Just Group restates 2022 accounts under new standard for insurers

Just Group restated its financial results for 2022 on Tuesday, as well as for the first six months of the same year, in accordance with IFRS 17 – the new accounting standard for insurers.

The FTSE 250 company said the implementation of IFRS 17, which took effect on 1 January, had led to certain changes in how it accounted for its financial results.

However, it emphasised that the accounting change did not impact the underlying economics of its business or its overall strategy.

Just Group said it remained committed to its growth ambition, investment capacity, capital strength, cash flows from new and existing business, dividend policy, and debt leverage.

Under IFRS 17, while the total economic profits of the group remained unchanged, the accounting treatment for the profits had been modified.

The firm said the new standard introduced two balance sheet concepts - the contractual service margin (CSM) and risk adjustment (RA).

Just Group said the concepts represented discounted future value stocks that were gradually released into reported profit over time, with additional value being added by future new business.

The restated underlying operating profit for the year ended 31 December 2022 under IFRS 17 was £257m, compared to £249m under the previous IFRS 4 standard.

In order to provide a meaningful measure of business performance, Just Group said it added back the net underlying CSM increase during the year to derive the underlying operating profit under IFRS 17.

The group's shareholder value, as measured by total net asset value (TNAV) per share, remained largely unchanged under IFRS 17 at 190p per share as at 31 December, compared to 172p per share under IFRS 4.

Just Group said adjusted shareholders' equity under IFRS 17 was £2bn at the end of 2022, compared to £2.1 billion on 31 December 2021.

That comprised £783m of IFRS 17 equity attributable to shareholders, compared to £1.18bn at the end of the prior year, and £1.21bn of CSM net of tax, compared to £966m year-on-year.

The growth in CSM was driven by the addition of new business, while the decline in IFRS 17 equity was primarily due to economic losses resulting from the interest rate hedging programme.

Just Group said it actively reduced the level of interest rate hedging in 2022, as its capital position strengthened, adding that it expected its sensitivity to remain close to nil in 2023.

Additionally, the increase in TNAV per share included 6p, or a total of £80m pre-tax, resulting from the reversal of a negative investment timing impact on a significant volume of business written in the fourth quarter, which was recognised under IFRS 4 but not under IFRS 17.

The return on equity (ROE) was also broadly unchanged under IFRS 17, standing at 10.3% compared to 10.7% under IFRS 4.

Just Group said the slightly higher underlying operating profit under IFRS 17 was offset by a slightly higher adjusted shareholders' equity.

“We remain committed to our ambition to target 15% growth in underlying operating profit,” Just Group said in its statement.

“Under IFRS 17, we will continue our commitment to deliver 15% growth in underlying operating profit per annum over the medium term.”

It explained that in 2022, it delivered 19% growth in underlying operating profit under IFRS 4.

“Our target to deliver a greater than 10% return on equity will also continue under IFRS 17.”

At 0830 BST, shares in Just Group were up 1.64% at 75.01p.

Reporting by Josh White for Sharecast.com.