TIDMSL.
RNS Number : 9562U
Standard Life plc
04 August 2015
Standard Life plc
Half year results 2015
Part 3 of 4
2. Statement of Directors' responsibilities
Each of the Directors, whose names and functions are listed on
the Standard Life plc website, www.standardlife.com, confirms to
the best of his or her knowledge that:
1. The International Financial Reporting Standards (IFRS)
condensed consolidated income statement, the IFRS condensed
consolidated statement of comprehensive income, the IFRS condensed
consolidated statement of financial position, the IFRS condensed
consolidated statement of changes in equity and the IFRS condensed
consolidated statement of cash flows and associated notes, which
have been prepared in accordance with IAS 34 Interim Financial
Reporting as endorsed by the European Union, give a true and fair
view of the assets, liabilities, financial position and profit of
the Company and the undertakings included in the consolidation
taken as a whole as required by DTR 4.2.4R
2. The Strategic report includes a fair review of the
information required by DTR 4.2.7R, namely important events that
have occurred during the period and their impact on the condensed
consolidated financial information, as well as a description of the
principal risks and uncertainties faced by the Company and the
undertakings included in the consolidation taken as a whole for the
remaining six months of the financial year
3. The Strategic report and the notes to the condensed
consolidated financial information include a fair review of the
information required by DTR 4.2.8R, namely material related party
transactions that have occurred during the period and any material
changes in the related party transactions described in the last
annual report
4. As per provision C1 of the UK Corporate Governance Code, the
Half year results 2015, taken as a whole, present a fair, balanced
and understandable position of the Company's prospects
Changes to Directors
As previously announced, John Paynter retired as a non-executive
Director on 28 April 2015. David Grigson retired as a non-executive
Director at the conclusion of the Company's Annual General Meeting
on 12 May 2015 and David Nish will stand down as an executive
Director on 5 August 2015.
By order of the Board
Sir Gerry Grimstone Luke Savage
Chairman Chief Financial Officer
4 August 2015 4 August 2015
3. Independent review report to Standard Life plc
Report on the interim financial information
Our conclusion
We have reviewed the IFRS condensed consolidated interim
financial information (the 'interim financial information'),
defined below, in the Half year results of Standard Life Plc for
the six months ended 30 June 2015.
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial information is not
prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
This conclusion is to be read in the context of what we say in
the remainder of this report.
What we have reviewed
The interim financial information, which is prepared by Standard
Life plc, comprises:
-- The IFRS condensed consolidated statement of financial position as at 30 June 2015
-- The IFRS condensed consolidated income statement and IFRS condensed consolidated statement of comprehensive income for the period then ended
-- The IFRS condensed consolidated statement of changes in equity for the period then ended
-- The IFRS condensed consolidated statement of cash flows for the period then ended
-- The notes to the IFRS condensed consolidated interim financial information
As disclosed in Note 4.1, the financial reporting framework that
has been applied in the preparation of the full annual financial
statements of the group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union.
The interim financial information included in the Half year
results has been prepared in accordance with International
Accounting Standard 34, Interim Financial Reporting, as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
What a review of interim financial information involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
Ireland) and, consequently, does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the Half year
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial information.
Responsibilities for interim financial information and the
review
Our responsibilities and those of the Directors
The Half year results, including the interim financial
information, are the responsibility of, and has been approved by,
the Directors. The Directors are responsible for preparing the Half
year results in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express to the Company a conclusion on
the interim financial information in the Half year results based on
our review.
This report, including the conclusion, has been prepared for and
only for the Company for the purpose of complying with the
Disclosure and Transparency Rules of the Financial Conduct
Authority and for no other purpose.
We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Edinburgh
4 August 2015
(a) The maintenance and integrity of the Standard Life plc
website is the responsibility of the Directors; the work carried
out by the auditors does not involve consideration of these matters
and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the financial statements since
they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
4. Financial statements
IFRS condensed consolidated income statement
For the six months ended 30 June 2015
6 months Full
6 months 2014 year
2015 restated(1) 2014
Notes GBPm GBPm GBPm
------------------------------------------ ------ --------- ------------- -------
Revenue
Gross earned premium 1,162 1,227 2,404
Premium ceded to reinsurers (27) (32) (61)
------------------------------------------ ------ --------- ------------- -------
Net earned premium 1,135 1,195 2,343
Investment return 3,956 4,504 13,179
Fee and commission income 540 424 985
Other income 37 36 81
------------------------------------------ ------ --------- ------------- -------
Total revenue 5,668 6,159 16,588
------------------------------------------ ------ --------- ------------- -------
Expenses
Claims and benefits paid 2,254 2,190 4,389
Claim recoveries from reinsurers (260) (270) (533)
------------------------------------------ ------ --------- ------------- -------
Net insurance benefits and claims 1,994 1,920 3,856
Change in reinsurance assets
and liabilities 296 76 (60)
Change in insurance and participating
contract liabilities (814) 1,037 3,834
Change in unallocated divisible
surplus (134) 4 (71)
Change in non-participating
investment contract liabilities 2,877 1,582 5,362
Expenses under arrangements
with reinsurers (13) 242 639
Administrative expenses
Restructuring and corporate
transaction expenses 4.4 48 27 106
Other administrative expenses 792 634 1,430
------------------------------------------ ------ --------- ------------- -------
Total administrative expenses 4.4 840 661 1,536
Change in liability for third
party interest in consolidated
funds 396 278 758
Finance costs 40 49 98
------------------------------------------ ------ --------- ------------- -------
Total expenses 5,482 5,849 15,952
------------------------------------------ ------ --------- ------------- -------
Share of profit from associates
and joint ventures 24 22 36
Profit before tax 210 332 672
------------------------------------------ ------ --------- ------------- -------
Tax expense attributable to
policyholders' returns 4.5 89 91 250
Profit before tax expense attributable
to equity holders' profits 121 241 422
------------------------------------------ ------ --------- ------------- -------
Total tax expense 4.5 107 126 292
Less: Tax attributable to policyholders'
returns 4.5 (89) (91) (250)
------------------------------------------ ------ --------- ------------- -------
Tax expense attributable to
equity holders' profits 4.5 18 35 42
------------------------------------------ ------ --------- ------------- -------
Profit for the period from continuing
operations 103 206 380
------------------------------------------ ------ --------- ------------- -------
Profit for the period from discontinued
operations 4.2 1,142 79 127
------------------------------------------ ------ --------- ------------- -------
Profit for the period 1,245 285 507
------------------------------------------ ------ --------- ------------- -------
Attributable to:
Equity holders of Standard Life
plc
From continuing operations 69 196 376
From discontinued operations 1,142 79 127
------------------------------------------ ------ --------- ------------- -------
Equity holders of Standard Life
plc 1,211 275 503
Non-controlling interests 34 10 4
------------------------------------------ ------ --------- ------------- -------
1,245 285 507
------------------------------------------ ------ --------- ------------- -------
Earnings per share from continuing
operations
Basic (pence per share) 4.6 3.2 8.3 15.8
Diluted (pence per share) 4.6 3.2 8.2 15.7
Earnings per share
Basic (pence per share) 4.6 56.7 11.6 21.1
Diluted (pence per share) 4.6 56.6 11.5 21.0
------------------------------------------ ------ --------- ------------- -------
(1) Comparatives for the six months ended 30 June 2014 have been
restated to reflect the classification of the Group's Canadian
business as discontinued operations. Refer to Note 4.2 -
Acquisitions and disposals.
IFRS condensed consolidated statement of comprehensive
income
For the six months ended 30 June 2015
6 months Full
6 months 2014 year
2015 restated(1) 2014
Notes GBPm GBPm GBPm
------------------------------------------------- ------ --------- ------------- ------
Profit for the period 1,245 285 507
Less: Profit from discontinued operations 4.2 (1,142) (79) (127)
------------------------------------------------- ------ --------- ------------- ------
Profit from continuing operations 103 206 380
------------------------------------------------- ------ --------- ------------- ------
Items that will not be reclassified
subsequently to profit or loss:
Remeasurement gains on defined benefit
pension plans 70 4 292
Revaluation of owner occupied property - 1 5
Equity movements transferred to unallocated
divisible surplus - 16 (4)
Equity holder tax effect relating
to items that will not be reclassified
subsequently
to profit or loss - - -
------------------------------------------------- ------ --------- ------------- ------
Total items that will not be reclassified
subsequently to profit or loss 70 21 293
------------------------------------------------- ------ --------- ------------- ------
Items that may be reclassified subsequently
to profit or loss:
Fair value gains on cash flow hedges - 1 1
Net investment hedge - 1 (1)
Fair value (losses)/gains on available-for-sale
financial assets (6) 10 27
Exchange differences on translating
foreign operations (46) (31) (13)
Equity movements transferred to unallocated
divisible surplus 21 (1) 6
Share of other comprehensive income
of joint ventures - 2 4
Equity holder tax effect relating
to items that may be reclassified
subsequently to profit or loss 4.5 1 (2) (6)
------------------------------------------------- ------ --------- ------------- ------
Total items that may be reclassified
subsequently to profit or loss (30) (20) 18
------------------------------------------------- ------ --------- ------------- ------
Other comprehensive income for the
period from continuing operations 40 1 311
------------------------------------------------- ------ --------- ------------- ------
Total comprehensive income for the
period from continuing operations 143 207 691
------------------------------------------------- ------ --------- ------------- ------
Profit from discontinued operations 4.2 1,142 79 127
Other comprehensive income from discontinued
operations 4.2 (187) (20) (18)
------------------------------------------------- ------ --------- ------------- ------
Total comprehensive income for the
period from discontinued operations 955 59 109
------------------------------------------------- ------ --------- ------------- ------
Total comprehensive income for the
period 1,098 266 800
------------------------------------------------- ------ --------- ------------- ------
Attributable to:
Equity holders of Standard Life plc
From continuing operations 109 197 687
From discontinued operations 955 59 109
Non-controlling interests
From continuing operations 34 10 4
1,098 266 800
------------------------------------------------- ------ --------- ------------- ------
(1) Comparatives for the six months ended 30 June 2014 have been
restated to reflect the classification of the Group's Canadian
business as discontinued operations. Refer to Note 4.2 -
Acquisitions and disposals.
Pro forma reconciliation of consolidated operating profit to
IFRS profit for the period
For the six months ended 30 June 2015
6 months 2015 6 months 2014
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------ ------------ ------------- ------ ------------ ------------- ------
Operating profit
before tax
Standard Life Investments 154 - 154 102 2 104
UK and Europe 147 - 147 188 - 188
Canada - 5 5 - 69 69
India and China(1) 21 (2) 19 12 (6) 6
Other (32) - (32) (28) - (28)
----------------------------- ------ ------------ ------------- ------ ------------ ------------- ------
Operating profit
before tax 4.3 290 3 293 274 65 339
----------------------------- ------ ------------ ------------- ------ ------------ ------------- ------
Adjusted for the
following items
Short-term fluctuations
in investment return
and economic assumption
changes (42) 63 21 - 50 50
Restructuring and
corporate transaction
expenses (62) (8) (70) (26) (1) (27)
Impairment of intangible
assets - (2) (2) - - -
Gain on sale of
Canadian business - 1,097 1,097 - - -
Other(2) (54) (31) (85) (10) - (10)
----------------------------- ------ ------------ ------------- ------ ------------ ------------- ------
Non-operating (loss)/profit
before tax 4.3 (158) 1,119 961 (36) 49 13
----------------------------- ------ ------------ ------------- ------ ------------ ------------- ------
Dubai included
in discontinued
operations segment(1) 4.3 - - - (3) 3 -
Singapore included
in discontinued
operations segment(1) 4.3 (40) 40 - (3) 3 -
Share of associates'
and joint ventures'
tax expense 4.3 (5) - (5) (1) - (1)
Profit attributable
to non-controlling
interests 4.3 34 - 34 10 - 10
----------------------------- ------ ------------ ------------- ------ ------------ ------------- ------
Profit before tax
expense attributable
to equity holders'
profits 121 1,162 1,283 241 120 361
----------------------------- ------ ------------ ------------- ------ ------------ ------------- ------
Tax (expense)/credit
attributable to
Operating profit 4.3 (37) - (37) (46) (27) (73)
Non-operating items 4.3 19 (20) (1) 11 (14) (3)
Dubai included
in discontinued
operations segment(1) 4.3 - - - - - -
Singapore included
in discontinued
operations segment(1) 4.3 - - - - - -
Total tax expense
attributable to
equity holders'
profits (18) (20) (38) (35) (41) (76)
----------------------------- ------ ------------ ------------- ------ ------------ ------------- ------
Profit for the
period 103 1,142 1,245 206 79 285
----------------------------- ------ ------------ ------------- ------ ------------ ------------- ------
(1) Dubai and Singapore businesses, the closure of which were
announced in November 2014 and June 2015 respectively, are included
as discontinued operations for segmental reporting purposes under
IFRS 8 as this is reflective of the presentation of information
provided to the Chief Operating Decision Maker. These were
previously included in the Asia and Emerging Markets segment which
has been renamed India and China. Under IFRS 5, Dubai and Singapore
do not constitute discontinued operations and are included under
continuing operations in the IFRS condensed consolidated income
statement. Therefore the pro forma reconciliation above includes
the reclassification of Dubai and Singapore results between
discontinued and continuing operations. Comparatives have been
restated.
(2) Following regulatory change in Hong Kong a review of expense
and reserving assumptions was undertaken which resulted in a GBP46m
non-operating loss being recognised, primarily relating to an
impairment of deferred acquisition costs. This is included in Other
non-operating items from continuing operations for the six months
ended 30 June 2015. Other non-operating items from discontinued
operations for the six months ended 30 June 2015 includes GBP31m in
respect of impairment of deferred acquisition costs and plan
enhancements relating to the closure of the Singapore business.
Pro forma reconciliation of consolidated operating profit to
IFRS profit for the period continued
Continuing Discontinued
operations operations Total
Full year 2014 Notes GBPm GBPm GBPm
---------------------------------------- ------ ------------ ------------- ------
Operating profit before tax
Standard Life Investments 257 4 261
UK and Europe 390 - 390
Canada - 132 132
India and China(1) 23 (9) 14
Other (62) - (62)
---------------------------------------- ------ ------------ ------------- ------
Operating profit before tax 4.3 608 127 735
---------------------------------------- ------ ------------ ------------- ------
Adjusted for the following
items
Short-term fluctuations in
investment return and economic
assumption changes 17 71 88
Restructuring and corporate
transaction expenses (109) (31) (140)
Impairment of intangible assets (43) (4) (47)
Gain on sale of Canadian business - - -
Other (22) (3) (25)
---------------------------------------- ------ ------------ ------------- ------
Non-operating (loss)/profit
before tax 4.3 (157) 33 (124)
---------------------------------------- ------ ------------ ------------- ------
Dubai included in discontinued
operations segment(1) 4.3 (22) 22 -
Singapore included in discontinued
operations segment(1) 4.3 (6) 6 -
Share of associates' and joint
ventures' tax expense 4.3 (5) - (5)
Profit attributable to non-controlling
interests 4.3 4 - 4
---------------------------------------- ------ ------------ ------------- ------
Profit before tax expense attributable
to equity holders' profits 422 188 610
---------------------------------------- ------ ------------ ------------- ------
Tax (expense)/credit attributable
to
Operating profit 4.3 (82) (42) (124)
Non-operating items 4.3 40 (19) 21
Dubai included in discontinued
operations segment(1) - - -
Singapore included in discontinued
operations segment(1) - - -
---------------------------------------- ------ ------------ ------------- ------
Total tax expense attributable
to equity holders' profits (42) (61) (103)
---------------------------------------- ------ ------------ ------------- ------
Profit for the year 380 127 507
---------------------------------------- ------ ------------ ------------- ------
(1) Dubai and Singapore businesses, the closure of which were
announced in November 2014 and June 2015 respectively, are included
as discontinued operations for segmental reporting purposes under
IFRS 8 as this is reflective of the presentation of information
provided to the Chief Operating Decision Maker. These were
previously included in the Asia and Emerging Markets segment which
has been renamed India and China. Under IFRS 5, Dubai and Singapore
do not constitute discontinued operations and are included under
continuing operations in the IFRS condensed consolidated income
statement. Therefore the pro forma reconciliation above includes
the reclassification of Dubai and Singapore results between
discontinued and continuing operations. Comparatives have been
restated.
The Group's chosen supplementary measure of performance is
operating profit. The Directors believe that operating profit
provides a more useful indication of the long-term operating
performance of the Group. To align the measure of the Group's
performance with the long-term nature of its business, operating
profit excludes items which create short-term volatility. Operating
profit includes the impact of significant actions taken by
management during the period.
IFRS condensed consolidated statement of financial position
As at 30 June 2015
30 June 30 June 31 December
2015 2014 2014
Notes GBPm GBPm GBPm
-------------------------------------- ------ -------- -------- ------------
Assets
Intangible assets 570 299 565
Deferred acquisition costs 663 897 771
Investments in associates and
joint ventures 4,795 1,885 4,508
Investment property 4.12 9,584 9,302 9,041
Property, plant and equipment 175 206 186
Pension and other post-retirement
benefit assets 4.11 820 442 760
Deferred tax assets 31 91 33
Reinsurance assets 5,736 6,088 6,036
Loans 4.12 791 2,645 400
Derivative financial assets 4.12 2,642 2,648 4,021
Equity securities and interests
in pooled investment funds 4.12 73,033 87,732 71,327
Debt securities 4.12 64,610 72,602 64,441
Receivables and other financial
assets 4.12 1,544 1,891 1,248
Other assets 343 329 307
Assets held for sale 4.12 975 33 29,338
Cash and cash equivalents 4.12 10,588 9,675 10,617
Total assets 176,900 196,765 203,599
-------------------------------------- ------ -------- -------- ------------
Equity
Share capital 4.9 241 239 239
Shares held by trusts 4.9 (2) (3) 1
Share premium reserve 4.9 627 1,110 1,115
Retained earnings 1,955 1,431 1,816
Other reserves 957 1,468 1,501
-------------------------------------- ------ -------- -------- ------------
Equity attributable to equity
holders of Standard Life plc 3,778 4,245 4,672
Non-controlling interests 344 312 278
-------------------------------------- ------ -------- -------- ------------
Total equity 4,122 4,557 4,950
-------------------------------------- ------ -------- -------- ------------
Liabilities
Non-participating insurance
contract liabilities 4.10 21,528 29,309 21,841
Non-participating investment
contract liabilities 4.10 91,589 100,716 88,207
Participating contract liabilities 4.10 29,784 30,705 31,276
Reinsurance liabilities - 257 -
Deposits received from reinsurers 5,359 5,538 5,642
Third party interest in consolidated
funds 4.13 16,607 17,994 15,805
Borrowings 28 136 44
Subordinated liabilities 1,325 1,841 1,612
Pension and other post-retirement
benefit provisions 4.11 40 119 44
Deferred income 254 300 276
Deferred tax liabilities 223 194 214
Current tax liabilities 105 94 172
Derivative financial liabilities 858 1,101 1,693
Other financial liabilities 4,064 3,778 3,690
Other liabilities 117 126 100
Liabilities of operations held
for sale 4.2 897 - 28,033
Total liabilities 172,778 192,208 198,649
-------------------------------------- ------ -------- -------- ------------
Total equity and liabilities 176,900 196,765 203,599
-------------------------------------- ------ -------- -------- ------------
IFRS condensed consolidated statement of changes in equity
For the six months ended 30 June 2015
Total
equity
attributable
to
equity
Shares holders
held Share of Standard
Share by premium Retained Other Life Non-controlling Total
capital trusts reserve earnings reserves plc interests equity
2015 Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------ -------- ------- -------- --------- --------- ------------- ---------------- --------
1 January 239 1 1,115 1,816 1,501 4,672 278 4,950
------------------ ------ -------- ------- -------- --------- --------- ------------- ---------------- --------
Profit for the
period from
continuing
operations - - - 69 - 69 34 103
Profit for the
period from
discontinued
operations 4.2 - - - 1,142 - 1,142 - 1,142
Other
comprehensive
income for the
period from
continuing
operations - - - 70 (30) 40 - 40
Other
comprehensive
income/(expense)
for the period
from
discontinued
operations - - - (14) (173) (187) - (187)
------------------ ------ -------- ------- -------- --------- --------- ------------- ---------------- --------
Total
comprehensive
income for the
period - - - 1,267 (203) 1,064 34 1,098
Dividends paid
on ordinary
shares 4.8 - - - (224) - (224) - (224)
Issue of share
capital 4.9 2 - - - - 2 - 2
Issue of 'B'
shares 4.9 488 - (488) - - - - -
Issue of 'C'
shares 4.9 - - - - - - - -
Redemption of 'B'
shares 4.9 (488) - - (488) 488 (488) - (488)
Dividends paid
on 'C' shares 4.9 - - - (1,261) - (1,261) - (1,261)
Purchase of 'C'
shares 4.9 - - - - - - - -
Dividends due on
unclaimed shares
not held in the
Unclaimed Asset
Trust - - - (2) - (2) - (2)
Reserves credit
for employee
share-based
payment schemes - - - - 18 18 - 18
Transfer to
retained
earnings for
vested
employee
share-based
payment schemes - - - 20 (20) - - -
Transfer to
retained
earnings on sale
of owner occupied
property - - - - - - - -
Transfer between
reserves on
disposal
of subsidiaries 4.2 - - - 827 (827) - - -
Shares acquired
by employee
trusts - (5) - - - (5) - (5)
Shares
distributed
or sold by
employee
and other trusts - 2 - (2) - - - -
Other movements
in
non-controlling
interests in the
period - - - - - - 32 32
Aggregate tax
effect
of items
recognised
directly in
equity 4.5 - - - 2 - 2 - 2
------------------ ------ -------- ------- -------- --------- --------- ------------- ---------------- --------
30 June 241 (2) 627 1,955 957 3,778 344 4,122
------------------ ------ -------- ------- -------- --------- --------- ------------- ---------------- --------
Total
equity
attributable
to equity
Shares holders
held Share of Standard
Share by premium Retained Other Life Non-controlling Total
capital trusts reserve earnings reserves plc interests equity
2014 Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------ -------- ------- -------- --------- --------- ------------- ---------------- -------
1 January 238 (6) 1,110 1,391 1,494 4,227 333 4,560
------------------ ------ -------- ------- -------- --------- --------- ------------- ---------------- -------
Profit for the
period from
continuing
operations - - - 196 - 196 10 206
Profit for the
period from
discontinued
operations 4.2 - - - 79 - 79 - 79
Other
comprehensive
income for the
period from
continuing
operations - - - 6 (5) 1 - 1
Other
comprehensive
income/(expense)
for the period
from
discontinued
operations - - - (13) (7) (20) - (20)
------------------ ------ -------- ------- -------- --------- --------- ------------- ---------------- -------
Total
comprehensive
income for the
period - - - 268 (12) 256 10 266
Dividends paid
on ordinary
shares 4.8 - - - (252) - (252) - (252)
Issue of share
capital 4.9 1 - - - - 1 - 1
Reserves credit
for employee
share-based
payment schemes - - - - 12 12 - 12
Transfer to
retained
earnings for
vested
employee
share-based
payment schemes - - - 25 (25) - - -
Transfer to
retained
earnings on sale
of owner
occupied
property - - - 4 (4) - - -
Shares acquired
by employee
trusts - (2) - - - (2) - (2)
Shares
distributed
or sold by
employee
and other trusts - 5 - (5) - - - -
Other movements
in
non-controlling
interests in the
period - - - - - - (31) (31)
Aggregate tax
effect
of items
recognised
directly in
equity 4.5 - - - - 3 3 - 3
------------------ ------ -------- ------- -------- --------- --------- ------------- ---------------- -------
30 June 239 (3) 1,110 1,431 1,468 4,245 312 4,557
------------------ ------ -------- ------- -------- --------- --------- ------------- ---------------- -------
Total
equity
attributable
to equity
Shares holders
held Share of Standard
Share by premium Retained Other Life Non-controlling Total
capital trusts reserve earnings reserves plc interests equity
2014 Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------ -------- ------- -------- --------- --------- ------------- ---------------- -------
1 January 238 (6) 1,110 1,391 1,494 4,227 333 4,560
----------------- ------ -------- ------- -------- --------- --------- ------------- ---------------- -------
Profit for the
year from
continuing
operations - - - 376 - 376 4 380
Profit for the
year from
discontinued
operations 4.2 - - - 127 - 127 - 127
Other
comprehensive
income for the
year from
continuing
operations - - - 296 15 311 - 311
Other
comprehensive
income for the
year from
discontinued
operations - - - (15) (3) (18) - (18)
----------------- ------ -------- ------- -------- --------- --------- ------------- ---------------- -------
Total
comprehensive
income for the
year - - - 784 12 796 4 800
Dividends paid
on ordinary
shares 4.8 - - - (386) - (386) - (386)
Issue of share
capital 4.9 1 - 5 - - 6 - 6
Reserves credit
for employee
share-based
payment schemes - - - - 27 27 - 27
Transfer to
retained
earnings for
vested
employee
share-based
payment schemes - - - 27 (27) - - -
Transfer to
retained
earnings of
sale
of owner
occupied
property - - - 4 (4) - - -
Shares acquired
by employee
trusts - (3) - - - (3) - (3)
Shares
distributed
or sold by
employee
and other
trusts - 10 - (10) - - - -
Other movements
in
non-controlling
interests in
the
year - - - - - - (59) (59)
Aggregate tax
effect
of items
recognised
directly in
equity 4.5 - - - 6 (1) 5 - 5
----------------- ------ -------- ------- -------- --------- --------- ------------- ---------------- -------
31 December 239 1 1,115 1,816 1,501 4,672 278 4,950
----------------- ------ -------- ------- -------- --------- --------- ------------- ---------------- -------
IFRS condensed consolidated statement of cash flows
For the six months ended 30 June 2015
6 months Full
6 months 2014 year
2015 2014
Notes GBPm GBPm GBPm
------------------------------------------ ------ --------- --------- ---------
Cash flows from operating activities
Profit before tax from continuing
operations 210 332 672
Profit before tax from discontinued
operations 4.2 1,162 120 188
------------------------------------------ ------ --------- --------- ---------
1,372 452 860
------------------------------------------ ------ --------- --------- ---------
Change in operating assets (5,711) (8,646) (13,455)
Change in operating liabilities 5,097 6,765 11,700
Adjustment for non-cash movements
in investment income (58) (209) (242)
Change in unallocated divisible
surplus (134) 4 (71)
Non-cash items relating to investing
and financing activities (1,005) 63 189
Taxation paid (199) (139) (242)
------------------------------------------ ------ --------- --------- ---------
Net cash flows from operating activities (638) (1,710) (1,261)
------------------------------------------ ------ --------- --------- ---------
Cash flows from investing activities
Purchase of property, plant and
equipment (3) (3) (21)
Proceeds from sale of property,
plant and equipment 4 12 13
Acquisition of subsidiaries and
unincorporated businesses net of
cash acquired (5) - (297)
Disposal of subsidiaries net of
cash disposed of 1,600 - -
Acquisition of investments in associates
and joint ventures (9) (14) (14)
Purchase of intangible assets not
acquired through business combinations (28) (14) (54)
------------------------------------------ ------ --------- --------- ---------
Net cash flows from investing activities 1,559 (19) (373)
------------------------------------------ ------ --------- --------- ---------
Cash flows from financing activities
Repayment of other borrowings (1) (2) (4)
Repayment of subordinated liabilities (282) - -
Capital flows from third party
interest in consolidated funds
and non-controlling interests 930 1,528 3,434
Distributions paid to third party
interest in consolidated funds
and non-controlling interests (62) (86) (172)
Shares acquired by trusts (4) (2) (1)
Proceeds from exercise of share
options - - 5
Interest paid (54) (56) (112)
Return of cash to shareholders
under 'B/C' share scheme 4.9 (1,749) - -
Ordinary dividends paid 4.8 (224) (252) (386)
------------------------------------------ ------ --------- --------- ---------
Net cash flows from financing activities (1,446) 1,130 2,764
------------------------------------------ ------ --------- --------- ---------
Net (decrease)/increase in cash
and cash equivalents (525) (599) 1,130
------------------------------------------ ------ --------- --------- ---------
Cash and cash equivalents at the
beginning of the period 11,243 10,253 10,253
Effects of exchange rate changes
on cash and cash equivalents (148) (92) (140)
------------------------------------------ ------ --------- --------- ---------
Cash and cash equivalents at the
end of the period(1) 10,570 9,562 11,243
------------------------------------------ ------ --------- --------- ---------
Supplemental disclosures on cash
flows from operating activities
Interest paid 5 6 13
Interest received 1,039 1,085 2,317
Dividends received 1,165 1,137 2,364
Rental income received on investment
property 250 309 597
------------------------------------------ ------ --------- --------- ---------
(1) Comprises GBP10,588m (30 June 2014: GBP9,675m; 31 December
2014: GBP11,326m) of cash and cash equivalents, including cash and
cash equivalents held for sale, and (GBP18m) (30 June 2014:
(GBP113m); 31 December 2014: (GBP83m)) of overdrafts which are
reported in borrowings and liabilities of operations held for sale
in the IFRS condensed consolidated statement of financial
position.
Notes to the IFRS condensed consolidated financial
information
4.1 Accounting policies
(a) Basis of preparation
The IFRS condensed consolidated half year financial information
has been prepared in accordance with the Disclosure Rules and
Transparency Rules of the Financial Conduct Authority and IAS 34
Interim Financial Reporting issued by the International Accounting
Standards Board as endorsed by the European Union (EU).
The accounting policies for recognition, measurement,
consolidation and presentation as set out in the Group's Annual
report and accounts for the year ended 31 December 2014 have been
applied in the preparation of the IFRS condensed consolidated half
year financial information except as noted below.
(a)(i) New standards, interpretations and amendments to existing
standards that have been adopted by the Group
The Group has adopted and early adopted the following new
International Financial Reporting Standards (IFRSs), International
Accounting Standards (IASs), interpretations and amendments to
existing standards, which are effective by EU endorsement for
annual periods beginning on or after 1 January 2015 unless
otherwise stated.
-- IFRIC 21 Levies
-- Amendments to IAS 19 Defined Benefit Plans: Employee
Contributions (effective for annual periods beginning on or after 1
February 2015)
-- Annual improvements 2010 - 2012 cycle (effective for annual
periods beginning on or after 1 February 2015)
-- Annual improvements 2011 - 2013 cycle
The Group's accounting policies have been updated to reflect
these. Management considers the implementation of the above
interpretations and amendments to existing standards has had no
significant impact on the Group's financial statements.
(b) IFRS condensed consolidated half year financial information
This IFRS condensed consolidated half year financial information
does not comprise statutory accounts within the meaning of Section
434 of the Companies Act 2006. Statutory accounts for the year
ended 31 December 2014 were approved by the Board of Directors on
20 February 2015 and delivered to the Registrar of Companies. The
report of the auditors on those accounts was unqualified, did not
contain an emphasis of matter paragraph and did not contain any
statement under Section 498 of the Companies Act 2006. This IFRS
condensed consolidated half year financial information has been
reviewed, not audited.
(c) Exchange rates
The income statements and cash flows and statements of financial
position of Group entities that have a different functional
currency from the Group's presentation currency have been
translated using the following principal exchange rates:
6 months 2015 6 months 2014 Full year 2014
Statement Statement Statement
Income of financial Income of financial Income of financial
statement position statement position statement position
exchange (closing exchange (closing exchange (closing
rate rate) rate rate) rate rate)
----------------- ----------- -------------- ----------- -------------- ----------- --------------
Euro 1.365 1.411 1.220 1.249 1.244 1.289
US Dollar 1.532 1.573 1.674 1.710 1.647 1.559
Canadian Dollar 1.893 1.963 1.826 1.821 1.818 1.806
Indian Rupee 96.441 110.150 101.807 102.839 100.735 98.425
Hong Kong
Dollar 11.881 12.192 12.984 13.252 12.775 12.092
----------------- ----------- -------------- ----------- -------------- ----------- --------------
The sale of Standard Life Financial Inc. and Standard Life
Investments Inc. completed on 30 January 2015. Refer to Note 4.2 -
Acquisitions and disposals. The average Canadian dollar rate used
to translate the income statements and cash flows of these entities
for the period ended 30 January 2015 was 1.855 and the rate used to
translate the statement of financial position of these entities at
30 January 2015 was 1.904. The Canadian dollar rates in the table
above for the six months to 30 June 2015 were used to translate the
income statement, cash flows and statement of financial position of
Standard Life Assurance Limited (SLAL) Canada branch.
4.2 Acquisitions and disposals
(a) Acquisitions
On 6 February 2015, the Group announced the launch of its wholly
owned, UK-wide financial advice business, 1825. At the same time,
the Company agreed to purchase the entire share capital of Pearson
Jones plc from Skipton Group Holdings Limited. Pearson Jones is an
established advice firm with assets under advice of GBP1.1bn. The
acquisition completed on 11 May 2015 and is not material to the
Group.
Prior year acquisition
On 1 July 2014, Standard Life Investments (Holdings) Limited, a
wholly owned subsidiary of the Company acquired the entire share
capital of Ignis Asset Management Limited (Ignis). The
consideration transferred included a GBP20m contingent
consideration asset. There have been no settlements of this asset
since recognition and at 30 June 2015 and 31 December 2014 the fair
value remained at GBP20m.
(b) Disposals
On 3 September 2014 the Group announced its intention to sell
its Canadian business to The Manufacturers Life Insurance Company
(MLC), a subsidiary of Manulife Financial Corporation (Manulife).
The sale of the Group's Canadian long-term savings and retirement,
individual and group insurance business (Standard Life Financial
Inc.) and Canadian investment management business (Standard Life
Investments Inc.) completed on 30 January 2015 for consideration of
CA$4.0bn (GBP2.1bn). A further GBP0.1bn was received from the
settlement of related hedging derivative contracts. The Group
recognised a gain on disposal in respect of the sale which is
included in profit from discontinued operations in the IFRS
condensed consolidated income statement for the six months ended 30
June 2015. The gain on sale was calculated as follows:
30 January
2015
GBPm
------------------------------------------ -----------
Total assets of operations disposed of (28,643)
Total liabilities of operations disposed
of 27,436
------------------------------------------- -----------
Net assets of operations disposed of (1,207)
------------------------------------------- -----------
Consideration less transaction costs 2,067
Release of available-for-sale financial
assets reserve 17
Release of cash flow hedges reserve 60
Release of net investment hedge reserve 110
Release of foreign currency translation
reserve 50
Gain on sale 1,097
------------------------------------------- -----------
The gain on sale was exempt from tax under UK and Canadian tax
legislation.
The following additional reserve releases were made as a result
of the sale. These releases were taken directly to retained
earnings.
30 January
2015
GBPm
----------------------------------------- -----------
Reserve arising on Group reconstruction (221)
Merger reserve 1,028
Revaluation of owner occupied property
reserve 20
827
----------------------------------------- -----------
(b)(i) Assets and liabilities of operations held for sale
Under the agreements entered into in September 2014, the assets
and liabilities of the SLAL Canada Branch will transfer once
certain conditions to completion, including regulatory approval,
are fulfilled. The assets and liabilities of the Canadian business
held for sale at 30 June 2015 (which relate to the SLAL Canada
Branch) and 31 December 2014 are as follows:
30 June 31 December
2015 2014
GBPm GBPm
---------------------------------------- -------- ------------
Assets of operations held for sale
Intangible assets - 13
Deferred acquisition costs - 115
Investments in associates and joint
ventures - 103
Investment property - 1,417
Property, plant and equipment - 31
Deferred tax assets - 54
Reinsurance assets 889 187
Loans - 2,313
Derivative financial assets - 44
Equity securities and interests in
pooled investment funds - 12,961
Debt securities - 11,059
Receivables and other financial assets 8 214
Other assets - 34
Assets held for sale - -
Cash and cash equivalents - 709
----------------------------------------- -------- ------------
Total assets of operations held for
sale 897 29,254
----------------------------------------- -------- ------------
Liabilities of operations held for
sale
Non-participating insurance contract
liabilities 614 9,425
Non-participating investment contract
liabilities 283 15,852
Participating contract liabilities - 704
Reinsurance liabilities - 273
Deposits received from reinsurers - -
Third party interest in consolidated
funds - 953
Borrowings - 59
Subordinated liabilities - 223
Pensions and other post-retirement
benefit provisions - 101
Deferred income - 1
Deferred tax liabilities - 13
Current tax liabilities - 3
Derivative financial liabilities - 26
Other financial liabilities - 368
Other liabilities - 32
----------------------------------------- -------- ------------
Total liabilities of operations held
for sale 897 28,033
----------------------------------------- -------- ------------
4.2 Acquisitions and disposals continued
(b) Disposals continued
(b)(ii) Discontinued operations
Discontinued operations relates solely to the Group's Canadian
business. The consolidated income statement, other comprehensive
income and cash flows from discontinued operations are shown below
for the six months ended 30 June 2015:
6 months 6 months Full
2015 2014 year
2014
Consolidated income statement GBPm GBPm GBPm
-------------------------------------------- --------- --------- ------
Revenue
Gross earned premium 126 773 1,720
Premium ceded to reinsurers (20) (18) (36)
-------------------------------------------- --------- --------- ------
Net earned premium 106 755 1,684
Investment return 1,166 1,810 2,914
Fee and commission income 11 61 124
Gain on sale of subsidiaries 1,097 - -
Other income 1 8 17
-------------------------------------------- --------- --------- ------
Total revenue from discontinued
operations 2,381 2,634 4,739
-------------------------------------------- --------- --------- ------
Expenses
Claims and benefits paid 110 528 1,121
Claim recoveries from reinsurers (31) (13) (29)
-------------------------------------------- --------- --------- ------
Net insurance benefits and claims 79 515 1,092
Change in reinsurance assets and
liabilities (11) (51) (36)
Change in insurance and participating
contract liabilities 564 866 1,548
Change in non-participating investment
contract liabilities 516 902 1,403
Administrative expenses
Restructuring and corporate transaction
expenses 3 1 21
Other administrative expenses 37 212 430
-------------------------------------------- --------- --------- ------
Total administrative expenses 40 213 451
Change in liability for third party
interest in consolidated funds 30 60 80
Finance costs 1 4 9
-------------------------------------------- --------- --------- ------
Total expenses from discontinued
operations 1,219 2,509 4,547
-------------------------------------------- --------- --------- ------
Share of loss from associates and
joint ventures - (5) (4)
Profit before tax from discontinued
operations 1,162 120 188
-------------------------------------------- --------- --------- ------
Tax expense attributable to policyholders'
returns - - -
Profit before tax expense attributable
to equity holders' profits 1,162 120 188
-------------------------------------------- --------- --------- ------
Total tax expense 20 41 61
Less: Tax attributable to policyholders'
returns - - -
-------------------------------------------- --------- --------- ------
Tax expense attributable to equity
holders' profits 20 41 61
-------------------------------------------- --------- --------- ------
Profit for the period from discontinued
operations 1,142 79 127
-------------------------------------------- --------- --------- ------
Attributable to:
Equity holders of Standard Life
plc 1,142 79 127
Non-controlling interests - - -
-------------------------------------------- --------- --------- ------
1,142 79 127
-------------------------------------------- --------- --------- ------
6 months 6 months Full
2015 2014 year
2014
Other comprehensive income GBPm GBPm GBPm
--------------------------------------------- --------- --------- ------
Items that will not be reclassified
subsequently to profit or loss:
Remeasurement losses on defined benefit
pension plans (19) (18) (20)
Revaluation of owner occupied property - 5 (2)
Equity holder tax effect relating
to items that will not be reclassified
subsequently to profit or loss 5 5 5
--------------------------------------------- --------- --------- ------
Total items that will not be reclassified
subsequently to profit or loss (14) (8) (17)
--------------------------------------------- --------- --------- ------
Items that may be reclassified subsequently
to profit or loss:
Fair value gains on cash flow hedges 58 - 2
Net investment hedge 57 25 16
Fair value gains on available-for-sale
financial assets 15 12 22
Exchange differences on translating
foreign operations (62) (46) (36)
Equity holder tax effect relating
to items that may be reclassified
subsequently to profit or loss (4) (3) (5)
--------------------------------------------- --------- --------- ------
Total items that may be reclassified
subsequently to profit or loss 64 (12) (1)
--------------------------------------------- --------- --------- ------
Items that were transferred to profit
or loss on disposal of subsidiaries:
Release of available-for-sale financial
assets reserve (17) - -
Release of cash flow hedges reserve (60) - -
Release of net investment hedge reserve (110) - -
Release of foreign currency translation
reserve (50) - -
--------------------------------------------- --------- --------- ------
Total items that were transferred
to profit or loss on disposal of
subsidiaries (237) - -
--------------------------------------------- --------- --------- ------
Other comprehensive income/(expense)
for the period from discontinued
operations (187) (20) (18)
--------------------------------------------- --------- --------- ------
6 months 6 months Full
2015 2014 year
2014
Cash flows GBPm GBPm GBPm
------------------------------------------ --------- --------- ------
Net cash flows from operating activities (132) 58 117
Net cash flows from financing activities (7) (19) (1)
Net cash flows from investing activities (500) 11 (65)
Total net cash flows (639) 50 51
------------------------------------------ --------- --------- ------
The net cash flows from investing activities for the six months
ended 30 June 2015 represents the cash and cash equivalents of the
operations disposed of at the date of disposal and do not include
the cash consideration received of GBP2,100m.
4.3 Segmental analysis
(a) Basis of segmentation
The Group's reportable segments have been identified in
accordance with the way in which the Group is structured and
managed. The Group's reportable segments are as follows:
Continuing operations:
Standard Life Investments
Standard Life Investments provides a range of investment
products for individuals and institutional customers through a
number of different investment vehicles. Investment management
services are also provided by Standard Life Investments to the
Group's other reportable segments. This segment includes the
Group's share of the results of HDFC Asset Management Company
Limited.
UK and Europe
UK and Europe provide a broad range of long-term, savings and
investment products to individual and corporate customers in the
UK, Germany, Austria and Ireland.
India and China (formerly Asia and Emerging Markets)
The businesses included in India and China offer a range of
insurance and savings products and comprise the Group's life joint
ventures in India and China and wholly owned operations in Hong
Kong.
Other
This primarily includes the corporate centre and related
activities.
Discontinued operations:
Canada
The operations in Canada provided long-term savings, investment
and insurance solutions to individuals, and group benefit and
retirement plan members. The Canadian business was sold on 30
January 2015.
Dubai
The business in Dubai provided a range of savings and investment
products. The closure of this business was announced in November
2014. This business was previously included in the Asia and
Emerging Markets segment.
Singapore
The business in Singapore provided a range of savings and
insurance products. The closure of this business was announced in
June 2015. This business was previously included in the Asia and
Emerging Markets segment.
(b) Reportable segments - Group operating profit, revenue and asset information
IFRS 8 Operating Segments requires that the information
presented in the financial statements is based on information
provided to the 'Chief Operating Decision Maker'. The Chief
Operating Decision Maker for the Group is the executive team.
The key performance metrics of the Group include operating
profit before tax and assets under administration (AUA), which are
analysed in the tables that follow by reportable segment.
A number of changes were made to the financial information
provided to the executive team in the six months to 30 June 2015
and in the year to 31 December 2014 and as a result to the Group's
segmental reporting as follows:
-- On 3 September 2014, the Group announced the disposal of its
Canadian business. As a consequence, the results of this business
have been presented as discontinued operations. Previously the
results of Standard Life Financial Inc. were reported and managed
as a separate segment (Canada) and the Standard Life Investments
Inc. business was reported and managed as part of the Standard Life
Investments segment. Withholding tax in relation to dividends
received from the Canadian business previously reported as
operating tax in the other segment, has also been included in
discontinued operations.
-- On 5 November 2014, the Group announced the closure of the
Dubai business. The results of this business are included as
discontinued operations for segmental reporting purposes as this is
reflective of the presentation of information provided to the Chief
Operating Decision Maker. Dubai was previously included in the Asia
and Emerging Markets segment (now India and China). Under IFRS 5,
Dubai does not constitute a discontinued operation and is included
under continuing operations in the IFRS condensed consolidated
income statement. Therefore the segmental analysis disclosures
include the reclassification of Dubai results between discontinued
and continuing operations.
-- On 25 June 2015, the Group announced the closure of the
Singapore business. The results of this business are included as
discontinued operations for segmental reporting purposes as this is
reflective of the presentation of information provided to the Chief
Operating Decision Maker. Singapore was previously included in the
Asia and Emerging Markets segment (now India and China). Under IFRS
5, Singapore does not constitute a discontinued operation and is
included under continuing operations in the IFRS condensed
consolidated income statement. Therefore the segmental analysis
disclosures include the reclassification of Singapore results
between discontinued and continuing operations.
-- Institutional pension business managed by Standard Life
Investments but legally written by the UK business has previously
been reported in both the Standard Life Investments and UK and
Europe segments with the inter-segment transactions and balances
removed through eliminations. In 2014, it was agreed by management
that to allow a more meaningful presentation of revenue, expenses
and AUA for each segment, institutional pension business would be
removed from the UK and Europe results and only presented within
Standard Life Investments. The UK and Europe results and the
eliminations have therefore been adjusted with no impact on the
Group results. This change reduces UK and Europe fee based revenue
and total operating expenses but there is no impact on UK and
Europe operating profit.
Comparative amounts for the six months ended 30 June 2014 and
the 12 months ended 31 December 2014 have been prepared on the same
basis as 30 June 2015 to allow more meaningful comparison.
(b)(i) Analysis of Group operating profit by segment
As described beneath the pro forma reconciliation of
consolidated operating profit to IFRS profit for the period,
operating profit is considered to present an indication of the
long-term operating performance of the Group. Operating profit is
the key measure utilised by the Group's management in their
evaluation of segmental performance and is therefore also presented
by reportable segment.
Standard UK India Total
Life and and continuing Discontinued
Investments Europe China Other Eliminations operations operations(1) Total
6 months 2015 Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
Fee based revenue 402 396 23 - (60) 761 21 782
Spread/risk
margin - 40 - - - 40 9 49
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
Total income 402 436 23 - (60) 801 30 831
Total operating
expenses (263) (297) (17) (25) 60 (542) (29) (571)
Capital management - 8 - (7) - 1 2 3
Share of associates'
and joint ventures'
profit before
tax(2) 15 - 15 - - 30 - 30
Operating profit/(loss)
before tax 154 147 21 (32) - 290 3 293
Tax on operating
profit (28) (18) - 9 - (37) - (37)
Share of associates'
and joint ventures'
tax expense 4.5 (5) - - - - (5) - (5)
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
Operating profit/(loss)
after tax 121 129 21 (23) - 248 3 251
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
Adjusted for
the following
items
Short-term
fluctuations
in investment
return and economic
assumption changes 4.7 - (37) - (5) - (42) 63 21
Restructuring
and corporate
transaction
expenses 4.4 (16) (39) - (7) - (62) (8) (70)
Impairment of
intangible assets - - - - - - (2) (2)
Gain on sale
of Canadian
business 4.2 - - - - - - 1,097 1,097
Other 4.7 (8) 2 (47) (1) - (54) (31) (85)
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
Total non-operating
items (24) (74) (47) (13) - (158) 1,119 961
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
Tax on non-operating
items 4 7 5 3 - 19 (20) (1)
Dubai included
in discontinued
operations segment(1) - - - - - - - -
Singapore included
in discontinued
operations segment(1) - - (40) - - (40) 40 -
Profit for the
period attributable
to equity holders
of Standard
Life plc 101 62 (61) (33) - 69 1,142 1,211
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
Profit attributable
to non-controlling
interests 34 - 34
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
Profit for the
period 103 1,142 1,245
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
(1) Under IFRS 5, Dubai and Singapore do not constitute
discontinued operations and are included under continuing
operations in the IFRS condensed consolidated income statement.
Therefore the analysis of Group operating profit by segment above
includes the reclassification of Singapore and Dubai results
between discontinued and continuing operations.
(2) Share of associates' and joint ventures' profit before tax
comprises the Group's share of results of HDFC Standard Life
Insurance Company Limited, Heng An Standard Life Insurance Company
Limited and HDFC Asset Management Company Limited.
Each operating segment reports total income as its measure of
revenue in its analysis of operating profit. Fee based revenue
consists of income generated primarily from asset management
charges, premium based charges and transactional charges.
Spread/risk margin reflects the margin earned on spread/risk
business and includes net earned premiums, claims and benefits
paid, net investment return using long-term assumptions and
reserving changes.
The Group has a widely diversified policyholder base and is
therefore not reliant on any individual customers.
4.3 Segmental analysis continued
(b) Reportable segments - Group operating profit, revenue and asset information continued
(b)(i) Analysis of Group operating profit by segment continued
Standard UK India Total
Life and and continuing Discontinued
Investments Europe China Other Eliminations operations operations(1) Total
6 months 2014 Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
Fee based revenue 288 389 26 - (51) 652 106 758
Spread/risk
margin - 79 - - - 79 103 182
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
Total income 288 468 26 - (51) 731 209 940
Total operating
expenses (197) (281) (23) (23) 51 (473) (152) (625)
Capital management - 1 - (5) - (4) 8 4
Share of associates'
and joint ventures'
profit before
tax(2) 11 - 9 - - 20 - 20
Operating profit/(loss)
before tax 102 188 12 (28) - 274 65 339
Tax on operating
profit (20) (31) - 5 - (46) (27) (73)
Share of associates'
and joint ventures'
tax expense 4.5 (3) - 2 - - (1) - (1)
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
Operating profit/(loss)
after tax 79 157 14 (23) - 227 38 265
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
Adjusted for
the following
items
Short-term
fluctuations
in investment
return and economic
assumption changes 4.7 1 6 (1) (6) - - 50 50
Restructuring
and corporate
transaction
expenses 4.4 (4) (21) - (1) - (26) (1) (27)
Impairment of
intangible assets - - - - - - - -
Other - (9) - (1) - (10) - (10)
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
Total non-operating
items (3) (24) (1) (8) - (36) 49 13
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- -------------- -----
Tax on non-operating
items - 10 - 1 - 11 (14) (3)
Dubai included
in discontinued
operations segment(1) - - (3) - - (3) 3 -
Singapore included
in discontinued
operations segment(1) - - (3) - - (3) 3 -
Profit/(loss)
for the period
attributable
to equity holders
of Standard
Life plc 76 143 7 (30) - 196 79 275
----------------------- ----- ------------ ------- ------ ----- ------------ ----------- --------------
Profit attributable
to non-controlling
interests 10 - 10
----------------------- ------------ ------- ------ ------------ ----------- --------------
Profit for the
period 206 79 285
----------------------- ----- ------------ ------ ------------ ----------- -------------- -----
(1) Under IFRS 5, Dubai and Singapore do not constitute
discontinued operations and are included under continuing
operations in the consolidated income statement. Therefore the
analysis of Group operating profit by segment above includes the
reclassification of Dubai and Singapore results between
discontinued and continuing operations.
(2) Share of associates' and joint ventures' profit before tax
comprises the Group's share of results of HDFC Standard Life
Insurance Company Limited, Heng An Standard Life Insurance Company
Limited and HDFC Asset Management Company Limited.
Standard Total
Life UK and India and continuing Discontinued
Investments Europe China Other Eliminations operations operations(1) Total
Full year 2014 Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----- ----- -------------
Fee based
revenue 686 802 49 - (108) 1,429 223 1,652
Spread/risk
margin - 183 - - - 183 191 374
----- ----- -------------
Total income 686 985 49 - (108) 1,612 414 2,026
Total operating
expenses (450) (605) (44) (54) 108 (1,045) (302) (1,347)
Capital
management - 10 - (8) - 2 15 17
Share of
associates' and
joint ventures'
profit before
tax(2) 21 - 18 - - 39 - 39
Operating
profit/(loss)
before tax 257 390 23 (62) - 608 127 735
Tax on operating
profit (51) (43) (1) 13 - (82) (42) (124)
Share of
associates' and
joint ventures'
tax expense 4.5 (7) - 2 - - (5) - (5)
----- -----
Operating
profit/(loss)
after tax 199 347 24 (49) - 521 85 606
Adjusted for the
following items
Short-term
fluctuations
in investment
return and
economic
assumption
changes 4.7 1 29 - (13) - 17 71 88
Restructuring
and corporate
transaction
expenses 4.4 (51) (51) - (7) - (109) (31) (140)
Impairment of
intangible
assets (43) - - - - (43) (4) (47)
Other (9) (11) - (2) - (22) (3) (25)
----- ----- -------------
Total
non-operating
items (102) (33) - (22) - (157) 33 (124)
----- -------------
Tax on
non-operating
items 17 18 - 5 - 40 (19) 21
Dubai included
in discontinued
operations
segment(1) - - (22) - - (22) 22 -
Singapore
included in
discontinued
operations
segment(1) - - (6) - - (6) 6 -
Profit/(loss)
for the year
attributable to
equity holders
of Standard
Life plc 114 332 (4) (66) - 376 127 503
----- ----- -------------
Profit
attributable to
non-controlling
interests 4 - 4
Profit for the
year 380 127 507
-------------
(1) Under IFRS 5, Dubai and Singapore do not constitute
discontinued operations and are included under continuing
operations in the IFRS condensed consolidated income statement.
Therefore the analysis of Group operating profit by segment above
includes the reclassification of Dubai and Singapore results
between discontinued and continuing operations.
(2) Share of associates' and joint ventures' profit before tax
comprises the Group's share of results of HDFC Standard Life
Insurance Company Limited, Heng An Standard Life Insurance Company
Limited and HDFC Asset Management Company Limited.
4.3 Segmental analysis continued
(b) Reportable segments - Group operating profit, revenue and asset information continued
(b)(ii) Analysis of assets under administration by segment
Group assets under administration (AUA) presents a measure of
the total assets of the Group including those administered on
behalf of customers and institutional clients. AUA represents the
IFRS gross assets of the Group adjusted to include third party AUA,
which are not included on the IFRS condensed consolidated statement
of financial position. In addition, certain assets on the condensed
consolidated statement of financial position are excluded from the
definition, including reinsurance assets, deferred acquisition
costs and intangible assets.
As a long-term savings and investments business, AUA is a key
driver of shareholder value and is consequently one of the key
measures utilised by the executive team in their evaluation of
segmental performance. AUA is therefore presented by reportable
segment (in billions).
Standard Total
Life India and continuing Discontinued
Investments UK and Europe China Other Eliminations(1) operations operations Total
30 June 2015 GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn
Assets under
administration
Fee based 167 126 - - (17) 276 - 276
Spread/risk - 15 - - - 15 - 15
Assets not
backing
products in
long-term
savings
business - 7 - - - 7 - 7
Joint ventures - - 2 - - 2 - 2
Other corporate
assets 1 - - 1 - 2 - 2
---------------
Total assets
under
administration 168 148 2 1 (17) 302 - 302
------------- ---------------
(1) In order to be consistent with the presentation of new
business information, certain products are included in both
Standard Life Investments AUA and other segments. Therefore, at a
Group level an elimination adjustment is required to remove any
duplication, in addition to other necessary consolidation
adjustments.
Standard Total
Life India and continuing Discontinued
Investments UK and Europe China Other Eliminations(1) operations operations Total
30 June 2014 GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn
Assets under
administration
Fee based 95 118 - - (14) 199 20 219
Spread/risk - 15 - - - 15 9 24
Assets not
backing
products in
long-term
savings
business - 6 - - - 6 1 7
Joint ventures - - 2 - - 2 - 2
Other corporate
assets 1 - - 1 - 2 - 2
------------ -----
Total assets
under
administration 96 139 2 1 (14) 224 30 254
------------- ------------ -----
(1) In order to be consistent with the presentation of new
business information, certain products are included in both
Standard Life Investments AUA and other segments. Therefore, at a
Group level an elimination adjustment is required to remove any
duplication, in addition to other necessary consolidation
adjustments.
Standard Total
Life India and continuing Discontinued
Investments UK and Europe China Other Eliminations(1) operations operations Total
31 December GBPbn
2014 GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn
Assets under
administration
Fee based 162 122 - - (15) 269 21 290
Spread/risk - 16 - - - 16 9 25
Assets not
backing
products in
long-term
savings
business - 8 - - - 8 2 10
Joint ventures - - 2 - - 2 - 2
Other corporate
assets 1 - - 1 - 2 - 2
------------ -----
Total assets
under
administration 163 146 2 1 (15) 297 32 329
------------- ------------ -----
(1) In order to be consistent with the presentation of new
business information, certain products are included in both
Standard Life Investments AUA and other segments. Therefore, at a
Group level an elimination adjustment is required to remove any
duplication, in addition to other necessary consolidation
adjustments.
4.4 Administrative expenses
Full
6 months 2015 6 months year
2014 restated(1) 2014
GBPm GBPm GBPm
------
Restructuring and corporate transaction expenses 48 27 106
Interest expense 6 5 11
Commission expenses 86 123 234
Staff costs and other employee-related costs 310 269 577
Other administrative expenses 306 242 592
--------------- ------
756 666 1,520
Acquisition costs deferred during the period (51) (81) (143)
Impairment of deferred acquisition costs 71 - 9
Amortisation of deferred acquisition costs 64 76 150
Total administrative expenses from continuing operations 840 661 1,536
(1) Comparatives for the six months ended 30 June 2014 have been
restated to reflect the classification of the Group's Canadian
business as discontinued operations. Refer to Note 4.2 -
Acquisitions and disposals.
Total restructuring and corporate transaction expenses incurred
from continuing operations during the year were GBP48m (six months
ended 30 June 2014: GBP27m; 12 months ended 31 December 2014:
GBP106m) which includes GBPnil of deal costs (six months ended 30
June 2014: GBP3m; 12 months ended 31 December 2014: GBP11m)
relating to acquisitions as described in Note 4.2 - Acquisitions
and disposals. The remaining expenses relate to the integration of
Ignis and a number of other business unit restructuring
programmes.
In December 2014 the Group announced that the UK staff defined
benefit pension plan would be closed to future accrual effective
April 2016. All employees in the closing plan will be transferred
to the UK defined contribution plan for future service and employer
contributions into the defined contribution plan will be amended.
Following this restructuring of the pension plans, operating profit
from continuing operations for the six months ended 30 June 2015
has been increased by GBP20m (12 months ended 31 December 2014:
GBP15m) so that operating profit reflects the expected long-term
pension expense for the period and is therefore more indicative of
the long-term operating performance of the Group. As a result
GBP20m (12 months ended 31 December 2014: GBP15m) of pension costs
that are included in staff costs in the IFRS condensed consolidated
income statement for the six months ended 30 June 2015, are
included in restructuring and corporate transaction expenses in
determining operating profit from continuing operations. Further
details of the defined benefit pension plan expense for the period
are included in Note 4.11 - Pension and other post-retirement
benefit provisions.
The table below reconciles restructuring and corporate
transaction expenses incurred from continuing operations with
restructuring and corporate transaction expenses used to determine
operating profit from continuing operations.
6 months 6 months Full year
2015 2014 2014
GBPm GBPm GBPm
Restructuring and corporate transaction expenses from continuing operations 48 27 106
Pension plan restructuring 20 - 15
Expenses incurred by the Heritage With Profit Fund (1) (1) (2)
Closure of Dubai(1) - - (10)
Closure of Singapore(1) (5) - -
Restructuring and corporate transaction expenses used to determine operating profit
from continuing
operations 62 26 109
(1) Dubai and Singapore businesses, the closure of which were
announced in November 2014 and June 2015 respectively, are included
as discontinued operations for segmental reporting purposes under
IFRS 8 as this is reflective of the presentation of information
provided to the Chief Operating Decision Maker. Under IFRS 5, Dubai
and Singapore do not constitute discontinued operations and are
included under continuing operations in the IFRS condensed
consolidated income statement.
Restructuring and corporate transaction expenses of GBP8m (six
months ended 30 June 2014: GBP1m; 12 months ended 31 December 2014:
GBP31m) are used to determine operating profit before tax from
discontinued operations. These expenses relate to the sale of the
Canadian business and the closure of the Dubai and Singapore
businesses.
4.5 Tax expense
The tax expense is attributed as follows:
6 months
2014 Full year
6 months 2015 restated(1) 2014
GBPm GBPm GBPm
-------------
Tax expense attributable to policyholders' returns 89 91 250
Tax expense attributable to equity holders' profits 18 35 42
Total tax expense from continuing operations 107 126 292
(1) Comparatives for the six months ended 30 June 2014 have been
restated to reflect the classification of the Group's Canadian
business as discontinued operations. Refer to Note 4.2 -
Acquisitions and disposals.
The standard rate of corporation tax in the UK changed from 21%
to 20% with effect from 1 April 2015. Accordingly, the Group's UK
profit for this accounting period was subject to a rate of 20.25%
(six months ended 30 June 2014: 21.5%; 12 months ended 31 December
2014: 21.5%). The UK corporation tax rate for 2016 is 20% and this
rate has been applied in calculating the UK deferred tax position
at 30 June 2015. The UK Government announced in July 2015 that the
corporation tax rate is set to be cut to 19% in 2017 and 18% in
2020. These rate reductions have not been substantively enacted,
therefore the impact of these reductions has not been incorporated
into the tax charge for the period.
The share of tax of associates and joint ventures from
continuing operations is GBP5m (six months ended 30 June 2014:
GBP1m; 12 months ended 31 December 2014: GBP5m) and is included in
profit before tax in the IFRS condensed consolidated income
statement in Share of profit from associates and joint
ventures.
The total tax expense is split as follows:
6 months
6 months 2014 Full year
2015 restated(1) 2014
GBPm GBPm GBPm
--------- -------------
Current tax:
UK 95 94 268
Overseas 4 13 14
Adjustment to tax expense in respect of prior years (5) (2) (7)
Total current tax attributable to continuing operations 94 105 275
Deferred tax:
Deferred tax expense arising from the current periods 13 21 17
Total deferred tax attributable to continuing operations 13 21 17
Total tax expense attributable to continuing operations 107 126 292
(1) Comparatives for the six months ended 30 June 2014 have been
restated to reflect the classification of the Group's Canadian
business as discontinued operations. Refer to Note 4.2 -
Acquisitions and disposals.
Tax relating to components of other comprehensive income is as
follows:
6 months 6 months Full year
2015 2014 restated(1) 2014
GBPm GBPm GBPm
Current tax on net change in financial assets designated as available-for-sale (1) 2 6
---------
Equity holder tax effect relating to items that may be reclassified
subsequently to profit
or loss (1) 2 6
---------
Tax relating to each component of other comprehensive income from continuing
operations (1) 2 6
---------
(1) Comparatives for the six months ended 30 June 2014 have been
restated to reflect the classification of the Group's Canadian
business as discontinued operations. Refer to Note 4.2 -
Acquisitions and disposals.
All of the amounts presented above are in respect of equity
holders of Standard Life plc.
Tax relating to items taken directly to equity is as
follows:
6 months 6 months Full year
2015 2014 2014
GBPm GBPm GBPm
Tax credit on reserves for employee share-based payments (2) (3) (5)
Tax relating to items taken directly to equity (2) (3) (5)
4.6 Earnings per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing profit
attributable to ordinary equity holders by the weighted average
number of ordinary shares outstanding during the period. The
weighted average number of ordinary shares outstanding during the
period is the weighted average number of shares in issue less the
weighted average number of shares owned by employee share trusts
that have not vested unconditionally to employees.
Full
6 months 6 months year
2015 2014 2014
--------- --------- ------
Profit attributable to equity holders of Standard Life plc from continuing operations
(GBPm) 69 196 376
Profit attributable to equity holders of Standard Life plc from discontinued operations
(GBPm) 1,142 79 127
--------- --------- ------
Profit attributable to equity holders of Standard Life plc (GBPm) 1,211 275 503
--------- --------- ------
Weighted average number of ordinary shares outstanding (millions) 2,136 2,379 2,384
--------- --------- ------
Basic earnings per share from continuing operations (pence per share) 3.2 8.3 15.8
Basic earnings per share from discontinued operations (pence per share) 53.5 3.3 5.3
--------- --------- ------
Basic earnings per share (pence per share) 56.7 11.6 21.1
--------- --------- ------
(b) Diluted earnings per share
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. The Group has
one category of dilutive potential ordinary shares - share awards
and share options awarded to employees.
For share options, a calculation is made to determine the number
of shares that could be acquired at fair value (determined as the
average annual market share price of the Company's shares) based on
the monetary value of the subscription rights attached to
outstanding share options. The number of shares calculated is
compared with the number of shares that could be issued, or
purchased, assuming the exercise of the share options.
Full
6 months 6 months year
2015 2014 2014
--------- --------- ------
Profit attributable to equity holders of Standard Life plc from continuing operations
(GBPm) 69 196 376
Profit attributable to equity holders of Standard Life plc from discontinued operations
(GBPm) 1,142 79 127
--------- --------- ------
Profit attributable to equity holders of Standard Life plc (GBPm) 1,211 275 503
--------- --------- ------
Weighted average number of ordinary shares outstanding for diluted earnings per share
(millions) 2,140 2,384 2,396
--------- --------- ------
Diluted earnings per share from continuing operations (pence per share) 3.2 8.2 15.7
Diluted earnings per share from discontinued operations (pence per share) 53.4 3.3 5.3
--------- --------- ------
Diluted earnings per share (pence per share) 56.6 11.5 21.0
--------- --------- ------
The dilutive effect of share awards and options included in the
weighted average number of ordinary shares above was four million
(six months ended 30 June 2014: five million; 12 months ended 31
December 2014: 12 million).
(c) Alternative earnings per share
Earnings per share is also calculated based on operating profit
before tax as well as on the profit attributable to equity holders
of Standard Life plc. The Directors believe that earnings per share
based on operating profit provides a more useful indication of the
long-term operating performance of the Group.
4.6 Earnings per share continued
(c) Alternative earnings per share continued
(c)(i) Basic alternative earnings per share
Discontinued
Continuing operations Continuing operations operations Discontinued operations
6 months 2015 GBPm p per share GBPm p per share
Operating profit before
tax 290 13.6 3 0.1
Tax on operating profit (37) (1.8) - -
Share of associates'
and joint ventures'
tax expense (5) (0.2) - -
Operating profit after
tax 248 11.6 3 0.1
Adjusted for the
following items
Short-term
fluctuations in
investment return and
economic assumption
changes (42) (2.0) 63 2.9
Restructuring and
corporate transaction
expenses (62) (2.9) (8) (0.4)
Impairment of
intangible assets - - (2) (0.1)
Gain on sale of
Canadian business - - 1,097 51.4
Other (54) (2.5) (31) (1.4)
Total non-operating
items (158) (7.4) 1,119 52.4
Tax on non-operating
items 19 0.9 (20) (0.9)
Dubai included in
discontinued operations
segment(1) - - - -
Singapore included in
discontinued
operations segment(1) (40) (1.9) 40 1.9
Profit attributable to
equity holders of
Standard Life plc 69 3.2 1,142 53.5
Discontinued
Continuing operations Continuing operations operations Discontinued operations
6 months 2014 GBPm p per share GBPm p per share
Operating profit before
tax 274 11.5 65 2.7
Tax on operating profit (46) (2.0) (27) (1.1)
Share of associates'
and joint ventures'
tax expense (1) - - -
Operating profit after
tax 227 9.5 38 1.6
Adjusted for the
following items
Short-term
fluctuations in
investment return and
economic assumption
changes - - 50 2.1
Restructuring and
corporate transaction
expenses (26) (1.1) (1) -
Impairment of
intangible assets - - - -
Other (10) (0.4) - -
Total non-operating
items (36) (1.5) 49 2.1
Tax on non-operating
items 11 0.5 (14) (0.6)
Dubai included in
discontinued
operations segment(1) (3) (0.1) 3 0.1
Singapore included in
discontinued
operations segment(1) (3) (0.1) 3 0.1
Profit attributable to
equity holders of
Standard Life plc 196 8.3 79 3.3
Discontinued
Continuing operations Continuing operations operations Discontinued operations
Full year 2014 GBPm p per share GBPm p per share
Operating profit before
tax 608 25.5 127 5.3
Tax on operating profit (82) (3.4) (42) (1.7)
Share of associates'
and joint ventures'
tax expense (5) (0.2) - -
Operating profit after
tax 521 21.9 85 3.6
Adjusted for the
following items
Short-term
fluctuations in
investment return and
economic assumption
changes 17 0.7 71 3.0
Restructuring and
corporate transaction
expenses (109) (4.6) (31) (1.3)
Impairment of
intangible assets (43) (1.8) (4) (0.2)
Other (22) (0.9) (3) (0.1)
Total non-operating
items (157) (6.6) 33 1.4
Tax on non-operating
items 40 1.7 (19) (0.9)
Dubai included in
discontinued
operations segment(1) (22) (0.9) 22 0.9
Singapore included in
discontinued
operations segment(1) (6) (0.3) 6 0.3
Profit attributable to
equity holders of
Standard Life plc 376 15.8 127 5.3
(1) Dubai and Singapore businesses, the closure of which were
announced in November 2014 and June 2015 respectively, are included
as discontinued operations for segmental reporting purposes under
IFRS 8 as this is reflective of the presentation of information
provided to the Chief Operating Decision Maker. Under IFRS 5, Dubai
and Singapore do not constitute discontinued operations and are
included under continuing operations in the IFRS condensed
consolidated income statement. Therefore the analysis of Group
operating profit above includes the reclassification of Dubai and
Singapore results between discontinued and continuing
operations.
(c)(ii) Diluted alternative earnings per share
Discontinued Discontinued
Continuing operations Continuing operations operations operations
6 months 2015 GBPm p per share GBPm p per share
Operating profit before
tax 290 13.6 3 0.1
Tax on operating profit (37) (1.8) - -
Share of associates'
and joint ventures'
tax expense (5) (0.2) - -
Operating profit after
tax 248 11.6 3 0.1
Adjusted for the
following items
Short-term
fluctuations in
investment return
and economic
assumption changes (42) (2.0) 63 2.9
Restructuring and
corporate
transaction expenses (62) (2.9) (8) (0.4)
Impairment of
intangible assets - - (2) (0.1)
Gain on sale of
Canadian business - - 1,097 51.3
Other (54) (2.5) (31) (1.4)
Total non-operating
items (158) (7.4) 1,119 52.3
Tax on non-operating
items 19 0.9 (20) (0.9)
Dubai included in
discontinued
operations segment(1) - - - -
Singapore included in
discontinued
operations segment(1) (40) (1.9) 40 1.9
Profit attributable to
equity holders of
Standard Life plc 69 3.2 1,142 53.4
Discontinued Discontinued
Continuing operations Continuing operations operations operations
6 months 2014 GBPm p per share GBPm p per share
Operating profit before
tax 274 11.4 65 2.7
Tax on operating profit (46) (1.9) (27) (1.1)
Share of associates'
and joint ventures'
tax expense (1) - - -
Operating profit after
tax 227 9.5 38 1.6
Adjusted for the
following items
Short-term
fluctuations in
investment return
and economic
assumption changes - - 50 2.1
Restructuring and
corporate
transaction expenses (26) (1.2) (1) -
Impairment of
intangible assets - - - -
Other (10) (0.4) - -
Total non-operating
items (36) (1.6) 49 2.1
Tax on non-operating
items 11 0.5 (14) (0.6)
Dubai included in
discontinued
operations segment(1) (3) (0.1) 3 0.1
Singapore included in
discontinued
operations segment(1) (3) (0.1) 3 0.1
Profit attributable to
equity holders of
Standard Life plc 196 8.2 79 3.3
Discontinued
Continuing operations Continuing operations operations Discontinued operations
Full year 2014 GBPm p per share GBPm p per share
Operating profit before
tax 608 25.4 127 5.3
Tax on operating profit (82) (3.5) (42) (1.8)
Share of associates'
and joint ventures'
tax expense (5) (0.2) - -
Operating profit after
tax 521 21.7 85 3.5
Adjusted for the
following items
Short-term
fluctuations in
investment return
and economic
assumption changes 17 0.7 71 3.0
Restructuring and
corporate
transaction expenses (109) (4.5) (31) (1.3)
Impairment of
intangible assets (43) (1.8) (4) (0.2)
Other (22) (0.9) (3) (0.1)
Total non-operating
items (157) (6.5) 33 1.4
Tax on non-operating
items 40 1.7 (19) (0.8)
Dubai included in
discontinued
operations segment(1) (22) (0.9) 22 0.9
Singapore included in
discontinued
operations segment(1) (6) (0.3) 6 0.3
Profit attributable to
equity holders of
Standard Life plc 376 15.7 127 5.3
(1) Dubai and Singapore businesses, the closure of which were
announced in November 2014 and June 2015 respectively, are included
as discontinued operations for segmental reporting purposes under
IFRS 8 as this is reflective of the presentation of information
provided to the Chief Operating Decision Maker. Under IFRS 5, Dubai
and Singapore do not constitute discontinued operations and are
included under continuing operations in the IFRS condensed
consolidated income statement. Therefore the analysis of Group
operating profit above includes the reclassification of Dubai and
Singapore results between discontinued and continuing
operations.
4.7 Non-operating items
The Group focuses on operating profit as a measure of its
performance, which incorporates expected returns on investments
backing equity holder funds with a consistent allowance for
corresponding expected movements in equity holder liabilities. The
methodology used in calculating operating profit is outlined
below.
Operating profit is calculated based on expected returns on
investments backing equity holder funds, with consistent allowance
for the corresponding expected movements in equity holder
liabilities. Impacts arising from the difference between the
expected return and actual return on investments, and the
corresponding impact on equity holder liabilities except where they
are directly related to a significant management action, are
excluded from operating profit and are presented within profit
before tax. As a result, the components of IFRS profit attributable
to market movements and interest rate changes which give rise to
variances between actual and expected investment returns, as well
as the impact of changes in economic assumptions on equity holder
liabilities, are excluded from operating profit and disclosed
separately within the heading of short-term fluctuations in
investment return and economic assumption changes.
Short-term fluctuations in investment return and economic
assumption changes
The expected rates of return for debt securities, equity
securities and property are determined separately for each of the
Group's operations. The expected rates of return for equity
securities and property, with the exception of the Canadian
operations, are determined based on the gilt spot rates of an
appropriate duration plus an equity risk premium or property risk
premium, respectively. The expected rates of return on equity
securities and property for Canadian operations were determined by
the Appointed Actuary in Canada.
The principal assumptions, as set at the start of the year, in
respect of gross investment returns underlying the calculation of
the expected investment return for equity securities and property
are as follows:
2015 2014
UK Canada UK Canada
% % % %
Equity securities 4.86 8.60 6.01 8.60
Property 3.86 8.60 5.01 8.60
----- ------
In respect of debt securities at fair value through profit or
loss, the expected rate of return is determined based on the
average prospective yields for the debt securities actually held
or, in respect of the Canadian operations, was determined by the
Appointed Actuary in Canada. For debt securities classified as
available-for-sale that support liabilities measured at amortised
cost, the expected rate of return is the effective interest rate
adjusted for an allowance, established at initial recognition, for
expected defaults. If debt securities classified as
available-for-sale are sold, any gain or loss is amortised within
the expected return over the period to the earlier of the maturity
date of the sold debt security, or the redemption date of the
supported liability.
Gains and losses on foreign exchange are deemed to represent
short-term fluctuations in investment return and economic
assumption changes and thus are excluded from operating profit.
For the six months ended 30 June 2015, short-term fluctuations
in investment return and economic assumption changes resulted in
losses of GBP42m (six months ended 30 June 2014: GBPnil; 12 months
ended 31 December 2014: gains of GBP17m) from continuing operations
and gains of GBP63m (six months ended 30 June 2014: gains of
GBP50m, 12 months ended 31 December 2014: gains of GBP71m) from
discontinued operations. Short-term fluctuations in investment
return from continuing operations relate principally to investment
volatility in UK annuities, and in respect of the Group's
subordinated liabilities, and assets backing those liabilities.
Short-term fluctuations in investment return from discontinued
operations relate principally to investment volatility in Canada
non-segregated funds.
Other
Other non-operating items from continuing operations for the six
months ended 30 June 2015 includes GBP10m (six months ended 30 June
2014: GBP2m; 12 months ended 31 December 2014: GBP15m) in relation
to amortisation of intangible assets acquired through business
combinations and GBP46m (six months ended 30 June 2014: GBPnil; 12
months ended 31 December 2014: GBPnil) relating to a review of
expense and reserving assumptions in Hong Kong following regulatory
change. The Hong Kong non-operating loss primarily relates to an
impairment of deferred acquisition costs.
Other non-operating items from discontinued operations for the
six months ended 30 June 2015 includes GBP31m (six months ended 30
June 2014: GBPnil; 12 months ended 31 December 2014: GBPnil) in
respect of impairment of deferred acquisition costs and plan
enhancements relating to the closure of the Singapore business.
Non-operating items also include restructuring and corporate
transaction expenses as discussed in Note 4.4 - Administrative
expenses.
4.8 Dividends and return of value
6 months 2015 6 months 2014 Full year 2014
Pence Pence
per per
share GBPm share GBPm Pence per share GBPm
--------------- ------------ --------
Dividends relating to reporting period
Interim dividend (2015 and 2014) 6.02 119 5.60 134 5.60 134
Final dividend (2014) - - - - 11.43 224
Total 6.02 119 5.60 134 17.03 358
--------------- ------------ --------
Dividends paid in reporting period
Current year interim dividend - - - - 5.60 134
Final dividend for prior year 11.43 224 10.58 252 10.58 252
Total 11.43 224 10.58 252 16.18 386
--------------- ------------ --------
The final dividend for the year ended 31 December 2014 which was
paid in the six months ended 30 June 2015 was paid on the lower
adjusted number of ordinary shares following the share
consolidation.
Subsequent to 30 June 2015, the Directors have proposed an
interim dividend for 2015 of 6.02 pence per ordinary share (interim
2014: 5.60 pence), an estimated GBP119m in total (interim 2014:
GBP134m). The dividend is expected to be paid on 20 October 2015
and will be recorded as an appropriation of retained earnings in
the financial statements for the year ended 31 December 2015.
In addition to the dividend distribution on ordinary shares, the
Group returned 73 pence per ordinary share (GBP1,749m) to
shareholders through a 'B/C' share scheme. Refer to Note 4.9 -
Issued share capital, share premium and shares held by trusts for
more detail.
4.9 Issued share capital, share premium and shares held by trusts
(a) Issued share capital
The movement in the issued ordinary share capital of the Company
was:
6 months 2015 6 months 2015 6 months 6 months 6 months Full year Full year 2014
2015 2014 2014 2014
Issued shares fully
paid 10p each 12 2/9p each GBPm 10p each GBPm 10p each GBPm
At start of period 2,394,373,744 - 239 2,376,616,730 238 2,376,616,730 238
Shares issued in
respect of share
incentive plans 169,283 80,904 - 153,768 - 287,120 -
Shares issued in
respect of share
options 642,089 9,489,898 2 13,896,549 1 17,469,894 1
New shares issued
immediately prior
to share
consolidation 6 - - - - - -
Share consolidation (2,395,185,122) 1,959,696,918 - - - - -
At end of period - 1,969,267,720 241 2,390,667,047 239 2,394,373,744 239
The Group operates share incentive plans, allowing employees the
opportunity to buy shares from their salary each month. The maximum
purchase that an employee can make in any one year is GBP1,800. The
Group offers to match the first GBP25 of shares bought each month.
During the six months ended 30 June 2015, the Company allotted
250,187 ordinary shares to Group employees under the share
incentive plans (six months ended 30 June 2014: 153,768; 12 months
ended 31 December 2014: 287,120).
The Group also operates long-term incentive plans (LTIPs) for
executives and senior management and a Sharesave (Save-as-you-earn)
scheme for all eligible employees. During the six months ended 30
June 2015, 9,836,651 ordinary shares were issued on exercise of
share options in respect of the LTIP (six months ended 30 June
2014: 13,836,439; 12 months ended 31 December 2014: 14,509,687) and
295,336 ordinary shares were issued on exercise of share options in
respect of the Sharesave scheme (six months ended 30 June 2014:
60,110; 12 months ended 31 December 2014: 2,960,207).
All ordinary shares in issue in the Company rank pari passu and
carry the same voting rights to receive dividends and other
distributions declared or paid by the Company.
4.9 Issued share capital, share premium and shares held by
trusts continued
(a) Issued share capital continued
(a)(i) Share consolidation and return of value
On 13 March 2015, the Company undertook a share consolidation of
the Company's share capital. Nine new ordinary shares of 12 2/9
pence each were issued for each holding of eleven existing ordinary
shares of 10 pence each. As a result, the number of shares in issue
reduced from 2,395,185,122 to 1,959,696,918.
668,370,013 'B' shares were issued for nil consideration with a
nominal value of 73 pence each on 19 March 2015, resulting in a
total of GBP488m being credited to the 'B' share capital account.
At the same time GBP488m was deducted from the share premium
account. On 20 March 2015 the 'B' shares were redeemed at 73 pence
each. An amount of GBP488m was deducted from the 'B' share capital
account and GBP488m was transferred from retained earnings to the
capital redemption reserve.
1,726,815,109 'C' shares were issued for nil consideration with
a nominal value of 0.0000001 pence each on 19 March 2015. An amount
of GBP1.73 was credited to the 'C' share capital account. On 20
March 2015 a dividend of 73 pence per share became payable at a
total cost of GBP1,261m and this amount has been recorded as a
deduction from retained earnings. On the same date, the 'C' shares
were automatically reclassified as deferred shares. The Company
subsequently purchased the deferred shares for an aggregate
consideration of one pence.
(b) Share premium
6 months 6 months Full year
2015 2014 2014
GBPm GBPm GBPm
---------
1 January 1,115 1,110 1,110
Issue of 'B' shares (488) - -
Premium arising on shares issued - - 5
30 June 627 1,110 1,115
---------
As noted above, 668,370,013 'B' shares were issued at 73 pence
each on 19 March 2015, resulting in a deduction of GBP488m from the
share premium account.
The premium arising on shares issued during the period was
GBPnil (six months ended 30 June 2014: GBPnil; 12 months ended 31
December 2014: GBP5m) and relates to share options exercised in
respect of the Sharesave scheme.
(c) Shares held by trusts
The Employee Share Trust (EST) purchases and holds shares in the
Company for delivery to employees under various employee share
schemes. Share-based liabilities to employees may also be settled
by the issue of new shares which may also be held in trust until
delivery to employees. The number of shares held in trust for the
purposes of settling employee share schemes at 30 June 2015 was
730,582 (30 June 2014: 2,916,212; 31 December 2014: 1,081,758).
Shares held by trusts also include shares held by the Unclaimed
Asset Trust (UAT). The shares held by the UAT are those not yet
claimed by the eligible members of The Standard Life Assurance
Company (SLAC) following its demutualisation on 10 July 2006. The
corresponding obligation to deliver these shares to eligible
members of SLAC is also included in the shares held by trusts
reserve. The number of shares held by the UAT at 30 June 2015 was
15,907,401 (30 June 2014: 24,521,450; 31 December 2014:
21,143,650).
4.10 Insurance contracts, investment contracts and reinsurance
contracts
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
------------
Non-participating insurance contract liabilities 22,142 29,309 31,266
Less: Non-participating insurance contract liabilities classified as held for sale (614) - (9,425)
21,528 29,309 21,841
------------
Non-participating investment contract liabilities 91,872 100,716 104,059
Less: Non-participating investment contract liabilities classified as held for sale (283) - (15,852)
91,589 100,716 88,207
------------
Non-participating contract liabilities 114,014 130,025 135,325
Less: Non-participating contract liabilities classified as held for sale (897) - (25,277)
113,117 130,025 110,048
------------
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
-------- ------------
Participating insurance contract liabilities 14,309 15,240 16,099
Less: Participating insurance contract liabilities classified as held for sale - - (702)
14,309 15,240 15,397
------------
Participating investment contract liabilities 14,809 14,764 15,193
Less: Participating investment contract liabilities classified as held for sale - - (2)
14,809 14,764 15,191
------------
Unallocated divisible surplus 666 701 688
Less : Unallocated divisible surplus classified as held for sale - - -
666 701 688
------------
Participating contract liabilities 29,784 30,705 31,980
Less: Participating contract liabilities classified as held for sale - - (704)
29,784 30,705 31,276
------------
Due to changes in economic and non-economic factors, certain
assumptions used in estimating insurance and investment contract
liabilities have been revised. Therefore, the change in liabilities
reflects actual experience over the period, changes in assumptions
and, to a limited extent, improvements in modelling techniques.
The movement in insurance contract liabilities, participating
investment contract liabilities and reinsurance contracts for
continuing operations during the six months ended 30 June 2015, and
the six months ended 30 June 2014 arising from changes in estimates
are set out below:
Participating Non-participating Participating Total
insurance insurance investment insurance and
contract contract contract participating Reinsurance
liabilities liabilities liabilities contracts contracts Net
6 months 2015 GBPm GBPm GBPm GBPm GBPm GBPm
Changes in
Methodology/modelling 2 2 9 13 (3) 10
Economic assumptions 13 (346) (28) (361) 95 (266)
Non-economic assumptions - (9) 1 (8) - (8)
---------------
6 months 2014
(restated)(1)
Changes in
Methodology/modelling (15) (30) 5 (40) - (40)
Economic assumptions 57 403 (75) 385 (83) 302
Non-economic assumptions - - (2) (2) - (2)
---------------
(1) Comparatives for the six months ended 30 June 2014 have been
restated to reflect the classification of the Group's Canadian
business as discontinued operations. Refer to Note 4.2 -
Acquisitions and disposals.
4.10 Insurance contracts, investment contracts and reinsurance
contracts continued
The movement in insurance contract liabilities, participating
investment contract liabilities and reinsurance contracts during
the year ended 31 December 2014 was as follows:
Participating Non-participating Participating Total
insurance insurance investment insurance and
contract contract contract participating Reinsurance
liabilities liabilities liabilities contracts contracts Net
2014 GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 15,060 28,312 14,707 58,079 (5,857) 52,222
Reclassified as held
for sale during the
year (667) (8,135) (3) (8,805) (123) (8,928)
14,393 20,177 14,704 49,274 (5,980) 43,294
--------------- -------
Expected change (1,014) (717) (701) (2,432) 350 (2,082)
Methodology/modelling
changes (3) (81) 44 (40) - (40)
Effect of changes in
Economic assumptions 356 1,625 (344) 1,637 (410) 1,227
Non-economic
assumptions 37 (65) (52) (80) 7 (73)
Effect of
Economic experience 2,092 207 1,319 3,618 6 3,624
Non-economic
experience 79 (264) 252 67 (1) 66
New business 42 1,000 22 1,064 (12) 1,052
--------------- -------
Total change in
contract liabilities 1,589 1,705 540 3,834 (60) 3,774
--------------- -------
Foreign exchange
adjustment (585) (41) (53) (679) 4 (675)
At 31 December 15,397 21,841 15,191 52,429 (6,036) 46,393
--------------- -------
Reinsurance assets (6,036)
Reinsurance
liabilities -
--------------- -------
(6,036)
--------------- -------
The change in non-participating investment contract liabilities
during the year ended 31 December 2014 was as follows:
2014
GBPm
At 1 January 97,659
Reclassified as held for sale during the year (15,097)
Contributions 11,261
Initial charges and reduced allocations (3)
Account balances paid on surrender and other terminations in the year (10,230)
Change in non-participating investment contracts recognised in the IFRS condensed consolidated
income statement 5,362
Foreign exchange adjustment (306)
Recurring management charges (439)
At 31 December 88,207
4.11 Pension and other post-retirement benefit provisions
In December 2014 the Group announced that the UK staff defined
benefit pension plan would be closed to future accrual effective
April 2016. From April 2016, all UK employees will accrue a pension
through a defined contribution plan.
(a) Analysis of amounts recognised in the IFRS condensed consolidated income statement
The amounts recognised in the IFRS condensed consolidated income
statement for defined contribution and defined benefit plans are as
follows:
6 months
6 months 2014
2015 restated(1) Full year 2014
GBPm GBPm GBPm
--------- -------------
Current service cost (42) (30) (60)
Interest income 13 10 21
Administrative expenses (1) - -
Charge recognised in the IFRS condensed consolidated income statement (30) (20) (39)
---------
(1) Comparatives for the six months ended 30 June 2014 have been
restated to reflect the classification of the Group's Canadian
business as discontinued operations. Refer to Note 4.2 -
Acquisitions and disposals.
An additional pension contribution of 6% of pensionable salary
into the defined contribution plan for eligible members of the
defined benefit plan on 16 March 2015 was made on 16 April 2015. A
further additional contribution of 6% will be made on 16 April
2016. These contributions have been accrued over the vesting period
and are included in current service cost.
(b) Analysis of amounts recognised on the IFRS condensed
consolidated statement of financial position
30 June 2015 30 June 2014 31 December 2014
UK Other Total UK Canada Other Total UK Other Total Canada
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Present value of funded
obligation (2,750) (89) (2,839) (2,456) (232) (73) (2,761) (2,816) (98) (2,914) (242)
Present value of unfunded
obligation - (8) (8) - (69) (7) (76) - (8) (8) (73)
Fair value of plan assets 4,030 57 4,087 3,140 204 58 3,402 3,990 62 4,052 214
Effect of limit on plan
surplus (460) - (460) (242) - - (242) (414) - (414) -
Net asset/(liability) on
the IFRS condensed
consolidated statement of
financial position 820 (40) 780 442 (97) (22) 323 760 (44) 716 (101)
(c) Principal assumptions
The principal economic assumptions for the plans are as
follows:
30 June
2015 30 June 2014 31 December 2014
UK UK Canada UK Canada
% % % % %
-------- -----
Discount rate 3.75 4.35 4.20 3.60 4.00
Rates of inflation
Consumer Price Index (CPI) 2.60 2.80 2.00 2.45 2.00
Retail Price Index (RPI) (UK only) 3.50 3.60 - 3.35 -
Salary inflation (Canada only) - - 3.50 - 3.50
-------- --------
4.12 Risk management
(a) Overview
The Group's strategic objectives and performance against them is
subject to a number of financial and non-financial risks. The
principal risks and uncertainties that affect the business model
are set out in detail in the Strategic report section 1.4 -
Principal risks and uncertainties.
The Group's IFRS condensed consolidated half year financial
information does not include all financial risk management
information and disclosures required in the Group's Annual report
and accounts. This note should therefore be read in conjunction
with the Group's Annual report and accounts for the year ended 31
December 2014. The information presented in this note has been
prepared on the same basis as that presented in the Group's Annual
report and accounts.
There have been no significant changes to the Group's risk
management framework since 31 December 2014 and no changes have
been made to the Group's qualitative risk appetites. The business
continues to be managed through a range of risk, capital and profit
metrics.
Standard Life Financial Inc. and Standard Life Investments Inc.
collectively were sold on 30 January 2015 - refer to Note 4.2 -
Acquisitions and disposals. The assets and liabilities of these
businesses were classified as held for sale on the consolidated
statement of financial position at 31 December 2014 and the
comparatives reflect this, however comparatives at 30 June 2014
have not been restated to reflect the sale. The transaction does
not impact the classification of the Group's assets and liabilities
within the risk segments.
(b) Investment property and financial assets
The values of the Group's holdings of investment property and
financial assets are impacted by the Group's exposure to adverse
fluctuations in financial markets (referred to as market risk) and
counterparty failure (referred to as credit risk).
The assets on the Group's IFRS condensed consolidated statement
of financial position can be split into four categories (risk
segments) which give the shareholder different exposures to these
risks as follows:
Shareholder business
Shareholder business refers to the assets and liabilities to
which the shareholder is directly exposed. For the purposes of this
note, the shareholder refers to the equity holders of the
Company.
Participating business
Participating business refers to the assets and liabilities of
the participating funds of the life operations of the Group. It
includes the liabilities for insurance features and financial
guarantees contained within contracts held in the Heritage With
Profits Fund that invest in unit linked funds. It does not include
the liabilities for insurance features contained in contracts
invested in the German With Profits Fund or German Smoothed Managed
With Profits Fund. Such liabilities are included in shareholder
business.
Unit linked and segregated funds
Unit linked and segregated funds refers to the assets and
liabilities of the unit linked and segregated funds of the life
operations of the Group. It does not include the cash flows (such
as asset management charges or investment expenses) arising from
the unit linked or segregated fund contracts or the liabilities for
insurance features or financial guarantees contained within the
unit linked or segregated fund contracts. Such cash flows and
liabilities are included in shareholder business or participating
business.
Third party interest in consolidated funds and non-controlling
interests
Third party interest in consolidated funds and non-controlling
interests refers to the assets and liabilities recorded on the
Group's consolidated statement of financial position which belong
to third parties. The Group controls the entities which own the
assets and liabilities but the Group does not own 100% of the
equity or units of the relevant entities.
The total Group holding in investment property and financial
assets has been presented below based on the risk segment.
Shareholder Unit linked and
business Participating business segregated funds TPICF and NCI(1) Total
30 June 31 Dec 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Investments in
associates(2) 26 16 433 535 3,850 3,568 218 145 4,527 4,264
Investment
property 1 - 2,100 2,090 5,588 5,223 1,895 1,728 9,584 9,041
Loans 27 4 340 194 326 166 98 36 791 400
Derivative
financial
assets 25 18 1,368 1,649 920 1,711 329 643 2,642 4,021
Equity
securities
and interests
in pooled
investment
funds 54 31 8,975 9,658 57,370 55,471 6,634 6,167 73,033 71,327
Debt
securities 7,635 7,235 26,232 27,785 24,683 23,597 6,060 5,824 64,610 64,441
Receivables
and other
financial
assets 582 468 115 98 662 534 185 148 1,544 1,248
Assets held
for sale 929 9,837 - 857 27 17,679 19 965 975 29,338
Cash and cash
equivalents 813 976 1,589 1,778 6,055 5,751 2,131 2,112 10,588 10,617
Total 10,092 18,585 41,152 44,644 99,481 113,700 17,569 17,768 168,294 194,697
(1) Third party interest in consolidated funds and
non-controlling interests.
(2) Comprises investments in associates at FVTPL and loans to
associates.
Unit linked and
Shareholder business Participating business segregated funds TPICF and NCI(1) Total
30 June 2014 GBPm GBPm GBPm GBPm GBPm
Investments in
associates(2) 4 375 1,105 101 1,585
Investment property 482 2,117 5,205 1,498 9,302
Loans 2,367 187 91 - 2,645
Derivative financial
assets 67 899 1,127 555 2,648
Equity securities and
interests in pooled
investment funds 215 10,235 69,141 8,141 87,732
Debt securities 12,009 27,230 26,542 6,821 72,602
Receivables and other
financial assets 629 168 859 235 1,891
Assets held for sale 33 - - - 33
Cash and cash
equivalents 1,443 1,400 5,111 1,721 9,675
Total 17,249 42,611 109,181 19,072 188,113
(1) Third party interest in consolidated funds and non-controlling interests.
(2) Comprises investments in associates at FVTPL and loans to
associates.
The shareholder is exposed to the impact of market movements
such as in property prices, interest rates and foreign exchange
rates and the impact of defaults and movements in credit spreads on
the value of assets held by the shareholder business. Appropriate
risk oversight, risk management and mitigation actions are in
place. The shareholder is also exposed to the market and credit
risk that the assets of the participating funds of the life
operations of the Group are not sufficient to meet their
obligations. In this situation, the shareholder would be exposed to
the full shortfall in the funds.
No further analysis is provided on the assets of the remaining
risk segments - unit linked and segregated funds and TPICF and NCI.
Assets of the unit linked and segregated funds are managed in
accordance with the mandates of the particular funds and the
financial risks of the assets are expected to be borne by the
policyholder. The unit linked business includes GBP3,383m (30 June
2014: GBP4,515m; 31 December 2014: GBP3,523m) of assets that are
held as reinsured external fund links. Under certain circumstances
the shareholder may be exposed to losses relating to the default of
the insured external fund links. These exposures are actively
monitored and managed by the Group and the Group considers the
circumstances under which losses may arise to be remote.
The shareholder is not exposed to market and credit risk from
assets in respect of TPICF and NCI since the financial risks of the
assets are borne by third parties.
Further information on the investment property and financial
assets of the shareholder and participating business at the
reporting date is provided below.
4.12 Risk management continued
(b) Investment property and financial assets continued
Investment property
The Group is subject to property price risk due to changes in
the value and return on holdings in investment properties. This
risk arises from various direct and indirect holdings which are
controlled through the use of portfolio limits.
The tables below analyse investment property held by the
shareholder and participating businesses by country and sector.
Shareholder business
Office Industrial Retail Other Total
30 30 31 Dec 30 30 31 Dec 30 30 31 Dec 30 30 31 30 30 Jun 31 Dec
Jun Jun 2014 Jun Jun 2014 Jun Jun 2014 Jun Jun Dec Jun 2014 2014
2015 2014 2015 2014 2015 2014 2015 2014 2014 2015
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
UK - - - - - - 1 - - - - - 1 - -
Canada - 348 - - 45 - - - - - 89 - - 482 -
-------- ----- ------
Total - 348 - - 45 - 1 - - - 89 - 1 482 -
-------- ----- ------
Participating business
Office Industrial Retail Other Total
30 30 31 Dec 30 30 31 Dec 30 30 31 Dec 30 30 31 30 30 31
Jun Jun 2014 Jun Jun 2014 Jun Jun 2014 Jun Jun Dec Jun Jun Dec
2015 2014 2015 2014 2015 2014 2015 2014 2014 2015 2014 2014
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
UK 680 598 608 219 285 237 993 1,007 1,051 6 - 6 1,898 1,890 1,902
Canada - 47 - - 19 - - 5 - - 15 - - 86 -
Belgium 12 13 14 - - - - - - - - - 12 13 14
France - - - - 4 3 - - - 1 2 2 1 6 5
Germany - - - 4 - - 14 - - - - - 18 - -
Ireland - - - - - - - - - 23 - 26 23 - 26
Netherlands 16 - - 13 - 14 - - - - - - 29 - 14
Spain 119 122 129 - - - - - - - - - 119 122 129
Total 827 780 751 236 308 254 1,007 1,012 1,051 30 17 34 2,100 2,117 2,090
-------------
There is no direct exposure to residential property in the
shareholder and participating businesses.
Equity securities
The Group is subject to equity price risk due to daily changes
in the market value and returns in the holdings in its equity
security portfolio. Exposure to equity securities are primarily
managed through the use of investment mandates including
constraints based on appropriate equity indices.
The following table analyses equity securities held by the
shareholder and participating businesses by country.
Shareholder business Participating business Total
30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 2014 31 Dec 2014
2015 2014 2014 2015 2014 2014 2015
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- -------- -------- --------- --------- -------- -------
UK 9 3 - 3,792 4,438 4,060 3,801 4,441 4,060
Canada - 148 - 53 252 42 53 400 42
Australia 1 1 1 32 33 53 33 34 54
Austria - - - - 25 - - 25 -
Belgium 1 - - 54 101 73 55 101 73
Denmark 1 - - 156 166 165 157 166 165
Finland 1 - - 88 62 48 89 62 48
France 2 - 1 422 546 453 424 546 454
Germany 2 - 1 398 503 523 400 503 524
Greece - - - 1 9 12 1 9 12
Ireland 1 - - 179 132 137 180 132 137
Italy 2 - - 138 72 100 140 72 100
Japan 1 1 1 119 124 114 120 125 115
Mexico - - - 1 6 1 1 6 1
Netherlands 2 - 1 346 454 364 348 454 365
Norway - - - 65 101 44 65 101 44
Portugal - - - 40 30 19 40 30 19
Russia - - - 4 5 4 4 5 4
Spain 2 - - 148 222 161 150 222 161
Sweden 1 - - 203 278 236 204 278 236
Switzerland 2 - - 621 597 669 623 597 669
US 7 26 - 1,784 1,814 1,977 1,791 1,840 1,977
Other 17 11 7 253 263 311 270 274 318
-------- -------- -------- --------- -------- -------
Total 52 190 12 8,897 10,233 9,566 8,949 10,423 9,578
-------- -------- -------- --------- -------- -------
In addition to the equity securities analysed above, the
shareholder business has interests in pooled investment funds of
GBP2m (30 June 2014: GBP25m; 31 December 2014: GBP19m). The
participating business has interests in pooled investment funds of
GBP78m (30 June 2014: GBP2m; 31 December 2014: GBP92m).
Debt securities
The Group is exposed to interest rate risk and credit risk
through its holdings in debt securities. The Group manages its
exposure to debt securities through the use of investment mandates
including setting exposure limits such as by issuer, sector and
credit rating.
At 30 June 2015, the total shareholder business holding of debt
securities was GBP7,635m (30 June 2014: GBP12,009m; 31 December
2014: GBP7,235m), of which 86% (30 June 2014: 96%; 31 December
2014: 89%) was rated as investment grade. The total participating
business holding of debt securities at 30 June 2015 was GBP26,232m
(30 June 2014: GBP27,230m; 31 December 2014: GBP27,785m), of which
97% (30 June 2014: 97%; 31 December 2014: 97%) was rated as
investment grade. This illustrates the quality of the debt
securities we choose to invest in.
4.12 Risk management continued
(b) Investment property and financial assets continued
The following tables show the shareholder and participating
businesses' exposure to credit risk from debt securities analysed
by credit rating and country.
Shareholder business
Government, provincial and Other financial Other
municipal(1) Banks institutions corporate Other(2) Total
30 30 30 30 30 30 30 30 30 30 30 31
Jun Jun 31 Dec Jun Jun 31 Dec Jun Jun 31 Dec Jun Jun 31 Dec Jun Jun 31 Dec Jun 30 Jun Dec
2015 2014 2014 2015 2014 2014 2015 2014 2014 2015 2014 2014 2015 2014 2014 2015 2014 2014
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
AAA 232 673 150 121 98 108 39 50 40 - 77 - 216 205 226 608 1,103 524
AA 714 1,403 699 359 636 297 302 179 275 236 532 246 - 31 - 1,611 2,781 1,517
A 5 1,174 4 1,375 1,269 1,392 418 1,014 399 1,254 2,738 1,498 - - - 3,052 6,195 3,293
BBB 6 - 5 172 163 97 252 94 247 847 1,201 756 - - - 1,277 1,458 1,105
Below BBB 1 - 2 8 4 7 46 - 1 85 15 21 - - - 140 19 31
Not rated - - - - - - 25 17 - 17 13 1 - 29 - 42 59 1
Internally
rated 74 4 78 - - - 483 330 480 348 51 206 - 9 - 905 394 764
Total 1,032 3,254 938 2,035 2,170 1,901 1,565 1,684 1,442 2,787 4,627 2,728 216 274 226 7,635 12,009 7,235
Government, provincial and Other financial Other
municipal(1) Banks institutions corporate Other(2) Total
30 30 30 30 31 30 30 30 30 30 30 30
Jun Jun 31 Dec Jun Jun Dec Jun Jun 31 Dec Jun Jun 31 Dec Jun Jun 31 Dec Jun 30 Jun 31 Dec
2015 2014 2014 2015 2014 2014 2015 2014 2014 2015 2014 2014 2015 2014 2014 2015 2014 2014
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
UK 520 354 565 428 491 377 1,338 955 1,286 1,480 1,254 1,330 - 69 - 3,766 3,123 3,558
Canada - 2,534 3 25 300 25 - 283 - 1 1,949 1 - - - 26 5,066 29
Australia - - - 75 79 72 6 14 6 10 10 10 - - - 91 103 88
Austria 21 22 25 - - - - - - - - - - - - 21 22 25
Belgium - - - 25 7 25 - - - 12 11 11 - - - 37 18 36
Denmark - - - 80 16 41 - - - 15 15 16 - - - 95 31 57
Finland - - - 25 50 25 - - - - - - - - - 25 50 25
France 200 24 209 223 211 228 - 16 - 313 440 347 - - - 736 691 784
Germany 243 303 87 124 97 115 1 1 1 280 301 300 - - - 648 702 503
Greece - - - - - - - - - - - - - - - - - -
Ireland - - - - - - - 3 3 - - - - - - - 3 3
Italy - - - 26 34 36 - - - 79 72 86 - - - 105 106 122
Japan - - - 51 135 119 62 29 10 31 30 32 - - - 144 194 161
Mexico 5 1 1 - - - - - - 106 83 112 - - - 111 84 113
Netherlands - - - 273 366 313 - - - 24 6 24 - - - 297 372 337
Norway - - - - - - - - - 38 37 40 - - - 38 37 40
Portugal 1 - - - - - - - - - - - - - - 1 - -
Russia - - - - - - - - - - - - - - - - - -
Spain - - - 116 2 37 - - - 50 26 52 - - - 166 28 89
Sweden - - - 67 12 38 1 1 1 61 59 66 - - - 129 72 105
Switzerland - - - 163 77 87 - - - 7 7 7 - - - 170 84 94
US - 13 - 255 273 302 130 381 133 268 318 283 - - - 653 985 718
Other 42 3 48 79 20 61 27 1 2 12 9 11 216 205 226 376 238 348
Total 1,032 3,254 938 2,035 2,170 1,901 1,565 1,684 1,442 2,787 4,627 2,728 216 274 226 7,635 12,009 7,235
(1) Government, provincial and municipal includes debt
securities which are issued by or explicitly guaranteed by the
national government. For Canada, this includes debt securities
which are issued by or explicitly guaranteed by the Crown
Corporations of the Government of Canada.
(2) This balance primarily consists of securities held in supranationals.
Participating business
Government, provincial and Other financial Other
municipal(1) Banks institutions corporate Other(2) Total
30 30 31 30 30 30 30 30 30
30 Jun 30 Jun 31 Dec Jun Jun Dec Jun Jun 31 Dec Jun Jun 31 Dec Jun Jun 31 Dec 30 Jun 30 Jun 31 Dec
2015 2014 2014 2015 2014 2014 2015 2014 2014 2015 2014 2014 2015 2014 2014 2015 2014 2014
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
AAA 3,191 3,226 3,764 514 402 591 154 371 168 27 28 28 234 248 291 4,120 4,275 4,842
AA 13,130 13,658 13,543 945 1,255 601 683 779 829 512 583 635 - 5 - 15,270 16,280 15,608
A 29 126 27 1,736 1,189 2,093 1,124 1,392 995 1,609 1,442 1,787 - - - 4,498 4,149 4,902
BBB 6 16 10 302 335 283 369 487 446 885 773 839 - - - 1,562 1,611 1,578
Below BBB - - - 180 201 209 27 84 25 225 222 247 - - - 432 507 481
Not rated 1 1 - - 5 - 65 129 33 93 169 - - 1 - 159 305 33
Internally
rated - - 2 7 - - 158 84 194 26 19 145 - - - 191 103 341
Total 16,357 17,027 17,346 3,684 3,387 3,777 2,580 3,326 2,690 3,377 3,236 3,681 234 254 291 26,232 27,230 27,785
Government, provincial and Other financial Other
municipal(1) Banks institutions corporate Other(2) Total
30 30 30 30 30 30 30 30
30 Jun 30 Jun 31 Dec Jun Jun 31 Dec Jun Jun 31 Dec Jun Jun 31 Dec Jun Jun 31 Dec 30 Jun 30 Jun 31 Dec
2015 2014 2014 2015 2014 2014 2015 2014 2014 2015 2014 2014 2015 2014 2014 2015 2014 2014
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
UK 10,719 11,332 11,030 826 861 926 2,018 2,242 2,050 1,792 1,707 1,966 - 1 - 15,355 16,143 15,972
Canada 33 323 35 214 166 77 8 55 10 1 58 1 - - - 256 602 123
Australia - - - 173 173 199 39 63 39 37 24 42 - - - 249 260 280
Austria 218 206 240 3 35 8 - - - - - - - - - 221 241 248
Belgium 362 383 381 7 18 16 - - - 17 20 16 - - - 386 421 413
Denmark 4 6 5 7 13 10 - - - 26 26 32 - - - 37 45 47
Finland 74 74 83 43 175 57 - 25 - 4 8 5 - - - 121 282 145
France 1,713 1,749 1,641 450 359 473 25 146 19 335 306 375 - - - 2,523 2,560 2,508
Germany 2,633 2,450 2,996 423 275 440 119 168 114 204 185 214 - - - 3,379 3,078 3,764
Greece - - - - - - - - - - - - - - - - - -
Ireland 4 1 1 8 14 6 10 12 10 12 13 13 - - - 34 40 30
Italy 2 2 3 32 29 31 8 66 13 112 118 138 - - - 154 215 185
Japan 20 22 20 184 277 295 - - - 10 10 10 - - - 214 309 325
Mexico - - - - - - - - - 60 66 64 - - - 60 66 64
Netherlands 390 356 358 362 270 228 41 42 46 33 13 31 - - - 826 681 663
Norway 17 65 18 27 56 16 - 13 - 64 59 72 - - - 108 193 106
Portugal - - - - - - - - - 4 - 3 - - - 4 - 3
Russia - - - - - - - - - - 7 7 - - - - 7 7
Spain 3 12 8 8 22 8 - - - 50 65 62 - - - 61 99 78
Sweden 1 4 1 211 101 261 6 16 8 19 18 20 - - - 237 139 290
Switzerland - - - 170 104 182 31 52 35 56 50 56 - - - 257 206 273
US 77 2 434 391 334 383 215 252 254 420 381 408 - - - 1,103 969 1,479
Other 87 40 92 145 105 161 60 174 92 121 102 146 234 253 291 647 674 782
Total 16,357 17,027 17,346 3,684 3,387 3,777 2,580 3,326 2,690 3,377 3,236 3,681 234 254 291 26,232 27,230 27,785
(1) Government, provincial and municipal includes debt
securities which are issued by or explicitly guaranteed by the
national government. For Canada, this includes debt securities
which are issued by or explicitly guaranteed by the Crown
Corporations of the Government of Canada.
(2) This balance primarily consists of securities held in supranationals.
Loans
The Group is exposed to interest rate risk and credit risk from
loans issued. The Group manages its exposure by setting portfolio
limits for business units specifying the proportion of the value of
the total portfolio loans that can be represented by a single, or
group of related counterparties and requires each business unit to
implement appropriate portfolio limits and benchmarks for the
assets.
The shareholder business holding of loans of GBP27m (30 June
2014: GBP2,367m; 31 December 2014: GBP4m) primarily comprises bank
deposits of more than 3 months maturity. At 30 June 2014 the
holding primarily comprised the Canada non-segregated funds
commercial mortgage book.
The participating business holding of loans of GBP340m (30 June
2014: GBP187m; 31 December 2014: GBP194m) comprises bank deposits
of more than 3 months maturity and UK mortgages.
4.13 Fair value of assets and liabilities
(a) Determination of fair value hierarchy
To provide further information on the approach used to determine
and measure the fair value of certain assets and liabilities, the
following fair value hierarchy categorisation has been used:
Level 1: Fair values measured using quoted prices (unadjusted)
in active markets for identical assets or liabilities. An active
market exists where transactions take place with sufficient
frequency and volume to provide pricing information on an ongoing
basis.
Level 2: Fair values measured using inputs other than quoted
prices included within level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices).
Level 3: Fair values measured using inputs that are not based on
observable market data (unobservable inputs).
(b) Methods and assumptions used to determine fair value of assets and liabilities
Information on the methods and assumptions used to determine
fair values for each major category of financial instrument
measured at fair value is given below. These methods and
assumptions include those used to fair value assets and liabilities
held for sale, including the individual assets and liabilities of
operations held for sale.
Investments in associates at FVTPL, equity securities and
interests in pooled investment funds and amounts seeded into funds
classified as held for sale
Investments in associates at FVTPL are valued in the same manner
as the Group's equity securities and interests in pooled investment
funds.
Equity instruments listed on a recognised exchange are valued
using prices sourced from the primary exchange on which they are
listed. These instruments are generally considered to be quoted in
an active market and are therefore treated as level 1 instruments
within the fair value hierarchy.
Unlisted equities are valued using an adjusted net asset value.
The Group's exposure to unlisted equity securities primarily
relates to private equity investments. The majority of the Group's
private equity investments are carried out through European fund of
funds structures, where the Group receives valuations from the
investment managers of the underlying funds.
The valuations received from investment managers of the
underlying funds are reviewed and where appropriate adjustments are
made to reflect the impact of changes in market conditions between
the date of the valuation and the end of the reporting period. The
valuation of these securities is largely based on inputs that are
not based on observable market data, and accordingly these
instruments are treated as level 3 instruments within the fair
value hierarchy. Where appropriate, reference is made to observable
market data.
Where pooled investment funds have been seeded and the
investments in the fund have been classified as held for sale, the
costs to sell are assumed to be negligible. The fair value of
pooled investment funds held for sale is calculated as equal to the
observable unit price.
Investment property and owner occupied property
The fair value of investment property and all owner occupied
property is valued by external property valuation experts. The
current use is considered the best indicator of the highest and
best use of the Group's property from a market participants'
perspective. No adjustment is made for vacant possession for the
Group's owner occupied property.
In UK and Europe valuations are completed in accordance with the
Royal Institution of Chartered Surveyors (RICS) valuation standards
and predominantly an income capitalisation method is used. In
Canada all valuations are completed in accordance with
International Valuation Standards (IVS) and predominantly a
discounted cash flow method is used. Both valuation techniques are
income approaches as they consider the income that an asset will
generate over its useful life and estimate fair value through a
capitalisation process. Capitalisation involves the conversion of
income into a capital sum through the application of an appropriate
discount rate.
The determination of the fair value of investment property and
all owner occupied property requires the use of estimates such as
future cash flows from the assets for example, future rental income
and discount rates applicable to those assets.
Where it is not possible to use an income approach a market
approach will be used whereby comparisons are made to recent
transactions with similar characteristics and locations to those of
the Group's assets. Where appropriate, adjustments will be made by
the valuer to reflect any differences.
Where an income approach, or a market approach with significant
unobservable adjustments, has been used, valuations are
predominantly based on unobservable inputs and accordingly these
assets are categorised as level 3 within the fair value hierarchy.
Where a market approach valuation does not include significant
unobservable adjustments, these assets are categorised as level
2.
Derivative financial assets and derivative financial
liabilities
The majority of the Group's derivatives are over-the-counter
(OTC) derivatives which are fair valued using valuation techniques
based on observable market data and are therefore treated as level
2 investments within the fair value hierarchy.
Exchange traded derivatives are valued using prices sourced from
the relevant exchange. They are considered to be instruments quoted
in an active market and are therefore categorised as level 1
instruments within the fair value hierarchy.
Non-performance risk arising from the credit risk of each
counterparty has been considered on a net exposure basis in line
with the Group's risk management policies. At 30 June 2015, 30 June
2014 and 31 December 2014, the residual credit risk is considered
immaterial and no credit risk adjustment has been made.
Debt securities
For debt securities, the Group has determined a hierarchy of
pricing sources. The hierarchy consists of reputable external
pricing providers who generally use observable market data. If
prices are not available from these providers or are considered to
be stale, the Group has established procedures to arrive at an
internal assessment of the fair value. These procedures are based
largely on inputs that are not based on observable market data. A
further analysis by category of debt security is as follows:
-- Government, including provincial and municipal, and supranational institution bonds
These instruments are valued using prices received from external
pricing providers who generally base the price on quotes received
from a number of market participants. They are categorised as level
1 or level 2 instruments within the fair value hierarchy depending
upon the nature of the underlying pricing information used for
valuation purposes.
-- Corporate bonds listed or quoted in an established
over-the-counter market including asset-backed securities
These instruments are generally valued using prices received
from external pricing providers who generally consolidate quotes
received from a panel of banks into a composite price. As the
market becomes less active the quotes provided by some banks may be
based on modelled prices rather than on actual transactions. These
sources are based largely on observable market data, and therefore
these instruments are categorised as level 2 instruments within the
fair value hierarchy. When prices received from external pricing
providers are based on a single broker indicative quote, the
instruments are treated as level 3 instruments.
For instruments for which prices are either not available from
external pricing providers or the prices provided are considered to
be stale, the Group performs its own assessment of the fair value
of these instruments. This assessment is largely based on inputs
that are not based on observable market data, principally single
broker indicative quotes, and accordingly these instruments are
categorised as level 3 instruments within the fair value
hierarchy.
-- Other corporate bonds including unquoted bonds, commercial paper and certificates of deposit
These instruments are valued using models. For unquoted bonds
the model uses inputs from comparable bonds and includes credit
spreads which are obtained from brokers or estimated internally.
Commercial paper and certificates of deposit are valued using
standard valuation formulas. The categorisation of these
instruments within the fair value hierarchy will be either level 2
or 3 depending upon the nature of the underlying pricing
information used for valuation purposes.
-- Commercial mortgages
These instruments are valued using models. The models use a
discount rate adjustment technique which is an income approach. The
key inputs for the valuation models are contractual future cash
flows, which are discounted using a discount rate that is
determined by adding a spread to the current base rate. The spread
is derived from a pricing matrix which incorporates data on current
spreads for similar assets and which may include an internal
underwriting rating. These inputs are generally observable with the
exception of the spread adjustment arising from the internal
underwriting rating. The classification of these instruments within
the fair value hierarchy will be either level 2 or 3 depending on
whether the spread is adjusted by an internal underwriting
rating.
Contingent consideration asset
A contingent consideration asset was recognised during 2014 in
respect of a purchase price adjustment mechanism relating to the
acquisition of Ignis. The fair value of the asset is calculated
using a binominal tree model. The main inputs are management fee
income and expected probabilities of payouts. These are considered
unobservable and as a result the asset is classified as level 3 in
the fair value hierarchy.
Non-participating investment contract liabilities
The fair value of the non-participating investment contract
liabilities is calculated equal to the fair value of the underlying
assets and liabilities in the funds. Thus, the value of these
liabilities is dependent on the methods and assumptions set out
above in relation to the underlying assets and liabilities in which
these funds are invested. The underlying assets and liabilities are
predominately categorised as level 1 or 2 and as such, the inputs
into the valuation of the liabilities are observable. Therefore,
the liabilities are categorised within level 2 of the fair value
hierarchy.
Liabilities in respect of third party interest in consolidated
funds
The fair value of liabilities in respect of third party interest
in consolidated funds is calculated equal to the fair value of the
underlying assets and liabilities in the funds. Thus, the value of
these liabilities is dependent on the methods and assumptions set
out above in relation to the underlying assets in which these funds
are invested. When the underlying assets and liabilities are valued
using readily available market information the liabilities in
respect of third party interest in consolidated funds are treated
as level 2. Where the underlying assets and liabilities are not
valued using readily available market information the liabilities
in respect of third party interest in consolidated funds are
treated as level 3.
4.13 Fair value of assets and liabilities continued
(b) Methods and assumptions used to determine fair value of assets and liabilities continued
(b)(i) Fair value hierarchy for assets measured at fair value in
the statement of financial position
The table below presents the Group's assets measured at fair
value by level of the fair value hierarchy.
As recognised in the
consolidated
statement of
financial position Classified as
line item held for sale Total Level 1 Level 2 Level 3
30 30 30 30
30 June June 31 Dec 30 June 31 Dec June 31 Dec June 31 Dec June 31 Dec
2015 31 Dec 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Investments in
associates at
FVTPL 4,527 4,264 14 33 4,541 4,297 4,433 4,214 7 - 101 83
Investment
property 9,584 9,041 38 1,427 9,622 10,468 - - - 105 9,622 10,363
Owner occupied
property 134 138 - 26 134 164 - - - 1 134 163
Derivative
financial
assets 2,642 4,021 - 44 2,642 4,065 638 971 2,004 3,094 - -
Equity
securities
and interests
in pooled
investment
vehicles 73,033 71,327 20 13,035 73,053 84,362 72,130 83,521 - 1 923 840
Debt
securities 64,610 64,441 - 11,059 64,610 75,500 22,120 23,780 41,841 50,077 649 1,643
Contingent
consideration
asset 20 20 - - 20 20 - - - - 20 20
Total assets
at fair value 154,550 153,252 72 25,624 154,622 178,876 99,321 112,486 43,852 53,278 11,449 13,112
As recognised in the
consolidated
statement of
financial position Classified as held for
line item sale Total Level 1 Level 2 Level 3
30 June 2014 GBPm GBPm GBPm GBPm GBPm GBPm
Investments in
associates at FVTPL 1,585 - 1,585 1,585 - -
Investment property 9,302 - 9,302 - 65 9,237
Owner occupied property 163 - 163 - 1 162
Derivative financial
assets 2,648 - 2,648 746 1,902 -
Equity securities and
interests in pooled
investment vehicles 87,732 9 87,741 86,692 - 1,049
Debt securities 72,602 20 72,622 22,353 49,049 1,220
Contingent
consideration asset - - - - - -
Total assets at fair
value 174,032 29 174,061 111,376 51,017 11,668
There were no significant transfers between levels 1 and 2
during the period (six months ended 30 June 2014: none; 12 months
ended 31 December 2014: none). Refer to 4.13 (b)(iii) for details
of movements in level 3.
All transfers between fair value hierarchy levels are deemed to
occur on the last day of the quarter in which they arise.
The table that follows presents an analysis of the Group's
financial assets measured at fair value by level of the fair value
hierarchy for each risk segment as set out in Note 4.12 - Risk
management.
As recognised in the
consolidated
statement of
financial position Classified as
line item held for sale Total Level 1 Level 2 Level 3
30
30 Jun Jun 31 Dec 30 Jun 31 Dec 30 Jun 31 Dec 30 Jun 31 Dec 30 Jun 31 Dec
2015 31 Dec 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Shareholder
business
Investments in
associates at
FVTPL 26 16 14 14 40 30 21 30 7 - 12 -
Investment
property 1 - - 520 1 520 - - - 105 1 415
Owner occupied
property 1 3 - 26 1 29 - - - 1 1 28
Derivative
financial
assets 25 18 - 44 25 62 - - 25 62 - -
Equity
securities and
interests in
pooled
investment
funds 54 31 20 250 74 281 68 254 - - 6 27
Debt securities 7,635 7,235 - 5,934 7,635 13,169 1,031 981 6,096 10,952 508 1,236
Contingent
consideration
asset 20 20 - - 20 20 - - - - 20 20
Total
shareholder
business 7,762 7,323 34 6,788 7,796 14,111 1,120 1,265 6,128 11,120 548 1,726
Participating
business
Investments in
associates at
FVTPL 433 535 - - 433 535 356 452 - - 77 83
Investment
property 2,100 2,090 - 86 2,100 2,176 - - - - 2,100 2,176
Owner occupied
property 133 135 - - 133 135 - - - - 133 135
Derivative
financial
assets 1,368 1,649 - - 1,368 1,649 374 332 994 1,317 - -
Equity
securities and
interests in
pooled
investment
funds 8,975 9,658 - 232 8,975 9,890 8,578 9,526 - - 397 364
Debt securities 26,232 27,785 - 418 26,232 28,203 15,739 17,036 10,352 10,991 141 176
Total
participating
business 39,241 41,852 - 736 39,241 42,588 25,047 27,346 11,346 12,308 2,848 2,934
Unit linked and
segregated funds
Investments in
associates at
FVTPL 3,850 3,568 - 19 3,850 3,587 3,838 3,587 - - 12 -
Investment
property 5,588 5,223 19 816 5,607 6,039 - - - - 5,607 6,039
Owner occupied
property - - - - - - - - - - - -
Derivative
financial
assets 920 1,711 - - 920 1,711 197 458 723 1,253 - -
Equity
securities and
interests in
pooled
investment
funds 57,370 55,471 - 11,909 57,370 67,380 57,186 67,200 - 1 184 179
Debt securities 24,683 23,597 - 4,420 24,683 28,017 5,147 5,536 19,536 22,273 - 208
Total unit
linked and
segregated
funds 92,411 89,570 19 17,164 92,430 106,734 66,368 76,781 20,259 23,527 5,803 6,426
Third party
interest in
consolidated
funds and
non-controlling
interests
Investments in
associates at
FVTPL 218 145 - - 218 145 218 145 - - - -
Investment
property 1,895 1,728 19 5 1,914 1,733 - - - - 1,914 1,733
Owner occupied
property - - - - - - - - - - - -
Derivative
financial
assets 329 643 - - 329 643 67 181 262 462 - -
Equity
securities and
interests in
pooled
investment
funds 6,634 6,167 - 644 6,634 6,811 6,298 6,541 - - 336 270
Debt securities 6,060 5,824 - 287 6,060 6,111 203 227 5,857 5,861 - 23
Total third
party interest
in consolidated
funds and
non-controlling
interests 15,136 14,507 19 936 15,155 15,443 6,786 7,094 6,119 6,323 2,250 2,026
Total 154,550 153,252 72 25,624 154,622 178,876 99,321 112,486 43,852 53,278 11,449 13,112
4.13 Fair value of assets and liabilities continued
(b) Methods and assumptions used to determine fair value of assets and liabilities continued
(b)(i) Fair value hierarchy for assets measured at fair value in
the statement of financial position continued
As recognised in Classified
the consolidated statement of as held
financial position for Level
line item sale Total 1 Level 2 Level 3
30 June 2014 GBPm GBPm GBPm GBPm GBPm GBPm
----------- ------- -------
Shareholder business
Investments in associates at FVTPL 4 - 4 4 - -
Investment property 482 - 482 - 65 417
Owner occupied property 36 - 36 - 1 35
Derivative financial assets 67 - 67 1 66 -
Equity securities and interests in
pooled investment funds 215 9 224 196 - 28
Debt securities 12,009 20 12,029 907 10,196 926
Contingent consideration asset - - - - - -
Total shareholder business 12,813 29 12,842 1,108 10,328 1,406
-----------
Participating business
Investments in associates at FVTPL 375 - 375 375 - -
Investment property 2,117 - 2,117 - - 2,117
Owner occupied property 127 - 127 - - 127
Derivative financial assets 899 - 899 249 650 -
Equity securities and interests in
pooled investment funds 10,235 - 10,235 9,572 - 663
Debt securities 27,230 - 27,230 16,391 10,828 11
Total participating business 40,983 - 40,983 26,587 11,478 2,918
-----------
Unit linked and segregated funds
Investments in associates at FVTPL 1,105 - 1,105 1,105 - -
Investment property 5,205 - 5,205 - - 5,205
Owner occupied property - - - - - -
Derivative financial assets 1,127 - 1,127 332 795 -
Equity securities and interests in
pooled investment funds 69,141 - 69,141 69,097 - 44
Debt securities 26,542 - 26,542 4,807 21,509 226
Total unit linked and segregated
funds 103,120 - 103,120 75,341 22,304 5,475
-----------
Third party interest in consolidated
funds and non-controlling interests
Investments in associates at FVTPL 101 - 101 101 - -
Investment property 1,498 - 1,498 - - 1,498
Owner occupied property - - - - - -
Derivative financial assets 555 - 555 164 391 -
Equity securities and interests in
pooled investment funds 8,141 - 8,141 7,827 - 314
Debt securities 6,821 - 6,821 248 6,516 57
Total third party interest in
consolidated funds and
non-controlling interests 17,116 - 17,116 8,340 6,907 1,869
-----------
Total 174,032 29 174,061 111,376 51,017 11,668
-----------
(b)(ii) Fair value hierarchy for liabilities measured at fair
value in the statement of financial position
The table below presents the Group's liabilities measured at
fair value by level of the fair value hierarchy.
As recognised in
the consolidated
statement of
financial Classified as
position line item held for sale Total Level 1 Level 2 Level 3
30 30 31 30 31
30 June 31 Dec June 31 Dec 30 June 31 Dec June Dec 30 June 31 Dec June Dec
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Non-participating
investment
contract
liabilities 91,583 88,203 - 13,734 91,583 101,937 - - 91,583 101,937 - -
Liabilities in
respect of third
party interest in
consolidated
funds 16,607 15,805 - 953 16,607 16,758 - - 15,214 15,419 1,393 1,339
Derivative
financial
liabilities 858 1,693 - 26 858 1,719 160 441 698 1,278 - -
Contingent
consideration
liability - 3 - - - 3 - - - - - 3
------------------
Total liabilities
at fair value 109,048 105,704 - 14,713 109,048 120,417 160 441 107,495 118,634 1,393 1,342
------------------ --------
As recognised in
the consolidated
statement of financial Classified as held for
position line item sale Total Level 1 Level 2 Level 3
30 June 2014 GBPm GBPm GBPm GBPm GBPm GBPm
Non-participating investment
contract liabilities 98,448 - 98,448 - 98,448 -
Liabilities in respect of
third party interest in
consolidated funds 17,994 - 17,994 - 16,715 1,279
Derivative financial
liabilities 1,101 - 1,101 207 894 -
Contingent consideration
liability - - - - - -
Total liabilities at fair
value 117,543 - 117,543 207 116,057 1,279
There were no transfers between levels 1 and 2 during the six
months ended 30 June 2015 (six months ended 30 June 2014: none; 12
months ended 31 December 2014: none). Refer to 4.13 (b)(iii) for
details of movements in level 3.
The table that follows presents an analysis of the Group's
financial liabilities measured at fair value by level of the fair
value hierarchy for each risk segment as set out in Note 4.12 -
Risk management.
4.13 Fair value of assets and liabilities continued
(b) Methods and assumptions used to determine fair value of assets and liabilities continued
(b)(ii) Fair value hierarchy for liabilities measured at fair
value in the statement of financial position continued
As recognised in
the consolidated
statement of
financial position Classified as
line item held for sale Total Level 1 Level 2 Level 3
30 31 30
30 June 31 Dec June 31 Dec 30 June 31 Dec 30June Dec 30 June 31 Dec June 31 Dec
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Shareholder
business
Derivative
financial
liabilities 7 17 - 23 7 40 1 8 6 32 - -
Contingent
consideration
liability - 3 - - - 3 - - - - - 3
Total shareholder
business 7 20 - 23 7 43 1 8 6 32 - 3
Participating
business
Derivative
financial
liabilities 69 80 - - 69 80 42 26 27 54 - -
Total
participating
business 69 80 - - 69 80 42 26 27 54 - -
Unit linked and
segregated funds
Non-participating
investment
contract
liabilities 91,583 88,203 - 13,734 91,583 101,937 - - 91,583 101,937 - -
Derivative
financial
liabilities 583 1,187 - 2 583 1,189 92 319 491 870 - -
Total unit linked
and segregated
funds 92,166 89,390 - 13,736 92,166 103,126 92 319 92,074 102,807 - -
Third party
interest in
consolidated funds
and
non-controlling
interests
Liabilities in
respect of third
party interest in
consolidated
funds 16,607 15,805 - 953 16,607 16,758 - - 15,214 15,419 1,393 1,339
Derivative
financial
liabilities 199 409 - 1 199 410 25 88 174 322 - -
Third party
interest in
consolidated
funds and
non-controlling
interests 16,806 16,214 - 954 16,806 17,168 25 88 15,388 15,741 1,393 1,339
Total 109,048 105,704 - 14,713 109,048 120,417 160 441 107,495 118,634 1,393 1,342
-------- --------- ------
As recognised in
the consolidated
statement of financial Classified as held for
position line item sale Total Level 1 Level 2 Level 3
30 June 2014 GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- ------- ------- -------
Shareholder business
Derivative financial
liabilities 21 - 21 2 19 -
Contingent consideration
liability - - - - - -
Total shareholder business 21 - 21 2 19 -
Participating business
Derivative financial
liabilities 49 - 49 5 44 -
Total participating
business 49 - 49 5 44 -
Unit linked and segregated
funds
Non-participating
investment contract
liabilities 98,448 - 98,448 - 98,448 -
Derivative financial
liabilities 690 - 690 147 543 -
Total unit linked and
segregated funds 99,138 - 99,138 147 98,991 -
Third party interest in
consolidated funds and
non-controlling interests
Liabilities in respect of
third party interest in
consolidated funds 17,994 - 17,994 - 16,715 1,279
Derivative financial
liabilities 341 - 341 53 288 -
Third party interest in
consolidated funds and
non-controlling interests 18,335 - 18,335 53 17,003 1,279
Total 117,543 - 117,543 207 116,057 1,279
-------------------------- -------- -------
4.13 Fair value of assets and liabilities continued
(b) Methods and assumptions used to determine fair value of assets and liabilities continued
(b)(iii) Reconciliation of movements in level 3 instruments
The movements during the period of level 3 assets and
liabilities held at fair value, excluding assets and liabilities
held for sale, are analysed below.
Liabilities in
Investments in Equity securities respect of third
associates at Investment Owner occupied and interests Debt party interest in
FVTPL property property in pooled securities consolidated funds
30 30 30 30 30
June 31 Dec June 31 Dec June 31 Dec June 31 Dec June 31 Dec 30 June 31 Dec
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At start of
period 83 - 9,041 8,542 138 171 836 1,066 519 1,299 (1,338) (1,246)
Reclassified as
held for sale - - - (1,233) - (42) - (1) - (945) - -
Total
(losses)/gains
recognised in
the
consolidated
income
statement (1) 2 249 825 1 4 62 (31) (9) 38 2 (124)
Purchases 31 101 412 1,033 - - 167 112 166 439 14 35
Settlement - - - - - - - - - - (71) (3)
Sales (10) (20) (82) (128) (5) - (146) (306) (30) (87) - -
Transfers in to
level 3 - - - - - - 21 1 15 436 - -
Transfers out
of level 3 - - - - - - - (1) (12) (659) - -
Foreign
exchange
adjustment (2) - (20) (14) - - (17) (4) - (2) - -
Total gains
recognised in
revaluation of
owner occupied
property
within other
comprehensive
income - - - - - 5 - - - - - -
Other - - (16) 16 - - - - - - - -
----
At end of
period 101 83 9,584 9,041 134 138 923 836 649 519 (1,393) (1,338)
---- ----
Liabilities
in respect
of third
Equity party
Investments Owner securities interest
in associates Investment occupied and interests Debt in consolidated
at FVTPL property property in pooled securities funds
2014 GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ----------- ---------- --------------- ------------ -----------------
1 January - 8,542 171 1,066 1,299 (1,246)
Total gains/(losses)
recognised in the
consolidated income
statement - 395 1 56 41 (68)
Purchases - 531 - 60 290 5
Settlement - - - - - 30
Sales - (188) (13) (117) (122) -
Transfers in to level 3 - - - 1 - -
Transfers out of level 3 - - - - (258) -
Foreign exchange
adjustment - (48) (2) (17) (30) -
Total gains recognised in
revaluation of owner
occupied property within
other comprehensive
income - - 5 - - -
Other - 5 - - - -
--------------- ----------- ---------- --------------- ------------ -----------------
30 June - 9,237 162 1,049 1,220 (1,279)
--------------- ----------- ---------- --------------- ------------ -----------------
In addition to the above, the Group had a contingent
consideration asset with a fair value of GBP20m at 30 June 2015 (30
June 2014: GBPnil; 31 December 2014: GBP20m). There were no
settlements during the period (12 months ended 31 December 2014:
none) in respect of the contingent consideration asset.
As at 30 June 2015, GBP253m of total gains (30 June 2014: gains
of GBP414m; 31 December 2014: gains of GBP625m) were recognised in
the IFRS condensed consolidated income statement in respect of
assets and liabilities held at fair value classified as level 3 at
the period end. Of this amount GBP251m of gains (30 June 2014:
gains of GBP482m; 31 December 2014: gains of GBP749m) were
recognised in investment return and GBP2m of gains (30 June 2014:
losses of GBP68m; 31 December 2014: losses of GBP124m) were
recognised in change in liability for liabilities in respect of
third party interest in consolidated funds in the IFRS condensed
consolidated income statement.
Transfers of equity securities and interests in pooled
investment funds and debt securities into level 3 generally arise
when external pricing providers stop providing a price or where the
price provided is considered stale. Transfers of equity securities
and interests in pooled investment funds and debt securities out of
level 3 arise when acceptable prices become available from external
pricing providers.
(b)(iv) Sensitivity of level 3 instruments measured at fair
value to changes in key assumptions
Effect of changes of significant unobservable assumptions to
reasonable possible alternative assumptions
For the majority of level 3 investments, the Group does not use
internal models to value the investments but rather obtains
valuations from external parties. The Group reviews the
appropriateness of these valuations on the following basis:
-- For investment property and owner occupied property
(including property that is classified as held for sale), the
valuations are obtained from external valuers and are assessed on
an individual property basis. The principal assumptions will differ
depending on the valuation technique employed and sensitivities are
determined by flexing the key inputs listed in the table below
using knowledge of the investment property market.
-- Private equity fund valuations are provided by the respective
managers of the underlying funds and are assessed on an individual
investment basis, with an adjustment made for significant movements
between the date of the valuation and the end of the reporting
period. Sensitivities are determined by comparison to the private
equity market.
-- Corporate bonds are predominantly valued using single broker
indicative quotes obtained from third party pricing. Sensitivities
are determined by flexing the single quoted prices provided using a
sensitivity to yield movements.
The shareholder is directly exposed to movements in the value of
level 3 investments held by the shareholder business (to the extent
they are not offset by opposite movements in investment and
insurance contract liabilities). Movements in level 3 investments
held by the other risk segments are offset by an opposite movement
in investment and insurance contract liabilities and therefore the
shareholder is not directly exposed to such movements unless they
are sufficiently severe to cause the assets of the participating
business to be insufficient to meet the obligations to
policyholders. Changing unobservable inputs in the measurement of
the fair value of level 3 financial assets to reasonably possible
alternative assumptions would not have a significant impact on
profit for the period or total assets.
The table below presents quantitative information about the
significant unobservable inputs for level 3 instruments:
Fair value
30 June 2015 GBPm Valuation technique Unobservable input Range (weighted average)
Investment property and 9,180 Income capitalisation Equivalent yield 3.4% to 13.1% (5.4%)
owner occupied property GBP1 to GBP2,422 (GBP349)
Estimated rental value
per square metre per
annum
Investment property 452 Income capitalisation Equivalent Yield 4.6% to 7.3% (6%)
(hotels) Estimated rental value GBP775 to GBP43,144
per room per annum (GBP8,910)
Investment property and - Discounted cash flow Internal rate of return -
owner occupied property
Terminal capitalisation -
rate
Investment property and 124 Market comparison Estimated value per GBP2 to GBP10,764
owner occupied property square metre (GBP3,116)
Equity securities and 1,024 Adjusted net asset value Adjustment to net asset N/A
interests in pooled value(1)
investment funds and
investments in associates
at
FVTPL
(private equity
investments)
Debt securities 303 Single broker Single broker indicative N/A
(corporate bonds) price(2)
Debt securities 346 Discounted cash flow Internal underwriting N/A
(commercial mortgages) rating
(1) A Group level adjustment is made for significant movements in private equity values.
(2) Debt securities which are valued using single broker
indicative quotes are disclosed in level 3 in the fair value
hierarchy. No adjustment is made to these prices.
4.13 Fair value of assets and liabilities continued
(b) Methods and assumptions used to determine fair value of assets and liabilities continued
(b)(iv) Sensitivity of level 3 instruments measured at fair
value to changes in key assumptions continued
Fair value
30 June 2014 GBPm Valuation technique Unobservable input Range (weighted average)
Investment property and 7,710 Income capitalisation Equivalent yield 4.0% to 13.6% (5.8%)
owner occupied property
Estimated rental value GBP11 to GBP4,844 (GBP446)
per square metre per
annum
Investment property 301 Income capitalisation Equivalent Yield 5.3% to 8.0% (6.5%)
(hotels) Estimated rental value
per room per annum GBP412 to GBP9,100
(GBP3,725)
Investment property and 1,284 Discounted cash flow Internal rate of return 6.0% to 10.8% (7.4%)
owner occupied property
Terminal capitalisation 5.3% to 9.5% (6.6%)
rate
Investment property and 104 Market comparison Estimated value per GBP2 to GBP10,000
owner occupied property square metre (GBP1,607)
Equity securities and 1,049 Adjusted net asset value Adjustment to net asset N/A
interests in pooled value(1)
investment funds and
investments in associates
at
FVTPL
(private equity
investments)
Debt securities 1,169 Single broker Single broker indicative N/A
(corporate bonds) price(2)
Debt securities 51 Discounted cash flow Internal underwriting N/A
(commercial mortgages) rating
(1) A Group level adjustment is made for significant movements in private equity values.
(2) Debt securities which are valued using single broker
indicative quotes are disclosed in level 3 in the fair value
hierarchy. No adjustment is made to these prices.
Fair value
31 December 2014 GBPm Valuation technique Unobservable input Range (weighted average)
Investment property and 8,753 Income capitalisation Equivalent yield 3.8% to 12.9% (5.5%)
owner occupied property
Estimated rental value GBP11 to GBP2,422 (GBP345)
per square metre per
annum
Investment property 312 Income capitalisation Equivalent Yield 4.6% to 7.3% (6.2%)
(hotels) Estimated rental value
per room per annum GBP215 to GBP43,143
(GBP8,918)
Investment property and 1,337 Discounted cash flow Internal rate of return 6.0% to 10.5% (7.3%)
owner occupied property
Terminal capitalisation 5.3% to 9.5% (6.6%)
rate
Investment property and 124 Market comparison Estimated value per GBP2 to GBP10,764
owner occupied property square metre (GBP2,591)
Equity securities and 923 Adjusted net asset value Adjustment to net asset N/A
interests in pooled value(1)
investment funds and
investments in associates
at
FVTPL
(private equity
investments)
Debt securities 1,369 Single broker Single broker indicative N/A
(corporate bonds) price(2)
Debt securities 274 Discounted cash flow Internal underwriting N/A
(commercial mortgages) rating
(1) A Group level adjustment is made for significant movements in private equity values.
(2) Debt securities which are valued using single broker
indicative quotes are disclosed in level 3 in the fair value
hierarchy. No adjustment is made to these prices.
(c) Fair value of assets and liabilities not carried at fair value
The table below presents estimated fair values of financial
assets and liabilities whose carrying value does not approximate
fair value. Fair values of assets and liabilities are based on
observable market inputs where available, or are estimated using
other valuation techniques.
As recognised in
the consolidated
statement of financial Classified as held for Total carrying
position line item sale value Fair value
30 June 30 June 30 June 30 June
2015 31 Dec 2014 2015 31 Dec 2014 2015 31 Dec 2014 2015 31 Dec 2014
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------- -------
Assets
Loans secured by
mortgages 97 107 - 2,230 97 2,337 93 2,426
Liabilities
Non-participating
investment
contract
liabilities 6 4 283 2,118 289 2,122 332 2,285
Subordinated notes 499 499 - 223 499 722 579 800
Subordinated
guaranteed
bonds 519 502 - - 519 502 610 580
Mutual Assurance
Capital
Securities 307 611 - - 307 611 337 643
------------------- ------------
As recognised in
the consolidated
statement of financial position Classified as held Total carrying
line item for sale value Fair value
30 June 2014 GBPm GBPm GBPm GBPm
Assets
Loans secured by mortgages 2,449 - 2,449 2,535
Liabilities
Non-participating investment
contract liabilities 2,268 - 2,268 2,354
Subordinated notes 721 - 721 777
Subordinated guaranteed bonds 519 - 519 599
Mutual Assurance Capital
Securities 601 - 601 646
The estimated fair values of the subordinated liabilities are
based on the quoted market offer price. The estimated fair values
of the other instruments detailed above are calculated by
discounting the expected future cash flows at current market
rates.
It is not possible to reliably calculate the fair value of
participating investment contract liabilities. The assumptions and
methods used in the calculation of these liabilities are set out in
Note 34 of the Group's Annual report and accounts for the year
ended 31 December 2014. The carrying value of participating
investment contract liabilities at 30 June 2015 was GBP14,809m (30
June 2014: GBP14,764m; 31 December 2014: GBP15,193m).
The carrying value of all other financial assets and liabilities
measured at amortised cost approximates their fair value.
4.14 Subordinated liabilities
On 6 January 2015, the Company redeemed in full the Euro
denominated 5.314% fixed/floating rate perpetual Mutual Assurance
Capital Securities at their outstanding principal amount of
EUR360,000,000 (GBP282m).
4.15 Contingent assets and contingent liabilities
(a) Legal proceedings and regulations
The Group, like other financial organisations, is subject to
legal proceedings and complaints in the normal course of its
business. While it is not practicable to forecast or determine the
final results of all pending or threatened legal proceedings, the
Directors do not believe that such proceedings (including
litigation) will have a material effect on the results and
financial position of the Group.
The Group is subject to insurance solvency regulations in all
the territories in which it issues insurance and investment
contracts, and it has complied in material respects with local
solvency and other regulations. Therefore, there are no
contingencies in respect of these regulations.
(b) Unclaimed asset trust (UAT)
The UAT was established in July 2006. It holds shares and cash
which were allocated to eligible members of The Standard Life
Assurance Company at the date of demutualisation where those
eligible members have not yet claimed their entitlement. Dividends
paid on the shares held by the UAT are also held in the UAT until
the related shares are claimed. The Scheme of Demutualisation sets
a 10-year time limit, ending in July 2016, for those eligible
members to claim their entitlements. On expiry of the UAT in July
2016, the ownership of any assets remaining in the UAT would be
transferred to the Company, for general corporate purposes
including charitable donations, and may be subject to a tax charge.
At 30 June 2015 the UAT held cash of GBP45m (30 June 2014: GBP35m;
31 December 2014: GBP32m). The number of shares held by the UAT is
presented in Note 4.9(c). The position at July 2016 will depend on
the actions of eligible members and the success of the ongoing
efforts to trace eligible members.
4.16 Commitments
(a) Capital commitments
As at 30 June 2015 capital expenditure that was authorised and
contracted for, but not provided and incurred, was GBP285m (30 June
2014: GBP425m; 31 December 2014: GBP332m) in respect of investment
property. Of this amount, GBP259m (30 June 2014: GBP378m; 31
December 2014: GBP287m) and GBP26m (30 June 2014: GBP47m; 31
December 2014: GBP36m) relates to the contractual obligations to
purchase, construct or develop investment property and repair,
maintain or enhance investment property respectively.
(b) Unrecognised financial instruments
The Group has committed the following unrecognised financial
instruments to customers and third parties:
30 June 30 June
2015 2014 31 December 2014
GBPm GBPm GBPm
--------
Commitments to extend credit with an original term to maturity of one year or
less - 89 1
Other commitments 341 299 300
--------
Included in other commitments is GBP325m (30 June 2014: GBP278m;
31 December 2014: GBP300m) committed by certain subsidiaries which
are not fully owned by the Group. These commitments are funded
through contractually agreed additional investments in the
subsidiary by the Group and the non-controlling interests. The
levels of funding are not necessarily in line with the relevant
percentage holdings.
(c) Operating lease commitments
The Group has entered into commercial non-cancellable leases on
certain property, plant and equipment where it is not in the best
interest of the Group to purchase these assets. Such leases have
varying terms, escalation clauses and renewal rights.
The future aggregate minimum lease payments under
non-cancellable operating leases are as follows:
30 June
30 June 2015 2014 restated(1) 31 December 2014
GBPm GBPm GBPm
Not later than one year 32 26 36
Later than one year and no later than five years 64 50 61
Later than five years 103 64 63
Total operating lease commitments 199 140 160
(1) Comparatives for the six months ended 30 June 2014 have been
restated to reflect the classification of the Group's Canadian
business as discontinued operations. Refer to Note 4.2 -
Acquisitions and disposals.
4.17 Related party transactions
(a) Transactions with related parties
Transactions with related parties carried out by the Group were
as follows:
Full
6 months 6 months year
2015 2014 restated(1) 2014
GBPm GBPm GBPm
--------- ------
Sales to:
Associates 413 75 451
Joint ventures - 1 1
Other related parties 36 4 94
449 80 546
Purchases from:
Associates 629 179 816
Joint ventures 9 14 14
638 193 830
(1) Comparatives for the six months ended 30 June 2014 have been
restated to reflect the classification of the Group's Canadian
business as discontinued operations. Refer to Note 4.2 -
Acquisitions and disposals.
Sales to other related parties include management fees received
from non-consolidated investment vehicles managed by Standard Life
Investments.
The Group's defined benefit pension plans have assets of
GBP1,114m (30 June 2014: GBP797m; 31 December 2014: GBP1,553m)
invested in investment vehicles managed by the Group.
(b) Transactions with key management personnel and their close family members
All transactions between key management personnel and their
close family members and the Group during the period are on terms
which are equivalent to those available to all employees of the
Group.
During the six months ended 30 June 2015, key management
personnel and their close family members contributed GBP3m (six
months ended 30 June 2014: GBP1m; 12 months ended 31 December 2014:
GBP1m) to products sold by the Group.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EAEPDESASEAF
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