Just Annual Report and Accounts 2024

Just Group plc | Annual Report and Accounts 2024

business review continued

When combined with our proven ability to originate high-quality illiquid assets, shareholder capital invested in new business adds substantially to increasing existing shareholder value. Shareholder funded DB sales at £4,275m (2023: £2,999m) were up 43%, as we were consistently busy throughout the year. In November, we announced our largest DB transaction to date at £1.8bn with the G4S pension scheme, comprising a full scheme Buy-in with c.22,500 pensioner and deferred members. In writing this transaction, we demonstrated our extensive structuring and operational capabilities, including our large deal framework and DB Partner (funded reinsurance) proposition to reinsure all of the investment and longevity risks on 60% of the deal, with the remaining 40% subject to our existing reinsurance structures on new business. The upfront origination fee received from our external reinsurance partner partially offsets the new business strain incurred on the £4.3bn 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 sales, DB wrote £5,376m of new business, up 57% year on year (2023: £3,415m), representing an 11% share of a £47bn DB market in 2024 (source: ABI, Just analysis). In 2024, we completed 129 deals, of which 120 were below £100m in transaction size. Prior investment in our proposition and early positioning enabled Just to take advantage of the very strong market demand, particularly for small transactions, which are typically less hedged to interest rates. Over the past three years, Just has completed 265 transactions, representing over a third of all deals written in the market during that time. As part of our proposition to EBCs (employee benefit consultants), trustees, and scheme sponsors, we are always available to service and quote for schemes of all sizes, as evidenced from our consistently high activity levels. Our whole of market offering is demonstrated by the 2024 transaction range from £0.5m (our smallest to date) to £1.8bn (our largest to date). We maintained our leadership position in the less than £100m transaction size segment, writing £1.8bn of business (2023: £1.4bn), with a further £1.7bn from the £100m-£1bn medium transaction size segment. Combined, we estimate that this resulted in a c.20% market share by value in the up to £1bn transaction size part of the market, a doubling over the past three years. Due to schemes improved funding position, there are now increased opportunities in the large deal transaction size segment (£1bn plus), as per 2024’s £1.8bn G4S transaction, where we will continue to actively quote and selectively participate. Our proprietary bulk quotation and price monitoring service, (“Beacon”), continues to grow in popularity with over 350 DB schemes now onboarded. Demonstrating the success of the service, all major EBCs completed a transaction during the year, reflecting its universal adoption across the industry. Beacon provides access to the DB de-risking 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 a £0.8m DB transaction with a charity, an £8m scheme that had been price monitored since 2021, before interest rates rose, and a £30m scheme where we transacted only six weeks after first receiving the member data – a unique turnaround time due to our talented people, client focussed culture, systems infrastructure and streamlined processes. GIfL sales were up 16% to £1,033m (2023: £894m). A strong foundation from the first half, together with continued market strength in the second half enables us to utilise our market leading medical underwriting to risk select more profitable and niche segments of a larger individual GIfL market. Due to the higher customer rates now on offer, advisers and customers are positively inclined to use guaranteed income in their retirement planning. The introduction of the FCA’s Consumer Duty in July 2023 and the findings from the FCA’s thematic review into retirement income advice published in March 2024 are leading advisers to re-examine the importance of considering guaranteed solutions to help customers achieve their objectives.

DEVELOPMENT COSTS AND OTHER Development costs and other include development costs of £25m (2023: £17m) and £10m of other items (2023: £7m). Development costs relate to investment in systems capability, in addition to various business line and functional transformation. This investment will enable Just to continue to grow efficiently allowing us to increasingly benefit from operational gearing, while managing our risks and delivering products and services to our customers and business partners through the latest technology. FINANCE COSTS Finance costs are stable at £69m (2023: £68m). 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. Due to favourable market conditions, in September 2024, the Group prudently refinanced its £250m Tier 2 (callable from October 2025) and £155m Tier 3 (repaid in February 2025) into a single £400m Tier 2 bond, while extending maturity to 2035. A larger and more liquid bond has expanded the pool of investors available to Just, which improved pricing, while also acting as a reference point for future issuance. Reflecting growth in the balance sheet and our ambitious growth plans for the future, in June 2024, we exercised our ability to increase the £300m revolving credit facility to £400m, while extending it to June 2027. The facility is provided by eight banks and has not been drawn upon since inception. 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

Year ended 31 December 2024 £m

Year ended 31 December 2023 £m

Change %

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

4,275

2,999

1,033

894

5,308 1,101 6,409

3,893

416 165

4,309

1 Adding the DB shareholder funded and Partner business leads to total DB de-risking sales volumes of £5,376m (2023: £3,415m). 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 three years, rising interest rates have accelerated the closure of, and in most cases eliminated, DB pension scheme funding gaps. Therefore, more of our target 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 is also buoyant, driven by the customer rate available and advisers shopping around in the Open market. The level of long-term interest rates directly influences the customer rate we can offer, which is further augmented by 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 the Group’s cash generation.