Delivering value for shareholders Last year I highlighted three priorities for 2019. First, improve investment performance; second, progress the integration and transformation of the two businesses into a coherent forward-looking entity; and third, unlock the revenue potential of the combined business.
It was pleasing then, at the start of 2020, to see this improvement recognised with a number of our funds featuring in Investment Week's coverage of the best performers of 2019. One of those included was our ASI UK Impact Employment Opportunities Equity fund, illustrating our long-held belief that a fund oriented towards ESG considerations does not mean a compromise on returns. Both Standard Life UK Smaller Companies and Aberdeen Smaller Companies were featured in the top ten performing investment trusts, marking an outstanding year for the team.
By combining diverse revenue growth from asset management, platform and wealth capabilities with a strong balance sheet and careful management of our costs, we can create sustainable shareholder value over the long term. The sale of part of our holdings in HDFC Life and HDFC Asset Management has strengthened our capital position. We have a strong track record of returning value to shareholders which includes the payment of dividends and share buyback activity.
We go beyond providing products to act as a trusted adviser. This includes sharing high-impact market intelligence from our Research Institute and our adviser clients have access to our expert technical team. Importantly, it means we can act in partnership to build bespoke solutions that meet our clients’ and customers’ specific requirements for today and tomorrow.
Strategic insurance We provide investment solutions to manage assets on behalf of our strategic insurance partners.
• We launched Individually Managed Accounts on the Wrap platform – a cost-effective and scalable solution that, for the first time, allows advisers to personalise investment solutions for individual customers.
The partnership creates the potential for us to offer these customers products and services through our Platforms and Wealth channel. These products are complementary to those provided directly by Phoenix, which are typically workplace and individual pensions. The partnership has also created the potential for revenue growth that will allow us to further invest in our capabilities, including how we innovate and develop our offering to advisers and customers.
How we engage with our people Our people around the world are encouraged to share their views openly and honestly with our leadership team, through our ‘In Conversation with’ and ‘Meet the Board’ sessions, as well as their local and department leaders.
Good leadership has great people management as its foundation. In 2019 we have made this a key focus, which we will continue in 2020.
Big Issue Invest We aim to provide investment strategies that reflect society’s concerns about key issues, and promote societal as well as financial returns.
We are also committed to maintaining our charitable contribution at a consistent level, both directly and through the Standard Life Aberdeen Charitable Foundation.
Environment Our approach to climate change Our role in society (page 25) Employees Global code of conduct1 Our role in society (page 27)
Modern slavery statement We want to do all we can to help tackle human trafficking, forced labour, bonded labour and child slavery. We worked to raise awareness of modern slavery issues with a new employee training module in 2019, which was completed by 92% of employees, and we continue to encourage good practices among our suppliers and the companies in which we invest. Our 2019 statement and outcomes are published on our website, reinforcing our commitment to this important issue.
The strength of our capital position and balance sheet supports ongoing investment in the business and continuing returns to shareholders
Holding1 26.90% Listed value of holding1 £1.7bn • We are asset manager of choice for Phoenix (£146bn of AUM) • Potential for new asset management mandates from further
Phoenix acquisitions • Provides Platforms and Wealth access to up to 10m potential customers
We aim to: Increase diversification into growth areas to drive overall revenue growth
Investment performance 1 year: 74% 2018: 47% 3 years: 60% 2018: 50% 5 years: 67% 2018: 62%
APMs 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. Further details on alternative performance measures including reconciliations to relevant IFRS metrics are provided in the Supplementary information in Section 9.
Phoenix 19.97 136 19.98 86 HDFC Life 14.73 36 29.23 42 HASL 50.00 17 50.00 12 Adjusted profit before tax 189 140
Total tax contribution from continuing operations Total tax contribution is a measure of all the taxes the Group pays to and collects on behalf of governments in the territories in which we operate. Our total tax contribution for continuing business was £526m (2018: £538m). Of the total £211m (2018: £218m) was borne by Standard Life Aberdeen whilst £315m (2018: £320m) represents tax collected by us on behalf of the tax authorities. Taxes borne by the Group mainly consist of corporation tax, employer’s national insurance contributions and irrecoverable VAT. The taxes collected figure is mainly comprised of pay-as-you-earn deductions from employee payroll payments, employee’s national insurance contributions, VAT collected and income tax collected on behalf of HMRC on platform pensions business.
Platforms and Wealth Net inflows continued on Wrap and Elevate at £2.3bn (2018: £4.2bn). This is an encouraging level of inflows given the weak market sentiment caused by the political uncertainty in the UK during 2019, as well as a further reduction in defined benefit to defined contribution transfers. Wealth had strong net inflows of £4.7bn (2018: £0.4bn) including £3.5bn from Virgin Money in H1 2019.
Note 46 of the Group financial statements of this report includes a reconciliation between IFRS equity and surplus regulatory capital and also details of our capital management policies.
Net cash inflows Following the sale of the UK and European insurance business in 2018, the IFRS consolidated statement of cash flows now presents a shareholder view of cash generation, and therefore the Group no longer reports adjusted cash generation as an alternative performance measure. Further details are provided in Section 9, Supplementary information.
Dividends Dividend policy Management actions, in terms of improving underlying profitability and reducing the share count, are designed to deliver a level of dividend that is sustainable and progressive over the medium term. As disclosed in last year’s Annual report and accounts, it is the Board’s current intention that the total annual dividend per share will be held at the 2018 level of 21.6p while the business is transformed, cost synergies are delivered and future financial performance confirms the sustainability of this level of distribution and provides line of sight to its future growth.
Reverse stress tests are, by their very nature, intended to explore scenarios that could potentially threaten viability. However, the remoteness of the scenarios reviewed and the mitigants that are in place mean the viability assessment is supported and no qualification is considered necessary.
• Extending the Senior Manager and Certification Regime across all of our UK regulated subsidiaries, including training and support for our senior managers and certified staff
The risk that suppliers fail to deliver products/services in accordance with their contractual obligations. Outsourcing of key activities to firms with specialist capabilities is part of our strategy. We remain responsible for the delivery of activities by these firms and continue to streamline the delivery of these services so as to reduce complexity. Increased outsourcing brings with it an increased risk associated with the failure of that supplier to deliver the service required of them.
 Together with the CE and the Company Secretary, sets agendas for meetings of the Board
Risk and Capital Committee (RCC) Risk management framework Compliance reporting Risk appetites and tolerances Transactional risk assessments Capital adequacy
Executive leadership team (ELT) The role of the ELT is to support the CE by providing clear leadership, line of sight and accountability throughout the business. The ELT is responsible to the CE for the development and delivery of strategy and for leading the organisation through challenges and opportunities.
Client and Customer Committee Support the Global Head of Distribution by overseeing the development, delivery and monitoring of client and customer initiatives.
 Specific updates in CE report  As appropriate, reports to Board/
 Engagement supported various decisions including the final terms of the CFO Deferred Share Plan award in 2019 59Standard Life Aberdeen 2019
The Chairman is not a member of the Audit, Risk and Capital, or Remuneration Committees. He may, however, attend meetings of all Committees, by invitation, in order to keep abreast of their discussions. The table below reflects the composition of the Board during 2019 and the members’ attendance. The Board met nine times during the year.
As well as overseeing financial reporting, a major role of the Committee in 2019 was to consider the impact of transformation activities on internal controls as the business transitions following the sale of the UK and European insurance business to Phoenix in 2018 (the Sale).
During 2019, the Committee reviewed the Annual report and accounts 2018 and the Half year results 2019. For the half year it received written and/or oral reports from the Chief Financial Officer, the Company Secretary, the Chief Internal Auditor and the External auditors. The Committee used these reports to aid its understanding of the composition of the financial statements, to confirm that the specific reporting standards and compliance requirements had been met and to support the accounting judgements and estimates. Following its reviews, the Committee was able to recommend the approval of each of the reports to the Board, being satisfied that the full and half year financial statements complied with laws and regulations and had been appropriately compiled.
The year end impairment review of asset management goodwill resulted in the recognition of an impairment of £1,569m. The Committee spent time at three meetings reviewing and challenging assumptions relating to future cash flow projections and the discount and long-term growth rates. The Committee considered, in particular, the basis of revenue projections and the margin for forecasting risk in the discount rate, which were considered to be the most significant assumptions. The Committee considered these assumptions were appropriate, and supported the disclosure of sensitivities given the significant inherent judgements involved and range of reasonable outcomes. See Note 15 for further details. The Committee also considered the value in use compared to analyst valuations for the asset management business, and concluded that the analysts’ market perspective did not contradict the impairment conclusion.
 The Annual report and accounts presents both successes and challenges experienced during the year and, as appropriate, reflects those expected in the future
The Committee also considered disclosures relating to CRD IV results included in the Strategic report section of the Annual report and accounts and half year reporting, together with related assurance over these disclosures.
The Committee formally assess the effectiveness of the function via a scorecard, which is aligned to the Group’s objectives, along with assessing its independence and quality assurance practices. In addition, regular reporting is provided to the Committee to illustrate plan progress, and the status of implementation of recommendations.
 The Committee reviewed the annual findings of the Audit Quality Review team of the FRC in respect of KPMG’s audits. We requested a formal report from KPMG of the applicability of the findings to Standard Life Aberdeen both in respect of generally identified failings and failings specific to individual audits. We were satisfied insofar as the issues might be applicable to Standard Life Aberdeen’s audit, that KPMG had proper and adequate procedures in place for our audit.
KPMG has confirmed to us that the audit complies with their independent review procedures.
Committee effectiveness The Committee reviews its remit and effectiveness annually. In 2019 this was carried out by external consultants IBE. The review included observation of a meeting, access to papers and interviews with Committee members. The key points arising from the review were:  The Committee has had a challenging year given the particular risk environment and the complexity of its duties, but the feedback indicates that the Committee has performed well and is making progress and continuing to fulfil its remit
 Considering how the Group should comply with developing corporate governance requirements
Corporate governance and 2018 Code implementation Board and committee appointments and composition Culture, diversity and inclusion Succession planning and talent development 77Standard Life Aberdeen 2019
Variable remuneration outcomes in respect of 2019 The targets for the Executive Incentive Plan (EIP) in 2019 covered a range of focus areas that the Board regarded as critical in challenging management to drive stretch performance while operating within appropriate risk settings. The outcome of the scorecard is set out on page 82 and summarised in the table below.
 The shareholder experience during 2019  The input from the Risk and Capital Committee, and Audit
Shareholding requirement – remains 500% of salary for CE and 300% for CFO. For executive Directors serving from this year’s AGM the post-employment shareholding requirement has been extended to two years following departure from the Board.
2020 policy implementation A core part of the design of our new remuneration policy was to maintain a similar remuneration potential at target and maximum for executive Directors as their potential under the current policy. The proposed 2020 remuneration package for our executive Directors is detailed on page 96. The Board increased salaries in line with the salary increase being awarded to our employees. Pension has been reduced to align to the pension opportunity for our wider workforce. There has been no change to the incentive pay opportunity or the proportion potentially available to recipients in cash, as distinct from deferred. We have chosen adjusted diluted earnings per share (EPS) and relative total shareholder return (TSR) as the two shareholder value measures to be used as the basis for judging performance for the 2020 LTIP.
EIP deferred (£000s)1 1 Deferred awards will be made in 2020, in the form of nil cost options under the Deferred Bonus Plan rules. Performance Underpins are applied, as set out on page 87. 2 Martin Gilbert’s total opportunity was 600% of salary until the 13 March 2019 and 350% of salary thereafter as a result of his change in role to Vice Chairman of the Company. 3 Stephanie Bruce’s total opportunity was 350% of salary from 1 June 2019 to 31 December 2019. 4 Bill Rattray retired from the Board on 31 May 2019. The EIP outcome has been pro-rated to reflect the period of time spent on the Board.
The following table sets out the performance scorecard to be used based on the Company’s strategic priorities: Focus area Weighting Example performance metrics to be used to assess 2020
2019 Remuneration Outcomes This section reports remuneration awarded and paid at the end of 2019 in further detail, including the performance Underpins to be applied to the EIP deferred awards granted in 2020 and payments to past Directors.
Percentage change in remuneration of the Chief Executive compared to UK based employees The table below shows the percentage year-on-year change in salary, benefits and annual bonus earned between the year ended 31 December 2018 and the year ended 31 December 2019 for Keith Skeoch as Chief Executive compared to the average UK-based Group employee. The Remuneration Committee considers these appropriate comparators as the Chief Executive is UK-based and the largest number of Group employees are based in the UK.
UK-based employees 3% 5% 0% 1 The percentage change in EIP outcome for the CE reflects the Committee’s discretion exercised in 2018 to reduce the vesting outcome by 50%; in 2019 the Committee concluded that no such discretionary reduction was required. 2 The change in benefits figure is based on the change in medical premium paid by the Group on behalf of employees. Benefits do not include pension contributions for these purposes.
2 The Chairman’s fees are inclusive of the non-executive Directors’ core fee and no additional fees are paid to the Chairman where they chair, or are a member of, other committees/boards. The Chairman is eligible to receive life insurance benefits with effect from December 2019.
Maximum opportunity There is no maximum value of the core benefit package. The costs associated with benefits provision are monitored and controlled by the Remuneration Committee.
Awards are subject to review by the Remuneration Committee at the end of the three-year performance period to confirm that vesting of the award is appropriate in the context of overall performance of the Company and the individual. The Committee may take advice from the Risk and Capital Committee and the Audit Committee to determine appropriate vesting.
 Any failure of risk management, fraud or other material financial irregularity
 Customer and client metrics for satisfaction are included as part of the annual bonus non-financial assessment
Service Contracts and loss of office policy for executive Directors Within executive service contracts, the Committee aims to strike the right balance between the Company’s interests and those of the executive Directors, whilst ensuring that the contracts comply with best practice, legislation and the agreed remuneration principles. Contracts are not for a fixed term, but set out notice periods in line with the executive Director’s role.
Legacy awards under the Aberdeen Deferred Share Plans A good leaver is defined as someone whose employment comes to an end because of death, ill-health, injury, disability, redundancy or retirement, sale of the employing company or business or any other reason at the discretion of the Remuneration Committee. Unvested awards granted to good leavers will typically vest in full at the normal vesting date, unless the Remuneration Committee decides that they should vest on the date of termination.
 Target – fixed pay, 50% of the maximum bonus award, 50% of LTIP vesting  Maximum – fixed pay, 100% of maximum bonus award, 100% of LTIP vesting  Maximum + share price growth assumes share price growth of 50% for the LTIP element
Non-executive Directors, including the Chairman, have letters of appointment that set out their responsibilities. The key terms are:  Period of appointment: A three-year term, which can be extended by mutual consent and is subject to re-election by shareholders in line with the Company’s articles of association and the UK Corporate Governance Code
Reporting for the year ended 31 December 2019 The Company is the holding company of the Group. You can find out about the relevant activities of the Company’s principal subsidiary undertakings and their overseas branches in the Strategic report. During 2019, the Company’s principal undertakings operated branches in Europe, together with Hong Kong and India.
In accordance with the terms of the Standard Life Employee Trust Deed, the trustees waived all entitlements to current or future dividend payments for shares they hold.
Directors and their interests The Directors who served during the year were: Sir Douglas Flint (Chairman) Melanie Gee Keith Skeoch Richard Mully1 Martin Gilbert Martin Pike Bill Rattray2 Cathleen Raffaeli Stephanie Bruce3 Cecilia Reyes5 Rod Paris6 Jutta af Rosenborg Jonathan Asquith4 Simon Troughton1 John Devine 1 Retired 14 May 2019. 2 Retired 31 May 2019. 3 Appointed 1 June 2019. 4 Appointed 1 September 2019. 5 Appointed 1 October 2019. 6 Resigned 31 December 2019.
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 KPMG LLP is made aware of that information.
The Directors’ report was approved by the Board and signed on its behalf by
Group financial statements Group primary statements .............................................. 121 Presentation of consolidated financial statements ......... 129 Note 1. Group structure ............................................... 136 Note 2. Segmental analysis ......................................... 138 Note 3. Investment return ............................................ 142 Note 4. Revenue from contracts with customers ......... 143 Note 5. other income .................................................. 144 Note 6. other administrative expenses ....................... 144 Note 7. Staff costs and other employee-related costs . 145 Note 8 Auditors’ remuneration .................................... 145 Note 9. Restructuring and corporate transaction expenses ...................................... 145
Note 25. Unit linked liabilities and assets backing unit linked liabilities ............................ 174
Our findings: We found the estimate of the separation cost provision to balanced (2018: balanced) with proportionate (2018: proportionate) disclosures of the related assumptions and sensitivities.
We have summarised below the changes to our key audit matters from the 31 December 2018 year end audit.
Total equity 2018 Notes £m £m £m £m £m £m £m £m £m £m
 Held for trading no longer exists as a separate FVTPL category and these assets and liabilities were included within the financial assets or liabilities measured at fair value through profit or loss. Similarly this had no impact on their initial recognition or subsequent measurement.
Prior year disposals (c)(ii) Subsidiaries (c)(ii)(i) UK and European insurance business On 23 February 2018, the Group announced the proposed sale of the UK and European insurance business to Phoenix (the Sale), conditional on shareholder and relevant regulatory approvals. The Sale was completed on 31 August 2018 and was implemented by the sale to Phoenix of the entire issued share capital of Standard Life Assurance Limited (SLAL).
Total consideration received comprised cash of £2.0bn, a dividend received from SLAL of £312m in March 2018 and new shares issued at completion representing approximately 19.98% of the then issued share capital of Phoenix. The shareholding in Phoenix was subject to a lockup of 12 months from completion. The Group recognised a gain on disposal in respect of the Sale which is included in profit from discontinued operations in the consolidated condensed income statement for the year ended 31 December 2018 of £1,780m. On disposal £43m was recycled from the translation reserve and was included in determining the gain on sale. £99m (net) of other reserves were also released directly to retained earnings.
Share of associates’ and joint ventures’ profit before tax1 57 189 246 – – 246 Adjusted profit before tax 395 189 584 – – 584 Tax on adjusted profit (69) – (69) – – (69) Share of associates’ and joint ventures' tax expense 10 (21) (25) (46) – – (46) Adjusted profit after tax 305 164 469 – – 469 Adjusted for the following items
Restructuring and corporate transaction expenses 9 (379) (28) (407) – – (407) Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts2 (1,733) (111) (1,844) – – (1,844) Profit on disposal of interests in associates 1 205 1,337 1,542 – – 1,542 Reversal of impairment of associates – 243 243 – – 243 Investment return variances and economic assumption changes 13 – (25) (25) – – (25)
Asset management Through a number of its subsidiaries, the Group provides asset management services to its customers. This performance obligation is performed over time with the revenue recognised as the obligation is performed. The Group generally receives asset management fees based on the percentage of the assets under management. The percentage varies depending on the level and nature of assets under management. Asset management fees are either deducted from assets or invoiced. Deducted fees are generally calculated, recognised and collected on a daily basis. Other asset management fees are invoiced to the customer either monthly or quarterly with receivables recognised for unpaid invoices. The payment terms for invoiced revenue vary but are typically 30 days from receipt of invoice. Accrued income is recognised to account for income earned but not yet invoiced. There is also some use of performance fees. Performance fees are only recognised once it is highly probable that the revenue will be received.
Fee income from fund platforms includes revenue passed to the product provider and included below in other cost of sales.
The revenue from the contracts with customers is reported within the Asset management, platforms and wealth segment. The following table provides a reconciliation of Revenue from contracts with customers as presented in the consolidated income statement to fee based revenue, as presented in the analysis of adjusted profit before tax for the Asset management, platforms and wealth segment.
Depreciation of property, plant and equipment 17 47 16 Amortisation of intangible assets 15 184 207 Impairment losses on intangible assets1 15 2 46 Impairment losses on disposal group classified as held for sale 23 – 2 Impairment losses on property right-of-use assets 17 16 –
Employee share-based payments and deferred fund awards 44 34 14 Total staff costs and other employee-related costs 646 772
The audit of the Company’s consolidated subsidiaries pursuant to legislation 3.7 3.6 Audit related assurance services 2.1 1.7
Restructuring and corporate transaction expenses of £264m were used to determine adjusted profit before tax from discontinued operations in 2018. These expenses mainly related to the sale of the UK and European insurance business discussed in Note 1. This included separation costs of £53m and £198m in relation to the redemption of Tier 1 subordinated bonds. A further £80m of separation costs was included in the gain on sale relating to contractual obligations arising from the transaction.
Deferred tax assets comprise: Losses carried forward 40 27 Depreciable assets 12 9 Employee benefits 22 24 Provisions and other temporary timing differences 1 2 Gross deferred tax assets 75 62 Less: Offset against deferred tax liabilities (1) (1) Deferred tax assets 74 61 Deferred tax liabilities comprise: Unrealised gains on investments 2 3 Employee benefits 3 2 Temporary timing differences 2 1 Deferred tax on intangible assets acquired through business combinations 78 92
 Fee revenue yields reflect past experience adjusted to assume a decline relative to 2019 due to market pressure on margins  Cost forecasts are based on function level budgets, which are based on past experience adjusted to assume the delivery of planned expense savings over the three-year planning period
Phoenix HDFC Life HDFC Asset Management Other Total £m £m £m £m £m £m £m £m £m £m
On 23 February 2018, the Group announced the proposed sale of the UK and European insurance business to Phoenix (the Sale), implemented by selling the entire issued share capital of Standard Life Assurance Limited (SLAL). Refer Note 1 for further details. Following the completion of the Sale in August 2018, as part of the total consideration, the Group was issued with new Phoenix shares representing 19.98% of the issued share capital of Phoenix. Our judgement is that taking into account our representation on Phoenix’s board and the significant transactions between the Group and Phoenix, Phoenix should be classified as an associate.
The fair value of HASL’s financial assets at 31 December 2019 that remain under IAS 39 for equity accounting purposes and the change in fair value during the year ended 31 December 2019 are as follows: Fair value as at 31 December 2019
The fair value of these right-of-use assets at 31 December 2019 is £28m. The valuation technique used to determine the fair value considers the rental income expected to be received under sub-leases during the term of the lease and the direct expenses expected to be incurred in managing the leased property, discounted using a discount rate that reflects the risks inherent in the cash flow estimates. It is not based on valuations by an independent valuer. This is a Level 3 valuation technique as defined in Note 40.
Classification and measurement in accordance with IAS 17 in respect of prior periods Under IAS 17, a contract was or contained a lease based on the assessment of whether fulfilment of the arrangement was dependent on the use of a specific asset or assets; and the arrangement had conveyed a right to use the asset.
All other debt securities were classified as AFS and were recognised at fair value with changes in fair value recognised in other comprehensive income. Interest was credited to the consolidated income statement using the effective interest rate method. On disposal of an AFS security any gains or losses previously recognised in other comprehensive income were recognised in the consolidated income statement (recycling).
At fair value through profit or loss1 Cash flow hedge At amortised cost Total 2019 Notes £m £m £m £m
Greater than 20 years Total 2019 £m £m £m £m £m £m £m
(a) Standard Life (Asia) Limited On 29 March 2017, the Group announced the proposed sale of its wholly owned Hong Kong insurance business, Standard Life (Asia) Limited to the Group’s Chinese joint venture business, Heng An Standard Life Insurance Company Limited. Standard Life (Asia) Limited is reported in the Asset management, platforms and wealth segment and Heng An Standard Life Insurance Company Limited is reported within the Insurance associates and joint ventures segment. The transaction remains subject to regulatory approval and Standard Life (Asia) Limited continues to be classified as an operation held for sale.
Receivables and other financial assets – – – 11 – 11 Cash and cash equivalents – – – 31 (1) 30 Total financial assets backing unit linked liabilities 2,114 149 – 42 (605) 1,700 Investment contract liabilities – 1,520 – – (52) 1,468 Third party interest in consolidated funds – 228 – – – 228 Other unit linked financial liabilities – – – 3 – 3 Total unit linked financial liabilities – 1,748 – 3 (52) 1,699 1 Financial investments include financial assets backing unit linked liabilities classified as non-participating insurance contracts within liabilities of operations held for sale. (Refer
The preference shares have no fixed redemption date, except at the sole discretion of the issuer after the fifth anniversary from issue. Preference share dividends are discretionary and where declared, are paid in arrears in two tranches at a rate of 5% per annum and are non-cumulative. No interest accrues on any cancelled or unpaid dividends. During the year ended 31 December 2019 preference share dividends of £5m (2018: £5m) were paid.
Gross earned premium 67 75 Premium ceded to reinsurers (1) (2) Insurance contract premium income from continuing operations 66 73
Claims and benefits paid 61 62 Claim recoveries from reinsurers (2) (4) Net insurance claims 59 58 Change in reinsurance assets and liabilities 1 5 Change in insurance contract liabilities 96 (62) Insurance contract claims and change in liabilities from continuing operations 156 1 32. Financial liabilities
(f) Duration of defined benefit obligation The graph below provides an illustration of the undiscounted expected benefit payments included in the valuation of the principal plan obligations.
Liquidity The risk of financial loss as a result of being unable to settle financial obligations when they fall due, as a result of having insufficient liquid resources or being unable to realise investments and other assets other than at excessive costs. The shareholder is directly exposed to the liquidity risk from the shareholder business if it is unable to realise investments and other assets in order to settle its financial obligations when they fall due, or can do so only at excessive cost.
Non-designated derivatives relate to foreign exchange forward contracts that are not designated as cash flow hedges or net investment hedges.
Group Treasury perform central monitoring of exposures against limits and are responsible for the escalation of any limit breaches to the Chief Risk Officer. The Group adopted IFRS 9 Financial Instruments on 1 January 2019. Prior to adoption of IFRS 9, under IAS 39 impairment was only recognised when a default occurred. See Basis of preparation for further information.
The Group has a liquidity risk policy and processes in place for monitoring, assessing, and controlling liquidity risk.
Non-participating investment contract liabilities The fair value of the non-participating investment contract liabilities is calculated equal to the fair value of the underlying assets and liabilities in the funds. Thus, the value of these liabilities is dependent on the methods and assumptions set out above in relation to the underlying assets and liabilities in which these funds are invested. The underlying assets and liabilities are predominately categorised as level 1 or 2 and as such, the inputs into the valuation of the liabilities are observable. Therefore, the liabilities are categorised within level 2 of the fair value hierarchy.
(c)(i) Fair value hierarchy for assets measured at fair value in the statement of financial position The table below presents the Group's non-unit linked assets measured at fair value by level of the fair value hierarchy (refer Note 25 for fair value analysis in relation to assets backing unit linked liabilities).
Total liabilities at fair value 136 59 – 14 136 73 1 – 121 44 14 29
(c)(v) Sensitivity of the fair value of level 3 instruments to changes in key assumptions At 31 December 2019 the shareholder is directly exposed to movements in the value of all level 3 instruments since none are held in the Group’s unit linked funds or in consolidated structured entities. Estimates, assumptions and range of outcomes relating to contingent consideration assets and liabilities which are considered critical accounting estimates are discussed in Section (c)(iv). Changing unobservable inputs in the measurement of the fair value of other level 3 financial assets and financial liabilities to reasonably possible alternative assumptions would not have a significant impact on profit attributable to equity holders or on total assets.
The estimated fair values for subordinated liabilities are based on the quoted market offer price.
Opening balance carried forward 1,081 2,253 Effect of change in accounting policy to IFRS 91 5 – Opening balance at 1 January 1,086 2,253
The Group has contractual commitments in respect of expenditure on investment property, funding arrangements and leases which will be payable in future periods. These commitments are not recognised on the Group’s statement of financial position at the year end but are disclosed to give an indication of the Group’s future committed cash flows.
In addition to the above, the following plans issued no share options during the year ended 31 December 2019 but have outstanding options.
Remaining contractual life of options outstanding (years)1 9.29 1.22 1.17 5.99 3.29
Remaining contractual life of options outstanding (years)1 1.96 1.38 7.10 2.65 1 Weighted average.
In the year ended 31 December 2019 there were sales to joint ventures of £1m (2018: £nil) and purchases from joint ventures of £1m (2018: £nil).
Seocho-gu, Seoul, Korea 53 Suite 1005, 10th Floor, Wisma Hamzah-Kwong Hing No.1, Leboh Ampang 50100 Kuala Lumpur, Malaysia 54 Schweizergasse 14, Zurich, 8001, Switzerland 55 Suite 26.3, Level 26, Menara IMC, Letter Box No.66, No. 8, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia 56 Unit 1901-03, Platinum Tower, 233 Tai Cang Road Huang Pu District,
Square, KY1-9010, Cayman Islands 73 Heritage Hall, Le Marchant Street, St Peter Port, Guernsey, GY1 4HY 74 Aurora (3rd Floor) Finzels Reach, Counterslip, Bristol, BS1 6BX 75 Clayton Wood Close, West Park Ring Road, Leeds LS16 6QE 76 12/F, Lincoln House, Taikoo Place, 979 King's Road, Quarry Bay, Hong Kong 77 100 Avenue des Champs Elysees, 1 Rue de Berri, F- 75008, Paris, France 78 2-4, Rue Eugène Ruppert, L-2453 Luxembourg, Luxembourg 79 30th Floor, Jardine House, One Connaught Place, Hong Kong 80 44 Esplanade, St Helier, Jersey, JE4 9WG 81 8 Marina Boulevard #05-02, Marina Bay Financial Centre Tower 1 01 8981,
(e) Investments in subsidiaries at FVTPL Investments in subsidiaries at FVTPL, valued at £562m (2018: £218m), relate to a holding in money market funds over which the Company has control. During 2018, holdings in two further funds were reclassified to equity securities and interests in pooled investment funds, following the Sale.
Investments in subsidiaries measured at FVTPL A 218 – – 218 Loans to subsidiaries – – 6 6 Derivative financial assets D – 13 – 13 Equity securities and interests in pooled investment funds 197 – – 197 Debt securities – – 854 854 Receivables and other financial assets E 8 – 49 57 Cash and cash equivalents – – 17 17
Phoenix profitability The table below provides a breakdown for the calculation of our share of adjusted profit before tax from Phoenix of £136m which is included in the Insurance associates and joint ventures reportable segment total of £189m. Phoenix use an operating profit alternative performance measure which is before finance costs, while the Group’s adjusted profit is after deducting finance costs.
AUMA is a measure of the total assets we manage, administer or advise on behalf of our clients and customers. It includes assets under management (AUM), assets under administration (AUA) and assets under advice (AUAdv).
AUM is a measure of the total assets that we manage on behalf of individual customers and institutional clients. AUM also includes captive assets managed on behalf of the Group including assets managed for corporate purposes.
Platforms and Wealth 9.5 Institutional and Wholesale AUM 9.5.1 Detailed asset class split
Strategic insurance partners Wealth Total £bn £bn £bn £bn £bn £bn £bn £bn
# These figures include the Company-sponsored nominee – the Standard Life Aberdeen Share Account – which had 1,005,103 participants holding 651,170,271 shares.
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