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Good morning everybody. I’m David Richardson, Chief Executive of Just

Group plc, and I want to welcome you to our full year results presentation.

Understandably we have more people on the webcast today due to travel

restrictions. Thank you to Deutsche Bank for the use of their facilities this

morning.

I will be sharing the podium today with our new CFO, Andy Parsons. Andy

joined just over 10 weeks ago and I’m absolutely delighted to have him by my

side. He has got up to speed rapidly and not surprisingly given both the depth

and breadth of experience he brings to the role. I’m also joined by Guy

Horton who leads our Actuarial and Capital teams and who you will remember

from the interim results day. Guy will help out with the Q&A and I’m sure you’ll

keep him busy.

Let me open with some overarching comments.

We have a clear strategy focused on improving the group’s capital position

and we are making good progress.

Despite operating in a tough environment we took big strides in improving our

organic capital generation and reducing balance sheet risks in 2019. We

have halved the new business capital strain, reduced our property sensitivity,

signed our first Define Benefit (“DB”) partnering deal and released capital

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through longevity reinsurance.

We achieved organic capital generation in the second half of the year and at

the same time accelerated our adoption of the new regulatory requirements.

However we have no plans to ease up - there is much to do and still a way to

go before we are truly capital self-sufficient in the sense that the level of

capital surplus being generated by the business that gives us real choices in

how to deploy it.

We are confident we have a robust plan to deliver a sustainable capital model

and achieving this will allow us to re-focus on our real purpose of helping our

customers achieve a better later life, while creating value for shareholders.

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As you all know, capital was my number one priority when I assumed the

CEO role last May. We’ve already taken some big strides in the right

direction.

We’ve held our discipline on new business pricing, costs and product design,

and our reward has been a halving of new business capital strain despite only

having to trim volumes by 12%.

This meant that in the second half of the year the margins and capital

released from the back book actually exceeded capital consumption by new

business strain, finance costs and other expenses. And for the year as a

whole we were organically capital generative when you take management

actions such as DB longevity reinsurance into account.

I’m also really excited that the first DB partnering deal has been done. It’s the

kind of initiative that will help us deliver sustainable organic capital

generation. We’ll come back to that later.

We have also decided that the sooner we recognise the full cost of regulatory

change, the better. So we’ve decided to take £219m of regulatory cost today,

not just the £70m we flagged at interims. We now estimate the remaining

regulatory cost of fully implementing SS3/17 and PS19/19 at around £80m,

which together with the £219m, would be well within the guidance of an

aggregate £350m that we provided at the interim results.

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Getting to this point has required us to restructure the internal LTM

securitisation which is the mechanism by which we recognise the matching

adjustment on these assets. The old notes structure was designed before the

recent regulatory changes, in particular the advent of the effective value test

or EVT for short. The restructuring facilitates our compliance with the new

rules.

This decision to accelerate our regulatory costs has obviously affected our

headline capital coverage ratio. If we hadn’t decided to recognise these

regulatory costs up front, our capital coverage ratio would have been 156%.

Having taken more of the regulatory charges up front, we believe that our

underlying solvency ratio trajectory, absent significant unhedged market

movements, should be positive from this point forward. This will be driven by

our expectation that we will be organically capital generative and also given

that we have a range of capital management actions still available to us.

In ordinary circumstances market movements would cause some fluctuations

around that underlying trend. Right now we are experiencing extraordinary

short term market fluctuations but our increased level of interest rate hedging

means that our capital coverage ratio is unchanged since the year-end and

remains at 141%. Andy will cover this in more detail later.

Although our primary focus is on capital we have still managed to post healthy

IFRS operating profits. And our IFRS TNAV of 181p per share remains

significantly higher than our share price.

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You’ll recognise slide five from the interims. It shows the capital actions

toolkit available to us to offset the regulatory costs we have faced.

I am pleased that since the interims we have made good progress on all six of

the boxes on the right, but with more to come on each. I will talk to most of

them over the coming slides.

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Now No Negative Equity Guarantee, or (“NNEG”), risk transfer, or NNEG. As

a reminder we are hedging our property NNEG risk for two reasons:

•To improve our regulatory capital position

•To reduce the level of property sensitivity on our balance sheet

Since year-end we have concluded a second transaction, this time in respect

of a rather more substantial £670m of lifetime mortgages (“LTM”) – roughly 3

times the size of the first transaction.

The counterparty is a very well-regarded AA rated insurance company. It is a

partial hedge with a 30 year duration, providing loss absorbency of up to

£220m, and has delivered a useful capital benefit since year-end. We also

expect to get some Matching Adjustment (“MA”) benefit from this in the

future, but we’ll update you when the work is complete.

The NNEG hedging has also contributed to the reduction in property

sensitivity which you will see later.

With this transaction and the pilot, we have now hedged almost £900m of

LTMs, but there are still £5.5bn unhedged, so there is plenty of potential to

de-risk further in the future.

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We’ve also made significant further progress in creating a capital-lite DB

solution to tackle transactions of more than £250m. We have excellent

pricing and distribution skills for larger DB transactions, but we don’t have the

capital base to retain a significant number of them on our own balance sheet.

Writing these larger transactions using mainly external capital provided by

reinsurers enables us to play a part in this huge market by deploying our

award winning new business franchise at the front end and somebody else’s

balance sheet at the back-end.

The news today is that we are now up and running with our first reinsurance

partner and working hard to sign others.

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I think it is fair to say that we have transformed our organic capital generation

dynamics in 2019. This has been achieved primarily through the reduction in

new business capital strain by more than half. It fell from £160m in 2018 to

just £74m in 2019. Premiums were 12% lower, but strain as a percentage of

premiums fell from 7.4% to 3.9%, and is now within our “mid single digit”

guidance. We think this broad level of strain is sustainable in the future.

We made multiple price increases to compensate for the additional capital we

are now required to hold under the effective value text (“EVT”), and to

mitigate the impact of lower risk free rates.

As well as our prices, we have changed our business mix, and are writing

shorter liability duration business which is less capital intensive.

The DB longevity reinsurance we announced at the half year has already had

a beneficial effect in these numbers.

This means that, even in the new capital regime, we are achieving our

targeted mid-teen returns on shareholder capital deployed in new business,

with an average five year pay-back period. We have shown the cash

emergence profile of new business in the press release if you’re interested in

further detail.

We haven’t finished yet, either. Further management actions such as DB

partnering and additional reinsurance should enable us to reduce strain even

more in time.

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Cost control is another important focus across the business and has been a

key contributor in our journey to organic capital generation.

We duly achieved the £16m of cost savings in 2019 that we had estimated at

the interims. This is equivalent to a 10% reduction in core management

expenses compared to 2018.

We have further initiatives planned for 2020, and are focused on the need to

eliminate the £18m expenses overrun which you’ll see later.

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Adding these factors up, you can see in the top graph that before

management actions we came close to being organically capital generative in

2019 and that once we include management actions, which are shown in the

bottom graph, we were organically capital generative in 2019.

We think there is a reasonable chance we get there before management

actions in 2020 and fully expect to make it over the line with them included.

The leadership team are now all strongly incentivised to deliver organic

capital generation, not just IFRS profits.

This means we are more confident than ever that we will achieve our goal of

capital self-sufficiency.

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In the context of significantly improved organic capital dynamics, we thought

it was time to grasp the nettle on regulatory change.

As I said at the beginning, we have restructured our LTM securitisation notes

in an EVT compliant way. We take less Matching Adjustment credit in our

Solvency II balance sheet, and have increased our SCR. This reduced our

December excess own funds by £219m in total. The reduction in MA also

reduces our property sensitivity

There is some unfinished business, which will cost approximately £80m in

due course given today’s starting point. Although it isn’t exactly comparing

like with like, as I mentioned before, the revised total regulatory cost of

£299m in the pink box on the slide compares to the £350m which had been

our previous expectation at interims.

The process is not yet complete, but we feel we have significantly greater

clarity now that the note restructuring has been completed and given that we

have faced up to a greater proportion of the ultimate cost.

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LTMs remain an economically attractive asset class and also act as a partial

hedge for the longevity risk in our Retirement Income book.

However as this chart shows the amount of credit we can take for them in

the regulatory balance sheet has fallen significantly since the introduction of

Solvency II, mainly as a result of SS3/17. Following our reconstructed LTM

securitisation the MA allowance is now broadly in line with our infrastructure

loans and only slightly higher than our corporate bonds, although, I should

add that typically the MA benefit in pound terms is higher on LTMs due to

their longer duration.

With that I’ll hand over to Andy

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Thanks David. Good morning everybody.

I am very pleased to be able to stand here today as CFO of Just Group. I

joined shortly after the New Year and it’s been quite a long wait, after being

announced in June, so I am pleased to be finally on-board.

Before I move on to the numbers, I want to say a few words on why I

decided to join the Group and what I have found since coming on-board. I

have always recognised and been impressed by Just’s ability to compete in

the retirement market place. The regulatory challenges impacting the

business have been well documented, but from the outside I could see that

the fundamentals of the business were robust – with growing in-force

surpluses that would lead to positive capital generation provided the

business was disciplined in containing new business strain and controlling

costs. I also strongly believe that the market and in particular customers

benefit from the presence of Just in a retirement market place that can lack

innovation and to an extent competition. Observing since last summer and

more recently since joining I have been very impressed by the progress that

the Group has made during 2019 – the energy and determination of the

business to overcome its challenges and succeed. I’ve really appreciated

the warm welcome I’ve had from the whole team and hope to be able to get

up to speed quickly to add my contribution going forward.

Turning then to the 2019 financial results

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I want to focus first on the capital journey. I’ve come from a place where

capital was key and I completely share David’s focus on this as his number 1

priority.

This waterfall shows the development of our Solvency II surplus over 2019.

I’ll go through the detail in the following slides but first let’s pick out the most

important numbers.

Our opening surplus was £577m, a capital coverage ratio of 136% and as

you can see we would have finished the year with a surplus £390m higher at

a 156% ratio before making the regulatory changes David has described.

Those changes took our ratio back to 141%, still 5 points higher than at the

start of the year, but not yet at a level where I would feel satisfied.

I am very pleased to be able to point to the positive contribution from organic

capital generation in 2019, with this contributing 2 percentage points to the

ratio in the year, including the accelerated release of DB longevity capital via

reinsurance.

Economic movements for the full year are similar to those at the half year,

with the housing market largely performing in line with our long term

assumptions in H2.

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You were already aware of the Capital issuance. This includes the £125m of

new Tier 2 debt issued in the autumn net of £37m repaid following the

October tender offer. However it does not reflect the £63m redemption of the

remaining T2 debt that we have announced our intention to call and which will

happen at the end of this month.

Now, let’s go into further detail on the organic capital generation, and how we

see this developing.

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This slide shows the key components that make up organic capital

generation. This is a measure of the capital generation achieved by the

business before the impacts of regulatory change, market movements and

any capital raising. It includes the ability of the business to generate capital

surplus from management actions.

The £36m of organic capital generated in 2019 is a significant improvement

on the £165m consumed in 2018, with a huge benefit coming from the

reduction in strain.

The in-force surplus grew strongly, reflecting growth in the book and higher

investment margin unwind, with further growth expected, although at slightly

lower rates going forward – I would expect high single digits in future.

The increase in finance costs mainly reflects the RT1 coupons. Note that

these are charged on a paid basis and should be around £14m higher in

2020 after tax, creating a small headwind.

Expenses outside of acquisition and maintenance allowances are similar to

last year. There is more to do here, but good progress has continued to be

made in 2019, with the acquisition cost overrun falling by £2m to £18m which

included £16m of acquisition cost savings offset by the reduction in volumes.

We have further savings to come and are targeting the elimination of expense

overruns by end 2021. I expect development and non-recurring costs to be at

similar levels in 2020 as we continue to reshape the business and finalise the

impacts of regulatory change.

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The other and management actions section includes a number of items, but

most importantly the £89m gain from the DB reinsurance deal that we

discussed at the interims. This number is a little lower than previously

indicated in part as £12m of the benefit has been included in the new

business strain line. The £38m other cost includes a number of modelling and

basis changes. Note that in 2020 this line will include the benefit of the NNEG

hedging we have announced, plus potential further management actions,

such as increased longevity reinsurance.

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This slide highlights the dynamic that has driven the improved organic capital

generation picture – which is impressive both in terms of quantum and speed

of changes delivered to reshape the business.

As you can see from the intersect of the two lines, in H219, the margins and

capital being released from the back book now exceed new business strain

and other costs, including interest.

Note that we are already pricing – and computing new business strain –

based on 13% volatility and a 1% deferment rate for lifetime mortgages, even

though we don’t yet reserve fully on this basis.

So as you can see, we were already living within our means in H2 2019. But

it wasn’t by much, and we have further to go, especially on costs. We are

committed to continuing to drive further progress to extend the positive “jaws”

on this chart – with the aim that this will then start to give us real choices on

how to deploy surplus capital in future.

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Now let’s take a look at the non-operating items

First the property variance of £101m. This represents the solvency impact of

the flat house prices seen through our portfolio largely during H1 2019

compared to our long term 3.8% p.a. house price inflation assumption. In the

second half of the year prices broadly tracked our long term expectations,

with £96m out of the £101m cost for the year arising in the first half.

Other economic variances for the year totalled £45m, also little changed from

the half year and comprising small positives from corporate bond default

experience and credit spread narrowing and a small negative on interest

rates. Remember at the half year we told you that we had been proactive in

hedging our sensitivity to interest rates.

2020 is the final year of the accelerated “TMTP” amortisation, with £25m

expected this year after the £42m in 2019.

At the interims we had flagged £70m of regulatory change. Through the

restructuring of the LTM securitisation notes at year-end, we have chosen to

take more of the impact of regulatory change up front. The cost here of

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£219m includes meeting an EVT test parameterised at 13% volatility and

0.67% deferment rate within the Matching Adjustment portfolio and with a

level of SCR that we believe will cover the allowance for EVT in stress

required under PS19/19 by year-end 2021. A key benefit is that we believe

we now have only £80m of expected further regulatory headwind ahead of us

in order to achieve the full requirements of the new regulations for LTMs by

end 2021. Although there is still much work to do, including with the PRA, to

flow the new regulatory requirements into our capital model, overall we have

achieved improved clarity on the regulatory impact – and at a lower expected

cost.

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Solvency II sensitivities now. Focussing first on interest rates given the

significant movements year to date.

Our interest rate sensitivity, shown here as at the year-end, demonstrates the

effect of hedges we had in place at the time. We generally look to hedge the

impact of long term interest rates on our Solvency II excess own funds

position. Since the year-end we have increased our interest rate hedging to

continue to minimise our Solvency II capital exposure to interest rates –

especially given the extent of recent market movements, which have reduced

10 year rates by over 50 basis points.

Credit spreads also helped marginally as you can see from the slight positive

sensitivity. Early redemptions are only a minor factor and we don’t disclose

an equity sensitivity as we don’t hold any equities.

As we disclosed at HY19, our largest exposure is to UK housing. You will

notice that the hit to our capital ratio from a 10 percent fall in property prices

is now estimated at 15 percentage points, compared to 20 points at interims.

This is an encouraging reduction, resulting mainly from the regulatory

changes to our balance sheet, with less Matching Adjustment benefit now

included. There is also some benefit from our NNEG hedging trades,

including the trade completed recently. Further hedging trades will reduce

this sensitivity more.

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To date the housing market has performed well, post-election, however we

should recognise that in the current environment the outlook for house prices

remains uncertain.

On policyholder mortality we can see that a reduction of 5% would affect us

by 10 percentage points. This has also come down since interims due in part

to our increased use of reinsurance.

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On this slide we bring our solvency coverage ratio up to date by combining

the three key non-economic developments since year-end with our estimate

of movement from our business and financial markets.

First the key non-economic developments.

As many of you expected, we have, called the remaining T2 notes – with this

action not in our reported solvency position, but very much included in the

way that we look at our solvency.

Since year-end we have also completed two significant deals, which David

outlined earlier - specifically the NNEG hedge and the DB partner

reinsurance.

We then bring the picture fully up to date by including the first couple of

months of normal business as well as market moves to 10 March. The

combination of the two has reduced our coverage ratio by only 1%. As a

result of our active hedging the impact on our solvency position from interest

rates and other economic and market moves is actually a minimal change to

our capital coverage ratio – delivering an even better result than the year-end

sensitivity would suggest.

Factoring all these changes against the reported year-end position would

produce a coverage ratio of 141%.

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As I mentioned earlier, we would ideally like to improve this ratio further –

and, absent any significant unhedged market movements, would expect to

see this grow further over 2020 and beyond as we continue to grow our

organic capital generation.

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I’ll now take you through the IFRS results.

Adjusted operating profit before tax rose by 4% to £219m, as a decline in

underlying operating profit and a higher finance charge were more than offset

by positive assumption changes.

Underlying operating profit fell by 16% to £266m. The 18% increase in in-

force operating profit was not enough to offset a 25% decline in new business

profit. The new business profit decline reflects the 12% fall in Retirement

Income volumes, and lower margins as flagged in the results last year.

Operating variances and assumption changes were a £42m positive this year.

This included the £10m pre-tax cost of the DB reinsurance that we flagged at

the interims. The positive elements come from maintenance cost reductions

and from LTM redemption charges, where a positive basis change has more

than offsett the negative experience variance. There were minimal longevity

variances or changes.

Other Group Company losses are now declining and the pace of this decline

should increase given management’s focus.

Finance costs have increased as a result of the RT1, which will add another

£11m in 2020 as we recognise the full annual coupon cost.

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Looking at new business and in-force profit in more detail.

As previously guided, our new house price inflation and volatility assumptions,

together with a change in LTM duration and backing ratio, resulted in a

roughly 2 percentage point drag on the IFRS new business margin compared

to FY18.

In the second half, a combination of pricing improvements and expense

control has resulted in a slight uplift in margins compared to H1.

Going forward we would expect a similar margin level. We will maintain our

pricing discipline and would hope for some growth in new business in 2020 –

absent any significant impacts from Coronavirus.

In-force operating profit increased by 18%, similar to the increase seen at the

half year. This was driven by growth in the inforce book and better returns on

our surplus assets, which increased following the March capital raise. Overall,

a pleasing in-force result – although we would expect future growth to be in

lower double digits moving forward.

Moving to the below the line items.

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Although operating profit rose only slightly, there was a quite dramatic swing

in total profit as a result of investment variances. So much so that this year is

a record year for Just’s IFRS profit before tax - £369m in 2019, compared to a

loss of £86m in 2018.

The main cause is, as you can see, the replacement of the economic and

investment losses booked in 2018 with £174m of gains this time around. As

the analysis on the right shows, this was driven almost entirely by the positive

impact from lower risk free rates, with the smaller gain from credit spreads

being offset by the negative impact of lower property prices.

These significant gains on falling interest rates reflect the fact that we are

hedging our Solvency II capital position, not our IFRS balance sheet. Hence if

rates rise in future, you would therefore expect us to book IFRS losses.

The gains this year have resulted in a healthy increase in Tangible NAV to

181p per share.

So with that I’ll hand back to David

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Thanks Andy, really good to have you on the team

I’d like to start my conclusions by spending a moment to re-cap on “why we

do what we do” here at Just.

Our purpose statement is a good reminder of why Just exists. We help

people achieve a better later life. Every colleague across the Group

contributes to this purpose whether they are serving the customer or

providing support to someone else who is.

We’re helping retail savers, homeowners, pension trustees and our clients of

our corporate customers with advice and solutions that help them to achieve

peace of mind in later life. It is times like this that really bring home the value

of locking into certainty.

Our Group businesses have leadership positions in attractive segments of

the retirement market. We achieve this leadership by investing to innovate

and by deploying our intellectual property. This ensures we are able to fulfil

our purpose by providing great value and outstanding service to our

customers. This is recognised in the awards we have won across all sections

of the later life market in 2019.

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We continue to invest in developing new disruptive solutions; albeit selectively

given our focus on managing costs. We are piloting two exciting

developments this year; one is to help close the financial advice gap for

people in middle Britain with more modest pension savings; and the second is

a highly innovative solution to deliver guaranteed income to retail investors

who manage their portfolios on modern investment platforms.

So we continue to invest in the future to ensure we can fulfil our purpose. A

purpose which motivates me and over a thousand of my colleagues at Just

every day.

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You’ll know investors are increasingly interested in how Boards are

addressing environmental, social and governance factors. At Just we have

an active ESG agenda.

Firstly sustainable investing. We consider key ESG factors in our investment

analysis and decisions, and for some time we have excluded new

investments into tobacco and we have ceased making investments in

upstream oil and gas companies. Our ESG credentials are evident in the

significant investments we have already made in renewables such as the

Walney and Hornsea offshore wind farms projects, as well as investments in

solar and social housing. We were the first UK insurer to sign up to the

United Nations Principles for Responsible Investment.

Secondly, I’m pleased to report we have reduced our carbon footprint by 41%

during 2019. We’ve been building a modern workplace which has enabled us

to provide increased flexibility for our colleagues and also reduce our

property square footage by 30%.

We’ve been taking our social purpose to a new levels this year by investing in

our communities. We’ve been helping older adults get active for a happier,

healthier life through our new walking sports programme, Just Get Active.

Just are raising awareness of walking sports as an alternative way to

introduce exercise into people’s lives and guide them to opportunities to get

involved.

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And finally we have been making good progress on diversity as part of our

governance agenda as you can see.

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So before we end the formal part of the presentation I just want to underline a

few key points.

First, we have made really significant progress on improving the organic

capital efficiency of the business - and I want to ensure that positive capital

generation is sustainable.

Second this progress on organic capital generation means we are confident in

achieving capital self-sufficiency earlier than previously expected; and

Third, we have accelerated the recognition of the regulatory costs of the

change to the EVT world.

Taken together, this means that in the absence of any significant unhedged

market movements we expect the capital coverage ratio to gradually grow

from this point.

We’ve taken decisive actions over the last nine months. I hope you’ll agree

we have been doing whatever it takes to get us onto a sustainable capital

trajectory.

The transformation is underway, but there is a lot more to do.

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Before I go to questions a few words about our Chair, Chris Gibson-Smith,

who has informed us of his intention to retire as Chair of the Group as soon

as we have identified a suitable successor.

On behalf of the Board, I’d like to thank Chris for the leadership he has

provided since Just was formed in 2016.

He has brought great insights to the role, gained over his rich and varied

career. Personally I’ve thoroughly enjoyed working with Chris closely over the

past seven years. He has steered the Group through some very challenging

times and takes with him our best wishes for the future.

With that, who wants to ask the first question?

Steve do we have any questions via the webcast?

Ok in that case thanks for your interest, and we look forward to seeing you for

interims.

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