Good morning everyone. I m Rodney Cook, CEO of Just Group. Today, I am joined by our CFO, Simon Thomas and our Deputy CEO, David Richardson.

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3 Good morning everyone. I m Rodney Cook, CEO of Just Group. Today, I am joined by our CFO, Simon Thomas and our Deputy CEO, David Richardson. I d like to thank Nomura for the use of their conference facilities and welcome all of you joining us today, including those on the webcast. We really appreciate your interest. As usual, I ll start by giving you a brief update on how we see the business. Simon will then go through the numbers in more detail, and David will talk about our capital position. After that, we ll conclude with your questions. Please note that, unless stated otherwise, the comparative figures are presented as if the merger had taken place at the beginning of 2016 rather than in April. Finally, we know it is a busy reporting day, and we aim to finish by 11am so you can get to the next analyst presentation in time. Before I jump into the results highlights, I would like to take a moment to restate why we do what we do here at Just. David, Simon and I are going to spend a lot of time talking about the what so let me start by briefly adding 3

4 the why. As you know - we believe everyone deserves a fair, fulfilling and secure retirement. We focus our attention and invest our resources to improve the lives of people who are in later life. To make this happen, we positively disrupt markets, we campaign and make our case to politicians and regulators in order to improve competition and protect consumers - we innovate, and we solve problems. Our mission is to help people achieve a better later life, both directly and importantly indirectly through our distribution and corporate partners. That purpose motivates over a thousand of my colleagues at Just every day. Now, to the results highlights. 3

5 You ll see that the main operating highlight today is the 9.0% new business margin. This is up from just under 7% in 2016 and reflects our continued pricing discipline throughout the year. This focus on margin over volume drove a 37% increase in new business profit and helped delivered a 35% increase in operating profit. We are today announcing that we have achieved a 52m run rate for cost synergies. This is 30% higher than we originally targeted and we have delivered it a year ahead of plan. Now that the merger is done we will give our full attention to how we can disrupt markets and diversify our model by focusing our investment on innovation. Simon is making sure that the level of investment is manageable within our profit expectations and delivers suitable returns. But we think our markets are ready for further change and want to be at the forefront. You ll see that we have significantly improved our capital structure and financial flexibility during the year. In July, we agreed a 200m revolving credit facility, twice the size of our previous senior term facility and on significantly better terms. Then, in August, we announced inaugural single A and single A+ credit ratings for certain Group entities. Last month we put our new rating to 4

6 work and issued a 230m Tier 3 subordinated bond with a 3.5% coupon, which would have taken our year end capital position to 156% on a pro forma basis. Our Embedded Value per share increased by 4% to 228p, and our Tangible IFRS Net Asset Value was 165p at the end of December. So overall, lots of positives, and we are well positioned for We are expressing this confidence via another 6% dividend increase, making the total 3.72p per share for the year. Now I m going to talk about the attractive growth markets in which we operate. However, our strategy has been about growing profit not headline sales, and we have used these expanding markets to choose more attractive risks. This gets easier when you have more to choose from. 4

7 Most of you attended our three product seminars in 2017, which detailed our leadership positions in some of the sector s most exciting markets. As a retirement specialist, we have differentiated ourselves through continuous product innovation, exemplary customer service and unparalleled distribution reach. This means that our market leading propositions are making a real difference to help our customer achieve a better later life. As you can see from the top left hand chart, Defined Benefit momentum has been strong, with LCP estimating that the 2017 market exceeded 12bn (but that doesn t include the Prudential deal announced yesterday of course). The industry pipeline is as strong as ever, including our small-to-medium transaction segment. Recent high profile DB pension scheme issues are expected to result in a renewed focus on deficits, even perhaps at the expense of dividends to the shareholders of sponsoring employers. Hymans Robertson s research suggests the DB de-risking market will continue to grow substantially during the next decade. They forecast 700bn of de-risking over the period to 2031 implying more than 45bn pa., well ahead of historic levels. I ll leave it at that on DB, but suffice to say, we are very positive about the long term outlook for the market 5

8 The Guaranteed Income for Life, or GIfL, outlook is also positive. You ll see from the top right chart that open market GIfL volumes were up by almost 11% in 2017 compared to the prior year. That growth rate is significantly higher than for the total GIfL market. Open market sales accounted for 48% of 2017 volumes, which is the highest level since Pension Freedoms. It s good to see the drivers we have described to you many times translating into a greater propensity to shop around. We see no reason why the open market can t eventually exceed 80% of total sales, driven by continued regulatory pressure. Adding it up, we think that by 2021 the open market could grow to 2.9bn from last year s 2.1bn, a CAGR of 11% from 2016 levels. But if things go well the upside could be considerably more. The lifetime mortgage market is developing particularly favourably at present. In the bottom left chart you ll see that in 2017 it grew by 42%, building on 34% growth in the prior year. As we explained at our LTM seminar last November, we think the market could more than double to 6.6bn by Obviously this market has been growing more quickly than the DB or GIfL segments which fund our mortgage advances. This means we have been able to achieve the mortgage volumes we require at attractive spreads, helping our positive overall margin story. New capacity has been entering the LTM market, but has been met by strong demand, and we have maintained our disciplined approach towards pricing. As we have previously demonstrated, LTMs offer a very attractive risk adjusted yield, as well as being very suitable for duration matching All in all, we are excited by our strong positioning and distribution capability in each of these growing markets With that, I ll hand straight over to Simon so he can take you through the figures 5

9 Thanks Rodney. I m Simon Thomas, Group CFO, and I d like to add my welcome to all of you. Today s numbers show that our strategy is delivering real benefits to our shareholders. We ve had an impressive year and are proud of the progress made, but there s plenty more to do. 6

10 This slide shows the summary IFRS result, and I will provide some colour on key lines. Our adjusted pre-tax operating profit grew by 35%, and underlying operating profit by 21%. Both were driven by the 37% increase in new business profit. This is a real vindication of our disciplined pricing approach, with the benefits of our cost synergies making an impact. I ll go into more detail on new business and in-force operating profit in a moment. Operating experience and assumption changes were unusually large for us. The starting point is the 52m run rate of merger cost savings. Although this mostly relates to new business some, relates to the in-force book, and, given clear evidence that per-policy costs are below our pre-synergy reserving assumptions, we have released some expense reserves. We have also decided that it is time to strengthen our mortgage mortality assumptions, but are still reporting a net positive P&L benefit of 35m in relation to operating 7

11 experience variances and assumption changes. I ll go into more detail shortly. The Other Group Companies result includes our continued investment in HUB, our corporate solutions and distribution business & our Central costs. As Rodney has said, we will be investing in our business during 2018, and this could add as much as 10m to this line this year. The increase in our reinsurance and finance costs reflects the full year cost of our 250m Tier 2 debt issued in October So looking at our sales in a little more detail. 7

12 Retirement Income sales were up 4%, driven by a solid performance in both DB and GIfL product lines. We ve already touched on the long term growth drivers in these areas and I echo Rodney s enthusiasm for the exciting DB de-risking growth market. DB sales were up 6%, on improved margins, as we maintained our disciplined pricing approach. We remain focused on relatively smaller transactions where our asset liability management works best and where our medical underwriting can add most value. We completed 22 transactions during the year. For 2018 and beyond, we are already benefitting from our track record of product innovation with the launch of our DB Choice proposition in November, which has been positively received by EBCs. The trend towards writing business later in the year - may be becoming less pronounced in as the market is uncharacteristically busy for the time of year. 8

13 Our pipeline is robust, with multiple potential transactions of various sizes in our target segment. GIfL sales were up 5%, again reflecting our disciplined pricing approach and rigorous risk selection. The open market is slowly gaining traction. Our own distribution company HUB, and others like it, are establishing panels to help retirees purchase a better value GIfL from a wide choice of providers. Previously they may have just defaulted to the company that happened to help them save for their retirement. As for mortgages, despite the strong market background, we have managed advances to take a risk based approach towards our mortgage appetite and use the longer duration characteristics of these assets to provide an optimum backing ratio relative to the shape of the liabilities we write during a particular period. This reduction in mortgage volumes is a reflection of our pricing discipline and risk selection, and spreads remained satisfactory. Mortgages exemplified our strategy of controlling volumes to optimise profit during Now turning to new business margins. 8

14 Our 2017 new business margin of 9.0% was a further significant improvement on the 6.8% margin achieved in We were able to maintain firm pricing discipline during H2 and have improved margins beyond recognition from a low point of c.3% after pension freedoms. Combined with Retirement Income sales growth of 4%, this margin expansion led to a 37% increase in new business profitability in This margin expansion was driven by the same key drivers we discussed at Interims. First we have been particularly selective in 2017 in our GIFL & DB business, actively choosing more profitable risks, even if it has meant lower market share I would flag that general market pricing discipline has also been maintained Second, margins were helped by continued attractive mortgage yields. Demand for mortgages has significantly increased in the market as a whole, but our own appetite is a function of our own DB and GIfL volumes 9

15 and their duration. We have therefore been more selective on mortgage pricing, enabling us to broadly maintain our mortgage spread even if it has meant a lower mortgage market share Thirdly, as we discussed in September, we allocated more mortgages as part of the asset mix. You will recall that we previously targeted a 25% ratio of mortgage advances to retirement income sales. We now use a dynamic approach based on the shape of the liabilities we write, and in 2017 the LTM retirement income backing ratio in new business rose towards the upper twenty percents, allowing us to capture higher spreads across the portfolio. The final driver of the margin is the synergy benefits, which naturally are now being felt to a greater extent than in Looking ahead to 2018, we are seeing & hearing about more mortgage supply and competition therefore coming into the market, however our markets are constructive and on that basis I d probably would expect to see our margin to be in excess of 8% for 2018 Now turning to our in-force result. 9

16 In-force profit fell by 4m from 75m in 2016 to 71m in Here the impact of a higher opening actuarial reserve was mainly offset by a continued tightening of corporate bond spreads and lower earnings on our surplus assets. In 2017, bond spreads continued the trend seen in 2016, and tightened by about a further 35 bps which led to reduction in the in-force earnings of about 5m and therefore represented the main reason for the reduction in this caption. As I have said before, I d flag that we do not lose this benefit - as the capitalised impact of the spread tightening on defaults is captured in the Investment & Economic variances line. This year we have seen a benefit of c 34m created by this spread tightening and is recognised in the investment variance line which I ll come back in a couple of slides. The other factor affecting the in-force margin relates to earnings on surplus 10

17 assets, where in 2016 we had a higher number of mortgages in surplus, over the two years this amount has reduced and thereby reduced the earning on surplus by about 2m Looking ahead, and subject of course to spread developments, I d expect the in-force profit to get back on track, more closely following the growth in reserves. Next, given their size, I want to talk through the operating experience variances and assumption changes 10

18 You will see that we reported positive operating experience variances and assumption changes of 35m. This is the net result of some larger movements, including: - First, a c 90m release in reserves captured from the integration expense synergies. Rodney highlighted that we are at a run rate saving of 52m at the end of Although this mostly relates to new business, some relates to the in-force book, and, given clear evidence that per-policy costs are below our reserving assumptions, we have released some expense reserves. The 90m represents that capitalised effect and, along with the improvement in the new business margins, is another tangible benefit of the merger. - However, conversely, the first half trend of higher than expected mortgage mortality continued into the second half. This was the main driver of a 15m negative operating experience variance, albeit partly mitigated by positive experience in other areas including GIfL, Care and DB In the light of that experience, we decided to strengthen our mortgage longevity assumptions which was partly offset by releases from our standard 11

19 underwritten DB book, resulting in a c 30m net increase in reserves As part of the year end basis review, we have generally moved to the new CMI mortality improvement tables for our standard underwritten blocks. We do not generally medically underwrite the lives of LTM borrowers, and we have therefore seen the impact of lower mortality improvements on our mortgagees. This has prompted us to prudently strengthen our assumptions by assuming that we will accrue interest on these mortgages for approximately one year less and get repaid sooner. We then conservatively assume that the proceeds are held in cash rather than put back to work. Similarly, we have looked at our mortality reserves for our standard underwritten DB business and found that this book is exhibiting similar characteristics. This means reserves here can be reduced, partly offsetting the effect of the mortgage changes this is a practical example of the hedge we have between our Life Time mortgages & our GIFL & DB liabilities Moving onto the medically underwritten business, primarily individual GIfL, but also the rest of the DB book, It is important to consider the interaction between the mortality of people we have medically underwritten and the general population data. We are doing this as part of the process of integrating our IP from both the Just Retirement and Partnership sides of the business. We expect this to complete in 2018, and our analysis, so far, supports the existing medically underwritten bases, which we have therefore not changed. Overall we are comfortable that our reserves continue to remain prudent following these changes. Next, I just wanted to look at our statutory result, specifically the nonoperating items. 11

20 This is the only slide in the pack where the comparative figures are shown on a statutory basis including 18 months of Just Retirement and 9 months of Partnership. I want to highlight a few areas: First, non-recurring and project expenditure of 12m was down from 21m. The main costs here includes include the costs of the combination & reorganisation of JRS & TOMAS to form the HUB Group, IFRS 17 and a continued but reduced charge for Solvency II work. The Investment & economic profit line has made a net positive contribution of 23m. This was the line that benefitted from the tightening of credit spreads to the tune of 34m - which as I explained represents the capitalised amount of the spread tightening earlier and reduction of the in-force operating result by about 5m. This line also includes the negative effect of slightly rising interest rates on our surplus assets and by other changes to economic assumptions. 12

21 Merger integration costs of 26m were incurred as the integration programme came to a conclusion. Further integration efficiency gains will come, but these will be captured via normal BAU activity. The total investment of 67m of integration costs has released 52m of run rate savings, which confirms the success of the deal. Finally the cost of the amortisation of intangible assets is flat over the year Now moving to our Tier 3 bond issuance after the year end in February. 12

22 Our credit story improved significantly over the last year or so, especially since we achieved an investment grade credit rating. Together with favourable market conditions, this allowed us last month to issue 230m of 7 year Tier 3 capital with a 3.5% coupon. Our year end gearing level at 16% was lower than our sector peers, but our pro forma leverage ratio would now be in the middle of the pack at 25%, a position we are comfortable with. Fitch have confirmed our existing A/A+ ratings with Stable outlook. The support feels like a real vote of confidence in our model. We will use the debt proceeds to strengthen our capital position so that we can invest in the business and take advantage of profitable growth opportunities. You will also recall that in July we announced a five year revolving credit facility. This gives us flexible access to liquidity at interest rates broadly 100b.p. less than under the previous senior term facility. The facility remains undrawn and gives us up to 200m of liquidity if need be. 13

23 Overall, following the recent Tier 3 issuance, our capital and funding base is significantly more efficient than at IPO and we have made real progress with our cost of debt. Now I ll hand over to David, who will take you through our capital position. 13

24 I m going to focus on the capital position, before handing back to Rodney for concluding remarks. 14

25 First of all, our Solvency II capital coverage ratio was 141% at the end of 2017, compared to 148% at the prior year end. To enable a like for like comparison, we have restated the year-end 2016 figure assuming TMTP recalculation at that date, even though it was only actually re-done at the end of The reduction in coverage ratio we saw during 2017 was expected and I ll take you through the moving parts on the next slide. You ll see in the chart on the bottom left that we have added an extra column to show the position as if the new Tier 3 debt had been in place at year end, increasing the pro-forma Solvency II coverage ratio to 156%. The Board remains comfortable with both the level of surplus and coverage ratio. Economic movements since the year end reporting date have actually meant solvency has improved so far in 2018, but we ll wait until the interim results to update you on that. Until then you can use the sensitivities provided later to inform your own estimates. As you can see from the chart on the bottom right, our capital structure is now taking advantage of more of the features available to us under Solvency II. We have utilized some of the hybrid capital capacity available to us, making our solvency capital structure less equity dependent and, as a result, more 15

26 efficient. That being said, 117% of SCR continues to be covered by unrestricted tier 1 Own Funds. The economic capital ratio at year end was 238%. This further demonstrates the significant capital strength of our balance sheet. This is much higher than our Solvency II capital ratio as it reflects our true economic view and does not contain the more onerous elements of Solvency II, such as the risk margin or inefficiencies introduced by the structuring required to make lifetime mortgages eligible for matching adjustment treatment under Solvency 2. During 2017 our economic capital ratio increased by 22% even as the Solvency 2 coverage ratio fell by 7%. As we layer on more new business under the SII regime, don t be surprised if the gap between economic capital and Solvency 2 continues to widen. The Board has proposed a final dividend of 2.55p per share, a 6% increase on the prior year. Added to the interim dividend this makes a full year dividend of 3.72p per share, also up 6%. The dividend is supported by our resilient capital position. The payout ratio is not something we intend to change significantly in the short term. However it is intended to be progressive, subject to continued earnings growth, opportunities to invest in the business and a satisfactory capital position Moving to the next slide, I will take you through the change in the Solvency 2 surplus during

27 This chart shows the development in our Solvency II surplus over I will step through every component and how we expect them to develop in the future. Note that all figures here are net of tax. To compare like with like the waterfall we ve shown here starts with a yearend 2016 position as if the TMTP had been recalculated then, This gives a starting Solvency II coverage ratio of 148% and a surplus of 666m. In-force surplus over the period was 128m, a little higher than my original guidance at last year s full year results. This represents the gradual release of all the prudent margins Solvency II requires you to hold, including risk margin and SCR, and it allows for twelve months amortisation of transitionals. We expect this figure to grow by around 15% per annum over the next few years. New business strain over the period, loaded for post-synergy cost levels, was 105m. On 1.9bn of new business premiums, that represents a strain of around 5.5% of premium. This is in line with our mid-single digit % of premium guidance and this remains our expectation for the future. We also continue to expect to achieve a mid-teen return on shareholder capital deployed on new business and indeed exceeded that during As we ve 16

28 previously explained, the amount of new business strain and the IRR are subject to a number of variables including business mix, customer rates, the level of mortgage spreads, risk-free rates and other economic variables. The dividend and interest cost captures the dividends paid during 2017, and also reflects the full 12 months of coupon on the Tier 2 debt issued in October For 2018, full year interest costs are expected to be 40m pre-tax, which you can net down for tax in your projections and add to your dividend forecast. As Simon explained, we ve made great progress in achieving 52m of run rate merger expense synergies, however there is a lag in converting those to actual cash savings. During 2017, there was a 22m cost overrun versus expected 2018 cost-base, which was in-line with our expectations, in addition to 21m of merger integration costs. Finally, there was a positive benefit of 76m from Other items during the year. The largest single component of this was the impact of the merger expense synergies that Simon explained earlier; this led to a release in SII expense reserves of just over 60m post-tax In aggregate this means that on a like for like basis we achieved a stable surplus in terms during Looking forward, the growth opportunities in the DB de-risking market are exciting and our recent Tier 3 debt raise will allow us to target a higher level of growth. In addition, we have decided to invest in our business to grow in new areas and diversify our sources of revenue. As a result of the decision, we expect the business will reach a capital neutral point in terms during We expect the Solvency II coverage ratio to reach its low point in 2020, and to remain above the Board s capital risk appetite throughout that time. Of course there are lots of variables which will affect the actual capital ratio development over time, but that is our base-line expectation consistent with the 5-year business plan approved by our Board. Let s move next to the Solvency II sensitivities 16

29 This chart shows the sensitivity of our capital position to the key risks that the balance sheet is exposed to. Overall, the picture is one of a resilient balance sheet, with scope to absorb various stress scenarios and still support the growth of the business. Note that these sensitivities are on a pro forma basis including the Tier 3 debt issued in February. They make no allowance for any potential management actions to mitigate the impact of the scenarios modelled. First, we can absorb falls in interest rates. A 50bp fall from 31 December 2017 levels would have left the Solvency II coverage ratio 19 percentage points lower. For falls bigger than 50b.p., we have positioned the balance sheet so that the effect on the coverage ratio is dampened to changes in riskfree rates after recalculation of TMTP. To be clear, a 50b.p fall does not automatically trigger a recalculation of the transitionals, and as per the previous slide, the TMTP was recalculated at the end of Thus far in 2018, interest rates have risen, which is a positive for our balance sheet, and the sensitivity allows you to estimate the impact of market movements both pre and post TMTP 17

30 Credit spread expansion is manageable in a Solvency II world and a 10% increase in LTM early redemptions would be a net positive for us, in contrast to IFRS, because the associated risk capital is released earlier than expected Our principle balance sheet risks otherwise remain property and longevity. Our exposure to property risk primarily relates to our No Negative Equity Guarantee on Lifetime Mortgages. The property stress represents a 10% permanent fall below the assumed long term trend for property prices, and assumes no subsequent recovery of that fall. In other words, a permanent step down below the long-term trend with no subsequent mean reversion. This stress would have reduced Solvency II coverage ratio by 12 percentage points Current property price trends are not uniform across the country and this is where we benefit from a geographically diversified LTM portfolio with a low initial loan to value ratio. As for longevity, trends are actually favourable. Latest CMI analysis shows that the rate of improvement has continued to fall. People are living longer than ever before, however incremental gains are harder to come by, and the rate of improvement has slowed down to a crawl. You can see a good depiction of this on slide 25 in the appendix. There is general agreement in the industry that the slow down in the rate of mortality improvement over recent years now reflects a trend as opposed to a blip. The 5% uniform increase in longevity shown here would represent a material surprise to the business given the credibility of our accumulated mortality IP, but again this is a risk we could absorb, should current trends dramatically reverse. And with that, back to Rodney for concluding remarks 17

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32 Thanks David Now that we have delivered 52m of run rate cost synergies, I want to restate our equity story. It hasn t changed, and we are delivering. First: our markets are growing and profitable. We have been maximising our profits by risk-selection rather than pursuing headline sales growth for its own sake. We expect market growth to continue Second: We have a sustainable competitive advantage within these attractive markets, driven by our medical underwriting, extensive distribution franchise and importantly, our mortgage origination capability. These advantages power our risk selection and are translating into higher profits. Third: These improving returns mean we remain confident of achieving a self sustaining capital position. Our balance sheet is stronger and more efficient than it was a year ago and we expect to be capital neutral in Fourth, the merger has now delivered synergies well beyond our expectations. It isn t a coincidence that margins have expanded over the 19

33 integration period, and not just because of cost savings. 19

34 I also want to recap on our achievements during 2017, and talk about how we can kick on in 2018 and beyond. Our model really delivered the goods last year. A 37% leap in new business profits gives me huge pride and we have really delivered on the promise of the merger. This is confirmed by the 52m run rate of cost savings, 30% higher than we originally planned. We are already achieving an Internal Rate of Return on new business above our 2018 target helped by synergies and our pricing discipline. The merger has been a big success. We have also significantly improved our balance sheet strength and flexibility over the last twelve months, with our recent bond issue being the icing on the cake. Although our business will remain capital consumptive for another 20

35 couple of years we are starting from a good position. I think we have earned credibility here and significantly lowered our cost of capital. But there is more to come as we are focused on improving our returns. We will do this partly through doing more of the same, given supportive markets and our sound capital position, but also through innovation and renewal. With this in mind, we have renewed our 5 year business plan to invest in our strategic priorities. This includes digitising the Group to help us deliver a market leading customer experience and to drive operational efficiencies. We are relishing this shift in focus from integration to investment and innovation, as we diversify and grow our business further with product launches and service innovations aimed at the millions of middle Britons who currently don t have access to help in managing their retirement finances. Adding it up we think our model is delivering, and more importantly, will continue to do so. 20

36 With that, who wants to ask the first question? Usual format please raise your hand, and state your name and your company s name (Questions from the floor) Steve, are there any questions from those people have joined on the webcast? Any further questions? In that case I d like to thank you all again for your interest, and I hope to see you again soon. 21

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