STRATEGIC REPORT
49
S172 FACTOR/ KEY STAKEHOLDERS
AREA OF DECISION
MATTER CONSIDERED
WHAT WE DID
The impact of COVID-19 was a key consideration for the Board in many decisions taken during the year.
The Board considered the operational, commercial and financial implications of COVID-19 on the business both over the short term and longer term during the year. Protecting the welfare of colleagues and ensuring the delivery of critical services to customers was at the forefront of the Board’s decision making. The Board oversaw the steps taken to ensure colleagues had the right resources and support to work remotely with colleague wellbeing being a key focus area for the Directors. The Board also took the decision not to furlough any employees during this challenging time. The business model was reviewed to determine what potential management actions were required to offset the impacts of any downturn of the UK economy on the Group and its life companies’ capital positions. To support customers through this difficult period, the Board approved various changes to our products and services. This included a reduction in interest rates on our lifetime mortgages for customers who had passed away or moved into long-term care and were unable to sell their property because the housing market was effectively closed for a number of weeks. Other examples are covered in more detail on page 21. The Board was kept appraised of any potential impacts on customer services and performance arising due to issues experienced across the supply chain. The Board continues to monitor developments and potential longer-term impacts of COVID-19 on the business, such as the future direction of UK residential property prices to which the Group’s solvency position is exposed. The Group’s exposure to UK residential property risk has reduced due to various management actions that have been executed over the year. Following on from 2019 activities, the Group continued to make significant progress on the delivery of strong capital generation with various management actions executed throughout the year. The Group achieved its goal of delivering a self-sufficient sustainable capital model more than a year earlier than originally planned, which is a significant achievement given the particularly difficult economic environment. The increase in our Solvency II capital coverage ratio reflects a sustained improvement in organic capital generation and the benefits arising from the successful execution of various management actions. Key actions by the Group included: • entering into further no-negative equity guarantee (“NNEG”) hedging transactions to manage negative interest rate exposure; • signing its first defined benefit partnering deal enabling Just to expand its market presence; • releasing capital through more longevity insurance on the Guaranteed Income for Life portfolio; and • further reducing the Group’s exposure to UK residential property risk by completing the sale of a book of £540m of lifetime mortgages. Further information on the Group’s focus on capital, sustainability and purpose can be found on pages 8 to 9. The Group completed its £250m Green Tier 2 capital raise via a 7% sterling denominated BBB rated 10.5 year, non-call 5.5 year issue, which was the first issue of a Green Bond by a UK insurer. The Green Bond issue underscores the Group’s commitment to diversifying our illiquid portfolio and also to support the transition to a low-carbon global economy as all the proceeds are earmarked to be invested in green infrastructure projects.
COVID-19
CUSTOMERS, COLLEAGUES AND SUPPLIERS
The Board considered the Group’s strategy and concluded that improving the Group’s capital position remained its key priority.
STRATEGY AND CAPITAL
LONG TERM AND INVESTORS
The Board considered innovative capital raising opportunities and approved the issue of a Green Bond.
STRATEGY AND CAPITAL – GREEN BOND
INVESTORS, COMMUNITY AND ENVIRONMENT
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