Governance Financial Statements
Strategic Report
29
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 2024, including IFRS and Solvency II (“SII”) information. 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. In line with our investment strategy, we continue to diversify the asset portfolio by originating a wide variety of high quality investments. We remain focused on cost control across the business whilst specifically targeting investment in systems and people to enable the business to scale efficiently. As we innovate and further broaden our growth strategy, increased product development investment will be aligned to our purpose to help people achieve a better later life through the before, at, and in-retirement phases of life. SALES During 2024, total retirement income sales grew 49% to £6.4bn (2023: £4.3bn), driven by continued strong momentum in both shareholder funded DB (up 43% to £4.3bn) and GIfL (up 16% to £1.0bn), further augmented by £1.1bn of DB Partner (funded reinsurance). Since the beginning of 2022, rising interest rates have accelerated the closure of, and in most cases eliminated, DB pension scheme funding gaps. During 2024, we wrote a record amount of DB new business, up 57% to £5,376m from 129 transactions (2023: £3,415m from 80 transactions). Our consistent high level of activity translates into over one third of all market transactions that have occurred over the past three years. Prior investment in our proposition and early positioning enabled Just to take advantage of the strong market demand as rates rose. In November 2024, Just announced that it had completed its largest transaction to date, a £1.8bn deal with the G4S pension scheme. This complex, multi-faceted transaction demonstrated our structuring and operational capabilities, with Just now actively quoting and participating in the large transaction segment (£1bn+), in addition to being a major participant in the up to £1bn transaction size part of the market. Combined, this translated into an 11% market share by value of a £47bn DB market in 2024 (source: ABI, Just analysis). We expect the strong momentum in all segments to continue in 2025 and beyond, with multiple small, medium and large opportunities available as corporates of all sizes choose to offload legacy and complex DB pension risk to insurers. Despite record market volumes in recent years, we estimate that only c.20% of the £1.1tn DB market opportunity has transferred across to insurers thus far. In October 2024, LCP 1 re-affirmed their forecast that £400-600bn of DB Buy-in/Buy-out transactions could transact over the decade to 2033, of which c.£300bn could transact in the first five years (2024 to 2028 inclusive). The forecasts demonstrate the growth opportunity available to drive material increases in shareholder value. Our Retail business also had a strong 2024, as the market continues to benefit from higher and more normalised long-term interest rates, which directly increase the GIfL customer rate on offer. This increases 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. During 2024, we continued to maintain pricing discipline and selectively wrote £1,033m of GIfL/Care new business, up 16% (2023: £894m), in a buoyant market.
Our market insight allowed us to tactically choose the most profitable risks and allocate the available capital budget to those opportunities. Furthermore, the introduction of the FCA’s Consumer Duty and findings from the FCA’s thematic review into retirement income advice, are leading to increased adviser conversations on the importance of considering guaranteed solutions to help customers achieve their objectives. Regulatory pressure, technology tools and consolidation into larger advice networks are driving new trends in distribution, as advisers respond to the changing needs of their customers as they decumulate in the spending phase of retirement. We see a multi-decade opportunity as an increasing proportion of the population reach retirement age with larger pension pots, driven by auto-enrolment. 1 LCP: “Reaching cruising altitude” – October 2024 PROFIT In 2024, underlying operating profit was £504m (2023: £377m), up 34%, thereby significantly exceeding guidance of doubling 2021’s £211m underlying operating profit over five years, achieving the target in three years instead. Prior investment, market insight and strong demand for our products enabled us to write high volumes of new business at an efficient capital strain. Shareholder funded Retirement Income sales at £5,308m, were 36% higher (2023: £3,893m). New business profit was up 30% at £460m (2023: £355m), translating to a new business margin of 8.7% (2023: 9.1%) on shareholder funded premiums. As expected, new business margin was a little lower and reverted to its medium term average due to business mix and tighter credit spreads compared to the prior year, where we had outperformed. Buoyant markets in both of our business lines supported active risk selection, and we are increasingly benefiting from operational gearing and systems investment. Growth of the in-force book of business together with continued higher and more normalised interest rates during 2024 boosted the return on surplus assets, thereby increasing in-force operating profit, up 24% to £236m (2023: £191m). Finance costs were stable at £69m, and we invested £25m (2023: £17m) in development expenditure regarding new systems and processes to scale the business efficiently for the future. We delivered a 15.3% Return on equity and underlying earnings per share of 36p (2023: 13.5% and 28p respectively). We incurred negative operating experience, the cost of strengthening the maintenance expense basis, together with strategic costs as we invest to develop new customer propositions. These were partially offset by investment and economic profits and adjustments for items accounted for in equity, resulting in an adjusted profit before tax of £482m (2023: £520m). After allowing for the deferral of profit into the CSM balance sheet reserve, the IFRS profit before tax is £113m (2023: £172m). This decrease primarily reflects lower positive investment and economic variances of £18m (2023: £92m) primarily due to lower asset trading and other variances, and a smaller decrease in credit spreads in 2024 compared to 2023, as explained on page 33. INCREASING SHAREHOLDER VALUE Buoyant markets in both of our business lines drive volumes, which combined with Just’s strong pricing discipline, market insight and business mix determine the new business margin, and therefore the shareholder value we create through new business. In addition, we prudently reserve for credit default and other risks, and release the excess provisions and profits earned as the existing book of business unwinds, together with the return earned on surplus assets into in-force profits.
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