Quilter plc interims 2021 - part 2

RNS Number : 2222I

Quilter PLC

11 August 2021

Statement of Directors' responsibilities in respect of the interim financial statements

For the period ended 30 June 2021

Each of the Directors of Quilter plc confirms to the best of his or her knowledge and belief that:

· The condensed set of consolidated financial statements, which comprises the consolidated income statement and statement of comprehensive income, consolidated statement of changes in equity, consolidated statement of financial position, consolidated statement of cash flows and the related explanatory notes, has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the United Kingdom and gives a true and fair view of the assets, liabilities, financial position and profits of the Group for the period ended 30 June 2021. These interim financials have been prepared and published in compliance with the acceptable accounting frameworks of the London Stock Exchange ("LSE"), where the company has its primary listing.

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

a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of consolidated financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the Group's 2020 Annual Report, that could have a material effect on the financial position or performance of the enterprise in the first six months of the current financial year.

As per provision C1 of the UK Corporate Governance Code, the results for the six months ended 30 June 2021 taken as a whole, present a fair, balanced and understandable position of the Company's prospects.

Quilter plc is listed as a primary listing on the LSE and a secondary listing on the Johannesburg Stock Exchange ("JSE").

Paul Feeney Mark Satchel
Chief Executive Officer Chief Financial Officer
10 August 2021 10 August 2021

Independent review report to Quilter plc

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed Quilter plc's condensed consolidated interim financial statements (the "interim financial statements") in the interim results of Quilter plc for the 6 month period ended 30 June 2021 (the "period").

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

· the consolidated statement of financial position as at 30 June 2021;

· the consolidated income statement and consolidated statement of comprehensive income for the period then ended;

· the consolidated statement of cash flows for the period then ended;

· the consolidated statement of changes in equity for the period then ended; and

· the explanatory notes to the interim financial statements.

The interim financial statements included in the interim results of Quilter plc have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The interim results, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the interim 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 Guidance and Transparency Rules sourcebook of the United Kingdom's 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.

What a review of interim financial statements 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, 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 interim results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

London

10 August 2021

Consolidated income statement
For the period ended 30 June 2021
				£m
	Notes	Six months 2021	Six months 2020 restated¹	Full year 2020
Income
Fee income and other income from service activities	6(c)	339	286	594
Investment return	6(c)	2,489	(965)	2,837
Other income		9	12	20
Total income		2,837	(667)	3,451
Expenses
Change in investment contract liabilities	16	(2,087)	921	(2,272)
Fee and commission expenses, and other acquisition costs		(29)	(31)	(62)
Change in third-party interest in consolidated funds		(347)	106	(440)
Other operating and administrative expenses		(340)	(346)	(652)
Finance costs		(7)	(8)	(16)
Total expenses		(2,810)	642	(3,442)
Profit/(loss) before tax from continuing operations		27	(25)	9
Tax (expense)/credit attributable to policyholder returns	7(a)	(48)	38	(36)
(Loss)/profit before tax attributable to equity holders from continuing operations		(21)	13	(27)
Income tax (expense)/credit	7(a)	(40)	36	4
Less: tax expense/(credit) attributable to policyholder returns		48	(38)	36
Tax credit/(expense) attributable to equity holders		8	(2)	40
(Loss)/profit after tax from continuing operations		(13)	11	13
Profit after tax from discontinued operations	4(a)	33	32	75
Profit after tax		20	43	88

Attributable to:
Equity holders of Quilter plc		20	43	88

Earnings per Ordinary Share on profit attributable to Ordinary Shareholders of Quilter plc
Basic
From continuing operations (pence)	8(b)	(0.8)	0.6	0.8
From discontinued operations (pence)	4(a)	2.0	1.8	4.2
Basic earnings per Ordinary Share (pence)	8(b)	1.2	2.4	5.0
Diluted
From continuing operations (pence)	8(b)	(0.8)	0.6	0.8
From discontinued operations (pence)	4(a)	1.9	1.7	4.1
Diluted earnings per Ordinary Share (pence)	8(b)	1.1	2.3	4.9

¹ See note 3(a) for details of changes to comparative amounts.

Consolidated statement of comprehensive income
For the period ended 30 June 2021

											£m
					Note	Six months 2021		Six months 2020			Full year 2020
Profit after tax						20		43			88
Exchange (losses)/gains on translation of foreign operations						(1)		1			-
Income tax on items that may be reclassified subsequently to income statement						1		-			-
Items that may be reclassified subsequently to income statement						-		1			-
Total other comprehensive income, net of tax						-		1			-
Total comprehensive income						20		44			88
Attributable to:
Continuing operations						(12)		11			12
Discontinued operations					4(b)	32		33			76
Equity holders of Quilter plc						20		44			88
Consolidated statement of changes in equity
For the period ended 30 June 2021

												£m
	Notes	Share capital	Share premium	Capital redemption reserve		Merger reserve	Share-based payments reserve		Other reserves	Retained earnings		Total share- holders' equity
Balance at 1 January 2020		133	58	-		149	45		1	1,685		2,071
Profit for the period		-	-	-		-	-		-	43		43
Other comprehensive income		-	-	-		-	-		-	1		1
Total comprehensive income		-	-	-		-	-		-	44		44
Dividends	9	-	-	-		-	-		-	(64)		(64)
Shares repurchased in the buyback programme¹	15	(3)	-	3		-	-		-	(56)		(56)
Movement in own shares		-	-	-		-	-		-	(43)		(43)
Equity share-based payment transactions		-	-	-		-	(3)		-	16		13
Total transactions with the owners of the Company		(3)	-	3		-	(3)		-	(147)		(150)
Balance at 30 June 2020		130	58	3		149	42		1	1,582		1,965
Profit for the period		-	-	-		-	-		-	45		45
Other comprehensive expense		-	-	-		-	-		-	(1)		(1)
Total comprehensive income		-	-	-		-	-		-	44		44
Dividends	9	-	-	-		-	-		-	(17)		(17)
Shares repurchased in the buyback programme¹	15	(5)	-	5		-	-		-	(123)		(123)
Movement in own shares		-	-	-		-	-		-	(1)		(1)
Equity share-based payment transactions		-	-	-		-	-		-	12		12
Dividend equivalents paid on vested shares		-	-	-		-	-		-	(2)		(2)
Total transactions with the owners of the Company		(5)	-	5		-	-		-	(131)		(131)
Balance at 31 December 2020		125	58	8		149	42		1	1,495		1,878
Profit for the period		-	-	-		-	-		-	20		20
Other comprehensive income/(expense)		-	-	-		-	1		-	(1)		-
Total comprehensive income		-	-	-		-	1		-	19		20
Dividends	9	-	-	-		-	-		-	(61)		(61)
Shares repurchased in the buyback programme¹	15	(5)	-	5		-	-		-	(103)		(103)
Movement in own shares		-	-	-		-	-		-	(2)		(2)
Equity share-based payment transactions		-	-	-		-	(8)		-	19		11
Dividend equivalents paid on vested shares		-	-	-		-	-		-	(1)		(1)
Total transactions with the owners of the Company		(5)	-	5		-	(8)		-	(148)		(156)
Balance at 30 June 2021		120	58	13		149	35		1	1,366		1,742

¹ On 11 March 2020 the Company announced a share buyback programme to purchase shares up to a maximum value of £375 million, in order to reduce the share capital of the Company. The programme commenced on 11 March 2020 and will continue throughout 2021. During the six months ended 30 June 2021, the Company acquired 63 million shares for a total consideration of £100 million and incurred additional costs of £3 million. The shares, which have a nominal value of £5 million, have subsequently been cancelled, giving rise to a capital redemption reserve of the same value as required by the Companies Act 2006.

Consolidated statement of financial position
At 30 June 2021

				£m
	Notes	30 June 2021	30 June 2020 restated¹	31 December 2020
Assets
Goodwill and intangible assets	10	479	578	556
Property, plant and equipment		127	135	142
Investments in associated undertakings		1	1	1
Contract costs		8	435	413
Loans and advances		32	235	219
Financial investments	11	45,037	57,653	63,274
Deferred tax assets		88	45	78
Current tax receivable		15	40	24
Trade, other receivables and other assets		615	727	701
Derivative assets		9	23	43
Cash and cash equivalents	14	1,703	2,078	1,921
Assets of operations classified as held for sale	4(d)	24,046	-	-
Total assets		72,160	61,950	67,372

Equity and liabilities
Equity
Ordinary Share capital	15	120	130	125
Ordinary Share premium reserve	15	58	58	58
Capital redemption reserve	15	13	3	8
Merger reserve		149	149	149
Share-based payments reserve		35	42	42
Other reserves		1	1	1
Retained earnings		1,366	1,582	1,495
Total equity		1,742	1,965	1,878
Liabilities
Investment contract liabilities	16	38,804	52,267	57,407
Third-party interests in consolidated funds		6,698	6,036	6,513
Provisions	17	75	88	77
Deferred tax liabilities		140	50	106
Current tax payable		-	4	1
Borrowings and lease liabilities		312	330	319
Trade, other payables and other liabilities		671	770	672
Contract liabilities		-	393	379
Derivative liabilities		26	47	20
Liabilities of operations classified as held for sale	4(d)	23,692	-	-
Total liabilities		70,418	59,985	65,494
Total equity and liabilities		72,160	61,950	67,372

¹ See note 3(a) for details of changes to comparative amounts.

Approved by the Board of Directors on 10 August 2021.

Paul Feeney Mark Satchel

Chief Executive Officer Chief Financial Officer

Consolidated statement of cash flows

For the period ended 30 June 2021

The cash flows presented in this statement cover all the Group's activities (continuing and discontinued operations, and cash that is held for sale) and includes flows from both policyholder and shareholder activities. All cash and cash equivalents are available for use by the Group except for cash and cash equivalents in consolidated funds (as shown in note 14). Cash flows for discontinued operations are shown separately in note 4(c).

				£m
	Notes	Six months 2021	Six months 2020 restated¹	Full year 2020
Cash flows from operating activities
Cash flows from operating activities		1,586	916	1,473
Taxation paid		(5)	(32)	(28)
Total net cash from operating activities		1,581	884	1,445
Cash flows from investing activities
Net acquisitions of financial investments		(1,422)	(846)	(1,419)
Acquisition of property, plant and equipment		(1)	(17)	(28)
Acquisition of intangible assets	10(a)	-	(3)	(4)
Acquisition of interests in subsidiaries²		(7)	(16)	(20)
Net payments from the disposal of interests in subsidiaries		(8)	(2)	(3)
Total net cash used in investing activities		(1,438)	(884)	(1,474)
Cash flows from financing activities
Dividends paid to ordinary equity holders of the Company	9	(61)	(64)	(81)
Finance costs on external borrowings		(5)	(5)	(10)
Payment of interest on lease liabilities		(1)	(1)	(2)
Payment of principal lease liabilities		(5)	(7)	(14)
Repurchase of shares		-	(41)	(41)
Repurchase and cancellation of shares³		(102)	(54)	(157)
Total net cash used in financing activities		(174)	(172)	(305)
Net decrease in cash and cash equivalents		(31)	(172)	(334)
Cash and cash equivalents at the beginning of the year		1,921	2,253	2,253
Effects of exchange rate changes on cash and cash equivalents		(1)	(3)	2
Cash and cash equivalents at end of the period	14	1,889	2,078	1,921

¹ See note 3(a) for details of changes to comparative amounts.

² The acquisition of interests in subsidiaries balance of £7 million results from contingent consideration payments relating to historical acquisitions (30 June 2020: £16 million, 31 December 2020: £20 million).

³ Repurchase and cancellation of shares are in respect of cash movements associated with the share buyback programme. Further details are included within the consolidated statement of changes in equity.

Basis of preparation and significant accounting policies

For the period ended 30 June 2021

General information

Quilter plc (the "Company"), a public limited company incorporated and domiciled in the United Kingdom ("UK"), together with its subsidiaries (collectively, the "Group") offers investment and wealth management services, long-term savings and financial advice through its subsidiaries and associates primarily in the UK with a presence in a number of cross-border markets.

The address of the registered office is Senator House, 85 Queen Victoria Street, London, EC4V 4AB.

1: Basis of preparation

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted international accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. Quilter Plc transitioned to UK-adopted international accounting standards ("IAS") in its consolidated financial statements on 1 January 2021. There was no impact or changes in accounting policies from the transition.

The results for the six months ended 30 June 2021 have been prepared in accordance with the UK-adopted IAS 34 Interim Financial Reporting and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority, and although unaudited, have been reviewed by the Group's Auditor, PricewaterhouseCoopers LLP, and their report is included earlier in this document. These condensed consolidated interim financial statements ("interim financial statements") of Quilter plc for the six months ended 30 June 2021 do not constitute statutory accounts as defined by section 434 of the Companies Act 2006. Comparative financial information for the full year 2020 has been presented from the Group's 2020 Annual Report, which has been filed with the Registrar of Companies and was prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 ("IFRS") and the applicable legal requirements of the Companies Act 2006, as well as international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The auditor's report on those financial statements was not qualified, did not include a reference to any matters to which the auditor drew attention by the way of emphasis without qualifying the report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006. Copies of the Group's 2020 Annual Report are available online at www.quilter.com.

These interim financial statements do not include all of the information required for a complete set of IFRS compliant financial statements. Selected notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the publication of the Group's 2020 Annual Report. The Board believes that the Alternative Performance Measures ("APMs") provided, such as adjusted profit, are also useful for both management and investors. Any seasonal or cyclical factors, to the extent that they materially impact the Group's results, are described in the Financial Review.

There have been no changes in the Group's significant accounting policies during the period. All accounting policies for recognition, measurement, consolidation and presentation are as outlined in the Group's 2020 Annual Report. These interim financial statements have been prepared on a historical cost basis, except for the revaluation of certain financial instruments, and are presented in pounds sterling, which is the currency of the primary economic environment in which the Group operates.

Going concern

The Directors have considered the resilience of the Group, its current financial position, the principal risks facing the business and the effectiveness of any mitigating strategies which are or could be applied. This included an assessment of capital, liquidity and solvency over a three-year planning period concluding that the Group can withstand a severe but plausible downside scenario for at least the next 12 months after the date of signing the 2021 interim financial statements. This assessment incorporated a number of stress tests covering a broad range of scenarios, including economic and market shocks of up to 40% falls in equity markets, mass lapse events, new business growth scenarios and severe business interruption, equivalent to 1-50 and 1-200 year events. As a result, the Directors believe that the Group is well placed to manage its business risks in the context of the current economic outlook and has sufficient financial resources to continue in business for a period of at least 12 months from the date of approval of these interim financial statements and continue to adopt the going concern basis in preparing the interim financial statements.

Critical accounting estimates and judgements

The preparation of financial statements requires management to exercise judgement in applying the Group's significant accounting policies and make estimates and assumptions that affect the reported amounts of net assets and liabilities at the date of the financial statements. The Board Audit Committee reviews these areas of judgement and estimates, and the appropriateness of significant accounting policies adopted in the preparation of these financial statements.

The Group's critical accounting judgements are those that management makes when applying its significant accounting policies and that have the most effect on the net profit and net assets recognised in the Group's financial statements.

The Group's critical accounting estimates involve the most complex or subjective assessments and assumptions, which have a significant risk of resulting in material adjustment to the net carrying amounts of assets and liabilities within the next financial year. Management uses its knowledge of current facts and circumstances and applies estimation and assumption setting techniques that are aligned with relevant actuarial and accounting guidance to make predictions about future actions and events. Actual results may differ from those estimates.

The critical estimates and judgements disclosed in the Group's 2020 Annual Report continue to be critical to the Group and, during the six months ended 30 June 2021, the following update has also been considered by management to be critical:

Provision for the cost of Lighthouse defined benefit pension advice:

A further estimation for redress was performed during the six months ended 30 June 2021 for historical advice provided for non-British Steel transfers identified as part of the skilled person review which was disclosed in detail in the Group's 2020 Annual Report. See note 17 of these interim financial statements for further details.

2: New standards, amendments to standards, and interpretations adopted by the Group

There were no new standards or interpretations which became effective from 1 January 2021.

The following amendments to accounting standards became applicable for the current reporting period, with no material impact on the Group's consolidated results, financial position or disclosures:

Adopted by the Group from	Amendments to standards
1 January 2021	Amendments to IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance Contracts and IFRS 16 Leases - Interest Rate Benchmark Reform - Phase 2
1 April 2021	Amendments to IFRS 16 Leas es - COVID-19-Related Rent Concessions beyond 30 June 2021

3: Significant changes in the current reporting period

On 1 April 2021, the Group announced the proposed disposal of Quilter International to Utmost Group for approximately £483 million. Quilter International has subsequently been classified as a discontinued operation (the Group's comparative amounts have been restated accordingly, see note 3(a) for details of all restatements) and, as at 30 June 2021, all assets and liabilities of this business are classified as held for sale. Further details of the Group's discontinued operations and assets and liabilities held for sale are included in note 4.

Global equity markets have improved significantly during the six months to 30 June 2021, resulting in increases in the Group's assets under management and administration and positive net client cash flows. Given the positive market movements and the easing of COVID-19 restrictions, management consider there to be no indicators of impairment for the Group's continuing operations at 30 June 2021 and therefore an impairment assessment of the Group's goodwill has not been performed. £52 million of goodwill has been transferred to assets held for sale following the announcement of the proposed disposal of Quilter International, which represents the share of the goodwill in the Wealth Platforms cash generating unit ("CGU") group attributable to Quilter International based on its fair value relative to the fair value of the other businesses within that CGU group. Further detail of the Group's performance and financial position to 30 June 2021 are included in the Financial Review.

There have been no major changes to the Group's capital and financial risk management during the first half of the year, nor as a result of COVID-19. Full capital and financial risk management disclosures are included within note 37 of the Group's 2020 Annual Report.

3(a): Changes to comparative amounts

As described in note 4(b) of the Group's 2020 Annual Report, changes to comparative amounts have been made in respect of consolidated investment funds and fee income receivable. The changes made to the period ended 30 June 2020 are explained in detail in notes 3(a)(i) and 3(a)(ii) respectively and have been made to align to the Group's accounting policies presented within the Group's 2020 Annual Report, with no impact to the Group's profit, equity or Alternative Performance Measures. In addition, as a result of Quilter International now being classified as a discontinued operation, the impacts of this on the Group's consolidated income statement are also presented below in order to clearly reconcile to the previously published 30 June 2020 comparatives.

The changes to the statement of financial position at 30 June 2020 are shown below:

Statement of financial position (extract)
				£m
				30 June 2020
	As reported	Consolidated funds Note 3(a)(i)	Fee income receivable Note 3(a)(ii)	Restated
Financial investments	57,872	(219)	-	57,653
Trade, other receivables and other assets	566	(47)	208	727
Derivative assets	12	11	-	23
Cash and cash equivalents	2,467	(389)	-	2,078
Other¹	1,469	-	-	1,469
Total assets	62,386	(644)	208	61,950

Third-party interests in consolidated funds	6,582	(546)	-	6,036
Trade, other payables and other liabilities	843	(73)	-	770
Contract liabilities	185	-	208	393
Derivative liabilities	72	(25)	-	47
Other¹	52,739	-	-	52,739
Total liabilities	60,421	(644)	208	59,985

Total equity	1,965	-	-	1,965

¹ 'Other' represents remaining assets and liabilities not impacted by the changes to comparative amounts.

Changes in respect of consolidated investment funds also impacted the Group's consolidated income statement in the prior year, as well as Quilter International being classified as a discontinued operation. There are no prior period income statement impacts arising from the fee income receivable reclassification.

Consolidated income statement (extract)
				£m
			Six months 2020
	As reported	Consolidated funds Note 3(a)(i)	Quilter International ¹ Note 4(a)	Restated
Fee income and other income from service activities	428	(40)	(102)	286
Investment return	(1,547)	248	334	(965)
Other income	11	-	1	12
Total revenue	(1,108)	208	233	(667)

Fee and commission expenses and other acquisition costs	(203)	128	44	(31)
Change in third-party interest in consolidated funds	428	(322)	-	106
Other operating and administrative expenses	(355)	(14)	23	(346)
Other²	1,246	-	(333)	913
Total expenses	1,116	(208)	(266)	642

Profit/(loss) before tax from continuing operations	8	-	(33)	(25)

¹ As a result of the Group's proposed disposal of Quilter International, the business is now classified as a discontinued operation. See note 4(a) for full details. An intercompany elimination of £2 million is included within fee income and other income from service activities, and fee and commission expenses and other acquisition costs, between Quilter International and the Group's continuing operations.

² 'Other' represents remaining expenses not impacted by the changes to comparative amounts.

The impact to the Group's consolidated statement of cash flows in respect of changes in consolidated investment funds in the prior period is shown below. There are no prior period cash flow statement impacts arising from the fee income receivable reclassification.

Consolidated statement of cash flows (extract)
			£m
		Six months 2020
	As reported	Consolidated funds Note 3(a)(i)	Restated
Cash flows from/(used in) operating activities	978	(62)	916
Total net cash from/(used in) operating activities	946	(62)	884
Net acquisitions of financial investments	(739)	(107)	(846)
Total net cash used in investing activities	(777)	(107)	(884)
Net decrease in cash and cash equivalents	(3)	(169)	(172)
Cash and cash equivalents at the beginning of the year	2,473	(220)	2,253
Effects of exchange rate changes on cash and cash equivalents	(3)	-	(3)
Cash and cash equivalents at end of the period	2,467	(389)	2,078

3(a)(i): Consolidated funds

Following a review of the Group's consolidated investment funds methodology for the year ended 31 December 2020, corrections to previously reported values have been made on the consolidated statement of financial position and consolidated income statement (with corresponding impacts on the consolidated statement of cash flows). There has been no impact on profit or equity for any of the periods presented. The nature of the changes is as follows:

Statement of financial position impacts:

· Changes to the calculation of minority ownership of certain fund investments have been made, reflecting a re-evaluation of the status of nominee holdings, held by the Group on behalf of its clients, that had historically been included in the control assessment. This has resulted in a restatement of fund assets and liabilities attributable to the Group, and an adjustment to deconsolidate a number of investment funds where the Group was incorrectly deemed to have been the controlling entity in previous periods.

Income statement impacts:

· The changes to the calculation of minority ownership described above has resulted in changes to a number of line items in the Group's consolidated income statement for the period ended 30 June 2020, as shown in the table above.

· In addition, fund management fee income received from consolidated funds previously included within 'Fee income and other income from service activities' has been eliminated on consolidation, resulting in it being re-presented primarily as investment return.

· A correction has been made in respect of realised and unrealised gains and losses on investments within a limited number of funds being previously presented within the Group's fee and commission expenses rather than investment return.

3(a)(ii): Fee income receivable

Fee Income Receivable ("FIR") relates to premium based establishment fee income, where income is taken over an initial period of the contract. When a policy is written, future income is capitalised, and the resulting asset is subsequently amortised as the cash proceeds are received.

Deferred Fee Income ("DFI") is the initial fee income, including FIR, which is deferred over the expected life of the contract as the services are provided. DFI is recognised as a contract liability.

In the period ended 30 June 2020, the Group's FIR (all written within investment contracts in Quilter International) and DFI were reported net within the statement of financial position within contract liabilities. This interpretation was made as both balances arise within individual contracts and FIR was assumed to represent a contract asset (which are permitted to be presented net with contract liabilities) rather than an unconditional receivable.

For the year ended 31 December 2020, a review was performed and these FIR balances were reclassified from a contract asset (previously netted within contract liabilities) to a receivable, as consideration is only conditional upon the passage of time. The prior period balance has been restated accordingly. This has no impact on reported profits or equity at the beginning or end of the prior period.

The impact of the changes to the consolidated statement of financial position is summarised in the table above.

Notes to the condensed consolidated interim financial statements

For the period ended 30 June 2021

4: Discontinued operations, assets and liabilities held for sale, acquisitions and disposals

4(a): Discontinued operations - income statement

The Group's discontinued operations principally relate to Quilter International for which the Group announced the proposed sale to Utmost Group on 1 April 2021.

				£m
	Notes	Six months 2021	Six months 2020	Full year 2020
Income
Gross earned premiums		1	1	1
Premiums ceded to reinsurers		(1)	(1)	(1)
Net earned premiums		-	-	-
Fee income and other income from service activities	6(c)	103	104	206
Investment return	6(c)	1,183	(334)	1,061
Other income		-	(1)	-
Total income		1,286	(231)	1,267
Expenses
Change in investment contract liabilities	16	(1,183)	333	(1,056)
Fee and commission expenses, and other acquisition costs		(49)	(46)	(91)
Other operating and administrative expenses		(20)	(23)	(42)
Finance costs		-	-	(1)
Total expenses		(1,252)	264	(1,190)
Loss on sale of operations before tax¹	4(e)	-	(1)	(1)
Profit before tax attributable to equity holders from discontinued operations		34	32	76
Tax expense attributable to equity holders	7(a)	(1)	-	(1)
Profit after tax from discontinued operations		33	32	75
Attributable to:
Equity holders of Quilter plc		33	32	75

Earnings per Ordinary Share on profit attributable to Ordinary Shareholders of Quilter plc
Basic - from discontinued operations (pence)	8(b)	2.0	1.8	4.2
Diluted - from discontinued operations (pence)	8(b)	1.9	1.7	4.1

¹ Loss on sale of operations before tax in the prior period relates to transaction and separation costs associated with the historical sales of the QLA and Single Strategy businesses.

£5 million of Other operating and administrative expenses (30 June 2020: £9 million; 31 December 2020: £17 million) previously reported in Quilter International are now presented within continuing operations, as these costs will not transfer to Utmost Group (the acquirer) on disposal.

4(b): Discontinued operations - Statement of comprehensive income

			£m
	Six months 2021	Six months 2020	Full year 2020
Profit after tax	33	32	75
Items that may be reclassified subsequently to profit or loss:
Exchange (loss)/gain on translation of foreign operations	(1)	1	1
Total comprehensive income from discontinued operations	32	33	76

4(c): Discontinued operations - Net cash flows

			£m
	Six months 2021	Six months 2020	Full year 2020
Total net cash flows used in operating activities	374	104	126
Total net cash used in investing activities	(326)	(85)	(87)
Total net cash used in financing activities	(1)	(2)	(24)
Net increase in cash and cash equivalents	47	17	15

4(d): Assets and liabilities held for sale

Assets and liabilities of operations classified as held for sale at 30 June 2021 relate to Quilter International. The Group has announced the proposed disposal of this business to Utmost Group as detailed in note 3.

		£m
	Notes	30 June 2021
Assets classified as held for sale
Goodwill and intangible assets	10	54
Property, plant and equipment		11
Contract costs		384
Loans and advances		174
Financial investments	11	23,019
Trade, other receivables and other assets		218
Cash and cash equivalents	14	186
Total assets classified as held for sale		24,046

Liabilities classified as held for sale
Investment contract liabilities	16	23,202
Provisions	17	5
Deferred tax liabilities		2
Lease liabilities		12
Trade, other payables and other liabilities		102
Contract liabilities		369
Total liabilities classified as held for sale		23,692
Net assets classified as held for sale		354

4 (e): Business acquisitions and disposals

There have been no material business acquisitions or disposals during the periods presented in these interim financial statements.

Loss on sale of operations relating to historical business disposals:

The Group incurred £1 million of transaction and separation costs in the prior period, relating to the historical sales of the Quilter Life Assurance and Single Strategy businesses.

Contingent consideration arising from historical business acquisitions:

The table below details the movements in the contingent consideration balance during the current and prior periods arising from the business acquisitions in previous years.

			£m
	30 June 2021	30 June 2020	31 December 2020
Opening balance	16	39	39
Payments	(7)	(16)	(20)
Financing interest charge	-	1	2
Other movements	-	-	(5)
Closing balance	9	24	16

Contingent consideration represents the Group's best estimate of the amount payable in relation to each acquisition discounted to net present value. The basis of each acquisition varies but includes payments based upon a percentage of the level of assets under administration, funds under management and levels of ongoing fee income at future dates.

5: Alternative Performance Measures ("APMs")

5(a): Adjusted profit before tax and reconciliation to profit after tax

Basis of preparation of adjusted profit before tax

Adjusted profit before tax is one of the Group's Alternative Performance Measures and reflects the Directors' view of the underlying performance of the Group. It is used for management decision making and internal performance management and is the profit measure presented in the Group's segmental reporting. Adjusted profit before tax is a non-GAAP measure which adjusts the Group's IFRS profit for specified items as detailed in note 5(b). The definition of adjusted profit before tax is unchanged from the Group's 2020 Annual Report.

										£m
		Six months 2021			Six months 2020			Full year 2020
	Notes	Continuing operations	Discontinued operations ¹	Total	Continuing operations	Discontinued operations¹	Total	Continuing operations	Discontinued operations¹	Total
Advice and Wealth Management		45	-	45	41	-	41	90	-	90
Wealth Platforms		25	29	54	23	24	47	54	60	114
Head Office		(14)	-	(14)	(17)	-	(17)	(36)	-	(36)
Adjusted profit before tax		56	29	85	47	24	71	108	60	168
Reallocation of Quilter International costs	4(a)	(5)	5	-	(9)	9	-	(17)	17	-
Adjusted profit before tax after reallocation	6(b)	51	34	85	38	33	71	91	77	168
Adjusting items:
Impact of acquisition and disposal related accounting	5(b)(i)	(23)	-	(23)	(23)	-	(23)	(42)	-	(42)
Loss on business disposals	4(e)	-	-	-	-	(1)	(1)	-	(1)	(1)
Business transformation costs	5(b)(ii)	(32)	-	(32)	(39)	-	(39)	(70)	-	(70)
Managed separation costs	5(b)(iii)	(1)	-	(1)	-	-	-	-	-	-
Finance costs	5(b)(iv)	(5)	-	(5)	(5)	-	(5)	(10)	-	(10)
Policyholder tax adjustments	5(b)(v)	(4)	-	(4)	47	-	47	9	-	9
Customer remediation	5(b)(vi)	(7)	-	(7)	(5)	-	(5)	(5)	-	(5)
Total adjusting items before tax		(72)	-	(72)	(25)	(1)	(26)	(118)	(1)	(119)
(Loss)/profit before tax attributable to equity holders		(21)	34	13	13	32	45	(27)	76	49
Tax attributable to policyholder returns	7(a)	48	-	48	(38)	-	(38)	36	-	36
Income tax (expense)/credit	7(a),(b)	(40)	(1)	(41)	36	-	36	4	(1)	3
(Loss)/profit after tax		(13)	33	20	11	32	43	13	75	88

¹ Discontinued operations includes the results of Quilter International.

5(b): Adjusting items

In determining adjusted profit before tax, certain adjustments are made to IFRS profit before tax to reflect the underlying performance of the Group. These are detailed below.

5(b)(i): Impact of acquisition and disposal related accounting

The recognition of goodwill and other acquired intangibles is created on the acquisition of a business and represents the premium paid over the fair value of the Group's share of the identifiable assets and liabilities acquired at the date of acquisition (as recognised under IFRS 3 Business Combinations). The Group excludes any impairment of goodwill from adjusted profit as well as the amortisation and impairment of acquired other intangible assets, any acquisition costs, finance costs related to the discounting of contingent consideration and incidental items relating to past disposals.

The effect of these adjustments to determine adjusted profit are summarised below. All adjustments are in respect of continuing operations.

				£m
	Note	Six months 2021	Six months 2020	Full year 2020
Amortisation of other acquired intangible assets	10(a)	23	23	45
Fair value gains on revaluation of contingent consideration		-	(1)	(4)
Acquisition and disposal related income ¹		-	-	(1)
Unwinding of discount on contingent consideration		-	1	2
Total impact of acquisition and disposal related accounting		23	23	42

¹ Acquisition and disposal related income in the year ended 31 December 2020 includes a £(1) million acceleration of discounting unwind following the settlement of a loan receivable from TA Associates that related to deferred consideration arising from the sale of the Single Strategy Asset Management business.

5(b)(ii): Business transformation costs

Business transformation costs include three items: costs associated with the UK Platform Transformation Programme, build out costs incurred within Quilter Investors as a result of the sale of the Single Strategy business and Optimisation Programme costs. For the period ended 30 June 2021, these costs totalled £32 million (30 June 2020: £39 million, 31 December 2020: £70 million) in aggregate, the principal components of which are described below:

UK Platform Transformation Programme - 30 June 2021: £22 million, 30 June 2020: £20 million, 31 December 2020: £38 million

The last of three phased migrations completed successfully in February 2021 with all Quilter Investment Platform assets now live on the new platform. Costs to date reflect the delivery of the final migration, together with the on-going decommissioning of the previous system and transition of back office processes to FNZ. The total costs of the programme of £196 million to 30 June 2021, are expected to conclude at approximately £200 million, in line with previous guidance.

Optimisation Programme costs - 30 June 2021: £10 million, 30 June 2020: £19 million, 31 December 2020: £33 million

The Optimisation programme has delivered further efficiencies and improvements in operational performance for the Group through greater technology utilisation, integration and simplification activity. During the first half of 2021 the Group successfully deployed the new finance, HR and procurement modules as part of our general ledger consolidation and modernisation activity.

Quilter Investors' build out costs - 30 June 2021: £nil, 30 June 2020: £(1) million, 31 December 2020: £(1) million

The Group incurred build out costs to develop Quilter Investors as a separate business distinct from the Single Strategy business, which was sold on 29 June 2018. The build was substantially completed in 2019, resulting in the release of the remaining £1 million of the provision during 2020 which was established to complete the build.

5(b)(iii): Managed separation costs

For the period ended 30 June 2021 these costs were £1 million (30 June 2020: £nil, 31 December 2020: £0.1 million ) and relate to further rebranding of the Quilter business. These o ne-off costs relating to the Group's separation from Old Mutual plc have been excluded from adjusted profit on the basis that they relate to a fundamental restructuring of the Group and are not representative of the operating activity of the Group.

5(b)(iv): Finance costs

The nature of much of the Group's operations means that, for management's decision making and internal performance management, the effects of interest costs on external borrowings are removed when calculating adjusted profit. For the period ended 30 June 2021 finance costs were £5 million (30 June 2020: £5 million, 31 December 2020: £10 million).

5(b)(v): Policyholder tax adjustments

For the period ended 30 June 2021 the total policyholder tax adjustments to adjusted profit is £(4) million (30 June 2020: £47 million, 31 December 2020: £9 million). Adjustments to policyholder tax are made to remove distortions arising from market volatility that can, in turn, lead to volatility in the policyholder tax charge between periods. The recognition of the income received from policyholders (which is included within the Group's income) to fund the policyholder tax liability can vary in timing to the recognition of the corresponding tax expense, creating volatility to the Group's IFRS profit/(loss) before tax attributable to equity holders. For a further explanation of the impact of markets on the policyholder tax charge see note 7(a). Adjustments are also made to remove policyholder tax distortions from other non-operating adjusting items.

5(b)(vi): Customer remediation

Lighthouse pension transfer advice provision - 30 June 2021: £7 million, 30 June 2020: £5 million, 31 December 2020: £5 million

The provision for the potential redress of British Steel cases and other pension transfer cases has been increased by £7 million in the period, which has been recognised in the income statement (30 June 2020: £5 million, 31 December 2020: £5 million). This increase reflects the impact of post-acquisition market and discount rate movements, together with further consideration of the cases where redress is potentially payable, as part of the ongoing skilled person review. This has been excluded from adjusted profit on the basis that the costs are not representative of the operating activities of the Group, and the advice activities to which the charge relates was provided prior to the Group's acquisition of the business. Further details of the provision are provided in note 17.

5(c): Reconciliation of IFRS income and expenses to "Total net fee revenue" and "Operating expenses" within adjusted profit

This reconciliation shows how each line of the Group's consolidated IFRS income statement is allocated to the Group's APMs: Net management fees, Total net fee revenue and Operating expenses, which are all defined on page 6 and form the Group's adjusted profit before tax for continuing operations. The IFRS income statement column in the table below, down to "Profit/(loss) before tax attributable to equity holders from continuing operations", reconciles to each line of the Group's consolidated income statement. Allocations are determined by management and aim to show the Group's sources of profit (net of relevant directly attributable expenses). These allocations remain consistent from period to period to ensure comparability, unless otherwise stated.

							£m
Six months 2021	Net mgmt fees ¹	Other revenue ¹	Total net fee revenue ¹	Operating expenses ¹	Adjusted profit before tax	Consol. of funds ²	Consolidated income statement
Income
Fee income and other income from service activities	325	58	383	-	383	(44)	339
Investment return	-	2,087	2,087	-	2,087	402	2,489
Other income	-	1	1	7	8	1	9
Total income	325	2,146	2,471	7	2,478	359	2,837
Expenses
Change in investment contract liabilities	-	(2,087)	(2,087)	-	(2,087)	-	(2,087)
Fee and commission expenses, and other acquisition costs	(31)	3	(28)	-	(28)	(1)	(29)
Change in third-party interest in consolidated funds	-	-	-	-	-	(347)	(347)
Other operating and administrative expenses	(8)	-	(8)	(321)	(329)	(11)	(340)
Finance costs	-	-	-	(7)	(7)	-	(7)
Total expenses	(39)	(2,084)	(2,123)	(328)	(2,451)	(359)	(2,810)
Tax expense attributable to policyholder returns	(48)	-	(48)	-	(48)	-	(48)
Profit/(loss) before tax attributable to equity holders from continuing operations	238	62	300	(321)	(21)	-	(21)
Adjusting items:
Impact of acquisition and disposal related accounting	-	-	-	23	23
Business transformation costs	-	-	-	32	32
Managed separation costs	-	-	-	1	1
Finance costs	-	-	-	5	5
Customer remediation	-	-	-	7	7
Policyholder tax adjustments	4	-	4	-	4
Adjusting items	4	-	4	68	72
Adjusted profit before tax after reallocation	242	62	304	(253)	51
Reallocation of Quilter International costs⁴	-	-	-	5	5
Adjusted profit before tax - continuing operations	242	62	304	(248)	56

							£m
Six months 2020 (restated^3,4)	Net mgmt fees ¹	Other revenue ¹	Total net fee revenue ¹	Operating expenses ¹	Adjusted profit before tax	Consol. of funds ^2,3	Consolidated income statement ^3,4
Income
Fee income and other income from service activities ⁴	263	56	319	-	319	(33)	286
Investment return	-	(915)	(915)	-	(915)	(50)	(965)
Other income	-	1	1	9	10	2	12
Total income	263	(858)	(595)	9	(586)	(81)	(667)
Expenses
Change in investment contract liabilities	-	921	921	-	921	-	921
Fee and commission expenses, and other acquisition costs	(28)	(1)	(29)	-	(29)	(2)	(31)
Change in third party interest in consolidated funds	-	-	-	-	-	106	106
Other operating and administrative expenses	(6)	(1)	(7)	(316)	(323)	(23)	(346)
Finance costs	-	(2)	(2)	(6)	(8)	-	(8)
Total expenses	(34)	917	883	(322)	561	81	642
Tax credit attributable to policyholder returns	38	-	38	-	38	-	38
Profit/(loss) before tax attributable to equity holders from continuing operations	267	59	326	(313)	13	-	13
Adjusting items:
Impact of acquisition and disposal related accounting	-	-	-	23	23
Business transformation costs	-	-	-	39	39
Finance costs	-	-	-	5	5
Customer remediation	-	-	-	5	5
Policyholder tax adjustments	(47)	-	(47)	-	(47)
Adjusting items	(47)	-	(47)	72	25
Adjusted profit before tax after reallocation	220	59	279	(241)	38
Reallocation of Quilter International costs⁴	-	-	-	9	9
Adjusted profit before tax - continuing operations	220	59	279	(232)	47

							£m
Full year 2020	Net mgmt fees¹	Other revenue¹	Total net fee revenue¹	Operating expenses¹	Adjusted profit before tax	Consol. of funds²	Consolidated income statement³
Income
Fee income and other income from service activities	561	113	674	-	674	(80)	594
Investment return	-	2,281	2,281	-	2,281	556	2,837
Other income	-	2	2	14	16	4	20
Total income	561	2,396	2,957	14	2,971	480	3,451
Expenses
Change in investment contract liabilities	-	(2,272)	(2,272)	-	(2,272)	-	(2,272)
Fee and commission expenses, and other acquisition costs	(58)	(1)	(59)	-	(59)	(3)	(62)
Change in third-party interest in consolidated funds	-	-	-	-	-	(440)	(440)
Other operating and administrative expenses	(13)	(1)	(14)	(601)	(615)	(37)	(652)
Finance costs	-	-	-	(16)	(16)	-	(16)
Total expenses	(71)	(2,274)	(2,345)	(617)	(2,962)	(480)	(3,442)
Tax expense attributable to policyholder returns	(36)	-	(36)	-	(36)	-	(36)
Profit/(loss) before tax attributable to equity holders from continuing operations	454	122	576	(603)	(27)	-	(27)
Adjusting items:
Impact of acquisition and disposal related accounting	-	-	-	42	42
Business transformation costs	-	-	-	70	70
Finance costs	-	-	-	10	10
Policyholder tax adjustments	(9)	-	(9)	-	(9)
Customer remediation	-	-	-	5	5
Adjusting items	(9)	-	(9)	127	118
Adjusted profit before tax after reallocation	445	122	567	(476)	91
Reallocation of Quilter International costs⁴	-	-	-	17	17
Adjusted profit before tax - continuing operations	445	122	567	(459)	108

¹The APMs "Net Management Fees", "Other revenue", "Total net fee revenue" and "Operating expenses" are commented on within the Financial Review.

²Consolidation of funds shows the grossing up impact to the Group's consolidated income statement as a result of the consolidation of funds requirements, as described within note 5(a) of the Group's 2020 Annual Report. This grossing up is excluded from the Group's adjusted profit.

³See note 3(a) for details of changes to comparative amounts.

⁴See note 4(a) for details of cost reallocations.

6: Segmental information

6(a): Segmental presentation

The Group's operating segments comprise Advice and Wealth Management and Wealth Platforms, which, for the periods presented in these interim financial statements, is consistent with the manner in which the Group is structured and managed. Head Office includes certain revenues and central costs that are not allocated to the segments.

Adjusted profit before tax is an Alternative Performance Measure ("APM") reported to the Group's management and Board. Management and the Board use additional APMs to assess the performance of each of the segments, including net client cash flows, assets under management and administration, total net fee revenue and operating margin.

Consistent with internal reporting, assets, liabilities, income and expenses that are not directly attributable to a particular segment are allocated between segments where appropriate. The Group accounts for inter-segment income and transfers as if the transactions were with third parties at current market prices. Intra-group recharges in respect of operating and administration expenses within businesses disclosed as discontinued operations are not adjusted for potential future changes to the level of remaining costs following the disposal of those businesses.

The segmental information in this note reflects the adjusted and IFRS profit measures and the assets and liabilities for each operating segment as provided to management and the Board. Income is further segmented into the geographic location of the businesses in note 6(c).

Continuing operations:

Advice and Wealth Management

This segment comprises Quilter Investors, Quilter Cheviot and Quilter Financial Planning.

Quilter Investors is a leading provider of investment solutions in the UK multi-asset market. It develops and manages investment solutions in the form of funds for the Group and third-party clients. It has several fund ranges which vary in breadth of underlying asset class.

Quilter Cheviot provides discretionary investment management predominantly in the United Kingdom with bespoke investment portfolios tailored to the individual needs of affluent and high-net worth customers, charities, companies and institutions through a network of branches in London and the regions. Investment management services are also provided by operations in the Channel Islands and the Republic of Ireland.

Quilter Financial Planning is a restricted and independent financial adviser network including Quilter Private Client Advisors ("QPCA"), Quilter Financial Advisers ("QFA") and Lighthouse, providing mortgage and financial planning advice and financial solutions for both individuals and businesses through a network of intermediaries. It operates across all markets, from wealth management and retirement planning advice through to dealing with property wealth and personal and business protection needs.

Wealth Platforms

This segment is comprised of Quilter Investment Platform ("QIP").

Quilter Investment Platform is a leading investment platform provider of advice-based wealth management products and services in the UK, which serves a largely affluent customer base through advised multi-channel distribution.

Head Office

In addition to the two operating segments, Head Office comprises the investment return on centrally held assets, central support function expenses, central core structural borrowings and certain tax balances.

Discontinued operations:

Quilter International, previously part of the Wealth Platforms operating segment, has been classified as a discontinued operation following the Group's announcement on 1 April 2021 of the proposed disposal of the business, subject to obtaining the necessary shareholder and regulatory approvals. See note 3 for full details. Comparative amounts for the six months ended 30 June 2020 and the year ended 31 December 2020 have been restated accordingly.

Quilter International is a cross-border business, focusing on high net worth and affluent local customers and expatriates in the UK, Asia, the Middle East, Europe and Latin America.

6(b)(i): Adjusted profit statement - segmental information for the period ended 30 June 2021

The table below presents the Group's continuing operations split by operating segment, reconciling the segmented IFRS income statement (to "Profit/(loss) before tax attributable to equity holders from continuing operations") to adjusted profit before tax.

							£m
		Operating segments
	Notes	Advice and Wealth Management	Wealth Platforms	Head Office	Reallocation of Quilter International costs¹	Consolidation adjustments²	Consolidated income statement
Income
Fee income and other income from service activities		247	136	-	-	(44)	339
Investment return		2	2,086	-	-	401	2,489
Other income		-	70	-	-	(61)	9
Segmental income		249	2,292	-	-	296	2,837
Expenses
Change in investment contract liabilities		-	(2,087)	-	-	-	(2,087)
Fee and commission expenses, and other acquisition costs		(27)	(2)	-	-	-	(29)
Change in third-party interest in consolidated funds		-	-	-	-	(347)	(347)
Other operating and administrative expenses		(207)	(156)	(23)	(5)	51	(340)
Finance costs		(1)	(1)	(5)	-	-	(7)
Segmental expenses		(235)	(2,246)	(28)	(5)	(296)	(2,810)
Profit/(loss) before tax from continuing operations		14	46	(28)	(5)	-	27
Tax attributable to policyholder returns		-	(48)	-	-	-	(48)
Profit/(loss) before tax attributable to equity holders from continuing operations		14	(2)	(28)	(5)	-	(21)
Adjusted for non-operating items:
Impact of acquisition and disposal related accounting	5(b)(i)	23	-	-	-	-	23
Business transformation costs	5(b)(ii)	1	23	8	-	-	32
Managed separation costs	5(b)(iii)	-	-	1	-	-	1
Finance costs	5(b)(iv)	-	-	5	-	-	5
Policyholder tax adjustments	5(b)(v)	-	4	-	-	-	4
Customer remediation	5(b)(vi)	7	-	-	-	-	7
Adjusting items before tax		31	27	14	-	-	72
Adjusted profit/(loss) before tax after reallocation		45	25	(14)	(5)	-	51
Reallocation of Quilter International costs	4(a)				5	-	5
Adjusted profit/(loss) before tax - continuing operations		45	25	(14)	-	-	56

¹See note 4(a) for details of cost reallocations.

²Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

6(b)(ii): Adjusted profit statement - segmental information for the six months ended 30 June 2020 restated³

							£m
		Operating segments
	Notes	Advice and Wealth Management	Wealth Platforms	Head Office	Reallocation of Quilter International costs¹	Consolidation adjustments restated^2,3	Consolidated income statement³
Income
Fee income and other income from service activities		225	95	-	-	(34)	286
Investment return		3	(919)	1	-	(50)	(965)
Other income		-	78	3	-	(69)	12
Segmental income		228	(746)	4	-	(153)	(667)
Expenses
Change in investment contract liabilities		-	920	-	-	1	921
Fee and commission expenses, and other acquisition costs		(24)	(5)	-	-	(2)	(31)
Change in third-party interest in consolidated funds		-	-	-	-	106	106
Other operating and administrative expenses		(191)	(156)	(38)	(9)	48	(346)
Finance costs		(1)	(2)	(5)	-	-	(8)
Segmental expenses		(216)	757	(43)	(9)	153	642
Profit/(loss) before tax from continuing operations		12	11	(39)	(9)	-	(25)
Tax attributable to policyholder returns		-	38	-	-	-	38
Profit/(loss) before tax attributable to equity holders from continuing operations		12	49	(39)	(9)	-	13
Adjusted for non-operating items:
Impact of acquisition and disposal related accounting	5(b)(i)	24	-	(1)	-	-	23
Business transformation costs	5(b)(ii)	-	21	18	-	-	39
Finance costs	5(b)(iv)	-	-	5	-	-	5
Policyholder tax adjustments	5(b)(v)	-	(47)	-	-	-	(47)
Customer remediation	5(b)(vi)	5	-	-	-	-	5
Adjusting items before tax		29	(26)	22	-	-	25
Adjusted profit/(loss) before tax after reallocation		41	23	(17)	(9)	-	38
Reallocation of Quilter International costs	4(a)	-	-	-	9	-	9
Adjusted profit/(loss) before tax - continuing operations		41	23	(17)	-	-	47

¹See note 4(a) for details of cost reallocations.

²Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

³See note 3(a) for details of changes to comparative amounts.

6(b)(iii): Adjusted profit statement - segmental information for the year ended 31 December 2020

							£m
		Operating segments
	Notes	Advice and Wealth Management	Wealth Platforms	Head Office	Reallocation of Quilter International costs¹	Consolidation adjustments²	Consolidated income statement
Income
Fee income and other income from service activities		456	220	-	-	(82)	594
Investment return		4	2,273	1	-	559	2,837
Other income		4	143	5	-	(132)	20
Segmental income		464	2,636	6	-	345	3,451
Expenses
Change in investment contract liabilities		-	(2,272)	-	-	-	(2,272)
Fee and commission expenses, and other acquisition costs		(50)	(10)	-	-	(2)	(62)
Change in third-party interest in consolidated funds		-	-	-	-	(440)	(440)
Other operating and administrative expenses		(370)	(291)	(71)	(17)	97	(652)
Finance costs		(3)	(3)	(10)	-	-	(16)
Segmental expenses		(423)	(2,576)	(81)	(17)	(345)	(3,442)
Profit/(loss) before tax from continuing operations		41	60	(75)	(17)	-	9
Tax attributable to policyholder returns		-	(36)	-	-	-	(36)
Profit/(loss) before tax attributable to equity holders from continuing operations		41	24	(75)	(17)	-	(27)
Adjusted for non-operating items:
Impact of acquisition and disposal related accounting	5(b)(i)	44	-	(2)	-	-	42
Business transformation costs	5(b)(ii)	-	39	31	-	-	70
Finance costs	5(b)(iv)	-	-	10	-	-	10
Policyholder tax adjustments	5(b)(v)	-	(9)	-	-	-	(9)
Customer remediation	5(b)(vi)	5	-	-	-	-	5
Adjusting items before tax		49	30	39	-	-	118
Adjusted profit/(loss) before tax after reallocation		90	54	(36)	(17)	-	91
Reallocation of Quilter International costs	4(a)	-	-	-	17	-	17
Adjusted profit/(loss) before tax - continuing operations		90	54	(36)	-	-	108

¹See note 4(a) for details of cost reallocations.

²Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

6(c): Geographic segmental information

This note analyses the Group's total income, split by geographic location of our businesses (UK and International) and further analyses the Group's fee income and other income from service activities, based on the type of fees earned. The Group also earns an immaterial amount of income through operations based in the Republic of Ireland and the Channel Islands.

					£m	£m
	UK					International
Six months 2021	Advice and Wealth Management	Wealth Platforms	Head Office	Consolidation adjustments	Total continuing operations	Discontinued operations
Premium based fees	57	-	-	-	57	33
Fund based fees¹	190	90	-	(43)	237	46
Retrocessions received, intragroup	-	1	-	(1)	-	4
Fixed fees	-	1	-	-	1	14
Exit fees	-	-	-	-	-	6
Other fee and commission income	-	44	-	-	44	-
Fee income and other income from service activities	247	136	-	(44)	339	103
Investment return	2	2,086	-	401	2,489	1,183
Other income	-	70	-	(61)	9	-
Total income	249	2,292	-	296	2,837	1,286

					£m	£m
	UK					International
Six months 2020 (restated²)	Advice and Wealth Management	Wealth Platforms	Head Office	Consolidation adjustments²	Total continuing operations²	Discontinued operations
Premium based fees	56	-	-	-	56	35
Fund based fees¹	169	82	-	(40)	211	47
Retrocessions received, intragroup	-	1	-	(1)	-	2
Fixed fees	-	1	-	-	1	14
Exit fees	-	-	-	-	-	6
Other fee and commission income	-	11	-	7	18	-
Fee income and other income from service activities²	225	95	-	(34)	286	104
Investment return²	3	(919)	1	(50)	(965)	(334)
Other income	-	78	3	(69)	12	(1)
Total income	228	(746)	4	(153)	(667)	(231)

					£m	£m
	UK					International
Full year 2020	Advice and Wealth Management	Wealth Platforms	Head Office	Consolidation adjustments	Total continuing operations	Discontinued operations
Premium based fees	113	-	-	-	113	70
Fund based fees¹	343	168	-	(94)	417	88
Retrocessions received, intragroup	-	2	-	(2)	-	6
Fixed fees	-	2	-	-	2	29
Exit fees	-	-	-	-	-	13
Other fee and commission income	-	48	-	14	62	-
Fee income and other income from service activities	456	220	-	(82)	594	206
Investment return	4	2,273	1	559	2,837	1,061
Other income	4	143	5	(132)	20	-
Total income	464	2,636	6	345	3,451	1,267
¹Income from fiduciary activities is included within fund based fees.
²See note 3(a) for details of changes to comparative amounts.

7: Tax

7(a): Tax charged to the income statement

				£m
	Note	Six months 2021	Six months 2020	Full year 2020
Current tax
United Kingdom		14	1	18
International		-	2	3
Adjustments to current tax in respect of prior periods		(1)	-	(7)
Total current tax charge		13	3	14
Deferred tax
Origination and reversal of temporary differences		32	(38)	(22)
Effect on deferred tax of changes in tax rates		(6)	(1)	-
Adjustments to deferred tax in respect of prior periods		1	-	4
Total deferred tax charge/(credit)		27	(39)	(18)
Total tax charged/(credited) to income statement - continuing operations		40	(36)	(4)
Total tax charged to income statement - discontinued operations	4(a)	1	-	1
Total tax charged/(credited) to income statement		41	(36)	(3)

Attributable to policyholder returns - continuing operations		48	(38)	36
Attributable to equity holders - continuing operations		(8)	2	(40)
Total tax charged/(charged) to income statement - continuing operations		40	(36)	(4)
Attributable to equity holders - discontinued operations		1	-	1
Total tax charged to income statement - discontinued operations		1	-	1
Total tax charged/(credited) to income statement		41	(36)	(3)

Policyholder tax

Certain products are subject to tax on policyholders' investment returns. This "policyholder tax" is an element of total tax expense. To make the tax expense more meaningful, tax attributable to policyholder returns and tax attributable to equity holders' profits are shown separately in the income statement.

The tax attributable to policyholder returns is the amount payable in the period plus the movement of amounts expected to be payable in future years. The remainder of the tax expense is attributed to shareholders as tax attributable to equity holders.

The Group's income tax charge on continuing operations was £40 million for the period ended 30 June 2021, compared to a credit of £(36) million for the prior period. This income tax expense/(credit) can vary significantly period on period as a result of market volatility and the impact this has on policyholder tax. The recognition of the income received from policyholders (which is included within the Group's income) to fund the policyholder tax liability can vary in timing to the recognition of the corresponding policyholder tax expense, creating volatility to the Group's IFRS profit before tax attributable to equity holders. An adjustment is made to adjusted profit to remove these distortions, as explained further in note 5(b)(v).

Market movements during the period ended 30 June 2021 resulted in investment gains of £232 million on products subject to policyholder tax. The gain is a component of the total "investment return" gain of £2,489 million shown in the income statement. The impact of the £232 million investment return gain is the primary reason for the £48 million tax expense attributable to policyholder returns in respect of the continuing operations for the period ended 30 June 2021 (30 June 2020: £38 million credit in respect of continuing operations and £nil expense in respect of discontinued operations).

Impact of changes in UK corporation tax rate

The £(8) million tax credit attributable to equity holders (continuing operations) includes a tax credit of £(6) million relating to the rebasing of deferred tax assets and liabilities as a result of the change in the UK corporation tax rate from 19% to 25% from 1 April 2023.

7(b): Reconciliation of total income tax expense

The income tax charged to profit or loss differs from the amount that would apply if all of the Group's profits from the different tax jurisdictions had been taxed at the UK standard corporation tax rate. The difference in the effective rate is explained below:

				£m
	Note	Six months 2021	Six months 2020	Full year 2020
Profit before tax from continuing operations		27	(25)	9
Tax at UK standard rate of 19% (2020: 19%)		5	(5)	2
Different tax rate or basis on overseas operations		1	3	4
Untaxed and low taxed income		-	(4)	(1)
Expenses not deductible for tax		1	2	2
Adjustments to current tax in respect of prior years		(1)	-	(7)
Net movements on unrecognised deferred tax assets		-	-	(38)
Effect on deferred tax of changes in tax rates		(6)	(1)	-
Adjustments to deferred tax in respect of prior years		1	-	4
Income tax attributable to policyholder returns (net of tax relief)		39	(31)	30
Total tax charged/(credited) to income statement - continuing operations		40	(36)	(4)
Total tax charged to income statement - discontinued operations	4(a)	1	-	1
Total tax charged/(credited) to income statement		41	(36)	(3)

7(c): Reconciliation of income tax expense in the income statement to income tax on adjusted profit

				£m
	Note	Six months 2021	Six months 2020	Full year 2020
Income tax expense/(credit) on continuing operations¹		40	(36)	(4)
Tax on adjusting items
Impact of acquisition and disposal related accounting		(2)	-	3
Business transformation costs		6	8	13
Finance costs		1	1	2
Customer remediation		1	1	1
Tax adjusting items
Policyholder tax adjustments	5(b)(v)	(4)	47	9
Other shareholder tax adjustments²		1	(5)	36
Tax on adjusting items - continuing operations		3	52	64
Less: tax attributable to policyholder returns within adjusted profit - continuing operations³		(44)	(9)	(45)
Tax (credited)/charged on adjusted profit - continuing operations		(1)	7	15
Tax charged on adjusted profit - discontinued operations		1	-	1

Tax charged on total adjusted profit		-	7	16

¹Includes both tax attributable to policyholders and shareholders, in compliance with IFRS reporting.

²Other shareholder tax adjustments comprise the reallocation of adjustments from policyholder tax as explained in note 5(b)(v) and shareholder tax adjustments for one-off items in line with the Group's adjusted profit policy.

³Adjusted profit treats policyholder tax as a pre-tax charge (this includes policyholder tax under IFRS and the policyholder tax adjustments) and is therefore removed from tax charge on adjusted profit.

8: Earnings per share

The Group calculates earnings per share ("EPS") on a number of different bases. IFRS requires the calculation of basic and diluted EPS. Adjusted EPS reflects earnings that are consistent with the Group's adjusted profit measure before and after the reallocation of Quilter International costs, and Headline earnings per share ("HEPS") is a requirement of the Johannesburg Stock Exchange. The Group's EPS (in aggregate, including both continuing and discontinued operations) on these different bases are summarised below.

Basic EPS is calculated by dividing profit after tax attributable to ordinary equity shareholders of the parent by the weighted average number of Ordinary Shares in issue during the year. The weighted average number of shares excludes Quilter plc shares held within Employee Benefit Trusts ("EBTs") to satisfy the Group's obligations under employee share awards, and Quilter plc shares held in consolidated funds ("Own shares"). Own shares are deducted for the purpose of calculating both basic and diluted EPS.

Diluted EPS recognises the dilutive impact of shares awarded and options granted to employees under share-based payment arrangements, to the extent they have value, in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full year.

The Group is also required to calculate HEPS in accordance with the Johannesburg Stock Exchange ("JSE") Listing Requirements, determined by reference to the South African Institute of Chartered Accountants' circular 1/2021 Headline Earnings. Disclosure of HEPS is not a requirement of IFRS, but it is a commonly used measure of earnings in South Africa.

					Pence
	Source of guidance	Notes	Six months 2021	Six months 2020	Full year 2020
Basic earnings per share	IFRS	8(b)	1.2	2.4	5.0
Diluted basic earnings per share	IFRS	8(b)	1.1	2.3	4.9
Adjusted basic earnings per share	Group policy	8(b)	5.1	3.6	8.6
Adjusted diluted earnings per share	Group policy	8(b)	5.0	3.5	8.5
Headline basic earnings per share (net of tax)	JSE Listing Requirements	8(c)	1.2	2.4	5.2
Headline diluted earnings per share (net of tax)	JSE Listing Requirements	8(c)	1.2	2.4	5.1

8(a): Weighted average number of Ordinary Shares

The table below summarises the calculation of the weighted average number of Ordinary Shares for the purposes of calculating basic and diluted earnings per share for each profit measure (IFRS, adjusted and headline profit):

			Millions
	Six months 2021	Six months 2020	Full year 2020
Weighted average number of Ordinary Shares	1,755	1,879	1,842
Own shares including those held in EBTs	(79)	(78)	(82)
Basic weighted average number of Ordinary Shares	1,676	1,801	1,760
Adjustment for dilutive share awards and options	36	36	37
Diluted weighted average number of Ordinary Shares	1,712	1,837	1,797

8(b): Basic and diluted EPS (IFRS and adjusted profit)

										£m
		Six months 2021			Six months 2020			Full year 2020
	Notes	Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total
(Loss)/profit after tax		(13)	33	20	11	32	43	13	75	88
Total adjusting items before tax	5(a)	72	-	72	25	1	26	118	1	119
Tax on adjusting items	7(c)	(3)	-	(3)	(52)	-	(52)	(64)	-	(64)
Less: Policyholder tax adjustments	7(c)	(4)	-	(4)	47	-	47	9	-	9
Adjusted profit after tax after reallocation		52	33	85	31	33	64	76	76	152
Reversal of:
Reallocation of Quilter International costs¹		5	(5)	-	9	(9)	-	17	(17)	-
Adjusted profit after tax		57	28	85	40	24	64	93	59	152

¹Reallocation of Quilter International costs includes £5 million of costs (30 June 2020: £9 million; 31 December 2020: £17 million) previously reported as part of Quilter International which are presented within continuing operations as these costs will not transfer to Utmost Group (the acquirer) on disposal. Adjusted profit is presented both before and after the reallocation of these costs. See note 4(a) for additional details.

		Six months 2021			Six months 2020			Full year 2020
	Post-tax profit measure used	Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total
	Post-tax profit measure used	Pence	Pence	Pence	Pence	Pence	Pence	Pence	Pence	Pence
Basic EPS	IFRS profit	(0.8)	2.0	1.2	0.6	1.8	2.4	0.8	4.2	5.0
Diluted EPS	IFRS profit	(0.8)	1.9	1.1	0.6	1.7	2.3	0.8	4.1	4.9
Adjusted basic EPS	Adjusted profit	3.4	1.7	5.1	2.3	1.3	3.6	5.3	3.3	8.6
Adjusted diluted EPS	Adjusted profit	3.3	1.7	5.0	2.2	1.3	3.5	5.2	3.3	8.5

8(c): Headline earnings per share

							£m
			Six months 2021		Six months 2020		Full year 2020
	Note	Gross	Net of tax	Gross	Net of tax	Gross	Net of tax
Profit attributable to ordinary equity holders			20		43		88
Adjusted for:
Loss on business disposals	4(e)	-	-	1	1	1	1
Impairment loss on right-of-use assets		-	-	-	-	3	2
Headline earnings			20		44		91
Headline basic EPS (pence)			1.2		2.4		5.2
Headline diluted EPS (pence)			1.2		2.4		5.1

9: Dividends

				£m
	Payment date	Six months 2021	Six months 2020	Full year 2020
2019 Final dividend paid - 3.5p per Ordinary Share	18 May 2020	-	64	64
2020 Interim dividend paid - 1.0p per Ordinary Share	21 September 2020	-	-	17
2020 Final dividend paid - 3.6p per Ordinary Share	17 May 2021	61	-	-
Dividends paid to Ordinary Shareholders		61	64	81

Final and interim dividends paid to ordinary shareholders are calculated using the number of shares in issue at the record date less own shares held in Employee Benefit Trusts.

10: Goodwill and intangible assets

10(a): Analysis of goodwill and intangible assets

The table below shows the movements in cost and amortisation of goodwill and intangible assets.

				£m
	Goodwill	Software development costs	Other intangible assets	Total
Gross amount
1 January 2020	350	101	428	879
Acquisitions through business combinations	7	-	-	7
Additions	-	3	-	3
30 June 2020	357	104	428	889
Acquisitions through business combinations	(1)	-	1	-
Additions	-	1	-	1
31 December 2020	356	105	429	890
Disposals¹	-	(65)	-	(65)
Transfer to non-current assets held for sale	(52)	-	(4)	(56)
30 June 2021	304	40	425	769

Amortisation and other movements
1 January 2020	-	(93)	(194)	(287)
Amortisation charge for the period	-	(1)	(23)	(24)
30 June 2020	-	(94)	(217)	(311)
Amortisation charge for the period	-	(1)	(22)	(23)
31 December 2020	-	(95)	(239)	(334)
Amortisation charge for the period	-	(1)	(23)	(24)
Disposals¹	-	65	-	65
Transfer to non-current assets held for sale	-	-	2	2
Other movements	-	1	-	1
30 June 2021	-	(30)	(260)	(290)

Carrying amount
30 June 2020	357	10	211	578
31 December 2020	356	10	190	556
30 June 2021	304	10	165	479

¹Disposals of £65 million in the period ending 30 June 2021 relate to the write off of fully amortised software relating to the Platform Transformation Programme and following the final migration of client assets in February 2021, with all Quilter Investment Platform assets now live on the new platform.

10(b): Analysis of other intangible assets

			£m
	30 June 2021	30 June 2020	31 December 2020	Average estimated useful life	Average period remaining
Net carrying value
Distribution channels - Quilter Financial Planning	12	19	15	8 years	3 years
Customer relationships
Quilter Cheviot	100	127	114	10 years	4 years
Quilter Financial Planning	49	57	54	8 years	6 years
Other	4	8	7	8 years	3 years
Total other intangible assets	165	211	190

10(c): Allocation of goodwill to cash generating units ("CGUs") and impairment testing

The Group considers that there are two groups of CGUs for goodwill impairment testing purposes. Goodwill is allocated to these groups of CGUs as follows:

			£m
	30 June 2021	30 June 2020	31 December 2020
Goodwill (net carrying amount)
Advice and Wealth Management	225	226	225
Wealth Platforms	79	131	131
Goodwill (as per the Statement of Financial Position)	304	357	356
Goodwill held for sale	52	-	-
Total goodwill	356	357	356

Impairment review

In accordance with the requirements of IAS 36 Impairment of Assets, goodwill in both the Advice and Wealth Management and Wealth Platforms CGU groups is tested for impairment annually, or earlier if an indicator of impairment exists, by comparing the carrying value of the CGU group to which the goodwill relates to the recoverable value of that CGU group, being the higher of that CGU group's value-in-use or fair value less costs to sell. If applicable, an impairment charge is recognised when the recoverable amount is less than the carrying value. Goodwill impairment indicators include sudden stock market falls, the absence of Net Client Cash Flows ("NCCF"), significant falls in profits and an increase in the discount rate.

The Group continually assesses whether there are any indicators of impairment by considering each of the Advice and Wealth Management and Wealth Platforms CGU groups. During the six months to 30 June 2021, management consider there to be no indicators of impairment for continuing operations across the Advice and Wealth Management and Wealth Platforms CGU groups. The positive movements in equity markets and resulting increase in AuMA have contributed to higher revenues and this, together with continued cost discipline, has led to adjusted profit before tax of £56 million, which is a 19% increase from the prior period of £47 million. NCCF has also been stronger compared to the prior period due to higher gross sales. The latest management approved three year profit forecasts demonstrate the viability of the continuing group following the proposed sale of Quilter International.

As part of the assessment of assets held for sale as disclosed in note 4(d), an allocation of goodwill was made in relation to Quilter International. The £52 million transferred represents the share of the goodwill in the Wealth Platforms CGU applicable to Quilter International, based on its fair value relative to the fair values of the other business within that CGU.

11: Financial investments

The table below analyses the investments and securities that the Group invests in, either on its own proprietary behalf (shareholder funds) or on behalf of third parties (policyholder funds).

			£m
	30 June 2021	30 June 2020 restated¹	31 December 2020
Government and government-guaranteed securities	758	562	632
Other debt securities, preference shares and debentures	2,001	1,948	1,952
Equity securities	11,236	8,607	14,163
Pooled investments	54,060	46,525	46,518
Short-term funds and securities treated as investments	1	11	9
Total financial investments	68,056	57,653	63,274
Less: financial investments classified as held for sale	(23,019)	-	-
Total financial investments (as per the Statement of Financial Position)	45,037	57,653	63,274

Recoverable within 12 months	68,056	57,652	63,274
Recoverable after 12 months	-	1	-
Total financial investments	68,056	57,653	63,274

¹See note 3(a) for details of changes to comparative amounts.

The financial investments recoverability profile is based on the intention with which the financial assets are held. These assets are held to cover the liabilities for linked investment contracts, all of which can be withdrawn by policyholders on demand.

12: Categories of financial instruments

The analysis of financial assets and liabilities into their categories as defined in IFRS 9 Financial Instruments is set out in the following tables. Assets and liabilities of a non-financial nature, or financial assets and liabilities that are specifically excluded from the scope of IFRS 9, are reflected in the non-financial assets and liabilities category.

For information about the methods and assumptions used in determining fair value, please refer to note 13. The Group's exposure to various risks associated with financial instruments is discussed in the 2020 Annual Report.

30 June 2021
					£m
Measurement basis	Fair value
	Mandatorily at FVTPL	Designated at FVTPL	Amortised cost	Non-financial assets and liabilities	Total
Assets
Investments in associated undertakings¹	-	-	-	1	1
Loans and advances	-	-	32	-	32
Financial investments	45,036	1	-	-	45,037
Trade, other receivables and other assets	-	-	561	54	615
Derivative assets	9	-	-	-	9
Cash and cash equivalents	842	-	861	-	1,703
Total assets that include financial instruments	45,887	1	1,454	55	47,397
Total other non-financial assets	-	-	-	717	717
Total assets net of held for sale	45,887	1	1,454	772	48,114
Assets classified as held for sale
Loans and advances	174	-	-	-	174
Financial investments	23,003	-	16	-	23,019
Trade, other receivables and other assets	-	-	22	196	218
Cash and cash equivalents	125	-	61	-	186
Total other non-financial assets	-	-	-	449	449
Total assets classified as held for sale	23,302	-	99	645	24,046
Total assets	69,189	1	1,553	1,417	72,160

Liabilities
Investment contract liabilities	-	38,804	-	-	38,804
Third-party interests in consolidation of funds	6,698	-	-	-	6,698
Borrowings and lease liabilities	-	-	312	-	312
Trade, other payables and other liabilities	-	-	562	109	671
Derivative liabilities	26	-	-	-	26
Total liabilities that include financial instruments	6,724	38,804	874	109	46,511
Total other non-financial liabilities	-	-	-	215	215
Total liabilities net of held for sale	6,724	38,804	874	324	46,726
Liabilities classified as held for sale
Borrowings and lease liabilities	-	-	12	-	12
Investment contract liabilities	-	23,202	-	-	23,202
Trade, other payables and other liabilities	-	-	102	-	102
Total other non-financial liabilities	-	-	-	376	376
Total liabilities classified as held for sale	-	23,202	114	376	23,692
Total liabilities	6,724	62,006	988	700	70,418

¹Investments in associated undertakings classified as non-financial assets and liabilities are equity accounted.

30 June 2020 (restated)²
					£m
Measurement basis	Fair value
	Mandatorily at FVTPL²	Designated at FVTPL²	Amortised cost	Non-financial assets and liabilities	Total
Assets
Investments in associated undertaking¹	-	-	-	1	1
Loans and advances	203	-	32	-	235
Financial investments	57,651	2	-	-	57,653
Trade, other receivables and other assets	-	-	460	267	727
Derivative financial instruments	23	-	-	-	23
Cash and cash equivalents	1,225	-	853	-	2,078
Total assets that include financial instruments	59,102	2	1,345	268	60,717
Total other non-financial assets	-	-	-	1,233	1,233
Total assets	59,102	2	1,345	1,501	61,950

Liabilities
Investment contract liabilities³	-	52,267	-	-	52,267
Third-party interest in consolidation of funds	6,036	-	-	-	6,036
Borrowings	-	-	330	-	330
Trade, other payables and other liabilities	-	-	665	105	770
Derivative financial instruments	47	-	-	-	47
Total liabilities that include financial instruments	6,083	52,267	995	105	59,450
Total other non-financial liabilities	-	-	-	535	535
Total liabilities	6,083	52,267	995	640	59,985

¹Investments in associated undertakings classified as non-financial assets and liabilities are equity accounted.

²See note 3(a) for details of changes to comparative amounts.

³Following a review of the Group's presentation of financial liabilities held at FVTPL, as disclosed in the Group's 2020 Annual Report, comparative amounts have been restated from those previously reported. The review identified amounts presented within mandatorily at FVTPL that are now presented as designated at FVTPL in the table above. These liabilities were previously shown as mandatorily at fair value through profit or loss ("FVTPL") as they form part of the Group's unit-linked business model. These liabilities are now classified as designated at FVTPL as they are managed on a fair value basis (in that their value is directly linked to the market value of the matching portfolio of unit-linked assets) therefore avoiding an accounting mismatch. There is no change to the underlying calculation of the fair value of these liabilities.

31 December 2020
					£m
Measurement basis	Fair value
	Mandatorily at FVTPL	Designated at FVTPL	Amortised cost	Non-financial assets and liabilities	Total
Assets
Investments in associated undertakings¹	-	-	-	1	1
Loans and advances	186	-	33	-	219
Financial investments	63,248	1	25	-	63,274
Trade, other receivables and other assets	-	-	444	257	701
Derivative assets	43	-	-	-	43
Cash and cash equivalents	1,064	-	857	-	1,921
Total assets that include financial instruments	64,541	1	1,359	258	66,159
Total other non-financial assets	-	-	-	1,213	1,213
Total assets	64,541	1	1,359	1,471	67,372

Liabilities
Investment contract liabilities	-	57,407	-	-	57,407
Third-party interests in consolidation of funds	6,513	-	-	-	6,513
Borrowings and lease liabilities	-	-	319	-	319
Trade, other payables and other liabilities	-	-	590	82	672
Derivative liabilities	20	-	-	-	20
Total liabilities that include financial instruments	6,533	57,407	909	82	64,931
Total other non-financial liabilities	-	-	-	563	563
Total liabilities	6,533	57,407	909	645	65,494

¹Investments in associated undertakings classified as non-financial assets and liabilities are equity accounted.

13: Fair value methodology

This section explains the judgements and estimates made in determining the fair values of financial instruments that are recognised and measured at fair value in the financial statements. Classifying financial instruments into the three levels of fair value hierarchy (see note 13(b)), prescribed under IFRS, provides an indication about the reliability of inputs used in determining fair value.

13(a): Determination of fair value

The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market exit prices for assets and offer prices for liabilities, at the close of business on the reporting date, without any deduction for transaction costs:

· for units in unit trusts and shares in open-ended investment companies, fair value is determined by reference to published quoted prices representing exit values in an active market;

· for equity and debt securities not actively traded in organised markets and where the price cannot be retrieved, the fair value is determined by reference to similar instruments for which market observable prices exist;

· for assets that have been suspended from trading on an active market, the last published price is used. Many suspended assets are still regularly priced. At the reporting date all suspended assets are assessed for impairment; and

· where the assets are private company shares or within consolidated investment funds, the valuation is based on the latest available set of audited financial statements where available, or if more recent, a statement of valuation provided by the private company's management.

There have been no significant changes in the valuation techniques applied when valuing financial instruments. Where assets are valued by the Group, the general principles applied to those instruments measured at fair value are outlined below:

Loans and advances

Loans and advances include loans to policyholders, loans to brokers, and other secured and unsecured loans. Loans and advances to policyholders of investment-linked contracts are measured at fair value. All other loans are stated at their amortised cost.

Financial investments

Financial investments include government and government-guaranteed securities, listed and unlisted debt securities, preference shares and debentures, listed and unlisted equity securities, listed and unlisted pooled investments (see below), short-term funds and securities treated as investments and certain other securities.

Pooled investments represent the Group's holdings of shares/units in open-ended investment companies, unit trusts, mutual funds and similar investment vehicles. Pooled investments are recognised at fair value. The fair values of pooled investments are based on widely published prices that are regularly updated.

Other financial investments that are measured at fair value use observable market prices where available. In the absence of observable market prices, these investments and securities are fair valued utilising various approaches including discounted cash flows, the application of an earnings before interest, tax, depreciation and amortisation multiple or any other relevant technique.

Derivatives

The fair value of derivatives is determined with reference to the exchange traded prices of the specific instruments. The fair value of the Group's over-the-counter forward foreign exchange contracts is determined by the underlying foreign currency exchange rates.

Investment contract liabilities

The fair value of the investment contract liabilities is determined with reference to the underlying funds that are held by the Group.

Third-party interest in consolidated funds

Third-party interests in consolidated funds are measured at the attributable net asset value of each fund.

Borrowings and lease liabilities

Borrowings and lease liabilities are stated at amortised cost.

13(b): Fair value hierarchy

Fair values are determined according to the following hierarchy:

Description of hierarchy	Types of instruments classified in the respective levels
Level 1- quoted market prices: financial assets and liabilities with quoted prices for identical instruments in active markets.	Listed equity securities, government securities and other listed debt securities and similar instruments that are actively traded, actively traded pooled investments, certain quoted derivative assets and liabilities, policyholder loans (where they form part of a policyholder's unit-linked policy) and investment contract liabilities directly linked to other Level 1 financial assets.
Level 2 - valuation techniques using observable inputs: financial assets and liabilities with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial assets and liabilities valued using models where all significant inputs are observable.	Unlisted equity and debt securities where the valuation is based on models involving no significant unobservable data. Over-the-counter ("OTC") derivatives, certain privately placed debt instruments and third-party interests in consolidated funds which meet the definition of Level 2 financial instruments.
Level 3 - valuation techniques using significant unobservable inputs: financial assets and liabilities valued using valuation techniques where one or more significant inputs are unobservable.	Unlisted equity and securities with significant unobservable inputs, securities where the market is not considered sufficiently active, including certain inactive pooled investments.

The judgement as to whether a market is active may include, for example, consideration of factors such as the magnitude and frequency of trading activity, the availability of prices and the size of bid/offer spreads. In inactive markets, obtaining assurance that the transaction price provides evidence of fair value or determining the adjustments to transaction prices that are necessary to measure the fair value of the asset or liability requires additional work during the valuation process.

The majority of valuation techniques employ only observable data and so the reliability of the fair value measurement is high. However, certain financial assets and liabilities are valued on the basis of valuation techniques that feature one or more significant inputs that are unobservable and, for them, the derivation of fair value is more judgemental. A financial asset or liability in its entirety is classified as valued using significant unobservable inputs if a significant proportion of that asset or liability's carrying amount is driven by unobservable inputs.

In this context, 'unobservable' means that there is little or no current market data available for which to determine the price at which an arm's length transaction would be likely to occur. It generally does not mean that there is no market data available at all upon which to base a determination of fair value. Furthermore, in some cases the majority of the fair value derived from a valuation technique with significant unobservable data may be attributable to observable inputs. Consequently, the effect of uncertainty in determining unobservable inputs will generally be restricted to uncertainty about the overall fair value of the asset or liability being measured.

When allocating investments within consolidated investment funds to the fair value hierarchy, the Group has adopted a simplified approach whereby investments (outside of those identified as Level 3) in listed equities and securities are allocated to fair value Level 1, and investments in unlisted equity and debt securities are allocated to Level 2, to align to the classifications set out in the table above.

13(c): Transfer between fair value hierarchies

The Group deems a transfer to have occurred between Level 1 and Level 2 or Level 3 when an active, traded primary market ceases to exist for that financial instrument. A transfer between Level 2 and Level 3 occurs when the majority of the significant inputs used to determine fair value of the instrument become unobservable. Transfers from Levels 3 or 2 to Level 1 are also possible when assets become actively priced.

There were transfers of financial investments of £46 million from Level 1 to Level 2 during the period (30 June 2020: £nil, 31 December 2020: £9 million). There were transfers of financial investments of £48 million from Level 2 to Level 1 during the period (30 June 2020: £nil, 31 December 2020: £3 million). These movements are matched exactly by transfers of investment contract liabilities. See note 13(e) for the reconciliation of Level 3 financial instruments.

13(d): Financial assets and liabilities measured at fair value, classified according to fair value hierarchy

The majority of the Group's financial assets are measured using quoted market prices for identical instruments in active markets (Level 1) and there have been no significant changes during the year.

The linked assets are held to cover the liabilities for linked investment contracts (net of reinsurance). The difference between linked assets and linked liabilities is principally due to short-term timing differences between policyholder premiums being received and invested in advance of policies being issued, and tax liabilities within funds which are reflected within the Group's tax liabilities.

Differences between assets and liabilities within the respective levels of the fair value hierarchy also arise due to the mix of underlying assets and liabilities within consolidated funds. In addition, third-party interests in consolidated funds are classified as Level 2.

The table below presents a summary of the Group's financial assets and liabilities that are measured at fair value in the consolidated statement of financial position according to their IFRS 9 classification (see note 12 for full details).

	30 June 2021		30 June 2020 restated¹		31 December 2020
	£m	%	£m	%	£m	%
Financial assets measured at fair value
Level 1	61,811	89.4%	44,283	74.9%	56,927	88.2%
Level 2	5,826	8.4%	12,359	20.9%	5,793	9.0%
Level 3	1,553	2.2%	2,462	4.2%	1,822	2.8%
Total	69,190	100.0%	59,104	100.0%	64,542	100.0%
Financial liabilities measured at fair value
Level 1	60,059	87.3%	49,405	84.7%	55,135	86.3%
Level 2	7,120	10.4%	6,483	11.1%	6,985	10.9%
Level 3	1,551	2.3%	2,462	4.2%	1,820	2.8%
Total	68,730	100.0%	58,350	100.0%	63,940	100.0%

¹See note 3(a) for details of changes to comparative amounts.

The tables below further analyse the Group's financial assets and liabilities measured at fair value by the fair value hierarchy described in note 13(b):

				£m
30 June 2021	Level 1	Level 2	Level 3	Total
Financial assets measured at fair value
Mandatorily (fair value through profit or loss)	40,409	5,430	48	45,887
Financial investments	39,567	5,421	48	45,036
Cash and cash equivalents	842	-	-	842
Derivative assets	-	9	-	9

Designated (fair value through profit or loss)	1	-	-	1
Financial investments	1	-	-	1

Total assets net of held for sale	40,410	5,430	48	45,888

Total assets classified as held for sale	21,401	396	1,505	23,302
Loans and advances²	174	-	-	174
Financial investments	21,102	396	1,505	23,003
Cash and cash equivalents	125	-	-	125

Total assets measured at fair value	61,811	5,826	1,553	69,190

Financial liabilities measured at fair value
Mandatorily (fair value through profit or loss)	-	6,724	-	6,724
Third-party interests in consolidated funds	-	6,698	-	6,698
Derivative liabilities	-	26	-	26

Designated (fair value through profit or loss)	38,758	-	46	38,804
Investment contract liabilities	38,758	-	46	38,804

Total liabilities net of held for sale	38,758	6,724	46	45,528

Total liabilities classified as held for sale	21,301	396	1,505	23,202
Investment contract liabilities	21,301	396	1,505	23,202

Total liabilities measured at fair value	60,059	7,120	1,551	68,730

				£m
30 June 2020 (restated^1,3)	Level 1	Level 2	Level 3	Total
Financial assets measured at fair value
Mandatorily (fair value through profit or loss)	44,281	12,359	2,462	59,102
Loans and advances²	203	-	-	203
Financial investments	42,853	12,336	2,462	57,651
Cash and cash equivalents	1,225	-	-	1,225
Derivative assets	-	23	-	23

Designated (fair value through profit or loss)	2	-	-	2
Financial investments	2	-	-	2


Total assets measured at fair value	44,283	12,359	2,462	59,104

Financial liabilities measured at fair value
Mandatorily (fair value through profit or loss)	-	6,083	-	6,083
Third-party interests in consolidated funds	-	6,036	-	6,036
Derivative liabilities	-	47	-	47

Designated (fair value through profit or loss)	49,405	400	2,462	52,267
Investment contract liabilities³	49,405	400	2,462	52,267


Total liabilities measured at fair value	49,405	6,483	2,462	58,350

				£m
31 December 2020	Level 1	Level 2	Level 3	Total
Financial assets measured at fair value
Mandatorily (fair value through profit or loss)	56,926	5,793	1,822	64,541
Loans and advances²	186	-	-	186
Financial investments	55,676	5,750	1,822	63,248
Cash and cash equivalents	1,064	-	-	1,064
Derivative assets	-	43	-	43

Designated (fair value through profit or loss)	1	-	-	1
Financial investments	1	-	-	1

Total assets measured at fair value	56,927	5,793	1,822	64,542

Financial liabilities measured at fair value
Mandatorily (fair value through profit or loss)	-	6,533	-	6,533
Third-party interests in consolidated funds	-	6,513	-	6,513
Derivative liabilities	-	20	-	20

Designated (fair value through profit or loss)	55,135	452	1,820	57,407
Investment contract liabilities	55,135	452	1,820	57,407

Total liabilities measured at fair value	55,135	6,985	1,820	63,940

¹See note 3(a) for details of changes to comparative amounts.

²Loans and advances mandatorily at fair value through profit or loss, included within fair value Level 1, solely relate to policyholder loans.

³Following a review of the Group's presentation of financial liabilities at FVTPL, comparative amounts have been restated from those previously reported. The review identified amounts presented within mandatorily at FVTPL (£52,267 million) that are now presented as designated at FVTPL in the table above.

13(e): Level 3 fair value hierarchy disclosure

The majority of the assets classified as Level 3 are held within linked policyholder funds. Where this is the case, all of the investment risk associated with these assets is borne by policyholders and the value of these assets is exactly matched by a corresponding liability due to policyholders. The Group bears no risk from a change in the market value of these assets except to the extent that it has an impact on management fees earned.

During the period ended 30 June 2021, Level 3 assets also include investments within consolidated funds to the value of £2 million (30 June 2020: £nil, 31 December 2021: £nil) relating to private equity investments. The Group bears no risk from a change in the market value of these assets and any changes in market value are matched by a corresponding Level 2 liability within Third-party interests in consolidated funds.

The table below reconciles the opening balance of Level 3 financial assets to the closing balance at each period end:

			£m
	30 June 2021	30 June 2020	31 December 2020¹
At beginning of the year	1,822	1,717	1,717
Fair value gains/(losses) charged to income statement	23	(3)	(121)
Purchases	56	-	16
Sales	(2)	(2)	(8)
Transfers in	95	887	930
Transfers out	(440)	(139)	(714)
Foreign exchange and other movements	(1)	2	2
Total Level 3 financial assets	1,553	2,462	1,822
Unrealised fair value gains/(losses) charged to income statement relating to assets held at the period end	23	(3)	(110)

¹During the year ended 31 December 2020, Level 3 assets also included a shareholder investment in suspended funds of £2 million; this was not matched by a corresponding liability and therefore the changes in market value were recognised in the Group's consolidated income statement.

Amounts shown as sales arise principally from the sale of private company shares, unlisted pooled investments and from distributions received in respect of holdings in property funds.

Transfers into Level 3 assets in the current period total £93 million (30 June 2020: £887 million, 31 December 2020: £930 million). This is due to a combination of stale priced assets that were previously shown within Level 2 and for which price updates have not been received for more than six months, and an increase in suspended funds previously shown within Level 1. Suspended funds are valued based on external valuation reports received from fund managers. Transfers out of Level 3 assets in the current period of £440 million (30 June 2020: £139 million, 31 December 2020: £714 million) result from a transfer to Level 2 assets relating to assets that are now being actively repriced (that were previously stale) and where fund suspensions have been lifted.

The table below analyses the type of Level 3 financial assets held:

			£m
	30 June 2021	30 June 2020	31 December 2020
Pooled investments	168	1,082	522
Unlisted and stale price pooled investments	121	175	87
Suspended funds	47	907	435
Private equity investments	1,385	1,380	1,300
Total Level 3 financial assets	1,553	2,462	1,822

All of the liabilities that are classified as Level 3 are investment contract liabilities which exactly match against the Level 3 assets held in linked policyholder funds.

The table below reconciles the opening balance of Level 3 financial liabilities to the closing balance at each period end:

			£m
	30 June 2021	30 June 2020	31 December 2020
At beginning of the year	1,820	1,717	1,717
Fair value gains/(losses) charged to income statement	23	(3)	(120)
Purchases	56	-	16
Sales	(2)	(2)	(8)
Transfers in	93	887	927
Transfers out	(438)	(139)	(714)
Foreign exchange and other movements	(1)	2	2
Total Level 3 financial liabilities	1,551	2,462	1,820
Unrealised fair value gains/(losses) charged to income statement relating to liabilities held at the period end	22	(3)	(110)

13(f): Effect of changes in significant unobservable assumptions to reasonable possible alternatives

Details of the valuation techniques applied to the different categories of financial instruments can be found in note 13(a) above, including the valuation techniques applied when significant unobservable assumptions are used to value Level 3 assets.

The majority of the Group's Level 3 assets are held within private equity investments, where the valuation of these assets is performed on an asset-by-asset basis using a valuation methodology appropriate to the specific investment and in line with industry guidelines. Private equity investments are valued at the value disclosed in the latest available set of audited financial statements or, if more recent information is available, from investment managers or professional valuation experts at the value of the underlying assets of the private equity investment. For this reason, no reasonable alternative assumptions are applicable and the Group therefore performs a sensitivity test of an aggregate 10% change in the value of the financial asset or liability (30 June 2020: 10%, 31 December 2020: 10%), representing a reasonable possible alternative judgement in the context of the current macro-economic environment in which the Group operates. It is therefore considered that the impact of this sensitivity will be in the range of £155 million to the reported fair value of Level 3 assets, both favourable and unfavourable (30 June 2020: £246 million, 31 December 2020: £182 million). As described in note 13(e), changes in the value of Level 3 assets held within linked policyholder funds are exactly matched by corresponding changes in the value of liabilities due to policyholders and therefore have no impact on the Group's net asset value or profit or loss, except to the extent that it has an impact on management fees earned.

13(g): Fair value hierarchy for assets and liabilities not measured at fair value

Certain financial instruments of the Group are not carried at fair value. The carrying values of these are considered reasonable approximations of their respective fair values, as they are either short term in nature or are repriced to current market rates at frequent intervals. Their classification within the fair value hierarchy would be as follows:

Trade, other receivables, and other assets Level 3

Trade, other payables, and other liabilities Level 3

Cash and cash equivalents (excluding money market funds) are held at amortised cost and therefore not carried at fair value. The cash and cash equivalents that are held at amortised cost would be classified as Level 1 in the fair value hierarchy.

Fixed term deposits, which are included within Financial investments, are held at amortised cost and therefore not carried at fair value. The fixed term deposits that are held at amortised cost would be classified as Level 1 in the fair value hierarchy.

Loans and advances are financial assets held at amortised cost and therefore not carried at fair value, with the exception of policyholder loans which are categorised as FVTPL. The loans and advances that are held at amortised cost would be classified as Level 3 in the fair value hierarchy.

Borrowed funds are financial liabilities held at amortised cost and therefore not carried at fair value. Borrowed funds relate to subordinated liabilities and would be classified as Level 2 in the fair value hierarchy.

Lease liabilities valued under IFRS 16 are held at amortised cost and therefore not carried at fair value. They would be classified as Level 3 in the fair value hierarchy.

14: Cash and cash equivalents

			£m
	30 June 2021	30 June 2020	31 December 2020
Cash at bank	580	485	550
Money market funds	968	1,225	1,064
Cash and cash equivalents in consolidated funds	341	368	307
Total cash and cash equivalents per consolidated statement of cash flows	1,889	2,078	1,921
Less: cash within held for sale	(186)	-	-
Total cash and cash equivalents per statement of financial position	1,703	2,078	1,921

Cash and cash equivalents are considered materially available for use in the Group's day-to-day operations, except for amounts held in consolidated funds of £341 million (30 June 2020: £368 million, 31 December 2020: £307 million).

15: Share capital and capital redemption reserve

Financial instruments issued are classified as equity when there is no contractual obligation to transfer cash, other financial assets or issue a variable number of own equity instruments. Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds, net of tax. The Parent Company's equity capital currently comprises 1,720,973,063 Ordinary Shares of 7p each with an aggregated nominal value of £120,468,114 (31 December 2020: 1,783,969,051 Ordinary Shares of 7p each with an aggregated nominal value of £124,877,834).

This note gives details of the Company's Ordinary Share capital and shows the movements during the period:

		£m	£m
	Number of shares	Nominal value	Share premium
At 1 January 2020	1,902,251,098	133	58
Shares cancelled through share buyback programme	(45,986,864)	(3)	-
At 30 June 2020	1,856,264,234	130	58
Shares cancelled through share buyback programme	(72,295,183)	(5)
At 31 December 2020	1,783,969,051	125	58
Shares cancelled through share buyback programme	(62,995,988)	(5)	-
At 30 June 2021	1,720,973,063	120	58

On 11 March 2020 the Company announced a share buyback programme to purchase shares up to a maximum value of £375 million, in order to reduce the share capital of the Company. The programme commenced on 11 March 2020 and will continue into 2021. During the year ended 31 December 2020, the Company acquired 118.3 million shares for a total consideration of £153 million and incurred additional costs of £4 million. The shares, which had a nominal value of £8 million, have subsequently been cancelled, giving rise to a capital redemption reserve of the same value as required by the Companies Act 2006. In December 2020, the committed remainder of £22 million was accrued as a liability against retained earnings.

During the period ended 30 June 2021, the Company acquired the committed remainder from 2020 and, as part of tranche 3 of the share buyback, a further 63 million shares for a total consideration of £100 million, with additional costs incurred of £3 million. In June 2021, the committed remainder of £23 million was accrued as a liability against retained earnings.

16: Investment contract liabilities

The following table provides a summary of the Group's investment contract liabilities:

			£m
	30 June 2021	30 June 2020	31 December 2020
Carrying amount at 1 January	57,407	52,455	52,455
From continuing operations
Fair value movements	1,987	(1,211)	1,760
Investment income	100	290	512
Movements arising from investment return	2,087	(921)	2,272
From discontinued operations
Fair value movements	1,088	(457)	872
Investment income	95	124	184
Movements arising from investment return	1,183	(333)	1,056
Contributions received	3,462	2,551	4,871
Maturities	(187)	(40)	(97)
Withdrawals and surrenders	(1,765)	(1,590)	(3,226)
Claims and benefits	(57)	(25)	(59)
Other movements	1	-	2
Change in liability	4,724	(358)	4,819
Currency translation (gain)/loss	(125)	170	133
Transfer to held for sale	(23,202)	-	-
Investment contract liabilities	38,804	52,267	57,407

For unit-linked investment contracts, movements in asset values are offset by corresponding changes in liabilities, limiting the net impact on profit.

The benefits offered under the unit-linked investment contracts are based on the risk appetite of policyholders and the return on their selected investments and collective fund investments, whose underlying investments include equities, debt securities, property and derivatives. This investment mix is unique to individual policyholders.

The maturity value of these financial liabilities is determined by the fair value of the linked assets at maturity date. There will be no difference between the carrying amount and the maturity amount at maturity date.

For unit-linked business, the unit liabilities are determined as the value of units credited to policyholders. Since these liabilities are determined on a retrospective basis no assumptions for future experience are required. Assumptions for future experience are required for unit-linked business in assessing whether the total of the contract costs asset and contract liability is greater than the present value of future profits expected to arise on the relevant blocks of business (the "recoverability test"). If this is the case, then the contract costs asset is restricted to the recoverable amount. For linked contracts, the assumptions are on a best estimate basis.

17: Provisions

					£m
30 June 2021	Compensation provisions	Sale of QLA	Sale of Single Strategy business	Clawback and other provisions	Total
Balance at beginning of the year	42	3	7	25	77
Charge to income statement¹	13	-	-	1	14
Utilised during the period	(3)	(1)	(2)	(2)	(8)
Unused amounts reversed	(3)	-	(1)	(2)	(6)
Transferred to liabilities held for sale	(5)	-	-	-	(5)
Reclassification within statement of financial position	2	-	-	1	3
Balance at 30 June 2021	46	2	4	23	75

					£m
30 June 2020	Compensation provisions	Sale of QLA	Sale of Single Strategy business	Clawback and other provisions	Total
Balance at beginning of the year	31	6	10	17	64
Additions from business combinations	12	-	-	-	12
Charge to income statement¹	8	-	-	-	8
Utilised during the period	(3)	(2)	(1)	-	(6)
Unused amounts reversed	(1)	-	(1)	-	(2)
Reclassification within statement of financial position	-	-	-	12	12
Balance at 30 June 2020	47	4	8	29	88

					£m
31 December 2020	Compensation provisions	Sale of QLA	Sale of Single Strategy business	Clawback and other provisions	Total
Balance at beginning of the year	31	6	10	17	64
Additions from business combinations	12	-	-	-	12
Charge to income statement¹	10	-	-	1	11
Utilised during the year	(5)	(3)	(1)	(4)	(13)
Unused amounts reversed	(6)	-	(2)	(3)	(11)
Reclassification within statement of financial position	-	-	-	14	14
Balance at 31 December 2020	42	3	7	25	77

¹Part of the charge to income statement is included within the discontinued operations income statement.

Compensation provisions

Compensation provisions total £46 million (30 June 2020: £47 million, 30 December 2020: £42 million), and are comprised of the following:

Lighthouse pension transfer advice provision of £35 million (30 June 2020: £29 million, 31 December 2020: £28 million)

Pension transfer advice provided to British Steel members

A provision for pension transfer advice was established within the fair value of the Lighthouse assets and liabilities acquired. As at 31 December 2019, the provision related to approximately 30 complaints received on advice provided by Lighthouse in respect of pension transfers for British Steel Pension Scheme members, prior to the Group's acquisition of Lighthouse in June 2019. All the complaints received related to transfers before that date.

During 2020, the FCA reported the results of their thematic review into the general market of pension transfers, which included British Steel pension transfers. The FCA review determined that the percentage of unsuitable files for British Steel transfers generally for the industry was higher than those for other pension scheme transfers in their thematic sample. The FCA review included a sample of British Steel pension transfer advice provided by Lighthouse. Additionally, approximately 45 further complaints were received from British Steel Pension Scheme members during the remainder of 2020. As such, the Group extended the provision to include consideration of the full population of 265 British Steel transfers on which Lighthouse advisers provided advice and the relevant customers proceeded to make a transfer, in order to determine a more reliable approximation of the estimated redress that may be payable to customers who are found to have received unsuitable advice which caused them to sustain a loss.

In April 2020, the Group was informed by the FCA that it would be required to appoint a skilled person to review the pension transfers by Lighthouse. A skilled person was appointed, and they have performed initial provisional calculations for a significant portion of the British Steel complaints received by Lighthouse where the advice given to customers was assessed as unsuitable to obtain an indication of how much redress may be payable to these customers. The methodology employed to perform these initial provisional redress calculations uses assumptions and estimation techniques which are consistent with principles under the FCA's FG17/9 "Guidance for firms on how to calculate redress for unsuitable defined benefit pension transfers". However, as is explained in more detail below, the methodology that will be used by the skilled person to perform actual redress calculations is in the process of being finalised between the skilled person and the FCA. The provisional redress amounts calculated on the complaints has been extrapolated to the entire population of British Steel transfers, noting however, that redress will only be available to those customers in this population who received unsuitable advice which caused them to sustain a loss by (a) subdividing the population into cohorts with similar characteristics, including the results to date of the skilled person's assessment of the number of cases where unsuitable advice was given, and also (b) dividing the population into transfers pre and post June 2017 when the Trustees of the British Steel Pension Scheme changed the basis on which transfer values were calculated. The timing of any benefits withdrawn by the member after the transfer also has an impact upon the provisional redress amounts calculated. The estimated redress per client as a proportion of the transfer value of the pensions was determined for each cohort and extrapolated to the population of cases assessed as unsuitable where advice was provided, and acted upon through Lighthouse.

As part of the skilled person review, the skilled person and the FCA are in the process of finalising a loss assessment and redress calculation methodology, in line with the FCA's FG 17/9, and once agreed it will be used to calculate redress offers for those cases where the skilled person determines that a customer received unsuitable defined benefit pension transfer advice which caused them to sustain a loss. We expect the skilled person review to be completed during the first half of 2022.

A total provision of £28 million (30 June 2020: £29 million, 31 December 2020: £28 million) has been calculated for the potential redress of British Steel cases, including anticipated costs associated with the redress activity. This is comprised of two parts:

(a) Client redress provision, including the anticipated costs of providing ongoing advice to the customer, of £25 million (30 June 2020: £26 million, 31 December 2020: £25 million).

(b) Anticipated costs associated with redress activity of £3 million (30 June 2020: £3 million, 31 December 2020: £3 million). This provision is recognised in respect of the anticipated costs of legal and professional fees related to the cases and redress process, which includes the expected costs to review advice provided of a similar nature in relation to cases that the Group believe may have similar characteristics.

The £3 million insurance recoverable that was included in the fair value of the acquired net assets of Lighthouse has not changed. Discussion with insurers is ongoing and the Group will review the recoverable amount as and when they receive further certainty. The insurance asset at 30 June 2021 is disclosed within "Trade, other receivables and other assets".

The final costs of redress for cases upheld will depend on specific calculations on a case-by-case basis, which will be calculated per the detailed redress methodology when agreed by the skilled person and the FCA and also impacted by market movements and other parameters affecting the defined contribution scheme asset, and therefore exposed to volatility from this, and may vary from the amounts currently provided. The skilled person review is expected to conclude in the first half of 2022.

The key assumptions which have an impact upon the redress payable calculation are the discount rate, changes in market levels and proportion of cases where redress is estimated to be payable. For the purpose of the redress calculation, changes in the discount rate impact the valuation of the defined benefit ("DB") scheme at the reporting date, and market level changes impact the valuation of the personal pension scheme for each client.

The following table presents the potential change to the provision balance at 30 June 2021 as a result of movements in the key assumptions:

		£m
	30 June 2021
	Increase	Decrease
Change in discount rate to value the DB pension liability of 0.25%	(4)	4
Change in market levels of 5%	(2)	2
Change in number of cases upheld of 10%	1	(1)

A further assumption which has an impact upon the provision is the timing of benefits taken. The uncertainty regarding the timing of benefits taken by each member for the cases not yet determined by the skilled person has a potentially material future impact upon the provision. The range of outcomes for the provision, including anticipated costs, varies from £25 million to £36 million at each extremity of possible timing of benefits taken.

Pension transfer advice provided to members of other schemes

During 2021, the skilled person review has identified unsuitable pension advice provided by former Lighthouse advisers for pension schemes other than the British Steel Pension Scheme. The provisional calculations of redress for these cases has resulted in the recognition of a provision of £7 million at 30 June 2021.

Compensation provisions (other) of £11 million (30 June 2020: £18 million, 31 December 2020: £14 million)

Other compensation provisions of £11 million are held within the Group's continuing operations and include amounts relating to the cost of correcting deficiencies in policy administration systems, including restatements, any associated litigation costs and the related costs to compensate previous or existing policyholders and customers. This provision represents the Group's best estimate of expected outcomes based upon previous experience, and a review of the details of each case. Due to the nature of the provision, the timing of the expected cash outflows is uncertain but the majority of the balance is expected to be settled within 12 months. Estimates are reviewed annually and adjusted as appropriate for new circumstances.

A provision of £2 million, included within the balance, has been recognised during 2021 relating to potentially unsuitable advice provided by a past acquisition. A corresponding indemnification asset has been recognised within "Trade, other receivables and other assets" representing the amount receivable from the sellers under the terms of the sale agreement.

During the period, compensation provisions of £5 million within Quilter International have been transferred to liabilities held for sale.

The Group estimates a reasonably possible change of +/- £3 million, based upon a review of the cases and the range of potential outcomes.

Provisions arising on the disposal of Quilter Life Assurance

The QLA business was sold on 31 December 2019, resulting in a number of provisions totalling £6 million being established in respect of the costs of disposing the business and the related costs of business separation.

The costs of business separation arise from the process to separate QLA's infrastructure, which is complex and covers a wide range of areas including people, IT systems, data, contracts and facilities. A programme team was established to ensure the transition of these areas to the acquirer. These provisions have been based on external quotations and estimations, and estimates of the time required for incremental resource costs to achieve the separation.

The most significant element of the provision is the cost of migration of IT systems and data to the acquirer. Work is expected to conclude during 2021. Calculation of the provision is based on the Group's best estimate of the work required, the time it is expected to take, the number and skills of the staff required and their cost, and the cost of related external IT services to support the work. In reaching these judgements and estimates, the Group has made use of their past experience of previous IT migrations following business disposals. The Group estimates a provision sensitivity of +/-25% (£1.5 million).

During the period £1 million of the provision has been utilised.

Sale of Single Strategy Asset Management business provision

In 2018, a restructuring provision was recognised as a result of the sale of the Single Strategy Asset Management business to enable the remaining Quilter Investors business to function as a standalone operation going forward. The remaining provision relates to various sale related future commitments, the outcome of which was uncertain at the time of the sale and the most significant of which is in relation to the guarantee of revenues for the seller in future years arising from funds invested by customers of Quilter. The balance has decreased to £4 million during 2021 as a result of the settlement of £2 million related to the 2020 measurement year and £1 million reversed for the latest estimate for the 2022 measurement year.

The provision considers sensitivities including potential scenarios which would result in a reduction in Group assets under management held in the relevant (Merian) funds, leading to a reduction in the management fees paid to Jupiter, who acquired Merian during 2020. The scenarios are based upon assumptions determined considering historical outflows over the past three years, expectation of outflows to December 2022 and the latest information received from Jupiter. Per the conditions of the sale agreement, the maximum remaining potential exposure is £14 million for the 2022 calendar year. The expected range of payments based upon the latest information received from Merian and the Group's reasonable expectations of AUM invested within Merian funds during the 2022 assessment period is between £2 million and £8 million.

The £4 million provision outstanding is estimated to be payable after one year, with expected final settlement due in the first half of 2023.

Clawback and other provisions

Other provisions include amounts for the resolution of legal uncertainties and the settlement of other claims raised by contracting parties and indemnity commission provisions. Where material, provisions and accruals are discounted at discount rates specific to the risks inherent in the liability. The timing and final amounts of payments in respect of some of the provisions, particularly those in respect of litigation claims and similar actions against the Group, are uncertain and could result in adjustments to the amounts recorded.

Included within the balance at 30 June 2021 is £19 million (30 June 2020: £18 million, 31 December 2020: £18 million) of clawback provisions in respect of potential refunds due to product providers on indemnity commission, within the Quilter Financial Planning business. This provision, which is estimated and charged as a reduction of revenue on the income statement at the point of sale of each policy, is based upon assumptions determined from historical experience of the proportion of policyholders cancelling their policies, which requires Quilter to refund a portion of commission previously received. Reductions to the provision result from the payment of cash to product providers as refunds or the recognition of revenue where a portion of the provision is assessed as no longer payable. The provision has been assessed at the reporting date and adjusted for the latest cancellation information available. At 30 June 2021, an associated balance of £14 million recoverable from brokers is included within "Trade, other receivables and other assets" (30 June 2020: £12 million, 31 December 2020: £13 million).

The Group estimates a reasonably possible change of +/- £6 million, based upon the potential range of outcomes for the proportion of cancelled policies within the clawback provision, and a detailed review of the other provisions.

Of the total £23 million provision outstanding, £12 million is estimated to be payable within one year (31 December 2020: £13 million).

18: Contingent liabilities

The Group, in the ordinary course of business, enters into transactions that expose it to tax, legal and business risks. The Group recognises a provision when it has a present obligation as a result of past events, it is probable that a transfer of economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made (see note 17). Possible obligations and known liabilities where no reliable estimate can be made or it is considered improbable that an outflow would result are reported as contingent liabilities in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Contingent liabilities - acquisitions and disposals

The Group routinely monitors and assesses contingent liabilities arising from matters such as business reviews, litigation, warranties and indemnities relating to past acquisitions and disposals.

In April 2020, the Group was informed by the FCA that it would be required to appoint a skilled person, under section 166(3)(a) of the Financial Services and Markets Act 2000 ("FSMA"), in relation to Lighthouse Defined Benefit ("DB") pension transfer advice. The review covers Lighthouse Advisory Services Limited only, and no other companies within the Group. The review covers the period from 1 April 2015 to 27 January 2020, which is the date that Lighthouse converted to the Quilter Financial Planning advice process for their Defined Benefit transfer activity.

The review covers British Steel DB pension transfer advice activity undertaken by Lighthouse, and a representative sample of other Lighthouse DB pension transfer advice activity. The skilled person will also calculate redress using a redress methodology that is in the process of being finalised with the FCA which will be in line with the FCA's FG17/9 "Guidance for firms on how to calculate redress for unsuitable defined benefit pension transfers" guidance for those cases where the skilled person determines that a customer received unsuitable DB pension transfer advice. We expect the skilled person review to be completed during the first half of 2022.

For the British Steel cases, and a portion of the other cases reviewed by the skilled person, the Group currently considers that the likelihood of redress is probable on a proportion of the cases, but this is subject to confirmation through the ongoing skilled person review process. An estimate of the amount of redress payable has been made and is included within Provisions in note 17. For other non-British Steel cases, it is possible that further costs of redress may be incurred following the outcome of the skilled person review.

Any further redress costs, and any differences between the provision and final payment to be made for the DB cases, will be recognised as an expense or credit in the Income Statement.

Tax

The Revenue authorities in the principal jurisdictions in which the Group operates routinely review historical transactions undertaken and tax law interpretations made by the Group. The Group is committed to conducting its tax affairs in accordance with the tax legislation of the jurisdictions in which they operate. All interpretations made by the Group are made with reference to the specific facts and circumstances of the transaction and the relevant legislation.

There are occasions where the Group's interpretation of tax law may be challenged by the Revenue authorities. The financial statements include provisions that reflect the Group's assessment of liabilities which might reasonably be expected to materialise as part of their review. The Board is satisfied that adequate provisions have been made to cater for the resolution of tax uncertainties and that the resources required to fund such potential settlements are sufficient.

Due to the level of estimation required in determining tax provisions, amounts eventually payable may differ from the provision recognised.

Complaints, disputes and regulations

The Group is committed to treating customers fairly and supporting its customers in meeting their lifetime goals. The Group does from time to time receive complaints and claims from customers, enters into commercial disputes with service providers, and is subject to regulatory discussions and reviews in the normal course of business. The costs, including legal costs, of these issues as they arise can be significant and, where appropriate, provisions have been established under IAS 37.

19: Related party transactions

In the normal course of business, the Group enters into transactions with related parties. Loans to related parties are conducted on an arm's length basis and are not material to the Group's results. There were no transactions with related parties during the current and prior year which had a material effect on the results or financial position of the Group.

20: Events after reporting date

Interim dividend

Subsequent to 30 June 2021, the Board has declared an interim dividend of 1.7 pence per Ordinary Share. This amounts to £28 million in total, and will be accounted for as an appropriation of retained earnings in the year ending 31 December 2021. The interim dividend will be paid on 20 September 2021 to shareholders on the UK and South African share registers.

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