CompanyGraph
Just Group plc
JUST · United Kingdom
UK pension scheme longevity risk is absorbed into guaranteed annuity payments by pairing Solvency II-constrained asset-liability matching with medical underwriting that prices individual health profiles into bulk and personal annuity terms.
Just Group absorbs UK pension scheme longevity risk by accepting defined benefit liabilities onto its balance sheet and backing guaranteed lifetime payments with duration-matched gilts and corporate bonds, as Solvency II requires — but each accepted liability consumes both regulatory capital and gilt-market duration capacity in parallel, and that capital cannot be recycled until annuitants die over decades-long horizons. Because capital reserves are calculated against longevity assumptions, medical underwriting of individual health profiles is not a supplementary feature but the mechanism that lowers the longevity assumption embedded in each reserve calculation, directly reducing the capital cost of each transaction and enabling pricing terms the reserve arithmetic would otherwise prohibit. The analytical infrastructure behind that underwriting — proprietary health assessment algorithms and specialised actuarial talent — replicates across additional transactions without proportional cost increases, yet the capital base scales directly with liability volume, so analytical capacity compounds as volume grows but capital remains the binding ceiling on how much volume can be accepted. That ceiling tightens further if Bank of England rate movements alter the cost of duration-matched assets, if demographic trends force upward reserve revisions, or if Brexit-related disruption to cross-border reinsurance removes longevity risk transfer routes — and because the health-adjusted assumptions sit precisely at the reserve calculation step where Solvency II exerts maximum constraint, any degradation of the underwriting algorithms or departure of key personnel collapses the capital advantage without any internal mechanism to recover it.
How does this company make money?
Money flows in through the spread between returns generated by the duration-matched gilt and corporate bond portfolio and the guaranteed annuity payments owed to annuitants. Medical underwriting enables health-based risk selection, which modifies the longevity assumptions embedded in reserve calculations and alters the capital cost of individual transactions.
What makes this company hard to replace?
The Solvency II regulatory approval process for new bulk annuity providers takes 12 to 18 months, creating a substantial lead time before any new entrant can operate. Existing annuitants are locked into guaranteed lifetime payment contracts that contain no transfer provisions, making their policies structurally immovable. Pension scheme trustees require extensive due diligence on the financial strength ratings of any new counterparty before committing a scheme's liabilities, adding a further layer of delay and cost to any switching process.
What limits this company?
Solvency II capital ratio requirements create a hard ceiling on liability volume: each bulk annuity transaction consumes regulatory capital proportional to its longevity risk and asset-liability duration gap, and that capital cannot be recycled until liabilities run off over decades-long annuitant lifetimes. Transaction scale therefore cannot be leveraged efficiently — larger deals consume capital linearly, preventing the volume growth that would otherwise follow from the replicable economics of actuarial pricing algorithms.
What does this company depend on?
The mechanism depends on five named upstream inputs: the UK gilt market, which supplies the duration-matched government bonds required for asset-liability matching under Solvency II; the Solvency II regulatory framework itself and ongoing supervision by the Prudential Regulation Authority; proprietary medical underwriting data systems used to assess individual health profiles; the Lloyd's of London reinsurance market, which absorbs longevity risk transferred outward from the balance sheet; and UK defined benefit pension scheme trustees, who act as the direct counterparties in bulk annuity transactions.
Who depends on this company?
UK defined benefit pension schemes depend on this structure for their primary route to transferring longevity exposure off their own balance sheets; without it, that de-risking exit option is unavailable. Individual annuitants aged 55 and over would lose access to medically-enhanced guaranteed income products that reflect their personal health profiles. Lloyd's longevity reinsurers would lose a significant source of UK longevity risk flow into their books.
How does this company scale?
Medical underwriting algorithms and actuarial pricing models replicate across additional transactions without proportional cost increases, meaning the analytical infrastructure spreads efficiently as volume grows. Solvency II capital requirements, however, scale directly with liability volume, so the capital base — not the analytical capacity — remains the bottleneck as transaction size grows.
What external forces can significantly affect this company?
Bank of England interest rate policy directly affects gilt yields, which are the rates used in asset-liability matching calculations, so rate movements alter the cost and availability of the duration-matched assets the structure requires. UK demographic longevity trends that exceed actuarial assumptions would increase liability duration, triggering upward revisions to required capital reserves. Brexit has affected access to EU reinsurance markets, creating uncertainty around longevity risk transfer arrangements that previously relied on cross-border market access.
Where is this company structurally vulnerable?
The health-adjusted longevity assumptions that reduce capital consumption are generated by specialised actuarial talent operating proprietary health assessment algorithms. The departure of key underwriting personnel or degradation of those algorithms removes the pricing advantage exactly where Solvency II exerts maximum constraint — at the reserve calculation step — leaving the company with the same capital costs as undifferentiated competitors and no mechanism to recover transaction capacity.