Strategic Report | Governance | Financial Statements | 205
27. INVESTMENT CONTRACT LIABILITIES
Year ended 31 December 2023 £m
Year ended 31 December 2022 £m
33 12
At 1 January
34 14
Deposits received from policyholders Payments made to policyholders
(1) (9)
(12)
Change in contract liabilities recognised in profit or loss
(3)
At 31 December
35
33
(a) Terms and conditions of investment contracts The Group has written Capped Drawdown products for the at-retirement market. In return for a single premium, these contracts pay a guaranteed lump sum on survival to the end of the fixed term. There is an option at the outset to select a lower sum at maturity and regular income until the earlier of death or maturity. Upon death of the policyholder and subject to the option selected at the outset, there may be a return of premium less income received or income payable to a dependant until the death of that dependant. Capped Drawdown pension business is classified as investment contracts as there is no transfer of longevity risk due to the premium protection option within these fixed term contracts. The Group has also written linked endowment contracts and term-certain GIfL contracts for the at-retirement market in South Africa which are classified as investment contracts. (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 20(d)(iii) 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. Our underlying default methodology allows for the impact of credit rating downgrades and changes in spreads and hence we have maintained the same methodology at 31 December 2023. As explained in note 20(d)(viii) the discount rate used for the fixed term annuity product treated as investment business is based on a curve where 6.88% is the one-year rate and 5.47% is the five-year rate (31 December 2022: 5.67%).
28. LOANS AND BORROWINGS
Carrying value
Fair value
2023 £m
2023 £m
2022 £m
2022 £m
£250m 9.0% 10-year subordinated debt 2026 (Tier 2) issued by Just Group plc (£150m principal outstanding)
152
164
174
188
£125m 8.125% 10-year subordinated debt 2029 (Tier 2) issued by Just Group plc
126
127
122
130
£250m 7.0% 10.5-year subordinated debt 2031 non-callable for first 5.5 years (Green Tier 2) issued by Just Group plc £230m 3.5% 7-year subordinated debt 2025 (Tier 3) issued by Just Group plc (£155m principal outstanding)
251
252
248
245
157 686
151 694
155 699
141 704
Total
The £250m 7.0% bond is callable after October 2025. The maturity analysis in note 34(d) assumes it is called at the first possible date. The Group also has an undrawn revolving credit facility held by the Parent Company of up to £300m for general corporate and working capital purposes available until 13 June 2025. 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.
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