Half-year Report part 2
Statement of Directors' responsibilities in respect of the interim financial statements
For the six month period ended 30 June 2019
Each of the Directors of Quilter plc confirms to the best of his or her knowledge and belief that:
· The condensed set of consolidated financial statements, which comprises the consolidated income statement and statement of comprehensive income, reconciliation of adjusted profit to profit after tax, consolidated statement of changes in equity, consolidated statement of financial position, consolidated statement of cash flows and the related explanatory notes, has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union.
· The interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of consolidated financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the Group's 31 December 2018 annual report and accounts, that could do so.
As per provision C1 of the UK Corporate Governance Code, the results for the half year 2019 results taken as a whole, present a fair, balanced and understandable position of the Company's prospects.
Paul Feeney Mark Satchel
Chief Executive Officer Chief Financial Officer
4 August 2019 4 August 2019
Independent review report to the members of Quilter plc
For the six month period ended 30 June 2019
Conclusion
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 which comprises the consolidated income statement and statement of comprehensive income, reconciliation of adjusted profit to profit after tax, consolidated statement of changes in equity, consolidated statement of financial position, the consolidated statement of cash flows and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ('the DTR') of the UK's Financial Conduct Authority ('the UK FCA').
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
The impact of uncertainties due to the UK exiting the European Union on our review
Uncertainties related to the effects of Brexit are relevant to understanding our review of the condensed financial statements. Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty of outcomes, with the full range of possible effects unknown. An interim review cannot be expected to predict the unknowable factors or all possible future implications for a company and this is particularly the case in relation to Brexit.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
Jonathan Mills
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
4 August 2019
|
Consolidated income statement |
|
|
||
|
For the six month period ended 30 June 2019 |
|
|
|
|
|
|
|
|
|
£m |
|
|
Notes |
Six months 2019¹ |
Six months 2018 |
Full year 2018 |
|
Revenue |
|
|
|
|
|
Gross earned premiums |
|
1 |
1 |
1 |
|
Premiums ceded to reinsurers |
|
(1) |
(1) |
(1) |
|
Net earned premiums |
|
- |
- |
- |
|
Fee income and other income from service activities |
5(d) |
450 |
475 |
954 |
|
Investment return |
|
5,043 |
288 |
(2,712) |
|
Other income |
|
21 |
9 |
35 |
|
Total revenue |
|
5,514 |
772 |
(1,723) |
|
Expenses |
|
|
|
|
|
Insurance contract claims and changes in liabilities |
|
- |
- |
(1) |
|
Change in investment contract liabilities |
17(b) |
(4,348) |
(190) |
2,499 |
|
Fee and commission expenses, and other acquisition costs |
|
(190) |
(209) |
(398) |
|
Change in third party interest in consolidated funds |
|
(586) |
3 |
369 |
|
Other operating and administrative expenses |
|
(344) |
(369) |
(722) |
|
Finance costs |
|
(8) |
(10) |
(16) |
|
Total expenses |
|
(5,476) |
(775) |
1,731 |
|
Profit/(loss) before tax from continuing operations |
|
38 |
(3) |
8 |
|
Tax (expense)/credit attributable to policyholder returns |
|
(78) |
3 |
61 |
|
(Loss)/profit before tax attributable to equity holders |
|
(40) |
- |
69 |
|
Income tax (expense)/credit |
7(a) |
(70) |
5 |
81 |
|
Less: tax expense/(credit) attributable to policyholder returns |
|
78 |
(3) |
(61) |
|
Tax credit attributable to equity holders |
|
8 |
2 |
20 |
|
(Loss)/profit after tax from continuing operations |
|
(32) |
2 |
89 |
|
Profit after tax from discontinued operations |
4(c) |
15 |
340 |
399 |
|
(Loss)/profit after tax |
|
(17) |
342 |
488 |
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Equity holders of Quilter plc |
|
(17) |
342 |
488 |
|
|
|
|
|
|
|
Earnings per ordinary share on profit attributable to ordinary shareholders of Quilter plc |
||||
|
Basic |
|
|
|
|
|
From continuing operations (pence) |
8(b) |
(1.7) |
0.1 |
4.8 |
|
From discontinued operations (pence) |
4(c) |
0.8 |
18.6 |
21.8 |
|
Basic earnings per ordinary share (pence) |
8(b) |
(0.9) |
18.7 |
26.6 |
|
Diluted |
|
|
|
|
|
From continuing operations (pence) |
8(b) |
(1.7) |
0.1 |
4.8 |
|
From discontinued operations (pence) |
4(c) |
0.8 |
18.6 |
21.7 |
|
Diluted earnings per ordinary share (pence) |
8(b) |
(0.9) |
18.7 |
26.5 |
1The 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 six month period ended 30 June 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
Note |
Six months 2019 |
Six months 2018 |
Full year 2018 |
|
(Loss)/profit after tax |
|
(17) |
342 |
488 |
|
Other comprehensive income: |
|
|
|
|
|
Items that may be reclassified subsequently to income statement |
|
- |
(1) |
- |
|
Total comprehensive (expense)/income |
|
(17) |
341 |
488 |
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Continuing operations |
|
(32) |
1 |
89 |
|
Discontinued operations |
4(d) |
15 |
340 |
399 |
|
Equity holders of Quilter plc |
|
(17) |
341 |
48 |
|
Reconciliation of adjusted profit to profit after tax |
||||||||||
|
For the six month period ended 30 June 2019 |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
|
|
Six months 2019 |
|
Six months 2018 |
|
Full year 2018 |
|||
|
|
Notes |
Continuing operations |
Discontinued operations¹ |
Total |
Continuing operations |
Discontinued operations¹ |
Total |
Continuing operations |
Discontinued operations¹ |
Total |
|
Advice and Wealth Management |
|
50 |
- |
50 |
47 |
26 |
73 |
102 |
26 |
128 |
|
Wealth Platforms |
|
56 |
26 |
82 |
56 |
27 |
83 |
105 |
57 |
162 |
|
Head Office |
|
(17) |
- |
(17) |
(20) |
- |
(20) |
(31) |
- |
(31) |
|
Adjusted profit before tax |
5(b) |
89 |
26 |
115 |
83 |
53 |
136 |
176 |
83 |
259 |
|
Adjusted for the following: |
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairment and impact of acquisition accounting |
6(a) |
(26) |
- |
(26) |
(28) |
- |
(28) |
(50) |
- |
(50) |
|
Profit on business disposals |
4(b) |
- |
- |
- |
- |
285 |
285 |
- |
290 |
290 |
|
Business transformation costs |
6(b) |
(35) |
- |
(35) |
(37) |
- |
(37) |
(84) |
- |
(84) |
|
Managed Separation costs |
6(c) |
(2) |
- |
(2) |
(17) |
- |
(17) |
(24) |
- |
(24) |
|
Finance costs |
6(d) |
(5) |
- |
(5) |
(8) |
- |
(8) |
(13) |
- |
(13) |
|
Policyholder tax adjustments |
6(e) |
(61) |
(15) |
(76) |
7 |
8 |
15 |
64 |
37 |
101 |
|
Voluntary customer remediation provision |
6(f) |
- |
6 |
6 |
- |
- |
- |
- |
- |
- |
|
Total adjusting items before tax |
|
(129) |
(9) |
(138) |
(83) |
293 |
210 |
(107) |
327 |
220 |
|
Profit/(Loss) before tax |
|
(40) |
17 |
(23) |
- |
346 |
346 |
69 |
410 |
479 |
|
Tax attributable to policyholder returns |
|
78 |
59 |
137 |
(3) |
(15) |
(18) |
(61) |
(97) |
(158) |
|
Income tax (expense)/credit |
7(b) |
(70) |
(61) |
(131) |
5 |
9 |
14 |
81 |
86 |
167 |
|
Profit/(Loss) after tax |
|
(32) |
15 |
(17) |
2 |
340 |
342 |
89 |
399 |
488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per share |
||||||||||
|
|
Notes |
Continuing operations |
Discontinued operations¹ |
Total |
Continuing operations |
Discontinued operations¹ |
Total |
Continuing operations |
Discontinued operations¹ |
Total |
|
Adjusted profit before tax |
|
89 |
26 |
115 |
83 |
53 |
136 |
176 |
83 |
259 |
|
Shareholder tax on adjusted profit |
7(c) |
(13) |
- |
(13) |
(9) |
(6) |
(15) |
(13) |
2 |
(11) |
|
Adjusted profit after tax |
8(b) |
76 |
26 |
102 |
74 |
47 |
121 |
163 |
85 |
248 |
|
Basic weighted average number of ordinary shares (millions) |
8(a) |
|
|
1,834 |
|
|
1,830 |
|
|
1,832 |
|
Adjusted basic earnings per share (pence) |
8(b) |
4.1 |
1.5 |
5.6 |
4.0 |
2.6 |
6.6 |
8.9 |
4.6 |
13.5 |
|
Diluted weighted average number of ordinary shares (millions) |
8(a) |
|
|
1,852 |
|
|
1,830 |
|
|
1,839 |
|
Adjusted diluted earnings per share (pence) |
8(b) |
4.1 |
1.4 |
5.5 |
4.0 |
2.6 |
6.6 |
8.9 |
4.6 |
13.5 |
1Discontinued operations for the six months and full year 2018 includes the results of Quilter Life Assurance ('QLA') and the Single Strategy business. Six months 2019 is QLA only. A breakdown of these businesses is included in the 'Review of Financial Performance'. For further details of the Group's segmentation see note 5.
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 specific agreed items as detailed in note 6.
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 interest costs on external borrowings. Adjusted profit also treats policyholder tax as a pre-tax charge (to offset against the related income collected from policyholders), though adjusted to remove the impact of non-operating tax items. Full details of the Group's adjusting items are described in note 6.
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 Committee assesses refinements to the policy on a case-by-case basis, and, where possible, the Group seeks to minimise such changes in order to maintain consistency over time.
The attached notes on pages 37 to 74 form an integral part of these condensed consolidated interim financial statements.
|
Consolidated statement of changes in equity |
||||||||
|
For the six month period ended 30 June 2019 |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
||
|
30 June 2019 |
Notes |
Share capital |
Share premium |
Merger reserve |
Share-based payments reserve |
Other reserves |
Retained earnings |
Total share- holders' equity |
|
Shareholders' equity at beginning of the period |
|
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 |
|
(Loss) for the period |
|
- |
- |
- |
- |
- |
(17) |
(17) |
|
Total comprehensive (expense) |
- |
- |
- |
- |
- |
(17) |
(17) |
|
|
Dividends |
9 |
- |
- |
- |
- |
- |
(61) |
(61) |
|
Movement in treasury shares |
|
- |
- |
- |
- |
- |
(1) |
(1) |
|
Equity share-based payment transactions2 |
16 |
- |
- |
- |
5 |
- |
8 |
13 |
|
Total transactions with the owners of the Company |
- |
- |
- |
5 |
- |
(54) |
(49) |
|
|
Balance at 30 June 2019 |
|
133 |
58 |
588 |
39 |
1 |
1,115 |
1,934 |
|
30 June 2018 |
Notes |
Share capital |
Share premium |
Merger reserve |
Share-based payments reserve |
Other reserves |
Retained earnings |
Total share- holders' equity |
|
Balance at 1 January 2018 |
|
130 |
58 |
- |
38 |
1 |
872 |
1,099 |
|
Profit for the period |
|
- |
- |
- |
- |
- |
342 |
342 |
|
Other comprehensive income/(expense) |
|
- |
- |
- |
1 |
- |
(2) |
(1) |
|
Total comprehensive income |
- |
- |
- |
1 |
- |
340 |
341 |
|
|
Acquisition of entities due to managed separation restructure3 |
|
- |
- |
591 |
- |
- |
- |
591 |
|
Issue of share capital |
|
3 |
- |
(3) |
- |
- |
- |
- |
|
Movement in treasury shares |
|
- |
- |
- |
- |
- |
1 |
1 |
|
Equity share-based payment transactions2 |
16 |
- |
- |
- |
(2) |
- |
30 |
28 |
|
Change in participation in subsidiaries |
|
- |
- |
- |
(12) |
- |
12 |
- |
|
Total transactions with the owners of the Company |
3 |
- |
588 |
(14) |
- |
43 |
620 |
|
|
Balance at 30 June 2018 |
|
133 |
58 |
588 |
25 |
1 |
1,255 |
2,060 |
|
31 December 2018 |
Notes |
Share capital |
Share premium |
Merger reserve |
Share-based payments reserve |
Other reserves |
Retained earnings |
Total share- holders' equity |
|
Balance at 1 January 2018 |
|
130 |
58 |
- |
38 |
1 |
872 |
1,099 |
|
Profit for the period |
|
- |
- |
- |
- |
- |
488 |
488 |
|
Total comprehensive income |
|
- |
- |
- |
- |
- |
488 |
488 |
|
Dividends |
9 |
- |
- |
- |
- |
- |
(221) |
(221) |
|
Acquisition of entities due to managed separation restructure3 |
|
- |
- |
591 |
- |
- |
- |
591 |
|
Issue of share capital |
|
3 |
- |
(3) |
- |
- |
- |
- |
|
Movement in treasury shares |
|
- |
- |
- |
- |
- |
5 |
5 |
|
Equity share-based payment transactions2 |
16 |
- |
- |
- |
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 |
1The 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.
2Equity-settled share-based payment transactions includes £13 million of IFRS 2 costs (June 2018: £13 million; December 2018: £27 million) and an £8 million transfer to retained earnings representing share-based payment schemes that have fully vested (June 2018: £30 million; December 2018: £35 million). June and December 2018 also include £15 million previously recognised within liabilities transferred to equity, including cash awards that were converted to equity-settled awards.
3Acquisition of Skandia UK Ltd group of entities from Old Mutual plc, comprising of seven entities with a net asset value of £591 million. The transfer was effected by the issue of one share and with the balance giving rise to a merger reserve of £591 million in the consolidated statement of financial position. Further details of this transaction are included within the Group's 2018 Annual Report and Accounts ('ARA').
The attached notes on pages 37 to 74 form an integral part of these condensed consolidated interim financial statements.
|
Consolidated statement of financial position |
||||
|
At 30 June 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
Notes |
30 June 2019¹ |
30 June 2018 |
31 December 2018 |
|
Assets |
|
|
|
|
|
Goodwill and intangible assets |
10 |
587 |
566 |
550 |
|
Property, plant and equipment2 |
11 |
89 |
17 |
17 |
|
Investments in associated undertakings |
|
2 |
1 |
2 |
|
Deferred acquisition costs |
|
- |
12 |
11 |
|
Contract costs |
|
477 |
575 |
551 |
|
Contract assets |
|
45 |
45 |
44 |
|
Loans and advances |
|
220 |
219 |
222 |
|
Financial investments |
12 |
56,423 |
64,569 |
59,219 |
|
Reinsurers' share of policyholder liabilities |
17 |
- |
2,666 |
2,162 |
|
Deferred tax assets |
|
32 |
19 |
38 |
|
Current tax receivable |
|
16 |
3 |
47 |
|
Trade, other receivables and other assets |
|
1,353 |
1,437 |
486 |
|
Derivative assets |
|
24 |
33 |
46 |
|
Cash and cash equivalents |
15 |
1,944 |
3,375 |
2,395 |
|
Assets of operations classified as held for sale |
4(f) |
12,317 |
- |
- |
|
Total assets |
|
73,529 |
73,537 |
65,790 |
|
|
|
|
|
|
|
Equity and liabilities |
|
|
|
|
|
Equity |
|
|
|
|
|
Ordinary share capital |
|
133 |
133 |
133 |
|
Ordinary share premium reserve |
|
58 |
58 |
58 |
|
Merger reserve |
|
588 |
588 |
588 |
|
Share-based payments reserve |
|
39 |
25 |
34 |
|
Other reserves |
|
1 |
1 |
1 |
|
Retained earnings |
|
1,115 |
1,255 |
1,191 |
|
Total equity |
|
1,934 |
2,060 |
2,005 |
|
Liabilities |
|
|
|
|
|
Long-term business insurance policyholder liabilities |
17 |
- |
513 |
602 |
|
Investment contract liabilities |
17 |
50,286 |
60,140 |
56,450 |
|
Third-party interests in consolidated funds |
|
6,972 |
8,105 |
5,116 |
|
Provisions |
18 |
45 |
115 |
94 |
|
Deferred tax liabilities |
|
91 |
164 |
59 |
|
Current tax payable |
|
4 |
12 |
5 |
|
Borrowings and lease liabilities2 |
|
280 |
197 |
197 |
|
Trade, other payables and other liabilities |
|
1,720 |
1,937 |
999 |
|
Contract liabilities |
|
192 |
235 |
226 |
|
Derivative liabilities |
|
24 |
59 |
37 |
|
Liabilities of operations classified as held for sale |
4(f) |
11,981 |
- |
- |
|
Total liabilities |
|
71,595 |
71,477 |
63,785 |
|
Total equity and liabilities |
|
73,529 |
73,537 |
65,790 |
1The 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.
2Following 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.
Approved by the Board on 4 August 2019.
Paul Feeney Mark Satchel
Chief Executive Officer Chief Financial Officer
The attached notes on pages 37 to 74 form an integral part of these condensed consolidated interim financial statements.
|
Consolidated statement of cash flows |
||||
|
For the six month period ended 30 June 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 include 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. |
||||
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
Notes |
Six months 2019 |
Six months 20182 |
Full year 2018 |
|
Cash flows from operating activities |
|
|
|
|
|
Profit before tax from continuing operations |
|
38 |
17 |
5 |
|
Profit before tax from discontinued operations |
4(c) |
76 |
311 |
316 |
|
Non-cash movements in profit before tax |
|
(647) |
637 |
584 |
|
Net changes in working capital |
|
(92) |
(603) |
(669) |
|
Taxation paid |
|
(10) |
(70) |
(92) |
|
Total net cash flows (used in)/from operating activities |
|
(635) |
292 |
144 |
|
Cash flows from investing activities |
|
|
|
|
|
Net disposals/(acquisitions) of financial investments |
|
707 |
227 |
(366) |
|
Acquisition of property, plant and equipment |
|
(4) |
(2) |
(7) |
|
Acquisition of intangible assets |
|
(4) |
(2) |
(4) |
|
Acquisition of interests in subsidiaries |
|
(69) |
(2) |
(5) |
|
Cash added from acquisitions of subsidiaries |
|
8 |
25 |
25 |
|
Net proceeds from the disposal of interests in subsidiaries |
|
- |
350 |
350 |
|
Total net cash from/(used in) investing activities |
|
638 |
596 |
(7) |
|
Cash flows from financing activities |
|
|
|
|
|
Dividends paid to ordinary equity holders of the Company |
|
(61) |
- |
(221) |
|
Finance costs on external borrowings |
|
(5) |
(3) |
(8) |
|
Payment of lease liabilities1 |
|
(8) |
- |
- |
|
Proceeds from issue of subordinated and other debt |
|
- |
497 |
497 |
|
Subordinated and other debt repaid |
|
- |
(516) |
(516) |
|
Total net cash used in financing activities |
|
(74) |
(22) |
(248) |
|
Net increase in cash and cash equivalents |
|
(71) |
866 |
(111) |
|
Cash and cash equivalents at beginning of the year |
|
2,395 |
2,507 |
2,507 |
|
Effects of exchange rate changes on cash and cash equivalents |
|
1 |
2 |
(1) |
|
Cash and cash equivalents at end of the period |
15 |
2,325 |
3,375 |
2,395 |
1The 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.
2A number of items within the six months 2018 comparatives have been reclassified to align with the presentation within the six months 2019 and full year 2018 cash flow statement. There was no impact on cash and cash equivalents resulting from these reclassifications.
Basis of preparation and significant accounting policies
For the six month period ended 30 June 2019
General Information
Quilter plc (the 'Company'), a public limited company incorporated and domiciled in the United Kingdom ('UK'), together with its subsidiary undertakings (collectively, the 'Group') offers investment and wealth management services, life assurance, 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.
1: Basis of preparation
The results for the six months ended 30 June 2019 have been prepared in accordance with IAS 34 Interim Financial Reporting issued by the International Accounting Standards Board, as adopted by the European Union ('EU'), and are unaudited but have been reviewed by the Auditor, KPMG LLP. These condensed consolidated interim financial statements ('interim financial statements') of Quilter plc for the six months ended 30 June 2019 do not constitute statutory accounts as defined by section 434 of the Companies Act 2006. Comparative financial information for full year 2018 have been taken from the Group's 2018 Annual Report and Accounts ('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.
These interim financial statements do not include all of the information required for a complete set of International Financial Reporting Standards ('IFRS') compliant financial statements. Selected notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the publication of the Group's 2018 ARA. The Board believes that the Alternative Performance Measures ('APMs') provided, such as adjusted profit, are also useful for both management and investors. Any seasonal or cyclical factors, to the extent that they materially impact the Group's results, are described in the Financial Review.
This is the first set of the Group's financial statements where IFRS 16 Leases and IFRIC 23 Uncertainty over Income Tax Treatments have been applied. Any changes in significant accounting policies to reflect these new standards are explained in note 3. All other accounting policies for recognition, measurement, consolidation and presentation are as outlined in the Group's 2018 ARA. These interim financial statements have been prepared on a historical cost basis, except for the revaluation of certain financial instruments (see note 14 for further details), 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 any mitigating strategies. 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 has sufficient financial resources to continue in business for a period of at least 12 months from the date of approval of these interim financial statements. Therefore, the Group continues to adopt the going concern basis in preparing the interim financial statements.
Critical accounting estimates and judgements
In preparing these interim financial statements, management has made estimates and judgements that affect the amounts of assets and liabilities, income and expense reported, as well as the application of the Group's accounting policies. The critical areas of accounting estimates and judgements are the same as those disclosed in the 2018 ARA, with the exception of new judgements and key sources of estimation uncertainty introduced through applying IFRS 16 for the first time, which are explained in more detail in note 3, and updated estimations applied to the measurement of the voluntary customer remediation provision as the programme has progressed, detailed in note 18: Provisions.
During the period, the Group has exercised its judgement in line with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations and has recognised the Quilter Life Assurance ('QLA') business as a discontinued operation, restating comparatives accordingly. QLA represents a separate major line of business, representing the Group's closed book of legacy business and comprising 16% of the Group's total assets at June 2019.
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 will not restate comparative amounts for the period prior to first adoption. The impact of adopting this new standard is outlined in note 3.
The Group adopted IFRIC 23 Uncertainty over Income Tax Treatments for the accounting period beginning on 1 January 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. All tax provisions for the Group continue to be calculated consistent with IAS 12 Income taxes and provisions in respect of any uncertain tax positions have been calculated consistent with IFRIC 23. No adjustments to tax balances have resulted from the adoption of IFRIC 23.
Other standards
In addition to IFRS 16 and IFRIC 23 there have been a number of amendments to the accounting standards issued by the IASB and endorsed by the EU that became mandatory during 2019. The Group has evaluated these changes and none have a significant impact on the interim financial statements.
3: Significant accounting policies
Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the Group's 2018 ARA.
In disclosing the QLA business within discontinued operations as explained in note 1, operating and administration expenses shown within discontinued operations represent the costs recorded within the accounts of those discontinued businesses in the relevant periods as recorded in the Group's results, and have not been adjusted or restated. See note 4(c) for further information.
Changes in significant accounting policies
The changes in accounting policies outlined below are also expected to be reflected in the Group's consolidated financial statements as at and for the year ending 31 December 2019.
IFRS 16 Leases
As outlined in note 2 above, the Group has adopted IFRS 16 Leases from 1 January 2019.
3: Significant accounting policies continued
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess where a contract conveys the right to control the use of an identified asset, the Group assesses whether:
• the contract involves the use of an identified asset which may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;
• the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
• the Group has the right to direct the use of the asset.
On transition to IFRS 16, the Group elected to apply the following practical expedients:
• apply a single discount rate to a portfolio of leases with similar characteristics;
• not recognise right-of-use assets and lease liabilities for contracts with a term of 12 months or less, or leases for low value items;
• use hindsight when determining the lease term if the contract contains options to extend or terminate the lease; and
• not reassess contracts originally deemed to not be a lease contract under IAS 17 Leases and IFRIC 4 Determining whether an arrangement contains a lease.
For lessee contracts, the right-of-use asset is initially measured at cost, which comprises the initial amount of lease liability, adjusted for any lease payments made at or before the commencement date, and any initial direct costs incurred. Adjustments are also made, where appropriate, for dilapidation requirements and lease incentives received such as rent free periods. The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the Group's incremental borrowing rate.
Subsequent to lease commencement, the Group measures the right-of-use asset using a cost model, whereby the asset is held at cost less accumulated depreciation and any accumulated impairment. Depreciation is charged to the income statement on a straight line basis to write down the cost of the right-of-use asset to its residual value over its estimated useful life which is dependent on the length of the lease. In addition, the carrying amount of the right-of-use asset may be adjusted for certain remeasurements of the lease liability. The lease liability is subsequently measured at amortised cost using the effective interest method and also reflects any lease modifications or reassessments.
The Group presents its right-of-use assets within 'Property, plant and equipment' and lease liabilities within 'Borrowings and lease liabilities' in the statement of financial position. The Group does not have any right-of-use assets that would meet the definition of investment property.
The Group currently has material lease commitments of varying durations for the rental of numerous office buildings. The future lease cash outflows within the Group are not exposed to variable lease payments, low value or short term leases, residual value guarantees, restrictions or covenants imposed by a lease contract or sale and leaseback transactions.
In the period prior to the adoption of IFRS 16, leases were accounted for under IAS 17 and classified as operating leases. Payments associated with operating leases were recognised in the income statement on a straight line basis over the term of the lease and not disclosed in the Group's statement of financial position.
Impacts on transition
On transition, the Group recognised right-of-use assets and lease liabilities, recognising the difference in retained earnings, with no impact to the income statement. Also on transition, rent free period equalisation and dilapidation provisions are included in the right-of-use assets and lease liabilities. Prior to IFRS 16, these provisions were recorded as separate items on the statement of financial position and so, on transition to IFRS 16, these provisions have been removed. The impact on transition is summarised below:
|
|
|
£m |
|
Right-of-use assets presented in Property, plant and equipment |
|
74 |
|
Lease liabilities presented in Borrowings and lease liabilities |
|
(88) |
|
Rent free equalisation and dilapidation provision adjustment |
|
8 |
|
Deferred tax adjustment |
|
1 |
|
Adjustment to opening retained earnings |
|
(5) |
When measuring the lease liabilities, the Group discounted the lease payments using its incremental borrowing rate at 1 January 2019 which ranged from 1.7% to 3.7%. The Group's operating lease commitments where the Group is the lessee at 31 December 2018 were valued at £98 million under IAS 17. Upon adoption of IFRS 16 on 1 January 2019, this was recalculated to £88 million using the incremental borrowing rates above. The simplified transition approach creates deferred tax implications, so as the corporation tax deduction is spread over the length of the remaining leases, the deferred tax is unwound over the same period.
3: Significant accounting policies continued
Impacts for the period
In subsequent periods, the Group recognises depreciation charges on right-of-use assets and finance interest charges on lease liabilities in the income statement and, over the term of lease contracts, there is expected to be a broadly neutral impact to the income statement as the aggregate depreciation charges and finance interest charges replace office lease rental payments.
For the six months ended 30 June 2019 the Group recognised the following:
|
|
£m |
|
Right-of-use assets presented in property, plant and equipment at 1 January 2019 |
74 |
|
Acquisitions through business combinations |
2 |
|
Depreciation charge for right-of-use assets for the period |
(6) |
|
Right-of-use assets presented in property, plant and equipment at 30 June 2019 |
70 |
|
|
|
|
Lease liability at 1 January 2019 |
88 |
|
Finance interest charge for the period |
1 |
|
Lease liability reduction for the period |
(7) |
|
Lease liability at 30 June 2019 |
82 |
|
Lease liability to be settled within 12 months |
13 |
|
Lease liability to be settled after 12 months |
69 |
|
Lease liability at 30 June 2019 |
82 |
Notes to the condensed consolidated interim financial statements
For the six month period ended 30 June 2019
4: Acquisitions, discontinued operations and disposal groups held for sale
This note provides details of the Group's acquisitions and disposals of subsidiaries during the financial periods covered by these interim financial statements, together with details of any businesses held for sale during the six months ended 30 June 2019.
4(a) Business acquisitions
Business acquisitions completed during the period ended 30 June 2019
Charles Derby Group Limited acquisition:
On 14 February 2019, the Group acquired the Charles Derby Group ('CDG') of companies. CDG is a financial planning business based in the United Kingdom. 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 £2 million for a 10% stake in CDG. At December 2018, the business was valued at £34 million, resulting in a fair value gain of £1 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 £2 million. The resulting fair value loss of £1 million (reducing the carrying value from £3 million to £2 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:
|
|
|
|
|
|
|
|
|
£m |
|
|
|
Acquiree's carrying amount |
Fair value |
|
Assets |
|
|
|
|
Intangible assets |
|
1 |
14 |
|
Loans and advances |
|
1 |
1 |
|
Cash and cash equivalents |
|
1 |
1 |
|
Trade, other receivables and other assets |
|
2 |
2 |
|
Total assets |
|
5 |
18 |
|
Liabilities |
|
|
|
|
Deferred tax liabilities |
|
- |
(2) |
|
Trade, other payables and other liabilities |
|
(9) |
(9) |
|
Total liabilities |
|
(9) |
(11) |
|
Total net (liabilities)/assets acquired |
|
(4) |
7 |
|
Total cash consideration |
|
|
31 |
|
Goodwill recognised |
|
|
24 |
After an initial cash payment of £15 million at acquisition, a further payment of £5 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 £9 million. These amounts exclude the £2 million value of the 6% stake already held.
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 £31 million and the fair value of net liabilities acquired of £5 million, the value of goodwill and intangible assets is £36 million. Intangible assets representing the value of customer advice contracts have been valued £14 million, less an associated deferred tax liability of £2 million, with an estimated useful life of 8 years over which the intangible and the associated tax provision will be amortised on a straight line basis. The balance of £24 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
· Ability to generate growth in Registered 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 of up to £10 million worth of 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 £1.39 per share, with an estimated fair value of £7 million. The cost of the awards is expected to be £2 million per annum across years 1 - 3 and £1 million in year 4.
Transaction costs of £1 million relating to the acquisition have been recognised within other operating expenses in the Group's consolidated income statement. These costs are not included within adjusted profit.
4(a) Business acquisitions continued
No contingent liabilities have been acquired.
The post-acquisition results from the business have been consolidated since the date of acquisition, contributing £1 million of revenue and a loss of £2 million to the Group's consolidated loss 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.
The 18 days post acquisition revenue and profits of Lighthouse are immaterial to the Group for the period and have not been consolidated into the Group results in the period ended 30 June 2019.
There were 139,864,270 shares in issue for which the offer was 33 pence per share, valuing the business at £46 million.
The Group held 3.99% of the issued share capital of Lighthouse prior to acquisition. This holding was valued at £2 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 £46 million and fair value of net tangible assets acquired of £6 million, the value of goodwill and intangible assets is £40 million. Intangible assets representing the value of customer advice contracts have been valued at £15 million (£18 million gross, less an associated deferred tax liability of £(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 £25 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
· Cost saving synergies arising through de-listing the business and integrating with Quilter Financial Planning
Expected transaction costs of £3 million relating to the acquisition will be recognised within other operating expenses in the Group's consolidated income statement, but not included within adjusted profit.
No contingent liabilities have been acquired.
The table below sets out the consolidated assets and liabilities acquired:
|
|
|
|
|
|
|
|
|
£m |
|
|
|
Acquiree's carrying amount |
Fair value |
|
Assets |
|
|
|
|
Intangible assets |
|
5 |
18 |
|
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 |
35 |
|
Liabilities |
|
|
|
|
Deferred tax liabilities |
|
- |
(3) |
|
Trade, other payables and other liabilities |
|
(11) |
(11) |
|
Total Liabilities |
|
(11) |
(14) |
|
Total net assets acquired |
|
11 |
21 |
|
Total cash consideration |
|
|
46 |
|
Goodwill recognised |
|
|
25 |
Acquisition of adviser businesses by Quilter Financial Planning ('QFP'))
During the period, the Group has continued its expansion of the Quilter Private Client Advisers ('QPCA') business, with the acquisition of 4 adviser businesses. 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 £6 million, of which £2 million was cash consideration and up to £4 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. No tangible net assets were acquired in these purchases. Total intangible assets of £3 million in respect of customer relationships and goodwill of £3 million have been recognised as a result of the acquisitions.
Impact of acquisitions on Group revenue and profit
If the above acquisitions had occurred on 1 January 2019, management estimates that the Group's consolidated revenues would have been £5,520 million, and consolidated post-tax loss for the period would have been £(22) million.
4(a) Business acquisitions continued
Business acquisitions completed during year ended 31 December 2018
Acquisition of Skandia UK Limited from Old Mutual plc
On 31 January 2018, the Group acquired the Skandia UK Limited group of entities from Old Mutual plc which comprises seven Old Mutual plc group entities with a net asset value ('NAV') of £591 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 is a £566 million receivable which corresponds to an equivalent payable within the Group's statement of financial position. The net effect of this transaction for the Group is 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 £5 million with additional potential contingent consideration of £6 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 £5 million, other intangible assets of £7 million and a deferred tax liability of £1 million were recognised as a result of the transaction. The contingent consideration was capitalised in the calculation of goodwill recognised.
4(b) Business disposals
Period ended 30 June 2019
There have been no disposals during the period ended 30 June 2019.
Year ended 31 December 2018
In December 2017, the Group announced that it had entered into an agreement to sell its Single Strategy Asset Management business ('Single Strategy 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'). On 29 June 2018, the Group completed the sale for a total consideration of £583 million, comprising cash consideration of £540 million on completion, with an additional £7 million payable before 2022 as surplus capital associated with the separation from the Group is released in the business. The contingent consideration is not subject to performance conditions. The remaining proceeds of £36 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 £292 million.
|
Profit on sale of operations |
|
|
|
|
|
|
|
£m |
|
|
Six months 2019 |
Six months 2018 |
Full year 2018 |
|
|
Single Strategy business |
Single Strategy business |
Single Strategy business and Old Mutual Wealth Italy adjustment |
|
Consideration received1 |
- |
546 |
546 |
|
Less: transaction costs on the sale of Single Strategy |
- |
(20) |
(20) |
|
Plus: release of accrued expenses in relation to OMW Italy S.p.A disposal |
- |
- |
2 |
|
Net proceeds from sale |
- |
526 |
528 |
|
Carrying value of net assets disposed of |
- |
(241) |
(238) |
|
Profit on sale of operations before tax |
- |
285 |
290 |
|
Tax on disposals |
- |
5 |
4 |
|
Profit on sale of operations after tax |
- |
290 |
294 |
|
1Consideration received in respect of the Single Strategy business includes £540 million of cash received together with the discounted contingent consideration of £6 million, and excludes the £36 million pre-completion dividend received in June 2018. |
|||
4(c) Discontinued operations - income statement
For the six months ended 30 June 2019, discontinued operations consist solely of Quilter Life Assurance ('QLA'). For the six months ended 30 June 2018 and year ended 31 December 2018, the Group's discontinued operations included QLA and the Single Strategy business (previously part of Old Mutual Global Investors).
|
|
|
|
|
£m |
|
|
Note |
Six months 2019 |
Six months 2018 |
Full year 2018 |
|
Revenue |
|
|
|
|
|
Gross earned premiums |
|
76 |
74 |
147 |
|
Premiums ceded to reinsurers |
|
(43) |
(43) |
(87) |
|
Net earned premiums |
|
33 |
31 |
60 |
|
Fee income and other income from service activities |
5(d) |
45 |
191 |
242 |
|
Investment return |
|
1,054 |
5 |
(771) |
|
Other income |
|
- |
2 |
2 |
|
Total revenue |
|
1,132 |
229 |
(467) |
|
Expenses |
|
|
|
|
|
Claims and benefits paid |
|
(46) |
(45) |
(86) |
|
Reinsurance recoveries |
|
33 |
29 |
60 |
|
Net insurance claims and benefits incurred |
|
(13) |
(16) |
(26) |
|
Change in reinsurance assets and liabilities |
|
78 |
20 |
103 |
|
Change in insurance contract liabilities |
|
(91) |
(22) |
(109) |
|
Change in investment contract liabilities |
17(b) |
(991) |
(2) |
737 |
|
Fee and commission expenses, and other acquisition costs |
|
(23) |
(59) |
(84) |
|
Other operating and administrative expenses |
|
(16) |
(104) |
(130) |
|
Finance costs |
|
- |
- |
(1) |
|
Total expenses |
|
(1,056) |
(183) |
490 |
|
Profit on sale of operations before tax |
4(b) |
- |
285 |
290 |
|
Profit before tax from discontinued operations |
|
76 |
331 |
313 |
|
Tax (expense)/credit attributable to policyholder returns |
|
(59) |
15 |
97 |
|
Profit before tax attributable to equity holders |
|
17 |
346 |
410 |
|
Income tax (expense)/credit |
7(a) |
(61) |
9 |
86 |
|
Less: tax expense/(credit) attributable to policyholder returns |
|
59 |
(15) |
(97) |
|
Tax (expense) attributable to equity holders |
|
(2) |
(6) |
(11) |
|
Profit after tax from discontinued operations |
|
15 |
340 |
399 |
|
Attributable to: |
|
|
|
|
|
Equity holders of Quilter plc |
|
15 |
340 |
399 |
|
Earnings per ordinary share on profit attributable to ordinary shareholders of Quilter plc |
||||
|
Basic - from discontinued operations (pence) |
8(b) |
0.8 |
18.6 |
21.8 |
|
Diluted - from discontinued operations (pence) |
8(b) |
0.8 |
18.6 |
21.7 |
As explained in Note 3: Significant accounting policies, operating and administration expenses shown within discontinued operations represent costs recorded within the accounts of those discontinued businesses as recorded in the Group's results, stated without adjustment.
As a result of the disposal of the QLA business, a portion of the costs which have historically been charged to QLA from Group service entities will remain within the continuing operations of the Group. Whilst the Group will seek to minimise these costs through adjusting ongoing Group resource requirements, renegotiation of third party agreements and employing other commercial practices, a level of costs are expected to remain in the continuing operations of the Group over and above that experienced historically. This includes a share of Group central costs currently charged to QLA. Where appropriate and permitted by IAS 37 Provisions, Contingent Liabilities and Contingent Assets, these costs are expected to be recognised as onerous contracts and provisions established for those future costs on completion of the transaction.
The level of these costs, and the extent of onerous contract provisions to be established on disposal of the QLA business, is not yet clear. They will also be influenced in the 12-24 months post-completion of the transaction by the duration and extent of the transitional services agreement entered into with the acquirer, which will be agreed between signing and completion of the transaction. Accordingly, management will further consider the disclosure and classification of costs between continued and discontinued operations in the full year 2019 financial statements.
|
4(d) Discontinued operations - Statement of comprehensive income |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
|
|
Six months 2019 |
Six months 2018 |
Full year 2018 |
|
|
Profit after tax from discontinued operations |
|
15 |
340 |
399 |
|
|
Total other comprehensive income from discontinued operations, net of tax |
|
- |
- |
- |
|
|
Total comprehensive income from discontinued operations |
|
15 |
340 |
399 |
|
|
|
|
|
|
|
|
|
4(e) Discontinued operations - Net cash flows |
|||||
|
|
|||||
|
|
|
|
|
£m |
|
|
|
|
Six months 2019 |
Six months 2018 |
Full year 2018 |
|
|
Total net cash flows from operating activities |
|
(1,424) |
(995) |
(2,437) |
|
|
Total net cash used in investing activities |
|
1,381 |
1,117 |
2,529 |
|
|
Total net cash used in financing activities |
|
(90) |
(45) |
(46) |
|
|
Net increase in cash and cash equivalents |
|
(133) |
77 |
46 |
|
4(f) Assets and liabilities held for sale
Assets and liabilities of operations classified as held for sale at 30 June 2019 relate to the Quilter Life Assurance ('QLA') business. The operation has been classified as held for sale at 30 June 2019 as a result of the Group's active programme at that date to locate a potential acquirer for this business. The Group has subsequently announced the disposal of this business, as detailed in note 22. QLA was previously reported within the Wealth Platforms segment but, as a result of being classified as held for sale and representing a separate major line of business, is now presented as a discontinued operation for all periods shown in these interim financial statements.
|
|
|
|
|
£m |
|
|
Note |
30 June 2019 |
30 June 2018 |
31 December 2018 |
|
Assets classified as held for sale |
|
|
|
|
|
Goodwill and intangible assets |
10 |
30 |
- |
- |
|
Deferred acquisition costs |
|
9 |
- |
- |
|
Contract costs |
|
46 |
- |
- |
|
Financial investments |
|
9,704 |
- |
- |
|
Reinsurers' share of policyholder liabilities |
17 |
2,087 |
- |
- |
|
Current tax receivable |
|
16 |
- |
- |
|
Trade, other receivables and other assets |
|
44 |
- |
- |
|
Cash and cash equivalents |
15 |
381 |
- |
- |
|
Total assets classified as held for sale |
|
12,317 |
- |
- |
|
|
|
|
|
|
|
Liabilities classified as held for sale |
|
|
|
|
|
Long-term business insurance policyholder liabilities |
17 |
694 |
- |
- |
|
Investment contract liabilities |
17 |
11,040 |
- |
- |
|
Provisions |
18 |
20 |
- |
- |
|
Deferred tax liabilities |
|
72 |
- |
- |
|
Current tax payable |
|
3 |
- |
- |
|
Trade, other payables and other liabilities |
|
125 |
- |
- |
|
Contract liabilities |
|
27 |
- |
- |
|
Total liabilities classified as held for sale |
|
11,981 |
- |
- |
|
Net assets classified as held for sale |
|
336 |
- |
- |
5: Segmental information
5(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. There have been no changes to the basis of segmentation for the periods in these condensed consolidated interim financial statements.
Adjusted profit is a key 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 margins.
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. Revenues are further segmented into the geographic location of our businesses in note 5(d).
Continuing operations:
Advice and Wealth Management
This segment comprises Quilter Investors, Quilter Cheviot and Quilter Financial Planning, which includes Quilter Private Client Advisers ('QPCA').
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 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 branches in the Channel Islands and the Republic of Ireland.
Quilter Financial Planning is a restricted and independent financial adviser network (including QPCA) 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 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:
Quilter Life Assurance ('QLA'), previously part of the Wealth Platforms operating segment, has been classified as a discontinued operation following the Group's strategic review. As set out in note 22, the Group has entered into an agreement, which is subject to obtaining the necessary regulatory approval, to sell the business. Quilter Life Assurance is predominantly a closed book of business, made up of legacy life insurance products, including protection and institutional pension products. For the year ended 31 December 2018, the Single Strategy Asset Management business (disposed of on 29 June 2018) is also included as discontinued operations. See Note 4(b) for further details on this disposal. The results of these two businesses, and the profit on disposal (including £2 million in respect of the disposal of Old Mutual Italy S.p.A, disposed of on 9 January 2017), have been presented as discontinued operations. Comparative amounts for the six months ended 30 June 2018 and the year ended 31 December 2018 have been restated accordingly. See note 3 and note 4(c) for further information.
5: Segmental information continued
5(b)(i): Adjusted profit statement - segmental information for the six month period ended 30 June 2019
|
|
|
|
|
|
|
|
|
£m |
|
|
|
Adjusted profit - Continuing operations |
Reconciliation to IFRS |
|||||
|
|
|
Operating segments |
|
|
|
|
|
|
|
|
Notes |
Advice and Wealth Management |
Wealth Platforms |
Head Office |
Adjusted profit |
Consolidation Adjustments1 |
Adjusting items (Note 6) |
IFRS Income Statement |
|
Revenue |
|
|
|
|
|
|
|
|
|
Gross earned premiums |
|
- |
1 |
- |
1 |
- |
- |
1 |
|
Premiums ceded to reinsurers |
|
- |
(1) |
- |
(1) |
- |
- |
(1) |
|
Net earned premiums |
|
- |
- |
- |
- |
- |
- |
- |
|
Fee income and other income from service activities |
5(d) |
246 |
198 |
- |
444 |
6 |
- |
450 |
|
Investment return |
|
5 |
4,373 |
2 |
4,380 |
663 |
- |
5,043 |
|
Other income |
|
2 |
66 |
3 |
71 |
(50) |
- |
21 |
|
Segmental revenue |
|
253 |
4,637 |
5 |
4,895 |
619 |
- |
5,514 |
|
Expenses |
|
|
|
|
|
|
|
|
|
Change in investment contract liabilities |
|
- |
(4,348) |
- |
(4,348) |
- |
- |
(4,348) |
|
Fee and commission expenses, and other acquisition costs |
|
(47) |
(56) |
- |
(103) |
(87) |
- |
(190) |
|
Change in third party interest in consolidated funds |
|
- |
- |
- |
- |
(586) |
- |
(586) |
|
Other operating and administrative expenses |
|
(154) |
(159) |
(22) |
(335) |
54 |
(63) |
(344) |
|
Finance costs |
|
(2) |
(1) |
- |
(3) |
- |
(5) |
(8) |
|
Segmental expenses |
|
(203) |
(4,564) |
(22) |
(4,789) |
(619) |
(68) |
(5,476) |
|
Adjusted profit/(loss) before all tax |
|
50 |
73 |
(17) |
106 |
- |
(68) |
38 |
|
Tax attributable to policyholders' returns |
|
- |
(17) |
- |
(17) |
- |
(61) |
(78) |
|
Adjusted profit/(loss) before tax attributable to equity holders |
|
50 |
56 |
(17) |
89 |
- |
(129) |
(40) |
|
Reconciliation to IFRS: |
|
|
|
|
|
|
|
|
|
Adjusted for non-operating items: |
|
|
|
|
|
|
|
|
|
Goodwill impairment and impact of acquisition accounting |
6(a) |
(26) |
- |
- |
(26) |
|
|
|
|
Business transformation costs |
6(b) |
- |
(30) |
(5) |
(35) |
|
|
|
|
Managed Separation costs |
6(c) |
- |
- |
(2) |
(2) |
|
|
|
|
Finance costs |
6(d) |
- |
- |
(5) |
(5) |
|
|
|
|
Policyholder tax adjustments |
6(e) |
- |
(61) |
- |
(61) |
|
|
|
|
Adjusting items before tax |
|
(26) |
(91) |
(12) |
(129) |
|
|
|
|
Profit/(Loss) before tax attributable to equity holders |
|
24 |
(35) |
(29) |
(40) |
|
|
|
1Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.
5: Segmental information continued
5(b)(ii): Adjusted profit statement - segmental information for the six months ended 30 June 2018
|
|
|
|
|
|
|
|
|
£m |
|
|
|
Adjusted profit - Continuing operations |
Reconciliation to IFRS |
|||||
|
|
|
Operating segments |
|
|
|
|
|
|
|
|
Notes |
Advice and Wealth Management |
Wealth Platforms |
Head Office |
Adjusted profit |
Consolidation Adjustments1 |
Adjusting items (Note 6) |
IFRS Income Statement |
|
Revenue |
|
|
|
|
|
|
|
|
|
Gross earned premiums |
|
- |
1 |
- |
1 |
- |
- |
1 |
|
Premiums ceded to reinsurers |
|
- |
(1) |
- |
(1) |
- |
- |
(1) |
|
Net earned premiums |
|
- |
- |
- |
- |
- |
- |
- |
|
Fee income and other income from service activities |
5(d) |
272 |
201 |
- |
473 |
2 |
- |
475 |
|
Investment return |
|
4 |
202 |
1 |
207 |
81 |
- |
288 |
|
Other income |
|
- |
62 |
3 |
65 |
(56) |
- |
9 |
|
Segmental revenue |
|
276 |
465 |
4 |
745 |
27 |
- |
772 |
|
Expenses |
|
|
|
|
|
|
|
|
|
Change in investment contract liabilities |
|
- |
(190) |
- |
(190) |
- |
- |
(190) |
|
Fee and commission expenses, and other acquisition costs |
|
(82) |
(58) |
- |
(140) |
(69) |
- |
(209) |
|
Change in third party interest in consolidated funds |
|
- |
- |
- |
- |
3 |
- |
3 |
|
Other operating and administrative expenses |
|
(145) |
(157) |
(24) |
(326) |
39 |
(82) |
(369) |
|
Finance costs |
|
(2) |
- |
- |
(2) |
- |
(8) |
(10) |
|
Segmental expenses |
|
(229) |
(405) |
(24) |
(658) |
(27) |
(90) |
(775) |
|
Adjusted profit/(loss) before all tax |
|
47 |
60 |
(20) |
87 |
- |
(90) |
(3) |
|
Tax attributable to policyholder returns |
|
- |
(4) |
- |
(4) |
- |
7 |
3 |
|
Adjusted profit/(loss) before tax attributable to equity holders |
|
47 |
56 |
(20) |
83 |
- |
(83) |
- |
|
Reconciliation to IFRS: |
|
|
|
|
|
|
|
|
|
Adjusted for non-operating items: |
|
|
|
|
|
|
|
|
|
Goodwill impairment and impact of acquisition accounting |
6(a) |
(28) |
- |
- |
(28) |
|
|
|
|
Business transformation costs |
6(b) |
(10) |
(27) |
- |
(37) |
|
|
|
|
Managed Separation costs |
6(c) |
- |
- |
(17) |
(17) |
|
|
|
|
Finance costs |
6(d) |
- |
- |
(8) |
(8) |
|
|
|
|
Policyholder tax adjustments |
6(e) |
- |
7 |
- |
7 |
|
|
|
|
Reallocation of central costs2 |
|
- |
(2) |
2 |
- |
|
|
|
|
Adjusting items before tax |
|
(38) |
(22) |
(23) |
(83) |
|
|
|
|
Profit/(loss) before tax attributable to equity holders |
|
9 |
34 |
(43) |
- |
|
|
|
1Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.
2Reallocation of central costs reverses management reallocations included within adjusted profit to reconcile back to IFRS profit.
5: Segmental information continued
5(b)(iii): Adjusted profit statement - segmental information for the year ended 31 December 2018
|
|
|
|
|
|
|
|
|
£m |
|
|
|
Adjusted profit - Continuing operations |
Reconciliation to IFRS |
|||||
|
|
|
Operating segments |
|
|
|
|
|
|
|
|
Notes |
Advice and Wealth Management |
Wealth Platforms |
Head Office |
Adjusted profit |
Consolidation Adjustments1 |
Adjusting items (Note 6) |
IFRS Income Statement |
|
Revenue |
|
|
|
|
|
|
|
|
|
Gross earned premiums |
|
- |
1 |
- |
1 |
- |
- |
1 |
|
Premiums ceded to reinsurers |
|
- |
(1) |
- |
(1) |
- |
- |
(1) |
|
Net earned premiums |
|
- |
- |
- |
- |
- |
- |
- |
|
Fee income and other income from service activities |
5(d) |
547 |
402 |
- |
949 |
5 |
- |
954 |
|
Investment return |
|
9 |
(2,478) |
3 |
(2,466) |
(246) |
- |
(2,712) |
|
Other income |
|
2 |
101 |
6 |
109 |
(74) |
- |
35 |
|
Segmental revenue |
|
558 |
(1,975) |
9 |
(1,408) |
(315) |
- |
(1,723) |
|
Expenses |
|
|
|
|
|
|
|
|
|
Insurance contract claims and changes in liabilities |
|
- |
(1) |
- |
(1) |
- |
- |
(1) |
|
Change in investment contract liabilities |
|
- |
2,499 |
- |
2,499 |
- |
- |
2,499 |
|
Fee and commission expenses, and other acquisition costs |
|
(163) |
(117) |
- |
(280) |
(118) |
- |
(398) |
|
Change in third party interest in consolidated funds |
|
- |
- |
- |
- |
369 |
- |
369 |
|
Other operating and administrative expenses |
|
(290) |
(298) |
(40) |
(628) |
64 |
(158) |
(722) |
|
Finance costs |
|
(3) |
- |
- |
(3) |
- |
(13) |
(16) |
|
Segmental expenses |
|
(456) |
2,083 |
(40) |
1,587 |
315 |
(171) |
1,731 |
|
Adjusted profit/(loss) before all tax |
|
102 |
108 |
(31) |
179 |
- |
(171) |
8 |
|
Tax attributable to policyholder returns |
|
- |
(3) |
- |
(3) |
- |
64 |
61 |
|
Adjusted profit/(loss) before tax attributable to equity holders |
|
102 |
105 |
(31) |
176 |
- |
(107) |
69 |
|
Reconciliation to IFRS: |
|
|
|
|
|
|
|
|
|
Adjusted for non-operating items: |
|
|
|
|
|
|
|
|
|
Goodwill impairment and impact of acquisition accounting |
6(a) |
(49) |
(1) |
- |
(50) |
|
|
|
|
Business transformation costs |
6(b) |
(19) |
(58) |
(7) |
(84) |
|
|
|
|
Managed Separation costs |
6(c) |
- |
(1) |
(23) |
(24) |
|
|
|
|
Finance costs |
6(d) |
- |
- |
(13) |
(13) |
|
|
|
|
Policyholder tax adjustments |
6(e) |
- |
64 |
- |
64 |
|
|
|
|
Reallocation of central costs2 |
|
- |
(2) |
2 |
- |
|
|
|
|
Adjusting items before tax |
|
(68) |
2 |
(41) |
(107) |
|
|
|
|
Profit/(Loss) before tax attributable to equity holders |
|
34 |
107 |
(72) |
69 |
|
|
|
1Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.
2Reallocation of central costs reverses management reallocations included within adjusted profit to reconcile back to IFRS profit.
5: Segmental information continued
5(c)(i): Statement of financial position - segmental information at 30 June 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
Notes |
Advice & Wealth Management |
Wealth Platforms |
Head Office |
Discontinued Operations |
Consolidation Adjustments1 |
Total |
|
Assets |
|
|
|
|
|
|
|
|
Goodwill and intangible assets |
10 |
453 |
134 |
- |
- |
- |
587 |
|
Property, plant and equipment |
11 |
33 |
54 |
3 |
- |
(1) |
89 |
|
Investments in associated undertakings |
|
- |
- |
2 |
- |
- |
2 |
|
Contract costs |
|
- |
477 |
- |
- |
- |
477 |
|
Contract assets |
|
45 |
- |
- |
- |
- |
45 |
|
Loans and advances |
|
27 |
186 |
7 |
- |
- |
220 |
|
Financial investments |
12 |
1 |
50,001 |
- |
- |
6,421 |
56,423 |
|
Reinsurers' share of policyholder liabilities |
17 |
- |
- |
- |
- |
- |
- |
|
Deferred tax assets |
|
8 |
15 |
9 |
- |
- |
32 |
|
Current tax receivable |
|
- |
16 |
- |
- |
- |
16 |
|
Trade, other receivables and other assets |
|
745 |
386 |
13 |
- |
209 |
1,353 |
|
Derivative assets |
|
- |
- |
- |
- |
24 |
24 |
|
Cash and cash equivalents |
15 |
392 |
608 |
398 |
- |
546 |
1,944 |
|
Assets of operations classified as held for sale |
4(f) |
- |
- |
- |
12,324 |
(7) |
12,317 |
|
Inter-segment funding - assets |
|
- |
12 |
- |
- |
(12) |
- |
|
Total assets |
|
1,704 |
51,889 |
432 |
12,324 |
7,180 |
73,529 |
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Investment contract liabilities |
17 |
- |
50,286 |
- |
- |
- |
50,286 |
|
Third-party interests in consolidated funds |
|
- |
- |
- |
- |
6,972 |
6,972 |
|
Provisions |
18 |
19 |
20 |
6 |
- |
- |
45 |
|
Deferred tax liabilities |
|
42 |
49 |
- |
- |
- |
91 |
|
Current tax payable |
|
11 |
4 |
(11) |
- |
- |
4 |
|
Borrowings and lease liabilities2 |
|
28 |
50 |
203 |
- |
(1) |
280 |
|
Trade, other payables and other liabilities |
|
895 |
599 |
23 |
- |
203 |
1,720 |
|
Contract liabilities |
|
1 |
191 |
- |
- |
- |
192 |
|
Derivative liabilities |
|
- |
1 |
- |
- |
23 |
24 |
|
Liabilities of operations classified as held for sale |
4(f) |
- |
- |
- |
11,988 |
(7) |
11,981 |
|
Inter-segment funding - liabilities |
|
- |
- |
12 |
- |
(12) |
- |
|
Total liabilities |
|
996 |
51,200 |
233 |
11,988 |
7,178 |
71,595 |
|
Total equity |
|
|
|
|
|
|
1,934 |
|
Total equity and liabilities |
|
|
|
|
|
|
73,529 |
1Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.
2The 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.
5: Segmental information continued
5(c)(ii): Statement of financial position - segmental information at 30 June 2018
|
|
|
|
|
|
|
|
£m |
|
|
Notes |
Advice & Wealth Management |
Wealth Platforms |
Head Office |
Discontinued Operations |
Consolidation Adjustments1 |
Total |
|
Assets |
|
|
|
|
|
|
|
|
Goodwill and intangible assets |
10 |
401 |
165 |
- |
- |
- |
566 |
|
Property, plant and equipment |
11 |
10 |
7 |
- |
- |
- |
17 |
|
Investments in associated undertakings |
|
- |
- |
1 |
- |
- |
1 |
|
Deferred acquisition costs |
|
- |
- |
- |
12 |
- |
12 |
|
Contract costs |
|
- |
514 |
- |
61 |
- |
575 |
|
Contract assets |
|
45 |
- |
- |
- |
- |
45 |
|
Loans and advances |
|
22 |
190 |
7 |
- |
- |
219 |
|
Financial investments |
12 |
5 |
46,401 |
2 |
11,334 |
6,827 |
64,569 |
|
Reinsurers' share of policyholder liabilities |
17 |
- |
- |
- |
2,666 |
- |
2,666 |
|
Deferred tax assets |
|
6 |
13 |
- |
- |
- |
19 |
|
Current tax receivable |
|
- |
3 |
- |
- |
- |
3 |
|
Trade, other receivables and other assets |
|
370 |
207 |
4 |
121 |
735 |
1,437 |
|
Derivative assets |
|
- |
- |
- |
- |
33 |
33 |
|
Cash and cash equivalents |
15 |
365 |
595 |
618 |
543 |
1,254 |
3,375 |
|
Inter-segment funding - assets |
|
- |
12 |
- |
- |
(12) |
- |
|
Total assets |
|
1,224 |
48,107 |
632 |
14,737 |
8,837 |
73,537 |
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Long-term business insurance policyholder liabilities |
17 |
- |
- |
- |
513 |
- |
513 |
|
Investment contract liabilities |
17 |
- |
46,654 |
- |
13,486 |
- |
60,140 |
|
Third-party interests in consolidated funds |
|
- |
- |
- |
- |
8,105 |
8,105 |
|
Provisions |
18 |
18 |
19 |
12 |
66 |
- |
115 |
|
Deferred tax liabilities |
|
42 |
38 |
- |
84 |
- |
164 |
|
Current tax payable/(receivable) |
|
6 |
- |
(11) |
17 |
- |
12 |
|
Borrowings |
|
- |
- |
197 |
- |
- |
197 |
|
Trade, other payables and other liabilities |
|
522 |
485 |
31 |
209 |
690 |
1,937 |
|
Contract Liabilities |
|
1 |
198 |
- |
36 |
- |
235 |
|
Derivative liabilities |
|
- |
1 |
- |
- |
58 |
59 |
|
Inter-segment funding - liabilities |
|
- |
- |
12 |
- |
(12) |
- |
|
Total liabilities |
|
589 |
47,395 |
241 |
14,411 |
8,841 |
71,477 |
|
Total equity |
|
|
|
|
|
|
2,060 |
|
Total equity and liabilities |
|
|
|
|
|
|
73,537 |
1Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.
The June 2018 segmental statement of financial position comparative has been re-presented and no longer includes a subtotal for continuing business. This change ensures that the elimination of inter-segment transactions can be reported at the Group level within consolidation adjustments.
5: Segmental information continued
5(c)(iii): Statement of financial position - segmental information at 31 December 2018
|
|
|
|
|
|
|
|
£m |
|
|
Notes |
Advice & Wealth Management |
Wealth Platforms |
Head Office |
Discontinued Operations |
Consolidation Adjustments1 |
Total |
|
Assets |
|
|
|
|
|
|
|
|
Goodwill and intangible assets |
10 |
386 |
164 |
- |
- |
- |
550 |
|
Property, plant and equipment |
11 |
10 |
7 |
- |
- |
- |
17 |
|
Investments in associated undertakings |
|
- |
- |
2 |
- |
- |
2 |
|
Deferred acquisition costs |
|
- |
- |
- |
11 |
- |
11 |
|
Contract costs |
|
- |
498 |
- |
53 |
- |
551 |
|
Contract assets |
|
44 |
- |
- |
- |
- |
44 |
|
Loans and advances |
|
27 |
188 |
7 |
- |
- |
222 |
|
Financial investments |
12 |
3 |
44,950 |
2 |
9,686 |
4,578 |
59,219 |
|
Reinsurers' share of policyholder liabilities |
17 |
- |
- |
- |
2,162 |
- |
2,162 |
|
Deferred tax assets |
|
7 |
22 |
9 |
- |
- |
38 |
|
Current tax receivable |
|
- |
23 |
1 |
23 |
- |
47 |
|
Trade, other receivables and other assets |
|
197 |
151 |
8 |
30 |
100 |
486 |
|
Derivative assets |
|
- |
- |
- |
- |
46 |
46 |
|
Cash and cash equivalents |
15 |
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 |
|
|
|
|
|
|
|
|
Long-term business insurance policyholder liabilities |
17 |
- |
- |
- |
602 |
- |
602 |
|
Investment contract liabilities |
17 |
- |
45,211 |
- |
11,239 |
- |
56,450 |
|
Third-party interests in consolidated funds |
|
- |
- |
- |
- |
5,116 |
5,116 |
|
Provisions |
18 |
26 |
20 |
9 |
39 |
- |
94 |
|
Deferred tax liabilities |
|
40 |
- |
- |
19 |
- |
59 |
|
Current tax payable/(receivable) |
|
9 |
5 |
(18) |
9 |
- |
5 |
|
Borrowings |
|
- |
- |
197 |
- |
- |
197 |
|
Trade, other payables and other liabilities |
|
340 |
425 |
20 |
158 |
56 |
999 |
|
Contract liabilities |
|
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 |
1Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.
The December 2018 segmental statement of financial position comparative has been re-presented and no longer includes a subtotal for continuing business. This change ensures that the elimination of inter-segment transactions can be reported at the Group level within consolidation adjustments.
5: Segmental information continued
5(d): Geographic segmental information
In the following table, revenue is shown based on the geographic location of our businesses.
|
|
UK |
International |
|
|
|
£m |
||
|
Six months 2019 |
Advice and Wealth Management |
Wealth Platforms |
Head Office |
Wealth Platforms |
Consolidation adjustments |
Total continuing operations |
Discontinued operations |
Total Group |
|
Gross earned premiums |
- |
- |
- |
1 |
- |
1 |
76 |
77 |
|
Premiums ceded to reinsurers |
- |
- |
- |
(1) |
- |
(1) |
(43) |
(44) |
|
Net earned premiums |
- |
- |
- |
- |
- |
- |
33 |
33 |
|
Premium based fees |
45 |
- |
- |
36 |
- |
81 |
6 |
87 |
|
Fund based fees1 |
201 |
86 |
- |
51 |
- |
338 |
33 |
371 |
|
Retrocessions received, intragroup |
- |
1 |
- |
1 |
(2) |
- |
5 |
5 |
|
Fixed fees |
- |
1 |
- |
14 |
- |
15 |
1 |
16 |
|
Surrender charges |
- |
- |
- |
8 |
- |
8 |
- |
8 |
|
Other fee and commission income |
- |
- |
- |
- |
8 |
8 |
- |
8 |
|
Fee income and other income from service activities |
246 |
88 |
- |
110 |
6 |
450 |
45 |
495 |
|
Investment return |
5 |
2,748 |
2 |
1,625 |
663 |
5,043 |
1,054 |
6,097 |
|
Other income |
2 |
82 |
3 |
- |
(66) |
21 |
- |
21 |
|
Total revenue |
253 |
2,918 |
5 |
1,735 |
603 |
5,514 |
1,132 |
6,646 |
|
|
|
|
|
|
|
|
|
|
|
|
UK |
International |
|
|
|
£m |
||
|
Six months 2018 |
Advice and Wealth Management |
Wealth Platforms |
Head Office |
Wealth Platforms |
Consolidation adjustments |
Total continuing operations |
Discontinued operations |
Total Group |
|
Gross earned premiums |
- |
- |
- |
1 |
- |
1 |
74 |
75 |
|
Premiums ceded to reinsurers |
- |
- |
- |
(1) |
- |
(1) |
(43) |
(44) |
|
Net earned premiums |
- |
- |
- |
- |
- |
- |
31 |
31 |
|
Premium based fees |
43 |
- |
- |
38 |
- |
81 |
8 |
89 |
|
Fund based fees1 |
230 |
85 |
- |
50 |
- |
365 |
175 |
540 |
|
Retrocessions received, intragroup |
- |
2 |
- |
3 |
(5) |
- |
7 |
7 |
|
Fixed fees |
- |
1 |
- |
14 |
- |
15 |
1 |
16 |
|
Surrender charges |
- |
- |
- |
9 |
- |
9 |
- |
9 |
|
Other fee and commission income |
- |
- |
- |
- |
5 |
5 |
- |
5 |
|
Fee income and other income from service activities |
273 |
88 |
- |
114 |
- |
475 |
191 |
666 |
|
Investment return |
4 |
204 |
1 |
(2) |
81 |
288 |
5 |
293 |
|
Other income |
- |
79 |
3 |
4 |
(77) |
9 |
2 |
11 |
|
Total revenue |
277 |
371 |
4 |
116 |
4 |
772 |
229 |
1,001 |
|
|
|
|
|
|
|
|
|
|
|
|
UK |
International |
|
|
|
£m |
||
|
Full year 2018 |
Advice and Wealth Management |
Wealth Platforms |
Head Office |
Wealth Platforms |
Consolidation adjustments |
Total continuing operations |
Discontinued operations |
Total Group |
|
Gross earned premiums |
- |
- |
- |
1 |
- |
1 |
147 |
148 |
|
Premiums ceded to reinsurers |
- |
- |
- |
(1) |
- |
(1) |
(87) |
(88) |
|
Net earned premiums |
- |
- |
- |
- |
- |
- |
60 |
60 |
|
Premium based fees |
87 |
- |
- |
77 |
- |
164 |
15 |
179 |
|
Fund based fees1 |
460 |
169 |
- |
102 |
- |
731 |
210 |
941 |
|
Retrocessions received, intragroup |
- |
3 |
- |
4 |
(7) |
- |
14 |
14 |
|
Fixed fees |
- |
2 |
- |
28 |
- |
30 |
2 |
32 |
|
Surrender charges |
- |
- |
- |
16 |
- |
16 |
1 |
17 |
|
Other fee and commission income |
- |
- |
- |
- |
13 |
13 |
- |
13 |
|
Fee income and other income from service activities |
547 |
174 |
- |
227 |
6 |
954 |
242 |
1,196 |
|
Investment return |
9 |
(1,562) |
3 |
(916) |
(246) |
(2,712) |
(771) |
(3,483) |
|
Other income |
2 |
98 |
6 |
3 |
(74) |
35 |
2 |
37 |
|
Total revenue |
558 |
(1,290) |
9 |
(686) |
(314) |
(1,723) |
(467) |
(2,190) |
|
1Income from fiduciary activities is included within fund based fees. |
|
|
|
|
|
|
||
6: 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.
6(a): 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 asset and liabilities acquired at the date of acquisition (as recognised under IFRS 3). 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.
|
|
|
|
|
£m |
|
|
Note |
Six months 2019 |
Six months 2018 |
Full year 2018 |
|
Amortisation of other acquired intangible assets |
10(a) |
22 |
21 |
41 |
|
Acquisition costs1 |
|
3 |
6 |
5 |
|
Impairment of other intangible assets |
|
- |
- |
1 |
|
Unwinding of discount on contingent consideration |
|
1 |
1 |
3 |
|
Total goodwill impairment and impact of acquisition accounting |
26 |
28 |
50 |
|
1Acquisition costs include items such as transaction costs or deferred incentives arising on the acquisition of businesses.
6(b): Business transformation costs
Business transformation costs include three 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, and the Optimisation Programme costs. All items are in respect of continuing operations and are described in detail below. For the period ended 30 June 2019, these costs totalled £35 million (30 June 2018: £37 million, 31 December 2018: £84 million) in aggregate.
UK Platform Transformation Programme - 30 June 2019: £30 million, 30 June 2018: £27 million, 31 December 2018: £58 million
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 over time.
Quilter Investors' build out costs - 30 June 2019: £nil, 30 June 2018: £10 million, 31 December 2018: £19 million
In March 2016, Old Mutual plc announced its Managed Separation strategy that sought to unlock and create significant long-term value for 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 £24 million of one-off costs in the year ended 31 December 2018, £5 million of which were included in profit on disposal within discontinued operations and £19 million is an adjusting item within continuing business.
Optimisation Programme costs - 30 June 2019: £5 million, 30 June 2018: £nil, 31 December 2018: £7 million
Following the Group's Managed Separation from Old Mutual plc in 2018, the Group has initiated an Optimisation Programme focused on driving operational efficiencies, incurring £5 million of one-off project costs in 2019.
6(c): Managed Separation costs
One-off costs related to the implementation of Managed Separation 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. These costs are not expected to persist in the long term as they relate to a fundamental restructuring of the Group, which is not operational in nature, rather than more routine restructuring activity which would be seen as part of the usual course of business. The treatment and the disclosure of these costs as an adjusting item are also intended to make these costs more visible to the readers of the financial statements in the context of publicly disclosed estimates previously given in relation to these items. For the period ended 30 June 2019 these costs were £2 million (30 June 2018: £17 million, 31 December 2018: £24 million). The 2019 Managed Separation costs primarily relate to post-listing rebranding.
6(d): 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 six months ended 30 June 2019 finance costs were £5 million (30 June 2018: £8 million, 31 December 2018: £13 million).
6(e): Policyholder tax adjustments
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 7(a). Adjustments are also made to remove distortions from other non-operating adjusting items. For the period ended 30 June 2019 the total of policyholder tax adjustments to adjusted profit is £(76) million (30 June 2018: £15 million, 31 December 2018: £101 million) relating to both continuing and discontinued operations, as shown in note 7(c).
6(f): Voluntary customer remediation
During 2017, as part of its ongoing work to promote fair customer outcomes, the Group conducted product reviews consistent with the recommendations from the Financial Contact Authority's ('FCA') thematic feedback and the FCA's guidance FG16/8 Fair treatment of long-standing customers in the life insurance sector. Following these reviews a provision of £69 million was established.
During 2019 the components of the remaining provision have been reviewed and £6 million of the provision was released (as detailed in note 18: Provisions), wholly relating to discontinued operations.
|
7: Tax |
|
|
|
|
|
|
|
|
|
|
|
7(a): Tax charged to the income statement |
|
|
|
|
|
|
|
|
|
£m |
|
|
Note |
Six months 2019 |
Six months 2018 |
Full year 2018 |
|
Current tax |
|
|
|
|
|
United Kingdom |
|
15 |
1 |
(5) |
|
International |
|
2 |
2 |
3 |
|
Adjustments to current tax in respect of prior periods |
|
- |
- |
(11) |
|
Total current tax |
|
17 |
3 |
(13) |
|
Deferred tax |
|
|
|
|
|
Origination and reversal of temporary differences |
|
51 |
(6) |
(61) |
|
Effect on deferred tax of changes in tax rates |
|
2 |
- |
- |
|
Adjustments to deferred tax in respect of prior periods |
|
- |
(2) |
(7) |
|
Total deferred tax |
|
53 |
(8) |
(68) |
|
Total tax charged/(credited) to income statement - continuing operations |
|
70 |
(5) |
(81) |
|
Total tax charged/(credited) to income statement - discontinued operations |
4(c) |
61 |
(9) |
(86) |
|
Total tax charged/(credited) to income statement |
|
131 |
(14) |
(167) |
|
|
|
|
|
|
|
Attributable to policyholder returns - continuing operations |
|
78 |
(3) |
(61) |
|
Attributable to equity holders - continuing operations |
|
(8) |
(2) |
(20) |
|
Total tax charged/(credited) to income statement - continuing operations |
|
70 |
(5) |
(81) |
|
Attributable to policyholder returns - discontinued operations |
|
59 |
(15) |
(97) |
|
Attributable to equity holders - discontinued operations |
|
2 |
6 |
11 |
|
Total tax charged/(credited) to income statement - discontinued operations |
|
61 |
(9) |
(86) |
|
Total tax charged/(credited) to income statement |
|
131 |
(14) |
(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 business was £70 million for the six months to 30 June 2019, compared to a credit of £81 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 (loss)/profit before tax attributable to equity holders. An adjustment is made to adjusted profit to remove these distortions, as explained further in note 6(e).
Significant market volatility during the year ended 31 December 2018 led to large investment losses that have reversed in the first half of 2019, resulting in investment gains of £623 million on products subject to policyholder tax. The gain is a component of the total 'investment return' gain of £5,043 million shown in the income statement and £1,054 million shown in the discontinued operations income statement. The impact of the £623 million investment return gain, is the primary reason for the £137 million tax charge attributable to policyholder returns in respect of both continuing (£78 million) and discontinued (£59 million) business for the period ended 30 June 2019 (30 June 2018: £18 million credit, 31 December 2018 £158 million credit).
7(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: |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
|
Note |
Six months 2019 |
Six months 2018 |
Full year 2018 |
|
|
Profit before tax from continuing operations |
|
38 |
(3) |
8 |
|
|
Tax at UK standard rate of 19% (2018: 19%) |
|
7 |
- |
1 |
|
|
Different tax rate or basis on overseas operations |
|
(3) |
(3) |
(5) |
|
|
Untaxed and low taxed income |
|
(1) |
(1) |
(8) |
|
|
Disallowable expenses |
|
1 |
4 |
6 |
|
|
Adjustments to current tax in respect of prior years |
|
- |
- |
(11) |
|
|
Net movement on deferred tax assets not recognised |
|
(1) |
(2) |
(11) |
|
|
Effect on deferred tax of changes in tax rates |
|
2 |
- |
- |
|
|
Adjustments to deferred tax in respect of prior years |
|
- |
(2) |
(7) |
|
|
Income tax attributable to policyholder returns |
|
65 |
(1) |
(46) |
|
|
Total tax charged/(credited) to income statement - continuing operations |
|
70 |
(5) |
(81) |
|
|
Total tax charged/(credited) to income statement - discontinued operations |
4(c) |
61 |
(9) |
(86) |
|
|
Total tax charged/(credited) to income statement |
|
131 |
(14) |
(167) |
|
|
7(c): Reconciliation of income tax expense in the income statement to income tax on adjusted profit. |
|||
|
|
|
|
|
|
|
|
|
£m |
|
|
Six months 2019 |
Six months 2018 |
Full year 2018 |
|
Income tax expense/(credit) on continuing operations |
70 |
(5) |
(81) |
|
Tax on adjusting items |
|
|
|
|
Goodwill impairment and impact of acquisition accounting |
4 |
3 |
8 |
|
Business transformation costs |
7 |
7 |
16 |
|
Managed Separation costs |
- |
2 |
2 |
|
Finance costs |
1 |
2 |
2 |
|
Policyholder tax adjustments |
(61) |
7 |
64 |
|
Other shareholder tax adjustments |
9 |
(3) |
5 |
|
Tax on adjusting items - continuing operations |
(40) |
18 |
97 |
|
Tax attributable to policyholder returns - continuing operations |
(17) |
(4) |
(3) |
|
Tax charged on adjusted profit - continuing operations |
13 |
9 |
13 |
|
|
|
|
|
|
Income tax expense/(credit) on discontinued operations |
61 |
(9) |
(86) |
|
Tax on adjusting items |
|
|
|
|
Policyholder tax adjustments |
(15) |
8 |
37 |
|
Profit on business disposals |
- |
5 |
4 |
|
Voluntary customer remediation provision |
(1) |
- |
- |
|
Other shareholder tax adjustments |
(1) |
(5) |
(17) |
|
Tax on adjusting items - discontinued operations |
(17) |
8 |
24 |
|
Tax attributable to policyholder returns - discontinued operations |
(44) |
7 |
60 |
|
Tax charged on adjusted profit - discontinued operations |
- |
6 |
(2) |
|
|
|
|
|
|
Tax charged on total adjusted profit |
13 |
15 |
11 |
8: 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 and Headline EPS is a requirement of the Johannesburg Stock Exchange. The Group's EPS (for total business, 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 treasury shares, comprising 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. Treasury 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.
|
|
|
|
|
|
Pence |
|
|
Source of guidance |
Notes |
Six months 2019 |
Six months 2018 |
Full year 2018 |
|
Basic earnings per share |
IFRS |
8(b) |
(0.9) |
18.7 |
26.6 |
|
Diluted basic earnings per share |
IFRS |
8(b) |
(0.9) |
18.7 |
26.5 |
|
Adjusted basic earnings per share |
Group policy |
8(b) |
5.6 |
6.6 |
13.5 |
|
Adjusted diluted earnings per share |
Group policy |
8(b) |
5.5 |
6.6 |
13.5 |
|
Headline basic earnings per share (net of tax) |
JSE Listing Requirements |
8(c) |
(0.9) |
2.8 |
10.6 |
|
Headline diluted earnings per share (net of tax) |
JSE Listing Requirements |
8(c) |
(0.9) |
2.8 |
10.5 |
|
|
|
|
|
|
|
8(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): |
|||||
|
|
|
|
|
Millions |
|
|
|
|
Six months 2019 |
Six months 2018 |
Full year 2018 |
|
|
Weighted average number of Ordinary Shares |
|
1,902 |
1,902 |
1,902 |
|
|
Treasury shares including those held in EBTs |
|
(68) |
(72) |
(70) |
|
|
Basic weighted average number of Ordinary Shares |
|
1,834 |
1,830 |
1,832 |
|
|
Adjustment for dilutive share awards and options |
|
18 |
- |
7 |
|
|
Diluted weighted average number of Ordinary Shares |
|
1,852 |
1,830 |
1,839 |
|
|
|
|
|
|
|
|
8(b): Basic and diluted EPS (IFRS and adjusted profit)
|
|
|
|
|
£m |
|
|
|
Six months 2019 |
Six months 2018 |
Full year 2018 |
|
(Loss)/profit after tax from continuing operations |
|
(32) |
2 |
89 |
|
Adjusting items |
|
129 |
83 |
107 |
|
Tax on adjusting items |
|
40 |
(18) |
(97) |
|
Less: Policyholder tax adjustments |
|
(61) |
7 |
64 |
|
Adjusted profit after tax on continuing operations |
|
76 |
74 |
163 |
|
|
|
|
|
|
|
Profit after tax from discontinued operations |
|
15 |
340 |
399 |
|
Adjusting items |
|
9 |
(293) |
(327) |
|
Tax on adjusting items |
|
17 |
(8) |
(24) |
|
Less: Policyholder tax adjustments |
|
(15) |
8 |
37 |
|
Adjusted profit after tax on discontinued operations |
|
26 |
47 |
85 |
|
Adjusted profit after tax |
|
102 |
121 |
248 |
|
|
|
|
|
|
8(b): Basic and diluted EPS (IFRS and adjusted profit) continued
|
|
|
|
|
Pence |
|
|
|
Six months 2019 |
Six months 2018 |
Full year 2018 |
|
Basic EPS from continuing operations |
|
(1.7) |
0.1 |
4.8 |
|
Basic EPS from discontinued operations |
|
0.8 |
18.6 |
21.8 |
|
Basic EPS |
|
(0.9) |
18.7 |
26.6 |
|
Diluted EPS from continuing operations |
|
(1.7) |
0.1 |
4.8 |
|
Diluted EPS from discontinued operations |
|
0.8 |
18.6 |
21.7 |
|
Diluted EPS |
|
(0.9) |
18.7 |
26.5 |
|
Adjusted basic EPS from continuing operations |
|
4.1 |
4.0 |
8.9 |
|
Adjusted basic EPS from discontinued operations |
|
1.5 |
2.6 |
4.6 |
|
Adjusted basic EPS |
|
5.6 |
6.6 |
13.5 |
|
Adjusted diluted EPS from continuing operations |
|
4.1 |
4.0 |
8.9 |
|
Adjusted diluted EPS from discontinued operations |
|
1.4 |
2.6 |
4.6 |
|
Adjusted diluted EPS |
|
5.5 |
6.6 |
13.5 |
|
8(c): Headline earnings per share |
|
|
|
|
|
|
|
||||
|
|
|
+ |
+ |
|
|
|
£m |
||||
|
|
|
|
Six months 2019 |
|
Six months 2018 |
|
Full year 2018 |
||||
|
|
|
Gross |
Net of tax |
Gross |
Net of tax |
Gross |
Net of tax |
||||
|
Profit attributable to ordinary equity holders |
|
|
(17) |
|
342 |
|
488 |
||||
|
Adjusting items: |
|
|
|
|
|
|
|
||||
|
Less: profit on business disposals |
|
- |
- |
(285) |
(290) |
(290) |
(294) |
||||
|
Headline earnings |
|
- |
(17) |
(285) |
52 |
(290) |
194 |
||||
|
Headline basic EPS (pence) |
|
|
(0.9) |
|
2.8 |
|
10.6 |
||||
|
Headline diluted EPS (pence) |
|
|
(0.9) |
|
2.8 |
|
10.5 |
||||
|
|
|
|
|
|
|
|
|
||||
|
9: Dividends |
|
|
|
|
|
|
|
||||
|
|
|
|
|
£m |
|||||||
|
|
Payment date |
Six months 2019 |
Six months 2018 |
Full year 2018 |
|||||||
|
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 |
- |
- |
|||||||
|
Dividends paid to ordinary shareholders |
|
61 |
- |
221 |
|||||||
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 EBTs.
|
10: Goodwill and intangible assets |
|
|
|
|
|
|
|
|
|
|
|
10(a): Summary of goodwill and intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
Goodwill |
Software development costs |
Other intangible assets |
Total |
|
Gross amount |
|
|
|
|
|
1 January 2018 |
306 |
97 |
371 |
774 |
|
Acquisitions through business combinations |
3 |
- |
5 |
8 |
|
Transfer to non-current assets held for sale |
(1) |
- |
- |
(1) |
|
Other movements1 |
5 |
2 |
- |
7 |
|
30 June 2018 |
313 |
99 |
376 |
788 |
|
Acquisitions through business combinations |
2 |
- |
4 |
6 |
|
Additions |
- |
4 |
- |
4 |
|
Other movements |
(1) |
(3) |
- |
(4) |
|
31 December 2018 |
314 |
100 |
380 |
794 |
|
Acquisitions through business combinations |
52 |
- |
36 |
88 |
|
Additions |
- |
4 |
- |
4 |
|
Transfer to non-current assets held for sale |
(30) |
- |
- |
(30) |
|
30 June 2019 |
336 |
104 |
416 |
856 |
|
|
|
|
|
|
|
Amortisation and impairment losses |
|
|
|
|
|
1 January 2018 |
- |
(92) |
(108) |
(200) |
|
Amortisation charge for the period |
- |
(2) |
(21) |
(23) |
|
Other movements |
- |
- |
1 |
1 |
|
30 June 2018 |
- |
(94) |
(128) |
(222) |
|
Amortisation charge for the period |
- |
(2) |
(20) |
(22) |
|
Impairment of other acquired intangibles |
- |
- |
(1) |
(1) |
|
Other movements |
- |
1 |
- |
1 |
|
31 December 2018 |
- |
(95) |
(149) |
(244) |
|
Amortisation charge for the period |
- |
(3) |
(22) |
(25) |
|
30 June 2019 |
- |
(98) |
(171) |
(269) |
|
|
|
|
|
|
|
Carrying amount |
|
|
|
|
|
30 June 2018 |
313 |
5 |
248 |
566 |
|
31 December 2018 |
314 |
5 |
231 |
550 |
|
30 June 2019 |
336 |
6 |
245 |
587 |
1Goodwill increased by £4 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, resulting in a reclassification from other intangibles to goodwill.
|
|
|
|
|
|
|
|
10(b): Analysis of other intangible assets |
|
|
|
|
|
|
|
|
|
£m |
|
|
|
|
30 June 2019 |
30 June 2018 |
31 December 2018 |
Average estimated useful life |
Average period remaining |
|
Net carrying value |
|
|
|
|
|
|
Distribution channels |
26 |
32 |
28 |
8 years |
4 years |
|
Customer relationships |
217 |
211 |
199 |
10 years |
6 years |
|
Brand |
2 |
5 |
4 |
5 years |
1 year |
|
Total other intangible assets |
245 |
248 |
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, both of which are provisional calculations and therefore the apportionment between goodwill and other intangibles is subject to change. The brand asset is in relation to the Quilter Cheviot business.
10: Goodwill and other intangibles continued
|
10(c): Allocation of goodwill to cash generating units ('CGUs') and impairment testing |
|||
|
|
|
|
|
|
|
|
|
£m |
|
|
30 June 2019 |
30 June 2018 |
31 December 2018 |
|
Goodwill (net carrying amount) |
|
|
|
|
Advice and Wealth Management |
205 |
151 |
153 |
|
Wealth Platforms |
131 |
162 |
161 |
|
Goodwill (as per the Statement of Financial Position) |
336 |
313 |
314 |
|
Goodwill held for sale |
30 |
- |
- |
|
Total goodwill |
366 |
313 |
314 |
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 net client cash flows ('NCCF'), significant falls in profit and an increase in the discount rate.
During the six months to 30 June 2019, there were no indicators of impairment for either the Advice and Wealth Management or Wealth Platforms CGUs. In this period, adjusted profit has increased by 5% from the prior period to £115 million, although NCCF has been weaker compared to the prior period due to lower gross sales. The IFRS profit after tax from continuing operations has declined from a profit of £2 million to a loss of £(32) million. However, due to significant headroom in the recoverable amount over the carrying value for both CGUs, the impact of the lower NCCF and IFRS loss from continuing operations in the current period are not considered material enough to be indicators of impairment.
As part of the assessment of assets held for sale as disclosed in note 4(f), an allocation of goodwill was made in relation to the QLA business. The £30 million transferred represents the share of the 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.
|
11: Property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
Right-of-use assets |
Leasehold improvements |
Plant and equipment |
Total |
|
Gross amount |
|
|
|
|
|
1 January 2018 |
- |
13 |
75 |
88 |
|
Additions |
- |
1 |
1 |
2 |
|
Disposals |
- |
- |
(1) |
(1) |
|
Other movements |
- |
(1) |
- |
(1) |
|
30 June 2018 |
- |
13 |
75 |
88 |
|
Additions |
- |
1 |
4 |
5 |
|
Other movements |
- |
(1) |
- |
(1) |
|
31 December 2018 |
- |
13 |
79 |
92 |
|
Implementation of IFRS 161 |
74 |
(3) |
- |
71 |
|
Acquisitions through business combinations |
1 |
1 |
2 |
4 |
|
Additions |
- |
- |
4 |
4 |
|
Other movements2 |
1 |
1 |
3 |
5 |
|
30 June 2019 |
76 |
12 |
88 |
176 |
|
|
|
|
|
|
|
Amortisation and impairment losses |
|
|
|
|
|
1 January 2018 |
- |
(7) |
(63) |
(70) |
|
Depreciation charge for the period |
- |
- |
(3) |
(3) |
|
Disposals |
- |
- |
1 |
1 |
|
Other movements |
- |
- |
1 |
1 |
|
30 June 2018 |
- |
(7) |
(64) |
(71) |
|
Depreciation charge for the period |
- |
(1) |
(4) |
(5) |
|
Disposals |
- |
- |
1 |
1 |
|
31 December 2018 |
- |
(8) |
(67) |
(75) |
|
Implementation of IFRS 16 |
- |
2 |
- |
2 |
|
Acquisitions through business combinations |
- |
- |
(1) |
(1) |
|
Depreciation charge for the period |
(6) |
- |
(3) |
(9) |
|
Other movements |
- |
- |
(4) |
(4) |
|
30 June 2019 |
(6) |
(6) |
(75) |
(87) |
|
|
|
|
|
|
|
Carrying amount |
|
|
|
|
|
30 June 2018 |
- |
6 |
11 |
17 |
|
31 December 2018 |
- |
5 |
12 |
17 |
|
30 June 2019 |
70 |
6 |
13 |
89 |
|
1The 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. |
||||
|
2During the year, fully amortised plant and equipment within the Quilter Financial Planning business have been reclassified from intangible assets to tangible assets. |
||||
12: Financial investments
|
The table below analyses the investments and securities that the Group invests in, either for its own proprietary behalf (shareholder funds) or on behalf of third parties (policyholder funds). |
||||
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
|
30 June 2019 |
30 June 2018 |
31 December 2018 |
|
Government and government-guaranteed securities |
|
1,055 |
1,562 |
1,175 |
|
Other debt securities, preference shares and debentures |
|
2,449 |
2,524 |
2,095 |
|
Equity securities |
|
12,339 |
13,944 |
10,006 |
|
Pooled investments |
|
50,261 |
46,520 |
45,931 |
|
Short-term funds and securities treated as investments |
|
25 |
19 |
12 |
|
Total financial investments |
|
66,127 |
64,569 |
59,219 |
|
Less: financial investments classified as held for sale |
|
(9,704) |
- |
- |
|
Total financial investments net of held for sale |
|
56,423 |
64,569 |
59,219 |
|
|
|
|
|
|
|
Recoverable within 12 months |
|
65,987 |
64,403 |
59,044 |
|
Recoverable after 12 months |
|
140 |
166 |
175 |
|
Total financial investments |
|
66,127 |
64,569 |
59,219 |
13: 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.
All gains and losses on measuring the financial assets and liabilities at each reporting date are included in the determination of profit or loss for the period.
The methods and assumptions used in determining fair value are set out in note 14.
|
30 June 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
Measurement basis |
Fair value |
|
|
|
|
|
|
|
|
Mandatorily at FVTPL |
Designated at FVTPL |
|
Amortised cost |
|
Non-financial assets and liabilities |
Total |
|
Assets |
|
|
|
|
|
|
|
|
Investments in associated undertakings1 |
- |
- |
|
- |
|
2 |
2 |
|
Contract assets |
- |
- |
|
45 |
|
- |
45 |
|
Loans and advances |
186 |
- |
|
34 |
|
- |
220 |
|
Financial investments |
56,421 |
2 |
|
- |
|
- |
56,423 |
|
Trade, other receivables and other assets |
- |
- |
|
1,309 |
|
44 |
1,353 |
|
Derivative financial instruments |
24 |
- |
|
- |
|
- |
24 |
|
Cash and cash equivalents |
1,072 |
- |
|
872 |
|
- |
1,944 |
|
Total assets that include financial instruments |
57,703 |
2 |
|
2,260 |
|
46 |
60,011 |
|
Total other non-financial assets |
- |
- |
|
- |
|
1,201 |
1,201 |
|
Total assets net of held for sale |
57,703 |
2 |
|
2,260 |
|
1,247 |
61,212 |
|
Total assets classified as held for sale |
11,421 |
137 |
|
86 |
|
673 |
12,317 |
|
Total assets |
69,124 |
139 |
|
2,346 |
|
1,920 |
73,529 |
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Investment contract liabilities |
50,286 |
- |
|
- |
|
- |
50,286 |
|
Third-party interest in consolidation of funds |
6,972 |
- |
|
- |
|
- |
6,972 |
|
Borrowings and lease liabilities2 |
- |
- |
|
280 |
|
- |
280 |
|
Trade, other payables and other liabilities |
- |
- |
|
1,587 |
|
133 |
1,720 |
|
Derivative financial instruments |
24 |
- |
|
- |
|
- |
24 |
|
Total liabilities that include financial instruments |
57,282 |
- |
|
1,867 |
|
133 |
59,282 |
|
Total other non-financial liabilities |
- |
- |
|
- |
|
332 |
332 |
|
Total liabilities net of held for sale |
57,282 |
- |
|
1,867 |
|
465 |
59,614 |
|
Total liabilities classified as held for sale |
11,040 |
- |
|
125 |
|
816 |
11,981 |
|
Total liabilities |
68,322 |
- |
|
1,992 |
|
1,281 |
71,595 |
1Investments in associated undertakings classified as non-financial assets and liabilities are equity accounted.
2The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, comparative information is not restated.
13: Categories of financial instruments continued
|
30 June 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
Measurement basis |
Fair value |
|
|
|
|
|
|
|
|
Mandatorily at FVTPL |
Designated at FVTPL |
|
Amortised cost |
|
Non-financial assets and liabilities |
Total |
|
Assets |
|
|
|
|
|
|
|
|
Investments in associated undertaking1 |
- |
- |
|
- |
|
1 |
1 |
|
Contract assets |
- |
- |
|
- |
|
45 |
45 |
|
Loans and advances |
190 |
- |
|
29 |
|
- |
219 |
|
Financial investments |
64,399 |
170 |
|
- |
|
- |
64,569 |
|
Reinsurers' share of policyholder liabilities |
2,263 |
- |
|
- |
|
403 |
2,666 |
|
Trade, other receivables and other assets |
- |
- |
|
1,437 |
|
- |
1,437 |
|
Derivative financial instruments |
33 |
- |
|
- |
|
- |
33 |
|
Cash and cash equivalents2 |
1,395 |
- |
|
1,980 |
|
- |
3,375 |
|
Total assets that include financial instruments |
68,280 |
170 |
|
3,446 |
|
449 |
72,345 |
|
Total other non-financial assets |
- |
- |
|
- |
|
1,192 |
1,192 |
|
Total assets |
68,280 |
170 |
|
3,446 |
|
1,641 |
73,537 |
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Long-term business insurance policyholder liabilities |
- |
- |
|
- |
|
513 |
513 |
|
Investment contract liabilities |
60,140 |
- |
|
- |
|
- |
60,140 |
|
Third-party interest in consolidation of funds |
8,105 |
- |
|
- |
|
- |
8,105 |
|
Borrowings |
- |
- |
|
197 |
|
- |
197 |
|
Trade, other payables and other liabilities |
- |
- |
|
1,937 |
|
- |
1,937 |
|
Derivative financial instruments |
59 |
- |
|
- |
|
- |
59 |
|
Total liabilities that include financial instruments |
68,304 |
- |
|
2,134 |
|
513 |
70,951 |
|
Total other non-financial liabilities |
- |
- |
|
- |
|
526 |
526 |
|
Total liabilities |
68,304 |
- |
|
2,134 |
|
1,039 |
71,477 |
1Investments in associated undertakings classified as non-financial assets and liabilities are equity accounted.
2As at 30 June 2018, money market collective investment funds have been reclassified from amortised cost to FVTPL Level 1 to aid comparability between periods.
|
31 December 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
Measurement basis |
Fair value |
|
|
|
|
|
|
|
|
Mandatorily at FVTPL |
Designated at FVTPL |
|
Amortised cost |
|
Non-financial assets and liabilities |
Total |
|
Assets |
|
|
|
|
|
|
|
|
Investments in associated undertakings1 |
- |
- |
|
- |
|
2 |
2 |
|
Contract assets |
- |
- |
|
44 |
|
- |
44 |
|
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 |
- |
- |
|
449 |
|
37 |
486 |
|
Derivative financial instruments |
46 |
- |
|
- |
|
- |
46 |
|
Cash and cash equivalents |
1,361 |
- |
|
1,034 |
|
- |
2,395 |
|
Total assets that include financial instruments |
62,319 |
167 |
|
1,560 |
|
530 |
64,576 |
|
Total other non-financial assets |
- |
- |
|
- |
|
1,214 |
1,214 |
|
Total assets |
62,319 |
167 |
|
1,560 |
|
1,744 |
65,790 |
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Long-term business insurance policyholder liabilities |
- |
- |
|
- |
|
602 |
602 |
|
Investment contract liabilities |
56,450 |
- |
|
- |
|
- |
56,450 |
|
Third-party interest in consolidation of funds |
5,116 |
- |
|
- |
|
- |
5,116 |
|
Borrowings |
- |
- |
|
197 |
|
- |
197 |
|
Trade, other payables and other liabilities |
- |
- |
|
840 |
|
159 |
999 |
|
Derivative financial instruments |
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 |
1Investments in associated undertakings classified as non-financial assets and liabilities are equity accounted.
14: 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 14(b)), prescribed under IFRS, provides an indication about the reliability of inputs used in determining fair value.
14(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 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. 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 are measured at 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. In situations where the derivatives are traded over the counter the fair value of the instruments is determined by the utilisation of option pricing models.
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 funds are stated at amortised cost.
14: Fair value methodology continued
14(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: financial assets and liabilities with quoted prices for identical instruments in active markets. |
Listed equity securities, government securities and other listed debt securities and similar instruments 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 using observable inputs: financial assets and liabilities with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial assets and liabilities valued using models where all significant inputs are observable. |
Unlisted equity and debt securities where the valuation is based on models involving no significant unobservable data. Over the counter (OTC) derivatives, certain privately placed debt instruments and third-party interests in consolidated funds. |
|
Level 3 - valuation techniques using significant unobservable inputs: financial assets and liabilities valued using valuation techniques where one or more significant inputs are unobservable. |
Unlisted equity and securities with significant unobservable inputs, securities where the market is not considered sufficiently active, including certain inactive pooled 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.
14(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 £167 million from Level 1 to Level 2 during the year (30 June 2018: £15 million, 31 December 2018: £13 million). There were transfers of financial investments of £55 million from Level 2 to Level 1 during the year (30 June 2018: £76 million, 31 December 2018: £107 million). These movements are matched exactly by transfers of investment contract liabilities. See note 14(e) for the reconciliation of Level 3 financial instruments.
14(d): Financial assets and liabilities measured at fair value, classified according to fair value hierarchy
The tables below present 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.
The majority of the Group's financial assets are measured using quoted market prices for identical instruments in active markets (Level 1) and there has been no significant change during the year.
The 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.
14: Fair value methodology continued
|
|
30 June 2019 |
30 June 2018 |
31 December 2018 |
|||
|
|
£m |
% |
£m |
% |
£m |
% |
|
Financial assets measured at fair value |
|
|
|
|
|
|
|
Level 11 |
55,561 |
80.2% |
58,211 |
85.1% |
52,060 |
83.4% |
|
Level 2 |
12,281 |
17.7% |
9,128 |
13.3% |
9,272 |
14.8% |
|
Level 3 |
1,421 |
2.1% |
1,111 |
1.6% |
1,154 |
1.8% |
|
Total |
69,263 |
100.0% |
68,450 |
100.0% |
62,486 |
100.0% |
|
Financial liabilities measured at fair value |
|
|
|
|
|
|
|
Level 1 |
59,498 |
87.1% |
58,566 |
85.8% |
54,944 |
89.2% |
|
Level 2 |
7,403 |
10.8% |
8,629 |
12.6% |
5,508 |
8.9% |
|
Level 3 |
1,421 |
2.1% |
1,109 |
1.6% |
1,151 |
1.9% |
|
Total |
68,322 |
100.0% |
68,304 |
100.0% |
61,603 |
100.0% |
1As at 30 June 2018 money market collective investment funds have been reclassified from amortised cost to FVTPL Level 1 to aid comparability between periods.
|
|
|
|
|
£m |
|
30 June 2019 |
Level 1 |
Level 2 |
Level 3 |
Total |
|
Financial assets measured at fair value |
|
|
|
|
|
Mandatorily (fair value through profit or loss) |
44,024 |
12,259 |
1,420 |
57,703 |
|
Loans and advances |
186 |
- |
- |
186 |
|
Financial investments |
42,766 |
12,235 |
1,420 |
56,421 |
|
Cash and cash equivalents |
1,072 |
- |
- |
1,072 |
|
Derivative financial instruments - assets |
- |
24 |
- |
24 |
|
|
|
|
|
|
|
Designated (fair value through profit or loss) |
2 |
- |
- |
2 |
|
Financial investments |
2 |
- |
- |
2 |
|
Total assets net of held for sale |
44,026 |
12,259 |
1,420 |
57,705 |
|
Total assets classified as held for sale |
11,535 |
22 |
1 |
11,558 |
|
Total assets measured at fair value |
55,561 |
12,281 |
1,421 |
69,263 |
|
|
|
|
|
|
|
Financial liabilities measured at fair value |
|
|
|
|
|
Mandatorily (fair value through profit or loss) |
48,481 |
7,381 |
1,420 |
57,282 |
|
Investment contract liabilities |
48,481 |
385 |
1,420 |
50,286 |
|
Third-party interests in consolidated funds |
- |
6,972 |
- |
6,972 |
|
Derivative financial instruments - liabilities |
- |
24 |
- |
24 |
|
Total liabilities net of held for sale |
48,481 |
7,381 |
1,420 |
57,282 |
|
Total liabilities classified as held for sale |
11,017 |
22 |
1 |
11,040 |
|
Total liabilities measured at fair value |
59,498 |
7,403 |
1,421 |
68,322 |
|
|
|
|
|
£m |
|
30 June 2018 |
Level 1 |
Level 2 |
Level 3 |
Total |
|
Financial assets measured at fair value |
|
|
|
|
|
Mandatorily (fair value through profit or loss) |
58,041 |
9,128 |
1,111 |
68,280 |
|
Reinsurers' share of policyholder liabilities |
2,263 |
- |
- |
2,263 |
|
Loans and advances |
190 |
- |
- |
190 |
|
Financial investments |
54,193 |
9,095 |
1,111 |
64,399 |
|
Cash and cash equivalents1 |
1,395 |
- |
- |
1,395 |
|
Derivative financial instruments - assets |
- |
33 |
- |
33 |
|
|
|
|
|
|
|
Designated (fair value through profit or loss) |
170 |
- |
- |
170 |
|
Financial investments |
170 |
- |
- |
170 |
|
|
|
|
|
|
|
Total assets measured at fair value |
58,211 |
9,128 |
1,111 |
68,450 |
|
Financial liabilities measured at fair value |
|
|
|
|
|
Mandatorily (fair value through profit or loss) |
58,566 |
8,629 |
1,109 |
68,304 |
|
Investment contract liabilities |
58,566 |
465 |
1,109 |
60,140 |
|
Third-party interests in consolidated funds |
- |
8,105 |
- |
8,105 |
|
Derivative financial instruments - liabilities |
- |
59 |
- |
59 |
|
|
|
|
|
|
|
Total liabilities measured at fair value |
58,566 |
8,629 |
1,109 |
68,304 |
1As at 30 June 2018 money market collective investment funds have been reclassified from amortised cost to FVTPL Level 1 to aid comparability between periods.
|
|
|
|
|
£m |
|
31 December 2018 |
Level 1 |
Level 2 |
Level 3 |
Total |
|
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 financial instruments - 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 financial instruments - liabilities |
- |
37 |
- |
37 |
|
|
|
|
|
|
|
Total liabilities measured at fair value |
54,944 |
5,508 |
1,151 |
61,603 |
14(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 prior periods, included within the assets classified as Level 3 was a shareholder investment in an unlisted equity (30 June 2018: £2 million, 31 December 2018: £3 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 period, 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.
14: Fair value methodology continued
The table below reconciles the opening balance of Level 3 financial assets to the closing balance at each period end:
|
|
|
|
£m |
|
|
30 June 2019 |
30 June 2018 |
31 December 2018 |
|
At beginning of the year |
1,154 |
1,169 |
1,169 |
|
Total net fair value gains recognised in: |
|
|
|
|
- profit or loss |
68 |
20 |
54 |
|
Purchases |
31 |
- |
38 |
|
Sales |
(3) |
(2) |
(25) |
|
Transfers in |
210 |
57 |
69 |
|
Transfers out |
(36) |
(133) |
(151) |
|
Foreign exchange and other |
(3) |
- |
- |
|
Total Level 3 financial assets |
1,421 |
1,111 |
1,154 |
|
Unrealised fair value gains/(losses) relating to assets held at the year end recognised in: |
|
|
|
|
- profit or loss |
68 |
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 for the current period total £210 million (30 June 2018: £57 million, 31 December 2018: £69 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. Transfers out of Level 3 assets in the current period comprise £36 million (30 June 2018: £133 million, 31 December 2018: £151 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:
|
|
|
|
|
£m |
|
|
|
30 June 2019 |
30 June 2018 |
31 December 2018 |
|
Pooled investments |
|
245 |
87 |
86 |
|
Unlisted and stale price pooled investments |
|
129 |
86 |
82 |
|
Suspended funds |
|
116 |
1 |
4 |
|
Private equity investments |
|
1,176 |
1,024 |
1,068 |
|
Total Level 3 financial assets |
|
1,421 |
1,111 |
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 period end:
|
|
|
|
£m |
|
|
30 June 2019 |
30 June 2018 |
31 December 2018 |
|
At beginning of the year |
1,151 |
1,167 |
1,167 |
|
Total net fair value gains recognised in: |
|
|
|
|
Profit or loss |
68 |
20 |
53 |
|
Purchases |
31 |
- |
38 |
|
Sales |
(3) |
(2) |
(25) |
|
Transfers in |
210 |
57 |
69 |
|
Transfers out |
(36) |
(133) |
(151) |
|
Total Level 3 financial liabilities |
1,421 |
1,109 |
1,151 |
|
Unrealised fair value gains/(losses) relating to liabilities held at the period end recognised in: |
|
|
|
|
Profit or loss |
68 |
20 |
53 |
14: Fair value methodology continued
14(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 14(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 perform a sensitivity of an aggregate 10% change in the value of the financial asset or liability (30 June 2018: 10%, 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 £142 million to the reported fair value of level 3 assets, both favourable and unfavourable (30 June 2018: £111 million, 31 December 2018: £115 million). As described in note 14(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.
14(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:
Contract assets Level 3
Trade, other receivables, and other assets Level 3
Cash and cash equivalents Level 1
Trade, other payables, and other liabilities Level 3
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. Loans and advances held at amortised cost and 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.
|
15: Analysis of cash and cash equivalents
|
||||
|
|
|
|
|
£m |
|
|
|
30 June 2019 |
30 June 2018 |
31 December 2018 |
|
Cash at bank |
|
369 |
726 |
550 |
|
Money market funds |
|
1,410 |
1,395 |
1,361 |
|
Cash and cash equivalents in consolidated funds |
|
546 |
1,254 |
484 |
|
Total cash and cash equivalents per consolidated statement of cash flows |
|
2,325 |
3,375 |
2,395 |
|
Less: cash within held for sale |
|
(381) |
- |
- |
|
Total cash and cash equivalents per statement of financial position |
|
1,944 |
3,375 |
2,395 |
Except for cash and cash equivalents subject to consolidation of funds of £546 million (30 June 2018: £1,254 million, 31 December 2018: £484 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.
16: Share-based payments
During the six months ended 30 June 2019, the Group participated in a number of share-based payment arrangements. This note describes the nature of the plans and how the share options and awards are valued.
16(a): Description of share-based payment arrangements
The Group operates the following share-based payment schemes with awards over Quilter plc shares which came into force on 25 June 2018: the Quilter plc Performance Share Plan, the Quilter plc Share Reward Plan, the Quilter plc Share Incentive Plan, and the Quilter plc Sharesave Plan.
The Old Mutual Wealth Joint Share Ownership Plan, the Old Mutual Wealth Phantom Share Reward Plan and the Old Mutual plc Managed Separation Incentive Plan were awards over Old Mutual plc shares or, in the case of the Old Mutual Wealth Phantom Share Reward Plan, notional Old Mutual plc shares. These share-based payment schemes were transferred to awards over Quilter plc shares on 25 June 2018 and continue to the original vesting dates.
|
|
Description of award |
|
Vesting conditions |
||||||
|
Scheme |
Restricted shares |
Conditional shares |
Options |
Other |
Dividend entitlement1 |
|
Contractual life (years) |
Typical service (years) |
Performance (measure) |
|
Quilter plc Performance Share Plan - Share Options (Nil cost options) |
- |
- |
ü |
- |
ü |
|
Up to 10 |
3 |
AP EPS CAGR2 and Relative Total Shareholder Return |
|
Quilter plc Performance Share Plan - Conditional Shares |
- |
ü |
- |
- |
ü |
|
Not less than 3 |
3 |
Conduct, Risk & Compliance Underpins |
|
Quilter plc Share Reward Plan - Conditional Shares |
- |
ü |
- |
- |
ü |
|
Typically 3 |
3 |
- |
|
Quilter plc Share Incentive Plan - Restricted Shares |
ü |
- |
- |
- |
ü |
|
Not less than 3 |
2 |
- |
|
Quilter plc Sharesave Plan3 |
- |
- |
ü |
ü |
- |
|
31/2 - 51/2 |
3 & 5 |
- |
|
Old Mutual Wealth Joint Share Ownership Plan - Jointly Owned/Restricted Shares4 |
ü |
- |
- |
ü |
ü |
|
3 |
3 |
- |
|
Old Mutual Wealth Phantom Share Reward Plan - Conditional Shares5 |
- |
ü |
- |
- |
ü |
|
Typically 3 |
3 |
- |
|
Old Mutual plc Managed Separation Incentive Plan - Share Options (Nil cost options) |
- |
- |
ü |
- |
ü |
|
Up to 10 |
- |
Targets in respect of Managed Separation completion |
1Participants are entitled to actual dividends for the Joint Share Ownership Plan Restricted shares and the Share Incentive Plan. For all other schemes participants are entitled to dividend equivalents.
2Adjusted Profit compound annual growth rate ('CAGR').
3The Quilter plc Sharesave Plan is linked to a savings plan.
4The Joint Share Ownership Plan ('JSOP') was implemented for certain key employees of the Group in 2013, with the final grant of awards in 2016. It provided participants with an interest in the capital growth of the company by granting joint ownership of shares in Old Mutual Wealth Management Ltd (now Quilter plc) with an EBT, whereby the trust owned the principal value of the shares and the participants owned any growth in value during the vesting period. Upon the demerger and listing of Quilter plc, the trust exercised a call option to acquire the participants' interest in the shares based on the growth in value of the Company between grant and listing, in return for consideration shares in Quilter plc. The consideration shares for any awards that remain unvested are restricted until the normal vesting date, and attract dividends during that time.
5Awards granted under the Phantom Share Reward Plan prior to the demerger of Quilter plc were made over notional ordinary shares in Old Mutual plc that were settled in cash on the vesting date. Upon the demerger and listing of Quilter plc, all unvested notional share awards were converted to conditional awards over ordinary shares in Quilter plc, which will be settled in Quilter plc shares on the normal vesting dates.
|
16(b): Reconciliation of movements in options |
|
|
|
|
|
|
|
The movement in options outstanding under the Performance Share Plan and Sharesave Plan arrangements during the period is detailed below: |
||||||
|
|
||||||
|
|
|
Six months |
|
Six months |
|
Full year |
|
|
|
2019 |
|
2018 |
|
2018 |
|
Options over shares (London Stock Exchange) |
Number of options |
Weighted average exercise price |
Number of options |
Weighted average exercise price |
Number of options |
Weighted average exercise price |
|
Outstanding at beginning of the period |
2,468,964 |
£0.00 |
7,622,956 |
£1.60 |
7,622,956 |
£1.60 |
|
Granted during the period |
23,277,265 |
£0.73 |
2,824,136 |
£0.00 |
2,824,136 |
£0.00 |
|
Forfeited during the period |
- |
- |
(2,083,686) |
£1.60 |
(2,252,333) |
£1.60 |
|
Exercised during the period |
- |
- |
(5,533,303) |
£1.60 |
(5,578,539) |
£1.60 |
|
Expired during the period |
- |
- |
(5,967) |
£1.60 |
(5,967) |
£1.60 |
|
Cancelled during the period |
(72,960) |
£1.25 |
- |
- |
(141,289) |
£1.60 |
|
Outstanding at end of the period |
25,673,269 |
£0.66 |
2,824,136 |
£0.00 |
2,468,964 |
£0.00 |
|
Exercisable at end of the period |
- |
- |
- |
- |
- |
- |
|
|
||||||
16: Share-based payments continued
16(b): Reconciliation of movements in options continued
The weighted average fair value of options at the measurement date, for options granted during the six months ended 30 June 2019 is £0.71, and for both the six months ended 30 June 2018 and the year ended 31 December 2018 was £1.24.
The options outstanding at 30 June 2019 have exercise prices of £nil for the Quilter plc Performance Share Plan and £1.25 for the Quilter plc Sharesave Plan, with a weighted average remaining contractual life of 3.2 years. At 30 June 2018 and 31 December 2018 the exercise price was £nil, as they were all nil cost options, with a weighted average remaining contractual life of 2.7 years and 2.2 years respectively.
16(c): Measurements and assumptions
In determining the fair value of equity-settled share-based awards and the related charge to the income statement, the Group makes assumptions about future events and market conditions. Specifically, management makes estimates of the likely number of shares that will vest and the fair value of each award granted which is valued and 'locked in' at the grant date.
The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of fair value of share options granted is measured using either a Black-Scholes option pricing model or a Monte Carlo simulation.
The inputs used in the measurement of fair values at the grant date for awards granted during 2019 were as follows:
|
|
Weighted average share price |
Weighted average exercise price |
Weighted average expected volatility |
Weighted average expected life |
Weighted average risk free interest rate |
Weighted average expected dividend yield |
Expected forfeitures per annum |
|
Scheme |
£ |
£ |
|
(years) |
|
|
|
|
Quilter plc Performance Share Plan - Share Options (Nil cost options) |
1.39 |
0.00 |
29.3% |
3.39 |
0.7% |
0.0% |
4% |
|
Quilter plc Performance Share Plan - Conditional Shares |
1.39 |
0.00 |
29.3% |
3.00 |
0.6% |
0.0% |
4% |
|
Quilter plc Share Reward Plan - Conditional Shares |
1.39 |
0.00 |
29.3% |
2.04 |
0.6% |
0.0% |
4% |
|
Quilter plc Sharesave Plan |
1.42 |
1.25 |
28.1% |
3.65 |
0.8% |
3.0% |
10% |
|
|
|
|
|
|
|
|
|
16(d): Share grants
The following summarises the fair value of Restricted Shares and Conditional Shares granted by the Group during the period:
|
|
|
Six months |
Six months |
Full year |
|
|||||
|
|
|
2019 |
|
2018 |
|
2018 |
|
|||
|
Instruments granted during the period |
Number granted |
Weighted average fair value |
Number granted |
Weighted average fair value |
Number granted |
Weighted average fair value |
|
|||
|
Quilter plc Performance Share Plan - Conditional Shares |
4,048,663 |
£1.39 |
2,256,591 |
£1.52 |
5,928,616 |
£1.41 |
|
|||
|
Quilter plc Share Reward Plan - Conditional Shares |
10,229,933 |
£1.39 |
- |
- |
- |
- |
|
|||
|
Quilter plc Share Incentive Plan - Restricted Shares |
- |
- |
5,199,510 |
£1.53 |
5,202,140 |
£1.53 |
|
|||
|
Old Mutual Wealth Phantom Share Reward Plan - Conditional Shares |
- |
- |
6,474,853 |
£1.52 |
6,474,853 |
£1.52 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
16(e): Financial impact |
|
|
|
|||||||
|
The total expense recognised for the period arising from equity compensation plans was as follows: |
||||||||||
|
|
|
|
£m |
|||||||
|
|
Six months 2019 |
Six months 2018 |
Full year 2018 |
|||||||
|
Expense arising from equity-settled share and share option plans - continuing operations |
13 |
12 |
26 |
|||||||
|
Expense arising from equity-settled share and share option plans - discontinued operations |
- |
1 |
1 |
|||||||
|
Total expense arising from equity-settled share and share option plans |
13 |
13 |
27 |
|||||||
|
Expense arising from cash-settled share and share option plans - continuing operations |
- |
3 |
3 |
|||||||
|
Total expense arising from share and share option plans |
13 |
16 |
30 |
|||||||
17: Insurance and investment contract liabilities
|
The following is a summary of the Group's insurance and investment contract provisions and related reinsurance assets. |
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
£m |
|
||||||||||||||||||
|
|
|
30 June 2019 |
30 June 2018 |
31 December 2018 |
|
||||||||||||||||||||||||
|
|
Notes |
Gross |
Re-insurance |
Net |
Gross |
Re-insurance |
Net |
Gross |
Re-insurance |
Net |
|
||||||||||||||||||
|
Life assurance policyholder liabilities |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Life assurance policyholder liabilities |
17(a) |
676 |
(556) |
120 |
503 |
(395) |
108 |
588 |
(478) |
110 |
|
||||||||||||||||||
|
Outstanding claims |
|
18 |
(14) |
4 |
10 |
(8) |
2 |
14 |
(13) |
1 |
|
||||||||||||||||||
|
Less: liabilities transferred to held for sale |
(694) |
570 |
(124) |
- |
- |
- |
- |
- |
- |
|
|||||||||||||||||||
|
Insurance contract liabilities |
|
- |
- |
- |
513 |
(403) |
110 |
602 |
(491) |
111 |
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
Unit-linked investment contracts |
|
61,326 |
(1,516) |
59,810 |
60,140 |
(2,263) |
57,877 |
56,450 |
(1,671) |
54,779 |
|
||||||||||||||||||
|
Less: liabilities transferred to held for sale |
(11,040) |
1,516 |
(9,524) |
- |
- |
- |
- |
- |
- |
|
|||||||||||||||||||
|
Investment contract liabilities |
17(b) |
50,286 |
- |
50,286 |
60,140 |
(2,263) |
57,877 |
56,450 |
(1,671) |
54,779 |
|
||||||||||||||||||
|
Total life assurance policyholder liabilities |
50,286 |
- |
50,286 |
60,653 |
(2,666) |
57,987 |
57,052 |
(2,162) |
54,890 |
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
17(a): Insurance contract liabilities |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Movements in the amounts outstanding in respect of life assurance policyholder liabilities, other than outstanding claims, are set out below: |
|||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
£m |
|||||||||||||||||||
|
|
|
30 June 2019 |
30 June 2018 |
31 December 2018 |
|||||||||||||||||||||||||
|
|
Note |
Gross |
Re-insurance |
Net |
Gross |
Re-insurance |
Net |
Gross |
Re-insurance |
Net |
|||||||||||||||||||
|
Carrying amount at 1 January |
|
588 |
(478) |
110 |
480 |
(375) |
105 |
480 |
(375) |
105 |
|||||||||||||||||||
|
Impact of new business |
|
3 |
(6) |
(3) |
2 |
(6) |
(4) |
2 |
(10) |
(8) |
|||||||||||||||||||
|
Impact of experience effects |
|
18 |
(11) |
7 |
19 |
(12) |
7 |
38 |
(26) |
12 |
|||||||||||||||||||
|
Impact of assumption changes |
|
67 |
(61) |
6 |
2 |
(2) |
- |
69 |
(68) |
1 |
|||||||||||||||||||
|
Other movements |
|
- |
- |
- |
- |
- |
- |
(1) |
1 |
- |
|||||||||||||||||||
|
Movement shown in discontinued operations income statement1 |
4(c) |
88 |
(78) |
10 |
23 |
(20) |
3 |
108 |
(103) |
5 |
|||||||||||||||||||
|
Transfer to liabilities held for sale |
|
(676) |
556 |
(120) |
- |
- |
- |
- |
- |
- |
|||||||||||||||||||
|
Total insurance contract life assurance policyholder liabilities |
|
- |
- |
- |
503 |
(395) |
108 |
588 |
(478) |
110 |
|||||||||||||||||||
|
1Of the £88 million gross movement in the six months ended 30 June 2019, £91 million is included within change in insurance contract liabilities and £3 million is included within in gross earned premiums in relation to the release of a provision for unearned premiums. |
|||||||||||||||||||||||||||||
|
17(b): Unit-linked investment contract liabilities |
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Movements in the amounts outstanding in respect of unit-linked and other investment contracts are set out below: |
|
|
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
£m |
|
|||||||||||||||||||
|
|
30 June 2019 |
30 June 2018 |
31 December 2018 |
|
|||||||||||||||||||||||||
|
|
Gross |
Re- insurance |
Net |
Gross |
Re- insurance |
Net |
Gross |
Re- insurance |
Net |
|
|||||||||||||||||||
|
Carrying amount at 1 January |
56,450 |
(1,671) |
54,779 |
59,139 |
(2,525) |
56,614 |
59,139 |
(2,525) |
56,614 |
|
|||||||||||||||||||
|
From continuing operations |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Fair value movements |
4,002 |
- |
4,002 |
(106) |
(3) |
(109) |
(3,109) |
- |
(3,109) |
|
|||||||||||||||||||
|
Investment income |
346 |
- |
346 |
299 |
- |
299 |
610 |
- |
610 |
|
|||||||||||||||||||
|
Movements arising from investment return |
4,348 |
- |
4,348 |
193 |
(3) |
190 |
(2,499) |
- |
(2,499) |
|
|||||||||||||||||||
|
From discontinued operations |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Fair value movements |
1,078 |
(159) |
919 |
(99) |
(1) |
(100) |
(1,010) |
78 |
(932) |
|
|||||||||||||||||||
|
Investment income |
72 |
- |
72 |
102 |
- |
102 |
195 |
- |
195 |
|
|||||||||||||||||||
|
Movements arising from investment return |
1,150 |
(159) |
991 |
3 |
(1) |
2 |
(815) |
78 |
(737) |
|
|||||||||||||||||||
|
Contributions received |
2,747 |
315 |
3,062 |
4,047 |
266 |
4,313 |
7,117 |
774 |
7,891 |
|
|||||||||||||||||||
|
Maturities |
(86) |
- |
(86) |
(100) |
- |
(100) |
(183) |
- |
(183) |
|
|||||||||||||||||||
|
Withdrawals and surrenders |
(3,189) |
- |
(3,189) |
(2,894) |
- |
(2,894) |
(6,091) |
- |
(6,091) |
|
|||||||||||||||||||
|
Claims and benefits |
(98) |
- |
(98) |
(116) |
- |
(116) |
(234) |
- |
(234) |
|
|||||||||||||||||||
|
Reclassification from provisions |
- |
- |
- |
3 |
- |
3 |
- |
- |
- |
|
|||||||||||||||||||
|
Transfer to held for sale |
(11,040) |
1,516 |
(9,524) |
- |
- |
- |
- |
- |
- |
|
|||||||||||||||||||
|
Other movements |
(1) |
(1) |
(2) |
(129) |
- |
(129) |
(2) |
2 |
- |
|
|||||||||||||||||||
|
Change in liability |
(6,169) |
1,671 |
(4,498) |
1,007 |
262 |
1,269 |
(2,707) |
854 |
(1,853) |
|
|||||||||||||||||||
|
Currency translation (gain)/loss |
5 |
- |
5 |
(6) |
- |
(6) |
18 |
- |
18 |
|
|||||||||||||||||||
|
Total unit-linked investment contract policyholder liabilities |
50,286 |
- |
50,286 |
60,140 |
(2,263) |
57,877 |
56,450 |
(1,671) |
54,779 |
|
|||||||||||||||||||
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.
None of the reinsurers share of policyholder liabilities relating to investment contract liabilities were past due as at 30 June 2019 (30 June 2018: £nil, 31 December 2018: £nil).
18: Provisions
|
|
|
|
|
£m |
|
30 June 2019 |
Compensation provisions |
Sale of Single Strategy business |
Other |
Total |
|
Balance at beginning of the period |
54 |
20 |
20 |
94 |
|
Adjustment on initial application of IFRS 16 |
- |
- |
(5) |
(5) |
|
Additions from business combinations |
1 |
- |
1 |
2 |
|
Charge to income statement |
1 |
- |
- |
1 |
|
Utilised during the period |
(15) |
(5) |
(1) |
(21) |
|
Unused amounts reversed |
(6) |
- |
- |
(6) |
|
Transfer to held-for-sale |
(19) |
- |
(1) |
(20) |
|
Balance at 30 June 2019 |
16 |
15 |
14 |
45 |
|
|
|
|
|
|
|
|
|
|
|
£m |
|
30 June 2018 |
Compensation provisions |
Sale of Single Strategy business |
Other |
Total |
|
Balance at beginning of the period |
82 |
- |
22 |
104 |
|
Charge to income statement |
4 |
19 |
1 |
24 |
|
Utilised during the year |
(4) |
(2) |
(2) |
(8) |
|
Unused amounts reversed |
(1) |
- |
(1) |
(2) |
|
Foreign exchange and other movements |
(3) |
- |
- |
(3) |
|
Balance at 30 June 2018 |
78 |
17 |
20 |
115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18: Provisions continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
31 December 2018 |
Compensation provisions |
Sale of Single Strategy business |
Other |
Total |
|
Balance at beginning of the year |
82 |
- |
22 |
104 |
|
Additions from business combinations |
- |
- |
1 |
1 |
|
Charge to income statement |
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 |
Compensation provisions
Compensation provisions totalled £16 million (30 June 2018: £78 million, 31 December 2018: £54 million).
Voluntary client remediation provision
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 of certain legacy products, establishing a provision for £69 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, £27 million was utilised against programme costs and pension remediation incurred. There was also a £4 million reclassification to 'liabilities for linked investment contracts', reflecting the capping of early encashment charges on live pension plans. At the end of 2018 there was £38 million of the provision remaining, including £6 million of programme costs.
During the first six months of 2019, the components of the remaining provision were reviewed as new and improved data emerged, together with improvements in estimation methodology and modelling, resulting in a £6 million release. A further £13 million was utilised during this period, leaving £19 million which has been transferred to held for sale liabilities at 30 June 2019.
Estimates and assumptions
Key estimates and assumptions in relation to the provision are:
· Timing of protection customer remediation; and
· The programme costs of carrying out the remediation activity.
The model used to calculate the costs of protection remediation assumes a generic annual investment return across the population of plans in scope. A sensitivity analysis has been calculated to determine the impact of adjusting the return rate.
The model assumes protection customers will be compensated within a certain timeframe. Delays to the programme and more specifically, in locating customers and resolving complicated plan arrangements, will increase the final cost of remediation.
The programme costs of conducting the remediation activity are highly variable and are subject to a number of uncertainties. In calculating the best estimate of these costs, consideration has been given to such matters as the identification of impacted customers, likelihood of the customer contesting the offer, the complexity of the calculations, the level of quality assurance and checking, the ease of contacting and communicating with customers and the level of customer interactions. The current remaining provision for programme costs has been calculated as falling within a range of approximately £6 million to £8 million.
Sensitivities relating to the assumptions and uncertainties are provided in the table below:
|
Assumption |
Change in assumption/estimate |
Consequential change in provision (£m) |
|
Modelled investment return |
+/- 2% |
+/- 0.2 |
|
Timing of protection remediation |
12 month delay |
+ 1.6 |
Compensation provisions (other)
Other compensation provisions of £16 million 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.
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 £19 million, of which £5 million was utilised during 2018. The carried forward restructuring provision at 31 December 2018 was £14 million. In the first six months of 2019, a further £5 million of the restructuring provision was utilised and therefore £9 million of the provision remains at the period end.
Additional provisions totalling £6 million were also made 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. The carried forward additional provision at 31 December 2018 was £6 million. None of the additional sale-related provision has been utilised in 2019 and this therefore still stands at £6 million.
18: Provisions continued
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 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.
19: 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 18). 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 reassesses contingent liabilities arising from matters such as litigation, warranties and indemnities relating to past acquisitions and disposals. These are not expected to result in any material provisions.
20: Capital and financial risk management
The principal risks and uncertainties of the Group and the management of these risks have not materially changed since the year ended 31 December 2018.
Details of the principal risks and uncertainties can be found in the Capital and Risk Management information in Note 40 of the Group's 2018 ARA, and the estimation techniques and uncertainties in the specific disclosures to which they relate.
21: Related party transactions
In the normal course of business, the Group enters into transactions with related parties. These 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 prior to separation from Old Mutual plc which was disclosed in the Group's 2018 ARA. Except for these intra-group loan repayments, the nature of the related party transactions of the Group has not changed over the course of the year.
22: Events after reporting date
Interim dividend
Subsequent to 30 June 2019, the Board has declared an interim dividend of 1.7 pence per ordinary share. This amounts to £31 million in total, and will be accounted for as an appropriation of retained earnings in the year ending 31 December 2019. The interim dividend will be paid on 20 September 2019 to shareholders on the UK and South African share registers.
Disposal of QLA business
Following the Group's recently announced strategic review in respect of Quilter Life Assurance ('QLA'), on 4 August 2019 the Group entered into an agreement to sell the business to ReAssure Group plc ('the Acquirer') for consideration of £425 million, anticipated to be settled by a cash payment of £395 million at completion and a pre-completion dividend, subject to QLA Board approval, of £30 million. In the event that the QLA Board does not approve this £30 million dividend, or approves a lower dividend amount, the Acquirer will increase the amount settled in cash at completion on a pound-for-pound basis up to £425 million. Sale consideration will be increased by an interest charge between 1 January 2019 and the earlier of the completion date (or, in the case of the dividend, the dividend payment date) and 31 December 2019. The Group expects to complete the sale, which is subject to receiving regulatory approval, by the end of 2019. Economic ownership of QLA will pass to the Acquirer from 1 January 2019 (with all profits earned up until 31 December 2018 for the account of Quilter plc), with the exception of a £90 million dividend paid to the Group in March 2019 and a further £40 million dividend payable by QLA, subject to QLA Board approval, to the Group anticipated during Q3 2019 prior to completion. No further deferred or contingent consideration is payable. The results of the QLA business will continue to be included within the Group's results until the completion date.
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.
Latest directors dealings
- 1 hour ago Oxford Nanopore Technologies
- 2 hours ago AVI Global Trust
- 2 hours ago LSL Property Services
- 2 hours ago Bluebird Merchant Ventures (DI)
- 3 hours ago Power Probe PLC