Just Group notes publication of PRA PS 31/18

10 December 2018

Prudential Regulation Authority publishes Policy Statement PS31/18 Solvency II: Equity release mortgages

Just Group plc ("Just", "the Group") notes Policy Statement 31/18 (the "Policy Statement") released by the Prudential Regulation Authority ("PRA") this morning, which sets out its conclusions on the treatment of equity release mortgages¹ ("ERMs") being held to back annuity liabilities. The Policy Statement follows the three month consultation process after the release of Consultation Paper 13/18 - Solvency II: equity release mortgages ("the CP"), on 2 July 2018. Just Group particularly welcomes the PRA's confirmation that transitional relief will remain available for pre-2016 business.

Our interpretation of the Policy Statement is that the following key changes compared to the CP will apply in relation to the treatment of lifetime mortgages within the effective value test ("EVT"):

The PRA has announced it intends to consult further in early 2019 on various matters, including the process by which the volatility and deferment rates will be reset and how the EVT applies in stress

As previously announced, the Group had already aligned new business pricing with the expected post-CP capital requirements. The Group's competitive advantages remain in place in its three core, structurally growing, retirement market segments: Defined Benefit de-risking, Guaranteed Income for Life and ERMs. Together, the growth in these markets supported a 44% increase in the Group's Retirement Income sales during the 9 months to 30 September 2018. Efficiency gains and the Group's focus on pricing discipline since the 2016 merger have enabled the Group to take advantage of these market conditions to expand new business margins from 3.3% in 2015 to 10.2% in the 6 months ended 30 June 2018.

The proposed new regime and an implementation date of 31 December 2019 mean the Board can adopt a considered approach to determining the optimal capital mix and level in order to provide a prudent base to support our new business franchise, and to establishing an appropriate dividend policy for shareholders. The Board is reviewing the strength of the balance sheet, and as set out in the Company's 2018 interim results presentation, has a range of capital options from which to choose in due course.

Rodney Cook, Group Chief Executive, said:

"We welcome the greater clarity provided by the Policy Statement, and the PRA's recognition of the important role played by ERMs for our customers as they plan their retirement finances. The regime envisaged is considerably less onerous for Just than set out in the CP, particularly in respect of pre Solvency II business, and the outcome is well within the range of what we have been planning for. However, even at the 13%/1% parameters confirmed today, we view the EVT as very prudent, as for JRL² it is equivalent to holding capital and technical provisions sufficient for the price of every house in the portfolio to fall immediately by over 35% and then remain there indefinitely. The changes prescribed by the Policy Statement do not take effect until 31 December 2019. This means the Board can evaluate the optimal capital structure to support our new business franchise in a considered manner."

A copy of this announcement will be available on the Group's website www.justgroupplc.co.uk

JUST GROUP PLC

GROUP COMMUNICATIONS

Vale House, Roebuck Close

Bancroft Road, Reigate

Surrey RH2 7RU

Forward-looking statements disclaimer:

This announcement 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 about the Group's current plans, goals and expectations relating to future financial conditions, 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 relate to future events and circumstances that 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 economic and business conditions; 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; inability of reinsurers to meet obligations or unavailability of reinsurance coverage; 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.

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 announcement. The forward-looking statements only speak as at the date of this document and the Group undertakes no obligation to update or change any of the forward-looking statements contained within this announcement or any other forward-looking statements it may make. Nothing in this announcement should be construed as a profit forecast.