THIS HAS ENHANCED THE SUSTAINABILITY OF THE GROUP AND WILL PROPEL US TOWARDS OUR NEW VISION TO BECOME EUROPE’S LEADING LIFE CONSOLIDATOR.
Our Strategic Partnership is underpinned by a 19.98% equity stake taken by Standard Life Aberdeen in Phoenix and our Board has been strengthened by the appointment of two Standard Life Aberdeen nominated Non-Executive Directors. We have a close and positive working relationship with Standard Life Aberdeen which extends through its management of c. 60% of our assets under administration and the distribution agreement generating new business. Our objectives are aligned as we seek to leverage our respective skill sets to grow our businesses.
CUSTOMERS Phoenix places its customers at the heart of what it does and is committed to delivering a high level of customer service and to improving customer outcomes.
THE DRIVERS OF CONSOLIDATION ARE INCREASING AND PHOENIX IS WELL PLACED TO BE THE LEADING LIFE CONSOLIDATOR IN EUROPE DURING THIS PROCESS.”
Note: Total Assets under administration of £223 billion analysed by product type excludes £3 billion held in shareholder funds.
The SunLife business also generates new business across its range of over 50’s products.
Phoenix continues to seek opportunities to acquire and manage closed life funds. The Group’s scale allows the generation of capital efficiencies through the diversification of risks and the wide range of product types that Phoenix currently manages provides a scalable platform for integrating further closed funds. In addition, Phoenix benefits from a variable cost model given the Group’s outsourcing model and an approved Solvency II Internal Model which provides greater clarity over capital requirements.
This flexibility enables us to keep our customers in the longer term and retain assets under administration with the Group evidenced by the steady flow of customers moving from our workplace schemes to retail pensions when they change employer.
SCALE OF OUR PLATFORM Largest Life and Pensions Consolidator in Europe
SECURITY Strong balance sheet which generates long term cash flows and provides security for all stakeholders
Furthermore, there are significant opportunities to increase and accelerate cash flows through the delivery of management actions across four key areas: operational management, risk management, restructuring and effective partnerships.
A reconciliation of operating profit of £708 million to the IFRS profit after tax of £410 million (2017: £(27) million) is included in the Business Review section.
Our focus on engagement and colleague empowerment creates a rich and diverse working environment, reflected in our continued status as one of the UK’s Top Employers.
KEY INITIATIVES AND PROGRESS IN 2018 Learning and Development • In partnership with Moving Ahead, we launched the Phoenix Group internal mentoring programme. We are fully committed to providing effective support for our colleagues personal and professional development and have 100 pairs currently working together across the Group.
• Creating one single platform for Talent Acquisition for the combined Group.
2 The 2018 figure of 141 does not include workforce from acquired Standard Life Assurance businesses or SunLife. Data relates to Phoenix Corporate and Phoenix Life companies only.
All amounts in the Business Review section marked with an ‘REM’ are KPIs linked to executive remuneration. See ‘Directors Remuneration Report’ on page 76 for further details of executive remuneration including the financial and non-financial performance measures on which is it based.
Uses of cash before debt repayments and shareholder dividend (385) (272)
Cost of acquisitions Cost of acquisitions of £1,971 million relates to the cash consideration settlement to finance the acquisition of the Standard Life Assurance businesses.
Expected cash flows after 2024 There is an expected £8.2 billion of cash to emerge after 2024. This assumes no management actions after 2023 and no additional value from future new business from the Group’s Open business.
Opening pro forma AUA The analysis that follows includes a Group AUA opening figure of £239.8 billion on a pro forma basis (assuming the acquisition of Standard Life Assurance completed on 31 December 2017). Movements in the year therefore include those of the acquired Standard Life Assurance businesses for the full year rather than the four month period post completion.
Outflows for the UK Open business were £7.0 billion, resulting in net inflows of £3.7 billion, reflecting AUA growth in the Group’s Wrap and Workplace products.
The non-profit and unit-linked funds operating profit increased to £524 million (2017: £386 million), which includes a contribution of £42 million from the Standard Life Assurance businesses, excluding actuarial assumption changes. Updating actuarial assumptions had a net positive impact of £205 million on the result for the year (2017: £166 million) and included the impact of updating longevity base and improvement assumptions to reflect latest experience analyses and the most recent Continuous Mortality Investigation 2017 core projection tables.
The long-term return on owners’ funds of £(5) million (2017: £5 million) reflects the asset mix of owners’ funds, primarily cash-based assets and fixed interest securities. The loss in the period reflects certain one-off project costs which have been borne by the shareholder.
Shareholder Value – The Group will take action to protect its shareholder value.
REUNITING CUSTOMERS WITH LOST POLICIES Phoenix Life reunited 2,380 unclaimed policies with their rightful owner or next of kin following an extensive tracing exercise. The work commenced in September 2016 and to date has reunited policies amounting £12.7 million.
The Group has fully utilised the Apprenticeship levy funding working in partnership with Corndell and has over 100 programmes underway including Project Management, Leadership, Data analytics and Accountancy enabling skill development across the Phoenix management population.
Read more about diversity and inclusion on our website at www.thephoenixgroup.com/diversity
Colleagues across the Group have access to an Employee Assistance Programme which provides free, independent and confidential advice on all matters affecting an individual’s wellbeing.
Arrangements are in place to manage onsite facilities across all sites, ensuring the working environment is kept clean and secure.
For 2019, the Group will enter into two further corporate charity partnerships, helping to unite the Enlarged Group with fundraising for a common cause. Colleagues in Scotland will be supporting Scotland’s Charity Air Ambulance and colleagues in Basingstoke will support Hampshire and Isle of Wight Air Ambulance. A donation of over £31,000 was presented to Scotland’s Charity Air Ambulance in recognition for colleague participation in onsite lottery, Give as you runner-up donations of £6,000 and £4,000 was awarded to Scotland’s Charity Air Ambulance and Streetwork in Edinburgh. In addition, for Dublin colleagues €4,000 were donated to The Peter McVerry Trust, to help reduce homelessness and the harm caused by substance misuse and social disadvantage.
Over £17,000 was donated across the year through onsite fundraising, primarily benefiting causes in the local area. Beneficiaries included: Macmillan Cancer Support, Alzheimer’s Society, Street Support Network Limited, St Michael’s Hospice in Basingstoke and the City’s Lord Mayor’s Appeal.
COMMUNITY INVESTMENT The Group has worked closely with various community partners over the year, offering support in both financial and non-financial ways.
INTERNAL PRINT RESOURCE Reducing print and paper consumption onsite remained one of the Group’s primary environmental focuses across 2018. Phoenix Group and Phoenix Life colleagues now receive quarterly personalised dashboards detailing print usage and ratio of colour print, so they can directly manage what impact their print habits have on the wider environment.
The Group’s full Corporate and Social Responsibility Report is available at www.thephoenixgroup.com/ CRreport2018
Accounts, ORSA and Pillar 3 reporting; • Manages the Group’s financial plans and management information in line with strategy; • Contributes to the effective management of the Group’s balance sheet and financial plan (including M&A); and
The Board considers that the following Directors are independent: Alastair Barbour, Karen Green, Wendy Mayall, John Pollock, Belinda Richards, Nicholas Shott and Kory Sorenson� The Board has considered the criteria proposed by the Code in assessing the independence of the Directors�
The Nomination Committee has confirmed its absolute satisfaction with the time and overall commitment given to Phoenix by all Directors� During 2018, several unscheduled meetings called at short notice impacted directors’ attendance�
• Reviewed the financial forecasts prepared by management, supported by the sensitivity analysis on the key assumptions underpinning the forecasts, in support of the assumption that the Group will continue as a going concern, the Group’s ongoing viability and in support of dividend payments�
• The Chief Risk Officer, Jonathan Pears, who joined from Standard Life Assurance on 31 August 2018, has full access to the Chair and the Committee and attends all meetings�
RISK COMMITTEE’S PRINCIPAL ACTIVITIES DURING 2018 In addition to the significant matters discussed in 2018, the Committee also: • Reviewed adherence to the Group Risk Management Framework and approved its harmonisation following the acquisition of Standard Life Assurance Limited, to include consideration of the appropriateness of the Group’s overall Risk Appetite Statements�
DURING 2018, IN ADDITION TO ITS EXISTING PRINCIPAL ACTIVITIES, THE COMMITTEE HAS REVIEWED AND CHALLENGED MATTERS RELATING TO THE STANDARD LIFE ACQUISITION AND THE IMPACT OF EXTERNAL POLITICAL AND ECONOMIC UNCERTAINTIES IN ORDER TO ENSURE THE COMPANY IS IN A STRONG POSITION TO DRIVE ITS STRATEGIC OBJECTIVES FORWARD.”
• Reviewed the time spent by Directors in fulfilling their duties, concluding that the time spent appeared to be high in comparison with other FTSE 250 companies�
FIT Remuneration Consultants provided advice to the Remuneration Committee until March 2018� PwC provided advice from May 2018 onwards� Both organisations are independent of the Group�
Phoenix Group Holdings previously voluntarily complied with the DRR regulations as a matter of good practice although it was not strictly required to do so as a non-UK incorporated quoted company. Subsequent to the completion of Phoenix Group Holdings’ re-domicile to the UK and following the completion of a Scheme of Arrangement on 12 December 2018, Phoenix Group Holdings plc was inserted as the new ultimate parent company of the Group in place of Phoenix Group Holdings. Accordingly, the Company, as a UK-registered quoted company, must now comply with the DRR regulations as a matter of UK company law.
Element and purpose Long Term Incentive Plan (‘LTIP’) To motivate and incentivise delivery of sustained performance over the long term, and to promote alignment with shareholders’ interests, the Group operates the Phoenix Group Holdings Long Term Incentive Plan
Policy and operation – Awards under the LTIP may be in any of the forms of awards to receive shares for nil-cost (as described for DBSS above). – LTIP awards are made automatically each year on the fourth dealing day following the announcement of annual results, using the average of the preceding three dealing days’ share prices to calculate the number of shares in awards. – The vesting period will be at least three years and run until the third anniversary of the award date (unless a longer vesting period is introduced).
PAYMENTS FOR LOSS OF OFFICE AND PAYMENTS TO PAST DIRECTORS There were no payments made to former Directors and no payments for loss of office in the year.
For the AIP the FOS overturn rate is calculated based on an average of the H1 current year and H2 prior year rates. This is due to the timing of when the FOS rates are published. The figures exclude cases from past Abbey Life businesses that are subject to the FCA’s past business review as such cases must follow an approach prescribed by the FCA and are therefore not an indicator of Phoenix customer treatment.
The Group CEO has sponsored the achievement of all the financial targets including above target cash flow, reduced expense, reduced leverage.
Taking account of the attainment of personal objectives, the Group Chief Executive Officer received an 87.5% payout (£183,750) for this element and the Group Finance Director received a 100%payout (£132,000) for this element, consistent with their ratings for 2018. These Personal (individual objectives) measures applied to 20% of incentive opportunity and Corporate (financial and strategic) measures applied to 80% of incentive opportunity. Overall outturns as a percentage of maximum opportunity are 85.5% for the Group Chief Executive Officer and 88.0% for the Group Finance Director.
TSR (50%) Target range between median performance against the constituents of the FTSE 250 (excluding Investment Trusts) rising on a pro rata basis until full vesting for upper quintile performance. In addition, the Committee must consider whether the TSR performance is reflective of the underlying financial performance of the Company.
EMPLOYEES Diversity and inclusion The Group is committed to creating a work environment free of discrimination where everyone is treated with dignity and respect.
Corporate governance statement The disclosures required by section 7.2 of the FCA’s Disclosure Guidance and Transparency Rules can be found in the Corporate Governance Report on pages 60 to 75 which is incorporated by reference into this Directors’ Report and comprises the Company’s Corporate Governance Statement.
– Valuation of certain complex and illiquid financial investments. – Accounting for the acquisition of SLAL and other associated entities.
Valuation of certain complex and illiquid financial investments (£2.5bn; 2017: £1.4bn)
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud The objectives of our audit: • in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management; and
Tax (charge)/credit relating to other comprehensive income items C6 (10) 3
• Amendments to IFRS 3 Business Combinations (2020). The amendments have revised the definition of a business and aim to assist companies to determine whether an acquisition made is of a business or a group of assets. The amended definition emphasises that the output of a business is to provide goods and services to customers, whereas the previous definition focused on returns in the form of dividends, lower costs or other economic benefits to investors and others.
Diluted earnings per share is as follows: 2018 pence 2017 pence
Other non-audit services of £0.3 million (2017: £0.5 million) also relate to services provided to Standard Life Assurance where the engagement occurred prior to completion of the acquisition and which were terminated within the three month grace period. The 2017 fees for other non-audit services were primarily in respect of assurance provided over the review of Abbey Life past business practices undertaken at the request of the regulator.
3 Included within disallowable deductions is a consolidation adjustment on the PGL Pension scheme ‘buy-in’ agreement of £6 million and costs in relation to projects of £14 million.
The Tier 1 Notes may be redeemed at par on the First Call Date or on any interest payment date thereafter at the option of the Company and also in other limited circumstances. If such redemption occurs prior to the fifth anniversary of the Issue Date such redemption must be funded out of the proceeds of a new issuance of, or exchanged into, Tier 1 Own Funds of the same or a higher quality than the Tier 1 Notes. In respect of any redemption or purchase of the Tier 1 Notes, such redemption or purchase is subject to the receipt of permission to do so from the PRA. Furthermore, on occurrence of a trigger event, linked to the Solvency II capital position and as documented in the terms of the Tier 1 Notes, the Tier 1 Notes will be subject to a permanent write-down in value to zero.
Level 1 financial instruments The fair value of financial instruments traded in active markets (such as exchange traded securities and derivatives) is based on quoted market prices at the period end provided by recognised pricing services. Market depth and bid-ask spreads are used to corroborate whether an active market exists for an instrument. Greater depth and narrower bid-ask spread indicate higher liquidity in the instrument and are classed as Level 1 inputs. For collective investment schemes, fair value is by reference to published bid prices.
Loans and deposits at amortised cost – 423 – 423 £m £m £m
An increase of 100bps in the swap curve would decrease the net value by £16 million (2017: £13 million) and a decrease of 100bps would increase the net value by £22 million (2017: £17 million). An increase of 1% in the RPI and CPI inflation rates would increase the value by £13 million (2017: £10 million) and a decrease of 1% would decrease the value by £15 million (2017: £10 million).
Financial assets designated at FVTPL upon initial recognition: Fixed and variable rate income securities 411 (40) 884 (30) (8) 1,217 (31)
Financial liabilities designated at FVTPL upon initial recognition: During 2017, updates to the Group’s observations, in particular with regard to the nature and liquidity of underlying assets held within a collective investment scheme, resulted in a net transfer from Levels 1 and 2 to Level 3.
The fair value of financial assets accepted as collateral for OTC derivatives but not recognised in the statement of consolidated financial position amounts to £374 million (2017: £466 million).
E4.4 Other collateral arrangements Details of collateral received to mitigate the counterparty risk arising from the Group’s reinsurance transactions is detailed in note F3.
Equity and property price risk is primarily borne in respect of assets held in with-profit funds, unit-linked funds or equity release mortgages in the non-profit funds. For unit-linked funds this risk is borne by policyholders and asset movements directly impact unit prices and hence policy values. For with-profit funds policyholders’ future bonuses will be impacted by the investment returns achieved and hence the price risk, whilst the Group also has exposure to the value of guarantees provided to with-profit policyholders. In addition some equity investments are held in respect of shareholders’ funds. The Group as a whole is exposed to price risk fluctuations impacting the income flow of management charges from the invested assets of all funds. For the non-profit fund property price risk from equity release mortgages is borne by the Group with the aim of achieving greater diversification and investment returns, consistent with the Strategic Asset Allocation approved by the Board.
A 10% decrease in equity prices, with all other variables held constant, would result in an increase in profits after tax in respect of a full financial year, and in equity, of £202 million (2017: £73 million).
Classification of contracts Contracts are classified as insurance contracts where the Group accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain event adversely affects the policyholder. Contracts under which the transfer of insurance risk to the Group from the policyholder is not significant are classified as investment contracts or derivatives and accounted for as financial liabilities (see notes E1 and E3 respectively). Some insurance and investment contracts contain a DPF. This feature entitles the policyholder to additional discretionary benefits as a supplement to guaranteed benefits. Investment contracts with a DPF are recognised, measured and presented as insurance contracts. Insurance contracts and investment contracts with DPF Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsured policy. Insurance liabilities Insurance contract liabilities for non-participating business, other than unit-linked insurance contracts, are calculated on the basis of current data and assumptions, using either a net premium or gross premium method. Where a gross premium method is used, the liability includes allowance for prudent lapses. Negative policy values are allowed for on individual policies: • where there are no guaranteed surrender values; or • in the periods where guaranteed surrender values do not apply even though guaranteed surrender values are applicable after a specified period of time.
Present value of future profits on non-participating business in the with-profit funds For UK with-profit life funds, an amount may be recognised for the present value of future profits (‘PVFP’) on non-participating business written in a with-profit fund where the determination of the realistic value of liabilities in that with-profit fund takes account, directly or indirectly, of this value. Where the value of future profits can be shown to be due to policyholders, this amount is recognised as a reduction in the liability rather than as an intangible asset. This is then apportioned between the amounts that have been taken into account in the measurement of liabilities and other amounts which are shown as an adjustment to the unallocated surplus. Where it is not possible to apportion the future profits on this non-participating business to policyholders, the PVFP on this business is recognised as an intangible asset and changes in its value are recorded as a separate item in the consolidated income statement (see note G7). The value of the PVFP is determined in a manner consistent with realistic measurement of liabilities. In particular, the methodology and assumptions involve adjustments to reflect risk and uncertainty, are based on current estimates of future experience and current market yields and allow for market consistent valuation of any guarantees or options within the contracts. The value is also adjusted to remove the value of capital backing the non-profit business if this is included in the realistic calculation of PVFP. The principal assumptions used to calculate the PVFP are the same as those used in calculating the insurance contract liabilities given in note F4. Embedded derivatives Embedded derivatives, including options to surrender insurance contracts, that meet the definition of insurance contracts or are closely related to the host insurance contract, are not separately measured. All other embedded derivatives are separated from the host contract and measured at fair value through profit or loss. Liability adequacy At each reporting date, liability adequacy tests are performed to assess whether the insurance contract and investment contract with DPF liabilities are adequate. Current best estimates of future cash flows are compared to the carrying value of the liabilities. Any deficiency is charged to the consolidated income statement. The Group’s accounting policies for insurance contracts meet the minimum specified requirements for liability adequacy testing under IFRS 4 Insurance Contracts, as they allow for current estimates of all contractual cash flows and of related cash flows such as claims handling costs. Cash flows resulting from embedded options and guarantees are also allowed for, with any deficiency being recognised in the consolidated income statement. Consolidated income statement recognition Gross premiums In respect of insurance contracts and investment contracts with DPF, premiums are accounted for on a receivable basis and exclude any taxes or duties based on premiums. Funds at retirement under individual pension contracts converted to annuities with the Group are, for accounting purposes, included in both claims incurred and premiums within gross premiums written.
The Group’s longevity risk exposures have increased as a result of the Bulk Purchase Annuity deals it has successfully acquired, however the vast majority of these exposures are reinsured to third parties.
A provision of £30 million was recognised in 2016, of which £17 million was utilised during 2017, and a further £8 million during 2018.
Expenses and deferred acquisition costs carried forward 3 21 – – 24
G. OTHER STATEMENT OF CONSOLIDATED FINANCIAL POSITION NOTES continued G6. Pension schemes continued G6.2 PGL Pension Scheme continued Scheme assets The distribution of the scheme assets at the end of the year was as follows: Total £m
Obligations for repayment of stock lending collateral received (24) – (254) –
Add back: Insurance policies eliminated on consolidation 877 877 916 916
The weighted average duration of the defined benefit obligation at 31 December 2018 is 17 years (2017: 18 years).
Brands and other contractual arrangements Brands and other contractual arrangements acquired in a business combination are recognised at fair value at the acquisition date, and measured on initial recognition at cost. Amortisation is calculated using the straight-line method to allocate the cost of brands and other contractual arrangements over their estimated useful lives. They are tested for impairment whenever there is evidence of possible impairment. For impairment testing, they are allocated to the relevant cash-generating unit. Brands and other contractual arrangements are impaired when the recoverable amount is less than the carrying value.
As at 31 December 2018, the Group held 44.7% (2017: 47.9%) of the issued share capital of UKCPT and the value of this investment, measured at fair value, was £496 million (2017: £550 million). Management has concluded that the Group did not control UKCPT in either the current or comparative periods. The Group does not hold a unilateral power of veto in general meetings and is restricted by the terms of an existing relationship agreement it has with UKCPT.
Phoenix Life Holdings Limited (holding company) Wythall1 Ordinary Shares 100.00% Pearl RLH Limited (investment holding company) Glasgow12 Ordinary Shares 100.00% PGMS (Ireland) Holdings Unlimited Company (holding company)
19808, United States 20 Suite 202, 103 Foulk Road, Wilmington, Delaware, 19803, USA 21 8 Boulevard Royal, L-2449, Luxembourg, Luxembourg 22 The Pearl Centre, Lynch Wood, Peterborough, PE2 6FY, England 23 Citco (Sweden) Ab Stureplan 4c 4 Tr 114 35 Stockholm 24 Aqr Capital Management LLC, Greenwich, 06830, United States 25 6B, rue Gabriel Lippmann, Parc d’Activité Syrdall 2, L-5365 Münsbach, Luxembourg 26 1 George Street, Edinburgh, EH2 2LL, United Kingdom 27 Standard Life House, 30 Lothian Road, Edinburgh, EH1 2DH, United Kingdom 28 4th Floor, 25-28 Adelaide Road, Dublin 2, D02RY98, Ireland 29 70 Sir Rogerson’s Quay, Dublin 2, Republic of Ireland 30 201 Bishopsgate, London, EC2M 3AE, United Kingdom 31 88 2-4, Rue Eugène Ruppert, L-2453 Luxembourg, Luxembourg 32 15 Dalkeith Road, Edinburgh, EH16 5BU, United Kingdom 33 7 Newgate Street, London EC1A 7NX, United Kingdom 34 Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW, United Kingdom 35 PO Box 28015, Edinburgh, EH16 5WL, United Kingdom 36 49, Avenue J.F. Kennedy, L-1855 Luxembourg 37 BMO Global Asset Management, Exchange House, Primrose Street, London EC2A
iShares MSCI Taiwan UCITS ETF Dublin38 UCITS, sub fund 24.46% Scottish Widow UK and Income – Scottish Widows Ethical Fund
Deferred Bonus Share Scheme (‘DBSS’) Each year, part of the annual incentive for certain executives is deferred into shares of the parent company. As noted for the LTIP, following the Scheme of Arrangement, participants in the Old PGH DBSS plan had their outstanding awards automatically exchanged for equivalent awards over PGH plc ordinary shares. The grant of these shares is conditional on the employee remaining in employment with the Group for a period of three years with the three-year deferral period running to the dealing day following the third anniversary of the announcement of the annual results. Dividends will accrue for DBSS awards over the three-year deferral period.
Risk-free rate (%) – based on UK government gilts commensurate with the expected term of the award 1.0 (for 3.25 year scheme) and 1.1
I4.2 Transactions with key management personnel The total compensation of key management personnel, being those having authority and responsibility for planning, directing and controlling the activities of the Group, including the Executive and Non-Executive Directors, are as follows: 2018 £m 2017 £m
During the year to 31 December 2018 key management personnel and their close family members contributed £28,000 (2017: nil) to Pensions and Savings products sold by the Group. At 31 December 2018, the total value of key management personnel’s investments in Group Pensions and Savings products was £1,639,000 (2017: nil).
The notes identified numerically on pages 216 to 221 are an integral part of these separate financial statements. Where items also appear in the consolidated financial statements, reference is made to the notes (identified alphanumerically) on pages 128 to 213.
Cash and cash equivalents at the end of the period 1
On 12 December 2018 the Company was substituted in place of Old PGH as issuer of the Tier 1 Notes and these were recognised at the £411 million fair value of an intragroup loan that was received as consideration. Details of the terms of the Tier 1 Notes can be found in note D3 to the consolidated financial statements.
Cross currency interest rate swap 1 7. ACCRUALS AND DEFERRED INCOME The accounting policy for accruals and deferred income is included in note G4 to the consolidated financial statements.
All loans and receivables balances are due from Group entities and are measured at amortised cost using the effective interest method. The fair value of these loans and receivables are also disclosed.
On 12 December 2018, the Company was assigned a US $500 million loan by PLHL due 2027 with a coupon of 5.375%. This loan was initially recognised at fair value of £349 million and is accreted to par over the period to 2027. Movement in foreign exchange during the period reduced the carrying value by £6 million. At 31 December 2018, the carrying value of the loan was £343 million.
Assets under Administration 226.3 1 Off-balance sheet AUA represents assets held in respect of certain Group Self-Invested Personal Pension products where the beneficial ownership interest resides with the customer (and which are therefore not recognised in the consolidated statement of financial position) but on which the Group earns fee revenue.
The £5,800 million shareholder exposure to financial institution corporate debt comprised £3,505 million (2017: £2,037 million) bank debt and £2,295 million (2017: £1,218 million) non-bank debt.
SHAREHOLDER SERVICES Managing your shareholding Our registrar, Computershare, maintains the Company’s register of members� Shareholders may request a hard copy of this Annual Report from our registrar and if you have any further queries in respect of your shareholding, please contact directly using the contact details set out below�