Standard Life Aberdeen plc

Full Year Results 2020

Part 7 of 8

 

8. Company financial statements

 

Company statement of financial position

As at 31 December 2020

		2020	2019
	Notes	£m	£m
Assets
Investments in subsidiaries	A	4,013	6,027
Investments in associates and joint ventures	B	1,216	1,229
Deferred tax assets	M	77	35
Loans to subsidiaries	C	109	-
Derivative financial assets	C	1	3
Equity securities and interests in pooled investment funds	C	249	218
Debt securities	C	326	603
Receivables and other financial assets	C	50	15
Other assets	F	-	14
Cash and cash equivalents	C	47	19
Total assets		6,088	8,163
Equity
Share capital	G	306	327
Shares held by trusts	H	(161)	(119)
Share premium reserve	G	640	640
Retained earnings	I
Brought forward retained earnings		2,933	2,035
(Loss)/profit for the year attributable to equity shareholders of Standard Life Aberdeen plc		(1,266)	1,020
Other movements in retained earnings		964	(122)
Total retained earnings		2,631	2,933
Other reserves	J	1,842	3,621
Total equity		5,258	7,402
Liabilities
Subordinated liabilities	K	638	655
Derivative financial liabilities	D	6	-
Other financial liabilities	K	110	25
Provisions	O	68	77
Other liabilities	O	8	4
Total liabilities		830	761
Total equity and liabilities		6,088	8,163

The financial statements on pages 211 to 221 were approved by the Board and signed on its behalf by the following Directors:

Sir Douglas Flint Chairman 9 March 2021

Stephanie Bruce Chief Financial Officer 9 March 2021

                                                                               

The Notes on pages 214 to 221 are an integral part of these financial statements.

 

Company statement of changes in equity

For the year ended 31 December 2020

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity
2020	Notes	£m	£m	£m	£m	£m	£m
1 January		327	(119)	640	2,933	3,621	7,402
Loss for the year		-	-	-	(1,266)	-	(1,266)
Other comprehensive income for the year		-	-	-	-	8	8
Total comprehensive income for the year		-	-	-	(1,266)	8	(1,258)
Dividends paid on ordinary shares		-	-	-	(479)	-	(479)
Share buyback	G	(21)	-	-	(402)	21	(402)
Reserves credit for employee share-based payment	J	-	-	-	-	64	64
Transfer to retained earnings for vested employee share-based payment	J	-	-	-	38	(38)	-
Transfer between reserves on impairment of investment in subsidiaries	J	-	-	-	1,834	(1,834)	-
Shares acquired by employee trusts		-	(66)	-	-	-	(66)
Shares distributed by employee and other trusts and related dividend equivalents		-	24	-	(27)	-	(3)
31 December		306	(161)	640	2,631	1,842	5,258

 

The Notes on pages 214 to 221 are an integral part of these financial statements.

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity
2019	Notes	£m	£m	£m	£m	£m	£m
1 January		353	(88)	640	2,035	4,505	7,445
Profit for the year		-	-	-	1,020	-	1,020
Other comprehensive income for the year		-	-	-	-	10	10
Total comprehensive income for the year		-	-	-	1,020	10	1,030
Dividends paid on ordinary shares		-	-	-	(518)	-	(518)
Share buyback	G	(26)	-	-	(390)	(100)	(516)
Reserves credit for employee share-based payment	J	-	-	-	-	43	43
Transfer to retained earnings for vested employee share-based payment	J	-	-	-	57	(57)	-
Transfer between reserves on impairment of investment in subsidiaries	J	-	-	-	780	(780)	-
Shares acquired by employee trusts		-	(76)	-	-	-	(76)
Shares distributed by employee and other trusts and related dividend equivalents		-	45	-	(52)	-	(7)
Transfer from the Standard Life Unclaimed Asset Trust		-	-	-	1	-	1
31 December		327	(119)	640	2,933	3,621	7,402

The Notes on pages 214 to 221 are an integral part of these financial statements.

Company accounting policies

(a)    Basis of preparation

These separate financial statements are presented as required by the Companies Act 2006. The Company meets the definition of a qualifying entity under Application of Financial Reporting Requirements 100 as issued by the Financial Reporting Council. Accordingly, the financial statements for period ended 31 December 2020 have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) as issued by the Financial Reporting Council.

The financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss (FVTPL).

As permitted by FRS 101, the Company has taken advantage of the following disclosure exemptions available under that standard:

·  A cash flow statement and related notes

·  Capital management

·  Effect of IFRSs issued but not effective

·  Related party transactions with wholly owned subsidiaries

As equivalent disclosures are given in the consolidated financial statements, we have also applied the disclosure exemptions for share based payments and financial instruments.

The principal accounting policies adopted are the same as those given in the consolidated financial statements, together with the Company specific policies set out below. These accounting policies have been consistently applied to all financial reporting periods presented in these financial statements.

The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its own income statement in these financial statements. The auditors' remuneration for audit and other services is disclosed in Note 8 to the consolidated financial statements. The Company has no employees.

(a)    Investment in subsidiaries, associates and joint ventures

The Company has certain subsidiaries which are investment vehicles such as open-ended investment companies, unit trusts and limited partnerships whose primary function is to generate capital or income growth through holding investments. This category of subsidiary is held at FVTPL since they are managed on a fair value basis.

Investments in subsidiaries (other than those measured at FVTPL), associates (other than those measured at FVTPL) and joint ventures are initially recognised at cost and subsequently held at cost less any impairment charge. An impairment charge is recognised when the carrying amount of the investment exceeds its recoverable amount. Any gain or loss on disposal of a subsidiary, associate or joint venture is recognised in profit for the year.

Distributions received of non-cash assets, including investments in subsidiaries, are recognised at fair value in the balance sheet and as dividends in specie in the income statement.

(b)    Critical accounting estimates and judgements in applying accounting policies

The preparation of financial statements requires management to make estimates and assumptions and exercise judgements in applying the accounting policies 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. Estimates and judgements 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 have the most significant effect on the amounts recognised in the financial statements are as follows:

Financial statement area	Critical judgements in applying accounting policies	Related notes
Investments in subsidiaries	Determining the cash-generating unit to be used in relation to the recoverable amount of investments in subsidiaries	Note A

The areas where assumptions and other sources of estimation uncertainty at the end of the reporting period have a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial year are as follows:

Financial statement area	Critical accounting estimates and assumptions	Related notes
Investments in subsidiaries, associates and joint ventures held at cost	Determination of the recoverable amount	Note A and B

 

Notes to the Company financial statements

A.    Investments in subsidiaries    

		2020	2019
	Notes	£m	£m
Investments in subsidiaries measured at cost		3,568	5,465
Investments in subsidiaries measured at FVTPL	C	445	562
Investments in subsidiaries		4,013	6,027

 

		2020	2019
		£m	£m
At 1 January		6,027	6,467
Investment into existing subsidiaries measured at cost		26	150
Acquisition of subsidiaries at cost		-	-
Disposal of subsidiaries measured at cost		(50)	(139)
Impairment of subsidiaries measured at cost		(1,873)	(795)
Acquisition of subsidiaries at FVTPL		8	344
Disposal of subsidiaries at FVTPL		(126)	-
Gains on subsidiaries at FVTPL		1	-
At 31 December		4,013	6,027

Details of the Company's subsidiaries are given in Note 48 of the Group financial statements.

(a)   Acquisitions

During 2020, the Company made the following acquisitions of subsidiaries measured at cost:

·  The Company increased its investment in 1825 Financial Planning Ltd (1825) through the purchase of 17,000,000 ordinary shares for a cash consideration of £17m

·  The company increased its investment in Aberdeen Asset Management PLC (AAM PLC) through the purchase of 1,171,875 ordinary shares for a cash consideration of £3.8m and through the purchase of 500,000 ordinary shares for a cash consideration of £1.6m

·  The company increased its investment in Standard Life Employee Services Limited (SLESL) through the purchase of 3,584 ordinary shares for a cash consideration of £3.6m

During 2019, the Company made the following acquisitions of subsidiaries measured at cost:

·  The Company increased its investment in AAM PLC through the purchase of 100,000,000 ordinary shares for a non-cash consideration of £10m and through the purchase of 22,010,558 ordinary shares for a cash consideration of £70.4m

·  The Company increased its investment in 1825 through the purchase of 63,600,000 ordinary shares for a cash consideration of £63.6m

·  The Company increased its investment in Focus Solutions Group Limited through the purchase of 30,000,000 ordinary shares for a cash consideration of £3m

·  The Company increased its investment in SLESL through the purchase of 3,389 ordinary shares for a cash consideration of £3.4m

See Section (d) below for details on investments in subsidiaries at FVTPL.

(b)   Disposals

During 2020, the Company made the following disposals of subsidiaries measured at cost:

·  The Company redeemed £44.4m of equity capital in Standard Life (Mauritius Holdings) 2006 Limited through the cancellation of 553,336.19 Participating shares

·  The Company received £5.2m by way of distribution of the unallocated divisible surplus from the Standard Life Assurance Company 2006 (SLAC 06) following its deauthorisation. The Company was the sole member of SLAC 06 and this amount was previously held as a subsidiary measured at cost.

During 2019, the Company made the following disposals of subsidiaries measured at cost:

·  The Company redeemed £139m of equity capital in Standard Life (Mauritius Holdings) 2006 Limited through the cancellation of 1,779,047.32 Participating shares

 

(c)   Impairment

The Company holds investments in AAM PLC and Standard Life Investments (Holdings) Limited (SLIH). As AAM PLC and SLIH are managed and reported together within the Asset management, Platforms and Wealth segment, and the synergies from the merger of these entities are expected to benefit both entities, we judge that it is appropriate to consider the recoverable amount of these entities on a combined basis. The Company impaired its investments in AAM PLC and SLIH by £1,834m in 2020 (2019: £780m). Following the impairment, £1,834m (2019: £780m) was transferred from the merger reserve to retained earnings (refer Note J).

The impairment of £1,834m was recognised at 30 June 2020, at the same time as a further impairment of the asset management goodwill was recognised in the Group financial statements. Refer Note 15 of the Group financial statements. The recoverable amount at 30 June 2020 was £3,074m which is based on fair value less cost of disposal (FVLCD). The FVLCD includes the fair value of HDFC Asset Management which is an associate of SLIH. The approach and key assumptions in determining the FVLCD are the same as used in the impairment review for asset management goodwill set out in Note 15 of the Group financial statements. Following the impairment loss recognised at 30 June 2020, the recoverable amount was equal to the carrying amount. At 31 December 2020, there is no indication that the Company's investments in AAM PLC and SLIH have become further impaired. The recoverable amount is impacted by changes in the fair value of HDFC AMC, which was £1,321m at 31 December 2020 (£1,204m at 30 June 2020), and the key assumptions used in determining the FVLCD of the asset management group of cash generating units at 30 June 2020 which are detailed in Note 15 of the Group financial statements. As for the valuation of the asset management goodwill set out in Note 15 of the Group financial statements, the primary valuation approach was within a range of reasonable outcomes and reflected market conditions and uncertainties at 30 June 2020, including significant uncertainties relating to the impact of COVID-19 at that point.  An impairment of an investment in subsidiaries can be reversed due to changes in circumstances; however, no indicators of reversal were identified during the course of the second half of the year.

The recoverable amount at 31 December 2019 of £4,808m was based on value in use, which was assessed by management as being higher than the FVLCD at this date. As set out in Note 15 of the Group financial statements, management has now assessed that the FVLCD is higher.

The Company's investment in its subsidiary 1825 Financial Planning Limited (1825 FPL) was impaired during 2020 by £39m (2019: £nil). The recoverable amount which is its FVLCD at 31 December 2020 was £115m. The FVLCD considered a number of valuation approaches, with the primary approach being a multiples approach based on price to revenue and price to assets under advice (AUAdv). Multiples were based on recent acquisitions, adjusted to take into account profitability where appropriate, and were benchmarked against other recent external transactions. Revenue and AUAdv were based on December 2020 actuals. The expected cost of disposal was based on past experience of previous transactions. This is a level 3 measurement as it is measured using inputs which are not based on observable market data. The impairment resulted from losses incurred by the business during the year and the impact of the level of profitability on valuation expectations for certain parts of the business. As the year end carrying value is the recoverable amount any downside sensitivity will lead to a further future impairment loss. A 10% reduction in recurring revenue and AUAdv would result in a further impairment of £13m.

The Company's investment in its subsidiary Focus Solutions Group Limited (Focus) was impaired during 2019 by £15m. The carrying amount of the Company's investment in Focus is £nil (2019: £nil).

(d)   Investments in subsidiaries at FVTPL

Investments in subsidiaries at FVTPL, valued at £445m (2019: £562m), relate to holdings in funds over which the Company has control.

B.    Investments in associates and joint ventures

		2020	2019
		£m	£m
Investment in associates measured at cost		1,020	1,033
Investment in joint venture measured at cost		196	196
Investments in associates and joint ventures		1,216	1,229

(a)    Investment in associates

The Company's investments in associates are measured at cost less impairment.

The Company has an interest of 14.4% (2019: 19.97%) in Phoenix Group Holdings plc (Phoenix), a company incorporated in England and Wales. On 22 July 2020, Phoenix announced the completion of its acquisition of ReAssure Group plc. Under the terms of the transaction, Phoenix issued 277,277,138 new ordinary shares as part consideration for the acquisition. Completion of the transaction resulted in the Company's holding in Phoenix becoming 14.4% of the enlarged Phoenix Group.

For Phoenix, we consider that the market value of Phoenix represents the best estimate of the present value of future dividends and therefore this market value is used as the VIU for determining any impairment or reversal of impairment of the Company's investment in Phoenix. As the VIU is based on the market value, a discount rate is not determined. At 31 December 2020 the market value of the Company's interest in Phoenix was £1,010m (31 December 2019: £1,079m) and a £13m impairment has been recognised in 2020 (2019: reversal of impairment £211m). Further details of this associate are provided in Note 16 of the Group financial statements.

The Company has an interest of 25.3% (2019: 25.3%) in Tenet Group Limited, a company incorporated in England and Wales.

(b)    Investment in joint venture

The Company has a 50% (2019: 50%) interest in Heng An Standard Life Insurance Company Limited (HASL), a company incorporated in China. Further details on this joint venture are provided in Note 16 of the Group financial statements.

C.    Financial investments

		Fair value through profit or loss		Derivative financial instruments used for hedging		Amortised cost		Total
		2020	2019	2020	2019	2020	2019	2020	2019
	Notes	£m	£m	£m	£m	£m	£m	£m	£m
Investments in subsidiaries measured at FVTPL	A	445	562	-	-	-	-	445	562
Loan to subsidiaries		-	-	-	-	109	-	109	-
Derivative financial assets	D	-	-	1	3	-	-	1	3
Equity securities and interests in pooled investment funds		249	218	-	-	-	-	249	218
Debt securities		-	-	-	-	326	603	326	603
Receivables and other financial assets	E	28	1	-	-	22	14	50	15
Cash and cash equivalents		-	-	-	-	47	19	47	19
Total		722	781	1	3	504	636	1,227	1,420

The amount of debt securities expected to be recovered or settled after more than 12 months is £231m (2019: £266m). The amount of loans to subsidiaries expected to be recovered or settled after more than 12 months is £100m (2019: £nil).

Under IFRS 9 the Company calculates expected credit losses (ECL) on financial assets which are measured at amortised cost (refer to Note 38 (c) of the Group financial statements), including loans to subsidiaries (which are unrated). At 31 December 2020 the Company does not hold financial assets at amortised cost that it regards as credit-impaired or for which it considers the probability of default would result in material expected credit losses (2019: £nil). In making this assessment the Company has considered if any evidence is available to indicate the occurrence of an event which would result in a detrimental impact on the estimated future cash flows of these assets.

D.    Derivative financial instruments

The Company uses derivative financial instruments in order to reduce the risk from potential movements in foreign exchange rates.

	2020			2019
	Contract amount	Fair value assets	Fair value liabilities	Contract amount	Fair value assets	Fair value liabilities
	£m	£m	£m	£m	£m	£m
Cash flow hedges	549	-	6	566	3	-
Foreign exchange forwards	79	1	-	74	-	-
Derivative financial instruments	628	1	6	640	3	-

The derivative liability of £6m (2019: derivative asset of £3m) is expected to be settled after more than 12 months.

On 18 October 2017, the Company issued subordinated notes with a principal amount of US $750m. In order to manage the foreign exchange risk relating to the principal and coupons payable on these notes the Company entered into a cross-currency swap which is designated as a hedge of future cash flows.

The maturity profile of the contractual undiscounted cash flows in relation to derivative financial instruments is as follows:

	Within 1 year		2-5 years		6-10 years		11-15 years		Total
	2020	2019	2020	2019	2020	2019	2020	2019	2020	2019
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Cash inflows
Cash flow hedges	23	24	93	96	607	650	-	-	723	770
Foreign exchange forwards	62	57	-	-	-	-	-	-	62	57
Total	85	81	93	96	607	650	-	-	785	827
Cash outflows							-
Cash flow hedges	(18)	(18)	(73)	(73)	(614)	(632)	-	-	(705)	(723)
Foreign exchange forwards	(61)	(56)	-	-	-	-	-	-	(61)	(56)
Total	(79)	(74)	(73)	(73)	(614)	(632)	-	-	(766)	(779)
Net derivative financial instruments cash flows	6	7	20	23	(7)	18	-	-	19	48

E.    Receivables and other financial assets

		2020	2019
		£m	£m
Amounts due from related parties		16	12
Contingent consideration asset		28	1
Other financial assets		6	2
Total receivables and other financial assets		50	15

The carrying amounts disclosed above reasonably approximate the fair values at the year end.

Receivables and other financial assets of £43m (2019: £15m) are expected to be recovered within 12 months.

F.    Other assets

Other assets of £14m in 2019 comprised amounts due from related parties which were expected to be recovered within 12 months.

G.    Share capital and share premium

Details of the Company's share capital and share premium are given in Note 26 of the Group financial statements including details of the share buyback.

H.    Shares held by trusts

Shares held by trusts relates to shares in Standard Life Aberdeen plc that are held by the Standard Life Aberdeen Employee Benefit Trust (SLA EBT), Standard Life Employee Trust (ET) and, prior to SLA issuing its closure instructions to the Trustees on 13 December 2019, the Standard Life Unclaimed Asset Trust (UAT). The SLA EBT was established on 28 March 2019. Further details of these trusts are provided in Note 27 of the Group financial statements.

I.      Retained earnings

Details of the dividends paid on the ordinary shares by the Company are provided in Note 14 of the Group financial statements. Note 14 also includes information regarding the final dividend proposed by the Directors for the year ended 31 December 2020.

J.     Movements in other reserves

The following tables show the movements in other reserves during the year:

	Merger reserve	Equity compensation reserve	Special reserve	Capital redemption reserve	Cash flow hedges	Total
2020	£m	£m	£m	£m	£m	£m
At 1 January	2,412	53	115	1,037	4	3,621
Fair value losses on cash flow hedges	-	-	-	-	(3)	(3)
Realised losses on cash flow hedges transferred to income statement	-	-	-	-	13	13
Share buyback	-	-	-	21	-	21
Reserves credit for employee share-based payments	-	64	-	-	-	64
Transfer to retained earnings for vested employee share-based payments	-	(38)	-	-	-	(38)
Transfer between reserves on impairment of investment in subsidiaries	(1,834)	-	-	-	-	(1,834)
Tax effect of items that may be reclassified subsequently to profit or loss	-	-	-	-	(2)	(2)
At 31 December	578	79	115	1,058	12	1,842

 

	Merger reserve	Equity compensation reserve	Special reserve	Capital redemption reserve	Cash flow hedges	Total
2019	£m	£m	£m	£m	£m	£m
At 1 January	3,192	67	241	1,011	(6)	4,505
Fair value losses on cash flow hedges	-	-	-	-	(10)	(10)
Realised losses on cash flow hedges transferred to income statement	-	-	-	-	22	22
Share buyback	-	-	(126)	26	-	(100)
Reserves credit for employee share-based payments	-	43	-	-	-	43
Transfer to retained earnings for vested employee share-based payments	-	(57)	-	-	-	(57)
Transfer between reserves on impairment of investment in subsidiaries	(780)	-	-	-	-	(780)
Tax effect of items that may be reclassified subsequently to profit or loss	-	-	-	-	(2)	(2)
At 31 December	2,412	53	115	1,037	4	3,621

During 2020, £21m (2019: £26m) was recognised in the capital redemption reserve for the share buyback (refer Note 26 of the Group financial statements).

Following the impairment loss recognised in the period on the Company's investments in AAM PLC and SLIH (refer Note A), £1,834m (2019: £780m) was transferred from the merger reserve to retained earnings.

K.    Financial liabilities

		Amortised cost		Total
		2020	2019	2020	2019
2020	Notes	£m	£m	£m	£m
Subordinated liabilities	L	638	655	638	655
Other financial liabilities	N	110	25	110	25
Total		748	680	748	680

 

L.    Subordinated liabilities

	2020		2019
	Principal amount	Carrying value	Principal amount	Carrying value
Subordinated notes:
4.25% US Dollar fixed rate due 30 June 2028	$750m	£546m	$750m	£563m
5.5% Sterling fixed rate due 4 December 2042	£92m	£92m	£92m	£92m
Total subordinated liabilities		£638m		£655m

Subordinated liabilities are considered current if the contractual re-pricing or maturity dates are within one year. The principal amount of all the subordinated liabilities is expected to be settled after more than 12 months. The accrued interest on the subordinated liabilities of less than £1m (2019: less than £1m) is expected to be settled within 12 months.

On 26 March 2019, the Company repurchased 5.5% Sterling fixed rate subordinated notes with a principal amount of £408m (out of a total principal amount of £500m).

Further information including the terms and conditions of all subordinated liabilities is given in Note 33 of the Group financial statements.

M.    Deferred tax assets and liabilities

		2020	2019
		£m	£m
Deferred tax assets		77	35

The amount of deferred tax assets expected to be recovered or settled after more than 12 months are £77m (2019: £35m).

Recognised deferred tax

		2020	2019
		£m	£m
Deferred tax assets comprise:
Unused tax losses		80	36
Unrealised losses on cash flow hedges		(2)	-
Gross deferred tax assets		78	36
Less: Offset against deferred tax liabilities		(1)	(1)
Deferred tax assets		77	35
Deferred tax liabilities comprise:
Unrealised gains on investments		1	1
Gross deferred tax liabilities		1	1
Less: Offset against deferred tax assets		(1)	(1)
Deferred tax liabilities		-	-
Net deferred tax asset at 31 December		77	35
Movements in net deferred tax assets comprise:
At 1 January		35	22
Amounts credited to profit or loss		44	15
Amounts charged to other comprehensive income		(2)	(2)
At 31 December		77	35

The deferred tax assets recognised are in respect of unused tax losses arising in the year and unrealised losses on cash flow hedges. The deferred tax assets are recognised to the extent that it is probable that the losses will be capable of being offset against future taxable profits.

N.    Other financial liabilities

		2020	2019
		£m	£m
Outstanding purchase of investment securities		6	-
Amounts due to related parties		47	2
Collateral held in respect of derivative contracts		7	13
Outstanding contractual obligation for share buyback		40	-
Other		10	10
Other financial liabilities		110	25

Other financial liabilities of £110m (2019: £25m) are expected to be settled within 12 months.

O.    Provisions and other liabilities

Of Provisions of £68m (2019: £77m), £58m are expected to be settled within 12 months (2019: £48m). The provisions in 2020 and 2019 relate to separation costs. Refer Note 37 of the Group financial statements for further information and details of the provisions.

Of Other liabilities of £8m (2019: £4m), £8m are expected to be settled within 12 months (2019: £4m) and include £8m (2019: £2m) in respect of amounts due to related parties.

P.    Contingent liabilities, contingent assets, indemnities and guarantees

(a)    Legal proceedings and regulations

The Company, like other financial organisations, is subject to legal proceedings and complaints in the normal course of its business. All such material matters are periodically reassessed, with the assistance of external professional advisers where appropriate, to determine the likelihood of the Company incurring a liability. Where it is concluded that it is more likely than not that a material outflow will be made a provision is established based on management's best estimate of the amount that will be payable. In some cases it will not be possible to form a view, for example because the facts are unclear or because further time is needed to properly investigate, and no provisions are held for such matters. It is not possible to predict with certainty the extent and timing of the financial impact of legal proceedings, complaints and related regulatory matters.

(b)    Indemnities and guarantees

Under the trust deed in respect of the UK Standard Life defined benefit pension plan, Standard Life Employee Services Limited (SLESL), the principal employer, must pay contributions to the pension plan as the trustees' actuary may certify necessary. The Company has guaranteed the obligations of SLESL in relation to this plan. In addition the Company has guaranteed similar obligations in respect of certain other subsidiaries' UK and Ireland defined benefit pension plans.

 

None of these guarantees give rise to any liabilities at 31 December 2020 (2019: none).

Q.    Related party transactions

(a)    Key management personnel

The Directors and key management personnel of the Company are considered to be the same as for the Group. See Note 45 of the Group financial statements for further information.

R.    Events after the reporting date

On 23 February 2021, the Group announced a simplification and extension of the strategic partnership between the Group and Phoenix. Further information is given in Note 47 of the Group financial statements.

The Company's shareholding in Phoenix remains at 14.4%. Following the changes to the commercial agreements between the Group and Phoenix, the Group concluded that Phoenix should no longer be accounted for as an associate with effect from 23 February 2021. From this date, the Company has reclassified its investment in Phoenix from an investment in associates measured at cost less impairment to equity securities measured at fair value.

 

9. Supplementary information

9.1   Key performance indicators

 

Key performance indicators (KPIs) are defined as the measures by which the development, performance or position of the business can be measured effectively. The KPIs that we use may not be directly comparable with similarly named measures used by other companies. The addition of adjusted capital generation was the only change to our KPIs in 2020, reflecting the linkage with our dividend policy.

9.2   Alternative performance measures

We assess our performance using a variety of measures that are not defined under IFRS and are therefore termed alternative performance measures (APMs). The APMs that we use may not be directly comparable with similarly named measures used by other companies.

We have presented below reconciliations from these APMs to the most appropriate measure prepared in accordance with IFRS. All APMs should be read together with the IFRS consolidated income statement, IFRS consolidated statement of financial position and IFRS consolidated statement of cash flows, which are presented in the Group financial statements section of this report. Ratios are presented in Section 9.4.

KPI  Key performance indicators (KPIs) are defined as the measures by which the development, performance or position of the business can be measured effectively.

R  Metric used for executive remuneration in 2020. See pages 78 and 83 for more information.

 

Definition						Purpose
Adjusted profit before tax	KPI
Adjusted profit before tax is the Group's key alternative performance measure. Adjusted profit excludes the impact of the following items: ·  Restructuring costs and corporate transaction expenses. Restructuring includes the impact of major regulatory change. ·  Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts ·  Profit or loss arising on the disposal of a subsidiary, joint venture or associate ·  Impairment loss/reversal of impairment loss recognised on investments in associates and joint ventures accounted for using the equity method ·  Changes in fair value of significant listed investments and related dividend income ·  Fair value movements in contingent consideration ·  Items which are one-off and, due to their size or nature, are not indicative of the long-term operating performance of the Group ·  Impacts arising from investment return variances and economic assumption changes in the Group's associate and joint venture insurance entities where they have a policy for determining investment return variances and economic assumption changes ·  Dividends payable on preference shares classified as non-controlling interests are excluded from adjusted profit in line with the treatment of ordinary shares. Similarly to preference shares, coupons paid on perpetual debt instruments classified as equity for which interest is only accounted for when paid is excluded from adjusted profit. This includes our share of interest payable on Tier 1 debt instruments held by associates. Further details are included in Note 13 of the Group financial statements. Fee based revenue is a component of adjusted profit and includes revenue we generate from asset management charges (AMCs), platform charges and other transactional charges. Fee based revenue is shown net of fees, costs of sale, commissions and similar charges. Refer to Note 4 of the Group financial statements.						Adjusted profit reporting provides further analysis of the results reported under IFRS and the Directors believe it helps to give shareholders a fuller understanding of the performance of the business by identifying and analysing adjusting items. Adjusted profit before tax is consistent with the way that financial performance is measured by management and reported to the Board and executive leadership team. Adjusted profit before tax is also a key input to the adjusted earnings per share measure which is used to assess performance for remuneration purposes. Fee based revenue is shown net of commission, costs of sale and similar charges so as to show the net charges received on AUMA and provides the basis for reporting of the fee revenue yield financial ratio.
Adjusted capital generation		KPI
Adjusted capital generation is part of the analysis of movements in CRDIV regulatory capital. Adjusted capital generation is calculated as adjusted profit after tax less returns relating to pension schemes in surplus, which do not benefit regulatory capital. It also excludes the Group's share of associates and joint ventures profit after tax which is replaced by dividends received from these entities. Dividends from significant listed investments are also included. Adjusted diluted capital generation per share is calculated as adjusted capital generation divided by the weighted average number of diluted ordinary shares outstanding.						This measure aims to show how adjusted profit contributes to regulatory capital, and therefore provides insight into our ability to generate capital that is deployed to support value for shareholders.
Cash and liquid resources
Cash and liquid resources are IFRS cash and cash equivalents (netted down for overdrafts), money market instruments and holdings in money market funds. It also includes surplus cash that has been invested in liquid assets such as high quality corporate bonds, gilts and pooled investment funds. Seed capital and co-investments are excluded.						The purpose of this measure is to demonstrate how much cash and invested assets we hold and can be readily accessed.

Adjusted profit before tax

Reconciliation of adjusted profit to IFRS profit by component

The key components of adjusted profit before tax are fee based revenue, adjusted operating expenses and share of associates' and joint ventures' profit before tax. These components provide a meaningful analysis of our adjusted results.

The table below provides a reconciliation of movements between adjusted profit component measures and relevant IFRS terms. A reconciliation of Fee based revenue to the IFRS item Revenue from contracts with customers is provided in Note 4 of the Group financial statements.

Adjusted profit term		Group adjusted profit	Presentation differences	Adjusting items	Capital management	Share of associates' and joint ventures' tax expense	Non-controlling interests	Group IFRS	IFRS term
2020		£m	£m	£m	£m	£m	£m	£m
Fee based revenue KPI R		1,425	214	1,949	21	-	-	3,609	Total income
Adjusted operating expenses		(1,206)	(214)	(1,500)	-	-	-	(2,920)	Total expenses
Capital management		21	-	-	(21)	-	-	-	N/A
Share of associates' and joint ventures' profit before tax		247	-	(81)	-	(17)	-	149	Share of profit from associates and JVs1
Adjusted profit before tax from continuing operations		487	-	368	-	(17)	-	838	Profit before tax
Tax on adjusted profit		(38)	-	53	-	-	-	15	Total tax expense
Share of associates' and joint ventures' tax		(38)	-	-	-	38	-	-	N/A
Adjusted profit after tax from continuing operations		411	-	421	-	21	-	853	Profit for the year from continuing operations
Adjusted profit after tax from discontinued operations		-	-	(15)	-	-	-	(15)	Profit for the year from discontinued operations
Adjusted profit after tax		411	-	406	-	21	-	838	Profit for the year

¹    Includes £45m impairment of interests in joint ventures.

Adjusted profit term	Group adjusted profit	Presentation differences	Adjusting items	Capital management	Share of associates' and joint ventures' tax expense	Non-controlling interests	Group IFRS	IFRS term
2019	£m	£m	£m	£m	£m	£m	£m
Fee based revenue	1,634	619	1,703	37	-	-	3,993	Total income
Adjusted operating expenses	(1,333)	(619)	(2,120)	-	-	-	(4,072)	Total expenses
Capital management	37	-	-	(37)	-	-	-	N/A
Share of associates' and joint ventures' profit before tax	246	-	84	-	(8)	-	322	Share of profit from associates and JVs2
Adjusted profit before tax from continuing operations	584	-	(333)	-	(8)	-	243	Profit before tax
Tax on adjusted profit	(69)	-	41	-	-	-	(28)	Total tax expense
Share of associates' and joint ventures' tax	(46)	-	-	-	46	-	-	N/A
Adjusted profit after tax from continuing operations	469	-	(292)	-	38	-	215	Profit for the year from continuing operations
Adjusted profit after tax from discontinued operations	-	-	56	-	-	-	56	Profit for the year from discontinued operations
Adjusted profit after tax	469	-	(236)	-	38	-	271	Profit for the year

²    Includes £243m reversal of impairment of interests in associates.

This reconciliation includes a number of reconciling items which arise due to presentation differences between IFRS reporting requirements and the determination of fee based revenue and adjusted operating expenses. Fee based revenue and adjusted operating expenses exclude items which have an equal and opposite effect on IFRS income and IFRS expenses in the consolidated income statement. This particularly relates to income and expenses of unit linked funds, where investment returns are for the account of policyholders. Investment return from unit linked business in 2020 was £49m (2019: £392m). Other presentation differences also include commission and other cost of sales expenses which are presented in expenses in the consolidated income statement but are netted against fee based revenue in the analysis of Group adjusted profit by segment.

The table below provides a summarised reconciliation of adjusted profit before tax (split by continuing operations, discontinued operations and Total) to Profit before tax:

	Continuing operations			Discontinued operations			Total
	2020	2019	2018	2020	2019	2018	2020	2019	2018
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Adjusted profit before tax	487	584	650	-	-	210	487	584	860
Share of associates' and joint ventures' tax expense	(17)	(8)	(40)	-	-	-	(17)	(8)	(40)
Total adjusting items	368	(333)	(1,397)	(15)	56	1,519	353	(277)	122
Profit attributable to non-controlling interests - ordinary shares	-	-	-	-	-	5	-	-	5
Profit before tax1	838	243	(787)	(15)	56	1,734	823	299	947

¹    Discontinued operations shown as (loss)/profit before tax expense attributable to equity holders.

Analysis of adjusting items

The table below provides detail of the adjusting items made in the calculation of adjusted profit before tax:

	Continuing operations			Discontinued operations			Total
	2020	2019	2018	2020	2019	2018	2020	2019	2018
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Restructuring and corporate transaction expenses	(355)	(407)	(239)	-	-	(264)	(355)	(407)	(503)
Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts	(1,287)	(1,844)	(1,155)	-	-	-	(1,287)	(1,844)	(1,155)
Profit on disposal of subsidiaries	-	-	-	-	-	1,780	-	-	1,780
Profit on disposal of interests in associates	1,858	1,542	185	-	-	-	1,858	1,542	185
(Loss on)/reversal of impairment of associates and joint ventures	(45)	243	(228)	-	-	-	(45)	243	(228)
Change in fair value of significant listed investments	65	-	-	-	-	-	65	-	-
Investment return variances and economic assumption changes	46	(25)	54	-	-	(41)	46	(25)	13
Other	86	158	(14)	(15)	56	44	71	214	30
Total adjusting items	368	(333)	(1,397)	(15)	56	1,519	353	(277)	122

An explanation for why individual items are excluded from adjusted profit is set out below:

·  Restructuring and corporate transaction expenses are excluded from adjusted profit. Restructuring includes the impact of major regulatory change. By highlighting and excluding these costs we aim to give shareholders a fuller understanding of the performance of the business. Restructuring and corporate transaction expenses include costs relating to the integration of businesses acquired. Other restructuring costs excluded from adjusted profit relate to projects which have a significant impact on the way the Group operates. Costs are only excluded from adjusted profit where they are outwith business as usual activities and the costs would not have been incurred had the restructuring project not taken place. For headcount related costs, where duplicate posts are identified as a result of an integration or transformation plan, the duplicated cost will be treated as a restructuring cost from the beginning of the process which eliminates the duplicate cost. The 2020 expenses included costs relating to integration and implementing our simplified operating model of £79m (2019: £214m), £112m (2019: £37m) in respect of Phoenix separation costs, and £69m (2019: £41m) of other transformation related restructuring costs. 2020 also included £39m (2019: £33m) relating to our share of the restructuring costs of joint ventures and associates (primarily Phoenix). 2019 also included £49m relating to the repurchase of subordinated debt and £20m variable compensation expense related to the receipt of £140m LBG compensation.

·  Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts is included as an adjusting item. This is consistent with peers and therefore excluding these items aids comparability. Highlighting this as an adjusting item aims to give a fuller understanding of these accounting impacts which arise where businesses have been acquired but do not arise where businesses have grown organically. Further details are provided in Note 15 of the Group financial statements.

·  Profits on the disposal of a subsidiary, joint venture or associate are also removed to assist comparability of results period on period. Profit on disposal of interests in associates in 2020 of £1,858m (2019: £1,542m), includes a one-off accounting gain of £1,051m following the reclassification of HDFC Life from an investment in associates accounted for using the equity method to equity securities measured at fair value (see Note 16), £540m from the sale of 5.83% of shares in HDFC Life (2019: £1,337m, 14.49%) and £263m from the sale of 5.64% of shares in HDFC Asset Management (2019: £204m, 3.02%). Details are provided in Note 1 of the Group financial statements.

·  The impairment of associates and joint ventures of £45m relates to our joint venture with Virgin Money. The reversal of impairment of associates in 2019 of £243m reflected the recovery of the Phoenix share price and reversed the impairment recognised in 2018. These impairment losses/reversals are considered one-off items and not indicative of the long-term operating performance of the Group and have therefore been excluded from adjusted profit to assist comparability of results period to period. More details are provided in Note 16 of the Group financial statements.

·  The change in fair value of significant listed investments of £65m represents the impact of movements in the listed share price on our 8.89% holding in HDFC Life from 3 December 2020 to 31 December 2020. Excluding fair value movements on significant listed investments for the purposes of adjusted profit is aligned with our treatment of gains on disposal for these holdings when they were classified as an associate, and reflects that the fair value movements are not indicative of the long-term operating performance of the group.

·  Investment return variances and economic assumption changes in the Group's associate and joint venture insurance entities are excluded from adjusted profit. Where associates and joint ventures have a policy for determining investment return variances and economic assumption changes, the Group uses the policy of the associate or joint venture for including their results in the Group's adjusted profit. This currently applies only to the Group's investment in Phoenix. Details of the Phoenix policy are included in Note 13 of the Group financial statements.

·  Details on items classified as 'Other' in the table on the previous page are provided in Note 13 of the Group financial statements. In 2020 this includes £66m relating to our share of Phoenix gains relating to the acquisition of ReAssure and the completion of the Part VII transfer of the Legal and General mature savings business. Also included is the gain on disposal of SL Asia of £8m.

The table below provides a breakdown for the calculation of our share of adjusted profit before tax from Phoenix of £163m which is included in the Insurance associates and joint ventures reportable segment total of £203m. Phoenix use an operating profit alternative performance measure which is before finance costs, while the Group's adjusted profit is after deducting finance costs.

	2020	2020	2019	2019
	100%	14.42%1	100%	19.97%
	£m	£m	£m	£m
Operating profit before tax (Phoenix APM)	1,199	196	810	162
Finance costs	(191)	(33)	(127)	(26)
Adjusted profit before tax (Standard Life Aberdeen APM)	1,008	163	683	136

¹    Our holding in the enlarged Phoenix Group reduced from 19.97% to 14.43% following the completion of its acquisition of ReAssure Group plc on 22 July 2020 (31 December 2020: 14.42%) and therefore the results shown above are based on 19.97% until 21 July 2020.

Adjusted capital generation

The table below provides a reconciliation of movements between adjusted profit after tax and adjusted capital generation. A reconciliation of adjusted profit after tax to IFRS profit for the year is included earlier in this section.

	2020	2019
	£m	£m
Adjusted profit after tax	411	469
Remove staff pension scheme returns	(20)	(29)
Remove associates' and joint ventures' adjusted profit after tax	(209)	(200)
Add associates' and joint ventures' dividends received	80	93
Adjusted capital generation	262	333

Staff pension scheme returns

Staff pension scheme returns are the contribution to adjusted profit before tax from defined benefit pension schemes which are in surplus and reconciled below:

	2020	2019
	£m	£m
Total income recognised in the consolidated income statement per Note 34 (c) of the Group financial statements	19	40
Past service costs (included in adjusting items)	-	(13)
Remove IFRS charge relating to schemes in deficit	1	2
	20	29

Share of associates' and joint ventures' adjusted profit after tax

An analysis is provided below:

	2020	2019
	£m	£m
Share of associates' and joint ventures' adjusted profit before tax - Note 2 (b)(i)	247	246
Share of associates' and joint ventures' adjusted tax expense - Note 2 (b)(i)	(38)	(46)
Share of associates' and joint ventures' adjusted profit after tax	209	200

Associates' and joint ventures' dividends received

This information is disclosed in Note 16 of the Group financial statements. An analysis is provided below:

	2020	2019
	£m	£m
Phoenix	67	67
HDFC Life	-	9
HDFC Asset Management	13	17
Associates' and joint ventures' dividends received	80	93

Cash and liquid resources

The table below provides a reconciliation between IFRS cash and cash equivalents and cash and liquid resources. Seed capital and co-investments are excluded. Details of seed capital and co-investments are provided in Note 38 (b).

	2020	2019
	£bn	£bn
Cash and cash equivalents per Note 24 of the Group financial statements	1.5	1.6
Bank overdrafts - Note 24	(0.2)	(0.3)
Debt securities excluding third party interests1 - Note 38 (c)(i)	1.0	1.2
Corporate funds held in absolute return funds - Note 38 (b)(i)(i)	0.2	0.2
Cash and liquid resources	2.5	2.7

¹    Excludes £54m (2019: £78m) relating to seeding, see Note 38 (b).

9.3 Surplus regulatory capital

The £2.3bn indicative capital surplus below includes a deduction to allow for the proposed final dividend which will be paid in May 2021.

At 31 December 2020, the indicative regulatory capital position was as follows:

	2020	FY 2019
CRD IV Group regulatory capital position	£bn	£bn
Common Equity Tier 1 capital resources	2.9	2.2
Tier 2 capital resources	0.5	0.6
Total regulatory capital resources	3.4	2.8
Total regulatory capital requirements	(1.1)	(1.1)
Surplus regulatory capital	2.3	1.7

The Group's capital resources include c£0.8bn (2019: c£0.3bn) from holdings in insurance entities that it is expected will no longer be eligible following the implementation of the Investment Firm Prudential Regime (IFPR) from 1 January 2022. The IFPR is also expected to introduce constraints on the proportion of the minimum capital requirement that can be met by each tier of capital. As a result, it is estimated that c£0.3bn of existing Tier 2 capital, whilst continuing to be reported within the Group's capital resources, would not be available to meet the current minimum capital requirement from 1 January 2022.

9.4   Financial ratios

We also use a number of financial ratios to help assess our performance and these are also not defined under IFRS. Details of our main financial ratios and how they are calculated are presented below:

Definition				Purpose and changes
Cost/income ratio	KPI  R
This is an efficiency measure that is calculated as adjusted operating expenses divided by fee based revenue in the period.				This ratio is used by management to assess efficiency and reported to the Board and executive leadership team. This ratio is also a measure used to assess performance for remuneration purposes. For 2020, we changed the KPI basis for the cost/income ratio to exclude the share of associates' and joint ventures' profit before tax. This change better links revenue to expenses.
Adjusted diluted earnings per share			KPI  R
Adjusted diluted earnings per share is calculated on adjusted profit after tax. The weighted average number of ordinary shares in issue is adjusted during the period to assume the conversion of all dilutive potential ordinary shares, such as share options granted to employees. Details on the calculation of adjusted diluted earnings per share are set out in Note 12 of the Group financial statements.				Earnings per share is a commonly used financial metric which can be used to measure the profitability and capital efficiency of a company over time. We also calculate adjusted diluted earnings per share to illustrate the impact of adjusting items on the metric. This ratio is used by management to assess performance and reported to the Board and executive leadership team.
Fee revenue yield (bps)
The fee revenue yield is calculated as annualised fee based revenue (excluding performance fees, SL Asia, Focus and Threesixty) divided by monthly average fee based assets.				The average revenue yield on fee based business is a measure that illustrates the average margin being earned on the assets that we manage, administer or advise our clients on. Fee revenue yield is now presented on a vector basis reflecting changes in our strategy. This includes changes in the allocation of fee based revenue, a reconciliation is provided in Section 9.4.3.
Investment performance		KPI  R
Investment performance has been aggregated using a money weighted average of our assets under management which are outperforming their respective benchmark. Calculations for investment performance are made gross of fees with the exception of those for which the stated comparator is net of fees. The investment performance calculation covers all funds that aim to outperform a benchmark, with certain assets excluded where this measure of performance is not appropriate or expected, such as private markets, execution only mandates and Aberdeen Standard Capital, as well as replication tracker funds which aim to perform in line with a given index.				As an asset managing business this measure demonstrates our ability to generate investment returns for our clients.

9.4.1 Cost/income ratio

 

	2020	2019
Adjusted operating expenses (£m)	(1,206)	(1,333)
Fee based revenue (£m)	1,425	1,634
Share of associates' and joint ventures' profit before tax (£m)	247	246
Cost/income ratio (%)	85	82
Cost/income ratio including our share of associates' and joint ventures' profit before tax (%)	72	71

9.4.2 Fee revenue yield (bps)¹

	Average AUMA (£bn)			Fee based revenue (£m)			Fee revenue yield (bps)
	2020	2019		2020	2019		2020	2019
Investments
Institutional and Wholesale2	235.1	239.0		922	1,027		38.8	42.8
Insurance	204.7	258.5		224	317		10.9	12.2
Adviser	61.5	59.3		137	150		22.3	25.3
Personal2	12.6	10.6		80	70		58.5	59.2
Parmenion	7.3	6.2		25	21		34.2	34.8
Eliminations	(10.2)	(10.1)		N/A	N/A		N/A	N/A
Fee revenue yield2	511.0	563.5		1,388	1,585		26.9	27.9
SL Asia				7	12
Performance fees				30	37
Fee based revenue				1,425	1,634

Analysis of Institutional and Wholesale by asset class³

 

	Average AUM (£bn)			Fee based revenue (£m)			Fee revenue yield (bps)
	2020	2019		2020	2019		2020	2019
Equities	61.9	71.8		403	472		65.1	65.7
Fixed income	47.1	47.5		137	131		29.0	27.6
Multi-asset	33.5	39.3		125	173		37.4	44.0
Private markets	16.5	15.4		79	71		47.9	46.5
Real estate	27.1	29.3		129	142		47.8	48.3
Alternatives4	19.0	13.0		20	17		10.5	12.9
Quantitative	6.6	5.5		4	3		5.6	5.5
Cash/Liquidity	23.4	17.2		16	12		6.8	7.1
Institutional and Wholesale	235.1	239.0		913	1,021		38.8	42.8

Analysis of Adviser revenue yield

Fee based revenue (gross basis) includes revenue passed to the product provider as shown below in other cost of sales. The cost of sales are netted against fee based revenue as presented in 9.4.2 above. The fee revenue yield presented on a gross basis in the table below represents the average bps charge payable by clients.

	Average AUMA (£bn)			Fee based revenue (£m)			Fee revenue yield (bps)
	2020	2019		2020	2019		2020	2019
Fee based revenue (net of cost of sales)	61.5	59.3		137	150		22.3	25.3
Add: Other cost of sales - Note 4 (a)	N/A	N/A		27	26		N/A	N/A
Fee based revenue (gross of cost of sales)	61.5	59.3		164	176		26.7	29.6

¹    Fee revenue yield is now presented on a vector basis and 2019 comparatives have been restated on this basis. See Section 9.4.3 for more information.

²    Institutional and Wholesale fee revenue yield excludes revenue of £9m (2019: £6m) and Personal fee revenue yield excludes revenue of £7m (2019: £7m), for which there are no attributable assets.

³    Excludes revenue of £9m (2019: £6m), for which there are no attributable assets.

⁴    Alternatives average AUM includes c£12bn (2019: c£7bn) of lower margin advisory mandates. At 31 December 2020 the closing AUM of these mandates was c£12bn.

9.4.3 Fee based revenue - reconciliation to previously disclosed information

	Fee based revenue	Methodology change	Reallocation of technology business and Virgin Money revenue	Parmenion reallocation	Fee based revenue
2019 as previously disclosed	£m	£m	£m	£m	£m	2019 on revised basis
						Investments
Institutional and Wholesale	1,011	9	7	-	1,027	Institutional and Wholesale
Strategic insurance partners	317	-	-	-	317	Insurance
Platforms and Wealth
Wrap and Elevate	150	-	-	-	150	Adviser
Wealth	107	(9)	(7)	(21)	70	Personal
	-	-	-	21	21	Parmenion
Eliminations	N/A	-	-	-	N/A	Eliminations
	1,585	-	-	-	1,585
SL Asia	12	-	-	-	12	SL Asia
Performance fees	37	-	-	-	37	Performance fees
Fee based revenue	1,634	-	-	-	1,634	Fee based revenue

9.4.4 Investment performance

	1 year			3 years			5 years
% of AUM ahead of benchmark1	2020	2019		2020	2019		2020	2019
Equities	73	59		74	31		62	31
Fixed income	78	83		81	86		85	72
Multi-asset	61	68		33	46		36	61
Real estate	41	39		37	48		44	36
Alternatives	95	89		95	98		93	100
Quantitative	32	44		17	52		24	58
Cash/Liquidity	94	91		89	88		87	88
Total	71	74		66	60		68	67

¹    The investment performance calculation covers all funds (including Insurance) that aim to outperform a benchmark, with certain assets excluded where this measure of performance is not appropriate or expected. Calculations for investment performance are made gross of fees except where the stated comparator is net of fees. Further details about the calculation of investment performance are included in the Glossary.

9.5   Assets under management and administration and flows

Definition		Purpose and changes
AUMA
AUMA is a measure of the total assets we manage, administer or advise on behalf of our clients. 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 and institutional clients. AUM also includes captive assets managed on behalf of the Group including assets managed for corporate purposes. AUA is a measure of the total assets we administer for clients through platform products such as ISAs and SIPPs. AuAdv is a measure of the total assets we advise our clients on, for which there is an ongoing charge.		The amount of funds that we manage, administer or advise directly impacts the level of fee based revenue that we receive. AUMA is now presented on a vector basis and 2019 comparatives have been restated on this basis. See Section 9.9 for a reconciliation to previously disclosed information.
Net flows
Net flows represent gross inflows less gross outflows or redemptions. Gross inflows are new funds from clients. Gross outflows or redemptions is the money withdrawn by clients during the period.		The level of net flows that we generate directly impacts the level of fee based revenue that we receive. Net flows are now presented on a vector basis and 2019 comparatives have been restated on this basis.

 

9.5.1 Analysis of AUMA¹

	Opening AUMA at 1 Jan 2020	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions	Closing AUMA at 31 Dec 2020
12 months ended 31 December 2020	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Investments
Institutional	160.6	26.6	(23.4)	3.2	7.9	-	171.7
Wholesale	76.1	23.2	(26.1)	(2.9)	6.8	-	80.0
Insurance	235.8	17.6	(50.4)	(32.8)	2.2	-	205.2
Adviser	62.6	6.3	(4.4)	1.9	2.5	-	67.0
Personal2	12.8	1.1	(1.1)	-	0.5	-	13.3
Parmenion	6.9	1.5	(0.5)	1.0	0.2	-	8.1
Eliminations2	(10.2)	(2.0)	2.6	0.6	(1.1)	-	(10.7)
Total AUMA	544.6	74.3	(103.3)	(29.0)	19.0	-	534.6

 

	Opening AUMA at 1 Jan 2019	Gross inflows	Redemptions	Net flows	Market and other movements3	Corporate actions4	Closing AUMA at 31 Dec 2019
12 months ended 31 December 2019	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Investments
Institutional	166.7	27.1	(41.3)	(14.2)	8.1	-	160.6
Wholesale	72.5	23.8	(27.6)	(3.8)	6.7	0.7	76.1
Insurance	255.0	26.9	(71.3)	(44.4)	25.2	-	235.8
Adviser	54.2	7.0	(4.7)	2.3	6.1	-	62.6
Personal2	5.7	1.1	(1.0)	0.1	5.2	1.8	12.8
Parmenion	5.2	2.4	(1.3)	1.1	0.6	-	6.9
Eliminations2	(7.8)	(2.1)	2.6	0.5	(2.9)	-	(10.2)
Total AUMA	551.5	86.2	(144.6)	(58.4)	49.0	2.5	544.6

¹    AUMA is now presented on a vector basis and 2019 comparatives have been restated on this basis. See Section 9.9 for more information.

²    Eliminations remove the double count reflected in Investments, Adviser and Personal. The Personal vector includes assets that are reflected in both Aberdeen Standard Capital and Advice businesses. This double count is also removed within Eliminations.

³    Personal market and other movements include 1825 opening assets under advice of £4.0bn.

⁴    Corporate actions in Wholesale relate to the acquisition of Orion Partners (£0.7bn). Personal corporate actions include £1.8bn of assets under advice following 1825's acquisition of Grant Thornton's wealth advisory business and BDO Northern Ireland's wealth management business.

 

9.5.2 Quarterly net flows¹

	3 months to 31 Dec 20	3 months to 30 Sep 20	3 months to 30 Jun 20	3 months to 31 Mar 20	3 months to 31 Dec 19
15 months ended 31 December 2020	£bn	£bn	£bn	£bn	£bn
Investments
Institutional	1.4	0.4	2.4	(1.0)	-
Wholesale	(0.4)	(0.5)	(0.2)	(1.8)	2.3
Insurance	(2.6)	(4.0)	0.3	(26.5)	(10.8)
Adviser	0.5	0.3	0.4	0.7	0.6
Personal	(0.1)	-	0.2	(0.1)	0.1
Parmenion	0.2	0.2	0.3	0.3	0.3
Eliminations	0.2	0.2	-	0.2	-
Total net flows	(0.8)	(3.4)	3.4	(28.2)	(7.5)

 

9.6   Institutional and Wholesale AUM

Detailed asset class split

	Opening AUM at 1 Jan 2020	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions	Closing AUM at 31 Dec 2020
12 months ended 31 December 20201	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Developed markets equities	14.7	3.6	(3.8)	(0.2)	0.2	-	14.7
Emerging markets equities	21.6	1.6	(6.2)	(4.6)	2.0	-	19.0
Asia Pacific equities	23.3	4.2	(4.8)	(0.6)	3.9	-	26.6
Global equities	9.4	1.4	(2.7)	(1.3)	0.8	-	8.9
Total equities	69.0	10.8	(17.5)	(6.7)	6.9	-	69.2
Developed markets credit	32.2	6.8	(9.3)	(2.5)	3.0	-	32.7
Developed markets rates	3.3	0.7	(0.9)	(0.2)	(0.3)	-	2.8
Emerging markets fixed income	10.9	3.8	(2.5)	1.3	-	-	12.2
Total fixed income	46.4	11.3	(12.7)	(1.4)	2.7	-	47.7
Absolute return	12.7	0.7	(2.6)	(1.9)	0.7	-	11.5
Diversified growth/income	1.9	0.2	(0.4)	(0.2)	(1.1)	-	0.6
MyFolio	15.7	2.4	(2.9)	(0.5)	0.4	-	15.6
Other multi-asset	4.1	0.9	(1.0)	(0.1)	5.7	-	9.7
Total multi-asset	34.4	4.2	(6.9)	(2.7)	5.7	-	37.4
Private equity	12.1	1.9	(1.0)	0.9	(1.8)	-	11.2
Private credit and solutions	-	0.5	-	0.5	0.3	-	0.8
Infrastructure equity	4.0	0.1	-	0.1	0.9	-	5.0
Total private markets	16.1	2.5	(1.0)	1.5	(0.6)	-	17.0
UK real estate	13.4	0.5	(1.3)	(0.8)	(3.4)	-	9.2
European real estate	12.1	1.0	(1.0)	-	-	-	12.1
Global real estate	1.0	0.3	(0.3)	-	0.8	-	1.8
Real estate multi-manager	1.4	0.3	(0.1)	0.2	-	-	1.6
Total real estate	27.9	2.1	(2.7)	(0.6)	(2.6)	-	24.7
Total alternatives	17.7	2.4	(1.1)	1.3	0.5	-	19.5
Total quantitative	7.8	1.3	(1.6)	(0.3)	(1.1)	-	6.4
Total cash/liquidity	17.4	15.2	(6.0)	9.2	3.2	-	29.8
Total	236.7	49.8	(49.5)	0.3	14.7	-	251.7

¹    AUMA is now presented on a vector basis and 2019 comparatives have been restated on this basis. See Section 9.9 for more information.

 

	Opening AUM at 1 Jan 2019	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions	Closing AUM at 31 Dec 2019
12 months ended 31 December 20191	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Developed markets equities	12.9	2.7	(3.4)	(0.7)	2.5	-	14.7
Emerging markets equities	25.0	2.1	(9.5)	(7.4)	4.0	-	21.6
Asia Pacific equities	22.5	3.8	(5.3)	(1.5)	2.3	-	23.3
Global equities	12.5	1.0	(5.6)	(4.6)	1.5	-	9.4
Total equities	72.9	9.6	(23.8)	(14.2)	10.3	-	69.0
Developed markets credit	32.1	6.0	(7.8)	(1.8)	1.9	-	32.2
Developed markets rates	5.2	0.6	(2.8)	(2.2)	0.3	-	3.3
Emerging markets fixed income	9.4	3.7	(2.5)	1.2	0.3	-	10.9
Total fixed income	46.7	10.3	(13.1)	(2.8)	2.5	-	46.4
Absolute return	21.9	1.1	(12.8)	(11.7)	2.5	-	12.7
Diversified growth/income	1.7	0.5	(0.3)	0.2	-	-	1.9
MyFolio	13.9	2.5	(2.4)	0.1	1.7	-	15.7
Other multi-asset	5.5	0.8	(2.2)	(1.4)	-	-	4.1
Total multi-asset	43.0	4.9	(17.7)	(12.8)	4.2	-	34.4
Private equity	12.3	2.1	(2.8)	(0.7)	0.5	-	12.1
Private credit and solutions	-	-	(0.1)	(0.1)	0.1	-	-
Infrastructure equity	3.7	0.4	-	0.4	(0.1)	-	4.0
Total private markets	16.0	2.5	(2.9)	(0.4)	0.5	-	16.1
UK real estate	15.3	0.9	(2.3)	(1.4)	(0.5)	-	13.4
European real estate	12.2	1.6	(0.8)	0.8	(0.9)	-	12.1
Global real estate	0.8	0.1	(0.2)	(0.1)	(0.4)	0.7	1.0
Real estate multi-manager	1.4	0.3	(0.2)	0.1	(0.1)	-	1.4
Total real estate	29.7	2.9	(3.5)	(0.6)	(1.9)	0.7	27.9
Total alternatives	12.3	7.7	(1.7)	6.0	(0.6)	-	17.7
Total quantitative	2.1	5.2	(0.8)	4.4	1.3	-	7.8
Total cash/liquidity	16.5	7.8	(5.4)	2.4	(1.5)	-	17.4
Total	239.2	50.9	(68.9)	(18.0)	14.8	0.7	236.7

9.7 Analysis of Insurance

	Opening AUM at 1 Jan 2020	Gross inflows	Redemptions	Net  flows	Market and other movements	Corporate actions	Closing AUM at 31 Dec 2020
12 months ended 31 December 2020	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Phoenix2	169.7	13.0	(18.7)	(5.7)	7.5	-	171.5
Lloyds	64.5	4.2	(31.5)	(27.3)	(5.4)	-	31.8
Other2	1.6	0.4	(0.2)	0.2	0.1	-	1.9
Total	235.8	17.6	(50.4)	(32.8)	2.2	-	205.2

 

	Opening AUMA at 1 Jan 2019	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate  actions	Closing AUMA at 31 Dec 2019
12 months ended 31 December 2019	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Phoenix2	154.8	16.3	(17.3)	(1.0)	15.9	-	169.7
Lloyds	98.6	10.6	(53.7)	(43.1)	9.0	-	64.5
Other2	1.6	-	(0.3)	(0.3)	0.3	-	1.6
Total	255.0	26.9	(71.3)	(44.4)	25.2	-	235.8

¹    AUMA is now presented on a vector basis and 2019 comparatives have been restated on this basis. See Section 9.9 for more information.

²    Following the acquisition of ReAssure by the Phoenix Group in 2020, ReAssure is now included within Phoenix for the analysis of Insurance AUM. 2019 has been restated on the same basis.

9.8 Analysis of total AUM (excluding Parmenion)¹

9.8.1 AUM by geography

	31 Dec 2020				31 Dec 2019
	Institutional and Wholesale	Insurance	Personal2	Total	Institutional and Wholesale	Insurance	Personal2	Total
	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
UK	116.5	205.2	7.8	329.5	112.2	235.8	7.1	355.1
Europe, Middle East and Africa (EMEA)	65.9	-	-	65.9	55.8	-	-	55.8
Asia Pacific (APAC)	16.8	-	-	16.8	16.9	-	-	16.9
Americas	52.5	-	-	52.5	51.8	-	-	51.8
Total AUM	251.7	205.2	7.8	464.7	236.7	235.8	7.1	479.6

9.8.2 AUM by asset class

	31 Dec 2020				31 Dec 2019
	Institutional and Wholesale	Insurance	Personal2	Total	Institutional and Wholesale	Insurance	Personal2	Total
	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Equities	69.2	48.8	-	118.0	69.0	50.3	-	119.3
Fixed income	47.7	69.0	-	116.7	46.4	88.5	-	134.9
Multi-asset	37.4	7.0	7.8	52.2	34.4	10.2	7.1	51.7
Private markets	17.0	1.8	-	18.8	16.1	0.8	-	16.9
Real estate	24.7	8.3	-	33.0	27.9	9.2	-	37.1
Alternatives	19.5	-	-	19.5	17.7	0.6	-	18.3
Quantitative	6.4	45.0	-	51.4	7.8	46.7	-	54.5
Cash/Liquidity	29.8	25.3	-	55.1	17.4	29.5	-	46.9
Total AUM	251.7	205.2	7.8	464.7	236.7	235.8	7.1	479.6

¹    AUMA is now presented on a vector basis and 2019 comparatives have been restated on this basis. See Section 9.9 for more information.

²    Excludes assets under advice of £5.5bn at 31 December 2020 (2019: £5.7bn).

9.9 AUMA - Reconciliation to previously disclosed information

	Closing AUMA	Parmenion reallocation	Virgin Money reallocation	Closing AUMA
2019 as previously disclosed	£bn	£bn	£bn	£bn	2019 on revised basis
					Investments
Institutional	160.6	-	-	160.6	Institutional
Wholesale	72.4	-	3.7	76.1	Wholesale
Strategic insurance partners	235.8	-	-	235.8	Insurance
Platforms and Wealth
Wrap and Elevate	62.6	-	-	62.6	Adviser
Wealth	23.4	(6.9)	(3.7)	12.8	Personal
	-	6.9	-	6.9	Parmenion
Eliminations	(10.2)	-	-	(10.2)	Eliminations
Total AUMA	544.6	-	-	544.6	Total AUMA