8. Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 103, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities 9. The purpose of our audit work and to whom we owe our responsibilities This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and the terms of our engagement by the Company. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report, and the further matters we are required to state to them in accordance with the terms agreed with the Company, and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
Restructuring and corporate transaction expenses 9 297 374 Impairment of goodwill – asset management 15 915 1,569 Other administrative expenses 6 1,608 1,651
Equity shareholders of Standard Life Aberdeen plc 833 266 Non-controlling interests
Profit for the year 838 271 Less: loss/(profit) from discontinued operations 11 15 (56) Profit from continuing operations 853 215 Items that will not be reclassified subsequently to profit or loss: Remeasurement gains/(losses) on defined benefit pension plans 34 280 (23) Share of other comprehensive income of associates and joint ventures 16 (13) (17) Equity holder tax effect of items that will not be reclassified subsequently to profit or loss 10 2 – Total items that will not be reclassified subsequently to profit or loss 269 (40)
The Notes on pages 123 to 210 are an integral part of these consolidated financial statements.
Restructuring and corporate transaction expenses 9 (355) – (355) (407) – (407) Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts 2 (1,287) – (1,287) (1,844) – (1,844) Profit on disposal of interests in associates 1 1,858 – 1,858 1,542 – 1,542 (Loss on)/reversal of impairment of interests in associates and joint ventures 16 (45) – (45) 243 – 243 Change in fair value of significant listed investments 13 65 – 65 – – – Investment return variances and economic assumption changes 13 46 – 46 (25) – (25) Other1 13 86 (15) 71 158 56 214
Total tax credit/(expense) 15 – 15 (28) – (28) Profit/(loss) for the year 853 (15) 838 215 56 271 1 The Other adjusting item in 2020 relating to continuing operations includes £66m relating to our share of Phoenix gains relating to the acquisition of ReAssure and the completion of the Part VII transfer of the Legal and General mature savings business. The Other adjusting item in 2019 relating to continuing operations includes £140m received in relation to the settlement of arbitration with Lloyds Banking Group/ Scottish Widows (LBG), refer Note 5.
Financial investments 1,395 1,528 Receivables and other unit linked assets 8 10 Cash and cash equivalents 38 44
The consolidated financial statements on pages 115 to 210 were approved by the Board and signed on its behalf by the following Directors: Sir Douglas Flint Stephanie Bruce Chairman 9 March 2021
Consolidated statement of cash flows For the year ended 31 December 2020
(a)(i) New standards, interpretations and amendments to existing standards that have been adopted by the Group The Group has adopted the following new International Financial Reporting Standards (IFRSs), interpretations and amendments to existing standards, which are effective by EU endorsement for annual periods beginning on or after 1 January 2020.
Amendments to existing standards • Amendments to IFRS 3 Definition of a business • Amendments to IFRS 9, IAS 39 and IFRS 7 Interest rate benchmark reform • Amendments to IAS 1 and IAS 8 Definition of material
The Group has no direct exposure to insurance contracts and contracts with discretionary participating features which will be impacted by the adoption of IFRS 17. However, the results of the Group’s insurance associate, Phoenix and the Group’s joint venture HASL, are expected to be significantly impacted by IFRS 17. The standard has not yet been endorsed by the EU nor by the UK Endorsement Board.
Provisions Determining whether a provision is required for separation costs Note 37
• The determination of the fair value of contingent consideration assets and liabilities relating to the sale of the UK and European insurance business to Phoenix is no longer considered to be a critical area of estimation uncertainty following the settlement of certain indemnities
Translation differences on non-monetary items, such as equity securities held at fair value through profit or loss, are reported as part of the fair value gain or loss within investment return in the consolidated income statement. Translation differences on financial assets and liabilities held at amortised cost are included in the relevant line in the consolidated income statement.
The income statements and cash flows, and statements of financial position of Group entities that have a different functional currency from the Group’s presentation currency have been translated using the following principal exchange rates: 2020 2019
Euro 1.127 1.117 1.142 1.180 US Dollar 1.292 1.367 1.280 1.325 Indian Rupee 95.602 99.880 90.106 94.563 Chinese Renminbi 8.905 8.940 8.830 9.228 Hong Kong Dollar 10.024 10.599 10.030 10.322 Singapore Dollar 1.778 1.807 1.745 1.781
Based on a review of the above factors the Directors are satisfied that the Group and Company have and will maintain sufficient resources to enable them to continue operating for at least 12 months from the date of approval of the financial statements. Accordingly, the financial statements have been prepared on a going concern basis. There were no material uncertainties relating to this going concern conclusion.
When the Group sells a subsidiary to an associate, the gain on sale of the subsidiary is recognised in full, with no elimination being made for the continuing interest in the subsidiary.
(b) Acquisitions (b)(i) Prior year acquisitions of subsidiaries On 29 November 2019, 1825 Financial Planning and Advice Limited (a subsidiary of 1825 Financial Planning Limited) purchased the wealth advisory business of Grant Thornton UK LLP through a business acquisition agreement under which the majority of the clients and employees of the wealth advisory business transferred to 1825 Financial Planning and Advice Limited. 1825 Financial Planning and Advice also purchased the wealth management business of BDO Northern Ireland through a similar business acquisition agreement on 1 July 2019.
(b)(ii) Prior year acquisitions of joint ventures On 31 July 2019, as part of the Group’s strategic joint venture with Virgin Money, AAM PLC completed the acquisition of 50% (less one share) of Virgin Money Unit Trust Managers Limited (VMUTM) for an upfront cash payment of £40m plus 50% of the capital in the business and certain other costs.
In total, 5.83% of the issued equity share capital of HDFC Life was sold for a combined total consideration net of taxes and expenses of Rs 58,561m (£616m). The combined gain on sale of £540m was calculated using the weighted-average cost method. On disposal a loss of £5m was recycled from the translation reserve and was included in determining the gain on sale.
Following the 3 December 2020 sale, the Group’s shareholding in HDFC Life was 179,539,209 equity shares or 8.89% and HDFC Life is no longer considered to be an associate of the Group. The Group’s investment in HDFC Life has been reclassified from an investment in associates accounted for using the equity method to equity securities measured at fair value. Refer Note16 for further details of this reclassification. A reclassification gain of £1,051m is included in the profit on disposal of interests in associates for the year ended 31 December 2020 as the fair value on 3 December 2020 of £1,168m is higher than the previous carrying value as an associate of £111m. On reclassification a loss of £6m was recycled from the translation reserve and was included in determining the gain.
Through the sale, 3.02% of the issued equity share capital of HDFC Asset Management was sold for a total consideration net of taxes and expenses of Rs 18,279m (£195m). The gain on sale of £204m before tax was calculated using the weighted-average cost method.
Through the sale, 5.64% of the issued equity share capital of HDFC Asset Management was sold for a total consideration net of taxes and expenses of Rs 25,404m (£265m). The gain on sale of £263m before tax was calculated using the weighted-average cost method. On disposal a loss of £3m was recycled from the translation reserve and was included in determining the gain on sale. The Group’s shareholding in HDFC Asset Management at 31 December 2020 is 45,228,305 equity shares or 21.24%.
Fee based revenue is reported as the measure of revenue in the analysis of adjusted profit before tax and relates to revenues generated from external customers. Refer Note 4 for a reconciliation of fee based revenue to revenue from contracts with customers.
(b) Reportable segments – Group adjusted profit before tax and revenue information (b)(i) Analysis of Group adjusted profit before tax Adjusted profit before tax is the key alternative performance measure utilised by the Group’s management in their evaluation of segmental performance and is therefore also presented by reportable segment.
Restructuring and corporate transaction expenses 9 (326) (29) (355) – – (355) Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts2 (1,180) (107) (1,287) – – (1,287) Profit on disposal of interests in associates 1 263 1,595 1,858 – – 1,858 Impairment of associates and joint ventures 16 (45) – (45) – – (45) Change in fair value of significant listed investments 13 – 65 65 – – 65 Investment return variances and economic assumption changes 13 – 46 46 – – 46 Other 22 64 86 (15) – 71
Discontinued operations Eliminations Total 31 December 2019 Notes £m £m £m £m £m £m Fee based revenue 1,634 – 1,634 – – 1,634 Adjusted operating expenses (1,333) – (1,333) – – (1,333) Adjusted operating profit 301 – 301 – – 301 Capital management 37 – 37 – – 37 Share of associates’ and joint ventures’ profit before tax1 57 189 246 – – 246 Adjusted profit before tax 395 189 584 – – 584 Tax on adjusted profit (69) – (69) – – (69) Share of associates’ and joint ventures' tax expense 10 (21) (25) (46) – – (46) Adjusted profit after tax 305 164 469 – – 469 Adjusted for the following items
Preference shares 5 – 5 Profit for the year 215 56 271 1 Share of associates’ and joint ventures’ profit before tax comprises the Group’s share of results of HDFC Life, HDFC Asset Management, Phoenix, HASL and VMUTM. 2 Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts includes £1,733m included in administrative expenses and set out in Note 15, and £111m 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.
(c) Total income from continuing operations by geographical location Total income from continuing operations as presented in the consolidated income statement split by geographical location is as follows: UK 1,399 1,862 Europe, Middle East and Africa 180 265 Asia Pacific 1,880 1,708 Americas 150 158 Total 3,609 3,993
3. Investment return Gains and losses resulting from changes in both market value and foreign exchange on investments classified as fair value through profit or loss are recognised in the consolidated income statement in the period in which they occur. The gains and losses include investment income received such as interest payments but exclude dividend income. Dividend income is separately recognised in the consolidated income statement when the right to receive payment is established.
Included in investment return from continuing operations of £163m (2019: £464m) is £49m (2019: £392m) in relation to unit linked business including (£13m) (2019: £107m) relating to operations held for sale. Investment returns relating to unit linked business are for the account of policyholders and are excluded from adjusted operating income as they have an equal and opposite effect on IFRS income and IFRS expenses in the consolidated income statement.
Asset management Through a number of its subsidiaries, the Group provides asset management services to its customers. This performance obligation is performed over time with the revenue recognised as the obligation is performed. The Group generally receives asset management fees based on the percentage of the assets under management. The percentage varies depending on the level and nature of assets under management. Asset management fees are either deducted from assets or invoiced. Deducted fees are generally calculated, recognised and collected on a daily basis. Other asset management fees are invoiced to the customer either monthly or quarterly with receivables recognised for unpaid invoices. The payment terms for invoiced revenue vary but are typically 30 days from receipt of invoice. Accrued income is recognised to account for income earned but not yet invoiced. There is also some use of performance fees and carried interest arrangements. Performance fees and carried interest are earned from some investment mandates when contractually agreed performance levels are exceeded within specified performance measurement periods. Performance fees and carried interest are only recognised once it is highly probable that a significant reversal will not occur in future periods. Given the unpredictability of future performance, the risk of a significant reversal occurring will typically only be considered low enough to make recognition appropriate upon the crystallisation event occurring.
Fund platforms Through a number of its subsidiaries, the Group offers customers access to fund platforms. The platforms give customers the ongoing functionality to manage and administer their investments. This performance obligation is performed over time with the revenue recognised as the obligation is performed. Customers pay a platform charge which is generally calculated as a percentage of their assets. The percentage varies depending on the level of assets on the specific platform. The main platform charges are calculated either daily or monthly and are collected and recognised monthly. The charges are collected directly from assets on the platform. There are no significant payment terms.
2020 2019 £m £m Revenue from contracts with customers from continuing operations as presented in the consolidated income statement 1,527 1,743 Presentation differences
Fee income from fund platforms includes revenue passed to the product provider and included below in other cost of sales. The revenue from the contracts with customers is reported within the Asset management, platforms and wealth segment. The following table provides a reconciliation of Revenue from contracts with customers as presented in the consolidated income statement to fee based revenue, as presented in the analysis of adjusted profit before tax for the Asset management, platforms and wealth segment.
Commission expenses (77) (89) Other cost of sales (27) (26) Other differences 2 6
Fee based revenue from continuing operations as presented in the Asset management, platforms and wealth segment 1,425 1,634
Amount receivable from contracts with customers 21 115 130 112 Accrued income from contracts with customers 21 221 227 214 Cost of obtaining customer contracts 15 49 60 80 Deferred acquisition costs 22 4 6 6 Total contract receivables and assets 389 423 412
In addition to interest expense of £2m (2019: £5m) set out above, interest expense of £24m (2019: £29m) was incurred in respect of subordinated liabilities and the related cash flow hedge (refer Note 20) and interest expense of £6m (2019: £7m) in respect of lease liabilities which are included in Finance costs in the consolidated income statement.
The aggregate remuneration payable in respect of employees: Wages and salaries 465 531 Social security costs 55 63 Pension costs
Employee share-based payments and deferred fund awards 44 66 34 Total staff costs and other employee-related costs 625 646
8. Auditors’ remuneration The following table shows the auditors’ remuneration aggregated for both continuing and discontinued operations.
Restructuring and corporate transaction expenses used to determine adjusted profit before tax 355 407 10. Taxation The Group’s tax expense comprises both current tax and deferred tax expense.
Current tax recoverable and current tax liabilities at 31 December 2020 were £9m (2019: £9m) and £15m (2019: £19m) respectively. In addition current tax recoverable and current tax liabilities in relation to unit linked business were £1m (2019: £nil) and £1m (2019: £2m) respectively. Current tax assets and liabilities at 31 December 2020 and 31 December 2019 are expected to be recoverable or payable in less than 12 months.
• A deferred tax liability of £10m has been recognised in the period in relation to our share of the unremitted earnings of HDFC AMC. This results from a change to the taxation of dividends from Indian companies under Indian tax law that took effect from 1 April 2020. The corresponding charge forms part of the tax expense in the consolidated income statement. The change also gives rise to the release of a deferred tax liability of £18m attributable to our holdings in HDFC AMC and HDFC Life that related to the taxation of undistributed reserves under the preceding Indian tax rules. This release gives rise to the recognition of an £18m credit to the Share of profit from associates and joint ventures line item in the consolidated income statement.
All of the amounts presented above are in respect of equity holders of Standard Life Aberdeen plc.
The accounting for certain items in the consolidated income statement results in certain reconciling items in the table above, the values of which vary from year to year depending upon the underlying accounting values.
• The impairments of both the goodwill intangible asset and investment in associates and joint ventures are not tax deductible • Certain profits are taxed at rates which differ from the UK corporation tax rate (such as the profit attributable to our Asian business)
• An additional £9m tax charge arises on the revaluation of deferred tax assets and liabilities in the UK following the reversal of a proposed tax rate reduction in the UK
• The sales of shares in HDFC Life did not give rise to taxable gains due to the effect of reliefs available under India’s tax legislation and its international tax treaties
A deferred tax asset of £89m (2019: £40m) for the Group has been recognised in respect of losses of various subsidiaries. Deferred tax assets are recognised to the extent that it is probable that the losses will be capable of being offset against taxable profits and gains in future periods. The value attributed to them takes into account the certainty or otherwise of their recoverability. Their recoverability is measured against the reversal of deferred tax liabilities and anticipated taxable profits and gains based on business plans. The deferred tax asset recognised on losses primarily relates to UK entities where there is currently no restriction on the period of time over which losses can be utilised. Recognition of this deferred tax asset requires that management must consider if it is more likely than not that this asset will be recoverable in future periods against future profits arising in the UK. In making this assessment management have considered future operating plans and forecast taxable profits and are satisfied that, following completion of transformation activities, forecast taxable profits will be sufficient to enable recovery of the UK tax losses. Based upon the level of forecast taxable profits management do not consider there is significant risk of a material adjustment to the carrying amount of the deferred tax asset on UK tax losses within the next financial year.
Of these unrecognised deferred tax assets, certain losses have expiry dates as follows: • US losses of £164m with expiry dates between 2027-2037 (2019: £164m) • Other overseas losses of £26m with expiry dates before 2024 (2019: £19m) • Other overseas losses of £22m with expiry dates between 2025 and 2030 (2019: £9m)
7. Group financial statements continued 12. Earnings per share Basic earnings per share is calculated by dividing profit attributable to ordinary equity holders by the weighted average number of ordinary shares in issue during the year excluding shares owned by the employee trusts that have not vested unconditionally to employees.
Discontinued operations Total £m £m £m £m £m £m Adjusted profit before tax 487 – 487 584 – 584 Tax on adjusted profit (38) – (38) (69) – (69) Share of associates’ and joint ventures’ tax expense (38) – (38) (46) – (46) Adjusted profit after tax 411 – 411 469 – 469 Dividend paid on preference shares (5) – (5) (5) – (5) Adjusted profit after tax attributable to equity shareholders of the Company 406 – 406 464 – 464 Adjusting items 368 (15) 353 (333) 56 (277) Tax on adjusting items 53 – 53 41 – 41 Share of associates’ and joint ventures’ tax expense on adjusting items 21 – 21 38 – 38 Profit attributable to equity shareholders of the Company 848 (15) 833 210 56 266
Basic earnings per share was 37.8p (2019: 11.2p) and diluted earnings per share was 37.2p (2019: 11.1p) for the year ended 31 December 2020. The following table shows details of basic, diluted and adjusted earnings per share.
The components of IFRS profit attributable to market movements and interest rate changes which give rise to variances between actual and expected returns on investments backing both owner and policyholder funds, with consistent allowance for the corresponding expected movement in liabilities, as well as the impact of changes in economic assumptions on liabilities, are excluded from adjusted profit. The impact of strategic asset allocation activities, such as investment in higher yielding illiquid assets, is also excluded from adjusted profit.
The expected return on investments backing both owner and policyholder funds is based on opening economic assumptions applied to the funds under management at the beginning of the reporting period. Expected investment return assumptions are derived actively based on market yields on risk-free fixed interest assets at the start of each financial year. Investment return variances, including those relating to owners’ funds, also include gains and losses on derivatives held to hedge life company Solvency II surplus positions.
(b) Significant listed investments Following the reclassification of HDFC Life from an associate to an equity security on 3 December 2020 fair value gains of £65m have been included in investment return in the consolidated income statement but excluded from adjusted profit (refer Note 16 for further details of the reclassification). These gains represent the impact of movements in the market value of our remaining 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.
The other adjusting items in 2019 included £140m relating to the settlement of arbitration with Lloyds Banking Group.
The final recommended dividend will be paid on 25 May 2021 to shareholders on the Company’s register as at 16 April 2021, subject to approval at the 2021 Annual General Meeting. After the current year final recommended dividend, the total dividend in respect of the year ended 31 December 2020 is 14.60p (2019: 21.60p).
The Group also recognises the cost of obtaining customer contracts (refer Note 4) as an intangible asset. These costs primarily relate to the cost of acquiring existing investment management contracts from other asset managers and commission costs for initial investors into new closed end funds where these are borne by the Group. For the cost of obtaining customer contracts, the intangible asset is amortised on the same basis as the transfer to the customer of the services to which the intangible asset relates.
Measuring the fair value of intangible assets acquired in business combinations required further assumptions and judgements. Customer relationships were valued using discounted cash flow projections. The key assumptions in measuring the fair value of the customer relationships at the acquisition date were as follows: • Net attrition – net attrition represents the expected rate of outflows of assets under management net of inflows from existing customers. This assumption was primarily based on recent experience.
There has been no change to the useful lives of the Open ended funds and Segregated and similar customer relationship intangible assets. Therefore the residual useful life of the Open ended funds customer relationship intangible asset is 7.6 years and the residual life of the Segregated and similar customer relationship intangible asset is 8.6 years.
Determination of the recoverable amount of goodwill and customer intangibles For all intangible assets including goodwill, an assessment is made at each reporting date as to whether there is an indication that the goodwill or intangible asset has become impaired. If any indication of impairment exists then the recoverable amount of the asset is determined. The recoverable amounts are defined as the higher of fair value less costs of disposal (FVLCD) and the value in use (VIU) where the value in use is based on the present value of future cash flows. Where the carrying value exceeds the recoverable amount then the carrying value is written down to the recoverable amount.
Carrying value 2019 £m £m £m Open ended funds Separate vehicle group – open ended investment
Estimates and assumptions The key estimates and assumptions in relation to intangible assets are: • Determination of the recoverable amount of goodwill and customer intangibles • Determination of useful lives
Goodwill The impairment of £915m was recognised at 30 June 2020 and relates to an impairment of asset management goodwill, the group of cash-generating units for which is our asset management business excluding HDFC Asset Management and VMUTM (2019: £1,569m). The impairment resulted from the impact on reported revenue and future revenue projections of global equity market falls and a shift in asset mix towards lower margin assets. Both the fall in equity markets and the shift in asset mix were global market impacts primarily resulting from COVID-19. Additional projections were prepared to take into account these COVID-19 impacts, and uncertainties over future financial markets, and these projections were a key input to the impairment review process. The asset management goodwill recognised is now fully impaired. The recoverable amount of this group of cash-generating units at 30 June 2020 was £1,654m, which is based on FVLCD. This is also the carrying value at 30 June 2020. The FVLCD considered a number of valuation approaches, with the primary approach being a price to earnings multiple approach. This is a level 3 measurement as it is measured using inputs which are not based on observable market data. Key assumptions used in the earnings multiples valuation approach were: • Projected adjusted profits which were based on management forecasts of maintainable earnings and market consensus views. Revenues in the management forecasts reflected past experience and modelling based on assets under management and fee revenue yields by asset class. Equity markets in 2020 were assumed to stay broadly in line with 30 June levels. Expenses in the management forecasts were based on past experience adjusted for planned expense savings.
• Premiums for control and discounts for lack of liquidity which were determined based on comparable transactions adjusted to remove strategic control premiums
In addition to the price to earnings multiple approach, other valuation approaches were considered including discounted cash flows and deriving the valuation from the market capitalisation of the Group, which gave a range of reasonable outcomes. The primary valuation approach was within this 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. Under IFRS requirements an impairment of goodwill recognised in an interim period cannot be reversed due to changes in circumstances during the second half of the financial year.
£m 30% increase in attrition (2) 25% one-off decrease in AUM at 1 January 2021 (12) Operating expense margin decreased by five percentage points (11)
Determination of useful lives The determination of useful lives requires judgement in respect of the length of time that the Group expects to derive benefits from the asset and considers for example expected duration of customer relationships and when technology is expected to become obsolete for technology based assets. The amortisation period and method for each of the Group’s intangible asset categories is as follows: • Customer relationships acquired through business combinations – generally between 7 and 12 years, generally reducing balance method
• Investment management contracts acquired through business combinations – between 10 and 17 years, straight-line • Brand acquired through business combinations – 5 years, straight-line • Technology acquired through business combinations – between 3 and 6 years, straight line • Internally developed software – between 2 and 6 years. Amortisation is on a straight-line basis and commences once the asset is available for use. • Purchased software – between 2 and 6 years, straight-line • Costs of obtaining customer contracts – between 3 and 12 years, generally reducing balance method
Internally developed software The determination of amounts to be recognised as internally developed software requires judgement and assumptions in respect of whether assets are capable of being separated and the extent to which development costs form part of the separable asset. Additionally judgement is required to determine which costs have been incurred in relation to the research phase, which are not capitalised, and which have been incurred in relation to the development phase of a project, which can be capitalised. We consider that costs are directly attributable to the software asset and can therefore be capitalised, where they would not have been incurred if the software development had not taken place.
The impairment of internally developed software of £14m recognised during the year to 31 December 2020 related to software made obsolete as a result of the development of the new investment platform in the Asset management, platforms and wealth segment.
16. Investments in associates and joint ventures Associates are entities where the Group can significantly influence decisions made relating to the financial and operating policies of the entity but does not control the entity. For entities where voting rights exist, significant influence is presumed where the Group holds between 20% and 50% of the voting rights. Where the Group holds less than 20% of voting rights, consideration is given to other indicators and entities are classified as associates where it is judged that these other indicators result in significant influence.
On partial disposal of an associate, a gain or loss is recognised based on the difference between the proceeds received and the equity accounted value of the portion disposed of. Indicators of significant influence are reassessed based on the remaining voting rights. Where significant influence is judged to have been lost, the investment in associate is reclassified to interests in equity securities and pooled investment funds measured at fair value. If an entity is reclassified, the difference between the fair value and the remaining equity accounted value is accounted for as a reclassification gain or loss on disposal.
The following associates and joint ventures are considered to be material to the Group as at 31 December 2020.
Fair value of interest held by the Group at 31 December 2019 Phoenix Group Holdings plc (Phoenix)
Management1 £m £m £m £m £m Summarised financial information of associate: Revenue 4,704 220 4,182 3,617 276 Profit after tax (all from continuing operations) 690 132 28 128 170 Other comprehensive income 25 – (110) – – Total comprehensive income 715 132 (82) 128 170 Total assets3 334,193 474 242,666 14,607 388 Total liabilities3 326,441 28 237,043 13,818 27 Net assets 7,752 446 5,623 789 361
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. Phoenix have recognised a gain on acquisition of £372m reflecting the excess of the fair value of the net assets acquired over the consideration paid and the Group’s share of this gain is recognised in our share of profit from Phoenix. Completion of the transaction resulted in the Group’s holding in Phoenix becoming 14.4% of the enlarged Phoenix Group. 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. Refer Note 1 for further details. Although our interest in Phoenix has reduced to 14.4%, taking into account our continued representation on Phoenix’s board and, in particular, the contractual relationships with Phoenix, including the licencing to Phoenix of the Standard Life brand, our judgement was that Phoenix should continue to be classified as an associate.
Following the completion of the ReAssure transaction, the Group’s current share of Phoenix’s intangible assets recognised at the date of acquisition has reduced from 19.98% to 14.4%. The notional partial disposal of these intangible assets results in a reduction in the corresponding amortisation recognised in the Group’s share of profit under the equity method.
There has been no change to the useful lives of the SLAL AVIF and Existing Phoenix AVIF. Therefore the residual useful lives of these assets at 31 December 2020 are 21.7 years and 12.7 years respectively.
Phoenix has taken advantage of the temporary exemption granted to insurers in IFRS 4 Insurance Contracts from applying IFRS 9 as a result of meeting the exemption criteria as at 31 December 2015.
Carrying value £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m Loans and deposits – – 6 21 195 47 – 164 – – 368 284 78 – 647 516 Cash and cash equivalents 30 295 1,728 733 7,035 3,105 193 23 – – 4 142 2,008 40 10,998 4,338 Accrued income – – – – – – – – – – 251 160 – – 251 160
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 Carrying value £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m Loans and deposits – – 6 21 195 47 – 164 – – 368 284 78 – 647 516 Cash and cash equivalents 30 295 1,728 733 7,035 3,105 193 23 – – 4 142 2,008 40 10,998 4,338 Accrued income – – – – – – – – – – 251 160 – – 251 160 Other receivables – – – – – – – – – – 1,540 1,183 – – 1,540 1,183 30 295 1,734 754 7,230 3,152 193 187 – – 2,163 1,769 2,086 40 13,436 6,197
During 2020 the Group further reduced its interest in HDFC Asset Management to 21.24% (2019:26.91%). Refer Note 1 for further details.
(c) Investments in joint ventures HASL Other Total 2020 2019 2020 2019 2020 2019 £m £m £m £m £m £m
Carrying value of joint ventures accounted for using the equity method 236 205 1 47 237 252 Dividends received – – – – – – Share of profit/(loss) after tax 23 20 (6) (4) 17 16
On 30 June 2020, HASL completed the acquisition of SL Asia. Refer Note 1 for further details.
Attributable to investee’s shareholder 471 410 Interest held 50% 50% Share of net assets 236 205 1 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 HASL.
(d) Investments in associates measured at FVTPL The aggregate fair value of associates accounted for at FVTPL included in equity securities and interests in pooled investment funds (refer Note 19) at 31 December 2020 is £54m (2019: £45m) none of which are considered individually material to the Group.
VMUTM Other joint ventures carrying value of £1m (2019: £47m) includes £1m (2019: £47m) for VMUTM.
Included in property right-of-use assets, are right-of-use assets that meet the definition of investment property. Their carrying amount at 31 December 2020 is £25m (2019: £28m). This is made up a gross carrying value of £47m (2019: £46m) and accumulated depreciation of £22m (2019: £18m). During the year to 31 December 2020 there were additions of £nil (2019: £26m), transfers to investment property of £5m (2019: £nil), depreciation of (£2m) (2019: (£2m)), derecognitions related to new subleases classified as finance leases of (£2m) (2019: (£4m)), impairments of (£2m) (2019: (£16m)) and disposals and adjustments of (£2m) (2019 £nil) related to these assets. Rental income received and direct operating expenses incurred to generate that rental income in the year to 31 December 2020 were £3m (2019: £2m) and £2m (2019: £3m) respectively. In addition, there were direct expenses of £1m (2019: £nil) in relation to investment properties not currently generating income.
The related lease liability (included in other financial liabilities – refer Note 36) is calculated as the present value of the future lease payments. The lease payments are discounted using the rate implicit within the lease where readily available or the Group’s incremental borrowing rate where the implicit rate is not readily available. Interest is calculated on the liability using the discount rate and is charged to the consolidated income statement under finance costs.
Where a leased property has been sublet, the Group assesses whether the sublease has transferred substantially all the risk and rewards of the right-of-use asset to the lessee under the sublease. Where this is the case, the right-of-use asset is derecognised and a net investment in finance leases (included in Receivables and other financial assets – refer Note 21) is recognised, calculated as the present value of the future lease payments receivable under the sublease. Where a property is only partially sublet, only the portion of the right-of-use asset relating to the sublet part of the property is derecognised and recognised as a net investment in finance leases.
The Group does not recognise right-of-use assets and lease liabilities for short-term leases (less than one year from inception) and leases where the underlying asset is of low value.
If owner occupied property was measured using the cost model, the historical cost before impairment would be £1m (2019: £2m). As the expected residual value of owner occupied property is in line with the current fair value, no depreciation is currently charged.
18. Leases A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. In 2019, on adoption of IFRS 16 the Group used the practical expedient permitted to apply the new standard at transition solely to leases previously identified in accordance with IAS 17 and IFRIC 4 Determining whether an Arrangement Contains a Lease. Right-of-use assets are measured at cost less accumulated depreciation and impairment losses and are presented in property, plant and equipment (refer Note 17). The Group does not revalue its right-of-use assets. This applies to all right-of-use assets, including those that are assessed as meeting the definition of investment property. The cost comprises the amount of the initial measurement of the lease liability plus any initial direct costs and expected restoration costs not relating to wear and tear. Costs relating to wear and tear are expensed over the term of the lease. Depreciation is charged on right-of-use assets on a straight line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group assesses right-of-use assets for impairment when such indicators exist, and where required, reduces the value of the right-of-use asset accordingly.
(a) Leases where the Group is lessee The Group leases various offices and equipment used to carry out its business. Leases are generally for fixed periods but may be subject to extensions or early termination clauses. The remaining periods for current leases range from less than 1 year to 18 years (2019: less than 1 year to 19 years). A number of leases which are due to end in 2031 contain options that would allow the Group to extend the lease term. The Group reviews its property use on an ongoing basis and these extensions have not been included in the right-of-use asset or lease liability calculations. The Group has recognised the following assets and liabilities in relation to these leases where the Group is a lessee: Right-of-use assets: Property 175 197 Equipment 1 1 Total right-of-use assets 176 198
The following table provides a maturity analysis of the contractual undiscounted cash flows for the lease liabilities: 2020 2019 £m £m
Less than 1 year 30 33 Greater than or equal to 1 year and less than 2 years 30 29 Greater than or equal to 2 years and less than 3 years 28 28 Greater than or equal to 3 years and less than 4 years 24 26 Greater than or equal to 4 years and less than 5 years 22 23 Greater than or equal to 5 years and less than 10 years 98 102 Greater than or equal to 10 years and less than 15 years 44 57 Greater than or equal to 15 years 10 14 Total undiscounted lease liabilities 286 312
The interest on lease liabilities for the year ended 31 December 2020 was £6m (2019: £7m).
The total cash outflow for lease liabilities recognised in the consolidated statement of cash flows for the year ended 31 December 2020 was £35m (2019: £32m).
At 31 December 2020, the Group had a net investment in finance leases asset of £18m (2019: £15m) for subleases which had transferred substantially all the risk and rewards of the right-of-use assets to the lessee under the sublease. All other sub-leases are accounted for as operating leases. Prior to the implementation of IFRS 16, all the Group’s subleases were accounted for as operating leases. The increase during the year ended 31 December 2020 was mainly due to one new sublease entered into during the year.
(b)(i) Finance leases During the year ended 31 December 2020, the Group received finance income on the net investment in finance leases asset of less than £1m (2019: less than £1m). The Group recorded an initial gain of £2m in relation to new sub-leases entered into during the year ended 31 December 2020 (2019: £4m).
The methods and assumptions used to determine fair value of financial assets at FVTPL are discussed in Note 40. Amortised cost is calculated, and related interest is credited to the consolidated income statement, using the effective interest method. Impairment is determined using an expected credit loss impairment model which is applied to all financial asset measured at amortised cost. Financial assets measured at amortised cost attract a loss allowance equal to either: • 12 month expected credit losses (losses resulting from possible default within the next 12 months) • Lifetime expected credit losses (losses resulting from possible defaults over the remaining life of the financial asset)
(b)(ii) Operating leases During the year ended 31 December 2020, the Group received property rental income from operating leases of £3m (2019: £2m).
At fair value through profit or loss1 Cash flow hedge At amortised cost Total 2020 2019 2020 2019 2020 2019 2020 2019 Notes £m £m £m £m £m £m £m £m Derivative financial assets 20 18 16 – 3 – – 18 19 Equity securities and interests in pooled investment funds 40 1,980 725 – – – – 1,980 725 Debt securities 40 787 769 – – 325 602 1,112 1,371 Financial investments 2,785 1,510 – 3 325 602 3,110 2,115
Receivables and other financial assets 21 28 1 – – 593 559 621 560 Cash and cash equivalents 24 – – – – 1,519 1,615 1,519 1,615 Total 2,813 1,511 – 3 2,437 2,776 5,250 4,290 1 All financial assets measured at fair value through profit or loss have been classified at FVTPL on a mandatory basis. The Group has not designated any financial assets as
The amount of debt securities expected to be recovered or settled after more than 12 months is £231m (2019: £273m). Due to the nature of equity securities and interests in pooled investment funds, there is no fixed term associated with these securities.
On adoption of IFRS 9 Financial instruments in 2019, the Group has elected to continue applying the hedge accounting requirements of IAS 39. The accounting treatment below applies to derivatives designated as part of a hedging relationship.
Notes £m £m £m £m £m £m Cash flow hedges 19,32 549 – 6 566 3 – FVTPL/Held for trading 19,32 687 18 7 534 16 3 Derivative financial instruments 40 1,236 18 13 1,100 19 3 Derivative financial instruments backing unit linked liabilities 25 463 6 9 669 5 6 Total derivative financial instruments 1,699 24 22 1,769 24 9
(a) Hedging strategy 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.
(a)(i) Cash flow hedges On 18 October 2017, the Group issued subordinated notes with a principal amount of US$750m. In order to manage its foreign exchange risk relating to the principal and coupons payable on these notes the Group entered into a cross-currency swap which is designated as a cash flow hedge. The cash flow hedge was fully effective during the year. The cross-currency swap has the effect of swapping the 4.25% US Dollar fixed rate subordinated notes into 3.2% Sterling fixed rate subordinated notes with a principal amount of £569m. The cross-currency swap has a fair value liability position of £6m (2019: £3m asset). During the year ended 31 December 2020 fair value losses of £3m (2019: losses of £10m) were recognised in other comprehensive income in relation to the cross-currency swap. Losses of £19m (2019: losses of £28m) and forward points/gains of £6m (2019: gains of £6m) were transferred from other comprehensive income to investment return and finance costs respectively in the consolidated income statement in relation to the crosscurrency swap during the year.
Fair value liabilities £m £m £m £m £m £m Equity derivatives: Futures 100 1 9 177 2 1 Variance swaps 6 6 – 5 6 – Total return swaps – – – 29 – 1 Bond derivatives: Futures – – – 1 – – Interest rate derivatives: Swaps 52 – 4 153 – 2 Futures 34 – – – – – Foreign exchange derivatives: Forwards 859 15 2 718 10 5 Other derivatives: Inflation rate swaps 18 2 – 14 1 – Credit default swaps 81 – 1 106 2 – Derivative financial instruments at FVTPL/ held for trading 1,150 24 16 1,203 21 9
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 Derivative financial assets 367 411 – 99 – 651 – – – – – 1 367 1,162 Derivative financial liabilities 183 281 93 – 607 – – – – – – – 883 281 Total 550 692 93 99 607 651 – – – – – 1 1,250 1,443
21. Receivables and other financial assets 2020 2019 Notes £m £m
Amounts receivable from contracts with customers 4(b) 115 130 Accrued income 227 231 Cancellations of units awaiting settlement 126 111 Net investment in finance leases 18 15 Collateral pledged in respect of derivative contracts 38 28 18 Contingent consideration asset 40 28 1 Other 79 54 Receivables and other financial assets 621 560
The amount of receivables and other financial assets expected to be recovered after more than 12 months is £33m (2019: £25m).
Accrued income includes £221m (2019: £227m) of accrued income from contracts with customers (refer Note 4(b)).
Assets of operations held for sale Parmenion Capital Partners LLP 18 – Standard Life (Asia) Limited – 765 Investment vehicles 1 2
7. Group financial statements continued 23. Assets and liabilities held for sale Assets and liabilities held for sale are presented separately in the consolidated statement of financial position and consist of operations and individual non-current assets whose carrying amount will be recovered principally through a sale transaction (expected within one year) and not through continuing use.
(a)(ii) Standard Life (Asia) Limited On 30 June 2020, the Group sold its wholly owned Hong Kong insurance business, SL Asia to the Group’s Chinese joint venture business, HASL. Refer Note 1 for further details. SL Asia was reported in the Asset management, platforms and wealth segment and HASL is reported within the Insurance associates and joint ventures segment. Prior to the sale SL Asia was classified as an operation held for sale. At 31 December 2019, this disposal group was measured at fair value less cost to sell and comprised the following assets and liabilities: Assets of operations held for sale Equity securities and interests in pooled investment funds 674 Cash and cash equivalents 26 Other assets 65 Total assets of operations held for sale 765 Liabilities of operations held for sale Non-participating insurance contract liabilities 647 Non-participating investment contract liabilities 49 Other liabilities 51 Total liabilities of operations held for sale 747 Net assets of operations held for sale 18
Following the remeasurement of the disposal group to the lower of its carrying amount and its fair value less costs to sell prior to the sale, an impairment loss of £1m (2019: £nil) is included in Other administrative expenses in the consolidated income statement. Fair value was determined by reference to the sale price.
Included in cash and cash equivalents and bank overdrafts are £230m (2019: £592m) and £202m (2019: £338m) respectively relating to balances within a cash pooling facility in support of which cross guarantees are provided by certain subsidiary undertakings and interest is paid or received on the net balance. Cash and cash equivalents includes an offsetting overdraft of £nil (2019: £219m) where the Group has a legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis.
7. Group financial statements continued 25. Unit linked liabilities and assets backing unit linked liabilities The Group operates unit linked life assurance businesses through a number of subsidiaries. These subsidiaries provide investment products through a life assurance wrapper. These products do not contain any features which transfer significant insurance risk and therefore are classified as investment contracts. Unit linked non-participating investment contracts are separated into two components being an investment management services component and a financial liability. All fees and related administrative expenses are deemed to be associated with the investment management services component (refer Note 4). The financial liability component is designated at FVTPL as it is implicitly managed on a fair value basis as its value is directly linked to the market value of the underlying portfolio of assets.
Assets backing unit linked liabilities comprise financial investments, which are all classified as FVTPL on a mandatory basis, and receivables and other financial assets and cash and cash equivalents which are measured at amortised cost.
Where the Group is deemed to control an investment vehicle as a result of holdings in that vehicle by subsidiaries to back unit linked non-participating investment contract liabilities, the assets and liabilities of the vehicle are consolidated within the Group’s statement of financial position. The liability for third party interest in such consolidated funds is presented as a unit linked liability.
Investment return and related benefits credited in respect of non-participating investment contracts and third party interest in consolidated funds are recognised in the consolidated income statement as changes in investment contract liabilities and changes in liability for third party interest in consolidated funds respectively. Investment returns relating to unit linked business are for the account of policyholders and have an equal and opposite effect on income and expenses in the consolidated income statement with no impact on profit after tax.
Transfers from level 1 to level 2 and from level 2 to level 1 during 2020 were £309m (2019: £nil) and £nil (2019: £nil) respectively. Transfers from level 1 to level 2 in the period primarily relate to interests in pooled investment vehicles which are priced daily but where the daily price is only offered by the fund manager. The Group now considers these investments to be level 2. All other transfers relate to assets where changes in the frequency of observable market transactions resulted in a change in whether the market was considered active. The movements during the period of level 3 unit linked assets and liabilities held at fair value are analysed below.
Equity securities and interests in pooled investment funds Investment contract liabilities
(c) Change in non-participating investment contract liabilities The change in non-participating investment contract liabilities was as follows: At 1 January 1,152 1,468 Contributions 83 158 Account balances paid on surrender and other terminations in the year (249) (729) Change in non-participating investment contract liabilities recognised in the consolidated income statement1 58 258 Recurring management charges (2) (3) At 31 December 1,042 1,152 1 Change in non-participating investment contract liabilities recognised in the consolidated income statement in the table above excludes (£2m) (2019: £7m) in relation to nonparticipating investment contract liabilities classified as held for sale.
Ordinary share capital Share premium Ordinary share capital Share premium Issued shares fully paid 13 61/63p each £m £m 13 61/63p each £m £m At 1 January 2,338,723,724 327 640 2,529,412,224 353 640 Shares issued in respect of share incentive plans 2,188 – – 1,114 – – Share buyback (144,610,296) (21) – (190,689,614) (26) – At 31 December 2,194,115,616 306 640 2,338,723,724 327 640
The accounting treatment adopted in the Half year results 2020 did not appropriately recognise a reduction to retained earnings and a corresponding liability within other financial liabilities for such an irrevocable contractual obligation. This will be corrected, and the 30 June 2020 retained earnings and other financial liabilities restated, in the Half year results 2021.The impact will be a reduction to 30 June 2020 retained earnings of £226m and the recognition of a corresponding other financial liability. There will be no impact on 30 June 2020 reported profit, earnings per share, regulatory capital or cash flows. There is no impact of this correction on any other previous reporting periods. This share buyback has resulted in a reduction in retained earnings of £402m (2019: £390m), There was no reduction in the special reserve for the share buyback in 2020 (2019: £126m). An amount of £21m (2019: £26m) has been credited to the capital redemption reserve relating to the nominal value of the shares cancelled.
The SLA EBT, ET and AAM EBT purchase shares in the Company for delivery to employees under employee incentive plans. Purchased shares are recognised as a deduction from equity at the price paid for them. Where new shares are issued to the SLA EBT, ET or AAM EBT the price paid is the nominal value of the shares. When shares are distributed from the trust their corresponding value is released to retained earnings.
Number of shares held by trusts Standard Life Aberdeen Employee Benefit Trust 37,667,681 15,378,831 Standard Life Employee Trust 23,773,359 26,685,390 Aberdeen Asset Management Employee Benefit Trust 2003 6,294,765 10,579,914 164 Standard Life Aberdeen 2020
On 7 February 2020, the Company announced a share buyback of up to £400m through on-market purchases which commenced on 10 February 2020. The previous buyback of up to £750m through on-market purchases which was approved by shareholders on 25 June 2018 completed in December 2019. During 2020, the Company has bought back and cancelled 144,610,296 shares (2019: 190,689,614 shares). The total consideration was £362m (2019: £516m) which includes transaction costs and any unsettled purchases of shares already transacted. At 31 December 2020, there were unsettled purchases of shares for 507,757 shares (2019: none). In addition at 31 December 2020 there was an irrevocable contractual obligation with a third party to purchase the Company’s own shares of £40m (2019: £nil). This obligation has been recognised as a part of the share buyback reduction to retained earnings for the year of £402m, with a corresponding £40m liability included within other financial liabilities (refer Note 36).
Remeasurement gains/(losses) on defined benefit pension plans 34 280 (23) Share of other comprehensive income of associates and joint ventures – (10) Equity holder tax effect of items that will not be reclassified subsequently to profit or loss 10 2 –
Reserve arising on Group reconstruction: The value of the shares issued at demutualisation was equal to the fair value of the business at that date. The business’s assets and liabilities were recognised at their book value at the time of demutualisation. The difference between the book value of the business’s net assets and its fair value was recognised in the reserve arising on Group reconstruction. The reserve comprises components attaching to each subsidiary that was transferred to the Company at demutualisation. On disposal of such a subsidiary any related component of the reserve arising on Group reconstruction is released to retained earnings.
The merger reserve includes £470m (2019: £2,304m) in relation to the Group’s asset management businesses. Following the impairment of the Company’s investments in its asset management entities (refer Section 8), £1,834m (2019: £780m) was transferred from the merger reserve to retained earnings to mitigate the impact on distributable reserves.
Aggregate tax effect of items recognised in other comprehensive income (2) – – – – – – (2) Total items recognised in other comprehensive income 8 (2) – – – – – 6 Recognised directly in equity Share buyback 26 – – – – – – 21 21 Reserves credit for employee share-based payments – – – 64 – – – 64 Transfer to retained earnings for vested employee share-based payments – – – (38) – – – (38) Transfer between reserves on impairment of subsidiaries – – (1,834) – – – – (1,834) Total items recognised directly within equity – – (1,834) 26 – – 21 (1,787) At 31 December 2020 12 1 483 80 115 (685) 1,058 1,064
Capital redemption reserve Total Notes £m £m £m £m £m £m £m £m £m 31 December 2018 (6) 49 7 3,097 68 241 (685) 1,011 3,782 Effect of change in accounting policy to IFRS 91 – – (7) – – – – – (7) 1 January 2019 (6) 49 – 3,097 68 241 (685) 1,011 3,775 Recognised in other comprehensive income Fair value losses on cash flow hedges (10) – – – – – – – (10) Exchange differences on translating foreign operations – (46) – – – – – – (46) Items transferred to profit or loss from continuing operations
The profit attributable to these non-controlling interests from continuing operations for the year ended 31 December 2020 was £5m (2019: £5m). Preference share dividends were discretionary and where declared, were paid in arrears in two tranches at a rate of 5% per annum and were non-cumulative. No interest accrued on any cancelled or unpaid dividends. During the year ended 31 December 2020 preference share dividends of £5m (2019: £5m) were paid including £2m paid as part of the redemption of the preference shares on 8 July 2020. Refer Note 33.
(a)(i) Premiums, claims and change in insurance contract liabilities Premiums received on insurance contracts are recognised as revenue in the consolidated income statement when due for payment except for unit linked premiums which are accounted for when the corresponding liabilities are recognised. For single premium business, this is the date from which the policy is effective. For regular (and recurring) premium contracts, receivables are established at the date when payments are due.
The change in insurance and participating investment contract liabilities, comprising the full movement in the corresponding liabilities during the period, is recognised in the consolidated income statement.
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 17 156 168 Standard Life Aberdeen 2020
SL Asia’s insurance and investment contracts did not contain any discretionary participating features so were classified as nonparticipating.
Claims paid on insurance contracts are recognised as expenses in the consolidated income statement. Maturity claims and annuities are accounted for when due for payment. Surrenders are accounted for when paid or, if earlier, on the date when the policy ceases to be included within the calculation of the insurance liability. Death claims and all other claims are accounted for when notified. Claims payable include the direct costs of settlement. Reinsurance recoveries are accounted for in the same period as the related claim.
(a)(ii) Measurement – non-participating insurance contract liabilities The Group’s policy for measuring liabilities for non-participating insurance contracts issued by overseas subsidiaries is to apply the valuation technique used in the issuing entity’s local statutory or regulatory reporting.
(a)(iii) Measurement – reinsurance contracts Reinsurance contracts are measured using valuation techniques and assumptions that are consistent with the valuation techniques and assumptions used in measuring the underlying policy benefits and taking into account the terms of the reinsurance contract.
Gross earned premium 32 67 Premium ceded to reinsurers (1) (1) Insurance contract premium income from continuing operations 31 66
Other financial liabilities are classified as being subsequently measured at amortised cost. Amortised cost is calculated, and the related interest expense is recognised in the consolidated income statement, using the effective interest method.
Where the terms of a financial liability measured at amortised cost are modified and the modification does not result in the derecognition of the liability, the liability is adjusted to the net present value of the future cash flows less transaction costs with a modification gain or loss recognised in the income statement. The methods and assumptions used to determine fair value of financial liabilities measured at fair value through profit or loss and derivatives are discussed in Note 40.
The table below sets out an analysis of financial liabilities excluding unit linked financial liabilities which are set out in Note 25.
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
(and at each fifth anniversary) 1 The cash flows arising from the US dollar subordinated notes give rise to foreign exchange exposure which the Group manages with a cross-currency swap designated as a cash flow hedge. Refer Note 20 for further details.
The difference between the fair value and carrying value of the subordinated liabilities is presented in Note 40. A reconciliation of movements in subordinated liabilities in the year is provided in Note 41.
34. Pension and other post-retirement benefit provisions The Group operates two types of pension plans: • Defined benefit plans which provide pension payments upon retirement to members as defined by the plan rules. All of the Group’s defined benefit plans, with the exception of a small plan in Ireland, are closed to future service accrual.
While the IAS 19 valuation reflects a best estimate of the financial position of the plan, the funding valuation reflects a prudent estimate. There is no material difference in how assets are measured. The funding measure of liabilities (technical provisions) and the IAS 19 measure are materially different. The key differences are the discount rate and inflation assumptions. While IAS 19 requires that the discount rate reflect corporate bond yields, the funding measure discount rate reflects a prudent estimate of future investment returns based on the actual investment strategy. The funding valuation adopts a market consistent measure of inflation without any adjustment. The IAS 19 assumption incorporates an adjustment to remove the inflation risk premium believed to exist within market prices.
In December 2009, this plan closed to new membership and changed from a final salary basis to a career average revalued earnings (CARE) basis. Following the sale of the UK and European insurance business in 2018, there remain fewer than 10 employees who continue to accrue benefits under this plan.
(a) Analysis of amounts recognised in the consolidated income statement The amounts recognised in the consolidated income statement for defined contribution and defined benefit plans are as follows: Current service cost 59 60 Past service cost – (13) Net interest income (23) (31) Administrative expenses 3 2 Expense from continuing operations recognised in the consolidated income statement 39 18 171Standard Life Aberdeen 2020
Present value of funded obligation (3,015) (375) (3,390) (2,852) (339) (3,191) Present value of unfunded obligation – (4) (4) – (3) (3) Fair value of plan assets 5,253 343 5,596 4,609 308 4,917 Effect of limit on plan surplus (783) – (783) (615) – (615) Net asset/(liability) 1,455 (36) 1,419 1,142 (34) 1,108
Return on plan assets, excluding amounts included in interest income – – 712 385 712 385 – – 712 385 Gain from change in demographic assumptions 286 16 – – 286 16 – – 286 16 Loss from change in financial assumptions (607) (459) – – (607) (459) – – (607) (459) Release of death in service obligation – 7 – – – 7 – – – 7 Experience gains 44 28 – – 44 28 – – 44 28 Change in effect of limit on plan surplus – – – – – – (155) – (155) –
Contributions to defined benefit plans in the year ended 31 December 2020 comprised £14m (2019: £15m) to the Other UK plans and the Ireland Standard Life plan. Contributions are expected to remain at this level over 2021 and are not expected to change materially over the subsequent two years. These contributions include a mixture of deficit funding and funding to achieve a targeted level of overall financial strength.
Current service cost (1) (2) – – (1) (2) – – (1) (2) Past service cost – 13 – – – 13 – – – 13 Interest (expense)/income (63) (79) 99 127 36 48 (13) (17) 23 31 Administrative expenses (3) (2) – – (3) (2) – – (3) (2)
The distribution of the fair value of the assets of the Group’s funded defined benefit plans is as follows: Principal plan Other Total 2020 2019 2020 2019 2020 2019 £m £m £m £m £m £m
Debt securities 4,431 3,098 – 4 4,431 3,102 Total assets measured at fair value based on level 1 inputs 4,616 4,062 – 194 4,616 4,256 Assets measured at fair value based on level 2 or 3 inputs Derivatives 95 262 – (4) 95 258 Equity securities 101 102 – – 101 102 Interests in pooled investment funds1
Debt 434 104 13 – 447 104 Equity 37 – 32 – 69 – Multi-asset private markets 164 157 – – 164 157 Property 119 – 12 10 131 10 Absolute return 74 – 100 – 174 – Cash 43 – 16 – 59 –
Debt securities 139 121 78 34 217 155 Qualifying insurance policies 3 6 80 71 83 77 Total assets measured at fair value based on level 2 or 3 inputs 1,209 752 331 111 1,540 863 Cash and cash equivalents 175 222 12 3 187 225 Liability in respect of collateral held (743) (426) – – (743) (426) Other (4) (1) – – (4) (1) Total 5,253 4,609 343 308 5,596 4,917 1 Transfers from level 1 to level 2 in the period primarily relate to interests in pooled investment vehicles which are priced daily but where the daily price is only offered by the fund manager. The Group now considers these investments to be level 2. All other transfers relate to assets where changes in the frequency of observable market transactions resulted in a change in whether the market was considered active.
Further information on risks is provided in Section (g) of this note. The £4,648m (2019: £3,257m) of debt securities includes £4,487m (2019: £3,205m) government bonds (including conventional and index-linked). Of the remaining £161m (2019: £52m) debt securities, £101m (2019: £22m) are investment grade corporate bonds or certificates of deposit.
Included in the qualifying insurance policy asset of £83m (2019: £77m) is an insurance policy purchased by the trustees of one of the Other UK defined benefit plans to protect the plan against future investment and actuarial risks.
Expectation of life from NRA Male age today Female age today 2020 Table Improvements NRA 40 NRA 40
The change in longevity assumptions over the period reflects the assumptions that have been agreed with the trustees for the 2019 triennial funding valuation. These assumptions reflect a cautious allowance for the recently observed slowdown in longevity improvements.
(e) Estimates and assumptions Determination of the valuation of principal plan liabilities is a key estimate as a result of the assumptions made relating to both economic and non-economic factors. The key economic assumptions for the principal plan, which are based in part on current market conditions, are shown below: Discount rate 1.45 2.05 Rates of inflation
The changes in economic assumptions over the period reflect changes in both corporate bond prices and market implied inflation. The population of corporate bond prices used in 2020 excludes bonds issued by UK universities which is a change in methodology for calculating the discount rate and therefore a change to the accounting estimate. The impact of this change in accounting estimate on the defined benefit obligation was a reduction of £72m. The inflation assumption reflects the future reform of RPI effective from 2030 as described in (g)(i) and this is the primary driver of the increase in the CPI assumption. The impact of the increase in the CPI assumption on the defined benefit obligation was an increase of £203m.
Core parameterisation of the CMI 2019 mortality improvements model (SK parameter of 7.0), with an initial improvement (or ‘A’) parameter of +0.5% for males and females, and a long-term rate of improvement of 1.5%
Failure of the asset strategy to keep pace with changes in plan liabilities would expose the plan to the risk of a deficit developing, which could increase funding requirements for the Group.
Outstanding purchases of investment securities 6 – Accruals 408 469 Creation of units awaiting settlement 121 110 Lease liabilities 18 249 268 Cash collateral held in respect of derivative contracts 38 14 21 Bank overdrafts 24 202 338 Contingent consideration liabilities 40 6 14 Outstanding contractual obligation for share buyback 26 40 – Other 131 95 Other financial liabilities 1,177 1,315
Accruals includes £nil (2019: £3m) relating to contracts with customers (refer Note 4(b)).
The amount of other financial liabilities expected to be settled after more than 12 months is £217m (2019: £239m).
Additional provisions – – 16 19 16 19 Release of unused provision – – (7) (7) (7) (7)
(b) Other liabilities As at 31 December 2020, other liabilities totalled £6m (2019: £5m). The amount of other liabilities expected to be settled after more than 12 months is £2m (2019: £2m).
• Third party interest in consolidated funds and non-controlling interests refers to the assets and liabilities recorded on the Group’s consolidated statement of financial position which belong to third parties. The Group controls the entities which own the assets and liabilities but the Group does not own 100% of the equity or units of the relevant entities.
Under IFRS 7 the following financial instruments are excluded from scope: • Interests in subsidiaries, associates and joint ventures • Rights and obligations arising from employee benefit plans • Insurance contracts as defined by IFRS 4 • Share-based payment transactions
Equity securities and interests in pooled investment funds at FVTPL 86 84 Total co-investments 86 84
The Group sets limits for investing in seed capital and co-investment activity and regularly monitors exposures arising from these investments. The Group will consider hedging its exposure to market risk in respect of seed capital investments where it is appropriate and efficient to do so. The Group will also consider hedging its exposure to currency risk in respect of co-investments where it is appropriate and efficient to do so. Other market risks associated with co-investments are not hedged given the need for the Group’s economic interests to be aligned with those of the co-investors.
The Equities and interests in pooled investment funds at FVTPL included in the consolidated statement of financial position includes £46m (2019: £68m) of third party interest in consolidated funds to which the shareholder is not exposed.
(b)(i)(ii) Exposure to interest rate risk Interest rate risk is the risk that arises from exposures to changes in the shape and level of yield curves which could result in losses due to the value of financial assets and liabilities, or the cash flows relating to these, fluctuating by different amounts.
The Indian Rupee exposure primarily relates to the Group’s investment in HDFC Life. Other currencies include assets of £10m (2019: £12m) and liabilities of £6m (2019: £nil) in relation to the fair value of derivatives used to manage currency risk.
Non-designated derivatives relate to foreign exchange forward contracts that are not designated as cash flow hedges or net investment hedges and primarily relate to the management of currency risk arising from seed capital and co-investment activity.
Profit after tax and equity sensitivity to market risk 31 December 2020 31 December 2019
% £m % £m Equity prices Increase 10 146 10 40 Decrease 10 (146) 10 (40) Indian Rupee against US Dollar Strengthen 10 136 – – Weaken 10 (110) – – US dollar against Sterling Strengthen 10 11 10 11 Weaken 10 (9) 10 (11) Euro against Sterling Strengthen 10 12 10 15 Weaken 10 (9) 10 (15)
Interest rate sensitivity to a reasonable change in the variable within the next calendar year are not material in both 2020 or 2019.
(c) Credit risk Exposures to credit risk and concentrations of credit risk are managed by setting exposure limits for different types of financial instruments and counterparties. The limits are established using the following controls: Financial instrument with credit risk exposure Control Cash and cash equivalents Maximum counterparty exposure limits are set with reference to internal credit assessments. Derivative financial instruments Maximum counterparty exposure limits, net of collateral, are set with reference to internal credit assessments. The forms of collateral that may be accepted are also specified and minimum transfer amounts in respect of collateral transfers are documented.
Group Treasury perform central monitoring of exposures against limits and are responsible for the escalation of any limit breaches to the Chief Risk Officer. Expected credit losses (ECL) are calculated on financial assets which are measured at amortised cost.
In determining whether a default has taken place, or where there is an increased risk of a default, a number of factors are taken into account including a deterioration in the credit quality of a counterparty, the number of days that a payment is past due, and specific events which could impact a counterparty’s ability to pay.
The Group applies the simplified approach, as permitted under IFRS 9, to calculate the ECL allowance for trade receivables, contract assets and lease receivables. Under the simplified approach, the ECL allowance is calculated over the remaining life of the asset, using a provision matrix approach based on historic observed default rates adjusted for knowledge of specific events which could influence loss rates. Historically, default levels have been insignificant. Trade debtors past due but not in default as at 31 December 2020 were £44m (2019: £45m) the majority of which were less than 90 days past due (2019: less than 90 days).
Fair value through profit or loss Cash flow hedge 12 month
ECL Lifetime ECL – not credit impaired Total 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 £m £m £m £m £m £m £m £m £m £m AAA – – – – 151 100 – – 151 100 AA+ to AA- 88 178 – – 467 843 – – 555 1,021 A+ to A- 631 485 – 3 1,088 1,146 – – 1,719 1,634 BBB 61 54 – – 117 120 – – 178 174 BB – – – – – 2 6 – 6 2 Not rated 31 25 – – 255 187 352 372 638 584 Gross carrying amount 811 742 – 3 2,078 2,398 358 372 3,247 3,515 Loss allowance – – – – – – – – – – Carrying amount 811 742 – 3 2,078 2,398 358 372 3,247 3,515
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 11 13 (3) (2) (1) (9) 7 2 Reverse repurchase agreements 120 25 – – (120) (25) – – Total financial assets 131 38 (3) (2) (121) (34) 7 2 Financial liabilities Derivatives1 (11) (2) 3 2 1 – (7) – Total financial liabilities (11) (2) 3 2 1 – (7) – 1 Only OTC derivatives subject to master netting agreements have been included above.
This framework ensures that liquidity risks are identified and also identifies which entities in the Group have this exposure. Stress testing of these risks is performed to understand the quantum of risk under stress conditions. This then informs the level of liquid resources that need to be maintained. Where appropriate, this is enhanced with external credit facilities and the Group has a syndicated revolving credit facility of £400m which was undrawn at 31 December 2020.
The Group also had unrecognised commitments in respect of financial instruments as at 31 December 2020 with a contractual maturity of within one year, between one and five years and over five years of £7m, £22m and £7m respectively (2019: £2m, £39m and £6m).
(d) Liquidity risk The shareholder is exposed to liquidity risk if the Group is unable to realise investments and other assets in order to settle its financial obligations when they fall due, or can do so only at excessive cost. The following quantitative liquidity risk disclosures are provided in respect of these financial liabilities.
Contingency funding plans are also maintained to ensure that if liquidity risk did materialise, processes and procedures are already in place to assist with resolving the issue. Regular monitoring of liquid assets is performed and projections undertaken (under both base and stressed conditions) to understand the outlook.
Subordinated liabilities 28 29 113 116 629 676 22 25 22 25 101 107 915 978 Other financial liabilities 963 1,124 108 107 101 102 44 57 10 14 – – 1,226 1,404 Total 991 1,153 221 223 730 778 66 82 32 39 101 107 2,141 2,382 39. Structured entities A structured entity is an entity that is structured in such a way that voting or similar rights are not the dominant factor in deciding who controls the entity. The Group has interests in structured entities through investments in a range of investment vehicles including: • Pooled investment funds managed internally and externally, including OEICs, SICAVs, unit trusts and limited partnerships • Debt securitisation vehicles which issue asset-backed securities
(b) Unconsolidated 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 unconsolidated structured entities and there are no current intentions to do so.
Total financial investments 1,043 929 Receivables and other financial assets 234 221 Other financial liabilities 128 129
Total assets under management of structured entities in which the Group has no direct investments but has other interests in are £58,110m at 31 December 2020 (2019: £102,558m). The fees recognised in respect of these assets under management during the year to 31 December 2020 were £269m (2019: £581m).
Information on the methods and assumptions used to determine fair values for equity securities and interests in pooled investment funds, debt securities and derivatives measured at fair value is given below: Equities and interests in pooled investment funds1,2 Debt securities Derivatives3 Level 1 Equity instruments listed on a recognised exchange valued using prices sourced from their primary exchange.
Over-the-counter derivatives measured using a range of valuation models including discounting future cash flows and option valuation techniques.
December 2020 and 31 December 2019, the residual credit risk is considered immaterial and no credit risk adjustment has been made. 4 If prices are not available from the external pricing providers or are considered to be stale, the Group has established procedures to arrive at an internal assessment of the fair value.
Debt securities valued using models and standard valuation formulas based on observable market data4.
Thus, the value of these liabilities is dependent on the methods and assumptions set out above in relation to the underlying assets and liabilities: • For third party interest in consolidated funds, when the underlying assets and liabilities are valued using readily available market information the liabilities in respect of third party interest in consolidated funds are treated as level 2. Where the underlying assets and liabilities are not valued using readily available market information the liabilities in respect of third party interest in consolidated funds are treated as level 3.
(a)(i) Fair value hierarchy for assets measured at fair value in the statement of financial position The table below presents the Group's non-unit linked assets measured at fair value by level of the fair value hierarchy (refer Note 25 for fair value analysis in relation to assets backing unit linked liabilities).
Transfers from level 1 to level 2 and from level 2 to level 1 during the year ended 31 December 2020 were £355m (2019: £7m) and £7m (2019: £6m) respectively. Transfers from level 1 to level 2 in the period primarily relate to interests in pooled investment vehicles which are priced daily but where the daily price is only offered by the fund manager. The Group now considers these investments to be level 2. All other transfers relate to assets where changes in the frequency of observable market transactions resulted in a change in whether the market was considered active. Transfers are deemed to have occurred at the end of the calendar quarter in which they arose.
At start of period 1 8 (14) (29) Total amounts recognised in the income statement (12) 56 2 5 Additions – – – (8) Settlements 39 (63) 6 18 At end of period 28 1 (6) (14)
For the year ended 31 December 2020 losses of £13m (2019: gains of £56m) were recognised in the consolidated income statement in respect of assets and liabilities held at fair value classified as level 3 at the period end, excluding assets and liabilities held for sale. Of this amount gains of £nil (2019: losses of £1m) were recognised in other income, gains of £2m (2019: gains of £1m) were recognised in investment return and losses of £15m (2019: gains of £56m) were recognised in respect of discontinued operations.
(a)(iv) Significant unobservable inputs in level 3 instrument valuations The table below identifies the significant unobservable inputs in relation to equity securities and interests in pooled investment funds categorised as level 3 instruments at 31 December 2020 with a fair value of £101m (2019: £82m).
Fair value £m Valuation technique Unobservable input Range (weighted average) Private equity, real estate and infrastructure funds 85 65 Net asset value Net asset value statements provided for six significant funds (fair value >£5m) and a large number of smaller funds
A range of unobservable inputs is not applicable as we have determined that the indicative share price from off market transactions represents fair value at the end of the reporting period
Amount expected to be received from Phoenix at 31 December 2020. This was in line with the £34m received in February 2021, refer Note 47. The residual fair value relates to a number of smaller contingent consideration liabilities for which the input used is expected payments based on earn-out terms and indemnity assessments.
Unobservable inputs relate to probability weighted cash flows; and where relevant, discount rates. The most significant unobservable inputs relate to assumptions used to value the contingent consideration related to the sale of SLAL to Phoenix, in particular those related to: – SLAL’s annuity sales practices provision
– Future lapse rates on relevant UK unit linked products of SLAL
(b) Assets and liabilities not carried at fair value The table below presents estimated fair values by level of the fair value hierarchy of non-unit linked financial assets and liabilities whose carrying value does not approximate fair value. Fair values of assets and liabilities are based on observable market inputs where available, or are estimated using other valuation techniques.
Assets Debt securities 325 602 335 614 – 23 335 591 – – Liabilities Subordinated liabilities 33 638 655 688 688 – – 688 688 – –
Equity securities and interests in pooled investment funds 711 Other assets of operations disposed of 74 Non-participating insurance contract liabilities (689) Non-participating investment contract liabilities (52) Other liabilities of operations disposed of (25) Net assets disposed of 19
Items transferred to profit or loss on disposal of subsidiaries 1 (8) Gain on sale 1 8 Total cash consideration 19 Cash and cash equivalents disposed of (27) Cash outflow from disposal of subsidiary 1 (8)
Opening balance carried forward 655 1,081 Effect of change in accounting policy to IFRS 91 – 5 Opening balance at 1 January 655 1,086
At 31 December 638 655 1 The Group has initially applied IFRS 9 at 1 January 2019. Under the transition method chosen, comparative information is not restated. 2 Dividends of £2m were paid as part of the redemption of the preference shares on 8 July 2020 subsequent to the reclassification of the preference shares as subordinated liabilities (Refer Note 30).
At 31 December 249 268 1 The Group has initially applied IFRS 16 at 1 January 2019. Under the transition method chosen, comparative information is not restated.
43. Commitments The Group has contractual commitments in respect of expenditure on investment property, funding arrangements and leases which will be payable in future periods. These commitments are not recognised on the Group’s statement of financial position at the year end but are disclosed to give an indication of the Group’s future committed cash flows.
Reclassified as held for sale during the year (7) – Additions 19 74 Disposals (2) (5) Interest capitalised 6 7 Foreign exchange adjustment – (3)
44. Employee share-based payments and deferred fund awards The Group operates share incentive plans for its employees. These generally take the form of an award of options, conditional awards or restricted shares in Standard Life Aberdeen plc (equity-settled share-based payments) but can also take the form of a cash award based on the share price of Standard Life Aberdeen plc (cash-settled share-based payments). The Group also incentivises certain employees through the award of units in Group managed funds (deferred fund awards) which are cash-settled. All the Group’s incentive plans have conditions attached before the employee becomes entitled to the award. These can be performance and/or service conditions (vesting conditions) or the requirement of employees to save in the save-as-you-earn scheme (non-vesting condition). The period over which all vesting conditions are satisfied is the vesting period and the awards vest at the end of this period.
At the time the equity instruments vest, the amount recognised in the equity compensation reserve in respect of those equity instruments is transferred to retained earnings.
The following plans made awards during the year ended 31 December 2020: Plan Options Conditional awards
Yes No No 3 or 5 Up to six months after vesting
Service only 1 Included in Deferred and discretionary share plans in Section (b)(i) below.
The awards made under the deferred and discretionary share plans include awards for deferred bonuses of the prior year. With the exception of the Executive Incentive Plan (EIP) awards, the deferred bonus awards have service conditions of one, two and three years after the date of the award and no outstanding performance conditions. The awards for deferred bonus for executive Directors in 2020 were made under the conditions of the EIP including a performance underpin.
Further details of the EIP and the 2020 LTIP are set out in the Directors’ remuneration report.
Options and conditional awards are all at nil cost with the exception of Sharesave where eligible employees in the UK and Ireland save a monthly amount from their salaries, over either a three or five year period, which can be used to purchase shares in the Company at a predetermined price.
The share incentive plan allows employees the opportunity to buy up to £1,800 of shares from their salary each year with the Group matching up to £600 per year. The matching shares awarded are granted each month but are restricted for three years (two years for Ireland).
In addition to nil costs options, 3,858,367 nil cost conditional awards were also granted under the deferred and discretionary share plans (2019: 4,283,186) with a weighted average share price at grant date was 230p which was also the weighted average fair value at grant date.
(b)(ii) Standard Life/Standard Life Investments Long-term incentive 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
Sharesave Outstanding at 1 January 7,870,064 227p 9,260,389 292p Granted 3,449,144 189p 5,473,382 199p Forfeited (159,189) 234p – – Exercised (149,911) 273p (353,534) 282p Expired (333,555) 272p – – Cancelled (1,941,634) 225p (6,510,173) 294p Outstanding at 31 December 8,734,919 210p 7,870,064 227p Exercisable at 31 December 225,676 341p 426,840 285p Remaining contractual life of options outstanding (years)1 2.98 3.29 Options exercised during the year Share price at time of exercise1 296p 305p 1 Weighted average.
(d) Deferred fund awards and cash settled share based payments (d)(i) Deferred fund awards At 31 December 2020, the liability recognised for cash-settled deferred fund awards was £61m (2019: £46m).
45. Related party transactions (a) Transactions and balances with related parties In the normal course of business, the Group enters into transactions with related parties that relate to insurance and asset management business.
(c) Matching shares granted under share incentive plans During the year ended 31 December 2020, 371,274 matching shares were granted under the share incentive plan (2019: 348,161). The weighted average share price at grant date was 254p which was also the weighted average fair value at grant date. The plans include the entitlement to the receipt of dividends in respect of awards that ultimately vest between the date of grant and the vesting date.
Note 47 (b) sets out Events after the reporting date relating to Phoenix.
In 2020, the Group committed to providing £12m of additional funding to a joint venture subject to the fulfilment of specified conditions (2019: £nil).
(b) Compensation of key management personnel In 2020, key management personnel includes Directors of Standard Life Aberdeen plc (since appointment) and the members of the executive leadership team (since appointment).
The summary of compensation of key management personnel is as follows: 2020 2019 £m £m
Salaries and other short-term employee benefits 9 8 Post-employment benefits – – Share-based payments and deferred fund awards 12 7 Termination benefits 1 1 Total compensation of key management personnel 22 16
The Group has complied with all externally imposed capital requirements during the year. The Group’s Pillar 3 disclosures will be published on the Group’s website at www.standardlifeaberdeen.com/annualreport 196 Standard Life Aberdeen 2020
The Group has complied with all externally imposed capital requirements during the year. The Group’s Pillar 3 disclosures will be published on the Group’s website at www.standardlifeaberdeen.com/annualreport 47. Events after the reporting date (a) Acquisition of Tritax Management LLP On 9 December 2020, the Group announced the proposed acquisition of 60% of the equity of Tritax Management LLP, a specialist logistics real estate fund manager. The initial cash consideration payable at completion for the acquisition is £64m. Subject to the satisfaction of certain conditions, an additional contingent deferred earn-out is expected to be payable to acquire the remaining 40% of equity in Tritax Management LLP via three exercisable put options in each of years ended 31 March 2024, 2025 and 2026. The Group will also have the right to purchase any outstanding equity interests at the end of the five-year period through exercising a call option. The amount payable under the contingent deferred earn-out is dependent on the growth in future profitability of the business and is a maximum of £140m. Completion is subject to certain conditions including relevant regulatory approvals. The assets under management of Tritax Management LLP at 31 December 2020 were approximately £5.5bn.
The Group have also agreed to sell the ‘Standard Life’ brand to Phoenix by mid-2021, replacing the existing agreement to licence the brand for no fee to Phoenix, and to transfer related employees to Phoenix. In addition the Group will pay £32m to Phoenix later in 2021 in return for Phoenix bearing the costs of workplace pensions marketing staff, who are currently employed by the Group but provide services to Phoenix. The sale of the brand and transfer of related marketing staff is not expected to materially impact on our results. The strategic asset management partnership (under which the Group manages £171.5bn of Phoenix assets at 31 December 2020) will be extended and will now operate for at least 10 years up to February 2031.
The particulars of the Company’s related undertakings at 31 December 2020 are listed below. For details of the Group’s consolidation policy refer to (b) Basis of consolidation in the Presentation of consolidated financial statements section. Under that policy limited partnerships in which the Group has no interest but whose general partner is controlled by the Group are not consolidated. However such limited partnerships are considered to be related undertakings under Companies Act 2006 and therefore are listed below. Where the Group has no interest in a limited partnership that is considered a related entity, the interest held is disclosed as 0%.
The registered head office of all related undertakings is 1 George Street, Edinburgh, EH2 2LL unless otherwise stated. (a) Direct subsidiaries Name of related undertaking Share class1 % interest held2 1825 Financial Planning Limited3 Ordinary shares 100% 30 STMA 1 Limited3 Ordinary shares 100% 30 STMA 2 Limited3 Ordinary shares 100% 30 STMA 3 Limited3 Ordinary shares 100% 30 STMA 4 Limited3 Ordinary shares 100% 30 STMA 5 Limited3 Ordinary shares 100% Aberdeen Asset Management PLC4 Ordinary shares 100% Focus Solutions Group Limited5 Ordinary shares 100% Standard Life Aberdeen Charitable Foundation4 N/A 100% Standard Life Aberdeen Trustee Company Limited Ordinary shares 100% Standard Life Charity Fund N/A 100% Standard Life Client Management Limited Ordinary shares 100% Standard Life Employee Services Limited Ordinary shares 100% Standard Life Finance Limited Ordinary shares 100% Standard Life Foundation N/A 100% Standard Life Investments (Holdings) Limited Ordinary shares 100% Standard Life (London) Limited3 Ordinary shares 100% Standard Life (Mauritius Holdings) 2006 Limited6 Ordinary shares 100% Standard Life Oversea Holdings Limited Ordinary shares 100% Standard Life Savings Limited Ordinary shares 100% The Standard Life Assurance Company 2006 N/A 100% Threesixty Services LLP7 Limited Liability Partnership 100% Threesixty Support LLP7 Limited Liability Partnership 100%
7. Group financial statements continued 48. Related undertakings The Companies Act 2006 requires disclosure of certain information about the Group’s related undertakings which is set out in this note. Related undertakings are subsidiaries, joint ventures, associates and other significant holdings. In this context significant means either a shareholding greater than or equal to 20% of the nominal value of any class of shares, or a book value greater than 20% of the Group’s assets.
(b) Other subsidiaries, joint ventures, associates and other significant holdings Name of related undertaking Share class1 % interest held2 1825 Financial Planning and Advice Limited3
Name of related undertaking Share class1 % interest held2 Aberdeen Asset Investment Group Limited3 Ordinary shares 100% Aberdeen Asset Investments Limited3 Ordinary shares 100% Aberdeen Asset Management Cayman Limited10 Ordinary shares 100% Aberdeen Asset Management Denmark A/S11 Ordinary shares 100% Aberdeen Asset Management Finland Oy12 Ordinary shares 100% Aberdeen Asset Management US GP Control LLC13 Limited Liability Company 100% Aberdeen Asset Managers Limited4 Ordinary shares 100% Aberdeen Asset Middle East Limited14 Ordinary shares 100% Aberdeen Capital Management LLC13 Limited Liability Company 100% Aberdeen Capital Managers GP LLC15 Limited Liability Company 100% Aberdeen Claims Administration, Inc.16 Ordinary shares 100% Aberdeen Co-Investment Mandate LP4 Limited Partnership 0% Aberdeen Direct Property (Holding) Limited3 Ordinary shares 100% Aberdeen do Brasil Gestao de Recursos Ltda17 Limited Liability Company 100% Aberdeen Emerging Asia Fund, L.P.10 Limited Partnership 0% Aberdeen Emerging Asia Pacific II (Offshore), L.P.10 Limited Partnership 0% Aberdeen Emerging Asia Pacific III Ex-Co-Investments, L.P.10 Limited Partnership 0% Aberdeen Emerging Capital Limited18 Ordinary shares 100% Aberdeen Energy & Resource Company IV, LLC13 Limited Liability Company 73% Aberdeen Energy & Resources Company V, LLC13 Limited liability company 100% Aberdeen Energy & Resources Partners IV, L.P.13 Limited Partnership 1% Aberdeen Energy & Resources Partners V, L.P.13 Limited Partnership 0% Aberdeen European Infrastructure Carry GP Limited4 Ordinary shares 100% Aberdeen European Infrastructure Carry Limited4 Ordinary shares 100% Aberdeen European Infrastructure Co-Invest II LP3 Limited Partnership 0% Aberdeen European Infrastructure GP Limited3 Ordinary shares 100% Aberdeen European Infrastructure GP II Limited3 Ordinary shares 100% Aberdeen European Infrastructure GP III Limited3 Ordinary shares 100% Aberdeen European Infrastructure Partners Carry LP4 Limited Partnership 25% Aberdeen European Infrastructure Partners Carry II LP4 Limited Partnership 25% Aberdeen European Infrastructure Partners Carry III LP4 Limited Partnership 25% Aberdeen European Infrastructure Partners LP3 Limited Partnership 3% Aberdeen European Infrastructure Partners II LP3 Limited Partnership 3% Aberdeen European Infrastructure Partners III LP3 Limited Partnership 1% Aberdeen European Residential Opportunities Fund SCSp19 Limited Partnership 1% Aberdeen France S.A.20 Ordinary shares 100% Aberdeen Fund Distributors LLC16 Limited Liability Company 100% Aberdeen Fund Management Oy12 Ordinary shares 100% Aberdeen Fund Management II Oy12 Ordinary shares 100% Aberdeen Fund Management Ireland Limited21 Ordinary shares 100% Aberdeen General Partner 1 Limited4 Ordinary shares 100% Aberdeen General Partner 2 Limited4 Ordinary shares 100% Aberdeen General Partner CAPELP Limited10 Ordinary shares 100% Aberdeen General Partner CGPLP Limited10 Ordinary shares 100% Aberdeen General Partner CMENAPELP Limited10 Ordinary shares 100% Aberdeen General Partner CPELP Limited10 Ordinary shares 100% Aberdeen General Partner CPELP II Limited10 Ordinary shares 100% Aberdeen Global Absolute Return Strategies Fund13 Mutual fund 47% Aberdeen Global ex-Japan FoF's LP10 Limited Partnership 6% Aberdeen Global ex-Japan GP Limited10 Ordinary shares 100% Aberdeen Global Infrastructure Carry GP Limited4 Ordinary shares 100% Aberdeen Global Infrastructure GP Limited22 Ordinary shares 100% Aberdeen Global Infrastructure GP II Limited22 Ordinary shares 100% Aberdeen Global Infrastructure Partners Carry LP4 Limited Partnership 25% Aberdeen Global Infrastructure Partners II Carry LP4 Limited Partnership 25% Aberdeen Global Infrastructure Partners LP3 Limited Partnership 1% Aberdeen Global Infrastructure Partners II LP4 Limited Partnership 0% Aberdeen GP 1 LLP4 Limited Liability Partnership 100%
Name of related undertaking Share class1 % interest held2 Aberdeen GP 2 LLP4 Limited Liability Partnership 100% Aberdeen GP 3 LLP4 Limited Liability Partnership 100% Aberdeen Infrastructure Feeder GP Limited4 Ordinary shares 100% Aberdeen Infrastructure Finance GP Limited22 Ordinary shares 100% Aberdeen Infrastructure GP II Limited3 Ordinary shares 100% Aberdeen Infrastructure Partners II Carry LP4 Limited Partnership 25% Aberdeen Infrastructure Partners II LP4 Limited Partnership 0% Aberdeen Infrastructure Partners LP Inc23 Limited Partnership 0% Aberdeen Institutional Commingled Funds LLC - Long Duration Corporate Bond Fund24 Unit Trust 100% Aberdeen Investment Company Limited4 Ordinary shares 100% Aberdeen Investment Solutions Limited4 Ordinary shares 100% Aberdeen Investments Euro Limited3 Ordinary shares 100% Aberdeen Investments Jersey Limited25 Ordinary shares 100% Aberdeen Investments Limited3 Ordinary shares 100% Aberdeen Investments USD Limited3 Ordinary shares 100% Aberdeen Keva Asia IV Property Partners SCSp9 Limited Partnership 0% Aberdeen Liquidity Fund (Lux)
Seabury Sterling Liquidity 1 Fund19 SICAV 100% Aberdeen Pension Trustees Limited4 Ordinary shares 100% Aberdeen Pooling II GP AB26 Ordinary shares 100% Aberdeen Private Equity Company VII, LLC13 Limited Liability Company 100% Aberdeen Private Equity Company VIII, LLC13 Limited liability company 100% Aberdeen Private Equity VII, L.P.13 Limited Partnership 1% Aberdeen Private Equity VIII, LP13 Limited Partnership 0% Aberdeen Property Fund Finland I Feeder Ky12 Limited Partnership 0% Aberdeen Property Fund Finland LP12 Limited Partnership 0% Aberdeen Property Fund Limited Partner Oy12 Ordinary shares 100% Aberdeen Property Fund Management (Jersey) Limited25 Ordinary shares 100% Aberdeen Property Fund Management Estonia Ou27 Ordinary shares 100% Aberdeen Property Investors (General Partner) S.a.r.l.28 Ordinary shares 100% Aberdeen Property Investors Estonia Ou29 Ordinary shares 100% Aberdeen Property Investors France SAS20 Ordinary shares 100% Aberdeen Property Investors Limited Partner Oy12 Ordinary shares 100% Aberdeen Property Investors The Netherlands BV30 Ordinary shares 100% Aberdeen Property Secondaries Partners II19 Limited Partnership 1% Aberdeen Property UK Retail Parks Partnership3 Limited Partnership 0% Aberdeen Real Estate Fund Finland LP31 Limited Partnership 5% Aberdeen Real Estate Operations Limited4 Ordinary shares 100% Aberdeen Residential JV Feeder Limited Partner Oy12 Ordinary shares 100% Aberdeen Secondaries II GP S.a.r.l.19 Ordinary shares 100% Aberdeen Sidecar LP Inc23 Limited Partnership Aberdeen SP 2013 A/S11 Ordinary shares 100% Aberdeen Standard (Jersey) Limited32 Ordinary shares 100% Aberdeen Standard 2019 European PE A Carry LP Limited Partnership 100% Aberdeen Standard 2019 European PE B Carry LP Limited Partnership 100% Aberdeen Standard Alternative Funds Limited Ordinary shares 100% Aberdeen Standard ASC I
Aberdeen Standard Asset Management (Shanghai) Co., Ltd.33 Ordinary shares 100% Aberdeen Standard Asset Management (Thailand) Limited34 Ordinary shares 100% Aberdeen Standard Asset Management Limited Ordinary shares 100% Aberdeen Standard Capital (CI) Limited35 Ordinary shares 100% Aberdeen Standard Capital International Limited36 Ordinary shares 100% Aberdeen Standard Capital Limited Ordinary shares 100% Aberdeen Standard Carlsbad Carry LP4 Limited Partnership 25% Aberdeen Standard Carlsbad GP Limited22 Ordinary shares 100% Aberdeen Standard Carlsbad LP4 Limited Partnership 0%
ASI Sustainable Index World Equity Fund3 OEIC 100% ASI Sustainable Index UK Equity Fund3 OEIC 99%
Name of related undertaking Share class1 % interest held2 Aberdeen Standard Diversified Fixed Income Fund37 OEIC 23% Aberdeen Standard ECF II GP LP Limited Partnership 100% Aberdeen Standard European Co-Investment II SCSp19 Limited Partnership 0% Aberdeen Standard European Infrastructure Partners Carry IV LP4 Limited Partnership 25% Aberdeen Standard European Property Growth Fund L.P.3 Limited Partnership 0% Aberdeen Standard Fund Managers Limited3 Ordinary shares 100% Aberdeen Standard Global Infrastructure GP III Ltd.22 Ordinary shares 100% Aberdeen Standard Greater China Value Fund38 Investment Trust 74% Aberdeen Standard Group Limited Ordinary shares 100% Aberdeen Standard Gulf Carry GP Limited4 Ordinary shares 100% Aberdeen Standard Indonesia Balanced Growth Fund39 Unit Trust 84% Aberdeen Standard Indonesia Bond Fund39 Unit Trust 69% Aberdeen Standard Indonesia Equity Fund39 Unit Trust 67% Aberdeen Standard Investment Management Limited Ordinary shares 100% Aberdeen Standard Investments (Asia) Limited40 Ordinary shares 100% Aberdeen Standard Investments (Canada) Limited41 Ordinary shares 100% Aberdeen Standard Investments (Holdings) Limited Ordinary shares 100% Aberdeen Standard Investments (Hong Kong) Limited42 Ordinary shares 100% Aberdeen Standard Investments (Japan) Limited43 Ordinary shares 100% Aberdeen Standard Investments (Malaysia) Sdn. Bhd44 Ordinary shares
Aberdeen Standard Investments (Switzerland) AG45 Ordinary shares 100% Aberdeen Standard Investments Australia Limited37 Ordinary shares 100% Aberdeen Standard Investments Beteiligungs GmbH46 Limited Liability Company 94% Aberdeen Standard Investments Churchill Square General Partner Limited Ordinary shares 100% Aberdeen Standard Investments Colombia SAS47 Ordinary shares 100% Aberdeen Standard Investments Deutschland AG46 Ordinary shares 94% Aberdeen Standard Investments ETFs (US) LLC48 Limited liability company 100% Aberdeen Standard Investments ETFs Advisors LLC48 Limited liability company 100% Aberdeen Standard Investments ETFs Sponsor LLC48 Limited liability company 100% Aberdeen Standard Investments Fund Management AS49 Ordinary shares 100% Aberdeen Standard Investments Inc.13 Ordinary shares 100% Aberdeen Standard Investments Ireland Limited50 Ordinary shares 100% Aberdeen Standard Investments Korea Co. Ltd.51 Ordinary shares 100% Aberdeen Standard Investments Life and Pensions Limited3 Ordinary shares 100% Aberdeen Standard Investments Limited Ordinary shares 100% Aberdeen Standard Investments Luxembourg Corporate Manager S.a.r.l.9 Ordinary shares 100% Aberdeen Standard Investments Luxembourg S.A.19 Ordinary shares 100% Aberdeen Standard Investments Nominees Services (HK) Limited42 Ordinary shares 100% Aberdeen Standard Investments Norway AS49 Ordinary shares 100% Aberdeen Standard Investments Norway Holding AS49 Ordinary shares 100% Aberdeen Standard Investments Operations AS49 Ordinary shares 100% Aberdeen Standard Investments Sweden AB26 Ordinary shares 100% Aberdeen Standard Investments Taiwan Limited38 Ordinary shares 100% Aberdeen Standard Islamic Investments (Malaysia) Sdn. Bhd.44 Ordinary shares 100% Aberdeen Standard Life Asset Management Limited Ordinary shares 100% Aberdeen Standard Life Group Limited Ordinary shares 100% Aberdeen Standard Life Investments Limited Ordinary shares 100% Aberdeen Standard Life Limited Ordinary shares 100% Aberdeen Standard Limited Ordinary shares 100% Aberdeen Standard MSPC Fund SCSp19 Limited Partnership 0% Aberdeen Standard MSPC General Partner S.a.r.l.19 Limited Liability Company 100% Aberdeen Standard Multi-Sector Private Credit Fund SCSp19 Limited Partnership 0% Aberdeen Standard OEIC I
Name of related undertaking Share class1 % interest held2 Aberdeen Standard OEIC III
Aberdeen Standard Overseas Investment Fund Management (Shanghai) Co., Ltd.33 Ordinary shares 100% Aberdeen Standard Pan European Residential Property Fund SICAV-RAIF19 Limited Partnership 1% Aberdeen Standard Private Equity Company IX, LLC13 Limited liability company 100% Aberdeen Standard Private Equity IX, L.P.24 Limited Partnership 0% Aberdeen Standard Private Real Assets Co-Investment Fund I GP, LLC13 Limited liability company 100% Aberdeen Standard Private Real Assets Co-investment Fund I GP, LP24 Limited partnership 79% Aberdeen Standard Private Real Assets Co-Investment Fund I, L.P.13 Limited Partnership 1% Aberdeen Standard Secure Credit LP Limited Partnership 0% Aberdeen Standard SICAV I
Aberdeen Standard SICAV I - Artificial Intelligence Global Equity Fund19 SICAV 70% Aberdeen Standard SICAV I - ASI-CCBI Belt & Road Bond Fund19 SICAV 33% Aberdeen Standard SICAV I - Asian Credit Bond Fund19 SICAV 50% Aberdeen Standard SICAV I - Asian Sustainable Development Equity Fund19 SICAV 99% Aberdeen Standard SICAV I - Emerging Markets Local Currency Corporate Bond Fund19 SICAV 84% Aberdeen Standard SICAV I - European Equity (ex-UK) Fund19 SICAV 23% Aberdeen Standard SICAV I - German Equity Fund19 SICAV 28% Aberdeen Standard SICAV I - Global Dynamic Dividend Fund19 SICAV 45%
Aberdeen Standard SOF Evergreen GP LP Limited Partnership 100% Aberdeen Standard SOF Evergreen LP Limited Partnership 0% Aberdeen Standard SOF IV Feeder LP Limited Partnership 0% Aberdeen Standard SOF IV GP LP Limited Partnership 100% Aberdeen Standard SOF IV LP Limited Partnership 0% Aberdeen Standard Syariah Asia Pacific Equity USD Fund39 Unit trust 38% Aberdeen Standard UK Shopping Centre Feeder Fund Limited Partnership3 Limited Partnership 0% Aberdeen Standard Unit Trust 1
ASI Diversified Growth Fund3 Unit trust 42% Aberdeen Standard Venture Company XII, LLC13 Limited liability company 100% Aberdeen Standard Venture XII, LP13 Limited Partnership 0% Aberdeen Trust Limited4 Ordinary shares 100% Aberdeen UK Infrastructure Carry GP Limited4 Ordinary shares 100% Aberdeen UK Infrastructure Carry Limited4 Ordinary shares 100% Aberdeen Unit Trust Managers Limited4 Ordinary shares 100% Aberdeen U.S. Mid Cap Equity Fund24 OEIC 86% Aberdeen U.S. Sustainable Leaders Fund24 OEIC 95% Aberdeen Venture Company X, LLC13 Limited Liability Company 100% Aberdeen Venture Company XI, LLC13 Limited liability company 100% Aberdeen Venture Partners X SPV-A, L.P.13 Limited Partnership 0% Aberdeen Venture Partners X, L.P.13 Limited Partnership 0% Aberdeen Venture XI, LP13 Limited Partnership 0% ACM Carry LP4 Limited Partnership 40% AEROF (Luxembourg) GP S.a.r.l.19 Ordinary shares 100% AIA Series T Holdings LLC24 Limited liability company 0% AIPP Folksam Europe II Kommanditbolag52 Limited Partnership 0% AIPP Pooling I SA19 Ordinary shares 100% Airport Industrial GP Limited3 Ordinary shares 100% Airport Industrial Limited Partnership3 Limited Partnership 0% Aldwych Capital Partners, L.P. Limited Partnership 0% Amberia General Partner Oy12 Ordinary shares 100% Andean Social Infrastructure Fund I LP4 Limited Partnership 0% Andean Social Infrastructure GP Limited10 Ordinary shares 100%
Elevate Portfolio Services Limited3 Ordinary shares 100% ESF I Executive Co Investment Limited Partnership Limited Partnership 0% ESP 2004 Co Investment Limited Partnership Limited Partnership 0% ESP 2004 Conduit LP Limited Partnership 0% ESP 2004 General Partner Limited Partnership Limited Partnership 100% ESP 2006 Co Investment Limited Partnership Limited Partnership 0% ESP 2006 Conduit LP Limited Partnership 0% ESP 2006 General Partner Limited Partnership Limited Partnership 5% ESP 2008 Coinvestment Fund L.P. Limited Partnership 0% ESP 2008 Coinvestment General Partner Limited partnership Limited Partnership 0% ESP 2008 Conduit LP Limited Partnership 0% ESP 2008 Executive Co Investment Limited Partnership Limited Partnership 0% ESP 2008 General partner Limited Partnership Limited Partnership 0% ESP CPPIB European Mid Market Fund Limited Partnership 0% ESP General Partner Limited Partnership Limited Partnership 0% ESP Golden Bear Europe Fund Limited Partnership 2% ESP Golden Bear General Partner Limited Partnership Limited Partnership 0% ESP II Co Investment Limited Partnership Limited Partnership 0% ESP II Conduit LP Limited Partnership 0% ESP II General Partner Limited Partnership Limited Partnership 0% ESP Tidal Reach General Partner Limited Partnership Limited Partnership 20% ESP Tidal Reach LP Limited Partnership 1% European Strategic Partners Limited Partnership 0% European Strategic Partners - I LP Limited Partnership 0% European Strategic Partners 2004 'A' Limited Partnership 0% European Strategic Partners 2004 'B' Limited Partnership 0% European Strategic Partners 2006 'A' Limited Partnership 0% European Strategic Partners 2006 'B' Limited Partnership 0% European Strategic Partners 2008 'A' Limited Partnership 0% European Strategic Partners 2008 'B' Limited Partnership 0% European Strategic Partners II 'A' Limited Partnership 0% European Strategic Partners II 'B' Limited Partnership 0% European Strategic Partners II 'C' Limited Partnership 0% European Strategic Partners II 'D' Limited Partnership 0% European Strategic Partners II 'E' Limited Partnership 0% European Strategic Partners Scottish 'B' Limited Partnership 0% European Strategic Partners Scottish 'C' Limited Partnership 0% Flag Asia Company III, L.P.13 Limited Partnership 0% Flag Asia Company III, LLC13 Limited liability company 100% Flag GG Opportunity Company, LLC13 Limited liability company 100% Flag Global Company, LLC13 Limited liability company 100% Flag International Company, L.P.13 Limited Partnership 0% Flag International Company II, L.P.13 Limited Partnership 0%
Name of related undertaking Share class1 % interest held2 Flag International Company III, L.P.13 Limited Partnership 0% Flag International Company, LLC13 Limited liability company 100% Flag International Company II, LLC13 Limited liability company 100% Flag International Company III, LLC13 Limited liability company 100% Flag Private Equity Company, LLC13 Limited liability company 100% Flag Private Equity Company II, LLC13 Limited liability company 100% Flag Private Equity Company III, LLC13 Limited liability company 100% Flag Private Equity Company IV, LLC13 Limited liability company 100% Flag Private Equity Company V, LLC13 Limited liability company 100% Flag Private Equity Company VI, LLC13 Limited liability company 100% Flag Private Equity Company III, L.P.13 Limited Partnership 0% Flag Private Equity Company IV, L.P.13 Limited Partnership 0% Flag Private Equity Company V, L.P.13 Limited Partnership 0% Flag Real Assets Company LLC13 Limited liability company 100% Flag Real Assets Company, L.P.13 Limited Partnership 0% Flag Real Estate Company II, LLC13 Limited liability company 100% Flag Real Estate Company III, LLC13 Limited liability company 100% Flag Squadron Asia Pacific III GP LP10 Limited Partnership 100% Flag Venture Company II, LLC13 Limited liability company 100% Flag Venture Company III, LLC13 Limited liability company 100% Flag Venture Company IV, LLC13 Limited liability company 100% Flag Venture Company V, LLC13 Limited liability company 100% Flag Venture Company VI, L.LC13 Limited liability company 100% Flag Venture Company VII, LLC13 Limited liability company 100% Flag Venture Company VIII, LLC13 Limited liability company 100% Flag Venture Company IX, LLC13 Limited liability company 100% Flag Venture Company VI, L.P.13 Limited Partnership 0% Flag Venture Company VII, L.P.13 Limited Partnership 0% Flag Venture Company VIII, L.P.13 Limited Partnership 0% Focus Business Solutions Limited5 Ordinary shares 100% Focus Holdings Limited5 Ordinary shares 100% Focus Software Limited5 Ordinary shares 100% Focus Solutions EBT Trustee Limited5 Ordinary shares 100% FOF III Venture Company, LLC13 Limited liability company 100% FOF IV Venture Company, LLC13 Limited liability company 100% FOF V Venture Company, LLC13 Limited liability company 100% Fraser Heath Financial Management Limited3 Ordinary shares 100% Griffin Nominees Limited3 Ordinary shares 100% GTAAN – SL LP Limited Partnership 1% HDFC Asset Management Company Limited57 Ordinary shares
Name of related undertaking Share class1 % interest held2 SLCP (Holdings) Limited Ordinary shares 100% SLIF Property Investment LP Limited Partnership 0% SLIPC (General Partner Infrastructure II LTP 2017) Limited Ordinary shares 100% SLIPC (General Partner Infrastructure II) S.a.r.l.28 Ordinary shares 100% SLIPC (General Partner PMD Co-Invest 2017) Limited Ordinary shares 100% SLIPC (General Partner SCF 1) Limited Ordinary shares 100% SLIPC PMD Co-Invest 2017 LP Limited Partnership 0% SLTM Limited Ordinary shares 100% SOF I Executive Co Investment Limited Partnership Limited Partnership 0% SOF II Executive Co Investment Limited Partnership Limited Partnership 0% SOF III Executive Co Investment Limited Partnership Limited Partnership 0% SOF IV Carry LP Limited Partnership 25% Squadron Capital Asia Pacific GP, LP10 Limited Partnership 100% Squadron Capital Asia Pacific II GP LP10 Limited Partnership 100% Squadron Capital Partners Limited10 Ordinary shares 100% Standard Aberdeen Asset Management Limited Ordinary shares 100% Standard Aberdeen Group Limited Ordinary shares 100% Standard Aberdeen Investment Management Limited Ordinary shares 100% Standard Aberdeen Investments Limited Ordinary shares 100% Standard Aberdeen Limited Ordinary shares 100% Standard Life Aberdeen Asset Management Limited Ordinary shares 100% Standard Life Aberdeen Group Limited Ordinary shares 100% Standard Life Digital Solutions Limited Ordinary shares 100% Standard Life Investments Brent Cross General Partner Limited Ordinary shares 100% Standard Life investments Brent Cross LP Limited Partnership 0% Standard Life Investments Commercial Real Estate Debt LP3 Limited Partnership 0% Standard Life Investments European RE Club (Offshore Feeder) Ltd10 Ordinary shares 100% Standard Life Investments European RE Club II (Offshore Feeder) Ltd10 Ordinary shares 100% Standard Life Investments European Real Estate Club II LP3 Limited Partnership 0% Standard Life Investments European Real Estate Club II LP Feeder Fund10 Limited Partnership 0% Standard Life Investments European Real Estate Club III LP3 Limited Partnership 2% Standard Life investments European Real Estate Club LP3 Limited Partnership 2% Standard Life Investments European Real Estate Club LP Feeder Fund10 Limited Partnership 0% Standard Life Investments (France) SAS20 Ordinary shares 100% Standard Life Investments (General Partner CRED) Limited3 Ordinary shares 100% Standard Life Investments (General Partner ELIREF) S.a.r.l.19 Ordinary shares 100% Standard Life Investments (General Partner EPGF) Limited Ordinary shares 100% Standard Life Investments (General Partner European Real Estate Club) Limited3 Ordinary shares 100% Standard Life Investments (General Partner European Real Estate Club II) Limited3 Ordinary shares 100% Standard Life Investments (General Partner European Real Estate Club III) Limited3 Ordinary shares 100% Standard Life Investments (General Partner GARS) Limited Ordinary shares 100% Standard Life Investments (General Partner GFS) Limited Ordinary shares 100% Standard Life Investments (General Partner Global Tactical Asset Allocation) Limited Ordinary shares 100% Standard Life Investments (General Partner MAC) Limited Ordinary shares 100% Standard Life Investments (General Partner PDFI) Limited Ordinary shares 100% Standard Life Investments (General Partner UK Shopping Centre Feeder Fund LP) Limited3 Ordinary shares 100% Standard Life Investments Global Absolute Return Strategies Master Fund Limited10 Ordinary shares 100% Standard Life Investments Global Absolute Return Strategies Offshore Feeder Fund Limited10 Ordinary shares 100% Standard Life Investments Global Absolute Return Strategies Onshore Feeder Fund, L.P. Limited Partnership 0% Standard Life Investments Global Focused Strategies Master Fund Limited10 Ordinary shares 100% Standard Life Investments Global Focused Strategies Offshore Feeder Fund Limited10 Ordinary shares 100% Standard Life Investments Global SICAV
Standard Life Investments Global SICAV II Global Equity Impact Fund68 SICAV 20%
Standard Life Investments Global SICAV II MyFolio Multi-Manager I Fund68 SICAV 41% Standard Life Investments Global SICAV II MyFolio Multi-Manager II Fund68 SICAV 21% Standard Life Investments Global SICAV II MyFolio Multi-Manager III Fund68 SICAV 27% Standard Life Investments Global SICAV II MyFolio Multi-Manager IV Fund68 SICAV 33% Standard Life Investments Global SICAV II MyFolio Multi-Manager V Fund68 SICAV 35%
Registered offices 3 Bow Bells House, 1 Bread Street, London, EC4M 9HH 4 10 Queen's Terrace, Aberdeen, AB10 1XL 5 Cranford House, Kenilworth Road, Blackdown, Leamington Spa, CV32 6RQ 6 c/o IQ EQ Fund Services (Mauritius) Ltd, 33 Edith Cavell Street, Port Louis, 11324, Mauritius 7 2nd Floor, The Royals, Altrincham Road, Sharston, Manchester, M22 4BJ 8 6, rue Gabriel Lippmann L – 5365 Munsbach, Luxembourg, Luxembourg 9 2-8 avenue Charles De Gaulle, L-1653 Luxembourg, Luxembourg 10 c/o Maples Corporate Services Limited, Ugland House, PO Box 309, George
Guernsey, GY1 1EJ 24 1900 Market St, Suite 200, Philadelphia, PA 19103, USA 25 1 Seaton Place, St Helier, Jersey, JE4 8YJ 26 Box 3039, Stockholm, 103 63, Sweden 27 Ahtri 6a, Tallinn, 10151, Estonia 28 2 Boulevard de la Foire, L-1528 Luxembourg, Luxembourg 29 Pamu Mnt 15, Talinn, 10141, Estonia 30 WTC, H-Tower, 20th Floor, Zuidplein 166, 1077 XV Amsterdam, Netherlands 31 Mikonkatu 9 Fin 00100, Helsinki, Finland 32 44 Esplanade, St Helier, Jersey, JE4 9WG 33 West Area, 2F, No.707 Zhangyang Road, China (Shanghai) Pilot Free Trade
Square, KY1-9010, Cayman Islands 64 28th and 30th Floor, LHT Tower, 31 Queen's Road Central, Hong Kong 65 Aurora (3rd Floor) Finzels Reach, Counterslip, Bristol, BS1 6BX 66 Juxon House, 100 St Paul's Churchyard, London, EC4M 8BU 67 80, Route d'Esch, L-1470 Luxembourg, Luxembourg 68 2-4, Rue Eugène Ruppert, L-2453 Luxembourg, Luxembourg 69 30th Floor, Jardine House, One Connaught Place, Hong Kong 70 Ogier House, The Esplanade, St Helier, JE4 9WG, Jersey 71 5 Lister Hill, Horsforth, Leeds, LS18 5AZ 72 Citadel House, 6 Citadel Place, Ayr, KA7 1JN 73 c/o Aon, PO Box 33, Maison Trinity, Trinity Square, St Peter Port, Guernsey
GY1 4AT 74 Lime Grove House, Green Street, St Helier, Jersey, JE1 2ST 75 Jubilee House, Gosforth, Newcastle-Upon-Tyne, NE3 4PL
Liabilities Subordinated liabilities K 638 655 Derivative financial liabilities D 6 – Other financial liabilities K 110 25 Provisions O 68 77 Other liabilities O 8 4 Total liabilities 830 761 Total equity and liabilities 6,088 8,163
The financial statements on pages 211 to 221 were approved by the Board and signed on its behalf by the following Directors: Sir Douglas Flint Stephanie Bruce Chairman Chief Financial Officer 9 March 2021 9 March 2021
The Notes on pages 214 to 221 are an integral part of these financial statements.
Company accounting policies (a) Basis of preparation These separate financial statements are presented as required by the Companies Act 2006. The Company meets the definition of a qualifying entity under Application of Financial Reporting Requirements 100 as issued by the Financial Reporting Council. Accordingly, the financial statements for period ended 31 December 2020 have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) as issued by the Financial Reporting Council.
As equivalent disclosures are given in the consolidated financial statements, we have also applied the disclosure exemptions for share based payments and financial instruments.
As permitted by FRS 101, the Company has taken advantage of the following disclosure exemptions available under that standard: • A cash flow statement and related notes • Capital management • Effect of IFRSs issued but not effective • Related party transactions with wholly owned subsidiaries
(a) Acquisitions During 2020, the Company made the following acquisitions of subsidiaries measured at cost: • The Company increased its investment in 1825 Financial Planning Ltd (1825) through the purchase of 17,000,000 ordinary shares for a cash consideration of £17m
• The company increased its investment in Standard Life Employee Services Limited (SLESL) through the purchase of 3,584 ordinary shares for a cash consideration of £3.6m
• The Company increased its investment in Focus Solutions Group Limited through the purchase of 30,000,000 ordinary shares for a cash consideration of £3m
See Section (d) below for details on investments in subsidiaries at FVTPL.
(c) Impairment The Company holds investments in AAM PLC and Standard Life Investments (Holdings) Limited (SLIH). As AAM PLC and SLIH are managed and reported together within the Asset management, Platforms and Wealth segment, and the synergies from the merger of these entities are expected to benefit both entities, we judge that it is appropriate to consider the recoverable amount of these entities on a combined basis. The Company impaired its investments in AAM PLC and SLIH by £1,834m in 2020 (2019: £780m). Following the impairment, £1,834m (2019: £780m) was transferred from the merger reserve to retained earnings (refer Note J).
(d) Investments in subsidiaries at FVTPL Investments in subsidiaries at FVTPL, valued at £445m (2019: £562m), relate to holdings in funds over which the Company has control.
B. Investments in associates and joint ventures 2020 2019 £m £m
(a) Investment in associates The Company’s investments in associates are measured at cost less impairment.
The Company has an interest of 14.4% (2019: 19.97%) in Phoenix Group Holdings plc (Phoenix), a company incorporated in England and Wales. On 22 July 2020, 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 Company’s holding in Phoenix becoming 14.4% of the enlarged Phoenix Group.
Investments in subsidiaries measured at FVTPL A 445 562 – – – – 445 562 Loan to subsidiaries – – – – 109 – 109 – Derivative financial assets D – – 1 3 – – 1 3 Equity securities and interests in pooled investment funds 249 218 – – – – 249 218 Debt securities – – – – 326 603 326 603 Receivables and other financial assets E 28 1 – – 22 14 50 15 Cash and cash equivalents – – – – 47 19 47 19 Total 722 781 1 3 504 636 1,227 1,420
The amount of debt securities expected to be recovered or settled after more than 12 months is £231m (2019: £266m). The amount of loans to subsidiaries expected to be recovered or settled after more than 12 months is £100m (2019: £nil).
Fair value liabilities £m £m £m £m £m £m Cash flow hedges 549 – 6 566 3 – Foreign exchange forwards 79 1 – 74 – – Derivative financial instruments 628 1 6 640 3 –
The derivative liability of £6m (2019: derivative asset of £3m) is expected to be settled after more than 12 months.
On 18 October 2017, the Company issued subordinated notes with a principal amount of US $750m. In order to manage the foreign exchange risk relating to the principal and coupons payable on these notes the Company entered into a cross-currency swap which is designated as a hedge of future cash flows.
The maturity profile of the contractual undiscounted cash flows in relation to derivative financial instruments is as follows: Within 1 year 11-15 years Total
Cash outflows – Cash flow hedges (18) (18) (73) (73) (614) (632) – – (705) (723) Foreign exchange forwards (61) (56) – – – – – – (61) (56) Total (79) (74) (73) (73) (614) (632) – – (766) (779) Net derivative financial instruments cash flows 6 7 20 23 (7) 18 – – 19 48 217Standard Life Aberdeen 2020
Receivables and other financial assets of £43m (2019: £15m) are expected to be recovered within 12 months.
H. 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) and, prior to SLA issuing its closure instructions to the Trustees on 13 December 2019, the Standard Life Unclaimed Asset Trust (UAT). The SLA EBT was established on 28 March 2019. Further details of these trusts are provided in Note 27 of the Group financial statements.
F. Other assets Other assets of £14m in 2019 comprised amounts due from related parties which were expected to be recovered within 12 months.
I. Retained earnings Details of the dividends paid on the ordinary shares by the Company are provided in Note 14 of the Group financial statements. Note 14 also includes information regarding the final dividend proposed by the Directors for the year ended 31 December 2020.
Capital redemption reserve Cash flow hedges Total 2020 £m £m £m £m £m £m At 1 January 2,412 53 115 1,037 4 3,621 Fair value losses on cash flow hedges – – – – (3) (3) Realised losses on cash flow hedges transferred to income statement – – – – 13 13 Share buyback – – – 21 – 21 Reserves credit for employee share-based payments – 64 – – – 64 Transfer to retained earnings for vested employee share-based payments – (38) – – – (38) Transfer between reserves on impairment of investment in subsidiaries (1,834) – – – – (1,834) Tax effect of items that may be reclassified subsequently to profit or loss – – – – (2) (2) At 31 December 578 79 115 1,058 12 1,842
Subordinated liabilities are considered current if the contractual re-pricing or maturity dates are within one year. 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.
M. Deferred tax assets and liabilities 2020 2019 £m £m Deferred tax assets 77 35
The deferred tax assets recognised are in respect of unused tax losses arising in the year and unrealised losses on cash flow hedges. The deferred tax assets are recognised to the extent that it is probable that the losses will be capable of being offset against future taxable profits.
Outstanding purchase of investment securities 6 – Amounts due to related parties 47 2 Collateral held in respect of derivative contracts 7 13 Outstanding contractual obligation for share buyback 40 – Other 10 10 Other financial liabilities 110 25
Other financial liabilities of £110m (2019: £25m) are expected to be settled within 12 months.
O. Provisions and other liabilities Of Provisions of £68m (2019: £77m), £58m are expected to be settled within 12 months (2019: £48m). The provisions in 2020 and 2019 relate to separation costs. Refer Note 37 of the Group financial statements for further information and details of the provisions.
P. Contingent liabilities, contingent assets, indemnities and guarantees (a) Legal proceedings and regulations The Company, like other financial organisations, is subject to legal proceedings and complaints in the normal course of its business. All such material matters are periodically reassessed, with the assistance of external professional advisers where appropriate, to determine the likelihood of the Company incurring a liability. Where it is concluded that it is more likely than not that a material outflow will be made a provision is established based on management’s best estimate of the amount that will be payable. In some cases it will not be possible to form a view, for example because the facts are unclear or because further time is needed to properly investigate, and no provisions are held for such matters. It is not possible to predict with certainty the extent and timing of the financial impact of legal proceedings, complaints and related regulatory matters. (b) Indemnities and guarantees Under the trust deed in respect of the UK Standard Life 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 in relation to this plan. In addition the Company has guaranteed similar obligations in respect of certain other subsidiaries’ UK and Ireland defined benefit pension plans.
R. Events after the reporting date On 23 February 2021, the Group announced a simplification and extension of the strategic partnership between the Group and Phoenix. Further information is given in Note 47 of the Group financial statements.
9.2 Alternative performance measures We assess our performance using a variety of measures that are not defined under IFRS and are therefore termed alternative performance measures (APMs). The APMs that we use may not be directly comparable with similarly named measures used by other companies. We have presented below reconciliations from these APMs to the most appropriate measure prepared in accordance with IFRS. All APMs should be read together with the IFRS consolidated income statement, IFRS consolidated statement of financial position and IFRS consolidated statement of cash flows, which are presented in the Group financial statements section of this report. Ratios are presented in Section 9.4.
Metric used for executive remuneration in 2020. See pages 79 and 84 for more information.
• Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts
Further details are included in Note 13 of the Group financial statements. Fee based revenue is a component of adjusted profit and includes revenue we generate from asset management charges (AMCs), platform charges and other transactional charges. Fee based revenue is shown net of fees, costs of sale, commissions and similar charges. Refer to Note 4 of the Group financial statements.
R Metric used for executive remuneration in 2020. See pages 78 and 83 for more information.
This measure aims to show how adjusted profit contributes to regulatory capital, and therefore provides insight into our ability to generate capital that is deployed to support value for shareholders.
The purpose of this measure is to demonstrate how much cash and invested assets we hold and can be readily accessed.
KPI R 1,425 214 1,949 21 – – 3,609 Total income Adjusted operating expenses (1,206) (214) (1,500) – – – (2,920) Total expenses Capital management 21 – – (21) – – – N/A Share of associates’ and joint ventures’ profit before tax 247 – (81) – (17) – 149
Adjusted profit before tax from continuing operations 487 – 368 – (17) – 838 Profit before tax Tax on adjusted profit (38) – 53 – – – 15 Total tax expense Share of associates’ and joint ventures’ tax (38) – – – 38 – – N/A Adjusted profit after tax from continuing operations 411 – 421 – 21 – 853
Adjusted profit before tax from continuing operations 584 – (333) – (8) – 243 Profit before tax Tax on adjusted profit (69) – 41 – – – (28) Total tax expense Share of associates’ and joint ventures’ tax (46) – – – 46 – – N/A Adjusted profit after tax from continuing operations 469 – (292) – 38 – 215
This reconciliation includes a number of reconciling items which arise due to presentation differences between IFRS reporting requirements and the determination of fee based revenue and adjusted operating expenses. Fee based revenue and adjusted operating expenses exclude items which have an equal and opposite effect on IFRS income and IFRS expenses in the consolidated income statement. This particularly relates to income and expenses of unit linked funds, where investment returns are for the account of policyholders. Investment return from unit linked business in 2020 was £49m (2019: £392m). Other presentation differences also include commission and other cost of sales expenses which are presented in expenses in the consolidated income statement but are netted against fee based revenue in the analysis of Group adjusted profit by segment.
The table below provides a summarised reconciliation of adjusted profit before tax (split by continuing operations, discontinued operations and Total) to Profit before tax: Continuing operations Discontinued operations Total 2020 2019 2018 2020 2019 2018 2020 2019 2018 £m £m £m £m £m £m £m £m £m
Share of associates’ and joint ventures’ tax expense (17) (8) (40) –
Analysis of adjusting items The table below provides detail of the adjusting items made in the calculation of adjusted profit before tax: Continuing operations Discontinued operations Total 2020 2019 2018 2020 2019 2018 2020 2019 2018 £m £m £m £m £m £m £m £m £m
Restructuring and corporate transaction expenses (355) (407) (239) – – (264) (355) (407) (503) Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts (1,287) (1,844) (1,155) – – – (1,287) (1,844) (1,155) Profit on disposal of subsidiaries – – – – – 1,780 – – 1,780 Profit on disposal of interests in associates 1,858 1,542 185 – – – 1,858 1,542 185 (Loss on)/reversal of impairment of associates and joint ventures (45) 243 (228) – – – (45) 243 (228) Change in fair value of significant listed investments 65 – – – – – 65 – – Investment return variances and economic assumption changes 46 (25) 54 – – (41) 46 (25) 13 Other 86 158 (14) (15) 56 44 71 214 30 Total adjusting items 368 (333) (1,397) (15) 56 1,519 353 (277) 122
An explanation for why individual items are excluded from adjusted profit is set out below: • Restructuring and corporate transaction expenses are excluded from adjusted profit. Restructuring includes the impact of major regulatory change. By highlighting and excluding these costs we aim to give shareholders a fuller understanding of the performance of the business. Restructuring and corporate transaction expenses include costs relating to the integration of businesses acquired. Other restructuring costs excluded from adjusted profit relate to projects which have a significant impact on the way the Group operates. Costs are only excluded from adjusted profit where they are outwith business as usual activities and the costs would not have been incurred had the restructuring project not taken place. For headcount related costs, where duplicate posts are identified as a result of an integration or transformation plan, the duplicated cost will be treated as a restructuring cost from the beginning of the process which eliminates the duplicate cost. The 2020 expenses included costs relating to integration and implementing our simplified operating model of £79m (2019: £214m), £112m (2019: £37m) in respect of Phoenix separation costs, and £69m (2019: £41m) of other transformation related restructuring costs. 2020 also included £39m (2019: £33m) relating to our share of the restructuring costs of joint ventures and associates (primarily Phoenix). 2019 also included £49m relating to the repurchase of subordinated debt and £20m variable compensation expense related to the receipt of £140m LBG compensation.
• Investment return variances and economic assumption changes in the Group’s associate and joint venture insurance entities are excluded from adjusted profit. 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. Details of the Phoenix policy are included in Note 13 of the Group financial statements.
• Details on items classified as ‘Other’ in the table on the previous page are provided in Note 13 of the Group financial statements. In 2020 this includes £66m relating to our share of Phoenix gains relating to the acquisition of ReAssure and the completion of the Part VII transfer of the Legal and General mature savings business. Also included is the gain on disposal of SL Asia of £8m.
The table below provides a breakdown for the calculation of our share of adjusted profit before tax from Phoenix of £163m which is included in the Insurance associates and joint ventures reportable segment total of £203m. Phoenix use an operating profit alternative performance measure which is before finance costs, while the Group’s adjusted profit is after deducting finance costs.
Adjusted profit after tax 411 469 Remove staff pension scheme returns (20) (29) Remove associates’ and joint ventures’ adjusted profit after tax (209) (200)
Staff pension scheme returns Staff pension scheme returns are the contribution to adjusted profit before tax from defined benefit pension schemes which are in surplus and reconciled below: Total income recognised in the consolidated income statement per Note 34 (c) of the Group financial statements 19 40 Past service costs (included in adjusting items) – (13) Remove IFRS charge relating to schemes in deficit 1 2 225Standard Life Aberdeen 2020
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 1.7 226 Standard Life Aberdeen 2020
Cash and liquid resources 2.5 2.7 1 Excludes £54m (2019: £78m) relating to seeding, see Note 38 (b).
9.3 Surplus regulatory capital The £2.3bn indicative capital surplus below includes a deduction to allow for the proposed final dividend which will be paid in May 2021.
At 31 December 2020, the indicative regulatory capital position was as follows: The Group’s capital resources include c£0.8bn (2019: c£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 (IFPR) from 1 January 2022. The IFPR 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 c£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 current minimum capital requirement from 1 January 2022.
This ratio is used by management to assess efficiency and reported to the Board and executive leadership team. This ratio is also a measure used to assess performance for remuneration purposes. For 2020, we changed the KPI basis for the cost/income ratio to exclude the share of associates’ and joint ventures’ profit before tax. This change better links revenue to expenses.
Details on the calculation of adjusted diluted earnings per share are set out in Note 12 of the Group financial statements.
Fee revenue yield is now presented on a vector basis reflecting changes in our strategy. This includes changes in the allocation of fee based revenue, a reconciliation is provided in Section 9.4.3.
Adviser 61.5 59.3 137 150 22.3 25.3 Personal2 12.6 10.6 80 70 58.5 59.2 Parmenion 7.3 6.2 25 21 34.2 34.8 Eliminations (10.2) (10.1) N/A N/A N/A N/A Fee revenue yield2 511.0 563.5 1,388 1,585 26.9 27.9 SL Asia 7 12 Performance fees 30 37 Fee based revenue 1,425 1,634
Analysis of Institutional and Wholesale by asset class3 Average AUM (£bn) Fee based revenue (£m) Fee revenue yield (bps)
Fee based revenue (net of cost of sales) 61.5 59.3 137 150 22.3 25.3 Add: Other cost of sales – Note 4 (a) N/A N/A 27 26 N/A N/A Fee based revenue (gross of cost of sales) 61.5 59.3 164 176 26.7 29.6 1 Fee revenue yield is now presented on a vector basis and 2019 comparatives have been restated on this basis. See Section 9.4.3 for more information. 2 Institutional and Wholesale fee revenue yield excludes revenue of £9m (2019: £6m) and Personal fee revenue yield excludes revenue of £7m (2019: £7m), for which there are no attributable assets. 3 Excludes revenue of £9m (2019: £6m), for which there are no attributable assets. 4 Alternatives average AUM includes c£12bn (2019: c£7bn) of lower margin advisory mandates. At 31 December 2020 the closing AUM of these mandates was c£12bn.
% of AUM ahead of benchmark1 2020 2019 2020 2019 2020 2019
AUM is a measure of the total assets that we manage on behalf of individual and institutional clients. AUM also includes captive assets managed on behalf of the Group including assets managed for corporate purposes.
AuAdv is a measure of the total assets we advise our clients on, for which there is an ongoing charge.
Net flows are now presented on a vector basis and 2019 comparatives have been restated on this basis.
Capital and Advice businesses. This double count is also removed within Eliminations. 3 Personal market and other movements include 1825 opening assets under advice of £4.0bn. 4 Corporate actions in Wholesale relate to the acquisition of Orion Partners (£0.7bn). Personal corporate actions include £1.8bn of assets under advice following 1825’s acquisition of Grant Thornton’s wealth advisory business and BDO Northern Ireland’s wealth management business.
Adviser 62.6 6.3 (4.4) 1.9 2.5 – 67.0 Personal2 12.8 1.1 (1.1) – 0.5 – 13.3 Parmenion 6.9 1.5 (0.5) 1.0 0.2 – 8.1 Eliminations2 (10.2) (2.0) 2.6 0.6 (1.1) – (10.7) Total AUMA 544.6 74.3 (103.3) (29.0) 19.0 – 534.6
Adviser 0.5 0.3 0.4 0.7 0.6 Personal (0.1) – 0.2 (0.1) 0.1 Parmenion 0.2 0.2 0.3 0.3 0.3 Eliminations 0.2 0.2 – 0.2 – Total net flows (0.8) (3.4) 3.4 (28.2) (7.5)
Wholesale Insurance Personal2 Total £bn £bn £bn £bn £bn £bn £bn £bn
Total AUM 251.7 205.2 7.8 464.7 236.7 235.8 7.1 479.6 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 Excludes assets under advice of £5.5bn at 31 December 2020 (2019: £5.7bn).
– 6.9 – 6.9 Parmenion Eliminations (10.2) – – (10.2) Eliminations Total AUMA 544.6 – – 544.6 Total AUMA
Contents 11. Shareholder information .............................................................................................................................................238 12. Forward‑looking statements .......................................................................................................................................239 13. Contact us ...................................................................................................................................................................IBC
11. Shareholder information .............................................................................................................................................238 12. Forward‑looking statements .......................................................................................................................................239 13. Contact us ...................................................................................................................................................................IBC
• Impairment loss/reversal of impairment loss recognised on investments in associates and joint ventures accounted for using the equity method
Dividends payable on preference shares classified as noncontrolling 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. Coupons payable on perpetual debt instruments classified as equity for which interest is accrued are included in adjusted profit before tax.
Cost/income ratio This is an efficiency measure that is calculated as adjusted operating expenses divided by fee based revenue. The measure may also be disclosed on a basis that includes the share of associates’ and joint ventures’ profit before tax.
Effective tax rate Tax expense/(credit) attributable to equity holders’ profit divided by profit before tax attributable to equity holders’ profits expressed as a percentage.
Executive leadership team Responsible for providing overall leadership of the business and comprises: Chief Executive Officer; Chief Financial Officer; CEO Aberdeen Standard Capital; CEO Aberdeen Standard Investments Asia Pacific; CEO Adviser Platforms; Chief HR Officer; Chief Investment Officer; Chief Brand, Marketing and Corporate Affairs Officer; Chief Risk Officer; General Counsel; Global Chief Operating Officer; Global Head of Aberdeen Standard Investments; Global Head of Product and Client Solutions; Global Head of Strategic Partnerships; Head of Americas and Head of EMEA and UK.
Fee based revenue Fee based revenue is a component of adjusted profit and includes revenue we generate from asset management charges (AMCs), platform charges and other transactional charges. AMCs are earned on products such as mutual funds, and are calculated as a percentage fee based on the assets held. Investment risk on these products rests principally with the client, with our major indirect exposure to rising or falling markets coming from higher or lower AMCs. Fee based revenue is shown net of fees, costs of sale, commissions and similar charges. Costs of sale include revenue from fund platforms which is passed to the product provider.
Adjusted profit 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.
Adjusted profit also excludes impacts arising from investment return variances and economic assumption changes in the Group’s associate and joint venture insurance entities where they have a policy for determining investment return variances and economic assumption changes. This currently applies only to the Group’s investment in Phoenix.
ICAAP Internal Capital Adequacy Assessment Process. The ICAAP is the means by which the Group assesses the level of capital that adequately supports all of the relevant current and future risks in its business.
Investment performance Investment performance has been aggregated using a money weighted average of our assets under management which are outperforming their respective benchmark. Calculations for investment performance are made gross of fees with the exception of those for which the stated comparator is net of fees. Benchmarks differ by fund and are defined in each fund’s Investment Management Agreement (for example, the benchmark for our GARS unit trust fund is six-month GBP LIBOR). The investment performance calculation covers all funds that aim to outperform a benchmark, with certain assets excluded where this measure of performance is not appropriate or expected, such as private markets, execution only mandates and Aberdeen Standard Capital, as well as replication tracker funds which aim to perform in line with a given index. Investment performance is calculated as if Standard Life Group and Aberdeen had always been merged.
Net flows Net flows represent gross inflows less gross outflows or redemptions. Gross inflows are new funds from clients. Gross outflows or redemptions is the money withdrawn by clients during the period.
Pillar 1 Under CRD IV, 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.
Platform An investment platform (e.g. Wrap or Elevate) which is essentially a trading platform enabling investment funds, pensions, direct equity holdings and some life assurance contracts to be held in the same administrative account rather than as separate holdings.
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Shareholder services We offer a wide range of shareholder services. For more information, please: • Contact our registrar, Link, who manage this service for us. Their details can be found on the inside back cover.
• Voting instructions for the Annual General Meeting will be sent to you electronically
Set up a share portal account Having a share portal account means you can: • Manage your account at a time that suits you • Download your documents when you need them
Aberdeen Share Account – which had 994,615 participants holding 665,021,873 shares.
By their nature, all forward-looking statements involve risk and uncertainty because they are based on information available at the time they are made, including current expectations and assumptions, and relate to future events and/or depend on circumstances which may be or are beyond the Group’s control, including among other things: the direct and indirect impacts and implications of the coronavirus COVID-19 on the economy, nationally and internationally, and on the Group, its operations and prospects; UK domestic and global political, economic and business conditions (such as the UK’s exit from the EU); market related risks such as fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the impact of inflation and deflation; the impact of competition; the timing, impact and other uncertainties associated with future acquisitions, disposals or combinations undertaken by the Company or its affiliates and/or within relevant industries; the value of and earnings from the Group’s strategic investments and ongoing commercial relationships; default by counterparties; information technology or data security breaches (including the Group being subject to cyberattacks); operational information technology risks, including the Group’s operations being highly dependent on its information technology systems (both internal and outsourced); natural or man-made catastrophic events (including the impact of the coronavirus COVID-19); climate change and a transition to a low-carbon economy (including the risk that the Group may not achieve its targets); exposure to third party risks including as a result of outsourcing; the failure to attract or retain necessary key personnel; the policies and actions of regulatory authorities (including changes in response to the coronavirus COVID-19 and its impact on the economy); and the impact of changes in capital, solvency or accounting standards, and tax and other legislation and regulations (including changes to the regulatory capital requirements that the Group is subject to or changes in connection with the coronavirus COVID-19) in the jurisdictions in which the Company and its affiliates operate. As a result, the Group’s actual future financial condition, performance and results may differ materially from the plans, goals, objectives and expectations set forth in the forward-looking statements.