JUST GROUP PLC Annual Report and Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
24 INVESTMENT CONTRACT LIABILITIES continued (b) Principal assumptions underlying the calculation of investment contracts Valuation discount rates
Valuation discount rate assumptions for investment contracts are set with regard to yields on supporting assets. The yields on lifetime mortgage assets are derived using the assumptions described in note 17 with allowance for risk through the deductions related to the NNEG. An explicit allowance for credit risk is included by making an explicit deduction from the yields on debt and other fixed income securities, loans secured by commercial mortgages, and other loans based on an expectation of default experience of each asset class and application of a prudent loading. Allowances vary by asset category and by rating. Economic uncertainty surrounding COVID-19 increases the risk of credit defaults. Our underlying default methodology allows for the impact of credit rating downgrades and spread widening and hence we have maintained the same methodology at 31 December 2021. The considerations around COVID-19 for property prices affecting the NNEG are as described in note 17.
2021 % 2.73
2020 % 2.34
Valuation discount rates
Investment contracts
25 LOANS AND BORROWINGS
Carrying value
Fair value
2021 £m
2021 £m
2020 £m
2020 1 £m
249.2 122.2 248.4 154.5 774.3
323.5 165.6 287.2 160.5 936.8
£250m 9.0% 10 year subordinated debt 2026 (Tier 2) issued by Just Group plc £125m 8.125% 10 year subordinated debt 2029 (Tier 2) issued by Just Group plc
249.1 121.8
316.7 144.2
£250m 7.0% 10.5 year subordinated debt 2013 non-callable 5.5 years (Green Tier 2) issued by Just Group plc
248.2 154.4 773.5
277.5 155.9 894.3
£230m 3.5% 7 year subordinated debt 2025 (Tier 3) issued by Just Group plc
Total loans and borrowings
1 The fair value disclosed for loans and borrowings in 2020 has been restated to correct the basis on which the fair value was determined. This resulted in a change across all loans from £802.0m to £894.3m.
On 15 October 2020, the Group completed the issue of £250mGreen Tier 2 capital via a 7.0% sterling denominated BBB rated 10.5 year, non-callable 5.5 year bonds issue, interest payable semi-annually in arrears. The bonds have a reset date of 15 April 2026 with optional redemption any time from 15 October 2025 up to the reset date. The proceeds of the issue have been used in part to finance the purchase of £75m of the £230m 3.5% 7 year subordinated debt 2025 (Tier 3) issued by the Group in 2018. The Group also has an undrawn revolving credit facility of up to £200m for general corporate and working capital purposes available until 15 May 2022. Interest is payable on any drawdown loans at a rate of SONIA plus a margin of between 1.50% and 2.75% per annum depending on the Group’s ratio of net debt to net assets.
Movements in borrowings during the year were as follows:
Year ended 31 December 2021 £m
Year ended 31 December 2020 £m
773.5
At 1 January
660.0 250.0
– – – – –
Proceeds from issue of Just Group plc Tier 2 subordinated debt
Issue costs
(1.9)
Repayment of Partnership Life Assurance Company Limited Tier 2 subordinated debt
(62.5) (75.0)
Repayment of Just Group plc Tier 3 subordinated debt
Financing cash flows
110.6
0.8 0.8
Amortisation of issue costs Non-cash movements
2.9 2.9
At 31 December
774.3
773.5
162
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