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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Just Retire. | LSE:JR. | London | Ordinary Share | GB00B1GN8L66 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 76.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
Hot Features
Premium
TIDMJR.
RNS Number : 6507Z
Just Retirement (Holdings) plc
25 September 2009
JUST RETIREMENT (HOLDINGS) PLC
("JUST RETIREMENT" OR "THE GROUP")
PRELIMINARY RESULTS
FOR THE YEAR ENDED 30 JUNE 2009
Just Retirement, the specialist UK life assurance group focusing on the
provision of financial services to those at or in retirement, today announces
its preliminary results for the year ended 30 June 2009.
Offer update
The Independent Directors of Just Retirement have agreed to recommend an offer
by Avalon Acquisitions Limited, a newly incorporated company owned by funds
advised by Permira Advisers LLP, to acquire the entire issued and to be issued
ordinary share capital of Just Retirement. Details of the offer are set out in
the accompanying announcement released today.
HIGHLIGHTS
* Record value of new business (VNB) of GBP49.0 million, up 17% on previous year
* Life company European Embedded Value (EEV) underlying operating profit before
tax of GBP79.4 million, up 20% on previous year
* Assets under management GBP1.9 billion, up 39% on 30th June 2008
* Current trading very satisfactory
+------------------------------------+-------------+--------------+-------------+
| FINANCIAL SUMMARY | Year ended | Year ended | % change |
| | 30 June | 30 June 2008 | |
| | 2009 | GBPm | |
| | GBPm | | |
+------------------------------------+-------------+--------------+-------------+
| Sale of Annuity Policies | 590.8 | 604.5 | (2.3%) |
+------------------------------------+-------------+--------------+-------------+
| Equity Release Mortgage Advances | 162.9 | 159.0 | 2.5% |
+------------------------------------+-------------+--------------+-------------+
| Total Sales | 753.7 | 763.5 | (1.3%) |
+------------------------------------+-------------+--------------+-------------+
| | | | |
+------------------------------------+-------------+--------------+-------------+
| Value of New Business after tax | 49.0 | 42.0 | 16.7% |
+------------------------------------+-------------+--------------+-------------+
| Life Company EEV Underlying | 79.4 | 66.4 | 19.6% |
| Operating Profit before tax (1) | | | |
+------------------------------------+-------------+--------------+-------------+
| EEV New Business Margin | 8.3% | 7.0% | N/A |
+------------------------------------+-------------+--------------+-------------+
| Group Embedded Value | 139.8 | 148.5 | (5.9%) |
+------------------------------------+-------------+--------------+-------------+
| | | | |
+------------------------------------+-------------+--------------+-------------+
| IFRS Operating Profit before tax | 45.2 | 46.4 | (2.6%) |
| (2) | | | |
+------------------------------------+-------------+--------------+-------------+
| IFRS Total Equity | 102.7 | 107.6 | (4.6%) |
+------------------------------------+-------------+--------------+-------------+
| | | | |
+------------------------------------+-------------+--------------+-------------+
(1)Excludes operating assumption changes: GBPnil 2008/9 (2007/8 -GBP4.3m)
(2) See note 2
Mike Fuller, Chief Executive of Just Retirement, commented:
"The economic crisis has meant this has been the most challenging year in the
company's history. Just Retirement's profit-focused strategy during this time,
which cost the company sales in the short term, has been successful, which is
evident in the results I am pleased to report for the year ended 30th June 2009.
Just Retirement has broadly maintained sales, despite significant competition,
whilst also increasing operating profitability."
Just Retirement will host a meeting for analysts and investors at 9.00am to
discuss the preliminary results statement. Please contact Lindsay Noton,
Citigate Dewe Rogerson, on 020 7282 1032 for details.
Enquiries
+---------------------------------------+---------------------------------------+
| Just Retirement | Citigate Dewe Rogerson |
| +44 (0)1737 233396 | +44 (0)20 7638 9571 |
| Mike Fuller, Chief Executive | Michael Berkeley |
| Simon Thomas, Finance Director | Ged Brumby |
| Shayne Deighton, Chief Actuary | |
| Scott Fulton, Investor Relations | |
+---------------------------------------+---------------------------------------+
Chief Executive's Review
Overview of results
Just Retirement's performance in the 12 months to June 2009 demonstrates both
the resilience of its economic model and its focus on profitability. Thus,
whilst the Group experienced a decline in annuity sales in the early part of the
year due to the impact of aggressive competitor pricing of annuities, this was
balanced by its ability to deliver high levels of equity release mortgages. As
the UK annuity market returned to more normal levels in the second half, the
Group's competitive position was re-established and it was able to report its
strongest quarter for annuity sales ever.
Enhanced annuities
Despite adopting a cautious approach to pricing during the first half of the
year during which the Group wrote GBP272 million of enhanced annuities (down 13%
on H1 2007/8), the second half of the year saw sales of GBP319 million. This was
a gain of 9.4% on the same period in 2007/8 and a 17.1% increase on the first
half of 2008/9. As a result, full year sales of annuities in 2008/9 were GBP591
million, only 2.3% less than 2007/8. Given the underlying uncertain financial
climate which existed for much of the year, these sales volumes were
satisfactory. Against this background, the increased overall value of new
business written was GBP28.7 million against GBP21.9 million in 2007/8,
representing a margin of 4.9% compared to 3.6% in 2007/8. This is an extremely
pleasing result and, as well as validating the approach Just Retirement has
adopted, demonstrates the ability of the Group to react quickly to changing
market conditions.
Equity release
Annual equity release advances demonstrated further growth, resulting in the
Group maintaining the position of second largest equity release provider in the
UK. Over the course of the year, further consolidation has been seen in this
market with four providers now accounting for the majority of sales and others
making alterations to product ranges in order to reduce risk exposure and make
funding last longer in current market conditions.
The value of new business for equity release was up 1.0% to GBP20.3 million
(2007/8: GBP20.1 million). Margins on equity release business were stable during
the financial year, at 12.5% compared to 12.6% in 2007/8. With the widely
publicised lack of mortgage funding available in the market during the year,
Just Retirement has been in a strong position through its self-financing
business model to consolidate its position.
Financial performance
VNB for the Group rose 16.7% to GBP49.0 million (2007/8: GBP42.0 million),
reflecting margin strength in both products and growth in total equity release
mortgage advances.
Underlying EEV operating profit for covered business for the year was GBP79.4
million representing a year-on-year increase of 19.6% (2007/8: GBP66.4 million).
Embedded value of GBP139.8m (2007/8: GBP148.5 million) was 5.9% lower due to
economic variance of GBP70.3m (2007/8: GBP42.7 million), itself substantially
caused by widening corporate bond spreads.
Value of New Business
+-----------+--------+---------+---------+
| | | Year | Year |
| | | ended | ended |
| | | 30 June | 30 June |
| | | 2009 | 2008 |
+-----------+--------+---------+---------+
| Sales | | | |
+-----------+--------+---------+---------+
| Enhanced | | 590.8 | 604.5 |
| Annuities | | | |
| (GBPm) | | | |
+-----------+--------+---------+---------+
| Equity | | 162.9 | 159.0 |
| Release | | | |
| (GBPm) | | | |
+-----------+--------+---------+---------+
| Total | | 753.7 | 763.5 |
| Sales | | | |
| (GBPm) | | | |
+-----------+--------+---------+---------+
| | | | |
+-----------+--------+---------+---------+
| Value | | | |
| of New | | | |
| Business | | | |
+-----------+--------+---------+---------+
| Enhanced | | 28.7 | 21.9 |
| Annuities | | | |
| (GBPm) | | | |
+-----------+--------+---------+---------+
| Equity | | 20.3 | 20.1 |
| Release | | | |
| (GBPm) | | | |
+-----------+--------+---------+---------+
| Total | | 49.0 | 42.0 |
| VNB | | | |
| (GBPm) | | | |
+-----------+--------+---------+---------+
| | | | |
+-----------+--------+---------+---------+
| Margin | | | |
+-----------+--------+---------+---------+
| Enhanced | | 4.9% | 3.6% |
| Annuities | | | |
+-----------+--------+---------+---------+
| Equity | | 12.5% | 12.6% |
| Release | | | |
+-----------+--------+---------+---------+
| Total | | 8.3% | 7.0% |
| Margin | | | |
| (post | | | |
| tax) | | | |
+-----------+--------+---------+---------+
Investment
At 30th June 2009, Just Retirement had GBP1.9 billion of assets under management
(30th June 2008: GBP1.4 billion) including approximately GBP1.2 billion of
corporate bonds and gilts (30th June 2008: GBP0.9 billion), GBP0.6 billion
mortgages (30th June 2008: GBP0.3 billion) and GBP0.1 billion cash (30th June
2008: GBP0.2 billion).
The corporate bond portfolio consisted of approximately 200 individual
bonds from around 100 issuers across a range of investment grades but
concentrated in A-rated and above. The Board monitors the quality of these
investments carefully and seeks to ensure that, in addition to careful matching
of its underlying liabilities, the risk of default on holdings is minimised. The
Group has experienced no defaults in the year under review.
Impact of economic conditions and the liquidity premium
The second half of 2008 saw a significant dislocation of global financial
markets, in particular very large increases in corporate bond spreads and sharp
movements in risk-free interest rates. This continued into the first quarter of
2009. The second quarter saw a material narrowing of credit spreads, albeit that
interest rates remained volatile. Just Retirement uses corporate bonds to match
part of its illiquid annuity liabilities and, therefore, it will ultimately only
be affected by these spreads to the extent they are reflected by actual future
defaults. Consequently the Group has modified its embedded value approach to
allow for a "liquidity premium", which was 125 basis points for the in-force
business at 30th June 2009. The liquidity premium represents the residual part
of the spread in excess of a prudent assumption for future defaults.
The liquidity premium adjustment used in calculating the value of new business
each month varied over the financial year but the average effect was equivalent
to an adjustment of 120 basis points.
The impact of the liquidity premium on the EEV partially offsets the losses
arising on corporate bonds. These arise because the bonds are "marked to market"
but the liabilities are discounted using risk-free rates. The liquidity premium
serves to increase the discount rate used for valuing annuity liabilities which
are supported by corporate bonds. The net impact of these two treatments in the
year accounted for the majority of the total economic variance of GBP70.3
million (2007/8: GBP42.7 million).
Since the start of the current financial year, spreads have narrowed by
approximately 100 basis points, partially recovering the 2008/9 economic
variance.
The spread on corporate bonds at 30th June 2009 will be reflected in the
expected return for 2009/10, which will, therefore, be somewhat higher than that
for 2008/9. Over the longer term, the value of the spreads will fall into profit
as corporate bonds move to maturity, offset partially by the release of
liquidity premium and any actual defaults which might occur.
Capital
At 30th June 2009, the Life Company had a Pillar 1 solvency ratio of 160%.
Market movements since the year end have not had a material effect on this
ratio.
The Group believes that its capital position is sound, acknowledging the
volatility of capital markets and given Just Retirement's use of a conservative
allowance for defaults within its fixed interest portfolio. Just Retirement used
a Pillar 1 default allowance of 97 basis points per annum into perpetuity as at
30th June 2009.
The Group is pleased to announce an agreement with Hannover Life Re of
reassurance financing facilities to cover planned new business levels for the
next three financial years.
Current trading
In sales terms, current trading remains positive for both products. However, the
split between the two products is likely to change as sales of enhanced
annuities continue to grow strongly while equity release mortgage advances are
more stable. Accordingly, the Group estimates that first half sales are likely
to show growth on the comparable period in 2008/9.
- ENDS -
Summarised Group EEV Income Statement for the year ended 30 June 2009
+-----------------------------------------+------+--------------+--+--------------+
| | | Year ended | | Year ended |
| | | 30 June 2009 | | 30 June 2008 |
+-----------------------------------------+------+--------------+--+--------------+
| | | GBPm | | GBPm |
+-----------------------------------------+------+--------------+--+--------------+
| | | | | |
+-----------------------------------------+------+--------------+--+--------------+
| Operating profit from covered business | 79.4 | | 62.1 |
+------------------------------------------------+--------------+--+--------------+
| Operating loss of distribution company | (2.7) | | (3.0) |
+------------------------------------------------+--------------+--+--------------+
| Operating loss from other Group companies | (3.7) | | (0.9) |
+------------------------------------------------+--------------+--+--------------+
| Operating profit | 73.0 | | 58.2 |
+------------------------------------------------+--------------+--+--------------+
| | | | |
+------------------------------------------------+--------------+--+--------------+
| Economic variance | (81.0) | | (46.2) |
+------------------------------------------------+--------------+--+--------------+
| (Loss) / profit before tax | (8.0) | | 12.0 |
+------------------------------------------------+--------------+--+--------------+
| | | | |
+------------------------------------------------+--------------+--+--------------+
| Tax | | | |
+------------------------------------------------+--------------+--+--------------+
| - Covered business | (2.5) | | (5.9) |
+------------------------------------------------+--------------+--+--------------+
| - Other | 4.0 | | 0.9 |
+------------------------------------------------+--------------+--+--------------+
| (Loss) / profit after tax | (6.5) | | 7.0 |
+------------------------------------------------+--------------+--+--------------+
| | | | |
+------------------------------------------------+--------------+--+--------------+
| Earnings per share | | | |
+------------------------------------------------+--------------+--+--------------+
| Basic (loss) / earnings per share (pence) | (2.2) | | 2.4 |
+------------------------------------------------+--------------+--+--------------+
| Diluted (loss) / earnings per share (pence) | (2.2) | | 2.4 |
+-----------------------------------------+------+--------------+--+--------------+
Group EEV Balance Sheet as at 30 June 2009
+--------------------------------------+---------+--------------+--+--------------+
| | | 30 June 2009 | | 30 June 2008 |
+--------------------------------------+---------+--------------+--+--------------+
| | | GBPm | | GBPm |
+--------------------------------------+---------+--------------+--+--------------+
| Assets | | | |
+------------------------------------------------+--------------+--+--------------+
| | | | |
+------------------------------------------------+--------------+--+--------------+
| Value of in-force business | 3.0 | | 20.9 |
+------------------------------------------------+--------------+--+--------------+
| Intangible assets | 3.8 | | 3.5 |
+------------------------------------------------+--------------+--+--------------+
| Equipment | 0.6 | | 1.0 |
+------------------------------------------------+--------------+--+--------------+
| Financial assets | 1,967.9 | | 1,371.3 |
+------------------------------------------------+--------------+--+--------------+
| Current tax assets | 5.4 | | 6.0 |
+------------------------------------------------+--------------+--+--------------+
| Deferred tax assets | 4.5 | | 1.3 |
+------------------------------------------------+--------------+--+--------------+
| Reinsurance assets | 1,141.0 | | 795.8 |
+------------------------------------------------+--------------+--+--------------+
| Prepayments and accrued income | 30.2 | | 25.4 |
+------------------------------------------------+--------------+--+--------------+
| Insurance and other receivables | 5.6 | | 3.1 |
+------------------------------------------------+--------------+--+--------------+
| Cash and cash equivalents | 3.2 | | 12.5 |
+------------------------------------------------+--------------+--+--------------+
| | | | |
+------------------------------------------------+--------------+--+--------------+
| Total assets | 3,165.2 | | 2,240.8 |
+------------------------------------------------+--------------+--+--------------+
| | | | |
+------------------------------------------------+--------------+--+--------------+
| Equity | 139.8 | | 148.5 |
+------------------------------------------------+--------------+--+--------------+
| | | | |
+------------------------------------------------+--------------+--+--------------+
| Liabilities | | | |
+------------------------------------------------+--------------+--+--------------+
| | | | |
+------------------------------------------------+--------------+--+--------------+
| Insurance liabilities | 1,843.1 | | 1,288.6 |
+------------------------------------------------+--------------+--+--------------+
| Financial liabilities | 1,155.4 | | 797.4 |
+------------------------------------------------+--------------+--+--------------+
| Other provisions | 0.3 | | 0.3 |
+------------------------------------------------+--------------+--+--------------+
| Insurance and other payables | 16.2 | | 2.8 |
+------------------------------------------------+--------------+--+--------------+
| Accruals and deferred income | 5.9 | | 3.2 |
+------------------------------------------------+--------------+--+--------------+
| Current tax liabilities | 4.5 | | - |
+------------------------------------------------+--------------+--+--------------+
| | | | |
+------------------------------------------------+--------------+--+--------------+
| Total liabilities | 3,025.4 | | 2,092.3 |
+------------------------------------------------+--------------+--+--------------+
| | | | |
+------------------------------------------------+--------------+--+--------------+
| Total equity and liabilities | 3,165.2 | | 2,240.8 |
+--------------------------------------+---------+--------------+--+--------------+
ANALYSIS OF EMBEDDED VALUE PROFIT OF JUST RETIREMENT LIMITED
+------------------------------------+-----+---------+----+--------+---+------+---+--+--+---------+
| | Year ended 30 June 2009 |
+------------------------------------+------------------------------------------------------------+
| | Shareholders' | Value of | Total | Year ended |
| | net assets | in-force | GBPm | 30 June 2008 |
| | GBPm | business | | GBPm |
| | | GBPm | | |
+------------------------------------+---------------+-------------+----------+-------------------+
| Expected return on opening | 6.0 | 10.9 | 16.9 | 7.6 |
| embedded value | | | | |
+------------------------------------+---------------+-------------+----------+-------------------+
| Expected surplus from in-force | (1.3) | 1.3 | - | - |
| business | | | | |
+------------------------------------+---------------+-------------+----------+-------------------+
| New business contribution | 42.7 | 25.4 | 68.1 | 59.1 |
+------------------------------------+---------------+-------------+----------+-------------------+
| Operating experience variance | (8.5) | 2.9 | (5.6) | (0.3) |
+------------------------------------+---------------+-------------+----------+-------------------+
| Operating assumption changes | | 10.5 | | (10.5) | | - | | (4.3) |
+------------------------------------+-----+---------+----+--------+---+------+------+------------+
| Operating profit from covered | 49.4 | 30.0 | 79.4 | 62.1 |
| business | | | | |
+------------------------------------+---------------+-------------+----------+-------------------+
| Economic variance (1) | (15.4) | (54.9) | (70.3) | (42.7) |
+------------------------------------+---------------+-------------+----------+-------------------+
| Embedded value profit before tax | | 34.0 | | (24.9) | | 9.1 | | 19.4 |
+------------------------------------+-----+---------+----+--------+---+------+------+------------+
| Tax | (9.5) | 7.0 | (2.5) | | (5.9) |
+------------------------------------+---------------+-------------+----------+---+---------------+
| Embedded value profit after tax | | 24.5 | | (17.9) | | 6.6 | | 13.5 |
+------------------------------------+-----+---------+----+--------+---+------+------+------------+
| | | | | | | |
+------------------------------------+-----+---------+----+--------+---+------+---+--+--+---------+
(1) The economic variance of GBP81.0 million (2008: GBP46.2million) reported in
the Group Income Statement includes GBP10.7 million (2008: GBP3.5 million) in
respect of the fair value loss on the interest rate swap derivatives held by
Just Retirement (Holdings) plc.
GROUP IFRS INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2009
+-------------------------------------------------+-----------+---+-----------+
| | Year | | Year |
| | ended | | ended |
| | 30 June | | 30 June |
| | 2009 | | 2008 |
| | GBPm | | GBPm |
+-------------------------------------------------+-----------+---+-----------+
| Revenue | | | |
+-------------------------------------------------+-----------+---+-----------+
| Gross premiums written | 590.8 | | 604.5 |
+-------------------------------------------------+-----------+---+-----------+
| Reinsurance premiums ceded | (334.7) | | (351.6) |
+-------------------------------------------------+-----------+---+-----------+
| Net premium revenue earned | 256.1 | | 252.9 |
+-------------------------------------------------+-----------+---+-----------+
| Net investment income | 56.5 | | 36.1 |
+-------------------------------------------------+-----------+---+-----------+
| Total Revenue | 312.6 | | 289.0 |
+-------------------------------------------------+-----------+---+-----------+
| Other operating income | 0.8 | | 2.1 |
+-------------------------------------------------+-----------+---+-----------+
| | | | |
+-------------------------------------------------+-----------+---+-----------+
| Expenses | | | |
+-------------------------------------------------+-----------+---+-----------+
| Claims incurred | | | |
+-------------------------------------------------+-----------+---+-----------+
| Claims paid | | | |
+-------------------------------------------------+-----------+---+-----------+
| Gross | (128.6) | | (85.7) |
| amount | | | |
+-------------------------------------------------+-----------+---+-----------+
| Reinsurers' | 80.4 | | 52.0 |
| share | | | |
+-------------------------------------------------+-----------+---+-----------+
| | (48.2) | | (33.7) |
+-------------------------------------------------+-----------+---+-----------+
| Change in insurance liabilities | | | |
+-------------------------------------------------+-----------+---+-----------+
| Gross | (501.0) | | (487.1) |
| amount | | | |
+-------------------------------------------------+-----------+---+-----------+
| Reinsurers' | 345.2 | | 327.7 |
| share | | | |
+-------------------------------------------------+-----------+---+-----------+
| | (155.8) | | (159.4) |
+-------------------------------------------------+-----------+---+-----------+
| Acquisition costs | (17.9) | | (14.9) |
+-------------------------------------------------+-----------+---+-----------+
| Other operating expenses | (43.1) | | (37.6) |
+-------------------------------------------------+-----------+---+-----------+
| Finance costs | (51.4) | | (33.5) |
+-------------------------------------------------+-----------+---+-----------+
| Total claims and expenses | (316.4) | | (279.1) |
+-------------------------------------------------+-----------+---+-----------+
| | | | |
+-------------------------------------------------+-----------+---+-----------+
| (Loss) / profit before tax | (3.0) | | 12.0 |
+-------------------------------------------------+-----------+---+-----------+
| | | | |
+-------------------------------------------------+-----------+---+-----------+
| Income tax | 0.3 | | (3.8) |
+-------------------------------------------------+-----------+---+-----------+
| | | | |
+-------------------------------------------------+-----------+---+-----------+
| (Loss) / profit for the year attributable | (2.7) | | 8.2 |
| to equity holders of the parent | | | |
+-------------------------------------------------+-----------+---+-----------+
| | | | |
+-------------------------------------------------+-----------+---+-----------+
| Earnings per share | | | |
+-------------------------------------------------+-----------+---+-----------+
| Basic (loss) / earnings per share (pence) | (0.9) | | 2.8 |
+-------------------------------------------------+-----------+---+-----------+
| Diluted (loss) / earnings per share (pence) | (0.9) | | 2.8 |
+-------------------------------------------------+-----------+---+-----------+
GROUP IFRS STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2009
+-------------+---------+------------+---------+-------------+--------+
| Year | Share | Capital | Share | Accumulated | Total |
| ended | capital | redemption | premium | profit | |
| 30 | | reserve | | | |
| June | | | | | |
| 2009 | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm |
+-------------+---------+------------+---------+-------------+--------+
| | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| Balance | 0.3 | 2.2 | 78.8 | 26.3 | 107.6 |
| at 1 | | | | | |
| July | | | | | |
| 2008 | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| Loss | - | - | - | (2.7) | (2.7) |
| for | | | | | |
| the | | | | | |
| year | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| Dividends | - | - | - | (3.0) | (3.0) |
| paid | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| Issue | - | - | 0.2 | - | 0.2 |
| of | | | | | |
| shares | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| Share-based | - | - | - | 0.6 | 0.6 |
| payments | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| Balance | 0.3 | 2.2 | 79.0 | 21.2 | 102.7 |
| at 30 | | | | | |
| June | | | | | |
| 2009 | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| | | | | | |
+-------------+---------+------------+---------+-------------+--------+
+-------------+---------+------------+---------+-------------+--------+
| Year | Share | Capital | Share | Accumulated | Total |
| ended | capital | Redemption | premium | profit | |
| 30 | | reserve | | | |
| June | | | | | |
| 2008 | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm |
+-------------+---------+------------+---------+-------------+--------+
| | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| Balance | 2.5 | - | 78.1 | 20.5 | 101.1 |
| at 1 | | | | | |
| July | | | | | |
| 2007 | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| Profit | - | - | - | 8.2 | 8.2 |
| for | | | | | |
| the | | | | | |
| year | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| Dividends | - | - | - | (2.6) | (2.6) |
| paid | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| Repurchase | (2.2) | 2.2 | - | - | - |
| of | | | | | |
| deferred | | | | | |
| shares | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| Issue | - | - | 0.7 | - | 0.7 |
| of | | | | | |
| shares | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| Share-based | - | - | - | 0.3 | 0.3 |
| payments | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| Excess | - | - | - | (0.1) | (0.1) |
| tax | | | | | |
| relief | | | | | |
| on | | | | | |
| share-based | | | | | |
| payments | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| Balance | 0.3 | 2.2 | 78.8 | 26.3 | 107.6 |
| at 30 | | | | | |
| June | | | | | |
| 2008 | | | | | |
+-------------+---------+------------+---------+-------------+--------+
| | | | | | |
+-------------+---------+------------+---------+-------------+--------+
GROUP IFRS BALANCE SHEET
AS AT 30 JUNE 2009
+-------------+---------+--------+---------+------------------------------------------------+
| | 30 | | 30 June 2008 |
| | June | | GBPm |
| | 2009 | | |
| | GBPm | | |
+-------------+---------+--------+----------------------------------------------------------+
| | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Assets | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Intangible | 3.8 | | 3.5 |
| assets | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Equipment | 0.6 | | 1.0 |
| | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Financial | 1,884.0 | | 1,346.9 |
| assets | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Current | 5.4 | | 6.0 |
| tax | | | |
| assets | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Deferred | 15.3 | | - |
| tax | | | |
| assets | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Reinsurance | 1,141.0 | | 795.8 |
| assets | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Prepayments | 30.2 | | 25.4 |
| and accrued | | | |
| income | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Insurance | 5.6 | | 3.1 |
| and other | | | |
| receivables | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Cash | 3.2 | | 12.5 |
| and | | | |
| cash | | | |
| equivalents | | | |
+-------------+---------+--------+----------------------------------------------------------+
| | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Total | 3,089.1 | | 2,194.2 |
| assets | | | |
+-------------+---------+--------+----------------------------------------------------------+
| | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Equity | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Share | 0.3 | | 0.3 |
| capital | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Capital | 2.2 | | 2.2 |
| redemption | | | |
| reserve | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Share | 79.0 | | 78.8 |
| premium | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Accumulated | 21.2 | | 26.3 |
| profit | | | |
+-------------+---------+--------+----------------------------------------------------------+
| | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Total | 102.7 | | 107.6 |
| equity | | | |
+-------------+---------+--------+---------+
| | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Liabilities | | | |
+-------------+---------+--------+----------------------------------------------------------+
| | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Insurance | 1,746.3 | | 1,245.3 |
| liabilities | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Financial | 1,199.1 | | 831.4 |
| liabilities | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Other | 0.3 | | 0.3 |
| provisions | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Insurance | 16.2 | | 2.8 |
| and other | | | |
| payables | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Accruals | 5.9 | | 3.2 |
| and | | | |
| deferred | | | |
| income | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Current | 4.5 | | - |
| tax | | | |
| liabilities | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Deferred | 14.1 | | 3.6 |
| tax | | | |
| liabilities | | | |
+-------------+---------+--------+----------------------------------------------------------+
| | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Total | 2,986.4 | | 2,086.6 |
| liabilities | | | |
+-------------+---------+--------+---------+
| | | | |
+-------------+---------+--------+----------------------------------------------------------+
| Total | 3,089.1 | | 2,194.2 |
| equity | | | |
| and | | | |
| liabilities | | | |
+-------------+---------+--------+---------+------------------------------------------------+
GROUP IFRS CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2009
+--------------+--------+---------+--------+---------+
| |
+--------------+
| | | Year | | Year |
| | | ended | | ended |
| | | 30 | | 30 |
| | | June | | June |
| | | 2009 | | 2008 |
+--------------+--------+---------+--------+---------+
| | | GBPm | | GBPm |
+--------------+--------+---------+--------+---------+
| | | Year | | Year |
| | | ended | | ended |
| | | 30 | | 30 |
| | | June | | June |
| | | 2009 | | 2008 |
+--------------+--------+---------+--------+---------+
| | | GBPm | | GBPm |
+--------------+--------+---------+--------+---------+
| | | | | |
+--------------+--------+---------+--------+---------+
| Cash | | | | |
| flows | | | | |
| from | | | | |
| operating | | | | |
| activities | | | | |
+--------------+--------+---------+--------+---------+
| | | | | |
+--------------+--------+---------+--------+---------+
| (Loss) | | (3.0) | | 12.0 |
| / | | | | |
| profit | | | | |
| before | | | | |
| tax | | | | |
+--------------+--------+---------+--------+---------+
| Depreciation | | 0.5 | | 0.7 |
| of equipment | | | | |
+--------------+--------+---------+--------+---------+
| Amortisation | | 1.6 | | 0.5 |
| of | | | | |
| intangible | | | | |
| assets | | | | |
+--------------+--------+---------+--------+---------+
| Share-based | | 0.6 | | 0.3 |
| payments | | | | |
+--------------+--------+---------+--------+---------+
| Interest | | (90.6) | | (68.2) |
| income | | | | |
+--------------+--------+---------+--------+---------+
| Interest | | 51.4 | | 33.5 |
| expense | | | | |
+--------------+--------+---------+--------+---------+
| Operating | | (39.5) | | (21.2) |
| loss | | | | |
| before | | | | |
| changes | | | | |
| in | | | | |
| operating | | | | |
| assets | | | | |
| and | | | | |
| liabilities | | | | |
+--------------+--------+---------+--------+---------+
| | | | | |
+--------------+--------+---------+--------+---------+
| (Increase) | | (589.1) | | (486.8) |
| in | | | | |
| financial | | | | |
| investments | | | | |
+--------------+--------+---------+--------+---------+
| (Increase) | | (345.2) | | (327.7) |
| in | | | | |
| reinsurance | | | | |
| assets | | | | |
+--------------+--------+---------+--------+---------+
| Decrease | | 0.9 | | 4.5 |
| in | | | | |
| prepayments | | | | |
| and accrued | | | | |
| income | | | | |
+--------------+--------+---------+--------+---------+
| (Increase) | | (2.5) | | (0.4) |
| in | | | | |
| insurance | | | | |
| and other | | | | |
| receivables | | | | |
+--------------+--------+---------+--------+---------+
| Increase | | 501.0 | | 487.1 |
| in | | | | |
| insurance | | | | |
| liabilities | | | | |
+--------------+--------+---------+--------+---------+
| Increase | | - | | 13.1 |
| in other | | | | |
| provisions | | | | |
+--------------+--------+---------+--------+---------+
| Increase | | 347.3 | | 322.6 |
| in | | | | |
| deposits | | | | |
| received | | | | |
| from | | | | |
| reinsurers | | | | |
+--------------+--------+---------+--------+---------+
| Increase | | 13.4 | | (2.3) |
| / | | | | |
| (decrease) | | | | |
| in | | | | |
| insurance | | | | |
| and other | | | | |
| payables | | | | |
+--------------+--------+---------+--------+---------+
| Increase | | 20.4 | | 3.5 |
| in other | | | | |
| creditors | | | | |
+--------------+--------+---------+--------+---------+
| Increase | | 2.7 | | (1.7) |
| / | | | | |
| (decrease) | | | | |
| in | | | | |
| accruals | | | | |
| and | | | | |
| deferred | | | | |
| income | | | | |
+--------------+--------+---------+--------+---------+
| Cash | | (90.6) | | (9.3) |
| outflow | | | | |
| generated | | | | |
| from | | | | |
| operations | | | | |
+--------------+--------+---------+--------+---------+
| | | | | |
+--------------+--------+---------+--------+---------+
| Interest | | 59.4 | | 44.7 |
| received | | | | |
+--------------+--------+---------+--------+---------+
| Interest | | (51.4) | | (33.5) |
| paid | | | | |
+--------------+--------+---------+--------+---------+
| Taxation | | 0.8 | | (5.0) |
| recoverable | | | | |
| / (paid) | | | | |
+--------------+--------+---------+--------+---------+
| Net | | (81.8) | | (3.1) |
| cash | | | | |
| outflow | | | | |
| from | | | | |
| operating | | | | |
| activities | | | | |
+--------------+--------+---------+--------+---------+
| | | | | |
+--------------+--------+---------+--------+---------+
| Cash | | | | |
| flows | | | | |
| from | | | | |
| investing | | | | |
| activities | | | | |
+--------------+--------+---------+--------+---------+
| Additions | | (1.9) | | (3.1) |
| to | | | | |
| internally | | | | |
| generated | | | | |
| intangible | | | | |
| assets | | | | |
+--------------+--------+---------+--------+---------+
| Acquisition | | (0.1) | | (0.8) |
| of | | | | |
| equipment | | | | |
+--------------+--------+---------+--------+---------+
| Net | | (2.0) | | (3.9) |
| cash | | | | |
| from | | | | |
| investing | | | | |
| activities | | | | |
+--------------+--------+---------+--------+---------+
| | | | | |
+--------------+--------+---------+--------+---------+
| Cash | | | | |
| flows | | | | |
| from | | | | |
| financing | | | | |
| activities | | | | |
+--------------+--------+---------+--------+---------+
| Dividends | | (2.9) | | (2.1) |
| paid | | | | |
+--------------+--------+---------+--------+---------+
| Net | | (2.9) | | (2.1) |
| cash | | | | |
| from | | | | |
| financing | | | | |
| activities | | | | |
+--------------+--------+---------+--------+---------+
| | | | | |
+--------------+--------+---------+--------+---------+
| Net | | (86.7) | | (9.1) |
| decrease | | | | |
| in cash | | | | |
| and cash | | | | |
| equivalents | | | | |
+--------------+--------+---------+--------+---------+
| Cash | | 150.7 | | 159.8 |
| and | | | | |
| cash | | | | |
| equivalents | | | | |
| at 1 July | | | | |
+--------------+--------+---------+--------+---------+
| Cash | | 64.0 | | 150.7 |
| and | | | | |
| cash | | | | |
| equivalents | | | | |
| at 30 June | | | | |
+--------------+--------+---------+--------+---------+
NOTES TO THE IFRS ACCOUNTS
1. Authorisation of financial statements and statement of compliance with
International Financial Reporting Standards
The preliminary announcement for the year ended 30 June 2009 has been prepared
in accordance with International Financial Reporting Standards as adopted by the
European Union at 30 June 2009 and the AIM rules.
The financial information contained in this preliminary announcement does not
constitute the Company's statutory accounts for the years ended 30th June 2009
or 2008 but is derived from those accounts. The auditors have reported on those
accounts; their reports were (i) unqualified, (ii) did not include a reference
to any matters to which the auditors drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under section 237
(2) or (3) of the Companies Act 1985 in respect of the accounts for 2008 nor a
statement under section 498 (2) or (3) of the Companies Act 2006 in respect of
the accounts for 2009.
The 2008 statutory accounts have been filed with the Registrar of Companies. The
2009 statutory accounts will be filed with the Registrar of Companies following
their adoption at the forthcoming Annual General Meeting.
2.Operating profit before tax
+------------------------------------------+------+-----------------+-----------+
| | | Year ended | Year |
| | | 30 June | ended |
| | | 2009 | 30 June |
| | | | 2008 |
+------------------------------------------+------+-----------------+-----------+
| | | GBPm | GBPm |
+------------------------------------------+------+-----------------+-----------+
| | | | |
+------------------------------------------+------+-----------------+-----------+
| | | | |
+------------------------------------------+------+-----------------+-----------+
| Operating profit before tax | | 45.2 | 46.4 |
+------------------------------------------+------+-----------------+-----------+
| Adjusting items (see below) | | (48.2) | (34.4) |
+------------------------------------------+------+-----------------+-----------+
| | | | |
+------------------------------------------+------+-----------------+-----------+
| IFRS (loss) / profit before tax | | (3.0) | 12.0 |
+------------------------------------------+------+-----------------+-----------+
| | | | |
+------------------------------------------+------+-----------------+-----------+
| Income tax | | 0.3 | (3.8) |
+------------------------------------------+------+-----------------+-----------+
| | | | |
+------------------------------------------+------+-----------------+-----------+
| (Loss) / profit for the year | | (2.7) | 8.2 |
| attributable to equity holders of the | | | |
| parent | | | |
+------------------------------------------+------+-----------------+-----------+
| | | | |
+------------------------------------------+------+-----------------+-----------+
| | | | |
+------------------------------------------+------+-----------------+-----------+
| Earnings per share | | | |
+------------------------------------------+------+-----------------+-----------+
| Basic (loss) / earnings per share | | (0.9) | 2.8 |
| (pence) | | | |
+------------------------------------------+------+-----------------+-----------+
| Diluted (loss) / earnings per share | | (0.9) | 2.8 |
| (pence) | | | |
+------------------------------------------+------+-----------------+-----------+
| | | | |
+------------------------------------------+------+-----------------+-----------+
| Operating earnings per share (pence) | | 10.9 | 11.3 |
+------------------------------------------+------+-----------------+-----------+
| Diluted operating earnings per share | | 10.9 | 11.3 |
| (pence) | | | |
+------------------------------------------+------+-----------------+-----------+
The Directors consider that the operating profit before tax gives a better
indication of the operating performance of the Group. The operating profit
before tax excludes the impact of the following items:
Economic variance
The change in corporate bond spreads together with the economic impact of
interest rate changes to 30 June 2009 has reduced profits on an IFRS basis
by GBP42.9 million (30 June 2008: reduction of GBP30.9 million). The Group
invests in corporate bonds whose cash flows broadly match those of the projected
future policyholder payments of the annuity liabilities. These assets are
generally bought with the intention of holding them until maturity. It is the
view of the Directors that the change in corporate bond spreads has arisen
mainly from a significant reduction in liquidity in financial markets. Assuming
that there are no defaults of either income or capital payments by the issuers,
these losses will be recovered during the future term of the assets as they will
be repaid at par.
In the accounts these assets are held at fair value but constraints on
reflecting the asset yield movements when deriving a valuation rate of interest
prevent a complete offsetting reduction in the value of the annuity liabilities.
Fair value movement in derivatives
Interest rate swaps are held to reduce volatility of the Group's European
Embedded Value results arising from a surplus of long-dated assets when
liabilities are measured on a realistic basis. The interest rate swaps do not
qualify for hedge accounting under IFRS and changes in fair value are reported
within the income statement. The fair value of the interest rate swaps
decreased by GBP10.7 million for the year to 30 June 2009 (30 June 2008:
GBP3.5 million). This volatility is excluded from the Group's IFRS operating
profit before tax.
Expenses
During the year an assessment was made in respect of policy costs of servicing
the in-force annuity portfolio. This was based on a long term view of costs and
as a result the policy costs were reduced to GBP25 per annum per policy.
In addition, the Group incurred non-recurring costs of GBP2.6 million and both
these adjustments contribute to an increase in IFRS profits of GBP5.4 million.
3.EARNINGS PER SHARE
+-----------+----------+----------+----------+----------+
| |
+-----------+
| | Earnings | 30 | Earnings | 30 |
| | | June | | June |
| | | 2009 | | 2008 |
| | | earnings | | earnings |
| | | per | | per |
| | | share | | share |
+-----------+----------+----------+----------+----------+
| | GBPm | pence | GBPm | pence |
+-----------+----------+----------+----------+----------+
| | | | | |
+-----------+----------+----------+----------+----------+
| Basic | (2.7) | (0.9) | 8.2 | 2.8 |
| (loss) | | | | |
| / | | | | |
| earnings | | | | |
+-----------+----------+----------+----------+----------+
| Dilutive | - | - | - | - |
| share | | | | |
| options | | | | |
+-----------+----------+----------+----------+----------+
| Diluted | (2.7) | (0.9) | 8.2 | 2.8 |
| (loss) | | | | |
| / | | | | |
| earnings | | | | |
+-----------+----------+----------+----------+----------+
| | | | | |
+-----------+----------+----------+----------+----------+
| Basic | (2.7) | (0.9) | 8.2 | 2.8 |
| (loss) | | | | |
| / | | | | |
| earnings | | | | |
+-----------+----------+----------+----------+----------+
| Adjusting | 34.7 | 11.8 | 24.8 | 8.5 |
| items, | | | | |
| net of | | | | |
| tax | | | | |
| effect | | | | |
| (note 2) | | | | |
+-----------+----------+----------+----------+----------+
| Operating | 32.0 | 10.9 | 33.0 | 11.3 |
| earnings | | | | |
+-----------+----------+----------+----------+----------+
| Dilutive | - | - | - | - |
| share | | | | |
| options | | | | |
+-----------+----------+----------+----------+----------+
| Operating | 32.0 | 10.9 | 33.0 | 11.3 |
| diluted | | | | |
| earnings | | | | |
+-----------+----------+----------+----------+----------+
Basic earnings per share
The calculation of basic earnings per share at 30 June 2009 is based on dividing
the profit attributable to equity holders of the Company by the weighted average
number of ordinary shares in issue during the year ended 30 June 2009 of 293.1
million (30 June 2008: 292.4 million).
Diluted earnings per share
The calculation of diluted earnings per share at 30 June 2009 is based on
dividing the profit attributable to equity holders of the Company by the
weighted average number of ordinary shares outstanding during the year ended 30
June 2009 of 294.1 million (30 June 2008: 292.4 million), adjusted to assume
conversion of all dilutive potential shares.
Operating earnings per share
Basic and diluted operating earnings per share are calculated on the operating
profit after tax attributable to equity holders of the Company. The Directors
consider that the operating earnings per share figure gives a better indication
of operating performance.
4.FINANCIAL INVESTMENTS AND FINANCIAL RISK MANAGEMENT
The following tables provide information regarding the credit risk exposure of
the Group:
+------------------------------+-----------+--------+--------+--------+---------+------------+
| 30 June 2009 | Loans | AAA | AA | A | BBB (1) | Total |
| | Secured | GBPm | GBPm | GBPm | GBPm | GBPm |
| | By | | | | | |
| | Mortgages | | | | | |
| | GBPm | | | | | |
+------------------------------+-----------+--------+--------+--------+---------+------------+
| | | | | | | |
+------------------------------+-----------+--------+--------+--------+---------+------------+
| Loans secured by mortgages | 573.8 | - | - | - | - | 573.8 |
+------------------------------+-----------+--------+--------+--------+---------+------------+
| Gilts | - | 82.4 | - | - | - | 82.4 |
+------------------------------+-----------+--------+--------+--------+---------+------------+
| Debt securities and other | - | 184.9 | 123.9 | 573.6 | 268.5 | 1,150.9 |
| fixed income securities | | | | | | |
+------------------------------+-----------+--------+--------+--------+---------+------------+
| Cash and cash equivalents | - | 64.0 | - | - | - | 64.0 |
| (2) | | | | | | |
+------------------------------+-----------+--------+--------+--------+---------+------------+
| Deposits with credit | - | 16.1 | - | - | - | 16.1 |
| institutions | | | | | | |
+------------------------------+-----------+--------+--------+--------+---------+------------+
| Total | 573.8 | 347.4 | 123.9 | 573.6 | 268.5 | 1,887.2 |
+------------------------------+-----------+--------+--------+--------+---------+------------+
+-----------------------------+-----------+----------+--------+--------+---------+----------+
| 30 June 2008 | Loans | AAA | AA | A | BBB (1) | Total |
| | secured | GBPm | GBPm | GBPm | GBPm | GBPm |
| | by | | | | | |
| | mortgages | | | | | |
| | GBPm | | | | | |
+-----------------------------+-----------+----------+--------+--------+---------+----------+
| | | | | | | |
+-----------------------------+-----------+----------+--------+--------+---------+----------+
| Loans secured by mortgages | 349.4 | - | - | - | - | 349.4 |
+-----------------------------+-----------+----------+--------+--------+---------+----------+
| Gilts | - | 34.6 | - | - | - | 34.6 |
+-----------------------------+-----------+----------+--------+--------+---------+----------+
| Debt securities and other | - | 217.4 | 177.3 | 331.5 | 93.1 | 819.3 |
| fixed income securities | | | | | | |
+-----------------------------+-----------+----------+--------+--------+---------+----------+
| Cash and cash | - | 150.7 | - | - | - | 150.7 |
| equivalents (2) | | | | | | |
+-----------------------------+-----------+----------+--------+--------+---------+----------+
| Deposits with credit | - | 5.4 | - | - | - | 5.4 |
| institutions | | | | | | |
+-----------------------------+-----------+----------+--------+--------+---------+----------+
| Total | 349.4 | 408.1 | 177.3 | 331.5 | 93.1 | 1,359.4 |
+-----------------------------+-----------+----------+--------+--------+---------+----------+
Notes: (1) Includes BBB and below, (2) includes units in sterling liquidity
fund.
The Group has no exposure to Collateralised Debt Obligations, Monoline Wrapped
securities or Mortgage Backed securities.
The Group uses Standard and Poor's and Moody's to rate its debt securities and
other fixed income securities.
Credit risk is mitigated on the equity release mortgages as they are secured
against the value of the underlying residential property. The average initial
loan to value for equity release mortgages is 20%, with the current in force
book at approximately 26%.
Company Number 5078978
This information is provided by RNS
The company news service from the London Stock Exchange
END
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