22 Just Group plc | Annual Report and Accounts 2024
OUR STRATEGY IN ACTION continued INVESTING THE JUST WAY
Over the last few years we’ve been investing in our capabilities to ensure we achieve our ambitions to become bigger and better so we can deliver improved value for customers and shareholders. Our investment approach is driven by our ability to cashflow match our liabilities via our combined investment portfolio. We continue to evolve our approach to generate better value for customers and shareholders. At Just, we have both a matching adjustment and non- matching adjustment portfolio. Matching adjustment is a mechanism prescribed by the Solvency II directive that allows the Group to adjust the relevant risk-free interest rate term structure when calculating a best estimate of a portfolio of eligible insurance obligations. We continue to explore new investment opportunities to broaden our investment universe, including assets that may qualify under the highly predictable cash flow category introduced in Solvency UK. For our credit assets, we invest in long-term, liquid and illiquid, income-producing assets to match our liabilities. The majority of these assets are managed in-house. To support with sourcing investments, we take a hybrid approach to investing where we directly source opportunities (on both liquid and illiquid assets), alongside partially outsourcing this to external managers. The illiquid credit assets include infrastructure loans, private placements, commercial mortgages, long income real estate and social housing. On the liquid side, we also invest in investment grade fixed income securities, such as government and corporate bonds, as well as cash and cash equivalents. We use derivatives to hedge the currency risk associated with non-sterling assets, and also any residual interest rate or inflation risk as we cashflow match the in-force book. We have built a panel of 13 specialist external managers, each carefully selected based on their areas of expertise. The assets originated by external managers are then assessed by our in-house investment function, who select the most suitable investments to pass through our internal screening process – exercising our veto right if the opportunity does not meet our investment criteria. It is through diversification of investments that we are able to source and access appropriate assets, within the tolerance of our risk appetites, to provide a portfolio that enables us to continue to meet our policyholder obligations over the long term. We also internally originate LTMs, which provide matching cashflows for longer duration liabilities and achieves higher return relative to our liquid assets. Our credit assets (bond portfolio and other assets) account for £19.6bn or 72% of our £27.0bn investment portfolio (see page 38).
PORTFOLIO BREAKDOWN BY ASSET CLASS
Liquid assets
48%
Illiquid assets
45%
Liquidity funds
7%
OUR PROGRESS OVER THE LAST 12 MONTHS Throughout 2024 our investment function has become bigger and better to match the ambitious growth plans of the business. Building capabilities All colleagues within our Company understand and drive forward our commitment to be a strong and sustainable purpose-led business for our customers, our colleagues, our planet and generations to come. The combination of our strong purpose and having highly engaged teams working the Just way, allows us to successfully implement our investment approach. Over the last 12 months we have continued to expand the team to support in delivering our investment objectives and priorities. We continue to focus on recruiting talent with the skills and expertise required of a high performing investment team. Our investment team has expanded from 21 colleagues in 2022 to 40 in 2024. We’ll be adding more talent in 2025 to expand our capabilities further so we can be more innovative to better meet the needs of customers and achieve Just Group’s ambitious growth plans. Asset origination To deliver great customer outcomes, while delivering shareholder returns and managing our risks through diversification, we need to source a wider range of investments. In 2024, we enhanced our Investments capabilities, which enabled us to insource a portion of our private asset investments, complementing our manager of managers model. This includes overseeing the lifecycle of private asset investments – origination, structuring, pricing and analysis, execution and ongoing asset management – across a variety of asset classes and sectors. Our new capabilities enabled Just to internally originate and manage £1.3bn or 54% of the £2.4bn of illiquid assets sourced during the year. Illiquid assets support new business pricing and provide certainty through long-term fixed rate financing into the economy. This new illiquid asset capability adds to our existing public credit asset management. We acquire public credit assets through a network of banks, brokers and dealers to back new business, and to enhance return generation through portfolio optimisation of existing assets. Liquidity funds and derivatives are also managed in-house.
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