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The Annual report and accounts 2015 is published on the Group’s website at www.standardlife.com/annualreport
Access to the website is available outside the UK, where comparable information may be different.
Our Annual report and accounts is also available on our Investor App for the iPad.
Financial information 100 7. Independent auditors’ report – Group financial statements 8. Group financial statements 109 9. Independent auditors’ report –
Company financial statements 10. Company financial statements 239 11. Supplementary information 261
Other information 266 12. Reports from the Committees of Standard Life Assurance Limited 14. Shareholder information 276
‘Sustainable growth comes from knowing how to adapt to change in a way that’s responsible and creates the best potential to deliver value for customers, clients and shareholders.’
Sir Gerry Grimstone Chairman We are a far simpler company than the one I became Chairman of in 2007, and I’m pleased that we’ve been able to stick to a consistent strategy that has stood the test of time. We made good progress in 2015. The completion of the sale of our Canadian business changed our shape, replacing David Nish with Keith Skeoch changed our leadership, the bedding in of the Ignis acquisition and the continued success of our asset management business changed our scale, and the new pension freedoms in the UK changed radically the market landscape. Our governance culture, founded on our strong sense of responsibility, persisted throughout all this and is a large factor in our continued success.
We are pushing on with regulatory approvals to increase our stake in HDFC Life in India to 35 per cent. We see this as a precursor to the business having a successful IPO which should be one of the largest-ever Indian equity capital market transactions. In China, together with our partner TEDA, we are working on how to bring our Hong Kong and China businesses into much closer alignment and also how best to enter the China pensions market. We hope our strategic partnerships in India and China will add disproportionately to shareholder value in the years to come.
Our Board and Management Our management and Board have had to evolve as the shape and nature of our company has changed. In August, Keith Skeoch became our new Chief Executive, succeeding David Nish. David did a great job repositioning Standard Life, both making us fit for purpose and also overseeing the sale of our Canadian businesses and the acquisition of Ignis. In appointing Keith as Chief Executive, the Board felt very strongly that he was the right person to take Standard Life forward in its new configuration. He has a deep understanding of the world’s investment markets and built Standard Life Investments into the powerhouse it is today. The task set for him by the Board is to replicate that success throughout our businesses, not least through close co-operation and collaboration across the different parts of the business to create ‘one company, one culture, one vision’.
Crawford Gillies, our Senior Independent Director, steps down in May. Crawford has been with us for nine years serving with distinction throughout that time not least as Chairman of the Remuneration Committee, Chairman of the Standard Life Charitable Trust, and our Senior 2 Standard Life
Using our voice There are other things that I believe are central to our continued success including a strong reputation for thought leadership. It’s important to use our voice to drive improvements within our industry, including improving transparency on how companies like ours make money, pay taxes and mitigate their impact on the environment, particularly when governments and regulators are contemplating changes in laws and regulations that might affect us, our clients and customers. We try to be clear, forthright and constructive.
Global financial markets have started 2016 in poor shape but, because of our investment expertise and the innovative solutions that we provide, this gives us opportunities to serve our clients as well. All of our achievements in 2015 were made possible thanks to our talented people and their dedication to keep trying to do the right thing and, of course, the support of our shareholders. My thanks go to everyone once again for their continued support.
1.1 Chief Executive’s overview 6 1.2 Our business 8 1.3 Chief Financial Officer’s overview 14 1.4 Business performance 19 1.4.1 Standard Life Investments 20 1.4.2 UK and Europe 24 1.4.3 India and China 28 1.4.4 Discontinued operations 30 1.5 Risk management 31 1.7 Basis of preparation 43
Almost two thirds of the assets we look after relate to our growth channels and have been attracted to Standard Life by our investment performance as well as our innovative products and the quality of our platforms and propositions. Our ‘mature books’ are valuable and well capitalised under Solvency II and provide capital that can act as a ‘shock absorber’ during periods of market turmoil, reinforcing our financial strength. We increasingly see ourselves as an investment company because investment is not only at the heart of what we do, it’s also at the heart of what our customers and clients need. Our progress in 2015 was also marked by the fact that our global asset manager, Standard Life Investments, became the largest fee-generating part of the business.
While we have simplified our business, we also believe that the growth we have generated is sustainable because its sources are well diversified by geography, customer and client, as well as by asset class. We now have clients and customers in 46 countries around the world.
Subject to receiving regulatory approval we intend to increase our stake in HDFC Life to 35% and we currently have a 40%
I was also very pleased to see our sustainability credentials validated once more in the annual independent surveys from Dow Jones (Dow Jones Sustainability Indices World and Europe) and FTSE4Good.
The UK business also faced some very challenging situations as a result of the radical pension changes that came into force in April 2015. However, our teams worked very hard to help customers understand the options available to them. I am pleased to report that 90% of those customers that had the opportunity to withdraw their entire pension have remained invested with Standard Life.
2015 saw volatility return to global financial markets, but also demonstrated that Standard Life has strengths across the broad range of institutional, wholesale, employer and retail channels. Throughout, we have sought to use our influence in capital markets to act in the best long-term interests of our clients and customers and, importantly, promote greater responsibility by asset managers and owners.
This focus will help us deliver value for our shareholders and opportunity for our people, who I would like to thank, once again, for their support and dedication to our business.
The breadth of our investment propositions underpinned by strong investment performance and innovation, combined with our strength in pensions and savings and the power of a trusted brand, means that we have a welldiversified and resilient business that will remain strategically focused on driving growth and returns to shareholders.
Our simple business model Standard Life has a simple and consistent business model that we have successfully operated to deliver value for shareholders. It has served us well during demutualisation, during the transformation of our business and we believe it continues to be fit for purpose as we build a world-class investment company. The way we seek to generate value is equally simple, coming from two main avenues. We aim to drive increased assets and revenue from growth channels across our business. These areas are growing strongly and include Standard Life Investments Institutional and Wholesale, and Workplace and Retail in the UK pensions and savings business. At the same time, our established ‘mature’ books of business – eg older retail business – provide us with a strong foundation and make an important contribution to our revenue.
Investment at the heart of our business Investment is at the heart of what we do because it’s at the heart of what our customers and clients need. They are looking for a good return on the investments they make with their savings to: 4 Build their wealth 4 Deliver income in retirement 4 Achieve a combination of both these things
Standard Life Investments, which includes Ignis Asset Management, looks after the assets of clients in 46 countries around the world.
We offer our solutions and expertise to: 4 Institutional clients, including corporations, pension schemes and sovereign wealth funds. We sell direct or via financial intermediaries.
4 Wholesale clients, including fund supermarkets, global financial institutions and private banks
Our associate business, HDFC Asset Management, is the largest private sector asset manager in India.
We offer our products and services via two broad channels: 4 Workplace: pensions, savings and flexible benefits to employees through their employers 4 Retail: our relationship is either directly with the client, or with their financial adviser
We also own businesses that specialise in financial advice, employee benefits, and risk and compliance services.
We also have associate and joint venture businesses offering insurance and savings products to customers in India and China. HDFC Life is one of the leading life insurance companies in India. They offer a range of individual and group insurance products, for example protection, pensions, and savings. They have over 20 million client accounts serviced across a network of 414 offices and over 8,000 partner branches covering 980 towns across India.
In Hong Kong, we offer insurance and savings products and services under the Standard Life brand.
Standard Life Wealth. We announce Standard Life Investments as Worldwide Partner of golf's Ryder Cup tournaments in 2014 and 2016.
We launch joint ventures in India (HDFC Life) and China (HASL).
Where we operate In building a world-class investment company we aim to reach more clients in markets around the globe. We do this through a combination of regional hubs, where we have a large physical presence, offices in key financial centres, and partnerships with other companies that have well established operations in parts of the world that are strategically important to us.
Associates and joint ventures: HDFC Life and HDFC Asset Management in Mumbai and Heng An Standard Life in Tianjin
Managing our risks effectively The nature of a large part of what we do – investing in world markets – means we need to be sure that we are managing our risks effectively. Effective and pre-emptive risk management, over both the short and long term, is essential for the continued success of our strategic development to create a world-class investment company. We operate a robust risk management framework, underpinned by a set of processes that helps us manage our short and long term risks. Good governance goes hand-in-hand with risk management, so that it’s easy to see what informs our business decisions. Effective governance helps us be more transparent and accountable to our stakeholders.
Read more about how we manage risk in Section 1.5, and governance in Section 4
A sustainable business model Our simple business model takes advantage of four major long term trends/factors that are shaping the savings and investment landscape around the world.
Innovation, technology and digitalisation: Technology continues to enable scalability and drive efficiency, helping to reduce the cost of guidance and advice. This improves access to assets for clients and also increases the importance of client relationships, product innovation as well as service and brand in creating a sustainable competitive advantage.
A positive impact on wider society 4 Our total tax contribution in 2015 was £1,059m, of which £944m related to the UK. You can read more about this on page 18.
4 Promoting employability and social mobility: using our people’s knowledge and expertise to encourage other organisations to create jobs 4 Using our influence as an investor to encourage ethical thinking and practices in other organisations
Optimising our balance sheet 4 Continued focus on risk management 4 Further optimisation of our Solvency II balance sheet 4 Focus on growing ‘capital-lite’ fee based business 4 Be seen as financially strong by our stakeholders
Maximising revenue 4 Focus on increased collaboration across our business 4 Leverage our strong strategic positions in the UK 4 Build on our global distribution capability 4 Increase our stake in HDFC Life
Sponsoring world-class excellence Sponsorship helps us bring our brands to a wider audience. When selecting who to partner with, we look for common ground and shared values, with teamwork and a commitment to excellence front of mind. Our current sponsorships with The Ryder Cup, Andy Murray and our recently-announced British & Irish Lions partnership all embody those shared values.
Teamwork - Our success is built on the strength and unity of our people. Our team-based approach encourages us to share ideas across asset classes, business areas and worldwide locations.
Client focus - We aspire to being an essential partner to every client and, supported by a growing range of innovative investment capabilities, we will always act in their best long-term interests.
Power & performance - The performance of our business is driven by a powerful breadth and depth of global investment capabilities.
Increasing assets Group assets under administration and net flows Group AUA increased by 4% to £307.4bn driven by strong net flows in our fee business and favourable market movements. Fee based AUA account for over 90% of total Group AUA.
Maximising revenue Fee based revenue Fee based revenue increased by 10% to £1,579m driven by strong performance in our UK pensions and savings business and Standard Life Investments third party growth channels. The contribution from Ignis increased by £33m (2015: £106m, 2014: £73m) due to the inclusion of a full year’s result.
2 The mandate to manage the Phoenix Group assets was included as part of the acquisition of Ignis and was therefore not part of net flows and fee based revenue prior to the acquisition in July 2014.
Further information on AUA and net flows is included in Supplementary information in Section 11
Lowering unit costs Operating expenses increased by 8% to £1,124m (2014: £1,045m) reflecting further investment in expanding the global reach of Standard Life Investments, including a full year of expenses in relation to Ignis (2015: £60m, 2014: £37m), acquired in 2014. Whilst we invest to enhance our propositions and capabilities, we have also demonstrated our scalability with operating expenses expressed as a proportion of average AUA decreasing to 40bps.
Group operating profit before tax increased by 9% to £665m (2014: £608m), driven mainly by strong fee revenue performance in our growth channels. This was tempered by a combination of expected challenging conditions impacting spread/risk margin in the UK business due to the current low yield environment, and the 2014 Budget changes to annuities.
Our share of profit from associates and JVs also contributed to the growth in operating profit. This includes continued strong performance by HDFC Life and HDFC Asset Management in India and continued progress from Heng An Standard Life in China.
Group underlying cash generation Group underlying cash generation aligns closely with how the business is managed and demonstrates our ability to generate cash that supports further investment in the business and the payment of dividends to our shareholders.
Group underlying cash generation increased to £447m due to higher Group underlying performance. The change in mix of profits towards our growth channels contributes to higher current tax on underlying performance.
Movement in Group underlying performance and operating profit from continuing operations £665m £117m (£56m)
Reconciliation of Group underlying cash generation £m Group underlying performance from continuing operations 630 565
Exclude share of associates and JVs’ profit before tax (56) (39)
Group operating return on equity, which includes discontinued operations, decreased to 14.2%1 (2014: 14.9%) as a result of a higher tax charge and the impact of the low interest rate environment on the returns earned on the net retained proceeds from the disposal of the Canadian business. We intend to invest c£175m of the net retained proceeds to increase our stake in HDFC Life.
Group capital surplus Up to 31 December 2015 the Group capital surplus was measured in accordance with the Insurance Group Directive (IGD).
On 1 January 2016, the Solvency II regulatory regime came into force for insurers across Europe. Under Solvency II, every insurer is required to identify its key risks – e.g. that equity markets fall – and hold sufficient capital to withstand adverse outcomes from those risks. The capital required to withstand these outcomes is the Solvency II ‘Solvency capital requirement’, or SCR. The SCR is calibrated so that the likelihood of a loss exceeding the SCR is less than 0.5% over one year. This ensures that capital is sufficient to withstand broadly a ‘1 in 200 year event’. The capital resources available to meet the requirements are called ‘Own funds’. Own funds differ materially from IFRS equity for a number of reasons, including the different treatment of certain items, such as pension scheme surpluses and most intangibles, and a different approach for calculating actuarial liabilities.
Capital generated by the business was offset by the payment of the 2014 final dividend of £224m in May 2015 and the 2015 interim dividend of £119m in October 2015.
Solvency II The Group is well capitalised under these new rules with Group Solvency II capital surplus of £2.1bn representing a Group solvency cover of 162%.
Subject to regulatory approval, we intend to increase our stake in HDFC Life in India by 9% to 35% (at a cost of approximately £175m). This would be paid from existing Standard Life plc cash and liquid resources.
This section covers further financial highlights which help to explain the Group financial performance.
Total IFRS profit, including discontinued operations, increased to £1,423m (2014: £503m) and included the £1,102m gain on sale of the Canadian business. IFRS profit from continuing operations decreased to £276m (2014: £376m) due to an increased non-operating loss of £257m (2014: £157m). The nonoperating loss consists of:  Short-term fluctuations in investment return and economic assumption changes which generated a loss of £63m (2014: gain £17m) mainly due to adverse UK economic variances driven by market movements on assets backing subordinated liabilities
 Restructuring and corporate transaction expenses of £115m (2014: £109m), which included £35m for staff pension scheme restructuring, £27m for the integration of Ignis, and other business unit restructuring programmes
Other3 profit from continuing operations comprises the share of associates and JV tax of £13m (2014: £5m) and Dubai and Singapore IFRS loss before tax of £42m (2014: loss £28m) which mainly relates to expenses for the closure of the Singapore business.
Standard Life plc cash and liquid resources £m £m Opening 1 January 657 907 Canada net retained proceeds 460 - Dividends received from subsidiaries 355 613 Cash dividends paid to shareholders (343) (386) Cash investments in subsidiaries (44) (431) Cash investments in associates and JVs (3) (14) Other (21) (32)
1 Liquid resources include uncashed cheque payments relating to dividends and return of value of £49m (2014: £27m).
The effective tax rate increased from 10% in 2014 to 19% in 2015, due to the above factors. There are a number of one-off items affecting both years but over time we would expect the effective tax rate on profit attributable to equity holders (excluding one-off items in any given year) to remain broadly in line with the UK corporation tax rate.
Tax policy Within the Group’s enterprise risk management framework, the Group has a tax policy which supports the delivery of the Group’s business objectives. The Group pro-actively manages tax risks and employs an experienced in-house tax team to oversee the tax affairs of the Group who report the Group's tax position and material tax issues to the Audit Committee.
Dividends Dividend policy Standard Life plc has a progressive dividend policy. The objective of the policy is to grow the annual dividend from the prior year pence per share payment. Our intention is to grow the dividend at a rate that is sustainable over the longterm.
The 2014 final dividend and 2015 interim dividends were paid on the lower adjusted number of ordinary shares following the share consolidation. The 2015 final dividend and future dividends will also be paid on this basis.
Visit www.standardlife.com/annualreport for details of the key principles underlying our tax policy 18 Standard Life
‘Increased profitability has been driven by strong revenue growth and ongoing management of costs. We are also continuing to see the benefits of our expanding distribution capabilities with £8.4bn of net inflows1 from outside the UK.’
Overview Standard Life Investments is a leading active asset manager with total AUM of £253.2bn (2014: £245.9bn), representing over 80% of Group AUA.
 Wholesale: selling funds and solutions to retail investors through wholesale distributors and platforms
We have developed our investment capabilities across a range of asset classes, including equities, fixed income, real estate and private equity. We also provide innovative investment solutions, such as high quality multi-asset and liability aware investments, including our absolute return strategies, and our wealth proposition available through Standard Life Wealth.
Our distinctive ‘Focus on Change’ investment philosophy lies at the heart of our wide range of investment funds and solutions. As active managers, we place significant emphasis on rigorous research and a strong team ethos. This, combined with disciplined risk management and shared commitment to a culture of investment excellence, is fundamental to helping our clients look forward to their future with confidence.
Sustainable global growth A multi-speed world remains in place at the start of 2016, with recessions and slower growth in some areas, especially emerging markets, offset by continued strength in others, especially in the US and Europe. Good cost control and lower commodity prices have allowed many companies to maintain profit levels, but weak financial markets at the start of the year reflect worries about earnings downgrades ahead. In this environment, selective allocation to risk markets and yield opportunities remains an appropriate strategy. In the UK, regulatory change impacting pensions presents ongoing opportunities for us to provide solutions to meet client needs, particularly for our multi-asset suite of products and MyFolio risk based funds.
We recognise that corporate governance along with responsible stewardship of a business’ capital, employees, customers and environment has a fundamental impact on long-term investment returns. Our commitment to socially responsible investing was reflected in Standard Life Investments being voted as the leading UK asset management firm in this area at the Extel 2015 Awards.
We remain well positioned to deliver profitable growth. We have a strong pipeline of new investment funds and solutions which positions us well to continue to meet the changing demands of our clients through new and innovative investment solutions. Despite net outflows again in 2015, Ignis remains of strategic importance and value to us. The integration of the business is on track and we expect to achieve £50m of annual cost savings by 2017.
Our focus on delivering consistently strong investment performance and strengthening relationships with our strategic partners continues.
We are one of the five largest asset managers in the UK and one of the largest active managers in institutional and wholesale markets. We are also ranked as one of the 501 largest asset managers globally by AUM. Strong investment performance Growth in AUM to £253.2bn (2014: £245.9bn) was underpinned by excellent money weighted average investment performance. 90% of third party2 funds were ahead of benchmark over five years, with 95% ahead over three years and 88% over one year (2014: five years 88%, three years 98%, one year 69%).
Our equity funds performed strongly with 94% of funds ahead of benchmark at three years (one year 89%, five years 78%). Fixed income funds also continued to perform strongly with 84% of funds ahead of benchmark at three years (one year 63%, five years 91%). 100% of our suite of multi-asset funds has outperformed their cash benchmark over three and five years (one year 99%). Growth in third party net flows Strong third party net inflows of £10.3bn (2014: £1.7bn), largely in our growth business channels of institutional and wholesale, were impacted by the disinvestment of a £1.7bn low revenue margin mandate within Ignis third party2. Excluding Ignis, net inflows for third party2 increased 113% to £12.8bn (2014: £6.0bn). This result reflects the diverse nature of our product offering, our expanding global distribution capability and the increasingly international nature of our client base. Strategic partner life business In our mature business channels, overall strategic partner life business net outflows increased to £6.8bn (2014: £4.0bn). This was largely due to net outflows of £4.8bn from the assets managed on behalf of Phoenix Group, which included a £1.4bn one-off outflow. Net outflows from Standard Life Group reduced slightly to £2.0bn (2014: £2.4bn).
Operating profit before tax increased 33% to £342m (2014: £257m). Key drivers included strong fee revenue growth, contribution of £46m (2014: £36m) from Ignis which was acquired on 1 July 2014 and increased share of profit before tax for HDFC AMC, our associate business in India, due to increased AUM in 2015.
We are controlling our cost base as our business grows, capitalising on economies of scale across Standard Life Investments and the wider Group.
A further impairment charge of £5m (2014: £43m) has been made on the acquired Ignis intangible assets due to continued third party outflows. Ongoing management of costs, combined with improved revenue margins, has resulted in an 18% compound annual growth in EBITDA over the last 10 years.
1 Source: P&I Research Centre data for 2014 closing AUM. 2 Excluding strategic partner life business.
Awards and recognition Our dedication to meeting clients’ financial needs resulted in us winning a number of industry awards, including:  Four Lipper Awards for Best Equity House for Austria, Switzerland, Netherlands and Hong Kong
 UK Equity Income Unconstrained Fund won the UK Core Equity category at the Institutional Investor Awards and the UK Equity Income category at the Investment Adviser 100 Club Awards
 Best Targeted Absolute Return Fund Provider – Investment Life & Pensions Moneyfacts Awards
 Best Fixed Income Manager – Annual Chief Investment Officer Innovation Awards 2015
Total net inflows increased to £3.5bn (2014: £2.3bn outflows) reflecting our expanding distribution footprint.
Third party1 By channel: Institutional – increasingly global Our increasingly global institutional business saw net inflows of £3.3bn (2014: £0.8bn). Our pipeline of institutional business continues to see fixed income, real estate and multi-asset propositions attract interest.
Wholesale - new record We continued to perform well with record net inflows of £9.3bn (2014: £5.2bn). Net inflows into MyFolio, equities, fixed income and multi-asset strategies remain particularly strong.
Ignis Ignis, which is mostly institutional in nature, saw net outflows of £2.5bn, following the disinvestment of £1.7bn from one large low revenue margin mandate. The Absolute Return Government Bond Fund net outflows have reduced to £0.5bn in 2015 following the £2.6bn net outflow in 2014.
By geography2: Continued strong net inflows in North America of £3.0bn (2014: £1.5bn) contributed to AUM reaching £11.7bn (2014: £8.1bn). European net inflows increased by 162% to £3.4bn (2014: £1.3bn). We began to see increasing success in Asia Pacific, with net inflows of £1.2bn (2014: £0.4bn). In India, our share of HDFC AMC net inflows were good at £0.8bn (2014: £0.9bn). Our domestic UK business also performed strongly with net inflows of £4.4bn (2014: £1.9bn).
Total strategic partner life business (6.8) (4.0) 122.7 128.4 1 Excluding strategic partner life business. 2 ‘By asset class’ and ‘By geography’ commentary excludes Ignis which is reported separately. Full information on AUM and flows can be found in the Supplementary information in Section 11.
‘We remain focused on meeting the needs of our customers in an evolving regulatory and economic environment. With marketleading solutions, great people and the effective use of technology we offer individual customers, advisers, employee benefit consultants and employers the choices and support necessary to meet their long-term savings objectives.’
Overview Our UK and Europe business is a leading provider of long-term pensions, savings and investment propositions to workplace and retail customers. We remain focused on being customers’ first choice for their life savings and aim to achieve this by providing engaging, digital-led solutions which can adapt to customers’ needs over their lifetimes.
AUA for our UK and Europe business has grown to £150.2bn (2014: £145.9bn). Within this, our market-leading workplace pensions now look after 1.7m customers with AUA of £33.0bn (2014: £32.0bn).
Our close collaboration with Standard Life Investments allows us to engage with customers across the value chain, providing benefit to our customers, our business and Standard Life as a whole. Over 85% of the MyFolio funds relate to assets distributed and administered by our UK and Europe business.
Our drawdown propositions and our award-winning Wrap platform support advisers and provide customers with the quality and choice to make the most of their retirement. Whilst the new regulations give customers greater control and flexibility, with increased choice comes complexity. We anticipate a significant increase in demand for financial advice and in response to this are building our own financial advice business under the brand 1825 – the year Standard Life was founded.
In January 2016, the Government announced that the Financial Conduct Authority would have the power to cap excessive exit charges for those eligible for pension freedoms. Less than 7% of our customers have a potential exit charge, with the average exit charge less than 1% of their fund value.
In the July 2015 UK Budget, the Chancellor announced a Green Paper consultation on pension tax relief. We have engaged constructively in the debate to help ensure that any changes to tax relief balances the short-term fiscal savings with the long-term need to ensure that UK citizens are incentivised to save for retirement.
The challenges arising from a prolonged low interest rate environment have been felt in a number of European jurisdictions. In Germany, we believe the level of guarantees typically provided by insurers have become unsustainable. Our German with profits business closed to new business in the year with the focus firmly on unit linked business where we have seen net inflows double in 2015.
Workplace AUA in our UK workplace growth channel increased 3% to £33.0bn benefiting from net inflows of £1.9bn (2014: £2.2bn). Whilst we have seen reduced net inflows from large scheme transfers as employers adapt to new pension regulations, we are benefiting from growing contributions into our existing schemes which provide a steady long term source of growth.
UK retail Net inflows of £3.9bn (2014: £2.9bn) into our UK retail growth channel were driven by a 27% increase in gross inflows to £7.5bn (2014: £5.9bn).
Our Wrap1 platform continues to lead the UK advised platform market2 with AUA increasing 22% to £25.5bn (2014: £20.9bn). In 2015 we have added 123 new firms and now have 1,463 firms using our Wrap platform.
Fee based revenue UK fee based revenue increased £12m to £631m benefiting from higher AUA as a result of favourable market movements and workplace and retail net inflows. Average fee revenue yield reduced to 59bps (2014: 62bps) reflecting the impact of changes in business mix including a growing proportion of newer style propositions, the impact of the price cap on qualifying workplace pension schemes and an £11m reduction in revenue earned on client cash balances.
 Our online Good to Go proposition meets the needs of smaller employers efficiently: processing schemes on the same day as application and has secured nearly 4,000 schemes to date
UK and Europe operating profit before tax reduced by 8% to £357m, with underlying performance decreasing by 7% to £322m.
Awards and recognition The Aberdeen UK Platform Awards 2015:  Wrap awarded Platform of the year  Best Platform with assets over £12.5bn as voted for by advisers  Best Platform for Adviser Service as voted for by advisers  Best use of Platform Technology alongside FNZ
Overview Our India and China segment consists of our life associate in India, our life joint venture in China and our wholly owned business in Hong Kong.
Also, the long awaited increase in foreign investment limits in insurance companies should provide an additional source of capital to help fund the growth prospects for the industry.
Continued development in China and Hong Kong In China, our joint venture, Heng An Standard Life, continues to build a sustainable and profitable business by offering a range of insurance and savings products to a growing customer base.
In 2015, Heng An Standard Life has seen continued growth in sales and profitability. We will continue to develop our future business strategy in Mainland China and Hong Kong by exploring opportunities which could be beneficial to both Heng An Standard Life and to our Hong Kong business.
In Hong Kong, a changing regulatory and market environment has made growing AUA and flows challenging. However, we are continuing to evolve our propositions to meet the needs of the growing affluent and wealth segments both in Hong Kong and from mainland Chinese visitors.
Operating profit before tax 27 23 Share of associates’ and joint ventures’ tax expense (2) 2 Non operating loss including impairment of DAC and related reserving changes in Hong Kong (47) - IFRS (loss) / profit before tax (22) 25
The growth in AUA was driven by continued positive net inflows in our associate and joint venture businesses of £230m (2014: £193m) with HDFC Life maintaining its market-leading position within the Indian private market. Heng An Standard Life’s AUA has grown by around 30% over the last 2 years and the business now services over 5 million customers.
In Hong Kong, net inflows decreased to £63m (2014: £68m). New single premium propositions are under development to drive asset growth in the new market landscape.
Operating profit before tax increased to £27m (2014: £23m) mainly driven by an increase in our associate and joint venture businesses’ profit to £25m (2014: £18m) as they benefit from continued growth in premium income.
HDFC Life continues to maintain one of the lowest operating expense ratios among its peer group while continuing to invest in technology, training and product innovation.
Operating return on equity for the India and China segment decreased to 9.9% (2014: 11.8%) reflecting higher opening shareholder net assets and an increased tax charge.
Note: Results are presented on the basis of Standard Life ownership percentages during 2015 and do not include the 40% share in HDFC AMC which is included in the results for Standard Life Investments. Hong Kong ownership is 100%, HDFC Life is 26% and Heng An Standard Life is 50%.
For segmental reporting the discontinued operations segment includes results for Dubai and Singapore. Singapore made an operating loss before tax of £2m (2014: loss £4m) and a £40m nonoperating loss (2014: £2m) relating to closure costs. The Dubai business closed at the start of 2015 and therefore made an operating loss before tax of £nil (2014: loss £5m). Non operating losses for Dubai were £nil (2014: loss £17m).
The consistent application of risk management processes has underpinned our further successful delivery over 2015 as we completed the sale of our Canadian operations further simplifying our business, integrated Ignis into our investment business and responded to changes in the external environment, for example the new pensions freedoms in our UK market.
In May 2015 we were very pleased that the strength of our approach to risk management was externally recognised when Standard & Poor’s upgraded their assessment of our Enterprise Risk Management (ERM) framework to ‘strong’.
Our principal risks and uncertainties The broad categories of risk that are faced by the Group, which include Strategic, Operational, Conduct and Financial have not changed over the year and we expect these to stay broadly consistent over time.
Viability statement The Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the next three years. The Directors’ assessment takes into account the Group’s current position (in particular the Capital and Liquidity position as described in Section 1.3) and the principal risks as described in this section.
Reverse stress testing which gives a qualitative understanding of plausible but severe risk scenarios which could threaten the viability of the Group, and informs related management actions. The scenarios assessed are based on the principal risks and include a cyber-attack, a critical infrastructure breakdown, major regulatory changes and a major shock to financial markets.
 Risk culture: The way we think and act as individuals and as a Group. It encompasses our attitudes, capabilities and behaviours.
 Risk and capital models: The models that we use to measure our risk exposures and capital position and the work that we do to test and understand the sensitivity of these positions
 Our appetite for these risks and how we manage them  Our own assessment of current solvency and capital requirements with respect to the risks  A forward-looking assessment of the risk and solvency needs of the company over a multi-year time horizon in light of the business plans
The ORSA plays a key role in supporting decision making and strategy development at our boards and risk committees.
 Third line: Independent verification of the adequacy and effectiveness of the internal risk and control management systems is provided by the Group internal audit function. This is subject to supervision and challenge from the Audit Committee.
STRATEGIC RISK Risks which threaten the achievement of the strategy through poor strategic decision-making, implementation or response to changing circumstances. The Group recognises that core strategic activity brings with it exposure to strategic risk. However, the Group seeks to proactively manage and control these exposures.
These decisions could be specific to our industry, such as the recent consultation on pension tax relief or broader initiatives such as the planned referendum on the UK’s membership of the EU and the devolution and application of tax and spending powers within the UK.
 Ongoing regulatory compliance is governed via our Group Policy Framework
 We maintain strong and open relationships with our regulators and engage early with areas of potential regulatory change
Delivering our business plan requires us to attract and retain customers and clients across all our key channels in both our insurance and investment businesses. We are therefore exposed to the risk that our propositions do not keep pace with emerging customer preferences or fail to meet the needs and expectations of customers.
During 2015 we continued to invest to develop our propositions. Examples include the launch of our new advice business 1825 and the enhancements to our propositions to enable customers to take full advantage of pension freedoms.
 New proposition developments start from the customer or client need
 We regularly seek customer feedback on our performance and use focus groups to help develop new propositions
CONDUCT RISK The risk that through our behaviours, strategies, decisions and actions the firm, or individuals within the firm, do not do the right thing and/or do not behave in a manner which:  Pays due regard to treating our customers and clients fairly  Is consistent with our disclosures and setting of customer and client expectations  Supports the integrity of financial markets
The Group recognises that its core strategic activity brings with it exposure to conduct risk which must be understood and managed. However, there is no appetite for purposeful or deliberate actions (behaviours/decisions) which result in conduct risk.
We are exposed to the risk of unfair customer and client outcomes as a result of our business not acting in the right way. This arises from a number of sources including failed or poorly designed processes, badly designed or performing propositions, poor customer communications or conduct by colleagues.
The standards that we aspire to internally, as well as those expected of us by regulators and third parties are consistently being raised. However higher standards and the regulatory focus on conduct means that the risk of failing to meet these is higher which leads to our assessment that this risk is increasing.
 Our Group Code of Conduct sets out the standards required by colleagues. This was revised and re-launched in early 2015.
 Strong oversight and challenge is provided within our business by our Conduct and Compliance risk centre
OPERATIONAL RISK Risk of loss or adverse consequences for the business resulting from inadequate or failed internal processes, people or systems, or from external events. The Group has limited appetite for large operational losses due to the related reputational damage and opportunity costs. The Group will seek to manage existing operational risk exposures and proactively control new exposures.
Our business relies on a wide range of IT systems to function and our strategy requires greater use of online functionality to meet customer preferences, improve efficiency and manage costs.
 We are continuously investing in and modernising our IT infrastructure via our EvolveIT programme
 IT failure and security is considered as part of our stress and scenario testing programme and emerging risk process
 We maintain appropriate business continuity and contingency plans which are regularly reviewed 34 Standard Life
These types of partnerships allow us to access specialist services and skills, and enable our business to run more efficiently and cost effectively.
 Outsourcing risks form part of our stress and scenario testing programme which help us to understand the impact of their failure and how we would continue to operate under such circumstances
It is essential that we are able to attract and retain people with the skills and capabilities that we need to deliver our business plans across all of our businesses.
 We maintain succession plans for key individuals which are regularly reviewed
 Our Emerging Leaders Development Support and Accelerated Development Support programmes help to build our talent pipeline
FINANCIAL MARKET AND CREDIT RISKS Risk of losses due to risks inherent in financial markets. The Group has appetite for market risk exposures where exposures arise as a consequence of core strategic activity. We have an appetite for credit risk to the extent that acceptance of this risk optimises the group risk adjusted return.
As we continue our strategic development to create a world-class investment company this risk becomes more important as the contribution of spread business reduces and we become more focused on fee based revenue.
 We use hedging to manage market risks in our with profits funds
Across the Group in both our insurance and investment businesses we use a number of credit and reinsurance counterparties to implement our business strategy.
This exposes our business to losses should one of our counterparties fail to perform its financial obligations to us, including failure to perform these obligations in a timely manner.
 Our credit risk management policy sets out the standards that are required
 Where appropriate, counterparties are collateralised and internal credit assessments are used
This risk arises from the annuity policies that we have sold in our insurance business.
We are exposed to the risk that policyholders live longer than expected and this causes a loss.
As a direct result of the pension freedoms changes that were introduced in 2015 we now expect this risk to decrease over time as we do not expect volumes of new annuity sales to offset existing business running off.
Our sustainability strategy helps us to identify opportunities and manage risks, inside and outside of our business. Our aim is to make a meaningful contribution to the futures of our people, clients and wider society.
We provide jobs – both directly as an employer and indirectly through our charitable programmes. For us, work must provide more than just fair pay. Areas like skills, training and career progression make work more meaningful and sustainable. Sustainable work can also enable more savings behaviour.
As an investor, we have a dual responsibility to meet clients’ investment aims and, at the same time, consider the impact our investments have on the environment and wider society.
Sustainability at Board level As part of the Chairman’s regular update to the Board, internal and external ESG issues are highlighted. Non-financial measures, which monitor progress against our sustainability strategy, are also discussed on at least a quarterly basis.
During the year, the Board considered long-term trends in our sector and wider society that may affect our business. Young people from our school leaver programme and the UK charity Tomorrow’s People, who focus on youth employment, attended a Board session to share their experiences of working life and what they want as clients themselves.
UK Modern Slavery Act We welcome the legislation to protect those at risk of what’s known as modernday slavery, for example forced labour and human trafficking. We are working to make sure we are ready for the new Act and its objectives.
Volunteering Encouraging our people to volunteer in their community has been part of our culture and heritage for many years. During 2015 we launched our new volunteering policy to raise awareness of the increase in paid leave available for volunteering – this increased from two to three days. Our people donated 661 days for volunteering work in 2015 (2014: 331 days).
Managing our environmental impact When it comes to minimising our impact on the environment, our main areas of focus are on the most material aspects for our business: energy use in our buildings and business travel (air and rail). We use 100% renewable electricity in our UK-owned and operated offices.
We’re a global business, so international travel to meet clients and partners is a necessary part of our operations. We’re currently reviewing ways that we can continue to reduce these types of emissions.
2. Employment We want to provide inclusive employment. We help to remove barriers to employment, encouraging meaningful jobs paid at a living wage. We aim to develop our people to reach their full potential and create an environment that supports healthy bodies and minds.
Our people and diversity Diversity and inclusion have been a key focus of our activities in 2015.
Total 725 923 884 (18.0%) (4%) 1 Scope 1 emissions include gas (and F gas from 2014). 2 Scope 2 emissions include electricity. 3 Scope 3 emissions include business travel and transmission and distribution losses for electricity. 4 Based on a full-time equivalent (FTE) employee figure which includes contingent FTE. 5 vs 2013 baseline.
We welcome the proposed UK legislation for gender transparency on pay and are working to make sure we’re ready for the changes.
To help support working families, we introduced enhanced maternity, adoption and parental leave policies in 2015.
We took part in the global corporate challenge healthy living initiative for the fourth year in a row, ranking in their global top 20 (out of 1,200 companies that took part). We have also promoted positive mental health through signing up to the Time for Change pledge. As part of this we have provided mental health manager training, raised awareness and organised events.
In 2015, 79% of our employees completed our group engagement survey – InterAction. The survey measures two dimensions – how engaged our people are and the extent to which they feel they are enabled to do their job. The responses gave us a clear update on how our people feel about a range of topics. The results pointed to some areas where we are strong: clarity on our strategy, doing the right thing for customers, and our ability to influence and raise standards in our industry.
Working communities One of the foundations for healthy communities is job creation. Providing the right environment, with access to skills and onthe -job experience, can turn jobs into careers. We have reinforced our commitment to the UK Living Wage by becoming the first private-sector company to become a UK Living Wage Friendly Funder. Living Wage Friendly Funders help charities they have funding relationships with to pay the Living Wage for any grantfunded posts. In Ireland we also pay our people at least the Irish Living Wage.
We have continued our work with the Edinburgh Guarantee – a partnership between Edinburgh City Council and Edinburgh’s business community. In 2015, 18 young people joined us for paid six-month work experiences in Edinburgh, and we provided a similar scheme for two young people in London. 98% of those who have been through these work placement programmes have moved on to full time employment or further education. Across our employment programmes we have provided 35 direct jobs in total.
3. Pensions and savings We want to help people manage their money and save for their future. By understanding their needs, we use our skills and knowledge to educate, inform and, importantly, develop the right products and services.
Client insight We use insight from a variety of research to help us understand the emerging asset management trends and resulting impact on investor needs in order to better shape products and services.
More saving in the workplace Around 5.2 million more people in the UK are now saving into a pension through their employer, since the UK government introduced the automatic enrolment initiative in October 2012.
Around 2,000 new pension schemes set up with us in 2015 were from small to medium sized businesses. Our Good to Go service has helped these businesses to set up their scheme in as little as six minutes.
Pension freedoms in the UK Major changes to how and when people could access their pension savings came into effect in April 2015. We offered the full flexibility to people from the first day the new rules came into effect.
In the first nine months of pension freedoms, 10% of our eligible customers made use of the new regulations, 90% have not accessed their pension. For the 10% who did access their pension, we helped them to understand the impact of their decisions and the risks involved. We received a record number of calls at the time the freedoms came into effect. The length of these conversations is much longer than normal, but we feel that it is the right thing to be thorough to help ensure our customers make informed decisions.
We received 7,516 complaints in 2015 compared to 6,156 in 2014; this represents 18 complaints per 10,000 active customer policies. The increase was largely driven by this significant spike in customer demand. Root cause analysis from these complaints has led to a number of enhancements to the customer retirement journey.
Heng An Standard Life – our joint venture business in China – runs a free knowledge sharing service aimed at current and potential new customers. It’s called Cultural Forum, and during 2015 they held lectures from experts on various subjects such as health, education and investment, which were well attended. They’re looking to run more interactive sessions including free health checks and information about different products in 2016, all with the aim of helping to meet the needs of society.
In Ireland, we ran two public events inviting people to come together and talk about the challenges that people thinking about retirement might face. This included financial planning as well as topics like health and wellbeing.
4. Investment By considering environmental, social and governance (ESG) issues we contribute to a better financial future for our clients and a sustainable world.
Standard Life Investments was one of the sponsors of Good Money Week – a UK campaign that raises awareness of sustainable, responsible and ethical finance.
Stewardship and responsible investment As stewards of our clients’ investments we act responsibly in our investment activities. Standard Life Investments is a signatory and strong supporter of the principles of good stewardship that are set out in the UK Stewardship Code. We believe that corporate stewardship and the ways in which companies manage ESG issues are significant components of investment risk and have a fundamental impact on the achievement of sustainable long-term investment returns. We therefore have dedicated teams who work collaboratively across Standard Life Investments to integrate ESG factors into our investment process
We again ranked in the KPMG Nunwood survey of top 100 brands in the UK.
and into mandates which have tailored responsible investment or ethical criteria.
Our Responsible Investment team carries out research, analysis and engagement work on social and environmental issues affecting our clients' investments. We believe that companies concerned about the longterm interests of their shareholders should manage relationships with employees, suppliers and customers, and consider the long-term impact of their actions on the environment and society as a whole.
Research and insight During the year, we published reports on current responsible investment topics, including the UK Living Wage, Modern Slavery Act and the Rise of the Millennials. The aim of these is to highlight possible risks and areas of concern amongst companies, as well as promote discussion on these topics.
Real estate investment We are committed to environmental management in all phases of a property’s life cycle – from acquisition through demolition, redevelopment and operational management to selling it on. We focus on energy conservation, limiting GHG emissions, maximising waste recycling and water conservation.
Green investment In 2015, we invested in Transport for London’s £400m green bond. The bond raises capital to invest in projects that will help Transport for London address a wide range of infrastructure and environmental issues like energy and climate resilience, air quality and pollution prevention.
Our measurement and assurance We have reviewed our annual nonfinancial measures to make sure they are relevant to our four priority areas: responsible business, employment, pensions and savings, and investment.
Our performance measures are independently assured each year by PricewaterhouseCoopers (PwC):  Total employee days volunteered  Carbon footprint  Total people directly employed through employability programmes  InterAction employee survey results  Gender diversity of the talent pipeline  Gender diversity of senior management  Total customer complaints  Annual movement in the Brand Net
All non-GAAP measures should be read together with the Group’s 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.
Going concern The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in this Strategic report. This includes details on our liquidity and capital management in Section 1.3 and our key risks in Section 1.5. In addition, the Group financial statements section includes notes on the Group’s subordinated liabilities (Note 36) management of its risks including market, credit and liquidity risk (Note 41), its contingent liabilities and commitments (Notes 45 and 46), and its capital structure and position (Note 49).
The Group continues to meet Group and individual entity capital requirements, and day-to-day liquidity needs through the Group’s available credit facilities. The Company has a revolving credit facility of £400 million as part of our contingency funding plans and this is due to mature in 2020. The Group has considerable financial resources together with a diversified business model, with a spread of business and geographical reach. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully.
The Directors have a reasonable expectation that the Company, and the Group as a whole, have adequate resources to continue in operational existence for the foreseeable future. For this reason, they consider it appropriate to adopt the going concern basis of accounting in preparing these financial statements and have not identified any material uncertainties to the Company’s ability to continue to do so over a period of at least 12 months from the date of approval of these financial statements.
IFRS reporting The financial results are prepared on an IFRS basis. All EU-listed companies are required to prepare consolidated financial statements using IFRS issued by the International Accounting Standards Board (IASB) as endorsed by the EU. The IFRS financial results in the Strategic report and in the Group financial statements have been prepared on the basis of the IFRS accounting policies as disclosed in the Group financial statements section of this report.
Group operating profit The 2015 reconciliation of consolidated operating profit to IFRS profit for the year, presented on page 111 of this report, presents profit before tax expense attributable to equity holders adjusted for non-operating items. Further details on the calculation of Group operating profit is presented in Note 14. By presenting our results in this way, the Directors believe they are presenting a more meaningful indication of the underlying business performance of the Group. Group operating profit has not been audited by our independent auditors.
Forward-looking statements This document may contain ‘forwardlooking statements’ about certain of the Standard Life Group’s current plans, goals and expectations relating to future financial conditions, performance, results, strategy and objectives. Statements containing the words: ‘believes’, ‘intends’, ‘targets’, ‘estimates’, ‘expects’, ‘plans’, ‘seeks’ and ‘anticipates’ and any other words of similar meaning are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which may be beyond the Group’s control. As a result, the Group’s actual financial condition, performance and results may differ materially from the plans, goals and expectations set out in the forward-looking statements, and persons receiving this document should not place undue reliance on forwardlooking statements. The Standard Life Group undertakes no obligation to update any of the forward-looking statements in this document or any other forward-looking statements it may make.
Luke was appointed Director and Chief Financial Officer in August 2014. He has been a Director for 1.5 years.
Background Sir Gerry is senior independent director and deputy chairman of Barclays PLC. He has continued in his role as an independent, public interest, non-executive board member of Deloitte LLP and as the lead non-executive at the Ministry of Defence. He is an adviser to the board of the Abu Dhabi Commercial Bank. He is a member of the advisory councils of both the UK-India Business Council and the China-Britain Business Council. Previously, he held senior positions within the Department of Health and Social Security and HM Treasury and with Schroders plc in London, Hong Kong and New York. He was vice chairman of Schroders’ worldwide investment banking activities from 1998 to 1999.
He holds an MA and MSc from the University of Oxford
He holds a BA from the University of Sussex and an MA from the University of Warwick. He is a Fellow of the Chartered Institute for Securities and Investment and a Fellow of the Society of Business Economists.
Luke was previously director of finance and operations at Lloyd’s of London. In addition, he held senior finance roles at Deutsche Bank (UK), Morgan Stanley & Company (UK) and Lloyds Bank plc. He is a member of the governing body of Queen Mary University of London.
He holds an Electrical and Electronic Engineering degree (BEng), from the University of London. He is a Member of the Institute of Chartered Accountants in England and Wales.
Board of Directors as at 19 February 2016 Our business is managed by our Board of Directors. Biographical details of the Directors as at 19 February 2016 are listed below.
Paul joined Standard Life in 1989, working in a variety of roles before becoming UK Chief Executive in June 2011 and gaining responsibility for Europe in 2012. His senior management roles have included UK Take to Market Director, Managing Director of UK Distribution, and Head of IFA Sales.
Paul started work straight from school, initially balancing his work with a rugby career, captaining the England U19’s before a serious injury ended his sporting ambitions. Before joining Standard Life, Paul held a variety of sales and investments roles with National Mutual Life from 1979 to 1989.
He holds a Law degree from the University of Edinburgh and an MBA from Harvard Business School. He is a Member of the Institute of Chartered Accountants in England and Wales.
Melanie is also a non-executive director of The Weir Group PLC where she chairs the remuneration committee and is a member of the audit and nomination committees. She is a non-executive director of Drax Group plc, where she serves as a member of the audit, nominations and remuneration committees. Melanie was appointed a managing director of Lazard and Co. Limited in 2008 and became a senior adviser in 2012. Previously, she held various roles with UBS, having been appointed a managing director in 1999 and served as a senior relationship director from 2006 to 2008.
Committee memberships 4Remuneration 4Risk and Capital 4Nomination and Governance 4Remuneration 48 Standard Life
Martin was appointed Director in September 2013. He has been a Director for 2.5 years.
Lynne was appointed Director in April 2012. She has been a Director for 4 years.
Lynne is a non-executive director of Scottish Water, where she chairs its audit committee. She is a nonexecutive director of Nationwide Building Society and chairs its remuneration committee. She is also a member of its audit, risk and nomination committees. Lynne joined National Australia Bank Limited in 2003 and, from 2004 to 2011, she was chief executive officer, UK (Clydesdale Bank plc and Yorkshire Bank). Previously, Lynne was with Woolwich plc from 1983 to 2003, finishing her career there as chief executive officer.
Kevin was appointed Director in October 2014. He has been a Director for 1.5 years.
Background Isabel is a non-executive director of BT Group plc, where she chairs the pensions committee and the BT Equality of Access board and sits on the nominating and governance committee. She also chairs the National House Building Council and is a non-executive director of Phoenix Group Holdings, where she is a member of the remuneration and audit committees. She was previously executive director at Prudential UK and chief financial officer of Eureko BV.
Kevin is a non-executive director of Intermediate Capital Group plc (ICG) and Daily Mail and General Trust plc. At both companies he chairs the audit committee and is a member of the risk committee. At ICG he is the senior independent director and has been announced as the chairman designate. He is chairman of the Homes and Communities Agency and deputy chairman of the Royal National Children’s Foundation.
He was formerly a director and the CFO of Schroders plc; chief executive of Management Consulting Group PLC; and a managing partner at KPMG.
3. Directors’ report The Directors present their annual report on the affairs of the Standard Life group of companies (the Group), together with the audited International Financial Reporting Standards (IFRS) consolidated financial statements for the Group, financial information for the Group and financial statements for Standard Life plc (the Company) for the year ended 31 December 2015.
The main trends and factors likely to affect the future development, performance and position of the Group are outlined in the Chief Executive’s overview section of the Strategic report. Reviews of the operating and financial performance of the Group for the year ended 31 December 2015 are given in the Strategic report.
This report was prepared by the Company’s executive team together with the Board and forms part of the management report.
The total payment is estimated at £243m for the final dividend and together with the interim dividend of 6.02p per share totalling £119m paid on 20 October 2015, the total dividend for 2015 will be 18.36p per share (2014: 17.03p) totalling £362m (2014: £358m). The 2014 final dividend and 2015 interim dividends were paid on the lower adjusted number of ordinary shares following the share consolidation. The 2015 final dividend and future dividends will also be paid on this basis.
A dividend of 73 pence was declared on each C Share issued and became payable on 20 March 2015. The relevant C Shares were automatically reclassified as Deferred Shares (having negligible value and carrying extremely limited rights) and the Company executed (on behalf of all holders of such Deferred Shares) a transfer of all such shares to the Company for the aggregate consideration of one penny. In view of the negligible amount of the aggregate consideration for the Deferred Shares, shareholders were not entitled to have any part of the aggregate consideration paid to them.
The B Shares were redeemed on 20 March 2015 for 73 pence per B Share. All B Shares were redeemed and cancelled.
As at 31 December 2015, there were 1,969,937,375 ordinary shares in issue held by 104,670 registered members. The Standard Life Share Account (the Company-sponsored nominee) held 746,258,569 of those shares on behalf of 1,074,753 participants. No person has any special rights of control over the Company’s share capital and all issued shares are fully paid.
The Trustees of the Standard Life (Employee) Share Plan voted the appropriate shares in accordance with any instructions received from participants in the plan. Details of the Company’s employee share plan can be found in Note 47 to the Group financial statements.
You can also obtain a copy from Companies House or by writing to the Group Company Secretary at our registered address (details of which can be found in the Contact details section). The Articles may only be amended by a special resolution passed by the shareholders.
The Board may decline to register the transfer of:  A share that is not fully paid  A certificated share, unless the instrument of transfer is duly stamped or duly certified and accompanied by the relevant share certificate or other evidence of the right to transfer, is in respect of only one class of share and is in favour of a sole transferee or no more than four joint transferees
The Board may withhold payment of all or part of any dividends or other monies payable in respect of the Company’s shares from a person with a 0.25 per cent interest (as defined in the Articles) if that person has been served with a restriction notice (as defined in the Articles) after failure to provide the Company with information about interests in those shares, which is required under the Companies Act 2006.
Subject to the Companies Act 2006, rights attached to any class of shares may be varied with the written consent of the holders of not less than threequarters in nominal value of the issued shares of that class (excluding any shares held as treasury shares). These rights can also be varied with the sanction of a special resolution passed at a separate general meeting of the holders of those shares. At every separate general meeting (except an adjourned meeting) the quorum shall be two persons holding, or representing by proxy, not less than one third in nominal value of the issued shares of the class (calculated excluding any shares held as treasury shares).
Power to purchase the Company’s own shares At the 2015 Annual General Meeting (AGM), shareholders granted the Directors limited powers to:  Allot ordinary shares in the Company up to a maximum aggregate amount of £79,839,504
 Disapply, up to a maximum total nominal amount of £11,975,925 or 5% of its issued ordinary share capital, shareholders’ pre-emption rights in respect of new ordinary shares issued for cash
 Make market purchases of the Company’s ordinary shares up to a maximum of 195,969,691or 10% of its issued ordinary shares
Significant agreements There are a number of agreements to which the Company or one of its subsidiaries is party that entitle the counterparties to exercise termination or other rights in the event of a change of control of the Company. These agreements are noted in the paragraphs below. Credit Facility – Under a £400m revolving credit facility between the Company and the banks and financial institutions named therein as lenders (Lender) dated 22 May 2015 (the Facility), in the event that (i) any persons or group of persons acting in concert, gain control of the Company or (ii) Standard Life Assurance Limited ceases to be a member of the Group, then any Lender may elect within a prescribed time frame to cancel its outstanding commitment under the Facility and declare its participation in all outstanding loans, together with accrued interest and all amounts accrued immediately due and payable, whereupon the commitment of that Lender under the Facility will be cancelled and all such outstanding amounts will become immediately due and payable. India – Under a shareholders' agreement dated 15 January 2002 (as amended) which is now between Housing Development Finance Corporation Limited (HDFC) and Standard Life (Mauritius Holdings) 2006 Limited (SLMH06), being the relevant Group company which holds the interest in HDFC Standard Life Insurance Company Limited (HDFC Standard Life), upon a change of control of the Company which results in a change of control of SLMH06 (as described in the shareholders' agreement), HDFC potentially has the right to terminate the joint venture and to purchase, or nominate a third party to purchase, SLMH06's shares in HDFC Standard Life for a price determined in accordance with the agreement. India – Under a shareholders' agreement dated 10 June 2003 (as amended) between Standard Life Investments Limited (SLI) and HDFC, pursuant to which the relevant Group company holds its interest in HDFC Asset Management Company Limited (HDFC AMC), upon a change in the ownership structure of SLI that results in the acquisition by a third party, either directly or indirectly, of more than 20% of the issued, subscribed and paid-up capital of SLI, HDFC will have 90 days from the date upon which SLI notifies it in writing of the occurrence of such a change to purchase the relevant Group company’s shares in HDFC AMC at a mutually agreed price.
China – Under a joint venture agreement dated 12 October 2009 (as amended) between the Company and Tianjin TEDA International Holding (Group) Co. Limited (TEDA), pursuant to which the Company holds its interest in Heng An Standard Life Insurance Company Limited (Heng An Standard Life), upon a change of control of the Company, TEDA has the right to terminate the joint venture and to purchase, or nominate a third party to purchase, the Company’s shares in Heng An Standard Life for a price determined in accordance with the agreement.
The Directors are not aware of any agreements with any employee that would provide compensation for loss of office or employment resulting from a takeover bid. The Company also has no agreement with any Director to provide compensation for loss of office or employment resulting from a takeover.
Details of the Directors’ interests in the Company’s ordinary shares, the Standard Life (Employee) Share Plan, the Standard Life Sharesave Plan and the share-based executive long-term incentive plans (LTIPs) are set out in the
Directors’ remuneration report together with details of the executive Directors’ service contracts and non-executive Directors’ appointment letters.
 Service contracts between each executive Director and subsidiary undertakings (Standard Life Employee Services Limited and Standard Life Investments Limited)
The UK Corporate Governance Code recommends that directors of FTSE 350 companies should stand for election every year. In line with this, all our Directors will retire at the AGM on 17 May 2016. Colin Clark, Melanie Gee and Paul Matthews will stand for election and all remaining Directors who wish to continue in office will stand for reelection. As announced, Crawford Gillies will retire from the Board at the conclusion of the 2016 AGM and, therefore, will not stand for re-election.
Standard Life takes pride in the high achieving, diverse and healthy working environment it has created, where all employees are valued, empowered and treated as individuals. We treat those with disabilities fairly in relation to job applications, training, promotion and career development. Adjustments are made to train and enable employees who become disabled whilst working at Standard Life to allow them to continue and progress in their role. In recent years we have seen considerable progress in our gender balance within our talent pipeline particularly in our graduate, emerging leaders and senior high potentials. However we recognise that work remains to be done to improve our gender balance in our senior management. We’re committed as a business to achieving gender balance and being inclusive for all. We’ve launched a curriculum to encourage female talent to develop executive team and board experience and are working with our female employees to focus career conversations on development. In 2015 we established two new employee networks – the Carers’ Network and The Young Persons’ Development Network – and launched the LGBT Allies Group. In addition, we continue to run our LGBT, Armed Forces and Women’s Development Networks. In addition, we’re working with executive search partners who have signed up to providing an equal balance of men and women on shortlists provided. We’ve also strengthened our talent pipeline by ensuring we hire employees from a range of ages. Our recruitment campaigns advertise our flexible approach to working patterns, capturing individuals in the middle years of their careers, and our veteran and “returnship” programmes also support mid and later careers. Through initiatives like the Edinburgh Guarantee Scheme and by offering traineeships and apprenticeships, Standard Life demonstrates it is committed to youth employment. People with multiple years’ service sit side by side with people at the start of their careers.
Having positive employee relations is key to engaging our people and realising our business goals. By informing the business of the views and insights of our people, constructive staff representation will help Standard Life as it seeks to achieve a single strategic direction. There are separate employee representation arrangements across the organisation. In the UK, most employees are represented through partnership agreements with the Group's staff associations, vivo and Bridge. In Ireland, there is an established agreement with Unite, and a works council was established in Germany in 2008.
Sustainability The commercial aims of our business are linked to our environmental, social and governance responsibilities. You can find out more about how we run our business sustainably in the Strategic report, under Section 1.5 and Section 1.6.
Details of our greenhouse gas emissions can be found in Section 1.6 of the Strategic report.
Auditors The Audit Committee is responsible for considering the Group’s external audit arrangements. Resolutions proposing the reappointment of PricewaterhouseCoopers LLP as auditors of the Company and giving authority to the Audit Committee to determine their remuneration will be submitted at the AGM to be held on 17 May 2016.
Disclosure of information to the auditors Each Director confirms that he or she has taken all reasonable steps necessary, in his or her role as a Director, to be made aware of any relevant audit information and to establish that PricewaterhouseCoopers LLP is made aware of that information.
 Presentations and question and answer session – the Chairman and the Chief Executive will review the business and provide an overview of Standard Life’s plans for 2016. After this, there will be an opportunity to ask questions
 Voting – shareholders will be asked to consider and vote on a number of resolutions 54 Standard Life
Publication of unaudited financial information in a class 1 circular or in a prospectus, other than in accordance with Annexes 1 and 2 of the FCA’s Prospectus Rules  Details of long-term incentive schemes  Waiver of emoluments by a director  Waiver of future emoluments by a director  Non pre-emptive issues of equity for cash 
Non pre-emptive issues of equity for cash in relation to major subsidiary undertakings  Parent participation in a placing by a listed subsidiary  Contracts of significance  Provision of services by a controlling shareholder  Shareholder waivers of dividends  Shareholder waivers of future dividends  Agreements with controlling shareholders 
Dear Shareholder It is my pleasure to introduce the 2015 Corporate governance statement and Nomination and Governance Committee report, in line with my responsibility to help ensure effective corporate governance throughout the Group. Your Board adheres to the highest standards of corporate governance and ethical behaviour in directing the Group’s affairs and in its accountability to you as shareholders. As Directors, we believe these commitments are key to understanding and managing our business effectively, providing engaged leadership, and delivering shareholder value over the longer term. Your Board takes the quality of its performance seriously and strives to improve performance through annual reviews and continuing self-assessment. One of our key governance activities during 2015 was Chief Executive succession, and you can read more about the process to appoint Keith Skeoch to succeed David Nish later in this statement.
Membership The members of the Committee are the Chairman and independent nonexecutive directors.
Member Attendance Sir Gerry Grimstone, Chairman 6/6 Pierre Danon 4/4 Crawford Gillies 6/6 Noel Harwerth 4/4
The Committee supports the composition and effectiveness of the Board, oversees the development and implementation of the Group’s governance framework and oversees the Group’s activities to strengthen its talent pipeline at all levels.
In this statement you can read about the Committee’s role in:  Identifying and recommending
Directors to be appointed to the Board, in particular overseeing the process to appoint the new Chief Executive
 Dividend policy  Financial reporting which, during 2015 included the approval of the internal model application and preparation for the introduction of Solvency II
 How risks are managed, including the Enterprise Risk Management (ERM) framework, risk strategy, risk appetite limits and internal controls
The Board regularly reviews reports from the Chief Executive and from the Chief Financial Officer on progress against approved strategies, plans and budgets, as well as updates on stock market and global economic conditions. There are also regular presentations from key business units and corporate centre functions including from the Chief Risk Officer. The Chairman reports at each Board meeting on the activities he has undertaken on behalf of the Board and the Group since the previous meeting.
The Chairman The Chairman:  Leads the Board and ensures that its principles and processes are maintained  Promotes high standards of corporate governance  Together with the Chief Executive and the Company
Secretary, sets agendas for meetings of the Board  Ensures Board members receive accurate, timely and clear information on the Group and its activities  Encourages open debate and constructive discussion and decision making  Leads the Board and individual Director performance assessments and training needs  Speaks on behalf of the Board and represents the Board to shareholders and other stakeholders
The Chief Executive The Chief Executive, within authorities delegated by the Board:  Leads the other executive Directors and the executive team in the day-to-day running of the Group  Develops appropriate capital, corporate, management and succession structures to support the Group’s objectives
 Makes and implements operational decisions  Develops strategic plans and structures for presentation to the Board  Reports to the Board with relevant and timely information  Together with the Chairman, represents the Group to external stakeholders, including shareholders, customers, suppliers, regulatory and governmental authorities, and the local and wider communities.
With regard to Code provision C.3.7, which requires external audit contracts to be put out to tender at least every ten years, and which was introduced with transitional provisions allowing the period for tender to extend to the end of the current engagement partner’s term of appointment, the Company, through the Audit Committee, has commenced a tender process for the appointment of its external auditor. This will be completed by mid-2016, with the chosen firm to be appointed for the financial year 2017 at the earliest. You can read about the tender process in the Audit Committee report in Section 4.2.
You can read the Board Charter on our website at www.standardlife.com/annual report
The Group’s Code of Conduct complements the Board Charter. It sets out our standards of conduct and governing principles for operational excellence, compliance responsibilities, customer service, our people, and other stakeholders.
The Board expects the Group to be a leader in corporate governance activities through its own actions and through its stewardship activities. The Nomination and Governance Committee regularly reviews the Group’s corporate governance framework against relevant generally accepted standards, guidance and best practice, and, as appropriate, recommends to the Board changes to the Board Charter.
 Supports the Chief Executive’s commitment to achieve and maintain a diverse workforce, both throughout the Group, and within his executive team
You can read more about our Directors in their biographies on pages 46 to 49.
Melanie Gee joined the Board on 1 November 2015 as a non-executive Director. She became a member of the Remuneration Committee at the same time. Melanie currently holds other nonexecutive directorships at the Weir Group plc and DRAX plc. She is also a senior adviser to Lazards. Her appointment reflects her strong knowledge of the financial services market and director experience.
Retirements John Paynter retired from the Board as a result of ill health on 28 April 2015 after three years’ service as Senior Independent Director and Chairman of Standard Life Investments (Holdings) Limited. David Grigson retired on 12 May 2015 after five years’ service. As announced, Crawford Gillies will retire at the conclusion of the 2016 AGM having served for nine years.
Board appointment process, terms of service and role Taking account of the Group’s strategy, as well as industry and regulatory developments, the Nomination and Governance Committee evaluates the Board’s balance of skills, diversity, knowledge and experience, in the context of the time served by nonexecutive Directors. The Committee uses the results of its analysis to direct its recruitment activities and appointment recommendations and reviews all recommendations to appoint independent non-executive Directors to the boards of subsidiary companies.
Director election and re-election Since 2011, shareholders have voted annually on whether to re-elect each Director. At the 2016 AGM, all of the current Directors except Crawford Gillies, Melanie Gee, Paul Matthews and Colin Clark will retire and stand for re-election. Melanie, Paul and Colin, having been appointed since the previous AGM, will retire and stand for election. Crawford will retire from the Board following the conclusion of the AGM.
You can read more background information about the Directors including the reasons why the Chairman believes you should support their election or reelection, in our AGM guide 2016, which will be published online at www.standardlife.com from 17 March 2016, and in Section 2 – Board of Directors.
John Paynter served as the Senior Independent Director (SID) until his retirement on 28 April 2015, and Crawford Gillies was appointed as SID on that date. In this role, Crawford supports the Chairman, and often meets with him one-to-one. He is also available to talk with our shareholders about any concerns that they may not have been able to resolve through the channels of Chairman, Chief Executive or Chief Financial Officer, or where a shareholder considers these channels are inappropriate.
The Directors continued to review and authorise Board members’ actual and potential conflicts of interest on a regular and ad hoc basis in line with the authority granted to them in the Company’s articles of association. As part of the process to approve the appointment of a new Director, the Board considers and, where appropriate, authorises his or her potential or actual conflicts. The Board also considers whether any new outside appointment of any current Director creates a potential or actual conflict before, where appropriate, authorising it. All appointments are approved in accordance with the Group’s Outside Appointments and Conflicts of Interest policies.
In January 2016, the Board reviewed all previously authorised potential and actual conflicts of interest of the Directors and their connected persons, and concluded that the authorisations should remain in place until January 2018. Under the terms of the approval, conflicted Directors can be excluded from receiving information, taking part in discussions and making decisions that relate to the potential or actual conflict. The Board and relevant Committees follow this process when appropriate. For example, during 2015, there were instances when Isabel Hudson did not receive information and excused herself from discussions, recognising her role as both a Director of the Company and a Director of Phoenix Group Holdings.
The Board’s policy encourages executive Directors to take up one external nonexecutive director role. Keith Skeoch continued as a non-executive director of the Financial Reporting Council. You can read more about the Directors’ outside appointments in their biographies on pages 46 to 49.
The Committee and the Board discussed the report and agreed recommendations to take forward. These included:  Refreshing the Board’s strategysetting process to ensure it remained fit for purpose
 Reviewing the Group’s organisation and reporting structures following on from the new Chief Executive appointment
 Continuing to discuss succession planning and talent development needs in light of the progressive reshaping of the Group
Progress to implement the recommendations is monitored by the Company Secretary and reported to the Nomination and Governance Committee. Each Board Committee followed a similar questionnaire, reporting and discussion process and reviewed its own results and recommendations in detail.
The feedback was summarised into a report which was reviewed by the SID and distributed to all Board members, except the Chairman. The Directors, led by the SID and without the Chairman being present, met to consider the report. They concluded that the Chairman had performed his role effectively, showed strong leadership of the Board, continued to devote significant time to the Group and continues to have sufficient time to carry out his duties. The SID was responsible for meeting with the Chairman to pass feedback from the review directly to him.
Before these meetings, the Directors assessed their own performance by completing a confidential online questionnaire. Individual development and engagement schedules were prepared to support each meeting. These built on the responses to particular questions and areas of interest and training needs identified by each Director. The meetings were designed to review whether each Director was contributing effectively to the Board and to the Board Committees, and whether they continued to have sufficient time to commit to the role. The meetings also considered individual training, development and engagement opportunities for each Director. The schedules also summarised the internal and external continuing development the non-executive Directors had undertaken during the year and considered the extent to which each non-executive Director had implemented the points raised in the previous year’s review. Each Director takes forward the resulting actions, supported by the Chairman and the Company, using either internal or external resources.
 Meetings with the external auditors and the FCA/PRA supervisory teams
 The Group’s key performance indicators, financial and operational measures and industry terminology
When Directors are appointed to the Board, they make a commitment to broaden their understanding of the Group’s business. Our corporate centre monitors relevant external governance and financial and regulatory developments and keeps the ongoing Board training and information programme up to date. During 2015, specific Board sessions took place on Pensions Freedoms, Solvency II and the IMAP process, and with profits matters. Similarly, the relevant Board Committees received updates on developments in financial reporting, remuneration and corporate governance. Non-executive Directors are actively invited to all parts of the Group’s business in order to familiarise themselves with how our business is conducted and to meet with our people. Succession planning and talent management Chief Executive succession As a result of the ongoing strategy to transform Standard Life, key parts of which included the sale of the Canadian Business and the purchase of Ignis, the Nomination and Governance Committee recognised the need for change and that the next stage of our evolution put a focus on our global investment capabilities. Together with David Nish, the Committee spent time considering the executive leadership and succession planning needed to continue the delivery of this next phase of our strategy. In light of this, the Board and David agreed that the time was right to hand over to his successor and therefore the Nomination and Governance Committee oversaw the process to recruit a new Chief Executive to succeed him. As a first step, the Committee agreed that the skills required of a new Chief Executive included:  A leader who put the well-being of clients and customers at the heart of what we do and appreciated the criticality of organisational culture in developing the business
The Appointments Committee met three times during the process, reviewed the output from each of the above stages, and agreed to recommend to the Board that Keith should be appointed to succeed David Nish as Chief Executive. Regulatory approval was also given, and Keith’s appointment was announced on 19 June 2015.
At its meetings, the Committee discussed the future leadership and talent needs of the Group and how the current programmes would be revised to take account of the skills and expertise required by the Board and senior management. The programmes recognise the changing shape of the Group, and also identify both the talent available within the Group and the need for external recruitment. The programmes are led by the Chief People Officer, with input from the Chief Executive and supported by the Group Talent and Organisation Development team. You can read about them in Section 1.6 of the Strategic report.
 Where the effectiveness review of the processes related to the SoG has 62 Standard Life
 Steps have been taken to identify any relevant audit information that the external auditors should be made aware of
The 2015 AGM was held at the Edinburgh International Conference Centre on 12 May 2015 when Directors were available to answer shareholders’ questions. In accordance with best practice, all resolutions were considered on a poll which was conducted by our registrars and monitored by independent scrutineers. The results, along with proxy votes lodged prior to the meeting, were made available on our website the same day. 45% of the shares in issue were voted and all resolutions were passed.
Our 2016 AGM will be held in London for the first time. To give more shareholders the opportunity to attend, we plan to hold the AGM in Edinburgh and London in alternate years.
Standard Life Investments has made public its processes to comply with the Stewardship Code’s seven best practice principles. In line with Principle 7 of the Stewardship Code, Standard Life Investments obtains appropriate independent assurance over the policies and procedures which underpin its stewardship policy statements. You can read more about this and its governance and stewardship annual review at www.standardlifeinvestments.com
Other information You can find details of the following, as required by Disclosure and Transparency Rule 7.2.6, in the Directors’ report and in the Directors’ remuneration report: Share capital  Significant direct or indirect holdings of the Company’s securities  Confirmation that there are no securities carrying special rights with regard to control of the Company  Confirmation that there are no restrictions on voting rights in normal circumstances  How the Articles can be amended  The powers of the Directors, including when they can issue or buy back shares
The Chairman is not a member of the Audit, Risk and Capital, and Remuneration Committees. He does, however, attend the meetings of all Committees, by invitation, in order to keep abreast of their discussions.
Executive Directors Keith Skeoch 8/8 Luke Savage 8/8 Paul Matthews 1/1 Colin Clark 1/1
Board Committees The Board has established Committees that oversee, consider and make recommendations to the Board on important issues of policy and governance. At each Board meeting, the Committee Chairmen provide reports of the key issues considered at recent Committee meetings, and minutes of Committee meetings are circulated to the appropriate Board members. The Committees operate within specific terms of reference approved by the Board and kept under review by the Nomination and Governance Committee. These terms of reference are published within the Board Charter on our website at www.standardlife.com/annualreport All Board Committees are authorised to engage the services of external advisers at the Company’s expense, whenever they consider this necessary.
 Enhanced our assessment of the quality of the external audit
Our report to you is structured in four parts:  Governance  Report on the year  Internal audit  External audit
Governance Membership All members of the Audit Committee are independent non-executive Directors. Their attendance at Committee meetings was: Member Attendance Kevin Parry, Chairman* 8/8 Noel Harwerth 8/8 Isabel Hudson 7/8 Lynne Peacock 8/8 Martin Pike 5/5
The Board believes members have the necessary range of financial, risk, control and commercial expertise required to provide effective challenge to management. Kevin Parry is a former senior KPMG audit partner, was chief financial officer of Schroders plc and is an experienced audit committee chairman. For the business of the Committee, he is considered by the Board to have competence in accounting and auditing as well as recent and relevant financial experience. The Committee schedules six meetings per annum, four of which are coordinated with external reporting timetables. This year there were two extra meetings focused on Solvency I and II.
Invitations to attend Committee meetings are extended on a regular basis to the Chairman, the Chief Executive, the Chief Financial Officer, the Chief Executive Standard Life Investments, the Chief Executive UK and Europe, the Group Financial Controller and Treasurer, the Chief Internal Auditor and the Group Chief Risk Officer.
The Audit Committee meets privately for part of its meetings and also has regular private meetings separately with the External Auditors, Chief Internal Auditor and Chief Financial Officer. These meetings address the level of cooperation and information exchange and provide an opportunity for participants to raise any concerns directly with the Committee.
 The clarity of the disclosures relating to accounting judgements and estimates
 Internal controls over financial reporting and procedures to prevent money laundering, financial crime, bribery and corruption
 Fulfilled its duties under its terms of reference, and kept its terms of reference up-to-date, recognising that in 2016 its regulatory reporting duties will be expanded to cover Solvency II
The review supported:  A deeper assessment of the work undertaken by Internal and External Auditors in the light of evolving best practice
 An evolution of work to reflect the changing profile of the Group
 Findings from Internal Audit reports and how high priority findings are being followed up by management
 Results of the monitoring of financial crime, fraud risk assessments and calls to our dedicated Speak Up helpline
 Details of non-audit services requested of the External Auditors by business units
 Annual report and accounts 2014  2014 Strategic report and financial highlights  External review of the effectiveness of Internal Audit (GIA)
July to September  Half year results 2015  External Auditors’ review of Half year results  External audit plan for 2015 for all audited entities  2015 external audit engagement letter for all audited entities  Solvency II reporting and asset valuations
The indicative proportion of time spent on the business of the Committee is illustrated below: Detail of work The focus of work in respect of 2015 is described below.
Financial reporting (including viability statement) The Committee supported the recommendation that International Financial Reporting Standards provide a clearer view of the performance and condition of the Group compared to other accounting conventions such as embedded value. We no longer include embedded value reporting because the Group is not solely an insurance company and, in the opinion of the Committee, more than one accounting convention detracts from the clarity of reporting. The Committee believes that some nonGAAP measures can add insight to the IFRS reporting and provide a more useful indication of the long-term operating performance of the Group (see ‘fair, balanced and understandable’ below). The Committee reviewed the Group accounting policies and confirmed they were appropriate to be used for the 2015 Group financial statements. There are no important changes this year. The Committee confirmed that it considered the Canadian business to be a discontinued business. The Committee also considered the accounting for the Singapore business which was closed during the year and concurred with the adopted presentation. The Committee reviewed the basis of accounting and in particular the appropriateness of adopting the going
We compared our Annual report and accounts with those of other major UK life insurers and asset managers and asked our auditors for improvement recommendations.
Three drafts of the Annual report and accounts were reviewed by the Audit Committee at three meetings. The Committee complemented its knowledge with that of executive management and the Internal and External Auditors. An interactive process allowed each draft to embrace contributions.
Prudential reporting The Committee reviewed capital reporting for the Group under the existing Solvency I regime, and discussed the presentation of these results in this Annual report and accounts. Solvency II reporting applies with effect from 1 January 2016. During 2015, the Group submitted preparatory phased reporting to the PRA as at the end of 2014 and as at the end of Q3 2015. The Committee established procedures that would allow it to adopt a compliance approach to future returns drawing on work undertaken by financial management, Group Risk, Internal Audit and External Audit. The procedures are designed to give the Audit Committee a high degree of comfort that returns have been properly prepared.
During 2015 the UK business implemented a new general ledger to transform business processes. Given the significant impact on finance processes, the Committee discussed the ledger implementation at a number of meetings. The Committee’s discussions focused on:  Controls over data migration and related opening balance reconciliations
 The impact of the transformation on ledger reconciliation processes and control
There were a number of bedding-in issues associated with the implementation of the new accounting system. The Committee was satisfied that reconciliation controls were completed satisfactorily and by the additional substantive external audit work undertaken to address identified issues.
Financial crime and whistleblowing Staff are trained to detect and report the signs of possible fraudulent or improper activity and how to report concerns. The Committee receives regular updates from the Group Head of Financial Crime who reports on compliance with the Group’s Anti-Financial Crime and AntiBribery policy, and any other activities associated with financial crime, including fraud risk.
Internal audit The Group has an internal audit function comprising 40 people. In addition, there is a co-sourcing agreement with KPMG LLP and this is used to support specific technical reviews. KPMG will take part in the tender for the external audit and if they are selected, they will not undertake any internal audit work after 31 December 2016. The Chief Internal Auditor reports to the Committee Chairman. Internal Audit operates in accordance with a global charter which is reviewed by the Committee every year. Their work plan is drawn from all businesses in the Group after holding risk based discussions with management, regulators, the External Auditor and the Committee. Identified areas of focus are mapped to the key risks within the Own Risk and Solvency Assessment (ORSA), which is a dynamic forward looking tool for decision making and strategic analysis at the heart of the Solvency II prudential regime. Consistent with that methodology, our regulators request specific reviews as part of the Risk Mitigation Plan. The Committee approves the determined scope and content of the annual internal audit plan, which is updated on a rolling basis to allow Internal Audit to address any emerging issues and reflect changes in the Group’s organisation.
The Committee receives regular reports from the Chief Internal Auditor on:  The implementation of the approved plan and proposed changes to it  Key findings from completed reviews, including the impact on financial reporting processes and related applications
 The assessment of the internal control environment at each business unit
Auditor independence The Board has an established policy setting out what non-audit services can be purchased from the firm appointed as External Auditors. The Committee monitors the implementation of the Policy on behalf of the Board. The aim of the Policy, which is reviewed annually, is to support and safeguard the objectivity and independence of the External Auditors and to comply with the ethical standards set out by the UK Audit Practices Board. It does this by prohibiting the auditors from carrying out certain types of non-audit services to ensure that the audit services provided are not impaired. It also ensures that where fees for approved non-audit services are significant, they are subject to the Committee’s prior approval. The services prohibited by the Policy include:  Book-keeping or other services related to the accounting records or financial statements
 Appraisal or valuation services where the results would be material to the financial statements
 Internal audit co-sourcing  Actuarial calculations  Management functions  Legal services  Forensic audit services  Temporary or permanent services as a director, officer or employee or performance of any decision-making, supervisory or monitoring function
 Consultations concerning financial accounting and reporting standards not relating to the audit of the Group’s financial statements
PwC has reviewed its own independence in line with these criteria and its own ethical guideline standards. PwC has confirmed to the Committee that following its review it is satisfied that it has acted in accordance with relevant regulatory and professional requirements and that its objectivity is not impaired. Having considered compliance with our policy and the fees paid to PwC, the Committee is satisfied that PwC has remained independent.
Audit and non-audit fees The Group audit fee payable to PwC in respect of 2015 was £3.7m (2014: £4.7m). The reduction in the audit fee reflects the disposal of the Canadian business. In addition £2.3m (2014: £1.5m) was incurred on audit related services. The increase largely relates to Solvency II related assurance services. The Committee is satisfied that the audit 70 Standard Life
Audit quality and materiality The Committee places great importance on the quality and effectiveness of the external audit. The Committee looks to the audit team’s objectivity, professional scepticism, continuing professional education and its relationship with management, all in the context of regulatory requirements and professional standards. Specifically:  The Committee discusses the scope of the audit prior to its commencement
 The Committee reviewed the annual findings of the Audit Quality Review team of the Financial Reporting Council in respect of PwC’s audits. We requested a formal report from PwC of the applicability of the findings to Standard Life both in respect of the generally identified failings and failings specific to individual audits. We were satisfied insofar as the issues might be applicable to Standard Life’s audit, that PwC had proper and adequate procedures in place for our audit.
 The Committee enters into a formal engagement with the auditor and agrees its audit fee
 The Committee Chairman has at least monthly meetings with the lead audit partner to discuss Group developments
 The Committee receives at nearly every meeting an update of PwC’s work, compliance with independence and its findings
 There was a detailed interview by the Committee Chairman with the audit partners of the work undertaken to support their opinion on the financial statements and the consistency of the remainder of the report and accounts with their work
 This year additional work was undertaken on Solvency II reporting. The Committee considered that it should exercise similar governance procedures over such disclosures as over other financial information because surplus capital is important information to equity and credit investors.
 Presentation to the Committee  Recommendation to the Board by the
PwC is not being invited to tender as the maximum time under the new regulations that they could serve as our auditor is three years. The business would be too disrupted by another audit tender in quick succession. We will use the 2016 audit as a year of transition and look forward to working with PwC and the successful firm to ensure efficient transition.
4.3 Risk and Capital Committee report The Risk and Capital Committee supports the Board in the effective oversight and challenge of risk management and the use of capital across the Group.
Dear Shareholder The Risk and Capital Committee has continued to support the Board in the effective oversight and independent challenge of risk management and the use of capital across the Group. Changes in the external landscape over the past year, including an increased regulatory focus on conduct risk and the finalisation of requirements related to Solvency II, have been notable drivers of the Committee’s activity in 2015. The Committee has also focused on the new risks that have arisen over the year as a result of the proposition launched in response to the pension flexibility and choice regime introduced by the UK government and the decision to enter into the UK advice business.
Membership All members of the Risk and Capital Committee are independent nonexecutive Directors. Their attendance at Committee meetings was: Member Attendance Martin Pike, Chairman* 8/8 Noel Harwerth* 8/8 Pierre Danon 7/8 Crawford Gillies 8/8 Isabel Hudson 8/8 Kevin Parry 8/8 Former member David Grigson 3/4 *the Chairmanship changed on 12 May 2015
 Group Views on Risk  Material with profits risk and capital matters  Thematic developments of relevance to the business  Own risk and solvency assessment
The Committee’s work in 2015 An indicative breakdown as to how the Committee spent its time is shown below: 72 Standard Life
Risk exposures and risk strategy The completion of the sale of the Canadian business in January has resulted in a notable shift in the Group’s overall risk profile. This reduced the Group’s exposure to credit and longevity risk in absolute terms whilst increasing the relative exposure to agency and technology risks arising from investment management activity.
During the year the Committee received regular risk reporting from the Group Chief Risk Officer in the form of the Group Views on Risk presentation. This contains standardised reporting on the customer, economic, regulatory, conduct and policy agenda environments providing an overview of the impact of the risk strategy on the Group’s key risk exposures and capital profile. A significant portion of each meeting is spent considering this reporting with the information being used to review and challenge the Group’s risk strategy, material risk exposures and capital position. During the year this prompted discussions including:  Low interest rates and the impact on the provision of guaranteed products in Germany – a discussion which led to the decision to withdraw from the marketing of these products
 Regulatory developments regarding Markets in Financial Instruments Directive II including the implications for investment management
 Progress regarding key items on the Group’s change programme, such as the integration of Ignis Asset Management
 The level and cause of customer and client complaints around the Group
A key aspect of the Committee’s activities this year has been monitoring the Group’s progress towards implementing Solvency II, the EU Directive focused on providing a harmonised insurance regulatory regime aimed at promoting policyholder protection and creating a safer, more resilient sector. As part of monitoring this progress, the Committee received regular updates on:  The development of methodology  The resolution of outstanding areas of uncertainty with the regulator  The steps being taken to meet the challenge associated with Solvency II reporting timescales
The Committee formally considered the Internal Model application submission to the regulator and provided advice concerning this to the Board and the boards of the insurance subsidiaries affected by this.
Prior to the launch of the proposition the Committee carried out an extensive review of the business’s proposals and provided challenge regarding the potential conduct risks introduced by the proposition, the operational readiness of the business and risks relating to fraud and security. The Committee has continued to monitor these risks following launch through regular updates provided in the Views on Risk reporting. The Committee also received regular updates on the Group’s own risk and solvency assessment (ORSA). This comprised:  Periodic summary ORSA reports  Updates via Group Views on Risk reporting  Results of stress and scenario testing  Ad-hoc papers including specific reviews performed by the risk function
Stress and scenario testing is a forwardlooking exercise that assists in assessing resilience to significant adverse events affecting key risk exposures. The stress and scenario tests performed by the businesses this year covered a range of scenarios and, in light of market conditions at the time, included a negative yield stress (where longer term yields were assumed to be less than 0%).
The results of the stress and scenario testing performed indicated that the Group’s solvency continued to be wellimmunised against stress due to the risk mitigation in place in the form of hedging, reinsurance and cash flow matching strategies.
Having reviewed the reporting presented, the Committee determined that developments in the ORSA environment were well understood and there was no need for the full ORSA report to be updated outside of the routine annual cycle.
In December the business went live with the “Living ORSA”, an internallydeveloped online application that allows users to readily access and navigate the latest Group risk information, further embedding the ORSA process.
Having reviewed and challenged the material presented in these regulatory returns, the Committee recommended that the respective Boards submit the returns.
Scrutiny of with profits risk and capital matters The Committee is advised of relevant updates on with profits risk and capital matters through content in the Group Chief Risk Officer’s regular risk reporting. In addition, mechanisms exist for the Chairman of the SLAL With Profits Committee to highlight specific matters to the Committee. None were highlighted during the year.
In carrying out their duties, the Committee reviewed the annual report from the With Profits Committee on the management of SLAL’s with profits business. Having had due regard to the material presented, the Committee agreed there were no items that required escalation to the Board.
A number of Business Risk Review reports were presented to the Committee during the year which provided the Committee with independent assessments from the risk function on various matters.
Business Risk Review reports presented to the Committee included reviews covering the development of the Standard Life Wealth and 1825 businesses. These were considered to be timely reviews in assessing and challenging the ambitions of Standard Life Wealth following the acquisition and integration of Newton Private Client Management in 2013 and the commercial and operational plans of the recently launched 1825 business.
Committee effectiveness The Committee reviews its remit and effectiveness annually and in 2015 this review was completed via an internal self-assessment questionnaire. The review concluded that the Committee continued to operate effectively and recognised positive developments through the introduction of Business Risk Review reports and the enhancements that had been made to Views on Risk reporting. For 2016, the review also highlighted expectations that the Committee’s work would continue to evolve reflecting a number of factors including the changing risk profile of the Group as well as the increased regulatory focus on matters such as conduct risk.
During 2015 we have continued our journey to be a world-class investment company. As part of this journey Keith Skeoch was promoted to the role of Chief Executive on 5 August 2015 succeeding David Nish. As a consequence, we have appointed two new executive Directors to strengthen the executive component of the Board and increase the voice of our customers and clients.
Our continued strong performance together with the executive Director changes noted above have shaped the remuneration decisions we have made during the year. Change of Chief Executive Keith Skeoch was appointed Chief Executive on 5 August 2015.
His remuneration package comprises:  Base salary of £700,000. Although this represents an increase of £200,000 from his previous base salary as Chief Executive, Standard Life Investments, it reflects his promotion and has been positioned at a level below the median position for companies of our market capitalisation and other FTSE 50 chief executives. It is also circa 16% lower than that paid to his predecessor.
 A pension opportunity of 27.5% of salary or an alternative cash allowance of 25% of salary, unchanged on promotion
 A maximum opportunity under the Standard Life Executive Long-term Incentive Plan (Executive LTIP) of 500% of salary based solely on stretching group-wide performance measures and vesting over five years. The performance targets are measured over three years with awards vesting after five years. In his previous role as Chief Executive, Standard Life Investments, Keith had a long term maximum opportunity of 400% of salary of which half vested over three years (based solely on Standard Life Investments’ performance) and the remainder over five years. As a result of the changes highlighted above a higher proportion of the variable remuneration is based on the long term performance of the Group and subject to malus and clawback over the long-term. It also aligns Keith’s remuneration to the longer term shareholder experience for an investment company such as ours. The 500% maximum award limit under the Executive LTIP was approved as part of our policy vote at the 2015 AGM.
At the time we consulted with our largest investors we were unable to share the threshold and maximum performance targets for the 2016 Executive LTIP awards. These have
been calibrated to be stretching against both our business plan and market expectations. I am now pleased to present these in comparison with the targets set for the 2015 awards.
The 2015 award is based on cumulative targets for the three years ended 31 December 2017. The 2016 award is based on cumulative targets for the three years ended 31 December 2018.
The Remuneration Committee considered all the views expressed and, having reviewed all the elements of the package in their totality and the calibre of the individual appointed to the role, concluded that a remuneration package significantly weighted towards long-term pay at risk, rewarding performance against stretching Group level targets, and with an increased shareholding requirement, was the most appropriate structure to incentivise sustained performance over the long-term.
From 1 April 2016 to 30 June 2016 David will be entitled, under the terms of his Executive Service Agreement, to payment in lieu of notice paid in instalments and subject to mitigation.
2015 Performance outcome Having considered the strong financial performance, as detailed earlier, and non-financial performance in 2015, the Remuneration Committee approved a score of 4.6 out of 5 for the Group element of the annual bonus plan. All bonus payments are set out on pages 85 to 86.
2016 Implementation The Chief Financial Officer has been awarded a salary increase of 2.5% which is in line with salary increases awarded across the Group. As the new Board appointments took place in the latter half of 2015 no other salary increases are proposed.
Our current remuneration policy sets out a two year deferral in relation to our Group annual bonus for executive Directors. Having considered our bonus deferral levels in the light of regulatory direction and best practice we have decided to increase the deferral period 76 Standard Life
This deferral level is in line with regulatory direction and conforms to best practice.
Agenda for 2016 As we continue the next phase in our evolution in becoming a world-class investment company during 2016 we will continue to review our remuneration arrangements for our executive Directors and strategic executive committee. We will consult the Company’s major institutional investors as part of that review as appropriate.
To provide a core reward for undertaking the role, positioned at a level needed to recruit and retain the talent required to develop and deliver the business strategy.
To provide market competitive monetary and non-monetary benefits, in a cost effective manner, to assist employees in carrying out their duties efficiently.
The Remuneration Committee may award increases above this level in certain circumstances.
Operation Executive Directors can participate in the all-employee share plans operated by Standard Life on the same basis as all other employees. The two current allemployee share plans are:  The Standard Life (Employee) Share
The focus is on the delivery of the annual financial, strategic, customer and people objectives.
Having considered our bonus deferral levels in the light of regulatory direction the deferral period which will apply for bonuses in respect of 2016 onwards will be three years.
Performance targets are set annually for each three-year cycle by the Remuneration Committee.
Vesting of the award is based on the following Group performance measures:  Cumulative Group operating profit performance before tax weighted at up to 100% of the award
 Cumulative Group net flows weighted at no more than 50% of the award
The split between these measures, for each grant, is set annually by the Remuneration Committee.
Standard Life Investments, before his appointment to his new role  Standard Life Investments’ Long-term Incentive plan – last award (to an executive Director) made in March 2015 to the Chief
Components and approach The remuneration package offered to new appointments may include any element of remuneration included in the remuneration policy, or any other element which the Remuneration Committee considers is appropriate given the particular circumstances but not exceeding the maximum level of bonus and long-term incentive awards detailed above. In considering which elements to include, and in determining the approach for all relevant elements, the Remuneration Committee will take into account a number of different factors, including (but not limited to) typical market practice, existing arrangements for other executive Directors and internal relativities, and market positioning.
Buyouts To facilitate recruitment, the Remuneration Committee may make an award to buy out remuneration terms forfeited on leaving a previous employer. In doing so, the Remuneration Committee will adhere to the FCA guidance in relation to the practice of buyout awards to new recruits and, in particular, the requirements for Code Staff (as defined by the Group’s regulators). In considering buyout levels and conditions, the Remuneration Committee will take into account such factors as the type of award and performance measures and the likelihood of performance conditions being met. The buyout award will reflect the foregone award in amount and terms (including any deferral or retention period and performance conditions) as closely as possible but within the structures and timing of equivalent Group plans. Where appropriate, the Remuneration Committee retains the discretion to utilise Listing Rule 9.4.2 (a rule, set by the United Kingdom Listing Authority, which permits an arrangement to be made without shareholder approval, specifically to facilitate, in unusual circumstances, the recruitment or retention of the relevant individual) for the purpose of making an award to ‘buy out’ remuneration terms forfeited on leaving a previous employer or to utilise any other incentive plan operated by the Group.
The service agreements for executive Directors are available for shareholders to view on request from the Group Company Secretary at the Company’s registered address (details of which can be found in Section 14) and at the 2016 AGM.
Rights to awards are governed by the rules of the respective plans.
In all plans, the Remuneration Committee retains the discretion to dis-apply time pro-rating for good leavers (see below) and, in the case of the Group LTIP and Executive LTIP, performance pro-rating.
Other payments Other payments such as legal fees or outplacement costs may be paid if considered commercially appropriate.
Long-term incentives with performance period ending during the year2,3 Other payments4
2 The figure reported for long-term incentives with a performance period ending 31 December 2015 is the market value of the Group LTIP and Standard Life Investments LTIP awards that will vest in March 2016. The share price at the date of vesting was not known at the date of publication of this report and therefore the number of Standard Life plc shares that will vest has been multiplied by the average share price over the quarter ending 31 December 2015 (£4.0448). The number of shares vesting includes additional Standard Life plc shares received in respect of accrued dividends from grant through to 31 December 2015. Where a Director has been appointed or ceased to hold the position in the year the amount has been pro-rated accordingly.
3 The figure reported for long-term incentives in 2014 has been restated. The market values at the date of vesting of the Group LTIP and Standard Life Investments LTIP, estimated in the Annual report and accounts 2014, are now known. The estimates provided in last year’s report were: Keith Skeoch £3,083k, David Nish £3,063k.
4 The other payments for 2014 comprise a cash award of £540,000 made to Luke Savage in recognition of long-term awards and £141,165 in respect of short-term awards awarded by his previous employer which were forfeited on joining Standard Life. Of the amount of £540,000, £270,000 was paid in 2014, £135,000 in 2015 and £135,000 will be paid in 2016 subject to ongoing employment requirements. The amount of £141,165 relating to the short-term award was paid in March 2015.
Annual base salary as at 1 Jan 2015 Annual base salary from 16 March 2015
Annual base salary from 5 August 2015 or date of appointment if later
2 David Nish ceased to be a Director on 5 August 2015 and the pension allowance shown is that paid from 1 January 2015 to 5 August 2015.
In addition to the cash allowance shown above Paul Matthews is a member of the Standard Life Staff Pension Scheme. Under the pension scheme rules his normal retirement date is at age 60. At 31 December 2015 he was aged 55 and his accrued defined benefit pension was £136,616 per annum. There is no additional value paid on early retirement.
Annual bonus plans Group annual bonus opportunity The target and maximum bonus award opportunities (expressed as a percentage of base salary at 31 December 2015) that could be earned in respect of 2015 Group performance were: Target Maximum opportunity 1 For period 1 January 2015 to 4 August 2015 and based on salary at 4 August 2015.
2 For period 5 August 2015 to 31 December 2015. 3 Paul Matthews and Colin Clark were appointed with effect from 1 November 2015 and the bonus opportunity shown is effective from that date.
More information on the Group’s financial key performance indicators can be found in Section 1.3 of the Strategic report.
Before approving the level of performance in 2015, the Remuneration Committee sought the views of the Group Chief Risk Officer and the Risk and Capital Committee on the management of risk within the business.
The key achievements, scores for each element and overall score for the 2015 scorecard are shown in the following tables: Element Financial Performance measures
Score (out of 5) 5 1 Operating profit and RoE Group targets were set based on the continuing business at 1 January 2015. Therefore the reported outcomes exclude Canada but include Singapore (although its inclusion does not change the vesting outcome).
Drive customer focus within the organisation and build advocacy for the Standard Life brand. Protect and enhance Standard Life’s corporate reputation.
Key achievements  Responded strongly to unprecedented customer demand arising from the new pension freedoms, helping customers make the most of the opportunities available to them
 Retained our position on our key sustainability indices – Dow Jones Sustainability Indices World and Europe, FTSE 4 Good and the Climate Disclosure Project
 Generated global brand exposure through our Andy Murray partnership, promoted our Ryder Cup sponsorship and concluded preparatory work for the January 2016 launch of our British & Irish Lions partnership
Develop our organisational capability by building the environment, the resources, capabilities and developing the behaviours we will need. This will include:  Ensuring the environment we work in creates a culture of continuous improvement  Developing powerful and consistent leadership, identifying and growing tomorrow’s leaders  Embedding our remuneration and performance management strategy to encourage high performance and the delivery of our business objectives
In addition, performance for each executive Director is measured against personal scorecards and objectives and against our leadership model to determine their bonus in relation to the personal bonus element.
As a result of the approved ratings, the Group annual bonus outcome as approved by the Remuneration Committee for 2015 is: Bonus opportunity based on Group performance as a % of total bonus
Bonus opportunity based on Personal performance as a % of total bonus
Actual 80% 10% 90% 157% £779,387 1 Keith Skeoch’s combined Group annual bonus is shown. This comprises the Group annual bonus earned as Chief Executive, Standard Life Investment for the period 1 January 2015 to 4 August 2015 based on his salary at 4 August 2015 of £500,000 and the bonus earned as Chief Executive for the period 5 August 2015 to 31 December 2015 based on the salary at 31 December 2015 of £700,000.
2 Total bonus payable calculated on salary at 31 December 2015. 3 For the period from 1 November 2015. 4 Total bonus shown is for the period 1 January 2015 to 5 August 2015.
If the bonus payable amounts to more than 25% of salary, then half of the amount above 25% of salary is deferred for two years into an award over Standard Life plc shares. The deferral is not made if the amount to be deferred is less than 10% of salary. There will be no deferral in respect of David Nish’s bonus as the timing of the grant of deferred shares will coincide with the termination of his employment and as he is a good leaver the award would immediately vest.
The determination of annual bonuses at Standard Life Investments is subject to two levels of control. First, the board of Standard Life Investments (Holdings) Limited reviews its financial results, and, after taking into account the level of overall performance and risk, its remuneration committee proposes the level of bonus payments. The second level of control is when this is referred to the Remuneration Committee which reviews these recommendations and determines the bonuses to be paid to the most senior employees within Standard Life Investments. In 2015, Standard Life Investments continued to expand globally and had another very successful year. The key achievements during the year in which the bonus outcome was determined were:  Very strong EBITDA performance up 32% to £352m (2014: £266m) with EBITDA margin up to 42% (2014: 39%)  Strong investment performance with third party AUM (excluding strategic life partner businesses) above benchmark: one year 88%; three years 95%; and five years 90%  Revenue yield on third party AUM from our growth channels remained strong  Strong third party net inflows from our growth channels of £10.3bn (2014: £1.7bn)  67% or £8.4bn (2014: £4.1bn) of Institutional and Wholesale third party net inflows from outside the UK with strong net inflows across all geographies including Asia Pacific with net inflows of £1.2bn (2014: £0.4bn)  High levels of client service and an increasingly global client base
Total bonus payable as a % of base salary Total bonus
European Embedded Value operating profit after tax1 £453m £525m £588m £627m
Threshold Target Maximum 2015 Group operating profit before tax £610m £675m £740m
In line with the above results, the Remuneration Committee determined that 40.77% of awards granted to David Nish and Keith Skeoch in 2013 should vest in 2016.
Standard Life Investments Long-Term Incentive Plan (Standard Life Investments LTIP) In 2013, in addition to the Group LTIP, Keith Skeoch participated in the Standard Life Investments LTIP. Under the Standard Life Investments LTIP, awards will only begin to vest if Standard Life Investments’ investment performance (threeyear money-weighted average) is above the lower quartile of the money-weighted average of all assets under management (both captive and third party assets) compared to other asset managers.
2013 Standard Life Investments LTIP awards vesting in respect of performance ending in 2015 (audited) In line with the above, Keith Skeoch received an award under this plan in March 2013 equivalent to 200% of salary (at maximum vesting). No other executive Director in post in 2013 received an award under this plan.
The following table sets out performance against targets for the 2013 award.
Awards granted in 2015 Awards to executive Directors were made in 2015 under the Executive LTIP and the Standard Life Investments LTIP. The table below summarises the key details of the awards made in 2015 (audited): Award Type of interest
% of award vesting at maximum 2015 Executive LTIP award, vests on 27 March 2020
Cumulative Group operating profit before tax (70%) and cumulative Group net flows for the three-year period ended 31 December 2017
Vesting: 0% Cumulative Group operating profit before tax Threshold: £1,670m Cumulative Group net flows Threshold: £16.6bn
Vesting: 100% Cumulative Group operating profit before tax Maximum: £2,040m Cumulative Group net flows Maximum: £27.6bn 2015 Standard Life Investments LTIP award, vests on 30 March 2018
As explained in the Remuneration Chairman’s statement, Colin Clark was granted an award under the Standard Life Restricted Stock Plan before his appointment.
 Shares currently held which were obtained from the exercise of awards and which contributed to satisfying the previous shareholding guidelines
Total number of shares owned at 16 March 2015 or date of appointment if later
Total value4 of shares owned at 31 December 2015 as a % of salary at 31 December 2015
Pre share consolidation on 13 March 20151 Post share consolidation on 13 March 2015 1 The date on which the Company’s shares were consolidated on a 9 for 11 basis. 2 Paul Matthews and Colin Clark were appointed with effect from 1 November 2015 and share ownership is shown from the date of their appointment. 3 David Nish ceased to be a Director on 5 August 2015 and the closing number of shares is stated as at that date and the value based on his salary at that date. 4 The closing share price at 31 December 2015 used to determine total value was 389.7p.
As is shown from the table, Keith Skeoch met the share ownership requirement in 2015. Luke Savage was appointed in August 2014 and no share awards have vested and as such he does not meet the shareholding requirement. Paul Matthews holds 108% from share awards that were subject to the previous guidelines which count towards the requirement. Colin Clark holds 433% from previous awards. David Nish met the shareholding requirement at the point he ceased to be a Director and is required to continue to comply with his shareholding requirement for a period of one year from the date his employment ceases.
David Nish 1,190,729 271,723 - 935,064 1 This comprises awards made under the Group LTIP in 2013, Executive LTIP awards in 2014 and 2015 and awards under the Standard Life Investments LTIP in 2013, 2014 and 2015 excluding shares to be awarded in lieu of dividend equivalents. In the case of Colin Clark this also includes awards made under the Standard Life Restricted Stock plan. All awards granted to Paul Matthews and Colin Clark were granted before their appointments as executive Directors on 1 November 2015. David Nish’s awards will be pro-rated on a time basis when his employment ceases.
The closing market price of Standard Life plc shares at 31 December 2015 was 389.7p and the range for the year was 365.9p to 499.9p.
Total value on exercise date Keith Skeoch 29/03/123 29/03/15 365,088 - 53,723 418,811 - - £2.3282 £4.8080 30/03/2015 £2,013,643 29/03/124 29/03/15 365,088 - 53,723 349,914 68,897 - £2.3282 £4.8080 30/03/2015 £1,682,387 25/03/133 25/03/16 236,634 - 40,365 - - 276,999 £3.6998 - - - 25/03/134 25/03/16 236,634 - 40,365 - - 276,999 £3.6998 - - - 28/03/144 28/03/17 237,818 - 19,409 - - 257,227 £3.7844 - - - 20/05/14 20/05/19 231,469 - 18,890 - - 250,359 £3.8882 - - - 27/03/15 27/03/20 - 207,805 7,962 - - 215,767 £4.8122 - - - 30/03/154 30/03/18 - 208,637 7,993 - - 216,630 £4.7930 - - - 1,672,731 416,442 242,430 768,725 68,897 1,493,981 Luke Savage 10/09/14 10/09/19 184,329 - 9,818 - - 194,147 £4.0688 - - - 27/03/15 27/03/20 - 155,853 5,971 - - 161,824 £4.8122 - - - 184,329 155,853 15,789 - - 355,971 David Nish5 29/03/123 29/03/15 665,750 - 97,969 763,719 - - £2.3282 £4.7589 31/03/2015 £3,634,462 25/03/133 25/03/16 427,050 - 72,849 - - 499,899 £3.6998 - - - 20/05/14 20/05/19 416,645 - 34,005 - - 450,650 £3.8882 - - - 27/03/15 27/03/20 - 347,034 13,297 - - 360,331 £4.8122 - - - 1,509,445 347,034 218,120 763,719 - 1,310,880 1 The 2012 Group LTIP vested at 100% and the Standard Life Investments LTIP vested at 83.6%. 2 Based on the average share price for the five dealing days immediately before the awards were granted. 3 Awards granted under the Group LTIP. 4 Awards granted under the Standard Life Investments LTIP. 5 The awards granted in 2014 and 2015 will be pro-rated on a time basis on the date employment ends (31 March 2016).
Bonus awards – deferred shares These awards are the deferred share elements of the 2012, 2013 and 2014 bonus awards. The value of the bonus deferred into share awards is reported within the annual bonus figures shown in the Directors’ remuneration for the year for which the bonus is payable. All awards lapse six months after the expected first date of exercise and carry the right to receive rolled-up dividends, but only to the extent awards vest.
Shares in lieu of rolled-up dividends from grant to end of year
Shares in lieu of rolled-up dividends from grant to end of year At end of year 8/10/15 31/03/17 173,181 - 173,181
Payments to former directors (audited) Payments made to former directors during the year (if not reported elsewhere) will in future be reported here if they are in excess of £20,000. No such payments were made in 2015.
The following table shows the single figure of total remuneration for the Director (and in the case of 2015 the Directors) in the role of Chief Executive (CE) for the same seven financial years as shown in the graph opposite. Also shown are the annual bonus awards and LTIP awards which vested based on performance in those years.
2009 Sir Sandy Crombie 2,175 67 49.67 1 The annual bonus award rates against maximum opportunity are in respect of the Group annual bonus plan for Keith Skeoch, David Nish and Sir Sandy Crombie. 2 The single figure of remuneration shown is the remuneration shown in the single figure table, time apportioned for the period 5 August 2015 to 31 December 2015. Annual bonus award rates against maximum opportunity and the long-term incentive plan vesting rate relates to the Group annual bonus and Group LTIP. 3 David Nish ceased to be CE with effect from 5 August 2015 and the figure reported is that relating to the period 1 January 2015 to 5 August 2015. 4 The increase in the CE single figure for 2012 reflects David Nish’s promotion to CE in 2010 and the correspondingly higher Group LTIP award granted, and also the impact of the increase in the Standard Life plc share price which moved from £1.86 at the award date to £3.46 on the first possible date of exercise and which drives the value outcome of the Group LTIP plan. All unvested awards will vest in full on date employment ends (31 March 2016).
Relative importance of spend on pay The following table compares what the Group spent on employee remuneration to what is paid in the form of dividends to the Company’s shareholders. Also shown is the Group’s operating profit before tax from continuing operations which is provided for context as it is one of our key performance measures: Remuneration payable to all Group employees (£m)
Keith Skeoch’s salary at 31 December 2015. The movement in bonus compares the total bonus payable as a percentage of maximum bonus opportunity under the Group annual bonus plan for Keith Skeoch in 2015 and David Nish in 2014 and excludes the bonus under the Standard Life Investments personal and company bonus plans.
Implementation of policy in 2016 Base salary The Remuneration Committee considered it appropriate to award increases as follows: Increase to base pay Base pay effective from 16 March 2016
For Keith Skeoch, 90% of the award will be based on Group performance and 10% on personal performance. For the other executive Directors, 80% of the award will be based on Group performance and 20% on personal performance.
Award 2016 Executive LTIP award, to vest in March 2021 Type of interest Nil-cost option Basis of award (% of salary and face value at grant)
Total remuneration for the year ended 31 December £000s Sir Gerry Grimstone 2015 370 21 391 2014 350 16 366 Pierre Danon 2015 72 17 89 2014 71 14 85 Melanie Gee2 2015 9 - 9 2014 - - - Crawford Gillies 2015 84 3 87 2014 81 5 86 David Grigson3 2015 38 4 42 2014 97 5 102 Noel Harwerth 2015 83 4 87 2014 97 9 106 Isabel Hudson 2015 72 7 79 2014 15 2 17 Kevin Parry 2015 90 16 106 2014 13 1 14 John Paynter4 2015 41 3 44 2014 127 10 137 Lynne Peacock 2015 101 9 110 2014 87 9 96 Martin Pike 2015 90 8 98 2014 71 9 80 1 Sir Gerry Grimstone received an allowance of £15,000 towards his business related accommodation costs in Edinburgh in addition to his Chairman’s fees. Other amounts reported relate to expenses such as travel and accommodation expenditure incurred on Group business. While these payments are the reimbursement of expenses and not benefits, they are included as being a payment which is subject to tax.
Letters of appointment The non-executive Directors, including the Chairman, have letters of appointment that set out their duties and responsibilities. The key terms are: Provision Policy Period of appointment Three-year term which can be extended by mutual consent and is subject to re-election by shareholders in line with
May 2013) Pierre Danon 28 November 2011 (continuation 6 October 2014) Melanie Gee2 26 October 2015 Crawford Gillies3 7 December 2006 (continuation 11 January 2010 and 3 December 2012)3 David Grigson4 26 October 2009 (continuation 30 October 2012) Noel Harwerth 18 July 2012 (continuation 29 June 2015) Isabel Hudson 15 October 2014 Kevin Parry 27 October 2014 John Paynter5 21 December 2011 (continuation 1 January 2015) Lynne Peacock 13 March 2012 (continuation 13 March 2015) Martin Pike 27 September 2013 1 Initially appointed as a director of The Standard Life Assurance Company and appointed as a Director of Standard Life plc effective from 30 March 2006. 2 Appointed with effect from 1 November 2015. 3 Appointed Senior Independent Director with effect from 28 April 2015. Crawford Gillies will serve as Senior Independent Director until the 2016 Annual General
The service agreements/letters of appointment for Directors are available to shareholders to view on request from the Group Company Secretary at the Company’s registered address (details of which can be found in Section 14) and at the 2016 AGM.
Non-executive Directors’ interests in shares (audited) The following table shows the total number of Standard Life plc shares held by each of the non-executive Directors and their connected persons: Total number of shares owned at the earlier of 1 January 2015 or date of appointment if later
Shares acquired/(sold) by the Directors during the period 16 March 2015 to
Pre share consolidation on 13 March 20151 Post share consolidation on 13 March 2015
Martin Pike 40,000 - 40,000 32,727 - 32,727 - 1 The date on which the Company’s shares were consolidated on a 9 for 11 basis. 2 Appointed 1 November 2015. 3 Stepped down from the Board following the conclusion of the AGM on 12 May 2015. 4 Stepped down from the Board with effect 28 April 2015.
The Chairman continues to be subject to a guideline holding of 100% of the value of his annual fee in Standard Life plc shares within four years of appointment. Sir Gerry Grimstone, as Chairman, fully met this requirement in 2015 with the value of his shares at the end of the year being 218% of his fees.
Chairman of Standard Life Assurance Limited £50,000 - 1 The core fee of £73,500 paid to each non-executive Director (including the Chairman) is expected to total £661,500 for 2016 (2015: £714,000). This is within the maximum £1,000,000 permitted under Article 87 of Standard Life plc’s articles of association. Total fees including additional duties are expected to amount to £1,108,000 for 2016 (2015: £1,041,000).
Member Attendance Lynne Peacock, Chairman 9/9 Pierre Danon 8/9 Melanie Gee 2/2 Martin Pike 9/9 Former member John Paynter 3/3
Our role To consider and make recommendations to the Board in respect of the total remuneration policy across the Group, including:  Rewards for the executive Directors, senior employees and the Chairman  The design and targets for any employee share plan  The design and targets for annual cash bonus plans throughout the Group
 Changes to employee benefit structures (including pensions) throughout the Group
Find the Remuneration Committee’s terms of reference in the Board Charter at www.standardlife.com/annualreport or request a copy from the Group Company Secretary
 Received sufficient, reliable and timely information from management and its advisers to enable it to fulfil its responsibilities
As noted in Section 2, Sir Gerry Grimstone is an independent nonexecutive of Deloitte LLP. He was appointed to this role to represent the public interest following a recommendation by the Financial Reporting Council that all major audit firms should have such representation. His remuneration for that role is a fixed sum and has no relationship to Deloitte’s business activities. Both the Chairman and the Remuneration Committee recognised the need to ensure there is no conflict of interest arising from the appointment process. We were satisfied at the date of the appointment that the nature of the Chairman’s appointment to Deloitte LLP did not create a conflict of interest. The
The Committee’s work in 2015 An indicative breakdown as to how the Remuneration Committee spent its time is shown below: Standard Life 97
The Remuneration Committee met nine times during 2015. The key issues discussed/approved were: January to March April to June  2014 Directors’ remuneration report  Approving 2014 bonus payments and 2012 LTIP outcome  Setting 2015 annual bonus and LTIP targets  Agreeing 2015 salaries and LTIP awards  Regulatory update
 Code Staff – review of population  Review of external regulation and its impact on Standard Life  Review of sales remuneration principles and governance
 Planning 2016 remuneration  2015 Directors’ remuneration report  Sales incentive governance  Regulatory update
For Against Withheld 2014 Directors remuneration report (% of total votes) 96.9% 3.1%
Promoting all-employee share ownership We believe that share ownership by our employees helps them to understand the interests of the Company’s shareholders. On 31 December 2015, 75% of our employees were Standard Life plc shareholders through participation in the Standard Life (Employee) Share Plan. We promote employee share ownership with a range of initiatives:  The Standard Life (Employee) Share Plan which allows employees to buy Standard Life plc shares directly from their earnings. At 31 December 2015, 3,796 employees were making a monthly average contribution of £45. A similar tax-approved plan is used in Ireland and has a 47% take-up. Even though the plan cannot be structured on a tax-favourable basis in Germany and Austria, more than 126 employees in these countries are buying shares each month.
 The Standard Life Sharesave Plan which allows UK tax resident employees to save towards the exercise of options over Standard Life plc shares with the option price set at the beginning of the savings period at a discount of up to 20% of the market price. Sharesave invitations have been made annually since 2011 to UK employees and, as at 31 December 2015, over 3,400 employees in the UK were saving towards one or more of the Sharesave offers.
Share dilution limits The Executive LTIP, the Group LTIP, the Standard Life Investments LTIP, the Standard Life (Employee) Share Plan, the Standard Life Sharesave Plan and the Standard Life Ireland Sharesave Plan contain dilution limits that comply with the guidelines produced by The Investment Association (IA). On 31 December 2015, the Company’s standing against these dilution limits was:  3.87% where the guideline is no more than 5% in any 10 years under all discretionary share plans in which the executive Directors participate (Executive LTIP, Group LTIP and Standard Life Investments LTIP)
 4.86% where the guideline is no more than 10% in any 10 years under all share plans (Executive LTIP, Group LTIP, Standard Life LTIP, Standard Life (Employee) Share Plan, the Sharesave Plan and Sharesave Ireland Plan)
As is normal practice, there are employee trusts that operate in conjunction with the Executive LTIP, Group LTIP and Standard Life Investments LTIP and the Standard Life (Employee) Share Plan. On 31 December 2015, the number of unallocated shares held within these trusts was 6,854 in respect of the Standard Life (Employee) Share Plan. In addition, the trusts held 1,637,419 shares acquired to satisfy deferred bonus awards, Executive LTIP, Group LTIP and Standard Life Investments LTIP awards and other share plan awards. Of these shares 7,447 are committed to satisfying vested but unexercised awards. The percentage of share capital held by the employee trusts is significantly less than the 5% best practice limit endorsed by the IA.
Related party transactions All transactions between Directors and the Group are on commercial terms that are equivalent to those available to all employees. During the year to 31 December 2015, the Directors contributed £3,283,620 (2014: £599,203) to products sold by the Group.
6. Directors’ responsibilities The following statements should be read with the statement of auditors’ responsibilities included in the independent auditors’ reports. They are made to help shareholders distinguish between the responsibilities of the Directors and those of the auditors in relation to the financial statements for 2015.
In preparing these financial statements, the Directors are required to:  Select suitable accounting policies and then apply them consistently  Make judgements and accounting estimates that are reasonable and prudent
 State whether applicable IFRS as adopted by the EU have been followed, subject to any material departures disclosed and explained in the financial statements
The Directors are also responsible for:  Safeguarding the assets of the
 Preparing a Strategic report, Directors’ report, Annual remuneration report and Corporate governance statement which comply with applicable law and regulations
 The maintenance and integrity of the corporate and financial information included on the Company’s website
Directors’ responsibility statement Each of the Directors, whose names and functions are listed in the Board of Directors section, confirms that to the best of their knowledge and belief: 1. The Group and the Company financial statements, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group and of the Company and taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group’s performance, business model and strategy 2. The Strategic report includes the information required by DTR 4.1.8 and DTR 4.1.9 – a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties it faces
Sir Gerry Grimstone Luke Savage Chairman Chief Financial Officer 19 February 2016 19 February 2016
Financial information Contents 7 Independent auditors’ report – Group financial statements 102 8 Group financial statements 109 9 Independent auditors’ report – Company financial statements 237 10 Company financial statements 239 11 Supplementary information 261 100 Standard Life
7. Independent auditors’ report to the members of Standard Life plc Report on the Group financial statements Our opinion In our opinion, Standard Life plc’s Group financial statements (the “financial statements”):  Give a true and fair view of the state of the Group’s affairs as at 31 December 2015 and of its profit and cash flows for the year then ended  Have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the
What we have audited The financial statements, included within the Annual report and accounts, comprise:  The consolidated statement of financial position as at 31
December 2015  The consolidated income statement and consolidated statement of comprehensive income for the year then ended  The consolidated statement of cash flows for the year then ended  The consolidated statement of changes in equity for the year then ended  The accounting policies  The notes to the financial statements, which include other explanatory information
We have not audited the pro forma reconciliation of consolidated operating profit for the year ended 31 December 2015 set out on page 111 which was prepared by Standard Life plc.
 We selected 25 reporting units (as explained on page 106) on whose financial information we conducted audit procedures
 For the remaining 18 reporting units across all segments, specific audit procedures were performed on certain account balances and transactions
 Procedures were also performed at the Group level over the Group consolidation processes. Our areas of focus included:  Determination of actuarial assumptions for valuation of assets and liabilities  Valuation of complex financial instruments and investment property  New UK general ledger implementation  Valuation of intangible assets arising from the acquisition of Ignis 102 Standard Life
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. We also addressed the risk of management override of internal controls and the risk of fraud in revenue recognition, including evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.
Due to the magnitude of the balance and the estimates involved in the valuation, we also considered the assumptions used in valuing pension scheme liabilities. This included assumptions over mortality, discount and inflation rates.
Our audit work in respect of actuarial assumptions in respect of life insurance contract liabilities included:  Assessing the key changes in the assumptions against regulatory and reporting requirements and industry standards  Obtaining audit evidence in respect of the key controls over the key actuarial models, data collection and analysis and the assumptions setting processes used by management, evaluating their design and implementation and testing their operating effectiveness
 Benchmarking management’s assumptions in the UK against over 25 of the largest life insurers in the UK which were included in PwC’s independent benchmarking survey. This allowed us to compare the assumptions used relative to those used by the Group’s industry peers.
Specifically for annuitant mortality assumptions:  Evaluating the choice of the industry standard Continuous Mortality
 Benchmarking management’s key assumptions (pensioner and non-pensioner mortality, spread between RPI and CPI and inflation rate premium) against over 50 companies which were included in PwC’s independent benchmarking survey. This allowed us to compare the assumptions used relative to those used by other companies.
 Understanding and assessing the models and methodology used for a sample of derivative investments across the investment portfolio, which management value using models. This included recalculating the sample of valuations using independent models and sourcing our own input data from recognised independent market data and investigating any differences found that were greater than predefined thresholds.
Our audit work in respect of the valuation of investment properties included:  Evaluating the assumptions used in a sample of investment property valuations by comparing a sample of the property yields used by management’s property experts against published market benchmarks in order to identify any assumptions or valuations which fell outside our expected range
We determined that the assumptions used, and the resultant valuations of the complex financial instruments and investment property were within ranges that we consider to be acceptable.
New UK general ledger implementation Refer to page 69 (Audit Committee report)
 Testing management’s reconciliations at the year end between the new ledger and underlying source systems
 Observing the operation of system-enforced segregation of duty controls within the new general ledger
 Obtaining details of manual journals being processed after migration and obtaining supporting evidence to assess the validity of the journal and the accuracy of the financial reporting impact
 Performing detailed testing of key reconciliations and investigating reconciling differences 104 Standard Life
During the implementation period management amended their approach to authorisation controls over reconciliations. As a result, we changed our audit approach and performed additional detailed testing of key reconciliations at year end. Based on the work performed we determined that the transactions and balances were mapped appropriately for financial reporting.
Valuation of identifiable intangible assets arising from the acquisition of Ignis Refer to page 68 (Audit Committee report), page 117 (Critical accounting estimates and judgements), pages 146 to 147 (Accounting policies and notes).
 Challenging the discount rate used through a comparison of the range of discount rates used in the industry, as well as company specific metrics such as the weighted average cost of capital and our assessment of the risk associated with forecast cash flows
 Performing stress testing and reverse stress testing on key assumptions in the valuation model to challenge the appropriateness of management’s assumptions
We determined that the assumptions used in the valuation of the remaining customer contract intangible asset were appropriate to the circumstances and plans of the Group, and were within a reasonable range. We determined that the impairment charge recognised in the financial statements for the year appropriately reflected the changes in assumptions.
We identified 7 of the Group's reporting units which, in our view, required an audit of their complete financial information (“full scope” reporting units). These focused on the material reporting units within the Standard Life Investments and UK and Europe segments.
In addition, specific audit procedures on certain account balances and transactions were performed at a further 18 reporting units within the Group across all segments (“limited scope” reporting units).
We performed testing over the controls in place at the Group level over the Group consolidation process including the consolidation of share capital and reserves and the elimination of intercompany transactions.
Where the work was performed by component auditors, we determined the level of involvement we needed to have in the audit work performed at those reporting units to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the financial statements. As a result, the Group engagement team attended management’s oversight and governance meetings within Standard Life Investments as the largest of the Group’s components, and visited the Germany operations as the largest reporting unit of the UK and Europe segment outside of the UK.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Overall Group materiality £31m (2014: £37m).
Having considered the coverage from the full scope reporting units, we assessed the risk of material misstatement within the limited scope reporting units and allocated materiality across in scope account balances and transactions. This resulted in allocation of between £30m and £7m.
As noted in the Directors’ statement, the Directors have concluded that it is appropriate to adopt the going concern basis in preparing the financial statements. The going concern basis presumes that the Group has adequate resources to remain in operation, and that the Directors intend it to do so, for at least one year from the date the financial statements were signed. As part of our audit, we have concluded that the Directors’ use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s ability to continue as a going concern.
In our opinion:  The information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements  The information given in the Corporate governance statement set out on pages 56 to 74 with respect to internal control and risk management systems and about share capital structures is consistent with the financial statements
 The statement given by the Directors on page 99, in accordance with provision C.1.1 of the UK Corporate Governance Code (the “Code”), that they consider the Annual report and accounts taken as a whole to be fair, balanced and understandable and provide the information necessary for members to assess the Group’s performance, business model and strategy is materially inconsistent with our knowledge of the Group acquired in the course of performing our audit
 The Directors’ explanation on page 31 of the Annual report and accounts, in accordance with provision C.2.2 of the Code, as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
Corporate governance statement Under the Companies Act 2006, we are required to report to you if, in our opinion, a Corporate governance statement has not been prepared by the Company. We have no exceptions to report arising from this responsibility.
Our responsibilities and those of the Directors As explained more fully in the Directors’ responsibility statement set out on page 99, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
What an audit of financial statements involves An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:  Whether the accounting policies are appropriate to the
 The reasonableness of significant accounting estimates made by the Directors
8. Group financial statements Consolidated income statement For the year ended 31 December 2015
Revenue Gross earned premium 2,276 2,404 Premium ceded to reinsurers (48) (61) Net earned premium 2,228 2,343 Investment return 4 5,460 13,179 Fee income 5 1,120 985 Other income 84 81 Total revenue 8,892 16,588
Restructuring and corporate transaction expenses 10 88 106 Other administrative expenses 7 1,540 1,430
Total administrative expenses 1,628 1,536 Change in liability for third party interest in consolidated funds 32 531 758 Finance costs 83 98 Total expenses 8,386 15,952
Profit before tax expense attributable to equity holders’ profits 415 422
Total tax expense 11 211 292 Less: Tax attributable to policyholders’ returns (134) (250) Tax expense attributable to equity holders’ profits 11 77 42 Profit for the year from continuing operations 338 380 Profit for the year from discontinued operations 12 1,147 127 Profit for the year 1,485 507
Less: Profit for the year from discontinued operations 12 (1,147) (127)
Items that will not be reclassified subsequently to profit or loss: Remeasurement gains on defined benefit pension plans 37 167 292
Items that may be reclassified subsequently to profit or loss: Fair value (losses)/gains on cash flow hedges (1) 1
Share of other comprehensive income of joint ventures 30 2 4 Equity holder tax effect relating to items that may be reclassified subsequently to profit or loss 11 2 (6)
Total items that may be reclassified subsequently to profit or loss (11) 18
Adjusted for the following items Short-term fluctuations in investment return and economic assumption changes 14 (63) 63 - 17 71 88 Restructuring and corporate transaction expenses 10 (115) (10) (125) (109) (31) (140)
Non-operating (loss)/profit before tax 2 (257) 1,122 865 (157) 33 (124) Dubai included in discontinued operations segment1 2 - - - (22) 22 - Singapore included in discontinued operations segment1 2 (42) 42 - (6) 6 - Share of associates’ and joint ventures’ tax expense 2 (13) - (13) (5) - (5)
Non-operating items 2 37 (20) 17 40 (19) 21 Dubai included in discontinued operations segment1 2 - - - - - - Singapore included in discontinued operations segment1 2 - - - - - -
Total tax expense attributable to equity holders’ profits (77) (20) (97) (42) (61) (103)
The consolidated financial statements on pages 109 to 236 were approved by the Board and signed on its behalf by the following Directors: Sir Gerry Grimstone Luke Savage Chairman Chief Financial Officer 19 February 2016 19 February 2016 112 Standard Life
interests Total equity 2015 Notes £m £m £m £m £m £m £m £m 1 January 239 1 1,115 1,816 1,501 4,672 278 4,950 Profit for the year from continuing operations - - - 276 - 276 62 338 Profit for the year from discontinued operations 12 - - - 1,147 - 1,147 - 1,147 Other comprehensive income for the year from continuing operations - - - 169 (13) 156 - 156 Other comprehensive income/(expense) for the year from discontinued operations - - - (14) (173) (187) - (187) Total comprehensive income for the year - - - 1,578 (186) 1,392 62 1,454
Dividends paid on ordinary shares 15 - - - (343) - (343) - (343)
interests Total equity 2014 Notes £m £m £m £m £m £m £m £m 1 January 238 (6) 1,110 1,391 1,494 4,227 333 4,560 Profit for the year from continuing operations - - - 376 - 376 4 380 Profit for the year from discontinued operations - - - 127 - 127 - 127 Other comprehensive income for the year from continuing operations - - - 296 15 311 - 311 Other comprehensive income for the year from discontinued operations - - - (15) (3) (18) - (18) Total comprehensive income for the year - - - 784 12 796 4 800
Acquisition of subsidiaries and unincorporated businesses net of cash acquired (6) (297)
Disposal of subsidiaries net of cash disposed of 44 1,600 -
Capital flows from third party interest in consolidated funds and non-controlling interests 1,575 3,434
Cash and cash equivalents at the beginning of the year 11,243 10,253
Cash and cash equivalents at the end of the year 27 9,591 11,243
(a) Basis of preparation These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as endorsed by the European Union (EU), with interpretations issued by the IFRS Interpretations Committee (IFRICs), and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of investment property, owner occupied property, available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss (FVTPL).
Amendments to IAS 19 Defined Benefit Plans: Employee Contributions 1 February 2015 The amendments clarify the requirements for attributing employee and third party contributions to periods of service and recognising employee and third party contributions in certain situations.
Certain new standards, interpretations and amendments to existing standards have been published that are mandatory for the Group’s annual accounting periods beginning after 1 January 2015. The Group has not early adopted the standards, amendments and interpretations described below: IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018) IFRS 15 will replace IAS 18 Revenue and related interpretations. IFRS 15 provides a new five-step revenue recognition model for determining recognition and measurement of revenue from contracts with customers. Extensive new disclosure requirements including estimate and judgement thresholds will also be introduced.
During 2015 the IASB has issued an exposure draft with clarifications to the standard and delayed the mandatory adoption date until 1 January 2018. The Group does not intend to early adopt the standard which has not yet been endorsed by the EU.
An initial high level assessment has been undertaken of the impact of implementing IFRS 9. It is not expected that the implementation will have a significant impact on the classification of financial assets and financial liabilities, with the Group continuing to classify the majority of these instruments as FVTPL in line with the current accounting policy. It is possible that based on the business model being applied on the adoption date of IFRS 9 certain portfolios of debt securities in the shareholder business risk segment may be classified as either FVTPL or FVOCI (at 31 December 2015 these portfolios have a fair value of £2bn compared to total financial assets of £158bn). The implementation of the new impairment model and the revised requirements for the application of hedge accounting are not expected to have a significant impact.
(a)(iii) Critical accounting estimates and judgements in applying accounting policies The preparation of financial statements requires management to exercise judgements in applying the accounting policies and make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses arising during the year. Judgements and sources of estimation uncertainty are continually evaluated and based on historical experience and other factors, including expectations of future events, that are believed to be reasonable under the circumstances. The areas where judgements, estimates and assumptions have the most significant effect on the amounts recognised in the consolidated financial statements are as follows: Financial statement area Critical judgements in applying accounting policies Related note Classification of insurance, reinsurance and investment contracts
Assessment of the significance of insurance risk transferred, and treatment of contracts which have insurance, non-participating investment and participating investment elements.
Defined benefit pension plans Assessment of whether the Group has an unconditional right to a refund of the surplus
Determination of the fair value of private equity investments, debt securities categorised as level 3 in the fair value hierarchy and over-thecounter derivatives
Investment property Determination of the fair value of investment property Notes 19 and 43
Intangible assets Identification and valuation of identifiable intangible assets arising from business combinations Determination of useful lives of intangible assets Determination of the recoverable amount
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: statement and cash flows
The sale of Standard Life Financial Inc. and Standard Life Investments Inc. completed on 30 January 2015 as discussed in Note 1. The average Canadian dollar rate used to translate the income statements and cash flows of these entities for the period ended 30 January 2015 was 1.855 and the rate used to translate the statement of financial position of these entities at 30 January 2015 was 1.904. The average Canadian dollar rate in the table above for the year to 31 December 2015 was used to translate the income statement and cash flows of Standard Life Assurance Limited (SLAL) Canada branch, the assets and liabilities of which were transferred on 31 December 2015 as part of the sale of the Canadian business.
Subsidiaries are all entities (including investment vehicles) over which the Group has control. Control arises when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. For operating entities this generally accompanies a shareholding of 50% or more in the entity. For investment vehicles, including structured entities, the control assessment also considers the removal rights of other investors and whether the Group acts as principal or agent in assessing the link between power and variable returns. In determining whether the Group acts as principal, and therefore controls the entity, the scope of the Group’s decision-making authority and the magnitude of the variability associated with the returns are also taken into account. As a result, the Group often is considered to control investment vehicles in which its shareholding is less than 50%.
All intra-group transactions, balances, income and expenses are eliminated in full.
The Group uses the acquisition method to account for acquisitions of businesses. At the acquisition date the assets and liabilities of the business acquired are identified and initially measured at fair value on the consolidated statement of financial position.
A full list of the Company’s subsidiaries is provided in Note 50.
The gain on sale was exempt from tax under UK and Canadian tax legislation.
2. Segmental analysis The Group’s reportable segments have been identified in accordance with the way in which the Group is structured and managed. IFRS 8 Operating Segments requires that the information presented in the financial statements is based on information provided to the ‘Chief Operating Decision Maker’. The Chief Operating Decision Maker for the Group is the strategic executive committee.
India and China (formerly Asia and Emerging Markets) The businesses included in India and China offer a range of insurance and savings products and comprise our life insurance associate in India, our life insurance joint venture in China, and wholly owned operations in Hong Kong.
Discontinued operations: Canada The operations in Canada provided long-term savings, investment and insurance solutions to individuals, and group benefit and retirement plan members. The Canadian business was sold on 30 January 2015.
Singapore The business in Singapore provided a range of savings and insurance products. The closure of this business was announced in June 2015. This business was previously included in the Asia and Emerging Markets segment.
Comparative amounts for the year ended 31 December 2014 have been prepared on the same basis as 31 December 2015 to allow more meaningful comparison.
Tax on operating profit (64) (54) - 4 - (114) - (114) Share of associates’ and joint ventures' tax expense 11 (11) - (2) - - (13) - (13)
Operating profit/(loss) after tax 267 303 25 (57) - 538 3 541
Adjusted for the following items: Short-term fluctuations in investment return and economic assumption changes 14 - (54) - (9) - (63) 63 - Restructuring and corporate transaction expenses 10 (23) (75) - (17) - (115) (10) (125)
Tax on non-operating items 11 16 5 5 - 37 (20) 17 Singapore included in discontinued operations segment1
The Group has a widely diversified policyholder base and is therefore not reliant on any individual customers.
Capital management - 10 - (8) - 2 15 17 Share of associates’ and joint ventures’ profit before tax2
Operating profit/(loss) before tax 257 390 23 (62) - 608 127 735
Adjusted for the following items Short-term fluctuations in investment return and economic assumption changes 14 1 29 - (13) - 17 71 88 Restructuring and corporate transaction expenses 10 (51) (51) - (7) - (109) (31) (140)
Tax on non-operating items 17 18 - 5 - 40 (19) 21 Dubai included in discontinued operations segment1
Profit/(loss) for the year attributable to equity holders of Standard Life plc controlling interests
2 Share of associates’ and joint ventures’ profit before tax comprises the Group’s share of results of HDFC Standard Life Insurance Company Limited, Heng An Standard Life Insurance Company Limited and HDFC Asset Management Company Limited.
(b)(ii) Total income and expenses The following table provides a reconciliation of total income and total operating expenses from continuing operations, as presented in the analysis of Group operating profit by segment, to total revenue and total expenses respectively, as presented in the consolidated income statement: 2015 2014 Income Expenses Income Expenses £m £m £m £m Total income or operating expenses from continuing operations as presented in the analysis of Group operating profit by segment 1,724 (1,124) 1,612 (1,045)
Change in liability for third party interest in consolidated funds 531 (531) 758 (758)
Singapore included in discontinued operations segment1 6 (48) 3 (9) Total revenue or expenses from continuing operations as presented on the consolidated income statement 8,892 (8,386) 16,588 (15,952) 1 Under IFRS 5, Dubai and Singapore do not constitute discontinued operations and are included under continuing operations in the consolidated income statement. Therefore the reconciliation includes the reclassification of Dubai and Singapore results between discontinued and continuing operations.
As a long-term savings and investments business, AUA is a key driver of shareholder value and is consequently one of the key measures utilised by the strategic executive committee in their evaluation of segmental performance. AUA is therefore presented by reportable segment (in billions).
Discontinued operations Total 31 December 2015 £bn £bn £bn £bn £bn £bn £bn £bn
Spread/risk - 15 - - - 15 - 15 Assets not backing products in long-term savings business - 8 - - - 8 - 8 Associate and joint venture businesses - - 2 - - 2 - 2
Deferred acquisition costs 1 Assets attributable to third party interest in consolidated funds and non-controlling interests 18
The third party AUA adjustment mainly relates to the investment products element of third party funds under administration and non-insured self invested personal pension (SIPP) AUA which are not included on the consolidated statement of financial position. Assets attributable to third party interest in consolidated funds and non-controlling interests are included on the consolidated statement of financial position but are excluded from the Group’s AUA.
Spread/risk - 16 - - - 16 9 25 Assets not backing products in longterm savings business - 8 - - - 8 2 10 Associate and joint venture businesses - - 2 - - 2 - 2
The revenue of the operating businesses is allocated based on customer location. The return on investment funds is allocated based on where funds are registered.
(a)(i) UK and Europe Standard Life Assurance Limited The main entity in the UK and Europe reportable segment that issues insurance and investment contracts is Standard Life Assurance Limited (SLAL). SLAL operates a fund structure which was established on the demutualisation of The Standard Life Assurance Company on 10 July 2006, under which its recognised assets and liabilities are allocated to one of the following funds: • Shareholder Fund (SHF) • Proprietary Business Fund (PBF) – includes UK, German and Irish branches • Heritage With Profits Fund (HWPF) – includes UK, German and Irish branches • German With Profits Fund (GWPF) • German Smoothed Managed With Profits Fund (GSMWPF) • UK Smoothed Managed With Profits Fund (UKSMWPF)
Until 31 December 2015 SLAL operated a Canada branch. A separate sub-fund of the PBF was maintained for this branch. All contracts issued from SLAL’s Canadian PBF were wholly reinsured to SLCC.
(b) Insurance, investment and reinsurance contract terms including guarantees and options Details of the significant types of insurance and investment contracts issued by the Group, the nature of any guarantees and options provided under these contracts and details of significant reinsurance contracts are given below. The accounting policy for the classification of contracts is set out in Note 33.
3. Business written in the Group’s insurance entities continued (b) Insurance, investment and reinsurance contract terms including guarantees and options continued (b)(i) UK and Europe – Insurance and investment contracts issued since demutualisation continued The International Bond is issued by SLIL to UK residents. It is a single premium whole of life investment bond. The customer has the option to invest in unit linked funds offered by SLIL and mutual funds and deposit accounts offered by other providers. The mutual funds and deposit accounts are recognised as assets by the Group and are classified as unit linked business along with a corresponding liability. On death of the last life assured an additional benefit of 0.1% of the surrender value is paid unless the death is accidental when an additional benefit of 10% of the surrender value is paid subject to a £1m cap. These contracts are classified as insurance contracts where it is considered that the accidental death benefit transfers significant insurance risk. No other guarantees apply to this contract. German unitised with profits deferred annuity contracts (fee business) German unitised with profits deferred annuity contracts were written in the PBF with the participating investment elements being transferred to the GWPF and, to a significantly lesser extent, to the GSMWPF. These contracts were closed to new business in 2015. The death benefit under all of the deferred annuities is the greater of the sum assured on death, 100% of the current surrender value, the nominal fund, and, for regular premium paying contracts and certain single premium contracts, a refund of premiums. These contracts are classified as participating insurance contracts.
The significant options and guarantees under these contracts are the following: • Contracts where, subject to specified conditions, it is guaranteed either that the unit price will rise at an annual rate of at least 4% per year or that the unit price will not fall and that there will be no unit price adjustment (UPA) at specified retirement dates or death
• Term extension option on then current premium rates under which the term of the contract may be extended by a whole number of years if the lender agrees to extend the term of the loan
3. Business written in the Group’s insurance entities continued (b) Insurance, investment and reinsurance contract terms including guarantees and options continued (b)(ii) UK and Europe – Insurance and investment contracts issued before demutualisation and related reinsurance contracts continued The maturity value, and for certain contracts the surrender benefits, are subject to guaranteed minimum amounts. For some participating unitised policies it is guaranteed that there will be no UPA on claims on or after the surrender option date. Certain contracts are subject to guaranteed annuity amounts or guaranteed annuity factors. In addition certain unit prices in the HWPF are guaranteed not to decrease.
UK and Irish unit linked pension contracts (fee business via RCF) This class of business comprises single or regular premium contracts under which a percentage of the premium is used to allocate units in one or more unit linked funds held in the PBF. Such contracts include hybrid contracts (see Note 33) resulting in the unit linked investment elements being classified as non-participating investment contracts. The major unit linked pension contracts include Individual Personal Pension Plans (retail), Group Personal Pension Plans, Executive Pensions and Stakeholder (corporate) and Trustee Investment Plans (institutional).
The costs of contracts invested in unit linked funds are recovered by deduction of asset management charges from the unit linked funds which are transferred from the PBF to the HWPF.
For those annuities in payment which increase at a predefined rate the total liability at 31 December 2015 is £2,869m (2014: £3,127m) and this represents approximately 33% (2014: 33%) of the total liability for UK annuity in payments contracts held within the HWPF.
(b)(iv) Canada – Insurance, investment and reinsurance contracts The Canadian business is included as discontinued operations.
Annuity-in-payment contracts (spread/risk business) This class of business consisted of single premium contracts that provided guaranteed annuity payments based on the survival of a life or lives or for a specified period. The majority of the portfolio was life contingent annuities and were classified as nonparticipating insurance contracts. However, there were some term certain annuities classified as investment contracts.
Registered and non-registered savings plans (fee business and spread/risk business) This category comprised individual and group non-participating savings contracts. These contracts permitted investment into term funds or segregated funds.
Where premiums on individual contracts were invested in segregated funds a death benefit guarantee applied being the greater of the segregated fund value and 100% of the net deposits. In addition provided that the monies had been invested for a minimum of 10 years, the maturity benefit was the greater of the segregated fund value at the maturity date and 75% or 100% of premiums invested, depending on the guarantee option selected, less any cash values previously paid out. Otherwise the maturity benefit was the fund value. The components of individual contracts invested in segregated funds were classified as non-participating insurance contracts.
Where premiums on group contracts were invested in segregated funds, no guarantees on death or maturity were given. The components of group contracts invested in segregated funds were classified as non-participating investment contracts.
4. Investment return Gains and losses resulting from changes in both market value and foreign exchange on investments classified at 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.
Gains/(losses) on financial instruments at fair value through profit or loss
Net fair value gains on investment property 19 452 825 939 1,275
In addition to interest expense from continuing operations of £12m (2014: £11m), interest expense of £83m (2014: £98m) was incurred in respect of subordinated liabilities and £34m (2014: £32m) in respect of deposits from reinsurers. For the year ended 31 December 2015, total interest expense from continuing operations is £129m (2014: £141m).
Employee share-based payments 47 35 1 36 27 2 29 Total staff costs and other employee-related costs 635 16 651 577 143 720
Fees payable to the Company’s auditors for other services The audit of the Company’s consolidated subsidiaries pursuant to legislation 3.4 - 3.4 3.3 1.1 4.4 The audit of funds not consolidated in the Group’s financial statements 0.7 - 0.7 0.6 0.3 0.9
Total audit related assurance fees 6.0 - 6.0 4.8 1.4 6.2
Audit related assurance services in 2015 include fees relating to Solvency II assurance services. For more information on nonaudit services, refer to the Report from the Chairman of the Audit Committee in Section 4 – Corporate governance statement.
10. Restructuring and corporate transaction expenses Total restructuring and corporate transaction expenses incurred from continuing operations during the year were £88m (2014: £106m). The expenses relate to Ignis integration, UK and Europe restructuring programmes, Solvency II and the closure of the Dubai and Singapore businesses. Deal costs relating to acquisitions included in restructuring and corporate transaction expenses for the year ended 31 December 2015 were £nil (2014: £11m).
The table below reconciles restructuring and corporate transaction expenses incurred from continuing operations with restructuring and corporate transaction expenses used to determine operating profit from continuing operations.
Deferred tax: Deferred tax expense arising from the current year (11) 17
The share of associates’ and joint ventures’ tax expense from continuing operations is £13m (2014: £5m) and is included in profit before tax in the consolidated income statement in ‘Share of profit from associates and joint ventures’.
In 2015 unrecognised tax losses from previous years of £1m (2014: £nil) were used to reduce the current tax expense. Unrecognised losses and timing differences of £nil were used to reduce the deferred tax expense (2014: £10m).
Adjustment to current tax expense in respect of prior years 12 (7)
(b) Tax relating to components of other comprehensive income Tax relating to components of other comprehensive income from continuing operations is as follows: Current tax on net change in financial assets designated as available-for-sale (2) 6
Equity holder tax effect relating to items that may be reclassified subsequently to profit or loss (2) 6
11. Taxation continued (d) Deferred tax assets and liabilities continued (d)(ii) Analysis of recognised deferred tax
Discontinued operations for the years ended 31 December 2015 and 31 December 2014 relate solely to the Group’s Canadian business. As discussed in Note 1, the sale of Standard Life Financial Inc. and Standard Life Investments Inc. completed on 30 January 2015 and the results of these operations until that date and the gain on their disposal are included in discontinued operations. The results of the SLAL Canada Branch, the assets and liabilities of which were transferred on 31 December 2015 are also included until that date.
Expenses Claims and benefits paid 123 1,121 Claim recoveries from reinsurers (63) (29) Net insurance benefits and claims 60 1,092 Change in reinsurance assets and liabilities 45 (36) Change in insurance and participating contract liabilities 507 1,548 Change in non-participating investment contract liabilities 525 1,403 Administrative expenses
Restructuring and corporate transaction expenses 3 21 Other administrative expenses 37 430
Total administrative expenses 40 451 Change in liability for third party interest in consolidated funds 30 80 Finance costs 1 9 Total expenses from discontinued operations 1,208 4,547
Items that will not be reclassified subsequently to profit or loss: Remeasurement losses on defined benefit pension plans (19) (20)
Total items that will not be reclassified subsequently to profit or loss (14) (17)
Items that were transferred to profit or loss on disposal of subsidiaries: Release of available-for-sale financial assets reserve (17) -
Alternative earnings per share is calculated on operating profit after tax. The Directors believe that earnings per share based on operating profit provides a more useful indication of the long-term operating performance of the Group.
Adjusted for the following items Short-term fluctuations in investment return and economic assumption changes (63) 63 17 71
Weighted average number of ordinary shares outstanding 2,051 2,051 2,384 2,384
14. Operating profit and non-operating items Operating profit is the Group’s chosen supplementary measure of performance. Operating profit excludes impacts arising from short-term fluctuations in investment return and economic assumption changes. It is calculated based on expected returns on investments backing equity holder funds, with consistent allowance for the corresponding expected movements in equity holder liabilities. Impacts arising from the difference between the expected return and actual return on investments, and the corresponding impact on equity holder liabilities except where they are directly related to a significant management action, are excluded from operating profit and are presented within profit before tax. The impact of certain changes in economic assumptions is also excluded from operating profit and is presented within profit before tax.
Operating profit also excludes the impact of the following items: • Restructuring costs and significant corporate transaction expenses. Restructuring includes the impact of major regulatory change.
• Impairment of intangible assets • Profit or loss arising on the disposal of a subsidiary, joint venture or associate • Amortisation of intangibles acquired in business combinations and fair value movements in contingent consideration Items which are one-off in nature and outside the control of management and which, due to their size or nature, are not indicative of the long-term operating performance of the Group
(b) Other In the pro forma reconciliation of consolidated operating profit to profit for the year other non-operating includes: • The impact of restructuring on deferred acquisition costs, claims, and change in investment and insurance contract liabilities • Amortisation of intangibles acquired in business combinations and fair value movements in contingent consideration
Other non-operating items from continuing operations for the year ended 31 December 2015 includes £20m (2014: £15m) in relation to amortisation of intangible assets acquired through business combinations and £46m (2014: £nil) relating to a review of expense and reserving assumptions in Hong Kong following regulatory change. This Hong Kong non-operating restructuring loss primarily relates to an impairment of deferred acquisition costs.
Amortisation charge for the year 7 - (16) (4) (23) (8) (51) Impairment losses recognised 7 - (5) - (4) - (9) Disposals and adjustments - - - 1 - 1 Other - - - - (2) (2) At 31 December 2015 - (75) (26) (144) (31) (276) Carrying amount At 1 January 2014 111 29 12 109 39 300 At 31 December 2014 216 183 8 116 42 565 At 31 December 2015 219 165 4 143 35 566
The Group’s goodwill has been acquired through a series of business combinations, most recently the acquisition of Pearson Jones plc in 2015 and Ignis in 2014. Of the Group’s goodwill of £219m (2014: £216m) at 31 December 2015, £145m (2014: £145m) is attributed to the Standard Life Investments cash-generating unit. The remaining goodwill of £74m (2014: £71m) is attributable to a number of smaller cash-generating units in the UK and Europe segment.
The identification of intangible assets arising from business combinations is considered as part of the acquisition and based on contractual relationships, technologies and brands in place in the acquired business. Measuring the fair value of these assets requires assumptions and judgements around expected future revenues, appropriate discount rates and the appropriate duration over which benefits are expected to be derived.
The determination of useful life 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 contractual relationships for investment management contracts acquired in business combinations and when technology is expected to become obsolete for technology based assets. The amortisation period for each of the Group’s intangible asset categories is as follows: • Investment management and customer contracts acquired through business combinations – between 10 and 17 years • Technology acquired through business combinations – 6 years • Internally developed software – between 2 and 10 years. Amortisation commences once the asset is fully developed. • Purchased software – between 2 and 6 years