Just Group H2 2024 Earnings Report

Just Group EPS Results

• Actual EPS: GBX 36
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Just Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Just Group Announcement Details

• Quarter: H2 2024
• Date: 3/7/2025
• Time: Before Market Opens
• Conference Call Date: Friday, March 7, 2025
• Conference Call Time: 4:30AM ET

Just Group (LON:JUST) provides various retirement income products and services to individual and corporate clients.in the United Kingdom. It offers defined benefit de-risking solutions, guaranteed income for life, secure lifetime income, care plans, and lifetime mortgage service. The company also engages in professional services and distribution business, which offers technology, broking, and advice solutions for corporate clients and pension schemes; and regulated financial advice for pension, investment, and savings. In addition, it provides the writing of insurance products for distribution to the at- or in-retirement market and the DB de-risking market; guaranteed income for life contracts and lifetime mortgages through regulated advice and intermediary services; and licensed software to financial advisers, banks, building societies, life assurance companies, and pension trustees. The company was formerly known as JRP Group plc and changed its name to Just Group plc in May 2017. Just Group plc was founded in 2004 and is based in Reigate, the United Kingdom.

Just Group H2 2024 Earnings Call Transcript

Key Takeaways

• Underlying operating profit up 34% to £504m in FY24, driven by a 36% rise in new business sales to £5.3bn and delivering record operating EPS of 36p.
• Tangible NAV climbed 30p to 254p per share and return on equity hit a record 15.3%, bolstered by strong in-force profit and recurring cash generation.
• Solvency II capital coverage ratio strengthened to 204%, providing substantial headroom for growth despite £42m of regulatory costs.
• Annual dividend increased by 20%, reflecting confidence in the business and its future cash generation.
• Completed its largest DB de-risking deal to date—the £1bn G4S scheme—and expects long-term structural growth in both the £900bn DB market and £1tn retail retirement market.

Presentation

[David Richardson, CEO at Just Group plc]

Good morning, everybody, and welcome to our 2024 full year results presentation. I'm David Richardson, Chief Executive of Just Group plc, and alongside me is Mark Godson, our Group CFO. We also have our Senior Executive team dotted around the room today. I see you talking to them already, but please feel free to chat to them afterwards as well.

[David Richardson, CEO at Just Group plc]

Let's jump straight into the highlights of the results today. I'm delighted that we have produced another excellent set of results and continue to fulfill our purpose to help people achieve a better later life. We've remained focused and disciplined and delivered record sales and profits together with a robust and resilient capital base. We remain sharply focused on increasing shareholder value.

[David Richardson, CEO at Just Group plc]

The tangible net asset value is up another 30p to 254 pence per share, and the return on equity has reached a new high, a new record, increasing to over 15%. Now, driving that is the outstanding growth in profits, which are up 34% to GBP 504 million, equivalent to operating earnings per share of 36p. This has been propelled by a combination of new business sales up 36% to GBP 5.3 billion and strong growth in recurring in force profit.

[David Richardson, CEO at Just Group plc]

Our DB and retail businesses have both contributed to this growth. In particular, the DB business had a breakthrough year, completing our largest transaction to date, the GBP 1.8 billion G4S scheme. Our markets have structural growth drivers, and we have all the capabilities in place to take advantage of our competitive position. We've achieved significant growth with a very low new business strain.

[David Richardson, CEO at Just Group plc]

Our balance sheet is more resilient and more robust, with a solvency ratio of 204%, which provides significant headroom for future growth. We know the importance of a dividend to shareholders. Given the confidence in our business and its future prospects, we have again increased it by 20%. I want to pause a moment here and reflect a little on our achievements over the past three years.

[David Richardson, CEO at Just Group plc]

Back in early 2022, we made a pledge to effectively double profits over a five-year period. We have, I think, by any objective measure, substantially exceeded that pledge and more than doubled profits in three years rather than five. GBP 500,000,000 of profit demonstrates the effective and decisive execution of our strategy and gives us a substantial base to build from.

[David Richardson, CEO at Just Group plc]

Would like to say thank you to our talented colleagues across the group who are responsible for consistently delivering excellent results. We will build on that success to date by capturing the tremendous opportunities available to us in both markets. Now, as a reminder, in DB, we are still at the relatively early stages of capturing some of the potential GBP 1 trillion market opportunity, with around GBP 50 billion per annum being de-risked.

[David Richardson, CEO at Just Group plc]

As the G4S transaction demonstrates, we are now better positioned in this market. In retail, more than GBP 1 trillion of savings from people reaching retirement age over the next decade will be moved from the savings phase to the spending phase of life. As a retirement specialist, we are very well positioned to benefit from the long-term demographic and structural drivers of growth.

[David Richardson, CEO at Just Group plc]

Over time, we believe that we can play a bigger role in helping more customers. I'll say more about this shortly. On this slide, we've grouped the schemes into four categories depending on their relative level of funding compared to insurer buyout level. At the top, around GBP 400 billion of uninsured liabilities are now over 100% funded.

[David Richardson, CEO at Just Group plc]

Some of these schemes are reevaluating their options, but for the majority that opt for an insurer solution, most will transact in the next five years and the remainder over the following five years. The next category are those on a journey to securing full funding within a longer time period, and we expect them to access the DB de-risking market over the next 5-15 years or so.

[David Richardson, CEO at Just Group plc]

The bottom two, much smaller categories representing around 10% of the opportunity, will be looking for innovative solutions, which we could in time provide. In summary, many, many years of significant business opportunities to come. Our DB business is now a whole-of-market service. We transact with large schemes, small schemes, and everything in between.

[David Richardson, CEO at Just Group plc]

On the left, a reminder of why that is important. Large schemes, those over GBP 1 billion, have contributed more than half the market's new business premiums over the last two years. Having broader access to that market segment materially increases the opportunity set available to us. Small schemes, those under GBP 100 million, account for around 10% of the market by volume, although this has significantly increased over the last few years.

[David Richardson, CEO at Just Group plc]

In order to have a whole-of-market tier one DB business, there are some very different capabilities that are needed at each end of the market. Over the last few years, we have invested to develop the capabilities needed to transact with larger schemes, of which asset management and reinsurance skills are prominent. At the same time, we have worked hard to maintain our competitive advantage to win smaller schemes.

[David Richardson, CEO at Just Group plc]

Our technology-enabled leadership through our Beacon price monitoring and bulk quotation service is extremely important. Success is also a function of proposition, service, and relationships. We have worked hard over a long period to develop a market-leading position in all these critical areas. Just is now firmly established as a top-tier whole-of-market business with opportunities to grow in all segments of the market. The market continues to be busy, and so are we.

[David Richardson, CEO at Just Group plc]

We achieved GBP 4.3 billion of funded sales last year, up 43% year on year, and a five-year growth rate of 30% per annum, all at very attractive IRRs. We transacted a record 129 deals during the year. No insurer has previously reached this volume in any single year. This is a significant increase on the 80 transactions completed in 2023 and 56 the year before.

[David Richardson, CEO at Just Group plc]

Our activity levels reflect how prior investment in people, technology, and market insight has equipped us to take advantage of the opportunities available. Our total DB premiums, including the GBP 1 billion of DB partner sales, were GBP 5.4 billion last year. That is over 11% market share. Let us now take a look at what is happening in another buoyant market, retail. There has been a real sea change in advisor behavior.

[David Richardson, CEO at Just Group plc]

The initial catalyst for this was long-term interest rates rising back to more normalized levels in 2022. Higher rates make our guaranteed income products more attractive to customers. There are other underlying changes in advisors' behavior taking place too. They are adjusting their advice models to meet the requirements of consumer duty, which was further reinforced by an FCA review of retirement income advice.

[David Richardson, CEO at Just Group plc]

Furthermore, their advice models are changing as their customers age and shift their focus from saving during their working life to spending during their retirement. It is relatively early days for many of these firms, but for those who are more advanced in adjusting their advice models, this is resulting in more frequent conversations with their clients about the relevance and attractiveness of guaranteed income solutions. This is further supplemented by an increasing volume of assets reaching retirement age each year.

[David Richardson, CEO at Just Group plc]

Putting all this together, we've seen GIFL sales across the market double in the last two years. Our GIFL sales have risen by a similar proportion over the period. Importantly, our medical underwriting expertise continues to equip us to select the most profitable risks in what is now a much greater opportunity pool. Over the next decade, the retail market provides significant opportunities for Just.

[David Richardson, CEO at Just Group plc]

I think it's worth just spending some time looking down the road and unpacking this. Starting on the left, you'll see the stock of investment assets held by people in the U.K. aged 55 and older, available to support them in retirement, is around GBP 2 trillion and growing. Importantly, you'll see that's made up of both pension and non-pension assets. Now, baby boomers receive income from generous defined benefit pensions in addition to their estate pension.

[David Richardson, CEO at Just Group plc]

However, the next generation of retirees, Generation X, must draw on other assets to provide their retirement income, given fewer of them have DB pensions. In addition to pension benefits, they must draw from cash resources, ISAs, general investment accounts, and property equity to aggregate sufficient funds to cover the outgoings of the typical Gen X household. The bar chart in the middle of this slide shows the transfer of Just DC assets from savers into the spending phase, which we primarily participate.

[David Richardson, CEO at Just Group plc]

That flow at the moment is roughly GBP 60 billion per annum, but is expected to increase. That rate of increase will be about 10% per annum, and will add up to a total of over GBP 1 trillion of DC assets reaching retirement age over the next decade, with other non-DC assets on top of that. There is a significant opportunity over the next two decades to help Generation X navigate the challenges of aggregating their assets and tax-efficiently generating income to meet the household's needs.

[David Richardson, CEO at Just Group plc]

We want to play our part in helping many of these 14 million potential customers, and we're investing to explore how we might best achieve this opportunity. In summary, the DB and retail markets have short, medium, and long-term opportunities. There are millions of customers with unmet needs, and for a retirement specialist such as Just, we feel really well positioned to help them and fulfill our purpose in the process. Through brilliant execution, we have successfully captured the opportunities available and created significant shareholder value over the past three years.

[David Richardson, CEO at Just Group plc]

The structural drivers of growth in our markets remain intact. We continue to develop and expand our business model and our capabilities in those markets. We are confident in our ability to grow earnings at an attractive rate from this significantly higher level. This earnings growth will translate directly into increases in shareholder value.

[David Richardson, CEO at Just Group plc]

Over the past two years, the tangible net asset value has grown by 34%, or GBP 0.64, to GBP 2.54 per share. We are committed to consistently compounding the value of the business and translating the exceptional operating performance into an attractive return on equity in excess of our target of 12%, and as a result, generating significant shareholder value. With that, I'll hand over to Mark.

[Mark Godson, CFO at Just Group plc]

Thank you, David, and good morning to you all. As David mentioned, we continue to see significant opportunities to deploy our capital and capabilities into our markets and thus deliver our strategic objectives both now and into the future. Let's start with one of my favorite slides, which neatly demonstrates our consistent and strong performance: outstanding growth delivered sustainably.

[Mark Godson, CFO at Just Group plc]

As you can see on the top left, sales grew 34% in 2024, delivering a five-year compound growth rate of 25%. The chart on the bottom left shows how that growth continues to be disciplined, with a focus on returns and shareholder value. High growth and an 8.7% margin, which is in line with the average over the period.

[Mark Godson, CFO at Just Group plc]

Moving to the right-hand side in capital, we have an increasingly resilient and stable capital base with a large buffer. As important as the absolute capital strength is that our capital sensitivities, in particular to interest rates and property, continue to reduce from historic levels due to management actions. A high and stable capital surplus gives us optionality and flexibility as we execute on our long-term growth ambitions.

[Mark Godson, CFO at Just Group plc]

Finally, the graph on the bottom right shows one of the key pillars of our success. In a competitive market, we have demonstrated superb execution and delivered a 1.3% new business strain. Over the last five years, we have consistently beaten our target of less than 2.5% of premium. When we operate in buoyant markets, price with discipline, and maintain good cost control, we can comfortably fund attractive levels of new business growth from our own means.

[Mark Godson, CFO at Just Group plc]

Underlying operating profit is up 34% to GBP 504 million, with earnings per share up a similar amount to GBP 0.36. Let us go through the main drivers. New business profits were up by 30% to GBP 460 million, driven by volumes. The margin of 8.7% is an excellent result, particularly given the tight credit markets in 2024. Our pricing discipline and market insight enables a continued focus on risk selection.

[Mark Godson, CFO at Just Group plc]

This is augmented by an excellent performance from our growing asset management team. In force operating profit is up a quarter, primarily driven by the investment return on a higher stock of surplus assets. The growing balance sheet provides a growing source of recurring profit. Other group company results and development expenditure increased as we continue to invest in proposition development and infrastructure to enable us to scale and build the business for the future.

[Mark Godson, CFO at Just Group plc]

Finance costs were broadly unchanged. Our business plans include increased issuance in the future as our balance sheet grows. In 2024, we were very pleased to refinance two bonds with a single new GBP 400 million Tier 2 at an attractive coupon. Pleasingly, return on equity rose by 1.8 percentage points to 15.3%, well above our greater than 12% target that we set in March last year.

[Mark Godson, CFO at Just Group plc]

The business is firing on all cylinders with our new, with our low strain new business model, combining with asset and liability origination to drive returns at our mid-teens or above IRR targets. As we execute this strategy, it will allow us to significantly add to existing shareholder value. Much of this growth comes from the growth in CSM, which represents tangible shareholder value.

[Mark Godson, CFO at Just Group plc]

Here we look at it in a little more detail. The stock of CSM continues to grow rapidly, up 19% over the year. From this growing stock, a predictable portion amortizes into the in force profit, which then flows into statutory profit. The scale of our new business profits versus the size of the current business really drives the growth in CSM stock.

[Mark Godson, CFO at Just Group plc]

As the chart on the top right demonstrates, the GBP 460 million of new business profit is three times the scale of the release from the in force. On the bottom right, a reminder of how all this has combined to grow the tangible net asset value to GBP 2.6 billion. Here, we show the key components of the solvency to surplus movement during a period and a reminder that the closing surplus and ratio are pro forma, taking into account the post-year-end GBP 155 million Tier 3 repayment that has already been refinanced in September 2024.

[Mark Godson, CFO at Just Group plc]

Cash generation grew to GBP 119 million. From this, we funded GBP 5.3 billion of new business through GBP 71 million of capital strain. Adding GBP 33 million of management actions, primarily the implementation of an internal model in relation to the Partnership business, resulted in a total of GBP 81 million of organic capital generation.

[Mark Godson, CFO at Just Group plc]

Given the growth in the balance sheet, these organic or operating items lead to a small reduction in the ratio. Moving forward, we expect that cash generation will grow in line with growth in the balance sheet. In addition, we have substantial surplus capital available to support our growth ambitions.

[Mark Godson, CFO at Just Group plc]

Moving now to the right-hand side of the chart, the circa 80 basis points increase in interest rates had a relatively small negative impact on the surplus, but a positive effect on the capital coverage ratio. Offsetting the positive management actions, there were GBP 42 million of regulatory costs in relation to the final leg of the Solvency U.K. reforms. In aggregate, these operating and non-operating movements have translated to a very healthy Solvency II capital coverage ratio of 204%.

[Mark Godson, CFO at Just Group plc]

In order to participate in the growth opportunities available, we need to have the right investments to support new business pricing and deliver reliable and secure returns to shareholders. On this slide, we give a picture of how our investment capabilities have evolved significantly over the last five years. At the beginning of this evolution, we took most of our public credit management in-house. At the same time, we expanded our roster of private credit managers as we rotated the illiquid origination side of our business.

[Mark Godson, CFO at Just Group plc]

During 2023, we started sourcing additional illiquid asset classes ourselves. During 2024, that grew significantly to GBP 1.3 billion of illiquids through our expanded investment capabilities. These assets have attractive risk-reward characteristics relative to public markets, such as the charge over the asset, which provides rating stability. In addition, our external asset manager origination provides optionality to flex allocations between different asset classes.

[Mark Godson, CFO at Just Group plc]

Our investment strategy has enabled us to keep pace with the very strong growth in premiums over the last five years, while at the same time increasingly diversifying the investment portfolio. All in all, around 80% of new assets sourced in 2024, and also 80% of our GBP 27 billion investment assets on our balance sheet are managed internally. As we grow, we're investing more U.K. pension money back into the U.K. and we're keen to do more and play an even greater role as part of the industry's GBP 100 billion investment pledge following the Solvency U.K. reforms.

[Mark Godson, CFO at Just Group plc]

We can now invest up to GBP 250 million at a time, and we have a strong preference for U.K. assets that are matching adjustment compliant and preferably inflation-linked. On this slide, you can see examples of the U.K. investments we've made this year: higher education, social housing, and financing hospitals. The latter two were internally sourced with triple-digit million ticket sizes. In conclusion, a very strong set of results that the team should be very proud of, underpinned by strong capabilities to continue delivery into the future. With that, I'll hand back to David for his concluding remarks.

[David Richardson, CEO at Just Group plc]

Great. Good stuff. Thank you, Mark. I've now deliberately repeated this slide from last year. Just to remind you how important this subject is to me and to our leadership team, and in fact, a theme that investors often ask me about. With talent and high demand, how do we attract and retain high-quality people?

[David Richardson, CEO at Just Group plc]

When we speak with prospective recruits about joining Just, there are typically three areas they pick out that attract them to us beyond the role itself. The first of those is our purpose. We help people achieve a better later life, and that is why we exist. This resonates strongly with most people.

[David Richardson, CEO at Just Group plc]

Secondly, they are keen to join a growing and successful business. Thirdly, they are attracted by a culture driven by impactful behaviors and the environment that we have built at Just and which they hear about within a relatively small industry. These behaviors are shown on the left-hand side.

[David Richardson, CEO at Just Group plc]

We believe that our strong and distinctive culture is a strategic differentiator that empowers us to attract new talent whilst also creating an environment that builds a real sense of belonging amongst our existing colleagues. As demonstrated by the results today, this collective talent enables us to consistently deliver excellent results. Let me sum up with some final conclusions. We have delivered what I hope you agree are another set of excellent results.

[David Richardson, CEO at Just Group plc]

We are exceptionally well positioned to convert the opportunities available so that we may help more customers and continue building substantial value for shareholders. We can only achieve these outcomes when customers place their trust in Just. Our colleagues always put the customer first, and we are acutely conscious of the responsibility that entails.

[David Richardson, CEO at Just Group plc]

We have a proven track record of being both innovative and disciplined, and that's equipped us to consistently exceed the promises we've made. We've developed a winning formula, one which will ensure we fulfill our purpose to help people achieve a better later life. Putting all of this together, we're more optimistic than ever about the future for Just. I think now we can move to questions.

[David Richardson, CEO at Just Group plc]

If you could simply raise your hand and wait for the microphone before introducing yourself and asking your question. I had not even looked up Mandeep, but I saw your hand. For those of you who have joined the webcast, please type in your question, and we will read those shortly. Mandeep, I think you are first on the draw.

[Mandeep Jagpal, Equity Analyst at RBC Capital Markets]

Good morning, everyone. Mandeep Jagpal, RBC Capital Markets. Three for me, please. First one on pipeline. You wrote a significant number of transactions on the Beacon platform last year, very attractive margins. Would you be able to give an indication of the net additions to that platform? Even with all these deals going through, do you have more schemes coming on than going off? On the dividend growth of 20%, could you provide some color of the decision-making framework that gives you the confidence to make this substantial increase?

[Mandeep Jagpal, Equity Analyst at RBC Capital Markets]

On growth, Mark mentioned that Just will fund new business growth through its own means. Just a clarification here, is there a particular metric you had in mind, for example, positive underlying organic capital generation, or is this just the same statement as before where you mean you have enough capital more broadly for your overall growth plans?

[David Richardson, CEO at Just Group plc]

Okay, great. Thank you for that, Mandeep. I'll let Mark pick up the second and third ones around dividend growth and how also more generally we think about funding for growth. In terms of DB pipeline, probably a few things to comment on there. First of all, as you said yourself in the question, Beacon, which is very much our market-leading bulk quotation service that we offer across the market, continues to go from strength to strength.

[David Richardson, CEO at Just Group plc]

We've now got well over 300 schemes loaded onto that system with a regular addition every single month. Also, as I mentioned in my comments, by doing our first-ever greater than GBP 1 billion deal in 2024, we have now opened up that segment more fully to us. We see a number of attractive opportunities at the end of the market. You put it together, our pipeline is strong, and we remain confident about our growth plans for the year ahead.

[David Richardson, CEO at Just Group plc]

The only thing that is probably worth noting is that the DB market does tend to be more weighted towards the second half of the year. I would say looking at, it is only early March, but looking at the pace at which transactions are moving through the pipeline, I think that may be particularly the case in 2025. Still early to say, but that is kind of the early signals at this stage.

[Mark Godson, CFO at Just Group plc]

Yeah, so on dividend, I mean, we consider all the normal things that you would imagine we consider. We look at cash earnings, capital, all of those things, and we look at it over the medium term as well. We do not just look at the coverage in one year. We look at it over our business planning horizon, and that is how we get to a position where we are very comfortable with the dividend and the dividend growth.

[Mark Godson, CFO at Just Group plc]

What I would say is that, as you know, dividends are a very small amount of our surplus generation, and we use most of the surplus that we generate to invest in new business, and that will continue to be the case. Very much at the moment, we are looking at very attractive markets in both of our core markets. As such, we're really looking to utilize our surplus generation to continue to grow the business rather than materially create dividend as a material component of our capital usage, but to demonstrate confidence in the longer-term value of this business.

[Mark Godson, CFO at Just Group plc]

That's why we want to increase by the rate that we have. The comment around growth through means is very similar to the point made last time. We have the capital availability on the balance sheet today to make our growth ambitions real. I mentioned we might well become a net issuer of debt over time as we grow, but certainly it's within our means to grow as we want to.

[David Richardson, CEO at Just Group plc]

Brilliant. Thanks, Mark. Get you a second. Just, I think it was Barrie just about next. I'll get to you, Larissa.

[Barrie Cornes, Insurance Analyst at Panmure Liberum]

Good morning. It's Barrie Cornes from Panmure Liberum. I've got three questions, but congratulations on a good set of figures despite the reaction to the share price this morning. It's good. First question, in terms of targets, obviously, you've achieved the big target within three years rather than five.

[Barrie Cornes, Insurance Analyst at Panmure Liberum]

Why have you not set any new targets given how confident you are? Clearly. The second question is on the balance sheet, you've desensitized the balance sheet. I wonder if you could give some details of what you've done during the year, please. And thirdly, the solvency coverage ratio has been impacted by GBP 42 million regulatory change. Can you just tell us what that is, please? Thank you.

[David Richardson, CEO at Just Group plc]

Right. Yep. Again, I'll lead off on the first one and then invite Mark to contribute to that and to the last two. As you said in your question, Barrie, when we just indulge me with a little bit of history for everyone who may not have been around, three years ago, we set this target that we would double profits over a five-year period. Clearly, we've gone a lot further than that. We've increased our profits by a factor of 2.4, and we've done it in three years rather than five years.

[David Richardson, CEO at Just Group plc]

It was important when we set that target back three years ago that after a period of turnaround, we were demonstrating not just our confidence in future execution, but that we were setting a very clear target against which we could be measured and against which we could build credibility of delivery. I think having substantially outperformed that and done it in three years rather than five, we feel we've kind of ticked those boxes.

[David Richardson, CEO at Just Group plc]

How we feel about it is, and I've said in my comments, we have got a tremendous new business franchise and great capability supporting that. We feel confident that that, together with the market opportunities, will allow us to grow earnings at an attractive rate from this much higher level than anyone had anticipated a few years ago. We feel good about that. We also feel good about the ROE target, which I mentioned remains. I don't know, Mark, if you want to add anything to that.

[Mark Godson, CFO at Just Group plc]

Yeah, maybe just to say, if you look at consensus, both in terms of earning growth and ROE over the coming years, their double-digit earnings growth and mid-teens ROE growth, and we're certainly very comfortable with where consensus is. We're not looking to change any consensus views at all. We're very comfortable that we're continuing to be a growth business from this point forward.

[Mark Godson, CFO at Just Group plc]

Just to pick up then on the second two questions, balance sheet sensitivities, primarily through management actions. If you think of the two that have come down the most, interest rates and property. With interest rates, we have extended our interest rate hedging on the solvency balance sheet. If you remember, we hedge IFRS.

[Mark Godson, CFO at Just Group plc]

We hedge TNAV, and we essentially take the interest rate exposure out of TNAV. In order to also hedge the solvency ratio, we have a portfolio of held to maturity gilts, and we've extended that to reduce that interest rate sensitivity to the solvency ratio. On property, it is predominantly driven by the lower investments in LTMs as a proportion of the asset portfolio over time.This year, we originated something like GBP 300 million of LTMs versus GBP 5.3 billion of premiums. It just keeps diluting the LTM portfolio and therefore the property risk.

[Barrie Cornes, Insurance Analyst at Panmure Liberum]

There is a GBP 42 million reg change.

[Mark Godson, CFO at Just Group plc]

Oh, yeah, sorry. That was the third question, the GBP 42 million reg change. That was the final part of the Solvency U.K. reforms, which was essentially, they call them the fundamental spread add-ons. It is where we look through our asset portfolio and where we think we need to add a bit of prudence into the risk deduction. We do that. It is a one-way gate, effectively, the way that it works. You do not take anything off where you think there is overprudence, but you are allowed to put something on.

[David Richardson, CEO at Just Group plc]

Larissa, please.

[Larissa van Deventer, Equity Research Analyst at Barclays]

Thank you. Congratulations from my side as well for beating most of the targets, sorry, most of the expectations today. Three from my side. The first one, congratulations on the very big deal that you did in the second half of last year. However, the regulator has targeted Funded Re as an area of interest. What are your thoughts about using Funded Re going forward?

[Larissa van Deventer, Equity Research Analyst at Barclays]

The second one on margins, very robust margins despite the bigger deal, but how should we think about margins as gilt rates come down and also if credit spreads do not widen concurrently? And then the third one, if you can give us a little bit of color on how you see the issue on ground rents moving and whether you have and how you think about your provision in that regard. Thank you.

[David Richardson, CEO at Just Group plc]

Okay. Same pattern. I will do the first one. Mark, you pick up the latter two. Funded re, yes, the PRA issued its supervisory statement on expectations it has on firms who enter into Funded Re transactions. We feel comfortable with what we're doing and that our risk practices, management, and controls around that absolutely comply with the supervisory statement.

[David Richardson, CEO at Just Group plc]

Just more generally, each time we have entered into a Funded Re transaction in the past, we've always done that on a very much open book basis with the regulator. We have shared that with them, shared our views, and answered any questions they have on that. We know they've been very clear to PRA at the top of the house that this is a kind of thematic issue for them across the sector.

[David Richardson, CEO at Just Group plc]

We have always viewed Funded Re as a potential option to enhance margins, but not something on which our profitability, our margins, or our future expectations are dependent on. That was always the case in the past, and that remains the case in the future. We will continue to use Funded Re only if it's attractive and in moderation.

[Mark Godson, CFO at Just Group plc]

Yep. Picking up on the two questions. The first one on margin, you asked about gilt rates and credit. Gilt rates themselves probably do not directly impact margin so much. They can, at the edges, impact demand because it changes, particularly on the retail side, the attractiveness of the product sometimes, but margin-wise, relatively stable. Credit, we are seeing tight public credit markets, particularly at the moment, and that does have a little bit of a reduction in margin, but not substantial.

[Mark Godson, CFO at Just Group plc]

As you saw, we delivered 8.7 in 2024, and we had tight credit markets through most of that period. We are confident that over the medium term, our margin is as it has been in the last few years. We are not looking at margin erosion. On ground rents, no particular news on the specific issue that we were talking about last year. If you remember, we have a small portfolio where we financed some ground rents, about GBP 150 million. Pretty small.

[Mark Godson, CFO at Just Group plc]

There has been absolutely no news and almost a lack of news on that topic. Nothing particular. The government did release a white paper earlier in the week around Commonhold, which is particularly focused on new builds. The impact is essentially not having leasehold properties in the future. There were some components about people being able to buy out their freeholds, but ultimately, nothing that's in any way changed our worry about that topic or exposure.

[David Richardson, CEO at Just Group plc]

Thank you. I'll give you a second, but yes, Rhea.

[Rhea Shah, Equity Research Analyst at Deutsche Bank]

Thank you. Rhea Shah, Deutsche Bank. Three questions. The first, just on development costs and strategic expenditure. Development costs, in particular, did tick up quite a bit year on year. I mean, what are your expectations for this going forward? Because until now, it's been ticking up a couple of million per year. The second one is around cash generation, but also capital generation. I think, Mark, you said that capital generation should grow with the balance sheet going forwards. If you could just clarify that, but also cash generation.

[Rhea Shah, Equity Research Analyst at Deutsche Bank]

I remember you did say from 2025 onwards, cash would also grow with the book. Just a clarification on that. The third one is also back to growth ambitions and the attractive growth rates. It is good to see that Mark is happy with where the market and consensus is. There was also a medium-term guidance of growing profit by 15% over the medium term. I just want to see if that is still in play and what medium term means for you.

[David Richardson, CEO at Just Group plc]

Mark, do you want to open up on the questions on expenditure and cash generation?

[Mark Godson, CFO at Just Group plc]

Yes, happy to. Yes, you are right. Our development costs and our strategic costs, actually, but predominantly our development costs increased over the year. What that is, is that is us investing in our capabilities. That is us ensuring that where we have things that we are ahead of the market on, we are continuing to invest, we are not resting on our laurels.

[Mark Godson, CFO at Just Group plc]

Where we think we need to build new operational capabilities, we are doing that. We are doing it from our position of strength. You should not rest on your laurels. You should continue to invest in the business. Strategic costs are, by definition, a bit more strategic, and those are things where predominantly we are looking at new propositions. David sort of alluded to it in his comments, particularly around the retail space, where we think there is more we can do over the medium term in that retirement market.

[Mark Godson, CFO at Just Group plc]

One thing I would say, particularly with the development costs, I mean, we still delivered over 15% ROE, including those costs. We are doing it in an affordable way. We are ensuring that we are only investing an appropriate amount of money in that activity. On your comment on cash and capital, to reiterate and be clearer, cash generation will grow in line with the balance sheet. The cash that comes off our enforced book, to which we then decide what we do with it, will grow as the balance sheet grows, and you'll see that over time.

[David Richardson, CEO at Just Group plc]

Great. Thanks for the clarifying question on the 15% profit growth target. That was the one I was referring to three years ago, and that was essentially guiding to doubling over five years. Given that we've kind of significantly exceeded that, it's effectively redundant. Just added just a little bit of emphasis to Mark's comments on development and strategic expenditure. I hope to most people in the room, it's fairly self-evident that that is the right thing to do to invest for the future.

[David Richardson, CEO at Just Group plc]

It is also investing in the capabilities that allow you to continue to grow in a sustainable way. When you have got a business which has more than doubled its sales in a three-year period, it is not just a nice to have, it is an imperative to develop in your system so that you can grow, continue to grow. However, it is all about longer-term taking this position of strength we have got and using that to build for the future.

[David Richardson, CEO at Just Group plc]

I think it would be pretty short-sighted if you are not doing that right now. We have got absolutely loads to go at. If you look at the comments that I made on the DB market, you could think about that as a GBP 900 billion opportunity over the next 15 years. A long way to run, but it's now you need to be building for the future and to play into those trends that I spoke about for Gen X, which themselves are going to play out over the next 15-20 years. Abid? And I'll get you, Andreas, next.

[Abid Hussain, Managing Director and Equity Analyst at Panmure Liberum]

Morning. It's Abid Hussain from Panmure Liberum. I've got three questions, if I can. The first one is on the share price. What do you think the market is missing today? It feels like the double-digit earnings growth is still a sensible pledge. When do you think you might hit the symptom of earnings or GBP 1 billion in sort of absolute pound amounts?

[Abid Hussain, Managing Director and Equity Analyst at Panmure Liberum]

The second question is on growth. It feels like the opportunity set for you across the retirement space, so both bulks and retail is huge. I'm just wondering if there are any self-imposed or other constraints that you face internally in terms of growing. The final one is on Beacon. Can you just talk to how Beacon works and whether that tech can be leveraged into the retail IFA space? I know your development spend is in that direction, so just curious if you can provide any more color on that.

[David Richardson, CEO at Just Group plc]

Okay. Let me speak to each of those, and Mark also absolutely welcome to join in on the growth point as well. Share price, I'm not going to particularly comment on because I think there's a lot of people in the room better qualified to do that. The only thing I would just, again, emphasize is what Mark and I have already said, which is that we feel we can really grow earnings from this substantially higher level at attractive rates, comfortable consensus, double-digit profit growth that's in that over the short term, and ROEs, which, as Mark said, are kind of in the kind of the mid-teens.

[David Richardson, CEO at Just Group plc]

That is all stuff we're comfortable with. In terms of Beacon, it's not really transferable to the retail space. Actually, frankly, given the opportunity set, there is GBP 100 billion worth of schemes with less than GBP 100 million of assets, which Beacon's not exclusively pointing at small schemes, but it's particularly valuable there. We want that focused on the DB mark, and we continue to invest in it. You must keep moving to stay ahead.

[David Richardson, CEO at Just Group plc]

Hopefully, the numbers have supported the fact that we're not just staying ahead, but if anything, slightly extending that lead. However, we are also investing in the retail space and systems as well. That'd be an example of the development expenditure that Mark was explaining. We are investing in systems so that we can serve advisors in, frankly, a much more suitable way for 2025.

[David Richardson, CEO at Just Group plc]

A lot of the ways that the industry serves advisors today was built a long time ago. We are trying to make that step forward. Growth, any self-imposed constraint, it's just a balancing act. There is no hard limit. As Mark has said, not only are we retaining most of our surplus capital we're generating to support growth, we've also got surplus capital with 204%.

[David Richardson, CEO at Just Group plc]

It's more about doing it in a way where you're kind of expanding the whole balloon at the same time, your capabilities, your asset origination, your reinsurance, your business development capabilities, but also about maintaining your pricing discipline. Do not chase volumes in the market. If the opportunities present themselves, we will absolutely strike. We are not imposing any hard limit or anything like that. I think, Andreas, you've been patiently waiting.

[Andreas van Embden, Insurance Analyst at Peel Hunt]

Yeah, thank you, Andreas from Peel Hunt. Just thinking about the comments you made about new propositions. Obviously, you've been basically a one-product company. You sell annuities. I just wonder what you're thinking about diversifying your product set. Are you looking into that?

[Andreas van Embden, Insurance Analyst at Peel Hunt]

If so, what types of other solutions are you thinking about offering in the future to diversify your business model? The second question is about the sort of capital requirement. It's come down. I just wonder whether that's purely due to the movement in interest rates, or whether any sort of management actions you're considering just to keep that capital requirement at a low level as you grow your asset base. Thank you.

[David Richardson, CEO at Just Group plc]

Great, Andreas. I'll pick up the first one, and Mark lets you answer the second one. I think probably the right way to think about that future opportunity set, certainly in our opinion, is to always concentrate on the customer. Be customer-led in all of your thinking. As I kind of alluded to, what you've got with Gen X is a cohort, an enormous cohort of people who are going to be getting to retirement.

[David Richardson, CEO at Just Group plc]

Not only have they not got the safety net of a substantial defined benefit or final salary pension scheme to fall back on, they also tend to have more complex multi-generational households. You have parents who are living a lot longer. You have kids who are hanging around the house a lot longer and everything that goes on around that.

[David Richardson, CEO at Just Group plc]

They have a disparate range of savings of multiple DC part sizes, other savings, a lot in cash. You look at industry numbers, a crazy amount of money in cash. I think it is a huge opportunity to help those people who have complex solutions to solve, a mix of investments available to help them really engage with retirement as a life phase they should get excited about, but which does have some complexities in which we can help them on.

[David Richardson, CEO at Just Group plc]

That for me is less about new products, certainly new products in the industry. I think the industry has got the right product set, give or take. You might have to reshape the odd bit here and there. For me, it's more about how do you engage customers in that at scale using technology. High net worth can still be served at the high-touch approach by financial advisors, but how can we bring tech to serve mass market, mass affluent in a way that really allows them to step into retirement with confidence? From that, SCR movements.

[Mark Godson, CFO at Just Group plc]

You're right, the rates have brought the SCR down because we hit the ratio. Rates go up, and both the own funds and the SCR come down to keep the ratio stable. The one other thing to call out is the Partnership internal model.

[Mark Godson, CFO at Just Group plc]

Over the second half of last year, we moved the partnership business, our kind of closed small entity, onto the group internal model. That released approximately GBP 60 million of SCR, predominantly because you can then allow for the diversification between the different businesses. When you get into the appendices, that's what you see on page 29 in the management actions and other items. That's the main thing going on there.

[William Hawkins, Director of Research at KBW]

Hi, thank you. I'm William Hawkins from KBW. Just the one question from me. Could you talk maybe slightly following up on what you've just been saying, talk a bit more about the commercial product mix trends in the GIFL book? I think two, three years ago, when we were first talking about the inflation spike, you were very much reassuring that your product was kind of effectively a level annuity, which is great for the company, tougher for the customer.

[William Hawkins, Director of Research at KBW]

Presumably, there's much more of a shift towards some kind of ratchet annuity product with a guaranteed increase in the annuity or maybe more inflation linkage in the annuities. I'm just kind of wondering how you're seeing demand moving and product evolution. Thank you.

[David Richardson, CEO at Just Group plc]

Yeah. First of all, yes, we do offer inflation-linked annuities. We offer annuities that step up in fixed compounding increments, fixed percentage increases. We still find, though, that the general propensity of customers is to buy level annuities. Part of the reason of that is, as they look at their immediate needs, that's what they're solving for. Also, certainly, as you get to slightly wealthier clients, some form of fixed income will be part of an overall retirement strategy.

[David Richardson, CEO at Just Group plc]

It will be blended with them remaining invested in growth assets, which under their package or advice they get from their financial intermediary, that is where they feel they get that kind of inflation protection as well. No massive change on that front in this particular guaranteed income for life market. Sorry, Dom, just first, yeah.

[Dom O'Mahony, Equity Analyst at BNP Paribas Exane]

Thanks very much. Dom O'Mahony, BNP Paribas Exane. Really just one question with a couple of subparts. The new business strain is remarkably low, much lower than your targets.

[Dom O'Mahony, Equity Analyst at BNP Paribas Exane]

Consistently so, when you reflect back on the last few years, are you surprised by this? Also, could you just diagnose why it has been so low, so consistently? Are you not tempted to take on a bit more risk, use a bit more of that enormous capital headroom, maybe add to your new business profit metrics? Thank you.

[David Richardson, CEO at Just Group plc]

Do you want to open up on that, Mark?

[Mark Godson, CFO at Just Group plc]

Happy to. You are right. We have historically had a low new business strain model since we introduced that target of having below 2.5% of strain. There are a couple of different things that go into that, predominantly pricing. New business strain effectively is the difference between the premium you charge and the reserves and capital you put up. It is really the pricing bit that changes that, and that is impacted by competition, and it is also impacted by market conditions at the time, that sort of thing. We absolutely focus on it.

[Mark Godson, CFO at Just Group plc]

It is really a core part of our business model because we want to grow sustainably. We want to continue to be able to invest more but get the highest return for the investments that we are making. So much so that it is a core part of compensation schemes, for example. Would we be happy to take more risk? We're not looking to change the 2.5%.

[Mark Godson, CFO at Just Group plc]

Even though we've been well under that, we would happily, I think, if it was 2%, we'd still be totally happy that that was well below our target. Within that range, I think we're very happy to make sure we invest. I think we just want to keep making sure we invest each one of our pounds in the highest returning place that we can invest it. That's the mechanism that supports that.

[David Richardson, CEO at Just Group plc]

Super. Before we go, any other questions? Mike's last question. Sorry, Abid. We've only had two out of pound really room. Markus, we'll let you have the final say.

[David Richardson, CEO at Just Group plc]

Sorry about that. It's Markus [Audio distortion] from Jefferies. Two for me, please. First of all, in the billion-plus market, to what extent can you go alone there, noting that the partner on the last transaction you worked with is now looking to set up in the U.K. on its own?

[David Richardson, CEO at Just Group plc]

To what extent is that relationship sort of done now, given that they're probably a competitor for you? Secondly, on leverage, Mark, you mentioned that you expect to be a net issuer of debt going forward. You provide three measures of leverage in the deck. The Fitch is extremely generous. Let's just be open about that. What leverage metric are you going to be focusing on when thinking about net issuance? Thank you.

[David Richardson, CEO at Just Group plc]

Great. Do you want to go leverage first?

[Mark Godson, CFO at Just Group plc]

Happy to finish up on that one. You're right. In the deck, we show IFRS, Solvency II, and Fitch. I think the market looks predominantly at both IFRS and Solvency II. Therefore, so do we. We're comfortable with where both of those ratios are at the moment.

[Mark Godson, CFO at Just Group plc]

As we grow, we would expect them to come down. Where the ratios are today, we're totally comfortable with. We're not looking to particularly increase them. If you imagine the range between 27-32, the two numbers today, that feels like a sensible place.

[Mark Godson, CFO at Just Group plc]

Would we ever go up one or two percentage points above that if we could see that we have a lot of growth to grow into? Maybe. We are not looking to lever the balance sheet in any particular way. On your question on billion-pound plus deals, could we do those on our own? Absolutely.

[Mark Godson, CFO at Just Group plc]

That is just kind of echoing my comments from earlier. There is no dependence in the business model on funded re. It is an option and can be an incredibly valuable option. No, we absolutely have the capabilities. Mark gave you a little flavor there of how we are increasing and improving our asset origination capabilities. Yeah, very excited about what we might build at that larger deal space over time.

[David Richardson, CEO at Just Group plc]

Listen, thank you all for your attention and your questions. We've got a few minutes at the end if you want to just catch up over teas and some pastries left at the back. Thank you very much for your questions and your support. Thank you.

Participants

Executives

• David Richardson, CEO
• Mark Godson, CFO

Analysts

• Mandeep Jagpal, Equity Analyst at RBC Capital Markets
• Dom O'Mahony, Equity Analyst at BNP Paribas Exane
• Andreas van Embden, Insurance Analyst at Peel Hunt
• Analyst at Jefferies
• Abid Hussain, Managing Director and Equity Analyst at Panmure Liberum
• Larissa van Deventer, Equity Research Analyst at Barclays
• William Hawkins, Director of Research at KBW
• Barrie Cornes, Insurance Analyst at Panmure Liberum
• Rhea Shah, Equity Research Analyst at Deutsche Bank