Half Year Results - 2 of 4

RNS Number : 8734Q

Standard Life plc

11 August 2010

 



Standard Life plc

Half Year Results 2010

11 August 2010

Part 2 of 4

2  Statement of Directors' responsibilities

We confirm to the best of our knowledge that:

1.   the condensed consolidated IFRS financial information which has been prepared in accordance with IAS 34 as adopted by the European Union gives a true and fair view of the assets, liabilities, financial position and profit/(loss) of the company and the undertakings included in the consolidation taken as a whole as required by the DTR 4.2.4; and

2.   the consolidated income statement, the earnings per share statement, the consolidated statement of comprehensive income and the consolidated statement of financial position and associated notes have been prepared on the European Embedded Value basis as set out in Note 4.1; and

3.   the business review includes a fair review of the information required by DTR 4.2.7, namely important events that have occurred during the period and their impact on the condensed set of financial statements, as well as a description of the principal risks and uncertainties faced by the company and the undertakings included in the consolidation taken as a whole for the remaining six months of the financial year; and

4.   the business review and the notes to the condensed set of financial statements include a fair review of the information required by DTR 4.2.8, namely material related party transactions and any material changes in the related party transactions described in the last annual report.

The Directors of Standard Life plc are listed in the Standard Life Annual Report and Accounts 2009 with the exception of the following changes:

Jackie Hunt             Appointed Chief Financial Officer on 14 May 2010

A list of current Directors is found in Section 8 and is maintained on the Standard Life plc website, www.standardlife.com

By order of the Board

Gerry Grimstone  Chairman 11 August 2010	Jackie Hunt     Chief Financial Officer     11 August 2010

3  International Financial Reporting Standards (IFRS)

IFRS condensed consolidated income statement

For the six months ended 30 June 2010

		6 months 2010*	Restated 6 months 2009*	Restated Full year 2009*
	Notes	£m	£m	£m
Revenue
Gross earned premium		1,661	1,673	3,296
Premium ceded to reinsurers		(47)	(45)	(95)
Net earned premium		1,614	1,628	3,201
Net investment return		2,860	5	13,171
Fee and commission income		359	314	666
Other income		47	40	129
Total net revenue		4,880	1,987	17,167
Expenses
Claims and benefits paid		2,785	3,048	5,821
Claim recoveries from reinsurers		(314)	(317)	(623)
Net insurance benefits and claims		2,471	2,731	5,198
Change in policyholder liabilities		748	(1,558)	9,985
Change in reinsurance assets		(132)	(44)	(942)
Expenses under arrangements with reinsurers		405	60	563
Administrative expenses	3.3	770	781	1,486
Change in liability for third party interest in consolidated funds		124	(9)	323
Finance costs		57	57	115
Total expenses		4,443	2,018	16,728
Share of losses from associates and joint ventures		(4)	(35)	(29)
Profit/(loss) before tax		433	(66)	410
Tax expense attributable to policyholders' returns	3.6	158	10	299
Profit/(loss) before tax attributable to equity holders' profits		275	(76)	111
Total tax expense	3.6	199	15	279
Less: Tax attributable to policyholders' returns	3.6	(158)	(10)	(299)
Tax expense/(credit) attributable to equity holders' profits	3.6	41	5	(20)
Profit/(loss) for the period from continuing operations		234	(81)	131
(Loss)/profit for the period from discontinued operations	3.7	(17)	32	49
Profit/(loss) for the period		217	(49)	180
		-
Attributable to:
Equity holders of Standard Life plc		182	(20)	213
Non-controlling interests		35	(29)	(33)
		217	(49)	180
Earnings per share from continuing operations
Basic (pence per share)	3.4	8.9	(2.4)	7.5
Diluted (pence per share)	3.4	8.9	(2.4)	7.5

*     The Group's banking business, Standard Life Bank plc, was sold on 1 January 2010. On 11 May 2010, the Group entered into an agreement to sell its healthcare business, Standard Life Healthcare Limited. Both businesses have been classified as discontinued operations. The presentation of the 2009 comparatives in certain primary statements and in the corresponding notes has been reclassified accordingly, as indicated.

The Notes on pages 49 to 66 are an integral part of this consolidated financial information.

IFRS consolidated statement of comprehensive income

For the six months ended 30 June 2010

		6 months 2010	Restated 6 months 2009	Restated Full year 2009
	Notes	£m	£m	£m
Profit/(loss) for the period		217	(49)	180
Less: Loss/(profit) from discontinued operations	3.7	17	(32)	(49)
Profit/(loss) from continuing operations		234	(81)	131
Fair value gains on cash flow hedges		-	-	1
Actuarial gains/(losses) on defined benefit pension schemes		122	(80)	(77)
Revaluation of land and buildings		(10)	(17)	(16)
Net investment hedge		(16)	15	(12)
Exchange differences on translating foreign operations		104	(239)	(65)
Equity movements transferred to unallocated divisible surplus		(26)	125	104
Aggregate equity holder tax effect of items recognised in comprehensive income		(40)	26	28
Other		(1)	-	-
Other comprehensive income/(expense) for the period from continuing operations		133	(170)	(37)
Total comprehensive income/(expense) for the period from continuing operations		367	(251)	94
(Loss)/profit from discontinued operations	3.7	(17)	32	49
Other comprehensive income from discontinued operations	3.7	24	3	8
Total comprehensive income for the period from discontinued operations		7	35	57
Total comprehensive income/(expense) for the period		374	(216)	151
Attributable to:
Equity holders of Standard Life plc
From continuing operations		332	(222)	127
From discontinued operations		7	35	57
Non-controlling interests
From continuing operations		35	(29)	(33)
		374	(216)	151

The Notes on pages 49 to 66 are an integral part of this consolidated financial information.

IFRS pro forma reconciliation of consolidated operating profit to profit for the period

For the six months ended 30 June 2010

		6 months 2010*	6 months 2009*	Full year 2009*
	Notes	£m	£m	£m
Operating profit before tax from continuing operations
UK		76	80	222
Canada		62	74	113
International		8	(8)	23
Global investment management		49	27	73
Other		(13)	(7)	(32)
Operating profit before tax from continuing operations	3.1(a)	182	166	399
Adjusted for the following items:
Short-term fluctuations in investment return and economic assumption changes	3.8(a)	69	(186)	(214)
Restructuring and corporate transaction expenses	3.3	(17)	(28)	(52)
Impairment of intangible assets		-	-	(2)
Other operating profit adjustments	3.8(b)	6	1	13
Profit/(loss) attributable to non-controlling interests		35	(29)	(33)
Profit/(loss) before tax attributable to equity holders' profits		275	(76)	111
Tax (expense)/credit attributable to:
Operating profit		(48)	(39)	(34)
Adjusted items		7	34	54
Total tax (expense)/credit attributable to equity holders' profits		(41)	(5)	20
Profit/(loss) for the period from continuing operations		234	(81)	131
(Loss)/profit for the period from discontinued operations	3.7	(17)	32	49
Profit/(loss) for the period		217	(49)	180

*    The Group's banking business, Standard Life Bank plc, was sold on 1 January 2010. On 11 May 2010, the Group entered into an agreement to sell its healthcare business, Standard Life Healthcare Limited. Both businesses have been classified as discontinued operations. The analysis presented for the six months ended 30 June 2010 and 30 June 2009, and year ended 31 December 2009 includes continuing operations only.

Operating profit excludes impacts arising from short-term fluctuations in investment return and economic assumption changes. It is calculated based on expected returns on investments backing equity holder funds, with consistent allowance for the corresponding expected movements in equity holder liabilities. Impacts arising from the difference between the expected return and actual return on investments, and the corresponding impact on equity holder liabilities, are excluded from operating profit and are presented within profit before tax. The impact of certain changes in economic assumptions is also excluded from operating profit and is presented within profit before tax.

Adjustment is made for restructuring costs and significant corporate transaction expenses. Operating profit is also adjusted for impairment of intangible assets and profit or loss arising on the disposal of a subsidiary, joint venture or associate.  Other operating profit adjustments include volatility arising from changes in insurance and investment contract liabilities driven by corresponding changes in tax provisions, and items which are one-off in nature and outside the control of management and which, due to their size or nature, are not indicative of the long-term operating performance of the Group.

The Directors believe that, by eliminating this volatility from equity holder profit, they are presenting a more meaningful indication of the long-term operating performance of the Group.

The Notes on pages 49 to 66 are an integral part of this consolidated financial information.

IFRS condensed consolidated statement of financial position

As at 30 June 2010

		30 June 2010	30 June 2009	31 December 2009
	Notes	£m	£m	£m
Assets
Intangible assets		111	111	106
Deferred acquisition costs		864	855	872
Investments in associates and joint ventures		3,003	1,699	2,169
Investment property		7,907	6,937	7,111
Property, plant and equipment		157	150	161
Reinsurance assets		7,181	6,085	7,032
Loans and receivables		2,946	11,027	2,769
Derivative financial assets		1,698	1,474	1,229
Investment securities		108,459	91,078	106,181
Other assets		2,792	2,577	2,152
Cash and cash equivalents		6,636	10,644	7,436
Assets of operations classified as held for sale	3.7	279	-	9,395
Total assets		142,033	132,637	146,613
Equity
Share capital	3.9(a)	226	221	224
Shares held by trusts	3.9(b)	(18)	-	-
Share premium reserve		932	847	888
Retained earnings		807	537	685
Other reserves		1,695	1,501	1,660
Equity attributable to equity holders of Standard Life plc		3,642	3,106	3,457
Non-controlling interests		315	290	296
Total equity		3,957	3,396	3,753
Liabilities
Non-participating contract liabilities	3.10	88,741	71,814	85,892
Participating contract liabilities	3.10	32,419	31,152	32,352
Deposits received from reinsurers		6,177	5,827	6,104
Third party interest in consolidated funds		3,930	1,666	3,004
Borrowings	3.11	299	3,393	227
Subordinated liabilities		1,772	2,083	1,832
Deferred income		377	380	371
Income tax liabilities		285	83	214
Customer accounts related to banking activities and deposits by banks		-	6,771	-
Derivative financial liabilities		508	987	797
Other liabilities		3,394	5,085	2,924
Liabilities of operations classified as held for sale	3.7	174	-	9,143
Total liabilities		138,076	129,241	142,860
Total equity and liabilities		142,033	132,637	146,613

The Notes on pages 49 to 66 are an integral part of this consolidated financial information.

IFRS consolidated statement of changes in equity

For the six months ended 30 June 2010

	Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity attributable to equity holders of Standard Life plc	Non-controlling interests	Total equity
2010	£m	£m	£m	£m	£m	£m	£m	£m
1 January	224	-	888	685	1,660	3,457	296	3,753
Profit for the period	-	-	-	182	-	182	35	217
Other comprehensive income for the period	-	-	-	81	76	157	-	157
Total comprehensive income for the period	-	-	-	263	76	339	35	374
Distributions to equity holders	-	-	-	(180)	-	(180)	-	(180)
Issue of share capital other than in cash	2	-	44	-	-	46	-	46
Reserves credit for employee share-based payment schemes	-	-	-	-	8	8	-	8
Transfer to retained earnings for vested employee share-based payment schemes	-	-	-	5	(5)	-	-	-
Shares acquired by employee trusts	-	(32)	-	-	-	(32)	-	(32)
Shares distributed by employee trusts	-	10	-	-	(10)	-	-	-
Transfer between reserves on disposal of subsidiary	-	-	-	34	(34)	-	-	-
Shares gifted to charity	-	4	-	-	-	4	-	4
Other movements in non-controlling interests in the period	-	-	-	-	-	-	(16)	(16)
30 June	226	(18)	932	807	1,695	3,642	315	3,957

	Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity attributable to equity holders of Standard  Life plc	Non-controlling interests	Total equity
2009	£m	£m	£m	£m	£m	£m	£m	£m
1 January	218	-	792	774	1,623	3,407	334	3,741
Loss for the period	-	-	-	(20)	-	(20)	(29)	(49)
Other comprehensive expense for the period	-	-	-	(56)	(111)	(167)	-	(167)
Total comprehensive expense for the period	-	-	-	(76)	(111)	(187)	(29)	(216)
Distributions to equity holders	-	-	-	(168)	-	(168)	-	(168)
Issue of share capital other than in cash	3	-	55	-	-	58	-	58
Reserves credit for employee share-based payment schemes	-	-	-	-	(4)	(4)	-	(4)
Transfer to retained earnings for vested employee share-based payment schemes	-	-	-	7	(7)	-	-	-
Other movements in non-controlling interests in the period	-	-	-	-	-	-	(15)	(15)
30 June	221	-	847	537	1,501	3,106	290	3,396

	Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity attributable to equity holders of Standard Life plc	Non-controlling interests	Total equity
2009	£m	£m	£m	£m	£m	£m	£m	£m
1 January	218	-	792	774	1,623	3,407	334	3,741
Profit/(Loss) for the period	-	-	-	213	-	213	(33)	180
Other comprehensive (expense)/income for the year	-	-	-	(50)	21	(29)	-	(29)
Total comprehensive income/(expense) for the year	-	-	-	163	21	184	(33)	151
Distributions to equity holders	-	-	-	(260)	-	(260)	-	(260)
Issue of share capital other than in cash	6	-	96	-	-	102	-	102
Reserves credit for employee share-based payment schemes	-	-	-	-	24	24	-	24
Transfer to retained earnings for vested employee share-based payment schemes	-	-	-	8	(8)	-	-	-
Other movements in non-controlling interests in the year	-	-	-	-	-	-	(5)	(5)
31 December	224	-	888	685	1,660	3,457	296	3,753

The Notes on pages 49 to 66 are an integral part of this consolidated financial information.

IFRS condensed consolidated statement of cash flows

For the six months ended 30 June 2010

	6 months 2010	Restated 6 months 2009	Restated Full year 2009
	£m	£m	£m
Cash flows from operating activities
Profit/(loss) before tax from continuing operations	433	(66)	410
(Loss)/profit before tax from discontinued operations	(20)	45	93
	413	(21)	503
Non-cash movements from operating activities	171	120	256
Net (increase)/decrease in operational assets	(6,825)	2,108	(11,074)
Net increase/(decrease) in operational liabilities	3,115	(1,393)	8,838
Taxation paid	(136)	(147)	(239)
Net cash flows from operating activities	(3,262)	667	(1,716)
Cash flows from investing activities
Net (acquisition)/disposal of property, plant and equipment	(6)	48	41
Disposal of subsidiary	226	-	-
Investments in associates and joint ventures	(12)	(6)	(6)
Other	(35)	(4)	(16)
Net cash flows from investing activities	173	38	19
Cash flows from financing activities
Proceeds from other borrowings	10	13	11
Repayment of other borrowings	(1)	(13)	(19)
Capital flows from non-controlling interests and third party interest in consolidated funds	989	159	960
Distributions paid to non-controlling interests	(22)	(12)	(35)
Shares acquired by trusts	(32)	-	-
Interest paid	(40)	(49)	(131)
Ordinary dividends paid	(134)	(110)	(158)
Net cash flows from financing activities	770	(12)	628
Net (decrease)/increase in cash and cash equivalents	(2,319)	693	(1,069)
Cash and cash equivalents at the beginning of the period	8,840	9,951	9,951
Effects of exchange rate changes on cash and cash equivalents	(22)	(86)	(42)
Cash and cash equivalents at the end of the period	6,499	10,558	8,840
Supplemental disclosures on cash flows from operating activities
Interest paid	-	182	275
Interest received	1,369	1,503	3,003
Dividends received	665	749	1,266
Rental income received on investment properties	286	325	599

The Notes on pages 49 to 66 are an integral part of this consolidated financial information.

Notes to the IFRS financial information

3.1    Accounting policies

(a)        Basis of preparation

The condensed half year financial information has been prepared in accordance with the Disclosure Rules and Transparency Rules of the Financial Services Authority (FSA) and IAS 34 Interim Financial Reporting issued by the International Accounting Standards Board (IASB) as endorsed by the European Union (EU).

The accounting policies for recognition, measurement, consolidation and presentation as set out in the Group's Annual Report and Accounts for the year ended 31 December 2009 have been applied in the preparation of the condensed half year financial information, with the exception of the change to the Group's chosen supplementary measure of IFRS performance described below.

The Group has adopted a number of amendments to IFRSs and interpretations which are effective from 1 January 2010 and management considers that the implementation of these amendments and interpretations has had no significant impact on the Group's financial information.

Change in the Group's chosen supplementary measure of IFRS performance

As indicated at the 2009 Preliminary Results presentation in March 2010, the Group has reviewed its performance reporting under IFRS. Following this review, the Group is adopting IFRS operating profit as its main IFRS performance measure in place of IFRS underlying profit. The Directors consider that this change will provide equity holders and other stakeholders with a better understanding of the Group's long-term operating performance by removing the impact of short-term economic volatility.  In addition, the change will better reflect the Group's internal management approach while also allowing for greater comparability with others in the industry. The key differences between the previous and the new measure are as follows:

Removal of short-term fluctuations in investment return and economic assumption changes:

·    Under the previous method of reporting, short-term fluctuations in investment return were only partly excluded from IFRS underlying profit through an adjustment for the volatility arising on different asset and liability valuation bases.

·    Under the new performance measure, these fluctuations will be excluded, in line with others in the industry. IFRS operating profit is calculated based on expected returns on investments backing equity holder funds, with a consistent treatment of the corresponding expected movements in equity holder liabilities. Impacts arising from the difference between the expected return and actual return on investments and the corresponding impact on liabilities are excluded from IFRS operating profit, and are reported within the statutory IFRS profit before tax. The impact of certain changes in economic assumptions is also excluded from IFRS operating profit, and is reported within profit before tax.

Other adjustments:

·    Volatility arising from changes in insurance and investment contract liabilities caused by changes in tax provisions in our Canadian subsidiary was previously included in IFRS underlying profit. As this item has no overall impact on equity holder profit after tax, it will be excluded from IFRS operating profit.

·    Adjustment will also be made for one-off items which are outside the control of management and which, due to their size or nature, are not indicative of the long-term operating performance of the Group. Previously such items would have been included in IFRS underlying profit. In 2010 and 2009, no such one-off items were adjusted in determining IFRS operating profit.

3.1    Accounting policies continued

(a)        Basis of preparation continued

The table below sets out the effect of the above changes to the Group's chosen measure of IFRS performance for the six months ended 30 June 2009 and the year ended 31 December 2009:

	IFRS underlying profit 30 June 2009	Effect of change of measure	IFRS operating profit 30 June 2009	IFRS underlying profit 31 December 2009	Effect of change of measure	IFRS operating profit 31 December 2009
	£m	£m	£m	£m	£m	£m
Underlying/operating profit before tax from continuing operations
UK	36	44	80	184	38	222
Canada	(10)	84	74	(7)	120	113
International	(4)	(4)	(8)	18	5	23
Global investment management	21	6	27	66	7	73
Other	(16)	9	(7)	(45)	13	(32)
Underlying/operating profit before tax from continuing operations	27	139	166	216	183	399
Adjusted for the following items:
Short-term fluctuations in investment return and economic assumption changes	-	(186)	(186)	-	(214)	(214)
Volatility arising on different asset and liability valuation bases	(46)	46	-	(18)	18	-
Restructuring and corporate transaction expenses	(28)	-	(28)	(52)	-	(52)
Impairment of intangible assets	-	-	-	(2)	-	(2)
Other operating profit adjustments	-	1	1	-	13	13
Loss attributable to non-controlling interests	(29)	-	(29)	(33)	-	(33)
(Loss)/profit before tax attributable to equity holders' profits	(76)	-	(76)	111	-	111
Tax (expense)/credit attributable to underlying/operating profit	(17)	(22)	(39)	3	(37)	(34)
Tax credit attributable to adjusted items	12	22	34	17	37	54
Total tax (expense)/credit attributable to equity holders' profits	(5)	-	(5)	20	-	20
(Loss)/profit for the period from continuing operations	(81)	-	(81)	131	-	131
Profit for the period from discontinued operations	32	-	32	49	-	49
(Loss)/profit for the period	(49)	-	(49)	180	-	180

(b)        Condensed half year financial information

The condensed half year financial information for the six months ended 30 June 2010 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The results for the six months ended 30 June 2010 and 2009 are unaudited, but have been reviewed by PricewaterhouseCoopers LLP whose review report is set out in Section 5. PricewaterhouseCoopers LLP have audited the Annual Report and Accounts of the Group for the year ended 31 December 2009 and their report was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The Group's consolidated statutory accounts for the year ended 31 December 2009 have been filed with the Registrar of Companies.

3.2    Segmental analysis

(a)        Basis of segmentation

The Group's reportable segments have been identified in accordance with the way in which the Group is structured and managed and the way in which key financial information used by the Executive team to review performance is presented. The Group's reportable segments are as follows:

UK

UK operations comprise life and pensions business and healthcare business. The life and pensions business provides a broad range of pensions, protection, savings and investment products to individual and corporate customers. On 11 May 2010, the Group entered into an agreement to sell its healthcare business, Standard Life Healthcare Limited. It has therefore been classified as a discontinued operation, refer to Note 3.16 - Events after the reporting period. UK operations previously included the Group's banking business, Standard Life Bank plc, which was sold on 1 January 2010.

Canada

Canadian operations offer a broad range of pensions and savings products to individual and corporate customers in addition to commercial mortgage products.

International

The businesses included in this reportable segment offer a range of life and pension products. The Group has operations in Ireland, Germany and Austria, which for 31 December 2009 reporting were included in the 'Europe' reportable segment. The Group also holds investments in joint ventures in India and China and has a wholly owned subsidiary in Hong Kong, each of which were included in the 'Asia' reportable segment for 31 December 2009 reporting. This change in composition of reportable segments corresponds to changes made during the reporting period to the way in which the Group is managed and the relevant 31 December 2009 and 30 June 2009 segment information has been restated accordingly.

Global investment management

Investment management services are provided by global investment management operations to the Group's other reportable segments. Global investment management also provides a range of investment products for individuals and institutional customers through a number of different investment vehicles.

Other

This reportable segment primarily includes the Group corporate centre and the shared service centre. 

(b)        Reportable segments - income statement, operating profit and asset information

Income statement and asset information is presented by reportable segment in the tables below. As described beneath the pro forma reconciliation of consolidated operating profit to profit for the period, operating profit is considered to present an indication of the operating business performance of the Group. Operating profit is one of the key measures utilised by the Group's management in their evaluation of segmental performance and is therefore also presented by reportable segment.

3.2    Segmental analysis continued

(b)        Reportable segments - income statement, operating profit and asset information continued

	UK	Canada	International	Global investment management	Other	Elimination	Total
30 June 2010	£m	£m	£m	£m	£m	£m	£m
Revenue
Net earned premium	738	451	423	2	-	-	1,614
Net investment return	2,060	287	508	-	5	-	2,860
Other segment income	224	69	19	96	10	(12)	406
Inter-segment revenue	18	1	(4)	56	266	(337)	-
Total net revenue	3,040	808	946	154	281	(349)	4,880
Expenses
Segment expenses	2,655	755	911	109	298	(342)	4,386
Finance costs	57	7	-	-	-	(7)	57
Total expenses	2,712	762	911	109	298	(349)	4,443
Share of profits/(losses) from associates and joint ventures	1	12	(20)	3	-	-	(4)
Profit/(loss) before tax	329	58	15	48	(17)	-	433
Tax attributable to policyholders' returns	149	-	9	-	-	-	158
Tax attributable to equity holders' profits	14	13	4	13	(3)	-	41
Profit/(loss) for the period from continuing operations	166	45	2	35	(14)	-	234
Loss for the period from discontinued operations1	(17)	-	-	-	-	-	(17)
Profit/(loss) for the period	149	45	2	35	(14)	-	217
Profit attributable to non-controlling interests from continuing operations	(35)	-	-	-	-	-	(35)
Profit/(loss) attributable to equity holders of Standard Life plc	114	45	2	35	(14)	-	182
Reconciliation to consolidated operating profit1
Tax expense/(credit) attributable to equity holders' profits from continuing operations	14	13	4	13	(3)	-	41
Adjustments to reconcile the consolidated operating profit to profit for the period from continuing operations	(69)	4	2	1	4	-	(58)
Less: Loss for the period from discontinued operations	17	-	-	-	-	-	17
Operating profit/(loss) before tax from continuing operations	76	62	8	49	(13)	-	182
Other income included in the income statement is as follows:
Interest income2	47	81	15	-	1	-	144
Other expenses included in the income statement include:
Impairment losses recognised/(reversed)2	(3)	(1)	-	-	-	-	(4)
Amortisation of intangible assets:
From continuing operations	5	-	1	-	2	-	8
From discontinued operations	2	-	-	-	-	-	2
Amortisation of deferred acquisition costs:
From continuing operations	40	6	21	-	-	-	67
From discontinued operations	32	-	-	-	-	-	32
Depreciation of property, plant and equipment2	-	1	1	-	4	-	6
Interest expense2,3	61	11	1	-	60	(68)	65
Assets
Segment assets	106,727	22,129	9,688	468	746	(728)	139,030
Investments in associates and joint ventures	2,625	124	201	34	19	-	3,003
Total assets	109,352	22,253	9,889	502	765	(728)	142,033
Additions during the period
Intangible assets	36	-	4	-	2	-	42
Deferred acquisition costs	71	10	34	-	-	-	115
Property, plant and equipment	-	1	-	-	6	-	7
Investment properties	358	34	-	-	-	-	392
	465	45	38	-	8	-	556

¹    The Group's banking business, Standard Life Bank plc, was sold on 1 January 2010. On 11 May 2010, the Group entered into an agreement to sell its healthcare business, Standard Life Healthcare Limited. Both businesses have been classified as discontinued operations. The reconciliation to consolidated operating profit for the six months ended 30 June 2010 includes continuing operations only.           

²    All from continuing operations.

³    Refer to Note 3.3.

⁴    Total net revenue, excluding inter-segment revenue, for Germany, Ireland and Asia is £698m (six months to 30 June 2009: £380m and 12 months to 31 December 2009: £1,188m), £223m (six months to 30 June 2009: £143m and 12 months to 31 December 2009: £597m) and £29m (six months to 30 June 2009: £15m and 12 months to 31 December 2009: £44m) respectively.

	UK	Canada	International	Global investment management	Other	Elimination	Total
30 June 2009	£m	£m	£m	£m	£m	£m	£m
Revenue
Net earned premium	871	322	433	2	-	-	1,628
Net investment return	(970)	895	91	(1)	(4)	(6)	5
Other segment income	218	52	14	70	3	(3)	354
Inter-segment revenue	14	1	-	53	276	(344)	-
Total net revenue	133	1,270	538	124	275	(353)	1,987
Expenses
Segment expenses	113	1,258	533	107	291	(341)	1,961
Finance costs	61	6	-	2	-	(12)	57
Total expenses	174	1,264	533	109	291	(353)	2,018
Share of (losses)/profits from associates and joint ventures	(6)	(16)	(17)	4	-	-	(35)
(Loss)/profit before tax	(47)	(10)	(12)	19	(16)	-	(66)
Tax attributable to policyholders' returns	14	-	(4)	-	-	-	10
Tax attributable to equity holders' profits	(2)	12	(6)	5	(4)	-	5
(Loss)/profit for the period from continuing operations	(59)	(22)	(2)	14	(12)	-	(81)
Profit for the period from discontinued operations1	32	-	-	-	-	-	32
(Loss)/profit for the period	(27)	(22)	(2)	14	(12)	-	(49)
Loss attributable to non-controlling interests from continuing operations	29	-	-	-	-	-	29
Profit/(loss) attributable to equity holders of Standard Life plc	2	(22)	(2)	14	(12)	-	(20)
Reconciliation to consolidated operating profit1
Tax (credit)/expense attributable to equity holders' profits from continuing operations	(2)	12	(6)	5	(4)	-	5
Adjustments to reconcile the consolidated operating profit to profit for the period from continuing operations	112	84	-	8	9	-	213
Less: Profit for the period from discontinued operations	(32)	-	-	-	-	-	(32)
Operating profit/(loss) before tax from continuing operations	80	74	(8)	27	(7)	-	166
Other income included in the income statement is as follows:
Interest income:
From continuing operations	90	72	19	1	3	-	185
From discontinued operations	189	-	-	-	-	-	189
Other expenses included in the income statement include:
Impairment losses recognised/(reversed):
From continuing operations	20	2	-	-	-	-	22
From discontinued operations	6	-	-	-	-	-	6
Amortisation of intangible assets2	4	-	1	-	1	-	6
Amortisation of deferred acquisition costs:
From continuing operations	42	6	23	-	-	-	71
From discontinued operations	17	-	-	-	-	-	17
Depreciation of property, plant and equipment2	-	1	1	-	3	-	5
Interest expense:3
From continuing operations	69	10	1	2	57	(70)	69
From discontinued operations	143	-	-	-	-	-	143
Assets
Segment assets	105,211	17,144	8,026	570	815	(828)	130,938
Investments in associates and joint ventures	1,446	106	83	16	48	-	1,699
Total assets	106,657	17,250	8,109	586	863	(828)	132,637
Additions during the period
Intangible assets	3	-	3	-	-	-	6
Deferred acquisition costs	59	7	37	-	-	-	103
Property, plant and equipment	-	1	-	1	3	-	5
Investment properties	83	3	11	-	-	-	97
	145	11	51	1	3	-	211

¹    The Group's banking business, Standard Life Bank plc, was sold on 1 January 2010. On 11 May 2010, the Group entered into an agreement to sell its healthcare business, Standard Life Healthcare Limited. Both businesses have been classified as discontinued operations. The reconciliation to consolidated operating profit for the six months ended 30 June 2009 and year ended 31 December 2009 include continuing operations only.       

²    All from continuing operations.

³    Refer to Note 3.3. 

3.2    Segmental analysis continued

(b)        Reportable segments - income statement, operating profit and asset information continued

	UK	Canada	International	Global investment management	Other	Elimination	Total
31 December 2009	£m	£m	£m	£m	£m	£m	£m
Revenue
Net earned premium	1,574	709	914	4	-	-	3,201
Net investment return	10,272	2,044	885	-	4	(34)	13,171
Other segment income	499	112	30	155	7	(8)	795
Inter-segment revenue	8	2	(5)	91	539	(635)	-
Total net revenue	12,353	2,867	1,824	250	550	(677)	17,167
Expenses
Segment expenses	11,850	2,833	1,781	200	603	(654)	16,613
Finance costs	120	13	-	5	-	(23)	115
Total expenses	11,970	2,846	1,781	205	603	(677)	16,728
Share of profits/(losses) from associates and joint ventures	7	(29)	(27)	19	1	-	(29)
Profit/(loss) before tax	390	(8)	16	64	(52)	-	410
Tax attributable to policyholders' returns	294	-	5	-	-	-	299
Tax attributable to equity holders' profits	(53)	33	(3)	13	(10)	-	(20)
Profit/(loss) for the year from continuing operations	149	(41)	14	51	(42)	-	131
Profit for the year from discontinued operations1	49	-	-	-	-	-	49
Profit/(loss) for the year	198	(41)	14	51	(42)	-	180
Loss attributable to non-controlling interests from continuing operations	33	-	-	-	-	-	33
Profit/(loss) attributable to equity holders of Standard Life plc	231	(41)	14	51	(42)	-	213
Reconciliation to consolidated operating profit1
Tax (credit)/expense attributable to equity holders' profits from continuing operations	(53)	33	(3)	13	(10)	-	(20)
Adjustments to reconcile the consolidated operating profit to profit for the year from continuing operations	93	121	12	9	20	-	255
Less: Profit for the year from discontinued operations	(49)	-	-	-	-	-	(49)
Operating profit/(loss) before tax from continuing operations	222	113	23	73	(32)	-	399
Other income included in the income statement is as follows:
Interest income:
From continuing operations	154	145	60	1	5	-	365
From discontinued operations	350	-	-	-	-	-	350
Other expenses included in the income statement include:
Impairment losses recognised/(reversed):
From continuing operations	30	4	-	-	7	-	41
From discontinued operations	19	-	-	-	-	-	19
Amortisation of intangible assets:
From continuing operations	9	1	2	-	3	-	15
From discontinued operations	2	-	-	-	-	-	2
Amortisation of deferred acquisition costs:
From continuing operations	82	12	45	-	-	-	139
From discontinued operations	34	-	-	-	-	-	34
Depreciation of property, plant and equipment2	-	2	1	1	6	-	10
Interest expense:3
From continuing operations	132	19	2	5	116	(139)	135
From discontinued operations	238	-	-	-	-	-	238
Assets
Segment assets	114,042	20,423	9,516	506	796	(839)	144,444
Investments in associates and joint ventures	1,915	104	80	32	38	-	2,169
Total assets	115,957	20,527	9,596	538	834	(839)	146,613
Additions during the year
Intangible assets	6	1	5	-	4	-	16
Deferred acquisition costs	105	14	82	-	-	-	201
Property, plant and equipment	1	2	-	1	9	-	13
Investment properties	348	4	13	-	-	-	365
	460	21	100	1	13	-	595

¹    The Group's banking business, Standard Life Bank plc, was sold on 1 January 2010. On 11 May 2010, the Group entered into an agreement to sell its healthcare business, Standard Life Healthcare Limited. Both businesses have been classified as discontinued operations. The reconciliation to consolidated operating profit for the six months ended 30 June 2009 and year ended 31 December 2009 include continuing operations only.       

²    All from continuing operations.

³    Refer to Note 3.3.

Inter-segment transactions are entered into under normal commercial terms and conditions that would be available to unrelated third parties. The allocation of total net revenue presented above is based on customer location and this basis is not materially different to geographical origin. The Group has a widely diversified policyholder base and is therefore not reliant on any individual customers. The Group utilises additional measures to assess the performance of each of the reportable segments, which are presented in the European Embedded Value information.

(c)        Non-current non-financial assets by geographical location

	30 June 2010	30 June 2009	31 December 2009
	£m	£m	£m
UK	7,003	6,193	6,292
Continental Europe	52	56	51
Canada	1,147	949	1,035
Total	8,202	7,198	7,378

Non-current non-financial assets for this purpose consist of investment property, property, plant and equipment and intangible assets (excluding intangible assets arising from insurance or participating investment contracts).

3.3    Administrative expenses

		6 months 2010	6 months 2009	Full year 2009
	Notes	£m	£m	£m
Restructuring and corporate transaction expenses		18	30	59
Commission expenses		179	166	331
Interest expenses		8	150	250
Staff costs and other employee-related costs		328	302	599
Acquisition costs deferred during the period		(115)	(103)	(201)
Amortisation of deferred acquisition costs		99	88	173
Impairment losses on deferred acquisition costs		-	19	33
Other administrative expenses		286	337	608
Total administrative expenses		803	989	1,852
Less: administrative expenses from discontinued operations	3.7	(33)	(208)	(366)
Administrative expenses		770	781	1,486

Interest expense of £57m (six months ended 30 June 2009: £62m; 12 months ended 31 December 2009: £123m) in respect of subordinated liabilities is included within finance costs, of which £nil (six months ended 30 June 2009: £5m; 12 months ended 31 December 2009: £8m) relates to discontinued operations.  For the period ended 30 June 2010, total interest expense is £65m (six months ended 30 June 2009: £212m; 12 months ended 31 December 2009: £373m).

Restructuring costs comprise £17m (six months ended 30 June 2009: £29m; 12 months ended 31 December 2009: £53m) from continuing operations and £1m (six months ended 30 June 2009: £1m; 12 months ended 31 December 2009: £6m) from discontinued operations. In the six months ended 30 June 2010, all of the restructuring costs from continuing operations were adjusted when determining operating profit for the period (six months ended 30 June 2009: £28m; 12 months ended 31 December 2009: £52m). In 2009, the remaining costs (six months ended 30 June 2009: £1m; 12 months ended 31 December 2009: £1m) related to the Continuous Improvement Programme (CIP) expenses incurred by the Heritage With Profits Fund.

Restructuring costs from continuing operations incurred during the period of £17m (six months ended 30 June 2009: £29m; 12 months ended 31 December 2009: £53m) include £11m of expenses in relation to the Group's CIP (six months ended 30 June 2009: £24m; 12 months ended 31 December 2009: £44m) and other restructuring costs of £6m (six months ended 30 June 2009: £5m; 12 months ended 31 December 2009: £9m). In the 12 months ended 31 December 2009, other restructuring costs include £5m in relation to transaction costs for the sale of Standard Life Bank plc.

3.4    Earnings per share

(a)        Basic earnings per share

Basic earnings per share is calculated by dividing profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the period. The weighted average number of ordinary shares outstanding during the period is the weighted average number of shares in issue less the weighted average number of shares owned by employee share trusts that have not vested unconditionally to employees.

	6 months 2010	Restated 6 months 2009	Restated Full year 2009
Profit/(loss) from continuing operations (£m)	199	(52)	164
(Loss)/profit from discontinued operations (£m)	(17)	32	49
Profit/(loss) attributable to equity holders of Standard Life plc (£m)	182	(20)	213
Weighted average number of ordinary shares in issue (millions)	2,230	2,184	2,201
Basic earnings per share from continuing operations (pence per share)	8.9	(2.4)	7.5
Basic earnings per share from discontinued operations (pence per share)	(0.7)	1.5	2.2
Basic earnings per share (pence per share)	8.2	(0.9)	9.7

(b)        Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.  The Group has one category of dilutive potential ordinary shares - share awards and share options awarded to employees. 

For share options, a calculation is made to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated is compared with the number of shares that would have been issued, or purchased, assuming the exercise of the share options. 

	6 months 2010	Restated 6 months 2009	Restated Full year 2009
Profit/(loss) from continuing operations (£m)	199	(52)	164
(Loss)/profit from discontinued operations (£m)	(17)	32	49
Profit/(loss) attributable to equity holders of Standard Life plc (£m)	182	(20)	213
Weighted average number of ordinary shares for diluted earnings per share (millions)	2,235	2,185	2,203
Diluted earnings per share from continuing operations (pence per share)	8.9	(2.4)	7.5
Diluted earnings per share from discontinued operations (pence per share)	(0.7)	1.5	2.2
Diluted earnings per share (pence per share)	8.2	(0.9)	9.7

The dilutive effect of share awards and options included in the weighted average number of ordinary shares above was five million (six months ended 30 June 2009: one million; 12 months ended 31 December 2009: two million). The effect of these dilutive potential ordinary shares did not impact the profit attributable to equity holders of the Company.

(c)        Alternative earnings per share

Earnings per share is also calculated based on the operating profit before tax as well as on the profit attributable to equity holders. The Directors believe that earnings per share based on operating profit provides a better indication of the operating business performance of the Group.

	6 months 2010	6 months 2010	Restated 6 months 2009	Restated 6 months 2009	Restated Full year 2009	Restated Full year 2009
	£m	p per share	£m	p per share	£m	p per share
Operating profit before tax from continuing operations	182	8.2	166	7.6	399	18.1
Short-term fluctuations in investment return and economic assumption changes	69	3.1	(186)	(8.5)	(214)	(9.7)
Impairment of intangible assets	-	-	-	-	(2)	(0.1)
Restructuring and corporate transaction expenses	(17)	(0.8)	(28)	(1.3)	(52)	(2.4)
Other operating profit adjustments	6	0.3	1	-	13	0.6
Profit/(loss) attributable to non-controlling interests	35	1.6	(29)	(1.3)	(33)	(1.5)
Profit/(loss) before tax from continuing operations	275	12.4	(76)	(3.5)	111	5.0
Tax (expense)/credit attributable to:
Operating profit	(48)	(2.2)	(39)	(1.8)	(34)	(1.5)
Adjusted items	7	0.3	34	1.6	54	2.5
(Profit)/loss attributable to non-controlling interests	(35)	(1.6)	29	1.3	33	1.5
(Loss)/profit from discontinued operations	(17)	(0.7)	32	1.5	49	2.2
Profit attributable to equity holders of Standard Life plc	182	8.2	(20)	(0.9)	213	9.7

Alternative earnings per share results in the same pence per share for both a basic and diluted basis.

3.5    Dividends

Subsequent to 30 June 2010, the Directors have proposed an interim dividend for 2010 of 4.35 pence per ordinary share (interim 2009: 4.15 pence), an estimated £98m in total (interim 2009: £92m). The dividend will be paid on 19 November 2010. This dividend will be recorded as an appropriation of retained earnings in the financial statements for the year ended 31 December 2010. During the six months to 30 June 2010 the Directors declared a final dividend for the year ended 31 December 2009 of 8.09 pence per ordinary share (final 2008: 7.70 pence) totalling £180m (final 2008: £168m).

On 15 May 2009, the Group's equity holders approved the introduction of the Scrip dividend scheme, effective for the final 2008 dividend payment onwards. Investors taking part in the Scrip scheme receive their dividend entitlement in the form of shares rather than cash. The distribution under Scrip is recorded as an appropriation of retained earnings. Dividends paid in the six months ended 30 June 2010 comprise £46m (six months ended 30 June 2009: £58m; 12 months ended 31 December 2009: £102m) settled by the issue of shares under the Scrip scheme and £134m (six months ended 30 June 2009: £110m; 12 months ended 31 December 2009: £158m) paid in cash.

3.6    Tax expense/(credit)

The tax expense/(credit) is attributed as follows:

		6 months 2010	Restated 6 months 2009	Restated Full year 2009
	Notes	£m	£m	£m
Tax expense attributable to policyholders' returns		158	10	299
Tax expense/(credit) attributable to equity holders' profits		41	5	(20)
		199	15	279
Tax (credit)/expense from discontinued operations	3.7	(3)	13	44
		196	28	323

The Finance (No. 2) Act 2010, given Royal Assent on 27 July, contains legislation to reduce the UK corporation tax rate from 28% to 27% from 1 April 2011. The legislation was not substantively enacted at 30 June 2010 and therefore the reduced rate has not been used in preparing these financial statements.

The share of tax of associates and joint ventures is £4m (six months ended 30 June 2009: £5m; 12 months ended 31 December 2009: £9m) and is included above the line 'Profit/(loss) before tax' in the condensed consolidated income statement in 'Share of losses from associates and joint ventures'.

The total tax expense is split as follows:

		6 months 2010	Restated 6 months 2009	Restated Full year 2009
		£m	£m	£m
Income tax:
UK		147	57	162
Double tax relief		(1)	(1)	(1)
Canada and international		20	9	28
Adjustment to tax expense in respect of prior years		(6)	(15)	(3)
Total income tax		160	50	186
Deferred tax:
Deferred tax expense/(credit) arising from the current period		36	(22)	137
Total deferred tax		36	(22)	137
Total tax expense		196	28	323
Less income tax credit/(expense) attributable to discontinued operations		3	(13)	(44)
Total income tax expense attributable to continuing operations		199	15	279
Attributable to equity holders' profits		41	5	(20)

Tax relating to components of other comprehensive income is as follows:

		6 months 2010	6 months 2009	Full year 2009
		£m	£m	£m
Tax on actuarial losses/(gains) on defined benefit pension schemes		40	(25)	(27)
Revaluation of land and buildings		-	(1)	(1)
Tax on fair value gains on cash flow hedges attributable to discontinued operations		6	2	3
Aggregate tax effect of items debited/(credited) directly to equity		46	(24)	(25)

3.7    Discontinued operations

On 1 January 2010, the Group sold Standard Life Bank plc to Barclays Bank PLC for a consideration of £246m. The Group's decision to sell was primarily driven by the view that the growth of the volume of lending activity was no longer consistent with its long-term financial objectives. Standard Life Bank plc has therefore been classified as a discontinued operation for the year ended 31 December 2009 and the six months ended 30 June 2009 and the presentation in the relevant (condensed) primary statements and corresponding notes to the consolidated half year financial information has been reclassified accordingly, as indicated.  The assets and liabilities attributable to Standard Life Bank plc as at 31 December 2009 are presented in the condensed consolidated statement of financial position as assets and liabilities of operations classified as held for sale respectively.

On 11 May 2010, the Group entered into an agreement to sell its healthcare business, Standard Life Healthcare Limited (refer to Note 3.16 - Events after the reporting period). It has therefore been classified as a discontinued operation. The assets and liabilities attributable to Standard Life Healthcare Limited as at 30 June 2010 are presented in the condensed consolidated statement of financial position as assets and liabilities of operations classified as held for sale respectively.

At 31 December 2009, assets and liabilities of operations classified as held for sale also include assets of £48m and liabilities of £42m respectively that are attributable to newly acquired subsidiaries classified as held for sale. The holdings in these subsidiaries were disposed of during the period to 30 June 2010.

Losses from discontinued operations of £17m (six months ended 30 June 2009: £32m profit; 12 months ended 31 December 2009: £49m profit) comprise £7m profit from Standard Life Healthcare Limited (six months ended 30 June 2009: £3m; 31 December 2009: £7m) and a loss of £24m arising from recycling losses previously recognised in the cash flow hedge reserve on the disposal of Standard Life Bank plc. Profits from discontinued operations for the six months ended 30 June 2009 and the 12 months ended 31 December 2009 include £29m and £42m profit from Standard Life Bank plc respectively, the figure for the 12 months to 31 December 2009 reflecting a £10m impairment charge recognised when the assets of the disposal group were classified as held for sale.

3.8    Operating profit

(a)        Short-term fluctuations in investment return and economic assumption changes

Operating profit is based on expected returns on investments backing equity holder funds and the difference between the expected return and actual return on investments is excluded from operating profit and presented within profit before tax. Adjustments are also made consistently to allow for expected movements in equity holder liabilities. As a result, the components of IFRS profit attributable to market movements and interest rate changes which give rise to variances between actual and expected investment returns, as well as the impact of changes in economic assumptions on equity holder liabilities, are excluded from operating profit and disclosed separately within the heading of short-term fluctuations in investment return and economic assumption changes.

The effects of non-economic experience variances and assumption changes are generally included in operating profit.

Methodology

Expected rates of return for debt securities, equity securities and property are determined separately for each of the Group's operations and are consistent with the expected rates of return as determined under the Group's published European Embedded Value (EEV) methodology.

The expected rates of return for equities and property, with the exception of the Canadian operations, are determined based on the gilt spot rates of an appropriate duration plus an equity risk premium or property risk premium, respectively. The expected rates of return on equities and property for Canadian operations are determined by the Appointed Actuary in Canada. 

The principal assumptions in respect of gross investment returns underlying the calculation of the expected investment return for equities and property are as follows:

	6 months 2010		6 months 2009		Full year 2009
	UK	Canada	UK	Canada	UK	Canada
	%	%	%	%	%	%
Equities	7.11	8.60	6.42	8.60	6.42	8.60
Property	6.11	8.60	5.42	8.60	5.42	8.60

3.8     Operating profit continued

(a)        Short-term fluctuations in investment return and economic assumption changes continued

In respect of debt securities, the expected rate of return is determined based on the average prospective yields for the debt securities actually held or, in respect of the Canadian operations, is determined by the Appointed Actuary in Canada.

Gains and losses on foreign exchange are deemed to represent short-term fluctuations in investment return and economic assumption changes and thus are excluded from operating profit.

Short-term fluctuations in investment return and economic assumption changes

Short-term fluctuations in investment return and economic assumption changes were as follows:

	6 months 2010	6 months 2009	Full year 2009
	£m	£m	£m
Short-term fluctuations in investment return and economic assumption changes	69	(186)	(214)

Short-term fluctuations in investment return relate principally to the investment volatility in the Group's Canadian non-segregated funds operations, UK annuities and in respect of the Group's subordinated liabilities and assets backing those liabilities.

(b)        Other operating profit adjustments

Volatility arising from changes in insurance and investment contract liabilities caused by changes in tax provisions in the Group's Canadian subsidiary was as follows:

	6 months 2010	6 months 2009	Full year 2009
	£m	£m	£m
Changes in insurance and investment contract liabilities caused by changes in tax provisions	6	1	13

This volatility has no impact on equity holder profit after tax and as such is excluded from IFRS operating profit before tax.

3.9    Issued share capital and shares held by trusts

(a)        Issued share capital

The movement in the issued share capital of the Company during the period was:

	6 months 2010	6 months 2010	6 months 2009	6 months 2009	Full year 2009	Full year 2009
	Number	£m	Number	£m	Number	£m
At start of period	2,236,292,157	224	2,177,799,354	218	2,177,799,354	218
Shares issued in lieu of cash dividends	21,942,218	2	32,080,285	3	55,018,211	6
Shares issued in respect of employee share plans	348,795	-	305,327	-	630,003	-
Shares issued in respect of share options	1,305,584	-	2,842,293	-	2,842,293	-
Demutualisation shares	490	-	-	-	449	-
Shares issued in respect of bonus issue	184	-	1,802	-	1,847	-
At end of period	2,259,889,428	226	2,213,029,061	221	2,236,292,157	224

During the six months ended 30 June 2010, 21,942,218 shares have been issued in respect of dividends declared in the period under the Scrip dividend scheme (six months ended 30 June 2009: 32,080,285; 12 months ended 31 December 2009: 55,018,211).

The Group operates share incentive plans, allowing employees the opportunity to buy shares from their salary each month. The maximum purchase that an employee can make in any one year is £1,500. The Group offers to match the first £25 of shares bought each month. During the six months ended 30 June 2010, the Company allotted 348,795 (six months ended 30 June 2009: 305,327; 12 months ended 31 December 2009: 630,003) ordinary shares to its employees under the share incentive plans.

The Group also operates a Long-Term Incentive Plan (LTIP) for executives and senior management.  During the six months ended 30 June 2010, 1,305,584 (six months ended 30 June 2009: 2,842,293; 12 months ended 31 December 2009: 2,842,293) ordinary shares were issued on exercise of share options in respect of the LTIP.

The Scheme of Demutualisation sets a 10-year limit, ending in 2016, for those eligible members of The Standard Life Assurance Company (SLAC) who were not allocated shares at the date of demutualisation to claim their entitlements. During the six months ended 30 June 2010, 490 ordinary shares were issued to eligible members in respect of their demutualisation entitlements (six months ended 30 June 2009: nil; 12 months ended 31 December 2009: 449).

As part of the offer on the demutualisation of SLAC and flotation of Standard Life plc, holders of demutualisation shares, employee shares or shares acquired in the preferential offer who retained their shares for a continuous period of one year from 10 July 2006 were entitled to one bonus share for every 20 shares. Equity holders who are entitled to bonus shares but were not allocated shares on 10 July 2007 have three years from 10 July 2007 to claim their entitlements. During the period ended 30 June 2010, a further 184 ordinary shares were issued to equity holders entitled to receive bonus shares (six months ended 30 June 2009: 1,802; 12 months ended 31 December 2009: 1,847).

(b)       Shares held by trusts

The Employee Share Trust (EST) purchases and holds shares of the Group for delivery to employees under various employee share schemes. Shares purchased by the EST are recognised at cost in the condensed consolidated statement of financial position and are presented as a deduction from equity. Share-based liabilities to employees may also be settled by the issue of new shares.

Shares held by trusts also include shares held by the Unclaimed Asset Trust (UAT), along with the corresponding obligation to deliver a fixed number of the Group's own equity instruments. The shares held by the UAT are those not yet claimed by the eligible members of the Standard Life Assurance Company following its demutualisation on 10 July 2006.

8,817,384 shares were held by trusts at 30 June 2010 (30 June 2009: nil; 31 December 2009: nil), with a total cost of £18m (30 June 2009: £nil; 31 December 2009: £nil).

3.10 Insurance contract liabilities, non-participating investment contract liabilities, participating investment contract liabilities and reinsurance assets

		30 June 2010	30 June 2009	31 December 2009
	Notes	£m	£m	£m
Non-participating insurance contract liabilities		23,344	19,241	22,164
Non-participating investment contract liabilities		65,554	52,573	63,728
Total non-participating contract liabilities		88,898	71,814	85,892
Less: Non-participating insurance contracts classified as held for sale1	3.7	(157)	-	-
Non-participating contract liabilities		88,741	71,814	85,892
Participating insurance contract liabilities		16,654	15,663	16,568
Participating investment contract liabilities		15,008	14,697	14,993
Unallocated divisible surplus		757	792	791
Participating contract liabilities		32,419	31,152	32,352

¹   Non-participating contract liabilities classified as held for sale are attributable to Standard Life Healthcare.

Non-participating insurance contracts include £4m (30 June 2009: £4m; 31 December 2009: £3m) relating to general insurance.

Due to changes in economic and non-economic factors certain assumptions used in estimating insurance and investment contract liabilities have been revised. Therefore, the change in liabilities reflects actual performance over the period, changes in assumptions and, to a limited extent, improvements in modelling techniques.

3.10 Insurance contract liabilities, non-participating investment contract liabilities, participating investment contract liabilities and reinsurance assets continued

The movements in participating and non-participating insurance and investment contracts and reinsurers' share of liabilities during the six months ended 30 June 2010 arising from changes in estimates are set out below:

	Participating insurance contract liabilities	Non-participating insurance contract liabilities	Participating investment contract liabilities	Non-participating investment contract liabilities	Reinsurers' share of liabilities (reinsurance asset)	Net
	£m	£m	£m	£m	£m	£m
Changes in:
Methodology/modelling changes	2	20	(1)	-	(1)	20
Non-economic assumptions	-	2	-	-	-	2
Economic assumptions	(34)	672	27	-	(283)	382

The movements in participating and non-participating insurance and investment contracts and reinsurers' share of liabilities during the six months ended 30 June 2009 arising from changes in estimates are set out below:

	Participating insurance contract liabilities	Non-participating insurance contract liabilities	Participating investment contract liabilities	Non-participating investment contract liabilities	Reinsurers' share of liabilities (reinsurance asset)	Net
	£m	£m	£m	£m	£m	£m
Changes in:
Methodology/modelling changes	(42)	53	4	-	(94)	(79)
Non-economic assumptions	(1)	-	(4)	-	-	(5)
Economic assumptions	(190)	(164)	67	-	(47)	(334)

The movement in insurance contract liabilities, participating investment contracts and reinsurance assets during 2009 was as follows:

	Participating insurance contract liabilities	Non-participating insurance contract liabilities	Participating investment contract liabilities	Total insurance and participating contracts	Reinsurers' share of liabilities (reinsurance asset)	Net
	£m	£m	£m	£m	£m	£m
At 1 January 2009	17,625	19,635	15,674	52,934	(6,076)	46,858
Expected change	(627)	(379)	(828)	(1,834)	184	(1,650)
Methodology/modelling changes	(17)	(70)	(12)	(99)	(27)	(126)
Effect of changes in:
Economic assumptions	(311)	1,759	(268)	1,180	(1,117)	63
Non-economic assumptions	(22)	(90)	-	(112)	52	(60)
Effect of:
Economic experience	205	593	133	931	(25)	906
Non-economic experience	(21)	(324)	272	(73)	(4)	(77)
New business	38	777	110	925	(5)	920
Total change in contract liabilities	(755)	2,266	(593)	918	(942)	(24)
Foreign exchange adjustment	(302)	276	(88)	(114)	(14)	(128)
Movements attributable to discontinued healthcare operations1	-	(13)	-	(13)	-	(13)
At 31 December 2009	16,568	22,164	14,993	53,725	(7,032)	46,693

¹    On 11 May 2010, the Group entered into an agreement to sell its healthcare business, Standard Life Healthcare Limited. Refer to Note 3.7 - Discontinued operations. 

The change in non-participating investment contract liabilities during the year ended 31 December 2009 was as follows:

	£m
At 1 January 2009	52,273
Contributions	8,997
Initial charges and reduced allocations	(21)
Account balances paid on surrender and other terminations in the year	(6,682)
Investment return credited and related benefits	9,088
Foreign exchange adjustment	376
Recurring management charges	(303)
At 31 December 2009	63,728

3.11   Borrowings

		30 June 2010	30 June 2009	31 December 2009
		£m	£m	£m
Certificates of deposit, commercial paper and medium term notes		-	1,034	816
Securitisations - mortgage backed floating rate notes		-	2,126	1,967
Bank overdrafts		148	86	87
Other		151	147	140
Total borrowings		299	3,393	3,010
Less: Borrowings classified as held for sale		-	-	(2,783)
Borrowings		299	3,393	227

The amounts included as at 30 June 2009 and 31 December 2009 in Certificates of deposit, commercial paper and medium term notes and Securitisations - mortgage backed floating rate notes are wholly attributable to Standard Life Bank. Following the sale of Standard Life Bank on 1 January 2010, the 31 December 2009 balances were reclassified as held for sale.

3.12   Defined benefit and defined contribution plans

(a)        Analysis of amounts recognised in the condensed consolidated income statement

The amounts recognised in the condensed consolidated income statement for defined contribution and defined benefit schemes are as follows:

		6 months 2010	6 months 2009	Full year 2009
		£m	£m	£m
Current service cost		(34)	(27)	(53)
Interest cost on benefit obligation		(55)	(47)	(93)
Expected return on plan assets		59	46	91
Past service cost		-	(1)	1
Gains on curtailment		-	-	4
Expense recognised in the condensed consolidated income statement		(30)	(29)	(50)

3.12   Defined benefit and defined contribution plans continued

(b)        Analysis of amounts recognised in the condensed statement of financial position

The present value of the defined benefit obligation less the fair value of gross scheme assets is as follows:

	30 June 2010				30 June 2009				31 December 2009
	UK	Canada	Ireland	Total	UK	Canada	Ireland	Total	UK	Canada	Ireland	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Present value of funded obligation	(1,712)	(162)	(40)	(1,914)	(1,451)	(117)	(54)	(1,622)	(1,700)	(135)	(43)	(1,878)
Present value of unfunded obligation	-	(48)	-	(48)	-	(35)	-	(35)	-	(41)	-	(41)
Fair value of plan assets	1,833	152	45	2,030	1,398	120	40	1,558	1,644	144	48	1,836
Adjustment for unrecognised past service costs	-	(6)	-	(6)	-	(5)	-	(5)	-	(6)	-	(6)
Net asset/(liability) in the condensed consolidated statement of financial position	121	(64)	5	62	(53)	(37)	(14)	(104)	(56)	(38)	5	(89)

The Group also recognises a net liability of £5m (30 June 2009: £4m; 31 December 2009: £5m) arising from a scheme with a total defined benefit obligation of £5m (30 June 2009: £4m; 31 December 2009: £5m) administered for the benefit of employees in Germany, resulting in a net asset of £57m (30 June 2009: liability of £108m; 31 December 2009: liability of £94m). The condensed consolidated statement of financial position presents any net scheme assets within 'Other assets' and any net scheme liabilities within 'Other liabilities'.

(c)        Principal assumptions

The principal economic assumptions used in determining pension benefit obligation for the Group's plans are as follows:

	30 June 2010			30 June 2009			31 December 2009
	UK	Canada	Ireland	UK	Canada	Ireland	UK	Canada	Ireland
	%	%	%	%	%	%	%	%	%
Rate of increase in salaries	4.55-5.55	3.50	3.50	4.85-5.85	3.50	4.83	4.80-5.80	3.50	3.50
Rate of increase in pensions	3.55	1.33	1.00	3.85	1.33	2.00	3.80	1.33	1.00
Discount rate	5.45	5.70	6.00	6.20	6.25	5.75	5.60	6.25	6.00
Inflation assumption	3.55	2.00	2.00	3.85	2.00	2.00	3.80	2.00	2.00
Expected return on plan assets	6.30	7.00	5.93	5.50	7.00	5.93	6.30	7.00	5.93

3.13 Related party transactions

(a)        Transactions with/from related parties

Transactions with related parties carried out by the Group were as follows:

		6 months 2010	6 months 2009	Full year 2009
		£m	£m	£m
Sale to:
Associates		5,798	8,186	11,607
Joint ventures		2	-	2
		5,800	8,186	11,609
Purchase from:
Associates		6,320	6,928	10,907
Joint ventures		25	70	100
		6,345	6,998	11,007

Transactions with associates presented above relate primarily to the sales and purchases of holdings in investment funds managed by the Group.

In addition to the amounts shown above, the Group's defined benefit pension schemes have assets of £532m (30 June 2009: £384m; 31 December 2009: £528m) invested in investment vehicles managed by the Group.

(b)        Transactions with key management personnel

All transactions between key management personnel and the Group are on commercial terms which are equivalent to those available to all employees of the Group.

During the six months ended 30 June 2010, the key management contributed £1.4m (six months ended 30 June 2009: £10.5m; 12 months ended 31 December 2009: £11.1m) to products sold by the Group.

3.14 Contingent liabilities, indemnities and guarantees

(a)        Legal proceedings and regulations

The Group, like other financial organisations, is subject to legal proceedings and complaints in the normal course of its business. While it is not practicable to forecast or determine the final results of all pending or threatened legal proceedings, the Directors do not believe that such proceedings (including litigations) will have a material effect on the results and financial position of the Group.

The Group is subject to insurance solvency regulations in all the territories in which it issues insurance and investment contracts, and it has complied in material respects with local solvency and other regulations. Therefore, there are no contingencies in respect of these regulations.

(b)        Issued share capital

The Scheme of Demutualisation sets a 10-year time limit, ending in 2016, for those eligible members of The Standard Life Assurance Company who were not allocated shares at the date of demutualisation to claim their entitlements. As future issues of these shares are dependent upon the actions of eligible members, it is not practical to estimate the financial effect of this potential obligation.

(c)        Other

In the ordinary course of business, Standard Life Trust Company enters into agreements which contain guarantee provisions for clearing system arrangements related to investment activities. Under such arrangements, the company, together with other participants in the clearing systems, may be required to guarantee certain obligations of a defaulting member. The guarantee provisions and amounts vary based upon the agreement. The company cannot estimate the amount, if any, that may be payable upon default. To facilitate its participation in the clearing system, Standard Life Trust Company has provided as security a bank credit facility up to a maximum of CA$84m.

3.15   Commitments

(a)        Capital commitments

As at 30 June 2010, capital expenditure that was authorised and contracted for, but not provided and incurred, was £310m (30 June 2009: £364m; 31 December 2009: £296m) in respect of investment properties.

Of this amount, £289m (30 June 2009: £351m; 31 December 2009: £283m) and £21m (30 June 2009: £13m; 31 December 2009: £13m) relates to the contractual obligations to purchase, construct or develop investment property and repair, maintain or enhance investment property respectively.

(b)        Unrecognised financial instruments

As at 30 June 2010, the Group had committed the following unrecognised financial instruments to customers and third parties:

		30 June 2010	30 June 2009	31 December 2009
		£m	£m	£m
Guarantees and standby letters of credit		3	3	3
Commitments to extend credit:
Original term to maturity of less than one year		22	9	112
Original term to maturity of more than one year		7	2,041	1,859
Other commitments		384	737	715

Guarantees and letters of credit include guarantees in relation to the Group's Canadian operations. These guarantees are considered to be financial guarantee contracts under IAS 39 Financial Instruments: Recognition and Measurement.

Included in 'Other commitments' is £364m (30 June 2009: £718m; 31 December 2009: £696m) committed by certain subsidiaries which are not fully owned by the Group. These commitments are funded through (contractually agreed) additional investments in the subsidiary by the Group and the non-controlling interests. The levels of funding are not necessarily in line with the relevant percentage holdings.

The commitments to extend credit with an original term to maturity of more than one year as at 30 June 2009 and 31 December 2009 were primarily in respect of the Group's banking business, Standard Life Bank plc, which was sold on 1 January 2010. 

3.16 Events after the reporting period

On 11 May 2010, the Group entered into an agreement to sell its healthcare business, Standard Life Healthcare Limited. The Group's decision to sell Standard Life Healthcare was primarily driven by the view that the Group's focus is on the long-term savings and investments market and as a result the manufacturing of private medical insurance is not core to its UK strategy. The sale took place on 31 July 2010 with consideration of £138m, which is subject to adjustments resulting from conclusion of the signing balance sheet of Standard Life Healthcare.

As a result of entering into the disposal agreement, the assets and liabilities of Standard Life Healthcare as at 30 June 2010 have been classified as held for sale.

As a result of a statutory pension fund valuation carried out under Section 75 of the Pensions Act 1995, a payment of £15m will be made by Standard Life Healthcare to the Standard Life UK staff pension scheme. As part of the disposal agreement, a corresponding payment of £14m will be made by Standard Life plc to the purchaser of Standard Life Healthcare after completion.

 

END

 

 

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