Just Annual Report and Accounts 2021

JUST GROUP PLC Annual Report and Accounts 2021

BUSINESS REVIEW CONTINUED

ALTERNATIVE PERFORMANCE MEASURES AND KEY PERFORMANCE INDICATORS

RETURN ON EQUITY The return on equity in the year to 31 December 2021 was 9.4% (2020: 9.7%), based on adjusted operating profit after attributed tax of £193m (2020: £194m) arising on average tangible net assets of £2,048m (2020: £1,989m). Tangible net assets are reconciled to IFRS total equity as follows: 31 December 2021 £m 31 December 2020 £m IFRS total equity 2,440 2,490 Less intangible assets (120) (134) Less tax on amortised intangible assets 17 19 Less equity attributable to Tier 1 noteholders (322) (294) Tangible net assets 2,015 2,081

Within the Business Review, the Group has presented a number of alternative performance measures (“APMs”), which are used in addition to IFRS statutory performance measures. The Board believes that the use of APMs gives a more representative view of the underlying performance of the Group. The APMs used by the Group are: return on equity, organic capital generation, underlying organic capital generation, new business operating profit, in-force operating profit, underlying operating profit, adjusted operating profit before tax, Retirement Income sales, management expenses and adjusted earnings per share. Further information on our APMs can be found in the glossary, together with a reference to where the APM has been reconciled to the nearest statutory equivalent. The Board has also adopted a number of KPIs, which include certain APMs, and which are considered to give an understanding of the Group’s underlying performance drivers. KPIs are regularly reviewed against the Group’s strategic objectives to ensure that we continue to have the appropriate set of measures in place to assess and report on our progress. During the second half of 2021 the Group introduced two new KPIs, return on equity and underlying operating profit, and discontinued organic capital generation as a KPI. During the second half of 2020 the Group introduced two new KPIs, management expenses, and underlying organic capital generation, and discontinued in-force operating profit as a KPI. These changes reflect the Group’s focus on monitoring and controlling its costs and growing capital, and provide a balance of KPIs across capital, sales, expenses, profit and net assets. The Group’s KPIs are discussed in more detail on the following pages.

ADJUSTED OPERATING PROFIT

Year ended 31 December 2021 £m

Year ended 31 December 2020 £m

Change %

225

New business operating profit

199

In-force operating profit

(8)

Other Group companies’ operating results Development expenditure Reinsurance and finance costs

(15)

(17)

(12)

(7)

– 4 9

(83)

(80)

Underlying operating profit

210

193

The Group’s KPIs are shown below:

Operating experience and assumption changes Adjusted operating profit before tax1

Year ended 31 December 2021 £m

Year ended 31 December 2020 £m

(39)

238

239

–

Change

Return on equity 1

9.4% 2,674

9.7% (0.3)pp 2,145 25%

1 See reconciliation to IFRS Loss/profit before tax further in this Business Review.

Retirement Income sales 1 Underlying organic capital generation 1

Adjusted operating profit before tax Adjusted operating profit before tax of £238mwas broadly flat in 2021 (2020: £239m) as higher new business profit was offset by lower operating experience and assumption changes and in-force operating profit. Underlying operating profit Underlying operating profit, which is the same as adjusted operating profit before tax but excludes operating experience and assumption changes, rose 9% to £210m. New business operating profit New business operating profit increased by 13% to £225m (2020: £199m) driven by a 25% increase in Retirement Income sales to £2,674m (2020: £2,145m). The new business margin achieved on Retirement Income sales during the year was 8.4% (2020: 9.3%), reflecting adjustments made to the asset mix backing the new business, tighter credit spreads, in particular on lifetime mortgages, and a significant increase in the proportion of DB deferred business within the sales mix (2021: 38% of DB sales, 2020: 2% of DB sales).

18 183% 199 13%

New business operating profit 1 Adjusted operating profit before tax 1

225 238 210

239 193

–

Underlying operating profit 1 IFRS (loss)/profit before tax Management expenses 1

(21)

237 (109)% 159 (8)%

147

31 December 2021 £m

31 December 2020

£m Change

Solvency II capital coverage ratio 2

164% 2,440

156% 8pp

IFRS net assets

2,490

(2)%

1 Alternative performance measure, see glossary for definition. 2 This figure allows for a notional recalculation of TMTP as at 31 December 2020. In 2021, the figures include the estimated impact of the biennial reset of the TMTP as at 31 December 2021 and the TMTP has been calculated excluding the contribution from the LTMs that have been sold on 22 February 2022.