I am looking forward to our AGM in May for my first opportunity to meet and talk with shareholders about our company in general, its ambitions and future direction. I hope to see as many of you as possible there.
With effect from 13 March, the Board has unanimously approved the dissolution of its current co-Chief Executive structure. Keith Skeoch has been appointed sole Chief Executive Officer. Recognising the critical importance of his client facing responsibilities, Martin Gilbert becomes Vice Chairman of Standard Life Aberdeen, Chairman of Aberdeen Standard Investments and will continue to be an executive Director of the Board. In this role, Martin will be able to focus solely on our strategic relationships with key clients, winning new business and realising the potential from our global network and product capabilities.
Under the transaction we have also retained our valuable and fast growing Standard Life branded UK retail platforms Wrap and Elevate, as well as our financial planning and advice business 1825.
We are also making good progress in optimising the benefits from our new simplified global operating model that embraces modern working practices, lays the foundations for a common culture and supports the delivery of our targeted annual efficiency savings of over £350m.
Markets are increasingly volatile, and in those conditions active managers can have the potential to add real value – this is an opportunity for us. It’s positive that overall gross inflows are up compared to last year and are well balanced across our asset classes. In particular, we have seen strong demand continue for some of our newer propositions, for instance our MyFolio range and for services offered through the Parmenion platform.
Create connections We bring together our diverse talents, perspectives and insights and use our collective intelligence to deliver value. We remain true to our shared purpose, working as one team and with all our external partners to build better futures.
…to drive innovation and efficiencies We continue to make good progress and remain on track to deliver our previously announced targeted annual efficiency savings of over £350m by the end of 2020. This is comprised of the £250m announced in 2017 at the time of the merger and the additional £100m announced in 2018 resulting from the sale of our UK and European insurance business. The pace of delivery in our merger integration has accelerated across many areas of the business. We are also making progress on delivering the efficiency savings as we implement our simplified operating model. Delivering change on this scale is challenging and will be a key area of focus during 2019 and 2020.
Due to the actions we’ve taken, we don’t anticipate that Brexit, in whatever form it takes, will have a material impact on our business model. See page 14 for details of our preparations in our EMEA (Europe, the Middle East and Africa) business to ensure that we can continue to serve the needs of our clients. As an asset manager, our revenue is exposed to any market uncertainty that may arise due to Brexit. Further details of potential risks to our business relating to Brexit are included in the Risk management section of this report.
By encouraging broader and deeper collaboration across our locations, we share in a wider range of perspectives, using that insight to evolve our propositions and to stimulate new ideas.
Overview A key focus for 2018 and early 2019 was on completing arrangements to ensure continuity of service for our EU clients, whatever the final outcome of the Brexit process, including anticipating the potential loss of passporting rights. We addressed this risk by establishing an EU MiFID firm in Dublin and expanding the activities of our Luxembourg-based company to provide services to an increased number of Irish and Luxembourg domiciled funds.
In integrating our businesses and coming together as one company, we have worked to evolve our investment and distribution processes. We have carried out an extensive programme to integrate and rationalise our fund ranges. In reviewing and refreshing our distribution strategies, we’ve aimed to bring more discipline and consistency to our relationship and client teams across the world – with an emphasis on growing our business in G10 countries.
• Capabilities across developed and emerging markets, public and private credit, investment-grade and high-yield markets
, i m pl em en ta tio n a nd active ownership Research and idea generation
• One of largest fixed income managers in Europe with a diverse client base
• Developed range of advanced, flexible solutions that target positive returns while also constraining and controlling risk
• Manage assets for a broad range of institutional clients • Enhanced size and scale enable us to deliver better outcomes for clients • Offer tailored solutions for capital preservations, daily dealing and enhanced yield objectives 1 Excludes strategic insurance partners.
We have also focused on maintaining trusted, long-term relationships with our clients to help them understand the causes of weak investment performance and, importantly, what we are doing to address this. We’ve engaged with clients in a variety of ways to keep them informed. This includes white papers, market analysis, and webinars led by our senior leaders.
• Joint venture announced with Virgin Money with potential to offer investment solutions to the combined retail customer base of Clydesdale Bank, Yorkshire Bank and Virgin Money
• Launched Aberdeen Standard Investments’ first global marketing campaign, to show the breadth of expertise and solutions we can offer to high net worth customers
Board 33 25 3 of 12 Executive1 33 34 80 of 235 Entire global workforce 502 45 2,801 of 6,192 Entire UK workforce 502 45 2,119 of 4,727 1 People employed in roles across the two leadership levels below CEO, excluding admin employees. Our CFO and CIO, who sit on our Board, are included in both our Board and Executive populations.
Careful cost control as we continue to implement the merger synergy benefits resulted in operating costs reducing by 10%. This, together with the inclusion of our share of Phoenix adjusted profits, led to the cost/income ratio improving significantly to 68% (2017: 71% Pro forma basis).
Gross inflows remained strong at £75.2bn (2017: £72.4bn) with decreases in institutional and wholesale being more than offset by increased gross inflows from strategic insurance partners. Institutional/Wholesale gross inflows decreased by £8.4bn to £40.4bn (2017: £48.8bn) but remained robust in all asset classes.
Phoenix 19.98 86 – HDFC Life 29.23 42 48 HASL 50.00 12 10 Adjusted profit before tax 140 58
Viability statement In accordance with the UK Corporate Governance Code, the Directors have carried out a robust assessment of the key risks facing the Group in considering the Group’s viability and longer-term prospects. This assessment is based on information known today.
• Second line: Risk oversight is provided by the Chief Risk Officer. The Risk and Compliance function is organised so that there is a consistent view across all of our principal risks, especially conduct, regulatory and strategic risks working closely with the first and third lines of defence.
Failing to execute operational processes may result in poor client and customer outcomes, operational losses, reputational damage and potentially increase the amount of capital we have to hold. Our increase in operational activity resulting from our merger which created the Standard Life Aberdeen Group, the sale of our UK and European insurance business and the implementation of our transformation has resulted in some additional strain to the normal operating environment. We recognise that these additional challenges require additional oversight and support to ensure we deliver against our strategy. We employ robust risk control processes to ensure that there is effective management and oversight of any process execution or trade error issues.
• We regularly benchmark our terms and conditions against the market
Risk appetite statement: The Company operates in an ever increasing technology driven environment, which brings complex challenges around data governance and cyber security. We have no appetite for substantial flaws in our technology infrastructure that could expose our systems to reoccurring or prolonged failure, unauthorised access, compromise by third parties, or breach of data protection regulation. We will maintain the confidentiality and integrity of our data, technology infrastructure and systems by implementing credible risk-prioritised controls to protect against known and emerging threats, focusing protection around our risk-sensitive assets and protect customer and staff data from unauthorised or accidental access, misuse or disclosure.
• Our Global Code of Conduct and Policy Framework provide our people with minimum standards and drive our culture
• We maintain a strong capital position to ensure any increased capital costs are covered
Environment Environmental policy1 Our business practices (page 48) Single-use plastics policy1 www.standardlifeaberdeen.com/annualreport Employees Global code of conduct1 Our business practices (page 48) Diversity strategy1 Our people and culture (pages 28 to 29) Anti-bribery and corruption policy2 Our business practices (page 48) Human rights Human rights policy1 Our business practices (page 48) Modern slavery statement1 Our business practices (page 48) Social matters Young people and money report www.standardlifeaberdeen.com/annualreport Corporate sustainability report www.standardlifeaberdeen.com/annualreport Supplier code of conduct1 www.standardlifeaberdeen.com/annualreport Other matters Business model Our business model (pages 10 to 11) Non-financial KPIs Our strategy (page 27),
Our business is overseen by our Board of Directors. Biographical details (and shareholdings) of the Directors as at 12 March 2019 are listed below.
Board composition, balance and diversity The Board’s policy is to appoint and retain non-executive Directors who bring relevant expertise as well as a wide perspective to the Group and its decision-making framework. The Directors believe that at least half of the Board should be made up of independent nonexecutive Directors. As at 13 March 2019, the Board comprises the Chair, 7 independent non-executive Directors and 4 executive Directors. The Board is made up of 9 men (75%) and 3 women (25%) (2017: men 75%, women 25%). The Board continues to support its Board Diversity statement which states that the Board:  Believes in equal opportunities and supports the principle that due regard should be had for the benefits of diversity, including gender, ethnicity, age, and educational and professional background when undertaking a search for candidates, both executive and nonexecutive
The Nomination and Governance Committee supports the Group’s commitment to diversity and inclusion in the broadest sense and receives updates on progress towards achieving and maintaining diversity targets throughout the Group. This includes reviewing statistics on gender representation and approving gender diversity targets and oversees progress against these on a regular basis. The Group also promotes initiatives and programmes to raise awareness of why diversity and inclusion matter. You can read more about our diversity activities and current targets in the People and Culture section of the Strategic report and in our stand alone Corporate sustainability report. We are committed to working to make the Group as inclusive a place to work as possible. Our activities and targets are in pursuit of ‘our vision for an inclusive future’ which is published on our website www.standardlifeaberdeen.com. You can find our gender pay gap disclosure statement on page 29. The Committee continues to follow the development of, and the Group’s participation in, significant diversity reviews, including the Hampton Alexander review, and we are one of the initial signatories to the Women in Finance Charter. In October 2018 we became one of the founding members of the UK Government Race at Work Charter. The Committee supports our commitments under these charters and continues to oversee our progress against these, which we report publically on an annual basis. The Committee also supports the goal of strong engagement with the wider workforce, and Melanie Gee has taken the role as the designated non-executive director responsible for representing the views of the workforce at the Board.
Board effectiveness Review process The Board has, with the help of the Nomination and Governance Committee, developed a formal review process to assess how well the Board, its Committees, the Chair and the Directors are performing collectively and individually and how performance could be improved.
Chair The review of Sir Gerry’s performance as Chair was led by the previous SID, Kevin Parry and supported by IBE. It was based on feedback given in individual interviews between the external facilitator and each Director as well as regular discussions between the SID and other NEDs.
The 2018 AGM was held in London on 29 May 2018 when Directors were available to answer shareholders’ questions. In accordance with best practice, all resolutions were considered on a poll which was conducted by our registrars and monitored by independent scrutineers. The results, including proxy votes lodged prior to the meeting, were made available on our website the same day. 40% of the shares in issue were voted and all resolutions were passed.
Invitations to attend Committee meetings are extended on a regular basis to the Chair, the Co-Chief Executives, the Chief Financial Officer, the Group Financial Controller, the Chief Internal Auditor and the Group Chief Risk Officer.
Committee effectiveness The Committee reviews its remit and effectiveness annually. The 2018 review was carried out by external consultants IBE. The key points arising from the review were:  Meetings of the Committee were characterised by good debate and mature discussion
 The Committee’s agenda has been dominated by the merger, the Sale, and year end complexity, and it would be of benefit to now focus more on the ongoing retained business as it completes the transformation. Going forward, the intention is also to spend more time on core control areas so that the Committee covers as much ground as possible in future.
The Board’s review similarly confirmed its satisfaction with the performance of the Committee.
In relation to actuarial assumptions used for year end 2017 Solvency II reporting, including mortality, persistency and expenses assumptions, the Committee received a report from the Chair of the Standard Life Assurance Limited (SLAL) Audit Committee which noted the consideration of these assumptions by the SLAL Audit Committee and External auditors. After due consideration of this reporting the Committee was satisfied that these assumptions were appropriate for year end Solvency II reporting.
The control environment around financial reporting will continue to be monitored closely.
In accordance with the relevant independence standards, the External auditors do not place reliance on the work of Internal audit.
These include:  Audit related services, such as regulatory reporting  Accounting consultations and audits in connection with proposed transactions  Investment circular reporting accountant engagements  Due diligence related to mergers and acquisitions  Employee benefit plan audits  Attesting to services not required by statute or regulation (e.g.
 The Committee Chair had at least monthly meetings with our lead audit partner to discuss Group developments
Group. It is also authorised to seek, at the expense of the Group, appropriate external professional advice whenever it considers this necessary. The Committee did not need to take any independent advice during the year.
Stress testing and scenario analysis performed in 2018 also supported the Committee in understanding, monitoring and managing the risk and capital profile of the business under stressed conditions. This provided a forward-looking assessment of resilience to potentially significant adverse events affecting key risk exposures and comprised:  Univariate stresses – looking at stresses to financial and demographic risks in isolation
On 25 June 2018, shareholders voted at a general meeting to approve a return of capital of 33.99 pence per share via a B Share Scheme, along with an associated share capital consolidation. Shareholders received 7 new ordinary shares of 13 61/63 pence for every 8 existing ordinary shares of 12 2/9 pence held at 5pm on 19 October 2018. The total number of shares in issue at 6pm on Friday 19 October 2018 was 2,941,738,848 ordinary shares of 12 2/9 pence each. The total number of shares in issue at the opening of markets on Monday 22 October 2018 was 2,574,021,492 (new) ordinary shares of 13 61/63 pence each.
As at 31 December 2018, 2,197 of the Group's employees were shareholders through participation in the Standard Life Aberdeen (Employee) Share Plan (the Plan). As part of the integration programme in 2019 participation in this Plan will be extended so that over 99% of employees in the UK and Ireland will be eligible to participate. Participation allows employees to buy ordinary shares in the Company directly from their earnings up to a market value of £150 per month (UK) or €175 (Ireland) per month. The Company matches the shares purchased by the employees, matching up to £50 per month in the UK and €70 per month in Ireland.
We welcomed Cathleen Raffaeli to the Committee this year. Cathleen brings substantial experience to the Committee from her international roles and we look forward to working with her. I also extend my thanks to Gerhard Fusenig and Kevin Parry, both of whom stepped down from the Board at end of the year and have offered invaluable advice during their time on the Committee.
Performance measured over annual and trailing performance, building up to three years by 2020
Threshold (0% of maximum) Target (50% of maximum) Stretch (100% of maximum) Actual Vesting (% of maximum)
Cumulative adjusted profit performance 70% of target 100% of target 130% of target 72% of target 3.175% 1 Of the executive Directors, only Keith Skeoch participated in this plan in 2016. 2 Of the executive Directors, only Rod Paris participated in this plan in 2016.
 Accelerated pace of innovation with circa 30 fund launches in 2018 and initiatives completed to diversify geographic footprint across Asia, EMEA and the Americas
Bill Rattray 10%  Oversight of the move from Solvency II to the CRD IV regulatory regime that created a capital light company
EIP deferred awards to be granted in 2019 EIP deferred awards will be made in 2019, in the form of nil-cost options, under the Deferred Bonus Plan rules. Awards will be subject to performance underpins, measured over a three-year period. Subject to performance against the underpins, awards will vest pro-rata over years three, four and five following grant. Awards will not be released to participants until the fifth anniversary of grant.
The following table sets out performance against targets for the 2016 award: Performance level Below threshold Threshold Target Maximum
Summary table of scheme interests awarded during the year The table below shows the key details of scheme interests granted in 2018: Plan Participant Type of award Basis of award Face value at grant
Bill Rattray – 258,585 652,206 – – 1 This comprises Executive LTIP awards made in 2016, 2017 and 2018, awards under the Standard Life Investments LTIP made in 2016 and 2017 excluding, in each case, shares to be awarded in lieu of dividend equivalents. 2 This comprises awards under the Executive LTIP granted in 2014 and 2015 and deferred bonus awards (including unvested awards under the Aberdeen Variable Pay plans).
Implementation of policy for non-executive Directors in 2019 The following table sets out non-executive Director fees to be paid in 2019. No changes were made to the level of fees from 2018.
Non-executive Directors’ interests in shares (audited) The following table shows the total number of Standard Life Aberdeen plc shares held by each of the non-executive Directors and their connected persons: Total number of shares owned at 1 January 2018 or date of appointment if later
Our Results We found the initial valuation of the investment in Phoenix to be acceptable.
The remaining 16% of total group revenue, 22% of group profit before tax and 10% of total group assets is represented by 246 reporting components, none of which individually represented more than 5% of any of total group revenue, or total group assets. For these residual components, we performed analysis at an aggregated group level to re-examine our assessment that there were no significant risks of material misstatement within these.
4. We have nothing to report on going concern The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or the Group or to cease their operations and as they have concluded that the Company’s and the Group’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (‘the going concern period’).
Disclosures of principal risks and longer-term viability Based on the knowledge we acquired during our financial statements audit, we have nothing material to add or draw attention to in relation to: • The directors’ confirmation within the viability statement page 39 that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity
Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Consolidated income statement For the year ended 31 December 2018 restated1
Liabilities connected to insurance £m Non-participating insurance contract liabilities 21,206 21,206 21,206 Non-participating investment contract liabilities 92,894 – 92,894 Participating contract liabilities 29,654 29,654 29,654 Deposits received from reinsurers 5,134 5,134 5,134 Third party interest in consolidated funds 17,196 – 17,196 Other liabilities 6,289 – –
(a)(ii) Standards, interpretations and amendments to existing standards that are not yet effective and have not been early adopted by the Group Certain new standards, interpretations and amendments to existing standards have been published that are mandatory for the Group’s annual accounting periods beginning after 1 January 2018. The Group has not early adopted the standards, amendments and interpretations described below: IFRS 16 Leases (effective for annual periods beginning on or after 1 January 2019) IFRS 16 replaces IAS 17 Leases and introduces a new single accounting approach for lessees for all leases (with limited exceptions). As a result there is no longer a distinction between operating leases and finance leases, and lessees will recognise a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The accounting for leases by lessors remains largely unchanged.
IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2019 for the Group) IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 allows two measurement categories for financial assets in the statement of financial position: amortised cost and fair value. All equity instruments and derivative instruments are measured at fair value. A debt instrument is measured at amortised cost only if it is held to collect contractual cash flows and the cash flows are solely payments of principal and interest, otherwise it is classified at fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL) depending on the business model it is held within or whether the option to adopt FVTPL has been applied. Changes in value of all equity instruments and derivative instruments are recognised in profit or loss unless an OCI presentation election is made at initial recognition for an equity instrument or a derivative instrument is designated as a hedging instrument in a cash flow hedge. IFRS 9 also introduces a new impairment model, an expected credit loss model which will replace the current incurred loss model in IAS 39. An impairment loss will now be recognised prior to a loss event occurring. Accounting for financial liabilities remains the same as under IAS 39 except that for financial liabilities designated as at FVTPL, changes in the fair value due to changes in the liability’s credit risk are recognised in OCI.
(c) Disposals (c)(i) Subsidiaries UK and European insurance business On 23 February 2018, the Group announced the proposed sale of the UK and European insurance business to Phoenix (the Sale), conditional on shareholder and relevant regulatory approvals. The Sale was completed on 31 August 2018 and was implemented by the sale to Phoenix of the entire issued share capital of Standard Life Assurance Limited (SLAL).
There are no customers whose revenue represents greater than 10% of fee based revenue.
(a) Revenue from contracts with customers The following table provides a breakdown of total revenue from contracts with customers: £m £m
(a) Tax charge in the consolidated income statement (a)(i) Current year tax expense restated1 £m £m
The Other adjusting item in 2018 relating to discontinued operations includes a held for sale accounting adjustment relating to the amortisation of intangible assets (primarily deferred acquisition costs) and depreciation of tangible assets of £44m. Following the classification of the UK and European insurance business as held for sale on the announcement of the proposed transaction on 23 February 2018, no amortisation or depreciation was recognised. This increase to profit has been recognised as an adjusting item.
Phoenix has taken advantage of the temporary exemption granted to insurers in IFRS 4 Insurance Contracts from applying IFRS 9 as a result of meeting the exemption criteria as at 31 December 2015. As at that date Phoenix’s activities were considered to be predominantly connected with insurance as the percentage of the carrying amount of its liabilities in relation to insurance relative to the total carrying amounts of all its liabilities was greater than 90%.
Property held for long-term rental yields or investment gain that is not occupied by the Group and property being constructed or developed for future use as investment property are classified as investment property. Investment property is initially recognised at cost and subsequently measured at fair value. Gains or losses arising from changes in fair value are recognised in the consolidated income statement.
Impairment losses reversed 4 – 4 Foreign exchange adjustment – (1) (1)
Reclassified as held for sale during the year – 91 91 Depreciation charge for the year 5 – (16) (16) Disposals and adjustments1 – 2 2 Foreign exchange adjustment – (2) (2)
Loans and receivables Total 2018 Notes £m £m £m £m £m £m
A derivative is a financial instrument that is typically used to manage risk and whose value moves in response to an underlying variable such as interest or foreign exchange rates. The Group uses derivative financial instruments in order to match contractual liabilities, to reduce the risk from potential movements in foreign exchange rates, equity indices, property indices and interest rates, to reduce credit risk or to achieve efficient portfolio management. Certain consolidated investment vehicles also use derivatives to take and alter market exposure, with the objective of enhancing performance and controlling risk.
Total return swaps – – – 714 4 16 Bond derivatives: Futures – – – 25,104 116 50 Interest rate derivatives: Swaps 37 – – 65,346 686 215
Cash outflows Derivative financial assets (18) (64) (660) – – – (742) Derivative financial liabilities (10) – – – – – (10)
Shares issued in respect of business combinations – – – 997,661,231 122 Shares issued in respect of share incentive plans 435,340 288 – 496,817 – Shares issued in respect of share options 350,156 – – 1,894,392 – New shares issued immediately prior to share consolidation 4 – – – – Share consolidation (2,941,738,848) 2,574,021,492 – – – Shares bought back on-market and cancelled (37,983,529) (44,609,556) (11) – –
The 2017 reserves credit for employee share-based payments included £57m in relation to replacement awards granted to employees of Aberdeen which were unvested at the acquisition date.
Non-participating insurance contract liabilities includes UK immediate annuities of £nil (2017: £12,667m) and UK deferred annuities of £nil (2017: £1,289m).
4.85% over the five-year gilt rate (and at each fifth anniversary)
2 During the year to 31 December 2018, the terms of the 4.25% US Dollar fixed rate subordinated notes were renegotiated to allow the notes to qualify as regulatory capital under CRD IV (see Note 47).
Aberdeen Asset Management PLC and all its subsidiaries (excluding Aberdeen Asset
Pension and other post-retirement benefit provisions 38 78 – – – – – – 38 78
1 Third party interest in consolidated funds and non-controlling interests. 2 Net assets of the shareholder business comprises equity attributable to equity holders of Standard Life Aberdeen plc of £7,438m (2017: £8,604m) and equity attributable to preference shareholders of £99m (2017: £99m).
Quantitative market risk disclosures are not provided in respect of the assets of the unit linked funds since the shareholder is not directly exposed to market risks from these assets. The shareholder’s exposure to market risk on these assets is limited to variations in the value of future fee based revenue earned on the contracts as fees are based on a percentage of the fund value. The shareholder is also not exposed to the market risk from the assets held by third party interest in consolidated funds and non-controlling interests and therefore they have been excluded from the following quantitative disclosures.
The table below shows the direct shareholder businesses’ exposure to equity markets. Equity securities are analysed by country based on the ultimate parent country of risk.
Shareholder business Under the Group’s ERM framework, Group companies are required to manage their interest rate exposures in line with the Group’s Board’s risk appetite. Group companies typically use a combination of cash flow and duration matching techniques to manage their interest rate risk at an entity level.
These sensitivities concern only the impact on financial instruments and exclude indirect impacts of the variable on fee income and certain costs which may be affected by the changes in market conditions.
The impact of interest rate changes on profit after tax in 2018 primarily relates to cash and cash equivalents, while the impact in 2017 primarily relates to assets and insurance contract liabilities of the UK and European insurance business.
The tables that follow provide an analysis of the quality of financial assets that are neither past due nor impaired at the reporting date and are exposed to credit risk. For those financial assets with credit ratings assigned by external rating agencies, classification is within the range of AAA to BBB. AAA is the highest possible rating and rated financial assets that fall outside the range of AAA to BBB have been classified as below BBB with rules followed for determining the credit rating to be disclosed when different credit ratings are assigned by different external rating agencies. For those financial assets that do not have credit ratings assigned by external rating agencies but where the Group has assigned internal ratings for use in managing and monitoring credit risk, the assets have been classified in the analysis that follows as ‘internally rated’. If a financial asset is neither rated by an external agency nor ‘internally rated’, it is classified as ‘not rated’. The total amounts presented represent the Group’s maximum exposure to credit risk at the reporting date without taking into account any collateral held. The analysis also provides information on the concentration of credit risk.
All business units are required to monitor, assess, manage and control liquidity risk in accordance with the relevant principles within the Group’s policy framework. Oversight is provided both at a Group level and within the business unit. In addition, all business units benefit from membership of a Group to the extent that, centrally, the Group:  Coordinates strategic planning and funding requirements  Monitors and manages risk, capital requirements and available capital on a group-wide basis  Maintains a portfolio of committed bank facilities The Group’s committed bank facilities are currently undrawn.
At start of period 6 10 (25) (15) Acquired through business combinations – – (19) (39) Total amounts recognised in the income statement (6) (4) 9 3 Additions 8 – – –
(21) Unobservable inputs relate to probability weighted cash flows and, where relevant, discount rates. The most significant unobservable inputs relate to assumptions used to value the contingent consideration related to the sale of SLAL to Phoenix, in particular those related to:  SLAL’s annuity sales practices provision (including the likelihood and value of annuity sales practices insurance recoveries and any FCA-levied penalty)
Statistical distribution used in the Group’s Solvency II internal model at 31 December 2017 204 Standard Life Aberdeen 2018
The lost income for customers who were entitled to enhanced annuities, for an average purchase price of £25,000, is assumed to be £300 per annum. This assumption is based on expected experience from SLAL’s review utilising the redress calculator provided by the FCA in early 2018. This assumption is unchanged from that used at end 2017.
(d)(v) Sensitivity of the fair value of level 3 instruments to changes in key assumptions At 31 December 2018 the shareholder is directly exposed to movements in the value of all level 3 instruments since none are held in the Group’s unit linked funds or in consolidated structured entities. Estimates, assumptions and sensitivities relating to contingent consideration assets and liabilities are discussed in Section (d)(iv). Changing unobservable inputs in the measurement of the fair value of other level 3 financial assets and financial liabilities to reasonably possible alternative assumptions would not have a significant impact on profit attributable to equity holders or on total assets.
Contingent liabilities are possible obligations of the Group of which timing and amount are subject to significant uncertainty. Contingent liabilities are not recognised on the consolidated statement of financial position but are disclosed, unless they are considered remote. If such an obligation becomes probable and the amount can be measured reliably it is no longer considered contingent and is recognised as a liability.
The Group operates share incentive plans for its employees. These generally take the form of an award of options or shares in Standard Life Aberdeen plc (equity-settled share-based payments) but can also take the form of a cash award based on the share price of Standard Life Aberdeen plc (cash-settled share-based payments). Aberdeen Asset Management PLC and its subsidiaries also incentivise certain employees through the award of units in Group managed funds (deferred fund awards) which are cash-settled. All the Group’s incentive plans have conditions attached before the employee becomes entitled to the award. These can be performance and/or service conditions (vesting conditions) or the requirement of employees to save in the save-as-you-earn scheme (non-vesting condition). The period over which all vesting conditions are satisfied is the vesting period and the awards vest at the end of this period.
J. Movements in other reserves The following tables show the movements in other reserves during the year
Amounts due to related parties 38 13 Collateral held in respect of derivative contracts 21 –
Adjusted diluted earnings per share1 17.8 17.2 15.1 4.7 11.7 14.8 22.5 28.9 29.9 1 In accordance with IAS 33, earnings per share have not been restated following the share consolidation as there was an overall corresponding change in resources due to the redemption of the ‘B’ shares. As a result of the share consolidation and share buyback, earnings per share from continuing operations for the year ended 31 December 2018 is not directly comparable with the prior year. Refer to Note 11 of the Group financial statements for information relating to the calculation of diluted earnings per share.
International Financial Reporting Standards (IFRS) International Financial Reporting Standards are accounting standards issued by the International Accounting Standards Board (IASB). The Group’s consolidated financial statements are prepared in accordance with IFRS as endorsed by the EU. All EU-listed companies are required to prepare consolidated financial statements using IFRS issued by the International Accounting Standards Board (IASB) as endorsed by the EU. The IFRS financial results in the Strategic report and in the Group financial statements have been prepared on the basis of the IFRS accounting policies as disclosed in the Group financial statements section of this report.
Non-financial highlights Employee survey 2018 Defaqto ratings Investment innovation of the year 2019 Insurance Asset Risk Awards