Half Yearly Report - Part 3 of 4

RNS Number : 9562U

Standard Life plc

04 August 2015

Standard Life plc

Half year results 2015

Part 3 of 4

2. Statement of Directors' responsibilities

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

1. 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, which have been prepared in accordance with IAS 34 Interim Financial Reporting as endorsed by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole as required by DTR 4.2.4R

2. The Strategic report includes a fair review of the information required by DTR 4.2.7R, namely important events that have occurred during the period and their impact on the condensed consolidated financial information, as well as a description of the principal risks and uncertainties faced by the Company and the undertakings included in the consolidation taken as a whole for the remaining six months of the financial year

3. The Strategic report and the notes to the condensed consolidated financial information include a fair review of the information required by DTR 4.2.8R, namely material related party transactions that have occurred during the period and any material changes in the related party transactions described in the last annual report

4. As per provision C1 of the UK Corporate Governance Code, the Half year results 2015, taken as a whole, present a fair, balanced and understandable position of the Company's prospects

Changes to Directors

As previously announced, John Paynter retired as a non-executive Director on 28 April 2015. David Grigson retired as a non-executive Director at the conclusion of the Company's Annual General Meeting on 12 May 2015 and David Nish will stand down as an executive Director on 5 August 2015.

By order of the Board

Sir Gerry Grimstone

Chairman

4 August 2015

Luke Savage

Chief Financial Officer

4 August 2015

3. Independent review report to Standard Life plc

Report on the interim financial information

Our conclusion

We have reviewed the IFRS condensed consolidated interim financial information (the 'interim financial information'), defined below, in the Half year results of Standard Life Plc for the six months ended 30 June 2015.

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

This conclusion is to be read in the context of what we say in the remainder of this report.

What we have reviewed

The interim financial information, which is prepared by Standard Life plc, comprises:

· The IFRS condensed consolidated statement of financial position as at 30 June 2015

· The IFRS condensed consolidated income statement and IFRS condensed consolidated statement of comprehensive income for the period then ended

· The IFRS condensed consolidated statement of changes in equity for the period then ended

· The IFRS condensed consolidated statement of cash flows for the period then ended

· The notes to the IFRS condensed consolidated interim financial information

As disclosed in Note 4.1, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The interim financial information included in the Half year results has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

What a review of interim financial information involves

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 United Kingdom. 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.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) 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.

We have read the other information contained in the Half year results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial information.

Responsibilities for interim financial information and the review

Our responsibilities and those of the Directors

The Half year results, including the interim financial information, are the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half year results in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express to the Company a conclusion on the interim financial information in the Half year results based on our review.

This report, including the conclusion, has been prepared for and only for the Company for the purpose of complying with the Disclosure and Transparency Rules of the Financial Conduct Authority and for no other purpose.

We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

PricewaterhouseCoopers LLP

Chartered Accountants

Edinburgh

4 August 2015

(a) The maintenance and integrity of the Standard Life plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

4. Financial statements

IFRS condensed consolidated income statement

For the six months ended 30 June 2015

		6 months 2015	6 months 2014 restated¹	Full year 2014
	Notes	£m	£m	£m
Revenue
Gross earned premium		1,162	1,227	2,404
Premium ceded to reinsurers		(27)	(32)	(61)
Net earned premium		1,135	1,195	2,343
Investment return		3,956	4,504	13,179
Fee and commission income		540	424	985
Other income		37	36	81
Total revenue		5,668	6,159	16,588
Expenses
Claims and benefits paid		2,254	2,190	4,389
Claim recoveries from reinsurers		(260)	(270)	(533)
Net insurance benefits and claims		1,994	1,920	3,856
Change in reinsurance assets and liabilities		296	76	(60)
Change in insurance and participating contract liabilities		(814)	1,037	3,834
Change in unallocated divisible surplus		(134)	4	(71)
Change in non-participating investment contract liabilities		2,877	1,582	5,362
Expenses under arrangements with reinsurers		(13)	242	639
Administrative expenses
Restructuring and corporate transaction expenses	4.4	48	27	106
Other administrative expenses		792	634	1,430
Total administrative expenses	4.4	840	661	1,536
Change in liability for third party interest in consolidated funds		396	278	758
Finance costs		40	49	98
Total expenses		5,482	5,849	15,952
Share of profit from associates and joint ventures		24	22	36
Profit before tax		210	332	672
Tax expense attributable to policyholders' returns	4.5	89	91	250
Profit before tax expense attributable to equity holders' profits		121	241	422
Total tax expense	4.5	107	126	292
Less: Tax attributable to policyholders' returns	4.5	(89)	(91)	(250)
Tax expense attributable to equity holders' profits	4.5	18	35	42
Profit for the period from continuing operations		103	206	380
Profit for the period from discontinued operations	4.2	1,142	79	127
Profit for the period		1,245	285	507
Attributable to:
Equity holders of Standard Life plc
From continuing operations		69	196	376
From discontinued operations		1,142	79	127
Equity holders of Standard Life plc		1,211	275	503
Non-controlling interests		34	10	4
		1,245	285	507
Earnings per share from continuing operations
Basic (pence per share)	4.6	3.2	8.3	15.8
Diluted (pence per share)	4.6	3.2	8.2	15.7
Earnings per share
Basic (pence per share)	4.6	56.7	11.6	21.1
Diluted (pence per share)	4.6	56.6	11.5	21.0

¹ Comparatives for the six months ended 30 June 2014 have been restated to reflect the classification of the Group's Canadian business as discontinued operations. Refer to Note 4.2 - Acquisitions and disposals.

IFRS condensed consolidated statement of comprehensive income

For the six months ended 30 June 2015

		6 months 2015	6 months 2014 restated¹	Full year 2014
	Notes	£m	£m	£m
Profit for the period		1,245	285	507
Less: Profit from discontinued operations	4.2	(1,142)	(79)	(127)
Profit from continuing operations		103	206	380
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gains on defined benefit pension plans		70	4	292
Revaluation of owner occupied property		-	1	5
Equity movements transferred to unallocated divisible surplus		-	16	(4)
Equity holder tax effect relating to items that will not be reclassified subsequently to profit or loss		-	-	-
Total items that will not be reclassified subsequently to profit or loss		70	21	293

Items that may be reclassified subsequently to profit or loss:
Fair value gains on cash flow hedges		-	1	1
Net investment hedge		-	1	(1)
Fair value (losses)/gains on available-for-sale financial assets		(6)	10	27
Exchange differences on translating foreign operations		(46)	(31)	(13)
Equity movements transferred to unallocated divisible surplus		21	(1)	6
Share of other comprehensive income of joint ventures		-	2	4
Equity holder tax effect relating to items that may be reclassified subsequently to profit or loss	4.5	1	(2)	(6)
Total items that may be reclassified subsequently to profit or loss		(30)	(20)	18
Other comprehensive income for the period from continuing operations		40	1	311
Total comprehensive income for the period from continuing operations		143	207	691

Profit from discontinued operations	4.2	1,142	79	127
Other comprehensive income from discontinued operations	4.2	(187)	(20)	(18)
Total comprehensive income for the period from discontinued operations		955	59	109
Total comprehensive income for the period		1,098	266	800

Attributable to:
Equity holders of Standard Life plc
From continuing operations		109	197	687
From discontinued operations		955	59	109
Non-controlling interests
From continuing operations		34	10	4
		1,098	266	800

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

For the six months ended 30 June 2015

		6 months 2015			6 months 2014
		Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total
	Notes	£m	£m	£m	£m	£m	£m
Operating profit before tax
Standard Life Investments		154	-	154	102	2	104
UK and Europe		147	-	147	188	-	188
Canada		-	5	5	-	69	69
India and China¹		21	(2)	19	12	(6)	6
Other		(32)	-	(32)	(28)	-	(28)
Operating profit before tax	4.3	290	3	293	274	65	339
Adjusted for the following items
Short-term fluctuations in investment return and economic assumption changes		(42)	63	21	-	50	50
Restructuring and corporate transaction expenses		(62)	(8)	(70)	(26)	(1)	(27)
Impairment of intangible assets		-	(2)	(2)	-	-	-
Gain on sale of Canadian business		-	1,097	1,097	-	-	-
Other²		(54)	(31)	(85)	(10)	-	(10)
Non-operating (loss)/profit before tax	4.3	(158)	1,119	961	(36)	49	13
Dubai included in discontinued operations segment¹	4.3	-	-	-	(3)	3	-
Singapore included in discontinued operations segment¹	4.3	(40)	40	-	(3)	3	-
Share of associates' and joint ventures' tax expense	4.3	(5)	-	(5)	(1)	-	(1)
Profit attributable to non-controlling interests	4.3	34	-	34	10	-	10
Profit before tax expense attributable to equity holders' profits		121	1,162	1,283	241	120	361
Tax (expense)/credit attributable to
Operating profit	4.3	(37)	-	(37)	(46)	(27)	(73)
Non-operating items	4.3	19	(20)	(1)	11	(14)	(3)
Dubai included in discontinued operations segment¹	4.3	-	-	-	-	-	-
Singapore included in discontinued operations segment¹	4.3	-	-	-	-	-	-
Total tax expense attributable to equity holders' profits		(18)	(20)	(38)	(35)	(41)	(76)
Profit for the period		103	1,142	1,245	206	79	285

¹ Dubai and Singapore businesses, the closure of which were announced in November 2014 and June 2015 respectively, are included as discontinued operations for segmental reporting purposes under IFRS 8 as this is reflective of the presentation of information provided to the Chief Operating Decision Maker. These were previously included in the Asia and Emerging Markets segment which has been renamed India and China. Under IFRS 5, Dubai and Singapore do not constitute discontinued operations and are included under continuing operations in the IFRS condensed consolidated income statement. Therefore the pro forma reconciliation above includes the reclassification of Dubai and Singapore results between discontinued and continuing operations. Comparatives have been restated.

² Following regulatory change in Hong Kong a review of expense and reserving assumptions was undertaken which resulted in a £46m non-operating loss being recognised, primarily relating to an impairment of deferred acquisition costs. This is included in Other non-operating items from continuing operations for the six months ended 30 June 2015. Other non-operating items from discontinued operations for the six months ended 30 June 2015 includes £31m in respect of impairment of deferred acquisition costs and plan enhancements relating to the closure of the Singapore business.

Pro forma reconciliation of consolidated operating profit to IFRS profit for the period continued

		Continuing operations	Discontinued operations	Total
Full year 2014	Notes	£m	£m	£m
Operating profit before tax
Standard Life Investments		257	4	261
UK and Europe		390	-	390
Canada		-	132	132
India and China¹		23	(9)	14
Other		(62)	-	(62)
Operating profit before tax	4.3	608	127	735
Adjusted for the following items
Short-term fluctuations in investment return and economic assumption changes		17	71	88
Restructuring and corporate transaction expenses		(109)	(31)	(140)
Impairment of intangible assets		(43)	(4)	(47)
Gain on sale of Canadian business		-	-	-
Other		(22)	(3)	(25)
Non-operating (loss)/profit before tax	4.3	(157)	33	(124)
Dubai included in discontinued operations segment¹	4.3	(22)	22	-
Singapore included in discontinued operations segment¹	4.3	(6)	6	-
Share of associates' and joint ventures' tax expense	4.3	(5)	-	(5)
Profit attributable to non-controlling interests	4.3	4	-	4
Profit before tax expense attributable to equity holders' profits		422	188	610
Tax (expense)/credit attributable to
Operating profit	4.3	(82)	(42)	(124)
Non-operating items	4.3	40	(19)	21
Dubai included in discontinued operations segment¹		-	-	-
Singapore included in discontinued operations segment¹		-	-	-
Total tax expense attributable to equity holders' profits		(42)	(61)	(103)
Profit for the year		380	127	507

The Group's chosen supplementary measure of performance is operating profit. The Directors believe that operating profit provides a more useful indication of the long-term operating performance of the Group. To align the measure of the Group's performance with the long-term nature of its business, operating profit excludes items which create short-term volatility. Operating profit includes the impact of significant actions taken by management during the period.

IFRS condensed consolidated statement of financial position

As at 30 June 2015

		30 June 2015	30 June 2014	31 December 2014
	Notes	£m	£m	£m
Assets
Intangible assets		570	299	565
Deferred acquisition costs		663	897	771
Investments in associates and joint ventures		4,795	1,885	4,508
Investment property	4.12	9,584	9,302	9,041
Property, plant and equipment		175	206	186
Pension and other post-retirement benefit assets	4.11	820	442	760
Deferred tax assets		31	91	33
Reinsurance assets		5,736	6,088	6,036
Loans	4.12	791	2,645	400
Derivative financial assets	4.12	2,642	2,648	4,021
Equity securities and interests in pooled investment funds	4.12	73,033	87,732	71,327
Debt securities	4.12	64,610	72,602	64,441
Receivables and other financial assets	4.12	1,544	1,891	1,248
Other assets		343	329	307
Assets held for sale	4.12	975	33	29,338
Cash and cash equivalents	4.12	10,588	9,675	10,617
Total assets		176,900	196,765	203,599
Equity
Share capital	4.9	241	239	239
Shares held by trusts	4.9	(2)	(3)	1
Share premium reserve	4.9	627	1,110	1,115
Retained earnings		1,955	1,431	1,816
Other reserves		957	1,468	1,501
Equity attributable to equity holders of Standard Life plc		3,778	4,245	4,672
Non-controlling interests		344	312	278
Total equity		4,122	4,557	4,950
Liabilities
Non-participating insurance contract liabilities	4.10	21,528	29,309	21,841
Non-participating investment contract liabilities	4.10	91,589	100,716	88,207
Participating contract liabilities	4.10	29,784	30,705	31,276
Reinsurance liabilities		-	257	-
Deposits received from reinsurers		5,359	5,538	5,642
Third party interest in consolidated funds	4.13	16,607	17,994	15,805
Borrowings		28	136	44
Subordinated liabilities		1,325	1,841	1,612
Pension and other post-retirement benefit provisions	4.11	40	119	44
Deferred income		254	300	276
Deferred tax liabilities		223	194	214
Current tax liabilities		105	94	172
Derivative financial liabilities		858	1,101	1,693
Other financial liabilities		4,064	3,778	3,690
Other liabilities		117	126	100
Liabilities of operations held for sale	4.2	897	-	28,033
Total liabilities		172,778	192,208	198,649
Total equity and liabilities		176,900	196,765	203,599

IFRS condensed consolidated statement of changes in equity

For the six months ended 30 June 2015

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity attributable to equity holders of Standard Life plc	Non-controlling interests	Total equity
2015	Notes	£m	£m	£m	£m	£m	£m	£m	£m
1 January		239	1	1,115	1,816	1,501	4,672	278	4,950
Profit for the period from continuing operations		-	-	-	69	-	69	34	103
Profit for the period from discontinued operations	4.2	-	-	-	1,142	-	1,142	-	1,142
Other comprehensive income for the period from continuing operations		-	-	-	70	(30)	40	-	40
Other comprehensive income/(expense) for the period from discontinued operations		-	-	-	(14)	(173)	(187)	-	(187)
Total comprehensive income for the period		-	-	-	1,267	(203)	1,064	34	1,098
Dividends paid on ordinary shares	4.8	-	-	-	(224)	-	(224)	-	(224)
Issue of share capital	4.9	2	-	-	-	-	2	-	2
Issue of 'B' shares	4.9	488	-	(488)	-	-	-	-	-
Issue of 'C' shares	4.9	-	-	-	-	-	-	-	-
Redemption of 'B' shares	4.9	(488)	-	-	(488)	488	(488)	-	(488)
Dividends paid on 'C' shares	4.9	-	-	-	(1,261)	-	(1,261)	-	(1,261)
Purchase of 'C' shares	4.9	-	-	-	-	-	-	-	-
Dividends due on unclaimed shares not held in the Unclaimed Asset Trust		-	-	-	(2)	-	(2)	-	(2)
Reserves credit for employee share-based payment schemes		-	-	-	-	18	18	-	18
Transfer to retained earnings for vested employee share-based payment schemes		-	-	-	20	(20)	-	-	-
Transfer to retained earnings on sale of owner occupied property		-	-	-	-	-	-	-	-
Transfer between reserves on disposal of subsidiaries	4.2	-	-	-	827	(827)	-	-	-
Shares acquired by employee trusts		-	(5)	-	-	-	(5)	-	(5)
Shares distributed or sold by employee and other trusts		-	2	-	(2)	-	-	-	-
Other movements in non-controlling interests in the period		-	-	-	-	-	-	32	32
Aggregate tax effect of items recognised directly in equity	4.5	-	-	-	2	-	2	-	2
30 June		241	(2)	627	1,955	957	3,778	344	4,122

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity attributable to equity holders of Standard Life plc	Non-controlling interests	Total equity
2014	Notes	£m	£m	£m	£m	£m	£m	£m	£m
1 January		238	(6)	1,110	1,391	1,494	4,227	333	4,560
Profit for the period from continuing operations		-	-	-	196	-	196	10	206
Profit for the period from discontinued operations	4.2	-	-	-	79	-	79	-	79
Other comprehensive income for the period from continuing operations		-	-	-	6	(5)	1	-	1
Other comprehensive income/(expense) for the period from discontinued operations		-	-	-	(13)	(7)	(20)	-	(20)
Total comprehensive income for the period		-	-	-	268	(12)	256	10	266
Dividends paid on ordinary shares	4.8	-	-	-	(252)	-	(252)	-	(252)
Issue of share capital	4.9	1	-	-	-	-	1	-	1
Reserves credit for employee share-based payment schemes		-	-	-	-	12	12	-	12
Transfer to retained earnings for vested employee share-based payment schemes		-	-	-	25	(25)	-	-	-
Transfer to retained earnings on sale of owner occupied property		-	-	-	4	(4)	-	-	-
Shares acquired by employee trusts		-	(2)	-	-	-	(2)	-	(2)
Shares distributed or sold by employee and other trusts		-	5	-	(5)	-	-	-	-
Other movements in non-controlling interests in the period		-	-	-	-	-	-	(31)	(31)
Aggregate tax effect of items recognised directly in equity	4.5	-	-	-	-	3	3	-	3
30 June		239	(3)	1,110	1,431	1,468	4,245	312	4,557

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity attributable to equity holders of Standard Life plc	Non-controlling interests	Total equity
2014	Notes	£m	£m	£m	£m	£m	£m	£m	£m
1 January		238	(6)	1,110	1,391	1,494	4,227	333	4,560
Profit for the year from continuing operations		-	-	-	376	-	376	4	380
Profit for the year from discontinued operations	4.2	-	-	-	127	-	127	-	127
Other comprehensive income for the year from continuing operations		-	-	-	296	15	311	-	311
Other comprehensive income for the year from discontinued operations		-	-	-	(15)	(3)	(18)	-	(18)
Total comprehensive income for the year		-	-	-	784	12	796	4	800
Dividends paid on ordinary shares	4.8	-	-	-	(386)	-	(386)	-	(386)
Issue of share capital	4.9	1	-	5	-	-	6	-	6
Reserves credit for employee share-based payment schemes		-	-	-	-	27	27	-	27
Transfer to retained earnings for vested employee share-based payment schemes		-	-	-	27	(27)	-	-	-
Transfer to retained earnings of sale of owner occupied property		-	-	-	4	(4)	-	-	-
Shares acquired by employee trusts		-	(3)	-	-	-	(3)	-	(3)
Shares distributed or sold by employee and other trusts		-	10	-	(10)	-	-	-	-
Other movements in non-controlling interests in the year		-	-	-	-	-	-	(59)	(59)
Aggregate tax effect of items recognised directly in equity	4.5	-	-	-	6	(1)	5	-	5
31 December		239	1	1,115	1,816	1,501	4,672	278	4,950

IFRS condensed consolidated statement of cash flows

For the six months ended 30 June 2015

		6 months 2015	6 months 2014	Full year 2014
	Notes	£m	£m	£m
Cash flows from operating activities
Profit before tax from continuing operations		210	332	672
Profit before tax from discontinued operations	4.2	1,162	120	188
		1,372	452	860
Change in operating assets		(5,711)	(8,646)	(13,455)
Change in operating liabilities		5,097	6,765	11,700
Adjustment for non-cash movements in investment income		(58)	(209)	(242)
Change in unallocated divisible surplus		(134)	4	(71)
Non-cash items relating to investing and financing activities		(1,005)	63	189
Taxation paid		(199)	(139)	(242)
Net cash flows from operating activities		(638)	(1,710)	(1,261)
Cash flows from investing activities
Purchase of property, plant and equipment		(3)	(3)	(21)
Proceeds from sale of property, plant and equipment		4	12	13
Acquisition of subsidiaries and unincorporated businesses net of cash acquired		(5)	-	(297)
Disposal of subsidiaries net of cash disposed of		1,600	-	-
Acquisition of investments in associates and joint ventures		(9)	(14)	(14)
Purchase of intangible assets not acquired through business combinations		(28)	(14)	(54)
Net cash flows from investing activities		1,559	(19)	(373)
Cash flows from financing activities
Repayment of other borrowings		(1)	(2)	(4)
Repayment of subordinated liabilities		(282)	-	-
Capital flows from third party interest in consolidated funds and non-controlling interests		930	1,528	3,434
Distributions paid to third party interest in consolidated funds and non-controlling interests		(62)	(86)	(172)
Shares acquired by trusts		(4)	(2)	(1)
Proceeds from exercise of share options		-	-	5
Interest paid		(54)	(56)	(112)
Return of cash to shareholders under 'B/C' share scheme	4.9	(1,749)	-	-
Ordinary dividends paid	4.8	(224)	(252)	(386)
Net cash flows from financing activities		(1,446)	1,130	2,764
Net (decrease)/increase in cash and cash equivalents		(525)	(599)	1,130
Cash and cash equivalents at the beginning of the period		11,243	10,253	10,253
Effects of exchange rate changes on cash and cash equivalents		(148)	(92)	(140)
Cash and cash equivalents at the end of the period¹		10,570	9,562	11,243
Supplemental disclosures on cash flows from operating activities
Interest paid		5	6	13
Interest received		1,039	1,085	2,317
Dividends received		1,165	1,137	2,364
Rental income received on investment property		250	309	597

¹ Comprises £10,588m (30 June 2014: £9,675m; 31 December 2014: £11,326m) of cash and cash equivalents, including cash and cash equivalents held for sale, and (£18m) (30 June 2014: (£113m); 31 December 2014: (£83m)) of overdrafts which are reported in borrowings and liabilities of operations held for sale in the IFRS condensed consolidated statement of financial position.

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 Rules 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 2014 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 and early adopted the following new International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs), interpretations and amendments to existing standards, which are effective by EU endorsement for annual periods beginning on or after 1 January 2015 unless otherwise stated.

· IFRIC 21 Levies

· Amendments to IAS 19 Defined Benefit Plans: Employee Contributions (effective for annual periods beginning on or after 1 February 2015)

· Annual improvements 2010 - 2012 cycle (effective for annual periods beginning on or after 1 February 2015)

· Annual improvements 2011 - 2013 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 2006. Statutory accounts for the year ended 31 December 2014 were approved by the Board of Directors on 20 February 2015 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006. This IFRS condensed consolidated half year financial information has been reviewed, not audited.

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 2015		6 months 2014		Full year 2014
	Income statement exchange rate	Statement of financial position (closing rate)	Income statement exchange rate	Statement of financial position (closing rate)	Income statement exchange rate	Statement of financial position (closing rate)
Euro	1.365	1.411	1.220	1.249	1.244	1.289
US Dollar	1.532	1.573	1.674	1.710	1.647	1.559
Canadian Dollar	1.893	1.963	1.826	1.821	1.818	1.806
Indian Rupee	96.441	110.150	101.807	102.839	100.735	98.425
Hong Kong Dollar	11.881	12.192	12.984	13.252	12.775	12.092

The sale of Standard Life Financial Inc. and Standard Life Investments Inc. completed on 30 January 2015. Refer to Note 4.2 - Acquisitions and disposals. The average Canadian dollar rate used to translate the income statements and cash flows of these entities for the period ended 30 January 2015 was 1.855 and the rate used to translate the statement of financial position of these entities at 30 January 2015 was 1.904. The Canadian dollar rates in the table above for the six months to 30 June 2015 were used to translate the income statement, cash flows and statement of financial position of Standard Life Assurance Limited (SLAL) Canada branch.

4.2 Acquisitions and disposals

(a) Acquisitions

On 6 February 2015, the Group announced the launch of its wholly owned, UK-wide financial advice business, 1825. At the same time, the Company agreed to purchase the entire share capital of Pearson Jones plc from Skipton Group Holdings Limited. Pearson Jones is an established advice firm with assets under advice of £1.1bn. The acquisition completed on 11 May 2015 and is not material to the Group.

Prior year acquisition

On 1 July 2014, Standard Life Investments (Holdings) Limited, a wholly owned subsidiary of the Company acquired the entire share capital of Ignis Asset Management Limited (Ignis). The consideration transferred included a £20m contingent consideration asset. There have been no settlements of this asset since recognition and at 30 June 2015 and 31 December 2014 the fair value remained at £20m.

(b) Disposals

On 3 September 2014 the Group announced its intention to sell its Canadian business to The Manufacturers Life Insurance Company (MLC), a subsidiary of Manulife Financial Corporation (Manulife). The sale of the Group's Canadian long-term savings and retirement, individual and group insurance business (Standard Life Financial Inc.) and Canadian investment management business (Standard Life Investments Inc.) completed on 30 January 2015 for consideration of CA$4.0bn (£2.1bn). A further £0.1bn was received from the settlement of related hedging derivative contracts. The Group recognised a gain on disposal in respect of the sale which is included in profit from discontinued operations in the IFRS condensed consolidated income statement for the six months ended 30 June 2015. The gain on sale was calculated as follows:

		30 January 2015
		£m
Total assets of operations disposed of		(28,643)
Total liabilities of operations disposed of		27,436
Net assets of operations disposed of		(1,207)
Consideration less transaction costs		2,067
Release of available-for-sale financial assets reserve		17
Release of cash flow hedges reserve		60
Release of net investment hedge reserve		110
Release of foreign currency translation reserve		50
Gain on sale		1,097

The gain on sale was exempt from tax under UK and Canadian tax legislation.

The following additional reserve releases were made as a result of the sale. These releases were taken directly to retained earnings.

		30 January 2015
		£m
Reserve arising on Group reconstruction		(221)
Merger reserve		1,028
Revaluation of owner occupied property reserve		20
		827

(b)(i) Assets and liabilities of operations held for sale

Under the agreements entered into in September 2014, the assets and liabilities of the SLAL Canada Branch will transfer once certain conditions to completion, including regulatory approval, are fulfilled. The assets and liabilities of the Canadian business held for sale at 30 June 2015 (which relate to the SLAL Canada Branch) and 31 December 2014 are as follows:

	30 June 2015	31 December 2014
	£m	£m
Assets of operations held for sale
Intangible assets	-	13
Deferred acquisition costs	-	115
Investments in associates and joint ventures	-	103
Investment property	-	1,417
Property, plant and equipment	-	31
Deferred tax assets	-	54
Reinsurance assets	889	187
Loans	-	2,313
Derivative financial assets	-	44
Equity securities and interests in pooled investment funds	-	12,961
Debt securities	-	11,059
Receivables and other financial assets	8	214
Other assets	-	34
Assets held for sale	-	-
Cash and cash equivalents	-	709
Total assets of operations held for sale	897	29,254

Liabilities of operations held for sale
Non-participating insurance contract liabilities	614	9,425
Non-participating investment contract liabilities	283	15,852
Participating contract liabilities	-	704
Reinsurance liabilities	-	273
Deposits received from reinsurers	-	-
Third party interest in consolidated funds	-	953
Borrowings	-	59
Subordinated liabilities	-	223
Pensions and other post-retirement benefit provisions	-	101
Deferred income	-	1
Deferred tax liabilities	-	13
Current tax liabilities	-	3
Derivative financial liabilities	-	26
Other financial liabilities	-	368
Other liabilities	-	32
Total liabilities of operations held for sale	897	28,033

4.2 Acquisitions and disposals continued

(b) Disposals continued

(b)(ii) Discontinued operations

Discontinued operations relates solely to the Group's Canadian business. The consolidated income statement, other comprehensive income and cash flows from discontinued operations are shown below for the six months ended 30 June 2015:

	6 months 2015	6 months 2014	Full year 2014
Consolidated income statement	£m	£m	£m
Revenue
Gross earned premium	126	773	1,720
Premium ceded to reinsurers	(20)	(18)	(36)
Net earned premium	106	755	1,684
Investment return	1,166	1,810	2,914
Fee and commission income	11	61	124
Gain on sale of subsidiaries	1,097	-	-
Other income	1	8	17
Total revenue from discontinued operations	2,381	2,634	4,739

Expenses
Claims and benefits paid	110	528	1,121
Claim recoveries from reinsurers	(31)	(13)	(29)
Net insurance benefits and claims	79	515	1,092
Change in reinsurance assets and liabilities	(11)	(51)	(36)
Change in insurance and participating contract liabilities	564	866	1,548
Change in non-participating investment contract liabilities	516	902	1,403
Administrative expenses
Restructuring and corporate transaction expenses	3	1	21
Other administrative expenses	37	212	430
Total administrative expenses	40	213	451
Change in liability for third party interest in consolidated funds	30	60	80
Finance costs	1	4	9
Total expenses from discontinued operations	1,219	2,509	4,547

Share of loss from associates and joint ventures	-	(5)	(4)

Profit before tax from discontinued operations	1,162	120	188

Tax expense attributable to policyholders' returns	-	-	-

Profit before tax expense attributable to equity holders' profits	1,162	120	188

Total tax expense	20	41	61
Less: Tax attributable to policyholders' returns	-	-	-
Tax expense attributable to equity holders' profits	20	41	61
Profit for the period from discontinued operations	1,142	79	127

Attributable to:
Equity holders of Standard Life plc	1,142	79	127
Non-controlling interests	-	-	-
	1,142	79	127

	6 months 2015	6 months 2014	Full year 2014
Other comprehensive income	£m	£m	£m
Items that will not be reclassified subsequently to profit or loss:
Remeasurement losses on defined benefit pension plans	(19)	(18)	(20)
Revaluation of owner occupied property	-	5	(2)
Equity holder tax effect relating to items that will not be reclassified subsequently to profit or loss	5	5	5
Total items that will not be reclassified subsequently to profit or loss	(14)	(8)	(17)

Items that may be reclassified subsequently to profit or loss:
Fair value gains on cash flow hedges	58	-	2
Net investment hedge	57	25	16
Fair value gains on available-for-sale financial assets	15	12	22
Exchange differences on translating foreign operations	(62)	(46)	(36)
Equity holder tax effect relating to items that may be reclassified subsequently to profit or loss	(4)	(3)	(5)
Total items that may be reclassified subsequently to profit or loss	64	(12)	(1)
Items that were transferred to profit or loss on disposal of subsidiaries:
Release of available-for-sale financial assets reserve	(17)	-	-
Release of cash flow hedges reserve	(60)	-	-
Release of net investment hedge reserve	(110)	-	-
Release of foreign currency translation reserve	(50)	-	-
Total items that were transferred to profit or loss on disposal of subsidiaries	(237)	-	-
Other comprehensive income/(expense) for the period from discontinued operations	(187)	(20)	(18)

	6 months 2015	6 months 2014	Full year 2014
Cash flows	£m	£m	£m
Net cash flows from operating activities	(132)	58	117
Net cash flows from financing activities	(7)	(19)	(1)
Net cash flows from investing activities	(500)	11	(65)
Total net cash flows	(639)	50	51

The net cash flows from investing activities for the six months ended 30 June 2015 represents the cash and cash equivalents of the operations disposed of at the date of disposal and do not include the cash consideration received of £2,100m.

4.3 Segmental analysis

(a) Basis of segmentation

The Group's reportable segments have been identified in accordance with the way in which the Group is structured and managed. The Group's reportable segments are as follows:

Continuing operations:

Standard Life Investments

Standard Life Investments provides a range of investment products for individuals and institutional customers through a number of different investment vehicles. Investment management services are also provided by Standard Life Investments to the Group's other reportable segments. This segment includes the Group's share of the results of HDFC Asset Management Company Limited.

UK and Europe

UK and Europe provide a broad range of long-term, savings and investment products to individual and corporate customers in the UK, Germany, Austria and Ireland.

India and China (formerly Asia and Emerging Markets)

The businesses included in India and China offer a range of insurance and savings products and comprise the Group's life joint ventures in India and China and wholly owned operations in Hong Kong.

Other

This primarily includes the corporate centre and related activities.

Discontinued operations:

Canada

The operations in Canada provided long-term savings, investment and insurance solutions to individuals, and group benefit and retirement plan members. The Canadian business was sold on 30 January 2015.

Dubai

The business in Dubai provided a range of savings and investment products. The closure of this business was announced in November 2014. This business was previously included in the Asia and Emerging Markets segment.

Singapore

The business in Singapore provided a range of savings and insurance products. The closure of this business was announced in June 2015. This business was previously included in the Asia and Emerging Markets segment.

(b) Reportable segments - Group operating profit, revenue and asset information

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.

The key performance metrics of the Group include operating profit before tax and assets under administration (AUA), which are analysed in the tables that follow by reportable segment.

A number of changes were made to the financial information provided to the executive team in the six months to 30 June 2015 and in the year to 31 December 2014 and as a result to the Group's segmental reporting as follows:

· On 3 September 2014, the Group announced the disposal of its Canadian business. As a consequence, the results of this business have been presented as discontinued operations. Previously the results of Standard Life Financial Inc. were reported and managed as a separate segment (Canada) and the Standard Life Investments Inc. business was reported and managed as part of the Standard Life Investments segment. Withholding tax in relation to dividends received from the Canadian business previously reported as operating tax in the other segment, has also been included in discontinued operations.

· On 5 November 2014, the Group announced the closure of the Dubai business. The results of this business are included as discontinued operations for segmental reporting purposes as this is reflective of the presentation of information provided to the Chief Operating Decision Maker. Dubai was previously included in the Asia and Emerging Markets segment (now India and China). Under IFRS 5, Dubai does not constitute a discontinued operation and is included under continuing operations in the IFRS condensed consolidated income statement. Therefore the segmental analysis disclosures include the reclassification of Dubai results between discontinued and continuing operations.

· On 25 June 2015, the Group announced the closure of the Singapore business. The results of this business are included as discontinued operations for segmental reporting purposes as this is reflective of the presentation of information provided to the Chief Operating Decision Maker. Singapore was previously included in the Asia and Emerging Markets segment (now India and China). Under IFRS 5, Singapore does not constitute a discontinued operation and is included under continuing operations in the IFRS condensed consolidated income statement. Therefore the segmental analysis disclosures include the reclassification of Singapore results between discontinued and continuing operations.

· Institutional pension business managed by Standard Life Investments but legally written by the UK business has previously been reported in both the Standard Life Investments and UK and Europe segments with the inter-segment transactions and balances removed through eliminations. In 2014, it was agreed by management that to allow a more meaningful presentation of revenue, expenses and AUA for each segment, institutional pension business would be removed from the UK and Europe results and only presented within Standard Life Investments. The UK and Europe results and the eliminations have therefore been adjusted with no impact on the Group results. This change reduces UK and Europe fee based revenue and total operating expenses but there is no impact on UK and Europe operating profit.

Comparative amounts for the six months ended 30 June 2014 and the 12 months ended 31 December 2014 have been prepared on the same basis as 30 June 2015 to allow more meaningful comparison.

(b)(i) Analysis of Group operating profit by segment

As described beneath the pro forma reconciliation of consolidated operating profit to IFRS profit for the period, operating profit is considered to present an indication of the long-term operating performance of the Group. Operating profit is the key measure utilised by the Group's management in their evaluation of segmental performance and is therefore also presented by reportable segment.

		Standard Life Investments	UK and Europe	India and China	Other	Eliminations	Total continuing operations	Discontinued operations¹	Total
6 months 2015	Notes	£m	£m	£m	£m	£m	£m	£m	£m
Fee based revenue		402	396	23	-	(60)	761	21	782
Spread/risk margin		-	40	-	-	-	40	9	49
Total income		402	436	23	-	(60)	801	30	831
Total operating expenses		(263)	(297)	(17)	(25)	60	(542)	(29)	(571)
Capital management		-	8	-	(7)	-	1	2	3
Share of associates' and joint ventures' profit before tax²		15	-	15	-	-	30	-	30
Operating profit/(loss) before tax		154	147	21	(32)	-	290	3	293
Tax on operating profit		(28)	(18)	-	9	-	(37)	-	(37)
Share of associates' and joint ventures' tax expense	4.5	(5)	-	-	-	-	(5)	-	(5)
Operating profit/(loss) after tax		121	129	21	(23)	-	248	3	251
Adjusted for the following items
Short-term fluctuations in investment return and economic assumption changes	4.7	-	(37)	-	(5)	-	(42)	63	21
Restructuring and corporate transaction expenses	4.4	(16)	(39)	-	(7)	-	(62)	(8)	(70)
Impairment of intangible assets		-	-	-	-	-	-	(2)	(2)
Gain on sale of Canadian business	4.2	-	-	-	-	-	-	1,097	1,097
Other	4.7	(8)	2	(47)	(1)	-	(54)	(31)	(85)
Total non-operating items		(24)	(74)	(47)	(13)	-	(158)	1,119	961
Tax on non-operating items		4	7	5	3	-	19	(20)	(1)
Dubai included in discontinued operations segment¹		-	-	-	-	-	-	-	-
Singapore included in discontinued operations segment¹		-	-	(40)	-	-	(40)	40	-
Profit for the period attributable to equity holders of Standard Life plc		101	62	(61)	(33)	-	69	1,142	1,211
Profit attributable to non-controlling interests							34	-	34
Profit for the period							103	1,142	1,245

¹Under IFRS 5, Dubai and Singapore do not constitute discontinued operations and are included under continuing operations in the IFRS condensed consolidated income statement. Therefore the analysis of Group operating profit by segment above includes the reclassification of Singapore and Dubai results between discontinued and continuing operations.

² Share of associates' and joint ventures' profit before tax comprises the Group's share of results of HDFC Standard Life Insurance Company Limited, Heng An Standard Life Insurance Company Limited and HDFC Asset Management Company Limited.

Each operating segment reports total income as its measure of revenue in its analysis of operating profit. Fee based revenue consists of income generated primarily from asset management charges, premium based charges and transactional charges. Spread/risk margin reflects the margin earned on spread/risk business and includes net earned premiums, claims and benefits paid, net investment return using long-term assumptions and reserving changes.

The Group has a widely diversified policyholder base and is therefore not reliant on any individual customers.

4.3 Segmental analysis continued

(b) Reportable segments - Group operating profit, revenue and asset information continued

(b)(i) Analysis of Group operating profit by segment continued

		Standard Life Investments	UK and Europe	India and China	Other	Eliminations	Total continuing operations	Discontinued operations¹	Total
6 months 2014	Notes	£m	£m	£m	£m	£m	£m	£m	£m
Fee based revenue		288	389	26	-	(51)	652	106	758
Spread/risk margin		-	79	-	-	-	79	103	182
Total income		288	468	26	-	(51)	731	209	940
Total operating expenses		(197)	(281)	(23)	(23)	51	(473)	(152)	(625)
Capital management		-	1	-	(5)	-	(4)	8	4
Share of associates' and joint ventures' profit before tax²		11	-	9	-	-	20	-	20
Operating profit/(loss) before tax		102	188	12	(28)	-	274	65	339
Tax on operating profit		(20)	(31)	-	5	-	(46)	(27)	(73)
Share of associates' and joint ventures' tax expense	4.5	(3)	-	2	-	-	(1)	-	(1)
Operating profit/(loss) after tax		79	157	14	(23)	-	227	38	265
Adjusted for the following items
Short-term fluctuations in investment return and economic assumption changes	4.7	1	6	(1)	(6)	-	-	50	50
Restructuring and corporate transaction expenses	4.4	(4)	(21)	-	(1)	-	(26)	(1)	(27)
Impairment of intangible assets		-	-	-	-	-	-	-	-
Other		-	(9)	-	(1)	-	(10)	-	(10)
Total non-operating items		(3)	(24)	(1)	(8)	-	(36)	49	13
Tax on non-operating items		-	10	-	1	-	11	(14)	(3)
Dubai included in discontinued operations segment¹		-	-	(3)	-	-	(3)	3	-
Singapore included in discontinued operations segment¹		-	-	(3)	-	-	(3)	3	-
Profit/(loss) for the period attributable to equity holders of Standard Life plc		76	143	7	(30)	-	196	79	275
Profit attributable to non-controlling interests							10	-	10
Profit for the period							206	79	285

¹Under IFRS 5, Dubai and Singapore do not constitute discontinued operations and are included under continuing operations in the consolidated income statement. Therefore the analysis of Group operating profit by segment above includes the reclassification of Dubai and Singapore results between discontinued and continuing operations.

		Standard Life Investments	UK and Europe	India and China	Other	Eliminations	Total continuing operations	Discontinued operations¹	Total
Full year 2014	Notes	£m	£m	£m	£m	£m	£m	£m	£m
Fee based revenue		686	802	49	-	(108)	1,429	223	1,652
Spread/risk margin		-	183	-	-	-	183	191	374
Total income		686	985	49	-	(108)	1,612	414	2,026
Total operating expenses		(450)	(605)	(44)	(54)	108	(1,045)	(302)	(1,347)
Capital management		-	10	-	(8)	-	2	15	17
Share of associates' and joint ventures' profit before tax²		21	-	18	-	-	39	-	39
Operating profit/(loss) before tax		257	390	23	(62)	-	608	127	735
Tax on operating profit		(51)	(43)	(1)	13	-	(82)	(42)	(124)
Share of associates' and joint ventures' tax expense	4.5	(7)	-	2	-	-	(5)	-	(5)
Operating profit/(loss) after tax		199	347	24	(49)	-	521	85	606
Adjusted for the following items
Short-term fluctuations in investment return and economic assumption changes	4.7	1	29	-	(13)	-	17	71	88
Restructuring and corporate transaction expenses	4.4	(51)	(51)	-	(7)	-	(109)	(31)	(140)
Impairment of intangible assets		(43)	-	-	-	-	(43)	(4)	(47)
Other		(9)	(11)	-	(2)	-	(22)	(3)	(25)
Total non-operating items		(102)	(33)	-	(22)	-	(157)	33	(124)
Tax on non-operating items		17	18	-	5	-	40	(19)	21
Dubai included in discontinued operations segment¹		-	-	(22)	-	-	(22)	22	-
Singapore included in discontinued operations segment¹		-	-	(6)	-	-	(6)	6	-
Profit/(loss) for the year attributable to equity holders of Standard Life plc		114	332	(4)	(66)	-	376	127	503
Profit attributable to non-controlling interests							4	-	4
Profit for the year							380	127	507

¹Under IFRS 5, Dubai and Singapore do not constitute discontinued operations and are included under continuing operations in the IFRS condensed consolidated income statement. Therefore the analysis of Group operating profit by segment above includes the reclassification of Dubai and Singapore results between discontinued and continuing operations.

4.3 Segmental analysis continued

(b) Reportable segments - Group operating profit, revenue and asset information continued

(b)(ii) Analysis of assets under administration by segment

Group assets under administration (AUA) presents a measure of the total assets of the Group including those administered on behalf of customers and institutional clients. AUA represents the IFRS gross assets of the Group adjusted to include third party AUA, which are not included on the IFRS condensed consolidated statement of financial position. In addition, certain assets on the condensed consolidated statement of financial position are excluded from the definition, including reinsurance assets, deferred acquisition costs and intangible assets.

As a long-term savings and investments business, AUA is a key driver of shareholder value and is consequently one of the key measures utilised by the executive team in their evaluation of segmental performance. AUA is therefore presented by reportable segment (in billions).

	Standard Life Investments	UK and Europe	India and China	Other	Eliminations¹	Total continuing operations	Discontinued operations	Total
30 June 2015	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Assets under administration
Fee based	167	126	-	-	(17)	276	-	276
Spread/risk	-	15	-	-	-	15	-	15
Assets not backing products in long-term savings business	-	7	-	-	-	7	-	7
Joint ventures	-	-	2	-	-	2	-	2
Other corporate assets	1	-	-	1	-	2	-	2
Total assets under administration	168	148	2	1	(17)	302	-	302

¹ In order to be consistent with the presentation of new business information, certain products are included in both Standard Life Investments AUA and other segments. Therefore, at a Group level an elimination adjustment is required to remove any duplication, in addition to other necessary consolidation adjustments.

	Standard Life Investments	UK and Europe	India and China	Other	Eliminations¹	Total continuing operations	Discontinued operations	Total
30 June 2014	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Assets under administration
Fee based	95	118	-	-	(14)	199	20	219
Spread/risk	-	15	-	-	-	15	9	24
Assets not backing products in long-term savings business	-	6	-	-	-	6	1	7
Joint ventures	-	-	2	-	-	2	-	2
Other corporate assets	1	-	-	1	-	2	-	2
Total assets under administration	96	139	2	1	(14)	224	30	254

	Standard Life Investments	UK and Europe	India and China	Other	Eliminations¹	Total continuing operations	Discontinued operations	Total
31 December 2014	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Assets under administration
Fee based	162	122	-	-	(15)	269	21	290
Spread/risk	-	16	-	-	-	16	9	25
Assets not backing products in long-term savings business	-	8	-	-	-	8	2	10
Joint ventures	-	-	2	-	-	2	-	2
Other corporate assets	1	-	-	1	-	2	-	2
Total assets under administration	163	146	2	1	(15)	297	32	329

4.4 Administrative expenses

	6 months 2015	6 months 2014 restated¹	Full year 2014
	£m	£m	£m
Restructuring and corporate transaction expenses	48	27	106
Interest expense	6	5	11
Commission expenses	86	123	234
Staff costs and other employee-related costs	310	269	577
Other administrative expenses	306	242	592
	756	666	1,520
Acquisition costs deferred during the period	(51)	(81)	(143)
Impairment of deferred acquisition costs	71	-	9
Amortisation of deferred acquisition costs	64	76	150
Total administrative expenses from continuing operations	840	661	1,536

Total restructuring and corporate transaction expenses incurred from continuing operations during the year were £48m (six months ended 30 June 2014: £27m; 12 months ended 31 December 2014: £106m) which includes £nil of deal costs (six months ended 30 June 2014: £3m; 12 months ended 31 December 2014: £11m) relating to acquisitions as described in Note 4.2 - Acquisitions and disposals. The remaining expenses relate to the integration of Ignis and a number of other business unit restructuring programmes.

In December 2014 the Group announced that the UK staff defined benefit pension plan would be closed to future accrual effective April 2016. All employees in the closing plan will be transferred to the UK defined contribution plan for future service and employer contributions into the defined contribution plan will be amended. Following this restructuring of the pension plans, operating profit from continuing operations for the six months ended 30 June 2015 has been increased by £20m (12 months ended 31 December 2014: £15m) so that operating profit reflects the expected long-term pension expense for the period and is therefore more indicative of the long-term operating performance of the Group. As a result £20m (12 months ended 31 December 2014: £15m) of pension costs that are included in staff costs in the IFRS condensed consolidated income statement for the six months ended 30 June 2015, are included in restructuring and corporate transaction expenses in determining operating profit from continuing operations. Further details of the defined benefit pension plan expense for the period are included in Note 4.11 - Pension and other post-retirement benefit provisions.

The table below reconciles restructuring and corporate transaction expenses incurred from continuing operations with restructuring and corporate transaction expenses used to determine operating profit from continuing operations.

	6 months 2015	6 months 2014	Full year 2014
	£m	£m	£m
Restructuring and corporate transaction expenses from continuing operations	48	27	106
Pension plan restructuring	20	-	15
Expenses incurred by the Heritage With Profit Fund	(1)	(1)	(2)
Closure of Dubai¹	-	-	(10)
Closure of Singapore¹	(5)	-	-
Restructuring and corporate transaction expenses used to determine operating profit from continuing operations	62	26	109

Restructuring and corporate transaction expenses of £8m (six months ended 30 June 2014: £1m; 12 months ended 31 December 2014: £31m) are used to determine operating profit before tax from discontinued operations. These expenses relate to the sale of the Canadian business and the closure of the Dubai and Singapore businesses.

4.5 Tax expense

The tax expense is attributed as follows:

	6 months 2015	6 months 2014 restated¹	Full year 2014
	£m	£m	£m
Tax expense attributable to policyholders' returns	89	91	250
Tax expense attributable to equity holders' profits	18	35	42
Total tax expense from continuing operations	107	126	292

The standard rate of corporation tax in the UK changed from 21% to 20% with effect from 1 April 2015. Accordingly, the Group's UK profit for this accounting period was subject to a rate of 20.25% (six months ended 30 June 2014: 21.5%; 12 months ended 31 December 2014: 21.5%). The UK corporation tax rate for 2016 is 20% and this rate has been applied in calculating the UK deferred tax position at 30 June 2015. The UK Government announced in July 2015 that the corporation tax rate is set to be cut to 19% in 2017 and 18% in 2020. These rate reductions have not been substantively enacted, therefore the impact of these reductions has not been incorporated into the tax charge for the period.

The share of tax of associates and joint ventures from continuing operations is £5m (six months ended 30 June 2014: £1m; 12 months ended 31 December 2014: £5m) and is included in profit before tax in the IFRS condensed consolidated income statement in Share of profit from associates and joint ventures.

The total tax expense is split as follows:

	6 months 2015	6 months 2014 restated¹	Full year 2014
	£m	£m	£m
Current tax:
UK	95	94	268
Overseas	4	13	14
Adjustment to tax expense in respect of prior years	(5)	(2)	(7)
Total current tax attributable to continuing operations	94	105	275

Deferred tax:
Deferred tax expense arising from the current periods	13	21	17
Total deferred tax attributable to continuing operations	13	21	17

Total tax expense attributable to continuing operations	107	126	292

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

	6 months 2015	6 months 2014 restated¹	Full year 2014
	£m	£m	£m
Current tax on net change in financial assets designated as available-for-sale	(1)	2	6
Equity holder tax effect relating to items that may be reclassified subsequently to profit or loss	(1)	2	6
Tax relating to each component of other comprehensive income from continuing operations	(1)	2	6

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

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

	6 months 2015	6 months 2014	Full year 2014
	£m	£m	£m
Tax credit on reserves for employee share-based payments	(2)	(3)	(5)
Tax relating to items taken directly to equity	(2)	(3)	(5)

4.6 Earnings per share

(a) Basic earnings per share

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

	6 months 2015	6 months 2014	Full year 2014
Profit attributable to equity holders of Standard Life plc from continuing operations (£m)	69	196	376
Profit attributable to equity holders of Standard Life plc from discontinued operations (£m)	1,142	79	127
Profit attributable to equity holders of Standard Life plc (£m)	1,211	275	503
Weighted average number of ordinary shares outstanding (millions)	2,136	2,379	2,384
Basic earnings per share from continuing operations (pence per share)	3.2	8.3	15.8
Basic earnings per share from discontinued operations (pence per share)	53.5	3.3	5.3
Basic earnings per share (pence per share)	56.7	11.6	21.1

(b) Diluted earnings per share

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

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

	6 months 2015	6 months 2014	Full year 2014
Profit attributable to equity holders of Standard Life plc from continuing operations (£m)	69	196	376
Profit attributable to equity holders of Standard Life plc from discontinued operations (£m)	1,142	79	127
Profit attributable to equity holders of Standard Life plc (£m)	1,211	275	503
Weighted average number of ordinary shares outstanding for diluted earnings per share (millions)	2,140	2,384	2,396
Diluted earnings per share from continuing operations (pence per share)	3.2	8.2	15.7
Diluted earnings per share from discontinued operations (pence per share)	53.4	3.3	5.3
Diluted earnings per share (pence per share)	56.6	11.5	21.0

The dilutive effect of share awards and options included in the weighted average number of ordinary shares above was four million (six months ended 30 June 2014: five million; 12 months ended 31 December 2014: 12 million).

Earnings per share is also calculated based on operating profit before tax as well as on the profit attributable to equity holders of Standard Life plc. The Directors believe that earnings per share based on operating profit provides a more useful indication of the long-term operating performance of the Group.

4.6 Earnings per share continued

(c)(i) Basic alternative earnings per share

	Continuing operations	Continuing operations	Discontinued operations	Discontinued operations
6 months 2015	£m	p per share	£m	p per share
Operating profit before tax	290	13.6	3	0.1
Tax on operating profit	(37)	(1.8)	-	-
Share of associates' and joint ventures' tax expense	(5)	(0.2)	-	-
Operating profit after tax	248	11.6	3	0.1
Adjusted for the following items
Short-term fluctuations in investment return and economic assumption changes	(42)	(2.0)	63	2.9
Restructuring and corporate transaction expenses	(62)	(2.9)	(8)	(0.4)
Impairment of intangible assets	-	-	(2)	(0.1)
Gain on sale of Canadian business	-	-	1,097	51.4
Other	(54)	(2.5)	(31)	(1.4)
Total non-operating items	(158)	(7.4)	1,119	52.4
Tax on non-operating items	19	0.9	(20)	(0.9)
Dubai included in discontinued operations segment¹	-	-	-	-
Singapore included in discontinued operations segment¹	(40)	(1.9)	40	1.9
Profit attributable to equity holders of Standard Life plc	69	3.2	1,142	53.5

	Continuing operations	Continuing operations	Discontinued operations	Discontinued operations
6 months 2014	£m	p per share	£m	p per share
Operating profit before tax	274	11.5	65	2.7
Tax on operating profit	(46)	(2.0)	(27)	(1.1)
Share of associates' and joint ventures' tax expense	(1)	-	-	-
Operating profit after tax	227	9.5	38	1.6
Adjusted for the following items
Short-term fluctuations in investment return and economic assumption changes	-	-	50	2.1
Restructuring and corporate transaction expenses	(26)	(1.1)	(1)	-
Impairment of intangible assets	-	-	-	-
Other	(10)	(0.4)	-	-
Total non-operating items	(36)	(1.5)	49	2.1
Tax on non-operating items	11	0.5	(14)	(0.6)
Dubai included in discontinued operations segment¹	(3)	(0.1)	3	0.1
Singapore included in discontinued operations segment¹	(3)	(0.1)	3	0.1
Profit attributable to equity holders of Standard Life plc	196	8.3	79	3.3

	Continuing operations	Continuing operations	Discontinued operations	Discontinued operations
Full year 2014	£m	p per share	£m	p per share
Operating profit before tax	608	25.5	127	5.3
Tax on operating profit	(82)	(3.4)	(42)	(1.7)
Share of associates' and joint ventures' tax expense	(5)	(0.2)	-	-
Operating profit after tax	521	21.9	85	3.6
Adjusted for the following items
Short-term fluctuations in investment return and economic assumption changes	17	0.7	71	3.0
Restructuring and corporate transaction expenses	(109)	(4.6)	(31)	(1.3)
Impairment of intangible assets	(43)	(1.8)	(4)	(0.2)
Other	(22)	(0.9)	(3)	(0.1)
Total non-operating items	(157)	(6.6)	33	1.4
Tax on non-operating items	40	1.7	(19)	(0.9)
Dubai included in discontinued operations segment¹	(22)	(0.9)	22	0.9
Singapore included in discontinued operations segment¹	(6)	(0.3)	6	0.3
Profit attributable to equity holders of Standard Life plc	376	15.8	127	5.3

¹Dubai and Singapore businesses, the closure of which were announced in November 2014 and June 2015 respectively, are included as discontinued operations for segmental reporting purposes under IFRS 8 as this is reflective of the presentation of information provided to the Chief Operating Decision Maker. Under IFRS 5, Dubai and Singapore do not constitute discontinued operations and are included under continuing operations in the IFRS condensed consolidated income statement. Therefore the analysis of Group operating profit above includes the reclassification of Dubai and Singapore results between discontinued and continuing operations.

(c)(ii) Diluted alternative earnings per share

	Continuing operations	Continuing operations	Discontinued operations	Discontinued operations
6 months 2015	£m	p per share	£m	p per share
Operating profit before tax	290	13.6	3	0.1
Tax on operating profit	(37)	(1.8)	-	-
Share of associates' and joint ventures' tax expense	(5)	(0.2)	-	-
Operating profit after tax	248	11.6	3	0.1
Adjusted for the following items
Short-term fluctuations in investment return and economic assumption changes	(42)	(2.0)	63	2.9
Restructuring and corporate transaction expenses	(62)	(2.9)	(8)	(0.4)
Impairment of intangible assets	-	-	(2)	(0.1)
Gain on sale of Canadian business	-	-	1,097	51.3
Other	(54)	(2.5)	(31)	(1.4)
Total non-operating items	(158)	(7.4)	1,119	52.3
Tax on non-operating items	19	0.9	(20)	(0.9)
Dubai included in discontinued operations segment¹	-	-	-	-
Singapore included in discontinued operations segment¹	(40)	(1.9)	40	1.9
Profit attributable to equity holders of Standard Life plc	69	3.2	1,142	53.4

	Continuing operations	Continuing operations	Discontinued operations	Discontinued operations
6 months 2014	£m	p per share	£m	p per share
Operating profit before tax	274	11.4	65	2.7
Tax on operating profit	(46)	(1.9)	(27)	(1.1)
Share of associates' and joint ventures' tax expense	(1)	-	-	-
Operating profit after tax	227	9.5	38	1.6
Adjusted for the following items
Short-term fluctuations in investment return and economic assumption changes	-	-	50	2.1
Restructuring and corporate transaction expenses	(26)	(1.2)	(1)	-
Impairment of intangible assets	-	-	-	-
Other	(10)	(0.4)	-	-
Total non-operating items	(36)	(1.6)	49	2.1
Tax on non-operating items	11	0.5	(14)	(0.6)
Dubai included in discontinued operations segment¹	(3)	(0.1)	3	0.1
Singapore included in discontinued operations segment¹	(3)	(0.1)	3	0.1
Profit attributable to equity holders of Standard Life plc	196	8.2	79	3.3

	Continuing operations	Continuing operations	Discontinued operations	Discontinued operations
Full year 2014	£m	p per share	£m	p per share
Operating profit before tax	608	25.4	127	5.3
Tax on operating profit	(82)	(3.5)	(42)	(1.8)
Share of associates' and joint ventures' tax expense	(5)	(0.2)	-	-
Operating profit after tax	521	21.7	85	3.5
Adjusted for the following items
Short-term fluctuations in investment return and economic assumption changes	17	0.7	71	3.0
Restructuring and corporate transaction expenses	(109)	(4.5)	(31)	(1.3)
Impairment of intangible assets	(43)	(1.8)	(4)	(0.2)
Other	(22)	(0.9)	(3)	(0.1)
Total non-operating items	(157)	(6.5)	33	1.4
Tax on non-operating items	40	1.7	(19)	(0.8)
Dubai included in discontinued operations segment¹	(22)	(0.9)	22	0.9
Singapore included in discontinued operations segment¹	(6)	(0.3)	6	0.3
Profit attributable to equity holders of Standard Life plc	376	15.7	127	5.3

¹Dubai and Singapore businesses, the closure of which were announced in November 2014 and June 2015 respectively, are included as discontinued operations for segmental reporting purposes under IFRS 8 as this is reflective of the presentation of information provided to the Chief Operating Decision Maker. Under IFRS 5, Dubai and Singapore do not constitute discontinued operations and are included under continuing operations in the IFRS condensed consolidated income statement. Therefore the analysis of Group operating profit above includes the reclassification of Dubai and Singapore results between discontinued and continuing operations.

4.7 Non-operating items

The Group focuses on operating profit as a measure of its performance, which incorporates expected returns on investments backing equity holder funds with a consistent allowance for corresponding expected movements in equity holder liabilities. The methodology used in calculating operating profit is outlined below.

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

Short-term fluctuations in investment return and economic assumption changes

The expected rates of return for debt securities, equity securities and property are determined separately for each of the Group's operations. The expected rates of return for equity securities and property, with the exception of the Canadian operations, are determined based on the gilt spot rates of an appropriate duration plus an equity risk premium or property risk premium, respectively. The expected rates of return on equity securities and property for Canadian operations were determined by the Appointed Actuary in Canada.

The principal assumptions, as set at the start of the year, in respect of gross investment returns underlying the calculation of the expected investment return for equity securities and property are as follows:

	2015		2014
	UK	Canada	UK	Canada
	%	%	%	%
Equity securities	4.86	8.60	6.01	8.60
Property	3.86	8.60	5.01	8.60

In respect of debt securities at fair value through profit or loss, the expected rate of return is determined based on the average prospective yields for the debt securities actually held or, in respect of the Canadian operations, was determined by the Appointed Actuary in Canada. For debt securities classified as available-for-sale that support liabilities measured at amortised cost, the expected rate of return is the effective interest rate adjusted for an allowance, established at initial recognition, for expected defaults. If debt securities classified as available-for-sale are sold, any gain or loss is amortised within the expected return over the period to the earlier of the maturity date of the sold debt security, or the redemption date of the supported liability.

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

For the six months ended 30 June 2015, short-term fluctuations in investment return and economic assumption changes resulted in losses of £42m (six months ended 30 June 2014: £nil; 12 months ended 31 December 2014: gains of £17m) from continuing operations and gains of £63m (six months ended 30 June 2014: gains of £50m, 12 months ended 31 December 2014: gains of £71m) from discontinued operations. Short-term fluctuations in investment return from continuing operations relate principally to investment volatility in UK annuities, and in respect of the Group's subordinated liabilities, and assets backing those liabilities. Short-term fluctuations in investment return from discontinued operations relate principally to investment volatility in Canada non-segregated funds.

Other

Other non-operating items from continuing operations for the six months ended 30 June 2015 includes £10m (six months ended 30 June 2014: £2m; 12 months ended 31 December 2014: £15m) in relation to amortisation of intangible assets acquired through business combinations and £46m (six months ended 30 June 2014: £nil; 12 months ended 31 December 2014: £nil) relating to a review of expense and reserving assumptions in Hong Kong following regulatory change. The Hong Kong non-operating loss primarily relates to an impairment of deferred acquisition costs.

Other non-operating items from discontinued operations for the six months ended 30 June 2015 includes £31m (six months ended 30 June 2014: £nil; 12 months ended 31 December 2014: £nil) in respect of impairment of deferred acquisition costs and plan enhancements relating to the closure of the Singapore business.

Non-operating items also include restructuring and corporate transaction expenses as discussed in Note 4.4 - Administrative expenses.

4.8 Dividends and return of value

	6 months 2015		6 months 2014		Full year 2014
	Pence per share	£m	Pence per share	£m	Pence per share	£m
Dividends relating to reporting period
Interim dividend (2015 and 2014)	6.02	119	5.60	134	5.60	134
Final dividend (2014)	-	-	-	-	11.43	224
Total	6.02	119	5.60	134	17.03	358

Dividends paid in reporting period
Current year interim dividend	-	-	-	-	5.60	134
Final dividend for prior year	11.43	224	10.58	252	10.58	252
Total	11.43	224	10.58	252	16.18	386

The final dividend for the year ended 31 December 2014 which was paid in the six months ended 30 June 2015 was paid on the lower adjusted number of ordinary shares following the share consolidation.

Subsequent to 30 June 2015, the Directors have proposed an interim dividend for 2015 of 6.02 pence per ordinary share (interim 2014: 5.60 pence), an estimated £119m in total (interim 2014: £134m). The dividend is expected to be paid on 20 October 2015 and will be recorded as an appropriation of retained earnings in the financial statements for the year ended 31 December 2015.

In addition to the dividend distribution on ordinary shares, the Group returned 73 pence per ordinary share (£1,749m) to shareholders through a 'B/C' share scheme. Refer to Note 4.9 - Issued share capital, share premium and shares held by trusts for more detail.

4.9 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 was:

	6 months 2015	6 months 2015	6 months 2015	6 months 2014	6 months 2014	Full year 2014	Full year 2014
Issued shares fully paid	10p each	12 2/9p each	£m	10p each	£m	10p each	£m
At start of period	2,394,373,744	-	239	2,376,616,730	238	2,376,616,730	238
Shares issued in respect of share incentive plans	169,283	80,904	-	153,768	-	287,120	-
Shares issued in respect of share options	642,089	9,489,898	2	13,896,549	1	17,469,894	1
New shares issued immediately prior to share consolidation	6	-	-	-	-	-	-
Share consolidation	(2,395,185,122)	1,959,696,918	-	-	-	-	-
At end of period	-	1,969,267,720	241	2,390,667,047	239	2,394,373,744	239

The Group operates share incentive plans, allowing employees the opportunity to buy shares from their salary each month. The maximum purchase that an employee can make in any one year is £1,800. The Group offers to match the first £25 of shares bought each month. During the six months ended 30 June 2015, the Company allotted 250,187 ordinary shares to Group employees under the share incentive plans (six months ended 30 June 2014: 153,768; 12 months ended 31 December 2014: 287,120).

The Group also operates long-term incentive plans (LTIPs) for executives and senior management and a Sharesave (Save-as-you-earn) scheme for all eligible employees. During the six months ended 30 June 2015, 9,836,651 ordinary shares were issued on exercise of share options in respect of the LTIP (six months ended 30 June 2014: 13,836,439; 12 months ended 31 December 2014: 14,509,687) and 295,336 ordinary shares were issued on exercise of share options in respect of the Sharesave scheme (six months ended 30 June 2014: 60,110; 12 months ended 31 December 2014: 2,960,207).

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

4.9 Issued share capital, share premium and shares held by trusts continued

(a) Issued share capital continued

(a)(i) Share consolidation and return of value

On 13 March 2015, the Company undertook a share consolidation of the Company's share capital. Nine new ordinary shares of 12 2/9 pence each were issued for each holding of eleven existing ordinary shares of 10 pence each. As a result, the number of shares in issue reduced from 2,395,185,122 to 1,959,696,918.

668,370,013 'B' shares were issued for nil consideration with a nominal value of 73 pence each on 19 March 2015, resulting in a total of £488m being credited to the 'B' share capital account. At the same time £488m was deducted from the share premium account. On 20 March 2015 the 'B' shares were redeemed at 73 pence each. An amount of £488m was deducted from the 'B' share capital account and £488m was transferred from retained earnings to the capital redemption reserve.

1,726,815,109 'C' shares were issued for nil consideration with a nominal value of 0.0000001 pence each on 19 March 2015. An amount of £1.73 was credited to the 'C' share capital account. On 20 March 2015 a dividend of 73 pence per share became payable at a total cost of £1,261m and this amount has been recorded as a deduction from retained earnings. On the same date, the 'C' shares were automatically reclassified as deferred shares. The Company subsequently purchased the deferred shares for an aggregate consideration of one pence.

(b) Share premium

	6 months 2015	6 months 2014	Full year 2014
	£m	£m	£m
1 January	1,115	1,110	1,110
Issue of 'B' shares	(488)	-	-
Premium arising on shares issued	-	-	5
30 June	627	1,110	1,115

As noted above, 668,370,013 'B' shares were issued at 73 pence each on 19 March 2015, resulting in a deduction of £488m from the share premium account.

The premium arising on shares issued during the period was £nil (six months ended 30 June 2014: £nil; 12 months ended 31 December 2014: £5m) and relates to share options exercised in respect of the Sharesave scheme.

The Employee Share Trust (EST) purchases and holds shares in the Company for delivery to employees under various employee share schemes. Share-based liabilities to employees may also be settled by the issue of new shares which may also be held in trust until delivery to employees. The number of shares held in trust for the purposes of settling employee share schemes at 30 June 2015 was 730,582 (30 June 2014: 2,916,212; 31 December 2014: 1,081,758).

Shares held by trusts also include shares held by the Unclaimed Asset Trust (UAT). The shares held by the UAT are those not yet claimed by the eligible members of The Standard Life Assurance Company (SLAC) following its demutualisation on 10 July 2006. The corresponding obligation to deliver these shares to eligible members of SLAC is also included in the shares held by trusts reserve. The number of shares held by the UAT at 30 June 2015 was 15,907,401 (30 June 2014: 24,521,450; 31 December 2014: 21,143,650).

4.10 Insurance contracts, investment contracts and reinsurance contracts

	30 June 2015	30 June 2014	31 December 2014
	£m	£m	£m
Non-participating insurance contract liabilities	22,142	29,309	31,266
Less: Non-participating insurance contract liabilities classified as held for sale	(614)	-	(9,425)
	21,528	29,309	21,841
Non-participating investment contract liabilities	91,872	100,716	104,059
Less: Non-participating investment contract liabilities classified as held for sale	(283)	-	(15,852)
	91,589	100,716	88,207
Non-participating contract liabilities	114,014	130,025	135,325
Less: Non-participating contract liabilities classified as held for sale	(897)	-	(25,277)
	113,117	130,025	110,048

	30 June 2015	30 June 2014	31 December 2014
	£m	£m	£m
Participating insurance contract liabilities	14,309	15,240	16,099
Less: Participating insurance contract liabilities classified as held for sale	-	-	(702)
	14,309	15,240	15,397
Participating investment contract liabilities	14,809	14,764	15,193
Less: Participating investment contract liabilities classified as held for sale	-	-	(2)
	14,809	14,764	15,191
Unallocated divisible surplus	666	701	688
Less : Unallocated divisible surplus classified as held for sale	-	-	-
	666	701	688
Participating contract liabilities	29,784	30,705	31,980
Less: Participating contract liabilities classified as held for sale	-	-	(704)
	29,784	30,705	31,276

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

The movement in insurance contract liabilities, participating investment contract liabilities and reinsurance contracts for continuing operations during the six months ended 30 June 2015, and the six months ended 30 June 2014 arising from changes in estimates are set out below:

	Participating insurance contract liabilities	Non-participating insurance contract liabilities	Participating investment contract liabilities	Total insurance and participating contracts	Reinsurance contracts	Net
6 months 2015	£m	£m	£m	£m	£m	£m
Changes in
Methodology/modelling	2	2	9	13	(3)	10
Economic assumptions	13	(346)	(28)	(361)	95	(266)
Non-economic assumptions	-	(9)	1	(8)	-	(8)

6 months 2014 (restated)¹
Changes in
Methodology/modelling	(15)	(30)	5	(40)	-	(40)
Economic assumptions	57	403	(75)	385	(83)	302
Non-economic assumptions	-	-	(2)	(2)	-	(2)

4.10 Insurance contracts, investment contracts and reinsurance contracts continued

The movement in insurance contract liabilities, participating investment contract liabilities and reinsurance contracts during the year ended 31 December 2014 was as follows:

	Participating insurance contract liabilities	Non-participating insurance contract liabilities	Participating investment contract liabilities	Total insurance and participating contracts	Reinsurance contracts	Net
2014	£m	£m	£m	£m	£m	£m
At 1 January	15,060	28,312	14,707	58,079	(5,857)	52,222
Reclassified as held for sale during the year	(667)	(8,135)	(3)	(8,805)	(123)	(8,928)
	14,393	20,177	14,704	49,274	(5,980)	43,294
Expected change	(1,014)	(717)	(701)	(2,432)	350	(2,082)
Methodology/modelling changes	(3)	(81)	44	(40)	-	(40)
Effect of changes in
Economic assumptions	356	1,625	(344)	1,637	(410)	1,227
Non-economic assumptions	37	(65)	(52)	(80)	7	(73)
Effect of
Economic experience	2,092	207	1,319	3,618	6	3,624
Non-economic experience	79	(264)	252	67	(1)	66
New business	42	1,000	22	1,064	(12)	1,052
Total change in contract liabilities	1,589	1,705	540	3,834	(60)	3,774
Foreign exchange adjustment	(585)	(41)	(53)	(679)	4	(675)
At 31 December	15,397	21,841	15,191	52,429	(6,036)	46,393
Reinsurance assets					(6,036)
Reinsurance liabilities					-
					(6,036)

The change in non-participating investment contract liabilities during the year ended 31 December 2014 was as follows:

	2014
	£m
At 1 January	97,659
Reclassified as held for sale during the year	(15,097)
Contributions	11,261
Initial charges and reduced allocations	(3)
Account balances paid on surrender and other terminations in the year	(10,230)
Change in non-participating investment contracts recognised in the IFRS condensed consolidated income statement	5,362
Foreign exchange adjustment	(306)
Recurring management charges	(439)
At 31 December	88,207

4.11 Pension and other post-retirement benefit provisions

In December 2014 the Group announced that the UK staff defined benefit pension plan would be closed to future accrual effective April 2016. From April 2016, all UK employees will accrue a pension through a defined contribution plan.

(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 2015	6 months 2014 restated¹	Full year 2014
	£m	£m	£m
Current service cost	(42)	(30)	(60)
Interest income	13	10	21
Administrative expenses	(1)	-	-
Charge recognised in the IFRS condensed consolidated income statement	(30)	(20)	(39)

An additional pension contribution of 6% of pensionable salary into the defined contribution plan for eligible members of the defined benefit plan on 16 March 2015 was made on 16 April 2015. A further additional contribution of 6% will be made on 16 April 2016. These contributions have been accrued over the vesting period and are included in current service cost.

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

	30 June 2015			30 June 2014				31 December 2014
	UK	Other	Total	UK	Canada	Other	Total	UK	Other	Total	Canada
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Present value of funded obligation	(2,750)	(89)	(2,839)	(2,456)	(232)	(73)	(2,761)	(2,816)	(98)	(2,914)	(242)
Present value of unfunded obligation	-	(8)	(8)	-	(69)	(7)	(76)	-	(8)	(8)	(73)
Fair value of plan assets	4,030	57	4,087	3,140	204	58	3,402	3,990	62	4,052	214
Effect of limit on plan surplus	(460)	-	(460)	(242)	-	-	(242)	(414)	-	(414)	-
Net asset/(liability) on the IFRS condensed consolidated statement of financial position	820	(40)	780	442	(97)	(22)	323	760	(44)	716	(101)

The principal economic assumptions for the plans are as follows:

	30 June 2015	30 June 2014		31 December 2014
	UK	UK	Canada	UK	Canada
	%	%	%	%	%
Discount rate	3.75	4.35	4.20	3.60	4.00
Rates of inflation
Consumer Price Index (CPI)	2.60	2.80	2.00	2.45	2.00
Retail Price Index (RPI) (UK only)	3.50	3.60	-	3.35	-
Salary inflation (Canada only)	-	-	3.50	-	3.50

4.12 Risk management

(a) Overview

The Group's strategic objectives and performance against them is subject to a number of financial and non-financial risks. The principal risks and uncertainties that affect the business model are set out in detail in the Strategic report section 1.4 - Principal risks and uncertainties.

The Group's IFRS condensed consolidated half year financial information does not include all financial risk management information and disclosures required in the Group's Annual report and accounts. This note should therefore be read in conjunction with the Group's Annual report and accounts for the year ended 31 December 2014. The information presented in this note has been prepared on the same basis as that presented in the Group's Annual report and accounts.

There have been no significant changes to the Group's risk management framework since 31 December 2014 and no changes have been made to the Group's qualitative risk appetites. The business continues to be managed through a range of risk, capital and profit metrics.

Standard Life Financial Inc. and Standard Life Investments Inc. collectively were sold on 30 January 2015 - refer to Note 4.2 - Acquisitions and disposals. The assets and liabilities of these businesses were classified as held for sale on the consolidated statement of financial position at 31 December 2014 and the comparatives reflect this, however comparatives at 30 June 2014 have not been restated to reflect the sale. The transaction does not impact the classification of the Group's assets and liabilities within the risk segments.

(b) Investment property and financial assets

The values of the Group's holdings of investment property and financial assets are impacted by the Group's exposure to adverse fluctuations in financial markets (referred to as market risk) and counterparty failure (referred to as credit risk).

The assets on the Group's IFRS condensed consolidated statement of financial position can be split into four categories (risk segments) which give the shareholder different exposures to these risks as follows:

Shareholder business

Shareholder business refers to the assets and liabilities to which the shareholder is directly exposed. For the purposes of this note, the shareholder refers to the equity holders of the Company.

Participating business

Participating business refers to the assets and liabilities of the participating funds of the life operations of the Group. It includes the liabilities for insurance features and financial guarantees contained within contracts held in the Heritage With Profits Fund that invest in unit linked funds. It does not include the liabilities for insurance features contained in contracts invested in the German With Profits Fund or German Smoothed Managed With Profits Fund. Such liabilities are included in shareholder business.

Unit linked and segregated funds

Unit linked and segregated funds refers to the assets and liabilities of the unit linked and segregated funds of the life operations of the Group. It does not include the cash flows (such as asset management charges or investment expenses) arising from the unit linked or segregated fund contracts or the liabilities for insurance features or financial guarantees contained within the unit linked or segregated fund contracts. Such cash flows and liabilities are included in shareholder business or participating business.

Third party interest in consolidated funds and non-controlling interests

Third party interest in consolidated funds and non-controlling interests refers to the assets and liabilities recorded on the Group's consolidated statement of financial position which belong to third parties. The Group controls the entities which own the assets and liabilities but the Group does not own 100% of the equity or units of the relevant entities.

The total Group holding in investment property and financial assets has been presented below based on the risk segment.

	Shareholder business		Participating business		Unit linked and segregated funds		TPICF and NCI¹		Total
	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Investments in associates²	26	16	433	535	3,850	3,568	218	145	4,527	4,264
Investment property	1	-	2,100	2,090	5,588	5,223	1,895	1,728	9,584	9,041
Loans	27	4	340	194	326	166	98	36	791	400
Derivative financial assets	25	18	1,368	1,649	920	1,711	329	643	2,642	4,021
Equity securities and interests in pooled investment funds	54	31	8,975	9,658	57,370	55,471	6,634	6,167	73,033	71,327
Debt securities	7,635	7,235	26,232	27,785	24,683	23,597	6,060	5,824	64,610	64,441
Receivables and other financial assets	582	468	115	98	662	534	185	148	1,544	1,248
Assets held for sale	929	9,837	-	857	27	17,679	19	965	975	29,338
Cash and cash equivalents	813	976	1,589	1,778	6,055	5,751	2,131	2,112	10,588	10,617
Total	10,092	18,585	41,152	44,644	99,481	113,700	17,569	17,768	168,294	194,697

¹Third party interest in consolidated funds and non-controlling interests.

²Comprises investments in associates at FVTPL and loans to associates.

	Shareholder business	Participating business	Unit linked and segregated funds	TPICF and NCI¹	Total
30 June 2014	£m	£m	£m	£m	£m
Investments in associates²	4	375	1,105	101	1,585
Investment property	482	2,117	5,205	1,498	9,302
Loans	2,367	187	91	-	2,645
Derivative financial assets	67	899	1,127	555	2,648
Equity securities and interests in pooled investment funds	215	10,235	69,141	8,141	87,732
Debt securities	12,009	27,230	26,542	6,821	72,602
Receivables and other financial assets	629	168	859	235	1,891
Assets held for sale	33	-	-	-	33
Cash and cash equivalents	1,443	1,400	5,111	1,721	9,675
Total	17,249	42,611	109,181	19,072	188,113

¹ Third party interest in consolidated funds and non-controlling interests.

²Comprises investments in associates at FVTPL and loans to associates.

The shareholder is exposed to the impact of market movements such as in property prices, interest rates and foreign exchange rates and the impact of defaults and movements in credit spreads on the value of assets held by the shareholder business. Appropriate risk oversight, risk management and mitigation actions are in place. The shareholder is also exposed to the market and credit risk that the assets of the participating funds of the life operations of the Group are not sufficient to meet their obligations. In this situation, the shareholder would be exposed to the full shortfall in the funds.

No further analysis is provided on the assets of the remaining risk segments - unit linked and segregated funds and TPICF and NCI. Assets of the unit linked and segregated funds are managed in accordance with the mandates of the particular funds and the financial risks of the assets are expected to be borne by the policyholder. The unit linked business includes £3,383m (30 June 2014: £4,515m; 31 December 2014: £3,523m) of assets that are held as reinsured external fund links. Under certain circumstances the shareholder may be exposed to losses relating to the default of the insured external fund links. These exposures are actively monitored and managed by the Group and the Group considers the circumstances under which losses may arise to be remote.

The shareholder is not exposed to market and credit risk from assets in respect of TPICF and NCI since the financial risks of the assets are borne by third parties.

Further information on the investment property and financial assets of the shareholder and participating business at the reporting date is provided below.

4.12 Risk management continued

(b) Investment property and financial assets continued

Investment property

The Group is subject to property price risk due to changes in the value and return on holdings in investment properties. This risk arises from various direct and indirect holdings which are controlled through the use of portfolio limits.

The tables below analyse investment property held by the shareholder and participating businesses by country and sector.

Shareholder business

	Office			Industrial			Retail			Other			Total
	30 Jun 2015	30 Jun 2014	31 Dec 2014	30 Jun 2015	30 Jun 2014	31 Dec 2014	30 Jun 2015	30 Jun 2014	31 Dec 2014	30 Jun 2015	30 Jun 2014	31 Dec 2014	30 Jun 2015	30 Jun 2014	31 Dec 2014
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
UK	-	-	-	-	-	-	1	-	-	-	-	-	1	-	-
Canada	-	348	-	-	45	-	-	-	-	-	89	-	-	482	-
Total	-	348	-	-	45	-	1	-	-	-	89	-	1	482	-

Participating business

	Office			Industrial			Retail			Other			Total
	30 Jun 2015	30 Jun 2014	31 Dec 2014	30 Jun 2015	30 Jun 2014	31 Dec 2014	30 Jun 2015	30 Jun 2014	31 Dec 2014	30 Jun 2015	30 Jun 2014	31 Dec 2014	30 Jun 2015	30 Jun 2014	31 Dec 2014
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
UK	680	598	608	219	285	237	993	1,007	1,051	6	-	6	1,898	1,890	1,902
Canada	-	47	-	-	19	-	-	5	-	-	15	-	-	86	-
Belgium	12	13	14	-	-	-	-	-	-	-	-	-	12	13	14
France	-	-	-	-	4	3	-	-	-	1	2	2	1	6	5
Germany	-	-	-	4	-	-	14	-	-	-	-	-	18	-	-
Ireland	-	-	-	-	-	-	-	-	-	23	-	26	23	-	26
Netherlands	16	-	-	13	-	14	-	-	-	-	-	-	29	-	14
Spain	119	122	129	-	-	-	-	-	-	-	-	-	119	122	129
Total	827	780	751	236	308	254	1,007	1,012	1,051	30	17	34	2,100	2,117	2,090

There is no direct exposure to residential property in the shareholder and participating businesses.

Equity securities

The Group is subject to equity price risk due to daily changes in the market value and returns in the holdings in its equity security portfolio. Exposure to equity securities are primarily managed through the use of investment mandates including constraints based on appropriate equity indices.

The following table analyses equity securities held by the shareholder and participating businesses by country.

	Shareholder business			Participating business			Total
	30 Jun 2015	30 Jun 2014	31 Dec 2014	30 Jun 2015	30 Jun 2014	31 Dec 2014	30 Jun 2015	30 Jun 2014	31 Dec 2014
	£m	£m	£m	£m	£m	£m	£m	£m	£m
UK	9	3	-	3,792	4,438	4,060	3,801	4,441	4,060
Canada	-	148	-	53	252	42	53	400	42
Australia	1	1	1	32	33	53	33	34	54
Austria	-	-	-	-	25	-	-	25	-
Belgium	1	-	-	54	101	73	55	101	73
Denmark	1	-	-	156	166	165	157	166	165
Finland	1	-	-	88	62	48	89	62	48
France	2	-	1	422	546	453	424	546	454
Germany	2	-	1	398	503	523	400	503	524
Greece	-	-	-	1	9	12	1	9	12
Ireland	1	-	-	179	132	137	180	132	137
Italy	2	-	-	138	72	100	140	72	100
Japan	1	1	1	119	124	114	120	125	115
Mexico	-	-	-	1	6	1	1	6	1
Netherlands	2	-	1	346	454	364	348	454	365
Norway	-	-	-	65	101	44	65	101	44
Portugal	-	-	-	40	30	19	40	30	19
Russia	-	-	-	4	5	4	4	5	4
Spain	2	-	-	148	222	161	150	222	161
Sweden	1	-	-	203	278	236	204	278	236
Switzerland	2	-	-	621	597	669	623	597	669
US	7	26	-	1,784	1,814	1,977	1,791	1,840	1,977
Other	17	11	7	253	263	311	270	274	318
Total	52	190	12	8,897	10,233	9,566	8,949	10,423	9,578

In addition to the equity securities analysed above, the shareholder business has interests in pooled investment funds of £2m (30 June 2014: £25m; 31 December 2014: £19m). The participating business has interests in pooled investment funds of £78m (30 June 2014: £2m; 31 December 2014: £92m).

Debt securities

The Group is exposed to interest rate risk and credit risk through its holdings in debt securities. The Group manages its exposure to debt securities through the use of investment mandates including setting exposure limits such as by issuer, sector and credit rating.

At 30 June 2015, the total shareholder business holding of debt securities was £7,635m (30 June 2014: £12,009m; 31 December 2014: £7,235m), of which 86% (30 June 2014: 96%; 31 December 2014: 89%) was rated as investment grade. The total participating business holding of debt securities at 30 June 2015 was £26,232m (30 June 2014: £27,230m; 31 December 2014: £27,785m), of which 97% (30 June 2014: 97%; 31 December 2014: 97%) was rated as investment grade. This illustrates the quality of the debt securities we choose to invest in.

4.12 Risk management continued

(b) Investment property and financial assets continued

The following tables show the shareholder and participating businesses' exposure to credit risk from debt securities analysed by credit rating and country.

Shareholder business

	Government, provincial and municipal¹			Banks			Other financial institutions			Other corporate			Other²			Total
	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec
	2015	2014	2014	2015	2014	2014	2015	2014	2014	2015	2014	2014	2015	2014	2014	2015	2014	2014
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
AAA	232	673	150	121	98	108	39	50	40	-	77	-	216	205	226	608	1,103	524
AA	714	1,403	699	359	636	297	302	179	275	236	532	246	-	31	-	1,611	2,781	1,517
A	5	1,174	4	1,375	1,269	1,392	418	1,014	399	1,254	2,738	1,498	-	-	-	3,052	6,195	3,293
BBB	6	-	5	172	163	97	252	94	247	847	1,201	756	-	-	-	1,277	1,458	1,105
Below BBB	1	-	2	8	4	7	46	-	1	85	15	21	-	-	-	140	19	31
Not rated	-	-	-	-	-	-	25	17	-	17	13	1	-	29	-	42	59	1
Internally rated	74	4	78	-	-	-	483	330	480	348	51	206	-	9	-	905	394	764
Total	1,032	3,254	938	2,035	2,170	1,901	1,565	1,684	1,442	2,787	4,627	2,728	216	274	226	7,635	12,009	7,235

	Government, provincial and municipal¹			Banks			Other financial institutions			Other corporate			Other²			Total
	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec
	2015	2014	2014	2015	2014	2014	2015	2014	2014	2015	2014	2014	2015	2014	2014	2015	2014	2014
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
UK	520	354	565	428	491	377	1,338	955	1,286	1,480	1,254	1,330	-	69	-	3,766	3,123	3,558
Canada	-	2,534	3	25	300	25	-	283	-	1	1,949	1	-	-	-	26	5,066	29
Australia	-	-	-	75	79	72	6	14	6	10	10	10	-	-	-	91	103	88
Austria	21	22	25	-	-	-	-	-	-	-	-	-	-	-	-	21	22	25
Belgium	-	-	-	25	7	25	-	-	-	12	11	11	-	-	-	37	18	36
Denmark	-	-	-	80	16	41	-	-	-	15	15	16	-	-	-	95	31	57
Finland	-	-	-	25	50	25	-	-	-	-	-	-	-	-	-	25	50	25
France	200	24	209	223	211	228	-	16	-	313	440	347	-	-	-	736	691	784
Germany	243	303	87	124	97	115	1	1	1	280	301	300	-	-	-	648	702	503
Greece	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Ireland	-	-	-	-	-	-	-	3	3	-	-	-	-	-	-	-	3	3
Italy	-	-	-	26	34	36	-	-	-	79	72	86	-	-	-	105	106	122
Japan	-	-	-	51	135	119	62	29	10	31	30	32	-	-	-	144	194	161
Mexico	5	1	1	-	-	-	-	-	-	106	83	112	-	-	-	111	84	113
Netherlands	-	-	-	273	366	313	-	-	-	24	6	24	-	-	-	297	372	337
Norway	-	-	-	-	-	-	-	-	-	38	37	40	-	-	-	38	37	40
Portugal	1	-	-	-	-	-	-	-	-	-	-	-	-	-	-	1	-	-
Russia	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Spain	-	-	-	116	2	37	-	-	-	50	26	52	-	-	-	166	28	89
Sweden	-	-	-	67	12	38	1	1	1	61	59	66	-	-	-	129	72	105
Switzerland	-	-	-	163	77	87	-	-	-	7	7	7	-	-	-	170	84	94
US	-	13	-	255	273	302	130	381	133	268	318	283	-	-	-	653	985	718
Other	42	3	48	79	20	61	27	1	2	12	9	11	216	205	226	376	238	348
Total	1,032	3,254	938	2,035	2,170	1,901	1,565	1,684	1,442	2,787	4,627	2,728	216	274	226	7,635	12,009	7,235

¹Government, provincial and municipal includes debt securities which are issued by or explicitly guaranteed by the national government. For Canada, this includes debt securities which are issued by or explicitly guaranteed by the Crown Corporations of the Government of Canada.

² This balance primarily consists of securities held in supranationals.

Participating business

	Government, provincial and municipal¹			Banks			Other financial institutions			Other corporate			Other²			Total
	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec
	2015	2014	2014	2015	2014	2014	2015	2014	2014	2015	2014	2014	2015	2014	2014	2015	2014	2014
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
AAA	3,191	3,226	3,764	514	402	591	154	371	168	27	28	28	234	248	291	4,120	4,275	4,842
AA	13,130	13,658	13,543	945	1,255	601	683	779	829	512	583	635	-	5	-	15,270	16,280	15,608
A	29	126	27	1,736	1,189	2,093	1,124	1,392	995	1,609	1,442	1,787	-	-	-	4,498	4,149	4,902
BBB	6	16	10	302	335	283	369	487	446	885	773	839	-	-	-	1,562	1,611	1,578
Below BBB	-	-	-	180	201	209	27	84	25	225	222	247	-	-	-	432	507	481
Not rated	1	1	-	-	5	-	65	129	33	93	169	-	-	1	-	159	305	33
Internally rated	-	-	2	7	-	-	158	84	194	26	19	145	-	-	-	191	103	341
Total	16,357	17,027	17,346	3,684	3,387	3,777	2,580	3,326	2,690	3,377	3,236	3,681	234	254	291	26,232	27,230	27,785

	Government, provincial and municipal¹			Banks			Other financial institutions			Other corporate			Other²			Total
	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec	30 Jun	30 Jun	31 Dec
	2015	2014	2014	2015	2014	2014	2015	2014	2014	2015	2014	2014	2015	2014	2014	2015	2014	2014
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
UK	10,719	11,332	11,030	826	861	926	2,018	2,242	2,050	1,792	1,707	1,966	-	1	-	15,355	16,143	15,972
Canada	33	323	35	214	166	77	8	55	10	1	58	1	-	-	-	256	602	123
Australia	-	-	-	173	173	199	39	63	39	37	24	42	-	-	-	249	260	280
Austria	218	206	240	3	35	8	-	-	-	-	-	-	-	-	-	221	241	248
Belgium	362	383	381	7	18	16	-	-	-	17	20	16	-	-	-	386	421	413
Denmark	4	6	5	7	13	10	-	-	-	26	26	32	-	-	-	37	45	47
Finland	74	74	83	43	175	57	-	25	-	4	8	5	-	-	-	121	282	145
France	1,713	1,749	1,641	450	359	473	25	146	19	335	306	375	-	-	-	2,523	2,560	2,508
Germany	2,633	2,450	2,996	423	275	440	119	168	114	204	185	214	-	-	-	3,379	3,078	3,764
Greece	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Ireland	4	1	1	8	14	6	10	12	10	12	13	13	-	-	-	34	40	30
Italy	2	2	3	32	29	31	8	66	13	112	118	138	-	-	-	154	215	185
Japan	20	22	20	184	277	295	-	-	-	10	10	10	-	-	-	214	309	325
Mexico	-	-	-	-	-	-	-	-	-	60	66	64	-	-	-	60	66	64
Netherlands	390	356	358	362	270	228	41	42	46	33	13	31	-	-	-	826	681	663
Norway	17	65	18	27	56	16	-	13	-	64	59	72	-	-	-	108	193	106
Portugal	-	-	-	-	-	-	-	-	-	4	-	3	-	-	-	4	-	3
Russia	-	-	-	-	-	-	-	-	-	-	7	7	-	-	-	-	7	7
Spain	3	12	8	8	22	8	-	-	-	50	65	62	-	-	-	61	99	78
Sweden	1	4	1	211	101	261	6	16	8	19	18	20	-	-	-	237	139	290
Switzerland	-	-	-	170	104	182	31	52	35	56	50	56	-	-	-	257	206	273
US	77	2	434	391	334	383	215	252	254	420	381	408	-	-	-	1,103	969	1,479
Other	87	40	92	145	105	161	60	174	92	121	102	146	234	253	291	647	674	782
Total	16,357	17,027	17,346	3,684	3,387	3,777	2,580	3,326	2,690	3,377	3,236	3,681	234	254	291	26,232	27,230	27,785

² This balance primarily consists of securities held in supranationals.

Loans

The Group is exposed to interest rate risk and credit risk from loans issued. The Group manages its exposure by setting portfolio limits for business units specifying the proportion of the value of the total portfolio loans that can be represented by a single, or group of related counterparties and requires each business unit to implement appropriate portfolio limits and benchmarks for the assets.

The shareholder business holding of loans of £27m (30 June 2014: £2,367m; 31 December 2014: £4m) primarily comprises bank deposits of more than 3 months maturity. At 30 June 2014 the holding primarily comprised the Canada non-segregated funds commercial mortgage book.

The participating business holding of loans of £340m (30 June 2014: £187m; 31 December 2014: £194m) comprises bank deposits of more than 3 months maturity and UK mortgages.

4.13 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

Information on the methods and assumptions used to determine fair values for each major category of financial 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 treated as level 1 instruments within the fair value hierarchy.

Unlisted equities are valued using an adjusted net asset value. The Group's exposure to unlisted equity securities primarily relates to private equity investments. The majority of the Group's private equity investments are carried out through European fund of funds structures, where the Group receives valuations from the investment managers of the underlying funds.

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 treated 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 investments in the fund 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.

Investment property and owner occupied property

The fair value of investment property and all owner occupied property is valued by external property valuation experts. The current use is considered the best indicator of the highest and best use of the Group's property from a market participants' perspective. No adjustment is made for vacant possession for the Group's owner occupied property.

In UK and Europe valuations are completed in accordance with the Royal Institution of Chartered Surveyors (RICS) valuation standards and predominantly an income capitalisation method is used. In Canada all valuations are completed in accordance with International Valuation Standards (IVS) and predominantly a discounted cash flow method is used. Both valuation techniques are income approaches as they consider the income that an asset will generate over its useful life and estimate fair value through a capitalisation process. Capitalisation involves the conversion of income into a capital sum through the application of an appropriate discount rate.

The determination of the fair value of investment property and all owner occupied property requires the use of estimates such as future cash flows from the assets for example, future rental income and discount rates applicable to those assets.

Where it is not possible to use an income approach a market approach will be used whereby comparisons are made to recent transactions with similar characteristics and locations to those of the Group's assets. Where appropriate, adjustments will be made by the valuer to reflect any differences.

Where an income approach, or a market approach with significant unobservable adjustments, has been used, valuations are predominantly based on unobservable inputs and accordingly these assets are categorised as level 3 within the fair value hierarchy. Where a market approach valuation does not include significant unobservable adjustments, these assets are categorised as level 2.

Derivative financial assets and derivative financial liabilities

The majority of the Group's derivatives are over-the-counter (OTC) derivatives which are fair valued using valuation techniques based on observable market data and are therefore treated as level 2 investments within 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 2015, 30 June 2014 and 31 December 2014, 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 treated 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.

· Commercial mortgages
These instruments are valued using models. The models use a discount rate adjustment technique which is an income approach. The key inputs for the valuation models are contractual future cash flows, which are discounted using a discount rate that is determined by adding a spread to the current base rate. The spread is derived from a pricing matrix which incorporates data on current spreads for similar assets and which may include an internal underwriting rating. These inputs are generally observable with the exception of the spread adjustment arising from the internal underwriting rating. The classification of these instruments within the fair value hierarchy will be either level 2 or 3 depending on whether the spread is adjusted by an internal underwriting rating.

Contingent consideration asset
A contingent consideration asset was recognised during 2014 in respect of a purchase price adjustment mechanism relating to the acquisition of Ignis. The fair value of the asset is calculated using a binominal tree model. The main inputs are management fee income and expected probabilities of payouts. These are considered unobservable and as a result the asset is classified as level 3 in the fair value hierarchy.

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.

4.13 Fair value of assets and liabilities continued

(b) Methods and assumptions used to determine fair value of assets and liabilities continued

(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.

	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 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Investments in associates at FVTPL	4,527	4,264	14	33	4,541	4,297	4,433	4,214	7	-	101	83
Investment property	9,584	9,041	38	1,427	9,622	10,468	-	-	-	105	9,622	10,363
Owner occupied property	134	138	-	26	134	164	-	-	-	1	134	163
Derivative financial assets	2,642	4,021	-	44	2,642	4,065	638	971	2,004	3,094	-	-
Equity securities and interests in pooled investment vehicles	73,033	71,327	20	13,035	73,053	84,362	72,130	83,521	-	1	923	840
Debt securities	64,610	64,441	-	11,059	64,610	75,500	22,120	23,780	41,841	50,077	649	1,643
Contingent consideration asset	20	20	-	-	20	20	-	-	-	-	20	20
Total assets at fair value	154,550	153,252	72	25,624	154,622	178,876	99,321	112,486	43,852	53,278	11,449	13,112

	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 2014	£m	£m	£m	£m	£m		£m
Investments in associates at FVTPL	1,585	-	1,585	1,585	-		-
Investment property	9,302	-	9,302	-	65		9,237
Owner occupied property	163	-	163	-	1		162
Derivative financial assets	2,648	-	2,648	746	1,902		-
Equity securities and interests in pooled investment vehicles	87,732	9	87,741	86,692	-		1,049
Debt securities	72,602	20	72,622	22,353	49,049		1,220
Contingent consideration asset	-	-	-	-	-		-
Total assets at fair value	174,032	29	174,061	111,376	51,017		11,668

There were no significant transfers between levels 1 and 2 during the period (six months ended 30 June 2014: none; 12 months ended 31 December 2014: none). Refer to 4.13 (b)(iii) for details of movements in level 3.

All transfers between fair value hierarchy levels are deemed to occur on the last day of the quarter in which they arise.

The table that follows presents an analysis of the Group's financial assets measured at fair value by level of the fair value hierarchy for each risk segment as set out in Note 4.12 - Risk management.

	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 2015	31 Dec 2014	30 Jun 2015	31 Dec 2014	30 Jun 2015		31 Dec 2014	30 Jun 2015	31 Dec 2014	30 Jun 2015	31 Dec 2014	30 Jun 2015		31 Dec 2014
	£m	£m	£m	£m	£m		£m	£m	£m	£m	£m	£m		£m
Shareholder business
Investments in associates at FVTPL	26	16	14	14	40		30	21	30	7	-	12		-
Investment property	1	-	-	520	1		520	-	-	-	105	1		415
Owner occupied property	1	3	-	26	1		29	-	-	-	1	1		28
Derivative financial assets	25	18	-	44	25		62	-	-	25	62	-		-
Equity securities and interests in pooled investment funds	54	31	20	250	74		281	68	254	-	-	6		27
Debt securities	7,635	7,235	-	5,934	7,635		13,169	1,031	981	6,096	10,952	508		1,236
Contingent consideration asset	20	20	-	-	20		20	-	-	-	-	20		20
Total shareholder business	7,762	7,323	34	6,788	7,796		14,111	1,120	1,265	6,128	11,120	548		1,726
Participating business
Investments in associates at FVTPL	433	535	-	-	433		535	356	452	-	-	77		83
Investment property	2,100	2,090	-	86	2,100		2,176	-	-	-	-	2,100		2,176
Owner occupied property	133	135	-	-	133		135	-	-	-	-	133		135
Derivative financial assets	1,368	1,649	-	-	1,368		1,649	374	332	994	1,317	-		-
Equity securities and interests in pooled investment funds	8,975	9,658	-	232	8,975		9,890	8,578	9,526	-	-	397		364
Debt securities	26,232	27,785	-	418	26,232		28,203	15,739	17,036	10,352	10,991	141		176
Total participating business	39,241	41,852	-	736	39,241		42,588	25,047	27,346	11,346	12,308	2,848		2,934
Unit linked and segregated funds
Investments in associates at FVTPL	3,850	3,568	-	19	3,850		3,587	3,838	3,587	-	-	12		-
Investment property	5,588	5,223	19	816	5,607		6,039	-	-	-	-	5,607		6,039
Owner occupied property	-	-	-	-	-		-	-	-	-	-	-		-
Derivative financial assets	920	1,711	-	-	920		1,711	197	458	723	1,253	-		-
Equity securities and interests in pooled investment funds	57,370	55,471	-	11,909	57,370		67,380	57,186	67,200	-	1	184		179
Debt securities	24,683	23,597	-	4,420	24,683		28,017	5,147	5,536	19,536	22,273	-		208
Total unit linked and segregated funds	92,411	89,570	19	17,164	92,430		106,734	66,368	76,781	20,259	23,527	5,803		6,426
Third party interest in consolidated funds and non-controlling interests
Investments in associates at FVTPL	218	145	-	-	218		145	218	145	-	-	-		-
Investment property	1,895	1,728	19	5	1,914		1,733	-	-	-	-	1,914		1,733
Owner occupied property	-	-	-	-	-		-	-	-	-	-	-		-
Derivative financial assets	329	643	-	-	329		643	67	181	262	462	-		-
Equity securities and interests in pooled investment funds	6,634	6,167	-	644	6,634		6,811	6,298	6,541	-	-	336		270
Debt securities	6,060	5,824	-	287	6,060		6,111	203	227	5,857	5,861	-		23
Total third party interest in consolidated funds and non-controlling interests	15,136	14,507	19	936	15,155		15,443	6,786	7,094	6,119	6,323	2,250		2,026
Total	154,550	153,252	72	25,624	154,622		178,876	99,321	112,486	43,852	53,278	11,449		13,112

4.13 Fair value of assets and liabilities continued

(b) Methods and assumptions used to determine fair value of assets and liabilities continued

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

	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 2014	£m	£m	£m	£m	£m	£m
Shareholder business
Investments in associates at FVTPL	4	-	4	4	-	-
Investment property	482	-	482	-	65	417
Owner occupied property	36	-	36	-	1	35
Derivative financial assets	67	-	67	1	66	-
Equity securities and interests in pooled investment funds	215	9	224	196	-	28
Debt securities	12,009	20	12,029	907	10,196	926
Contingent consideration asset	-	-	-	-	-	-
Total shareholder business	12,813	29	12,842	1,108	10,328	1,406
Participating business
Investments in associates at FVTPL	375	-	375	375	-	-
Investment property	2,117	-	2,117	-	-	2,117
Owner occupied property	127	-	127	-	-	127
Derivative financial assets	899	-	899	249	650	-
Equity securities and interests in pooled investment funds	10,235	-	10,235	9,572	-	663
Debt securities	27,230	-	27,230	16,391	10,828	11
Total participating business	40,983	-	40,983	26,587	11,478	2,918
Unit linked and segregated funds
Investments in associates at FVTPL	1,105	-	1,105	1,105	-	-
Investment property	5,205	-	5,205	-	-	5,205
Owner occupied property	-	-	-	-	-	-
Derivative financial assets	1,127	-	1,127	332	795	-
Equity securities and interests in pooled investment funds	69,141	-	69,141	69,097	-	44
Debt securities	26,542	-	26,542	4,807	21,509	226
Total unit linked and segregated funds	103,120	-	103,120	75,341	22,304	5,475
Third party interest in consolidated funds and non-controlling interests
Investments in associates at FVTPL	101	-	101	101	-	-
Investment property	1,498	-	1,498	-	-	1,498
Owner occupied property	-	-	-	-	-	-
Derivative financial assets	555	-	555	164	391	-
Equity securities and interests in pooled investment funds	8,141	-	8,141	7,827	-	314
Debt securities	6,821	-	6,821	248	6,516	57
Total third party interest in consolidated funds and non-controlling interests	17,116	-	17,116	8,340	6,907	1,869
Total	174,032	29	174,061	111,376	51,017	11,668

(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.

	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 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Non-participating investment contract liabilities	91,583	88,203	-	13,734	91,583	101,937	-	-	91,583	101,937	-	-
Liabilities in respect of third party interest in consolidated funds	16,607	15,805	-	953	16,607	16,758	-	-	15,214	15,419	1,393	1,339
Derivative financial liabilities	858	1,693	-	26	858	1,719	160	441	698	1,278	-	-
Contingent consideration liability	-	3	-	-	-	3	-	-	-	-	-	3
Total liabilities at fair value	109,048	105,704	-	14,713	109,048	120,417	160	441	107,495	118,634	1,393	1,342

	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 2014	£m	£m	£m	£m	£m	£m
Non-participating investment contract liabilities	98,448	-	98,448	-	98,448	-
Liabilities in respect of third party interest in consolidated funds	17,994	-	17,994	-	16,715	1,279
Derivative financial liabilities	1,101	-	1,101	207	894	-
Contingent consideration liability	-	-	-	-	-	-
Total liabilities at fair value	117,543	-	117,543	207	116,057	1,279

There were no transfers between levels 1 and 2 during the six months ended 30 June 2015 (six months ended 30 June 2014: none; 12 months ended 31 December 2014: none). Refer to 4.13 (b)(iii) for details of movements in level 3.

The table that follows presents an analysis of the Group's financial liabilities measured at fair value by level of the fair value hierarchy for each risk segment as set out in Note 4.12 - Risk management.

4.13 Fair value of assets and liabilities continued

(b) Methods and assumptions used to determine fair value of assets and liabilities continued

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

	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 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Shareholder business
Derivative financial liabilities	7	17	-	23	7	40	1	8	6	32	-	-
Contingent consideration liability	-	3	-	-	-	3	-	-	-	-	-	3
Total shareholder business	7	20	-	23	7	43	1	8	6	32	-	3
Participating business
Derivative financial liabilities	69	80	-	-	69	80	42	26	27	54	-	-
Total participating business	69	80	-	-	69	80	42	26	27	54	-	-
Unit linked and segregated funds
Non-participating investment contract liabilities	91,583	88,203	-	13,734	91,583	101,937	-	-	91,583	101,937	-	-
Derivative financial liabilities	583	1,187	-	2	583	1,189	92	319	491	870	-	-
Total unit linked and segregated funds	92,166	89,390	-	13,736	92,166	103,126	92	319	92,074	102,807	-	-
Third party interest in consolidated funds and non-controlling interests
Liabilities in respect of third party interest in consolidated funds	16,607	15,805	-	953	16,607	16,758	-	-	15,214	15,419	1,393	1,339
Derivative financial liabilities	199	409	-	1	199	410	25	88	174	322	-	-
Third party interest in consolidated funds and non-controlling interests	16,806	16,214	-	954	16,806	17,168	25	88	15,388	15,741	1,393	1,339
Total	109,048	105,704	-	14,713	109,048	120,417	160	441	107,495	118,634	1,393	1,342

	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 2014	£m	£m	£m	£m	£m	£m
Shareholder business
Derivative financial liabilities	21	-	21	2	19	-
Contingent consideration liability	-	-	-	-	-	-
Total shareholder business	21	-	21	2	19	-
Participating business
Derivative financial liabilities	49	-	49	5	44	-
Total participating business	49	-	49	5	44	-
Unit linked and segregated funds
Non-participating investment contract liabilities	98,448	-	98,448	-	98,448	-
Derivative financial liabilities	690	-	690	147	543	-
Total unit linked and segregated funds	99,138	-	99,138	147	98,991	-
Third party interest in consolidated funds and non-controlling interests
Liabilities in respect of third party interest in consolidated funds	17,994	-	17,994	-	16,715	1,279
Derivative financial liabilities	341	-	341	53	288	-
Third party interest in consolidated funds and non-controlling interests	18,335	-	18,335	53	17,003	1,279
Total	117,543	-	117,543	207	116,057	1,279

4.13 Fair value of assets and liabilities continued

(b) Methods and assumptions used to determine fair value of assets and liabilities continued

(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.

	Investments in associates at FVTPL		Investment property		Owner occupied property		Equity securities and interests in pooled		Debt securities		Liabilities in respect of third party interest in consolidated funds
	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At start of period	83	-	9,041	8,542	138	171	836	1,066	519	1,299	(1,338)	(1,246)
Reclassified as held for sale	-	-	-	(1,233)	-	(42)	-	(1)	-	(945)	-	-
Total (losses)/gains recognised in the consolidated income statement	(1)	2	249	825	1	4	62	(31)	(9)	38	2	(124)
Purchases	31	101	412	1,033	-	-	167	112	166	439	14	35
Settlement	-	-	-	-	-	-	-	-	-	-	(71)	(3)
Sales	(10)	(20)	(82)	(128)	(5)	-	(146)	(306)	(30)	(87)	-	-
Transfers in to level 3	-	-	-	-	-	-	21	1	15	436	-	-
Transfers out of level 3	-	-	-	-	-	-	-	(1)	(12)	(659)	-	-
Foreign exchange adjustment	(2)	-	(20)	(14)	-	-	(17)	(4)	-	(2)	-	-
Total gains recognised in revaluation of owner occupied property within other comprehensive income	-	-	-	-	-	5	-	-	-	-	-	-
Other	-	-	(16)	16	-	-	-	-	-	-	-	-
At end of period	101	83	9,584	9,041	134	138	923	836	649	519	(1,393)	(1,338)

	Investments in associates at FVTPL	Investment property	Owner occupied property	Equity securities and interests in pooled	Debt securities	Liabilities in respect of third party interest in consolidated funds
2014	£m	£m	£m	£m	£m	£m
1 January	-	8,542	171	1,066	1,299	(1,246)
Total gains/(losses) recognised in the consolidated income statement	-	395	1	56	41	(68)
Purchases	-	531	-	60	290	5
Settlement	-	-	-	-	-	30
Sales	-	(188)	(13)	(117)	(122)	-
Transfers in to level 3	-	-	-	1	-	-
Transfers out of level 3	-	-	-	-	(258)	-
Foreign exchange adjustment	-	(48)	(2)	(17)	(30)	-
Total gains recognised in revaluation of owner occupied property within other comprehensive income	-	-	5	-	-	-
Other	-	5	-	-	-	-
30 June	-	9,237	162	1,049	1,220	(1,279)

In addition to the above, the Group had a contingent consideration asset with a fair value of £20m at 30 June 2015 (30 June 2014: £nil; 31 December 2014: £20m). There were no settlements during the period (12 months ended 31 December 2014: none) in respect of the contingent consideration asset.

As at 30 June 2015, £253m of total gains (30 June 2014: gains of £414m; 31 December 2014: gains of £625m) 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. Of this amount £251m of gains (30 June 2014: gains of £482m; 31 December 2014: gains of £749m) were recognised in investment return and £2m of gains (30 June 2014: losses of £68m; 31 December 2014: losses of £124m) were recognised in change in liability for liabilities in respect of third party interest in consolidated funds in the IFRS condensed consolidated income statement.

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.

(b)(iv) Sensitivity of level 3 instruments measured at fair value to changes in key assumptions

Effect of changes of significant unobservable assumptions to reasonable possible alternative assumptions

For the majority of level 3 investments, the Group does not use internal models to value the investments but rather obtains valuations from external parties. The Group reviews the appropriateness of these valuations on the following basis:

· For investment property and owner occupied property (including property that is classified as held for sale), the valuations are obtained from external valuers and are assessed on an individual property basis. The principal assumptions will differ depending on the valuation technique employed and sensitivities are determined by flexing the key inputs listed in the table below using knowledge of the investment property market.

· Private equity fund valuations are provided by the respective managers of the underlying funds and are assessed on an individual investment basis, with an adjustment made for significant movements between the date of the valuation and the end of the reporting period. Sensitivities are determined by comparison to the private equity market.

· Corporate bonds are predominantly valued using single broker indicative quotes obtained from third party pricing. Sensitivities are determined by flexing the single quoted prices provided using a sensitivity to yield movements.

The shareholder is directly exposed to movements in the value of level 3 investments held by the shareholder business (to the extent they are not offset by opposite movements in investment and insurance contract liabilities). Movements in level 3 investments held by the other risk segments are offset by an opposite movement in investment and insurance contract liabilities and therefore the shareholder is not directly exposed to such movements unless they are sufficiently severe to cause the assets of the participating business to be insufficient to meet the obligations to policyholders. Changing unobservable inputs in the measurement of the fair value of level 3 financial assets to reasonably possible alternative assumptions would not have a significant impact on profit for the period or total assets.

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

	Fair value
30 June 2015	£m	Valuation technique	Unobservable input	Range (weighted average)
Investment property and owner occupied property	9,180	Income capitalisation	Equivalent yield Estimated rental value per square metre per annum	3.4% to 13.1% (5.4%) £1 to £2,422 (£349)
Investment property (hotels)	452	Income capitalisation	Equivalent Yield Estimated rental value per room per annum	4.6% to 7.3% (6%) £775 to £43,144 (£8,910)
Investment property and owner occupied property	-	Discounted cash flow	Internal rate of return Terminal capitalisation rate	- -
Investment property and owner occupied property	124	Market comparison	Estimated value per square metre	£2 to £10,764 (£3,116)
Equity securities and interests in pooled investment funds and investments in associates at FVTPL (private equity investments)	1,024	Adjusted net asset value	Adjustment to net asset value¹	N/A
Debt securities (corporate bonds)	303	Single broker	Single broker indicative price²	N/A
Debt securities (commercial mortgages)	346	Discounted cash flow	Internal underwriting rating	N/A

¹ A Group level adjustment is made for significant movements in private equity values.

²Debt securities which are valued using single broker indicative quotes are disclosed in level 3 in the fair value hierarchy. No adjustment is made to these prices.

4.13 Fair value of assets and liabilities continued

(b) Methods and assumptions used to determine fair value of assets and liabilities continued

(b)(iv) Sensitivity of level 3 instruments measured at fair value to changes in key assumptions continued

	Fair value
30 June 2014	£m	Valuation technique	Unobservable input	Range (weighted average)
Investment property and owner occupied property	7,710	Income capitalisation	Equivalent yield Estimated rental value per square metre per annum	4.0% to 13.6% (5.8%) £11 to £4,844 (£446)
Investment property (hotels)	301	Income capitalisation	Equivalent Yield Estimated rental value per room per annum	5.3% to 8.0% (6.5%) £412 to £9,100 (£3,725)
Investment property and owner occupied property	1,284	Discounted cash flow	Internal rate of return Terminal capitalisation rate	6.0% to 10.8% (7.4%) 5.3% to 9.5% (6.6%)
Investment property and owner occupied property	104	Market comparison	Estimated value per square metre	£2 to £10,000 (£1,607)
Equity securities and interests in pooled investment funds and investments in associates at FVTPL (private equity investments)	1,049	Adjusted net asset value	Adjustment to net asset value¹	N/A
Debt securities (corporate bonds)	1,169	Single broker	Single broker indicative price²	N/A
Debt securities (commercial mortgages)	51	Discounted cash flow	Internal underwriting rating	N/A

¹ A Group level adjustment is made for significant movements in private equity values.

²Debt securities which are valued using single broker indicative quotes are disclosed in level 3 in the fair value hierarchy. No adjustment is made to these prices.

	Fair value
31 December 2014	£m	Valuation technique	Unobservable input	Range (weighted average)
Investment property and owner occupied property	8,753	Income capitalisation	Equivalent yield Estimated rental value per square metre per annum	3.8% to 12.9% (5.5%) £11 to £2,422 (£345)
Investment property (hotels)	312	Income capitalisation	Equivalent Yield Estimated rental value per room per annum	4.6% to 7.3% (6.2%) £215 to £43,143 (£8,918)
Investment property and owner occupied property	1,337	Discounted cash flow	Internal rate of return Terminal capitalisation rate	6.0% to 10.5% (7.3%) 5.3% to 9.5% (6.6%)
Investment property and owner occupied property	124	Market comparison	Estimated value per square metre	£2 to £10,764 (£2,591)
Equity securities and interests in pooled investment funds and investments in associates at FVTPL (private equity investments)	923	Adjusted net asset value	Adjustment to net asset value¹	N/A
Debt securities (corporate bonds)	1,369	Single broker	Single broker indicative price²	N/A
Debt securities (commercial mortgages)	274	Discounted cash flow	Internal underwriting rating	N/A

¹ A Group level adjustment is made for significant movements in private equity values.

²Debt securities which are valued using single broker indicative quotes are disclosed in level 3 in the fair value hierarchy. No adjustment is made to these prices.

The table below presents estimated fair values of financial 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		Classified as held for sale		Total carrying value		Fair value
	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014	30 June 2015	31 Dec 2014
	£m	£m	£m	£m	£m	£m	£m	£m
Assets
Loans secured by mortgages	97	107	-	2,230	97	2,337	93	2,426
Liabilities
Non-participating investment contract liabilities	6	4	283	2,118	289	2,122	332	2,285
Subordinated notes	499	499	-	223	499	722	579	800
Subordinated guaranteed bonds	519	502	-	-	519	502	610	580
Mutual Assurance Capital Securities	307	611	-	-	307	611	337	643

	As recognised in the consolidated statement of financial position line item	Classified as held for sale	Total carrying value	Fair value
30 June 2014	£m	£m	£m	£m
Assets
Loans secured by mortgages	2,449	-	2,449	2,535
Liabilities
Non-participating investment contract liabilities	2,268	-	2,268	2,354
Subordinated notes	721	-	721	777
Subordinated guaranteed bonds	519	-	519	599
Mutual Assurance Capital Securities	601	-	601	646

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.

It is not possible to reliably calculate the fair value of participating investment contract liabilities. The assumptions and methods used in the calculation of these liabilities are set out in Note 34 of the Group's Annual report and accounts for the year ended 31 December 2014. The carrying value of participating investment contract liabilities at 30 June 2015 was £14,809m (30 June 2014: £14,764m; 31 December 2014: £15,193m).

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

4.14 Subordinated liabilities

On 6 January 2015, the Company redeemed in full the Euro denominated 5.314% fixed/floating rate perpetual Mutual Assurance Capital Securities at their outstanding principal amount of €360,000,000 (£282m).

4.15 Contingent assets and contingent liabilities

(a) Legal proceedings and regulations

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

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

(b) Unclaimed asset trust (UAT)

The UAT was established in July 2006. It holds shares and cash which were allocated to eligible members of The Standard Life Assurance Company at the date of demutualisation where those eligible members have not yet claimed their entitlement. Dividends paid on the shares held by the UAT are also held in the UAT until the related shares are claimed. The Scheme of Demutualisation sets a 10-year time limit, ending in July 2016, for those eligible members to claim their entitlements. On expiry of the UAT in July 2016, the ownership of any assets remaining in the UAT would be transferred to the Company, for general corporate purposes including charitable donations, and may be subject to a tax charge. At 30 June 2015 the UAT held cash of £45m (30 June 2014: £35m; 31 December 2014: £32m). The number of shares held by the UAT is presented in Note 4.9(c). The position at July 2016 will depend on the actions of eligible members and the success of the ongoing efforts to trace eligible members.

4.16 Commitments

(a) Capital commitments

As at 30 June 2015 capital expenditure that was authorised and contracted for, but not provided and incurred, was £285m (30 June 2014: £425m; 31 December 2014: £332m) in respect of investment property. Of this amount, £259m (30 June 2014: £378m; 31 December 2014: £287m) and £26m (30 June 2014: £47m; 31 December 2014: £36m) relates to the contractual obligations to purchase, construct or develop investment property and repair, maintain or enhance investment property respectively.

(b) Unrecognised financial instruments

The Group has committed the following unrecognised financial instruments to customers and third parties:

	30 June 2015	30 June 2014	31 December 2014
	£m	£m	£m
Commitments to extend credit with an original term to maturity of one year or less	-	89	1
Other commitments	341	299	300

Included in other commitments is £325m (30 June 2014: £278m; 31 December 2014: £300m) committed by certain subsidiaries which are not fully owned by the Group. These commitments are funded through contractually agreed additional investments in the subsidiary by the Group and the non-controlling interests. The levels of funding are not necessarily in line with the relevant percentage holdings.

The Group has entered into commercial non-cancellable leases on certain property, plant and equipment where it is not in the best interest of the Group to purchase these assets. Such leases have varying terms, escalation clauses and renewal rights.

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

	30 June 2015	30 June 2014 restated¹	31 December 2014
	£m	£m	£m
Not later than one year	32	26	36
Later than one year and no later than five years	64	50	61
Later than five years	103	64	63
Total operating lease commitments	199	140	160

4.17 Related party transactions

(a) Transactions with related parties

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

	6 months 2015	6 months 2014 restated¹	Full year 2014
	£m	£m	£m
Sales to:
Associates	413	75	451
Joint ventures	-	1	1
Other related parties	36	4	94
	449	80	546
Purchases from:
Associates	629	179	816
Joint ventures	9	14	14
	638	193	830

Sales to other related parties include management fees received from non-consolidated investment vehicles managed by Standard Life Investments.

The Group's defined benefit pension plans have assets of £1,114m (30 June 2014: £797m; 31 December 2014: £1,553m) invested in investment vehicles managed by the Group.

(b) Transactions with key management personnel and their close family members

All transactions between key management personnel and their close family members and the Group during the period are on terms which are equivalent to those available to all employees of the Group.

During the six months ended 30 June 2015, key management personnel and their close family members contributed £3m (six months ended 30 June 2014: £1m; 12 months ended 31 December 2014: £1m) to products sold by the Group.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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