2022, the company had an issued share capital of
1,038,702,932 ordinary shares of 10 pence each, all fully paid up and listed
on the premium section of the london Stock Exchange. no shares are held
in treasury.
the holders of the ordinary shares are entitled to receive notice of, attend
and speak at general meetings including the AGM, to appoint proxies and
to exercise voting rights. the shares are not redeemable.
the share price on 31 december 2022 was 81.60 pence.
Further information relating to the company’s issued share capital can be
found in note 21.
Restricted Tier 1 bonds
the company has £325m of Restricted tier 1 bonds (“Bonds”) in issue. the
Bonds are convertible into equity in certain circumstances. the circumstances
in which the Bonds may convert into ordinary shares would be limited to a
“trigger event”. A trigger event may only occur if the Board determines in
consultation with the Prudential Regulation Authority that it has ceased to
comply with its capital requirements under Solvency II in a significant way.
this may occur if the amount of capital held by the Group fails to comply with
its capital requirements for a continuous period of three months or more or if
the Group fails to comply with other minimum capital requirements
applicable to it. only if a trigger event occurs would any Bonds convert into
ordinary shares. the holders of the Bonds do not have the right or option to
require conversion of the Bonds. on a change of control, the Bonds may also
be convertible into equity in an entity other than the company where the
acquiror is an approved entity (being an entity which has in issue ordinary
share capital which is listed or admitted to trading on a regulated market)
and the new conversion condition (as set out therein) is satisfied. otherwise
the Bonds may be written-down to zero.
Share capital authorities
the company’s Articles of Association specify that, subject to the
authorisation of an appropriate resolution passed at a general meeting of
the company, directors can allot relevant securities under Section 551 of
the companies Act up to the aggregate nominal amount specified by the
relevant resolution. In addition, the Articles of Association state that the
directors can seek authority from shareholders at a general meeting of the
company to allot equity securities for cash, without first being required to
116
offer such shares to existing ordinary shareholders in proportion to their
existing holdings under Section 561 of the companies Act, in connection
with a rights issue and in other circumstances up to the aggregate nominal
amount specified by the relevant resolution.
during the 12 months to 31 december 2022, 165,888 ordinary shares of 10
pence each were issued to employees in satisfaction of the exercise of share
options under the SAYE (2021: 408,488). no shares were issued to the EBt or
to employees in respect of other plans during the year.
•
•
•
the directors were granted the following authorities at the 2022 AGM held
on 10 May 2022:
•
to allot ordinary shares in the company up to a maximum aggregate
nominal amount of £69,242,103;
to allot equity securities for cash on a non pre-emptive basis up to an
aggregate nominal amount of £5,193,158 and further granted an
additional power to disapply pre-emption rights representing a further
5% only to be used in specified circumstances;
to make market purchases of up to an aggregate of 103,863,154 ordinary
shares, representing approximately 10% of the company’s issued ordinary
share capital as of 21 March 2022; and
to allot ordinary shares in the company and to grant rights to subscribe
for or to convert any security into ordinary shares in the company, on a
non pre-emptive basis, up to an aggregated nominal amount of
£50,000,000 in relation to any issue(s) by the company or any subsidiary
undertaking of the company (together the “Group”) of contingent
convertible securities.
Major shareholders
the company had been notified in accordance with dtR 5 of the disclosure
Guidance and transparency Rules of the following major interests of 3% or
more in the company’s issued ordinary share capital. the information in the
following table was correct at the date of notification.
ordinary
shareholdings at
31 dec 2022
%
of capital
ordinary
shareholdings at
6 Mar 20231
%
of capital
Shareholder
Baillie Gifford
58,515,211
Fidelity International
57,253,643
Aegon n.V.
AXA Investment
Ameriprise
51,584,569
49,615,299
48,341,471
credit Suisse Group AG
40,054,845
5.63
5.51
4.97
4.78
4.65
3.86
58,515,211
57,253,643
51,584,569
49,615,299
48,341,471
40,054,845
5.63
5.51
4.97
4.78
4.65
3.86
details of the shares issued by the company during 2022 and 2021 can be
found in note 21. no shares were purchased by the company during the year.
the directors propose to renew these above mentioned authorities at the
2023 AGM for a further year and will take into account the revised Statement
of Principles published by the Pre-Emption Group for the disapplication of
pre-emption rights.
Other securities carrying special rights
no person holds securities in the company carrying special rights with regard
to control of the company.
Restrictions on transfer of shares and voting
the company’s Articles of Association do not contain any specific restrictions
on the size of a holding or on the transfer of shares, except that certain
restrictions may from time to time be imposed by laws and regulations (for
example, by the Market Abuse Regulation (“MAR”) and insider trading law) or
pursuant to the listing Rules whereby the directors and certain employees of
the company require clearance from the company to deal in the company’s
ordinary shares. the directors are not aware of any agreements between
holders of the company’s shares that may result in restrictions on the
transfer of securities or voting rights.
no person has any special rights with regard to the control of the company’s
share capital and all issued shares are fully paid. this is a summary only and
the relevant provisions of the Articles of Association should be consulted if
further information is required.
Share plans
the Group operates a number of share-based incentive plans that provide the
company’s ordinary shares to participants at exercise of share options upon
vesting or maturity. the plans in operation include the Just Retirement Group
plc 2013 long term Incentive Plan (“ltIP”), the Just Group plc deferred Share
Bonus Plan (“dSBP”), the Just Retirement Group plc Sharesave Scheme
(“SAYE”), and the Just Retirement Group plc Share Incentive Plan. details of
these plans are set out in the directors’ Remuneration report.
the rules for the company’s ltIP, dSBP and SAYE were adopted shortly prior
to the company’s admission to the london Stock Exchange in november
2013. the ltIP and dSBP each have a ten year life expiring in november 2023.
the SAYE has a ten year life expiring in March 2024. the Board will seek
shareholder approval for the renewal of these rules for another ten years at
the 2023 AGM. details of the proposed amendments can be found in the
notice of 2023 AGM which will be made available to shareholders separately.
Awards under the ltIP, dSBP and SAYE are satisfied by using either newly
issued shares or market purchased shares held in the employee benefit trust
(“EBt”). the trustee does not register votes in respect of these shares and has
waived the right to receive any dividends.
1 Being the last practical date prior to publication of the Annual Report.
no notifications have been received from the year end to 6 March 2023.
EMPLOYEES
Equal opportunities employment
Just Group plc is an equal opportunities employer and has policies in place
to ensure decisions on recruitment, development, promotions and other
employment-related issues are made solely on the grounds of individual
ability, achievement, expertise and conduct. these principles are operated on
a non-discriminatory basis, without regard to race, nationality, culture, ethnic
origin, religion, belief, gender, sexual orientation, age, disability or any other
reason not related to job performance or prohibited by applicable law.
We are a disability confident committed employer and our recruitment
process ensures we give full and fair consideration to applications made by
disabled persons and any reasonable adjustments are made as required
during the recruitment process to ensure disabled persons have the same
opportunity to demonstrate their skills as all other applicants. If an employee
were to become disabled during their employment with the Group, support
for continued employment would be provided and workplace adjustments
made as appropriate in respect of their duties and working environment.
Employee engagement and communication
2022 was a year in which our colleagues once again rose to the challenge,
providing support and certainty to our customers when needing it most.
A key business priority is that all of our colleagues feel proud to work at Just.
the combination of our strong purpose and having highly engaged teams
working the ‘Just Way’, is a competitive advantage which will help drive high
performance and our growth strategy.
We continue to have a well-defined communication and engagement
programme in place so that all colleagues understand our organisation’s
strategy and goals and the role they play in achieving them. this includes
quarterly town hall business updates, regular emails to all colleagues, videos
and news items on our intranet.
We consistently monitor the engagement of our colleagues and their views
on matters that are important to them. during the year we introduced a new
tool called Peakon for formal surveying, and we combine these insights with
informal approaches, such as gathering feedback via word of mouth.
In light of the challenging external environment, we have increased our focus
on the financial wellbeing of colleagues, and put in place specific financial
support for over 65% of uK based colleagues with a one-off cost of living
payment. this focused our support on those individuals who were likely to
be most negatively impacted financially by inflation over the past year, to
help ease the challenges they faced over the winter period. We have also
made interest free loans and salary advances available to those requiring
additional support.
117
FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
DIRECTORS’ REPORT continued
Performance-based pay rewards colleagues for the achievement of strategic
business objectives and upholding our cultural, conduct and behavioural
expectations. In addition, alignment with shareholder interest is provided
through the use of employee share plans for all employees.
Further information regarding colleague engagement and how the directors
have engaged with colleagues, including the impact on decision making, is
included in the Strategic report.
EMPLOYEE DIVERSITY
We have increased gender diversity at senior levels (global grade 14+,
which includes approximately 12% of the most senior employees) by three
percentage points from 27% to 30%. We are on track to achieve the “33 by
23” target in line with our pledge as a signatory to the Women in Finance
charter that 33% of our senior leaders will be female by the end of 2023.
of 123 senior managers, 45 directly report to members of the Group
Executive committee and of these, 14 (31%) are female and 4 (9%) are
from a Black, Asian and minority ethnic background.
Board and Executive Management diversity
the tables below set out the Group’s data on the gender identity or sex and
ethnic diversity of the Board and Executive Management as at 31 december
2022 (the reference date) in accordance with the listing Rules requirements.
Further details on the Board’s progress to meet the new Board diversity
targets can be found in the nomination and Governance committee report.
Gender identity or sex
number in
executive
management
% of
executive
management
7
2
0
78
22
0
number
of Board
Members
%
of the
Board
6
3
0
67
33
0
number
of Board
Members
%
of the
Board
number
of senior
positions
on the
Board1
4
0
0
number
of senior
positions
on the
Board1
AUDITOR
Disclosure of information to the auditor
Each director of the company at the date of approval of this directors’ report
has confirmed that, so far as he or she is aware, there is no relevant audit
information of which the company’s external auditor is unaware. Each
director has taken all the steps that he or she ought to have taken as a
director in order to make himself or herself aware of any relevant audit
information and to establish that the company’s external auditor is aware
of that information. this confirmation is given and should be interpreted in
accordance with the provisions of Section 418 of the companies Act 2006.
Auditor appointment
Pwc has expressed its willingness to continue in office as the external auditor.
A resolution to reappoint Pwc will be proposed at the forthcoming AGM. An
assessment of the effectiveness and recommendation for reappointing Pwc
can be found in the Group Audit committee report.
ENVIRONMENT AND EMISSIONS
In accordance with lR 9.8.6R, climate-related financial disclosures consistent
with the task Force on climate-related Financial disclosures (“tcFd”)
recommendations and recommended disclosures are contained in the
Strategic report on pages 36 to 43. Information on the Group’s greenhouse
gas emissions is set out in the Sustainability and the environment report.
OTHER DISCLOSURES
Change of control provisions
there are various agreements that take effect, alter or terminate upon a
change of control of the company, such as commercial contracts, bank loan
agreements, property lease arrangements and employee share plans. In the
context of the Group as a whole, none of these are deemed to be significant
in terms of their potential impact. All the reinsurance treaties previously
disclosed, which could have been terminated by the company on a change
of control, have been recaptured.
Financial instruments
derivatives are used to manage the Group’s capital position which entails a
surplus of long dated fixed interest assets when liabilities are measured on
a realistic basis. details of these derivatives are contained in note 28 to the
financial statements. disclosure with respect to financial risk is included in
the Strategic report and in note 33 to the financial statements.
number in
executive
management
% of
executive
management
Political donations
no political donations were made, or political expenditure incurred, by the
company and its subsidiaries during the year (2021: nil).
POST BALANCE SHEET EVENTS
details of post-balance sheet events are set out in note 38 to the financial
statements.
the directors’ report has been approved by the Board and is signed on its
behalf by:
8
0
1
0
0
89
0
11
0
0
4
0
0
0
0
8
0
1
0
0
89
0
11
0
0
Male
Female
not specified/
prefer not to say
Ethnic background
White British or
other White
(including minority
white groups)
Mixed/multiple
ethnic groups
Asian/Asian British
Black/African/
caribbean/Black
British
not specified/
prefer not to say
1 Senior positions on the Board, as defined by the listing Rules, comprise the chair, Senior
Independent director, Group chief Executive officer and Group chief Financial officer.
Further information on colleagues, culture and diversity can be found in the
culture and colleagues report.
SIMON WATSON
Group company Secretary
6 March 2023
118
DIRECTORS’ RESPONSIBILITIES
the directors are responsible for preparing the Annual Report and financial
statements in accordance with applicable law and regulations.
company law requires the directors to prepare Group and Parent company
financial statements for each financial year. under that law they have
elected to prepare both the Group and Parent company financial statements
in accordance with uK-adopted International Accounting Standards.
under company law the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Parent company and of their profit or loss for that
period. In preparing each of the Group and Parent company financial
statements, the directors are required to:
•
• make judgements and estimates that are reasonable, relevant and
select suitable accounting policies and then apply them consistently;
•
reliable;
state whether they have been prepared in accordance with applicable
uK-adopted International Accounting Standards;
• assess the Group and Parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern; and
• use the going concern basis of accounting unless they either intend to
liquidate the Group or the Parent company or to cease operations, or have
no realistic alternative but to do so.
the directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the Parent company’s transactions and
disclose with reasonable accuracy at any time the financial position of the
Parent company, and enable them to ensure that its financial statements
comply with the companies Act 2006. they are responsible for such internal
control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud
or error, and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
DIRECTORS’ RESPONSIBILITY STATEMENT
We confirm to the best of our knowledge that:
•
the financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and comprehensive income of the company
and the undertakings included in the consolidation taken as a whole;
the Strategic report includes a fair review of the development and
performance of the business and the position of the company and the
undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they face;
and
the Annual Report and Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders
to assess the company’s position and performance business model
and strategy.
•
•
the Strategic report contains certain forward-looking statements providing
additional information to shareholders to assess the potential for the
company’s strategies to succeed. Such statements are made by the directors
in good faith, based on the statements available to them up to the date of
their approval of this report, and should be treated with caution due to the
inherent uncertainties underlying forward-looking information.
neither the company nor the directors accept any liability to any person in
relation to the Annual Report and Accounts except to the extent that such
liability could arise under English law. Accordingly, any liability to a person
who has demonstrated reliance on any untrue or misleading statement or
omission shall be determined in accordance with Section 90A and Schedule
10A of the Financial Services and Markets Act 2000.
By order of the Board
under applicable law and regulations, the directors are also responsible
for preparing a Strategic report, directors’ report, directors’ Remuneration
report and corporate Governance statement that complies with that law
and those regulations.
DAVID RICHARDSON
Group chief Executive officer
the directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company’s website.
legislation in the uK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
ANDY PARSONS
Group chief Financial officer
6 March 2023
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FINANCIAL STATEMENTSGovernanceSTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
INDEPENDENT AUDITORS’ REPORT
to the members of Just Group plc
Report on the audit of the financial statements
OPINION
In our opinion, Just Group plc’s Group financial statements and company
financial statements (the “financial statements”):
• give a true and fair view of the state of the Group’s and of the company’s
affairs as at 31 december 2022 and of the Group’s loss and the Group’s
and company’s cash flows for the year then ended;
• have been properly prepared in accordance with uK-adopted
international accounting standards as applied in accordance with the
provisions of the companies Act 2006; and
• have been prepared in accordance with the requirements of the
companies Act 2006.
We have audited the financial statements, included within the Annual Report
and Accounts (the “Annual Report”), which comprise:
•
the consolidated statement of financial position and Statement of
financial position of the company as at 31 december 2022;
the consolidated statement of comprehensive income for the year then
ended;
the consolidated statement of changes in equity and the Statement of
changes in equity of the company for the year then ended;
the consolidated statement of cash flows and the Statement of cash
flows of the company for the year then ended; and
the notes to the financial statements, which include a description of the
significant accounting policies.
•
•
•
•
our opinion is consistent with our reporting to the Group Audit committee.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on
Auditing (uK) (“ISAs (uK)”) and applicable law. our responsibilities under ISAs
(uK) are further described in the Auditors’ responsibilities for the audit of the
financial statements section of our report. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We remained independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the
uK, which includes the FRc’s Ethical Standard, as applicable to listed public
interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
to the best of our knowledge and belief, we declare that non-audit services
prohibited by the FRc’s Ethical Standard were not provided.
other than those disclosed in note 4, we have provided no non-audit services
to the company or its controlled undertakings in the period under audit.
OUR AUDIT APPROACH
Context
the Group is predominantly based in the united Kingdom and writes business
across four main product lines, being defined Benefit risk transfers, Individual
Annuities, lifetime Mortgages and long-term care Plans. the Group has two
regulated insurance companies, Just Retirement limited and Partnership life
Assurance company limited, in addition to other financial services
companies. In planning our audit, we met with the Audit committee and
members of management across the Group to discuss and understand
business developments during the year, and to understand their perspectives
on associated business risks. We used this insight and our knowledge of the
Group and our industry experience when forming our own views regarding
the audit risks and as part of developing our planned audit approach to
address those risks. Given the activities of the Group, we have built a team
with the relevant industry experience and technical expertise.
Overview
Audit scope
• our audit scope has been determined to provide coverage of all material
financial statement line items.
• three reporting components were subject to full scope audits and we
performed a limited scope audit covering specific financial statement line
items for a further four components.
Key audit matters
• Valuation of insurance contract liabilities (Group)
• Valuation of insurance contract liabilities - Annuitant mortality
assumptions (Group)
• Valuation of insurance contract liabilities - credit default assumptions
(Group)
• Valuation of insurance contract liabilities - Expense assumptions (Group)
• Valuation of investments classified as level 3 under IFRS 13, including
lifetime Mortgages (Group)
• Recoverability of the company’s investments in Group undertakings
(company)
• disclosure of the expected impact of initial application of IFRS 17
‘Insurance contracts’ in accordance with IAS 8 (Group)
Materiality
• overall Group materiality: £21,778,000 (2021: £24,400,000) based on 1%
of total equity.
• overall company materiality: £12,852,000 (2021: £12,574,000) based on
1% of total equity.
• Performance materiality: £16,333,500 (2021: £18,300,000) (Group) and
£9,639,000 (2021: £9,430,000) (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the
risks of material misstatement in the financial statements.
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Key audit matters
Key audit matters are those matters that, in the auditors’ professional
judgement, were of most significance in the audit of the financial statements
of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by the
auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of
the engagement team. these matters, and any comments we make on the
results of our procedures thereon, were addressed in the context of our audit
of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
this is not a complete list of all risks identified by our audit.
disclosure of the expected impact of initial application of IFRS 17 ‘Insurance
contracts’ in accordance with IAS 8 is a new key audit matter this year.
otherwise, the key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Valuation of insurance contract liabilities (Group)
Refer to Group Audit committee Report, Accounting policy 1.21 Insurance liabilities and note 23 Insurance contracts and related reinsurance.
the inherent uncertainty involved in setting the assumptions used to
determine the insurance liabilities represents a significant area of
management judgement for which small changes in assumptions can result
in material impacts to the valuation of these liabilities. As part of our
consideration of the entire set of assumptions, we focused particularly on
longevity assumptions, credit default risk assumptions and expense
assumptions as these are considered the most significant and judgemental.
the work to address the valuation of the insurance contract liabilities
included the following procedures:
• understood the process and tested controls in place over the
determination of the insurance contract liabilities, including those
relating to model inputs, model operation and extraction and
consolidation of results from the actuarial model;
• tested the design and, where applicable, the operating effectiveness of
controls related to the completeness and accuracy of policyholder data
used in the valuation of insurance contract liabilities;
• For a sample, agreed policyholder data used in the actuarial model to
source documentation;
• using our actuarial specialist team members, we applied our industry
knowledge and experience to assess the appropriateness of the
methodology, model and assumptions used against recognised actuarial
practices;
• Performed testing over the actuarial model calculations. We have placed
reliance on model baselining carried out as part of our first year audit (in
2020), whereby we independently replicated the liability cash flows for a
sample of policies in order to validate that the model calculations were
operating as intended. In 2022 we performed model baselining for the
deferred annuities model, given the increase in size of business this year,
using the same sample-based approach. In addition to this, we
performed procedures over changes in the model and examined the
analysis of change in modelled results, to assess whether the model
continues to operate as expected;
• tested the derivation of the valuation rates of interest used to discount
the insurance contract liabilities;
• used the results of an independent Pwc annual benchmarking survey
of assumptions to further challenge the assumption setting process
by comparing certain assumptions used relative to the Group’s
industry peers; and
• Assessed the disclosures in the financial statements.
Further testing was also conducted on the annuitant mortality,
credit default and expense assumptions as set out below.
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INDEPENDENT AUDITORS’ REPORT continued
Key audit matter
How our audit addressed the key audit matter
Valuation of insurance contract liabilities – Annuitant mortality assumptions (Group)
Refer to Group Audit committee Report, Accounting policy 1.21 Insurance liabilities and note 23 Insurance contracts and related reinsurance.
Annuitant mortality assumptions are an area of significant management
judgement due to the inherent uncertainty involved in setting them. Whilst
the Group manages the extent of its exposure to annuitant mortality risk
through reinsurance, we consider these assumptions underpinning gross
insurance contract liabilities to be a key audit matter given the Group’s
exposure to annuities.
the annuitant mortality assumptions have two main components as set out
below and a margin for prudence is then applied to these components.
Base mortality assumptions
this component of the assumption is mainly driven by internal experience
analyses. It requires expert judgement, in determining the most appropriate
granularity at which to carry out the analysis; the period used for historic
experience (considering coVId-19 in recent periods); whether data should be
excluded from the analysis; and in selecting an appropriate industry
mortality table to which management overlays the results of the experience
analysis.
Rate of future mortality improvements
this component of the assumption is more subjective given the lack of data
and the uncertainty over how life expectancy will change in the future. the
allowance for future mortality improvements is inherently subjective, as
improvements develop over long timescales and cannot be captured by
analysis of internal experience data, with additional uncertainty around the
longer term impact of coVId-19 on future mortality rates. the continuous
Mortality Investigation Bureau (“cMIB”) provides mortality projection
models which are widely used throughout the industry and contain a
standard core set of assumptions calculated by the cMIB based on the most
recent available population data.
We performed the following audit procedures to test the annuitant mortality
assumptions (including base mortality assumptions, rate of future mortality
improvements and margin for prudence):
• Assessed the appropriateness of the methodology used to perform the
annual experience studies. this involved the assessment of key
judgements with reference to relevant rules, actuarial guidance and by
applying our industry knowledge and experience;
• tested the controls in place over the performance of annuitant mortality
experience analysis studies, approval of the proposed assumptions and
implementation within the actuarial model;
• Assessed the appropriateness of areas of expert judgments used in the
development of the mortality improvement assumptions, including the
assessment of coVId-19 adjustments applied to future mortality rates as
well as the selection and parameterisation of the cMI model such as the
choice of the smoothing parameter, initial rate, long term rate and
tapering at older ages;
• Assessed the appropriateness of the margin for prudence and its
consistency over time;
• compared the annuitant mortality assumptions selected by
management against those used by peers using our independent annual
benchmarking survey of assumptions (to the extent available);
• Assessed the disclosure of the annuitant mortality assumptions and the
commentary to support the impact, if any, from changes in these
assumptions over the period.
Based on the work performed and the evidence obtained, we consider the
assumptions used for annuitant mortality to be appropriate.
Valuation of insurance contract liabilities – Credit default assumptions (Group)
Refer to Group Audit committee Report, Accounting policy 1.21 Insurance liabilities and note 23 Insurance contracts and related reinsurance.
the credit default assumptions are applied as a deduction to the valuation
rate of interest and therefore have a significant impact on the valuation of
the insurance contract liabilities. the appropriate deduction is subjective and
requires expert judgement. the Group’s investment portfolio primarily
consists of corporate bonds and a material amount of illiquid assets,
including lifetime Mortgages, where there is greater uncertainty.
We performed the following audit procedures to test the credit default
assumptions:
• Assessed the methodologies used to derive the assumptions (including
margin for prudence) with reference to relevant rules and actuarial
guidance and by applying our industry knowledge and experience;
• Assessed significant assumptions used by management against market
For corporate bonds, the assumption is based upon historical observed
default rates with an additional allowance when current observed spreads
are in excess of an assumed long-term level. For lifetime Mortgages, the
assumption is set with reference to the no negative Equity Guarantee
(“nnEG”) and for other illiquid assets, the assumption is set as an
adjustment to the equivalent corporate bond assumption. In addition, a
margin for prudence is applied to the credit default assumptions.
observable data (to the extent available and relevant) and our
experience of market practises;
• tested the controls in place over the application of credit default
assumptions within the valuation interest rate calculation; approval of
the proposed assumptions and implementation within the actuarial
model;
• compared the assumptions selected against those adopted by peers
using our independent annual survey of assumptions (to the extent
available);
• Assessed the appropriateness of the margin for prudence for each asset
class individually and in aggregate and its consistency over time; and
• Assessed the disclosure of the credit default risk assumptions and the
commentary to support the impact, if any, from changes in these
assumptions over the period.
Based on the work performed and the evidence obtained, we consider the
assumptions used for credit default risk to be appropriate.
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Key audit matter
How our audit addressed the key audit matter
Valuation of insurance contract liabilities - Expense assumptions (Group)
Refer to Group Audit committee Report, Accounting policy 1.21 Insurance liabilities and note 23 Insurance contracts and related reinsurance.
Future maintenance expenses and expense inflation assumptions are used
in the measurement of the insurance contract liabilities. the assumptions
reflect the expected future expenses that will be required to maintain the
in-force policies at the balance sheet date, including an allowance for
unavoidable project costs and a margin for prudence. the assumptions used
require judgement, particularly with respect to the allocation of expenses to
future maintenance.
We performed the following audit procedures to test the expense
assumptions:
• tested the design and, where applicable, the operating effectiveness of
controls related to the expense assumption setting process; Assessed
the methodology used by management to derive the assumptions with
reference to relevant rules and actuarial guidance and by applying our
industry knowledge and experience;
• tested the completeness and accuracy of the total cost base and
allocation of expenses to the appropriate cost centre;
• Assessed the appropriateness of significant judgements in application of
the methodology, including excluded costs (for example, due to costs
either not relating to the insurance business or being non-recurring in
nature), the allocation of expenses between acquisition and
maintenance costs and the allocation of costs to products;
• Assessed the methodology used by management to derive the
assumptions with reference to relevant rules and actuarial guidance and
by applying our industry knowledge and experience;
• Assessed the appropriateness of significant judgements in application of
the methodology, including excluded costs (for example, due to costs
either not relating to the insurance business or being non-recurring in
nature), the allocation of expenses between acquisition and
maintenance costs and the allocation of costs to products;
• Assessed the appropriateness of the rate at which expenses are
assumed to inflate in the future, taking into account current and future
market expectations of both price and earnings inflation;
• Assessed the appropriateness of the margin for prudence and its
consistency over time;
• tested the policy counts used in the derivation of per policy expense
assumptions and considered whether any adjustments are required to
reflect changes in future expected policy volumes, for example, to allow
for diseconomies of scale; and
• Assessed the disclosure of the maintenance assumptions and the
commentary to support the impact, if any, from changes in these
assumptions over 2022.
Based on the work performed and the evidence obtained, we consider the
expense assumptions to be appropriate.
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financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
INDEPENDENT AUDITORS’ REPORT continued
Key audit matter
How our audit addressed the key audit matter
Valuation of investments classified as Level 3 under IFRS 13, including Lifetime Mortgages (Group)
Refer to Group Audit committee Report, Accounting policy 1.17 Financial investments and note 17 Financial assets and liabilities measured at fair value.
the valuation of investments classified as level 3 is typically calculated
using a discounted cash flow model with significant unobservable inputs.
this is inherently complex and requires expert judgement. Furthermore, the
balances are material to the financial statements. this comprises
investments in certain illiquid debt instruments, commercial mortgages and
lifetime Mortgages.
We performed the following audit procedures to test the valuation of the
investments classified as level 3 (excluding lifetime Mortgages):
• tested the design and, where applicable, the operating effectiveness of
controls related to the valuation of investments; and
• obtained independent confirmations from third party asset managers
(where relevant).
For lifetime Mortgages, an internal model which projects the future cash
flows expected to arise is used to value each mortgage. this is based on a
current valuation of the underlying property. the future cash flows allow for
expected future expenses, mortality and voluntary redemption experience
and any potential repayment shortfalls due to the existence of the nnEG. A
key judgement in the assessment of the nnEG is the best estimate future
house price growth assumption. the illiquidity premium used within the
discount rate is set at outset for each mortgage to ensure there is no day 1
gain and it is unchanged thereon unless there are further advances.
For a sample of investments, we performed the following procedures:
• Engaged our valuation experts to assess the reasonableness and
appropriateness of the valuation methodology applied;
• Performed an independent revaluation and investigated any variances
outside of our tolerable threshold; and
• tested inputs into the valuation to external sources, where possible.
For lifetime Mortgages, we performed the following audit procedures:
• understood the process and tested controls in place over the
determination of the valuation, including those relating to model inputs,
model operation and extraction and consolidation of results from the
valuation model;
• tested the design and, where applicable, the operating effectiveness of
controls related to the accuracy and completeness of data used in the
modelling of lifetime Mortgages;
• For a sample of mortgages, agreed data used in the modelling of
lifetime Mortgages to policyholder documentation;
• Assessed the appropriateness of current property prices by obtaining
evidence to support the latest property value used (based on valuations
by Hometrack AVM or property surveyors) and recalculating the
application of the nationwide indices to property data;
• using our actuarial specialists, applied our industry knowledge and
experience to assess the appropriateness of the methodology, model
and assumptions used to measure the nnEG component against
recognised actuarial practices;
• Evaluated the appropriateness of significant economic assumptions,
including the property price inflation assumption and property price
volatility assumptions used within the valuation process, with reference
to market data and industry benchmarks where available;
• Evaluated the Group’s historic redemptions data used to prepare the
Group’s mortality, morbidity and voluntary redemptions experience
analysis, together with industry data on expectations of future mortality
improvements and assessed whether this supports the assumptions
adopted;
• Performed testing over the actuarial model calculations. We have placed
reliance on our model baselining carried out as part of our first year audit
(in 2020), whereby we independently replicated the asset cash flows for a
sample of loans in order to validate that the model calculations were
operating as intended. In 2022 we performed additional procedures over
changes in the model and tested the analysis of change in modelled
results, to assess whether the model continued to operate as expected;
• Assessed the valuation implications (if any) from the Group’s recent
portfolio sales; and
• used the results of our independent annual benchmarking survey of
assumptions to further challenge the assumptions and modelling
approach adopted, relative to the Group’s industry peers.
We have also considered the adequacy of the Group’s disclosures in relation
to the valuation of those assets designated level 3, in particular the
sensitivity of the valuations adopted to alternative assumptions.
Based on the work performed and the evidence obtained, we consider the
valuation of level 3 assets to be appropriate.
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Key audit matter
How our audit addressed the key audit matter
Recoverability of the Company’s investments in Group undertakings (Company)
Refer to Group Audit committee Report, company accounting policy 1.4 Investments in Group undertakings and note 2 to the company’s financial
statements – Investments in Group undertakings.
the carrying amount of the company’s investments in subsidiaries is
significant and in excess of the market capitalisation of the Group. this gives
rise to an indicator of impairment. the estimated recoverable amount of
these balances is subjective due to the inherent uncertainty in forecasting
trading conditions and discounting future cash flows.
the effect of these matters is that, as part of our risk assessment, we
determined that the recoverable amount of investment in subsidiaries has a
high degree of estimation uncertainty, with a potential range of reasonable
outcomes greater than our materiality for the financial statements as a
whole.
Management calculated a Viu which exceeds the carrying amount of the
investment at year end, indicating no impairment is required. We performed
the following audit procedures related to the recoverability of the company’s
investments in Group undertakings:
• Assessed the reasonableness and appropriateness of the assumptions
used in the cash flows based on our knowledge of the Group and the
markets in which the subsidiaries operate;
• Assessed the reasonableness of the budgets by considering the historical
accuracy of the previous forecasts;
• Evaluated the current level of trading, including identifying any
indications of a downturn in activity, by considering our knowledge of the
Group and the market;
under IAS 36 the recoverable amount is the higher of value in use (“Viu”)
and fair value less costs of disposal (“FVlcd”) and calculating both the Viu
and the FVlcd is not necessary if either of these amounts exceeds the
asset’s carrying amount.
• Reviewed the methodology used in determining the discount rate
applied, including engaging our valuation experts to assess the
appropriateness of the inputs into the discount rate; and
• Assessed the adequacy of the company’s disclosures.
Based on the work performed and the evidence obtained, we consider the
carrying amount of the company’s investments in Group undertakings to be
appropriate.
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financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
INDEPENDENT AUDITORS’ REPORT continued
Key audit matter
How our audit addressed the key audit matter
Disclosure of the expected impact of initial application of IFRS 17 ‘Insurance Contracts’ in accordance with IAS 8 (Group)
Refer to note 1(ii) new accounting standards and new significant accounting policies.
International Accounting Standard 8: Accounting Policies, changes in
Accounting Estimates and Errors (IAS 8), requires the disclosure of
reasonably estimable information relevant to assessing the possible impact
of new accounting standards issued but not yet effective. International
Financial Reporting Standard 17, Insurance contracts, (IFRS 17 or “the
standard”) became effective for periods beginning on or after 1st January
2023.
We performed the following procedures to assess the appropriateness of the
IAS 8 disclosures with respect to the estimated impact of the initial adoption
of IFRS 17:
• understood and evaluated the relevant controls and governance process
in place for the determination and approval of key methodologies,
judgments and assumptions;
• understood and evaluated the relevant controls in place with respect to
the valuation of the impact on the Group’s accumulated profit on
adopting IFRS 17 at the transition date;
• challenged management’s conclusions with respect to impracticability
and the transition approach and ensured it was in accordance with the
requirements of IFRS 17;
• obtained an understanding of and challenged the key methodologies,
judgements and assumptions used to develop and calculate the impact
on the Group’s accumulated profit on adopting IFRS 17 at the transition
date. We involved our actuarial specialists to evaluate the key actuarial
judgments made including the approach to the fair value calculation at
the transition date; the calculation of the fully retrospective cSM at
inception; and an estimation of the change in this cSM to the transition
date;
• Performed testing oner the fair value models used to calculate the
impact on the Group’s accumulated profit on adopting IFRS 17 at the
transition date. In doing so we determined whether the model
adequately incorporated the methodology adopted; and
• Reviewed the quantitative and qualitative disclosures to ensure they
comply with the requirements of IAS 8.
Based on the audit procedures performed and evidence obtained, we
consider the disclosures related to the initial impact of IFRS 17 to be
appropriate.
the related IAS 8 disclosures in these financial statements are intended to
provide users with an understanding of the estimated impact of the new
standard, and as a result, are more limited than the disclosures which will be
required within the 2023 interim and annual reports.
In addition, IFRS 9 ‘Financial instruments’ replaced IAS 39 Financial
Instruments: Recognition and Measurement, which will also be applied as of
1 January 2023, having previously been deferred until implementation of
IFRS 17. However, this does not have a significant impact on the financial
statements or IAS disclosures and is therefore not considered to be a key
audit matter.
We have determined the disclosure of the impact of IFRS 17 to be a key audit
matter because of the significant changes introduced under the new
standard, and the judgements required to estimate the impact on 1 January
2022 (the “transition date”).
IFRS 17 adoption is expected to significantly reduce the Group’s
accumulated profit as at the transition date. this is primarily due to the
establishment of the contractual Service Margin (“cSM”) on adopting IFRS 17
which reflects the slower release of profits compared to IFRS 4. the cSM is
the mechanism in IFRS 17 by which profits are deferred and amortised over
the duration of a contract.
the implementation of IFRS 17 requires the Group to interpret the
requirements of the new standard and make significant judgments and
assumptions to develop its accounting policies. Key judgments made
include:
• the determination of the date before which it is impracticable to apply
the fully retrospective approach;
• the approach for how the fair value has been determined to calculate
the cSM on transition; and
• the cSM amortisation approach for deferred annuities.
new models and processes are required in order to calculate the transition
impact, in addition to changes to end-state models and processes following
transition.
consideration is required as to whether the models developed adequately
incorporate the methodology and have been through an appropriate
governance and review process.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into
account the structure of the Group and the company, the accounting processes and controls, and the industry in which they operate.
decisions regarding scoping require a significant degree of professional judgement based on quantitative and qualitative considerations, including the size and
nature of business activities in each operating entity.
the Group is predominantly based in the united Kingdom and writes business across four main product lines, being defined Benefit risk transfers, Individual
Annuities, lifetime Mortgages and long-term care Plans. the Group consists of the parent company, Just Group plc, and a number of subsidiary companies, of
which the most significant are Just Retirement limited and Partnership life Assurance company limited, which conduct substantially all the insurance
business on behalf of the Group.
126
We have determined three components which were subject to full scope audits. this included Just Group plc, Just Retirement limited and Partnership life
Assurance company limited. In addition, we performed a limited scope audit covering specific financial statement line items for a further four components.
For the residual components, we performed analysis at an aggregated Group level to re-examine our assessment that there were no significant risks of
material misstatements. our scoping resulted in 93% coverage of consolidated total assets, 98% coverage of consolidated total liabilities and 96% coverage of
consolidated loss before tax.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the governance and process adopted to assess the extent of the potential impact of
climate risk on the Group’s financial statements and support the disclosures made within the Annual Report.
In addition to enquiries with management, we also read the Group’s climate risk assessment documentation, reviewed board minutes and considered
disclosures in the annual report and accounts in relation to climate change (including the task Force on climate-related Financial disclosures (“tcFd”)) in order
to assess the completeness of management’s climate risk assessment.
Management has made commitments to aim for the operations of the Group to be carbon net zero by 2025 and for emissions from the investment portfolio,
properties on which lifetime mortgages are secured and supply chain to be net zero by 2050, with a 50% reduction in emissions from the portfolio by 2030.
the key areas of the financial statements where management evaluated that climate risk has a potential impact are lifetime Mortgage and investment
portfolios. Whilst management has assessed the risks, no allowances or changes have been made to current valuation methodology as the estimated
potential impact is not expected to be material.
We have assessed the risks of material misstatement to the Annual Report and Accounts as a result of climate change and concluded that for the year ended
31 december 2022, the main audit risks are related to disclosures included within the ‘Sustainability and the environment’, ‘Sustainable investment strategy’
and ‘Sustainability strategy: tcFd disclosure framework’ sections.
We also considered the consistency of the disclosures in relation to climate change (including the disclosures in the task Force on climate-related Financial
disclosures section) within the Annual Report with the financial statements and our knowledge obtained from our audit.
our procedures did not identify any material impact in the context of our audit of the financial statements as a whole, or our key audit matters for the year
ended 31 december 2022.
Materiality
the scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. these, together with qualitative
considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement
line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – Group
Overall materiality
£21,778,000 (2021: £24,400,000).
How we determined it
1% of total equity
Financial statements – company
£12,852,000 (2021: £12,574,000).
1% of total equity
Rationale for
benchmark applied
Based on the benchmarks used in the Annual Report, we
consider total equity to be the most appropriate benchmark
for our materiality. It represents the residual interest that
can be ascribed to shareholders after policyholder assets
and corresponding liabilities have been accounted for and is
aligned to the primary focus of the business and users of the
financial statements, being the capital position of the Group.
We compared our materiality against other relevant
benchmarks, such as total assets, total revenue and profit or
loss before tax to ensure the materiality selected was
appropriate for our audit.
In determining our materiality, we considered financial
metrics which we believed to be relevant and concluded that
total equity was the most appropriate benchmark. the
primary use of the financial statements is to determine the
entity’s ability to pay dividends and the users will therefore be
focussed on distributable reserves, a balance captured using
a total equity benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. the range of materiality
allocated across components was between £3.6 million and £14.6 million.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of
account balances, classes of transactions and disclosures, for example in determining sample sizes. our performance materiality was 75% (2021: 75%) of
overall materiality, amounting to £16,333,500 (2021: £18,300,000) for the Group financial statements and £9,639,000 (2021: £9,430,000) for the company
financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and the
effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Group Audit committee that we would report to them misstatements identified during our audit above £1.1 million (Group audit) (2021:
£1.25 million) and £0.7 million (company audit) (2021: £0.6 million) as well as misstatements below those amounts that, in our view, warranted reporting for
qualitative reasons.
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financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
INDEPENDENT AUDITORS’ REPORT continued
CONCLUSIONS RELATING TO GOING CONCERN
our evaluation of the directors’ assessment of the Group’s and the company’s ability to continue to adopt the going concern basis of accounting included:
• obtained the directors’ going concern assessment and challenged the rationale for downside scenarios adopted and material assumptions made using our
knowledge of the Group’s business performance, review of regulatory correspondence and obtaining further corroborating evidence;
• considered management’s assessment of the regulatory solvency coverage and liquidity position in the forward looking scenarios considered;
• Assessed the impact of severe, but plausible, downside scenarios which removed certain actions which are not necessarily within management’s control;
• Assessed the impact of the factors outlined in note 34, which could erode the Group’s capital resources and/or the quantum of risk to which the Group is
exposed;
• Assessed liquidity of the Group and company, including the Group’s ability to pay policyholder obligations, suppliers and creditors as amounts fall due;
• Assessed the ability of the Group and the company to comply with covenants; and
• Reviewed the disclosures included in the financial statements, including the Basis of Preparation.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may
cast significant doubt on the Group’s and the company’s ability to continue as a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s and the company’s ability to
continue as a going concern.
In relation to the directors’ reporting on how they have applied the uK corporate Governance code, we have nothing material to add or draw attention to in
relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of
accounting.
our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
REPORTING ON OTHER INFORMATION
the other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. the directors
are responsible for the other information, which includes reporting based on the task Force on climate-related Financial disclosures (tcFd) recommendations.
our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If
we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material
misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and directors’ report, we also considered whether the disclosures required by the uK companies Act 2006 have been
included.
Based on our work undertaken in the course of the audit, the companies Act 2006 requires us also to report certain opinions and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and directors’ report for the year ended
31 december 2022 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and company and their environment obtained in the course of the audit, we did not identify any
material misstatements in the Strategic report and directors’ report.
Directors’ Remuneration
In our opinion, the part of the directors’ Remuneration Report to be audited has been properly prepared in accordance with the companies Act 2006.
CORPORATE GOVERNANCE STATEMENT
the listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate governance
statement relating to the company’s compliance with the provisions of the uK corporate Governance code specified for our review. our additional
responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other information section of this
report.
128
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is
materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in
relation to:
• the directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• the disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation of how
these are being managed or mitigated;
• the directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in
preparing them, and their identification of any material uncertainties to the Group’s and company’s ability to continue to do so over a period of at least
twelve months from the date of approval of the financial statements;
• the directors’ explanation as to their assessment of the Group’s and company’s prospects, the period this assessment covers and why the period is
appropriate; and
• the directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in operation and meet its liabilities
as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
our review of the directors’ statement regarding the longer-term viability of the Group and company was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment with the relevant
provisions of the uK corporate Governance code; and considering whether the statement is consistent with the financial statements and our knowledge and
understanding of the Group and company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement
is materially consistent with the financial statements and our knowledge obtained during the audit:
• the directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information
necessary for the members to assess the Group’s and company’s position, performance, business model and strategy;
• the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• the section of the Annual Report describing the work of the Group Audit committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s compliance with the code does
not properly disclose a departure from a relevant provision of the code specified under the listing Rules for review by the auditors.
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT
Responsibilities of the directors for the financial statements
As explained more fully in the directors’ Responsibility Statement, the directors are responsible for the preparation of the financial statements in accordance
with the applicable framework and for being satisfied that they give a true and fair view. the directors are also responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the
Group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (uK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities, including fraud. the extent to which our procedures are capable of detecting irregularities,
including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to breaches
of uK regulatory principles, such as those governed by the Prudential Regulation Authority (“PRA”) and the Financial conduct Authority (“FcA”), and we
considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that
have a direct impact on the financial statements such as the companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to management bias
in accounting estimates and judgemental areas as shown in our key audit matters. Audit procedures performed by the engagement team included:
• discussions with the Board, management, Internal Audit, senior management involved in the Risk and compliance functions and the Group’s legal
function, including consideration of known or suspected instances of non-compliance with laws and regulation and fraud;
• Assessment of matters reported on the Group’s whistleblowing register and the results of management’s investigation of such matters where applicable;
• Reviewing correspondence with the PRA and FcA in relation to compliance with laws and regulations;
• Meeting with the PRA supervisory team to discuss matters in relation to compliance with laws and regulations;
• Attendance at Group Audit committee meetings;
• Reviewing relevant meeting minutes including those of the Board of directors, Group Audit, Group Risk and compliance, Investment and Remuneration
committees;
• Reviewing data regarding policyholder complaints, the Group’s register of litigation and claims, Internal Audit reports, and compliance reports in so far as
they related to non-compliance with laws and regulations and fraud;
129
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
INDEPENDENT AUDITORS’ REPORT continued
• Procedures relating to the valuation of life insurance contract liabilities, in particular annuitant mortality, credit default and expense assumptions, and the
valuation of investments classified as level 3 under IFRS 13, including lifetime Mortgages, described in the related key audit matters;
• Validating the appropriateness of journal entries identified based on our fraud risk criteria; and
• designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing.
there are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and
regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion.
our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it
typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which
the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRc’s website at: www.frc.org.uk/auditorsresponsibilities.
this description forms part of our auditors’ report.
Use of this report
this report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with chapter 3 of Part 16 of the
companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
other required reporting
COMPANIES ACT 2006 EXCEPTION REPORTING
under the companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by
us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
•
the company financial statements and the part of the directors’ Remuneration Report to be audited are not in agreement with the accounting records and
returns.
We have no exceptions to report arising from this responsibility.
APPOINTMENT
Following the recommendation of the Group Audit committee, we were appointed by the members on 14 May 2020 to audit the financial statements for the
year ended 31 december 2020 and subsequent financial periods. the period of total uninterrupted engagement is 3 years, covering the years ended
31 december 2020 to 31 december 2022.
other matter
As required by the Financial conduct Authority disclosure Guidance and transparency Rule 4.1.14R, these financial statements form part of the ESEF-prepared
annual financial report filed on the national Storage Mechanism of the Financial conduct Authority in accordance with the ESEF Regulatory technical Standard
(‘ESEF RtS’). this auditors’ report provides no assurance over whether the annual financial report has been prepared using the single electronic format
specified in the ESEF RtS.
Lee Clarke (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
chartered Accountants and Statutory Auditors
london
6 March 2023
130
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 december 2022
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
3,391.3
2,676.1
(271.5)
(23.3)
3,119.8
2,652.8
(4,778.5)
(130.3)
14.0
(2.9)
15.6
–
(1,647.6)
2,538.1
(1,446.5)
(1,381.3)
236.5
239.9
(1,210.0)
(1,141.4)
3,487.4
(552.4)
(706.7)
(332.0)
2,935.0
(1,038.7)
2.6
(55.5)
(209.2)
(132.7)
(0.8)
(48.6)
(193.2)
(136.8)
1,330.2
(2,559.5)
(317.4)
85.7
(231.7)
0.2
0.5
0.7
(231.0)
(231.1)
(0.6)
(231.7)
(230.4)
(0.6)
(231.0)
(23.70)
(23.70)
(21.4)
5.6
(15.8)
–
(0.6)
(0.6)
(16.4)
(15.0)
(0.8)
(15.8)
(15.6)
(0.8)
(16.4)
(7.97)
(7.97)
note
6
2
35
24
3
4
5
6
7
7, 14
35
35
11
11
Gross premiums written
Reinsurance premiums ceded
Net premium revenue
net investment expense
Fee and commission income
Share of results of associates accounted for using the equity method
Total revenue net of investment expense
Gross claims paid
Reinsurers’ share of claims paid
Net claims paid
change in insurance liabilities:
Gross amount
Reinsurers’ share
Net change in insurance liabilities
change in investment contract liabilities
Acquisition costs
other operating expenses
Finance costs
Total claims and expenses
Loss before tax
Income tax
Loss for the year
Other comprehensive income/(loss):
Items that will not be reclassified subsequently to profit or loss:
Revaluation of land and buildings
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations
Other comprehensive income/(loss) for the year, net of income tax
Total comprehensive loss for the year
Loss attributable to:
Equity holders of Just Group plc
non-controlling interest
Loss for the year
Total comprehensive loss attributable to:
Equity holders of Just Group plc
non-controlling interest
Total comprehensive loss for the year
Basic earnings per share (pence)1
diluted earnings per share (pence)1
the notes are an integral part of these financial statements.
1 Restated see note 1.
131
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 december 2022
Year ended
31 December 2022
Share
capital
£m
Share
premium
£m
Reorganisation
reserve
£m
Merger
reserve
£m
Revaluation
reserve
£m
note
At 1 January 2022
103.9
94.6
348.4
597.1
loss for the year
other comprehensive
income for the year,
net of income tax
Total comprehensive
income/(loss) for
the year
Contributions and
distributions
Shares issued
dividends
Interest paid on tier 1
notes (net of tax)
Share-based
payments
Total contributions
and distributions
Total changes in
ownership interests
21
12
22
–
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.8
–
0.2
0.2
–
–
–
–
–
–
–
–
–
–
–
–
Shares
held
by trusts
£m
Accumulated
profit1
£m
Total
shareholders’
equity
£m
Tier 1
notes
£m
Total
owners
Equity
£m
Non-
controlling
interest
£m
Total
£m
(4.3)
977.0
2,119.5
322.4 2,441.9
(1.9) 2,440.0
(231.1)
(231.1)
–
(231.1)
(0.6)
(231.7)
0.5
0.7
–
0.7
–
0.7
(230.6)
(230.4)
–
(230.4)
(0.6)
(231.0)
–
(15.6)
0.1
(15.6)
(13.6)
(13.6)
(5.9)
3.8
(2.1)
(5.9)
(25.4)
(31.2)
–
–
–
–
–
–
–
–
–
0.1
(15.6)
(13.6)
(2.1)
(31.2)
–
–
–
–
–
–
–
0.1
(15.6)
(13.6)
(2.1)
(31.2)
–
At 31 December 2022
103.9
94.7
348.4
597.1
3.0
(10.2)
721.0
1,857.9
322.4 2,180.3
(2.5) 2,177.8
1 Includes currency translation reserve of £1.1m, 31 december 2021 £1.6m.
132
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY continued
for the year ended 31 december 2022
Share
premium
£m
Reorganisation
reserve
£m
Merger
reserve
£m
Revaluation
reserve
£m
Shares
held
by trusts
£m
Accumulated
profit1
£m
total
shareholders’
equity
£m
tier 1
notes
£m
total
owners
Equity
£m
non-
controlling
interest
£m
total
£m
94.5
348.4
597.1
3.3
(5.4)
1,056.6
2,198.3
294.0 2,492.3
(1.9) 2,490.4
Year ended
31 december 2021
note
At 1 January 2021
(loss)/income for
the year
other comprehensive
(loss)/income for the
year, net of income tax
total comprehensive
(loss)/income for
the year
contributions and
distributions
Share
capital
£m
103.8
–
–
–
–
–
–
Shares issued
21
0.1
0.1
tier 1 notes issued (net
of costs)
tier 1 notes redeemed
dividends
Interest paid on tier 1
notes (net of tax)
22
22
12
22
Share-based
payments
total contributions and
distributions
changes in ownership
interest
Acquisition of
non-controlling
interest
total changes in
ownership interests
–
–
–
–
–
–
–
–
–
–
0.1
0.1
35
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.5)
(0.5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.1
1.1
–
–
–
–
–
–
(15.0)
(15.0)
(0.1)
(0.6)
(15.1)
(15.6)
(15.0)
(0.8)
(15.8)
(0.6)
–
(0.6)
(15.6)
(0.8)
(16.4)
–
–
(47.0)
–
0.2
0.2
–
322.4
322.4
(47.0)
(294.0)
(341.0)
–
–
–
–
–
(20.4)
4.8
(20.4)
(20.4)
3.7
4.8
(63.7)
(62.4)
28.4
(34.0)
–
–
–
–
–
–
–
0.2
322.4
(341.0)
–
(20.4)
4.8
(34.0)
(0.8)
(0.8)
(0.8)
(0.8)
–
–
(0.8)
(0.8)
0.8
0.8
–
–
At 31 december 2021
103.9
94.6
348.4
597.1
2.8
(4.3)
977.0
2,119.5
322.4 2,441.9
(1.9) 2,440.0
the notes are an integral part of these financial statements.
133
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 december 2022
Assets
Intangible assets
Property, plant and equipment
Investment property
Financial investments
Investments accounted for using the equity method
Reinsurance assets
deferred tax assets
current tax assets
Prepayments and accrued income
Insurance and other receivables
cash available on demand
Assets classified as held for sale
Total assets
Equity
Share capital
Share premium
Reorganisation reserve
Merger reserve
Revaluation reserve
Shares held by trusts
Accumulated profit
Total equity attributable to shareholders of Just Group plc
tier 1 notes
Total equity attributable to owners of Just Group plc1
non-controlling interest
Total equity
Liabilities
Insurance liabilities
Reinsurance liabilities
Investment contract liabilities
loans and borrowings
lease liabilities
other financial liabilities
deferred tax liabilities
other provisions
Accruals and deferred income
Insurance and other payables
Total liabilities
Total equity and liabilities
31 December
2022
£m
31 december
2021
£m
note
13
14
15
16
35
23
18
19
20
14
21
21
21
14
22
35
23
23
24
25
26
27
18
30
103.8
22.4
40.3
119.7
14.2
69.6
23,477.2
24,681.7
194.3
2,286.9
–
2,808.2
93.2
5.7
85.0
322.8
482.0
–
–
30.2
75.6
35.4
510.2
3.1
27,113.6
28,347.9
103.9
94.7
348.4
597.1
3.0
(10.2)
721.0
1,857.9
322.4
2,180.3
103.9
94.6
348.4
597.1
2.8
(4.3)
977.0
2,119.5
322.4
2,441.9
(2.5)
(1.9)
2,177.8
2,440.0
18,332.9
21,812.9
305.8
32.5
699.3
8.6
274.7
33.6
774.3
3.9
5,250.2
2,865.6
–
1.1
42.9
262.5
24,935.8
27,113.6
5.3
1.2
43.1
93.3
25,907.9
28,347.9
1 total equity attributable to owners of Just Group plc has been restated to include tier 1 notes, which were previously presented separately within total equity.
the notes are an integral part of these financial statements.
the financial statements were approved by the Board of directors on 6 March 2023 and were signed on its behalf by:
ANDY PARSONS
director
134
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 december 2022
Cash flows from operating activities
loss before tax
depreciation of property, plant and equipment
Share of results from associates
Impairment of property, plant and equipment
Amortisation of intangible assets
Property revaluation loss
Share-based payments
Interest income
Interest expense
Realised and unrealised gains on financial investments
decrease in reinsurance assets
Increase in prepayments and accrued income
Increase in insurance and other receivables
(decrease)/increase in insurance liabilities
decrease in investment contract liabilities
decrease in deposits received from reinsurers
Increase/(decrease) in accruals and deferred income
Increase in insurance and other payables
Increase/(decrease) in other creditors
Interest received
Interest paid
taxation received/(paid)
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Additions to internally generated intangible assets
Acquisition of property and equipment
disposal of assets
Acquisition of associates/subsidiaries
Net cash outflow from investing activities
Cash flows from financing activities
Issue of ordinary share capital (net of costs)
Proceeds from issue of tier 1 notes (net of costs)
Redemption of tier 1 notes (including costs)
decrease in borrowings (net of costs)
dividends paid
coupon paid on tier 1 notes
Interest paid on borrowings
Payment of lease liabilities – principal
Payment of lease liabilities – interest
Net cash outflow from financing activities
net decrease in cash and cash equivalents
Foreign exchange differences on cash balances
cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
cash available on demand
units in liquidity funds
Cash and cash equivalents at 31 December
the notes are an integral part of these financial statements.
135
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
note
(317.4)
(21.4)
14
14
13
2
5
13
14
35
21
22
22
25
12
12
26
26
20
3.3
2.9
–
20.5
0.5
(3.4)
(637.9)
132.7
2,914.4
552.4
(9.4)
(287.8)
(3,480.0)
(1.1)
(540.8)
1.4
169.2
1,339.6
401.9
(74.7)
16.0
202.3
(4.6)
(3.5)
3.1
(197.3)
(202.3)
0.1
–
–
(76.5)
(15.6)
(16.9)
(57.1)
(2.9)
(0.1)
(169.0)
(169.0)
4.7
4.2
–
0.3
20.4
–
4.8
(572.1)
136.8
(1,103.8)
332.0
(1.3)
(3.8)
694.5
(9.2)
(270.3)
(10.8)
1.7
(60.4)
337.8
(78.7)
(12.7)
(612.0)
(6.6)
(0.7)
–
(70.6)
(77.9)
0.2
321.8
(350.6)
–
–
(25.2)
(56.7)
(3.6)
(0.1)
(114.2)
(804.1)
–
1,820.7
1,656.4
482.0
1,174.4
1,656.4
2,624.8
1,820.7
510.2
1,310.5
1,820.7
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 SIGNIFICANT ACCOUNTING POLICIES
General information
Just Group plc (the “company”) is a public company limited by shares, incorporated and domiciled in England and Wales. the company’s registered office is
Enterprise House, Bancroft Road, Reigate, Surrey, RH2 7RP.
Restatement
A limited scope review of the company’s Annual Report and Accounts to 31 december 2021 was performed by the FRc in accordance with Part 2 of the FRc
corporate Reporting Review operating Procedures. the review covered only those aspects of the Annual Report and Accounts that relate to the application of
IAS 33, ‘Earnings per Share’, and compliance with its requirements.
As a result of the review of the 2021 Annual Report by the FRc, the directors reconsidered the accounting for the loss on redemption of the Restricted tier 1
(“Rt1”) notes redeemed in 2021. the requirements in IAS 33 regarding redemption of preference shares should have been applied to the redemption of the Rt1
notes and as such the loss on redemption should have been deducted from earnings for the purposes of calculating earnings per share and diluted earnings
per share. the impact of correcting this error is shown below.
Earnings per share
diluted earnings per share
the above restatement has no effect on the 2021 adjusted earnings per share.
As originally
disclosed
pence
Adjusted
pence
As restated
pence
(3.42)
(3.42)
(4.55)
(4.55)
(7.97)
(7.97)
the FRc’s enquiry, which was limited to only those aspects of the 2021 Annual Report and Accounts that relate to the application of IAS 33, Earnings per share,
and compliance with its requirements is now complete. the FRc review does not benefit from detailed knowledge of our business or an understanding of the
underlying transaction entered into in redemption of the Restricted tier 1 notes, and accordingly the review provides no assurance that the Annual Report and
Accounts are correct in all material respects.
1.1 Basis of preparation
the consolidated financial statements have been prepared in accordance with uK adopted international accounting standards in conformity with the
requirements of the companies Act 2006 and the disclosure guidance and transparency rules sourcebook of the united Kingdom’s Financial conduct
Authority.
the consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of land and buildings, and
financial assets and financial liabilities (including derivative instruments and investment contract liabilities) at fair value. Values are expressed to the
nearest £0.1m.
i) Going concern
A detailed going concern assessment has been undertaken and having completed this assessment, the directors are satisfied that the Group has adequate
resources to continue to operate as a going concern for a period of not less than 12 months from the date of this report and that there is no material
uncertainty in relation to going concern. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
this assessment includes the consideration of the Group’s business plan approved by the Board; the projected liquidity position of the company and the Group,
impacts of economic stresses, the current financing arrangements and contingent liabilities and a range of forecast scenarios with differing levels of new
business and associated additional capital requirements to write anticipated levels of new business.
the Group has a robust liquidity framework designed to withstand 1-in-200 year stress events. the Group liquid resources includes an undrawn revolving credit
facility of up to £300m for general corporate and working capital purposes. the borrowing facility is subject to covenants that are measured biannually in June
and december, being the ratio of consolidated net debt to the sum of net assets and consolidated net debt not being greater than 45%. the ratio on
31 december 2022 was 14.6% (2021: 15.8%). the Group’s business plan indicates that liquidity headroom will be maintained above the Group’s borrowing
facilities and financial covenants will be met throughout the period.
the Group and its regulated insurance subsidiaries are required to comply with the requirements established by the Solvency II Framework directive as
adopted by the Prudential Regulation Authority (“PRA”) in the uK, and to measure and monitor its capital resources on this basis. the overriding objective
of the Solvency II capital framework is to ensure there is sufficient capital within the insurance company to protect policyholders and meet their payments
when due. Insurers are required to maintain eligible capital, or “own Funds”, in excess of the value of the Solvency capital Requirement (“ScR”). the ScR
represents the risk capital required to be set aside to absorb 1-in-200 year stress tests, over the next year’s time horizon, of each risk type that the insurer is
exposed to, including longevity risk, property risk, credit risk, and interest rate risk. these risks are aggregated together with appropriate allowance for
diversification benefits.
the resilience of the solvency capital position has been tested under a range of adverse scenarios, before and after management actions within the Group’s
control, which considers the possible impacts on the Group’s business, including stresses to uK residential property prices, house price inflation, the credit
quality of assets, mortality, and risk-free rates, together with a reduction in new business levels. In addition, the results of extreme property stress tests
were considered, including a property price fall of over 40%. Eligible own funds exceeded the minimum capital requirement in all stressed scenarios
described above.
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1 SIGNIFICANT ACCOUNTING POLICIES continued
Based on the assessment performed above, the directors conclude that it remains appropriate to value assets and liabilities on the assumption that there are
adequate resources to continue in business and meet obligations as they fall due for the foreseeable future, being at least 12 months from the date of signing
this report.
Furthermore, the directors note that in a scenario where the Group ceases to write new business the going concern basis would continue to be applicable while
the Group continued to service in-force policies.
the directors’ assessment concluded that it remains appropriate to value assets and liabilities on the assumption that there are adequate resources to
continue in business and meet obligations as they fall due for the foreseeable future, being at least 12 months from the date of signing this report. the
directors also considered the findings of the work performed to support the long-term viability statement of the Group in the Risk management section of the
Annual Report and Accounts, which is undertaken together with the going concern assessment. the Board and Audit committee considered going concern
over 12 months as well as the consistency with the longer-term viability of the Group, reviewing this over five years. Accordingly, the going concern basis has
been adopted in the valuation of assets and liabilities.
ii) New accounting standards and new significant accounting policies
the following amendments to existing accounting standards are effective from 1 January 2022 but do not have a significant impact on the Group’s financial
statements. the amendments include clarifications that are not inconsistent with the Group’s existing accounting treatment and other insignificant changes.
•
IFRS 3, Business combinations – Amendments to references to the conceptual framework for financial reporting in order to avoid the unintentional
recognition of day-two gains following revisions to the conceptual framework in 2018;
IAS 16, Property, plant and equipment – Amendments in respect of proceeds before intended use that prohibits deducting proceeds from selling items
from the cost of an item of property, plant and equipment;
IAS 37, Provisions, contingent liabilities and contingent assets – Amendments in respect of costs of fulfilling a contract to clarify that such costs include
both direct costs and an allocation of costs that relate directly to fulfilling the contract.
•
•
the following new accounting standards and amendments to existing accounting standards have not yet been adopted and are expected to have a significant
impact on the Group.
•
Amendments to IFRS 4, Insurance contracts, published in September 2016 and adopted by the Group with effect from 1 January 2018, permits the deferral
IFRS 9, Financial instruments (effective 1 January 2018).
of the application of IFRS 9 until accounting periods commencing on 1 January 2023 for eligible insurers. Just continues to defer IFRS 9.
If the Group had adopted IFRS 9 it would continue to classify financial assets at fair value through profit or loss. therefore, under IFRS 9 all financial assets
would continue to be recognised at fair value through profit or loss and the fair value at 31 december 2022 would be unchanged at £23,474.1m. As well as
financial assets, the Group also holds Insurance and other receivables and cash and cash equivalent assets, with contractual terms that give rise to cash
flows on specified dates; the fair value of these investments is considered to be materially consistent with their carrying value.
•
IFRS 17, Insurance contracts (effective 1 January 2023).
i) IFRS 17
Background
IFRS 17 Insurance contracts was issued in May 2017 with an effective date of 1 January 2021. In June 2020, the IASB issued an amended standard which
delayed the effective date to 1 January 2023. the amendments issued in June 2020 aimed to assist entities implementing the standard. during 2022, the IASB
Interpretation committee (“IFRIc”) signalled its conclusion regarding the approach to assessing coverage units for annuity contracts in payment and this has
been adopted in Just’s approach. IFRS 17 was approved for adoption by the uK Endorsement Board in May 2022. Results in the 2023 financial year will comply
with IFRS 17, with the first Annual Report published in accordance with IFRS 17 being that for the year ending 31 december 2023. IFRS 17 establishes the
principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4, Insurance contracts. IFRS 17
represents a significant conceptual change from IFRS 4, with recognition of profits over lives of contracts instead of mainly at point of sale for annuity business.
Furthermore, recognition of demographic and expense assumption changes will also be deferred under IFRS 17, with recognition over the remaining lives of
contracts, which will result in reduced volatility in reported profits in future. there is no change to the interpretation of significant insurance risk and its
application to Just’s products, and hence the scope of contracts within IFRS 17 is consistent with IFRS 4.
IFRS 17 Project
the Group has deployed a cross-functional project team dedicated to the implementation of IFRS 17. this team has been engaged in determining accounting
policies under the new standard, quantifying the transitional adjustments and developing and implementing a new system for calculating the contractual
service margin together with a new accounting system which will support the extensive financial statements disclosures required by IFRS 17. the team is
currently focussed on validating transition results, producing the 2022 year end results on an IFRS 17 basis, and the embedding of new IFRS 17 processes and
controls across reporting, planning and relevant operational functions.
Transition
on the transition date, 1 January 2022, the Group will:
•
Identify, recognise, and measure each group of gross insurance contracts and associated reinsurance contracts, as if IFRS 17 had always applied unless
impracticable;
• derecognise any existing IFRS 4 balances, including the Present Value of In Force Business and other relevant balances that would not exist had IFRS 17
always applied;
• classify reinsurance balances separately depending whether they are in an asset or liability position at a portfolio level, where previously they were
classified at a treaty level;
• Reclassify reinsurance deposits previously classified as financial instruments, to be included within the value of reinsurance contracts; and
• Recognise any resulting net difference in accumulated profit net of any related tax adjustments.
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1 SIGNIFICANT ACCOUNTING POLICIES continued
Firms are required to apply IFRS 17 fully retrospectively, unless it is impracticable to do so, in which case either a modified retrospective approach or fair value
approach may be taken. For insurance and reinsurance contracts where the effective date of the contract was prior to 1 January 2021, management have
concluded that it would be impracticable to apply the standard on a fully retrospective basis due to the inability of determining the risk adjustment, a new
requirement in terms of IFRS 17, in earlier years without the application of hindsight. Guidance contained in the IAS 8 accounting standard ‘Accounting Policies,
changes in Accounting Estimates and Errors’ requires that hindsight should not be applied in the application of an accounting standard on a retrospective
basis. the risk adjustment is a new requirement of IFRS 17 and represents the compensation that an entity requires to take on non-financial risk. defining
“compensation that the entity requires” to take on non-financial risk differs to any of the risk-based allowances adopted by the Group for either existing
regulatory or statutory reporting purposes. the Group’s new risk adjustment policy was developed and adopted during 2021 with calculation of the risk
stresses to be applied from 1 January 2021. under this policy, management determines a target confidence level based upon an assessment of the current
level of risks that the business is exposed to and the compensation required to cover those risks. Key factors for consideration here include: the size of the
business, products offered, reinsurance structures, regulatory challenges and market competitiveness. these factors are not necessarily stable from period to
period, and today’s understanding of these aspects should be excluded from any historic assessment of risk as doing so would be to apply hindsight.
Management have assessed whether other information used in previous reporting cycles, including for pricing new business, could be used to determine the
risk adjustment, but have concluded that none of these alternatives would be appropriate. the development of the new approach for IFRS 17 represents a
significant enhancement in the approach used to determine the Group’s allowance for non-financial risk, with the use of a target confidence interval and
probability distributions providing a more meaningful quantification of allowance for risk compared with IFRS 4 reporting. the reinsurance risk adjustment in
IFRS 17 reflects the “amount of risk being transferred” to the reinsurer, so where the risk adjustment for insurance contracts is impracticable then, by
definition, the reinsurance risk adjustment is also impracticable. For contracts for which the Fully Retrospective Approach is impracticable, the Group will apply
the Fair Value Approach. A reconciliation of our primary financial statements under IFRS 17 to those in accordance with IFRS 4 will be provided in the 2023
interim financial statements.
Fair value calculations
under the fair value approach, the contractual Service Margin (“cSM”) will be determined as the difference between the fair value of a group of contracts and
the fulfilment cash flows at the transition date. Fair values have been calculated in accordance with IFRS 13 which requires that entities should consider
market observable data. there is no active observable market for the transfer of insurance liabilities and associated reinsurance between market participants
and therefore there is limited market observable data. the fair value methodology adopted by the Group calculates the premium that would be required by a
market participant to accept the insurance liabilities together with associated reinsurance. the fair value models have been based on Just’s internal pricing
models as used for pricing new business. By basing the fair values on results from pricing models used in the active insurance markets, management believes
that the results are representative of market fair values. Key assumptions used as inputs within the models are the Solvency capital Requirement coverage
ratio, the Return on capital (“Roc”) assumption and the backing asset mix. these assumptions and other key inputs into the fair value calculations have been
reviewed by an independent firm of accountants who have access to industry surveys and other benchmarking, and their review conclusions made available
to the Group Audit committee. the fair value result has been benchmarked against any publicly available and relevant market information as well as an
independent internal calculation based upon a dividend discount Model (“ddM”) approach sometimes used in industry for the valuation of insurance business.
Contractual Service Margin
the recognition of the contractual Service Margin (“cSM”) liability represents a major change from existing accounting treatment under which profits in excess
of prudence margins are immediately recognised in the income statement. the cSM is held on the balance sheet as part of insurance contract liabilities, and
represents the unearned profit of insurance contracts. the cSM in respect of contracts gross of reinsurance cannot be negative; in this event, a loss will be
reported in the statement of comprehensive income (the “income statement”) to the extent that fulfilment cash flows represent a net outflow over the
coverage period.
under the general model, the cSM is adjusted at each subsequent reporting period, using discount rate determined at inception, for changes in expected
future cash flows. changes in fulfilment cash flows are recognised as follows:
• changes relating to future services adjusted against the cSM (or recognised in the insurance service result in the income statement if the group is onerous).
• changes relating to current or past services are recognised in the insurance service result in the income statement.
• Effects of the time value of money, financial risk and changes therein on estimated future cash flows are recognised as insurance finance income or
expenses in the income statement.
Interest is accreted on the cSM at rates locked in at initial recognition of a contract (i.e. discount rate used at inception to determine the present value of the
estimated cash flows). the cSM will be released into the income statement based on coverage units which reflect the quantity of the benefits provided and the
expected coverage duration of the remaining contracts in the group.
the Group provides the following services to customers:
•
•
Investment return service when a customer is in the deferred or guarantee phase; and
Insurance coverage services when an annuitant is in payment period for annuitants.
By their nature, coverage units will vary depending on the type of service provided. A weighting then needs to be applied to the different types of coverage unit
in order to calculate an aggregate value of the proportion of the cSM balance that is to be released. the Group will use the probability of the policy being in
force in each time period for weighting the disparate types of coverage unit. this weighting reflects management’s view that the value of services provided to
policyholders is broadly equivalent across the different phases in the life of contracts. these weightings are applied to the coverage units which are defined as
follows:
•
In the deferred phase, investment return service coverage units are represented by the return on the funds backing the future cash flows in this
accumulation phase and the insurance service is considered insignificant;
In the guaranteed phase when payments outwards are being made, investment return service is represented by the payments to annuitants; and
In the life contingent phase, insurance service is represented by payments to annuitants.
•
•
the coverage units and the weightings used to combine coverage units are discounted using the locked-in discount rates and financial risk assumptions as at
inception of the contracts. the weightings applied are updated each period for changes in life expectancies.
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IFRS 17 fulfilment cash flows
the IFRS 17 fulfilment cash flows comprise a best estimate component, the ‘estimate of present value of future cash flows’, and a risk adjustment for
non-financial risks. the best estimate cash flows are expected to be consistent with the current IFRS 4 cash flows after removing the prudence margins.
Risk adjustment for non-financial risks
A further change introduced by IFRS 17 is the inclusion of the risk adjustment for non-financial risk (risk adjustment) as an explicit reserve within insurance
liabilities to reflect the compensation required by the Group for bearing the uncertainty in respect of the amount and timing of the future cash flows. this
component replaces an implicit allowance for prudence within the IFRS 4 reserves. the determination of the risk adjustment within Just follows a value-at-risk
type approach, representing the maximum loss within a retained confidence level. Applying a confidence level technique, the Group will estimate the
probability distribution of the expected present value of the future cash flows from the contracts at each reporting date and calculate the risk adjustment for
non-financial risk as the excess of the value at risk at the target confidence level over the expected present value of the future cash flows allowing for the
associated risks over all future years. the Group is targeting a confidence level of 70% on an ultimate run off basis. this target level has been chosen in light of
it being commensurate to a 1 in 10 year risk confidence level on a one-year basis. no diversification of risk adjustment for non-financial risk between legal
entities is assumed.
Discount rates
the Group will continue to use the ‘top-down’ approach for determining the discount rates as it currently does for IFRS 4. Following this approach, the effect of
factors within the yield that are not characteristic of the insurance cash flows, notably credit risk, both expected and unexpected, must be removed. this
marks a change from IFRS 4, which simply requires that a prudent allowance is made for credit risk. the quantification of the allowance for credit risk within
asset yields is not observable in the market or readily available data sources and hence involves subjective judgement. the Group will make an allowance for
unexpected default risk and remove the IFRS 4 prudence for different investment types, with the overall change not expected to be significant in the context of
the insurance contracts balance. no adjustment for liquidity differences between the reference portfolio and the liabilities is made.
discount rates at the inception of each contract are based on the yields within a hypothetical reference portfolio of assets which the Group expects to acquire
to back the portfolio of new insurance liabilities (the “target portfolio”). this is consistent with the approach taken for the current new business operating profit
metric. For the purposes of the cSM relating to each group of contracts, a weighted average of these discount rate curves is determined to lock-in each annual
cohort.
At each valuation date, the estimate of the present value of future cash flows and the risk adjustment for non-financial risk are discounted based on the yields
within a reference portfolio of assets consisting of the actual asset portfolio backing the net of reinsurance liabilities. the reference portfolio is adjusted in
respect of new contracts incepting in the period to allow for a period of transition from the target portfolio to the actual asset portfolio.
Level of aggregation
the Group’s life companies will aggregate all insurance contracts into single portfolios as their products bear similar risks and are managed together. the cSM
is computed for separate contract groupings based on annual cohorts split between dB, GIfl and care products. these groupings are further subdivided at the
date of initial recognition into three groupings: onerous (if any); contracts which have no significant possibility of becoming onerous subsequently (if any); and
the remaining contracts.
Reinsurance
the Group will measure reinsurance contracts separately to the underlying contracts using consistent assumptions in cases where the reinsurance is
transacted or in place in the same accounting period, in accordance with the standard. the level of aggregation for cSM calculation purposes will be at treaty
(contract) level. the existing treaties for which the deposit back arrangements are currently reported separately as financial liabilities will be included within
the value of the associated reinsurance contracts under IFRS 17.
Impact
We have estimated that the post-tax impact on accumulated profit of the Group at transition will be a decrease of between £0.9bn and £1.1bn. the
corresponding impact will primarily be recorded as cSM within the insurance contract balance. the results from the models used to calculate the post-tax
impact on accumulated profit have been through validation processes by the company which have enabled us to present the range above. Further checks and
system refinements are being undertaken as part of the production of the transition balance sheet which will be reported as part of our interim results for the
six month period ending 30 June 2023. the implementation of the comprehensive end state control environment will continue as Just introduces business as
usual controls throughout the first half of 2023, and in the meantime we have only presented the impact on accumulated profits of the Group at transition.
the impact of the transition to IFRS 17 will be to de-recognise profits that were previously taxed under IFRS 4, thereby creating a tax loss. transition relief for
tax purposes was enacted in december 2022 which spreads relief for the tax loss over a ten year period. the Group anticipates full recovery of this tax loss
against profits to be earned in future years.
under IFRS 17, new business profits and changes in non-economic assumptions will be recognised in the income statement over the lifetime of the contracts.
the timing of the recognition of the cSM in the income statement will be determined based on services that are provided, and the risk adjustment for
non-financial risk as the related risk expires. the Group expects that, even though the total profit recognised over the lifetime of the contracts will not change,
it will emerge more slowly under IFRS 17. under IFRS 4, profits are currently recognised in the income statement account on initial recognition of the contracts.
the different timing of profit recognition will result in an increase in liabilities on adoption of IFRS 17 because a portion of profits previously recognised and
accumulated in equity under IFRS 4 will be included in the measurement of the liabilities under IFRS 17.
Disclosures
IFRS 17 requires extensive new financial statement disclosures. the format of the Statement of comprehensive Income will be fundamentally altered to report
a net profit or loss from insurance services separately from the investment result. new detailed disclosures will include a roll-forward from the prior period of
the insurance balances split by component, including risk adjustment and cSM. Information on the expected cSM emergence pattern will be provided, as well
as disclosures about significant judgements made when applying IFRS 17.
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1 SIGNIFICANT ACCOUNTING POLICIES continued
ii) IFRS 9 ‘Financial instruments’
Background
IFRS 9 ‘Financial instruments’ replaces IAS 39 Financial Instruments: Recognition and Measurement and is effective for accounting periods beginning on or
after 1 January 2018. However, the Group has met the relevant criteria and has applied the temporary exemption from IFRS 9 for annual periods before
1 January 2023, the date at which IFRS 17 becomes effective. consequently, the Group will apply IFRS 9 commencing 1 January 2023, with comparative
periods restated. the IFRS 9 standard is applicable to financial assets and financial liabilities and covers the classification, measurement, impairment and
de-recognition of financial assets and liabilities together with a new hedge accounting model.
Financial assets
the Group’s business model is to manage financial instruments on a fair value basis. the Group will therefore adopt the approach allowed within the standard
to continue to measure the majority of its financial assets at fair value through profit or loss. this remains appropriate as it is consistent with the Group’s
business model and the management of the underlying instruments. the Group is investigating the opportunity to create a separate amortised cost portfolio
of newly acquired surplus assets which would back the cSM reserve which is not interest rate sensitive.
For the residual financial assets which are measured at amortised cost, IFRS 9 operates an expected credit loss model rather than an incurred credit loss
model. Providing for an expected credit loss on our existing financial assets, measured at amortised cost, is not expected to have a material impact on Group
shareholders’ funds.
Financial liabilities
As explained above in the section on IFRS 17, the existing reinsurance deposit-back IAS 39 financial liabilities will move to within the scope of IFRS 17. other
than this, IFRS 9 retains the requirements in IAS 39 for the classification and measurement of financial liabilities, and hence there are no further changes
required in this area.
Hedge accounting
the Group does not currently apply hedge accounting and therefore will not be impacted by the new requirements of IFRS 9.
the following amendments to existing standards in issue have not been adopted by the Group and are not expected to have a significant impact on the
financial statements.
•
•
IAS 1, Presentation of financial statements – Amendments in respect of disclosures of accounting policies (effective 1 January 2023, not yet endorsed);
IAS 1, Presentation of financial statements – Amendments in respect of the classification of liabilities as current or non-current (effective 1 January 2024,
not yet endorsed);
IAS 8, Accounting policies – Amendments in respect of the definition of accounting estimates (effective 1 January 2023, not yet endorsed);
IAS 12, Income taxes – Amendments in respect of deferred tax related to assets and liabilities arising from a single transaction (effective 1 January 2023,
not yet endorsed).
•
•
1.2 Significant accounting policies and the use of judgements, estimates and assumptions
the preparation of financial statements requires the Group to select accounting policies and make estimates and assumptions regarding items reported in the
consolidated statement of comprehensive income, consolidated statement of financial position, other primary statements and notes to the consolidated
financial statements.
the major areas of judgement in applying accounting policies are as follows.
Accounting policy
Item involving judgement
Critical accounting judgement
1.6
classification of insurance and
investment contracts
Assessment of significance of insurance risk transferred.
A contract is classified as an insurance contract if it transfers significant insurance risk from the
policyholder to the insurer, or from the cedent to the reinsurer in the case of a reinsurance contract.
Insurance risk is significant if an insured event could cause an insurer to pay significant additional
benefits to those payable if no insured event occurred.
Any contracts that do not include the transfer of significant insurance risk are classified as investment
contracts.
1.17
classification of financial
investments
classification of financial investments and determining whether an active market exists for a financial
investment.
1.17
Measurement of fair value of loans
secured by residential mortgages,
including measurement of the
no-negative equity guarantees
Financial investments classified at fair value through profit or loss include those that are designated as
such by management on initial recognition as they are managed on a fair value basis.
Management’s assessment of the market activity of a financial investment determines the fair value
hierarchy of the valuation method used to determine the fair value of the financial investment.
the use of a variant of the Black-Scholes option pricing formula with real world assumptions.
the measurement of the no-negative equity guarantee underlying the fair value of loans secured by
mortgages uses a variant of the Black-Scholes option pricing formula, which has been adapted to use
real world assumptions instead of risk neutral assumptions due to the lack of relevant observable
market inputs to support a risk neutral valuation approach.
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the table below sets out those items the Group considers most susceptible to changes in critical estimates and assumptions. Management applies judgement
in making estimates and assumptions that are applied to the balances described in the table below.
Accounting policy and notes
Item involving estimates and assumptions
Critical estimates and assumptions
1.17, 17(a) and (d)
Measurement of fair value of loans secured
by residential mortgages, including
measurement of the no-negative equity
guarantees
the critical estimates used in valuing loans secured by residential mortgages include
the projected future receipts of interest and loan repayments and the future costs of
administering the loan portfolio.
1.17, 17(a) and (d)
Measurement of fair value of Financial
investments - illiquids
the key assumptions used as part of the valuation calculation include future
property prices and their volatility, mortality, the rate of voluntary redemptions and
the liquidity premium added to the risk-free curve and used to discount the
mortgage cash flows.
the critical estimates used in valuing investments in illiquid financial assets include
the projected future cashflows from settlement of the investment. the key
assumption used as part of the valuation calculation is the discount rate which
includes a credit spread allowance associated with the asset. the redemption and
default assumptions are derived from the assumptions for the Group’s bond
portfolio.
1.18, 17(a) and (d), 23, 27 Measurement of reinsurance assets and
deposits received from reinsurers arising
from reinsurance arrangements
the critical estimates used in measuring the value of reinsurance assets include the
projected future cash flows arising from reinsurers’ share of the Group’s insurance
liabilities.
1.21, 23(b)
Measurement of insurance liabilities arising
from writing Retirement Income insurance
the key assumptions used in the valuation include discount rates, as described
below, and assumptions around the reinsurers’ ability to meet its claim obligations.
deposits received from reinsurers are measured in accordance with the reinsurance
contract and taking account of an appropriate discount rate for the timing of the
expected cash flows of the liabilities.
For deposits received from reinsurers measured at fair value through profit or loss,
the key assumption used in the valuation is the discount rate.
the critical estimates used in measuring insurance liabilities include the projected
future Retirement Income payments and the cost of administering payments
to policyholders.
the key assumptions are the discount rates and mortality experience used in the
valuation of future Retirement Income payments, and level and inflation of costs of
administration.
the valuation discount rates are derived from yields on supporting assets after
deducting allowances for default. Mortality assumptions are derived from the
appropriate standard mortality tables and adjusted to reflect the future expected
mortality experience of the policyholders. Maintenance expenses are determined
from expense analyses and are assumed to inflate at market-implied rates.
All estimates are based on management’s knowledge of current facts and circumstances, assumptions based on that knowledge and predictions of future
events and actions. Actual results may differ significantly from those estimates. Where relevant the impact of coVId-19 has been considered and detail
included in the relevant note disclosures.
1.3 Consolidation principles
the consolidated financial statements incorporate the assets, liabilities, results and cash flows of the company and its subsidiaries.
Subsidiaries are those investments over which the Group has control. the Group has control over an investee if all of the following are met: (1) it has power over
the investee; (2) it is exposed, or has rights, to variable returns from its involvement with the investee; and (3) it has the ability to use its power over the
investee to affect its own returns. Subsidiaries are consolidated from the date on which control is transferred to the Group and are excluded from consolidation
from the date on which control ceases. All inter-company transactions, balances and unrealised surpluses and deficits on transactions between Group
companies are eliminated. Accounting policies of subsidiaries are aligned on acquisition to ensure consistency with Group policies.
the Group uses the acquisition method of accounting for business combinations. under this method, the cost of acquisition is measured as the aggregate of
the fair value of the consideration at the date of acquisition and the amount of any non-controlling interest in the acquiree. the excess of the consideration
transferred over the identifiable net assets acquired is recognised as goodwill.
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the Group uses the equity method to consolidate its investments in joint ventures and associates. under the equity method of accounting the investment is
initially recognised at fair value and adjusted thereafter for the post-acquisition change in the Group’s share of net assets of the joint ventures and associates.
1.4 Segments
the Group’s segmental results are presented on a basis consistent with internal reporting used by the chief operating decision Maker (“codM”) to assess the
performance of operating segments and the allocation of resources. the codM has been identified as the Group Executive committee.
An operating segment is a component of the Group that engages in business activities from which it derives income and incurs expenses.
operating segments, where certain materiality thresholds in relation to total results from operating segments are not exceeded, are combined when
determining reportable segments. For segmental reporting, the arranging of guaranteed income for life contracts, providing intermediary mortgage advice
and arranging, plus the provision of licensed software, are included in the other segment along with Group activities, such as capital and liquidity
management, and investment activities.
1.5 Foreign currencies
transactions in foreign currencies are translated to sterling at the rates of exchange ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the end of the financial year. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
the assets and liabilities of foreign operations are translated to sterling at the rates of exchange at the reporting date. the revenues and expenses are
translated to sterling at the average rates of exchange for the year. Foreign exchange differences arising on translation to sterling are accounted for through
other comprehensive income.
1.6 Classification of insurance and investment contracts
the measurement and presentation of assets, liabilities, income and expenses arising from Retirement Income contracts issued and associated reinsurance
contracts held is dependent upon the classification of those contracts as either insurance or investment contracts.
A contract is classified as insurance only if it transfers significant insurance risk. Insurance risk is significant if an insured event could cause an insurer to pay
significant additional benefits to those payable if no insured event occurred. A contract that is classified as an insurance contract remains an insurance
contract until all rights and obligations are extinguished or expire. dB, GIfl, care Plan and Protection policies currently written by the Group are classified as
insurance contracts.
Any contracts not considered to be insurance contracts under IFRS are classified as investment contracts. capped drawdown pension business is classified as
investment contracts as there is no transfer of longevity risk due to the premium protection option within these fixed term contracts. capped drawdown
contracts are no longer marketed by the Group. loans secured by residential mortgages (“ltM’s”) are accounted for as financial instruments in accordance
with IAS 39.
1.7 Premium revenue
Premium revenue in respect of individual GIfl contracts is accounted for when the liability to pay the GIfl contract is established.
Premium revenue in respect of defined Benefit de-risking contracts is accounted for when the company becomes “on risk”, which is the date from which the
policy is effective. If a timing difference occurs between the date from which the policy is effective and the receipt of payment, the amount due for payment
but not yet received is recognised as a receivable in the consolidated statement of financial position.
Premium revenue in respect of care Plans and Protection policies is accounted for when the insurance contract commences.
deposits collected under investment contracts are not accounted for through the consolidated statement of comprehensive income, except for fee income
and attributable investment income, but are accounted for directly through the consolidated statement of financial position as an adjustment to the
investment contract liability.
Reinsurance premiums payable in respect of reinsurance treaties are accounted for when the reinsurance premiums are due for payment under the terms of
the contract.
1.8 Net investment income
Investment income consists of interest receivable for the year and realised and unrealised gains and losses on financial assets and liabilities at fair value
through profit or loss.
Interest income is recognised as it accrues.
Realised gains and losses on financial assets and liabilities occur on disposal or transfer and represent the difference between the proceeds received net of
transaction costs and the original cost.
unrealised gains and losses arising on financial assets and liabilities represent the difference between the carrying value at the end of the year and the
carrying value at the start of the year or purchase value during the year, less the reversal of previously recognised unrealised gains and losses in respect of
disposals made during the year.
1.9 Revenue from contracts with customers
Revenue from contracts with customers is recognised at the amount that reflects the consideration to which the Group expects to be entitled in exchange for
the services provided. Revenue from contracts with customers comprises commission on GIfl contracts, commission on ltM advances and other income
which includes investment management fees, administration fees and software licensing fees.
Fee income excludes facilitated adviser charges collected on behalf of advisers.
142
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 1 SIGNIFICANT ACCOUNTING POLICIES continued
1.10 Claims paid
claims paid includes policyholder benefits and claims handling expenses. Policyholder benefits are accounted for when due for payment. death claims are
accounted for when notified.
Reinsurance claim recoveries are accounted for in the same period as the related claim.
1.11 Acquisition costs
Acquisition costs comprise direct costs, such as commission, and indirect costs of obtaining and processing new business. Acquisition costs are not deferred as
they relate to single premium business.
1.12 Finance costs
Finance costs on deposits received from reinsurers are recognised as an expense in the period in which they are incurred.
Interest on loans and borrowings is accrued in accordance with the terms of the loan agreement. Issue costs are added to the loan amount and interest
expense is calculated using the effective interest rate method.
1.13 Employee benefits
Defined contribution plans
the Group operates a defined contribution pension scheme. the assets of the scheme are held separately from those of the Group in funds managed by a third
party. obligations for contributions to the defined contribution pension scheme are recognised as an expense in profit or loss when due.
Share-based payment transactions
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at grant date, determined using stochastic and
scenario-based modelling techniques where appropriate. the fair value of each scheme, based on the Group’s estimate of the equity instruments that will
eventually vest, is expensed in the consolidated statement of comprehensive income on a straight-line basis over the vesting period, with a corresponding
credit to equity.
At each balance sheet date, the Group revises its estimate of the number of equity instruments that will eventually vest as a result of changes in non-market-
based vesting conditions, and recognises the impact of the revision of original estimates in the consolidated statement of comprehensive income over the
remaining vesting period, with a corresponding adjustment to equity. Where a leaver is entitled to their scheme benefits, this is treated as an acceleration of
the vesting in the period they leave. Where a scheme is modified before it vests, any change in fair value as a result of the modification is recognised over the
remaining vesting period. Where a scheme is cancelled, this is treated as an acceleration in the period of the vesting of all remaining options.
1.14 Intangible assets
Intangible assets consist of goodwill, which is deemed to have an indefinite useful life, Present Value of In-Force business (“PVIF”), acquired and internally
generated intellectual property (including PrognoSys™), and purchased and internally developed software, which are deemed to have finite useful lives.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of the acquired subsidiary and represents
the future economic benefit arising from assets that are not capable of being individually identified and separately recognised. Goodwill is measured at initial
value less any accumulated impairment losses. Goodwill is not amortised but assessed for impairment annually or when circumstances or events indicate
there may be uncertainty over the carrying value.
For the purpose of impairment testing, goodwill has been allocated to cash-generating units and an impairment is recognised when the carrying value of the
cash-generating unit exceeds its recoverable amount. Impairment losses are recognised directly in the consolidated statement of comprehensive income and
are not subsequently reversed.
other intangible assets are recognised if it is probable that future economic benefits attributable to the asset will flow to the Group, and are measured at cost
less accumulated amortisation and any impairment losses. For intangible assets with finite useful lives, impairment testing is performed where there is an
indication that the carrying value of the assets may be subject to an impairment. An impairment loss is recognised where the carrying value of an intangible
asset exceeds its recoverable amount.
PVIF, representing the present value of future profits from the purchased in-force business, is recognised upon acquisition and is amortised over its expected
remaining economic life up to 16 years on a straight-line basis. PVIF is within the scope of IFRS 4.
PrognoSys™ is the Group’s proprietary underwriting engine. the Group has over two million person-years of experience collected over 20 years of operations.
It is enhanced by an extensive breadth of external primary and secondary healthcare data and medical literature.
costs that are directly associated with the production of identifiable and unique software products controlled by the Group are capitalised and recognised as
an intangible asset. direct costs include the incremental software development team’s employee costs. All other costs associated with researching or
maintaining computer software programmes are recognised as an expense as incurred.
Intangible assets with finite useful lives are amortised on a straight-line basis over their useful lives up to 16 years. the useful lives are determined by
considering relevant factors, such as usage of the asset, potential obsolescence, competitive position and stability of the industry.
143
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1 SIGNIFICANT ACCOUNTING POLICIES continued
the useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:
Intangible asset
PVIF
Intellectual property
Estimated useful economic life
Valuation method
up to 16 years
12 – 15 years
Estimated value in-force using European embedded value model
Estimated replacement cost
the useful economic lives of intangible assets recognised by the Group other than those acquired in a business combination are as follows:
Intangible asset
PrognoSys™
Software
Estimated useful economic life
12 years
3 years
1.15 Property, plant and equipment
land and buildings are measured at their revalued amounts less any subsequent depreciation, and impairment losses. Valuations are performed periodically
but at least triennially to ensure that the fair value of the revalued asset does not differ materially from its carrying value. A revaluation surplus is recognised in
other comprehensive income and credited to the revaluation reserve in equity. A revaluation deficit is recognised in profit or loss, except to the extent that it
offsets an existing surplus on the same asset recognised in the revaluation reserve. Reversals of revaluation deficits follow the original classification of the
deficit in the Statement of comprehensive income.
All other property, plant and equipment is measured at cost less accumulated depreciation and impairment losses. depreciation is calculated on a straight-line
basis to write down the cost to residual value over the estimated useful lives.
the useful lives over which depreciation is charged for all categories of property, plant and equipment are as follows:
Property, plant and equipment
Estimated useful economic life
land
Buildings
computer equipment
Furniture and fittings
Indefinite – land is not depreciated
25 years
3 – 4 years
2 – 10 years
1.16 Investment property
Investment property includes property that is held to earn rentals and/or for capital appreciation. Investment property is initially recognised at cost, including
any directly attributable transaction costs and subsequently measured at fair value.
Investment property held by the Group relates to the Group’s investment in a Jersey Property unit trust (“JPut”). cost represents the transaction price paid for
the investment in the JPut. Although the Group obtained control of the JPut, the investment was not accounted for as a Business combination because
substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset or group of similar identifiable assets. As such, no
goodwill was recognised and the cost of the group of assets was allocated to the individual identifiable assets and liabilities on the basis of their relative fair
values at the date of purchase.
Fair value is the price that would be received to sell a property in an orderly transaction between market participants at the measurement date. the
subsequent measurement of fair value reflects, among other things, rental income from current leases and other assumptions that market participants would
use when pricing investment property under current market conditions. Gains and losses arising from the change in fair value are recognised as income or an
expense in the consolidated statement of comprehensive income. Where investment property is leased out by the Group, rental income from these operating
leases is recognised as income in the consolidated statement of comprehensive income on a straight-line basis over the period of the lease.
1.17 Financial investments
Classification and measurement
the Group continues to apply IAS 39, prior to adoption of IFRS 9 concurrently with IFRS 17 in 2023. Investments are classified at fair value through profit and
loss; including those assets designated by management as such on inception, as they are managed on a fair value basis, and also derivatives that are
classified as held for trading. Financial investments include loans secured by residential mortgages (“ltM’s”) which are classified as financial assets.
Investments are measured at fair value with any gains and losses recognised in net investment income in the consolidated statement of comprehensive
income. transaction costs are recognised in other operating expenses when incurred.
the Group does not apply hedge accounting.
Recognition and derecognition
Regular-way purchases and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the assets.
Amounts payable or receivable on unsettled purchases or sales are recognised in other payables or other receivables respectively. loans secured by residential
mortgages are recognised when cash is advanced to borrowers.
Financial investments are derecognised when our rights to the contractual cash flows expire or the IAS 39 derecognition criteria for transferred financial
assets are met. the criteria include assessment of rights and obligations to the cash flows and assessment of the transfer of substantially all the risks and
rewards of ownership.
144
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 1 SIGNIFICANT ACCOUNTING POLICIES continued
Collateral
the Group receives and pledges collateral in the form of cash or securities in respect of derivative, reinsurance or other contracts such as securities lending.
cash collateral received that is not legally segregated from the Group is recognised as an asset with a corresponding liability for the repayment in other
financial liabilities. cash collateral pledged that is legally segregated from the Group is derecognised and a receivable for its return is recorded in the
consolidated statement of financial position. non-cash collateral received is not recognised as an asset unless it qualifies for derecognition by the transferor.
non-cash collateral pledged continues to be recognised in the consolidated statement of financial position within the appropriate asset classification when
the Group continues to control the collateral and receives the economic benefit.
the Group has various reinsurance collateral arrangements including funds withheld, funds transferred and premium deposit-back arrangements. the
recognition/derecognition of the collateral assets is determined by the IAS 39 recognition/derecognition criteria. An assessment is made of the contractual
terms, including consideration of the Group’s exposure to the economic benefits. See accounting policy 1.18 and note 29 for further details.
Determination of fair value
the financial investments measured at fair value are classified into the three-level hierarchy described in note 17 on the basis of the observability of the inputs
that are significant to the fair value measurement of the financial investment concerned.
the Group uses current bid prices to value its investments with quoted prices. Actively traded investments without quoted prices are valued using prices
provided by third parties. If there is no active established market for an investment, the Group applies an appropriate valuation technique as described below.
the Group holds certain financial investments which are not quoted in active markets. these include loans secured by residential mortgages, derivatives and
other financial investments for which markets are not active. When the markets are not active, there is generally no or limited observable market data that
can be used in the fair value measurement of the financial investments. the determination of whether an active market exists for a financial investment
requires management’s judgement. For all listed fixed maturity securities, a third party fixed income liquidity provider is used to determine whether there is an
active market for a particular security.
If the market for a financial investment of the Group is not active, the fair value is determined using valuation techniques. the Group establishes fair value for
these financial investments by using quotations from independent third parties or internally developed pricing models. the valuation technique is chosen with
the objective of arriving at a fair value measurement which reflects the price at which an orderly transaction would take place between market participants on
the measurement date. the valuation techniques include the use of recent arm’s length transactions, reference to other instruments that are substantially the
same, discounted cash flow analysis and option pricing models. the valuation techniques may include a number of assumptions relating to variables such as
credit risk and interest rates and, for loans secured by mortgages, mortality, future expenses, voluntary redemptions and house price assumptions. changes in
assumptions relating to these variables impact the reported fair value of these financial instruments positively or negatively.
Deferral of IFRS 9
IFRS 4, Insurance contracts, permits the deferral of the application of IFRS 9 until accounting periods commencing on 1 January 2023 to align with the
effective date of IFRS 17, the replacement insurance contracts standard. the option to defer the application of IFRS 9, which the Group has continued to adopt
for 2022, is subject to meeting criteria relating to the predominance of insurance activity.
Eligibility for the deferral approach was based on an assessment of the Group’s liabilities as at 31 december 2016, the end of the annual period during which
the acquisition of Partnership Assurance Group plc took place and the most recent period of significant change in the magnitude of the Group’s activities. At
this date, the Group’s liabilities connected with insurance exceeded the 90% threshold required for the carrying amount of the Group’s total liabilities. In the
Statement of financial position at this date, the Group’s total liabilities were £22,283.9m and liabilities connected with insurance were £21,497.7m, consisting of
insurance contracts within the scope of IFRS 4 of £15,748.0m, investment contract liabilities of £222.3m, and amounts within other financial liabilities and
insurance payables which arise in the course of writing insurance business of £5,527.4m, giving a predominance ratio of 96%.
1.18 Reinsurance
Reinsurance assets and liabilities
Amounts recoverable from reinsurers are measured in a consistent manner with insurance liabilities and are classified as reinsurance assets. If a reinsurance
asset is impaired, the carrying value is reduced accordingly and that impairment loss is recognised in the consolidated statement of comprehensive income.
Reinsurance longevity swap arrangements are classified as either reinsurance assets or reinsurance liabilities based on the net position on the swap at the
reporting date.
Amounts receivable/payable
Where reinsurance contracts entered into by the Group include longevity swap arrangements, such contracts are settled on a net basis and amounts
receivable from or payable to the reinsurers are included in the appropriate heading under either Insurance and other receivables or Insurance and other
payables. Amounts due on quota share reinsurance contracts are included within Insurance and other payables.
Financial liabilities
the Group has reinsurance collateral arrangements whereby the reinsurer deposits back the reinsurance premium. An assessment against the IAS 39
recognition/derecognition criteria is made based on the collateral terms within the reinsurance contracts in order to conclude whether such deposit assets are
recognised on the Group’s balance sheet. Where the assets are recognised the Group also recognises an obligation for the repayment of the collateral. this
obligation is not exposed to longevity risk and is only exposed to financial risk. As such it is unbundled from the IFRS 4 Reinsurance contract balance and is
classified in accordance with IAS 39 within other financial liabilities. the obligation for the return of deposits received from reinsurers is designated at fair
value through profit or loss in order to avoid an accounting mismatch with the valuation of the associated IFRS 4 reinsurance balance.
145
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
1 SIGNIFICANT ACCOUNTING POLICIES continued
the obligation is subsequently valued using an appropriate discount rate for the timing of expected cash flows. the resulting gain or loss is recognised in net
investment income. Interest is charged on the liability in accordance with the terms of the reinsurance contracts and is recognised in finance costs.
1.19 Cash and cash equivalents
cash and cash equivalents in the consolidated statement of cash flows consist of amounts reported in cash available on demand in the consolidated
statement of financial position and also cash equivalents that are reported in Financial investments in the consolidated statement of financial position.
cash available on demand includes cash at bank and in hand and deposits held at call with banks. Additional cash equivalents reported in the consolidated
statement of cash flows include other short-term highly liquid investments with less than 90 days’ maturity from the date of acquisition. these do not meet
the definition of cash available on demand and are therefore reported in financial investments (note 16).
1.20 Equity
the difference between the proceeds received on issue of the shares, net of share issue costs, and the nominal value of the shares issued is credited to the
share premium account.
Interim dividends are recognised in equity in the period in which they are paid. Final dividends require shareholder approval prior to payment and are therefore
recognised when they have been approved by shareholders.
Where the company purchases shares for the purposes of employee incentive plans, the consideration paid, net of issue costs, is deducted from equity. upon
issue or sale, any consideration received is credited to equity net of related costs.
the reserve arising on the reorganisation of the Group represents the difference in the value of the shares in the company and the value of shares in Just
Retirement Group Holdings limited for which they were exchanged as part of the Group reorganisation in november 2013.
loan notes are classified as either debt or equity based on the contractual terms of the instruments. loan notes are classified as equity where they do not
meet the definition of a liability because they are perpetual with no fixed redemption or maturity date, they are only repayable on liquidation, conversion is
only triggered under certain circumstances of non-compliance, and interest on the notes is non-cumulative and cancellable at the discretion of the issuer.
1.21 Insurance liabilities
Measurement
long-term insurance liabilities arise from writing Retirement Income contracts, including defined Benefit de-risking solutions, Guaranteed Income for life
products, long-term care insurance, and protection insurance. their measurement uses estimates of projected future cash flows arising from payments to
policyholders plus the costs of administering them. this is in accordance with the SoRP on Accounting for Insurance Business issued by the ABI in december
2005 (amended in december 2006) and withdrawn with effect for accounting periods beginning on or after 1 January 2015, but which continues to apply to
the Group as the grandfathered existing accounting policy under IFRS 4. Valuation of insurance liabilities is derived using mortality assumptions taken from the
appropriate mortality tables and adjusted to reflect actual and expected experience, expense level and inflation assumptions, discounted using discount rates,
adjusted for default allowance. the assumptions in the valuation are set on a prudent basis.
Liability adequacy test
Insurance liabilities are subject to adequacy testing to ensure the carrying amount is sufficient to cover the current estimate of future cash flows. Any deficit is
immediately charged to the consolidated statement of comprehensive income.
1.22 Investment contract liabilities
Investment contracts are measured at fair value through profit or loss in accordance with IAS 39. the fair value of investment contracts is estimated using an
internal model and determined on a policy-by-policy basis using a prospective valuation of future retirement income benefit and expense cash flows.
1.23 Loans and borrowings
loans and borrowings are initially recognised at fair value, net of transaction costs, and subsequently amortised through profit or loss over the period to
maturity at the effective rate of interest required to recognise the discounted estimated cash flows to maturity.
1.24 Taxation
the current tax expense is based on the taxable profits for the year, using tax rates substantively enacted at the consolidated statement of financial position
date, and after any adjustments in respect of prior years. current and deferred tax is charged or credited to Profit or loss unless it relates to items recognised in
other comprehensive income or directly in equity.
Provision is made for deferred tax liabilities, or credit taken for deferred tax assets, using the liability method, on all material temporary differences between
the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. deferred tax assets and liabilities are measured
using substantively enacted rates based on the timings of when they are expected to reverse.
deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be
utilised.
146
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 2 NET INVESTMENT EXPENSE
Interest income:
Assets at fair value through profit or loss
Movement in fair value:
Financial assets and liabilities designated on initial recognition at fair value through profit or loss
derivative financial instruments (note 28)
Total net investment expense
3 ACQUISITION COSTS
commission
other acquisition expenses
Total acquisition costs
4 OTHER OPERATING EXPENSES
Personnel costs (note 9)
Investment expenses and charges
depreciation of property, plant and equipment (note 14)
Amortisation of intangible assets (note 13)
Impairment of property, plant and equipment (note 14)
other costs
Total other operating expenses
other costs include reassurance management fees, professional fees, and It and marketing costs.
Reconciliation of Other operating expenses to Management expenses
Management expenses are costs that are incurred in the routine running of the business and is included as an APM.
Total other operating expenses
Investment expenses and charges
Reassurance management fees
Amortisation of acquired intangible assets
other costs
Total management expenses
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
637.9
572.1
(4,311.0)
(1,105.4)
(4,778.5)
(832.1)
129.7
(130.3)
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
15.9
39.6
55.5
17.2
31.4
48.6
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
106.3
101.5
30.1
3.3
20.5
–
49.0
209.2
16.8
4.2
20.4
0.3
50.0
193.2
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
209.2
(30.1)
(7.1)
(18.0)
(0.8)
153.2
193.2
(16.8)
(8.4)
(18.0)
(2.6)
147.4
147
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
4 OTHER OPERATING EXPENSES continued
Fees payable for services provided by the Group’s auditor during the year, net of VAt and expenses , are as follows:
Fees payable for the audit of the Parent company and consolidated accounts
Fees payable for other services:
the audit of the company’s subsidiaries pursuant to legislation
Audit-related assurance services
other assurance services
other non-audit services not covered above
Auditor remuneration
Total
Year ended
31 December
2022
£000
Year ended
31 december
2021
£000
616
550
3,042
705
48
1
4,412
4,412
1,876
656
65
–
3,147
3,147
Fees payable for the audit of the company’s subsidiaries pursuant to legislation includes fees of £1.7m (2021: £0.45m) for audit activities related to the
implementation of IFRS 17. Audit-related assurance services mainly include fees relating to the audit of the Group’s Solvency II regulatory returns and review
procedures in relation to the Group’s interim results.
5 FINANCE COSTS
Interest payable on deposits received from reinsurers
Interest payable on subordinated debt
other interest payable
Total finance costs
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
74.7
54.5
3.5
78.7
55.6
2.5
132.7
136.8
the interest payable on deposits received from reinsurers is as defined by the respective reinsurance treaties and calculated with reference to the risk-adjusted
yield on the relevant backing asset portfolio.
6 SEGMENTAL REPORTING
Segmental analysis
the operating segments from which the Group derives income and incurs expenses are as follows:
•
•
the writing of insurance products for distribution to the at- or in-retirement market and the dB de-risking market;
the arranging of guaranteed income for life contracts and lifetime mortgages through regulated advice and intermediary services and the provision of
licensed software to financial advisers, banks, building societies, life assurance companies and pension trustees.
the insurance segment writes insurance products for the retirement market – which include Guaranteed Income for life Solutions, defined Benefit de-risking
Solutions, care Plans and Protection − and invests the premiums received from these contracts in debt and other fixed income securities, gilts, liquidity funds
and lifetime Mortgage advances.
the two revenue streams of the professional services business, HuB represents the other two operating segments. the HuB operating segments are not
currently sufficiently significant to separate to disclose as a reportable segment. In the segmental profit table below, the single reportable segment for
Insurance is reconciled to the total Group result by including an ‘other’ column which includes the non-reportable segments plus the other companies’ results.
this includes the Group’s corporate activities that are primarily involved in managing the Group’s liquidity, capital and investment activities.
the Group operates in one material geographical segment which is the united Kingdom.
the internal reporting used by the codM includes segmental information regarding premiums and profit. Material product information is analysed by product
line and includes shareholder funded dB, GIfl, dB Partnering, care Plans, Protection, ltM and drawdown products. Further information on the dB partnering
transactions is included in the Business Review. the information on adjusted operating profit and profit before tax used by the codM is presented on a
combined product basis within the insurance operating segment and is not analysed further by product.
Adjusted operating profit
the Group reports adjusted operating profit as an alternative measure of profit which is used for decision making and performance measurement. Adjusted
operating profit is the sum of the new business operating profit and in-force operating profit, operating experience and assumption changes, other Group
companies’ operating results, development expenditure and reinsurance and financing costs. the Board believes it provides a better view of the longer-term
performance of the business than profit before tax because it excludes the impact of short-term economic variances and other one-off items. It excludes the
following items that are included in profit before tax: non-recurring and project expenditure, implementation costs for cost saving initiatives, investment and
economic profits and amortisation and impairment costs of acquired intangible assets. In addition, it includes tier 1 interest (as part of financing costs) which
is not included in profit before tax.
148
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 6 SEGMENTAL REPORTING continued
new business profits represent expected investment returns on financial instruments assumed to be newly purchased to back that business after allowances
for expected movements in liabilities and deduction of acquisition costs. Profits arising from the in-force book of business represent the expected return on
surplus assets, the expected unwind of prudent reserves above best estimates for mortality, expenses, and corporate bond defaults.
Segmental reporting and reconciliation to financial information
Year ended 31 December 2022
Year ended 31 december 2021
new business operating profit
In-force operating profit
other Group companies’ operating results
development expenditure
Reinsurance and financing costs
Underlying operating profit
operating experience and assumption changes
Adjusted operating profit/(loss) before tax
non-recurring and project expenditure
Investment and economic (losses)/profits
Interest adjustment to reflect IFRS accounting for tier 1 notes as equity
Profit/(loss) before amortisation costs and tax
Amortisation of acquired intangibles
Loss before tax
Insurance
£m
233.2
113.1
–
(9.4)
(87.5)
249.4
86.9
336.3
(11.7)
(658.5)
27.3
(306.6)
–
(306.6)
Other
£m
–
2.9
(15.2)
(2.3)
14.2
(0.4)
–
(0.4)
(0.4)
19.3
(11.3)
7.2
(18.0)
(10.8)
Total
£m
233.2
116.0
(15.2)
(11.7)
(73.3)
249.0
86.9
335.9
(12.1)
(639.2)
16.0
(299.4)
(18.0)
(317.4)
Insurance
£m
224.7
87.3
–
(4.2)
(89.1)
218.7
28.0
246.7
(14.8)
(248.6)
28.1
11.4
–
11.4
other
£m
–
2.7
(15.1)
(2.6)
6.0
(9.0)
–
(9.0)
(0.2)
(2.6)
(3.0)
(14.8)
(18.0)
(32.8)
total
£m
224.7
90.0
(15.1)
(6.8)
(83.1)
209.7
28.0
237.7
(15.0)
(251.2)
25.1
(3.4)
(18.0)
(21.4)
Investment and economic losses of £639.2m in 2022 (2021: £251.2m), were principally driven by rising interest rates.
Product information analysis
Premium information relating to the Group’s products is presented below:
defined Benefit de-risking Solutions (“dB”)
Guaranteed Income for life contracts (“GIfl”)
defined benefit de-risking partnering (“dB partnering”)
care Plans (“cP”)
Protection
Gross premiums written
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
2,566.9
519.7
258.6
44.1
2.0
1,934.6
688.2
–
51.1
2.2
3,391.3
2,676.1
drawdown and lifetime Mortgage (“ltM”) products are accounted for as investment contracts and financial investments respectively in the statement of
financial position. An analysis of the amounts advanced during the year for these products is shown below:
ltM advances
drawdown deposits and other investment products
Reconciliation of gross premiums written to Retirement Income sales
Retirement Income sales is a collective term for GIfl, dB and care Plan and can be seen in the Business Review on page 25.
Gross premiums written
Protection sales excluded from Retirement Income sales
dB partnering funded
Retirement Income sales
149
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
538.3
14.0
528.2
1.1
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
3,391.3
2,676.1
(2.0)
(258.6)
(2.2)
–
3,130.7
2,673.9
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
7 INCOME TAX
Current taxation
current year
Adjustments in respect of prior periods
Total current tax
Deferred taxation
deferred tax recognised for losses in period
origination and reversal of temporary differences
Adjustment in respect of prior period
Remeasurement of deferred tax - change in uK tax rate
Total deferred tax
Total income tax recognised in profit or loss
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
–
8.5
8.5
(84.4)
(2.6)
(8.4)
1.2
(94.2)
(85.7)
0.8
(0.4)
0.4
–
(5.7)
–
(0.3)
(6.0)
(5.6)
deferred tax assets are recognised at the rate at which they are expected to be utilised. on 3 March 2021, the Government announced an increase in the rate
of corporation tax to 25% from 1 April 2023. the change in tax rate was substantively enacted in May 2021.
Reconciliation of total income tax to the applicable tax rate
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
(317.4)
(60.3)
(21.4)
(4.1)
1.4
1.2
–
(23.3)
0.1
(4.8)
(85.7)
1.0
(0.3)
0.1
–
(0.4)
(1.9)
(5.6)
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
0.2
0.2
0.2
–
–
–
loss on ordinary activities before tax
Income tax at 19%, (2021: 19%)
Effects of:
Expenses not deductible for tax purposes
Remeasurement of deferred tax - change in uK tax rate
unrecognised deferred tax asset
Impact of future tax rate on tax losses
Adjustments in respect of prior periods
other
Total income tax recognised in profit or loss
Income tax recognised in other comprehensive income
Revaluation of land and buildings
total deferred tax
Total income tax recognised in other comprehensive income
150
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 7 INCOME TAX continued
Income tax recognised directly in equity
Current taxation
Relief on tier 1 interest
Relief on cost of redeeming tier 1 notes
other
Total current tax
Deferred taxation
Relief on tier 1 interest
Relief in respect of share-based payments
Total deferred tax
Total income tax recognised directly in equity
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
–
–
–
–
(3.2)
(1.3)
(4.5)
(4.5)
(4.8)
(9.6)
(0.6)
(15.0)
–
–
–
(15.0)
taxation of life insurance companies was fundamentally changed following the publication of the Finance Act 2012. Since 1 January 2013, life insurance tax
has been based on financial statements; prior to this date, the basis for profits chargeable to corporation tax was surplus arising within the Pillar 1 regulatory
regime. cumulative differences arising between the two bases, which represent the differences in retained profits and taxable surplus which are not excluded
items for taxation, are brought back into the computation of taxable profits. However, the legislation provides for transitional arrangements whereby such
differences are amortised on a straight-line basis over a ten year period from 1 January 2013. Similarly, the resulting cumulative transitional adjustments for
tax purposes in adoption of IFRS are amortised on a straight-line basis over a ten year period from 1 January 2016. the tax charge for the year to 31 december
2022 includes profits chargeable to corporation tax arising from amortisation of transitional balances of £2.5m (2021: £2.5m).
8 REMUNERATION OF DIRECTORS
Information concerning individual directors’ emoluments, interests and transactions is given in the directors’ Remuneration report. For the purposes of the
disclosure required by Schedule 5 to the companies Act 2006, the total aggregate emoluments of the directors in the year was £5.2m (2021: £3.9m). Employer
contributions to pensions for Executive directors for qualifying periods were £nil (2021: £nil). the aggregate net value of share awards granted to the directors
in the year was £2.4m (2021: £2.0m). the net value has been calculated by reference to the closing middle-market price of an ordinary share at the date of
grant. two directors exercised share options during the year with an aggregate gain of £0.9m (2021: two directors exercised options with an aggregate gain of
£0.6m).
9 STAFF NUMBERS AND COSTS
the average number of persons employed by the Group (including directors) during the financial year, analysed by category, was as follows:
directors
Senior management
Staff
Average number of staff
the aggregate personnel costs were as follows:
Wages and salaries
Social security costs
other pension costs
Share-based payment expense
Total personnel costs
151
Year ended
31 December
2022
Number
Year ended
31 december
2021
number
10
124
990
9
123
944
1,124
1,076
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
85.6
10.2
4.6
5.9
82.3
9.9
4.3
5.0
106.3
101.5
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
10 EMPLOYEE BENEFITS
Defined contribution pension scheme
the Group operates a defined contribution pension scheme. the pension cost charge for the year represents contributions payable to the fund and amounted
to £4.6m (2021: £4.3m).
Employee share plans
the Group operates a number of employee share option plans. details of those plans are as follows:
Just Retirement Group plc 2013 Long Term Incentive Plan (“LTIP”)
the Group has made awards under the ltIP to Executive directors and other senior managers. Awards are made in the form of nil-cost options which become
exercisable on the third anniversary of the grant date, subject to the satisfaction of service and performance conditions set out in the directors’ Remuneration
report. options are exercisable until the tenth anniversary of the grant date. options granted are subject to a two year holding period after the options have
vested.
the options are accounted for as equity-settled schemes.
the number and weighted-average remaining contractual life of outstanding options under the ltIP are as follows:
outstanding at 1 January
Granted
Forfeited
Exercised
Expired
Outstanding at 31 December
Exercisable at 31 december
Weighted-average share price at exercise (£)
Weighted-average remaining contractual life (years)
the exercise price for options granted under the ltIP is nil.
Year ended
31 December
2022
Number of
options
Year ended
31 december
2021
number of
options
22,403,125
19,264,506
8,563,671
6,795,784
(1,149,299)
(868,418)
(2,679,669)
(1,351,472)
(1,202,105)
(1,437,275)
25,935,723
22,403,125
4,740,542
3,853,927
0.81
1.09
1.02
1.19
during the year to 31 december 2022, awards of ltIPs were made on 24 March 2022 and 12 April 2022. the weighted-average fair value and assumptions used
to determine the fair value of the ltIPs and the buy-out options granted during the year are as follows:
Fair value at grant date
option pricing models used
Share price at grant date
Exercise price
Expected volatility – tSR performance
Expected volatility – holding period
option life
dividends
Risk-free interest rate – tSR performance
Risk-free interest rate – holding period
Black–Scholes, Stochastic, Finnerty
£0.80
£0.89
Nil
March awards – 53.13%, April awards – 52.96%
March awards – 47.14%, April awards – 44.09%
3 years + 2 year holding period
HUB LTIP awards – 1.69%, Other – Nil
March awards – 1.46%, April awards – 1.62%
March awards – 1.45%, April awards – 1.61%
A Stochastic model is used where vesting is related to a total shareholder return target, a Black-Scholes option pricing model is used for all other performance
vesting targets, and a Finnerty model is used to model the holding period.
For awards subject to a tSR performance condition, expected volatility has been calculated using historic volatility of the company and each company in the
tSR comparator group, where available, over the period of time commensurate with the remainder of the performance period immediately prior to the date of
grant. For awards with a holding period condition, expected volatility has been calculated using historic volatility of the company over the period of time
commensurate with the holding period immediately prior to the date of grant.
Deferred share bonus plan (“DSBP”)
the dSBP is operated in conjunction with the Group’s short-term incentive plan for Executive directors and other senior managers of the company or any of its
subsidiaries, as explained in the directors’ Remuneration Report. Awards are made in the form of nil-cost options which become exercisable on the third
anniversary, and until the tenth anniversary, of the grant date.
152
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 10 EMPLOYEE BENEFITS continued
the options are accounted for as equity-settled schemes.
the number and weighted-average remaining contractual life of outstanding options under the dSBP are as follows:
outstanding at 1 January
Granted
Forfeited
Exercised
Outstanding at 31 December
Exercisable at 31 december
Weighted-average share price at exercise (£)
Weighted-average remaining contractual life (years)
the exercise price for options granted under the dSBP is nil.
Year ended
31 December
2022
Number of
options
Year ended
31 december
2021
number of
options
5,788,003
5,094,921
1,313,916
1,432,610
–
–
(1,103,280)
(739,528)
5,998,639
5,788,003
1,652,826
1,683,566
0.83
0.84
0.93
0.93
during the year to 31 december 2022, awards of dSBPs were made on 24 March 2022. the weighted-average fair value and assumptions used to determine the
fair value of options granted during the year under the dSBP are as follows:
Fair value at grant date
option pricing model used
Share price at grant date
Exercise price
Expected volatility
option life
dividends
Risk-free interest rate
£0.89
Black–Scholes
£0.89
Nil
Nil
3 years
Nil
Nil
Save As You Earn (“SAYE”) scheme
the Group operates SAYE plans for all employees, allowing a monthly amount to be saved from salaries over either a three or five year period that can be used
to purchase shares in the company at a predetermined price. the employee must remain in employment for the duration of the saving period and satisfy the
monthly savings requirement (except in “good leaver” circumstances). options are exercisable for up to six months after the saving period.
the options are accounted for as equity-settled schemes.
the number, weighted-average exercise price, weighted-average share price at exercise, and weighted-average remaining contractual life of outstanding
options under the SAYE are as follows:
outstanding at 1 January
Granted
Forfeited
cancelled
Exercised
Expired
Outstanding at 31 December
Exercisable at 31 december
Weighted-average share price at exercise
Weighted-average remaining contractual life (years)
153
Year ended 31 December 2022
Year ended 31 december 2021
Number of
options
14,779,553
1,924,649
(791,758)
(526,561)
(2,337,700)
(130,043)
12,918,140
233,954
Weighted-
average
exercise price
£
0.44
0.71
0.46
0.59
0.50
0.79
0.45
0.59
0.72
1.22
number of
options
15,516,003
1,149,350
(1,081,602)
(363,145)
(408,488)
(32,565)
14,779,553
278,130
Weighted-
average
exercise price
£
0.41
0.74
0.42
0.45
0.45
0.84
0.44
0.60
0.93
1.66
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
10 EMPLOYEE BENEFITS continued
the range of exercise prices of options outstanding at the end of the year are as follows:
£0.38
£0.52
£0.71
£0.74
£1.07
£1.18
Total
2022
Number of
options
outstanding
2021
number of
options
outstanding
9,949,082
11,119,351
395,051
2,443,437
1,718,536
–
787,780
1,079,922
66,166
1,525
66,166
70,677
12,918,140
14,779,553
during the year to 31 december 2022, awards of SAYEs were made on 20 April 2022. the weighted-average fair value and assumptions used to determine the
fair value of options granted during the year under the SAYE are as follows:
Fair value at grant date
option pricing model used
Share price at grant date
Exercise price
Expected volatility – 3 year scheme
Expected volatility – 5 year scheme
option life
dividends
Risk-free interest rate – 3 year scheme
Risk-free interest rate – 5 year scheme
£0.41
Black–Scholes
£0.93
£0.71
54.24%
48.39%
3.37 or 5.37 years
1.62%
1.70%
1.72%
Expected volatility has been calculated using historic volatility of the company over the period of time commensurate with the expected term of the awards
immediately prior to the date of grant.
11 EARNINGS PER SHARE
the calculation of basic and diluted earnings per share is based on dividing the profit or loss attributable to ordinary equity holders of the company by the
weighted-average number of ordinary shares outstanding and by the diluted weighted-average number of ordinary shares potentially outstanding at the end
of the year. the weighted-average number of ordinary shares excludes shares held by the Employee Benefit trust on behalf of the company to satisfy future
exercises of employee share scheme awards.
Year ended 31 December 2022
Year ended 31 december 2021
(loss)/profit attributable to equity holders of Just Group plc
coupon payments in respect of tier 1 notes (net of tax)
loss on redemption of tier 1 notes (net of tax)
Weighted-
average
number of
shares
million
–
–
–
Earnings
£m
(231.1)
(13.6)
–
Earnings
per share
pence
Earnings
(restated)
£m
–
–
–
(15.0)
(20.4)
(47.0)
(82.4)
–
Weighted-
average
number of
shares
million
Earnings
per share
(restated)
pence
–
–
–
–
–
–
1,033.7
(7.97)
–
–
Basic (loss)/profit attributable to ordinary equity holders of Just Group plc
(244.7)
1,032.4
(23.70)
Effect of potentially dilutive share options1
–
–
–
Diluted (loss)/profit attributable to ordinary equity holders of Just Group plc
(244.7)
1,032.4
(23.70)
(82.4)
1,033.7
(7.97)
1 the weighted-average number of share options for the year ended 31 december 2022 that could potentially dilute basic earnings per share in the future but are not included in diluted EPS
because they would be antidilutive was 23.3 million share options.
during the current year, the FRc conducted a limited scope review of the company’s 2021 Annual Report and Accounts in accordance with Part 2 of the FRc
corporate Reporting Review operating Procedures. the review covered only those aspects of the Annual Report and Accounts that relate to the application of
IAS 33, Earnings per share, and compliance with its requirements.
154
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 11 EARNINGS PER SHARE continued
As a result of this review, the directors reconsidered the accounting for the loss on redemption of the Restricted tier 1 (“Rt1”) notes redeemed in 2021.
Judgement is required in determining the treatment the Rt1 notes in application of IAS 33, Earnings per share. the rights associated with the Rt1 notes are
such that the notes are deemed similar to preference shares. therefore the requirements in IAS 33 to adjust earnings for redemption gains and losses apply
to the Rt1 notes in addition to the company’s existing treatment of the coupon payments which were deducted from earnings in the 2021 Annual Report.
this note has therefore been restated to correct the treatment of the loss on redemption of the 2019 Restricted tier 1 notes identified during their review.
the table showing the calculation of the numerator has been amended to include this; losses for the purposes of calculating EPS were previously reported
as £(35.4)m and have been restated to £(82.4)m. Following on from this, EPS and diluted EPS have both been restated to use the restated earnings figure.
Previously, losses per share was disclosed as (3.42) pence and diluted losses per share was disclosed as (3.42) pence. losses per share is now disclosed as
(7.97) pence and diluted losses per share as (7.97) pence. there is no impact on adjusted earnings per share.
12 DIVIDENDS AND APPROPRIATIONS
dividends and appropriations paid in the year were as follows:
Final dividend
Final dividend in respect of prior year end (1.0 pence per ordinary share, paid on 17 May 2022)
Interim dividend
Interim dividend in respect of current year end (0.5 pence per ordinary share, paid on 2 September 2022)
dividends paid on the vesting of employee share schemes
Total dividends paid
coupon payments in respect of tier 1 notes1
Total distributions to equity holders in the period
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
10.4
5.2
–
15.6
16.9
32.5
–
–
–
–
25.2
25.2
1 coupon payments on tier 1 notes are treated as an appropriation of retained profits and, accordingly, are accounted for when paid.
Subsequent to 31 december 2022, the directors proposed a final dividend for 2022 of 1.23 pence per ordinary share (2021: 1.0 pence) and together with the
interim dividend of 0.5 pence per ordinary share paid in 2 September 2022 amounting to £17.9m (2021: £10.4m) in total. Subject to approval by shareholders at
the company’s 2023 AGM, the dividend will be paid on 17 May 2023 to shareholders on the register of members at the close of business on 14 April 2023, and
will be accounted for as an appropriation of retained earnings in year ending 31 december 2023.
13 INTANGIBLE ASSETS
Acquired intangible assets
Year ended 31 December 2022
Cost
At 1 January 2022
Additions
disposals
At 31 December 2022
Amortisation and impairment
At 1 January 2022
disposals
charge for the year
At 31 December 2022
Net book value at 31 December 2022
net book value at 31 december 2021
Present
value of
in-force
business
£m
Goodwill
£m
34.9
200.0
–
–
–
–
34.9
200.0
(0.8)
(125.4)
–
–
–
(17.9)
(0.8)
(143.3)
34.1
34.1
56.7
74.6
Distribution
network
£m
Brand
£m
Intellectual
property
£m
Software
£m
Leases
£m
PrognoSys™
£m
Software
£m
Total
£m
–
–
–
–
–
–
–
–
–
–
2.0
–
–
2.0
(0.7)
–
(0.1)
(0.8)
1.2
1.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5.9
–
0.4
6.3
25.0
4.6
(0.4)
267.8
4.6
–
29.2
272.4
(3.1)
(18.1)
(148.1)
–
(0.5)
(3.6)
2.7
2.8
–
–
(2.0)
(20.5)
(20.1)
(168.6)
9.1
6.9
103.8
119.7
–
–
–
–
–
–
–
–
–
–
155
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
13 INTANGIBLE ASSETS continued
Acquired intangible assets
Present
value of
in-force
business
£m
Goodwill
£m
distribution
network
£m
Brand
£m
Intellectual
property
£m
Software
£m
leases
£m
PrognoSys™
£m
Software
£m
total
£m
Year ended 31 december 2021
cost
At 1 January 2021
Additions
disposals
34.9
200.0
–
–
–
–
26.6
–
5.6
–
(26.6)
(5.6)
At 31 december 2021
34.9
200.0
–
–
Amortisation and impairment
At 1 January 2021
disposals
charge for the year
At 31 december 2021
net book value at 31 december 2021
net book value at 31 december 2020
(0.8)
(107.6)
–
–
–
(17.8)
(0.8)
(125.4)
34.1
34.1
74.6
92.4
(26.6)
26.6
(5.6)
5.6
–
–
–
–
–
–
–
–
2.0
–
–
2.0
(0.6)
–
(0.1)
(0.7)
1.3
1.4
11.1
–
2.0
–
(11.1)
(2.0)
5.9
18.4
306.5
–
–
6.6
–
6.6
(45.3)
–
–
5.9
25.0
267.8
(11.1)
11.1
(2.0)
2.0
–
–
–
–
–
–
–
–
(2.6)
(16.1)
(173.0)
–
(0.5)
(3.1)
2.8
3.3
–
45.3
(2.0)
(20.4)
(18.1)
(148.1)
6.9
2.3
119.7
133.5
the amortisation and impairment charge is recognised in other operating expenses in profit or loss.
Impairment testing
Goodwill is tested for impairment in accordance with IAS 36, Impairment of Assets, at least annually.
the Group’s goodwill of £34.1m at 31 december 2022 represents £1.0m recognised on the 2018 acquisition of HuB Pension consulting (Holdings) limited,
£0.3m recognised on the 2016 acquisition of the Partnership Assurance Group and £32.8m on the 2009 acquisition by Just Retirement Group Holdings limited
of Just Retirement (Holdings) limited, the holding company of Just Retirement limited (“JRl”).
the existing goodwill has been allocated to the insurance segment as the cash-generating unit. the recoverable amounts of goodwill have been determined
from value-in-use. the key assumptions of this calculation are noted below:
Period on which management approved forecasts are based
discount rate (pre-tax)
2022
2021
5 years
12.7%
5 years
10.5%
the value-in-use of the insurance operating segment is considered by reference to the latest business plans over the next five years, which reflect
management’s best estimate of future cash flows based on historical experience, expected growth rates and assumptions around market share, customer
numbers, expense inflation and mortality rates, including an allowance for the mortality rates basis changes due to coVId-19. the discount rate was
determined using a weighted average cost of capital approach, with appropriate adjustments to reflect a market participant’s view. the outcome of the
impairment assessment is that the goodwill in respect of the insurance operating segment is not impaired and that the value-in-use is higher than the
carrying value of goodwill.
Any reasonably possible changes in assumptions will not cause the carrying value of the goodwill to exceed the recoverable amounts.
other intangible assets with finite useful economic lives are tested for impairment when there is an indication that the carrying value of the asset may be
subject to an impairment.
the Group’s PVIF of £56.7m at 31 december 2022 represents the present value of future profits from the purchased in-force business of £46.4m recognised on
the 2016 acquisition of Partnership Assurance Group and £10.3m on the 2009 acquisition of Just Retirement (Holdings) limited, the holding company of Just
Retirement limited. the remaining useful economic lives of the Group’s PVIF ranges from between two to three years. there are no indications of impairment
of the carrying values of PVIF or other intangible assets with finite useful economic lives.
PVIF is an intangible asset within the scope of IFRS 4 and is assessed at least annually, together with the insurance contract liabilities, which are subject to the
required liability adequacy test.
156
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 14 PROPERTY, PLANT AND EQUIPMENT
Year ended 31 December 2022
Cost or valuation
At 1 January 2022
Acquired during the year
Revaluations
At 31 December 2022
Depreciation and impairment
At 1 January 2022
Eliminated on revaluation
Impairment
depreciation charge for the year
At 31 December 2022
Net book value at 31 December 2022
net book value at 31 december 2021
Year ended 31 december 2021
cost or valuation
At 1 January 2021
Acquired during the year
transfer to held for sale
At 31 december 2021
depreciation and impairment
At 1 January 2021
Impairment
depreciation charge for the year
transfer to held for sale
At 31 december 2021
net book value at 31 december 2021
net book value at 31 december 2020
(8.6)
(6.1)
(5.0)
(20.2)
Freehold land
and buildings
£m
Computer
equipment
£m
Furniture and
fittings
£m
Right-of-use
assets
£m
10.8
–
(0.9)
9.9
(0.5)
0.8
–
(0.4)
(0.1)
9.8
10.3
10.6
0.9
–
11.5
6.3
2.6
–
8.9
6.7
8.1
–
14.8
–
–
(1.0)
(9.6)
1.9
2.0
–
–
(0.1)
(6.2)
2.7
0.2
–
–
(1.8)
(6.8)
8.0
1.7
Freehold land
and buildings
£m
computer
equipment
£m
Furniture and
fittings
£m
Right-of-use
assets
£m
14.3
–
(3.5)
10.8
(0.1)
(0.3)
(0.5)
0.4
(0.5)
10.3
14.2
9.9
0.7
–
10.6
(7.2)
–
(1.4)
–
(8.6)
2.0
2.7
6.3
–
–
6.3
(5.9)
–
(0.2)
–
(6.1)
0.2
0.4
6.1
0.6
–
6.7
(2.9)
–
(2.1)
–
(5.0)
1.7
3.2
Total
£m
34.4
11.6
(0.9)
45.1
0.8
–
(3.3)
(22.7)
22.4
14.2
total
£m
36.6
1.3
(3.5)
34.4
(16.1)
(0.3)
(4.2)
0.4
(20.2)
14.2
20.5
Included in freehold land and buildings is land of value £2.3m (2021: £2.8m).
the company’s freehold land and buildings are stated at their revalued amounts, being the fair value at the date of revaluation less any subsequent
accumulated depreciation and subsequent accumulated impairment losses. the fair value measurements of freehold land and buildings as at 11 november
2022 were performed by Hurst Warne & Partners Surveyors ltd, independent valuers not related to the company. Hurst Warne & Partners Surveyors ltd is
registered for regulation by the Royal Institution of chartered Surveyors (“RIcS”). the valuation process relies on expert judgement which is heightened due to
the macroeconomic related uncertainty. the valuer has sufficient current local knowledge of the particular market, and the knowledge, skills and
understanding to undertake the valuation competently. the fair value of the freehold land was undertaken using a residual valuation assuming a new build
office on each site to an exact equivalent size as currently and disregarding the possibility of developing any alternative uses or possible enhancements. the
fair value of the buildings was determined based on open market comparable evidence of market rent. the fair value measurement of revalued land and
buildings has been categorised as level 3 within the fair value hierarchy based on the non-observable inputs to the valuation technique used.
Revaluations during 2022 comprise a loss of £0.5m recognised in profit or loss, a gain of £0.5m recognised in other comprehensive income (gross of tax of
£0.3m), partially reversing previously recognised gains of £4.3m (gross of tax of £0.7m), and the elimination of depreciation on the revaluations of £0.8m.
If freehold land and buildings were stated on the historical cost basis, the carrying values would be land of £3.6m (2021: £3.6m) and buildings of £4.4m
(2021: £4.6m).
Right-of-use assets are property assets leased by the Group (see note 26).
157
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
15 INVESTMENT PROPERTY
At 1 January
Recognised on acquisition of the Jersey Property unit trust (see note 35)
net loss from fair value adjustment
At 31 December
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
69.6
–
(29.3)
40.3
–
70.6
(1.0)
69.6
Investment properties are leased to tenants. Investment properties are valued using discounted cash flow analysis using assumptions based on the
repayment of the underlying loan. the valuation model discounts the expected future cash flows using a discount rate which includes a credit spread
allowance associated with that asset. the redemption and default assumptions are derived from the assumptions for the Group’s bond portfolio.
Minimum lease payments receivable on leases of investment properties are as follows (undiscounted cashflows):
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
later than 5 years
Total
2022
£m
1.1
1.1
1.1
1.1
1.1
127.7
133.2
2021
£m
1.1
1.1
1.1
1.1
1.1
128.8
134.3
16 FINANCIAL INVESTMENTS
All of the Group’s financial investments are measured at fair value through the profit or loss and are either designated as such on initial recognition or, in the
case of derivative financial assets, classified as held for trading.
units in liquidity funds
Investment funds
debt securities and other fixed income securities
deposits with credit institutions
loans secured by residential mortgages
loans secured by commercial mortgages
loans secured by ground rents
Infrastructure loans
other loans
derivative financial assets
Total
Fair value
2022
£m
1,174.4
421.0
2021
£m
1,310.5
301.8
cost
2022
£m
1,174.4
407.8
2021
£m
1,310.5
290.5
11,370.5
12,924.0
13,229.7
12,141.7
907.6
52.9
907.6
52.9
5,305.9
7,422.8
4,265.6
4,328.7
583.7
246.9
1,056.4
134.2
2,276.6
677.8
189.7
993.1
117.9
691.2
643.4
356.3
1,205.8
131.0
–
686.3
185.9
858.0
115.0
–
23,477.2
24,681.7
22,321.6
19,969.5
the majority of investments included in debt securities and other fixed income securities are listed investments.
units in liquidity funds comprise wholly of units in funds which invest in very short dated liquid assets. However as they do not meet the definition of cash
available on demand, liquidity funds are reported within financial investments. liquidity funds do however meet the definition of cash equivalents for the
purposes of disclosure in the consolidated statement of cash flows.
deposits with credit institutions with a carrying value of £892.4m (2021: £50.3m) have been pledged as collateral in respect of the Group’s derivative financial
instruments. Amounts pledged as collateral are deposited with the derivative counterparty.
derivatives are reported within financial investments where the derivative valuation is in an asset position, or alternatively within other financial liabilities
where the derivative is in a liability position.
158
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 17 FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE
this note explains the methodology for valuing the Group’s financial assets and liabilities measured at fair value, including financial investments, and provides
disclosures in accordance with IFRS 13, Fair value measurement, including an analysis of such assets and liabilities categorised in a fair value hierarchy based
on market observability of valuation inputs.
(a) Determination of fair value and fair value hierarchy
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy described as
follows, based on the lowest level input that is significant to the fair value measurement as a whole.
Level 1
Inputs to level 1 fair values are unadjusted quoted prices in active markets for identical assets and liabilities that the entity can access at the measurement
date.
Level 2
Inputs to level 2 fair values are inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.
If the asset or liability has a specified (contractual) term, a level 2 input must be observable for substantially the full term of the instrument. level 2 inputs
include the following:
• quoted prices for similar assets and liabilities in active markets;
• quoted prices for identical assets or similar assets in markets that are not active, the prices are not current, or price quotations vary substantially either
over time or among market makers, or in which very little information is released publicly;
inputs other than quoted prices that are observable for the asset or liability; and
•
• market-corroborated inputs.
Level 3
Inputs to level 3 fair values include some unobservable inputs for the asset or liability. unobservable inputs are used to measure fair value to the extent that
observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement
date. However, the fair value measurement objective remains the same, i.e. an exit price at the measurement date from the perspective of a market
participant that holds the asset or owes the liability. unobservable inputs reflect the same assumptions as those that the market participant would use in
pricing the asset or liability.
Assessment of the observability of pricing information
All level 1 and 2 assets continue to have pricing available from actively quoted prices or observable market data.
Where the Group receives broker/asset manager quotes and the information is given a low BVAl score, the investments are classified as level 3 as are assets
valued internally.
debt securities and financial derivatives are valued using independent pricing services or third party broker quotes are classified as level 2.
the Group’s assets and liabilities held at fair value which are valued using valuation techniques for which significant observable market data is not available
and classified as level 3 include loans secured by mortgages, infrastructure loans, private placement debt securities, investment funds, investment contract
liabilities, and deposits received from reinsurers.
159
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
17 FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE continued
(b) Analysis of assets and liabilities held at fair value according to fair value hierarchy
Assets held at fair value through profit or loss
units in liquidity funds
Investment funds
2022
2021
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
level 1
£m
level 2
£m
level 3
£m
total
£m
1,169.8
–
4.6
82.6
–
1,174.4
1,304.9
338.4
421.0
–
5.6
68.5
–
1,310.5
233.3
301.8
debt securities and other fixed income securities
3,843.7
5,904.0
1,622.8 11,370.5
4,302.5
7,172.0
1,449.5 12,924.0
deposits with credit institutions
loans secured by residential mortgages
loans secured by commercial mortgages
loans secured by ground rents
Infrastructure loans
other loans
derivative financial assets
Financial investments
Investment property
Assets classified as held for sale
Total financial assets
892.4
15.2
–
907.6
50.3
2.6
–
52.9
–
–
–
–
–
–
–
–
–
–
5,305.9
5,305.9
583.7
246.9
583.7
246.9
1,056.4
1,056.4
–
–
–
–
–
–
–
–
22.3
111.9
134.2
15.6
12.6
2,276.6
–
2,276.6
–
682.7
7,422.8
7,422.8
677.8
189.7
993.1
89.7
8.5
677.8
189.7
993.1
117.9
691.2
5,905.9
8,305.3
9,266.0 23,477.2
5,673.3
7944.0 11,064.4 24,681.7
–
–
–
–
40.3
40.3
–
–
–
–
–
–
69.6
3.1
69.6
3.1
5,905.9
8,305.3
9,306.3 23,517.5
5,673.3
7,944.0 11,137.1 24,754.4
Liabilities held at fair value through profit or loss
derivative financial liabilities
–
3,004.1
19.1
3,023.2
–
386.1
obligations for repayment of cash collateral received
592.8
30.3
–
623.1
311.7
14.5
8.6
–
394.7
326.2
deposits received from reinsurers
Other financial liabilities
Investment contract liabilities
Fair value of loans and borrowings at amortised cost
–
–
1,603.9
1,603.9
–
–
2,144.7
2,144.7
592.8
3,034.4
1,623.0
5,250.2
311.7
400.6
2,153.3
2,865.6
–
–
–
32.5
32.5
704.2
–
704.2
–
–
–
33.6
33.6
936.8
–
936.8
Total financial liabilities
592.8
3,738.6
1,655.5
5,986.9
311.7
1,337.4
2,186.9
3,836.0
other than freehold land and buildings classified as held for sale in 2021 and disposed of in 2022, there are no non-recurring fair value measurements as at
31 december 2022 (2021: nil).
(c) Transfers between levels
the Group’s policy is to assess pricing source changes and determine transfers between levels as of the end of each half-yearly reporting period. during 2021
the Group enhanced its methodology over the levelling of financial instruments, and in 2022, it continued to use this methodology which improved the pricing
sources resulting in transfers of £1,421.7m from level 2 to level 1 (2021: £2,820.8m), and saw the pricing quality fall for £368.2m which moved from level 1 to
level 2 (2021: £13.3m). A further £122.9m saw the pricing quality also improve so were moved from level 3 to level 2. In the prior year £49.9m moved from
level 2 to level 3 as the pricing quality fell.
160
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 17 FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE continued
(d) Level 3 assets and liabilities measured at fair value
Reconciliation of the opening and closing balances of level 3 financial assets and liabilities.
Debt
securities
and other
fixed
income
securities
£m
Investment
funds
£m
Loans
secured by
residential
mortgages
£m
Loans
secured by
commercial
mortgages
£m
Loans
secured
by ground
rents
£m
Infra-
structure
loans
£m
Year ended 31 December 2022
At 1 January 2022
233.3
1,449.5
7,422.8
Purchases/advances/deposits
106.6
716.0
538.3
transfers to level 2
–
(122.9)
–
677.8
91.5
–
189.7
217.6
–
993.1
369.4
–
Other
loans
£m
89.7
–
–
Sales/redemptions/payments
(17.7)
(101.1)
(542.7)
(134.4)
(11.2)
(21.6)
(14.3)
disposal of a portfolio of ltMs1
Recognised in profit or loss in net
investment income
Realised gains and losses
–
–
–
–
(750.8)
–
(87.0)
(2.2)
–
–
–
–
–
–
unrealised gains and losses
16.2
(303.3)
(1,433.9)
(49.1)
(149.2)
(286.1)
36.5
(8.5)
Interest accrued
change in fair value of liabilities
recognised in profit or loss
–
–
(15.4)
159.2
–
–
0.1
–
–
–
1.6
–
–
–
At 31 December 2022
338.4
1,622.8
5,305.9
583.7
246.9
1,056.4
111.9
–
–
–
Derivative
financial
assets
£m
Investment
contract
liabilities
£m
Derivative
financial
liabilities
£m
Deposits
received
from
reinsurers
£m
(33.6)
(14.0)
–
11.4
–
–
–
–
3.7
(8.6)
(2,144.7)
–
–
–
–
–
(10.5)
–
–
(0.9)
–
192.9
–
–
423.5
(74.7)
–
(32.5)
(19.1)
(1,603.9)
1 In February 2022 the Group disposed of a portfolio of loans secured by residential mortgages with a fair value of £750.8m. the transaction is part of the Group’s strategy to reduce exposure and
sensitivity of the balance sheet to the uK property market following changes in the regulatory environment in 2018.
debt
securities
and other
fixed
income
securities
£m
Investment
funds
£m
loans
secured by
residential
mortgages
£m
loans
secured by
commercial
mortgages
£m
loans
secured
by ground
rents
£m
Infra-
structure
loans
£m
Year ended 31 december 2021
At 1 January 2021
139.0
1,256.8
8,261.1
Purchases/advances/deposits
84.9
281.4
528.2
114.9
945.0
72.4
79.1
transfers from level 2
Sales/redemptions/payments
disposal of a portfolio of ltMs1
Recognised in profit or loss in net
investment income
Realised gains and losses
unrealised gains and losses
Interest accrued
change in fair value of liabilities
recognised in profit or loss
–
–
–
–
9.4
–
–
49.9
(87.9)
–
–
(37.6)
(13.1)
–
(508.9)
(508.8)
169.1
(722.8)
204.9
–
–
–
592.1
169.0
–
(49.4)
–
–
(34.6)
0.7
other
loans
£m
66.1
46.1
–
–
–
–
–
(17.7)
–
–
(13.4)
(22.5)
0.1
–
–
–
–
–
–
–
2.4
–
–
derivative
financial
assets
£m
Investment
contract
liabilities
£m
derivative
financial
liabilities
£m
deposits
received
from
reinsurers
£m
(42.8)
(1.1)
–
11.1
–
–
–
–
(0.8)
(33.6)
(3.3)
(2,415.0)
–
–
–
–
–
(1.2)
–
202.9
–
–
(5.3)
–
–
147.3
(78.7)
–
(8.6)
(2,144.7)
At 31 december 2021
233.3
1,449.5
7,422.8
677.8
189.7
993.1
89.7
8.5
1 In August 2021 the Group disposed of a portfolio of loans secured by residential mortgages with a fair value of £508.8m.
Investment funds
Investment funds classified as level 3 are structured entities that operate under contractual arrangements which allow a group of investors to invest in a pool
of corporate loans without any one investor having overall control of the entity. there have not been any significant impacts to these investments in relation to
coVId-19, global, political and other economic factors.
Principal assumptions underlying the calculation of investment funds classified as Level 3
Discount rate
discount rates are the most significant assumption applied in calculating the fair value of investment funds. the average discount rate used is 7.0% (2021: 7.0%).
161
8.5
–
–
–
–
–
3.6
–
–
–
–
–
4.9
–
–
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
17 FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE continued
Sensitivity analysis
Reasonably possible alternative assumptions for unobservable inputs used in the valuation model either as at the valuation date or from a suitable recent
reporting period where appropriate to do so could give rise to significant changes in the fair value of the assets. the sensitivity of the valuation of investment
funds is determined by reference to the movement in credit spreads. the Group has estimated the impact on fair value to changes to these inputs as follows:
Investment funds
net increase/(decrease) in fair value (£m)
2022
2021
credit spreads
+100bps
(9.4)
(8.9)
Debt securities and other fixed income securities
Fixed income securities, in line with market practice, are generally valued using an independent pricing service. these valuations are determined using
independent external quotations from multiple sources and are subject to a number of monitoring controls, such as monthly price variances, stale price
reviews and variance analysis. Pricing services, where available, are used to obtain the third party broker quotes. When prices are not available from pricing
services, prices are sourced from external asset managers or internal models and classified as level 3 under the fair value hierarchy due to the use of
significant unobservable inputs. these include private placement bonds and asset backed securities as well as less liquid corporate bonds.
Principal assumptions underlying the calculation of the debt securities and other fixed income securities classified as Level 3
Credit spreads
the valuation model discounts the expected future cash flows using a discount rate which includes a credit spread allowance associated with that asset.
Sensitivity analysis
Reasonably possible alternative assumptions for unobservable inputs used in the valuation model either as at the valuation date or from a suitable recent
reporting period where appropriate to do so could give rise to significant changes in the fair value of the assets. the sensitivity of the valuation of bonds is
determined by reference to movement in credit spreads. the Group has estimated the impact on fair value to changes to these inputs as follows:
debt securities and other fixed income securities
net increase/(decrease) in fair value (£m)
2022
2021
credit spreads
+100bps
(138.1)
(124.6)
Loans secured by residential mortgages
Methodology and judgement underlying the calculation of loans secured by residential mortgages
the valuation of loans secured by residential mortgages is determined using internal models which project future cash flows expected to arise from each loan.
Future cash flows allow for assumptions relating to future expenses, future mortality experience, voluntary redemptions and repayment shortfalls on
redemption of the mortgages due to the nnEG. the fair value is calculated by discounting the future cash flows at a swap rate plus a liquidity premium.
under the nnEG, the amount recoverable by the Group on eligible termination of mortgages is generally capped at the net sale proceeds of the property. A key
judgement is with regard to the calculation approach used. We have used the Black 76 variant of the Black-Scholes option pricing model in conjunction with an
approach using best estimate future house price growth assumptions.
cash flow models are used in the absence of a deep and liquid market for loans secured by residential mortgages. the bulk sales of the portfolios of Just
ltMs over the past three years represented market prices specific to the characteristics of the underlying portfolios of loans sold. In particular, loan rates,
loan-to-value and customer age. this was considered insufficient to affect the judgement of the methodology and assumptions underlying the discounted
cash flow approach used to value individual loans in the remaining portfolio. the methodology and assumptions used would be reconsidered if any
information is obtained from future portfolio sales that is relevant and applicable to the remaining portfolio.
Principal assumptions underlying the calculation of loans secured by residential mortgages
All gains and losses arising from loans secured by mortgages are largely dependent on the term of the mortgage, which in turn is determined by the longevity
of the customer. Principal assumptions underlying the calculation of loans secured by mortgages include the items set out below. these assumptions are also
used to provide the expected cash flows from the loans secured by residential mortgages which determines the yield on this asset. this yield is used for the
purpose of setting valuation discount rates on the liabilities supported, as described in note 23(b).
Maintenance expenses
Assumptions for future policy expense levels are based on the Group’s recent expense analyses. the assumed future expense levels incorporate an annual
inflation rate allowance of 3.9% (2021: 4.2%).
162
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 17 FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE continued
Mortality
Mortality assumptions have been derived with reference to England & Wales population mortality using the cMI 2021 model for mortality improvements.
these base mortality and improvement tables have been adjusted to reflect the expected future mortality experience of mortgage contract holders, taking
into account the medical and lifestyle evidence collected during the sales process and the Group’s assessment of how this experience will develop in the
future. this assessment takes into consideration relevant industry and population studies, published research materials and management’s own experience.
the Group has considered the possible impact of the coVId-19 pandemic on its mortality assumptions and has included an allowance for the expected future
direct and indirect impacts of this. Further details of the matters considered in relation to mortality assumptions at 31 december 2022 are set out in note 23(b).
Property prices
the approach in place at 31 december 2022 is to calculate the value of a property by taking the latest Automated Valuation Model “AVM” result, typically as at
30 September 2022 or latest surveyor value if more recent, indexing this to the balance sheet date using nationwide uK house price indices and then making a
further allowance for property dilapidation since the last revaluation date. to the extent that this reflects market values as at 31 december 2022, no additional
short-term adjustment is allowed for.
the appropriateness of this valuation basis is regularly tested on the event of redemption of mortgages. the sensitivity of loans secured by mortgages to a fall
in property prices is included in the table of sensitivities below.
Future property price
In the absence of a reliable long-term forward curve for uK residential property price inflation, the Group has made an assumption about future residential
property price inflation based upon available market and industry data. these assumptions have been derived with reference to the long-term expectation of
the uK consumer price inflation, “cPI”, plus an allowance for the expectation of house price growth above cPI (property risk premium) less a margin for a
combination of risks including property dilapidation and basis risk. An additional allowance is made for the volatility of future property prices. this results in a
single rate of future house price growth of 3.3% (2021: 3.3%), with a volatility assumption of 13% per annum (2021: 13%). the setting of these assumptions
includes consideration of future long and short-term forecasts, the Group’s historical experience, benchmarking data, and future uncertainties including the
possible impacts of Brexit, the coVId-19 pandemic and a higher interest and inflation rate economic environment on the uK property market. House price
growth over 2022 continued to be strong initially, but has experienced falls in the latter part of the year. Whilst it is becoming more likely that short term falls in
property prices may be experienced, at this stage our view is that there is no clear indication of a change in the long-term prospects of the housing market. In
light of this, the future house price growth and property volatility assumptions have been maintained at the same level as assumed at 31 december 2021. the
sensitivity of loans secured by mortgages to changes in future property price growth, and to future property price volatility, are included in the table of
sensitivities below.
Voluntary redemptions
Assumptions for future voluntary redemption levels are based on the Group’s recent analyses. the assumed redemption rate varies by duration and product
line between 0.5% and 4.1% for loans in JRl (2021: 0.5% and 4.1%) and between 0.6% and 6.8% for loans in PlAcl (2021: 0.6% and 6.8%).
In the prior period, a separate provision for potential higher short-term experience arising from additional remortgaging activity was also allowed for. the
sharp increase in loan interest rates observed over the year and reductions in maximum loan-to-value ratios available for new business significantly reduce
the opportunities for customers to benefit from remortgaging. consequently, this separate provision has been removed.
Liquidity premium
the liquidity premium at initial recognition is set such that the fair value of each loan is equal to the face value of the loan. the liquidity premium partly reflects
the illiquidity of the loan and also spreads the recognition of profit over the lifetime of the loan. once calculated, the liquidity premium remains unchanged at
future valuations except when further advances are taken out. In this situation, the single liquidity premium to apply to that loan is recalculated allowing for all
advances. the average liquidity premium for loans held within JRl is 3.2% (2021: 3.04%) and for loans held within PlAcl is 3.5% (2021: 3.51%). the movement
over the period observed in both JRl and PlAcl is a function of the liquidity premiums on new loan originations compared to the liquidity premiums on those
policies which have redeemed or have been included in a portfolio sale over the period, both in reference to the average spread on the back book of business.
Sensitivity analysis
Reasonably possible alternative assumptions for unobservable inputs used in the valuation model could give rise to significant changes in the fair value of the
assets. the Group has estimated the impact on fair value to changes to these inputs as follows:
loans secured by residential mortgages
net increase/(decrease) in fair value (£m)
2022
2021
Maintenance
expenses
+10%
Base
mortality
-5%
Mortality
improvement
+0.25%
Immediate
property price
fall -10%
Future
property price
growth
-0.5%
Future
property price
volatility
+1%
Voluntary
redemptions
+10%
(5.2)
(6.5)
(13.9)
22.7
(6.3)
10.5
(75.2)
(114.6)
(48.5)
(82.3)
(32.1)
(53.2)
19.7
(5.2)
liquidity
premium
+10bps
(47.8)
(78.0)
the sensitivity factors are applied via financial models either as at the valuation date or from a suitable recent reporting period where appropriate to do so.
the analysis has been prepared for a change in each variable with other assumptions remaining constant. In reality such an occurrence is unlikely due to
correlation between the assumptions and other factors. It should be noted that some of these sensitivities are non-linear and larger or smaller impacts should
not be simply interpolated or extrapolated from these results. For example, the impact from a 5% fall in property prices would be slightly less than half of that
disclosed in the table above. Sensitivities are generally of a smaller magnitude compared to the prior period due to the discounting effect of interest rate rises
over the period. these interest rate rises also underpin the directional change in the mortality and voluntary redemption sensitivities.
163
financial statementsGOVERNANCESTRATEGIC REPORT
JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
17 FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE continued
the sensitivities above only consider the impact of the change in these assumptions on the fair value of the asset. Some of these sensitivities would also
impact the yield on this asset and hence the valuation discount rate used to determine liabilities. For some of these sensitivities, the impact on the value of
insurance liabilities and hence profit before tax is included in note 23(e).
other limitations in the above sensitivity analysis include the use of hypothetical market movements to demonstrate potential risk that only represents the
Group’s view of reasonably possible near-term market changes that cannot be predicted with any certainty.
Loans secured by commercial mortgages
loans secured by commercial mortgages are valued using discounted cash flow analysis using assumptions based on the repayment of the underlying loan.
Principal assumptions underlying the calculation of loans secured by commercial mortgages
Credit spreads
the valuation model discounts the expected future cash flows using a discount rate which includes a credit spread allowance associated with that asset.
Sensitivity analysis
Reasonably possible alternative assumptions for unobservable inputs used in the valuation model either as at the valuation date or from a suitable recent
reporting period where appropriate to do so could give rise to significant changes in the fair value of the assets. the sensitivity of the valuation of commercial
mortgages is determined by reference to movement in credit spreads. the Group has estimated the impact on fair value to changes to these inputs as follows:
loans secured by commercial mortgages
net increase/(decrease) in fair value (£m)
2022
2021
credit spreads
+100bps
(19.2)
(25.0)
Loans secured by ground rents
loans secured by ground rents are valued using discounted cash flow analysis using assumptions based on the repayment of the underlying loan.
Principal assumptions underlying the calculation of loans secured by ground rents
Credit spreads
the valuation model discounts the expected future cash flows using a discount rate which includes a credit spread allowance associated with that asset.
Sensitivity analysis
Reasonably possible alternative assumptions for unobservable inputs used in the valuation model either as at the valuation date or from a suitable recent
reporting period where appropriate to do so could give rise to significant changes in the fair value of the assets. the sensitivity of the valuation of ground rents
is determined by reference to movement in credit spreads. the Group has estimated the impact on fair value to changes to these inputs as follows:
loans secured by ground rents
net increase/(decrease) in fair value (£m)
2022
2021
Infrastructure loans
Infrastructure loans are valued using discounted cash flow analyses.
credit spreads
+100bps
(77.9)
(59.2)
Principal assumptions underlying the calculation of infrastructure loans classified as Level 3
Credit spreads
the valuation model discounts the expected future cash flows using a discount rate which includes a credit spread allowance associated with that asset.
Sensitivity analysis
Reasonably possible alternative assumptions for unobservable inputs used in the valuation model either as at the valuation date or from a suitable recent
reporting period where appropriate to do so could give rise to significant changes in the fair value of the assets. the sensitivity of the valuation of infrastructure
loans is determined by reference to movement in credit spreads. the Group has estimated the impact on fair value to changes to these inputs as follows:
164
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 17 FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE continued
Infrastructure loans
net increase/(decrease) in fair value (£m)
2022
2021
credit spreads
+100bps
(71.7)
(96.6)
Other loans
other loans classified as level 3 are mainly commodity trade finance loans. these are valued using discounted cash flow analyses.
Principal assumptions underlying the calculation of other loans classified as Level 3
Credit spreads
the valuation model discounts the expected future cash flows using a discount rate which includes a credit spread allowance associated with that asset.
Sensitivity analysis
Reasonably possible alternative assumptions for unobservable inputs used in the valuation model either as at the valuation date or from a suitable recent
reporting period where appropriate to do so could give rise to significant changes in the fair value of the assets. the sensitivity of the valuation of other loans to
the default assumption is determined by reference to movement in credit spreads. the Group has estimated the impact on fair value to changes to these
inputs as follows:
other loans
net increase/(decrease) in fair value (£m)
2022
2021
credit spreads
+100bps
(1.1)
(0.9)
Investment contract liabilities
Investment contracts are valued using an internal model and determined on a policy-by-policy basis using a prospective valuation of future retirement income
benefit and expense cash flows.
Principal assumptions underlying the calculation of investment contract liabilities
Valuation discount rates
the valuation model discounts the expected future cash flows using a discount rate derived from the assets hypothecated to back the liabilities. the discount
rate used for the fixed term annuity product treated as investment business is 5.67% (2021: 2.73%).
Sensitivity analysis
the sensitivity of fair value to changes in the discount rate assumptions in respect of investment contract liabilities is not material.
Deposits received from reinsurers
deposits from reinsurers which have been unbundled from their reinsurance contract and recognised at fair value through profit or loss are measured in
accordance with the reinsurance contract and taking into account an appropriate discount rate for the timing of expected cash flows of the liabilities.
Principal assumptions underlying the calculation of deposits received from reinsurers
Discount rate
the valuation model discounts the expected future cash flows using a contractual discount rate derived from the assets hypothecated to back the liabilities at
a product level. the discount rates used for individual retirement and individual care annuities were 5.89% and 4.2% respectively (2021: 2.87% and 1.03%
respectively).
Credit spreads
the valuation of deposits received from reinsurers includes a credit spread derived from the assets hypothecated to back these liabilities. A credit spread of
252bps (2021: 219bps) was applied in respect of the most significant reinsurance contract.
Sensitivity analysis
Reasonably possible alternative assumptions for unobservable inputs used in the valuation model either as at the valuation date or from a suitable recent
reporting period where appropriate to do so could give rise to significant changes in the fair value of the liabilities (see note 27(b)). the Group has estimated the
impact on fair value to changes to these inputs as follows:
deposits received from reinsurers
net increase/(decrease) in fair value (£m)
2022
2021
credit spreads
+100bps
discount rates
+100bps
(39.9)
(72.4)
(111.2)
(196.1)
165
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
18 DEFERRED TAX
transitional tax
Intangible assets
land and buildings
tax losses and other
Total deferred tax
Asset
£m
1.0
(15.0)
(1.0)
108.2
93.2
2022
Liability
£m
–
–
–
–
–
Total
£m
1.0
(15.0)
(1.0)
108.2
93.2
Asset
£m
–
–
–
–
–
2021
liability
£m
(1.5)
(17.0)
(0.8)
14.0
(5.3)
total
£m
(1.5)
(17.0)
(0.8)
14.0
(5.3)
the transitional tax asset of £1.0m (2021: liability of £1.5m) represents the transitional adjustments for the purposes of adopting IFRS which is amortised over
ten years from 1 January 2016. In the prior year, this was offset by the adjustment arising from the change to the tax rules for life companies which was
amortised over ten years from 1 January 2013.
deferred tax assets have been recognised because it is probable that these assets will be recovered. the losses arising in 2022 were principally from
investment and economic losses driven by rising interest rates. Previously, the Group took an active approach to hedging its interest rate exposure. In the
second half of 2021 and first half of 2022, as rates rose and our solvency position strengthened, we gradually reduced the interest rate hedging to a broadly
neutral position for our IFRS balance sheet during the second half of 2022. our revised approach is to allow the solvency position to fluctuate as interest rates
move, and hence minimise the economic cost should rates rise as they did in 2022 before we had neutralised the hedging. Economic losses were also realised
on the third and final portfolio sale of ltMs.
the movement in the net deferred tax balance was as follows:
net balance at 1 January
Recognised in profit or loss
Recognised in equity
Recognised in other comprehensive income
Net balance at 31 December
the Group has unrecognised deferred tax assets of £6.3m, (2021: £6.2m).
19 INSURANCE AND OTHER RECEIVABLES
Receivables arising from insurance and reinsurance contracts
Finance lease receivables
other receivables
Total insurance and other receivables
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
(5.3)
94.2
4.5
(0.2)
93.2
2022
£m
295.4
0.8
26.6
322.8
(11.3)
6.0
–
–
(5.3)
2021
£m
20.0
2.3
13.1
35.4
Receivables arising from insurance contracts, reinsurance contracts and also other receivables are accounted for at amortised cost, which approximates fair
value. the timing of settlements for december 2022 transactions has resulted in an increase to receivables arising from Insurance contracts in the period. the
credit rating of these balances is disclosed in note 33.
Insurance and other receivables expected to be recovered after more than one year are £59.7m (2021: £0.7m in respect of finance lease receivables).
20 CASH AND CASH EQUIVALENTS
cash available on demand
units in liquidity funds
Cash and cash equivalents in the Consolidated statement of cash flows
2022
£m
482.0
1,174.4
1,656.4
2021
£m
510.2
1,310.5
1,820.7
units in liquidity funds comprise wholly of units in funds which invest in very short dated liquid assets. However as they do not meet the definition of cash
available on demand, liquidity funds are reported within financial investments (see note 16). liquidity funds do however meet the definition of cash
equivalents for the purposes of disclosure in the consolidated statement of cash flows.
166
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 21 SHARE CAPITAL
the allotted, issued and fully paid ordinary share capital of Just Group plc is detailed below:
At 1 January 2022
In respect of employee share schemes
At 31 December 2022
At 1 January 2021
In respect of employee share schemes
At 31 december 2021
number of £0.10
ordinary shares
1,038,537,044
165,888
1,038,702,932
1,038,128,556
408,488
1,038,537,044
Share
capital
£m
103.9
–
103.9
103.8
0.1
103.9
Share
premium
£m
94.6
0.1
94.7
94.5
0.1
94.6
Merger
reserve
£m
597.1
–
597.1
597.1
–
597.1
total
£m
795.6
0.1
795.7
795.4
0.2
795.6
the company does not have a limited amount of authorised share capital.
the merger reserve is the result of a placing of 94,012,782 ordinary shares in 2019 and the acquisition of 100% of the equity of Partnership Assurance Group plc
in 2016. the placing was achieved by the company acquiring 100% of the equity of a limited company for consideration of the new ordinary shares issued.
Accordingly, merger relief under Section 612 of the companies Act 2006 applies, and share premium has not been recognised in respect of this issue of shares.
the merger reserve recognised represents the premium over the nominal value of the shares issued.
consideration for the acquisition of the equity shares of Partnership Assurance Group plc consisted of a new issue of shares in the company. Accordingly,
merger relief under Section 612 of the companies Act 2006 applies, and share premium has not been recognised in respect of this issue of shares. the merger
reserve recognised represents the difference between the nominal value of the shares issued and the net assets of Partnership Assurance Group plc acquired.
22 TIER 1 NOTES
At 1 January
Issued in the year
Issue costs, net of tax
Redeemed in the year
At 31 December
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
322.4
–
–
–
322.4
294.0
325.0
(2.6)
(294.0)
322.4
on 16 September 2021 the Group issued £325m 5.0% perpetual restricted tier 1 contingent convertible notes, incurring issue costs of £2.6m, net of tax, and
concurrently redeemed its £300m 9.375% perpetual restricted tier 1 contingent convertible notes issued in 2019 (£294.0m net of issue costs, net of tax) at a
cost of £341.0m, net of tax. the loss on redemption of the 2019 notes of £47.0m (net of tax) was recognised directly in equity.
during the year, interest of £16.9m was paid to holders of the 2021 notes (2021: interest of £25.2m to holders of the 2019 notes). the 2021 notes bear interest
on the principal amount up to 30 September 2031 (the first reset date) at the rate of 5.0% per annum, and thereafter at a fixed rate of interest reset on the first
call date and on each fifth anniversary thereafter. Interest is payable on the notes semi-annually in arrears on 30 March and 30 September each year which
commenced on 30 March 2022.
the Group has the option to cancel the coupon payment at its discretion and cancellation of the coupon payment becomes mandatory upon non-compliance
with the solvency capital requirement or minimum capital requirement or where the Group has insufficient distributable items. cancelled coupon payments do
not accumulate or become payable at a later date and do not constitute a default. In the event of non-compliance with specific solvency requirements, the
conversion of the tier 1 notes into ordinary shares could be triggered.
the tier 1 notes are treated as a separate category within equity and the coupon payments are recognised outside of the profit after tax result and directly in
shareholders’ equity.
23 INSURANCE CONTRACTS AND RELATED REINSURANCE
Insurance liabilities
Gross insurance liabilities
net reinsurance assets
Net insurance liabilities
2022
£m
2021
£m
18,332.9
21,812.9
(1,981.1)
(2,533.5)
16,351.8
19,279.4
Reinsurance in the table above includes reinsurance assets net of reinsurance liability positions that can arise on longevity swaps which are presented as
liabilities in the consolidated statement of financial position.
167
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
23 INSURANCE CONTRACTS AND RELATED REINSURANCE continued
(a) Terms and conditions of insurance contracts
the Group’s long-term insurance contracts, written by the Group’s life companies, Just Retirement limited (“JRl”) and Partnership life Assurance company
limited (“PlAcl”), include Retirement Income (Guaranteed Income for life (“GIfl”), defined Benefit (“dB”), and care Plans), and whole of life and term
protection insurance.
the valuation of insurance liabilities are agreed by the Board using recognised actuarial valuation methods proposed by the Group’s Actuarial Reporting
function. In particular, a prospective gross premium valuation method has been adopted for major classes of business.
Although the process for the establishment of insurance liabilities follows specified rules and guidelines, the liabilities that result from the process remain
uncertain. As a consequence of this uncertainty, the eventual value of claims could vary from the amounts provided to cover future claims. the Group seeks to
provide for appropriate levels of contract liabilities taking known facts and experiences into account but nevertheless such liabilities remain uncertain.
the estimation process used in determining insurance liabilities involves projecting future annuity payments and the cost of maintaining the contracts. For
non-annuity contracts, the liability is determined as the sum of the discounted value of future benefit payments and future administration expenses less the
expected value of premiums payable under the contract.
(b) Principal assumptions underlying the calculation of insurance contracts
the principal assumptions underlying the calculation of insurance contracts are explained below. this includes any areas sensitive to coVId-19 effects or other
economic downturn.
Mortality assumptions
the coVId-19 pandemic has had a significant effect on mortality rates over the past three years. High coVId-19 mortality rates in 2020 and early 2021
contributed significantly to positive mortality experience variances in those respective reporting periods, whereas during 2022 rates have been closer to
expected levels, for the uK population overall. the extent to which mortality rates may be elevated in future, as a result of the pandemic, is subject to
considerable uncertainty.
An allowance for future effects of coVId-19 has been implemented through a combination of using the latest cMI 2021 improvement model and applying an
overlay to increase short term mortality rates but which tapers to zero in the long-term. the cMI 2021 improvement model has been used with core
parameters, placing no weight on 2020 and 2021 experience. the overlay applies multipliers to mortality rates for each calendar year, uniformly across all
ages. the Group will continue to follow closely the actual impact of coVId-19 on mortality and to analyse potential direct and indirect future impacts of the
pandemic, including the possibility there will be enduring influences on the longevity of customers. the Group will consider the conclusions of such analysis,
alongside assessment of other factors influencing mortality trends, in keeping its assumptions under regular review.
Mortality assumptions have been set by reference to appropriate standard mortality tables. these tables have been adjusted to reflect the future mortality
experience of the policyholders, taking into account the medical and lifestyle evidence collected during the underwriting process, premium size, gender and
the Group’s assessment of how this experience will develop in the future. the assessment takes into consideration relevant industry and population studies,
published research materials, and management’s own industry experience.
the standard tables which underpin the mortality assumptions are summarised in the table below.
Individually underwritten Guaranteed Income
for life Solutions (JRl)
Modified E&W Population mortality, with CMI
2021 model mortality improvements
Modified E&W Population mortality, with cMI 2019
model mortality improvements
Individually underwritten Guaranteed Income
for life Solutions (PlAcl)
Modified E&W Population mortality, with CMI
2021 model mortality improvements
Modified E&W Population mortality, with cMI 2019
model mortality improvements
2022
2021
defined Benefit (JRl)
Modified E&W Population mortality, with CMI
2021 model mortality improvements. Medically
underwritten unchanged from 2021
Modified E&W Population mortality, with cMI 2019
model mortality improvements for standard
underwritten business; Reinsurer supplied tables
underpinned by the Self-Administered Pension
Scheme (“SAPS”) S1 tables, with modified cMI 2009
model mortality improvements for medically
underwritten business
defined Benefit (PlAcl)
Modified E&W Population mortality, with CMI
2021 model mortality improvements
Modified E&W Population mortality, with cMI 2019
model mortality improvements
care Plans and other annuity products (PlAcl)
Unchanged from 2021
Modified PcMA/PcFA or modified E&W Population
mortality with cMI 2019 model mortality
improvements
Protection (PlAcl)
Unchanged from 2021
tM/tF00 Select
All references to the use of the cMI 2019 or cMI 2021 models relate to improvements for calendar year 2020 onwards.
168
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 23 INSURANCE CONTRACTS AND RELATED REINSURANCE continued
the long-term improvement rates in the cMI 2021 model are 2.0% for males and 1.75% for females (2021: 2.0% for males and 1.75% for females). the period
smoothing parameter in the modified cMI 2021 model has been set to 7.0 (2021: 7.0). the addition to initial rates (“A”) parameter in the model varies between
0% and 0.25% depending on product (2021: between 0% and 0.25% depending on product). All other cMI model parameters are the defaults (2021: other
parameters set to defaults).
Valuation discount rates
Valuation discount rate assumptions are set by considering the yields on the assets allocated to back the liabilities. the yields on lifetime mortgage assets are
derived using the assumptions described in note 17 with allowance for risk through the deductions related to the nnEG. An explicit allowance for credit risk is
included by making an explicit deduction from the yields on debt and other fixed income securities, loans secured by commercial mortgages, and other loans
based on an expectation of default experience of each asset class and application of a prudent loading. Allowances vary by asset category and by rating.
Economic uncertainty relating to the Russian/ukraine conflict, supply chain issues and inflation increases the risk of credit defaults. our underlying default
methodology allows for the impact of credit rating downgrades and spread widening and hence we have maintained the same methodology at 31 december
2022. the considerations around coVId-19 and macro-economic factors for property prices affecting the nnEG are as described in note 17.
Valuation discount rates – gross liabilities
Individually underwritten Guaranteed Income for life Solutions (JRl)
Individually underwritten Guaranteed Income for life Solutions (PlAcl)
defined Benefit (JRl)
defined Benefit (PlAcl)
other annuity products (PlAcl)
term and whole of life products (PlAcl)
2022
%
5.67
5.89
5.67
5.89
4.20
4.12
2021
%
2.73
2.87
2.73
2.87
1.03
1.03
the overall reduction in yield to allow for the risk of defaults from all non-ltM assets (including gilts, corporate bonds, infrastructure loans, private placements
and commercial mortgages) and the nnEG from ltMs was 79 bps in JRl and 66bps in PlAcl (2021: 64bps and 63bps respectively).
Future expenses
Assumptions for future policy expense levels, expressed as a per plan charge for GIfl and a per scheme member charge for dB, are determined from the
Group’s recent expense analyses. the assumed future policy expense levels incorporate an annual inflation rate allowance of 4.15% (2021: 4.45%) derived from
the long-term expected retail price and consumer price indices implied by inflation swap rates and an additional allowance for earnings inflation. long-term
inflation expectations have fallen during the period, resulting in a decrease in the inflation rate allowance.
Inflation
Assumptions for annuity escalation are required for lPI, RPI and cPI index linked liabilities, the majority of which are within the defined Benefit business. the
inflation curve assumed in each case is that which is implied by market swap rates, taking into account any escalation caps and/or floors applicable. A change
in approach since 31 december 2021, to using a mark to model basis for lPI inflation instead of the previous approach which utilised market prices that were
not actively traded, has been implemented.
(c) Movements
the following movements have occurred in the insurance contract balances during the year.
Year ended 31 December 2022
At 1 January 2022
change due to new premiums
change due to new claims
unwinding of discount
changes in economic assumptions
changes in non-economic assumptions
other movements
At 31 December 2022
Year ended 31 december 2021
At 1 January 2021
change due to new premiums
change due to new claims
unwinding of discount
changes in economic assumptions
changes in non-economic assumptions
other movements
At 31 december 2021
169
Gross
£m
Reinsurance
£m
Net
£m
21,812.9
(2,533.5)
19,279.4
2,982.5
(1,494.0)
612.7
(5,418.7)
(164.1)
1.6
(202.8)
2,779.7
231.6
(73.6)
515.1
95.2
(13.1)
(1,262.4)
539.1
(4,903.6)
(68.9)
(11.5)
18,332.9
(1,981.1)
16,351.8
Gross
£m
Reinsurance
£m
net
£m
21,118.4
(2,865.5)
18,252.9
2,298.1
(1,478.1)
488.8
(595.1)
(9.8)
(9.4)
33.8
239.0
(62.1)
135.4
–
(14.1)
2,331.9
(1,239.1)
426.7
(459.7)
(9.8)
(23.5)
21,812.9
(2,533.5)
19,279.4
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
23 INSURANCE CONTRACTS AND RELATED REINSURANCE continued
Reinsurance in the table above includes reinsurance assets net of reinsurance liability positions that can arise on longevity swaps which are presented as
liabilities in the consolidated statement of financial position.
Effect of changes in assumptions and estimates during the year
Economic assumption changes
the principal economic assumption changes impacting the movement in insurance liabilities during the year relate to discount rates and inflation.
Discount rates
the movement in the valuation interest rate captures the impact of underlying changes in risk-free curves and spreads and cash flows arising on backing
assets held over the course of the year. the movement of the discount rate includes the effect of any change in the underlying assets over the period, for
example due to purchases to support new business and trading for risk management purposes. For the year to 31 december 2022, changes in discount rates
resulted in a net reduction of insurance liabilities of £4,659m (2021: £813m) which was due to large increases in risk-free rates over the period (e.g. the 10- year
risk-free rate increased by 276bps) and changes to the backing asset portfolio, including as a consequence of the ltM portfolio sale during 2022.
Inflation
Insurance liabilities for inflation-linked products, most notably defined Benefit business and expenses on all products are impacted by changes in future
expectations of RPI, cPI and earnings inflation. For the year to 31 december 2022, changes in inflation, driven by a rise in market-implied expectations of future
RPI and cPI inflation, resulted in a net increase of insurance liabilities of £153.3m (2021: £348m). this includes an impact of a £49m reduction in respect of the
change in approach since 31 december 2021 to the derivation of the annuity escalation curves required for lPI linked liabilities and is a reduction in liabilities.
Non-economic assumption changes
the principal non-economic assumption changes impacting the movement in insurance liabilities during the year relate to mortality assumptions for both JRl
and PlAcl products. note that impacts quoted below relate specifically to the liability cash flow impact of these changes; any resulting change to the discount
rate is captured above.
Mortality
the mortality bases applied are outlined above in note 23(b). A decrease in future expectations of longevity decreases the carrying value of the Group’s
insurance liabilities.
(d) Estimated timing of net cash outflows from insurance contract liabilities
the following table shows the insurance contract balances analysed by duration. the total balances are split by duration of payments in proportion to the
policy cash flows estimated to arise during the year.
2022
Gross
Reinsurance
Net
2021
Gross
Reinsurance
net
Expected cash flows (undiscounted)
Within
1 year
£m
1-5 years
£m
5-10 years
£m
Over
10 years
£m
Carrying
value
(discounted)
£m
Total
£m
1,505.9
5,884.3
6,954.4
20,876.9
35,221.5
18,332.9
(209.4)
(762.1)
(801.7)
(1,567.4)
(3,340.6)
(1,981.1)
1,296.5
5,122.2
6,152.7
19,309.5
31,880.9
16,351.8
Expected cash flows (undiscounted)
Within
1 year
£m
1-5 years
£m
5-10 years
£m
over
10 years
£m
carrying
value
(discounted)
£m
total
£m
1,435.4
5,465.3
6,356.3
16,893.6
30,150.6
21,812.9
(201.7)
(733.5)
(786.3)
(1,650.8)
(3,372.3)
(2,533.5)
1,233.7
4,731.8
5,570.0
15,242.8
26,778.3
19,279.4
Reinsurance in the table above includes reinsurance assets net of reinsurance liability positions that can arise on longevity swaps which are presented as
liabilities in the consolidated statement of financial position.
(e) Sensitivity analysis
the Group has estimated the impact on profit before tax for the year in relation to insurance contracts and related reinsurance from reasonably possible
changes in key assumptions relating to financial assets and to liabilities. the sensitivities capture the liability impacts arising from the impact on the yields of
the assets backing liabilities in each sensitivity. the impact of changes in the value of assets and liabilities has been shown separately to aid the comparison
with the change in value of assets for the relevant sensitivities in note 17. to further assist with this comparison, any impact on reinsurance assets has also
been included within the liabilities line item.
the sensitivity factors are applied via financial models either as at the valuation date or from a suitable recent reporting period where appropriate to do so.
the analysis has been prepared for a change in each variable with other assumptions remaining constant. In reality, such an occurrence is unlikely, due to
correlation between the assumptions and other factors. It should also be noted that these sensitivities are non-linear, and larger or smaller impacts cannot
necessarily be interpolated or extrapolated from these results. the extent of non-linearity grows as the severity of any sensitivity is increased. For example, in
the specific scenario of property price falls, the impact on IFRS profit before tax from a 5% fall in property prices would be slightly less than half of that
disclosed in the table below. Furthermore, in the specific scenario of a mortality reduction, a smaller fall than disclosed in the table below or a similar increase
in mortality may be expected to result in broadly linear impacts.
170
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 23 INSURANCE CONTRACTS AND RELATED REINSURANCE continued
However, it becomes less appropriate to extrapolate the expected impact for more severe scenarios. the sensitivity factors take into consideration that the
Group’s assets and liabilities are actively managed and may vary at the time that any actual market movement occurs. the sensitivities below cover the
changes on all assets and liabilities from the given stress. the impact on liabilities includes the net effect of the impact on reinsurance assets and liabilities.
the impact of these sensitivities on IFRS net equity is the impact on profit before tax as set out in the table below less tax at the current tax rate.
Sensitivities are generally of a smaller magnitude compared to the prior period due to the discounting effect of interest rate rises over the period. the
reduction in the interest rate sensitivity is further due to the change in the interest rate hedging position adopted. the mortality and voluntary redemption
sensitivities are further impacted by the interest rate increases observed during the period, as mentioned in the sensitivities to loans secured against
residential mortgages in note 17.
Sensitivity factor
description of sensitivity factor applied
Interest rate and investment
return
the impact of a change in the market interest rates by +/- 1% (e.g. if a current interest rate is 5%, the impact of an immediate
change to 4% and 6% respectively). the test consistently allows for similar changes to both assets and liabilities
Expenses
Base mortality rates
the impact of an increase in maintenance expenses by 10%
the impact of a decrease in base table mortality rates by 5% applied to both Retirement Income liabilities and loans secured
by residential mortgages
Mortality improvement rates
the impact of a level increase in mortality improvement rates of 0.25% for both Retirement Income liabilities and loans
secured by residential mortgages
Immediate property price fall
the impact of an immediate decrease in the value of properties by 10%
Future property price growth
the impact of a reduction in future property price growth by 0.5%
Future property price volatility
the impact of an increase in future property price volatility by 1%
Voluntary redemptions
the impact of an increase in voluntary redemption rates on loans secured by residential mortgages by 10%
credit defaults
the impact of an increase in the credit default assumption of 10bps
Impact on profit before tax (£m)
Interest
rates
+1%
Interest
rates
-1%
Maintenance
expenses
+10%
Base
mortality
-5%
Mortality
improvement
+0.25%
2022
Assets
(1,545.4)
1,837.6
Liabilities
1,552.7
(1,848.6)
Total
7.3
(11.0)
2021
Assets
(2,602.0)
3,118.9
liabilities
2,076.3
(2,492.5)
total
(525.7)
626.4
24 INVESTMENT CONTRACT LIABILITIES
(5.2)
(27.0)
(32.2)
(6.5)
(33.7)
(40.2)
(13.4)
(111.3)
(124.7)
23.8
(140.6)
(116.8)
(6.0)
(81.9)
(87.9)
7.5
(104.4)
(96.9)
At 1 January
deposits received from policyholders
Payments made to policyholders
change in contract liabilities recognised in profit or loss
At 31 December
Future property
price growth
-0.5%
Future property
price volatility
+1%
Voluntary
redemptions
+10%
credit
defaults
+10bps
Immediate
property
price fall
-10%
(62.6)
(34.3)
(96.9)
(90.8)
(67.7)
(37.1)
(32.2)
(69.3)
(59.2)
(67.7)
(158.5)
(126.9)
(25.6)
(16.1)
(41.7)
(41.2)
(22.5)
(63.7)
19.2
–
(30.1)
(123.2)
(10.9)
(123.2)
(6.2)
(0.0)
(64.2)
(151.6)
(70.4)
(151.6)
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
33.6
14.0
(12.5)
(2.6)1
32.5
42.8
1.1
(11.1)
0.8
33.6
1 this represents the £2.6m in the consolidated statement of comprehensive income less the impact for foreign exchange translation.
(a) Terms and conditions of investment contracts
the Group has written capped drawdown products for the at-retirement market. these products are no longer available to new customers. In return for a
single premium, these contracts pay a guaranteed lump sum on survival to the end of the fixed term. there is an option at outset to select a lower sum at
maturity and regular income until the earlier of death or maturity. upon death of the policyholder and subject to the option selected at the outset, there may
be a return of premium less income received or income payable to a dependant until the death of that dependant. capped drawdown pension business is
classified as investment contracts as there is no transfer of longevity risk due to the premium protection option within these fixed term contracts.
(b) Principal assumptions underlying the calculation of investment contracts
Valuation discount rates
Valuation discount rate assumptions for investment contracts are set with regard to yields on supporting assets. the yields on lifetime mortgage assets are
derived using the assumptions described in note 17 with allowance for risk through the deductions related to the nnEG. An explicit allowance for credit risk is
included by making an explicit deduction from the yields on debt and other fixed income securities, loans secured by commercial mortgages, and other loans
based on an expectation of default experience of each asset class and application of a prudent loading. Allowances vary by asset category and by rating.
171
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
24 INVESTMENT CONTRACT LIABILITIES continued
our underlying default methodology allows for the impact of credit rating downgrades and spread widening and hence we have maintained the same
methodology at 31 december 2022.
Valuation discount rates
Investment contracts
25 LOANS AND BORROWINGS
£250m 9.0% 10 year subordinated debt 2026 (tier 2) issued by Just Group plc
£125m 8.125% 10 year subordinated debt 2029 (tier 2) issued by Just Group plc
£250m 7.0% 10.5 year subordinated debt 2031 non-callable 5.5 years (Green tier 2) issued by Just Group plc
£230m 3.5% 7 year subordinated debt 2025 (tier 3) issued by Just Group plc
Total loans and borrowings
2022
%
5.67
carrying value
Fair value
2022
£m
173.6
122.5
248.5
154.7
699.3
2021
£m
249.2
122.2
248.4
154.5
774.3
2022
£m
187.8
130.1
244.7
141.6
704.2
2021
%
2.73
2021
£m
323.5
165.6
287.2
160.5
936.8
the £250m 7.0% bond is callable after october 2025. the maturity analysis in note 33(d) assumes it is called at the first possible date.
on 15 october 2020, the Group completed the issue of £250m Green tier 2 capital via a 7.0% sterling denominated BBB rated 10.5 year, non-callable 5.5 year
bonds issue, interest payable semi-annually in arrears. the bonds have a reset date of 15 April 2026 with optional redemption any time from 15 october 2025
up to the reset date. the proceeds of the issue have been used in part to finance the purchase of £75m of the £230m 3.5% 7 year subordinated debt 2025
(tier 3) issued by the Group in 2018.
the Group also has an undrawn revolving credit facility of up to £300m for general corporate and working capital purposes available until 13 June 2025.
Interest is payable on any drawdown loans at a rate of SonIA plus a margin of between 1.50% and 2.75% per annum depending on the Group’s ratio of net
debt to net assets.
Movements in borrowings during the year were as follows:
At 1 January
Repayment of Just Group plc tier 2 subordinated debt
Financing cash flows
Amortisation of issue costs
Non-cash movements
At 31 December
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
774.3
(76.0)
(76.0)
1.0
1.0
773.5
–
–
0.8
0.8
699.3
774.3
26 LEASE LIABILITIES
lease liabilities are in respect of property assets leased by the Group recognised as right-of-use assets within property, plant and equipment on the
consolidated statement of financial position. the Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of less than
12 months and leases of low value assets.
Movements in lease liabilities during the year were as follows:
At 1 January
lease payments
Financing cash flows
new lease
Rent increase
disposal
Interest
Non-cash movements
At 31 December
172
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
3.9
(3.0)
(3.0)
7.6
–
–
0.1
7.7
8.6
6.9
(3.7)
(3.7)
–
0.6
–
0.1
0.7
3.9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 26 LEASE LIABILITIES continued
lease liabilities are payable as follows:
At 31 december
less than one year
Between one and five years
More than five years
Interest
total lease liability
27 OTHER FINANCIAL LIABILITIES
the Group has the following other financial liabilities which are measured at fair value through profit or loss:
derivative financial liabilities
obligations for repayment of cash collateral received
deposits received from reinsurers
Total other liabilities
2022
£m
1.1
6.8
0.8
8.7
(0.1)
8.6
2021
£m
3.0
1.0
–
4.0
(0.1)
3.9
note
(a)
(a)
(b)
2022
£m
3,023.2
623.1
1,603.9
5,250.2
2021
£m
394.7
326.2
2,144.7
2,865.6
(a) Derivative financial liabilities and obligations for repayment of cash collateral received
derivative financial liabilities and obligations for repayment of cash collateral received are classified at fair value through profit or loss. All financial liabilities at
fair value through profit or loss are designated as such on initial recognition or, in the case of derivative financial liabilities, are classified as held for trading.
(b) Deposits received from reinsurers
deposits received from reinsurers are unbundled from their reinsurance contract and recognised at fair value through profit or loss in accordance with IAS 39,
Financial instruments: recognition and measurement. deposits received from reinsurers are measured in accordance with the reinsurance contract, taking
into account an appropriate discount rate for the timing of expected cash flows of the liabilities.
the amount of deposits received from reinsurers and reinsurance funds withheld that is expected to be settled more than one year after the consolidated
statement of financial position date is £1,421.9m (2021: £1,952.7m).
28 DERIVATIVE FINANCIAL INSTRUMENTS
the Group uses various derivative financial instruments to manage its exposure to interest rates, counterparty credit risk, inflation and foreign exchange risk
(see note 33).
derivatives
Foreign currency swaps
Interest rate swaps
Inflation swaps
Forward swaps
total return swaps
Put options on property index (nnEG hedges)
Total
2022
2021
Asset fair
value
£m
Liability fair
value
£m
Notional
amount
£m
Asset fair
value
£m
liability fair
value
£m
412.9
1,320.3
12,662.5
1,407.6
1,580.0
13,647.9
437.5
5.0
13.6
–
79.7
10.5
13.5
19.2
4,293.4
546.3
–
705.0
243.4
169.9
261.8
1.8
5.8
8.5
247.2
44.9
92.5
3.4
5.8
0.9
notional
amount
£m
8,069.4
9,117.7
4,580.0
213.9
–
705.0
2,276.6
3,023.2
31,855.1
691.2
394.7
22,686.0
the Group’s derivative financial instruments are not designated as hedging instruments and changes in their fair value are included in profit or loss. the
significant increase in the interest rate swaps is due to changes in the hedging position.
All over-the-counter derivative transactions are conducted under standardised International Swaps and derivatives Association Inc. master agreements, and
the Group has collateral agreements between the individual Group entities and relevant counterparties in place under each of these market master
agreements.
As at 31 december 2022, the Group had pledged collateral of £1,286.2m (2021: £61.3m), of which £393.8m were corporate bonds and European Investment
Bank bonds (2021: £11m) and had received cash collateral of £623.1m (2021: £326.2m).
173
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
29 REINSURANCE
the Group uses reinsurance as an integral part of its risk and capital management activities.
new business is reinsured via longevity swap arrangements for dB and GIfl business and quota share for dB partnering business, as follows:
• dB was reinsured at 90% for non-underwritten schemes in 2021 and 2022.
• dB Partnering was reinsured at 100% for the scheme completed in 2022.
• GIfl was reinsured at 90% in 2021 and 2022.
• care new business was not reinsured in 2021 or 2022.
In-force business is reinsured under longevity swap and quota share treaties. the quota share reinsurance treaties have deposit back or other collateral
arrangements to remove the majority of the reinsurer credit risk, as described below. the majority of longevity swaps also have collateral arrangements, for
the same purpose.
In addition to the deposits received from reinsurers recognised within other financial liabilities (see note 27(b)), certain reinsurance arrangements give rise to
deposits from reinsurers that are not included in the consolidated statement of financial position of the Group as described below:
• the Group has an agreement with two reinsurers whereby financial assets arising from the payment of reinsurance premiums, less the repayment of
claims, in relation to specific treaties, are legally and physically deposited back with the Group. Although the funds are controlled by the Group, no future
benefits accrue to the Group as any returns on the deposits are paid to reinsurers. consequently, the deposits are not recognised as assets of the Group and
the investment income they produce does not accrue to the Group.
• the Group has an agreement with one reinsurer whereby assets equal to the reinsurer’s full obligation under the treaty are deposited into a ringfenced
collateral account. the Group has first claim over these assets should the reinsurer default, but as the Group has no control over these funds and does not
accrue any future benefit, this fund is not recognised as an asset of the Group.
• the Group has an agreement with one reinsurer whereby assets equal to the reinsurer’s full obligation under the treaty are either deposited into a
ringfenced collateral account of corporate bonds, or held under a funds withheld structure of lifetime Mortgages. the latter are legally and physically held
by the Group. Although the funds are managed by the Group (as the Group controls the investment of the asset), no future benefits accrue to the Group as
returns on the assets are paid to reinsurers. consequently, the lifetime mortgages are not recognised as assets of the Group and the investment income
they produce does not accrue to the Group. the reinsurer also deposits cash into a bank account held legally by the Group to fund future lifetime
Mortgages but as this cash is ringfenced for issued lifetime Mortgage quotes agreed by the reinsurer, it is also not recognised as an asset by the Group.
• the Group has an agreement with one reinsurer whereby assets equal to the reinsurer’s full obligation under the treaty are deposited into a ringfenced
collateral account of notes/shares issued through the dedicated Investment vehicle. the investments in the vehicle are restricted only for the purpose of
this reinsurance. consequently, the collateralised assets are not recognised as assets of the Group and the investment income they produce does not
accrue to the Group. the reinsurer also deposits cash into a bank account held legally by the Group to fund reinsurance claims but as this cash is ringfenced
for the reinsurer purpose, it is also not recognised as an asset by the Group.
deposits held in trust
2022
£m
568.7
2021
£m
491.7
the Group is exposed to a minimal amount of reinsurance counterparty default risk in respect of the above arrangements and calculates a counterparty
default reserve accordingly. At 31 december 2022, this reserve totalled £2.0m (2021: £3.4m).
30 INSURANCE AND OTHER PAYABLES
Payables arising from insurance and reinsurance contracts
other payables
Total insurance and other payables
2022
£m
31.7
230.8
262.5
2021
£m
22.0
71.3
93.3
other payables include unsettled investment purchases, which have increased in the period as a result of cash liability for recognised investment trades.
All amounts are due within one year.
31 COMMITMENTS
Capital commitments
the Group had no capital commitments as at 31 december 2022 (2021: £nil).
32 CONTINGENT LIABILITIES
there are no contingent liabilities as at 31 december 2022 (2021: £nil).
174
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 33 FINANCIAL AND INSURANCE RISK MANAGEMENT
this note presents information about the major financial and insurance risks to which the Group is exposed, and its objectives, policies and processes for their
measurement and management. Financial risk comprises exposure to market, credit and liquidity risk.
(a) Insurance risk
the Group’s insurance risks include exposure to longevity, mortality and morbidity and exposure to factors such as withdrawal levels and management and
administration expenses. the writing of long-term insurance contracts requires a range of assumptions to be made and risk arises from these assumptions
being materially inaccurate. the Group’s main insurance risk arises from adverse experience compared with the assumptions used in pricing products and
valuing insurance liabilities.
Individually underwritten GIfl policies are priced using assumptions about future longevity that are based on historic experience information, lifestyle and
medical factors relevant to individual customers, and judgements about the future development of longevity improvements. In the event of an increase in
longevity, the actuarial reserve required to make future payments to customers may increase.
loans secured by mortgages are used to match some of the liabilities arising from writing long term insurance policies. In the event that early repayments on
ltMs in a given period are higher than anticipated, less interest will have accrued on the mortgages and the amount repayable will be less than assumed at
the time of sale. In the event of an increase in longevity, although more interest will have accrued and the amount repayable will be greater than assumed at
the time of the sale, the associated cash flows will be received later than had originally been anticipated. In addition, a general increase in longevity would
have the effect of increasing the total amount repayable, which would increase the ltV ratio and could increase the risk of failing to be repaid in full as a
consequence of the no-negative equity guarantee. there is also exposure to morbidity risk as the ltM is repayable when the customer moves into long-
term care.
Management of insurance risk
underpinning the management of insurance risk are:
• the use of controls around the development of suitable products and their pricing;
• Adherence to approved underwriting requirements;
• the development and use of medical information including PrognoSys™ for both pricing and reserving to provide detailed insight into longevity risk;
• the use of reinsurance to reduce longevity risk. the Group retains oversight of the overall exposures and monitors that the aggregation of risk ceded is
within the reinsurance counterparty risk appetite;
• the assessment and recalibration of adequacy of risk based capital;
• Review and approval of assumptions used by the Board;
• Regular monitoring and analysis of actual experience; and
• Monitoring of expense levels.
Concentrations of insurance risk
Improved longevity arises from enhanced medical treatment and improved life circumstances. concentration risk to individuals groups whose longevity may
improve faster than the population is managed by writing business across a wide range of different medical and lifestyle conditions to avoid excessive
exposure. Reinsurance is also an important mitigant to concentrations of insurance risk.
(b) Market risk
Market risk is the risk of loss or of adverse change in the financial situation from fluctuations in the level and in the volatility of market prices of assets, liabilities
and financial instruments, together with the impact of changes in interest rates. Market risk is implicit in the insurance business model and arises from
exposure to interest rates, property markets, inflation and exchange rates. the Group is not exposed to equity risk. Some very limited equity risk exposure
arises from investment into credit funds which have a mandate which allows preferred equity to be held. changes in the value of the Group’s investment
portfolio will also affect the Group’s financial position. In addition falls in the financial markets can reduce the value of pension funds available to purchase
Retirement Income products and changes in interest rates can affect the relative attractiveness of Retirement Income products.
In mitigation, Retirement Income product monies are invested to match the asset and liability cash flows as closely as practicable. In practice, it is not possible
to eliminate market risk fully as there are inherent uncertainties surrounding many of the assumptions underlying the projected asset and liability cash flows.
Just has several EuR denominated bonds that have coupons linked to EuRIBoR, which are hedged into fixed GBP coupons. If EuRIBoR were no longer
produced, there is a risk that the bond coupons would not match the swap EuR leg payments. In mitigation, Just would restructure the related cross currency
asset swap to match the new coupon rate.
For each of the material components of market risk, described in more detail below, the Group’s Market Risk Policy sets out the Group’s risk appetite and
management processes governing how each risk should be measured, managed, monitored and reported.
(i) Interest rate risk
the Group is exposed to interest rate risk arising from the changes in the values of assets or liabilities as a result of changes in risk-free interest rates. the
Group seeks to limit its exposure through appropriate asset and liability matching and hedging strategies. the Group actively hedges its interest rate exposure
to protect balance sheet positions on both Solvency II and economic bases in accordance with its risk appetite framework and principles.
the Group’s main exposure to changes in interest rates is concentrated in the investment portfolio, loans secured by mortgages and its insurance obligations.
changes in investment and loan values attributable to interest rate changes are mitigated by corresponding and partially offsetting changes in the value of
insurance liabilities. the Group monitors this exposure through regular reviews of the asset and liability position, capital modelling, sensitivity testing and
scenario analyses. Interest rate risk is also managed using derivative instruments e.g. swaps.
175
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
33 FINANCIAL AND INSURANCE RISK MANAGEMENT continued
the following table indicates the earlier of contractual repricing or maturity dates for the Group’s significant financial assets.
2022
units in liquidity funds
Investment funds
debt securities and other fixed income securities
deposits with credit institutions
loans secured by residential mortgages
loans secured by commercial mortgages
loans secured by ground rents
Infrastructure loans
other loans
derivative financial assets
Total
2021
units in liquidity funds
Investment funds
debt securities and other fixed income securities
deposits with credit institutions
derivative financial assets
loans secured by residential mortgages
loans secured by commercial mortgages
loans secured by ground rents
Infrastructure loans
other loans
total
Less than
one year
£m
1,174.4
82.7
676.2
907.6
–
67.1
–
–
1.5
51.8
less than
one year
£m
1,310.5
68.4
733.5
52.9
8.0
–
43.4
–
–
0.9
One
to five years
£m
Five
to ten years
£m
Over
ten years
£m
No
fixed term
£m
–
338.3
–
–
–
–
1,424.5
2,405.0
6,864.7
–
–
338.5
–
24.2
117.9
157.4
–
–
125.1
–
160.3
6.4
322.3
2,961.3
2,400.8
3,019.1
Total
£m
1,174.4
421.0
11,370.4
907.6
5,305.9
5,305.9
–
–
–
–
–
583.7
246.9
1,056.4
134.3
2,276.6
5,305.9
23,477.2
–
–
–
–
–
–
–
–
–
–
–
53.0
246.9
871.9
8.5
1,745.1
9,790.1
–
524.1
one
to five years
£m
Five
to ten years
£m
over
ten years
£m
no
fixed term
£m
–
233.4
–
–
–
–
1,920.0
2,345.9
7,924.6
–
62.7
–
395.0
–
25.3
108.3
–
96.4
–
189.8
–
123.5
3.2
–
7,422.8
7,422.8
49.6
189.7
844.3
5.5
–
–
–
–
677.8
189.7
993.1
117.9
total
£m
1,310.5
301.8
12,924.0
52.9
691.2
2,217.6
2,744.7
2,758.8
9,537.8
7,422.8
24,681.7
A sensitivity analysis of the impact of interest rate movements on profit before tax is included in note 23(e).
(ii) Property risk
the Group’s exposure to property risk arises from the provision of lifetime mortgages which creates an exposure to the uK residential property market. A
substantial decline or sustained underperformance in uK residential property prices, against which the Group’s lifetime mortgages are secured, could result in
the mortgage debt at the date of redemption exceeding the proceeds from the sale of the property.
demand for lifetime mortgage products may also be impacted by a fall in property prices. It may diminish consumers’ propensity to borrow and reduce the
amount they are able to borrow due to reductions in property values.
the risk is managed by controlling the loan value as a proportion of the property’s value at outset and obtaining independent third party valuations on each
property before initial mortgages are advanced. lifetime mortgage contracts are also monitored through dilapidation reviews. House prices are monitored
and the impact of exposure to adverse house prices (both regionally and nationally) is regularly reviewed. Further mitigation is through management of the
volume of lifetime Mortgages, including disposals, in the portfolio in line with the Group’s ltM backing ratio target, and the establishment of the nnEG hedges.
the Group has managed its property risk exposure in the year via a reduction in the ltM backing ratio and an additional ltM portfolio sale.
A sensitivity analysis of the impact of residential property price movements is included in note 17 and note 23(e). these notes also discuss the Group’s
consideration of the impact of coVId-19 on property assumptions at 31 december 2022.
the Group is also exposed to commercial property risk indirectly through the investment in loans secured by commercial mortgages. Mitigation of such risk is
covered by the credit risk section below.
176
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 33 FINANCIAL AND INSURANCE RISK MANAGEMENT continued
(iii) Inflation risk
Inflation risk is the risk of change in the value of assets or liabilities arising from changes in actual or expected inflation or in the volatility of inflation.
Exposure to long term inflation occurs in relation to the Group’s own management expenses and its writing index-linked Retirement Income contracts.
Its impact is managed through the application of disciplined cost control over management expenses and through matching inflation-linked assets and
inflation-linked liabilities for the long term inflation risk.
(iv) Currency risk
currency risk arises from changes in foreign exchange rates which affect the value of assets denominated in foreign currencies.
Exposure to currency risk could arise from the Group’s investment in non-sterling denominated assets. the Group invests in fixed income securities
denominated in uS dollars and other foreign currencies for its financial asset portfolio. All material Group liabilities are in Sterling. As the Group does not wish
to introduce foreign exchange risk into its investment portfolio, derivative or quasi-derivative contracts are entered into to mitigate the foreign exchange
exposure as far as possible.
(c) Credit risk
credit risk arises if another party fails to perform its financial obligations to the Group, including failing to perform them in a timely manner.
credit risk exposures arise from:
• Holding fixed income investments. the risk of default (where the counterparty fails to pay back the capital and/or interest on a corporate bond) is mitigated
by investing only in higher quality or investment grade assets. concentration of credit risk exposures is managed by placing limits on exposures to
individual counterparties, sectors and geographic areas.
• counterparties in derivative contracts. the Group uses financial instruments to mitigate interest rate and currency risk exposures. It therefore has credit
exposure to various counterparties through which it transacts these instruments, although this is usually mitigated by collateral arrangements (see
note 28).
• Reinsurance treaties. Reinsurance is used to manage longevity risk and to fund new business but, as a consequence, credit risk exposure arises should a
reinsurer fail to meet its claim repayment obligations. credit risk on reinsurance balances is mitigated by the reinsurer depositing back more than 100% of
premiums ceded under the reinsurance agreement and/or through robust collateral arrangements.
• cash balances – credit risk on cash assets is managed by imposing restrictions over the credit ratings of third parties with whom cash is deposited.
• credit risk for loans secured by residential mortgages has been considered within “property risk” above.
the following table provides information regarding the credit risk exposure for financial assets of the Group, which are neither past due nor impaired at
31 december:
2022
units in liquidity funds
Investment funds
UK gilts
£m
–
–
AAA
£m
1,169.8
–
AA
£m
–
–
A
£m
–
–
–
–
debt securities and other fixed income securities
306.0
698.2
1,582.5
3,262.6
5,120.6
deposits with credit institutions
loans secured by residential mortgages
loans secured by commercial mortgages
loans secured by ground rents
Infrastructure loans
other loans
derivative financial assets
Reinsurance
Insurance and other receivables
–
–
–
–
–
–
–
–
–
–
–
–
–
99.4
773.0
20.0
–
–
–
–
–
–
–
–
–
71.2
97.4
141.7
733.9
–
–
–
–
–
–
126.9
–
–
1,669.9
197.1
–
–
606.7
3.7
–
BBB
£m
BB or below
£m
Unrated
£m
Total
£m
4.6
–
400.6
15.1
–
–
–
12.2
22.3
–
–
–
–
1,174.4
421.0
421.0
–
0.1
11,370.5
907.6
5,305.9
5,305.9
583.7
246.9
583.7
246.9
–
1,056.4
111.9
134.2
–
2,276.6
204.4
322.8
532.1
322.8
Total
306.0
1,939.2
1,906.2
6,044.3
6,484.9
454.8
7,196.7
24,332.1
177
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
33 FINANCIAL AND INSURANCE RISK MANAGEMENT continued
uK gilts
£m
2021
units in liquidity funds
Investment funds
–
–
AAA
£m
1,304.9
–
AA
£m
–
–
A
£m
–
–
–
–
debt securities and other fixed income securities
741.8
894.0
2,132.3
3,279.7
5,554.2
BBB
£m
BB or below
£m
unrated
£m
total
£m
5.6
–
322.0
2.6
–
–
–
45.7
12.5
–
–
–
–
1,310.5
301.8
301.8
–
–
12,924.0
52.9
7,422.8
7,422.8
677.8
189.7
–
105.4
–
0.5
35.4
677.8
189.7
993.1
117.9
691.2
497.3
35.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
82.4
116.6
–
–
–
–
–
0.3
214.7
–
11.1
39.2
–
–
–
180.9
–
519.3
277.0
–
–
–
–
567.5
–
171.6
5.1
–
deposits with credit institutions
loans secured by residential mortgages
loans secured by commercial mortgages
loans secured by ground rents
Infrastructure loans
other loans
derivative financial assets
Reinsurance
Insurance and other receivables
total
741.8
2,281.3
2,463.9
4,268.0
6,337.6
388.4
8,733.4
25,214.4
there are no financial assets that are either past due or impaired.
the credit rating for cash available on demand at 31 december 2022 was between a range of AA and BB (2021: between a range of AA and BB).
the carrying amount of those assets subject to credit risk represents the maximum credit risk exposure.
In the tables below, the amounts of assets or liabilities presented in the consolidated Balance Sheet are offset first by financial instruments that have the right
of offset under a master netting arrangement or similar arrangements with any remaining amount reduced by cash and securities collateral.
2022
derivative assets
derivative liabilities
Balance Sheet
£m
2,277
(3,023)
Related
financial
Instruments1
£m
(1,766)
1,766
Cash
collateral2
£m
(491)
783
Securities
collateral
pledged
£m
(5)
444
Net
amount
£m
15
(30)
1 Related financial instruments represents outstanding amounts with the same counterparty which, under agreements such as the ISdA Master Agreement, could be offset and settled net
following certain predetermined events.
2 cash and securities held may exceed target levels due to the complexities of operational collateral management, timing and agreements in place with individual counterparties.
2021
derivative assets
derivative liabilities
Balance Sheet
£m
691
(395)
Related
financial
Instruments1
£m
(369)
380
cash
collateral2
£m
(311)
26
Securities
collateral
pledged
£m
–
–
net
amount
£m
11
–
1 Related financial instruments represents outstanding amounts with the same counterparty which, under agreements such as the ISdA Master Agreement, could be offset and settled net
following certain predetermined events.
2 cash and securities held may exceed target levels due to the complexities of operational collateral management, timing and agreements in place with individual counterparties. this may result
in over/under-collateralisation of derivative positions. the amount of collateral reported in the table above is restricted to the value of the associated derivatives recognised in the Statement of
Financial Position.
178
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 33 FINANCIAL AND INSURANCE RISK MANAGEMENT continued
(d) Liquidity risk
liquidity risk is the risk of loss because the Group, although solvent, does not have sufficient financial resources available to it in order to meet its obligations as
they fall due.
the investment of cash received from Retirement Income sales into corporate bonds, gilts and lifetime mortgages, and commitments to pay policyholders and
other obligations, requires liquidity risks to be taken.
Exposure to liquidity risk arises from:
• maintaining and servicing collateral requirements arising from the changes in market value of financial derivatives used by the Group;
• needing to realise assets to meet liabilities during stressed market conditions;
•
• needing to support liquidity requirements for day-to-day operations; and
• ensuring financial support can be provided across the Group.
increasing cash flow volatility in the short-term giving rise to mismatches between cash flows from assets and requirements from liabilities;
liquidity risk is managed by holding assets of a suitable maturity and marketability to meet liabilities as they fall due. the Group’s short-term liquidity
requirements to meet annuity payments are predominantly funded by investment coupon receipts, and bond principal repayments. there are significant
barriers for policyholders to withdraw funds that have already been paid to the Group in the form of premiums. cash outflows associated with Retirement
Income liabilities can be reasonably estimated and liquidity can be arranged to meet this expected outflow through asset-liability matching and new business
premiums.
the cash flow characteristics of the lifetime Mortgages are reversed when compared with Retirement Income products, with cash flows effectively
representing an advance payment, which is eventually funded by repayment of principal plus accrued interest. Policyholders are able to redeem mortgages,
albeit at a cost. the mortgage assets are considered illiquid, as they are not readily saleable due to the uncertainty about their value and the lack of a market
in which to trade them individually.
cash flow forecasts over the short, medium and long term are regularly prepared to predict and monitor liquidity levels in line with limits set on the minimum
amount of liquid assets required. cash flow forecasts include an assessment of the impact of a 1-in-200 year event on the Group’s long term liquidity and the
minimum cash and cash equivalent levels required to cover enhanced stresses. derivative stresses have been revised to take into account the market volatility
caused by coVId-19, and focus on the worst observed movements over the last 40 years, in shorter periods from one day up to and including one month.
during the year the Group replaced the existing revolving credit facility with a new and undrawn revolving credit facility of up to £300m for general corporate
and working capital purposes available until 13 June 2025.
Interest is payable on any drawdown loans at a rate of SonIA plus a margin of between 1.00% and 1.50% per annum depending on the Group’s unsecured
issuer rating provided by any of Fitch, S&P and Moody’s.
the table below summarises the maturity profile of the financial liabilities, including both principal and interest payments, of the Group based on remaining
undiscounted contractual obligations:
2022
Investment contract liabilities
Subordinated debt
derivative financial liabilities
obligations for repayment of cash collateral received
deposits received from reinsurers
2021
Investment contract liabilities
Subordinated debt
derivative financial liabilities
obligations for repayment of cash collateral received
deposits received from reinsurers
179
Within one
year or
payable on
demand
£m
7.8
65.0
28.3
623.1
182.0
Within one
year or
payable on
demand
£m
10.2
71.8
7.3
326.2
192.0
One to
five years
£m
More than
five years
£m
30.7
559.8
324.5
–
0.7
855.3
2,651.3
–
651.3
1,772.3
one to
five years
£m
More than
five years
£m
21.1
684.2
41.9
–
1.5
899.2
344.6
–
679.8
1,924.0
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
34 CAPITAL
Group capital position
the Group’s estimated capital surplus position at 31 december 2022 was as follows:
Eligible own Funds
Solvency capital Requirement
Excess Own Funds
Solvency coverage ratio
Solvency
capital Requirement
Minimum Group Solvency
capital Requirement
20221
£m
20212
£m
2,757
3,004
(1,387)3
(1,836)
1,3703
199%3
1,168
164%
2022
£m
2,152
(388)3
1,7643
555%3
2021
£m
2,263
(482)
1,781
469%
1 Estimated regulatory position. Solvency II capital coverage ratios as at 31 dec 2021 and 31 dec 2022 include a recalculation of transitional measures on technical provisions (“tMtP”) as at the
respective dates.
2 this is the reported regulatory position as included in the Group’s Solvency and Financial condition Report as at 31 december 2021.
3 unaudited.
Further information on the Group’s Solvency II position, including a reconciliation between the regulatory capital position to the reported capital surplus, is
included in the Business Review. this information is estimated and therefore subject to change. It is also unaudited.
the Group and its regulated insurance subsidiaries are required to comply with the requirements established by the Solvency II Framework directive as
adopted by the Prudential Regulation Authority (“PRA”) in the uK, and to measure and monitor its capital resources on this basis. the overriding objective of
the Solvency II capital framework is to ensure there is sufficient capital within the insurance company to protect policyholders and meet their payments when
due. they are required to maintain eligible capital, or “own Funds”, in excess of the value of their Solvency capital Requirements (“ScR”). the ScR represents
the risk capital required to be set aside to absorb 1-in-200 year stress tests over the next one year time horizon of each risk type that the Group is exposed to,
including longevity risk, property risk, credit risk and interest rate risk. these risks are all aggregated with appropriate allowance for diversification benefits.
the capital requirement for Just Group plc is calculated using a partial internal model. Just Retirement limited (“JRl”) uses a full internal model and
Partnership life Assurance company limited (“PlAcl”) capital is calculated using the standard formula.
Group entities that are under supervisory regulation and are required to maintain a minimum level of regulatory capital include:
•
• HuB Financial Solutions limited, Just Retirement Money limited and Partnership Home loans limited – authorised and regulated by the FcA.
JRl and PlAcl – authorised by the PRA, and regulated by the PRA and FcA.
the Group and its regulated subsidiaries complied with their regulatory capital requirements throughout the year.
Capital management
the Group’s objectives when managing capital for all subsidiaries are:
•
to comply with the insurance capital requirements required by the regulators of the insurance markets where the Group operates. the Group’s policy is to
manage its capital in line with its risk appetite and in accordance with regulatory expectations;
to safeguard the Group’s ability to continue as a going concern, and to continue to write new business;
to ensure that in all reasonably foreseeable circumstances, the Group is able to fulfil its commitment over the short term and long term to pay
policyholders’ benefits;
to continue to provide returns for shareholders and benefits for other stakeholders;
to provide an adequate return to shareholders by pricing insurance and investment contracts commensurately with the level of risk; and
to generate capital from in-force business, excluding economic variances, management actions, and dividends.
•
•
•
•
•
the Group regularly assesses a wide range of actions to improve the capital position and resilience of the business.
to improve resilience to property risk, we have significantly reduced the exposure related to ltMs by selling three blocks of ltMs and transacting three
no-negative equity guarantee (“nnEG”) hedges since 2018.
In managing its capital, the Group undertakes stress and scenario testing to consider the Group’s capacity to respond to a series of relevant financial,
insurance, or operational shocks or changes to financial regulations should future circumstances or events differ from current assumptions. the review also
considers mitigating actions available to the Group should a severe stress scenario occur, such as raising capital, varying the volumes of new business written
and a scenario where the Group stops writing new business.
EVT compliance
At 31 december 2022, Just passed the PRA EVt with a buffer of 1.53% (unaudited) over the current minimum published deferment rate of 2.0% (allowing for
volatility of 13%, in line with the requirement for the EVt). At 31 december 2021, the buffer was 0.75% (unaudited) compared to the minimum deferment rate
of 0.5%. the buffer increased primarily due to rise in risk free rates.
Management regularly assesses the level of buffer above the minimum deferment rate and considers appropriateness of the buffer against an established
framework.
Regulatory developments
the PRA approved the Group’s major model change application on 28 november 2022. We are planning to apply to the PRA to bring the PlAcl ScR calculation
onto the internal model.
180
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 34 CAPITAL continued
In november 2022, HMt published its response to the consultation on the review of Solvency II and set out its plans for reform. the key elements of the reform
for the Group relate to the risk margin and the Matching Adjustment. We welcome the reduction in risk margin to a more appropriate level and that we hope
that the proposed expansion of the matching adjustment criteria enables us to invest in a wider range of assets, in particular to help support investment in the
uK economy. However, the detailed expectations underlying the reforms still needs to be developed and the implementation date has not been set. the Group
will engage with PRA and HMt consultations in 2023 as appropriate.
35 GROUP ENTITIES
the Group holds investment in the ordinary shares (unless otherwise stated) of the following subsidiary undertakings and associate undertakings, which are all
consolidated in these Group accounts. All subsidiary undertakings have a financial year end at 31 december (unless otherwise stated).
Principal activity
Registered office
Percentage of
nominal share
capital and voting
rights held
Holding company
Holding company
Direct subsidiary
Just Retirement Group Holdings limited5
Partnership Assurance Group limited5
Indirect subsidiary
HuB Acquisitions limited1, 5
HuB Financial Solutions limited
Just Re 1 limited5
Just Re 2 limited5
Just Retirement (Holdings) limited5
Just Retirement (South Africa) Holdings (Pty) limited
Just Retirement life (South Africa) limited
Just Retirement limited
Just Retirement Management Services limited5
Just Retirement Money limited
Partnership Group Holdings limited5
Partnership Holdings limited5
Partnership Home loans limited
Partnership life Assurance company limited
Partnership Services limited5
toMAS online development limited5
Enhanced Retirement limited
HuB digital Solutions limited
Pension Buddy limited (formerly HuB online development limited)
HuB Pension Solutions limited
HuB transfer Solutions limited
JRP Group limited
JRP nominees limited
Just Annuities limited
Just Equity Release limited
Just Incorporated limited
Just Management Services (Proprietary) limited
Just Protection limited
Just Retirement Finance plc
Just Retirement nominees limited
Just Retirement Solutions limited
PAG Finance limited
PAG Holdings limited
PASPV limited
PayingForcare limited
PlAcl RE 1 limited
PlAcl RE 2 limited
toMAS Acquisitions limited
the open Market Annuity Service limited
HuB Pension consulting (Holdings) limited (formerly corinthian Group limited)5 Holding company
HuB Pension consulting limited5
Spire Platform Solutions limited2, 3
Associate
Guernsey Property unit trust
comentis
Holding company
distribution
Investment activity
Investment activity
Holding company
Holding company
life assurance
life assurance
Management services
Provision of lifetime mortgage products
Holding company
Holding company
Provision of lifetime mortgage products
life assurance
Management services
Software development
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
dormant
Investment activity
Product development
Pension consulting
Software development
Reigate
Reigate
Reigate
Reigate
Reigate
Reigate
Reigate
South Africa
South Africa
Reigate
Reigate
Reigate
Reigate
Reigate
Reigate
Reigate
Reigate
Belfast
Reigate
Reigate
Belfast
Reigate
Reigate
Reigate
Reigate
Reigate
Reigate
Reigate
South Africa
Reigate
Reigate
Reigate
Reigate
Jersey
Jersey
Reigate
Reigate
Reigate
Reigate
Reigate
Belfast
Reigate
Reigate
Portsmouth
Guernsey
Bristol
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
33%4
60%
13%
1 class “A” and class “B” ordinary shares. 2 class “B” ordinary shares. 3 30 June year end. 4 control is based on Board representation rather than percentage holding.
5 the financial statements of these subsidiary undertakings are exempt from the requirements of the companies Act 2006 relating to the audit of individual financial statements by virtue of
Section 479A of the companies Act 2006.
181
financial statementsGOVERNANCESTRATEGIC REPORT
JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
35 GROUP ENTITIES continued
Registered offices
Reigate office:
Enterprise House
Bancroft Road
Reigate, Surrey RH2 7RP
Jersey office:
44 Esplanade
St Helier
Jersey JE4 9WG
Belfast office:
3rd Floor, Arena Building
ormeau Road
Belfast Bt7 1SH
Portsmouth office:
Building 3000, lakeside north Harbour
Portsmouth
Hampshire Po6 3En
South Africa office:
Spaces – Waterfront, dock Road Junction
corner of Stanley and dock Road
Waterfront
cape town 8001
Consolidated structured entities
In november 2020 the Parent company invested in a cell of a Protected cell company, White Rock Insurance (Gibraltar) Pcc limited. Financial support provided
by the Group is limited to amounts required to cover transactions between the cell and the Group. Just is the cell owner of the individual protected cell and
owns the single insurance share associated with the cell. the Group has provided £10m financial support in the form of a letter of credit.
In december 2021 the Group invested in a controlling interest in a Jersey Property unit trust (“JPut”). the Group has determined that it controls the JPut as a
result of the Group’s ability to remove the trustees; other than the Group and the trustees there are no other parties with decision making rights over the JPut.
the Group has taken the option within IFRS 3, Business combinations to apply the concentration test to determine whether the JPut represents a business
within the scope of IFRS 3. the conclusion of the concentration test is that the assets of the JPut are concentrated in the single identifiable asset of the
investment property and as such the investment by the Group does not represent a business combination (see note 15). the Group has consolidated the
results of the JPut; any excess of investment purchase price over the fair value of the assets acquired is allocated against the identifiable assets and liabilities
in proportion to their relative fair values; goodwill is not recognised.
Unconsolidated structured entities
the Group has interests in structured entities which are not consolidated as the definition of control has not been met based on the investment proportion
held by the Group.
Interests in unconsolidated structured entities include investment funds and liquidity funds and loans granted to special purpose vehicles (“SPVs”) secured by
assets held by the SPVs such as commercial mortgages and ground rents.
As at 31 december 2022 the Group’s interest in unconsolidated structured entities, which are classified as investments held at fair value through profit or loss,
are shown below:
loans secured by commercial mortgages
loans secured by ground rents
Asset backed securities
Investment funds
liquidity funds
Total
2022
£m
583.7
246.9
7.0
399.2
2021
£m
677.8
189.7
9.5
301.8
1,174.4
2,411.2
1,310.5
2,489.3
the Group’s exposure to financial loss from its interest in unconsolidated structured entities is limited to the amounts shown above. the Group is not required
to provide financial support to the entities, nor does it sponsor the entities.
Non-controlling interests
on 4 July 2018 the Group subscribed to 33% of the ordinary share capital of Spire Platform Solutions limited. the Group has majority representation on the
Board of the company, giving it effective control, and therefore consolidates the company in full in the results of the Group.
on 17 August 2018 the Group acquired 75% of the ordinary share capital of HuB Pension consulting (Holdings) limited (formerly corinthian Group limited).
on 22 September 2021 the Group acquired the remaining 25% of the ordinary share capital at a cost of £52,659.80.
the non-controlling interests of the minority shareholders of Spire Platform Solutions limited of £0.6m have been recognised in the year.
Associates
during the year the Group invested £196m for a 60% equity stake in a Guernsey Property unit trust (“GPut”) “tP2 unit trust”, M&G (Guernsey), Po Box 156,
dorey court, Admiral Park, St. Peter Port, Guernsey GY1 4Eu.
the GPut is a structured entity as voting rights are not the determining factor in assessing which party controls the entity. Although the Group has a majority
equity stake, the decisions regarding the relevant activities of the GPut are made by the trustee. Each investor holds veto rights, however these are not
proportionate to the equity holding and as such the veto rights do not give any investor more power than any other investor. the Group accounts for this
investment as an Associate using the equity method.
In december 2022 the Group invested £1m for a 13% equity stake in comentis ltd, incorporated and registered in England and Wales with company number
13061362 whose registered office is at Henleaze House, Harbury Road, Bristol, England, BS9 4Pn.
182
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 35 GROUP ENTITIES continued
the investment includes the right for the Group to appoint a director to the board of comentis ltd and as a result the investment has been classified as an
Associate and accounted for using the equity method in the Group accounts. comentis ltd has a reporting period ending 31 March which is different to the Group’s
year end of 31 december. Given the timing of the acquisition, there is no impact on the application of the equity method in the Group’s 2022 financial statements.
Summarised financial information for associates
Assets
Investment properties
trade and other receivables
cash and cash equivalents
Total assets
Equity
Partners capital
Retained earnings
Total equity
Reconciliation of carrying value
Investment in associate - GPut
Share of associates net income - GPut
Carrying amount - GPUT
Investment in associate - comentis
Carrying amount
Year ended
31 December
2022
£m
212.0
52.0
6.0
270.0
327.0
(57.0)
270.0
Year ended
31 December
2022
£m
196.2
(2.9)
193.3
1.0
194.3
36 RELATED PARTIES
the Group has related party relationships with its key management personnel and subsidiary undertakings detailed in note 35.
Key management personnel comprise the directors of the company. there were no material transactions between the Group and its key management
personnel other than those disclosed below.
Key management compensation is as follows:
Short-term employee benefits
Share-based payments
Total key management compensation
loans owed by directors
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
3.0
1.7
4.7
0.4
3.9
1.5
5.4
0.4
the loan advances to directors accrue interest fixed at 4% per annum and are repayable in whole or in part at any time.
37 ULTIMATE PARENT COMPANY AND ULTIMATE CONTROLLING PARTY
the company is the ultimate Parent company of the Group and has no controlling interest.
38 POST BALANCE SHEET EVENTS
Subsequent to 31 december 2022, the directors proposed a final dividend for 2022 of 1.23 pence per ordinary share (2021: 1.0 pence), amounting to £17.9m (2021:
£10.4m) in total. Subject to approval by shareholders at the company’s 2023 AGM, the dividend will be paid on 17 May 2023 to shareholders on the register of
members at the close of business on 14 April 2023, and will be accounted for as an appropriation of retained earnings in year ending 31 december 2023.
there are no other material post balance sheet events that have taken place between 31 december 2022 and the date of this report.
183
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
for the year ended 31 december 2022
Year ended
31 December 2022
At 1 January 2022
Profit for the year
Total comprehensive loss for the year
Contributions and distributions
Shares issued
tier 1 notes issued (net of costs)
tier 1 notes redeemed
dividends
Interest paid on tier 1 notes (net of tax)
Share-based payments
transfer from merger reserve
Total contributions and distributions
At 31 December 2022
Year ended 31 december 2021
At 1 January 2021
loss for the year
total comprehensive loss for the year
contributions and distributions
Shares issued
tier 1 notes issued (net of costs)
tier 1 notes redeemed
dividends
Interest paid on tier 1 notes (net of tax)
Share-based payments
transfer from merger reserve
total contributions and distributions
At 31 december 2021
103.8
–
–
–
–
–
–
0.1
103.9
Share
capital
£m
103.8
–
–
–
–
–
–
–
–
–
–
Share
capital
£m
103.8
–
–
Share
premium
£m
93.4
–
–
0.1
0.1
–
–
–
–
–
–
0.1
93.5
Merger
reserve
£m
299.5
Shares held
by trusts
£m
Accumulated
profit
£m
(4.3)
442.6
–
–
–
–
–
–
–
–
–
–
299.5
–
–
–
–
–
–
–
(5.9)
–
(5.9)
(10.2)
60.6
60.6
–
–
–
(15.6)
(13.7)
2.2
–
(27.1)
476.1
Total
shareholders’
equity
£m
935.0
60.6
60.6
0.2
–
–
(15.6)
(13.7)
(3.7)
–
(32.8)
962.8
Tier 1 notes
£m
Total
£m
322.4
1,257.4
–
–
–
–
–
–
–
–
–
–
60.6
60.6
0.2
–
–
(15.6)
(13.7)
(3.7)
–
(32.8)
322.4
1,285.2
Share
premium
£m
Merger
reserve
£m
Shares held by
trusts
£m
Accumulated
profit
£m
total
shareholders’
equity
£m
tier 1 notes
£m
total
£m
93.3
487.5
(5.4)
327.8
1,007.0
294.0
1,301.0
–
–
0.1
–
–
–
–
–
–
0.1
93.4
–
–
–
–
–
–
–
–
(188.0)
(188.0)
299.5
–
–
–
–
–
–
–
1.1
–
1.1
(4.3)
(9.6)
(9.6)
–
–
(47.0)
–
(20.4)
3.8
188.0
124.4
442.6
(9.6)
(9.6)
0.1
–
(47.0)
–
(20.4)
4.9
–
(62.4)
935.0
–
–
–
322.4
(294.0)
–
–
–
–
28.4
322.4
(9.6)
(9.6)
0.1
322.4
(341.0)
–
(20.4)
4.9
–
(34.0)
1,257.4
184
STATEMENT OF FINANCIAL POSITION OF THE COMPANY
as at 31 december 2022
company number: 08568957
Assets
Non-current assets
Investments in Group undertakings
loans to Group undertakings
deferred tax
Current assets
Financial investments
Prepayments and accrued income
Amounts due from Group undertakings
cash available on demand
Total assets
Equity
Share capital
Share premium
Merger reserve
Shares held by trusts
Accumulated profit
Total equity attributable to ordinary shareholders of Just Group plc
tier 1 notes
Total equity
Liabilities
Non-current liabilities
Subordinated debt
Current liabilities
other payables
Total liabilities
Total equity and liabilities
note
2022
£m
2021
£m
2
3
4
5
5
25
848.5
842.5
1,000.0
1,000.0
1.3
–
1,849.8
1,842.5
109.0
1.1
27.2
11.1
148.4
167.7
0.2
27.0
11.5
206.4
1,998.2
2,048.9
103.9
93.5
299.5
(10.2)
476.1
962.8
322.4
103.8
93.4
299.5
(4.3)
442.6
935.0
322.4
1,285.2
1,257.4
702.5
702.5
10.5
10.5
777.9
777.9
13.6
13.6
713.0
791.5
1,998.2
2,048.9
the company has taken advantage of the exemption in Section 408 of the companies Act 2006 not to present its own income statement and statement of
comprehensive income. the profit arising in the year amounts to £60.6m, (2021: loss of £9.6m).
the financial statements were approved by the Board of directors on 6 March 2023 and were signed on its behalf by:
ANDY PARSONS
director
185
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
STATEMENT OF CASH FLOWS OF THE COMPANY
for the year ended 31 december 2022
Cash flows from operating activities
Profit/(loss) before tax
Impairment of investments in Group undertakings
Share-based payments
Income from shares and loans to Group undertakings
Interest income
Interest expense
Increase in prepayments and accrued income
decrease in other payables
taxation paid
Net cash outflow from operating activities
Cash flows from investing activities
Increase in financial assets
capital injections in subsidiaries
dividends received
Net cash inflow from investing activities
Cash flows from financing activities
Issue of ordinary share capital (net of costs)
Proceeds from issue of tier 1 notes (net of costs)
Redemption of tier 1 notes
decrease in borrowings (net of costs)
dividends paid
net coupon received on tier 1 notes
net interest received on borrowings
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
cash and cash equivalents at start of year
Cash and cash equivalents at end of year
cash available on demand
units in liquidity funds
Cash and cash equivalents at end of year
186
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
62.6
–
(3.7)
(78.1)
(52.2)
57.0
(1.3)
(16.0)
(3.3)
(35.0)
(3.4)
(6.0)
50.0
40.6
0.2
–
–
(77.6)
(15.6)
11.2
17.1
(64.7)
(59.1)
179.2
120.1
11.1
109.0
120.1
(7.7)
188.0
4.9
(197.1)
(55.6)
57.6
–
(8.0)
(11.3)
(29.2)
–
(5.8)
169.0
163.2
0.1
321.8
(350.6)
–
–
2.9
15.6
(10.2)
123.8
55.4
179.2
11.5
167.7
179.2
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES
General information
Just Group plc (the “company”) is a public company limited by shares, incorporated and domiciled in England and Wales.
1.1 Basis of preparation
the financial statements have been prepared in accordance with uK adopted international accounting standards in conformity with the requirements of the
companies Act 2006 and the disclosure guidance and transparency rules sourcebook of the united Kingdom’s Financial conduct Authority
the accounting policies followed in the company financial statements are the same as those in the consolidated accounts with the exception that the
company applies IFRS 9 in its separate financial statements. Values are expressed to the nearest £0.1m.
1.2 Net investment income
Investment income is accrued up to the balance sheet date. Investment expenses and charges are recognised on an accruals basis.
1.3 Taxation
taxation is based on profits for the year as determined in accordance with the relevant tax legislation, together with adjustments to provisions for prior
periods. deferred taxation is provided on temporary differences that have originated but not reversed at the balance sheet date, where transactions or events
that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. A net deferred tax asset
is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will
be sufficient taxable profits to utilise carried forward tax losses against which the reversal of underlying timing differences can be deducted. deferred tax is
measured at the average tax rates that are expected to apply in the periods in which the temporary differences are expected to reverse, based on tax rates
and laws that have been enacted or substantially enacted by the balance sheet date. deferred tax is measured on an undiscounted basis.
1.4 Investments in Group undertakings
Shares in subsidiary undertakings are stated at cost less any provision for impairment.
1.5 Loans to Group undertakings
Investments in subordinated debt issued by subsidiary companies are valued at amortised cost net of impairment for expected credit losses. Expected credit
losses are calculated on a 12 month forward-looking basis where the debt has low credit risk or has had no significant increase in credit risk since the debt
originated.
1.6 Financial investments
Financial investments are designated at fair value through profit or loss on initial recognition.
1.7 Share-based payments
the Group offers share award and option plans for certain key employees and a Save As You Earn scheme for all employees. the share-based payment plans
operated by the Group are all equity-settled plans. under IFRS 2, Share-based payment, where the company, as the Parent company, has the obligation to
settle the options or awards of its equity instruments to employees of its subsidiary undertakings, and such share-based payments are accounted for as
equity-settled in the Group financial statements, the company records an increase in the investment in subsidiary undertakings for the value of the share
options and awards granted with a corresponding credit entry recognised directly in equity. the value of the share options and awards granted is based upon
the fair value of the options and awards at the grant date, the vesting period and the vesting conditions.
1.8 Classification of intra-group loan arrangements
the company assesses the commercial substance of its intra-group lending arrangements to determine the classification as either a financial asset (that gives
rise to a financial liability or equity instrument in the subsidiary) or whether the lending arrangement forms part of the company’s investment in the
subsidiary. In making the assessment the company considers evidence of past principal and coupon payments, planned payments and the contractual terms
of the arrangement. Intra-group loans that bear a market rate of interest and have fixed repayment dates are classified as financial liabilities by the subsidiary
and as financial assets by the company.
the company also issued Restricted tier 1 notes in the external market in 2019 and on-lent the proceeds from these instruments to its subsidiaries JRl and
PlAcl under the same commercial terms as the company obtained in the external market. these instruments are classified as equity instruments by the
issuer as explained in note 22 to the Group financial statements; classification by the subsidiaries is consistent with this. As the on-lending of this instrument
was on the same commercial terms, the company does not consider that the transaction represents an action in its capacity as shareholder, and therefore the
asset recognised in the company’s financial statements is classified as a financial asset in the scope of IFRS 9.
2 INVESTMENTS IN GROUP UNDERTAKINGS
At 1 January 2022
Additions
At 31 December 2022
At 1 January 2021
Additions
Provision for impairment
At 31 december 2021
187
Shares in Group
undertakings
£m
842.5
6.0
848.5
1,024.7
5.8
(188.0)
842.5
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
2 INVESTMENTS IN GROUP UNDERTAKINGS continued
details of the company’s investments in the ordinary shares of subsidiary undertakings are given in note 35 to the Group financial statements. Additions to
shares in Group undertakings relate to shares issued by Just Retirement Group Holdings limited and the cost of share-based payments for services provided by
employees of subsidiary undertakings to be satisfied by shares issued by the company. Investments in Group undertakings are assessed annually to assess
whether there is any indication of impairment.
As at 31 december 2022, the market capitalisation of the Group was less than its net assets. the shortfall between the market capitalisation and net assets of
the Group was an indicator of possible impairment of Just Group plc’s investments in its life company subsidiaries, JRl and PlAcl.
Impairment testing was therefore carried out to assess the recoverable amount of the investments in JRl and PlAcl at 31 december 2022. the testing
assessed the recoverable amount for each subsidiary through a value-in-use calculation based on the expected emergence of excess capital under Solvency II
for each subsidiary. the carrying amount of the investment at 31 december 2022 for JRl was £513m and £272m for PlAcl. the recoverable amounts for both
entities were calculated to be in excess of this amount, indicating that no impairment of the Group’s investment in JRl or PlAcl was required. upon acquisition
of the investment in PlAcl in 2016, Just Group plc recognised a merger reserve of £532m. Since the acquisition, impairments in the investment in PlAcl
totalling £298m have been transferred from the merger reserve to the accumulated profit reserve. the calculation of value-in-use for JRl and PlAcl uses cash
flow projections based on the emergence of surplus for in-force business on a Solvency II basis, together with new business cash flows on a Solvency II basis
set out in the Group’s business plan approved by the Board. the pre-tax discount rates used were 9.5% for JRl and 9.0% for PlAcl. the discount rates were
determined using a weighted average cost of capital approach, adjusted for specific risks attributable to the businesses, with the lower rate used for PlAcl
reflecting that it is largely closed to new business. A one percentage point increase in the discount rates used would reduce the value-in-use of JRl and PlAcl
by £150m and £25m respectively. the directors have not identified a reasonably possible change in assumptions which would result in the carrying amount of
the Group’s investment in JRl or PlAcl to exceed its recoverable amount. For PlAcl, future distributions to the company are expected to reduce the
value-in-use. the discount rate used to determine the recoverable amount of Just Group plc’s investment in JRl is consistent with the discount rate used to
assess the recoverable amount of goodwill in relation to JRl recognised in the Group’s consolidated financial statements (see note 13 to the Group’s
consolidated financial statements). no impairment was required to the carrying value of the goodwill relating to JRl at 31 december 2022.
3 LOANS TO GROUP UNDERTAKINGS
At 1 January 2022
Additions
At 31 December 2022
At 1 January 2021
Additions
At 31 december 2021
details of the company’s loans to Group undertakings are as follows:
9.375% perpetual restricted tier 1 contingent convertible debt (call option in April 2024) issued by
Just Retirement limited in April 2019
9.375% perpetual restricted tier 1 contingent convertible debt (call option in April 2024) issued by Partnership life Assurance
company limited in April 2019
9.0% 10 year subordinated debt 2026 (tier 2) issued by Just Retirement limited in october 2016
8.125% 10 year subordinated debt 2029 (tier 2) issued by Just Retirement limited in october 2019
8.2% 10 year subordinated debt 2030 (tier 2) issued by Just Retirement limited in May 2020
7.0% 10.5 year subordinated debt 2031 (tier 2) issued by Just Retirement limited in november 2020
8.125% 10 year subordinated debt 2029 (tier 2) issued by Partnership life Assurance company limited in october 2019
7.0% 10.5 year subordinated debt 2031 (tier 2) issued by Partnership life Assurance company limited in november 2020
5.0% 7 year subordinated debt 2025 (tier 3) issued by Just Retirement limited in december 2018
Loans to Group
undertakings
£m
1,000.0
–
1,000.0
1,000.0
–
1,000.0
2022
£m
2021
£m
250.0
250.0
50.0
250.0
25.0
100.0
75.0
100.0
100.0
50.0
50.0
250.0
25.0
100.0
75.0
100.0
100.0
50.0
1,000.0
1,000.0
Total
4 FINANCIAL INVESTMENTS
units in liquidity funds
total
All financial investments are measured at fair value through the profit or loss and designated as such on initial recognition. All assets for which fair value is
measured or disclosed in the financial statements are categorised within the fair value hierarchy, based on the lowest level input that is significant to the fair
value measured as a whole.
188
Fair value
cost
2022
£m
109.0
109.0
2021
£m
167.7
167.7
2022
£m
109.0
109.0
2021
£m
167.7
167.7
4 FINANCIAL INVESTMENTS continued
In the fair value hierarchy, units in liquidity funds are all classified as level 1. there have been no transfers between levels during the year.
5 SHARE CAPITAL
the allotted, issued and fully paid ordinary share capital of the company at 31 december 2022 is detailed below:
At 1 January 2022
Shares issued in respect of employee share schemes
At 31 December 2022
At 1 January 2021
Shares issued in respect of employee share schemes
Provision for impairment in investment in Group undertakings (see note 2)
number of £0.10
ordinary shares
Share capital
£m
1,038,537,044
165,888
1,038,702,932
1,038,128,556
408,488
–
103.8
0.1
103.9
103.8
–
–
At 31 december 2021
1,038,537,044
103.8
Share
premium
£m
93.4
0.1
93.5
93.3
0.1
–
93.4
Merger
reserve
£m
299.5
–
299.5
487.5
–
(188.0)
299.5
total
£m
496.7
0.2
496.9
684.6
0.1
(188.0)
496.7
the merger reserve is the result of a placing of 94,012,782 ordinary shares in 2019 and the acquisition of 100% of the equity of Partnership Assurance Group plc
in 2016. the placing was achieved by the company acquiring 100% of the equity of a limited company for consideration of the new ordinary shares issued.
Accordingly, merger relief under Section 612 of the companies Act 2006 applies, and share premium has not been recognised in respect of this issue of shares.
the merger reserve recognised represents the premium over the nominal value of the shares issued. consideration for the acquisition of the equity shares of
Partnership Assurance Group plc consisted of a new issue of shares in the company. Accordingly, merger relief under Section 612 of the companies Act 2006
applies, and share premium has not been recognised in respect of this issue of shares. the merger reserve recognised represents the difference between the
nominal value of the shares issued and the net assets of Partnership Assurance Group plc acquired.
6 SUBORDINATED DEBT
details of the company’s subordinated debt are shown in note 25 to the Group financial statements.
7 RELATED PARTY TRANSACTIONS
(a) Trading transactions and balances
the following transactions were made with related parties during the year:
Staff costs, directors’ remuneration, operating expenses and management fees charged
by Just Retirement Management Services limited
Interest on loan balances charged to Just Retirement limited
Interest on loan balances charged to Partnership life Assurance company limited
dividends from Partnership Assurance Group limited
the following balances in respect of related parties were owed by the company at the end of the year:
Just Retirement limited
Just Retirement Management Services limited
the following balances in respect of related parties were owed to the company at the end of the year:
HuB Financial Solutions limited
Just Retirement Group Holdings limited
Partnership life Assurance company limited
loan to Just Retirement limited (including interest)
loan to Partnership life Assurance company limited (including interest)
Amounts owed for Group corporation tax
(b) Key management compensation
Key management personnel comprise the directors of the company.
Key management compensation is disclosed in note 36 to the Group financial statements.
189
Year ended
31 December
2022
£m
Year ended
31 december
2021
£m
10.7
63.9
19.8
50.0
2022
£m
(0.2)
–
2022
£m
–
0.1
0.7
759.9
253.0
13.0
14.8
63.9
19.8
169.0
2021
£m
(0.1)
(1.6)
2021
£m
0.3
0.1
0.7
759.9
253.0
13.0
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
ADDITIONAL FINANCIAL INFORMATION
the following additional financial information is unaudited.
SOLVENCY II SURPLUS GENERATION
the table below shows the expected future emergence of Solvency II surplus from the in-force book in excess of 100% of ScR over the next 35 years. the
amounts are shown undiscounted and exclude Excess own Funds at 31 december 2022 of £1,370m.
the core surplus generation assumes that future property growth is in line with the best estimate assumption of 3.3%. the cash flow amounts allow for return
on surplus on assets that maintain the current capital coverage ratio. the cash flow amounts shown are before the interest and principal payments on all debt
obligations. the projection does not allow for the impact of future new business.
Year
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043 – 2047
2048 – 2052
2053 – 2057
core surplus
generation
£m
tMtP
amortisation
£m
Surplus
generation
£m
228
223
215
208
202
198
194
190
186
181
176
171
165
158
151
144
136
128
119
110
429
254
145
(73)
(73)
(73)
(73)
(73)
(73)
(73)
(73)
(73)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
155
150
142
135
129
125
121
117
113
181
176
171
165
158
151
144
136
128
119
110
429
254
145
190
SOLVENCY II SURPLUS GENERATION continued
New business contribution
the table below shows the expected future emergence of Solvency II surplus arising from 2022 new business at 100% of ScR over 50 years from the point of
sale. It shows the initial Solvency II capital strain in 2022. the amounts are shown undiscounted.
Surplus
generation
£m
(60.0)
15.5
15.2
15.9
16.6
17.2
17.1
17.7
17.0
16.4
16.4
16.0
16.3
16.6
16.5
16.2
15.9
15.1
14.4
14.1
13.7
114.3
44.1
18.4
Year
Point of sale
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Year 12
Year 13
Year 14
Year 15
Year 16
Year 17
Year 18
Year 19
Year 20
Years 21 to 30
Years 31 to 40
Years 41 to 50
191
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
ADDITIONAL FINANCIAL INFORMATION continued
FINANCIAL INVESTMENTS CREDIT RATINGS
the sector analysis of the Group’s financial investments portfolio by credit rating is shown below:
Basic materials
communications and technology
Auto manufacturers
consumer (staples including healthcare)
consumer (cyclical)
Energy
Banks
Insurance
Financial – other
Real estate including REIts
Government
Industrial
utilities
commercial mortgages
Ground Rent
Infrastructure loans
other
Corporate/government bond total
lifetime mortgages
liquidity funds
Investments portfolio
derivatives and collateral
Total
%
1.3
6.5
1.2
5.1
0.7
2.6
5.5
3.0
4.7
2.1
7.8
3.1
11.0
2.9
1.4
9.0
0.2
68.1
26.1
5.8
100.0
total
£m
270
1,327
250
1,012
142
535
1,120
607
956
437
1,596
622
2,266
584
291
1,811
42
13,868
5,306
1,174
20,348
3,169
23,517
AAA
£m
–
100
–
127
–
–
35
6
59
31
340
–
–
77
138
71
–
984
AA
£m
–
191
–
245
4
181
61
142
85
15
782
63
115
144
7
103
–
A
£m
103
249
218
193
13
105
568
96
270
96
216
71
797
253
81
474
42
2,138
3,845
BBB
£m
BB or below
£m
unrated
£m
157
741
26
354
125
160
456
363
43
267
258
430
1,342
110
65
1,137
–
6,034
10
46
6
15
0
89
–
(0)
324
28
–
24
12
(0)
(0)
26
0
–
–
–
78
–
–
–
–
175
–
–
34
–
–
–
–
–
580
287
192
INFORMATION FOR SHAREHOLDERS
the following information is unaudited.
ANNUAL GENERAL MEETING
the company’s 2023 Annual General Meeting (“AGM”) will be held on tuesday 9 May 2023 at 10.00 am at 1 Angel lane, london Ec4R 3AB. More information
about the 2023 AGM can be found in the notice of Meeting, which will be made available to shareholders separately.
SHAREHOLDER PROFILE AS AT 31 DECEMBER 2022
Holdings
1–5,000
5,001–10,000
10,001–100,000
100,001–1,000,000
1,000,001–10,000,000
10,000,001–20,000,000
20,000,001 and over
Totals
No. of
holders
% of
holders
506
74
192
119
98
14
13
49.80
7.28
18.90
11.71
9.65
1.38
1.28
No. of
shares
500,416
552,097
6,797,838
42,816,299
336,830,751
202,901,683
448,303,848
% of issued
share capital
0.05
0.05
0.65
4.12
32.43
19.54
43.16
1,016
100.00
1,038,702,932
100.00
JUST GROUP PLC SHARE PRICE
the company’s ordinary shares have a premium listing on the london Stock Exchange’s main market for listed securities and are listed under the symbol JuSt.
current and historical share price information is available on our website www.justgroupplc.co.uk/investors/data-and-share-information/share-monitor and
also on many other websites.
REGISTRAR
the company’s register of shareholders is maintained by our Registrar, Equiniti limited. All enquiries regarding shareholder administration, including
dividends, lost share certificates or changes of address, should be communicated in writing, quoting the company’s reference number 3947 to Equiniti via one
of the methods below.
Online
Shareholders can view and manage their shareholdings
online and dividend mandates at www.shareview.co.uk.
Telephone
+44 (0) 371 384 2787
lines are open 8.30am to 5.30pm (uK time)
Monday to Friday (excluding public holidays in
England and Wales).
Post
Equiniti limited
Aspect House
Spencer Road
lancing
West Sussex
Bn99 6dA
DIVIDEND PAYMENTS AND MANDATES
From April 2023, any dividends due will only be paid by direct credit. We strongly encourage all shareholders to register a Shareview Portfolio and nominate
their bank account at www.shareview.co.uk in order to receive their cash dividends by direct transfer to a bank or building society account.
ELECTRONIC COMMUNICATIONS
Shareholders are encouraged to elect to receive shareholder documents electronically to receive shareholder information quickly and securely, and to help us
save paper and reduce our carbon footprint, by registering with Shareview at www.shareview.co.uk.
Shareholders who have registered will be sent an email notification whenever shareholder documents are available on the company’s website. When
registering, shareholders will need their shareholder reference number which can be found on their share certificate or Form of Proxy.
WARNING ABOUT UNSOLICITED APPROACHES TO SHAREHOLDERS AND “BOILER ROOM” SCAMS
In recent years, many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning
investment matters. these are typically from overseas based “brokers” who target uK shareholders, offering to sell them what often turn out to be worthless
or high risk shares in uK investments. these operations are commonly known as “boiler rooms”. these “brokers” can be very persistent and persuasive.
Just Group plc shareholders are advised to be extremely wary of such approaches and to only deal with firms authorised by the FcA. You can check whether
an enquirer is properly authorised and report scam approaches by contacting the FcA on www.fca.org.uk/consumers or by calling the FcA consumer Helpline
on 0800 111 6768.
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financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
INFORMATION FOR SHAREHOLDERS continued
INVESTOR RELATIONS ENQUIRIES
For all institutional investor relations enquiries, please contact our Investor Relations department whose contact details can be found at
www.justgroupplc.co.uk/investors/investor-contacts. Individual shareholders with queries regarding their shareholding in the company should contact our
Registrar, Equiniti limited.
Shareholders can keep up to date with all the latest Just Group plc news and events by registering with our Alert Service http://justgroupplc.co.uk/investors/
alert-service. Select the information of interest to you, such as Results, Board changes and AGM and other meetings. You will then be notified by email when
this information is available to view on our website.
digital copies of our Annual Report and Accounts are available at www.justgroupplc.co.uk/investors/results-and-presentations and physical copies can be
obtained by contacting our registrar, Equiniti limited.
CAUTIONARY STATEMENT AND FORWARD-LOOKING STATEMENTS
this Annual Report has been prepared for, and only for, the members of Just Group plc (the “company”) as a body, and for no other persons. the company, its
directors, employees, agents and advisers do not accept or assume responsibility to any other person to whom this document is shown or into whose hands it
may come and any such responsibility or liability is expressly disclaimed.
By their nature, the statements concerning the risks and uncertainties facing the company and its subsidiaries (the “Group”) in this Annual Report involve
uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. this Annual Report
contains, and we may make other statements (verbal or otherwise) containing, forward-looking statements in relation to the current plans, goals and
expectations of the Group relating to its or their future financial condition, performance, results, strategy and/or objectives. Statements containing the words:
“believes”, “intends”, “expects”, “plans”, “seeks”, “targets”, “continues” and “anticipates” or other words of similar meaning are forward-looking (although their
absence does not mean that a statement is not forward-looking). Forward-looking statements involve risk and uncertainty because they are based on
information available at the time they are made, based on assumptions and assessments made by the company in light of its experience and its perception of
historical trends, current conditions, future developments and other factors which the company believes are appropriate and relate to future events and
depend on circumstances which may be or are beyond the Group’s control. For example, certain insurance risk disclosures are dependent on the Group’s
choices about assumptions and models, which by their nature are estimates. As such, although the Group believes its expectations are based on reasonable
assumptions, actual future gains and losses could differ materially from those that we have estimated. other factors which could cause actual results to differ
materially from those estimated by forward-looking statements include, but are not limited to: domestic and global political, economic and business
conditions (such as the impact from the coVId-19 outbreak or other infectious diseases and the continuing situation in ukraine); asset prices; market-related
risks such as fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the policies and actions of governmental
and/or regulatory authorities including, for example, new government initiatives related to the provision of retirement benefits or the costs of social care; the
impact of inflation and deflation; market competition; changes in assumptions in pricing and reserving for insurance business (particularly with regard to
mortality and morbidity trends, gender pricing and lapse rates); risks associated with arrangements with third parties, including joint ventures and distribution
partners and the timing, impact and other uncertainties associated with future acquisitions, disposals or other corporate activity undertaken by the Group
and/or within relevant industries; inability of reinsurers to meet obligations or unavailability of reinsurance coverage; default of counterparties; information
technology or data security breaches; the impact of changes in capital, solvency or accounting standards; and tax and other legislation and regulations in the
jurisdictions in which the Group operates (including changes in the regulatory capital requirements which the company and its subsidiaries are subject to). As
a result, the Group’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set out in the
forward-looking statements. the forward-looking statements only speak as at the date of this document and reflect knowledge and information available at
the date of preparation of this Annual Report. the Group undertakes no obligation to update these forward-looking statements or any other forward-looking
statement it may make (whether as a result of new information, future events or otherwise), except as may be required by law. Persons receiving this Annual
Report should not place undue reliance on forward-looking statements. Past performance is not an indicator of future results. the results of the company and
the Group in this Annual Report may not be indicative of, and are not an estimate, forecast or projection of, the Group’s future results. nothing in this Annual
Report should be construed as a profit forecast.
194
DIRECTORS AND ADVISERS
the following is unaudited.
DIRECTORS
Non-Executive Directors:
John Hastings-Bass, chair
Ian cormack, Senior Independent director
Paul Bishop
Michelle cracknell
Mary Kerrigan
Mary Phibbs
Kalpana Shah
Executive Directors:
david Richardson, Group chief Executive officer
Andy Parsons, Group chief Financial officer
GROUP COMPANY SECRETARY
Simon Watson
JUST GROUP REGISTERED OFFICE AND REIGATE OFFICE
Enterprise House
Bancroft Road
Reigate
Surrey RH2 7RP
Website: www.justgroupplc.co.uk
tel: +44 (0)1737 233296
Registered in England and Wales number 08568957
RBC Capital Markets
100 Bishopsgate
london
Ec2n 4AA
CORPORATE BROKERS
J.P. Morgan Cazenove
25 Bank Street
canary Wharf
london
E14 5JP
INDEPENDENT AUDITOR
PricewaterhouseCoopers LLP
7 More london Riverside
london
SE1 2Rt
CORPORATE LAWYERS
Hogan Lovells International LLP
Atlantic House
Holborn Viaduct
london
Ec1A 2FG
195
financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
GLOSSARY
Acquisition costs – comprise the direct costs (such as commissions) of obtaining new business.
Adjusted earnings per share (adjusted EPS) – an APM, this measures earnings per share based on underlying operating profit after attributed tax, rather than
IFRS profit before tax. this measure is calculated by dividing underlying operating profit after attributed tax by the weighted average number of shares in issue
by the Group for the period. For remuneration purposes (see directors’ Remuneration Report), the measure is calculated as adjusted operating profit before tax
divided by the weighted average number of shares in issue by the Group for the period.
Adjusted operating profit before tax – an APM and one of the Group’s KPIs, this is the sum of the new business operating profit and in-force operating profit,
operating experience and assumption changes, other Group companies’ operating results, development expenditure and reinsurance and financing costs. the
Board believes it provides a better view of the longer-term performance of the business than profit before tax because it excludes the impact of short-term
economic variances and other one-off items. It excludes the following items that are included in profit before tax: non-recurring and project expenditure,
implementation costs for cost saving initiatives, investment and economic profits and amortisation and impairment costs of acquired intangible assets. In
addition, it includes tier 1 interest (as part of financing costs) which is not included in profit before tax (because the tier 1 notes are treated as equity rather
than debt in the IFRS financial statements). Adjusted operating profit is reconciled to IFRS profit before tax in the Business Review.
Alternative performance measure (“APM”) – in addition to statutory IFRS performance measures, the Group has presented a number of non-statutory
alternative performance measures within the Annual Report and Accounts. the Board believes that the APMs used give a more representative view of the
underlying performance of the Group. APMs are identified in this glossary together with a reference to where the APM has been reconciled to its nearest
statutory equivalent. APMs which are also KPIs are indicated as such.
Amortisation and impairment of acquired intangibles – relate to the amortisation of the Group’s intangible assets arising on consolidation, including the
amortisation of intangible assets recognised in relation to the acquisition of Partnership Assurance Group plc by Just Group plc (formerly Just Retirement
Group plc).
Buy-in – an exercise enabling a pension scheme to obtain an insurance contract that pays a guaranteed stream of income sufficient to cover the liabilities of a
group of the scheme’s members.
Buy-out – an exercise that wholly transfers the liability for paying member benefits from the pension scheme to an insurer which then becomes responsible
for paying the members directly.
Capped Drawdown – a non-marketed product from Just Group previously described as Fixed term Annuity. capped drawdown products ceased to be available
to new customers when the tax legislation changed for pensions in April 2015.
Care Plan (“CP”) – a specialist insurance contract contributing to the costs of long-term care by paying a guaranteed income to a registered care provider for
the remainder of a person’s life.
Change in insurance liabilities – represents the difference between the year-on-year change in the carrying value of the Group’s insurance liabilities and the
year-on-year change in the carrying value of the Group’s reinsurance assets including the effect of the impact of reinsurance recaptures.
Combined Group/Just Group – following completion of the merger with Partnership Assurance Group plc, Just Group plc and each of its consolidated
subsidiaries and subsidiary undertakings comprising the Just Retirement Group and the Partnership Assurance Group.
Defined benefit deferred (“DB deferred”) business – the part of dB de-risking transactions that relates to deferred members of a pension scheme. these
members have accrued benefits in the pension scheme but have not retired yet.
Defined benefit de-risking partnering (“DB partnering”) – a dB de-risking transaction in which a reinsurer has provided reinsurance in respect of the asset
and liability side risks associated with one of our dB Buy-in transactions.
Defined benefit (“DB”) pension scheme – a pension scheme, usually backed or sponsored by an employer, that pays members a guaranteed level of
retirement income based on length of membership and earnings.
Defined contribution (“DC”) pension scheme – a work-based or personal pension scheme in which contributions are invested to build up a fund that can be
used by the individual member to provide retirement benefits.
De-risk/de-risking – an action carried out by the trustees of a pension scheme with the aim of transferring investment, inflation and longevity risk from the
sponsoring employer and scheme to a third party such as an insurer.
Development expenditure – captures costs relating to the development of new products and new initiatives, and is included within adjusted operating profit.
Drawdown (in reference to Just Group sales or products) – collective term for Flexible Pension Plan and capped drawdown.
Employee benefits consultant – an adviser offering specialist knowledge to employers on the legal, regulatory and practical issues of rewarding staff,
including non-wage compensation such as pensions, health and life insurance and profit sharing.
Equity release – products and services enabling homeowners to generate income or lump sums by accessing some of the value of the home while continuing
to live in it – see lifetime mortgage.
196
Finance costs – represent interest payable on reinsurance deposits and financing and the interest on the Group’s tier 2 and tier 3 debt.
Gross premiums written – total premiums received by the Group in relation to its Retirement Income and Protection sales in the period, gross of commission
paid.
Guaranteed Income for Life (“GIfL”) – retirement income products which transfer the investment and longevity risk to the company and provide the retiree a
guarantee to pay an agreed level of income for as long as a retiree lives. on a “joint-life” basis, continues to pay a guaranteed income to a surviving spouse/
partner. Just provides modern individually underwritten GIfl solutions.
IFRS net assets – one of the Group’s KPIs, representing the assets attributable to equity holders.
IFRS profit before tax – one of the Group’s KPIs, representing the profit before tax attributable to equity holders.
In-force operating profit – an APM capturing the expected margin to emerge from the in-force book of business and free surplus, and results from the gradual
release of prudent reserving margins over the lifetime of the policies. In-force operating profit is reconciled to adjusted operating profit before tax, and
adjusted operating profit before tax is reconciled to IFRS profit before tax in the Business Review.
Investment and economic profits – reflect the difference in the period between expected investment returns, based on investment and economic
assumptions at the start of the period, and the actual returns earned. Investment and economic profits also reflect the impact of assumption changes in
future expected risk-free rates, corporate bond defaults and house price inflation and volatility.
Key performance indicators (“KPIs”) – KPIs are metrics adopted by the Board which are considered to give an understanding of the Group’s underlying
performance drivers. the Group’s KPIs are Return on equity, Solvency II capital coverage ratio, underlying organic capital generation, Retirement Income sales,
new business operating profit, underlying operating profit, Management expenses, Adjusted operating profit, IFRS profit before tax and IFRS net assets.
Lifetime mortgage (“LTM”) – an equity release product that allows homeowners to take out a loan secured on the value of their home, typically with the loan
plus interest repaid when the homeowner has passed away or moved into long-term care.
LTM notes – structured assets issued by a wholly owned special purpose entity, Just Re1 ltd. Just Re1 ltd holds two pools of lifetime mortgages, each of which
provides the collateral for issuance of senior and mezzanine notes to Just Retirement ltd, eligible for inclusion in its matching portfolio.
Management expenses – an APM and one of the Group’s KPIs, and are business as usual costs incurred in running the business, including all operational
overheads. Management expenses are other operating expenses excluding investment expenses and charges; reassurance management fees which are
largely driven by strategic decisions; amortisation of acquired intangible assets relating to merger and acquisition activity; and other costs impacted by
external factors. Management expenses are reconciled to IFRS other operating expenses in note 4 to the consolidated financial statements.
Medical underwriting – the process of evaluating an individual’s current health, medical history and lifestyle factors, such as smoking, when pricing an
insurance contract.
Net asset value (“NAV”) – IFRS total equity, net of tax, and excluding equity attributable to tier 1 noteholders.
Net claims paid – represents the total payments due to policyholders during the accounting period, less the reinsurers’ share of such claims which are payable
back to the Group under the terms of the reinsurance treaties.
Net investment income – comprises interest received on financial assets and the net gains and losses on financial assets designated at fair value through
profit or loss upon initial recognition and on financial derivatives.
Net premium revenue – represents the sum of gross premiums written and reinsurance recapture, less reinsurance premium ceded.
New business margin – the new business operating profit divided by Retirement Income sales. It provides a measure of the profitability of Retirement Income
sales.
New business operating profit – an APM and one of the Group’s KPIs, representing the profit generated from new business written in the year after allowing
for the establishment of prudent reserves and for acquisition expenses. new business operating profit is reconciled to adjusted operating profit before tax, and
adjusted operating profit before tax is reconciled to IFRS profit before tax in the Business Review.
New business strain – represents the capital strain on new business written in the year after allowing for acquisition expense allowances and the
establishment of Solvency II technical provisions and Solvency capital Requirements.
No-negative equity guarantee (“NNEG”) hedge – a derivative instrument designed to mitigate the impact of changes in property growth rates on both the
regulatory and IFRS balance sheets arising from the guarantees on lifetime mortgages provided by the Group which restrict the repayment amounts to the net
sales proceeds of the property on which the loan is secured.
Non-recurring and project expenditure – includes any one-off regulatory, project and development costs. this line item does not include acquisition
integration, or acquisition transaction costs, which are shown as separate line items.
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financial statementsGOVERNANCESTRATEGIC REPORT JUST GROUP PLC | AnnuAl REPoRt And AccountS 2022
GLOSSARY continued
Operating experience and assumption changes – captures the impact of the actual operating experience differing from that assumed at the start of the
period, plus the impact of changes to future operating assumptions applied during the period. It also includes the impact of any expense reserve movements,
and other sundry operating items.
Organic capital generation/(consumption) – an APM and calculated in the same way as underlying organic capital generation/(consumption), but includes
impact of management actions and other operating items.
Other Group companies’ operating results – the results of Group companies including our HuB group of companies, which provides regulated advice and
intermediary services, and professional services to corporates, and corporate costs incurred by Group holding companies and the overseas start-ups.
Other operating expenses – represent the Group’s operational overheads, including personnel expenses, investment expenses and charges, depreciation of
equipment, reinsurance fees, operating leases, amortisation of intangibles, and other expenses incurred in running the Group’s operations.
Pension Freedoms/Pension Freedom and Choice/Pension Reforms – the uK government’s pension reforms, implemented in April 2015.
PrognoSys™ – a next generation underwriting system, which is based on individual mortality curves derived from Just Group’s own data collected since its
launch in 2004.
Regulated financial advice – personalised financial advice for retail customers by qualified advisers who are regulated by the Financial conduct Authority.
Reinsurance and finance costs – the interest on subordinated debt, bank loans and reinsurance financing, together with reinsurance fees incurred.
Retail sales (in reference to Just Group sales or products) – collective term for GIfl and care Plan.
Retirement Income sales (in reference to Just Group sales or products) – an APM and one of the Group’s KPIs and a collective term for GIfl, dB and care Plan.
Retirement Income sales are reconciled to IFRS gross premiums in note 6 to the consolidated financial statements. dB partner premium is not included in the
Retirement Income sales.
Return on equity – an APM and one of the Group’s KPIs. Return on equity is underlying operating profit after attributed tax for the period divided by the
average tangible net asset value for the period. tangible net asset value is reconciled to IFRS total equity in the Business Review.
Secure Lifetime Income (“SLI”) – a tax efficient solution for individuals who want the security of knowing they will receive a guaranteed income for life and
the flexibility to make changes in the early years of the plan.
Solvency II – an Eu directive that codifies and harmonises the Eu insurance regulation. Primarily this concerns the amount of capital that Eu insurance
companies must hold to reduce the risk of insolvency.
Solvency II capital coverage ratio – one of the Group’s KPIs. Solvency II capital is the regulatory capital measure and is focused on by the Board in capital
planning and business planning alongside the economic capital measure. It expresses the regulatory view of the available capital as a percentage of the
required capital.
Tangible net asset value – IFRS total equity excluding goodwill and other intangible assets, net of tax, and excluding equity attributable to tier 1 noteholders.
Trustees – individuals with the legal powers to hold, control and administer the property of a trust such as a pension scheme for the purposes specified in the
trust deed. Pension scheme trustees are obliged to act in the best interests of the scheme’s members.
Underlying operating profit – an APM and one of the Group’s KPIs. underlying operating profit is calculated in the same way as adjusted operating profit
before tax but excludes operating experience and assumption changes. underlying operating profit is reconciled to adjusted operating profit before tax, and
adjusted operating profit before tax is reconciled to IFRS profit before tax in the Business Review.
Underlying organic capital generation/(consumption) – an APM and one of the Group’s KPIs. underlying organic capital generation/(consumption) is the net
increase/(decrease) in Solvency II excess own funds over the year, generated from ongoing business activities, and includes surplus from in-force, net of new
business strain, cost overruns and other expenses and debt interest. It excludes economic variances, regulatory adjustments, capital raising or repayment and
impact of management actions and other operating items. the Board believes that this measure provides good insight into the ongoing capital sustainability
of the business. underlying organic capital generation/(consumption) is reconciled to Solvency II excess own funds, and Solvency II excess own funds is
reconciled to shareholders’ net equity on an IFRS basis in the Business Review.
198
ABBREVIATIONS
ABI – Association of British Insurers
AGM – Annual General Meeting
APM – alternative performance measure
Articles – Articles of Association
CMI – continuous Mortality Investigation
Code – uK corporate Governance code
CP – care Plans
CPI – consumer prices index
LPI – limited Price Indexation
LTIP – long term Incentive Plan
LTM – lifetime mortgage
MA – matching adjustment
MAR – Market Abuse Regulation
NAV – net asset value
NNEG – no-negative equity guarantee
ORSA – own Risk and Solvency Assessment
DB – defined Benefit de-risking Solutions
PAG – Partnership Assurance Group
DC – defined contribution
DSBP – deferred share bonus plan
EBT – employee benefit trust
EPS – earnings per share
ERM – equity release mortgage
ESG – environment, social and governance
EVT – effective value test
FCA – Financial conduct Authority
FRC – Financial Reporting council
PLACL – Partnership life Assurance company limited
PPF – Pension Protection Fund
PRA – Prudential Regulation Authority
PRI – united nations Principles for Responsible Investment
PVIF – purchased value of in-force
PwC – Pricewaterhousecoopers llP
REIT – Real Estate Investment trust
RPI – retail price inflation
SAPS – Self-Administered Pension Scheme
GDPR – General data Protection Regulation
SAYE – Save As You Earn
GHG – greenhouse gas
GIfL – Guaranteed Income for life
SCR – Solvency capital Requirement
SFCR – Solvency and Financial condition Report
Hannover – Hannover life Reassurance Bermuda ltd
SID – Senior Independent director
IFRS – International Financial Reporting Standards
IP – intellectual property
SIP – Share Incentive Plan
SLI – Secure lifetime Income
ISA – International Standards on Auditing
SME – small and medium-sized enterprise
JRL – Just Retirement limited
KPI – key performance indicator
LCP – lane clark & Peacock llP
STIP – Short term Incentive Plan
tCO2e – tonnes of carbon dioxide equivalent
TMTP – transitional measures on technical provisions
TSR – total shareholder return
financial statementsGOVERNANCESTRATEGIC REPORT THE RE TIREMENT SPECI ALIST
Just Group plc
Enterprise House
Bancroft Road
Reigate
Surrey RH2 7RP
justgroupplc.co.uk
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