Adjusted profit before tax Asset management, platforms and wealth 284 – 284 395 – 395 Insurance associates and joint ventures 203 – 203 189 – 189 Adjusted profit before tax 2 487 – 487 584 – 584 Adjusted for the following items
Total adjusting items 2 368 (15) 353 (333) 56 (277) Share of associates’ and joint ventures’ tax credit/(expense)
Profit/(loss) before tax expense 838 (15) 823 243 56 299 Tax credit/(expense) attributable to
The Group’s key alternative performance measure is adjusted profit before tax. Refer Note 13 for further details.
Assets Intangible assets 15 501 1,707 Pension and other post-retirement benefit assets 34 1,474 1,163 Investments in associates and joint ventures accounted for using the equity method 16 1,371 1,509 Property, plant and equipment 17 236 266 Deferred tax assets 10 131 74 Financial investments 19 3,110 2,115 Receivables and other financial assets 19 621 560 Current tax recoverable 10 9 9 Other assets 22 46 55 Assets held for sale 23 19 767 Cash and cash equivalents 19 1,519 1,615 9,037 9,840 Assets backing unit linked liabilities (excluding held for sale) 25
2020 2019 Notes £m £m Liabilities Third party interest in consolidated funds 32 77 119 Subordinated liabilities 32 638 655 Pension and other post-retirement benefit provisions 34 55 55 Deferred income 35 73 67 Deferred tax liabilities 10 66 87 Current tax liabilities 10 15 19 Derivative financial liabilities 20 13 3 Other financial liabilities 32 1,177 1,315 Provisions 37 93 102 Other liabilities 37 6 5 Liabilities of operations held for sale 23 11 747 2,224 3,174 Unit linked liabilities (excluding held for sale) 25
Investment contract liabilities 1,042 1,152 Third party interest in consolidated funds 388 416 Other unit linked liabilities 11 14 1,441 1,582 Total liabilities 3,665 4,756 Equity Share capital 26 306 327 Shares held by trusts 27 (170) (134) Share premium reserve 26 640 640 Retained earnings 28 4,970 2,886 Other reserves 29 1,064 2,845 Equity attributable to equity shareholders of Standard Life Aberdeen plc 6,810 6,564 Non-controlling interests
Notes £m £m £m £m £m £m £m £m £m 1 January 2020 327 (134) 640 2,886 2,845 6,564 3 99 6,666 Profit for the year from continuing operations – – – 848 – 848 – 5 853 Loss for the year from discontinued operations – – – (15) – (15) – – (15) Other comprehensive income for the year from continuing operations – – – 282 6 288 – – 288 Other comprehensive income for the year from discontinued operations – – – – – – – – – Total comprehensive income for the year 28,29 – – – 1,115 6 1,121 – 5 1,126 Issue of share capital 26 – – – – – – – – – Dividends paid on ordinary shares 14 – – – (479) – (479) – – (479) Dividends paid on preference shares 30,33 – – – – – – – (3) (3) Reclassification of preference shares to liability 30,33 – – – (1) – (1) – (101) (102) Share buyback 26 (21) – – (402) 21 (402) – – (402) Reserves credit for employee sharebased payments 29 – – – – 64 64 – – 64 Transfer to retained earnings for vested employee share-based payments 28,29 – – – 38 (38) – – – – Transfer between reserves on impairment of subsidiaries 28,29 – – – 1,834 (1,834) – – – – Shares acquired by employee trusts – (54) – – – (54) – – (54) Shares distributed by employee and other trusts and related dividend equivalents 28 – 18 – (21) – (3) – – (3) 31 December 2020 306 (170) 640 4,970 1,064 6,810 3 – 6,813 120 Standard Life Aberdeen 2020
Notes £m £m £m £m £m £m £m £m £m 1 January 2020 327 (134) 640 2,886 2,845 6,564 3 99 6,666 Profit for the year from continuing operations – – – 848 – 848 – 5 853 Loss for the year from discontinued operations – – – (15) – (15) – – (15) Other comprehensive income for the year from continuing operations – – – 282 6 288 – – 288 Other comprehensive income for the year from discontinued operations – – – – – – – – – Total comprehensive income for the year 28,29 – – – 1,115 6 1,121 – 5 1,126 Issue of share capital 26 – – – – – – – – – Dividends paid on ordinary shares 14 – – – (479) – (479) – – (479) Dividends paid on preference shares 30,33 – – – – – – – (3) (3) Reclassification of preference shares to liability 30,33 – – – (1) – (1) – (101) (102) Share buyback 26 (21) – – (402) 21 (402) – – (402) Reserves credit for employee sharebased payments 29 – – – – 64 64 – – 64 Transfer to retained earnings for vested employee share-based payments 28,29 – – – 38 (38) – – – – Transfer between reserves on impairment of subsidiaries 28,29 – – – 1,834 (1,834) – – – – Shares acquired by employee trusts – (54) – – – (54) – – (54) Shares distributed by employee and other trusts and related dividend equivalents 28 – 18 – (21) – (3) – – (3) 31 December 2020 306 (170) 640 4,970 1,064 6,810 3 – 6,813
Cash flows from operating activities Profit before tax from continuing operations 838 243 (Loss)/profit before tax from discontinued operations 11 (15) 56 823 299 Change in operating assets 41 817 158 Change in operating liabilities 41 (991) (291) Adjustment for non-cash movements in investment income 6 4 Other non-cash and non-operating items 41 (646) (28) Dividends received from associates and joint ventures 16 80 93 Taxation paid1 (33) (34) Net cash flows from operating activities 56 201
Cash flows from investing activities Purchase of property, plant and equipment 17 (13) (28) Proceeds from sale of property, plant and equipment – 2 Acquisition of subsidiaries and unincorporated businesses net of cash acquired – (40) Disposal of subsidiaries net of cash disposed of 41 (8) – Acquisition of investments in associates and joint ventures 16 (5) (51) Proceeds in relation to contingent consideration 40 3 63 Payments in relation to contingent consideration 40 (48) (18) Disposal of investments in associates and joint ventures 1 914 1,720 Taxation paid on disposal of investments in associates and joint ventures1 (33) (22) Purchase of financial investments (521) (590) Proceeds from sale or redemption of financial investments 737 800 Purchase of intangible assets (12) (15) Net cash flows from investing activities 1,014 1,821 Cash flows from financing activities Repayment of subordinated liabilities and preference shares (100) (455) Payment of lease liabilities (35) (32) Shares acquired by trusts (54) (50) Interest paid (30) (39) Share buyback 26 (361) (516) Preference dividends paid (5) (5) Ordinary dividends paid 14 (479) (518) Net cash flows from financing activities (1,064) (1,615) Net (decrease)/increase in cash and cash equivalents 6 407 Cash and cash equivalents at the beginning of the year 1,347 957 Effects of exchange rate changes on cash and cash equivalents 5 (17) Cash and cash equivalents at the end of the year 24 1,358 1,347 Supplemental disclosures on cash flows from operating activities Interest paid 2 5 Interest received 30 34 Dividends received 122 143 Rental income received on investment property 3 3 1 Total taxation paid was £66m in 2020 (2019: £56m).
(a) Basis of preparation These consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of owner occupied property, derivative instruments and other financial assets and financial liabilities at fair value through profit or loss (FVTPL).
Intangible assets Identification and valuation of intangible assets arising from business combinations and the determination of useful lives
Intangible assets Determination of the recoverable amount in relation to impairment assessment of the segregated and similar customer relationship intangible asset
The areas where judgements have the most significant effect on the amounts recognised in the consolidated financial statements are as follows: Financial statement area Critical judgements in applying accounting policies Related note Defined benefit pension plans Assessment of whether the Group has an unconditional right to a refund of the surplus Treatment of tax relating to the surplus
Determining the group of cash-generating units to which goodwill acquired in a business combination should be allocated is no longer considered a critical judgement in applying accounting policies following the impairment of goodwill in 2020. Additionally, our judgement relating to the classification of Phoenix and HDFC Life as associates has considered the reductions in these shareholdings during the year ended 31 December 2020. There are no other changes to critical judgements in applying accounting policies from the prior year. The areas where assumptions and other sources of estimation uncertainty at the end of the reporting period have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows: Financial statement area Critical accounting estimates and assumptions Related note Defined benefit pension plans Determination of principal UK pension plan assumptions for mortality, discount rate and inflation Note 34
The following changes have been made to the Group’s critical estimates and assumptions: • As a result of market and revenue movements, the determination of the recoverable amount in relation to the impairment assessment of the segregated and similar customer relationship intangible asset is now considered a critical estimate
The statements of financial position of Group entities, including associates and joint ventures accounted for using the equity method, that have a different functional currency than the Group’s presentation currency are translated into the presentation currency at the year end exchange rate and their income statements and cash flows are translated at average exchange rates for the year. All resulting exchange differences arising are recognised in other comprehensive income and the foreign currency translation reserve in equity. On disposal of a Group entity the cumulative amount of any such exchange differences recognised in other comprehensive income is reclassified to profit or loss.
Income statement and cash flows (average rate) Statement of financial position (closing rate)
(a)(v) Going concern The Group’s business activities, together with the factors likely to affect its future development, performance and financial position, are set out in the Strategic report. This includes details on our liquidity and capital management and our viability statement in the Chief Financial Officer’s overview section and our principal risks in the Risk management section including the impact of COVID-19 on these principal risks. In addition, these financial statements includes notes on the Group’s subordinated liabilities (Note 33), management of its risks including market, credit and liquidity risk (Note 38), its contingent liabilities and commitments (Notes 42 and 43), and its capital structure and position (Note 46).
In preparing these financial statements on a going concern basis, the Directors have considered the following matters and have taken into account the uncertainty created by COVID-19.
• The Group has robust cash and liquid resources of £2.5bn at 31 December 2020. In addition the Company has a revolving credit facility of £400m as part of our contingency funding plans which is due to mature in 2024 and remains undrawn.
• The Group’s indicative regulatory capital surplus was £2.3bn in excess of capital requirements at 31 December 2020. The regulatory capital surplus does not include the majority of the value of the Group’s listed associates or the listed investment in HDFC Life which were £2.3bn and £1.2bn respectively at 31 December 2020.
• The Group performs regular stress and scenario analysis as described in the Annual report and accounts 2020 Viability statement. The market stresses considered in these analyses are considerably more severe than experienced as a result of COVID-19, and the diverse range of management actions available meant the Group was able to withstand these extreme stresses.
• In addition, the Group has performed specific scenario analysis in the period taking into account COVID-19 impacts on revenue, asset mix, flows and listed associates. These scenarios assumed that key equity market indexes held at the lowest levels witnessed during the COVID-19 outbreak, with only modest growth during 2021. Liquidity and capital remained robust over the going concern period in these scenarios.
• The Group’s operational resilience processes have operated effectively during the period including the provision of services by key outsource providers. We have put in place additional processes to monitor key outsource providers during this remote working environment.
Notes to the Group financial statements 1. Group structure (a) Composition The following diagram is an extract of the Group structure at 31 December 2020 and gives an overview of the composition of the Group.
A full list of the Company’s subsidiaries is provided in Note 48.
On 15 February 2019, Aberdeen Asset Management PLC (AAM PLC) completed the purchase of the entire share capital of Orion Partners Holding Limited and Orion Partner Services Inc.
Prior to the completion of the sale, SL Asia was classified as an operation held for sale (refer Note 23).
(c)(ii) Associates Profit on disposals of interests in associates of £1,858m includes £1,591m of gains in relation to the sale of equity shares in HDFC Life and its reclassification from an investment in associate, £263m of gains in relation to the sale of equity shares in HDFC Asset Management and a £4m dilution gain in Phoenix.
HDFC Life Insurance Company Limited (HDFC Life) During 2020, the Group completed sales of equity shares in HDFC Life on the National Stock Exchange of India Limited and BSE Limited. The gains on sales and the gain on reclassification from an associate to an equity investment can be summarised as follows: £m Gain on sale of 50,000,000 equity shares in HDFC Life sold through a Bulk Sale on 27 March 2020 206 Gain on sale of 40,000,000 equity shares in HDFC Life sold through a Bulk Sale on 4 June 2020 182 Gain on sale of 27,772,684 equity shares in HDFC Life sold through a Bulk Sale on 3 December 2020 152 Gain on reclassification of remaining 179,539,209 equity shares in HDFC Life from an associate to equity investment on 3 December 2020 (Refer Note 16)
HDFC Asset Management Company Limited (HDFC Asset Management) During 2020, the Group completed the following sale of equity shares in HDFC Asset Management on the National Stock Exchange of India Limited and BSE Limited: • 12,000,000 equity shares in HDFC Asset Management sold through an Offer for Sale on 17 and 18 June 2020
Phoenix Group Holdings (Phoenix) On 22 July 2020 the Group’s associate, Phoenix, announced the completion of its acquisition of ReAssure Group plc. Under the terms of the transaction, Phoenix issued 277,277,138 new ordinary shares as part consideration for the acquisition. Completion of the transaction resulted in the Group’s holding in Phoenix becoming 14.43% of the enlarged Phoenix Group (31 December 2020: 14.42%). A dilution gain of £4m was recognised within the Profit on disposal of interests in associates in the consolidated income statement as a result of the transaction.
In total, 14.49% of the issued equity share capital of HDFC Life was sold for a combined consideration net of taxes and expenses of Rs 135,994m (£1,503m). The combined gain on sale of £1,337m was calculated using the weighted-average cost method.
HDFC Asset Management During 2019, the Group completed the following sale of equity shares in HDFC Asset Management on the National Stock Exchange of India Limited and BSE Limited: • 6,422,310 equity shares in HDFC Asset Management sold through an Offer for Sale on 4 and 5 December 2019
2. Segmental analysis The Group’s reportable segments have been identified in accordance with the way in which the Group is structured and managed. IFRS 8 Operating Segments requires that the information presented in the financial statements is based on information provided to the ‘Chief Operating Decision Maker’ which for the Group is the executive leadership team.
Insurance associates and joint ventures This segment comprises our life insurance associates and joint ventures in the UK (Phoenix) and China (HASL) and our life insurance business in India (HDFC Life), which was classified as an associate until 3 December 2020. These businesses offer a range of pension, insurance and savings products to the UK, European, Chinese and Indian markets. The Group’s reportable segments will be revised in 2021 to align with the growth vectors.
In the year ended 31 December 2020, transactions with one external customer amounted to more than 10% of fee based revenue. This fee based revenue of £195m is included in the Asset management, platforms and wealth segment.
Discontinued operations Eliminations Total 31 December 2020 Notes £m £m £m £m £m £m Fee based revenue 1,425 – 1,425 – – 1,425 Adjusted operating expenses (1,206) – (1,206) – – (1,206) Adjusted operating profit 219 – 219 – – 219 Capital management 21 – 21 – – 21 Share of associates’ and joint ventures’ profit before tax1 44 203 247 – – 247 Adjusted profit before tax 284 203 487 – – 487 Tax on adjusted profit (38) – (38) – – (38) Share of associates’ and joint ventures' tax expense 10 (12) (26) (38) – – (38) Adjusted profit after tax 234 177 411 – – 411 Adjusted for the following items
Total adjusting items (1,266) 1,634 368 (15) – 353 Tax on adjusting items 53 – 53 – – 53 Share of associates’ and joint ventures’ tax expense on adjusting items 20 1 21 – – 21 Profit attributable to non-controlling interests (preference shares) (5) – (5) – – (5) (Loss)/profit for the year attributable to equity shareholders of Standard Life Aberdeen plc (964) 1,812 848 (15) – 833 Profit attributable to non-controlling interests
Preference shares 5 – – 5 Profit for the year 853 (15) – 838 1 Share of associates’ and joint ventures’ profit before tax comprises the Group’s share of results of HDFC Asset Management, Phoenix, HASL, VMUTM and HDFC Life (until 3
December 2020). 2 Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts includes £1,180m included in administrative expenses and set out in Note 15, and £107m relating to intangibles recognised on the part acquisition of associates and included in Share of profit from associates and joint ventures in the consolidated income statement.
All interest income, interest expense, depreciation and amortisation from continuing operations relates to the Asset management, platforms and wealth segment.
Restructuring and corporate transaction expenses 9 (379) (28) (407) – – (407) Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts2 (1,733) (111) (1,844) – – (1,844) Profit on disposal of interests in associates 1 205 1,337 1,542 – – 1,542 Reversal of impairment of associates 16 – 243 243 – – 243 Investment return variances and economic assumption changes 13 – (25) (25) – – (25) Other 160 (2) 158 56 – 214
Total adjusting items (1,747) 1,414 (333) 56 – (277) Tax on adjusting items 41 – 41 – – 41 Share of associates’ and joint ventures’ tax expense on adjusting items (5) 43 38 – – 38 Profit attributable to non-controlling interests (preference shares) (5) – (5) – – (5) (Loss)/profit for the year attributable to equity shareholders of Standard Life Aberdeen plc (1,411) 1,621 210 56 – 266 Profit attributable to non-controlling interests
Fee based revenue and adjusted operating expenses as presented in the analysis of Group adjusted profit by segment from continuing operations 1,425 (1,206) 1,634 (1,333) Insurance and participating investment contract claims and change in liabilities 17 (17) 156 (156) Change in non-participating investment contract liabilities 56 (56) 265 (265) Change in liability for third party interest in consolidated funds (3) 3 21 (21) Other presentation differences 144 (144) 177 (177) Profit on disposal of interests in associates 1,858 – 1,542 – Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts – (1,180) – (1,733) Other adjusting items included in income and expenses 91 (320) 161 (387) Capital management 21 – 37 – Total income and expenses as presented in the IFRS consolidated income statement from continuing operations 3,609 (2,920) 3,993 (4,072)
The income of the operating businesses shown above is allocated based on where the income is earned. The return on investment funds is allocated based on where funds are registered.
Non-current non-financial assets for this purpose consist of property, plant and equipment and intangible assets.
(b)(ii) Total income and expenses The following table provides a reconciliation of fee based revenue and adjusted operating expenses, as presented in the analysis of Group adjusted profit by segment, to total income and total expenses respectively, as presented in the IFRS consolidated income statement.
(d) Non-current non-financial assets by geographical location 2020 2019 £m £m
Interest and similar income Cash and cash equivalents 10 18 Debt securities measured at amortised cost 9 10 19 28 Gains on financial instruments at fair value through profit or loss
Equity securities and interests in pooled investment funds (other than dividend income) 137 365 Debt securities 5 21 Derivative financial instruments (30) 1 112 387 Dividend income 41 52 Gains on financial instruments at amortised cost – 1 Foreign exchange losses on financial instruments other than those at fair value through profit or loss (9) (4) Investment return from continuing operations 163 464
(a) Revenue from contracts with customers The following table provides a breakdown of total revenue from contracts with customers: Asset management Management fee income – Insurance1 216 312 Management fee income – Other clients1 1,008 1,122 Performance fees 30 37
Revenue from contracts with customers for asset management 1,254 1,471 Fund platforms
Deferred Income 35 73 67 75 Accruals 36 – 3 5 Total contract liabilities 73 70 80 5. Other income The Group’s other income for the year ended 31 December 2020 of £30m (2019: £178m) includes the £8m gain on the sale of SL Asia (refer Note 1). Other income for the year ended 31 December 2019 included £140m in relation to the settlement of arbitration with Lloyds Banking Group.
Interest expense 2 5 Commission expenses 77 89 Other cost of sales 27 26 Staff costs and other employee-related costs 625 646 Short-term and low value lease rentals 3 2 Auditors’ remuneration 8 8 8 Depreciation of property, plant and equipment 17 46 47 Amortisation of intangible assets 15 152 184 Impairment losses on intangible assets1 15 149 2 Impairment losses on disposal group classified as held for sale 23 1 – Impairment losses on property right-of-use assets 17 2 16 Other 514 626 1,606 1,651 Acquisition costs deferred during the year – (2) Amortisation of deferred acquisition costs 2 2 Total other administrative expenses from continuing operations 1,608 1,651 1 Impairment losses on intangible assets excludes a goodwill impairment charge of £915m (2019: £1,569m) recognised separately as an individual item on the consolidated income statement. Refer Note 15.
In addition, wages and salaries of £28m (2019: £40m), social security costs of £4m (2019: £4m), pension costs – defined benefit plans of less than £1m (2019: less than £1m), pension costs – defined contribution plans of £1m (2019: £1m), employee share-based payments and deferred fund awards of £27m (2019: £19m) and termination benefits of £31m (2019: £67m) have been included in restructuring and corporate transaction expenses. Refer Note 9.
The average number of staff employed by the Group during the year was 6,029 (2019: 6,268). All staff were employed within the asset management, platforms and wealth segment.
The audit of the Company’s consolidated subsidiaries pursuant to legislation 4.1 3.7 Audit related assurance services 2.3 2.1
Total audit and audit related assurance fees 7.5 6.9 Other assurance services 0.8 1.2 Other non-audit fee services – – Total non-audit fees 0.8 1.2 Total auditors’ remuneration 8.3 8.1 135Standard Life Aberdeen 2020
9. Restructuring and corporate transaction expenses Total restructuring and corporate transaction expenses incurred from continuing operations during the year were £297m (2019: £374m). The expenses mainly relate to ongoing transformation costs for integration, separation from Phoenix and implementing our simplified operating model. 2019 expenses also included £49m in respect of the repurchase of subordinated liabilities (refer Note 33). Deal costs relating to acquisitions included in restructuring and corporate transaction expenses for the year ended 31 December 2020 were £1m (2019: £2m).
Impairment of internally generated software and right-of-use assets as a result of restructuring, which are included in Other administrative expenses
Current tax is the expected tax payable on taxable profit for the year and is calculated using tax rates and laws substantively enacted at the balance sheet date.
The Group operates in a large number of territories and during the normal course of business will be subject to audit or enquiry by local tax authorities. At any point in time the Group will also be engaged in commercial transactions the tax outcome of which may be uncertain due to their complexity or uncertain application of tax law. Tax provisions, therefore, are subjective by their nature and require management judgement based on the interpretation of legislation, management experience and professional advice. As such, this may result in the Group recognising provisions for uncertain tax positions. Management will provide for uncertain tax positions where they judge that it is probable there will be a future outflow of economic benefits from the Group to settle the obligation. In assessing uncertain tax positions management considers each issue on its own merits using their judgement as to the estimate of the most likely outcome. When making estimates, management considers all available evidence. This may include forecasts of future profitability, the frequency and severity of any losses, and statutory carry forward and carry back provisions as well as management experience of tax attributes expiring without use. Where the final outcome differs from the amount provided this difference will impact the tax charge in future periods. Management re-assesses provisions at each reporting date based upon latest available information.
(a) Tax charge in the consolidated income statement (a)(i) Current year tax expense
Current tax: UK (1) 6 Overseas 55 49 Adjustment to tax expense in respect of prior years 9 (1) Total current tax attributable to continuing operations 63 54 Deferred tax: Deferred tax credit arising from the current year (76) (26) Adjustment to deferred tax in respect of prior years (2) – Total deferred tax attributable to continuing operations (78) (26) Total tax (credit)/expense attributable to continuing operations (15) 28
In 2020 unrecognised tax losses from previous years were used to reduce the current tax expense by £1m (2019: £nil). Unrecognised tax losses and timing differences were used to reduce the deferred tax expense by £1m (2019: £1m).
Profit before tax from continuing operations 838 243 Tax at 19% (2019: 19%) 159 46 Remeasurement of deferred tax due to rate changes1 9 1 Permanent differences (20) (4) Tax effect of accounting for share of profit from associates and joint ventures (37) (15) Impairment losses on intangible assets 174 298 Impairment/ (reversal of impairment) of investment in associates and joint ventures 9 (46) Differences in overseas tax rates1 (21) (16) Adjustment to current tax expense in respect of prior years 9 (1) Recognition of previously unrecognised tax credit (2) (1) Deferred tax not recognised 7 13 Adjustment to deferred tax expense in respect of prior years (2) – Write down of deferred tax asset – 6 Non-taxable profit on sale of subsidiaries and associates (303) (254) Other 3 1 Total tax (credit)/expense from continuing operations for the year (15) 28 1 2019 figures were previously disclosed as a single line – different tax rates (£15m).
On 3 March 2021, the UK Government announced its intention to increase the rate of UK corporation tax rate from 19% to 25% with effect from 1 April 2023. The proposed increase in the rate of UK corporation tax is expected to be enacted in Finance Act 2021. As the rate change was not substantively enacted as at 31 December 2020, it has not been taken account of in computing the UK deferred tax assets and liabilities which are reflected in the statement of financial position for that date. However, the rate change is expected to be substantively enacted during 2021. The effect of this change in the rate of UK corporation tax if it had been substantively enacted at 31 December 2020 would have been to increase the deferred tax assets and deferred tax liabilities in the statement of financial position by £19m and £9m respectively and increase the tax credit in the income statement by £10m.
Details of significant reconciling items are as follows: • Permanent differences in 2020 include expenses and accounting losses which are not deductible for tax purposes. It also includes the difference between the tax basis and accounting value for employee share-based awards. Notably, within permanent differences, is a (£12m) tax adjustment for non-taxable fair value movements that arose following reclassification of the investment in HDFC Life.
• The ability to value tax losses and other tax assets also affects the tax charge. We have not recognised a deferred tax asset of £7m on tax losses arising in the year due to uncertainty as to when these losses will be utilised. In addition, we have recognised £2m of previously unrecognised deferred tax assets due to evidence of their current or future utilisation.
(b) Tax relating to components of other comprehensive income Tax relating to components of other comprehensive income is as follows: Tax relating to defined benefit pension plan deficits (2) – Equity holder tax effect relating to items that will not be reclassified subsequently to profit or loss (2) – Tax relating to fair value losses recognised on cash flow hedges (1) (2) Tax relating to cash flow hedge losses transferred to consolidated income statement 3 4 Equity holder tax effect relating to items that may be reclassified subsequently to profit or loss 2 2 Tax relating to other comprehensive income from continuing operations – 2
Opening balance carried forward (13) (39) Effect of change in accounting policy to IFRS 91 – 1 Effect of change in accounting policy to IFRS 161 – 1 Opening balance at 1 January (13) (37) Reclassified as held for sale during the year – – Acquired through business combinations – (2) Amounts credited to the consolidated income statement 78 26 Amounts credited directly to equity in respect of employee share-based payments – – Tax on defined benefit pension plan deficits 2 – Tax on cash flow hedge (2) (2) Other – 2 Net deferred tax asset/(liability) at 31 December 65 (13) 1 The Group has initially applied IFRS 9 and IFRS 16 at 1 January 2019. Under the transition methods chosen, comparative information is not restated.
• The share of profits from associates and joint ventures is presented net of tax in the consolidated income statement and therefore gives a reconciling item
Deferred tax assets comprise: Losses carried forward 89 40 Depreciable assets 12 12 Employee benefits 28 22 Provisions and other temporary timing differences 2 1 Gross deferred tax assets 131 75 Less: Offset against deferred tax liabilities – (1) Deferred tax assets 131 74 Deferred tax liabilities comprise: Unrealised gains on investments 4 2 Employee benefits – 3 Temporary timing differences – 2 Deferred tax on intangible assets acquired through business combinations 52 78 Other 10 3 Gross deferred tax liabilities 66 88 Less: Offset against deferred tax assets – (1) Deferred tax liabilities 66 87 Net deferred tax asset/(liability) at 31 December 65 (13)
(d) Unrecognised deferred tax Due to uncertainty regarding recoverability, deferred tax assets have not been recognised in respect of the following: • Cumulative losses carried forward of £80m in the UK and £287m overseas (2019: £80m, £301m respectively)
The consolidated income statement loss and cash flows from discontinued operations relate solely to the UK and European insurance business which was sold in 2018 to Phoenix. For the year ended 31 December 2020, the loss from discontinued operations was £15m (2019: profit of £56m) which reflected changes in the value of contingent consideration relating to the sale. The 2020 loss includes the impact of the resolution of certain legacy issues with Phoenix, refer Note 47. For the year ended 31 December 2020, net cash flows from discontinued operations of (£42m) (2019: £63m) are included in net cash flows from investing activities. There was no other comprehensive income from discontinued operations for the year ended 31 December 2020 (2019: £nil).
Pence Pence Pence Pence Pence Pence Basic earnings per share 38.5 (0.7) 37.8 8.9 2.3 11.2 Diluted earnings per share 37.9 (0.7) 37.2 8.8 2.3 11.1 Adjusted earnings per share 18.4 – 18.4 19.5 – 19.5 Adjusted diluted earnings per share 18.1 – 18.1 19.3 – 19.3 140 Standard Life Aberdeen 2020
Millions Millions Weighted average number of ordinary shares outstanding 2,202 2,374 Dilutive effect of share options and awards 37 32 Weighted average number of diluted ordinary shares outstanding 2,239 2,406
Adjusted profit also excludes impacts arising from investment return variances and economic assumption changes in the Group’s insurance entities as described further below.
(a) Investment return variances and economic assumptions changes – insurance entities Associates and joint ventures insurance entities Where associates and joint ventures have a policy for determining investment return variances and economic assumption changes, the Group uses the policy of the associate or joint venture for including their results in the Group’s adjusted profit. This currently applies only to the Group’s investment in Phoenix. The Phoenix policy is described below.
Adjusted profit includes the effect of variance in experience for non-economic items, for example mortality, persistency and expenses, and the effect of changes in non-economic assumptions. It also incorporates the impacts of significant management actions where such actions are consistent with Phoenix’s core operating activities (for example, actuarial modelling enhancements and data reviews).
Wholly owned insurance entities The Group’s wholly owned insurance business, SL Asia, was sold on 30 June 2020 (refer Note 1). The policy applied to wholly owned insurance entities is similar to that used by Phoenix as described above. The main difference relevant to SL Asia is that Phoenix recognises charges on unit linked business based on expected investment returns, whereas wholly owned insurance entities use actual investment returns.
7. Group financial statements continued 14. Dividends on ordinary shares Dividends are distributions of profit to holders of Standard Life Aberdeen plc’s share capital and as a result are recognised as a deduction in equity. Final dividends are announced with the Annual report and accounts and are recognised when they have been approved by shareholders. Interim dividends are announced with the Half year results and are recognised when they are paid.
Prior year’s final dividend paid 14.3 320 14.30 345 Interim dividend paid 7.3 159 7.30 173 Total dividends paid on ordinary shares 479 518
Current year final recommended dividend 7.3 154 14.30 320 1 Estimated for current year final recommended dividend.
15. Intangible assets Goodwill is created when the Group acquires a business and the consideration exceeds the fair value of the net assets acquired. In determining the net assets acquired in business combinations, intangible assets are recognised where they are separable or arise from contractual or legal rights. Intangible assets acquired by the Group through business combinations consist mainly of customer relationships, technology and brands. Any remaining value that cannot be identified as a separate intangible asset on acquisition forms part of goodwill.
Intangible assets are recognised at cost and amortisation is charged to the income statement over the length of time the Group expects to derive benefits from the asset. The allocation of the income statement charge to each reporting period is dependent on the expected pattern over which future benefits are expected to be derived. Where this pattern cannot be determined reliably the charge is allocated on a straight-line basis.
Notes £m £m £m £m £m £m £m £m Gross amount At 1 January 2019 3,438 93 1,019 67 121 4 96 4,838 Additions 37 – 13 – 10 3 2 65 Other – – (1) – – (4) (2) (7) At 31 December 2019 3,475 93 1,031 67 131 3 96 4,896 Reclassified as held for sale during the year – – – (3) (2) – – (5) Additions – – – – 2 2 8 12 At 31 December 2020 3,475 93 1,031 64 131 5 104 4,903 Accumulated amortisation and impairment At 1 January 2019 (906) (26) (386) (41) (59) – (16) (1,434) Amortisation charge for the year – (19) (111) (13) (20) (1) (20) (184) Impairment losses recognised2 (1,569) – – (1) (1) – – (1,571) At 31 December 2019 (2,475) (45) (497) (55) (80) (1) (36) (3,189) Reclassified as held for sale during the year – – – 2 1 – – 3 Amortisation charge for the year 6 – (18) (86) (7) (21) (1) (19) (152) Impairment losses recognised2 6 (915) – (134) (1) (14) – – (1,064) At 31 December 2020 (3,390) (63) (717) (61) (114) (2) (55) (4,402) Carrying amount At 1 January 2019 2,532 67 633 26 62 4 80 3,404 At 31 December 2019 1,000 48 534 12 51 2 60 1,707 At 31 December 2020 85 30 314 3 17 3 49 501 1 Included in the internally developed software of £17m (2019: £51m) is £8m (2019: £6m) relating to intangible assets not yet ready for use. 2 For the year ended 31 December 2020, goodwill impairment losses of £915m (2019: £1,569m) were recognised on asset management goodwill and presented separately in the consolidated income statement.
At 31 December 2020 £85m of goodwill (2019: £85m) is attributable to a number of smaller cash-generating units in the Asset management, platforms and wealth segment. At 31 December 2020, there was no goodwill (2019: £915m) attributable to the asset management group of cash-generating units, which comprises the Group’s asset management business excluding HDFC Asset Management, in the Asset management, platforms and wealth segment.
In relation to the open ended funds we considered that it was most appropriate to recognise an intangible asset relating to customer relationships between AAM PLC and open ended fund customers, rather than an intangible asset relating to investment management agreements between AAM PLC and AAM PLC’s open ended funds. Our judgement was that the value associated with the open ended fund assets under management was predominantly derived from the underlying customer relationships, taking into account that a significant proportion of these assets under management are from institutional clients.
The intangible asset for Lloyds Banking Group had a carrying value of £nil at the end of 2019. The description of the remaining two separate intangible assets including their estimated useful life at the acquisition date of 14 August 2017 was as follows: Customer relationship intangible asset Description
The customer relationships acquired through AAM PLC were grouped where the customer groups have similar economic characteristics and similar useful economic lives. This gave rise to three separate intangible assets which we have termed Lloyds Banking Group, open ended funds, and segregated and similar.
All other vehicle groups dominated by segregated mandates which represent 75% of this group
• Market growth – a market growth adjustment was applied based on the asset class • Operating margin – this assumption was consistent with forecast margins and included the impact of synergies that would be expected by any market participant and impacted the Aberdeen customer relationship cash flows • Discount rate – this assumption was based on the internal rate of return (IRR) of the transaction and is consistent with a market participant discount rate
In 2020, an impairment of goodwill of £915m (2019: £1,569m) and an impairment of customer relationships and investment management contracts of £134m (2019: £nil) have been recognised. Both impairments relate to assets included in the Asset management, platforms and wealth segment. The impairments are included within administrative expenses in the consolidated income statement.
• Price to earnings multiples which were determined based on market data on multiples of a peer group of comparable European asset managers as at 30 June 2020
• The expected cost of disposal, which was based on past experience of previous transactions
Customer relationship and investment management contract intangibles The recoverable amount for customer relationship intangible assets for which there were indicators of impairment is VIU. In assessing VIU, expected future cash flows are discounted to their present value using a pre-tax discount rate. Judgement is required in assessing both the expected cash flows and an appropriate discount rate which is based on current market assessments of the time value of money and the risks associated with the asset.
The impairment of £134m (2019: £nil) relates to the Segregated and similar customer relationship intangible asset which was recognised on the acquisition of AAM PLC. The impairment resulted from the impact of markets, net outflows and a fall in revenue yield on future earnings expectations. The impairment was recognised at 30 June 2020. The recoverable amount of this asset which is its VIU at 30 June 2020 was £119m and was calculated using a pre-tax discount rate of 14.8%.
The other key assumptions in the VIU were: • Future assets under management which were modelled based on past experience of attrition rates and assumed market growth rates tapered to 2% in the longer term
• Fee revenue yields based on past experience adjusted to assume a decline due to changes in asset mix over the projection period • Operating expense margins based on past experience and management forecasts
At 31 December 2020, there is no indication that the Segregated and similar customer relationship intangible asset has become further impaired. The following table shows the consequence of illustrative downside sensitivities of key assumptions on the carrying amount of the Segregated and similar customer relationship intangible balance at 31 December 2020. An increase in the discount rate of two percentage points would not lead to a further impairment loss.
Under the equity method, investments in associates and joint ventures are initially recognised at cost. When an interest is acquired at fair value from a third party, the value of the Group’s share of the investee’s identifiable assets and liabilities is determined applying the same valuation criteria as for a business combination at the acquisition date. This is compared to the cost of the investment in the investee. Where cost is higher the difference is identified as goodwill and the investee is initially recognised at cost which includes this component of goodwill. Where cost is lower a bargain purchase has arisen and the investee is initially recognised at the Group’s share of the investee’s identifiable assets and liabilities unless the recoverable amount for the purpose of assessing impairment is lower, in which case the investee is initially recognised at the recoverable amount.
The level of future dividend payments and other transfers of funds to the Group from associates and joint ventures accounted for using the equity method could be restricted by the regulatory solvency and capital requirements of the associate or joint venture, certain local laws or foreign currency transaction restrictions.
(a) Investments in associates and joint ventures accounted for using the equity method 2020 2019
The Group’s investment in the following company was considered to be a material associate at 31 December 2019 but was reclassified to equity securities and interest in pooled investment funds during 2020. Refer Section (b) below for further details.
Fair value of interest held by the Group at 31 December 2019
Attributable to NCI and other equity holders 835 – 808 – – Attributable to investee’s shareholder 6,917 446 4,815 789 361
December 2020. For 2019, revenue and profit after tax for HDFC Asset Management presented were for the 15 months to 31 December 2019 (refer below for details of accounting period alignment) and total assets and total liabilities presented were as at 30 September 2019 as the statement of financial position at 31 December 2019 was not made publicly available.
3 As a liquidity presentation is used by insurance companies when presenting their statement of financial position, an analysis of total assets and total liabilities between current and non-current has not been provided for Phoenix and HDFC Life. The majority of HDFC Asset Management’s assets and liabilities are current.
4 For the year ended 31 December 2020 the share of profit/(loss) after tax of £19m for Other relates to HDFC Life for the period from 1 January 2020 to 3 December 2020 prior to its reclassification to equity securities and interests in pooled funds (refer below for further details of the reclassification).
Interest held 14.42% 21.24% 19.97% 14.73% 26.91% Share of net assets 998 95 962 116 97
Phoenix Phoenix is the largest life and pensions consolidator in Europe. Our investment in Phoenix supports our strategic partnership. On 23 February 2021, the Group announced a simplification and extension of the strategic partnership between the Group and Phoenix. Refer Note 47.
Following the completion of the Sale of the Group’s UK and European insurance business in August 2018, as part of the total consideration, the Group was issued with new Phoenix shares representing 19.98% of the issued share capital of Phoenix. While our interest was less than 20%, being the threshold where significant influence is presumed, our judgement was that Phoenix should be classified as an associate. This judgement took into account other key indicators of significant influence from the contractual relationships with Phoenix, including the licensing to Phoenix of the Standard Life brand, and the Group’s representation on the Phoenix Board.
At acquisition the value of the Group’s share of Phoenix’s identifiable assets and liabilities was determined. This value was determined using the same valuation bases as required for a business combination under which most of the identifiable assets and liabilities of the enlarged Phoenix group (including Standard Life Assurance Limited (SLAL)) were measured at fair value. The most significant assets that were not measured at fair value were Phoenix’s defined benefit pension schemes which were measured at their IAS 19 value.
Group’s share at acquisition date1 £m Intangible asset: SLAL AVIF 24 2,931 586 Existing Phoenix AVIF 15 1,503 300 1 Based on Group’s share at the date of acquisition (19.98%).
The determination of longevity and persistency actuarial assumptions, and the determination of the bargain purchase gain in relation to the acquisition of ReAssure are also key judgements in the determination of the Phoenix profits for 2020 and therefore the Group’s carrying value of Phoenix at 31 December 2020 and share of profits for the year ended 31 December 2020.
Refer Note 47 for disclosure regarding the reclassification of Phoenix from an associate to an equity investment subsequent to the year end date of 31 December 2020.
An analysis of credit ratings of financial assets with contractual cash flows that are SPPI, excluding those held for trading or managed on a fair value basis, is provided below: AAA AA A BBB BB and below Non-rated Unit linked Total 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
HDFC Asset Management HDFC Asset Management manages a range of mutual funds and provides portfolio management and advisory services. The investment in HDFC Asset Management is a strategic investment in a leading asset manager in India, one of the world’s fastest growing markets.
The year end date of HDFC Asset Management is 31 March which is different from the Group’s year end date of 31 December. For the purposes of the preparation of the Group’s consolidated financial statements, financial information for the period to 31 December is used for HDFC Asset Management. Prior to 2019, financial information for the 12 months to 30 September was used for HDFC Asset Management and 2019 included the Group’s share of HDFC Asset Management’s profits for the 15 months to 31 December 2019. £42m, which included £7m relating to the three months to 31 December 2018 (£12m net of tax of £5m), was recognised in the consolidated income statement for 2019. Profits for the three months to 31 December 2018 were excluded from 2019 adjusted profit.
At 31 December 2020 the market value of the Group’s interest in Phoenix was £1,010m which was above the carrying value so no impairment was identified.
At 31 December 2019 the market value of the Group’s interest in Phoenix was £1,079m and this was used as the value in use at this date. On this basis, a reversal of a previously recognised impairment of £243m was recognised in the consolidated income statement for the year ended 31 December 2019.
Fair value as at 31 December 2020 Fair value as at
During 2020 the Group further reduced its interest in HDFC Life to 8.89% (2019:14.73%). Refer Note 1 for further details of the sales during 2020. While the Group’s remaining interest at 31 December 2019 was less than 20%, being the threshold where significant influence is presumed, our judgement was that HDFC Life should continue to be classified as an associate. This judgement took into account other key indicators of significant influence including the Group’s representation on the board of HDFC Life and the Group’s ability to participate in policy-making processes including decisions about dividends or other distributions that require unanimous board approval under the articles of association. The final sale on 3 December 2020 reduced the Group’s interest from 10.27% to 8.89% and the Group is no longer entitled to representation on the board of HDFC Life and, from this date, HDFC Life is no longer considered to be an associate of the Group.
On 3 December 2020, the Group’s investment in HDFC Life was reclassified to equity securities and interests in pooled investment funds measured at fair value. The equity accounted value of the investment at this date was £111m. The fair value of the Group investment in HDFC Life at this date was £1,168m based on the HDFC Life share price on the date of the reclassification and a reclassification gain of £1,051m has been recognised in the consolidated income statement. On reclassification a loss of £6m was recycled from the translation reserve and was included in determining the gain.
The year end date for HDFC Life is 31 March which is different from the Group’s year end date of 31 December. For the purposes of the preparation of the Group’s consolidated financial statements, financial information for the period from 1 January 2020 to 3 December 2020 was used for HDFC Life (2019: as at and for the 12 months ended 31 December 2019) for equity accounting purposes. The difference between the carrying value of this associate and the Group’s share of net assets at 31 December 2019 was due primarily to goodwill of £49m arising from additional investments being made at fair value rather than book value.
Financial assets with contractual cash flows that are solely payments of principal and interest (SPPI) excluding those held for trading or managed on a fair value basis1,2 6,871 Financial assets other than those above2 8,046 Total 14,917 1 Financial assets that were SPPI (excluding those held for trading or managed on a fair value basis) are predominantly AAA debt instruments including central and state government securities. Their carrying value at 31 December 2019 was £6,659m. Securities with fair value and carrying value of £34m were rated below BBB. 2 The change in fair value in the year to 31 December 2019 for financial assets that are SPPI (excluding those held for trading or managed on a fair value basis) was a gain of £758m. The change in fair value for all other financial assets is a gain of £727m.
The Group’s share of the profit after tax (all from continuing operations) and total comprehensive income of other joint ventures was a loss of £6m (2019: loss of £4m).
HASL The Group has a 50% share in HASL, one of China’s leading life insurance companies offering life and health insurance products. The investment in HASL is a strategic investment giving the Group access to one of the world’s largest markets.
HASL 2020 2019 £m £m Summarised financial information of joint venture: Revenue 481 426 Depreciation and amortisation 3 3 Interest income 57 57 Interest expense 2 2 Income tax (expense)/income (3) 6 Profit after tax (all from continuing operations) 46 41 Other comprehensive income 1 25 Total comprehensive income 47 66 Total assets1 3,156 1,957 Total liabilities1 2,685 1,547 Cash and cash equivalents 122 67 Net assets 471 410
In 2020 an impairment loss of £45m has been recognised on the Group’s interest in VMUTM (2019: £nil). The impairment resulted from a reduction in projected future revenues as a result of a business plan reassessment by the joint venture which took into account the fall in UK equity markets due to COVID-19, and an increase in projected costs to develop a new retail customer proposition. The impairment charge is recognised in the Asset management, platforms and wealth segment and is included in loss on impairment of interests in associates and joint ventures in the consolidated income statement.
At 31 December 2015 HASL had significant insurance liabilities and its liabilities arising from contracts within the scope of IFRS 4 and liabilities connected with insurance were over 90% of its total liabilities. Therefore HASL was eligible to defer the implementation of IFRS 9 for equity accounting purposes.
The fair value of HASL’s financial assets at 31 December 2020 that remain under IAS 39 for equity accounting purposes and the change in fair value during the year ended 31 December 2020 are as follows: Fair value as at 31 December 2020 Fair value as at
Financial assets with contractual cash flows that are solely payments of principal and interest (SPPI) excluding those held for trading or managed on a fair value basis1,2 1,862 1,344 Financial assets other than those above2 431 598 Total 2,293 1,942 1 Financial assets that are SPPI (excluding those held for trading or managed on a fair value basis) are predominantly AAA debt instruments. Their carrying value at 31
December 2020 is £1,378m (2019: £1,321m). No securities are rated below BBB (2019: none). 2 The change in fair value in the year to 31 December 2020 for financial assets that are SPPI (excluding those held for trading or managed on a fair value basis) is a gain of £129m (2019: £63m). The change in fair value for all other financial assets is a gain of £23m (2019: gain of £68m).
The impairment was recognised at 30 June 2020. Following the impairment, the carrying value of the investment in the VMUTM joint venture at 30 June 2020 was £nil which was the recoverable amount. The recoverable amount was based on value in use (VIU), the key assumptions for which are the discount rate, terminal growth rate and forecast cash flows. The pre-tax discount rate used was 14.9% and the terminal growth rate used was 2%. Cash flow projections for the five years to 30 June 2025 were based on management approved profit forecasts, with the terminal growth rate used for subsequent years. Profits were adjusted to a cash flow basis, e.g. amortisation and depreciation removed. The VIU cash flow projections at 30 June 2020 took into account expected future capital contributions to the business.
17. Property, plant and equipment Property, plant and equipment consists primarily of property owned and occupied by the Group and the computer equipment used to carry out the Group’s business along with right-of-use assets for leased property and equipment. Owner occupied property: Owner occupied property is initially recognised at cost and subsequently revalued to fair value at each reporting date. Depreciation, being the difference between the carrying amount and the residual value of each significant part of a building, is charged to the consolidated income statement over its useful life. The useful life of each significant part of a building is estimated as being between 30 and 50 years. A revaluation surplus is recognised in other comprehensive income unless it reverses a revaluation deficit which has been recognised in the consolidated income statement. Equipment: Equipment is initially recognised at cost and subsequently measured at cost less depreciation. Depreciation is charged to the income statement over 2 to 15 years depending on the length of time the Group expects to derive benefit from the asset. Right-of-use asset: Refer Note 18 below for the accounting policies for right-of-use assets.
Cost or valuation At 31 December 2018 2 101 – – 103 Right-of-use assets recognised on implementation of IFRS 161 – – 354 1 355 At 1 January 2019 2 101 354 1 458 Additions – 28 74 1 103 Disposals and adjustments2 – (3) (9) – (12) Derecognition of right-of-use assets relating to subleases classified as finance leases – – (11) – (11) Foreign exchange adjustment – (1) (4) – (5) At 31 December 2019 2 125 404 2 533 Reclassified as held for sale during the year – (4) (7) – (11) Additions – 13 16 1 30 Disposals and adjustments2 – (26) (38) – (64) Derecognition of right-of-use assets relating to subleases classified as finance leases – – (5) – (5) At 31 December 2020 2 108 370 3 483 Accumulated depreciation and impairment At 31 December 2018 – (42) – – (42) Right-of-use assets recognised on implementation of IFRS 161 – – (176) – (176) At 1 January 2019 – (42) (176) – (218) Depreciation charge for the year 6 – (18) (28) (1) (47) Disposals and adjustments2 – 1 3 – 4 Derecognition of right-of-use assets relating to subleases classified as finance leases – – 8 – 8 Impairment – – (16) – (16) Foreign exchange adjustment – – 2 – 2 At 31 December 2019 – (59) (207) (1) (267) Reclassified as held for sale during the year – 2 2 – 4 Depreciation charge for the year 6 – (19) (26) (1) (46) Disposals and adjustments2 (1) 27 36 – 62 Derecognition of right-of-use assets relating to subleases classified as finance leases – – 3 – 3 Impairment – – (2) – (2) Foreign exchange adjustment – – (1) – (1) At 31 December 2020 (1) (49) (195) (2) (247) Carrying amount At 1 January 2019 2 59 178 1 240 At 31 December 2019 2 66 197 1 266 At 31 December 2020 1 59 175 1 236 1 The Group has initially applied IFRS 16 at 1 January 2019. Under the transition methods chosen, comparative information is not restated and the cumulative effect of initially applying these standards is recognised in retained earnings at the date of initial application. 2 For the year ended 31 December 2020 £26m (2019: £nil) of disposals and adjustments relates to equipment with net book value of £nil which is no longer in use.
The fair value of these right-of-use assets at 31 December 2020 is £25m (2019: £28m). The valuation technique used to determine the fair value considers the rental income expected to be received under sub-leases during the term of the lease and the direct expenses expected to be incurred in managing the leased property, discounted using a discount rate that reflects the risks inherent in the cash flow estimates. It is not based on valuations by an independent valuer. This is a Level 3 valuation technique as defined in Note 40.
Where the sublease does not transfer substantially all the risk and rewards of the right-of-use assets to the lessee under the sublease, the Group continues to recognise the right-of-use asset. The sub-lease is accounted for as an operating lease with the lease payments received recognised as property rental income in other income in the consolidated income statement. Lease incentives granted are recognised as an integral part of the property rental income and are spread over the term of the lease.
The Group does not recognise right-of-use assets and lease liabilities for short-term leases and leases where the underlying asset is of low value. The expenses for these leases for the year ended 31 December 2020 were £3m (2019: £2m).The Group lease commitment for short-term leases was £nil at 31 December 2020 (2019: £nil).
The following table provides a maturity analysis of the future contractual undiscounted cash flows for the net investment in finance leases and a reconciliation to the net investment in finance leases asset: Less than 1 year 3 2 Greater than or equal to 1 year and less than 2 years 2 2 Greater than or equal to 2 years and less than 3 years 2 2 Greater than or equal to 3 years and less than 4 years 2 1 Greater than or equal to 4 years and less than 5 years 2 1 Greater than or equal to 5 years and less than 10 years 9 7 Greater than or equal to 10 years and less than 15 years – 2 Total contractual undiscounted cash flows under finance leases 20 17 Unearned finance income (2) (2) Total net investment in finance leases 18 15
The subsequent measurement of debt instruments depends on whether their cash flows are solely payments of principal and interest and the nature of the business model they are held in as follows: SPPI1 test satisfied? Business model Classification Yes A: Objective is to hold to collect contractual cash flows Amortised cost2 Yes
The following table provides a maturity analysis of the future contractual undiscounted cash flows for subleases classified as operating leases: Less than 1 year 2 3 Greater than or equal to 1 year and less than 2 years 2 3 Greater than or equal to 2 years and less than 3 years 1 2 Total contractual undiscounted cash flows under operating leases 5 8 19. Financial assets Financial assets are initially recognised at their fair value. Subsequently all equity securities and interests in pooled investment funds and derivative instruments are measured at fair value. All equity securities and interests in pooled investment funds are classified as FVTPL on a mandatory basis. Changes in their fair value are recognised in investment return in the consolidated income statement. The classification of derivatives and the accounting treatment of derivatives designated as a hedging instrument are set out in Note 20.
The table below sets out an analysis of financial assets excluding those assets backing unit linked liabilities which are set out in Note 25.
20. Derivative financial instruments 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 subordinated debt liabilities and to reduce the risk from potential movements in foreign exchange rates on seed capital and co-investments and potential movements in market rates on seed capital. Certain consolidated investment vehicles may also use derivatives to take and alter market exposure, with the objective of enhancing performance and controlling risk.
Management determines the classification of derivatives at initial recognition. All derivative instruments are classified as at FVTPL except those designated as part of a cash flow hedge or net investment hedge. Derivatives at FVTPL are measured at fair value with changes in fair value recognised in the consolidated income statement.
Derivative assets of £nil (2019: £4m) are expected to be recovered after more than 12 months. Derivative liabilities of £5m (2019: £1m) are expected to be settled after more than 12 months.
(a)(ii) FVTPL/Held for trading Derivative financial instruments classified as FVTPL/held for trading include those that the Group holds as economic hedges of financial instruments that are measured at fair value. FVTPL/held for trading derivative financial instruments are also held by the Group to match contractual liabilities that are measured at fair value or to achieve efficient portfolio management in respect of instruments measured at fair value.
(b) Maturity profile The maturity profile of the contractual undiscounted cash flows in relation to derivative financial instruments is as follows: years 10-15 years
Cash outflows Derivative financial assets (360) (386) – (73) – (633) – – – – – – (360) (1,092) Derivative financial liabilities (187) (287) (73) (1) (614) (1) – – – – – (1) (874) (290) Total (547) (673) (73) (74) (614) (634) – – – – – (1) (1,234) (1,382)
Included in the above maturity profile are the following cash flows in relation to cash flow hedge assets: years 10-15 years
Greater than 20 years Total 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 £m £m £m £m £m £m £m £m £m £m £m £m £m £m Cash inflows 23 24 93 96 607 650 – – – – – – 723 770 Cash outflows (18) (18) (73) (73) (614) (632) – – – – – – (705) (723) Net cash flow hedge cash inflows 5 6 20 23 (7) 18 – – – – – – 18 47
The amount of other assets expected to be recovered after more than 12 months is £4m (2019: £6m). All deferred acquisition costs above are costs deferred on investment contracts (deferred origination costs) which relate to contracts with customers (refer Note 4(b)). The amortisation charge for deferred origination costs relating to contracts with customers from continuing operations for the year was £2m (2019: £2m).
Assets held for sale 19 767 Liabilities of operations held for sale
At 31 December 2020, this disposal group was measured at its carrying amount and comprised the following assets and liabilities: 2020 £m
Parmenion Capital Partners LLP 11 – Standard Life (Asia) Limited – 747 Investment vehicles – –
Assets of operations held for sale Intangible assets 2 Property, plant and equipment 7 Receivables and other financial assets 5 Other assets 1 Cash and cash equivalents 3 Total assets of operations held for sale 18 Liabilities of operations held for sale Other financial liabilities 11 Total liabilities of operations held for sale 11 Net assets of operations held for sale 7
Net assets of operations held for sale are net of intercompany balances between Parmenion and other group entities, the net assets of Parmenion on a gross basis as at 31 December 2020 are £12m.
Net assets of operations held for sale were net of intercompany balances between SL Asia and the rest of the Group. The net assets of SL Asia on a gross basis as at 31 December 2019 were £18m.
24. Cash and cash equivalents Cash and cash equivalents include cash at bank, money at call and short notice with banks, money market funds and any highly liquid investments with less than three months to maturity from the date of acquisition. For the purposes of the consolidated statement of cash flows, cash and cash equivalents also include bank overdrafts which are included in other financial liabilities on the consolidated statement of financial position.
Cash at bank and in hand 788 852 Money at call, term deposits, reverse repurchase agreements and debt instruments with less than three months to maturity from acquisition 615 698 Money market funds 116 65 Cash and cash equivalents 1,519 1,615 2020 2019 Notes £m £m Cash and cash equivalents 1,519 1,615 Cash and cash equivalents backing unit linked liabilities 25 38 44 Cash and cash equivalents classified as held for sale 23 3 26 Bank overdrafts 36 (202) (338) Total cash and cash equivalents for consolidated statement of cash flows 1,358 1,347
Contributions received on non-participating investment contracts and from third party interest in consolidated funds are treated as deposits and not reported as revenue in the consolidated income statement.
(b) Fair value measurement of unit linked financial liabilities and financial assets backing unit linked liabilities Each of the unit linked financial liabilities and the financial assets backing unit linked liabilities has been categorised below using the fair value hierarchy as defined in Note 40. Refer Note 40 for details of valuation techniques used.
Level 1 Level 2 Level 3 Not at fair value Classified as held for sale1 Total 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 £m £m £m £m £m £m £m £m £m £m £m £m Financial investments 832 1,991 545 211 18 – – – – (674) 1,395 1,528 Receivables and other financial assets – – – – – – 7 10 – – 7 10 Cash and cash equivalents – – – – – – 38 45 – (1) 38 44 Total financial assets backing unit linked liabilities 832 1,991 545 211 18 – 45 55 – (675) 1,440 1,582 Investment contract liabilities – – 1,024 1,201 18 – – – – (49) 1,042 1,152 Third party interest in consolidated funds – – 388 416 – – – – – – 388 416 Other unit linked financial liabilities 7 – 2 6 – – 1 6 – – 10 12 Total unit linked financial liabilities 7 – 1,414 1,623 18 – 1 6 – (49) 1,440 1,580 1 Financial investments in 2019 include financial assets backing unit linked liabilities classified as non-participating insurance contracts within liabilities of operations held for sale.
Unit linked liabilities and assets backing unit linked liabilities are presented separately in the consolidated statement of financial position except for those held in operations held for sale, which are presented in assets and liabilities held for sale in the consolidated statement of financial position.
The financial investments backing unit linked liabilities comprise equity securities and interests in pooled investment funds of £1,244m (2019: £1,338m), debt securities of £145m (2019: £185m) and derivative financial assets of £6m (2019: £5m). In addition to financial assets backing unit linked liabilities and unit linked financial liabilities shown above there is a current tax asset of £1m (2019: £nil) included in unit linked assets and a current tax liability of £1m (2019: £2m) included in unit linked liabilities.
At start of period – – – – Total gains/(losses) recognised in the consolidated income statement (2) – 2 – Sales (1) – 1 – Transfers in to level 31 21 – (21) – At end of period 18 – (18) – 1 Transfers are deemed to have occurred at the end of the calendar quarter in which they arose.
Unit linked level 3 assets relate to holdings in real estate funds. No individual unobservable input is considered significant. Changing unobservable inputs in the measurement of the fair value of these unit linked level 3 financial assets and liabilities to reasonably possible alternative assumptions would have no impact on profit attributable to equity holders or on total assets.
Transfers of unit linked assets and liabilities to level 3 generally arise when external pricing providers stop providing prices for the underlying assets and liabilities in the funds or where the price provided is considered stale.
Gross amounts of financial instruments as presented on the consolidated statement of financial position Financial instruments Financial collateral pledged/(received) Net position 2020 2019 2020 2019 2020 2019 2020 2019 £m £m £m £m £m £m £m £m Financial assets Derivatives1 5 3 – (2) – – 5 1 Total financial assets 5 3 – (2) – – 5 1 Financial liabilities Derivatives1 (2) (5) – 2 – – (2) (3) Total financial liabilities (2) (5) – 2 – – (2) (3) 1 Only OTC derivatives subject to master netting agreements have been included above.
The movement in the issued ordinary share capital and share premium of the Company was: 2020 2019
27. Shares held by trusts Shares held by trusts relates to shares in Standard Life Aberdeen plc that are held by the Standard Life Aberdeen Employee Benefit Trust (SLA EBT), Standard Life Employee Trust (ET), the Aberdeen Asset Management Employee Benefit Trust 2003 (AAM EBT) and, prior to SLA plc issuing its closure instruction to the Trustees on 13 December 2019, the Standard Life Unclaimed Asset Trust (UAT). The SLA EBT was established on 28 March 2019.
7. Group financial statements continued 26. Issued share capital and share premium Shares are classified as equity instruments when there is no contractual obligation to deliver cash or other assets to another entity on terms that may be unfavourable. The Company’s share capital consists of the number of ordinary shares in issue multiplied by their nominal value. The difference between the proceeds received on issue of the shares and the nominal value of the shares issued is recorded in share premium.
The number of shares held by trusts was as follows: 2020 2019
Recognised in comprehensive income Recognised in profit for the year attributable to equity holders 833 266 Recognised in other comprehensive income
Recognised directly in equity Dividends paid on ordinary shares (479) (518) Reclassification of preference shares to liability 30,33 (1) – Shares buyback 26 (402) (390) Transfer between reserves on impairment of subsidiaries 29 1,834 780 Transfer for vested employee share-based payments 38 57 Transfer from the Standard Life Unclaimed Asset Trust – 1 Shares distributed by employee and other trusts (21) (38) Total items recognised directly in equity 969 (108) At 31 December 4,970 2,886 1 The Group has initially applied IFRS 9 and IFRS 16 at 1 January 2019. Under the transition methods chosen, comparative information is not restated and the cumulative effect of initially applying these standards is recognised in retained earnings at the date of initial application.
29. Movements in other reserves In July 2006 Standard Life Group demutualised and during this process the merger reserve, the reserve arising on Group reconstruction and the special reserve were created.
Capital redemption reserve Total Notes £m £m £m £m £m £m £m £m 1 January 2020 4 3 2,317 54 115 (685) 1,037 2,845 Recognised in other comprehensive income Fair value losses on cash flow hedges (3) – – – – – – (3) Exchange differences on translating foreign operations – (8) – – – – – (8) Items transferred to profit or loss from continuing operations
(a) Non-controlling interests – ordinary shares Non-controlling interests – ordinary shares of £3m were held at 31 December 2020 (2019: £3m).
7. Group financial statements continued 31. Insurance contracts, investment contracts and reinsurance contracts Insurance contracts, participating investment contracts and reinsurance contracts relate to SL Asia which was sold on 30 June 2020 (refer Note 1).
SL Asia held non-participating insurance and investment contracts. A contract is classified as an insurance contract only if it transfers significant insurance risk. Insurance risk is significant if an insured event could cause an insurer to pay significant additional benefits to those payable if no insured event occurred, excluding scenarios that lack commercial substance. Life and pensions business contracts that are not classified as insurance contracts are classified as investment contracts.
(b) Insurance contract claims and change in liabilities 2020 2019 £m £m
Claims and benefits paid 28 61 Claim recoveries from reinsurers – (2) Net insurance claims 28 59 Change in reinsurance assets and liabilities (3) 1 Change in insurance contract liabilities (8) 96 Insurance contract claims and change in liabilities from continuing operations 17 156 32. Financial liabilities Management determines the classification of financial liabilities at initial recognition. Financial liabilities which are managed and whose performance is evaluated on a fair value basis are designated as at fair value through profit or loss. Changes in the fair value of these financial liabilities are recognised in the consolidated income statement.
Derivatives are also measured at fair value. Changes in the fair value of derivatives are recognised in investment return in the consolidated income statement except for derivative instruments that are designated as a cash flow hedge or net investment hedge. The classification of derivatives and the accounting treatment of derivatives designated as a hedging instrument are set out in Note 20.
All financial liabilities are initially recognised at fair value less, in the case of financial liabilities subsequently measured at amortised cost, transaction costs that are directly attributable to the issue of the liability.
Designated as at fair value through profit or loss Cash flow hedge At amortised cost Total 2020 2019 2020 2019 2020 2019 2020 2019 Notes £m £m £m £m Third party interest in consolidated funds 77 119 – – – – 77 119 Subordinated liabilities 33 – – – – 638 655 638 655 Derivative financial liabilities 20 7 3 6 – – – 13 3 Other financial liabilities 36 6 14 – – 1,171 1,301 1,177 1,315 Total 90 136 6 – 1,809 1,956 1,905 2,092 33. Subordinated liabilities Subordinated liabilities are debt instruments issued by the Company which rank below its other obligations in the event of liquidation but above the share capital. Subordinated liabilities are initially recognised at the value of proceeds received after deduction of issue expenses. Subsequent measurement is at amortised cost using the effective interest rate method.
A description of the key features of the Group’s subordinated liabilities as at 31 December 2020 is as follows: 4.25% US Dollar fixed rate1 5.5% Sterling fixed rate Principal amount $750m £92m Issue date 18 October 2017 4 December 2012 Maturity date 30 June 2028 4 December 2042
Callable at par at option of the Company from Not applicable 4 December 2022 and on every interest payment date (semi-annually) thereafter
If not called by the Company interest will reset to Not applicable 4.85% over the five-year gilt rate
The principal amount of all the subordinated liabilities is expected to be settled after more than 12 months. The accrued interest on the subordinated liabilities of less than £1m (2019: less than £1m) is expected to be settled within 12 months.
During the year to 31 December 2020, the 5% 2015 Non-voting perpetual non-cumulative redeemable preference shares issued by AAM PLC were reclassified as subordinated liabilities. Refer Note 30 for further details. The liabilities were recognised at fair value of £102m with fair value movements since acquisition of £1m being transferred to retained earnings. The fair value included the final dividend paid of £2m as part of the redemption. The preference shares were redeemed on 8 July 2020 for a total consideration of £102m which included the dividend.
During the year to 31 December 2019, the Company repurchased 5.5% Sterling fixed rate subordinated notes with a principal amount of £408m (out of a total principal amount of £500m). The total amount paid was £462m including £7m of accrued interest and a repurchase loss of £49m was included in restructuring and corporate transaction expenses for the year ended 31 December 2019 (refer Note 9).
The statement of financial position reflects a net asset or net liability for each defined benefit pension plan. The liability recognised is the present value of the defined benefit obligation (estimated future cash flows are discounted using the yields on high quality corporate bonds) less the fair value of plan assets, if any. If the fair value of the plan assets exceeds the defined benefit obligation, a pension surplus is only recognised if the Group considers that it has an unconditional right to a refund of the surplus from the plan. The amount of surplus recognised will be limited by tax and expenses. Our judgement is that, in the UK, an authorised surplus tax charge is not an income tax. Consequently, the surplus is recognised net of this tax charge rather than the tax charge being included within deferred taxation.
• Defined contribution plans where the Group makes contributions to a member’s pension plan but has no further payment obligations once the contributions have been paid
Remeasurements, which include gains and losses as a result of changes in actuarial assumptions, the effect of the limit on the plan surplus and returns on plan assets (other than amounts included in net interest) are recognised in other comprehensive income in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Following a High Court ruling against a third party’s pension scheme in 2018, that required pension schemes to address inequalities for the effect of unequal GMPs accrued between May 1990 and April 1997, an allowance for assumed equalisation was recognised as a past service cost for our principal defined benefit plan in 2018 and this adjustment has been carried forward to 2020. There was a further judgment in 2020 requiring pension schemes to address inequalities for the effect of unequal GMPs for those beneficiaries that transferred out of the scheme between May 1990 and October 2018. The estimated impact is immaterial and is recognised as a past service cost in 2020.
The funding of the plan depends on the statutory valuation performed by the trustees, and the relevant employers, with the assistance of the scheme actuary – i.e. not the IAS 19 valuation. The funding valuation was last completed as at 31 December 2019, and measured plan assets and liabilities to be £4.6bn and £3.3bn respectively. This corresponds to a surplus of £1.3bn and funding level of 140%. As there is currently no deficit, no recovery plan is required.
The Group also operates two UK defined benefit plans as a result of the acquisition of AAM PLC in 2017. These plans are final salary based, with benefits depending on members’ length of service and salary prior to retirement. At the last statutory valuation date, these plans were in deficit and the Group agreed funding plans which aimed to eliminate the deficits, with the plans’ trustees. At 31 December 2020, one of the two schemes is in surplus on an IAS 19 basis. The funding valuations were last competed as at 30 June 2019; both plans were in deficit and recovery plans have been agreed.
The principal plan surplus is considered to be recoverable as a right to a refund exists. The surplus has been reduced to reflect an authorised surplus payments charge that would arise on a refund. Other includes a defined benefit plan with a surplus of £19m at 31 December 2020 (2019: £21m).
Remeasurement (losses)/gains recognised in other comprehensive income (277) (408) 712 385 435 (23) (155) – 280 (23) Exchange differences (7) 7 5 (5) (2) 2 – – (2) 2 Employer contributions – – 14 15 14 15 – – 14 15 Benefit payments 151 133 (151) (132) – 1 – – – 1 At 31 December (3,394) (3,194) 5,596 4,917 2,202 1,723 (783) (615) 1,419 1,108
To provide more information on the approach used to determine and measure the fair value of the plan assets, the fair value hierarchy has been used as defined in Note 40. Those assets which cannot be classified as level 1 have been presented together as level 2 or 3.
Assets measured at fair value based on level 1 inputs Derivatives 2 3 – – 2 3 Equity securities 183 171 – – 183 171 Interests in pooled investment funds1
Debt – 330 – 12 – 342 Equity – – – 34 – 34 Property – 117 – 6 – 123 Absolute return – 68 – 116 – 184 Cash – 275 – 22 – 297
The £743m liability in respect of collateral held (2019: £426m) consists of repurchase agreements of £647m (2019: £125m), margins on derivatives of £51m (2019: £25m) and collateral of £45m (2019: £276m).
Consumer Price Index (CPI) 2.40 2.00 Retail Price Index (RPI) 2.90 2.90
2020 2019 Weighted average duration years years Current pensioner 14 15 Non-current pensioner 27 28
(g) Risk (g)(i) Risks and mitigating actions The Group’s consolidated statement of financial position is exposed to movements in the defined benefit plans’ net asset. In particular, the consolidated statement of financial position could be materially sensitive to reasonably likely movements in the principal assumptions for the principal plan. By offering post-retirement defined benefit pension plans the Group is exposed to a number of risks. An explanation of the key risks and mitigating actions in place for the principal plan is given below.
Inflation Increases in inflation expectations would in isolation be expected to increase the defined benefit plan liabilities.
A House of Lords report in 2019 raised the potential for changes to the RPI measure of inflation, which was followed by recommendations from the UK Statistics Authority. The results of the consultation on the reform of RPI (announced on 25 November 2020) confirmed that RPI will be aligned to CPIH (CPI excluding owner occupiers’ housing costs) as proposed, but not before 2030. While uncertainty remains, there is a risk that future cash flows from, and thus the value of, the plan’s RPI-linked assets fall without a corresponding reduction in the plan’s CPI-linked liabilities. While not directly observable from market data, the plan’s RPI-linked asset values may already reflect an element of the expected changes and risk of such changes.
Increase/(decrease) in fair value of plan assets £m £m £m £m Yield/discount rate Decrease by 1% (e.g. from
Rates of inflation Decrease by 1% 555 (1,036) 587 (889) Increase by 1% (698) 1,430 (756) 1,243
Life expectancy Decrease by 1 year 103 n/a 82 n/a Increase by 1 year (103) n/a (96) n/a 175Standard Life Aberdeen 2020
At 1 January 67 75 Additions during the year 25 – Released to the consolidated income statement as revenue from contracts with customers (19) (8) At 31 December 73 67
7. Group financial statements continued 35. Deferred income Where the Group receives fees in advance (front-end fees) for services it is providing, including investment management services, these fees are initially recognised as a deferred income liability and released to the consolidated income statement over the period services are provided.
The amount of deferred income expected to be settled after more than 12 months is £3m (2019: £60m).
(a) Provisions The movement in provisions during the year is as follows: Separation costs Other provisions Total provisions 2020 2019 2020 2019 2020 2019 £m £m £m £m £m £m Opening balance carried forward 77 80 25 25 102 105 Effect of change in accounting policy to IFRS 161 – – – (12) – (12) At 1 January 77 80 25 13 102 93 Charged/(credited) to the consolidated income statement
Used during the year (9) (3) (9) – (18) (3) At 31 December 68 77 25 25 93 102 1 The Group has initially applied IFRS 16 at 1 January 2019. Under the transition method chosen, comparative information is not restated and the cumulative effect of initially applying this standard is recognised in retained earnings at the date of initial application.
The amount of provisions expected to be settled after more than 12 months is £12m (2019: £34m).
For the purposes of this note: • Shareholder business refers to the assets and liabilities to which the shareholder is directly exposed. The shareholder refers to the equity holders of the Company and the preference shareholders.
• Unit linked funds refers to the assets and liabilities of the unit linked 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 fund contracts. These cash flows are included in shareholder business.
Unit linked funds are excluded from the analysis in this note. Details regarding the financial risks of instruments relating to the Group’s unit linked funds can be found in Note 25 and the risks relating to the Group’s principal defined benefit pension plan are explained in Note 34.
2020 2019 Notes £m £m Equity securities and interests in pooled investment funds at FVTPL 222 195 Debt securities 54 78 Assets held for sale 23 1 2 Total seed capital 277 275
At 31 December 2020 the shareholder exposure to equity markets was £1,411m (2019: £199m) in relation to equity securities. This primarily relates to the Group’s investment in HDFC Life of £1,216m (2019: £nil), seed capital investments of £109m (2019: £118m), and equity securities held by the Standard Life Foundation of £53m (2019: £48m).
The main financial assets held by the Group which give rise to interest rate risk are debt securities and cash and cash equivalents. The Group is also exposed to interest rate risk on its investments in pooled investment funds where the underlying instruments are exposed to interest rate risk.
Interest rate exposures are managed in line with the Group’s risk appetite.
(b)(i)(iii) Exposure to foreign currency risk Foreign currency risk arises where adverse movements in currency exchange rates impact the value of revenues received from, and the value of assets and liabilities held in, currencies other than UK Sterling. The Group’s financial assets are generally held in the local currency of its operational geographic locations. The Group generally does not hedge the currency exposure relating to revenue and expenditure, nor does it hedge translation of overseas profits in the income statement. Where appropriate, the Group may use derivative contracts to reduce or eliminate currency risk arising from individual transactions or seed capital and co-investment activity. The Group does not hedge foreign exchange risk in relation to its investment in HDFC Life.
(b) Market risk Market risk exposures in the Asset management, platforms and wealth segment primarily arise as a result of holdings in newly established investment vehicles which the Group has seeded and co-investments in property and infrastructure funds. Seed capital is classified as held for sale when it is the intention to dispose of the vehicle in a single transaction and within one year. Co-investments are typically held for a longer term and align the Group’s economic interests with those of property, private equity and infrastructure fund coinvestors. The consolidated statement of financial position includes the following amounts in respect of seed capital and co-investments.
Market risk exposures in the Insurance associates and joint ventures segment primarily relates to our investment in HDFC Life.
The Group is also exposed to adverse market price movements on its interests in pooled investment funds. The shareholder exposure of £523m (2019: £458m) to pooled investment funds primarily relates to £199m (2019: £161m) of seed capital and co-investments, corporate funds held in absolute return funds of £223m (2019: £210m), investments in certain managed funds to hedge against liabilities from variable pay awards that are deferred and settled in cash by reference to the price of those funds of £58m (2019: £44m) and pooled investment funds held by the Standard Life Foundation of £36m (2019: £35m).
Exposures to equity risk are primarily managed though the hedging of market risk in respect of seed capital investments where it is appropriate and efficient to do so. Additionally limits are imposed on the amount of seed capital and co-investment activity that may be undertaken. The Group does not hedge equity risk in relation to its investment in HDFC Life.
The table below summarises the financial instrument exposure to foreign currency risks in UK Sterling.
In addition to financial instruments analysed above, the principal source of foreign currency risk for shareholders arises from the Group's investments in overseas subsidiaries and associates and joint ventures accounted for using the equity method. The carrying value and, where listed, market value of the Group’s Indian and Chinese associates and joint ventures are disclosed in Note 16. The Group does not hedge foreign currency risk in relation to these investments.
(b)(ii) Sensitivity of financial instruments to market risk analysis The Group’s profit after tax and equity are sensitive to variations in respect of the Group’s market risk exposures and a sensitivity analysis is presented below. The analysis has been performed by calculating the sensitivity of profit after tax and equity to changes in equity security prices (equity risk), changes in interest rates (interest rate risk) and changes in foreign exchange rate (foreign currency risk) as at the reporting date applied to assets and liabilities other than those classified as held for sale, and after allowing for the Group’s hedging strategy.
The variables used in the sensitivity analysis are considered reasonable assumptions and are consistent with market peers. Changes to variables are provided by internal specialists who determine what are reasonable assumptions.
The equity prices and Indian Rupee sensitivities primarily relate to the Group’s investment in HDFC Life which is held by an intermediate subsidiary which has a US Dollar functional currency.
Limitations The sensitivity of the Group’s profit after tax and equity may be non-linear and larger or smaller impacts should not be derived from these results. The sensitivities provided illustrate the impact of a reasonably possible change in a single sensitivity factor, while the other sensitivity factors remain unchanged. Correlations between the different risks and/or other factors may mean that experience would differ from that expected if more than one risk event occurred simultaneously.
– No significant increase in credit risk since initial recognition – Trade receivables or contract assets with significant financing component, or lease receivables if lifetime ECL measurement has not been elected Lifetime ECL (losses resulting from possible defaults over the remaining life of the financial asset)
Financial assets attract an ECL allowance equal to either: 12 month ECL (losses resulting from possible default within the next 12 months)
– Significant increase in credit risk since initial recognition – Trade receivables or contract assets with no significant financing component – Trade receivables or contract assets with significant financing component, or lease receivables for which lifetime ECL measurement has been elected Changes in Lifetime ECL – Credit-impaired at initial recognition
The Group assumes that a significant increase in credit risk has arisen when contractual payments are more than 30 days past due. The Group assumes that credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. Financial instruments with an external rating of ‘investment grade’ are presumed to have low credit risk in the absence of evidence to the contrary. Investment grade financial instruments are financial assets with credit ratings assigned by external rating agencies with classification within the range of AAA to BBB. If a financial asset is not rated by an external agency it is classified as ‘not rated’.
At 31 December 2020 the Group does not hold financial assets at amortised cost that it regards as credit-impaired (2019: £nil). In making this assessment the Group has considered if any evidence is available to indicate the occurrence of an event which would result in a detrimental impact on the estimated future cash flows of these assets.
(c)(i) Credit exposure The following table presents an analysis of the credit quality of shareholder financial assets and the maximum exposure to credit risk without taking into account any collateral held: Amortised cost
Derivative financial assets 18 16 – 3 – – – – 18 19 Debt securities 763 725 – – 320 602 5 – 1,088 1,327 Receivables and other financial assets 30 1 – – 244 187 352 372 626 560 Cash and cash equivalents – – – – 1,514 1,609 1 – 1,515 1,609 Carrying amount 811 742 – 3 2,078 2,398 358 372 3,247 3,515
Where there is an event of default under the terms of the agreements, any collateral balances will be included in the close-out calculation of net counterparty exposure. At 31 December 2020, the Group had pledged £28m (2019: £18m) of cash and £nil (2019: £nil) of securities as collateral for derivative financial liabilities. At 31 December 2020, the Group had accepted £14m (2019: £21m) of cash and £120m (2019: £25m) of securities as collateral for derivatives financial assets and reverse repurchase agreements. None of the securities were sold or repledged at the year end.
The level of liquid resources in the Group is also projected under a number of adverse scenarios. These are described more fully in the Viability Statement.
As a result of the policies and processes established to manage risk, the Group expects to be able to manage liquidity risk on an ongoing basis. We recognise there are a number of scenarios that can impact the liquid resources of a business as discussed in the Risk management section of the Strategic report.
The Group has a liquidity risk framework and processes in place for monitoring, assessing, and controlling liquidity risk.
(a) Consolidated structured entities As at 31 December 2020 and 31 December 2019, the Group has not provided any non-contractual financial or other support to any consolidated structured entity and there are no current intentions to do so.
Financial investments Equity securities and interests in pooled investment funds 1,003 917 Debt securities 40 12
The total issuance balance relating to unconsolidated structured debt securitisation vehicles in which the Group has an investment is £2,857m (2019: £1,000m).
Additional information on how the Group manages its exposure to risk can be found in Note 38.
(a) Fair value hierarchy In determining fair value, 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 3: Fair values measured using inputs that are not based on observable market data (unobservable inputs)
Exchange traded derivatives valued using prices sourced from the relevant exchange.
Debt securities valued using prices received from external pricing providers based on quotes received from a number of market participants.
Debt securities valued using prices received from external pricing providers based on a single broker indicative quote.
7. Group financial statements continued 40. Fair value of assets and liabilities The Group uses fair value to measure many of its assets and liabilities. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction.
• 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)
Debt securities listed on a recognised exchange valued using prices sourced from their primary exchange.
Level 2 Pooled investment funds where daily unit prices are available and reference is made to observable market data.
Level 3 These relate primarily to interests in private equity, real estate and infrastructure funds which are valued at net asset value. Underlying real estate and private equity investments are generally valued in accordance with independent professional valuation reports or International Private Equity and Venture Capital Valuation Guidelines where relevant. The underlying investments in infrastructure funds are generally valued based on the phase of individual projects forming the overall investment and discounted cash flow techniques based on project earnings.
Where net asset values are not available at the same date as the reporting date, these valuations 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.
1 Investments in associates at FVTPL are valued in the same manner as the Group’s equity securities and interests in pooled investment funds. 2 Where pooled investment funds have been seeded and the investment in the funds 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. 3 Non-performance risk arising from the credit risk of each counterparty is also considered on a net exposure basis in line with the Group’s risk management policies. At 31
The fair value of liabilities in respect of third party interest in consolidated funds and non-participating investment contracts are calculated equal to the fair value of the underlying assets and liabilities.
• For non-participating investment contracts, 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 and these liabilities are predominately categorised within level 2 of the fair value hierarchy. Where the underlying assets are categorised as level 3, the liabilities are also categorised as level 3.
In addition, contingent consideration assets and contingent consideration liabilities are also categorised as level 3 in the fair value hierarchy. Contingent consideration assets and liabilities have been recognised in respect of acquisitions and disposals. Generally valuations are based on unobservable assumptions regarding the probability weighted cash flows and, where relevant, discount rate. This includes the contingent consideration relating to the terms of the sale of SLAL to Phoenix in August 2018. The terms include a number of indemnities that give rise to contingent consideration. The matters that had the most significant impact on the fair value of this contingent consideration at 31 December 2020 related to the annuity sales practices indemnity, and related tax, and the resolution of other legacy matters which were previously under dispute. The valuation of these elements of the contingent consideration at 31 December 2020 was based on the amount expected to be received from Phoenix. This was in line with the £34m received in February 2021, refer Note 47.
Liabilities in respect of third party interest in consolidated funds 77 119 – – 77 119 – – 77 119 – – Derivative financial liabilities 13 3 – – 13 3 2 1 11 2 – – Contingent consideration liabilities 6 14 – – 6 14 – – – – 6 14 Total liabilities at fair value 96 136 – – 96 136 2 1 88 121 6 14
There were no significant transfers between levels 1 and 2 during the year (2019: none). Refer Note 40(a)(iii) for details of movements in level 3.
(a)(iii) Reconciliation of movements in level 3 instruments The movements during the year of level 3 assets and liabilities held at fair value, excluding unit linked assets and liabilities and assets and liabilities held for sale, are analysed below.
(a)(ii) Fair value hierarchy for liabilities measured at fair value in the statement of financial position The table below presents the Group's non-unit linked liabilities measured at fair value by level of the fair value hierarchy.
As recognised in the consolidated statement of financial position line item Classified as held for sale Total Level 1 Level 2 Level 3
At 1 January 2 2 82 59 1 1 Total gains/(losses) recognised in the consolidated income statement – – 2 2 – – Purchases – – 29 23 – – Sales and other adjustments (1) – (13) (8) – – Transfers in to level 31 – – 1 6 – – At 31 December 1 2 101 82 1 1 1 Transfers are deemed to have occurred at the end of the calendar quarter in which they arose.
A range of unobservable inputs is not applicable as we have determined that the reported NAV represents fair value at the end of the reporting period
Other unlisted equity securities 16 17 Indicative share price Recent off market capital raising transactions
The table below identifies the significant unobservable inputs in relation to contingent consideration assets and liabilities categorised as level 3 instruments at 31 December 2020 with a fair value of £22m (2019: (£13m)). Fair value £m Valuation technique Unobservable input Input used 2020 Contingent consideration assets and liabilities 22 Probability weighted cash flows
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.
Expected amount required to cover the redress due to customers compared to SLAL’s provision at 31 December 2017
Our assessment of the expected resolution taking into account our legal advice 187Standard Life Aberdeen 2020
As recognised in the consolidated statement of financial position line item Fair value Level 1 Level 2 Level 3 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 Notes £m £m £m £m £m £m £m £m £m £m
Dividends received from associates and joint ventures are presented as cash flows arising from operating activities.
(a)(v) Sensitivity of the fair value of level 3 instruments to changes in key assumptions At 31 December 2020 the shareholder is directly exposed to movements in the value of all non-unit linked level 3 instruments. Changing unobservable inputs in the measurement of the fair value of these 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. No level 3 instruments are held in in consolidated structured entities. See Note 25 for unit linked level 3 instruments.
For activities related to the acquisition and disposal of subsidiaries, associates and joint ventures, cash flows are classified as investing activities. The settlement of contingent and deferred amounts recognised on acquisitions and disposals are classified as investing activities where there is not considered to be a significant financing component of the related inflows or outflows.
Other financial liabilities, provisions and other liabilities (122) (230) Pension and other post-retirement benefit provisions (30) (60) Deferred income 6 (8) Investment contract liabilities (110) (316) Change in liability for third party interest in consolidated funds 1 197 Liabilities held for sale (736) 126 Change in operating liabilities (991) (291)
Gain on sale of subsidiaries (8) – Profit on disposal of associates (1,858) (1,542) Depreciation of property, plant and equipment 46 47 Amortisation of intangible assets 152 184 Impairment losses on intangible assets 1,064 1,571 (Reversal of)/loss on impairment of associates 45 (243) Impairment losses recognised on property, plant and equipment 2 16 Impairment losses on disposal group held for sale 1 – Movement in contingent consideration asset/liability 10 (61) Equity settled share-based payments 64 43 Finance costs 30 36 Share of profit from associates and joint ventures accounted for using the equity method (194) (79) Other non-cash and non-operating items (646) (28)
Repayment of subordinated liabilities (100) (455) Dividend paid2 (2) – Interest paid (30) (39)
Amounts reclassified from equity 102 – Interest expense 30 35 Transfer to profit or loss on redemption of subordinated liabilities – 47 Foreign exchange adjustment (17) (19)
Payment of lease liabilities (35) (32) Cash flows from financing activities (35) (32) Non-cash items
Legal proceedings, complaints and regulations The Group is subject to regulation in all of the territories in which it operates insurance and investment businesses. In the UK, where the Group primarily operates, the FCA has broad powers, including powers to investigate marketing and sales practices.
Opening balance carried forward 268 – Effect of change in accounting policy to IFRS 161 – 227 Opening balance at 1 January 268 227
42. Contingent liabilities and contingent 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.
For all share-based payments services received for the incentive granted are measured at fair value. For equity-settled share-based payment transactions, the fair value of services received is measured by reference to the fair value of the equity instruments at the grant date. The fair value of the number of instruments expected to vest is charged to the income statement over the vesting period with a corresponding credit to the equity compensation reserve in equity.
For cash-settled share-based payment and deferred fund awards transactions, services received are measured at the fair value of the liability. The fair value of the liability is remeasured at each reporting date and any changes in fair value are recognised in the consolidated income statement.
Service, or service and performance conditions. These can be tailored to the individual award.
All of the awards made under these plans are equity-settled except for a small number of cash-settled awards for the deferred and discretionary share plans 2020 (see Section (d)(ii) below).
The fair value of awards granted under the Group’s incentive schemes is determined using a relevant valuation technique, such as the Black Scholes option pricing model.
The awards made under the deferred and discretionary share plans also include the awards under the 2020 LTIP for executive Directors and awards to senior management with specific performance conditions.
The deferred and discretionary share plans also made a number of deferred fund awards in the year end 31 December 2020 (see Section (d)(i) below).
In addition, the Group operates the following plans for which there are outstanding awards but for which no awards were made during the year ended 31 December 2020: Plan Options Conditional awards
1 Included in Annual bonus deferred share options Section (b)(i) below.
(a) Employee share-based payments and deferred fund awards expense The amounts recognised as an expense for equity-settled share-based payment transactions and deferred fund awards with employees are as follows: Share options and share awards granted under deferred and discretionary share plans1 61 36 Share options granted under long-term incentive plans – 4 Share options granted under Sharesave 2 2 Matching shares granted under share incentive plans 1 1 Equity-settled share-based payments 64 43 Cash-settled deferred fund awards 29 10 Total expense 93 53 1 Includes expense for annual bonus deferred share options and conditional awards.
Included in the expense above is £27m (2019: £19m) of share-based payment expenses which are included in restructuring and corporate transaction expenses in the consolidated income statement.
Service, or service and performance conditions. These are tailored to the individual award.
Service only. There are no outstanding performance conditions at date of grant.
(b) Options and conditional awards granted (b)(i) Deferred and discretionary share plans The number and remaining contractual life for options outstanding and the share price at exercise of options exercised during the year are as follows: 2020 2019
(excluding RSP) RSP Outstanding at 1 January 36,411,803 1,997,896 55,702,777 6,562,186 Granted – – – – Forfeited (19,454,369) (827,383) (18,310,221) (1,693,033) Exercised (754,907) (901,616) (952,703) (2,855,702) Expired – – (28,050) (15,555) Outstanding at 31 December 16,202,527 268,897 36,411,803 1,997,896 Exercisable at 31 December – – – 89,798 Remaining contractual life of options outstanding (years)1 0.92 0.75 1.22 1.17 Options exercised during the year Share price at time of exercise1 237p 265p 268p 252p 1 Weighted average.
(b)(iii) Sharesave The number, exercise price and remaining contractual life for options outstanding and the share price at exercise of options exercised during the year are as follows: 2020 2019
The Sharesave options were granted on 14 October 2020 with an exercise price of 189p. The weighted average option term was 3.64 years. The weighted average share price at grant date was 247p and the weighted average fair value at grant date was 44p. Sharesave options have no dividend entitlement. In determining the fair value of options granted under the Sharesave scheme the historic volatility of the share price over a period of up to five years and a risk free rate determined by reference to swap rates was also considered.
(d)(ii) Cash settled share based payments At 31 December 2020, the liability recognised for cash-settled share based payments was £nil (2019: £nil).
In the year ended 31 December 2020, for associates accounted for using the equity method, the Group recognised sales primarily in relation to management fees of £195m (2019: £200m1) and purchases in relation to services received of £79m (2019: £49m). Management fees include sales where the selection of the Group as the asset manager is made by the underlying policyholder.
During the year, the Group recognised management fees from Group managed non-consolidated investment vehicles. These fees are disclosed in Note 39. It also recognised management fees of £4m (2019: £4m) from the Group’s defined benefit pension plans.
In the year ended 31 December 2020 there were sales to joint ventures of £10m (2019: £1m) and purchases from joint ventures of £nil (2019: £1m). In addition to these transactions between the Group and related parties during the year, in the normal course of business the Group made a number of investments into/divestments from investment vehicles managed by the Group including investment vehicles which are classified as investments in associates measured at FVTPL. Group entities paid amounts for the issue of shares or units and received amounts for the cancellation of shares or units. 1 2019 comparative restated to include sales where the selection of the Group as the asset manager is made by the underlying policyholder.
The Group had balances due from associates accounted for using the equity method of £65m (2019: £55m), balances due to associates accounted for using the equity method of £43m (2019: £22m), £1m due from joint ventures (2019: £nil) and no amounts due to joint ventures (2019: £nil) as at 31 December 2020. The Group’s defined benefit pension plans have assets of £965m (2019: £1,154m) invested in investment vehicles managed by the Group.
Details of the sale of a subsidiary to a joint venture business are included in Note 1.
On 24 May 2019 the executive leadership team replaced the executive committee. For 2019 key management personnel therefore included Directors of Standard Life Aberdeen plc (since appointment) and the executive committee (since appointment) for the period from 1 January 2019 until 23 May 2019 and from 24 May 2019 included Directors of Standard Life Aberdeen plc (since appointment) and the members of the executive leadership team (since appointment).
(c) Transactions with key management personnel and their close family members Certain members of key management personnel hold investments in investments products which are managed by the Group. None of the amounts concerned are material in the context of funds managed by the Group. All transactions between key management and their close family members and the Group during the year are on terms which are equivalent to those available to all employees of the Group.
46. Capital management (a) Capital and risk management policies and objectives Managing capital is the ongoing process of determining and maintaining the quantity and quality of capital appropriate for the Group and ensuring capital is deployed in a manner consistent with the expectations of our stakeholders. For these purposes, the Board considers our key stakeholders to be our clients, the providers of capital (our equity holders and holders of our subordinated liabilities) and the Financial Conduct Authority (FCA) as the lead prudential supervisor for the Group.
Capital requirements are forecast on a periodic basis and assessed against the forecast available capital resources. In addition, internal rates of return achieved on capital invested are assessed against hurdle rates, which are intended to represent the minimum acceptable return given the risks associated with each investment. The capital planning process is the responsibility of the Chief Financial Officer. Capital plans are ultimately subject to approval by the Board.
The formal procedures for identifying and assessing risks that could affect the capital position of the Group are described in the Risk management section of the Strategic report on page 39. Information on financial instruments risk is also provided in Note 38.
(b) Regulatory capital (b)(i) Regulatory capital framework The Group is supervised under the CRD IV regulatory regime for group prudential supervisory purposes and therefore measures and monitors its capital on that basis. The Group’s regulatory capital position under CRD IV is determined by consolidating the eligible capital and reserves of the Group (subject to a number of deductions) to derive regulatory capital resources, and comparing this to the Group’s regulatory capital requirements.
Pillar 1 – minimum requirement for capital Pillar 1 focuses on fixed overhead requirements and the Group’s exposure to credit and market risks in respect of risk-weighted assets, and sets a minimum requirement for capital based on these measures. At 31 December 2020, the Group’s draft Pillar 1 minimum requirement for capital was £0.5bn (2019: £0.4bn).
The Group’s current capital resources include approximately £0.8bn (2019: approximately £0.3bn) from holdings in insurance entities that it is expected will no longer be eligible following the implementation of the Investment Firm Prudential Regime from 1 January 2022. The Investment Firm Prudential Regime is also expected to introduce constraints on the proportion of the minimum capital requirement that can be met by each tier of capital. As a result, it is estimated that approximately £0.3bn of existing Tier 2 capital, whilst continuing to be reported within the Group’s capital resources, would not be available to meet the minimum capital requirement from 1 January 2022.
(b) Simplification and extension of the strategic partnership between the Group and Phoenix On 23 February 2021, the Group announced the purchase of certain products in the Phoenix Group’s savings business offered through the Standard Life Aberdeen Wrap platform, comprising a self-invested pension plan (SIPP) and an onshore bond product; together with the Phoenix Group’s trustee investment plan (TIP) business for UK pension scheme clients. The assets relating to these Phoenix Group-administered businesses at 31 December 2020 are £38bn and are currently included in Group AUMA. The transaction will be effected through a Part VII transfer which is targeted to complete in late 2022. The upfront consideration paid by the Group in February 2021 was £62.5m, which will be offset in part by expected payments from Phoenix to the Group relating to profits of the business prior to completion of the legal transfer. The transaction will result in the Group earning adjusted profit in relation to the acquired businesses post completion.
The Group have also resolved legacy issues with Phoenix relating to the operation of certain aspects of the agreements that were entered into at the time of the sale of SLAL to Phoenix and which impacted the value of certain indemnities and other payments under the transaction terms. The impact of the resolution of these legacy matters is included in the 2020 results and resulted in the Group receiving a cash inflow of £34m in February 2021.
The ability of subsidiaries to transfer cash or other assets within the Group for example through payment of cash dividends is generally restricted only by local laws and regulations, and solvency requirements. Included in equity attributable to equity holders of Standard Life Aberdeen plc at 31 December 2020 is £93m (2019: £88m) related to the Standard Life Foundation, a subsidiary undertaking of the Group. The assets of the Standard Life Foundation are restricted to be used for charitable purposes.
Ordinary A shares Ordinary B shares 21ASI Long Term Fund I SCSp8 Limited Partnership 0% 6 SAS 1 Limited Ordinary shares 100% Aberdeen ACM Team LP4 Limited Partnership 0% Aberdeen ACP LLP4 Limited Liability Partnership 100% Aberdeen Alternatives (Holdings) Limited4 Ordinary shares 100% Aberdeen Asia IV (General Partner) S.a.r.l.9 Ordinary shares 100% Aberdeen Asia Pacific Fund (Offshore), L.P.10 Limited Partnership 0% Aberdeen Asia Pacific Fund II (Offshore), L.P.10 Limited Partnership 0% Aberdeen Asia Pacific Fund, L.P.10 Limited Partnership 0% Aberdeen Asia Pacific Fund II, L.P.10 Limited Partnership 0% Aberdeen Asia Pacific III Ex-Co-Investment (Offshore), L.P.10 Limited Partnership 0% Aberdeen Asia Pacific III Ex-Co-Investment, L.P.10 Limited Partnership 0% Aberdeen Asia Pacific III, L.P.10 Limited Partnership 0% Aberdeen ASIF Carry LP4 Limited Partnership 25%
ASI Sterling Long Dated Government Bond Fund3 OEIC 38% ASI China A Share Equity Fund3 OEIC 63%
ASI MyFolio Sustainable I Fund3 OEIC 100% ASI MyFolio Sustainable II Fund3 OEIC 100% ASI MyFolio Sustainable III Fund3 OEIC 100% ASI MyFolio Sustainable IV Fund3 OEIC 100% ASI MyFolio Sustainable V Fund3 OEIC 100%
Aberdeen Standard OEIC V ASI UK Impact - Employment Opportunities Equity Fund3 OEIC 96%
Name of related undertaking Share class1 % interest held2 Arden Garden State NJ Fund, L.P.24 Limited Partnership 0% Arden Institutional Advisers, L.P.24 Limited Partnership 0% Arden Institutional Fund LP24 Limited Partnership 0% Arthur House (No.6) Limited3 Ordinary shares 100% Artio Global Investors Inc.16 Ordinary shares 100% ASI Core Private Equity Fund GP, LLC13 Limited liability company 100% ASI Core Private Equity Fund L.P.13 Limited Partnership 0% ASI Direct RE GP LLP Limited Liability Partnership 100% ASI European Long Income RE Fund SCSp19 Limited Partnership 0% ASI European Private Equity 2019 B LP Limited Partnership 0% ASI (General Partner 2019 European PE B) Limited Ordinary shares 100% ASI (General Partner 2019 European PE A Carry) Limited Ordinary shares 100% ASI (General Partner 2019 European PE A) S.à r.l.19 Ordinary shares 100% ASI (General Partner AS 2020 FF) S.a r.l.19 Ordinary shares 100% ASI (General Partner ECF II) Limited Ordinary shares 100% ASI (General Partner PE2) Limited Ordinary shares 100% ASI (General Partner PFF 2018) S.a.r.l.19 Ordinary shares 100% ASI (General Partner SOF IV) Limited Ordinary shares 100% ASI (General Partners 2019 European PE B) LLC13 Limited liability company 100% ASI (Gold) Limited3 Ordinary shares 100% ASI Han Co-Investment LP Limited Partnership 0% ASI Hark Capital I GP, LLC13 Limited liability company 100% ASI Hark Capital II GP, LLC13 Limited liability company 100% ASI Hark Capital I Parallel, LP24 Limited Partnership 0% ASI Hark Capital II Parallel, LP24 Limited Partnership 0% ASI Hark Capital I, LP24 Limited Partnership 0% ASI Hark Capital II, LP24 Limited Partnership 0% ASI Hark Capital III, LP13 Limited Partnership 0% ASI Hark Capital III GP, LLC13 Limited liability company 100% ASI (KFAS) RE GP LLP Limited Liability Partnership 100% ASI Korea GP 2 Pte. Ltd.53 Ordinary shares 100% ASI Korea Separate Account 2 LP53 Limited Partnership 0% ASI Little Mill Carry LP4 Limited Partnership 100% ASI Little Mill LP4 Limited Partnership 0% ASI Mid Market Fund 1 LP19 Limited Partnership 0% ASI Mid-Market 1 LP4 Limited Partnership 0% ASI MM Executive Co Investment LP4 Limited Partnership 0% ASI PE 1 Carry LP4 Limited Partnership 40% ASI (PGPE III) GP LP Limited Partnership 0% ASI Phoenix Fund Financing SCSp19 Limited Partnership 0% ASI Phoenix Global Private Equity III LP Limited Partnership 0% ASI Private Equity 1 LP4 Limited Partnership 0% ASI Private Equity 2 GP LP Limited Partnership 100% ASI Private Equity 2 LP Limited Partnership 0% ASI REMM GP LLP4 Limited Liability Partnership 100% ASI Shin Co-Investment LP4 Limited Partnership 0% ASI Shin Global Investment GP Limited10 Ordinary shares 100% ASI (SOF E GP) Limited Ordinary shares 100% ASPER (Luxembourg) GP S.a.r.l.19 Ordinary shares 100% Baigrie Davies & Company Limited3 Ordinary shares 100% Baigrie Davies Holdings Limited3 Ordinary shares 100% Bonaccord Capital Company LP13 Limited Partnership 0% BoS Mezzanine Partners Fund L.P.54 Limited Partnership 0% BOSEMP Feeder LP4 Limited Partnership 0% Castlepoint General Partner Limited55 Ordinary shares 100% Castlepoint LP55 Limited Partnership 0% Castlepoint Nominee Limited55 Ordinary shares 100% C.C. U.S. Private Equity Fund GP, LLC13 Limited Liability Company 100%
Name of related undertaking Share class1 % interest held2 NASP 2008 General Partner Limited Partnership Limited Partnership 0% NASP 2008 Special Limited Partnership Limited Partnership 0% Next Generation Associates III, LLC13 Limited liability company 100% Next Generation Associates IV, LLC13 Limited liability company 100% Next Generation Associates V, LLC13 Limited liability company 100% Next Generation Associates V, L.P.13 Limited Partnership 0% North American Strategic Partners (Feeder) 2006 Limited Partnership 0% North American Strategic Partners (Feeder) 2008 Limited Partnership Limited Partnership 0% North American Strategic Partners 2006 LP10 Limited Partnership 0% North American Strategic Partners 2008 LP10 Limited Partnership 0% North American Strategic Partners Companion Fund LP60 Limited Partnership 0% North American Strategic Partners, LP60 Limited Partnership 4% North East Trustees Limited61 Ordinary A shares
Origo Services Limited62 Ordinary shares 19% Orion Partners CLP Inc.63 Ordinary shares 100% Orion Partners Holdings Limited64 Ordinary shares 100% Orion Partners Services Inc.63 Ordinary shares 100% Ostara China RE Fund LP Limited Partnership 0% Ostara China Real Estate Fund L.P.63 Limited Partnership 0% Ostara Japan Fund 3 LP63 Limited Partnership 0% Ostara Korea GP 2 Pte. Ltd.53 Ordinary shares 100% Ostara Korea Separate Account LP53 Limited Partnership 0% Ostara Partners Inc. China63 Ordinary shares 100% Ostara Partners Inc. Japan 363 Ordinary shares 100% Pace Financial Solutions Limited3
PE1 LP4 Limited Partnership 0% PE1A LP4 Limited Partnership 0% PE2 LP4 Limited Partnership 0% Pearl Private Equity LP Limited Partnership 0% Pearl Strategic Credit LP Limited Partnership 0% Pearson Jones & Company (Trustees) Limited61 Ordinary shares 100% Pearson Jones Nominees Limited61 Ordinary shares 100% PGB European Buy-out Fund I SCSp19 Limited Partnership 0% Phoenix Group Holdings plc66 Ordinary shares 14% PT Aberdeen Standard Investments Indonesia39 Limited Liability Company 99% PURetail Luxembourg Management Company S.a.r.l.67 Class A shares 50% Regent Property Partners (Retail Parks) Limited3 Ordinary shares 100% Self Directed Investments Ltd.65 Ordinary shares 100% Serin Wealth Limited3 Ordinary shares 100% Shin Global Investment Partners LP10 Limited Partnership 95% SL Capital 2016 Co-Investment GP LP Limited Partnership 5% SL Capital 2016 Co-Investment LP Limited Partnership 0% SL Capital ECF GP LP Limited Partnership 4% SL Capital ESF I GP LP Limited Partnership 0% SL Capital ESF I LP Limited Partnership 1% SL Capital European Co-Investment B LP Limited Partnership 0% SL Capital European Co-Investment LP Limited Partnership 0% SL Capital Ignis Private Equity Founder LP Limited Partnership 65%
Name of related undertaking Share class1 % interest held2 SL Capital Ignis Strategic Credit Founder LP Limited Partnership 0% SL Capital Infrastructure Fund II Top-Up Co-Investment Fund SCSp19 Limited Partnership 0% SL Capital Infrastructure I GP LP Limited Partnership 100% SL Capital Infrastructure I LP Limited Partnership 0% SL Capital Infrastructure II LTP LP Limited Partnership 100% SL Capital Infrastructure II SCSp28 Limited Partnership 0% SL Capital Infrastructure Secondary I GP LP Limited Partnership 100% SL Capital Infrastructure Secondary I LP Limited Partnership 0% SL Capital NASF I A LP Limited Partnership 2% SL Capital NASF I Carry LP Limited Partnership 0% SL Capital NASF I GP LP Limited Partnership 0% SL Capital NASF I LP Limited Partnership 0% SL Capital Partners (US) Limited Ordinary shares 100% SL Capital Partners LLP Limited Liability Partnership 100% SL Capital Pearl Private Equity GP LP Limited Partnership 0% SL Capital Pearl Strategic Credit GP LP Limited Partnership 1% SL Capital SOF I Feeder LP Limited Partnership 0% SL Capital SOF II Feeder LP Limited Partnership 0% SL Capital SOF III Feeder LP Limited Partnership 0% SL Capital SOF I GP LP Limited Partnership 0% SL Capital SOF II GP LP Limited Partnership 0% SL Capital SOF III GP LP Limited Partnership 0% SL Capital SOF I LP Limited Partnership 0% SL Capital SOF II LP Limited Partnership 0% SL Capital SOF III LP Limited Partnership 0% SLA Corporate Secretary Limited Ordinary shares 100% SLC EC I Executive Co Investment Limited Partnership Limited Partnership 0% SLCI (Infrastructure 2018 A) Co-Invest LP Limited Partnership 0% SLCI I Executive Co Investment Limited Partnership Limited Partnership 0% SLCI Rail Co-Invest LP Limited Partnership 0% SLCP (Founder Partner Ignis Private Equity) Limited Ordinary shares 100% SLCP (Founder Partner Ignis Strategic Credit) Limited Ordinary shares 100% SLCP (General Partner 2016 Co-investment) Limited Ordinary shares 100% SLCP (General Partner CPP) Limited Ordinary shares 100% SLCP (General Partner EC) Limited Ordinary shares 100% SLCP (General Partner Edcastle) Limited Ordinary shares 100% SLCP (General Partner ESF I) Limited Ordinary shares 100% SLCP (General Partner ESF II) Limited Ordinary shares 100% SLCP (General Partner ESP 2004) Limited Ordinary shares 100% SLCP (General Partner ESP 2006) Limited Ordinary shares 100% SLCP (General Partner ESP 2008 Coinvestment) Limited Ordinary shares 100% SLCP (General Partner ESP 2008) Limited Ordinary shares 100% SLCP (General Partner ESP CAL) Limited Ordinary shares 100% SLCP (General Partner Europe VI) Limited Ordinary shares 100% SLCP (General Partner II) Limited Ordinary shares 100% SLCP (General Partner Infrastructure I) Limited Ordinary shares 100% SLCP (General Partner Infrastructure Secondary I) Limited Ordinary shares 100% SLCP (General Partner NASF I) Limited Ordinary shares 100% SLCP (General Partner NASP 2006) Limited Ordinary shares 100% SLCP (General Partner NASP 2008) Limited Ordinary shares 100% SLCP (General Partner Pearl Private Equity) Limited Ordinary shares 100% SLCP (General Partner Pearl Strategic Credit) Limited Ordinary shares 100% SLCP (General Partner SOF I) Limited Ordinary shares 100% SLCP (General Partner SOF II) Limited Ordinary shares 100% SLCP (General Partner SOF III) Limited Ordinary shares 100% SLCP (General Partner Tidal Reach) Limited Ordinary shares 100% SLCP (General Partner USA) Limited Ordinary shares 100% SLCP (General Partner) Limited Ordinary shares 100%
Standard Life Investments Global SICAV II Standard Life Investments Global SICAV II Emerging Market Debt Sustainable & Responsible Investment Fund68
Standard Life Investments Global SICAV Dynamic Multi Asset Income Fund68 SICAV 100% Standard Life Investments Global SICAV Global Equities Unconstrained Fund68 SICAV 48%
Standard Life Investments (Hong Kong) Limited69 Ordinary shares 100% Standard Life Investments Limited Ordinary shares 100% Standard Life Investments (Mutual Funds) Limited Ordinary shares 100% Standard Life Investments (PDF No. 1) Limited32 Ordinary shares 50% Standard Life Investments (Private Capital) Limited Ordinary shares 100% Standard Life Investments (SLIPIT) Limited Partnership3 Limited Partnership 0% Standard Life Investments UK Shopping Centre Feeder Fund Company Limited70 Ordinary shares 100% Standard Life Investments (USA) Limited Ordinary shares 100% Standard Life Portfolio Investments Limited Ordinary shares 100% Standard Life Portfolio Investments US Inc.24 Ordinary shares 100% Standard Life Premises Services Limited Ordinary shares 100% Standard Life Savings Nominees Limited Ordinary shares 100% Tenet Group Limited71 Ordinary B shares 25% Tenon Nominees Limited4 Ordinary shares 100% The Coaching Platform Limited5 Ordinary shares 100% The Munro Partnership Ltd.72 Ordinary shares 100% Threesixty Partnerships Limited7 Ordinary shares 100% Touchstone Insurance Company Limited73 Ordinary shares 100% Two Rivers Limited Partnership3 Limited Partnership 0% Two Rivers One Limited74 Ordinary shares 100% Two Rivers Two Limited74 Ordinary shares 100% UK PRS Opportunities General Partner Limited3 Ordinary shares 100% UK PRS Opportunities LP3 Limited Partnership 0% Virgin Money Unit Trust Managers Limited75 Ordinary shares 50% VZWL Private Equity GmbH & Co geschlossene Investment KG46 Limited Partnership 40% Waverley Healthcare Private Equity Limited4 Ordinary shares 100% Wealth Horizon Limited65 Ordinary shares 100% Wise Trustee Limited65 Ordinary shares 100% 1 OEIC = Open-ended investment company
Town, KY1-1104, Cayman Islands 11 Tuborg Havnevej 15, 2nd Floor, DK-2900 Hellerup, Denmark 12 Kaivokatu 6, Helsinki, 00100, Finland 13 c/o Corporation Service Company, 251 Little Falls Drive, Wilmington, DE, 19808, USA 14 Office Unit 8, 6th Floor, Al Khatem Tower, Abu Dhabi Global Market Square, Al
Street, DE 19801 Wilmington, USA 16 c/o Corporation Service Company, 2711 Centerville Road, Suite 400,
Zone 34 Bangkok City Tower, 28th Floor, 179 South Sathorn Road, Thungmahamek,
Churchgate, Mumbai – 400 020, India 58 Edinburgh One, Morrison Street, Edinburgh, EH3 8BE 59 18F, Tower II, The Exchange, 189 Nanjing Road, Heping District, Tianjin,
People’s Republic of China, 300051 60 1 Rodney Square 10th Fl, 10 & King St, Wilmington, DE 19801, USA 61 Clayton Wood Close, West Park Ring Road, Leeds, LS16 6QE 62 7 Lochside View, Edinburgh, EH12 9DH 63 Campbells Corporate Services Limited, 4th Floor, Willow House, Cricket
Marya Island, PO Box 764605, Abu Dhabi, United Arab Emirates 15 c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange
Sathorn, Bangkok, 10120, Thailand 35 IFC 1 The Esplanade, St Helier , JE1 4BP, Jersey 36 First Floor, Sir Walter Raleigh House, 48-50 Esplanade, St Helier, Jersey, JE2 3QB 37 Level 10, 255 George Street, Sydney, NSW 2000, Australia 38 8F-1, No. 101, Songren Road, Taipei City, 110, Taiwan, Republic of China 39 16th Floor, Menara Dea Tower 2, Kawasan Mega Kuningan, Jl Mega Kuningan Barat Kav. E4.3 No. 1-2, 12950 Jakarta, Indonesia 40 21 Church Street, #01-01, Capital Square Two, 049480, Singapore 41 1 First Canadian Place, 100 King Street West, Toronto, Ontario, Canada 42 6th Floor, Alexandra House, 18 Chater Road, Central, Hong Kong 43 Toranomon Seiwa Building 11F, 1-2-3 Toranomon, Minato-ku, Tokyo, 1050001, Japan 44 Suite 1005, 10th Floor, Wisma Hamzah-Kwong Hing No.1, Leboh Ampang 50100 Kuala Lumpur, Malaysia 45 Schweizergasse 14, Zurich, 8001, Switzerland 46 Bockenheimer Landstrasse 25, 60325 Frankfurt am Main, Germany 47 AC 82 NO. 10 60 P 5 Bogota DC, Columbia 48 712 5th Ave, New York, NY 10019, USA 49 Henrik Ibsens gate 100, PO Box 2882 Solli, 0230 Oslo, Norway 50 24 Merrion Row, Dublin 2, Republic of Ireland 51 13th Fl., B Tower (Seocho-dong, Kyobo Tower Building), 465, Gangnam-daero,
Seocho-gu, Seoul, Korea 52 Sveavägen 24, 111 57 Stockholm, Sweden 53 80 Robinson Road, #02-00, 068898, Singapore 54 7 Melville Crescent, Edinburgh, EH3 7JA 55 11th Floor, Two Snowhill, Birmingham, B4 6WR 56 c/o Paget-Brown Trust Company Ltd, Boundary Hall, Cricket Square, P.O. Box 1111, Grand Cayman, KY1-1102, Cayman Islands 57 HDFC House, 2nd floor, H.T. Parekh Marg, 165-166, Backbay Reclamation,
Assets Investments in subsidiaries A 4,013 6,027 Investments in associates and joint ventures B 1,216 1,229 Deferred tax assets M 77 35 Loans to subsidiaries C 109 – Derivative financial assets C 1 3 Equity securities and interests in pooled investment funds C 249 218 Debt securities C 326 603 Receivables and other financial assets C 50 15 Other assets F – 14 Cash and cash equivalents C 47 19 Total assets 6,088 8,163
Equity Share capital G 306 327 Shares held by trusts H (161) (119) Share premium reserve G 640 640 Retained earnings I
Brought forward retained earnings 2,933 2,035 (Loss)/profit for the year attributable to equity shareholders of Standard Life Aberdeen plc (1,266) 1,020 Other movements in retained earnings 964 (122)
Total retained earnings 2,631 2,933 Other reserves J 1,842 3,621 Total equity 5,258 7,402
Company statement of changes in equity For the year ended 31 December 2020
Share premium reserve Retained earnings Other reserves Total equity 2020 Notes £m £m £m £m £m £m 1 January 327 (119) 640 2,933 3,621 7,402 Loss for the year – – – (1,266) – (1,266) Other comprehensive income for the year – – – – 8 8 Total comprehensive income for the year – – – (1,266) 8 (1,258) Dividends paid on ordinary shares – – – (479) – (479) Share buyback G (21) – – (402) 21 (402) Reserves credit for employee share-based payment J – – – – 64 64 Transfer to retained earnings for vested employee share-based payment J – – – 38 (38) – Transfer between reserves on impairment of investment in subsidiaries J – – – 1,834 (1,834) – Shares acquired by employee trusts – (66) – – – (66) Shares distributed by employee and other trusts and related dividend equivalents – 24 – (27) – (3) 31 December 306 (161) 640 2,631 1,842 5,258
The financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss (FVTPL).
Investments in subsidiaries (other than those measured at FVTPL), associates (other than those measured at FVTPL) and joint ventures are initially recognised at cost and subsequently held at cost less any impairment charge. An impairment charge is recognised when the carrying amount of the investment exceeds its recoverable amount. Any gain or loss on disposal of a subsidiary, associate or joint venture is recognised in profit for the year.
The areas where judgements have the most significant effect on the amounts recognised in the financial statements are as follows: Financial statement area Critical judgements in applying accounting policies Related notes
The areas where assumptions and other sources of estimation uncertainty at the end of the reporting period have a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial year are as follows: Financial statement area Critical accounting estimates and assumptions Related notes Investments in subsidiaries, associates and joint ventures held at cost
The principal accounting policies adopted are the same as those given in the consolidated financial statements, together with the Company specific policies set out below. These accounting policies have been consistently applied to all financial reporting periods presented in these financial statements.
The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its own income statement in these financial statements. The auditors’ remuneration for audit and other services is disclosed in Note 8 to the consolidated financial statements. The Company has no employees.
(b) Critical accounting estimates and judgements in applying accounting policies The preparation of financial statements requires management to make estimates and assumptions and exercise judgements in applying the accounting policies that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses arising during the year. Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Investments in subsidiaries measured at cost 3,568 5,465 Investments in subsidiaries measured at FVTPL C 445 562 Investments in subsidiaries 4,013 6,027
At 1 January 6,027 6,467 Investment into existing subsidiaries measured at cost 26 150 Acquisition of subsidiaries at cost – – Disposal of subsidiaries measured at cost (50) (139) Impairment of subsidiaries measured at cost (1,873) (795) Acquisition of subsidiaries at FVTPL 8 344 Disposal of subsidiaries at FVTPL (126) – Gains on subsidiaries at FVTPL 1 – At 31 December 4,013 6,027
• The company increased its investment in Aberdeen Asset Management PLC (AAM PLC) through the purchase of 1,171,875 ordinary shares for a cash consideration of £3.8m and through the purchase of 500,000 ordinary shares for a cash consideration of £1.6m
During 2019, the Company made the following acquisitions of subsidiaries measured at cost: • The Company increased its investment in AAM PLC through the purchase of 100,000,000 ordinary shares for a non-cash consideration of £10m and through the purchase of 22,010,558 ordinary shares for a cash consideration of £70.4m
• The Company increased its investment in 1825 through the purchase of 63,600,000 ordinary shares for a cash consideration of £63.6m
• The Company increased its investment in SLESL through the purchase of 3,389 ordinary shares for a cash consideration of £3.4m
(b) Disposals During 2020, the Company made the following disposals of subsidiaries measured at cost: • The Company redeemed £44.4m of equity capital in Standard Life (Mauritius Holdings) 2006 Limited through the cancellation of 553,336.19 Participating shares
• The Company received £5.2m by way of distribution of the unallocated divisible surplus from the Standard Life Assurance Company 2006 (SLAC 06) following its deauthorisation. The Company was the sole member of SLAC 06 and this amount was previously held as a subsidiary measured at cost.
During 2019, the Company made the following disposals of subsidiaries measured at cost: • The Company redeemed £139m of equity capital in Standard Life (Mauritius Holdings) 2006 Limited through the cancellation of 1,779,047.32 Participating shares 215Standard Life Aberdeen 2020
The Company has an interest of 25.3% (2019: 25.3%) in Tenet Group Limited, a company incorporated in England and Wales.
The impairment of £1,834m was recognised at 30 June 2020, at the same time as a further impairment of the asset management goodwill was recognised in the Group financial statements. Refer Note 15 of the Group financial statements. The recoverable amount at 30 June 2020 was £3,074m which is based on fair value less cost of disposal (FVLCD). The FVLCD includes the fair value of HDFC Asset Management which is an associate of SLIH. The approach and key assumptions in determining the FVLCD are the same as used in the impairment review for asset management goodwill set out in Note 15 of the Group financial statements. Following the impairment loss recognised at 30 June 2020, the recoverable amount was equal to the carrying amount. At 31 December 2020, there is no indication that the Company’s investments in AAM PLC and SLIH have become further impaired. The recoverable amount is impacted by changes in the fair value of HDFC AMC, which was £1,321m at 31 December 2020 (£1,204m at 30 June 2020), and the key assumptions used in determining the FVLCD of the asset management group of cash generating units at 30 June 2020 which are detailed in Note 15 of the Group financial statements. As for the valuation of the asset management goodwill set out in Note 15 of the Group financial statements, the primary valuation approach was within a range of reasonable outcomes and reflected market conditions and uncertainties at 30 June 2020, including significant uncertainties relating to the impact of COVID-19 at that point. An impairment of an investment in subsidiaries can be reversed due to changes in circumstances; however, no indicators of reversal were identified during the course of the second half of the year.
The recoverable amount at 31 December 2019 of £4,808m was based on value in use, which was assessed by management as being higher than the FVLCD at this date. As set out in Note 15 of the Group financial statements, management has now assessed that the FVLCD is higher.
The Company’s investment in its subsidiary 1825 Financial Planning Limited (1825 FPL) was impaired during 2020 by £39m (2019: £nil). The recoverable amount which is its FVLCD at 31 December 2020 was £115m. The FVLCD considered a number of valuation approaches, with the primary approach being a multiples approach based on price to revenue and price to assets under advice (AUAdv). Multiples were based on recent acquisitions, adjusted to take into account profitability where appropriate, and were benchmarked against other recent external transactions. Revenue and AUAdv were based on December 2020 actuals. The expected cost of disposal was based on past experience of previous transactions. This is a level 3 measurement as it is measured using inputs which are not based on observable market data. The impairment resulted from losses incurred by the business during the year and the impact of the level of profitability on valuation expectations for certain parts of the business. As the year end carrying value is the recoverable amount any downside sensitivity will lead to a further future impairment loss. A 10% reduction in recurring revenue and AUAdv would result in a further impairment of £13m.
The Company’s investment in its subsidiary Focus Solutions Group Limited (Focus) was impaired during 2019 by £15m. The carrying amount of the Company’s investment in Focus is £nil (2019: £nil).
Investment in associates measured at cost 1,020 1,033 Investment in joint venture measured at cost 196 196 Investments in associates and joint ventures 1,216 1,229
Derivative financial instruments used for hedging Amortised cost Total 2020 2019 2020 2019 2020 2019 2020 2019
Under IFRS 9 the Company calculates expected credit losses (ECL) on financial assets which are measured at amortised cost (refer to Note 38 (c) of the Group financial statements), including loans to subsidiaries (which are unrated). At 31 December 2020 the Company does not hold financial assets at amortised cost that it regards as credit-impaired or for which it considers the probability of default would result in material expected credit losses (2019: £nil). In making this assessment the Company has considered if any evidence is available to indicate the occurrence of an event which would result in a detrimental impact on the estimated future cash flows of these assets.
Cash inflows Cash flow hedges 23 24 93 96 607 650 – – 723 770 Foreign exchange forwards 62 57 – – – – – – 62 57 Total 85 81 93 96 607 650 – – 785 827
Amounts due from related parties 16 12 Contingent consideration asset 28 1 Other financial assets 6 2 Total receivables and other financial assets 50 15
G. Share capital and share premium Details of the Company’s share capital and share premium are given in Note 26 of the Group financial statements including details of the share buyback.
Capital redemption reserve Cash flow hedges Total 2019 £m £m £m £m £m £m At 1 January 3,192 67 241 1,011 (6) 4,505 Fair value losses on cash flow hedges – – – – (10) (10) Realised losses on cash flow hedges transferred to income statement – – – – 22 22 Share buyback – – (126) 26 – (100) Reserves credit for employee share-based payments – 43 – – – 43 Transfer to retained earnings for vested employee share-based payments – (57) – – – (57) Transfer between reserves on impairment of investment in subsidiaries (780) – – – – (780) Tax effect of items that may be reclassified subsequently to profit or loss – – – – (2) (2) At 31 December 2,412 53 115 1,037 4 3,621
During 2020, £21m (2019: £26m) was recognised in the capital redemption reserve for the share buyback (refer Note 26 of the Group financial statements).
Following the impairment loss recognised in the period on the Company’s investments in AAM PLC and SLIH (refer Note A), £1,834m (2019: £780m) was transferred from the merger reserve to retained earnings.
Further information including the terms and conditions of all subordinated liabilities is given in Note 33 of the Group financial statements.
Subordinated notes: 4.25% US Dollar fixed rate due 30 June 2028 $750m £546m $750m £563m 5.5% Sterling fixed rate due 4 December 2042 £92m £92m £92m £92m Total subordinated liabilities £638m £655m
The amount of deferred tax assets expected to be recovered or settled after more than 12 months are £77m (2019: £35m).
Recognised deferred tax 2020 2019 £m £m Deferred tax assets comprise: Unused tax losses 80 36 Unrealised losses on cash flow hedges (2) – Gross deferred tax assets 78 36 Less: Offset against deferred tax liabilities (1) (1) Deferred tax assets 77 35 Deferred tax liabilities comprise: Unrealised gains on investments 1 1 Gross deferred tax liabilities 1 1 Less: Offset against deferred tax assets (1) (1) Deferred tax liabilities – – Net deferred tax asset at 31 December 77 35 Movements in net deferred tax assets comprise: At 1 January 35 22 Amounts credited to profit or loss 44 15 Amounts charged to other comprehensive income (2) (2) At 31 December 77 35
Of Other liabilities of £8m (2019: £4m), £8m are expected to be settled within 12 months (2019: £4m) and include £8m (2019: £2m) in respect of amounts due to related parties.
None of these guarantees give rise to any liabilities at 31 December 2020 (2019: none).
Q. Related party transactions (a) Key management personnel The Directors and key management personnel of the Company are considered to be the same as for the Group. See Note 45 of the Group financial statements for further information.
9. Supplementary information 9.1 Key performance indicators Key performance indicators (KPIs) are defined as the measures by which the development, performance or position of the business can be measured effectively. The KPIs that we use may not be directly comparable with similarly named measures used by other companies. The addition of adjusted capital generation was the only change to our KPIs in 2020, reflecting the linkage with our dividend policy.
Adjusted profit before tax is the Group’s key alternative performance measure. Adjusted profit excludes the impact of the following items: • Restructuring costs and corporate transaction expenses. Restructuring includes the impact of major regulatory change.
Fee based revenue is shown net of commission, costs of sale and similar charges so as to show the net charges received on AUMA and provides the basis for reporting of the fee revenue yield financial ratio.
Adjusted capital generation is part of the analysis of movements in CRDIV regulatory capital. Adjusted capital generation is calculated as adjusted profit after tax less returns relating to pension schemes in surplus, which do not benefit regulatory capital. It also excludes the Group’s share of associates and joint ventures profit after tax which is replaced by dividends received from these entities. Dividends from significant listed investments are also included. Adjusted diluted capital generation per share is calculated as adjusted capital generation divided by the weighted average number of diluted ordinary shares outstanding.
Cash and liquid resources Cash and liquid resources are IFRS cash and cash equivalents (netted down for overdrafts), money market instruments and holdings in money market funds. It also includes surplus cash that has been invested in liquid assets such as high quality corporate bonds, gilts and pooled investment funds. Seed capital and co-investments are excluded.
KPI Key performance indicators (KPIs) are defined as the measures by which the development, performance or position of the business can be measured effectively.
KPI Adjusted profit before tax is the Group’s key alternative performance measure. Adjusted profit excludes the impact of the following items: • Restructuring costs and corporate transaction expenses. Restructuring includes the impact of major regulatory change.
• Dividends payable on preference shares classified as non-controlling interests are excluded from adjusted profit in line with the treatment of ordinary shares. Similarly to preference shares, coupons paid on perpetual debt instruments classified as equity for which interest is only accounted for when paid is excluded from adjusted profit. This includes our share of interest payable on Tier 1 debt instruments held by associates.
Adjusted profit reporting provides further analysis of the results reported under IFRS and the Directors believe it helps to give shareholders a fuller understanding of the performance of the business by identifying and analysing adjusting items.
Adjusted profit before tax is consistent with the way that financial performance is measured by management and reported to the Board and executive leadership team. Adjusted profit before tax is also a key input to the adjusted earnings per share measure which is used to assess performance for remuneration purposes.
Adjusted profit before tax Reconciliation of adjusted profit to IFRS profit by component The key components of adjusted profit before tax are fee based revenue, adjusted operating expenses and share of associates’ and joint ventures’ profit before tax. These components provide a meaningful analysis of our adjusted results. The table below provides a reconciliation of movements between adjusted profit component measures and relevant IFRS terms. A reconciliation of Fee based revenue to the IFRS item Revenue from contracts with customers is provided in Note 4 of the Group financial statements.
IFRS IFRS term 2020 £m £m £m £m £m £m £m
Adjusted profit after tax from discontinued operations – – (15) – – – (15)
Adjusted profit after tax 411 – 406 – 21 – 838 Profit for the year 1 Includes £45m impairment of interests in joint ventures.
Fee based revenue 1,634 619 1,703 37 – – 3,993 Total income Adjusted operating expenses (1,333) (619) (2,120) – – – (4,072) Total expenses Capital management 37 – – (37) – – – N/A Share of associates’ and joint ventures’ profit before tax 246 – 84 – (8) – 322
Adjusted profit after tax 469 – (236) – 38 – 271 Profit for the year 2 Includes £243m reversal of impairment of interests in associates.
Total adjusting items 368 (333) (1,397) (15) 56 1,519 353 (277) 122 Profit attributable to non-controlling interests – ordinary shares – – – – – 5 – – 5 Profit before tax1 838 243 (787) (15) 56 1,734 823 299 947 1 Discontinued operations shown as (loss)/profit before tax expense attributable to equity holders.
• The impairment of associates and joint ventures of £45m relates to our joint venture with Virgin Money. The reversal of impairment of associates in 2019 of £243m reflected the recovery of the Phoenix share price and reversed the impairment recognised in 2018. These impairment losses/reversals are considered one-off items and not indicative of the long-term operating performance of the Group and have therefore been excluded from adjusted profit to assist comparability of results period to period. More details are provided in Note 16 of the Group financial statements.
• The change in fair value of significant listed investments of £65m represents the impact of movements in the listed share price on our 8.89% holding in HDFC Life from 3 December 2020 to 31 December 2020. Excluding fair value movements on significant listed investments for the purposes of adjusted profit is aligned with our treatment of gains on disposal for these holdings when they were classified as an associate, and reflects that the fair value movements are not indicative of the long-term operating performance of the group.
Operating profit before tax (Phoenix APM) 1,199 196 810 162 Finance costs (191) (33) (127) (26) Adjusted profit before tax (Standard Life Aberdeen APM) 1,008 163 683 136 1 Our holding in the enlarged Phoenix Group reduced from 19.97% to 14.43% following the completion of its acquisition of ReAssure Group plc on 22 July 2020 (31 December 2020: 14.42%) and therefore the results shown above are based on 19.97% until 21 July 2020.
Share of associates’ and joint ventures’ adjusted profit after tax 209 200
Associates’ and joint ventures’ dividends received This information is disclosed in Note 16 of the Group financial statements. An analysis is provided below: Phoenix 67 67 HDFC Life – 9 HDFC Asset Management 13 17
Cash and cash equivalents per Note 24 of the Group financial statements 1.5 1.6 Bank overdrafts – Note 24 (0.2) (0.3) Debt securities excluding third party interests1 – Note 38 (c)(i) 1.0 1.2
Share of associates’ and joint ventures’ adjusted profit after tax An analysis is provided below: Share of associates’ and joint ventures’ adjusted profit before tax – Note 2 (b)(i) 247 246 Share of associates’ and joint ventures’ adjusted tax expense – Note 2 (b)(i) (38) (46)
Cash and liquid resources The table below provides a reconciliation between IFRS cash and cash equivalents and cash and liquid resources. Seed capital and coinvestments are excluded. Details of seed capital and co-investments are provided in Note 38 (b).
Common Equity Tier 1 capital resources 2.9 2.2 Tier 2 capital resources 0.5 0.6 Total regulatory capital resources 3.4 2.8 Total regulatory capital requirements (1.1) (1.1) Surplus regulatory capital 2.3 1.7 9.4 Financial ratios We also use a number of financial ratios to help assess our performance and these are also not defined under IFRS. Details of our main financial ratios and how they are calculated are presented below: Definition Purpose and changes
This is an efficiency measure that is calculated as adjusted operating expenses divided by fee based revenue in the period.
Earnings per share is a commonly used financial metric which can be used to measure the profitability and capital efficiency of a company over time. We also calculate adjusted diluted earnings per share to illustrate the impact of adjusting items on the metric. This ratio is used by management to assess performance and reported to the Board and executive leadership team.
The fee revenue yield is calculated as annualised fee based revenue (excluding performance fees, SL Asia, Focus and Threesixty) divided by monthly average fee based assets.
Analysis of Adviser revenue yield Fee based revenue (gross basis) includes revenue passed to the product provider as shown below in other cost of sales. The cost of sales are netted against fee based revenue as presented in 9.4.2 above. The fee revenue yield presented on a gross basis in the table below represents the average bps charge payable by clients.
Average AUMA (£bn) Fee based revenue (£m) Fee revenue yield (bps)
Investments Institutional and Wholesale2 235.1 239.0 922 1,027 38.8 42.8 Insurance 204.7 258.5 224 317 10.9 12.2
Equities 61.9 71.8 403 472 65.1 65.7 Fixed income 47.1 47.5 137 131 29.0 27.6 Multi-asset 33.5 39.3 125 173 37.4 44.0 Private markets 16.5 15.4 79 71 47.9 46.5 Real estate 27.1 29.3 129 142 47.8 48.3 Alternatives4 19.0 13.0 20 17 10.5 12.9 Quantitative 6.6 5.5 4 3 5.6 5.5 Cash/Liquidity 23.4 17.2 16 12 6.8 7.1 Institutional and Wholesale 235.1 239.0 913 1,021 38.8 42.8
Investments Institutional and Wholesale 1,011 9 7 – 1,027 Institutional and Wholesale Strategic insurance partners 317 – – – 317 Insurance Platforms and Wealth
– – – 21 21 Parmenion Eliminations N/A – – – N/A Eliminations 1,585 – – – 1,585 SL Asia 12 – – – 12 SL Asia Performance fees 37 – – – 37 Performance fees Fee based revenue 1,634 – – – 1,634 Fee based revenue 9.4.4 Investment performance 1 year 3 years 5 years
AUA is a measure of the total assets we administer for clients through platform products such as ISAs and SIPPs.
The amount of funds that we manage, administer or advise directly impacts the level of fee based revenue that we receive.
AUMA is a measure of the total assets we manage, administer or advise on behalf of our clients. It includes assets under management (AUM), assets under administration (AUA) and assets under advice (AUAdv).
AUMA is now presented on a vector basis and 2019 comparatives have been restated on this basis.
The level of net flows that we generate directly impacts the level of fee based revenue that we receive.
Closing AUMA at 31 Dec 2020 12 months ended 31 December 2020 £bn £bn £bn £bn £bn £bn £bn
Adviser 54.2 7.0 (4.7) 2.3 6.1 – 62.6 Personal2 5.7 1.1 (1.0) 0.1 5.2 1.8 12.8 Parmenion 5.2 2.4 (1.3) 1.1 0.6 – 6.9 Eliminations2 (7.8) (2.1) 2.6 0.5 (2.9) – (10.2) Total AUMA 551.5 86.2 (144.6) (58.4) 49.0 2.5 544.6 1 AUMA is now presented on a vector basis and 2019 comparatives have been restated on this basis. See Section 9.9 for more information. 2 Eliminations remove the double count reflected in Investments, Adviser and Personal. The Personal vector includes assets that are reflected in both Aberdeen Standard
9.5.2 Quarterly net flows1 3 months to 31 Dec 19 15 months ended 31 December 2020 £bn £bn £bn £bn £bn
Closing AUM at 31 Dec 2020 12 months ended 31 December 20201 £bn £bn £bn £bn £bn £bn £bn
Closing AUM at 31 Dec 2019 12 months ended 31 December 20191 £bn £bn £bn £bn £bn £bn £bn
Closing AUM at 31 Dec 2020 12 months ended 31 December 2020 £bn £bn £bn £bn £bn £bn £bn
Phoenix2 154.8 16.3 (17.3) (1.0) 15.9 – 169.7 Lloyds 98.6 10.6 (53.7) (43.1) 9.0 – 64.5 Other2 1.6 – (0.3) (0.3) 0.3 – 1.6 Total 255.0 26.9 (71.3) (44.4) 25.2 – 235.8 1 AUMA is now presented on a vector basis and 2019 comparatives have been restated on this basis. See Section 9.9 for more information. 2 Following the acquisition of ReAssure by the Phoenix Group in 2020, ReAssure is now included within Phoenix for the analysis of Insurance AUM. 2019 has been restated on the same basis.
9.8 Analysis of total AUM (excluding Parmenion)1 9.8.1 AUM by geography 31 Dec 2020 31 Dec 2019
UK 116.5 205.2 7.8 329.5 112.2 235.8 7.1 355.1 Europe, Middle East and Africa (EMEA) 65.9 – – 65.9 55.8 – – 55.8 Asia Pacific (APAC) 16.8 – – 16.8 16.9 – – 16.9 Americas 52.5 – – 52.5 51.8 – – 51.8 Total AUM 251.7 205.2 7.8 464.7 236.7 235.8 7.1 479.6 9.8.2 AUM by asset class 31 Dec 2020 31 Dec 2019
Equities 69.2 48.8 – 118.0 69.0 50.3 – 119.3 Fixed income 47.7 69.0 – 116.7 46.4 88.5 – 134.9 Multi-asset 37.4 7.0 7.8 52.2 34.4 10.2 7.1 51.7 Private markets 17.0 1.8 – 18.8 16.1 0.8 – 16.9 Real estate 24.7 8.3 – 33.0 27.9 9.2 – 37.1 Alternatives 19.5 – – 19.5 17.7 0.6 – 18.3 Quantitative 6.4 45.0 – 51.4 7.8 46.7 – 54.5 Cash/Liquidity 29.8 25.3 – 55.1 17.4 29.5 – 46.9
AUMA 2019 as previously disclosed £bn £bn £bn £bn 2019 on revised basis
Wrap and Elevate 62.6 – – 62.6 Adviser Wealth 23.4 (6.9) (3.7) 12.8 Personal
Aberdeen Asset Management or Aberdeen Aberdeen Asset Management PLC, or Aberdeen Asset Management PLC and its subsidiaries.
• Changes in fair value of significant listed investments • Fair value movements in contingent consideration • Items which are one-off and, due to their size or nature, are not indicative of the long-term operating performance of the Group
Assets under management and administration (AUMA) AUMA is a measure of the total assets we manage, administer or advise on behalf of our clients. It includes assets under management (AUM), assets under administration (AUA) and assets under advice (AUAdv). AUMA does not include assets for associates and joint ventures.
AUM is a measure of the total assets that Aberdeen Standard Investments manages on behalf of individual and institutional clients. AUM also includes assets managed for corporate purposes.
Capital management Capital management is a component of adjusted profit and relates to the return from the net assets of the shareholder business, net of costs of financing. This includes the net assets in defined benefit staff pension plans and net assets relating to the financing of subordinated liabilities.
CRD IV CRD IV is the European regulatory capital regime (comprising the Capital Requirements Directive and Capital Requirements Regulation) that applies to investment firms.
Group, Standard Life Aberdeen Group or Standard Life Aberdeen Relates to the Company and its subsidiaries.
Growth vectors We provide services across three growth vectors: • Investments: Asset management investment solutions for institutional, wholesale and insurance clients
International Financial Reporting Standards (IFRS) International Financial Reporting Standards are accounting standards issued by the International Accounting Standards Board (IASB).
LBG tranche withdrawals On 24 July 2019, the Group announced that it had agreed a final settlement in relation to the arbitration proceedings between the parties concerning LBG’s attempt to terminate investment management arrangements under which assets were managed by members of the Group for LBG entities. In its decision of March 2019, the arbitral tribunal found that LBG was not entitled to terminate these investment management contracts. The Group had continued to manage approximately £104bn (as at 30 June 2019) of assets under management (AUM) for LBG entities during the period of the dispute. Approximately two thirds of the total
AUM (the transferring AUM) will be transferred to third party managers appointed by LBG through a series of planned tranches from 24 July 2019. During this period, the Group will continue to be remunerated for its services in relation to the transferring AUM.
Phoenix or Phoenix Group Phoenix Group Holdings plc or Phoenix Group Holdings plc and its subsidiaries.
Pillar 2 The requirement for companies to assess the level of additional capital held against risks not covered in Pillar 1.
Pillar 3 This complements Pillar 1 and Pillar 2 with the aim of improving market discipline by requiring companies to publish certain details of their risks, capital and risk management. The latest available Group’s Pillar 3 disclosures are published at www.standardlifeaberdeen.com/annualreport
Subordinated liabilities Subordinated liabilities are debts of a company which, in the event of liquidation, rank below its other debts but above share capital.
Range of shares Number of holders % of total holders Number of shares % of total shares 1-1,000 63,666 65.24 25,688,131 1.17 1,001-5,000 29,045 29.76 59,210,354 2.70 5,001-10,000 2,778 2.85 18,480,640 0.84 10,001-100,000 1,564 1.60 38,235,469 1.74 #100,001+ 538 0.55 2,052,501,022 93.55 Total 97,591 100.00 2,194,115,616 100.00 # These figures include the Company-sponsored nominee – the Standard Life
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Last date for DRIP elections for 2020 final dividend 5 May
Last date for DRIP elections for 2021 interim dividend 8 September
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Please remember that the value of shares can go down as well as up and you may not get back the full amount invested or any income from it. All figures and share price information have been calculated as at 31 December 2020 (unless otherwise indicated).