Just Group Regulatory News (JUST)

Just Group plc notes the consultation paper published today, CP 13/18 "Solvency II: equity release mortgages", which aims to develop the regulatory approach to this asset class beyond SS3/171. The Group looks forward to playing a full part in an open consultation, both bilaterally and in conjunction with the Association of British Insurers and the Equity Release Council.

Just Group plc's audited capital position at 31 December 2017, as reported in its Solvency and Financial Condition Report, was computed on a basis which was consistent with SS3/17 as originally published. New business is written on terms that allow us to continue to comply with SS3/17.

Equity release mortgages, also known as lifetime mortgages, are appropriate products for many UK retirees who wish to access value from their homes and a valuable matching asset for our Retirement Income portfolios.

Just Group observes that future UK residential house prices will be the result of a number of economic factors. We would welcome publication by the Prudential Regulation Authority of a common economic stress test against which both banks and insurers could test their portfolios.

A further announcement may be made as appropriate as the consultation process progresses.

Notes

1. In July 2017 the Prudential Regulation Authority issued Supervisory Statement 3/17 "Solvency II: Matching adjustment - illiquid unrated assets and equity release mortgages". SS3/17 includes a number of financial tests as to the reasonableness of the Matching Adjustment, which life insurers are expected to meet. The consultation paper CP13/18 seeks to provide clarification to firms in interpreting SS3/17 particularly in respect of firms investing in equity release mortgage portfolios.

2. The loan to value ratio of the Group's mortgage portfolio at 31 December 2017 was approximately 29%.

3. The conservatism within Just Retirement Limited's reserving and capital requirements in relation to property risk is equivalent to assuming a 28% immediate drop in house prices with no increases indefinitely thereafter.

4. The Board of Just regularly reviews its exposures, and ensures that appropriate provisions and mitigating actions are in place to manage them. A key area is our exposure to future United Kingdom ("UK") residential property prices, through the no-negative equity guarantee provided to our equity release customers. This limits their loan liability to the value of their property if they die or enter long term care. Just Retirement Limited, the Group's primary insurance company currently has £5.4bn of lifetime mortgages, and benefits from the yield on these assets in calculating its Matching Adjustment

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