Just Annual Report and Accounts 2021

JUST GROUP PLC Annual Report and Accounts 2021

NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

2 INVESTMENTS IN GROUP UNDERTAKINGS continued Impairment testing was therefore carried out to assess the recoverable amount of the investments in JRL and PLACL at 31 December 2021. The testing assessed the recoverable amount for each subsidiary through a value-in-use calculation based on the expected emergence of excess capital under Solvency II for each subsidiary. The carrying amount of the investment in JRL at 31 December 2021 was £513m. The recoverable amount was calculated to be in excess of this amount, indicating that no impairment of the Group’s investment in JRL was required. The carrying amount of the investment in PLACL at 31 December 2021 was £460m. The recoverable amount was calculated as £272m. Accordingly, a provision for impairment of £188m in respect of the investment in PLACL has been recognised at 31 December 2021, largely reflecting the dividend distribution of £169m by PLACL in the year. Upon acquisition of the investment in PLACL in 2016, Just Group plc recognised a merger reserve of £532m. Since the acquisition, impairments in the investment in PLACL totalling £298m have been transferred from the merger reserve to the accumulated profit reserve. The calculation of value-in-use for JRL and PLACL uses cash flow projections based on the emergence of surplus for in-force business on a Solvency II basis, over a 25 year period, together with new business cash flows on a Solvency II basis set out in the Group’s business plan approved by the Board. The pre-tax discount rates used were 10.5% for JRL and 8.9% for PLACL. The discount rates were determined using a weighted average cost of capital approach, adjusted for specific risks attributable to the businesses, with the lower rate used for PLACL reflecting that it is largely closed to new business. A one percentage point increase in the discount rates used would reduce the value-in-use of JRL and PLACL by £134m and £32m respectively. The Directors have not identified a reasonably possible change in assumptions which would result in the carrying amount of the Group’s investment in JRL to exceed its recoverable amount. For PLACL, future distributions to the Company are expected to reduce the value-in-use. The discount rate used to determine the recoverable amount of Just Group plc’s investment in JRL is consistent with the discount rate used to assess the recoverable amount of goodwill in relation to JRL recognised in the Group’s consolidated financial statements (see note 13 to the Group’s consolidated financial statements). No impairment was required to the carrying value of the goodwill relating to JRL at 31 December 2021.

3 LOANS TO GROUP UNDERTAKINGS

Loans to Group undertakings £m

1,000.0

At 1 January 2021

–

Additions

At 31 December 2021

1,000.0

825.0 175.0

At 1 January 2020

Additions

1,000.0

At 31 December 2020

Details of the Company’s loans to Group undertakings are as follows:

2021 £m

2020 £m

9.375% perpetual restricted Tier 1 contingent convertible debt (call option in April 2024) issued by Just Retirement Limited in April 2019 9.375% perpetual restricted Tier 1 contingent convertible debt (call option in April 2024) issued by Partnership Life Assurance Company Limited in April 2019 9.0% 10 year subordinated debt 2026 (Tier 2) issued by Just Retirement Limited in October 2016 8.125% 10 year subordinated debt 2029 (Tier 2) issued by Just Retirement Limited in October 2019 8.2% 10 year subordinated debt 2030 (Tier 2) issued by Just Retirement Limited in May 2020 7.0% 10.5 year subordinated debt 2031 (Tier 2) issued by Just Retirement Limited in November 2020

250.0

50.0

250.0

25.0

100.0

75.0

100.0 100.0

8.125% 10 year subordinated debt 2029 (Tier 2) issued by Partnership Life Assurance Company Limited in October 2019 7.0% 10.5 year subordinated debt 2031 (Tier 2) issued by Partnership Life Assurance Company Limited in November 2020

100.0 100.0

50.0

5.0% 7 year subordinated debt 2025 (Tier 3) issued by Just Retirement Limited in December 2018

50.0

Total

1,000.0

4 FINANCIAL INVESTMENTS

Fair value

Cost

2021 £m

2020 £m 45.0 45.0

167.7 167.7

Units in liquidity funds

Total

All financial investments are measured at fair value through the profit or loss and designated as such on initial recognition. All assets for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, based on the lowest level input that is significant to the fair value measured as a whole. In the fair value hierarchy, units in liquidity funds are all classified as Level 1 and derivative financial assets are all classified as Level 2. There have been no transfers between levels during the year.

178