26 | Just Group PLC | Annual Report and Accounts 2023
BUSINESS REVIEW continued
Shareholder funded DB sales at £2,999m (2022: £2,567m) were up 17%, as we were consistently busy throughout the year. In February, we closed our largest DB transaction to date at £513m, with GKN/ Melrose. In December, utilising our DB Partner proposition, we reinsured all of the investment and longevity risks on a £416m transaction, our second largest deal of the year. The upfront origination fee received from our external reinsurance partner partially offsets the new business strain incurred on the £3.0bn of DB new business funded by Just’s shareholders. Transactions of this type are additive to Just’s core shareholder funded business by generating incremental fee income, while being repeatable, scalable and providing optionality going forward. Adding both shareholder funded and partner business, the DB segment wrote £3,415m of new business, up 21% year on year (2022: £2,826m), representing a 7% share by market value (LCP and WTW: c.£50bn). In total, we completed 80 deals, of which 73 were below £100m in transaction size. We maintained our leadership position in the less than £100m transaction size segment. Our positioning has led to a doubling in our market share to 16% in the up to £1bn size segment over the past three years. In 2023, we estimate that Just wrote over one third of all transactions in the market. These activity levels are well ahead of the 56 transactions in 2022. Our proprietary bulk quotation service continues to grow in popularity with hundreds of DB schemes onboarded. Demonstrating the multiple benefits of the service, 17 EBCs completed a transaction during the year. Our bulk quotation service provides access to the DB market for trustees, accelerates transaction flow for EBCs by providing a streamlined process and provides a steady source of completions for Just. Recent examples include our smallest DB transaction to date at £0.6m, and a £2m scheme that had been price monitored since 2019. We continue to develop the service to allow us to significantly increase our onboarding capacity. As part of our proposition to EBCs, trustees, and scheme sponsors, we are always available to quote for any credible transaction, as evidenced from our activity levels in the past two years. GIfL sales were £894m (2022: £564m), 59% higher year on year. The strong foundation from the first half, together with continued market strength in the second half allowed us to utilise our market- leading medical underwriting to risk select more profitable and niche segments of the market. These market dynamics, together with operational gearing due to tight cost control helped to improve margins in the second half. In recognition of our consistent level of customer service and excellence, in November, at the FT Financial Adviser Service Awards (“FASA”), Just won its 19th consecutive five star in the Pensions and Protection Providers category, five stars for the 14th time in the Mortgage Providers category, and were awarded Outstanding Achievement of the Year, due to our overall scores and ratings. This consistently high level of service was achieved even as business volumes grew strongly, and is a testament to the dedication from the customer service and business development teams. Furthermore, we estimate that since 2014, more than £140bn of cumulative retirement savings have moved to drawdown on platform, often without a decumulation strategy. Due to the higher customer rates now on offer, we expect that advisers and customers will re-examine the role of guaranteed income in retirement. The introduction of the FCA’s Consumer Duty in July and the findings due from the FCAs thematic review into retirement income advice are also likely to increase the importance of considering guaranteed solutions to help customers achieve their objectives.
LIFETIME MORTGAGES ADVANCES 2023 internally funded lifetime mortgage advances were £164m (2022: £519m), a decrease of 68%. In 2023, the LTM market fell by 58% to £2.6bn. We continue to be selective, and use our market insight and distribution to target certain sub-segments of the market. LTMs remain an attractive asset class, however, in a higher interest rate environment, the capital charge attaching to the NNEG risk becomes onerous. Prior investment in LTM digital capabilities and proposition has been well received by financial advisers, resulting in retention of our five star service award, as mentioned above.
RECONCILIATION OF UNDERLYING OPERATING PROFIT TO IFRS PROFIT BEFORE TAX
Year ended 31 December 2022 £m (restated)
Year ended 31 December 2023 £m
377
Underlying operating profit 1 Operating experience and assumption changes
257
52
104 361
Adjusted operating profit before tax 1 Investment and economic movements
429
92
(537)
(17)
Strategic expenditure
(7)
Interest adjustment to reflect IFRS accounting for Tier 1 notes as equity Adjusted profit/(loss) before tax 1
16
16
520
(167) (327) (494)
(348)
Deferral of profit in CSM Profit/(loss) before tax
172
1 Alternative performance measure, see glossary for definition.
OPERATING EXPERIENCE AND ASSUMPTION CHANGES As usual, the Group carried out a full basis review in December 2023, and has updated its longevity reserving using the CMI 2022 mortality tables (2022: CMI 2021). The Group continues to allow for future improvements in long-term mortality, but with the longer term also reflecting the heightened mortality being experienced post pandemic. Assessment of the longer-term impact of the pandemic on the population continues to evolve, but these factors, combined with the winter flu season, longer NHS waiting lists and inflation pressures on incomes are contributing towards a deterioration in the rate of improvement across the population, which we have sought to reflect in our year end assumption. There were a number of minor changes to the Group’s other assumptions in 2023. Sensitivity analysis is shown in notes 20 and 26, which sets out the impact on the IFRS results from changes to key assumptions, including mortality and property. Overall, operating experience and assumption changes were £52m (2022: £104m). The Group reported negative operating experience of £10m in 2023 (2022: negative £3m). Assumption changes resulted in a £62m release (2022: £107m reserve release), and were almost entirely driven by the mortality assumption change, as per above.
Powered by FlippingBook