Final Results - Part 6 of 7

RNS Number : 5265P

Standard Life plc

19 February 2016

 

Standard Life plc

Full year results 2015

Part 6 of 7

9. Independent auditors' report to the members of Standard Life plc

Report on the Company financial statements

Our opinion

In our opinion, Standard Life plc's company financial statements (the 'financial statements'):

·   Give a true and fair view of the state of the company's affairs as at 31 December 2015 and of its profit and cash flows for the year then ended

·   Have been properly prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union

·   Have been prepared in accordance with the requirements of the Companies Act 2006

What we have audited

The financial statements, included within the Annual report and accounts, comprise:

·   The Company statement of financial position as at 31 December 2015

·   The Company statement of comprehensive income for the year then ended

·   The Company statement of cash flows for the year then ended

·   The Company statement of changes in equity for the year then ended

·   The accounting policies

·   The Notes to the financial statements, which include other explanatory information

Certain required disclosures have been presented elsewhere in the Annual report and accounts, rather than in the notes to the financial statements. These are cross-referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as adopted by the European Union.

Other required reporting

Consistency of other information

Companies Act 2006 opinion

In our opinion, the information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements.

ISAs (UK & Ireland) reporting

Under International Standards on Auditing (UK and Ireland) ('ISAs (UK & Ireland)') we are required to report to you if, in our opinion, information in the Annual report and accounts is:

·   Materially inconsistent with the information in the audited financial statements

·   Apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in the course of performing our audit

·   Otherwise misleading

We have no exceptions to report arising from this responsibility.

Adequacy of accounting records and information and explanations received

Under the Companies Act 2006 we are required to report to you if, in our opinion:

·   We have not received all the information and explanations we require for our audit

·   Adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us

·   The financial statements and the part of the Directors' remuneration report to be audited are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Directors' remuneration

Directors' remuneration report - Companies Act 2006 opinion

In our opinion, the part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

Other Companies Act 2006 reporting

Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors' remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

Responsibilities for the financial statements and the audit

Our responsibilities and those of the Directors

As explained more fully in the Directors' responsibility statement set out on page 99, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, 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 an audit of financial statements involves

We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:

·   Whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed

·   The reasonableness of significant accounting estimates made by the Directors

·   The overall presentation of the financial statements

We primarily focus our work in these areas by assessing the directors' judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual report and accounts to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Other matter

We have reported separately on the Group financial statements of Standard Life plc for the year ended 31 December 2015.

Stephanie Bruce (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

Edinburgh

19 February 2016

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

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

10. Company financial statements

Company statement of comprehensive income

For the year ended 31 December 2015

		2015	2014
	Notes	£m	£m
Revenue
Investment return	A	1,312	697
Other income		-	1
Total revenue		1,312	698
Expenses
Administrative expenses	B	157	65
Finance costs		82	97
Total expenses		239	162
Profit before tax		1,073	536
Tax credit	F	17	17
Profit for the year		1,090	553
Other comprehensive income that may be reclassified subsequently to profit or loss
Fair value (losses)/gains on available-for-sale financial assets	R	(7)	28
Loss on sale of available-for-sale financial assets recycled to profit and loss		(2)	-
Tax effect relating to items that may be reclassified subsequently to profit or loss	F	2	(6)
Total other comprehensive (loss)/income for the year that may be reclassified subsequently to profit or loss		(7)	22
Total comprehensive income for the year		1,083	575

The Notes on pages 243 to 260 are an integral part of these financial statements.

Company statement of financial position

As at 31 December 2015

		2015	2014
	Notes	£m	£m
Assets
Investments in subsidiaries	G	4,591	5,833
Investments in associates and joint ventures	H	150	150
Loans to subsidiaries	J	322	634
Derivative financial assets	J	-	24
Debt securities	J	743	492
Receivables and other financial assets	J	48	40
Other assets	M	19	10
Cash and cash equivalents	J	61	34
Total assets		5,934	7,217
Equity
Share capital	O	241	239
Shares held by trusts	P	(6)	(3)
Share premium reserve		628	1,115
Retained earnings	Q	837	785
Other reserves	R	2,860	3,405
Total equity		4,560	5,541
Liabilities
Subordinated liabilities	S	1,318	1,612
Deferred tax liabilities	I	1	1
Derivative financial liabilities	K	2	25
Other financial liabilities	S	52	38
Other liabilities	V	1	-
Total liabilities		1,374	1,676
Total equity and liabilities		5,934	7,217

The financial statements on pages 239 to 260 were approved by the Board and signed on its behalf, by the following Directors:

Sir Gerry Grimstone, Chairman 19 February 2016

Luke Savage, Chief Financial Officer 19 February 2016

The Notes on pages 243 to 260 are an integral part of these financial statements.

Company statement of changes in equity

For the year ended 31 December 2015

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity
2015	Notes	£m	£m	£m	£m	£m	£m
1 January		239	(3)	1,115	785	3,405	5,541
Profit for the year		-	-	-	1,090	-	1,090
Other comprehensive (loss)/income for the year		-	-	-	-	(7)	(7)
Total comprehensive income for the year		-	-	-	1,090	(7)	1,083
Dividends paid on ordinary shares		-	-	-	(343)	-	(343)
Issue of share capital	O	2	-	1	-	-	3
Issue of 'B' shares		488	-	(488)	-	-	-
Issue of 'C' shares		-	-	-	-	-	-
Redemption of 'B' shares		(488)	-	-	(488)	488	(488)
Dividends paid on 'C' shares		-	-	-	(1,261)	-	(1,261)
Purchase of 'C' shares		-	-	-	-	-	-
Reserves credit for employee share-based payment schemes	R	-	-	-	-	34	34
Transfer to retained earnings for vested employee share-based payment schemes	Q, R	-	-	-	32	(32)	-
Transfer between reserves on disposal of subsidiary	Q, R	-	-	-	1,028	(1,028)	-
Shares acquired by employee trusts		-	(9)	-	-	-	(9)
Shares distributed by employee trusts	Q	-	6	-	(6)	-	-
31 December		241	(6)	628	837	2,860	4,560

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity
2014	Notes	£m	£m	£m	£m	£m	£m
1 January		238	(10)	1,110	601	3,383	5,322
Profit for the year		-	-	-	553	-	553
Other comprehensive (loss)/income for the year		-	-	-	-	22	22
Total comprehensive income for the year		-	-	-	553	22	575
Dividends paid on ordinary shares		-	-	-	(386)	-	(386)
Issue of share capital	O	1	-	5	-	-	6
Reserves credit for employee share-based payment schemes	R	-	-	-	-	27	27
Transfer to retained earnings for vested employee share-based payment schemes	Q, R	-	-	-	27	(27)	-
Shares acquired by employee trusts		-	(3)	-	-	-	(3)
Shares distributed by employee trusts	Q	-	10	-	(10)	-	-
31 December		239	(3)	1,115	785	3,405	5,541

The Notes on pages 243 to 260 are an integral part of these financial statements.

Company statement of cash flows

For the year ended 31 December 2015

		2015	2014
	Notes	£m	£m
Cash flows from operating activities
Profit before tax		1,073	536
Impairment of subsidiary undertakings		1,415	-
Gains on financial instruments	A	(1)	(2)
Dividend income from subsidiaries		(2,585)	(613)
Interest income on loans to subsidiaries	A	(20)	(36)
Interest income on available-for-sale debt securities	A	(15)	(10)
Distributions from equity instruments	A	(34)	(34)
Interest payable on subordinated liabilities		82	97
Movements in operating assets and liabilities		49	25
Net cash flows from operating activities		(36)	(37)
Cash flows from investing activities
Loans issued to subsidiaries		-	(9)
Loans repaid by subsidiaries		301	-
Capital injections into existing subsidiaries	G	(35)	(431)
Acquisition of subsidiaries measured at cost	G	(12)	-
Interest received on loans to subsidiaries	A	20	36
Interest received on available-for-sale securities		6	7
Distributions from equity instruments	A	34	34
Dividends received from subsidiaries	A	2,585	613
Acquisition of subsidiaries at FVTPL	G	(200)	-
Disposal of subsidiaries at FVTPL	G	75	12
Sale of debt securities and derivatives		(235)	262
Capital injections into associates and joint ventures		-	(14)
Net cash flows from investing activities		2,539	510
Cash flows from financing activities
Repayment of subordinated liabilities		(294)	-
Dividends paid		(343)	(386)
Interest paid on subordinated liabilities		(82)	(97)
Proceeds from exercise of share options		1	5
Shares acquired by trusts		(9)	(1)
Return of cash to shareholders under 'B/C' share scheme		(1,749)	-
Net cash flows from financing activities		(2,476)	(479)
Net increase/(decrease) in cash and cash equivalents		27	(6)
Cash and cash equivalents at the beginning of the year	N	34	40
Cash and cash equivalents at the end of the year	N	61	34
Supplemental disclosures on cash flows from operating activities
Interest received	A	2	2

The Notes on pages 243 to 260 are an integral part of these financial statements.

Company accounting policies

(a)      Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as endorsed by the European Union (EU), with interpretations issued by the IFRS Interpretations Committee and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of available-for-sale financial assets (AFS) and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss (FVTPL).

The principal accounting policies adopted are the same as those set out in the Group financial statements, together with the Company specific policies set out below, and have been consistently applied to all financial reporting periods presented in these financial statements.

(a)(i)    Investment in subsidiaries, associates and joint ventures

The Company has certain subsidiaries which are investment vehicles such as open-ended investment companies (OEIC's), unit trusts and limited partnerships whose primary function is to generate capital or income growth through holding investments. This category of subsidiary is held at FVTPL since they are managed on a fair value basis.

Investments in subsidiaries (other than those measured at FVTPL), associates (other than those measured at FVTPL) and joint ventures are initially recognised at cost and subsequently held at cost less any impairment charge. An impairment charge is recognised when the carrying amount of the investment exceeds its recoverable amount. Any gain or loss on disposal of a subsidiary, associate or joint venture is recognised in the statement of comprehensive income.

(a)(ii)   Financial guarantee contracts

The Company recognises and measures financial guarantee and indemnity contracts initially at fair value. The Company must reassess the value at each subsequent reporting date by estimating the expenditure required to settle the contract and comparing this to the fair value (net of any amortisation). The higher of these values is recognised on the statement of financial position.

(a)(iii)  Pension costs and other post-retirement benefits

The Group operates a number of defined benefit and defined contribution plans, the assets of which are held in separate trustee administered funds. The pension plans are funded by payments from employees and by the Group companies, determined by periodic actuarial calculations.

The sponsoring employer for the UK defined benefit plan is Standard Life Assurance Limited (SLAL), and therefore the net defined benefit cost of the plan is recognised by SLAL. As a result, the Company treats its participation in the defined benefit plan as a defined contribution plan. Consequently the costs of this plan and the UK defined contribution plan represent the contributions payable for the accounting period.

For the defined contribution plan, the Company pays contributions to separately administered pension insurance plans. The contributions are recognised in staff costs and other employee-related costs when they are due.

(b)      Critical accounting estimates and judgement in applying accounting policies

The preparation of financial statements requires management to make estimates and assumptions and exercise judgements in applying the accounting policies that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses arising during the year. Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The area where estimates and assumptions have the most significant effect on the amounts recognised in the consolidated financial statements is as follows:

Financial statement area	Critical accounting estimates or assumptions	Related notes
Investments in subsidiaries and joint ventures held at cost	Determination of the recoverable amount	Notes G and H

Notes to the Company financial statements

A.    Investment return

	2015	2014
	£m	£m
Interest and similar income
Cash and cash equivalents	2	2
Loans to subsidiaries	20	36
Debt securities	15	10
	37	48
Income from subsidiary undertakings
Dividend income	1,240	613
Distributions from equity instruments	34	34
	1,274	647
Gains on financial instruments
Subsidiaries at FVTPL	1	1
Associates at FVTPL	-	1
	1	2
Investment return	1,312	697

Dividend income for the year of £1,240m (2014: £613m) includes £885m relating to a dividend received from the Company's subsidiary Standard Life Oversea Holdings Limited (SLOH). The Company received a dividend of £2,230m from SLOH on 4 February 2015 which resulted in an impairment in the Company's investment in SLOH of £1,345m. The dividend has been presented in dividend income net of the resulting impairment.

B.    Administrative expenses

		2015	2014
	Notes	£m	£m
Staff costs and other employee-related costs	C	37	46
Other administrative expenses		120	19
Total administrative expenses		157	65

Other administrative expenses include an impairment of the investment in Standard Life Oversea Holdings Limited of £70m

(2014: £nil) as detailed in note G.

C.      Staff costs and other employee-related costs

		2015	2014
	Notes	£m	£m
The aggregate remuneration payable in respect of employees was:
Wages and salaries		28	35
Social security costs		4	5
Pension costs	D	2	4
Employee share-based payments		3	2
Total staff costs and other employee-related costs		37	46
		2015	2014
The average number of staff during the year was:
Group corporate centre		297	443
Total average number of staff		297	443

The staff who manage the affairs of the Company are employed by Standard Life Employee Services Limited (SLESL), a wholly owned subsidiary of the Company. These costs are recharged to the Company and the amounts recharged are set out above. Information in respect of compensation of key management personnel is provided in Note 48 of the Group financial statements and the audited section of the Directors' remuneration report. Details of the employee share-based payment schemes operated by the Company are given in Note 47 of the Group financial statements.

D.    Pension and other post-retirement benefit provisions

The staff who manage the affairs of the Company are members of a defined benefit pension plan and/or a defined contribution pension scheme operated by the Group for its employees in the UK. There is no contractual agreement or policy for charging the net defined benefit cost of the defined benefit plan across the participating UK companies. The sponsoring employer for the defined benefit plan is SLAL, and therefore the net defined benefit cost of the plan is recognised by SLAL. As a result, the Company treats its participation in the defined benefit plan as a defined contribution plan. Contributions to defined contribution plans are expensed when employees have rendered services in exchange for such contributions, generally in the year of contribution. The contributions to the defined contribution and the defined benefit plans recognised as an expense for the year ended 31 December 2015 were £2m (2014: £4m).

Further information on the Group's pension plans and the changes agreed during the year to the employee pension the Group provides, is given in Note 37 of the Group financial statements.

E.    Auditors' remuneration      

In 2015 auditors' remuneration amounted to £0.3m (2014: £0.3m) in respect of the audit of the Company's individual and Group financial statements. Auditors' remuneration for services other than the statutory audit of the Company is disclosed in Note 9 of the Group financial statements.

F.    Tax credit

(a)     Current year tax credit

		2015	2014
		£m	£m
Current tax credit		17	17
Total income tax credit		17	17

The standard rate of UK corporation tax for the accounting period is 20.25% (2014: 21.5%). The UK tax rate will reduce to 19% from 1 April 2017 and 18% from 1 April 2020. These future rate changes have been taken into account in the calculation of the UK deferred tax balance at 31 December 2015.

(b)     Tax relating to components of other comprehensive income

			2015	2014
		Notes	£m	£m
Current tax credit/(charge) on net change in financial assets designated as available-for-sale		R	2	(6)
Tax relating to each component of other comprehensive income that may be reclassified subsequently to profit or loss			2	(6)

(c)     Reconciliation of tax credit

		2015	2014
		£m	£m
Profit before tax		1,073	536
Tax at UK corporation tax rate of 20.25% (2014: 21.5%)		(217)	(115)
Dividends not subject to UK corporation tax		523	132
Non-taxable impairment of subsidiary undertakings		(287)	-
Permanent differences		(3)	-
Prior year tax adjustment		1	-
Total income tax credit		17	17

G.    Investments in subsidiaries 

		2015	2014
	Notes	£m	£m
Investments in subsidiaries measured at cost		4,334	5,702
Investments in subsidiaries measured at FVTPL	J	257	131
Investments in subsidiaries		4,591	5,833

		2015	2014
		£m	£m
At 1 January		5,833	5,413
Investment into existing subsidiaries measured at cost		35	554
Acquisition of subsidiaries at cost		12	-
Disposal of subsidiaries measured at cost		-	(123)
Impairment of subsidiaries measured at cost		(1,415)	-
Acquisition of subsidiaries at FVTPL		200	-
Gains on subsidiaries at FVTPL		1	1
Disposal of subsidiaries at FVTPL		(75)	(12)
At 31 December		4,591	5,833

Details of the Company's subsidiaries are given in Note 50 of the Group financial statements.

On 19 June 2014 the Company sold 100% of the share capital of Standard Life Wealth Limited (SLW) to Standard Life Investments (Holdings) Limited (SLIH), another wholly owned subsidiary of the Company. The consideration received was equal to 123,200,000 newly issued £1 ordinary shares of SLIH. As the carrying value of Standard Life Wealth Limited on the Company's statement of financial position at the date of disposal was £123m no gain or loss was recognised in the statement of comprehensive income.

On 30 January 2015 Standard Life Oversea Holdings Limited, a subsidiary of the Company, sold its Canadian business to The Manufacturers Life Insurance Company (MLC), a subsidiary of Manulife Financial Corporation (Manulife), for a fixed consideration of CAD $4bn (£2.1bn). Following the sale, a dividend of £2,230m was paid to the Company from Standard Life Oversea Holdings Limited which resulted in an impairment in the Company's investment in this subsidiary of £1,345m (see Note A).

Included within the impairment charge of £1,415m (2014: £nil) is £70m (2014: £nil) additional impairment in the Company's investment in its subsidiary Standard Life Oversea Holdings Limited. This was primarily in relation to an impairment of Standard Life Oversea Holdings Limited's investment in Standard Life (Asia) Limited as a result of a review of expense and reserving assumptions following regulatory change.

Investments in subsidiaries at FVTPL are £257m (2014: £131m) which relates to holdings in short term investment funds over which the Group has control.

H.    Investments in associates and joint ventures

		2015	2014
	Notes	£m	£m
Investment in associates measured at cost		13	13
Investments in associates measured at FVTPL	J	13	13
Investments in joint ventures measures at cost		124	124
Investments in associates and joint ventures		150	150

(a)     Investments in associates

The Company's investment in associates measured at cost relates to a 25.3% (2014: 25.3%) interest in Tenet Group Limited, a company incorporated in England. The reporting date for Tenet Group Limited is 30 September as this is its year end date. This is different from the Company's year end date of 31 December. In addition to the above the Company has investments in associates measured at FVTPL of £13m (2014: £13m).

(b)     Investments in joint ventures

The Company has a 50% (2014: 50%) interest in Heng An Standard Life Insurance Company Limited, a company incorporated in China. Further details on this joint venture are provided in Note 18 of the Group financial statements.

I.      Tax assets and liabilities

		2015	2014
		£m	£m
Deferred tax liabilities		1	1
Total tax liabilities		1	1

The amount of deferred tax liabilities expected to be settled after more than 12 months is £1m (2014: £1m).

There are no tax assets or current tax liabilities.

The Company has surrendered the benefit of its tax losses to underlying subsidiaries for a consideration of £19m (2014: £11m) which will be receivable within one year. The Company has provided for deferred tax amounting to £1m (2014: £1m) in respect of unrealised gains on equity securities.

Recognised deferred tax

		2015	2014
		£m	£m
Deferred tax liabilities comprise:
Unrealised gains on investments		(1)	(1)
Net deferred tax liabilities		(1)	(1)
Movements in deferred tax liabilities comprise:
At 1 January		(1)	(1)
Amounts credited to net profit		-	-
At 31 December		(1)	(1)

J.    Financial investments

		Designated as at fair value through profit or loss	Held for trading	Available-       for-sale	Loans and receivables	Total
2015	Notes	£m	£m	£m	£m	£m
Investments in subsidiaries at FVTPL		257	-	-	-	257
Investments in associates at FVTPL		13	-	-	-	13
Loans to subsidiaries		-	-	-	322	322
Derivative financial assets	K	-	-	-	-	-
Debt securities		-	-	743	-	743
Receivables and other financial assets	L	-	-	-	48	48
Cash and cash equivalents	N	-	-	-	61	61
Total		270	-	743	431	1,444

		Designated as at fair value through profit or loss	Held for trading	Available-     for-sale	Loans and receivables	Total
2014	Notes	£m	£m	£m	£m	£m
Investments in subsidiaries at FVTPL		131	-	-	-	131
Investments in associates at FVTPL		13	-	-	-	13
Loans to subsidiaries		-	-	-	634	634
Derivative financial assets	K	-	24	-	-	24
Debt securities		135	-	357	-	492
Receivables and other financial assets	L	-	-	-	40	40
Cash and cash equivalents	N	-	-	-	34	34
Total		279	24	357	708	1,368

The amount of debt securities expected to be recovered or settled after more than 12 months is £290m (2014: £357m). Due to the nature of investments in associates at FVTPL, there is no fixed term associated with these securities.

The amount of loans and receivables expected to be recovered or settled after more than 12 months is £322m (2014: £634m).

K.    Derivative financial instruments

The Company uses derivative financial instruments in order to reduce the risk from potential movements in foreign exchange rates, equity indices and interest rates, to reduce credit risk or to achieve efficient portfolio management. These instruments are designated as held for trading in the Company's financial statements.

Included within derivative financial instruments held for trading in 2014 were certain forward foreign exchange contracts, which for the Group, hedged part of the currency translation risk of net investments in foreign operations and a portion of the expected cash proceeds of the sale of the Canadian business received on 30 January 2015. For details refer to Note 23 of the Group financial statements.

	2015			2014
	Contract amount	Fair value assets	Fair value liabilities	Contract amount	Fair value assets	Fair value liabilities
	£m	£m	£m	£m	£m	£m
Foreign exchange forwards	40	-	2	8,511	24	25

The derivative liabilities of £2m (2014: £25m) are expected to be settled within 12 months. The derivative assets of £nil (2014: £24m) are expected to be recovered within 12 months.

The maturity profile of the contractual undiscounted cash flows in relation to derivative financial instruments is as follows:

	Within 1 year	2-5 years	Total
2015	£m	£m	£m
Cash inflows
Derivative financial assets	18	-	18
Derivative financial liabilities	22	-	22
Total	40	-	40
Cash outflows
Derivative financial assets	18	-	18
Derivative financial liabilities	24	-	24
Total	42	-	42
Net derivative financial instruments cash flows	(2)	-	(2)

	Within 1 year	2-5 years	Total
2014	£m	£m	£m
Cash inflows
Derivative financial assets	4,262	-	4,262
Derivative financial liabilities	4,245	4	4,249
Total	8,507	4	8,511
Cash outflows
Derivative financial assets	4,237	-	4,237
Derivative financial liabilities	4,270	4	4,274
Total	8,507	4	8,511
Net derivative financial instruments cash flows	-	-	-

L.    Receivables and other financial assets

		2015	2014
		£m	£m
Due from related parties		44	39
Collateral pledged in respect of derivatives contracts		2	-
Other financial assets		2	1
Total receivables and other financial assets		48	40

The carrying amounts disclosed above reasonably approximate the fair values at the year end.

Receivables and other financial assets are expected to be recovered within 12 months.

M.   Other assets

Other assets of £19m (2014: £10m) comprise amounts due from related parties in respect of Group relief, which are expected to be received within 12 months.

N.    Cash and cash equivalents

		2015	2014
		£m	£m
Demand and term deposits with original maturity of less than three months		61	34
Total cash and cash equivalents		61	34

Demand and term deposits with original maturity of less than three months are subject to variable interest rates. 

O.    Share capital

Details of the Company's share capital are given in Note 28 of the Group financial statements.

P.    Shares held by trusts

Shares held by trusts represents the Company's funding of the Employee Share Trust (EST) in relation to the acquisition of shares of the Company for delivery to employees under various employee share schemes.

Q.    Retained earnings

		2015	2014
	Notes	£m	£m
At 1 January		785	601
Profit for the year attributable to equity holders		1,090	553
Dividends and appropriations		(343)	(386)
Dividends paid on 'C' shares		(1,261)	-
Redemption of 'B' shares	R	(488)
Transfer from merger reserve on disposal of subsidiary	R	1,028	-
Transfer from equity compensation reserve for vested employee share-based payments	R	32	27
Shares distributed by employee trusts		(6)	(10)
At 31 December		837	785

Details of the dividends paid on ordinary shares and the 73p per ordinary share returned to the shareholders through a 'B/C' share scheme by the Company are provided in Notes 15 and 28 of the Group financial statements. Note 15 also includes information regarding the final dividend proposed by the Directors for the year ended 31 December 2015.

R.    Reconciliation of movements in other reserves

		Merger reserve	Equity compensation reserve	Special reserve	Capital redemption reserve	Available-for-sale financial assets	Total
2015		£m	£m	£m	£m	£m	£m
At 1 January		3,108	48	241	-	8	3,405
Reserves credit for employee share-based payment schemes		-	34	-		-	34
Transfer to retained earnings for vested employee share-based payments		-	(32)	-	-	-	(32)
Redemption of 'B' shares		-	-	-	488	-	488
Transfer between reserves on disposal of subsidiary		(1,028)	-	-	-	-	(1,028)
Loss on sale of AFS financial assets recycled to profit and loss		-	-	-	-	(2)	(2)
Fair value losses on available-for-sale financial assets		-	-	-	-	(7)	(7)
Tax effect relating to items that may be reclassified subsequently to profit or loss		-	-	-	-	2	2
At 31 December		2,080	50	241	488	1	2,860
2014
At 1 January		3,108	48	241	-	(14)	3,383
Reserves credit for employee share-based payment schemes		-	27	-	-	-	27
Transfer to retained earnings for vested employee share-based payments		-	(27)	-	-	-	(27)
Fair value gains on available-for-sale financial assets		-	-	-	-	28	28
Tax effect relating to items that may be reclassified subsequently to profit or loss		-	-	-	-	(6)	(6)
At 31 December		3,108	48	241	-	8	3,405

Further information on the merger reserve and special reserve is given in Note 31 of the Group financial statements.

S.    Financial liabilities

		Held for trading	Financial liabilities measured at amortised cost	Total
2015	Notes	£m	£m	£m
Subordinated liabilities	T	-	1,318	1,318
Derivative financial liabilities	K	2	-	2
Other financial liabilities	U	-	52	52
Total		2	1,370	1,372

		Held for trading	Financial liabilities measured at amortised cost	Total
2014	Notes	£m	£m	£m
Subordinated liabilities	T	-	1,612	1,612
Derivative financial liabilities	K	25	-	25
Other financial liabilities	U	-	38	38
Total		25	1,650	1,675

T.    Subordinated liabilities

	2015		2014
	Principal	Carrying value	Principal	Carrying value
	Amount	£m	Amount	£m
Subordinated notes:
5.5% Sterling fixed rate due 4 December 2042	£500,000,000	499	£500,000,000	499
Subordinated guaranteed bonds:
6.75% Sterling fixed rate perpetual	£500,000,000	502	£500,000,000	502
Mutual Assurance Capital Securities:
6.546% Sterling fixed rate perpetual	£300,000,000	317	£300,000,000	317
5.314% Euro fixed/floating rate perpetual	-	-	€360,000,000	294
Subordinated liabilities		1,318		1,612

Subordinated liabilities are considered current if the contractual re-pricing or maturity dates are within one year. On 6 January 2015 the Company redeemed in full the 5.314% Euro fixed/floating rate perpetual Mutual Assurance Capital Securities at their outstanding principal amount of €360,000,000. Accrued interest of £15m relating to these securities was also settled. The principal amount of all other subordinated liabilities is expected to be settled after more than 12 months. The accrued interest on the remaining subordinated liabilities of £37m (2014: £37m) is expected to be settled within 12 months.

Further information on the terms and conditions of the subordinated liabilities is given in Note 36 of the Group financial statements.

U.    Other financial liabilities

		2015	2014
		£m	£m
Collateral accepted in respect of derivative contracts		-	3
Loan notes arising on acquisition of subsidiary		-	6
Other		52	29
Total other financial liabilities		52	38

The amount of other financial liabilities expected to be settled after more than 12 months is £nil (2014: £6m).

V.    Other liabilities

The amount of other liabilities expected to be settled after more than 12 months is £nil (2014: £nil).

W.   Risk management

(a)     Overview

An overview of the Group risk management framework and policies is provided in Note 41 of the Group financial statements.

The Company is exposed to market, credit and liquidity risks.

(b)     Market risk 

The Group defines market risk as the risk that arises from the Group's exposure to market movements which could result in the value of income, or the value of financial assets and liabilities, or the cash flows relating to these, fluctuating by different amounts.

The most significant element of market risk for the Company arises from its exposure to fluctuations in interest rates and equity markets. The Company is exposed to fluctuations in the fair value of future cash flows of financial instruments caused by changes in market interest rates. Financial assets and liabilities which are subject to the most significant exposure to interest rate risk include corporate bonds, money market instruments, derivative financial instruments and subordinated liabilities. The Company is also exposed to fluctuations in the equity securities markets, and as a result, changes in the value of its holdings and the return on those holdings.

Market risk is managed through the Group market risk policy. The Company is required to manage risk in accordance with the policy and to take mitigating action as appropriate to operate within defined risk appetites. The Company ensures that risks remain within the approved market risk appetite through the use of a number of specific controls and techniques, including defined lists of permitted securities and/or application of investment constraints and the active use of derivatives to improve the matching characteristics of assets and liabilities.

The Company's investments and liabilities are generally held in its functional currency. However, for strategic and capital reasons the Company may hold investments and liabilities in other currencies. In these cases, derivative financial instruments may be employed to manage currency exposure so that the Company has no remaining significant exposure to foreign exchange fluctuations.

Derivative instruments may also be utilised to reduce risk arising from exposure to fluctuations in interest rates and equity indices. Transactions in derivatives are undertaken on a regulated market or are with an approved counterparty. In employing derivatives, the Company must always have sufficient cash and cash equivalents or underlying assets to cover any potential obligation or exercise right following reasonably foreseeable adverse variations.

(b)(i)   Market risk concentrations

The Group manages market risk concentrations by ensuring that exposure is divided among a number of instruments. For each type of asset within a portfolio, responsibility for setting adequately diversified benchmarks and for limiting the structure of market risk exposure is set by the Company.

The following table provides information regarding the market risk exposure of the Company at 31 December 2015 and 31 December 2014, showing diversification by asset type and geographic region.

The geographic classification for loans and cash and cash equivalents is determined by the currency of the underlying financial instruments.

	Geography
	UK		Europe		Other		Total
	2015	2014	2015	2014	2015	2014	2015	2014
	£m	£m	£m	£m	£m	£m	£m	£m
IInvestments in subsidiaries at FVTPL	257	131	-	-	-	-	257	131
IInvestments in associates at FVTPL	-	-	-	-	13	13	13	13
Loans to subsidiaries	317	317	-	294	5	23	322	634
Derivative financial assets	-	24	-	-	-	-	-	24
Debt securities	183	277	521	181	39	34	743	492
Cash and cash equivalents	49	30	11	4	1	-	61	34
	806	779	532	479	58	70	1,396	1,328
Receivables and other financial assets							48	40
Financial investments							1,444	1,368

The market risk exposure to foreign currency assets is either matched by liabilities held in the same currency or managed using derivative financial instruments.

(b)(ii)  Sensitivity analysis - market risk

The table below illustrates the sensitivity of profit after tax and equity to reasonably possible variations in the key assumptions made in relation to the Company's most significant market risk exposures. The sensitivity analysis has been performed by calculating the sensitivity of profit after tax and equity to changes in equity security prices and to changes in interest rates as at the reporting date, assuming other assumptions remain unchanged. When illustrating the impact of equity risk, the expectations of corporate earnings remain unchanged. Correlation between the different risks and/or other factors may mean that experience would differ from that expected if more than one risk event occurred simultaneously.

	Equity								Interest
	+20%		-20%		+10%		-10%		+1%		-1%
	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Impact on profit after tax	5	3	(5)	(3)	2	1	(2)	(1)	-	1	-	1

Equity sensitivity to market risk

The Company classifies certain debt securities which back subordinated debt liabilities as available-for-sale. These debt securities are measured at fair value. Interest is calculated using the effective interest method and recognised in the income statement. Other changes in fair value and the related tax are recognised in other comprehensive income. As a result, the sensitivity of the Company's equity to variations in interest rate risk exposures differs from the sensitivity of the Company's profit after tax to variations in interest rate risk exposures.

The Company's equity sensitivity to a 1% increase in interest rates is (£16m) (2014: (£17m)) and to a 1% decrease in interest rates is £16m (2014: £17m). 

The sensitivity of the Company's total equity to variations in equity markets in respect of each of the scenarios shown in the preceding tables is the same as the sensitivity of the Company's profit after tax.

Limitations

The sensitivity analysis is non-linear and larger or smaller impacts should not be derived from these results. The sensitivity analysis represents the impact on profits at the year end that the changes in assumptions can have. The sensitivity will vary with time, both due to changes in market conditions and changes in the actual asset mix, and this mix is being actively managed. The results of the sensitivity analysis may also have been different from those illustrated had the tests been applied at a date other than the reporting date.

(c)     Credit risk

The Group defines credit risk as the risk of exposure to loss if a counterparty fails to perform its financial obligations, including failure to perform these obligations in a timely manner. It also includes the risk of a reduction in the value of assets due to widening of mortgage, bond and swap spreads.

Credit risk is managed through the Group credit risk policy. The Company is required to manage risk in accordance with the Group policy and to take mitigating action as appropriate to operate within defined risk appetites.

In managing credit risk, maximum counterparty exposure limits are used for financial instruments where the Company has significant credit risk.

For cash and cash equivalents, the Company maintains exposures within limits that are set with reference to internal credit assessments. For derivative financial instruments, maximum counterparty exposure limits, net of collateral, are set with reference to internal credit assessments. The forms of collateral that may be accepted are also specified and minimum transfer amounts in respect of collateral transfers are documented. No credit limits are set in respect of loans to subsidiaries, where the main exposure is to SLAL, a wholly owned subsidiary undertaking, with long-term ratings of A+ from Standard & Poors' and A1 from Moody's. Any loans to subsidiaries require approval from the Group Enterprise Risk Management Committee prior to being transacted.

(c)(i)  Credit exposure of financial assets

The following table provides an analysis of the quality of financial assets that are neither past due nor impaired at the reporting date and are exposed to credit risk. For those financial assets with credit ratings assigned by external rating agencies, classification is within the range of AAA to BBB. AAA is the highest possible rating and rated financial assets that fall outside the range of AAA to BBB have been classified as below BBB. For those financial assets that do not have credit ratings assigned by external rating agencies but where the Company has assigned internal ratings for use in managing and monitoring credit risk, the assets have been classified in the analysis that follows as 'internally rated'. If a financial asset is neither rated by an external agency nor 'internally rated', it is classified as 'not rated'. The total amounts presented represent the Company's maximum exposure to credit risk at the reporting date without taking into account any collateral held. The analysis also provides information on the concentration of credit risk.

The total amount in the table below represents the Company's credit exposure to financial investments at the year end without taking into account any collateral held.

	Investments in subsidiaries at FVTPL		Investments in associates at FVTPL		Loans to subsidiaries		Derivative financial assets		Debt Securities		Receivables  and other financial assets		Cash and cash equivalents		Total
	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
AAA	-	-	-	-	-	-	-	-	35	36	-	-	-	-	35	36
AA	-	-	-	-	-	-	-	-	64	121	-	-	9	7	73	128
A	-	-	-	-	-	-	-	-	537	235	-	-	4	25	541	260
BBB	-	-	-	-	-	-	-	-	92	99	-	-	48	2	140	101
Not rated	257	131	13	13	322	634	-	24	15	1	48	40	-	-	655	843
Total	257	131	13	13	322	634	-	24	743	492	48	40	61	34	1,444	1,368

The Investments in subsidiaries at FVTPL of £257m (2014: £131m) includes £200m (2014: £nil) invested in absolute return funds and £57m (2014: £131m) relating to a holding in a money market fund. These funds are managed by a subsidiary company and are not rated. The money market fund invests in a range of counterparties that are externally rated, and uses concentration limits and maturity limits in managing its exposures.

Assets are deemed to be past due when a counterparty has failed to make a payment when contractually due. An allowance account is not used by the Company to record separately the impairment of assets by credit losses. Instead, the carrying amount of an asset subject to any impairment charge is directly reduced by the amount of the impairment. At 31 December 2015 and 31 December 2014, all financial assets were neither past due nor impaired.

(c)(ii)  Collateral accepted and pledged in respect of financial instruments

Collateral in respect of derivative financial instruments is accepted from and provided to certain market counterparties to mitigate counterparty risk in the event of default. The use of collateral in respect of derivative financial instruments is governed by formal bilateral agreements between the parties. The amount of collateral required by either party is calculated daily based on the value of derivative transactions in accordance with these agreements and collateral is moved on a daily basis to ensure there is full collateralisation. Any collateral moved under the terms of these agreements is transferred outright. With regard to either collateral pledged or accepted the Company may request the return of, or be required to return, collateral to the extent it differs from that required under the daily margin calculations.

Where there is an event of default under the terms of the agreements, any collateral balances will be included in the close-out calculation of net counterparty exposure. At 31 December 2015, the Company had pledged £nil (2014: £9m) of debt securities and £2m (2014: £nil) of cash as collateral for derivative financial liabilities and accepted £nil (2014: £3m) of cash as collateral for derivative financial assets.

None of the collateral accepted has been sold or repledged at the year end. 

(c)(iii) Offsetting financial assets and liabilities

The Company does not offset any financial assets and liabilities in the statement of financial position, as there are no unconditional rights to set off. 

The Company's over-the-counter (OTC) derivatives are all subject to an International Swaps and Derivative Association (ISDA) master agreement, which provide a right of set off that is enforceable only in the event of default, insolvency, or bankruptcy. An ISDA master agreement is considered a master netting agreement. The Company does not hold any other financial instruments which are subject to master netting agreements or similar arrangements.

				Related amounts not offset in the Company statement of financial position
As at 31 December 2015	Gross amounts of financial instruments recognised	Gross amounts of financial instruments offset in the Company statement of financial position	Net amounts of financial instruments as presented  in the Company statement of financial position	Financial Instruments	Financial  collateral pledged/ (received)	Net position
	£m	£m	£m	£m	£m	£m
Financial assets
Derivatives1	-	-	-	-	-	-
Total financial assets	-	-	-	-	-	-
Financial liabilities
Derivatives1	(2)	-	(2)	-	2	-
Total financial liabilities	(2)	-	(2)	-	2	-

¹    Only derivatives subject to master netting agreements have been included above.

				Related amounts not offset in the Company statement of financial position
As at 31 December 2014	Gross amounts of financial instruments recognised	Gross amounts of financial instruments offset in the Company statement of financial position	Net amounts of financial instruments as presented  in the Company statement of financial position	Financial Instruments	Financial collateral pledged/ (received)	Net position
	£m	£m	£m	£m	£m	£m
Financial assets
Derivatives1	24	-	24	-	(10)	14
Total financial assets	24	-	24	-	(10)	14
Financial liabilities
Derivatives1	(25)	-	(25)	-	16	(9)
Total financial liabilities	(25)	-	(25)	-	16	(9)

¹    Only derivatives subject to master netting agreements have been included above.

(d)    Liquidity risk

The Group defines liquidity risk as the risk that the business units are unable to realise investments and other assets in order to settle their financial obligations when they fall due, or can do so only at excessive cost.

Liquidity risk is managed through the Group liquidity and capital management policy. The Company is required to manage risk in accordance with the Group policy and to take mitigating action as appropriate to operate within defined risk appetites.

Liquidity risk is managed by the Company in consultation with the central Group Treasury function. Liquidity risk is primarily managed by placing limits on the value of financial assets held which are neither quoted nor regularly traded on a recognised exchange and by maintaining a portfolio of committed bank facilities. In May 2015, the Company reduced its syndicated revolving credit facility which it holds as part of its contingency funding plans, to £400m (2014: £500m) in line with a lower risk profile following the sale of the Canadian business. The maturity date for this facility was extended until 2020 and is currently undrawn. The Company is also responsible for the definition and management of the contingency funding plan which operates on a continuous basis and is fully documented.

(d)(i)   Maturity analysis

The cash flows payable by the Company under its financial liabilities are analysed in the table that follows by remaining contractual maturities at the reporting date. The amounts shown are the contractual undiscounted cash flows.

	Within 1 year	2-5 years	6-10 years	11-15 years	16-20 years	Greater than 20 years	Total
2015	£m	£m	£m	£m	£m	£m	£m
Subordinated liabilities	81	324	377	345	208	700	2,035
Other financial liabilities	64	-	-	-	-	-	64
Total	145	324	377	345	208	700	2,099

2014
Subordinated liabilities	390	324	375	341	206	449	2,085
Other financial liabilities	40	-	-	-	-	-	40
Total	430	324	375	341	206	449	2,125

The principal amounts of financial liabilities where the counterparty has no right to repayment are excluded from the table along with interest payments on such instruments after 20 years.

The Company ensures that it can meet its financial obligations as they fall due by maintaining suitable levels of liquid assets. The obligations arising from subordinated liabilities are offset by receipts arising from loans to subsidiaries and investments in subsidiaries. Refer to Note K, for the maturity profile of undiscounted cash flows of derivative financial instruments.

X.    Contingent liabilities, contingent assets, indemnities and guarantees

(a)     Legal proceedings and regulations

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

(b)     Unclaimed asset trust

The details of the expiry of the Unclaimed Asset Trust are given in Note 45 of the Group financial statements.

(c)          Indemnities and guarantees

During 2009, the Company provided an indemnity to the Standard Life Unclaimed Asset Trust (UAT) to cover any expenses, damages, losses and costs that cannot be recovered from the assets held within the UAT. The indemnity is for a maximum of £30m and gave rise to a liability of £nil at 31 December 2015 (2014: £nil).

Under the trust deed in respect of the Group's UK defined benefit pension plan, Standard Life Employee Services Limited (SLESL), the principal employer, must pay contributions to the pension plan as the trustees' actuary may certify necessary. The Company has guaranteed the obligations of SLESL to the UK defined benefit pension plan for a period of 15 years from 10 July 2006, which gave rise to a liability of £nil at 31 December 2015 (2014: £nil).

Y.    Related party transactions

(a)     Transactions with and balances from/(to) related parties

In the normal course of business, the Company enters into transactions with related parties. The year end balances arising from such transactions are as follows:

		2015	2014
		£m	£m
Due from related parties:
Subsidiaries		63	49
Loans to subsidiaries		322	634
		385	683

Transactions with related parties carried out by the Company during the year were as follows:

		2015	2014
		£m	£m
Revenues from related parties:
Subsidiaries		1,295	684
Associates		-	1
		1,295	685
Expenses to related parties:
Subsidiaries		156	64
		156	64

Where financial instruments arising from transactions with related parties are offset in the statement of financial position, the net position is presented in the tables above.

(b)     Compensation of key management personnel

The Directors and key management personnel of the Company are considered to be the same as for the Group. Information on both Company and Group compensation paid to Directors and key management personnel can be found in Note 48 of the Group financial statements. Information on transactions with/from and balances from/to key management personnel and their close family members can also be found in Note 48 of the Group financial statements.

Z.    Fair value of assets and liabilities

(a)    Determination of fair value hierarchy

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

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

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

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

(b)     Financial investments and financial liabilities

An analysis of the Company's financial investments and financial liabilities in accordance with the categories of financial instrument set out in IAS 39 Financial Instruments: Recognition and Measurement is presented in Notes J and S and includes those financial assets and liabilities held at fair value.

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

Information on the methods and assumptions used to determine fair values for each major category of instrument measured at fair value is given in the following note:

Derivative financial assets and derivative financial liabilities         

The Company's derivatives are over-the-counter investments which are fair valued using valuation techniques based on observable market data and are therefore treated as level 2 investments within the fair value hierarchy.

Non-performance risk arising from the credit risk of each counterparty has been considered on a net exposure basis in line with the Group's risk management policies. At 31 December 2015 the residual credit risk is considered immaterial and no credit risk adjustment has been made.

Investments in subsidiaries at FVTPL
Investments in subsidiaries at FVTPL comprises £200m (2014: £nil) of investments on a recognised exchange which are valued using prices sourced from the primary exchange on which they are listed. These instruments are generally considered to be quoted in an active market and are therefore treated as level 1 investments within the fair value hierarchy.

The remaining investments in subsidiaries at FVTPL relate to a short term investment fund which is valued daily at net asset value (NAV) adjusted for accrued interest. Although the price is not quoted in an active market the valuation is based on observable market data and as a result has been classified as level 2 in the fair value hierarchy.

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

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

·   Government, including provincial and municipal, and supranational institution bonds
These instruments are valued using prices received from external pricing providers who generally base the price on quotes received from a number of market participants. They are treated as level 1 or level 2 instruments within the fair value hierarchy depending upon the nature of the underlying pricing information used for valuation purposes.

·   Corporate bonds (listed or quoted in an established over the counter market including asset-backed securities)
These instruments are generally valued using prices received from external pricing providers who generally consolidate quotes received from a panel of banks into a composite price. As the market becomes less active the quotes provided by some banks may be based on modelled prices rather than on actual transactions. These sources are based largely on observable market data, and therefore these instruments are treated as level 2 instruments within the fair value hierarchy. When prices received from external pricing providers are based on a single broker indicative quote the instruments are treated as level 3 instruments.

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

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

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

The following table sets out an analysis of financial assets and liabilities measured at fair value by level of the fair value hierarchy.

	Fair value hierarchy
	Level 1		Level 2		Level 3		Total
	2015	2014	2015	2014	2015	2014	2015	2014
Assets	£m	£m	£m	£m	£m	£m	£m	£m
Investment in subsidiaries at FVTPL	200	-	57	131	-	-	257	131
Investment in associates at FVTPL	13	13	-	-	-	-	13	13
Derivative financial assets	-	-	-	24	-	-	-	24
Debt securities	31	78	711	413	1	1	743	492
Total	244	91	768	568	1	1	1,013	660

Liabilities
Derivative financial liabilities	-	-	2	25	-	-	2	25
Total	-	-	2	25	-	-	2	25

There were no significant transfers between level 1 and level 2 in the year.

(c)(ii) Reconciliation of movements in level 3 instruments

During the year, there were no disposals (2014: none) of level 3 equity securities.

(c)(iii) Sensitivity of level 3 financial instruments measured at fair value to changes in key assumptions

There is no significant sensitivity of level 3 financial instruments measured at fair value in relation to changes in key assumptions.

(d)    Fair value of financial assets and liabilities measured at amortised cost

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

		2015	2014	2015	2014
		Carrying value	Carrying value	Fair value	Fair value
	Notes	£m	£m	£m	£m
Assets
Loans to subsidiaries	J	322	634	348	666
Liabilities
Subordinated notes	T	499	499	530	561
Subordinated guaranteed bonds	T	502	502	579	580
Mutual Assurance Capital Securities	T	317	611	345	643

The estimated fair values of loans to subsidiaries are determined with reference to quoted market prices determined using observable market inputs. The fair values of subordinated liabilities are based on the quoted market offer price. The Company does not consider its loans to subsidiaries to be impaired.

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

The table below presents the instruments as detailed above measured at fair value by level of the fair value hierarchy.

	Level 1		Level 2		Level 3		Total
	2015	2014	2015	2014	2015	2014	2015	2014
	£m	£m	£m	£m	£m	£m	£m	£m
Assets
Loans to subsidiaries	-	-	343	643	5	23	348	666
Liabilities
Subordinated notes	-	-	530	561	-	-	530	561
Subordinated guaranteed bonds	-	-	579	580	-	-	579	580
Mutual Assurance Capital Securities	-	-	345	643	-	-	345	643

11.   Supplementary information

11.1  Group assets under administration and net flows

Group assets under administration (AUA) represent the IFRS gross assets of the Group adjusted to include third party AUA, which are not included on the consolidated statement of financial position. In addition, certain assets are excluded, for example deferred acquisition costs, intangibles and reinsurance assets. Continuing operations excludes the Canadian business assets sold on 30 January 2015 and includes Ignis assets acquired on 1 July 2014 (£60.5bn) which were reflected within market and other movements in 2014.

Group assets under administration (summary)

12 months ended 31 December 2015

	Growth (G) Mature (M) Other (O)	Fee (F) Spread/risk (S/R)  Other (O)	Opening  AUA at 1 Jan 2015	Gross flows	Redemptions	Net flows	Market and other movements	Closing AUA at 31 Dec 2015
			£bn	£bn	£bn	£bn	£bn	£bn
Total fee			268.6	42.4	(35.4)	7.0	4.7	280.3
Total spread/risk			16.1	0.2	(1.1)	(0.9)	(0.3)	14.9
Total other			11.9	0.4	(0.2)	0.2	0.1	12.2
Total AUA			296.6	43.0	(36.7)	6.3	4.5	307.4
By business:
Standard Life Investments
Institutional	G		61.4	11.1	(7.8)	3.3	2.3	67.0
Wholesale	G		35.5	16.8	(7.5)	9.3	1.1	45.9
Wealth	G		6.1	0.9	(0.7)	0.2	0.2	6.5
Ignis	G		14.5	2.6	(5.1)	(2.5)	(0.9)	11.1
Third party strategic partner life business	M		43.8	0.2	(5.0)	(4.8)	0.6	39.6
Standard Life Investments third party		F	161.3	31.6	(26.1)	5.5	3.3	170.1
UK Pensions and Savings
Workplace	G		32.0	4.1	(2.2)	1.9	(0.9)	33.0
Retail1	G		37.3	7.5	(3.6)	3.9	1.4	42.6
Mature Retail	M		33.5	0.7	(3.1)	(2.4)	1.6	32.7
Workplace and Retail		F	102.8	12.3	(8.9)	3.4	2.1	108.3
Conventional with profits	M	F	2.1	-	(0.9)	(0.9)	0.1	1.3
Annuities	M	S/R	15.5	0.2	(1.1)	(0.9)	(0.3)	14.3
Assets not backing products	O	O	7.7	-	-	-	-	7.7
UK Pensions and Savings			128.1	12.5	(10.9)	1.6	1.9	131.6
Europe Pensions and Savings
Fee1	G/M	F	17.2	2.3	(1.2)	1.1	(0.3)	18.0
Spread/risk	M	S/R	0.6	-	-	-	-	0.6
Europe Pensions and Savings			17.8	2.3	(1.2)	1.1	(0.3)	18.6
UK and Europe Pensions and Savings			145.9	14.8	(12.1)	2.7	1.6	150.2
India and China
Hong Kong	G	F	0.4	0.1	-	0.1	-	0.5
Associate and joint venture life businesses	O	O	2.1	0.4	(0.2)	0.2	-	2.3
India and China			2.5	0.5	(0.2)	0.3	-	2.8
Other corporate assets	O	O	2.5	-	-	-	0.2	2.7
Consolidation and eliminations2	G/O	F/O	(15.6)	(3.9)	1.7	(2.2)	(0.6)	(18.4)
Group AUA - continuing operations			296.6	43.0	(36.7)	6.3	4.5	307.4

¹      Wrap AUA is reported predominantly within Retail: £23.4bn, (2014: £19.2bn). Offshore bond is reported within Europe fee business: £2.1bn, (2014: £1.7bn).

²      Certain products are included in both Pensions and Savings AUA and Standard Life Investments third party AUM. Therefore, at a Group level an elimination adjustment is required to remove any duplication, in addition to other necessary consolidation adjustments. Comprises £17.9bn (2014: £15.2bn) related to fee business eliminations and £0.5bn (2014: £0.4bn) related to other eliminations.

Group assets under administration (summary)

12 months ended 31 December 2014

	Growth(G) Mature (M) Other (O)	Fee (F) Spread/risk (S/R)  Other (O)	Opening AUA at 1 Jan 2014	Gross flows	Redemptions	Net flows	Market and other movements	Closing AUA at 31 Dec 2014
			£bn	£bn	£bn	£bn	£bn	£bn
Total fee			190.7	33.3	(31.6)	1.7	76.2	268.6
Total spread/risk			15.1	0.3	(1.2)	(0.9)	1.9	16.1
Total other			8.9	0.4	(0.2)	0.2	2.8	11.9
Total AUA			214.7	34.0	(33.0)	1.0	80.9	296.6
By business:
Standard Life Investments
Institutional	G		55.1	9.4	(8.6)	0.8	5.5	61.4
Wholesale	G		28.9	11.8	(6.6)	5.2	1.4	35.5
Wealth	G		5.8	0.7	(0.7)	-	0.3	6.1
Ignis	G		-	1.9	(6.2)	(4.3)	18.8	14.5
Third party strategic partner life business	M		-	-	(1.6)	(1.6)	45.4	43.8
Standard Life Investments third party		F	89.8	23.8	(23.7)	0.1	71.4	161.3
UK Pensions and Savings
Workplace	G		29.2	4.0	(1.8)	2.2	0.6	32.0
Retail1	G		33.8	5.9	(3.0)	2.9	0.6	37.3
Mature Retail	M		33.5	0.6	(2.8)	(2.2)	2.2	33.5
Workplace and Retail		F	96.5	10.5	(7.6)	2.9	3.4	102.8
Conventional with profits	M	F	2.9	0.1	(1.1)	(1.0)	0.2	2.1
Annuities	M	S/R	14.6	0.3	(1.2)	(0.9)	1.8	15.5
Assets not backing products	O	O	5.7	-                 -	-	-	2.0	7.7
UK Pensions and Savings			119.7	10.9	(9.9)	1.0	7.4	128.1
Europe Pensions and Savings
Fee1	G/M	F	14.9	2.2	(1.1)	1.1	1.2	17.2
Spread/risk	M	S/R	0.5	-	-	-	0.1	0.6
Europe Pensions and Savings			15.4	2.2	(1.1)	1.1	1.3	17.8
UK and Europe Pensions and Savings			135.1	13.1	(11.0)	2.1	8.7	145.9
India and China
Hong Kong	G	F	0.3	0.1	-	0.1	-	0.4
Associate and joint venture life businesses	O	O	1.6	0.4	(0.2)	0.2	0.3	2.1
India and China			1.9	0.5	(0.2)	0.3	0.3	2.5
Other corporate assets	O	O	2.0	-	-	-	0.5	2.5
Consolidation and eliminations2	G/O	F/O	(14.1)	(3.4)	1.9	(1.5)	-	(15.6)
Group AUA - continuing operations			214.7	34.0	(33.0)	1.0	80.9	296.6

¹      Wrap AUA is reported predominantly within Retail: £19.2bn. Offshore bond is reported within Europe fee business: £1.7bn.

²      Certain products are included in both Pensions and Savings AUA and Standard Life Investments third party AUM. Therefore, at a Group level an elimination adjustment is required to remove any duplication, in addition to other necessary consolidation adjustments. Comprises (£15.2bn) related to fee business eliminations and (£0.4bn) related to other eliminations.

11.2  Standard Life Investments assets under management and net flows

12 months ended 31 December 2015		Opening AUA at 1 Jan 2015	Gross flows	Redemptions	Net flows	Market and other movements	Closing AUA at 31 Dec 2015
		£bn	£bn	£bn	£bn	£bn	£bn
Third party AUM1	UK	75.5	15.2	(10.8)	4.4	3.3	83.2
	Europe	11.3	5.4	(2.0)	3.4	(0.5)	14.2
	North America	8.1	5.3	(2.3)	3.0	0.6	11.7
	Asia Pacific	2.0	2.1	(0.9)	1.2	0.1	3.3
	India	6.1	0.8	-	0.8	0.1	7.0
	Ignis	14.5	2.6	(5.1)	(2.5)	(0.9)	11.1
	By geography of client	117.5	31.4	(21.1)	10.3	2.7	130.5
	Equities	15.5	2.6	(2.6)	-	1.4	16.9
	Fixed income	22.0	3.1	(2.8)	0.3	(0.5)	21.8
	Multi-asset2	38.6	17.3	(7.8)	9.5	2.2	50.3
	Real estate	7.4	1.1	(0.8)	0.3	0.9	8.6
	MyFolio	5.9	2.6	(0.7)	1.9	0.3	8.1
	Other3	13.6	2.1	(1.3)	0.8	(0.7)	13.7
	Ignis4	14.5	2.6	(5.1)	(2.5)	(0.9)	11.1
	By asset class	117.5	31.4	(21.1)	10.3	2.7	130.5
	Institutional	61.4	11.1	(7.8)	3.3	2.3	67.0
	Wholesale	35.5	16.8	(7.5)	9.3	1.1	45.9
	Wealth	6.1	0.9	(0.7)	0.2	0.2	6.5
	Ignis	14.5	2.6	(5.1)	(2.5)	(0.9)	11.1
	By channel	117.5	31.4	(21.1)	10.3	2.7	130.5
Standard Life Group		84.6	4.1	(6.1)	(2.0)	0.5	83.1
Phoenix Group		43.8	0.2	(5.0)	(4.8)	0.6	39.6
Strategic partner life business AUM		128.4	4.3	(11.1)	(6.8)	1.1	122.7
Standard Life Investments AUM - continuing operations		245.9	35.7	(32.2)	3.5	3.8	253.2

12 months ended 31 December 2014		Opening AUA at 1 Jan 2014	Gross flows	Redemptions	Net flows	Market and other movements	Closing AUA at 31 Dec 2014
		£bn	£bn	£bn	£bn	£bn	£bn
Third party AUM1	UK	68.3	14.3	(12.4)	1.9	5.3	75.5
	Europe	10.4	2.8	(1.5)	1.3	(0.4)	11.3
	North America	5.2	2.9	(1.4)	1.5	1.4	8.1
	Asia Pacific	1.8	1.0	(0.6)	0.4	(0.2)	2.0
	India	4.1	0.9	-	0.9	1.1	6.1
	Ignis	-	1.9	(6.2)	(4.3)	18.8	14.5
	By geography of client	89.8	23.8	(22.1)	1.7	26.0	117.5
	Equities	15.1	2.8	(4.1)	(1.3)	1.7	15.5
	Fixed income	20.2	2.3	(3.3)	(1.0)	2.8	22.0
	Multi-asset2	31.4	11.4	(6.3)	5.1	2.1	38.6
	Real estate	6.1	1.1	(0.4)	0.7	0.6	7.4
	MyFolio	4.0	2.2	(0.6)	1.6	0.3	5.9
	Other3	13.0	2.1	(1.2)	0.9	(0.3)	13.6
	Ignis4	-	1.9	(6.2)	(4.3)	18.8	14.5
	By asset class	89.8	23.8	(22.1)	1.7	26.0	117.5
	Institutional	55.1	9.4	(8.6)	0.8	5.5	61.4
	Wholesale	28.9	11.8	(6.6)	5.2	1.4	35.5
	Wealth	5.8	0.7	(0.7)	-	0.3	6.1
	Ignis	-	1.9	(6.2)	(4.3)	18.8	14.5
	By channel	89.8	23.8	(22.1)	1.7	26.0	117.5
Standard Life Group		80.3	3.8	(6.2)	(2.4)	6.7	84.6
Phoenix Group		-	-	(1.6)	(1.6)	45.4	43.8
Strategic partner life business AUM		80.3	3.8	(7.8)	(4.0)	52.1	128.4
Standard Life Investments AUM - continuing operations		170.1	27.6	(29.9)	(2.3)	78.1	245.9

¹    Excluding strategic partner life business.

²      Comprises absolute return strategies, enhanced diversification strategies, risk-based portfolios and traditional balanced portfolios.

³    Comprises cash, private equity and Wealth. Net inflows from India cash funds £0.6bn (2014: net inflow £0.3bn).

⁴    Includes net inflows from Ignis liquidity funds of £0.7bn (2014: net outflows £1.0bn).

11.3  Additional analysis - Group 15 months net flows

Group assets under administration net flows

15 months ended 31 December 2015

	Growth (G) Mature (M) Other (O)	Fee (F) Spread/risk (S/R) Other (O)	3 months to 31 Dec 2015	3 months to 30 Sep 2015	3 months to 30 Jun 2015	3 months to 31 Mar 2015	3 months to 31 Dec 2014
			£bn	£bn	£bn	£bn	£bn
Total fee			0.7	2.5	0.8	3.0	(3.1)
Total spread/risk			(0.2)	(0.2)	(0.3)	(0.2)	(0.3)
Total other			-	0.1	-	0.1	0.1
Total net flows			0.5	2.4	0.5	2.9	(3.3)
By business:
Standard Life Investments
Institutional	G		0.4	1.1	0.7	1.1	0.1
Wholesale	G		2.2	1.8	2.7	2.6	1.5
Wealth	G		0.1	0.1	-	-	-
Ignis	G		(0.2)	(0.4)	(1.9)	-	(4.5)
Third party strategic partner life business	M		(2.3)	(0.3)	(0.9)	(1.3)	(0.9)
Standard Life Investments third party		F	0.2	2.3	0.6	2.4	(3.8)
UK Pensions and Savings
Workplace	G		0.4	0.4	0.5	0.6	0.6
Retail1	G		1.0	1.1	0.9	0.9	0.8
Mature Retail	M		(0.5)	(0.7)	(0.7)	(0.5)	(0.5)
Workplace and Retail		F	0.9	0.8	0.7	1.0	0.9
Conventional with profits	M	F	(0.2)	(0.3)	(0.2)	(0.2)	(0.3)
Annuities	M	S/R	(0.2)	(0.2)	(0.3)	(0.2)	(0.3)
Assets not backing products	O	O	-	-	-	-	-
UK Pensions and Savings			0.5	0.3	0.2	0.6	0.3
Europe Pensions and Savings
Fee1	G/M	F	0.3	0.3	0.2	0.3	0.3
Spread/risk	M	S/R	-	-	-	-	-
Europe Pensions and Savings			0.3	0.3	0.2	0.3	0.3
UK and Europe Pensions and Savings			0.8	0.6	0.4	0.9	0.6
India and China
Hong Kong	G	F	0.1	-	-	-	-
Associate and joint venture life businesses	O	O	-	0.1	-	0.1	0.1
India and China			0.1	0.1	-	0.1	0.1
Consolidation and eliminations2	G	F	(0.6)	(0.6)	(0.5)	(0.5)	(0.2)
Group net flows - continuing			0.5	2.4	0.5	2.9	(3.3)

¹      Wrap net flows are reported predominantly within Retail and offshore bond net flows are reported within Europe fee business.

²      Certain products are included in both Pensions and Savings AUA and Standard Life Investments third party AUM. Therefore, at a Group level an elimination adjustment is required to remove any duplication, in addition to other necessary consolidation adjustments. Net flows eliminations relate entirely to fee business and growth channels, FY15: £2.2bn (FY14: £1.5bn).

11.4  Additional analysis - Standard Life Investments 15 months net flows

Standard Life Investments assets under management net flows

15 months ended 31 December 2015

		3 months to 31 Dec 2015	3 months to 30 Sep 2015	3 months to 30 Jun 2015	3 months to 31 Mar 2015	3 months to 31 Dec 2014
		£bn	£bn	£bn	£bn	£bn
Third party net flows1	UK	0.8	1.5	1.1	1.0	0.4
	Europe	0.7	0.5	1.0	1.2	0.5
	North America	0.6	0.9	0.7	0.8	0.3
	Asia Pacific	0.5	(0.1)	0.6	0.2	0.1
	India	0.1	0.2	-	0.5	0.3
	Ignis	(0.2)	(0.4)	(1.9)	-	(4.5)
	By geography of client	2.5	2.6	1.5	3.7	(2.9)
	Equities	-	0.1	-	(0.1)	(1.0)
	Fixed income	(0.3)	0.2	-	0.4	-
	Multi-asset2	2.1	1.8	2.9	2.7	1.4
	Real estate	-	0.1	0.1	0.1	0.3
	MyFolio	0.5	0.5	0.5	0.4	0.5
	Other3	0.4	0.3	(0.1)	0.2	0.4
	Ignis4	(0.2)	(0.4)	(1.9)	-	(4.5)
	By asset class	2.5	2.6	1.5	3.7	(2.9)
	Institutional	0.4	1.1	0.7	1.1	0.1
	Wholesale	2.2	1.8	2.7	2.6	1.5
	Wealth	0.1	0.1	-	-	-
	Ignis	(0.2)	(0.4)	(1.9)	-	(4.5)
	By channel	2.5	2.6	1.5	3.7	(2.9)
Standard Life Group		(0.4)	(0.4)	(0.7)	(0.5)	(0.5)
Phoenix Group		(2.3)	(0.3)	(0.9)	(1.3)	(0.9)
Strategic partner life business net flows		(2.7)	(0.7)	(1.6)	(1.8)	(1.4)
Standard Life Investments net flows - continuing operations		(0.2)	1.9	(0.1)	1.9	(4.3)

¹    Excluding strategic partner life business.

²      Comprises absolute return strategies, enhanced diversification strategies, risk-based portfolios and traditional balanced portfolios.

³    Comprises cash, private equity and Wealth. Net inflows from India cash funds, FY15: £0.6bn (FY14: net inflow £0.3bn).

⁴    Includes net inflows from Ignis liquidity funds, FY15: £0.7bn (FY14: net outflows £1.0bn).

 

END

 

 

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