Strategic Report
Financial Statements
Governance
87
Defined BENEFITS Strategy
S172 factor considered: Background
The Board considered and refined the Group’s strategy with clear, specific goals driven by appropriate priorities to be delivered sustainably and following the Just way. One of the strategic objectives for the business was to enhance the Group’s capacity to support Defined Benefit (“DB”) growth ambitions sustainably. How the Board approached it The Board considered Just’s strategy and agreed on goals for 2024 and beyond, driven by appropriate priorities to fulfil its purpose of helping people achieve a better later life. The Group remains focused on achieving its growth ambitions, maintaining a sustainable capital model and reaching its environmental sustainability targets. It updated its strategic priorities to reflect its growth plans. The strategic objectives approved by the Board fall into five broad categories, namely, Grow sustainably, Scale with technology, Reach new customers, Be recommended by our customers and Be proud to work at Just. Sustainably building on the success of the DB business to date and enhancing brand awareness were themes which weaved through a number of the strategic objectives. As part of the strategic objective to enhance the Group’s capacity to support DB growth ambitions sustainably, the Board set a goal to write larger DB deals. In preparation for supporting larger transactions, the GRCC requested a detailed overview of the Large Deal Framework and the governance arrangements, which support its effective operation. The GRCC considered the processes that were followed to mitigate the risks that had been identified and drew comfort that there was a strong governance framework to ensure the smooth delivery of larger DB transactions. During the year, the Board played an active role in the oversight of the successful completion of Just’s largest defined benefit de-risking transaction, a £1.8bn full Buy-in covering the benefits of c. 22,500 pensioner and deferred members. As part of the discussions, the Board engaged on third party relationships and Just’s operational readiness for the transaction. The Board considered the technological developments that had been made to enable the DB function to scale its business and it reflected on the importance of maintaining high standards of conduct to operate the DB scheme effectively and to protect Just’s reputation. The Board engaged on the reinsurance arrangements and associated regulatory expectations, and approved a new reinsurance counterparty for the transaction. The Board also kept abreast of resourcing requirements and the allocation of resources, and noted that there was strong and effective collaboration between teams, which led to the successful delivery of this transaction. Outcome The long term sustainability of the Group and associated impact on investors and customers were key considerations by the Board when determining the Group’s strategic priorities. Further information on the Group’s strategy can be found in the Strategic priorities report on pages 16 to 17. Scaling with technology has been an important focus area that has enabled Just to execute larger transactions and deliver excellent customer service. The Board had a debrief on the transaction to reflect on what worked well and whether any processes could be enhanced in the future to ensure the Group maintains high standards of conduct to help achieve its sustainable growth ambitions for the DB business.
Debt Refinancing Programme
S172 factor considered: Background Just has issued Restricted Tier 1, Tier 2 and Tier 3 debt instruments, which have varying maturity dates. The Board considered the Group’s debt structure and asked management to explore debt optimisation opportunities. How the Board approached it The Board is responsible for determining the Group’s appetite for issuing debt instruments as part of its long-term strategic plans. During the year, the Board considered the Group’s debt structure and maturity timelines, and noted that market conditions were favourable to potentially early refinance £405m of debt first callable/due in 2025. The Board asked management to explore the opportunities available and to present options for consideration. A proposal to refinance a tranche of Tier 2 and Tier 3 debt into a larger single Tier 2 note was presented to the Board. The Directors took into consideration the financial implications of the proposal to repurchase the existing notes, including issuance costs for the new Tier 2 note and investor appetite. Feedback from the regulator was also taken into consideration. The Board engaged on the sustainability credentials and their alignment with the Group’s sustainability strategy. It was proposed that the new issue would be a Sustainability bond with proceeds invested in a mixture of qualifying Green and Social assets. Just’s Sustainability Bond Framework was updated to include an overview of the Group’s broad approach to investing and the specific type of assets that Just would invest in as part of the new issue. Outcome Once the Board approved the Tier 2 refinancing arrangements in principle, a Board Committee was authorised to consider the market conditions at launch and approve the final terms. Following approval, Just issued a Tier 2 note as covered in more detail on page 32. This issuance supports the long term success of the Company, meets debt investor demand and provides a reference pricing point for future debt issuance. It also is aligned with Just’s sustainability strategy through investment in Green and Social assets.
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