EXCEEDING
EXPECTATIONS
JUST GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2023
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.
APPROVAL
The Strategic Report was approved by the Board of Directors
on 7 March 2024 and signed on its behalf by:
All Just Group plc regulatory announcements,
shareholder information and news releases
can be found on our Group website,
www.justgroupplc.co.uk
JOHN HASTINGS-BASS
Group Chair
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 1
p18 A TRACK RECORD OF INNOVATION
p36 INVESTING THE JUST WAY
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.
For more information about each
of our Stakeholders see P4
Investment case
Financial and operational highlights
STRATEGIC REPORT
1 Our purpose
2
3
4 At a glance
6 Chair’s statement
8 Chief Executive Officer’s statement
10 Market context
14 Business model
16 Strategic priorities
18 Case study: Innovation
20 Key performance indicators
22 Business review
34 Sustainability and the environment
36 Sustainable investment strategy
40 Sustainability strategy: TCFD
disclosure framework
50 Colleagues and culture
54 Relationships with stakeholders
56 Section 172 statement
61 Non-financial and sustainability
information statement
64 Risk management
66 Principal risks and uncertainties
GOVERNANCE REPORT
70 Chair’s Governance overview
72 Board of Directors
76 Senior leadership
78 Governance in operation
88 Nomination and Governance
Committee report
91 Group Audit Committee report
97 Group Risk and Compliance
Committee report
100 Directors’ Remuneration report
120 Directors’ report
125 Directors’ responsibilities
FINANCIAL STATEMENTS
126 Independent Auditors’ Report
137 Consolidated statement of
comprehensive income
138 Consolidated statement of
changes in equity
139 Consolidated statement of
financial position
140 Consolidated statement of cash flows
141 Notes to the consolidated
financial statements
218 Statement of changes in equity
of the Company
219 Statement of financial position
of the Company
220 Statement of cash flows of
the Company
221 Notes to the Company
financial statements
225 Additional information
228 Information for shareholders
230 Directors and advisers
231 Glossary and abbreviations
2 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
INVESTMENT CASE
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. We help people achieve a
better later life, by providing competitive products, financial advice,
guidance and services to those approaching, at and in-retirement.
We are retirement experts and deliver value for shareholders by
putting customers first and meeting their needs.
GROWING SHARE THROUGH INNOVATION
AND POSITIVE DISRUPTION
We increase our share in these growing markets through continuous
innovation – seeking to positively disrupt the markets where we
choose to participate. By delivering better outcomes for customers,
we also deliver value for shareholders.
Read more on p5
Read more on p14
EXCEEDING OUR 15% PROFIT GROWTH TARGET
Our priority is to deliver profitable and sustainable growth. We have
exceeded our profit growth pledge each year by growing profits
19% in 2022 and 47% in 2023. With the opportunities available to
us, we are confident in our ability to continue to deliver exciting
profit growth.
CONSISTENT DELIVERY AND DISCIPLINE
Over the past five years, we have developed a strong track record of
delivery. We have consistently met or exceeded our profit targets, our
cash generation and balance sheet promises. During that period, we
have progressively improved both the quality and resilience of our
capital base, and the estimated solvency ratio now stands at 197%.
Read more on p23
Read more on p20
FAST GROWING RETIREMENT MARKETS
Our retirement markets are growing rapidly. Helped by higher
interest rates, the markets for defined benefit schemes de-risking
and individual retirees seeking a guaranteed income for life are
buoyant. As the population ages, our markets have many years
of growth ahead.
Read more on p10
We have consistently exceeded the
commitments we have made and
we’re more optimistic than ever
about the future for Just.”
DAVID RICHARDSON
Group Chief Executive Officer
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 3
FINANCIAL AND OPERATIONAL HIGHLIGHTS
KEY PERFORMANCE INDICATORS
RETIREMENT INCOME SALES
(SHAREHOLDER FUNDED)1
£3,893M
2022: £3,131m, up 24%
IFRS PROFIT/(LOSS)
BEFORE TAX
£172M
2022: £(494)m
NEW BUSINESS STRAIN1
0.9%
2022: 1.9%
NEW BUSINESS PROFIT1
UNDERLYING OPERATING PROFIT1
£355M
2022: £266m, up 33%
RETURN ON EQUITY1
13.5%
10.3% at 31 December 2022
UNDERLYING ORGANIC
CAPITAL GENERATION1
£57M
£377M
2022: £257m, up 47%
TANGIBLE NET ASSET
VALUE PER SHARE1
224P
2022: 190p
SOLVENCY II CAPITAL
COVERAGE RATIO (ESTIMATED)1,2
197%
£34m at 31 December 2022
199% at 31 December 2022
FINANCIAL STRENGTH AND OTHER INDICATORS
A
FITCH INSURER FINANCIAL
STRENGTH RATING
for Just Retirement limited (2022: A+)
A
FITCH ISSUER DEFAULT RATING
for Just Group plc (2022: A)
AWARDED FURTHER RECOGNITION FOR OUTSTANDING SERVICE
FINANCIAL ADVISER:
Outstanding
achievement award
5 Star service award
(Pensions and Protection)
5 Star service award
(Mortgages)
1
2
Alternative performance measure (unaudited, see glossary for definition). New business strain, Underlying organic capital generation and Solvency coverage ratio are reconciled to
Solvency II excess own funds on page 27. New business profit is reconciled to IFRS profit before tax on pages 24 and 26. Return on equity is based on Underlying operating profit, which
is reconciled to IFRS profit before tax on page 26, and Tangible net asset value, which is reconciled to IFRS total equity on page 24. Retirement Income sales (shareholder funded) are
reconciled to premium cash flows in note 9 to the consolidated financial statements on page 169.
Solvency II capital coverage ratios as at 31 December 2023 and 31 December 2022 include a recalculation of transitional measures on technical provisions (“TMTP”) as at the
respective dates.
4 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
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 create
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
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 5
...WITH PRODUCTS AND SERVICES
Competitive position:
A leader
Developing
SERVICES
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.
BENEFIT AND COMPETITIVE POSITION
We have developed our own proprietary
technology platform to underpin our highly
successful bulk quotation service. We are a
market leader in the small to medium size
transaction space, with a differentiated
position and competitive advantage.
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
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.
BENEFIT AND COMPETITIVE POSITION
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.
+
+
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.
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.
MARKETED
PRODUCTS1
1 Reported in our Insurance segment.
PROFESSIONAL
SERVICES2
2 Reported in our Other segment.
6 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
CHAIR’S STATEMENT
EXCEEDING
EXPECTATIONS
We are fulfilling our purpose
by providing certainty to our
customers in an uncertain world,
which results in us delivering
profitable and sustainable growth
to create value for shareholders.
JOHN HASTINGS-BASS
Group Chair
ANNUAL GENERAL MEETING 2023
10.00am, 7 May 2024
at Just Group plc
1 Angel lane,
london EC4R 3AB
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 7
I am pleased to introduce Just Group plc’s 2023
Annual Report. Our Company has never been
stronger. This is the second year in succession
our performance has significantly exceeded the
profit growth pledge we made two years ago.
We have delivered sustainable growth of the
business, helped more of our customers and
increased 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. 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 them and their
families. Our customers, existing and prospective, are at the heart
of everything we do at Just.
OVERVIEW OF GROUP PERFORMANCE
The primary focus of our Group in 2023 has been to capture profitable
growth opportunities to ensure we meet our medium-term profit
growth pledge.
It has been a year of record growth, continued delivery, with
successful strategic execution and ongoing investment. This has
resulted in a strong balance sheet and financial performance, with
exceptionally strong business momentum.
The Group’s financial strength and performance have never been
stronger, and both are set out in detail in the Business Review.
DIVIDEND
Given the Group’s performance, strong capital position and our
confidence in the future prospects of the business, the Board has
recommended a final ordinary dividend of 1.50 pence per share,
resulting in a 2023 total dividend per share of 2.08p (2022: 1.73p).
This represents a 20% increase on prior year, and is in line with our
stated policy to grow the dividend over time.
BOARD COMPOSITION AND GOVERNANCE
We welcomed Mark Godson, our new Group Chief Financial Officer to
Just in November and to the Board on 1 December. He is one of the
top talents in the insurance market, bringing with him extensive
commercial and financial insight gained from across the sector.
I’d like to welcome Jim Brown as Independent Non-Executive Director,
who joined the Board on 1 November 2023. He brings extensive
experience of financial services leadership, and you can read Jim’s
full biography on page 73.
Andy Parsons, our outgoing Group Chief Financial Officer, started
his retirement and stood down from the Board on 31 December.
On behalf of the Board, I want to thank Andy for his central role in
building our financial strength which has allowed us to return to
growth in recent years and face into the future with confidence.
We all wish him a very healthy and happy retirement.
ACTING SUSTAINABLY
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 towards our goal
to become carbon net zero. You can read our high-level transition
plan on our Group website and this year’s Annual Report provides
insight to our 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 40 to 49.
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.
We are encouraged by the government’s reforms of the Solvency II
regime, referred to as Solvency UK. When fully implemented these
reforms could unlock billions of pounds of investment from insurers into
the UK economy, contributing to the sustainability agenda, and enabling
us to provide even more competitive products to our customers.
Read more about our sustainability strategy on P34
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 help people achieve a better later life, this is our purpose, it’s why
we exist. We fulfil our purpose by delivering excellent products and
services to our customers.
Most people don’t get an opportunity to test drive their retirement.
Organising finances when the regular salary cheques no longer arrive
can be complex and create anxiety. We help people explore what
their life after work could look like and provide help, guidance and
advice so they have the confidence to take the next steps.
We develop market-leading products and award-winning services so
our customers achieve great outcomes.
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
attractive. The propensity of company directors and pension scheme
trustees to transact with insurers to de-risk their defined benefit
pension schemes has increased.
Read more about the Directors of the Company on
P72–74.
We have focused our leadership team on driving long-term profitable
growth. The commercial outlook remains favourable for our Group.
I take great pride in leading the Board and the Group’s governance
function, and my introduction to the Corporate Governance Report
on page 70 provides further information on our governance and
decision-making processes. We have an excellent team in place
for the medium term, that will ensure the Company is effectively
governed and well led. I would like to thank the entire Board for
their significant contribution and look forward to working with
them over the coming year.
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 optimistic about the future.
8 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
CHIEF EXECUTIVE OFFICER’S STATEMENT
WE HAVE NEVER
BEEN STRONGER
£377m
Underlying operating profit1
2022: £257m ↑47%
We continue to exceed
the promises we’ve made
and we are very optimistic
about the future.
£3,893M
Retirement Income sales
(shareholder funded)1
2022: £3,131m ↑24%
1
Alternative
performance measure.
DAVID RICHARDSON
Group Chief Executive Officer
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 9
I am very pleased to present my Chief Executive
Officer’s Statement for 2023. We’ve delivered
an exceptionally strong performance and are
extremely well positioned to continue benefiting
from the positive drivers and favourable
demographics supporting both of our markets.
RETIREMENT INCOME SALES GROWTH
The rise in interest rates during 2022 and 2023 had a positive effect on
both the Defined Benefit and retail Guaranteed Income for life markets.
Shareholder funded sales have grown by 24% to £3.9bn. Our DB and
retail businesses both contributed to this growth and have started the
year with positive momentum. This gives us increased confidence we
will achieve our growth ambitions in 2024.
DEFINED BENEFIT DE-RISKING BUSINESS
Our DB business continues to thrive and recorded total sales of
£3.4bn, up 21%. We completed 80 transactions during the year,
which is a substantial increase from 56 completed in 2022. Our bulk
quotation service continues to grow in popularity, with completed
transactions from 17 employee benefit consultants (“EBC”) during
the year. We have hundreds of schemes onboarded and this service
provides a vibrant market for schemes of all sizes and a steady source
of smaller deal completions. Indeed around 40 completions in 2023
were schemes with fewer than 100 members and they represent half
the schemes currently onboarded.
As well as expanding our leadership position in the smaller
transaction size segment, we will also drive growth by securing
additional larger transactions. We have significant pricing and deal
experience having written almost 400 DB transactions since entering
the market in 2013, which is more than one-in-five of all transactions
completed since then. The flexibility provided by our stronger capital
position and expanded panel of reinsurance partners further supports
our participation in the larger transaction segment. The DB market
had a record year in 2023, with c.£50bn of new business volumes
(source lCP, WTW). These EBCs are forecasting that industry volumes
in 2024 and beyond could grow significantly from this higher base.
RETAIL BUSINESS
I am delighted that our retail business has had a very strong year with
sales up 59% to £0.9bn. The GIfl market has returned to strong growth
and has had its busiest year since Pensions Freedoms were announced in
2014. The number of advisers looking for quotes from Just has increased
by 50% and this is providing us with increased opportunity to utilise our
medical underwriting expertise to select the most attractive risks.
Conduct regulation changes being introduced by the FCA may result
in greater use of retirement income solutions containing guarantees
to help deliver improved customer outcomes.
EXPANDING OUR INVESTMENTS IN TANDEM
We are continuing to broaden our investment capabilities. Our
successful illiquid origination strategy enabled us to source £1.6bn
of non-lTM illiquid investments during 2023, a 50% increase year
on year.
As the government’s Solvency UK legislation is implemented, we expect
this will unlock additional opportunities to grow and diversify our
investments portfolio, while enabling us to support the UK economy.
CUSTOMERS AND OUR PURPOSE
The current unpredictable economic outlook in the UK and volatility in
investment markets creates uncertainty and worry for many. We provide
a guaranteed income for life to customers, and as long-term interest
rates have risen over the last two years, the amount of retirement income
we are able to pay customers has increased significantly. This secure
income is often purchased to cover the essential expenditure of the
household. Our solutions provide much sought reassurance to customers.
Our purpose is to help people achieve a better later life. We provide
a range of professional advice and guidance to help people, and are
continuing to invest in these services to make them more available to
a wider pool of potential customers. We can’t resolve all the challenges
faced by our customers, but we are helping where we are able to, and
remain focused on living up to the purpose we set out many years ago.
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 four years we have reduced our
operational carbon intensity per employee by 83%. However, the
most material impact we can make to reduce carbon emissions
will be achieved through the decisions we take with our £24bn
investments portfolio. Compared to our 2019 baseline, we have
reduced these emissions over 30% for each million pound invested.
During 2023, we also continued to invest in environmental, social, and
corporate governance (“ESG”) related assets with £325m invested in
social housing, the renewable energy industry and NHS facilities.
OUR PEOPLE
Our Just culture is underpinned by our people who are passionate and
committed to making a difference to the lives of those around them.
The combination of our strong purpose and having highly engaged
teams working the “Just way”, is a competitive advantage which is
helping us to drive high performance and achieve our ambitious
growth targets.
I would like to thank my colleagues for their continued focus in
providing outstanding support for our customers when they needed
it most and for helping to deliver an excellent set of results.
We are investing to develop the skills of our colleagues, attract new
talent into Just and build high-performing teams. We have excellent,
and improving, levels of colleague engagement (2023: 7.9; 2022: 7.7),
with a key priority to build a diverse and inclusive workforce.
FINANCIAL PERFORMANCE
In 2023, underlying operating profit, is up 47% to £377m, driven by
the strong new business performance, which has delivered a return
on equity of 13.5%.
Investment and economic profits were £92m, and, combined with
a number of smaller non-operating items, led to an adjusted profit
before tax of £520m for 2023 (2022: adjusted loss before tax £167m).
Of this, £348m of profit is deferred to the CSM reserve in the balance
sheet, leaving a statutory profit before tax of £172m (2022: loss
before tax £494m).
The strength and resilience of our capital position and our disciplined
pricing and risk selection ensures we are, and will continue to be
capital self-sufficient. This means we can fund our growth ambitions,
reward shareholders with a growing dividend and maintain a strong
buffer of capital.
We will pay a final dividend of 1.50 pence per share, giving a total
of 2.08 pence for the year, representing 20% year on year growth.
The 20% growth in total dividend is ahead of the 15% 2022 dividend
growth rate.
IN CONCLUSION
2023 represents another year of outperformance, further building
our track record. We are exceptionally well positioned to capture the
benefits of positive market trends and have increased confidence in
our ability, from this higher base, to deliver 15% growth in underlying
operating profit. In addition, we have increased our target return on
equity to greater than 12% from greater than 10% previously.
We have never been stronger. We are retirement experts and 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.
10 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
MARKET CONTEXT
HELPING CUSTOMERS
STRENGTHEN THEIR
FINANCIAL RESILIENCE
Structural drivers in our markets mean
that 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. Over 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. Before
moving to Buy-out, many schemes move through the Buy-in phase.
This involves the pension scheme paying 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 retaining 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.
Buy-out allows a pension scheme to fully remove its obligations to
pay the benefits of its members, who then receive individual policies
and become customers of the insurer. Subsequently, the pension
scheme is wound down as the pension obligation owed to each
member has moved across to the insurer.
CURRENT MARKET
As of 31 March 2023, total UK defined benefit obligations, across
more than 5,000 schemes, owed by sponsors were £1.3trillion.
Over the past 5 years, the funding level of the schemes on a full
Buy-out basis has steadily increased from 68% to 112%, initially
through sponsor contributions and improved pricing for longevity
reinsurance, but especially over the past two years through rising
interest rates. This has resulted in Buy-out being a realistic option for
an increasing number of schemes, who have strong appetite to take
the opportunity to de-risk. We were consistently busy during 2023,
driven by our bulk quotation service and EBCs actively managing the
industry pipeline, leading to less seasonality than previous years.
However, de-risking is not an overnight process. We estimate that since
2007, only 15% of defined benefit liabilities have been transferred to
insurers via de-risking transactions. There is significant headroom for
growth over the next decade.
In 2023 bulk annuity volumes are estimated at c.£50bn (source: lCP
De-Risking report 2023), with a continued shift towards full scheme
transactions.
COMPETITIVE, REGULATORY FACTORS AND POTENTIAL FOR ALTERNATIVE
DE-RISKING SOLUTIONS
The Pensions Regulator’s interim regulatory regime has been in place
for three years. One consolidator, Clara, has successfully completed
the Pensions Regulator’s assessment. They completed their first deal
at the end of 2023.
In July 2023 the Chancellor delivered his Mansion House speech
outlining a number of initiatives to enhance pension savings in
the UK, whilst also seeking to increase funding for high-growth
companies. Two aspects are particularly relevant for the defined
benefit market:
1. DB commercial consolidation
The potential for the establishment of a regulatory regime to
consolidate smaller defined benefit schemes into larger funds
was mentioned. This initiative would be overseen by The Pensions
Regulator. The government’s objective is that larger funds would
invest a higher proportion of their funds in productive assets,
compared to many closed or smaller defined benefit schemes.
The structural growth drivers for the
defined benefit de-risking market
have accelerated and the outlook for
2024 and beyond is exciting.”
2. Pension Protection Fund
In his Autumn statement, the Chancellor confirmed that he will
publish a consultation on how the Pension Protection Fund (“PPF”)
can act as a consolidator for schemes unattractive to commercial
providers. Ultimately, the Chancellor hopes to increase opportunities
for pension funds to invest in productive finance without compromising
on the security of members’ benefits or trustees’ fiduciary duties.
The government also plans to consult on enabling 100% PPF
coverage for DB schemes that opt to pay a higher levy.
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 cash flow 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 reforms of the current
Solvency II regime, known as Solvency UK, when implemented, will
widen asset eligibility criteria. This could unlock over £100 billion 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.
SUSTAINABLE INVESTING
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
In conclusion, the structural growth drivers for the defined benefit
de-risking market continue to accelerate and the outlook for 2024
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. It is expected that
c.£600bn of defined benefit scheme funds will move to de-risk over
the next decade of which potentially more than £360bn could
transact in the next 5 years (source: lCP).
There is a vibrant market for schemes of all sizes and insurance
capacity has kept pace with demand. As transaction volumes
continue to increase, pressure on scarce human resources may
be felt across the wider ecosystem. When selecting new business,
insurers will prioritise pension schemes that have their governance,
data and benefit specifications in good order. Just Group is continuing
to invest in its proposition, resources and service to ensure that
schemes we work with can realise their de-risking ambition.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 11
88% OF DEFINED BENEFIT PENSION SCHEMES ARE CLOSED
TO NEW MEMBERS AND INCREASINGLY TO FUTURE ACCRUAL (%)
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
0
20
40
60
80
100
Closed to new members (open to benefit accrual)
Closed to future accrual 2023
Source: The Purple Book 2023, PPF
EXPECTED GROWTH IN DB DE-RISKING TRANSACTIONS (£BN)
2023
(est.)
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
0
10
20
30
40
50
60
Buy–in/Buy-out
Backbook acquisition
Source: Just analysis, lCP
12 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
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, typically, for as long as 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 2023 was 70% up significantly from 56% in 2022 (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;
• 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;
•
following the rise in UK interest rates, the level of income on GIfl
has risen by around 50% compared to 2021. This has resulted in
the volume of quotations from financial intermediaries and their
clients for guaranteed income solutions increasing; and
• new solutions are being introduced to the market to provide
financial advisers with more sophisticated options to blend a
guaranteed income producing asset with other investments
to deliver improved outcomes for their clients.
REGULATION AND LEGISLATION
There are a number of changes in-flight from legislators and
regulators that when implemented may increase the size of
our addressable market.
•
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 and 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 FCA aim to publish a report setting out their
findings in Q1 2024.
• The FCA will have greater rule making powers under the future
regulatory framework legislation. In August 2023 the FCA set
out the basis for a joint review of the Advice Guidance Boundary
with the HM Treasury which forms part of the UK government’s
Edinburgh Reforms. 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.
In July 2023 the FCA introduced a new duty that sets higher and
clearer standards of consumer protection across financial services,
and requires firms to put their customers’ needs first. The duty
introduces a new consumer principle that requires firms to act
to deliver good outcomes for retail customers. The outcomes
relate to (i) products and services; (ii) price and value; (iii) consumer
understanding; and (iv) consumer support.
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 71 years old,
has a house valued at around £360,000 and borrows 23% 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 2023 was 10.7% 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
As predicted in last year’s Annual Report, the lTM market experienced
a decline in 2023, as the market and consumer demand adjusted to
increased interest rates and the impact of increased inflation. The
fundamental drivers of growth over the medium term remain intact
and we forecast the market will return to growth towards the end of
2024. 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 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.
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 £46bn. In October 2022, following the
UK Growth Plan announced by the Chancellor on 23 September 2022,
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.
EXTERNAL GIFL MARKET (£M)
4,000
3,000
2,000
1,000
0
2015
2016
2017
2018
2019
2020
2021
2022
2023
Source: Just analysis, ABI
LIFETIME MORTGAGE MARKET SIZE AND GROWTH RATE (£M)
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
CAGR 10.7%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
lump sum
mortgage sales
New drawdown
mortgage –
initial advance
Existing drawdown
mortgages –
further advances
Source: Equity Release Council
NUMBER OF PEOPLE (MILLIONS) AGE 60+
40
30
20
10
0
25%
26.2%
27.9%
28.9%
29.3%
30.7%
2022
2025
2030
2035
2040
2050
Source: Office of National Statistics
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 13
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.
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. The FCA stated they would be engaging with a number of
firms across the industry.
In September 2023, the FCA published the results from its targeted
review carried out in the previous 12 months on later life mortgage
advertising and advice. It found in many cases advice did not meet
the standards expected. The FCA has required those firms which fell
short to improve the quality of their advice.
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.
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.
14 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
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
retirement expert with Specialist focus
Risk Selection
Product innovation
HOW WE CREATE VALUE
Our sustainable business model organically generates capital to
support our growth ambitions. 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, assessing related policy risks and our customers’ expected
income levels. We ensure we are able to pay policyholder pensions
as they fall due, whilst generating financial value for our business.
GROWTH OPPORTUNITIES
Due to the complexity of retirement and a growing ageing population
with evolving needs, there is a 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.
These risks include:
•
their defined benefit pension scheme running into
financial difficulty;
running out of money;
•
• being unable to plan their financial affairs;
• unable to access to affordable financial advice;
•
• not being able to achieve the lifestyle they had expected;
• being invested in inappropriate products and securities; and
•
increasing and uncertain care costs;
inflation outpacing their savings.
Our sustainable and scalable business model is built to optimise
value from our solutions that service these needs.
Cost Discipline
Scalable operating model
Focus on underlying organic
capital generation
WE CREATE VALUE FOR
SHAREHOLDERS
Through our efficient resource management, we generate
returns in excess of our cost of capital. Our approach to
capital management is conservative and focused on
maintaining our strong underlying organic capital generation,
to grow our business and enable sustainable dividends.
CUSTOMERS
We utilise our medical underwriting expertise to fairly optimise
the returns for our customers and we strive to deliver the best
customer experience, making it as easy as possible for them to
navigate the complexities of later life planning and events. Our
robust business model ensures our customers can depend on
us to pay claims over the long term.
PARTNERS
Corporate clients: our scalable retirement focused solutions
create opportunities and solve problems for companies.
Trustees and scheme sponsors: we provide solutions to de-risk
pension liabilities and deliver member security.
COLLEAGUES
We focus on high-performance working, and secure a skilled
and motivated team through the development, reward and
recognition of our colleagues.
ENVIRONMENT
Our focused sustainability strategy aligns with how we
operate, and the investment decisions we make aimed
at benefiting the environment.
KEY CHARACTERISTICS OF OUR BUSINESS MODEL
PRODUCTS AND SERVICES
Our products and services
are distributed via our
multi-channel model.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 15
RISK SELECTION
Selecting the optimal risks and establishing
suitable pricing for our products
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. Also, because we operate
in attractive markets that are growing, this further allows us
to be selective in the risks we choose to write.
INVESTMENT STRATEGY
Continuous evolution of our investment
strategy enables our business to generate
value for shareholders and better outcomes
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 on page 36.
INNOVATION
We innovatively utilise 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.
16 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
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 retirement experts and are
looking at more ways in which we
can help people in later life during
times of economic stress.
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
1.
GROW
THROUGH
INNOVATION
2.
TRANSFORM
HOW WE WORK
FOCUS
Strengthening and expanding our Defined
Benefit and Retail business propositions to
achieve long-term success.
2023 PROGRESS
• We have increased our participation in
the £100m–£1bn deal segment, and
completed our largest deal to date, at
£513m in February 2023. Adding this
increased participation to our leadership
position in the <£100m transaction size
segment has translated into a 16%
market share in the less than £1bn
size segment, a doubling since 2020.
• We have expanded our DB partnering
proposition through the addition of
new reinsurance counterparties.
• We have expanded our partnership,
launching a Saga branded platform
which brings innovative investment
products to better support
our customers.
FOCUS
We have foundations in place and continue
to streamline and automate our operations
across the business, evolving our workplace;
and making it fit for the future and the
customers and partners we support.
2023 PROGRESS
• We continue with the modernisation of
business processes and technology to
futureproof our business and to be able
to service our customers in the future.
• Our new Belfast property supports
our sustainability ambitions and has
transformed the hybrid working
experience for our colleagues.
• We have invested in our people by
launching a new programme, which
provides the skills and resources to
be brilliant people managers and
lead truly high-performing teams.
FOCUS
FOCUS
FOCUS
Investing in our propositions; enhancing our
Building a solid foundation to support the
Continuing to build profitable and
existing services and working to increase
next phase of our growth transformation.
sustainable growth over the medium
awareness of our brand to get closer to our
customers and partners.
term to maximise opportunities available to
us and build shareholder value through the
operation of a sustainable capital model
and proposition development.
2023 PROGRESS
2023 PROGRESS
2023 PROGRESS
• Our investment in research and
• We continue to work to strengthen
• We continue to maintain capital strength
insights has helped us understand
our capabilities to support our strategy;
and resilience, while using capital
what’s important to our customers and
enabling high-performing individuals and
efficiently to generate shareholder value.
potential customers; and what their
teams through a high-performance
life and financial priorities are.
culture and organisation.
•
Investment in new data and insight
• We have implemented our employee
• Our first interim results reported under
IFRS 17 were well received from our
external stakeholders and feedback
services has improved the speed to
wellbeing strategy incorporating a range
from investors has been very positive.
access information about our customers
of initiatives, with a particular focus on
and the robustness of the data quality.
inclusion and purpose.
•
Investment in new customer relationship
• We continue to further embed our
management systems has improved the
Sustainability Strategy, mapping our
service we provide to our customers.
investment path to achieving
2030 targets.
• Developments we have made through
our Pension Buddy and Destination
Retirement services, help us to
understand the objectives of our
customers in much more detail.
• We have executed and further established
customer and partner experience
measures across the Group enabling
us to deliver a consistently high-quality
customer experience across the Group.
2024 FOCUS
• This priority will shift to “reach new
customers” as we move into 2024. We
intend to utilise our customer-focused
data insights to continue to develop
innovative solutions, disrupting our
markets with new propositions.
2024 FOCUS
• This priority will shift to “scale with
technology” as we move into 2024 as
we focus on technological solutions
that facilitate business improvements.
2024 FOCUS
2024 FOCUS
2024 FOCUS
• This priority will shift to “be recommended
• Continue to drive our high performance
• Continue to take advantage of the
by our customers” as we move into 2024
and purpose led culture across
to support our enhanced ambitions of
the organisation.
customer advocacy.
multiple growth opportunities available
to us whilst being capital generative and
increasing economic value.
LINK TO ONGOING RISKS:
LINK TO ONGOING RISKS:
LINK TO ONGOING RISKS:
LINK TO ONGOING RISKS:
LINK TO ONGOING RISKS:
LINK TO RISK OUTLOOK:
LINK TO RISK OUTLOOK:
LINK TO RISK OUTLOOK:
LINK TO RISK OUTLOOK:
LINK TO RISK OUTLOOK:
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 17
3.
4.
5.
GET CLOSER TO
OUR CUSTOMERS
AND PARTNERS
BE PROUD TO
WORK AT JUST
GROW
SUSTAINABLY
FOCUS
Investing in our propositions; enhancing our
existing services and working to increase
awareness of our brand to get closer to our
customers and partners.
FOCUS
Building a solid foundation to support the
next phase of our growth transformation.
2023 PROGRESS
• Our investment in research and
insights has helped us understand
what’s important to our customers and
potential customers; and what their
life and financial priorities are.
2023 PROGRESS
• We continue to work to strengthen
our capabilities to support our strategy;
enabling high-performing individuals and
teams through a high-performance
culture and organisation.
Investment in new data and insight
services has improved the speed to
access information about our customers
and the robustness of the data quality.
• We have implemented our employee
wellbeing strategy incorporating a range
of initiatives, with a particular focus on
inclusion and purpose.
•
•
FOCUS
Continuing 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.
2023 PROGRESS
• We continue to maintain capital strength
and resilience, while using capital
efficiently to generate shareholder value.
• Our first interim results reported under
IFRS 17 were well received from our
external stakeholders and feedback
from investors has been very positive.
Investment in new customer relationship
management systems has improved the
service we provide to our customers.
• Developments we have made through
our Pension Buddy and Destination
Retirement services, help us to
understand the objectives of our
customers in much more detail.
• We have executed and further established
customer and partner experience
measures across the Group enabling
us to deliver a consistently high-quality
customer experience across the Group.
2024 FOCUS
• This priority will shift to “be recommended
by our customers” as we move into 2024
to support our enhanced ambitions of
customer advocacy.
• We continue to further embed our
Sustainability Strategy, mapping our
investment path to achieving
2030 targets.
2024 FOCUS
• Continue to drive our high performance
2024 FOCUS
• Continue to take advantage of the
and purpose led culture across
the organisation.
multiple growth opportunities available
to us whilst being capital generative and
increasing economic value.
FOCUS
FOCUS
Strengthening and expanding our Defined
We have foundations in place and continue
Benefit and Retail business propositions to
to streamline and automate our operations
achieve long-term success.
across the business, evolving our workplace;
and making it fit for the future and the
customers and partners we support.
2023 PROGRESS
2023 PROGRESS
• We have increased our participation in
• We continue with the modernisation of
the £100m–£1bn deal segment, and
business processes and technology to
completed our largest deal to date, at
futureproof our business and to be able
£513m in February 2023. Adding this
to service our customers in the future.
increased participation to our leadership
position in the <£100m transaction size
segment has translated into a 16%
market share in the less than £1bn
size segment, a doubling since 2020.
• We have expanded our DB partnering
proposition through the addition of
new reinsurance counterparties.
• We have expanded our partnership,
launching a Saga branded platform
which brings innovative investment
products to better support
our customers.
• Our new Belfast property supports
our sustainability ambitions and has
transformed the hybrid working
experience for our colleagues.
• We have invested in our people by
launching a new programme, which
provides the skills and resources to
be brilliant people managers and
lead truly high-performing teams.
2024 FOCUS
2024 FOCUS
• This priority will shift to “reach new
• This priority will shift to “scale with
customers” as we move into 2024. We
intend to utilise our customer-focused
data insights to continue to develop
innovative solutions, disrupting our
markets with new propositions.
technology” as we move into 2024 as
we focus on technological solutions
that facilitate business improvements.
LINK TO ONGOING RISKS:
LINK TO ONGOING RISKS:
LINK TO ONGOING RISKS:
LINK TO ONGOING RISKS:
LINK TO ONGOING RISKS:
LINK TO RISK OUTLOOK:
LINK TO RISK OUTLOOK:
LINK TO RISK OUTLOOK:
LINK TO RISK OUTLOOK:
LINK TO RISK OUTLOOK:
18 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
CASE STUDY: INNOVATION
WE LOVE
INNOVATING
INNOVATION TO HELP CUSTOMERS ACHIEVE BETTER
OUTCOMES AND SUPPORT OUR GROWTH AGENDA
At Just we’ve always had
a reputation for innovation.
We are retirement experts
and we like positively disrupting
markets to bring about change
that delivers better outcomes
for customers. In doing so we
fulfil our purpose.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 19
GUARANTEED INCOME FOR LIFE
We became famous for introducing medical and lifestyle underwriting
into products we used to call pension annuities. Today we prefer to
call them guaranteed income for life solutions – because that’s how
customers talk about them. By asking customers a series of questions
about their medical conditions and lifestyle we were able to provide
a personalised offer, which typically resulted in over six-in-ten
customers receiving a better retirement income than they would
have received from a non-medically underwritten offer. Typically,
the additional income was worth thousands of pounds to a customer
over their expected retirement.
LIFETIME MORTGAGES
For avid readers of our previous Annual Report, you may have spotted
we introduced a similar innovation into the lifetime mortgage market.
By using medical and lifestyle underwriting we were able to offer
around six-in-ten customers a better outcome, which resulted in
a lower interest rate or a higher amount that could be advanced.
HELP, GUIDANCE AND PROFESSIONAL ADVICE
We’ve developed the UK’s most comprehensive and sophisticated digital
retirement service. It’s to support people who want help, guidance and
professional advice when they are approaching retirement and when
they decide to start accessing their pension benefits. Over 50 employers
across the UK are now using the service, and those pension schemes
have over 300,000 pension scheme members.
BULK QUOTATION SERVICE
Our bulk quotation service has been designed to support pension
scheme trustees of small and medium sized schemes. We capture
precise details of the pension scheme in our digital platform and
continuously track the funding position of the scheme. This equips
us to alert the trustees as soon as the scheme is in a position to
execute a pension de-risking transaction. We are adding hundreds
of schemes to the platform each year so that we can help
more schemes to advance their de-risking transactions at the
earliest opportunity.
SPOTLIGHT ON SECURE LIFETIME INCOME
There are criticisms by some market commentators that there
has been little product innovation since pension freedoms were
introduced. We think our Secure lifetime Income solution is an
excellent contribution to challenge that assertion.
Professional financial advisers administer client investment portfolios
on modern retail fund platforms. All their investments, whether
they be pensions, individual savings accounts, or other general
investment accounts can all be managed holistically on
these efficient, digital platforms.
We have developed a guaranteed income producing asset (“GIPA”),
delivered by our Secure lifetime Income solution, that sits inside
these modern digital platforms, alongside clients’ other assets
such as equities, bonds and other alternative assets.
We’ve created a simple, digital solution that makes it efficient
for the adviser to add our GIPA into their investment portfolios.
But the bigger benefits emerge for the advisers’ clients.
SECURE LIFETIME INCOME | BENEFITS TO THE CLIENT
The most typical investment portfolio used by financial advisers
has a 60% equity and 40% bond weighting. We’ve commissioned
independent research that concludes by substituting some of the
bonds with our GIPA, advisers can deliver better outcomes for the
majority of their clients. And better outcomes means higher income
and higher portfolio values.
TRADITIONAL DRAWDOWN SIPP PORTFOLIO
Equity
Bonds
60%
40%
NEW BLENDED DRAWDOWN SIPP PORTFOLIO
Equity
Bonds
GIPA
60%
20%
20%
Our GIPA, assists financial advisers to manage some of the most
significant risks impacting clients who are withdrawing their
pension benefits, or what often gets referred to in the industry as
decumulating. Those risks are (i) sequence of investment returns
risk and (ii) longevity risk. It’s a little complicated to explain here
but you can find out more by visiting our justadviser.com website.
But in short, let’s just say our GIPA, delivered by Secure lifetime
Income is turning the heads of professional investment managers.
More positive innovation from Just to help advisers and their clients.
There’s more where that came from.
We are retirement experts and we’ve got lot’s
more innovation in the pipeline to support our
growth agenda, and most importantly, to help
deliver better outcomes for our customers and
ensure we fulfil our purpose.
We help people achieve a better later life
Strategic Report
20 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
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. Our KPI for sales measures performance
against our growth ambitions to deliver our strategic
priority to Grow through innovation. Monitoring KPIs for
Tangible net asset value and Capital Coverage Ratio
provide measures of our financial strength and combined
with the profit, Return on equity and capital KPIs, enables
the Group to monitor performance against our strategic
priority of sustainable growth.
MEASURED AGAINST OUR STRATEGIC PRIORITIES
1.
2.
3.
4.
5.
Grow through innovation
Transform how we work
Get closer to our customers and partners
Be proud to work at Just
Grow sustainably
See p16 for our Strategic Priorities
1 Alternative performance measure. See glossary on page 231 for definition.
2
Solvency II capital coverage ratios as at 31 December 2023 (estimated) and
31 December 2022 include a recalculation of transitional measures on technical
provisions (“TMTP”) as at the respective dates.
3 KPI has been restated following adoption of IFRS 17.
RETIREMENT
INCOME SALES
(SHAREHOLDER FUNDED)1
£3,893M
NEW BUSINESS PROFIT1,3
£355M
Retirement Income sales (shareholder funded)
include DB, GIfl and Care premiums written and
are a key measure of the Group’s performance and
ability to grow shareholder value.
2023
2022
2021
£3,893M
£3,131M
£2,674M
In 2023, Retirement Income sales (shareholder
funded) increased by 24% as higher interest rates
and market positioning allowed us to take advantage
of the multiple growth opportunities available.
LINK TO STRATEGIC PRIORITIES
1.
3.
New business profit represents the profit generated
from new business written in the year.
New business profit increased by 33% driven by
the increase in Retirement Income volumes and
higher margins.
New business profit is reconciled to Underlying
operating profit on page 24 in the Business Review.
2023
2022
2021
£355M
£266M
£244M
LINK TO STRATEGIC PRIORITIES
1.
5.
UNDERLYING
OPERATING PROFIT1,3
£377M
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. In 2023, it was up 47% driven by new business
and in-force profits, and lower financing costs.
Underlying operating profit is reconciled to
IFRS profit/(loss) before tax on page 26 in the
Business Review.
2023
2022
2021
£377M
£257M
£211M
LINK TO STRATEGIC PRIORITIES
1.
5.
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IFRS PROFIT/(LOSS)
BEFORE TAX3
£172M
RETURN ON EQUITY1,3
13.5%
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 21
IFRS profit/(loss) before tax is the primary IFRS
statutory KPI used by management to monitor the
profit/(loss) before tax attributable to equity holders.
2023
2022
£(494)M
£172M
In 2022, losses incurred through interest rate
hedging the Solvency II balance sheet drove the
result. A revised interest rate hedging strategy and
limited movements in the non-operating items has
meant that the Group’s operating performance is
the main driver the FY23 IFRS result.
Return on equity is the measure used by
management to monitor the Group’s generation
of underlying operating profit from its tangible
net asset base. In 2023, Return on equity increased
as Underlying operating profit after tax rose by 39%.
Return on equity is based on Underlying operating
profit, which is reconciled to IFRS profit on page 26,
and Tangible net asset value, which is reconciled to
IFRS total equity on page 24 in the Business Review.
LINK TO STRATEGIC PRIORITIES
1.
5.
2023
2022
13.5%
10.3%
LINK TO STRATEGIC PRIORITIES
1.
5.
TANGIBLE NET ASSET
VALUE PER SHARE1,3
224P
Tangible net asset value represents the tangible
net assets attributable to the shareholders. 2023
Tangible net asset value rose strongly due to the very
strong operating performance and limited negative
non-operating items in the profit & loss.
Tangible net asset value is reconciled to IFRS total
equity on page 24 in the Business Review.
2023
2022
2021
LINK TO STRATEGIC PRIORITIES
1.
5.
224P
190P
203P
NEW BUSINESS STRAIN1
0.9%
New business strain is a key measure of our pricing
discipline, reflecting the amount of capital invested
as a percentage of premium to write the new
business volumes. It is assessed against our target
of below 2.5% of premium.
UNDERLYING ORGANIC
CAPITAL GENERATION1,2
£57M
SOLVENCY II CAPITAL
COVERAGE RATIO2
197%
(ESTIMATED)
Continued outperformance driven by pricing
discipline, risk selection and business mix.
Underlying organic capital generation provides good
insight into the ongoing capital sustainability of the
business. It is the amount of capital generated by the
in-force business less the day to day running costs
including expenses, finance costs and funding our
ambitious growth plans. 2023 performance was
driven by a lower pound amount of new business
capital strain despite substantially higher Retirement
Income sales. UOCG forms part of the movement in
excess own funds on page 27 in the Business Review.
Solvency II capital is monitored as it is the regulatory
capital measure. Therefore, its trajectory is a key
focus for the Board in capital and business planning.
It expresses the regulatory view of the available
capital as a percentage of the required capital.
In 2023, the capital coverage ratio was resilient and
broadly stable, as the business grew sustainably
through capital generated by its own in-force
business, and risks were contained.
IFRS equity is reconciled to Solvency II own funds on
page 28 in the Business Review.
2023
2022
2021
0.9%
1.9%
1.5%
LINK TO STRATEGIC PRIORITIES
1. 3.
5.
2023
2022
2021
£34M
£57M
£51M
LINK TO STRATEGIC PRIORITIES
1.
5.
2023
2022
2021
LINK TO STRATEGIC PRIORITIES
5.
197%
199%
164%
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22 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
BUSINESS REVIEW
DELIVERING
COMPOUNDING
GROWTH
Our strong capital base and
compelling proposition in the
market provide the opportunity
to deliver compounding and
sustainable growth.
224p per share
Tangible net asset value
2022: 190p per share
2.08P
Dividend
2022: 1.73 pence
per share, up 20%
MARK GODSON
Group Chief Financial Officer
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STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 23
The Group is well positioned in attractive markets
with strong structural growth drivers. This enables
us to benefit from the significant boost in demand
for our products, now and into the future. We
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 2023, including IFRS and unaudited Solvency II
information. These are the first audited results under IFRS 17, which
has prompted some modification of the Group’s key performance
indicators including restatement of comparatives where applicable,
as set out below.
The continued growth and success of the business is built on
the foundation of our low capital intensity new business model,
supported by a strong and resilient capital base. We are focused
on cost control across the business whilst specifically targeting
investment in proposition development, and to enable the business
to scale efficiently as we take advantage of the multiple growth
opportunities in our markets. We continue to diversify the asset
portfolio by originating a greater proportion of illiquid assets to
back the new business in line with our investment strategy.
SALES
The DB business continues to go from strength to strength as rising
interest rates have accelerated the closure of scheme funding gaps,
enabling a market shift towards full scheme Buy-ins. During 2023, we
wrote a record amount of DB new business, up 21% to £3,415m from
80 transactions (2022: £2,827m, 56 transactions), in a buoyant market
estimated by lCP and WTW to be c£50bn (2022: £28bn). Heightened and
consistent demand throughout 2023 allowed Just to increasingly risk
select as the year progressed with strong pricing discipline, a wider panel
of reinsurers, market insight and business mix driven by our streamlined
bulk quotation service all contributing towards higher margins.
The drivers behind this momentum remain and we expect a busy
2024 and beyond, as we execute on small, medium and larger
transactions, while maintaining capital flexibility. We estimate that
15% of the £1.2tn DB market opportunity has transferred across to
insurers thus far. lCP are forecasting that c.£600bn of DB Buy-in/
Buy-out transactions could transact over the decade to 2033, of
which up to £360bn could transact in the next five years. This
compares to £180bn in the last five years.
Our GIfl business had a very strong 2023, following a competitive
year in 2022, where we demonstrated our pricing discipline by
reducing volumes. During 2023, we wrote £894m of GIfl new
business, up 59% year on year (2022: £564m). The UK individual
GIfl market grew by 46% to £5.3bn (2022: £3.6bn), its highest level
since Pension Freedoms in 2014. Quote activity levels remain elevated
as higher interest rates directly increase the customer rate on offer,
thus increasing the attractiveness of a guaranteed income relative to
other forms of retirement income. The customer rate can be further
improved through bespoke medical underwriting, in which Just is a
market leader. The introduction of the FCA’s Consumer Duty in July
2023 and findings from the FCAs thematic review into retirement
income advice, expected shortly, are likely to lead to increased
adviser conversations on the importance of considering guaranteed
solutions to help customers achieve their objectives.
PROFIT
During 2023, underlying operating profit was £377m (2022: £257m),
up 47%, and substantially ahead of our 15% operating profit growth
target. Strong demand for our products provided the opportunity to
write a greater volume of new business at an efficient capital strain.
Shareholder funded Retirement Income sales of £3,893m were 24%
higher than 2022. New business profit, which includes the DB Partner
origination fee, was up 33% at £355m (2022: £266m), translating to a
new business margin of 9.1% (2022: 8.5%) on shareholder funded
premiums as buoyant markets supported active risk selection. Higher
and rising interest rates during 2023 boosted the return on surplus
assets, thereby increasing in-force operating profit, up 22% to £191m.
Finance costs have reduced following the November 2022 tender offer
and subsequent cancellation of £100m tier 2 debt, thus optimising
the capital structure and providing future capital flexibility.
Operating experience and assumption changes, primarily related to
longevity, were a combined £52m positive (2022: £104m positive)
impact on profit. Total investment and economic profits of £92m
(2022: £537m losses) combined with other items led to an adjusted
profit before tax of £520m (2022: £167m loss). Of this £520m, £348m
of profit is deferred to the CSM reserve in the balance sheet, leaving
an IFRS Profit before tax of £172m (2022: loss before tax of £494m
after deferral of £327m to CSM).
CAPITAL
The Group’s estimated Solvency II capital position remains at a very
healthy and robust level of 197% (31 December 2022: 199%) as we
benefited from organic capital generation and regulatory changes,
specifically a large reduction in the risk margin, as part of the ongoing
Solvency UK reforms. Through our targeted management actions,
property and interest rate sensitivities have much reduced in recent
years. Underlying organic capital generation (“UOCG”) grew strongly
to £57m (2022: £34m), delivering a fourth consecutive year of positive
UOCG, a key metric to delivering a sustainable business model. Within
this, the £35m capital strain from writing the increased level of new
business was substantially lower year on year at 0.9% of premium
(2022: £60m and 1.9% of premium). This low new business strain,
materially inside our target of less than 2.5%, reflects strong pricing
discipline, risk selection, development of reinsurance optionality and
our ability to originate increasing quantities of high-quality illiquid
assets. lower finance costs also contributed. During the year, we paid
a £19m shareholder dividend, well covered by UOCG. We continue to
closely monitor and prudently manage our risks, including interest
rates, inflation, currency, residential property and credit. The Solvency
II sensitivities are set out below.
The 2023 Financial Services and Markets Act contains new powers to
set the direction for financial services following the UK’s exit from the
European Union, including reforms to the Solvency II capital regime.
As part of the proposed new Solvency UK regime, last June, HM
Treasury and the Prudential Regulation Authority (“PRA”) set out their
proposals to implement the more straightforward items, including
simplification measures and reforms which have led to a c.60%
reduction in risk margin for life insurance business. Industry and the
regulator were very much aligned on these objectives. A consultation
paper on the more complex changes to matching adjustment (“MA”)
rules and the associated investment flexibility was launched in
September, with reforms to take effect in 2024. We expect these
MA changes to support the role HM Treasury is expecting from
the industry, whereby appropriate reforms could increase insurer
investment by tens of billions of pounds in long-term finance to the
broader economy, including infrastructure, decarbonisation, social
housing and increased investment in science and technology.
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24 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
BUSINESS REVIEW continued
OUTLOOK
The outlook for the economy continues to evolve, reflecting macro-
economic and political events including the trajectory of central bank
rates to reduce and control inflation, and a UK election by the end of
2024. The 2022/23 interest rate increases have led to a flat-lining of the
economy in 2023, predicted to be followed by a gradual recovery. We
expect these macro forces to have a negligible effect on the Group’s
business model, with the normalisation of long-term interest rates
continuing to drive demand for our products. Sensitivities of our
capital position to long-term interest rates is included on page 28.
TANGIBLE NET ASSETS / RETURN ON EQUITY (UNDERLYING)
The return on equity in the year to 31 December 2023 was 13.5%
(2022: 10.3%), based on underlying operating profit after attributed
tax of £288m (2022: £208m) arising on average adjusted tangible net
assets of £2,133m (2022: £2,025m).
Tangible net assets are reconciled to IFRS total equity as follows:
31 December
2023
£m
31 December
2022
£m
(restated)
883
(41)
2
1,959
(488)
2,315
224p
13.5%
783
(47)
3
1,611
(399)
1,951
190p
10.3%
The Group is closely monitoring the Government consultation regarding
restriction of ground rent for existing residential leases announced in
November 2023 and the impact of this on the Group’s £176m portfolio
of residential ground rents. For further information on the Group’s
approach to reflecting the uncertainty associated with the Consultation
in the year end valuation of residential ground rents see note 1.7.
IFRS total equity attributable
to ordinary shareholders
less intangible assets
Tax on amortised intangible assets
Add back contractual service margin
We have a strong and resilient capital base, with a low-strain business
model that is generating sufficient capital on an underlying basis 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
The Group uses a combination of alternative performance measures
(“APMs”) and 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 Directors have concluded that the principles used as a basis for
the calculation of the APMs remain appropriate, although due to the
adoption of new accounting standards the reconciliation from APMs’
to IFRS reported results has changed. Just Group has been growing
strongly for a number of years and regards the writing of profitable
new business contracts as a key objective for management. As a result,
in management’s view, the use of an alternative performance measure
which includes the value of profits deferred for recognition in future
periods is a more meaningful measure than IFRS profits under IFRS 17
which now exclude the profits from new business sales.
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.
KPIs are regularly reviewed against the Group’s strategic objectives,
which have remained unchanged following the adoption of IFRS 17,
which has also not impacted the Group dividend policy. The Group’s
KPIs are discussed in more detail on the following pages.
The Group’s KPIs are shown below:
Retirement Income sales1
New business profit1
Underlying operating profit1
IFRS profit / (loss) before tax
Return on equity1
Tangible net asset value per share1
New business strain1
(as % of premium)
New business strain1
Underlying organic capital
generation1
Solvency II capital coverage ratio2
2023
2022
(restated)
Change
£3,893m £3,131m 24%
£355m
£377m
£172m
13.5%
224p
£266m 33%
£257m 47%
£(494)m
n/a
10.3% 3.2pp
190p
34p
0.9%
1.9% +1pp
£(35)m
£(60)m 42%
£57m
197%
£34m 68%
199% -2pp
1 Alternative performance measure, see glossary for definition.
2
Solvency II capital coverage ratios as at 31 December 2023 (estimated) and
31 December 2022 includes a formal recalculation of TMTP at the respective dates.
Adjust for tax on contractual service margin
Tangible net assets
Tangible net assets per share
Return on equity % (underlying)
UNDERLYING OPERATING PROFIT
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. 2023 underlying
operating profit grew by 47% to £377m (2022: £257m), as we strongly
outperformed against our medium-term target, driven by pricing
discipline and positioning in buoyant markets. We set the 15% profit
growth target from the 2021 baseline (£211m), and given the strong
growth in 2023, we are confident that we can add a further 15% to
the 2023 level during 2024, and thereby double underlying operating
profit in three years instead of five.
New business profit
CSM amortisation
Net underlying CSM increase
In-force operating profit
Other Group companies’
operating results
Development expenditure
Finance costs
Underlying operating profit
Year ended
31 December
2023
£m
Year ended
31 December
2022
£m
(restated)
Change
%
355
(62)
293
191
(22)
(17)
(68)
377
266
(61)
205
156
(16)
(15)
(73)
257
33%
(2)%
43%
22%
(38)%
(13)%
7%
47%
1 See reconciliation to IFRS profit before tax further in this Business Review.
NEW BUSINESS PROFIT
New business profit was up 33% at £355m (2022: £266m),
as shareholder funded Retirement Income sales rose 24% to
£3,893m (2022: £3,131m). The new business margin achieved
was 9.1% (2022: 8.5%). As the year progressed, we increasingly
risk selected, which combined with strong pricing discipline, a wider
panel of reinsurers able to offer bespoke terms, market insight and
our streamlined bulk quotation service all contributed towards
higher margins. We are also increasingly benefiting from scale
and strong cost control leading to operating leverage.
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Strategic Report
CSM AMORTISATION
IFRS 17 introduces a new concept of the Contractual Service Margin
to the statement of financial position. CSM amortisation represents
the release from the CSM reserve into profit as services are provided,
net of accretion (unwind of discount) on the CSM reserve balance
(see below). £62m of net CSM amortisation (2022: £61m) represents
a £129m release of CSM into profit, offset by £67m of interest
accreted to the CSM. The £129m CSM release into profit (2022: £95m)
represents 6.2% (2022: 5.6%) of the CSM balance immediately prior
to release. The increase during the year represents growth in the
CSM reserve from an additional year of new business profit, and the
longevity assumption change at 31 December 2023 which was also
deferred to the CSM reserve.
Accretion on the CSM balance amounted to £67m (2022: £35m), which
represents 3.4% (2022: 2.1%) of the opening plus new business CSM
balance. CSM accretion is calculated using locked-in discount rates.
The increase during the period reflects the higher interest rates
applicable on the forward rates locked in curve at transition on
31 December 2021 for the new business written pre-2021 as well as
higher interest rates applicable to the new business written since the
end of 2021. The higher accretion is also due to the increase in CSM
balance following the FY 22 longevity assumption changes.
NET UNDERLYING CSM INCREASE
This represents the net underlying increase of profit deferral to CSM
during the year before any transfers to CSM in respect of operating
experience and assumption changes recognised in the current year.
The new business profit deferred to CSM (£355m) to CSM in-force
release (£129m) multiple of 3 times reflects the very high and healthy
level of replacement profit, and demonstrates the value of new
business written during the year relative to the gross CSM release
from existing business. This strong growth dynamic increases the
CSM store of value to release into in-force profit in future years.
IN-FORCE OPERATING PROFIT
In-force operating profit represents investment returns earned
on surplus assets, the release of allowances for credit default, CSM
amortisation, release of risk adjustment allowance for non-financial
risk and other. Taken together, these are the key elements of the
IFRS 17 basis operating profit from insurance activities.
Investment return earned
on surplus assets
Release of allowances
for credit default
CSM amortisation
Release of risk adjustment
for non-financial risk / Other
In-force operating profit
Year ended
31 December
2023
£m
Year ended
31 December
2022
£m
(restated)
Change
%
94
28
62
7
191
61
54%
26
61
8%
2%
8 (13)%
156
22%
The in-force operating profit increased by 22% to £191m (2022:
£156m), driven by a significant increase in investment return, as a
result of higher interest rates, on a greater amount of surplus assets.
The higher release of allowance for credit default reflects the growth
in the investment portfolio that backs the insurance guarantees we
provide to our customers. CSM amortisation, reflects growth in the
CSM release offset by the higher accretion as noted earlier.
OTHER GROUP COMPANIES’ OPERATING RESULTS
The operating result for Other Group companies was a loss of £22m
(2022: loss of £16m). These costs arise from the holding company,
Just Group plc, and the HUB group of businesses. The increase in losses
was driven by upfront investment in the Destination Retirement
proposition and other development initiatives.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 25
DEVELOPMENT EXPENDITURE
Development expenditure of £17m (2022: £15m), relates mainly to
investment in systems capability, in addition to various business line
and functional transformation.
FINANCE COSTS
Finance costs have decreased by 7% to £68m (2022: £73m).
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.
Finance costs have reduced following the November 2022 tender and
associated offers, which resulted in the subsequent cancellation of
£100m 9% tier 2 debt, paid from excess Group liquidity.
In 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 or 2023.
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 underlying and adjusted operating profit basis.
RETIREMENT INCOME SALES
Defined Benefit De-risking
Solutions (“DB”)1
Guaranteed Income for life
Solutions (“GIfl”)2
Retirement Income sales
(shareholder funded)
DB Partner (funded reinsurance)1
Total Retirement Income sales
Year ended
31 December
2023
£m
Year ended
31 December
2022
£m
Change
%
2,999
2,567
17%
894
564
59%
3,893
416
4,309
3,131
259
3,390
24%
61%
27%
1
Adding the DB shareholder funded and Partner business leads to total DB de-risking
segment volumes of £3,415m (2022: £2,826m).
2 GIfl includes UK GIfl, South Africa GIfl and Care Plans.
The structural drivers and trends in our markets underpin our
confidence that we can continue to deliver attractive returns and
growth rates over the long-term. We are extremely well positioned to
take advantage of the growth opportunities available in both of our
chosen markets. Over the past two years, rising interest rates have
accelerated the closure of DB scheme funding gaps, and therefore
more schemes are able to begin the process to be “transaction
ready”, accelerating business into our short/medium-term pipeline
that previously would have been expected to transact in the second
half of the decade. The retail GIfl market had its busiest year since
2014, with the Open market, where Just competes, showing
particularly strong growth, driven by the customer rate available
and advisers shopping around. The level of long-term interest rates
directly influences the customer rate we can offer, with the higher
rates in 2023 enhanced by our individual medical underwriting.
This increases the value of the guarantee to customers, making
the product more attractive relative to other forms of retirement
income. We will take advantage of this very strong market backdrop
through our low-strain new business model, which enables us to
fund our ambitious growth plans through underlying organic capital
generation. 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.
Contents Generation – PageContents Generation – Sub Page Strategic Report
26 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
BUSINESS REVIEW continued
Shareholder funded DB sales at £2,999m (2022: £2,567m) were up
17%, as we were consistently busy throughout the year. In February,
we closed our largest DB transaction to date at £513m, with GKN/
Melrose. In December, utilising our DB Partner proposition, we
reinsured all of the investment and longevity risks on a £416m
transaction, our second largest deal of the year. The upfront
origination fee received from our external reinsurance partner
partially offsets the new business strain incurred on the £3.0bn
of DB new business funded by Just’s shareholders. Transactions
of this type are additive to Just’s core shareholder funded business
by generating incremental fee income, while being repeatable,
scalable and providing optionality going forward. Adding both
shareholder funded and partner business, the DB segment wrote
£3,415m of new business, up 21% year on year (2022: £2,826m),
representing a 7% share by market value (lCP and WTW: c.£50bn).
In total, we completed 80 deals, of which 73 were below £100m in
transaction size. We maintained our leadership position in the less
than £100m transaction size segment. Our positioning has led to a
doubling in our market share to 16% in the up to £1bn size segment
over the past three years. In 2023, we estimate that Just wrote over
one third of all transactions in the market. These activity levels
are well ahead of the 56 transactions in 2022. Our proprietary bulk
quotation service continues to grow in popularity with hundreds of
DB schemes onboarded. Demonstrating the multiple benefits of the
service, 17 EBCs completed a transaction during the year. Our bulk
quotation service provides access to the DB market for trustees,
accelerates transaction flow for EBCs by providing a streamlined
process and provides a steady source of completions for Just.
Recent examples include our smallest DB transaction to date at
£0.6m, and a £2m scheme that had been price monitored since 2019.
We continue to develop the service to allow us to significantly
increase our onboarding capacity. As part of our proposition to EBCs,
trustees, and scheme sponsors, we are always available to quote for
any credible transaction, as evidenced from our activity levels in the
past two years.
GIfl sales were £894m (2022: £564m), 59% higher year on year.
The strong foundation from the first half, together with continued
market strength in the second half allowed us to utilise our market-
leading medical underwriting to risk select more profitable and niche
segments of the market. These market dynamics, together with
operational gearing due to tight cost control helped to improve
margins in the second half. In recognition of our consistent level of
customer service and excellence, in November, at the FT Financial
Adviser Service Awards (“FASA”), Just won its 19th consecutive five
star in the Pensions and Protection Providers category, five stars for
the 14th time in the Mortgage Providers category, and were awarded
Outstanding Achievement of the Year, due to our overall scores and
ratings. This consistently high level of service was achieved even as
business volumes grew strongly, and is a testament to the dedication
from the customer service and business development teams.
Furthermore, we estimate that since 2014, more than £140bn of
cumulative retirement savings have moved to drawdown on platform,
often without a decumulation strategy. Due to the higher customer
rates now on offer, we expect that advisers and customers will
re-examine the role of guaranteed income in retirement. The
introduction of the FCA’s Consumer Duty in July and the findings
due from the FCAs thematic review into retirement income advice
are also likely to increase the importance of considering guaranteed
solutions to help customers achieve their objectives.
LIFETIME MORTGAGES ADVANCES
2023 internally funded lifetime mortgage advances were £164m
(2022: £519m), a decrease of 68%. In 2023, the lTM market fell by
58% to £2.6bn. We continue to be selective, and use our market
insight and distribution to target certain sub-segments of the market.
lTMs remain an attractive asset class, however, in a higher interest
rate environment, the capital charge attaching to the NNEG risk
becomes onerous. Prior investment in lTM digital capabilities and
proposition has been well received by financial advisers, resulting
in retention of our five star service award, as mentioned above.
RECONCILIATION OF UNDERLYING OPERATING PROFIT TO IFRS
PROFIT BEFORE TAX
Underlying operating profit1
Operating experience and
assumption changes
Adjusted operating profit before tax1
Investment and economic movements
Strategic expenditure
Interest adjustment to reflect IFRS
accounting for Tier 1 notes as equity
Adjusted profit/(loss) before tax1
Deferral of profit in CSM
Profit/(loss) before tax
Year ended
31 December
2023
£m
Year ended
31 December
2022
£m
(restated)
377
257
52
429
92
(17)
16
520
(348)
172
104
361
(537)
(7)
16
(167)
(327)
(494)
1 Alternative performance measure, see glossary for definition.
OPERATING EXPERIENCE AND ASSUMPTION CHANGES
As usual, the Group carried out a full basis review in December
2023, and has updated its longevity reserving using the CMI 2022
mortality tables (2022: CMI 2021). The Group continues to allow for
future improvements in long-term mortality, but with the longer
term also reflecting the heightened mortality being experienced post
pandemic. Assessment of the longer-term impact of the pandemic on
the population continues to evolve, but these factors, combined with
the winter flu season, longer NHS waiting lists and inflation pressures
on incomes are contributing towards a deterioration in the rate of
improvement across the population, which we have sought to reflect
in our year end assumption. There were a number of minor changes
to the Group’s other assumptions in 2023. Sensitivity analysis is
shown in notes 20 and 26, 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 £52m
(2022: £104m). The Group reported negative operating experience of
£10m in 2023 (2022: negative £3m). Assumption changes resulted in a
£62m release (2022: £107m reserve release), and were almost entirely
driven by the mortality assumption change, as per above.
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INVESTMENT AND ECONOMIC MOVEMENTS
Change in interest rates
Narrower/(Wider) credit spreads
Property growth experience
Other
Investment and economic movements
Year ended
31 December
2023
£m
Year ended
31 December
2022
£m
(restated)
(5)
44
(13)
66
92
(536)
(51)
(23)
73
(537)
Investment and economic movements were positive at £92m
(2022: £537m loss). Movements in risk free rates during 2023 have
had a negligible effect due to the implementation of a revised interest
rate hedging strategy in the latter part of 2022 and across 2023. This
includes the purchase of £2.5bn of long dated gilts held at amortised
cost under IFRS. This approach has significantly reduced1 the IFRS
exposure whilst also containing our Solvency II sensitivity to future
interest rate movements (see estimated Group Solvency II sensitivities
below). In the second half of 2021 and across 2022, as rates rose and the
solvency position strengthened, we gradually reduced the swap based
interest rate hedging to a broadly economically neutral position. In 2023,
we recorded £5m of losses in relation to interest rates (2022: loss of
£536m due to rising interest rates under from the previous hedging
strategy, which was originally designed to protect the solvency position).
Credit spreads narrowed during 2023, leading to a £44m positive
movement (2022: credit spreads widened leading to a negative
movement of £51m). The lTM portfolio property growth was c.2%
during 2023, with our diversified portfolio performing a little below
the 3.3% annual long-term property growth assumption (2022: 3.3%
annual property growth assumption). Other includes positives from
corporate bond default experience, investment return on surplus
assets being above our assumption and backbook optimisation.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 27
CAPITAL MANAGEMENT
The Group’s capital coverage ratio was estimated to be 197% at
31 December 2023, including a formal recalculation of transitional
measures on technical provisions (“TMTP”) (31 December 2022: 199%
including a formal 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
20231
£m
31 December
20222
£m
3,104
(1,577)
1,527
197%
2,757
(1,387)
1,370
199%
1
2
Solvency II capital coverage ratios as at 31 December 2023 and 31 December 2022
includes a formal recalculation of TMTP at the respective dates.
This is the reported regulatory position as included in the Group’s Solvency and Financial
Condition Report as at 31 December 2022.
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 business is delivering sufficient ongoing capital generation to
support deployment of capital to capture the significant growth
opportunity available in our chosen markets, provide returns to our
capital providers and further investment in the strategic growth of
the business.
The table below analyses the movement in excess own funds, in the
year to 31 December 2023.
At
31 December
20232
£m
At
31 December
2022
£m
(restated)
1 See note 26 for interest rate sensitivities, with a 100 bps increase in interest rates
resulting in a pre tax loss of £(40)m and a 100 bps decrease in interest rates resulting
in a pre tax profit increase of £49m.
Unaudited
STRATEGIC EXPENDITURE
Strategic expenditure was £17m (2022: £7m). This included increased
investment to scale and bring to market various retail related
propositions, costs in relation to Consumer Duty, final implementation
costs for IFRS 17 and preparations for an internal model update.
UNDERLYING EARNINGS PER SHARE
Underlying EPS (based on underlying operating profit after attributed
tax) has increased to 27.9 pence (2022: 20.2 pence per share).
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
Underlying operating profit after attributable
tax (£m)
Weighted average number of shares (million)
Underlying EPS1 (pence)
288
1,032
27.9
208
1,032
20.2
1 Alternative performance measure, see glossary for definition.
EARNINGS PER SHARE
Earnings per share (based on net profit/(loss) after tax, see note 14)
has increased to 11.3 pence (2022: 36.3 pence per share loss).
Earnings (£m)
Weighted average number of shares (million)
EPS (pence)
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
117
1,032
11.3
(375)
1,032
(36.3)
Excess own funds at 1 January
1,370
1,168
Operating
In-force surplus net of TMTP amortisation
Financing costs
Group and other costs
Cash generation
New business strain2
Underlying organic capital generation
Management actions and other items
Total organic capital generation3
Non-operating
Strategic expenditure
Dividends
Economic movements
Regulatory changes
Capital actions4
Excess own funds
168
(49)
(27)
92
(35)
57
69
126
(13)
(19)
(22)
109
(24)
174
(57)
(23)
94
(60)
34
105
139
(5)
(16)
117
–
(33)
1,527
1,370
1 All figures are net of tax, and include a formal recalculation of TMTP where applicable.
2 New business strain calculated based on pricing assumptions.
3
Organic capital generation includes surplus from in-force, new business strain, overrun
and other expenses, interest and other operating items. It excludes economic variances,
regulatory changes, dividends and capital issuance.
4 Capital actions are the effect of Tier 2 buyback (2023 and 2022) and includes the positive
effect (if any) from release of Solvency II tiering restrictions.
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28 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
BUSINESS REVIEW continued
UNDERLYING ORGANIC CAPITAL GENERATION AND NEW BUSINESS STRAIN
In 2023, we achieved £57m of underlying organic capital generation
(2022: £34m). Over the past four years, we have delivered £160m
cumulative since we became capital generative on an underlying
basis in 2020, while at the same time growing the shareholder backed
new business volumes at a 22% compound annual growth rate to
£3.9bn in 2023.
Underlying organic capital generation (“UOCG”) has benefited from
the ongoing focus across the business on minimising new business
capital strain. Due to a combination of focused risk selection, pricing
discipline, bespoke reinsurance and originating sufficient quantities
of high-quality illiquid assets, new business strain has decreased by
£25m (40%) even though shareholder funded new business premiums
were up 24% year on year to £3.9bn. This level of new business strain
represents 0.9% of new business premium (2022: 1.9% of premium),
well within our target of below 2.5% of premium. This continued
outperformance is driven by our market insight, leading to an
origination strategy focussed on business mix within the DB and GIfl
units. It also includes the commission received from the DB Partner
transaction. In-force surplus after TMTP amortisation was down 3% to
£168m, primarily due to higher average interest rates during the year
which reduces the amount of capital available (via lower SCR and risk
margin) to release. Group and other costs including development and
non-life costs were £27m (2022: £23m). Finance costs at £49m were
lower (2022: £57m), which reflected the interest savings following the
tier 2 debt cancellation previously mentioned. Management actions
and other items, primarily a mortality assumption changed, boosted
the capital surplus by £69m. This lead to a total of £126m from
organic capital generation, which contributed one percentage
point to the capital coverage ratio.
NON-OPERATING ITEMS
Economic movements summed to £(22)m in the capital surplus.
The effect to the surplus from the fall in long term interest rates at
year end cut-off was relatively small at £(15)m, but resulted in a three
percentage point fall in the capital coverage ratio. Property price
growth at 2.3% (compared to our annual 3.3% long-term growth
assumption) led to a £(11)m decrease in capital surplus, while we
established a £(45)m provision for the potential residential ground
rent consultation, which may impact valuation of those assets.
These three negative items were offset by £49m of positive items,
primarily asset trading and timing variances.
Regulatory changes resulted in a £109m increase in the surplus
following a reduction in the Solvency II risk margin. Offsetting this,
in September/October 2023, we completed the repurchase of a
further £24m (nominal) of T2 debt via the open market. Shareholder
dividend payments totalled £19m, while strategic expenses reduced
the capital surplus by a further £13m.
The positive benefit from the risk margin reform has added seven
percentage points to the capital coverage ratio, which has been offset
by the other non-operating items. There were no capital restrictions
or deferred tax assets in the 31 December 2023 capital position.
Ineligible items
Subordinated debt
Group adjustments
ESTIMATED GROUP SOLVENCY II SENSITIVITIES1,5
The property sensitivity has reduced to 10% (31 December 2022: 12%).
We expect that reduced lTM origination and backing ratio on new
business will contain the Solvency II sensitivity to house prices
at or below this level over time. The credit quality step downgrade
sensitivity has slightly reduced due to credit spreads narrowing
during the period, which decreases the cost of trading the 10% of
our credit portfolio3 assumed to be downgraded back to their
original credit rating.
Sensitivities to economic and other key metrics are shown in the
table below.
Unaudited
Solvency coverage ratio/excess own
funds at 31 December 20232
-50bps fall in interest rates
(with TMTP recalculation)
+50bps increase in interest rates
(with TMTP recalculation)
+100bps credit spreads
(with TMTP recalculation)
Credit quality step downgrade3
-10% property values
(with TMTP recalculation)4
-5% mortality
At 31
December
2023
%
At 31
December
2023
£m
197
1,527
(6)
6
14
(7)
(10)
(10)
26
(27)
109
(109)
(141)
(147)
1
2
3
In all sensitivities the Effective Value Test (“EVT”) deferment rate is allowed to change
subject to the minimum deferment rate floor of 3% as at 31 December 2023 (2.0% as at
31 December 2022) except for the property sensitivity where the deferment rate is
maintained at the level consistent with base balance sheet.
Sensitivities are applied to the reported capital position which includes a formal
TMTP recalculation.
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, long income real estate/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. In addition for residential ground rents, the Group
has identified that the impact of downgrading the entire portfolio to BBB would reduce
Excess own funds by £22m and CCR% by two percentage points.
4 After application of NNEG hedges.
5 The results do not include the impact of capital tiering restriction, if applicable.
RECONCILIATION OF IFRS EQUITY TO SOLVENCY II OWN FUNDS
Unaudited
IFRS net equity
CSM
Goodwill
Intangibles
Solvency II risk margin
Solvency II TMTP1
Other valuation differences
and impact on deferred tax
Solvency II own funds1
Solvency II SCR1
Solvency II excess own funds1
31 December
2023
£m
31 December
2022
£m
(restated)
1,203
1,959
(34)
(7)
(196)
637
1,103
1,611
(34)
(13)
(456)
874
(1,059)
(884)
(5)
619
(13)
3,104
(1,577)
1,527
(50)
619
(13)
2,757
(1,387)
1,370
1
The Solvency II capital coverage ratios as at 31 December 2023 (estimated) and
31 December 2022 include a formal recalculation of TMTP at the respective dates.
RECONCILIATION FROM OPERATING PROFIT TO IFRS CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
The tables below present the reconciliation from the Group’s APM income
statement view to the IFRS statement of comprehensive income for the
Group. The Group’s results reflect the adoption of IFRS 17 including
the restatement of comparatives. For further information on the
restatement see note 1 of the Consolidated financial statements.
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Year ended 31 December 2023
New business profit
CSM amortisation
Net underlying CSM increase
In-force operating profit:
Investment return earned
on surplus assets
Release of allowances for credit default
CSM amortisation
Release of risk adjustment
for non-financial risk
Other Group companies’
operating results
Development expenditure
Finance costs
Underlying operating profit
Operating experience and
assumption changes
t
a
m
r
o
f
e
r
u
s
a
e
m
t
fi
o
r
p
e
v
i
t
a
n
r
e
t
l
A
Adjusted operating profit before tax
Investment and economic movements
Strategic expenditure
Interest adjustment to reflect IFRS
accounting for Tier 1 notes as equity
Adjusted profit before tax
Deferral of profit in CSM
Profit before tax
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 29
Reported
£m
Quote date
difference
£m
CSM
deferral
£m
Adjusted
total
£m
Insurance
result
£m
Investment
result
£m
Other
income,
expenses
and
associates
£m
Other
finance
costs
£m
Statutory accounts format
PBT
£m
94
28
62
7
(22)
(17)
(68)
84
(15)
104
(17)
16
94
28
(67)
129
7
(22)
(17)
(39)
(41)
(17)
(68)
(68)
136
(18)
55
3
215
(70)
16
355
(62)
293
(12)
(343)
62
(12)
(281)
94
28
62
7
(22)
(17)
(68)
377
52
429
92
(17)
16
520
(348)
172
(12)
(281)
(12)
12
(67)
(348)
(348)
348
–
–
–
94
28
62
7
(22)
(17)
(68)
84
(15)
69
104
(17)
16
172
–
172
118
273
(122)
(97)
172
The rows and first numeric column of this table present the alternative profit measure (APM) format as presented in the Underlying operating
profit section on page 24 and Reconciliation of Underlying operating profit to IFRS profit before tax section on page 26.
The Quote date difference adjustment is made because Just bases its assessment of new business profitability for management purposes on
the economic parameters prevailing at the quote date of the business instead of completion dates as required by IFRS 17 (see new business
profit reconciliation on page 227).
The CSM deferral column presents how elements of the APM basis result are deferred in the CSM reserve held on the IFRS balance sheet
consistent with the table on page 33. Under IFRS 17, new business profits and the impact of changes to estimates of future cash flows are
deferred in the CSM reserve for release over the life of contracts (see accounting policy note 1.5.6).
The adjusted total column is then transposed in the columns on the right-hand side into the IFRS statutory accounts Consolidated statement
of comprehensive income format as presented on page 137. Figures are presented on a net of reinsurance basis.
Investment return on surplus assets and Release of allowance for credit default are recognised within the investment result in the IFRS
Statement of Comprehensive income. CSM amortisation includes recognition of services provided within IFRS Insurance result and the unwind
of discounting in the IFRS Investment result.
The insurance service result of £118m (2022: £99m) represents the excess of insurance revenue over insurance service expenses, with the year
on year increase attributable to a higher release from CSM reserve as an additional year of new business is added, partly offset by higher
external investment management expenses.
The net investment result of £273m (2022: £(454)m loss) represents the difference between the total investment return and the finance charge
in respect of insurance reserves attributable to unwinding of discounting and changes in discount rates. In 2023, this net profit is attributable
to the return on surplus funds, the emergence of credit default margins, and the effects of investment into higher yielding assets.
Other finance costs of £122m (2022: £57m) represent the costs of servicing tier 2 and tier 3 debt and repurchase agreements in connection
with the amortised cost gilt portfolio established in 2023. Other income, expenses and associates of £97m loss (2022: £82m loss) represent
the results from the Group’s non-insurance businesses and expenses not attributed to insurance contracts in force.
Contents Generation – PageContents Generation – Sub Page
Strategic Report
30 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
BUSINESS REVIEW continued
Year ended 31 December 2022 (restated)
Reported
£m
Quote date
difference
£m
CSM
deferral
£m
Adjusted
total
£m
Insurance
result
£m
Investment
result
£m
Other
income,
expenses
and
associates
£m
Other
finance
costs
£m
Statutory accounts format
New business profit
CSM amortisation
Net underlying CSM increase
In-force operating profit:
Investment return earned
on surplus assets
Release of allowances for credit default
CSM amortisation
Release of risk adjustment
for non-financial risk
Other Group companies’
operating results
Development expenditure
Finance costs
Underlying operating profit
Operating experience and
assumption changes
t
a
m
r
o
f
e
r
u
s
a
e
m
t
fi
o
r
p
e
v
i
t
a
n
r
e
t
l
A
Adjusted operating profit before tax
Investment and economic movements
Strategic expenditure
Interest adjustment to reflect IFRS
accounting for Tier 1 notes as equity
Adjusted loss before tax
Deferral of profit in CSM
Loss before tax
266
(61)
205
61
26
61
8
(16)
(15)
(73)
257
104
361
(537)
(7)
16
(167)
(327)
(494)
4
4
(270)
61
(209)
4
(209)
4
(4)
(118)
(327)
(327)
327
–
–
–
61
26
61
8
(16)
(15)
(73)
52
(14)
38
(541)
(7)
16
(494)
–
(494)
PBT
£m
61
26
61
8
(16)
(15)
(73)
(14)
(541)
(7)
16
61
26
(35)
96
8
(5)
(9)
(497)
(16)
(15)
(44)
(7)
(73)
16
99
(454)
(57)
(82)
(494)
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Strategic Report
HIGHLIGHTS FROM CONDENSED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
The table on page 31 presents selected items from the Condensed
consolidated statement of financial position. The information below
is extracted from the statutory consolidated statement of
financial position.
Financial investments
During the year, financial investments increased by £6bn to £29.4bn
(2022: £23.4bn). Excluding the derivatives and collateral, and gilts
purchased in relation to the interest rate hedging, the core
Investments portfolio on which we take credit risk increased by 18%
to £24bn. Over the past two years, central banks have rapidly raised
base rates from their historical low levels to counteract the effect of
inflation and prevent it becoming embedded in the economy. Base
rates are expected to have peaked, with progressive interest rate
cuts expected later this year and into 2025. The year on year portfolio
increase to £24bn has been driven by investment of the Group’s
£4.3bn of new business premiums, credit spread tightening, and
the decrease in long-term risk-free rates at year end cut-off, which
increased the value of the assets (and matched liabilities). The credit
quality of the Group’s bond portfolio remains resilient, with 54% rated
A or above (31 December 2022: 50%), driven by an increase in A rated
consumer staples and infrastructure assets. Our diversified portfolio
continues to grow and is well balanced across a range of industry
sectors and geographies.
We continue to position the portfolio with a defensive bias, and
year to date have experienced positive ratings performance as 11%
of the Group’s bond portfolio (excluding gilts) 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), energy and basic materials. The Group has
increased its infrastructure, utilities and long income real estate
(primarily commercial) investments, and selectively added to
consumer and banks investments. The BBB-rated bonds
are weighted towards the most defensive sectors including
utilities, communications and technology, and infrastructure.
The Group continues to have ample liquidity. We prudently manage
the balance sheet by hedging all foreign exchange and inflation
exposure, and fully implemented a revised interest rate hedging
strategy during the first half of 2023. This involved the purchase of
£2.5bn of long dated gilts, which are held at amortised cost under
IFRS. The effect is to significantly reduce the Solvency II sensitivity
to future interest rate movements, with a much reduced volatility
on the IFRS position.
The table opposite presents selected items from the Condensed
consolidated statement of financial position. The information
below is extracted from the statutory consolidated statement
of financial position.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 31
Assets
Financial investments
Reinsurance contract assets
of which CSM
Cash available on demand
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 contract liabilities
of which CSM
Reinsurance contract liabilities
of which CSM
Other financial liabilities
Other liabilities
Total liabilities
Total equity and liabilities
Total Net Contractual Service
Margin included above
Net Contractual Service Margin
net of deferred tax
31 December
2023
£m
31 December
2022
£m
(restated)
29,423
1,143
100
546
726
23,352
776
107
482
802
31,838
25,412
199
943
(259)
883
322
(2)
199
938
(354)
783
322
(2)
1,203
1,103
24,131
2,449
125
(296)
5,588
791
30,635
31,838
19,647
1,943
121
(225)
3,669
872
24,309
25,412
1,959
1,611
1,471
1,212
Other illiquid assets and lifetime mortgages
To support new business pricing, optimise back book returns, 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 are typically
much longer duration and hence the cash flow profile is very
beneficial, especially to match DB deferred liabilities.
In 2023, we originated £1,550m of other illiquid assets (68 investments)
and funded £164m of lifetime mortgages, which together represent a
44% new business backing ratio. Other illiquid assets are originated
via a panel of 14 specialist external asset managers, each carefully
selected based on their particular area of expertise. Our illiquid asset
origination strategy allows us to efficiently scale origination of new
investments, and to flex allocations between sectors depending on
market conditions and risk adjusted returns.
Contents Generation – PageContents Generation – Sub Page Strategic Report
32 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
BUSINESS REVIEW continued
To date, Just has invested £4.9bn in other illiquid assets, representing
21% of the Investments portfolio (31 December 2022: 16%), spread
across more than 330 investments, both UK and abroad. We have
invested in our in-house credit team as we have broadened the illiquid
asset origination, and 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 Solvency II reforms, when fully
implemented, will increase the investment opportunities available to us
through wider matching adjustment eligibility criteria, such as callable
bonds, or assets with a construction phase, where the commencement
of cash flows is not entirely certain. A PRA consultation paper on the
more complex changes to matching adjustment (“MA”) rules and the
associated investment flexibility was launched in September, with
reforms to take effect in 2024. We expect these MA changes to support
the role HM Treasury is expecting from the industry, whereby appropriate
reforms could increase investment by tens of billions of pounds in
long-term finance that underpins UK economic growth.
Internally funded lifetime mortgages were £164m (2022, £519m),
primarily due to a much reduced lTM market, which more than halved
to £2.6bn, and our ongoing pricing discipline. lTMs remain an attractive
asset class, however, in a higher interest rate environment, the capital
charge attaching to the lTM NNEG risk becomes onerous. The loan-to-
value ratio of the in-force lifetime mortgage portfolio was 38.2%
(31 December 2022: 37.3%), reflecting continued performance across
our geographically diversified portfolio, which offsets the interest roll-up.
lifetime mortgages at £5.7bn represent 24% of the investments portfolio,
which we expect to continue drifting lower over time as we originate fewer
new lTMs and diversify the portfolio with other illiquid assets. The 10%
Solvency II capital coverage ratio impact for an immediate 10% fall in
UK house prices remains at a level we are comfortable with.
The following table provides a breakdown by credit rating of financial
investments, including privately rated investments allocated to the
appropriate rating.
31 December
2023
£m
31 December
2023
%
31 December
2022
£m
(restated)
31 December
2022
%
(restated)
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
2023
£m
31 December
2023
%
31 December
2022
£m
(restated)
31 December
2022
%
(restated)1
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
mortgages2
long income real
estate3
Infrastructure
Other
Bond total
Other assets
lifetime mortgages
149
1,334
130
1,405
197
378
1,606
735
583
660
1,767
543
2,637
764
916
2,473
42
16,319
822
5,681
1,141
0.6
5.6
0.5
5.9
0.8
1.6
6.7
3.1
2.4
2.8
7.4
2.3
11.0
3.2
3.8
10.3
0.2
68.1
3.4
23.7
4.8
270
1,327
250
935
125
535
1,119
607
342
437
1,596
588
2,266
584
291
1,702
42
13,016
726
5,306
1,174
1.3
6.6
1.2
4.6
0.6
2.6
5.5
3.0
1.7
2.2
7.9
2.9
11.2
2.9
1.4
8.4
0.2
64.4
3.6
26.2
5.8
23,963
100.0
20,222
100.0
3,083
2,549
29,595
3,169
–
23,391
AAA1
AA1,3 and gilts
A1,2,3
BBB1,2,3
BB or below1,2
lifetime mortgages
Other assets
Total1,2,3
2,252
5,327
7,239
8,083
176
5,681
837
8
18
24
27
1
19
3
2,154
2,136
6,262
6,544
265
5,306
724
9
9
27
28
1
23
3
liquidity funds
Investments
portfolio
Derivatives
and collateral
Gilts (interest
rate hedging)
Total
29,595
100
23,391
100
1
2
3
4
Includes units held in liquidity funds, derivatives and collateral and gilts (interest
rate hedging).
Includes investment in trusts which holds long income real estate assets which are
included in investment properties and investments accounted for using the equity
method in the IFRS consolidated statement of financial position.
The comparative has been restated to re-allocate ground rents and certain SME
investment and other funds to the appropriate rating (previously Other unrated).
The residential ground rent portfolio includes £164m rated AAA and £12m rated AA.
The Group holds a £176m portfolio of residential ground rents and is
monitoring the progress of the Government Consultation regarding
existing leases and the impact on the Group’s exposure to these
assets. The Group invests in loans secured by residential ground rents,
rather than directly in residential leases. These investments are
valued at fair value, and reflect our estimate of the impact that the
uncertainty from the consultation has had on the fair value of this
asset class at the reporting date. The Group acknowledges the
significant uncertainty regarding the outcome of the consultation,
and that the fair value of these investments may change in the future
after the consultation concludes. For further information on the
consultation please see the Risk management note on page 67
and the accounting estimates made in note 1.7.
1
Restated to re-allocate various short term illiquid fund assets and cash/investments,
primarily from the Financial – other sector. These assets are now in the “Other
Assets” category.
2 Includes investment in trusts which are included in investment properties in the IFRS
3
consolidated statement of financial position.
Includes direct long income real estate and where applicable, investment in trusts
which are included in investments accounted for using the equity method in the IFRS
consolidated statement of financial position. long income real estate include £740m
commercial ground rents and £176m residential ground rents.
Reinsurance contract assets and liabilities
In accordance with IFRS 17, the Group distinguishes between its
portfolios of reinsurance contracts which cover longevity and inflation
risks and portfolios of reinsurance treaties covering longevity
reinsurance alone. The Group’s contracts transferring inflation risk
are quota share arrangements which are in asset positions. Since the
introduction of Solvency II in 2016, the Group has increased its use
of reinsurance swaps rather than quota share treaties and these are
in liability positions.
Reinsurance assets increased to £1,143m at 31 December 2023
(31 December 2022: £776m) as the funded reinsurance in relation
to the DB Partner transaction in December 2023 was partially offset
by reinsurance quota share treaties which are in gradual run-off.
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STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 33
Cash and other assets
Other assets (primarily cash) remained consistent at £1.3bn at 31 December 2023 (31 December 2022: £1.3bn). The Group holds significant
amounts of assets in cash, so as to protect against liquidity stresses.
Insurance contract liabilities
Insurance contract liabilities increased to £24.1bn at 31 December 2023 (31 December 2022: £19.6bn). The increase in liabilities reflects the new
business premiums written and decrease to the valuation rate of interest, offset by mortality assumptions changes and policyholder payments
over the period.
Other liabilities
Other liability balances decreased to £791m at 31 December 2023 (31 December 2022: £872m) due to a reduction in loans and other payables.
IFRS net assets
The Group’s total equity at 31 December 2023 was £1.2bn (31 December 2022: £1.1bn). Total equity includes the Restricted Tier 1 notes of
£322m (after issue costs) issued by the Group in September 2021. The total equity attributable to ordinary shareholders increased to £883m
(31 December 2022: £783m).
DEFERRAL OF PROFIT IN CSM
As noted above, underlying operating profit is the core performance metric on which we have based our profit growth target. This includes new
business profits deferred in CSM that will be released in future. When reconciling the underlying operating profit with the statutory IFRS profit it
is necessary to adjust for the value of the net deferral of profit in CSM.
Net transfers to contractual service margin includes amounts that are recognised in profit or loss including the accretion and the amortisation
of the contractual service margin:
Year ended 31 December 2023
Year ended 31 December 2022 (restated)
CSM balance at 1 January
New Business initial CSM recognised
Accretion of interest on CSM
Changes to future cash flows at
locked-in economic assumptions
Release of CSM
Net transfers to CSM
CSM balance at 31 December
Gross insurance
contracts
£m
Reinsurance
contracts
£m
1,943
380
79
203
(156)
506
2,449
(332)
(37)
(12)
(136)
27
(158)
(490)
Total
£m
1,611
343
67
67
(129)
348
1,959
Gross insurance
contracts
£m
Reinsurance
contracts
£m
1,489
320
41
213
(120)
454
1,943
(205)
(50)
(6)
(96)
25
(127)
(332)
Total
£m
1,284
270
35
117
(95)
327
1,611
RESTATEMENT OF ALTERNATIVE PERFORMANCE MEASURES
As noted earlier, certain of the Group’s APMs and KPIs have been affected by the implementation of IFRS 17 as a result of changes to risk
parameters and other measurement factors in the underlying statutory accounts. The opportunity has been taken to make other changes
to the derivation of the KPIs at the same time as implementing IFRS 17, notably:
• The impact of demographic changes on the valuation of lTMs has been reclassified as an investment value change instead of being
included with insurance experience and assumption changes. This change treats the full return on lTMs as investment return and
recognises their reduced significance within the investment portfolio.
• Non-recurring expenses have been reallocated to new business acquisition expenses or development expenses within underlying
operating profit or to strategic expenses. This has also been reflected and aligned to the classifications used for measurement of
Solvency II capital generation.
The table below compares the new business profits, Underlying profit and Adjusted operating profit before tax as presented in the
Annual Report and Accounts in 2022 under IFRS 4 (previous accounting standard) with the equivalent APMs based on the IFRS 17 accounts:
As presented in 2022 Annual Report and Accounts under IFRS 4
Changes in allowances for credit defaults
Changes attributable to replacement of IFRS 4 prudent reserves with IFRS 17
risk adjustment
Change to the classification of demographic assumption changes and
experience variances in respect of lTMs
Reclassification of expenses
Other differences
As presented in 2023 Annual Report and Accounts under IFRS 17
New business profit
£m
Underlying operating profit
£m
Adjusted operating profit
£m
233
38
2
–
(1)
(6)
266
249
25
(9)
–
(6)
(2)
257
336
25
(9)
24
(6)
(9)
361
Dividends
In line with our stated policy to grow the dividend over time, the Board is recommending a final dividend of 1.50 pence per share bringing the total
dividend for the year ended 31 December 2023 to 2.08 pence per share. The 20% growth in total dividend is ahead of the 15% 2022 dividend growth rate.
MARK GODSON
Group Chief Financial Officer
Contents Generation – PageContents Generation – Sub Page 34 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
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/
sustainability
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
2019
2020
2021
2022
2023
(includes all Scope 3 emissions categories as per GHG protocol)
2024
OUR PROGRESS SO FAR TO NET ZERO BY 2025
Just set an ambitious target to reach Net Zero in our own operations
(Scope 1, 2) and business travel by 2025. We have made great
progress to the target so far, reducing our emissions by 1,040 tCO2e
and the trees we are planting in partnership with Ecotree have
already certified 2,195 tCO2e of ex-ante credits for use in 2025
against our net zero target.
2025
You can read more about our
transition to Net Zero on our website.
200
400
600
800
1,000
1,200
1,400
Gas
Electricity
(market)
Business
travel
Plan
LEAVING A RESPONSIBLE FOOTPRINT
We have reduced the carbon footprint of our operations by 83%
since 2019 (market based) including the impact of switching to a
green energy supplier 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’ve optimised our heating schedule to better align with staff
attendance, reducing our energy consumption and emissions.
• Just has also engaged with the local council to understand what the
possibility is of support for energy efficiencies in our Reigate office.
1 The Renewable Energy Guarantees of Origin (REGO) scheme provides transparency
to consumers about the proportion of electricity that suppliers source from
renewable electricity.
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 signed the age-friendly employers pledge.
• Just is on track to meet our HM Treasury Women in
Finance targets.
• We are in partnership with the national charity Volunteering
Works with over 97 of our colleagues taking part in activities
during 2023.
• We continue to be:
– Signatories to the Asset Owner Diversity Charter.
– Member of Progress Together.
– Members of GAIN (Group for Insurance, Autism, Insurance,
Investment and Neurodiversity).
You can read more about creating a fair world within our Colleagues
and culture section on pages 50 to 53.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 35
42%
REDUCTION IN MARKET BASED
BUILDINGS EMISSIONS IN 2023
10,899
SELF-DECLARED ACTIONS
TAKEN BY OUR COLLEAGUES
TO REDUCE THEIR IMPACT
ON CLIMATE CHANGE
33%
OF SENIOR LEADERSHIP ARE
WOMEN, TARGET OF 33%
BY DECEMBER 2023
£82k
DONATED TO CHARITY BY
THE BUSINESS AND OUR
COLLEAGUES IN 2023
99%
OF OUR PURCHASED ELECTRICITY
IS FROM RENEWABLE SOURCES
(REGO1 CERTIFIED)
592
NEW HABITS FORMED BY
EMPLOYEES TO REDUCE
THEIR FOOTPRINT
50%
OF OUR BOARD ARE WOMEN
19%
OF SENIOR LEADERSHIP ARE
FROM A BLACK, ASIAN OR
MINORITY ETHNIC BACKGROUND,
TARGET OF 18% ALIGNED WITH
2021 UK CENSUS DATA
696
NUMBER OF HOURS OF
VOLUNTEERING RECORDED
IN 2023
MAKING A POSITIVE IMPACT
We understand we have a long way to go, including investing in more
assets that support a positive impact. like others we are on a journey
to fulfil this goal.
Our progress against our target is shown below.
£325M
INVESTED IN ELIGIBLE GREEN AND
SOCIAL ASSETS IN 2023
Aligned with our sustainability
bond framework
£825M
TARGET TO INVEST OVER 2023
TO 2025
Invested in eligible green and
social assets
GHG EMISSIONS DATA
Emissions – tCO2e1
Scope 1 (natural gas and fugitive gas)2
Scope 2 (purchased electricity location based)
Scope 3 (business travel)
Total emissions (location based)
Scope 2 (purchased electricity market based)
Usage – Kwh
2023
73
177
145
395
1
2023
2022
111
205
138
454
18
2022
Scope 1 (natural gas and fugitive gas)
401,266
429,407
Scope 2 (purchased electricity location based)
854,557 1,060,746
Scope 2 (purchased electricity market based)
5,416
136,362
Market based
location based
Intensity ratios
2023
2022
2023
2022
tCO2e per retirement income sales
tCO2e2 per full time employee
1 Tonnes of carbon dioxide equivalent (“tCO2e”).
2 Fugitive emissions are based on refrigerant gas escape from on-site chiller systems.
0.06
0.19
0.34
0.10
0.22
0.09
0.15
0.38
Methodology: We have used the GHG Protocol Corporate Accounting and Reporting Standard (revised edition), and 2023 emission factors from the Department for Business, Energy and
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 retirement income sales and
an employee intensity metric (tonnes of CO2e per employee) to normalise our data and provide useful performance indicators. Eshcon ltd conducts an annual review of Just Group plc’s
data collation and calculation processes and provides verification of the 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. 100% of the reported emissions relate to emissions in the UK and offshore area.
36 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
SUSTAINABLE INVESTMENT STRATEGY
INVESTING
THE JUST WAY
We invest in a diversified
mix of investment grade
liquid and illiquid credit assets,
and cash flow match our
liabilities utilising an “enhanced
buy and maintain” approach
within specified risk parameters.
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, and long income real estate. We have built a panel of
14 specialist external asset managers, each carefully selected
based on their particular areas of expertise to originate investment
opportunities for us. These opportunities are then assessed with
multiple lenses by our in-house investment team who select the most
suitable investments to pass through our internal screening process
through a right of veto on each potential investment. The illiquid
credit assets (excluding lifetime mortgages) account for £4.9bn
or 21% of our £24bn Investments portfolio, but this is expected to
increase over time, as the proportion backing new business is higher
than the in-force portfolio. In 2023, we originated £1.6bn of illiquid
credit assets in addition to £0.2bn of lifetime mortgages to support
new business pricing, optimise backbook returns and provide
certainty through long-term fixed rate financing into the economy.
RESPONSIBLE INVESTMENT FRAMEWORK
We developed our Responsible Investment Framework (“RIF”) in
2019. The RIF defines our approach to integration of responsible
investment-related factors in our investment decision making
processes. This year, we have continued to enhance our approach
to implementation by more explicitly incorporating climate change
into our day-to-day trading and credit research processes. For more
detail on this, see page 45. We annually review our framework to
remain in line with market standards.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 37
Within the framework, we adopt a principles-based approach seeking
to achieve four overarching objectives:
•
to analyse and identify risks and opportunities arising from
responsible investment 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 responsible investment 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 influence 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
Just’s Green Bond Framework (“Framework”) was developed in 2020
and is aligned with the International Capital Markets Association
Green, Social and Sustainability Bond Guidelines verified by a second
party opinion provided by Sustainalytics.
Following the full allocation of Just’s Green and Sustainability
Bonds, we continue to increase the Group’s exposure to green
and social investments, in line with our overarching frameworks
to deliver positive outcomes. In 2023, we originated a total
of £325m into eligible green and social investments. Eligible
investments in 2023 included UK and French social housing projects
that benefited those with learning disabilities and people from
lower socioeconomic backgrounds, in addition to renewable energy
investments in the UK and USA. More details of how green and social
assets are defined can be found in our Sustainability Bond Framework
www.justgroupplc.co.uk/sustainability/our-approach. In addition,
a significant proportion of our in-force 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.
£325M
has been invested over
the past year into green
and social investments
£1.6bn
of illiquid credit assets
originated in 2023
38 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
SUSTAINABLE INVESTMENT STRATEGY continued
PROGRESS IN 2023
Team
Due to the evolving nature of the responsible investment market
and as the Group has continued to enhance and implement
its responsible investment strategy, in 2023, we hired a further
two experienced responsible investment analysts, who brought
knowledge and experience in natural sciences, climate change,
and sustainable development.
Policies and frameworks
We implemented our Manager Assessment Forum, which focuses
on assessing the performance of our external asset managers.
To complement this, a Responsible Investment Manager Assessment
framework and a supporting questionnaire were developed using
a variety of external guidance, such as the United Nations-backed
Principles for Responsible Investing, and internal information to
aid the Group in achieving its sustainability commitments by more
explicitly integrating responsible investment criteria in the manager
selection, appointment and monitoring process. The development
of this framework is supportive of meeting our wider stewardship
commitments and enables us to work more effectively with our
external asset managers on responsible investment activities.
The Responsible Investment Manager Assessment framework
is a key input into our overall manager performance assessments.
The table below displays a summary of the categories of questions that are included in the questionnaire.
ORGANISATION-LEVEL
Governance
Policy and strategy
Team and culture
Collaboration
FUND-LEVEL
Stewardship
Reporting
Investment
process/risk
management
Organisation-wide
oversight
Key policies and
frameworks
Resource and
responsibilities
Involvement in key
initiatives (e.g. net
zero focused)
Evidence of ESG
integration
Evidence of
engagements
Internal controls
and reporting
Net zero
commitments
Training and
development
PRI Scoring
Risk identification
Influence on
investment process
Climate-related
risk and emissions
reporting
Other Responsible
Investment
metrics
KEY
Net Zero Asset Owner Alliance
Just Internal
PRI
Asset Owner Diversity Charter
UK Stewardship Code
Partnership for Carbon Accounting Financials
Climate change and data
Overall we have continued to further integrate climate-related
information into investment decision making as part of our day-to-day
trading and optimisation work as well as our bottom-up credit research
analysis. In particular, we have enhanced our existing emissions
modelling tool which is used to analyse and project the potential
future emissions of our investments to help inform investment
decisions, asset allocation and our path to a net zero investment
portfolio. We have supplemented this with a new tool to analyse
the potential impacts of physical and transition risks of climate
change. The actions we have taken and the development of these
models have therefore resulted in an improvement in data quality
and integrity, which will continue to be an area of focus going forward.
£4.9bn
of our £24bn investments portfolio
are illiquid credit assets
£0.2bn
of lifetime mortgages originated in 2023
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 39
Stewardship
This year, we have been working diligently within the working groups
we are committed to. In addition, we have continued to enhance our
independent stewardship strategy. Notable achievements include for
example engaging with high emitting issuers, signing up to the
Nature Action 100 as a founding participant and joining the
Partnership for Biodiversity Accounting Financials. Below is
a summary of the initiatives/organisations we are currently
a member of:
INITIATIVE/ORGANISATION
JOINING YEAR
DESCRIPTION
United Nations Principles for Responsible Investing (the “PRI”)
2018
Association of British Insurers (“ABI”)
Asset Owners Diversity Charter (“AODC”)
2004
2022
Partnership for Carbon Accounting Financials (“PCAF”)
2022
Net Zero Asset Owners Alliance (“NZAOA”)
Financial Institutions Focus Group for the Net Zero Data
Public Utility (“NZDPU”)
Nature Action 100 (“NA100”)
World Health Organisation Framework Convention on
Tobacco Control (“WHO FCTC”)
2022
2022
2023
2023
Partnership for Biodiversity Accounting Financials (“PBAF”)
2023
Looking to the future
We are committed to building a brighter and more sustainable future,
and are continually evolving our approach to responsible investment
and more broadly sustainability. Below we outline some of our key
priorities for the coming year:
• Climate change: continuing to integrate climate-related data and
information in investment decision making and developing an
internal climate scoring system (initially focused on public bonds)
to identify leaders and laggards within sectors;
• Stewardship: engaging with high emitting issuers and continuing
to participate in existing initiatives supportive of meeting our
stewardship priorities;
• Policies and frameworks: improving existing and developing
new policies/frameworks supportive of achieving our overall
responsible investment and sustainability objectives;
The world’s leading proponent of responsible investment. It works to
understand the investment implications of ESG factors and to support its
international network of investor signatories in incorporating these factors
into their investment and ownership decisions.
An industry organisation recognised as the voice of the UK’s world-leading
insurance and long-term savings industry.
An asset owner driven diversity initiative focused on improving disclosure
and standards across the investment industry. Just is a member of the working
group overseeing the future strategy of this initiative.
An industry-led partnership to facilitate transparency and accountability of the
financial industry to the Paris Agreement. Just is a member of this initiative.
A member-led initiative of institutional investors committed to transitioning
their investment portfolios to net zero GHG emissions by 2050 – consistent with
a maximum temperature rise of 1.5°C. Just is a member of the Alliance.
A Glasgow financial alliance for net zero led initiative focusing on challenges
and opportunities for financial institutions in relation to climate-transition
data. Just is a member of the NZDPU’s financial institution focus group.
A global investor engagement initiative focused on driving greater corporate
ambition and action to reverse nature and biodiversity loss. Just signed the
inaugural letter sent to companies targeted via this initiative.
One of the main goals of the statement is to respond to the tobacco epidemic,
described as a “global problem”. Just signed the investor statement on WHO FCTC.
A partnership of financial institutions that work together to explore the
opportunities and challenges surrounding the assessment and disclosure of
the impact on biodiversity associated with their loans and investments. Just is
a member of this initiative.
Below we summarise our current allocation towards sustainable assets.
DEDICATED SUSTAINABLE ASSETS
(IFRS VALUATION BASIS)
31 Dec 23
£m
31 Dec 22
£m
Renewable energy – wind
Renewable energy – solar
local authority
Social housing – private
Green buildings
Eligible under Sustainability
Bond Framework1
• Monitoring and reporting: enhancing existing tools to
Social housing – public
appropriately monitor and disclose relevant responsible
investment information in relation to our investment portfolio
and to remain on track with achieving our net-zero objectives; and
• Team and resource: expanding the headcount and the capabilities
within the investment team to continue meeting our strategic
objectives and fulfil our wider obligations.
Emerging market social finance
Other social assets
Green, social, sustainability bonds
Total dedicated ESG assets
Bond portfolio & Other assets
As % of total bond portfolio
371
387
196
249
41
1,244
893
123
260
497
3,017
17,141
17.6%
287
342
135
129
42
935
454
120
84
244
1,837
13,742
13.4%
1
Sustainable assets are those that align with the our sustainability bond framework
criteria or our internal PRAYG classification system. includes the £325m invested in 2023
towards our target (investment of £825m over 2023 to 2025).
40 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
SUSTAINABILITY STRATEGY: TCFD DISCLOSURE FRAMEWORK
MAKING A
POSITIVE
IMPACT
LEAVING A
RESPONSIBLE
FOOTPRINT
CREATING A
FAIR WORLD
Strategy and Governance
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.
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.
Two years ago 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 December 2024.
Prior to 2023 we invested in understanding our emissions
baseline and taking steps toward 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 by using third party data for actual and
estimated emissions, where necessary. The result of this work
enabled Just to develop the first iteration of a transition plan
aiming to align with the Transition Plan Taskforce disclosure
recommendations. Our focus for 2023 was to continue to enhance
our efforts towards transitioning our business, specifically our
investment portfolio, towards net zero. More information can
be found in our Transition Plan on our sustainability website
https://www.justgroupplc.co.uk/sustainability
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 41
The Group’s strategic objectives 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 we make strategic
decisions as a business. Just incorporates Sustainability into the
Group Strategy development process and subsequently the Group
Strategy Execution Plan. The plan progress is monitored monthly by
the Group Executive Committee and quarterly by the Group Board.
Our pillars
Our commitment
How will we achieve our ambition?
2024 focus
MAKING A
POSITIVE
IMPACT
LEAVING A
RESPONSIBLE
FOOTPRINT
Develop and
offer sustainable
products
Innovate to support our existing and
new customers to deliver
sustainable products
Further develop propositions
to support our customers
Increase our
green financing
opportunities
look for further opportunities to
fund green and social assets
Continue allocating in line with
existing targets
Protect our
business
Grow in a sustainable way so Just
remains strong for future colleagues
and customers
Embed sustainability into
business planning
Link to Just’s
strategic objective
Grow through
innovation
Grow
sustainably
Invest responsibly
Attain net zero in
our near-term own
operations target
by 2025
Attain net zero
in our scope 3
emissions by 2050
Continue to integrate responsible
investment criteria into our
investment decisions
Understand, measure and analyse
our baseline, then identify areas of
efficiencies and initiatives to enact
Continue enhancing our
investment approach
Reduce the need for carbon
intensive fuels in our properties
Decarbonise our lTM and
credit portfolios
Set interim targets aligned to
NZAOA and SBTi frameworks
Transform the
way we work
Continue to reduce business travel
and support our colleagues in finding
ways to reduce their own emissions
Engage with our supply chain and
partners to understand their plans for
net zero and encourage reductions
Manage with
good governance
Continue to integrate sustainability
throughout our business and ensure
it is governed to a high standard
Further education on business
travel impacts and embed
sustainable travel initiatives
for our employees
Direct engagement with supply
chain where possible. Develop
understanding and knowledge
across business
Increase employees’ awareness
of sustainability issues through
annual training and
communications
Get closer to our
customers
and partners
Transform how
we work
CREATING A
FAIR WORLD
Ensure data is
well managed
and secure
Improve diversity
and inclusion
Support health
and wellbeing of
our colleagues
Support our
customers
(poverty, income
and housing)
Continue good standards of data
privacy and control
Maintain appropriate
internal controls
Build a diverse workforce
Continue to deliver against our
strategic objective of building a
workforce that is proud to work
at Just
Monitor and review progress
against targets
Retain a positive and
supportive culture
Be proud to
work at Just
Continue to provide sound and
helpful advice and continue to provide
support to our charitable partners
Increase awareness of initiatives
to support our customers
Get closer
to our customers
and partners
42 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
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 includes a Sustainability Sponsor responsible
for ensuring the Board is appropriately discussing sustainability
matters including climate.
A section of the Group Executive Committee and the Group Board
meetings are dedicated to sustainability on a quarterly basis, chaired
by the CEO and the Board sponsor for sustainability respectively.
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 are listed in the table below:
1.
Group Board
Sets sustainability strategy and targets.
Focus Areas
Frequency
Annual review
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)
2.
3.
4.
5.
6.
7.
8.
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
Executes the sustainability strategy approved by the Group
Board and delegates responsibilities, as appropriate.
Executive Sponsor
for Sustainability
Oversees and communicates sustainability initiatives to
the business.
Group Executive
Committee
Oversees new sustainability initiatives including emissions
reduction strategies.
Monitors progress of ongoing sustainability initiatives.
Oversees progress to reach diversity and inclusion targets.
Ongoing
Periodic
Ongoing
Ongoing
Periodic
Quarterly
Monthly
Reviews any proposed changes to diversity and inclusion targets.
Annual
Tracks sustainability management information and progress
against the Group Strategy Execution plan.
Monthly
Group Audit
Committee
Reviews 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)
Mary Phibbs
Group Nomination and
Governance
Committee
Group Risk
and Compliance
Committee (“GRCC”)
9.
Group Executive
Risk Committee
10. Remuneration
Committee
11.
JRl and PlACl
Investment
Committees
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
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
Formulates and monitors performance-related criteria for Executive
Directors and Senior Management, which include relevant
sustainability targets.
Annual
Michelle
Cracknell
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.
Quarterly
Oversight and review of climate risks impacting the
investment portfolio.
Quarterly
Chair/OWNER
John
Hastings-Bass
Mary Kerrigan
David
Richardson
Alex Duncan
David
Richardson
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 43
12.
JRMl Board
Focus Areas
Oversight of approach to reduce the emissions associated with
lTMs support net zero commitments.
Oversight and review of climate risks impacting the residential
property portfolio.
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.
14.
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.
Frequency
Quarterly
Annual
Chair/OWNER
Michelle
Cracknell
Quarterly
Alex Duncan
Monthly
Alex Duncan
15.
Sustainability
Working Group
Monitors the status of various sustainability initiatives and reports
into the Sustainability Steering Committee.
Bi-weekly
Rowena Dailey
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 will
support a market-wide transition which aligns with broader net
zero commitments.
Link to Just’s strategic objective
Get closer to our customers
and partners
MAKING A
POSITIVE
IMPACT
LEAVING A
RESPONSIBLE
FOOTPRINT
CREATING A
FAIR WORLD
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: There are opportunities 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
Lifetime Mortgage: There is an opportunity to provide more support
to our customers with the need increased due to continued higher
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
44 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
SUSTAINABILITY STRATEGY: TCFD DISCLOSURE FRAMEWORK continued
Summary of key risks
Our climate risk assessment remains that our investment portfolios
(Credit portfolio and lTM Portfolio) are the areas with the largest
potential exposure to climate-related transition and physical risks.
The nature of the key risks have 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
2023 change/update
More stringent
energy performance
standards –
commercial and
residential property
Residential property
values may fall below
the level of the loan
leading to losses
Transition
5 – 10 years
Fund EPC ratings for new lTM customers
to improve the energy performance
data we hold.
No change to
risk identified
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.
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
Targets for reduced
Scope 1 and 2
emissions are missed
by Just
Targets for reduced
Scope 3 emissions
are missed by Just
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 the
objectives outlined
under out Responsible
Investment
Framework while
meeting investment
return needs
Income should
continue but with
increased risk of
default if issuers
cannot refinance at
an affordable price
Reputational damage
from failing to meet
stated commitments
Reputational
damage due to
failure to maintain
commitments
Physical
10 years+
Potential government action to protect
populated areas.
No change to
risk identified
Vary lending policy to avoid vulnerable
residential and commercial properties.
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
No change to
risk identified
Monitor progress closely.
Pursue Responsible Investment
Framework and align with relevant
external initiatives/guidance.
Enhance lTM proposition strategy
to support customers with energy
efficiency improvements.
Engage with supply chain to
reduce emissions.
Monitor progress closely.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 45
Further Analysis of Key Risks
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. 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.
INVESTMENT RISKS:
Credit portfolio
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. Sensitivity analysis of
the risk of default on our credit portfolio is included in note 20
on page 180.
Risk management – investments
Credit portfolio
Our Responsible Investment Framework sets the basis for managing
the risk exposure arising from broader environmental, social and
governance risks, including climate change, and is monitored by the
Investment Committee. At the broader strategic level, we consider
the overall emissions of the portfolio and other metrics, such as the
portfolio’s exposure to issuers with science based targets, to monitor
the portfolio’s potential future decarbonisation pathway.
For the purposes of implementation, we have split our approach into
the following areas:
• Top down: portfolio management and asset manager due diligence.
• Bottom up: credit research and investment due diligence.
Top down:
For internally and externally managed assets, our approach to portfolio
management seeks to combine fundamental and responsible
investment data, to support with meeting our overarching net zero
objectives. The investment team uses outputs from our proprietary
emissions modelling tool as a key input into the investment decision
making process while seeking more information directly from issuer
reporting, in the case of internally managed assets, and via asset
managers for externally managed assets.
For externally managed assets, we seek to engage with our asset
managers to understand their broader approach to responsible
investment integration. For existing, and new managers, we use our
internal responsible investment manager assessment questionnaire
to source information on their approach to responsible investment at
an organisational level and as part of the investment process. The
outputs of our assessment feed into a broader manager performance
assessment, the results of which are presented to the
Investment Committee.
More information can be found on our responsible investment manager
assessment on page 38 of the responsible investment section.
Bottom up:
All of Just’s existing and prospective investments, where we have
veto rights in place, are scored using our internal classification
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
This ensures a consistent and robust approach is taken to assessing
environmental, social and governance risks, including climate-related
risks. Our classification system leverages information from third party
data providers, external asset managers (where relevant) and directly
sourced information from issuers.
As part of our analysis for PRAYG, the Credit Research team considers
a prospective investment’s emissions using estimated or reported
data before determining their recommendation.
Climate risk management
To explicitly consider the physical and transition risks of climate
change, we leverage third party data on the Climate Value-at-Risk
(“CVaR”), where data is primarily available for our liquid corporate
bonds. The purpose of this data is to understand, directionally, the
potential impact of different climate change-related scenarios. Where
data is unavailable, primarily illiquid investments, a sector average
based estimate has been applied to produce a holistic assessment
of the portfolio’s exposure to physical and transition risks.
We expect some of our illiquid credit assets, which are linked to
renewable energy production, to exhibit less transitional risk than our
liquid credit assets. Investments in these areas currently represent
4% of our credit portfolio. For other real estate and infrastructure
debt assets, the transition to net zero is expected to be the dominant
risk with potential costs associated with mitigation and adaptation.
Lifetime Mortgage Portfolio
Just Group is exposed to property risk via 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.
Climate risk can lead to increased property risk on the lTMs held on
our portfolio due to changes in property values as a result of physical
risks or transitional risks, for further information see pages 48 and 49.
46 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
SUSTAINABILITY STRATEGY: TCFD DISCLOSURE FRAMEWORK continued
What progress have we made to improve climate risk management
of the credit portfolio?
In 2023, we continued to enhance our approach to responsible
investment in the following ways:
• Developed a comprehensive responsible investment manager
assessment framework aligned with industry best practices,
such as the United Nations-backed Principles for Responsible
Investing guidelines.
• Enhanced our internal classification system, PRAYG, by leveraging
our third party data sources.
• Signed up to the Partnership for Biodiversity Accounting Financials
and various other initiatives (more detail on page 39).
• Set and published investment specific targets aligned with the
Net Zero Asset Owner Alliance.
• Further enhanced our emissions model and developed an internal
tool for deeper scenario analysis.
•
Improved governance, reporting and culture, we:
– introduced a responsible investment tracker to monitor
investment decisions and engagement activity;
– provided quarterly responsible investment updates to the
investment team reflecting the dynamic nature of this area;
– hired two more employees dedicated to responsible investment.
Lifetime Mortgage 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.
We have been engaging with the ERC and PCAF on developing
a standardised approach to emission reporting to further support
the development of green lending and retrofit mortgages.
METRICS AND TARGETS
The metrics below are used for our Credit portfolio:
CLIMATE VALUE-AT-RISK
A risk metric which is an estimation of scenario-specific
valuation impact for transition and physical impacts,
at both an issuer and portfolio level.
CARBON FOOTPRINT
An impact metric that gives the GHG emissions at an
issuer and portfolio level.
IMPLIED TEMPERATURE RISE (“ITR”)
A metric to analyse and monitor the portfolio’s exposure to
companies with forward-looking commitments (an ITR).
The Climate Value-at-Risk is purely illustrative as it projects 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.
The metrics below are used for our Lifetime Mortgage portfolio:
CARBON FOOTPRINT
The estimated carbon emissions of the lTM portfolio
expressed as an average per USD million of lTM 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 about 96% of the portfolio).
SCENARIO ANALYSIS
Background
Scenario analysis remains a key tool for ensuring we have a deep
understanding of the risks the Group faces over a long-term time
horizon. Just’s climate scenarios comprise property scenarios,
relating to the lifetime mortgage portfolio, measured using the
Representative Concentration Pathway (“RCP”) for assessment
of physical risks and assuming that a minimum EPC-C rating is
implemented by government for assessment of transition risks.
The Network for Greening Financial System (NGFS) scenarios were
used for the Credit Portfolio. Overall, each of these scenarios were
mapped against the wider NGFS climate scenarios.
The identification, disclosure and management of climate-related
risks and broader sustainability risks (environmental, social
or governance) is key for Just. We recognise that the potential
impact from these risks on Just’s overall strategy could manifest
in a way that might lead us to change aspects of our strategy. We
also recognise that sustainability and climate-related risks impact
many of the other types of risks faced by Just, such as credit, market,
operational, reputational and compliance/legal. As a result, during
2023 we took the action to ensure the management of sustainability
risks were further embedded within Just’s risk governance and
management structures and are reflected within Just’s Enterprise
Risk Management Framework. Sustainability was further incorporated
into our overall Risk Operating Model to ensure integration across all
business areas.
Scenario analysis is used to deepen understanding of the risks the
Group faces and permit a consideration of a long-term time horizon.
For 2023, we retained the use of the NGFS scenarios and in particular
the base case given market conditions continue to reflect a scenario,
where policy actions appear to be changing due to general
geopolitical tensions. We have taken a prudent approach by assessing
the most extreme transition/physical risk scenarios to understand the
extent to which this may affect the Group. Below we provide
additional information on these scenarios.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 47
h
g
H
i
disorderly
too little too late
A summary of how Just has interpreted each scenario is provided below:
NGFS SCENARIOS ASSUMPTIONS
Divergent
net zero
(1.5 C)
k
s
i
r
l
a
n
o
i
t
i
s
n
a
r
T
Net Zero
2050
(NZ2050)
Current
Policies
w
o
l
low
orderly
Hot house world
Physical Risks
Divergent Net
Zero (“DNZ”)
Net Zero 2050
(“NZ2050”)
Current Policies
(“Hot House
World”)
Net zero reached by 2050 but with higher costs
due to divergence with more stringent policies
across all sectors, primarily focusing on 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.
ENHANCEMENTS
As part of the scenario analysis, we have further enhanced our
approach in the following ways:
1. Modelling and tools:
– Developed a tool to further analyse the impacts of climate-
related scenarios on the investment portfolio
– Improved modelling of carbon emissions on the lTM portfolio
through refined assumptions
– Improved analysis of projected emissions on the lTM and
Credit portfolio
High
2. Risk Exposure
– Analysed emissions data to identify where high intensity
exposures exist across the portfolio
3. Data integrity
– Enhanced data processing and tools for analysis of emissions
across the portfolio
– Compared data across providers and against issuers’
reported data
Source: derived using the NGFS climate scenarios NGFS Scenarios Portal.
48 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
SUSTAINABILITY STRATEGY: TCFD DISCLOSURE FRAMEWORK continued
COMBINED ILLUSTRATIVE IMPACTS – PRE-MANAGEMENT ACTIONS
The results of our quantitative analysis of Climate Value-at-Risk
(“CVaR”) relating to the Credit portfolio and Property Value at Risk
(“PVaR”) relating to the lifetime Mortgage portfolio are shown in the
table below. The metrics show the illustrative impacts on our existing
Credit 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,
reinsurance assets and sovereign bonds.
SUB-PORTFOLIO
DIVERGENT NET
ZERO 2050
NET ZERO 2050
CURRENT POLICIES
(HOT HOUSE WORLD)
Credit portfolio1
-10.5% CVaR
-6.4% CVaR
-4.3% CVaR
lifetime Mortgage
portfolio
-3.1% PVaR
-3.1% PVaR
-0.3% PVaR
Our physical risk modelling estimates that they lead to at most a
0.3% 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 0.7% by 2080 of properties
backing our lifetime mortgages. Under the “Current Policies” scenario,
this could mean an additional 180 properties exposed to high flood
risk by 2080 out of a portfolio of 54,000 properties.
Due to climate change increasing the chances of lengthy periods
of drought, the projections suggest a similar pattern of increasing risk
of subsidence over time. Under the most severe scenario considered,
about 86 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.
1 Results as at 30 June 2023
CREDIT PORTFOLIO
Overall the increase in potential impact across each scenario is
primarily due to the following factors:
• Underlying scenarios have been updated to reflect the NGFS
scenarios available via our third party data provider MSCI.
• An overall increase in the coverage across the portfolio using
existing data to estimate the potential impacts primarily for
illiquid/private credit assets.
The modelling suggests that transition risks potentially represent a
more material risk to our Credit portfolio than physical risks. In the
DNZ scenario, a 1.5°C temperature rise could potentially produce
higher costs due to the costs associated with the increased rate of
decarbonisation under this scenario.
LIFETIME MORTGAGE PORTFOLIO
The modelling 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). The cost of transition risk
could lead to a 2.8% 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.
CARBON FOOTPRINT – INVESTMENT PORTFOLIO
Investment
Portfolio
Coverage
Year
Credit portfolio
2019
99.8%
Carbon
Footprint
Scope 1&2: 84
Scope 3: 407
2023*
99.2%**
Scope 1&2: 102
2019***
2023
n/a
96%
Scope 3: 275
Scope 3: 13.3***
Scope 3: 13.3
(tCO2e/$m
nominal
invested)
lifetime
Mortgage
portfolio
(tCO2e tonnes
per annum)
* Data as at 30 June 2023.
** Coverage of the portfolio in the carbon footprint data. Data coverage varies across
individual scopes of emissions, lowest value shown for prudence.
*** We have updated our approach to calculating emissions on lTMs to use a more
accurate approach than prior years. To avoid using an inconsistent baseline, we have
set the 2019 figure equal to the 2023 position. We believe this is a slightly prudent,
but reasonable approximation.
CREDIT PORTFOLIO
A combination of latest available 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 aiming
to apply the principles under version one of the Partnership for
Carbon Accounting Financials (“PCAF”) Financed Emissions Standard.
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 standard. Where data was not available
an unweighted sector average was applied to produce a full portfolio
footprint. Sector averages cover c.30% of the 2019 data. In 2023,
scope 1 data improved significantly with c.7% of data representing
sector averages and c.25% for scope 2 and scope 3. Data could be
subject to change due to improvements in data quality going forward.
We acknowledge there is double counting in producing the carbon
footprint data and have therefore split the data by scope of
emissions. It does not include cash/cash equivalents, derivatives
and reinsurance assets.
LIFETIME MORTGAGE PORTFOLIO
The lifetime Mortgage portfolio’s carbon footprint is calculated using
the estimated emissions data based on the EPC rating of the property
on which the lifetime mortgage is secured and calculated based on
CO2 intensity factors from the SAP 2012 methodology. 2023 emissions
calculations used an analysis of the current split between energy
from different heat sources across the portfolio, giving a percentage
of gas, electricity, oil, etc. These percentages were used to calculate
a weighted average CO2 intensity factor based on the energy mix of
the current portfolio but using the intensity factor from the SAP 2012
documentation. For 38% of properties we use the rating on the record,
and for 58% of properties we use an estimated rating. There is not an
emissions standard for lifetime mortgages. We have calculated the
emissions intensity based on the PCAF residential mortgage standard.
The contribution of an individual property to the carbon emissions of
the overall portfolio is based on current loan-to-value ratio of the
relevant lifetime mortgage. We have used the current loan balance
and property value to calculate the loan-to-value ratio.
LIMITATIONS AND OUTCOMES
The scenario analysis shows that the Group’s primary exposure is to
transition risks based on both the DNZ scenario and NZ 2050 scenario.
The DNZ scenario appears to have the most potential financial impact
to Just. Whilst some conclusions can be drawn from our analysis, we
recognise that there are limitations to our approach as noted below.
In determining the potential impact on the Credit portfolio,
we have used the data available for our liquid credit assets and
estimated the remaining by taking sector averages, accounting for
the investment time horizon. Sector averages can give an indication
of the climate-related risks a company may face but do not account
for the company-specific nature of these risks. The longer-term time
horizon for projections on the Credit portfolio, to 2100, lends itself to
greater uncertainty of potential future impacts. As a result, whilst
some conclusions can be drawn from our analysis, we acknowledge
that our data has limitations associated with it. We are continuing to
address this area as part of our development work going forward.
The analysis does not include cash/cash equivalents, derivatives,
reinsurance assets and sovereigns bonds.
Given the evolving nature of reporting on greenhouse gas emissions,
we anticipate over time that issuers will provide more transparency
and reporting on emissions. Therefore, we will continue to annually
restate the carbon footprint figures for the portfolio as at the baseline
year and subsequent years reflecting the overall improvements in
availability of data and data quality, where relevant.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 49
Potential Actions to Mitigate Climate Risks
CREDIT PORTFOLIO
Within the Credit 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,
which are also consistent with our stewardship objectives, to address
these risks:
• Enhance the data feeds and modelling approach to improve our
overall analysis of impacts from climate related scenarios.
• Engage further with our third party data providers and external
asset managers to improve the quality of data used and 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.
LIFETIME MORTGAGE 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 ENHANCING CLIMATE RISK
MANAGEMENT OF THE INVESTMENT PORTFOLIO?
We plan to:
• Continue analysing the potential impacts of climate-related
scenarios alongside emissions to identify areas of significant risk:
– To mitigate these risks, identify specific actions such as
engagement or divestment.
– Further incorporate the scenario analysis data in day-to-day
investment decision making.
•
Identify other sources of information to improve the overall quality
of data used to analyse the physical and transition risks of
climate change.
• Develop an internal scoring system for classification of climate
leaders/laggards by taking a materiality based approach.
• Embed climate change risk factors in our lifetime mortgage
lending decisions, if possible using a post code level risk rating.
Strategic Report
50 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
COLLEAGUES AND CULTURE
BE BOLD.
BE BRILLIANT.
BE JUST.
2023 was a year in which we harnessed
the power of our highly talented and
engaged colleagues to deliver strong
business growth and help more people
achieve a better later life.
We focused on three key strategic people priorities to enable the
delivery of our Group strategy:
• Ensuring we have the right capabilities for today and the future,
with an enhanced talent acquisition strategy and a new
employer brand.
• Delivering a brilliant colleague experience to engage and retain
our talent, underpinned by a culture centred on belonging and
valuing differences.
• Enhancing the skills of all of our people managers, recognising
that this makes the biggest difference to individual and team
performance and success.
INCREASED LEVELS OF ENGAGEMENT
Building on the foundation of good levels of colleague engagement,
we were delighted that our Peakon surveying highlighted even higher
levels of engagement, with our people feeling the benefits of specific
actions we have taken to ensure Just is a brilliant place to work. We
successfully galvanised people around our commitment of being a
strong and sustainable purpose-led business for our customers, our
colleagues, our planet and generations to come.
We received an excellent response rate to our full
Peakon survey, in addition to the pulse survey we
held during the year. This in itself demonstrates that
colleagues are keen to share their views as they know
that we will act on feedback. We received over 7,000
free text comments, giving us rich insights into how
colleagues feel about a whole range of aspects
related to working at Just. This was underpinned by
improvements in 13 out of the 14 drivers of engagement.
All of these insights are increasingly important,
particularly with the adoption of hybrid working
and working in the office with purpose, so that
we continue to collaborate, innovate, support
one another and maintain our Just culture.
Great Company, looked after both
financially and from a culture and
wellbeing perspective. line manager
is great and have visible access to
the senior leadership team.”
Colleague comment from October Peakon survey
RESPONSE RATE
OVERALL ENGAGEMENT
(OUT OF 10)
PROUD TO WORK AT
JUST METRICS
(consisting of six questions
particularly relevant to
our business)
October 2023
October 2022
90% 85%
7.9 7.7
8.3 8.0
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COLLEAGUES HAVE A VOICE
As part of an integrated programme of communication and
engagement activities, every quarter we hold town halls for
colleagues, led by the Group CEO. This is an opportunity to share a
business update, talk about current successes and challenges, and
look to future opportunities. Importantly, it provides another way
for colleagues to ask any questions directly to the Group CEO and
members of the Executive team. As well as sharing “what” we do,
which is our strategy, we also focus on “how” we do it with our
“culture on a page” and storytelling around our behaviours and
doing business the Just Way.
There are many opportunities to share opinions,
from 1–1 chats to town halls, team meetings and
more – and the culture of the company is that
everyone should have a voice. Within my team
I do feel that my opinions are valued.”
Colleague comment from October Peakon survey
During the year we also continued to hold our “Take on Board”
sessions, which are designed to give colleagues the opportunity to
hear directly from our Non-Executive Directors and ask any questions
they may have. Topics have included inclusivity, high performance,
equity and the Company’s approach to remuneration and bonuses.
You can read more about Board engagement on page 54.
92%
100%
of colleagues that attended
the town hall session in June
2023, and completed the
survey, strongly or somewhat
agreed that they found
it valuable.
of colleagues that attended the
“Take on Board” in November,
and completed the survey,
strongly agreed or agreed that
they found it valuable.
In addition to the town halls and “Take on Board” sessions which
are held virtually and in-person, we also run “Conversations with
the Execs”. The aim is to offer another opportunity for colleagues
to be able to hear from members of the Executive team, share
views about what we’re doing well as an organisation and where
we could improve, and ask questions. Sessions during the year have
included conversations around the importance of company culture,
understanding the benefits of hybrid working, knowledge sharing
and the career journeys of our Executive team.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 51
WHAT IT MEANS TO WORK AT JUST
Following six months of research and design we launched our new
Employee Value Proposition (“EVP”) and employer brand. The aim is
to clearly communicate why the people we want to become part of
our business should join Just – and stay – as highly engaged team
members. Authentically saying what it’s like to work for Just and
what we offer allows us to effectively communicate with everyone
throughout their time working in the organisation. Whether we’re
creating attraction campaigns, inducting new joiners, discussing
career development, sabbaticals, maternity leave or annual reviews,
our aim is that everything we say and do should feel consistently true
to who we are as an employer. Importantly, it also links to what the
Company expects from colleagues in return as part of the “deal”
– from being completely engaged around “what” we do and achieving
objectives, through to “how” we do things the Just Way.
I think we strike a nice balance between
ambition and integrity”
Colleague comment from EVP focus group session.
Our programme of communication and engagement activities to embed
our EVP and employer brand, included the introduction of a new colleague
magazine, called US. to share more about life at Just – from reward,
development and ways of working, through to stories about the positive
impact we are making on people’s lives and the environment around us.
EMPLOYEE VALUE PROPOSITION
Hearing from the women on the Board, and open,
honest conversations. I loved how enthusiastically
Michelle and Kathy spoke about a range of topics.
As a new starter, it really showed me that the top
level care about this Company beyond profits!”
Colleague comment from the ‘Take on Board’ session
Consisting of three brand pillars, our
EVP is the link between colleagues and the
Company, underpinning the aim that
everyone feels they have a brilliant colleague
experience and that they belong at Just.
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52 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
COLLEAGUES AND CULTURE continued
CREATING A CULTURE OF BELONGING
As part of building a brilliant diversity, equity, inclusion and belonging
(“DEIB”) strategy and plan, we are committed to attracting and
retaining diverse talent, and believe that our collective brilliance
comes from our diversity of thinking and experience. We are
passionate about strengthening our inclusive culture and our sense
of belonging. This year we had a strong focus on belonging, and it
was really positive to see that the efforts we have made resulted in
a 5% increase in our Peakon score for colleagues saying that they
feel a sense of belonging at Just.
TAKE ACTION AND MAKE AN IMPACT
Increasing diverse representation is a key part of our DEIB
strategy and we’re delighted that we met our 2023 targets for:
• 33% of women at senior leadership levels, as part of our
commitment to the HM Treasury Women in Finance charter.
• 18% Black, Asian and minority ethnic representation at senior
leadership levels.
In enhancing our talent acquisition strategy, we are also making
progress in attracting a broad range of talent and ensuring we have
inclusive practices. This has included using specialist job boards,
training for people managers, diverse shortlists and interviewers,
and becoming signatories to the Centre for Ageing Better Age-friendly
Employers Pledge.
I feel like Just/HUB have created a great work
environment that is inclusive and enables people to
thrive and be themselves.”
Colleague comment from October Peakon survey
DEIB NETWORKS AND CHAMPIONS
Each of our six diversity strands has an Executive sponsor, with DEIB
networks and champions spanning our organisation. During the year
we undertook a range of activities to foster this sense of inclusion and
belonging, including celebrating and recognising Pride, Rosh Hashana,
Yom Kippur, Diwali, Black History Month, Neurodiversity Celebration
Week, Movember, International Women’s Day and World Menopause
Day. Our colleagues are also very open to sharing their own personal
stories through a series of Just Perspectives pieces – from a
colleague’s breast cancer journey, through to an autism diagnosis.
OUR DIVERSITY, EQUITY, INCLUSION & BELONGING PROGRAMMES
We have completed another year of our reciprocal mentoring
programme where diverse participants are paired with senior leaders
for conversations to increase allyship and mutual understanding. This
programme sits alongside our Executive sponsorship programme
where diverse participants meet regularly and are sponsored by our
Executive leaders. We also take part in the 30% Club Mission Include
cross-company mentoring for our diverse talent and the Actuarial
Mentoring Programme specifically for diverse actuarial talent.
TWO FLAGSHIP EVENTS
We also had two “flagship” activities in September
– our Belonging at Just Week and Just Walk.
Belonging at Just Week
Colleagues were invited to attend sessions
with three inspirational speakers. Shola Kaye,
an award-winning DEIB speaker, focused on
belonging and inclusion with the perspective
of empathy. Seven-time Paralympic champion,
Hannah Cockcroft OBE, talked about belonging
and inclusion from the perspective of living
with a disability. As the culmination of the
week of activities, celebrated Olympic and
World Champion swimmer, Mark Foster, shared
a story of inclusion from an lGBTQ+ perspective.
Just Walk for Hourglass
We held Just Walk in london and Belfast in
aid of our corporate charity partner, Hourglass,
the UK’s only charity focused on ending the
abuse and neglect of older people. This charity
fully aligns with our purpose of helping people
achieve a better later life and resonates
strongly with our people. In addition,
colleagues also have the opportunity to take
part in volunteering activities with our partner,
Volunteering Works, from outdoor projects
to mentoring.
The speakers during National Inclusion Week
were terrific!”
Colleague comments from October Peakon survey
Just Walk was an amazing and
rewarding day. And for such an
incredible charity.”
Colleague comments from October
Peakon survey
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POWERING UP OUR PEOPLE MANAGERS
In July we launched a new programme for every people manager
called “Power up”. As a business we recognise that the quality of
people management makes the biggest difference to individual
and team performance, and supports a sense of engagement
and belonging. We want all colleagues to be working with people
managers who get the best out of their teams and create conditions
that allow people to thrive. It is also creating a common set of
standards and a shared language around what being a brilliant
people manager at Just means. Key modules include:
• Setting a clear purpose and direction.
• Creating a culture of trust, inclusion and belonging.
• Caring about the engagement and wellbeing of team members.
• Rewarding and recognising great performance.
•
Identifying and developing talent.
love connecting with other managers, finding
this very useful. The AID* model also gave a clearly
defined breakdown on how to give feedback.
Great session all round.”
Colleague comment from Power Up feedback
* Action, Impact, Do feedback model
The Just Group
TWELVE
THE ULTIMATE TEAM TO POWER-UP YOUR SKILLS
THE PERFORMANCE
LEADER
THE
COMMUNICATOR
THE COACH
THE BOLD
AND BRAVE
THE TACTICIAN
THE SUPPORTER
THE MOTIVATOR
THE SCOUT
THE INCLUSIVE
LEADER
THE TRAILBLAZER THE CONDUCTOR
THE ADVOCATE
SUPPORTING COLLEAGUES’ WELLBEING
Positive wellbeing can have both physical and mental benefits
and helps build resilience to deal more effectively with whatever
life throws people’s way. The wellbeing of all colleagues is a key
business priority and our aim is to provide managers and colleagues
with the tools, support and strategies to adopt and maintain healthy
behaviours. As part of working at Just we offer a wide range of
benefits and support offerings, including private medical insurance,
life insurance, a health cash plan and income protection. In addition,
we offer access to the Headspace wellbeing app, a 24/7 colleague
assistance helpline and trained onsite physical and mental health
first aiders.
I always tell my friends and family how great it is
working at Just. Along with the employee benefits,
kind staff, generous events and away days and
all-round caring employer.”
Colleague comment from October Peakon survey
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 53
OWNING YOUR OWN DEVELOPMENT
Whilst working at Just, colleagues can develop their careers whilst
making a difference to the lives of those around them. We aim to
support everyone to perform brilliantly and achieve incredible
things, and we promote the importance of colleagues owning
their development.
As well as a number of opportunities for individuals, such as linkedIn
learning, networking events and lunch and learns, there is also
a range of learning initiatives for teams and groups of colleagues.
These span from our apprenticeship and graduate programmes
through to professional qualifications in areas like actuarial, project
management and data science.
I have already made positive changes to the way
I work based on many ‘lightbulb moments’ the
course has given me so far! I really believe the
programme has given me the foundation and
knowledge I need to develop into the best leader
I can be which will stay with me well after the
course has finished.”
Colleague comment from Corndell level 7 apprenticeship programme
BRILLIANT PERFORMANCE
Our purpose and Just culture, which is underpinned by our
behaviours, continues to be our North star and recognising our
people for the difference they make is extremely important. In
addition to local recognition schemes, we once again brought
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. This sense of being “Just” is a competitive advantage
which is driving our brilliant performance and growth strategy.
DYNAMIC
leading the way
with innovation and
high performance
FOR THE
CUSTOMER
Our actions
always support
our social purpose
BEING
ALWAYS
ADAPTIng
Being agile,
resilient and
embracing change
COLLABORATIVE
Working together
to achieve our
shared goals
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54 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
RELATIONSHIPS WITH STAKEHOLDERS
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 on page 56.
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.
LINK TO STRATEGIC PRIORITIES
1.
5.
2.
3.
• Engage directly when we provide regulated financial advice, guidance and
other forms of assistance and customer service;
• Engage indirectly via financial intermediaries and other organisations such
as pension schemes and corporates; and
• 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 on its promises;
• Advice they can trust;
• Good value for money;
• Product differentiation;
• Quality of service delivered; and
• 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;
• Continue 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; and
• 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.
• Convene industry events to bring together trustees, advisers and subject
• An insured solution that offers certainty for trustees
• Ongoing development of strong asset sourcing capability that delivers pricing advantage;
matter experts to encourage dialogue and share knowledge;
and security for members;
• Selectively participate in bulk annuity tenders and deploy our innovative defined benefit partnering solution to
• Hold individual meetings to understand the specific challenges facing
• Financial strength and strong counterparty;
preserve capital and help maintain our secure counterparty credentials;
pension scheme trustees; and
credentials that deliver security for advisers, trustees
• Regular attendance at client trustee board meetings to update them on their Just Buy-in assets;
• Commission surveys and other research to listen to feedback from
and their members;
• Hosted a wide range of events to share knowledge; and
trustees and advisers.
• Reputation of the Company and service quality;
• Offer a bulk quotation service to provide early visibility of insurer pricing.
LINK TO STRATEGIC PRIORITIES
2.
4.
3.
COLLEAGUES
The team of colleagues at Just who deliver
outstanding service to customers and to the
people who support those that deliver the services.
• Directly, day-to-day through line management and by using a variety
• The Group having a clear vision and purpose;
• CEO quarterly briefing sessions for all colleagues to reiterate Just’s purpose and provide a business update on key
of communication channels; and
• Gather feedback using a range of techniques such as structured
surveys and through more informal channels.
LINK TO STRATEGIC PRIORITIES
1.
5.
4.
2.
INVESTORS
The equity and debt investors who invest the
capital to finance the business.
• Direct meetings with members of the Board;
• Annual General Meeting and results presentations;
• Shareholder communications; and
• Regular news updates on the business and industry topics.
• Access to the defined benefit de-risking market for
smaller transactions;
• Policyholder experience and service quality; and
• A secure asset portfolio with ESG and sustainability
at its heart.
• A brilliant employee experience;
• A listening culture to share views;
initiatives to deliver our strategic priorities the Just Way and help people achieve a better later life;
• Non-Executive Director engagement with colleagues to bring their voice into the boardroom;
• Having the opportunity to grow and develop;
• Informal Executive sessions with colleagues to discuss matters that are important to them;
• Diversity, equity, inclusion and belonging initiatives;
• Employee engagement surveys and action planning at a Group, functional and local level;
• Wellbeing;
• Hybrid working; and
• 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
• Strong community and environmental credentials.
culture at Just, for example through events as part of National Inclusion Week and Belonging at Just Week;
• Offer support and guidance for our colleagues built around mental, physical, social and financial wellbeing;
• Continue with a hybrid way of working to encourage collaboration and innovation, and to sustain Just’s culture;
• Provide volunteering opportunities to make a positive impact in our local communities; and
• Encourage sustainability initiatives through Pawprint, an app to support colleagues reduce their carbon footprint.
• Deliver a sustainable business model;
• Held meetings with shareholders to engage on Just’s performance and strategic developments, and to discuss
• Returns on investment;
any issues or concerns;
• Scheduled interest payments and managing the
• Held seminars for investors and potential investors to discuss areas such as Just’s Defined Benefit de-risking
capital base prudently;
strategy and the Group’s investment strategy, with webcasts published on our website;
• Business performance and executing on
• Further refined our strategy with clear, specific goals driven by appropriate priorities;
opportunities available; and
• Regional roadshows and attendance at multiple investor conferences, including outside of the UK;
• Operate in a socially responsible and
• Payment of dividends to shareholders; and
sustainable manner.
• Continued our focus on refreshment of the Board.
LINK TO STRATEGIC PRIORITIES
1.
3.
5.
REGULATORS
Organisations who regulate the conduct of
firms and their financial stability.
• Direct meetings with members of the Board and the Executive
• Board and senior management understand the
• Continue to respond to regulators in a timely and constructive manner and engage directly on any key regulatory
and Senior leadership teams;
• Written responses to consultation documents; and
• Participation in workshops directly with regulators and via
trade associations.
regulatory objectives, and seek to ensure good
matters and thematic reviews;
consumer outcomes are achieved and policyholder
• Implemented plans to ensure that the FCA Consumer Duty requirements are met and that customers receive
commitments are met;
good outcomes;
• A culture that supports adherence to the spirit and
• Active participation in policy development directly with regulators and via trade bodies; and
letter of regulatory rules and principles;
• Timely preparation and filing of regulatory returns.
LINK TO STRATEGIC PRIORITIES
2.
3.
5.
SUPPLIERS
The companies providing the services, materials and
resources to enable Just to operate the businesses in
the Group.
LINK TO STRATEGIC PRIORITIES
1. 3.
COMMUNITY AND THE ENVIRONMENT
Our peers, civic society and the later life financial
advice communities who we engage with and the
wider environment.
LINK TO STRATEGIC PRIORITIES
1.
5.
4.
2.
• Foster open and transparent communications with
our regulators; and
• Positive engagement to encourage effective
competition and consumer protection which results
in better customer outcomes.
• Regular performance reviews enable all parties to understand expectations
• Collaborative relationships with open, honest
• Our procurement and outsourcing policy ensures that tender processes are fair and transparent, and all suppliers
and support each other to optimise delivery;
• Written feedback following each tender process to explain the outcomes;
• Conflicts of interest checks, ensuring advantages are not gained through
personal relationships; and
and transparent communications;
receive feedback on submissions. All suppliers are expected to adhere to relevant legislation and regulatory
• Fair, transparent and objective process and
regimes, and to act ethically and with integrity. Risk-based profiling ensures all suppliers receive the relevant
evaluation criteria when bidding for new
level of governance oversight and interaction with Just;
business; and
• Clearly defined performance metrics are agreed with our key suppliers at the outset to measure
• Sanctions screening, ensuring that Just and its suppliers are free from
• Fair payment terms which are consistently
ongoing success; and
financial crime risk.
met within deadlines.
• Supplier Code of Conduct: A regulatory obligation for Just to make new suppliers aware of relevant internal policies.
• Partnership with charities supporting local communities and
• Offering 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; and
• 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;
• Continued partnership with Hourglass, a national charity whose mission is to end the harm, abuse and
• Support fundraising efforts in local
exploitation of older people in the UK;
communities; and
• leave a responsible footprint.
• Continue to make progress to reach our carbon net zero targets; and
• Continued partnership with EcoTree, a sustainable forestry management company, to plant trees, as one of our
sustainability initiatives.
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STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 55
STRATEGIC PRIORITIES
1.
1.
Grow through innovation
2.
2. Transform how we work
Transform how we work
3.
Get closer to our
customers and partners
4.
5.
Be proud to work at Just
Grow sustainably
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 assistance and customer service;
• Engage indirectly via financial intermediaries and other organisations such
as pension schemes and corporates; and
• 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 on its promises;
• Advice they can trust;
• Good value for money;
• Product differentiation;
• Quality of service delivered; and
• 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;
• Continue 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; and
• Offer Destination Retirement, a financial planning service that provides tailor-made advice to individuals
approaching or transitioning into retirement after work.
• Convene industry events to bring together trustees, advisers and subject
• An insured solution that offers certainty for trustees
matter experts to encourage dialogue and share knowledge;
and security for members;
• 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
• Hold individual meetings to understand the specific challenges facing
• Financial strength and strong counterparty;
preserve capital and help maintain our secure counterparty credentials;
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; and
• A secure asset portfolio with ESG and sustainability
at its heart.
• The Group having a clear vision and purpose;
• A brilliant employee experience;
• A listening culture to share views;
• Having the opportunity to grow and develop;
• Diversity, equity, inclusion and belonging initiatives;
• Wellbeing;
• Hybrid working; and
• Strong community and environmental credentials.
• Deliver a sustainable business model;
• Returns on investment;
• Scheduled interest payments and managing the
capital base prudently;
• Business performance and executing on
opportunities available; and
• Operate in a socially responsible and
sustainable manner.
• Board 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
letter of regulatory rules and principles;
• Foster open and transparent communications with
our regulators; and
• Positive engagement to encourage effective
competition and consumer protection which results
in better customer outcomes.
• 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; and
• Offer a bulk quotation service to provide early visibility of insurer pricing.
• CEO quarterly briefing sessions for all colleagues to reiterate Just’s purpose and provide a business update on key
initiatives to deliver our strategic priorities the Just Way and help people achieve a better later life;
• Non-Executive Director engagement with colleagues to bring their voice into the boardroom;
• Informal Executive sessions with colleagues to discuss matters that are important to them;
• Employee engagement surveys and action planning at a Group, functional and local level;
• 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, for example through events as part of National Inclusion Week and Belonging at Just Week;
• Offer support and guidance for our colleagues built around mental, physical, social and financial wellbeing;
• Continue with a hybrid way of working to encourage collaboration and innovation, and to sustain Just’s culture;
• Provide volunteering opportunities to make a positive impact in our local communities; and
• Encourage sustainability initiatives through Pawprint, an app to support colleagues reduce their carbon footprint.
• Held meetings with shareholders to engage on Just’s performance and strategic developments, and to discuss
any issues or concerns;
• Held seminars for investors and potential investors to discuss areas such as Just’s Defined Benefit de-risking
strategy and the Group’s investment strategy, with webcasts published on our website;
• Further refined our strategy with clear, specific goals driven by appropriate priorities;
• Regional roadshows and attendance at multiple investor conferences, including outside of the UK;
• Payment of dividends to shareholders; and
• Continued our focus on refreshment of the Board.
• Continue to respond to regulators in a timely and constructive manner and engage directly on any key regulatory
matters and thematic reviews;
• Implemented plans to ensure that the FCA Consumer Duty requirements are met and that customers receive
good outcomes;
• Active participation in policy development directly with regulators and via trade bodies; and
• Timely preparation and filing of regulatory returns.
• Regular performance reviews enable all parties to understand expectations
• Collaborative relationships with open, honest
• Our procurement and outsourcing policy ensures that tender processes are fair and transparent, and all suppliers
and transparent communications;
• Fair, transparent and objective process and
evaluation criteria when bidding for new
business; and
• Fair payment terms which are consistently
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 governance oversight and interaction with Just;
• Clearly defined performance metrics are agreed with our key suppliers at the outset to measure
ongoing success; and
met within deadlines.
• Supplier Code of Conduct: A regulatory obligation for Just to make new suppliers aware of relevant internal policies.
• Offering support and information to help
individuals transition from work to retirement;
• Providing support for vulnerable customers;
• Support fundraising efforts in local
communities; and
• leave a responsible footprint.
• 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;
• Continued partnership with Hourglass, a national charity whose mission is to end the harm, abuse and
exploitation of older people in the UK;
• Continue to make progress to reach our carbon net zero targets; and
• Continued partnership with EcoTree, a sustainable forestry management company, to plant trees, as one of our
sustainability initiatives.
PENSION SCHEME TRUSTEES/EMPLOYEE
BENEFIT CONSULTANTS
Individuals accountable for securing good
outcomes for pension scheme members and clients.
• Commission surveys and other research to listen to feedback from
pension scheme trustees; and
trustees and advisers.
COLLEAGUES
The team of colleagues at Just who deliver
outstanding service to customers and to the
people who support those that deliver the services.
• Directly, day-to-day through line management and by using a variety
of communication channels; and
• Gather feedback using a range of techniques such as structured
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;
• Annual General Meeting and results presentations;
• Shareholder communications; and
• Regular news updates on the business and industry topics.
REGULATORS
Organisations who regulate the conduct of
firms and their financial stability.
• Direct meetings with members of the Board and the Executive
and Senior leadership teams;
• Written responses to consultation documents; and
• Participation in workshops directly with regulators and via
trade associations.
SUPPLIERS
the Group.
The companies providing the services, materials and
resources to enable Just to operate the businesses in
and support each other to optimise delivery;
• Written feedback following each tender process to explain the outcomes;
• Conflicts of interest checks, ensuring advantages are not gained through
• Sanctions screening, ensuring that Just and its suppliers are free from
personal relationships; and
financial crime risk.
COMMUNITY AND THE ENVIRONMENT
Our peers, civic society and the later life financial
advice communities who we engage with and the
wider environment.
• Partnership with charities supporting local communities and
the environment;
• Engage with the financial advice community; and
• Participate in sustainability initiatives.
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56 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
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:
a. the likely consequences of any decision in the long term
b. the interests of the Company’s employees
c.
d.
e.
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
f.
the need to act fairly between members of the Company
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EXAMPLES OF MATTERS THE BOARD HAS REGARD TO
Strategic Report
S172 FACTOR
LONG TERM
COLLEAGUES
BUSINESS
RELATIONSHIPS
– SUPPLIERS
AND CUSTOMERS
• Company’s purpose;
• Strategy;
• Business model;
• Key stakeholders;
• Risks including emerging risks; and
• Regulatory framework.
• Colleague engagement;
• Diversity, equity, inclusion and
belonging;
• Education and training;
• Hybrid working; and
• Wellbeing.
• Anti-bribery and anti-corruption;
• Modern slavery;
• Responsible payment practices;
• Consumer Duty; and
• Vulnerable customers.
COMMUNITY AND
ENVIRONMENT
• Community programme;
• Charity partnerships;
• Climate change and environmental
impact; and
• Sustainable investments.
HIGH STANDARDS
OF BUSINESS
CONDUCT
• Just Group brand;
• Culture and values;
• Awards and recognition;
• Internal controls; and
• Whistleblowing.
INVESTORS
• Shareholder engagement;
• General meetings;
• Education initiatives; and
• Dividend policy.
The Board has regard to all of our stakeholders when developing and executing our
long-term strategy. Our business model is reviewed at least annually taking into
consideration our Company’s purpose, strategy, key stakeholders, 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 teams have been key strategic focus areas for the Board during 2023.
Our Colleagues and culture report on pages 50 to 53 details Just’s commitment to
colleagues’ interests, diversity, equity, inclusion, belonging, colleague engagement,
education and training, hybrid working and wellbeing.
The Board is committed to fostering the Company’s business relationships with
suppliers, customers and other stakeholders. Pages 54 and 55 detail 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. We ensure all supplier-related activity is managed in line with ethical
business practice with regard to anti-money laundering, anti-bribery and corruption,
whistleblowing and anti-slavery and human trafficking laws.
The Board is responsible for the oversight of implementation plans by relevant business
areas to ensure that the Consumer Duty requirements are met and that customers
receive good outcomes. Ensuring the fair treatment of vulnerable customers also
continues to be an important area of focus for the Board. Further information on
our focus on supporting vulnerable customers can be found on page 63.
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 and provide support to its corporate charity
partner, Hourglass, as summarised in the Colleagues and culture report. Just also
encourages colleagues to participate in a range of volunteering activities that are
aligned to our purpose of helping people achieve a better later life by entitling every
colleague to one day’s paid leave for volunteering purposes per year.
Following the adoption of Just’s sustainability strategy by the Board, a number of
initiatives have been developed to deliver the Group’s sustainability ambitions,
which includes leaving a responsible footprint. Pages 40 to 49 outline 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 actively listens to our 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. The Group Risk and Compliance
Committee receives bi-annual reports on risk culture including key themes requiring
further attention. Everything Just and our colleagues do should be delivered
sustainably and is underpinned by our four behavioural principles of for our customers,
dynamic, always adapting, and collaborative, 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
ensures there is sufficient oversight of the management of the systems of internal
control and provides regular updates to the Board on how this is achieved.
The Group Audit Committee reviews and approves the Group’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. Our Annual General Meeting provides another
opportunity for investors to meet with our Directors. See pages 54 and 55 for the
various ways in which we engage with our different investor groups. Following a review
of the dividend policy, the Board concluded to recommend dividend payments in 2023.
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58 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
SECTION 172 STATEMENT
– EXAMPLES OF DECISIONS TAKEN 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
MATTER
CONSIDERED
WHAT WE DID
TRANSFORM
HOW WE WORK
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 2023
which had been updated to include a measurable and deliverable goal for each
business area. The Board took into consideration the needs and expectations of
customers and colleagues in the decision making process in addition to its
long-term goals and sustainability initiatives.
S172 FACTOR/
KEY STAKEHOLDERS
Long term, high standards
of business conduct,
colleagues, customers,
environment
The key growth dependencies included enabling scalability of the Defined Benefit
(“DB”) business to achieve our growth ambitions, modernising business processes
and technology to future proof our business, further embedding the sustainability
strategy, and enhancing the value and suitability of what we can offer to our
customers. The Board has committed to invest in transformation and operational
improvements across all business areas to enable the Group to create a business
that can scale without adding significant cost. The positive impact on our trustees
and customers experience, and enhancements to the quality of our service have
been key focus areas for this programme of activity.
The Directors have provided oversight on these initiatives and regular status
updates were received at Board and Board Committee meetings. The Finance
transformation project has been one of the key focus areas during the year, with
a number of initiatives implemented including a new General ledger and Treasury
system. The Group Audit Committee has been responsible for oversight of the
progress with a number of discussions held during the year to specifically focus
on this project.
A key strategic focus area previously 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. Following the
introduction of key risk indicators (“KRIs”) in 2022, the Group Risk and Compliance
Committee now receives bi-annual reports on KRIs of the risk culture.
Diversity, Equity, Inclusion and Belonging (“DEIB”) is a key focus area for the Directors
both at Board level and the wider workforce, and is aligned to the DEIB Policy which is
approved annually by the Board. The Board considered and supported a number of
key initiatives for 2023 and beyond. Further information on such initiatives can be
found in the colleagues and culture report on pages 50 to 53.
During the year, colleagues were invited to attend a series of engagement sessions
with Non-Executive Directors branded as “Take on Board”. At all sessions, colleagues
had the opportunity to provide feedback and ask questions on any matters of
interest to give the Directors visibility of any topics which required the attention of
the Board. In addition to taking part in the engagement sessions, Michelle Cracknell,
the designated lead Non-Executive Director on employee engagement, regularly
engaged with the Group Chief People Officer on colleagues, culture and wellbeing
matters, and fed back to the Board outcomes from those discussions.
Colleagues
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.
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AREA OF
DECISION
STRATEGY
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 59
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.
S172 FACTOR/
KEY STAKEHOLDERS
Long term, investors
and customers
Long term, Investors
Long term, Investors
The Board considered Just’s strategy and agreed on goals for 2023 and beyond,
driven by appropriate priorities to fulfil its purpose of helping people achieve a
better later life. The Group remains focused on achieving its growth ambitions,
building a sustainable capital model and reaching its environmental
sustainability targets.
Key actions by the Group during the year included:
• delivering major milestones within the defined benefit (“DB”) business including
the securing of new reinsurance counterparties and upgrading the DB pricing
platform to enable an increased number of priced deals each month;
• the model of Just’s pioneering automated financial advice and integrated
retirement service, Destination Retirement, was adjusted to enable the
provision of guidance and support to customers who need help to structure
their financial plans for life after work at a much earlier stage in life (from age
45 up). The new developments have significantly broadened the relevance of
the offering to a much wider population and positions Destination Retirement
as the UK’s premier customer facing platform for retirement consolidation,
guidance, and advice;
• from 11 September 2023, as part of becoming a greener business, the Green
Mortgage discount applied to our entire Just For You lifetime Mortgage (“lTM”)
range, with the discount extended to include properties with C-rated Energy
Performance Certificates (“EPC”). Extending the offering to our customers is
another step in helping us meet our sustainability goals of reaching net zero by
2050 and halving our emissions by 2030, as our lTM portfolio forms part of our
scope 3 emissions;
• continued investment in environmental, social, and corporate governance
(“ESG”) related assets with over £300m invested in social housing, the
renewable energy industry, and public health care facilities at NHS University
Hospital Southampton; and
• progressed plans to expand our Secure lifetime Income proposition onto an
additional platform in 2024.
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.
As part of the Board’s considerations for the payment of a final dividend for
the year ended 31 December 2022, the Board assessed the affordability and
sustainability of a dividend with regard to the solvency position, business
performance, liquidity of the business across the plan period and reviewed the
outcome of various stress tests. The Board also considered the impact of the
dividend decision on shareholder expectations as it relates to the Group’s dividend
policy. Following due consideration of the various matters, the Board declared a
final dividend of 1.23 pence per share which was paid to shareholders in May 2023.
An interim dividend of 0.58 pence per ordinary share was declared, which was
paid to shareholders in October 2023.
Just’s Directors’ Remuneration policy (the “Policy”) was previously approved at the
2020 Annual General Meeting (“AGM”) and had remained in place for three years.
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 longer-term strategic objectives and emerging
best practices. The Remuneration Committee Chair also engaged with our largest
shareholders to listen and reflect on their views in 2023 prior to finalising the
proposed new Policy. On 9 May 2023, the new Policy was approved by
shareholders at the 2023 AGM.
DIVIDEND
AND CAPITAL
MANAGEMENT
The Board considered
the long-term impact
of payment of
dividends on the
Group’s liquidity and
solvency positions.
REMUNERATION The Remuneration
Committee reviewed
the Directors’
remuneration policy.
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60 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
SECTION 172 STATEMENT
– EXAMPLES OF DECISIONS TAKEN DURING THE YEAR continued
AREA OF
DECISION
MATTER
CONSIDERED
WHAT WE DID
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
and approved the first
reported results under
IFRS 17, the new
insurance accounting
standard and the
impact on key
stakeholders.
CONSUMER DUTY The Board considered
the Group’s position
in relation to the
FCA’s Consumer Duty
requirements and
was satisfied that
the Group was in a
place of substantive
compliance by the
Phase 1 deadline set
by the FCA.
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 annually by the
Board. The Modern Slavery Statement can be found on the Company’s website
www.justgroupplc.co.uk.
S172 FACTOR/
KEY STAKEHOLDERS
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. A key consideration was to ensure stakeholders
including investors, regulators and the external auditor understood the changes
to financial reporting and the associated impact to the Group.
High standards of
business conduct,
investors
The Group Audit Committee has been responsible for oversight of the
implementation and providing comfort to the Board with the progress made.
In 2023, the Board considered and approved the first reported results under
IFRS 17, which included a modification to a number of the Group’s key
performance indicators.
Further information on the key performance indicators can be found in the
Group Audit Committee report on page 94.
The FCA’s rules for a new Consumer Duty sets higher and clearer standards
of consumer protection across the financial services and requires firms to put
customers’ needs first. Following an initial scope of the business against the
requirements of the Duty, the Board approved Implementation Plans for the
Retail, HUB and DB businesses in October 2022 which, together with a milestone
plan considered by the Board in March 2023, set out a number of programme
milestones to complete by 31 July 2023, the Phase 1 deadline set by the FCA for all
businesses to be in a place of substantive compliance. The Board received regular
updates from the Project team on the progress made against the implementation
plan and concluded that they were satisfied the Group was in substantive
compliance with the regulation. A further road map was developed for the
delivery of Phase 2, which requires all firms to be in full compliance by
31 July 2024. There is continued dialogue with the lead Non-Executive Director
responsible for Consumer Duty, Michelle Cracknell, and an updated Conduct
and Customer Risk dashboard is presented to the Group Risk and Compliance
Committee on a quarterly basis to ensure that the information flow through
to the Board remains appropriate.
High standards of
business conduct,
customers, suppliers
and partners
PURCHASE OF
LONG-DATED
GILTS
The Board considered
the impact of interest
rate movements to
the Group’s Solvency
II position, and
approved the
purchase of £2.5bn
long-dated gilts.
During the year, the Board considered the impact of the interest rate movements
to the Group’s Solvency II position. Historically, hedges to protect interest rate
exposure in our Solvency II position have created volatility in IFRS profit before
tax as interest rates moved. However, a revised hedging strategy during 2022 and
2023, including approval by the Board of a purchase of £2.5bn long dated gilts held
at amortised cost under IFRS, has removed the IFRS exposure whilst significantly
containing our Solvency II sensitivity to future interest rate movements.
Long term
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NON-FINANCIAL AND SUSTAINABILITY INFORMATION STATEMENT
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 61
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 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.
SUSTAINABILITY KEY PERFORMANCE INDICATORS
Just has set the following key performance indicators and targets
as part of its Sustainability strategy:
• Amount invested in eligible green and social assets. Target: invest
£825m in green and social assets over 2023 to 2025.
• level of Scope 1, 2 and business travel emissions. Target: achieve
net zero in our operations Scope 1, 2 and business travel by 2025.
• level of Scope 3 emissions. Target: 50% reduction of our overall
Scope 3 emissions by 2030.
• An overall target to operate as a net zero business by 2050.
Progress towards these targets is included on pages 34 to 35.
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. Our Group policy framework is
designed to ensure that all policies collectively demonstrate how
all core risks to the business are effectively controlled.
The information below outlines Just’s material areas of impact relating to environmental matters and climate-related disclosures, social
matters, colleagues, anti-bribery and anti-corruption matters and respect for human rights, which are in scope of the reporting requirements
contained in the Companies Act 2006.
ENVIRONMENTAL MATTERS AND CLIMATE-RELATED DISCLOSURES
MATERIAL AREAS OF IMPACT
RELEVANT POLICIES AND FRAMEWORKS
• Deliver net zero targets
• Manage climate issues
• Carbon performance, metrics
and targets
• Responsible resource use –
water and energy use,
air emissions
Responsible Investment framework A framework used by our Investment team. Refer to our Sustainable
investment strategy report on pages 36 to 39.
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.
TCFD disclosure framework Refer to our Sustainability strategy: TCFD disclosure framework report
on pages 40 to 49.
DUE DILIGENCE AND OUTCOMES OF OUR POLICIES ON OUR MATERIAL AREAS OF IMPACT
The direct impact of our operations on the environment is relatively low.
We have reduced the carbon footprint of our operations by 82% since
2019 (market based) and the remaining carbon is from business travel,
and small electricity and gas emissions from our office in Reigate.
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. Our london office building has won
awards for its low environmental footprint and work is underway to
reduce the carbon footprint in our other office locations.
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.
The Group continues to invest in green and sustainable projects as part
of our commitment to deliver our net zero targets. 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.
Colleagues were asked to complete a commuting and home working
survey to help measure our impact on the planet. The Company
supports sustainable travel arrangements through a number of
initiatives, including a cycle to work scheme, and employees are
encouraged to use sustainable modes of transport for work-related
travel, where possible.
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NON-FINANCIAL AND SUSTAINABILITY INFORMATION STATEMENT continued
SOCIAL MATTERS
MATERIAL AREAS OF IMPACT
RELEVANT POLICIES AND FRAMEWORKS
• Deliver net zero targets
• Partnership with charities
and volunteering initiatives
• Support local communities
• Support vulnerable
customers
• Responsible approach to tax
Sustainability strategy Refer to our Sustainability strategy: TCFD disclosure framework report.
Conduct and customer risk framework Sets out the framework of principles, systems and controls around
the management of conduct and customer risk by the Group and encompasses regulatory requirements
such as integrity, market conduct, customer interests and communication including the treatment of
vulnerable customers, skill, care and diligence, and conflicts of interest.
Tax strategy Summarises our approach to tax affairs. Available to view on our website at
www.justgroupplc.co.uk.
DUE DILIGENCE AND OUTCOMES OF OUR POLICIES ON OUR MATERIAL AREAS OF IMPACT
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
continued to support our charity partner, Hourglass. Further details of the
charity can be found in our Colleagues and culture report. We supported
colleague fundraising (half matching each colleagues’ funds up to £500).
We also encouraged colleagues to take part in a range of volunteering
activities, including mentoring female students from underprivileged
backgrounds who need support into STEM subjects (Sciences, Technology,
Engineering and Mathematics) to successfully attain roles in businesses
such as ours. We provide helpful tips and guidance on our website,
www.wearejust.co.uk, on topics relating to retirement and the events
that can impact finances in retirement such as inheritance tax and
writing a will. For further information about our social activities and
the impacts, see our Colleagues and culture report.
COLLEAGUES
MATERIAL AREAS OF IMPACT
RELEVANT POLICIES AND FRAMEWORKS
• Culture and ethics
• Health and safety
• Diversity, equity, inclusion
and belonging
• Rewards and benefits
• Training and career
development
• Wellbeing
Board diversity, equity, inclusion and belonging policy Refer to page 89
Diversity and conscious inclusion policy Provides the framework within which we promote equality
of opportunity, inclusive behaviours and diversity across the business.
Capability policy Sets out the Company’s approach when dealing with cases of unsatisfactory
performance and long-term incapacity.
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 and customer risk framework Refer to “social matters” above.
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.
DUE DILIGENCE AND OUTCOMES OF OUR POLICIES ON OUR MATERIAL AREAS OF IMPACT
Ensuring we have the right capabilities for today and the future,
delivering a brilliant employee experience and enhancing the skills of our
people managers are key strategic people priorities. The Group’s Diversity,
Equity, Inclusion and Belonging (DEIB) strategy continues to focus on
six areas: gender, ethnicity, disability and neurodiversity, social mobility,
sexual orientation and older workers. Our progress against our DEIB
strategy and targets is underpinned by a range of initiatives, which
are outlined in our Colleagues and culture report. The Board sponsor
for DEIB is the Group Chief Executive Officer.
There is an active programme to improve Board diversity in accordance
with the Board diversity, equity, inclusion and belonging policy. Further
information on this policy and the steps taken to improve Board diversity
can be found in the Nomination and Governance Committee report.
As a signatory to the Race at Work Charter, we are meeting our updated
commitment that at least 18% of our senior leaders are from a Black,
Asian, and minority ethnic background by the end of 2026. At present,
19% of our senior leaders are from a Black, Asian or minority ethnic
background. We have published our ethnicity pay gap report alongside
our gender pay gap report. This report shows no significant mean pay gap
and our median pay gap is 20% in favour of colleagues from a Black,
Asian or minority ethnic background.
We continued to provide 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. Further
information on our wellbeing initiatives can be found in our Colleagues
and culture report.
Gender diversity across senior roles has increased this year by three
percentage points to 33%. As such, we have achieved our target as a
signatory to the Women in Finance Charter that 33% of senior leaders
will be female by the end of 2023. We have now updated our target to
40% by the end of 2026. Our gender pay gap remained broadly the same,
from 31.0% in April 2022 to 31.3% in April 2023. Further details can be
found in our gender pay gap report at www.justgroupplc.co.uk.
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 mandatory training, encourage colleagues
to report any wrongdoing. All such reports are fully investigated and
appropriate remedial actions are taken.
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ANTI-BRIBERY AND ANTI-CORRUPTION MATTERS
MATERIAL AREAS OF IMPACT
RELEVANT POLICIES AND FRAMEWORKS
• 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 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.
DUE DILIGENCE AND OUTCOMES OF OUR POLICIES ON OUR MATERIAL AREAS OF IMPACT
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 Board. Repeated failure to complete the training
is a disciplinary matter.
RESPECT FOR HUMAN RIGHTS
MATERIAL AREAS OF IMPACT
RELEVANT POLICIES AND FRAMEWORKS
• Reinforce an ethical
business culture
• Speak up against
wrongdoing
• Approach to human rights
and modern slavery
• Support vulnerable
customers
Modern slavery statement Sets out our policies and processes to combat modern slavery in all its forms.
It is 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 and customer risk framework Refer to “Social Matters” above.
Whistleblowing policy Refer to “Colleagues” above.
DUE DILIGENCE AND OUTCOMES OF OUR POLICIES ON OUR MATERIAL AREAS OF IMPACT
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. We conduct due
diligence on potential suppliers, impose obligations on those suppliers,
and monitor their compliance with those obligations. Our modern slavery
statement available on our Group website provides further information.
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 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 conduct
and customer risk framework 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.
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), colleagues, customers, suppliers
and other stakeholders. Our Risk team manages the Group’s Risk Policy
Framework. The framework comprises three Group Risk policies and
underlying company risk policies.
Each policy has a policy owner and an executive sponsor, who review and
approve 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 Risk policies with details of all
underlying company risk 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 Risk 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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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.
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 AND CONTROL
• An established risk and
control environment
2nd LINE
OVERSIGHT FUNCTIONS
Oversight functions in the Company, such as
Risk Management and Compliance, support
the Board in setting risk appetite and
defining risk and compliance policy.
RISK AND 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
3rd LINE
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 AND CONTROL
• Provide independent challenge
and assurance
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 65
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 65
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.
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 identification, measurement, management, monitoring,
and reporting. 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.
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.
Reporting on climate risk is being integrated into the Group’s
regular reporting processes, which will continue to 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 assessments made, 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 potential 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.
The resilience of the Group’s capital position is tested under a range
of adverse stresses and scenarios. These include testing against
Group risk appetites, severe stresses and specific scenarios which
reflect the Group’s exposures to risks. The factors stressed include
UK residential property prices, house price inflation, the credit quality
of assets, mortality rates and trends and interest rates. Scenarios
include a run-off scenario where the Group is closed to new business,
liquidity scenarios, and a scenario of the worst case outcome
peppercorn rent from the Government consultation regarding
restriction of ground rent for existing residential leases.
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.
Quantification of the financial impact of climate risk is subject to
significant uncertainty. Climate-related transition and physical risks
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 both methodologies and data quality improve.
In addition, as part of the viability assessment after severe shocks,
an extreme property stress test is considered including severe
property price falls coupled with long-term zero HPI. 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 identification, disclosure and management of climate-related risks
and broader sustainability risks are embedded within Just’s Enterprise
Risk Management Framework. This includes climate-related scenario
analysis, based on Network for Greening the Financial System scenarios,
which is a key tool for ensuring we have a deep understanding of the
risks the Group faces over a long-term time horizon.
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 an important 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, and conduct, operational and market
risk developments, to keep the Board appraised of the Group’s
evolving risk profile.
In this case, even if the Group ceases to write new business and is
subject to such scenarios the Group would still be expected to remain a
going concern and able to meet its liabilities as they fall due 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 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.
66 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
PRINCIPAL RISKS AND UNCERTAINTIES
Risks and uncertainties are presented in this report in
two separate sections: (1) the first section summarises
the Group’s ongoing core risks and how they are managed
in business as usual; and (2) the second section calls out
the risk outlook for subjects that are evolving and are
of material importance from a Group perspective.
STRATEGIC
PRIORITIES
1.
2.
3.
4.
5.
Grow through innovation
Transform how we work
Get closer to our customers and partners
Be proud to work at Just
Grow sustainably
ONGOING PRINCIPAL RISKS
RISK
A
MARKET RISK
STRATEGIC
PRIORITIES
1. 5.
B
CREDIT RISK
STRATEGIC
PRIORITIES
1. 3. 5.
C
INSURANCE RISK
STRATEGIC
PRIORITIES
1. 3. 5.
D
LIQUIDITY RISK
STRATEGIC
PRIORITIES
1. 3. 5.
E
CONDUCT AND
OPERATIONAL RISK
STRATEGIC
PRIORITIES
1. 2.
3.
4.
5.
f
STRATEGIC RISK
STRATEGIC
PRIORITIES
1. 2.
3.
4.
5.
HOW WE MANAGE OR MITIGATE THE 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 that allows preferred equity to be held.
• Premiums are invested to match asset and liability cash flows as closely
as practicable;
• Market risk exposures are managed within pre-defined limits aligned to risk
appetite for individual risks;
• Exposure is managed using regulatory and economic metrics to achieve desired
financial outcomes;
• Balance sheet is 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.
Arises if another party fails to perform its financial
obligations to the Group, including failing to perform
them in a timely manner.
• Investments are restricted to permitted asset classes and concentration limits;
• Credit risk exposures are monitored in line with credit risk framework, driving
corrective action where required;
Arises through exposure to longevity, mortality,
morbidity risks and related factors such as levels
of withdrawal from lifetime mortgages and
management and administration expenses.
• External events that could impact credit markets are tracked continuously;
• Credit risks from reinsurance balances are 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 are maintained over insurance risks related to product development
and pricing;
• Approved underwriting requirements are adhered to;
• Medical information is 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 approve assumption used; and
• Regular monitoring, control and analysis of actual experience and expense
levels is conducted.
The risk of insufficient suitable assets available
to meet the Group’s financial obligations as they
fall due.
• Stress and scenario testing and analysis is conducted: including collateral
margin stresses, asset eligibility and haircuts under stress;
• Corporate collateral capacity to reduce liquidity demands and improve our
Arise from 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.
Arises from the choices the 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.
liquidity stress resilience is monitored;
• Risk assessment reporting and risk event logs inform governance and enable
effective oversight; and
• Contingency funding plan is maintained with funding options and process for
determining actions.
•
Implement policies, controls, and mitigating activities to keep risks
within appetite;
• Oversee risk status reports and any actions needed to bring risks back
within appetite;
• Scenario-based assessment is in place to establish the level of capital needed
for conduct and operational risks;
• Monitor conduct and customer risk indicators and their underlying drivers
prompting action to protect customers;
• Conduct risk management training and other actions to embed regulatory
changes; and
• Ensure 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.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 67
JUST’S EXPOSURE TO RISK
OUTLOOK AND HOW WE MANAGE OR MITIGATE THE RISK
Just monitors and assesses regulatory
developments for their potential impact 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.
The matching adjustment and Solvency II reform is of key
importance to Just’s business model.
In September 2023, the PRA issued its first substantive consultation
on the detail of its proposed changes to the matching adjustment
(MA). Subject to the government’s legislative timetable and responses
to the consultation, the PRA plans to publish final policy and rules on
the MA during Q2 2024 with an effective date of 30 June 2024, with
all other changes relating to the Solvency II review taking effect on
31 December 2024. Whilst greater clarity has now been provided, the
potential impact of the changes will not be completely understood
until the final details have been agreed and full details of their
implementation are known in 2024.
The Group has limited Funded Reinsurance and that which it has is
collateralised with awareness of the recapture risks and correlated
risks the PRA is concerned with in CP 24/23. The Group will evaluate
the changes required as a result of the final supervisory statement
and if required make changes to its approach.
The FCA’s rules for a new consumer duty sets higher and clearer
standards for consumer protection across financial services and
require firms to put customers’ needs first. The Duty applied to new
and existing products and services that are open to sale (or renewal)
from 31 July 2023. Just achieved substantive compliance with the
requirements in line with the timescales provided by the FCA. Work
is in progress to apply the requirements to products and services in
closed books by 31 July 2024, and completion of these works will
form part of the required annual Board report.
Following the PRA and FCA regulations on operational resilience from
March 2022, Just identified its most important business services and
set impact tolerances for each. These are subject to regular scenario
testing and an annual self-Assessment is prepared for Board approval.
Just continues to evolve its operational resilience capability through
the pillars that support the delivery of business services.
On 9 November 2023, the Government published a consultation
seeking views on capping the maximum ground rent that
residential leaseholders can be required to pay in England
and Wales. The consultation set out five options including
capping ground rents at a peppercorn (essentially zero). The
Group invests in loans secured on residential ground rents as
part of its investment portfolio, and if the consultation results
in a reduction in future cash flow from ground rents, the security
and/or value of the loans will be reduced, in some cases materially.
For more information on the Group’s exposure to residential ground
rents see page 32.
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 and scenario 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)
(ii)
transition risk – such as potential government
policy changes related to the energy efficiency
of residential properties;
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.
Just is proactive in pursuing its sustainability responsibilities and
recognises the importance of its social purpose. We have set targets
for Scope 1, 2 and business travel to be carbon net zero by 2025.
For emissions from our Scope 3 emissions including our investment
portfolio, properties on which lifetime mortgages are secured and
supply chain we have set net zero targets by 2050, with a 50%
reduction in these emissions by 2030. Performance against these
targets is being monitored and reported.
We continue to look to improve stress and scenario 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.
The lifetime mortgage lending criteria will be kept under review and
adjustments made as required.
Under Just’s Responsible Investment Framework, the ESG risks,
including climate change, are considered for liquid and illiquid assets.
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; but may also
create new opportunities to invest in assets that are perceived to
be more sustainable.
RISK OUTLOOK
HOW THIS RISK
EFFECTS 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.
TREND
UNCERTAIN
STRATEGIC PRIORITIES
1.
4.
3.
5.
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 or
broader sustainability issues.
TREND
INCREASING
STRATEGIC PRIORITIES
1. 2.
4.
3.
5.
68 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
PRINCIPAL RISKS AND UNCERTAINTIES continued
RISK OUTLOOK
HOW THIS RISK
EFFECTS JUST
2
CLIMATE AND ESG CONT...
JUST’S EXPOSURE TO RISK
OUTLOOK AND HOW WE MANAGE OR MITIGATE THE RISK
The value of corporate bonds and illiquid
investments can be affected by the impact of
climate risk on the assets or business models of
corporate bond issuers and commercial borrowers.
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.
Following the BoE and PRA Climate and Capital Conference, in
March 2023, the BoE published a report setting out its latest thinking.
This included consideration of whether firms assess risks within the
matching adjustment (MA) adequately to allow for the capture of
climate risk. They will also start to explore whether it is appropriately
reflected in external credit ratings (or firms’ own internal ratings) and
if resulting MA benefits could be too large. The ABI are maintaining
engagement with key stakeholders including Just.
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, and
reputational damage.
Our IT systems are central to conducting our
business from delivering outstanding Customer
service and 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.
TREND
STABLE
STRATEGIC PRIORITIES
1. 2.
4.
3.
5.
4
INSURANCE RISK
In the long-term, the rates of
mortality suffered by our customers
and other demographic risks may
differ from the assumptions made
when we priced the contract.
TREND
STABLE
STRATEGIC PRIORITIES
1. 3. 5.
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 certain 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 26 and 34 of the Annual Report
and Accounts.
Mortality experience continues to be volatile and
remains above pre-pandemic levels.
The cyber threat to firms is expected to continue at a high level in
the coming years and evolve in sophistication. We will continue to
closely monitor evolving external cyber threats to ensure our
information security measures remain fit for purpose. Just’s Chief
Information Security Officer has recently implemented a revised
information security team structure and approach.
2024 will see further investments in cyber-attack countermeasures,
to enable consistent delivery of required security standards, in line
with our Cyber strategy. We will continue to evaluate impacts of
other new and emerging technologies, such as Artificial Intelligence,
during the year.
Following the 2023 CBEST thematic findings from the Bank of
England, a review of such by the Chief Information Security Officer
found that there were minimal improvements required regarding the
recommendations and guidance; all of which were of low residual
risk and for which improvements have been undertaken to
address such.
To strengthen data security and overall resilience, in 2023,
we continued to make enhancements to network architecture
and implemented data centre upgrades.
Our email system has been made more resilient to malicious attacks,
including detection of emerging types of phishing and malware.
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, including cloud, is continuously monitored by technical
teams following established standards and practices.
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 views on the changes are updated annually taking into
account recent data, emerging best practice and expected trends.
The assumptions about these changes have been incorporated into
Just’s pricing across our Retirement Income and lifetime Mortgage
products and will be updated as more information
becomes available.
Changes in customer behaviour due to current higher interest
rates have been taken into account where appropriate.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 69
JUST’S EXPOSURE TO RISK
OUTLOOK AND HOW WE MANAGE OR MITIGATE THE RISK
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.
Global growth has held up in 2023 despite tighter fiscal and
monetary policy. 2024 is likely to see weaker growth with a recession
possible in the UK and the countries in which the Group invests.
Financial markets are likely to remain volatile during this period.
Our investment assets may experience increased movements in
downgrade and/or default experience.
Investment in fixed income investments exposes
the Group to default risk and subsequent losses
should collateral and recovery be less than the
expected investment value. Additionally, the
Group is exposed to concentration risk and to
the downgrade of assets which shows an
increased probability of default.
Credit risk exposures arise due to the potential
default by counterparties we use to:
• provide reinsurance to manage Group exposure
to insurance risks, most notably longevity risk;
• provide financial instruments to mitigate
interest rate and currency risk exposures; and
• hold our cash balances.
To reduce risk, the Group ensures it trades with a
wide range of counterparties to diversify exposures.
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.
Reinsurance transactions are collateralised to
reduce the Group’s exposure to loss from default.
The Group measures reinsurance default with
respect to its regulatory balance sheet as expected
by SS 24/23. Contracts offer protections against
termination due to various events.
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.
•
2023 saw limited changes to UK residential property prices; however,
sustained high interest rates may result in price falls, increasing 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 loan portfolio secured against
commercial properties.
Our balance sheet sensitivities to these risks can be found in note 20.
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, 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.
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.
Regulation changes, such as Solvency II reform, have been agreed
recently and it is likely the Group’s 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.
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.
The Government is keen for the development of Collective Defined
Contributions (CDC) Schemes. The Group believes that CDC would
likely be complementary to the existing decumulation market rather
than replace it. Both the ABI and the Group continue to actively
contribute to ongoing discussions specific to this matter.
RISK OUTLOOK
HOW THIS RISK
EFFECTS JUST
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.
TREND
INCREASING
STRATEGIC PRIORITIES
1. 3. 5.
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
to reflect extremely volatile conditions
such as those triggered by the
September 2022 “mini-Budget”.
TREND
INCREASING
STRATEGIC PRIORITIES
1. 3. 5.
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.
TREND
STABLE
STRATEGIC PRIORITIES
1. 2.
4.
3.
5.
70 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
CHAIR’S GOVERNANCE OVERVIEW
JOHN HASTINGS-BASS
Group Chair
DEAR SHAREHOLDERS AND OTHER STAKEHOLDERS,
On behalf of the Board of Just Group plc (the “Board”),
I am pleased to present the 2023 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
on page 79, 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”)
except for temporary non-compliance of Provision 32
on Remuneration Committee composition from the
conclusion of the 2023 Annual General Meeting (“AGM”)
on 9 May 2023 until 1 November 2023. Following the
retirement of Paul Bishop and Ian Cormack as Non-
Executive Directors during the year, there was a period
of transition during which the composition of the Board
and its Committees was reviewed by the Nomination
and Governance Committee. During that period, the
Remuneration Committee’s three members comprised
myself and two independent Non-Executive Directors.
This did not meet the Code requirement to have three
independent Non-Executive Directors as the Chair of
the Company is not considered to be independent.
Following the appointment of Jim Brown as a Non-
Executive Director and member of the Remuneration
Committee, the requirements of Provision 32 of
the Code have been met.
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 financial 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. As noted earlier in the report, Mark Godson was appointed as
Group Chief Financial Officer on 1 December 2023 and Andy Parsons
retired from the Board on 31 December 2023.
Mary Phibbs and Jim Brown were appointed as independent
Non-Executive Directors of Just Group plc on 5 January 2023 and
1 November 2023 respectively. Following the retirement of Ian Cormack
at the conclusion of the 2023 AGM, Mary Phibbs was appointed as
Senior Independent Director and a member of the Nomination
and Governance Committee on 9 May 2023. Mary Phibbs was also
appointed as Chair of the Audit Committees of the Group, Just
Retirement limited (“JRl”) and Partnership life Assurance Company
limited (“PlACl”) (collectively the “Audit Committees”) on 12 July 2023.
Paul Bishop retired as a Director at the conclusion of the 2023 AGM on
9 May 2023 as part of the Board succession plans disclosed in the
2022 Annual Report and Accounts. However, he was immediately
reappointed as a Director and acted as Chair of the Audit Committees
until Mary Phibbs obtained the relevant regulatory approval to take
over this responsibility. Paul subsequently retired as a Director on
12 July 2023.
Other key changes to highlight include the appointment of
Michelle Cracknell as Chair of the Remuneration Committee and
Mary Kerrigan was appointed as a member of the Audit Committees
from the conclusion of the 2023 AGM. Jim Brown was appointed as a
member of the Remuneration Committee, Group Risk and Compliance
Committee (“GRCC”) and the JRl and PlACl Investment Committees
from appointment as a Director on 1 November 2023.
I would like to formally thank both Ian Cormack and Paul Bishop
for their service as Directors of the Group. Also, I offer further thanks
to Paul Bishop who extended his appointment to facilitate a smooth
transition of the changes to the Audit Committees.
BOARD AND BOARD COMMITTEE ACTIVITY
The Governance in Operation report describes the work of the Board
and its Committees during the year on pages 78 to 87. This has been
a busy year for the Board and I would like to take the opportunity to
highlight some of the main activities in 2023.
The Board and its Committees have been actively engaged on the
Group’s strategy and change initiatives to ensure that it can achieve
its growth ambitions in a controlled and sustainable manner.
The implementation of the FCA’s Consumer Duty requirements
has been a key focus area for the Board who has overseen the
programme of activity and steps being taken to ensure compliance
with the new regulation. During the year, the Board satisfied itself
that the Group was compliant. Michelle Cracknell is the Board’s
Consumer Duty Champion and she meets regularly with relevant
stakeholders in the business to engage on the Group’s approach
to ensuring it achieves good customer outcomes.
The GRCC receives regular reporting on conduct and customer risk
matters, including any concerns escalated by the Consumer Duty
Champion that require attention. The Board continues to oversee the
second phase of activity to comply with regulatory requirements, and
will keep abreast of initiatives to ensure good customer outcomes.
The Nomination and Governance Committee has been fully engaged
in refreshing the Board and its Committees. The recent programme of
activity to appoint new Directors to replace longer-serving members,
who were due to retire, is now complete. In addition to overseeing the
Board appointments and resignations, the Committee considered
plans for the orderly succession to the Board and to members of the
Group Executive Committee and the Group Company Secretary during
the year. It also reviewed the Board training schedule, recommended
the updated Board Diversity, Equity, Inclusion and Belonging Policy to
the Board for approval and monitored the consultation on proposed
changes to the Code.
A key focus for the Group Audit Committee was the introduction of
accounting standard IFRS 17, which represented significant changes
to insurance accounting. The 2023 Annual Report and Accounts is
the first full year financial statements to apply the new accounting
standard. The Group Audit Committee has been extensively engaged
and has overseen the implementation of this standard. It has
received regular updates and held-in depth sessions to ensure that
the Committee members 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.
The GRCC considered various risk matters during the year.
This included an in-depth review of the Group’s operational risks
and respective risk appetites. The oversight of cyber security
was enhanced with regular reporting from the Chief Information
Security Officer and the GRCC received updates on the outcomes
of regulatory thematic reviews. Further details are contained in
the Group Risk and Compliance Committee report.
The Remuneration Committee discharged its delegated
responsibilities for the remuneration arrangements for the Chair,
Executive Directors and Senior Management during the year. It also
reviewed workforce remuneration and related policies, and took into
consideration the alignment of incentives and rewards with the
Group’s culture.
The updated Directors’ Remuneration Policy was approved by
shareholders at the 2023 AGM. The Chair of the Remuneration
Committee consulted with major shareholders on our proposed
renewal of the Directors’ Remuneration Policy who expressed broad
consent with the proposed Policy. I was pleased that over 95% of
those shareholders voting at the AGM voted in favour of the
updated Policy.
BOARD EVALUATION AND EFFECTIVENESS
Board evaluation is an important annual process and in 2023, there
was an externally facilitated evaluation by Boardroom Review
limited. The review was based on the theme of cohesion and was
split into three key areas: Internal workings of the Board; Culture
and dynamics; and the effective use of the Board’s time.
The evaluation consisted of reviewing detailed information provided
to the Board at its scheduled meetings and strategy sessions. There
were also private sessions with the facilitator and each Director.
Finally, there was a workshop whereby the conclusions of the review
were discussed and actions agreed.
Following the 2023 evaluation, the following actions were agreed:
• Revisit and refine Board administration and reporting.
• Enhance reporting on culture to the Board.
• Streamline the oversight of the control environment.
• Oversee the implementation of the changes to the Code.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 71
The outputs of the review will be monitored by the Nomination and
Governance Committee and they will be taken into account for the
2024 review.
ANNUAL GENERAL MEETING
I am pleased to confirm that the 2024 AGM will be held at 10.00 am
on 7 May 2024 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
Group Chair
7 March 2024
UK CORPORATE GOVERNANCE CODE
The Code, which is available to view on the Financial Reporting
Council’s website, is the governance standard against which we
measured ourselves in 2023.
Details on how we have applied the principles and provisions set
out in the Code and how governance operates at Just have been
summarised throughout this Governance section and elsewhere
in the 2023 Annual Report and Accounts as set out below.
BOARD LEADERSHIP AND COMPANY PURPOSE
A. Effective Board
B. Purpose, values and culture
C. Governance framework
D. Stakeholder engagement
E. Workforce policies and practices
DIVISION OF RESPONSIBILITIES
F. Role of Chair
G.
Independence
H. External commitments and conflicts of interest
I. Board resources
COMPOSITION, SUCCESSION AND EVALUATION
J. Appointment to the Board
K. Board skills, experience and knowledge
l. Annual Board evaluation
AUDIT, RISK AND INTERNAL CONTROL
M. External Auditor and Internal Auditor
N. Fair, balanced and understandable review
PAGES
72–74
1, 50–53
78
54–55
62
81
81
79, 83
82
88–89
88, 90
84–85
94–96
85
O.
Internal financial controls and risk management
95, 97–99
REMUNERATION
P.
linking remuneration to purpose and strategy
Q. Remuneration policy review
R. Performance outcomes in 2023
117–119
102–103
107
72 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
BOARD OF DIRECTORS
NON-EXECUTIVE CHAIR
EXECUTIVE DIRECTORS
John Hastings-Bass
GROUP Chair
David Richardson
Group Chief Executive Officer
Mark Godson
Group Chief Financial Officer
Mary Phibbs
Senior Independent Director
James Brown
(known as Jim Brown)
Independent Non-Executive Director
Michelle Cracknell
Independent Non-Executive Director
Appointed: 13 August 2020 (4 years)
Appointed: 4 April 2016 (8 years)
Appointed: 1 December 2023 (3 months)
Appointed: 5 January 2023 (1 year)
Appointed: 1 November 2023 (4 months)
Appointed: 1 March 2020 (4 years)
CAREER AND EXPERIENCE
John brings over 40 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 limited, 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 a 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. He joined the Board of Novae Group plc in
May 2007 and was appointed as Chair in May 2008.
In January 2015, John was appointed Non-Executive
Chair of BMS Group 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 appointed Group CEO on 19 September
2019. Prior to that David was Deputy CEO and
Managing Director of the DB Solutions business.
He was the CFO of Partnership Assurance Group plc
from February 2013 until April 2016.
David has gained deep and varied experience
across long-term savings, life insurance, pensions
and reinsurance over a 30 year career. Since his
appointment as Group CEO he has focused on
transforming the Group into a customer-focused
leader in the retirement space, growing
sustainably and profitably to create material
value for shareholders.
Previously, David was Group Chief Actuary of Phoenix
Group, where he was the Executive Committee
member responsible for restructuring the group’s
balance sheet and enhancing its overall capital
management. Prior to this, David worked in various
senior roles at Swiss Re in the UK and US, across both
its Admin Re and traditional reinsurance businesses.
David commenced his career at Tillinghast.
David is a Fellow of the Institute and Faculty of
Actuaries and a CFA charterholder.
CAREER AND EXPERIENCE
Prior to his appointment as Group Chief Financial
Officer, Mark was a partner at Ernst & Young (EY),
and leader of their UK Actuarial practice. His career
in the insurance industry has spanned over 20 years
across several international markets, with particular
expertise in delivering growth strategies, business
transformation, commercial optimisation, and
mergers and acquisition.
Prior to EY, Mark was a Director at Swiss Re from
2013 to 2017, leading the pricing, structuring, and
due diligence of closed and open book transactions
across Europe and the USA.
CAREER AND EXPERIENCE
CAREER AND EXPERIENCE
CAREER AND EXPERIENCE
Mary has more than 40 years of international
Jim has considerable corporate finance,
Michelle brings a wealth of strategic and customer
business, risk management and board experience
restructuring and mergers and acquisition
behavioural experience, having spent over 30 years
in various countries.
experience, and has worked within the financial
in senior roles in the regulated financial
services industry throughout his career, latterly
services industry.
Previous UK and overseas board experience includes
serving as a Non-Executive Director of Morgan
within the Retail sector.
Michelle was Chief Executive Officer of The Pensions
Stanley & Co International plc, Novae Group plc,
Jim is Chief Executive Officer of Sainsbury’s Bank plc,
Advisory Service between October 2013 and
New Day Group limited, Friends life Group plc,
and is an Operating Board Member of J Sainsbury
December 2018. Prior to that, she held Director
and The Charity Bank limited. Mary has held senior
plc. He has held several senior positions, including
roles in advice firms, pension providers and
positions at Standard Chartered Bank plc, ANZ
Chief Executive Officer of Williams and Glyn between
insurance companies.
Banking Group, National Australia Bank,
Commonwealth Bank of Australia, and
Pricewaterhouse Coopers.
2015 and 2017. Prior to that, Jim was Chief Executive
Officer of Ulster Bank in Northern Ireland and the
Republic of Ireland from 2011 to 2015.
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 and
Mary currently holds the role of Chair of Virgin Money
Internationally, Jim has held a number of senior
Non-Executive Director of FIl Holdings limited and
Unit Trust Managers limited. She is a Director of
roles in Asia, Australia and New Zealand, including
Financial Administration Services limited. Michelle is
Canada Pension Plan Investment Board (CPP
Chief Executive Officer of Retail and Commercial
also a Non-Executive Director and Chair of the Audit
Investments) and Chair of its Risk Committee.
Banking, Asia and the Middle East for RBS
and Risk Committee of PensionBee Group plc, and
and ABN AMRO.
Non-Executive Director of Sport England.
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
• Strong broad commercial skills in strategy,
mergers and acquisitions
SKILLS AND COMPETENCIES
• Extensive experience in long-term savings,
life insurance, pensions and reinsurance
SKILLS AND COMPETENCIES
• Significant international experience across the
insurance industry
SKILLS AND COMPETENCIES
SKILLS AND COMPETENCIES
SKILLS AND COMPETENCIES
• Extensive experience in financial services
• Extensive experience of corporate finance,
• Broad knowledge and understanding of
including banking, insurance and investment
restructuring and mergers and acquisitions
remuneration issues
• High level of competency managing customer
and financial adviser relationships through his
brokering experience
• Outstanding enterprise-wide executive leadership
• Strategic clarity supported by strong delivery
• Actuary and CFA charterholder
• Strong understanding of the markets the Group
management sectors
• Highly competent in change management
• Extensive experience in later life benefits
operates in
• Strong experience of financial, accounting,
• Certified Bank Director
• Extensive experience of business transformation,
risk management and internal control matters
and regulated financial services
• Qualified Actuary
• Extensive experience of all aspects of
governance from over 15 years as an
independent Non-Executive Director
mergers and acquisitions
• Qualified Actuary
• Chartered Accountant
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
KEY INTERNAL DIRECTORSHIPS
KEY INTERNAL DIRECTORSHIPS
• Director of Just Retirement limited
• Director of Just Retirement limited
• Chair of Just Retirement Money limited
• Director of Partnership life Assurance
• Director of Partnership life Assurance
• Chair of Partnership Home loans limited
Company limited
Company limited
• Director of Just Retirement Money limited
• Director of Partnership Home loans limited
• Director of Just Retirement limited
• Director of Partnership life Assurance
Company limited
• Director of HUB Financial Solutions limited
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 73
PLC COMMITTEES
JRL AND PLACL COMMITTEES
Group Audit Committee
Nomination and Governance Committee
Audit Committees
Remuneration Committee
Group Risk and Compliance Committee
Investment Committees
Market Disclosure Committee
Committee Chair
Committee Chair
SENIOR INDEPENDENT DIRECTOR
NON-EXECUTIVE DIRECTORS
John Hastings-Bass
GROUP Chair
David Richardson
Group Chief Executive Officer
Mark Godson
Group Chief Financial Officer
Mary Phibbs
Senior Independent Director
James Brown
(known as Jim Brown)
Independent Non-Executive Director
Michelle Cracknell
Independent Non-Executive Director
Appointed: 13 August 2020 (4 years)
Appointed: 4 April 2016 (8 years)
Appointed: 1 December 2023 (3 months)
Appointed: 5 January 2023 (1 year)
Appointed: 1 November 2023 (4 months)
Appointed: 1 March 2020 (4 years)
CAREER AND EXPERIENCE
CAREER AND EXPERIENCE
CAREER AND EXPERIENCE
John brings over 40 years of business experience
David was appointed Group CEO on 19 September
Prior to his appointment as Group Chief Financial
in the insurance and reinsurance sectors and has
2019. Prior to that David was Deputy CEO and
Officer, Mark was a partner at Ernst & Young (EY),
undertaken the role of Chair in publicly quoted and
Managing Director of the DB Solutions business.
and leader of their UK Actuarial practice. His career
privately owned businesses. He currently holds the
He was the CFO of Partnership Assurance Group plc
in the insurance industry has spanned over 20 years
role of Chair of BMS Group limited, the private equity
from February 2013 until April 2016.
backed global insurance broking group and, until
2017, was Chair of publicly quoted Novae Group plc.
David has gained deep and varied experience
across long-term savings, life insurance, pensions
John began his career in Hong Kong with Jardine
and reinsurance over a 30 year career. Since his
across several international markets, with particular
expertise in delivering growth strategies, business
transformation, commercial optimisation, and
mergers and acquisition.
Matheson in 1976. He moved to london and
appointment as Group CEO he has focused on
Prior to EY, Mark was a Director at Swiss Re from
was latterly a Director of JlT Group and Chief
transforming the Group into a customer-focused
2013 to 2017, leading the pricing, structuring, and
Executive Officer of International Business Group.
leader in the retirement space, growing
due diligence of closed and open book transactions
He joined Arthur J. Gallagher in 2007 as Chairman of
sustainably and profitably to create material
across Europe and the USA.
International Development, leading the Asia Pacific
value for shareholders.
business. He joined the Board of Novae Group plc in
May 2007 and was appointed as Chair in May 2008.
In January 2015, John was appointed Non-Executive
Chair of BMS Group and in October 2022, he was
appointed Chair of Dale Management
Agency limited.
Previously, David was Group Chief Actuary of Phoenix
Group, where he was the Executive Committee
member responsible for restructuring the group’s
balance sheet and enhancing its overall capital
management. Prior to this, David worked in various
senior roles at Swiss Re in the UK and US, across both
John is a Trustee of the landmark Trust and Chair
its Admin Re and traditional reinsurance businesses.
of its Audit Committee.
David commenced his career at Tillinghast.
David is a Fellow of the Institute and Faculty of
Actuaries and a CFA charterholder.
CAREER AND EXPERIENCE
Mary 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, Friends life Group plc,
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
Pricewaterhouse Coopers.
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.
CAREER AND EXPERIENCE
Jim has considerable corporate finance,
restructuring and mergers and acquisition
experience, and has worked within the financial
services industry throughout his career, latterly
within the Retail sector.
Jim is Chief Executive Officer of Sainsbury’s Bank plc,
and is an Operating Board Member of J Sainsbury
plc. He has held several senior positions, including
Chief Executive Officer of Williams and Glyn between
2015 and 2017. Prior to that, Jim was Chief Executive
Officer of Ulster Bank in Northern Ireland and the
Republic of Ireland from 2011 to 2015.
Internationally, Jim has held a number of senior
roles in Asia, Australia and New Zealand, including
Chief Executive Officer of Retail and Commercial
Banking, Asia and the Middle East for RBS
and ABN AMRO.
CAREER AND EXPERIENCE
Michelle brings a wealth of strategic and customer
behavioural experience, having spent over 30 years
in senior roles in the regulated financial
services industry.
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, pension 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 and
Non-Executive Director of FIl Holdings limited and
Financial Administration Services limited. Michelle is
also a Non-Executive Director and Chair of the Audit
and Risk Committee of PensionBee Group plc, and
Non-Executive Director of Sport England.
SKILLS AND COMPETENCIES
SKILLS AND COMPETENCIES
SKILLS AND COMPETENCIES
• Strong broad commercial skills in strategy,
• Extensive experience in long-term savings,
• Significant international experience across the
mergers and acquisitions
life insurance, pensions and reinsurance
insurance industry
• High level of competency managing customer
• Outstanding enterprise-wide executive leadership
• Strong understanding of the markets the Group
and financial adviser relationships through his
• Strategic clarity supported by strong delivery
operates in
• Actuary and CFA charterholder
• Extensive experience of business transformation,
mergers and acquisitions
• Qualified Actuary
brokering experience
• Extensive experience of all aspects of
governance from over 15 years as an
independent Non-Executive Director
SKILLS AND COMPETENCIES
• Extensive experience in financial services
including banking, insurance and investment
management sectors
• Strong experience of financial, accounting,
risk management and internal control matters
• Chartered Accountant
SKILLS AND COMPETENCIES
• Extensive experience of corporate finance,
restructuring and mergers and acquisitions
• Highly competent in change management
• Certified Bank Director
SKILLS AND COMPETENCIES
• Broad knowledge and understanding of
remuneration issues
• Extensive experience in later life benefits
and regulated financial services
• 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
KEY INTERNAL DIRECTORSHIPS
KEY INTERNAL DIRECTORSHIPS
• Director of Just Retirement limited
• Director of Just Retirement limited
• Director of Just Retirement limited
• Director of Partnership life Assurance
• Director of Partnership life Assurance
• Director of Partnership life Assurance
Company limited
Company limited
Company limited
• Director of HUB Financial Solutions 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
• 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 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
74 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
BOARD OF DIRECTORS continued
NON-EXECUTIVE DIRECTORS continued
INDEPENDENCE1
Mary Kerrigan
INDEPENDENT
NON-EXECUTIVE DIRECTOR
Kalpana Shah
INDEPENDENT
NON-EXECUTIVE DIRECTOR
Appointed: 1 February 2022 (2 years)
Appointed: 1 March 2021 (3 years)
CAREER AND EXPERIENCE
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 Aegon Asset Management UK plc. She is
also a Non-Executive Director of Companjon Services
DAC and New Ireland Assurance Company plc, and is
Chair of their respective Risk Committees.
She is an Independent Member of the Supervisory
Board of la Banque Postale Asset Management
limited. Mary also is a member of the Independent
Governance Committee of Prudential Assurance UK
limited and Trustee of The london Irish Centre.
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 was elected to the governing body of the
Institute and Faculty of Actuaries in 2019 and was
appointed as President in September 2023. She is
a member of court for the Worshipful Company
of Actuaries.
In addition to Just Group, Kalpana is Chair of
RiverStone Managing Agency limited, Senior
Independent Director of RiverStone Insurance (UK)
limited, and a Non-Executive Director of Markel
International. She is also a Non-Executive Director
of Asta Managing Agency limited and is Chair of
their Syndicates-in-a-Box Board. Kalpana also sits
on the Capacity Transfer Panel at lloyds of london.
Chair
Executive Directors
Non-Executive Directors
GENDER DIVERSITY1
Male
Female
ETHNIC DIVERSITY1
SKILLS AND COMPETENCIES
• Considerable experience in the pensions,
life insurance and investment industries
• Qualified Actuary
SKILLS AND COMPETENCIES
• Considerable experience in the actuarial
and insurance industry
• Qualified Actuary
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
Asian
Black
Mixed
White
Other
1
As at March 2024.
1
2
5
4
4
1
0
0
7
0
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 75
PLC COMMITTEES
JRL AND PLACL COMMITTEES
Group Audit Committee
Nomination and Governance Committee
Audit Committees
Remuneration Committee
Group Risk and Compliance Committee
Investment Committees
Market Disclosure Committee
Committee Chair
Committee Chair
AVERAGE NON-EXECUTIVE
DIRECTOR TENURE1
2.3 YEARS
John Hastings-Bass
Mary Phibbs
Jim Brown
1
0
Michelle Cracknell
4
4
Mary Kerrigan
2
Kalpana Shah
3
1
As at March 2024.
SKILLS AND COMPETENCIES
See the Nomination and Governance
Committee report on page 90
for the Director’s skills and
expertise matrix.
TIME COMMITMENT
The Board considers and approves any
additional external commitments taken
on by Directors, after assessing the impact
on the time commitment required for the
respective roles. The annual assessment
of independence and objectivity was
conducted for the Non-Executive Directors
in 2023, and no concerns were identified.
Further details on the Directors’ time
commitment are contained on page 83.
NON PLC
INDEPENDENT NON-EXECUTIVE DIRECTORS
John Perks
LIFE COMPANIES’ CHAIR
Kathleen Byrne
(known as Kathy Byrne)
Independent Non-Executive Director
Appointed: 1 April 2021 (3 years)
Appointed: 1 February 2022 (2 years)
CAREER AND EXPERIENCE
John has significant experience in the life and
pensions industry, with 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 is a Non-Executive
Director of Mobius life limited and is Chair of its
Audit and Risk Committee, and the Chair of HSBC
life (UK) limited.
John is a Fellow of the Institute and Faculty
of Actuaries.
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 Cardif 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. In June 2023 Kathy was
appointed as a Non-Executive Director of Amicorps
FS (UK) plc.
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
None
CURRENT OTHER LISTED DIRECTORSHIPS
Amicorps FS (UK) plc
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
76 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
SENIOR LEADERSHIP
01.
David Richardson
Group Chief Executive Officer
See David’s biography on P72
02.
Mark Godson
Group Chief Financial Officer
See Mark’s biography on P72
03.
Conor Breslin
Group Chief Digital Information Officer
Appointed: 4 March 2024
Conor is responsible for Technology, Transformation,
Change and IT Architecture as well as embedding
modern methods of change delivery.
Conor brings a wealth of experience and expertise
to Just, having held leadership roles at Cover-More
Group limited (part of Zurich Group), Provident
Financial, EasyJet, and AstraZeneca, working in a
number of areas including strategy and architecture,
change management and service delivery.
04.
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.
David is a Non-Executive Director of Comentis
limited and Criterion Tec Holdings limited, a
not-for-profit body that delivers professional
standards and governance services for the UK’s
financial services industry.
05.
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.
06.
Ellie Evans
Group Chief People Officer
Appointed: 31 October 2022
Ellie is responsible for the people and talent 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.
07.
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.
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 Trustee for the Miners
Pension Scheme.
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.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 77
01.
David Richardson
02.
Mark Godson
03.
Conor Breslin
04.
David Cooper
05.
Alex Duncan
06.
Ellie Evans
07.
Paul Fulcher
08.
Pretty Sagoo
09.
Paul Turner
78 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
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
Our Governance Framework is designed to embed strong governance and oversight processes and to ensure compliance with the Code.
It 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”.
BOARD OF DIRECTORS
The Board is responsible for the overall leadership of the Group and setting its purpose, values and strategy including the Group’s
sustainability strategy. The Board ensures our culture is aligned with our strategy, oversees our conduct and affairs, and promotes the
success of the Group for the benefit of our shareholders and other stakeholders.
The effective working relationship between the
Board and the Group Chief Executive Officer and
the Group Executive team facilitates support and
challenge through regular reporting and dialogue.
GROUP CHIEF EXECUTIVE OFFICER
Responsible for the overall performance and
day-to-day leadership of the Group.
The Board delegates certain matters to its Board Committees. At each scheduled Board
meeting, the Chairs provide an update on their Committees’ activities.
BOARD COMMITTEES
GROUP AUDIT COMMITTEE
Responsible for monitoring the integrity of the financial statements, reviewing the
effectiveness of the Group Internal Audit function, assessing the Group’s internal
controls and maintaining the external auditor relationship.
GROUP RISK AND COMPLIANCE COMMITTEE
GROUP EXECUTIVE COMMITTEE
Assists the Group Chief Executive Officer
discharge their duties.
Responsible for maintaining effective systems of risk management, compliance and
internal control throughout the Group.
NOMINATION AND GOVERNANCE COMMITTEE
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.
Responsible for reviewing Board and Board Committee composition and succession
needs, proposes new Board appointments and oversees governance developments.
REMUNERATION COMMITTEE
Determines the remuneration policies for the Chair, Executive Directors, Senior
Management and Solvency II identified staff. It is also responsible for the operation
of share incentive plans and the oversight of gender and ethnicity pay gap reporting.
MARKET DISCLOSURE COMMITTEE
Oversees the identification of inside information and disclosure of information to the
market to ensure the Company complies with relevant regulatory rules including the UK
Market Abuse Regulation.
Underlying the governance framework between the Board, Board Committees, Group Chief Executive Officer and the Group Executive
Committee, there are various senior management committees and forums strengthening our governance and improving Board oversight.
SENIOR MANAGEMENT COMMITTEES AND FORUMS
These bodies support the Group’s strategic priorities, business needs or specific projects and meet regularly with approved terms
of reference to discharge their duties on behalf of the Group. The Senior Management Committees and Forums include:
BUSINESS AREAS’ LEADERSHIP
BUSINESS CHANGE
INVESTMENTS
RISK MANAGEMENT
SUSTAINABILITY
• HUB Executive Committee
• Retail Senior Management
• Executive Change
Committee
Team Committee
• UK Corporate Business
Senior Management
Committee
• Asset liability Committee
• Credit Committee
• Insurance Committee
• Executive Risk Committee
• Conduct and Operational
Risk Committee
• Green and Sustainability
Bond Forum
• Sustainability
• Information Security and
Steering Committee
IT Risk Committee
• Retail Conduct and
• Sustainability
Working Group
Customer Risk Committee
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 79
The Board considered Provision 5 of the Code on workforce
engagement in 2019 and concluded to appoint a designated
Non-Executive Director, which is currently Michelle Cracknell.
The Nomination and Governance Committee now considers this
appointment as part of Director effectiveness reviews and succession
planning. Each year, the programme of work for the Non-Executive
Director responsible for workforce engagement is supported in
collaboration with the Group Chief People Officer. In 2023, Michelle
Cracknell kept abreast of colleagues, culture and wellbeing matters
through engagement with senior leadership and colleagues from
various business areas. The success of the role is measured in action,
whereby the employee voice is represented by Michelle Cracknell in
Board meetings.
Shareholder engagement
The Group maintained an open dialogue with its major institutional
shareholders and debt investors during 2023 through a programme
of meetings undertaken by the Group Chair, Group Chief Executive
Officer, Group Chief Financial Officer and the Investor Relations team.
The Chair of the Remuneration Committee also communicated with
major institutional investors on the new Remuneration Policy ahead
of the 2023 AGM. Equity-led roadshows were held in March and
August/September 2023, and Executive Directors and management
attended multiple investor conferences throughout the year, where
they met both debt and equity investors. They also provided broker
and non-broker salesforce briefings, and throughout the year,
hosted various events including a “Simplifying Just” series,
roundtable discussions and one-to-one meetings with existing
and prospective shareholders.
There was regular engagement with shareholders during 2023 on
a number of important matters including the growth opportunities
available to the Group and our strategic priorities, the investment
strategy including illiquid asset origination, capital management and
allocation, the new accounting standard IFRS 17 and its impact on
the Group, and the regulatory environment prior to and following the
Solvency UK reforms announced by the Chancellor of the Exchequer
in November 2022. Other topics included people, customers, culture
and responsible investing.
The Investor Relations team provides regular reporting to the
Board on investor activity, market and peer analysis, share price
performance and investor feedback from meetings with the Group
Chair, Executive Directors and the Investor Relations team. Analysts’
and brokers’ reports are also made available to the Directors and
the Board receives detailed feedback from our corporate brokers
following the results roadshow.
The Company’s ordinary shares are covered by seven 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 2023.
During 2023, the Company’s ordinary shares increased by 5% to
85.9 pence at 31 December 2023, compared with the FTSE 250 life
insurance index which decreased by 11%.
The Senior Independent Director is available for consultation with
shareholders if they have concerns which are inappropriate to raise with
the Group Chair, Group Chief Executive Officer or other Executive Directors.
Our 2023 AGM was held on 9 May 2023 in our london 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 89% of those voting supporting the resolutions.
CORPORATE GOVERNANCE STATEMENT
Compliance with the UK Corporate Governance Code 2018
The Board has considered and concluded that the Company has fully
complied with the principles and provisions set out in the Code except
for temporary non-compliance with Provision 32 on Remuneration
Committee composition from the conclusion of the Annual General
Meeting (“AGM”) on 9 May 2023 until 1 November 2023 when Jim
Brown was appointed as a member of the Remuneration Committee.
Further details of how the Company applied the Code’s principles
and complied with the provisions are provided in the Chair’s
governance overview, Governance in Operation report and
Board Committees’ reports.
BOARD LEADERSHIP AND COMPANY PURPOSE
Role of the Board
The Board promotes the long-term sustainable success of the
Company, generating value for customers, shareholders, other
stakeholders and wider society. The Board is responsible for the
overall leadership of the Company and establishing the Group’s
purpose, values, culture, standards and strategy.
The schedule of matters reserved for the Board contains items
reserved for the Board to consider and approve, relating to strategy
and management, structure and capital, financial reporting and
controls, internal controls and risk management, material contracts,
Board membership and succession planning, corporate governance
and delegation of authority.
The matters reserved for the Board are reviewed at least annually
to ensure they remain appropriate and in line with best practice.
Throughout 2023, the Board acted in accordance with the matters
reserved for the Board.
The Board discharges some of its responsibilities through its Board
Committees, which have terms of reference defining their roles and
responsibilities that are reviewed and approved by the Board at
least annually. The matters reserved for the Board and the terms
of reference of the principal Board Committees can be found at
www.justgroupplc.co.uk.
Purpose, strategy, culture and values
During the year, the Board considered and agreed the longer-term
strategy of the Group and its associated strategic goals and
objectives at its strategy days. The Board oversees the execution of the
Group’s strategy and business plan, and receives regular updates on
key strategic initiatives from the Group Chief Executive Officer and the
Group Executive team. An overview of the Group’s strategic priorities
and business model can be found in the Strategic report.
The Board is committed to growing and fostering a strong culture and
tracks progress across the Group in a number of ways. This includes
reviewing the outputs of the employee engagement survey and
receiving regular updates on the Group’s diversity initiatives. Further
information on our culture is contained in the Colleagues and culture
report, and an overview of the Board’s role in the oversight of our
culture can be found in the Section 172 report.
Conflicts of interest
The Group has a policy and process to address 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.
Stakeholder engagement
The Board engages with its stakeholders in a variety of ways.
The Colleagues and culture, 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.
80 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
GOVERNANCE IN OPERATION continued
BOARD ACTIVITIES
Sustainability oversight
As agreed by the Board in 2022, additional time is now allocated
on the Board meeting agenda each quarter to engage specifically
on sustainability matters to enhance the level of oversight on
sustainability initiatives and regulatory developments, and to receive
regular updates on progress to reach 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. Additional training was also provided to the
Directors on sustainability matters during the year.
STRATEGY, CULTURE AND MANAGEMENT
Grow through innovation
Transform how we work
GROUP STRATEGIC PRIORITIES
1.
2.
3.
4.
5.
Be proud to work at Just
Grow sustainably
Get closer to our customers and partners
Board activities overview
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.
• Held Board strategy sessions to consider and agree refinements to the
Group’s strategy with a particular focus on the evolution of the Retail
strategy, growth opportunities and sustainability initiatives.
• Approved the Group’s key strategic targets and priorities for the year.
• Received updates on the delivery of the Group strategy execution plan.
• Monitored progress of various initiatives to reach our carbon net zero
targets, and received updates on the transition plan.
• Enhanced the oversight of sustainability matters.
Alignment to strategic priorities 1. 2. 3. 4. 5.
STRUCTURE AND CAPITAL
• Received updates on the Change delivery programme.
• Monitored colleague engagement and culture initiatives.
• Approved updates to the Diversity, Inclusion, Equity and
Belonging Policy.
• Received detailed updates on strategically important
initiatives for the Group.
• Conducted in-depth reviews of the strategy, including
opportunities and challenges, of each of the Group’s
business areas.
• Assessed the Group’s capital and liquidity requirements including
optimisation of its Solvency II capital structure.
• 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 resolutions for adoption by shareholders to issue
new shares and Restricted Tier 1 (“RT1”) capital for the 2024
AGM to create flexibility for the Group.
• Approved the payment of RT1 coupons for their respective
RT1 notes.
Alignment to strategic priorities 1. 2. 5.
FINANCIAL PERFORMANCE AND INVESTOR RELATIONS
• Approved the Group’s business plan and targets, and monitored the
Group’s results against them.
• Approved the Group’s half-year and annual financial results.
• Reviewed the dividend policy. Recommended the 2022 final dividend
and declared the 2023 interim dividend.
• Considered the appropriateness of the approach to surplus
capital management.
• Approved the Group Solvency and Financial Condition Report
and the Group Regular Supervisory Report for submission
to the Prudential Regulation Authority.
• Considered reinsurance counterparty arrangements.
• Received updates on investor activity, market and peer
analysis, and share price performance.
• Reviewed broker reports on the Group and received feedback
from investor meetings.
Alignment to strategic priorities 2. 5.
RISK MANAGEMENT AND INTERNAL CONTROLS
• Approved the risk appetite framework and introduction of an IFRS
risk appetite.
• Considered risks to the Group’s strategy and business plan.
• Approved the Group’s Own Risk and Solvency Assessment (“ORSA”).
• Approved the annual operational resilience self-assessment.
• Provided oversight of the implementation of the Consumer Duty
requirements. Assessed and concluded that the Group was compliant
with Phase 1 requirements across various business areas.
• Approved the Group recovery plan and run-off plan.
• Approved the cyber security strategy.
• Received annual Chief Actuary validation reports.
• Approved a matching adjustment application and major
model change application 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 risks to PlACl.
Alignment to strategic priorities 2. 5.
BOARD AND BOARD COMMITTEE GOVERNANCE
• Received reports from the principal Board Committees.
• Approved updates to matters reserved for the Board and Board
• Convened the 2023 AGM.
• Conducted a review of the Board and Board Committees’
Committees’ terms of reference.
• Approved changes to the Board and Board Committees’ composition.
• Approved refreshments to the composition of various regulated
companies’ Boards.
• Received updates on regulated subsidiaries governance, initiatives
and challenges.
Alignment to strategic priorities 1. 5.
effectiveness facilitated by an external consultant.
• Received corporate governance updates.
• Approved the Company’s Modern Slavery Statement.
• Attended a series of workshops and training sessions
covering, amongst others, detailed updates on the IFRS 17
accounting standard requirements and sustainability matters.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 81
Whistleblowing
Just’s Whistleblowing Policy is reviewed and approved by the Group
Audit Committee at least annually. Colleagues across the Group are
encouraged to raise any matters of concern with our Group Company
Secretary or anonymously through our dedicated and independent
whistleblowing hotline. The Group Company Secretary leads the
review and response from relevant areas of the business, and raises
the matters with the Group Audit Committee Chair, who is the
whistleblowing champion. Regular reports are provided to the Group
Audit Committee on the operation of the policy, including an overview
of the steps taken to ensure colleagues are aware and understand
the whistleblowing process and associated protections.
DIVISION OF RESPONSIBILITIES
Board balance and independence
As at the date of this report there are eight members of the Board:
the Group Chair (independent on appointment), two Executive
and five Non-Executive Directors, all of whom are considered
independent. Mary Phibbs 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
Group 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 Group 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 Group 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
GROUP CHAIR
•
•
responsible for the effective leadership and governance of the
Board but takes no part in the day-to-day running of the business;
leads 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;
• ensures the Board determines the significant risks the Group is
•
willing to embrace in the implementation of its strategy;
leads the succession planning process (except his own succession)
and chairs the Nomination and Governance Committee;
•
• encourages all Directors to contribute fully to Board discussions
and decision-making, and ensures that there is constructive
challenge on major proposals;
fosters relationships within the Board and provides a sounding board
for the Group Chief Executive Officer on important business matters;
identifies development needs for the Board and individual Directors;
leads the process for evaluating Board and individual Director
performance; and
•
•
• ensures 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
Group Chair present to appraise his performance, and address any
other matters which the Directors might wish to raise.
INDEPENDENT NON-EXECUTIVE DIRECTORS
• provide constructive challenge and scrutiny of the performance
of management, and promote the highest standards of integrity
and governance;
GROUP CHIEF EXECUTIVE OFFICER
•
responsible for leadership of the business and manages it within
the authorities delegated by the Board;
• proposes and develops the Group’s strategy and significant
commercial initiatives;
leads the executive team in the day-to-day running of the Group;
•
• ensures 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;
represents the Group’s interests to external parties;
•
• maintains dialogue with the Group Chair on important business
and strategy issues;
recommends budgets and forecasts for Board approval;
•
• makes recommendations to the Remuneration Committee on
•
Just’s remuneration strategy; and
leads the communication programme with shareholders,
regulators and other stakeholders, and ensures the appropriate
and timely disclosure of information to the stock market.
GROUP CHIEF FINANCIAL OFFICER
•
leads the actuarial, finance, legal, company secretarial, treasury
and tax functions;
• deputises for the Group Chief Executive Officer;
• proposes policy and action to support sound financial
management; and
• engages with shareholders, analysts and other key stakeholders.
GROUP COMPANY SECRETARY
• supports the Group Chair and provides guidance to support the
smooth functioning of the Board;
• ensures the Board receives high-quality information in adequate
• bring an external perspective, knowledge and experience to the
time and has access to appropriate resources;
Board; and
• assist in the development of strategy and the decision-
making process.
• advises the Directors on corporate governance developments;
•
• coordinates Director induction programmes and assists with
facilitates Board effectiveness reviews; and
professional development.
DESIGNATED NON-EXECUTIVE DIRECTORS
Consumer Duty Champion: supports the Group Chair and Group Chief Executive Officer in ensuring that 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: champions sustainability matters at Board level.
Whistleblowing Champion: ensures and oversees the integrity, independence, and effectiveness of whistleblowing policies and procedures.
82 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
GOVERNANCE IN OPERATION continued
The Board has delegated responsibility for implementing the strategy
and business plans, and for managing risk and operating effective
controls across the business 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 developments 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 processes which govern how
we do business and how we interact with our stakeholders; and
• development and oversight of initiatives to ensure colleagues
feel well led, managed and supported with opportunities
for development.
John Hastings-Bass
Group Chair
David Richardson
Mark Godson1
Mary Phibbs2
Jim Brown3
Executive Director
Executive Director
Senior Independent Director
Non-Executive Director
Michelle Cracknell4
Non-Executive Director
Mary Kerrigan5
Kalpana Shah
Retired in 2023
Andy Parsons
Paul Bishop6
Ian Cormack7
Additional meetings held
Non-Executive Director
Non-Executive Director
Executive Director
Non-Executive Director
Non-Executive Director
There is also a Group Executive Risk Committee (“ERC”) chaired by the
Group Chief Risk Officer, which focuses on risk management across
the Group. This includes oversight of risk appetite, risk controls, and
regulatory and compliance matters. The ERC considers reports from
management before they are presented to the Group Risk and
Compliance Committee (“GRCC”).
MEETING ATTENDANCE
There were seven scheduled Board meetings in 2023 and two
meetings to discuss the Group’s 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,
they had the opportunity to provide comments and raise any concerns
to the Group 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 2023. Additional Board and
Board Committee meetings were convened during the year to discuss
various governance and regulatory matters.
Board
Group Audit
Group Risk and
Compliance
Nomination and
Governance
Remuneration
7/7
7/7
0/0
7/7
1/1
7/7
7/7
7/7
7/7
3/4
2/2
6
–
–
–
7/7
–
–
4/4
7/7
–
4/4
–
2
8/8
–
–
8/8
1/1
–
–
8/8
–
3/3
1/3
0
3/3
–
–
3/3
–
2/3
–
–
–
1/1
1/1
4
4/4
–
–
4/4
1/1
4/4
–
–
–
–
2/2
1
1 Mark Godson was appointed as a Director on 1 December 2023.
2 Mary Phibbs was appointed as a Director and member of the Group Audit Committee, GRCC and Remuneration Committee on 5 January 2023. She was appointed as a member of the
Nomination and Governance Committee on 9 May 2023.
3 Jim Brown was appointed as a Director on 1 November 2023.
4 Michelle Cracknell was unable to attend the Nomination and Governance Committee meeting on 23 November 2023 due to prior commitments.
5 Mary Kerrigan was appointed as a member of the Group Audit Committee on 9 May 2023.
6 Paul Bishop retired as a Director, Chair of the Group Audit Committee, and member of the GRCC and Nomination and Governance Committee at the conclusion of the AGM on 9 May 2023.
He was immediately reappointed as a Director and Chair of the Group Audit Committee until he retired as a Director on 12 July 2023. He was unable to attend the Board meeting on
6 July 2023 due to prior commitments.
7 Ian Cormack retired as a Director at the conclusion of the AGM on 9 May 2023. He was unable to attend the GRCC meetings in January 2023 due to prior commitments.
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 Group
Chair and the Board, which includes bringing all governance matters
to the attention of the Board and delivering a programme of Board
and Board 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.
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, and 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.
The Directors must obtain approval from the Board prior to accepting
any additional external appointments.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 83
COMMITMENT
The Non-Executive Directors made a significant contribution to Just in
2023 and remain committed to ensuring the long-term sustainable
success of the business.
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.
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
Company’s Directors serve as Directors of any FTSE 100 companies.
COMPOSITION, SUCCESSION AND EVALUATION
Board composition and succession planning
As at the date of this report, the Board comprised the Group Chair
who was independent on appointment, two Executive Directors and
five independent Non-Executive Directors, including the Senior
Independent Director.
Biographical details of the Directors of the Company as at the date
of this report can be found on pages 72 to 74.
A list of Directors who have served throughout the year up to the
date of this report can be found in the Directors’ report on pages 120
to 121.
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 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 who were appointed 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.
Directors’ induction
On appointment, all Directors receive a formal and tailored induction to enable each of them to effectively contribute to the Group’s
strategy and wider initiatives from the outset. The induction is tailored through discussion with the Group Chair and the Group Company
Secretary, and takes into consideration existing expertise and any prospective Board or Board Committee roles.
The Directors who joined the Board in 2023 received induction packs comprising a broad range of information including corporate
governance documents, Board and Board Committee meeting papers and minutes, and a detailed overview of strategic, financial and
operational plans and priorities, and risk management, compliance and regulatory information. Introductory meetings were held with
members of the Board and Group Executive Committee, the Group Company Secretary and key senior managers across the Group.
A high-level overview of the induction programme provided to Jim Brown following his appointment as a Director on 1 November 2023
is provided in the table below.
Non-Executive Director induction programme for Jim Brown
Areas covered
Sessions by
Just’s purpose, strategy, culture and business model
Group Chair
Group Chief Executive Officer
Managing Directors of each Business Unit
Financial performance and capital requirements
Group Chief Financial Officer
Risk management, internal controls, assurance, compliance and
regulatory developments
Investments, sustainability and net zero transition
Cyber security and operational resilience
Operations
Remuneration and colleagues
Corporate governance and Board operations
Group Risk and Compliance Committee Chair
Group Chief Risk Officer
Director of Compliance
JRl and PlACl Investment Committees’ Chair
Group Chief Risk Officer (Executive Sponsor for Sustainability)
Group Chief Digital Information Officer
Chief Information Security Officer
Retail Operations and Underwriting Director
Remuneration Committee Chair
Group Chief People Officer
Group Chair
Group Company Secretary
84 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
GOVERNANCE IN OPERATION continued
Training and Development
As part of the annual Board effectiveness review, the Group 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 as beneficial.
DIVERSITY, EQUITY, INCLUSION AND BELONGING
The Board is fully committed to promoting diversity, equity, inclusion
and belonging at Board and senior management level as well as
throughout the Group. The Board has in place a Diversity, Equity,
Inclusion and Belonging Policy which sets out the Board’s broader
diversity strategy and plans alongside Just’s approach to the diversity
of the Board, Board Committees and the Group Executive Committee.
While new appointments will be based on skill, experience and
knowledge, careful consideration will also be given to diversity.
The Board continues to satisfy the diversity targets set by the FTSE
Women leaders and Parker reviews, and listing Rules as described
in more detail in the Nomination and Governance Committee report.
In accordance with the Code requirements, the Board has considered
its composition and 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.
ASSESSING BOARD AND BOARD COMMITTEE EFFECTIVENESS
The Board monitors and improves performance by reflecting on the
continuing effectiveness of its activities, the quality of its decisions,
and by considering the individual and collective contribution made
by each Board member. This is assessed annually through the Board
evaluation process. The 2023 Board and Board Committee evaluation
was facilitated by an external consultant, Boardroom Review limited,
who has no other connection with the Company or Director. The
methodology of the 2023 review was aligned with the 2022 internal
review and structured to allow the identification of new focus areas.
In line with prior years, the effectiveness review also covered the
regulated life companies’ Boards.
Thematic priorities for review were established by Boardroom
Review limited in discussion with the Group Chair and Group
Company Secretary. The external consultant reviewed meeting
papers and supporting material, conducted one-to-one interviews
with Board members and the Group Company Secretary, and hosted
a workshop at which the conclusions of the review were discussed
and actions agreed.
The Nomination and Governance Committee monitored progress
against the actions agreed following the 2022 review and concluded
that good progress had been made to address the areas that required
further attention as summarised in the table below.
Progress against 2022 evaluation findings
Focus areas
Actions taken during 2023
Board and Board Committee
succession planning
The composition of the Board and Board Committees, including the preferred number of Non-Executive
Directors were considered by the Group Chair and the Nomination and Governance Committee during the
year. The Committee’s recommendations were approved by the Board, which led to various changes to the
composition of the Board and Board Committees as covered in more detail in the Chair’s governance overview.
Emergency (up to six months), Medium (six months to a year) and long-Term contingency planning of the key
roles of Group Chair, Senior Independent Director and Chairs of the Board Committees, was considered by the
Group Chair and Nomination and Governance Committee, with an update presented to the Board by the Group
Chair on the agreed actions.
Management information
There continued to be a strong focus on streamlining and enhancing management information provided
in papers to the various Board Committees.
Training
Independent views were sought and presented to the Board and Board Committees on specialist areas
including House Prices, Economics, and Consumer Duty requirements.
A comprehensive and tailored training programme was provided to the Board and its Board Committees
in 2023, which covered various topical themes and technical matters, including the new IFRS 17 insurance
accounting standard, climate risk, Consumer Duty requirements, collateral management, and the
Internal Model.
Business development
The Business Development team now provides competitor analysis and market share information to the Board
and Board Committees to support the wider Board in-depth reviews.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 85
2023 Board evaluation findings
The findings of the Board evaluation were positive, with progress
thought to have been achieved across a number of areas considered
in previous reviews. Areas which scored well included the clarity of
strategic purpose, the relationship between the Group Chair,
Non-Executive Directors and the Group Chief Executive Officer,
and the Directors’ contribution to the development of the Group’s
strategy and growth ambitions.
The review concluded that the Board, its Committees and individual
Directors continue to operate effectively and demonstrate a high
level of skills, knowledge and experience. The findings further
affirmed strong Board composition, with good levels of diversity and
mix of tenure which has brought new perspectives to the Board in its
discussions and decision making.
Various opportunities for improvement and refinement were
identified as set out in the table below. 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.
Focus areas
Commentary and actions for 2024
Board administration
In line with the continued growth ambitions of the Group, a reassessment of the administration of the Board
agenda is required to facilitate sufficient time for the Board to debate and constructively challenge strategic
matters. As part of this reassessment, regard is also to be given to the inclusion of the outcomes from debates
on proposals that are held prior to their presentation to the Board.
Culture
Agreed actions by the Board:
• Reassess the administration of the Board timetable and agenda to ensure sufficient time is allocated to the
presentation of strategic initiatives.
• Ensure that Board papers sufficiently detail the debate and challenge that has taken place through the
development process of Board proposals.
The Board acknowledged the importance of ensuring the ongoing alignment of culture to the Group’s purpose.
In order to continue to fulfil its oversight responsibilities, it was agreed that the reporting should be revisited
and enhanced, where appropriate, to ensure the Board continues to receive the appropriate level of information
to enable it to effectively assess and monitor culture.
Agreed actions by the Board:
• At least bi-annually, the Board are to discuss the Group’s management of culture, with a key focus on topics
such as the results from employee surveys.
Effective control environment It was acknowledged that as the business continues to grow, it is important to ensure that the control
environment and three lines of defence remain effective, and it was agreed that they should be closely
monitored to assess whether they remain effective.
Agreed actions by the Board:
• A nested meeting of the Group Audit Committee and GRCC is to be held to discuss the control environment
and ensure that all areas remain effective and interconnected.
• Consider the recent changes to the Code and oversee the implementation of additional processes and
procedures, where required, to ensure compliance by 1 January 2025.
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 the appointments of Executive and
Non-Executive Directors;
the approach to succession planning;
the Board’s policy on diversity, equity, inclusion and belonging; 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 65.
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.
86 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
GOVERNANCE IN OPERATION continued
Risk management and internal control systems
The Board, with the assistance of the Group Audit Committee and
GRCC, and support from the Risk and Group Internal Audit functions,
as appropriate, monitored the Group’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 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.
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, can be found in the
Group Audit Committee report.
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 GRCC. The Committee is
also responsible for the oversight of compliance and regulatory
matters. Information regarding the composition of the Committee,
its responsibilities and a review of its activities during the year can be
found in the Group Risk and Compliance Committee report. Additional
information on the management of risks can be found in the Risk
management report on pages 64 to 69.
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 2023,
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 JRl are writing premiums
for Defined Benefit de-risking solutions, Guaranteed Income for
life solutions, the Secure lifetime Income product, and residential
lifetime mortgage solutions in the UK, and the servicing and
administration of in-force policies. PlACl’s principal activities focus
on the orderly run-off of life assurance products and annuities,
and writing new Care annuities in the UK.
Boards
Operating the life companies’ Boards on a nested basis with the
Board ensures the Group 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 for JRl and PlACl
business 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 respective Board. The matters
reserved for the JRl and PlACl Boards are reviewed at least annually
to ensure that they reflect best practice and are aligned with the
matters reserved for the Board, where appropriate.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 87
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 one Executive Director. There
were four scheduled Board meetings held during the year as well
as a strategy day. Additional meetings were held to oversee the
implementation of the Consumer Duty programme of activities.
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 (“JRMl”) and Partnership Home
loans limited (“PHll”), is the origination and administration of
loans secured by residential mortgages. Each Board comprises
three Non-Executive Directors and two Executive Directors. Four
scheduled meetings were held during the year and additional
meetings were held to oversee the implementation of the
Consumer Duty programme of activities. The matters reserved
for the JRMl and PHll Boards have been documented and
approved by the respective Boards.
Board committees
Audit
The Boards of JRl and PlACl have established independent subsidiary
audit committees to ensure effective oversight of financial reporting
and internal controls, and to ensure compliance 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 set aside,
where appropriate, to consider matters specific to the 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 delegated responsibilities
of each Committee, are reviewed and approved by the JRl and PlACl
Boards at least annually. 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 the
oversight of 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 the 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 GRCC to consider investment risk related matters.
The terms of reference, which set out the scope and delegated
responsibilities of each Committee, are reviewed and approved by
the JRl and PlACl Boards at least annually.
88 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
NOMINATION AND GOVERNANCE COMMITTEE REPORT
REVIEW OF THE YEAR
The Committee held three scheduled meetings during the year. A key
focus was Director appointments and succession planning for the Board
and its Committees, including the orderly transition of the Board as the
longer-serving Non-Executive Directors retired and new Directors were
appointed. Director inductions, Board effectiveness and an assessment
of the Non-Executive Directors’ skills and capabilities were also areas
of focus during the year. The Committee also monitored developments
in governance and considered and agreed various enhancements to
its governance and oversight responsibilities for the future.
The Group Chief Executive Officer and Group 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.
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 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 regularly considers the composition and balance of
the Board and Board Committees with the objective to ensure that
the Board’s collective experience, expertise, diversity and cultural
alignment are aligned with the Group’s longer-term strategy.
Mark Godson was appointed as the Group Chief Financial Officer
on 1 December 2023, replacing Andy Parsons who retired on
31 December 2023. Further details on the appointment process
for Mark Godson are included overleaf.
Two new independent Non-Executive Directors were appointed in
2023, Mary Phibbs and Jim Brown, and longer-serving Non-Executive
Directors, Paul Bishop and Ian Cormack, retired as Directors. Following
a comprehensive search process, Mary Phibbs was appointed as an
independent Non-Executive Director on 5 January 2023 and took
over the role of Senior Independent Director at the conclusion of the
AGM on 9 May 2023. External search firm, Teneo, which has no other
connection to the Company or any Director, was engaged to support
the recruitment.
During the year, the Committee considered the Board and Board
Committees’ structure, including Directors’ skills, experience
and capabilities, and diversity, and concluded that a further
Non-Executive Director should be appointed. Following an extensive
search utilising the services of Teneo, and after concluding fitness
and propriety checks, Jim Brown was appointed as an independent
Non-Executive Director and member of the Group Risk and
Compliance Committee (“GRCC”), Remuneration Committee, and JRl
and PlACl Investment Committees, on 1 November 2023. Jim has
considerable experience in the retail financial services industry and
strong stakeholder management skills, and he brings excellent
technical abilities and experience of digitisation, which are key
attributes to complement the existing skills, experience and
capabilities of the Board. Other changes to Board Committee
membership, which were recommended by the Committee and
subsequently approved by the Board, are outlined in the Chair’s
governance overview.
BOARD SKILLS, KNOWLEDGE AND EXPERIENCE
Following various Board changes during the year, the Committee
considered the skills, knowledge and experience of each Board
member, which is summarised in the skills and expertise matrix
at the end of this report. The assessment of the Board’s skills and
areas of expertise feeds into succession planning and the ongoing
recruitment of Non-Executive Directors, with action being taken to
address areas highlighted for strengthening.
JOHN HASTINGS-BASS
Chair, Nomination and
Governance Committee
I am pleased to present my report on behalf of
the Nomination and Governance Committee
(the “Committee”) for the year ended 31 December 2023.
This report outlines the key areas of focus and activities
carried out by the Committee during the year.
ROLE
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.
MEMBERSHIP
John Hastings-Bass
Chair
Michelle Cracknell
Independent Non-Executive Director
Mary Phibbs
Senior Independent Director
At the conclusion of the Company’s Annual General Meeting
(“AGM”) on 9 May 2023, Paul Bishop and Ian Cormack retired
as members of the Committee. Mary Phibbs was appointed
as a member of the Committee on 9 May 2023.
Committee meeting attendance can be found on p82.
Biographies of Committee members can be found on p72–73.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 89
The Board comprises individuals with significant financial services and
actuarial experience which continues to be valuable in supporting the
complex issues that can arise from the core business of the Group. 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.
Tailored induction programmes were provided for Mark Godson,
Mary Phibbs and Jim Brown during the year. An overview of Just’s
approach to Directors’ inductions is contained in the Governance in
Operation report. 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
During 2023, the Committee remained active in its consideration of
Non-Executive Director succession, which has led to various changes
to the Board composition. The Board monitors the tenure of the
Directors to ensure that it plans sufficiently in advance for an orderly
succession of 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 2023 including the appointment of Mark Godson
as Group Chief Financial Officer, and Conor Breslin joined Just in early
2024 as the new Group Chief Digital Information Officer.
DIVERSITY, EQUITY, INCLUSION AND BELONGING
The Board’s strategy reinforces Just’s commitment to drive progress
on all aspects of diversity, equity, inclusion and belonging with a
pledge to build a culture at Just that has diversity, equity, inclusion
and belonging at its core. The Board Diversity, Equity, Inclusion and
Belonging Policy was reviewed by the Committee during the year
and updated to reflect the Board’s commitment to recognise and
embrace the benefits of diverse Board Committees in line with
updates to the requirements of listing Rule 9.8.6. The Board Diversity,
Equity, Inclusion and Belonging Policy outlines our commitment to
hiring and developing diverse talent at all levels of the organisation.
APPOINTMENT OF MARK GODSON AS GROUP CHIEF
FINANCIAL OFFICER
The Chair, assisted by the Senior Independent Director, Group
Chief Executive Officer and Group Chief People Officer, led the
process that resulted in the appointment of Mark Godson as the
Group Chief Financial Officer.
An in-depth market mapping exercise was undertaken by Russell
Reynolds Associates (“RRA”) to identify potential candidates in
the market who were suitable for the role specification provided.
RRA, which has no connection to the Company or any Director,
produced a diverse longlist of candidates. The Committee requires
search firms to ensure that longlists and shortlists are balanced
from a diversity and inclusion perspective.
Following a number of first stage interviews, a shortlist of
candidates undertook a leadership assessment exercise, which
included a detailed interview process against the Just values
and the technical and leadership competencies for the role.
The Committee considered the suitability of the preferred
candidate for the role and recommended the appointment of
Mark Godson, which was subsequently approved by the Board
on 5 July 2023.
A tailored induction programme has been provided to Mark
to ensure an orderly transition of the role from Andy Parsons
who stepped down as the Group Chief Financial Officer on
1 December 2023 and retired as a Director on 31 December 2023.
BOARD RECRUITMENT AND SUCCESSION PROCESS
STAGE 1
Confirm objective of the process
and the role specification
STAGE 2
Engage an external recruitment
firm and set out process
STAGE 3
Assess how the specification can
be met through a longlist
STAGE 4
Review technical and cultural fit
to agree a shortlist
STAGE 5
Identify the preferred candidate
to recommend to the Board
As at 31 December 2023, the Board met the three targets on Board
diversity set out in listing Rule 9.8.6. The Senior Independent Director
is a woman and one Non-Executive Director is from a minority ethnic
background. As set out in a table on diversity in the Directors’ report
on page 123, 50% of the Board and 20% of Executive Management
are women.
The Committee fully supports Just’s commitment to all aspects
of diversity, including gender, race, sexuality, neurodiversity and
disability, and welcomes the Group’s strong progress with respect
to gender and ethnic diversity since signing up to the Women in
Finance Charter and Race at Work Charter.
EFFECTIVENESS
Board and Committee effectiveness
The annual review of Board effectiveness was facilitated by an
independent external consultant, Boardroom Review limited.
The Committee considered and approved the proposed facilitator
and the format and timeline of the evaluation exercise. Further
information about the review and the conclusions can be found in
the Chair’s governance overview and Governance in Operation report.
The Committee conducted a review of individual Director effectiveness.
This included considering their independence, length of service, other
time commitments, attendance at regular and ad-hoc meetings, and
feedback from the Group Chair on his assessment of their overall
performance and effectiveness. The Senior Independent Director
carried out the review for the Group Chair.
90 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
NOMINATION AND GOVERNANCE COMMITTEE REPORT continued
Independence and time commitment
In assessing the Non-Executive Directors’ independence, the
Committee noted the Code requirements, which states that the
following circumstances may impair independence:
• serving more than nine years as a Non-Executive Director;
• has been an employee of the Company within the last five years;
• has had a material business relationship with the Company within
the last three years;
• has received additional remuneration from the Company;
• has close family ties; and
• holds cross directorships with other Directors.
The Committee concluded that the independence of the Non-
Executive Directors was not impaired. 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.
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, balance of skills,
knowledge and experience of the Board as well as taking into
consideration the requirements of the UK listing Rules.
The Committee and the Board believe 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, 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 monitored proposed changes to the Code
and considered the potential implications to reporting requirements.
It considered best practice around Director appointments and agreed
on various enhancements to future recruitment processes.
PRIORITIES FOR THE YEAR AHEAD
The focus of the Committee for the year ahead is to strengthen the
effectiveness of the Board’s governance and oversight framework
including continued enhancements to its oversight of Consumer
Duty and sustainability matters. It will revisit the Board’s role in
the oversight of Just’s culture and consider whether there are
any opportunities to enhance future reporting to the Board. The
Committee will also oversee the implementation of any changes
required to Just’s governance processes to ensure compliance
with the new requirements in the Code published in January 2024.
On behalf of the Nomination and Governance Committee.
JOHN HASTINGS-BASS
Chair, Nomination and Governance Committee
7 March 2024
BOARD SKILLS AND EXPERTISE TO SUPPORT LONG-TERM SUCCESS
The skills and expertise matrix below sets out a high level of skills and experience that the Non-Executive Directors have assimilated
outside of their Board role at Just. The collective position is enhanced by the innate differences in approach and thinking styles, which
results from the diverse background and experience of each individual as set out in their biographies on pages 72 to 74.
Core skills Secondary skills
John
Hastings-Bass
Jim
Brown
Michelle
Cracknell
Mary
Kerrigan
Mary
Phibbs
Kalpana
Shah
Sectoral Experience
Insurance / Financial Services
Actuarial
Pensions
Equity Release
Functional Expertise
Customer Experience
Digital / Fintech
Finance / Audit / Accounting
Mergers and Acquisition
Remuneration
Risk Management
Sustainability
Other
Financial Services Regulation
listed Board Experience
GROUP AUDIT COMMITTEE REPORT
MARY PHIBBS
Chair, Group Audit
Committee
“I am pleased to present my report on behalf of the
Group Audit Committee (“the Committee”) for the year
ended 31 December 2023. This report outlines the
main activities and areas of focus during the year.”
ROLE
The Committee is responsible for assisting the Board in
discharging its responsibility for 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 responsible for the oversight of the work and effectiveness of
the Group Internal Audit function and the external auditors.
The Committee considers the above matters from the perspective
of the Company and each of the Group’s principal 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
alongside other Committees, in particular the Group Risk and
Compliance Committee (“GRCC”), with close co-operation
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.
MEMBERSHIP
Mary Phibbs
Mary Kerrigan
Kalpana Shah
Chair
Independent Non-Executive Director
Independent Non-Executive Director
Paul Bishop retired as a Director and Chair of the Committee
on 12 July 2023. From the conclusion of the Company’s Annual
General Meeting on 9 May 2023, Mary Kerrigan was appointed as
a member of the Committee.
Committee meeting attendance can be found on p82.
Biographies of Committee members can be found on p72–74.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 91
REVIEW OF THE YEAR
This is my first report as Chair of the Committee at Just Group. Firstly, I
would like to thank my predecessor, Paul Bishop, for his commitment to
the role before stepping down on 12 July 2023 when I took over. I have
been a member of the Committee since 5 January 2023, and am pleased
to have taken over as Committee Chair. I was also pleased to welcome
Mary Kerrigan who joined as a member of the Committee with effect
from 9 May 2023.
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 and includes
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.
The Committee held nine meetings during the year. 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 and met privately with each of the
Group Chief Financial Officer, Director of Group Internal Audit, and
the external auditor without executive management being present
during the year to give them the opportunity to discuss any matters
confidentially. The Committee received briefing sessions throughout
the year on a number of relevant areas including Solvency II,
implementation of the new IFRS 17 insurance accounting standard,
longevity, and property assumptions, all of which were led by
management’s subject matter experts.
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
had decided to focus on. Regular reporting was received from Group
Internal Audit and the external auditor as outlined later in this report.
Key areas of focus during the year included the following matters.
Financial reporting
In 2023 and to date in 2024, the Committee:
•
•
•
•
• oversaw the implementation of the IFRS 17 “Insurance contracts”
and IFRS 9 “Financial instruments” accounting standards by the
Group and its insurance subsidiaries;
reviewed the changes in the Group’s accounting policies for
insurance contracts, including associated significant judgements;
reviewed the transition approach applied on adoption of IFRS 17
including the restatement of the opening balance sheet and
2022 results;
reviewed the existing 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 they are to be disclosed within the Annual
Report and Accounts;
reviewed the changes in APMs and KPIs on adoption of IFRS 17;
•
• considered the findings from the FRC’s thematic review of IFRS 17;
reviewed the assumptions critical to assessing the value of assets
•
and liabilities, in particular insurance liabilities and lTMs;
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 2023;
reviewed 31 December 2023 Group Annual Report and Accounts
and the half-year statements to 30 June 2023;
•
•
•
92 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
GROUP AUDIT COMMITTEE REPORT continued
• assessed whether the Group Annual Report and Accounts, taken
as a whole, were fair, balanced and understandable and provided
the information necessary for shareholders to assess the Group’s
performance, business model and strategy, and concluded that
they were; and
The Committee was pleased to advise the Board that the judgements
and assumptions were appropriate and that the Group Annual Report
and Accounts were fair, balanced and understandable, and provided
the necessary information for shareholders to assess the Group’s
position, prospects, business model and strategy.
• oversaw the preparation and reviewed the Group’s 2023 Solvency
II reporting including the Group-wide Solvency and Financial
Condition Report (“SFCR”), the Summary Group and Solo Regular
Supervisory Report 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 constructive challenge and professional scepticism
that its role required throughout the year.
Accounting standards
The new accounting standard for insurance contracts “IFRS 17” was
introduced during 2023 following the successful implementation and
transition from the previous standard IFRS 4. The Committee reviewed
draft disclosures of IFRS 17 data in the IFRS 17 updates released in
February and July 2023, and the Group Interim announcement and
Group Annual Report and Accounts. The Committee also monitored
the resilience of 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 2023 Group Annual Report and Accounts, and how
these were addressed, are set out in the following table.
SIGNIFICANT
JUDGEMENTS
APPROACH
ACTION BY THE COMMITTEE
In determining the transitional approach for the
Group’s in-force insurance contracts on adoption
of IFRS 17, an assessment of impracticability
of applying the fully retrospective approach
was performed.
The Committee reviewed management’s impracticability assessment
and concluded that it was appropriate to apply the fully retrospective
approach only for insurance contracts written after 1 January 2021.
The fair value approach will be applied to insurance contracts written
prior to 2021.
IFRS 17
transitional
approach
Selection of
discount rate
for insurance
and
reinsurance
contracts
Judgement was applied in determining the
approach for selection of the rate used to
discount insurance contracts. This included
selecting the appropriate reference portfolio
of investment assets.
The Committee reviewed the methodology approach for discount
rates applied on adoption of IFRS 17. The Group has elected to
calculate discount rates based on a top-down approach using a
reference portfolio of the actual investments backing the insurance
contracts net of reinsurance and also on allowance for deductions
for credit risk.
On policy inception the contractual service margin (“CSM”) is
calculated based on the yields from a reference portfolio of the
current target portfolio mix in accordance with the investment
strategy. Interest is accreted on the CSM using a weighted average
discount rate curve.
The Committee reviewed the methodology approach for
determination of coverage units on adoption of IFRS 17. The Group
weights coverage units across different phases on contracts using the
probability of the policy being in force in each time period. Coverage
units are based on annuity payments for pensioners and investment
returns for deferred DB scheme members.
Determination
of coverage
units
Determination of coverage units for the release of
CSM to profit and loss involved assessment of the
pattern of delivery of insurance services over the
terms of insurance contracts.
Calibration
of the risk
adjustment
The risk adjustment for non-financial risk is
calibrated based on management’s judgement
of the level of compensation that the Group
requires in exchange for bearing the risk of
uncertainty associated with selling insurance
contracts over the policy term.
The Committee has reviewed the assessment by management.
It agreed that the calibrated risk adjustment was appropriate.
The risk adjustment applies a 70% level of confidence that the
longevity, expense and insurance contract specific operational
risks will be covered by the liabilities when viewed over the
lifetime of the contracts.
Financial
assets
– valuation
method
For financial assets not held in an active market
and where a listed price is not available,
determination of the appropriate valuation
method requires judgement.
The Committee noted that for illiquid assets such as commercial
mortgages, infrastructure loans and long income real estate, an
assessment of the extent of use of unobservable inputs in the
valuation is made and management has applied appropriate
judgement in determining the valuation technique.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 93
SIGNIFICANT
JUDGEMENTS
APPROACH
ACTION BY THE COMMITTEE
Measurement
model for
lifetime
Mortgages
A key feature of Just’s lifetime Mortgages (“lTMs”)
is the No-Negative Equity Guarantee (NNEG).
Determination of the appropriate measurement
model to measure the fair value of these contracts
requires significant judgement.
longevity
assumptions
Assumptions regarding the length of time that
Retirement Income and lTM customers are
expected to live are key assumptions when valuing
the Group’s insurance liabilities and lTM assets.
Property
assumptions
used to value
the Group’s
lifetime
Mortgages
Solvency II
Matching
adjustment /
IFRS Credit
default
assumptions
The values of the Group’s lTMs are reliant on a
range of assumptions, of which the key ones are
future house price growth and house price volatility.
These assumptions determine the expected
shortfall of the house value compared with the
outstanding lTM balance on redemption that
is covered by the NNEG which is given to all
lTM customers.
The matching adjustment is a mechanism
prescribed in the Solvency II Directive that allows
the Group to adjust the relevant risk-free interest
rate term structure for the calculation of a best
estimate of a portfolio of eligible insurance
obligations. Under IFRS, the Group reduces gross
yields by a credit default assumption to allow for
both expected and unexpected credit
default losses.
Valuation of
residential
ground rents
Judgement was applied in determining the
appropriate adjustment to the market value of the
Group’s portfolio of residential ground rents in light
of the uncertainty introduced by the Government
consultation regarding residential ground rents.
The Committee noted that in line with industry practice, the Group
continues to apply a variant of the Black-Scholes option pricing
formula with real-world assumptions to determine the fair value
of the NNEG component of lTMs. The Group has selected 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.
longevity assumptions are a key area of focus for the Board and the
Committee. The expected impact on future mortality rates over the
short and long term was considered. Mortality experience has been
highly volatile and at times significantly higher in aggregate than
expected since March 2020 because of the COVID-19 pandemic.
There is some evidence that the outlook is stabilising; with insights
emerging since mid-2021 strongly suggesting that the pandemic will
have enduring, direct and indirect influences on future mortality
experience. From 31 December 2023, the explicit allowance for the
impact of the pandemic on future mortality experience was revised to
reflect the change in the Group’s estimates in light of the emerging
evidence of the future impacts of COVID-19 infections and continuing
and likely long-lasting disruption to healthcare services.
The Committee reviewed the key assumptions including detailed
analysis from management. Whilst there is uncertainty over the
extent of short-term property valuation changes, 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 2022 year end.
The Committee concluded it was appropriate for the IFRS
methodology to remain unchanged from the 2022 year end.
The Committee reviewed management’s assessment of the estimated
impacts of the range of scenarios described in the Government’s
consultation regarding residential ground rents, and the possibility
of an outcome other than one of the five options considered. The
Committee considered management’s approach to estimating the
fair value of the Group’s investment in residential ground rents and
reviewed the disclosure within the Annual Report in light of the
significant uncertainty regarding the conclusion of the consultation.
The Committee concluded that the adjustment to the fair value in
light of the uncertainty was appropriate and was satisfied with the
disclosures made.
94 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
GROUP AUDIT COMMITTEE REPORT continued
Alternative performance measures
The Committee reviewed the changes in APM and KPIs on adoption of
IFRS 17. The Committee considered the APMs and KPIs and concluded
that they were 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 and the FRC.
Going concern
As part of the assessment of going concern and longer-term viability
for December 2023, the Committee considered factors including a fall
in property prices from the business plan, additional downgrades,
a reduction in interest rates, and other uncertainties which may
impact the Group including a scenario of the worst case outcome
of peppercorn rent from the Government consultation regarding
the restriction of ground rent for existing residential leases.
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 and liquidity stresses; eligible own funds being
in excess of minimum capital requirements in stressed scenarios;
further credit downgrades and property fall sensitivity; interest
rate sensitivity; availability of Transitional Measures on Technical
Provisions (“TMTP”) recalculation; 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 2023 and the forecast regulatory
solvency position calculated on a Solvency II basis, which includes
adverse scenarios.
Regulatory reporting oversight
The Committee received regular updates on the Group’s regulatory
reporting matters, including the oversight and preparation of the
Group’s annual SFCR.
The Committee has responsibility for overseeing the recalculation of
TMTP. During the year, it reviewed and approved changes to the TMTP
methodology for inclusion in the SFCR at 31 December 2023 to reflect
refinements in the methodology. There was regular engagement with
the PRA on the changes proposed to the TMTP and other matters
affecting reporting during the year.
The implementation of Solvency II in practice has continued to evolve
and is expected to do so in the future. Following the UK’s withdrawal
from the European Union, the UK Government has been working with
regulators to adapt the UK’s financial services regulatory framework
to the UK’s position outside of the EU. Reforms to Solvency II, to be
known as Solvency UK, will be delivered through a combination of
legislation and PRA rules.
The Committee reviewed the changes to the Solvency II position
arising from the reform to Risk Margin, legislation for which came
into force as of December 2023.
Following the issue of major consultations in 2023 by the PRA on
simplification and flexibility in CP12/23 and investment flexibility,
including matching adjustment, in CP19/23, the corresponding policy
statements are expected to be issued in the first half of 2024. Once
the policy statements are published, the Committee will consider if
any changes are required to the Solvency II position.
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
implementation of the new General ledger, Financial Reporting
Controls Framework and Treasury transformation and automation
initiatives, which together, were designed to enhance controls and
create scalable Finance systems that deliver increased value for
the business.
EXTERNAL AUDIT
Appointment
The Company’s external auditor is PwC. 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 fourth 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 2024 Annual General Meeting on
7 May 2024 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.
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 reviewed
regular reports from PwC and 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 between the lead audit engagement
partner and the Chair of the Committee on a regular basis.
In 2023 and to date in 2024, the Committee:
•
•
•
•
•
reviewed the 2023 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;
received an update from the external auditor on their review of
year two of mandatory reporting under the UK listing Rules, the
Task Force on Climate-related Financial Disclosures (“TCFD”);
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 2023 Annual Report and
Accounts and any non-audit services;
• considered the minimum standards for Audit Committees, noting
•
the focus on greater market diversity; and
reviewed the external auditor’s explanation of how the significant
risks to accounts were addressed.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 95
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
received a detailed audit plan from PwC, identifying its assessment
of the key risks. For the 2023 reporting period the significant risks
identified were broadly in line with those in 2022. The key risks
identified were: Valuation of insurance liabilities (mortality
assumptions, expense assumptions, credit default assumptions,
and judgements and models relating to the implementation of IFRS
17), valuation of level 3 investments, recoverability of investments in
subsidiaries by the Company, calculation of the Solvency II matching
adjustment, management override of controls and fraud in revenue
recognition. The significant judgements made in connection with
these risks are set out in the table on pages 92 and 93.
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 2023 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 and delivered effectively. The Committee concluded that PwC
had demonstrated a depth of knowledge, as well as an appreciation
of complex issues, whilst providing constructive, independent and
objective challenge to management.
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 £3.2m (2022: £3.7m). The value of non-audit services
during the year amounted to £0.74m (2022: £0.7m), comprising:
Audit-related assurance services (interim review &
Subscription to PwC Viewpoint accounting manual)
Audit of the Solvency Financial Condition report (“SFCR”)
£m
0.2
0.54
The ratio of non-audit services to audit services fees was 1:5.3.
Non-audit services of £0.54m were provided during 2023 in relation
to the audit of the SFCR. A further £0.2m of non-audit services were
provided in relation to the review of the Group’s interim report and
Just subscription to PwC’s Viewpoint accounting manual.
Non-audit services for 2023 were similar to the previous year.
The non-audit services were 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 received and reviewed written
confirmation that PwC had 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 had also concluded that
the independence was 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 also
appointed other accountancy firms to provide certain non-audit
services in connection with internal audit, controls, governance, tax
and regulatory advice, and with regard to the implementation of IFRS
17. An analysis of auditor remuneration is shown in note 3 to the
consolidated financial statements. The Committee approved PwC’s
remuneration and terms of engagement for 2023 and remained
satisfied with the audit quality and that PwC continued to remain
independent and objective.
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,
Compliance and Actuarial Assurance, which oversee the first line,
ensuring 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 Group 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 that are overseen by the appropriate
Management Committees; 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.
96 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
GROUP AUDIT COMMITTEE REPORT continued
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 included updates on audit activities,
progress of the Internal Audit plan, the results of all audits with a
particular focus on any unsatisfactory audits, and the action plans to
address those areas. Monitoring and reviewing the scope, extent and
effectiveness of the activity of the Group Internal Audit team was
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 received regular updates
on any concerns identified and, where appropriate, what action had
been taken to address the issues raised. The Committee received a
report on two whistleblowing disclosures received during the year
which related to potential fraud and regulatory-related concerns.
The Committee noted the steps taken by the Group Company
Secretary to investigate the concerns and considered whether
the framework remained fit for purpose, from which it was
satisfied that there were no material issues.
In 2023, the Committee:
• continued to oversee the Group Internal Audit function with the
Director of Group Internal Audit reporting directly to the
Committee Chair;
• held private discussions with the Director of Group Internal Audit
during the year;
• approved the appointment of an acting Head of Internal Audit
while the Group undergoes recruitment of a permanent
replacement of the Director of Group Internal Audit who left the
Group on 31 December 2023;
• considered and remained satisfied that the Group Internal Audit
function remained appropriately resourced;
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 Group whistleblowing
policy which is reviewed and approved annually.
On behalf of the Group Audit Committee
MARY PHIBBS
Chair, Group Audit Committee
7 March 2024
•
•
•
• oversaw the engagement of EY and Grant Thornton to work with
the Group Internal Audit function on the combined internal audit
assurance work to complete the audit plan for 2023;
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;
reviewed and approved the Just Group Internal Audit
Independence and Objectivity Policy;
reviewed and approved the Just Group Internal Audit Charter,
which is available to view on the Group’s website; and
reviewed and approved the Internal Audit calendar for 2023.
•
•
•
•
Outside the formal Committee process, the Committee Chair regularly
met with the Director of Group Internal Audit and is accountable for
the setting and appraisal of their 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 those actions.
The Chartered Institute of Internal Auditors’ standards require that
an External Quality Assessment (“EQA”) of the Internal Audit function
is carried out every three to five years. The Committee oversaw the
appointment of Deloitte llP who performed an EQA in May 2023
which assessed the function against the Chartered Institute of
Internal Auditors’ standards with an overall rating of Partially
Conforms, which judged practices to have deviated from the
Standards, but the deficiencies did not preclude the Internal Audit
function from performing its responsibilities. A quality assurance
and improvement plan was developed by the Group Internal Audit
function with a number of deliverables already completed or in
progress. The Committee continues to receive regular updates on
achievement of agreed milestones.
GROUP RISK AND COMPLIANCE COMMITTEE REPORT
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 97
REVIEW OF THE YEAR
Eight scheduled meetings were convened during 2023. Four of the
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. A further two scheduled
meetings were held on a nested basis with the JRl and PlACl
Investment Committees (“Nested meetings”). The purpose of the
Nested meetings is to review investment activities to ensure they
are within risk appetite, and to consider and challenge any proposed
changes to the investment risk frameworks.
The Chair of the JRl and PlACl Boards, 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 and the Board concluded that the
Committee was effective. 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 assesses its compliance with
its terms of reference annually.
The Committee follows an annual rolling forward agenda with various
standing items considered throughout the year in addition to other
focus areas as outlined in more detail in the next section. A report
from the Group Chief Risk Officer is considered at six scheduled
meetings, and a report from the Director of Financial Risk outlining
investment risk-related concerns is reviewed at each scheduled
Nested meeting. Own Risk and Solvency Assessment (“ORSA”) reports
and updates, compliance oversight reports, conduct and customer
risk dashboards, and updates on regulatory developments and cyber
security risk strategy are received on a quarterly basis or more
frequently 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 proposed changes
during the course of the year.
KALPANA SHAH
Chair, Group Risk and
Compliance Committee
I am pleased to present my report on behalf of the Group
Risk and Compliance Committee (the “Committee”)
for the year ended 31 December 2023. This report
outlines the key areas of focus and main activities carried
out during the year.
ROLE
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 an important 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. The Committee also oversees regulatory
compliance matters.
The Committee is responsible for considering the above matters
from the perspectives of 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.
MEMBERSHIP
Kalpana Shah
Jim Brown
John Hastings-Bass
Mary Phibbs
Chair
Independent Non-Executive Director
Chair of the Board
Senior Independent Director
At the conclusion of the Company’s Annual General Meeting
on 9 May 2023, Paul Bishop and Ian Cormack retired as members
of the Committee. Mary Phibbs and Jim Brown were appointed
as members of the Committee on 5 January 2023 and
1 November 2023, respectively.
Committee meeting attendance can be found on p82.
Biographies of Committee members can be found on p72–74.
98 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
GROUP RISK AND COMPLIANCE COMMITTEE REPORT continued
AREAS OF FOCUS
Key areas of focus during the year included the following matters.
Matters considered
How the Committee addressed the matter
RISK MANAGEMENT, CONTROLS AND CULTURE
RISK MANAGEMENT
AND CONTROLS
FRAMEWORK
RISK CULTURE
ORSA
RECOVERY AND
RUN-OFF PLANS
RISK APPETITES
INVESTMENT
RISK OVERSIGHT
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 received reports on activity to enhance the documentation of the control environment over core
risks (other than financial reporting) to ensure the Group’s activities continue to evolve in line with leading practice.
Separate updates on the financial reporting controls 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, the Risk Function and Group Internal Audit provided an
update on the completeness of key controls and an outline of the assurance activities that were being undertaken
throughout 2023 to assess the effectiveness of the overall controls framework. The findings of this assessment will
be presented to the Committee in 2024 including any concerns that require further attention.
During the year, the Committee received an update on risk culture which included management information on the
key risk indicators and observations from the Group Risk function, which facilitated a constructive discussion on
positive developments and areas requiring more focus by the business. Work is underway to determine how the
Group’s culture and people metrics and associated key performance indicators need to be developed to explicitly
reflect the delivery of good customer outcomes under Consumer Duty regulation. The Committee will consider the
outcomes of this work and the reporting requirements in 2024.
The Committee received updates on risk events and breaches, and considered the controls assurance processes in
place to investigate risk events during the year. The Committee was satisfied that, overall, there is a healthy risk
culture of reporting risk events and breaches, and that processes are in place to address any weaknesses identified
as part of ongoing monitoring and oversight.
The Own Risk and Solvency Assessment (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 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 main risks it faces. The Committee considered the Group’s readiness to operate effectively
in an uncertain environment, the sustainability of the Group’s business model and Just’s ability to recover from
various stress events. It considered and agreed recommendations from the Risk function to enhance the ability of
the Group to address and withstand the risks identified and they will be monitored to ensure they are implemented
effectively. The Committee also received regular updates on the Group’s evolving risk profile for review and
discussion throughout the year. This included an in-depth review of the operational risk appetite tolerances and key
risk indicators to ensure that the measurement of risk was appropriate and reflected the size and growth ambitions
of Just. Further details of the Group’s principal risks can be found on pages 66 to 69.
The Committee receives 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 2023, 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 the impact on capital and liquidity. When considering the main execution risks of the Run-Off Plan, the
Committee was supportive that the scenarios were 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.
Following a comprehensive review in 2022, the Committee considered the continued appropriateness of the
capital, liquidity and operational risk appetites, against which the Business Plan and strategy are assessed, and
concluded that the overarching risk appetite statements and overall risk limits should remain unchanged in 2023.
The Committee agreed to change the risk preference for traded (derivatives and securities financing) counterparty
risks to align it with similar risks, which was subsequently approved by the Group Board. The Committee considered
the completeness, adequacy and consistency in approach applied to the operational risk appetite statements, and
approved proposed changes to the risk taxonomy and categories, which will be reflected in the enterprise risk
management framework in 2024.
During the year, the Committee reviewed the challenges and lessons learnt in managing the dynamic relationship
between Solvency II capital and IFRS equity exposures to protect shareholder value, including a case study on
interest rate management. The discussions led to a proposal to set appetites for financial risks to IFRS equity under
IFRS 17. The Committee was supportive of the proposal, which was subsequently approved by the Group Board.
The Nested meetings of the Committee considered proposed changes to the investment risk frameworks and
investment limits during the year. There was also a discussion on the risks related to the purchase of gilts to support
interest rate management of Solvency and IFRS metrics, and how these risks were mitigated. A focus area in 2023,
which will continue in 2024, is the oversight of the ongoing development of enhanced credit risk metric measures to
support portfolio management and regulatory developments more effectively.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 99
Matters considered
How the Committee addressed the matter
OPERATIONAL RESILIENCE
OPERATIONAL
RESILIENCE
FRAMEWORK
CYBER SECURITY
AND DATA
PROTECTION
SUSTAINABILITY
CLIMATE CHANGE
SOLVENCY II
INTERNAL MODEL
The Committee considered a self-assessment, which described Just’s operational resilience at a specific date and
included an overview of lessons learnt from testing that had been conducted, and future remediation and test
plans scheduled to ensure ongoing operational resilience. As part of this review, the Committee considered and
agreed changes to the impact tolerances for various important business services to ensure they are reasonable
for the Group to operate safely and soundly to protect our customers in the event of a material disruption to
business operations.
During the year, the Committee enhanced its oversight of the Group’s information security strategy, including cyber
security, and kept abreast of the steps being taken to attain an industry recognised accreditation for information
security management. In addition to receiving regular reporting on cyber security developments, the Committee
engaged on data risks, with particular focus on the risks associated with the use of third party administrators, and it
considered the steps taken by Just to ensure that appropriate governance oversight processes and controls are in
place to mitigate the risks.
The Committee also considered changes to the information security and data protection key risk indicators which
were made to ensure they remain appropriate for the identification and measurement of these risks.
During 2023, the Nested meetings of the Committee received updates on the Responsible Investment Framework
and the transition plan to meet the climate-related commitments set by the Group Board, including the specific
target for scope 3 emissions to reduce by 50% by 2030 and achieve net zero by 2050. 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. This will remain an important focus area for the Committee in 2024 and beyond. During
the year, the Committee also considered responsibilities for the management and oversight of sustainability. The
Committee noted that there was appropriate accountabilities and oversight across the various environmental, social
and governance elements of the sustainability framework to manage and mitigate sustainability-related risks.
The Committee received an update on the Internal Model validation plan and developments in 2023 including risks
to their delivery. Proposed changes to the approach taken by PlACl to calculate its regulatory capital requirement,
which was aligned with the Group’s view of the underlying risk to PlACl, were considered and recommended to the
Board for approval. As part of the approval process, the Committee considered the governance process followed
when developing the proposed changes, regulatory expectations and the Group Chief Risk Officer’s opinion on the
proposals. The Committee also received a report from the Group Chief Actuary, which summarised the validation
work carried out on the JRl Internal Model during the year and conclusions of the validation performed. The report
also summarised the validation work on the proposed changes to the calculation of PlACl’s regulatory Solvency
Capital Requirement carried out in 2023 and outlined further work planned for 2024.
COMPLIANCE, CONDUCT AND REGULATORY RISK
COMPLIANCE
OVERSIGHT
CONDUCT AND
CUSTOMER RISK
REGULATORY RISK
In 2023, the Committee received regular updates on the Group’s oversight of prudential and conduct risks, and
financial crime issues. It also approved the compliance monitoring programme, including various changes
requested throughout the year, and provided oversight of the findings from the reviews completed during the
year. The Committee considered findings from various regulatory thematic reviews including the FCA’s review
of advice processes for lifetime mortgages and noted the actions being taken to ensure the Group continues to
meet regulatory expectations.
The Committee regularly reviews and challenges management’s view of conduct and customer risks across the
Group. During the year, the Committee continued to provide oversight on the programme of work to update the
conduct and customer risk framework to ensure that consumer outcomes are properly considered. The conduct
and customer risk dashboard presented to the Committee has evolved to include a number of new metrics and
there will be further enhancements in 2024 to reflect evolving Consumer Duty requirements.
The Committee receives regular updates on general and specific regulatory developments relevant to the Group
and the actions being undertaken by management in response. During 2023, there continued to be a high level of
regulatory activity as covered in more detail in principal risks and uncertainties on page 67.
On behalf of the Group Risk and Compliance Committee
KALPANA SHAH
Chair, Group Risk and Compliance Committee
7 March 2024
Governance
100 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
DIRECTORS’ REMUNERATION REPORT
MICHELLE CRACKNELL
Chair, Remuneration
Committee
UNDERLYING OPERATING
PROFIT1
£377m
2022: £257m
IFRS PROFIT/(LOSS)
BEFORE TAX
£172m
2022: £(494)m
1 Alternative performance measure.
NEW BUSINESS PROFIT1
£355m
2022: £266m
ORGANIC CAPITAL GENERATION1
£126m
2022: £139m
Return on equity1
13.5%
2022: 10.3%
I am pleased to present the Remuneration Committee
Report for the year ended 31 December 2023.
STATEMENT FROM THE CHAIR OF THE REMUNERATION COMMITTEE
Dear Shareholder
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 Committee is made up of
Michelle Cracknell, John Hastings-Bass, Jim Brown and
Mary Phibbs. Jim Brown was appointed an 1 November 2023.
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.
Membership
Michelle Cracknell
John Hastings-Bass
Chair
Chair of the Board
Mary Phibbs
Senior Independent Non-Executive Director
Jim Brown
Independent Non-Executive Director
At the conclusion of the AGM on 9 May 2023, Ian Cormack retired
as a member of the Committee and Michelle Cracknell was
appointed Chair.
The Committee comprises three independent Non-Executive
Directors and the Group Chair, who was independent
on appointment.
Committee meeting attendance can be found on p82.
Biographies of Committee members can be found on p72–74.
This is my first report as chair of the Remuneration Committee at Just
Group. Firstly, I would like to thank my predecessor, Ian Cormack, for
his commitment to the role before stepping down at the 2023 AGM
when I took over the role. I have been an Non-Executive Director
since 1 March 2020 and member of the Committee since 14 May 2020,
and was pleased to take over as Committee Chair with effect from the
conclusion of the 2023 AGM.
The Company’s directors’ remuneration policy was renewed at that
AGM with over 95% of shares voted in favour, both for the new policy
and for the annual advisory vote on the Remuneration report.
In terms of Company performance during 2023, the business has
faced a number of challenges as a result of an uncertain global
and domestic macro-economic climate, heightened geo-political
uncertainty and domestic monetary policy undertaken by the Bank
of England 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 2023.
Shareholder funded sales in 2023 were up 24% to £3.9bn, driven by
growth in DB sales which were up 17% to £3.0bn. This was as a result
of completing 80 DB deals which is well ahead of the 56 transactions
in 2022. Underlying operating profit increased by 47% helped by
higher new business and in-force profit, and lower financing costs.
Alongside the good progress being made on the financial business
priorities, the Group has continued to build strong engagement levels
as reported in the colleagues and culture section page 50, 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).
Committee meeting attendance can be found on page 82.
Biographies of Committee members can be found on pages 72 to 74.
We have shared the work of the Committee and information on
remuneration with Board members and colleagues throughout the
year. Sessions with colleagues 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.
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REMUNERATION COMMITTEE 2023
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;
• approval of the grant of the 2023 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 2023 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 2024;
•
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 2023
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 2023, the strategic measures within the
scorecard for the Group STIP were changed to reflect the focus on
profitable and sustainable growth. 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 2023. David
Richardson and his team have delivered a strong set of results in
2023, demonstrated by the STIP outturn of 100% of maximum.
This creates the overall pool from which payments are made with
individual allocations based on personal performance.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 101
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 2023 of 4.5% for the CEO and the CFO,
against an average increase received by other employees (excluding
promotions and joiners shortly prior to year end of 6.0%. 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.
It was decided that no one-off payments should be made in relation
to cost of living in 2023. This was in response to the support provided
in 2022 and the sharp fall in the rate of inflation. The business did
however continue to provide support to employees in short-term
financial difficulty in the form of access to salary advances and
interest-free loans.
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 106 details the targets and outcomes relating to 2023. For
performance in 2023 the Committee approved awards for David
Richardson at 90% and Andy Parsons at 80% 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
outturn. 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.
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 2023. 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 107.
Financial
performance measure
New
business profit
Underlying
operating profit
New business
strain
Weighting
Outturn
40%
£355m
30%
£377m
30%
0.9%
Achievement
40%/40%
30%/30%
30%/30%
Strategic
performance measure
Achievement1
Adjustment
Aggregate Scores Corporate outturn
Moderated outturn
Outturn
David Richardson
Andy Parsons
People
1.9%
–
Customer
(0.9)%
–
100.0%
100.0%
Award level
Difference from
maximum2
90%
80%
-10%
-20%
1
The strategic performance measures did not affect the financial outturn of 100% due to
reaching the limit on the corporate outturn of 100%.
2 Outturn includes the impact of personal performance, see page 107.
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102 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
DIRECTORS’ REMUNERATION REPORT continued
Long Term Incentive Plan
As reported in last year’s report, in March 2023, awards under the
lTIP were made to David Richardson and Andy Parsons over shares
worth 200% and 175% of base salary respectively. These lTIP award
measures included organic capital generation at a weighting of 15%,
total shareholder return (“TSR”) performance compared with the
constituents of the FTSE 250 at 25%, return on equity at 45% and
environmental, social and governance (“ESG”) performance at 15%
of the lTIP.
The lTIP awards made in 2021 are due to vest in March 2024 with
reference to performance to 31 December 2023. The TSR performance
condition was achieved at 100%, the adjusted EPS condition was
achieved at 100%, and organic capital generation was achieved at
95%. Therefore 98% of the 2021 lTIP awards will vest in March 2024.
The Committee felt that outturns under the lTIP in respect of 2023
were appropriate and did not exercise discretion.
CHANGE OF CFO
During the year, Andy Parsons decided to retire as our CFO.
He continued in role until 1 December 2023 when he was succeeded
by Mark Godson. Andy continued to serve on the Board and as an
Executive Director until his retirement on 31 December 2023.
Andy continued to receive his normal remuneration for 2023 and,
on retirement, is regarded as a good leaver under our remuneration
policy. He receives a bonus for 2023 in the normal way (including 40%
being deferred into shares for a further three years) and will retain his
outstanding lTIP and Deferred Bonus share awards until their normal
maturity with the lTIP awards subject to performance assessment at
that time. Consistent with good practice, the lTIP awards will be
further reduced to reflect time pro-rating for the period not worked.
He will also be required to retain shares for a period of two years
post-retirement in accordance with the policy. He has not received
any termination payments.
Mark Godson joined the Group as CFO Designate on 6 November 2023
and joined the Board and became CFO with effect from 1 December
2023. His package is set moderately below that of his predecessor’s
with a starting salary of £400,000 and from 2024 onwards a bonus
and lTIP opportunity of 150% of salary (compared with 150% and
175% respectively for his predecessor). It is anticipated that his salary
and lTIP opportunity will increase as he becomes more experienced
in his role.
IMPLEMENTATION OF THE REMUNERATION POLICY FOR 2024
The policy was approved at the 2023 AGM with 95% support from
shareholders and is felt to continue to serve the Company well.
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 David Richardson would receive a
salary increase with effect from 1 April 2024 of 10%. He has now
served as CEO for five years and is considered high performing and
fully experienced. At the time of his appointment it was envisaged
that his salary would be aligned with that of his predecessor (£680k
in 2019) as he grew into the role. The impact of COVID slowed down
the Committee’s decision which has been implemented now to
reflect the strong financial footing which the Company has achieved.
As Mark Godson had only recently joined the Company, he was not
considered for a similar increase. The CEO’s increase is above 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 4.5%, with individual increases varying within a
range, depending on a number of factors. Having considered both
external benchmark data and relative pay levels across the
Company, the Committee considers this increase to be appropriate.
SUMMARY OF REMUNERATION FOR
DAVID RICHARDSON IN RESPECT OF 2023
VARIABLE
DEFERRED
47%
FIXED
CASH
31%
VARIABLE
CASH
22%
SUMMARY OF REMUNERATION FOR
ANDY PARSONS IN RESPECT OF 2023
VARIABLE
DEFERRED
48%
FIXED
CASH
32%
VARIABLE
CASH
20%
SUMMARY OF REMUNERATION FOR
MARK GODSON IN RESPECT OF 2023
VARIABLE
DEFERRED
0%
FIXED
CASH
100%
VARIABLE
CASH
0%
Salary
Benefits
Pension
STIP – cash
STIP – deferred
lTIP
(£000)
630
28
63
515
344
776
Salary
Benefits
Pension
STIP – cash
STIP – deferred
lTIP
(£000)
437
24
44
318
212
540
Salary
Benefits
Pension
(£000)
63
4
6
The remuneration figures for Mark Godson are from his appointment date as CFO
Designate on 6 November 2023.
A decision was taken not to take a tiered approach to budget
allocation for this year’s pay review. This was in response to the
improving economic situation, notably slowing inflation. Whilst
the potential for an economic downturn persists due to ongoing
geo-political uncertainty the case to revert to a flat approach was
deemed appropriate. The Committee have increased the organic
capital generation target for 2021 due to IFRS17 and strategic costs.
The organic capital targets for the 2022 and 2023 targets have also
been increased to reflect IFRS17 and strategic costs and in addition
the 2022 organic capital outturn will be adjusted to reflect the
ambitious growth targets set by the board and the impact on
organic capital generation.
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STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 103
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.
The Committee anticipates making awards under the lTIP over shares
worth 200% of salary to David Richardson and 150% of salary to Mark
Godson in 2024.
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 2024, there have been some
changes to measures:
• We have replaced Organic Capital Generation with Cash
Generation so that this metric aligned to strategic objectives is
not constrained by new business growth.
•
Including the investment emissions target which aligns to an
already existing external commitment made by Just. The main
impact that Just can make on the environment is through
its investments.
For the 2024 STIP performance year, there will continue to be three
performance measures focusing on profitable growth. The Committee
has approved the following:
COMPONENTS OF REMUNERATION
Illustration of 2024 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 37.5% 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 150% 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
150% 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%
47% 32% 21%
25%
20%
32%
27%
790
1,665
3,240
53%
3,940
43%
Remuneration
0
500
1,000 1,500 2,000 2,500
3,000
3,500
4,000
4,500
• Group STIP: The structure remains unchanged from 2023.
(£’000)
Fixed pay
STIP
LTIP
• For the Business units: A new additional adjuster has been
approved for 2024, which is to now have a strategic customer
measure for each business unit. The bonus pool is to be created
based on 50% of Group performance, and 50% on the performance
of the respective business unit. The business unit performance is
calculated by applying the business unit financial performance
modifiers first and then this is further adjusted by the +/-15%
business unit strategic customer modifiers. If the business unit
outturn is already at maximum this can only be a neutral or
downward adjustment.
Chair’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.
I continue to make myself available to discuss these arrangements
with key stakeholders and welcome feedback.
I hope that you will support the resolution at the AGM on the
Directors’ Remuneration Report (excluding policy summary).
MICHELLE CRACKNELL
Chair, Remuneration Committee
7 March 2024
Group Chief Financial Officer
Minimum
On-target
100%
51% 33% 16%
Maximum
28%
36%
36%
Maximum 50% growth
23%
31%
46%
460
910
1,660
1,960
Remuneration
0
500
1,000 1,500 2,000 2,500
3,000
3,500
4,000
4,500
(£’000)
Fixed pay
STIP
LTIP
Considering the policy
The Committee continues to consider the policy against 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.
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Governance
104 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
DIRECTORS’ REMUNERATION REPORT continued
As set out in the UK Corporate Governance Code, the 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 2024 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.
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. Putting customers first is central to Just’s mission and
the Remuneration Committee ensures that its pay programs are
consistent with this objective and do not inadvertently encourage
participants to behave contrary to this core value.
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 Committee engaged with its largest shareholders and the main
proxy advisory firms as part of the policy renewal process.
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.
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STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 105
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 2023.
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 Benefit
STIP
lTIP3,4
Pension
Other5
Total
Total fixed
remuneration
Total variable
remuneration
£000
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
David
Richardson
Andy Parsons
Mark Godson1
Paul Bishop2
Jim Brown2
Ian Cormack2
Michelle
Cracknell
63
42
10
30
–
80
–
85
74
60
John
Hastings-Bass 200
Mary Kerrigan7
Mary Phibbs2
Kalpana Shah
75
75
80
200
69
–
80
630
437
606
421
28
24
30
26
859
530
685
476
776
540
1,352
940
63
44
61
42
–
– 2,356 2,734
177
296 1,752 2,201
697 1,635 2,037
489 1,070 1,712
4
–
–
–
1
–
1
1
–
–
–
–
–
1
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
721
682
73
42
10
30
–
80
–
85
73
42
10
30
–
80
–
85
75
61
75
61
200
201
200
201
76
76
80
69
–
80
76
76
80
69
–
80
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Mark Godson was appointed as Executive Director of the Company with effect from 1 December 2023 and his remuneration for 2023 represents his salary, benefits and pension from
2
3
4
5
when he joined the Group as CFO Designate on 6 November 2023.
Jim Brown was appointed as a Non-Executive Director of the Company with effect from 1 November 2023 and his remuneration for 2023 represents his fees from this date.
Mary Phibbs was appointed as a Non-Executive Director of the Company with effect from 5 January 2023 and her remuneration for 2023 represents her fees from this date. Ian Cormack
and Paul Bishop stepped down from the Board as Non-Executive Directors on 9 May 2023 and 12 July 2023 respectively. Their remuneration for 2023 represents fees up to these dates.
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 2023 amounts in the table
represent the outcome of the 2021–2023 lTIP scheme. This scheme was earned but did not vest during 2023. The estimate of value vesting represents vesting of 98% of maximum based
on achievement of performance conditions. For the purposes of valuation, the amounts have been estimated based on a share price of £0.7921 (the average share price from 1 October
to 31 December 2023) plus any dividend equivalents on that scheme. This estimate will be updated to reflect the actual valuation in next year’s report. The share price used for this
estimate represents a decrease of 15.1% when measured against the share price at the time of grant of £0.9331.
The 2022 amounts in the table represent the 2020–2022 lTIP scheme and the value has been updated since the estimate reported in the 2022 ARA to reflect the actual share price of
£0.8360 at the time of vesting of that scheme and also updated to include the dividend equivalents on that scheme.
‘Other’ relates to Buy-out awards negotiated as part of Andy Parsons’ joining and paid to him in 2022 and 2023. 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. The 2023 value includes the 210,129 shares released to him on 31 March 2023, for nil consideration at a market
price of £0.8430.
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106 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
DIRECTORS’ REMUNERATION REPORT continued
2023 FIXED PAY (AUDITED)
Base salaries
David Richardson and Andy Parsons each received a salary increase
in 2023 of 4.5%, increasing their salaries to £636,500 and £442,000
respectively. On appointment Mark Godson’s salary was £400,000.
The salaries of the wider employee population were reviewed, and
increases were awarded selectively within a budget of 6%.
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 2023 are as detailed in the
table below. These remain unchanged from 2019.
£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
The Board Chair receives a single, all-inclusive fee for the role.
2023 EXECUTIVE DIRECTORS’ SHORT TERM INCENTIVE PLAN (AUDITED)
The 2023 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. The personal performance of David and Andy against strategic objectives is outlined on page 107. Based on the personal
performance achievements the Committee distributed a bonus of 90% of maximum and 80% of maximum to David and Andy respectively.
In line with our policy, 40% of the 2023 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)
90% of maximum
80% of maximum
Cash
STIP
(£000)
515
318
Deferred
STIP
(£000)
Estimated number
of shares deferred
under DSBP1
344
212
435
268
1
The estimated number of shares deferred under the DSBP were determined using the average closing share price between 1 October 2023 and 31 December 2023, being £0.79.
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 2023 STIP was as follows:
Core bonus (balanced scorecard)
New business profit
Underlying operating profit
New business strain
Total
Weighting
Threshold (25%)
On-target (50%)
Maximum (100%)
Actual
% achieved
40%
30%
30%
£242m
£256m
3.0%
£273m
£290m
2.0%
£305m
£325m
1.5%
£355m
£377m
0.9%
40%
30%
30%
100%
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.
As explained earlier in the report, the non-financial performance measures did not affect the financial outturn of 100% due to reaching the
limit on the corporate outturn of 100%. The bonus metrics led 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. Andy and David 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 as a result of personal performance
and the bonus 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. Remuneration policy is designed to encourage a positive approach to risk management. 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.
Contents Generation – PageContents Generation – Sub Page Governance
Personal performance
Strategic personal objective 90%
DAVID RICHARDSON
Business Performance and Business Model
development
Operational Performance and Modernisation
Talent, Engagement and Belonging
Regulatory Developments
Strategic personal objective 80%
ANDY PARSONS
Deliver the Business Plan
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 107
Key achievements
Business performance was outstanding; topline growth was very strong and well
controlled, with strong pricing discipline maintained throughout the year. This led to
increased profit and low new business capital strain which supports our sustainable
growth strategy.
Key modernisation goals were met in 2023, in particular in the DB business.
Major improvements were made to our Finance systems in parallel with an
IFRS 17 implementation.
Substantial improvements were achieved in all engagement focus areas identified
from the 2022 all-staff engagement survey (Environment, Wellbeing, Growth), leading
to the Proud to Work at Just score increasing from 80% to 83%. The senior leadership
team was further strengthened which will support achievement of the future
ambitions of the Group.
Good progress has been made against the key regulatory priorities of the PRA and the
FCA, including meeting the requirements of Consumer Duty.
Key achievements
Delivered the Group Business Plan in 2023 to achieve sales, new business profit, ROE,
cost and capital generation targets. Maintained solvency ratio at a strong level and
improved its resilience to macroeconomic shocks.
Develop the Market to Improve Shareholder Value
Developed market messaging and key KPI’s to showcase value and growth potential
in the business, in particular, as we transitioned to IFRS 17.
Finance Transformation
People Leadership
Safely delivered and embedded IFRS 17. Embedded newly developed top down
financial controls framework and implemented improved Finance Systems.
Continued to build talent, capability and succession across Finance, legal and
Company Secretariat teams, developing and delivering against a clear organisational
design and people plan to develop each area.
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108 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
DIRECTORS’ REMUNERATION REPORT continued
VESTING OF LTIP AWARDS WITH A PERFORMANCE PERIOD ENDING IN 2023 (AUDITED)
2021 awards
The 2021 lTIP award performance period ended on 31 December 2023. The award is forecast to vest at 98% on 24 March 2024 based on capital
generation, adjusted earnings per share growth and relative TSR performance and performance against targets over the three-year period
ending 31 December 2023.
Date of grant
Type of award
Number of
shares awarded
% vesting
Dividend
equivalent due
Number of shares
due to vest1
Value of shares
due to vest1
David Richardson
Andy Parsons
24/03/2021
24/03/2021
Nil-cost options
Nil-cost options
959,704
667,131
98%
98%
£31,130
£21,640
940,509
653,788
£744,977
£517,865
1
The value shown is based on the three month average share price to the year end, being £0.7921. 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
Measure
Weighting
Target
Organic capital generation
including management
actions
37.5%
Below £156m
Threshold: £156m
Vesting
0%
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Maximum: £448m
Actual Organic capital generation £427m; vesting outcome 35.5%
Measure
Weighting
Target
Solvency ratio underpin to
the capital metric
n/a*
Below 150%
Threshold: 150%
100%
Vesting
0%
As per capital metric outturn
* An underpin is applied to the organic capital generation metric. This metric will only vest if the solvency ratio is above 150%.
Actual 197%
Measure
Weighting
Target
Adjusted earnings
per share growth1
37.5%
Below 3% p.a. average
Threshold: 3% p.a. average
Vesting
0%
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Maximum: 10% p.a. average or above
100%
Actual Adjusted EPS growth 16% average; vesting outcome 37.5%
Measure
Weighting
Target
Relative TSR vs. FTSE 250
25%
Below median
Threshold: Median
Vesting
0%
25%
Between median and upper quartile
Between 25% and 100% on a straight-line basis
Maximum: Upper quartile or above
100%
Actual Relative TSR Upper quartile; vesting outcome 25%
Total Actual Vesting Outcome 98%
1
Adjusted EPS is calculated as underlying 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 £5m, thereby reducing operating profit to £372m and the number of shares to
1,031m, resulting in an adjusted EPS of 36.1 pence.
The Committee have increased the organic capital generation target for 2021 due to the change in definition of strategic costs. The organic
capital targets for the 2022 and 2023 targets have also been increased to reflect the new strategic costs definition and in addition the 2022
organic capital outturn will be adjusted to reflect the ambitious growth targets set by the board and the impact on organic capital generation.
The use of UOCG in the 2022 lTIP has also been reviewed by the Remuneration Committee. Given the success in delivering capital
self-sufficiency ahead of schedule, the Company has been able to write new business at a higher level than envisaged when first
approving the targets. For the 2022 lTIP we adopted UOCG. As such the Committee is proposing to exercise discretion at the 2022 award
vesting in 2025 and remove the impact of such additional business without making the satisfaction of the targets any easier to achieve.
Contents Generation – PageContents Generation – Sub Page Governance
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 109
2023 LTIP AWARDS GRANTED (AUDITED)
The following awards were made to the Executive Directors in 2023:
Date of grant
Type of award
Face value at time of grant1
Number of shares
End of performance period
David Richardson
23 March 2023
Nil-cost options
Andy Parsons
23 March 2023
Nil-cost options
£1,273,000
(200% of salary)
£773,499
(175% of salary)
1,543,030
31 December 2025
937,575
31 December 2025
1 The actual share price calculated as the average price over the five days preceding the grant was £0.825.
Performance conditions and targets applying to the 2023 LTIP awards
Condition
Weighting
Target
Organic capital
generation (including
management actions)
15%
Below £80m
Threshold: £80m
Vesting
0%
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Relative TSR vs.
FTSE 250
Maximum: £230m
25%
Below median
Threshold: 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. average
Threshold: 8% p.a. average
Maximum: Upper quartile or above
100%
0%
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Maximum: 12% p.a. average or above
7.5%
Below £330m
Threshold £330m
100%
0%
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Maximum: £825m
7.5%
Below Threshold
Threshold: Net zero with 10% offset
100%
0%
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Maximum: Net zero with 8% offset
100%
ESG – investment into
sustainable assets over
the three-year period
ESG – net zero by 2025
(with offset)1
1 Scope 1, 2 and business travel
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110 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
DIRECTORS’ REMUNERATION REPORT continued
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
Mark Godson4
Paul Bishop5
Jim Brown6
Ian Cormack7
Michelle Cracknell
John Hastings-Bass
Mary Kerrigan
Mary Phibbs8
Kalpana Shah
Beneficially
owned shares at
31 December 2023
Interest in share
awards – subject to
performance conditions
Interest in share
awards – not subject to
performance conditions
Interest in share
awards – vested
but unexercised
Shareholding
guideline
(% of salary)
Shareholding
guideline met1
(% of salary)
2,503,673
1,299,460
–
36,754
118,000
130,000
59,000
210,200
61,715
–
–
3,894,415
2,450,512
980,576
667,909
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
200%
200%
200%
376%
296%
0%
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 £0.7921 between 1 October 2023 and 31 December 2023.
2
Included in David Richardson’s 2,503,673 beneficially owned shares at 31 December 2023 are 334,172 shares, which were financed by way of a company loan, of which £437k was
outstanding as at 31 December 2023. 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 retired from the Board on the 31st December 2023 and his shareholding guideline is shown is at the end of his appointment.
4 Mark Godson was appointed to the Board on 1 December 2023.
5 Paul Bishop retired from the Board on 12 July 2023. His share interest shown is at the end of his appointment.
6 Jim Brown was appointed to the Board on 1 November 2023.
7 Ian Cormack retired from the Board on 9 May 2023. His share interest shown is at the end of his appointment.
8 Mary Phibbs was appointed to the Board on 5 January 2023.
There have been no changes in the Directors’ interests in shares in the Company between the end of the 2023 financial year and the date of
this Annual Report.
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:
Date of grant
LTIP
23 Mar 2023
24 Mar 2022
24 Mar 2021
23 Mar 2020
DSBP
23 Mar 2023
24 Mar 2022
24 Mar 2021
23 Mar 2020
Exercise
price
Interest as at
31/12/2022
Granted in
the year
Dividend shares
accumulating
at vesting
Vesting in
the year
lapsed in
the year
Exercised in
the year1
Interest as at
31/12/2023
Vesting date
Expiry date
Nil
–
1,543,030
Nil 1,391,681
Nil
959,704
Nil 1,708,317
–
–
–
Nil
Nil
Nil
Nil
–
325,475
323,796
331,305
501,548
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,543,030
23 Mar 2026
23 Mar 2033
1,391,681
24 Mar 2025
24 Mar 2032
959,704
24 Mar 2024
24 Mar 2031
1,588,734
119,583
1,588,734
–
23 Mar 2023 23 Mar 2030
–
–
–
501,548
–
–
–
–
–
–
–
325,475
23 Mar 2026
23 Mar 2033
323,796
24 Mar 2025
24 Mar 2032
331,305
24 Mar 2024
24 Mar 2031
501,548
–
23 Mar 2023 23 Mar 2030
1 2020 lTIP and DSBP were exercised on 12 April 2023 at a price of £0.922.
Contents Generation – PageContents Generation – Sub Page Governance
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 111
The table below summarises the outstanding awards made to Andy Parsons:
Exercise
price
Interest as at
31/12/2022
Granted in
the year
Dividend shares
accumulating
at vesting
Vesting in
the year
lapsed in
the year
Exercised/
released in
the year1,2
Interest as at
31/12/2023
Vesting date
Expiry date
Date of grant
LTIP1
23 Mar 2023
24 Mar 2022
24 Mar 2021
23 Mar 2020
DSBP
23 Mar 2023
24 Mar 2022
24 Mar 2021
Nil
Nil
Nil
Nil
Nil
Nil
Nil
–
937,575
845,806
667,131
1,187,523
–
–
–
–
226,068
225,084
216,757
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
937,575
23 Mar 2026
23 Mar 2033
845,806
24 Mar 2025
24 Mar 2032
667,131
24 Mar 2024
24 Mar 2031
1,104,396
83,127
1,104,396
–
23 Mar 2023 23 Mar 2030
–
–
–
210,129
–
–
–
–
–
–
–
226,068
23 Mar 2026
23 Mar 2033
225,084
24 Mar 2025
24 Mar 2032
216,757
24 Mar 2024
24 Mar 2031
210,129
– 31 Mar 2021–23
n/a
BUY-OUT AWARDS2
20 Mar 2020 (II)
Nil
210,129
1 2020 lTIP was exercised on 31 March 2023 at a price of £0.8363.
2
As detailed in the 2019 Directors’ Remuneration report, the final tranche of the 20 March 2020 (II) buy-out award vested on 31 March 2023 and 210,129 shares were released to Andy on
such day for nil consideration and at a market price of £0.8363.
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 3.45% (10% in 10 years under
the all shares plans) and 2.68% (5% in 10 years under the executive share plans).
PAYMENTS FOR LOSS OF OFFICE (AUDITED)
No payments were made for loss of office to Directors during 2023.
As set out in the Committee Chair’s statement, Andy Parsons retired from the Company on 31 December 2023. He ceased to be a Director upon
retirement, having stepped down as CFO on 1 December 2023. He was paid his normal remuneration to that date and received no termination
payments. Consistent with the remuneration policy, he was regarded as a good leaver and so retained and deferred share bonus awards which
will be released on normal maturity and similarly retained his outstanding lTIP awards which will also be retained to normal maturity and
performance assessment. The lTIP awards will be further reduced to reflect time pro-rating for the period not worked. He will also be required
to retain shares for two-years’ post-cessation in accordance with the remuneration policy.
PAYMENTS TO PAST DIRECTORS (AUDITED)
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 2023. He exercised and sold all his 2015 DSBP nil-cost options of 85,267 shares on
17 August 2023 at a market price of £0.801.
Contents Generation – PageContents Generation – Sub Page Governance
112 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
DIRECTORS’ REMUNERATION REPORT continued
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
Mark Godson
Andy Parsons
Date of contract
Notice period by Company
Notice period by Director
27 November 2019
6 November 2023
1 January 2020
6 months
6 months
6 months
6 months
6 months
6 months
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.
Contract/letter of appointment effective dates
Michelle Cracknell
John Hastings-Bass
Mary Kerrigan
Mary Phibbs
Kalpana Shah
Jim Brown
1 March 2020
13 August 2020
1 February 2022
5 January 2023
1 March 2021
1 November 2023
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.
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 2023 AGM held on 9th May, shareholders were asked to vote on the Directors’ Remuneration report for the year ended
31 December 2022 and the Directors’ Remuneration policy. 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 (2023 AGM)
To approve the Directors’ Remuneration policy (2023 AGM)
807,852,479
810,331,240
95%
95%
41,928,546
39,534,784
5%
5%
80,500
5,501
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 2023 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, 56% of the workforce (including the Executive Directors) participate in
a common bonus plan (which led to an outturn of 90% for 2023). 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.
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STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 113
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 2023,
the average salary increase (excluding promotions and joiners shortly prior to year end) for all employees awarded
in April 2023 was 6.0%. 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 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 2023, 65 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 is 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 in 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.
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
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e
v
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x
e
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I
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r
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R
11/11/2013
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
31/12/2023
Just Group
FTSE 250 (excluding investment trusts)
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114 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
DIRECTORS’ REMUNERATION REPORT continued
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.
Chief Executive
Total remuneration
(£000)
STIP (% of maximum)
lTIP (% of maximum)
Year ended 30 June
2014
RC
2015
RC
1,196
1,357
63%
n/a
89%
n/a
Year ended 31 December
20161
RC
2,630
97.5%
39.5%
2017
RC
2,369
95.0%
50.0%
2018
RC
2,507
91.2%
50.0%
20192
RC
438
0%
20192
DR
1,440
83.1%
2020
DR
1,541
85%
2021
DR
1,577
80%
50.0%
50.0% 19.75%
31.8%
2022
DR
2023
DR
2,470
2,356
75%
93%
90%
98%
1
2
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.
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 fifth year in which Just Group has been required to publish its CEO pay ratio.
Year
2023
2022
2021
2020
20192
Method1
Option A
Option A
Option A
Option A
Option A
25th percentile
pay ratio
50th percentile
pay ratio
75th percentile
pay ratio
62 : 1
73 : 1
47 : 1
42 : 1
44 : 1
38 : 1
44 : 1
29 : 1
26 : 1
28 : 1
21 : 1
25 : 1
17 : 1
16 : 1
17 : 1
1
2
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.
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 was 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. The reduction between 2022 and 2023 represents the 6%
average payrise for employees.
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 2023.
£000
25th percentile
50th percentile
75th percentile
Group Chief Executive
Total pay and benefits
Salary component
of total pay
38
62
111
2,356
31
34
78
630
The Group Chief Executive Officer was paid 38 times the median employee in 2023. 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.
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STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 115
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 2019 and 2023,
compared to that for the average employee of the Group (on a per capita (FTE) basis).
Percentage change
between 2022 and 2023
Percentage change
between 2021 and 2022
Percentage change
between 2020 and 2021
Percentage change
between 2019 and 2020
Base
salary
Benefits
Annual
bonus
Base
salary
Benefits
Annual
bonus
Base
salary
Benefits
Annual
bonus
Base
salary
Benefits
Annual
bonus
9.5%
5.9% 24.3%
5.9%
1.1% -2.8%
2.5%
2.2% -7.4%
4.6%
4.8%
0.5%
3.9%
3.9%
n/a
0.0%
n/a
0.0%
25.0%
0.0%
0.0%
n/a
0.0%
3.0% 24.1%
2.7% 24.1%
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
1.5%
1.5%
n/a
0.0%
n/a
0.0%
0.0%
0.0%
n/a
n/a
0.0%
1.2% -4.4%
1.0% -2.0% -6.0%
8.9%
2.7% 11.9%
1.0% -4.4%
0.0% -51.0%
0.0%
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
n/a
n/a
n/a
0.0%
n/a
0.0%
0.0%
0.0%
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
n/a
n/a
n/a
1.60%
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
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Average employee1
Executive Directors
David Richardson
Andy Parsons
Mark Godson
Non-Executive Directors
Paul Bishop4
Jim Brown
Ian Cormack4
Michelle Cracknell5
John Hastings-Bass2
Mary Kerrigan
Mary Phibbs
Kalpana Shah3
1
2
3
All permanent employees (excluding the Executive Directors) of the Group in the UK who were in employment during 2020 and 2023 were selected as the most relevant comparator.
This was chosen as the listed Company has no employees.
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.
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.
4 Ian Cormack retired from the Board on 9 May 2023 and Paul Bishop retired from the Board on 12th July 2023.
5 Michelle Cracknell was appointed Chair of the Remuneration Committee on 9th May 2023, her fees for 2023 have been adjusted to reflect a full year appointment.
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 2023
Year ended
31 December 2022
127
19
106
16
% difference
20%
19%
Implementation of the remuneration policy in 2024 for Executive Directors (unaudited)
Element
BASE SALARY
Policy approach
David Richardson, CEO: £700,000
Mark Godson CFO £400,000
David Richardson’s salary increased by 10% from 1 April 2024, compared to 4.5% for the wider workforce.
Mark Godson’s salary will not be increased in 2024
NON-EXECUTIVE
DIRECTORS FEES
Board Chair
Basic fee
Additional fee for Senior Independent Director
£230,000
£ 65,000
£ 10,000
Additional fee for Committee Chair, Risk and Audit Committees
£ 20,000
Additional fee for Committee Chair, all other Committees
£ 15,000
The Remuneration Committee have also decided to award a 15% increase (£30,000) in fees to the Chair. This increase is
to align the chairs compensation with that of his peers. The Board has also decided to increase the general NED fee by
£5,000 to £65,000. There have been no changes to the base fee since 2015 and this is to account for changes in market
rate and inflation.
BENEFITS AND
PENSIONS
The Executive Directors will receive a benefits allowance of £20,000 for 2024 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.
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116 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
DIRECTORS’ REMUNERATION REPORT continued
Element
SHORT TERM
INCENTIVE PLAN
(“STIP”)
Policy approach
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 2024 will be determined by a balanced scorecard of performance against financial and strategic
measures. The financial measures are:
• 40% based on new business profit measure
• 30% based on underlying operating profit
• 30% based on new business strain
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.
LONG TERM INCENTIVE PLAN (“LTIP”)
Awards will be made over shares with a face value of 200% and 150% of salary in 2024 to the CEO and CFO respectively. The awards made in
2024 will be subject to the conditions below, calculated over the three financial years to 31 December 2026, and will be subject to a further
two-year post-vesting holding period.
Performance conditions and targets applying to the 2024 LTIP awards
Condition
Weighting
Target
Cash Generation
15%
Below £291m
Threshold: £291m
Vesting
0%
25%
Relative TSR vs. FTSE 250,
excluding investment
trusts
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Maximum: £341m
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 10% p.a. average
Upper quartile or above
Threshold: 10% p.a. average
100%
0%
25%
ESG – investments
emissions reduction by
2026
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Maximum: 15% p.a. average or above
15%
Below 38%
Threshold: 38%
100%
0%
25%
Between threshold and maximum
Between 25% and 100% on a straight-line basis
Maximum: 50%
100%
APPROVAL
This report was approved by the Board of Directors on 7 March 2024 and signed on its behalf by:
MICHELLE CRACKNELL
Chair, Remuneration Committee
7 March 2024
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STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 117
SUMMARY OF THE DIRECTORS’ REMUNERATION POLICY
The following is a copy of the main table from the Directors’ Remuneration Policy approved at the 2023 AGM. The full policy on Directors’
Remuneration can be found in the 2022 Annual Report on pages 98 to 103.
Executive Directors
Element
BASE SALARY
Purpose and link to strategy
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.
BENEFITS
Provides competitive,
appropriate and
cost-effective benefits.
Operation (including framework
used to assess performance)
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.
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.
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.
Where the annual or lifetime allowances are
exceeded, or in certain other circumstances,
the Group will pay cash in lieu of a
Company contribution.
Opportunity
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.
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.
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.
This limit may change to reflect
any changes in the contributions
available to the majority of
the workforce.
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118 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
DIRECTORS’ REMUNERATION REPORT continued
Element
SHORT TERM
INCENTIVE PLAN
(“STIP”)
Purpose and link to strategy
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.
Operation (including framework
used to assess performance)
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 STIP1.
Annual awards of performance shares 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 lTIP1.
Opportunity
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
150% 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.
SHARESAVE
(“SAYE”)
Encourages employee
share ownership and
therefore shareholders.
A tax-advantaged share scheme which the
Executive Directors are eligible to participate
as well as all of the UK based employees.
The scheme is subject to the limit
and rules set by HMRC from time
to time.
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.
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STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 119
Element
SHARE INCENTIVE
PLAN (“SIP”)
Purpose and link to strategy
Encourages employee
share ownership and
therefore shareholders.
Operation (including framework
used to assess performance)
Opportunity
A tax-advantaged share scheme which the
Executive Directors are eligible to participate
as well as all of the UK based employees.
The scheme is subject to the limit
and rules set by HMRC from time
to time.
SHAREHOLDING
GUIDELINES
Encourages Executive Directors
to build a meaningful
shareholding in the Group so as
to further align interests with
shareholders.
Non-Executive Directors
Free shares were awarded to the UK-based
employees in 2016 and this scheme is not
currently in operation.
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 2023.
Element
FEES
Purpose and link to strategy
Operation (including framework used to assess performance)
Opportunity
To attract and retain a high-
calibre Chair and Non-Executive
Directors by offering market-
competitive fee levels.
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.
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
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.
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120 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
DIRECTORS’ REPORT
The Directors present their
report for the financial year
ended 31 December 2023.
The Strategic report, the Corporate Governance report and the
Directors’ Remuneration report include information that would
otherwise be included in the Directors’ report.
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 risk,
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.
STRATEGY AND FUTURE DEVELOPMENTS
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 36.
Commentary on the Group’s strategy and performance in
the financial year ended 31 December 2023 and likely future
developments is included in the Strategic report. Our approach
to stakeholder engagement, including our Section 172 statement,
can be found in the Strategic report.
GOVERNANCE
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
Page number
Interest capitalised by the Group
Not applicable
Publication of unaudited
financial information
Page 225
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
Not applicable
Non pre-emptive issues of equity for cash in
relation to major subsidiary undertakings
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 waiver of dividends
Share plans – page 122
Shareholder waiver of future dividends
Share plans – page 122
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’s Articles of Association can be
found at www.justgroupplc.co.uk/about-us/governance.
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
consideration of the Group’s business plan approved by the Board; the
projected liquidity position of the Company and the Group; ongoing
impacts of economic stresses; current financing arrangements and
contingent liabilities; a range of forecast scenarios with differing levels
of new business, and associated additional capital requirements to
write anticipated levels of new business; and a scenario of the worst
case outcome peppercorn rent from the Government consultation
regarding the restriction of ground rent for existing residential leases.
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, before and after management actions
within the Group’s control, which considers the possible impact 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. In addition, the results of extreme residential 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.
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.
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 65.
THE BOARD
Directors
The Directors who served during the year and up to the date of this
report are set out below.
• John Hastings-Bass, Group Chair
• Paul Bishop (retired on 12 July 2023)
• James Brown (known as Jim Brown)
(appointed on 1 November 2023)
Ian Cormack (retired on 9 May 2023)
•
• Michelle Cracknell
• Mark Godson (appointed on 1 December 2023)
• Mary Kerrigan
• Andrew Parsons (known as Andy Parsons)
(retired on 31 December 2023)
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STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 121
• Mary Phibbs (appointed on 5 January 2023)
• David Richardson
• Kalpana Shah
Paul Bishop retired at the conclusion of the Annual General Meeting
(“AGM”) of the Company on 9 May 2023. He was immediately
reappointed to continue as a Non-Executive Director and Chair of
the Group’s Audit Committees (“Audit Chair”) until the regulatory
authorisation process for Mary Phibbs to take over the role of Audit
Chair had completed. This arrangement provided continuity and
ensured a smooth transition in the operation of the Group’s Audit
Committees. Paul subsequently retired as a Director on 12 July 2023.
SHAREHOLDERS
Annual General Meeting
The Company’s AGM in respect of the financial year ended
31 December 2023 will be held at 10.00 am on Tuesday 7 May 2024
at 1 Angel lane, london EC4R 3AB. More information about the
2024 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 and the
Company for the year ended 31 December 2023 and are shown on
pages 137 to 224.
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 2024 AGM.
The Board is recommending a final dividend for the year ended
31 December 2023 of 1.50 pence per ordinary share (2022: 1.23
pence). Subject to approval by shareholders at the Company’s 2024
AGM, the Company will pay the final dividend on 15 May 2024 to
shareholders on the register of members at the close of business
on 12 April 2024.
Secretary
Simon Watson is the Group Company Secretary of Just Group plc and
can be contacted at the Company’s Registered Office, details of which
are on page 230.
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 them 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 116.
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.
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 2024 AGM.
SHARE CAPITAL
Ordinary share capital
As at 31 December 2023, 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 2023 was 85.90 pence.
Further information relating to the Company’s issued share capital
can be found in note 23.
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 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.
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122 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
DIRECTORS’ REPORT continued
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 2006 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 offer such shares to
existing ordinary shareholders in proportion to their existing holdings
under Section 561 of the Companies Act 2006, in connection with a
rights issue and in other circumstances up to the aggregate nominal
amount specified by the relevant resolution.
The Directors were granted the following authorities at the 2023 AGM
held on 9 May 2023:
•
•
•
•
to allot ordinary shares in the Company up to a maximum
aggregate nominal amount of £69,246,862;
to allot equity securities for cash on a non pre-emptive basis up to
an aggregate nominal amount of £10,387,029 and further granted
an additional power to disapply pre-emption rights representing a
further 10% only to be used in specified circumstances;
to make market purchases of up to an aggregate of 103,870,293
ordinary shares, representing approximately 10% of the
Company’s issued ordinary shares as of 14 March 2023; 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.
Details of the shares issued by the Company during 2023 and 2022
can be found in note 23. No shares were purchased by the Company
during the year.
The Directors propose to renew these above-mentioned authorities
at the 2024 AGM for a further year.
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, 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 of 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 can 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 Group plc long Term Incentive Plan (“lTIP”), the Just Group
plc Deferred Share Bonus Plan (“DSBP”), Just Group plc Sharesave
Scheme (“SAYE”), and the Just Retirement Group plc Share Incentive
Plan (“SIP”). Details of these plans are set out in the Directors’
Remuneration report.
The rules for the Company’s lTIP, DSBP and SAYE were adopted by
shareholders at the 2023 AGM. They each have a ten year life expiring
in May 2033. The SIP does not have an expiry date.
Awards under the lTIP, DSBP and SAYE are satisfied by using either
newly issued shares or shares purchased in the market, which are
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.
During the 12 months to 31 December 2023, no ordinary shares of
10 pence each were issued to employees in satisfaction of the exercise
of share options under the SAYE (2022: 165,888). No shares were issued
to the EBT or to employees in respect of other plans during the year
(2022: nil).
Substantial shareholdings
The table below shows the holdings of the major shareholders in the
Company’s ordinary issued share capital, as at 31 December 2023 and
as at 7 March 2024, as notified in accordance with the provisions of
Chapter 5 of the FCA’s Disclosure Guidance and Transparency Rules.
It should be noted that these holdings may have changed since the
Company was notified. However, notification of any change is not
required until the next notable threshold is crossed.
Shareholder
Baillie Gifford
Ordinary
shareholdings
at 31 Dec 2023
% of
capital
Ordinary
shareholdings
at 7 Mar 20241
% of
capital
58,515,211
5.63 58,515,211
Fidelity International
57,253,643
5.51 57,253,643
Ameriprise
48,341,471
4.65 48,341,471
Janus Henderson Group plc
52,407,563
5.04 52,407,563
Schroders plc
lombard Odier
Aegon N.V.
52,147,535
5.02 52,147,535
–
– 51,361,808
51,584,569
4.97 51,584,569
AXA Investment
49,615,299
4.78 49,615,299
Credit Suisse Group AG
40,054,845
3.86 40,054,845
5.63
5.51
4.65
5.04
5.02
4.94
4.97
4.78
3.86
1 The last practicable date prior to publication of the Annual Report.
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.
Modern slavery
The Directors are committed to combatting modern slavery and
human trafficking in all its forms and Just takes a zero tolerance
approach to modern slavery within our workforce and the same is
expected from suppliers. In compliance with Section 54(1) of the
Modern Slavery Act 2015, the Company’s modern slavery statement,
approved by the Board, is available to view on our website at
www.justgroupplc.co.uk.
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EMPLOYEES
Equal opportunities employment
Just 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 those who are neurodivergent or have a disability, and any
reasonable adjustments are made as required during the recruitment
process to ensure all applicants have the same opportunity to
demonstrate their skills. 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
A key priority for Just in 2023 was to harness the power of our highly
talented and engaged colleagues to deliver strong business growth,
supporting our purpose of helping people achieve a better later life.
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 led by our leadership
team, regular emails to all colleagues, videos and news items on
our intranet.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 123
We regularly monitor the engagement of our colleagues and their
views on matters that are important to them. During the year,
colleagues were asked to complete a full and pulse employee
engagement survey, and we combine the insights from the surveys
with informal approaches, such as gathering feedback via word
of mouth.
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 offering employee share
plans to 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
As at 31 December 2023, Just employed 645 males (55%), 536
females (45%) and <1% under other categories. We have increased
gender diversity at senior levels (global grade 14+, making up the 13%
most senior of Just employees) by three percentage points to 33%
and, in 2023, we achieved our target as a signatory to the Women
in Finance Charter that 33% of our senior leaders are female. As a
signatory to the Race at Work Charter, 19% of our senior leaders are
from a Black, Asian and minority ethnic background in line with our
commitment to ensuring our workforce is representative of the ethnic
composition of the wider UK population. Of the Group Executive
Committee and their direct reports, 37% are female and 15% 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 2023, the reference date, in accordance with the listing Rules requirements. Details of the Board’s diversity, equity, inclusion
and belonging policy and targets can be found in the Nomination and Governance Committee report.
Gender diversity
Men
Women
Other categories
Not specified/prefer not to say
Ethnic background
White British or other White
Mixed/multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group including Arab
Not specified/prefer not to say
Number of
Board members
Percentage
of the Board
(%)
Number of senior
positions on
the Board1
Number in
executive
management2
Percentage of
executive
management
(%)
4
4
0
0
7
0
1
0
0
0
50
50
0
0
87.5
0
12.5
0
0
0
3
1
0
0
4
0
0
0
0
0
8
2
0
0
9
0
1
0
0
0
80
20
0
0
90
0
10
0
0
0
1 Senior positions on the Board, as defined by the listing Rules, comprise the Group Chair, Senior Independent Director, Group Chief Executive Officer and Group Chief Financial Officer.
2 Executive Management, as defined by the listing Rules and in line with the Code requirements, comprises members of the Group Executive Committee and the Group Company
Secretary. The number of males and females in senior management positions in accordance with the Companies Act 2006 definition (includes executive directors of the Group’s
subsidiary undertakings but excludes directors of the parent company) was 10 (83%) and 2 (16.7%) respectively as at 31 December 2023.
The Company is committed to building a diverse workforce and inclusive culture, and we collect data to monitor our progress in achieving our
diversity targets. The data collected for the purposes of making this disclosure was received from the Directors on a voluntary basis. The data
of our Executive Management and wider workforce is captured via the Company’s internal HR system on a voluntary basis. Further information
on colleagues, culture and diversity can be found in the Colleagues and culture report.
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124 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
DIRECTORS’ REPORT continued
AUDITOR
Disclosure of information to the auditor
Each Director of the Company at the date of this Directors’ report has
confirmed that, so far as they are aware, there is no relevant audit
information of which the Company’s external auditor is unaware.
Each Director has taken all the steps that they ought to have taken
as a Director in order to make themselves 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.
Financial instruments
The Group does not currently apply hedge accounting although it
applies asset and liability matching and hedging strategies to limit its
exposure to interest rate risk and market risk arising from the Group’s
financial instruments and insurance contracts. In addition, in 2023,
the Group acquired UK sovereign gilts that act as an economic hedge
to liabilities that are not sensitive to interest rate movements. Details
of the Group’s exposure to risk management are included in the
Strategic report and note 34 to the financial statements. Details
of the derivatives held for risk management purposes are included
in note 30 to the financial statements.
Overseas branches
The Company does not have any overseas branches within the
meaning of the Companies Act 2006.
Political donations
No political donations were made, or political expenditure incurred,
by the Company and its subsidiaries during the year (2022: nil).
POST BALANCE SHEET EVENTS
Details of post balance sheet events are set out in note 39 to the
financial statements.
The Directors’ report has been approved by the Board and is signed
on its behalf by:
SIMON WATSON
Group Company Secretary
7 March 2024
Auditor appointment
PwC has expressed its willingness to continue in office as the external
auditor of the Group. A resolution to reappoint PwC will be proposed
at the forthcoming AGM in 2024. An assessment of the effectiveness
and recommendation for reappointing PwC can be found in the Group
Audit Committee report.
RESEARCH AND DEVELOPMENT
The Group is involved in a range of innovative projects and
programmes, which are designed to support the fulfilment
of our strategic objectives. A number of these projects and
programmes are referred to in the Strategic 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 40 to 49.
Information on the Group’s greenhouse gas emissions is set out in
the Sustainability and 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 and property lease arrangements. None of these
agreements are considered significant in terms of their impact on the
Group’s business as a whole. All the Company’s employee share
incentive plans contain provisions relating to a change of control.
Outstanding awards would typically vest and become exercisable.
This is subject to satisfying any performance conditions, and normally
with an additional time-based pro-rata reduction where performance
conditions apply, and with approval from the Remuneration Committee.
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DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable UK 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 in conformity with the requirements of the
Companies Act 2006.
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:
• select suitable accounting policies and then apply
them consistently;
• make judgements and estimates that are reasonable and prudent;
• present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and
understandable information;
• 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 and
Group’s transactions, and disclose with reasonable accuracy at any
time the financial position of the Parent Company and the Group, and
enable them to ensure that the 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.
STRATEGIC REPORT | GOVERNANCE | FINANCIAl STATEMENTS | 125
DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors confirm to the best of their 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 profit or loss of the
Company and the undertakings included in the consolidation
taken as a whole;
the Annual Report, including the Strategic report, includes a fair
review of the development and performance of the business and
the position of the Company and 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 the financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company’s position,
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
DAVID RICHARDSON
Group Chief Executive Officer
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 comply with that law and those regulations.
MARK GODSON
Group Chief Financial Officer
7 March 2024
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.
Contents Generation – PageContents Generation – Sub Page 126 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
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 2023 and of the Group’s profit
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 the Statement of
financial position of the Company as at 31 December 2023; 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, comprising material accounting policy information
and other explanatory information.
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 3, 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 De-risking
Solutions, Guaranteed Income for life Solutions, lifetime Mortgages and
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 Group 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 an audit of specific account balances for a further
five 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).
• Valuation of insurance contract liabilities and reinsurance assets
and liabilities - Implementation of IFRS 17: Judgements, new models
and data flows (Group).
• Recoverability of the Company’s investments in Group
undertakings (Company).
Materiality
• Overall Group materiality: £26,722,500 (2022: £21,778,000) based on
1% of Total Equity plus net of tax contractual service margin (“CSM”).
• Overall Company materiality: £12,760,000 (2022: £12,852,000) based
on 1% of Total Equity.
• Performance materiality: £20,042,000 (2022: £16,333,500) (Group)
and £9,570,000 (2022: £9,639,000) (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.
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 127
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.
Valuation of insurance contract liabilities and reinsurance assets and
liabilities - Implementation of IFRS 17: Judgements, new models and
data flows is a new key audit matter this year. In addition, the key audit
matters on annuitant mortality assumptions, credit default and expense
assumptions have been updated to reflect changes as a result of IFRS 17
implementation. Disclosure of the expected impact of initial application
of IFRS 17 ‘Insurance Contracts’ in accordance with IAS 8, which was a
key audit matter last year, is no longer included because IFRS 17 has
been fully implemented for the current period so this key audit matter
has been replaced by the new key audit matter on implementation of
IFRS 17 noted above. Otherwise, the key audit matters below are
consistent with last year.
This is not a complete list of all risks identified by our audit.
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 1.5
IFRS 17 accounting policies and note 26 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 annuitant mortality assumptions, credit default risk
assumptions and expense assumptions as these are considered the
most significant and judgemental. Adoption of IFRS 17 in the accounting
period involves additional uncertainty around certain judgements. These
have been considered separately in the key audit matter on IFRS 17
implementation as well as part of the ongoing key audit matters post
transition below.
We performed the following audit procedures to test the valuation of
insurance contract liabilities (including best estimate liabilities, risk
adjustment and contractual service margin):
• Tested the design and, where applicable, operating effectiveness of
the 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 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 prior
audits (in 2020 and 2022), 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. We have also
performed supplementary model testing performed as part of the
IFRS 17 implementation (see IFRS 17 implementation key audit matter
below). In addition to this, we performed procedures over changes in
the models and examined the analysis of change in modelled results,
to assess whether the model continues to operate as expected;
• Tested the derivation of the current, new business and annual locked in
discount rates used to discount the insurance contract liabilities; and
• 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 (where available and applicable).
Further testing was also conducted on the annuitant mortality, credit
default and expense assumptions as set out below.
128 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
INDEPENDENT AUDITORS’ REPORT continued
to the members of Just Group plc
Key audit matter
How our audit addressed the key audit matter
We performed the following audit procedures to test the annuitant
mortality assumptions (including base mortality assumptions, rate of
future mortality improvements and the risk adjustment):
• Tested the reasonableness of the methodology used to perform the
annual experience studies and the exclusion of 2020-2022 data when
deriving base mortality rates. This involves the assessment of key
judgements with reference to relevant rules, actuarial guidance and
by applying our industry knowledge and experience;
• For a sample, agreed experience analysis data used to
source documentation;
• 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 any expert judgments used in the
development of the mortality improvement assumptions, including
the selection and parameterisation of the CMI model (e.g. the choice
of the smoothing parameter, initial rate, long term rate and tapering
at older ages);
• Assessed management’s adjustments to uplift the future mortality
rates in relation to the long term impacts of COVID-19 and other trends
in the UK. This included the selection and calibration of the drivers of
these potential trends;
• Assessed management’s risk adjustment methodology relative to
the compensation required by management for non-financial risk,
including the selected confidence level and calibration, as well as
testing management’s controls over the processes; and
• Compared the annuitant mortality assumptions selected by
management against those adopted by peers using our independent
annual benchmarking survey of assumptions (to the extent available).
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 – Annuitant mortality
assumptions (Group)
Refer to Group Audit Committee Report, Accounting policy 1.5
IFRS 17 accounting policies and note 26 Insurance contracts and
related reinsurance.
Annuitant mortality assumptions are an area of significant management
judgement due to the inherent uncertainty involved. Annuity liabilities
are sensitive to the choice of best estimate annuitant mortality
assumptions due to the large volume of annuity business. The best
estimate annuitant mortality assumption has two main components:
Base mortality assumptions
This part of the assumption is mainly driven by internal experience
analyses, but judgement is also required. For example, in determining
the most appropriate granularity at which to carry out the analysis; the
time window used for historic experience, or 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 part 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.
The extent to which mortality rates may remain elevated in future, as a
result of COVID-19 and other trends in the UK, is subject to considerable
uncertainty. Judgement is required in estimating the allowance for
expected high future mortality rates in the long term. The Continuous
Mortality Investigation Bureau 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.
Risk adjustment for longevity risk
In addition, under IFRS 17, an allowance for risk in excess of the best
estimate and representing the view of compensation for non-financial
risk that management required is held (known as the risk adjustment).
The primary component of the risk adjustment is annuity mortality risk
and the selection of the distribution and associated stresses is a matter
of judgement.
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 129
Key audit matter
How our audit addressed the key audit matter
Valuation of insurance contract liabilities – Credit default
assumptions (Group)
We performed the following audit procedures to test the credit
default assumptions:
Refer to Group Audit Committee Report, Accounting policy 1.5
IFRS 17 accounting policies and note 26 Insurance contracts and
related reinsurance.
The discount rate for calculating the insurance contract liabilities
(future cash flows and risk adjustment) is determined in IFRS 17 using a
‘top-down’ approach. In this approach the discount rate is set using the
yield on a reference portfolio of assets (based on the actual assets held)
with explicit deductions for both expected and unexpected credit
default risk.
The credit default assumptions are also used to determine the locked-in
discount rate based on the target asset mix for new business written in
the period (applicable to the contractual service margin).
This is a key audit matter because the Group’s asset portfolio includes
a material amount of illiquid assets for which the determination of
credit default assumptions, including consideration of expected and
unexpected default risk, requires a greater level of expert judgement.
Valuation of insurance contract liabilities – Expense assumptions (Group)
Refer to Group Audit Committee Report, Accounting policy 1.5
IFRS 17 Accounting policies and note 26 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 project costs and future inflation. The assumptions used
require judgement, particularly with respect to the allocation of
expenses to future maintenance.
• Tested the methodologies used to derive the assumptions (including
expected and unexpected risk) with reference to relevant rules and
actuarial guidance and by applying our industry knowledge
and experience;
• Tested significant assumptions used by management against market
observable data (to the extent available and relevant) and our
experience of market practices. We have also considered the impact
of current economic conditions on levels of expected and unexpected
credit default risk;
• Tested controls in respect of management’s review of internal credit
ratings which includes Credit Committee oversight and review and
challenge over asset managers ratings;
• Tested controls over management’s analysis of change in discount rate
(including credit default assumptions);
• Assessed the impact of the recent leasehold and Freehold Reform Bill
and the associated consultation on potential restrictions to the level of
residential ground rents on the credit ratings for residential ground rent
assets and ensured this was reflected in credit default risk assumptions;
• Tested the implementation of the credit default assumptions within the
various tools used for current and locked-in discount rates for new
business written in the period; and
• Compared the assumptions selected against those adopted by peers
using our independent annual benchmarking survey of assumptions
(to the extent available).
Based on the work performed and the evidence obtained, we consider the
assumptions used for credit default risk to be appropriate.
We performed the following audit procedures to test the
expense assumptions:
• Evaluated the design and, where applicable, tested the operating
effectiveness of controls related to the expense assumption 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), expected future improvements in efficiency, and
the allocation of expenses between acquisition and maintenance and
to products. This assessment also considered the appropriateness of
the treatment of non-discretionary project spend where we expect
these costs to be included in the ongoing cost base;
• 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; and
• 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.
Based on the work performed and the evidence obtained, we consider the
expense assumptions to be appropriate.
130 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
INDEPENDENT AUDITORS’ REPORT continued
to the members of Just Group plc
Key audit matter
How our audit addressed the key audit matter
Valuation of investments classified as Level 3 under IFRS
13, including Lifetime Mortgages (“LTMs”) (Group)
We performed the following audit procedures to test the valuation of the investments
classified as level 3 (excluding lifetime mortgages):
Refer to Group Audit Committee Report, Accounting policy
1.6 IFRS 9 Financial Instruments and note 20 Fair value of
financial assets and liabilities.
The valuation of investments classified as level 3 is
typically based on either inputs into a valuation model or
observable prices for proxy positions. This is inherently
complex and requires the use of significant management
judgement. Furthermore, the balances are material to the
financial statements.
The most significant level 3 asset class is lTMs. The setting
of voluntary redemptions (persistency), as well as key
economic assumptions, applied in the valuation of lTMs
(including current property values, house price inflation and
volatility) are impacted by the uncertainty in the current
economic environment.
Other level 3 assets material to the financial statements
comprise investments in commercial mortgages, long
income real estate (which includes residential ground rents)
and other illiquid debt instruments. Specifically on
residential ground rents, the valuation could be impacted
by the UK government’s leasehold and Freehold Reform Bill
and the associated consultation on potential restrictions
to the level of residential ground rents, issued on
9 November 2023.
• 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 comparison to management’s internal valuations.
For a sample of other illiquid assets, we performed the following procedures:
• Engaged our valuation experts to assess the reasonableness and appropriateness of
the internal 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.
In response to the recent leasehold and Freehold Reform Bill and the associated
consultation on potential restrictions to the level of residential ground rents, we have:
• Assessed the appropriateness of the judgements made in determining the impact
of the consultation on the valuation of the loans secured on residential ground
rent assets;
• Ensured that sufficient consideration was given to a range of likely outcomes of the
consultation and subsequent changes in legislation;
• Challenged management on the stresses and changes in credit ratings applied; and
• Assessed and reviewed the associated disclosures given the inherent uncertainty
resulting from the consultation.
We performed the following audit procedures to test the valuation of lifetime Mortgages:
• Tested the design and, where applicable, operating effectiveness of the controls in
place over the determination of the valuation of lTMs, including those relating to
model inputs, model operation and extraction and consolidation of results from
the valuation models;
• Tested the design and, where applicable, the operating effectiveness of controls
related to the data used in the modelling of lifetime Mortgages;
• For a sample of mortgages, agreed data used in the modelling of lTMs to
policyholder documentation;
• Assessed the appropriateness of the methodology, models and assumptions used
against recognised actuarial practices, including any changes made during the year,
taking into account the impact of current economic conditions;
• Performed testing over the actuarial model calculations. We placed reliance on our
model baselining carried out as part of the 2020 audit, 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 2023, we performed additional
procedures over changes in the model, baselined an additional sample of loans and
tested the analysis of change in modelled results, to assess whether the model
continues to operate as expected;
• 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, and taking into account the impact of current
economic conditions;
• Assessed the appropriateness of current property prices derived using Automated
Valuation Model;
• Tested the key judgements involved in the preparation of the manually calculated
components of the asset balance, and the accuracy of the calculations; and
• Evaluated the Group’s historic data used to prepare the Group’s mortality, morbidity
and voluntary redemptions experience analysis, taking into account the impact of
current economic conditions for voluntary redemptions together with industry data
on expectations of future mortality improvements and assess whether this supports
the assumptions adopted.
Based on the work performed and the evidence obtained, we consider the valuation of
level 3 assets to be appropriate.
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 131
Key audit matter
How our audit addressed the key audit matter
Valuation of insurance contract liabilities and reinsurance assets and
liabilities - Implementation of IFRS 17: Judgements, new models and
data flows (Group)
We performed the following procedures to audit the transition to IFRS 17:
• Assessed the implementation methodology for compliance with the
requirements of IFRS 17 and market practice;
Refer to Group Audit Committee Report and Accounting policy 1.3 Adoption
of IFRS 17.
• Assessed the impracticability of adopting the fully retrospective
approach to measure the transition CSM prior to 2021;
IFRS 17 became effective for periods beginning on or after 1 January 2023,
replacing International Financial Reporting Standard 4, ‘Insurance
Contracts’. As a result, the Group has adopted IFRS 17 in these
financial statements.
International Accounting Standard 8 ‘Accounting Policies, Changes in
Accounting Estimates and Errors’ (“IAS 8”) requires that when the
impact of adopting a new accounting standard would be material to
the financial statement comparatives, these comparatives should be
restated. As a result, the 2022 opening balance sheet and the 2022
comparatives have been restated in order to comply with the
requirements of IFRS 17.
Transition to IFRS 17 introduces significant changes to the recognition,
measurement and presentation of (re-)insurance contract liabilities (or
assets), and requires significant judgement to estimate the impact on 1
January 2022 (the transition date) and 31 December 2022 comparative
period. IFRS 17 adoption has resulted in a significant reduction in the
Group’s accumulated profit at the transition date (£0.9bn). 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;
• The CSM amortisation approach for deferred annuities;
• Assessment of the expense assumptions (an ongoing key audit
matter post transition);
• Assessment of the credit default assumptions (an ongoing key audit
matter risk post transition); and
• Calibration of risk adjustment for longevity risk (an ongoing key audit
matter post transition).
New models and processes are also required in order to calculate the
transition balance sheet, in addition to changes to end-state models
and processes following transition. In particular, the key audit matter
relates to:
• The implementation of the Just IFRS 17 CSM engine (“JACI 17”);
• The new data transfers introduced by the implementation of JACI 17
and the general ledger (including appropriate mapping of the models
to the general ledger); and
• The enhancements to policyholder and transaction data to the unit of
account level as required by IFRS 17.
Consideration is required as to whether the models and processes
developed adequately incorporate the methodology and have been
through an appropriate governance and review process.
• Tested the calibration, methodology and models to measure the fair
value at the transition date (for contracts incepting prior to 2021),
including assessing the calibration and methodology relative to market
data (to the extent available and relevant) and independently
replicating certain aspects of management’s models;
• Tested the transition balances for business written from 2021 onwards
(measured using the fully retrospective approach) relative to previously
audited IFRS 4 liabilities and new business operating profit;
• Assessed the appropriateness of the approach to amortise the CSM
relative to the requirements of IFRS 17 and market practice, including
the approach to weight the insurance and investment-return services
for deferred annuities;
• Assessed management’s risk adjustment methodology relative to the
compensation required by management for non-financial risk (as set
out in the ongoing significant key audit matter post transition relating
to annuitant mortality);
• Assessed the allowance for expected and unexpected credit risk as
part of discount rate assumptions to measure the future cash flows at
transition (as set out in the ongoing key audit matter post transition);
• Assessed the expense assumptions used to measure the future cash
flows at transition (as set out in the ongoing key audit matter
post transition);
• Tested the derivation of current and locked-in discount rates, including
the selection of the reference portfolio and the weightings applied to
determine the locked-in rates;
• Tested the CSM engine by assessing the calculation methodology
against the IFRS 17 requirements, examining management’s baseline
testing relative to our independent test cases, and independently
replicating the calculation of a sample of the steps in the analysis of
change. We also performed model change testing over any subsequent
developments by management;
• Tested developments made to the existing cash flows models to
incorporate IFRS 17 functionality;
• Tested reconciliations to confirm the completeness and accuracy of
data transfers in the new data flows introduced as a result of IFRS 17;
• Tested the appropriateness of the IFRS 17 data enhancements in the
general ledger and JACI 17, including the allocation of (re-)insurance
contracts to groups (portfolios, annual cohorts and profitability
categories); and
• Assessed the transition date and 31 December 2022 comparative
period disclosures for compliance with IFRS 17.
Based on the audit procedures performed and evidence obtained, we
consider the judgments applied, new models and data flows implemented
for transition to IFRS 17, and related disclosures to be appropriate.
132 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
INDEPENDENT AUDITORS’ REPORT continued
to the members of Just Group plc
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 Group
undertakings is significant and in excess of the net asset value 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
investments in Group undertakings 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. 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.
Management calculated a ViU which exceeds the carrying amount of
the investment at 31 December 2023, 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;
• Considered the consistency of the assumptions used in the cash flows
with those used in other areas such as the going concern assessment
and recoverability of deferred tax assets;
• 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; and
• 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, where necessary.
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.
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 De-risking
Solutions, Guaranteed Income for life Solutions, lifetime Mortgages and 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.
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 five 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 91% coverage of consolidated total assets, 98% coverage of consolidated
total liabilities and 93% coverage of consolidated profit 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 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, where the value of investments may be affected over time based on market expectations.
We have assessed the risks of material misstatement to the Annual Report as a result of climate change and concluded that for the year ended
31 December 2023, 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 2023.
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 133
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
Financial statements - Company
Overall materiality
£26,722,500 (2022: £21,778,000).
£12,760,000 (2022: £12,852,000).
How we determined it
1% of Total Equity plus net of tax contractual service
margin (“CSM”)
1% of Total Equity
Rationale for benchmark applied
In determining our materiality, we considered financial
metrics alongside additional non-financial factors such
as nature of the entity, its industry and the economic
environment. The engagement team has considered the
primary focus of the users of the financial statements,
including shareholders, policyholders and regulators and
has determined that an equity based benchmark would be
the most appropriate given the primary focus of the users of
the financial statements continues to be the capital position
of the Group. In addition, the income statement is driven
largely by balance sheet movements in insurance contract
liabilities for long-term products. Total equity plus net of
tax CSM is considered an indication of the valuation of the
current in-force business as it reflects the in-force profits
to be released over the duration of the existing contracts.
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 £3,900,000 and £20,100,000. Certain components were audited to a local statutory audit
materiality that was also less than our overall Group materiality.
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% (2022: 75%) of overall materiality, amounting to £20,042,000 (2022: £16,333,500) for the Group financial statements and
£9,570,000 (2022: £9,639,000) 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 £1,336,000 (Group audit)
(2022: £1,100,000) and £700,000 (Company audit) (2022: £700,000) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
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; including the impact of the UK Government’s leasehold and Freehold Reform Bill and the associated consultation on potential restrictions
to the level of residential ground rents, issued on 9 November 2023;
• Assessed the impact of the factors outlined in Note 35, 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.
134 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
INDEPENDENT AUDITORS’ REPORT continued
to the members of Just Group plc
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. 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 2023 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.
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.
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 135
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;
• Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
• 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.
136 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
INDEPENDENT AUDITORS’ REPORT continued
to the members of Just Group plc
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 four years, covering the
years ended 31 December 2020 to 31 December 2023.
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
7 March 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2023
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 137
Year ended
31 December 2023
£m
Note
Year ended
31 December 2022
(restated)
£m
Insurance revenue
Insurance service expenses
Net expenses from reinsurance contracts
Insurance service result
Interest income on financial assets measured at amortised cost
Other investment return
Investment return
Net finance (expenses)/income from insurance contracts
Net finance income/(expenses) from reinsurance contracts
Movement in investment contract liabilities
Net investment result
Other income
Other operating expenses
Other finance costs
Share of results of associates accounted for using the equity method
Profit/(loss) before tax
Income tax (expense)/credit
Profit/(loss) for the year
Profit/(loss) attributable to:
Equity holders of Just Group plc
Profit/(loss) for the year
Total comprehensive income/(loss) attributable to:
Equity holders of Just Group plc
Total comprehensive income/(loss) for the year
Basic earnings/(loss) per share (pence)
Diluted earnings/(loss) per share (pence)
The notes are an integral part of these financial statements.
2
3
4
5
5
6
7
3
8
36
9
10
14
14
1,555
(1,396)
(41)
118
54
2,119
2,173
(2,006)
108
(2)
273
21
(104)
(122)
(14)
172
(43)
129
129
129
129
129
11.3
11.2
1,325
(1,196)
(30)
99
–
(5,189)
(5,189)
4,823
(91)
3
(454)
14
(93)
(57)
(3)
(494)
132
(362)
(362)
(362)
(362)
(362)
(36.3)
(36.3)
138 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2023
At 31 December 2023
104
95
943
(259)
Year ended 31 December 2023
At 1 January 2023
Profit for the year
Total comprehensive income for the year
Contributions and distributions
Dividends
Interest paid on Tier 1 notes (net of tax)
Share-based payments
Total contributions and distributions
Year ended 31 December 2022
At 1 January 2022 – previously reported
Impact of adoption of new accounting standards2
At 1 January 2022 – restated
loss for the year
Total comprehensive loss for the year
Contributions and distributions
Dividends
Interest paid on Tier 1 notes (net of tax)
Share-based payments
Total contributions and distributions
Share
capital
£m
Share
premium
£m
Other
reserves
£m
Retained
earnings1
£m
Note
Total
shareholders’
equity
£m
Tier 1
notes
£m
Total
owners’
equity
£m
Non-
controlling
interest
£m
Total
£m
104
95
938
(354)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5
5
129
129
(19)
(12)
(3)
(34)
15
25
783
129
129
(19)
(12)
2
(29)
883
322
1,105
(2)
1,103
–
–
–
–
–
–
129
129
(19)
(12)
2
(29)
–
–
–
–
–
–
129
129
(19)
(12)
2
(29)
322
1,205
(2)
1,203
Share
capital
£m
Share
premium
£m
Other
reserves
£m
Retained
earnings1
£m
Note
Total
shareholders’
equity
£m
Tier 1
notes
£m
Total
owners’
equity
£m
Non-
controlling
interest
£m
104
–
104
–
–
–
–
–
–
15
25
95
–
95
–
–
–
–
–
–
944
–
944
–
–
–
–
(6)
(6)
977
(944)
33
(362)
(362)
(15)
(14)
4
(25)
(354)
2,120
322
2,442
(944)
–
(944)
1,176
322
1,498
(362)
(362)
(15)
(14)
(2)
(31)
–
–
–
–
–
–
(362)
(362)
(15)
(14)
(2)
(31)
(2)
–
(2)
–
–
–
–
–
–
Total
£m
2,440
(944)
1,496
(362)
(362)
(15)
(14)
(2)
(31)
783
322
1,105
(2)
1,103
At 31 December 2022
104
95
938
1 Includes currency translation reserve of £1m (31 December 2022: £1m).
2 See note 1.2.2.
The notes are an integral part of these financial statements.
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 139
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2023
Note
31 December 2023
£m
31 December 2022
(restated)
£m
1 January 2022
(restated)
£m
Assets
Intangible assets
Property and equipment
Investment property
Financial investments
Investments accounted for using the equity method
Reinsurance contract assets
Deferred tax assets
Current tax assets
Prepayments and accrued income
Other receivables
Cash available on demand
Assets classified as held for sale
Total assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total equity attributable to shareholders of Just Group plc
Tier 1 notes
Total equity attributable to owners of Just Group plc
Non-controlling interest
Total equity
Liabilities
Insurance contract liabilities
Reinsurance contract liabilities
Investment contract liabilities
loans and borrowings
Other financial liabilities
Other provisions
Accruals and deferred income
Other payables
Total liabilities
Total equity and liabilities
16
17
18
19
36
26
21
22
23
23
24
25
36
26
26
27
28
29
31
41
22
32
29,423
149
1,143
406
4
12
60
546
–
47
22
40
45
14
70
23,352
24,682
194
776
449
6
11
33
482
–
–
716
304
30
6
21
510
3
31,838
25,412
26,401
104
95
943
(259)
883
322
1,205
(2)
1,203
24,131
125
35
686
5,588
3
47
20
30,635
31,838
104
95
938
(354)
783
322
1,105
(2)
1,103
19,647
121
33
699
3,669
1
43
96
24,309
25,412
104
95
944
33
1,176
322
1,498
(2)
1,496
23,086
165
34
774
721
1
43
81
24,905
26,401
The notes are an integral part of these financial statements.
The financial statements were approved by the Board of Directors on 7 March 2024 and were signed on its behalf by:
MARK GODSON
Director
140 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2023
Cash flows from operating activities
Profit/(loss) before tax
Property revaluation loss
Depreciation of property and equipment
Share of results from associates
Amortisation of intangible assets
Impairment of intangible assets
Share-based payments
Interest income
Interest expense
Net (increase)/decrease in financial investments
Increase in net reinsurance contracts
Increase in prepayments and accrued income
Decrease/(increase) in other receivables
Increase/(decrease) in insurance contract liabilities
Increase/(decrease) in investment contract liabilities
Increase in accruals, provisions and deferred income
Increase in net derivative liabilities and financial liabilities
(Decrease)/increase in other payables
Interest received
Taxation received
Net cash inflow from operating activities
Cash flows from investing activities
Additions to internally generated intangible assets
Acquisition of property and equipment
Disposal of property
Acquisition of subsidiaries
Net cash outflow from investing activities
Cash flows from financing activities
Decrease in borrowings (net of costs)
Dividends paid
Coupon paid on Tier 1 notes
Interest paid on borrowings
Payment of lease liabilities – principal
Net cash outflow from financing activities
Net increase/(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
Year ended
31 December 2023
£m
Note
Year ended
31 December 2022
(restated)
£m
17
17
16
16
5
8
16
17
17
28
15
15
22
172
–
2
14
3
3
1
(1,104)
122
(6,068)
(363)
(1)
3
4,484
2
16
1,849
(75)
1,075
6
141
–
(3)
1
–
(2)
(26)
(19)
(16)
(48)
(1)
(110)
29
2
1,656
1,687
546
1,141
1,687
(494)
1
4
3
2
–
(3)
(638)
57
3,063
(105)
(5)
(13)
(3,439)
(1)
1
1,340
10
402
16
201
(4)
(4)
3
(197)
(202)
(76)
(15)
(17)
(57)
(3)
(168)
(169)
4
1,821
1,656
482
1,174
1,656
The Consolidated Statement of Cash Flows for year ended 2022 includes corrections to the restatements previously included within the interim financial statements.
The notes are an integral part of these financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 141
1. MATERIAL 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.
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 and the accounting for
the remeasurement of insurance and reinsurance contracts as required by IFRS 17. Values are expressed to the nearest £1m.
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 these
financial statements.
This assessment includes the consideration of the Group’s business plan approved by the Board; the projected liquidity positions 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 a range of “worst case” 1-in-200 year historic liquidity events. The Group liquid
resources includes the Parent Company’s 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 at the end of 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 2023 was 24%. 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 years’ 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 including residential ground rents, mortality, and risk-free rates. In addition more extreme stresses and scenarios
have been considered, including a scenario where of the worst case outcome of peppercorn rent from the Government consultation regarding
restriction of ground rent for existing residential leases, and also a reverse property stress. The Group continued to be a going concern with the
addition of the extreme peppercorn scenario and also in the scenario of a property price fall of 40%. Eligible own funds exceeded the minimum
capital requirement in all stressed scenarios described above.
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 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.
142 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
1. MATERIAL ACCOUNTING POLICIES continued
1.2. New accounting standards and new material accounting policies
1.2.1. Adoption of new and amended accounting standards
The Group has adopted two new accounting standards, with effect from 1 January 2023:
•
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. IFRS 17 was approved for adoption by the UK Endorsement Board in May 2022.
IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4,
“Insurance Contracts”.
•
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 previously met the relevant criteria for, and 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 has applied IFRS 9
commencing 1 January 2023, with comparative periods restated.
IFRS 9 is applicable to financial assets and financial liabilities and covers the classification, measurement, impairment and derecognition of
financial assets and liabilities together with a new hedge accounting model.
The comparative figures in the financial statements have been restated on the adoption of the standards. The impact on the opening statement of
financial position for the earliest presented period (1 January 2022) is disclosed in note 1.2.2.
Material accounting policy choices on the adoption of the new standards (IFRS 17 and IFRS 9) are included in note 1.5 and note 1.6 respectively.
On the transition date, 1 January 2022, the Group has:
•
identified, recognised, and measured each group of gross insurance contracts and associated reinsurance contracts, as if IFRS 17 had always
applied unless impracticable (refer to note 1.3). Where the Group has concluded that the fully retrospective approach is impracticable, it has
applied the fair value approach (refer to note 1.4) on transition;
• derecognised 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;
• presented reinsurance balances separately depending on whether they are in an asset or liability position at a portfolio level (previously at a treaty
level), and reinsurance deposits previously classified as financial instruments are included within the value of reinsurance contracts;
•
•
recognised allowance for expected credit losses (ECl) on financial assets which are measured at amortised cost, on the adoption of IFRS 9; and
recognised any resulting net difference in retained earnings net of any related tax adjustments.
The change in tax law enabling spreading of the tax recovery of the deferred tax asset created at implementation of IFRS 17 over a period of 10 years
was enacted on 10 November 2022. The deferred tax asset at the transition date has been deemed fully recoverable based on projections of future
business activity.
The following amendments to existing standards have been adopted by the Group and do not have a significant impact on the financial statements:
•
•
•
•
IAS 1 “Presentation of financial statements” – Amendments in respect of disclosures of accounting policies.
IAS 8 “Accounting policies” – Amendments in respect of the definition of accounting estimates.
IAS 12 “Income taxes” – Amendments in respect of deferred tax related to assets and liabilities arising from a single transaction.
IAS 12 “Amendments in respect of International tax reform” – Pillar two model rules.
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 – Amendments in respect of the classification of liabilities as current or non-current (effective 1 January 2024).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 143
1. MATERIAL ACCOUNTING POLICIES continued
1.2.2. Impact of adoption of new accounting standards
Statement of financial position
The Statements of financial position reported at 31 December 2021 (the transitional balance sheet presented on 1 January 2022 for the cumulative
impacts of the adoption of new accounting standards) and 31 December 2022 (the comparative balance sheet) have been restated as follows:
Restatement of the transitional Statement of financial position (1 January 2022)
31 December 2021
(as reported)
£m
Reclassification
adjustments
£m
Measurement
adjustments
£m
1 January 2022
(restated)
£m
Assets
Intangible assets
Property and equipment
Financial investments measured at fair value through profit or loss
Reinsurance contract assets (previously reinsurance assets)
Deferred tax assets
Current tax assets
Prepayments and accrued income
Other receivables (previously insurance and other receivables)
Other assets
Total assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total equity attributable to shareholders of Just Group plc
Tier 1 notes
Total equity attributable to owners of Just Group plc
Non-controlling interest
Total equity
Liabilities
Insurance contract liabilities (previously insurance liabilities)
Reinsurance contract liabilities (previously reinsurance liabilities)
Investment contract liabilities
Other financial liabilities
Deferred tax liabilities
Other payables (previously insurance and other payables)
Other liabilities
Total liabilities
Total equity and liabilities
120
14
24,682
2,808
–
30
76
35
583
28,348
104
95
944
977
2,120
322
2,442
(2)
2,440
21,813
275
34
2,866
5
93
822
25,908
28,348
–
–
–
(2,128)
(6)
–
(70)
(13)
–
(2,217)
–
–
–
–
–
–
–
–
–
(57)
6
–
(2,145)
(5)
(12)
(4)
(2,217)
(2,217)
(75)
–
–
36
310
–
–
(1)
–
270
–
–
–
(944)
(944)
–
(944)
–
(944)
1,330
(116)
–
–
–
–
–
1,214
270
45
14
24,682
716
304
30
6
21
583
26,401
104
95
944
33
1,176
322
1,498
(2)
1,496
23,086
165
34
721
–
81
818
24,905
26,401
144 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
1. MATERIAL ACCOUNTING POLICIES continued
Restatement of the comparative Statement of financial position at 31 December 2022
31 December 2022
(previously reported)
£m
Reclassification
adjustments
£m
Measurement
adjustments
£m
31 December 2022
(restated)
£m
Assets
Intangible assets
Property and equipment
Financial investments measured at fair value through profit or loss
Investments accounted for using the equity method
Reinsurance contract assets (previously reinsurance assets)
Deferred tax assets
Current tax assets
Prepayments and accrued income
Other receivables (previously insurance and other receivables)
Other assets
Total assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total equity attributable to shareholders of Just Group plc
Tier 1 notes
Total equity attributable to owners of Just Group plc
Non-controlling interests
Total equity
Liabilities
Insurance contract liabilities (previously insurance liabilities)
Reinsurance contract liabilities (previously reinsurance liabilities)
Investment contract liabilities
Other financial liabilities
Deferred tax liabilities
Other payables (previously insurance and other payables)
Other liabilities
Total liabilities
Total equity and liabilities
The reclassification adjustments are:
104
22
23,477
194
2,287
93
6
85
324
522
27,114
104
95
938
721
1,858
322
2,180
(2)
2,178
18,332
306
33
5,250
–
263
752
24,936
27,114
–
–
(125)
–
(1,598)
–
–
(74)
(289)
–
(2,086)
–
–
–
–
–
–
–
–
–
(336)
7
–
(1,581)
–
(167)
(9)
(2,086)
(2,086)
(57)
–
–
–
87
356
–
–
(2)
–
384
–
–
–
(1,075)
(1,075)
–
(1,075)
–
(1,075)
1,651
(192)
–
–
–
–
–
1,459
384
47
22
23,352
194
776
449
6
11
33
522
25,412
104
95
938
(354)
783
322
1,105
(2)
1,103
19,647
121
33
3,669
–
96
743
24,309
25,412
•
•
•
•
the inclusion of insurance receivables and payables balances as cash flows in the measurement of insurance and reinsurance contracts;
the aggregation of reinsurance deposit backed liabilities with reinsurance contract assets, previously recognised in ‘Other financial liabilities’;
the presentation of reinsurance contracts as an asset / liability based on the net position of all contracts within a portfolio, rather than the
previous IFRS 4 treatment which was recognised on an individual contract basis; and
in addition to the reclassifications as a result of adopting IFRS 17 and IFRS 9, a further reclassification of £23m has been made in respect of future
funding commitments as a derivative forward which was previously incorrectly accounted for gross within investment assets and the funding
commitment in other payables. There is no impact on net assets of this revised classification. The impact on 1 January 2022 is not material.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 145
1. MATERIAL ACCOUNTING POLICIES continued
• The following table summarises the impact of reclassification and impact on cash flows:
Financial investments
Other financial liabilities – Derivatives
Other payables
Statement of cash flows – net decrease in financial investments
Statement of cash flows – increase in other payables
Note
19
30
31
Reclassification
adjustments
£m
(125)
(23)
148
148
(148)
IFRS 17 represents a significant change from the previous measurement requirements contained in IFRS 4. The measurement adjustments are:
• For insurance and reinsurance contracts principally:
– discount rates, which include allowance for expected and unexpected credit default risks instead of the prudent allowance for credit default
risk in IFRS 4;
– risk adjustment for non-financial risk, a new concept required by IFRS 17 compared to the prudent margins required by IFRS 4; and
– Contractual Service Margin (“CSM”), which is a significant conceptual change from IFRS 4, whereby profits are recognised over the term of
insurance and reinsurance contracts rather than at point of sale.
• The derecognition of present value in force business intangible assets.
• Accounting for the associated tax impacts of the measurement adjustments.
The impact of implementation of IFRS 9 has been minor, with the recognition of an expected credit loss adjustment of £1m in the opening
balance sheet.
Impact on Statement of comprehensive income
The Statement of comprehensive income has been re-presented for the year ended 31 December 2022 to reflect the changes in the opening balance
sheet at 1 January 2022. The transitional requirements of IFRS 17 do not require a reconciliation between the previous format of profit or loss and the
new format of profit or loss.
Except for note 5 on net investment gains/(losses) from financial assets, notes 2 to 7 of the financial statements are newly required by the adoption
of IFRS 17.
Impact on earnings per share
The loss per share for the year ended 31 December 2022 (both basic and diluted) has been restated to 36.30 pence per share from 23.70 pence per
share as a result of the adoption of the standards.
1.3. Adoption of IFRS 17
1.3.1. Insurance and reinsurance contracts – determination of transitional amounts
The transition approach on initial adoption of IFRS 17 for the calculation of the contractual service margin was determined for groupings of insurance
and reinsurance contracts either using the:
a) fully retrospective approach – the contractual service margin at inception is calculated based on initial assumptions when groupings of contracts
were incepted, and rolled forward to the date of transition as if IFRS 17 had always been applied; or the
b)
fair value approach – the fair value CSM is calculated as the difference between the fair value of the insurance (or reinsurance contracts) and the
value of the fulfilment cash flows at the date of transition.
The following table summarises the approaches outlined in 1.3.3 and 1.4 below in order to transition from the previous standard, IFRS 4, to IFRS 17:
Insurance contract liabilities
– Fully retrospective approach (1.3.3)
– Fair value approach (1.3.4)
Total insurance contract liabilities
Reinsurance contracts
Reinsurance contract assets
– Fair value approach (1.3.4)
Reinsurance contract liabilities
– Fully retrospective approach (1.3.3)
– Fair value approach (1.3.4)
Reinsurance contract liabilities
Net reinsurance contract (assets)
31 December 2021
(as reported)
£m
Reclassification
adjustments
£m
Measurement
adjustments
£m
1 January 2022
(restated)
£m
2,284
19,529
21,813
(8)
(49)
(57)
335
995
1,330
2,611
20,475
23,086
(2,808)
2,128
(36)
(716)
33
242
275
–
6
6
(2,533)
2,134
(32)
(84)
(116)
(152)
–
165
165
(551)
146 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
1. MATERIAL ACCOUNTING POLICIES continued
1.3.2. Inputs used to determine best estimate and risk adjustment (IFRS 17 values) at date of transition for insurance and reinsurance contracts
1.3.2.1. Determination of best estimate and risk adjustment
For insurance and reinsurance contracts where the fully retrospective approach has been adopted, the best estimate and risk adjustment components
of fulfilment cash flows have been recognised and measured using the accounting policies set out in note 1.5 from the inception date of the contracts to
the date of transition (1 January 2022). For insurance and reinsurance contracts where the fair value approach has been adopted, the best estimate and
risk adjustment components of fulfilment cash flows have been determined as at 1 January 2022. The longevity assumptions used are consistent with
the basis used in the Just Group plc Solvency and Financial Condition Report as at 31 December 2021.
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 for the relevant products of the Group’s insurance subsidiaries Just Retirement limited
(“JRl”) and Partnership life Assurance Company limited (“PlACl”).
Product group
Individually underwritten Guaranteed
Income for life Solutions (“GIfl”)
Individually underwritten Guaranteed
Income for life Solutions (“GIfl”)
Entity
JRl
Mortality tables
Modified E and W Population mortality, with CMI 2019 model mortality improvements
PlACl
Modified E and W Population mortality, with CMI 2019 model mortality improvements
Defined Benefit (“DB”)
JRl
Modified E and 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 (“DB”)
PlACl
Modified E and W Population mortality, with modified CMI 2019 model mortality improvements
Care Plans (“Care”) and other annuity
products
JRl/PlACl Modified PCMA/PCFA and with CMI 2019 model mortality improvements for Care Plans; Modified
PCMA/PCFA or modified E and W Population mortality with CMI 2019 model mortality
improvements for other annuity products
Protection
PlACl
TM/TF00 Select
The long-term improvement rates in the CMI 2019 model are 1.5% for males and 1.25% for females. The period smoothing parameter in the modified
CMI 2019 model has been set to 7.00. The addition to initial rates (“A”) parameters in the model varies between 0% and 0.25% depending on product.
All other CMI model parameters are the defaults.
1.3.2.2. Discount rates
All cash flows were discounted using investment yield curves adjusted to allow for expected and unexpected credit risk (refer to note 1.5 and
note 26(b).
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 adjustment from lTMs, which included a combination of the NNEG guarantee and the additional
reduction to future house price growth rate, was 61bps in JRl and 68bps in PlACl.
The discount rates used to calculate the value of the best estimate and risk adjustment for the groups of contracts applying the fair value approach
were determined based on a reference portfolio as at the transition date.
The discount rates used for the determination of the fulfilment cash flows (and the locked-in rates for the contracts transitioning to IFRS 17 under the
fair value approach) were:
1 year
5 years
10 years
20 years
30 years
JRl
DB / GIfl
2.6%
3.0%
2.9%
2.8%
2.7%
PlACl
Care
0.8%
1.1%
1.0%
1.0%
0.9%
PlACl
DB / GIfl
2.7%
3.0%
2.9%
2.9%
2.8%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 147
1. MATERIAL ACCOUNTING POLICIES continued
1.3.3. Fully retrospective approach
On transition to IFRS 17, the Group has applied the fully retrospective approach unless it has concluded it is impracticable (see notes 1.3.4 and 1.3.5).
The Group has applied the fully retrospective approach on transition for all insurance contracts issued on or after 1 January 2021 and prior to the
1 January 2023 effective date. For all contracts issued after 1 January 2021, the Group has applied the accounting policies described in note 1.5 for
the measurement and recognition of insurance and reinsurance contracts and used the quantitative inputs described in note 1.3.2 to determine the
best estimate and risk adjustment.
The locked-in discount rates for the 2021 cohort, which have been determined on a fully retrospective basis are:
1 year
5 years
10 years
20 years
30 years
JRl
GIfl
2.2%
3.1%
3.2%
2.9%
2.7%
JRl
DB
2.2%
2.7%
2.7%
2.4%
2.4%
PlACl
Care
0.8%
1.1%
1.0%
1.0%
0.9%
For all groups of insurance and associated reinsurance contracts issued prior to this, the fair value approach has been applied (see notes 1.3.4
and 1.4).
1.3.4. Fair value approach
Where the Group has concluded that the fully retrospective approach is impracticable, it has applied the fair value approach on transition for
all groups of insurance and associated reinsurance contracts. For each legal entity, fair value basis cohorts have been grouped across multiple
underwriting years into a single unit for each product type and reinsurance treaty for measurement purposes, which is the unit of account applied.
The fair value approach was selected as the modifications allowed by the modified retrospective approach were not deemed to be sufficient to
enable that approach to be adopted.
The assumptions, models and the results of the determination of the fair value of the insurance and reinsurance contracts under this approach are
explained in note 1.4.
1.3.5. Impracticability assessment
IFRS 17 requires firms to apply the Standard 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, the Group 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 IAS 8 “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.
Impracticability of application of risk adjustment on the fully retrospective approach (insurance contracts)
The most significant issue identified was the absence of an approved Group Risk Adjustment framework, policy and methodology prior to 2021,
with any target setting to prior year information representing the application of hindsight which is prohibited by the Standard.
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 risk differs to any of the risk-based allowances adopted for either existing regulatory or statutory
reporting purposes. A new framework and policy have been defined and implemented to measure the risk adjustment.
The 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, the Group 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 the 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.
The Group has assessed whether other information used in previous reporting cycles, including pricing for new business, could be used to determine
the risk adjustment, but has concluded that none of these alternatives would be an appropriate proxy for the risk adjustment. 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.
Therefore, the Group has concluded that the fully retrospective approach is impracticable prior to 2021 in respect of risk adjustment as it would
require the use of hindsight.
Impracticability assessment for reinsurance contracts held
The risk adjustment for reinsurance contracts held in IFRS 17 reflects the “amount of risk being transferred” to the reinsurer, therefore where the risk
adjustment for insurance contracts is impracticable then, by definition, the reinsurance risk adjustment is also impracticable.
Approach adopted
After considering the severity of these factors, the Group concluded that it was impracticable to determine the value of insurance and reinsurance
contracts on a fully retrospective approach basis for those years of business transacted prior to 2021.
As a result of this impracticality, the IFRS 17 standard allows an accounting policy choice of the fair value approach or modified retrospective
approach from which the Group elected to apply the fair value approach.
148 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
1. MATERIAL ACCOUNTING POLICIES continued
1.4. Determination of fair value
1.4.1. Fair value principles
The Group has used the principles contained in IFRS 13 “Fair Value Measurement” except the principles relating to demand features, to determine the
fair value of the insurance and reinsurance contracts.
The objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would
take place between market participants at the measurement date under current market conditions (i.e. an exit price at the measurement date from
the perspective of a market participant that holds the asset or owes the liability).
For certain assets and liabilities, observable market transactions or market information may be available. For other assets and liabilities, such as
insurance obligations and associated reinsurance agreements, observable market transactions and market information are not widely available.
There is no active market for the transfer of insurance liabilities and associated reinsurance between market participants and therefore there is
limited market observable data. Although there may be transactions for specific books of annuity business, the profile of the cash flows and nature
of the risks of each book of business is unique to each, with key inputs underlying the price of these transactions not being widely available public
knowledge, and therefore it is not possible to determine a reliable market benchmark from these transactions.
When a price for an identical asset or liability is not observable, the Group measures fair value using an alternative valuation technique that
maximises the use of relevant observable inputs and minimises the use of unobservable inputs. Because fair value is a market-based measurement,
it is determined using the assumptions that market participants would use when pricing the asset or liability, including assumptions about risk. As a
result, an entity’s intention to hold an asset or to settle or otherwise fulfil a liability is not relevant when measuring fair value.
The initial determination of the fair value was calculated on a gross and net of reinsurance basis. The fair value of the reinsurance contracts was
then determined based on the difference between the gross and net of reinsurance results.
In arriving at the definition of a “market participant” the Group has assumed the following:
• a similar monoline, rather than a multi-product line insurer;
•
•
•
the portfolios are transferred as closed books of business;
transferral of the associated reinsurance contracts currently in place, as these would be expected to transfer at the point of sale alongside the
underlying insurance contracts; and
treatment of the business under a Solvency II Internal Model approach including a matching adjustment as it is expected that a market
participant would adopt this approach. This is regardless as to whether the business as part of the Group today has an internal model and/or
applies the matching adjustment.
The measurement of the fair value of insurance contracts and associated reinsurance contracts have therefore been classified in terms of the
financial reporting fair value hierarchy as level 3.
1.4.2. Aggregation of contracts for the determination of fair value
The Group has aggregated contracts issued more than one year apart when determining groups of insurance and reinsurance contracts under the
fair value approach at transition as permitted by IFRS 17. For the application of the fair value approach, the Group has used reasonable and
supportable information available at the transition date in order to identify groups of insurance and reinsurance contracts.
All insurance contracts which are valued at the date of transition using the fair value transition method have been allocated to the “any remaining
contracts” profitability grouping (refer to note 1.5.3).
1.4.3. Overview of the fair value approach applied
The fair value approach adopted by the Group calculates the theoretical premium (market premium approach) required by a market participant to
accept insurance liabilities. The quantification of the premium required for the gross insurance liabilities and the associated reinsurance contracts
was determined separately.
The market premium required at the transition date has been determined as follows:
•
•
•
the premium required to earn the target rate of return on capital (“RoC”) on reserves held in respect of Solvency II Best Estimate liability,
Risk Margin and Solvency Capital Requirements, adjusted for associated Solvency II Transitional Measure on Technical Provisions (TMTP) benefits
for the relevant pre-2016 business;
the level of Solvency Capital assumed to be required has been determined as 140% of the solvency capital required under Solvency II regulations,
being based on an external benchmark of a market participant’s requirement for a closed book of business (refer to note 1.4.4.2); and
the target Return on Capital has been determined as 8%, being based on an external benchmark of a market participant’s target return for a
closed book of business (refer to note 1.4.4.3).
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 were 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 used in industry for the valuation of insurance business.
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1. MATERIAL ACCOUNTING POLICIES continued
1.4.4. Principal inputs used to determine fair value
1.4.4.1. Best estimate and risk margin
The estimates for the best estimate and the risk margin are determined on a basis consistent with Solvency II. The inputs used for JRl are based on
its Internal Model, and for PlACl are based on the assumed results that would be derived from its internal model. An allowance for Solvency II TMTP
benefits on relevant pre-2016 business is reflected within the valuation.
The longevity assumptions used for the determination of the best estimate and risk margin are consistent with the basis used in the Just Group plc
Solvency and Financial Condition Report as at 31 December 2021.
The discount rate assumption used for the determination of JRl and PlACl best estimate liabilities is the prescribed Solvency II risk-free rate term
structure including a Matching Adjustment (“MA”) based upon the JRl asset portfolio as at 31 December 2021.
1.4.4.2. Solvency Capital Requirement (“SCR”) coverage ratio
The target SCR coverage ratio assumed for the determination of fair value at the date of transition is based on a market participant view for a closed
book of business. A target ratio of 140% is assumed in the fair value calculation after consideration of the current ranges quoted by similar peers,
notably those principally operating closed books of business in the market and other publicly available data. The fair value calculated is based on the
purchase of the insurance contracts liabilities and the associated reinsurance agreements and does not include a premium associated with writing
new business.
1.4.4.3. Return on Capital – Weighted Average Cost of Capital (“WACC”)
The fair value measurement guidance within IFRS 13 requires that the Return on Capital assumption should be based upon a Weighted Average Cost
of Capital (“WACC”) applicable to a “generic” market participant, rather than the Group’s specific WACC. Consequently, an appropriate market
participant WACC is computed for the Group’s business based on debt and equity cost of capital for companies that have closed books of insurance
business, using input from brokers, and the cost of external debt sourced from an external pricing provider.
The market participant WACC determined was 8% and is applied to all books of business irrespective of the expected duration of the
underlying schemes.
1.4.5. Summary of fair value results
The following table summarises the fair value of insurance and reinsurance contracts determined at the 1 January 2022 transition date.
Insurance contract liabilities
Reinsurance contract assets
Reinsurance contract liabilities
Net reinsurance contracts (asset)
Fair value
£m
20,475
716
(165)
551
18,343
546
(677)
(131)
Insurance contract liabilities – net of reinsurance
19,924
18,474
905
115
395
510
395
1,227
54
119
173
1,054
Estimate of present
value of future cash
flows
£m
Risk adjustment
£m
Contractual
service margin
£m
The amounts previously reported under IFRS 4 on 1 January 2022 for insurance contract liabilities and net reinsurance contracts, where the fair value
approach to transition has been adopted was £19,529m and £2,566m respectively. Disclosure of the fair value component of the transition approach
can be found in note 1.3.1.
150 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
1. MATERIAL ACCOUNTING POLICIES continued
1.4.6. Sensitivities
The following table provides sensitivities to changes in key inputs used to determine the fair value of net insurance contract liabilities. Figures
shown in the table represent the estimated impact on the fair value of each sensitivity in isolation. The SCR coverage ratio and Return on Capital
sensitivities can be interpreted as the corresponding impact on the contractual service margin. However, the Matching Adjustment sensitivity may
not display the same relationship as there may be linkages between the asset portfolio referenced by a market participant in the calculation of the
fair value and the asset portfolio underlying the calculation of IFRS 17 best estimate and risk adjustment liabilities. This linkage has not been allowed
for in the sensitivity.
Reported balances
SCR coverage ratio
+10%
-10%
Return on capital
+1%
-1%
Matching adjustment
+10bps
-10bps
Insurance contract
liabilities (increase)/
decrease
£m
Reinsurance contract
(net) increase/
(decrease)
£m
Insurance contract
liabilities net
of reinsurance
(increase)/decrease
£m
20,475
(551)
19,924
103
(103)
177
(201)
(49)
50
(25)
25
(60)
68
2
(2)
78
(78)
117
(133)
(47)
48
1.5. IFRS 17 Accounting policies
The Group uses the General Measurement Model to measure all insurance and reinsurance contracts and consequently does not apply the Variable
Fee Approach or the Premium Allocation Approach to the measurement of any of its liabilities. IFRS 17 is only applied to insurance and reinsurance
contracts and not to any other ancillary agreements which represent the provision of distinct non-insurance services including lTM servicing as part
of reinsurance arrangements, see note 34(c)(iii).
1.5.1. 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 in JRl
and linked endowment contracts and term-certain GIfl contracts in the South African business are classified as investment contracts as there is
limited transfer of longevity risk. Capped Drawdown contracts are no longer marketed by JRl. IFRS 17 includes an election to treat lifetime mortgages
as either as financial instruments or insurance contracts, Just has chosen to report lifetime mortgages as financial assets, measured at FVTPl in
accordance with IFRS 9.
1.5.2. Recognition
The Group recognises a group of insurance contracts issued from the earliest of the following dates (point of sale):
• The date of the beginning of the insurance coverage period of the group of contracts.
• The date when the first payment from a policyholder in the group becomes due.
• The date when facts and circumstances indicate that the group to which an insurance contract will belong is onerous.
Premiums are considered to be due and the Group is “on risk” only after a contract with a policyholder has been completed. New contracts are added
to the annual cohort group when they are issued, provided that all contracts in the Group are issued in the same financial year.
Reinsurance is recognised from the start of the period during which the Group receives coverage for claims arising from the reinsured portions of the
underlying insurance contracts. From time to time the Group may transact reinsurance coverage in respect of underlying contracts already in force,
in which case recognition is from the date of the reinsurance contract.
The Group recognises a group of contracts acquired as part of a business transfer as at the date of acquisition.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 151
1. MATERIAL ACCOUNTING POLICIES continued
1.5.3. Level of aggregation
Within each legal entity, the Group identifies portfolios of insurance contracts which comprise contracts that are subject to similar risks, and are
managed together. Risks included in this assessment comprise both risks transferred from the policyholder and other business risks. For this purpose,
Defined Benefit (DB), Guaranteed Income for life (GIfl), and Care contracts have been determined to represent a single portfolio that is managed
together and subject to primarily longevity and financial risk. Minor products including the small protection portfolio that is in run-off have been
included in the same portfolio on the grounds of immateriality.
The single annual portfolio for reporting purposes is divided into three groups:
• contracts that are onerous on initial recognition, if any;
• contracts that have no significant likelihood of becoming onerous, if any; and
• any remaining contracts in the portfolio.
Contracts within the single portfolio that would fall into different groups only because law or regulation specifically constrains the Group’s practical
ability to set a different price or level of benefits for policyholders with different characteristics are included in the same group. This applies to
contracts issued in the UK that are required by regulation to be priced on a gender-neutral basis.
All GIfl and Care contracts are evaluated based on the margins that individual contracts contribute when measured on a gender-neutral basis. The
Group has evaluated that these contracts all fall into the remaining contracts grouping in the current year. DB contracts are allocated either to the
grouping of those contracts that have no significant likelihood of becoming onerous, or the remainder, based on whether contracts are Solvency II
capital generative at inception. Each group of insurance contracts is further divided by year of issue for calculation of the CSM. The resulting groups
represent the level at which the recognition and measurement accounting policies are applied. The groups are established on initial recognition and
their composition is not reassessed subsequently.
Reinsurance treaties are allocated to portfolios depending on whether they transfer longevity and financial (inflation and/or investment) risk or
longevity risk alone. The Group has also concluded that both JRl and PlACl hold portfolios of reinsurance contracts that transfer only longevity risk,
and that JRl holds a portfolio that transfers longevity risk and financial risks. Reinsurance CSM is computed separately for each reinsurance treaty for
each underwriting year.
1.5.4. Contract boundaries
The measurement of a group of contracts includes all of the future cash flows within the boundary of each contract in the group. Cash flows are
within the boundary of a contract if they arise from substantive rights and obligations that exist during the current reporting period under which the
Group has a substantive obligation to provide services or be compelled to pay reinsurance premiums, or can compel reinsurers to pay claims.
1.5.5. Initial measurement
On initial recognition, the Group measures a group of profitable insurance contracts as the total of:
•
•
the fulfilment cash flows; and
the CSM, if a positive value.
Fulfilment cash flows include payments to policyholders and directly attributable expenses including investment management expenses. Investment
management expenses are considered to be directly attributable if they are in respect of investment activities from which the expected investment
returns are considered in setting the price at outset for the policyholder benefits.
Fulfilment cash flows, which comprise estimates of current and future cash flows, are adjusted to reflect the time value of money and associated
financial risks, and a risk adjustment for non-financial risk. These calculations are maintained at contract level for GIfl and Care business, and at DB
scheme member level. Insurance acquisition cash flows which are included in fulfilment cash flows at point of sale are costs incurred in the selling,
underwriting and starting a group of contracts that are directly attributable to the portfolio of contracts to which the group of contracts belongs.
The risk adjustment for non-financial risk for a group of insurance contracts is the compensation required for bearing uncertainty regarding the
amount and timing of the cash flows that arise from non-financial risk. The measurement of the fulfilment cash flows of a group of insurance
contracts does not reflect non-performance (own credit) risk of the Group.
The detailed policies and methodologies used for the determination of the discount rate and the risk adjustment are included within note 26(b).
The CSM of a group of insurance contracts represents the unearned profit that the Group will recognise as it provides services under those contracts.
A group of insurance contracts is not onerous on initial recognition if the total of the fulfilment cash flows, any derecognised assets for insurance
acquisition cash flows, and any cash flows arising at that date is a net inflow. In this case, the CSM is measured as the equal and opposite amount of
the net inflow, which results in no income or expenses arising on initial recognition.
If the total of the fulfilment cash flows is a net outflow, then the CSM grouping of contracts is considered to be onerous. The full value of the fulfilment
cash flows is recognised as an insurance liability, and the net outflow recognised as a loss component in profit or loss on initial recognition. Reversals
of loss components following re-projection of future cash flows are recognised in profit or loss only to the extent that they reverse the loss previously
recorded in profit or loss, with any further amounts recognised on the balance sheet by creation of a CSM. The value of the run-off of the loss
component as policyholder benefits are paid is excluded from insurance revenue.
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1. MATERIAL ACCOUNTING POLICIES continued
1.5.6. Subsequent measurement
The carrying amount of a group of insurance contracts at each reporting date is the sum of the liability for remaining coverage and the liability for
incurred claims. The liability for remaining coverage comprises:
•
•
the fulfilment cash flows that relate to services that will be provided under the contracts in future periods; and
any remaining CSM at that date.
The fulfilment cash flows of groups of insurance contracts are measured at the reporting date using current estimates of future cash flows, current
discount rates and current estimates of the risk adjustment for non-financial risk. Outstanding balances due from or to policyholders and
intermediaries are also included within this balance.
Payments of annuities made before due dates owing to the timing of non-working days are included within insurance contract liabilities.
The CSM of each group of contracts is calculated on a cumulative year to date basis, rather than being locked in at each interim reporting period.
For insurance contracts, the carrying amount of the CSM at the end of each period is the carrying amount at the start of the period, adjusted for:
•
•
the CSM of any new contracts that are added to the group in the period;
interest accreted on the carrying amount of the CSM during the period, measured at the discount rates determined on initial recognition of the
group of contracts;
• changes in fulfilment cash flows that relate to future services, except to the extent that:
– any increases in the fulfilment cash flows exceed the carrying amount of the CSM, in which case the excess is recognised as a loss in the profit
or loss account and creates a loss component; or
– any decreases in the fulfilment cash flows are allocated to the loss component, reversing losses previously recognised in profit or loss account;
– the changes are due to financial risk in policyholder cash flows compared with expectations, for example inflation; and
the amount recognised as insurance revenue in respect of services provided in the period.
•
Changes in fulfilment cash flows that relate to future services and accordingly adjust the CSM comprise:
• premium adjustments, such as DB true-ups (which can be both positive and negative) to the extent that they relate to future coverage;
• changes in estimates of the present value of future cash flows in the liability for remaining coverage, except for those that relate to the effects of
the time value of money, benefit inflation, financial risk and changes therein; and
• changes in the risk adjustment for non-financial risk that relate to future services.
Adjustments to CSM for changes in fulfilment cash flows are measured at the discount rates determined at initial recognition, i.e. are calculated using
“locked-in” discount rates. The allowance for benefit inflation within the CSM calculation uses the locked-in inflation assumptions prospectively, with
actual inflation experience recognised in the period up to the measurement date. The effect of changes to the related best estimate and risk
adjustment balances caused by changes in discount rates and benefit inflation are recognised as insurance finance income or expenses within the
profit or loss account.
The standard requires that the CSM is recognised in profit and loss over the period of the contracts issued. The recognition of amounts in profit and
loss is based on coverage units which represent the services that are received by the customers.
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 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 uses the probability of
the policy being in force in each time period for weighting the disparate types of coverage units. 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.
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 of annuitants.
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1. MATERIAL ACCOUNTING POLICIES continued
1.5.7. Reinsurance contracts
The Group applies consistent accounting policies to measure reinsurance contracts as it does for the underlying contracts. Measurement of the
estimates of the present value of future cash flows uses assumptions that are consistent with those used to measure the estimates of the present
value of future cash flows for the underlying insurance contracts, with an adjustment within the future cash flows for risk of non-performance by the
reinsurer. The effect of the non-performance risk of the reinsurer is assessed at each reporting date and the effect of changes in the non-
performance risk is recognised in profit or loss.
The risk adjustment for non-financial risk represents the amount of the risk transferred by the Group to the reinsurer.
On initial recognition, the CSM of a group of reinsurance contracts represents the net cost or net gain on purchasing reinsurance. Reinsurance
contracts cannot be onerous. The initial CSM is measured as the equal and opposite amount of the total of the reinsurance fulfilment cash flows
recognised in the period including any cash flows arising at that date. However, if any net cost on purchasing reinsurance coverage relates to insured
events that occurred before the purchase, the cost is recognised immediately in profit or loss as an expense.
The level of aggregation for CSM calculation purposes is at annual cohort level for each treaty. The existing treaties for which the deposit back
arrangements were reported separately as financial liabilities prior to adoption of IFRS 17 are included within the value of the associated reinsurance
contracts under IFRS 17. Reinsurance contracts are presented in the Statement of financial position based on whether the portfolios of reinsurance
contracts are an asset or liability. The Group has identified that, for each entity, it has two portfolios of reinsurance contracts based on whether or not
the underlying contracts transfer financial risk in addition to longevity risk.
The carrying amount of the reinsurance CSM at the end of each period is the carrying amount at the start of the year, adjusted for:
•
•
the CSM of reinsurance ceded in the period;
interest accreted on the CSM during the period, measured at the discount rates determined on initial recognition;
• changes in fulfilment cash flows that relate to future services, measured at the discount rates determined on initial recognition, except to the
extent that a change results from a change in fulfilment cash flows allocated to a group of underlying insurance contracts that does not adjust
the CSM of the group of underlying contracts, in which case the change is recognised in profit or loss;
• any reinsurance recovery, or reversal thereof, recognised in connection with a loss component on underlying contracts calculated based on the
reinsurance quota share; and
•
the amount representing either the cost or gain of services received from reinsurance in the period.
The allowance for benefit inflation within the CSM calculation uses the locked-in inflation assumptions prospectively, with actual inflation experience
recognised in the period up to the measurement date.
The coverage units for the release of the reinsurance CSM in profit and loss are based on the “variable leg” reinsurance claim cash flow values.
1.5.8. Derecognition and contract modification
The Group derecognises a contract when it is extinguished – i.e. when the specified obligations in the contract expire or are discharged or cancelled.
It also derecognises a contract if its terms are modified in a way that would have changed the accounting for the contract significantly had the new
terms always existed, in which case a new contract based on the modified terms is recognised. If a contract modification does not result in
derecognition, then the Group treats the changes in cash flows caused by the modification as changes in estimates of fulfilment cash flows.
The Group transacts two main types of contract modification which are not normally expected to result in derecognition as they do not result in
changes to profitability groupings or accounting treatment:
•
•
transition of DB schemes from buy-in to buy-out is anticipated within the original contracts and are therefore not treated as modifications;
from time to time, fee charging terms and quota shares are amended within reinsurance treaties however these do not have a significant impact
on the accounting for the treaties.
On the derecognition of a contract from within a group of contracts, the fulfilment cash flows, CSM and coverage units of the group are adjusted to
reflect the removal of the contract that has been derecognised.
1.5.9. Presentation
The Group only writes types of annuity insurance business which are similar in risk profile and are managed together. The small protection portfolio,
which is in run-off, is considered immaterial and is aggregated with the annuity business and reported as a single portfolio.
The Group holds proportional reinsurance cover that is designed to be similar in longevity risk profile to the underlying contracts. The proportional
reinsurance cover is reported in separate portfolios depending on whether or not treaties transfer financial risk. Aggregated reinsurance portfolio
balances may be either assets or liabilities in the statement of financial position.
Income and expenses from insurance contracts are presented separately from income and expenses from reinsurance contracts. Income and
expenses from reinsurance contracts, other than insurance finance income or expenses, are presented on a net basis as “net expenses from
reinsurance contracts” in the insurance service result.
The Group has elected to disaggregate the change in the risk adjustment for non-financial risk between the insurance service result and insurance
finance income or expenses.
154 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
1. MATERIAL ACCOUNTING POLICIES continued
1.5.9.1. Insurance revenue
The Group recognises insurance revenue as it satisfies its performance obligations – i.e. as it provides coverage or other services under groups of
insurance contracts through the payment of annuities and expenses. Repayment of investment components do not represent provision of services.
In addition, the Group allocates a portion of premiums that relate to recovery of insurance acquisition cash flows to each period in a systematic way
based on CSM coverage units. The Group recognises the allocated amount as insurance revenue and an equal amount as insurance service expenses.
The proportion of the CSM account balance recognised as insurance revenue in each period is based on the proportion of insurance contract services
provided in the period compared with the value of services expected to be provided in future periods. The proportion of CSM is based on “coverage
units” which represent the quantity of insurance coverage provided by the contracts in the group, determined by considering for each contract the
quantity of benefits provided and its expected coverage duration. Further information on the calculation of CSM is given in note 1.5.6.
Policyholder cash flows that may occur regardless of an insurance event are deemed to be “investment components” or other non-insurance
components (such as a premium refund) or a combination. This includes the guarantees that the Group offers to policyholders which provide for
annuity payments to continue after death until the policy reaches a predetermined anniversary of its start date (the guarantee period), tax-free
cash payments that DB scheme members may select at retirement, and payments on surrenders and transfers to other retirement schemes.
All investment components are regarded as non-distinct as they only exist as a result of the underlying insurance contract, and are measured
consistently with future insurance cash flows included in the Estimate of present value of future cash flows.
The value of payments made within investment components and other non-insurance payments are excluded from both insurance revenue
and expenses.
1.5.9.2. Insurance service expenses
The Group recognises insurance service expenses arising from groups of insurance contracts issued comprising incurred claims (excluding
repayments of investment components); maintenance expenses; amortisation of insurance acquisition cash flows; and the impact of changes
that relate to either past service (changes in fulfilment cash flows relating to the liability for incurred claims) or future service (loss component).
1.5.9.3. Loss component
The Group establishes a loss component of the liability for remaining coverage for onerous groups of insurance contracts, if any. The Group writes
only single premium contracts which are generally profitable, and hence loss components are not expected to occur. The loss component represents
the amount of fulfilment cash outflows that exceed the premium income, and hence are excluded from insurance revenue. loss components are
recognised in the statement of comprehensive income within insurance service expenses when they occur. The balance sheet disclosures in note 26
present the allocation between the loss component and the liability for remaining coverage excluding the loss component, if any. This run-off of the
loss component element of the liability for remaining coverage is determined based on coverage units (as used for CSM amortisation) such that the
loss component is nil at the end of the contracts.
Once a loss component is established, changes in estimates of cash flows relating to future services are allocated solely to the loss component. If the
loss component is reduced to zero, then any excess over the amount allocated to the loss component creates a new CSM for the group of contracts.
1.6. IFRS 9 Financial instruments
1.6.1. Summary of impact of adoption of IFRS 9
1.6.1.1. Financial assets
The Group classifies financial assets on the basis of both the business model for which the portfolio is held and the contractual cash flow
characteristics of the financial asset. The Group’s business model is to manage the financial assets and liabilities which back its net insurance
contract fulfilment cash flows 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 (“FVTPl”). On the adoption of the standards (IFRS 17 and IFRS 9), the Group has
elected to apply the option contained in paragraph 8A in IFRS 17 to recognise and measure lifetime Mortgages, including the No Negative Equity
Guarantee component, as financial instruments in terms of IFRS 9, rather than as insurance contracts.
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 the existing financial assets measured at amortised cost has not had a material impact on Group
shareholders’ funds.
During 2023, the Group has acquired a portfolio of sovereign gilts which it has classified at amortised cost due to the Group’s intention to collect
solely payments of principal and interest. Further details have been provided in note 19 Financial Investments.
1.6.1.2. Financial liabilities
IFRS 9 retains the requirements in IAS 39 for the classification and measurement of financial liabilities, and hence there are no changes required in
this area.
1.6.1.3. Hedge accounting
The Group does not currently apply hedge accounting and therefore was not impacted by the requirements of IFRS 9.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 155
1. MATERIAL ACCOUNTING POLICIES continued
1.6.1.4. Classification of financial assets and financial liabilities on adoption of IFRS 9
The following table shows the original measurement category and carrying amount under IAS 39 and the new measurement category and carrying
amount under IFRS 9 for each class of the Group’s financial assets and financial liabilities as at 31 December 2022. There has been no significant
change in the measurement basis (either FVTPl or amortised cost) as a result of the adoption of IFRS 9, nor is there a change to the carrying amount
of financial instruments on the opening balance sheet presented as at 1 January 2022.
Original classification
under IAS 39
New classification
under IFRS 9
Carrying amount
under IAS 39
£m
New carrying amount
under IFRS 9
£m
2022
Financial assets
Financial investments
– Derivative assets
– Residential mortgages
FVTPl (held for trading)
FVTPl (designated)
FVTPl (mandatory)
FVTPl (mandatory)
– All other financial investments
FVTPl (designated)
FVTPl (business model)
Other receivables
Cash available on demand
Financial liabilities
loans and receivables
loans and receivables
Amortised cost
Amortised cost
Investment contract liabilities
FVTPl (designated)
FVTPl (accounting mismatch)
loans and borrowings
Other financial liabilities
– Derivative liabilities
– Other financial liabilities
Other payables
Amortised cost
Amortised cost
FVTPl (held for trading)
FVTPl (mandatory)
Amortised cost
Amortised cost
Amortised cost
Amortised cost
2,277
5,306
15,769
34
482
33
699
3,046
623
96
2,277
5,306
15,769
33
482
33
699
3,046
623
96
Amounts reported in this table include the amounts reported as at 31 December 2022 in the 2022 financial statements adjusted for the
reclassifications of certain balances as required by IFRS 17.
1.6.2. Classification of financial assets and financial liabilities
The Group classifies its financial assets into either the Amortised Cost or FVTPl measurement categories. The Group measures its financial assets
according to the business model applied. This reflects how the Group manages financial assets either in order to solely collect the contractual cash
flows from assets (measured at amortised cost), or collect both the contractual cash flows and cash flows arising from the sale of assets (measured
at FVTPl).
Business model – measurement of financial investments at FVTPL
Financial investments which back the net insurance fulfilment cash flows are classified as part of the fair value business model and measured at
FVTPl. Factors considered by the Group in determining the business model for a group of assets include past experience on how the cash flows for
these assets were collected, how the asset’s performance is evaluated and reported to key management personnel, how risks are assessed and
managed, and how managers are compensated. To ensure that the contractual cash flows from the financial assets are sufficient to settle those
liabilities, the Group undertakes significant buying and selling activity on a regular basis to rebalance its portfolio of assets and to meet cash flow
needs as they arise. Investments are measured at fair value with any gains and losses recognised in Investment return in the Consolidated statement
of comprehensive income. Transaction costs are recognised in Other operating expenses when incurred.
The Groups’ investments in lifetime Mortgages, which contain No Negative Equity Guarantees, are included in financial investments measured
at FVTPl.
Derivative instruments
All derivative instruments, both assets and liabilities are classified as FVTPl in accordance with IFRS 9. All derivatives are carried as assets when the
fair value is positive and liabilities when the fair values are negative. The Group does not use hedge accounting.
Amortised cost
The Group has classified bank balances and other receivables at amortised cost. These financial assets are eligible for this measurement as they
contain payments of solely payments of principal and interest and are not held for trading purposes.
In addition, the Group has purchased a distinct portfolio of sovereign gilts where the purpose of holding the instruments is to collect solely payments
of principal and interest. This portfolio is managed separately from the assets that are held to back the insurance contract fulfilment cash flows (net
of reinsurance), financial liabilities measured at amortised cost, and equity balances. The Group has policies and procedures which define the
framework for when disposals of these gilts can occur, which is expected to be in extremely limited circumstances.
Transaction costs incurred on financial assets measured at amortised cost are capitalised to the underlying instrument and are included in the
determination of the effective rate of interest.
156 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
1. MATERIAL ACCOUNTING POLICIES continued
1.6.3. 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. Forward
contracts to enter into investments at a contracted date some time in the future are not recognised until the settlement date; prior to that a
derivative forward contract is recognised. 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 IFRS 9 derecognition criteria for transferred
financial assets are met. The criteria include assessment of rights and obligations to the cash flows, an assessment of the transfer of substantially
all the risks and rewards of ownership and an assessment of whether the Group has retained control of the investment.
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. Where non-cash collateral pledged continues to be recognised by the Group but the
counterparty is permitted to sell or re-pledge the collateral, the non-cash collateral assets are classified separately within the Financial instruments
note. In the current year these include the new portfolio of amortised cost gilts (See note 19).
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 IFRS 9 recognition/derecognition criteria. An assessment is made of the
contractual terms, including consideration of the Group’s exposure to the economic benefits. See note 34(c)(iii) for further details.
1.6.4. Investment return
Net investment (losses)/gains on financial assets consists of interest receivable for the year and realised and unrealised gains and losses on financial
assets and liabilities at FVTPl. Net investment (expense)/ revenue is presented in the Statement of comprehensive income based on the classification
of the financial assets.
Interest income is recognised as it accrues on the effective interest method and is reported separately for each classification of financial instruments.
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 measured at fair value through profit or loss 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.
1.6.5. Use of fair value
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.
Determining the fair value of financial investments when the markets are not active
The Group holds certain financial investments which are not quoted in active markets and include loans secured by residential mortgages, derivatives
and other illiquid 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.
Fixed-maturity 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 treated as level 3 under the fair value
hierarchy. 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.
The financial investments measured at fair value are classified into the three-level hierarchy described in note 20 on the basis of the lowest level of
inputs that are significant to the fair value measurement of the financial investment concerned.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 157
1. MATERIAL ACCOUNTING POLICIES continued
1.6.6. Financial assets measured at amortised cost
Financial assets held at amortised cost are measured using the effective interest rate method and are impaired using an expected credit loss model.
The model splits financial assets into those which are performing, underperforming and non-performing based on changes in credit quality since
initial recognition.
At initial recognition financial assets are considered to be performing. They become underperforming where there has been a significant increase in
credit risk since initial recognition, and non-performing when there is objective evidence of impairment. 12 months of expected credit losses are
recognised within expenses in the Consolidate statement of comprehensive income and netted against the financial asset in the Consolidated
statement of financial position for all performing financial assets, with lifetime expected credit losses recognised for underperforming and
non-performing financial assets.
Expected credit losses are based on the historic levels of loss experienced for the relevant financial assets, with due consideration given to
forward-looking information. The most significant categories of financial assets held at amortised cost for the Group are its portfolio of investments
in sovereign gilts (see note 19) and cash available on demand. Investments are reclassified from performing to under-performing when coupons
become more than 30 days past due, in line with the presumption set out in IFRS 9, or when the financial institution is no longer considered to be
investment grade by the rating agents. Due to the nature of the investment in sovereign gilts, the Group concludes that these investments are low
credit risk and there has been no significant deterioration in credit risk in the investments.
1.6.7. Investment contract liabilities
Investment contracts are measured at fair value through profit or loss in accordance with IFRS 9. 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.
1.6.8. 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. There is no change in accounting
for loans and borrowings on adoption of IFRS 9.
1.6.9. Other financial liabilities
Except for derivative financial liabilities, all other financial liabilities are held at amortised cost and measured using the effective interest rate method.
1.7. Material 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 that affect items
reported in the Consolidate statement of comprehensive income, Consolidated statement of financial position, other primary statements and
Notes to the financial statements. The adoption of IFRS 17 and IFRS 9 by the Group has resulted in changes to significant accounting estimates
and judgements.
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. Sensitivities of investments and insurance contracts to
reasonably possible changes in significant estimates and assumptions are included in notes 20(d) and 26(h) respectively.
The major areas of judgement used as part of accounting policy application are summarised below.
Note
1.3
1.5
Item involving judgement
Critical accounting judgement
Method of transition in the
adoption of IFRS 17
The Group has concluded that is impracticable to apply the fully retrospective approach to all insurance
and reinsurance contracts prior to 1 January 2021 and has elected to adopt the fair value approach to
these contracts.
Selection of method to
determine the discount
rate for insurance and
reinsurance contracts
The Group has elected to apply the top-down approach for the determination of discount rates.
Discount rates are determined based on a reference portfolio of assets and allow for deductions for
credit risk (both expected and unexpected). The reference portfolio consists of the actual asset portfolio
backing the net of reinsurance best estimate liabilities and risk adjustment and is adjusted in respect of
new contracts incepting in the period to allow for a period of transition from the actual asset holdings to
the target portfolio where necessary. No adjustment for liquidity differences between the reference
portfolio and the liabilities is made.
For calculation of the CSM at the inception of contracts, discount rates are based on the yields from a
reference portfolio assumed to be represented by the current target portfolio mix based on the latest
investment strategy.
A weighted average discount rate curve is used for accreting interest on the CSM and for calculating
movements in the CSM due to changes in fulfilment cash flows relating to future service. This separate
“locked-in” discount rate curve, is determined for each annual cohort at the end of the cohort’s first year
and then does not change throughout the remainder of life of the group of contracts.
158 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
1. MATERIAL ACCOUNTING POLICIES continued
Note
Item involving judgement
Critical accounting judgement
1.5, 26
Calibration of risk adjustment
for insurance contract
liabilities and reinsurance
assets and liabilities
IFRS 17 requires that the future cash flows are adjusted by the risk adjustment for non-financial risk.
The risk adjustment for non-financial risks reflects the adjustment to the best estimate cash flows
required to provide a 70% level of confidence that longevity, expense and insurance contract specific
operational risks will be covered by the liabilities when viewed over the lifetime of the contracts. This
judgement represents the level of compensation that the Group requires for bearing the uncertainty
regarding the amount and timing of the cash flows that arises from non-financial risk and is used as a
core parameter within the Group’s pricing framework when assessing the profitability of new business.
The reinsurance risk adjustment represents the extent to which non-financial risks are transferred to
reinsurers and is measured using the same calibrations as applied to the underlying contracts.
1.5, 26
Subsequent measurement of
CSM for insurance contracts
The CSM is recognised at point of sale based on the value of the fulfilment cash flows, including directly
attributable acquisition expenses. The CSM is recognised in profit and loss over the terms of services
provided to policyholders (coverage units).
Coverage units will vary depending on the type of service provided. The Group uses 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 of Defined Benefit policies, investment return service coverage units are
represented by the return on the funds backing the future cash flow liability in this accumulation
phase. Insurance service in this phase is considered insignificant.
• In the guaranteed phase of Defined Benefit and Guaranteed Income for life policies, when
payments outwards are being made regardless of any insurance event, investment return service is
represented by the payments to annuitants.
• In the life contingent phase of all policies, insurance service is represented by payments to
annuitants, as confirmed by the IASB Interpretation Committee (“IFRIC”) during 2022.
Assessment of fair value hierarchy for financial investments, which considers the market observability
of valuation inputs. Where the market is not active, such as for illiquid assets including commercial
mortgages, infrastructure loans and long income real estate, management applies judgement in
selecting the appropriate valuation technique.
The Group has selected and used a variant of the Black-Scholes option pricing formula with real world
assumptions to determine the fair value of the no-negative equity guarantee component of the fair
value of loans secured by residential mortgages. The Group has selected 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.
This selected measurement approach is in line with common industry practice and there does not
appear to be an alternative approach that is widely supported in the industry. We acknowledge that
there has been significant recent academic and market debate concerning the valuation of no-negative
equity guarantees and we intend to continue to actively monitor this debate.
1.6.3
Financial assets –
valuation method
1.6
The selection of an
appropriate measurement
model to determine the fair
value of loans secured by
residential mortgages which
includes the no-negative
equity guarantees
The table below sets out those items the Group considers susceptible to changes in critical estimates and assumptions.
Note
1.4
Item involving estimate
Critical estimates and assumptions
Determination of the fair value
of insurance and reinsurance
contracts issued prior to
1 January 2021
The Group has determined the fair value of these insurance contracts on 1 January 2022. The critical
assumptions used as part of the determination of fair value included the selection of an appropriate
weighted average cost of capital, the appropriate level of solvency capital required, and the selection of
the asset portfolio to determine the discount rate.
A comprehensive description of the approach applied, and the inputs used in the determination of fair
value can be found in note 1.4.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 159
1. MATERIAL ACCOUNTING POLICIES continued
Note
Item involving estimate
Critical estimates and assumptions
1.5, 26
Measurement of insurance
contract liabilities – present
value of future cash flows
The critical estimates used in measuring insurance liabilities include the projected future annuity
payments and the cost of administering payments to policyholders. The Group considers any
maintenance expenses to be directly attributable if they are required to be incurred to enable the
insurance entities to continue to operate as insurance companies maintaining the contracts in force.
The key assumptions used in the determination of future cash flows are the mortality and annuity
escalations assumptions and the level and inflation of costs of administration.
Mortality assumptions are derived from the appropriate standard mortality tables, 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. Further detail can be found
in note 26(b).
The present value of future cash flows are discounted based on discount rates as at the valuation date.
1.5, 26
1.5, 26
Determination of discount
rate for insurance and
reinsurance contracts
Discount rates for gross insurance contract liabilities are based on the yield of a reference portfolio after
deducting allowances for expected and unexpected credit default losses. Factors that may affect future
levels of defaults, including historic trends and current spread levels, are closely monitored when
determining deductions for credit risk.
Measurement of the fulfilment
cash flows arising from
reinsurance arrangements
The critical estimates used in measuring the value of reinsurance assets and liabilities include the
projected future cash flows arising from the reinsurers’ share of the Group’s insurance liabilities
including the risk adjustment.
The key assumptions used in the valuation include discount rates and mortality experience, as
described above, and assumptions around the reinsurers’ ability to meet their claims obligations.
Consistent discount rates are used for calculation of reinsurance CSM as used for the underlying
business. In instances where reinsurance cover is in place when underlying contracts are written, the
reinsurance CSM is calculated using discount rates as at the start of the relevant treaty notice period. In
instances where reinsurance is transacted subsequently to the underlying business being written, the
reinsurance CSM is calculated using discount rates as at the start date of the reinsurance treaty.
Allowance is made for reinsurer credit default risk within the expected cash flows based on the net
balance held with the reinsurer after allowing for collateral arrangements.
The critical estimates used in valuing loans secured by residential mortgages include the projected
future receipts of interest and loan repayments, future house prices, and the future costs of
administering the loan portfolio.
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 swap
curve and used to discount the mortgage cash flows.
Assumptions based on unobservable inputs are used in the measurement of the fair value of financial
investments where there is not a quoted price available and limited market activity. The fair value is
estimated using valuation techniques including discounted cash flows and pricing from asset managers.
The assumptions used in making this significant estimate include management’s expectations regarding
credit spreads for determining the discount rate for such investments including residential ground rents.
The Group has considered the proposals set out in the government consultation regarding potential
restrictions to the level of residential ground rents and has also considered the alternative proposal put
forward by the ABI. In determining the fair value of residential ground rents the Group has concluded
that it is appropriate to include an allowance for increased uncertainty and this has been made by
making adjustments to the rating framework to reflect the Group’s estimate of the impact that a third
party would consider. Specifically by adjusting two key parameters in the ratings model, the amortisation
benefit and the cap rate, for the purposes of providing a valuation overlay.
The valuation of residential ground rents is adjusted to reflect an expected increase in credit spread.
The increased spread would also increase the credit risk deduction for defaults. These adjustments have
been applied to the valuation of IFRS insurance contract liabilities by increasing the credit risk deduction
for defaults to reflect a lower rating and hence the valuation of liabilities. Further information regarding
management’s consideration of the impact on the valuation of residential ground rents as a result of
Government consultation can be found in note 20(d)(v).
The adoption of IFRS 17 has created tax losses on transition which can be offset against future taxable
profits. The Group has assessed that these tax losses will be fully recoverable based on the Group’s
five-year business plan and projection thereafter.
1.6, 20(a),
20(d)
Measurement of fair value of
loans secured by residential
mortgages, including
measurement of the
no-negative equity guarantee
20(a)
20
Measurement of fair value
of other illiquid financial
investments
Determination of the
appropriate adjustment to
the value of residential
ground rents as a result of
the publication of the
government consultation.
1.18, 21
Recoverability of deferred tax
160 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
1. MATERIAL ACCOUNTING POLICIES continued
1.8. 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:
•
•
•
it has power over the investee;
it is exposed, or has rights, to variable returns from its involvement with the investee; and
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.
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.
1.9. 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.
The results of operating segments that do not meet the Reportable segment criteria within IFRS 8 “Operating segments” are not disclosed.
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.
1.10. 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 immaterial
and are accounted for through other comprehensive income.
1.11. Finance costs
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.
1.12. 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 increase 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 161
1. MATERIAL ACCOUNTING POLICIES continued
1.13. Intangible assets
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.
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 15 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.
The useful economic life and the method used to determine the cost of intangible acquired in a business combination is as follows:
Intangible asset
Intellectual property
Estimated useful economic life
Valuation method
12–15 years
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
1.14. Property 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 Consolidated statement of comprehensive income.
All other property 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 and equipment are as follows:
Property 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
162 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
1. MATERIAL ACCOUNTING POLICIES continued
1.15. 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.
1.16. 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 19).
1.17. 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.
1.18. 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. The principal temporary
differences arise from the transitional tax adjustments resulting from the implementation of IFRS 17. In November 2022, provision was made
in UK tax law to spread the impact of transition to IFRS 17 over a period of 10 years.
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.
The deferred tax assets and liabilities are measured using substantively enacted corporation tax rates based on the timings of when they are
expected to reverse.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 163
2. INSURANCE REVENUE
Contractual service margin recognised for services provided
Change in risk adjustment for non-financial risk for risks expired
Expected incurred claims and other insurance service expenses
Recovery of insurance acquisition cash flows
Total
Insurance revenue measured by transition type:
Fully retrospective approach and General measurement model applied since inception
Fair value measurement at the date of transition
Total
Year ended
31 December 2023
£m
Year ended
31 December 2022
(restated)
£m
156
11
1,369
19
1,555
120
13
1,184
8
1,325
Year ended
31 December 2023
£m
Year ended
31 December 2022
(restated)
£m
310
1,245
1,555
150
1,175
1,325
Contractual service margin recognised
The contractual service margin (“CSM”) release of £156m (2022: £120m) is based on the coverage units, at cohort level, representing services
provided in the year as a proportion of current and future coverage units, (see note26(f)). The increase compared with 2022 reflects the inclusion
of an additional year’s cohort of business, and the increase in the CSM balance in 2023 as a result of favourable changes in estimates of future
cash flows following demographic assumption changes.
The CSM release represents 6.0% (2022: 5.8%) of the CSM reserve balance immediately prior to release.
Change in risk adjustment for non-financial risk for risks expired
The risk adjustment release of £11m (2022: £13m) represents the value of the release of risk as insurance coverage expires.
Expected incurred claims and other insurance service expenses
This amount represents the expected claims and maintenance expense cash flows in the period based on the assumptions within the opening
liability for future cash flows excluding the value of investment components and other non-insurance cash flows.
As the business continues to grow and mature, more of the Group’s claims payments are for policies that are beyond guarantee periods. This together
with the increase in business mix towards DB business results in an increase in expected claims and expenses recorded as part of insurance revenue.
Recovery of insurance acquisition cash flows
Acquisition costs are deducted from the CSM at point of sale, with the result that as the CSM release is recognised in the income statement, there will
be an implicit allowance for acquisition costs made each year over the life of contracts. The amount recognised in each period represents the portion
of past and current acquisition expenses in respect of insurance contracts that are allocable to the current period based on the services provided
(coverage units). Insurance revenue and insurance service expenses are grossed up by this annual value of acquisition expenses so that the full value
of the premium is recognised as insurance revenue over the lifetime of contracts.
The growth in the value in the year to £19m (2022: £8m) reflects the inclusion of an additional new business cohort. Only the cohorts measured on a
fully retrospective basis at transition to IFRS 17 and cohorts of business written since transition (i.e. underwriting years 2021 onwards) have insurance
acquisition cash flows. The recovery percentage recognised in the period is consistent with the CSM release percentages.
164 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
3. INSURANCE SERVICE EXPENSES
Incurred expenses
Claims
Commission
Personnel expenses and other
Investment expenses and charges
Depreciation of equipment
Impairment of intangible assets
Amortisation of intangible assets
Audit costs
Other costs
IFRS 17 treatment of acquisition costs
Amounts attributable to insurance acquisition cash flows
Amortisation of insurance acquisition cash flows
Represented by:
Actual claims and maintenance expenses
Amortisation of insurance acquisition cash flows
Insurance service expenses
Other operating expenses
Total
Note
12
Year ended
31 December 2023
£m
Year ended
31 December 2022
(restated)
£m
1,332
29
127
93
2
3
3
4
71
(183)
19
1,500
1,377
19
1,396
104
1,500
1,153
55
106
44
4
–
2
4
37
(124)
8
1,289
1,188
8
1,196
93
1,289
Total expenses, including claims costs, recognised in profit and loss in the period amounted to £1,500m (2022: £1,289m), of which £1,396m
(2022: £1,196m) are attributed to provision of insurance services, and £104m (2022: £93m) of other operating expenses. The actual insurance
claims and expenses of £1,377m (2022: £1,188m) compared with an expected value of £1,369m (2022: £1,184m), included within insurance revenue.
Other operating expenses of £104m (2022 £93m) represent expenses of the Group’s non-insurance business of £38m (2022: £30m), development and
strategic expenses of £34m (2022: £22m), and other costs of £32m (2022: £41m) which are mainly investment acquisition related expenses not
attributed to insurance contracts in force. The reduction in commission costs and addition in investment expenses reflects the switch in investment
strategy from lTMs towards other illiquid investments.
These figures are stated after adjustments for:
•
reduction of claims to exclude investment components and other non-insurance cash flows as noted above for insurance revenue; and
• acquisition expenses incurred in the period are treated as a deduction when calculating the CSM, with only the portion related to the current
period service provision included in profit or loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 165
3. INSURANCE SERVICE EXPENSES continued
During the year the following services were provided by the Group’s auditor at costs as detailed below:
Auditor remuneration
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
Total
Year ended
31 December 2023
£000
Year ended
31 December 2022
£000
676
2,555
792
–
1
4,024
616
3,042
705
48
1
4,412
Fees payable for the audit of the Company’s subsidiaries pursuant to legislation includes fees of £789,000 (2022: £1,700,000) 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.
4. NET EXPENSES FROM REINSURANCE CONTRACTS
Contractual service margin recognised for services received
Change in risk adjustment for non-financial risk for risk expired
Expected net settlements and reinsurance expenses
Actual net settlements and reinsurance expenses
Total
Year ended
31 December 2023
£m
Year ended
31 December 2022
(restated)
£m
27
4
27
(17)
41
25
5
12
(12)
30
Contractual service margin recognised for services received
The CSM release for reinsurance contracts is recognised based on coverage units in a similar manner to the CSM in respect of the underlying
contracts. For reinsurance swaps, the coverage units are calculated based on the cash flows of the floating (receiving) leg only.
Change in reinsurance risk adjustment for non-financial risk for risk expired
The reinsurance risk adjustment is based on the floating leg cash flows, and hence the behaviour of the risk adjustment, including its release, is
similar to the movement on the underlying contracts that are reinsured.
Actual vs. Expected incurred reinsurance claims and other reinsurance service expenses
Actual reinsurance claims and expenses of £17m (2022: £12m) were lower than the expected value of £27m (2022: £12m) as a result of reductions in
longevity experience during the year.
5. INVESTMENT RETURN
Interest income on assets designated on initial recognition at FVTPl
Interest income on assets mandatorily measured at FVTPl: lTMs
Interest income on assets at amortised cost
Movement in fair value of financial assets designated on initial recognition at FVTPl
Movement in fair value of financial assets mandatorily measured at FVTPl: lTMs
Movement in fair value of financial assets mandatorily measured at FVTPl: Derivatives
Foreign exchange gains/(losses) on amortised cost assets
Total
Year ended
31 December 2023
£m
Year ended
31 December 2022
(restated)
£m
806
244
54
424
278
365
2
2,173
473
165
–
(3,143)
(1,578)
(1,106)
–
(5,189)
Interest income and change in valuation of investments is reported separately for assets classified in a portfolio at FVTPl and assets classified in an
amortised cost portfolio. The majority of the Group’s investments are classified at FVTPl; a separate amortised cost portfolio of sovereign gilts was
entered into during the year as explained in note 1.6.1.
166 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
6. NET FINANCE (EXPENSES)/INCOME FROM INSURANCE CONTRACTS
Interest accreted
Effect of changes in interest rates and other financial assumptions
Effect of measuring changes in estimates at current rates and adjusting
the CSM at rates on initial recognition
Total
Year ended
31 December 2023
£m
Year ended
31 December 2022
(restated)
£m
(1,317)
(622)
(67)
(2,006)
(607)
5,544
(114)
4,823
Interest accreted
Interest accreted of £1,317m (2022: £607m) represents the effect of unwinding of the discount rates on the future cash flow and risk adjustment
components of the insurance contract liabilities and the effect of interest accretion on the CSM. The increase of accretion in the current period
compared with the prior year reflects the impact of higher discount rates at the start of 2023 compared with the start of 2022, combined with
growth in the size of the insurance portfolio.
The future cash flows and risk adjustment are interest rate sensitive and represent 90% of the total value of insurance contract liabilities. The CSM is
measured using historic “locked-in” discount rate curves. The majority of the CSM arises from the fair value approach on transition to IFRS 17 which is
measured using the locked-in discount rate curve as at 1 January 2022. This curve is upward sloping in the early years which, combined with an
increasing CSM balance attributable to new business and demographic assumption changes, has resulted in increased accretion.
Effect of changes in interest rates and other financial assumptions
The principal economic assumption changes adversely impacting the movement in insurance liabilities during the year of £(622)m (2022: £5,544m
gain) relate to discount rates and inflation. The CSM is held at locked-in discount rates and benefit inflation, and hence the effect of the increase in
interest rates experienced in the year applies only to the future cash flows and the risk adjustment components of the insurance contract liabilities.
It is expected that amounts recognised in “investment return” will broadly offset the “net finance (expense)/income from insurance contracts”. The
principal driver for these amounts recognised in the Consolidated statement of comprehensive income observed over the year is the changes in the
value of the investment assets and net insurance liabilities due to changes in interest rates.
During 2023, the Group created a portfolio of investments that are expected to be held to maturity, and which are valued at amortised cost rather
than at fair value. As a result, the valuation of these assets is not sensitive to interest rate movements.
The amounts recognised in profit and loss will not completely offset for a number of reasons, including:
•
•
the term structures for financial investments held and net insurance liabilities are not identical;
the existence of surplus assets held on the balance sheet which do not back insurance liabilities and the value of which are subject to changes in
interest rates; and
•
the deduction of a credit default allowance from the interest rate used to value insurance liabilities.
Insurance liabilities for inflation-linked products, most notably Defined Benefit business, and expenses on all products are impacted by changes in
future expectations of Retail Price Inflation (RPI), Consumers Price Inflation (CPI), linked Price Indexation (lPI) and earnings inflation.
The relationship between changes in key inputs used in determining the value of net insurance liabilities and financial assets is explained in note 26(h).
Effect of measuring changes in estimates at current rates and adjusting the CSM at rates on initial recognition
The difference in the measurement of changes in estimates relating to future coverage at current discount rates of £136m (2022: £99m) compared
to locked-in rates of £203m (2022: £213m), amounting to a £67m loss (2022: £114m loss), is recognised within net finance expenses. Significant
assumption changes in estimates mainly relates to the demographic basis change on a gross of reinsurance basis.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 167
7. NET FINANCE INCOME/(EXPENSES) FROM REINSURANCE CONTRACTS
Interest accreted
Effect of changes in interest rates and other financial assumptions
Effect of measuring changes in estimates at current rates and adjusting
the CSM at rates on initial recognition
Effect of changes in non-performance risk of reinsurers
Total
Year ended
31 December 2023
£m
Year ended
31 December 2022
(restated)
£m
34
32
49
(7)
108
15
(169)
63
–
(91)
Interest accreted for reinsurance
The interest accretion on reinsurance balances of £34m (2022: £15m) represents the unwind of discounting across the components of the reinsurance
contracts balance, namely the future cash flows, risk adjustment and CSM. The future cash flows and CSM amount may be in either an asset or
liability position.
Effect of changes in interest rates and other financial assumptions
Consistent with the underlying business, the principal economic assumption changes impacting the movement in reinsurance liabilities relate to
discount rates and inflation.
Effect of measuring changes in estimates at current and locked-in rates
The CSM is valued using economic parameters locked-in at point of sale. During the year, the impact of £49m (2022: £63m) on reinsurance is from
demographic assumption changes alone.
8. OTHER FINANCE COSTS
Interest payable on subordinated debt (loans and borrowings)
Interest payable on repurchase agreements
Other interest payable
Total
Year ended
31 December 2023
£m
Year ended
31 December 2022
(restated)
£m
49
70
3
122
54
–
3
57
Interest payable on loans and borrowings has reduced as a result of the repurchase of Tier 2 debt in October 2022 and 2023. The amortised cost Gilt
portfolio was funded by repurchase agreements; interest on these is recorded in Other finance costs above.
9. 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, lifetime Mortgage advances and other illiquid assets.
The advisory and Destination retirement revenue streams of the professional services business, HUB, represents the other two operating segments.
The HUB operating segments are not currently sufficiently significant to disclose separately 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.
168 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
9. SEGMENTAL REPORTING continued
Underlying operating profit
The Group reports underlying operating profit as an alternative measure of profit which is used for decision making and performance measurement.
The Board believes that underlying operating profit, which represents a combination of both the future profit generated from new business written in
the year and additional profit emerging from the in-force book of business, provides a better view of the development of the business. Moreover, the
net underlying CSM increase is added back when calculating the underlying operating profit as the Board considers the value of new business is
significant in assessing business performance. Actual operating experience, where different from that assumed at the start of the year, and the
impacts of changes to future operating assumptions applied in the year, are then also included in arriving at adjusted operating profit.
New business profits represent expected investment returns on the financial instruments assumed to be newly purchased to back that business
after allowances for expected movements in liabilities and deduction of acquisition costs. New business profits are based on valuation of investment
returns as at the date of quoting for new business whereas the CSM on new business is computed as at the date of inception of new contracts.
Profits arising from the in-force book of business represent an expected return on surplus assets of 4% (2022: 2% H1, 3% H2), the expected unwind
of allowances for credit default and the release of the risk adjustment.
Underlying operating profit excludes the impairment and amortisation of intangible assets arising on consolidation, and strategic expenditure, since
these items arise outside the normal course of business in the year. Underlying operating profit also excludes exceptional items. Exceptional items
are those items that, in the Directors’ view, are required to be separately disclosed by virtue of their nature or incidence to enable a full understanding
of the Group’s financial performance.
Variances between actual and expected investment returns due to economic and market changes, including on surplus assets and on assets
assumed to back new business, and gains and losses on the revaluation of land and buildings, are also disclosed outside underlying operating profit.
Segmental reporting and reconciliation to financial information
New business profits
CSM amortisation1
Net underlying CSM increase2
In-force operating profit3
Other Group companies’ operating results
Development expenditure
Finance costs
Underlying operating profit
Operating experience and assumption changes4
Adjusted operating profit/(loss) before tax
Investment and economic movements
Strategic expenditure
Interest adjustment to reflect IFRS
accounting for Tier 1 notes as equity
Adjusted profit/(loss) before tax
Deferral of profit in CSM5
Profit/(loss) before tax
Year ended 31 December 2023
Year ended 31 December 2022 (restated)
Insurance
£m
Other
£m
Total
£m
Insurance
£m
Other
£m
355
(62)
293
185
–
(16)
(84)
378
52
430
106
(8)
28
556
(348)
208
–
–
–
6
(22)
(1)
16
(1)
–
(1)
(14)
(9)
(12)
(36)
–
(36)
355
(62)
293
191
(22)
(17)
(68)
377
52
429
92
(17)
16
520
(348)
172
266
(61)
205
153
–
(14)
(87)
257
104
361
(557)
(7)
28
(175)
(327)
(502)
–
–
–
3
(16)
(1)
14
–
–
–
20
–
(12)
8
–
8
Total
£m
266
(61)
205
156
(16)
(15)
(73)
257
104
361
(537)
(7)
16
(167)
(327)
(494)
1
CSM amortisation represents the net release from the CSM reserve into profit as services are provided. The figures are net of accretion (unwind of discount), and the release is computed
based on the closing CSM reserve balance for the period.
2 Net underlying CSM increase excludes the impact of using quote date for profitability measurement. Just recognises contracts based on their completion dates for IFRS 17, but bases
its assessment of new business profitability for management purposes on the economic parameters prevailing at the quote date of the business.
3 In-force operating profit represents profits from the in force portfolio before investment and insurance experience variances, and assumption changes. It mainly represents
release of risk adjustment for non-financial risk and of allowances for credit default in the period, investment returns earned on shareholder assets, together with the value of the
CSM amortisation.
Operating experience and assumption changes represent changes to cash flows in the current and future periods valued based on end of period economic assumptions.
4
5 Deferral of profit in CSM represents the total movement in the CSM in the year. The figure represents CSM recognised on new business, accretion of CSM (unwind of discount),
transfers to CSM related to changes to future cash flows at locked-in economic assumptions, less CSM release in respect of services provided.
The reconciliation of the non-GAAP new business profit to the new business contractual service margin (IFRS measure) is included in the Additional
financial information.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 169
9. SEGMENTAL REPORTING continued
Additional analysis of segmental profit or loss
Revenue, depreciation of property and equipment, and amortisation of intangible assets are materially all allocated to the insurance segment.
The interest adjustment in respect of Tier 1 notes in the other segment represents the difference between interest charged to the insurance segment
in respect of Tier 1 notes and interest incurred by the Group in respect of Tier 1 notes.
Product information analysis
Additional analysis relating to the Group’s products is presented below:
Defined Benefit De-risking Solutions (“DB”)
Guaranteed Income for life contracts (“GIfl”)1
Retirement Income sales (shareholder funded)
Defined Benefit De-risking partnering (“DB partnering”)
Retirement Income sales
Premium adjustments to in-force policies
Net change in premiums receivable
Premium cash flows (note 26(c))
1 GIfl includes UK GIfl, South Africa GIfl and Care Plans.
Year ended
31 December 2023
£m
Year ended
31 December 2022
(restated)
£m
2,999
894
3,893
416
4,309
(27)
212
4,494
2,567
564
3,131
259
3,390
–
(276)
3,114
Drawdown and lifetime Mortgage (“lTM”) products are accounted for as investment contracts and financial investments respectively in the
Consolidated 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
10. INCOME TAX
Current taxation
Adjustments in respect of prior periods
Total current tax
Deferred taxation
Deferred tax recognised for losses in the current period
Origination and reversal of temporary differences
Adjustments in respect of prior periods
Tax relief on the transitional adjustment on IFRS 17 implementation
Remeasurement of deferred tax – change in UK tax rate
Total deferred tax
Total income tax recognised in profit or loss
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
186
12
538
14
Year ended
31 December 2023
£m
Year ended
31 December 2022
(restated)
£m
–
–
(2)
6
3
34
2
43
43
9
9
(129)
(4)
(9)
–
1
(141)
(132)
Further disclosure of the tax impacts of the adoption of IFRS 17 on 1 January 2023 is disclosed in note 21.
The deferred tax assets and liabilities at 31 December 2023 have been calculated based on the rate at which they are expected to reverse.
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.
A deferred tax asset of £341m has been recognised on the adoption of IFRS 17 Insurance Contracts on 1 January 2023, which is expected to be fully
recoverable. Deferred tax has been recognised at 25%, reflecting the rate at which the deferred tax asset is expected to unwind.
In accordance with Paragraph 4A of IAS 12 “Income taxes”, the Group has not recognised nor disclosed information about deferred tax assets and
liabilities related to Pillar Two income taxes. The Group does not currently expect the effect of the Pillar Two legislation to have a material impact on
the tax position in future periods.
170 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
10. INCOME TAX continued
Reconciliation of total income tax to the applicable tax rate
Profit/(loss) on ordinary activities before tax
Income tax at 23.5% (2022: 19%)
Effects of:
Expenses not deductible for tax purposes
Remeasurement of deferred tax – change in UK tax rate
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 directly in equity
Current taxation
Relief on Tier 1 interest
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 2023
£m
Year ended
31 December 2022
(restated)
£m
172
40
2
2
–
3
(4)
43
(494)
(94)
2
1
(34)
–
(7)
(132)
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
(4)
(4)
–
–
–
(4)
–
–
(3)
(1)
(4)
(4)
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 2023 includes tax relief arising from amortisation of transitional balances of £3m
(2022: £3m).
IFRS 17 Insurance Contracts was adopted during the year. Cumulative differences arising between IFRS 17 and the previous accounting standards
(IFRS 4), which represent the differences in retained profits previously reported and impact of the adoption of the standard, are brought back into
the computation of taxable profits. However, legislation provides for transitional arrangements whereby such differences are amortised on a
straight-line basis over a ten-year period from 1 January 2023. The tax charge for the year to 31 December 2023 includes current tax relief arising
from amortisation of transitional balances of £32m.
11. 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 £5m (2022:
£5m). Employer contributions to pensions for Executive Directors for qualifying periods were £nil (2022: nil). The aggregate net value of share awards
granted to the Directors in the year was £3m (2022: £2m), calculated by reference to the average closing middle-market price of an ordinary share
over the five days preceding the grant. Two Directors exercised share options during the year with an aggregate gain of £3m (2022: two Directors
exercised options with an aggregate gain of £1m).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 171
12. 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
Year ended
31 December 2023
Number
Year ended
31 December 2022
Number
11
142
1,052
1,205
10
124
990
1,124
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
104
11
6
6
127
86
10
4
6
106
13. 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 £6m (2022: £4m).
Employee share plans
The Group operates a number of employee share option plans. Details of those plans are as follows:
Long Term Incentive Plans (“LTIP”)
The Group has made awards under the lTIP to Executive Directors and other senior managers. Awards granted prior to 9 May 2023 were granted
under the Just Retirement Group plc 2013 long Term Incentive Plan. Awards granted since 9 May 2023 are granted under the Just Group plc long
Term Incentive Plan. 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, with the exception for good leavers in respect of awards granted after 9 May 2023 which are exercisable until the
first anniversary of the vesting date. The majority of options granted are also 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
Granted1
Forfeited
Exercised
Expired
Outstanding at 31 December
Exercisable at 31 December
Weighted-average share price at exercise (£)
Weighted-average remaining contractual life (years)
Year ended
31 December 2023
Number of options
Year ended
31 December 2022
Number of options
25,935,723
9,544,856
(2,902,296)
(6,573,503)
–
26,004,780
4,546,466
0.85
1.14
22,403,125
8,563,671
(1,149,299)
(2,679,669)
(1,202,105)
25,935,723
4,740,542
0.81
1.09
1
Includes 294,437 options granted on 14 September 2023 under the Just Group plc long Term Incentive Plan. All other options granted under the Just Retirement Group plc 2013 long
Term Incentive Plan.
The exercise price for options granted under the lTIP is nil.
172 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
13. EMPLOYEE BENEFITS continued
During the year to 31 December 2023, awards of lTIPs were made on 23 March 2023, 30 March 2023 and 14 September 2023. 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 – Other performance
Expected volatility – holding period
Option life
Dividend yield
Risk-free interest rate – TSR performance
Risk-free interest rate – holding period
Black–Scholes, Stochastic, Finnerty
£0.77
£0.84
Nil
41.34%
44.36 – 44.43%
37.52% – 37.60%
3 years + 2 year holding period
HUB lTIP awards – 2.05%, Other – Nil
3.44%
3.25% – 3.41%
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 market performance condition, such as Total Shareholder Return (“TSR”), expected volatility has been calculated using
historic volatility of the Company, and for each company in the TSR comparator group, over the period of time commensurate with the remainder
of the performance period immediately prior to the date of grant. For awards not subject to a market performance condition, expected volatility has
been calculated using historic volatility of the Company over the period of time commensurate with the expected award term immediately prior to
the date of the 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.
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 (2022: nil).
Year ended
31 December 2023
Number of options
Year ended
31 December 2022
Number of options
5,998,639
1,278,872
(273,206)
(1,603,924)
5,400,381
1,661,999
0.83
0.85
5,788,003
1,313,916
–
(1,103,280)
5,998,639
1,652,826
0.83
0.84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 173
13. EMPLOYEE BENEFITS continued
During the year to 31 December 2023, awards of DSBPs were made on 23 March 2023. 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
Dividend yield
Risk-free interest rate
£0.84
Black–Scholes
£0.84
Nil
45.43%
3 years
Nil
Nil
Expected volatility has been calculated using historic volatility of the Company over the period of time commensurate with the expected award term
immediately prior to the date of the grant.
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:
Year ended 31 December 2023
Year ended 31 December 2022
Number of options
Weighted-average
exercise price
£
Number of options
Weighted-average
exercise price
£
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)
12,918,140
3,910,005
(646,127)
(442,187)
(7,794,942)
(91,501)
7,853,387
231,646
0.84
1.97
0.45
0.67
0.56
0.71
0.38
0.92
0.60
0.50
14,779,553
1,924,649
(791,758)
(526,561)
(2,337,700)
(130,043)
12,918,140
233,954
0.72
1.22
The range of exercise prices of options outstanding at the end of the year are as follows:
0.44
0.71
0.46
0.59
0.50
0.79
0.45
0.59
£0.38
£0.52
£0.67
£0.71
£0.74
£1.07
£1.18
Total
2023
Number of options
outstanding
2022
Number of options
outstanding
2,043,899
217,744
3,647,050
1,380,653
562,516
–
1,525
9,949,082
395,051
–
1,718,536
787,780
66,166
1,525
7,853,387
12,918,140
174 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
13. EMPLOYEE BENEFITS continued
During the year to 31 December 2023, awards of SAYEs were made on 18 April 2023. 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
Dividend yield
Risk-free interest rate – 3-year scheme
Risk-free interest rate – 5-year scheme
£0.38
Black–Scholes
£0.89
£0.67
47.78%
50.32%
3.37 or 5.37 years
1.95%
3.65%
3.62%
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.
14. 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.
Earnings for the purposes of determining earnings per share and diluted earnings per share is calculated by adjusting the profit or loss attributable
to ordinary equity holders of the Company for amounts in respect of the RT1 notes. This is based on the judgement that the rights associated with
the RT1 notes are similar to preference shares. Adjustments include coupon payments and any gains/losses on redemption.
Profit/(loss) attributable to equity holders of Just Group plc
Coupon payments in respect of Tier 1 notes (net of tax)
Profit/(loss) attributable to ordinary equity holders of
Just Group plc (basic)
Effect of potentially dilutive share options1
Diluted profit/(loss) attributable to ordinary equity holders
of Just Group plc
Year ended 31 December 2023
Year ended 31 December 2022
(restated)
Weighted-
average
number of
shares
million
1,032
–
1,032
17
Earnings
£m
129
(12)
117
–
Earnings
per share
pence
–
–
11.3
–
Weighted-
average
number of
shares
million
1,032
–
Earnings
£m
(362)
(14)
Earnings
per share
pence
–
–
(376)
1,032
(36.3)
–
–
–
117
1,049
11.2
(376)
1,032
(36.3)
1 The weighted-average number of share options for the year ended 31 December 2022 that could have potentially diluted basic earnings per share in the future but are not included in
diluted EPS because they would be anti dilutive was 23.3 million share options.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 175
15. DIVIDENDS AND APPROPRIATIONS
Dividends and appropriations paid in the year were as follows:
Final dividend
Final dividend in respect of prior year end
(1.23 pence per ordinary share, paid on 17 May 2023)
Interim dividend
Interim dividend in respect of current year end
(0.58 pence per ordinary share, paid on 4 October 2023)
Total dividends paid
Coupon payments in respect of Tier 1 notes1
Total distributions to equity holders in the period
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
13
6
19
16
35
10
5
15
17
32
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 2023, the Directors proposed a final dividend for 2023 of 1.50 pence per ordinary share (2022: 1.23 pence) and together
with the interim dividend of 0.58 pence per ordinary share paid in 4 October 2023 amounting to £22m (2022: £18m) in total. Subject to approval by
shareholders at the Company’s 2024 AGM, the dividend will be paid on 15 May 2024 to shareholders on the register of members at the close of
business on 12 April 2024, and will be accounted for as an appropriation of retained earnings in year ending 31 December 2024.
16. INTANGIBLE ASSETS
Year ended 31 December 2023
Cost
At 1 January 2023 (restated)
At 31 December 2023
Amortisation and impairment
At 1 January 2023 (restated)
Impairment
Charge for the year
At 31 December 2023
Net book value at 31 December 2023
Net book value at 31 December 2022 (restated)
Acquired intangible assets
Goodwill
£m
Intellectual property
£m
PrognoSys™
£m
Software
£m
35
35
(1)
–
–
(1)
34
34
2
2
(1)
–
–
(1)
1
1
6
6
(3)
–
(1)
(4)
2
3
29
29
(20)
(3)
(2)
(25)
4
9
Total
£m
72
72
(25)
(3)
(3)
(31)
41
47
176 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
16. INTANGIBLE ASSETS continued
Year ended 31 December 2022 – (restated)
Cost
At 1 January 2022
Additions
At 31 December 2022
Amortisation and impairment
At 1 January 2022
Charge for the year
At 31 December 2022
Net book value at 31 December 2022
Net book value at 31 December 2021
Acquired intangible assets
Goodwill
£m
Intellectual property
£m
PrognoSys™
£m
Software
£m
35
–
35
(1)
–
(1)
34
34
2
–
2
(1)
–
(1)
1
1
6
–
6
(3)
–
(3)
3
3
25
4
29
(18)
(2)
(20)
9
7
Total
£m
68
4
72
(23)
(2)
(25)
47
45
The amortisation and impairment charge is recognised in other operating expenses in profit or loss.
Impairment testing
The Group’s goodwill of £34m at 31 December 2023 represents the following:
• £33m on the 2009 acquisition by Just Retirement Group Holdings limited of Just Retirement (Holdings) limited, the Holding Company of Just
Retirement limited (“JRl”); and
• £1m recognised on the 2018 acquisition of HUB Pension Consulting (Holdings) limited.
The majority of the goodwill has been allocated to the cash-generating unit of Just Retirement (Holdings) limited and its subsidiaries. The recoverable
amounts of goodwill have been determined from the value-in-use of the cash generating unit.
Period on which management approved forecasts are based
Discount rate (pre-tax)
2023
5 years
11.4%
2022
5 years
12.7%
The value-in-use of the cash-generating unit 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. 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 allocated to
the cash-generating unit 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 177
Freehold land
and buildings
£m
Computer
equipment
£m
Furniture
and fittings
£m
Right-of-use assets
£m
10
–
–
10
–
–
–
10
10
11
1
–
12
(10)
(1)
(11)
1
1
9
–
–
9
(6)
–
(6)
3
3
15
2
(1)
16
(7)
(1)
(8)
8
8
Freehold land
and buildings
£m
Computer
equipment
£m
Furniture
and fittings
£m
Right-of-use assets
£m
11
–
(1)
10
–
1
(1)
–
10
11
10
1
–
11
(9)
–
(1)
(10)
1
1
6
3
–
9
(6)
–
–
(6)
3
–
7
8
–
15
(5)
–
(2)
(7)
8
2
Total
£m
45
3
(1)
47
(23)
(2)
(25)
22
22
Total
£m
34
12
(1)
45
(20)
1
(4)
(23)
22
14
17. PROPERTY AND EQUIPMENT
Year ended 31 December 2023
Cost or valuation
At 1 January 2023
Acquired during the year
Disposals
At 31 December 2023
Depreciation and impairment
At 1 January 2023
Depreciation charge for the year
At 31 December 2023
Net book value at 31 December 2023
Net book value at 31 December 2022
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
Depreciation charge for the year
At 31 December 2022
Net book value at 31 December 2022
Net book value at 31 December 2021
Included in freehold land and buildings is land of value £2m (2022: £2m).
The Group’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 Group. 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 £1m.
If freehold land and buildings were stated on the historical cost basis, the carrying values would be land of £4m (2022: £4m) and buildings of £4m
(2022: £4m).
Right-of-use assets are property assets leased by the Group.
178 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
18. INVESTMENT PROPERTY
At 1 January
Net loss from fair value adjustment
At 31 December
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
40
(8)
32
70
(30)
40
Investment properties are leased to commercial 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 cash flows):
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
2023
£m
1
1
1
1
1
127
132
2022
£m
1
1
1
1
1
128
133
19. FINANCIAL INVESTMENTS
The Group’s financial investments that are measured at fair value through the profit or loss are either managed within a fair value business model, or
mandatorily measured at fair value. The Group’s financial investments that are measured at amortised cost are held within a business model where
the intention of holding the instruments is to collect solely payments of principal and interest.
During the course of 2023, the Group purchased – in several transactions – nominal Gilts with a total value of ~£2.5bn with maturities between 10 and
30 years and the average weighted yield of ~4.2% (at the time of purchase). The purchase of these Gilts was financed through repurchase operations
(“repos”). At the inception, repo maturities were from 12 to 21 months. The purpose of this purchase was to reduce the duration gap between the
Solvency II and the IFRS exposure (Gilts were booked under the amortised cost basis under the IFRS).
The table below summarises the classification of the Group’s financial assets and liabilities.
31 December 2023
Cash available on demand
Financial investments
Other receivables
Total financial assets
Underlying assets
– Investment contracts
– Other
Total financial assets
Investment contract liabilities
loans and borrowings
Other financial liabilities
Other payables
Total financial liabilities
Amortised cost
£m
Mandatory
£m
Designated
£m
Fair value
546
2,549
60
3,155
–
3,155
3,155
–
686
3,101
20
3,807
–
8,058
–
8,058
–
8,058
8,058
–
–
2,487
–
2,487
–
18,816
–
18,816
35
18,781
18,816
35
–
–
–
35
Total
£m
546
29,423
60
30,029
35
29,994
30,029
35
686
5,588
20
6,329
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 19. FINANCIAL INVESTMENTS continued
31 December 2022 (restated)
Cash available on demand
Financial investments
Other receivables
Total financial assets
Underlying assets
– Investment contracts
– Other
Total financial assets
Investment contract liabilities
loans and borrowings
Other financial liabilities
Other payables
Total financial liabilities
Analysis of financial investments
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
long income real estate1
Infrastructure loans
Other loans
Derivative financial assets
Total investments measured at FVTPL
Gilts – subject to repurchase agreements
Total investments measured at amortised cost
Total financial investments
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 179
Amortised cost
£m
Mandatory
£m
Designated
£m
Fair value
482
–
33
515
–
515
515
–
699
623
96
1,418
–
7,583
–
7,583
–
7,583
7,583
–
–
3,046
–
3,046
–
15,769
–
15,769
33
15,736
15,769
33
–
–
–
33
2023
£m
1,141
495
13,654
706
5,681
764
779
1,113
164
2,377
26,874
2,549
2,549
29,423
Total
£m
482
23,352
33
23,867
33
23,834
23,867
33
699
3,669
96
4,497
2022
(restated)
£m
1,174
421
11,353
908
5,306
584
247
948
134
2,277
23,352
–
–
23,352
1. Includes £176m residential and £603m commercial ground rents. For further information on residential ground rents see note 1.7.
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 £706m (2022: £892m) 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.
As explained in note 1.2.2, financial investments are restated by £125m in respect of future funding commitments.
180 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
20. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
This note explains the methodology for valuing the Group’s financial assets and liabilities 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 significant 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 including those about risk.
The sensitivity of level 3 investments to reasonably possible alternative assumptions for unobservable inputs used in the valuation model that could
give rise to significant changes in the fair value of the assets is included in section (d). The sensitivities in this note 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 assets 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 26(h).
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 score by Bloomberg’s pricing service (BVAl), the
investments are classified as level 3 as are assets valued internally.
Debt securities and financial derivatives which 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, long income real estate, infrastructure loans, private placement debt
securities, investment funds, investment contract liabilities, and other loans.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 181
20. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES continued
(b) Analysis of assets and liabilities held at fair value according to fair value hierarchy
2023
2022
(restated)
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
level 1
£m
level 2
£m
level 3
£m
Total
£m
Assets held at fair value through profit or loss
Units in liquidity funds
Investment funds
1,135
–
6
97
–
398
1,141
495
Debt securities and other fixed income securities
4,941
5,799
2,914
13,654
Deposits with credit institutions
loans secured by residential mortgages
loans secured by commercial mortgages
long income real estate
Infrastructure loans
Other loans
Derivative financial assets
Financial investments
Investment property
Fair value of financial assets held at amortised cost
Gilts – subject to repurchase agreements (fair value)
Total financial assets and investment property
Liabilities held at fair value
Investment contract liabilities
Derivative financial liabilities
Fair value of financial liabilities at amortised cost
Obligations for repayment of cash collateral received
(fair value)
loans and borrowings at amortised cost (fair value)
Repurchase obligation (fair value)
Total financial liabilities
1,170
–
3,844
892
–
–
–
–
–
–
4
83
–
338
1,174
421
5,904
1,605
11,353
16
–
–
–
–
22
2,277
8,306
–
–
–
5,306
584
247
948
112
–
908
5,306
584
247
948
134
2,277
9,140
23,352
40
–
40
–
–
706
5,681
5,681
764
779
764
779
1,113
1,113
123
–
164
2,377
11,772
26,874
5,906
32
32
–
2,614
–
–
–
–
–
–
–
41
2,377
8,320
–
–
706
–
–
–
–
–
–
6,782
–
2,614
9,396
8,320
11,804
29,520
5,906
8,306
9,180
23,392
–
–
–
2,473
511
–
–
511
21
694
2,569
5,757
35
14
–
–
–
49
35
2,487
532
694
2,569
6,317
–
–
–
3,004
593
–
–
30
704
–
33
42
–
–
–
33
3,046
623
704
–
593
3,738
75
4,406
Other than freehold land and buildings disposed of in 2022, there are no non-recurring fair value measurements in either period.
(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.
Transfers between levels arise from changes in the pricing sources. During the year there were the following transfers between levels:
• Transfers from level 2 to level 1 as a result of improved pricing sources £1,492m (2022: £1,422m)
• Transfer from level 1 to level 2 due to a fall in pricing quality £279m (2022: £368m)
• Transfers from level 3 to level 2 as a result of improved pricing sources £15m (2022: £123m)
• Transfer from level 2 to level 3 due to a fall in pricing quality £157m (2022: nil)
182 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
20. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES continued
(d) Level 3 assets and liabilities measured at fair value
Reconciliation of the opening and closing recorded amount of level 3 assets and liabilities held at fair value. The sensitivities disclosed in this note
only consider the impact of the change in these assumptions on the fair value of the investment assets. Some of these sensitivities would also
impact the yield on assets and hence the valuation discount rate used to determine the insurance contract liabilities. For some of these sensitivities,
the impact on the value of insurance liabilities and hence profit before tax is included in note 26(h).
At 31 December 2023
398
2,914
5,681
764
779
1,113
Year ended 31 December 2023
At 1 January 2023
Purchases/advances/deposits
Transfers to level 2
Sales/redemptions/payments
Recognised in profit or loss in
Investment return
– Realised gains and losses
– Unrealised gains and losses
Interest accrued
Change in fair value of liabilities
recognised in profit or loss
Year ended 31 December 2022 (restated)
At 1 January 2022
Purchases/advances/deposits
Transfers to level 2
Sales/redemptions/payments
Disposal of a portfolio of lTMs1
Recognised in profit or loss in
Investment return
– Realised gains and losses
– Unrealised gains and losses
Interest accrued
Change in fair value of liabilities
recognised in profit or loss
Debt securities
and other fixed
income
securities
£m
Loans
secured by
residential
mortgages
£m
Loans
secured by
commercial
mortgages
£m
Investment
funds
£m
Long
income real
estate
£m
Infra-
structure
loans
£m
Other loans
£m
Derivative
financial
assets
£m
Investment
contract
liabilities
£m
Derivative
financial
liabilities
£m
338
56
–
4
–
–
–
–
1,605
1,195
142
(116)
5,306
186
–
584
256
–
(342)
(110)
247
529
–
(4)
–
93
(5)
–
122
164
245
–
–
32
2
–
–
7
–
–
948
138
–
(50)
–
72
5
–
112
17
–
–
–
(16)
10
–
123
–
–
–
–
–
–
–
–
–
(33)
(12)
–
1
–
–
–
9
(42)
–
–
23
–
5
–
–
(35)
(14)
Debt securities
and other fixed
income
securities
£m
loans
secured by
residential
mortgages
£m
loans
secured by
commercial
mortgages
£m
Investment
funds
£m
long
income real
estate
£m
Infra-
structure
loans
£m
Other loans
£m
Derivative
financial
assets
£m
Investment
contract
liabilities
£m
Derivative
financial
liabilities
£m
233
107
–
(18)
–
–
16
–
–
1,450
7,423
699
(123)
(101)
–
–
539
–
(543)
(751)
(87)
(304)
(1,434)
(16)
159
–
–
678
92
–
(135)
–
(2)
(49)
–
–
190
217
–
(11)
–
–
993
233
–
(22)
–
–
(149)
(258)
–
–
2
–
90
–
–
(14)
–
–
36
–
–
8
–
–
–
–
–
(8)
–
–
–
(34)
(14)
–
12
–
–
–
–
3
(9)
–
–
–
–
–
(33)
–
–
(33)
(42)
At 31 December 2022
338
1,605
5,306
584
247
948
112
1
In February 2022 the Group disposed of a portfolio of loans secured by residential mortgages with a fair value of £751m. The transaction was 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.
(i) 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.
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 10%
(2022: 7.0%).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 183
20. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES 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)
2023
2022
Credit spreads
+100bps
(10)
(9)
(ii) 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)
2023
2022
Credit spreads
+100bps
(293)
(138)
(iii) 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 capped at the net sale proceeds of the property.
A key judgement is with regard to the calculation approach used. The Black 76 variant of the Black-Scholes option pricing model has been used
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 in recent years represented market prices specific to the characteristics of the underlying portfolios of loans sold, in particular: loan rates;
loan-to-value ratios; 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.
184 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
20. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES continued
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 determine 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 26(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 3.6% (2022: 3.9%).
Mortality
Mortality assumptions have been derived with reference to England and Wales population mortality using the CMI 2022 (2022: 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 and wider UK mortality trends, updated from that which
applied at 31 December, 2022. Further details of the matters considered in relation to mortality assumptions at 31 December 2023 are set out in
note 26(b).
Property prices
The approach in place at 31 December 2023 is to calculate the value of a property by taking the latest Automated Valuation Model “AVM” result,
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 2023, 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% (2022: 3.3%), with a volatility assumption of 13% per annum
(2022: 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 the COVID-19 pandemic and a higher interest and inflation rate
economic environment on the UK property market. House price reductions have been experienced across much of the UK over the year, albeit
these have been more modest than some forecasts for the period. As such, 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 2022. 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 (2022: 0.5% and 4.1%) and between 0.6% and 6.8% for loans in PlACl (2022: 0.6% and 6.8%).
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% (2022: 3.2%) and for loans held within
PlACl is 3.3% (2022: 3.5%). 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 over the period, both in reference to the average spread
on the back book of business.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 185
20. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES continued
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)
2023
2022
Maintenance
expenses
+10%
Base
mortality
-5%
Mortality
improvement
+10%
Immediate
property price
fall
-10%
Future
property price
growth
-0.5%
Future
property price
volatility
+1%
Voluntary
redemptions
+10%
liquidity
premium
+10bps
(5)
(5)
(15)
(14)
(3)
(4)
(83)
(75)
(50)
(49)
(34)
(32)
19
20
(49)
(48)
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. The mortality improvement sensitivity applies a multiplicative adjustment to
improvement rates.
The impact on insurance liabilities of sensitivities to mortality is included in note 26(h).
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.
(iv) 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)
2023
2022
Credit spreads
+100bps
(27)
(19)
(v) Long income real estate
long income real estate is valued using discounted cash flow analysis using assumptions based on the repayment of the underlying loan.
Principal assumptions underlying the calculation of long income real estate
In determining the credit spreads for the valuation of residential ground rents, the Group has taken a market participant approach, which requires
consideration of the assumptions, including those about risk, that a market participant would make at the balance sheet date for valuing such assets.
The Group notes the significant uncertainty regarding the outcome of the Government consultation regarding restriction of residential ground rents
as explained on page 67 and has included an adjustment to the valuation of its residential ground rents portfolio to reflect this uncertainty in the fair
value that a market participant would be willing to exchange such assets at the balance sheet date.
The value of these assets has been adjusted to reflect an expected increase in credit spread and consequential increase the credit risk deduction
for defaults.
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.
186 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
20. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES continued
Sensitivity analysis
Reasonably possible alternative assumptions for long income real estate are a +100 basis point change in credit spreads. Given the ongoing Government
consultation regarding residential ground rents, the Group has performed additional sensitivity analysis over the residential ground rents within the long
income real estate portfolio. The sensitivity of residential ground rents to more significant adverse changes in credit quality has been evaluated in light of
the potential scenarios proposed in the Government consultation. An additional sensitivity has been performed under the scenario that the credit rating
of the Group’s holding in residential ground rents reduces to BBB.
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:
long income real estate
net increase/(decrease) in fair value (£m)
2023
2022
(vi) Infrastructure loans
Infrastructure loans are valued using discounted cash flow analyses.
Credit spread
+100bps
Residential ground rent
downgraded to BBB
(158)
(78)
(11)
N/A
Principal assumptions underlying the calculation of infrastructure loans classified at 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:
Infrastructure loans
net increase/(decrease) in fair value (£m)
2023
2022
Credit spreads
+100bps
(78)
(72)
(vii) 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 at 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
The sensitivity of fair value to changes in credit spread assumptions in respect of other loans is not material.
(viii) 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 based on a curve where 6.88% is the one-year rate and 5.47%
is the five-year rate (31 December 2022: 5.67%).
Sensitivity analysis
The sensitivity of fair value to changes in the discount rate assumptions in respect of investment contract liabilities is not material and is linked to the
value of the contract.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 187
21. DEFERRED TAX ASSETS
Transitional tax relief on adoption of IFRS 17
Tax losses and other
Transitional tax on adoption of IFRS
land and buildings
Total
Year ended
31 December 2023
£m
Year ended
31 December 2022
(restated)
£m
307
98
1
–
406
341
108
1
(1)
449
The impact on deferred tax from implementation of IFRS 17 of £356m is represented by creation of a £341m deferred tax asset in respect of
transitional tax relief, and elimination of a £15m deferred tax liability in respect of purchased value of in force. The transitional tax relief will be
recognised over a period of ten years commencing 1 January 2023.
The movement in the net deferred tax balance was as follows:
Year ended
31 December 2023
£m
Year ended
31 December 2022
(restated)
£m
Net balance at 1 January
Recognised in profit or loss
Recognised in equity
Net balance at 31 December
449
(43)
–
406
The group has unrecognised deferred tax assets of £6m (2022: £6m).
The net balance of deferred tax at 1 January 2022 has been restated by £310m due to the adoption of IFRS 17 Insurance Contracts.
On 13 November 2022, the tax authorities agreed that the tax impact from the restatement of prior year profits recognised as a result of
the IFRS 17 transitional adjustment should be spread over a period of ten years. The deferred tax asset created on transition to IFRS 17
represents tax previously paid on profits under IFRS 4.
Deferred tax assets have been recognised because it is probable that these assets will be recovered. Deferred tax assets principally comprise
of the transitional tax asset of £307m recognised on the gross IFRS 17 transitional adjustment of £1,228m and the deferred tax asset of £91m
recognised on the balance of tax losses carried forward of £364m, which can used to offset taxable future profits of group entities.
22. CASH AND CASH EQUIVALENTS
Cash available on demand
Units in liquidity funds
Cash and cash equivalents in the Consolidated statement of cash flows
2023
£m
546
1,141
1,687
304
141
4
449
2022
£m
482
1,174
1,656
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 19). liquidity funds do however meet the definition
of cash equivalents for the purposes of disclosure in the Consolidated statement of cash flows.
188 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
23. SHARE CAPITAL AND SHARE PREMIUM
The allotted, issued and fully paid ordinary share capital of Just Group plc is detailed below:
Number of £0.10
ordinary shares
Share capital
£m
Share premium
£m
At 1 January 2023
At 31 December 2023
At 1 January 2022
In respect of employee share schemes
At 31 December 2022
1,038,702,932
1,038,702,932
1,038,537,044
165,888
1,038,702,932
The Company does not have a limited amount of authorised share capital.
24. OTHER RESERVES
Merger reserve
Reorganisation reserve
Revaluation reserve
Share held by trusts
Total
104
104
104
–
104
2023
£m
597
348
3
(5)
943
95
95
95
–
95
2022
£m
597
348
3
(10)
938
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.
25. TIER 1 NOTES
At 1 January
At 31 December
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
322
322
322
322
On 16 September 2021 the Group issued £325m 5.0% perpetual restricted Tier 1 contingent convertible notes, incurring issue costs of £3m.
During the year, interest of £16m was paid to holders of the Tier 1 notes (2022: £17m). The Tier 1 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 Tier 1 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 funds.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 189
26. INSURANCE CONTRACTS AND RELATED REINSURANCE
Gross insurance liabilities
Reinsurance contract assets
Reinsurance contract liabilities
Net reinsurance contracts
Net insurance liabilities
31 December 2023
£m
31 December 2022
(restated)
£m
24,131
(1,143)
125
(1,018)
23,113
19,647
(776)
121
(655)
18,992
Insurance liabilities and reinsurance assets and liabilities include valuation of the Best estimate of the present value of future cash flows, the Risk
adjustment for non-financial risk and the Contractual service margin. A summary of the movement in insurance liabilities and net reinsurance
contracts is presented below.
Year ended 31 December 2023
Year ended 31 December 2022 (restated)
Gross
£m
Net Reinsurance
£m
Best estimate
Risk adjustment
CSM
Net opening balance
CSM recognised for services provided
CSM accretion
Other movements in the CSM
Release from risk adjustment
Other movements in risk adjustment
Movements in best estimate
Net closing balance
Best estimate
Risk adjustment
CSM
Net closing balance
17,030
674
1,943
19,647
(156)
79
583
(11)
261
3,728
24,131
20,758
924
2,449
24,131
Net
£m
17,106
275
1,611
18,992
(129)
67
410
(7)
64
3,716
23,113
20,822
332
1,959
76
(399)
(332)
(655)
27
(12)
(173)
4
(197)
(12)
(1,018)
64
(592)
(490)
(1,018)
23,113
Gross
£m
Net Reinsurance
£m
20,574
1,023
1,489
23,086
(120)
41
533
(13)
(336)
(3,544)
19,647
17,030
674
1,943
19,647
257
(603)
(205)
(551)
25
(6)
(146)
5
199
(181)
(655)
76
(399)
(332)
(655)
Net
£m
20,831
420
1,284
22,535
(95)
35
387
(8)
(137)
(3,725)
18,992
17,106
275
1,611
18,992
The detailed movements analysis of insurance liabilities and reinsurance assets and liabilities are presented in note 26 (c) and (d) respectively. The
movements include the CSM split between contracts under the Fair Value Approach (“FVA”) and the General Measurement Model (“GMM”) including
those measured under the Fully Retrospective Approach (“FRA”) at transition to IFRS 17.
(a) Terms and conditions of insurance and reinsurance contracts
The Group’s long-term insurance contracts, written by the Group’s life companies JRl and PlACl, include Retirement Income (Defined Benefit,
Guaranteed Income for life, and Care Plans), and whole of life and term protection insurance.
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 estimation process used in determining insurance liabilities involves projecting future annuity payments and the cost of maintaining the contracts.
The Group uses reinsurance as an integral part of its risk and capital management activities.
New business is reinsured via longevity swap and quota share arrangements as follows:
• GIfl was reinsured using longevity swap reinsurance at 90% during 2023.
• Care new business was not reinsured in 2023.
• DB was reinsured using longevity swap reinsurance at c.90% and a small proportion was reinsured using quota share reinsurance in 2023.
190 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
In-force business is reinsured under longevity swap and quota share treaties.
The reinsurance on JRl GIfl in-force business is as described for new business, noting the following differences in proportion reinsured:
• Business written between 1 January 2016 and 31 December 2019 is reinsured at 100% following a change implemented in 2020 for in-force
policies, which increased the reinsurance coverage from 75% to 100%.
• Business written prior to March 2015 is not reinsured; business written from March to December 2015 is reinsured at 45%.
The reinsurance on JRl DB written:
• Between 1 January 2016 and 30 June 2019 is reinsured at 100% following a change implemented in 2019 for in-force policies, which increased
the reinsurance coverage from 55% for underwritten schemes and 75% for non-underwritten schemes.
• Between 1 July 2019 and 31 December 2022 is reinsured at 90% for non-underwritten schemes and 75% for underwritten schemes, and a
small proportion was reinsured using quota share reinsurance in 2022 and 2020.
The reinsurance arrangements above are subject to collateral arrangements in order to mitigate the credit risk created by such contracts.
Collateral arrangements for both quota share and longevity swap treaties are described in note 34(c)(iii).
(b) Measurement of insurance contracts
The Group’s long-term insurance contracts include retirement annuities, namely Defined Benefit and Guaranteed Income for life products,
and annuities to fund care fees (immediate needs and deferred).
The value of insurance contracts in the financial statements comprises the following components:
• estimates of future cash flows;
• an adjustment to reflect the time value of money and the financial risks related to future cash flows, to the extent that the financial risks
are not included in the estimates of future cash flows;
• a risk adjustment for non-financial risk; and
• a contractual service margin.
(i) Estimates of future cash flows
In estimating future cash flows, the Group incorporates, in an unbiased way, all reasonable and supportable information that is available without
undue cost or effort at the reporting date. This information includes both internal and external historical data about claims and other experience,
updated to reflect current expectations of future events. When estimating future cash flows, the Group takes into account current expectations of
future events that might affect those cash flows.
Cash flows within the boundary of a contract relate directly to the fulfilment of the contract, including those for which the Group has discretion
over the amount or timing. These include payments to (or on behalf of) policyholders, insurance acquisition cash flows and other costs, including
investment expenses, that are incurred when fulfilling contracts. The valuation of future policyholder payments is by its nature inherently uncertain,
and is based on recognised mortality assumptions as described below.
Insurance acquisition cash flows, and other costs that are incurred in fulfilling contracts, comprise both direct costs and an allocation of fixed and
variable overheads. These may include costs incurred in providing the required level of benefits; policy administration and maintenance costs;
transaction-based taxes and levies directly associated with the insurance contract; payments by the insurer in a fiduciary capacity to meet tax
obligations incurred by the policyholder, and related receipts; costs the entity will incur performing investment activities to the extent the entity
performs that activity to enhance benefits from insurance coverage for policyholders; and an allocation of fixed and variable overheads.
Cash flows are attributed to acquisition activities, other fulfilment activities and other activities using activity-based costing techniques. Cash flows
attributable to acquisition and other fulfilment activities are allocated to groups of contracts using methods that are systematic and rational and
are consistently applied to all costs that have similar characteristics. Other costs are recognised in profit or loss as they are incurred.
(ii) Mortality assumptions
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 expected impact on future mortality rates over the short and long term has been considered. Mortality experience has been volatile and at
times significantly higher in aggregate than expected since March 2020 due to the COVID-19 pandemic. There is some evidence that the outlook is
stabilising with insights emerging suggesting that the pandemic will have enduring direct and indirect influences on future mortality experience.
At 31 December 2022, we considered it appropriate to make an explicit allowance in the Group’s assumptions for the impact of the pandemic
on future mortality experience. From 31 December 2023, the explicit allowance was revised to reflect the change in our estimates in light of the
emerging evidence of the future impacts of COVID infections and continuing and likely long-lasting disruption to healthcare services. This explicit
allowance involved a mortality uplift of +6.1% over 2024–2026, +4.0% over 2027–36 and +2.2% over 2037–53, leading to higher assumed rates of
mortality improvements over the short to medium term relative to our view prior to the pandemic. Further, it was considered appropriate to make
adjustments to the Group’s assumptions on current mortality rates as the Office for National Statistics released revised population estimates
based on the 2021 Census that suggested that historical mortality rates for older lives had been understated. The mortality uplift applies uniform
multipliers to mortality ages across all ages.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 191
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
The Group will continue to follow closely the actual impact of COVID-19 on mortality and separately consider direct and indirect future impacts of the
pandemic. The Group will consider the conclusions of such analysis, alongside assessment of other factors influencing mortality trends, in keeping its
assumptions under regular review.
The standard tables which underpin the mortality assumptions are summarised in the table below.
Product group
Individually underwritten Guaranteed
Income for life Solutions
Entity
JRl
2023
2022
Modified E and W Population mortality, with
CMI 2022 model mortality improvements
Modified E and W Population mortality, with CMI
2021 model mortality improvements
Individually underwritten Guaranteed
Income for life Solutions
PlACl
Modified E and W Population mortality, with
CMI 2022 model mortality improvements
Modified E and W Population mortality, with CMI
2021 model mortality improvements
Defined Benefit
JRl
Modified E and W Population mortality, with
CMI 2022 model mortality improvements.
Medically underwritten unchanged
from 2022
Modified E and W Population mortality, with CMI
2021 model mortality improvements. Medically
underwritten unchanged from 2021
Defined Benefit
PlACl
Modified E and W Population mortality, with
CMI 2022 model mortality improvements
Modified E and W Population mortality, with CMI
2021 model mortality improvements
Care Plans and other annuity products
PlACl
Modified PCMA/PCFA or modified E and W
Population mortality with CMI 2022 model
mortality improvements
Modified PCMA/PCFA or modified E and W
Population mortality with CMI 2019 model
mortality improvements
Protection
PlACl
Unchanged from 2022
TM/TF00 Select
The long-term improvement rates in the CMI 2022 model are 1.5% for males and 1.25% for females (2022: 1.5% for males and 1.25% for females).
The period smoothing parameter in the modified CMI 2022 model has been set to 7.0 (2022: 7.0). The addition to initial rates (“A”) parameter in the
model varies between 0% and 0.25% depending on product (2022: between 0% and 0.25% depending on product). A 0% weighting has been given
to 2022 CMI mortality experience (2022: n/a for CMI 2021 model). All other CMI model parameters are the defaults (2022: other parameters set
to defaults).
(iii) Discount rates
All cash flows are discounted using investment yield curves adjusted to allow for expected and unexpected credit risk. For non-lifetime mortgage
assets, this adjustment is comprised of an element based upon historic default experience and an element based upon current spread levels where
both elements are relevant to the asset in question. The yields on lifetime mortgage assets are derived using the assumptions described in note 20
with an additional reduction to the future house price growth rate of 50bps (2022: 50bps) allowed for. The yields on residential ground rents are
derived using the assumptions described in note 20(d)(v) and the adjustments set out in note 1.7 in light of the uncertainty introduced by the
announcement of the government consultation regarding these investments.
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 adjustment from lTMs, which included a combination of the NNEG and the additional reduction to
future house price growth rate, was 58bps for JRl (2022: 58bps) and 69bps for PlACl (2022: 69bps).
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”). A weighted average of these discount rate curves is determined for
the purpose of calculating movements in the CSM relating to each group of contracts.
Separate weighted average discount curves are calculated for each new business product line. The point of sale discount curves are weighted by the
value of projected claims payments.
At each valuation date, the estimate of the present value of future liability cash flows and the risk adjustment for non-financial risks are discounted
based on the yields from a reference portfolio consisting of the actual asset portfolio backing the net of reinsurance best estimate liabilities and risk
adjustment. The reference portfolio is adjusted in respect of new contracts incepting in the period to allow for a period of transition from the actual
asset holdings to the target portfolio where necessary. Typically, this period of transition can be up to six months but is dependent on the volume of
new business transactions completed.
The target asset portfolio seeks to select the appropriate mix of assets to match the underlying net insurance contract liabilities. The target asset
portfolio consists of listed bonds, unlisted illiquid investments and loans secured by residential mortgages.
192 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
The tables below set out rates at certain points on the yield curves used to discount the best estimate liability and risk adjustment reserves as at
31 December together with the weighted average discount rates applied to the new business cohorts for the principal insurance product lines.
The discount rates used for the gross insurance and reinsurance contracts at the year end date are consistent, having been based on a single
investment portfolio for each legal entity. The discount rates used for locking-in the CSM for the new business cohort are based on the interest
rates applicable on the first day of the reinsurance treaty notice periods for reinsurance and the dates of recognition for underlying business.
For 2022 and 2023 the reinsurance rates are not materially different to the gross insurance discount rates. As such only the rates for underlying
business are presented below.
Discount rate – insurance contracts JRL
1 year
5 year
10 year
20 year
30 year
2023
2022 (restated)
Valuation rate at
31 December
New business cohort
(Locked-in rates)
Valuation rate at
31 December
New business cohort
(locked-in rates)
All products
GIfL
DB
All products
6.9%
5.5%
5.4%
5.5%
5.5%
7.1%
6.5%
6.2%
6.0%
5.9%
7.0%
6.3%
6.0%
5.9%
5.6%
6.6%
6.3%
5.9%
5.8%
5.6%
GIfl
5.4%
4.9%
4.5%
4.5%
4.5%
DB
5.6%
5.3%
4.9%
4.8%
4.7%
Discount rates have been disclosed in aggregate and have not been split according to their profitability groupings.
Discount rate – insurance contracts PLACL
1 year
5 year
10 year
20 year
30 year
2023
Valuation rate at
31 December
2022 (restated)
Valuation rate at
31 December
GIfL/DB
6.8%
5.5%
5.4%
5.5%
5.5%
GIfl/DB
6.6%
6.3%
5.9%
5.7%
5.5%
Care new business forms an immaterial part of the Group’s insurance contract liabilities and therefore not shown in the table above.
(iv) Inflation
Assumptions for annuity escalation are required for RPI, CPI and lPI 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, using a mark to model basis for lPI inflation, taking
into account any escalation caps and/or floors applicable. This methodology is unchanged compared to the previous period.
For the purposes of calculating movements in the CSM relating to each group of contracts, for JRl separate weighted average inflation curves for
each index are calculated and locked-in for each annual cohort. The inflation curves from each day are weighted by the business volumes completed
on that day to which that inflation variant applies.
(v) Future expenses
Assumptions for future costs of maintaining policies are set with reference to analysis of the existing expense base and actual fees payable under the
contracts for those services outsourced. The assumptions cover both the direct and indirect costs of maintaining policies. The JRl GIfl maintenance
expense assumption used was £25.37 per plan (2022: £23.98), and the JRl DB maintenance assumption used was £68.49 per scheme member (2022:
£62.73). The PlACl GIfl maintenance expense assumption used was £28.85 per plan (2022: £28.42), and the PlACl DB maintenance assumption used
was £203.50 per scheme member (2022: £207.49).
Assumptions for future policy expense levels are determined from the Group’s recent expense analyses and incorporate an annual inflation rate
allowance of 3.6% (2022: 3.90%) derived from the expected retail price and consumer price indices implied by inflation swap rates and an additional
allowance for earnings inflation. The annual inflation rate allowance is regarded as a financial assumption and therefore all changes in expense
inflation rates are recognised in the profit or loss account.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 193
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
(vi) Risk adjustment
The best estimate liability represents the present value of future net cash outflows to settle claims and expenses quantified at the 50th percentile
confidence interval. The risk adjustment for non-financial risk is determined to reflect the compensation that the Group requires for bearing longevity,
expense, and insurance-contract specific operational risks. The risk adjustment represents an additional reserve held that increases the ultimate
time horizon confidence interval by 20% up to the 70th percentile and amounts to £0.3bn (2022 £0.3bn) net of reinsurance. Based upon the latest risk
adjustment calibration exercise, a 5% increase in the ultimate run-off confidence interval would increase the net of reinsurance risk adjustment by
c£0.1bn (2022: c£0.1bn).
The Group determines the risk adjustment for non-financial risk using a “value at risk” technique. The primary non-financial risks allowed for are
longevity and expenses, which is consistent with the primary life underwriting risks allowed for in Solvency II reporting. On an annual basis, the Group
uses the probability distributions of the future net of reinsurance cash flows from insurance contracts on a one-year time horizon as used within JRl’s
internal model for Solvency II reporting for the aforementioned non-financial risks, which are then converted to ultimate horizon distributions in
order to determine stress parameters at the target percentile. The risk adjustment in PlACl uses the same risk adjustment stress factors as
determined for JRl as these represent the compensation the Group requires in light of there being no standalone PlACl internal model for Solvency
II reporting. Financial risks are reflected as adjustments to discount rates (by comparison, both financial and non-financial risks are included in the
Solvency II SCR).
The risk adjustment for non-financial risk is then calculated as the excess of the value at risk at the target confidence level percentile over the
expected present value of the future cash flows. The Group targets an ultimate confidence interval at the 70th percentile. At the point of calibration,
this calibration represents an approximately one-in-ten year stress on a one-year basis. The calibration is carried out on an annual basis ahead of
the financial reporting year end, therefore the actual confidence interval as at the valuation date may differ slightly, for example, due to economic
movements in the intervening period.
The Group’s IFRS risk adjustment for non-financial risk is considered by management to provide an economic view of the profitability of new business
and is therefore used for pricing purposes as well as representing the basis used within the new business profits KPI.
The confidence level is targeted on a net of reinsurance basis as this reflects how insurance risk is managed by the Group. The reinsurance risk
adjustment represents the amount of risk being transferred by the holder of the reinsurance contract to the issuer of that contract. Reinsurance
contracts held by the Group transfer longevity risk proportional to the underlying insurance contract. Consequently, the same risk adjustment
stresses for this non-financial risk are applied to both gross and reinsurance contracts to determine the respective risk adjustment for each.
Expense and operational risks are not transferred to reinsurers as part of the reinsurance contract held by the Group and hence there are no
stresses applied for these in the reinsurance risk adjustment.
Allowance is made for diversification between risks within legal entities, but not between the different legal entities within the Group.
(c) Movements analyses – insurance contracts
(i) Insurance contracts analysis of remaining coverage
Year ended 31 December 2023
Opening insurance contract liabilities balance (restated)
Changes in the statement of comprehensive income
Insurance revenue
Insurance service expenses
– Incurred claims and directly attributable expenses
– Amortisation of insurance acquisition cash flows
Insurance service result
Investment component
Net finance expenses from insurance contracts
Exchange rate movements
Total changes in the statement of comprehensive income
Cash flows
Premiums received
Claims and other insurance service expenses paid,
including investment components
Insurance acquisition cash flows
Total cash flows
Closing insurance contract liabilities balance
Liability for
remaining coverage
£m
(19,720)
1,555
–
(19)
(19)
1,536
233
(2,006)
26
(211)
(4,494)
–
183
(4,311)
(24,242)
Incurred claims
£m
73
–
(1,377)
–
(1,377)
(1,377)
(233)
–
–
(1,610)
–
1,648
–
1,648
111
Total
£m
(19,647)
1,555
(1,377)
(19)
(1,396)
159
–
(2,006)
26
(1,821)
(4,494)
1,648
183
(2,663)
(24,131)
194 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
Year ended 31 December 2022 (restated)
Opening insurance contract liabilities balance
Changes in the statement of comprehensive income
Insurance revenue
Insurance service expenses
– Incurred claims and directly attributable expenses
– Amortisation of insurance acquisition cash flows
Insurance service result
Investment component
Net finance expenses from insurance contracts
Exchange rate movements
Total changes in the statement of comprehensive income
Cash flows
Premiums received
Claims and other insurance service expenses paid,
including investment components
Insurance acquisition cash flows
Total cash flows
Closing insurance contract liabilities balance
liability for
remaining coverage
£m
(23,154)
1,325
–
(8)
(8)
1,317
292
4,823
(8)
6,424
(3,114)
–
124
(2,990)
(19,720)
Incurred claims
£m
68
–
(1,188)
–
(1,188)
(1,188)
(292)
–
–
(1,480)
–
1,485
–
1,485
73
Total
£m
(23,086)
1,325
(1,188)
(8)
(1,196)
129
–
4,823
(8)
4,944
(3,114)
1,485
124
(1,505)
(19,647)
liabilities for remaining coverage represent the present value of cash flows due for payment in future years adjusted for non-financial risk, together
with the value of unamortised CSM. This balance includes guarantee period payments due in future years (together with related CSM) regardless of
whether or not the guarantees have crystallised.
Incurred claims represent the value of annuity payments due in the current year. Payments of annuities in advance, notably where due dates fall on
non-working days, are treated as prepaid incurred claims.
There were no material loss components during the year.
Insurance service result
Insurance revenue and insurance service expenses are explained in more detail in notes 2 and 3 respectively.
Investment component
Investment component represents the value of payments due to annuitants in the year that fall within guarantee periods. These payments are made
to annuitants or their beneficiaries regardless of any insurance event and are excluded from insurance revenue and insurance service expenses.
Transfer payments and tax-free cash paid to DB scheme members at retirement are treated by the Group as non-insurance cash flows, not relating
to any insurance event, and are therefore also included as investment component and also excluded from insurance revenue and insurance
service expenses.
This is further explained in accounting policy note 1.5.9.1.
Net finance expenses from insurance contracts
Net finance expenses are explained in note 6.
Exchange rate movements
Exchange rate movements of £26m in 2023 (2022: £8m) reflect the impact of change in converting the reserves of Just Retirement South Africa into
sterling at year end exchange rates.
Cash flows
Premiums received and claims paid represent the cash flows received from, and paid to, policyholders in the year respectively. Insurance acquisition
cash flows represent the costs of acquiring new business incurred in the year.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 195
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
(ii) Insurance contracts analysed by measurement component
Year ended 31 December 2023
Estimate of
present value of
future cash flows
£m
Risk adjustment
for non-financial
risk
£m
Contractual service margin
Contracts under
FRA and GMM
£m
Contracts under
FVA
£m
Total
£m
Opening insurance contract liabilities balance (restated)
(17,030)
(674)
(589)
(1,354)
(19,647)
Changes in the statement of comprehensive income
Changes that relate to current service
CSM recognised for service provided
Change in risk adjustment for non-financial risk for risk expired
Experience adjustments
Changes that relate to future service
Contracts initially recognised in the year
Changes in estimates that adjust the CSM
Insurance service result
Net finance expenses from insurance contracts
Exchange rate movement
Total changes in the statement of comprehensive income
Cash flows
Premiums received
Claims and other insurance service expenses paid,
including investment components
Insurance acquisition cash flows
Total cash flows
Closing insurance contract liabilities balance
–
–
(8)
542
292
826
(1,917)
26
(1,065)
(4,494)
1,648
183
(2,663)
(20,758)
–
11
–
(162)
(89)
(240)
(10)
–
(250)
–
–
–
–
47
–
–
(380)
(53)
(386)
(37)
–
(423)
–
–
–
–
109
–
–
–
(150)
(41)
(42)
–
(83)
–
–
–
–
(924)
(1,012)
(1,437)
156
11
(8)
–
–
159
(2,006)
26
(1,821)
(4,494)
1,648
183
(2,663)
(24,131)
196 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
Year ended 31 December 2022 (restated)
Estimate of
present value of
future cash flows
£m
Risk adjustment
for non-financial
risk
£m
Contractual service margin
Contracts under
FRA and GMM
£m
Contracts under
FVA
£m
Total
£m
Opening insurance contract liabilities balance (restated)
(20,574)
(1,023)
(262)
(1,227)
(23,086)
Changes in the statement of comprehensive income
Changes that relate to current service
CSM recognised for service provided
Change in risk adjustment for non-financial risk for risk expired
Experience adjustments
Changes that relate to future service
Contracts initially recognised in the year
Changes in estimates that adjust the CSM
Insurance service result
Net finance income/(expenses) from insurance contracts
Exchange rate movement
Total changes in the statement of comprehensive income
Cash flows
Premiums received
Claims and other insurance service expenses paid, including
investment components
Insurance acquisition cash flows
Total cash flows
Closing insurance contract liabilities balance
–
–
(4)
469
172
637
4,420
(8)
5,049
(3,114)
1,485
124
(1,505)
(17,030)
–
13
–
(149)
41
(95)
444
–
349
–
–
–
–
18
–
–
(320)
(16)
(318)
(9)
–
(327)
–
–
–
–
102
–
–
–
(197)
(95)
(32)
–
(127)
–
–
–
–
(674)
(589)
(1,354)
120
13
(4)
–
–
129
4,823
(8)
4,944
(3,114)
1,485
124
(1,505)
(19,647)
Changes that relate to current service
CSM recognised in the period is computed based on the provision of benefits based on the policy as outlined in note 1.5.6 and note 2 Insurance
revenue. Change in risk adjustment for non-financial risk for risk expired is also explained in note 2. Experience adjustments represent the difference
between the expected value of claims and expenses projected as at the start of the year included in insurance revenue, and the actual value of
claims and expenses due in the year included in insurance service expense. The experience adjustment of £(8)m in 2023 (2022: £(4)m) should be
viewed in the context of £1,648m (2022: £1,485m) of claims and expenses paid, and reflected investment management expenses in excess of
amounts held within the opening reserve as the Group pursued a strategy of investing in higher yielding illiquid assets; mortality experience
was favourable.
Changes that relate to future service
Contracts initially recognised in the year
The value of contracts initially recognised in the year is presented in note 26(e).
Changes in estimates that adjust the CSM
Changes in estimates that adjust the CSM represent changes in projected future years cash flows that arise from experience in the period and
non-economic assumption changes, measured at locked-in discount rates.
In 2023, the £292m release from estimate of present value of future cash flows mainly reflected the improvement to longevity assumptions and was
offset by a £89m increase in the risk adjustment reserve following the recalibration of risk stress parameters at the year end. The 2022 results also
included an improvement to longevity assumptions which was the main driver behind the increase in estimate of present value of future cash flows
of £172m; the recalibration of the risk adjustment lead to a £41m release at locked in discount rates.
Net finance (expenses)/income from insurance contracts
Total net finance expenses from insurance contracts of £2,006m in 2023 compared with net finance income of £4,823m in 2022, with the year on year
change driven by the decrease in yields experienced in 2023 which followed the substantial increase in 2022. The net finance expense represents a
combination of unwind of discount rates and impact of changes in discount rates for the Estimate of present value of future cash flows and Risk
adjustment, and unwind of discount rates alone for the CSM, which is measured using locked-in discount rates.
The £79m of accretion of CSM (discount unwind of which £37m was in FRA/GMM cohorts and £42m in FVA cohorts) in 2023 compared with £41m in
2022, with the increase reflecting a combination of higher discount rates applicable to the 2023 cohort and an increase on prior years due to the
upwards shape of the yield curves for earlier years.
Cash flow items are described in the previous section.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
(d) Movements analysis – reinsurance contracts
(i) Reinsurance contracts analysis of remaining coverage
Year ended 31 December 2023
Opening reinsurance contract asset (restated)
Opening reinsurance contract liability (restated)
Net opening balance
Changes in the statement of comprehensive income
Reinsurance expenses
Claims recovered
Net expenses from reinsurance contracts
Net finance expenses from reinsurance contracts
Total changes in the statement of comprehensive income
Cash flows
Premiums paid
Claims received
Total cash flows
Closing reinsurance contract asset
Closing reinsurance contract liability
Net closing balance
Year ended 31 December 2022 (restated)
Opening reinsurance contract asset
Opening reinsurance contract liability
Net opening balance
Changes in the statement of comprehensive income
Reinsurance expenses
Claims recovered
Net expenses from reinsurance contracts
Net finance expenses from reinsurance contracts
Total changes in the statement of comprehensive income
Cash flows
Premiums paid
Claims received
Total cash flows
Closing reinsurance contract asset
Closing reinsurance contract liability
Net closing balance
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 197
Remaining coverage
£m
Incurred claims
£m
769
(114)
655
(857)
–
(857)
108
(749)
1,196
–
1,196
1,136
(34)
1,102
7
(7)
–
–
816
816
–
816
–
(900)
(900)
7
(91)
(84)
Remaining coverage
£m
Incurred claims
£m
700
(159)
541
(599)
–
(599)
(91)
(690)
804
–
804
769
(114)
655
16
(6)
10
–
569
569
–
569
–
(579)
(579)
7
(7)
–
Total
£m
776
(121)
655
(857)
816
(41)
108
67
1,196
(900)
296
1,143
(125)
1,018
Total
£m
716
(165)
551
(599)
569
(30)
(91)
(121)
804
(579)
225
776
(121)
655
liabilities for remaining coverage represent the present value of reinsurance cash flows due for payment in future years adjusted for non-financial
risk, together with the value of unamortised CSM.
Incurred claims represent the value of net reinsurance settlements on longevity swaps, facultative reinsurance, and other reinsurance arrangements
during the period.
As noted in note 1.5.3, reinsurance contracts in each legal entity are allocated to either a portfolio of treaties transferring longevity and inflation risks,
or a portfolio transferring longevity risk alone. Portfolios may be in either net asset or liability positions including CSM.
Within the table above, the value of fixed legs of longevity swaps are presented as Reinsurance expenses and Premiums paid, and the value of
floated legs of longevity swaps are presented as Claims recovered and Claims received.
The net expenses from reinsurance contracts in 2023 of £41m (2022: £30m) are explained in note 4.
Premiums paid of £1,196m in 2023 mainly represented new quota share premiums of £397m and current year fixed leg values on longevity swaps
of £761m (2022: £246m and £525m respectively).
198 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
(ii) Reinsurance contracts analysed by measurement component
Year ended 31 December 2023
Opening reinsurance contract asset (restated)
Opening reinsurance contract liability (restated)
Net opening balance
Changes in the statement of comprehensive income
Changes that relate to current service
CSM recognised for service received
Change in risk adjustment for non-financial risk for risk expired
Experience adjustments
Changes that relate to future service
Contracts initially recognised in the year
Change in estimates that adjust the CSM
Net (expenses)/income from reinsurance contracts
Net finance income from reinsurance contracts
Total changes in the statement of comprehensive income
Cash flows
Premiums paid
Claims received
Total cash flows
Closing reinsurance contract asset
Closing reinsurance contract liability
Net closing balance
Estimate of
present value of
future cash flows
£m
Risk adjustment
for non-financial
risk
£m
Contractual service margin
Contracts under
FRA and GMM
£m
Contracts under
FVA
£m
589
(665)
(76)
–
–
(10)
(168)
(200)
(378)
94
(284)
1,196
(900)
296
937
(1,001)
(64)
80
319
399
–
(4)
–
131
64
191
2
193
–
–
–
106
486
592
32
88
120
(7)
–
–
37
63
93
6
99
–
–
–
32
187
219
75
137
212
(20)
–
–
–
73
53
6
59
–
–
–
68
203
271
Total
£m
776
(121)
655
(27)
(4)
(10)
–
–
(41)
108
67
1,196
(900)
296
1,143
(125)
1,018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 199
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
Year ended 31 December 2022 (restated)
Opening reinsurance contract asset
Opening reinsurance contract liability
Net opening balance
Changes in the statement of comprehensive income
Changes that relate to current service
CSM recognised for service received
Change in risk adjustment for non-financial risk for risk expired
Changes that relate to future service
Contracts initially recognised in the period
Change in estimates that adjust the CSM
Net expenses from reinsurance contracts
Net finance expenses from reinsurance contracts
Total changes in the statement of comprehensive income
Cash flows
Premiums paid
Claims received
Total cash flows
Closing reinsurance contract asset
Closing reinsurance contract liability
Net closing balance
Estimate of
present value of
future cash flows
£m
Risk adjustment
for non-financial
risk
£m
Contractual service margin
Contracts under
FRA and GMM
£m
Contracts under
FVA
£m
546
(803)
(257)
–
–
(165)
(61)
(226)
182
(44)
804
(579)
225
589
(665)
(76)
116
487
603
–
(5)
115
(35)
75
(279)
(204)
–
–
–
80
319
399
–
32
32
(3)
–
50
40
87
1
88
–
–
–
32
88
120
54
119
173
(22)
–
–
56
34
5
39
–
–
–
75
137
212
Total
£m
716
(165)
551
(25)
(5)
–
–
(30)
(91)
(121)
804
(579)
225
776
(121)
655
The changes that relate to current service in 2023 of £41m (2022: £30m) are explained in note 4.
The value of contracts initially recognised in the year are explained in note 26(e).
The change in estimates that adjust the CSM recognised in the estimate of present value of future cash flows and risk adjustment in 2023 of £(200)m
and £64m respectively represent the reinsurers’ share of the equivalent gross changes of £292m and £(89)m respectively explained in note 26(cii).
Net finance income from reinsurance contracts of £108m (2022: £91m expenses) reflect the impact of changes in discount rates and unwinding of
discounting. Accretion of the reinsurance CSM was £12m in 2023 compared with £6m in 2022, with the increase reflecting an additional year’s cohort
and the upwards shape of the yield curve applying to the in-force business, as noted earlier for gross business.
200 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
e) New insurance contracts issued and reinsurance contracts held
The tables below present the CSM at point of inception of new contracts sold in the year together with CSM for the related reinsurance:
Insurance contracts issued
Insurance acquisition cash flows
Estimate of present value of future cash outflows
Estimate of present value of future cash inflows
Estimates of net present value of cash flows
Risk adjustment
Contractual service margin
2023
£m
(183)
(3,580)
4,305
542
(162)
380
2022
(restated)
£m
(124)
(2,797)
3,390
469
(149)
320
The amount recognised in the CSM represents the value of new business acquired in the period valued based on point of sale economic and non-
economic assumptions.
Insurance acquisition cash flows are deducted from CSM at point of sale and recognised in Insurance revenue and Insurance services expenses over
the life of contracts. The total of £183m in 2023 increased compared with the prior year amount of £124m mainly reflecting growth in business
volumes combined with higher investment acquisition costs as the Group has increased its investment in illiquid assets.
The estimate of present value of future cash outflows of £3,580m (2022: £2,797m) represents the present value of claims and maintenance expenses
quantified at the discount rates applicable at date of inception of contracts. The expense loading is determined based on incremental marginal costs
including overheads that are attributable to the new contracts signed in the current period and does not include costs which have been previously
allocated to existing contracts in prior years. The increase reflects the increase in business sold in the year, with premiums receivable increasing from
£3,390m in 2022 to £4,305m in 2023.
Reinsurance contracts ceded
Estimate of present value of future net cash outflows
Risk adjustment
Contractual service margin
2023
2022 (restated)
Originated with
a positive CSM
£m
Originated with
a negative CSM
£m
(19)
31
12
(149)
100
(49)
Total
£m
(168)
131
(37)
Originated with
a negative CSM
£m
(165)
115
(50)
Total
£m
(165)
115
(50)
A negative reinsurance CSM reflect costs that will be incurred by the Group on entering into the reinsurance arrangement, whereas a positive CSM for
reinsurance reflects when a gain is made on entering into a reinsurance contract. Under IFRS 17, reinsurance CSM can be either positive or negative at
initial recognition, and then amortised over the life of the underlying contracts based on coverage units.
During 2023 the Group broadened its use of reinsurers for new DB business which resulted in recognition of contracts with positive CSM.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 201
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
(f) Contractual service margin run-off
The following represents the current view of the run-off of the CSM.
31 December 2023
Within 1 year
1–2 years
2–3 years
3–4 years
4–5 years
5–10 years
10–20 years
20–30 years
Over 30 years
Total
31 December 2022 (restated)
Within 1 year
1–2 years
2–3 years
3–4 years
4–5 years
5–10 years
10–20 years
20–30 years
Over 30 years
Total
CSM release before the impact of accretion
After accretion
Insurance
contract liability
£m
Net reinsurance
£m
172
170
168
167
164
777
1,247
724
437
4,026
(31)
(30)
(30)
(30)
(30)
(149)
(266)
(174)
(114)
(854)
Net
£m
141
140
138
137
134
628
981
550
323
Net after
accretion
£m
61
67
68
72
74
363
614
376
264
3,172
1,959
CSM release before the impact of accretion
After accretion
Insurance
contract liability
£m
Net reinsurance
£m
Net
£m
Net after accretion
£m
133
131
129
127
125
584
928
515
274
2,946
(21)
(21)
(20)
(20)
(20)
(95)
(166)
(105)
(62)
(530)
112
110
109
107
105
489
762
410
212
55
58
59
61
64
308
523
304
179
2,416
1,611
202 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
(g) 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, measured as the expected undiscounted net cash flows.
31 December 2023
less than 1 year
1–2 years
2–3 years
3–4 years
4–5 years
5–10 years
10–20 years
20–30 years
Over 30 years
Total value (undiscounted)
Carrying value (discounted)
31 December 2022 (restated)
less than 1 year
1–2 years
2–3 years
3–4 years
4–5 years
5–10 years
10–20 years
20–30 years
Over 30 years
Total value (undiscounted)
Carrying value (discounted)
Insurance
contract liability
£m
Reinsurance
contract assets
£m
Reinsurance
contract liabilities
£m
1,731
1,715
1,697
1,679
1,662
7,971
13,317
8,325
5,802
43,899
21,789
(73)
(75)
(76)
(76)
(76)
(378)
(659)
(408)
(253)
(2,074)
(1,039)
30
31
33
34
35
187
324
86
(130)
630
426
Insurance
contract liability
£m
Reinsurance
contract assets
£m
Reinsurance
contract liabilities
£m
1,508
1,492
1,473
1,450
1,430
6,800
11,012
6,237
3,556
34,958
17,704
(55)
(56)
(56)
(55)
(55)
(265)
(427)
(198)
(47)
(1,214)
(669)
28
30
30
31
32
157
220
42
(32)
538
346
Net
£m
1,688
1,671
1,654
1,637
1,621
7,780
12,982
8,003
5,419
42,455
21,176
Net
£m
1,481
1,466
1,447
1,426
1,407
6,692
10,805
6,081
3,477
34,282
17,381
The tables above present the timing and amount of expected future cash flows excluding both current insurance related accruals and prepayments,
and the CSM release as presented in Note 26(f). Contractual amounts payable on demand include amounts that DB scheme members may transfer
out in the deferred phase prior to retirement of £2,868m at 31 December 2023 (31 December 2022: £1,467m).
(h) 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 20.
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 in fulfilment cash flows than disclosed in the table below or a similar increase in mortality may be expected to result in broadly linear impacts.
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. Parameters that have had limited sensitivity both historically and currently
are not included, such as inflation for which the risk is substantially hedged. 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 203
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
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
The impact of an increase in maintenance expenses by 10%
Base mortality rates
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 10% for both Retirement Income liabilities and
lTMs. This sensitivity applies a multiplicative adjustment to the improvement rates.
Immediate property price fall
The impact of an immediate decrease in the value of properties on loans secured by residential mortgages by 10%
Future property price growth
The impact of a reduction in future property price growth on loans secured by residential mortgages by 0.5%
Future property price volatility
The impact of an increase in future property price volatility on loans secured by residential mortgages 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 of sensitivities
31 December 2023
Interest rate and investments +1%
Contractual service margin
Fulfilment cash flows
Profit/(loss) before tax
Fulfilment cash flows
Interest rate and investments -1%
Contractual service margin
Profit/(loss) before tax
Fulfilment cash flows
Maintenance expenses +10%
Contractual service margin
Profit/(loss) before tax
Fulfilment cash flows
Decrease in base mortality by 5%
Contractual service margin
Profit/(loss) before tax
Fulfilment cash flows
Mortality improvements rates +10%
Contractual service margin
Profit/(loss) before tax
Fulfilment cash flows
Immediate fall of 10% in house prices
Contractual service margin
Future property price growth reduces
by 0.5%
Future property price volatility
increase by 1%
Voluntary redemptions increase
by 10%
Credit default allowance – increase
by 10bps1
Profit/(loss) before tax
Fulfilment cash flows
Contractual service margin
Profit/(loss) before tax
Fulfilment cash flows
Contractual service margin
Profit/(loss) before tax
Fulfilment cash flows
Contractual service margin
Profit/(loss) before tax
Fulfilment cash flows
Contractual service margin
Profit/(loss) before tax
1 Over that included in the discount rate section in note 26(b).
Insurance
contract liabilities
£m
Reinsurance
contracts
(net) held
£m
Net insurance
contract liabilities
£m
Valuation
of assets
£m
Net impact on
profit and loss
£m
1,893
–
1,893
(2,266)
–
–
–
(1,933)
–
–
(2,266)
2,316
1,970
–
1,970
(2,366)
–
(2,366)
(30)
31
1
(327)
476
148
(178)
263
85
(46)
–
(46)
(38)
–
(38)
(18)
–
(18)
(24)
–
(24)
(213)
–
(213)
(77)
–
(77)
100
–
100
–
–
–
196
(293)
(97)
106
(172)
(66)
2
–
2
2
–
2
1
–
1
1
–
1
9
–
9
(30)
31
1
(131)
182
51
(72)
91
20
(44)
–
(44)
(36)
–
(36)
(17)
–
(17)
(23)
–
(23)
(204)
–
(204)
–
–
(40)
–
–
49
–
–
(5)
–
–
37
–
–
17
–
–
–
–
(5)
–
–
(14)
–
–
(3)
–
–
(68)
(113)
–
–
(38)
–
–
(27)
–
–
19
–
–
–
–
–
(74)
–
–
(44)
–
–
(4)
–
–
(204)
204 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
31 December 2022 (restated)
Interest rate and investments +1%
Contractual service margin
Fulfilment cash flows
Profit/(loss) before tax
Fulfilment cash flows
Interest rate and investments -1%
Contractual service margin
Maintenance expenses +10%
Contractual service margin
Profit/(loss) before tax
Fulfilment cash flows
Profit/(loss) before tax
Fulfilment cash flows
Decrease in base mortality by 5%
Contractual service margin
Mortality improvements rates +10%
Contractual service margin
Profit/(loss) before tax
Fulfilment cash flows
Immediate fall of 10% in house prices
Contractual service margin
Profit/(loss) before tax
Fulfilment cash flows
Future property price growth reduces
by 0.5%
Future property price volatility
increase by 1%
Voluntary redemptions increase
by 10%
Credit default allowance – increase
by 10bps1
Profit/(loss) before tax
Fulfilment cash flows
Contractual service margin
Profit/(loss) before tax
Fulfilment cash flows
Contractual service margin
Profit/(loss) before tax
Fulfilment cash flows
Contractual service margin
Profit/(loss) before tax
Fulfilment cash flows
Contractual service margin
Profit/(loss) before tax
1 Over that included in the discount rate section in note 26(b).
A guide to the sensitivity table is provided below:
Metric
Impact
Insurance
contract liabilities
£m
Reinsurance
contracts
(net) held
£m
Net insurance
contract liabilities
£m
Valuation of assets
£m
Net impact on
profit and loss
£m
1,555
–
1,555
(1,860)
–
(1,860)
(28)
27
(1)
(269)
428
160
(160)
253
93
(59)
–
(59)
(50)
–
(50)
(25)
–
(25)
(33)
–
(33)
(170)
–
(170)
(37)
–
(37)
47
–
47
1
–
1
157
(256)
(99)
86
(155)
(69)
3
–
3
2
–
2
1
–
1
1
–
1
5
–
5
1,518
–
1,518
(1,813)
–
–
–
(1,545)
–
–
(1,813)
1,838
(27)
27
–
(112)
173
60
(74)
98
24
(56)
–
(56)
(48)
–
(48)
(24)
–
(24)
(32)
–
(32)
(165)
–
(165)
–
–
(5)
–
–
(13)
–
–
(4)
–
–
(63)
–
–
(37)
–
–
(26)
–
–
19
–
–
–
–
–
(28)
–
–
25
–
–
(5)
–
–
47
–
–
20
–
–
(119)
–
–
(85)
–
–
(49)
–
–
(13)
–
–
(165)
Fulfilment cash flows
Positive values represent cash inflows or lower cash outflows resulting in reductions in insurance contract liabilities or
an increase in reinsurance contracts assets.
Negative values represent cash outflows or higher cash outflows resulting in increased insurance contract liabilities or
a decrease in reinsurance contracts assets.
Contractual service margin
Positive values represent a reduction in the CSM
Negative values represent an increase in the CSM
Profit/(loss) before tax
Profit – increase in pre-tax profit
(loss) – decrease in pre-tax profit
Sensitivities can result in an opposite impact on Profit/(loss) before and after allowance for the CSM due to the impact
of the use of locked-in rates for the CSM.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 205
27. INVESTMENT CONTRACT LIABILITIES
At 1 January
Deposits received from policyholders
Payments made to policyholders
Change in contract liabilities recognised in profit or loss
At 31 December
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
33
12
(1)
(9)
35
34
14
(12)
(3)
33
(a) Terms and conditions of investment contracts
The Group has written Capped Drawdown products for the at-retirement market. 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 the 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.
The Group has also written linked endowment contracts and term-certain GIfl contracts for the at-retirement market in South Africa which are
classified as investment 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 20(d)(iii) 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.
Our underlying default methodology allows for the impact of credit rating downgrades and changes in spreads and hence we have maintained
the same methodology at 31 December 2023. As explained in note 20(d)(viii) the discount rate used for the fixed term annuity product treated
as investment business is based on a curve where 6.88% is the one-year rate and 5.47% is the five-year rate (31 December 2022: 5.67%).
28. LOANS AND BORROWINGS
£250m 9.0% 10-year subordinated debt 2026 (Tier 2) issued
by Just Group plc (£150m principal outstanding)
£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
for first 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 (£155m principal outstanding)
Total
Carrying value
2023
£m
152
126
251
157
686
2022
£m
174
122
248
155
699
Fair value
2023
£m
164
127
252
151
694
2022
£m
188
130
245
141
704
The £250m 7.0% bond is callable after October 2025. The maturity analysis in note 34(d) assumes it is called at the first possible date.
The Group also has an undrawn revolving credit facility held by the Parent Company 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.
206 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
28. LOANS AND BORROWINGS continued
Movements in borrowings during the year were as follows:
At 1 January
Coupon payments
Repayment of Just Group plc Tier 2 subordinated debt
Financing cash flows
Transfer brought forward interest from accruals
Interest charged at the effective interest rate
Amortisation of issue costs
Non-cash movements
At 31 December
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
699
(48)
(24)
(72)
10
48
1
59
686
774
(44)
(76)
(120)
–
44
1
45
699
During the year the Company redeemed a further £24m of the 2026 9% Tier 2 subordinated debt (2022: £76m). A loss of £2m (2022: £5m) was
recognised on redemption.
29. OTHER FINANCIAL LIABILITIES
Derivative financial liabilities
Repurchase obligation
Obligations for repayment of cash collateral received
Total
31 December 2023
£m
31 December 2022
(restated)
£m
2,487
2,569
532
5,588
3,046
–
623
3,669
Derivative financial liabilities are classified as mandatorily FVTPl and are analysed in note 30 below. The restatement of Other financial liabilities
including the treatment of reinsurance deposit-back monies under IFRS 17 and commitments for future investments is explained in note 1.2.
As described in note 19, the Group has entered into a number of repurchase agreements whereby a fixed amount is repayable at a certain date.
At the inception of these agreements they had durations of between 12 and 21 months. The repurchase agreements are measured at amortised
cost in the financial statements. The fair value of these agreements is £2,569m (2022 not applicable).
Obligations to repay cash collateral is measured at amortised cost and there is no material difference between the fair value and amortised cost
of the instruments.
30. 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.
Derivatives
Foreign currency swaps
Interest rate swaps
Inflation swaps
Forward swaps
Total return swaps
Put options on property index (NNEG hedges)
Interest rate options
Investment asset derivatives
Total
31 December 2023
31 December 2022
(restated)
Asset fair value
£m
Liability fair value
£m
Notional amount
£m
Asset Fair value
£m
liability fair value
£m
Notional Amount
£m
515
1,435
409
4
–
–
–
14
2,377
857
1,512
102
1
–
14
1
–
16,607
26,995
5,681
630
–
380
100
–
413
1,408
438
5
13
–
–
–
1,320
1,580
80
10
14
19
–
23
12,663
13,648
4,293
546
–
705
–
149
2,487
50,393
2,277
3,046
32,004
As explained in note 1.2.2, derivative liabilities are restated by £23m in respect of future funding commitments.
The Group’s derivative financial instruments are not designated as hedging instruments and changes in their fair value are included in profit or
loss. 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 207
30. DERIVATIVE FINANCIAL INSTRUMENTS continued
As at 31 December 2023, the Group had pledged collateral of £4,016m (2022: £1,286m), of which £2,614m were gilts measured at amortised cost
(2022: nil), £696m were corporate bonds (2022: £394m) and £706m held in deposits (2022: £892m), which continue to be recognised in financial
investments in the statement of financial position as the Group retains the significant risks and rewards of ownership.
The Group has received cash collateral of £532m (2022: £623m).
31. OTHER PAYABLES
Outstanding investment purchases
Other payables
lease liability
Total
31 December 2023
£m
31 December 2022
(restated)
£m
–
11
9
20
66
21
9
96
Other payables are restated for reclassifications as explained in note 1.2.2. As a result of adoption of IFRS 17, all balances within the boundary of
IFRS 17 insurance and reinsurance contracts are reclassified within note 26. In addition, as explained in note 1.2.2, outstanding investment purchases
at 31 December 2022 are restated by £148m.
32. COMMITMENTS
The Group had £2m of capital commitments at 31 December 2023 in respect of fit-out works to be undertaken during 2024 to the Group’s
replacement Belfast office (2022: nil).
At 31 December 2023, the Group had £210m unfunded commitments (2022 restated: £148m) primarily related to investments.
33. CONTINGENT LIABILITIES
There are no contingent liabilities as at 31 December 2023 (2022: £nil).
34. 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 levels of withdrawal from lifetime
mortgages 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. Our DB
business uses our DB pricing platform and we perform regular insurer price monitoring utilising our bulk quotation service. 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 as part of the portfolio to match 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.
(i) 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 assess longevity risk;
the use of reinsurance to transfer longevity risk outside the Group. The Group retains oversight of the risks transferred, uses a range of reinsurers
and monitors exposures to ensure the Group remains within the reinsurance counterparty risk appetite;
review and approval of insurance assumptions used by the Board; and
regular monitoring and analysis of actual experience and expense levels.
(ii) Concentrations of insurance risk
Improved longevity arises from enhanced medical treatment and improved life circumstances. Concentration risk to individual 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.
208 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
34. FINANCIAL AND INSURANCE RISK MANAGEMENT continued
(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, residential property markets, credit spreads, inflation and exchange rates. 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 that 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 premiums 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 IFRS 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.
The following table indicates the earlier of contractual repricing or maturity dates for the Group’s significant financial assets.
2023
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
long income real estate1
Infrastructure loans
Other loans
Derivative financial assets
Total investments measured at FVTPL
Gilts – subject to repurchase agreements
Total investments measured at amortised cost
Less than
one year
£m
1,141
97
527
706
–
87
–
–
1
48
2,607
–
–
One to
five years
£m
Five to
ten years
£m
Over
ten years
£m
No fixed term
£m
Total
£m
–
398
1,625
–
–
378
4
72
146
177
–
–
–
–
2,513
8,989
–
–
202
–
246
4
573
–
–
97
775
795
13
1,579
12,248
2,549
2,549
14,797
–
–
–
–
5,681
–
–
–
–
–
5,681
–
–
5,681
1,141
495
13,654
706
5,681
764
779
1,113
164
2,377
26,874
2,549
2,549
29,423
2,800
3,538
–
–
–
–
Total financial investments
2,607
2,800
3,538
1. Includes residential ground rents of £176m.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 209
34. FINANCIAL AND INSURANCE RISK MANAGEMENT continued
2022 (restated)
Units in liquidity funds
Investment funds
Debt securities and other fixed income securities¹
Deposits with credit institutions
loans secured by residential mortgages
loans secured by commercial mortgages
long income real estate
Infrastructure loans¹
Other loans
Derivative financial assets
Total
less than
one year
£m
1,174
83
675
908
–
67
–
–
2
52
2,961
Five to
ten years
£m
Over
ten years
£m
No fixed term
£m
–
–
–
–
2,389
6,864
One to
five years
£m
–
338
1,425
–
–
339
–
24
118
157
–
–
125
–
160
6
322
–
–
53
247
764
8
1,746
9,682
2,401
3,002
Total
£m
1,174
421
11,353
908
5,306
584
247
948
134
2,277
23,352
–
–
–
–
5,306
–
–
–
–
–
5,306
1. Restated to correct the treatment of future funding commitments as explained in note 1.2.2.
A sensitivity analysis of the impact of interest rate movements on profit before tax is included in note 26(h).
(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.
A sensitivity analysis of the impact of residential property price movements is included in note 20(d)(iii) and note 26(h).
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.
(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 including inflation swaps, 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.
210 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
34. FINANCIAL AND INSURANCE RISK MANAGEMENT continued
(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. The Group holds a portion of its fixed income investments as loans secured
against a variety of types of collateral including but not limited to commercial real estate and commercial ground rents as well as residential
ground rents.
• 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 19).
• 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.
• Reinsurance concentration risk: to reduce risk, the Group ensures it trades with a wide range of counterparties to diversify exposures.
• Cash balances – credit risk on cash assets is managed by imposing restrictions over the credit ratings of third parties with whom cash is deposited,
as well as the balances permitted.
• Credit risk for lifetime mortgages secured on residential property has been considered within “property risk” above.
(i) Credit ratings of financial assets
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:
2023
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
long income real estate1
Infrastructure loans
Other loans
Derivative financial assets
Gilts – subject to repurchase agreements
Reinsurance²
Other receivables
Total
1 Includes residential ground rents of £164m rated AAA and £12m rated AA.
2 This is the reinsurance asset position excluding CSM.
AAA
£m
1,135
–
927
–
–
–
164
64
–
–
–
–
–
AA
£m
6
–
2,283
100
–
–
20
121
–
28
2,549
264
–
A
£m
–
–
4,521
425
–
–
185
151
–
1,686
–
193
–
BBB
£m
BB or below
£m
Unrated
£m
Total
£m
–
–
5,763
181
–
–
410
764
–
649
–
387
–
–
–
160
–
–
–
–
13
41
–
–
–
–
–
495
–
–
5,681
764
–
–
123
14
–
199
60
1,141
495
13,654
706
5,681
764
779
1,113
164
2,377
2,549
1,043
60
2,290
5,371
7,161
8,154
214
7,336
30,526
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 211
34. FINANCIAL AND INSURANCE RISK MANAGEMENT continued
2022 (restated)
Units in liquidity funds
Investment funds
Debt securities and other fixed income securities¹
Deposits with credit institutions
loans secured by residential mortgages
loans secured by commercial mortgages
long income real estate
Infrastructure loans¹
Other loans
Derivative financial assets
Reinsurance2
Other receivables
Total
AAA
£m
1,170
–
698
–
–
–
139
71
–
–
–
–
AA
£m
–
–
1,889
100
–
–
7
97
–
–
276
–
A
£m
–
–
3,260
773
–
–
37
142
–
1,670
195
–
BBB
£m
BB or below
£m
Unrated
£m
Total
£m
–
–
5,105
20
–
–
64
625
–
607
–
–
4
–
401
15
–
–
–
13
22
–
–
–
–
421
–
–
5,306
584
–
–
112
–
198
33
1,174
421
11,353
908
5,306
584
247
948
134
2,277
669
33
2,078
2,369
6,077
6,421
455
6,654
24,054
1 Restated to correct the treatment of future funding commitments as explained in note 1.2.2.
2 This is the reinsurance asset position excluding CSM (2022 restated since initially disclosed).
There are no financial assets that are either past due or impaired. The new amortised cost portfolio of UK Sovereign gilts entered into during
the year are investment grade and deemed low credit risk. lifetime expected credit losses are therefore considered immaterial.
The credit rating for Cash available on demand at 31 December 2023 was between a range of AA- and A (31 December 2022: between a range
of AA and BB).
The carrying amount of those assets subject to credit risk represents the maximum credit risk exposure.
(ii) Offsetting financial assets and liabilities
The Group has no financial assets and financial liabilities that have been offset in the Consolidated statement of financial position as at
31 December 2023 (2022: none).
In the tables below, the amounts of assets or liabilities presented in the Consolidated statement of financial position are offset first by financial
instruments that have the right of offset under master netting arrangement or similar arrangements with any remaining amount reduced by
cash and securities collateral.
2023
Derivative assets
Derivative liabilities
Repurchase obligation
2022 (restated)
Derivative assets
Derivative liabilities
As reported
£m
2,362
(2,471)
(2,569)
As reported
£m
2,277
(3,023)
Related financial
Instruments1
£m
Cash collateral2
£m
Securities
collateral pledged
£m
Net amount
£m
(1,917)
1,917
–
(376)
338
–
(67)
211
2,569
Related financial
Instruments1
£m
Cash collateral2
£m
Securities
collateral pledged
£m
(1,766)
1,766
(491)
783
(5)
444
2
(5)
–
Net amount
£m
15
(30)
1
2
Related financial instruments represent 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.
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.
212 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
34. FINANCIAL AND INSURANCE RISK MANAGEMENT continued
(iii) Significant reinsurance collateral arrangements
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.
The Group has received deposits from reinsurers that are recognised as part of the cash flows from the reinsurance contract and are included in the
measurement of reinsurance balances within note 26. Whereas 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
ring-fenced 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 ring-fenced 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 ring-fenced for issued lifetime mortgage quotes agreed by the reinsurer, it is
also not recognised as an asset by the Group.
• The Group has agreements with two reinsurers whereby assets equal to the reinsurers’ full obligation under the treaties are deposited into
ring-fenced collateral accounts of notes/shares issued through the dedicated Investment vehicles. The investments in these vehicles are restricted
only for the purpose of these reinsurance agreements. 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 reinsurers also deposit cash into a bank account held legally by the Group to
fund reinsurance claims but as this cash is ring-fenced for the reinsurers purpose, it is also not recognised as an asset by the Group.
Deposits held in trust
2023
£m
787
2022
£m
569
The collateral that is not recognised in the Consolidated statement of financial position does not represent a cash flow within the IFRS 17
contract boundaries. The Group is exposed to a minimal amount of reinsurance counterparty default risk in respect of reinsurance arrangements and
calculates an allowance for counterparty default in the reinsurance future cash flows accordingly. At 31 December 2023, this liability totalled £8m
(2022: £2m).
(d) Liquidity risk
liquidity risk is the risk of loss because the Group does not have sufficient suitable assets available to meet its financial obligations as they fall due.
The Group is exposed to liquidity risk as part of its business model and its desire to manage its exposure to inflation, interest rates and currency risks.
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;
•
increasing cash flow volatility in the short-term giving rise to mismatches between cash flows from assets and requirements from liabilities;
• needing to support liquidity requirements for day-to-day operations;
• higher than expected funding requirements on existing lTM contracts, or lower redemptions than expected; and
• ensuring financial support can be provided across the Group.
liquidity risk is managed by holding assets of a suitable maturity, collateral eligibility 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 insurance liabilities including any pension commencement lump sum payments can be reasonably estimated and
liquidity can be arranged to meet this expected outflow through asset-liability matching.
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. Borrowers are able to redeem
mortgages, albeit with payment of an early redemption charge. The mortgage assets themselves are considered illiquid, as they are not readily
saleable due to the complexity of valuation and the lack of a market in which to trade them.
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. Short-term stresses, periods from one day up to and including one month, take into account market
volatility and focus on the worst observed movements over the last 40 years. Cash flow forecasts include an assessment of the impact to a range of
scenarios including 1-in-200 shocks on the Group’s long-term liquidity and the minimum cash and cash equivalent levels required to cover
enhanced stresses. During 2022 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 213
34. FINANCIAL AND INSURANCE RISK MANAGEMENT continued
Interest is payable on any drawdown loans at a rate of SONIA plus a margin of between 1.00% and 2.75% per annum depending on the Group’s ratio
of net debt to net assets.
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:
2023
Investment contract liabilities
Subordinated debt
Derivative financial liabilities
Repurchase obligation
Obligations for repayment of
cash collateral received
Other payables (excluding lease liability)
2022 (restated)¹
Investment contract liabilities
Subordinated debt¹
Derivative financial liabilities¹
Obligations for repayment of
cash collateral received
Other payables (excluding lease liability)¹
Within one year or
payable on demand
£m
One to five years
£m
Five to ten years
£m
Over ten years
£m
7
47
1,463
2,178
532
11
38
598
4,273
478
–
–
–
285
5,725
–
–
–
–
–
17,642
–
–
–
Within one year or
payable on demand
£m
One to five years
£m
Five to ten years
£m
Over ten years
£m
8
49
907
623
87
31
495
4,328
–
–
–
465
4,534
–
–
1
–
13,345
–
–
Total
£m
45
930
29,103
2,656
532
11
Total
£m
40
1,009
23,114
623
87
1 2022 is restated on transition to IFRS 17. In addition subordinated debt is restated to exclude the Restricted Tier 1 equity instrument. Derivatives are restated to report the amounts on
an undiscounted basis. Derivatives and other payables are restated to correct the treatment of future funding commitments as explained in note 1.2.2.
35. CAPITAL
Group capital position
The Group’s estimated capital surplus position at 31 December 2023 was as follows:
Eligible own funds
Capital requirement
Excess own funds
Solvency II Capital coverage ratio
Solvency capital requirement
Minimum Group Solvency capital requirement
20231, 2
£m
3,104
(1,577)3
1,5273
197%3
20221, 2
£m
2,757
(1,387)
1,370
199%
2023
£m
2,572
(462)3
2,1103
557%3
20222
£m
2,152
(388)
1,764
555%
1 Solvency II capital coverage ratios as at 31 December 2023 and 31 December 2022 include a formal recalculation of TMTP.
2 2023 regulatory position is estimated. 2022 regulatory position is reported as included in the Group’s Solvency and Financial Condition Report as at 31 December 2022.
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.
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 are:
• JRl and PlACl – authorised by the PRA, and regulated by the PRA and FCA.
• HUB Financial Solutions limited, Just Retirement Money limited and Partnership Home loans limited – authorised and regulated by the FCA.
The Group and its regulated subsidiaries complied with their regulatory capital requirements throughout the year.
214 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
35. CAPITAL continued
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, that is greater than new
business strain.
The Group regularly assesses a wide range of actions to improve the capital position and resilience of the business. To improve resilience, the Group
purchased long-term gilts during 2023 to reduce the Group’s capital exposure to interest rate risk.
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 does not write new business.
EVT Compliance
At 31 December 2023, Just passed the PRA EVT with a buffer of 1.1% (unaudited) over the current minimum deferment rate of 3.0% (allowing for
volatility of 13%, in line with the requirement for the EVT). At 31 December 2022, the buffer was 1.5% (unaudited) compared to the minimum
deferment rate of 2.0%.
Regulatory developments
The Group has applied to the PRA to include the PlACl lifetime mortgages in the matching adjustment portfolio (via a securitisation) and to calculate
the PlACl SCR using the internal model. Subject to PRA approval, we expect to report PlACl on an internal model basis from 31 December 2024.
The Group implemented changes related to Risk Margin reform at 31 December 2023, in line with legislation. The impact of this is included in the
reported results.
On 9 November 2023, the Government published a consultation seeking views on capping the maximum ground rent that residential leaseholders
can be required to pay. The consultation set out five options including capping ground rents at a peppercorn. The Group is closely monitoring the
Government consultation and the impact of this on the Group’s £176m portfolio of residential ground rents. As explained in the Business Review on
page 28 an adjustment has been included in the estimated Solvency II position to reflect the impact on the value of the asset portfolio, technical
provisions and on the SCR.
As part of the further proposed UK Solvency II reforms, the Group responded to the PRA consultation relating to matching adjustment and
investment flexibility in January 2024. In advance of the PRA publishing the final Policy Statement ahead of the anticipated implementation
date of 30 June 2024, we are preparing for implementation and assessing the potential financial impact.
36. GROUP ENTITIES
In accordance with the requirements of the Companies Act 2006, information regarding the Group’s related undertakings at 31 December 2023 are
disclosed below. Related undertakings comprise subsidiaries, joint ventures, associates and other significant holdings.
Principal activity
Registered office
Percentage of nominal
share capital and voting
rights held
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
Holding company
Holding company
Holding company
Distribution
Investment activity
Investment activity
Holding company
Just Retirement (South Africa) Holdings (Pty) limited
Holding company
Just Retirement life (South Africa) limited
Just Retirement limited
life assurance
life assurance
Reigate
Reigate
Reigate
Reigate
Reigate
Reigate
Reigate
South Africa
South Africa
Reigate
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 215
36. GROUP ENTITIES continued
Indirect subsidiary continued
Principal activity
Registered office
Percentage of nominal
share capital and voting
rights held
Just Retirement Management Services limited5
Management services
Just Retirement Money limited
Provision of lifetime mortgage products
Partnership Group Holdings limited5
Partnership Holdings limited5
Partnership Home loans limited
Holding company
Holding company
Provision of lifetime mortgage products
Partnership life Assurance Company limited
life assurance
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 plc5
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) limited5
HUB Pension Consulting limited5
Spire Platform Solutions limited2, 3
Management services
Software development
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Holding company
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Holding company
Pension consulting
Software development
White Rock Insurance (Gibraltar) PCC limited
Protected cell company
Pineyard Unit Trust
Associate
TP2 Unit trust
Comentis ltd
Unit trust
Unit trust
Product development
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
Gibraltar
Jersey
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%
33%4
100%
100%
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.
216 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
36. GROUP ENTITIES continued
Registered offices
Reigate office:
Enterprise House
Bancroft Road
Reigate, Surrey RH2 7RP
Jersey office (PAG):
44 Esplanade
St Helier
Jersey JE4 9WG
Belfast office:
3rd Floor, Arena Building
Ormeau Road
Belfast BT7 1SH
South Africa office:
Office G01, Big Bay Office Park
16 Beach Estate Boulevard, Big Bay
Western Cape 7441
Portsmouth office:
Building 3000, lakeside North Harbour
Portsmouth
Hampshire PO6 3EN
Consolidated structured entities
The Group holds an investment in a cell of a Protected Cell Company, White Rock Insurance (Gibraltar) PCC limited, 913 Europort, Gibraltar, GX 11 1AA.
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.
The Group holds a controlling interest in a Jersey Property Unit Trust (JPUT), Pineyard Unit Trust, Pineyard Trustee 1 limited, 47 Esplanade, St Helier,
Jersey JE1 0BD. 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, which the Trust is
not permitted to dispose except on termination, and as such the investment by the Group does not represent a business combination (see note 18).
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.
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 long income real estate.
As at 31 December 2023 the Group’s interest in unconsolidated structured entities, which are classified as investments held at fair value through
profit or loss, is shown below:
loans secured by commercial mortgages
long income real estate
Asset backed securities
Investment funds
liquidity funds
Total
2023
£m
764
779
7
495
1,141
3,186
2022
£m
584
247
7
399
1,174
2,411
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, or intend to do so.
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.
The Group has no material non-controlling interests; the loss attributable to non-controlling interests in the year was £0m (2022: £0m).
Associates
The Group holds 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.
All other associates are immaterial.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
36. GROUP ENTITIES continued
Summarised financial information for associates
Summarised balance sheet – GPUT
Assets
Financial investments
Trade and other receivables
Cash and cash equivalents
Total assets
Equity
Partners capital
Retained earnings
Total equity
Reconciliation to carrying amount
Net assets brought forward – GPUT
loss for the period
Net assets at 31 December – GPUT
Group’s share – GPUT
Group’s share – Other associates
Carrying amount of associates
Summarised statement of comprehensive income – GPUT
Fair value loss on financial investments
Payments to unitholders
Loss for the period
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 217
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
244
–
3
247
327
(80)
247
212
52
6
270
327
(57)
270
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
270
(23)
247
148
1
149
275
(5)
270
193¹
1
194
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
(15)
(8)
(23)
(5)
–
(5)
1 The Group’s share of the GPUT in the prior year included £30m related to recovery of Stamp Duty land Tax by the GPUT on behalf of the Group, which was settled in 2023.
37. RELATED PARTIES
The Group has related party relationships with its key management personnel and subsidiary undertakings detailed in note 36.
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
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
3
2
5
3
2
5
In addition there are loans owed by Directors of £0.4m (2022: £0.4m) which accrue interest fixed at 4% per annum and are repayable in whole or in
part at any time.
38. ULTIMATE PARENT COMPANY AND ULTIMATE CONTROLLING PARTY
The Company is the ultimate Parent and Controlling Party of the Group.
39. POST BALANCE SHEET EVENTS
Subsequent to 31 December 2023, the Directors proposed a final dividend for 2023 of 1.50 pence per ordinary share (2022: 1.23 pence), amounting to
£22m (2022: £18m) in total. Subject to approval by shareholders at the Company’s 2024 AGM, the dividend will be paid on 15 May 2024 to
shareholders on the register of members at the close of business on 12 April 2024, and will be accounted for as an appropriation of retained earnings
in year ending 31 December 2024.
218 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
for the year ended 31 December 2023
Year ended 31 December 2023
At 1 January 2023
Profit for the year
Total comprehensive income for the year
Contributions and distributions
Dividends
Interest paid on Tier 1 notes (net of tax)
Share-based payments
Total contributions and distributions
At 31 December 2023
Year ended 31 December 2022
At 1 January 2022
Profit for the year
Total comprehensive loss for the year
Contributions and distributions
Dividends
Interest paid on Tier 1 notes (net of tax)
Share-based payments
Total contributions and distributions
At 31 December 2022
Share
capital
£m
Share
premium
£m
Other
reserves
£m
104
93
290
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5
5
104
93
295
Share
capital
£m
Share
premium
£m
Other
reserves
£m
104
93
296
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(6)
(6)
104
93
290
Retained
earnings
£m
Total
shareholders’
equity
£m
Tier 1
notes
£m
Total
£m
476
22
22
(19)
(12)
(5)
(36)
462
963
322
1,285
22
22
(19)
(12)
–
(31)
954
–
–
–
–
–
–
22
22
(19)
(12)
–
(31)
322
1,276
Retained
earnings
£m
Total
shareholders’
equity
£m
Tier 1
notes
£m
Total
£m
442
61
61
(15)
(14)
2
(27)
476
935
322
1,257
61
61
(15)
(14)
(4)
(33)
–
–
–
–
–
–
61
61
(15)
(14)
(4)
(33)
963
322
1,285
STATEMENT OF FINANCIAL POSITION OF THE COMPANY
as at 31 December 2023
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 219
Company number: 08568957
Assets
Non-current assets
Investments in Group undertakings
loans to Group undertakings
Property and equipment
Deferred tax
Current assets
Financial investments
Prepayments and accrued income
loans to Group undertakings
Amounts due from Group undertakings
Cash available on demand
Total assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total equity attributable to shareholders of Just Group plc
Tier 1 notes
Total equity
Liabilities
Non-current liabilities
Subordinated debt
lease liability
Current liabilities
Other payables
Total liabilities
Total equity and liabilities
Note
2023
£m
2022
£m
2
3
4
3
5
5
6
7
855
711
3
1
849
1,000
–
1
1,570
1,850
85
1
300
1
12
109
1
–
27
11
399
1,969
148
1,998
104
93
295
462
954
322
104
93
290
476
963
322
1,276
1,285
689
2
691
2
2
693
1,969
703
–
703
10
10
713
1,998
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 £22m (2022: £61m).
The financial statements were approved by the Board of Directors on 7 March 2024 and were signed on its behalf by:
MARK GODSON
Director
220 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
STATEMENT OF CASH FLOWS OF THE COMPANY
for the year ended 31 December 2023
Cash flows from operating activities
Profit before tax
Impairment of loans to Group undertakings
Share-based payments
Income from shares and loans to Group undertakings
Interest income
Interest expense
Increase in prepayments and accrued income
Increase/(decrease) in other payables
Taxation received/(paid)
Net cash outflow from operating activities
Cash flows from investing activities
Decrease/(increase) in financial assets
Capital injections in subsidiaries
Dividends received
Net cash inflow from investing activities
Cash flows from financing activities
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 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
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
30
2
(6)
(28)
(59)
51
–
5
4
(1)
4
–
–
4
(26)
(19)
12
7
(26)
(23)
120
97
12
85
97
62
–
(4)
(78)
(52)
57
(1)
(16)
(3)
(35)
(3)
(6)
50
41
(78)
(15)
11
17
(65)
(59)
179
120
11
109
120
NOTES TO THE COMPANY FINANCIAL STATEMENTS
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 221
1. MATERIAL 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. Values are expressed to
the nearest £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 and subsequently measured at Fair Value Through Profit
or loss (“FVTPl”).
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 25 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.
222 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
2. INVESTMENTS IN GROUP UNDERTAKINGS
At 1 January 2023
Additions
At 31 December 2023
At 1 January 2022
Additions
At 31 December 2022
Shares in Group
undertakings
£m
849
6
855
843
6
849
Details of the Company’s investments in the ordinary shares of subsidiary undertakings are given in note 36 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 2023, the market capitalisation of the Group at £892m was slightly less than its net assets attributable to equity holders of £897m.
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 2023.
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 2023 for JRl was £513m and for PlACl was
£272m. The recoverable amounts for both entities were calculated to be in excess of this amount, indicating that no impairment of the Company’s
investment in JRl or PlACl was required.
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 11.4% for JRl and 11.1% 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 headroom of the excess of the value-in-use above the cost of investment
of JRl and PlACl by 11% and 20% 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.
3. LOANS TO GROUP UNDERTAKINGS
At 1 January 2023
Additions
less: loss allowance
At 31 December 2023
At 1 January 2022
At 31 December 2022
Loans to Group
undertakings
£m
1,000
13
(2)
1,011
1,000
1,000
NOTES TO THE COMPANY FINANCIAL STATEMENTS continued STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 223
3. LOANS TO GROUP UNDERTAKINGS continued
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 2019¹
9.375% perpetual restricted Tier 1 contingent convertible debt (call option in April 2024) issued by Partnership life
Assurance Company limited in April 2019 ¹
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
Total
less: loss allowance
At 31 December
1 Included in current assets.
4. FINANCIAL INVESTMENTS
Units in liquidity funds
Total
2023
£m
250
50
254
25
103
76
102
102
51
2022
£m
250
50
250
25
100
75
100
100
50
1,013
1,000
(2)
–
1,011
1,000
Fair value (designated)
2023
£m
85
85
2022
£m
109
109
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.
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 2023 is detailed below:
£m
At 1 January 2023
At 31 December 2023
At 1 January 2022
Shares issued in respect of employee share schemes
At 31 December 2022
Number of £0.10
ordinary shares
Share capital
£m
Share premium
£m
1,038,702,932
1,038,702,932
1,038,537,044
165,888
1,038,702,932
104
104
104
–
104
93
93
93
–
93
Total
£m
197
197
197
–
197
224 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
6. OTHER RESERVES
Merger reserve
Share held by trusts
Total other reserves
Year ended
31 December
2023
£m
Year ended
31 December
2022
£m
300
(5)
295
300
(10)
290
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.
7. SUBORDINATED DEBT
Details of the Company’s subordinated debt are shown in note 28 to the Group financial statements.
8. 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
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:
Others
The following balances in respect of related parties were owed to the Company at the end of the year:
loan to Just Retirement limited (including interest)
loan to Partnership life Assurance Company limited (including interest)
Others
Amounts owed for Group corporation tax
loss allowance
Year ended
31 December
2023
£m
Year ended
31 December
2022
£m
5
64
20
–
2023
£m
(2)
2023
£m
759
253
1
1
(2)
11
64
20
50
2022
£m
–
2022
£m
760
253
1
13
–
A small loss allowance of £2m was recognised in relation to loans to related parties during the year. No loss allowance was recognised in expense
in 2022.
(b) Key management compensation
Key management personnel comprise the Directors of the Company.
Key management compensation is disclosed in note 37 to the Group financial statements.
9. COMMITMENTS
The Company had £2m of capital commitments at 31 December 2023 in respect of fit-out works to be undertaken during 2024 to the Group’s
replacement Belfast office (2022: nil).
NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 225
ADDITIONAL 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 2023 of £1,527m.
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
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044 – 2048
2049 – 2053
2054 – 2058
Core surplus generation
£m
TMTP amortisation
£m
Surplus generation
£m
221
218
215
212
210
208
205
203
199
192
186
181
173
166
159
151
143
134
125
116
457
293
187
(60)
(60)
(60)
(60)
(60)
(60)
(60)
(60)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
161
158
155
152
150
148
145
143
199
192
186
181
173
166
159
151
143
134
125
116
457
293
187
226 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
ADDITIONAL INFORMATION continued
SOLVENCY II SURPLUS GENERATION continued
New business contribution
The table below shows the expected future emergence of Solvency II surplus arising from 2023 new business at 100% of SCR over 50 years from the
point of sale. It shows the initial Solvency II capital strain in 2023. The amounts are shown undiscounted.
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 – 30
Years 31 – 40
Years 41 – 50
Surplus generation
£m
(35)
15
15
17
19
20
21
23
23
23
23
23
22
21
22
21
21
20
21
20
20
194
91
35
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 227
Financial investments credit ratings
The sector analysis of the Group’s financial investments portfolio by credit rating at 31 December 2023 is shown below:
AAA
£m
–
125
–
125
–
–
84
–
95
31
317
–
–
111
164
65
–
AA
£m
5
244
–
228
8
114
119
208
133
46
971
65
106
205
20
173
–
A
£m
39
260
115
660
54
30
814
50
266
279
220
79
833
212
185
991
42
BBB
£m
% BBB
£m
BB or below
£m
101
700
15
371
135
167
589
477
89
272
259
380
1,686
233
547
1,231
–
1%
10%
0%
5%
2%
2%
8%
7%
1%
4%
4%
5%
23%
3%
8%
17%
–
4
5
–
21
–
67
–
–
–
32
–
19
12
3
–
13
–
1,117
2,645
5,129
7,252
100%
176
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
long income real estate¹
Infrastructure
Other
Corporate/government bond total
Other assets
lifetime mortgages
liquidity funds
Investments portfolio
Derivatives and collateral
Gilts (interest rate hedging)
Total
Total
£m
149
1,334
130
1,405
197
378
1,606
735
583
660
1,767
543
2,637
764
916
2,473
42
16,319
822
5,681
1,141
%
0.6%
5.6%
0.5%
5.9%
0.8%
1.6%
6.7%
3.1%
2.4%
2.8%
7.4%
2.3%
11.0%
3.2%
3.8%
10.3%
0.2%
68.1%
3.4%
23.7%
4.8%
23,963
100.0%
3,083
2,549
29,595
1 Includes residential ground rents of £164m rated AAA and £12m rated AA.
NEW BUSINESS PROFIT RECONCILIATION
New business profit is deferred on the balance sheet under IFRS 17. It is the equivalent of the previous new business profit KPI under IFRS 4 and is
determined in a similar manner, but uses risk parameters updated for IFRS 17. The effect of these changes is detailed in the reconciliation in the
Business Review on page 33.
In addition IFRS 17 introduces clarification regarding the economic assumptions to be used at the point of recognition of contracts for accounts
purposes. Just recognises contracts based on their completion dates for IFRS 17, but bases its assessment of new business profitability for
management purposes based on the economic parameters prevailing at the quote date of the business. IFRS 17 also introduces a requirement
to include the reinsurance CSM in respect of business to be written after the reporting date up until the end of reinsurance treaty notice periods.
New business CSM on gross business written
Reinsurance CSM
Net new business CSM
Impact of using quote date for profitability measurement
New business profit
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
(restated)
380
(37)
343
12
355
320
(50)
270
(4)
266
228 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
INFORMATION FOR SHAREHOLDERS
The following information is unaudited.
ANNUAL GENERAL MEETING
The Company’s 2024 Annual General Meeting (“AGM”) will be held on Tuesday 7 May 2024 at 10.00 am at 1 Angel lane, london EC4R 3AB. More
information about the 2024 AGM can be found in the Notice of Meeting, which will be made available to shareholders separately.
SHAREHOLDER PROFILE AS AT 31 DECEMBER 2023
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
502
75
212
129
102
11
13
% of
holders
48.08
7.18
20.31
12.36
9.77
1.05
1.25
No. of
shares
485,123
571,034
7,414,060
49,362,648
362,346,924
152,732,929
465,790,214
% of issued
share capital
0.05
0.06
0.71
4.75
34.89
14.70
44.84
1,044
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/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 and dividend
mandates online 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
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.
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 229
INVESTOR RELATIONS ENQUIRIES
For all institutional investor relations enquiries, please contact our Investor Relations team whose contact details can be found at
www.justgroupplc.co.uk/contact-us. 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
www.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-reports-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
(including, without limitation, climate-related plans and goals). Statements containing the words: ‘believes’, ’intends’, ’expects’, ’plans’, ’seeks’,
’targets’, ‘continues’, ‘future’, ‘outlook’, ‘potential’ 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 longer-term impact from the COVID-19 outbreak or the impact of other
infectious diseases, the conflict in the Middle East, 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, 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.
230 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
DIRECTORS AND ADVISERS
The following is unaudited.
DIRECTORS
Non-Executive Directors:
John Hastings-Bass, Group Chair
Mary Phibbs, Senior Independent Director
Jim Brown
Michelle Cracknell
Mary Kerrigan
Kalpana Shah
Executive Directors:
David Richardson, Group Chief Executive Officer
Mark Godson, 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
CORPORATE BROKERS
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
london
E14 5JP
RBC Capital Markets
100 Bishopsgate
london
EC2N 4AA
AUDITOR
PricewaterhouseCoopers LLP
7 More london Riverside
london
SE1 2RT
CORPORATE LAWYERS
Hogan Lovells International LLP
Atlantic House
Holborn Viaduct
london
EC1A 2FG
GLOSSARY
Acquisition costs comprise the direct costs (such as commissions
and new business processing team costs) of obtaining new business,
together with associated indirect costs.
Adjusted operating profit before tax this is the sum of the new
business profit and in-force operating profit, operating experience and
assumption changes, other Group companies’ operating results,
development expenditure and financing costs. The Board believes the
combination of both future profit generated from new business written
in the year and additional profit from the in-force book of business,
provides a better view of the development of the business. The net
underlying CSM increase is added back as the Board considers the
value of new business is significant in assessing business performance.
Adjusted operating profit before tax excludes the following items that
are included in profit before tax: strategic expenditure, 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.
Adjusted profit/(loss) before tax an APM, this is the profit/(loss) before
tax before deferral of profit in CSM and includes non operating items
(investment and economic movement, strategic expenditure, and
interest adjustment to reflect IFRS accounting for Tier 1 notes as equity).
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.
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.
Cash Generation underlying organic capital generation before the
impact of new business strain.
Confidence interval the degree of confidence that the provision for
future cash flows plus the risk adjustment reserve will be adequate to
meet the cost of future payments to annuitants.
Contractual Service Margin (“CSM”) represents deferred profit earned
on insurance products. CSM is recognised in profit or loss over the life of
the contracts.
CSM amortisation represents the net release from the CSM reserve into
profit as services are provided. The figures are net of accretion (unwind of
discount), and the release is computed based on the closing CSM reserve
balance for the period.
Deferral of profit in CSM the total movement on CSM reserve in the
year. The figure represents CSM recognised on new business, accretion of
CSM (unwind of discount), transfers to CSM related to changes to future
cash flows at locked-in economic assumptions, less CSM release in
respect of services provided.
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.
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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 relates to development of existing products,
markets, technology, and transformational projects.
Drawdown (in reference to Just Group sales or products) collective
term for investment products including 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.
Finance costs represent interest payable 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 profit before tax one of the Group’s KPIs, representing the profit
before tax attributable to equity holders.
In-force operating profit represents profits from the in-force portfolio
before investment and insurance experience variances, and assumption
changes. It mainly represents release of risk adjustment for non-
financial risk and of allowance for credit default in the period, investment
returns earned on shareholder assets, together with the value of the
(net) CSM amortisation.
Investment and economic movements 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,
Retirement income sales, Underlying organic capital generation, New
business profit, Underlying operating profit, IFRS profit before tax, New
business strain, Solvency II capital coverage ratio and Tangible net asset
value per share.
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.
232 | JUST GROUP PLC | ANNUAl REPORT AND ACCOUNTS 2023
GLOSSARY continued
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.
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
and interest accrued on financial assets which are measured at
amortised cost.
New business margin the new business profit divided by Retirement
Income sales (shareholder funded). It provides a measure of the
profitability of Retirement Income sales.
New business 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 reserves and for future expected cash flows and
risk adjustment and allowance for acquisition expenses and other
incremental costs on a marginal basis. New business profit is reconciled
to adjusted profit before tax, and adjusted profit before tax is reconciled
to IFRS profit before tax in the Business Review.
New business strain one of the Group’s APMs, representing 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.
Operating experience and assumption changes represents changes to
cash flows in the current and future periods valued based on end of
period economic assumptions.
Organic capital generation/(consumption) 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.
Pension Freedoms/Pension Freedom and Choice/Pension Reforms the
UK government’s pension reforms, implemented in April 2015.
Peppercorn rent a very low or nominal rent.
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.
Retail sales (in reference to Just Group sales or products) collective
term for GIfl and Care Plan.
Retirement Income sales (shareholder funded) an APM and one of
the Group’s KPIs and a collective term for GIfl, DB and Care Plan new
business sales and excludes DB partner premium. Retirement Income
sales (shareholder funded) are reconciled in note 9 to premiums included
in the analysis of movement in insurance liabilities in note 26.
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 and expressed as
an annualised percentage. Tangible net asset value is reconciled to IFRS
total equity in the Business Review.
Risk adjustment for non-financial risk (“RA”) allowance for longevity,
expense, and insurance specific operational risks representing the
compensation required by the business when managing existing and
pricing new business.
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.
Strategic expenditure Costs incurred for major strategic investment,
new products and business lines, and major regulatory projects.
Tangible net asset value (“TNAV”) IFRS total equity attributable to
ordinary shareholders, excluding goodwill and other intangible assets,
and after adding back contractual service margin, net of tax.
Tangible net asset value per share an APM and one of the Group’s KPIs,
representing tangible net asset value divided by the closing number of
issued ordinary shares excluding shares held in trust.
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 earnings per share 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.
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 strategic expenditure, 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.
Value at Risk a quantification of the extent of possible insurance losses
within a portfolio over a specific time frame.
STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS | 233
ABBREVIATIONS
ABI – Association of British Insurers
LTIP – long Term Incentive Plan
AGM – Annual General Meeting
APM – alternative performance measure
LTM – lifetime mortgage
MA – matching adjustment
Articles – Articles of Association
MAR – Market Abuse Regulation
CMI – Continuous Mortality Investigation
NAV – net asset value
Code – UK Corporate Governance Code
NNEG – no-negative equity guarantee
CP – Care Plans
CPI – consumer prices index
ORSA – Own Risk and Solvency Assessment
PAG – Partnership Assurance Group
DB – Defined Benefit De-risking Solutions
PLACL – Partnership life Assurance Company limited
DC – defined contribution
PPF – Pension Protection Fund
DSBP – deferred share bonus plan
PRA – Prudential Regulation Authority
EBT – employee benefit trust
EPS – earnings per share
ERM – equity release mortgage
PRI – United Nations Principles for Responsible Investment
PVIF – purchased value of in-force
PwC – PricewaterhouseCoopers llP
ESG – environment, social and governance
REIT – Real Estate Investment Trust
EVT – effective value test
FCA – Financial Conduct Authority
FRC – Financial Reporting Council
RPI – retail price inflation
SAPS – Self-Administered Pension Scheme
SAYE – Save As You Earn
GDPR – General Data Protection Regulation
SCR – Solvency Capital Requirement
GHG – greenhouse gas
SFCR – Solvency and Financial Condition Report
GIfL – Guaranteed Income for life
SID – Senior Independent Director
GIPA – Guaranteed Income Producing Asset
SIP – Share Incentive Plan
Hannover – Hannover life Reassurance Bermuda ltd
SLI – Secure lifetime Income
IFRS – International Financial Reporting Standards
SME – small and medium-sized enterprise
IP – intellectual property
STIP – Short Term Incentive Plan
ISA – International Standards on Auditing
tCO2e – tonnes of carbon dioxide equivalent
JRL – Just Retirement limited
KPI – key performance indicator
LCP – lane Clark & Peacock llP
LPI – limited price index
TMTP – transitional measures on technical provisions
TSR – total shareholder return
Just Group plc
Enterprise House
Bancroft Road
Reigate
Surrey RH2 7RP
JUSTGROUPPLC.CO.UK