Governance Financial Statements
Strategic Report
33
In recognition of our consistent level of customer service and excellence, in November, at the FT Financial Adviser Service Awards (“FASA”), Just won its 20th consecutive five star award in the Pensions and Protection Providers category, and five star award for the 15th time in the Mortgage Providers category. In both categories, Just scored particularly highly on product support, product knowledge, communications and reliability. This consistent high level of service was achieved even as business volumes grew strongly in 2023 and 2024, and is a testament to the dedication from the customer service and business development teams. LIFETIME MORTGAGES ADVANCES 2024 internally funded lifetime mortgage advances were £326m (2023: £164m). In 2024, the LTM market fell by 11% to £2.3bn, but began to stabilise towards the end of the year. 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 and hence we carefully monitor the loan to value and borrower age at inception. 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
INVESTMENT AND ECONOMIC MOVEMENTS
Year ended 31 December 2024 £m
Year ended 31 December 2023 £m
Change in interest rates
1 6
(5)
Narrower/(Wider) credit spreads Property growth experience
44
(22)
(13)
Other
33 18
66
Investment and economic movements 92 Investment and economic movements were positive at £18m (2023: £92m). Movements in risk free rates have had a negligible effect due to the revised hedging strategy that was first implemented in the latter part of 2022 and continued into 2023 and 2024. This includes the purchase of £4.0bn (2023: £2.5bn) of long dated gilts held at amortised cost under IFRS. This approach has almost eliminated the IFRS exposure 1 whilst also containing our Solvency II sensitivity to future interest rate movements (see estimated Group Solvency II sensitivities below). Credit spreads further narrowed during 2024 leading to a positive £6m movement (2023: credit spreads narrowed leading to a positive movement of £44m). The LTM portfolio property growth performed a little below the 3.3% annual long-term property growth assumption (2023: 3.3% annual property growth assumption), resulting in a negative variance. Other includes positives from corporate bond default experience, investment return on surplus assets being above the assumption allowed for in the in-force operating profit, offset by lower asset trading and other variances. 1 See note 22 for interest rate sensitivities, with a 100 bps increase in interest rates resulting in an increase in pre-tax profit of £19m and a 100 bps decrease in interest rates resulting in a decrease in pre-tax profit of £(24)m. STRATEGIC EXPENDITURE Strategic expenditure was £23m (2023: £17m). This included increased investment to scale and bring to market various retail related propositions, corporate project costs and costs in relation to the implementation of Consumer Duty, Solvency UK reforms, and the internal model update.
Year ended 31 December 2024 £m
Year ended 31 December 2023 £m
Underlying operating profit 1 Operating experience and assumption changes
504
377
(37)
52
467
429
Adjusted operating profit before tax 1 Investment and economic movements
18
92
Strategic expenditure
(23)
(17)
Adjustment for transactions reported directly in equity in IFRS
20
16
482
520
Adjusted profit before tax 1 Deferral of profit in CSM
(369)
(348)
Profit before tax
113
172
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 2024, and has updated its longevity reserving using the CMI 2023 mortality tables (2023: CMI 2022). Assessment of the longer-term impact of the pandemic on the population continues to evolve. Our year end assumptions reflect our expectation that longer term mortality rates are predicted to be marginally higher than previously as challenges over NHS funding, retention of healthcare staff and insufficient investment mean that future healthcare capacity could be insufficient to meet increased demand from an ageing, growing population. Operating experience and assumption changes were £(37)m (2023: £52m release). The Group reported negative operating experience of £14m in 2024 (2023: negative £10m). Assumption changes resulted in a £(23)m strengthening (2023: £62m reserve release), and were primarily driven by a strengthening of the Group’s maintenance expense assumption. Sensitivity analysis is shown in notes 16 and 22, which sets out the impact on the IFRS results from changes to key assumptions, including mortality, expenses and property.
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