JUST GROUP PLC Annual Report and Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
28 DERIVATIVE FINANCIAL INSTRUMENTS The Group uses various derivative financial instruments to manage its exposure to interest rates, counterparty credit risk, property risk, inflation and foreign exchange risk.
2021
2020
Asset fair value £m
Liability fair value £m
Notional amount £m
Asset fair value £m
Liability fair value £m
Notional amount £m
Derivatives
243.4 169.9 261.8
247.2 8,069.4 44.9 9,117.7 92.5 4,580.0 3.4 213.9
Foreign currency swaps
267.7 484.3
194.5 4,557.5 76.8 6,798.5 228.2 3,238.4
Interest rate swaps Inflation swaps Forward swaps Total return swaps
25.6
1.8 5.8 8.5
8.9 9.9 3.6
0.1 9.8 3.3
93.8
5.8
–
–
0.9 705.0
Put option on property index (NNEG hedge)
730.0
Total
691.2 394.7 22,686.0
800.0
512.7 15,418.2
The Group’s derivative financial instruments are not designated as hedging instruments and changes in their fair value are included in profit or loss.
All over-the-counter derivative transactions are conducted under standardised International Swaps and Derivatives Association Inc. master agreements, and the Group has collateral agreements between the individual Group entities and relevant counterparties in place under each of these market master agreements. As at 31 December 2021, the Group had pledged collateral of £61.3m (2020: £97.8m) in respect of derivative financial instruments, of which £11.0mwere gilts (2020: £nil) and had received cash collateral of £326.2m (2020: £377.4m).
Amounts recognised in profit or loss in respect of derivative financial instruments are as follows:
Year ended 31 December 2021 £m
Year ended 31 December 2020 £m
9.2
Movement in fair value of derivative instruments Realised losses on interest rate swaps closed Total amounts recognised in profit or loss
298.7
120.5 129.7
29.0
327.7
29 REINSURANCE The Group uses reinsurance as an integral part of its risk and capital management activities.
New business is reinsured via longevity swap arrangements for DB and GIfL business and quota share for DB partnering business, as follows: • DB was reinsured at 90% for non-underwritten schemes. • DB Partnering was reinsured at 100% for the first scheme completed in 2020.
• GIfL was reinsured at 90% during 2021 and 2020. • Care new business was not reinsured in 2021 or 2020.
In-force business is reinsured under longevity swap and quota share treaties. The quota share reinsurance treaties have deposit back or other collateral arrangements to remove the majority of the reinsurer credit risk, as described below. The majority of longevity swaps also have collateral arrangements, for the same purpose. During 2020 the Group increased the reinsurance on JRL GIfL business written between 1 January 2016 and 31 December 2019 from 75% to 100%. The increased cover was effective from 30 June 2020. Reinsurance on JRL DB in-force business is 100% for all schemes written between 1 January 2016 and 30 June 2019. Within JRL there were a number of quota share treaties with financing arrangements, which were originally entered into for the capital benefits under the old Solvency I regime (the financing formed part of available capital). The repayment of this financing was contingent upon the emergence of surplus under the Solvency I or IFRS valuation rules. These treaties also allowed JRL to recapture business once the financing loan from the reinsurer has been fully repaid. During 2020 the Group made additional repayments so as to fully repay all financing loans and trigger the recapture of all remaining financing treaties. In aggregate, recaptures during 2020 (including those occurring as a result of these additional repayments) resulted in a decrease of reinsurance assets of £940.0m and a reduction of equal amount in the deposits received from reinsurers recognised within other financial liabilities.
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