The PA(GI) provision of £40 million (2016: £33 million) represents the Group’s best estimate of the likely future costs. However, this is subject to a number of risks and uncertainties including volumes of future complaints, the rates by which those complaints are upheld and the average redress value. At 31 December 2017, a reimbursement asset of £32 million (2016: £nil) has been recognised in other receivables in connection with the Group’s exposure to these complaints. This represents recoveries due from third parties under contractual arrangements. Recoveries of £7 million (2016: £nil) have been received during the year.
Under the terms of the acquisition, Deutsche Bank has provided PLHL with an indemnity, with a duration of up to eight years, in respect of exposures that may arise in Abbey Life as a result of the FCA’s final thematic review findings. The maximum amount that can be claimed under the indemnity is £175 million and it applies to all regulatory fines and to 80% to 90% of the costs of customer remediation. The indemnity would be expected to mitigate any additional costs not covered by the existing provision, arising in the event of a crystallisation of exposures deemed not to trigger the recognition of a provision based on current information, or a deterioration in management’s estimate of the liabilities associated with present obligations. At 31 December 2017, a reimbursement asset of £23 million (2016: £nil) has been recognised in other receivables under this indemnity, which is net of £6 million tax relief arising on recognition of costs in the year.
Adjustment for insurance policies held with related parties in respect of the PGL pension scheme (4) 4 – – –
Deferred tax assets not recognised on capital losses1 16 18 1 These can only be recognised against future capital gains and have no expiry date.
This note analyses the Group’s accruals and deferred income at the end of the year.
Provision for tax on that part of the economic surplus available as a refund on a winding-up of the Scheme (200) (157)
Provision for tax on that part of the economic surplus available as a refund on a winding-up of the Scheme (147) (135)
In December 2016, the PGL Pension Scheme entered into a buy-in transaction with PLL which converted the existing longevity swap contract into a bulk annuity contract. Further details are included in section G6.2.
The Group’s defined benefit schemes typically expose the Group to a number of risks, the most significant of which are: Asset volatility – the value of the schemes’ assets will vary as market conditions change and as such is subject to considerable volatility. The volatility in the schemes’ assets can be caused by both volatility within the markets or variations in the return achieved by the schemes’ investment managers relative to market performance. In particular there is the risk that the variation in asset values will not be in line with the variation in pension liability values, and as such differences in the nature and duration of the assets and liabilities can cause difference in the way that the assets and liabilities vary.
Inflation risk – a significant proportion of the schemes’ benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities (although in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). Assets in all schemes are invested so as to hedge a significant proportion of the inflation risks, further details of which are included in this note.
Defined benefit scheme The Pearl Scheme is established under, and governed by, the trust deeds and rules and is funded by payment of contributions to a separately administered trust fund. A Group company, Pearl Group Holdings No.2 Limited (‘PGH2’), is the principal employer of the Pearl Scheme. The principal employer meets the administration expenses of the Scheme. The Pearl Scheme is administered by a separate Trustee company, P.A.T. (Pensions) Limited, which is separate from the Company. The Trustee company is comprised of two representatives from the Group, three member nominated representatives and one independent trustee in accordance with the Trustee company’s articles of association. The Trustee is required by law to act in the interest of all relevant beneficiaries and is responsible for the investment policy with regard to the assets.
The valuation has been based on an assessment of the liabilities of the Pearl Scheme as at 31 December 2017, undertaken by independent qualified actuaries. The present values of the defined benefit obligation and the related interest costs have been measured using the projected unit credit method.
(ii) to reach full funding on a gilts flat basis by 30 June 2031; – the Trustee continues to benefit from a first charge over shares in Phoenix Life Assurance Limited, National Provident Life Limited, Pearl Group Services Limited and PGS2 Limited. The security claim granted under the share charges is capped at the lower of £600 million and 100% of the Pearl Scheme deficit (calculated on a basis linked to UK government securities) revalued every three years thereafter; and
It should be noted that the terms of the £900 million facility agreement (see note E5) restrict the Group’s ability, with certain exceptions, to transfer assets into the secured companies over which the Trustee holds a charge over shares.
An additional liability of £50 million (2016: £66 million) has been recognised, reflecting a charge on any refund of the resultant IAS 19 surplus that arises after adjustment for discounted future contributions of £143 million (2016: £189 million) in accordance with the minimum funding requirement. A deferred tax asset of £24 million (2016: £32 million) has also been recognised to reflect tax relief at a rate of 17% (2016: 17%) that is expected to be available on the contributions, once paid into the scheme.
Loss from changes in demographic assumptions – (15) – – (15)
Change in minimum funding requirement obligation – – – 11 11
Defined benefit obligation The calculation of the defined benefit obligation can be allocated to the scheme’s members as follows: – Deferred scheme members: 37% (2016: 38%); and
Principal assumptions The principal financial assumptions of the Pearl Scheme are set out in the table below: Rate of increase for pensions in payment (5% per annum or RPI if lower) 3.05 3.05
It has been assumed that post-retirement mortality is in line with a scheme-specific table which was derived from the actual mortality experience in recent years based on the SAPS standard tables for males and for females based on year of use. Future longevity improvements are based on CMI 2016 Core Projections (2016: CMI 2014 Core Projections) and a long-term rate of improvement of 1.75% per annum for males and 1.50% per annum for females up to and including age 85 then decreasing linearly to 0% per annum at age 110 (2016: Longterm rate of improvement of 2% per annum up to and including age 75 then decreasing linearly to 0% per annum at age 110). Under these assumptions, the average life expectancy from retirement for a member currently aged 40 retiring at age 60 is 30.0 years and 32.0 years for male and female members respectively (2016: 31.0 and 33.1 respectively).
Scheme details Defined contribution scheme Contributions in the year amounted to £6 million (2016: £6 million).
The valuation has been based on an assessment of the liabilities of the PGL Pension Scheme as at 31 December 2017, undertaken by independent qualified actuaries.
Funding A triennial funding valuation of the PGL Pension Scheme as at 30 June 2015 was completed in June 2016. This showed a surplus as at 30 June 2015 of £164 million. Following discussions with the Trustee of the PGL Pension Scheme it was agreed that the existing schedule of cash contributions to the scheme amounting to £59 million in total over the period from October 2013 to August 2017 would remain unchanged. The remaining contributions totalling £10 million were paid into the scheme in 2017 (2016: £15 million) and there are no further committed contributions to pay.
Liability management exercises Two liability management exercises were carried out in 2016 that impacted on the results in the comparative period. No such exercises were undertaken in the current period.
In January 2016, the Group carried out a pension increase exchange (‘PlE’) exercise in respect of the PGL Pension Scheme. Existing in-scope pensioners were offered the option to exchange future non-statutory pension increases for a one-off uplift to their current pension, thereby reducing longevity and inflation risk for the Group. The financial effect of all acceptances received in the prior period has been recognised in 2016 in the consolidated financial statements as a reduction in scheme liabilities of £3 million shown as a past service credit in the consolidated income statement.
In February 2016, the Group commenced a flexible retirement option (‘FRO’) exercise whereby defined members who are eligible to retire within the PGL Pension Scheme were offered a transfer value on standard terms or a pension in the scheme. The financial effect of all acceptances received has been recognised in 2016 in the consolidated financial statements and an experience gain of £2 million on liabilities arose as a result of this exercise.
In December 2016, the PGL Pension Scheme entered into a ‘buy-in’ agreement with PLL, which converted the longevity swap contract into a bulk annuity contract. The Scheme transferred certain additional risks in respect of the benefits payable to the deferred members covered by the longevity swap arrangement, including the investment risk associated with the assets covering those benefits. The Scheme transferred £1,164 million of plan assets to a collateral account and this transfer constituted the payment of premium to PLL and was net of a £23 million prepayment by PLL to the scheme in respect of benefits up to 31 May 2017. The assets transferred to PLL are recognised in the relevant line within financial assets in the statement of consolidated financial position. An adjustment of £6 million to the value of the premium was paid by PLL to the PGL Scheme in 2017. The economic effect of the ‘buy-in’ transaction in the Scheme is to replace the plan assets transferred with a single line insurance policy reimbursement asset which is eliminated on consolidation. The value of this insurance policy at 31 December 2017 was £895 million (2016: £892 million).
Included within insurance policies with Group entities of £916 million (2016: 913 million) is a further insurance policy reimbursement asset of £21 million (2016: £21 million) which was also eliminated on consolidation.
Remeasurements: Return on plan assets excluding amounts included in interest income 22 – – – 22
Loss from changes in financial assumptions – (38) – – (38)
Gain from changes in demographic assumptions – 37 – – 37
Remeasurements: Return on plan assets excluding amounts included in interest income 349 – – – 349 Experience gains – 15 – – 15 Loss from changes in financial assumptions – (289) – – (289) Loss from changes in demographic assumptions (8) (8) Change in provision for tax on economic surplus available as a refund – – 72 – 72 Change in minimum funding requirement obligation – – – 5 5 Included in other comprehensive income 349 (282) 72 5 144
G. OTHER STATEMENT OF CONSOLIDATED FINANCIAL POSITION NOTES continued G6. PENSION SCHEMES continued G6.2 PGL Pension Scheme continued Scheme assets The distribution of the scheme assets at the end of the year was as follows: Total £m
Add back: Insurance policies eliminated on consolidation 916 – 913 –
Amounts due from subsidiary eliminated on consolidation – – 6 –
Defined benefit obligation The calculation of the defined benefit obligation can be allocated to the scheme’s members as follows: – Deferred scheme members: 39% (2016: 39%); and
The weighted average duration of the defined benefit obligation at 31 December 2017 is 19 years (2016: 19 years).
It has been assumed that post-retirement mortality is in line with 86%/94% of S1PL base tables with future longevity improvements in line with CMI 2016 Core Projections (2016: CMI 2014 Core Projections) and a long-term rate of improvement of 1.75% per annum up to and including age 85 then decreasing linearly to 0% at age 110 (2016: Longterm rate of improvement of 2% per annum up to and including age 75 then decreasing linearly to 0% at age 110). Under these assumptions, the average life expectancy from retirement for a member currently aged 40 retiring at age 62 is 28.3 years (2016: 29.4 years) and 29.6 years (2016: 30.6 years) for male and female members respectively.
Impact on the defined benefit obligation (£m) 1,649 (70) 75 47 (51) 60 (59)
G6.3 Abbey Life Staff Pension Scheme Scheme details The Abbey Life Staff Pension Scheme (‘the Abbey Life Scheme’) was consolidated into the Group statement of financial position following the acquisition of Abbey Life Assurance Company Limited (‘Abbey Life’) (see note H2.2). The scheme is a defined benefit scheme which is currently open to future accrual.
Following the transfer of the Scheme to PeLHL a revised schedule of contributions was agreed effective from 1 July 2017, for PeLHL to pay 39.5% of gross personable earnings and the following amounts in respect of deficit contributions: – a lump sum of £25 million into the Scheme settled on 31 July 2017; – fixed monthly contributions of £400,000 payable up to 30 June 2026 and monthly contributions of £83,552 in respect of administration expenses which are payable up to 30 June 2028 and will increase annually in line with the Retail Prices Index assumption; and
– annual payments of £4 million into the 2016 Charged Account by 31 July each year, with the first payment being made on 31 July 2017, and the last payment due by 31 July 2025.
Scheme assets The distribution of the scheme assets at the end of the year was as follows: Total £m
Derivative values above include interest rate and inflation rate swaps and foreign exchange forward contracts. The Abbey Life Scheme has hedged its inflation risk through an inflation swap. It is currently exposed to interest rate risk to the extent that the holdings in bonds are mismatched to the scheme liabilities. The long-term intention is to fully hedge this risk through an interest rate swap. Further key risks that will remain are longevity and credit spread exposures.
Defined benefit obligation The calculation of the defined benefit obligation can be allocated to the scheme’s members as follows: – Active scheme members: 5% (2016: 5%); – Deferred scheme members: 55% (2016: 59%); and
Principal assumptions The principal financial assumptions of the Abbey Life Scheme are set out in the table below: Rate of increase for pensions in payment 3.05 3.05
Rate of increase for deferred pensions ('CPI' subject to caps) 2.20 2.20
G. OTHER STATEMENT OF CONSOLIDATED FINANCIAL POSITION NOTES continued G7. INTANGIBLE ASSETS
Goodwill Business combinations are accounted for by applying the purchase method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.
Acquired in-force business Insurance and investment contracts with DPF acquired in business combinations and portfolio transfers are measured at fair value at the time of acquisition. The difference between the fair value of the contractual rights acquired and obligations assumed and the liability measured in accordance with the Group’s accounting policies for such contracts is recognised as acquired in-force business. This acquired inforce business is amortised over the estimated life of the contracts on a basis which recognises the emergence of the economic benefits.
On acquisition of Abbey Life 8 180 – – – – 188
G7.1 Goodwill The carrying value of goodwill has been tested for impairment at the year end. No impairment has resulted as the value in use of this intangible continues to exceed its carrying value.
£47 million of the goodwill is attributable to the management services business of the Phoenix Life segment including the £8 million arising on acquisition of Abbey Life. Value in use has been determined as the present value of certain future cash flows associated with this business. The cash flows used in this calculation have been valued using a risk adjusted discount rate of 7.1% (2016: 7.7%) and are consistent with those adopted by management in the Group’s operating plan and, for the period 2023 and beyond, reflect the anticipated run-off of the Phoenix Life insurance business. The underlying assumptions of these projections include management’s best estimates with regards to longevity, persistency, mortality and morbidity.
During 2016, goodwill of £10 million was recognised on the acquisition of AXA Wealth and was determined to represent the value of the workforce assumed and the potential for future value creation. This is considered to relate to the ability to invest in and grow the SunLife brand. A separate impairment test was performed to consider the recoverability of the AXA Wealth goodwill along side the brand intangible. Value in use has been determined as the present value of certain future cash flows associated with that business. The cash flows used in the calculation are consistent with those adopted by management in the Group’s operating plan, and for the period 2023 and beyond, assume a zero growth rate. The underlying assumptions of these projections include market share, customer numbers, commission rates and expense inflation. The cash flows have been valued at a risk adjusted discount rate of 11% that makes prudent allowance for the risk that future cashflows may differ from that assumed.
G7.2 Acquired in-force business Acquired in-force business on insurance contracts and investment contracts with DPF represents the difference between the fair value of the contractual rights under these contracts and the liability measured in accordance with the Group’s accounting policies for such contracts. This intangible is being amortised in accordance with the run-off of the book of business.
During 2016, acquired in-force business of £38 million and £180 million was recognised upon the acquisitions of AXA Wealth and Abbey Life respectively. The £38 million arising upon the acquisition of AXA Wealth is analysed as £116 million in respect of the value in-force of acquired unit linked business and negative AVIF of £78 million arising on consolidation in respect of the acquired protection business.
G7.3 Customer relationships The customer relationships intangible at 31 December 2017 relates to vesting pension premiums which captures the new business arising from policies in-force at the acquisition date, specifically top-ups made to existing policies and annuities vested from matured pension policies. The total value of this customer relationship intangible at acquisition was £297 million and has been allocated to the Phoenix Life segment. This intangible is being amortised over a 20 year period.
Leases, where a significant portion of the risks and rewards of ownership are retained by the lessor, are classified as operating leases. Where investment property is leased out by the Group, rental income from these operating leases is recognised as income in the consolidated income statement on a straight-line basis over the period of the lease.
Unrealised gains on properties held at end of period 5 27
As at 31 December 2017, a property portfolio of £474 million (2016: £444 million) is held by the life companies in a mix of commercial sectors, spread geographically throughout the UK.
In February 2016, the Group assessed that it no longer controlled UKCPT and consequently deconsolidated this group of subsidiaries effective from this date. As a result, the UKCPT property portfolio was no longer included within the Group investment property portfolio from this date.
The residential property reversions, an interest in customers’ properties which the Group will realise upon their death, are valued using a DCF model based on the Group’s proportion of the current open market value, and discounted for the expected lifetime of the policyholder. The open market value is measured by independent local property surveyors having appropriate recognised professional qualifications with reference to the condition of the property and local market conditions. The individual properties are valued triennially and indexed using regional house price indices to the balance sheet date. The discount rate is a risk-free rate appropriate for the duration of the asset, adjusted for the deferred possession rate. Assumptions are also made in the valuation for future movements in property prices. The residential property reversions have been substantially refinanced under the arrangements with Santander as described in note E5.
RICS valuation Expected income per sq. ft. £5.39 – £100.40 (£23.85) £4.91 - £99.97 (£22.62)
Future growth in house prices Risk free rate (4 year swap) 5 year RPI estimate + 1% margin
Discount rates Risk free rate (4 Year swap) + deferred possession rate (3.6%) 5 year Gilt spot rate + 1.7% margin
The estimated fair value of commercial properties would increase (decrease) if: – the expected income were to be higher (lower); or
The key valuation sensitivities in respect of the residential property reversions are noted below: – an increase of 1% in the deferred possession rate would decrease the market value by £6 million; – a decrease of 1% in the deferred possession rate would increase the market value by £6 million; – an increase of 10% in the mortality rate would increase the market value by £1 million; and
Direct operating expenses (offset against rental income in the consolidated income statement) in respect of investment properties that generated rental income during the year amounted to £1 million (2016: £1 million). The direct operating expenses arising from investment property that did not generate rental income during the year amounted to £4 million (2016: £2 million).
Other receivables are recognised when due and measured on initial recognition at the fair value of the amount receivable. Subsequent to initial recognition, these receivables are measured at amortised cost using the effective interest rate method.
All deposits are subject to fixed interest rates. The carrying amounts approximate to fair value at the period end. Cash and cash equivalents in long-term business operations and consolidated collective investment schemes of £1,878 million (2016: £1,517 million) are primarily held for the benefit of policyholders and so are not generally available for use by the owners.
The Group uses the acquisition method to account for the acquisition of subsidiaries. The cost of an acquisition is measured at the fair value of the consideration. Any excess of the cost of acquisition over the fair value of the net assets acquired is recognised as goodwill. Any excess of the fair value of the net assets acquired over the cost of acquisition is recognised in the consolidated income statement. Directly attributable acquisition costs are included within administrative expenses, except for acquisitions undertaken prior to 2010 when they are included within the cost of the acquisition. Costs directly related to the issuing of debt or equity securities are included within the initial carrying amount of debt or equity securities where these are not carried at fair value. Intra-group balances and income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.
– the investee is managed by the Group’s fund manager, and the Group holds a significant investment in the investee. It is generally presumed that the Group has rights to variable returns and has the ability to use its power to affect its returns where the Group’s holding is greater than 50%. For holdings between 25% and 50% the Group performs an assessment of power and associated control on a case by case basis. This assessment includes establishing the nature of the decision making rights that the fund manager has over the investee and whether these rights give it the power to control the investee.
Certain of the collective investment schemes have non-coterminous period ends and are consolidated on the basis of additional financial statements prepared to the period end.
– Pearl Life Holdings Limited (‘PeLHL’) is required to make payments of contributions into charged accounts on behalf of The Abbey Life Staff Pension Scheme. These amounts do not form part of the pension scheme assets and at 31 December 2017, PeLHL held £40 million within fixed and variable rate income securities and £5 million within cash and cash equivalents in respect of these charged accounts. Further details of when these amounts may become payable to the pensions scheme are included in note G6.
H2.2 Acquisition of Abbey Life On 30 December 2016, the Group acquired 100% of the issued share capital of Abbey Life Assurance Company Limited, Abbey Life Trustee Services Limited and Abbey Life Trust Securities Limited from Deutsche Holdings No.4 Ltd (a wholly owned subsidiary of Deutsche Bank AG) for total cash consideration of £933 million. The fair values of the identifiable assets acquired, liabilities assumed and the resultant goodwill determined at the date of acquisition have not been adjusted within the 12 month period since the date of acquisition.
H2.3 Disposal of Pearl Breakfast Unit Trust On 25 February 2016, the Group completed the sale of its entire interest in an investment property joint venture which was held by the Pearl Breakfast Unit Trust. The units in the Pearl Breakfast Unit Trust were sold to Tesco Property Holdings (No.2) Limited and Tesco Property Holdings Limited. As part of the sale agreement Tesco plc also purchased the Group’s investment in Tesco Property Partner (GP) Limited. No gain or loss arose on this disposal.
In February 2016, the Group reduced its holding in the issued share capital of UKCPT to 48.9%. The Group deems that it no longer controls its investment in UKCPT as it no longer has a unilateral power of veto in general meetings and also because the Group is restricted by the terms of the existing relationship agreement it has with UKCPT. Consequently, UKCPT has been deconsolidated from the date of this loss of control.
Collective investment schemes: Directly held collective investment schemes1: Short-term liquidity 8,465 8,052
Phoenix Wealth Services Limited (management services company) Wythall1 Ordinary shares 100.00%
Phoenix SL Direct Limited (management services company) Wythall1 Ordinary shares 100.00%
PGH Capital plc (finance company)4 Republic of Ireland6 Ordinary shares 100.00%
Pearl Assurance Group Holdings Limited (investment company) Wythall1 Ordinary shares 100.00%
PGMS (Ireland) Holdings Unlimited Company (holding company) Republic of Ireland8 Ordinary shares 100.00%
Phoenix SCP Pensions Trustees Limited (trustee company) Wythall1 Ordinary shares 100.00%
Abbey Life Trustee Services Limited (dormant company) Wythall1 Ordinary shares 100.00%
Phoenix Pensions Trustee Services Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl Group Secretariat Services Limited (dormant company) Wythall1 Ordinary shares 100.00%
Phoenix Life Pension Trust Limited (dormant company) Wythall1 Ordinary shares 100.00%
PG Dormant (No 4) Limited (dormant company) Wythall1 Ordinary shares 100.00%
PG Dormant (No 3) Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl (Martineau Phase 2) Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl (Moor House 2) Limited (dormant company) Wythall1 Ordinary shares 100.00%
Janus Henderson Institutional Mainstream UK Equity Trust London14 Authorised unit trust 100.00%
Janus Henderson Strategic Investment Funds – Janus Henderson Institutional Japan Index Opportunities Fund
Janus Henderson Institutional UK Equity Tracker Trust London14 Authorised unit trust 100.00%
Janus Henderson Institutional Short Duration Bond Fund London14 Authorised unit trust 86.54%
Type of investment (including class of shares held) % of shares/
PUTM Bothwell UK Equity Smaller Companies Fund Wythall1 Authorised unit trust 98.53%
PUTM Bothwell UK Equity 350 Fund Wythall1 Authorised unit trust 99.27%
PUTM Bothwell UK Equity Income Fund Wythall1 Authorised unit trust 100.00%
Ignis Strategic Solutions Funds plc – Systematic Strategies Fund Republic of Ireland8 OEIC, sub fund 100.00%
Significant holdings: Janus Henderson Global Care Funds – Janus Henderson Institutional Global Care Managed Fund
AB SICAV I – Diversified Yield Plus Portfolio S GBP Acc Luxembourg17 SICAV, sub fund 42.65%
BlackRock Market Advantage X GBP Acc London16 Authorised unit trust 66.03%
Standard Life Investments UK Real Estate Income Feeder Fund Edinburgh22 OEIC, sub fund 29.04%
Aberdeen Global Emerging Markets Quantitative Equity Fund London19 OEIC, sub fund 21.52%
American Century SICAV – Concentrated Global Growth Equity Luxembourg23 SICAV, sub fund 42.23%
1 1 Wythall Green Way, Wythall, Birmingham, B47 6WG 2 Marsh Management Services (Dublin) Limited, DS-28 Adelaide Road, Dublin 2,
Republic of Ireland 3 The shares of this subsidiary undertaking are held by a trust. The Group has assessed that it exercises overall control in respect of this subsidiary undertaking 4 These subsidiary undertakings are directly owned by Phoenix Group Holdings 5 The Argus Building, 12 Wesley Street, Hamilton, Bermuda 6 Arthur Cox Building, Earlsfort Terrace, Dublin 2, Dublin, Republic of Ireland 7 Juxon House, 100 St Paul’s Churchyard, London, EC4M 8BU 8 25–28 North Wall Quay, IFSC, Dublin 1, Republic of Ireland 9 c/o Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, USA 10 301 St Vincent Street, Glasgow, Strathclyde, G2 5HN 11 32 Commercial Street, St Helier, Jersey, JE2 3RU 12 50 Bothwell Street, Glasgow, G2 6HR
13 19 Middle Furlong, Bushey, England, WD23 3SZ 14 201 Bishopsgate, London, EC2M 3AE 15 Ugland House, Grand Cayman, Cayman Islands, KY1-1104 16 12 Throgmorton Avenue, London, EC2N 2DL 17 2–4, Rue Eugène Ruppert, Luxembourg, L-2453 18 7 Newgate Street, London, EC1A 7NX 19 1 Bread Street, London, EC4M 9HH 20 Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 3QL 21 100 Barbirolli Square, Manchester, M2 3AB 22 1 George Street, Edinburgh, EH2 2LL 23 33 Rue de Gasperich, Luxembourg, E-5826 24 15 Dalkeith Road, Edinburgh, EH16 5BU 25 10 Queens Terrace, Aberdeen, AB10 1YG 26 30 St Mary, London, EC3A 8BF
The following associate and subsidiaries were fully disposed of during the period. The subsidiaries were deconsolidated from the date of disposal: – Castle Hill Asset Management LLC; – PUTM North American Unit Trust; and
The following subsidiaries were reclassified as significant holdings due to the loss of effective control by the Group during the period: – AB SICAV I – Global Factor Portfolio (SF1);and
– AXA Fixed Interest Investment ICVC – Sterling Strategic Bond Fund
The Group no longer has significant holdings in the following undertakings: – Janus Henderson Global Funds – World Select Fund
The fair value determined at the grant date of the equity-settled sharebased payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest. At each period end, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the consolidated income statement such that the cumulative expense reflects the revised estimate with a corresponding adjustment to equity.
I1.2 Share-based payment expense Long-Term Incentive Plan (‘LTIP’) The Group implemented a long-term incentive plan to retain and motivate its senior management group. The awards under this plan are in the form of nil-cost options to acquire an allocated number of ordinary shares. Assuming no good leavers or other events which would trigger early vesting rights, the 2014 and 2015 LTIP awards are subject to performance conditions tied to the Company’s financial performance over a three year period in respect of growth in MCEV (up to 31 December 2015), growth in Own Funds (from 1 January 2016), cumulative cash generation and total shareholder return (‘TSR’). The 2016 and 2017 LTIP awards are subject to performance conditions tied to the Company’s performance in respect of cumulative cash generation and TSR.
2017 LTIP awards were granted on 24 March 2017. The number of shares for all outstanding LTIP awards as at 9 November 2016 were increased to take into account the impact of the Group’s rights issue (see note D1). This adjustment was based on the Theoretical Ex-Rights Price. The 2014
LTIP awards vested during the year. The 2015 awards will vest on 28 September 2018, the 2016 awards will vest on 30 March 2019 and 2 June 2019 and the 2017 awards will vest on 24 March 2020.
Expected dividend yield (%) Dividends are received by holders of the awards therefore no adjustment to fair value is required
Deferred bonus share scheme (‘DBSS’) Each year, part of the annual incentive for certain executives is deferred into Phoenix Group Holdings’ shares. This grant of shares is conditional on the employee remaining in employment with the Group for a period of three years. For DBSS awards made in 2015 and in subsequent years, the three year deferral period will run to the dealing day following the third anniversary of the announcement of the annual results. Dividends will accrue for DBSS awards over the three year deferral period. The 2017 DBSS was granted on 24 March 2017 and is expected to vest on 20 March 2020. The number of shares for all outstanding DBSS awards has been increased to take into account the impact of the Group’s rights issue (see note D1). This adjustment has been based on the Theoretical Ex-Rights Price. The 2014 DBSS awards vested during the year. The 2015 awards are expected to vest on 19 March 2018 and the 2016 awards are expected to vest on 24 March 2019.
The 2012 sharesave awards were increased during 2013, and the exercise prices updated, as a result of the equity raising on 21 February 2013. All sharesave awards were increased in November 2016 following the Group’s rights issue (see note D1) and the exercise price of these awards was also amended as a result of this issue. The 2017 sharesave awards were granted on 13 April 2017.
Risk-free rate (%) – based on UK government gilts commensurate with the expected term of the award 0.2 (for 3.25 year scheme) and 0.4
The fair value of the Matching shares granted is estimated as the share price at date of grant, taking into account terms and conditions upon which the instruments were granted. At 31 December 2017, 33,705 matching shares were conditionally awarded to employees.
I1.3 Movements in the year The following tables illustrate the number of, and movements in, LTIP, Sharesave and DBSS share options during the year: Number of share options 2017
The weighted average share price at the date of exercise for the rewards exercised is £7.72 (2016: £7.69).
Premium paid on partial redemption of £300 million unsecured bond 25 –
Net interest expense/(income) on Group defined benefit pension scheme asset/liability 11 (21)
The Group’s capital management is based on the new Solvency II framework. This involves a valuation in line with Solvency II principles of the Group’s Own Funds and risk based assessment of the Group’s Solvency Capital Requirement (‘SCR’).
The risk management disclosures in the consolidated financial statements set out the major risks that the Group businesses are exposed to and describe the Group’s approach to managing these. The section on financial risk is included in note E6, the section on insurance risk is included in note F4 and the sections on risk and capital management objectives and other risks are included below. The Group’s risk management framework is described in the risk management commentary on pages 32 to 37 of the Annual Report and Accounts.
Under the Solvency II framework, the primary sources of capital managed by the Group comprise of the Group’s Own Funds as measured under the Solvency II principles adjusted to exclude surplus funds attributable to the Group’s unsupported with-profit funds and unsupported pension schemes. In addition, the Group has access to the undrawn portion of the revolving credit facility of £900 million as at 31 December 2017 (2016: £50 million). For further details, see note E5.
Remove Own Funds pertaining to unsupported with-profit funds and the PGL pension scheme (2.0) (2.0)
Group capital resources 4.6 4.0 1 The 2016 Own Funds include pro forma adjustments to illustrate the impacts of the issuance in January 2017 of the £300 million Solvency II qualifying Tier 3 bond and the receipt of the PRA’s approval in March 2017 to include the acquired AXA Wealth business within the Group’s internal model.
Solvency II surplus Until 1 July 2017, the Group’s Solvency II assessment and Group supervision was performed at the PLHL level as this was the highest EEA insurance holding company. A waiver which permited Group supervision to take place at the level of the ultimate parent, PGH, via other methods as opposed to full Group supervision expired on 30 June 2017. The Group’s capital position is now being managed at the PGH level only.
I4.2 Transactions with key management personnel The total compensation of key management personnel, being those having authority and responsibility for planning, directing and controlling the activities of the Group, including the Executive and Non-Executive Directors, are as follows: 2017 £m 2016 £m
Details of the shareholdings and emoluments of individual Directors are provided in the Remuneration report on pages 62 to 87.
Operating lease rentals charged within administrative expenses amounted to £6 million (2016: £6 million).
Later than 1 year and not later than 5 years 11 16
To subscribe to private equity funds and other unlisted assets 543 646
Where the Group has a possible future obligation as a result of a past event, or a present legal or constructive obligation but it is not probable that there will be an outflow of resources to settle the obligation or the amount cannot be reliably estimated, this is disclosed as a contingent liability.
On 23 February 2018, the Group announced the proposed acquisition of the majority of Standard Life Assurance Limited and Vebnet Limited for a total consideration of £2,930 million. The consideration will be financed through a cash consideration of £1,971 million and the issuance of shares in Phoenix Group Holdings representing approximately 19.99% of the enlarged share capital of the Group. The Group proposes to finance the cash consideration via a £950 million rights issue with the remaining cash consideration of £1,021 million financed from up to £1,500 million of underwritten debt facilities and up to £250 million of own cash resources.
The £1,500 million of underwritten debt facilities comprises a £900 million backstop revolving credit facility (“the backstop facility”) and a sterling term loan facility with an aggregate principal amount of £600 million (“the acquisition facility”). Both agreements were entered into on 23 February 2018.
The terms of the backstop facility closely mirror the terms of the Group’s existing £900 million unsecured revolving credit facility (see note E5), with an additional condition that the drawdown of loans under the backstop facility results in the cancellation in full of the current revolving credit facility.
On 27 February 2018, the Company updated the terms of its £900 million unsecured revolving credit facility which extends the term of the facility to 30 June 2022.
Parent Company Accounts Statement of Comprehensive Income For the year ended 31 December 2017 £m £m
The Company was exempt from tax in the Cayman Islands on any profits, income, gains or appreciations from 11 May 2010.
Statement of Changes in Equity For the year ended 31 December 2017
Total comprehensive income for the year attributable to owners – – – 87 87
Credit to equity for equity–settled share–based payments (note I1) – – – 8 8
Statement of Changes in Equity For the year ended 31 December 2016
Credit to equity for equity–settled share–based payments (note I1) – – – 7 7
Phoenix Group Holdings is subject to Cayman Islands Companies Law. Under Cayman Islands Companies Law distributions can be made out of profits or share premium subject, in each, to a solvency test. The solvency test is broadly consistent with the Group’s going concern assessment criteria.
Notes to the Parent Company Financial Statements 1. ACCOUNTING POLICIES (A) BASIS OF PREPARATION The financial statements have been prepared on an historical cost basis except for those financial assets and financial liabilities that have been measured at fair value.
The financial statements are presented in sterling (£) rounded to the nearest million unless otherwise stated.
(B) ACCOUNTING POLICIES The accounting policies in the separate financial statements are the same as those presented in the consolidated financial statements on pages 110 to 113, except for the policy noted below. In addition, the Company does not adopt the Group’s policy of hedge accounting. Where an accounting policy can be directly attributed to a specific note to the consolidated financial statements, the policy is presented within that note. Each note within the Company financial statements makes reference to the note to the consolidated financial statements containing the applicable accounting policy. The accounting policy in relation to foreign currency transactions is included within note A2.1 to the consolidated financial statements.
Under IFRS 9, all financial assets will be measured either at amortised cost or fair value and the basis of classification will depend on the business model and the contractual cash flow characteristics of the financial assets. In relation to the impairment of financial assets, IFRS 9 requires the use of an expected credit loss model, as opposed to the incurred credit loss model required under IAS 39. The expected credit loss model will require the Company to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition.
The Company has performed a high-level impact assessment to consider the impact of IFRS 9. Overall, the Company expects no significant impact on its statement of financial position and equity from applying both the classification and expected credit loss requirements of the standard. A process has been established to calculate the expected credit loss allowance for debt instruments held at amortised cost including loans and other receivables. This considers both qualitative and quantitative information and based upon information currently available no material expected credit loss allowances are expected.
Predominantly, all revenues from external customers are sourced in the UK.
Interest income on financial assets designated at fair value through profit and loss on initial recognition 4 –
Recharge of bank facility fees to other Group companies 4 –
Fair value gains/(losses) on financial assets at fair value through profit and loss: Held for trading – derivatives 2 –
Write down of loans due from other Group entities 7 11
7. BORROWINGS The accounting policy for borrowings is included in note E5 to the consolidated financial statements.
Carrying value Fair value 2017 £m 2016 £m 2017 £m 2016 £m £300 million senior unsecured bond (note a) 133 – 137 –
£450 million Tier 3 subordinated notes (note c) 452 – 481 –
All borrowings are measured at amortised cost using the effective interest method.
a. On 7 July 2014, the Group’s financing subsidiary, PGH Capital plc (’PGHC’), issued a £300 million 7 year senior unsecured bond at an annual coupon rate of 5.75% (’£300 million senior bond’). On 20 March 2017, the Company was substituted in place of PGHC as issuer of the £300 million senior bond, which was initially recognised at fair value of £336 million net of transaction costs. On 5 May 2017, the Company completed the purchase of £178 million of the £300 million senior bond at a premium of £25 million in excess of the principal amount. Transaction costs charged to the Company on substitution were deferred and are being amortised over the life of the bond.
b. On 23 January 2015, PGHC issued £428 million of subordinated notes due 2025 at a coupon of 6.625%. On 20 March 2017, the Company was substituted in place of PGHC as issuer of the £428 million subordinated notes which was initially recognised at fair value of £462 million net of transaction costs. The transaction costs charged to the Company on substitution were deferred and are being amortised over the life of the notes.
c. On 20 January 2017, PGHC issued £300 million Tier 3 subordinated notes due 2022 at a coupon of 4.125%. On 20 March 2017, the Company was substituted in place of PGHC as issuer of the £300 million Tier 3 subordinated notes which were initially recognised at fair value of £301 million net of transaction costs. On 5 May 2017, the Company also completed the issue of a further £150 million of Tier 3 subordinated notes, the terms of which are the same as the Tier 3 subordinated notes issued in January 2017. The Company received a premium of £2 million in excess of the principal amount. Fees of £1 million associated with the additional £150 million notes issued were deferred. All deferred issue costs associated with these notes are being amortised over the life of the notes.
d. On 6 July 2017, the Company issued US $500 million Tier 2 bonds due 2027 with a coupon of 5.375%. Fees associated with these notes of £2 million were deferred and are being amortised over the life of the bond.
For the purposes of the additional fair value disclosures for financial liabilities for which fair value is disclosed, £1,521 million is categorised as Level 2 financial instruments. There were no gains or losses recognised in other comprehensive income in the current period.
New borrowings net of costs £m Repayments3 £m £900 million unsecured revolving credit facility – 544 – 6 – (550) –
1 Loans issued via substitution is a non-cashflow item as consideration was the transfer of loans and receivables (refer to note 10.4). 2 Primarily comprises amortisation under the effective interest method applied to borrowings held at amortised cost. 3 Repayment of borrowings in the statement of cashflows includes a premium of £3 million in excess of the fair value amount on repayment of the £300 million senior unsecured bond.
8. ACCRUALS AND DEFERRED INCOME The accounting policy for accruals and deferred income is included in note G4 to the consolidated financial statements.
All investments are categorised as Level 3 financial instruments. The investment is a debt holding in a property investment structure and was acquired by the Company during 2017 and all fair value movements are included in the net investment income in the statement of comprehensive income. There were no gains or losses recognised in other comprehensive income in the current period. Sensitivities are included in note E2.3.
Carrying value Fair value 2017 £m 2016 £m 2017 £m 2016 £m
Loans due from PGH (LCA) Limited and PGH (LCB) Limited (note a) 634 603 781 718
Loans due from Phoenix Group Employee Benefit Trust (note d) 3 6 3 6
In June 2015, the Company was assigned loans of £436 million issued equally by PGH (LCA) Limited and PGH (LCB) Limited. These loans accrue interest at a rate of LIBOR plus a margin of 2.9% and mature on 5 June 2020. During the year, interest of £12 million was capitalised (2016: £16 million) and £177 million of repayments were received (2016: £50 million). At 31 December 2017 £247 million was due (2016: £412 million).
b. On 22 March 2010, the Company subscribed for £250 million of Eurobonds which were issued equally by PGH (MC1) Limited and PGH (MC2) Limited. On 23 March 2010, the Eurobonds were listed on the Channel Islands Stock Exchange. Interest accrues on these Eurobonds at a rate of LIBOR plus a margin of 2.5% and the final maturity date is 30 June 2025. The Eurobonds were initially recognised at fair value and are accreted to par over the period to 2025. At 31 December 2017, £142 million was due (2016: £128 million).
d. On 16 July 2010, the Company entered into an interest free facility arrangement with Phoenix Group Employee Benefit Trust (‘EBT’). In 2017, an additional £4 million was drawn down against this facility (2016: £7 million). The loan is recoverable until the point the awards held by the EBT vest to the participants, at which point the loan is reviewed for impairment. Any impairments are determined by comparing the carrying value to the estimated recoverable amount of the loan. Following the vesting of awards in 2017 £7 million of the loan (2016: £6 million) has been written off. At 31 December 2017, £3 million was due (2016: £6 million).
No other loans are considered to be past due or impaired.
Adjustments to reconcile profit for the year to cash flows from operating activities: Investment income from other Group entities (150) (80)
12. CAPITAL AND RISK MANAGEMENT The Company’s capital comprises share capital and all reserves. At 31 December 2017, total capital was £2,235 million (2016: £2,331 million). The movement in capital in the year comprises the total comprehensive income for the year attributable to owners of £87 million (2016: £38 million), proceeds from the issue of ordinary share capital of £2 million (2016: £908 million) and a credit to equity for equitysettled share-based payments of £8 million (2016: £7 million), partly offset by payment of dividends of £193 million (2016: £126 million). Details of the Groups capital management policies are outlined in note I3 to the consolidated statements.
The principal risks and uncertainties facing the Company are interest rate risk, liquidity risk and credit risk. Details of the Group risk management policies are outlined in note E6 to the consolidated financial statements.
Notes to the Parent Company Financial Statements continued 13. SHARE-BASED PAYMENTS For detailed information on the long-term incentive plans, sharesave schemes and deferred bonus share schemes refer to note I1 to the consolidated financial statements.
14. DIRECTORS’ REMUNERATION Details of the remuneration of the Directors’ of Phoenix Group Holdings is included in the Directors’ remuneration report on pages 63 to 87 of the Annual Report and Accounts.
During the year ended 31 December 2017, the Company entered into the following transactions with Group entities: 2017 £m 2016 £m
Premium received on partial redemption of loans due from PGH (LCA) Limited and PGH (LCB) Limited 3 –
16. AUDITOR’S REMUNERATION Details of auditor’s remuneration, for Phoenix Group Holdings subsidiaries, is included in note C3 to the consolidated financial statements.
17. EVENTS AFTER THE REPORTING PERIOD Details of events after the reporting date are included in note I8 to the consolidated financial statements
3 This information is presented on a look through basis to underlying funds where available. 4 Includes equity release mortgages of £1,255 million, policy loans of £12 million, other loans of £199 million, net derivative assets of £1,563 million, reinsurers’ share of investment contracts of £6,085 million, and other investments of £487 million.
1 Includes equity release mortgages of £433 million, policy loans of £10 million, other loans of £308 million, net derivative assets of £1,468 million, reinsurers’ share of investment contracts of £6,808 million, and other investments of £1,292 million.
Participating non-supported £m Unit-linked £m Total £m 2 Includes debt issued by governments; public and statutory bodies; government backed institutions and supranationals.
Participating non-supported £m Unit-linked £m Total £m 99% of rated securities were investment grade at 31 December 2017 (2016: 98%). The percentage of rated securities that were investment grade in relation to the shareholder and policyholders’ funds were 99% and 98% respectively (2016: 99% and 98% respectively).
CAPITAL MANAGEMENT FRAMEWORK The Group’s capital management framework is designed to achieve the following objectives: – to provide appropriate security for policyholders and meet all regulatory capital requirements under the Solvency II regime while not retaining unnecessary excess capital; – to ensure sufficient liquidity to meet obligations to policyholders and other creditors; – to optimise the Fitch Rating’s financial leverage ratio to maintain an investment grade credit rating; – to support the Group’s progress in putting in place a new UK-registered holding company for the Group; and
PGH’s Tier 1 capital accounts for 76% (2016: 83%) of total Own Funds and comprises ordinary share capital, surplus funds of the unsupported with-profit funds which are recognised only to a maximum of the SCR, and the accumulated profits of the remaining business.
Tier 3 items include the Tier 3 subordinated notes of £0.5 billion (31 December 2016: £0.3 billion, pro forma for the January 2017 Tier 3 subordinated notes issuance) and the deferred tax asset of £0.1 billion (2016: £0.1 billion).
Own Funds within Phoenix Life of £4.0 billion (2016: £4.0 billion) comprise £0.8 billion (2016: £1.0 billion) in the shareholders’ funds, £2.1 billion (2016: £1.8 billion) in the non-profit funds, £0.5 billion (2016: £0.6 billion) in the supported with-profit funds and future shareholder transfers of £0.6 billion (2016: £0.5 billion).
The MCR is calculated according to a formula prescribed by the Solvency II regulations and is subject to a floor of 25% of the SCR or EUR 3.7 million, whichever is higher, and a cap of 45% of the SCR. The MCR formula is based on factors applied to technical provisions and capital at risk.
The eligible Own Funds to cover the MCR is subject to quantitative limits as shown below: – the eligible amounts of Tier 1 items should be at least 80% of the MCR; and
– the eligible amounts of Tier 2 items shall not exceed 20% of the MCR.
The statement of cash flows prepared in accordance with IFRS combines cash flows relating to shareholders with cash flows relating to policyholders, but the practical management of cash within the Group maintains a distinction between the two. The Group therefore focuses on the cash flows of the holding companies which relate only to shareholders. Such cash flows are considered more representative of the cash generation that could potentially be distributed as dividends or used for debt repayment and servicing, group expenses and pension contributions. Operating companies’ cash generation is a key performance indicator used by management for planning, reporting and executive remuneration.
A reconciliation of operating profit to the IFRS result before tax attributable to owners is included in the business review on page 30 and in the primary financial statements on page 103.
Represents total eligible own funds divided by the Solvency Capital Requirements (’SCR’), adjusted to a shareholder view through the exclusion of amounts relating to those ring-fenced with-profit funds and Group pension schemes whose own funds exceed their SCR.
The Solvency II surplus of the life companies that is in excess of their Board approved capital management policies.
Please see business review section page 29 for further analysis of the solvency positions of the life companies.
ANNUAL GENERAL MEETING Our Annual General Meeting (’AGM’) will be held on 2 May 2018 at 10:00am.
The voting results for our 2018 AGM, including proxy votes and votes withheld, will be available on the Group’s website shortly after the meeting.
Phoenix Group FTSE 250 (excluding investment trusts) FTSE 350 Life Assurance
PHOENIX GROUP HOLDINGS SHARE PRICE PERFORMANCE Price (rebased to PHNX) pence
REGISTRAR DETAILS Computershare Investor Services (Cayman) Limited Queensway House Hilgrove Street St Helier Jersey, JE1 1ES
If you receive any unsolicited investment advice: – make sure you get the correct name of the person and organisation; – check that they are properly authorised by the Financial Conduct Authority (’FCA’) before getting involved by visiting www.fca.org.uk/ firms/systems-reporting/register; – report the matter to the FCA by calling the FCA Consumer Helpline on 0800 111 6768; and
If you deal with an unauthorised firm, you will not be eligible to receive payment under the Financial Services Compensation Scheme (’FSCS’). The FCA can also be contacted by completing an online form available at www.fca.org.uk/consumers/scams/investment-scams/share-fraud-andboiler -room-scams/reporting-form.
FORWARD-LOOKING STATEMENTS The 2017 Annual Report and Accounts contains, and the Group may make other statements (verbal or otherwise) containing, forward-looking statements and other financial and/or statistical data about the Group’s current plans, goals and expectations relating to future financial conditions, performance, results, strategy and/or objectives.
Statements containing the words: ’believes’, ’intends’, ’will’, ’may’, ’should’, ’expects’, ’plans’, ’aims’, ’seeks’, ’targets’, ’continues’ and ’anticipates’ or other words of similar meaning are forward-looking. Such forward-looking statements and other financial and/or statistical data involve risk and uncertainty because they relate to future events and circumstances that are beyond the Group’s control. For example, certain insurance risk disclosures are dependent on the Group’s choices about assumptions and models, which by their nature are estimates. As such, actual future gains and losses could differ materially from those that we have estimated. Other factors which could cause actual results to differ materially from those estimated by forward-looking statements include but are not limited to: – domestic and global economic and business conditions; – asset prices; – market-related risks such as fluctuations in interest rates and exchange rates, the potential for a sustained low-interest rate environment, and the performance of financial markets generally; – the policies and actions of governmental and/or regulatory authorities, including, for example, new government initiatives related to the financial crisis and the effect of the European Union’s ’Solvency II’ requirements on the Group’s capital maintenance requirements; – the political, legal and economic effects of the UK’s vote to leave the European Union; – the impact of inflation and deflation; – market competition; – changes in assumptions in pricing and reserving for insurance business (particularly with regard to mortality and morbidity trends, gender pricing and lapse rates); – the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; – risks associated with arrangements with third parties; – inability of reinsurers to meet obligations or unavailability of reinsurance coverage; and
– the impact of changes in capital, solvency or accounting standards, and tax and other legislation and regulations in the jurisdictions in which members of the Group operate.
The 2017 Annual Report and Accounts has been prepared for the members of the Company and no one else. The Company, its Directors or agents do not accept or assume responsibility to any other person in connection with this document and any such responsibility or liability is expressly disclaimed.
Nothing in the 2017 Annual Report and Accounts is or should be construed as a profit forecast or estimate.
An Alternative Performance Measure (’APM’) is a financial measure of historic or future financial performance, financial position,or cash flows, other than a financial measure defined under IFRS or under Solvency II regulations. The Group uses a range of these metrics to provide a better understanding of the underlying performance of the Group. All APMs are defined within this glossary and an APM note is provided on page 200
The management of assets using a structured approach to guide the act of acquiring and disposing of assets, with the objective of meeting defined investment goals and maximising value for investors, including policyholders
Refers to Phoenix Group Holdings, PGH Capital plc, Phoenix Life Holdings Limited, Pearl Group Holdings (No. 2) Limited, Impala Holdings Limited, Pearl Group Holdings (No. 1) Limited, PGH (TC1) Limited, PGH (TC2) Limited, PGH (MC1) Limited, PGH (MC2) Limited, PGH (LCA) Limited, PGH (LCB) Limited, PGH (LC1) Limited, PGH (LC2) Limited and Pearl Life Holdings Limited
OWN FUNDS Basic Own Funds comprise the excess of assets over liabilities valued in accordance with the Solvency II principles and subordinated liabilities which qualify to be included in Own Funds under the Solvency II rules.
PART VII TRANSFER The transfer of insurance policies under Part VII of Financial Services and Markets Act 2000. The insurers involved can be in the same corporate group or in different groups. Transfers require the consent of the High Court, which will consider the views of the PRA and FCA and of an Independent Expert
SCR relates to the risks and obligations to which the Group is exposed, and is calibrated so that the likelihood of a loss exceeding the SCR is less than 0.5% over one year. This ensures that capital is sufficient to withstand a broadly ’1-in-200-year event’
Registered address Phoenix Group Holdings Po Box 309 Ugland House Grand Cayman Ky1-1104 Cayman Islands