This was compared to an IFRS pre-tax profit of £237m in 2021.
The sale of the mortgages to reduce its risk to UK house prices resulted in a loss of £161m. According to the group, its sensitivity to a 10 per cent immediate fall in house prices was now “within appetite”.
Just announced its decision to reduce its exposure to the housing market last year and subsequently sold three lifetime mortgage portfolios at a total value of £1.6bn.
Just also noted that interest rates rose during 2021, and although it factored this into its Solvency II position, the increases resulted in a loss for its IFRS balance sheet of £226m for the year.
It saw tighter credit spreads during the year, particularly on its lifetime mortgages.
Lifetime mortgages
Lifetime mortgage advances came to £528m in 2021, a three per cent rise on 2020’s £512m. This included £40m of originations on behalf of a third party, up on £36m in 2020.
Just said: “The group does not hold an economic exposure for these assets; instead it earns a fee for originating and administering these loans.”
Its spreads across lifetime mortgages compressed during the first half of 2021 as risk-free rates rose and affected the new business margin.
Risk-free rates of return are what an investor would expect to receive from a risk-free investment over a period of time.
In the second half of the year, the market repriced and lifetime mortgage spreads widened.
Just said: “We continue to be selective in the mortgages we originate, as we use our market insight and distribution to target certain sub-segments of the market, for example shorter duration loans to older borrowers, and/or customers with sufficient income to service interest on their borrowings.”
Retirement income sales
Strong sales across its retirement income business also helped to achieve a 13 per cent rise in new business profit to £225m.
Its retirement income sales totalled £2.7bn, a 25 per cent growth on the previous year.
As a result of this, Just reinstated its dividends to shareholders and also issued guidance saying it would target 15 per cent growth in underlying operating profit over the medium term.
In 2021, its underlying operating profit rose by nine per cent to £210m.
Overall, its adjusted operating profit before tax was flat at £238m, compared to £239m the year before.
David Richardson, group chief executive, said: “This is an excellent set of results which demonstrate our ability to generate profitable growth within a sustainable capital model. New business premiums, underlying operating profits and underlying capital generation have improved significantly on the previous year.
“Furthermore, we have also attained a sustainable level of underlying capital generation and coverage ratio to be in a position to re-commence dividend payments.”
“Our confidence in the growth opportunities available to the group is reflected in our new target to grow underlying operating profits over the medium term by an average of 15 per cent per annum,” he added.
