Just Group plc (LON:JUST) announced today that Chris Gibson-Smith has informed the Board of his intention to retire as Chair of the Group as soon as a suitable successor has been identified. A search will commence shortly, led by the Group’s Senior Independent Director, Keith Nicholson. In the meantime Chris will stand for re-election at the Company’s AGM in May 2020.
Chris was appointed Chair of the Group in April 2016. He had previously served as Chair of Partnership Assurance Group plc from May 2013.
Chris Gibson-Smith said:
“It has been an honour to chair Just Group since its creation. 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, Just Group Chief Executive, said:
“Working with Chris has 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.”
Key Points: Capital generation and balance sheet
- Organic capital generation1,3. A halving of new business strain, improved in-force surplus generation and positive management actions including Defined Benefit reinsurance, have helped to produce organic capital generation of £36m (FY18 – organic capital consumption of £165m)
- Just Group expects to be organically capital generative in 2020 & thereafter. Further management actions will support this as well as continued underlying improvement in capital generation
- Increased clarity on impact of regulatory change with a capital coverage ratio of 141% (31 December 2018: 136%2). The Group has chosen to restructure its Lifetime Mortgage notes to accelerate alignment with the new regulatory requirements. This has resulted in a £219m regulatory capital cost in H219, which together with the estimated £80m future cost of full compliance with SS3/17 and PS19/19 is within the guidance of £350m provided at the 2019 half year
Key Points: IFRS profits
- IFRS profit before tax was £369m (FY18: £86m loss), with the turnaround due to the improved operating result and positive economic variances
- Adjusted operating profit3 was 4% higher at £219m in FY19, as positive operating variances and operating assumption changes offset lower new business profits
- New business operating profit3 was down 25% to £182m in FY19. Lower new business margins were in line with expectations on lower volumes, reflecting our focus on capital discipline
Key Points: Developments since year-end
- We have entered into our second NNEG hedging transaction covering £670m of LTMs
- Completion of our first DB partnering deal of c.£250m
- The Group’s capital coverage ratio has not been significantly affected by recent financial market volatility helped by increased interest rate hedging. Our capital coverage ratio at 10 March 2020 is estimated to have been 141% including management actions4
David Richardson, Just Group Chief Executive Officer, said:
“We have a clear focus on improving the Group’s capital position and are making good progress. 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. Our capital coverage ratio would have grown to 156% if we had not recognised the £219m of regulatory capital strengthening. In the absence of any significant unhedged market movements, we would expect 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.
Our preparations continue to ensure that we can serve our customers through the potential disruption if Coronavirus spreads 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.”
1 Organic capital generation/consumption includes surplus from in-force, new business strain, cost overruns and other expenses, interest and other operating items. It excludes economic variances, regulatory adjustments, accelerated transitional measures for technical provisions (“TMTP”) amortisation and capital raising
2 Comparative figure is adjusted for notional TMTP recalculation
3 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. Underlying operating profit and new business operating profit are reconciled to IFRS profit before tax in the Financial Review
4 Management actions completed since year-end include the notice to call Partnership Life Assurance Company Limited (“PLACL”) debt, NNEG hedging and DB partnering