142 JUST GROUP PLC Annual Report and Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
24 INVESTMENT CONTRACT LIABILITIES continued (a) Terms and conditions of investment contracts
The Group has written Capped Drawdown products for the at-retirement market. These products are no longer available to new customers. 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 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. (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 17 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 based on historical default experience of each asset class.
2020 % 2.34
2019 % 3.01
Valuation discount rates
Investment contracts
25 LOANS AND BORROWINGS
Carrying value
Fair value
2020 %
2020 %
2019 %
2019 %
£100m 9.5% 10 year subordinated debt 2025 non-callable 5 years (Tier 2) issued by Partnership Life Assurance Company Limited (call option in March 2020)
–
–
60.7
67.2
249.1 121.8 248.2 154.4 773.5
260.0 127.0 253.9 161.1 802.0
£250m 9.0% 10 year subordinated debt 2026 (Tier 2) issued by Just Group plc £125m 8.125% 10 year subordinated debt 2029 (Tier 2) issued by Just Group plc
248.9 121.4
255.8 127.5
£250m 7.0% 10.5 year subordinated debt 2013 non-callable 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
229.0 660.0
239.7 690.2
Total loans and borrowings
On 2 October 2019, the Group completed the issue of £125m Tier 2 capital via an 8.125% sterling denominated BBB rated 10 year bonds issue, interest payable semi-annually in arrears. The proceeds of the issue have been used to refinance the £100m 9.5% Partnership Life Assurance Company Limited subordinated notes due 2025 (“PLACL notes”), a proportion of which were tendered for and subsequently cancelled in October 2019, the remainder being called at the first call option date in March 2020. On 15 October 2020, the Group completed the issue of £250mGreen Tier 2 capital via a 7.0% sterling denominated BBB rated 10.5 year, non-callable 5.5 year bonds issue, interest payable semi-annually in arrears. The bonds have a reset date of 15 April 2026 with optional redemption any time from 15 October 2025 up to the reset date. The proceeds of the issue have been used in part to finance the purchase of £75m of the £230m 3.5% 7 year subordinated debt 2025 (Tier 3) issued by the Group in 2018. The Group also has an undrawn revolving credit facility of up to £200m for general corporate and working capital purposes available until 15 May 2022. Interest is payable on any drawdown loans at a rate of LIBOR plus a margin of between 1.50% and 2.75% per annum depending on the Group’s ratio of net debt to net assets.
Movements in borrowings during the year were as follows:
Year ended 31 December 2020 £m
Year ended 31 December 2019 £m
660.0 250.0
At 1 January
573.4 125.0
Proceeds from issue of Just Group plc Tier 2 subordinated debt
(1.9)
Issue costs
(3.6)
(62.5) (75.0)
Repayment of Partnership Life Assurance Company Limited Tier 2 subordinated debt
(37.5)
Repayment of Just Group plc Tier 3 subordinated debt
–
Financing cash flows
110.6
83.9
2.9 2.9
Amortisation of issue costs Non-cash movements
2.7 2.7
At 31 December
773.5
660.0
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