Just Retirement Preliminary results for the year to 30 th June 2015 17 th September 2015 Just Retirement results for the year ended 30 June 2015
Rodney Cook Group CEO 1 Just Retirement results for the year ended 30 June 2015
Agenda Business Update – Rodney Cook Financials – Simon Thomas Outlook and update on the proposed merger – Rodney Cook Q&A 2 Just Retirement results for the year ended 30 June 2015
Unprecedented change, continued delivery H1 14/15 results: FY 14/15 results Q3 13/14 results: strong DB sales, Announcement of Initial Public FY 13/14 results: confirm recovering announced £14m resilient profits, proposed merger with Offering record sales and EV momentum, DB our annual cost savings announcement of new Partnership largest product world products August/ November March December May September February March-May September 2013 2014 2014 2014 2014 2015 2015 2015 FCA Retirement Income JR internal model FCA papers on annuities Market Study and Budget announcement on Paul Fisher letter application Death benefit tax changes sales practices and remedies, dear CEO letter freedom and choice in setting out PRA submitted on time announced retirement income market on Second Line of pensions framework for matching (May) study interim findings Defence consumer adjustment for LTMs protection 3 Just Retirement results for the year ended 30 June 2015
Resilient sales and operating profits, record embedded value New business sales 1 , financial year £m IFRS underlying op profit 2 , financial year £m Embedded value 3 , financial year £m 100 97 1,751 1,019 1,654 959 88 86 477 1,465 310 1,456 76 796 74 270 308 59 53 37 1,135 55 1,002 242 198 46 50 45 764 754 677 1,344 159 163 1,274 366 1,195 125 344 1,148 26 893 805 50 44 298 41 605 591 552 33 26 253 4 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 New business In force Retirement products LTM Source: Just Retirement. Note: 1. retirement products includes DB, GIfL, Care plans, Capped Drawdown 2 Normalised new business operating profit for the year ended 30 June 2011 shown (excludes exceptional profit of £14m). 3 Chart shows JRH up until FY12, JRG plc pro forma for 2013 including IPO proceeds 4 Just Retirement results for the year ended 30 June 2015
Underlying growth drivers remain in place New business growth returning, liability growth continues DB sales drove 10% Q4 sales growth v Q414, +28% v Q3 15 (£m) 15% y-o-y liability growth (£m, gross of reassurance) 600 7,440 6,484 500 5,490 400 4,627 DB 300 CD 3,258 GIfL 200 100 0 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 5 Just Retirement results for the year ended 30 June 2015
DB de-risking: significant market potential Our confidence in the DB de-risking growth outlook is Strong growth expected in bulk annuity (DB de-risking) transactions (1) growing Total UK bulk annuity transactions (£bn) The UK market is among the world’s largest, with over 25.0 6,000 schemes and £1.7trn of liabilities. De-risking could generate a significantly larger bulks 13.2 market by 2020. 8.0 7.6 Within this, the medically underwritten segment is growing 5.2 5.3 4.5 3.7 2.9 from a standing start two years ago. Medical underwriting should become the norm for many smaller schemes looking for better value. DB de-risking sales already account for more than half of Just Retirement’s total Retirement new business volumes Segmentation of DB de-risking represented 53% of and this proportion may grow if pricing remains attractive UK DB pension schemes (2) 2015 JRG total retirement sales Clear opportunity for JR in the provision of de-risking Members by Number of Assets Liabilities solutions for small to mid-sized DB schemes. Median size band schemes (£bn) (£bn) scheme size of £17m GIfL 5 to 99 2,188 13 18 43% The ability to access a broad range of investments, 100 to 999 2,684 102 154 including lifetime mortgages, is a key competitive DB 1,000 to 4,999 802 175 266 53% 5,000 to 9,999 188 139 204 advantage Over 10,000 208 708 1,049 Total 6,070 1,137 1,691 CD Small and medium sized schemes are the 4% core target market for the combined group Note: 1. Hymans Robertson, Oliver Wyman, KPMG.2. The Purple Book, 2014 6 Just Retirement results for the year ended 30 June 2015
Simon Thomas Group CFO 7 Just Retirement results for the year ended 30 June 2015
Summary IFRS results IFRS operating profit (£m) 2015 2014 +/-% IFRS new business operating profit 36.8 53.1 -31% IFRS in-force operating profit 49.6 43.6 14% IFRS underlying operating profit 86.4 96.7 -11% Operating variances and assumption changes 2.4 4.7 -49% Other Group companies' operating results -8.7 -7.5 16% Reinsurance and bank finance costs -12.5 -13.4 -7% IFRS operating profit 67.6 80.5 -16% Non-recurring and project expenditure -19.4 -7.0 177% Restructuring costs 0.0 -5.4 -100% Investment and economic profits/(losses) -74.1 44.1 -268% Profit before amortisation and pre-IPO finance costs -25.9 112.2 -123% 8 Just Retirement results for the year ended 30 June 2015
Q4 sales: return to growth confirmed £ million Q415 Q414 +/- % Strong momentum in DB sales. Prospects remain positive for this growing market DB 160.9 49.7 224% Now showing signs of recovery GIfL 1 109.8 175.1 -37% Total Retirement Income Return to growth in Retirement Income driven by DB sales 270.7 224.8 20% Fall reflects success of one year Capped Drawdown CD 2.4 23.5 -90% (CD) post-Budget in comparative period Total Retirement sales 273.1 248.3 10% Advances close to 25% of GIfL and DB target for FY14/15 LTM advances 86.4 98.9 -13% Total sales 359.5 347.2 4% 1 Includes GIfL and Care Plans 9 Just Retirement results for the year ended 30 June 2015
DB de-risking: strong momentum for our largest product DB sales quarterly progression (£m, FY) DB is now firmly established as a core product of 350 the Group, and accounted for a majority of FY14/15 Retirement Income sales, less than two 300 years since our first transaction FY14/15 sales of £609m represented a more 250 DB than fivefold increase compared to the previous year 200 The progression in raw sales is lumpy but an 150 upward trend is clear. Every quarter of the 2014/15 financial year significantly exceeded the 100 trailing equivalent prior year quarter 12m 1/4ly average The trend in 12m trailing average is more 50 consistent, and the run rate averages c£150m per quarter 0 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 10 Just Retirement results for the year ended 30 June 2015
IFRS new business operating profit As expected, margins have remained under pressure New business profit (£m, FY) 59 GIfL pricing has generally been competitive since the 55 53 50 Budget, with a similar amount of capital chasing a smaller pool of demand 37 59 GIfL margin pressure has been partly offset by the 55 53 50 37 beneficial mix effect of writing DB Mortgage pricing remains attractive and has 2011 2012 2013 2014 2015 supported the overall margin Margins (FY) Cost reductions have helped to offset lower volumes 5.6% The 3.3% overall margin for FY14/15 represents a 4.8% 4.7% 4.4% modest recovery from the first half margin, helped by improving mortgage returns. 3.3% 2011 2012 2013 2014 2015 11 Just Retirement results for the year ended 30 June 2015
Growing IFRS in-force profit In-force profit growth driven by a maturing book Growing in-force profit (£m, FY) In-force profit has grown 14% due to strong growth 50 44 in opening liabilities and stable in force margins 41 33 We continue to have positive net inflows 26 The Budget had no effect on in-force results 2011 2012 2013 2014 2015 In-force margins (bp) 103 101 89 79 77 2011 2012 2013 2014 2015 12 Just Retirement results for the year ended 30 June 2015
Group embedded value increased to £1,019m EEV has risen to £1,019m, or 204p per share. This represents an annualised growth rate of 8% before distributions This was driven by a 19% increase in life operating profit which was partly offset by economic variances. Net of tax movements in EEV, £m 1,200 30 -23 98 -16 -12 1,019 -17 959 1,000 800 600 1,028 959 400 200 - Opening EEV New business Return on opening Operating Economic Non-covered Dividend Closing EEV contribution EEV variances and variances business assumption changes 13 Just Retirement results for the year ended 30 June 2015
Capital and dividends We principally manage our business using the Economic Capital basis Economic capital at 176% is comfortably ahead of our 140% minimum target, an improvement on the 171% December level Final dividend of 2.2p per share is unchanged compared to the prior year The directors keep the amount and mix of capital under constant review. We intend to maintain our capital strength, particularly given the opportunity to grow DB volumes Solvency 2 preparations continue ahead of January 2016. We submitted our internal model application in May and applied for matching adjustment in June Group economic capital JRL Pillar one Jun-15 Jun-15 Dec 14 Jun-14 Dec-14 Jun -14 Surplus (£m) 220 254 389 Surplus (£m) 395 387 440 Coverage 166% 173% 236% Coverage 176% 171% 178% 14 Just Retirement results for the year ended 30 June 2015
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