Quilter plc - 2023 Full Year Results Part 2

Quilter PLC

06 March 2024

Statement of Directors' responsibilities

in respect of the preliminary announcement of the Annual Report and the financial statements

The Directors confirm to the best of their knowledge:

· The results in this preliminary announcement have been taken from the Group's 2023 Annual Report, which will be available on the Company's website on 22 March 2024; and

· The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group.

Signed on behalf of the Board

Steven Levin Mark Satchel
Chief Executive Officer Chief Financial Officer

6 March 2024

Consolidated statement of comprehensive income
For the year ended 31 December 2023
			£m
	Notes	Year ended 31 December 2023	Year ended 31 December 2022
Income
Fee income and other income from service activities		542	581
Investment return		4,075	(4,649)
Other income		9	28
Total income		4,626	(4,040)
Expenses
Change in investment contract liabilities	15	(3,313)	4,318
Fee and commission expenses, and other acquisition costs		(49)	(54)
Change in third-party interests in consolidated funds		(579)	438
Other operating and administrative expenses		(575)	(584)
Finance costs		(22)	(13)
Total expenses		(4,538)	4,105
Profit before tax		88	65
Tax (expense)/credit attributable to policyholder returns	7(a)	(76)	134
Profit before tax attributable to shareholder returns		12	199
Income tax (expense)/credit	7(a)	(46)	110
Less: tax expense/(credit) attributable to policyholder returns		76	(134)
Tax credit/(expense) attributable to shareholder returns		30	(24)
Profit after tax attributable to the owners of the Company		42	175

Total comprehensive income		42	175

Earnings per Ordinary Share
Basic earnings per Ordinary Share (pence)	8	3.1	12.2
Diluted earnings per Ordinary Share (pence)	8	3.1	12.0

All income and expenses relate to continuing operations.

Consolidated statement of financial position
At 31 December 2023

			£m
	Notes	31 December 2023	31 December 2022
Assets
Goodwill and intangible assets	9	372	413
Property, plant and equipment		91	112
Investment property		10	-
Investments in associates		2	1
Contract costs		16	10
Loans and advances		38	34
Financial investments	10	50,329	43,617
Deferred tax assets		91	94
Current tax receivable		33	10
Trade, other receivables and other assets		447	303
Derivative assets		57	40
Cash and cash equivalents	13	1,859	1,782
Assets held for sale		-	1
Total assets		53,345	46,417

Equity and liabilities
Equity
Ordinary Share capital	14	115	115
Ordinary Share premium reserve	14	58	58
Capital redemption reserve		346	346
Share-based payments reserve		42	41
Other reserves		-	(1)
Retained earnings		958	989
Total equity		1,519	1,548
Liabilities
Investment contract liabilities	15	43,396	38,186
Third-party interests in consolidated funds		7,444	5,843
Provisions	16	46	69
Deferred tax liabilities		64	24
Current tax payable		2	1
Borrowings and lease liabilities		279	290
Trade, other payables and other liabilities		570	436
Derivative liabilities		25	20
Total liabilities		51,826	44,869
Total equity and liabilities		53,345	46,417

Approved by the Board of Directors and authorised for issue on 6 March 2024 and signed on its behalf:

Steven Levin Mark Satchel

Chief Executive Officer Chief Financial Officer

Consolidated statement of changes in equity
For the year ended 31 December 2023


										£m
Year ended 31 December 2023		Ordinary Share capital	Ordinary Share premium reserve	B shares	Capital redemption reserve	Merger reserve	Share-based payments reserve	Other reserves	Retained earnings	Total share- holders' equity
Balance at 1 January 2023		115	58	-	346	-	41	(1)	989	1,548
Profit after tax attributable to the owners of the Company		-	-	-	-	-	-	-	42	42
Total comprehensive income		-	-	-	-	-	-	-	42	42
Dividends		-	-	-	-	-	-	-	(65)	(65)
Acquisition of own shares¹		-	-	-	-	-	-	-	(14)	(14)
Movement in own shares		-	-	-	-	-	-	-	(13)	(13)
Exchange rate movement (ZAR/GBP)²		-	-	-	-	-	-	-	2	2
Equity-settled share-based payment transactions		-	-	-	-	-	-	-	18	18
Aggregate tax effects of items recognised directly in equity		-	-	-	-	-	1	-	-	1
Total transactions with the owners of the Company		-	-	-	-	-	1	-	(72)	(71)
Transfer to retained earnings		-	-	-	-	-	-	1	(1)	-
Balance at 31 December 2023		115	58	-	346	-	42	-	958	1,519



										£m
Year ended 31 December 2022	Notes	Ordinary Share capital	Ordinary Share premium reserve	B shares	Capital redemption reserve	Merger reserve	Share-based payments reserve	Other reserves	Retained earnings	Total share- holders' equity
Balance at 1 January 2022		116	58	-	17	25	42	(1)	1,482	1,739
Profit after tax attributable to the owners of the Company		-	-	-	-	-	-	-	175	175
Total comprehensive income		-	-	-	-	-	-	-	175	175
Dividends		-	-	-	-	-	-	-	(78)	(78)
Ordinary Shares repurchased in the buyback programme³	14	(1)	-	-	1	-	-	-	-	-
Issue of B shares⁴	14	-	-	328	-	(25)	-	-	(303)	-
Redemption of B shares⁴	14	-	-	(328)	328	-	-	-	(328)	(328)
Exchange rate movement (ZAR/GBP)²		-	-	-	-	-	-	-	(4)	(4)
Movement in own shares		-	-	-	-	-	-	-	22	22
Equity-settled share-based payment transactions		-	-	-	-	-	1	-	23	24
Aggregate tax effects of items recognised directly in equity		-	-	-	-	-	(2)	-	-	(2)
Total transactions with the owners of the Company		(1)	-	-	329	(25)	(1)	-	(668)	(366)
Balance at 31 December 2022		115	58	-	346	-	41	(1)	989	1,548

¹In November 2023, as a result of an Odd-lot Offer, Quilter plc purchased 15,798,423 of its own Ordinary Shares for £14 million. Those shares were gifted to the Employee Benefit Trust and are held as treasury shares.

²For shares registered on the Johannesburg Stock Exchange, the amounts of proposed dividends and share buybacks are set in South African Rand on the relevant Market Announcement date which is prior to the date of payment. The impact of exchange rate movements between these dates is recognised directly in equity. The Group held cash in South African Rand equal to the expected cash outflows and therefore was economically hedged for these payments.

³On 11 March 2020, the Company announced a share buyback programme to purchase Ordinary Shares up to a maximum value of £375 million, in order to return the net surplus proceeds arising from the sale of Quilter Life Assurance to shareholders. During 2022, the Company acquired 17.7 million shares for a total consideration of £26 million and incurred additional costs of £1 million. The Company had committed to the buyback of these shares during 2021 and had recognised an accrual for £26 million as at 31 December 2021. This was the final tranche of the share buyback programme and was completed in January 2022. The shares, which have a nominal value of £1 million, were subsequently cancelled, giving rise to a capital redemption reserve of the same value as required by the Companies Act 2006.

⁴On 9 March 2022, the Company announced a capital return of £328 million from the net surplus proceeds arising from the sale of Quilter International by way of a B Share Scheme accompanied by a Share Consolidation. Refer to note 14 for further details of the capital return and Share Consolidation. Following the issue and redemption of the B preference shares as part of the B Share Scheme, the Company transferred £328 million from retained earnings to the capital redemption reserve, as required under the provisions of sections 688 and 733 of the Companies Act 2006, being an amount equal to the nominal value of the B shares redeemed. The increase in the capital redemption reserve results from the UK company law requirement to maintain the company's capital when shares are redeemed out of the company's distributable profits.

Consolidated statement of cash flows

For the year ended 31 December 2023

The cash flows presented in this statement cover all the Group's activities and include flows from both policyholder and shareholder activities. All cash and cash equivalents are available for general use by the Group for the purposes of the disclosures required under IAS 7 Statement of Cash Flows except for cash and cash equivalents in consolidated funds (as shown in note 13).

			£m
	Notes	Year ended 31 December 2023	Year ended 31 December 2022
Cash flows from operating activities
Cash flows from operating activities		2,137	1,698
Taxation paid		(26)	(22)
Total net cash flows from operating activities	13(b)	2,111	1,676
Cash flows from investing activities
Net purchases and sales of financial investments		(1,908)	(1,494)
Purchase of property, plant and equipment		(1)	(3)
Proceeds from sale of property, plant and equipment held for sale		1	-
Acquisition of interests in subsidiaries¹		-	(5)
Increase in investment in associate		(1)	-
Total net cash flows from investing activities		(1,909)	(1,502)
Cash flows from financing activities
Dividends paid to the owners of the Company		(65)	(78)
Finance costs on borrowings		(18)	(9)
Payment of interest on lease liabilities		(3)	(3)
Payment of principal of lease liabilities		(9)	(11)
Quilter plc shares acquired under the Odd-lot Offer²		(14)	-
Quilter plc shares acquired for use within the Group's employee share scheme		(15)	-
Redemption of B shares³		-	(328)
Repurchase and cancellation of Ordinary Shares⁴		-	(28)
Exchange rate movements passed to shareholders⁵		2	(4)
Proceeds from the issue of subordinated debt		199	-
Subordinated debt repaid		(200)	-
Total net cash flows from financing activities		(123)	(461)
Net increase/(decrease) in cash and cash equivalents		79	(287)
Cash and cash equivalents at the beginning of the year		1,782	2,064
Effect of exchange rate changes on cash and cash equivalents		(2)	5
Cash and cash equivalents at the end of the year	13(a)	1,859	1,782

¹The acquisition of interests in subsidiaries in 2022 resulted from contingent consideration payments relating to historical acquisitions.

²Further information relating to the Odd-lot Offer is included within the consolidated statement of changes in equity.

³In March 2022, the Company announced a capital return of £328 million from the net surplus proceeds arising from the sale of Quilter International by way of a B Share Scheme accompanied by a Share Consolidation. The capital return was completed in May 2022.

⁴The repurchase and cancellation of Ordinary Shares outflow relates to the cash movements associated with the share buyback programme. Further details are included within the consolidated statement of changes in equity.

⁵The exchange rate movements passed to shareholders relate to foreign exchange gains or losses that have arisen on the capital return and dividend payments to JSE shareholders. Further details are included within the consolidated statement of changes in equity.

Notes to the condensed consolidated financial statements

For the year ended 31 December 2023

General information

Quilter plc (the "Company", the "Parent Company"), a public limited company incorporated in England and Wales 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 primarily in the UK. Quilter plc is listed on the London and Johannesburg Stock Exchanges.

The Company's registration number is 06404270. The address of the registered office is Senator House, 85 Queen Victoria Street, London, EC4V 4AB.

1: Basis of preparation

The results in this preliminary announcement have been taken from the Group's 2023 Annual report which will be available on the Company's website on 22 March 2024. These condensed consolidated financial statements of Quilter plc for the year ended 31 December 2023 have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

These condensed consolidated financial statements have been prepared on a historical cost basis, except for the revaluation of certain financial instruments which are held at fair value, 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 and liquidity over a three-year planning period covering 2024 to 2026. 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‑in‑50 and 1‑in‑200 year events. As part of the going concern assessment, the Group took into consideration the current position of the UK and global economy including the impact of inflation and increases in the cost of living. The Group also considered how climate-related risks and opportunities affect operations, investment activities and advice and distribution activities and their impact on specific projects and initiatives, estimates and judgements. Based on the assessment, the Directors believe that both the Group and Quilter plc, have sufficient financial resources to continue in business for a period of at least 12 months from the date of approval of these financial statements and continue to adopt the going concern basis in preparing the Group and Parent Company financial statements. Further information is contained in the viability statement and going concern section of the Annual Report.

Liquidity analysis of the statement of financial position

The Group's statement of financial position is in order of liquidity. For each asset and liability line item, those amounts expected to be recovered or settled more than 12 months after the reporting date are disclosed separately in the notes to the consolidated financial statements.

Critical accounting estimates and judgements

The preparation of financial statements requires management to exercise judgement in applying the Group's material accounting policies and make estimates and assumptions that affect the reported amounts of 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 material accounting policies adopted in the preparation of these financial statements.

Critical accounting judgements

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

Recognition of provisions following the sale of Quilter International

Management exercised significant judgement in determining the accounting treatment for a number of provisions related to business activities to separate the business from the Group in respect of the sale of Quilter International. Significant judgement was required to assess whether the costs were directly attributable and incremental to the sale and whether a legal or constructive obligation existed in order to recognise the provisions. See note 16 for further details.

Recognition of revenue from the advice business

Given the Group's business model for advice, management is required to exercise significant judgment in assessing the capacity in which the Group is contracting for the purposes of recognising revenue from the advice business under IFRS 15 (Revenue from Contracts with Customers). As a result of the assessment, management has determined that revenue from the advice business should be presented net of certain fees and commissions payable to Appointed Representatives of Quilter companies.

Critical accounting estimates

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 standards and guidance to make predictions about future actions and events. Actual results may differ from those estimates.

Provision for the cost of defined benefit pension advice

An estimate is determined for unsuitable pension advice related to schemes other than those concluded as part of the skilled person review, using a methodology which takes account of recent experience of redress payments calculated by an independent expert and applying a proportion of transfer value to determine redress payable as an indicative provision. The calculations are based upon FCA guidelines and modelling performed, and factors including redress as a percentage of pension transfer value and opt-in assumptions. See note 16 for further details.

Measurement of deferred tax

The estimation of future taxable profits is performed as part of the annual business planning process, and is based on estimated levels of assets under management and administration ("AuMA"), which are subject to a large number of factors including global stock market movements, related movements in foreign exchange rates and net client cash flows, together with estimates of expenses and other charges. The Business Plan, adjusted for known and estimated tax adjusting items, is used to determine the extent to which deferred tax assets are recognised. The Group assesses the recoverability of shareholder assets based on estimated taxable profits over a five-year horizon and assesses policyholder assets based on estimated investment growth over the medium term. To the extent that profit estimates extend beyond the normal three-year planning cycle, average profits over the final two years of the plan are used. Based on historic profitability, the Group has taken the approach to assess the recoverability of deferred tax assets beyond the three-year planning cycle for the first time in 2023. Future profit projections show the majority of deferred tax assets being utilised over the next three years. Management has reassessed the sensitivity of the recoverability of deferred tax assets based on the latest forecast cash flows.

Other principal estimates

The Group's assessment of goodwill and intangible assets for impairment uses the latest cash flow forecasts from the Group's three-year Business Plan. These forecasts include estimates relating to equity market levels and growth in AuMA in future periods, together with levels of new business growth, net client cash flows, revenue margins, and future expenses and discount rates (see note 9). These forecasts take account of climate-‑related risks and other responsible business considerations. Management does not consider that the use of these estimates has a significant risk of causing a material adjustment to the carrying amount of the assets within the next financial year.

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

IFRS 17 became effective on 1 January 2023. The Group has assessed all relevant contracts with policyholders. Based on this assessment, it was determined that there are no contracts that will be accounted for under IFRS 17.

The amendments to accounting standards in the table below became applicable for the current reporting year, with no material impact on the Group's consolidated results, financial position or disclosures.

The Group has applied the narrow scope amendment to IAS 12 Income Taxes in respect of the OECD Pillar II international tax rules issued in the current period. In doing so, the Group has applied the exception in IAS 12.4A and accordingly will not recognise or disclose information about deferred tax assets and liabilities related to Pillar II income taxes.

Adopted by the Group from	Amendments to standards
1 January 2023	Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - Definition of Accounting Estimates
1 January 2023	Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements - Disclosure of Accounting Policies
1 January 2023	Amendments to IAS 12 Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction
1 January 2023	Amendments to IAS 12 Income Taxes - International Tax Reform - Pillar Two Model Rules

3: Significant changes in the year

Repayment and new issue of Fixed Rate Reset Subordinated Notes

On 18 January 2023, the Company issued £200,000,000 8.625% Fixed Rate Reset Subordinated Notes (due 18 April 2033) and received net cash proceeds of £199 million. After deducting structuring costs and professional fees, the retained cash proceeds were £197 million. The Notes are listed and regulated under the terms of the London Stock Exchange. On 28 February 2023, the Company repaid the existing £200,000,000 4.478% Fixed Rate Reset Subordinated Notes (due 28 February 2028).

4: Business combinations

4(a): Business disposals

There have been no material disposals of businesses during 2022 and 2023 and there were no profit or loss impacts relating to past business disposals in either year.

The Group made the final payment of £4 million during 2023 in respect of the closure of the warranty relating to the sale of the Single Strategy business. There were no inflows or outflows of cash relating to discontinued operations during 2022 or 2023.

4(b): Business acquisitions

There have been no acquisitions of businesses during 2022 and 2023. A final amount of contingent consideration of £5 million was paid in 2022 in respect of acquisitions prior to 2022. No payments were required in 2023.

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

4(c): Assets held for sale

Assets classified as held for sale in 2022 related to a leasehold interest in an office property which was vacant and was subsequently sold in April 2023.

5: Alternative performance measures

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 ("APMs") and represents the Group's IFRS profit, adjusted for specific items that management considers to be outside of the Group's normal operations or one-off in nature, as detailed in note 5(b). Adjusted profit before tax does not provide a complete picture of the Group's financial performance, which is disclosed in the statement of comprehensive income, but is instead intended to provide additional comparability and understanding of the financial results.

			£m
	Notes	Year ended 31 December 2023	Year ended 31 December 2022
Affluent		124	105
High Net Worth		41	45
Head Office		2	(16)
Adjusted profit before tax	6(b)	167	134
Adjusting items:
Impact of acquisition and disposal-related accounting	5(b)(i)	(39)	(42)
Business transformation costs	5(b)(ii)	(28)	(30)
Finance costs	5(b)(iii)	(19)	(10)
Customer remediation	5(b)(iv)	(6)	12
Voluntary customer repayments	5(b)(v)	-	(6)
Exchange rate movement (ZAR/GBP)	5(b)(vi)	(2)	4
Policyholder tax adjustments	5(b)(vii)	(62)	138
Other adjusting items	5(b)(viii)	1	(1)
Total adjusting items before tax		(155)	65
Profit before tax attributable to shareholder returns		12	199
Tax attributable to policyholder returns	7	76	(134)
Income tax (expense)/credit	7	(46)	110
IFRS profit after tax		42	175

5(b): Adjusting items

In determining adjusted profit before tax, the Group's IFRS profit before tax is adjusted for specific items that management considers to be outside of the Group's normal operations or one-off in nature. These are detailed below.

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

The Group excludes any impairment of goodwill from adjusted profit as well as the amortisation and impairment of acquired 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.

		£m
	Year ended 31 December 2023	Year ended 31 December 2022
Amortisation of acquired intangible assets	38	42
Impairment of acquired intangible assets¹	1	-
Total impact of acquisition and disposal-related accounting	39	42

¹The impairment of acquired intangible assets results from the impairment of specific client books held within the Affluent operating segment as the Group can no longer support the carrying value.

5(b)(ii): Business transformation costs

In 2023, business transformation costs totalled £28 million (2022: £30 million), the principal components of which are described below:

Business Simplification costs - 2023: £25 million, 2022: £17 million

The Business Simplification programme announced in November 2021, set the target of £45 million of annualised run-rate cost savings by the end of 2024. This target was achieved one year early. As announced at the half-year results in 2023, the Group expects to achieve a further £50 million of annualised run-rate savings by the end of 2025. Approximately £8 million of these additional savings have been achieved during 2023 on a run-rate basis.

As at 31 December 2023, the Simplification programme delivered £53 million of annualised run-rate savings. An incremental £30 million of annualised run-rate savings were achieved during 2023 largely through the continued rationalisation of the Group's technology and property estates together with a reduction in support costs as we simplify the Group's structures and organisation to support the two business segments, Affluent and High Net Worth. During 2023, the Group spent £25 million (2022: £17 million) on Simplification initiatives. Further implementation costs to deliver the remaining annualised run-rate savings are estimated to be £78 million.

Investment in business costs - 2023: £1 million, 2022: £4 million

Investment in business costs of £1 million were incurred in 2023 as the Group continues to enable and support advisers and clients and improve productivity through better utilisation of technology.

Business separation costs following the sale of Quilter International - 2023: £2 million, 2022: £nil

The Group sold Quilter International to Utmost Group in 2021 and entered into a Transitional Service Agreement with the acquirer. The cost to the Group of running the Transitional Service Agreement was £2 million in 2023.

Optimisation programme costs - 2023: £nil, 2022: £6 million

The Optimisation programme commenced in 2018 to provide closer business integration, create central support, rationalise technology and reduce third-party spend. The programme has now achieved its target of delivering annualised run-rate cost savings of £65 million with total implementation costs since inception of £87 million. This programme concluded in 2022 and no costs were incurred in 2023.

Restructuring costs following the sale of Quilter Life Assurance - 2023: £nil, 2022: £3 million

The Transitional Service Agreement following the sale of Quilter Life Assurance in 2019 has now concluded. No restructuring costs relating to this sale were incurred in 2023.

5(b)(iii): 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 2023, finance costs were £19 million (2022: £10 million).

5(b)(iv): Customer remediation

Lighthouse pension transfer advice provision - 2023: £6 million cost, 2022: £12 million net income

The provision for the redress of British Steel Pension Scheme cases and other defined benefit ("DB") to defined contribution ("DC") pension transfer advice cases, excluding the impact of payments made, has increased by £2 million in the year, which has been recognised as an increase in expenses (2022: £4 million credit). This increase reflects the impact of the review for suitability of additional cases by an independent expert as part of the Group-led past business review of DB to DC pension transfer advice and the anticipated number of cases where customer redress is required. During the year, £4 million of additional legal, consulting, and other costs were incurred (2022: £4 million). These items have been excluded from adjusted profit on the basis that the advice activities, to which the charge and benefit relate, took place prior to the Group's acquisition of the business. In 2022, insurance proceeds in relation to claims in respect of legal liabilities arising in connection with Lighthouse's DB to DC pension transfer advice cases were received, contributing £12 million to the Group's profit before tax. Further details of the provision are provided in note 16.

5(b)(v): Voluntary customer repayments

In 2023, these costs were £nil (2022: £6 million) and relate to a change in business policy during H2 2022. The voluntary repayments represent amounts to be paid to customers relating to revenue previously recognised in respect of Final Plan Closure receipts.

5(b)(vi): Exchange rate movements (ZAR/GBP)

In 2023, an expense of £2 million was incurred (2022: £4 million income) due to foreign exchange movements on cash held in South African Rand in preparation for payments to shareholders. In 2022, these payments related to the capital return and Final Dividend paid in May 2022. In 2023, these payments related to the dividends paid in May and September 2023. Cash was converted to South African Rand upon announcement of the details of the capital return and dividend payments to provide an economic hedge for the Group. The foreign exchange movements are fully offset by an equal amount taken directly to retained earnings.

5(b)(vii): Policyholder tax adjustments

In 2023, the total amount of policyholder tax adjustments to adjusted profit is £62 million credit (2022: £138 million charge). Adjustments to policyholder tax are made to remove distortions arising from market volatility that can, in turn, lead to volatility in the policyholder tax adjustments 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 in the Group's IFRS profit or loss before tax. Note 7 provides further information on the impact of markets on the policyholder tax adjustment. Adjustments are also made to remove policyholder tax distortions from other non-operating adjusting items.

5(b)(viii): Other adjusting items

In 2023, income of £1 million was received (2022: £1 million cost) in relation to the settlement offer received for the indemnification asset that was impaired in 2022.

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

This reconciliation shows how each line of the Group's IFRS income and expenses are allocated to the Group's APMs: Net management fees, Other revenue, Investment revenue, Total net revenue and Operating expenses which form the Group's adjusted profit before tax. The total column in the table below, down to "Profit before tax attributable to shareholder returns", reconciles to each line of the consolidated statement of comprehensive income. 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
Year ended 31 December 2023	Net mgmt. fees¹	Other revenue¹	Investment revenue¹	Total net revenue¹	Operating expenses¹	Adjusted profit before tax	Consol. of funds²	Total
Income
Fee income and other income from service activities	527	86	-	613	-	613	(71)	542
Investment return³	48	3,285	68	3,401	-	3,401	674	4,075
Other income	-	-	-	-	9	9	-	9
Total income	575	3,371	68	4,014	9	4,023	603	4,626
Expenses
Change in investment contract liabilities³	(25)	(3,282)	(6)	(3,313)	-	(3,313)	-	(3,313)
Fee and commission expenses, and other acquisition costs	(46)	-	-	(46)	-	(46)	(3)	(49)
Change in third-party interests in consolidated funds	-	-	-	-	-	-	(579)	(579)
Other operating and administrative expenses	(13)	(5)	-	(18)	(536)	(554)	(21)	(575)
Finance costs	-	-	-	-	(22)	(22)	-	(22)
Total expenses	(84)	(3,287)	(6)	(3,377)	(558)	(3,935)	(603)	(4,538)
Tax expense attributable to policyholder returns	(76)	-	-	(76)	-	(76)	-	(76)
Profit before tax attributable to shareholder returns	415	84	62	561	(549)	12	-	12
Adjusting items:
Impact of acquisition and disposal-related accounting	-	-	-	-	39	39
Business transformation costs	-	-	-	-	28	28
Finance costs	-	-	-	-	19	19
Customer remediation	-	-	-	-	6	6
Exchange rate movements (ZAR/GBP)	-	2	-	2	-	2
Policyholder tax adjustments	62	-	-	62	-	62
Other adjusting items	-	-	-	-	(1)	(1)
Adjusting items	62	2	-	64	91	155
Adjusted profit before tax	477	86	62	625	(458)	167

¹The APMs "Net management fees", "Other revenue", "Investment revenue", "Total net revenue" and "Operating expenses" are commented on within the Financial review. In the financial statements for 2022, interest income on shareholder cash and cash equivalents and interest income on customer cash and cash equivalents was previously presented within "Other revenue". For 2023, in order to provide additional information to the users of the Group's financial reporting, interest income on shareholder cash and cash equivalents has been presented separately as Investment revenue and interest income on customer cash and cash equivalents has been presented within Net management fees. Disclosures for the prior year have been re-presented to ensure comparability.

²Consolidation of funds shows the grossing up impact to the Group's profit or loss as a result of the consolidation of funds requirements. This grossing up is excluded from the Group's adjusted profit.

³Reported within net management fees, investment return of £48 million represents £30 million interest income on investments held for the benefit of policyholders and £18 million net interest income on client money balances. Change in investment contract liabilities of £25 million represents the amount of interest income paid to policyholders. The net balance of £23 million of interest income on customer balances was retained by the Group for 2023. The £68 million investment return less £6 million change in investment contract liabilities paid to customers on transactional cash balances, as reported within investment revenue, represents £62 million of net interest income on shareholder cash and cash equivalents.

								£m
Year ended 31 December 2022	Net mgmt. fees¹	Other revenue¹	Investment revenue¹	Total net revenue¹	Operating expenses¹	Adjusted profit before tax	Consol. of funds²	Total
Income
Fee income and other income from service activities	548	95	-	643	-	643	(62)	581
Investment return³	12	(4,320)	16	(4,292)	-	(4,292)	(357)	(4,649)
Other income	-	5	-	5	21	26	2	28
Total income	560	(4,220)	16	(3,644)	21	(3,623)	(417)	(4,040)
Expenses
Change in investment contract liabilities³	(5)	4,323	-	4,318	-	4,318	-	4,318
Fee and commission expenses, and other acquisition costs	(46)	1	-	(45)	-	(45)	(9)	(54)
Change in third-party interests in consolidated funds	-	-	-	-	-	-	438	438
Other operating and administrative expenses	(15)	-	-	(15)	(557)	(572)	(12)	(584)
Finance costs	-	-	-	-	(13)	(13)	-	(13)
Total expenses	(66)	4,324	-	4,258	(570)	3,688	417	4,105
Tax credit attributable to policyholder returns	134	-	-	134	-	134	-	134
Profit before tax attributable to shareholder returns	628	104	16	748	(549)	199	-	199
Adjusting items:
Impact of acquisition and disposal-related accounting	-	-	-	-	42	42
Business transformation costs	-	-	-	-	30	30
Finance costs	-	-	-	-	10	10
Customer remediation	-	-	-	-	(12)	(12)
Voluntary customer repayments	-	-	-	-	6	6
Exchange rate movements (ZAR/GBP)	-	(4)	-	(4)	-	(4)
Policyholder tax adjustments	(138)	-	-	(138)	-	(138)
Other adjusting items	-	-	-	-	1	1
Adjusting items	(138)	(4)	-	(142)	77	(65)
Adjusted profit before tax	490	100	16	606	(472)	134

¹The APMs "Net management fees", "Other revenue", "Investment revenue", "Total net revenue" and "Operating expenses" are commented on within the Financial review. In the 2022 financial statements, interest income on shareholder cash and cash equivalents and interest income on customer cash and cash equivalents was previously presented within "Other revenue". For 2023, to provide additional information to the users of the Group's financial reporting, interest income on shareholder cash and cash equivalents has been presented separately as Investment revenue and interest income on customer cash and cash equivalents has been presented within Net management fees. Disclosures for the prior year have been re-presented to ensure comparability.

³Reported within net management fees, investment return of £12 million represents £5 million interest income on investments held for the benefit of policyholders and £7 million net interest income on client money balances. Change in investment contract liabilities of £5 million represents the amount of interest income paid to policyholders. The net balance of £7 million of interest income on customer balances was retained by the Group for 2022. The £16 million investment return, as reported within investment revenue, relates to interest income on shareholder cash and cash equivalents.

6: Segment information

6(a): Segment presentation

The Group's operating segments comprise High Net Worth and Affluent, which is consistent with the manner in which the Group is structured and managed. For 2022 and 2023, these segments have been classified as continuing operations. Head Office includes certain revenues and central costs that are not allocated to the segments.

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

Consistent with internal reporting, 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.

The segment information in this note reflects the adjusted and IFRS profit measures for each operating segment as provided to management and the Board. Income is analysed in further detail for each operating segment in note 6(b).

High Net Worth

This segment comprises Quilter Cheviot and Quilter Cheviot Financial Planning.

Quilter Cheviot provides discretionary investment management predominantly in the United Kingdom with bespoke investment portfolios tailored to the individual needs of high net worth clients, 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 Ireland.

Quilter Cheviot Financial Planning provides financial advice for protection, mortgages, savings, investments and pensions predominantly to high net worth clients.

Affluent

This segment is comprised of Quilter Investment Platform, Quilter Investors and Quilter Financial Planning.

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 client base through advised multi-channel distribution.

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 Financial Planning is a restricted and independent financial adviser network 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.

Head Office

In addition to the Group's 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.

6(b): Adjusted profit statement - segment information for the year ended 31 December 2023

The table below presents the Group's operations split by operating segment, reconciling IFRS profit (or loss) to adjusted profit before tax. The Total column reconciles to the consolidated statement of comprehensive income.

						£m
		Operating segments
	Notes	Affluent	High Net Worth	Head Office	Consolidation adjustments¹	Total
Income
Premium-based fees		66	20	-	-	86
Fund-based fees		336	172	-	(71)	437
Fixed fees		1	-	-	-	1
Other fee and commission income		18	-	-	-	18
Fee income and other income from service activities		421	192	-	(71)	542
Investment return²		3,361	19	28	667	4,075
Other income		88	1	-	(80)	9
Segment income		3,870	212	28	516	4,626
Expenses
Change in investment contract liabilities²		(3,313)	-	-	-	(3,313)
Fee and commission expenses, and other acquisition costs		(47)	-	-	(2)	(49)
Change in third-party interests in consolidated funds		-	-	-	(579)	(579)
Other operating and administrative expenses		(387)	(205)	(41)	58	(575)
Finance costs		(3)	-	(26)	7	(22)
Segment expenses		(3,750)	(205)	(67)	(516)	(4,538)
Profit/(loss) before tax		120	7	(39)	-	88
Tax expense attributable to policyholder returns		(76)	-	-	-	(76)
Profit/(loss) before tax attributable to shareholder returns		44	7	(39)	-	12
Adjusting items:
Impact of acquisition and disposal-related accounting	5(b)(i)	7	32	-	-	39
Business transformation costs	5(b)(ii)	5	3	20	-	28
Finance costs	5(b)(iii)	-	-	19	-	19
Customer remediation	5(b)(iv)	6	-	-	-	6
Exchange rate movements (ZAR/GBP)	5(b)(vi)	-	-	2	-	2
Policyholder tax adjustments	5(b)(vii)	62	-	-	-	62
Other adjusting items	5(b)(viii)	-	(1)	-	-	(1)
Adjusting items before tax		80	34	41	-	155
Adjusted profit before tax		124	41	2	-	167

¹Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

²Investment return and change in investment contract liabilities includes net £23 million of interest income on customer cash and cash equivalents retained by the Group. Investment return total also includes £62 million of interest income on shareholder cash and cash equivalents.

6(c): Adjusted profit statement - segment information for the year ended 31 December 2022

						£m
		Operating segments
	Notes	Affluent	High Net Worth	Head Office	Consolidation adjustments¹	Total
Income
Premium-based fees		75	21	-	-	96
Fund-based fees		356	181	-	(62)	475
Fixed fees		2	-	-	-	2
Other fee and commission income		8	-	-	-	8
Fee income and other income from service activities		441	202	-	(62)	581
Investment return²		(4,307)	9	8	(359)	(4,649)
Other income		112	3	5	(92)	28
Segment income		(3,754)	214	13	(513)	(4,040)
Expenses
Change in investment contract liabilities²		4,318	-	-	-	4,318
Fee and commission expenses, and other acquisition costs		(46)	-	-	(8)	(54)
Change in third-party interests in consolidated funds		-	-	-	438	438
Other operating and administrative expenses		(410)	(202)	(53)	81	(584)
Finance costs		(3)	-	(12)	2	(13)
Segment expenses		3,859	(202)	(65)	513	4,105
Profit/(loss) before tax		105	12	(52)	-	65
Tax credit attributable to policyholder returns		134	-	-	-	134
Profit/(loss) before tax attributable to shareholder returns		239	12	(52)	-	199
Adjusting items:
Impact of acquisition and disposal-related accounting	5(b)(i)	10	32	-	-	42
Business transformation costs	5(b)(ii)	-	-	30	-	30
Finance costs	5(b)(iii)	-	-	10	-	10
Customer remediation	5(b)(iv)	(12)	-	-	-	(12)
Voluntary customer repayments	5(b)(v)	6	-	-	-	6
Exchange rate movements (ZAR/GBP)	5(b)(vi)	-	-	(4)	-	(4)
Policyholder tax adjustments	5(b)(vii)	(138)	-	-	-	(138)
Other adjusting items	5(b)(viii)	-	1	-	-	1
Adjusting items before tax		(134)	33	36	-	(65)
Adjusted profit/(loss) before tax		105	45	(16)	-	134

¹Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

²Investment return and change in investment contract liabilities includes net £7 million interest income on customer cash and cash equivalents retained by the Group. Investment return total also includes £16 million interest income on shareholder cash and cash equivalents.

7: Tax

7(a): Tax charged/(credited)

		£m
	Year ended 31 December 2023	Year ended 31 December 2022
Current tax
United Kingdom	2	12
Overseas tax	-	1
Total current tax charge	2	13
Deferred tax
Origination and reversal of temporary differences	52	(120)
Effect on deferred tax of changes in tax rates	(3)	(1)
Adjustments to deferred tax in respect of prior years	(5)	(2)
Total deferred tax charge/(credit)	44	(123)
Total tax charged/(credited)	46	(110)

Attributable to policyholder returns	76	(134)
Attributable to shareholder returns	(30)	24
Total tax charged/(credited)	46	(110)

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 shareholder returns are shown separately in the consolidated statement of comprehensive income.

The tax attributable to policyholder returns is the amount payable in the year plus the movement of amounts expected to be payable in future periods. The remainder of the tax expense is attributed to shareholders returns.

The Group's income tax charge was £46 million in 2023, compared to an income tax credit of £110 million for 2022. The income tax charge/credit can vary significantly year-on-year as a result of market volatility and the impact this has on policyholder tax. The recognition of the income received from policyholders to fund the policyholder tax liability (which is included within the Group's income) can vary in timing to the recognition of the corresponding policyholder tax expense, creating volatility in the Group's IFRS profit before tax. An adjustment is made to adjusted profit to remove these distortions, as explained further in note 5(b)(vii).

Market movements during 2023 resulted in investment gains of £298 million on products subject to policyholder tax. The gain is a component of the total "investment return" gain of £4,075 million shown in the consolidated statement of comprehensive income. The tax impact of the £298 million investment return gain is the primary reason for the £76 million tax charge attributable to policyholder returns in 2023 (2022: £134 million credit).

UK Corporation Tax rate

The main rate of Corporation Tax increased from 1 April 2023 from 19% to 25%. The blended rate of 23.5% has been used in calculating current tax for 2023 and any deferred tax assets and liabilities have been recognised at the new rate of 25%.

First time recognition of deferred tax asset on tax losses

Within the £44 million total deferred tax charge the Group has recognised a £30 million shareholder deferred tax credit in respect of previously unrecognised losses.

Pillar II taxes

On 20 June 2023, the Finance (No. 2) Act 2023 was substantively enacted in the UK, introducing the Pillar II minimum effective tax rate of 15%. The legislation implements a Multinational Top-up Tax ("MTT") and a Domestic Top-up Tax ("DTT"), effective for accounting periods starting on or after 31 December 2023. As these rules were not in effect during 2023, there was no current tax impact for the year. The Group has applied the exception under IAS 12.4A and accordingly will not recognise or disclose information about deferred tax assets and liabilities related to Pillar II income taxes.

The Group expects to exceed the qualifying multinational group revenue threshold (€750m) in accounting periods from 1 January 2024 and so expects to be within the scope of these new rules.

The Group continues to assess the full impact of the introduction of Pillar II taxes in the countries in which it operates. In assessing the likely impact, the Group has assessed the potential outcomes based on the latest tax authority guidance in each of the relevant countries and historical financial data for entities in the Group. The position in respect of these rules in each of the Group's main territories is summarised below.

The UK rules are complex and there remain areas of uncertainty in HMRC guidance, especially with regards the tax treatment of the life business in Quilter Life & Pensions Limited. Management has assessed the likely UK impact based on current guidance and historical data. Although the Group may expect the UK Pillar II ETR to be close to 15% in the near term, there are scenarios where the rate may fall below the minimum rate. The Group is therefore currently unable to estimate any future DTT charge on its UK operations with any reasonable level of certainty.

The scope of the MTT means that a top-up tax charge may also arise in the UK on profits earned in countries with lower tax rates in which the Group operates, subject to a local qualifying domestic minimum tax. The Group's main non-UK operations are in Jersey and Ireland. Ireland has enacted a qualifying domestic minimum tax (see below), so no additional tax charge is expected to arise in the UK on Irish operations. Jersey is expected to introduce a qualifying domestic minimum tax in 2025. The Group's effective tax rate in Jersey is expected to be around 10% and therefore a MTT liability in the range of 0-5% of Jersey profits may arise in the UK during 2024. This is not expected to have a material impact on the Group's tax charge or credit.

Jersey, Guernsey and the Isle of Man

The three Crown Dependencies issued a joint statement in May 2023 stating their intention to introduce a domestic minimum tax in 2025. The Group does not therefore expect to pay additional local tax in these countries during 2024. The Group will continue to monitor the developments in these countries. Until such time as a qualifying domestic minimum tax is introduced, the Group expects to pay a MTT in the UK in respect of any taxable profits arising in these countries (see above).

Ireland

Ireland has introduced a qualifying domestic minimum tax. This has been substantively enacted, effective for accounting periods starting on or after 31 December 2023. The Group's effective tax rate in Ireland is expected to be around 12.5% and therefore an additional minimum tax charge in the range of 0-2.5% is expected to apply to any taxable profits arising in Ireland in 2024. This is not expected to have a material impact on the Group's tax charge.

Other

The Group does not expect there to be any material Pillar II tax charge in any other countries in which it is expected to have a presence during 2024.

7(b): Reconciliation of total income tax expense/(credit)

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

		£m
	Year ended 31 December 2023	Year ended 31 December 2022
Profit before tax	88	65
Tax at UK standard rate of 23.5% (2022: 19%)	21	12
Untaxed and low taxed income	(1)	(6)
Expenses not deductible for tax purposes	2	1
Net movements on unrecognised deferred tax assets¹	(29)	(6)
Effect on deferred tax of changes in tax rates	(3)	(1)
Adjustments to deferred tax in respect of prior periods	(5)	(2)
Income tax attributable to policyholder returns (net of tax relief)	61	(108)
Total tax charged/(credited) to profit or loss	46	(110)

¹Includes first time recognition of tax losses as explained in note 7(a).

7(c): Reconciliation of IFRS income tax credit or expense to income tax on adjusted profit

			£m
	Note	Year ended 31 December 2023	Year ended 31 December 2022
Income tax expense/(credit)¹		46	(110)
Tax on adjusting items
Impact of acquisition and disposal-related accounting		9	8
Business transformation costs		8	5
Finance costs		4	2
Exchange rate movements (ZAR/GBP)		1	(1)
Tax adjusting items
Policyholder tax adjustments	5(b)(vii)	(62)	138
Other shareholder tax adjustments²		46	(19)
Tax on adjusting items		6	133
Less: tax attributable to policyholder returns within adjusted profit³		(14)	(4)
Tax charged on total adjusted profit		38	19

¹Includes both tax attributable to policyholder and shareholder returns, in compliance with IFRS.

²Other shareholder tax adjustments comprise the reallocation of adjustments from policyholder tax as explained in note 5(b)(vii) and shareholder tax adjustments for one‑off items in line with the Group's adjusted profit policy, including first time recognition of shareholder deferred tax.

³Adjusted profit treats policyholder tax as a pre-tax expense (this includes policyholder tax under IFRS and the policyholder tax adjustments) and is therefore removed from the 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 and Headline earnings per share ("HEPS") is a requirement of the Johannesburg Stock Exchange.

				Pence
	Framework	Notes	Year ended 31 December 2023	Year ended 31 December 2022
Basic earnings per share	IFRS	8(b)	3.1	12.2
Diluted basic earnings per share	IFRS	8(b)	3.1	12.0
Adjusted basic earnings per share	Group policy	8(b)	9.6	8.0
Adjusted diluted earnings per share	Group policy	8(b)	9.4	7.9
Headline basic earnings per share (net of tax)	JSE Listing Requirements	8(c)	3.2	12.6
Headline diluted earnings per share (net of tax)	JSE Listing Requirements	8(c)	3.1	12.4

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 profit and Headline earnings). Details of the impact on the number of shares from the Quilter plc share buyback scheme are detailed in note 14.

		Million
	Year ended 31 December 2023	Year ended 31 December 2022
Weighted average number of Ordinary Shares	1,404	1,496
Own shares including those held in consolidated funds and employee benefit trusts	(54)	(58)
Basic weighted average number of Ordinary Shares	1,350	1,438
Adjustment for dilutive share awards and options¹	24	26
Diluted weighted average number of Ordinary Shares	1,374	1,464

¹The adjustment for dilutive share awards and options includes dividend equivalent shares. Previously these shares were not included in the figures presented in the 2022 financial statements. Comparatives have been updated and there was no impact on the earnings per share.

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

			£m
	Notes	Year ended 31 December 2023	Year ended 31 December 2022
Profit after tax		42	175
Total adjusting items before tax	5(a)	155	(65)
Tax on adjusting items	7(c)	(6)	(133)
Less: Policyholder tax adjustments	7(c)	(62)	138
Adjusted profit after tax		129	115

			Pence
	Post-tax profit measure used	Year ended 31 December 2023	Year ended 31 December 2022
Basic EPS	IFRS profit	3.1	12.2
Diluted EPS	IFRS profit	3.1	12.0
Adjusted basic EPS	Adjusted profit	9.6	8.0
Adjusted diluted EPS	Adjusted profit	9.4	7.9

8(c): Headline earnings per share

	+	+		£m
	Year ended 31 December 2023		Year ended 31 December 2022
	Gross	Net of tax	Gross¹	Net of tax¹
Profit		42		175
Adjusted for:
- add back of impairment loss on property, plant and equipment	-	-	7	6
- add back of impairment loss on intangible assets	1	1	-	-
Headline earnings		43		181
Headline basic EPS (pence)		3.2		12.6
Headline diluted EPS (pence)		3.1		12.4

¹Figures were re-presented to address an issue with the signage of an adjusting item for 2022 and to clearly present the tax effects of each adjusting item in the prior year in line with the relevant guidance.

9: Goodwill and intangible assets

9(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 2022	306	30	425	761
31 December 2022	306	30	425	761
Disposals¹	-	(21)	-	(21)
31 December 2023	306	9	425	740

Accumulated amortisation and impairment losses
1 January 2022	-	(22)	(282)	(304)
Amortisation charge for the year	-	(2)	(42)	(44)
31 December 2022	-	(24)	(324)	(348)
Amortisation charge for the year	-	(2)	(38)	(40)
Disposals¹	-	21	-	21
Impairment of other intangibles	-	-	(1)	(1)
31 December 2023	-	(5)	(363)	(368)

Carrying amount
31 December 2022	306	6	101	413
31 December 2023	306	4	62	372

¹Following the completion of a number of strategic projects, the Group reviewed the fixed asset register. Assets related to software development costs with a cost of £21 million and an accumulated amortisation of £21 million (net book value: £nil) that were no longer held by the Group or no longer in use have been disposed during the year.

9(b): Analysis of other intangible assets

	31 December 2023	31 December 2022	Average estimated useful life	Average Period remaining
	£m	£m
Net carrying value
Distribution channels - Quilter Financial Planning	2	4	8 years	1 year
Customer relationships
Quilter Cheviot	32	59	10 years	1 year
Quilter Financial Planning	17	22	8 years	3 years
Quilter Cheviot Financial Planning¹	10	14	8 years	3 years
Other	1	2	7 years	< 1 year
Total other intangible assets	62	101

¹Formerly known as Quilter Private Client Advisers.

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

Goodwill is monitored by management at the level of the Group's two operating segments: Affluent and High Net Worth. Both operating segments represent a group of CGUs.

		£m
	31 December 2023	31 December 2022
Goodwill (net carrying amount)
Affluent	223	223
High Net Worth	83	83
Total goodwill	306	306

Impairment review

Goodwill in both the Affluent and High Net Worth 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 positive Net Client Cash Flows ("NCCF"), significant falls in profits and significant increases in the discount rate.

The goodwill balance has been tested for impairment at 31 December 2023 and continues to demonstrate a surplus of the recoverable amount over the carrying value of the CGUs. As a result, no impairment is required.

The following table shows the percentage change required in each key assumption before the carrying value would exceed the recoverable amount, assuming all other variables remain the same. This highlights that further adverse movements in the key assumptions used in the CGU value-in-use calculation would be required before an impairment would need to be recognised.

	Affluent	High Net Worth
Reduction in forecast cash flows	27%	61%
Percentage point increase in the discount rate	9%	25%

Forecast cash flows are impacted by movements in underlying assumptions, including equity market levels, revenue margins and NCCF. The Group considers that forecast cash flows are most sensitive to movements in equity markets because they have a direct impact on the level of the Group's fee income.

The principal sensitivity within equity market level assumptions relates to the estimated growth in equity market indices included in the three-year cash flow forecasts. Management forecasts equity market growth for each business using estimated asset-specific growth rates that are supported by internal research, historical performance, Bank of England forecasts and other external estimates.

The Group has considered and assessed reasonably possible changes for other key assumptions and has not identified any other instances that could cause the carrying amount of CGUs to exceed its recoverable amount.

Value-in-use methodology

The value-in-use calculations are determined as the sum of net tangible assets and the expected cash flows from existing and expected future new business derived from the Business Plan. Future cash flow elements allow for the cost of capital needed to support the business.

The cash flows that have been used to determine the value in use of the groups of CGUs are based on the most recent management approved three-year profit forecasts, which are contained in the Group's Business Plan. These profit forecasts incorporate anticipated equity market growth on the Group's future cash flows and take into account climate-related risks and opportunities affecting operations, investment activities and advice and distribution activities and their impact on specific projects and initiatives, estimates and judgements. These cash flows change at different rates because of the different strategies of the groups of CGUs. Post the three-year forecast period, the growth rate used to determine the terminal value of the groups of CGUs in the annual assessment was 2.0% (2022: 2.0%). Market share and market growth information is also used to inform the expected volumes of future new business.

Cost savings linked to future restructuring activity are only included in the value-in-use calculation in cases where an associated restructuring provision has also been recognised. Consequently, for the purpose of the value-in-use calculation, a number of planned cost savings and the related implementation costs, primarily in relation to the Business Simplification programme, have been removed from the future cash flows.

The Group uses a single cost of capital (post tax) of 10.0% (2022: 11.4%) to discount expected future cash flows across its two groups of CGUs. The single cost of capital is based on the Group's consideration of the level of risk that each CGU represents. Capital is provided to the Group predominantly by shareholders with a relatively small amount of debt financing. The cost of capital is the weighted average of the cost of equity (return required by shareholders) and the cost of debt (return required by bondholders and owners of properties leased by the Group). When assessing the systematic risk (i.e. the beta value) within the calculation of the cost of equity, a triangulation approach is used that combines beta values obtained from historical data, a forward-looking view on the progression of beta values and the external views of investors.

10: 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
	31 December 2023	31 December 2022
Government and government-guaranteed securities	202	225
Other debt securities, preference shares and debentures	2,175	1,609
Equity securities	8,488	6,225
Pooled investments	39,462	35,557
Short-term funds and securities treated as investments	1	1
Other	1	-
Total financial investments	50,329	43,617

Recoverable within 12 months	50,329	43,617
Total financial investments	50,329	43,617

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.

11: 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, refer to note 12. The Group's exposure to various risks associated with financial instruments is discussed in note 18.

31 December 2023
					£m
Measurement basis	Fair value
	Mandatorily at FVTPL	Designated at FVTPL	Amortised cost	Non-financial assets and liabilities	Total
Assets
Loans and advances	-	-	38	-	38
Financial investments	50,329	-	-	-	50,329
Trade, other receivables and other assets	-	-	404	43	447
Derivative assets	57	-	-	-	57
Cash and cash equivalents	1,091	-	768	-	1,859
Total assets that include financial instruments	51,477	-	1,210	43	52,730
Total other non-financial assets	-	-	-	615	615
Total assets	51,477	-	1,210	658	53,345

Liabilities
Investment contract liabilities	-	43,396	-	-	43,396
Third-party interests in consolidated funds	7,444	-	-	-	7,444
Borrowings and lease liabilities	-	-	279	-	279
Trade, other payables and other liabilities	1	-	484	85	570
Derivative liabilities	25	-	-	-	25
Total liabilities that include financial instruments	7,470	43,396	763	85	51,714
Total other non-financial liabilities	-	-	-	112	112
Total liabilities	7,470	43,396	763	197	51,826

31 December 2022
					£m
Measurement basis	Fair value
	Mandatorily at FVTPL	Designated at FVTPL	Amortised cost (Restated)	Non-financial assets and liabilities (Restated)	Total
Assets
Loans and advances	-	-	34	-	34
Financial investments	43,617	-	-	-	43,617
Trade, other receivables and other assets	-	-	261	42	303
Derivative assets	40	-	-	-	40
Cash and cash equivalents	1,112	-	670	-	1,782
Total assets that include financial instruments	44,769	-	965	42	45,776
Total other non-financial assets¹	-	-	-	641	641
Total assets	44,769	-	965	683	46,417

Liabilities
Investment contract liabilities	-	38,186	-	-	38,186
Third-party interests in consolidated funds	5,843	-	-	-	5,843
Borrowings and lease liabilities	-	-	290	-	290
Trade, other payables and other liabilities²	-	-	351	85	436
Derivative liabilities	20	-	-	-	20
Total liabilities that include financial instruments	5,863	38,186	641	85	44,775
Total other non-financial liabilities	-	-	-	94	94
Total liabilities	5,863	38,186	641	179	44,869

¹Investments in associates shown separately in the Group's 2022 financial statements have been included in Total other non-financial assets.

²The disclosures for 2022 have been restated to reclassify £7 million of accruals from the amortised cost category to the non-financial assets and liabilities category. The relevant accruals which were presented in the amortised cost category in the Group's 2022 financial statements arose in connection with the Group's statutory and constructive obligations as opposed to arising in connection with the Group's contractual obligations.

12: 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 the fair value hierarchy (see note 12(b)) provides an indication of the reliability of inputs used in determining fair value.

12(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 equity investments or within consolidated investment funds, the valuation is based on the latest available set of audited financial statements, or if more recent is available, reports from investment managers or professional valuation experts on the value of the underlying assets of the private equity investment or fund.

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:

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 using 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 over-the-counter forward foreign exchange contracts is determined by reference to the relevant 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 interests in consolidated funds

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

12(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 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 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. 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 from 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.

12(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 the 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 no transfers of financial investments between Level 1 and Level 2 during 2023 (2022: £nil). There were no transfers of financial investments from Level 2 to Level 1 during the year (2022: £nil).

See note 12(e) for the reconciliation of Level 3 financial instruments.

12(d): Financial assets and liabilities measured at fair value, classified according to the 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. 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 tables below analyse the Group's financial assets and liabilities measured at fair value by the fair value hierarchy described in note 12(b). All items are recognised mandatorily at fair value through profit or loss, apart from Investment contract liabilities which are designated at fair value through profit or loss.

				£m
31 December 2023	Level 1	Level 2	Level 3	Total
Financial investments	41,691	8,605	33	50,329
Cash and cash equivalents	1,091	-	-	1,091
Derivative assets	-	57	-	57
Total financial assets measured at fair value through profit or loss	42,782	8,662	33	51,477

Third-party interests in consolidated funds	-	7,444	-	7,444
Other liabilities	-	1	-	1
Derivative liabilities	-	25	-	25
Investment contract liabilities	43,372	-	24	43,396
Total financial liabilities measured at fair value through profit or loss	43,372	7,470	24	50,866

				£m
31 December 2022	Level 1	Level 2	Level 3	Total
Financial investments	37,340	6,248	29	43,617
Cash and cash equivalents	1,112	-	-	1,112
Derivative assets	-	40	-	40
Total financial assets measured at fair value through profit or loss	38,452	6,288	29	44,769

Third-party interests in consolidated funds	-	5,843	-	5,843
Derivative liabilities	-	20	-	20
Investment contract liabilities	38,161	-	25	38,186
Total financial liabilities measured at fair value through profit or loss	38,161	5,863	25	44,049

12(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.

Level 3 assets also include investments within consolidated funds. 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. 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 year end:

		£m
	31 December 2023	31 December 2022
At beginning of the year	29	27
Fair value losses charged to profit or loss¹	(1)	(5)
Sales	(1)	(2)
Transfers in	27	125
Transfers out	(21)	(116)
Total Level 3 financial assets at the end of the year	33	29
Unrealised fair value gains/(losses) recognised in profit or loss relating to assets held at the year end	2	(9)

¹Included in Investment return.

All of the assets that are classified as Level 3 are suspended funds for 2022 and 2023.

Transfers into Level 3 assets in the current year total £27 million (2022: £125 million). This is mainly due to 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 year of £21 million (2022: £116 million) result from a transfer to Level 1 assets relating to assets that are now being actively repriced (that were previously stale) and where fund suspensions have been lifted.

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

		£m
	31 December 2023	31 December 2022
At beginning of the year	25	24
Fair value losses charged to profit or loss¹	-	(2)
Transfers in	20	119
Transfers out	(21)	(116)
Total Level 3 financial liabilities at the end of the year	24	25
Unrealised fair value losses recognised in profit or loss relating to liabilities at the year end	-	(5)

¹Included in Investment return.

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

Details of the valuation techniques applied to the different categories of financial instruments can be found in note 12(a) above, including the valuation techniques applied when significant unobservable assumptions are used to value Level 3 assets.

For Level 3 assets and liabilities, no reasonable alternative assumptions are applicable and the Group therefore performs a sensitivity test of an aggregate 10% (2022: 10%), which is a reasonably possible change in the value of the financial asset or liability. It is therefore considered that the impact of this sensitivity will be in the range of £3 million (2022: £3 million) to the reported fair value of Level 3 assets, both favourable and unfavourable.

12(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.

13: Cash and cash equivalents

13(a): Analysis of cash and cash equivalents

		£m
	31 December 2023	31 December 2022
Cash at bank	444	406
Money market funds	1,091	1,112
Cash and cash equivalents in consolidated funds	324	264
Total cash and cash equivalents per statement of cash flows	1,859	1,782

The Group's management does not consider that the cash and cash equivalents balance arising due to consolidation of funds of £324 million (2022: £264 million) is available for use in the Group's day-to-day operations. The remainder of the Group's cash and cash equivalents balance of £1,535 million (2022: £1,518 million) is considered to be available for general use by the Group for the purposes of the disclosures required under IAS 7 Statement of Cash Flows. This balance includes policyholder cash as well as cash and cash equivalents held by regulated subsidiaries to meet their capital and liquidity requirements.

13(b): Analysis of net cash flows from operating activities:

			£m
	Notes	Year ended 31 December 2023	Year ended 31 December 2022
Cash flows from operating activities
Profit before tax		88	65
Adjustments for
Depreciation and impairment of property, plant and equipment		12	22
Movement on contract costs		(6)	(1)
Amortisation and impairment of intangibles		41	44
Fair value and other movements in financial assets		(3,200)	4,410
Fair value movements in investment contract liabilities	15	2,528	(4,878)
Other changes in investment contract liabilities		2,682	1,993
Other movements		47	32
		2,104	1,622
Net changes in working capital
Increase in derivatives position		(12)	(21)
Increase in loans and advances		(4)	(5)
Decrease in provisions	16	(23)	(24)
Movement in other assets/liabilities		(16)	61
		(55)	11
Taxation paid		(26)	(22)
Net cash flows from operating activities		2,111	1,676

14: Ordinary Share capital

At 31 December 2023, the Company's equity capital comprises 1,404,105,498 Ordinary Shares of 8 1/6 pence each with an aggregated nominal value of £114,668,616 (2022: 1,404,105,498 Ordinary Shares of 8 1/6 pence each with an aggregated nominal value of £114,668,616). All Ordinary Shares have been called up and fully paid.

This note gives details of the movements in Ordinary Share capital during the year 2023 and 2022.

		£m	£m
	Number of Ordinary Shares	Nominal value of Ordinary Shares	Ordinary Share premium
At 1 January 2022	1,655,827,217	116	58
Shares cancelled through share buyback programme	(17,704,132)	(1)	-
Share Consolidation (including shares cancelled)	(234,017,587)	-	-
At 31 December 2022	1,404,105,498	115	58
At 31 December 2023	1,404,105,498	115	58

In 2020, the Company announced a share buyback programme to purchase shares up to a maximum value of £375 million, in order to return the net surplus proceeds to shareholders arising from the sale of Quilter Life Assurance which had the impact of reducing the share capital of the Company. The programme completed in January 2022.

On 9 March 2022, the Company announced a capital return of £328 million, equivalent to 20 pence per share, from the net surplus proceeds arising from the sale of Quilter International by way of a B Share Scheme. Following the return of capital, a share consolidation was completed so that comparability between the market price for Quilter plc's Ordinary Shares before and after the implementation of the B Share Scheme was maintained.

In 2022, new Ordinary Shares were issued for existing Ordinary Shares in a ratio of six new shares of 8 1/6 pence each for seven existing shares of 7 pence each resulting in a reduction in the number of shares by 234,017,587.

All Ordinary Shares issued carry equal voting rights. The holders of the Company's Ordinary Shares are entitled to receive dividends as declared and are entitled to one vote per share at shareholder meetings of the Company.

15: Investment contract liabilities

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

		£m
	2023	2022
Carrying amount at 1 January	38,186	41,071
Fair value movements	2,528	(4,878)
Investment income	785	560
Movements arising from investment return	3,313	(4,318)
Contributions received	5,358	4,408
Withdrawals and surrenders	(3,212)	(2,759)
Claims and benefits	(245)	(219)
Other movements	(4)	3
Change in liability	5,210	(2,885)
Investment contract liabilities at end of the year	43,396	38,186

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.

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.

16: Provisions

					£m
Year ended 31 December 2023	Compensation provisions	Sale of subsidiaries provision	Property provisions	Clawback and other provisions	Total
Balance at beginning of the year	23	15	12	19	69
Charge to profit or loss	17	-	-	6	23
Used during the year	(14)	(12)	(2)	(8)	(36)
Unused amounts reversed	(9)	-	-	(1)	(10)
Balance at 31 December 2023	17	3	10	16	46

					£m
31 December 2022	Compensation provisions	Sale of subsidiaries provision	Property provisions	Clawback and other provisions	Total
Balance at beginning of the year	41	22	9	21	93
Charge to profit or loss	22	-	4	3	29
Used during the year	(28)	(7)	(1)	(2)	(38)
Unused amounts reversed	(12)	-	-	(4)	(16)
Reclassification within the statement of financial position¹	-	-	-	1	1
Balance at 31 December 2022	23	15	12	19	69

¹Clawback and other provisions included the balancing premium payable for the bulk annuity purchased for the Quilter Cheviot Limited Retirement Benefits scheme which was reclassified during the year to 31 December 2022 from accruals reflecting the uncertainty of the amounts to be settled.

Compensation provisions

Compensation provisions total £17 million (2022: £23 million). The net reduction of £6 million during the year consists of additional charges to profit or loss of £17 million, compensation payments made during the year of £14 million and £9 million release of unused amounts during 2023 following further review work completed during the year. Compensation provisions are comprised of the following:

Lighthouse pension transfer advice provision of £6 million (2022: £5 million)

Lighthouse pension transfer advice provided to British Steel Pension Scheme members of £nil (2022: £4 million)

A total provision of £nil (2022: £4 million) remains for the redress of British Steel Pension Scheme cases. This is comprised of two parts:

(a) Customer redress provision of £nil (2022: £3 million). During the year, payments of £1 million have been made to customers. The redress provision has been recalculated for the final suitability assessments and redress calculations performed by the independent expert, and the remaining provision of £2 million released to profit or loss.

(b) Anticipated costs associated with redress activity of £nil (2022: £1 million). This provision was recognised in respect of the anticipated costs of legal and professional fees related to the cases and redress process, which included the expected costs to review advice. Legal and professional fees of £3 million have been paid during the year.

During the year to 31 December 2022, the skilled person completed their review of all British Steel Pension Scheme cases within the scope of the skilled person's review, reflecting the outcome of the review of the suitability of the DB to DC pension transfer advice for each case, and all remaining offers were made to customers who received unsuitable DB to DC pension transfer advice which caused them to sustain a loss.

Certain customers who were included in the skilled person review have referred their case to the Financial Ombudsman Service, relating to cases where: (i) relevant DB to DC pension transfer advice was found to be suitable by the skilled person; or (ii) where relevant DB to DC pension transfer advice was found to be unsuitable by the skilled person, but the customer disagreed with the way in which their redress offer has been calculated by the skilled person. The Financial Ombudsman Service has upheld some challenges and the redress payments in relation to such cases are included within the amounts stated above in this note. It is possible further challenges may be upheld.

In November 2022, the FCA published a policy statement containing the final rules for a redress scheme for former members of the British Steel Pension Scheme who received unsuitable advice (the "BSPS Redress Scheme"). The BSPS Redress Scheme covers those persons who received advice between 26 May 2016 and 29 March 2018 to transfer out of the British Steel Pension Scheme. The rules for the BSPS Redress Scheme set out how advisers must determine whether they gave unsuitable advice and whether they must pay redress. The Group may therefore face further costs of redress as a result of the BSPS Redress Scheme. The BSPS Redress Scheme does not cover individuals that have accepted redress for the advice provided, referred the matter to the Financial Ombudsman Service or received a final outcome following a suitability assessment of their case conducted through a skilled person review. Therefore, based on the rules of the BSPS Redress Scheme, this process does not include Lighthouse cases that have already been reviewed by the skilled person where the customer received a final outcome.

Based on the rules for the BSPS Redress Scheme, there were approximately 30 Lighthouse cases relating to British Steel Pension Scheme members that fall within the scope of the BSPS Redress Scheme. These customers were written to during 2023, and where applicable sent a redress determination letter, in line with the timeline prescribed within the BSPS Redress Scheme. The redress payments in relation to such cases are included within the amounts stated above in this note. At 31 December 2023, the review of cases is complete, and there are no further redress amounts to be paid under the BSPS Redress Scheme.

Lighthouse pension transfer advice provided to members of other schemes of £6 million (2022: £1 million)

The skilled person review of Lighthouse DB to DC pension transfer advice cases identified unsuitable DB to DC pension transfer advice provided by Lighthouse advisers for pension schemes other than the British Steel Pension Scheme. The initial scope of the review concluded in 2022, with £3 million paid to customers and the remaining provision released to profit or loss. The skilled person review concluded in December 2022.

The skilled person recommended a review of a further sample of Lighthouse DB to DC pension transfer advice cases not relating to the British Steel Pension Scheme. In December 2022, the FCA confirmed to the Group that it agreed with the skilled person's recommendation. The FCA also confirmed that, given the cooperation of the Group in relation to the skilled person review and established past business review methodology and consistent with the recommendation made by the skilled person, this further sample should be reviewed under a Group-managed past business review process. The FCA also agreed with the skilled person that the further sample should be selected on a risk-based approach and set out to the Group the key risk factors to be used in determining the sample. The review of this sample has identified some additional cases where customer redress is required. Until the review of the relevant sample has been completed, uncertainty exists as to the number of cases where this will be required and the value of total redress which may be payable. A provision for redress relating to the review of this further sample of cases of £1 million was established at 31 December 2022 and has been increased by £4 million at 31 December 2023, based upon the suitability review of cases to date, and the anticipated number of cases required to be reviewed. Payments of £1 million have been made to customers during 2023. Additionally, anticipated costs associated with the redress activity of £2 million (2022: £nil) have been included within the provision at 31 December 2023. Any further redress payable is expected to be paid during 2024.

The Group estimates a reasonably possible change of +/- £3 million from the £6 million balance, based upon an increase or decrease of five percentage points in redress as a percentage of transfer value.

Compensation provisions (other) of £11 million (2022: £18 million)

Other compensation provisions of £11 million 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 management'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. The best estimate of the timing of outflows is that the majority of the balance is expected to be settled within 12 months.

A provision of £3 million, included within the balance, has been recognised at 31 December 2023 (2022: £7 million) relating to potentially unsuitable DB to DC pension transfer advice provided by adviser businesses other than Lighthouse. Of this balance, £nil (2022: £2 million) has been recognised for potentially unsuitable DB to DC pension transfer advice provided to British Steel Pension Scheme members by Quilter Financial Planning firms other than Lighthouse. This provision was recognised following the receipt of a "Dear CEO" letter from the FCA in 2021, and subsequent establishment of the BSPS Redress Scheme in 2022. During 2023, all relevant British Steel Pension Scheme cases have been reviewed for suitability by an independent expert, and redress calculations performed where applicable. There were no redress payments made related to the BSPS Redress Scheme and the provision balance of £2 million at 31 December 2022 was released to profit or loss during the year. The estimate of the provision unrelated to the BSPS Redress Scheme has been updated for the current status of the past business reviews and redress estimated based upon the Group's experience of the Lighthouse skilled person and past business reviews. Customer redress is expected to be calculated and paid to relevant customers during 2024.

A provision of £4 million, included within the balance at 31 December 2022, related to Final Plan Closure ("FPC") receipts previously recognised as revenue since 2013 for distributions the Group received from investments for customers who had previously closed their accounts. FPC receipts represent distributions, including tax gross ups where relevant, and rebates received after a customer has left the Quilter platform, which the terms and conditions of the pension and insured bonds legally entitled the Group to retain. A review in 2022 led to a change in business policy, and Quilter made the decision to voluntarily return these amounts to those impacted customers backdated to inception, with an appropriate rate of interest applied to each balance. A provision of £6 million was initially recognised in 2022, and payments of £2 million were made to customers during 2022. The remaining provision outstanding at 31 December 2022 of £4 million has been paid to customers during the current year.

The Group estimates a reasonably possible change of +/- £3 million from the £11 million balance, based upon a review of the cases and the range of potential outcomes for the customer redress payments.

Sale of subsidiaries provision

Sale of subsidiaries provisions total £3 million at 31 December 2023 (2022: £15 million), and include the following:

Provisions arising on the sale of Quilter International of £2 million (2022: £11 million)

Quilter International was sold on 30 November 2021, resulting in provisions totalling £17 million being established in respect of costs related to the disposal including the costs of business separation and data migration activities.

The costs of business separation arise from the process required to separate Quilter International'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 were based on external quotations and estimates, together with estimates of the incremental time and resource costs required to achieve the separation, which was expected to occur over a two-to-three-year period from the date of the sale.

The most significant element of the provision is the cost of migration of IT systems and data to the acquirer. Calculation of the provision was based on management'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, management has made use of its past experience of previous IT migrations following business disposals.

During the year, £9 million (2022: £6 million) of the provision has been used. The Group estimates a provision sensitivity of +/-25% (£1 million), based upon a review of the range of time periods expected to complete the work required. The remaining balance of £2 million related to decommissioning works is forecast to be paid within one year.

Sale of Single Strategy business provision of £nil (2022: £4 million)

The provision in the prior year related to sale-related future commitments made to the buyer (now known as Jupiter Investment Management ("Jupiter")) of the Single Strategy business, which was initially recognised in 2018, in relation to the level of revenues for Jupiter in future years arising from funds invested by customers of Quilter.

In the year to 31 December 2023, £4 million was agreed and settled relating to the 2022 measurement year, which is the final measurement year according to the sale agreement. This was the final amount payable under this arrangement with Jupiter.

Property provisions

Property provisions total £10 million (2022: £12 million). Property provisions represent the discounted value of expected future costs of reinstating leased property to its original condition at the end of the lease term, and any onerous commitments which may arise in cases where a leased property is no longer fully used by the Group. The estimate is based upon property location, size of property and an estimate of the charge per square foot. Property provisions are used or released when the reinstatement obligations have been fulfilled. The associated asset for the property provisions relating to the cost of reinstating property is included within Property, plant and equipment.

Of the £10 million provision outstanding, £3 million (2022: £3 million) is estimated to be payable within one year. The majority of the balance relates to leased properties which have a lease term maturity of more than five years.

Clawback and other provisions

Clawback and other provisions total £16 million (2022: £19 million) and 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 are discounted at discount rates specific to the risks inherent in the liability. The timing and final amounts of payments, 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 31 December 2023 is £12 million (2022: £14 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 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 is assessed as no longer payable. The provision has been assessed at the reporting date and adjusted for the latest cancellation information available. At 31 December 2023, an associated balance of £8 million recoverable from brokers is included within Trade, other receivables and other assets (2022: £8 million).

The Group estimates a reasonably possible change of +/- £3 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 £16 million provision outstanding, £7 million is estimated to be payable within one year (2022: £8 million).

17: Contingent liabilities

The Group, in the ordinary course of business, enters into transactions that expose it to tax, legal, regulatory 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 16). 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.

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.

Contingent liabilities - DB to DC pension transfer advice redress

As set out in note 16, the Lighthouse skilled person review concluded in December 2022. A further sample of Lighthouse DB to DC pension transfer advice cases not relating to the British Steel Pension Scheme is being reviewed under a Group-managed past business review process. Until the review has finalised, uncertainty exists as to the number of cases where further review will be required and the value of total redress that will be payable.

Customers have the legal right to challenge the outcome of the skilled person review and the BSPS Redress Scheme in respect of their case via a complaint to the Financial Ombudsman Service. The skilled person was independent from the Group and ran a robust process, which was overseen by the FCA. The Financial Ombudsman Service may uphold further challenges, which may lead to further redress payable by the Group.

At the conclusion of its enforcement investigation, the FCA issued a Final Notice to Lighthouse in May 2023. The FCA found that Lighthouse had provided unsuitable DB to DC pension transfer advice but imposed no financial penalty. The FCA acknowledged in its decision that Lighthouse provided very high levels of co-operation in relation to the FCA's investigation and that the Group, on its own initiative, promptly paid redress to customers who received unsuitable DB to DC pension transfer advice from Lighthouse and sustained losses as a result of that advice.

It is possible that further material costs of redress may be incurred in relation to past business reviews. Further customer redress costs may also be incurred for other potential unsuitable DB to DC pension transfer advice provided across the Group.

Any further redress costs, and any differences between the provision and the final payment to be made for any unsuitable DB to DC pension transfer cases, will be recognised as an expense or credit in profit or loss.

Tax

The Group is committed to conducting its tax affairs in accordance with the tax legislation of the countries in which it operates and this includes compliance with legislation related to levies, sales taxes and payroll deductions.

The tax authorities in the countries in which the Group operates routinely review historical transactions undertaken and tax law interpretations made by the Group. 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 tax authorities. The consolidated 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 Group is satisfied that adequate provisions have been made to allow for the resolution of tax uncertainties and that the resources available 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 remains focussed on delivering good outcomes for customers to support them in meeting their lifetime goals. During the normal course of business, from time to time, the Group receives complaints and claims from customers including, but not limited to, complaints to the Financial Ombudsman Service and legal proceedings related thereto, enters into commercial disputes with service providers and other parties, and is subject to discussions and reviews with regulators. The costs, including legal costs, of these issues as they arise can be significant and, where appropriate, provisions have been established.

Subsequent to the year-end date, on 15 February 2024, the FCA wrote to around 20 advice firms, including Quilter, requesting information regarding ongoing servicing to assess what, if any, further regulatory work the FCA may undertake in this area. The Group is commencing a review of historical data and practices across the Group's network to determine what, if any, further action may be required. This may lead to remedial costs but it is too early to quantify. Until the Group has further clarity of its position on this matter, there remains uncertainty as to the potential financial and non-financial implications that may arise.

Where the Group's regular adviser oversight controls have determined that a customer may not have received the servicing that they have paid for, or where the Group has received complaints from customers regarding ongoing servicing, this has been investigated, and, where appropriate, remediation has been undertaken and recognised as a normal business as usual expense.

18: Capital and financial risk management

18(a): Capital management

The Group manages its capital with a focus on capital efficiency and effective risk management. The capital management objectives are to maintain the Group's ability to continue as a going concern while supporting the optimisation of return relative to the risks. The Group ensures that it can meet its expected capital and financing needs at all times having regard to the Group's Business Plans, forecasts, strategic initiatives and the regulatory requirements applicable to Group entities.

The Group's overall capital risk appetite is set with reference to the requirements of the relevant stakeholders and seeks to:

· maintain sufficient, but not excessive, financial strength to support stakeholder requirements;

· optimise debt to equity structure to enhance shareholder returns; and

· retain financial flexibility by maintaining liquidity including unutilised committed credit lines.

The primary sources of capital used by the Group are equity shareholders' funds of £1,519 million (2022: £1,548 million) and subordinated debt which was issued at £200 million in January 2023. Alternative resources are utilised where appropriate. Risk appetite has been defined for the level of capital, liquidity and debt within the Group. The risk appetite includes long-term targets, early warning thresholds and risk appetite limits. The dividend policy sets out the target dividend level in relation to profits.

The regulatory capital for the Group is assessed under Solvency II requirements.

18(a)(i): Regulatory capital (unaudited)

The Group is subject to Solvency II group supervision by the Prudential Regulation Authority. The Group is required to measure and monitor its capital resources under the Solvency II regulatory regime.

The Group's UK life insurance undertaking is included in the Group solvency calculation on a Solvency II basis. Other regulated entities are included in the Group solvency calculation according to the relevant sectoral rules. The Group's Solvency II surplus is the amount by which the Group's capital on a Solvency II basis (own funds) exceeds the Solvency II capital requirement (solvency capital requirement or "SCR").

The Group's Solvency II surplus is £972 million at 31 December 2023 (2022: £820 million), representing a Solvency II ratio of 271% (2022: 230%) calculated under the standard formula. The Solvency II regulatory position at 31 December 2023 allows for the impact of the recommended Final Dividend payment of £50 million (2022: £45 million).

The Solvency II position as at 31 December 2023 (unaudited estimate) and 31 December 2022 is presented below:

		£m
	31 December 2023¹	31 December 2022²
Own funds	1,540	1,451
Solvency capital requirement	568	631
Solvency II surplus	972	820
Solvency II coverage ratio	271%	230%

¹Filing of annual regulatory reporting forms due by 17 May 2024.

²As reported in the Group Solvency and Financial Condition Report for the year ended 31 December 2022.

The Group's own funds include the Quilter plc issued subordinated debt security which qualifies as capital under Solvency II. The composition of own funds by tier is presented in the table below.

		£m
Group own funds	31 December 2023	31 December 2022
Tier 1¹	1,336	1,249
Tier 2²	204	202
Total Group Solvency II own funds	1,540	1,451

¹All Tier 1 capital is unrestricted for tiering purposes.

²Comprises a Solvency II compliant subordinated debt security in the form of a Tier 2 bond, which was issued at £200 million in January 2023.

The Group's UK life insurance undertaking is also subject to Solvency II at entity level. Other regulated entities in the Group are subject to the locally applicable entity-level capital requirements in the countries in which they operate. In addition, the Group's asset management and advice businesses are subject to group supervision by the FCA under the UK Investment Firms Prudential Regime ("IFPR").

During 2023, the capital requirements for the Group and its regulated subsidiaries were reported and monitored through regular Capital Management Forum meetings. Throughout 2023, the Group has complied with the regulatory requirements that apply at a consolidated level and Quilter's insurance undertakings and investment firms have complied with the regulatory capital requirements that apply at entity level.

18(a)(ii): Loan covenants

Under the terms of the revolving credit facility agreement, the Group is required to comply with the following financial covenant: the ratio of total net borrowings to consolidated equity shareholders' funds shall not exceed 0.5.

		£m
	31 December 2023	31 December 2022
Total external borrowings of the Company	198	200
Less: cash and cash equivalents of the Company	(110)	(126)
Total net external borrowings of the Company	88	74
Total shareholders' equity of the Group	1,519	1,548
Tier 2 bond	198	200
Total Group equity (including Tier 2 bond)	1,717	1,748
Ratio of Company net external borrowings to Group equity	0.051	0.042

The Group has complied with the covenant since the facility was created in 2018.

18(a)(iii): Own Risk and Solvency Assessment ("ORSA") and Internal Capital Adequacy and Risk Assessment ("ICARA")

The Group ORSA process is an ongoing cycle of risk and capital management processes which provides an overall assessment of the current and future risk profile of the Group and demonstrates the relationship between business strategy, risk appetite, risk profile and solvency needs. These assessments support strategic planning and risk-based decision making.

The underlying ORSA processes cover the Group and consider how risks and solvency needs may evolve over the planning period. The ORSA includes stress and scenario tests, which are performed to assess the financial and operational resilience of the Group.

The Group ORSA report is produced annually. This summarises the analysis, insights and conclusions from the underlying risk and capital management processes in respect of the Group. The ORSA report is submitted to the PRA as part of the normal supervisory process and may be supplemented by ad hoc assessments where there is a material change in the risk profile of the Group outside the usual reporting cycle.

In addition to the Group ORSA process, an entity-level ORSA process is performed for Quilter Life & Pensions Limited.

The Group ICARA process is an ongoing cycle of risk and capital management processes, similar to the ORSA process. The Group ICARA process is performed for the prudential consolidation of Quilter's investment and advice firms under IFPR requirements. The ICARA process is also performed at an entity level for Quilter's UK investment firms, which are Quilter Investment Platform Limited, Quilter Investors Limited and Quilter Cheviot Limited.

The Group ICARA report is produced annually. This summarises the analysis, insights and conclusions from the underlying risk and capital management processes in respect of Quilter's IFPR prudential consolidation group.

The conclusions of the ORSA and ICARA processes are reviewed by management and the Board throughout the year.

18(b): Credit risk

Overall exposure to credit risk

Credit risk is the risk of adverse movements in credit spreads (relative to the reference yield curve), credit ratings or default rates leading to a deterioration in the level or volatility of assets, liabilities or financial instruments resulting in loss of earnings or reduced solvency. This includes counterparty default risk, counterparty concentration risk and spread risk.

The Group has established a Credit Risk Framework that includes a Credit Risk Policy and Credit Risk Appetite Statement. This framework applies to all activities where the Group is exposed to credit risk, either directly or indirectly, ensuring appropriate identification, measurement, management, monitoring and reporting of the Group's credit risk exposures.

The credit risk arising from all exposures is mitigated by ensuring that the Group only enters into relationships with appropriately robust counterparties, adhering to the Group Credit Risk Policy. For each asset, consideration is given as to:

· the credit rating of the counterparty, which is used to derive the probability of default;

· the loss given default;

· the potential recovery which may be made in the event of default;

· the extent of any collateral that the Group has in respect of the exposures; and

· any second order risks that may arise where the Group has collateral against the credit risk exposure.

The credit risk exposures of the Group are monitored regularly to ensure that counterparties remain creditworthy, that there is appropriate diversification of counterparties and that exposures are within approved limits. At the end of 2023, the Group's material credit exposures were to financial institutions (primarily through the investment of shareholder funds), corporate entities (including external fund managers) and individuals (primarily through fund management trade settlement activities).

There is no direct exposure to non-UK sovereign debt within the shareholder investments. The Group has no significant concentrations of credit risk exposure.

Other credit risks

The Group is exposed to financial adviser counterparty risk through a number of loans that it makes to its advisers and the payment of upfront commission on the sale of certain types of business. The risk of default by financial advisers is managed through monthly monitoring of loan and commission debt balances.

The Group is also exposed to the risk of default by fund management groups in respect of settlements and rebates of fund management charges on collective investments held for the benefit of policyholders. This risk is managed through the due diligence process which is completed before entering into any relationship with a fund group. Amounts due to and from fund groups are monitored for prompt settlement and appropriate action is taken where settlement is not timely.

Legal contracts are maintained where the Group enters into credit transactions with a counterparty.

Impact of credit risk on fair value

Due to the limited exposure that the Group has to credit risk, credit risk does not have a material impact on the fair value movement of financial instruments for the year under review. The fair value movements on these instruments are mainly due to changes in market conditions.

Maximum exposure to credit risk

The Group's maximum exposure to credit risk does not differ from the carrying value disclosed in the relevant notes to the consolidated financial statements.

Loans and advances subject to 12-month expected credit losses are £38 million (2022: £34 million) and other receivables subject to lifetime expected credit losses are £297 million (2022: £204 million). Those balances represent the pool of counterparties that do not require a rating. These counterparties individually generate no material credit exposure and this pool is highly diversified, monitored and subject to limits.

Exposure arising from financial instruments not recognised on the statement of financial position is measured as the maximum amount that the Group would have to pay, which may be significantly greater than the amount that would be recognised as a liability. The Group does not have any significant exposure arising from items not recognised on the statement of financial position.

The table below represents the Group's exposure to credit risk from cash and cash equivalents.

														£m
		Credit rating relating to cash and cash equivalents
31 December 2023		AAA		AA		A		B		<BBB		Not rated¹		Carrying value
Cash at amortised cost, subject to 12-month ECL		-		63		381		-		-		324		768
Money market funds at FVTPL		1,091		-		-		-		-		-		1,091
Total cash and cash equivalents		1,091		63		381		-		-		324		1,859

													£m
	Credit rating relating to cash and cash equivalents
31 December 2022	AAA		AA		A		B		<BBB		Not rated¹		Carrying value
Cash at amortised cost, subject to 12-month ECL	-		13		388		5		-		264		670
Money market funds at FVTPL	1,112		-		-		-		-		-		1,112
Total cash and cash equivalents	1,112		13		388		5		-		264		1,782

¹Cash included in the consolidation of funds is not rated (see note 13(a)).

Impairment allowance

Assets that are measured and classified at amortised cost are monitored for any expected credit losses on either a 12-month or lifetime ECL model. The majority of such assets within the Group are measured on the lifetime ECL model, with the exception of some specific loans that are on the 12-month ECL model.

Impairment allowance	£m
Balance at 1 January 2022	(1.2)
Change due to change in counterparty balance	0.1
31 December 2022	(1.1)
Change due to change in counterparty balance	(0.4)
Additional impairment in the year	(1.5)
31 December 2023	(3.0)

18(c): Market risk

Market risk is the risk of an adverse change in the level or volatility of market prices of assets, liabilities or financial instruments resulting in loss of earnings or reduced solvency. Market risk arises from changes in equity, bond and property prices, interest rates and foreign exchange rates. Market risks are linked to wider economic and geopolitical conditions and may be driven by the crystallisation of climate related financial risks. Market risk arises differently across the Group's businesses depending on the types of financial assets and liabilities held.

The Group has a market risk policy which sets out the risk management framework, permitted and prohibited market risk exposures, maximum limits on market risk exposures, management information and stress testing requirements which are used to monitor and manage market risk. The policy is cascaded to the businesses across the Group, and Group-level governance and monitoring processes provide oversight of the management of market risk by the individual businesses.

The Group does not undertake any principal trading for its own account. The Group's revenue is however affected by the value of assets under management and administration and consequently it has exposure to equity market levels and economic conditions. Scenario testing is undertaken to test the resilience of the business to severe but plausible events, including assessment of the potential implications of climate-related risks and opportunities, and to assist in the identification of management actions.

18(c)(i): Equity risk

In accordance with the market risk policy, the Group does not generally invest shareholder assets in equity, or related collective investments, except where the exposure arises due to:

· mismatches between unitised fund assets and liabilities. These mismatches are permitted, subject to maximum limits, to avoid excessive dealing costs; and

· seed capital investments. Seed capital is invested within new unitised or other funds within the Group at the time when these funds are launched. The seed capital is then withdrawn from the funds as policyholders and customers invest in the funds.

The above exposures are not material to the Group.

The Group derives fees (e.g. annual management charges) and incurs costs (e.g. outsourced service provider) which are linked to the performance of the underlying assets. Therefore, future earnings will be affected by equity market performance.

Equity sensitivity testing

A movement in equity would impact the fee income that is based on the market value of the investments held by or on behalf of customers. The sensitivity is applied as an instantaneous shock to equity at the start of the year. The sensitivity analysis is not limited to the unit-linked business and therefore reflects the sensitivity of the Group as a whole.

		£m
Impact on profit after tax and net assets	31 December 2023	31 December 2022
Impact of 10% increase in equity	26	30
Impact of 10% decrease in equity	(26)	(30)

18(c)(ii): Interest rate risk

Interest rate risk arises primarily from bank balances held with financial institutions.

A rise in interest rates would also cause an immediate fall in the value of investments in fixed income securities within clients' investment funds, resulting in a fall in fund-based revenues.

Conversely, a reduction in interest rates would cause a rise in the value of investments in fixed income securities within clients' investment funds. It would also reduce the interest rate earned on cash deposits and money market funds.

Exposure of the financial statements to interest rates are summarised below.

Interest rate sensitivity testing

The impact of an increase and decrease in market interest rates of 1% is tested (e.g. if the current interest rate is 5%, the test allows for the effects of an instantaneous change to 4% and 6% from the start of the year). The test allows consistently for similar changes in investment returns and movements in the market value of any fixed interest assets backing the liabilities. The sensitivity of profit to changes in interest rates is provided.

		£m
Impact on profit after tax and net assets	31 December 2023	31 December 2022 (Restated)¹
Impact of 1% increase in interest rates	9	10
Impact of 1% decrease in interest rates	(9)	(10)

¹The disclosures for 2022 have been restated to include certain non-trading entities that were previously excluded.

18(c)(iii): Currency translation risk

Currency translation risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group's functional currency is pounds sterling, which accounts for the majority of the Group's transactions. The Group has minor exposure to Euros, through the Group's Irish subsidiary and to the South African Rand, due to the listing on the Johannesburg Stock Exchange and the payment of a proportion of shareholder dividends in Rand. During 2023, the Group had limited exposure to foreign exchange risk in respect of other currencies due to its non-UK operations and foreign currency transactions.

18(d): Liquidity risk

Liquidity risk is the risk that there are insufficient assets or that assets cannot be realised in order to settle financial obligations as they fall due or that market conditions preclude the ability of the Group to trade in illiquid assets in order to maintain its asset and liability matching ("ALM") profile. The Group manages liquidity on a daily basis through:

· maintaining adequate high-quality liquid assets and banking facilities, the level of which is informed through appropriate liquidity stress testing;

· continuously monitoring forecast and actual cash flows; and

· monitoring a number of key risk indicators to help in the identification of a liquidity stress.

Individual businesses maintain and manage their local liquidity requirements according to their business needs within the overall Group Liquidity Risk Framework that includes a Group Liquidity Risk Policy and Group Liquidity Risk Appetite Statement. The Group framework is applied consistently across all businesses in the Group to identify, manage, measure, monitor and report on all liquidity risks that have a material impact on liquidity levels. This framework considers both short-term liquidity and cash management considerations and longer-term funding risk considerations.

Liquidity is monitored centrally by Group Treasury, with management actions taken at a business level to ensure each business has sufficient liquidity to cover its minimum liquidity requirement, with an appropriate buffer set in line with the Group Risk Appetite Statement.

Throughout the ongoing market volatility during 2023, Quilter plc and its subsidiaries have operated above their individual liquidity targets and there were no material liquidity stresses identified during the year. Daily liquidity monitoring continues across the Group to enable timely identification of any emerging issues.

The Group maintains contingency funding arrangements to provide liquidity support to businesses in the event of liquidity stresses. Contingency Funding Plans are in place for each individual business in order to set out the approach and management actions that would be taken should liquidity levels fall below liquidity thresholds which have been set to reflect the liquidity risk appetite of each business. The plans undergo an annual review and testing cycle to ensure they are fit for purpose and can be relied upon during a liquidity stress.

Information on the nature of the investments and securities held is given in note 10.

The Group has a £125 million five-year Revolving Credit Facility with a five-bank club that provides a form of contingency liquidity for the Group. No drawdown on this facility has been made since inception in February 2018. The Group entered into a new five-year arrangement in January 2024 with the option to extend the facility for a further two-year period, to January 2031, and has continued to meet all the covenants attached to its financing arrangements.

The financing arrangements are considered sufficient to maintain the target liquidity levels of the Group and offer coverage for appropriate stress scenarios identified within the liquidity stress testing undertaken across the Group.

18(e): Insurance risk

18(e)(i): Overview

Insurance risk covers risks arising under products provided by Quilter's life insurance firm, Quilter Life & Pensions Limited. These products do not meet the IFRS definition of insurance contracts.

Insurance risk covers risk of adverse experience of withdrawal, overrun in expenses or higher than expected mortality experience.

The sensitivity of the Group's earnings and capital position to insurance risks is monitored through the Group's capital management processes.

The Group manages its insurance risks through the following mechanisms:

· Management of expense levels relative to approved budgets.

· Analysis and monitoring of experience relative to the assumptions used to determine technical provisions.

Persistency

Persistency risk is the risk that the level of surrenders or withdrawals on products offered by Quilter Life & Pensions Limited occur at levels that are different to the levels assumed in the determination of technical provisions. Persistency statistics are monitored monthly and a detailed persistency analysis at a product group level is carried out on an annual basis. Management actions may be triggered if persistency statistics indicate significant adverse movement or emerging trends in experience.

Expenses

Expense risk is the risk that actual expenses and expense inflation differ from the levels assumed in the determination of technical provisions. Expense levels are monitored on a quarterly basis against budgets and forecasts. Expense drivers are used to allocate expenses to entities and products. Some product structures include maintenance charges. These charges are reviewed annually in light of changes in maintenance expense levels and the market rate of inflation. This review may result in changes in charge levels.

Mortality

Mortality risk is not material as the Group does not provide material mortality insurance on its products.

18(e)(ii): Sensitivity analysis

Sensitivity analysis has been performed by applying the following parameters to the financial statements for 2022 and 2023. Interest rate and equity and property price sensitivities are included within the Group market sensitivities above.

Expenses

The increase in expenses is assumed to apply to the costs associated with the maintenance and acquisition of contracts within the unit-linked business. It is assumed that these expenses are increased by 10% from the start of the year, so is applied as an expense shock rather than a gradual increase. The only administrative expenses that are deferrable are sales bonuses but as new business volumes are unchanged in this sensitivity, sales bonuses and the associated deferrals have not been increased. Administrative expenses have been allocated equally between life and pensions.

An increase in expenses of 10% would have decreased profit by £5 million after tax (2022: £6 million).

18(f): Operational risk

Operational risk is the risk of loss arising from inadequate or failed internal processes, or from personnel and systems, or from external events, resulting in an adverse impact to earnings or reduced solvency. Operational risk includes all risks resulting from operational activities, excluding the risks already described above and excluding strategic risks.

Operational risk includes, but is not limited to, the effects of failure of administration processes, IT and Information Security maintenance and development processes, advice processes (including oversight of ongoing servicing provided by financial advisers), investment processes (including settlements with fund managers, fund pricing and matching and dealing), people and HR processes, product development and management processes, legal risks (e.g. risk of inadequate legal contracts with third parties), change delivery risks (including poorly managed responses to regulatory change), physical and certain transitional financial risks arising from climate change, risks relating to the relationship with third-party suppliers and outsourcers, and the consequences of financial crime and business interruption events.

In accordance with Group policies, management has primary responsibility for the identification, measurement, assessment, management and monitoring of risks, and the escalation and reporting on issues to Executive Management.

The Group's Executive Management has responsibility for implementing the Group Operational Risk Framework and for the development and implementation of action plans designed to manage risk levels within acceptable tolerances and to resolve issues identified.

18(g): Contractual maturity analysis

Investment contract policyholders have the option to terminate or transfer their contracts at any time and to receive the surrender or transfer value of their policies, and these liabilities are therefore classified as having a maturity of less than three months. Although these liabilities are payable on demand, the Group does not expect that all liabilities will be settled within a short time period.

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 year or the prior year which had a material effect on the results or financial position of the Group. Full details of transactions with related parties, including key management personnel compensation is included within note 39 of the financial statements within the Group's 2023 Annual report. The Group's interest in subsidiaries and related undertakings are set out in Appendix A of the financial statements within the Group's 2023 Annual report.

20: Events after the reporting date

Final Dividend

On 6 March 2024, the Group announced a proposed Final Dividend for 2023 of 3.7 pence per Ordinary Share amounting to £50 million in total. Subject to approval by shareholders at the Annual General Meeting, the dividend will be paid on 28 May 2024.

Borrowings

In January 2024, the Company entered into a £125 million five-year revolving credit facility with an option for the Company to extend for a further two years until January 2031. This new facility replaces the existing £125 million revolving credit facility entered into in February 2018. The facility remains undrawn and is being held for contingent funding purposes across the Group.

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