Standard Life Aberdeen plc

Full Year Results 2017

Part 7 of 8

 

9. Company financial statements

Company statement of financial position

As at 31 December 2017

		2017	2016
	Notes	£m	£m
Assets
Investments in subsidiaries	A	9,425	4,769
Investments in associates and joint ventures	B	134	134
Loans to subsidiaries	C	324	323
Debt securities	C	857	605
Receivables and other financial assets	C	76	54
Other assets	F	27	8
Cash and cash equivalents	C	7	55
Total assets		10,850	5,948
Equity
Share capital	H	364	242
Shares held by trusts	I	(36)	(2)
Share premium reserve	H	639	634
Retained earnings
Brought forward retained earnings		1,351	837
Profit for the year		624	351
Other movements in retained earnings		(411)	163
Total retained earnings		1,564	1,351
Other reserves	K	6,390	2,393
Total equity		8,921	4,618
Liabilities
Subordinated liabilities	L	1,876	1,319
Deferred tax liabilities	N	-	3
Derivative financial liabilities	L	33	-
Other financial liabilities	L	19	8
Other liabilities	P	1	-
Total liabilities		1,929	1,330
Total equity and liabilities		10,850	5,948

The financial statements on pages 265 to 279 were approved by the Board and signed on its behalf, by the following Directors:

                                               

 

 

Sir Gerry Grimstone                                                           Bill Rattray

Chairman                                                                              Chief Financial Officer

23 February 2018                                                                 23 February 2018

Company statement of changes in equity

For the year ended 31 December 2017

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity
2017	Notes	£m	£m	£m	£m	£m	£m
1 January		242	(2)	634	1,351	2,393	4,618
Profit for the year		-	-	-	624	-	624
Other comprehensive income that may be reclassified subsequently to profit or loss
Fair value losses on cash flow hedges		-	-	-	-	(33)	(33)
Realised losses on cash flow hedges transferred to income statement		-	-	-	-	13	13
Tax effect of items that may be reclassified subsequently to profit or loss	K	-	-	-	-	3	3
Total other comprehensive income for the year that may be reclassified subsequently to profit or loss		-	-	-	-	(17)	(17)
Total comprehensive income for the year		-	-	-	624	(17)	607
Issue of share capital	H	122	-	5	-	3,972	4,099
Dividends paid on ordinary shares		-	-	-	(469)	-	(469)
Reserves credit for employee share-based payment schemes	K	-	-	-	-	96	96
Transfer to retained earnings for vested employee share-based payment schemes	K	-	-	-	86	(54)	32
Shares acquired by employee trusts		-	(63)	-	-	-	(63)
Shares distributed or sold by employee trusts		-	29	-	(28)	-	1
Aggregate tax effect of items recognised directly in equity		-	-	-	-	-	-
31 December		364	(36)	639	1,564	6,390	8,921

 

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity
2016	Notes	£m	£m	£m	£m	£m	£m
1 January		241	(6)	628	837	2,860	4,560
Profit for the year		-	-	-	351	-	351
Other comprehensive income that may be reclassified subsequently to profit or loss
Fair value gains on available-for-sale financial assets		-	-	-	-	17	17
Tax effect of items that may be reclassified subsequently to profit or loss		-	-	-	-	(3)	(3)
Total other comprehensive income for the year that may be reclassified subsequently to profit or loss		-	-	-	-	14	14
Total comprehensive income for the year		-	-	-	351	14	365
Issue of share capital	H	1	-	6	-	-	7
Dividends paid on ordinary shares		-	-	-	(370)	-	(370)
Expiry of unclaimed asset trust claim period	J	-	-	-	36	-	36
Reserves credit for employee share-based payment schemes	K	-	-	-	-	30	30
Transfer to retained earnings for vested employee share-based payment schemes	K	-	-	-	23	(23)	-
Shares acquired by employee trusts		-	(3)	-		-	(3)
Shares distributed or sold by employee trusts		-	7	-	(7)	-	-
Cancellation of capital redemption reserve		-	-	-	488	(488)	-
Aggregate tax effect of items recognised directly in equity		-	-	-	(7)	-	(7)
31 December		242	(2)	634	1,351	2,393	4,618

Company statement of cash flows

For the year ended 31 December 2017

		2017	2016
	Notes	£m	£m
Cash flows from operating activities
Profit before tax		597	334
Impairment of subsidiary undertakings	A	20	49
Impairment of associate undertaking		-	3
Gains on financial instruments		(2)	(4)
Dividend income from subsidiaries		(794)	(458)
Interest income on loans to subsidiaries		(20)	(20)
Interest income on available-for-sale debt securities		(10)	(12)
Distributions from equity instruments		(34)	(34)
Interest payable on subordinated liabilities		86	82
Movements in operating assets and liabilities		10	5
Taxation paid		-	-
Net cash flows used in operating activities		(147)	(55)
Cash flows from investing activities
Capital injections into existing subsidiaries	A	(413)	(208)
Acquisition of subsidiaries measured at cost		(60)	-
Interest received on loans to subsidiaries		20	20
Interest received on available-for-sale debt securities		15	17
Distributions from equity instruments		34	34
Dividends received from subsidiaries		792	457
Acquisition of subsidiaries at FVTPL	A	(55)	(18)
Disposal of subsidiaries at cost	A	37	-
(Purchase)/sale of debt securities and derivatives		(258)	147
Disposal of investment in associates and joint ventures		-	13
Net cash flows generated from investing activities		112	462
Cash flows from financing activities
Proceeds from issue of subordinated liabilities		565	-
Dividends paid		(469)	(370)
Interest paid on subordinated liabilities		(81)	(82)
Proceeds from issue of shares		5	6
Shares acquired by trusts		(37)	(3)
Sale of shares held by trusts		4	-
Expiry of unclaimed asset trust claim period		-	36
Net cash flows used in financing activities		(13)	(413)
Net decrease in cash and cash equivalents		(48)	(6)
Cash and cash equivalents at the beginning of the year	G	55	61
Cash and cash equivalents at the end of the year	G	7	55
Supplemental disclosures on cash flows from operating activities
Interest received		-	-

 

Company accounting policies

(a)     Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as endorsed by the European Union (EU), with interpretations issued by the IFRS Interpretations Committee and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of available-for-sale financial assets (AFS) and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss (FVTPL).

The principal accounting policies adopted are the same as those set out in the Group financial statements, together with the Company specific policies set out below, and 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 Company has no employees.

(a)(i)   Standards, interpretations and amendments to existing standards that are not yet effective and have not been early adopted by the Company

IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018)

IFRS 9 will replace IAS 39 Financial Instruments: Recognition and Measurement. Details of the Group's assessment of IFRS 9 are given in the basis of preparation of the Group financial statements.  Management have assessed the impact of the standard in relation to the Company financial statements. The main impact is that the Company's debt securities currently classified as available-for-sale and therefore measured at fair value will be measured at amortised cost under IFRS 9. IFRS 9 also introduces a new impairment model, an expected credit loss model, which will replace the current incurred loss model in IAS 39. An impairment loss will now be recognised prior to a loss event occurring. At 31 December 2017 the fair value of available-for-sale securities is £857m with a corresponding available-for-sale financial assets reserve balance of £15m. Of the £857m, £839m is investment grade and £566m is expected to be recovered within one year.

(a)(ii)      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.

(a)(iii) Financial guarantee contracts

The Company recognises and measures financial guarantee and indemnity contracts initially at fair value. The Company must reassess the value at each subsequent reporting date by estimating the expenditure required to settle the contract and comparing this to the fair value (net of any amortisation). The higher of these values is recognised on the statement of financial position.

(a)(iv) Pension costs and other post-retirement benefits

The Group operates a number of defined benefit and defined contribution plans, the assets of which are held in separate trustee administered funds. Further detail is provided in Note 35 of the Group financial statements. The pension plans are funded by payments from employees and by the Group companies, determined by periodic actuarial calculations. The Company is not the sponsoring employer for a defined benefit plan. As a result, the Company treats its participation in defined benefit plans as defined contribution plans.

For the defined contribution plans, the Company pays contributions to separately administered pension insurance plans. The contributions are recognised in profit for the year when they are due.

(b)     Critical accounting estimates and judgement 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 area where estimates and assumptions have the most significant effect on the amounts recognised in the financial statements is as follows:

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

 

Notes to the Company financial statements

A.    Investments in subsidiaries         

		2017	2016
	Notes	£m	£m
Investments in subsidiaries measured at cost		9,092	4,493
Investments in subsidiaries measured at FVTPL	C	333	276
Investments in subsidiaries		9,425	4,769

 

		2017	2016
		£m	£m
At 1 January		4,769	4,591
Investment into existing subsidiaries measured at cost		413	220
Acquisition of subsidiaries at cost		4,243	-
Disposal of subsidiaries measured at cost		(37)	(12)
Impairment of subsidiaries measured at cost		(20)	(49)
Acquisition of subsidiaries at FVTPL		55	19
Gains on subsidiaries at FVTPL		2	-
At 31 December		9,425	4,769

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

On 14 August 2017 the Company acquired Aberdeen Asset Management PLC (Aberdeen) and was renamed Standard Life Aberdeen plc. The Company acquired 100% of the share capital of Aberdeen, and Aberdeen ordinary shareholders received 0.757 of a share in Standard Life Aberdeen plc on the completion date satisfied through newly issued shares. The cost of the investment in Aberdeen was £4,243m consisting of £4,098m based on the fair value of the equity consideration at the date of completion including £98m for shares issued to the Aberdeen Asset Management Employee Benefit Trust 2003, £89m for replacement employee share-based payments reflecting the fair value of the pre-acquisition service element of the awards and transaction costs of £56m. Further details are provided in Note 1 of the Group financial statements.

On 16 August 2017 the Company increased its investment in Standard Life Assurance Limited through the purchase of 13,000,000 ordinary shares for a cash consideration of £13m.

On 22 November 2017 the Company reduced its investment in Standard Life (Mauritius Holdings) 2006 Limited through the disposal of 494,589.5 participating shares for a cash consideration of £37m, as a result of a share capital reduction by Standard Life (Mauritius Holdings) 2006 Limited.

On 13 December 2017 the Company increased its investment in Aberdeen Asset Management PLC through the purchase of 125,000,000 ordinary shares for cash consideration of £400m.

On 11 February 2016 the Company increased its investment in Standard Life Employee Services Limited through the purchase of 8,000 ordinary shares for a cash consideration of £8m.

On 11 April 2016 the Company increased its investment in Standard Life (Mauritius Holdings) 2006 Limited through the purchase of 250,300,000 ordinary shares for a cash consideration of £177m.

On 30 June 2016 the Company increased its investment in Standard Life Assurance Limited through the purchase of 10,000,000 ordinary shares for a cash consideration of £10m.

On 14 December 2016 the Company transferred its 100% holding in Pearson Jones plc to 1825 Financial Planning Limited, the Group's UK-wide financial advice business. The consideration received was 11,600,000 £1 ordinary shares in Standard Life Assurance Limited.

On 22 December 2016 the Company further increased its investment in Standard Life Assurance Limited through the purchase of 13,000,000 ordinary shares for a cash consideration of £13m.

Included within the impairment charge of £20m in 2017 (2016: £49m) is an impairment of £7m (2016: £31m) of the Company's investment in its subsidiary Focus Solutions Group Limited. The recoverable amount is £11m which is its value in use and has been determined using a discount rate of 12% (2016: 12%).  Additionally during 2017, an impairment of £13m (2016: £nil) was recognised in relation to the Company's investment in its subsidiary Standard Life Employee Services Limited. The recoverable amount is £30m which is its value in use and has been determined using a discount rate of 9%. The impairments are as a result of a decrease in projected future revenues of the entities.

During 2016, an impairment charge of £18m was recognised in the Company's investment in its subsidiary Standard Life Oversea Holdings Limited. This was primarily in relation to an impairment of Standard Life Oversea Holdings Limited's investment in Standard Life (Asia) Limited.

Investments in subsidiaries at FVTPL are £333m (2016: £276m) which relate to holdings in money market and absolute return investment funds over which the Group has control.

B.    Investments in associates and joint ventures

		2017	2016
		£m	£m
Investment in associate measured at cost		10	10
Investment in joint venture measured at cost		124	124
Investments in associates and joint ventures		134	134

(a)     Investment in associates

The Company's investment in associate measured at cost relates to a 25.3% (2016: 25.3%) interest in Tenet Group Limited, a company incorporated in England and Wales. The year end date for Tenet Group Limited is 30 September which is different from the Company's year end date of 31 December. For the purposes of the preparation of the Company's financial statements, financial information for the year ended 31 December is used. 

(b)     Investment in joint venture

The Company has a 50% (2016: 50%) interest in Heng An Standard Life Insurance Company Limited, a company incorporated in China. Further details on this joint venture are provided in Note 16 of the Group financial statements.

C.    Financial investments

		Designated as at fair value through profit or loss	Available -for-sale	Loans and receivables	Total
2017	Notes	£m	£m	£m	£m
Investments in subsidiaries at FVTPL		333	-	-	333
Loans to subsidiaries		-	-	324	324
Debt securities		-	857	-	857
Receivables and other financial assets	E	-	-	76	76
Cash and cash equivalents	G	-	-	7	7
Total		333	857	407	1,597

 

		Designated as at fair value through profit or loss	Available -for-sale	Loans and receivables	Total
2016	Notes	£m	£m	£m	£m
Investments in subsidiaries at FVTPL		276	-	-	276
Loans to subsidiaries		-	-	323	323
Debt securities		-	605	-	605
Receivables and other financial assets	E	-	-	54	54
Cash and cash equivalents	G	-	-	55	55
Total		276	605	432	1,313

 

The amount of debt securities expected to be recovered or settled after more than 12 months is £291m (2016: £297m).

The amount of loans to subsidiaries expected to be recovered or settled after more than 12 months is £324m (2016: £323m).

D.    Derivative financial instruments

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

	2017			2016
	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	559	-	(33)	-	-	-
Foreign exchange forwards	6	-	-	6	-	-
Derivative financial instruments	565	-	(33)	6	-	-

Derivative liabilities of £33m (2016: £nil) are 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 has entered into a cross-currency swap which is designated as a hedge of future cash flows. Further details are provided in Note 21 of the Group financial statements.

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
2017	£m	£m	£m	£m	£m
Cash inflows
Foreign exchange forwards	6	-	-	-	6
Cash flow hedges	28	94	118	566	806
Total	34	94	118	566	812
Cash outflows
Foreign exchange forwards	(6)	-	-	-	(6)
Cash flow hedges	(22)	(73)	(91)	(578)	(764)
Total	(28)	(73)	(91)	(578)	(770)
Net derivative financial instruments cash flows	6	21	27	(12)	42

 

	Within 1 year	2-5 years	Total
2016	£m	£m	£m
Cash inflows
Derivative financial liabilities	6	-	6
Total	6	-	6
Cash outflows
Derivative financial liabilities	(6)	-	(6)
Total	(6)	-	(6)
Net derivative financial instruments cash flows	-	-	-

E.     Receivables and other financial assets

		2017	2016
		£m	£m
Due from related parties		43	52
Collateral pledged in respect of derivatives contracts		28	-
Other financial assets		5	2
Total receivables and other financial assets		76	54

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

Receivables and other financial assets are expected to be recovered within 12 months.

F.     Other assets

Other assets of £27m (2016: £8m) comprise amounts due from related parties in respect of Group relief, which are expected to be recovered within 12 months.

G.    Cash and cash equivalents

		2017	2016
		£m	£m
Money at call and term deposits with original maturity of less than three months		7	55
Total cash and cash equivalents		7	55

Money at call and term deposits with original maturity of less than three months are subject to variable interest rates.

H.    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 the shares issued during the year in relation to the acquisition of Aberdeen discussed in Note A.

Details of the dividends paid on ordinary shares by the Company are provided in Note 13 of the Group financial statements. Note 13 also includes information regarding the final dividend proposed by the Directors for the year ended 31 December 2017.

I.      Shares held by trusts

Shares held by trusts relates to shares in Standard Life Aberdeen plc that are held by the Employee Share Trust (EST) and the Unclaimed Asset Trust (UAT). Further details of these trusts are provided in Note 27 of the Group financial statements.

In July 2006 Standard Life demutualised and former members of the mutual company were allocated shares in the new listed Company. Some former members were yet to claim their shares and the UAT held these on their behalf. On expiry of the claim period on 9 July 2016, the entitlement to the unclaimed shares remaining in the UAT transferred to the Company and they became classified as shares held by trusts. During the year ended 31 December 2017 11,719,073 shares were transferred from the UAT to the EST for £nil consideration. An amount equivalent to the fair value of shares as at the date of transfer was donated by the Company to the Standard Life Foundation.

J.     Retained earnings

Transfer for vested employee share-based payments includes £32m (2016: £nil) in relation to replacement awards granted to employees of Aberdeen which vested before the acquisition date and were recognised directly in retained earnings on acquisition.

Included in retained earnings in 2016 is an amount related to the expiry of the UAT claim period. In addition to unclaimed shares, which are referred to in Note I, the UAT held cash in relation to unclaimed cash entitlements arising from both cash entitlements which were allocated to eligible members of the mutual company at the date of demutualisation and dividends received on shares held in the UAT. On expiry of the UAT claim period on 9 July 2016, the entitlement to the unclaimed cash remaining in the UAT transferred partly to the Company and partly to the Standard Life Foundation. The transfer of the cash entitlement to the Company resulted in the recognition of a cash asset of £36m, the impact of which was recognised directly in retained earnings in equity during the year ended 31 December 2016.

K.    Reconciliation of movements in other reserves

		Merger reserve	Equity compensation reserve	Special reserve	Capital redemption reserve	Available-for-sale financial assets	Cash flow hedges	Total
2017		£m	£m	£m	£m	£m	£m	£m
At 1 January		2,080	57	241	-	15	-	2,393
Shares issued in respect of business combinations		3,972	-	-	-	-	-	3,972
Fair value losses on cash flow hedges		-	-	-	-	-	(33)	(33)
Realised losses on cash flow hedges transferred to income statement		-	-	-	-	-	13	13
Reserves credit for employee share-based payments		-	96	-	-	-	-	96
Transfer to retained earnings for vested employee share-based payments		-	(54)	-	-	-	-	(54)
Tax effect of items that may be reclassified subsequently to profit or loss		-	-	-	-	-	3	3
At 31 December		6,052	99	241	-	15	(17)	6,390
2016
At 1 January		2,080	50	241	488	1		2,860
Reserves credit for employee share-based payment schemes		-	30	-	-	-		30
Transfer to retained earnings for vested employee share-based payments		-	(23)	-	-	-		(23)
Cancellation of capital redemption reserve		-	-	-	(488)	-		(488)
Fair value gains on available-for-sale financial assets		-	-	-	-	17		17
Tax effect of items that may be reclassified subsequently to profit or loss		-	-	-	-	(3)		(3)
At 31 December		2,080	57	241	-	15		2,393

Following the completion of the merger of Standard Life plc and Aberdeen Asset Management plc on 14 August 2017 an amount was recognised in the merger reserve representing the difference between the nominal value of shares issued to shareholders of Aberdeen and their fair value on that date. Further information on the merger reserve and special reserve is given in Note 29 of the Group financial statements.

The reserves credit for employee share-based payments includes £57m (2016: £nil) in relation to replacement awards granted to employees of Aberdeen which were unvested at the acquisition date.

On 17 June 2016 the Company's capital redemption reserve was cancelled in accordance with section 649 of the Companies Act 2006 resulting in a transfer of £488m to retained earnings.

L.     Financial liabilities

		Financial liabilities measured at  amortised cost	Cash flow hedge	Total
2017	Notes	£m	£m	£m
Subordinated liabilities	M	1,876	-	1,876
Derivative financial liabilities	D	-	33	33
Other financial liabilities	O	19	-	19
Total		1,895	33	1,928

 

 

		Financial liabilities measured at  amortised cost	Cash flow hedge	Total
2016	Notes	£m	£m	£m
Subordinated liabilities	M	1,319	-	1,319
Other financial liabilities	O	8	-	8
Total		1,327	-	1,327

M.    Subordinated liabilities

	2017		2016
	Principal amount	Carrying value	Principal amount	Carrying value
Subordinated notes:
4.25% US Dollar fixed rate due 30 June 2048	$750m	£556m	-	-
5.5% Sterling fixed rate due 4 December 2042	£500m	£500m	£500m	£499m
Subordinated guaranteed bonds:
6.75% Sterling fixed rate perpetual	£500m	£502m	£500m	£502m
Mutual Assurance Capital Securities:
6.546% Sterling fixed rate perpetual	£300m	£318m	£300m	£318m
Subordinated liabilities		£1,876m		£1,319m

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 £42m (2016: £37m) is expected to be settled within 12 months.

On 18 October 2017, the Company issued US Dollar subordinated notes with a principal amount of $750m. Further information on this and the terms and conditions of all subordinated liabilities is given in Note 34 of the Group financial statements.

N.    Deferred tax liabilities

		2017	2016
		£m	£m
Deferred tax liabilities		-	(3)

The amount of deferred tax liabilities expected to be recovered or settled after more than 12 months is £nil (2016: £3m).

The Company has surrendered the benefit of its tax losses to underlying subsidiaries for a consideration of £27m (2016: £8m).

Recognised deferred tax

		2017	2016
		£m	£m
Deferred tax assets comprise:
Unrealised losses on cash flow hedges		3	-
Deferred tax liabilities comprise:
Unrealised gains on assets held as available-for-sale		(3)	(3)
Net deferred tax liability		-	(3)
Movements in net deferred tax assets/(liabilities) comprise:
At 1 January		(3)	(1)
Amounts credited to net profit		3	1
Amounts charged to other comprehensive income		-	(3)
At 31 December		-	(3)

O.    Other financial liabilities

The amount of other financial liabilities expected to be settled after more than 12 months is £nil (2016: £nil).

P.    Other liabilities

The amount of other liabilities expected to be settled after more than 12 months is £nil (2016: £nil).

Q.    Risk management  

(a)     Overview

The Company is principally involved in the management of its investments in subsidiaries and is responsible for the raising and allocation of capital to ensure that the operational funding and regulatory capital needs of its subsidiaries are met at all times. The Group's capital management policies are explained in Note 47 of the Group financial statements.

Through the management of its investment in subsidiaries and capital position, the Company holds financial instruments and is principally exposed to market, credit and liquidity risks.

The risk management processes of the Company are aligned with those of the Group as a whole. Details of the Group's risk management processes are outlined in the 'Risk Management' section within the Strategic report and in Note 39 of the Group financial statements.

(b)     Market risk

The most significant element of market risk for the Company arises from its exposure to fluctuations in interest rates and equity markets. The Company is exposed to fluctuations in the fair value of future cash flows of financial instruments caused by changes in market interest rates. Financial assets and liabilities which are subject to the most significant exposure to interest rate risk include corporate bonds and money market instruments. The Company is also exposed to fluctuations in equity securities markets, and as a result, changes in the value of its holdings and the return on those holdings.

The Company's investments and liabilities are generally held in its functional currency. However, for strategic and capital reasons the Company may hold investments and liabilities in other currencies. In these cases, derivative financial instruments may be employed to manage currency exposure so that the Company has no remaining significant exposure to foreign exchange fluctuations.

On 18 October 2017, the Company issued US Dollar Subordinated Notes with a principal amount of $750m, the related cash flows expose the Company to foreign currency risk on the principal and coupon payments. The Company manages the foreign exchange risk with a cross-currency swap which is designated as a cash flow hedge.

The market risk exposure to foreign currency assets is matched by liabilities held in the same currency or managed using derivative financial instruments.

Derivative instruments may also be utilised to reduce risk arising from exposure to fluctuations in interest rates and equity indices. Transactions in derivatives are undertaken on a regulated market or are with an approved counterparty. In employing derivatives, the Company must always have sufficient cash and cash equivalents or underlying assets to cover any potential obligation or exercise right following reasonably foreseeable adverse variations.

The following table provides information regarding the market risk exposure to debt securities of the Company at 31 December 2017 and 31 December 2016, showing diversification by geographic region.

	Geography
	UK		Europe		Other		Total
	2017	2016	2017	2016	2017	2016	2017	2016
	£m	£m	£m	£m	£m	£m	£m	£m
Debt securities	232	215	464	254	161	136	857	605

(b)(i) Sensitivity analysis - market risk

The table below illustrates the sensitivity of profit after tax to changes in equity security prices and to changes in interest rates as at the reporting date, assuming other assumptions remain unchanged.

	Equity security prices						Interest rates
	+20%		-20%		+10%		-10%		+1%		-1%
	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Impact on profit after tax	5	4	(6)	(4)	3	2	(3)	(2)	(3)	(2)	3	2

Equity sensitivity to market risk

The Company classifies certain debt securities as available-for-sale. These debt securities are measured at fair value. Interest is calculated using the effective interest method and recognised in profit or loss for the year. Other changes in fair value and the related tax are recognised in other comprehensive income. As a result, the sensitivity of the Company's equity to variations in interest rate risk exposures differs from the sensitivity of the Company's profit after tax to variations in interest rate risk exposures.

The Company's equity sensitivity to a 1% increase in interest rates is (£15m) (2016: (£17m)) and to a 1% decrease in interest rates is £15m (2016: £17m). 

The sensitivity of the Company's total equity to change in equity security prices in respect of each of the scenarios shown in the preceding tables is the same as the sensitivity of the Company's profit after tax.

(c)     Credit risk

The Company is exposed to credit risk from the risk of exposure to loss if a counterparty fails to perform its financial obligations, including failure to perform these obligations in a timely manner. Exposure also includes the risk of a reduction in the value of assets due to widening of credit spreads. Any loans to subsidiaries require approval from the Group's Enterprise Risk Management Committee prior to being transacted.

(c)(i)  Credit exposure of financial assets

The following table provides an analysis of the quality of financial assets that are neither past due nor impaired at the reporting date and are exposed to credit risk. An explanation of credit ratings is included in Note 39(c) of the Group financial statements.

The total amount in the table below represents the Company's credit exposure to financial investments at the year end without taking into account any collateral held.

	Investments in subsidiaries at FVTPL		Loans to subsidiaries		Debt securities		Receivables           and other     financial assets		Cash and cash equivalents		Total
	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
AAA	-	-	-	-	37	36	-	-	-	-	37	36
AA	-	-	-	-	166	127	-	-	1	2	167	129
A	-	-	-	-	529	295	-	-	4	10	533	305
BBB	-	-	-	-	107	131	-	-	2	43	109	174
Below BBB	-	-	-	-	17	15	-	-	-	-	17	15
Not rated	333	276	324	323	1	1	76	54	-	-	734	654
Total	333	276	324	323	857	605	76	54	7	55	1,597	1,313

Investments in subsidiaries at FVTPL of £333m (2016: £276m) includes £203m (2016: £201m) invested in absolute return funds and £130m (2016: £75m) relating to a holding in a money market fund. These funds are managed by a subsidiary company and are not rated. The money market fund invests in a range of counterparties that are externally rated, and uses concentration limits and maturity limits in managing its exposures.

At 31 December 2017 and 31 December 2016, no financial assets were past due or impaired.

(d)     Liquidity risk

Liquidity risk is the risk that the Company is unable to realise investments and other assets in order to settle its financial obligations when they fall due, or can do so only at excessive cost. The Company ensures that it can meet its financial obligations as they fall due by maintaining suitable levels of liquid assets. The obligations arising from subordinated liabilities are mostly offset by receipts arising from loans to subsidiaries and investments in subsidiaries. Refer to Note D for the maturity profile of undiscounted cash flows of derivative financial instruments.

Liquidity risk is managed through the Group liquidity and capital management policy which is outlined in Note 39(e) of the Group financial statements. The Company is required to manage risk in accordance with Group policy and to take mitigating action as appropriate to operate within defined risk appetites.

Liquidity risk is managed by the Company in consultation with the central Group Treasury function. Liquidity risk is primarily managed by placing limits on the value of financial assets held which are neither quoted nor regularly traded on a recognised exchange and by maintaining a portfolio of committed bank facilities. The Company has access to a syndicated revolving credit facility of £400m which it holds as part of its contingency funding plans. The maturity date of this facility is in 2022 and it is currently undrawn. The Company is also responsible for the definition and management of the contingency funding plan which operates on a continuous basis and is fully documented.

(d)(i) Maturity analysis

The analysis that follows presents the cash flow analysis by remaining contractual maturities for subordinated liabilities.

	Within 1 year		2-5 years		6-10 years		11-15 years		16-20 years		Greater than 20 years		Total
	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Subordinated liabilities	109	81	390	313	461	359	422	290	422	143	1,493	671	3,297	1,857

The principal amounts of subordinated liabilities where the counterparty has no right to repayment are excluded from the above analysis along with interest payments on such instruments after 20 years.

Other financial liabilities have a contractual maturity of within 1 year.

R.    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 to the UK Standard Life defined benefit pension plan for a period of 15 years from 10 July 2006, which gave rise to a liability of £nil at 31 December 2017 (2016: £nil).

S.    Related party transactions

(a)     Transactions with and balances from/(to) related parties

In the normal course of business, the Company enters into transactions with related parties. The year end balances arising from such transactions are as follows:

		2017	2016
		£m	£m
Due from related parties:
Subsidiaries		70	60
Loans to subsidiaries		324	323
		394	383
Due to related parties:
Subsidiaries		12	60

Transactions with related parties carried out by the Company during the year were as follows:

		2017	2016
		£m	£m
Revenue from related parties:
Subsidiaries		848	512
Associates		-	4
		848	516
Expenses to related parties:
Subsidiaries		179	109
Associates		-	3
		179	112

Where financial instruments arising from transactions with related parties are offset in the statement of financial position, the net position is presented in the tables above.

(b)     Compensation of key management personnel

The Directors and key management personnel of the Company are considered to be the same as for the Group. Information on both Company and Group compensation paid to Directors and key management personnel can be found in Note 46 of the Group financial statements and the audited section of the Directors' remuneration report. Information on transactions with/from and balances from/to key management personnel and their close family members can also be found in Note 46 of the Group financial statements. Details of the employee share-based payment schemes operated by the Company are given in Note 45 of the Group financial statements.

T.     Fair value of assets and liabilities

The Company's approach to the fair value of assets and liabilities is aligned with the Group policy detailed in Note 41 of the Group financial statements. An analysis of the Company's financial investments and financial liabilities in accordance with the categories of financial instrument set out in IAS 39 Financial Instruments: Recognition and Measurement is presented in Notes C and L and includes those financial assets and liabilities held at fair value.

(a)     Methodology used to determine fair value of assets and liabilities

The fair value hierarchy, and the methods and assumptions used to determine fair value by the Company are aligned with the Group, as detailed in Note 41 of the Group financial statements, with the following exceptions:

Investments in subsidiaries at FVTPL

Investments in subsidiaries at FVTPL comprises £203m (2016: £201m) of investments on a recognised exchange which are valued using prices sourced from the primary exchange on which they are listed. These instruments are generally considered to be quoted in an active market and are therefore treated as level 1 investments within the fair value hierarchy.

The remaining investments in subsidiaries at FVTPL relate to a short term investment fund which is valued daily at net asset value (NAV) adjusted for accrued interest. Although the price is not quoted in an active market the valuation is based on observable market data and as a result has been classified as level 2 in the fair value hierarchy.

(b)     Fair value hierarchy for financial instruments measured at fair value in the statement of financial position

The following table sets out an analysis of financial assets and liabilities measured at fair value by level of the fair value hierarchy.

	Fair value hierarchy
	Level 1		Level 2		Level 3		Total
	2017	2016	2017	2016	2017	2016	2017	2016
Assets	£m	£m	£m	£m	£m	£m	£m	£m
Investments in subsidiaries at FVTPL	203	201	130	75	-	-	333	276
Debt securities	33	32	823	572	1	1	857	605
Total	236	233	953	647	1	1	1,190	881

 

Liabilities
Derivative financial liabilities	-	-	33	-	-	-	33	-
Total	-	-	33	-	-	-	33	-

There were no significant transfers between level 1 and level 2 in the year. During the year, there were no disposals (2016: none) of level 3 securities. There is no significant sensitivity of level 3 financial instruments measured at fair value in relation to changes in key assumptions.

(c)     Fair value of financial assets and liabilities measured at amortised cost

The fair value of subordinated liabilities is set out in Note 41 of the Group financial statements.

The table below presents estimated fair values of other financial assets and liabilities held by the Company whose carrying value does not approximate fair value.

		Carrying value		Fair value
		2017	2016	2017	2016
	Notes	£m	£m	£m	£m
Loans to subsidiaries	C	324	323	355	340

The estimated fair values of loans to subsidiaries are determined with reference to quoted market prices determined using observable market inputs. The Company does not consider its loans to subsidiaries to be impaired.

The carrying value of all other financial assets and liabilities measured at amortised cost approximates their fair value.

The table below presents the loans to subsidiaries as detailed above measured at fair value by level of the fair value hierarchy.

	Level 1		Level 2		Level 3		Total
	2017	2016	2017	2016	2017	2016	2017	2016
	£m	£m	£m	£m	£m	£m	£m	£m
Loans to subsidiaries	-	-	349	334	6	6	355	340

U.   Events after the reporting date

On 23 February 2018 the Group announced the sale of the majority of the business within the Pensions and Savings reportable segment to Phoenix Group Holdings (Phoenix) (the Sale), conditional on shareholder and relevant regulatory approvals. The Sale includes the disposal of Standard Life Assurance Limited (SLAL).

Under the transaction the following businesses will be retained by the Group:

·  UK retail platforms, including Wrap and Elevate

·  1825, our financial advice business

In addition, the assets and liabilities of both the UK and Ireland Standard Life defined benefit pension plans will be retained by the Group.  We are currently considering whether these assets and liabilities should be recognised on the Company statement of financial position post completion.

The total consideration payable to the Group by Phoenix in respect of the Sale is £3.24bn. This comprises cash payable on closing of £2.0bn, a dividend to be paid by SLAL to the Company of £0.3bn in Q2 2018 and new shares issued at completion representing 20% of the then issued share capital of Phoenix following the completion of the rights issue undertaken to part finance the acquisition and worth £1.0bn based on Phoenix's share price on 22 February 2018. The shareholding in Phoenix is subject to a lock-up of 12 months from completion.

The financial effect of the transaction on the Company, if it completes, is expected to be as follows at completion:

·  recognition of a gain on disposal in the income statement. The magnitude of the gain will be dependent on the carrying value of SLAL following a group re-organisation to remove the assets detailed above and the share price of Phoenix at completion.

·  recognition of the cash proceeds as detailed above

·  recognition of an investment in associate relating to the 20% shareholding in the enlarged Phoenix group

 

10. Supplementary information

10.1 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 Group's IFRS consolidated income statement, IFRS consolidated statement of financial position and IFRS consolidated statement of cash flows, which are presented in the Group financial statements section of this report.

Certain APMs that we use were revised following the merger with Aberdeen to reflect the increased asset management focus of the Group, as explained in the relevant sections below. Underlying performance and EBITDA which were APMs previously used by Standard Life plc are no longer reported for the merged Group.

The merger of Standard Life plc and Aberdeen completed on 14 August 2017, with the merger accounted for as an acquisition of Aberdeen by Standard Life plc on that date. The Reported basis results reflect this accounting treatment and therefore Aberdeen results are included from 14 August 2017 only. In our Strategic report we have also presented results on a Pro forma basis to assist in explaining trends by showing a full 12 months performance for the combined Group for both the current year and prior years. Pro forma results for the Group are prepared as if Standard Life plc and Aberdeen had always been merged. The difference between the Reported results and Pro forma results is the results of Aberdeen in the period prior to completion of the merger.

 

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 = Measure is a key input to a metric used for Executive remuneration. See page 100 for more information.

 

	Definition	Purpose and changes made
Adjusted profit before tax KPI R	Adjusted profit before tax (previously named operating profit before tax) is the Group's key alternative performance measure. Adjusted profit excludes impacts arising from short-term fluctuations in investment return and economic assumption changes in the Group's wholly owned insurance entities. It is calculated based on expected returns on investments backing equity holder funds, with consistent allowance for the corresponding expected movements in equity holder liabilities. Impacts arising from the difference between the expected return and actual return on investments, and the corresponding impact on equity holder liabilities except where they are directly related to a significant management action, are excluded from adjusted profit and are presented within profit before tax. The impact of certain changes in economic assumptions is also excluded from adjusted profit and is presented within profit before tax. Adjusted profit also excludes the impact of the following items: ·  Restructuring costs and corporate transaction expenses. Restructuring includes the impact of major regulatory change. ·  Impairment and amortisation of intangible assets acquired in business combinations ·  Profit or loss arising on the disposal of a subsidiary, joint venture or associate ·  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 Coupons payable on perpetual notes classified as non-controlling interests are included in adjusted profit before tax. For IFRS purposes, these are recognised directly in equity. This gives rise to an adjusting item relating to 'coupons payable on perpetual notes classified as equity'. Dividends payable on preference shares classified as non-controlling interests are excluded from adjusted profit in line with the treatment of ordinary dividends.	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 committee. Adjusted profit before tax is also a key measure used to assess performance for remuneration purposes. Following the merger, the Group renamed 'operating profit before tax' as 'adjusted profit before tax'. Short-term fluctuations in investment return and economic assumption changes are now only adjusted for wholly owned insurance entities. Previously these adjustments also applied to holding companies and other non-insurance entities. Comparatives have been updated to reflect the new methodology. The reason for the change in methodology is to align the approach with that used by Aberdeen and to improve consistency with other asset management peers. The reason for the change in the name of the metric is that 'operating profit' is used in a different way by many asset managers. We consider that the term 'adjusted' better differentiates the metric from IFRS metrics. We provide a reconciliation to previously published financial information in the adjusted profit section below.

 

 

	Definition	Purpose and changes
Adjusted cash generation	Adjusted cash generation (previously named underlying cash generation) presents a shareholder view of cash generation. The calculation of this measure has been amended following the merger. For the Aberdeen Standard Investments segment, adjusted cash generation adjusts IFRS net cash flows from operating activities for restructuring and corporate transaction expenses paid. For the Standard Life Pensions and Savings segment and Other, adjusted cash generation removes certain non-cash items from adjusted profit before tax. Adjustments are made for deferred acquisition costs/deferred income and fixed/intangible assets. Adjusted cash generation is stated net of current (cash) tax. IFRS net cash flows from operating activities is not used as the basis for these segments as it includes policyholder cash flows, and therefore does not present a shareholder view. For the India and China life segment, adjusted cash generation reflects dividends received in the period.	This APM presents a shareholder view of cash generation and removes adjusting items to make this cash metric more comparable to adjusted profit after tax. Adjusted cash generation provides insight into our ability to generate cash that supports further investment in the business and the payment of dividends to shareholders. The IFRS consolidated statement of cash flows includes policyholder cash flows for the Standard Life Pension and Savings business, and therefore does not present a shareholder view, and does not exclude adjusting items. Following the merger, the Group changed the methodology for the Aberdeen Standard Investments segment to more directly align adjusted cash generation for this segment with the cash flow statement. The reason for the change is to align the approach with that used by Aberdeen and to improve consistency with other asset management peers. The methodology for the Standard Life Pensions and Savings segment was also amended to remove underlying adjustments (primarily spread/risk actuarial assumption changes) to better align with the adjusted profit measure. We provide a reconciliation to previously published financial information in the adjusted cash generation section on page 289.

 

Adjusted profit before tax

The table below reconciles adjusted profit to Profit for the year attributable to equity holders of the Company (which we also refer to as IFRS profit after tax attributable to equity holders). We also provide, in the reconciliation to IFRS profit by component section below, a reconciliation between adjusted profit before tax and IFRS profit before tax. We consider IFRS profit after tax attributable to equity holders to be a more useful indicator of performance than IFRS profit before tax, due to the impact of policyholder tax. As described in Note 10 of the Group financial statements the tax expense includes policyholder tax, and IFRS profit before tax includes an offsetting equivalent amount of income in relation to this policyholder tax.

	Pro forma basis			Remove Aberdeen results pre-merger completion			Reported basis
	2017	2016	2015	2017	2016	2015	2017	2016	2015
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Fee based revenue	2,763	2,686	2,686	(652)	(1,035)	(1,107)	2,111	1,651	1,579
Spread/risk margin	165	134	145	-	-	-	165	134	145
Total adjusted operating income	2,928	2,820	2,831	(652)	(1,035)	(1,107)	2,276	1,785	1,724
Total adjusted operating expenses	(1,994)	(1,853)	(1,786)	467	697	662	(1,527)	(1,156)	(1,124)
Adjusted operating profit	934	967	1,045	(185)	(338)	(445)	749	629	600
Capital management	6	11	(27)	-	2	27	6	13	-
Share of associates' and joint ventures' profit before tax	99	76	56	-	-	-	99	76	56
Adjusted profit before tax	1,039	1,054	1,074	(185)	(336)	(418)	854	718	656
Tax on adjusted profit	(134)	(180)	(173)	26	54	61	(108)	(126)	(112)
Share of associates' and joint ventures' tax expense	(41)	(13)	(13)	-	-	-	(41)	(13)	(13)
Adjusted profit after tax	864	861	888	(159)	(282)	(357)	705	579	531
Total adjusting items							(40)	(269)	(248)
Tax on adjusting items							42	58	35
Singapore included in discontinued operations segment							-	-	(42)
Profit attributable to non-controlling interests (preference shares and perpetual notes)							(8)	-	-
Profit for the year attributable to equity holders of Standard Life Aberdeen plc							699	368	276
Profit attributable to non-controlling interests
Ordinary shares							25	51	62
Preference shares and perpetual notes							8	-	-
Profit for the year							732	419	338

 

Analysis of adjusting items

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

 

	Reported basis
	2017	2016	2015
	£m	£m	£m
Short-term fluctuations in investment return and economic assumption changes	67	13	(54)
Restructuring and corporate transaction expenses	(173)	(67)	(115)
Amortisation and impairment of intangible assets acquired in business combinations	(138)	(38)	(27)
Provision for annuity sales practices	(100)	(175)	-
Coupons payable on perpetual notes classified as equity	10	-	-
Profit on disposal of interests in associates	319	-	-
Other	(25)	(2)	(52)
Total adjusting items	(40)	(269)	(248)

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

·  Short-term fluctuations in investment return and economic assumption changes in the Group's wholly owned insurance entities are excluded from adjusted profit. For annuities this means that all fluctuations in liabilities and the assets backing those liabilities due to market interest rate (including credit risk) movements over the year are excluded from adjusted profit. Removing these short-term fluctuations and economic assumption changes is consistent with many of our insurance peers and aims to ensure that adjusted profit reflects a long-term view aligned to the maturity profile and economic matching of the corresponding assets and liabilities. In relation to certain subordinated liabilities this adjustment also excludes an accounting mismatch that arises where subordinated liabilities are measured at amortised cost and certain assets backing the liabilities are measured at fair value. More details on this adjustment are provided in Note 12 of the Group financial statements.

·  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. Restructuring and corporate transaction expenses in 2017 mainly related to Standard Life Group merger transaction costs of £59m and integration and merger related costs of £50m. 2017 also included £24m of costs relating to the Elevate integration and Ignis integration costs of £9m. The residual costs of £31m relate to other corporate transaction expenses, Pensions and Savings/corporate centre restructuring, and costs in relation to Brexit which we consider to be a major regulatory change.

·  Amortisation and impairment of intangible assets acquired in business combinations is included as an adjusting item. This is consistent with the vast majority of 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.

·  Items which are one-off and due to their size or nature are not indicative of the long-term operating performance of the Group are also excluded from adjusted profit. This aims to assist comparability of results period on period. The provision for annuity sales practices falls under this category. Any future changes to the provision will be treated consistently.

·  Profits on the disposal of a subsidiary, joint venture or associate are also removed to assist comparability of results period on period.

·  Details on items classified as 'Other' in the table above are provided in Note 12 of the Group financial statements. In 2017 this balance primarily relates to the impairment of a disposal group classified as held for sale. This is similar to a loss on disposal of a subsidiary, discussed above, but arises prior to the sale completing.

·  In the current year we have also made an adjustment for coupons payable on perpetual notes classified as equity to remove the finance cost. This adjustment is required because the finance cost for these notes is included within adjusted profit so that, for adjusted profit purposes, perpetual notes classified as equity and our other subordinated debt classified as liabilities are treated consistently. These perpetual notes were reclassified to liabilities prior to the year end and therefore this adjustment will not be required in future periods.

Restructuring and corporate transaction expenses used to determine adjusted profit before tax on a Pro forma basis were £215m (2016: £86m), compared to the Reported basis of £173m (2016: £67m). The Pro forma basis in 2017 includes merger related costs of £42m incurred by Aberdeen in the period 1 January 2017 to 13 August 2017.

We have not disclosed amortisation of intangible assets on a Pro forma basis as we do not consider this to provide meaningful information. Assuming that the merger took place at an earlier date would lead to a change to the amortisation of intangibles in the post-merger period which we consider would not be useful to users of the accounts.

Other major categories of adjusting items (that is short-term fluctuations in investment return and economic assumption changes, provision for annuity sales practices, and profit on disposal of associates) are the same on a Pro forma basis as on a Reported basis.

The results on a Pro forma basis for 2016 disclosed above are consistent with data disclosed in the published Prospectus dated 16 October 2017 relating to the issue of $750m subordinated notes, other than in relation to restructuring and corporate transaction expenses. The data disclosed in the Prospectus required the inclusion of £95m in 2016 in relation to Aberdeen merger transaction costs incurred in 2017. These costs are included in 2017 expenses in the above Pro forma restructuring and corporate transaction expenses.

 

Reconciliation to previously published financial information

The tables below provide a reconciliation of 2016 and 2015 adjusted profit on a Pro forma basis to the operating profit and underlying profit financial information previously disclosed by Standard Life plc and Aberdeen Asset Management PLC.

	FY 2016		Adjustments			FY 2016
2016	Standard Life as reported	Aberdeen as reported Y/E 30 Sep 2016 1	Calendarisation adjustments 2	Other Aberdeen adjustments 3	Standard Life adjustments 4	Restated
Fee based revenue	1,651	1,007	28	-	-	2,686
Spread/risk margin	134	-	-	-	-	134
Total adjusted operating income	1,785	1,007	28	-	-	2,820
Total adjusted operating expenses	(1,159)	(679)	(18)	-	3	(1,853)
Adjusted operating profit	626	328	10	-	3	967
Capital management	21	25	(1)	(26)	(8)	11
Share of associates' and joint ventures' profit before tax	76	-	-	-	-	76
Adjusted profit before tax 5	723	353	9	(26)	(5)	1,054
	FY 2015		Adjustments			FY 2015
2015	Standard Life as reported	Aberdeen as reported Y/E 30 Sep 2015 1	Calendarisation adjustments 2	Other Aberdeen adjustments 3	Standard Life adjustments 4	Restated
Fee based revenue	1,579	1,169	(62)	-	-	2,686
Spread/risk margin	145	-	-	-	-	145
Total adjusted operating income	1,724	1,169	(62)	-	-	2,831
Total adjusted operating expenses	(1,124)	(670)	8	-	-	(1,786)
Adjusted operating profit	600	499	(54)	-	-	1,045
Capital management	9	(7)	3	(23)	(9)	(27)
Share of associates' and joint ventures' profit before tax	56	-	-	-	-	56
Adjusted profit before tax 5	665	492	(51)	(23)	(9)	1,074

¹    Figures are 'underlying profit' which was an Alternative Performance Measure presented by the Aberdeen Group as reported in the audited financial statements for the year ended 30 September.

²    Adjusted to bring into line with Standard Life Group accounting practice to prepare financial results for the period 1 January to 31 December.

³    Adjusted to align the presentation of the Aberdeen Group's underlying profit Alternative Performance Measure to adjusted profit of the Standard Life Aberdeen Group. Coupon payments on perpetual notes classified as equity were excluded from the Aberdeen Group underlying profit metric. The Group will now include these coupons payable within adjusted profit. This has resulted in a reduction in the adjusted profit before tax of the Aberdeen Group within capital management, and the corresponding inclusion of an adjustment for 'Coupons payable on perpetual notes classified as equity' within adjusting items.

⁴    Following the completion of the merger, the Group has changed the calculation of adjusted profit (previously named operating profit). Short-term fluctuations in investment return and economic assumption changes will now only be adjusted for insurance entities. Previously these adjustments also applied to non-insurance entities. For the period ended 31 December 2016, this has resulted in an £8m reduction (2015: £9m) to the adjusted profit of the Other segment within capital management, and a £3m (2015: nil) increase to the adjusted profit of the Standard Life Investments segment within operating expenses.

⁵    Following the Merger, the Group has renamed 'operating profit' as 'adjusted profit'. Line items have been changed accordingly.

 

Reconciliation of adjusted profit to IFRS profit by component

The key components of adjusted profit before tax are total adjusted operating income (which is broken down into fee based revenue and spread/risk margin), total 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 their closest IFRS equivalent.

Adjusted profit term	Group adjusted profit	Presentation differences	Adjusting items	Capital management	Share of associates' and joint ventures' tax expense	Tax expense attributable to policyholders' returns / related income	Non-controlling interests -Ordinary shares	Group IFRS	IFRS term
2017	£m	£m	£m	£m	£m	£m	£m	£m
Adjusted operating income	2,276	14,176	331	6	-	166	25	16,980	Total revenue
Adjusted operating expenses	(1,527)	(14,176)	(358)	-	-	-	-	(16,061)	Total expenses
Capital management	6	-	-	(6)	-	-	-	-	N/A
Share of associates' and joint ventures' profit before tax	99	-	(13)	-	(41)	-	-	45	Share of profit from associates and JVs
Adjusted profit before tax	854	-	(40)	-	(41)	166	25	964	Profit before tax
Tax on adjusted profit	(108)	-	42	-	-	(166)	-	(232)	Total tax expense
Share of associates' and joint ventures' tax	(41)	-	-	-	41	-	-	-	N/A
Adjusted profit after tax	705	-	2	-	-	-	25	732	Profit for the year

This reconciliation includes a number of reconciling items which arise due to presentation differences between IFRS reporting requirements and the determination of adjusted operating income and adjusted operating expenses. Adjusted operating income and expenses exclude items which have an equal and opposite effect on IFRS revenue and IFRS expenses in the consolidated income statement, such as investment returns which are for the account of policyholders. Other presentation differences generally relate to items included in administrative expenses which are borne by policyholders, for example investment property management expenses, or are directly related to fee income. Other presentation differences also include Aberdeen Standard Investment's commission expenses which are presented in expenses in the consolidated income statement but are netted against adjusted operating income in the analysis of Group adjusted profit by segment. Further details of presentation differences are included Note 2(b)(ii) of the Group financial statements section of this report.

Reconciliation of adjusted profit to IFRS profit by component (continued)
Adjusted profit term	Group adjusted profit	Presentation differences	Adjusting items	Capital management	Share of associates' and JVs' tax expense	Tax expense attributable to policyholders' returns / related income	Non-controlling interests	Group IFRS	IFRS term
2016	£m	£m	£m	£m	£m	£m	£m	£m
Adjusted operating income	1,785	16,578	-	13	-	302	51	18,729	Total revenue
Adjusted operating expenses	(1,156)	(16,578)	(269)	-	-	-	-	(18,003)	Total expenses
Capital management	13	-	-	(13)	-	-	-	-	N/A
Share of associates' and joint ventures' profit before tax	76	-	-	-	(13)	-	-	63	Share of profit from associates and JVs
Adjusted profit before tax	718	-	(269)	-	(13)	302	51	789	Profit before tax
Tax on adjusted profit	(126)	-	58	-	-	(302)	-	(370)	Total tax expense
Share of associates' and joint ventures' tax	(13)	-	-	-	13	-	-	-	N/A
Adjusted profit after tax	579	-	(211)	-	-	-	51	419	Profit for the year

Reconciliation of fee income and fee based revenue

The following table provides a reconciliation of fee income as presented in the consolidated income statement to fee based revenue, as presented in the analysis of adjusted profit before tax by segment.

	2017	2016
Reported basis	£m	£m
Fee income as presented in the consolidated income statement	1,686	1,186
Differences in recourse cash flow for the year	135	131
Presentation differences
Aberdeen Standard Investments funds Asset Management Charges (AMC) and commission expenses	263	294
Earned premium on German insurance business	158	125
Policyholder differences	(131)	(85)
Fee based revenue as presented in the analysis of adjusted profit before tax	2,111	1,651

The reconciling items are as follows:

·  The recourse cash flow is a payment from the Heritage With Profits Fund to the shareholder business. The element relating to fee based business is included in fee based revenue in determining adjusted profit, but arises in insurance and participating contract claims and change in liabilities in the consolidated income statement.

·  Presentation differences mainly relate to AMCs earned by Aberdeen Standard Investments on the management of consolidated funds. These are eliminated on consolidation in the IFRS income statement and are therefore not included in fee income. The financial statements include the investment return and external expenses of the funds. In addition, commission expenses are netted against fee based revenue but are included within expenses in the consolidated income statement.

·  Earned premium on German insurance business relates to fees earned on insurance contracts classified as fee based revenue in the analysis of adjusted profit before tax. In the consolidated income statement these changes are part of Insurance and participating investment contract premium income.

·  Policyholder differences relate to policyholder's items in the consolidated income statement. These have an equal and opposite impact on income and expenses in the consolidated income statement and are therefore not included in adjusted operating income and adjusted operating expenses.

Adjusted cash generation

Adjusted cash generation provides insight into our ability to generate cash that supports further investment in the business and the payment of dividends to shareholders. The IFRS consolidated statement of cash flows includes policyholder cash flows, and therefore does not present a shareholder view, and does not exclude adjusting items.

Analysis of adjusted cash generation (Pro forma basis)			2017	2016
			£m	£m
Aberdeen Standard Investments	(a)		551	643
Standard Life Pensions and Savings	(b)		332	267
India and China life			10	8
Other	(b)		(52)	(25)
Adjusted cash generation			841	893

Further details of the segmental calculation of adjusted cash generation are included below.

(a)     Aberdeen Standard Investments

	per Group financial statements		2017	2016
			£m	£m
IFRS Net cash flow from operating activities - Total Group	Consolidated statement of cash flows		2,194	736
Less: Net cash flows from operating activities - Standard Life Pensions and Savings, India and China life and Other			(1,846)	(446)
Net cash flow from operating activities - Aberdeen Standard Investments			348	290
Pro forma adjustment for pre-merger results1			140	331
Restructuring and corporate transaction expenses paid - Aberdeen Standard Investments			63	22
Adjusted cash generation - Aberdeen Standard Investments (Pro forma basis)			551	643

¹    The Pro forma adjustment adds pre-merger results for Aberdeen which are excluded from the consolidated statement of cash flows.

(b)     Pensions and Savings and Other

		2017		2016
		Standard Life Pensions and Savings	Other	Standard Life Pensions and Savings	Other
		£m	£m	£m	£m
Adjusted profit/(loss) before tax		381	(78)	362	(66)
Current tax adjustment	(i)	(53)	5	(57)	15
DAC/DIR adjustment	(ii)	(6)	-	(8)	-
Fixed and intangible assets adjustment	(iii)	10	21	(30)	26
Adjusted cash generation - Standard Life Pensions and Savings and Other		332	(52)	267	(25)

Further details on the reconciling items between adjusted profit before tax and adjusted cash generation are included in tables (i) to (iii).

(i)      Current tax adjustment

The current tax adjustment adjusts current tax for the Standard Life Pensions and Savings segment and Other to exclude tax on adjusting items and current tax attributable to policyholders.

	Notes per Group financial statements	2017			2016
		Total	Standard Life Pensions and Savings	Other	Total	Standard Life Pensions and Savings	Other
		£m	£m	£m	£m	£m	£m
Group total current tax	10	(243)			(333)
Less: current tax - Aberdeen Standard Investments and India and China life		186			180
Current tax - Standard Life Pensions and Savings and Other		(57)	(82)	25	(153)	(170)	17
Current tax expense attributable to policyholders' returns			39	-		150	-
Current tax credit relating to adjusting items			(10)	(20)		(37)	(2)
Current tax adjustment			(53)	5		(57)	15

(ii)     Deferred acquisition costs (DAC)/ Deferred income reserve (DIR) adjustment

The DAC/DIR non-cash adjustment adds back existing business DAC/DIR amortisation included in adjusted profit for the period and deducts the equivalent new business DAC/DIR additions for the period. The following table reconciles DAC/DIR movements in the Group financial statements to the DAC/DIR adjustment used for Standard Life Pensions and Savings.

	Notes per Group financial statements	2017	2016
		£m	£m
Amortisation of deferred acquisition costs	15	79	96
Acquisition costs deferred during the period	15	(49)	(51)
Amortisation of deferred income	36	(52)	(61)
Fee income deferred during the period	36	11	15
Adjustments for Heritage With Profits Fund and German With Profits Fund DAC/DIR not included in shareholder view		5	(1)
Adjustment to remove India and China life DAC/DIR		-	(6)
DAC/DIR adjustment - Standard Life Pensions and Savings		(6)	(8)

 

(iii)    Fixed and intangible assets adjustment

The fixed and intangible assets adjustment adds back depreciation and amortisation that is included within adjusted profit for the period and deducts additions for the period where the depreciation or amortisation of those additions will be included within adjusted profit. The following table reconciles equipment and intangible asset movements in the Group financial statements to the fixed and intangible asset adjustment used for the Standard Life Pensions and Savings segment and Other.

	Notes per Group financial statements	2017				2016
		Total Group	Aberdeen Standard Investments and India and China life	Standard Life Pensions and Savings	Other	Total Group	Aberdeen Standard Investments and India and China life	Standard Life Pensions and Savings	Other
		£m	£m	£m	£m	£m	£m	£m	£m
Depreciation of equipment	18	15	5	-	10	14	2	1	11
Amortisation and impairment of intangible assets	14	201	122	56	23	84	41	17	26
Amortisation and impairment of intangible assets acquired through business combinations (excluded from adjusted profit)		(125)	(117)	(8)	-	(39)	(36)	-	(3)
Additions of equipment	18	(34)	(23)	(1)	(10)	(9)	(3)	-	(6)
Additions of intangible assets	14	(4,143)	(4,104)	(37)	(2)	(89)	(11)	(76)	(2)
Additions of intangible assets acquired through business combinations (not amortised through adjusted profit)		4,074	4,074	-	-	28	-	28	-
Fixed and intangible assets adjustment		(12)	(43)	10	21	(11)	(7)	(30)	26

Reconciliation to previously published financial information

The table below provides a reconciliation of adjusted cash generation on a pro forma basis to the financial information previously disclosed by Standard Life plc and Aberdeen Asset Management PLC.

	FY 2016			Adjustments				FY 2016
	Standard Life as reported	Aberdeen as reported Y/E 30 Sep 2016 1		Calendarisation adjustments 2	Other Aberdeen adjustments 3	Standard Life adjustments 4		Restated (Pro forma basis)
	£m	£m		£m	£m	£m		£m
Aberdeen Standard Investments	280	363		21	(48)	27		643
Standard Life Pensions and Savings	232	-		-	-	35		267
India and China life	9	-		-	-	(1)		8
Other	(19)	-		-	-	(6)		(25)
Adjusted cash generation	502	363		21	(48)	55		893

¹    Figures are 'core cash generated from operating activities' which was an APM presented by the Aberdeen Group as reported in the audited financial statements for the year ended 30 September 2016.

²    Adjusted to bring into line with Standard Life Group accounting practice to prepare financial results for the period 1 January to 31 December.

³    Adjusted to align the calculation of the Aberdeen Group's core cash generated from operating activities APM to adjusted cash generation of the Standard Life Aberdeen Group. Core cash generated from operating activities was on a pre-tax basis and included adjustments for short-term timing differences on open end fund settlements and net interest received. Adjusted cash generation is on a post-tax basis and is not adjusted for short-term timing differences on open end fund settlements or net interest received.

⁴    For the Aberdeen Standard Investments segment, the Standard Life Investments component of underlying cash generation was previously derived from operating profit but is now derived from net cash flows from operating activities in the IFRS statement of cash flows. For the Standard Life Pensions and Savings segment and Other, adjusted cash generation is impacted by the changes to adjusted profit as set out in the reconciliation of 2016 adjusted profit above, and no longer includes an underlying adjustment to remove spread/risk operating assumption changes. For the India and China life segment, adjusted cash generation reflects dividends received in the period and therefore no longer includes any contribution from the wholly owned Hong Kong business.

10.2 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.

Certain financial ratios that we use were revised following the merger with Aberdeen to reflect the increased asset management focus of the Group as described further below. Operating return on equity and EBITDA margin which were previously used by Standard Life plc are no longer reported following this review.

	Definition	Purpose and changes
Cost/income ratio   KPI R	This is an efficiency measure that is calculated as adjusted operating expenses divided by adjusted operating income, and includes the share of associates' and joint ventures' profit before tax.	This ratio is used by management to assess efficiency and reported to the Board and executive committee. This ratio is also a measure used to assess performance for remuneration purposes.
Adjusted diluted earnings per share KPI	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 year 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 11 in the Group financial statements section.	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 committee.
Fee revenue yield (bps)	The fee revenue yield is calculated as annualised fee based revenue (excluding performance fees) divided by monthly average fee based AUM/AUA (excluding HDFC AMC).	The average revenue yield on fee based business is a measure that illustrates the average margin being earned on the assets that we manage or administer. This ratio is used by management to assess performance and reported to the Board and executive committee. Following the merger, the Group changed the methodology to exclude performance fees from the fee revenue yield calculation. The reason for the change is to align the approach with that used by Aberdeen and to improve consistency with other asset management peers.

Cost/income ratio

 

	Pro forma basis			Reported basis
	2017	2016	20151	2017	2016	20151
Adjusted operating expenses (£m)	(1,994)	(1,853)	(1,786)	(1,527)	(1,156)	(1,124)
Fee based revenue (£m)	2,763	2,686	2,686	2,111	1,651	1,579
Spread/risk margin (£m)	165	134	145	165	134	145
Share of associates' and joint ventures' profit before tax (£m)	99	76	56	99	76	56
Total adjusted operating income and share of associates' and joint ventures' profit before tax (£m)	3,027	2,896	2,887	2,375	1,861	1,780
Cost/income ratio (%)	66	64	62	64	62	63

¹   2015 from continuing operations.

Adjusted diluted earnings per share

 

		Pro forma basis		Reported basis
		2017	2016	2017	2016
		£m	£m	£m	£m
Adjusted profit after tax		864	861	705	579
Dividend paid on preference shares		(5)	(5)	-	-
Adjusted profit after tax attributable to equity holders of the Company		859	856	705	579
Profit attributable to equity holders of the Company		N/A	N/A	699	368
		Millions	Millions	Millions	Millions
Weighted average number of ordinary shares outstanding		2,943	2,945	2,343	1,972
Dilutive effect of share options and awards		29	24	17	6
Weighted average number of diluted ordinary shares outstanding		2,972	2,969	2,360	1,978
		Pence	Pence	Pence	Pence
Basic earnings per share		N/A	N/A	29.8	18.7
Adjusted diluted earnings per share		28.9	28.8	29.9	29.3

Fee revenue yield (bps)

 

Fee revenue yield (Pro forma basis)		Average AUMA (£bn) 1			Fee based revenue (£m)1			Fee revenue yield (bps)1
		2017	2016		2017	2016		2017	2016
Aberdeen Standard Investments	Equities	103.4	95.0		667	637		67.9	67.7
	Fixed income	52.5	54.4		145	163		29.4	31.5
	Multi-asset	74.7	78.0		432	458		57.7	58.6
	Private markets and alternatives	25.0	24.3		119	108		41.5	41.4
	Real estate	28.0	28.7		153	165		54.2	56.5
	Quantitative	2.2	2.3		3	3		12.1	14.3
	Cash/liquidity	22.3	21.6		14	18		7.4	9.4
	Growth	308.1	304.3		1,533	1,552		51.1	51.6
	Standard Life Group	N/A	N/A		N/A	N/A		N/A	N/A
	Third party strategic partner life business	N/A	N/A		N/A	N/A		N/A	N/A
	Mature	271.1	262.5		379	368		13.7	13.8
	Total assets under management	579.2	566.8		1,912	1,920		33.3	33.8
Pensions and Savings	UK Retail	69.6	47.9		303	228		43.5	47.5
	UK Workplace	39.2	34.5		194	185		49.6	53.6
	Europe growth	11.4	9.9		100	95		87.7	95.8
	Growth	120.2	92.3		597	508		49.7	54.3
	UK mature Retail	34.7	33.7		260	251		75.0	76.7
	Europe mature fee	9.6	9.3		107	102		110.7	109.7
	Spread/risk	N/A	N/A		N/A	N/A		N/A	N/A
	Mature	N/A	N/A		367	353		N/A	N/A
	Total assets under administration	N/A	N/A		964	861		N/A	N/A
India and China life		N/A	N/A		12	17		N/A	N/A
Eliminations		N/A	N/A		(125)	(112)		N/A	N/A
Standard Life Aberdeen total		N/A	N/A		2,763	2,686		N/A	N/A

¹    Average AUMA includes £12.1bn (2016: £8.6bn) of average AUM relating to HDFC AMC which is excluded when calculating fee revenue yield. Fee based revenue includes £26m (2016: £33m) of performance fees which are excluded when calculating fee revenue yield.

10.3 Assets under management and administration and net flows (Pro forma basis)

	Definition	Purpose and changes made
Assets under management and administration   KPI	AUMA is a measure of the total assets we manage or administer on behalf of our clients and customers. It includes Aberdeen Standard Investments assets under management (AUM) and Standard Life Pensions & Savings assets under administration (AUA), as well as AUM and AUA from our associate and joint venture businesses in India and China based on our ownership percentages. AUM is a measure of the total assets that Aberdeen Standard Investments manages on behalf of individual customers and institutional clients. AUM also includes captive assets managed on behalf of Standard Life Aberdeen Group including assets managed for corporate purposes. These corporate assets are eliminated from Group AUMA. AUA is a measure of the total assets we administer for customers through products such as pensions, platforms and ISAs, as well as assets backing our Spread/risk products such as annuities.	As an investment company, AUMA and net flows are key drivers of shareholder value. Certain items previously included in AUA for Standard Life plc are now no longer included. These items are other corporate assets and assets which do not generate revenue from products. Comparatives have been restated. A reconciliation of AUMA and net flows to previously disclosed information is provided in section 10.5.
Net flows   KPI	Net flows represent gross inflows less gross outflows or redemptions. Gross inflows are new funds from clients and customers. Gross outflows or redemptions is the money withdrawn by clients or customers during the period, including annuity payments.	As an investment company, AUMA and net flows are key drivers of shareholder value.

10.3.1 Assets under management and administration

12 months ended 31 December 2017

			Opening AUMA at 1 Jan 2017	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions and business rationalisation	Closing AUMA at 31 Dec 2017
			£bn	£bn	£bn	£bn	£bn	£bn	£bn
Aberdeen Standard Investments	Equities		97.4	16.2	(24.4)	(8.2)	15.3	-	104.5
	Fixed income		55.1	8.4	(11.7)	(3.3)	0.9	(1.3)	51.4
	Multi-asset		79.1	13.9	(20.8)	(6.9)	2.6	(2.4)	72.4
	Private markets/alternatives		25.7	1.9	(2.7)	(0.8)	(0.4)	-	24.5
	Real estate		27.5	3.6	(4.6)	(1.0)	2.0	-	28.5
	Quantitative		2.4	0.2	(0.7)	(0.5)	0.3	-	2.2
	Cash/liquidity		21.9	6.7	(8.1)	(1.4)	(0.1)	-	20.4
	Growth		309.1	50.9	(73.0)	(22.1)	20.6	(3.7)	303.9
	Standard Life Pensions and Savings		90.2	3.3	(6.0)	(2.7)	4.7	-	92.2
	Third party strategic partner life business		181.3	12.3	(24.8)	(12.5)	10.8	-	179.6
	Mature		271.5	15.6	(30.8)	(15.2)	15.5	-	271.8
	Total assets under management		580.6	66.5	(103.8)	(37.3)	36.1	(3.7)	575.7
Pensions and Savings	UK Retail		62.9	12.9	(6.5)	6.4	6.4	-	75.7
	UK Workplace		37.4	4.2	(2.8)	1.4	1.4	-	40.2
	Europe growth		10.8	1.3	(1.0)	0.3	0.9	-	12.0
	Growth		111.1	18.4	(10.3)	8.1	8.7	-	127.9
	UK Mature Retail		34.9	0.6	(3.9)	(3.3)	3.6	-	35.2
	Europe mature fee		9.5	0.7	(0.6)	0.1	0.3	-	9.9
	Spread/risk		16.1	0.2	(1.1)	(0.9)	(0.1)	-	15.1
	Mature		60.5	1.5	(5.6)	(4.1)	3.8	-	60.2
	Total assets under administration		171.6	19.9	(15.9)	4.0	12.5	-	188.1
India and China life			4.6	1.0	(0.5)	0.5	0.3	(0.6)	4.8
Eliminations			(109.2)	(7.3)	9.1	1.8	(6.3)	-	(113.7)
Total AUMA			647.6	80.1	(111.1)	(31.0)	42.6	(4.3)	654.9

Assets under management and administration

12 months ended 31 December 2016

			Opening AUMA at 1 Jan 2016	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions and business rationalisation	Closing AUMA at 31 Dec 2016
			£bn	£bn	£bn	£bn	£bn	£bn	£bn
Aberdeen Standard Investments	Equities		90.3	15.0	(28.9)	(13.9)	21.0	-	97.4
	Fixed income		53.1	9.4	(14.7)	(5.3)	9.5	(2.2)	55.1
	Multi-asset		74.5	16.7	(20.3)	(3.6)	6.2	2.0	79.1
	Private markets/alternatives		23.2	1.6	(2.8)	(1.2)	3.7	-	25.7
	Real estate		28.7	4.3	(5.9)	(1.6)	2.1	(1.7)	27.5
	Quantitative		2.4	0.3	(0.5)	(0.2)	0.2	-	2.4
	Cash/liquidity		19.3	7.8	(8.1)	(0.3)	2.9	-	21.9
	Growth		291.5	55.1	(81.2)	(26.1)	45.6	(1.9)	309.1
	Standard Life Pensions and Savings		83.1	3.5	(5.6)	(2.1)	9.2	-	90.2
	Third party strategic partner life business		169.1	12.9	(24.4)	(11.5)	23.7	-	181.3
	Mature		252.2	16.4	(30.0)	(13.6)	32.9	-	271.5
	Total assets under management		543.7	71.5	(111.2)	(39.7)	78.5	(1.9)	580.6
Pensions and Savings	UK Retail		42.6	8.1	(4.4)	3.7	5.5	11.1	62.9
	UK Workplace		33.0	4.1	(2.4)	1.7	2.7	-	37.4
	Europe growth		9.3	1.3	(0.8)	0.5	1.0	-	10.8
	Growth		84.9	13.5	(7.6)	5.9	9.2	11.1	111.1
	UK mature Retail		34.0	0.6	(4.0)	(3.4)	4.3	-	34.9
	Europe mature fee		7.9	0.7	(0.8)	(0.1)	1.7	-	9.5
	Spread/risk		14.9	0.2	(1.1)	(0.9)	2.1	-	16.1
	Mature		56.8	1.5	(5.9)	(4.4)	8.1	-	60.5
	Total assets under administration		141.7	15.0	(13.5)	1.5	17.3	11.1	171.6
India and China life			2.8	0.9	(0.5)	0.4	0.6	0.8	4.6
Eliminations			(101.6)	(7.0)	8.0	1.0	(8.6)	-	(109.2)
Total AUMA			586.6	80.4	(117.2)	(36.8)	87.8	10.0	647.6

 

10.3.2 AUMA growth and mature split

	Opening AUMA at 1 Jan 2017	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions and business rationalisation	Closing AUMA at 31 Dec 2017
	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Aberdeen Standard Investments growth	309.1	50.9	(73.0)	(22.1)	20.6	(3.7)	303.9
Standard Life Pensions and Savings growth	111.1	18.4	(10.3)	8.1	8.7	-	127.9
Eliminations	(19.0)	(4.0)	3.1	(0.9)	(1.6)	-	(21.5)
Total growth channels	401.2	65.3	(80.2)	(14.9)	27.7	(3.7)	410.3
Aberdeen Standard Investments mature	271.5	15.6	(30.8)	(15.2)	15.5	-	271.8
Standard Life Pensions and Savings mature	60.5	1.5	(5.6)	(4.1)	3.8	-	60.2
Eliminations	(90.2)	(3.3)	6.0	2.7	(4.7)	-	(92.2)
Total mature books	241.8	13.8	(30.4)	(16.6)	14.6	-	239.8
India and China life	4.6	1.0	(0.5)	0.5	0.3	(0.6)	4.8
Total AUMA	647.6	80.1	(111.1)	(31.0)	42.6	(4.3)	654.9

 

	Opening AUMA at 1 Jan 2016	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions and business rationalisation	Closing AUMA at 31 Dec 2016
	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Aberdeen Standard Investments growth	291.5	55.1	(81.2)	(26.1)	45.6	(1.9)	309.1
Standard Life Pensions and Savings growth	84.9	13.5	(7.6)	5.9	9.2	11.1	111.1
Eliminations	(18.5)	(3.5)	2.4	(1.1)	0.6	-	(19.0)
Total growth channels	357.9	65.1	(86.4)	(21.3)	55.4	9.2	401.2
Aberdeen Standard Investments mature	252.2	16.4	(30.0)	(13.6)	32.9	-	271.5
Standard Life Pensions and Savings mature	56.8	1.5	(5.9)	(4.4)	8.1	-	60.5
Eliminations	(83.1)	(3.5)	5.6	2.1	(9.2)	-	(90.2)
Total mature books	225.9	14.4	(30.3)	(15.9)	31.8	-	241.8
India and China life	2.8	0.9	(0.5)	0.4	0.6	0.8	4.6
Total	586.6	80.4	(117.2)	(36.8)	87.8	10.0	647.6

 

10.3.3 Quarterly net flows

	3 Months to 31 Dec 17	3 Months to 30 Sep 17	3 Months to 30 Jun 17	3 Months to 31 Mar 17	3 Months to 31 Dec 16
	£bn	£bn	£bn	£bn	£bn
Aberdeen Standard Investments:
Equities	(2.9)	(1.9)	(1.9)	(1.5)	(6.4)
Fixed income	(0.6)	(1.1)	(1.4)	(0.2)	(0.6)
Multi-asset	(1.3)	(1.8)	(1.8)	(2.0)	(2.9)
Private markets/alternatives	(0.1)	(0.2)	(0.3)	(0.2)	-
Real estate	(0.1)	(0.2)	(0.6)	(0.1)	(0.7)
Quantitative	-	(0.1)	(0.4)	-	(0.1)
Cash/liquidity	(0.7)	(2.1)	0.1	1.3	(0.5)
Growth	(5.7)	(7.4)	(6.3)	(2.7)	(11.2)
Standard Life Pensions and Savings	(0.6)	(0.7)	(0.7)	(0.7)	(0.8)
Third Party strategic partner life business	(2.9)	(3.6)	(3.1)	(2.9)	(1.9)
Mature	(3.5)	(4.3)	(3.8)	(3.6)	(2.7)
Aberdeen Standard Investments net flows	(9.2)	(11.7)	(10.1)	(6.3)	(13.9)
Standard Life Pensions and Savings:
UK Retail	1.4	1.6	1.7	1.7	1.0
UK Workplace	0.3	0.3	0.4	0.4	0.3
Europe growth	0.1	0.1	0.1	-	0.1
Growth	1.8	2.0	2.2	2.1	1.4
UK Mature Retail	(0.7)	(1.0)	(0.8)	(0.8)	(0.9)
Europe mature fee	-	-	0.1	-	(0.2)
Spread/risk	(0.2)	(0.2)	(0.3)	(0.2)	(0.2)
Mature	(0.9)	(1.2)	(1.0)	(1.0)	(1.3)
Standard Life Pensions and Savings net flows	0.9	0.8	1.2	1.1	0.1
India and China life	0.1	0.1	0.1	0.2	0.2
Eliminations	0.2	1.9	(0.4)	0.1	0.6
Total net flows	(8.0)	(8.9)	(9.2)	(4.9)	(13.0)

 

10.4 Aberdeen Standard Investments assets under management and net flows (Pro forma basis)

10.4.1 Growth AUM detailed asset class split and total AUM by channel

	Opening AUM at 1 Jan 2017	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions and business rationalisation	Closing AUM at 31 Dec 2017
Breakdown of growth channel asset classes	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Developed markets equities	15.8	2.4	(3.2)	(0.8)	1.3	-	16.3
Emerging markets equities	33.9	5.6	(8.4)	(2.8)	5.9	-	37.0
Asia Pacific equities	26.1	4.6	(7.7)	(3.1)	4.7	-	27.7
Global equities	21.6	3.6	(5.1)	(1.5)	3.4	-	23.5
Total equities	97.4	16.2	(24.4)	(8.2)	15.3	-	104.5
Developed markets credit	37.8	4.8	(9.1)	(4.3)	0.7	(1.3)	32.9
Developed markets rates	5.5	1.4	(1.2)	0.2	-	-	5.7
Emerging markets fixed income	11.8	2.2	(1.4)	0.8	0.2	-	12.8
Total fixed income	55.1	8.4	(11.7)	(3.3)	0.9	(1.3)	51.4
Absolute return	48.9	5.8	(15.6)	(9.8)	0.7	-	39.8
Diversified growth/income	0.7	1.0	(0.3)	0.7	0.1	-	1.5
MyFolio	10.6	3.3	(1.3)	2.0	0.7	-	13.3
Other multi-asset	9.1	1.4	(2.2)	(0.8)	0.6	(2.4)	6.5
Parmenion	3.0	1.5	(0.2)	1.3	0.1	-	4.4
Standard Life Wealth	6.8	0.9	(1.2)	(0.3)	0.4	-	6.9
Total multi-asset	79.1	13.9	(20.8)	(6.9)	2.6	(2.4)	72.4
Private equity	14.6	0.8	(1.4)	(0.6)	(0.2)	(1.4)	12.4
Private credit and solutions	-	0.3	-	0.3	-	-	0.3
Alternative investment solutions	8.9	0.8	(1.3)	(0.5)	(0.4)	-	8.0
Infrastructure equity	2.2	-	-	-	0.2	1.4	3.8
Total private markets/alternatives	25.7	1.9	(2.7)	(0.8)	(0.4)	-	24.5
UK real estate	15.2	1.4	(2.0)	(0.6)	1.2	-	15.8
European real estate	10.5	2.1	(2.3)	(0.2)	0.8	-	11.1
Global real estate	0.2	-	(0.1)	(0.1)	-	-	0.1
Real estate multi-manager	1.6	0.1	(0.2)	(0.1)	-	-	1.5
Total real estate	27.5	3.6	(4.6)	(1.0)	2.0	-	28.5
Total quantitative	2.4	0.2	(0.7)	(0.5)	0.3	-	2.2
Total cash/liquidity	21.9	6.7	(8.1)	(1.4)	(0.1)	-	20.4
Total growth assets under management	309.1	50.9	(73.0)	(22.1)	20.6	(3.7)	303.9

 

	Opening AUM at 1 Jan 2017	Gross inflows	Redemptions	Net  flows	Market and other movements	Corporate actions and business rationalisation	Closing AUM at 31 Dec 2017
12 months ended 31 December 2017	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Institutional	202.4	24.3	(44.0)	(19.7)	11.1	(1.3)	192.5
Wholesale	96.9	24.2	(27.7)	(3.5)	9.2	(2.4)	100.2
Wealth/Digital	9.8	2.4	(1.3)	1.1	0.3	-	11.2
Growth channels	309.1	50.9	(73.0)	(22.1)	20.6	(3.7)	303.9
Standard Life Pensions and Savings	90.2	3.3	(6.0)	(2.7)	4.7	-	92.2
Third party strategic partner life business	181.3	12.3	(24.8)	(12.5)	10.8	-	179.6
Mature channels	271.5	15.6	(30.8)	(15.2)	15.5	-	271.8
Total assets under management	580.6	66.5	(103.8)	(37.3)	36.1	(3.7)	575.7

 

	Opening AUM at 1 Jan 2016	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions and business rationalisation	Closing AUM at 31 Dec 2016
Breakdown of growth channel asset classes	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Developed markets equities	15.0	3.0	(3.9)	(0.9)	1.7	-	15.8
Emerging markets equities	25.8	5.6	(5.8)	(0.2)	8.3	-	33.9
Asia Pacific equities	26.2	4.0	(9.7)	(5.7)	5.6	-	26.1
Global equities	23.3	2.4	(9.5)	(7.1)	5.4	-	21.6
Total equities	90.3	15.0	(28.9)	(13.9)	21.0	-	97.4
Developed markets credit	38.3	6.3	(10.1)	(3.8)	5.5	(2.2)	37.8
Developed markets rates	4.7	0.9	(1.5)	(0.6)	1.4	-	5.5
Emerging markets fixed income	10.1	2.2	(3.1)	(0.9)	2.6	-	11.8
Total fixed income	53.1	9.4	(14.7)	(5.3)	9.5	(2.2)	55.1
Absolute return	49.8	10.6	(14.7)	(4.1)	3.2	-	48.9
Diversified growth/income	0.4	0.2	-	0.2	0.1	-	0.7
MyFolio	8.1	2.6	(1.0)	1.6	0.9	-	10.6
Other multi-asset	9.7	1.6	(3.7)	(2.1)	1.5	-	9.1
Parmenion	-	0.9	(0.1)	0.8	0.2	2.0	3.0
Standard Life Wealth	6.5	0.8	(0.8)	-	0.3	-	6.8
Total multi-asset	74.5	16.7	(20.3)	(3.6)	6.2	2.0	79.1
Private equity	12.7	1.2	(1.2)	-	1.9	-	14.6
Private credit and solutions	-	-	-	-	-	-	-
Alternative investment solutions	8.4	0.4	(1.6)	(1.2)	1.7	-	8.9
Infrastructure equity	2.1	-	-	-	0.1	-	2.2
Total private markets/alternatives	23.2	1.6	(2.8)	(1.2)	3.7	-	25.7
UK real estate	16.7	1.2	(2.9)	(1.7)	0.2	-	15.2
European real estate	9.8	2.9	(2.7)	0.2	2.2	(1.7)	10.5
Global real estate	0.5	0.1	(0.2)	(0.1)	(0.2)	-	0.2
Real estate multi-manager	1.7	0.1	(0.1)	-	(0.1)	-	1.6
Total real estate	28.7	4.3	(5.9)	(1.6)	2.1	(1.7)	27.5
Total quantitative	2.4	0.3	(0.5)	(0.2)	0.2	-	2.4
Total cash/liquidity	19.3	7.8	(8.1)	(0.3)	2.9	-	21.9
Total growth assets under management	291.5	55.1	(81.2)	(26.1)	45.6	(1.9)	309.1

 

	Opening AUM at 1 Jan 2016	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions and business rationalisation	Closing AUM at 31 Dec 2016
12 months ended 31 December 2016	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Institutional	183.7	28.6	(45.4)	(16.8)	39.4	(3.9)	202.4
Wholesale	101.3	24.8	(34.9)	(10.1)	5.7	-	96.9
Wealth/Digital	6.5	1.7	(0.9)	0.8	0.5	2.0	9.8
Growth channels	291.5	55.1	(81.2)	(26.1)	45.6	(1.9)	309.1
Standard Life Pensions and Savings	83.1	3.5	(5.6)	(2.1)	9.2	-	90.2
Third party strategic partner life business	169.1	12.9	(24.4)	(11.5)	23.7	-	181.3
Mature channels	252.2	16.4	(30.0)	(13.6)	32.9	-	271.5
Total assets under management	543.7	71.5	(111.2)	(39.7)	78.5	(1.9)	580.6

10.4.2 Aberdeen Standard Investments growth assets under management by geography

12 months ended 31 December	2017	2016
	£bn	£bn
UK	145.6	150.5
Europe, Middle East and Africa (EMEA)	61.8	59.0
India	13.6	10.5
Asia Pacific (APAC)	22.7	25.2
North America	60.2	63.9
Total growth channels	303.9	309.1

 

10.4.3 Aberdeen Standard Investments total assets under management by asset class

	2017			2016
	Growth	Mature	Total	Growth	Mature	Total
	£bn	£bn	£bn	£bn	£bn	£bn
Equities	104.5	53.1	157.6	97.4	52.1	149.5
Fixed income	51.4	92.6	144.0	55.1	98.5	153.6
Multi-asset	72.4	17.6	90.0	79.1	15.9	95.0
Private markets/alternatives	24.5	1.2	25.7	25.7	1.3	27.0
Real estate	28.5	10.7	39.2	27.5	11.1	38.6
Quantitative	2.2	66.3	68.5	2.4	60.8	63.2
Cash/liquidity	20.4	30.3	50.7	21.9	31.8	53.7
Total assets under management	303.9	271.8	575.7	309.1	271.5	580.6

 

10.5 Assets under management and administration - reconciliation to previously disclosed information
(Pro forma basis)

12 months ended 31 December 2016

	Opening AUMA at 1 Jan 2016	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions and business rationalisation	Closing AUMA at 31 Dec 2016
	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Standard Life plc AUA as reported	307.4	42.1	(44.7)	(2.6)	52.3	N/A	357.1
Add: Aberdeen AUM	290.6	38.3	(72.5)	(34.2)	48.2	(1.9)	302.7
Less: eliminations between Aberdeen AUM and UK Pensions & Savings AUA	(0.6)	-	-	-	-	-	(0.6)
Less: changes due to new AUMA methodology1	(10.8)	-	-	-	(0.8)	-	(11.6)
Presentational change for new AUMA layout2	-	-	-	-	(11.9)	11.9	-
Total Standard Life Aberdeen AUMA	586.6	80.4	(117.2)	(36.8)	87.8	10.0	647.6

¹    Some assets which were formerly included in Standard Life plc's AUA are now excluded under the definition of AUMA for Standard Life Aberdeen plc. These assets largely comprise Assets which do not generate revenue from products and Other corporate assets.

²    AUMA tables include separate disclosure of 'Corporate actions and business rationalisation' which was not presented separately in previous disclosures by Standard Life plc. The AUMA impact of the stake increase in HDFC Life in April 2016 and the purchase of Elevate in October 2016 are both corporate actions and have been reallocated out of Market and other movements.