GOVERNANCE
FINANCIAL STATEMENTS
strategic report
Other operating expenses Other operating expenses have increased to £209m (2021: £193m) driven by higher investment management fees due to our significantly increased origination of illiquid assets, which have higher fees, but also diversify our investments portfolio, support new business pricing and optimise back book returns. Finance costs The Group’s overall finance costs decreased to £133m (2021: £137m). Note that the coupon on the Group’s Restricted Tier 1 notes is recognised as a capital distribution directly within equity and not within finance costs. Income tax Income tax for the year ended 31 December 2022 was a credit of £85m (2021: credit of £5m). The effective tax rate of 27.0% (2021: 26.4%) is 8% higher than the standard 19% corporation tax rate. This is due to the current year’s losses being carried forward at 25% as opposed to the current tax rate of 19%.
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.
Year ended 31 December 2022 £m
Year ended 31 December 2021 £m
3,391
Gross premiums written
2,676
(271)
Reinsurance premiums ceded Net premium revenue Net investment expense Fee and commission income Share of results of associates Total (expense)/revenue
(23)
3,120
2,653
(4,778)
(130)
14
16
(3)
–
(1,647) (1,210)
2,539 (1,141) (1,039)
HIGHLIGHTS FROM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Net claims paid
2,935
Change in insurance liabilities
The table below presents selected items from the Condensed consolidated statement of financial position, with key line item explanations below. The information below is extracted from the statutory consolidated statement of financial position. 31 December 2022 £m 31 December 2021 £m Assets Financial investments 23,477 24,682 Reinsurance assets 2,287 2,808 Other assets 1,350 858 Total assets 27,114 28,348 Share capital and share premium 199 199 Other reserves 948 948 Accumulated profit and other adjustments 711 973 Total equity attributable to ordinary shareholders of Just Group plc 1,858 2,120 Tier 1 notes 322 322 Non-controlling interest (2) (2) Total equity 2,178 2,440 Liabilities Insurance liabilities 18,333 21,813 Reinsurance liabilities 306 275 Other financial liabilities 5,250 2,866 Insurance and other payables 263 93 Other liabilities 784 861 Total liabilities 24,936 25,908 Total equity and liabilities 27,114 28,348 Financial investments During the year, financial investments decreased by £1.2bn to £23.5bn (2021: £24.7bn). Accommodative central bank and fiscal stimulus during 2021 led to credit spread narrowing, however, in 2022, various government asset purchase programmes in response to the pandemic started to be gradually unwound. At the same time, central banks raised base rates from their historical low levels to counteract the effect of inflation. The interest rate increases are predicted to cause a shallow recession in 2023 followed by a gradual recovery, and this backdrop led to wider spreads during the year. The effect of credit spread widening and increases in risk-free rates, both of which reduce the value of the assets was partially offset by investment of the Group’s new business premiums. The credit quality of the corporate bond portfolio remains resilient, with 50% of the Group’s corporate bond and gilts portfolio rated A or above (31 December 2021: 54%), with the reduction due to lower government investments (see overleaf). Year to date, credit spreads have narrowed as the UK and global economic outlook relative to forecasts continues to improve. Our diversified portfolio continues to increase by issuer and is well balanced across a range of industry sectors and geographies.
3
Change in investment contract liabilities
(1)
(56)
Acquisition costs
(49)
(209) (133)
Other operating expenses
(193) (137)
Finance costs
Total claims and expenses
1,330
(2,560)
Loss before tax
(317)
(21)
85
Income tax
5
Loss after tax
(232)
(16)
Gross premiums written Gross premiums written for the year ended 31 December 2022 were £3,391m, an increase of 27% (2021: £2,676m). As discussed above, this reflects overall higher new business premiums, as shareholder backed DB and DB partner business combined led to a 46% increase in DB business offset by a 24%
reduction in GIfL/Care business. Reinsurance premiums ceded
Reinsurance premiums ceded (expense of £271m) has increased in 2022 as a result of reinsurance in relation to the Group’s DB partner transaction mentioned above. Net investment expense Net investment expense increased to £4,778m (2021: £130m). The main components of net investment expense are interest earned and changes in fair value of the Group’s corporate bond, mortgage and other fixed income assets. There has been an increase in risk-free rates during the period, which has resulted in unrealised losses in relation to assets held at fair value. We closely match our assets and liabilities, hence fluctuations in interest rates will cause similar movements on both sides of the IFRS balance sheet. We also actively monitor and had hedged interest rate exposure to reduce the effect of interest rate movements on the Solvency II capital position, but with this creating IFRS losses as interest rates rose. We have progressively reduced our hedging of the Solvency II interest rate exposure over the year and by the end of 2022 were broadly economically neutral to interest rates up and down. Net claims paid Net claims paid increased to £1,210m, (2021: £1,141m) reflecting the continuing growth of the in-force book. Change in insurance liabilities Change in insurance liabilities was £2,935m (2021: £(1,039)m). The increase is principally due to an increase in the valuation interest rate due to the rise in risk-free rates noted above. Acquisition costs Acquisition costs have increased to £56m (2021: £49m), driven by the 6% increase in internally funded LTM origination.
29
Powered by FlippingBook