Just Group plc has announced its results for the year ended 31 December 2023.
Profitable and sustainable growth1
| · | Underlying operating profit2 up 47% to £377m (FY 22: £257m), driven by significantly higher new business and in-force profits. | |
| · | Retirement Income sales2 have grown by 24% to £3.9bn (FY 22: £3.3bn). Pricing discipline and risk selection in buoyant markets have led to an increased margin of 9.1% (FY 22: 8.5%). This has combined to drive a 33% increase in new business profits to £355m (FY 22: £266m). | |
| · | Momentum continues into 2024. The DB market had a record year in 2023 (c.£50bn), while the GIfL market was at its highest level in a decade, up 46% to £5.3bn. That momentum has carried into 2024 and we expect the strong structural growth drivers of each market to continue well into the future. |
Strong Solvency II and IFRS1
| · | Capital coverage ratio is a very healthy 197%3 and more resilient (31 December 2022: 199%3). The interest rate sensitivity is significantly reduced, through locking-in interest rate gains. Property sensitivity has further reduced, as we increasingly diversify the investment portfolio. | |
| · | New business strain2 at 0.9% (FY 22: 1.9%) is exceptionally low. This outperformance is once again well inside our target of below 2.5% of premium. Underlying capital generation, after new business strain, has grown by 67% to £57m (FY 22: £34m). | |
| · | Adjusted profit before tax2 was £520m (FY 22: Adjusted loss before tax £167m), driven by strong growth in underlying operating profit, positive longevity assumption changes, and economic profits. Of this £520m, £348m of profit is deferred to the CSM4 , leaving an IFRS profit before tax of £172m (FY 22: IFRS loss before tax of £494m). |
Delivering shareholder value
| · | Improved return on equity2 to 13.5% and tangible net assets per share2 to 224p (FY 22: 10.3% and 31 December 2022: 190p respectively). Increasing our target return on equity from greater than 10% to greater than 12%. | |
| · | Dividend of 2.08p per share, 20% growth. (FY 22: 1.73p, 15% growth) Increased growth driven by confidence in the strong fundamentals and future prospects of the business. | |
| · | Remain confident in our ability to deliver 15% growth in underlying operating profit from this higher base. Therefore, we are forecasting that 2024 underlying operating profit will be at least double the 2021 level of £211m. |
David Richardson, Just Group Chief Executive Officer, said:
“We are delighted with our financial performance in 2023, a record year for the Group, and are confident of exceeding our medium term profit growth pledge. As such, we now expect to achieve our target of doubling profits in three years instead of the originally intended five. Given the multiple opportunities available and strong structural growth drivers in our chosen markets, we have never been more confident in our ability to deliver sustainable and compounding growth.
We have a growth mindset and we’ve developed a winning formula – one which will ensure we fulfil our purpose, to help people achieve a better later life, while building substantial value for shareholders.”
Notes
1 All comparatives throughout the document are restated under IFRS 17.
2 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. APMs are identified in the glossary at the end of this announcement. Adjusted operating profit is reconciled to IFRS profit before tax in the Business Review.
3 The 31 December 2023 Solvency II capital coverage ratio includes a formal recalculation of TMTP, and is estimated. At 31 December 2022 the Solvency II figures include a formal TMTP recalculation.
4 Contractual Service Margin.
For those analysts who have registered, a presentation will take place today at 1 Angel Lane, London, EC4R 3AB, commencing at 09:30 am. The presentation will also be available via a live webcast.
| FINANCIAL CALENDAR | DATE |
| Ex-dividend date for final dividend | 11 April 2024 |
| Record date for final dividend | 12 April 2024 |
| Payment of final dividend | 15 May 2024 |
A copy of this announcement, the presentation slides and the transcript will be available on the Group’s website www.justgroupplc.co.uk.
Chief Executive Officer’s statement
WE HAVE NEVER BEEN STRONGER
We continue to exceed the promises we’ve made and we are very optimistic about the future.
I am very pleased to present my Chief Executive Officer’s Statement for 2023. We’ve delivered an exceptionally strong performance and are extremely well positioned to continue benefiting from the positive drivers and favourable demographics supporting both of our
markets.
RETIREMENT INCOME SALES GROWTH
The rise in interest rates during 2022 and 2023 had a positive effect on both the Defined Benefit and retail Guaranteed Income for Life markets.
Shareholder funded sales have grown by 24% to £3.9bn. Our DB and retail businesses both contributed to this growth and have started the year with positive momentum. This gives us increased confidence we will achieve our growth ambitions in 2024.
DEFINED BENEFIT DE-RISKING BUSINESS
Our DB business continues to thrive and recorded total sales of £3.4bn, up 21%. We completed 80 transactions during the year, which is a substantial increase from 56 completed in 2022. Our bulk quotation service continues to grow in popularity, with completed transactions from 17 employee benefit consultants (“EBC”) during the year. We have hundreds of schemes onboarded and this service provides a vibrant market for schemes of all sizes and a steady source of smaller deal completions. Indeed around 40 completions in 2023 were schemes with fewer than 100 members and they represent half the schemes currently onboarded.
As well as expanding our leadership position in the smaller transaction size segment, we will also drive growth by securing additional larger transactions. We have significant pricing and deal experience having written almost 400 DB transactions since entering the market in 2013, which is more than one-in-five of all transactions completed since then. The flexibility provided by our stronger capital position and expanded panel of reinsurance partners further supports our participation in the larger transaction segment.
The DB market had a record year in 2023, with c.£50bn of new business volumes (source LCP, WTW). These EBCs are forecasting that industry volumes in 2024 and beyond could grow significantly from this higher base.
RETAIL BUSINESS
I am delighted that our retail business has had a very strong year with sales up 59% to £0.9bn. The GIfL market has returned to strong growth and has had its busiest year since Pensions Freedoms were announced in 2014. The number of advisers looking for quotes from Just has increased by 50% and this is providing us with increased opportunity to utilise our medical underwriting expertise to select the most attractive risks.
Conduct regulation changes being introduced by the FCA may result in greater use of retirement income solutions containing guarantees to help deliver improved customer outcomes.
EXPANDING OUR INVESTMENTS IN TANDEM
We are continuing to broaden our investment capabilities. Our successful illiquid origination strategy enabled us to source £1.6bn of non-LTM illiquid investments during 2023, a 50% increase year on year.
As the government’s Solvency UK legislation is implemented, we expect this will unlock additional opportunities to grow and diversify our investments portfolio, while enabling us to support the UK economy.
CUSTOMERS AND OUR PURPOSE
The current unpredictable economic outlook in the UK and volatility in investment markets creates uncertainty and worry for many. We provide a guaranteed income for life to customers, and as long-term interest rates have risen over the last two years, the amount of retirement income we are able to pay customers has increased significantly. This secure income is often purchased to cover the essential expenditure of the household. Our solutions provide much sought reassurance to customers.
Our purpose is to help people achieve a better later life. We provide a range of professional advice and guidance to help people, and are continuing to invest in these services to make them more available to a wider pool of potential customers. We can’t resolve all the challenges faced by our customers, but we are helping where we are able to, and remain focused on living up to the purpose we set out many years ago.
We achieve our goals responsibly and are committed to a sustainable strategy that protects our communities and the planet we live on. I am very proud that over the last four years we have reduced our operational carbon intensity per employee by 83%. However, the most material impact we can make to reduce carbon emissions will be achieved through the decisions we take with our £24bn investments portfolio. Compared to our 2019 baseline, we have reduced these emissions over 30% for each million pound invested.
During 2023, we also continued to invest in environmental, social, and corporate governance (“ESG”) related assets with £325m invested in social housing, the renewable energy industry and NHS facilities.
OUR PEOPLE
Our Just culture is underpinned by our people who are passionate and committed to making a difference to the lives of those around them. The combination of our strong purpose and having highly engaged teams working the “Just way”, is a competitive advantage which is helping us to drive high performance and achieve our ambitious growth targets.
I would like to thank my colleagues for their continued focus in providing outstanding support for our customers when they needed it most and for helping to deliver an excellent set of results.
We are investing to develop the skills of our colleagues, attract new talent into Just and build high-performing teams. We have excellent, and improving, levels of colleague engagement (2023: 7.9; 2022: 7.7), with a key priority to build a diverse and inclusive workforce.
FINANCIAL PERFORMANCE
In 2023, underlying operating profit, is up 47% to £377m, driven by the strong new business performance, which has delivered a return on equity of 13.5%.
Investment and economic profits were £92m, and, combined with a number of smaller non-operating items, led to an adjusted profit before tax of £520m for 2023 (2022: adjusted loss before tax £167m). Of this, £348m of profit is deferred to the CSM reserve in the balance sheet, leaving a statutory profit before tax of £172m (2022: loss before tax £494m).
The strength and resilience of our capital position and our disciplined pricing and risk selection ensures we are, and will continue to be capital self-sufficient. This means we can fund our growth ambitions, reward shareholders with a growing dividend and maintain a strong buffer of capital.
We will pay a final dividend of 1.50 pence per share, giving a total of 2.08 pence for the year, representing 20% year on year growth. The 20% growth in total dividend is ahead of the 15% 2022 dividend growth rate.
IN CONCLUSION
2023 represents another year of outperformance, further building our track record. Just Group are exceptionally well positioned to capture the benefits of positive market trends and have increased confidence in our ability, from this higher base, to deliver 15% growth in underlying operating profit. In addition, we have increased our target return on equity to greater than 12% from greater than 10% previously.
We have never been stronger. We are retirement experts and have the capability and opportunities to achieve our ambitious growth plans so that we build substantial value for shareholders and fulfil our purpose to help more people achieve a better later life.
