TIDMQLT
RNS Number : 6876F
Quilter PLC
11 March 2020
Statement of Directors' responsibilities
in respect of the preliminary announcement of the Annual report
and accounts and the financial statements
The Directors confirm that to the best of their knowledge:
-- The results in this preliminary announcement have been taken
from the Group's 2019 Annual report and accounts, which will be
available on the Company's website on 26 March 2020; and
-- The financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Group.
Approved by the Board on 11 March 2020.
Paul Feeney Mark Satchel
Chief Executive Officer Chief Financial Officer
Consolidated income statement
For the year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
Notes GBPm GBPm
===================================================== ===== ============ ============
Revenue
Fee income and other income from service activities 936 954
Investment return 6,866 (2,712)
Other income 22 35
===================================================== ===== ============ ============
Total revenue 7,824 (1,723)
===================================================== ===== ============ ============
Expenses
Insurance contract claims and changes in liabilities (1) (1)
Change in investment contract liabilities 14(c) (5,810) 2,499
Fee and commission expenses, and other acquisition
costs (294) (398)
Change in third party interest in consolidated
funds (917) 369
Other operating and administrative expenses (740) (750)
Finance costs1 (17) (16)
===================================================== ===== ============ ============
Total expenses (7,779) 1,703
===================================================== ===== ============ ============
Profit/(loss) before tax from continuing operations 45 (20)
Tax (expense)/credit attributable to policyholder
returns 6(a) (98) 61
===================================================== ===== ============ ============
(Loss)/profit before tax attributable to equity
holders from continuing operations (53) 41
===================================================== ===== ============ ============
Income tax (expense)/credit 6(a) (66) 86
Less: tax expense/(credit) attributable to
policyholder returns 98 (61)
===================================================== ===== ============ ============
Tax credit attributable to equity holders 32 25
===================================================== ===== ============ ============
(Loss)/profit after tax from continuing operations (21) 66
Profit after tax from discontinued operations 3(c) 167 422
===================================================== ===== ============ ============
Profit after tax 146 488
===================================================== ===== ============ ============
Attributable to:
Equity holders of Quilter plc 146 488
===================================================== ===== ============ ============
Earnings per ordinary share on profit attributable
to ordinary shareholders of Quilter plc
===================================================== ===== ============ ============
Basic
----------------------------------------------------- ----- ------------ ------------
From continuing operations (pence) 7(b) (1.1) 3.5
From discontinued operations (pence) 3(c) 9.1 23.1
===================================================== ===== ============ ============
Basic earnings per ordinary share (pence) 7(b) 8.0 26.6
===================================================== ===== ============ ============
Diluted
----------------------------------------------------- ----- ------------ ------------
From continuing operations (pence) 7(b) (1.1) 3.5
From discontinued operations (pence) 3(c) 8.9 23.0
===================================================== ===== ============ ============
Diluted earnings per ordinary share (pence) 7(b) 7.8 26.5
===================================================== ===== ============ ============
(1) The Group has initially applied IFRS 16 at 1 January 2019
using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect
of initially applying IFRS 16 is recognised in retained earnings at
the time of initial application.
Consolidated statement of comprehensive income
For the year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
Note GBPm GBPm
===================================================== ==== ============ ============
Profit after tax 146 488
Exchange losses on translation of foreign operations (1) -
===================================================== ==== ============ ============
Items that may be reclassified subsequently
to income statement (1) -
Measurement movements on defined benefit plans (7) -
Tax on amounts related to defined benefit pension
plans 1 -
===================================================== ==== ============ ============
Items that will not be reclassified subsequently
to income statement (6) -
===================================================== ==== ============ ============
Total other comprehensive expense, net of tax (7) -
===================================================== ==== ============ ============
Total comprehensive income 139 488
===================================================== ==== ============ ============
Attributable to:
Continuing operations (28) 66
Discontinued operations 3(d) 167 422
===================================================== ==== ============ ============
Equity holders of Quilter plc 139 488
===================================================== ==== ============ ============
Reconciliation of adjusted profit to profit after tax
For the year ended 31 December 2019
Year ended 31 Year ended 31 December
December 2019 2018
================================== ==================================
Continuing Discontinued Continuing Discontinued
operations operations(1) Total operations operations(1) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
================================= ========= =========== ============== ===== =========== ============== =====
Advice and Wealth Management 103 - 103 102 26 128
Wealth Platforms 112 53 165 105 57 162
Head Office (33) - (33) (31) - (31)
================================= ========= =========== ============== ===== =========== ============== =====
Adjusted profit before tax before
reallocation 182 53 235 176 83 259
Reallocation of QLA costs2 (26) 26 - (28) 28 -
Adjusted profit before tax 4(b)(i) 156 79 235 148 111 259
================================= ========= =========== ============== ===== =========== ============== =====
Adjusted for the following:
Goodwill impairment and impact
of acquisition accounting 5(a)(i) (54) - (54) (50) - (50)
Profit on business disposals 3(b) - 103 103 - 290 290
Business transformation costs 5(a)(ii) (77) - (77) (84) - (84)
Managed Separation costs 5(a)(iii) (6) - (6) (24) - (24)
Finance costs 5(a)(iv) (10) - (10) (13) - (13)
Policyholder tax adjustments 5(a)(v) (62) (12) (74) 64 37 101
Voluntary customer remediation
provision 5(a)(vi) - 10 10 - - -
================================= ========= =========== ============== ===== =========== ============== =====
Total adjusting items before tax (209) 101 (108) (107) 327 220
================================= ========= =========== ============== ===== =========== ============== =====
(Loss)/profit before tax attributable
to equity holders (53) 180 127 41 438 479
Tax attributable to policyholder
returns 6(a) 98 76 174 (61) (97) (158)
Income tax (expense)/credit 6(a),(b) (66) (89) (155) 86 81 167
================================= ========= =========== ============== ===== =========== ============== =====
(Loss)/profit after tax (21) 167 146 66 422 488
================================= ========= =========== ============== ===== =========== ============== =====
Adjusted earnings per share
================================= ========= =========== ============== ===== =========== ============== =====
Year ended 31 Year ended 31 December
December 2019 2018
========= ================================== ==================================
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
================================= ========= =========== ============== ===== =========== ============== =====
Adjusted profit before tax before
reallocation 182 53 235 176 83 259
Shareholder tax on adjusted
profit
before reallocation 6(c) (22) (3) (25) (13) 2 (11)
================================= ========= =========== ============== ===== =========== ============== =====
Adjusted profit after tax before
reallocation 7(b) 160 50 210 163 85 248
================================= ========= =========== ============== ===== =========== ============== =====
Basic weighted average number
of ordinary shares (millions) 7(a) 1,835 1,832
================================= ========= =========== ============== ===== =========== ============== =====
Adjusted basic earnings per share
(pence) 7(b) 8.7 2.7 11.4 8.9 4.6 13.5
================================= ========= =========== ============== ===== =========== ============== =====
Diluted weighted average number
of ordinary shares (millions) 7(a) 1,863 1,839
================================= ========= =========== ============== ===== =========== ============== =====
Adjusted diluted earnings per
share (pence) 7(b) 8.6 2.7 11.3 8.9 4.6 13.5
================================= ========= =========== ============== ===== =========== ============== =====
(1) Discontinued operations includes the results of the Quilter
Life Assurance ("QLA") business. In 2018, it also includes the
Single Strategy business up to the date of its disposal in June
2018. For further details of the Group's segmentation, see note
4.
(2) Adjusted profit from continuing operations includes GBP26
million of costs (2018: GBP28 million) previously reported as part
of the QLA business which has been reclassified from discontinued
to continuing operations as these costs do not transfer to ReAssure
on disposal at 31 December 2019. See note 3(c) for further
information.
Basis of preparation of adjusted profit
Adjusted profit is one of the Group's Alternative Performance
Measures and reflects the Directors' view of the underlying
performance of the Group. It is used for management decision making
and internal performance management and is the profit measure
presented in the Group's segmental reporting. Adjusted profit is a
non-GAAP measure which adjusts the IFRS profit for specified items
as detailed in note 5(a).
Adjusted profit excludes significant costs or income that are
non-operating or one-off in nature, which includes but is not
limited to: the impact of acquisition accounting and any impairment
of goodwill, any profit or loss on business acquisitions and
disposals, costs related to business transformation, and finance
costs on external borrowings. Adjusted profit also treats
policyholder tax (adjusted to remove the impact of non-operating
tax items) as a pre-tax charge (to offset against the related
income collected from policyholders). Full details of the Group's
adjusting items are described in note 5(a).
Adjusted earnings applied in the calculation of adjusted
earnings per share is calculated based on adjusted profit after
tax. The calculation of the adjusted weighted average number of
shares includes own shares held in policyholders' funds.
The Board Audit Committee regularly reviews the use of adjusted
profit to confirm that it remains an appropriate basis on which to
analyse the operating performance of the business. The Group seeks
to minimise such changes in order to maintain consistency over
time. The Committee assesses refinements to the policy on a
case-by-case basis.
Consolidated statement of changes in equity
For the year ended 31 December 2019
Total
Share-based share-
Share Share Merger payments Other Retained holders'
capital premium reserve reserve reserves earnings equity
31 December 2019 Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================== ==== ======== ======== ======== =========== ========= ========= =========
Shareholders' equity at
beginning of the year 133 58 588 34 1 1,191 2,005
Adjustment on initial application
of IFRS 16 (net of tax) (1) - - - - - (5) (5)
======================================== ======== ======== ======== =========== ========= ========= =========
Balance at 1 January 2019 133 58 588 34 1 1,186 2,000
-------- -------- -------- ----------- --------- --------- ---------
Profit for the year - - - - - 146 146
Other comprehensive expense - - - - - (7) (7)
-------- -------- -------- ----------- --------- --------- ---------
Total comprehensive income - - - - - 139 139
Dividends 8 - - - - - (92) (92)
Release of merger reserve - - (439) - - 439 -
Movement in own shares - - - - - (2) (2)
Equity share-based payment
transactions2 - - - 11 - 15 26
================================== ==== ======== ======== ======== =========== ========= ========= =========
Total transactions with the
owners of the Company - - (439) 11 - 360 (68)
======================================== ======== ======== ======== =========== ========= ========= =========
Balance at 31 December
2019 133 58 149 45 1 1,685 2,071
================================== ==== ======== ======== ======== =========== ========= ========= =========
Total
Share-based share-
Share Share Merger payments Other Retained holders'
capital premium reserve reserve reserves earnings equity
31 December 2018 Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================== ==== ======== ======== ======== =========== ========= ========= =========
Balance at 1 January
2018 130 58 - 38 1 872 1,099
-------- -------- -------- ----------- --------- --------- ---------
Profit for the year - - - - - 488 488
-------- -------- -------- ----------- --------- --------- ---------
Total comprehensive income - - - - - 488 488
Dividends 8 - - - - - (221) (221)
Acquisition of entities
due to Managed Separation
restructure - - 591 - - - 591
Issue of share capital 3 - (3) - - - -
Movement in own shares - - - - - 5 5
Equity share-based payment
transactions2 - - - 7 - 35 42
Change in participation
in subsidiaries - - - (12) - 12 -
Aggregate tax effects
of items recognised directly
in equity - - - 1 - - 1
============================== ==== ======== ======== ======== =========== ========= ========= =========
Total transactions with the
owners of the Company 3 - 588 (4) - (169) 418
==================================== ======== ======== ======== =========== ========= ========= =========
Balance at 31 December
2018 133 58 588 34 1 1,191 2,005
============================== ==== ======== ======== ======== =========== ========= ========= =========
(1) The Group has initially applied IFRS 16 at 1 January 2019
using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect
of initially applying IFRS 16 is recognised in retained earnings at
the time of initial application.
(2) Equity-settled share-based payment transactions of GBP26
million (December 2018: GBP42 million) consists of IFRS 2 costs of
GBP26 million (December 2018: GBP27 million). In the year ended 31
December 2019, GBP15 million has transferred from share-based
payments reserve to retained earnings representing share-based
payment schemes that have fully vested (December 2018: GBP35
million). The year ended 31 December 2018 also included a transfer
of GBP15 million previously recognised within liabilities to the
share-based payment reserve, including cash awards that were
converted to equity-settled awards.
Consolidated statement of financial position
At 31 December 2019
At At
31 December 31 December
2019 1 2018
Notes GBPm GBPm
============================================== ===== ============ ============
Assets
Goodwill and intangible assets 9 592 550
Property, plant and equipment2 143 17
Investments in associated undertakings 1 2
Deferred acquisition costs - 11
Contract costs 455 551
Loans and advances 217 222
Financial investments 10 59,345 59,219
Reinsurers' share of policyholder liabilities 14 - 2,162
Deferred tax assets 43 38
Current tax receivable 13 47
Trade, other receivables and other assets3 424 530
Derivative assets 32 46
Cash and cash equivalents 13(a) 2,473 2,395
============================================== ===== ============ ============
Total assets 63,738 65,790
============================================== ===== ============ ============
Equity and liabilities
Equity
============================================== ===== ============ ============
Ordinary Share capital 133 133
Ordinary Share premium reserve 58 58
Merger reserve 149 588
Share-based payments reserve 45 34
Other reserves 1 1
Retained earnings 1,685 1,191
============================================== ===== ============ ============
Total equity 2,071 2,005
============================================== ===== ============ ============
Liabilities
Insurance contract liabilities 14 - 602
Investment contract liabilities 14 52,455 56,450
Third-party interests in consolidated funds 7,675 5,116
Provisions 15 64 94
Deferred tax liabilities 88 59
Current tax payable 6 5
Borrowings and lease liabilities2 335 197
Trade, other payables and other liabilities 836 999
Contract liabilities and deferred revenue 191 226
Derivative liabilities 17 37
============================================== ===== ============ ============
Total liabilities 61,667 63,785
============================================== ===== ============ ============
Total equity and liabilities 63,738 65,790
============================================== ===== ============ ============
(1) The Group has initially applied IFRS 16 at 1 January 2019
using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect
of initially applying IFRS 16 is recognised in retained earnings at
the time of initial application.
(2) Following the adoption of IFRS 16, the Group has presented
right-of-use assets within Property, plant and equipment and lease
liabilities within Borrowings and lease liabilities.
(3) The Group's contract assets are now included within Trade,
other receivables and other assets, having previously been shown
separately on the statement of financial position.
Approved by the Board on 11 March 2020.
Paul Feeney Mark Satchel
Chief Executive Officer Chief Financial Officer
Consolidated statement of cash flows
For the year ended 31 December 2019
The cash flows presented in this statement cover all the Group's
activities (continuing and discontinued operations and cash that is
held for sale) and includes flows from both policyholder and
shareholder activities. All cash and cash equivalents are available
for use by the Group except for cash and cash equivalents in
consolidated funds.
Year ended Year ended
31 December 31 December
2019(1) 2018
Notes GBPm GBPm
====================================================== ===== ============ ============
Cash flows from operating activities
Profit/(loss) before tax from continuing operations 45 (20)
Profit before tax from discontinued operations 3(c) 256 341
Non-cash movements in profit before tax (2,268) 584
Net changes in working capital2 (39) (662)
Taxation paid (37) (92)
====================================================== ===== ============ ============
Total net cash (used in)/from operating activities (2,043) 151
====================================================== ===== ============ ============
Cash flows from investing activities
Net disposals/(acquisitions) of financial investments 2,260 (366)
Acquisition of property, plant and equipment (8) (7)
Acquisition of intangible assets (5) (4)
Net acquisition of interests in subsidiaries2,3 (87) 13
Net proceeds from the disposal of interests
in subsidiaries 78 350
====================================================== ===== ============ ============
Total net cash from/(used in) investing activities 2,238 (14)
====================================================== ===== ============ ============
Cash flows from financing activities
Dividends paid to ordinary equity holders of
the Company (92) (221)
Finance costs on external borrowings (10) (8)
Payment of interest on lease liabilities (3) -
Payment of principal lease liabilities (13) -
Proceeds from issue of subordinated and other
debt - 497
Subordinated and other debt repaid - (516)
====================================================== ===== ============ ============
Total net cash used in financing activities (118) (248)
====================================================== ===== ============ ============
Net increase/(decrease) in cash and cash equivalents 77 (111)
Cash and cash equivalents at the beginning
of the year 2,395 2,507
Effects of exchange rate changes on cash and
cash equivalents 1 (1)
====================================================== ===== ============ ============
Cash and cash equivalents at end of the year 13(a) 2,473 2,395
====================================================== ===== ============ ============
(1) The Group has initially applied IFRS 16 at 1 January 2019
using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect
of initially applying IFRS 16 is recognised in retained earnings at
the time of initial application.
(2) There has been a GBP7 million reallocation between net
changes in working capital and acquisitions of interests in
subsidiaries in respect of the comparative figures to conform with
the current year presentation of contingent consideration payments
(see note 3(a)).
(3) The acquisition of interests in subsidiaries balance also
includes GBP21 million paid in the year in respect of contingent
consideration payments relating to historical acquisitions.
Basis of preparation and significant accounting policies
For the year ended 31 December 2019
General information
Quilter plc (the "Company"), a public limited company
incorporated and domiciled in the United Kingdom ("UK"), together
with its subsidiaries (collectively, the "Group") offers investment
and wealth management services, long-term savings and financial
advice through its subsidiaries and associates primarily in the UK
with a presence in a number of cross-border markets.
The address of the registered office is Millennium Bridge House,
2 Lambeth Hill, London EC4V 4AJ.
The Company was, until 25 June 2018, a wholly owned subsidiary
of Old Mutual plc, a FTSE-100 listed group. The Company formed part
of the Old Mutual Wealth division of Old Mutual plc, for which it
acted as a holding company and delivered strategic and governance
oversight. On 25 June 2018, Quilter plc was listed on the London
and the Johannesburg Stock Exchanges and is no longer part of the
Old Mutual plc Group.
1: Basis of preparation
The results in this preliminary announcement have been taken
from the Group's 2019 Annual report and accounts ("ARA") which will
be available on the Company's website on 26 March 2020. These
condensed consolidated financial statements of Quilter plc for the
year ended 31 December 2019 have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as endorsed by
the European Union ("EU"), and those parts of the Companies Act
2006 applicable to those reporting under IFRS.
Significant accounting policies applicable to the Group's
condensed consolidated financial statements can be found in note 4
of the consolidated financial statements within the Group's 2019
ARA.
The preliminary announcement for the year ended 31 December 2019
does not constitute statutory accounts as defined in Section 434 of
the Companies Act 2006. The consolidated financial statements for
full year 2019 have been audited by KPMG. Comparative financial
information for full year 2018 has been taken from the Group's 2018
ARA, which has been filed with the Registrar of Companies and was
prepared in accordance with IFRS, as endorsed by the EU. KPMG
provided an unqualified report that did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
This is the first set of the Group's annual financial statements
in which IFRS 16 Leases and IFRIC 23 Uncertainty over Income Tax
Treatments have been applied. Changes in significant accounting
policies to reflect these new IFRSs are explained in note 2. All
other accounting policies for recognition, measurement,
consolidation and presentation are as outlined in the Group's 2019
ARA.
These condensed consolidated financial statements have been
prepared on a historical cost basis, except for the revaluation of
certain financial instruments, and are presented in pounds
sterling, which is the currency of the primary economic environment
in which the Group operates.
Going concern
The Directors have considered the resilience of the Group,
taking into account its current financial position, the principal
risks facing the business and the effectiveness of the mitigating
strategies which are or will be applied. As a result, the Directors
believe that the Group is well placed to manage its business risks
in the context of the current economic outlook and have sufficient
financial resources to continue in business for a period of at
least 12 months from the date of approval of these consolidated
financial statements, and continue to adopt the going concern basis
in preparing the consolidated financial statements.
Critical accounting estimates and judgements
The preparation of financial statements requires management to
exercise judgement in applying the Group's significant accounting
policies and make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements. The Group Audit Committee reviews these areas
of judgement and estimates and the appropriateness of significant
accounting policies adopted in the preparation of these financial
statements.
The Group's critical accounting judgements are detailed below
and are those that management makes when applying its significant
accounting policies and that have the most effect on the amounts
recognised in the Group's financial statements.
Area Critical accounting judgements Related
notes
================ =================================================================== =========
Consolidation The Group's interest in investment funds can fluctuate n/a(1)
of investment according to the Group's participation in them as clients'
funds underlying investment choices change. The Group exercises
judgement in assessing its level of power, exposure to
variable returns and its ability to use such power to affect
those returns relative to the power of other investors
in those funds, when evaluating the need to consolidate
those funds. In particular, management uses its judgement
when assessing rights held by other parties including substantive
removal ("kick-out" rights).
================ =================================================================== =========
Complaints were received after the reporting date in relation
to advice provided by Lighthouse before its acquisition
by the Group. Judgement is required to determine whether
a provision can be reasonably estimated in relation to
the complaints and whether redress is probable, and therefore
whether a provision can be recognised. Judgement is also
required to determine the treatment for advice where no
Recognition complaint has been received and there is no present obligation, 5(a),
of provisions and these cases have been treated as a contingent liability. 15,
and contingent
liabilities 16, 19
in respect
of Lighthouse
complaints
===================================================================================== =========
Management judgement was applied in the classification
of the QLA business (disposed in December 2019) as a discontinued
operation. Management concluded that QLA represented a
separate major line of business, being the Group's closed
book of legacy business and as such, met the discontinued
operations criteria, restating prior year comparatives
accordingly. Judgement has also been applied in the reallocation
of specific on-going costs to the Group's continuing operations
Discontinued that will remain in the business after the disposal of
operations QLA. 3(c)
================ =================================================================== =========
Judgement was applied in the allocation of goodwill in
Apportionment relation to the QLA business, impacting the profit on disposal
of goodwill of that business. The allocation was based on QLA's fair
to business value relative to the other businesses within the Wealth
disposals Platforms cash generating unit ("CGU"). 9(c)
================ =================================================================== =========
The Group has exercised significant judgement in determining
the accounting treatment for a number of provisions in
respect of the disposal of QLA. The disposal of QLA has
led to a series of business activities related to the sale
of the business resulting in costs to separate the business
from the Group, including its separation from a significant
number of shared IT systems. Provisions have been established
where costs are either contractual within the disposal
Recognition agreement or represent a constructive liability in respect
of of ancillary work to separate the businesses. Significant
provisions judgement was required to assess whether the costs were
following directly attributable and incremental to the sale and whether
the disposal a legal or constructive obligation existed in order to
of QLA recognise certain provisions. 15
================ =================================================================== =========
Area Critical accounting judgements Related
notes
================ =================================================================== =========
Uncertain Due to the complexity of tax law, the tax treatment of n/a(2)
tax specific transactions may be uncertain. In assessing uncertain
position tax positions, the Group considers the likelihood that
the tax authority may take a different view to that reached
by management. In that regard, the Group has exercised
judgement in assessing the accounting tax position in relation
to transactions undertaken as part of the demerger from
Old Mutual plc in 2018.
================ =================================================================== =========
The Group's critical accounting estimates are shown below and
involve the most complex or subjective assessments and assumptions,
which have a significant risk of resulting in material adjustment
to the carrying amounts of assets and liabilities within the next
financial year. Management uses its knowledge of current facts and
circumstances and applies estimation and assumption setting
techniques that are aligned with relevant actuarial and accounting
guidance to make predictions about future actions and events.
Actual results may differ from those estimates.
Area Critical accounting estimates Related
notes
================ ================================================================= =======
Consolidation Where the Group consolidates investment funds, estimation n/a(1)
of investment is required in some circumstances when sourcing the up-to-date
funds financial information, aligned to the Group's reporting
date. In instances where financial information is unavailable
for the Group's reporting dates, the Group sources the
most recently available financial information for those
funds, as the best reliable estimate.
================ ================================================================= =======
An estimation of the provision required for the complaints
received was determined based upon a sample of cases which
was deemed representative of the broader population to
form a reasonable estimate. The estimation per case is
Provision based upon FCA guidelines and modelling performed based
for cost of upon factors, including pension transfer value, discount
Lighthouse rate, and retail price indexation. The sample was then
complaints extrapolated to the entire population of complaint cases. 15
================ ================================================================= =======
The valuation of goodwill and intangible assets that are
recognised as the result of a business combination involves
the use of valuation models. During the current year, these
assets have arisen on the acquisition of the Charles Derby
Group, Lighthouse Group and various smaller adviser businesses.
In relation to goodwill impairment, the determination of
a CGU's recoverable value is based on the discounted value
of the expected future profits of each business. Significant
Goodwill and estimates include forecast cash flows, new business growth
intangible and discount rates. Estimation was also used in the valuation
assets of goodwill attributable to the disposal of the QLA business. 9
================ ================================================================= =======
Where quoted market prices are not available, valuation
techniques are used to measure financial investments. When
valuation techniques use significant unobservable inputs
Valuation they are subject to estimation uncertainty and are categorised
of as level 3 in the fair value hierarchy. Matching liabilities
investments are similarly categorised as level 3. 12
================ ================================================================= =======
Insurance
contracts
measurement Measurement of insurance contracts involves significant
and the impact use of assumptions including mortality, morbidity, persistency,
upon profit expense valuation and interest rates. This measurement
on disposal impacted upon the closing net asset value of QLA, and therefore
of QLA the profit recognised by the Group on the disposal of QLA. 3(b)
14
================================================================================== =======
Measurement The estimation of future taxable profits is performed as n/a(2)
of deferred part of the annual business planning process, and is based
tax on estimated levels of assets under management, which are
subject to a large number of factors including worldwide
stock market movements, related movements in foreign exchange
rates and net client cash flow, together with estimates
of expenses and other charges. The business plan, adjusted
for known and estimated tax sensitivities, is used to determine
the extent to which deferred tax assets are recognised.
In general the Group assesses recoverability based on estimated
taxable profits over a 3 year planning horizon. Where credible
longer term profit forecasts are available (e.g. for the
life insurance companies) the specific entity may assess
recoverability over a longer period, subject to a higher
level of sensitivity testing.
================ ================================================================= =======
(1) Refer to note 4(a) in the financial statements included
within the Group's 2019 Annual Report and Accounts.
(2) Refer to note 28 in the financial statements included within
the Group's 2019 Annual Report and Accounts.
During the year, the Group reassessed its critical accounting
estimates and judgements and no longer considers the judgements and
estimates relating to the classification and measurement of
insurance contracts to be critical to the Group, following the sale
of the QLA business (see note 3(b) for further details of the
sale). In addition, the estimates and judgements involved in the
recognition and measurement of the voluntary customer remediation
provision is no longer relevant to the Group as the provision was
part of the QLA net assets sold.
2: New standards, amendments to standards, and interpretations
adopted by the Group
The Group adopted IFRS 16 Leases for the first time in 2019. The
Group has applied the simplified transition approach and has not
restated comparative amounts for the period prior to initial
adoption. The impact of adopting this new standard is explained in
detail in note 4(s) of the consolidated financial statements within
the Group's 2019 Annual report and accounts.
The Group has also adopted IFRIC 23 Uncertainty over Income Tax
Treatments during the year ended 31 December 2019. This
interpretation sets out how to determine taxable profits/losses,
tax bases, unused tax losses, unused tax credits and tax rates
(collectively referred to as the "accounting tax position") where
there is uncertainty over treatment. In applying IFRIC 23, the
Group has made judgements on whether tax authorities will accept
the Group's tax filing position and estimated the likely impact on
the Group's tax assets and liabilities. The adoption of this
interpretation during 2019 has had no material impact on the
Group's consolidated financial statements other than a reduction in
unrecognised deferred tax assets.
Other standards:
In addition to IFRS 16 and IFRIC 23, the following amendments to
the accounting standards, issued by the International Accounting
Standards Board ("IASB") and endorsed by the EU, have been adopted
by the Group from 1 January 2019 with no material impact on the
Group's consolidated results, financial position or
disclosures:
-- Amendments to IFRS 9 Financial Instruments - Prepayment features with negative compensation.
-- Amendments to IAS 28 Investments in Associates - Long-term
interests in associates and joint ventures.
-- Amendments to IAS 19 Employee Benefits - Plan amendments, curtailments or settlements.
-- Annual improvements to IFRSs 2015-2017 Cycle - Amendments to
IFRS 3 Business Combinations, IFRS 11 Joint Arrangements, IAS 12
Income Taxes and IAS 23 Borrowing Costs.
Notes to the consolidated financial statements
For the year ended 31 December 2019
3: Acquisitions, disposals and discontinued operations
This note provides details of the Group's acquisitions and
disposals of subsidiaries during the financial periods covered by
these financial statements.
3(a): Business acquisitions
Business acquisitions completed during the year ended 31
December 2019
Charles Derby Group Limited acquisition:
On 14 February 2019, the Group acquired the Charles Derby Group
("CDG") of companies (recently rebranded "Quilter Financial
Advisers"). CDG is a financial planning business based in the UK.
The acquisition complements the growth of Quilter Private Client
Advisers which serves upper affluent and high net worth customers.
CDG has over 200 restricted advisers (as at 31 December 2018), and
represents the next stage of Quilter's ambition to broaden out its
national advice business.
Prior to acquisition, the Group had previously invested GBP2
million for a 10% stake in CDG. At December 2018, the business was
valued at GBP34 million, resulting in a fair value gain of GBP1
million being recognised, representing the increase in the value on
the 10% share in the business. Immediately prior to acquisition,
CDG undertook a share issue to other shareholders, which diluted
the Group's stake to 6%, with a fair value of GBP2 million. The
resulting fair value loss of GBP1 million (reducing the carrying
value from GBP3 million to GBP2 million) has been recognised by the
Group in 'Other operating and administrative expenses' in the
consolidated income statement in 2019. On acquisition, the Group
acquired the remaining share capital and associated voting
rights.
The table below sets out the consolidated assets and liabilities
acquired:
Acquiree's
carrying Fair
amount value
GBPm GBPm
============================================ ========== ======
Assets
Intangible assets 1 15
Loans and advances 1 1
Cash and cash equivalents 1 1
Trade, other receivables and other assets 2 2
============================================ ========== ======
Total assets 5 19
============================================ ========== ======
Liabilities
Deferred tax liabilities - (2)
Trade, other payables and other liabilities (9) (9)
============================================ ========== ======
Total liabilities (9) (11)
============================================ ========== ======
Total net (liabilities)/assets acquired (4) 8
Total consideration 31
============================================ ========== ======
Goodwill recognised 23
============================================ ========== ======
After an initial cash payment of GBP15 million at acquisition, a
further payment of GBP5 million was made on 1 April 2019. Further
contingent payments based on a percentage of the level of assets
under administration at 2020 and 2022 are expected to be made.
Management's best estimate of the net present value of these
payments total GBP9 million. These amounts exclude the GBP2 million
value of the 6% stake already held.
The purchase price has been allocated based on the fair value of
assets acquired and liabilities at the date of acquisition
determined in accordance to IFRS 3 Business Combinations. The
allocation required significant use of assumptions regarding cash
flows, profit margin and discount, attrition and growth rates.
Based on the purchase price of GBP31 million and the fair value
of net liabilities acquired of GBP5 million (excluding acquired
intangible assets of GBP1 million), the value of goodwill and
intangible assets is GBP36 million. Intangible assets representing
the value of customer advice contracts have been valued at GBP15
million, less an associated deferred tax liability of GBP(2)
million, with an estimated useful life of 8 years over which the
intangible assets and the associated tax provision will be
amortised on a straight line basis. The balance of GBP23 million is
recognised as goodwill in the statement of financial position.
The goodwill recognised is not expected to be deductible for tax
purposes, and represents:
-- net client cash flow and fee earning productivity of the acquired advisers;
-- quality and experience of the existing executive team;
-- creation of scale and increased service range to the National channel proposition; and
-- ability to generate growth in Restricted Financial Planners and client numbers.
The carrying value of tangible assets and liabilities in CDG's
consolidated statement of financial position on acquisition date
approximates the fair value of these items determined by the
Group.
As part of the acquisition of CDG, a Long Term Incentive Plan
scheme was set up with a maximum value up to GBP10 million worth of
Quilter plc shares. Vesting of awards is up to 50% after three
years (31 December 2021), 25% after 4 years, and 25% after 5
years.
The fair value at grant date was GBP1.39 per share, with an
estimated fair value of GBP7 million. The cost of the awards is
expected to be GBP2 million per annum across years 1 - 3 and GBP1
million in year 4.
Transaction costs of GBP1 million relating to the acquisition
have been recognised within other operating and administrative
expenses in the Group's consolidated income statement. These costs
are not included within adjusted profit.
No contingent liabilities have been acquired.
The post-acquisition results from the business, excluding
integration costs of GBP2 million, have been consolidated since the
date of acquisition, contributing GBP6 million of revenue (GBP3
million, net of cost of sales) and a loss of GBP6 million to the
Group's consolidated profit after tax.
Lighthouse Group plc acquisition:
On 3 April 2019, the Group made a cash offer to acquire the
entire share capital (and associated voting rights) of Lighthouse
Group plc ("Lighthouse"), and the acquisition completed on 12 June
2019. This acquisition helps to position Quilter as the best place
for trusted financial advice in the UK, bringing together Quilter's
strengths in its new platform with Lighthouse's strength in its
customer relationships and partnerships, covering more than 6
million affluent and mass affluent customers in the UK.
There were 139,864,270 shares in issue for which the offer was
33 pence per share, valuing the business at GBP46 million.
The Group held 3.99% of the issued share capital of Lighthouse
prior to acquisition. This holding was valued at GBP2 million,
based on the 33 pence per share offer.
The purchase price has been allocated based on a provisional
estimate of the fair value of assets acquired and liabilities
assumed at the date of acquisition determined in accordance to IFRS
3 Business Combinations. The provisional allocation required
significant use of assumptions regarding cash flows, profit margin
and discount, attrition and growth rates. It is possible that the
preliminary estimates may change as the purchase price allocations
are finalised. The accounting must be finalised within 12 months of
the acquisition date.
Based on the purchase price of GBP46 million and fair value of
net tangible liabilities acquired of GBP8 million (excluding
acquired intangible assets of GBP5 million), the value of goodwill
and intangible assets is GBP54 million. Intangible assets
representing the value of customer advice contracts have been
valued at GBP21 million (GBP24 million gross, less an associated
deferred tax liability of GBP(3) million), with an estimated useful
life of 8 years over which the intangible and associated tax
provision will be amortised on a straight line basis. The balance
of GBP33 million is recognised as goodwill in the Group's statement
of financial position.
The goodwill recognised is not expected to be deductible for tax
purposes, and represents:
-- synergies arising from the alignment of the advisers into a restricted model;
-- generation of additional net client cash flows into the
integrated solutions offered through the wider Quilter Group;
and
-- cost saving synergies arising through de-listing the business
and integrating with Quilter Financial Planning.
Transaction costs of GBP2 million relating to the acquisition
have been recognised within 'Other operating and administrative
expenses' in the Group's consolidated income statement, but not
included within adjusted profit.
No contingent liabilities have been recognised in the fair value
statement of financial position.
The table below sets out the consolidated assets and liabilities
acquired:
Acquiree's
carrying Fair
amount value
GBPm GBPm
===================================================== ========== ======
Assets
Intangible assets 5 24
Property, plant and equipment 2 2
Investments and securities 1 1
Cash and cash equivalents 7 7
Trade, other receivables and other assets 7 7
===================================================== ========== ======
Total assets 22 41
===================================================== ========== ======
Liabilities
Deferred tax liabilities - (3)
Trade, other payables and other liabilities (13) (13)
Provision in respect of British Steel pension scheme
members complaints (12) (12)
===================================================== ========== ======
Total liabilities (25) (28)
===================================================== ========== ======
Total net (liabilities)/assets acquired (3) 13
Total consideration 46
===================================================== ========== ======
Goodwill recognised 33
===================================================== ========== ======
The post-acquisition results from the business, excluding
integration costs of GBP3 million, have been consolidated since the
date of acquisition, contributing GBP9 million of revenue and a
profit of GBP1 million to the Group's consolidated profit after
tax.
As disclosed in notes 15, 16 and 19, the Group was advised after
the reporting date of a number of complaints received in respect of
pension transfer advice provided to certain Lighthouse clients
between 2016 and 2018, prior to the Group's acquisition of
Lighthouse in June 2019. As the advice was provided before the
Group's acquisition of Lighthouse, any redress costs will be
recognised as a pre-acquisition liability within the fair value of
the net assets acquired, with a corresponding increase in goodwill.
A provision of GBP12 million has been calculated for the potential
redress of the complaints received to date together with related
legal and professional costs, which is reflected in the acquisition
balance sheet above, along with the corresponding increase in
goodwill. Any additional liability in respect of any other cases
remains uncertain, as explained further in note 16. If further
information is received by June 2020, the 12 month point post
acquisition, further adjustments will be made to the acquisition
balance sheet as appropriate.
Acquisition of adviser businesses by Quilter Financial Planning
("QFP")
During the year, the Group continued the expansion of the
Quilter Private Client Advisers ("QPCA") business, with the
acquisition of a further seven adviser businesses, including the
acquisition of Prescient Financial Intelligence Limited on 20
December 2019. The purchase price has been allocated based on the
fair value of assets acquired and liabilities assumed at the date
of acquisition determined in accordance to IFRS 3 Business
Combinations.
The aggregate estimated consideration payable was GBP22 million,
of which GBP14 million was cash consideration and up to GBP8
million in contingent consideration. The amount of contingent
consideration, which is expected to be paid in full (discounted to
net present value), is dependent upon meeting certain performance
targets, generally relating to the value of funds under management
and levels of on-going fee income. Tangible net assets of GBP1
million were acquired in these purchases. Total intangible assets
of GBP9 million (GBP10 million gross, less an associated deferred
tax liability of GBP(1) million) in respect of customer
relationships and goodwill of GBP12 million have been recognised as
a result of the acquisitions.
Transaction costs of GBP1 million relating to these acquisitions
have been recognised within other operating expenses in the Group's
consolidated income statement, but not included within adjusted
profit.
Impact of acquisitions on Group revenue and profit
If all of the above acquisitions had occurred on 1 January 2019,
management estimates that the Group's consolidated revenues would
have been GBP10 million higher at GBP7,774 million, and
consolidated profit after tax for the year would have been GBP5
million lower at GBP141 million.
Business acquisitions completed during year ended 31 December
2018
Acquisition of Skandia UK Limited from Old Mutual plc
The Group acquired the Skandia UK Limited group of entities from
Old Mutual plc on 31 January 2018, comprising seven Old Mutual plc
group entities with a net asset value ("NAV") of GBP591 million.
The transfer was effected by the issue of a share and with the
balance represented by a merger reserve. No debt was taken on as a
result of this transaction. The most significant asset within these
entities was a GBP566 million receivable which had a corresponding
equivalent payable within the Group's statement of financial
position. The net effect of this transaction for the Group was to
replace a payable due to Old Mutual plc with equity.
Acquisition of adviser businesses by Quilter Financial Planning
("QFP")
During 2018 the Group completed the acquisition of fourteen
adviser businesses as part of the expansion of the QPCA business.
The total cash consideration paid was an initial GBP5 million with
additional potential contingent consideration of GBP6 million which
is expected to be paid in full (discounted to net present value for
this and all other acquisitions listed below), dependent upon
meeting certain performance targets generally relating to funds
under management. Goodwill of GBP5 million, other intangible assets
of GBP7 million and a deferred tax liability of GBP1 million were
recognised as a result of the transaction. The contingent
consideration was capitalised in the calculation of goodwill
recognised.
Contingent consideration arising from business combinations
The table below details the movements in the contingent
consideration balance during the current and prior year arising
from the business acquisitions detailed above and in earlier
years.
31 December 2019 31 December 2018
GBPm GBPm
=============================== ================ ================
Opening balance at 1 January 37 35
Acquisitions during the year 22 7
Payments (21) (7)
Financing interest charge 3 2
Other movements (2) -
=============================== ================ ================
Closing balance at 31 December 39 37
=============================== ================ ================
Contingent consideration represents management's best estimate
of the amount payable in relation to each acquisition discounted to
net present value. The basis of each acquisition varies but
includes payments based upon a percentage of the level of assets
under administration, funds under management and levels of on-going
fee income at future dates. Management estimate a provision
sensitivity of +/- 5% (GBP2 million).
3(b): Business disposals
Year ended 31 December 2019
On 31 December 2019, the Group completed the sale of the Quilter
Life Assurance ("QLA") business (consisting two of the Group's
subsidiary undertakings: Old Mutual Wealth Life Assurance Limited
and Old Mutual Wealth Pensions Trustee Limited) to ReAssure Group
for total consideration of GBP446 million. The Group has recognised
a profit on the disposal of QLA of GBP103 million. Provisions
established in respect of this disposal are shown in note 15.
Year ended 31 December 2018
On 29 June 2018, the Group completed the sale of its Single
Strategy Asset Management business ("Single Strategy business") for
a total consideration of GBP583 million, comprising cash
consideration of GBP540 million on completion, with an additional
GBP7 million payable before 2022 as surplus capital associated with
the separation from the Group is released in the business, to a
special purpose vehicle ultimately owned by funds managed by TA
Associates and certain members of the Single Strategy management
team (together "the Acquirer"). The contingent consideration was
not subject to performance conditions. The remaining proceeds of
GBP36 million were received in cash as a pre-completion dividend on
15 June 2018. Economic ownership of the Single Strategy business
passed to the Acquirer effective from 1 January 2018 with all
profits and performance fees generated up until 31 December 2017
for the account of Quilter plc.
The results of the Single Strategy business continued to be
included as part of the Group up until the date of sale on the 29
June 2018. The Group recognised a post tax profit on disposal of
the Single Strategy business of GBP292 million.
Profit on sale of operations
Year ended Year ended
31 December 31 December
2019 2018
====================== ==================
Single Strategy
business and
Old Mutual Wealth
Quilter Life Assurance Italy adjustment
GBPm GBPm
========================================== ====================== ==================
Consideration received(1) 446 546
Less: transaction and separation costs(2) (19) (20)
Plus: release of accrued expenses in
relation to OMW Italy S.p.A disposal - 2
========================================== ====================== ==================
Net proceeds from sale 427 528
Carrying value of net assets disposed (294) (155)
Goodwill allocated and disposed (30) (83)
========================================== ====================== ==================
Profit on sale of operations before
tax 103 290
Tax on disposals - 4
========================================== ====================== ==================
Profit on sale of operations after
tax 103 294
========================================== ====================== ==================
(1) Consideration received in 2018 in respect of the Single
Strategy business comprises GBP540 million of cash received
together with the discounted contingent consideration of GBP6
million, and excludes the GBP36 million pre-completion dividend
received in June 2018.
(2) Of the GBP19 million transaction and separation costs
relating to the sale of the QLA business in year ended 31 December
2019, GBP7 million has been expensed, with GBP12 million of
accruals and provisions remaining at 31 December 2019.
Carrying value of net assets disposed
Year ended Year ended
31 December 31 December
2019 2018
====================== ===============
Single Strategy
Quilter Life Assurance business
GBPm GBPm
============================================== ====================== ===============
Assets
Deferred acquisition costs 8 -
Contract costs 39 5
Financial investments 8,646 -
Reinsurers' share of policyholder liabilities 1,341 -
Deferred tax assets - 5
Current tax receivable 14 -
Trade, other receivables and other
assets 45 74
Cash and cash equivalents 361 170
============================================== ====================== ===============
Total assets 10,454 254
============================================== ====================== ===============
Liabilities
Long-term business insurance policyholder
liabilities 736 -
Investment contract liabilities 9,183 -
Provisions 12 3
Deferred tax liabilities 70 -
Current tax payable 7 3
Trade, other payables and other liabilities 129 93
Contract liabilities 23 -
============================================== ====================== ===============
Total liabilities 10,160 99
============================================== ====================== ===============
Carrying value of net assets disposed 294 155
============================================== ====================== ===============
3(c): Discontinued operations - income statement
During 2019, the Group's discontinued operations consisted
solely of the QLA business up to its disposal date of 31 December
2019 and the associated profit on sale of that business. For 2018,
in addition to QLA's profit after tax, the Group's discontinued
operations also included the profit after tax of the Single
Strategy business up to the date of disposal on 29 June 2018 and
the related profit on sale of that business.
Year ended Year ended
31 December 31 December
2019 2018
Notes GBPm GBPm
========================================================= ===== ============ ============
Revenue
Gross earned premiums 145 147
Premiums ceded to reinsurers (86) (87)
========================================================= ===== ============ ============
Net earned premiums 59 60
Fee income and other income from service activities(1) 164 206
Investment return(1,2) 1,386 (770)
Other income - 2
========================================================= ===== ============ ============
Total revenue 1,609 (502)
Expenses
Claims and benefits paid (98) (86)
Reinsurance recoveries 72 60
========================================================= ===== ============ ============
Net insurance claims and benefits incurred (26) (26)
Change in reinsurance assets and liabilities 121 103
Change in insurance contract liabilities (134) (109)
Change in investment contract liabilities(2) 14(c) (1,364) 772
Fee and commission expenses, and other acquisition
costs (45) (84)
Other operating and administrative expenses (8) (102)
Finance costs - (1)
========================================================= ===== ============ ============
Total expenses (1,456) 553
Profit on sale of operations before tax 3(b) 103 290
========================================================= ===== ============ ============
Profit before tax from discontinued operations 256 341
Tax (expense)/credit attributable to policyholder
returns 6(a) (76) 97
========================================================= ===== ============ ============
Profit before tax from discontinued operations
attributable to equity holders 180 438
Income tax (expense)/credit 6(a) (89) 81
Less: tax expense/(credit) attributable to policyholder
returns 76 (97)
========================================================= ===== ============ ============
Tax expense attributable to equity holders (13) (16)
========================================================= ===== ============ ============
Profit after tax from discontinued operations 167 422
========================================================= ===== ============ ============
Attributable to:
Equity holders of Quilter plc 167 422
========================================================= ===== ============ ============
Earnings per ordinary share on profit attributable
to ordinary shareholders of Quilter plc
========================================================= ===== ============ ============
Basic - from discontinued operations (pence) 7(b) 9.1 23.1
========================================================= ===== ============ ============
Diluted - from discontinued operations (pence) 7(b) 8.9 23.0
========================================================= ===== ============ ============
(1) In the year ended 31 December 2018, the Group has
reclassified GBP36 million from Fee income and other income from
service activities to Investment return to conform with current
year
presentation.
(2) In the year ended 31 December 2018, the Group has
reclassified GBP35 million from Investment return to Change in
investment contract liabilities to conform with current year
presentation.
Operating and administration expenses shown within discontinued
operations for the current and prior year have been amended in
order to reallocate costs historically charged to QLA from Group
service entities (31 December 2019: GBP26 million and 31 December
2018: GBP28 million) back to the Group's continuing operations.
This principally reflects those costs previously recharged from
Group central support functions to QLA that the Group will continue
to incur after the disposal of QLA but will no longer be recharged
to that business subsequent to its disposal. For more information
on these costs and related revenues in 2020 (as part of the
Transitional Service Arrangement ("TSA") with ReAssure ("The
Acquirer", in respect of QLA)) see the Financial Review.
3(d): Discontinued operations - Statement of comprehensive
income
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
========================================================== ============ ============
Profit after tax 167 422
========================================================== ============ ============
Total comprehensive income for the year from discontinued
operations 167 422
========================================================== ============ ============
3(e): Discontinued operations - Net cash flows
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
===================================================== ============ ============
Total net cash used in operating activities (3,789) (2,437)
Total net cash from investing activities 3,765 2,529
Total net cash used in financing activities (130) (46)
===================================================== ============ ============
Net (decrease)/increase in cash and cash equivalents (154) 46
===================================================== ============ ============
4: Segmental information
4(a): Segmental presentation
The Group's operating segments comprise Advice and Wealth
Management and Wealth Platforms, which is consistent with the way
in which the Group is structured and managed. For all reporting
periods, these segments have been classified as continuing
operations in the income statement. Head Office includes certain
revenues and central costs that are not allocated to the
segments.
Adjusted profit is an Alternative Performance Measure ("APM")
reported to the Group's management and Board. Management and the
Board use additional APMs to assess the performance of each of the
segments, including net client cash flows, assets under management
and administration, revenue and operating margin.
Consistent with internal reporting, assets, liabilities,
revenues and expenses that are not directly attributable to a
particular segment are allocated between segments where
appropriate. The Group accounts for inter-segment revenues and
transfers as if the transactions were with third parties at current
market prices. Intra-group recharges in respect of operating and
administration expenses within businesses disclosed as discontinued
operations are not adjusted for potential future changes to the
level of those costs resulting from the disposal of those
businesses.
The segmental information in this note reflects the adjusted and
IFRS profit measures and the assets and liabilities for each
operating segment as provided to management and the Board.
Continuing operations:
Advice and Wealth Management
This segment comprises Quilter Investors, Quilter Cheviot and
Quilter Financial Planning.
Quilter Investors is a leading provider of investment solutions
in the UK multi-asset market. It develops and manages investment
solutions in the form of funds for the Group and third party
clients. It has several fund ranges which vary in breadth of
underlying asset class.
Quilter Cheviot provides discretionary investment management
predominantly in the United Kingdom with bespoke investment
portfolios tailored to the individual needs of affluent and
high-net worth customers, charities, companies and institutions
through a network of branches in London and the regions. Investment
management services are also provided by operations in the Channel
Islands and the Republic of Ireland.
Quilter Financial Planning is a restricted and independent
financial adviser network, including Quilter Private Client
Advisers ("QPCA"), CDG and Lighthouse, providing mortgage and
financial planning advice and financial solutions for both
individuals and businesses through a network of intermediaries. It
operates across all markets, from wealth management and retirement
planning advice through to dealing with property wealth and
personal and business protection needs.
Wealth Platforms
This segment comprises Quilter Wealth Solutions ("QWS") and
Quilter International.
Quilter Wealth Solutions is a leading investment platform
provider of advice-based wealth management products and services in
the UK, which serves a largely affluent customer base through
advised multi-channel distribution.
Quilter International is a cross-border business, focusing on
high net worth and affluent local customers and expatriates in the
UK, Asia, the Middle East, Europe and Latin America.
Head office
In addition to the two operating segments, Head Office comprises
the investment return on centrally held assets, central support
function expenses, central core structural borrowings and certain
tax balances in the segmental statement of financial position.
Discontinued operations:
The disposal of Quilter Life Assurance ("QLA") on 31 December
2019, previously part of the Wealth Platforms operating segment,
has resulted in its classification as a discontinued operation. For
the year ended 31 December 2018, the Single Strategy Asset
Management business (disposed of on 29 June 2018) is also included
as a discontinued operation. The results of these two businesses,
along with the profits on disposal, have been presented as
discontinued operations. See note 3(b) and note 3(c) for further
information.
4(b)(i): Adjusted profit statement - segmental information for
the year ended 31 December 2019
This reconciliation presents the Group's operating segments'
IFRS income statements and reconcile to pre-tax adjusted profit and
to the Group's consolidated income statement, including the
'Profit/(loss) before tax attributable to equity holders' (for
continuing operations only).
Operating segments
=======================
Advice Reallocation Consolidated
and Wealth Wealth Head of QLA Consolidation income
Management Platforms Office costs(1) adjustments(2) statement
Continuing operations Notes GBPm GBPm GBPm GBPm GBPm GBPm
============================ ========= =========== ========== ======= ============ =============== ============
Revenue
Fee income and other income
from service activities 486 438 - - 12 936
Investment return 10 5,823 3 - 1,030 6,866
Other income 1 160 6 - (145) 22
============================ ========= =========== ========== ======= ============ =============== ============
Segmental revenue 497 6,421 9 - 897 7,824
============================ ========= =========== ========== ======= ============ =============== ============
Expenses
Insurance contract claims
and
changes in liabilities - (1) - - - (1)
Change in investment
contract
liabilities 14(c) - (5,810) - - - (5,810)
Fee and commission expenses, and
other acquisition costs (73) (110) - - (111) (294)
Change in third party
interest
in consolidated funds - - - - (917) (917)
Other operating and
administrative
expenses (368) (409) (68) (26) 131 (740)
Finance costs (4) (3) (10) - - (17)
============================ ========= =========== ========== ======= ============ =============== ============
Segmental expenses (445) (6,333) (78) (26) (897) (7,779)
============================ ========= =========== ========== ======= ============ =============== ============
Profit/(loss) before tax
from
continuing operations 52 88 (69) (26) - 45
Tax attributable to
policyholder
returns - (98) - - - (98)
============================ ========= =========== ========== ======= ============ =============== ============
Profit/(loss) before tax
attributable
to equity holders from
continuing
operations 52 (10) (69) (26) - (53)
============================ ========= =========== ========== ======= ============ =============== ============
Adjusted for non-operating
items:
Goodwill impairment and
impact
of acquisition accounting 5(a)(i) 52 1 1 - - 54
Business transformation
costs 5(a)(ii) (1) 58 20 - - 77
Managed Separation costs 5(a)(iii) - 1 5 - - 6
Finance costs 5(a)(iv) - - 10 - - 10
Policyholder tax adjustments 5(a)(v) - 62 - - - 62
============================ ========= =========== ========== ======= ============ =============== ============
Adjusting items before tax 51 122 36 - - 209
============================ ========= =========== ========== ======= ============ =============== ============
Adjusted profit/(loss) before tax
- continuing operations 103 112 (33) (26) - 156
======================================= =========== ========== ======= ============ =============== ============
Adjusted profit before tax
- discontinued operations - 53 - 26 - 79
============================ ========= =========== ========== ======= ============ =============== ============
Total adjusted profit/(loss)
before tax 103 165 (33) - - 235
============================ ========= =========== ========== ======= ============ =============== ============
(1) Reallocation of QLA costs includes GBP26 million of costs
previously reported as part of the QLA business which has been
reallocated from discontinued to continuing operations as these
costs do not transfer to ReAssure on disposal at 31 December 2019.
See note 3(c) for further information.
(2) Consolidation adjustments comprise the elimination of
inter-segment transactions and the consolidation of investment
funds.
4(b)(ii): Adjusted profit statement - segmental information for
the year ended 31 December 2018
Operating segments
=======================
Advice Reallocation Consolidated
and Wealth Wealth Head of QLA Consolidation income
Management Platforms Office costs(1) adjustments(2) statement
Continuing operations Notes GBPm GBPm GBPm GBPm GBPm GBPm
============================ ========= =========== ========== ======= ============ =============== ============
Revenue
Fee income and other income
from service activities 547 402 - - 5 954
Investment return 9 (2,478) 3 - (246) (2,712)
Other income 2 101 6 - (74) 35
============================ ========= =========== ========== ======= ============ =============== ============
Segmental revenue 558 (1,975) 9 - (315) (1,723)
============================ ========= =========== ========== ======= ============ =============== ============
Expenses
Insurance contract claims
and
changes in liabilities - (1) - - - (1)
Change in investment
contract
liabilities 14(c) - 2,499 - - - 2,499
Fee and commission expenses, and
other acquisition costs (163) (117) - - (118) (398)
Change in third party
interest
in consolidated funds - - - - 369 369
Other operating and
administrative
expenses (358) (360) (68) (28) 64 (750)
Finance costs (3) - (13) - - (16)
============================ ========= =========== ========== ======= ============ =============== ============
Segmental expenses (524) 2,021 (81) (28) 315 1,703
============================ ========= =========== ========== ======= ============ =============== ============
Profit/(loss) before tax
from
continuing operations 34 46 (72) (28) - (20)
Tax attributable to
policyholder
returns - 61 - - - 61
============================ ========= =========== ========== ======= ============ =============== ============
Profit/(loss) before tax
attributable
to equity holders from
continuing
operations 34 107 (72) (28) - 41
============================ ========= =========== ========== ======= ============ =============== ============
Adjusted for non-operating
items:
Goodwill impairment and
impact
of acquisition accounting 5(a)(i) 49 1 - - - 50
Business transformation
costs 5(a)(ii) 19 58 7 - - 84
Managed Separation costs 5(a)(iii) - 1 23 - - 24
Finance costs 5(a)(iv) - - 13 - - 13
Policyholder tax adjustments 5(a)(v) - (64) - - - (64)
Reallocation of central
costs(3) - 2 (2) - - -
============================ ========= =========== ========== ======= ============ =============== ============
Adjusting items before tax 68 (2) 41 - - 107
============================ ========= =========== ========== ======= ============ =============== ============
Adjusted profit/(loss) before tax
- continuing operations 102 105 (31) (28) - 148
======================================= =========== ========== ======= ============ =============== ============
Adjusted profit before tax
- discontinued operations 26 57 - 28 - 111
============================ ========= =========== ========== ======= ============ =============== ============
Total adjusted profit/(loss)
before tax 128 162 (31) - - 259
============================ ========= =========== ========== ======= ============ =============== ============
(1) Reallocation of QLA costs includes GBP28 million of costs
previously reported as part of the QLA business which has been
reallocated from discontinued to continuing operations as these
costs do not transfer to ReAssure on disposal at 31 December 2019.
See note 3(c) for further information.
(2) Consolidation adjustments comprise the elimination of
inter-segment transactions and the consolidation of investment
funds.
(3) Reallocation of central costs reverses management
reallocations included within adjusted profit to reconcile back to
IFRS profit.
4(c)(i): Statement of financial position - segmental information
at 31 December 2019
Advice
& Wealth Wealth Head Discontinued Consolidation
Management Platforms Office Operations Adjustments(1) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
====================================== ===== =========== ========== ======= ============ =============== ======
Assets
Goodwill and intangible assets 9 458 134 - - - 592
Property, plant and equipment 30 111 2 - - 143
Investments in associated
undertakings - - 1 - - 1
Contract costs - 455 - - - 455
Loans and advances 31 180 6 - - 217
Financial investments 10 1 52,249 - - 7,095 59,345
Deferred tax assets 11 22 10 - - 43
Current tax receivable - - 13 - - 13
Trade, other receivables and
other assets 207 177 3 - 37 424
Derivative assets - - - - 32 32
Cash and cash equivalents 13(a) 383 725 838 - 527 2,473
Inter-segment funding - assets - 12 - - (12) -
====================================== ===== =========== ========== ======= ============ =============== ======
Total assets 1,121 54,065 873 - 7,679 63,738
====================================== ===== =========== ========== ======= ============ =============== ======
Liabilities
Investment contract liabilities 14 - 52,455 - - - 52,455
Third-party interests in consolidated
funds - - - - 7,675 7,675
Provisions 15 28 26 10 - - 64
Deferred tax liabilities 38 50 - - - 88
Current tax payable/(receivable)(2) 1 (7) 12 - - 6
Borrowings and lease liabilities(3) 26 108 201 - - 335
Trade, other payables and
other liabilities 322 477 37 - - 836
Contract liabilities and deferred
revenue 1 190 - - - 191
Derivative liabilities - - - - 17 17
Inter-segment funding - liabilities - - 12 - (12) -
====================================== ===== =========== ========== ======= ============ =============== ======
Total liabilities 416 53,299 272 - 7,680 61,667
====================================== ===== =========== ========== ======= ============ =============== ======
Total equity 2,071
====================================== ===== =========== ========== ======= ============ =============== ======
Total equity and liabilities 63,738
====================================== ===== =========== ========== ======= ============ =============== ======
(1) Consolidation adjustments comprise the elimination of
inter-segment transactions and the consolidation of investment
funds.
(2) Current tax payable/(receivable) includes Group relief
payable and receivable that net to GBPnil on a consolidated basis
but may appear as a receivable within individual segments.
(3) The Group has initially applied IFRS 16 at 1 January 2019
using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect
of initially applying IFRS 16 is recognised in retained earnings at
the time of initial application.
4(c)(ii): Statement of financial position - segmental
information at 31 December 2018
Advice
& Wealth Wealth Head Discontinued Consolidation
Management Platforms Office Operations Adjustments(1) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
==================================== ===== =========== ========== ======= ============ =============== ======
Assets
Goodwill and intangible assets 9 386 164 - - - 550
Property, plant and equipment 10 7 - - - 17
Investments in associated
undertakings - - 2 - - 2
Deferred acquisition costs - - - 11 - 11
Contract costs - 498 - 53 - 551
Loans and advances 27 188 7 - - 222
Financial investments 10 3 44,950 2 9,686 4,578 59,219
Reinsurers' share of policyholder
liabilities - - - 2,162 - 2,162
Deferred tax assets 7 22 9 - - 38
Current tax receivable - 23 1 23 - 47
Trade, other receivables
and other assets(2) 241 151 8 30 100 530
Derivative assets - - - - 46 46
Cash and cash equivalents 13(a) 358 599 440 514 484 2,395
Inter-segment funding - assets - 12 - - (12) -
==================================== ===== =========== ========== ======= ============ =============== ======
Total assets 1,032 46,614 469 12,479 5,196 65,790
==================================== ===== =========== ========== ======= ============ =============== ======
Liabilities
Insurance contract liabilities 14 - - - 602 - 602
Investment contract liabilities 14 - 45,211 - 11,239 - 56,450
Third-party interests in
consolidated funds - - - - 5,116 5,116
Provisions 15 26 20 9 39 - 94
Deferred tax liabilities 40 - - 19 - 59
Current tax payable/(receivable)(3) 9 5 (18) 9 - 5
Borrowings - - 197 - - 197
Trade, other payables and
other liabilities 340 425 20 158 56 999
Contract liabilities and
deferred revenue 1 194 - 31 - 226
Derivative liabilities - 1 - - 36 37
Inter-segment funding - liabilities - - 12 - (12) -
==================================== ===== =========== ========== ======= ============ =============== ======
Total liabilities 416 45,856 220 12,097 5,196 63,785
==================================== ===== =========== ========== ======= ============ =============== ======
Total equity 2,005
==================================== ===== =========== ========== ======= ============ =============== ======
Total equity and liabilities 65,790
==================================== ===== =========== ========== ======= ============ =============== ======
(1) Consolidation adjustments comprise the elimination of
inter-segment transactions and the consolidation of investment
funds.
(2) The Group's contract assets are now included within Trade,
other receivables and other assets, having previously been shown
separately on the statement of financial position.
(3) Current tax payable/(receivable) includes Group relief
payable and receivable that net to GBPnil on a consolidated basis
but may appear as a receivable within individual segments.
-5: Alternative performance measures ("APMs")
5(a): Adjusted profit and adjusting items
In determining adjusted profit before tax, certain adjustments
are made to IFRS profit before tax to reflect the underlying
performance of the Group. These are detailed below.
5(a)(i): Goodwill impairment and impact of acquisition
accounting
The recognition of goodwill and other acquired intangibles is
created on the acquisition of a business and represents the premium
paid over the fair value of the Group's share of the identifiable
assets and liabilities acquired at the date of acquisition (as
recognised under IFRS 3 Business Combinations). The Group excludes
any impairment of goodwill from adjusted profit as well as the
amortisation and impairment of acquired other intangible assets,
any acquisition costs and finance costs related to the discounting
of contingent consideration.
The effect of these adjustments to determine adjusted profit are
summarised below. All adjustments are in respect of continuing
operations.
Year ended Year ended
31 December 31 December
2019 2018
Note GBPm GBPm
==================================================== ==== ============ ============
Amortisation of other acquired intangible assets 9(a) 45 41
Acquisition costs(1) 6 5
Impairment of other intangible assets - 1
Unwinding of discount on contingent consideration 3 3
==================================================== ==== ============ ============
Total goodwill impairment and impact of acquisition
accounting 54 50
==================================================== ==== ============ ============
(1) Acquisition costs include items such as transaction costs or
deferred incentives arising on the acquisition of businesses.
5(a)(ii): Business transformation costs
Business transformation costs include four items: costs
associated with the UK Platform Transformation Programme, build out
costs incurred within Quilter Investors as a result of the sale of
the Single Strategy business, restructuring costs incurred as a
result of the sale of Quilter Life Assurance, and the Optimisation
Programme costs. All items are within the Group's continuing
operations and are described in detail below. For the year ended 31
December 2019, these costs totalled GBP77 million (31 December
2018: GBP84 million) in aggregate.
UK Platform Transformation Programme - 31 December 2019: GBP57
million, 31 December 2018: GBP58 million
The Group embarked on a significant programme to develop new
platform capabilities and to outsource UK business administration.
This involved replacing many aspects of the existing UK Platform,
and on completion certain elements of service provision will be
migrated to FNZ under a long-term outsourcing agreement. The costs
of developing the new technology do not meet the criteria for
capitalisation and have therefore been expensed. These direct costs
and the costs of decommissioning existing technology and migrating
of services to FNZ are excluded from adjusted profit.
In partnership with FNZ, the Group expects to deliver all the
existing functionality of the platform with increased levels of
straight-through processing and enhanced functionality for new
business and to migrate the in-force (UK Platform) business during
2020.
Quilter Investors' build out costs - 31 December 2019: GBP(1)
million, 31 December 2018: GBP19 million
In March 2016, the Group's former parent company, Old Mutual
plc, announced its Managed Separation strategy that sought to
unlock and create significant long-term value for Old Mutual plc
shareholders. As part of this strategy, Quilter's Multi-Asset (now
renamed as Quilter Investors) and Single Strategy teams were to
develop as separate distinct businesses, and the Single Strategy
business was sold to its management and TA Associates on 29 June
2018. As a result, the Group incurred GBP24 million of one-off
costs in the year ended 31 December 2018, GBP5 million of which
were included in profit on disposal within discontinued operations
and GBP19 million is an adjusting item within continuing business.
During 2019, the build has been substantially completed resulting
in the release of GBP1 million of the provision established to
complete the build.
Optimisation Programme costs - 31 December 2019: GBP18 million,
31 December 2018: GBP7 million
The Group initiated a phased, multi-year Optimisation Programme
in March 2019 targeting a 4 percentage point uplift in the Group's
operating margin by 2021. Phase 1 is aiming to unify and simplify
the Group through a number of efficiency initiatives that will
deliver improvements in operational performance.
A number of quick win tactical efficiencies have been delivered,
which included targeted staff restructuring, third party contract
renegotiation and termination, and property and facilities savings.
Some more complex initiatives, such as the insourcing of certain
technology capabilities as well as the simplification of certain
group support functions, have also been delivered. All the planned
programmes that will transform our business through technology
enablement, such as the consolidation and modernisation of our
general ledgers and other associated finance, HR and procurement
modules, have been initiated. The use of robotics to automate
manual operational processes in our International business as well
as streamlining and automating some of the processes used in our
advice business, are also underway.
Restructuring costs following disposal of Quilter Life Assurance
- 31 December 2019: GBP3 million, 31 December 2018: GBPnil
As a result of the disposal of QLA on the 31 December 2019, the
Group has recognised GBP3 million as an adjusting item principally
in respect of redundancy costs incurred during the year. The Group
expects to incur further restructuring costs during the following
two years, including the cost of decommissioning IT systems as the
TSA runs off and the remaining business is restructured following
the disposal.
5(a)(iii): Managed Separation costs
One-off costs related to the Managed Separation from Old Mutual
plc, recognised in the IFRS income statement, have been excluded
from adjusted profit on the basis that they are not representative
of the operating activity of the Group. These costs relate to
preparing the Group to operate as a standalone business and the
execution of various transactions required to implement its Managed
Separation strategy. For the year ended 31 December 2019 these
costs were GBP6 million (31 December 2018: GBP24 million). In 2019
these costs primarily relate to post-listing rebranding. These
costs are not expected to persist in the long term as they relate
to a fundamental restructuring of the Group.
5(a)(iv): Finance costs
The nature of much of the Group's operations means that, for
management's decision-making and internal performance management,
the effects of interest costs on external borrowings are removed
when calculating adjusted profit. For the year ended 31 December
2019 finance costs were GBP10 million (31 December 2018: GBP13
million).
5(a)(v): Policyholder tax adjustments
For the year ended 31 December 2019 the total of policyholder
tax adjustments to adjusted profit is GBP74 million (31 December
2018: GBP(101) million) relating to both continuing and
discontinued operations, as shown in note 5(c). Adjustments to
policyholder tax are made to remove distortions arising from market
volatility that can, in turn, lead to volatility in the
policyholder tax charge between periods. The recognition of the
income received from policyholders (which is included within the
Group's revenue) to fund the policyholder tax liability can vary in
timing to the recognition of the corresponding tax expense,
creating volatility to the Group's IFRS (loss)/profit before tax
attributable to equity holders. For a further explanation of the
impact of markets on the policyholder tax charge see note 6(a).
Adjustments are also made to remove policyholder tax distortions
from other non-operating adjusting items.
5(a)(vi): Voluntary customer remediation
Within QLA, the voluntary customer remediation provision was
established in 2017 following product reviews consistent with
recommendations from the Financial Conduct Authority's ("FCA")
thematic review and the FCA's guidance FG16/8 Fair treatment of
long-standing customers in the life assurance sector. During 2019
the components of the remaining provision have been reviewed and
GBP10 million of the provision released (as detailed in note 15),
wholly relating to discontinued operations and hence the remaining
provision is not included in the Group's statement of financial
position as at 31 December 2019.
5(b): IFRS profit before tax (excluding amortisation,
policyholder tax adjustments and other one-off items)
For remuneration purposes, the Group uses IFRS profit before tax
adjusted to exclude agreed non-operating, one-off items as shown
below. For further details please refer to the remuneration report
and KPIs section within the Group's 2018 ARA.
Year ended Year ended
31 December 31 December
2019 2018(1)
Notes GBPm GBPm
===================================================== ======== ============ ============
(Loss)/profit before tax attributable to equity
holders - continuing operations (53) 41
Profit before tax attributable to equity holders
- discontinued operations 3(c) 180 438
Adjusted for the following:
Profit on business disposals 3(b) (103) (290)
Goodwill impairment and impact of acquisition
accounting 5(a)(i) 54 50
Policyholder tax adjustments 5(a)(v) 74 (101)
Voluntary customer remediation provision 5(a)(vi) (10) -
Quilter Investors' build out costs 5(a)(ii) (1) 19
2018 Single Strategy business profit before
tax - (26)
===================================================== ======== ============ ============
IFRS profit before tax (excluding amortisation, policyholder
tax adjustments and other one-off items) 141 131
=============================================================== ============ ============
(1) The 2018 comparative has been restated from GBP112 million
to GBP131 million to include the adjustment for the Quilter
Investors' build out costs of GBP19 million (as shown in the table
above.
5(c): Reconciliation of IFRS revenue and expenses to adjusted
profit total fee revenue and expenses
This reconciliation shows how each line of the Group's
consolidated IFRS income statement is allocated to the Group's
APMs: Net management fee, Total net fee revenue and Expenses as
part of the Group's adjusted profit. Allocations are determined by
management and aim to show the sources of profit (net of relevant
directly attributable expenses). These allocations remain
consistent from period to period to ensure comparability.
Deduct
Adjusted QLA
Net Total profit (incl. IFRS
Year ended 31 mgmt Other net fee incl. Consol. interco income
December fees(1) revenue(2) revenue(3) Expenses QLA of funds(4) elims)(5) statement(6)
2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
===================== ======== =========== =========== ======== ======== ============ ========== =============
Revenue
Net earned premiums - 59 59 - 59 - (59) -
Fee income and other
income
from service
activities 871 203 1,074 - 1,074 17 (155) 936
Investment return - 7,384 7,384 - 7,384 1,031 (1,549) 6,866
Other income - 1 1 - 1 21 - 22
===================== ======== =========== =========== ======== ======== ============ ========== =============
Total revenue 871 7,647 8,518 - 8,518 1,069 (1,763) 7,824
Expenses
Insurance contract
claims
and changes
in liabilities - (40) (40) - (40) - 39 (1)
Change in investment
contract
liabilities - (7,339) (7,339) - (7,339) - 1,529 (5,810)
Fee and commission
expenses,
and other
acquisition costs (108) (103) (211) - (211) (117) 34 (294)
Change in third-party
interest
in
consolidated funds - - - - - (917) - (917)
Other operating and
administrative
expenses (14) (2) (16) (697) (713) (35) 8 (740)
Finance costs - (4) (4) (13) (17) - - (17)
===================== ======== =========== =========== ======== ======== ============ ========== =============
Total expenses (122) (7,488) (7,610) (710) (8,320) (1,069) 1,610 (7,779)
Tax (expense)/credit
attributable
to policyholder
returns (174) - (174) - (174) - 76 (98)
--------------------- -------- ----------- ----------- -------- -------- ------------ ---------- -------------
Total before
adjusting
items 575 159 734 (710) 24 - (77) (53)
======== ============ ========== =============
Adjusting items:
Goodwill impairment
and
impact
of acquisition
accounting - - - 54 54
Business
transformation
costs - - - 77 77
Managed Separation
costs - - - 6 6
Finance costs - - - 10 10
Policyholder tax
adjustments 74 - 74 - 74
Voluntary customer
remediation
provision - - - (10) (10)
===================== ======== =========== =========== ======== ========
Adjusting items 74 - 74 137 211
===================== ======== =========== =========== ======== ========
Adjusted profit
before
tax - continuing
operations
and QLA 649 159 808 (573) 235
===================== ======== =========== =========== ======== ========
Deduct
Adjusted QLA
Total profit Consol. (incl. IFRS
Net mgmt Other net fee incl. of interco income
Year ended 31 December fees(1) revenue(2) revenue(3) Expenses QLA funds(4) elims)(5) statement(6)
2018 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================= ======== ========== ========== ======== ======== ======== ========= ============
Revenue
Net earned premiums - 60 60 - 60 - (60) -
Fee income and other income
from
service activities(8) 801 195 996 - 996 14 (56) 954
Investment return(8,9) 10 (3,245) (3,235) - (3,235) (246) 769 (2,712)
Other income - 6 6 - 6 29 - 35
============================= ======== ========== ========== ======== ======== ======== ========= ============
Total revenue 811 (2,984) (2,173) - (2,173) (203) 653 (1,723)
Expenses
Insurance contract claims
and changes
in liabilities - (33) (33) - (33) - 32 (1)
Change in investment contract
liabilities(9) - 3,271 3,271 - 3,271 - (772) 2,499
Fee and commission expenses,
and other acquisition
costs (199) (112) (311) - (311) (126) 39 (398)
Change in third-party
interest in
consolidated funds - - - - - 369 - 369
Other operating and
administrative
expenses (22) - (22) (710) (732) (40) 22 (750)
Finance costs - (1) (1) (16) (17) - 1 (16)
============================= ======== ========== ========== ======== ======== ======== ========= ============
Total expenses (221) 3,125 2,904 (726) 2,178 203 (678) 1,703
Tax
credit/(expense)attributable
to policyholder returns 158 - 158 - 158 - (97) 61
============================= ======== ========== ========== ======== ======== ======== ========= ============
Total before adjusting
items 748 141 889 (726) 163 - (122) 41
-------- -------- --------- ------------
Adjusting items:
Goodwill impairment and
impact
of acquisition accounting - - - 50 50
Business transformation
costs - - - 84 84
Managed Separation costs - - - 24 24
Finance costs - - - 13 13
Policyholder tax adjustments (101) - (101) - (101)
============================= ======== ========== ========== ======== ========
Adjusting items (101) - (101) 171 70
============================= ======== ========== ========== ======== ========
Adjusted profit before
tax - continuing operations
and QLA(7) 647 141 788 (555) 233
============================= ======== ========== ========== ======== ========
(1) Net Management Fees are commented on within the Financial
Review and explained in the Alternative Performance Measures within
the Group's 2019 ARA.
(2) Other revenue is commented on within the Financial Review
and explained in the Alternative Performance Measures on page 202
within the Group's 2019 ARA.
(3) Total net fee revenue is commented on within the Financial
Review and explained in the Alternative Performance Measures on
page 202 within the Group's 2019 ARA.
(4) Consol of funds shows the grossing up impact to the Group's
consolidated income statement as a result of the consolidation of
funds. This grossing up is excluded from the Group's adjusted
profit.
(5) The results of QLA are deducted in order to reconcile to the
Group's consolidated income statement. QLA is presented as a
discontinued operation. This includes intercompany eliminations
that are required when the Group's results are split between
continuing and discontinued operations.
(6) The IFRS income statement column in the table above, down to
Total before adjusting items, reconciles to each line of the
Group's consolidated income statement down to (Loss)/profit before
tax attributable to equity holders.
(7) Adjusted profit before tax - continuing operations and QLA
of GBP233 million for year ended 31 December 2018 represents the
Group's total adjusted profit before tax of GBP259 million (see
"Reconciliation of adjusted profit to profit after tax" statement),
less GBP26 million of adjusted profit before tax attributable to
the Single Strategy business.
(8) In the year ended 31 December 2018, the Group has
reclassified GBP36 million from Fee income and other income from
service activities to Investment return to conform with current
year presentation.
(9) In the year ended 31 December 2018, the Group has
reclassified GBP35 million from Investment return to Change in
investment contract liabilities to conform with current year
presentation.
6: Tax
6(a): Tax charged to the income statement
Year ended Year ended
31 December 31 December
2019 2018
Note GBPm GBPm
==================================================== ==== ============ ============
Current tax
United Kingdom 33 (10)
International 5 3
Adjustments to current tax in respect of prior
periods (11) (11)
==================================================== ==== ============ ============
Total current tax 27 (18)
==================================================== ==== ============ ============
Deferred tax
Origination and reversal of temporary differences 40 (61)
Effect on deferred tax of changes in tax rates 2 -
Adjustments to deferred tax in respect of prior
periods (3) (7)
==================================================== ==== ============ ============
Total deferred tax 39 (68)
Total tax charged/(credited) to income statement
- continuing operations 66 (86)
Total tax charged/(credited) to income statement
- discontinued operations 3(c) 89 (81)
==================================================== ==== ============ ============
Total tax charged/(credited) to income statement 155 (167)
==================================================== ==== ============ ============
Attributable to policyholder returns - continuing
operations 98 (61)
Attributable to equity holders - continuing
operations (32) (25)
==================================================== ==== ============ ============
Total tax charged/(credited) to income statement
- continuing operations 66 (86)
==================================================== ==== ============ ============
Attributable to policyholder returns - discontinued
operations 76 (97)
Attributable to equity holders - discontinued
operations 13 16
==================================================== ==== ============ ============
Total tax charged/(credited) to income statement
- discontinued operations 89 (81)
==================================================== ==== ============ ============
Total tax charged/(credited) to income statement 155 (167)
==================================================== ==== ============ ============
Policyholder tax
Certain products are subject to tax on policyholders' investment
returns. This "policyholder tax" is an element of total tax
expense. To make the tax expense more meaningful, tax attributable
to policyholder returns and tax attributable to equity holders'
profits are shown separately in the income statement.
The tax attributable to policyholder returns is the amount
payable in the year plus the movement of amounts expected to be
payable in future years. The remainder of the tax expense is
attributed to shareholders as tax attributable to equity
holders.
The Group's income tax expense on continuing operations was
GBP66 million for the year ended 31 December 2019, compared to a
credit of GBP(86) million for the prior year. This income tax
expense/(credit) can vary significantly period on period as a
result of market volatility and the impact this has on policyholder
tax. The recognition of the income received from policyholders
(which is included within the Group's revenue) to fund the
policyholder tax liability can vary in timing to the recognition of
the corresponding policyholder tax expense, creating volatility to
the Group's IFRS profit before tax attributable to equity holders.
An adjustment is made to adjusted profit to remove these
distortions, as explained further in note 5(a)(v).
Significant market volatility during the year ended 31 December
2018 led to large investment losses that have reversed in 2019,
resulting in investment gains of GBP833 million on products subject
to policyholder tax. The gain is a component of the total
"investment return" gain of GBP6,806 million shown in the income
statement and GBP1,386 million shown in the discontinued operations
income statement. The impact of the GBP833 million investment
return gain is the primary reason for the GBP174 million tax charge
attributable to policyholder returns in respect of both continuing
(GBP98 million) and discontinued (GBP76 million) operations for the
year ended 31 December 2019 (31 December 2018: GBP(61) million
credit in respect of continuing operations and GBP(97) million in
respect of discontinued operations).
First time recognition of deferred tax asset on accelerated
depreciation
Within the GBP39 million total deferred tax charge and the
GBP(32) million tax credit attributable to equity holders
(continuing operations) above, the Group has recognised a GBP7
million deferred tax credit for the first time in the current year.
This is in respect of a change in recognition of deferred tax
assets where the Group now recognises the future reversal of
temporary differences in respect of capital allowances against
matching temporary differences in respect of amortisation of
acquired intangible assets. Had this been in place in the prior
year, the equivalent adjustment in 2018 would have been a GBP9
million deferred tax credit, with a corresponding GBP2 million
charge in the current year.
6(b): Reconciliation of total income tax expense
The income tax charged to profit or loss differs from the amount
that would apply if all of the Group's profits from the different
tax jurisdictions had been taxed at the UK standard corporation tax
rate. The difference in the effective rate is explained below:
Year ended Year ended
31 December 31 December
2019 2018
Note GBPm GBPm
=================================================== ==== ============ ============
Profit before tax from continuing operations 45 (20)
Tax at UK standard rate of 19% (2018: 19%) 9 (4)
Different tax rate or basis on overseas operations (6) (5)
Untaxed and low taxed income 1 (8)
Disallowable expenses 3 6
Adjustments to current tax in respect of prior
years (11) (11)
Net movement on deferred tax assets not recognised (11) (11)
Effect on deferred tax of changes in tax rates 2 -
Adjustments to deferred tax in respect of prior
years (3) (7)
Income tax attributable to policyholder returns 82 (46)
=================================================== ==== ============ ============
Total tax charged/(credited) to income statement
- continuing operations 66 (86)
Total tax charged/(credited) to income statement
- discontinued operations 3(c) 89 (81)
=================================================== ==== ============ ============
Total tax charged/(credited) to income statement 155 (167)
=================================================== ==== ============ ============
6(c): Reconciliation of income tax expense in the income
statement to income tax on adjusted profit
Year ended Year ended
31 December 31 December
2019 2018
Notes GBPm GBPm
========================================================== ======= ============ ============
Income tax expense/(credit) on continuing operations(1) 66 (86)
---------------------------------------------------------- ------- ------------ ------------
Tax on adjusting items
Goodwill impairment and impact of acquisition accounting 8 8
Business transformation costs 14 16
Managed Separation costs 1 2
Finance costs 2 2
Tax adjusting items
Policyholder tax adjustments 5(a)(v) (62) 64
Other shareholder tax adjustments(2) 24 5
========================================================== ======= ============ ============
Tax on adjusting items - continuing operations (13) 97
Less: Tax attributable to policyholder returns within
adjusted profit - continuing operations(3) (36) (3)
========================================================== ======= ============ ============
Tax charged on adjusted profit - continuing operations 17 8
Reversal of income tax expense on the reallocation
of QLA costs 5 5
========================================================== ======= ============ ============
Tax charged on adjusted profit - continuing operations
before the reallocation of QLA costs 22 13
========================================================== ======= ============ ============
Income tax expense/(credit) on discontinued operations(1) 3(c) 89 (81)
Tax on adjusting items
Profit on business disposals - 4
Voluntary customer remediation provision (2) -
Tax adjusting items
Policyholder tax adjustments 5(a)(v) (12) 37
Other shareholder tax adjustments(2) (3) (17)
========================================================== ======= ============ ============
Tax on adjusting items - discontinued operations (17) 24
Less: Tax attributable to policyholder returns within
adjusted profit - discontinued operations(3) (64) 60
========================================================== ======= ============ ============
Tax charged on adjusted profit - discontinued operations 8 3
Reversal of income tax credit on the reallocation
of QLA costs (5) (5)
========================================================== ======= ============ ============
Tax charged/(credited) on adjusted profit - discontinued
operations before the reallocation of QLA costs 3 (2)
========================================================== ======= ============ ============
Tax charged on total adjusted profit 25 11
========================================================== ======= ============ ============
(1) Includes both tax attributable to policyholders and
shareholders, in compliance with IFRS reporting.
(2) Other shareholder tax adjustments comprise the reallocation
of adjustments from policyholder tax as explained in note 5(a)(v)
together with other adjustments made to deferred tax to remove
distortions arising from timing differences in respect of
acquisition accounting. As such, the GBP7 million deferred tax
credit in respect of a change of deferred tax asset recognition
described in note 6(a) has been removed from the tax charge on
adjusted profit.
(3) Adjusted profit treats policyholder tax as a pre-tax charge
(this includes policyholder tax under IFRS and the policyholder tax
adjustments) and is therefore removed from tax charge on adjusted
profit.
7: Earnings per share
The Group calculates earnings per share ("EPS") on a number of
different bases. IFRS requires the calculation of basic and diluted
EPS. Adjusted EPS reflects earnings that are consistent with the
Group's adjusted profit measure before and after the reallocation
of QLA costs, and Headline EPS is a requirement of the Johannesburg
Stock Exchange. The Group's EPS (in aggregate, including both
continuing and discontinued operations) on these different bases
are summarised below.
Basic EPS is calculated by dividing profit after tax
attributable to ordinary equity shareholders of the parent by the
weighted average number of Ordinary Shares in issue during the
year. The weighted average number of shares excludes Quilter plc
shares held within Employee Benefit Trusts ("EBTs") to satisfy the
Group's obligations under employee share awards, and Quilter plc
shares held in consolidated funds ("Own shares"). Own shares are
deducted for the purpose of calculating both basic and diluted
EPS.
Diluted EPS recognises the dilutive impact of shares awarded and
options granted to employees under share-based payment
arrangements, to the extent they have value, in the calculation of
the weighted average number of shares, as if the relevant shares
were in issue for the full period.
The Group is also required to calculate headline earnings per
share ("HEPS") in accordance with the Johannesburg Stock Exchange
Limited ("JSE") Listing Requirements, determined by reference to
the South African Institute of Chartered Accountants' circular
02/2015 Headline Earnings. Disclosure of HEPS is not a requirement
of IFRS, but it is a commonly used measure of earnings in South
Africa.
Year ended Year ended
31 December 31 December
2019 2018
Source of guidance Notes Pence Pence
================================= ========================= ===== ============ ============
Basic earnings per share IFRS 7(b) 8.0 26.6
Diluted basic earnings per share IFRS 7(b) 7.8 26.5
Adjusted basic earnings per
share Group policy 7(b) 11.4 13.5
Adjusted diluted earnings per
share Group policy 7(b) 11.3 13.5
================================= ========================= ===== ============ ============
Headline basic earnings per
share (net of tax) JSE Listing Requirements 7(c) 2.3 10.6
Headline diluted earnings per
share (net of tax) JSE Listing Requirements 7(c) 2.3 10.5
================================= ========================= ===== ============ ============
7(a): Weighted average number of Ordinary Shares
The table below summarises the calculation of the weighted
average number of Ordinary Shares for the purposes of calculating
basic and diluted earnings per share for each profit measure (IFRS,
adjusted and headline profit):
Year ended Year ended
31 December 31 December
2019 2018
Millions Millions
=================================================== ============ ============
Weighted average number of Ordinary Shares 1,902 1,902
Own shares including those held in EBTs (67) (70)
=================================================== ============ ============
Basic weighted average number of Ordinary Shares 1,835 1,832
Adjustment for dilutive share awards and options 28 7
=================================================== ============ ============
Diluted weighted average number of Ordinary Shares 1,863 1,839
=================================================== ============ ============
7(b): Basic and diluted EPS (IFRS and adjusted profit)
The table below shows the profit measures used in the EPS
calculations.
Year ended 31 December Year ended 31 December
2019 2018
================================ ================================
Continuing Discontinued Total Continuing Discontinued Total
operations operations GBPm operations operations GBPm
Notes GBPm GBPm GBPm GBPm
============================== ======= =========== ============ ===== =========== ============ =====
(Loss)/profit after tax (21) 167 146 66 422 488
Total adjusting items
before tax 209 (101) 108 107 (327) (220)
Tax on adjusting items 6(c) 13 17 30 (97) (24) (121)
Less: Policyholder tax
adjustments 6(c) (62) (12) (74) 64 37 101
============================== ======= =========== ============ ===== =========== ============ =====
Adjusted profit after
tax 139 71 210 140 108 248
============================== ======= =========== ============ ===== =========== ============ =====
Reversal of:
Reallocation of QLA costs(1) 26 (26) - 28 (28) -
Income tax on reallocation
of QLA costs 6(c) (5) 5 - (5) 5 -
============================== ======= =========== ============ ===== =========== ============ =====
Adjusted profit after
tax before reallocation 160 50 210 163 85 248
============================== ======= =========== ============ ===== =========== ============ =====
(1) Adjusted profit from continuing operations includes GBP26
million of costs (2018: GBP28 million) previously reported as part
of the QLA business which has been reallocated from discontinued to
continuing operations as these costs do not transfer to ReAssure on
disposal at 31 December 2019. See note 3(b) for further
information.
Year ended 31 December Year ended 31 December
2019 2018
================================= =================================
Post-tax profit Continuing Discontinued Total Continuing Discontinued Total
measure used operations operations operations operations
Pence Pence Pence Pence Pence Pence
======================= ===================== =========== ============ ====== =========== ============ ======
Basic EPS IFRS profit (1.1) 9.1 8.0 3.5 23.1 26.6
Diluted EPS IFRS profit (1.1) 8.9 7.8 3.5 23.0 26.5
Adjusted basic EPS Adjusted profit 7.5 3.9 11.4 7.6 5.9 13.5
Adjusted diluted EPS Adjusted profit 7.5 3.8 11.3 7.6 5.9 13.5
Adjusted basic EPS
before Adjusted profit
reallocation before reallocation 8.7 2.7 11.4 8.9 4.6 13.5
Adjusted diluted EPS Adjusted profit
before reallocation before reallocation 8.6 2.7 11.3 8.9 4.6 13.5
======================= ===================== =========== ============ ====== =========== ============ ======
7(c): Headline earnings per share
Year ended Year ended
31 December 31 December
2019 2018
===== ============ ===== ============
Gross Net of tax Gross Net of
GBPm GBPm GBPm tax
GBPm
======================================= ===== ============ ===== ============
Profit attributable to ordinary equity
holders 146 488
Adjusting items:
Less: profit on business disposals (103) (103) (290) (294)
======================================= ===== ============ ===== ============
Headline earnings (103) 43 (290) 194
======================================= ===== ============ ===== ============
Headline basic EPS (pence) 2.3 10.6
Headline diluted EPS (pence) 2.3 10.5
======================================= ===== ============ ===== ============
8: Dividends
Year ended Year ended
31 December 31 December
2019 2018
Payment date GBPm GBPm
======================================== ================== ============ ============
2018 Special interim dividend paid -
12.0p per ordinary share 21 September 2018 - 221
2018 Final dividend paid - 3.3p per
ordinary share 20 May 2019 61 -
2019 Interim dividend paid - 1.7p per
ordinary share 20 September 2019 31 -
======================================== ================== ============ ============
Dividends paid to ordinary shareholders 92 221
============================================================ ============ ============
Subsequent to year ended 31 December 2019, the Directors
proposed a final dividend for 2019 of 3.5 pence per Ordinary Share
amounting to GBP65 million in total. Subject to approval by
shareholders at the AGM, the dividend will be paid on 18 May 2020.
In compliance with the rules issued by the Prudential Regulation
Authority ("PRA") in relation to the implementation of the Solvency
II ("SII") regime and other regulatory requirements to which the
Group is subject, the dividend is required to remain cancellable at
any point prior to it becoming due and payable on 18 May 2020 and
to be cancelled if, prior to payment, the Group ceases to hold
capital resources equal to or in excess of its Solvency Capital
Requirement, or if that would be the case if the dividend was paid.
The Directors have no intention of exercising this cancellation
right, other than where required to do so by the PRA or for
regulatory capital purposes. Final and interim dividends paid to
ordinary shareholders are calculated using the number of shares in
issue at the record date less own shares held in Employee Benefit
Trusts.
9: Goodwill and intangible assets
9(a): Analysis of goodwill and intangible assets
The table below shows the movements in cost, amortisation and
impairment of goodwill and intangible assets.
Software Other
development intangible
Goodwill costs assets Total
GBPm GBPm GBPm GBPm
=========================================== ======== ============ =========== =====
Gross amount
------------------------------------------- -------- ------------ ----------- -----
1 January 2018 306 97 371 774
Acquisitions through business combinations 5 - 9 14
Additions - 4 - 4
Transfer to non-current assets held
for sale (1) - - (1)
Other movements(1) 4 (1) - 3
=========================================== ======== ============ =========== =====
31 December 2018 314 100 380 794
Acquisitions through business combinations 68 - 49 117
Additions - 5 - 5
Disposals (30) (4) (4) (38)
Other movements(2) (2) - 3 1
=========================================== ======== ============ =========== =====
31 December 2019 350 101 428 879
=========================================== ======== ============ =========== =====
Amortisation and impairment losses
1 January 2018 - (92) (108) (200)
Amortisation charge for the year - (4) (41) (45)
Impairment of other acquired intangibles - - (1) (1)
Other movements - 1 1 2
=========================================== ======== ============ =========== =====
31 December 2018 - (95) (149) (244)
Amortisation charge for the year - (2) (45) (47)
Disposals - 4 4 8
Other movements(2) - - (4) (4)
=========================================== ======== ============ =========== =====
31 December 2019 - (93) (194) (287)
=========================================== ======== ============ =========== =====
Carrying amount
31 December 2018 314 5 231 550
=========================================== ======== ============ =========== =====
31 December 2019 350 8 234 592
=========================================== ======== ============ =========== =====
(1) Goodwill increased by GBP4 million in 2018 due to a review
of the Purchase Price Allocation ("PPA") calculation at 31 December
2017 year end relating to the Quilter Financial Planning
acquisitions.
(2) During the year, there has been a gross up of fully
amortised intangible assets in the Quilter Financial Planning and
Quilter Cheviot businesses arising from previous business
combinations.
9(b): Analysis of other intangible assets
Average
31 December 31 December estimated Average
2019 2018 useful period
GBPm GBPm life remaining
============================== =========== =========== ========== ==========
Net carrying value
Distribution channels 22 28 8 years 4 years
Customer relationships 211 199 10 years 6 years
Brand 1 4 5 years 1 year
============================== =========== ===========
Total other intangible assets 234 231
============================== =========== ===========
Distribution channel assets are in relation to various Quilter
Financial Planning businesses. Customer relationship assets are
largely in relation to the Quilter Cheviot and Quilter Financial
Planning businesses, the latter element increasing due to the 2019
acquisitions of Charles Derby Group and Lighthouse plc, of which
Lighthouse plc is still a provisional calculation and therefore the
apportionment between goodwill and other intangibles for this
acquisition is subject to change. The brand asset is in relation to
the Quilter Cheviot business.
9(c): Allocation of goodwill to cash generating units ("CGUs")
and impairment testing
The Group's CGUs are based on the Advice and Wealth Management
and Wealth Platforms operating segments, as defined in note 4(a).
Goodwill is allocated to these CGUs as follows:
31 December 31 December
2019 2018
GBPm GBPm
=============================== =========== ===========
Goodwill (net carrying amount)
Advice and Wealth Management 219 153
Wealth Platforms 131 161
=============================== =========== ===========
Total goodwill 350 314
=============================== =========== ===========
Annual impairment review
In accordance with the requirements of IAS 36 Impairment of
Assets, goodwill in both the Advice and Wealth Management and
Wealth Platforms CGUs is tested for impairment annually, or earlier
if an indicator of impairment exists, by comparing the carrying
value of the CGU to which the goodwill relates to the recoverable
value of that CGU, being the higher of that CGU's value-in-use or
fair value less costs to sell. If applicable, an impairment charge
is recognised when the recoverable amount is less than the carrying
value. Goodwill impairment indicators include sudden stock market
falls, the absence of NCCF, significant falls in profit and an
increase in the discount rate.
The annual impairment test performed in November 2019 continued
to show that there was significant headroom in the recoverable
amount over the carrying value of the CGUs. The goodwill model is
subject to stress tests, including the impact of a 20% and 40%
decrease in profitability and the impact of an increase in discount
rates. None of the stress test scenarios have resulted in any
indication of impairment.
The impact on expected future profits resulting from muted flows
and the IFRS loss after tax for continuing operations of GBP21
million in the year has been partially offset by the effect of a
0.8% decrease in the Group's cost of capital rate, used as part of
the value-in-use calculation, from 10.8% in 2018 to 10.0% in 2019.
The significant headroom in the recoverable amount over the
carrying value for both CGUs also means the impact of the lower
NCCF and IFRS loss from continuing operations in the current year
are not considered sufficiently material to be indicators of
impairment.
Following the sale of the QLA business in the year, there has
been a GBP30 million disposal of associated goodwill. This
represented the share of goodwill in the Wealth Platforms CGU
applicable to QLA, based on its fair value relative to the fair
values of the other businesses within that CGU. The annual
impairment assessment performed in November 2019 excluded the
impact of QLA in the Wealth Platforms CGU. This resulted in a small
decrease in headroom in the Wealth Platforms CGU, as the
value-in-use of QLA was only slightly higher than its carrying
value.
Value-in-use methodology
The value-in-use calculations for life assurance operations are
determined as the sum of net tangible assets, the expected future
profits arising from the in-force business, together with the
expected profits from future new business derived from the business
plans. Future profit elements allow for the cost of capital needed
to support the business.
The net tangible assets and future profits arising from the
in-force business are derived from Solvency II ("SII")
calculations. The value of in-force ("VIF") is calculated as the
prospective value of future expected cash flows on all in-force
policies at the valuation date on a policy-by-policy basis allowing
for surrender or transfer payments, death claims, income
withdrawals, maintenance expenses, fund-based fees, mortality
charge/ protection premiums and other policy charges. The
underlying assumptions are based on the best estimate view for the
future, which is largely based on recent business experience and
any emerging trends. The unit fund growth rates (gross of
investment charges) and the risk discount rates are set using the
prescribed SII term-dependent risk-free interest rates. The SII
calculations are adjusted for a risk margin using the prescribed
SII rules.
The value-in-use calculations for asset management operations
are determined as the sum of net tangible assets and the expected
profits from existing and expected future new business.
The cash flows that have been used to determine the value-in-use
of the cash generating units are based on three year business
plans. These cash flows grow at different rates because of the
different strategies of the CGUs. In cases where the CGUs have made
significant acquisitions in the recent past, the profits are
forecast to grow faster than the more mature businesses. Post the
three year business plan, the growth rate used to determine the
terminal value of the CGUs in the annual assessment approximates to
the UK long-term growth rate of 1.7% (2018: 2.1%). Market share and
market growth information are also used to inform the expected
volumes of future new business.
The Group uses a single cost of capital of 10.0% (2018: 10.8%)
to discount future expected business plan cash flows across its two
CGUs because they are perceived to present a similar level of risk
and are integrated. Capital is provided to the Group predominantly
by shareholders with only a small amount of debt. The cost of
capital is the weighted average of the cost of equity (return
required by shareholders) and the cost of debt (return required by
bond holders). When assessing the systematic risk (i.e. beta value)
within the calculation of the cost of equity, a triangulation
approach is used that combines beta values obtained from historical
data, a forward looking view on the progression of beta values and
the external views of investors.
10: Financial investments
The table below analyses the investments and securities that the
Group invests in, either on its own proprietary behalf (shareholder
funds) or on behalf of third parties (policyholder funds).
31 December 31 December
2019 2018
Notes GBPm GBPm
================================================ ===== =========== ===========
Government and government-guaranteed securities 1,018 1,175
Other debt securities, preference shares and
debentures 10(a) 2,160 2,095
Equity securities 10(b) 12,051 10,006
Pooled investments 44,101 45,931
Short-term funds and securities treated as
investments 15 12
================================================ ===== =========== ===========
Total financial investments 59,345 59,219
================================================ ===== =========== ===========
Recoverable within 12 months 59,344 59,044
Recoverable after 12 months 1 175
================================================ ===== =========== ===========
Total financial investments 59,345 59,219
================================================ ===== =========== ===========
The financial investments recoverability profile is based on the
intention with which the financial assets are held. These assets,
together with the reinsurers' share of investment contract
liabilities, are held to cover the liabilities for linked
investment contracts (net of reinsurance), all of which can be
withdrawn by policyholders on demand.
10(a): Other debt securities, preference shares and
debentures
Debt securities, preference shares and debentures are neither
past due nor impaired. These debt instruments and similar
securities are classified according to their local credit rating
(Standard & Poor's or an equivalent), by investment grade.
10(b): Equity securities
Equity securities are held to cover the liabilities for linked
investment contracts. The majority of the listed securities are
traded on the London Stock Exchange. The majority of the Group's
holdings of unlisted equity securities arise principally from
private equity investments, held exclusively on behalf of
policyholders.
11: Categories of financial instruments
The analysis of financial assets and liabilities into their
categories as defined in IFRS 9 Financial Instruments is set out in
the following tables. Assets and liabilities of a non-financial
nature, or financial assets and liabilities that are specifically
excluded from the scope of IFRS 9, are reflected in the
non-financial assets and liabilities category.
For information about the methods and assumptions used in
determining fair value please refer to note 12. The Group's
exposure to various risks associated with financial instruments is
discussed in note 17(b).
Fair value
========================================== =========== ========== ========= ================ ======
Non-financial
Mandatorily Designated Amortised assets
31 December 2019 - Measurement at FVTPL at FVTPL cost and liabilities Total
basis GBPm GBPm GBPm GBPm GBPm
========================================== =========== ========== ========= ================ ======
Assets
Investments in associated undertakings(1) - - - 1 1
Loans and advances 180 - 37 - 217
Financial investments 59,343 2 - - 59,345
Trade, other receivables and
other assets - - 373 51 424
Derivative assets 32 - - - 32
Cash and cash equivalents 1,159 - 1,314 - 2,473
========================================== =========== ========== ========= ================ ======
Total assets that include financial
instruments 60,714 2 1,724 52 62,492
Total other non-financial assets - - - 1,246 1,246
========================================== =========== ========== ========= ================ ======
Total assets 60,714 2 1,724 1,298 63,738
========================================== =========== ========== ========= ================ ======
Liabilities
Investment contract liabilities 52,455 - - - 52,455
Third-party interests in consolidation
of funds 7,675 - - - 7,675
Borrowings and lease liabilities(2) - - 335 - 335
Trade, other payables and other
liabilities - - 730 106 836
Derivative liabilities 17 - - - 17
========================================== =========== ========== ========= ================ ======
Total liabilities that include
financial instruments 60,147 - 1,065 106 61,318
Total other non-financial liabilities - - - 349 349
========================================== =========== ========== ========= ================ ======
Total liabilities 60,147 - 1,065 455 61,667
========================================== =========== ========== ========= ================ ======
(1) Investments in associated undertakings classified as
non-financial assets and liabilities are equity accounted.
(2) The Group has initially applied IFRS 16 at 1 January 2019
using the modified retrospective approach. Under this approach,
comparative information is not restated.
Fair value
========================================== =========== ========== ========= ================ ======
Non-financial
Mandatorily Designated Amortised assets
31 December 2018 - Measurement at FVTPL at FVTPL cost and liabilities Total
basis GBPm GBPm GBPm GBPm GBPm
========================================== =========== ========== ========= ================ ======
Assets
Investments in associated undertakings(1) - - - 2 2
Loans and advances 189 - 33 - 222
Financial investments 59,052 167 - - 59,219
Reinsurers' share of policyholder
liabilities 1,671 - - 491 2,162
Trade, other receivables and
other assets(2) - - 486 44 530
Derivative assets 46 - - - 46
Cash and cash equivalents 1,361 - 1,034 - 2,395
========================================== =========== ========== ========= ================ ======
Total assets that include financial
instruments 62,319 167 1,553 537 64,576
Total other non-financial assets - - - 1,214 1,214
========================================== =========== ========== ========= ================ ======
Total assets 62,319 167 1,553 1,751 65,790
========================================== =========== ========== ========= ================ ======
Liabilities
Insurance contract liabilities - - - 602 602
Investment contract liabilities 56,450 - - - 56,450
Third-party interests in consolidation
of funds 5,116 - - - 5,116
Borrowings - - 197 - 197
Trade, other payables and other
liabilities - - 840 159 999
Derivative liabilities 37 - - - 37
========================================== =========== ========== ========= ================ ======
Total liabilities that include
financial instruments 61,603 - 1,037 761 63,401
Total other non-financial liabilities - - - 384 384
========================================== =========== ========== ========= ================ ======
Total liabilities 61,603 - 1,037 1,145 63,785
========================================== =========== ========== ========= ================ ======
(1) Investments in associated undertakings classified as
non-financial assets and liabilities are equity accounted.
(2) The Group's contract assets are now included within Trade,
other receivables and other assets, having previously been shown
separately on the statement of financial position.
12: Fair value methodology
This section explains the judgements and estimates made in
determining the fair values of financial instruments that are
recognised and measured at fair value in the financial statements.
Classifying financial instruments into the three levels of fair
value hierarchy (see note 12(b)), prescribed under IFRS, provides
an indication about the reliability of inputs used in determining
fair value.
12(a): Determination of fair value
The fair value of financial instruments that are actively traded
in organised financial markets is determined by reference to quoted
market exit prices for assets and offer prices for liabilities, at
the close of business on the reporting date, without any deduction
for transaction costs:
-- for units in unit trusts and shares in open-ended investment
companies, fair value is determined by reference to published
quoted prices representing exit values in an active market;
-- for equity and debt securities not actively traded in
organised markets and where the price cannot be retrieved, the fair
value is determined by reference to similar instruments for which
market observable prices exist;
-- for assets that have been suspended from trading on an active
market, the last published price is used. Many suspended assets are
still regularly priced. At the reporting date all suspended assets
are assessed for impairment; and
-- where the assets are private company shares or within
consolidated investment funds the valuation is based on the latest
available set of audited financial statements where available, or
if more recent, a statement of valuation provided by the private
company's management.
There have been no significant changes in the valuation
techniques applied when valuing financial instruments. Where assets
are valued by the Group, the general principles applied to those
instruments measured at fair value are outlined below:
Reinsurers' share of policyholder liabilities
Reinsurers' share of policyholder liabilities are measured on a
basis that is consistent with the measurement of the provisions
held in respect of the related insurance contracts. Reinsurance
contracts which cover financial risk are measured at fair value of
the underlying assets.
Loans and advances
Loans and advances include loans to policyholders, loans to
brokers, and other secured and unsecured loans. Loans and advances
to policyholders of investment linked contracts are measured at
fair value. All other loans are stated at their amortised cost.
Financial investments
Financial investments include government and
government-guaranteed securities, listed and unlisted debt
securities, preference shares and debentures, listed and unlisted
equity securities, listed and unlisted pooled investments (see
below), short-term funds and securities treated as investments and
certain other securities.
Pooled investments represent the Group's holdings of
shares/units in open-ended investment companies, unit trusts,
mutual funds and similar investment vehicles. Pooled investments
are recognised at fair value. The fair values of pooled investments
are based on widely published prices that are regularly
updated.
Other financial investments that are measured at fair value use
observable market prices where available. In the absence of
observable market prices, these investments and securities are fair
valued utilising various approaches including discounted cash
flows, the application of an earnings before interest, tax,
depreciation and amortisation multiple or any other relevant
technique.
Derivatives
The fair value of derivatives is determined with reference to
the exchange traded prices of the specific instruments. The fair
value of the Group's over the counter forward foreign exchange
contracts is determined by the underlying foreign currency exchange
rates.
Investment contract liabilities
The fair value of the investment contract liabilities is
determined with reference to the underlying funds that are held by
the Group.
Third-party interest in consolidated funds
Third-party interests in consolidated funds are measured at the
attributable net asset value of each fund.
Borrowings and lease liabilities
Borrowings and lease liabilities are stated at amortised
cost.
12(b): Fair value hierarchy
Fair values are determined according to the following
hierarchy:
Description of hierarchy Types of instruments classified
in the respective levels
======================================= ==========================================
Level 1 - quoted market prices: Listed equity securities, government
financial assets and liabilities securities and other listed debt
with quoted prices for identical securities and similar instruments
instruments in active markets. that are actively traded, actively
traded pooled investments, certain
quoted derivative assets and liabilities,
reinsurers' share of investment
contract liabilities and investment
contract liabilities directly linked
to other Level 1 financial assets.
======================================= ==========================================
Level 2 - valuation techniques Unlisted equity and debt securities
using observable inputs: financial where the valuation is based on
assets and liabilities with quoted models involving no significant
prices for similar instruments in unobservable data.
active markets or quoted prices Over the counter ("OTC") derivatives,
for identical or similar instruments certain privately placed debt instruments
in inactive markets and financial and third-party interests in consolidated
assets and liabilities valued using funds.
models where all significant inputs
are observable.
======================================= ==========================================
Level 3 - valuation techniques Unlisted equity and securities with
using significant unobservable inputs: significant unobservable inputs,
financial assets and liabilities securities where the market is not
valued using valuation techniques considered sufficiently active,
where one or more significant inputs including certain inactive pooled
are unobservable. investments.
======================================= ==========================================
The judgement as to whether a market is active may include, for
example, consideration of factors such as the magnitude and
frequency of trading activity, the availability of prices and the
size of bid/offer spreads. In inactive markets, obtaining assurance
that the transaction price provides evidence of fair value or
determining the adjustments to transaction prices that are
necessary to measure the fair value of the asset or liability
requires additional work during the valuation process.
The majority of valuation techniques employ only observable data
and so the reliability of the fair value measurement is high.
However, certain financial assets and liabilities are valued on the
basis of valuation techniques that feature one or more significant
inputs that are unobservable and, for them, the derivation of fair
value is more judgemental. A financial asset or liability in its
entirety is classified as valued using significant unobservable
inputs if a significant proportion of that asset or liability's
carrying amount is driven by unobservable inputs.
In this context, 'unobservable' means that there is little or no
current market data available for which to determine the price at
which an arm's length transaction would be likely to occur. It
generally does not mean that there is no market data available at
all upon which to base a determination of fair value. Furthermore,
in some cases the majority of the fair value derived from a
valuation technique with significant unobservable data may be
attributable to observable inputs. Consequently, the effect of
uncertainty in determining unobservable inputs will generally be
restricted to uncertainty about the overall fair value of the asset
or liability being measured.
12(c): Transfer between fair value hierarchies
The Group deems a transfer to have occurred between Level 1 and
Level 2 or Level 3 when an active, traded primary market ceases to
exist for that financial instrument. A transfer between Level 2 and
Level 3 occurs when the majority of the significant inputs used to
determine fair value of the instrument become unobservable.
Transfers from Levels 3 or 2 to Level 1 are also possible when
assets become actively priced.
There were transfers of financial investments of GBP139 million
from Level 1 to Level 2 during the year (31 December 2018: GBP13
million). There were transfers of financial investments of GBP76
million from Level 2 to Level 1 during the year (31 December 2018:
GBP107 million). These movements are matched exactly by transfers
of investment contract liabilities. See note 12(e) for the
reconciliation of Level 3 financial instruments.
12(d): Financial assets and liabilities measured at fair value,
classified according to fair value hierarchy
The majority of the Group's financial assets are measured using
quoted market prices for identical instruments in active markets
(Level 1) and there have been no significant changes during the
year.
The linked assets, together with the reinsurers' share of
investment contract liabilities, are held to cover the liabilities
for linked investment contracts (net of reinsurance). The
difference between linked assets and linked liabilities is
principally due to short term timing differences between
policyholder premiums being received and invested in advance of
policies being issued, and tax liabilities within funds which are
reflected within the Group's tax liabilities.
Differences between assets and liabilities within the respective
levels of the fair value hierarchy also arise due to the mix of
underlying assets and liabilities within consolidated funds. In
addition, third-party interests in consolidated funds are
classified as Level 2.
The table below presents a summary of the Group's financial
assets and liabilities that are measured at fair value in the
consolidated statement of financial position according to their
IFRS 9 classification (see note 11 for full details).
31 December 31 December
2019 2018
======================================== ====== ============= ====== =============
GBPm % GBPm %
======================================== ====== ============= ====== =============
Financial assets measured at fair value
Level 1 46,904 77.3% 52,060 83.4%
Level 2 12,095 19.9% 9,272 14.8%
Level 3 1,717 2.8% 1,154 1.8%
======================================== ====== ============= ====== =============
Total 60,716 100.0% 62,486 100.0%
======================================== ====== ============= ====== =============
Financial liabilities measured at fair
value
Level 1 50,315 83.6% 54,944 89.2%
Level 2 8,115 13.5% 5,508 8.9%
Level 3 1,717 2.9% 1,151 1.9%
======================================== ====== ============= ====== =============
Total 60,147 100.0% 61,603 100.0%
======================================== ====== ============= ====== =============
The tables below further analyse the Group's financial assets
and liabilities measured at fair value by the fair value hierarchy
described in note 12(b):
Level 1 Level 2 Level 3 Total
31 December 2019 GBPm GBPm GBPm GBPm
========================================= ======= ======= ======= ======
Financial assets measured at fair value
Mandatorily (fair value through profit
or loss) 46,902 12,095 1,717 60,714
------- ------- ------- ------
Loans and advances 180 - - 180
Financial investments 45,563 12,063 1,717 59,343
Cash and cash equivalents 1,159 - - 1,159
Derivative assets - 32 - 32
------- ------- ------- ------
Designated (fair value through profit
or loss) 2 - - 2
------- ------- ------- ------
Financial investments 2 - - 2
------- ------- ------- ------
Total assets measured at fair value 46,904 12,095 1,717 60,716
========================================= ======= ======= ======= ======
Financial liabilities measured at fair
value
Mandatorily (fair value through profit
or loss) 50,315 8,115 1,717 60,147
------- ------- ------- ------
Investment contract liabilities 50,315 423 1,717 52,455
Third-party interests in consolidated
funds - 7,675 - 7,675
Derivative liabilities - 17 - 17
------- ------- ------- ------
Total liabilities measured at fair value 50,315 8,115 1,717 60,147
========================================= ======= ======= ======= ======
Level 1 Level 2 Level 3 Total
31 December 2018 GBPm GBPm GBPm GBPm
=============================================== ======= ======= ======= ======
Financial assets measured at fair value
Mandatorily (fair value through profit
or loss) 51,893 9,272 1,154 62,319
------- ------- ------- ------
Reinsurers' share of policyholder liabilities 1,671 - - 1,671
Loans and advances 189 - - 189
Financial investments 48,672 9,226 1,154 59,052
Cash and cash equivalents 1,361 - - 1,361
Derivative assets - 46 - 46
------- ------- ------- ------
Designated (fair value through profit
or loss) 167 - - 167
------- ------- ------- ------
Financial investments 167 - - 167
------- ------- ------- ------
Total assets measured at fair value 52,060 9,272 1,154 62,486
=============================================== ======= ======= ======= ======
Financial liabilities measured at fair
value
Mandatorily (fair value through profit
or loss) 54,944 5,508 1,151 61,603
------- ------- ------- ------
Investment contract liabilities 54,944 355 1,151 56,450
Third-party interests in consolidated
funds - 5,116 - 5,116
Derivative liabilities - 37 - 37
------- ------- ------- ------
Total liabilities measured at fair value 54,944 5,508 1,151 61,603
=============================================== ======= ======= ======= ======
12(e): Level 3 fair value hierarchy disclosure
All of the assets that are classified as Level 3 are held within
linked policyholder funds. This means that all of the investment
risk associated with these assets is borne by policyholders and
that the value of these assets is exactly matched by a
corresponding liability due to policyholders. The Group bears no
risk from a change in the market value of these assets except to
the extent that it has an impact on management fees earned.
In the prior year, included within the assets classified as
Level 3 was a shareholder investment in an unlisted equity (31
December 2018: GBP3 million); this was not matched by a
corresponding liability and therefore any changes in market value
were recognised in the Group's income statement. Following the
acquisition of the Charles Derby Group during the year, the Group's
investment is no longer held as a Level 3 financial investment, but
instead as an investment in subsidiary which is eliminated on
consolidation.
The table below reconciles the opening balance of Level 3
financial assets to the closing balance at each year end:
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
======================================================== ============ ============
At beginning of the year 1,154 1,169
Total net fair value gains recognised in:
- profit or loss (20) 54
Purchases 314 38
Sales (24) (25)
Transfers in 369 69
Transfers out (71) (151)
Foreign exchange and other (5) -
======================================================== ============ ============
Total Level 3 financial assets 1,717 1,154
======================================================== ============ ============
Unrealised fair value gains/(losses) relating to assets
held at the year end recognised in:
- profit or loss (20) 54
======================================================== ============ ============
Amounts shown as sales arise principally from the sale of
private company shares, unlisted pooled investments and from
distributions received in respect of holdings in property
funds.
Transfers into Level 3 assets in the current year total GBP369
million (31 December 2018: GBP69 million). This is due to a
combination of stale priced assets that were previously shown
within Level 2 and for which price updates have not been received
for more than six months, and an increase in suspended funds
previously showed within Level 1. Suspended funds are valued based
on external valuation reports received from fund managers.
Transfers out of Level 3 assets in the current year comprise GBP71
million (31 December 2018: GBP151 million) of stale priced assets
that were not previously being repriced and that have been
transferred into Level 2 as they are now actively priced.
The table below analyses the type of Level 3 financial assets
held:
31 December 31 December
2019 2018
GBPm GBPm
============================================= =========== ===========
Pooled investments 361 86
----------- -----------
Unlisted and stale price pooled investments 133 82
Suspended funds 228 4
----------- -----------
Private equity investments 1,356 1,068
============================================= =========== ===========
Total Level 3 financial assets 1,717 1,154
============================================= =========== ===========
All of the liabilities that are classified as Level 3 are
investment contract liabilities which exactly match against the
Level 3 assets held in linked policyholder funds.
The table below reconciles the opening balance of Level 3
financial liabilities to the closing balance at each year end:
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
============================================================= ============ ============
At beginning of the year 1,151 1,167
Total net fair value gains recognised in:
- profit or loss (20) 53
Purchases 314 38
Sales (24) (25)
Transfers in 369 69
Transfers out (71) (151)
Foreign exchange and other (2) -
============================================================= ============ ============
Total Level 3 financial liabilities 1,717 1,151
============================================================= ============ ============
Unrealised fair value gains/(losses) relating to liabilities
held at the year end recognised in:
- profit or loss (20) 53
============================================================= ============ ============
12(f): Effect of changes in significant unobservable assumptions
to reasonable possible alternatives
Details of the valuation techniques applied to the different
categories of financial instruments can be found in note 12(a)
above, including the valuation techniques applied when significant
unobservable assumptions are used to value Level 3 assets.
The majority of the Group's Level 3 assets are held within
private equity investments, where the valuation of these assets is
performed on an asset-by-asset basis using a valuation methodology
appropriate to the specific investment and in line with industry
guidelines. Private equity investments are valued at the value
disclosed in the latest available set of audited financial
statements or, if more recent information is available, from
investment managers or professional valuation experts at the value
of the underlying assets of the private equity investment. For this
reason, no reasonable alternative assumptions are applicable and
management therefore performs a sensitivity test of an aggregate
10% change in the value of the financial asset or liability (31
December 2018: 10%), representing a reasonable possible alternative
judgement in the context of the current macro-economic environment
in which the Group operates. It is therefore considered that the
impact of this sensitivity will be in the range of GBP172 million
to the reported fair value of Level 3 assets, both favourable and
unfavourable (31 December 2018: GBP115 million). As described in
note 12(e), changes in the value of Level 3 assets held within
linked policyholder funds are exactly matched by corresponding
changes in the value of liabilities due to policyholders and
therefore have no impact on the Group's net asset value or profit
or loss, except to the extent that it has an impact on management
fees earned.
12(g): Fair value hierarchy for assets and liabilities not
measured at fair value
Certain financial instruments of the Group are not carried at
fair value. The carrying values of these are considered reasonable
approximations of their respective fair values, as they are either
short term in nature or are repriced to current market rates at
frequent intervals. Their classification within the fair value
hierarchy would be as follows:
Trade, other receivables, and other
assets Level 3
Trade, other payables, and other
liabilities Level 3
Cash and cash equivalents (excluding money market funds) are
held at amortised cost and therefore not carried at fair value. The
cash and cash equivalents that are held at amortised cost would be
classified as Level 1 in the fair value hierarchy.
Loans and advances are financial assets held at amortised cost
and therefore not carried at fair value, with the exception of
policyholder loans which are categorised as FVTPL. The loans and
advances that are held at amortised cost would be classified as
Level 3 in the fair value hierarchy.
Borrowed funds are financial liabilities held at amortised cost
and therefore not carried at fair value. Borrowed funds relate to
subordinated liabilities and would be classified as Level 2 in the
fair value hierarchy.
Lease liabilities valued under IFRS 16 are held at amortised
cost and therefore not carried at fair value. They would be
classified as Level 3 in the fair value hierarchy.
13: Cash and cash equivalents
13(a): Analysis of cash and cash equivalents
31 December 31 December
2019 2018
GBPm GBPm
================================================ =========== ===========
Cash at bank 787 550
Money market funds 1,159 1,361
Cash and cash equivalents in consolidated funds 527 484
================================================ =========== ===========
Total cash and cash equivalents 2,473 2,395
================================================ =========== ===========
Except for cash and cash equivalents subject to consolidation of
funds of GBP527 million (2018: GBP484 million), management do not
consider that there are any material amounts of cash and cash
equivalents which are not available for use in the Group's
day-to-day operations.
14: Insurance and investment contract liabilities
The following table provides a summary of the Group's insurance
and investment contract liabilities and related reinsurance assets.
Following the sale of QLA (see note 3) the Group has no pure
insurance contracts (unbundled elements of linked investment
contracts are included within "unit linked investment contracts and
similar contracts") and as a result the Group no longer has any
insurance liabilities or related reinsurance assets.
31 December 2019 31 December 2018
================================== =========================== ===========================
Notes Gross Reinsurance Net Gross Reinsurance Net
GBPm GBPm GBPm GBPm GBPm GBPm
================================== ===== ====== =========== ====== ====== =========== ======
Insurance contract liabilities
----------- ------ ------ ----------- ------
Life assurance policyholder
liabilities 14(a) - - - 588 (478) 110
Outstanding claims - - - 14 (13) 1
----------- ------ ------ ----------- ------
Insurance contract liabilities - - - 602 (491) 111
Investment contract liabilities 14(c) 52,455 - 52,455 56,450 (1,671) 54,779
================================== ===== ====== =========== ====== ====== =========== ======
Total life assurance policyholder
liabilities 52,455 - 52,455 57,052 (2,162) 54,890
================================== ===== ====== =========== ====== ====== =========== ======
14(a): Insurance contract liabilities
Movements in the amounts outstanding in respect of life
assurance policyholder liabilities, other than outstanding claims,
are set out below:
31 December 2019 31 December 2018
========================= =========================
Gross Reinsurance Net Gross Reinsurance Net
Note GBPm GBPm GBPm GBPm GBPm GBPm
================================ ==== ===== =========== ===== ===== =========== =====
Carrying amount at 1 January 588 (478) 110 480 (375) 105
----- ----------- ----- ----- ----------- -----
Impact of new business 4 (11) (7) 2 (10) (8)
Impact of experience effects(1) 36 (24) 12 38 (26) 12
Impact of assumption changes 91 (86) 5 69 (68) 1
Other movements - - - (1) 1 -
----- ----------- ----- ----- ----------- -----
Movement shown in discontinued
operations
income statement(2) 3(c) 131 (121) 10 108 (103) 5
Disposal of subsidiaries (719) 599 (120) - - -
================================ ==== ===== =========== ===== ===== =========== =====
Life assurance policyholder
liabilities - - - 588 (478) 110
================================ ==== ===== =========== ===== ===== =========== =====
(1) Impact of experience effects includes the difference between
the assumptions made and the actual experience during the
period.
(2) The movement in gross insurance contract liabilities for
2019 of GBP131 million is a GBP134 million change in insurance
contract liabilities and a GBP(3) million claim reported within
gross premiums in the discontinued operations income statement.
14(b): Assumptions - life assurance
The key assumptions considered are mortality/morbidity rates,
maintenance expenses, interest rates, persistency rates and
maintenance expense inflation. These assumptions are based on
market data and internal experience data. External data is also
used where either no internal experience data exists or where
internal data is too sparse to give credible estimates of the true
expectation of experience. Anticipated future trends have been
allowed for in deriving mortality and morbidity assumptions.
The liabilities for non-linked contracts have been calculated
using a gross premium discounted cash flow approach on a policy by
policy basis, using the following assumptions. The Continuous
Mortality Investigation ("CMI"), supported by the Institute and
Faculty of Actuaries ("IFoA"), provides mortality and sickness rate
tables for UK life insurers and pension funds. The interest rate
assumption is set with reference to a matching portfolio of
gilts.
Mortality/morbidity Interest rates
======================================== ======================== ================
Class of business 2019 2018 2019 2018
======================================== =========== =========== ======= =======
Non-linked protection business (pre
1 January 2013)(1)
excluding stand-alone critical illness Based on relevant
policies CMI tables 0.993% 1.378%
Non-linked protection business (post
31 December 2012)(1)
and all stand-alone critical illness Based on relevant
policies CMI tables 1.242% 1.724%
100% PA92 (C2030)
ult. projected
using the long-term
Pension annuity payment cohort basis(2) 1.050% 1.420%
======================================== ======================== ======= =======
(1) On 1 January 2013, the discount rate was impacted by the
Finance Act 2012 amendments to the life tax rules.
(2) PA92 (C2030) ult. is the CMI reference for the relevant
Pension Annuity table.
For non-linked contracts (defined as insurance contracts under
IFRS 4), the margin of prudence for the individual assumptions is
generally taken as the 60% confidence interval over a one year
timeframe so that, broadly speaking, in 100 scenarios the reserves
are expected to cover the liabilities in 60 of those scenarios.
Overall, the level of confidence is likely to be greater than 60%
on the basis that these margins are applied to several assumptions
at the same time and prudence is applied to all future years.
The liability values did not make allowance for the amortisation
of the DAC asset. A separate liability adequacy test was carried
out on best estimate assumptions allowing for all of the cash flows
used to derive the liability values and the run off of the DAC.
Impact of assumption changes
Assumptions are reviewed annually and updated as appropriate.
The impact of the assumption changes on the Group's annual IFRS
profit before tax are as follows:
Impact Impact
on on
IFRS profit IFRS profit
before before
tax Impact tax
(before of (after
reinsurance) reinsurance reinsurance)
2019 GBPm GBPm GBPm
============================== ============= ============ =============
Assumption
Mortality/morbidity rates 5 (5) -
Maintenance expense inflation 1 - 1
Interest rates (104) 90 (14)
Methodology changes 8 - 8
Persistency rates (1) 1 -
============================== ============= ============ =============
Total (91) 86 (5)
============================== ============= ============ =============
Impact Impact
on on
IFRS profit IFRS profit
before before
tax tax
(before Impact (after
reinsurance) of reinsurance reinsurance)
2018 GBPm GBPm GBPm
========================== ============= =============== =============
Assumption
Mortality/morbidity rates (86) 81 (5)
Maintenance expense 2 - 2
Interest rates 21 (18) 3
Persistency rates (6) 5 (1)
========================== ============= =============== =============
Total (69) 68 (1)
========================== ============= =============== =============
The sensitivity of IFRS profit before tax to variations in key
assumptions are shown below. The values for 2018 have been
determined by varying the relevant assumption as at the reporting
date and considering the consequential impact assuming other
assumptions remain unchanged. Sensitivities have not been included
for 2019 due to the disposal of QLA.
2018
============================================== ===== =====
+10% -10%
(Decrease)/Increase in IFRS profit before tax GBPm GBPm
============================================== ===== =====
Mortality/morbidity rates (3.3) 3.4
Maintenance expenses (2.2) 2.2
Persistency rates 2.6 (2.8)
============================================== ===== =====
14(c): Investment contract liabilities
Movements in the amounts outstanding in respect of unit-linked
and other investment contracts are set out below:
31 December 2019 31 December 2018
=================================== ============================= =============================
Gross Reinsurance Net Gross Reinsurance Net
GBPm GBPm GBPm GBPm GBPm GBPm
=================================== ======= =========== ======= ======= =========== =======
Carrying amount at 1 January 56,450 (1,671) 54,779 59,139 (2,525) 56,614
From continuing operations
------- ----------- ------- ------- ----------- -------
Fair value movements 5,091 - 5,091 (3,109) - (3,109)
Investment income 719 - 719 610 - 610
------- ----------- ------- ------- ----------- -------
Movements arising from investment
return 5,810 - 5,810 (2,499) - (2,499)
From discontinued operations
------- ----------- ------- ------- ----------- -------
Fair value movements 1,427 (205) 1,222 (1,010) 78 (932)
Investment income(1) 142 - 142 160 - 160
------- ----------- ------- ------- ----------- -------
Movements arising from investment
return 1,569 (205) 1,364 (850) 78 (772)
Contributions received(1) 5,718 1,148 6,866 7,152 774 7,926
Maturities (166) - (166) (183) - (183)
Withdrawals and surrenders (7,419) - (7,419) (6,091) - (6,091)
Claims and benefits (205) - (205) (234) - (234)
Other movements 2 (1) 1 (2) 2 -
------- ----------- ------- ------- ----------- -------
Change in liability 5,309 942 6,251 (2,707) 854 (1,853)
Currency translation (gain)/loss (121) - (121) 18 - 18
Disposal of subsidiaries (9,183) 729 (8,454) - - -
=================================== ======= =========== ======= ======= =========== =======
Investment contract liabilities 52,455 - 52,455 56,450 (1,671) 54,779
=================================== ======= =========== ======= ======= =========== =======
(1) In the year ended 31 December 2018, within discontinued
operations, the Group has reclassified GBP35 million from
Investment income to Contributions received to conform with current
year presentation.
For unit-linked investment contracts, movements in asset values
are offset by corresponding changes in liabilities, limiting the
net impact on profit.
The benefits offered under the unit-linked investment contracts
are based on the risk appetite of policyholders and the return on
their selected investments and collective fund investments, whose
underlying investments include equities, debt securities, property
and derivatives. This investment mix is unique to individual
policyholders.
The maturity value of these financial liabilities is determined
by the fair value of the linked assets at maturity date. There will
be no difference between the carrying amount and the maturity
amount at maturity date.
The reinsurers' share of policyholder liabilities relating to
investment contract liabilities has reduced to GBPnil (2018:
GBP1,671 million) due to the disposal of QLA. Reinsurance
contributions received of GBP1,148 million are disclosed net of
withdrawals, reflecting the total of payments made to and
settlements received from the reinsurer. The underlying movements
in the investment funds to which the reinsurance arrangements
relate indicate contributions received of GBP(219) million (2018:
GBP(202) million) and withdrawals of GBP1,367 million (2018: GBP976
million). In the prior year the reinsurers' share of policyholder
liabilities were rated according to the credit ratings in note
17.
14(d): Methodology and assumptions - investment contracts
For unit-linked business, the unit liabilities are determined as
the value of units credited to policyholders. Since these
liabilities are determined on a retrospective basis no assumptions
for future experience are required. Assumptions for future
experience are required for unit-linked business in assessing
whether the total of the contract costs asset and contract
liability is greater than the present value of future profits
expected to arise on the relevant blocks of business (the
"recoverability test"). If this is the case, then the contract
costs asset is restricted to the recoverable amount. For linked
contracts, the assumptions are on a best estimate basis.
15: Provisions
Sale of
Single
Sale of Compensation Strategy
QLA provisions business Other Total
31 December 2019 GBPm GBPm GBPm GBPm GBPm
===================================== ======= ============ ========= ===== =====
Balance at beginning of the
year - 54 20 20 94
Adjustment on initial application
of IFRS 16 - - - (5) (5)
Additions from business combinations - 14 - 1 15
Charge to income statement(1) 6 9 1 7 23
Utilised during the year - (19) (11) (1) (31)
Unused amounts reversed - (13) - (4) (17)
Reclassification within Statement
of Financial Position - (3) - - (3)
Disposals - (11) - (1) (12)
===================================== ======= ============ ========= ===== =====
Balance at 31 December 2019 6 31 10 17 64
===================================== ======= ============ ========= ===== =====
Sale of
Single
Compensation Strategy
provisions business Other Total
31 December 2018 GBPm GBPm GBPm GBPm
===================================== ============ ========= ===== =====
Balance at beginning of the year 82 - 22 104
Additions from business combinations - - 1 1
Charge to income statement(1) 11 25 3 39
Utilised during the year (31) (5) (5) (41)
Unused amounts reversed (4) - (1) (5)
Reclassification within Statement of
Financial Position (4) - - (4)
===================================== ============ ========= ===== =====
Balance at 31 December 2018 54 20 20 94
===================================== ============ ========= ===== =====
(1) Part of the charge to income statement in both 2019 and 2018
is included within the discontinued operations income
statement.
Provisions arising on the disposal of Quilter Life Assurance
The QLA business was sold on 31 December 2019 (see note 3),
resulting in a number of provisions totalling GBP6 million being
established in respect of the costs of disposing the business and
the related costs of business separation.
The costs of business separation arise from the process to
separate QLA's infrastructure, which is complex and covers a wide
range of areas including people, IT systems, data, contracts and
facilities. A programme team has been established to ensure the
transition of these areas to the acquirer. These provisions have
been based on external quotations and estimations, and estimates of
the time required for incremental resource costs to achieve the
separation.
The most significant element of the provision is the cost of
migration of IT systems and data to the acquirer. Work will take
place during 2020 and 2021. Calculation of the provision is based
on management's best estimate of the work required, the time it is
expected to take, the number and skills of the staff required and
their cost, and the cost of related external IT services to support
the work. In reaching these judgements and estimates, management
have made use of their past experience of previous IT migrations
following business disposals. Management estimate a provision
sensitivity of +/-25% (GBP1.5 million).
Of the total GBP6 million provision, GBP2 million is estimated
to be payable after one year.
Compensation provisions
Compensation provisions total GBP31 million (31 December 2018:
GBP54 million), and are comprised of the following:
QLA Voluntary client remediation provision of GBPnil (31
December 2018: GBP38 million )
This provision was established within the QLA business and has
therefore formed part of the Group's discontinued operations, which
were subsequently disposed of on 31 December 2019.
During 2017, as part of its ongoing work to promote fair
customer outcomes, the Group conducted product reviews consistent
with the recommendations from the FCA's thematic feedback and the
FCA's guidance FG16/8 Fair treatment of long-standing customers in
the life insurance sector. Following these reviews, the Group
decided to commence voluntary remediation to customers with certain
legacy products, establishing a provision for GBP69 million. The
redress relates to early encashment charges and contribution
servicing charges made on pension products and, following the
re-introduction of annual reviews, compensation payable to a subset
of protection plan holders.
During 2018, GBP27 million was utilised against programme costs
and pension remediation incurred. In addition GBP4 million was
reclassified to "investment contract liabilities", reflecting the
capping of early encashment charges on live pension plans. At the
end of 2018 there was GBP38 million of the provision remaining,
including GBP6 million of programme costs.
During 2019, the components of the remaining provision were
reviewed as refinements in supporting data emerged together with
improvements in estimation methodology and modelling, resulting in
a GBP10 million release. A further GBP14 million (31 December 2018:
GBP27 million) was utilised during the year, with GBP3 million
reclassified as "Trade, other payables and other liabilities". The
remaining GBP11 million provision prior to the sale of QLA was
transferred to the acquirer on 31 December 2019.
Lighthouse pension transfer advice complaints of GBP12 million
(31 December 2018: GBPnil)
A provision was established within the fair value of the
Lighthouse assets and liabilities acquired. The provision relates
to approximately 30 complaints received on advice provided by
Lighthouse in respect of pension transfers for British Steel
pension scheme members, prior to the Group's acquisition of
Lighthouse in June 2019. All the complaints received relate to
transfers before that date.
The Group has performed a detailed case file review of a sample
of 5 of the complaints, as a sample representative of the overall
population. The loss per client as a proportion of the transfer
value of the pension was determined and extrapolated to the overall
complaint population. The methodology employed to assess the
probable redress payable uses assumptions and estimation techniques
which are consistent with principles under the FCA's FG17/9
"Guidance for firms on how to calculate redress for unsuitable
defined benefit pension transfers". A provision of GBP9 million has
been calculated for the potential redress of all complaints
received to date. The final costs of redress for complaints upheld
will depend on specific calculations on a case-by-case basis and
therefore may vary from the currently provided amounts. Further
details are provided in note 34.
An additional provision for GBP3 million has been established in
respect of the cost of legal and professional fees related to the
complaints and redress process, which includes the anticipated
costs to review advice provided of a similar nature in relation to
cases that management believe may have similar characteristics.
No reduction in the provision has been recognised at the
reporting date in relation to recoverability of any redress or
other costs under Lighthouse's professional indemnity insurance
policy.
Compensation provisions (other) of GBP19 million (31 December
2018: GBP16 million)
Other compensation provisions of GBP19 million are all held
within the Group's continuing operations and include amounts
relating to the cost of correcting deficiencies in policy
administration systems, including restatements and clawbacks, any
associated litigation costs and the related costs to compensate
previous or existing policyholders. This provision represents
management's best estimate of expected outcomes based upon previous
experience. Due to the nature of the provision, the timing of the
expected cash outflows is uncertain. Estimates are reviewed
annually and adjusted as appropriate for new circumstances.
Management estimate a provision sensitivity of +/-25% (GBP5
million).
Sale of Single Strategy Asset Management business provision
In 2018, a restructuring provision was recognised as a result of
the sale of the Single Strategy Asset Management business to enable
the remaining Quilter Investors business to function as a
standalone operation going forward. The provision includes those
costs directly related to replacing and restoring the operational
capability that previously underpinned and supported both parts of
the asset management business. Key parts of this capability had
either been disposed of or disrupted as a consequence of the sale.
The provision established for restructuring was GBP19 million, of
which GBP5 million was utilised during 2018. In 2019, a further
GBP11 million of the restructuring provision was utilised and
therefore GBP3 million of the provision remains at year end 31
December 2019. Management estimate a provision sensitivity of
+/-20% (GBP0.6 million).
Additional provisions totalling GBP6 million were also made in
the year ended 31 December 2018 as a consequence of the sale of the
Single Strategy Asset Management business. These were in relation
to various sale related future commitments, the outcome of which
was uncertain at the time of the sale and the most significant of
which is in relation to the guarantee of revenues in future years.
A further GBP1 million was added to the provision during 2019,
bringing the closing balance to GBP7 million at 31 December
2019.
The provision takes into account sensitivities including
potential scenarios which would result in a reduction in Group
assets under management held in Merian (Single Strategy Asset
Management business) funds, leading to a reduction in the
management fees paid to Merian. The maximum potential exposure is
GBP29 million, arising between 2020 and 2022.
Of the total GBP10 million provision outstanding, GBP3 million
(2018: GBP6 million) is estimated to be payable after one year.
Other provisions
Other provisions include amounts for the resolution of legal
uncertainties and the settlement of other claims raised by
contracting parties, property dilapidation provisions (up to the
end of 31 December 2018) and indemnity commission provisions. Where
material, provisions and accruals are discounted at discount rates
specific to the risks inherent in the liability. The timing and
final amounts of payments in respect of some of the provisions,
particularly those in respect of litigation claims and similar
actions against the Group, are uncertain and could result in
adjustments to the amounts recorded. During 2019, provisions
related to dilapidations were removed as part of the establishment
of right-of-use assets and lease liabilities under IFRS 16 Leases.
Management estimate a provision sensitivity of +/-20% (GBP3
million).
The total GBP17 million provision outstanding is all estimated
to be payable within one year (2018: GBP6 million).
16: Contingent liabilities
The Group, in the ordinary course of business, enters into
transactions that expose it to tax, legal and business risks. The
Group recognises a provision when it has a present obligation as a
result of past events, it is probable that a transfer of economic
benefits will be required to settle the obligation and a reliable
estimate of the amount can be made (see note 15). Possible
obligations and known liabilities where no reliable estimate can be
made or it is considered improbable that an outflow would result
are reported as contingent liabilities in accordance with IAS 37
Provisions, Contingent Liabilities and Contingent Assets.
Tax
The Revenue authorities in the principal jurisdictions in which
the Group operates routinely review historical transactions
undertaken and tax law interpretations made by the Group. The Group
is committed to conducting its tax affairs in accordance with the
tax legislation of the jurisdictions in which they operate. All
interpretations made by management are made with reference to the
specific facts and circumstances of the transaction and the
relevant legislation.
There are occasions where the Group's interpretation of tax law
may be challenged by the Revenue authorities. The financial
statements include provisions that reflect the Group's assessment
of liabilities which might reasonably be expected to materialise as
part of their review. The Board is satisfied that adequate
provisions have been made to cater for the resolution of tax
uncertainties and that the resources required to fund such
potential settlements are sufficient.
Due to the level of estimation required in determining tax
provisions, amounts eventually payable may differ from the
provision recognised.
Complaints and disputes
The Group is committed to treating customers fairly and
supporting its customers in meeting their lifetime goals. The Group
does from time to time receive complaints and claims, and enters
into commercial disputes with service providers, in the normal
course of business. The costs, including legal costs, of these
issues as they arise can be significant and, where appropriate,
provisions have been established under IAS 37.
Contingent liabilities - acquisitions and disposals
The Group routinely monitors and assesses contingent liabilities
arising from matters such as litigation, warranties and indemnities
relating to past acquisitions and disposals.
Prior to the Group's acquisition of Lighthouse in June 2019,
Lighthouse provided pension transfer advice to around 300 British
Steel pension scheme members between 2016 and 2018. The Group was
advised after the reporting date of a number of complaints on the
advice given by Lighthouse. The Group has initiated a review of all
cases advised by Lighthouse, prior to its acquisition by Quilter in
June 2019, to assess the standard of advice given to British Steel
pension scheme members.
For the cases where a complaint has been received on the advice
given by Lighthouse, the likelihood of redress is probable. An
estimate of the amount of redress payable has been made and is
included within Provisions in note 15. For the remaining cases, it
is possible that further costs of redress may be incurred following
the outcome of the reviews. Of the pension transfers Lighthouse
advised on between 2016 and 2018, approximately 80 cases were
undertaken prior to mid-2017 after which the British Steel pension
scheme was restructured and transfer values were enhanced
considerably.
As the advice was provided before the Group's acquisition of
Lighthouse, any further redress costs will be recognised as a
pre-acquisition liability within the fair value of the net assets
acquired (as disclosed in note 5), with a corresponding increase in
the goodwill recognised. Any adjustments to the acquisition balance
sheet must be finalised within 12 months after the acquisition, in
June 2020.
17: Capital and financial risk management
17(a): Capital management
The Group manages its capital with a focus on capital efficiency
and effective risk management. The capital objectives are to
maintain the Group's ability to continue as a going concern while
supporting the optimisation of return relative to the risks. The
Group ensures that it can meet its expected capital and financing
needs at all times having regard to the Group's business plans,
forecasts and strategic initiatives and regulatory requirements in
all businesses in the Group. The Group's overall capital risk
appetite is set with reference to the requirements of the relevant
stakeholders and seeks to:
-- maintain sufficient, but not excessive, financial strength to
support stakeholder requirements;
-- optimise debt to equity structure to enhance shareholder returns; and
-- retain financial flexibility by maintaining liquidity
including unutilised committed credit lines.
The primary sources of capital used by the Group are equity
shareholders' funds of GBP2,071 million (31 December 2018: GBP2,005
million) and subordinated debt which was issued at GBP200 million
in February 2018. Alternative resources are utilised where
appropriate. Risk appetite has been defined for the level of
capital, liquidity and debt within the Group. The risk appetite
includes long-term targets, early warning thresholds and risk
appetite limits. The dividend policy sets out the target dividend
level in relation to profits.
The regulatory capital for the Group is assessed under Solvency
II requirements.
17(a)(i): Regulatory capital (unaudited)
The Group is subject to Solvency II group supervision by the
PRA. The Group is required to measure and monitor its capital
resources under the Solvency II regulatory regime.
The Group's insurance undertakings are included in the Group
solvency calculation on a Solvency II basis. Other regulated
entities are included in the Group solvency calculation according
to the relevant sectoral rules. The Group's Solvency II surplus is
the amount by which the Group's capital on a Solvency II basis (own
funds) exceeds the Solvency II capital requirement (the Solvency
Capital Requirement or "SCR").
The Group's Solvency II surplus is GBP1,168 million at 31
December 2019 (2018: GBP1,059 million), representing a Solvency II
ratio of 221% (2018: 190%) calculated under the standard formula.
The Solvency II regulatory position for the year ended 31 December
2019 allows for the impact of the recommended final dividend
payment of GBP65 million (2018: GBP61 million). The disclosure does
not include the impact of any future distribution of the net
surplus proceeds from the QLA sale to shareholders or the impact of
the odd-lot offer.
The Solvency II estimated results for year ended 31 December
2019 (unaudited) and 31 December 2018 were as follows:
31 December 31 December
2019(1) 2018(2)
GBPm GBPm
=================================== =========== ===========
Own funds 2,132 2,237
Solvency capital requirement (SCR) 964 1,178
Solvency II surplus 1,168 1,059
=================================== =========== ===========
Solvency II coverage ratio 221% 190%
=================================== =========== ===========
(1) Based on preliminary estimates. Formal annual filing due to
the PRA by 19 May 2020.
(2) As represented within the Quilter plc Group Solvency and
Financial Condition report for the year ended 31 December 2018.
The Group own funds include the Quilter plc issued subordinated
debt security which qualifies as capital under Solvency II. The
composition of own funds by tier is presented in the table
below.
31 December 31 December
2019 2018
Group own funds GBPm GBPm
================================== =========== ===========
Tier 1(1) 1,925 2,036
Tier 2(2) 207 201
================================== =========== ===========
Total Group Solvency II own funds 2,132 2,237
================================== =========== ===========
(1) All Tier 1 capital is unrestricted for tiering purposes.
(2) Comprises a Solvency II compliant subordinated debt security
in the form of a Tier 2 bond, which was issued at GBP200 million in
February 2018.
The Group's insurance subsidiaries based in the UK and in
Ireland are also subject to Solvency II at entity level. The
Group's asset management and advisory businesses are subject to
group supervision by the FCA under the Capital Requirement
Directive IV regime ("CRD IV"). Other regulated entities in the
Group are subject to the locally applicable entity-level capital
requirements in the jurisdictions in which they operate.
The solvency and the capital requirements for the Group and each
of its regulated subsidiaries are reported and monitored through
monthly Capital Management Forum meetings. Throughout 2019, the
Group and each of its regulated subsidiaries have complied with the
applicable regulatory capital requirements.
17(a)(ii): Loan covenants
Under the terms of the revolving credit facility agreement, the
Group is required to comply with the following financial covenant:
the ratio of total net borrowings to consolidated equity
shareholders' funds shall not exceed 0.5.
31 December 31 December
2019 2018
GBPm GBPm
=============================================== =========== ===========
Total external borrowings of the Company 198 197
Less: cash and cash equivalents of the Company (559) (281)
================================================ =========== ===========
Total net external borrowings of the Company (361) (84)
Total shareholders' equity of the Group 2,071 2,005
Tier 2 bond 198 197
================================================ =========== ===========
Total Group equity (including Tier 2 bond) 2,269 2,202
================================================ =========== ===========
Ratio of Company net external borrowings to
Group equity -0.159 -0.038
================================================ =========== ===========
The Group has complied with the covenant since the facility was
created in February 2018.
17(a)(iii): Own Risk and Solvency Assessment ("ORSA") and
Internal Capital Adequacy Assessment Process ("ICAAP")
The Group ORSA process is an ongoing cycle of risk and capital
management processes which provides an overall assessment of the
current and future risk profile of the Group and demonstrates the
relationship between business strategy, risk appetite, risk profile
and solvency needs. These assessments support strategic planning
and risk-based decision making.
The underlying ORSA processes cover the Group and consider how
risks and solvency needs may evolve over the planning period. The
ORSA includes stress and scenario tests, which are performed to
assess the financial and operational resilience of the Group.
The Group ORSA report is produced annually and summarises the
analysis, insights and conclusions from the underlying risk and
capital management processes in respect of the Group. The ORSA
report is submitted to the PRA as part of the normal supervisory
process and may be supplemented by ad hoc assessments where there
is a material change in the risk profile of the Group outside the
usual reporting cycle.
In addition to the Group ORSA process, entity level ORSA
processes are performed for each of the solo insurance entities
within the Group.
The Group ICAAP process is similar to the ORSA process although
the ICAAP process is performed for a subset of the Group consisting
of the investment and advisory firms within the Group (the "ICAAP
Group"). The Group ICAAP report is also produced annually and
summarises the analysis, insights and conclusions from the
underlying risk and capital management processes in respect of the
ICAAP Group. The ICAAP report is submitted to the FCA as part of
the normal supervisory process and may be supplemented by ad-hoc
assessments where there is a material change in the risk profile of
the ICAAP Group outside the usual reporting cycle.
The conclusions of ORSA and ICAAP processes are reviewed by
management and the Board throughout the year.
17(b): Credit risk
Overall exposure to credit risk
Credit risk is the risk of adverse movements in credit spreads
(relative to the reference yield curve), credit ratings or default
rates leading to a deterioration in the level or volatility of
assets, liabilities or financial instruments resulting in loss of
earnings or reduced solvency. This includes counterparty default
risk, counterparty concentration risk and spread risk.
The Group has established a Credit Risk Framework that includes
a Credit Risk Policy, Credit Risk Standard and Credit Risk Appetite
Statement. This framework applies to all activities where the
shareholder is exposed to credit risk, either directly or
indirectly, ensuring appropriate identification, measurement,
management, monitoring and reporting of the Group's credit risk
exposures.
The credit risk arising from all exposures is mitigated through
ensuring the Group only enters into relationships with
appropriately robust counterparties, adhering to the Group Credit
Risk Policy. For each asset, consideration is given as to:
-- the credit rating of the counterparty, which is used to derive the probability of default;
-- the loss given default;
-- the potential recovery which may be made in the event of default;
-- the extent of any collateral that the firm has in respect of the exposures; and
-- any second order risks that may arise where the firm has
collateral against the credit risk exposure.
The credit risk exposures of the Group are monitored regularly
to ensure that counterparties remain creditworthy, to ensure there
is appropriate diversification of counterparties and to ensure that
exposures are within approved limits. At 31 December 2019, the
Group's material credit exposures were to financial institutions
(primarily through the investment of shareholder funds), corporate
entities (including external fund managers and reinsurers) and
individuals (primarily through fund management trade settlement
activities).
There is no direct exposure to European sovereign debt (outside
of the UK) within the shareholder investments. The Group has no
significant concentrations of credit risk exposure.
Reinsurance arrangements
The Group has reinsurance arrangements in place to mitigate the
risk of excessive claims on unit-linked and, prior to the sale of
QLA, non-linked protection contracts. Also specific to QLA before
its disposal, reinsurance arrangements were used in respect of
unit-linked institutional business to access specific funds not
available through direct fund links and to provide liquidity. Since
the Group uses reinsurance as a means of mitigating insurance risk,
reinsurance counterparties bear a significant financial obligation
to the Group.
In general, credit risk in respect of reinsurance counterparties
is controlled through the use of risk premium reinsurance terms,
where reinsurance cover is paid for as the cover is provided. In
these arrangements credit risk is limited to the risk of being
unable to recover amounts due as a result of claims arising over
the latest quarter, since reinsurance accounts are settled
quarterly in arrears. This risk is largely mitigated since the
Group would be able to withhold amounts due to the reinsurer to
offset amounts due from the reinsurer.
The Group also has reinsurance arrangements in which there is a
timing difference between the reinsurance premium payment and the
provision of cover, which results in prepayment for cover by the
company. In respect of these arrangements, a credit risk exposure
can arise.
Reinsurance credit risk is managed by dealing only with
reinsurance firms with credit ratings which meet the requirements
of the company's credit risk policy on inception of new reinsurance
arrangements. The Group monitors the exposure to and credit rating
of reinsurance counterparties regularly to ensure that these remain
within acceptable limits. Legal agreements are in place for all
reinsurance arrangements which set out the terms of the arrangement
and the rights of both the Group and the reinsurance providers.
Details of the age analyses and credit quality of reinsurance
assets in respect of insurance contracts and investment contracts
are included below.
Investment of shareholder funds
The risk of counterparty default in respect of the investment of
shareholder funds is managed through:
-- setting minimum credit rating requirements for counterparties;
-- setting limits and key risk indicators for individual
counterparties and counterparty concentrations;
-- monitoring exposures regularly against approved limits; and
-- on-going monitoring of counterparties and associated limits.
Other credit risks
The Group is exposed to financial adviser counterparty risk
through a number of loans that it makes to its advisers and the
payment of upfront commission on the sale of certain types of
business. The risk of default by financial advisers is managed
through monthly monitoring of loan and commission debt
balances.
The Group is exposed to the risk of default by fund management
groups in respect of settlements and rebates of fund management
charges on collective investments held for the benefit of
policyholders. This risk is managed through the due diligence
process which is completed before entering into any relationship
with a fund group. Amounts due to and from fund groups are
monitored for prompt settlement and appropriate action is taken
where settlement is not timely.
Legal contracts are maintained where the Group enters into
credit transactions with a counterparty.
Details of the credit quality of debt securities can be found in
this note in the table below.
Impact of credit risk on fair value
Due to the limited exposure that the Group has to credit risk,
credit risk does not have a material impact on the fair value
movement of financial instruments for the year under review. The
fair value movements on these instruments are mainly due to changes
in market conditions.
Maximum exposure to credit risk
The Group's maximum exposure to credit risk does not differ from
the carrying value disclosed in the relevant notes to the financial
statements.
Loans and advances subject to 12 month expected credit losses
("12 month ECL") are GBP37 million (2018: GBP33 million) and other
receivables subject to lifetime expected credit losses ("lifetime
ECL") are GBP246 million (2018: 335 million). These balances are
not rated; they represent the pool of counterparties that do not
require a rating. These counterparties individually generate no
material credit exposure and this pool is highly diversified,
monitored and subject to limits.
The table below represents the Group's exposure to credit risk
from cash and cash equivalents.
Exposure arising from financial instruments not recognised on
the statement of financial position is measured as the maximum
amount that the Group would have to pay, which may be significantly
greater than the amount that would be recognised as a liability.
The Group does not have any significant exposure arising from items
not recognised on the statement of financial position.
Credit rating relating to financial assets
that are neither past due nor impaired
================================ =========================================================
AAA AA A BBB <BBB Not rated(1) Carrying
GBPm GBPm GBPm GBPm GBPm GBPm value
31 December 2019 GBPm
================================ ===== ===== ===== ===== ===== ============ ========
Cash at amortised cost,
subject to 12 month ECL - 272 511 2 2 527 1,314
Money market funds at FVTPL 1,156 - - 3 - - 1,159
================================= ===== ===== ===== ===== ===== ============ ========
Total cash and cash equivalents 1,156 272 511 5 2 527 2,473
================================= ===== ===== ===== ===== ===== ============ ========
Credit rating relating to financial assets
that are neither past due nor impaired
================================ =========================================================
AAA AA A BBB <BBB Not rated(1) Carrying
GBPm GBPm GBPm GBPm GBPm GBPm value
31 December 2018 GBPm
================================ ===== ===== ===== ===== ===== ============ ========
Cash at amortised cost,
subject to 12 month ECL - 60 451 1 3 519 1,034
Money market funds at FVTPL 1,358 - - - 3 - 1,361
================================= ===== ===== ===== ===== ===== ============ ========
Total cash and cash equivalents 1,358 60 451 1 6 519 2,395
================================= ===== ===== ===== ===== ===== ============ ========
(1) Cash included in the consolidation of funds is not
rated.
Impairment allowance
Assets that are measured and classified as amortised costs are
monitored for any expected credit loss ("ECL") on either a 12 month
or lifetime ECL model. The majority of such assets within the Group
are measured on the lifetime ECL model, with the exception of some
specific loans that are on the 12 month ECL model.
Impairment allowance GBPm
=============================================== =====
2018 Opening impairment allowance under IAS 39 (0.3)
Impact upon adoption of IFRS 9 (0.2)
Additions due to increased broker loans (0.4)
=============================================== =====
31 December 2018 (0.9)
Additions due to increased broker loans (0.3)
=============================================== =====
31 December 2019 (1.2)
=============================================== =====
17(c): Market risk
Market risk is the risk of an adverse change in the level or
volatility of market prices of assets, liabilities or financial
instruments resulting in loss of earnings or reduced solvency.
Market risk arises from changes in equity, bond and property
prices, interest rates and foreign exchange rates. Market risk
arises differently across the Group's businesses depending on the
types of financial assets and liabilities held.
The Group has a market risk policy which sets out the risk
management framework, permitted and prohibited market risk
exposures, maximum limits on market risk exposures, management
information and stress testing requirements which are used to
monitor and manage market risk. The policy is cascaded to the
businesses across the Group and Group level governance and
monitoring processes provide oversight of the management of market
risk by the individual businesses.
The Group does not undertake any principal trading for its own
account. The Group's revenue is however affected by the value of
assets under management and consequently it has exposure to equity
market levels and economic conditions. Scenario testing is
undertaken to test the resilience of the business to severe but
plausible events and to assist in the identification of management
actions.
17(c)(i): Equity and property price risk
In accordance with the market risk policy, the company does not
invest shareholder assets in equity or property, or related
collective investments, except where the exposure arises due
to:
-- mismatches between unitised fund assets and liabilities.
These mismatches are permitted, subject to maximum limits, to avoid
excessive dealing costs; and
-- seed capital investments. Seed capital is invested within new
unit-linked funds at the time when these funds are launched. The
seed capital is then withdrawn from the funds as policyholders
invest in the funds.
The above exposures are not material to the Group.
The Group derives fees (e.g. annual management charges) and
incurs costs (e.g. adviser fund based renewal commissions) which
are linked to the performance of the underlying assets. Therefore
future earnings will be affected by equity and property market
performance.
Equity and property price sensitivity testing
A movement in equity and property prices would impact the fee
income that is based on the market value of the investments held
for the policyholders. In this analysis, all linked renewal
commission is assumed to be fund based. The sensitivity is applied
as an instantaneous shock to equity and property prices at the
start of the year. The sensitivity analysis is not limited to the
unit-linked business and therefore reflects the sensitivity of the
Group as a whole.
Impact on profit
after tax and shareholders'
equity
===================================================== ==============================
31 December 31 December
2019 2018
GBPm GBPm
===================================================== ============== ==============
Impact of 10% increase in equity and property prices 32 36
Impact of 10% decrease in equity and property prices (32) (36)
===================================================== ============== ==============
17(c)(ii): Interest rate risk
Interest rate risk arises primarily from bank balances held with
financial institutions. A small amount of the company assets are
held in fixed interest UK government bonds, which are exposed to
fluctuations in interest rates. Fixed interest UK government bonds
are mainly held to match liabilities by durations and so the
exposure to interest rate risk is not material.
A rise in interest rates would also cause an immediate fall in
the value of investments in fixed income securities within
unit-linked funds. The unit-linked funds asset look-through
analysis has revealed that less than 30% of the Group's linked
assets are invested in the fixed income securities which generally
have short durations, resulting in a low material impact in fund
based revenues.
Exposure of the IFRS income statement and statement of financial
position equity to interest rates are summarised below.
Interest rate sensitivity testing
The impact of an increase and decrease in market interest rates
of 1% is tested (e.g. if the current interest rate is 5%, the test
allows for the effects of an instantaneous change to 4% and 6% from
the start of the year). The test allows consistently for similar
changes in investment returns and movements in the market value of
any fixed interest assets backing the liabilities. The sensitivity
of profit to changes in interest rates is provided.
Impact on profit
after tax and shareholders'
equity
======================================== ==============================
31 December 31 December
2019 2018
GBPm GBPm
======================================== ============== ==============
Impact of 1% increase in interest rates 16 19
Impact of 1% decrease in interest rates (12) (12)
======================================== ============== ==============
17(c)(iii): Currency translation risk
Currency risk is the risk that the fair value of future cash
flows of a financial instrument will fluctuate because of changes
in foreign exchange rates. The Group's functional currency is
Sterling, which accounts for the majority of the Group's
transactions, but the Group also has minor exposures to foreign
exchange risk in respect to accounts receivable and future revenues
denominated in US Dollars, Euros and Swedish Krona through its
International business. The currency risk is mitigated using
derivative financial instruments such as forward foreign exchange
contracts. After risk mitigation, the Group does not have material
foreign currency risk exposure.
17(d): Liquidity risk
Liquidity risk is the risk that there are insufficient assets or
that assets cannot be realised in order to settle financial
obligations as they fall due or that market conditions preclude the
ability of the Group to trade in illiquid assets in order to
maintain its asset and liability matching ("ALM") profile. The
Group manages liquidity on a daily basis through:
-- maintaining adequate high quality liquid assets and banking
facilities, the level of which is informed through appropriate
liquidity stress testing;
-- continuously monitoring forecast and actual cash flows; and
-- monitoring a number of key risk indicators to help in the
identification of a liquidity stress.
Individual businesses maintain and manage their local liquidity
requirements according to their business needs within the overall
Group Liquidity Risk Framework that includes a Group Liquidity Risk
Policy, Group Liquidity Risk Standard and Group Liquidity Risk
Appetite Statement. The Group framework is applied consistently
across all businesses in the Group to identify, manage, measure,
monitor and report on all liquidity risks that have a material
impact on liquidity levels. This framework considers both
short-term liquidity and cash management considerations and
longer-term funding risk considerations.
Liquidity is monitored centrally by Group Treasury, with
management actions taken at a business level to ensure each
business has liquidity to cover its minimum liquidity requirement,
with an appropriate buffer set in line with the Group Risk Appetite
Statement.
The Group maintains contingency funding arrangements to provide
liquidity support to businesses in the event of liquidity stresses
that are greater than their risk appetite. Contingency Funding
Plans are in place for each individual business in order to set out
the approach and management actions that would be taken should
liquidity levels fall below minimum liquidity requirements. The
plans undergo an annual review and testing cycle to ensure they are
fit for purpose and can be relied upon during a liquidity
stress.
Information on the nature of the investments and securities held
is given in note 10.
The Group has a GBP125 million 5 year Revolving Credit Facility
with a 5 bank club that represents a form of contingency liquidity
for the Group. No drawdown on this facility has been made since
inception. The Group has the option to extend the facility for a
further 2 year period.
The financing arrangements are considered sufficient to maintain
the target liquidity levels of the Group and offer coverage for
appropriate stress scenarios identified within the liquidity stress
testing undertaken across the Group.
Further details, together with information on the Group's
borrowed funds, are given in note 29 of the financial statements
within the Group's 2019 Annual report and accounts.
The Group does not have material liquidity exposure to special
purpose entities or investment funds.
17(e): Insurance Risk
17(e)(i): Overview
The Group assumes insurance risk by providing life assurance
cover to customers within insurance policies, under which the Group
agrees to compensate the policyholder or other beneficiary in the
event that a specified uncertain future event (the insured event)
affecting the policyholder occurs. The Group offers life assurance
and, within QLA prior to its disposal, offered critical illness
protection business. The Group does not offer general insurance
business and therefore does not take on other forms of insurance
risk such as motor and property insurance risks. The QLA business
was part of the Group until it was sold on 31 December 2019.
Therefore, the insurance risks associated with this business were
managed by the Group throughout the year and so are described
below.
Insurance risk arises through exposure to variable claims
experience on life assurance and critical illness, exposure to
variable operating experience in respect of factors such as
persistency levels and management expenses. Unfavourable
persistency, expenses and mortality and morbidity claim rates,
relative to the actuarial assumptions made in the pricing process,
may result in profit margins reducing below the target levels
included in the pricing process.
The Group has implemented an insurance risk policy which sets
out the Group requirements for the management, measurement,
monitoring and reporting of insurance risks. The Group has
implemented three standards to support the insurance risk policy,
as follows:
-- Underwriting and Claims Standard;
-- Reinsurance Standard; and
-- Technical Provisions Standard.
The sensitivity of the Group's earnings and capital position to
insurance risks is monitored through the Group's capital management
processes.
The Group manages its insurance risks through the following
mechanisms:
-- management of expense levels relative to approved budgets;
-- pricing of insurance contracts utilising analysis of
mortality and morbidity, persistency and expense experience;
-- underwriting of mortality risks;
-- reinsurance, which is used to limit the Group's exposure to
large single claims and catastrophes through transfer of mortality
and morbidity risk exposures; and
-- the Group does not offer group insurance business in order to
avoid risk concentrations of insurance risk.
Mortality and morbidity
Mortality and morbidity risk is the risk that death, critical
illness and disability claims experience is higher than the rates
assumed when pricing contracts.
For unit-linked contracts a risk charge is applied to meet the
expected cost of the insured benefit (in excess of the unit value).
This risk charge can be altered in the event of changes in the
expectation for future claims experience, subject to the objective
to provide fair customer outcomes.
Persistency
Persistency risk is the risk that the level of surrenders or
withdrawals on insurance policies occur at levels that are
different to the levels assumed in the pricing process and relative
to the levels assumed in determination of technical provisions.
Persistency statistics are monitored monthly and a detailed
persistency analysis at a product group level is carried out on an
annual basis. Management actions may be triggered if persistency
statistics indicate significant adverse movement or emerging trends
in experience.
Expenses
Expense risk is the risk that actual expenses and expense
inflation differ from the levels expected and allowed for within
the pricing process. Expense levels are monitored quarterly against
budgets and forecasts. Expense drivers are used to allocate
expenses to entities and products. Some product structures include
maintenance charges. These charges are reviewed annually in light
of changes in maintenance expense levels and the market rate of
inflation. This review may result in changes in charge levels.
17(e)(ii): Sensitivity analysis
Changes in key assumptions used to value contracts would result
in increases or decreases to the contract liabilities recognised,
with impact on profit/(loss) and/or shareholders' equity.
Sensitivity analysis has been performed by applying the
following parameters to the statement of financial position and
income statement as at 31 December 2019 and 31 December 2018.
Interest rate and equity and property price sensitivities are
included within the Group market sensitivities above.
Expenses
The increase in expenses is assumed to apply to the costs
associated with the maintenance and acquisition of contracts. It is
assumed that these expenses are increased by 10% from the start of
the year, so is applied as an expense shock rather than a gradual
increase. The only administrative expenses that are deferrable are
sales bonuses but as new business volumes are unchanged in this
sensitivity, sales bonuses and the associated deferrals have not
been increased. Administrative expenses have been allocated equally
between life and pensions.
An increase in expenses of 10% would have decreased profit by
GBP13 million after tax (2018: GBP15 million).
Mortality
Mortality risk is not material as the Group does not provide
material mortality insurance on its products and mortality benefits
are reinsured.
17(f): Operational risk
Operational risk is the risk that failure of people, processes,
systems or external events results in financial loss, damage to
brand/reputation or adverse regulatory intervention, or government
or regulatory fine. Operational risk includes all risks resulting
from operational activities, excluding the risks already described
above and excluding strategic risks and risks resulting from being
part of a wider group of companies.
Operational risk includes the effects of failure of
administration processes, IT maintenance and development processes,
investment processes (including settlements with fund managers,
fund pricing and matching and dealing), product development and
management processes, legal risks (e.g. risk of inadequate legal
contract with third parties), risks relating to the relationship
with third party suppliers and outsourcers, and the consequences of
financial crime and business interruption events.
In accordance with Group policies, management have primary
responsibility for the identification, assessment, management and
monitoring of risks, and the escalation and reporting on issues to
executive management.
The Group executive management have responsibility for
implementing the Group Operational Risk management methodologies
and frameworks and for development and implementation of action
plans to manage risk levels within acceptable tolerances and to
resolve issues identified.
17(g): Contractual maturity analysis
The following table provides a maturity analysis of liability
cash flows based on the contractual maturity dates for investment
contract liabilities and expected claim dates for insurance
contracts. Investment contract policyholders have the option to
terminate or transfer their contracts at any time and to receive
the surrender or transfer value of their policies, and these
liabilities are therefore classified as less than three months
maturity. Although these liabilities are payable on demand, the
Group does not expect that all liabilities will be settled within
this period. Following the sale of QLA (see note 3) the Group has
no pure insurance contracts (unbundled elements of linked
investment contracts are included within "Investment contracts and
similar contracts").
Undiscounted cash flows
================================== ===================================================
Three Between
months one More
Up to to and than
Carrying three one five five
amount months year years years Total
31 December 2019 GBPm GBPm GBPm GBPm GBPm GBPm
================================== ======== ======= ======= ======= ====== ======
Investment contracts
Investment contracts and similar
contracts 52,455 52,455 - - - 52,455
================================== ======== ======= ======= ======= ====== ======
Total policyholder liabilities 52,455 52,455 - - - 52,455
================================== ======== ======= ======= ======= ====== ======
Undiscounted cash flows
========================================= ===================================================
Between
Three one More
Up to months and than
Carrying three to one five five
amount months year years years Total
31 December 2018 GBPm GBPm GBPm GBPm GBPm GBPm
========================================= ======== ======= ======= ======= ====== ======
Insurance contracts 602 21 11 46 992 1,070
-------- ------- ------- ------- ------ ------
Life assurance policyholder liabilities 588 7 11 46 992 1,056
Outstanding claims 14 14 - - - 14
-------- ------- ------- ------- ------ ------
Investment contracts
Investment contracts and similar
contracts 56,450 56,450 - - - 56,450
========================================= ======== ======= ======= ======= ====== ======
Total policyholder liabilities 57,052 56,471 11 46 992 57,520
========================================= ======== ======= ======= ======= ====== ======
18: Related party transactions
In the normal course of business, the Group enters into
transactions with related parties. Loans to related parties are
conducted on an arm's length basis and are not material to the
Group's results. There were no transactions with related parties
during the current and prior year which had a material effect on
the results or financial position of the Group except for the
repayment of intercompany indebtedness with Old Mutual plc in 2018.
The nature of the related party transactions of the Group has not
changed over the course of the year. Full details of transactions
with related parties, including key management personnel
compensation is included within note 38 of the financial statements
within in the Group's 2019 Annual Report and Accounts ("ARA"). The
Group's interests in subsidiaries and related undertakings are set
out in Appendix B of the financial statements within the Group's
2019 ARA.
19: Events after the reporting date
Complaints provision and contingent liability
The Group was advised after the reporting date of a number of
complaints received in respect of pensions transfer advice given to
clients of Lighthouse, for advice provided between 2016 and 2018,
prior to the Group's acquisition of Lighthouse in June 2019.
Further details are provided in notes 3(a), 15 and 16.
Coronavirus
In early 2020, the existence of a new coronavirus ("COVID-19")
was confirmed which has since spread across a significant number of
countries, leading to disruption to businesses and economic
activity which has been reflected in recent fluctuations in global
stock markets. The Group considers the emergence and spread of
COVID-19 to be a non-adjusting post balance sheet event. Given the
inherent uncertainties, it is not practicable at this time to
determine the impact of COVID-19 on the Group or to provide a
quantitative estimate of this impact.
Share buyback programme
Following the sale of QLA to ReAssure, on 2 January 2020 the
Group announced that it intends to return the GBP375 million net
surplus proceeds of the sale to shareholders via a share buyback
programme. This will be conducted concurrently on the London and
Johannesburg stock exchanges. The buyback is dependent on
regulatory and Board approval and the renewal of share repurchase
authorities at the Group's 2020 Annual General Meeting ("AGM"), and
will be subject to periodic Board review to ensure that this
remains the most effective and timely method of returning capital
to shareholders. Given the size of the capital return relative to
the current trading liquidity in Quilter shares, the Group
currently expect the buyback programme to complete by the time of
the 2021 AGM.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR JMMLTMTIBBMM
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March 11, 2020 03:00 ET (07:00 GMT)
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