Upload
others
View
0
Download
0
Embed Size (px)
Citation preview
H1 2020 results
Interim results for six months ended 30 June 2020
Just Group plc
13 August 2020
Delivery and Resilience
H1 2020 results 2
Introduction: Continued transformation, demonstrating resilience – David Richardson
H1 20 results – Andy Parsons
Outlook – David Richardson
Q&A – David Richardson & Andy Parsons
Group Chief Executive Officer
David Richardson
Group Chief Financial Officer
Andy Parsons
Agenda
H1 2020 results 3
David RichardsonChief executive officer
H1 2020 results 4
Capital generation Business resilience H1 20 results
Material organic capital generation: £145m in H1 20
Organic capital generation before management actions break-even in H1 20
Management actions totalling £142m, including NNEG1 hedging, DB partnering and GIfL reinsurance
Limiting new business strain to <4%
Continuing to serve our customers and write new business during lockdown
Balance sheet resilience:o impact of credit
downgrades c1%o hedging protects against
falling interest rateso property market robust to
date
Capital coverage ratio increased over H1 20
Working to reduce exposure to property sensitivity
145%2 Solvency II capital coverage ratio, up from 141% at FY 19
Seasonal sales and an improving trend
Strong DB pipeline expected to deliver rebound in H2 20
Underlying operating profit unchanged at £117m
Shareholders Solvency II own funds 184p per share
IFRS TNAV: 204p per share, up from 181p in Dec
Continued transformation, demonstrating resilience
Organic capital generation in 2020 and thereafter
Remaining regulatory cost covered by future management actions
Continuing actions to de-risk the business to meet a range of future economic scenarios
Note 1: No-negative equity guarantee; Note 2 : Estimated
H1 2020 results
Moving PLACL to internal
model
5
Building a track record of delivering management actions
Raise new capital
Constrain new
business
Re-price new
business
DB backbooklongevity
reinsurance
Ongoing / future actionsH1 202019
Reducing expenses
GIfLbackbooklongevity
reinsurance
NNEG hedging
Defined benefit
partnering
Sale of LTM portfolios
NNEG hedgingDebt capacity
available
Defined benefit
partnering
Various forms of reinsurance
Reducing expenses
Other actions
H1 2020 results 6
Colleagues Customers Markets
Defined Benefit o pipeline at record
levelso confident of H2 20
GIfL o initial dip in saleso advisers quickly
adjusted and are thriving in new environment
LTM market more affected but recovering
Maintained constant delivery of services to advisers and customers
Range of initiatives to support customers :
o LTM – making it easier to complete and helping at redemption
o Care – new capital guarantee feature
99% of employees working at home
A range of well-being support
All on full pay and no employee on furlough
Phased return to offices has commenced with appropriate safety measures
Living up to our purpose
Covid–19: Proud of Just’s response
GIfL – Guaranteed Income for LifeLTM – Lifetime mortgageDB – Defined benefit de-risking
H1 2020 results 7
H1 20 impact Action to further reduce exposure
H2 20 and beyond
Forward indicators positive
No indication of a significant drop in H2 20 ONS
Considering a range of property scenarios
Range of future management actions
Long-term assets economically unaffected by short-term fluctuations
NNEG hedging on c£900m of LTMs so far
Options for the future:
o up to £2bn of further NNEG hedging
o sale of LTM books
Targeting lower sensitivity
Reducing LTM backing ratio on new business
Used May ONS
HPI of (0.2)% vs +1.9% assumption
NNEG hedging in Q1 20
H1 20 property sensitivity unchanged at 15%
Continuing to reduce property risk
Managing property exposure
H1 2020 results
95
65
35 39
24
H1 18 H2 18 H1 19 H2 19 H1 20
3.6%4.2%
6.5%
1
8
New business strain remains low
New business strain (£m) and as a % of premium 3.2% strain maintains strong progress made in
2019:
o helped by new GIfL longevity reinsurance
Seasonal DB led to a 10% fall in new business premiums
New business written in H1 20 has:
o Exceeded our target of a mid-teen IRR on shareholder capital invested
o A five year pay-back period
Fundamental change in new business model since 2018
Future DB partnering will further reduce strain
8.1%
3.2%
Note 1: H1 19 reported as £47m, but £35m after application of DB longevity reinsurance
H1 2020 results
(54)
51
142
2018 2019 H1 20
(111)
(15)
32018 2019 H1 20
Management actions and basis changes
9
Organic capital generation
Organic capital (consumption)/generation before management actions and basis changes
Break-even on organic capital generation before management actions in H1 20
Driving the improvement
o Reduction in new business strain is the biggest driver in the improvement in organic capital generation
o In-force surplus growth
o Expense reduction programme will eliminate the overrun
o Further management actions
We expect to be organic capital generative in 2020 and thereafter
Ensuring a sustainable capital trajectory
H1 2020 results 10
Andy ParsonsChief financial officer
H1 20 financial results
H1 2020 results
748872
145
74 (67)
(28)
Opening excessown funds
Organic capitalgeneration
Economicmovements (incl
capitalrestriction)
Capitalredeemed
Regulatorychange
Closing excessown funds
11
1 January – 30 June 2020
Showing excess own funds and capital coverage ratio
Development of Solvency II surplus1
Note 1: Closing ratio is post notional TMTP recalculationSome figures may not sum due to roundingsNote 2: Partnership Life Assurance Company Limited
145%141% 9% (3%)0% (1%)
The capital coverage ratio isestimated at 145% as at 30 June2020
Organic capital generation of 9%
Of which management actions 9%
Positive impact from economicmovements despite the volatilityin H1 20
Redeemed PLACL2 bond
Regulatory includes theaccelerated TMTP amortisation
H1 2020 results 12
1 January – 30 June 2020
Organic Solvency II surplus generation
£m £m
H1 201 H1 191
In-force surplus net of TMTP amortisation 83 72
New business strain (24) (47)
Finance cost (36) (25)
Expenses (20) (22)
Other – management actions incl. basis changes ands experience variances
142 (14)
Total organic capital (consumption)/generation 145 (36)
3.2% of new business premium.
H1 20 run-rate higher due to pre-financing of T2 debt since repaid
Expected to grow at “mid single-digit” over the medium term
Expect to eliminate expense overruns by end 2021
Multiple management actions still available
Expense overruns (12)Development expenses (3)Non-recurring costs (5)Total (20)
Note 1: H1 20 and H1 19 figures post notional TMTP re-calculationSome figures may not sum due to roundings
NNEG, DB partner & GIfL Reinsurance 93Mortality experience 18Basis, methodology and modelling changes 31Total 142
H1 2020 results
4250
55
IF as of31/12/2018
IF as of31/12/2019
IF as of30/06/20
Group
13
Additional longevity reinsurance on GIfL business written post 2015. 100% reinsured (from 75%)
Increases Solvency II surplus by £48m at an attractive effective cost of capital
Increased new business reinsurance from 1 January 2020 to 90% (from 75% previously)
Transaction with existing reinsurance counterparties SCOR and Gen Re, which re-affirms the strength of our medical underwriting IP
£5m one off impact on 2020 IFRS operating profit (pre-tax)
Increased GIfL longevity reinsurance
% longevity reinsurance: In-force (“IF”) and New business per product line
36 38 44
90
2018 IF 2019 IF H1 20 IF Newbusiness
GIfL - medically underwritten
45 35 32
2018 IF 2019 IF H1 20 IF Newbusiness
Care - medically underwritten
Care longevity:
100% retained
5779 79 90
2018 IF 2019 IF H1 20 IF Newbusiness:standard
Defined Benefit
H1 2020 results
68
73
161
145141
128
2018 2019 2020 2021F
14
Cost reduction continues in 2020
Recurring core management expenses (£m)
Note 1: Total recurring core management expenses are “total other operating expenses” excluding reinsurance fees, investment fees, amortisation of intangibles and non-recurring expenses
2019 recurring core management expenseswere 10% lower than 2018, a saving ofc.£16m
Fresh bottom up review of cost base
Planning and commencement in 2020,execution and delivery in 2021. Furtherinitiatives in 2022
Major initiatives include procurement,business process optimisation, automationand property
£20m cost to achieve 2020/21 and beyondsavings
Ongoing cost savings offset inflation
A 20% cost reduction over the 3 year period
On course to eliminate £18m acquisition expense overrun by end 2021
-20%
Actual Forecast
H1
H2
H1 2020 results
Property
House price inflation of (0.2)% on Just’s portfolio inH1 20, below our long-term assumption of +1.9%
Credit
Includes £(24)m of Solvency II credit migration – a1% hit to Solvency coverage ratio – more than offsetby £69m gain from credit portfolio management
Other economic
Interest rate falls have generated positive excessown funds but negligible impact on Solvency IIcoverage ratio
Capital
Capital includes the call of £63m remaining PLACLT2 debt
Regulatory
Combination of corporation tax, modelling changes and interest rate effect on Effective Value Test (EVT)
Expect 6 p.p. in 2021 due to EVT, covered by management actions
15
1 January – 30 June 2020
Development of Solvency II surplus : non-operating
£mSCR
coverage2
Opening surplus 1 748 141%
Total organic capital generation 145 9%
Non-operating
Property value movement (47) (3%)
Credit portfolio management 45 2%
Other economic movements, including interest rates 76 0%
Repayment of T2 capital at first call (67) (3%)
Accelerated TMTP amortisation (12) (1%)
Regulatory adjustments (16) 0%
Surplus at 30 June 2020 872 145%
Note 1: Opening surplus post notional TMTP re-calculationNote 2: The Solvency Capital Requirement (SCR) coverage ratio percentage movements represent the effect of movements in Own Funds and SCRSome figures may not sum due to roundings
H1 2020 results
872
(3)
8 26
(234) (274) (211)
Surplus at 30June 2020
Interestrates
-50bps(with TMTP
recalc)
Creditspreads+100bps
LTM earlyredemption
+10%
Creditmigration
20%
Propertyvalues-10%
(with TMTPrecalc)
Mortality-5%
1% 2%
16
Solvency II sensitivities
1 1,2
145%
(3%)
(13%)
Further reductions in future
Sensitivities of excess own funds (£m) and Solvency II capital coverage ratio (%) Sensitivities are broadly unchanged
since FY 19
Property – remains at 15% despite interest rate fall. Future management actions will reduce this
Interest rates – further hedging during H1 20 has kept this unchanged
Credit migration – sensitivity isunchanged but experience morebenign
Mortality – falling interest ratesoffset positive from GIfL reinsurance
Note 1: TMTP – Transitional Measures on Technical ProvisionsNote 2: Represents a 10% immediate fall in property pricesSome figures may not sum due to roundings
(15%) (12%)
H1 2020 results 17
Just Group
£m
H1 20 H1 19 % change
New business profit 66 74 (10)
In-force operating profit 51 41 25
Underlying operating profit 117 114 2
Operating variances and assumption changes
(3) (2) 37
Other Group company results (8) (7) 10
Development expenditure (4) (4) 8
Reinsurance and finance costs (40) (26) 57
Adjusted operating profit before tax
62 76 (18)
Note: Column sums may differ from totals due to rounding.
H1 20 IFRS operating results
Volumes impacted slightly by Covid-19
Reflects increase in in-force book and creditspread widening
Positive mortality benefit offset by LTM early redemptions, GIfL reinsurance and DB Partnering transactions
Includes HUB Group
Reflects full six months of RT1 coupon
H1 2020 results
41 4351
H1 19 H2 19 H1 20
512
719
460
319368
285
H1 19 H2 19 H1 20
DB Retail
18
New business and in-force operating profit
New business profit HY (£m) and margin FY (%) In-force profit HY (£m) and margin FY (bps)
8.9% new business margin on £745m of premiums (-10%)
Lower H1 18 and H1 19 NB margin due to operationalgearing. Full year outcome expected to be similar to 2019
New business IRRs continue to exceed our “mid-teen”target
H1 20 IFRS in-force profit increased 25% to £51m
o Credit spread widening which releases the prudentdefault allowance over the actual incurred
o Higher surplus assets
o Improved yield on surplus assets
74108
66
H1 19 H2 19 H1 20
8.9%
9.9%
8.9%
831 1,087 745
DB and Retail premiums (£m)
H1 2020 results
Statutory IFRS results: focus on non-operating items
19
Just Group
£m
H1 20 H1 19
Adjusted operating profit before tax 62 76
Non-recurring and project expenditure (6) (11)
Investment and economic profits/(losses) 243 68
RT1 interest adjustment 14 3
Amortisation of intangibles (9) (10)
Profit/(losses) before tax 305 125
£mInvestment and economic profits / losses H1 20
398 Risk free rates fell
(120)Credit spreads widened, together with impact from downgrades
(38) Property growth experience
3 Other
243
Note: All figures subject to rounding
Tangible NAV of 204p per share, up from 181p as at 31 Dec 2019
H1 2020 results
Communications
Consumer (staples)
Banks
Financial - other
Insurance
Government
Utilities
Commercialmortgages
Infrastructure
Basic materials
Energy
Automanufacturers
Consumer(cyclical)
Real Estate incl.REITS
Industrials
Other
Prudently positioned and well diversified bond portfolio
20
Corporate and government credit portfolio1 by sector
Note 1: Corporate/government credit portfolio is comprised of public and private bonds, infrastructure, commercial mortgages and various (£205m)
IFRS credit default reserve: £500m, defaultallowance 62bps
o £11.9bn corporate/government credit portfolio1
o 80% invested in defensive sectors
o 519 issuer groups, an average holding of £23m
Sold c£600m of credit since the start of thepandemic, generating a net contribution toSolvency II surplus of c£45m
2% of the bond portfolio is BB and below
Corporate and government credit portfolio1 by BBB segment
£5.4bn or 46% of the bond portfolio is rated BBB
o 77% of the BBB rated credit in defensivesectors
o Only 3% invested in Energy and 2% inConsumer cyclical (airlines, hotel, leisure,retail)
Defensive “More exposed”All bonds
BBB’s
H1 2020 results 21
David RichardsonChief executive officer
Conclusion and outlook
H1 2020 results 22
Our purpose
We help people achieve a
better later life
At a time when individuals and organisations are faced with much uncertainty we provide certainty and help people achieve a better later life
Customers: retail savers, homeowners, pension trustees, clients of our corporate customers
Covid-19 : looking after customers, providing peace of mind
Award winning: we have been recognised for delivering outstanding service
H1 2020 results
UK’s first green LTM Encouraging retro-fitting Government £2bn Green
Homes Grant SchemeDESTINATION RETIREMENT A low cost automated
retirement planning service
Strategic priorities
23
Responding to a changing retirement landscape through innovation
Be proud to work at just
Get closer to our customers & partners
Transform how we work
Improve our capital position
Generate growth in new markets
DB Partnering Secure Lifetime Income Innovative fin-tech
solution to provide guaranteed income on modern investment platforms
Launched Testing
H1 2020 results
Continued delivery and business transformation
24
Transforming the model
Proud of our Covid-19 response
Operational, commercial and financial resilience to significant disruption
Transformation continues, delivering strong organic capital generation in 2020
Range of further management actions available to strengthen the capital base
Operating in attractive and growing markets
Delivery and resilience
Tangible net asset value 204p Solvency II own funds 184p
H1 2020 results 25
Questions
H1 2020 results 26
Appendix
H1 2020 results 27
Well positioned in attractive, growing markets
Structurally growing markets Just’s positioning
DB de-risking
c£800bn market opportunity to
2034
LTMs
Market consolidating
after 23% CAGR between 2011
and 2019
GIfL
Growth of open market option
(OMO) supported by regulatory environment
10.224.2
44
9.0
18.5
4.4 7.513.2 12.3
19.212.3
42.7
20-25
c.800
2012 2013 2014 2015 2016 2017 2018 2019 -Just est.
2020P- LCP
2020-34P: LCP
Buy-in / buy-out Backbook acq.
Industry DB de-risking transactions (£bn)(1)
Industry lifetime mortgage advances (£m)(2)
GIfL market: 2015 –2019(3), £m
1) Sourced from PPF and LCP. Just analysis 2) Sourced from ERC. Just analysis. 3) Sourced from ABI. Just analysis. 4) As of 31 December 2019. Figures include both 1st and 2nd lives based on quotes
Competitive advantages
Proprietary intellectual property creates competitive advantage
Leading proprietary IP consisting of:
o Proprietary database comprising of 3.5m person years of data, growing at over 30k per month4
o Automated underwriting via PrognoSysTM
Improved risk selection and pricing
Greater reserving accuracy and capital efficiency
Competitive advantages
Strong distribution channels
Trusted provider of DB solutions for Employee Benefit Consultants and professional advisors – Pensions Age ‘Risk Management Provider of the Year’
5* award in Life and Pensions category at Financial Advisor Service Awards – 15th consecutive 5* rating. Also 5* award in Mortgage Lenders and Packagers category
Strong intermediary brand with longstanding relationships
B2B2C services and technology solutions are supporting growth of the open market
Competitive advantages
Attractive market positioning
20% share of the DB de-risking <£250m transaction size segment since inception(1,4). 2020 DB market; £20-25bn forecast
11% share of the LTM market in 2019(2)
28% share of the OMO GIfL market in 2019(3)
HUB accounted for 19% of 2019 OMO GIfL flows
3,941
772 920 1,073 1,379 1,6022,149
3,0573,917
1,762
2011 2012 2013 2014 2015 2016 2017 2018 2019 H12020
4,225 4,253 4,378 4,352 4,295
2015 2016 2017 2018 2019
H1 2020 results
1,896 2,174 1,918
4% 12%24%
52% 53% 60% 64% 62%
93% 83% 70%
43% 43% 36% 32% 35%
3% 5% 6% 6% 4% 3% 4% 3%
2013 2014 2015 2016 2017 2018 2019 H1 20
DB GIfL Care/Protection
295
703 718
596512
719
460427 471 462398
319368
285
H1 17 H2 17 H1 18 H2 18 H1 19 H2 19 H1 20
DB Retail
28
New business premiums and profitability
Just Group
£m
H1 19 H1 20
New business premiums 831 745
New business profit 73.7 66.0
Note: May not add to 100% due to rounding. 2013-2016 pro forma Just Retirement/Partnership
New business margin (%) and premium (£m)1
512 460
288259
3126
831745
H1 19 H1 20
DB GIfL Care
8.9% 8.9%
DB & Retail premiums (£m) Sources of premium: 2013 – H1 20 (%)
H1 2020 results 29
125
250230
300
2020 2021 2022 2023 2024 2025 2026 2027 2028 20298.125% JG plc 2029 - maturity
9.000% JG plc T2 2026 - maturity
3.500% JG plc T3 2025 - maturity
9.375% JG plc RT1 perpetual - first call
Solvency Capital Requirement (SCR) as of 30 June 2020: £1,950m
Capital flexibility – further £300m tier 2 capacity available
Leverage4 at 19%
o Supports the Group’s “A+” insurer financial strength rating
Solvency II Own Funds by capital tier (£m, 30 June 2020)1,2
Subordinated debt maturity profile (£m, nominal value, coupon %)
Solvency II capital structure & subordinated debt profile
Note: (1) Tiering percentages subject to roundingNote: (2) Solvency II Own Funds (£2,822m) and Solvency Capital Requirement (£1,950m) as at 30/06/20 are estimated, and include a notional calculation of TMTPNote: (3) Tier 3 includes Deferred Tax Assets (capped at 15% of SCR and does not include capital restriction of £6m)Note: (4) Leverage on a Fitch Ratings definition
9.375%
3.500%
9.000%
£m % of SCR % of Own Funds
Tier 1 2,146 110% 76%
T1 – unrestricted 1,852 95% 66%
T1 – restricted 294 15% 10%
Tier 2 383 20% 14%
Tier 33 293 15% 10%
TOTAL 2,822 145% 100%
8.125%
H1 2020 results 30
Solvency II surplus generation
In-force only, no new business from 31 December 2019. Assumed 3.8% HPI. No allowance for capital management actions
Excludes day one surplus of £748m and debt interest/repayments
Current book – steady profile of cash emergence
Offset by impact of regulatory changes in the near term. Expect move to 13/0.75 in one step in 2021
And in the medium term by TMTP amortization
Underpins tangible net asset value of 204p per shareNote: Only includes known impact of regulatory changes e.g. SS 3/17 and PS 19/19. 2020 TMTP as includes final year of accelerated portion of TMTP, which is expected to be an additional £25m (post tax)
£m
£1.59bn of surplus generation during TMTP period to 2031
£1.85bn of surplus generation in next ten years 2032-2041
(250)
(200)
(150)
(100)
(50)
-
50
100
150
200
250
300
350
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
20
29
20
30
20
31
20
32
20
33
20
34
20
35
20
36
20
37
20
38
20
39
20
40
20
41
20
42
20
43
20
44
20
45
20
46
20
47
20
48
20
49
20
50
20
51
20
52
20
53
20
54
Core surplus generation TMTP amortisation Regulatory changes Surplus generation
Note: As of 31 December 2019, updated annually
H1 2020 results
45%
5%
23%
19%
1%7%
UK
UKsovereign
Europe
NorthAmerica
Asia
Rest ofWorld
31
Diversified and well matched asset portfolio
Note 1: Percentages relate to total portfolio, totals subject to roundingNote 2: AAA and unrated both include units in liquidity funds
38.8%
10.3%9.2%
15.0%
24.7%
1.1%0.9%
Lifetimemortgages
AAA
AA and gilts
A
BBB
BB or below
Unrated
Total £22.8bn asset portfolio by rating 1,2
Single name concentration limit
Sector concentration limit
FX hedged, concentration limit
Rating limit (relative to iBoxx)
£11.9bn corporate/govt credit portfolio3 by geography
77% denominated in stg
Note 3: This portfolio is comprised of fixed income / private placement bonds, infrastructure, commercial mortgages and Various (£205m). It does not include liquidity, lifetime mortgages and derivatives & collateral
50% non-UK
30 June 2020
H1 2020 results 32
Defensively positioned credit portfolio actively managed within SII framework
Financial investment portfolio at 30 June 2020
£mTotal
Of which AAA
Of which AA
Of which A
Of which BBB
% of BBB portfolio
BB and below
Unrated
Basic materials 286 - - 112 87 2% 3 84
Communications & Technology 1,047 23 46 134 807 15% 37 -
Auto manufacturers 377 - 43 88 218 4% 28 -
Consumer (staples incl. healthcare) 875 46 198 173 399 7% 50 9
Consumer (cyclical) 238 - 12 105 108 2% 6 7
Energy 377 - 103 70 140 3% 64 -
Banks 1,434 172 191 506 561 10% 4 -
Insurance 732 - 87 185 460 9% - -
Financial – other 449 101 156 68 94 2% 19 11
Real Estate incl. REITs 486 46 11 86 296 5% 41 6
Government 1,638 575 913 68 82 2% - -
Industrial 593 - 30 79 394 7% 3 87
Utilities 1,748 - 21 751 973 18% 3 -
Commercial mortgages 601 69 143 206 183 3% - -
Infrastructure 960 89 137 129 604 11% 1 -
Other 38 - - 38 - 1 -
Corporate and government credit 11,879 1,121 2,091 2,798 5,406 100% 259 204
Lifetime mortgages 8,865
Liquidity funds 1,228
Derivatives & collateral 864
TOTAL 22,836
Note 1: Corporate/government credit portfolio is comprised of public and private bonds, infrastructure, commercial mortgages and various (£205m)
£11.9bn corporate/government credit portfolio, average rating “A”
H1 2020 results 33
Lifetime mortgages – an increasingly mature book
£22.8bn asset portfolio: Liquid and illiquid split
Lifetime mortgages
39%
Commercial mortgages
3%
Infrastructure4%
Private placement
2%
Fixed income
securities42%
Liquidity5%
Derivatives & collateral
4%
Various1%
Liquid: 52%Illiquid: 48%
Note 1: Various includes SME loans, commodity trade finance etc
1
Just Group has been writing LTMs since 2005
Total Group NNEG claims of £1.9m incurred from total redemptions of £2.0bn to date (cost of risk: 10bps)
Advances/redemptions converging as book increasingly matures
£m H1 20 FY19
Advances 224 416
Redemptions & Payments 158 338
IFRS cashflows
Note (2) The difference between the total amount outstanding (principal and accrued interest), and the balance sheet amount (£8.9bn) is due to the discount rate used to compute fair value;
LTVAge
(years)
Time to redemption /
duration
35% 75.5 13 years
In-force metrics (average)
Seasoned book of business with steady predictable cashflows
Significant junior note “equity” tranche provides first loss absorption
New business
Manufacturer of own brand product. Also provide funding to 3rd parties with specialist distribution
Offer low, mainstream and medically underwritten products, with age-related LTV thresholds
Interest servicing available
Launched the UK’s first green LTM
H1 2020 results
Total outstanding of £6.6bn2 is made up of over 69k
loans, average balance £95k
Average property-weighted LTV for new business in H1
2020 is 29.2%
Average LTV across portfolio remains low at 35.3%,
1.5% of loans with LTV greater than 75%3
6,634
TOTAL
34
297 385 293 174 101
899
1,180
930
476
210
25
213
498
489
364
0
2 12
36
51
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Below 70 70-75 75-80 80-85 85+
<30% 30%-50% 50%-75% >75%
810
945983
345
831
440491
411
562
208251
308
49
0%
10%
20%
30%
40%
50%
0
500
1,000
Gre
ate
r L
on
do
n
Ou
ter
Me
tro
po
lita
n
Ou
ter
So
uth
Ea
st
Ea
st A
ng
lia
So
uth
We
st
Ea
st M
idla
nd
s
We
st M
idla
nd
s
Yo
rksh
ire
& H
um
be
r
No
rth
We
st
No
rth
Wa
les
Sco
tla
nd
No
rth
ern
Ire
lan
d
LT
V
Ou
tsta
nd
ing
Total outstanding (LHS, loan + accumulated interest)
Average of LTV based on total outstanding (RHS)
LTV breakdown by geography (£m, % June-20)1
Total outstandingLTV breakdown by customer age bands (£m, June-20)3
A low risk LTM portfolio
Well-diversified LTM portfolio with low average LTVs
Notes: (1) Amounts outstanding, including rolled-up interest; (2) The difference between the total amount outstanding (principal and accrued interest), and the balance sheet amount (£8.9bn) is due to the discount rate used to compute fair value; (3) Based on loans in-force as at 30 June 2020 for the entire portfolio
35.3%
19%
56%
24%
1.5%
Lifetime mortgages – current portfolio
H1 2020 results 35
Spotlight on other illiquid assets: 9% of investment portfolioInfrastructure, private placement, and commercial real estate mortgages sourced via specialist fund managers
£22.8bn asset portfolio: Liquid and illiquid split
Lifetime mortgages
39%
Fixed income securities
42%
Liquidity5%
Derivatives & collateral
4%
Various1%
Liquid: 52%Illiquid: 48%
Note 1: Various includes SME loans, commodity trade finance etc
1
Commercial mortgages (£601m, 3% of portfolio)
Infrastructure (£960m, 4% of portfolio)
Average LTV of 54%
Geographically diversified across UK -higher weightings in SW / SE (outside London) and Northwest
All privately rated
Office, 24%
Industrial, 16%
Retail, 24%
Leisure, 13%
Other, 23%
Typically inflation linked returns
Main exposures to electricity generation / distribution (43%), local authority (18%), housing (10%), water (13%), port (6%), Other (7%)
Private placement (£529m, 2% of portfolio)
Predominantly US, sourced via Metlife. 35 issuers
AAA AA A BBB Non-IG / Unrated
Total
- 26 165 267 72 529
H1 2020 results 36
Covid-19: Longer term mortality impact uncertain
Cumulative excess death registrations: England and Wales 2020 vs 2019
0
10,000
20,000
30,000
40,000
50,000
60,000
Non Covid-19 Community Covid-19 Hospital Covid-19
Longer term
Unclear - a number of potential negative and positive new drivers
Annual review of mortality basis, present basis is CMI 17
FY 20 is likely to be too early for full clarity
H1 20 effects
2020 YTD - peak excess deaths in week 24
Sustained period of 11 weeks, in which non Covid-19 deaths are lower vs same period in 2019
Positive mortality experience in Solvency II and IFRS
H1 2020 results 37
Longevity trends – slower improvements prior to Covid-19
Average rate of mortality improvement, England & Wales ages 65-84, five year rolling periods to 2019, by gender
Source: Just Group calculations using data from ONS
Life expectancy at 65 for men rose byaround six years over the period 1970 to2010
The pace of change has moderated overthe last nine years, with rates ofmortality improvement reducing toaround 1% p.a.
Our analysis of trends prior to Covid-19suggested our existing improvementbasis was appropriate
Following the Covid-19 outbreak, wehave been systematically investigatingpossible direct and indirect impacts ofthe pandemic, including the possibilitythere will be enduring influences on thelongevity of customers
Given the rapidly evolving situation, andin-line with previous years, we will do afull review of our mortality assumptionsand basis as part of the FY 20 results
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
Males Females
H1 2020 results 38
Environment, Social & GovernanceBecame a constituent of the FTSE4Good Index Series for the first time in December 2019
Just Group complies with the internationally recognisedstandard for environmental management, ISO 14001:2015.
Sustainable operations
Environmental governanceEnvironmental awareness
Greenhouse gases emissions data
Tonnes of CO2e (tCO2e) YE 19 YE 18 Change
Scope 1 – Gas consumption 144 163 (12)%
Scope 2 – Purchased electricity 579 700 (17)%
Scope 3 – Business travel 824 1,781 (54)%
Total emissions 1,547 2,644 (41)%
Intensity measurement – tCO2e per full time employee
1.42 2.41
Intensity measurement – tCO2e per £m of gross premium
0.81 1.21
Carbon footprint down 41% year on year Invested in offshore windfarms
Invested in social housing
Solar energy
SME loans
Microfinance via commodity trade finance
£374m
£163m
£119m
£108m
£84m
41% reduction in CO2
Five figures above as per 30 June 2020
H1 2020 results 39
The Defined Benefit de-risking market
H1 2020 results
321 376 408508 550
65359 25
76
103123
150
24 2526
4868
105
404 426510
659741
908
2011 2012 2013 2014 2015 2016
Segregated Bespoke Pooled
40
DB market overviewThe DB de-risking market is growing rapidly, as active members move into deferred or pensioner in payment liabilities
As pension schemes mature, insurers are predominantly taking from the pensioner in payment segment where ALM and capital work best
Deferred, 40%
Pensioner, 39%
Active, 21%
Source – PPF 2010 & 2019, on a s179 liability basis
2019
2010: 32%
87% of schemes (by number) are closed to future accrual or new members
56%61%
67% 71%79% 82% 83% 84% 85% 85% 85% 86% 87% 88%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Closed to new members Closed to future accrual
Source: PPF purple book 2019
Scheme funding continues to improve, with sponsors increasingly seeking to buyout. Just’s small scheme focus is best funded
No members No. schemes
Aggregate funding –
buyout basis%
<100 1,964 80.5
100-999 2,377 74.6
1000-4999 727 75.4
5000-9999 161 77.8
>10000 193 78.0
TOTAL 5,422 77.3Source: PPF purple book 2019
2010: 27%
2010: 41%
772019
LDI liabilities for UK pension schemes by type of mandate (£bn)
Source: KPMG
H1 2020 results
No members No. schemesTotal buyout
liabilities£bn
Split total by liability type (£bn)
Pensioner in payment
Deferred Active
<100 1,964 21 10 10 1
100-999 2,377 198 83 101 14
1000-4999 727 345 141 173 31
5000-9999 161 250 106 119 25
>10000 193 1,277 537 574 166
TOTAL 5,422 2,091 877 977 237
£bn
Pensioners addressable in full 93
Deferreds/actives addressable now and in future as pensioner tranches
126
Deferreds/actives addressable in future as tranches 130
Pensioners addressable for Partnering, predominantly in buy-in tranches
1,104
2,091
41
£7.0bn
5.3%
194
20%
of DB premium since 20131,
leading to a total market share since commencing2 of
viatransactions,
or
of the targeted <£250m transaction size segment2
Note 1: Up to 30/06/2020; (2) Estimated as of 31/12/19 based on Just market analysis Source – PPF, on a full buyout basis, Just analysis
Just’s core DB focus
Defined Benefit – a £2.1trillion opportunity 47% addressable by Just BAU through buyout/buyins. Partnering opens up >£250m segment, initially pensioner in payment deals
Partnering focus
H1 2020 results 42
Guaranteed Income for Life
H1 2020 results 43
GIfL – sizeable addressable market
Open market option (OMO) continues to recover
57%60% 59%
52%
41%
45% 48%50% 50%
2011 2012 2013 2014 2015 2016 2017 2018 2019
OMO % of Total
2019 market share as Just controls volume, pricing discipline
Source: ABI and Just analysis
Source - ABI
Open market option (OMO) sales vs Rest of market (£m)
Source: ABI and Just analysis
18% 18% 18% 17%14%
44%40% 38%
35%
28%
2015 2016 2017 2018 2019
Just share - total market Just share - OMO
1,7281,917 2,119 2,165 2,127
2,4972,336 2,259 2,187 2,168
2015 2016 2017 2018 2019
OMO - GIfL Rest of Market
+11%+11% +2%OMO
growth
GIfL market 2015 – 2019 (£m): steady flow business
Source - ABI
1,985 2,126 2,236 2,138 2,194
2,240 2,127 2,142 2,214 2,101
4,225 4,253 4,378 4,352 4,295
2015 2016 2017 2018 2019
H1 H2
(2)%
H1 2020 results 44
Lifetime mortgages
H1 2020 results 45
LTM market consolidating after a very strong decade of growth
Growth drivers
More attractive and flexible product features
Favourable demographics
Increased housing wealth amongst retirees
Maturity of Interest Only mortgages
Retirement Income shortfall
Move from Defined Benefit to Defined Contribution pensions
Increased advertising spend by providers and distributors
Changing attitudes towards using housing equity
Peace of mind from No Negative Equity Guarantee (“NNEG”) feature in products
Increased distribution capacity
Note 1: Forecast was preceding Covid19, and will reviewed at end of 2020 post receipt of H2 activity levels. Source: Equity Release Council, Just internal analysis
772 920 1,0731,379 1,602
2,149
3,057
3,941 3,917
1,762
5,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 H1 2020 2021
Lump sum mortgage sales New drawdown mortgages - initial advance Existing drawdown mortgages - further advance Forecast
LTM market forecast (£m)
13% CAGR
Just will review its pre-Covid 19 £5.0bn market by 2021 forecast when H2 20 activity levels have been received
23% CAGR
-5% yoy
1
H1 2020 results
122
33 49 33
0-10 yrs 10-20 yrs 20-30 yrs 30 yrs +
Spread over GBP swaps (bps) Additional term spread
577
308.1
203
131.590
59.526 21.1
No. of Issuers Market value (£bn)
0-10 yrs 10-20 yrs 20-30 yrs 30 yrs +
46
Lifetime mortgages
LTMs play a key role in ALM process
Particularly suitable to match DB/GIfL liabilities, whilst offering significant yield pick up vs long dated bonds
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49
Ca
sh f
low
s p
er
an
nu
m (
£m
)
Year
Corporate Bonds &Gilts
Lifetime Mortgages
GIfL Liabilities
DB Liabilities
Source – Just analysis
0 5 10 15 20 25 30 35 40 45 50Years
Drawdown Interest Serviced Lump Sum
iBoxx £ corporate bond index - spread over GBP swaps by term (bps)1
155171
155
Note 1: iBoxx index as of 31 July 2020, excluding government and supra national issuance and callable bonds
Different types of Lifetime mortgages – PV cashflow profiles
iBoxx stg corporate bond index – Issuers and market value by term1
H1 2020 results 47
The economics of NNEG
NNEG is a guarantee that a borrower’s estate will never have to repay
more than the value of the house
o Our NNEG provision is robust. For example, it is sufficient to cover
future NNEG costs if property prices immediately fall by 28% and
never recover
o For a typical 70 year old customer, house price inflation (“HPI”) in
line with historic levels makes NNEG a remote risk
o At 30% initial LTV and HPI of 0% indefinitely would drive a 100%
LTV as the typical 70 year old customer reaches 97 ½ years.
0% indefinitely, and if house prices fell 10% at the end of Year
1, and never recovered, the customer would reach 100% LTV at
95 years of age
NNEG is carefully managed by lending across regions and adhering to age-linked LTV thresholds
NNEG for various HPI growth rates (initial 30% LTV / 4.5% interest)
0%
20%
40%
60%
80%
100%
120%
70 75 80 85 90 95 100
0%HPI1%
2%
3%
4%
100% LTV at 97 ½
years
Females c.18 years Males c.16 years UK life expectancy from age 701
Note 1: Projected Cohort Life Expectancy at age 70 as at 01/01/2020. Source: CMI_2019 (M 1.50%, F 1.25%) projected from NLT16-18 (E&W)
Projected LTV by age and HPI (initial 30% LTV and 4.5% interest)
Nationwide UK house price index: 1973 – H1 2020
-20%
-10%
0%
10%
20%
30%
40%
0
50,000
100,000
150,000
200,000
250,000
Q4
19
73
Q4
19
75
Q4
19
77
Q4
19
79
Q4
19
81
Q4
19
83
Q4
19
85
Q4
19
87
Q4
19
89
Q4
19
91
Q4
19
93
Q4
19
95
Q4
19
97
Q4
19
99
Q4
20
01
Q4
20
03
Q4
20
05
Q4
20
07
Q4
20
09
Q4
20
11
Q4
20
13
Q4
20
15
Q4
20
17
Q4
20
19
Property price (£) % change per annum
1.0%
2.0%
3.1%
4.1%4.5% 4.5% 4.5%
0
50
100
150
200
-3% -2% -1% 0% 1% 2% 3%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Age at which NNEG materialises Yield if lives to exactly 100
H1 2020 results 48
Contacts
www.justgroupplc.co.uk
Alistair SmithJust Group plc01737 232792
Paul KellyJust Group plc0207 444 8127
H1 2020 results 49
Disclaimer
This presentation in relation to Just Group plc and its subsidiaries (the “Group”) 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.
Statements containing the words: 'believes', 'intends', 'expects', 'plans', 'seeks', 'targets', 'continues' 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, 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 UK’s exit from the EU and the terms of any trade deal which may be negotiated between the UK and the EU; or arising from the
Coronavirus (COVID-19) outbreak or other infectious diseases); 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 within this presentation. 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 presentation. The Group undertakes no obligation to update or change any of the forward-looking statements contained within this presentation or any other
forward-looking statements it may make (whether as a result of new information, future events or otherwise), except as may be required by law. Past performance is not an
indicator of future results. The results of the Company and the Group in this presentation may not be indicative of, and are not an estimate, forecast or projection of, the Groups
future results. Nothing in this presentation should be construed as a profit forecast.