Just Group turns in decent full-year performance as chair steps down
Just Group reported an improvement in total revenue in its preliminary results on Thursday, rising to £3.83bn from £2.86bn.
The FTSE 250 financial services group said that was made up of a fall in its net premium revenue to £2.36bn from £2.71bn, offset by an improvement in net investment income to £1.45bn from £142.6m for the year ended 31 December.
Just Group said it swung to an IFRS profit before tax of £369m from a loss of £86m in 2018, with the turnaround put down to an improved operating result and positive economic variances.
Adjusted operating profit was 4% higher at £219m, as positive operating variances and operating assumption changes offset lower new business profits.
New business operating profit fell 25% to £182m, with the board explaining that lower new business margins were in line with expectations on lower volumes, reflecting its focus on capital discipline.
Looking at its organic capital generation, Just said a “halving” of new business strain, improved in-force surplus generation and positive management actions including defined benefit reinsurance helped to produce generation of £36m, swinging from organic capital consumption of £165m in 2018.
It said it expected to be organically capital generative in 2020 and thereafter, with further management actions set to support that, as well as continued underlying improvement in capital generation.
The firm said it saw “Increased clarity” on the impact of regulatory change, with a capital coverage ratio of 141%, compared to 136% at the end of 2018.
Just Group said it had chosen to restructure its lifetime mortgage notes in a bid to accelerate its alignment with new regulatory requirements.
That resulted in a £219m regulatory capital cost in the second half of 2019, which - together with the estimated £80m future cost of full compliance with SS3/17 and PS19/19 - was said to be within the guidance of the £350m provided at the 2019 half-year.
Since the year ended, Just Group noted that it had entered into its second no negative equity guarantee (NNEG) hedging transaction, covering £670m of lifetime mortgages.
It also completed its first defined benefit partnering deal of around £250m since the end of the year.
The group said its capital coverage ratio had not been significantly affected by recent financial market volatility, helped by increased interest rate hedging.
It said its capital coverage ratio at 10 March was estimated to have been 141%, including management actions.
“We have a clear focus on improving the group's capital position and are making good progress,” said chief executive officer David Richardson.
“Despite operating in a tough environment we took big strides in 2019 to improve our organic capital generation and to reduce balance sheet risk.
“We achieved organic capital generation in the second half of the year and at the same time have accelerated our adoption of the new regulatory requirements at a lower cost than previously expected.”
Richardson said the firm’s capital coverage ratio would have grown to 156% if it had not recognised the £219m of regulatory capital strengthening.
In the absence of any significant unhedged market movements, he added that the company expected the capital coverage ratio to grow “gradually” from the 141% year-end level.
“Although the focus since my appointment has been on capital, I have not lost sight of the key strengths which make Just such a great place to work.
“Our competitive advantage is underpinned by our deep understanding of customer needs in retirement.
“I have been hugely impressed by the commitment of the whole team.”
Just Group’s preparations were continuing, Richardson added, to ensure that it could serve its customers through the potential disruption if the Covid-19 coronavirus pandemic spread more widely across the UK.
“We have made significant progress in adapting the business model during 2019 and will continue this transformation during 2020.
“We are focussed on managing the business to maximise shareholder value and remain open to all options that will achieve this.
“I am hugely energised after my first nine months as CEO, and am determined that Just's strengths will be recognised in full by customers, intermediaries, colleagues and shareholders.”
In a separate announcement on Thursday morning, Just Group said Chris Gibson-Smith had informed the board of his intention to retire as chair as soon as a suitable successor was identified.
It said a search would commence shortly, led by its senior independent director Keith Nicholson.
In the meantime, Gibson-Smith would stand for re-election at the annual general meeting in May.
Just Group noted that Gibson-Smith was appointed as chair in April 2016, and had previously served as chair of Partnership Assurance Group from May 2013.
“It has been an honour to chair Just Group since its creation,” said Chris Gibson-Smith.
“Having overseen a transformational merger, navigated significant regulatory change and overseen the appointment of a new team of executive directors, now is the right time for me to move on.
“I know that Just is in good hands and wish David and his team well as they take the group forwards.”
David Richardson added that working with Gibson-Smith had been “a privilege”.
“He brought a wealth of experience to the role drawn from a diverse range of sectors, combined with a passion for the business and an astute commercial brain.
“The entire board benefitted from his insights and I have valued his wise counsel.
“He has steered the group through some very challenging times and takes with him our best wishes for the future.”
At 0908 GMT, shares in Just Group were down 4.21% at 54.79p.