161
FINANCIAL STATEMENTS
2 INVESTMENTS IN GROUP UNDERTAKINGS continued Impairment testing was therefore carried out to assess the recoverable amount of the investments in JRL and PLACL at 31 December 2019. The testing assessed the recoverable amount for each subsidiary through a value in use calculation based on the expected emergence of excess capital under Solvency II for each subsidiary. The carrying amount of the investment in JRL at 31 December 2019 was £423m. The recoverable amount was calculated to be in excess of this amount, indicating that no impairment of the Group’s investment in JRL was required. The carrying amount of the investment in PLACL at 31 December 2019 was £570m. The recoverable amount was calculated as £474m. Accordingly, a provision for impairment of £96m in respect of the investment in PLACL has been recognised at 31 December 2019. Upon acquisition of the investment in PLACL in 2016, Just Group plc recognised a merger reserve of £532m. Following the impairment in the investment in PLACL recognised at 31 December 2019, an amount of £96m has been transferred from the merger reserve to the accumulated profit reserve. The calculation of value in use for JRL and PLACL uses cash flow projections based on the emergence of surplus for in-force business on a Solvency II basis, over a 25 year period, together with new business cash flows on a Solvency II basis set out in the Group’s business plan approved by the Board. The pre-tax discount rates used were 10.3% for JRL and 9.4% for PLACL. The discount rates were determined using a weighted average cost of capital approach, adjusted for specific risks attributable to the businesses, with the lower rate used for PLACL reflecting that it is largely closed to new business. The Directors have not identified a reasonably possible change in assumptions which would result in the carrying amount of the Group’s investment in JRL to exceed its recoverable amount. For PLACL future distributions to the Company are expected to reduce the value in use. The discount rate used to determine the recoverable amount of the Just Group plc’s investment in JRL is consistent with the discount rate used to assess the recoverable amount of goodwill in relation to JRL recognised in the Group’s consolidated financial statements (see note 13 to the Group’s consolidated financial statements). No impairment was required to the carrying value of the goodwill relating to JRL at 31 December 2019. A one percentage point increase in the discount rates used would reduce the value in use of JRL and PLACL by £102m and £29m respectively.
3 LOANS TO GROUP UNDERTAKINGS
Loans to Group undertakings £m
400.0 425.0 825.0 250.0 150.0 400.0
At 1 January 2019
Additions
At 31 December 2019
At 1 January 2018
Additions
At 31 December 2018
Details of the Company’s loans to Group undertakings are as follows:
2019 £m
2018 £m
250.0
9.375% perpetual restricted Tier 1 contingent convertible debt (call option in April 2024) issued by Just Retirement Limited in April 2019 9.375% perpetual restricted Tier 1 contingent convertible debt (call option in April 2024) issued by Partnership Life Assurance Company Limited in April 2019 9.0% 10 year subordinated debt 2026 (Tier 2) issued by Just Retirement Limited in October 2016 8.125% 10 year subordinated debt 2029 (Tier 2) issued by Just Retirement Limited in October 2019
–
50.0
–
250.0
250.0
25.0
– –
100.0 100.0
8.125% 10 year subordinated debt 2029 (Tier 2) issued by Partnership Life Assurance Company Limited in October 2019
3.519% 7 year subordinated debt 2025 (Tier 3) issued by Just Retirement Limited in May 2018 5.0% 7 year subordinated debt 2025 (Tier 3) issued by Just Retirement Limited in December 2018
100.0
50.0
50.0
Total
825.0
400.0
4 DEFERRED TAX ASSET A deferred tax charge of £3.7m (2018: credit of £3.7m) has been recognised in the profit or loss.
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