REG - Just Group plc - IFRS 17 FY 2022 and H1 22 restatement
11/07/2023 07:00
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RNS Number : 5666F Just Group PLC 11 July 2023
http://www.rns-pdf.londonstockexchange.com/rns/5666F_1-2023-7-10.pdf
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NEWS RELEASE www.justgroupplc.co.uk
11 July 2023
JUST GROUP plc
IFRS 17 FY 2022 and H1 22 restatement
Just Group plc ("Just", the "Group") has today made presentation slides
available on the Group's website www.justgroupplc.co.uk, and below, provides a
restatement of its financial results for the year ended 31 December 2022 and
the six months ended 30 June 2022 under IFRS 17. IFRS 17 is a new accounting
standard for insurers, which was implemented on 1 January 2023.
We remain committed to our ambition to target 15% growth in underlying
operating profit.
Under IFRS 17, we will continue our commitment to deliver 15% growth in
underlying operating profit per annum over the medium term. In 2022, we
delivered 19% growth in underlying operating profit under IFRS 4. Our IFRS 17
measure for underlying operating profit is explained further below.
Our target to deliver a greater than 10% return on equity will also continue
under IFRS 17(1).
No change in strategy, growth ambition, capital, cash or dividend policy
IFRS 17 is an accounting change and does not affect the underlying economics
of our business or our strategy
· Our commitment and ability to invest in future growth is unchanged
· The capital strength of the Group is unchanged
· Our new and existing business cashflows are unchanged
· The Group's dividend policy is unchanged
· The Group's debt leverage is unchanged
Effect of transition to IFRS 17
Under IFRS 17 total economic profits do not change, but how these are
accounted for does. IFRS 17 introduces two new balance sheet concepts - the
Contractual Service Margin ("CSM") and Risk Adjustment ("RA"), which are
stocks of discounted future value that are released into reported profit over
time. These stocks of future value are added to by future new business, which
in turn also releases over time.
· Underlying operating profit is broadly unchanged for FY22: £257m
under IFRS 17 versus £249m under IFRS 4. To provide a meaningful measure of
business performance, we add back the net underlying CSM increase during the
year to derive underlying operating profit under IFRS 17.
· The Group's shareholder value is broadly unchanged with TNAV per
share at 31 December 2022 under IFRS 17 of 190p per share versus 172p under
IFRS 4
o IFRS 17 Adjusted shareholders equity on 31 December 2022 of £2.0bn (31
December 2021: £2.1bn) is comprised £783m of IFRS 17 Equity attributable to
shareholders (31 December 2021: £1,175m) and £1,212m of CSM net of tax (31
December 2021: £966m).
o The CSM growth was driven by the addition of new business, whilst the IFRS
17 equity fell largely due to economic losses resulting from the interest rate
hedging programme. During 2022, we actively reduced the level of interest rate
hedging as the capital position strengthened, with the sensitivity remaining
close to zero in 2023.
o The increase in TNAV per share includes 6p (£80m pre-tax) which arises from
the reversal of a negative investment timing impact on the large volume of
business written in Q4 22 that was recognised under IFRS 4, but is not
recognised under IFRS 17
· Return on Equity is broadly unchanged: 10.3% under IFRS 17 vs 10.7% under IFRS 4
o Under IFRS 17, the Return on Equity was 10.3%. The slightly higher IFRS
17 Underlying operating profit has been offset by a slightly higher IFRS 17
Adjusted shareholders equity.
o Our intention is to continue growing the Return on Equity from this level.
IFRS 17 - Results for the Year Ended 31 December 2022
All figures presented are unaudited.
IFRS 17 based Key Performance Indicators
Year ended Six months
31-Dec 30-Jun
2022 2022
£m £m
New business profit(1) 266 76
Underlying operating profit(1) 257 68
IFRS (loss)/profit before tax (494) (237)
Return on equity(1,2) 10.3% 5.4%
TNAV per share(1) 190p 187p
Underlying Operating Profit
Year ended Six months
31-Dec 30-Jun
2022 2022
£m £m
New business profits 266 76
CSM amortisation(3) (61) (27)
Net underlying CSM increase 205 50
In-force operating profit(4) 156 72
Other Group companies' operating results (16) (7)
Development expenditure(5) (15) (9)
Finance costs (73) (37)
Underlying operating profit(1) 257 68
Operating Profit METRICS
Year ended Six months
31-Dec 30-Jun
2022 2022
Retirement Income sales(1) (£m) 3,131 879
New business margin(1) (%) 8.5% 8.6%
Underlying Operating EPS(1) (p per share) 20.2p 5.3p
Reconciliation of Underlying Operating Profit to Statutory IFRS
Year ended Six months
31-Dec 30-Jun
2022 2022
£m £
m
Underlying operating profit (1) 257 68
Operating experience and assumption changes(6) 104 (4)
Adjusted operating profit/(loss) before tax (1) 361 64
Investment and economic movement (537) (255)
Strategic expenditure(5) (7) (3)
Interest adjustment to reflect IFRS accounting for Tier 1 notes as equity 16 9
Profit/(loss) before tax prior to deferral of profit to CSM (167) (185)
Deferral of profit in CSM(7) (327) (52)
Profit/(loss) before tax (494) (237)
See notes at the end of the release
Reconciliation from IFRS4 to IFRS17
Underlying operating profit Year ended Six months
31-Dec 30-Jun
2022 2022
£m £m
As presented in 2022 Annual Report and Accounts under IFRS 4 249 74
Changes in allowances for credit defaults 25 5
Changes attributable to replacement of IFRS 4 prudent reserves with IFRS 17 (9) (4)
risk adjustment
Reclassification of expenses (6) (3)
Other differences (3) (4)
Restated underlying operating profit(1) 257 68
Tangible Net Assets and Return on Equity
31-Dec-22 30-Jun-22 31-Dec-21
£m £m £m
Total equity attributable to ordinary shareholders of Just Group plc 783 979 1,175
Less intangible assets (47) (46) (45)
Tax on intangibles 3 3 3
Add back contractual service margin 1,611 1,336 1,284
Adjust for tax on contractual service margin (399) (331) (318)
IFRS 17 Tangible Net Assets(1) 1,951 1,941 2,099
IFRS 17 Tangible Net Assets per share(1) 190p 187p 203p
Return on equity % (underlying) (1) 10.3% 5.4%
Tangible Net Asset Value per share (pence) is the Tangible Net Asset Value of
the Group divided by the number of shares in issue, adjusted for the treasury
shares held by the Group
Condensed Consolidated Statement of Financial Position
31-Dec-22 30-Jun-22 31-Dec-21
£m £m £m
Assets
Financial investments 23,477 22,789 24,682
Reinsurance contract assets 776 599 716
of which CSM 107 51 54
Other assets 1,285 1,062 1,003
Total assets 25,538 24,450 26,401
Share capital and share premium 199 199 199
Other reserves 585 780 977
Total equity attributable to ordinary shareholders of Just Group plc 783 979 1,175
Tier 1 notes 322 322 322
Non-controlling interest (2) (2) (2)
Total equity 1,103 1,299 1,496
Liabilities
Insurance contract liabilities 19,647 19,559 23,086
of which CSM 1,943 1,523 1,489
Reinsurance contract liabilities 121 146 165
of which CSM (225) (136) (151)
Other financial liabilities 4,378 3,302 1,529
Other liabilities 289 144 125
Total liabilities 24,435 23,151 24,905
Total equity and liabilities 25,538 24,450 26,401
Total Contractual Service Margin included above 1,611 1,336 1,284
Contractual Service Margin net of deferred tax 1,212 1,006 966
Note 1: 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. There
have been changes to APMs since the 2022 Annual Report and Accounts. The
tables and footnotes above explain the basis of their calculation. Net
underlying CSM increase is added back to calculate underlying operating profit
as the Board considers the value of new business is significant in assessing
business performance.
Note 2: Return on equity is IFRS 17 underlying operating profit after
attributed tax divided by the average IFRS 17 adjusted shareholders equity
less goodwill.
Note 3: CSM amortisation represents the net release from the CSM reserve into
profit as services are provided. The figures are net of accretion (unwind of
discount), and the release is computed based on the closing CSM reserve
balance for the period.
Note 4: In-force operating profit represents profits from the in force
portfolio before investment and insurance experience variances, and assumption
changes. It mainly represents release of risk adjustment for non-financial
risk and of allowances for credit default in the period, investment returns
earned on shareholder assets, together with the value of the CSM amortisation.
Note 5: Following a review of expense allocation to bring consistency with
Solvency II KPIs, non recurring costs have been reallocated to development
expenditure and strategic expenditure. Development expenditure relates to the
development of existing products, markets, technology, and transformation
projects. Strategic expenditure relates to major strategic investment, new
products and business lines, and major regulatory projects.
Note 6: Operating experience and assumption changes represent changes to cash
flows in the current and future periods valued based on end of period economic
assumptions.
Note 7: Deferral of profit in CSM represents the total movement on CSM reserve
in the year. The figure represents CSM recognised on new business, accretion
of CSM (unwind of discount), transfers to CSM related to changes to future
cash flows at locked-in economic assumptions, less CSM release in respect of
services provided.
Note 8: All the figures are unaudited.
Further Information
Please contact the Investor Relations team, details below.
FINANCIAL CALENDAR AND TIMELINES DATE BASIS
Interim results for the six months ended 30 June 2023 15 August 2023 First financial reporting under IFRS 17
Enquiries
Investors / Analysts Media
Alistair Smith, Investor Relations Stephen Lowe, Group Communications Director
Telephone: +44 (0) 1737 232 792 Telephone: +44 (0) 1737 827 301
alistair.smith@wearejust.co.uk press.office@wearejust.co.uk
Paul Kelly, Investor Relations Temple Bar Advisory
Telephone: +44 (0) 20 7444 8127 Alex Child-Villiers
paul.kelly@wearejust.co.uk William Barker
Telephone: +44 (0) 20 7183 1190
A copy of this announcement 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
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