94 | Just Group PLC | Annual Report and Accounts 2023
GROUP AUDIT COMMITTEE REPORT continued
Alternative performance measures The Committee reviewed the changes in APM and KPIs on adoption of IFRS 17. The Committee considered the APMs and KPIs and concluded that they were appropriate and useful measures. The Committee reviewed the disclosures in the Annual Report and Accounts in relation to the APMs used by the Group and also considered compliance with the guidance on APMs set out by the European Securities and Markets Authority and the FRC. Going concern As part of the assessment of going concern and longer-term viability for December 2023, the Committee considered factors including a fall in property prices from the business plan, additional downgrades, a reduction in interest rates, and other uncertainties which may impact the Group including a scenario of the worst case outcome of peppercorn rent from the Government consultation regarding the restriction of ground rent for existing residential leases. The Committee also considered various risks in stressed scenarios for the going concern assessment including the risks associated with capital requirements to write anticipated levels of new business which form part of the Group’s business plan; the projected liquidity position of the Group and liquidity stresses; eligible own funds being in excess of minimum capital requirements in stressed scenarios; further credit downgrades and property fall sensitivity; interest rate sensitivity; availability of Transitional Measures on Technical Provisions (“TMTP”) recalculation; the findings of the Group Own Risk and Solvency Assessment; and the risk of regulatory intervention. In addition to risks, the Committee considered the Group business plan approved by the Board in November 2023 and the forecast regulatory solvency position calculated on a Solvency II basis, which includes adverse scenarios. Regulatory reporting oversight The Committee received regular updates on the Group’s regulatory reporting matters, including the oversight and preparation of the Group’s annual SFCR. The Committee has responsibility for overseeing the recalculation of TMTP. During the year, it reviewed and approved changes to the TMTP methodology for inclusion in the SFCR at 31 December 2023 to reflect refinements in the methodology. There was regular engagement with the PRA on the changes proposed to the TMTP and other matters affecting reporting during the year. The implementation of Solvency II in practice has continued to evolve and is expected to do so in the future. Following the UK’s withdrawal from the European Union, the UK Government has been working with regulators to adapt the UK’s financial services regulatory framework to the UK’s position outside of the EU. Reforms to Solvency II, to be known as Solvency UK, will be delivered through a combination of legislation and PRA rules. The Committee reviewed the changes to the Solvency II position arising from the reform to Risk Margin, legislation for which came into force as of December 2023. Following the issue of major consultations in 2023 by the PRA on simplification and flexibility in CP12/23 and investment flexibility, including matching adjustment, in CP19/23, the corresponding policy statements are expected to be issued in the first half of 2024. Once the policy statements are published, the Committee will consider if any changes are required to the Solvency II position. Finance transformation During the year, the Committee received reports on progress against key milestones in the Group’s Finance Transformation Programme. The Committee provided oversight on various workstreams, including implementation of the new General Ledger, Financial Reporting Controls Framework and Treasury transformation and automation initiatives, which together, were designed to enhance controls and create scalable Finance systems that deliver increased value for the business.
EXTERNAL AUDIT Appointment
The Company’s external auditor is PwC. PwC was formally appointed as the Company’s external auditor by shareholders in 2020. The current lead audit engagement partner is Lee Clarke who has just completed the fourth year of his five-year term. The Committee is responsible for recommending to the Board the appointment, reappointment and removal of the external auditor, taking into account independence, effectiveness, lead partner rotation and any other relevant factors, and oversees the tender process for new appointments. Following recommendation by the Committee, the Board intends to propose the reappointment of PwC as the Company’s auditor at the 2024 Annual General Meeting on 7 May 2024 to hold office until the conclusion of the next general meeting at which accounts are laid before the Company. It believes the independence and objectivity of the external auditor and the effectiveness of the audit process are safeguarded and remain strong. The Committee confirms it has complied with The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Process and Audit Committee Responsibilities) Order 2014, published by the Competition and Markets Authority on 26 September 2014. There are no contractual obligations restricting the Group’s choice of external auditor. Oversight The Committee is responsible for approving the terms of engagement of the external auditor. Throughout the year, the Committee reviewed regular reports from PwC and met with the lead audit engagement partner without the presence of management, providing an opportunity to raise any matters in confidence and for open dialogue. Private meetings were also held between the lead audit engagement partner and the Chair of the Committee on a regular basis. In 2023 and to date in 2024, the Committee: • reviewed the 2023 year end audit work plan including the scope of the audit and the materiality levels adopted by the external auditor; • reviewed the recommendations made by the external auditor in their internal control report and considered the adequacy of management’s response; • received an update from the external auditor on their IFRS 17 audit activities and findings on the key IFRS 17 methodology judgements; • received an update from the external auditor on their review of year two of mandatory reporting under the UK Listing Rules, the Task Force on Climate-related Financial Disclosures (“TCFD”); • reviewed the Group’s policy on the use of the external auditor for non-audit work and concluded that further work commissioned during the year was in compliance with the policy. It also evaluated: a) the independence and objectivity of the external auditor having regard to the report from the external auditor describing the general procedures to safeguard independence and objectivity; b) the level, nature and extent of non-audit services provided by the external auditor; c) whether the external audit firm was the most suitable supplier of the non-audit services; and d) the fees for the non-audit services, both individually and in aggregate; • agreed the terms of engagement and fees to be paid to the external auditor for the audit of the 2023 Annual Report and Accounts and any non-audit services; • considered the minimum standards for Audit Committees, noting the focus on greater market diversity; and • reviewed the external auditor’s explanation of how the significant risks to accounts were addressed.
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