GOVERNANCE
FINANCIAL STATEMENTS
strategic report
I’m pleased to present my Chief Executive Officer’s Statement for 2022. We’ve delivered a strong performance and have increased confidence in meeting our pledge to grow underlying operating profits over the medium term by an average of 15% per annum. RETIREMENT SALES GROWTH Sales in 2022 were up 17% at £3.1bn. This was driven by growth in DB sales, which were up 33% to £2.6bn (2021: £1.9bn). Operationally, we were exceptionally busy as we completed 56 DB transactions, almost double the number in 2021 (2021: 29 transactions). The rise in interest rates has improved pension scheme funding levels materially. As a result, DB de-risking market volumes were boosted in the second half of 2022, with that momentum carrying into 2023. Our pipeline of DB business is over £6bn and in March 2023 we announced our largest transaction to date at £513m. We expect that our DB sales in 2023 will continue to show substantial growth over the record levels achieved in 2022. In our retail market, sales of GIfL and Care products at £564m were 24% lower than in 2021. In a year of falling investment markets and a competitive environment, we maintained a disciplined approach to pricing and returns. However rising interest rates has stimulated increased customer appetite for guaranteed income solutions, boosting quotation volumes. This augers well for a return to growth in 2023. GROWING OUR DEFINED BENEFIT DE-RISKING BUSINESS AND EXPANDING OUR INVESTMENTS IN TANDEM During the year we were delighted to host two seminars for investors and analysts to develop their understanding of our growth potential. We showcased our investment capability and explained how the investment strategy delivers competitive customer pricing and shareholder returns. During 2022 our investments in other illiquids, including infrastructure, private placements, social housing, commercial mortgages, ground rents and income strips, amounted to over £1bn (2021: £615m). Growth will continue in 2023 as we access the fast developing investment opportunities in private debt markets through our partnerships with 15 external asset managers. We were pleased with the government’s consultation response to the proposed reforms of the Solvency II regime, published in November 2022. When implemented these reforms could unlock billions of pounds of investment from insurers into the UK economy. In our second seminar we highlighted the enormous growth potential in our DB business. The development of the DB risk transfer market is relatively immature. To date, only 11% of total DB liabilities have been transferred from sponsors to insurers. This is expected to accelerate in the coming years. Slowing longevity increases and significant employer contributions have led to a steady improvement in DB pension scheme funding levels, and in 2022, this was boosted by rising interest rates. This is translating into more schemes bringing forward their de-risking plans which will further increase our addressable market. We will drive growth by securing more larger transactions and by expanding our leadership position in the smaller transaction size segment of the DB market. We are receiving increased enquiries from smaller schemes and to service this demand efficiently we have developed a streamlined quotation service. This service delivers updated quotes each month to over 120 small and mid-sized schemes. In 2022 we completed 28 transactions that originated from our streamlined service. We have written almost 300 DB transactions since entering the market in 2013 and through these, have gained significant pricing and deal experience to now regularly quote on larger transactions. This is supported by our stronger capital position and expanded panel of reinsurance partners. Combined with the strong outlook for the market in 2023, we expect our participation in the larger deal segment to increase further.
CUSTOMERS AND OUR PURPOSE As the Chair mentioned in his statement, the challenging economic events in the UK and the volatility in investment markets witnessed by our customers in 2022 has created uncertainty and worry for many who have investments in equities and fixed interest bonds. We provide a guaranteed income for life to customers. This secure income is often purchased to cover the essential expenditure of the household and in these uncertain times, our solutions provide reassurance to customers. As the retirement specialist we are doing what we can to help people. We help them to discover whether they are entitled to State Benefits and often uncover many missed benefits, that when secured, can make a profound impact on their lives. We provide a range of professional advice and guidance to help our customers. We can’t resolve all the challenges faced by our customers, but we are helping where we are able to do so and remain focused on living up to the purpose we set out many years ago: we help people achieve a better later life. SUSTAINABILITY We achieve our goals responsibly and are committed to a sustainable strategy that protects our communities and the planet we live on. I am very proud that over the last three years we have reduced our operational carbon intensity per employee by 81%, but the most material impact we can make to reduce carbon emissions will be achieved through the decisions we take with our £20bn investments portfolio (excluding derivatives and collateral). During 2022, we invested in £279m of eligible green and social assets in accordance with our Sustainability Bond Framework and we have now completed our total £575m green and sustainability bond investment commitments well ahead of schedule. OUR PEOPLE Our Just culture is underpinned by our people who are passionate and are committed to making a difference to the lives of those around them. A key business priority is that all of our colleagues feel proud to work at Just. The combination of our strong purpose and having highly engaged teams working the ‘Just way’, is a competitive advantage which will help drive high performance and our growth strategy. I would like to thank my colleagues who once again rose to the challenge in 2022, providing support and certainty to our customers when they needed it most. Our people have been energised and inspired by our commitment to be a strong and sustainable purpose-led business for our customers, our colleagues and our planet. We have continued to maintain excellent levels of employee engagement, with a key priority to build a diverse and inclusive workforce. Further details on all our initiatives in this area can be found in the Colleagues and Culture section. FINANCIAL PERFORMANCE Underlying operating profit increased by 19% to £249m in 2022, helped by improved in-force returns and lower financing costs. Our interest rate hedging programme has successfully protected our solvency capital position during the years of falling interest rates. The continued rise in interest rates in 2022 has resulted in an economic loss, which means we have an overall IFRS loss after tax of £232m for 2022 (2021: £16m). The strength and resilience of our capital position and our disciplined pricing and risk selection ensures we are capital self-sufficient. This means we can fund our growth ambitions, reward shareholders with a growing dividend and maintain a high buffer of capital in what are uncertain times. We will pay a final dividend of 1.23 pence per share, giving a total of 1.73 pence for the year – which represents 15% growth over last year’s pro forma full year dividend. IN CONCLUSION We have never been stronger. We have the capability and opportunities to achieve our ambitious growth plans so that we build substantial value for shareholders and fulfil our purpose to help more people achieve a better later life.
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