202 | Just Group PLC | Annual Report and Accounts 2024
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
29. CONTINGENT LIABILITIES, GUARANTEES AND INDEMNITIES Provision for the liabilities arising under contracts with policyholders is based on certain assumptions at outset, which may differ over time based upon actual experience, resulting in a variance of the provision originally made. Liabilities may also arise in respect of claims relating to the interpretation of policyholder contracts, or circumstances in which policyholders have entered into them. It is not possible to predict the preciseness of such liabilities as they are influenced by a number of factors, including updated legislation, guidance and regulation of the PRA, FCA, ombudsman rulings, industry compensation schemes and court judgments. Relevant Group companies ensure that they make prudent provision as and when such circumstances became known and more precise, and readjust capital and reserves to meet such reasonably foreseeable eventualities. However, it is not always possible to predict with certainty the extent and timing of the financial impact on such liabilities arising from these circumstances. Group companies continue to give warranties, indemnities and guarantees as part of their normal business operations, whether in relation to capital market transactions or otherwise.
30. CAPITAL Group capital position
The Group’s estimated regulatory capital surplus position at 31 December 2024 is shown below. This excludes the impact from repayment of Tier 3 debt in February 2025, which is estimated to reduce the Solvency coverage ratio to 204% as reported in the Business Review.
Solvency II capital requirement
Minimum Group Solvency II capital requirement
31 December 2024 1, 2 £m
31 December 2023 1, 2 £m
31 December 2024 £m
31 December 2023 2 £m
Eligible own funds Capital requirement Excess own funds
3,159
3,104
2,508
2,572
(1,577) 1,527 197%
(502) 4
(462)
(1,494) 4
1,665 4
2,006 4
2,110 557%
499% 3,4
Solvency II Capital coverage ratio³
211% 3,4
1 Solvency II capital coverage ratios as at 31 December 2024 and 31 December 2023 include a formal recalculation of TMTP. 2 2024 regulatory position is estimated. 2023 regulatory position is reported as included in the Group’s Solvency II and Financial Condition Report as at 31 December 2023. 3 2 024 regulatory position excludes the £104m reduction in eligible own funds (net of release of restrictions) from repayment of the Group’s £155m Tier 3 debt in February 2025, which is estimated to reduce the Solvency coverage ratio to 204%. There would be no impact on the Minimum Group Solvency II capital requirement. 4 The capital requirement, excess own funds and Capital coverage ratio information is 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 Group and its insurance companies to protect policyholders and meet their payments when due. Firms 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, allowing for 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. The capital requirement for Just Group plc is calculated using an approved Internal Model. 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. • In accordance with a waiver agreed with the PRA, the Group’s South Africa business is out of scope for regulatory reporting to the PRA. The Group and its regulated subsidiaries complied with their regulatory capital requirements throughout the year. Capital management The Group’s objectives when managing capital for all subsidiaries are: • to comply with the insurance capital requirements required by the regulators of the insurance markets where the Group operates. The Group’s policy is to manage its capital in line with its risk appetite and in accordance with regulatory expectations; • to safeguard the Group’s ability to continue as a going concern, and to continue to write new business; • to ensure that in all reasonably foreseeable circumstances, the Group is able to fulfil its commitment over the short term and long term to pay policyholders’ benefits; • to continue to provide returns for shareholders and benefits for other stakeholders; • to provide an adequate return to shareholders by pricing insurance 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.
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