Investments in subsidiaries at FVTPL are £131m (2013: £142m) which relates to a 10% (2013:13%) holding in a short term investment fund, Seabury Assets Fund plc, over which the Company is deemed to have control by virtue of 100% holding by Group entities. Seabury Assets Fund plc was incorporated in the Republic of Ireland.
H. Investments in associates and joint ventures 2014 2013 Notes £m £m
(b) Investments in joint ventures The Company has a 50% (2013: 50%) interest in Heng An Standard Life Insurance Company Limited, a company incorporated in China. Further details on this joint venture are provided in Note 18 of the Group financial statements.
The Company has surrendered the benefit of its tax losses to underlying subsidiaries for a consideration of £11m (2013: £23m) which will be receivable within one year. The Company has provided for deferred tax amounting to £1m (2013: £1m) in respect of unrealised gains on equity securities.
Debt securities 135 - 357 - 492 Receivables and other financial assets L - - - 40 40
Loans and receivables Total 2013 (restated1) Notes £m £m £m £m £m
Total 545 54 333 739 1,671 1 Comparatives for the year ended 31 December 2013 have been restated to reflect retrospective application of changes to accounting policies as a result of new
The amount of debt securities expected to be recovered or settled after more than 12 months is £357m (2013: £333m). Due to the nature of investments in associates at FVTPL, there is no fixed term associated with these securities.
The amount of loans and receivables expected to be recovered or settled after more than 12 months is £634m (2013: £644m).
K. Derivative financial instruments The Company uses derivative financial instruments in order to reduce the risk from potential movements in foreign exchange rates, equity indices and interest rates, to reduce credit risk or to achieve efficient portfolio management. These instruments are designated as held for trading in the Company’s financial statements.
K. Derivative financial instruments continued 2014 2013 Contract amount Fair value assets Fair value liabilities
The derivative liabilities of £25m (2013: £53m) are expected to be settled within 12 months. The derivative assets of £24m (2013: £54m) are expected to be recovered within 12 months.
M. Other assets Other assets comprise amounts due from related parties in respect of Group relief, which are expected to be received within 12 months.
Total cash and cash equivalents 34 40 1 Comparatives for the year ended 31 December 2013 have been restated to reflect retrospective application of changes to accounting policies as a result of new
O. Share capital and share premium Details of the Company’s share capital and share premium are given in Note 29 of the Group financial statements.
At 1 January 601 650 Profit for the year attributable to equity holders 553 566 Dividends and appropriations (386) (636) Transfer from equity compensation reserve for vested employee share-based payments R 27 33 Shares distributed by employee trusts (10) (12) At 31 December 785 601
At 1 January 3,108 49 261 - 3,418 Reserves credit for employee share-based payment schemes - 32 - - 32 Vested employee share-based payments - (33) - - (33) Dividends and appropriations - - (20) - (20) Fair value losses on available-for-sale financial assets - - - (18) (18) Tax effect relating to items that may be reclassified subsequently to profit or loss - - - 4 4 At 31 December 3,108 48 241 (14) 3,383
Financial liabilities measured at amortised cost Total 2013 Notes £m £m £m
Subordinated notes: Subordinated guaranteed bonds: Mutual Assurance Capital Securities: 5.314% Euro fixed/floating rate perpetual €360,000,000 294 €360,000,000 315
The most significant element of market risk for the Company arises from its exposure to fluctuations in interest rates and equity markets. The Company is exposed to fluctuations in the fair value of future cash flows of financial instruments caused by changes in market interest rates. Financial assets and liabilities which are subject to the most significant exposure to interest rate risk include corporate bonds, money market instruments, derivative financial instruments and subordinated liabilities. The Company is also exposed to fluctuations in the equity securities markets, and as a result, changes in the value of its holdings and the return on those holdings.
Market risk is managed through the Group market risk policy. The Company is required to manage risk in accordance with the policy and to take mitigating action as appropriate to operate within defined risk appetites. The Company ensures that risks remain within the approved market risk appetite through the use of a number of specific controls and techniques, including defined lists of permitted securities and/or application of investment constraints and the active use of derivatives to improve the matching characteristics of assets and liabilities.
The following table provides information regarding the market risk exposure of the Company at 31 December 2014 and 31 December 2013, showing diversification by asset type and geographic region.
Investments in associates at FVTPL - - - - 13 12 13 12
V. Risk management continued (b) Market risk continued (b)(ii) Sensitivity analysis – market risk The table below illustrates the sensitivity of profit after tax and equity to reasonably possible variations in the key assumptions made in relation to the Company’s most significant market risk exposures. The sensitivity analysis has been performed by calculating the sensitivity of profit after tax and equity to changes in equity security prices and to changes in interest rates as at the reporting date, assuming other assumptions remain unchanged. When illustrating the impact of equity risk, the expectations of corporate earnings remain unchanged. Correlation 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.
Impact on profit after tax 3 2 (3) (2) 1 1 (1) (1) 1 1 1 (1)
Equity sensitivity to market risk The company classifies certain debt securities which back subordinated debt liabilities as AFS. These debt securities are measured at fair value. Interest is calculated using the effective interest method and recognised in the income statement. Other changes in fair value and the related tax are recognised in other comprehensive income. As a result, the sensitivity of the Company's equity to variations in interest rate risk exposures differs from the sensitivity of the Company's profit after tax to variations in interest rate risk exposures.
In managing credit risk, maximum counterparty exposure limits are used for financial instruments where the Company has significant credit risk.
Receivables and other financial assets Cash and cash equivalents Total restated1 £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m
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 2014, the Company had pledged £9m (2013: £nil) of debt securities as collateral for derivative financial liabilities and accepted £3m (2013: £47m) of cash as collateral for derivative financial assets.
Liquidity risk is managed through the Group liquidity and capital management policy. The Company is required to manage risk in accordance with the Group policy and to take mitigating action as appropriate to operate within defined risk appetites.
(d)(i) Maturity analysis The cash flows payable by the Company under its financial liabilities are analysed in the table that follows by remaining contractual maturities at the reporting date. The amounts shown are the contractual undiscounted cash flows.
Greater than 20 years Total 2014 £m £m £m £m £m £m £m Subordinated liabilities 390 324 375 341 206 449 2,085 Other financial liabilities 40 - - - - - 40 Total 430 324 375 341 206 449 2,125
Subordinated liabilities 97 363 427 408 278 757 2,330 Other financial liabilities 81 - - - - - 81 Total 178 363 427 408 278 757 2,411
Refer to Note Z for events after the reporting date regarding the redemption of the Mutual Assurance Capital Securities.
(b) Issued share capital The Scheme of Demutualisation of The Standard Life Assurance Company (SLAC) sets a 10-year time limit, ending in 2016, for those eligible members of SLAC who were not allocated shares at the date of demutualisation to claim their entitlement. As future issues of these shares are dependent upon the actions of eligible members, it is not practical to estimate the financial effect of this potential obligation.
Under the trust deed in respect of the Group’s UK defined benefit pension plan, Standard Life Employee Services Limited (SLESL), the principal employer, must pay contributions to the pension plan as the trustees’ actuary may certify necessary. The Company has guaranteed the obligations of SLESL to the UK defined benefit pension plan for a period of 15 years from 10 July 2006, which gave rise to a liability of £nil at 31 December 2014 (2013: £nil).
The Company’s derivatives are over-the-counter investments which are fair valued using valuation techniques based on observable market data and are therefore treated as level 2 investments within the fair value hierarchy.
Investments in associates at FVTPL – 2014: £13m (2013: £12m) Investments in associates at FVTPL listed on a recognised exchange are valued using prices sourced from the primary exchange on which they are listed. These instruments are generally considered to be quoted in an active market and are therefore treated as level 1 investments within the fair value hierarchy.
Derivative financial liabilities - - 25 53 - - 25 53 Total - - 25 53 - - 25 53 1 Comparatives for the year ended 31 December 2013 have been restated to reflect retrospective application of changes to accounting policies as a result of new
(d) Fair value of financial assets and liabilities measured at amortised cost The table below presents estimated fair values of financial assets and liabilities whose carrying value does not approximate fair value. Fair values of financial assets and financial liabilities are based on observable market inputs where available, or are estimated using other valuation techniques.
2014 2013 2014 2013 Carrying value Carrying value Fair value Fair value Notes £m £m £m £m
The table below presents the instruments as detailed above measured at fair value by level of the fair value hierarchy. Level 1 Level 2 Level 3 Total 2014 2013 2014 2013 2014 2013 2014 2013 £m £m £m £m £m £m £m £m
Following completion of the sale, the Company received a dividend of £2.2bn from its subsidiary Standard Life Oversea Holdings Limited.
Supplementary information 1. Group assets under administration and net flows Group assets under administration (AUA) represent the IFRS gross assets of the Group adjusted to include third party AUA, which are not included on the consolidated statement of financial position. In addition, certain assets are excluded, for example deferred acquisition costs, intangibles and reinsurance assets.
Fee business: Standard Life Investments third party (excl. strategic partner life business)2 89.8 23.8 (22.1) 1.7 26.0 117.5 Standard Life Investments third party strategic partner life business - - (1.6) (1.6) 45.4 43.8 Standard Life Investments total third party 89.8 23.8 (23.7) 0.1 71.4 161.3 UK retail new2 33.8 5.9 (3.0) 2.9 0.6 37.3 UK retail old 33.5 0.6 (2.8) (2.2) 2.2 33.5 Corporate 29.2 4.0 (1.8) 2.2 0.6 32.0 UK retail and corporate 96.5 10.5 (7.6) 2.9 3.4 102.8 Conventional with profits 2.9 0.1 (1.1) (1.0) 0.2 2.1 UK3 99.4 10.6 (8.7) 1.9 3.6 104.9 Europe2,3 14.9 2.2 (1.1) 1.1 1.2 17.2 Asia and Emerging Markets (wholly owned) 0.3 0.1 - 0.1 - 0.4 Consolidation/eliminations2,3,4 (13.7) (3.4) 1.9 (1.5) - (15.2) Total fee business 190.7 33.3 (31.6) 1.7 76.2 268.6 Spread/risk business: UK 14.6 0.3 (1.2) (0.9) 1.8 15.5 Europe 0.5 - - - 0.1 0.6 Total spread/risk business 15.1 0.3 (1.2) (0.9) 1.9 16.1 Other (incl. joint ventures) 8.9 0.4 (0.2) 0.2 2.8 11.9 Group AUA - continuing operations1 214.7 34.0 (33.0) 1.0 80.9 296.6
3. Financial information - Supplementary information continued 1. Group assets under administration and net flows continued Group assets under administration (summary) 12 months ended 31 December 2013
Group assets under administration – total 12 months ended 31 December 2013
Third party strategic partner life business - - (1.6) (1.6) 45.4 43.8
Standard Life Investments total third party 89.8 23.8 (23.7) 0.1 71.4 161.3
UK and Europe long-term savings 135.1 13.1 (11.0) 2.1 8.7 145.9
Wholly owned long-term savings F 0.3 0.1 - 0.1 - 0.4
Asia and Emerging Markets long-term savings 1.9 0.5 (0.2) 0.3 0.3 2.5
Group assets under administration 244.2 38.5 (37.1) 1.4 82.8 328.4 1 Continuing operations exclude our Canadian business which was sold on 30 January 2015. Comparatives have been restated. 2 From 1 January 2014, Standard Life Wealth is reported as part of Standard Life Investments, previously it was reported in UK and Europe. Comparatives have been restated. 3 Institutional pensions assets previously included in both life and pensions AUA and investment operations have now been excluded from UK and Europe and are only included in Standard Life Investments third party. Eliminations have been adjusted and there is a nil impact on Group AUA. Comparatives have been restated. 4 In order to be consistent with the presentation of new business information, certain products are included in both life and pensions AUA and investment operations.
Ignis - 1.9 (6.2) (4.3) 18.8 14.5 Third party AUM (excl. strategic partner life business) 89.8 23.8 (22.1) 1.7 26.0 117.5
Ignis5 - 1.9 (6.2) (4.3) 18.8 14.5 Third party AUM (excl. strategic partner life business) 89.8 23.8 (22.1) 1.7 26.0 117.5
C on tin ui ng o pe ra tio ns 1.2 1.0 (0.5) 0.5 0.1 1.8 India Wholesale2 4.5 0.1 - 0.1 (0.5) 4.1 Ignis - - - - - - Total Wholesale2 22.4 10.1 (4.9) 5.2 1.3 28.9
Ignis - - - - - - Third party AUM (excl. strategic partner life business) 72.6 20.6 (11.0) 9.6 7.6 89.8
Closing AUM at 31 Dec 2013 £bn £bn £bn £bn £bn £bn
Equities 13.9 1.9 (2.6) (0.7) 1.9 15.1 Fixed Income 20.8 3.1 (2.6) 0.5 (1.1) 20.2 Multi Asset3 22.1 12.0 (4.4) 7.6 1.7 31.4 Real Estate 5.9 0.6 (0.3) 0.3 (0.1) 6.1 MyFolio 2.2 1.9 (0.4) 1.5 0.3 4.0 Other4 7.7 1.1 (0.7) 0.4 4.9 13.0 Ignis - - - - - - Third party AUM (excl. strategic partner life business) 72.6 20.6 (11.0) 9.6 7.6 89.8 Standard Life Group 77.2 4.6 (7.8) (3.2) 6.3 80.3
Standard Life Investments total third party (3.8) (0.1) 2.1 1.9 1.3
Total Group net flows (3.3) 0.1 2.2 2.4 1.9 1 Continuing operations excludes our Canadian business which was sold on 30 January 2015. Comparatives have been restated. 2 From 1 January 2014, Standard Life Wealth is reported as part of Standard Life Investments, previously it was reported in UK and Europe. Comparatives have been restated. 3 Institutional pensions assets previously included in both life and pensions AUA and investment operations have now been excluded from UK and Europe and are only included in Standard Life Investments third party. Eliminations have been adjusted and there is a nil impact on Group AUA. Comparatives have been restated. 4 In order to be consistent with the presentation of new business information, certain products are included in both life and pensions AUA and investment operations.
Ignis (4.5) 0.2 - - - Third party net flows (excl. strategic partner life business )
Strategic partner life business net flows (1.4) (1.5) (0.7) (0.4) (0.7)
Total asset management net flows (4.2) (0.8) 1.5 1.5 1.0 1 Continuing operations excludes our Canadian business which was sold on 30 January 2015. Comparatives have been restated. 2 Comprises suite of global absolute return strategies and balanced funds. 3 Comprises cash, private equity and Wealth. 4 In the year to 31 December 2014, India cash funds have been reclassified as Wholesale. Comparatives have been restated.
3. Financial information - Supplementary information continued 4. Long-term savings operations new business 12 months ended 31 December 2014
Europe long-term savings 1,663 1,593 40 39 2,075 2,029 2% 6% UK and Europe long-term savings 12,720 14,228 992 1,022 17,335 19,076 (9%) (9%)
Wholly owned long-term savings F 18 14 43 62 300 434 (31%) (26%)
Joint ventures long-term savings 69 70 86 89 449 465 (3%) 5% Asia and Emerging Markets long-term savings 87 84 129 151 749 899 (17%) (11%) Total worldwide long-term savings – continuing operations3 12,807 14,312 1,121 1,173 18,084 19,975 (9%) (9%)
Total worldwide long-term savings 14,805 16,161 1,203 1,241 21,191 22,903 (7%) (6%) 1 Present value of new business premiums (PVNBP) is the industry measure of insurance new business sales under the EEV methodology, calculated as 100% of single premiums plus the expected present value of new regular premiums. 2 PVNBP includes the impact of year end changes to non-economic assumptions of decrease £98m (2013: decrease £518m). 3 Continuing operations exclude our Canadian business which was sold on 30 January 2015 and our Dubai business, the closure of which was announced in
New business gross sales for overseas operations are calculated using average exchange rates.
Group underlying performance before tax 257 347 19 (62) 561 131 692
Exclude current tax on underlying performance (51) (27) - 5 (73) (14) (87)
Fixed and intangible assets adjustment (15) (4) - (1) (20) - (20)
Group underlying performance before tax 197 331 - (66) 462 176 638
Exclude share of associates and JVs’ PBT (22) - (5) - (27) - (27)
Total continuing operations1 Discontinued operations1 Total 31 December 2012 £m £m £m £m £m £m £m
Group underlying performance before tax 145 304 3 (27) 425 109 534
Exclude current tax on underlying performance (32) (24) - - (56) (31) (87)
Fixed and intangible assets adjustment - (3) - (16) (19) (1) (20)
Shareholder information Registered office Standard Life plc Standard Life House 30 Lothian Road Edinburgh EH1 2DH Scotland
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Totals 106,666 100 2,394,373,744 100 1 These figures include the Company-sponsored nominee – the Standard Life Share Account – which had 1,097,356 participants holding 925,969,894 shares and the
Record date for 2014 final dividend 10 April 2015 Q1 interim management statement 29 April
Last date for DRIP elections for 2014 final dividend 29 April
The sale of Standard Life Financial Inc. and Standard Life Investments Inc. completed on 30 January 2015. Under the agreements entered into in September 2014, the business of the SLAL Canada Branch will transfer to MLC and one or more subsidiaries of Manulife once certain conditions to completion, including regulatory approval, are fulfilled. The net assets of the SLAL Canada branch classified as held for sale are £nil at 31 December 2014 and no further consideration will be received when the transfer takes place.
Covered business The business covered by the EEV methodology. This should include any contracts that are regarded by local insurance supervisors as long-term or life insurance business and may cover other long-term life insurance, short-term life insurance such as group risk business and long-term accident and health business. Where short-term healthcare is regarded as part of or ancillary to a company’s long-term life insurance business, then it may be regarded as long-term business. For covered business within the Standard Life Group please refer to the EEV methodology within the EEV consolidated financial information.
Development costs Costs that are considered to be non-recurring and are reported separately from other expenses in the EEV movement analysis.
Economic assumptions Assumptions in relation to future interest rates, investment returns, inflation and tax. These assumptions, and variances in relation to these assumptions, are treated as non-operating profit/(loss) under EEV.
EEV operating profit after tax Covered business EEV operating profit after tax represents profit generated from new business sales and the in-force book of business, based on closing non-economic and opening economic assumptions.
Experience variances Current period differences between the actual experience incurred over the period and the assumptions used in the calculation of the embedded value, excluding new business non-economic experience variances which are captured in new business contribution.
Fee based business Fee based business is a component of operating profit and is made up of products where we generate revenue primarily from asset management charges (AMCs), premium based charges and transactional charges. AMCs are earned on products such as SIPP, corporate pensions and mutual funds, and are calculated as a percentage fee based on the assets held. Investment risk on these products rests principally with the customer, with the major indirect Group exposure to rising or falling markets coming from higher or lower AMCs.
Financial options and guarantees Terms relating to covered business conferring potentially valuable guarantees underlying, or options to change, the level and nature of policyholder benefits and exercisable at the discretion of the policyholder, whose potential value is impacted by the behaviour of financial variables.
Group underlying performance Group underlying performance is Group operating profit before tax after excluding the impact of spread/risk operating actuarial assumption changes and specific management actions in the reporting period.
Heritage With Profits Fund (HWPF) The Heritage With Profits Fund contains all business – both with profits and non profit – written before demutualisation in the UK, Irish or German branches, with the exception of the classes of business which the Scheme of Demutualisation allocated to the Proprietary Business Fund. The HWPF also contains increments to this business.
In-force Long-term business which has been written before the period end and which has not terminated before the period end.
Internal rate of return (IRR) A measure of rate of return on an investment and so an indicator of capital efficiency. The IRR is equivalent to the discount rate at which the present value of the post-tax cash flows expected to be earned over the lifetime of new business written is equal to the capital invested to support the writing of the business.
Net worth The market value of shareholders' funds and the shareholders' interest in the surplus held in the non profit component of the longterm business funds, determined on a statutory solvency basis and adjusted to add back any non-admissible assets per regulatory returns.
New business contribution (NBC) The expected present value of all future post-tax cash flows attributable to the equity holder from new business, as included within EEV operating profit after tax.
Non-economic assumptions Assumptions in relation to future levels of mortality, morbidity, persistency and expenses. These assumptions, and variances in relation to these assumptions, are included as operating profit/(loss) under EEV.
Present value of in-force business (PVIF) The present value of the projected future distributable profit after tax attributable to equity holders from the covered business in-force at the valuation date, adjusted where appropriate to take account of TVOG (see TVOG).
Present value of new business premiums (PVNBP) The industry measure of insurance new business sales under the EEV methodology. It is calculated as 100% of single premiums plus the expected present value of new regular premiums.
Profit contribution Profit contribution reflects the income and expenses directly attributable to each of the UK lines of business. It differs from operating profit due to the exclusion of indirect expenses, such as overheads, and capital management.
Scheme of Demutualisation (the Scheme) The scheme pursuant to Part VII of, and Schedule 12 to, the Financial Services and Markets Act 2000, under which substantially all of the long-term business of SLAC was transferred to Standard Life Assurance Limited on 10 July 2006.
UK retail This relates to business where we have a relationship with the customer either directly or through an independent financial adviser. We analyse this type of business into new and old categories. Retail new includes the products, platforms, investment solutions and services of our UK retail business that we continue to market actively to our customers. Retail old includes business that was predominantly written before demutualisation.
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