STRATEGIC REPORT
29
Amortisation costs Amortisation mainly relates to the acquired in-force business asset relating to Partnership Assurance Group plc, which is being amortised over ten years in line with the expected run-off of the in-force business. HIGHLIGHTS FROM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME The table below presents the Condensed consolidated statement of comprehensive income for the Group, with key line item explanations.
assets held at fair value. During 2020 this line item also includes realised gains from the sale of £540m of the Group’s lifetime mortgages, offset by the change to the carrying value of mortgages from the change to the Group’s property growth assumption. Net claims paid Net claims paid increased to £1,000.2m, from £861.1m in 2019, reflecting the continuing growth of the in-force book. Change in insurance liabilities Change in insurance liabilities was £2,983.1m for the current year, compared to £2,237.8m in 2019. The increase is principally due to a greater fall in the valuation interest rate and a larger reinsurance recapture. Acquisition costs Acquisition costs have increased from £35.2m in 2019 to £44.5m in 2020, mainly as a result of an increase in LTM new business compared to the prior year. Other operating expenses Other operating expenses decreased from £227.8m in 2019 to £219.9m for the current year. This is driven by a reduction in management expenses, as explained above, which has been achieved through the cost saving initiatives entered into during 2019 and 2020. Finance costs The Group’s overall finance costs decreased from £186.7m in 2019 to £159.0m in 2020. The main driver relates to a reduction in reinsurance deposits, which have fallen in line with the reinsurance recaptures made. This decrease has partly offset by interest on the new Tier 2 loan notes issued in October 2019 and October 2020. Income tax Income tax for the year ended 31 December 2020 was £44.2m (2019: £66.2m), with an effective tax rate of 18.7% in line with corporation tax rates (2019: effective tax rate of 18.0%). HIGHLIGHTS FROM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION The following table presents selected items from the Condensed consolidated statement of financial position, with key line item explanations below. 31 December 2020 £m 31 December 20191 £m
Year ended 31 December 2020 £m
Year ended 31 December 2019 £m
2,147.8
Gross premiums written
1,921.0
(232.0)
Reinsurance premiums ceded
2.8
940.0
Reinsurance recapture Net premium revenue Net investment income
436.8
2,855.8 1,777.7
2,360.6 1,451.7
11.7
Fee and commission income
12.7
Total revenue Net claims paid
4,645.2 (1,000.2) (2,983.1)
3,825.0
(861.1)
Change in insurance liabilities
(2,237.8)
(1.8)
Change in investment contract liabilities
92.2
(44.5) (219.9) (159.0)
Acquisition costs
(35.2) (227.8) (186.7)
Other operating expenses
Finance costs
Total claims and expenses
(4,408.5)
(3,456.4)
Profit before tax
236.7
368.6
(44.2)
Income tax
(66.2)
Profit after tax
192.5
302.4
Gross premiums written Gross premiums written for the year were £2,147.8m, an increase of 12% compared to the prior period (2019: £1,921.0m). As discussed above, the overall increase reflects a 22% increase in DB sales, offset by a reduction in GIfL and Care sales, which were impacted by challenges from COVID-19 in the first half of 2020. Reinsurance premiums ceded Reinsurance premiums ceded (expense of £232.0m) has increased in 2020 as a result of reinsurance in relation to the Group’s DB partnering business. Also included within this line item are reinsurance swap premiums and During 2020 the Group recaptured all of the remaining quota share reinsurance arrangements held by its subsidiary JRL. These reinsurance treaties included financing arrangements, which allowed a capital benefit under the old Solvency I regime. The treaties allowed the recapture of business once the financing loan from the reinsurer had been repaid, and the Group has now fully repaid all such financing arrangements (2019: outstanding financing of £14.5m). This has resulted in a decrease of reinsurance assets of £940m and a reduction of equal amount in the fees (2019: £2.8m credit). Reinsurance recapture deposits received from reinsurers recognised within other financial liabilities in the statement of financial position. These movements are reflected in the statement of comprehensive income within net premium revenue and net change in insurance liabilities respectively. Net premium revenue Net premium revenue increased from £2,360.6m to £2,855.8m, driven by the increase in gross premiums written, plus the impact of the reinsurance recaptures made during the year, offset by reinsurance premiums ceded. Net investment income Net investment income increased from £1,451.7m to £1,777.7m in 2020. The main components of investment income are interest earned and changes in fair value of the Group’s corporate bond, mortgage and other fixed income assets. There has been a decrease in risk-free rates during the first half of 2020 which has resulted in unrealised gains in relation to
Assets Financial investments Reinsurance assets
23,269.8 3,132.6 1,771.0 28,173.4
21,606.0 3,860.6
Other assets Total assets
555.8
26,022.4
198.3 948.8
Share capital and share premium
198.0 949.9 879.9
Other reserves
1,051.2
Accumulated profit and other adjustments Total equity attributable to ordinary shareholders of Just Group plc
2,198.3
2,027.8
294.0
Tier 1 notes
294.0
(1.9)
Non-controlling interest
(0.8)
Total equity
2,490.4
2,321.0
Liabilities Insurance liabilities Reinsurance liabilities Other financial liabilities
21,118.4
19,003.7
267.1
128.6
3,305.1
3,678.9
91.6
Insurance and other payables
72.6
900.8
Other liabilities Total liabilities
817.6
25,683.0 28,173.4
23,701.4
Total equity and liabilities 26,022.4 1 Restated in relation to reinsurance assets and reinsurance liabilities. See sections on reinsurance assets and reinsurance liabilities below, and note 2 to the financial statements.
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