Half-year Report - Part 3 of 4

RNS Number : 1639I

Standard Life Aberdeen plc

07 August 2019

Standard Life Aberdeen plc

Half year results 2019

Part 3 of 4

2. Statement of Directors' responsibilities

Each of the Directors, whose names and functions are listed on the Standard Life Aberdeen plc website, www.standardlifeaberdeen.com, confirms to the best of his or her knowledge and belief that:

· The International Financial Reporting Standards (IFRS) condensed consolidated income statement, the IFRS condensed consolidated statement of comprehensive income, the IFRS condensed consolidated statement of financial position, the IFRS condensed consolidated statement of changes in equity and the IFRS condensed consolidated statement of cash flows and associated notes, have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU

· The interim management report includes a fair review of the information required by:

- 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 IFRS condensed consolidated financial information and a description of the principal risks and uncertainties for the remaining six months of the year

- 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 current 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 last annual report that could do so

· As per principle N of the UK Corporate Governance Code, the Half year results 2019 taken as a whole, present a fair, balanced and understandable assessment of the Company's position and prospects

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Changes to Directors during the period

As previously announced, Simon Troughton and Richard Mully retired as non-executive Directors at the conclusion of the Company's Annual General Meeting on 14 May 2019. Bill Rattray retired on 31 May 2019 and was succeeded as Chief Financial Officer and executive Director by Stephanie Bruce who was appointed on 1 June 2019. In addition, the Company announced Jonathan Asquith's appointment to the Board, as a non-executive Director, Chair of the Remuneration Committee and Senior Independent Director, with effect from 1 September 2019.

By order of the Board

Sir Douglas Flint

Chairman

7 August 2019

Stephanie Bruce

Chief Financial Officer

7 August 2019

3. Independent review report to Standard Life Aberdeen plc

Conclusion

We have been engaged by the Company to review the condensed set of financial statements in the Half year results for the six months ended 30 June 2019 which comprises the:

· IFRS condensed consolidated income statement

· IFRS condensed consolidated statement of comprehensive income

· Reconciliation of consolidated adjusted profit before tax to IFRS profit for the period

· IFRS condensed consolidated statement of financial position

· IFRS condensed statement of changes in equity

· IFRS condensed 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 year results 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 year results 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 year results is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half year results in accordance with the DTR of the UK FCA.

As disclosed in Note 4.1, 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 IFRS condensed consolidated financial information included in the Half year results in accordance with IAS 34 as adopted by the EU.

Our responsibility

Our responsibility is to express to the Company a conclusion on the IFRS condensed consolidated financial information in the Half year results 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
Saltire Court
20 Castle Terrace
Edinburgh
EH1 2EG

7 August 2019

4. Financial information

IFRS condensed consolidated income statement

For the six months ended 30 June 2019

		6 months 2019	6 months 2018¹	Full year 2018¹
	Notes	£m	£m	£m
Income
Investment return		318	10	(116)
Revenue from contracts with customers	4.4	860	1,019	1,955
Insurance contract premium income		34	36	73
Profit on disposal of interests in associates		443	6	185
Other income		23	13	34
Total income from continuing operations		1,678	1,084	2,131

Expenses
Insurance contract claims and change in liabilities		95	27	1
Change in non-participating investment contract liabilities		197	2	(78)
Administrative expenses
Restructuring and corporate transaction expenses	4.5	192	59	231
Impairment of goodwill - Aberdeen Standard Investments		-	-	880
Other administrative expenses		821	883	1,746
Total administrative expenses	4.5	1,013	942	2,857
Change in liability for third party interest in consolidated funds		5	4	(5)
Finance costs		20	21	45
Total expenses from continuing operations		1,330	996	2,820

Share of profit from associates and joint ventures		38	39	130
Reversal of/(loss on) impairment of interest in associates	4.11	243	-	(228)

Profit/(loss) before tax from continuing operations		629	127	(787)
Tax (credit)/expense attributable to continuing operations	4.6	(10)	13	43
Profit/(loss) for the period from continuing operations		639	114	(830)
Profit for the period from discontinued operations	4.2	25	79	1,698
Profit for the period		664	193	868

Attributable to:
Equity shareholders of Standard Life Aberdeen plc
From continuing operations		636	111	(835)
From discontinued operations		25	74	1,665
Equity shareholders of Standard Life Aberdeen plc		661	185	830
Other equity holders
From discontinued operations - perpetual notes		-	-	28
Non-controlling interests
From continuing operations - preference shares and perpetual notes		3	3	5
From discontinued operations - ordinary shares		-	5	5
		664	193	868
Earnings per share from continuing operations
Basic (pence per share)	4.7	26.3	3.8	(29.3)
Diluted (pence per share)	4.7	26.0	3.7	(29.3)
Earnings per share
Basic (pence per share)	4.7	27.3	6.3	29.1
Diluted (pence per share)	4.7	27.0	6.2	29.1

¹ The Group has initially applied IFRS 9 and IFRS 16 at 1 January 2019. Under the transition methods chosen, comparative information is not restated. Refer Note 4.1.

The Notes on pages 19 to 43 are an integral part of this IFRS condensed consolidated financial information.

IFRS condensed consolidated statement of comprehensive income

For the six months ended 30 June 2019

		6 months 2019	6 months 2018¹	Full year 2018¹
	Notes	£m	£m	£m
Profit for the period		664	193	868
Less: profit from discontinued operations		(25)	(79)	(1,698)
Profit/(loss) from continuing operations		639	114	(830)
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gains/(losses) on defined benefit pension plans		95	(84)	(29)
Share of other comprehensive income of associates and joint ventures		(3)	-	(15)
Total items that will not be reclassified subsequently to profit or loss		92	(84)	(44)

Items that may be reclassified subsequently to profit or loss:
Fair value gains/(losses) on cash flow hedges		18	15	54
Fair value losses on available-for-sale financial assets		-	(5)	(9)
Exchange differences on translating foreign operations		(2)	(9)	14
Share of other comprehensive income of associates and joint ventures		-	(5)	-
Items transferred to the consolidated income statement
Realised losses on cash flow hedges		(4)	(17)	(41)
Realised foreign exchange losses		-	-	(2)
Equity holder tax effect of items that may be reclassified subsequently to profit or loss	4.6	(2)	1	(1)
Total items that may be reclassified subsequently to profit or loss		10	(20)	15
Other comprehensive income for the period from continuing operations		102	(104)	(29)
Total comprehensive income for the period from continuing operations		741	10	(859)

Profit from discontinued operations	4.2	25	79	1,698
Other comprehensive income from discontinued operations		-	(2)	(43)
Total comprehensive income for the period from discontinued operations		25	77	1,655
Total comprehensive income for the period		766	87	796

Attributable to:
Equity shareholders of Standard Life Aberdeen plc
From continuing operations		738	7	(864)
From discontinued operations		25	72	1,622
Other equity holders
From discontinued operations - perpetual notes		-	-	28
Non-controlling interests
From continuing operations -- preference shares and perpetual notes		3	3	5
From discontinued operations - ordinary shares		-	5	5
		766	87	796

¹ The Group has initially applied IFRS 9 and IFRS 16 at 1 January 2019. Under the transition methods chosen, comparative information is not restated. Refer Note 4.1.

The Notes on pages 19 to 43 are an integral part of this IFRS condensed consolidated financial information.

Reconciliation of consolidated adjusted profit before tax to IFRS profit for the period

For the six months ended 30 June 2019

		6 months 2019			6 months 2018 restated^1,2
		Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total
	Notes	£m	£m	£m	£m	£m	£m
Adjusted profit before tax
Asset management and platforms		190	-	190	277	-	277
Insurance associates and joint ventures		90	-	90	34	-	34
UK and European insurance		-	-	-	-	167	167
Adjusted profit before tax	4.3	280	-	280	311	167	478
Adjusted for the following items
Restructuring and corporate transaction expenses		(198)	-	(198)	(59)	(51)	(110)
Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts		(144)	-	(144)	(108)	-	(108)
Profit on disposal of interests in associates		443	-	443	6	-	6
Reversal of impairment of associates		243	-	243	-	-	-
Investment return variances and economic assumption changes		(18)	-	(18)	-	(61)	(61)
Other²		22	25	47	(5)	38	33
Total adjusting items	4.3	348	25	373	(166)	(74)	(240)
Share of associates' and joint ventures' tax expense	4.3	1	-	1	(18)	-	(18)
Profit attributable to non-controlling interests - ordinary shares	4.3	-	-	-	-	5	5
Profit before tax³		629	25	654	127	98	225
Tax credit/(expense) attributable to
Adjusted profit	4.3	(31)	-	(31)	(48)	(29)	(77)
Adjusting items	4.3	41	-	41	35	10	45
Total tax credit/(expense)		10	-	10	(13)	(19)	(32)
Profit for the period		639	25	664	114	79	193

¹ The Group has initially applied IFRS 9 and IFRS 16 at 1 January 2019. Under the transition methods chosen, comparative information is not restated. Refer Note 4.1. Comparatives for the six months ended 30 June 2018 have been restated to reflect changes in the reportable segments. Refer Note 4.3.

² The Other adjusting item for the six months ended 30 June 2018 relating to discontinued operations is a held for sale accounting adjustment relating to the amortisation of intangible assets (primarily deferred acquisition costs) and depreciation of tangible assets of £38m. Following the classification of the UK and European Insurance business as held for sale, no amortisation or depreciation is recognised in accordance with applicable financial reporting standards.

³ For discontinued operations profit before tax expense attributable to equity holders consists of profit before tax of £25m (six months ended 30 June 2018: £122m) less tax expense attributable to policyholders' returns of £nil (six months ended 30 June 2018: £24m).

		Continuing operations	Discontinued operations	Total¹
Full year 2018	Notes	£m	£m	£m
Adjusted profit before tax
Asset management and platforms		510	-	510
Insurance associates and joint ventures		140	-	140
UK and European insurance		-	210	210
Adjusted profit before tax	4.3	650	210	860
Adjusted for the following items
Restructuring and corporate transaction expenses		(239)	(264)	(503)
Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts		(1,155)	-	(1,155)
Profit on disposal of subsidiaries		-	1,780	1,780
Profit on disposal of interests in associates		185	-	185
Impairment of associates		(228)	-	(228)
Investment return variances and economic assumption changes		54	(41)	13
Other²		(14)	44	30
Total adjusting items	4.3	(1,397)	1,519	122
Share of associates' and joint ventures' tax expense	4.3	(40)	-	(40)
Profit attributable to non-controlling interests - ordinary shares	4.3	-	5	5
(Loss)/profit before tax expense³		(787)	1,734	947
Tax (expense)/credit attributable to
Adjusted profit	4.3	(95)	(77)	(172)
Adjusting items	4.3	52	41	93
Total tax expense		(43)	(36)	(79)
(Loss)/profit for the year		(830)	1,698	868

¹ The Group has initially applied IFRS 9 and IFRS 16 at 1 January 2019. Under the transition methods chosen, comparative information is not restated. Refer Note 4.1.

² The Other adjusting item for the 12 months ended 31 December 2018 relating to discontinued operations is a held for sale accounting adjustment relating to the amortisation of intangible assets (primarily deferred acquisition costs) and depreciation of tangible assets of £44m. Following the classification of the UK and European insurance business as held for sale, no amortisation or depreciation was recognised in accordance with applicable financial reporting standards.

³ For discontinued operations profit before tax expense attributable to equity holders consists of profit before tax of £1,780m less tax expense attributable to policyholders' returns of £46m.

The Group's key alternative performance measure is adjusted profit before tax. Refer Note 4.8 for further details.

The Notes on pages 19 to 43 are an integral part of this IFRS condensed consolidated financial information.

IFRS condensed consolidated statement of financial position

As at 30 June 2019

		30 June 2019	30 June 2018¹	31 December 2018¹
	Notes	£m	£m	£m
Assets
Intangible assets	4.10	3,312	4,401	3,404
Investments in associates and joint ventures accounted for using the equity method	4.11	1,604	514	1,444
Property, plant and equipment	4.12	266	51	61
Pension and other post-retirement benefit assets	4.15	1,233	1,032	1,111
Deferred tax assets		80	43	61
Derivative financial assets	4.16	32	7	21
Equity securities and interests in pooled investment funds	4.16	2,295	3,196	2,030
Debt securities	4.16	1,038	469	1,723
Receivables and other financial assets		641	590	708
Current tax recoverable		8	30	6
Other assets		70	75	46
Assets held for sale		894	183,317	762
Cash and cash equivalents		1,284	935	1,140
Total assets		12,757	194,660	12,517
Equity
Share capital	4.13	337	364	353
Shares held by trusts	4.13	(113)	(76)	(115)
Share premium reserve	4.13	640	640	640
Retained earnings		2,994	2,857	2,778
Other reserves		3,685	4,472	3,782
Equity attributable to equity holders of Standard Life Aberdeen plc		7,543	8,257	7,438
Non-controlling interests
Ordinary shares		3	287	2
Preference shares		99	99	99
Total equity		7,645	8,643	7,539
Liabilities
Non-participating investment contract liabilities	4.16	1,600	1,274	1,468
Third party interest in consolidated funds	4.16	407	227	254
Subordinated liabilities	4.14	690	1,909	1,081
Pension and other post-retirement benefit provisions	4.15	46	70	38
Deferred income		71	-	75
Deferred tax liabilities		94	109	100
Current tax liabilities		21	72	23
Derivative financial liabilities	4.16	11	32	6
Other financial liabilities		1,342	1,090	1,162
Provisions		85	30	105
Other liabilities		14	25	9
Liabilities held for sale		731	181,179	657
Total liabilities		5,112	186,017	4,978
Total equity and liabilities		12,757	194,660	12,517

¹ The Group has initially applied IFRS 9 and IFRS 16 at 1 January 2019. Under the transition methods chosen, comparative information is not restated. Refer Note 4.1.

The Notes on pages 19 to 43 are an integral part of this IFRS condensed consolidated financial information.

IFRS condensed consolidated statement of changes in equity

For the six months ended 30 June 2019

								Non-controlling interests
		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity attributable to equity shareholders of Standard Life Aberdeen plc	Ordinary shares	Preference shares	Total equity
	Notes	£m	£m	£m	£m	£m	£m	£m	£m	£m
31 December 2018		353	(115)	640	2,778	3,782	7,438	2	99	7,539
Effect of change in accounting policy to IFRS 9¹	4.1	-	-	-	(5)	(7)	(12)	-	-	(12)
Effect of change in accounting policy to IFRS 16¹	4.1	-	-	-	(12)	-	(12)	-	-	(12)
1 January 2019		353	(115)	640	2,761	3,775	7,414	2	99	7,515
Profit for the period from continuing operations		-	-	-	636	-	636	-	3	639
Profit for the period from discontinued operations	4.2	-	-	-	25	-	25	-	-	25
Other comprehensive income for the period from continuing operations		-	-	-	92	10	102	-	-	102
Total comprehensive income for the period		-	-	-	753	10	763	-	3	766
Issue of share capital	4.13	-	-	-	-	-	-	-	-	-
Dividends paid on ordinary shares	4.9	-	-	-	(345)	-	(345)	-	-	(345)
Dividends paid on preference shares		-	-	-	-	-	-	-	(3)	(3)
Shares bought back on-market and cancelled		(16)	-	-	(180)	(110)	(306)	-	-	(306)
Other movements in non-controlling interests in the period		-	-	-	-	-	-	1	-	1
Reserves credit for employee share-based payments		-	-	-	-	21	21	-	-	21
Transfer to retained earnings for vested employee share-based payments		-	-	-	11	(11)	-	-	-	-
Shares acquired by employee trusts		-	(3)	-	-	-	(3)	-	-	(3)
Shares distributed by employee and other trusts and related dividend equivalents		-	5	-	(6)	-	(1)	-	-	(1)
30 June 2019		337	(113)	640	2,994	3,685	7,543	3	99	7,645

¹ The Group has initially applied IFRS 9 and IFRS 16 at 1 January 2019. Under the transition methods chosen, comparative information is not restated and the cumulative effect of initially applying these standards is recognised in retained earnings at the date of initial application. Refer Note 4.1.

								Non-controlling interests
		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity attributable to equity shareholders of Standard Life Aberdeen plc	Ordinary shares	Preference shares	Total equity
	Notes	£m	£m	£m	£m	£m	£m	£m	£m	£m
1 January 2018		364	(61)	639	3,162	4,500	8,604	289	99	8,992
Profit for the period from continuing operations		-	-	-	111	-	111	-	3	114
Profit for the period from discontinued operations	4.2	-	-	-	74	-	74	5	-	79
Other comprehensive income for the period from continuing operations		-	-	-	(89)	(15)	(104)	-	-	(104)
Other comprehensive income for the period from discontinued operations		-	-	-	-	(2)	(2)	-	-	(2)
Total comprehensive income for the period		-	-	-	96	(17)	79	5	3	87
Issue of share capital	4.13	-	-	1	-	-	1	-	-	1
Dividends paid on ordinary shares	4.9	-	-	-	(420)	-	(420)	-	-	(420)
Dividends paid on preference shares		-	-	-	-	-	-	-	(3)	(3)
Other movements in non-controlling interests in the period		-	-	-	-	-	-	(7)	-	(7)
Reserves credit for employee share-based payments		-	-	-	-	30	30	-	-	30
Transfer to retained earnings for vested employee share-based payments		-	-	-	41	(41)	-	-	-	-
Shares acquired by employee trusts		-	(35)	-	-	-	(35)	-	-	(35)
Shares distributed by employee and other trusts and related dividend equivalents		-	20	-	(21)	-	(1)	-	-	(1)
Aggregate tax effect of items recognised directly in equity	4.6	-	-	-	(1)	-	(1)	-	-	(1)
30 June 2018		364	(76)	640	2,857	4,472	8,257	287	99	8,643

									Non-controlling interests
		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity attributable to equity shareholders of Standard Life Aberdeen plc	Other equity¹	Ordinary shares	Preference shares	Total equity
	Notes	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
1 January 2018		364	(61)	639	3,162	4,500	8,604	-	289	99	8,992
(Loss)/profit for the period from continuing operations		-	-	-	(835)	-	(835)	-	-	5	(830)
Profit for the period from discontinued operations	4.2	-	-	-	1,665	-	1,665	28	5	-	1,698
Other comprehensive income for the period from continuing operations		-	-	-	(44)	15	(29)	-	-	-	(29)
Other comprehensive income for the period from discontinued operations	4.2	-	-	-	-	(43)	(43)	-	-	-	(43)
Total comprehensive income for the period		-	-	-	786	(28)	758	28	5	5	796
Issue of share capital	4.13	-	-	1	-	-	1	-	-	-	1
Issue of B shares		1,000	-	-	-	(1,000)	-	-	-	-	-
Reclassification of perpetual debt instruments to equity		-	-	-	-	-	-	1,005	-	-	1,005
Repurchase of perpetual debt instruments		-	-	-	-	-	-	(970)	-	-	(970)
Redemption of perpetual debt instruments		-	-	-	-	-	-	(44)	-	-	(44)
Dividends paid on ordinary shares	4.9	-	-	-	(634)	-	(634)	-	-	-	(634)
Dividends paid on preference shares		-	-	-	-	-	-	-	-	(5)	(5)
Coupons paid on perpetual debt instruments		-	-	-	-	-	-	(25)	-	-	(25)
Redemption of B shares		(1,000)	17	-	(1,002)	1,000	(985)	-	-	-	(985)
Shares bought back on-market and cancelled		(11)	-	-	(238)	11	(238)	-	-	-	(238)
Other movements in non-controlling interests in the period		-	-	-	-	-	-	-	(292)	-	(292)
Reserves credit for employee share-based payments		-	-	-	-	36	36	-	-	-	36
Transfer to retained earnings for vested employee share-based payments		-	-	-	68	(68)	-	-	-	-	-
Transfer between reserves on disposal of subsidiaries		-	-	-	99	(99)	-	-	-	-	-
Transfer between reserves on impairment of subsidiaries		-	-	-	570	(570)	-	-	-	-	-
Shares acquired by employee trusts		-	(100)	-	-	-	(100)	-	-	-	(100)
Shares distributed by employee and other trusts and related dividend equivalents		-	29	-	(33)	-	(4)	-	-	-	(4)
Aggregate tax effect of items recognised directly in equity	4.6	-	-	-	-	-	-	6	-	-	6
31 December 2018		353	(115)	640	2,778	3,782	7,438	-	2	99	7,539

¹ The presentation of amounts attributable to certain perpetual debt instruments in 2018 has been corrected to show these amounts separately as related to other equity holders rather than as part of non-controlling interests.

The Notes on pages 19 to 43 are an integral part of this IFRS condensed consolidated financial information.

IFRS condensed consolidated statement of cash flows

For the six months ended 30 June 2019

		6 months 2019	6 months 2018¹	Full year 2018¹
	Notes	£m	£m	£m
Cash flows from operating activities
Profit/(loss) before tax from continuing operations		629	127	(787)
Profit before tax from discontinued operations	4.2	25	122	1,780
		654	249	993
Change in operating assets		(132)	3,262	3,317
Change in operating liabilities		183	(2,262)	(2,551)
Adjustment for non-cash movements in investment income		2	(37)	(80)
Change in unallocated divisible surplus		-	(49)	(48)
Other non-cash and non-operating items		(615)	139	(581)
Taxation paid		(20)	(155)	(224)
Net cash flows from operating activities		72	1,147	826
Cash flows from investing activities
Purchase of property, plant and equipment		(16)	(12)	(28)
Proceeds from sale of property, plant and equipment		1	1	1
Acquisition of subsidiaries and unincorporated businesses net of cash acquired		-	(33)	(33)
Disposal of subsidiaries net of cash disposed of		-	-	(5,501)
Acquisition of investments in associates and joint ventures		-	-	(72)
Disposal of investments in associates and joint ventures		510	-	180
Purchase of financial investments		(121)	(29)	(55)
Proceeds from sale or redemption of financial investments		784	37	51
Purchase of intangible assets		(12)	(105)	(128)
Net cash flows from investing activities		1,146	(141)	(5,585)
Cash flows from financing activities
Repayment of other borrowings		-	(2)	(2)
Repayment of subordinated liabilities and perpetual notes	4.14	(455)	(363)	(1,377)
Payment of lease liabilities		(18)	-	-
Capital flows from/(to) third party interest in consolidated funds and non-controlling interests - ordinary shares		-	(358)	(507)
Distributions paid to third party interest in consolidated funds and non-controlling interests - ordinary shares		-	(55)	(69)
Shares acquired by trusts		(3)	(35)	(100)
Proceeds from issue of shares		-	1	1
Interest paid		(10)	(38)	(117)
Return of cash to shareholders under B share scheme		-	-	(983)
Shares bought back on-market and cancelled		(306)	-	(238)
Preference dividends paid		(3)	(3)	(5)
Ordinary dividends paid	4.9	(345)	(420)	(634)
Net cash flows from financing activities		(1,140)	(1,273)	(4,031)
Net increase/(decrease) in cash and cash equivalents		78	(267)	(8,790)
Cash and cash equivalents at the beginning of the period		957	9,715	9,715
Effects of exchange rate changes on cash and cash equivalents		2	2	32
Cash and cash equivalents at the end of the period²		1,037	9,450	957
Supplemental disclosures on cash flows from operating activities
Interest paid		2	3	6
Interest received		19	848	1,118
Dividends received		78	1,321	1,545
Rental income received on investment property		-	251	329

¹ The Group has initially applied IFRS 9 and IFRS 16 at 1 January 2019. Under the transition methods chosen, comparative information is not restated. Refer Note 4.1.

² Comprises £1,315m (30 June 2018: £9,790m; 31 December 2018: £1,173m) of cash and cash equivalents, including cash and cash equivalents held for sale and (£278m) (30 June 2018: (£340m); 31 December 2018: (£216m)) of overdrafts which are reported in other financial liabilities and liabilities of operations held for sale in the IFRS condensed consolidated statement of financial position.

The Notes on pages 19 to 43 are an integral part of this IFRS condensed consolidated financial information.

Notes to the IFRS condensed consolidated financial information

4.1 Accounting policies

(a) Basis of preparation

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

The accounting policies for recognition, measurement, consolidation and presentation as set out in the Group's Annual report and accounts for the year ended 31 December 2018 have been applied in the preparation of the IFRS condensed consolidated half year financial information except as noted below.

(a)(i) New standards, interpretations and amendments to existing standards that have been adopted by the Group

The Group has adopted the following new International Financial Reporting Standards (IFRSs), interpretations and amendments to existing standards, which are effective by EU endorsement for annual periods beginning on or after 1 January 2019 and IFRS 9 whose adoption has previously been deferred (see the Group's Annual report and accounts for the year ended 31 December 2018 for further details).

IFRS 9 Financial Instruments

On 1 January 2019 the Group adopted IFRS 9 Financial Instruments. Financial assets are classified at initial recognition based on whether their contractual cash flows are solely payments of principal and interest (SPPI) and the nature of the business model they are managed under. This has resulted in the Group's equity securities and interests in pooled investment funds and certain debt securities being classified as fair value through profit or loss (FVTPL) and the Group's receivables, other financial assets, cash and other debt securities being measured at amortised cost. Derivative instruments are measured at fair value.

Financial liabilities are measured at amortised cost using the effective interest method unless they are derivatives or they are designated as FVTPL.

Changes in fair value of all financial instruments classified as FVTPL and derivative instruments are recognised in profit or loss except for derivative instruments that are designated as a hedging instrument in a cash flow hedge. Interest is credited to profit or loss using the effective interest rate method for financial instruments measured at amortised cost.

An expected credit loss impairment model is applied to financial assets measured at amortised cost. Impairment losses representing the expected credit loss in the next 12 months are recognised unless there has been a significant increase in credit risk from initial recognition in which case lifetime expected losses are recognised.

Where the terms of a financial liability are modified and the modification does not result in the derecognition of the liability, the liability is adjusted to the net present value of the future cash flows less transaction costs with a modification gain or loss recognised in the income statement.

The Group has elected to continue applying the hedge accounting requirements of IAS 39. Therefore the hedge accounting policy is the same as that given in the Group's Annual report and accounts for the year ended 31 December 2018.

The main impacts of adopting IFRS 9 are as follows:

· The Group's debt securities which were previously classified as available-for-sale (AFS) and therefore measured at fair value are now measured at amortised cost. At 31 December 2018 the fair value of AFS securities was £862m with a corresponding AFS financial assets reserve balance of £7m and deferred tax liability of £1m. On reclassification, the Company's debt securities were recognised at 1 January 2019 at their amortised cost (less expected credit losses) of £854m. The available-for-sale financial assets reserve balance and the related deferred tax liability were no longer recognised. The expected credit losses at 1 January 2019 were less than £1m.

· At 31 December 2018, the Group had subordinated liabilities of £1,081m. Under IFRS 9, where the terms of a financial liability are modified and the modification does not result in the derecognition of the liability, the liability is adjusted to the net present value of the future cash flows less transaction costs with a modification gain or loss recognised in the income statement. During the year ended 31 December 2018, the terms of the 4.25% US Dollar fixed rate subordinated notes were modified. Consequently, on adoption of IFRS 9, these subordinated liabilities have been recognised at 1 January 2019 at a revised amortised cost of £1,086m. The impact on retained earnings is £5m.

As permitted by IFRS 9 comparatives have not been restated.

IFRS 16 Leases

On 1 January 2019 the Group adopted IFRS 16 Leases. IFRS 16 replaces IAS 17 Leases and introduces a new single accounting approach for lessees for all leases (with limited exceptions). As a result there is no longer a distinction between operating leases and finance leases, and lessees will recognise a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The accounting for leases by lessors remains largely unchanged.

Transition

The Group has applied the cumulative catch up approach to IFRS 16 and therefore no comparatives have been restated. On transition to IFRS 16, the Group recognised right-of-use assets and lease liabilities. Right-of-use assets for property have been calculated as if IFRS 16 has always been applied, recognising the difference between the assets and liabilities in retained earnings. For non-property leases, the right-of-use assets initially recognised was equal to the lease liability calculated with no impact on retained earnings.

Practical expedients

The Group has used the following practical expedients permitted under IFRS 16:

· To apply the new standard solely to leases previously identified in accordance with IAS 17 and IFRIC 4 Determining whether an Arrangement Contains a Lease

· To not recognise leases with a low value or short-term leases including those whose term ends within 12 months at 1 January 2019

· To apply a single discount rate to leases with similar characteristics

In addition, as at 31 December 2018 the Group recognised an onerous lease provision of £12m under IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The Group has applied the practical expedient to utilise the assessment that the lease was onerous under IAS 37 and therefore adjust the right of use asset at the date of initial application by the onerous lease provision rather than conduct an impairment test.

Impact of transition

The impact on opening retained earnings at 1 January 2019 is summarised below:

	1 January 2019
	£m
Recognised under IFRS 16
Right-of-use assets (within property, plant and equipment)¹
Property net of impairment	178
Equipment	1
Net investment in finance leases (within Receivables and other financial assets)	7
Lease liabilities (within Other financial liabilities)¹	(227)
Derecognised on application of IFRS 16
Onerous lease provisions	12
Accruals for lease incentives (within Other financial liabilities)	16
Net liabilities recognised before tax	(13)
Deferred tax	1
Reduction in opening retained earnings	(12)

¹ Additional right-of-use assets of £5m and additional lease liabilities for £5m were recognised within Assets held for sale and Liabilities of operations held for sale respectively.

When measuring lease liabilities for leases previously classified as operating leases, the Group used discount rates determined on a portfolio basis depending on the geographic location and term of the lease. The weighted average rate used at initial application was 2.6%. The lease commitments for operating leases as previously disclosed in the Group's Annual report and accounts for the year ended 31 December 2018 is reconciled to the lease liabilities at 1 January 2019 below:

	1 January 2019
	£m
Operating lease commitments at 31 December 2018 as disclosed in the Group's Annual report and accounts for the year ended 31 December 2018	250

Discounted value of operating lease commitments at 31 December 2018	227
Exemptions for low value leases and leases whose term ends within 12 months at 1 January 2019	(4)
Extension options reasonably certain to be exercised	6
Lease commitments for operations held for sale	(5)
Other	3
Lease liabilities recognised at 1 January 2019	227

Accounting policies

Right-of-use assets are measured at cost less accumulated depreciation and impairment losses. Depreciation is charged over the term of the lease (remaining term in the case of non-property right-of-use assets recognised at 1 January 2019 - see transition above).

The lease liability is calculated as the present value of the future lease payments. The lease payments are discounted using the rate implicit within the lease where readily available or the Group's incremental borrowing rate where the implicit rate is not readily available (see above for transitional arrangements). Interest is calculated on the liability using the discount rate and is charged to the income statement under finance costs.

In determining the value of the right-of-use assets and lease liabilities, the Group considers whether any leases contain lease extensions or termination options that the Group is reasonably certain to exercise.

Disclosure

IFRS 16 introduces new disclosure requirements for lessees and lessors. The objective of the disclosures is for lessees and lessors to disclose information in the notes that, together with the information provided in the statement of financial position, statement of profit or loss and statement of cash flows, gives a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows. These disclosures are not required under IAS 34 for interim reporting and will be included in the Group's Annual report and accounts for the year ended 31 December 2019.

Statement of cash flows: Classification

From 1 January 2019 the Group has changed the classification of cash flows arising from the sale and purchase of debt securities and equity securities and interests in pooled investment funds, with the exception of those related to unit linked funds. Such cash flows are now classified as cash flows arising from investing activities. During 2018 and in prior periods, the Group's cash flows predominantly related to insurance business. Consistent with other insurers, cash flows arising from the sale and purchase of debt securities and equity securities and interests in pooled investment funds, other than for seeding investments, were classified as arising from operating activities. In 2019, following the disposal of the UK and European insurance business in 2018, the Group's operating cash flows no longer predominantly relate to insurance business operating activities. In addition, from 1 January 2019 the Group has changed the classification of capital flows arising to/from third party interest in consolidated funds from cash flows arising from financing activities to cash flows arising from operating activities. The reason for the changes in accounting policy is to make the financial statements more relevant to users as it is more consistent with asset management peers. Comparative amounts have not been restated as we consider that the 2018 and prior period cash flow presentation was appropriate for the predominantly insurance business cash flows in those periods.

Interpretations and amendments to other standards

· IFRIC 23: Uncertainty over Income Tax Treatments

· Amendments to IFRS 9 Prepayment Features with Negative Compensation

· Amendments to IAS 19 Amendment, Curtailment or Settlement

· Amendments to IAS 28 Long-term interests in associates and joint ventures

· Annual Improvements 2015-2017 cycle

The Group's accounting policies have been updated to reflect these. Management considers the implementation of the above interpretations and amendments to existing standards has had no significant impact on the Group's financial statements.

(b) IFRS condensed consolidated half year financial information

This IFRS condensed consolidated half year financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act. Additionally, the comparative figures for the financial year ended 31 December 2018 are not the Company's statutory accounts for that financial year. The statutory accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The IFRS condensed consolidated half year financial information has been reviewed, not audited.

(c) Exchange rates

The income statements and cash flows, and statements of financial position of Group entities that have a different functional currency from the Group's presentation currency have been translated using the following principal exchange rates:

	6 months 2019		6 months 2018		Full year 2018
	Income statement and cash flows (average rate)	Statement of financial position (closing rate)	Income statement and cash flows (average rate)	Statement of financial position (closing rate)	Income statement and cash flows (average rate)	Statement of financial position (closing rate)
Euro	1.143	1.118	1.136	1.131	1.129	1.114
US Dollar	1.294	1.273	1.369	1.320	1.333	1.274
Indian Rupee	90.531	87.850	90.033	90.457	90.711	88.913
Chinese Renminbi	8.777	8.741	8.759	8.747	8.818	8.744
Hong Kong Dollar	10.145	9.943	10.727	10.358	10.444	9.971
Singapore Dollar	1.757	1.722	1.819	1.800	1.795	1.736

4.2 Acquisitions and disposals

(a) Acquisitions

(a)(i) Subsidiaries

On 15 February 2019, Aberdeen Asset Management PLC completed the purchase of the entire share capital of Orion Partners Holding Limited and Orion Partner Services Inc. The assets under management were US$0.9bn (£0.7bn) at the acquisition date.

(a)(ii) Prior year acquisitions

On 27 April 2018, Aberdeen Asset Management Inc. purchased the US business of specialist commodity exchange traded product provider ETF Securities by purchasing the entire members' interests of ETF Securities USA LLC, ETF Securities (US) LLC and ETF Securities Advisers LLC. In addition, the Group's UK wide financial advice business, 1825, completed the purchase of the entire share capital of Fraser Heath Financial Management Ltd and Cumberland Place Financial Management Ltd on 1 March 2018 and 6 April 2018 respectively.

(b) Current period disposals

(b)(i) Associates

HDFC Life Insurance Company Limited (HDFC Life)

On 12 and 13 March 2019 and 3 to 6 May 2019 through Offers for Sale on the National Stock Exchange of India Limited and BSE Limited, the Group sold 92,181,992 and 33,032,381 equity shares in HDFC Life, respectively (in total 6.21% of the issued equity share capital of HDFC Life), for a combined total consideration net of taxes and expenses of Rs 47,063m (£510m). The combined gain on sale of £442m was calculated using the weighted-average cost method. On disposal a loss of £1m was recycled from the translation reserve and was included in determining the gain on sale. The Group's shareholding in HDFC Life at 30 June 2019 is 464,411,893 equity shares or 23.02% of the issued equity share capital of HDFC Life.

(c)(i) Subsidiaries

UK and European insurance business

On 23 February 2018, the Group announced the proposed sale of the UK and European insurance business to Phoenix (the Sale), conditional on shareholder and relevant regulatory approvals. The Sale was completed on 31 August 2018 and was implemented by the sale to Phoenix of the entire issued share capital of Standard Life Assurance Limited (SLAL).

Under the transaction the following businesses were retained by the Group:

· UK retail platforms, including Wrap and Elevate

· 1825, our financial advice business

In addition, the assets and liabilities of both the UK and Ireland Standard Life staff defined benefit pension plans were retained by the Group.

Following the announcement on 23 February 2018 the UK and European insurance business was classified as held for sale and measured at its carrying amount. The results of the UK and European insurance business to 31 August 2018 were classified as discontinued operations.

Total consideration received comprised cash of £2.0bn, a dividend received from SLAL of £312m in March 2018 and new shares issued at completion representing approximately 19.98% of the then issued share capital of Phoenix. The shareholding in Phoenix is subject to a lock-up of 12 months from completion. The Group recognised a gain on disposal in respect of the Sale which is included in profit from discontinued operations in the consolidated condensed income statement for the year ended 31 December 2018 of £1,780m. On disposal £43m was recycled from the translation reserve and was included in determining the gain on sale. £99m (net) of other reserves were also released directly to retained earnings.

(c)(ii) Associates

HDFC Asset Management Company Limited (HDFC AMC)

HDFC AMC, the Group's associate Indian asset management business announced in November 2017 that its board of directors had approved initiation of an IPO with the Group offering up a portion of the paid up capital of HDFC AMC. On 6 August 2018, HDFC AMC listed on the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited following completion of the IPO. Through the IPO, the Group sold 16,864,585 equity shares in HDFC AMC for a total net consideration of Rs.16,212m (£180m). The gain on sale from the IPO of £177m (£156m after tax) was calculated using the weighted-average cost method. On disposal £2m was recycled from the translation reserve and was included in determining the gain on sale. The Group's shareholding in HDFC AMC at 30 June 2019 is 63,650,615 equity shares or 29.94% of the issued share capital of HDFC AMC.

(d) Assets and liabilities of operations held for sale

Standard Life (Asia) Limited

On 29 March 2017, the Group announced the proposed sale of its wholly owned Hong Kong insurance business, Standard Life (Asia) Limited (SL Asia) to the Group's Chinese joint venture business, Heng An Standard Life Insurance Company Limited. Standard Life (Asia) Limited is reported in the Asset management and platforms segment and Heng An Standard Life Insurance Company Limited is reported within the Insurance associates and joint ventures segment. The transaction is subject to obtaining local regulatory and other approvals in mainland China and Hong Kong.

At 30 June 2019, this disposal group was measured at fair value less cost to sell and comprised the following assets and liabilities:

	30 Jun 2019	30 Jun 2018	31 Dec 2018
	£m	£m	£m
Assets of operations held for sale
Equity securities and interests in pooled investment funds	674	639	604
Cash and cash equivalents	31	34	33
Other assets	34	31	30
Total assets of operations held for sale	739	704	667
Liabilities of operations held for sale
Non-participating insurance contract liabilities	647	605	574
Non-participating investment contract liabilities	50	59	52
Other liabilities	19	11	17
Total liabilities of operations held for sale	716	675	643
Net assets of operations held for sale	23	29	24

An impairment loss of £2m (30 June 2018: £nil; 31 December 2018: £2m) has been included in Other administrative expenses in the IFRS condensed consolidated income statement. Fair value has been determined by reference to the expected sale price.

Net assets of operations held for sale are net of intercompany balances between Standard Life (Asia) Limited and the rest of the Group.

(e) Discontinued operations

The consolidated income statement profit, other comprehensive income and cash flows from discontinued operations relate solely to the UK and European insurance business which was sold in 2018. Refer Note 4.2 (c)(i).

For the six months ended 30 June 2019, the profit from discontinued operations of £25m reflects a change in the value of contingent consideration relating to the sale of the UK and European insurance business to Phoenix.

4.3 Segmental analysis

The Group's reportable segments have been identified in accordance with the way in which the Group is structured and managed. IFRS 8 Operating Segments requires that the information presented in the financial statements is based on information provided to the 'Chief Operating Decision Maker'. The Chief Operating Decision Maker for the Group is the Executive team.

(a) Basis of segmentation

The Group's reportable segments are as follows:

Continuing operations:

Asset management and platforms

This segment primarily relates to our asset management and platform businesses. Aberdeen Standard Investments and its asset management associate in India, HDFC AMC, provide a range of investment products and services for individuals and institutional customers through a number of different investment vehicles. The segment includes the Group's three UK adviser platform businesses which provide administration services to advisers: Wrap and Elevate which are Standard Life branded, and the Parmenion digital platform. The segment also includes other wholly owned activities of the Group including the 1825 financial planning and advice business, corporate centre and related activities and the UK and Ireland Standard Life staff defined benefit pension plans.

Insurance associates and joint ventures

This segment comprises our life insurance associates and joint ventures in India (HDFC life), the UK (Phoenix) and China (HASL). These businesses offer a range of pension, insurance and savings products to the Indian, UK, European and Chinese markets. Phoenix is also the largest life and pensions consolidator in Europe.

Discontinued operations:

UK and European insurance

On 23 February 2018, the Group announced the proposed sale of the UK and European insurance business. Refer Note 4.2 for further details. As a consequence, the results of this business have been presented as discontinued operations. The UK and European insurance business provided a broad range of long-term savings and investment products to individual and corporate customers in the UK, Germany, Austria and Ireland.

Changes to reporting segments

As noted above, the segments are based on information provided to the Executive team. Prior to the sale of the UK and European insurance business, management information was provided separately for our asset management business and our pensions and savings business. Following the completion of the sale, the Group is being managed as a single company and this is reflected in our new combined Asset management and platforms segment. HDFC Life and HASL, which were previously reported in the India and China life segment, are included in the Insurance associates and joint ventures segment together with Phoenix.

Comparative amounts for the six months ended 30 June 2018 have been prepared on the same basis as the six months ended 30 June 2019 and the 12 months ended 31 December 2018 to allow more meaningful comparison.

(b) Reportable segments - Group adjusted profit before tax and revenue information

(b)(i) Analysis of Group adjusted profit before tax

Adjusted profit before tax is the key alternative performance measure utilised by the Group's management in their evaluation of segmental performance and is therefore also presented by reportable segment.

		Asset management and platforms	Insurance associates and joint ventures	Total continuing operations	Discontinued operations	Total
6 months 2019	Notes	£m	£m	£m	£m	£m
Fee based revenue		815	-	815	-	815
Adjusted operating expenses		(673)	-	(673)	-	(673)
Adjusted operating profit		142	-	142	-	142
Capital management		22	-	22	-	22
Share of associates' and joint ventures' profit before tax¹		26	90	116	-	116
Adjusted profit before tax		190	90	280	-	280
Tax on adjusted profit		(31)	-	(31)	-	(31)
Share of associates' and joint ventures' tax expense	4.6	(11)	(16)	(27)	-	(27)
Adjusted profit after tax		148	74	222	-	222
Adjusted for the following items
Restructuring and corporate transaction expenses	4.5	(192)	(6)	(198)	-	(198)
Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts²		(89)	(55)	(144)	-	(144)
Profit on disposal of interests in associates		1	442	443	-	443
Reversal of impairment of associates		-	243	243	-	243
Investment return variances and economic assumption changes		-	(18)	(18)	-	(18)
Other		22	-	22	25	47
Total adjusting items		(258)	606	348	25	373
Tax on adjusting items		41	-	41	-	41
Share of associates' and joint ventures' tax expense on adjusting items	4.6	-	28	28	-	28
Profit attributable to non-controlling interests (preference shares and perpetual notes)		(3)	-	(3)	-	(3)
(Loss)/profit for the period attributable to equity shareholders of Standard Life Aberdeen plc		(72)	708	636	25	661
Profit attributable to non-controlling interests
Preference shares and perpetual notes				3	-	3
Profit for the period				639	25	664

¹ Share of associates' and joint ventures' profit before tax comprises the Group's share of results of HDFC Life, HDFC AMC, Phoenix and HASL.

² Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts includes £89m included in Other administrative expenses, and £55m relating to intangibles recognised on the part acquisition of associates and included in Share of profit from associates and joint ventures in the condensed consolidated income statement.

Each reportable segment reports total adjusted operating income as its measure of revenue in its analysis of adjusted profit before tax. For the six months ended 30 June 2019, fee based revenue is the same as adjusted operating income. Fee based revenue consists of income generated primarily from asset management charges, premium based charges and transactional charges.

Adjusted operating income for the six months ended 30 June 2019 relates to revenues generated from external customers. The adjusted operating income of the Asset management and platforms segment for the six months ended 30 June 2018 and the full year ended 31 December 2018 included £69m and £94m respectively which related to investment management fees arising from intra-group transactions with the UK and European insurance segment classified as discontinued operations. At a Group level an elimination adjustment was required to remove intra-group impacts.

		Asset management and platforms	Insurance associates and joint ventures	Total continuing operations	Discontinued operations	Eliminations	Total
6 months 2018	Notes	£m	£m	£m	£m	£m	£m
Fee based revenue		966	-	966	395	(69)	1,292
Spread/risk margin		-	-	-	55	-	55
Total adjusted operating income		966	-	966	450	(69)	1,347
Total adjusted operating expenses		(712)	-	(712)	(280)	69	(923)
Adjusted operating profit		254	-	254	170	-	424
Capital management		(3)	-	(3)	(3)	-	(6)
Share of associates' and joint ventures' profit before tax¹		26	34	60	-	-	60
Adjusted profit before tax		277	34	311	167	-	478
Tax on adjusted profit		(48)	-	(48)	(29)	-	(77)
Share of associates' and joint ventures' tax expense	4.6	(11)	(7)	(18)	-	-	(18)
Adjusted profit after tax		218	27	245	138	-	383
Adjusted for the following items
Restructuring and corporate transaction expenses	4.5	(59)	-	(59)	(51)	-	(110)
Amortisation and impairment of intangible assets acquired in business combinations²		(105)	(3)	(108)	-	-	(108)
Profit on disposal of interests in associates		5	1	6	-	-	6
Investment return variances and economic assumption changes	4.8	-	-	-	(61)	-	(61)
Other		(5)	-	(5)	38	-	33
Total adjusting items		(164)	(2)	(166)	(74)	-	(240)
Tax on adjusting items		35	-	35	10	-	45
Profit attributable to non-controlling interests (preference shares)		(3)	-	(3)	-	-	(3)
Profit for the period attributable to equity shareholders of Standard Life Aberdeen plc		86	25	111	74	-	185
Profit attributable to non-controlling interests
Ordinary shares				-	5		5
Preference shares				3	-		3
Profit for the period				114	79		193

¹ Share of associates' and joint ventures' profit before tax comprises the Group's share of results of HDFC Life, HDFC AMC and HASL.

² Amortisation and impairment of intangible assets acquired in business combinations includes £105m included in Other administrative expenses, and £3m relating to intangibles recognised on the part acquisition of associates and included in Share of profit from associates and joint ventures in the condensed consolidated income statement.

Spread/risk margin for the six months ended 30 June 2018 and the full year ended 31 December 2018 reflected the margin earned on spread/risk business and includes net earned premiums, claims and benefits paid, net investment return using long-term assumptions and actuarial reserving changes.

		Asset management and platforms	Insurance associates and joint ventures	Total continuing operations	Discontinued operations	Eliminations	Total
Full year 2018	Notes	£m	£m	£m	£m	£m	£m
Fee based revenue		1,868	-	1,868	532	(94)	2,306
Spread/risk margin		-	-	-	59	-	59
Total adjusted operating income		1,868	-	1,868	591	(94)	2,365
Total adjusted operating expenses		(1,395)	-	(1,395)	(376)	94	(1,677)
Adjusted operating profit		473	-	473	215	-	688
Capital management		(9)	-	(9)	(5)	-	(14)
Share of associates' and joint ventures' profit before tax¹		46	140	186	-	-	186
Adjusted profit before tax		510	140	650	210	-	860
Tax on adjusted profit		(95)	-	(95)	(77)	-	(172)
Share of associates' and joint ventures' tax expense	4.6	(17)	(26)	(43)	-	-	(43)
Adjusted profit after tax		398	114	512	133	-	645
Adjusted for the following items
Restructuring and corporate transaction expenses	4.5	(231)	(8)	(239)	(264)	-	(503)
Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts²		(1,117)	(38)	(1,155)	-	-	(1,155)
Profit on disposal of subsidiaries		-	-	-	1,780	-	1,780
Profit on disposal of interests in associates		183	2	185	-	-	185
Impairment of associates		-	(228)	(228)	-	-	(228)
Investment return variances and economic assumption changes		-	54	54	(41)	-	13
Other		4	(18)	(14)	44	-	30
Total adjusting items		(1,161)	(236)	(1,397)	1,519	-	122
Tax on adjusting items		52	-	52	41	-	93
Share of associates' and joint ventures' tax expense on adjusting items	4.6	2	1	3	-	-	3
Profit attributable to non-controlling interests (preference shares and perpetual notes)		(5)	-	(5)	(28)	-	(33)
(Loss)/profit for the year attributable to equity shareholders of Standard Life Aberdeen plc		(714)	(121)	(835)	1,665	-	830
Profit attributable to other equity holders and non-controlling interests
Ordinary shares				-	5		5
Preference shares and perpetual notes				5	28		33
(Loss)/profit for the year				(830)	1,698		868

¹ Share of associates' and joint ventures' profit before tax comprises the Group's share of results of HDFC Life, HDFC AMC, Phoenix and HASL.

² Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts includes £1,117m included in administrative expenses and £38m relating to intangibles recognised on the part acquisition of associates and included in Share of profit from associates and joint ventures in the consolidated income statement.

(b)(ii) Total income and expenses

The following table provides a reconciliation of total adjusted operating income and total adjusted operating expenses from continuing operations, as presented in the analysis of Group adjusted profit by segment, to total revenue and total expenses from continuing operations respectively, as presented in the IFRS condensed consolidated income statement:

	6 months 2019		6 months 2018		Full year 2018
	Income	Expenses	Income	Expenses	Income	Expenses
	£m	£m	£m	£m	£m	£m
Total adjusted operating income and adjusted operating expenses as presented in the analysis of Group adjusted profit by segment from continuing operations	815	(673)	966	(712)	1,868	(1,395)
Insurance and participating investment contract claims and change in liabilities	95	(95)	27	(27)	1	(1)
Change in non-participating investment contract liabilities	197	(197)	2	(2)	(78)	78
Change in liability for third party interest in consolidated funds	5	(5)	4	(4)	(5)	5
Other presentation differences	77	(77)	79	(79)	152	(152)
Adjusting items	467	(283)	9	(172)	202	(1,355)
Capital management	22	-	(3)	-	(9)	-
Total income and expenses as presented in the IFRS condensed consolidated income statement from continuing operations	1,678	(1,330)	1,084	(996)	2,131	(2,820)

This reconciliation includes a number of reconciling items which arise due to presentation differences between IFRS reporting requirements and the determination of adjusted operating income and adjusted operating expenses. Adjusted operating income and expenses exclude items which have an equal and opposite effect on IFRS income and IFRS expenses in the consolidated income statement, such as investment returns which are for the account of policyholders. Other presentation differences include Aberdeen Standard Investments commission expenses which are presented in expenses in the consolidated income statement but are netted against adjusted operating income in the analysis of Group adjusted profit by segment.

4.4 Revenue from contracts with customers

The following table provides a breakdown of total revenue from contracts with customers:

	6 months 2019	6 months 2018	Full year 2018
	£m	£m	£m
Asset management
Management fee income - Strategic insurance partners¹	166	179	370
Management fee income - Other clients¹	559	747	1,372
Performance fees	6	3	9
Revenue from contracts with customers for asset management	731	929	1,751
Fund platforms
Fee income	98	81	173
Other revenue from contracts with customers	31	9	31
Total revenue from contracts with customers from continuing operations	860	1,019	1,955

¹ In addition to revenues earned as a percentage of AUM, management fee income includes certain other revenues such as registration fees.

The revenue from contracts with customers is reported within the Asset management and platforms segment. The following table provides a reconciliation of Revenue from contracts with customers as presented in the condensed consolidated income statement to fee based revenue, as presented in the analysis of adjusted profit before tax for the Asset management and platforms segment.

	6 months 2019	6 months 2018	Full year 2018
	£m	£m	£m
Revenue from contracts with customers from continuing operations as presented in the condensed consolidated income statement	860	1,019	1,955
Presentation differences
Commission expenses	(45)	(54)	(105)
Other differences	-	1	18
Fee based revenue from continuing operations as presented in the Asset management and platforms segment	815	966	1,868

Commission expenses are netted against fee based revenue in the segment reporting but are included within expenses in the consolidated income statement. Other presentation differences relates to amounts presented in a different income line item of the consolidated income statement and intra-group revenue which is eliminated in the consolidated income statement but grossed up for the purposes of segmental reporting.

4.5 Administrative expenses

	6 months 2019	6 months 2018	Full year 2018
	£m	£m	£m
Restructuring and corporate transaction expenses	192	59	231
Impairment of goodwill - Aberdeen Standard Investments	-	-	880
Commission expenses	45	54	105
Staff costs and other employee-related costs	320	365	673
Other impairment losses on intangible assets	1	11	46
Impairment losses on disposal group classified as held for sale	2	-	2
Other administration expenses	453	453	920
	1,013	942	2,857
Acquisition costs deferred during the period	(1)	(1)	(2)
Amortisation of deferred acquisition costs	1	1	2
Total administrative expenses from continuing operations	1,013	942	2,857

The 2019 restructuring and corporate transaction expenses mainly relate to merger integration, implementing our simplified global operating model and the repurchase of subordinated liabilities (refer Note 4.14).

4.6 Tax expense

	6 months 2019	6 months 2018	Full year 2018
	£m	£m	£m
Current tax:
UK	4	13	20
Overseas	11	18	44
Adjustment to tax expense in respect of prior years	-	(2)	3
Total current tax attributable to continuing operations	15	29	67
Deferred tax:
Deferred tax (credit)/expense arising from the current periods	(25)	(16)	(12)
Adjustment to deferred tax in respect of prior years	-	-	(12)
Total deferred tax attributable to continuing operations	(25)	(16)	(24)
Total tax (credit)/expense attributable to continuing operations	(10)	13	43

The share of associates' and joint ventures' tax expense is (£1m) (six months ended 30 June 2018: £18m; 12 months ended 31 December
2018: £40m) and is included in profit before tax in the IFRS condensed consolidated income statement in Share of profit from associates and joint ventures.

The standard UK corporation tax rate for the accounting period is 19% (six months ended 30 June 2018: 19%; 12 months ended 31 December 2018: 19%). The UK corporation tax rate will reduce to 17% from 1 April 2020. These changes have been taken into account in the calculation of the UK deferred tax balance at 30 June 2019.

The Group operates in a large number of territories and during the normal course of business will be subject to audit or enquiry by local tax authorities. At any point in time the Group will also be engaged in commercial transactions the tax outcome of which may be uncertain due to their complexity or uncertain application of tax law. Tax provisions, therefore, are subject to a level of estimation and judgement and may result in the Group recognising provisions for uncertain tax positions. Management will provide for uncertain tax positions where they judge that it is probable there will be a future outflow of economic benefits from the Group to settle the obligation. In assessing uncertain tax positions management considers each issue on its own merits using their judgement as to the estimate of the most likely outcome. Where the final outcome differs from the amount provided this difference will impact the tax charge in future periods. Management reassesses provisions at each reporting date based upon latest available information.

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

	6 months 2019	6 months 2018	Full year 2018
	£m	£m	£m
Tax relating to defined benefit pension plan deficit	-	-	-
Equity holder tax effect relating to items that will not be reclassified subsequently to profit or loss	-	-	-
Deferred tax on net change in financial assets designated as available-for-sale	-	(1)	(1)
Tax relating to fair value losses recognised as cash flow hedges	3	-	9
Tax relating to cash flow hedge losses transferred to consolidated income statement	(1)	-	(7)
Equity holder tax effect relating to items that may be reclassified subsequently to profit or loss	2	(1)	1
Tax relating to other comprehensive income from continuing operations	2	(1)	1

All of the amounts presented above are in respect of equity holders of Standard Life Aberdeen plc.

Tax relating to items taken directly to equity is as follows:

	6 months 2019	6 months 2018	Full year 2018
	£m	£m	£m
Tax expense on reserves for employee share-based payments	-	1	-
Tax credit relating to coupons payable on perpetual notes classified as equity	-	-	(6)
Tax relating to items taken directly to equity	-	1	(6)

4.7 Earnings per share

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

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue during the period to assume the conversion of all dilutive potential ordinary shares, such as share options granted to employees.

Adjusted earnings per share is calculated on adjusted profit after tax attributable to ordinary equity holders of the Company i.e. adjusted profit net of dividends paid on preference shares.

The following table shows details of basic, diluted and adjusted earnings per share for the period:

	6 months 2019			6 months 2018			Full year 2018
	Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total restated¹	Continuing operations	Discontinued operations	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Adjusted profit before tax	280	-	280	311	167	478	650	210	860
Tax on adjusted profit	(31)	-	(31)	(48)	(29)	(77)	(95)	(77)	(172)
Share of associates' and joint ventures' tax expense	(27)	-	(27)	(18)	-	(18)	(43)	-	(43)
Adjusted profit after tax	222	-	222	245	138	383	512	133	645
Dividend paid on preference shares	(3)	-	(3)	(3)	-	(3)	(5)	-	(5)
Adjusted profit after tax attributable to equity shareholders of the Company	219	-	219	242	138	380	507	133	640
Adjusting items	348	25	373	(166)	(74)	(240)	(1,397)	1,519	122
Tax on adjusting items	41	-	41	35	10	45	52	41	93
Share of associates' and joint ventures' tax expense on adjusting items	28	-	28	-	-	-	3	-	3
Adjustment for perpetual debt instruments classified as equity net of tax	-	-	-	-	-	-	-	(28)	(28)
Profit/(loss) attributable to equity shareholders of the Company	636	25	661	111	74	185	(835)	1,665	830
	6 months 2019			6 months 2018			Full year 2018
	Millions			Millions			Millions
Weighted average number of ordinary shares outstanding			2,420			2,937			2,848
Dilutive effect of share options and awards			29			28			29
Weighted average number of diluted ordinary shares outstanding			2,449			2,965			2,877
	6 months 2019			6 months 2018			Full year 2018
	Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total
	Pence	Pence	Pence	Pence	Pence	Pence	Pence	Pence	Pence
Basic earnings per share	26.3	1.0	27.3	3.8	2.5	6.3	(29.3)	58.4	29.1
Diluted earnings per share	26.0	1.0	27.0	3.7	2.5	6.2	(29.3)	58.4	29.1
Adjusted earnings per share	9.0	-	9.0	8.2	4.7	12.9	17.8	4.7	22.5
Adjusted diluted earnings per share	8.9	-	8.9	8.2	4.6	12.8	17.8	4.7	22.5

In accordance with IAS 33, no share options and awards were treated as dilutive for the year ended 31 December 2018 due to the loss attributable to equity holders of the Company from continuing operations in the year. This results in the adjusted diluted earnings per share from continuing operations and the total diluted earnings per share including discontinued operations being calculated using a weighted average number of ordinary shares of 2,848 million.

As discussed in Note 4.13 the Company undertook a share consolidation during the year ended 31 December 2018 followed by a return of capital to shareholders. In accordance with IAS 33, earnings per share have not been restated following the share consolidation as there was an overall corresponding change in resources due to the redemption of the B shares. As a result of the share consolidation and share buyback (see Note 4.13), earnings per share from continuing operations for the six months ended 30 June 2019 and the full year ended 31 December 2018 are not directly comparable with the respective prior periods.

4.8 Adjusted profit and adjusting items

Adjusted profit before tax is the Group's key alternative performance measure. Adjusted profit excludes the impact of the following items:

· Restructuring costs and corporate transaction expenses. Restructuring includes the impact of major regulatory change.

· Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts

· Profit or loss arising on the disposal of a subsidiary, joint venture or associate

· Fair value movements in contingent consideration

· Items which are one-off and, due to their size or nature, are not indicative of the long-term operating performance of the Group

Adjusted profit also excludes impacts arising from investment return variances (formerly called short-term fluctuations in investment return) and economic assumption changes in the Group's insurance entities. It is calculated based on expected returns on investments backing equity holder funds, with consistent allowance for the corresponding expected movements in equity holder liabilities. Impacts arising from the difference between the expected return and actual return on investments, and the corresponding impact on equity holder liabilities except where they are directly related to a significant management action, are excluded from adjusted profit and are presented within profit before tax. The impact of certain changes in economic assumptions is also excluded from adjusted profit and is presented within profit before tax.

Dividends payable on preference shares classified as non-controlling interests are excluded from adjusted profit in line with the treatment of ordinary shares. Similarly to preference shares, coupons paid on perpetual debt instruments classified as equity for which interest is only accounted for when paid is excluded from adjusted profit. This includes our share of interest payable on Tier 1 debt instruments held by associates. Coupons payable on perpetual debt instruments classified as equity for which interest is accrued are included in adjusted profit before tax.

(a) Investment return variances and economic assumption changes - insurance entities

Wholly owned insurance entities

The Group's UK and European insurance business was sold during the year ended 31 December 2018 and was classified as discontinued operations in 2018. The Group's other wholly owned insurance business, SL Asia, is classified as held for sale (see Note 4.2).

The components of IFRS profit attributable to market movements and interest rate changes which give rise to variances between actual and expected returns on investments backing equity holder funds, with consistent allowance for the corresponding expected movement in equity holder liabilities, as well as the impact of changes in economic assumptions on equity holder liabilities, are excluded from adjusted profit for the Group's wholly owned insurance entities. Investments backing equity holder funds include investments backing annuities and subordinated debt, and investments from surplus capital in insurance companies.

For UK and European insurance annuities this meant that all fluctuations in liabilities and the assets backing those liabilities due to market interest rate (including credit risk) movements over the year were excluded from adjusted profit.

The expected rates of return for debt securities and equity securities were determined separately for the UK and European insurance business. The expected rates of return for equity securities were determined based on the gilt spot rates of an appropriate duration plus an equity risk premium (2018: 3%). Investments in pooled investment funds which target equity returns over the longer term, including absolute return funds, also used an expected rate of return determined based on the gilt spot rates of an appropriate duration plus a risk premium (2018: 3%).

In respect of debt securities at fair value through profit or loss, the expected rate of return was determined based on the average prospective yields for the debt securities actually held.

For UK and European insurance business, the expected rates of return used for both the assets backing subordinated liabilities and the subordinated liabilities themselves included a discount for expected credit defaults. This meant that the interest expense included in adjusted profit for subordinated liabilities was after deducting a margin for own credit risk. Additionally, the effect of the accounting mismatch, where subordinated liabilities are measured at amortised cost and certain assets backing the liabilities are measured at fair value, was also excluded from adjusted profit.

There have been no actual defaults or impairments of assets backing subordinated liabilities during the six months ended 30 June 2019 or 30 June 2018 or the 12 months ended 31 December 2018. If these were to arise they would be excluded from adjusted profit.

Gains and losses on foreign exchange are deemed to represent investment return variances and economic assumption changes and thus are excluded from adjusted profit.

Investment return variances and economic assumption changes for the six months ended 30 June 2018 and the 12 months ended 31 December 2018 related principally to the impact of interest rate changes on UK annuity liabilities and the assets backing those liabilities.

Associates and joint ventures insurance entities

Where associates and joint ventures have a policy for determining investment return variances and economic assumption changes, the Group uses the policy of the associate or joint venture for including their results in the Group's adjusted profit. This currently applies only to the Group's investment in Phoenix. The Phoenix policy is similar to that used by the wholly owned insurance entities as described above. The main differences are as follows:

· Phoenix investment return variances, including those relating to owners' funds, include gains and losses on derivatives held to hedge life company Solvency II surplus positions. Such hedging positions were not previously held outside with profit funds by wholly owned insurance entities.

· Phoenix recognise charges on unit linked business based on expected investment returns, whereas wholly owned insurance entities use actual investment returns

· Phoenix include the impact of strategic asset allocation activities, such as investment in higher yielding illiquid assets, as investment variances. Wholly owned subsidiaries treat these within adjusted profit where they are directly related to a significant management action.

(b) Other

In the reconciliation of consolidated adjusted profit before tax to profit for the period the Other adjusting item sub-total includes (£2m) (six months ended 30 June 2018: £nil; 12 months ended 31 December 2018: (£2m)) in relation to the impairment of a disposal group classified as held for sale and £38m (six months ended 30 June 2018: (£4m); 12 months ended 31 December 2018: £3m) net fair value movements in contingent consideration. For the period ended 30 June 2019, £25m of the £38m fair value gain is in relation to discontinued operations.

The Other adjusting item in the six months ended 30 June 2018 relating to discontinued operations included a held for sale accounting adjustment relating to the amortisation of intangible assets (primarily deferred acquisition costs) and depreciation of tangible assets of £38m (12 months ended 31 December 2018: £44m). Following the classification of the UK and European Insurance business as held for sale on the announcement of the proposed transaction on 23 February 2018, no amortisation or depreciation was recognised. This increase to profit was recognised as an adjusting item.

4.9 Dividends on ordinary shares

	6 months 2019	6 months 2018		Full year 2018
	Pence per share	Pence per share	£m	Pence per share	£m
Dividends relating to reporting period
Interim dividend (2019 and 2018)	7.30	7.30	214	7.30	214
Final dividend (2018)	-	-	-	14.30	345
Total	7.30	7.30	214		559

Dividends paid in reporting period
Current year interim dividend	-	-	-	7.30	214
Final dividend for prior year	14.30	14.30	420	14.30	420
Total			420		634

Subsequent to 30 June 2019, the Board has declared an interim dividend for 2019 of 7.30 pence per ordinary share (interim 2018: 7.30 pence), an estimated £173m in total (interim 2018: £214m). The dividend is expected to be paid on 24 September 2019 and will be recorded as an appropriation of retained earnings in the financial statements for the year ended 31 December 2019.

4.10 Intangible assets

	30 Jun 2019	30 Jun 2018	31 Dec 2018
	£m	£m	£m
Acquired through business combinations
Goodwill	2,532	3,419	2,532
Brand	58	77	67
Customer relationships and investment management contracts	571	727	633
Technology	18	32	26
Internally developed software	63	59	62
Purchased software and other	-	-	4
Cost of obtaining customer contracts	70	87	80
Total intangible assets	3,312	4,401	3,404

4.11 Investments in associates and joint ventures accounted for using the equity method

Investments in associates and joint ventures accounted for using the equity method at 30 June 2019 of £1,604m (30 June 2018: £514m;
31 December 2018: £1,444m) includes £1,012m (30 June 2018: £nil; 31 December 2018: £812m) for the Group's Phoenix associate, which is included in the Insurance associates and joint ventures segment.

During the 12 months ended 31 December 2018 an impairment loss of £243m was recognised on the Group's interest in Phoenix, of which £15m arose at acquisition and was offset against the bargain purchase gain giving a loss on impairment in the consolidated income statement of £228m. The impairment loss was recognised due to the market value of the Group's interest in Phoenix of £812m as at 31 December 2018 being significantly below its carrying value. We considered that under IAS 28 the market value of Phoenix represented the best estimate of the present value of future dividends and therefore this market value of £812m was used as the value in use. As the value in use was based on the market value, a discount rate was not determined.

At 30 June 2019 the market value of the Group's interest in Phoenix was £1,022m and as set out above this has been used as the value in use. On this basis, a reversal of the impairment above of £243m has been recognised in the six months ended 30 June 2019.

4.12 Property, plant and equipment

	30 Jun 2019	30 Jun 2018	31 Dec 2018
	£m	£m	£m
Owner occupied property	2	2	2
Equipment	65	49	59
Right-of-use assets:
Property	198	-	-
Equipment	1	-	-
Total property, plant and equipment	266	51	61

On implementation of IFRS 16 on 1 January 2019, the Group recognised right of use assets of £178m and £1m for property and equipment respectively. The Group also recognised lease liabilities of £227m at this date. At 30 June 2019, other financial liabilities included £247m for lease liabilities. Refer Note 4.1 for further details.

4.13 Issued share capital, share premium and shares held by trusts

(a) Issued share capital

The movement in the issued ordinary share capital of the Company is:

	6 months 2019		6 months 2018		Full year 2018
Issued shares fully paid	13 61/63p each	£m	12 2/9p each	£m	12 2/9p each	13 61/63p each	£m
At start of period	2,529,412,224	353	2,978,936,877	364	2,978,936,877	-	364
Shares issued in respect of share incentive plans	540	-	246,523	-	435,340	288	-
Shares issued in respect of share options	-	-	304,611	-	350,156	-	-
New shares issued immediately prior to share consolidation	-	-	-	-	4	-	-
Share consolidation	-	-	-	-	(2,941,738,848)	2,574,021,492	-
Shares bought back on-market and cancelled	(116,128,848)	(16)	-	-	(37,983,529)	(44,609,556)	(11)
At end of period	2,413,283,916	337	2,979,488,011	364	-	2,529,412,224	353

All ordinary shares in issue in the Company rank pari passu and carry the same voting rights and entitlement to receive dividends and other distributions declared or paid by the Company.

On 22 October 2018, the Company undertook a share consolidation of the Company's share capital. Seven new ordinary shares of 13 61/63 pence each were issued for each holding of eight existing ordinary shares of 12 2/9 pence each. As a result, the number of shares in issue reduced from 2,941,738,848 to 2,574,021,492.

On 25 June 2018, a share buyback of up to £750m through on-market purchases was approved by shareholders. During the six months ended 30 June 2019, the Company has bought back and cancelled 116,128,848 shares (six months ended 30 June 2018: no shares; 12 months ended 31 December 2018: 82,593,085 shares). The total consideration (including transaction costs and unsettled purchases for a further 847,130 shares (six months ended 30 June 2018: no shares; 12 months ended 31 December 2018: 792,527 shares)) was £306m (six months ended 30 June 2018: £nil; 12 months ended 31 December 2018: £238m).

This consideration has resulted in a reduction in retained earnings of £180m (six months ended 30 June 2018: £nil; 12 months ended 31 December 2018: £238m) and in the special reserve of £126m (six months ended 30 June 2018: £nil; 12 months ended 31 December 2018: £nil). An amount of £16m (six months ended 30 June 2018: £nil; 12 months ended 31 December 2018: £11m) has been credited to the capital redemption reserve relating to the nominal value of the shares cancelled.

The Company can issue shares to satisfy awards granted under employee incentive plans which have been approved by shareholders.

(b) Return of capital in prior year

2,941,738,848 B shares were issued for nil consideration with a nominal value of 33.99 pence each on 22 October 2018, resulting in a total of £1,000m being credited to the B share capital account. At the same time £1,000m was deducted from the merger reserve. On 24 October 2018 the B shares were redeemed at 33.99 pence each. An amount of £1,000m was deducted from the B share capital account and £1,000m was transferred from retained earnings to the capital redemption reserve. The costs of the B share scheme of £2m were recognised directly in equity.

(c) Share premium

	6 months 2019	6 months 2018	Full year 2018
	£m	£m	£m
At start of period	640	639	639
Shares issued in respect of share options	-	1	1
At end of period	640	640	640

(d) Shares held by trusts

Shares held by trusts relates to shares in Standard Life Aberdeen plc that are held by the Standard Life Employee Trust (ET), the Aberdeen Asset Management Employee Benefit Trust 2003 (EBT) and the Standard Life Unclaimed Asset Trust (UAT).

The ET and EBT purchase shares in the Company for delivery to employees under employee incentive plans. Purchased shares are recognised as a deduction from equity at the price paid for them. Where new shares are issued to the ET or EBT the price paid is the nominal value of the shares. When shares are distributed from the trusts their corresponding value is released to retained earnings.

The number of shares held by trusts at 30 June 2019 was as follows:

	30 Jun 2019	30 Jun 2018	31 Dec 2018
Number of shares held by trusts
Standard Life Employee Trust	30,446,497	16,810,802	31,589,855
Aberdeen Asset Management Employee Benefit Trust 2003	20,257,282	23,589,384	20,327,295
Standard Life Unclaimed Asset Trust	136,224	175,994	153,020

4.14 Subordinated liabilities

On 26 March 2019, the Company repurchased 5.5% Sterling fixed rate subordinated notes with a principal amount of £408m (out of a total principal amount of £500m). The total amount paid was £462m including £7m of accrued interest and a repurchase loss of £49m has been included in restructuring and corporate transaction expenses (refer Note 4.5).

4.15 Pension and other post-retirement benefit provisions

The Group operates a number of defined benefit pension plans, the largest of which being the UK Standard Life Group staff defined benefit pension plan (principal plan) which is closed to future accrual. Following the merger with Aberdeen, the Group also operates two additional UK defined benefit plans. These two UK plans were in deficit when the last valuations were completed with the trustees, and the Group has agreed funding plans to eliminate these deficits. These two UK plans are included in Other along with the Ireland Standard Life plan, which is closed to new membership, and a number of smaller funded and unfunded plans in other countries.

For the UK plans the trustees set the plan investment strategy to protect the ratio of plan assets to the trustees' measure of technical provisions. Technical provisions represent the trustees' prudent view of the amount of assets needed to pay future benefits. The investment strategy does not aim to protect the IAS 19 surplus or ratio of plan assets to the IAS 19 measure of liabilities.

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

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

	6 months 2019	6 months 2018	Full year 2018
	£m	£m	£m
Current service cost	32	34	67
Past service cost	-	-	(15)
Net interest income	(15)	(14)	(27)
Administrative expenses	1	1	2
Expense from continuing operations recognised in the IFRS condensed consolidated income statement	18	21	27

(b) Analysis of amounts recognised on the IFRS condensed consolidated statement of financial position

	30 June 2019			30 June 2018				31 December 2018
	Principal plan	Other¹	Total	Principal plan	Other¹	Total	Held for sale	Principal plan	Other¹	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Present value of funded obligation	(2,802)	(311)	(3,113)	(2,776)	(345)	(3,121)	-	(2,542)	(311)	(2,853)
Present value of unfunded obligation	-	(3)	(3)	-	(3)	(3)	(7)	-	(3)	(3)
Fair value of plan assets	4,680	280	4,960	4,359	281	4,640	-	4,251	276	4,527
Effect of limit on plan surplus	(657)	-	(657)	(554)	-	(554)	-	(598)	-	(598)
Net asset/(liability)	1,221	(34)	1,187	1,029	(67)	962	(7)	1,111	(38)	1,073

¹ Included within Other is a defined benefit plan with a net asset position of £12m at 30 June 2019 (30 June 2018: £3m; 31 December 2018: £nil).

(c) Principal assumptions

The key economic assumptions for the principal plan which are based in part on current market conditions are as follows:

	30 Jun 2019	30 Jun 2018	31 Dec 2018
	%	%	%
Discount rate	2.35	2.55	2.85
Rates of inflation
Consumer Price Index (CPI)	2.15	2.10	2.20
Retail Price Index (RPI)	3.15	3.10	3.20

4.16 Fair value of assets and liabilities

(a) Determination of fair value hierarchy

To provide further information on the approach used to determine and measure the fair value of certain assets and liabilities, the following fair value hierarchy categorisation has been used:

· Level 1: Fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities. An active market exists where transactions take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

· Level 2: Fair values measured using inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

· Level 3: Fair values measured using inputs that are not based on observable market data (unobservable inputs)

(b) Methods and assumptions used to determine fair value of assets and liabilities including those held for sale

Information on the methods and assumptions used to determine fair values for each major category of instrument measured at fair value is given below. These methods and assumptions include those used to fair value assets and liabilities held for sale, including the individual assets and liabilities of operations held for sale.

Investments in associates at FVTPL, equity securities and interests in pooled investment funds and amounts seeded into funds classified as held for sale

Investments in associates at FVTPL are valued in the same manner as the Group's equity securities and interests in pooled investment funds.

Equity instruments listed on a recognised exchange are valued using prices sourced from the primary exchange on which they are listed. These instruments are generally considered to be quoted in an active market and are therefore categorised as level 1 instruments within the fair value hierarchy.

The Group's exposure to unlisted equity securities primarily relates to interests in real estate, infrastructure and private equity funds. These are valued in accordance with independent professional valuations or International Private Equity and Venture Capital Valuation Guidelines where relevant. The fair value of unlisted investments in infrastructure funds is based on the phase of individual projects forming the overall investment and discounted cash flow techniques based on project earnings. The valuation of these securities is largely based on inputs that are not based on observable market data, and accordingly these instruments are categorised as level 3 instruments within the fair value hierarchy. Where appropriate, reference is made to observable market data.

The valuations received from investment managers of the underlying funds are reviewed and where appropriate adjustments are made to reflect the impact of changes in market conditions between the date of the valuation and the end of the reporting period. The valuation of these securities is largely based on inputs that are not based on observable market data, and accordingly these instruments are categorised as level 3 instruments within the fair value hierarchy. Where appropriate, reference is made to observable market data.

Where pooled investment funds have been seeded and the investment in the funds have been classified as held for sale, the costs to sell are assumed to be negligible. The fair value of pooled investment funds held for sale is calculated as equal to the observable unit price.

Derivative financial assets and derivative financial liabilities

The majority of the Group's derivatives are over-the-counter derivatives which are measured at fair value using a range of valuation models including discounting future cash flows and option valuation techniques. The inputs are observable market data and over-the-counter derivatives are therefore categorised as level 2 in the fair value hierarchy.

Exchange traded derivatives are valued using prices sourced from the relevant exchange. They are considered to be instruments quoted in an active market and are therefore categorised as level 1 instruments within the fair value hierarchy.

Non-performance risk arising from the credit risk of each counterparty has been considered on a net exposure basis in line with the Group's risk management policies. At 30 June 2019, 30 June 2018 and 31 December 2018, the residual credit risk is considered immaterial and no credit risk adjustment has been made.

Debt securities

For debt securities, the Group has determined a hierarchy of pricing sources. The hierarchy consists of reputable external pricing providers who generally use observable market data. If prices are not available from these providers or are considered to be stale, the Group has established procedures to arrive at an internal assessment of the fair value. These procedures are based largely on inputs that are not based on observable market data. A further analysis by category of debt security is as follows:

· Government, including provincial and municipal, and supranational institution bonds

These instruments are valued using prices received from external pricing providers who generally base the price on quotes received from a number of market participants. They are categorised as level 1 or level 2 instruments within the fair value hierarchy depending upon the nature of the underlying pricing information used for valuation purposes.

· Corporate bonds listed or quoted in an established over-the-counter market including asset-backed securities

These instruments are generally valued using prices received from external pricing providers who generally consolidate quotes received from a panel of banks into a composite price. As the market becomes less active the quotes provided by some banks may be based on modelled prices rather than on actual transactions. These sources are based largely on observable market data, and therefore these instruments are categorised as level 2 instruments within the fair value hierarchy. When prices received from external pricing providers are based on a single broker indicative quote, the instruments are categorised as level 3 instruments.

For instruments for which prices are either not available from external pricing providers or the prices provided are considered to be stale, the Group performs its own assessment of the fair value of these instruments. This assessment is largely based on inputs that are not based on observable market data, principally single broker indicative quotes, and accordingly these instruments are categorised as level 3 instruments within the fair value hierarchy.

· Other corporate bonds including unquoted bonds, commercial paper and certificates of deposit

These instruments are valued using models. For unquoted bonds the model uses inputs from comparable bonds and includes credit spreads which are obtained from brokers or estimated internally. Commercial paper and certificates of deposit are valued using standard valuation formulas. The categorisation of these instruments within the fair value hierarchy will be either level 2 or 3 depending upon the nature of the underlying pricing information used for valuation purposes.

Contingent consideration assets and contingent consideration liabilities

Contingent consideration assets and liabilities have been recognised in respect of acquisitions and disposals. Generally valuations are based on unobservable assumptions regarding the probability weighted cash flows and, where relevant, discount rate and therefore the assets and liabilities are classified as level 3 in the fair value hierarchy. Significant contingent consideration arises under the terms of the sale of SLAL to Phoenix in August 2018. The terms include a number of indemnities that give rise to contingent consideration. The indemnities that have the most significant impact on the fair value of this contingent consideration are as follows:

· Annuity sales practices

The annuity sales practices indemnity primarily relates to enhanced annuities. At the request of the FCA, SLAL is conducting a review of non-advised annuity sales (with a purchase price above a minimum threshold) to customers eligible to receive an enhanced annuity from 1 July 2008 until 31 May 2016. The purpose of this review is to identify whether these customers received sufficient information about enhanced annuities to make the right decisions about their purchase, and, where appropriate, provide redress to customers who have suffered loss as a result of not having received sufficient information. SLAL has been working with the FCA regarding the process for conducting this past business review.

Under the indemnity if SLAL suffers a loss in excess of the provision it recognised at 31 December 2017 of £248m in relation to annuity sales practices, the Group will pay the excess to Phoenix subject to a £120m cap. If that provision is not fully utilised Phoenix will pay the Group the unutilised amount. In addition the Group shall pay to Phoenix an amount equivalent to the financial penalty of £31m levied by the FCA on SLAL in July 2019.

The technique used to value this element of the contingent consideration is to assess the likelihood of an over or under utilisation of the 31 December 2017 provision and to include the amount related to the FCA levied financial penalty.

· Persistency

If SLAL suffers adverse lapse experience relating to certain UK unit linked products (but excluding unit linked products written in a with profits fund) prior to 31 December 2019, the Group shall make a payment to Phoenix, based on the difference between expected and actual lapse experience, subject to a £75m cap.

The technique used to value this element of the contingent consideration is based on a statistical model used for the Group's Solvency II reporting at 31 December 2017, with each possible outcome weighted by the likelihood of that outcome.

Non-participating investment contract liabilities

The fair value of the non-participating investment contract liabilities is calculated equal to the fair value of the underlying assets and liabilities in the funds. Thus, the value of these liabilities is dependent on the methods and assumptions set out above in relation to the underlying assets and liabilities in which these funds are invested. The underlying assets and liabilities are predominately categorised as level 1 or 2 and as such, the inputs into the valuation of the liabilities are observable. Therefore, the liabilities are categorised within level 2 of the fair value hierarchy.

Liabilities in respect of third party interest in consolidated funds

The fair value of liabilities in respect of third party interest in consolidated funds is calculated equal to the fair value of the underlying assets and liabilities in the funds. Thus, the value of these liabilities is dependent on the methods and assumptions set out above in relation to the underlying assets in which these funds are invested. When the underlying assets and liabilities are valued using readily available market information the liabilities in respect of third party interest in consolidated funds are treated as level 2. Where the underlying assets and liabilities are not valued using readily available market information the liabilities in respect of third party interest in consolidated funds are treated as level 3.

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

The table below presents the Group's assets measured at fair value by level of the fair value hierarchy.

							Fair value hierarchy
	As recognised in the consolidated statement of financial position line item		Classified as held for sale		Total		Level 1		Level 2		Level 3
	30 Jun 2019	31 Dec 2018	30 Jun 2019	31 Dec 2018	30 Jun 2019	31 Dec 2018	30 Jun 2019	31 Dec 2018	30 Jun 2019	31 Dec 2018	30 Jun 2019	31 Dec 2018
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Owner occupied property	2	2	-	-	2	2	-	-	-	-	2	2
Derivative financial assets	32	21	-	-	32	21	-	1	32	20	-	-
Equity securities and interests in pooled investment vehicles	2,295	2,030	830	699	3,125	2,729	2,750	2,510	301	160	74	59
Debt securities	1,038	1,723	14	13	1,052	1,736	220	178	831	1,557	1	1
Contingent consideration asset	-	8	-	-	-	8	-	-	-	-	-	8
Total assets at fair value	3,367	3,784	844	712	4,211	4,496	2,970	2,689	1,164	1,737	77	70

				Fair value hierarchy
	As recognised in the consolidated statement of financial position line item	Classified as held for sale	Total	Level 1	Level 2	Level 3
30 June 2018	£m	£m	£m	£m	£m	£m
Investment property	-	9,895	9,895	-	-	9,895
Owner occupied property	2	82	84	-	-	84
Derivative financial assets	7	2,588	2,595	722	1,873	-
Equity securities and interests in pooled investment vehicles	3,196	95,581	98,777	97,730	26	1,021
Debt securities	469	58,440	58,909	23,676	33,792	1,441
Contingent consideration asset	2	-	2	-	-	2
Total assets at fair value	3,676	166,586	170,262	122,128	35,691	12,443

Transfers from level 1 to level 2 during the period were £42m (six months ended 30 June 2018: £nil; 12 months ended 31 December 2018: £nil). These transfers relate to assets where observable market transactions were not deemed sufficiently frequent to be considered an active market. Transfers are deemed to have occurred at the end of the calendar quarter in which they arose. Refer to 4.16 (b)(iii) for details of movements in level 3.

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

The table below presents the Group's liabilities measured at fair value by level of the fair value hierarchy.

							Fair value hierarchy
	As recognised in the consolidated statement of financial position line item		Classified as held for sale		Total		Level 1		Level 2		Level 3
	30 Jun 2019	31 Dec 2018	30 Jun 2019	31 Dec 2018	30 Jun 2019	31 Dec 2018	30 Jun 2019	31 Dec 2018	30 Jun 2019	31 Dec 2018	30 Jun 2019	31 Dec 2018
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Non-participating investment contract liabilities	1,600	1,468	50	52	1,650	1,520	-	-	1,650	1,520	-	-
Liabilities in respect of third party interest in consolidated funds	407	254	16	14	423	268	3	-	420	268	-	-
Derivative financial liabilities	11	6	-	-	11	6	2	1	9	5	-	-
Contingent consideration liabilities	71	29	-	-	71	29	-	-	-	-	71	29
Total liabilities at fair value	2,089	1,757	66	66	2,155	1,823	5	1	2,079	1,793	71	29

				Fair value hierarchy
	As recognised in the consolidated statement of financial position line item	Classified as held for sale	Total	Level 1	Level 2	Level 3
30 June 2018	£m	£m	£m	£m	£m	£m
Non-participating investment contract liabilities	1,274	102,242	103,516	-	103,516	-
Liabilities in respect of third party interest in consolidated funds	227	15,781	16,008	-	14,734	1,274
Derivative financial liabilities	32	897	929	168	761	-
Contingent consideration liabilities	39	-	39	-	-	39
Total liabilities at fair value	1,572	118,920	120,492	168	119,011	1,313

There were no significant transfers between levels 1 and 2 during the six months ended 30 June 2019 (six months ended 30 June 2018: none; 12 months ended 31 December 2018: none). Refer to 4.16 (b)(iii) for details of movements in level 3.

(b)(iii) Reconciliation of movements in level 3 instruments

The movements during the period of level 3 assets and liabilities held at fair value, excluding assets and liabilities held for sale, are analysed below.

	Investment property		Owner occupied property		Equity securities and interests in pooled investment funds		Debt securities		Liabilities in respect of third party interest in consolidated funds
	30 Jun 2019	31 Dec 2018	30 Jun 2019	31 Dec 2018	30 Jun 2019	31 Dec 2018	30 Jun 2019	31 Dec 2018	30 Jun 2019	31 Dec 2018
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At start of period	-	9,749	2	81	59	994	1	1,444	-	(1,298)
Reclassified to held for sale	-	(9,749)	-	(79)	-	(921)	-	(1,443)	-	1,298
Total gains/(losses) recognised in the consolidated income statement	-	-	-	-	1	5	-	-	-	-
Purchases	-	-	-	-	16	18	-	-	-	-
Sales	-	-	-	-	(2)	(37)	-	-	-	-
At end of period	-	-	2	2	74	59	1	1	-	-

	Investment property	Owner occupied property	Equity securities and interests in pooled investment funds	Debt securities	Liabilities in respect of third party interest in consolidated funds
2018	£m	£m	£m	£m	£m
1 January	9,749	81	994	1,444	(1,298)
Reclassified to held for sale	(9,749)	(79)	(882)	(1,443)	1,298
Total gains/(losses) recognised in the consolidated income statement	-	-	4	-	-
Purchases	-	-	5	-	-
Sales	-	-	(17)	-	-
30 June	-	2	104	1	-

	Contingent consideration asset			Contingent consideration liabilities
	30 Jun 2019	30 Jun 2018	31 Dec 2018	30 Jun 2019	30 Jun 2018	31 Dec 2018
	£m	£m	£m	£m	£m	£m
At start of period	8	6	6	(29)	(25)	(25)
Total amounts recognised in the income statement	-	(4)	(6)	38	-	9
Additions	-	-	8	-	(17)	(19)
Settlements	(95)	-	-	7	3	6
Transfer to contingent consideration liability	87	-	-	(87)	-	-
At end of period	-	2	8	(71)	(39)	(29)

For the six months ended 30 June 2019, £15m of total gains from continuing operations (six months ended 30 June 2018: gains of £4m; 12 months ended 31 December 2018: gains of £6m) were recognised in the IFRS condensed consolidated income statement in respect of assets and liabilities held at fair value classified as level 3 at the period end, excluding assets and liabilities held for sale. Of this amount £13m of gains (six months ended 30 June 2018: £nil; 12 months ended 31 December 2018: gains of £7m) were recognised in other income with the remainder recognised in investment return.

Transfers of equity securities and interests in pooled investment funds and debt securities into level 3 generally arise when external pricing providers stop providing a price or where the price provided is considered stale. Transfers of equity securities and interests in pooled investment funds and debt securities out of level 3 arise when acceptable prices become available from external pricing providers.

The table below presents quantitative information about the significant unobservable inputs for level 3 instruments:

	Fair value
30 June 2019	£m	Unobservable input	Input used
Equity securities and interests in pooled investment funds	74	This comprises holdings in approximately 100 separate funds, predominantly by value being interests in real estate, infrastructure and private equity funds. Given the numerous unobservable inputs pertaining to the valuation of the underlying assets in the funds no individual unobservable inputs are considered significant.	N/A
Contingent consideration assets and liabilities	(71)	Unobservable inputs relate to probability weighted cash flows and, where relevant, discount rates. The most significant unobservable inputs relate to assumptions used to value the contingent consideration related to the sale of SLAL to Phoenix, in particular those related to:
		· SLAL's annuity sales practices provision	Inputs as disclosed in the Group's Annual report and accounts for the year ended 31 December 2018 except for the lost income per annum for an average annuity purchase of £25,000 which reduced from £300 per annum to £235 per annum.
		· Future lapse rates on relevant UK unit linked products of SLAL	Statistical distribution used in the Group's Solvency II internal model at 31 December 2017

	Fair value
30 June 2018	£m	Valuation technique	Unobservable input	Range (weighted average)
Investment property and owner occupied property	9,453	Income capitalisation	Equivalent yield Estimated rental value per square metre per annum	3.5% to 9.1% (5.1%) £31 to £1,716 (£317)
Investment property (hotels)	449	Income capitalisation	Equivalent yield Estimated rental value per room per annum	3.9% to 6.6% (5.0%) £995 to £13,800 (£6,634)
Investment property and owner occupied property	77	Market comparison	Estimated value per square metre	£2 to £10,932 (£3,080)
Equity securities and interests in pooled investment funds	1,021	Adjusted net asset value	Adjustment to net asset value	N/A
Debt securities (commercial mortgages)	348	Discounted cash flow	Credit spread	1.9% to 2.6% (2.2%)
Debt securities (income strips)	538	Income capitalisation	Equivalent yield	4.1% to 6.4% (5.3%)
Debt securities (unquoted corporate bonds)	499	Discounted cash flow	Credit spread	0.8% to 2.4% (1.8%)
Debt securities (infrastructure loans)	56	Discounted cash flow	Credit spread	1.8% to 2.9% (2.4%)

	Fair value
31 December 2018	£m	Unobservable input	Input used
Equity securities and interests in pooled investment funds	59	This comprises holdings in approximately 80 separate funds, predominantly by value being interests in real estate, infrastructure and private equity funds. Given the numerous unobservable inputs pertaining to the valuation of the underlying assets in the funds no individual unobservable inputs are considered significant.	N/A
Contingent consideration assets and liabilities	(21)	Unobservable inputs relate to probability weighted cash flows and, where relevant, discount rates. The most significant unobservable inputs relate to assumptions used to value the contingent consideration related to the sale of SLAL to Phoenix, in particular those related to:
		· SLAL's annuity sales practices provision (including the likelihood and value of annuity sales practices insurance recoveries and any FCA-levied penalty)	Inputs as disclosed in the Group's Annual report and accounts for the year ended 31 December 2018
		· Future lapse rates on relevant UK unit linked products of SLAL	Statistical distribution used in the Group's Solvency II internal model at 31 December 2017

(b)(iv) Sensitivity of level 3 instruments measured at fair value on the statement of financial position to changes in key assumptions

At 30 June 2019 the shareholder is directly exposed to movements in the value of all level 3 instruments since none are held in the Group's unit linked funds or in consolidated structured entities.

The sensitivities at 30 June 2019 of the measurement of contingent consideration related to the annuity sales practices indemnity are as follows:

Assumption	Change in assumption	Consequential change in contingent consideration valuation
Percentage of customers eligible for an enhanced annuity	Percentage changed by +/-5 (e.g. 40% increased to 45%)	+/- £16m
Percentage of eligible customers that did not receive sufficient information from SLAL about enhanced annuities	Percentage changed by +/-5	+/- £7m
Lost income per annum for an average annuity purchase of £25,000	+/- £20	+/- £13m

Changing unobservable inputs in the measurement of the fair value of other level 3 financial assets and financial liabilities to reasonably possible alternative assumptions would not have a significant impact on profit attributable to equity holders or on total assets.

(c) Assets and liabilities not carried at fair value

The table below presents estimated fair values by level of the fair value hierarchy of assets and liabilities whose carrying value does not approximate fair value. Fair values of assets and liabilities are based on observable market inputs where available, or are estimated using other valuation techniques.

	As recognised in the consolidated statement of financial position line item			Fair value
	30 Jun 2019	30 Jun 2018	31 Dec 2018	30 Jun 2019	30 Jun 2018	31 Dec 2018
	£m	£m	£m	£m	£m	£m
Assets
Loans secured by mortgages	-	52	-	-	60	-
Debt securities¹	274	-	-	285	-	-
Liabilities
Non-participating investment contract liabilities	-	6	---	-	6	-
Subordinated notes	690	1,081	1,081	694	1,113	1,088
Subordinated guaranteed bonds	-	519	-	-	691	-
Mutual Assurance Capital Securities	-	309	-	-	333	-

¹ Debt securities are held under IFRS 9 at amortised cost. They were previously held at fair value as available-for-sale under IAS 39.

The estimated fair values of the subordinated liabilities are based on the quoted market offer price. The estimated fair values of the other instruments detailed above are calculated by discounting the expected future cash flows at current market rates.

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

4.17 Contingent liabilities and contingent assets

Legal proceedings, complaints and regulations

The Group is subject to regulation in all of the territories in which it operates investment and insurance businesses. In the UK, where the Group primarily operates, the FCA has broad powers, including powers to investigate marketing and sales practices.

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

Refer Note 4.20 in relation to the settlement of arbitration with Lloyds Banking Group/ Scottish Widows.

4.18 Commitments

(a) Unrecognised financial instruments

As at 30 June 2019, the Group has committed £33m (30 June 2018: £512m; 31 December 2018: £37m) in respect of unrecognised financial instruments to customers and third parties. Of this amount, £nil (30 June 2018: £391m; 31 December 2018: £nil) was committed by consolidated private equity funds. These commitments were funded through contractually agreed additional investments both by the Group, through its controlling interests, and the funds' non-controlling interests. The level of funding provided by each was not necessarily in line with the current ownership profile of the funds.

(b) Capital commitments

At 30 June 2019, the Group has capital commitments other than in relation to financial instruments of £37m (30 June 2018: £nil; 31 December 2018: £nil).

The Group's investment property was sold in the year ended 31 December 2018 so there are no capital commitments in respect of investment property as at 30 June 2019 and 31 December 2018. As at 30 June 2018, the Group's investment property was classified as held for sale.

4.19 Related party transactions

In the normal course of business, the Group enters into transactions with related parties that relate to insurance and investment management business. There have been no changes in the nature of these transactions during the period to those reported in the Group's Annual report and accounts for the year ended 31 December 2018.

In the six months ended 30 June 2019, for associates accounted for using the equity method, the Group recognised sales primarily in relation to management fees of £109m (six months ended 30 June 2018: £nil; 12 months ended 31 December 2018: £89m) and purchases in relation to services received of £39m (six months ended 30 June 2018: £nil; 12 months ended 31 December 2018: £28m). There were no other transactions with related parties that have materially affected the result or financial position of the Group during the period ended 30 June 2019, 30 June 2018 or 31 December 2018.

Details of the proposed sale of a subsidiary to a joint venture business are included in Note 4.2.

4.20 Events after the reporting date

(a) Settlement of arbitration with Lloyds Banking Group/ Scottish Widows

On 24 July 2019, the Group announced that it had agreed a final settlement with Lloyds Banking Group/ Scottish Widows (LBG) in relation to the arbitration proceedings between the parties concerning LBG's attempt to terminate investment management arrangements under which assets are managed by members of the Group for LBG entities.

In its decision of March 2019, the arbitral tribunal found that LBG was not entitled to terminate these investment management arrangements. The Group has continued to manage approximately £104bn (as at 30 June 2019) of assets under management (AUM) for LBG entities during the period of the dispute.

Under the terms of the settlement:

· The Group will continue to manage approximately one third of the total AUM (circa £35bn as at 30 June 2019) on behalf of LBG entities until at least April 2022 (the end of the initial term under the original investment management agreements) subject to applicable investment management arrangements. This AUM comprises circa £30bn in passive portfolios as well as circa £5bn in real estate funds.

· Approximately two thirds of the total AUM (the transferring AUM) will be transferred to third party managers appointed by LBG through a series of planned tranches over the next nine months. During this period, the Group will continue to be remunerated for its services in relation to the transferring AUM.

· In addition, the Group has received an upfront payment of £140m from LBG as final settlement to compensate for loss of profit in relation to the transferring AUM. This will be recognised in H2 2019 and will be subject to UK corporation tax.

(b) Joint venture with Virgin Money

On 31 July 2019, as part of a strategic joint venture with Virgin Money, the Group completed the acquisition of 50% (less one share) of Virgin Money Unit Trust Managers Limited for an upfront cash payment of £40m plus 50% of the capital in the business and certain other costs.

The financial effect of the transaction is expected to be the recognition of an investment in the joint venture at a cost of approximately £51m which will be accounted for using the equity method.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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