Just Group Regulatory News (JUST)

http://www.rns-pdf.londonstockexchange.com/rns/0827G_1-2024-3-8.pdf

Just Group plc (the "Group", "Just") announces its results for the year ended 31 December 2023.

Profitable and sustainable growth1

Strong Solvency II and IFRS1

Delivering shareholder value

David Richardson, Group Chief Executive Officer, said:

"We are delighted with our financial performance in 2023, a record year for the Group, and are confident of exceeding our medium term profit growth pledge. As such, we now expect to achieve our target of doubling profits in three years instead of the originally intended five. Given the multiple opportunities available and strong structural growth drivers in our chosen markets, we have never been more confident in our ability to deliver sustainable and compounding growth.

We have a growth mindset and we've developed a winning formula - one which will ensure we fulfil our purpose, to help people achieve a better later life, while building substantial value for shareholders."

Notes

1 All comparatives throughout the document are restated under IFRS 17.

2 Alternative performance measure ("APM") - In addition to statutory IFRS performance measures, the Group has presented a number of non-statutory alternative performance measures. The Board believes that the APMs used give a more representative view of the underlying performance of the Group. APMs are identified in the glossary at the end of this announcement. Adjusted operating profit is reconciled to IFRS profit before tax in the Business Review.

3 The 31 December 2023 Solvency II capital coverage ratio includes a formal recalculation of TMTP, and is estimated. At 31 December 2022 the Solvency II figures include a formal TMTP recalculation.

4 Contractual Service Margin.

For those analysts who have registered, a presentation will take place today at 1 Angel Lane, London, EC4R 3AB, commencing at 09:30 am. The presentation will also be available via a live webcast.

A copy of this announcement, the presentation slides and the transcript will be available on the Group's website www.justgroupplc.co.uk.

JUST GROUP PLC

GROUP COMMUNICATIONS

Enterprise House

Bancroft Road

Reigate

Surrey RH2 7RP

Forward-looking statements disclaimer:

This announcement has been prepared for, and only for, the members of Just Group plc (the "Company") as a body, and for no other persons. The Company, its Directors, employees, agents and advisers do not accept or assume responsibility to any other person to whom this document is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed.

By their nature, the statements concerning the risks and uncertainties facing the Company and its subsidiaries (the "Group") in this announcement involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. This announcement contains, and we may make other statements (verbal or otherwise) containing, forward-looking statements in relation to the current plans, goals and expectations of the Group relating to its or their future financial condition, performance, results, strategy and/or objectives (including, without limitation, climate-related plans and goals). Statements containing the words: 'believes', 'intends', 'expects', 'plans', 'seeks', 'targets', 'continues', 'future', 'outlook', 'potential' and 'anticipates' or other words of similar meaning are forward-looking (although their absence does not mean that a statement is not forward-looking). Forward-looking statements involve risk and uncertainty because they are based on information available at the time they are made, based on assumptions and assessments made by the Company in light of its experience and its perception of historical trends, current conditions, future developments and other factors which the Company believes are appropriate and relate to future events and depend on circumstances which may be or are beyond the Group's control. For example, certain insurance risk disclosures are dependent on the Group's choices about assumptions and models, which by their nature are estimates. As such, although the Group believes its expectations are based on reasonable assumptions, actual future gains and losses could differ materially from those that we have estimated. Other factors which could cause actual results to differ materially from those estimated by forward-looking statements include, but are not limited to: domestic and global political, economic and business conditions (such as the longer-term impact from the COVID-19 outbreak or the impact of other infectious diseases, the conflict in the Middle East, and the continuing situation in Ukraine); asset prices; market-related risks such as fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the policies and actions of governmental and/or regulatory authorities including, for example, new government initiatives related to the provision of retirement benefits or the costs of social care; the impact of inflation and deflation; market competition; changes in assumptions in pricing and reserving for insurance business (particularly with regard to mortality and morbidity trends, gender pricing and lapse rates); risks associated with arrangements with third parties, including joint ventures and distribution partners and the timing, impact and other uncertainties associated with future acquisitions, disposals or other corporate activity undertaken by the Group and/or within relevant industries; inability of reinsurers to meet obligations or unavailability of reinsurance coverage; default of counterparties; information technology or data security breaches; the impact of changes in capital, solvency or accounting standards; and tax and other legislation and regulations in the jurisdictions in which the Group operates (including changes in the regulatory capital requirements which the Company and its subsidiaries are subject to). As a result, the Group's actual future financial condition, performance and results may differ materially from the plans, goals and expectations set out in the forward-looking statements. The forward-looking statements only speak as at the date of this document and reflect knowledge and information available at the date of preparation of this announcement. The Group undertakes no obligation to update these forward-looking statements or any other forward-looking statement it may make (whether as a result of new information, future events or otherwise), except as may be required by law. Persons receiving this announcement should not place undue reliance on forward-looking statements. Past performance is not an indicator of future results. The results of the Company and the Group in this announcement may not be indicative, and are not an estimate, forecast or projection of, the Group's future results. Nothing in this announcement should be construed as a profit forecast.

Chief Executive Officer's statement

we have never been stronger

We continue to exceed the promises we've made and we are very optimistic about the future.

I am very pleased to present my Chief Executive Officer's Statement for 2023. We've delivered an exceptionally strong performance and are extremely well positioned to continue benefiting from the positive drivers and favourable demographics supporting both of ourmarkets.

Retirement income sales growth

The rise in interest rates during 2022 and 2023 had a positive effect on both the Defined Benefit and retail Guaranteed Income for Life markets.

Shareholder funded sales have grown by 24% to £3.9bn. Our DB and retail businesses both contributed to this growth and have started the year with positive momentum. This gives us increased confidence we will achieve our growth ambitions in 2024.

Defined Benefit de-risking business

Our DB business continues to thrive and recorded total sales of £3.4bn, up 21%. We completed 80 transactions during the year, which is a substantial increase from 56 completed in 2022. Our bulk quotation service continues to grow in popularity, with completed transactions from 17 employee benefit consultants ("EBC") during the year. We have hundreds of schemes onboarded and this service provides a vibrant market for schemes of all sizes and a steady source of smaller deal completions. Indeed around 40 completions in 2023 were schemes with fewer than 100 members and they represent half the schemes currently onboarded.

As well as expanding our leadership position in the smaller transaction size segment, we will also drive growth by securing additional larger transactions. We have significant pricing and deal experience having written almost 400 DB transactions since entering the market in 2013, which is more than one-in-five of all transactions completed since then. The flexibility provided by our stronger capital position and expanded panel of reinsurance partners further supports our participation in the larger transaction segment.

The DB market had a record year in 2023, with c.£50bn of new business volumes (source LCP, WTW). These EBCs are forecasting that industry volumes in 2024 and beyond could grow significantly from this higher base.

Retail business

I am delighted that our retail business has had a very strong year with sales up 59% to £0.9bn. The GIfL market has returned to strong growth and has had its busiest year since Pensions Freedoms were announced in 2014. The number of advisers looking for quotes from Just has increased by 50% and this is providing us with increased opportunity to utilise our medical underwriting expertise to select the most attractive risks.

Conduct regulation changes being introduced by the FCA may result in greater use of retirement income solutions containing guarantees to help deliver improved customer outcomes.

Expanding our investments in tandem

We are continuing to broaden our investment capabilities. Our successful illiquid origination strategy enabled us to source £1.6bn of non-LTM illiquid investments during 2023, a 50% increase year on year.

As the government's Solvency UK legislation is implemented, we expect this will unlock additional opportunities to grow and diversify our investments portfolio, while enabling us to support the UK economy.

Customers and our purpose

The current unpredictable economic outlook in the UK and volatility in investment markets creates uncertainty and worry for many. We provide a guaranteed income for life to customers, and as long-term interest rates have risen over the last two years, the amount of retirement income we are able to pay customers has increased significantly. This secure income is often purchased to cover the essential expenditure of the household. Our solutions provide much sought reassurance to customers.

Our purpose is to help people achieve a better later life. We provide a range of professional advice and guidance to help people, and are continuing to invest in these services to make them more available to a wider pool of potential customers. We can't resolve all the challenges faced by our customers, but we are helping where we are able to, and remain focused on living up to the purpose we set out many years ago.

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 four years we have reduced our operational carbon intensity per employee by 83%. However, the most material impact we can make to reduce carbon emissions will be achieved through the decisions we take with our £24bn investments portfolio. Compared to our 2019 baseline, we have reduced these emissions over 30% for each million pound invested.

During 2023, we also continued to invest in environmental, social, and corporate governance ("ESG") related assets with £325m invested in social housing, the renewable energy industry and NHS facilities.

Our people

Our Just culture is underpinned by our people who are passionate and committed to making a difference to the lives of those around them. The combination of our strong purpose and having highly engaged teams working the "Just way", is a competitive advantage which is helping us to drive high performance and achieve our ambitious growth targets.

I would like to thank my colleagues for their continued focus in providing outstanding support for our customers when they needed it most and for helping to deliver an excellent set of results.

We are investing to develop the skills of our colleagues, attract new talent into Just and build high-performing teams. We have excellent, and improving, levels of colleague engagement (2023: 7.9; 2022: 7.7), with a key priority to build a diverse and inclusive workforce.

Financial performance

In 2023, underlying operating profit, is up 47% to £377m, driven by the strong new business performance, which has delivered a return on equity of 13.5%.

Investment and economic profits were £92m, and, combined with a number of smaller non-operating items, led to an adjusted profit before tax of £520m for 2023 (2022: adjusted loss before tax £167m). Of this, £348m of profit is deferred to the CSM reserve in the balance sheet, leaving a statutory profit before tax of £172m (2022: loss before tax £494m).

The strength and resilience of our capital position and our disciplined pricing and risk selection ensures we are, and will continue to be capital self-sufficient. This means we can fund our growth ambitions, reward shareholders with a growing dividend and maintain a strong buffer of capital.

We will pay a final dividend of 1.50 pence per share, giving a total of 2.08 pence for the year, representing 20% year on year growth. The 20% growth in total dividend is ahead of the 15% 2022 dividend growth rate.

In conclusion

2023 represents another year of outperformance, further building our track record. We are exceptionally well positioned to capture the benefits of positive market trends and have increased confidence in our ability, from this higher base, to deliver 15% growth in underlying operating profit. In addition, we have increased our target return on equity to greater than 12% from greater than 10% previously.

We have never been stronger. We are retirement experts and 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.

Business Review

DELIVERING COMPOUNDING GROWTH

Our strong capital base and compelling proposition in the market provide the opportunity to deliver compounding and sustainable growth.

The Group is well positioned in attractive markets with strong structural growth drivers. This enables us to benefit from the significant boost in demand for our products, now and into the future. We innovate, risk select and price with discipline, ensuring our business model delivers long-term value for customers and shareholders.

The Business Review presents the results of the Group for the year ended 31 December 2023, including IFRS and unaudited Solvency II information. These are the first audited results under IFRS 17, which has prompted some modification of the Group's key performance indicators including restatement of comparatives where applicable, as set out below.

The continued growth and success of the business is built on the foundation of our low capital intensity new business model, supported by a strong and resilient capital base. We are focused on cost control across the business whilst specifically targeting investment in proposition development, and to enable the business to scale efficiently as we take advantage of the multiple growth opportunities in our markets. We continue to diversify the asset portfolio by originating a greater proportion of illiquid assets to back the new business in line with our investment strategy.

SALES

The DB business continues to go from strength to strength as rising interest rates have accelerated the closure of scheme funding gaps, enabling a market shift towards full scheme Buy-ins. During 2023, we wrote a record amount of DB new business, up 21% to £3,415m from 80 transactions (2022: £2,827m, 56 transactions), in a buoyant market estimated by LCP and WTW to be c£50bn (2022: £28bn). Heightened and consistent demand throughout 2023 allowed Just to increasingly risk select as the year progressed with strong pricing discipline, a wider panel of reinsurers, market insight and business mix driven by our streamlined bulk quotation service all contributing towards higher margins.

The drivers behind this momentum remain and we expect a busy 2024 and beyond, as we execute on small, medium and larger transactions, while maintaining capital flexibility. We estimate that 15% of the £1.2tn DB market opportunity has transferred across to insurers thus far. LCP are forecasting that c.£600bn of DB Buy-in/Buy-out transactions could transact over the decade to 2033, of which up to £360bn could transact in the next five years. This compares to £180bn in the last five years.

Our GIfL business had a very strong 2023, following a competitive year in 2022, where we demonstrated our pricing discipline by reducing volumes. During 2023, we wrote £894m of GIfL new business, up 59% year on year (2022: £564m). The UK individual GIfL market grew by 46% to £5.3bn (2022: £3.6bn), its highest level since Pension Freedoms in 2014. Quote activity levels remain elevated as higher interest rates directly increase the customer rate on offer, thus increasing the attractiveness of a guaranteed income relative to other forms of retirement income. The customer rate can be further improved through bespoke medical underwriting, in which Just is a market leader. The introduction of the FCA's Consumer Duty in July 2023 and findings from the FCAs thematic review into retirement income advice, expected shortly, are likely to lead to increased adviser conversations on the importance of considering guaranteed solutions to help customers achieve their objectives.

PROFIT

During 2023, underlying operating profit was £377m (2022: £257m), up 47%, and substantially ahead of our 15% operating profit growth target. Strong demand for our products provided the opportunity to write a greater volume of new business at an efficient capital strain. Shareholder funded Retirement Income sales of £3,893m were 24% higher than 2022. New business profit, which includes the DB Partner origination fee, was up 33% at £355m (2022: £266m), translating to a new business margin of 9.1% (2022: 8.5%) on shareholder funded premiums as buoyant markets supported active risk selection. Higher and rising interest rates during 2023 boosted the return on surplus assets, thereby increasing in-force operating profit, up 22% to £191m. Finance costs have reduced following the November 2022 tender offer and subsequent cancellation of £100m tier 2 debt, thus optimising the capital structure and providing future capital flexibility.

Operating experience and assumption changes, primarily related to longevity, were a combined £52m positive (2022: £104m positive) impact on profit. Total investment and economic profits of £92m (2022: £537m losses) combined with other items led to an adjusted profit before tax of £520m (2022: £167m loss). Of this £520m, £348m of profit is deferred to the CSM reserve in the balance sheet, leaving an IFRS Profit before tax of £172m (2022: Loss before tax of £494m after deferral of £327m to CSM).

CAPITAL

The Group's estimated Solvency II capital position remains at a very healthy and robust level of 197% (31 December 2022: 199%) as we benefited from organic capital generation and regulatory changes, specifically a large reduction in the risk margin, as part of the ongoing Solvency UK reforms. Through our targeted management actions, property and interest rate sensitivities have much reduced in recent years. Underlying organic capital generation ("UOCG") grew strongly to £57m (2022: £34m), delivering a fourth consecutive year of positive UOCG, a key metric to delivering a sustainable business model. Within this, the £35m capital strain from writing the increased level of new business was substantially lower year on year at 0.9% of premium (2022: £60m and 1.9% of premium). This low new business strain, materially inside our target of less than 2.5%, reflects strong pricing discipline, risk selection, development of reinsurance optionality and our ability to originate increasing quantities of high-quality illiquid assets. Lower finance costs also contributed. During the year, we paid a £19m shareholder dividend, well covered by UOCG. We continue to closely monitor and prudently manage our risks, including interest rates, inflation, currency, residential property and credit. The Solvency II sensitivities are set out below.

The 2023 Financial Services and Markets Act contains new powers to set the direction for financial services following the UK's exit from the European Union, including reforms to the Solvency II capital regime. As part of the proposed new Solvency UK regime, last June, HM Treasury and the Prudential Regulation Authority ("PRA") set out their proposals to implement the more straightforward items, including simplification measures and reforms which have led to a c.60% reduction in risk margin for life insurance business. Industry and the regulator were very much aligned on these objectives. A consultation paper on the more complex changes to matching adjustment ("MA") rules and the associated investment flexibility was launched in September, with reforms to take effect in 2024. We expect these MA changes to support the role HM Treasury is expecting from the industry, whereby appropriate reforms could increase insurer investment by tens of billions of pounds in long-term finance to the broader economy, including infrastructure, decarbonisation, social housing and increased investment in science and technology.

outlook

The outlook for the economy continues to evolve, reflecting macro-economic and political events including the trajectory of central bank rates to reduce and control inflation, and a UK election by the end of 2024. The 2022/23 interest rate increases have led to a flat-lining of the economy in 2023, predicted to be followed by a gradual recovery. We expect these macro forces to have a negligible effect on the Group's business model, with the normalisation of long-term interest rates continuing to drive demand for our products. Sensitivities of our capital position to long-term interest rates is included in the Estimated Group Solvency II sensitivities section of this review.

The Group is closely monitoring the Government consultation regarding restriction of ground rent for existing residential leases announced in November 2023 and the impact of this on the Group's £176m portfolio of residential ground rents. For further information on the Group's approach to reflecting the uncertainty associated with the Consultation in the year end valuation of residential ground rents see note 1.7.

We have a strong and resilient capital base, with a low-strain business model that is generating sufficient capital on an underlying basis to fund our ambitious growth plans, whilst also paying a shareholder dividend that is expected to grow over time.

ALTERNATIVE PERFORMANCE MEASURES AND KEY PERFORMANCE INDICATORS

The Group uses a combination of alternative performance measures ("APMs") and IFRS statutory performance measures. The Board believes that the use of APMs gives a more representative view of the underlying performance of the Group.

The Directors have concluded that the principles used as a basis for the calculation of the APMs remain appropriate, although due to the adoption of new accounting standards the reconciliation from APMs' to IFRS reported results has changed. Just Group has been growing strongly for a number of years and regards the writing of profitable new business contracts as a key objective for management. As a result, in management's view, the use of an alternative performance measure which includes the value of profits deferred for recognition in future periods is a more meaningful measure than IFRS profits under IFRS 17 which now exclude the profits from new business sales.

Further information on our APMs can be found in the glossary, together with a reference to where the APM has been reconciled to the nearest statutory equivalent.

KPIs are regularly reviewed against the Group's strategic objectives, which have remained unchanged following the adoption of IFRS 17, which has also not impacted the Group dividend policy. The Group's KPIs are discussed in more detail on the following pages.

The Group's KPIs are shown below:

1 Alternative performance measure, see glossary for definition.

2 Solvency II capital coverage ratios as at 31 December 2023 (estimated) and 31 December 2022 includes a formal recalculation of TMTP at the respective dates .

TANGIBLE NET ASSETS / RETURN ON EQUITY (UNDERLYING)

The return on equity in the year to 31 December 2023 was 13.5% (2022: 10.3%), based on underlying operating profit after attributed tax of £288m (2022: £208m) arising on average adjusted tangible net assets of £2,133m (2022: £2,025m).

Tangible net assets are reconciled to IFRS total equity as follows:

UNDERLYING OPERATING PROFIT

Underlying operating profit is the core performance metric on which we have based our target 15% growth, per annum, on average, over the medium term. Underlying operating profit captures the performance and running costs of the business including interest on the capital structure, but excludes operating experience and assumption changes, which by their nature are unpredictable and can vary substantially from period to period. 2023 underlying operating profit grew by 47% to £377m (2022: £257m), as we strongly outperformed against our medium-term target, driven by pricing discipline and positioning in buoyant markets. We set the 15% profit growth target from the 2021 baseline (£211m), and given the strong growth in 2023, we are confident that we can add a further 15% to the 2023 level during 2024, and thereby double underlying operating profit in three years instead of five.

1 See reconciliation to IFRS profit before tax further in this Business Review.

NEW BUSINESS PROFIT

New business profit was up 33% at £355m (2022: £266m), as shareholder funded Retirement Income sales rose 24% to £3,893m (2022: £3,131m). The new business margin achieved was 9.1% (2022: 8.5%). As the year progressed, we increasingly risk selected, which combined with strong pricing discipline, a wider panel of reinsurers able to offer bespoke terms, market insight and our streamlined bulk quotation service all contributed towards higher margins. We are also increasingly benefiting from scale and strong cost control leading to operating leverage.

CSM AMORTISATION

IFRS 17 introduces a new concept of the Contractual Service Margin to the statement of financial position. CSM amortisation represents the release from the CSM reserve into profit as services are provided, net of accretion (unwind of discount) on the CSM reserve balance (see below). £62m of net CSM amortisation (2022: £61m) represents a £129m release of CSM into profit, offset by £67m of interest accreted to the CSM. The £129m CSM release into profit (2022: £95m) represents 6.2% (2022: 5.6%) of the CSM balance immediately prior to release. The increase during the year represents growth in the CSM reserve from an additional year of new business profit, and the longevity assumption change at 31 December 2023 which was also deferred to the CSM reserve.

Accretion on the CSM balance amounted to £67m (2022: £35m), which represents 3.4% (2022: 2.1%) of the opening plus new business CSM balance. CSM accretion is calculated using locked-in discount rates. The increase during the period reflects the higher interest rates applicable on the forward rates locked in curve at transition on 31 December 2021 for the new business written pre-2021 as well as higher interest rates applicable to the new business written since the end of 2021. The higher accretion is also due to the increase in CSM balance following the FY 22 longevity assumption changes.

NET UNDERLYING CSM INCREASE

This represents the net underlying increase of profit deferral to CSM during the year before any transfers to CSM in respect of operating experience and assumption changes recognised in the current year. The new business profit deferred to CSM (£355m) to CSM in-force release (£129m) multiple of 3 times reflects the very high and healthy level of replacement profit, and demonstrates the value of new business written during the year relative to the gross CSM release from existing business. This strong growth dynamic increases the CSM store of value to release into in-force profit in future years.

IN-FORCE OPERATING PROFIT

In-force operating profit represents investment returns earned on surplus assets, the release of allowances for credit default, CSM amortisation, release of risk adjustment allowance for non-financial risk and other. Taken together, these are the key elements of the IFRS 17 basis operating profit from insurance activities.

The in-force operating profit increased by 22% to £191m (2022: £156m), driven by a significant increase in investment return, as a result of higher interest rates, on a greater amount of surplus assets. The higher release of allowance for credit default reflects the growth in the investment portfolio that backs the insurance guarantees we provide to our customers. CSM amortisation, reflects growth in the CSM release offset by the higher accretion as noted earlier.

OTHER GROUP COMPANIES' OPERATING RESULTS

The operating result for Other Group companies was a loss of £22m (2022: loss of £16m). These costs arise from the holding company, Just Group plc, and the HUB group of businesses. The increase in losses was driven by upfront investment in the Destination Retirement proposition and other development initiatives.

DEVELOPMENT EXPENDITURE

Development expenditure of £17m (2022: £15m), relates mainly to investment in systems capability, in addition to various business line and functional transformation.

FINANCE COSTS

Finance costs have decreased by 7% to £68m (2022: £73m). These include the coupon on the Group's Restricted Tier 1 notes, as well as the interest payable on the Group's Tier 2 and Tier 3 notes. Finance costs have reduced following the November 2022 tender and associated offers, which resulted in the subsequent cancellation of £100m 9% tier 2 debt, paid from excess Group liquidity.

In 2022, the Group entered into a new five-year revolving credit facility, with improved commercial terms. The facility has increased from £200m to £300m, with flexibility for this to grow as the balance sheet expands over time. This facility has not been drawn upon in 2022 or 2023.

On a statutory IFRS basis, the Restricted Tier 1 coupon is accounted for as a distribution of capital, consistent with the classification of the Restricted Tier 1 notes as equity, but the coupon is included as a finance cost on an underlying and adjusted operating profit basis.

RETIREMENT INCOME SALES

1 Adding the DB shareholder funded and Partner business leads to total DB de-risking segment volumes of £3,415m (2022: £2,826m).

2 GIfL includes UK GIfL, South Africa GIfL and Care Plans.

The structural drivers and trends in our markets underpin our confidence that we can continue to deliver attractive returns and growth rates over the long-term. We are extremely well positioned to take advantage of the growth opportunities available in both of our chosen markets. Over the past two years, rising interest rates have accelerated the closure of DB scheme funding gaps, and therefore more schemes are able to begin the process to be "transaction ready", accelerating business into our short/medium-term pipeline that previously would have been expected to transact in the second half of the decade. The retail GIfL market had its busiest year since 2014, with the Open market, where Just competes, showing particularly strong growth, driven by the customer rate available and advisers shopping around. The level of long-term interest rates directly influences the customer rate we can offer, with the higher rates in 2023 enhanced by our individual medical underwriting. This increases the value of the guarantee to customers, making the product more attractive relative to other forms of retirement income. We will take advantage of this very strong market backdrop through our low-strain new business model, which enables us to fund our ambitious growth plans through underlying organic capital generation. When combined with our proven ability to originate high-quality illiquid assets, shareholder capital invested in new business adds substantially to increasing the existing shareholder value.

Shareholder funded DB sales at £2,999m (2022: £2,567m) were up 17%, as we were consistently busy throughout the year. In February, we closed our largest DB transaction to date at £513m, with GKN/Melrose. In December, utilising our DB Partner proposition, we reinsured all of the investment and longevity risks on a £416m transaction, our second largest deal of the year. The upfront origination fee received from our external reinsurance partner partially offsets the new business strain incurred on the £3.0bn of DB new business funded by Just's shareholders. Transactions of this type are additive to Just's core shareholder funded business by generating incremental fee income, while being repeatable, scalable and providing optionality going forward. Adding both shareholder funded and partner business, the DB segment wrote £3,415m of new business, up 21% year on year (2022: £2,826m), representing a 7% share by market value (LCP and WTW: c.£50bn).

In total, we completed 80 deals, of which 73 were below £100m in transaction size. We maintained our leadership position in the less than £100m transaction size segment. Our positioning has led to a doubling in our market share to 16% in the up to £1bn size segment over the past three years. In 2023, we estimate that Just wrote over one third of all transactions in the market. These activity levels are well ahead of the 56 transactions in 2022. Our proprietary bulk quotation service continues to grow in popularity with hundreds of DB schemes onboarded. Demonstrating the multiple benefits of the service, 17 EBCs completed a transaction during the year. Our bulk quotation service provides access to the DB market for trustees, accelerates transaction flow for EBCs by providing a streamlined process and provides a steady source of completions for Just. Recent examples include our smallest DB transaction to date at £0.6m, and a £2m scheme that had been price monitored since 2019. We continue to develop the service to allow us to significantly increase our onboarding capacity. As part of our proposition to EBCs, trustees, and scheme sponsors, we are always available to quote for any credible transaction, as evidenced from our activity levels in the past two years.

GIfL sales were £894m (2022: £564m), 59% higher year on year. The strong foundation from the first half, together with continued market strength in the second half allowed us to utilise our market-leading medical underwriting to risk select more profitable and niche segments of the market. These market dynamics, together with operational gearing due to tight cost control helped to improve margins in the second half. In recognition of our consistent level of customer service and excellence, in November, at the FT Financial Adviser Service Awards ("FASA"), Just won its 19th consecutive five star in the Pensions and Protection Providers category, five stars for the 14th time in the Mortgage Providers category, and were awarded Outstanding Achievement of the Year, due to our overall scores and ratings. This consistently high level of service was achieved even as business volumes grew strongly, and is a testament to the dedication from the customer service and business development teams.

Furthermore, we estimate that since 2014, more than £140bn of cumulative retirement savings have moved to drawdown on platform, often without a decumulation strategy. Due to the higher customer rates now on offer, we expect that advisers and customers will re-examine the role of guaranteed income in retirement. The introduction of the FCA's Consumer Duty in July and the findings due from the FCAs thematic review into retirement income advice are also likely to increase the importance of considering guaranteed solutions to help customers achieve their objectives.

lifetime mortgages advanceS

2023 internally funded lifetime mortgage advances were £164m (2022: £519m), a decrease of 68%. In 2023, the LTM market fell by 58% to £2.6bn. We continue to be selective, and use our market insight and distribution to target certain sub-segments of the market. LTMs remain an attractive asset class, however, in a higher interest rate environment, the capital charge attaching to the NNEG risk becomes onerous. Prior investment in LTM digital capabilities and proposition has been well received by financial advisers, resulting in retention of our five star service award, as mentioned above.

RECONCILIATION OF UNDERLYING OPERATING PROFIT TO IFRS PROFIT BEFORE TAX

1 Alternative performance measure, see glossary for definition.

OPERATING EXPERIENCE AND ASSUMPTION CHANGES

As usual, the Group carried out a full basis review in December 2023, and has updated its longevity reserving using the CMI 2022 mortality tables (2022: CMI 2021). The Group continues to allow for future improvements in long-term mortality, but with the longer term also reflecting the heightened mortality being experienced post pandemic. Assessment of the longer-term impact of the pandemic on the population continues to evolve, but these factors, combined with the winter flu season, longer NHS waiting lists and inflation pressures on incomes are contributing towards a deterioration in the rate of improvement across the population, which we have sought to reflect in our year end assumption. There were a number of minor changes to the Group's other assumptions in 2023. Sensitivity analysis is shown in notes 20 and 26, which sets out the impact on the IFRS results from changes to key assumptions, including mortality and property.

Overall, operating experience and assumption changes were £52m (2022: £104m). The Group reported negative operating experience of £10m in 2023 (2022: negative £3m). Assumption changes resulted in a £62m release (2022: £107m reserve release), and were almost entirely driven by the mortality assumption change, as per above.

INVESTMENT AND ECONOMIC MOVEMENTS

Investment and economic movements were positive at £92m (2022: £537m loss). Movements in risk free rates during 2023 have had a negligible effect due to the implementation of a revised interest rate hedging strategy in the latter part of 2022 and across 2023. This includes the purchase of £2.5bn of long dated gilts held at amortised cost under IFRS. This approach has significantly reduced1 the IFRS exposure whilst also containing our Solvency II sensitivity to future interest rate movements (see estimated Group Solvency II sensitivities below). In the second half of 2021 and across 2022, as rates rose and the solvency position strengthened, we gradually reduced the swap based interest rate hedging to a broadly economically neutral position. In 2023, we recorded £5m of losses in relation to interest rates (2022: loss of £536m due to rising interest rates under from the previous hedging strategy, which was originally designed to protect the solvency position).

Credit spreads narrowed during 2023, leading to a £44m positive movement (2022: credit spreads widened leading to a negative movement of £51m). The LTM portfolio property growth was c.2% during 2023, with our diversified portfolio performing a little below the 3.3% annual long-term property growth assumption (2022: 3.3% annual property growth assumption). Other includes positives from corporate bond default experience, investment return on surplus assets being above our assumption and backbook optimisation.

1 See note 26 for interest rate sensitivities, with a 100 bps increase in interest rates resulting in a pre tax loss of £(40)m and a 100 bps decrease in interest rates resulting in a pre tax profit increase of £49m.

STRATEGIC EXPENDITURE

Strategic expenditure was £17m (2022: £7m). This included increased investment to scale and bring to market various retail related propositions, costs in relation to Consumer Duty, final implementation costs for IFRS 17 and preparations for an internal model update.

UNDERLYING EARNINGS PER SHARE

Underlying EPS (based on underlying operating profit after attributed tax) has increased to 27.9 pence (2022: 20.2 pence per share).

1 Alternative performance measure, see glossary for definition.

EARNINGS PER SHARE

Earnings per share (based on net profit/(loss) after tax, see note 14) has increased to 11.3 pence (2022: 36.3 pence per share loss).

CAPITAL MANAGEMENT

The Group's capital coverage ratio was estimated to be 197% at 31 December 2023, including a formal recalculation of transitional measures on technical provisions ("TMTP") (31 December 2022: 199% including a formal recalculation of TMTP). The Solvency II capital coverage ratio is a key metric and is considered to be one of the Group's KPIs.

1 Solvency II capital coverage ratios as at 31 December 2023 and 31 December 2022 includes a formal recalculation of TMTP at the respective dates.

2 This is the reported regulatory position as included in the Group's Solvency and Financial Condition Report as at 31 December 2022.

The Group has approval to apply the matching adjustment and TMTP in its calculation of technical provisions and uses a combination of an internal model and the standard formula to calculate its Group Solvency Capital Requirement ("SCR").

MOVEMENT IN EXCESS OWN FUNDS1

The business is delivering sufficient ongoing capital generation to support deployment of capital to capture the significant growth opportunity available in our chosen markets, provide returns to our capital providers and further investment in the strategic growth of the business.

The table below analyses the movement in excess own funds, in the year to 31 December 2023.

1 All figures are net of tax, and include a formal recalculation of TMTP where applicable.

2 New business strain calculated based on pricing assumptions.

3 Organic capital generation includes surplus from in-force, new business strain, overrun and other expenses, interest and other operating items. It excludes economic variances, regulatory changes, dividends and capital issuance.

4 Capital actions are the effect of Tier 2 buyback (2023 and 2022) and includes the positive effect (if any) from release of Solvency II tiering restrictions.

UNDERLYING ORGANIC CAPITAL GENERATION AND NEW BUSINESS STRAIN

In 2023, we achieved £57m of underlying organic capital generation (2022: £34m). Over the past four years, we have delivered £160m cumulative since we became capital generative on an underlying basis in 2020, while at the same time growing the shareholder backed new business volumes at a 22% compound annual growth rate to £3.9bn in 2023.

Underlying organic capital generation ("UOCG") has benefited from the ongoing focus across the business on minimising new business capital strain. Due to a combination of focused risk selection, pricing discipline, bespoke reinsurance and originating sufficient quantities of high-quality illiquid assets, new business strain has decreased by £25m (40%) even though shareholder funded new business premiums were up 24% year on year to £3.9bn. This level of new business strain represents 0.9% of new business premium (2022: 1.9% of premium), well within our target of below 2.5% of premium. This continued outperformance is driven by our market insight, leading to an origination strategy focussed on business mix within the DB and GIfL units. It also includes the commission received from the DB Partner transaction. In-force surplus after TMTP amortisation was down 3% to £168m, primarily due to higher average interest rates during the year which reduces the amount of capital available (via lower SCR and risk margin) to release. Group and other costs including development and non-life costs were £27m (2022: £23m). Finance costs at £49m were lower (2022: £57m), which reflected the interest savings following the tier 2 debt cancellation previously mentioned. Management actions and other items, primarily a mortality assumption changed, boosted the capital surplus by £69m. This lead to a total of £126m from organic capital generation, which contributed one percentage point to the capital coverage ratio.

NON-OPERATING ITEMS

Economic movements summed to £(22)m in the capital surplus. The effect to the surplus from the fall in long term interest rates at year end cut-off was relatively small at £(15)m, but resulted in a three percentage point fall in the capital coverage ratio. Property price growth at 2.3% (compared to our annual 3.3% long-term growth assumption) led to a £(11)m decrease in capital surplus, while we established a £(45)m provision for the potential residential ground rent consultation, which may impact valuation of those assets. These three negative items were offset by £49m of positive items, primarily asset trading and timing variances. 

Regulatory changes resulted in a £109m increase in the surplus following a reduction in the Solvency II risk margin. Offsetting this, in September/October 2023, we completed the repurchase of a further £24m (nominal) of T2 debt via the open market. Shareholder dividend payments totalled £19m, while strategic expenses reduced the capital surplus by a further £13m.

The positive benefit from the risk margin reform has added seven percentage points to the capital coverage ratio, which has been offset by the other non-operating items. There were no capital restrictions or deferred tax assets in the 31 December 2023 capital position.

ESTIMATED GROUP SOLVENCY II SENSITIVITIES1,5

The property sensitivity has reduced to 10% (31 December 2022: 12%). We expect that reduced LTM origination and backing ratio on new business will contain the Solvency II sensitivity to house prices at or below this level over time. The credit quality step downgrade sensitivity has slightly reduced due to credit spreads narrowing during the period, which decreases the cost of trading the 10% of our credit portfolio3 assumed to be downgraded back to their original credit rating.

Sensitivities to economic and other key metrics are shown in the table below.

1 In all sensitivities the Effective Value Test ("EVT") deferment rate is allowed to change subject to the minimum deferment rate floor of 3% as at 31 December 2023 (2.0% as at 31 December 2022) except for the property sensitivity where the deferment rate is maintained at the level consistent with base balance sheet.

2 Sensitivities are applied to the reported capital position which includes a formal TMTP recalculation.

3 Credit migration stress covers the cost of an immediate big letter downgrade (e.g. AAA to AA or A to BBB) on 10% of all assets where the capital treatment depends on a credit rating (including corporate bonds, long income real estate/income strips; but lifetime mortgage senior notes are excluded). Downgraded assets are assumed to be traded to their original credit rating, so the impact is primarily a reduction in Own Funds from the loss of value on downgrade. The impact of the sensitivity will depend upon the market levels of spreads at the balance sheet. In addition for residential ground rents, the Group has identified that the impact of downgrading the entire portfolio to BBB would reduce Excess own funds by £22m and CCR% by two percentage points.

4 After application of NNEG hedges.

5 The results do not include the impact of capital tiering restriction, if applicable.

RECONCILIATION OF IFRS EQUITY TO SOLVENCY II OWN FUNDS

1 The Solvency II capital coverage ratios as at 31 December 2023 (estimated) and 31 December 2022 include a formal recalculation of TMTP at the respective dates.

RECONCILIATION FROM OPERATING PROFIT TO IFRS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The tables below present the reconciliation from the Group's APM income statement view to the IFRS statement of comprehensive income for the Group. The Group's results reflect the adoption of IFRS 17 including the restatement of comparatives. For further information on the restatement see note 1 of the Consolidated financial statements.

Year ended 31 December 2023

The rows and first numeric column of this table present the alternative profit measure (APM) format as presented in the Underlying operating profit section and Reconciliation of Underlying operating profit to IFRS profit before tax section of this review.

The Quote date difference adjustment is made because Just bases its assessment of new business profitability for management purposes on the economic parameters prevailing at the quote date of the business instead of completion dates as required by IFRS 17 (see new business profit reconciliation in the additional information section towards the end of this announcement).

The CSM deferral column presents how elements of the APM basis result are deferred in the CSM reserve held on the IFRS balance sheet consistent with the table in the Deferral of profit in CSM section of this review. Under IFRS 17, new business profits and the impact of changes to estimates of future cash flows are deferred in the CSM reserve for release over the life of contracts (see accounting policy note 1.5.6).

The adjusted total column is then transposed in the columns on the right-hand side into the IFRS statutory accounts Consolidated statement of comprehensive income format. Figures are presented on a net of reinsurance basis.

Investment return on surplus assets and Release of allowance for credit default are recognised within the investment result in the IFRS Statement of Comprehensive income. CSM amortisation includes recognition of services provided within IFRS Insurance result and the unwind of discounting in the IFRS Investment result.

The insurance service result of £118m (2022: £99m) represents the excess of insurance revenue over insurance service expenses, with the year on year increase attributable to a higher release from CSM reserve as an additional year of new business is added, partly offset by higher external investment management expenses.

The net investment result of £273m (2022: £(454)m loss) represents the difference between the total investment return and the finance charge in respect of insurance reserves attributable to unwinding of discounting and changes in discount rates. In 2023, this net profit is attributable to the return on surplus funds, the emergence of credit default margins, and the effects of investment into higher yielding assets.

Other finance costs of £122m (2022: £57m) represent the costs of servicing tier 2 and tier 3 debt and repurchase agreements in connection with the amortised cost gilt portfolio established in 2023. Other income, expenses and associates of £97m loss (2022: £82m loss) represent the results from the Group's non-insurance businesses and expenses not attributed to insurance contracts in force.

Year ended 31 December 2022 (restated)

HIGHLIGHTS FROM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The table on below presents selected items from the Condensed consolidated statement of financial position. The information below is extracted from the statutory consolidated statement of financial position.

Financial investments

During the year, financial investments increased by £6bn to £29.4bn (2022: £23.4bn). Excluding the derivatives and collateral, and gilts purchased in relation to the interest rate hedging, the core Investments portfolio on which we take credit risk increased by 18% to £24bn. Over the past two years, central banks have rapidly raised base rates from their historical low levels to counteract the effect of inflation and prevent it becoming embedded in the economy. Base rates are expected to have peaked, with progressive interest rate cuts expected later this year and into 2025. The year on year portfolio increase to £24bn has been driven by investment of the Group's £4.3bn of new business premiums, credit spread tightening, and the decrease in long-term risk-free rates at year end cut-off, which increased the value of the assets (and matched liabilities). The credit quality of the Group's bond portfolio remains resilient, with 54% rated A or above (31 December 2022: 50%), driven by an increase in A rated consumer staples and infrastructure assets. Our diversified portfolio continues to grow and is well balanced across a range of industry sectors and geographies.

We continue to position the portfolio with a defensive bias, and year to date have experienced positive ratings performance as 11% of the Group's bond portfolio (excluding gilts) was upgraded, offset by 8% being downgraded. The Group continues to have very limited exposure to those sectors that are most sensitive to structural change or macroeconomic conditions, such as auto manufacturers, consumer (cyclical), energy and basic materials. The Group has increased its infrastructure, utilities and long income real estate (primarily commercial) investments, and selectively added to consumer and banks investments. The BBB-rated bonds are weighted towards the most defensive sectors including utilities, communications and technology, and infrastructure.

The Group continues to have ample liquidity. We prudently manage the balance sheet by hedging all foreign exchange and inflation exposure, and fully implemented a revised interest rate hedging strategy during the first half of 2023. This involved the purchase of £2.5bn of long dated gilts, which are held at amortised cost under IFRS. The effect is to significantly reduce the Solvency II sensitivity to future interest rate movements, with a much reduced volatility on the IFRS position.

The table below presents selected items from the Condensed consolidated statement of financial position. The information below is extracted from the statutory consolidated statement of financial position.

Other illiquid assets and lifetime mortgages

To support new business pricing, optimise back book returns, and to further diversify its investments, the Group originates other illiquid assets including infrastructure, real estate investments and private placements. Income producing real estate investments are typically much longer duration and hence the cash flow profile is very beneficial, especially to match DB deferred liabilities.

In 2023, we originated £1,550m of other illiquid assets (68 investments) and funded £164m of lifetime mortgages, which together represent a 44% new business backing ratio. Other illiquid assets are originated via a panel of 14 specialist external asset managers, each carefully selected based on their particular area of expertise. Our illiquid asset origination strategy allows us to efficiently scale origination of new investments, and to flex allocations between sectors depending on market conditions and risk adjusted returns.

To date, Just has invested £4.9bn in other illiquid assets, representing 21% of the Investments portfolio (31 December 2022: 16%), spread across more than 330 investments, both UK and abroad. We have invested in our in-house credit team as we have broadened the illiquid asset origination, and work very closely with our specialist asset managers on structuring to enhance our security, with a right to veto on each asset. We anticipate that the Solvency II reforms, when fully implemented, will increase the investment opportunities available to us through wider matching adjustment eligibility criteria, such as callable bonds, or assets with a construction phase, where the commencement of cash flows is not entirely certain. A PRA consultation paper on the more complex changes to matching adjustment ("MA") rules and the associated investment flexibility was launched in September, with reforms to take effect in 2024. We expect these MA changes to support the role HM Treasury is expecting from the industry, whereby appropriate reforms could increase investment by tens of billions of pounds in long-term finance that underpins UK economic growth.

Internally funded lifetime mortgages were £164m (2022, £519m), primarily due to a much reduced LTM market, which more than halved to £2.6bn, and our ongoing pricing discipline. LTMs remain an attractive asset class, however, in a higher interest rate environment, the capital charge attaching to the LTM NNEG risk becomes onerous. The loan-to-value ratio of the in-force lifetime mortgage portfolio was 38.2% (31 December 2022: 37.3%), reflecting continued performance across our geographically diversified portfolio, which offsets the interest roll-up. Lifetime mortgages at £5.7bn represent 24% of the investments portfolio, which we expect to continue drifting lower over time as we originate fewer new LTMs and diversify the portfolio with other illiquid assets. The 10% Solvency II capital coverage ratio impact for an immediate 10% fall in UK house prices remains at a level we are comfortable with.

The following table provides a breakdown by credit rating of financial investments, including privately rated investments allocated to the appropriate rating.

1 Includes units held in liquidity funds, derivatives and collateral and gilts (interest rate hedging).

2 Includes investment in trusts which holds long income real estate assets which are included in investment properties and investments accounted for using the equity method in the IFRS consolidated statement of financial position.

3 The comparative has been restated to re-allocate ground rents and certain SME investment and other funds to the appropriate rating (previously Other unrated).

4 The residential ground rent portfolio includes £164m rated AAA and £12m rated AA.

The Group holds a £176m portfolio of residential ground rents and is monitoring the progress of the Government Consultation regarding existing leases and the impact on the Group's exposure to these assets. The Group invests in loans secured by residential ground rents, rather than directly in residential leases. These investments are valued at fair value, and reflect our estimate of the impact that the uncertainty from the consultation has had on the fair value of this asset class at the reporting date. The Group acknowledges the significant uncertainty regarding the outcome of the consultation, and that the fair value of these investments may change in the future after the consultation concludes. For further information on the consultation please see the Risk management report and the accounting estimates made in note 1.7.

The sector analysis of the Group's financial investments portfolio is shown below and continues to be well diversified across a variety of industry sectors.

1 Restated to re-allocate various short term illiquid fund assets and cash/investments, primarily from the Financial - other sector. These assets are now in the "Other Assets" category. 

2 Includes investment in trusts which are included in investment properties in the IFRS consolidated statement of financial position.

3 Includes direct long income real estate and where applicable, investment in trusts which are included in investments accounted for using the equity method in the IFRS consolidated statement of financial position. Long income real estate include £740m commercial ground rents and £176m residential ground rents.

Reinsurance contract assets and liabilities

In accordance with IFRS 17, the Group distinguishes between its portfolios of reinsurance contracts which cover longevity and inflation risks and portfolios of reinsurance treaties covering longevity reinsurance alone. The Group's contracts transferring inflation risk are quota share arrangements which are in asset positions. Since the introduction of Solvency II in 2016, the Group has increased its use of reinsurance swaps rather than quota share treaties and these are in liability positions.

Reinsurance assets increased to £1,143m at 31 December 2023 (31 December 2022: £776m) as the funded reinsurance in relation to the DB Partner transaction in December 2023 was partially offset by reinsurance quota share treaties which are in gradual run-off.

Cash and other assets

Other assets (primarily cash) remained consistent at £1.3bn at 31 December 2023 (31 December 2022: £1.3bn). The Group holds significant amounts of assets in cash, so as to protect against liquidity stresses.

Insurance contract liabilities

Insurance contract liabilities increased to £24.1bn at 31 December 2023 (31 December 2022: £19.6bn). The increase in liabilities reflects the new business premiums written and decrease to the valuation rate of interest, offset by mortality assumptions changes and policyholder payments over the period.

Other liabilities

Other liability balances decreased to £791m at 31 December 2023 (31 December 2022: £872m) due to a reduction in loans and other payables.

IFRS net assets

The Group's total equity at 31 December 2023 was £1.2bn (31 December 2022: £1.1bn). Total equity includes the Restricted Tier 1 notes of £322m (after issue costs) issued by the Group in September 2021. The total equity attributable to ordinary shareholders increased to £883m (31 December 2022: £783m).

DEFERRAL OF PROFIT IN CSM

As noted above, underlying operating profit is the core performance metric on which we have based our profit growth target. This includes new business profits deferred in CSM that will be released in future. When reconciling the underlying operating profit with the statutory IFRS profit it is necessary to adjust for the value of the net deferral of profit in CSM.

Net transfers to contractual service margin includes amounts that are recognised in profit or loss including the accretion and the amortisation of the contractual service margin:

RESTATEMENT OF ALTERNATIVE PERFORMANCE MEASURES

As noted earlier, certain of the Group's APMs and KPIs have been affected by the implementation of IFRS 17 as a result of changes to risk parameters and other measurement factors in the underlying statutory accounts. The opportunity has been taken to make other changes to the derivation of the KPIs at the same time as implementing IFRS 17, notably:

· The impact of demographic changes on the valuation of LTMs has been reclassified as an investment value change instead of being included with insurance experience and assumption changes. This change treats the full return on LTMs as investment return and recognises their reduced significance within the investment portfolio.

· Non-recurring expenses have been reallocated to new business acquisition expenses or development expenses within underlying operating profit or to strategic expenses. This has also been reflected and aligned to the classifications used for measurement of Solvency II capital generation.

The table below compares the new business profits, Underlying profit and Adjusted operating profit before tax as presented in the Annual Report and Accounts in 2022 under IFRS 4 (previous accounting standard) with the equivalent APMs based on the IFRS 17 accounts:

Dividends

In line with our stated policy to grow the dividend over time, the Board is recommending a final dividend of 1.50 pence per share bringing the total dividend for the year ended 31 December 2023 to 2.08 pence per share. The 20% growth in total dividend is ahead of the 15% 2022 dividend growth rate.

MARK GODSON

Group Chief Financial Officer

Risk Management

Purpose

The Group risk management framework supports management in making decisions that balance the competing risks and rewards. This allows them to generate value for shareholders, deliver appropriate outcomes for customers, and help our business partners and other stakeholders have confidence in us. Our approach to risk management is designed to ensure that our understanding of risk underpins how we run the business.

Risk framework

Our risk framework, owned by the Group Board, covers all aspects involved in the successful management of risk, including governance, reporting and policies. Our appetite for different types of risk is embedded across the business to create a culture of confident risk-taking. The framework is continually developed to reflect our risk environment and emerging best practice.

Risk evaluation and reporting

We evaluate our principal and emerging risks to decide how best to manage them within our risk appetite. Management regularly reviews its risks and produces management information to provide assurance that material risks in the business are being appropriately mitigated. The Risk function, led by the Group Chief Risk officer ("GCRO"), challenges the management team on the effectiveness of its risk identification, measurement, management, monitoring, and reporting. The GCRO provides the Group Risk and Compliance Committee ("GRCC") with his independent assessment of the principal and emerging risks to the business.

Company policies govern the exposure of risks to which the Group is exposed and define the risk management activities to ensure these risks remain within appetite.

Financial risk modelling is used to assess the amount of each risk type against our capital risk appetite. This modelling is principally aligned to our regulatory capital metrics. The results of the modelling allow the Board to understand the risks included in the Solvency Capital Requirement ("SCR") and how they translate into regulatory capital needs. By applying stress and scenario testing, we gain insights into how risks might impact the Group in different circumstances.

Quantification of the financial impact of climate risk is subject to significant uncertainty. Climate-related transition and physical risks are heavily dependent on government policy developments, social responses to these developments and market trends. Just's initial focus has been on the implementation of strategies to reduce the likely exposure to this risk. Just will continue to adapt its view of climate risk as both methodologies and data quality improve.

The identification, disclosure and management of climate-related risks and broader sustainability risks are embedded within Just's Enterprise Risk Management Framework. This includes climate-related scenario analysis, based on Network for Greening the Financial System scenarios, which is a key tool for ensuring we have a deep understanding of the risks the Group faces over a long-term time horizon.

Own risk and solvency assessment

The Group's Own Risk and Solvency Assessment ("ORSA") process embeds comprehensive risk reviews into our Group management activities. Our annual ORSA report is an important part of our business risk management cycle.

It summarises work carried out in assessing the Group's risks related to its strategy and business plan, supported by a variety of quantitative scenarios, and integrates findings from recovery and run-off analysis. The report provides an opinion on the viability and sustainability of the Group and informs strategic decision making. Updates are provided to the GRCC each quarter, including factors such as key risk limit consumption, and conduct, operational and market risk developments, to keep the Board appraised of the Group's evolving risk profile.

Reporting on climate risk is being integrated into the Group's regular reporting processes, which will continue to evolve as the quantification of risk exposures develops and key risk indicators ("KRIs") are identified.

Principal risks and uncertainties

Risks and uncertainties are presented in this report in two separate sections: (1) the first section summarises the Group's ongoing core risks and how they are managed in business as usual; and (2) the second section calls out the risk outlook for subjects that are evolving and are of material importance from a Group perspective.

STRATEGIC PRIORITIES

1. Grow through innovation

2. Transform how we work

3. Get closer to our customers and partners

4. Be proud to work at Just

5. Grow sustainably

ONGOING PRINCIPAL RISKS

risk outlook

Consolidated statement of comprehensive income

for the year ended 31 December 2023

The notes are an integral part of these financial statements.

Consolidated statement of changes in equity

for the year ended 31 December 2023

1 Includes currency translation reserve of £1m (31 December 2022: £1m).

2 See note 1.2.2.

The notes are an integral part of these financial statements.?

Consolidated statement of financial position

as at 31 December 2023

The notes are an integral part of these financial statements.

The financial statements were approved by the Board of Directors on 7 March 2024 and were signed on its behalf by:

Mark Godson

Director

Consolidated statement of cash flows

for the year ended 31 December 2023