Concentration of credit risk Concentration of credit risk might exist where the Group has significant exposure to an individual counterparty or a group of counterparties with similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic and other conditions. The Group has most of its counterparty risk within its life business and is monitored by the Group Counterparty Credit Risk Framework contained within the Group Credit Risk Policy. It is further provided for in investment management agreements, overlaid by regulatory requirements and the monitoring of aggregate counterparty exposures across the Group against additional Group counterparty limits. Counterparty risk in respect of OTC derivative counterparties is monitored using a Potential Future Exposure (\u2018PFE\u2019) value metric. The Group is also exposed to concentration risk with outsource partners. This is due to the nature of the outsourced services market. The Group operates a policy to manage outsourcer service counterparty exposures and the impact from default is reviewed regularly by executive committees and measured through stress and scenario testing. Reinsurance The Group is exposed to credit risk as a result of insurance risk transfer contracts with reinsurers. The Group\u2019s policy is to place reinsurance only with highly rated counterparties (minimum rating requirement of A-). The Group restricts concentration with individual external reinsurers by specifying limits on ceding and minimum conditions for acceptance and retention of reinsurers. In recent years the Group has made progress in increasing the number of reinsurers it transacts with, however, an element of concentration remains due to the nature of the reinsurance market and the restricted range of reinsurers available. The Group manages its exposure to reinsurance credit risk through the operation of a credit policy, collateralisation, and regular monitoring of exposures at the Reinsurance Management Committee. Collateral The credit risk of the Group is mitigated, in certain circumstances, by entering into collateral agreements. The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of type s of collateral and the valuation parameters. Collateral is mainly obtained in respect of stock lending, certain reinsurance arrangements and to provide security against the daily mark to model value of derivative financial instruments. Management monitors the market value of the collateral received, requests additional collateral when needed, and performs an impairment valuation when impairment indicators exist and the asset is not fully secured and is not carried at fair value. See note E4 for further information on collateral arrangements. E. Financial assets & liabilities continued E6. Risk management \u2013 financial and other risks continued E6.2 Financial risk analysis continued E6.2.2 Market risk Market risk is defined as the risk of reductions in earnings and/or value, through financial or reputational loss, from unfavourable market movements. The risk typically arises from exposure to equity, property and fixed income asset classes and the impact of changes in interest rates, inflation rates and currency exchange rates. The Group is mainly exposed to market risk as a result of: \u2022 the mismatch between liability profiles and the related asset investment portfolios; \u2022 the investment of surplus assets including shareholder reserves yet to be distributed, surplus assets within the with-profit funds and assets held to meet regulatory capital and solvency requirements; and \u2022 the income flow of management charges derived from the value of invested assets of the business. The Group manages the levels of market risk that it accepts through the operation of a market risk policy using a number of controls and techniques including: \u2022 Defined lists of permitted securities and/or application of investment constraints and portfolio limits; \u2022 Clearly defined investment benchmarks for policyholder and shareholder funds; \u2022 Stochastic and deterministic asset/liability modelling; \u2022 Active use of derivatives to improve the matching characteristics of assets and liabilities and to reduce the risk exposure of a portfolio; and \u2022 Setting risk limits for main market risks and managing exposures against these appetites. All operations comply with regulatory requirements relating to the taking of market risk. Assets in the shareholder funds are managed against benchmarks that ensure they are diversified across a range of asset classes, instruments and geographies that are appropriate to the liabilities of the funds or are held to match the cash flows anticipated to arise in the business. A combination of limits by name of issuer, sector, geographical region and credit rating are used where relevant to reduce concentration risk among the assets held. The assets of the participating business are principally managed to support the liabilities of the participating business and are appropriately diversified by both asset class and geography, considering: \u2022 The economic liability and how this varies with market conditions; \u2022 The need to invest assets supporting participating business in a manner consistent with the participating policyholders\u2019 reasonable expectations and Principles and Practices of Financial Management (\u2018PPFM\u2019); and \u2022 The need to ensure that regulatory and capital requirements are met. In practice, an element of market risk arises as a consequence of the need to balance these considerations, for example, in certain instances participating policyholders may expect that equity market risk will be taken on their behalf, and derivative instruments may be used to manage these risks. Markets remain volatile particularly given geopolitical tensions, increased inflation, and action by central banks to reduce inflationary pressures on economies whilst balancing the need to aid post pandemic recovery. This is noted in the Strategic Report principal risk section. Interest rate and inflation risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate relative to the respective liability due to the impact of changes in market interest rates on the value of interest-bearing assets and on the value of future guarantees provided under certain contracts of insurance. The paragraphs in this section also apply to inflation risk, but references to fixed rate assets and liabilities would be replaced with index-linked assets and liabilities. The Group is required to manage its interest rate exposures in line with qualitative risk appetite statements, quantitative risk metrics and any additional hedging benchmarks. Interest rate risk is managed by matching assets and liabilities where practicable and by entering into derivative arrangements for hedging purposes where appropriate. This is particularly the case for the non-participating funds and supported participating funds. For unsupported participating business, some element of investment mismatching is permitted where it is consistent with the principles of treating customers fairly. The with-profit funds of the Group provide capital to allow such mismatching to be effected. In practice, the life companies of the Group maintain an appropriate mix of fixed and variable rate instruments according to the underlying insurance or investment contracts and will review this at regular intervals to ensure that overall exposure is kept within the risk profile agreed for each particular fund. This also requires the maturity profile of these assets to be managed in line with the liabilities to policyholders. The sensitivity analysis for interest rate and inflation risk indicates how changes in the fair value or future cash flows of a financial instrument arising from changes in market interest and inflation rates at the reporting date result in a change in profit after tax and in equity. It takes into account the effect of such changes in market interest and inflation rates on all assets and liabilities that contribute to the Group\u2019s reported profit after tax and in equity. Changes in the value of the Group\u2019s holdings in swaptions as the result of time decay or changes to interest rate volatility are not captured in the sensitivity analysis. With-profit business and non-participating business within the with-profit funds are exposed to interest rate risk as guaranteed liabilities are valued relative to market interest rates and investments include fixed interest securities and derivatives. For unsupported with-profit business the profit or loss arising from mismatches between such assets and liabilities is largely offset by increased or reduced discretionary policyholder benefits dependent on the existence of policyholder guarantees. The contribution of unsupported participating business to the Group result is largely limited to the shareholders\u2019 share of the declared annual bonus. The contribution of the supported participating business to the Group result is determined by the shareholders\u2019 interest in any change in value in the capital advanced to the with-profit funds. In the non-participating funds, policy liabilities\u2019 sensitivity to interest rates are matched primarily with debt securities and hedging if necessary to match duration, with the result that sensitivity to changes in interest rates is very low. The Group\u2019s exposure to interest rates principally arises from the Group\u2019s hedging strategy to protect the regulatory capital position, which results in an adverse impact on profit on an increase in interest rates. The Group is exposed to inflation risk through certain contracts, such as annuities, which may provide for future benefits to be paid taking account of changes in the level of experienced and implied inflation, and also through the Group\u2019s cost base. The Group seeks to manage inflation risk within the ALM framework through the holding of derivatives, such as inflation swaps, or physical positions in relevant assets, such as index-linked gilts, where appropriate. Due to the correlation between interest rates and inflation, a combined sensitivity has been presented. An increase of 1% in interest rates and 0.6% in the rate of inflation, with all other variables held constant, would result in a decrease in profits after tax in respect of a full financial year, and in equity, of \u00a325 million (2021: \u00a3364 million). A decrease of 1% in interest rates and 0.6% in the rate of inflation, with all other variables held constant, would result in an increase in profits after tax in respect of a full financial year, and in equity, of \u00a3128 million (2021: \u00a3415 million). Equity and property risk The Group is exposed to the risk of reductions in the valuation of equities (or changes in the volatility) or property investments which could result in reductions in asset values and losses for policyholders or shareholders. In this context, equity assets should be taken to include shares, equity derivatives, equity collectives and unlisted equities. Property assets include direct property investment, shares in property companies, property collectives and structured property assets. The portfolio of marketable equity securities and property investments which is carried in the statement of consolidated financial position at fair value, has exposure to price risk. The Group\u2019s objective in holding these assets is to earn higher long-term returns by investing in a diverse portfolio of equities and properties. Portfolio characteristics are analysed regularly and price risks are actively managed in line with investment mandates. The Group\u2019s holdings are diversified across industries and concentrations in any one company or industry are limited. Equity and property price risk is primarily borne in respect of assets held in with-profit funds, unit-linked funds or equity release mortgages in the non-profit funds. For unit-linked funds this risk is borne by policyholders and asset movements directly impact unit prices and hence policy values. For with-profit funds policyholders\u2019 future bonuses will be impacted by the investment returns achieved and hence the price risk, whilst the Group also has exposure to the value of guarantees provided to with-profit policyholders. In addition some equity investments are held in respect of shareholders\u2019 funds. For the non-profit fund property price risk from equity release mortgages is borne by the Group with the aim of achieving greater diversification and investment returns, consistent with the Strategic Asset Allocation approved by the Board. The Group as a whole is exposed to price risk fluctuations impacting the income flow of management charges from the invested assets of all funds; this is primarily managed through the use of derivatives. Equity and property price risk is managed through the agreement and monitoring of financial risk profiles that are appropriate for each of the Group\u2019s life funds in respect of maintaining adequate regulatory capital and treating customers fairly. This is largely achieved through asset class diversification and within the Group\u2019s ALM framework through the holding of derivatives or physical positions in relevant assets where appropriate. The shareholders\u2019 exposure to equity risk principally arises from the Group\u2019s hedging strategy to protect the regulatory capital position, which results in an adverse impact on profit on an increase in equity prices. The sensitivity analysis for equity and property price risk illustrates how a change in the fair value of equities and properties affects the Group result. It takes into account the effect of such changes in equity and property prices on all assets and liabilities that contribute to the Group\u2019s reported profit after tax and in equity (but excludes the impact on the Group\u2019s pension schemes). A 10% decrease in equity prices, with all other variables held constant, would result in an increase in profits after tax in respect of a full financial year, and in equity, of \u00a3324 million (2021: \u00a3294 million). A 10% increase in equity prices, with all other variables held constant, would result in a decrease in profits after tax in respect of a full financial year, and in equity, of \u00a3269 million (2021: \u00a3263 million). A 10% decrease in property prices, with all other variables held constant, would result in a decrease in profits after tax in respect of a full financial year, and in equity, of \u00a311 million (2021: \u00a36 million). E. Financial assets & liabilities continued E6. Risk management \u2013 financial and other risks continued E6.2 Financial risk analysis continued E6.2.2 Market risk continued A 10% increase in property prices, with all other variables held constant, would result in an increase in profits after tax in respect of a full financial year, and in equity, of \u00a310 million (2021: \u00a34 million). The sensitivity to changes in equity prices is primarily driven by the Group\u2019s equity hedging arrangements over the value of future management charges that are linked to asset values. Currency risk Currency risk is the risk that changes in the value of currencies could lead to reductions in asset values which may result in losses for policyholders and shareholders. With the exception of Standard Life International business sold in Germany and the Republic of Ireland and some historic business written in the Republic of Ireland, the Group\u2019s principal transactions are carried out in sterling. The assets for these books of business are generally held in the same currency denomination as their liabilities, therefore, any foreign currency mismatch is largely mitigated. Consequently, the foreign currency risk relating to this business mainly arises when the assets and liabilities are translated into sterling. The Group\u2019s financial assets are primarily denominated in the same currencies as its insurance and investment liabilities. Thus, the main foreign exchange risk arises from recognised assets and liabilities denominated in currencies other than those in which insurance and investment liabilities are expected to be settled and, indirectly, from the non-UK earnings of UK companies. Some of the Group\u2019s with-profit funds have an exposure to overseas assets which is not driven by liability considerations. The purpose of this exposure is to reduce overall risk whilst maximising returns by diversification. This exposure is limited and managed through investment mandates which are subject to the oversight of the investment committees of the boards of each life company. Fluctuations in exchange rates from certain holdings in overseas assets are hedged against currency risks. During 2021, the Group entered into four hedging relationships to hedge the currency risk on its Euro and US dollar denominated hybrid debt (US $500 million Tier 2 bonds, \u20ac500 million Tier 2 notes, US $750 million contingent convertible Tier 1 notes and US $500 million Fixed Rate Reset Tier 2 notes as set out in note E5) through cross currency rate swaps. E6.2.3 Financial soundness risk Financial soundness risk is a broad risk category encompassing capital management risk, tax risk and liquidity and funding risk. Capital management risk is defined as the failure of the Group, or one of its separately regulated subsidiaries, to maintain sufficient capital to provide appropriate security for policyholders and meet all regulatory capital requirements whilst not retaining unnecessary capital. The Group has exposure to capital management risk through the requirements of the Solvency II capital regime, as implemented by the PRA, to calculate regulatory capital adequacy at a Group level. The Group\u2019s UK life subsidiaries have exposure to capital management risk through the Solvency II regulatory capital requirements mandated by the PRA at the solo level. The Group\u2019s approach to managing capital management risk is described in detail in note I3. Tax risk Tax risk is defined as the risk of reductions in earnings and/or value, through financial or reputational loss, due to an unforeseen tax cost, or by the inappropriate reporting and disclosure of information in relation to taxation. Tax risk can be caused by: \u2022 the Group, or one of its subsidiaries, making a material error in its tax reporting; \u2022 incorrect calculation of tax provisions; \u2022 failure to implement the optimum financial arrangements to underpin a commercial transaction; and \u2022 incorrect operation of policyholder tax requirements. Tax risk is managed by maintaining an appropriately-staffed tax team who have the qualifications and experience to make judgements on tax issues, augmented by advice from external specialists where required. In addition, the Group has a formal tax risk policy, which sets o ut its risk appetite in relation to specific aspects of tax risk, and which details the controls the Group has in place to manage those risks. Liquidity risk Liquidity risk is defined as failure to maintain adequate levels of financial resources to meet obligations as they fall due. Funding risk relates to the potential inability to raise additional capital or liquidity when required in order to maintain the resilience of the balance sheet. The Group has exposure to liquidity risk as a result of servicing its external debt and equity investors, and from the operating requirements of its subsidiaries. The Group\u2019s subsidiaries have exposure to liquidity risk as a result of normal business activities, specifically the risk arising from an inability to meet short-term cash flow requirements and to meet obligations to policy liabilities. The Board of Phoenix Group Holdings plc has defined a number of governance objectives and principles and the liquidity risk frameworks of each subsidiary are designed to ensure that: \u2022 liquidity risk is managed in a manner consistent with the subsidiary company boards\u2019 strategic objectives, risk appetite and PPFM; \u2022 cash flows are appropriately managed and the reputation of the Group is safeguarded; and \u2022 appropriate information on liquidity risk is available to those making decisions. The Group\u2019s liquidity risk management strategy is based on a risk appetite of less than a 1 in 200 chance of having insufficient liquid or tangible assets to meet financial obligations as they fall due and is supported by: \u2022 holding appropriate assets to meet liquidity buffers; \u2022 holding high quality liquid assets to support day to day operations; \u2022 an effective stress testing framework to ensure survival horizons are met under different plausible scenarios; \u2022 effective liquidity portfolio management; and \u2022 liquidity risk contingency planning. The Group\u2019s funding strategy aims to maintain the appropriate level of debt and equity in order to support the Group\u2019s organic and inorganic growth ambitions, while maintaining sufficient headroom for hybrid capital under Solvency II rules. Liquidity forecasts showing headroom against liquidity buffers are prepared regularly to predict required liquidity levels over both the short and medium- term allowing management to respond appropriately to changes in circumstances. In the event of a liquidity shortfall, this would be managed in line with the Group\u2019s Contingency Liquidity Plan where the latest available contingency management actions would be considered. In extreme circumstances, the Group could be exposed to liquidity risk in its unit-linked funds. This could occur where a high volume of surrenders coincides with a tightening of liquidity in a unit-linked fund to the point where assets of that fund have to be sold to meet those withdrawals. Where the fund affected consists of less liquid assets such as property, it can take several months to complete a sale and this would impede the proper operation of the fund. In these situations, the Group considers its risk to be low since there are steps that can be taken first within the funds themselves both to ensure the fair treatment of all investors in those funds and to protect the Group\u2019s own risk exposure. The vast majority of the Group\u2019s derivative contracts are traded OTC and have a two-day collateral settlement period. The Group\u2019s derivative contracts are monitored daily, via an end-of-day valuation process, to assess the need for additional funds to cover margin or collateral calls. Some of the Group\u2019s commercial property investments, cash and cash equivalents are held through collective investment schemes. The collective investment schemes have the power to restrict and/or suspend withdrawals, which would, in turn, affect liquidity. E. Financial assets & liabilities continued E6. Risk management \u2013 financial and other risks continued E6.2 Financial risk analysis continued E6.2.3 Financial soundness risk continued The following table provides a maturity analysis showing the remaining contractual maturities of the Group\u2019s undiscounted financial liabilities and associated interest. Liabilities under insurance contract contractual maturities are included based on the estimated timing of the amounts recognised in the statement of consolidated financial position in accordance with the requirements of IFRS 4Insurance Contracts: 2022 1 year or less or on demand \u00a3m 1\u20135 years \u00a3m Greater than 5 years \u00a3m No fixed term \u00a3m Total \u00a3m Less amounts classified as held for sale (see note A6.1) \u00a3m Total \u00a3m Liabilities under insurance contracts 12,898 29,818 59,300 \u2013 102,016 \u2013 102,016 Investment contracts 152,157 \u2013 \u2013 \u2013 152,157 (8,312) 143,845 Borrowings 1 268 1,326 2,357 64 4,015 \u2013 4,015 Deposits received from reinsurers 1 377 687 1,626 \u2013 2,690 \u2013 2,690 Derivatives 1 757 794 9,335 \u2013 10,886 (4) 10,882 Net asset value attributable to unitholders 2,978 \u2013 \u2013 \u2013 2,978 \u2013 2,978 Obligations for repayment of collateral received 1,706 \u2013 \u2013 \u2013 1,706 \u2013 1,706 Reinsurance payables 95 20 130 \u2013 245 \u2013 245 Payables related to direct insurance contracts 1,964 \u2013 \u2013 \u2013 1,964 \u2013 1,964 Lease liabilities 1 11 37 95 \u2013 143 \u2013 143 Accruals and deferred income 549 42 12 \u2013 603 (37) 566 Other payables 965 \u2013 \u2013 \u2013 965 \u2013 965 2021 1 year or less or on demand \u00a3m 1\u20135 years \u00a3m Greater than 5 years \u00a3m No fixed term \u00a3m Total \u00a3m Less amounts classified as held for sale (see note A6.1) \u00a3m Total \u00a3m Liabilities under insurance contracts 14,319 36,061 78,484 \u2013 128,864 \u2013 128,864 Investment contracts 172,093 \u2013 \u2013 \u2013 172,093 (11,676) 160,417 Borrowings 1 664 1,380 2,772 70 4,886 \u2013 4,886 Deposits received from reinsurers 1 419 834 2,355 \u2013 3,608 \u2013 3,608 Derivatives 1 259 517 583 \u2013 1,359 (4) 1,355 Net asset value attributable to unitholders 3,568 \u2013 \u2013 \u2013 3,568 \u2013 3,568 Obligations for repayment of collateral received 3,442 \u2013 \u2013 \u2013 3,442 \u2013 3,442 Reinsurance payables 80 13 50 \u2013 143 \u2013 143 Payables related to direct insurance contracts 1,864 \u2013 \u2013 \u2013 1,864 \u2013 1,864 Lease liabilities 1 11 59 72 \u2013 142 \u2013 142 Accruals and deferred income 548 59 7 7 621 (54) 567 Other payables 721 \u2013 \u2013 \u2013 721 \u2013 721 1 These financial liabilities are disclosed at their undiscounted value and therefore differ from amounts included in the statement of consolidated financial position which discloses the discounted value. 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. Although these liabilities are payable on demand, and are therefore included in the contractual maturity analysis as due within one year, the Group does not expect all these amounts to be paid out within one year of the reporting date. A significant proportion of the Group\u2019s financial assets are held in gilts, cash, supranationals and investment grade securities which the Group considers sufficient to meet the liabilities as they fall due. The vast majority of these investments are readily realisable immediately since most of them are quoted in an active market. The Group has a set of established policies and processes to manage its exposure to liquidity risk, including impacts arising from the economic environment, business developments and funding changes. Where liquidity risk is heightened, such as during the market volatility following the UK mini- budget, triggers are in place to enhance the frequency of liquidity monitoring and to implement available contingency actions to ensure sufficient liquidity is maintained. E6.2.4 Strategic risk Strategic risks threaten the achievement of the Group strategy through poor strategic decision-making, implementation or response to changing circumstances. The Group recognises that core strategic activity brings with it exposure to strategic risk. However, the Group seeks to proactively review, manage and control these exposures. The Group\u2019s strategy and business plan are exposed to external events that could prevent or impact the achievement of the strategy; events relating to how the strategy and business plan are executed; and events that arise as a consequence of following the specific strategy chosen. The identification and assessment of strategic risks is an integrated part of the Risk Management Framework. Strategic risk should be considered in parallel with the Risk Universe as each of the risks within the Risk Universe can impact the Group\u2019s strategy. A Strategic Risk Policy is maintained and reported against regularly, with a particular focus on risk management, stakeholder management, corporate activity and overall reporting against the Group\u2019s strategic ambitions. E6.2.5 Operational risk Operational risk is the risk of reductions in earnings and/or value, through financial or reputational loss, from inadequate or failed internal processes and systems, or from people related or external events. Operational risk arises due to failures in one or more of the following aspects of our business: \u2022 indirect exposures through outsourcing service providers and suppliers; \u2022 direct exposures through internal practices, actions or omissions; \u2022 external threats from individuals or groups focused on malicious or criminal activities, or on external events occurring which are not within the Group\u2019s control; and \u2022 negligence, mal-practice or failure of employees, or suppliers to follow good practice in delivering operational processes and practices. It is accepted that it is neither possible, appropriate nor cost effective to eliminate operational risks from the business as operational risk is inherent in any operating environment particularly given the regulatory framework under which the Group operates. As such the Group will tolerate a degree of operational risk subject to appropriate and proportionate levels of control around the identification, management and reporting of such risks. A set of operational risk policies are maintained that set out the nature of the operational risk exposure and minimum control standards in place to control the risk. The Group also has a set of operational risk policies that set out the nature of the risk exposure and minimum control standards in place to control the risk. E6.2.6 Customer risk Customer risk is the risk of financial failure, reputational loss, loss of earnings and/or value through inappropriate or poor customer treatment (including poor advice). It can arise as a result of: \u2022 Customer Treatment: Failings in the design and execution of the support and service interactions with customers leads to poor customer outcomes. \u2022 Customer Transformation: The design, governance and oversight of Strategic Customer Transformation Activity in retained functions and service providers, fails to deliver on reasonable customer expectations, taking account of the Phoenix Group customer treatment risk appetites and regulatory requirements. \u2022 Product and Propositions: Products/propositions are not designed and managed appropriates leading to poor customer outcomes. \u2022 Sales and Distribution: Inappropriate (unclear, unfair or misleading) financial promotions, sales practices and/or distribution agreements resulting in poor customer outcomes. The Group\u2019s Conduct Risk Appetite, sets the boundaries within which the Group expect customer outcomes to be managed. In addition, the Group Conduct Strategy, which overarches our Risk Universe and all risk policies is designed to detect where our customers are at risk of poor outcome, minimise conduct risks, and respond with timely and appropriate mitigating actions. The Group also has a suite of customer polices which set out the key customer risks and control objectives in place to mitigate them. The customer risks for the Group are regularly reported to management oversight committees.F. Insurance contracts, investment contracts with DPF and reinsurance F1. Liabilities under insurance contracts Classification of contracts Contracts are classified as insurance contracts where the Group accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain event adversely affects the policyholder. Contracts under which the transfer of insurance risk to the Group from the policyholder is not significant are classified as investment contracts or derivatives and accounted for as financial liabilities (see notes E1 and E3 respectively). Some insurance and investment contracts contain a Discretionary Participation Feature (\u2018DPF\u2019). This feature entitles the policyholder to additional discretionary benefits as a supplement to guaranteed benefits. Investment contracts with a DPF are recognised, measured and presented as insurance contracts. Contracts with reinsurers are assessed to determine whether they contain significant insurance risks. Contracts that do not give rise to a significant transfer of insurance risk to the reinsurer are classified as financial instruments and are valued at fair value through profit or loss. Insurance contracts and investment contracts with DPF Insurance liabilities Insurance contract liabilities for non-participating business, other than unit-linked insurance contracts, are calculated on the basis of current data and assumptions, using either a net premium or gross premium method. Where a gross premium method is used, the liability includes allowance for prudent lapses. Negative policy values are allowed for on individual policies: \u2022 where there are no guaranteed surrender values; or \u2022 in the periods where guaranteed surrender values do not apply even though guaranteed surrender values are applicable after a specified period of time. For unit-linked insurance contract liabilities the provision is based on the fund value, together with an allowance for any excess of future expenses over charges, where appropriate. For participating business, the liabilities under insurance contracts and investment contracts with DPF are calculated in accordance with the following methodology: \u2022 liabilities to policyholders arising from the with-profit business are stated at the amount of the realistic value of the liabilities, adjusted to exclude the owners\u2019 share of projected future bonuses; \u2022 acquisition costs are not deferred; and \u2022 reinsurance recoveries are measured on a basis that is consistent with the valuation of the liability to policyholders to which the reinsurance applies. The With-Profit Benefit Reserve (\u2018WPBR\u2019) for an individual contract is determined by either a retrospective calculation of \u2018accumulated asset share\u2019 approach or by way of a prospective \u2018bonus reserve valuation\u2019 method. The cost of future policy related liabilities is determined using a market consistent approach, mainly based on a stochastic model calibrated to market conditions at the end of the reporting period. Non-market related assumptions (for example, persistency, mortality and expenses) are based on experience adjusted to take into account of future trends. The realistic liability for any contract is equal to the sum of the WPBR and the cost of future policy-related liabilities. The cost of future policy-related liabilities includes the unallocated surplus attributable to policyholders in relation to closed with-profit funds. Where policyholders have valuable guarantees, options or promises in respect of the with-profit business, these costs are generally valued using a stochastic model. In calculating the realistic liabilities, account is taken of the future management actions consistent with those set out in the Principles and Practices of Financial Management (\u2018PPFM\u2019). Standard Life Assurance Limited (\u2018SLAL\u2019), a wholly owned subsidiary of the Group, includes the Heritage With Profits Fund (\u2018HWPF\u2019). In 2006, the Standard Life Assurance Company demutualised. The demutualisation was governed by its Scheme of Demutualisation (\u2018the Scheme\u2019). Under the Scheme substantially all of the assets and liabilities of the Standard Life Assurance Company were transferred to SLAL. The Scheme provides that certain defined cash flows (recourse cash flows) arising in the HWPF on specified blocks of UK and Ireland business, both participating and non-participating, may be transferred out of that fund when they emerge, being transferred to the Shareholder Fund (\u2018SHF\u2019) or the Proprietary Business Fund (\u2018PBF\u2019) of SLAL, and thus accrue to the ultimate benefit of equity holders of the Company. Under the Scheme, such transfers are subject to certain constraints in order to protect policyholders. The Scheme also provides for additional expenses to be charged by the PBF to the HWPF in respect of German branch business in SLAL. Under the realistic valuation, the discounted value of expected future cash flows on participating contracts not reflected in the WPBR is included in the cost of future policy related liabilities (as a reduction where future cash flows are expected to be positive). The discounted value of expected future cash flows on non-participating contracts not reflected in the measure of non-participating liabilities is recognised as a separate asset (where future cash flows are expected to be positive). The Scheme requirement to transfer future recourse cash flows out of the HWPF is recognised as an addition to the cost of future policy related liabilities. The discounted value of expected future cash flows on non-participating contracts can be apportioned between those included in the recourse cash flows and those retained in the HWPF for the benefit of policyholders. Applying the policy noted above for the HWPF: \u2022 The value of participating investment contract liabilities on the consolidated statement of financial position is reduced by future expected (net positive) cash flows arising on participating contracts. \u2022 Future expected cash flows on non-participating contracts are not recognised as an asset of the HWPF on the consolidated statement of financial position. However, future expected cash flows on non-participating contracts that are not recourse cash flows under the Scheme are used to reduce the value of participating insurance and participating investment contract liabilities on the consolidated statement of financial position. Present value of future profits on non-participating business in the with-profit funds For UK with-profit life funds, an amount may be recognised for the present value of future profits (\u2018PVFP\u2019) on non-participating business written in a with-profit fund where the determination of the realistic value of liabilities in that with-profit fund takes account, directly or indirectly, of this value. Where the value of future profits can be shown to be due to policyholders, this amount is recognised as a reduction in the liability rather than as an intangible asset. This is then apportioned between the amounts that have been taken into account in the measurement of liabilities and other amounts which are shown as an adjustment to the unallocated surplus. Where it is not possible to apportion the future profits on this non-participating business to policyholders, the PVFP on this business is recognised as an intangible asset and changes in its value are recorded as a separate item in the consolidated income statement. The value of the PVFP is determined in a manner consistent with the realistic measurement of liabilities. In particular, the methodology and assumptions involve adjustments to reflect risk and uncertainty, are based on current estimates of future experience and current market yields and allow for market consistent valuation of any guarantees or options within the contracts. The value is also adjusted to remove the value of capital backing the non-profit business if this is included in the realistic calculation of PVFP. The principal assumptions used to calculate the PVFP are the same as those used in calculating the insurance contract liabilities given in note F4. Embedded derivatives Embedded derivatives, including options to surrender insurance contracts, that meet the definition of insurance contracts or are closely related to the host insurance contract, are not separately measured. All other embedded derivatives are separated from the host contract and measured at fair value through profit or loss. Liability adequacy At each reporting date, liability adequacy tests are performed to assess whether the insurance contract and investment contract with DPF liabilities are adequate. Current best estimates of future cash flows are compared to the carrying value of the liabilities. Any deficiency is charged to the consolidated income statement. The Group\u2019s accounting policies for insurance contracts meet the minimum specified requirements for liability adequacy testing under IFRS 4 Insurance Contracts, as they allow for current estimates of all contractual cash flows and of related cash flows such as claims handling costs. Cash flows resulting from embedded options and guarantees are also allowed for, with any deficiency being recognised in the consolidated income statement. Reinsurance Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsured policy. Reinsurance ceded The Group cedes insurance risk in the normal course of business. Reinsurance assets represent balances due from reinsurance providers. Reinsurers\u2019 share of insurance contract liabilities is dependent on expected claims and benefits arising under the related reinsured policies. Reinsurance assets are reviewed for impairment at each reporting date, or more frequently, when an indication of impairment arises during the reporting period. Impairment occurs when there is objective evidence, as a result of an event that occurred after initial recognition of the reinsurance asset, that the Group may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurer. The impairment loss is recognised in the consolidated income statement. The reinsurers\u2019 share of investment contract liabilities is measured on a basis that is consistent with the valuation of the liability to policyholders to which the reinsurance applies. Reinsurance premiums payable in respect of certain reinsured individual and group pensions annuity contracts are payable by quarterly instalments and are accounted for on a payable basis. Due to the period of time over which reinsurance premiums are payable under these arrangements, the reinsurance premiums and related payables are discounted to present values using a pre-tax risk-free rate of return. The unwinding of the discount is included as a charge within the consolidated income statement. Further details of net income under arrangements with reinsurers are given in note F3.3. F. Insurance contracts, investment contracts with DPF and reinsurance continued F1. Liabilities under insurance contracts continued Reinsurance accepted The Group accepts insurance risk under reinsurance contracts. Amounts paid to cedants at the inception of reinsurance contracts in respect of future profits on certain blocks of business are recognised as a reinsurance asset. Changes in the value of the reinsurance assets created from the acceptance of reinsurance are recognised as an expense in the consolidated income statement, consistent with the expected emergence of the economic benefits from the underlying blocks of business. At each reporting date, the Group assesses whether there are any indications of impairment. When indications of impairment exist, an impairment test is carried out by comparing the carrying value of the asset with the estimate of the recoverable amount. When the recoverable amount is less than the carrying value, an impairment charge is recognised as an expense in the consolidated income statement. Reassurance assets are also considered in the liability adequacy test for each reporting period. Consolidated income statement recognition Gross premiums In respect of insurance contracts and investment contracts with DPF, premiums are accounted for on a receivable basis and exclude any taxes or duties based on premiums. Funds at retirement under individual pension contracts converted to annuities with the Group are, for accounting purposes, included in both claims incurred and premiums within gross premiums written. Reinsurance premiums Outward reinsurance premiums are accounted for on a payable basis. Reinsurance premiums include amounts receivable as refunds of premiums in cases where the Group cancels arrangements for the reinsurance of risk to another reinsurer. Gross benefits and claims Claims on insurance contracts and investment contracts with DPF reflect the cost of all claims arising during the period, including policyholder bonuses allocated in anticipation of a bonus declaration. Claims payable on maturity are recognised when the claim becomes due for payment and claims payable on death are recognised on notification. Surrenders are accounted for at the earlier of the payment date or when the policy ceases to be included within insurance contract liabilities. Where claims are payable and the contract remains in-force, the claim instalment is accounted for when due for payment. Claims payable include the costs of settlement. Reinsurance claims are recognised when the related gross insurance claim is recognised according to the terms of the relevant contract. Gains or losses on purchasing reinsurance are recognised in the consolidated income statement at the date of purchase and are not amortised. They are the difference between the premiums ceded to reinsurers and the related change in the reinsurers\u2019 share of insurance contract liabilities. The table below shows a summary of the liabilities under insurance contracts and the related reinsurers\u2019 share included within assets in the statement of consolidated financial position. Gross liabilities 2022 \u00a3m Reinsurers\u2019 share 2022 \u00a3m Gross liabilities 2021 \u00a3m Reinsurers\u2019 share 2021 \u00a3m Life assurance business: Insurance contracts 77,499 6,142 99,169 8,587 Investment contracts with DPF 24,517 \u2013 29,695 \u2013 102,016 6,142 128,864 8,587 Amounts due for settlement after 12 months 89,117 5,194 114,545 7,472 Gross liabilities 2022 \u00a3m Reinsurers\u2019 share 2022 \u00a3m Gross liabilities 2021 \u00a3m Reinsurers\u2019 share 2021 \u00a3m At 1 January 128,864 8,587 133,907 9,542 Premiums 7,094 1,727 7,455 2,079 Claims (9,392) (1,693) (9,656) (1,597) Foreign exchange adjustments 797 5 (1,168) (48) Disposal of Ark Life \u2013 \u2013 (799) (730) Other changes in liabilities 1 (25,347) (2,484) (875) (659) At 31 December 102,016 6,142 128,864 8,587 1 Other changes in liabilities principally comprise changes in economic and non-economic assumptions and experience. F2. Unallocated surplus The unallocated surplus comprises the excess of the assets over the policyholder liabilities of the with-profit business of the Group\u2019s life operations. For the Group\u2019s with-profit funds this represents amounts which have yet to be allocated to owners since the unallocated surplus attributable to policyholders has been included within liabilities under insurance contracts. If the realistic value of liabilities to policyholders exceeds the value of the assets in the with-profit fund, the unallocated surplus is valued at \u00a3nil. In relation to the HWPF, amounts are considered to be allocated to shareholders when they emerge as recourse cash flows within the HWPF. \u2022 The unallocated surplus of the HWPF comprises the value of future recourse cash flows in participating contracts (but not the value of future cash flows on non-participating contracts), the value of future additional expenses to be charged on German branch business and the effect of any measurement differences between the realistic value and the IFRS accounting policy value of all assets and liabilities other than participating contract liabilities recognised in the HWPF. \u2022 The recourse cash flows are recognised as they emerge as an addition to shareholders\u2019 profits if positive or as a deduction if negative. As the additional expenses are charged in respect of the German branch business they are recognised as an addition to equity holders\u2019 profits. 2022 \u00a3m 2021 \u00a3m At 1 January 1,801 1,768 Transfer to consolidated income statement (378) (106) Foreign exchange movements (79) 139 At 31 December 1,344 1,801 F3. Reinsurance This section includes disclosures in relation to reinsurance. Further disclosures and accounting policies relating to reinsurance are included in note F1. F3.1 Premiums ceded to reinsurers Premiums ceded to reinsurers during the period were \u00a31,727 million (2021: \u00a32,079 million). F3.2 Collateral arrangements It is the Group\u2019s practice to obtain collateral to mitigate the counterparty risk related to reinsurance transactions usually in the form of cash or marketable financial instruments. Where the Group receives collateral in the form of marketable financial instruments which it is not permitted to sell or re-pledge except in the case of default, it is not recognised in the statement of consolidated financial position. The fair value of financial assets accepted as collateral for reinsurance transactions but not recognised in the statement of consolidated financial position amounts to \u00a34,002 million (2021: \u00a34,882 million). Where the Group receives collateral on reinsurance transactions in the form of cash it is recognised in the statement of consolidated financial position along with a corresponding liability to repay the amount of collateral received, disclosed as \u2018Deposits received from reinsurers\u2019. Where there is interest payable on such collateral, it is recognised within \u2018Net income under arrangements with reinsurers\u2019 (see note F3.3). The amounts recognised as financial assets and liabilities from cash collateral received at 31 December 2022 are set out below. Reinsurance transactions 2022 \u00a3m 2021 \u00a3m Financial assets 267 373 Financial liabilities 267 373 F3.3 Net income under arrangements with reinsurers The Group has reinsured the longevity and investment risk related to a portfolio of annuity contracts held within the HWPF. At inception of the reinsurance contract the reinsurer was required to deposit an amount equal to the reinsurance premium with the Group. The amount recognised in the statement of consolidated financial position in respect of this deposit is \u00a32.3 billion as at 31 December 2022 (31 December 2021: \u00a33.2 billion). Interest is payable to the reinsurer on the deposit at a floating rate. The Group maintains a ring fenced pool of assets to back this deposit liability. Annuity payments under the reinsured contracts are made by the Group from the ring fenced assets and the deposit liability is reduced by the amount of these payments. Periodically the Group is required to pay to the reinsurer or receive from the reinsurer Premium Adjustments defined as the difference between the fair value of the ring fenced assets and the deposit amount, such that the deposit amount equals the fair value of the ring fenced assets. This has the effect of ensuring that the investment risk on the ring fenced pool of assets falls on the reinsurer. The investment return on the ring fenced assets included within net investment return in the consolidated income statement is equal to an equivalent amount recognised in net income under arrangements with reinsurers. F. Insurance contracts, investment contracts with DPF and reinsurance continued F3. Reinsurance continued F3.3 Net income under arrangements with reinsurers continued 2022 \u00a3m 2021 \u00a3m Interest payable on deposits from reinsurers (46) (11) Premium adjustments 473 33 Net income under arrangements with reinsurers 427 22 F4. Risk management \u2013 insurance risk This note forms one part of the risk management disclosures in the consolidated financial statements. An overview of the Group\u2019s approach to risk management is outlined in note I3 and the Group\u2019s management of financial and other risks is detailed in note E6. Insurance risk refers to the risk of reductions in earnings and/or value, through financial or reputational loss, due to fluctuations in the timing, frequency and severity of insured/underwritten events and to fluctuations in the timing and amount of claim settlements. This includes fluctuations in profits due to customer behaviour. The Life businesses are exposed to the following elements of insurance risk: Mortality higher than expected death claims on assurance products or lower than expected improvements in mortality; Longevity lower than expected number of deaths experienced on annuity products or greater than expected improvements in annuitant mortality; Morbidity/Disability higher than expected number of inceptions on critical illness or income protection policies and lower than expected termination rates on income protection policies; Expenses unexpected timing or value of expenses incurred; Persistency adverse movement in surrender rates, premium paying rates, premium indexation rates, cash withdrawal/drawdown rates, GAO surrender rates, GAO take-up rates, policyholder retirement dates, propensity to commute benefits, transfer out rates or the occurrence of a mass lapse event leading to losses; New business pricing inappropriate pricing of new business that is not in line with the underlying risk factors for that business. Objectives and policies for mitigating insurance risk Insurance risks are managed by monitoring risk exposure against pre-defined appetite limits. If a risk is moving out of appetite, the Group can choose to mitigate it via reinsurance in the case of longevity, mortality and morbidity risks, or by taking other risk reducing actions. This is supported by additional methods to assess and monitor insurance risk exposures for both individual types of risks insured and overall risks. These methods include internal risk measurement models, experience analyses, external data comparisons, sensitivity analyses, scenario analyses and stress testing. Assumptions that are deemed to be financially significant are reviewed at least annually for pricing and reporting purposes. The profitability of the run-off of the Heritage business within the Group depends, to a significant extent, on the values of claims paid in the future relative to the assets accumulated to the date of claim. Typically, over the lifetime of a contract, premiums and investment returns exceed claim costs in the early years and it is necessary to set aside these amounts to meet future obligations. The amount of such future obligations is assessed on actuarial principles by reference to assumptions about the development of financial and insurance risks. It is therefore necessary for the Directors of each life company to make decisions, based on actuarial advice, which ensure an appropriate accumulation of assets relative to liabilities. These decisions include investment policy, bonus policy and, where discretion exists, the level of payments on early termination. For the Group\u2019s Open business, longevity risk exposures continue to increase as a result of the Bulk Purchase Annuity deals it has successfully acquired, however the vast majority of these exposures are reinsured to third parties. New business growth driven by product segments such as Workplace unit- linked pensions exposes the Group to persistency and expense risks. There remains uncertainty around future demographic experience as a result of COVID-19, where little weight has been given to experience for most products over the pandemic given its anomalous nature, in addition to the implications arising from the cost of living crisis, as outlined in page 66 \u2013 Principal Risks and Uncertainties section of the Annual Report and Accounts. Demographic experience and the latest views on future trends continue to be considered in regular assumption reviews although, for most products, experience over the COVID-19 pandemic has still been given little weight given its anomalous nature. Sensitivities Insurance liabilities are sensitive to changes in risk variables, such as prevailing market interest rates, currency rates and equity prices, since these variations alter the value of the financial assets held to meet obligations arising from insurance contracts and changes in investment conditions also have an impact on the value of insurance liabilities themselves. Additionally, insurance liabilities are sensitive to the assumptions which have been applied in their calculation, such as mortality and lapse rates. Sometimes allowance must also be made for the effect on future assumptions of management or policyholder actions in certain economic scenarios. This could lead to changes in assumed asset mix or future bonus rates. The most significant non economic sensitivities arise from mortality, longevity and lapse risk. A decrease of 5% in assurance mortality, with all other variables held constant, would result in an increase in the profit after tax in respect of a full year, and an increase in equity of \u00a360 million (2021: \u00a370 million). An increase of 5% in assurance mortality, with all other variables held constant, would result in a decrease in the profit after tax in respect of a full year, and a decrease in equity of \u00a361 million (2021: \u00a370 million). A decrease of 5% in annuitant longevity, with all other variables held constant, would result in an increase in the profit after tax in respect of a full year, and an increase in equity of 296 million (2021: \u00a3517 million). An increase of 5% in annuitant longevity, with all other variables held constant, would result in a decrease in the profit after tax in respect of a full year, and a decrease in equity of \u00a3290 million (2021: \u00a3530 million). A decrease of 10% in lapse rates, with all other variables held constant, would result in a decrease in the profit after tax in respect of a full year, and a decrease in equity of \u00a347 million (2021: \u00a327 million). An increase of 10% in lapse rates, with all other variables held constant, would result in an increase in the profit after tax in respect of a full year, and an increase in equity of \u00a348 million (2021: \u00a327 million). F4.1 Assumptions For participating business which is with-profit business (insurance and investment contracts with DPF), the insurance contract liability is calculated on a realistic basis, adjusted to exclude the shareholders\u2019 share of future bonuses and the associated tax liability. This is a market consistent valuation, which involves placing a value on liabilities similar to the market value of assets with similar cash flow patterns. The non-participating insurance contract liabilities are determined using either a net premium or gross premium valuation method. The assumptions used to determine the liabilities, under these valuation methods are updated at each reporting date to reflect recent experience. Material judgement is required in calculating these liabilities and, in particular, in the choice of assumptions about which there is uncertainty over future experience. The principal assumptions are as follows: Discount rates The Group discounts participating and non-participating insurance contract liabilities at a risk-free rate derived from the swap yield curve, plus an illiquidity premium of 36bps (2021: 36bps). For certain non-participating insurance contract liabilities (e.g. annuities), the Group makes a further explicit adjustment to the risk-free rate to reflect illiquidity in respect of the assets backing those liabilities. Expenses Insurance contract liabilities include an allowance for the best estimate of future expenses associated with the administration of in-force policies. This requires the allocation of the Group\u2019s future expenses between those that relate to the administration of in-force policies, those attributable to the acquisition of new business and other costs, such as corporate costs. There is a level of judgement applied in the analysis that supports this allocation. Additionally, judgement is applied in the determination of the projected costs of the Group, in particular where those projections include the impact of transition and integration activity. Expenses are assumed to increase at either the rate of increase in the Retail Price Index (\u2018RPI\u2019), or a rate derived from the UK inflation swaps curve, plus fixed margins in accordance with the various management service agreements (\u2018MSAs\u2019) the Group has in place with outsource partners. For with-profit business the rate of RPI inflation is determined within each stochastic scenario. For other business it is based on the Bank of England inflation spot curve. For MSAs with contractual increases set by reference to national average earnings inflation, this is approximated as RPI inflation or RPI inflation plus 1%. In instances in which inflation risk is not mitigated, a further margin for adverse deviations may then be added to the rate of expense inflation. F. Insurance contracts, investment contracts with DPF and reinsurance continued F4. Risk management \u2013 insurance risk continued F4.1 Assumptions continued Mortality and longevity rates Mortality rates are based on company experience and published tables, adjusted appropriately to take account of changes in the underlying population mortality since the table was published, company experience and forecast changes in future mortality. Where appropriate, a margin is added to assurance mortality rates to allow for adverse future deviations. Annuitant mortality rates are adjusted to make allowance for future improvements in pensioner longevity. Lapse and surrender rates (persistency) The assumed rates for surrender and voluntary premium discontinuance depend on the length of time a policy has been in force and the relevant company experience. Surrender or voluntary premium discontinuances are only assumed for realistic basis funds. Withdrawal rates used in the valuation of with-profit policies are based on observed experience and adjusted when it is considered that future policyholder behaviour will be influenced by different considerations than in the past. In particular, it is assumed that withdrawal rates for unitised with-profit contracts will be higher on policy anniversaries on which Market Value Adjustments do not apply. Discretionary participating bonus rate For realistic basis funds, the regular bonus rates assumed in each scenario are determined in accordance with each company\u2019s PPFM. Final bonuses are assumed at a level such that maturity payments will equal asset shares subject to smoothing rules set out in the PPFM and the value of guaranteed benefits. Policyholder options and guarantees Some of the Group\u2019s products give potentially valuable guarantees, or give options to change policy benefits which can be exercised at the policyholders\u2019 discretion. These products are described below. Most with-profit contracts give a guaranteed minimum payment on a specified date or range of dates or on death if before that date or dates. For pensions contracts, the specified date is the policyholder\u2019s chosen retirement date or a range of dates around that date. For endowment contracts, it is the maturity date of the contract. For with-profit bonds it is often a specified anniversary of commencement, in some cases with further dates thereafter. Annual bonuses when added to with-profit contracts usually increase the guaranteed amount. There are guaranteed surrender values on a small number of older contracts. Some pensions contracts include guaranteed annuity options. The total amount provided in the with-profit and non-profit funds in respect of the future costs of guaranteed annuity options are \u00a3905 million (2021: \u00a31,968 million) and \u00a359 million (2021: \u00a3111 million) respectively. In common with other life companies in the UK which have written pension transfer and opt-out business, the Group has set up provisions for the review and possible redress relating to personal pension policies. These provisions, which have been calculated from data derived from detailed file reviews of specific cases and using a certainty equivalent approach, which give a result very similar to a market consistent valuation, are included in liabilities arising under insurance contracts. The total amount provided in the with-profit funds and non-profit funds in respect of the review and possible redress relating to pension policies, including associated costs, are \u00a3197 million (2021: \u00a3349 million) and \u00a32 million (2021: \u00a36 million) respectively. With-profit deferred annuities participate in profits only up to the date of retirement. At retirement, a guaranteed cash option allows the policyholder to commute the annuity benefit into cash on guaranteed terms. Demographic prudence margin For non-participating insurance contract liabilities, the Group sets assumptions at management\u2019s best estimates and recognises an explicit margin for demographic risks. For participating business in realistic basis funds, the assumptions about future demographic trends represent \u2018best estimates\u2019. Assumption changes During the year a number of changes were made to assumptions to reflect changes in expected experience or to reflect transition activity. The impact of material changes during the year was as follows: (Decrease)/increase in insurance liabilities 2022 \u00a3m (Decrease)/increase in insurance liabilities 2021 \u00a3m Change in longevity assumptions (135) (272) Change in persistency assumptions 9 (12) Change in mortality assumptions 5 (7) Change in expenses assumptions 200 275 Change in other assumptions (376) \u2013 2022: The \u00a3135 million positive impact of changes in longevity assumptions reflects updates to base and improvement assumptions to reflect latest experience analyses and the most recent Continuous Mortality Investigation 2021 projection tables. The \u00a39 million and \u00a35 million negative impact of changes in persistency and mortality assumptions respectively reflects the results of the latest experience investigations. The \u00a3200 million negative impact from changes in expense assumptions includes an increase in reserves of \u00a377 million in respect of the anticipated costs associated with the implementation of IFRS 17 and \u00a3102 million in respect of the delivery of the Group Target Operating Model for IT and Operations. To the extent that the recognition criteria have been met, the Group has also recognised accounting provisions in respect of the anticipated costs of restructuring activity (see note G7 for further details). Other assumptions includes a \u00a3329 million positive impact of harmonising the calibration of prudential margins included within liabilities under insurance contracts in the ReAssure life companies with the rest of the Group and a \u00a347 million positive impact from updating the married rates assumption in respect of reversionary annuities. 2021: The \u00a3272 million positive impact of changes in longevity assumptions reflects updates to base and improvement assumptions to reflect latest experience analyses and the most recent Continuous Mortality Investigation 2020 projection tables. The \u00a312 million and \u00a37 million positive impact of changes in persistency and mortality assumptions respectively reflects the results of the latest experience investigations. The \u00a3275 million negative impact of changes in expense assumptions principally reflects the impact of investment in the Group\u2019s growth agenda on the maintenance cost base, including the development of capabilities within the Group\u2019s Open business, asset management capabilities and within certain Group functions. The increase in reserves also reflects provision for the anticipated costs associated with the implementation of IFRS 17 and delivery of the Group Target Operating Model for IT and Operations. F4.2 Managing product risk The following sections give an assessment of the risks associated with the Group\u2019s main life assurance products and the ways in which the Group manages those risks. Gross 1 Reinsurance 2022 Insurance contracts \u00a3m Investment contracts with DPF \u00a3m Insurance contracts \u00a3m Investment contracts with DPF \u00a3m With-profit funds: Pensions: Deferred annuities \u2013 with guarantees 5,627 36 413 \u2013 Deferred annuities \u2013 without guarantees 1,445 289 \u2013 \u2013 Immediate annuities 4,968 \u2013 2,881 \u2013 Unitised with-profit 10,438 22,337 \u2013 \u2013 Total pensions 22,478 22,662 3,294 \u2013 Life: Immediate annuities 261 \u2013 1 \u2013 Unitised with-profit 7,687 930 \u2013 \u2013 Life with-profit 1,681 \u2013 9 \u2013 Total life 9,629 930 10 \u2013 Other 1,020 (1) 159 \u2013 Non-profit funds: Deferred annuities \u2013 with guarantees 310 \u2013 \u2013 \u2013 Deferred annuities \u2013 without guarantees 2,851 \u2013 156 \u2013 Immediate annuities 27,279 \u2013 2,137 \u2013 Protection 1,018 \u2013 439 \u2013 Unit-linked 13,096 921 28 \u2013 Other (182) 5 (81) \u2013 77,499 24,517 6,142 \u2013 1 \u00a311,753 million (2021: \u00a39,864 million) of liabilities are subject to longevity swap arrangements F. Insurance contracts, investment contracts with DPF and reinsurance continued F4. Risk management \u2013 insurance risk continued F4.2 Managing product risk continued Gross Reinsurance 2021 Insurance contracts \u00a3m Investment contracts with DPF \u00a3m Insurance contracts \u00a3m Investment contracts with DPF \u00a3m With-profit funds: Pensions: Deferred annuities \u2013 with guarantees 8,746 53 728 \u2013 Deferred annuities \u2013 without guarantees 1,753 341 \u2013 \u2013 Immediate annuities 6,506 \u2013 3,787 \u2013 Unitised with-profit 13,344 27,078 \u2013 \u2013 Total pensions 30,349 27,472 4,515 \u2013 Life: Immediate annuities 348 \u2013 1 \u2013 Unitised with-profit 9,364 1,137 \u2013 \u2013 Life with-profit 2,166 \u2013 6 \u2013 Total life 11,878 1,137 7 \u2013 Other 1,245 (1) 192 \u2013 Non-profit funds: Deferred annuities \u2013 with guarantees 555 \u2013 \u2013 Deferred annuities \u2013 without guarantees 983 \u2013 158 \u2013 Immediate annuities 37,329 \u2013 2,885 \u2013 Protection 2,076 \u2013 876 \u2013 Unit-linked 14,891 1,084 22 \u2013 Other (137) 3 (68) \u2013 99,169 29,695 8,587 \u2013 With-profit fund (unitised and traditional) The Group operates a number of with-profit funds in which the with-profit policyholders benefit from a discretionary annual bonus (guaranteed once added in most cases) and a discretionary final bonus. Non-participating business is also written in some of the with-profit funds and some of the funds may include immediate annuities and deferred annuities with Guaranteed Annuity Rates (\u2018GAR\u2019). The investment strategy of each fund differs, but is broadly to invest in a mixture of fixed interest investments and equities and/or property and other asset classes in such proportions as is appropriate to the investment risk exposure of the fund and its capital resources. The Group has significant discretion regarding investment policy, bonus policy and early termination values. The process for exercising discretion in the management of the with-profit funds is set out in the PPFM for each with-profit fund and is overseen by with-profit committees. Advice is also taken from the with-profit actuary of each with-profit fund. Compliance with the PPFM is reviewed annually and reported to the PRA, Financial Conduct Authority (\u2018FCA\u2019) and policyholders. The bonuses are designed to distribute to policyholders a fair share of the return on the assets in the with-profit funds together with other elements of the experience of the fund. The shareholders of the Group are entitled to receive one-ninth of the cost of bonuses declared for some funds and \u00a3nil for others. For the HWPF, under the Scheme, shareholders are entitled to receive certain defined cash flows arising on specified blocks of UK and Irish business. Unitised and traditional with-profit policies are exposed to equivalent risks, the main difference being that unitised with-profit policies purchase notional units in a with-profit fund whereas traditional with-profit policies do not. Benefit payments for unitised policies are then dependent on unit prices at the time of a claim, although charges may be applied. A unitised with-profit fund price is typically guaranteed not to fall and increases in line with any discretionary bonus payments over the course of one year. Deferred annuities Deferred annuity policies are written to provide either a cash benefit at retirement, which the policyholder can use to buy an annuity on the terms then applicable, or an annuity payable from retirement. The policies contain an element of guarantee expressed in the form that the contract is written in, i.e. to provide cash or an annuity. Deferred annuity policies written to provide a cash benefit may also contain an option to convert the cash benefit to an annuity benefit on guaranteed terms; these are known as GAR policies. Deferred annuity policies written to provide an annuity benefit may also contain an option to convert the annuity benefit into cash benefits on guaranteed terms; these are known as Guaranteed Cash Option (\u2018GCO\u2019) policies. In addition, certain unit prices in the HWPF are guaranteed not to decrease. Whilst there has been an increase in interest rates recently, long-term rates remain relatively low compared to historical levels and life expectancy has increased more rapidly than originally anticipated. The guaranteed terms on GAR policies are more favourable than the annuity rates currently available in the market available for cash benefits. The guaranteed terms on GCO policies are currently not valuable. Deferred annuity policies which are written to provide annuity benefits are managed in a similar manner to immediate annuities and are exposed to the same risks. The option provisions on GAR policies are particularly sensitive to downward movements in interest rates, increasing life expectancy and the proportion of customers exercising their option. Adverse movements in these factors could lead to a requirement to increase reserves which could adversely impact profit and potentially require additional capital. In order to address the interest rate risk (but not the risk of increasing life expectancy or changing customer behaviour with regard to exercise of the option), insurance subsidiaries within the Group have purchased derivatives that provide protection against an increase in liabilities and have thus reduced the sensitivity of profit to movements in interest rates (see note E6.2.2). The Group seeks to manage this risk in accordance with both the terms of the issued policies and the interests of customers, and has obtained external advice supporting the manner in which it operates the long-term funds in this respect. Immediate annuities This type of annuity is purchased with a single premium at the outset, and is paid to the policyholder for the remainder of their lifetime. Payments may also continue for the benefit of a surviving spouse or partner after the annuitant\u2019s death. Annuities may be level, or escalate at a fixed rate, or may escalate in line with a price index and may be payable for a minimum period irrespective of whether the policyholder remains alive. The main risks associated with this product are longevity and investment risks. Longevity risk arises where the annuities are paid for the lifetime of the policyholder, and is managed through the initial pricing of the annuity and through reinsurance (appropriately collateralised) or transfer of existing liabilities. Annuities may also be a partial \u2018natural hedge\u2019 against losses incurred in protection business in the event of increased mortality (and vice versa) although the extent to which this occurs will depend on the similarity of the demographic profile of each book of business. In addition, the Group has in place longevity swaps that provide downside protection over longevity risk. The pricing assumption for mortality risk is based on both historic internal information and externally-generated information on mortality experience, including allowances for future mortality improvements. Pricing will also include a contingency margin for adverse deviations in assumptions. Market and credit risk is influenced by the extent to which the cash flows under the contracts have been matched by suitable assets which is managed under the ALM framework. Asset/liability modelling is used to monitor this position on a regular basis. Protection These contracts are typically secured by the payment of a regular premium payable for a period of years providing benefits payable on certain events occurring within the period. The benefits may be a single lump sum or a series of payments and may be payable on death, serious illness or sickness. The main risk associated with this product is the claims experience and this risk is managed through the initial pricing of the policy (based on actuarial principles), the use of reinsurance and a clear process for administering claims. Market and credit risk is influenced by the extent to which the cash flows under the contracts have been matched by suitable assets which is managed under the ALM framework. Asset/liability modelling is used to monitor this position on a regular basis. G. Other statement of consolidated financial position notes G1. Pension schemes Defined contribution pension schemes Obligations for contributions to defined contribution pension schemes are recognised as an expense in the consolidated income statement as incurred. Defined benefit pension schemes The net surplus or deficit (the economic surplus or deficit) in respect of the defined benefit pension schemes is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior years; that benefit is discounted to determine its present value and the fair value of any scheme assets is deducted. The economic surplus or deficit is subsequently adjusted to eliminate on consolidation the carrying value of insurance policies issued by Group entities to the defined benefit pension schemes (the reported surplus or deficit). A corresponding adjustment is made to the carrying values of insurance contract liabilities and investment contract liabilities. As required by IFRIC 14, IAS 19 \u2013\u2018The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction\u2019, to the extent that the economic surplus (prior to the elimination of the insurance policies issued by Group entities) will be available as a refund, the economic surplus is stated after a provision for tax that would be borne by the scheme administrators when the refund is made. The Group recognises a pension surplus on the basis that it is entitled to the surplus of each scheme in the event of a gradual settlement of the liabilities, due to its ability to order a winding up of the Trust. Additionally under IFRIC 14 pension funding contributions are considered to be a minimum funding requirement and, to the extent that the contributions payable will not be available to the Group after they are paid into the Scheme, a liability is recognised when the obligation arises. The net pension scheme asset/liability represents the economic surplus net of all adjustments noted above. The Group determines the net interest expense or income on the net pension scheme asset/liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the opening net pension scheme asset/liability. The discount rate is the yield at the period end on AA credit rated bonds that have maturity dates approximating to the terms of the Group\u2019s obligations. The calculation is performed by a qualified actuary using the projected unit credit method. The movement in the net pension scheme asset/liability is analysed between the service cost, past service cost, curtailments and settlements (all recognised within administrative expenses in the consolidated income statement), the net interest cost on the net pension scheme asset/liability, including any reimbursement assets (recognised within net investment income in the consolidated income statement), remeasurements of the net pension scheme asset/liability (recognised in other comprehensive income) and employer contributions. This note describes the Group\u2019s four main defined benefit pension schemes for its employees, the Pearl Group Staff Pension Scheme (\u2018Pearl Scheme\u2019), the PGL Pension Scheme, the Abbey Life Staff Pension Scheme (\u2018Abbey Life Scheme\u2019) and the ReAssure Staff Pension Scheme (\u2018ReAssure Scheme\u2019) and explains how the pension scheme asset/liability is calculated. An analysis of the pension scheme (liability)/asset for each pension scheme is set out in the table below and also includes the net pension scheme liability in respect of the Group operated unfunded unapproved retirement benefit scheme (\u2018ReAssure Private Retirement Trust\u2019): 2022 \u00a3m 2021 \u00a3m Pearl Group Staff Pension Scheme Economic surplus 46 263 Adjustment for insurance policies eliminated on consolidation (1,501) (1,680) Net economic deficit (1,455) (1,417) Provision for tax on that part of the economic surplus available as a refund on a winding-up of the Scheme \u2013 (92) Net pension scheme liability, as reported (1,455) (1,509) Reimbursement right in respect of reinsurance, as reported 205 212 Add: value attributed to assets held by PLL within financial assets 1 1,576 1,896 Adjusted net pension scheme asset 326 599 PGL Pension Scheme Economic surplus 23 26 Adjustment for insurance policies eliminated on consolidation (1,079) (1,618) Net pension scheme liability, as reported (1,056) (1,592) Add: assets held by PLL within financial assets 1 1,246 2,084 Adjusted net pension scheme asset 190 492 Abbey Life Staff Pension Scheme Economic (deficit)/surplus (5) 12 Provision for tax on that part of the economic surplus available as a refund on a winding-up of the Scheme \u2013 (4) Minimum funding requirement obligation (3) (7) Net pension scheme (liability)/asset (8) 1 ReAssure Staff Pension Scheme Economic surplus 22 54 Provision for tax on that part of the economic surplus available as a refund on a winding-up of the Scheme (8) (19) Net pension scheme asset 14 35 ReAssure Private Retirement Trust Net pension scheme liability (1) (2) 1 The Pearl Scheme and the PGL Pension Scheme have both executed buy-in transactions with a Group life company and subsequently assets supporting the Group's actuarial liabilities are recognised on a line by line basis within financial assets in the statement of consolidated financial position. Further details are included in notes G1.1 and G1.2 below. In the current and prior periods an adjusted net pension scheme asset has been presented in relation to both these pension schemes. The value of the assets held by PLL within financial assets in respect of the PGL Pension Scheme buy-ins is equal to the assets posted to a ring-fenced collateral account. For the Pearl Scheme the assets held by PLL supporting the buy-ins are not ring-fenced and the value has been determined as the value of the insurance contract liability within the PLL financial statements less the value of the associated reinsurance asset. . Movements in these financial assets are reflected in the consolidated income statement within Net investment income, however as noted in the accounting policy, the movement in the net pension scheme liability (as shown in notes G1.1 and G1.2) is primarily reflected in other comprehensive income. G. Other statement of consolidated financial position notes continued G1. Pension schemes continued Risks The Group\u2019s defined benefit schemes typically expose the Group to a number of risks, the most significant of which are: Asset volatility \u2013 the value of the schemes\u2019 assets will vary as market conditions change and as such is subject to considerable volatility. The liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform this yield, this will create a deficit. The majority of the assets are held within a liability driven investment strategy which is linked to the funding basis of the schemes (set with reference to government bond yields). As such, to the extent that movements in corporate bond yields are out of line with movements in government bond yields, volatility will arise. Inflation risk \u2013 a significant proportion of the schemes\u2019 benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities (although in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). The majority of the assets are held within a liability driven investment strategy which allows for movements in inflation, meaning that changes in inflation should not materially affect the surplus. Life expectancy \u2013 the majority of the schemes\u2019 obligations are to provide benefits for the life of the member therefore increases in life expectancy will result in an increase in the liabilities. For the Pearl and PGL schemes, this is partially offset by the buy in policies that move in line with the liabilities. These buy in policies are eliminated on consolidation (see sections G1.1 and G1.2 for further details). Information on each of the Group\u2019s pension schemes is set out below. G1.1 Pearl Group Staff Pension Scheme Scheme details The Pearl Scheme comprises a final salary section, a money purchase section and a hybrid section (a mix of final salary and money purchase). The Pearl Scheme is closed to new members and has no active members. Defined benefit scheme The Pearl Scheme is established under, and governed by, the trust deeds and rules and has been funded by payment of contributions to a separately administered trust fund. A Group company, Pearl Group Holdings No.2 Limited (\u2018PGH2\u2019), is the principal employer of the Pearl Scheme. The principal employer meets the administration expenses of the Pearl Scheme. The Pearl Scheme is administered by a separate trustee company, P.A.T. (Pensions) Limited, which is separate from the Company. The trustee company is comprised of four representatives from the Group, three member nominated representatives and one independent trustee in accordance with the trustee company\u2019s articles of association. The trustee is required by law to act in the interest of all relevant beneficiaries and is responsible for the investment policy with regard to the assets. To the extent that an economic surplus will be available as a refund, the economic surplus is stated after a provision for tax that would be borne by the scheme administrators when the refund is made. The valuation has been based on an assessment of the liabilities of the Pearl Scheme as at 31 December 2022, undertaken by independent qualified actuaries. The present values of the defined benefit obligation and the related interest costs have been measured using the projected unit credit method. A triennial funding valuation of the Pearl Scheme as at 30 June 2021 was completed in 2022 by a qualified actuary. This showed a surplus as at 30 June 2021 of \u00a367 million, on the agreed technical provisions basis. The funding and IFRS accounting bases of valuation can give rise to different results for a number of reasons. The funding basis of valuation is based on general principles of prudence whereas the accounting valuation is based on best estimates. Discount rates are gilt-based for the funding valuation whereas the rate used for IFRS valuation purposes is based on a yield curve for high quality AA-rated corporate bonds. In addition the values are prepared at different dates which will result in differences arising from changes in market conditions and employer contributions made in the subsequent period. Pension Scheme Commitment Agreement and buy-in transactions On 17 November 2020, the Pearl Scheme entered into a Commitment Agreement with PGH2 to complete a series of buy-ins. At the same time, the Pearl Scheme completed the first buy-in with Phoenix Life Limited (\u2018PLL\u2019) covering 25% of the Scheme\u2019s pensioner and deferred member liabilities, transferring the associated risks, including longevity improvement risk, to PLL effective from 30 September 2020. Two further buy-in transactions were completed in July 2021 and October 2021 covering 35% and 15% respectively of the Scheme\u2019s pensioner and deferred member liabilities and the final buy-in transaction was completed in November 2022. Risks, including longevity improvement risk, were transferred to PLL effective from 28 May 2021 and 31 August 2021 and 30 September 2022 respectively. Upon completion of each buy-in transaction the Scheme transferred the following plan assets to PLL: \u2022 In November 2020, \u00a3731 million of plan assets were transferred to PLL in satisfaction of the premium of \u00a3735 million and was net of a \u00a34 million payment by PLL to the Scheme in respect of members\u2019 benefits for October and November 2020; \u2022 In July 2021, \u00a31,049 million of plan assets were transferred to PLL in satisfaction of the premium and a further \u00a312 million cash payment was paid by the Scheme in August 2021. PLL paid \u00a35 million to the Scheme in respect of members\u2019 benefits for June and July 2021; and \u2022 In October 2021, \u00a3433 million of plan assets were transferred to PLL in satisfaction of the premium of \u00a3435 million and was net of a \u00a32 million payment by PLL to the Scheme in respect of members\u2019 benefits for September and October 2021. A further \u00a31 million cash payment in respect of the premium was paid by the Scheme in December 2021. \u2022 In November 2022, \u00a3556 million of plan assets were transferred to PLL in satisfaction of the premium of \u00a3560 million and was net of a \u00a34 million payment by PLL to the Scheme in respect of members\u2019 benefits for October and November 2022. The assets transferred to PLL are recognised in the relevant line within financial assets in the consolidated statement of financial position. The economic effect of the buy-in transactions in the Scheme is to replace the plan assets transferred with a single line insurance policy reimbursement right asset which is subsequently eliminated on consolidation. The value of this insurance policy at 31 December 2022 was \u00a31,501 million (2021: \u00a31,680 million) which includes an amount owed by PLL of \u00a32 million (2021: \u00a312 million). The Commitment agreement contained provisions under which payments by PGH2 to the Scheme were required in the event that the Group did not meet the minimum buy-in completion schedule the details of which are as follows: \u2022 Gilts Deficit Recovery Contributions: Contributions calculated as amounts required to reach full funding on a gilts-basis by 30 June 2027. Following the completion of the recent buy-in transactions, the Group has no further obligation to pay these contributions; and \u2022 Contingent Contributions: These represented a new form of security for the trustee. The amount of these contributions was initially capped at \u00a3200 million, with the cap running off in line with completion of the buy-ins. Following the completion of the recent buy-in transactions the cap is now \u00a3nil (2021: \u00a350 million). The new agreement also introduced a new form of security provided by PGH2 to the trustee. The share charges over certain Group entities were replaced by a new surety bond arrangement, whereby two external third-party insurers, each provided \u00a3100 million of cover payable to the Scheme following certain trigger events. This cover provided by the surety bond guarantee was fully released upon completion of the final buy-in transaction in November 2022. No contributions were paid to the Pearl Scheme in either the current or prior periods. PGH2 continues to meet the administrative and non-investment running expenses of the Scheme as set out in the schedule of contributions. During the year, the Company reached an agreement for the removal of a trustee discretion to pay some pension increases in excess of the 5% cap. The trustee has agreed to give up this discretion in exchange for a single 1.6% uplift for current pensions in payment effective from 1 April 2022 and a 1.3% future increase to eligible benefits of both pension and deferred members. The financial impact of the 1.6% uplift has been to recognise an increase in the defined benefit obligation of \u00a315 million and a past service cost in the consolidated income statement. Reimbursement right asset in respect of Reinsurance arrangement In March 2022, PLL entered into a quota share reinsurance arrangement with an external insurer to reinsure a further 27% of the risks transferred to PLL as part of the third buy-in transaction with the Pearl Scheme. A total of approximately 91% of these liabilities have now been reinsured. A premium of \u00a3104 million was paid by PLL to the reinsurer. As PLL expects to use the claims received to pay for its obligations under the insurance contract between it and the Pearl scheme (i.e. to settle the defined benefit obligation) the reinsurance arrangement is considered to be a non-qualifying insurance policy and is classified as a reimbursement right. The reinsurance arrangement is expected to match a proportion of the defined benefit obligation of the Pearl Scheme therefore the valuation of the reimbursement right is consistent with the valuation of the associated defined benefit obligation. The value of the reimbursement right asset amounted to \u00a3205 million (31 December 2021: \u00a3212 million). G. Other statement of consolidated financial position notes continued G1. Pension schemes continued G1.1 Pearl Group Staff Pension Scheme continued Summary of amounts recognised in the consolidated financial statements The amounts recognised in the consolidated financial statements are as follows: 2022 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Pension Scheme Liability \u00a3m Reimbursement right \u00a3m At 1 January 807 (2,224) (92) (1,509) 212 Interest income/(expense) 16 (52) (2) (38) 4 Past service cost \u2013 (15) \u2013 (15) \u2013 Included in profit or loss 16 (67) (2) (53) 4 Remeasurements: Return on plan assets excluding amounts included in interest income (208) \u2013 \u2013 (208) (101) Gain from changes in demographic assumptions \u2013 3 \u2013 3 \u2013 Gain from changes in financial assumptions \u2013 805 \u2013 805 \u2013 Experience loss \u2013 (116) \u2013 (116) \u2013 Change in provision for tax on economic surplus available as a refund \u2013 \u2013 94 94 \u2013 Included in other comprehensive income (208) 692 94 578 (101) Income received from insurance policies 89 \u2013 \u2013 89 \u2013 Benefit payments (98) 98 \u2013 \u2013 (14) Assets transferred as premium for Scheme buy-in (560) \u2013 \u2013 (560) \u2013 Assets transferred as premium for reinsurance arrangement 104 At 31 December 46 (1,501) \u2013 (1,455) 205 2021 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Pension Scheme Liability \u00a3m Reimbursement right asset \u00a3m At 1 January 2,315 (2,384) (185) (254) \u2013 Interest income/(expense) 24 (33) (2) (11) \u2013 Included in profit or loss 24 (33) (2) (11) \u2013 Remeasurements: Return on plan assets excluding amounts included in interest income 27 \u2013 \u2013 27 (49) Gain from changes in demographic assumptions \u2013 22 \u2013 22 \u2013 Loss from changes in financial assumptions \u2013 89 \u2013 89 \u2013 Experience gain \u2013 (26) \u2013 (26) \u2013 Change in provision for tax on economic surplus available as a refund \u2013 - 95 95 \u2013 Included in other comprehensive income 27 85 95 207 (49) Income received from insurance policies 46 \u2013 \u2013 46 \u2013 Benefit payments (108) 108 \u2013 \u2013 \u2013 Assets transferred as premium for Scheme buy-in (1,497) \u2013 \u2013 (1,497) \u2013 Assets transferred as premium for reinsurance arrangement \u2013 \u2013 \u2013 \u2013 261 At 31 December 807 (2,224) (92) (1,509) 212 Scheme assets The distribution of the scheme assets at the end of the year was as follows: 2022 2021 Total \u00a3m Of which not quoted in an active market \u00a3m Total \u00a3m Of which not quoted in an active market \u00a3m Hedging portfolio \u2013 \u2013 438 23 Other debt securities \u2013 \u2013 349 - Properties 5 5 104 104 Private equities 4 4 4 4 Hedge funds 3 3 4 4 Cash and other 34 \u2013 67 \u2013 Obligations for repayment of stock lending collateral received \u2013 \u2013 (159) \u2013 Reported scheme assets 46 12 807 135 Add back: Insurance policies eliminated on consolidation 1,501 1,501 1,680 1,680 Economic value of assets 1,547 1,513 2,487 1,815 Defined benefit obligation The calculation of the defined benefit obligation can be allocated to the scheme\u2019s members as follows: \u2022 Deferred scheme members: 40% (2021: 40%); and \u2022 Pensioners: 60% (2021: 60%) The weighted average duration of the defined benefit obligation at 31 December 2022 is 13.5 years (2021: 16 years). Principal assumptions The principal financial assumptions of the Pearl Scheme are set out in the table below: 2022 % 2021 % Rate of increase for pensions in payment (5% per annum or RPI if lower) 3.05 3.20 Rate of increase for deferred pensions (CPI) 2.70 2.70 Discount rate 4.95 2.00 Inflation \u2013 RPI 3.30 3.30 Inflation \u2013 CPI 2.70 2.70 The discount rate and inflation rate assumptions have been determined by considering the shape of the appropriate yield curves and the duration of the Pearl Scheme\u2019s liabilities. This method determines an equivalent single rate for each of the discount and inflation rates, which is derived from the profile of projected benefit payments. The post-retirement mortality assumptions are in line with a scheme-specific table which was derived from the actual mortality experience in recent years based on the SAPS standard tables for males and for females based on year of use. Future longevity improvements from 1 January 2021 are based on amended CMI 2021 Core Projections (2021: From 1 January 2021 based on amended CMI 2020 Core Projections) and a long-term rate of improvement of 1.5% (2021: 1.7%) per annum for males and 1.2% (2021: 1.2%) per annum for females. Under these assumptions, the average life expectancy from retirement for a member currently aged 40 retiring at age 60 is 29.2 years and 30.5 years for male and female members respectively (2021: 29.8 years and 30.6 years respectively). G. Other statement of consolidated financial position notes continued G1. Pension schemes continued G1.1 Pearl Group Staff Pension Scheme continued Principal assumptions continued A quantitative sensitivity analysis for significant actuarial assumptions is shown below: 2022 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 1,501 (40) 42 26 (25) 37 (37) 2021 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 2,224 (87) 93 70 (68) 80 (80) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension asset recognised within the statement of consolidated financial position. G1.2 PGL Pension Scheme The PGL Pension Scheme comprises a final salary section and a defined contribution section. Scheme details Defined contribution scheme On 1 July 2020 the Group closed the defined contribution section of the PGL Scheme and ceased making contributions from this date. Defined benefit scheme The defined benefit section of the PGL Pension Scheme is a final salary arrangement which is closed to new entrants and has no active members. The PGL Scheme is administered by a separate trustee company, PGL Pension Trustee Ltd. The trustee company is comprised of two representatives from the Group, three member nominated representatives and one independent trustee in accordance with the trustee company\u2019s articles of association. The trustee is required by law to act in the interest of all relevant beneficiaries and is responsible for the day to day administration of the benefits. The valuation has been based on an assessment of the liabilities of the PGL Pension Scheme as at 31 December 2022, undertaken by independent qualified actuaries. To the extent that an economic surplus will be available as a refund, the economic surplus is stated after a provision for tax that would be borne by the scheme administrators when the refund is made. A triennial funding valuation of the PGL Pension Scheme as at 30 June 2021 was completed in 2022 by a qualified actuary and finalised in January 2023. This showed a surplus as at 30 June 2021 of \u00a32 million. The IFRS valuation cash flows reflect the latest available data and are not limited to being updated following the completion of each funding valuation. There are no further committed contributions to pay in respect of the defined benefit section of the Scheme. Insurance policies with Group entities In March 2019, the PGL Pension Scheme entered into a \u2018buy-in\u2019 agreement with PLL which covered the remaining pensioner and deferred members of the Scheme not covered by the first such agreement concluded in December 2016. The plan assets transferred to PLL as premium are held in a collateral account and are recognised in the relevant line within financial assets in the statement of consolidated financial position. The economic effect of these transactions in the Scheme is to replace the plan assets transferred with a single line insurance policy reimbursement asset which is eliminated on consolidation along with the relevant insurance contract liabilities in PLL. The value of the insurance policies with Group entities at 31 December 2022 is \u00a31,079 million (2021: \u00a31,618 million). Summary of amounts recognised in the consolidated financial statements The amounts recognised in the consolidated financial statements are as follows: 2022 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Total \u00a3m At 1 January 31 (1,623) (1,592) Interest income/(expense) 1 (32) (31) Administrative expenses (4) \u2013 (4) Included in profit or loss (3) (32) (35) Remeasurements: Return on plan assets excluding amounts included in interest income (1) \u2013 (1) Gain from changes in demographic assumptions \u2013 5 5 Gain from changes in financial assumptions \u2013 531 531 Experience loss \u2013 (36) (36) Included in other comprehensive income (1) 500 499 Income received from insurance policies 72 \u2013 72 Benefit payments (72) 72 \u2013 At 31 December 27 (1,083) (1,056) 2021 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Total \u00a3m At 1 January 35 (1,754) (1,719) Interest expense \u2013 (25) (25) Administrative expenses (4) \u2013 (4) Included in profit or loss (4) (25) (29) Remeasurements: Gain from changes in demographic assumptions \u2013 16 16 Gain from changes in financial assumptions \u2013 70 70 Experience loss \u2013 (3) (3) Included in other comprehensive income \u2013 83 83 Income received from insurance policies 73 \u2013 73 Benefit payments (73) 73 \u2013 At 31 December 31 (1,623) (1,592) G. Other statement of consolidated financial position notes continued G1. Pension schemes continued G1.2 PGL Pension Scheme continued Scheme assets The distribution of the scheme assets at the end of the year was as follows: 2022 2021 Total \u00a3m Of which not quoted in an active market \u00a3m Total \u00a3m Of which not quoted in an active market \u00a3m Cash and other 27 \u2013 31 \u2013 Reported scheme assets 27 \u2013 31 \u2013 Add back: Insurance policies eliminated on consolidation 1,079 1,079 1,618 1,610 Economic value of assets 1,106 1,079 1,649 1,610 Defined benefit obligation The calculation of the defined benefit obligation can be allocated to the scheme\u2019s members as follows: \u2022 Deferred scheme members: 36% (2021: 36%); and \u2022 Pensioners: 64% (2021: 64%) The weighted average duration of the defined benefit obligation at 31 December 2022 is 13.5 years (2021: 16 years). Principal assumptions The principal financial assumptions of the PGL Pension Scheme are set out in the table below: 2022 % 2021 % Rate of increase for pensions in payment (7.5% per annum or RPI if lower) 3.30 3.30 Rate of increase for deferred pensions (CPI) 2.70 2.70 Discount rate 4.95 2.00 Inflation \u2013 RPI 3.30 3.30 Inflation \u2013 CPI 2.70 2.70 The discount rate and inflation assumptions have been determined by considering the shape of the appropriate yield curves and the duration of the PGL Pension Scheme liabilities. This method determines an equivalent single rate for each of the discount and inflation rates, which is derived from the profile of projected benefit payments. The post-retirement mortality assumptions are in line with 86%/94% of S1P Light base tables for males and females. Future longevity improvements from 1 January 2021 are based on amended CMI 2021 Core Projections (2021: From 1 January 2021 based on amended CMI 2020 Core Projections) with a long-term rate of improvement of 1.5% (2021: 1.7%) per annum for males and 1.2% (2021: 1.2%) per annum for females. Under these assumptions, the average life expectancy from retirement for a member currently aged 40 retiring at age 62 is 27.7 years (2021: 28.0 years) and 29.1 years (2021: 28.9 years) for male and female members respectively. A quantitative sensitivity analysis for significant actuarial assumptions is shown below: 2022 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 1,083 (31) 33 23 (22) 30 (30) 2021 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 1,623 (62) 66 54 (52) 60 (60) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension liability recognised within the statement of consolidated financial position. G1.3 Abbey Life Staff Pension Scheme Scheme details On 30 June 2017, the Abbey Life Scheme was transferred from Abbey Life to Pearl Life Holdings Limited (\u2018PeLHL\u2019), a fellow subsidiary. PeLHL assumed the scheme covenant together with all obligations of the scheme following implementation of the transfer. The Abbey Life Scheme is a registered occupational pension scheme, set up under trust, and legally separate from the employer PeLHL. The scheme is administered by Abbey Life Trust Securities Limited (the 'trustee'), a corporate trustee. There are three trustee directors, one of whom is nominated by the Abbey Life Scheme members and two of whom are appointed by PeLHL. The trustee is responsible for administering the scheme in accordance with the trust deed and rules and pensions laws and regulations. The Abbey Life Scheme is closed to new entrants and has no active members. The valuation has been based on an assessment of the liabilities of the Abbey Life Scheme as at 31 December 2022 undertaken by independent qualified actuaries. The present values of the defined benefit obligation and the related interest costs have been measured using the projected unit credit method. Funding The last funding valuation of the Abbey Life Scheme was carried out by a qualified actuary as at 31 March 2021 and showed a deficit of \u00a386 million. Following completion of the funding valuation a recovery plan was agreed between the Group and the trustee of the Abbey Life Scheme for PeLHL to pay monthly contributions of \u00a3400,000 into the Scheme until 31 July 2025 to eliminate the funding shortfall. A new schedule of contributions was agreed effective from November 2021, for PeLHL to pay the following amounts in respect of deficit contributions in addition to the amounts payable under the recovery plan: \u2022 fixed monthly contributions of \u00a3400,000 payable from 1 August 2025 to 30 June 2026; \u2022 monthly contributions in respect of administration expenses of \u00a3106,295 payable up to 31 March 2022, then increasing annually in line with the Retail Prices Index assumption to 30 June 2028; and \u2022 annual payments of \u00a34 million into the New 2016 Charged Account by 31 July each year, with the next payment being made by 31 July 2022, and the last payment due by 31 July 2025. The charged accounts are Escrow accounts which were created in 2010 to provide the trustees with additional security in light of the funding deficit. The amounts held in the charged accounts do not form part of Abbey Life Scheme assets. Under the terms of the 2013 Funding Agreement the funding position of the Scheme was assessed as at 31 March 2021 and this assessment revealed a shortfall, calculated in accordance with the terms of the New 2013 Funding Agreement, which exceeded the amount held in the New 2013 Charged Account. As such, the entire balance of \u00a342 million was paid from the New 2013 Charged Account to the Abbey Life Scheme in December 2021. Under the terms of the New 2016 Funding Agreement the funding position of the Abbey Life Scheme will be assessed as at 31 March 2027. A payment will be made from the New 2016 Charged Account to the Scheme if the results of the assessment reveal a shortfall calculated in accordance with the terms of the New 2016 Funding Agreement. The amount of the payment will be the lower of the amount of the shortfall and the amount held in the New 2016 Charged Account. An additional liability of \u00a33 million (2021: \u00a37 million) has been recognised reflecting a charge on any refund of the resultant IAS 19 surplus that arises after adjustment for discounted future contributions of \u00a315 million (2021: \u00a321 million) in accordance with the minimum funding requirement. A deferred tax asset of \u00a3nil (2021: \u00a34 million) has also been recognised to reflect tax relief at a rate of 19% that is expected to be available on the contributions once paid into the Scheme. G. Other statement of consolidated financial position notes continued G1. Pension schemes continued G1.3 Abbey Life Staff Pension Scheme continued Summary of amounts recognised in the consolidated financial statements The amounts recognised in the consolidated financial statements are as follows: 2022 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Minimum funding requirement obligation \u00a3m Total \u00a3m At 1 January 330 (318) (4) (7) 1 Interest income/(expense) 7 (6) \u2013 \u2013 1 Administration expenses (2) \u2013 \u2013 \u2013 (2) Included in profit or loss 5 (6) \u2013 \u2013 (1) Remeasurements: Return on plan assets excluding amounts included in interest income (123) \u2013 \u2013 \u2013 (123) Experience loss \u2013 (9) \u2013 \u2013 (9) Gain from changes in financial assumptions \u2013 110 \u2013 \u2013 110 Change in minimum funding requirement obligation \u2013 \u2013 \u2013 4 4 Change in provision for tax on economic surplus available as a refund \u2013 \u2013 4 \u2013 4 Included in other comprehensive income (123) 101 4 4 (14) Employer's contributions 6 \u2013 \u2013 \u2013 6 Benefit payments (12) 12 \u2013 \u2013 \u2013 At 31 December 206 (211) \u2013 (3) (8) 2021 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Minimum funding requirement obligation \u00a3m Total \u00a3m At 1 January 280 (341) \u2013 \u2013 (61) \u2013 \u2013 Interest income/(expense) 4 (5) \u2013 \u2013 (1) Administrative expenses (1) \u2013 \u2013 \u2013 (1) Included in profit or loss 3 (5) \u2013 \u2013 (2) Return on plan assets excluding amounts included in interest income 11 \u2013 \u2013 \u2013 11 Experience Loss \u2013 (5) \u2013 \u2013 (5) Gain from changes in demographic assumptions \u2013 6 \u2013 \u2013 6 Loss from changes in financial assumptions \u2013 15 \u2013 \u2013 15 Change in minimum funding requirement obligation \u2013 \u2013 \u2013 (7) (7) Change in provision for tax on economic surplus available as a refund \u2013 \u2013 (4) \u2013 (4) Included in other comprehensive income 11 16 (4) (7) 16 Employer's contributions 48 \u2013 \u2013 \u2013 48 Benefit payments (12) 12 \u2013 \u2013 \u2013 At 31 December 330 (318) (4) (7) 1 Scheme assets The distribution of the scheme assets at the end of the year was as follows: 2022 2021 Total \u00a3m Of which not quoted in an active market \u00a3m Total \u00a3m Of which not quoted in an active market \u00a3m Diversified income fund 44 \u2013 139 \u2013 Fixed interest government bonds 86 \u2013 68 \u2013 Corporate bonds 87 \u2013 118 \u2013 Derivatives (15) (15) 1 1 Cash and cash equivalents 4 \u2013 4 \u2013 Pension scheme assets 206 (15) 330 1 Defined benefit obligation The calculation of the defined benefit obligation can be allocated to the Abbey Life Scheme\u2019s members as follows: \u2022 Deferred scheme members: 44% (2021: 44%); and \u2022 Pensioners: 56% (2021: 56%). The weighted average duration of the defined benefit obligation at 31 December 2022 is 13.5 years (2021: 16 years). Principal assumptions The principal financial assumptions of the Abbey Life Scheme are set out in the table below: 2022 % 2021 % Rate of increase for pensions in payment (5% per annum or RPI if lower) 3.05 3.20 Rate of increase for deferred pensions (CPI subject to caps) 2.70 2.70 Discount rate 4.95 2.00 Inflation \u2013 RPI 3.30 3.30 Inflation \u2013 CPI 2.70 2.70 The discount rate and inflation assumptions have been determined by considering the shape of the appropriate yield curves and the duration of the Abbey Life Scheme liabilities. This method determines an equivalent single rate for each of the discount and inflation rates, which is derived from the profile of projected benefit payments. The post-retirement mortality assumptions are in line with a scheme-specific table which was derived from the actual mortality experience in recent years, performed as part of the actuarial funding valuation as at 31 March 2021, using the SAPS S3 \u2018Light\u2019 tables for males and for females based on year of use. Future longevity improvements from 1 January 2021 are based on amended CMI 2021 Core Projections (2021: From 1 January 2021 based on amended CMI 2020 Core Projections) and a long-term rate of improvement of 1.5% (2021: 1.7%) per annum for males and 1.2% (2021: 1.2%) per annum for females. Under these assumptions the average life expectancy from retirement for a member currently aged 45 retiring at age 65 is 24.8 years and 25.9 years for male and female members respectively (2021: 24.9 years and 25.7 years respectively). G. Other statement of consolidated financial position notes continued G1. Pension schemes continued G1.3 Abbey Life Staff Pension Scheme continued Defined benefit obligation A quantitative sensitivity analysis for significant actuarial assumptions is shown below: 2022 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 211 (7) 7 4 (4) 7 (7) 2021 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 318 (12) 13 8 (9) 12 (12) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension liability recognised within the statement of consolidated financial position. G1.4 ReAssure Life Staff Pension Scheme Scheme details The ReAssure Scheme was consolidated within the Group financial statements following the acquisition of the ReAssure businesses on 22 July 2020. The ReAssure Scheme is a registered occupational pension scheme, set up under trust, and legally separate from the employer ReAssure Midco Limited (\u2018RML\u2019). The scheme is administered by ReAssure Pension Trustees Limited, a corporate trustee. There are six trustee directors, two of whom are nominated by the ReAssure Scheme members and four of whom are appointed by RML. The trustee is responsible for administering the scheme in accordance with the trust deed and rules and pensions laws and regulations. The ReAssure Scheme is closed to new entrants and to future accrual for active members. The valuation has been based on an assessment of the liabilities of the ReAssure Scheme as at 31 December 2021 undertaken by independent qualified actuaries. The present values of the defined benefit obligation and the related interest costs have been measured using the projected unit credit method. Funding The last funding valuation of the ReAssure Scheme was carried out by a qualified actuary as at 31 December 2020 and showed a deficit of \u00a377 million. Following the completion of the 2020 valuation a recovery plan was agreed in September 2021 between the trustee and RML in order to make good the deficit. RML has agreed to pay contributions of \u00a317.7 million into the existing Custody Account spread over four annual payments of \u00a34.425 million payable on 1 April 2022, 1 April 2023, 1 April 2024 and 1 April 2025. It is anticipated that these payments will be sufficient to cover the difference between the funding shortfall and the balance of the Custody Account at 31 December 2020 and to remove any remaining deficit at 31 December 2025. The amounts held in this account do not form part of the Scheme\u2019s plan assets and are instead are held in the Custody Account and are included within financial assets in the statement of consolidated financial position. The Group agrees to cover those expenses incurred by the ReAssure Scheme and the cost of the death-in-service benefits for those members of the scheme entitled to those benefits. Payments of \u00a32 million (2021:\u00a31 million) have been made during the year to cover these costs. Summary of amounts recognised in the consolidated financial statements The amounts recognised in the consolidated financial statements are as follows: 2022 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Total \u00a3m At 1 January 492 (438) (19) 35 Interest income/(expense) 9 (9) \u2013 \u2013 Administrative expenses (1) \u2013 \u2013 (1) Included in profit or loss 8 (9) \u2013 (1) Remeasurements: Return on plan assets excluding amounts included in interest income (203) \u2013 \u2013 (203) Gain from changes in financial assumptions \u2013 188 \u2013 188 Experience loss \u2013 (19) \u2013 (19) Change in provision for tax on economic surplus available as a refund \u2013 \u2013 11 11 Included in other comprehensive income (203) 169 11 (23) Employer's contributions 3 \u2013 \u2013 3 Benefit payments (12) 12 \u2013 \u2013 At 31 December 288 (266) (8) 14 2021 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Total \u00a3m At 1 January 477 (461) (5) 11 Interest income/(expense) 6 (6) \u2013 \u2013 Administrative expenses (1) - \u2013 (1) Included in profit or loss 5 (6) \u2013 (1) Remeasurements: Return on plan assets excluding amounts included in interest income 19 \u2013 \u2013 19 Gain from changes in demographic assumptions \u2013 1 \u2013 1 Gain from changes in financial assumptions \u2013 20 \u2013 20 Experience loss \u2013 (2) \u2013 (2) Change in provision for tax on economic surplus available as a refund \u2013 \u2013 (14) (14) Included in other comprehensive income 19 19 (14) 24 Employer's contributions 1 \u2013 \u2013 1 Benefit payments (10) 10 \u2013 \u2013 At 31 December 492 (438) (19) 35 G. Other statement of consolidated financial position notes continued G1. Pension schemes continued G1.4 ReAssure Life Staff Pension Scheme continued Scheme assets The distribution of the scheme assets at the end of the year was as follows: 2022 2021 Total \u00a3m Of which not quoted in an active market \u00a3m Total \u00a3m Of which not quoted in an active market \u00a3m Equities 31 \u2013 62 \u2013 Government bonds 121 \u2013 151 \u2013 Corporate bonds 83 \u2013 173 \u2013 Managed funds \u2013 \u2013 60 \u2013 Other quoted securities 45 \u2013 43 \u2013 Cash and cash equivalents 8 \u2013 3 \u2013 Pension scheme assets 288 \u2013 492 \u2013 Defined benefit obligation The calculation of the defined benefit obligation can be allocated to the ReAssure Scheme\u2019s members as follows: \u2022 Deferred scheme members: 66% (2021: 66%); and \u2022 Pensioners: 34% (2021: 34%). The weighted average duration of the defined benefit obligation at 31 December 2022 is 17 years (2021: 21 years). Principal assumptions The principal assumptions of the ReAssure Scheme are set out in the table below: 2022 % 2021 % Rate of increase for pensions in payment (5% per annum or RPI if lower) 3.05 3.20 Rate of increase for deferred pensions 2.70 2.70 Rate of increase in salaries 3.70 3.70 Discount rate 4.95 2.00 Inflation \u2013 RPI 3.30 3.30 Inflation \u2013 CPI 2.70 2.70 The discount rate and inflation assumptions have been determined by considering the shape of the appropriate yield curves and the duration of the ReAssure Scheme liabilities. This method determines an equivalent single rate for each of the discount and inflation rates, which is derived from the profile of projected benefit payments. The post-retirement mortality assumptions are in line with SAPS Series 3 light base tables with a 102% (2021: 102%) multiplier for males and a 95% (2021: 95%) multiplier for females, with CMI 2019 projections in line with a 1.5% pa long term trend up to and including 31 December 2020. Future longevity improvements from 1 January 2021 onwards are in line with amended CMI 2021 Core Projections (2021: From 1 January 2021 in line with amended CMI 2020 Core Projections) with a long-term trend of 1.5% pa (2021: 1.7%) for males and 1.2% (2021: 1.2%) for females. Under these assumptions the average life expectancy from retirement for a member currently aged 45 retiring at age 60 is 30.0 years and 31.6 years for male and female members respectively (2021: 30.1 years and 31.4 years for male and female members respectively). A quantitative sensitivity analysis for significant actuarial assumptions is shown below: 2022 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 266 (10) 11 8 (8) 7 (7) 2021 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 438 (21) 23 18 (17) 18 (17) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension liability recognised within the statement of consolidated financial position. G. Other statement of consolidated financial position notes continued G2. Intangible assets Goodwill Business combinations are accounted for by applying the acquisition method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is measured on initial recognition at cost. Following initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is not amortised but is tested for impairment annually or when there is evidence of possible impairment. For impairment testing, goodwill is allocated to relevant cash generating units. Goodwill is impaired when the recoverable amount is less than the carrying value. In certain acquisitions an excess of the acquirer\u2019s interest in the net fair value of the acquiree\u2019s identifiable assets, liabilities, contingent liabilities and non- controlling interests over cost may arise. Where this occurs, the surplus of the fair value of net assets acquired over the fair value of the consideration is recognised in the consolidated income statement. Acquired in-force business Insurance and investment contracts with DPF acquired in business combinations and portfolio transfers are measured at fair value at the time of acquisition. The difference between the fair value of the contractual rights acquired and obligations assumed and the liability measured in accordance with the Group\u2019s accounting policies for such contracts is recognised as acquired in-force business. This acquired in-force business is amortised over the estimated life of the contracts on a basis which recognises the emergence of the economic benefits. The value of acquired in-force business related to investment contracts without DPF is recognised at its fair value and is amortised on a diminishing balance basis. An impairment review is performed whenever there is an indication of impairment. When the recoverable amount is less than the carrying value, an impairment loss is recognised in the consolidated income statement. Acquired in-force business is also considered in the liability adequacy test for each reporting period. The acquired in-force business is allocated to relevant cash generating units for the purposes of impairment testing. Customer relationships The customer relationship intangible asset includes vesting pension premiums and is measured on initial recognition at cost. The cost of this intangible asset acquired in a business combination is the fair value as at the date of acquisition. Following initial recognition, the customer relationship intangible asset is carried at cost less any accumulated amortisation and any accumulated impairment losses. The intangible asset is amortised on a straight-line basis over its useful economic life and assessed for impairment whenever there is an indication that the recoverable amount of the intangible asset is less than its carrying value. The customer relationship intangible asset is allocated to relevant cash generating units for the purposes of impairment testing. Brands and other contractual arrangements Brands and other contractual arrangements are measured on initial recognition at cost. The cost of an intangible asset acquired in a business combination is the fair value as at the date of the acquisition. The cost of an intangible asset acquired in exchange for a non-monetary asset is measured at fair value as at the date of the transaction. Following initial recognition, the brand and other contractual arrangement intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of brands and other contractual arrangements over their estimated useful lives. They are tested for impairment whenever there is evidence of possible impairment. For impairment testing, they are allocated to the relevant cash generating unit. Brands and other contractual arrangements are impaired when the recoverable amount is less than the carrying value. Other intangibles 2022 Goodwill \u00a3m Acquired in- force business \u00a3m Customer relationships \u00a3m Brands and other \u00a3m Total other intangibles \u00a3m Total \u00a3m Cost or valuation at 1 January and 31 December 57 7,007 297 131 428 7,492 Amortisation and impairment At 1 January (47) (2,630) (183) (13) (196) (2,873) Amortisation charge for the year \u2013 (488) (15) (6) (21) (509) Impairment charge for the year \u2013 (17) \u2013 \u2013 \u2013 (17) At 31 December (47) (3,135) (198) (19) (217) (3,399) Carrying amount 10 3,872 99 112 211 4,093 Less amounts classified as held for sale (see note A6.1) \u2013 (37) \u2013 \u2013 \u2013 (37) Carrying amount at 31 December 10 3,835 99 112 211 4,056 Amount recoverable after 12 months 10 3,382 84 106 190 3,582 Other intangibles 2021 Goodwill \u00a3m Acquired in- force business \u00a3m Customer relationships \u00a3m Brands and other \u00a3m Total other intangibles \u00a3m Total \u00a3m Cost or valuation At 1 January 57 7,028 297 56 353 7,438 Acquisition of ReAssure businesses \u2013 \u2013 \u2013 111 111 111 Disposal of Ark Life \u2013 (21) \u2013 \u2013 \u2013 (21) Termination of Client Services Proposition Agreement \u2013 \u2013 \u2013 (36) (36) (36) At 31 December 57 7,007 297 131 428 7,492 Amortisation and impairment At 1 January \u2013 (2,015) (168) (14) (182) (2,197) Amortisation charge for the year \u2013 (537) (15) (5) (20) (557) Impairment charge for the year 1 (47) (99) \u2013 \u2013 \u2013 (146) Disposal of Ark Life \u2013 21 \u2013 \u2013 \u2013 21 Termination of Client Services Proposition Agreement \u2013 \u2013 \u2013 6 6 6 At 31 December (47) (2,630) (183) (13) (196) (2,873) Carrying amount 10 4,377 114 118 232 4,619 Less amounts classified as held for sale (see note A6.1) \u2013 (54) \u2013 \u2013 \u2013 (54) Carrying amount at 31 December 10 4,323 114 118 232 4,565 Amount recoverable after 12 months 10 3,834 99 112 211 4,055 1 An impairment charge of \u00a359 million in acquired in-force business has been included within the \u2018gain on completion of abrdn plc transaction\u2019 in the consolidated income statement, see note G2.2 for further details . G. Other statement of consolidated financial position notes continued G2. Intangible assets continued G2.1 Goodwill The carrying value of goodwill has been tested for impairment at the year end and the results of this exercise are detailed below. Goodwill with a carrying value of \u00a310 million (2021: \u00a310 million) was recognised on the acquisition of AXA Wealth during 2016 and has been allocated to the UK Open segment. This represents the value of the workforce assumed and the potential for future value creation, which relates to the ability to invest in and grow the SunLife brand. Value in use has been determined as the present value of certain future cash flows associated with that business. The cash flows used in the calculation are consistent with those adopted by management in the Group\u2019s operating plan, and for the period 2028 and beyond, assume a zero growth rate. The underlying assumptions of these projections include market share, customer numbers, commission rates and expense inflation. The cash flows have been valued at a risk adjusted discount rate of 14% (2021: 11%) that makes prudent allowance for the risk that future cash flows may differ from that assumed. This test demonstrated that value in use was greater than carrying value. Given the magnitude of the excess of the value in use over carrying value, management does not believe that a reasonably foreseeable change in key assumptions would cause the carrying value to exceed value in use. Goodwill with a cost of \u00a347 million attributed to the Management Services segment was fully impaired during the year ended 31 December 2021. The Management Services segment generated income solely from the services provided to other operating segments within the Group. As a result of planned investment in the Group\u2019s growth agenda, including the development of capabilities of the Open segment and certain Group functions, it was anticipated that the Management Services segment would generate short-term losses in the period until service agreements could be renegotiated. Together with the effect of the expected run-off of the relevant Phoenix Life insurance business, these anticipated short-term losses resulted in an assessment of the recoverable amount of the goodwill to be \u00a3nil as at 31 December 2021 and consequently a \u00a347 million impairment charge was recognised. Value in use was determined as the present value of certain future cash flows associated with this business. The cash flows used in this calculation were valued using a risk adjusted discount rate of 9.5% and were consistent with those adopted by management in the Group's three year operating plan and, for the period 2027 and beyond, reflected the anticipated run-off of the Phoenix Life insurance business. The underlying assumptions of these projections include management\u2019s best estimates with regards to longevity, persistency, expenses, mortality and morbidity, determined on the basis as described in note F4.1. G2.2 Acquired in-force business Acquired in-force business (\u2018AVIF\u2019) on insurance contracts and investment contracts with DPF represents the difference between the fair value of the contractual rights under these contracts and the liability measured in accordance with the Group\u2019s accounting policies for such contracts. This intangible is being amortised in accordance with the run-off of the book of business. AVIF on investment contracts without DPF is amortised in line with emergence of economic benefits. AVIF balances are assessed for impairment where an indicator of impairment has been identified. The following paragraphs set out the impairment indicators identified and the results of the impairment tests carried out. On 23 February 2021, the Group entered into an agreement with abrdn plc to simplify the arrangements of their Strategic Partnership (see note A6.1 for further details). Under the terms of the transaction, the Group will sell its UK investment and platform related products, comprising Wrap SIPP, Onshore bond and UK TIP to abrdn plc and this will be effected through a Part VII transfer. The balances in the statement of consolidated financial position relating to this business were classified as a disposal group held for sale in February 2021. The total proceeds of disposal for this business are not expected to exceed the carrying value of the related net assets and accordingly the disposal group has been recognised at fair value less costs to sell. The value of the AVIF at 23 February 2021 was \u00a3122 million and an impairment charge of \u00a359 million was recognised in 2021 on classification of the AVIF balance as held for sale. This charge was included within the \u2018gain on completion of abrdn plc transaction\u2019 in the consolidated income statement. A further impairment of \u00a317 million has been recognised during the year (2021: \u00a38 million). The AVIF balance classified as held for sale is not being amortised. In June 2021, following the Group Board\u2019s approval to dispose of Ark Life Assurance Company DAC, the entity was initially classified as a disposal group held for sale. The proceeds of disposal were not expected to exceed the carrying value of the related net assets and accordingly the disposal group was measured at fair value less costs to sell. In 2021, an impairment charge of \u00a318 million was recognised in respect of the AVIF upon classification of the business as held for sale and recognised within \u2018amortisation and impairment of acquired in-force business\u2019 in the consolidated income statement. In 2021, updates to the reserving methodology in respect of certain blocks of European insurance contracts resulted in a release of reserves of \u00a320 million. This release of reserves was considered to be an indicator of impairment in relation to a component of the AVIF recognised on acquisition of the Standard Life Assurance businesses as it represented an acceleration of the recognition of profits that had been capitalised within the AVIF. Accordingly, an impairment test was performed. The value in use of the AVIF was determined using present value techniques applied to the best estimate cash flows expected to arise from the relevant policies that were in-force at the date of initial recognition of the AVIF, adjusted to reflect an internal view of the required compensation for bearing the uncertainty associated with those cash flows. The key underlying assumptions were management\u2019s best estimates with regards to persistency and expenses, which were determined on the basis as described in note F4.1. It was determined that the carrying value exceeded value in use by \u00a314 million and consequently an impairment charge was recognised. The resultant net carrying value of this component of the Standard Life Assurance AVIF at 31 December 2021 was \u00a349 million. G2.3 Customer relationships The customer relationships intangible at 31 December 2022 relates to vesting pension premiums which captures the new business arising from policies in-force at the acquisition date, specifically top-ups made to existing policies and annuities vested from matured pension policies. The total value of this customer relationship intangible at acquisition was \u00a3297 million and has been allocated to the UK Heritage segment. This intangible is being amortised over a 20 year period, and had a remaining useful life as at 31 December 2022 of 6.9 years (2021: 7.9 years). G2.4 Brands and other intangibles An intangible asset is recognised at cost on acquisition of the AXA Wealth and represents the value attributable to the SunLife brand as at 1 November 2016. The intangible asset was valued on a \u2018multi-period excess earnings\u2019 basis and was recognised at a cost of \u00a320 million. Impairment testing was performed in a combined test with the AXA goodwill (see section G2.1). The value in use continues to exceed its carrying value. This brand intangible is being amortised over a 10 year period. The carrying value of the AXA Wealth brand as at 31 December 2022 is \u00a38 million. Following the acquisition of the Standard Life Assurance businesses in 2018 an intangible asset was recognised in respect of the Client Services and Proposition Agreement (\u2018CSPA\u2019) with abrdn plc and represented the value of the Group\u2019s contractual rights to use the Standard Life brand. The CSPA formalised the Strategic Partnership between the two companies and established the contractual terms by which abrdn plc was previously to continue to market and distribute certain products to be manufactured by Group companies. On 23 February 2021, the Group entered into an agreement to acquire ownership of the Standard Life brand as part of the transaction with abrdn plc, which transferred to the Group in May 2021. The Standard Life brand was initially recognised at a value of \u00a3111 million which represented the fair value attributable to the brand as at the transaction date. The intangible asset was valued on a \u2018multi-period excess earnings\u2019 basis and is being amortised over a period of 30 years. The carrying value of the Standard Life brand as at 31 December 2022 is \u00a3104 million. As part of the transaction with abrdn plc, the CSPA was significantly amended prior to being dissolved. As a consequence, the CSPA intangible included within \u2018other intangibles\u2019 was derecognised. At that time, its carrying value was \u00a330 million and this was included in the calculation of the \u2018gain on completion of abrdn plc transaction\u2019 recognised in the consolidated income statement in the year ended 31 December 2021. G3. Property, plant and equipment Owner-occupied property is stated at its revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and impairment. Owner-occupied property is depreciated over its estimated useful life, which is taken as 20 \u2013 50 years. Land is not depreciated. Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the owner-occupied property and the net amount is restated to the revalued amount of the asset. Gains and losses on owner-occupied property are recognised in other comprehensive income. The right-of-use assets are initially measured at cost, and subsequently at cost less any accumulated depreciation and impairments, and adjusted for certain remeasurements of the lease liability. The right-of-use assets are depreciated over the remaining lease term which is between 1 and 11 years (2021: 1 and 11 years). Equipment consists primarily of computer equipment and fittings. Equipment is stated at historical cost less deprecation. Where acquired in a business combination, historical cost equates to the fair value at the acquisition date. Depreciation on equipment is charged to the consolidated income statement over its estimated useful life of between 2 and 15 years. G. Other statement of consolidated financial position notes continued G3. Property, plant and equipment continued 2022 Owner-occupied properties \u00a3m Right-o f -use assets \u2013 property \u00a3m Right-o f -use assets \u2013 equipment \u00a3m Equipment \u00a3m Total \u00a3m Cost or valuation At 1 January 29 94 2 59 184 Additions 9 3 \u2013 8 20 Revaluation losses (6) \u2013 \u2013 \u2013 (6) Disposals \u2013 (1) \u2013 (2) (3) At 31 December 32 96 2 65 195 Depreciation At 1 January \u2013 (24) (1) (29) (54) Depreciation \u2013 (9) \u2013 (10) (19) Disposals \u2013 1 \u2013 2 3 At 31 December \u2013 (32) (1) (37) (70) Carrying amount at 31 December 32 64 1 28 125 2021 Owner-occupied properties \u00a3m Right-of-use assets \u2013 property \u00a3m Right-of-use assets \u2013 equipment \u00a3m Equipment \u00a3m Total \u00a3m Cost or valuation At 1 January 33 78 2 54 167 Additions 1 22 \u2013 12 35 Remeasurement of Right-of-use assets \u2013 3 \u2013 \u2013 3 Disposals (5) (9) \u2013 (7) (21) At 31 December 29 94 2 59 184 Depreciation At 1 January \u2013 (23) \u2013 (25) (48) Depreciation \u2013 (9) (1) (8) (18) Disposals \u2013 8 \u2013 4 12 At 31 December \u2013 (24) (1) (29) (54) Carrying amount at 31 December 29 70 1 30 130 Owner-occupied properties have been valued by accredited independent valuers at 31 December 2022 on an open market basis in accordance with the Royal Institution of Chartered Surveyors\u2019 requirements, which is deemed to equate to fair value. The fair value measurement for the properties of \u00a332 million (2021: \u00a329 million) has been categorised as Level 3 based on the non-observable inputs to the valuation technique used. Unrealised loss for the current year is \u00a36 million (2021: \u00a3nil). G3. Property, plant and equipment The fair value of the owner-occupied properties was derived using the investment method supported by comparable evidence. The significant non- observable inputs used in the valuations are the expected rental values per square foot and the capitalisation rates. The fair value of the owner-occupied properties valuation would increase (decrease) if the expected rental values per square foot were to be higher (lower) and the capitalisation rates were to be lower (higher). G4. Investment property Investment property, including right-of-use asset, is initially recognised at cost, including any directly attributable transaction costs. Subsequently investment property is measured at fair value. Fair value is the price that would be received to sell a property in an orderly transaction between market participants at the measurement date. Fair value is determined without any deduction for transaction costs that may be incurred on sale or disposal. Gains and losses arising from the change in fair value are recognised as income or an expense in the statement of comprehensive income. Investment property includes right-of-use assets, where the Group acts as lessee. Leases, where a significant portion of the risks and rewards of ownership are retained by the lessor, are classified as operating leases. Where investment property is leased out by the Group, rental income from these operating leases is recognised as income in the consolidated income statement on a straight-line basis over the period of the lease. 2022 \u00a3m 2021 \u00a3m At 1 January 8,592 7,128 Additions 104 819 Improvements 27 22 Disposals (1,141) (550) Remeasurement of right-of-use asset 2 (1) Movement in foreign exchange 12 (22) (Losses)/gains on adjustments to fair value (recognised in consolidated income statement) (1,363) 1,196 6,233 8,592 Less amounts classified as held for sale (see note A6.1) (2,506) (3,309) At 31 December 3,727 5,283 Unrealised (losses)/gains on properties held at end of year (1,582) 529 As at 31 December 2022, a property portfolio including amounts classified held for sale of \u00a36,070 million (2021: \u00a38,412 million) is held by the life companies in a mix of commercial sectors, spread geographically throughout the UK and Europe. Investment properties also includes \u00a362 million (2021: \u00a373 million) of property reversions arising from sales of the NPI Extra Income Plan (see note E5 for further details) and \u00a380 million (2021: \u00a386 million) from the Group\u2019s interest in the residential property of policyholders who have previously entered into an Equity Release Income Plan (\u2018ERIP\u2019) policy. Certain investment properties held by the life companies possess a ground rent obligation which gives rise to both a right-of-use asset and a lease liability. The right-of-use asset associated with the ground rent obligation is valued at fair value and is included within the total investment property valuation. The value of the ground rent right-of-use asset as at 31 December 2022 was \u00a321 million (2021: \u00a321 million). The remeasurement gives rise to an increase of \u00a32 million (2021: reduction of \u00a31 million). There were \u00a32 million additions (2021: \u00a34 million) and \u00a34 million disposals (2021: \u00a3nil) of ground rent right-of-use assets during the period. Commercial investment property is measured at fair value by independent property valuers having appropriate recognised professional qualifications and recent experiences in the location and category of the property being valued. The valuations are carried out in accordance with the Royal Institute of Chartered Surveyors (\u2018RICS\u2019) guidelines with expected income and capitalisation rate as the key non-observable inputs. The NPI residential property reversions, an interest in customers\u2019 properties which the Group will realise upon their death, are valued using a discounted cash flow model based on the Group\u2019s proportion of the current open market value, and discounted for the expected lifetime of the policyholder derived from published mortality tables. The open market value is measured by independent local property surveyors having appropriate recognised professional qualifications with reference to the assumed condition of the property and local market conditions. The individual properties are valued triennially and indexed using regional house price indices to the year end date. The discount rate is a risk-free rate appropriate for the duration of the asset, adjusted for the deferred possession rate of 3.7% (2021: 3.7%). Assumptions are also made in the valuation for future movements in property prices, based on a risk free rate. The residential property reversions have been substantially refinanced under the arrangements with Santander as described in note E5. The ERIP residential property reversions, an interest in the residential property of policyholders who have previously entered into an ERIP policy and been provided with a lifetime annuity in return for the legal title to their property, are valued using unobservable inputs and management\u2019s best estimates. As the inward cash flows on these properties will not be received until the lifetime lease is no longer in force, which is usually upon the death of the policyholder, these interests are valued on a reversionary basis which is a discounted current open market value. G. Other statement of consolidated financial position notes continued G4. Investment property continued The open market values of the properties are independently revalued every two years by members of the Royal Institution of Chartered Surveyors and in the intervening period are adjusted by reference to the Nationwide Building Society regional indices of house prices. The discount period is based on the best estimates of the likely date the property will become available for sale and the discount rate applied is determined by the general partner as its best estimate of the appropriate discount rate. The mortality assumption is based on the PMLO8HAWP table for males and the PFLO8HAWP table for females, adjusted to reflect the historic experience of the business concerned. The mortality rates are projected using future mortality improvements from the CMI Mortality Projection Model. No explicit allowance is made for house price inflation in the year through to their realisation. Therefore, the key assumptions used in the valuation of the reversionary interests are the interest discount rate and the mortality assumption. The interest discount rate was 5% (2021: 5%). The fair value measurement of the investment properties has been categorised as Level 3 based on the inputs to the valuation techniques used. The following table shows the valuation techniques used in measuring the fair value of the investment properties, the significant non-observable inputs used, the inter- relationship between the key non-observable inputs and the fair value measurement of the investment properties: Description Valuation techniques Significant non-observable inputs Weighted average 2022 Weighted average 2021 Commercial Investment Property RICS valuation Expected income per sq. ft. \u00a322.41 \u00a321.36 Estimated rental value per hotel room \u00a37,043 \u00a38,534 Estimated rental value per parking space \u00a31,115 \u00a31,097 Capitalisation rate 5.01% 4.65% The estimated fair value of commercial properties would increase (decrease) if: \u2022 the expected income were to be higher (lower); or \u2022 the capitalisation rate were to be lower (higher). The estimated fair value of the NPI residential property reversions would increase (decrease) if: \u2022 the deferred possession rate were to be lower (higher); \u2022 the mortality rate were to be higher (lower). The estimated fair value of the ERIP residential property reversions would increase (decrease) if: \u2022 the discount rate were to be lower (higher); \u2022 the mortality rate were to be higher (lower). Direct operating expenses (offset against rental income in the consolidated income statement) in respect of investment properties that generated rental income during the year amounted to \u00a327 million (2021: \u00a341 million). The direct operating expenses arising from investment property that did not generate rental income during the year amounted to \u00a35 million (2021: \u00a31 million). Future minimum lease rental receivables in respect of non-cancellable operating leases on investment properties were as follows: 2022 \u00a3m 2021 \u00a3m Not later than 1 year 356 323 Later than 1 year and not later than 5 years 1,131 1,032 Later than 5 years 3,345 3,128 G5. Other receivables Other receivables are recognised when due and measured on initial recognition at the fair value of the amount receivable. Subsequent to initial recognition, these receivables are measured at amortised cost using the effective interest rate method. 2022 \u00a3m 2021 \u00a3m Investment broker balances 312 249 Cash collateral pledged and initial margins posted 3,698 958 Property related receivables 145 177 Deferred acquisition costs 133 108 Other debtors 323 313 4,611 1,805 Amount recoverable after 12 months 122 100 G6. Cash and cash equivalents Cash and cash equivalents comprise cash balances and short-term deposits with an original maturity term of three months or less at the date of placement. Bank overdrafts that are repayable on demand and form an integral part of the Group\u2019s cash management are deducted from cash and cash equivalents for the purpose of the statement of consolidated cash flows. 2022 \u00a3m 2021 \u00a3m Bank and cash balances 2,716 5,246 Short-term deposits (including notice accounts and term deposits) 6,156 3,942 8,872 9,188 Less amounts classified as held for sale (33) (76) At 31 December 8,839 9,112 Deposits are subject to a combination of fixed and variable interest rates. The carrying amounts approximate to fair value at the period end. Cash and cash equivalents in long-term business operations and consolidated collective investment schemes of \u00a38,597 million (2021: \u00a38,707 million) are primarily held for the benefit of policyholders and so are not generally available for use by the owners. G7. Provisions A provision is recognised when the Group has a present legal or constructive obligation, as a result of a past event, which is likely to result in an outflow of resources and where a reliable estimate of the amount of the obligation can be made. If the effect is material, the provision is determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. A provision is recognised for onerous contracts when the expected benefits to be derived from the contracts are less than the related unavoidable costs. The unavoidable costs reflect the net cost of exiting the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. Where it is expected that a part of the expenditure required to settle a provision will be reimbursed by a third party the reimbursement is recognised when, and only when, it is virtually certain that the reimbursement will be received. This reimbursement is recognised as a separate asset within other receivables and will not exceed the amount of the provision. Restructuring provisions 2022 Leasehold properties \u00a3m Staff related \u00a3m Known incidents \u00a3m Input VAT recovery provision \u00a3m Operational tax provision \u00a3m Transition and Transformation provision \u00a3m Transfer of policy administration provision \u00a3m ReAssure provision \u00a3m Other 1 \u00a3m Total 1 \u00a3m At 1 January 8 9 46 17 12 92 35 2 14 235 Additions in the year 1 \u2013 25 \u2013 \u2013 33 13 \u2013 11 83 Utilised during the year \u2013 \u2013 (8) \u2013 \u2013 (28) (15) (2) (13) (66) Released during the year \u2013 (2) (15) \u2013 \u2013 \u2013 \u2013 \u2013 (1) (18) At 31 December 9 7 48 17 12 97 33 \u2013 11 234 1 Other and total provisions excludes amounts classified as held for sale as at 31 December 2022 of \u00a3nil (2021: \u00a32 million). Leasehold properties The leasehold properties provision includes a \u00a37 million (2021: \u00a37 million) dilapidations provision in respect of obligations under operating leases and \u00a32 million (2021: \u00a31 million) in respect of the excess of lease rentals and other payments on properties that are currently vacant or are expected to become vacant, over the amounts to be recovered from subletting these properties. Staff related Staff related provisions include provisions for unfunded pensions of \u00a34 million (2021: \u00a35 million), and private medical and other insurance costs for former employees of \u00a33 million (2021: \u00a34 million). G. Other statement of consolidated financial position notes continued G7. Provisions continued Known incidents The known incidents provision was created for historical data quality, administration systems problems and process deficiencies on the policy administration, financial reconciliations and operational finance aspects of business outsourced. These balances represent the best estimates of costs payable to customers. Additional information has been given below in respect of the more significant balances within this provision. During 2021, a \u00a315 million provision was recognised in relation to errors in final encashment calculations for With Profits Trustee Investment Plans. During 2022, this provision was increased to \u00a329 million following a review of the calculations which have now been finalised and agreed. An \u00a311 million provision was also recognised in April 2021 following identification that certain customers who have a Protected Pension Age or a Protected Tax Free Lump Sum may not have had their benefits settled correctly. During 2022, this provision reduced to \u00a37 million following the release of \u00a34 million after further investigation deemed that one population of customers were no longer impacted. These provisions will be utilised within 2 to 5 years. In 2020, following completion of the Part VII transfer of the Legal & General business, a \u00a312 million provision was recognised in respect of amounts owed to customers due to various system and processing errors resulting in incorrect rules having been applied to policies. During the year, \u00a33 million (2021: \u00a32 million), of the remaining \u00a39 million provision was utilised and a further \u00a34 million (2021: \u00a31 million) was released. It is expected that the remaining balance of \u00a32 million (2021: \u00a39 million) will be fully utilised within one year. The remaining provisions of \u00a310 million as at 31 December 2022 (2021: \u00a310 million) are expected to be utilised within one to five years. As at 31 December 2022, there are no significant uncertainties which could give rise to a material change to the value of the provisions held for current known incidents. Input VAT recovery provision The provision of \u00a317 million (2021: \u00a317 million) reflects the potential outcome of on-going negotiations with HMRC in relation to the changes to the Partial Exemption Special Method (\u2018PESM\u2019) necessitated by the addition of the Standard Life entities to the Phoenix VAT Group. The provision reflects the fact that whilst Phoenix considers its proposal for the recovery of VAT on costs incurred by Standard Life Assets & Employee Services Limited (\u2018SLAESL\u2019) to be fair and reasonable, the revised PESM remains to be agreed and HMRC may take a different view. The current provision reflects the Group\u2019s maximum exposure as at the reporting date, and was increased by \u00a3nil million (2021: \u00a32 million) in the year. It is currently expected that the provision will be utilised within one to two years. Operational tax provision The operational tax provision relates to potential tax penalties payable to HMRC following failure to notify certain customers of changes to their lifetime allowance usage. The Group is currently in discussion with HMRC in respect of these items and the provision represents the Group\u2019s best estimate of the maximum exposure as at the reporting date. The balance at 31 December 2022 of \u00a312 million (2021: \u00a312 million) is expected to be utilised within one to two years. Restructuring provisions Transition and Transformation provision Following the acquisition of the Standard Life Assurance businesses in August 2018, the Group established a transition and transformation programme which aims to deliver the integration of the Group\u2019s operating models via a series of phases. During 2019, the Group announced its intention to extend its strategic partnership with TCS to provide customer servicing, to develop a digital platform and for migration of existing Standard Life policies to this platform by 2022 which raised a valid expectation of the impacts in those likely to be affected. An initial provision of \u00a3159 million was established in 2019 and included migration costs, severance costs and other expenses. Migration costs are considered a direct expenditure necessarily entailed by the restructuring and represent an obligation arising from arrangements entered into with TCS during 2019. No costs have been provided for that relate to the ongoing servicing of policies. Migration costs payable to TCS are subject to limited uncertainty as they are fixed under the terms of the agreement entered into. There was an increase in costs during 2022 following on from a strategic decision to re-phase the programme. The severance costs are subject to uncertainty and will be impacted by the number of staff that transfer to TCS, and the average salaries and number of years\u2019 service of those affected. A 10% increase in the number of staff subject to redundancy, based on an average length of service and salary, would increase the provision by \u00a34 million. During the year, the provision was increased by \u00a333 million (2021: \u00a3nil) and a further \u00a328 million (2021: \u00a317 million) was utilised. The remaining \u00a397 million (2021: \u00a392 million) is expected to be utilised within one to three years. Transfer of policy administration A significant proportion of the Group\u2019s policy administration is outsourced to Diligenta Limited (\u2018Diligenta\u2019), a UK-based subsidiary of Tata Consultancy Services (\u2018TCS\u2019). Diligenta provide life and pension business process services to a large number of the Group\u2019s policyholders. During 2018, the Group announced its intention to move to a single outsourcer platform and to transfer a further \u00a32 million of the Group\u2019s legacy policies to Diligenta by 31 December 2021. An initial provision of \u00a376 million was recognised in 2018 for the expected cost of the platform migration and for severance and other costs associated with exiting from the current arrangements. Migration costs are considered a direct expenditure necessarily entailed by the restructuring and represent an obligation arising from arrangements entered into with TCS during 2018. No costs have been provided for that relate to the ongoing servicing of policies. The migration elements of the provision are subject to limited uncertainty as a consequence of the signed agreements that are in place. There is a higher degree of uncertainty in relation to the severance and associated exit costs which will be impacted by the number of staff that ultimately transfer to Diligenta. A 10% increase in the level of severance and exit costs would increase the provision by \u00a31 million. During the year the provision was increased by \u00a313 million (2021: \u00a39 million) and a further \u00a315 million (2021: \u00a39 million) was utilised. The remaining provision of \u00a333 million (2021: \u00a335 million) is expected to be utilised within two years. ReAssure restructuring provision During 2020 a \u00a37 million restructuring provision was established in respect of ReAssure Life Limited (\u2018RLL\u2019) to cover severance costs. The remaining provision of \u00a32 million was fully utilised during the year. Other provisions Other provisions includes \u00a34 million (2021: \u00a34 million) of obligations arising under a gift voucher scheme operated by the SunLife business and a commission clawback provision which represents the expected future clawback of commission income earned by the SunLife business as a result of assumed lapses of policies or associated benefits. The remaining other provisions of \u00a37 million (2021: \u00a310 million) consist of a number of small balances all of which are less than \u00a32 million in value. Discounting The impact of discounting on all provisions during the year from the either the passage of time or from a change in the discount rate is not material. G8. Tax assets and liabilities Deferred tax is provided for on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not provided in respect of temporary differences arising from the initial recognition of goodwill and the initial recognition of assets or liabilities in a transaction that is not a business combination and that, at the time of the transaction, affects neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates and laws enacted or substantively enacted at the period end. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 2022 \u00a3m 2021 \u00a3m Current tax: Current tax receivable 519 419 Current tax payable (34) (19) Deferred tax: Deferred tax assets 158 \u2013 Deferred tax liabilities (660) (1,399) G. Other statement of consolidated financial position notes continued G8. Tax assets and liabilities continued Movement in deferred tax liabilities 2022 1 January \u00a3m Recognised in consolidated income statement \u00a3m Recognised in other comprehensive income \u00a3m Other movements \u00a3m Less amounts classified as held for sale \u00a3m 31 December \u00a3m Trading losses 109 81 \u2013 8 \u2013 198 Capital losses 32 (8) \u2013 \u2013 \u2013 24 Expenses and deferred acquisition costs carried forward 57 315 \u2013 (1) \u2013 371 Provisions and other temporary differences 135 (10) \u2013 (2) \u2013 123 Non refundable pension scheme surplus (255) 391 (287) \u2013 \u2013 (151) Committed future pension contributions \u2013 5 4 \u2013 \u2013 9 Accelerated capital allowances 16 1 \u2013 \u2013 \u2013 17 Intangibles 35 (5) \u2013 2 \u2013 32 Acquired in-force business (878) 68 \u2013 \u2013 (3) (813) Customer relationships (57) 4 \u2013 \u2013 \u2013 (53) Unrealised gains (593) 333 1 (2) \u2013 (261) IFRS transitional adjustments (5) 5 \u2013 \u2013 \u2013 \u2013 Other 5 (4) \u2013 1 \u2013 2 (1,399) 1,176 (282) 6 (3) (502) 2021 1 January \u00a3m Recognised in consolidated income statement \u00a3m Recognised in other comprehensive income \u00a3m Other movements \u00a3m Less amounts classified as held for sale \u00a3m 31 December \u00a3m Trading losses 30 80 \u2013 (1) \u2013 109 Capital losses 36 (4) \u2013 \u2013 \u2013 32 Expenses and deferred acquisition costs carried forward 42 15 \u2013 \u2013 \u2013 57 Provisions and other temporary differences 129 5 \u2013 1 \u2013 135 Non refundable pension scheme surplus (128) 13 (140) \u2013 \u2013 (255) Pension scheme deficit 13 (16) 3 \u2013 \u2013 - Accelerated capital allowances 8 8 \u2013 \u2013 \u2013 16 Intangibles 39 (2) \u2013 (2) \u2013 35 Acquired in-force business (798) (90) \u2013 \u2013 10 (878) Customer relationships (33) (24) \u2013 \u2013 \u2013 (57) Unrealised gains (365) (230) \u2013 2 \u2013 (593) IFRS transitional adjustments (10) 5 \u2013 - \u2013 (5) Other 1 \u2013 \u2013 4 \u2013 5 (1,036) (240) (137) 4 10 (1,399) The standard rate of UK Corporation tax for the year ended 31 December 2022 is 19% (year ended 31 December 2021: 19%). An increase from the current 19% UK corporation tax rate to 25%, effective from 1 April 2023, was announced in the Budget on 3 March 2021, and substantively enacted on 24 May 2021. Accordingly, shareholder deferred tax assets and liabilities, where provided, are reflected at rates between 19% and 25% depending on the expected timing of the reversal of the relevant temporary difference. Deferred income tax assets are recognised for tax losses carried forward only to the extent that realisation of the related tax benefit is probable. 2022 \u00a3m 2021 \u00a3m Deferred tax assets have not been recognised in respect of: Tax losses carried forward 73 55 Excess expenses and deferred acquisition costs 112 9 Intangibles 11 9 Deferred tax assets not recognised on capital losses 1 40 29 Other 6 \u2013 1 These can only be recognised against future capital gains and have no expiry date. The Group also has \u00a3456 million (2021: \u00a3109 million) of BLAGAB (life business) trading losses carried forward as at 31 December 2022 across across ReAssure Limited, Phoenix Life Limited and Phoenix Life Assurance Limited. \u00a3291 million of gross losses are projected to be utilised within these entities, however no value has been attributed to these deferred tax assets given the interaction with other deductible temporary differences (2021: \u00a3109 million of gross losses were projected to be utilised and deferred tax assets of \u00a35 million were recognised). Deferred tax assets have not been recognised in respect of the remaining \u00a3165 million (2021: \u00a3nil) losses due to the uncertainty of future BLAGAB trading profits arising against which the losses could be offset (at entity level). Deferred tax assets valued at \u00a37 million have been recognised in respect of \u00a3156 million (2021: \u00a3nil) arising from the interaction with other deductible timing differences on consolidation. There is a technical matter which is currently being discussed with HMRC in relation to the L&G insurance business transfer to ReAssure Limited. These discussions are not sufficiently progressed at this stage for recognition of any potential tax benefit arising. A tax dispute with HMRC in relation to the tax treatment of an asset formerly held by Guardian Assurance Limited (before the business was transferred to ReAssure Limited) was resolved in the period in favour of the Group. The 2021 current tax liability included an accrual for the total tax under dispute on the basis that there was sufficient risk that the tax treatment of the Group would not then be accepted. In 2022 this tax liability was released. The Group in conjunction with a number of other companies has challenged HMRC\u2019s position on the corporation tax treatment of overseas portfolio dividends from companies resident in the EU (\u2018EU dividends') using a Group Litigation Order (\u2018GLO\u2019). The issue relates to whether the UK tax rules, which taxed EU dividends received prior to 1 July 2009, was contrary to EU law given that dividends received from UK companies were exempt from tax. In 2009 UK tax law was changed with both overseas and UK dividends being treated as exempt from corporation tax. In July 2018, the Supreme Court concluded in favour of the tax payer and a tax benefit of \u00a313 million was recognised at the end of 2018 in relation to enhanced double tax relief claims which the Group is entitled to in accordance with the Court judgement. As a result of the insurance business transfer from Legal and General Assurance Society during 2020, the tax refund for the benefit of the Group\u2019s with-profit and unit linked funds increased to \u00a345 million and \u00a323 million respectively. In the case of the with-profit funds there was an increase in unallocated surplus and for the unit linked funds there was a corresponding increase in investment contract liabilities as a result of the recognition of the tax asset. In January 2020, HMRC issued a communication to taxpayers who are affected by the dividend GLO but are not direct participants of it, setting out HMRC\u2019s intended approach to settling enquiries into the amount of double tax relief available for statutory protective or other claims. The Group has been discussing the claims with HMRC during the course of 2022, but due to the significant number of cases and years affected, no amounts have as yet been repaid. The level of tax refund expected is currently unchanged as at the end of 2022. Some companies of the Group were late joiners or not members of the GLO but have made statutory protective tax claims totalling circa \u00a314 million for the benefit of unit linked life funds based on the Supreme Court decision. HMRC has challenged the validity of such claims and is currently considering further tax litigation in this area against other third parties. Some progress through the courts has been made in the course of 2022, but it is expected that the litigation will continue to run. Due to the uncertainty around the potential success of the claims a tax asset has not been recognised in respect of these claims. G9. Payables related to direct insurance contracts Payables related to direct insurance contracts primarily include outstanding claims provisions. Outstanding claims under insurance and investment contracts with DPF are valued using a best estimate method under IFRS 4 Insurance Contracts. Outstanding claims under investment contracts without DPF are measured at full settlement value in accordance with IAS 39 Financial Instruments: Recognition and Measurement. 2022 \u00a3m 2021 \u00a3m Payables related to direct insurance contracts 1,964 1,864 G. Other statement of consolidated financial position notes continued G10. Lease liabilities The operating lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Group\u2019s incremental borrowing rate as the interest rate implicit in the lease cannot be readily determined. For ground rent leases classified as finance leases, the incremental borrowing rate of investment funds holding the associated investment properties is used as the discount rate. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from, for example, rent reviews or from changes in the assessment of whether a termination option is reasonably certain not to be exercised. The Group has applied judgement to determine the lease term for some lease contracts with break clauses. 2022 \u00a3m 2021 \u00a3m At 1 January 99 84 Leases incepted during the year 6 27 Termination of leases following the disposal of associated investment properties (4) (1) Interest expense 3 3 Lease payments (14) (16) Remeasurement of leases 2 2 At 31 December 92 99 Amount due within twelve months 11 10 Amount due after twelve months 81 89 Details of the related right-of-use assets are included in notes G3 and G4. G11. Accruals and deferred income This note analyses the Group\u2019s accruals and deferred income at the end of the year. 2022 \u00a3m 2021 \u00a3m Accruals 498 498 Deferred income 105 123 Accruals and deferred income including amounts classified as held for sale 603 621 Less amounts classified as held for sale (37) (54) At 31 December 566 567 Amount due for settlement after 12 months 35 26 Deferred income includes consideration deferred as a result of the abrdn transaction pending the Part VII transfer (including amounts offset as a result of the profit share). G12. Other payables Other payables are recognised when due and are measured on initial recognition at the fair value of the consideration payable. Subsequent to initial recognition, these payables are measured at amortised cost using the effective interest rate method. 2022 \u00a3m 2021 \u00a3m Investment broker balances 513 228 Property related payables 53 73 Investment management fees 48 77 Other payables 351 343 965 721 Amount due for settlement after 12 months \u2013 \u2013 H. Interests in subsidiaries and associates H1. Subsidiaries Subsidiaries are consolidated from the date that effective control is obtained by the Group (see basis of consolidation in note A1) and are excluded from consolidation from the date they cease to be subsidiary undertakings. For subsidiaries disposed of during the year, any difference between the net proceeds, plus the fair value of any retained interest, and the carrying amount of the subsidiary including non-controlling interests, is recognised in the consolidated income statement. The Group uses the acquisition method to account for the acquisition of subsidiaries. The cost of an acquisition is measured at the fair value of the consideration. Any excess of the cost of acquisition over the fair value of the net assets acquired is recognised as goodwill. In certain acquisitions an excess of the acquirer\u2019s interest in the net fair value of the acquiree\u2019s identifiable assets, liabilities, contingent liabilities and non-controlling interests over cost may arise. Where this occurs, the surplus of the fair value of net assets acquired over the fair value of the consideration is recognised in the consolidated income statement. Directly attributable acquisition costs are included within administrative expenses, except for acquisitions undertaken prior to 2010 when they are included within the cost of the acquisition. Costs directly related to the issuing of debt or equity securities are included within the initial carrying amount of debt or equity securities where these are not carried at fair value. Intra-group balances and income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. The Group has invested in a number of collective investment schemes such as Open-ended Investment Companies (\u2018OEICs\u2019), unit trusts, Soci\u00e9t\u00e9 d\u2019Investissement \u00e0 Capital Variable (\u2018SICAVs\u2019), investment trusts and private equity funds. These invest mainly in equities, bonds, property and cash and cash equivalents. The Group\u2019s percentage ownership in these collective investment schemes can fluctuate according to the level of Group and third party participation in the structures. When assessing control over collective investment schemes, the Group considers those factors described under the \u2018Basis of consolidation\u2019 in note A1. In particular, the Group considers the scope of its decision-making authority, including the existence of substantive rights (such as power of veto, liquidation rights and the right to remove the fund manager) that give it the ability to direct the relevant activities of the investee. The assessment of whether rights are substantive rights, and the circumstances under which the Group has the practical ability to exercise them, requires the exercise of judgement. This assessment includes a qualitative consideration of the rights held by the Group that are attached to its holdings in the collective investment schemes, rights that arise from contractual arrangements between the Group and the entity or fund manager and the rights held by third parties. In addition, consideration is made of whether the Group has de facto power, for example, where third party investments in the collective investment schemes are widely dispersed. Where Group companies are deemed to control such collective investment schemes they are consolidated in the Group financial statements, with the interests of external third parties recognised as a liability (see the accounting policy for \u2018Net asset value attributable to unitholders\u2019 in note E1 for further details). Certain of the collective investment schemes have non-coterminous period ends and are consolidated on the basis of additional financial statements prepared to the period end. Portfolio transfers When completing an acquisition, the Group first considers whether the acquisition meets the definition of a business combination under IFRS 3 Business Combinations. IFRS 3, and the use of acquisition accounting, does not apply in circumstances where the acquisition of an asset or a group of assets does not constitute a business, and is instead a portfolio of assets and liabilities. In such cases, the Group\u2019s policy is to recognise and measure the assets acquired and liabilities assumed in accordance with the Group's accounting policies for those assets and liabilities. The difference between the consideration and the net assets or liabilities acquired is recognised in the consolidated income statement. H1.1 Significant restrictions The ability of subsidiaries to transfer funds to the Group in the form of cash dividends or to repay loans and advances is subject to local laws, regulations and solvency requirements. Each UK life company and the Group must retain sufficient capital at all times to meet the regulatory capital requirements mandated by or otherwise agreed with the relevant national supervisory authority. Further information on the capital requirements applicable to Group entities are set out in the Capital Management note (I3). Under UK company law, dividends can only be paid if a UK company has distributable reserves sufficient to cover the dividend. H. Interests in subsidiaries and associates continued H1. Subsidiaries continued In addition, contractual requirements may place restrictions on the transfer of funds as follows: \u2022 Pearl Life Holdings Limited (\u2018PeLHL\u2019) is required to make payments of contributions into charged accounts on behalf of the Abbey Life Scheme. These amounts do not form part of the pension scheme assets and at 31 December 2022, PeLHL held \u00a39 million (2021: \u00a311 million) within debt securities and \u00a318 million (2021: \u00a314 million) within cash and cash equivalents in respect of these charged accounts. In December 2021, following completion of the 31 March 2021 funding valuation \u00a342 million of assets were transferred from the charged accounts to the Abbey Life Pension Scheme. Further details of when the remaining amounts may become payable to the pensions scheme are included in note G1.3. \u2022 ReAssure Midco Limited (\u2018RML\u2019) is required to make payments of contributions into a ring-fenced account on behalf of the ReAssure Staff Pension Scheme. These amounts do not form part of the pension scheme assets and at 31 December 2022, RML held \u00a340 million (2021: \u00a357 million) within debt securities and \u00a3nil (2021: \u00a31 million) within cash and cash equivalents in respect of this account. Further details of when these amounts may become payable to the pensions scheme are included in note G1.4. H2. Associates: investment in UK Commercial Property REIT (\u2018UKCPR\u2019) UKCPR is a property investment company which is domiciled in Guernsey and is admitted to the official list of the UK Listing Authority and to trading on the London Stock Exchange. The Group\u2019s interest in UKCPR is held in the with-profit funds of the Group\u2019s life companies. Therefore, the shareholder exposure to fair value movements in the Group\u2019s investment in UKCPR is limited to the impact of those movements on the shareholder share of distributed profits of the relevant fund. As at 31 December 2022, the Group held 44.6% (2021: 44.5%) of the issued share capital of UKCPR and the value of this investment, measured at fair value and included within financial assets, was \u00a3329 million (2021: \u00a3431 million). Management has concluded that the Group did not control UKCPR in either the current or comparative periods. The Group does not hold a unilateral power of veto in general meetings and voting is subject to certain restrictions in accordance with the terms of an existing relationship agreement it has with UKCPR. Summary consolidated financial information (at 100%) for UKCPR group is shown below: 2022 \u00a3m 2021 \u00a3m Non-current assets 1,276 1,508 Current assets 83 90 Non-current liabilities (291) (248) Current liabilities (32) (25) 1,036 1,325 Revenue 71 58 (Loss)/profit for the year after tax (222) 236 H3. Structured entities A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only, and the relevant activities are directed by means of contractual arrangements. A structured entity often has some or all of the following features or attributes: (a) restricted activities; (b) a narrow and well-defined objective, such as to provide investment opportunities for investors by passing on risks and rewards associated with the assets of the structured entity to investors; (c) insufficient equity to permit the structured entity to finance its activities without subordinated financial support; and (d) financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches). The Group has determined that all of its investments in collective investment schemes are structured entities. In addition, a number of debt security structures and private equity funds have been identified as structured entities. The Group has assessed that it has interests in both consolidated and unconsolidated structured entities as shown below: \u2022 Unit trusts; \u2022 OEICs; \u2022 SICAVs; \u2022 Private Equity Funds; \u2022 Asset backed securities; \u2022 Collateralised Debt Obligations (\u2018CDOs\u2019); \u2022 Other debt structures; and \u2022 Phoenix Group Employee Benefit Trust (\u2018EBT\u2019). The Group\u2019s holdings in the investments listed above are susceptible to market price risk arising from uncertainties about future values. Holdings in investment funds are subject to the terms and conditions of the respective fund\u2019s prospectus and the Group holds redeemable shares or units in each of the funds. The funds are managed by internal and external fund managers who apply various investment strategies to accomplish their respective investment objectives. All of the funds are managed by fund managers who are compensated by the respective funds for their services. Such compensation generally consists of an asset-based fee and a performance-based incentive fee and is reflected in the valuation of each fund. H3.1 Interests in consolidated structured entities The Group has determined that where it has control over funds, these investments are consolidated structured entities. The EBT is a consolidated structured entity that holds shares to satisfy awards granted to employees under the Group\u2019s share-based payment schemes. During the year, the Group granted further loans to the EBT of \u00a313 million (2021: \u00a316 million). As at the reporting date, the Group has no intention to provide financial or other support to any other consolidated structured entity. H3.2 Interests in unconsolidated structured entities The Group has interests in unconsolidated structured entities. These investments are held as financial assets in the Group\u2019s consolidated statement of financial position held at fair value through profit or loss. Any change in fair value is included in the consolidated income statement in \u2018net investment income\u2019. Dividend and interest income is received from these investments. A summary of the Group\u2019s interest in unconsolidated structured entities is included below. These are shown according to the financial asset categorisatio in the consolidated statement of financial position. 2022 Carrying value of financial assets \u00a3m 2021 Carrying value of financial assets \u00a3m Equities 968 871 Collective investment schemes 75,389 85,995 Debt securities 8,062 10,991 84,419 97,857 The Group\u2019s maximum exposure to loss with regard to the interests presented above is the carrying amount of the Group\u2019s investments. Once the Group has disposed of its shares or units in a fund, it ceases to be exposed to any risk from that fund. The Group\u2019s holdings in the above unconsolidated structured entities are largely less than 50% and as such the size of these structured entities are likely to be significantly higher than their carrying value. Details of commitments to subscribe to private equity funds and other unlisted assets are included in note I5. H. Interests in subsidiaries and associates continued H4. Group entities The table below sets out the Group's subsidiaries (including consolidated collective investment schemes), associates and significant holdings in undertakings (including undertakings in which the holding amounts to 20% or more of the nominal value of the shares or units and they are not classified as a subsidiary or associate). Registered address of incorporated entities If unincorporated, address of principal place of business Type of investment (including class of shares held) % of shares/ units held Subsidiaries: Phoenix Life Limited (life assurance company) Wythall 2 Ordinary Shares 100.00% Phoenix Life Assurance Limited (life assurance company) Wythall 2 Ordinary Shares 100.00% Standard Life Assurance Limited (life assurance company \u2013 directly owned by the Company) Edinburgh 3 Ordinary Shares 100.00% Standard Life International Designated Activity Company (life assurance company \u2013 directly owned by the Company) Dublin 4 Ordinary Shares 100.00% Standard Life Pension Funds Limited (life assurance company) Edinburgh 3 Limited by Guarantee 100.00% ReAssure Life Limited (life assurance company) Telford 5 Ordinary Shares 100.00% ReAssure Limited (life assurance company) Telford 5 Ordinary Shares 100.00% Pearl Group Management Services Limited (management services company) Wythall 2 Ordinary Shares 100.00% Pearl Group Services Limited (management services company) Wythall 2 Ordinary Shares 100.00% Standard Life Assets and Employee Services Limited (management services company) Edinburgh 3 Ordinary Shares 100.00% ReAssure Companies Services Limited (management services company) 1 Telford 5 Ordinary Shares 100.00% PGMS (Ireland) Limited (management services company) Dublin 6 Ordinary Shares 100.00% ReAssure UK Services Limited (management services company) Telford 5 Ordinary Shares 100.00% PA (GI) Limited (non-trading company) Wythall 2 Ordinary Shares 100.00% 103 Wardour Street Retail Investment Company Limited (investment company) Telford 5 Ordinary Shares 100.00% 3 St Andrew Square Apartments Limited (property management company) Edinburgh 7 Ordinary Shares 100.00% 28 Riberia de Loira SL Madrid 64 Ordinary Shares 100.00% Abbey Life Assurance Company Limited (non-trading company) 1 Wythall 2 Ordinary Shares 100.00% Abbey Life Trust Securities Limited (pension trustee company) Wythall 2 Ordinary Shares 100.00% Abbey Life Trustee Services Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% Alba LAS Pensions Management Limited (dormant company) 1 Glasgow 8 Ordinary Shares 100.00% Alba Life Trustees Limited (non-trading company) Edinburgh 3 Ordinary Shares 100.00% Axial Fundamental Strategies (US Investments) LLC (investment company) Delaware 9 Limited Liability Company 100.00% BA (FURBS) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% BL Telford Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% Britannic Finance Limited (finance and insurance services company) 1 Wythall 2 Ordinary Shares 100.00% Britannic Group Services Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Britannic Money Investment Services Limited (investment advice company) 1 Wythall 2 Ordinary Shares 100.00% Century Trustee Services Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% CH Management Limited (investment company) Delaware 10 Ordinary Shares 100.00% Cityfourinc (dormant company) 1 Wythall 2 Unlimited with Shares 100.00% ERIP General Partner Limited (General Partner to ERIP Limited Partnership) Telford 5 Ordinary Shares 80.00% ERIP Limited Partnership (Limited Partnership) Telford 5 Ordinary Shares 100.00% G Assurance & Pensions Services Limited (non-trading company) 1 Telford 5 Ordinary Shares 100.00% G Financial Services Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% G Life H Limited (holding company) 1 Telford 5 Ordinary Shares 100.00% G Park Management Company Limited (property management company) London 11 Ordinary Shares 100.00% G Trustees Limited (trustee company) Telford 5 Ordinary Shares 100.00% Gallions Reach Shopping Park (Nominee) Limited (dormant company) London 11 Ordinary Shares 100.00% Gresham Life Assurance Society Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% Iceni Nominees (No. 2) Limited (dormant company) London 11 Ordinary Shares 100.00% IH (Jersey) Limited (dormant company) Jersey 12 Ordinary Shares 100.00% Impala Holdings Limited (holding company) Wythall 2 Ordinary Shares 100.00% Registered address of incorporated entities If unincorporated, address of principal place of business Type of investment (including class of shares held) % of shares/ units held Impala Loan Company 1 Limited (dormant company) Edinburgh 3 Ordinary Shares 100.00% Inesia SA (investment company) Luxembourg 13 Ordinary Shares 100.00% Inhoco 3107 Limited (dormant company) London 11 Ordinary Shares 100.00% London Life Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% London Life Trustees Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Namulas Pension Trustees Limited (dormant company) Telford 5 Ordinary Shares 100.00% National Provident Institution (dormant company) 1 Wythall 2 Unlimited without Shares 100.00% National Provident Life Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% NM Life Trustees Limited (dormant company) Telford 5 Ordinary Shares 100.00% NM Pensions Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% NP Life Holdings Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% NPI (Printworks) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% NPI (Westgate) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix (Barwell 2) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix (Chiswick House) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl (Covent Garden) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl (Martineau Phase 1) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl (Martineau Phase 2) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix (Moor House 1) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix (Moor House 2) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl (Moor House) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix (Printworks) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix (Stockley Park) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl (WP) Investments LLC (investment company) Delaware 9 Limited Liability Company 100.00% Pearl AL Limited (dormant company) 1 Glasgow 8 Ordinary Shares 100.00% Pearl Assurance Group Holdings Limited (investment company) 1 Wythall 2 Ordinary Shares 100.00% Pearl Customer Care Limited (financial services company) 1 Wythall 2 Ordinary Shares 100.00% Pearl Group Holdings (No. 1) Limited (finance company) London 14 Ordinary Shares 100.00% Pearl Group Holdings (No. 2) Limited (holding company) Wythall 2 Ordinary Shares 100.00% Pearl Group Secretariat Services Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl Life Holdings Limited (holding company) Wythall 2 Ordinary Shares 100.00% Phoenix Group Management Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl MP Birmingham Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl RLG Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl Trustees Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix ULA Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% PG Dormant (No 4) Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% PG Dormant (No 5) Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% PG Dormant (No 6) Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix Group Management Services Limited (dormant company) London 14 Ordinary Shares 100.00% Phoenix Holdings (Bermuda) Limited (non-trading company) Bermuda 63 Ordinary Shares 100.00% Phoenix Group Holdings (Bermuda) Limited (non-trading company) Bermuda 63 Ordinary Shares 100.00% Phoenix Management Services (Bermuda) Limited (non-trading company) Bermuda 63 Ordinary Shares 100.00% Phoenix Management Services Holdings (Bermuda) Limited (non-trading company) Bermuda 63 Ordinary Shares 100.00% Phoenix Re Limited Bermuda 63 Ordinary Shares 100.00% Standard Life Mortgages Limited Wythall 2 Ordinary Shares 100.00% Clyde Gateway Management Company Limited Edinburgh 7 Ordinary Shares 100.00% PGMS (Glasgow) Limited (investment company) 1 Edinburgh 3 Ordinary Shares H. Interests in subsidiaries and associates continued H4. Group entities continued Registered address of incorporated entities If unincorporated, address of principal place of business Type of investment (including class of shares held) % of shares/ units held PGMS (Ireland) Holdings Unlimited Company (holding company) Dublin 6 Unlimited with Shares 100.00% PGS 2 Limited (investment company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix & London Assurance Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix Advisers Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix AW Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix Customer Care Limited (financial services company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix ER1 Limited (finance company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix ER2 Limited (finance company) Wythall 2 Ordinary Shares 100.00% Phoenix ER3 Limited (finance company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix ER4 Limited (finance company) Wythall 2 Ordinary Shares 100.00% Phoenix ER5 Limited (finance company) Wythall 2 Ordinary Shares 100.00% Phoenix ER6 Limited (finance company) Wythall 2 Ordinary Shares 100.00% Phoenix Group Capital Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix Group Holdings (non-trading company) Cayman Islands 18 Private Company 100.00% Phoenix Life Assurance Europe DAC Dublin 19 Ordinary Shares 100.00% Phoenix Life Holdings Limited (holding company \u2013 directly owned by the Company) Wythall 2 Ordinary Shares 100.00% Phoenix Pension Scheme (Trustees) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix Pensions Trustee Services Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix SCP Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix SCP Pensions Trustees Limited (trustee company) Wythall 2 Ordinary Shares 100.00% Phoenix SCP Trustees Limited (trustee company) Edinburgh 3 Ordinary Shares 100.00% Phoenix SL Direct Limited (non-trading company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix SPV1 Limited (investment company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix SPV2 Limited (investment company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix SPV3 Limited (investment company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix SPV4 Limited (investment company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix Unit Trust Managers Limited (unit trust manager) Wythall 2 Ordinary Shares 100.00% Phoenix Wealth Holdings Limited (holding company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix Wealth Services Limited (financial services company) Wythall 2 Ordinary Shares 100.00% Phoenix Wealth Trustee Services Limited (trustee company) Wythall 2 Ordinary Shares 100.00% ReAssure FS Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% ReAssure FSH UK Limited (holding company) 1 Telford 5 Ordinary Shares 100.00% ReAssure Group plc (holding company - directly owned by the Company) Telford 5 Ordinary Shares 100.00% ReAssure Life Pension Trustees Limited (dormant company) Telford 5 Ordinary Shares 100.00% ReAssure LL Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% ReAssure Midco Limited (holding company) Telford 5 Ordinary Shares 100.00% ReAssure Nominees Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% ReAssure Pension Trustees Limited (dormant company) Telford 5 Ordinary Shares 100.00% ReAssure PM Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% ReAssure Trustees Limited (dormant company) Telford 5 Ordinary Shares 100.00% ReAssure Two Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% ReAssure UK Life Assurance Company Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% Scottish Mutual Assurance Limited (dormant company) 1 Edinburgh 3 Ordinary Shares 100.00% Scottish Mutual Nominees Limited (dormant company) 1 Edinburgh 3 Ordinary Shares 100.00% Scottish Mutual Pension Funds Investment Limited (trustee company) Edinburgh 3 Ordinary Shares 100.00% SL (NEWCO) Limited (dormant company) Edinburgh 3 Ordinary Shares 100.00% SL Liverpool plc (dormant company) 1 Wythall 2 Public Limited Company 100.00% SLA Belgium No.1 SA (investment company) Brussels 20 Soci\u00e9t\u00e9 Anonyme 100.00% Registered address of incorporated entities If unincorporated, address of principal place of business Type of investment (including class of shares held) % of shares/ units held SLA Netherlands No.1 B.V. (investment company) Amsterdam 21 Ordinary Shares 100.00% SLACOM (No. 10) Limited (dormant company) Edinburgh 3 Ordinary Shares 100.00% SLACOM (No. 8) Limited (dormant company) Edinburgh 3 Ordinary Shares 100.00% SLACOM (No. 9) Limited (dormant company) Edinburgh 3 Ordinary Shares 100.00% SLIF Property Investment GP Limited (General Partner to SLIF Property Investment) Edinburgh 7 Ordinary Shares 100.00% Pilangen Logistik AB (investment company) Stockholm 22 Ordinary Shares 100.00% Pilangen Logistik I AB (investment company) Stockholm 22 Ordinary Shares 100.00% SLA Denmark No.1 ApS (investment company) Copenhagen 23 Ordinary Shares 100.00% SLA Denmark No.2 ApS (investment company) Copenhagen 23 Ordinary Shares 100.00% SLA Germany No.1 S.\u00e0.r.l. (investment company) Luxembourg 24 Ordinary Shares 100.00% SLA Germany No.2 S.\u00e0.r.l. (investment company) Luxembourg 24 Ordinary Shares 100.00% SLA Germany No.3 S.\u00e0.r.l. (investment company) Luxembourg 24 Ordinary Shares 100.00% SLA Ireland No.1 S.\u00e0.r.l. (investment company) Luxembourg 24 Ordinary Shares 100.00% Standard Life Assurance (HWPF) Luxembourg S.\u00e0.r.l. (investment company) Luxembourg 24 Ordinary Shares 100.00% Standard Life Agency Services Limited (dormant company) Edinburgh 3 Ordinary Shares 100.00% Standard Life Investment Funds Limited (dormant company) Edinburgh 3 Ordinary Shares 100.00% Standard Life Lifetime Mortgages Limited (mortgage provider company) Edinburgh 3 Ordinary Shares 100.00% Standard Life Master Trust Co. Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Standard Life Private Equity Trust plc (investment company) Edinburgh 7 Ordinary Shares 56.01% Standard Life Property Company Limited (dormant company) Edinburgh 3 Ordinary Shares 100.00% Standard Life Trustee Company Limited (trustee company) Edinburgh 3 Ordinary Shares 100.00% SunLife Limited (financial services distribution company) Wythall 2 Ordinary Shares 100.00% The Heritable Securities and Mortgage Investment Association Ltd (dormant company) Edinburgh 3 Ordinary Shares 100.00% The London Life Association Limited (dormant company) Wythall 2 Limited by Guarantee 100.00% The Pathe Building Management Company Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% The Phoenix Life SCP Institution (dormant company) 1 Edinburgh 3 Limited by Guarantee 100.00% The Scottish Mutual Assurance Society (dormant company) 1 Glasgow 8 Limited by Guarantee 100.00% The Standard Life Assurance Company of Europe B.V. (financial holding company) Amsterdam 21 Ordinary Shares 100.00% Vebnet (Holdings) Limited (holding company) 1 Wythall 2 Ordinary Shares 100.00% Vebnet Limited (services company) 1 Wythall 2 Ordinary Shares 100.00% Welbrent Property Investment Company Limited (dormant company) London 11 Ordinary Shares 100.00% PC Management Limited (property management company) Dublin 25 Ordinary Shares 69.00% Phoenix Group Employee Benefit Trust Jersey 26 Trust 100.00% 330 Avenida de Aragon SL (property management company) Madrid 27 Ordinary Shares 100.00% SLIF Property Investment LP Edinburgh 7 Limited Partnership 100.00% Pearl Private Equity LP Edinburgh 7 Limited Partnership 100.00% Pearl Strategic Credit LP Edinburgh 7 Limited Partnership 100.00% European Strategic Partners LP Edinburgh 7 Limited Partnership 72.70% ASI Phoenix Global Private Equity III LP Edinburgh 7 Limited Partnership 100.00% Janus Henderson Institutional Short Duration Bond Fund London 29 Unit Trust 100.00% Janus Henderson Institutional Mainstream UK Equity Trust London 29 Unit Trust 100.00% H. Interests in subsidiaries and associates continued H4. Group entities continued Registered address of incorporated entities If unincorporated, address of principal place of business Type of investment (including class of shares held) % of shares/ units held Janus Henderson Institutional UK Equity Tracker Trust London 29 Unit Trust 100.00% Janus Henderson Institutional High Alpha UK Equity Fund London 29 Unit Trust 85.82% Janus Henderson Global Funds - Janus Henderson Institutional Overseas Bond Fund London 29 OEIC, sub fund 97.93% Janus Henderson Strategic Investment Funds - Janus Henderson Institutional North American Index Opportunities Fund London 29 OEIC, sub fund 83.06% Janus Henderson Strategic Investment Funds - Janus Henderson Institutional Asia Pacific ex Japan Index Opportunities Fund London 29 OEIC, sub fund 85.70% Janus Henderson Strategic Investment Funds - Janus Henderson Institutional Japan Index Opportunities Fund London 29 OEIC, sub fund 79.82% PUTM Far Eastern Unit Trust Wythall 2 Unit Trust 99.63% PUTM UK Stock Market Fund Wythall 2 Unit Trust 100.00% PUTM UK Stock Market Fund (Series 3) Wythall 2 Unit Trust 100.00% PUTM UK All-Share Index Unit Trust Wythall 2 Unit Trust 99.89% PUTM UK Equity Unit Trust Wythall 2 Unit Trust 99.91% PUTM Bothwell Asia Pacific (Excluding Japan) Fund Wythall 2 Unit Trust 99.63% PUTM Bothwell Emerging Market Debt Unconstrained Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell European Credit Fund Wythall 2 Unit Trust 99.58% PUTM Bothwell Global Bond Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Global Credit Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Floating Rate ABS Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Index-Linked Sterling Hedged Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Long Gilt Sterling Hedged Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Emerging Markets Equity Fund Wythall 2 Unit Trust 99.95% PUTM Bothwell Sterling Government Bond Fund Wythall 2 Unit Trust 99.61% PUTM Bothwell Euro Sovereign Fund Wythall 2 Unit Trust 82.16% PUTM Bothwell Sterling Credit Fund Wythall 2 Unit Trust 99.94% PUTM Bothwell Tactical Asset Allocation Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell UK All Share Listed Equity Fund Wythall 2 Unit Trust 99.63% PUTM ACS UK All Share Listed Equity Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Uk Equity Income Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Sub-Sovereign A Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Short Duration Credit Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Ultra Short Duration Fund Wythall 2 Unit Trust 100.00% PUTM ACS Lothian North American Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS Lothian European Ex UK Fund Wythall 2 Unit Trust 100.00% PUTM ACS Lothian UK Listed Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS European ex UK Fund Wythall 2 Unit Trust 100.00% PUTM ACS Japan Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS Lothian UK Gilt Fund Wythall 2 Unit Trust 100.00% PUTM ACS Sustainable Index Asia Pacific ex Japan Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS Sustainable Index European Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS Emerging Market Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS Sustainable Index Japan Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS Sustainable Index US Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS Sustainable Index UK Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS North American 2 Fund Wythall 2 Unit Trust 100.00% PUTM ACS Sustainable Index Emerging Markets Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS UK Smaller Companies Fund Wythall 2 Unit Trust 100.00% PUTM ACS North American Fund Wythall 2 Unit Trust 100.00% abrdn Strategic Bond Fund Edinburgh\u2077 Unit Trust 89.91% abrdn European Trust II Edinburgh\u2077 Unit Trust 100.00% Registered address of incorporated entities If unincorporated, address of principal place of business Type of investment (including class of shares held) % of shares/ units held abrdn Emerging Markets Income Equity Fund Edinburgh\u2077 OEIC, sub fund 78.04% abrdn Emerging Markets Equity Fund Edinburgh\u2077 OEIC, sub fund 96.86% abrdn Europe ex UK Ethical Equity Fund Edinburgh\u2077 OEIC, sub fund 80.53% abrdn European Trust Edinburgh\u2077 Unit Trust 96.78% abrdn Japan Trust Edinburgh\u2077 Unit Trust 80.67% abrdn North American Trust Edinburgh\u2077 Unit Trust 99.63% abrdn Pacific Basin Trust Edinburgh\u2077 Unit Trust 98.39% abrdn Short Dated UK Government Bond Trust Edinburgh\u2077 Unit Trust 99.96% abrdn UK Government Bond Trust Edinburgh\u2077 Unit Trust 99.91% abrdn UK Corporate Bond Trust Edinburgh\u2077 Unit Trust 99.89% abrdn Active Plus Bond Trust Edinburgh\u2077 Unit Trust 100.00% abrdn International Trust Edinburgh\u2077 Unit Trust 99.86% abrdn UK Equity General Trust Edinburgh\u2077 Unit Trust 99.94% abrdn Short Dated Corporate Bond Fund Edinburgh\u2077 OEIC, sub fund 80.55% abrdn MyFolio Managed I Fund Edinburgh\u2077 OEIC, sub fund 75.49% abrdn MyFolio Managed II Fund Edinburgh\u2077 OEIC, sub fund 75.37% abrdn MyFolio Managed III Fund Edinburgh\u2077 OEIC, sub fund 83.05% abrdn MyFolio Managed V Fund Edinburgh\u2077 OEIC, sub fund 75.09% abrdn Dynamic Multi Asset Growth Fund Edinburgh\u2077 OEIC, sub fund 95.47% abrdn American Income Equity Fund Edinburgh\u2077 OEIC, sub fund 74.41% abrdn Standard SICAV II Absolute Return Global Bond Strategies Fund Luxembourg 30 SICAV, sub fund 74.22% abrdn Standard SICAV II European Equities Fund Luxembourg 30 SICAV, sub fund 99.30% abrdn Standard SICAV II Global Equities Fund Luxembourg 30 SICAV, sub fund 88.67% abrdn Standard SICAV II European Government All Stocks Fund Luxembourg 30 SICAV, sub fund 100.00% abrdn Standard SICAV II Japanese Equities Fund Luxembourg 30 SICAV, sub fund 97.45% abrdn Standard SICAV II Global High Yield Bond Fund Luxembourg 30 SICAV, sub fund 54.53% abrdn Standard SICAV II Global REIT Focus Fund Luxembourg 30 SICAV, sub fund 93.22% abrdn Standard SICAV II China Equities Fund Luxembourg 30 SICAV, sub fund 68.15% abrdn Standard SICAV II Global Emerging Markets Local CCY Debt Fund Luxembourg 30 SICAV, sub fund 83.14% abrdn Standard SICAV II Emerging Market Debt Fund Luxembourg 30 SICAV, sub fund 97.87% ASIMT American Equity Unconstrained Fund Edinburgh 7 Unit Trust 78.87% ASIMT Japan Fund Edinburgh 7 Unit Trust 78.81% ASIMT Global REIT Fund Edinburgh 7 Unit Trust 81.32% ASIMT Sterling Intermediate Credit Fund Launch Fund Edinburgh 7 Unit Trust 89.33% abrdn Liquidity Fund (Lux) - Seabury Sterling Liquidity 3 Fund Luxembourg 31 UCITS, sub fund 100.00% abrdn Standard Liquidity Fund (Lux) - Seabury Sterling Liquidity 2 Fund Luxembourg 31 UCITS, sub fund 99.99% abrdn Standard Liquidity Fund (Lux) - Seabury Euro Liquidity 1 Fund Luxembourg\u00b3\u00b9 UCITS, sub fund 99.99% Ignis Private Equity Fund LP Cayman Islands 18 Limited Partnership 100.00% Ignis Strategic Credit Fund LP Cayman Islands 18 Limited Partnership 100.00% ASI Phoenix Fund Financing SCSp (PLFF) Luxembourg 31 Special Limited Partnership 100.00% North American Strategic Partners 2008 L.P. Delaware 9 Limited Partnership 100.00% H. Interests in subsidiaries and associates continued H4. Group entities continued Registered address of incorporated entities If unincorporated, address of principal place of business Type of investment (including class of shares held) % of shares/ units held North American Strategic Partners (Feeder) 2008 Limited Partnership Edinburgh 7 Limited Partnership 100.00% Crawley Unit Trust Jersey 32 Unit Trust 100.00% Ignis Strategic Solutions Funds plc - Fundamental Strategies Fund Dublin 33 OEIC, sub fund 96.83% Ignis Strategic Solutions Funds plc - Systematic Strategies Fund Dublin 33 OEIC, sub fund 100.00% HSBC Investment Funds - Balanced Fund London 34 OEIC, sub fund 82.18% IFSL AMR OEIC - IFSL AMR Diversified Portfolio Bolton 35 OEIC, sub fund 71.78% iShares 350 UK Equity Index Fund UK London 36 OEIC, sub fund 94.08% Legal & General European Equity Income Fund London 37 Unit Trust 85.74% Legal & General Growth Trust London 37 Unit Trust 75.60% abrdn Sustainable Index World Equity Fund Edinburgh 7 Unit Trust 100.00% abrdn Sustainable Index UK Equity Fund Edinburgh 7 Unit Trust 77.28% CF Macquaries Global Infrastructure Securities Fund London 38 OEIC, sub fund 70.77% Quilter Investors Global Equity Index Fund London 39 OEIC, sub fund 76.55% Quilter Investors UK Equity Index Fund London 39 OEIC, sub fund 84.30% Associates: UK Commercial Property REIT Limited (property investment company) Guernsey 41 Ordinary Shares 44.46% UK Commercial Property Estates Holdings Limited (property investment company) Guernsey 41 Ordinary Shares 44.46% UKCPT Limited Partnership (dormant company) London 42 Limited Partnership 44.46% UK Commercial Property Finance Holdings Limited (property investment company) Guernsey 41 Ordinary Shares 44.46% UK Commercial Property Estates (Reading) Limited (dormant company) London 42 Ordinary Shares 44.46% Duke Distribution Centres S.\u00e0.r.l. (investment company) Luxembourg 44 Ordinary Shares 44.46% Duke Offices & Developments S.\u00e0.r.l. (investment company) Luxembourg 44 Ordinary Shares 44.46% Significant holdings: Janus Henderson Institutional Global Responsible Managed Fund London 29 OEIC, sub fund 33.39% Janus Henderson Institutional UK Index Opportunities Fund London 29 OEIC, sub fund 56.15% Standard Life Capital Infrastructure I LP Edinburgh 7 Limited Partnership 48.00% abrdn (SLI) Corporate Bond Fund Edinburgh 7 OEIC, sub fund 40.46% abrdn Emerging Markets Local Currency Bond Tracker Fund Edinburgh 7 OEIC, sub fund 44.51% abrdn Global Absolute Return Strategies Retail Acc Edinburgh 7 Unit Trust 62.31% abrdn Dynamic Distribution Fund Edinburgh 7 Unit Trust 63.43% AB SICAV I - Diversified Yield Plus Portfolio Luxembourg 30 SICAV, sub fund 36.98% Standard Life Investments UK Real Estate Accumulation Feeder Fund Edinburgh 7 Unit Trust 53.89% abrdn Global Smaller Company Fund Edinburgh 7 Unit Trust 24.07% abrdn Global Focused Equity Fund Edinburgh 7 OEIC, sub fund 46.66% abrdn UK High Income Equity Fund Edinburgh 7 OEIC, sub fund 49.91% abrdn High Yield Bond Fund Edinburgh 7 OEIC, sub fund 21.64% abrdn UK Opportunities Equity Fund Edinburgh 7 OEIC, sub fund 55.59% abrdn Investment Grade Corporate Bond Fund Edinburgh 7 OEIC, sub fund 44.22% abrdn UK Smaller Companies Fund Edinburgh 7 OEIC, sub fund 30.76% abrdn Short Duration Global Inflation-Linked Bond Fund Edinburgh 7 OEIC, sub fund 37.23% abrdn UK Unconstrained Equity Fund Edinburgh 7 OEIC, sub fund 53.54% abrdn Ethical Corporate Bond Fund Edinburgh 7 OEIC, sub fund 56.62% abrdn Global Real Estate Fund Edinburgh 7 Unit Trust 40.27% abrdn MyFolio Market I Fund Edinburgh 7 OEIC, sub fund 43.39% abrdn MyFolio Market II Fund Edinburgh 7 OEIC, sub fund 47.20% abrdn MyFolio Market III Fund Edinburgh 7 OEIC, sub fund 54.17% Registered address of incorporated entities If unincorporated, address of principal place of business Type of investment (including class of shares held) % of shares/ units held abrdn MyFolio Market IV Fund Edinburgh 7 OEIC, sub fund 51.88% abrdn MyFolio Market V Fund Edinburgh 7 OEIC, sub fund 60.81% abrdn MyFolio Multi-Manager II Fund Edinburgh 7 OEIC, sub fund 54.75% abrdn MyFolio Multi-Manager III Fund Edinburgh 7 OEIC, sub fund 65.02% abrdn MyFolio Multi-Manager IV Fund Edinburgh 7 OEIC, sub fund 57.29% abrdn MyFolio Multi-Manager V Fund Edinburgh 7 OEIC, sub fund 60.59% abrdn MyFolio Managed IV Fund Edinburgh 7 OEIC, sub fund 67.78% abrdn Standard SICAV II European Smaller Companies Fund Luxembourg 30 SICAV, sub fund 28.68% abrdn Standard SICAV II European Corporate Bond Fund Luxembourg 30 SICAV, sub fund 33.26% abrdn Standard SICAV II Global Absolute Return Strategies Fund Luxembourg 30 SICAV, sub fund 49.38% abrdn Standard SICAV II Global Corporate Bond Fund Luxembourg 30 SICAV, sub fund 73.15% abrdn American Unconstrained Equity Fund Edinburgh 7 OEIC, sub fund 26.01% abrdn Liquidity Fund (Lux) Euro Fund Luxembourg 31 UCITS, sub fund 28.60% abrdn Europe ex UK Income Equity Fund Edinburgh 7 OEIC, sub fund 21.51% abrdn UK Income Unconstrained Equity Fund Edinburgh 7 OEIC, sub fund 58.73% Amundi Index Solutions - Amundi MSCI Emerging Ex China ESG Leaders Select Luxembourg 40 SICAV, sub fund 61.30% Brent Cross Partnership London 43 Limited Partnership 23.83% Gallions Reach Shopping Park Unit Trust Jersey 32 Unit Trust 100.00% Standard Life Investments UK Shopping Centre Trust Jersey 46 Unit Trust 40.13% Gallions Reach Shopping Park Limited Partnership London 11 Unit Trust 100.00% Standard Life Investments Brent Cross LP Edinburgh 7 Unit Trust 40.13% AXA Fixed Interest Investment ICVC - Sterling Strategic Bond Fund London 47 UCITS, sub fund 28.91% AQR Global Risk Premium UCITS Fund USA 49 UCITS, sub fund 96.48% Threadneedle Investment Funds ICVC - American Select Fund London 50 OEIC, sub fund 20.99% Vanguard Investment Series plc - Vanguard Global Short-Term Corporate Bond Index Fund Dublin 51 UCITS, sub fund 23.83% Vanguard Investment Series plc - Vanguard U.K. Short-Term Investment Grade Bond Index Fund Dublin 51 UCITS, sub fund 45.15% Vanguard Common Contractual Fund - Vanguard U.S. Equity Index Common Contractual Fund Dublin 51 UCITS, sub fund 92.82% Vanguard Investment Series plc - Vanguard Global Corporate Bond Index Fund Dublin 51 UCITS, sub fund 22.42% Vanguard Investments Common Contractual Fund - Vanguard FTST Developed World ex UK Common Contractual Fund Dublin 51 UCITS, sub fund 98.17% MI Somerset Global Emerging Markets Fund London 53 OEIC, sub fund 64.46% abrdn Emerging Markets Equity Enhanced Index Fund Edinburgh 7 OEIC, sub fund 20.36% Amundi UCITS Funds - Amundi Global Multi-Factor Equity Fund Luxembourg 40 UCITS, sub fund 61.34% abrdn SICAV I - Emerging Markets Low Volatility Equity Portfolio Luxembourg 30 SICAV, sub fund 87.52% abrdn SICAV I - GDP Weighted Global Government Bond Fund Luxembourg 31 SICAV, sub fund 84.51% abrdn SICAV I - Global Bond Fund Luxembourg 31 SICAV, sub fund 91.69% abrdn SICAV I - Global Government Bond Fund Luxembourg 31 SICAV, sub fund 37.28% Fidelity Multi Asset Open Adventurous Fund Surrey 54 OEIC, sub fund 55.92% Goldman Sachs SICAV - Emerging Markets Total Return Bond Portfolio Luxembourg 55 SICAV, sub fund 87.04% Janus Henderson Diversified Growth Fund London 29 OEIC, sub fund 68.80% L&G Emerging Markets Bond Fund Luxembourg 57 SICAV, sub fund 39.41% Legal & General European Trust London 37 Unit Trust 50.34% L&G Multi-Asset Target Return Fund Luxembourg 57 SICAV, sub fund 39.62% Legal & General Emerging Markets Government Bond USD Index Fund London 37 Unit Trust 26.58% Legal & General High Income Trust London 37 Unit Trust 42.68% L&G Euro High Alpha Corporate Bond Fund Luxembourg 57 SICAV, sub fund 21.28% Legal & General UK Smaller Companies Trust London 37 Unit Trust 30.59% H. Interests in subsidiaries and associates continued H4. Group entities continued Registered address of incorporated entities If unincorporated, address of principal place of business Type of investment (including class of shares held) % of shares/ units held LGIM Sterling Liquidity Plus Fund Dublin 51 UCITS, sub fund 43.41% Marks and Spencer Worldwide Managed Fund London 34 Unit Trust 36.28% Quilter Investors China Equity Fund London 39 OEIC, sub fund 21.88% Quilter Investors Ethical Equity Fund London 39 Unit Trust 50.02% Quilter Investors Global Equity Growth Fund London 39 OEIC, sub fund 46.52% Vanguard Investments Common Contractual Fund - Vanguard FTSE Developed Europe ex UK Common Contractual Fund Dublin 51 UCITS, sub fund 96.34% Vanguard Investments Common Contractual Fund - Vanguard FTSE Developed World Common Contractual Fund Dublin 51 UCITS, sub fund 44.19% Baillie Gifford UK & Balanced Funds ICVC - Baillie Gifford UK and Worldwide Equity Fund Edinburgh 59 OEIC, sub fund 24.88% Baillie Gifford Investment Funds II ICVC - Baillie Gifford UK Equity Core Fund Edinburgh 59 OEIC, sub fund 36.11% abrdn Short Dated Sterling Corporate Bond Tracker Fund Edinburgh 7 OEIC, sub fund 41.08% abrdn Global Inflation-Linked Bond Tracker Fund Edinburgh 7 OEIC, sub fund 49.65% abrdn Multi-Asset Fund Edinburgh 7 OEIC, sub fund 28.45% abrdn SICAV I - Diversified Income Fund Luxembourg 31 SICAV, sub fund 34.44% abrdn Diversified Growth Fund London 11 Unit Trust 24.69% Amundi Index Solutions - Amundi MSCI China ESG Leaders Select Luxembourg 40 SICAV, sub fund 43.46% Amundi Index Solutions - Amundi Global Corp SRI 1-5Y Luxembourg 40 SICAV, sub fund 37.32% BNY Mellon Multi-Asset Global Balanced Fund London 60 UCITS, sub fund 26.37% Aberdeen Japan Equity Fund Edinburgh 7 OEIC, sub fund 24.48% abrdn European Equity Tracker Fund Edinburgh 7 OEIC, sub fund 20.75% abrdn UK Responsible Equity Fund Edinburgh 7 OEIC, sub fund 33.71% Performance Retail Unit Trust Jersey 62 Unit Trust 50.10% Vanguard Investments Common Contractual Fund - Vanguard FTSE Developed Europe ex UK Common Contractual Fund Dublin 51 UCITS, sub fund 96.34% Vanguard Investments Common Contractual Fund - Vanguard FTSE Developed World Common Contractual Fund Dublin 51 UCITS, sub fund 44.19% 1 These subsidiaries have been granted audit exemption by parental guarantee by virtue of s.479A of the Companies Act 2006. 2 1 Wythall Green Way, Wythall, Birmingham, West Midlands, B47 6WG, United Kingdom 3 Standard Life House, 30 Lothian Road, Edinburgh, EH1 2DH, United Kingdom 4 90 St. Stephen\u2019s Green, Dublin, D2, Ireland 5 Windsor House, Telford Centre, Telford, Shropshire, TF3 4NB, United Kingdom 6 Goodbody Secretarial Limited, International Financial Services Centre, 25/28 North Wall Quay, Dublin 1, Ireland 7 1 George Street, Edinburgh, EH2 2LL, United Kingdom 8 301 St Vincent Street, Glasgow, G2 5HN, United Kingdom 9 Corporation Service Company, 2711 Centerville Rd Suite 400, Wilmington, DE 19808, United States 10 Suite 202, 103 Foulk Road, Wilmington, Delaware, 19803, United States 11 Bow Bells House, 1 Bread Street, London, EC4M 9HH, United Kingdom 12 22-24 New Street, St Pauls Gate, 4th Floor, JE1 4TR, Jersey 13 8 Boulevard Royal, L-2449, Luxembourg, Luxembourg 14 20 Old Bailey, London, England, EC4M 7AN, United Kingdom 15 30 Finsbury Square, London, EC2A 1AG, United Kingdom 16 33 Finsbury Square, London, EC2A 1AG, United Kingdom 17 Arthur Cox Building, 10 Earlsfort Terrace, Dublin 2, Dublin, Ireland 18 Ugland House, Grand Cayman, KY1-1104, Cayman Islands 19 25/28 North Wall Quay, Dublin 1, Dublin, Ireland 20 Avenue Louise 326, bte 33 1050 Brussels, Belgium 21 Telestone 8, Teleport, Naritaweg 165, 1043 BW, Amsterdam, Netherlands 22 Citco (Sweden) Ab, Stureplan 4c, 4 Tr, 114 35 Stockholm, Sweden 23 c/o Citco (Denmark) ApS, Holbergsgade 14, 2 .tv, 1057 K\u00f8benhavn K Denmark 24 6B, rue Gabriel Lippmann, Parc d\u2019Activit\u00e9 Syrdall 2, L-5365 M\u00fcnsbach, Luxembourg 25 5th Floor Beaux Lane House, Mercer Street Lower, Dublin 2, Dublin, Ireland 26 32 Commercial Street, St Helier, Jersey, Channel Islands, JE2 3RU, Jersey 27 Avenida de Aragon 330 \u2013 Building 5, 3rd Floor, Parque Empresarial Las Mercedes, 28022 \u2013 Madrid, Spain 28 The Pearl Centre, Lynch Wood, Peterborough, PE2 6FY, United Kingdom 29 201 Bishopsgate, London, EC2M 3AE, United Kingdom 30 88 2-4, Rue Eug\u00e8ne Ruppert, L-2453 Luxembourg, Luxembourg 31 35a Avenue J.F. Kennedy, L-1855, Luxembourg 32 Ogier House, The Esplanade, St Helier, JE4 9WG, Jersey 33 32 Molesworth Street, Dublin 2, Dublin, D02 Y512, Ireland 34 8 Canada Square, London, E14 5HQ, United Kingdom 35 Marlborough House, 59 Chorley New Road, Bolton, BL1 4QP, United Kingdom 36 12 Throgmorton Avenue, London EC2N 2DL, United Kingdom 37 One Coleman Street, London, EC2R 5AA, United Kingdom 38 6th Floor, 65 Gresham Street, London, EC2V 7NQ, United Kingdom 39 Senator House, 85 Queen Victoria Street, London, EC4V 4AB, United Kingdom 40 5, All\u00e9e Scheffer, L-2520 Luxembourg, Luxembourg 41 Trafalgar Court, Les Banques, St Peter Port, GY1 3QL, Guernsey 42 1 More London Place, London, SE1 2AF, United Kingdom 43 Kings Place, 90 York Way, London, N1 9GE, United Kingdom 44 1, All\u00e9e Scheffer, L-2520 Luxembourg, Luxembourg 45 2 Snowhill, Birmingham, B4 6WR, United Kingdom 46 Elizabeth House, 9 Castle Street, St Helier, JE4 2QP, Jersey 47 155 Bishopsgate, London, EX2M 3JX, United Kingdom 48 22 Bishopsgate, London, EC2N 4BQ, United Kingdom 49 Aqr Capital Management LLC, Greenwich, 06830, United States 50 Cannon Place, 78 Cannon Street, London, EC4N 6AG, United Kingdom 51 70 Sir John Rogerson\u2019s Quay, Dublin 2, Ireland 52 4th Floor, The Walbrook Building, 25 Walbrook, London, EC4N 8AF, United Kingdom 53 Manning House, 22 Carlisle Place, London, SWIP 1JA, United Kingdom 54 Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey, KT20 6RP, United Kingdom 55 49, Avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg 56 Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire, RG9 1HH, United Kingdom 57 10, Ch\u00e2teau d\u2019Eau, L-3364 Leudelange, Grand Duchy of Luxembourg 58 1st Floor, 2 Ballsbridge Park, Ballsbridge, Dublin, D04 YW83, Ireland 59 Calton Square, 1 Greenside Row, Edinburgh, EH1 3AN, United Kingdom 60 160 Queen Victoria Street, London, EC4V 4LA, United Kingdom 61 Grove House, Green Street, St Helier, JE1 2ST, Jersey 62 44-47 Esplanade, St Helier, JE4 9WG, Jersey 63 Canon's Court, 22 Victoria Street, Hamilton, HM12, Bermuda 64 Calle Nanclares de Oca, 1B, 28022 Madrid The following subsidiaries were dissolved during the period. The subsidiaries were deconsolidated from the date of dissolution: \u2022 PGH (LC1) Limited \u2022 PGH (LC2) Limited \u2022 PGH (LCA) Limited \u2022 PGH (LCB) Limited \u2022 PGH (MC1) Limited \u2022 PGH (MC2) Limited \u2022 PGH (TC1) Limited \u2022 PGH (TC2) Limited \u2022 PGH Capital PLC \u2022 PUTM Bothwell Japan Tracker Fund \u2022 PUTM Bothwell North America Fund The following subsidiaries were either fully disposed of or the Group was no longer deemed to control the entity. The subsidiaries were deconsolidated from either the date of disposal or from the date when the Group was deemed to no longer control the subsidiary: \u2022 Aberdeen Standard SICAV II European Equity Unconstrained Fund \u2022 Aberdeen Standard SICAV III Global Short Duration Corporate Bond Fund \u2022 Aberdeen Standard SICAV II Global Bond Fund \u2022 Aberdeen Standard SICAV II Global Emerging Markets Unconstrained Fund \u2022 Aberdeen Standard Liquidity Fund (Lux) Sterling Fund \u2022 Aberdeen Standard SICAV III Dynamic Multi Asset Growth Fund \u2022 ASI Europe ex UK Growth Equity Fund \u2022 ASI Global Real Estate Share Fund \u2022 ASI MyFolio Multi-Manager I Fund \u2022 ASI Phoenix Venture Capital Partners LP \u2022 ASI (Standard Life) Global Equity Trust II \u2022 ASI (Standard Life) Multi-Asset Trust \u2022 Legal & General Dynamic Bond Fund \u2022 Northampton General Partner Limited \u2022 The Pearl Martineau Galleries Limited Partnership \u2022 The Pearl Martineau Limited Partnership \u2022 Quilter Investors Diversified Portfolio Fund \u2022 Quilter Investors UK Equity Large-Cap Value Fund H. Interests in subsidiaries and associates continued H4. Group entities continued The following associates were dissolved during the period. The investment in associate was derecognised from the date of dissolution: \u2022 Brixton Radlett Property Limited \u2022 Moor House General Partner Limited \u2022 UK Commercial Property Estates Limited \u2022 UK Commercial Property GP Limited \u2022 UK Commercial Property Holdings Limited \u2022 UK Commercial Property Nominee Limited The Group no longer has significant holdings in the following undertakings: \u2022 Aberdeen Standard Global SICAV III Global Equity Impact Fund \u2022 Aberdeen Standard UK Retail Park Trust \u2022 AXA Global High Income Fund \u2022 Blackrock ICS Sterling Government Liquidity Fund \u2022 Castlepoint LP \u2022 Central Saint Giles Unit Trust \u2022 HSBC ETFs PLC \u2013 HSBC FTSE EPRA NAREIT Developed UCITS ETF \u2022 L&G Absolute Return Bond Plus Fund \u2022 Legal & General Asian Income Trust \u2022 Legal & General Emerging Markets Government Bond (Local Currency) Index Fund \u2022 Legal & General UK Equity Income Fund \u2022 Legal & General European Index Trust \u2022 Legal & General Global Real Estate Dividend Index Fund \u2022 Legal & General Real Capital Builder Fund \u2022 Legal & General UK Special Situations Trust \u2022 Invesco US Equity Fund \u2022 Quilter Investors Bond 2 Fund \u2022 Quilter Investors Cirilium Moderate Blend Portfolio Fund \u2022 Vanguard FTSE U.K. All Share Index Unit Trust \u2022 Vanguard Investment Series plc \u2013 Vanguard U.K. Investment Grade Bond Index Fund I. Other notes I1. Share-based payments Equity-settled share-based payments to employees and others providing services are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions. Further details regarding the determination of the fair value of equity- settled share-based transactions are set out below. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group\u2019s estimate of equity instruments that will eventually vest. At each period end, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the consolidated income statement such that the cumulative expense reflects the revised estimate with a corresponding adjustment to equity. I1.1 Share-based payment expense The expense recognised for employee services receivable during the year is as follows: 2022 \u00a3m 2021 \u00a3m Expense arising from equity-settled share-based payment transactions 16 14 I1.2 Share-based payment schemes Long-Term Incentive Plan (\u2018LTIP\u2019) The Group implemented a Long-Term Incentive Plan to retain and motivate its senior management group. The awards under this plan are in the form of nil-cost options to acquire an allocated number of ordinary shares. Assuming no good leavers or other events which would trigger early vesting rights, the 2020, 2021 and 2022 LTIP awards are subject to performance conditions tied to the Group\u2019s performance in respect of net operating cash receipts, return on shareholder value, persistency and total shareholder return (\u2018TSR\u2019). The 2022 LTIP also included a performance condition tied to the Group\u2019s performance on decarbonisation. See page 134 of the Directors\u2019 Remuneration Report for further details of the performance conditions. For all LTIP awards, a holding period applies so that any LTIP awards to Executive Committee members for which the performance vesting requirements are satisfied will not be released for a further two years from the third anniversary of the original award date. Dividends will accrue on LTIP awards until the end of the holding period. There are no cash settlement alternatives. 2022 LTIP awards were granted on 18 March 2022 and are expected to vest on 18 March 2025. The 2019 LTIP awards vested on 11 March 2022. The 2020 awards will vest on 13 March 2023 and the 2021 awards will vest on 12 March 2024. The number of shares for all outstanding LTIP awards was increased in July 2018 to take account of the impact of the 2018 Group rights issue. The fair value of these awards is estimated at the average share price in the three days preceding the date of grant, taking into account the terms and conditions upon which the instruments were granted. The fair value of the LTIP awards is adjusted in respect of the TSR performance condition which is deemed to be a \u2018market condition\u2019. The fair value of the 2020, 2021 and 2022 TSR elements of the LTIP awards has been calculated using a Monte Carlo model. The inputs to this model are shown below: 2022 TSR performance condition 2021 TSR performance condition 2020 TSR performance condition Share price (p) 639 738.6 586.3 Expected term (years) 2.8 3.0 3.0 Expected volatility (%) 31 30 20 Risk-free interest rate (%) 1.21 0.14 0.28 Expected dividend yield (%) Dividends are received by holders of the awards therefore no adjustment to fair value is required On 19 August 2022 and 17 August 2021, LTIP awards were granted to certain senior management employees. The vesting periods and performance conditions for these awards are linked to the core 2021 and 2022 LTIP awards respectively. On 18 March 2022 and 19 August 2022 LTIP Buy-out awards were granted to certain senior management employees. There are discreet vesting periods for these awards and these grants of shares are conditional on the employees remaining in employment with the Group for the vesting period. Similar awards were also issued on 12 March 2021 and 17 August 2021. On 14 August 2020, LTIP awards were granted to certain senior management employees. The vesting periods and performance conditions for these awards are linked to the Group\u2019s core 2018, 2019 and 2020 LTIP awards. Each year, the Group issues a Chair\u2019s share award under the terms of the LTIP which is granted to a small number of employees in recognition of their outstanding contribution in the previous year. The awards are granted on the same dates as the core 2020, 2021 and 2022 LTIP awards. These grants of shares are conditional on the employees remaining in employment with the Group for the vesting period and achieving an established minimum good/good performance grading. Good leavers will be able to, at the discretion of the Remuneration Committee, exercise their full award at vesting. Deferred Bonus Share Scheme (\u2018DBSS\u2019) Each year, part of the annual incentive for certain executives is deferred into shares of the Company. The grant of these shares is conditional on the employee remaining in employment with the Group for a period of three years from the date of grant. Good leavers will be able to, at the discretion of the Remuneration Committee, exercise their full award at vesting. Dividends will accrue for DBSS awards over the three year deferral period. The number of shares for all outstanding DBSS awards was increased in July 2018 to take account of the impact of the 2018 Group rights issue. The 2022 DBSS was granted on 18 March 2022 and is expected to vest on 18 March 2025. The 2019 DBSS awards vested on 11 March 2022. The 2020 awards are expected to vest on 13 March 2023 and the 2021 awards are expected to vest on 12 March 2024. The fair value of these awards is estimated at the average share price in the three days preceding the date of the grant, taking into account the terms and conditions upon which the options were granted. Sharesave scheme The Sharesave scheme allows participating employees to save up to \u00a3500 each month across all active UK scheme and up to \u20ac500 per month for the Irish scheme over a period of either three or five years. The 2022 UK Sharesave options were granted on 15 April 2022. Irish Sharesave options are no longer granted. Under the Sharesave arrangement, participants remaining in the Group\u2019s employment at the end of the three or five year saving period are entitled to use their savings to purchase shares at an exercise price at a 20% discounted exercise price which is calculated using a three-day average share price immediately before invitations are issued to employees. Employees leaving the Group for certain reasons are able to use their savings to purchase shares if they leave prior to the end of their three or five year period. In 2018, following the scheme of arrangement, participants in the Sharesave plans at this time exchanged their options over shares in the previous parent company for equivalent options over PGH plc ordinary shares. All Sharesave options were increased in July 2018 following the Group\u2019s rights issues and the exercise price of these awards was also amended as a result of these issues. Other notes continued I1. Share-based payment continued I1.2 Share-based payment schemes continued The fair value of the options has been determined using a Black-Scholes valuation model. Key assumptions within this valuation model include expected share price volatility and expected dividend yield. The following information was relevant in the determination of the fair value of the 2018 to 2022 UK Sharesave options: 2022 sharesave 2021 sharesave 2020 sharesave 2019 sharesave 2018 sharesave Share price (\u00a3) 6.142 7.486 5.664 6.800 7.685 Exercise price (\u00a3) (Revised) 5.090 5.890 4.970 5.610 5.629 Expected life (years) 3.25 and 5.25 3.25 and 5.25 3.25 and 5.25 3.25 and 5.25 3.25 and 5.25 Risk-free rate (%) \u2013 based on UK government gilts commensurate with the expected term of the award 2.0 (for 3.25 year scheme) and 1.9 (for 5.25 year scheme) 0.5 (for 3.25 year scheme) and 0.7 (for 5.25 year scheme) 0.5 (for 3.25 year scheme) and 0.5 (for 5.25 year scheme) 1.0 (for 3.25 year scheme) and 1.1 (for 5.25 year scheme) 1.0 (for 3.25 year scheme) and 1.1 (for 5.25 year scheme) Expected volatility (%) based on the Company\u2019s share price volatility to date 30.0 30.0 30.0 30.0 30.0 Dividend yield (%) 8 6.3 8.2 6.8 6.5 The information for determining the fair value of the 2021 Irish Sharesave options differed from that included in the table above as follows: \u2013 Share price (\u20ac): 8.618 \u2013 Exercise price (\u20ac): 6.880 \u2013 Risk-free rate (%): (0.4) (for 3.25 year scheme) and (0.3) (for 5.25 year scheme) \u2013 No Sharesave awards were granted to Irish employees during 2022. Share Incentive Plan The Group operates two Share Incentive Plans (\u2018SIP\u2019) open to UK and Irish employees which allows participating employees to purchase \u2018Partnership shares\u2019 in the Company through monthly contributions. In respect of the UK SIP, the contributions are limited to the lower of \u00a3150 per month and 10% gross monthly salary. In 2019 the matching element of the UK SIP was amended to give the employee one \u2018Matching share\u2019 for each \u2018Partnership share\u2019 purchased limited to \u00a350. Contributions above \u00a350 are not matched. The Irish SIP, which was launched in 2019, gives the employee 1.4 \u2018Matching shares\u2019 for each \u2018Partnership share\u2019 purchased. For this plan monthly contributions are limited to the lower of \u20ac40 per month and 7.5% of gross monthly salary. The fair value of the Matching shares granted is estimated as the share price at date of grant, taking into account terms and conditions upon which the instruments were granted. At 31 December 2022, 543,995 matching shares (excluding unrestricted shares) were conditionally awarded to employees (2021: 391,658). I1.3 Movements in the year The following tables illustrate the number of, and movements in, LTIP, Sharesave and DBSS share options during the year: Number of share options 2022 LTIP Sharesave DBSS Outstanding at the beginning of the year, including dividend shares 7,613,036 4,750,822 1,551,935 Granted during the year 3,350,169 1,827,291 1,121,085 Forfeited during the year (523,125) (252,992) (4,917) Cancelled during the year \u2013 (506,796) \u2013 Exercised during the year (1,328,703) (816,419) (443,747) Dividends on vested awards 275,858 \u2013 77,445 Outstanding at the end of the year 9,387,235 5,001,906 2,301,801 Number of share options 2021 LTIP Sharesave DBSS Outstanding at the beginning of the year 5,488,995 3,569,159 1,267,852 Granted during the year 2,984,144 1,729,022 601,944 Forfeited/cancelled during the year (290,064) (240,130) (5,236) Exercised during the year (882,043) (307,229) (314,267) Outstanding at the end of the year, excluding dividend shares \u2013 as previously reported 7,301,032 4,750,822 1,550,293 Outstanding dividend shares 312,004 \u2013 1,642 Outstanding at the end of the year, including dividend shares 7,613,036 4,750,822 1,551,935 1 The comparative disclosures for the LTIP and DBSS awards were previously reported excluding dividend shares that had been allocated at the vesting date. These dividend shares are now included within the movement analysis for the year ended 31 December 2022 The weighted average fair value of options granted during the year was \u00a34.34 (2021: \u00a34.98). The weighted average share price at the date of exercise for the rewards exercised is \u00a36.13 (2021: \u00a37.06). The weighted average remaining contractual life for the awards outstanding as at 31 December 2022 is 5.7 years (2021: 5.5 years). I2. Cash flows from operating activities Operating cash flows include purchases and sales of investment property and financial investments as the purchases are funded from cash flows associated with the origination of insurance and investment contracts, net of payments of related benefits and claims. The following analysis gives further detail behind the \u2018cash (utilised)/generated by operations\u2019 figure in the statement of consolidated cash flows. Notes 2022 \u00a3m 2021 \u00a3m Loss for the year before tax (2,840) (430) Adjustments for non-cash movements in loss before tax for the year: Gain on completion of abrdn plc transaction A6.1 \u2013 (110) Loss on disposal of Ark Life, excluding transaction costs A6.2 \u2013 17 Fair value losses/(gains) on: Investment property G4 1,363 (1,195) Financial assets and derivative liabilities 45,197 (9,436) Change in fair value of borrowings E5.2 186 (9) Amortisation and impairment of intangible assets G2 526 644 Change in unallocated surplus F2 (378) (106) Share-based payment charge I1.1 16 14 Finance costs C5 230 242 Net interest expense on Group defined benefit pension scheme liability/asset G1 64 37 Pension past service costs G1 15 \u2013 Other costs of pension schemes G1 7 6 Movement in assets and liabilities relating to operations: Decrease in investment assets 3,934 6,738 Decrease/(increase) in reinsurance assets 3,449 (227) Decrease in assets classified as held for sale 2,741 286 (Decrease)/increase in insurance contract and investment contract liabilities (44,351) 6,354 Decrease in deposits received from reinsurers (971) (521) Decrease in obligation for repayment of collateral received (1,740) (1,762) Decrease in liabilities classified as held for sale (3,386) (264) Net increase in working capital (3,034) (1,100) Other cash movements relating to operations: Contributions to defined benefit pension schemes G1 (9) (49) Cash generated/(utilised) by operations 1,019 (871) Other notes continued I3. Capital management The Group\u2019s capital management is based on the Solvency II framework. This involves a valuation in line with Solvency II principles of the Group\u2019s Own Funds and risk-based assessment of the Group\u2019s Solvency Capital Requirement (\u2018SCR\u2019). This note sets out the Group\u2019s approach to managing capital and provides an analysis of Own Funds and SCR. Risk and capital management objectives The risk management objectives and policies of the Group are based on the requirement to protect the Group\u2019s regulatory capital position, thereby safeguarding policyholders\u2019 guaranteed benefits whilst also ensuring the Group can meet its various cash flow requirements. Subject to this, the Group seeks to use available capital to achieve increased returns, balancing risk and reward, to generate additional value for policyholders and shareholders. In pursuing these objectives, the Group deploys financial and other assets and incurs insurance contract liabilities and financial and other liabilities. Financial and other assets principally comprise investments in equity securities, debt securities, collective investment schemes, property, derivatives, reinsurance, trade and other receivables, and banking deposits. Financial liabilities principally comprise investment contracts, borrowings for financing purposes, derivative liabilities and net asset value attributable to unit holders. The Group\u2019s risk management framework is described in the risk management commentary on pages 52 to 67 of the Annual Report and Accounts and the risk universe component of this framework summarises the comprehensive set of risks to which the Group is exposed. The major risks (\u2018Level 1\u2019 risks) that the Group\u2019s businesses are exposed to and the Group\u2019s approach to managing those risks are outlined in the following notes: \u2022 Note E6: Credit risk, market risk, financial soundness risk, strategic risk, customer risk and operational risk; and \u2022 Note F4: Insurance risk. The section on risk and capital management objectives is included below. Capital Management Framework The Group\u2019s Capital Management Framework is designed to achieve the following objectives: \u2022 to provide appropriate security for policyholders and meet all regulatory capital requirements under the Solvency II regime while not retaining unnecessary excess capital; \u2022 to ensure sufficient liquidity to meet obligations to policyholders and other creditors; \u2022 to optimise the Fitch Ratings financial leverage to maintain an investment grade credit rating; and \u2022 to maintain a dividend policy to pay an ordinary dividend that is sustainable and grows over time. The framework comprises a suite of capital management policies that govern the allocation of capital throughout the Group to achieve the framework objectives under a range of stress conditions. The policy suite is defined with reference to policyholder security, creditor obligations, owner dividend policy and regulatory capital requirements. Group capital Group capital is managed on a Solvency II basis. Under the Solvency II framework, the primary sources of capital managed by the Group comprises the Group\u2019s Own Funds as measured under the Solvency II principles adjusted to exclude surplus funds attributable to the Group\u2019s unsupported with-profit funds and unsupported pension schemes. A Solvency II capital assessment involves valuation in line with Solvency II principles of the Group's Own Funds and a risk-based assessment of the Group's Solvency Capital Requirement ('SCR'). Solvency II surplus is the excess of Own Funds over the SCR. The Group aims to maintain a Solvency II surplus at least equal to its Board-approved capital policy, which reflects Board risk appetite for meeting prevailing solvency requirements. The capital policy of each Life Company is set and monitored by each Life Company Board. These policies ensure there is sufficient capital within each Life Company to meet regulatory capital requirements under a range of stress conditions. The capital policy of each Life Company varies according to the risk profile and financial strength of the company. The capital policy of each Group Holding Company is designed to ensure that there is sufficient liquidity to meet creditor obligations through the combination of cash buffers and cash flows from the Group\u2019s operating companies. Own Funds and SCR Basic Own Funds represents the excess of assets over liabilities from the Solvency II balance sheet adjusted to add back any relevant subordinated liabilities that meet the criteria to be treated as capital items. The Basic Own Funds are classified into three Tiers based on permanency and loss absorbency (Tier 1 being the highest quality and Tier 3 the lowest). The Group\u2019s Own Funds are assessed for their eligibility to cover the Group SCR with reference to both the quality of capital and its availability and transferability. Surplus funds in with-profit funds of the Life companies and in the pension schemes are restricted and can only be included in Eligible Own Funds up to the value of the SCR they are used to support. Eligible Own Funds to cover the SCR are obtained after applying the prescribed Tiering limits and availability restrictions to the Basic Own Funds. The SCR is calibrated so that the likelihood of a loss exceeding the SCR is less than 0.5% over one year. This ensures that capital is sufficient to withstand a broadly \u20181 in 200 year event\u2019. The Group operates an Internal Model to calculate Group SCR, all Group companies are within the scope of the internal model, with the exception of acquired ReAssure businesses and the Irish life entity, Standard Life International Designated Activity Company, which determines their capital requirements in accordance with the Standard Formula. Group capital resources \u2013 unaudited The Group capital resources are based on the Group's Eligible Own Funds adjusted to remove amounts pertaining to unsupported with-profit funds and Group pension schemes: Unaudited 2022 \u00a3bn 2021 \u00a3bn PGH plc Eligible Own Funds 11.1 14.8 Remove Own Funds pertaining to unsupported with-profit funds and pension schemes (1.8) (2.9) Group capital resources 9.3 11.9 Solvency II surplus \u2013 unaudited An analysis of the PGH plc Solvency II surplus as at 31 December 2022 is provided in the business review section on page 34 to 35. During 2022, both Eligible Own Funds and SCR have decreased principally as a consequence of rising interest rates. This has resulted in a decrease in the present value of certain risks included within the SCR along with a corresponding fall in the value of Own Funds in accordance with the Group\u2019s hedging strategy that aims to protect the value of the Solvency II surplus. The Group has complied with all externally imposed capital requirements during the year. I. Other notes continued I4. Related party transactions In the ordinary course of business, the Group and its subsidiaries carry out transactions with related parties, as defined by IAS 24 Related party disclosures , which comprise a Group pension scheme, an associate and key management personnel I4.1 Related party transactions On 23 February 2021, the Group entered into a new agreement with abrdn plc to simplify the arrangements of their Strategic Partnership (see note A6.1 for further details). As part of the acquisition of the brand, the relevant marketing, distribution and data team members transferred to the Group. Consequently, the Client Service and Proposition Agreement (\u2018CSPA\u2019) entered into between the two groups following the acquisition of the Standard Life businesses in 2018, was significantly amended prior to being dissolved. As a consequence of this transaction, it has been assessed that abrdn plc no longer has significant influence over the Group and as a result is no longer considered to be a related party of the Group from the date that the Group entered into the new agreement. During the year, the Group entered into the following related party transactions with a Group pension scheme and an associate: Transactions 2022 1 \u00a3m Transactions 2021 1 \u00a3m Pearl Group Staff Pension Scheme Payment of administrative expenses (4) (4) UK Commercial Property REIT Dividend income 29 17 abrdn plc 2 Investment management fees N/A (20) Fees under Transitional Services Arrangement and material outsource agreements N/A (4) 1 There were no outstanding balances with related parties as at 31 December 2021 and 31 December 2022. 2 Transactions with abrdn plc only include those that took place prior to 23 February 2021. Balances outstanding as at the date abrdn plc ceased to be a related party of the Group were all settled prior to 31 December 2021. I4.2 Transactions with key management personnel The total compensation of key management personnel, being those having authority and responsibility for planning, directing and controlling the activities of the Group, including the Executive and Non-Executive Directors, are as follows: 2022 \u00a3m 2021 \u00a3m Salary and other short-term benefits 5 5 Equity compensation plans 3 3 Details of the shareholdings and emoluments of individual Directors are provided in the Remuneration report on pages 110 to 146. During the year to 31 December 2022 key management personnel and their close family members contributed \u00a3183,933 (2021: \u00a3291,546) to Pensions and Savings products sold by the Group. At 31 December 2022, the total value of key management personnel\u2019s investments in Group Pensions and Savings products was \u00a3525,781 (2021: \u00a33,443,658). I5. Commitments This note analyses the Group\u2019s other commitments. 2022 \u00a3m 2021 \u00a3m To subscribe to private equity funds and other unlisted assets 1,132 710 To purchase, construct or develop investment property and income strips 62 206 For repairs, maintenance or enhancements of investment property 13 12 I6. Contingent liabilities Where the Group has a possible future obligation as a result of a past event, or a present legal or constructive obligation but it is not probable that there will be an outflow of resources to settle the obligation or the amount cannot be reliably estimated, this is disclosed as a contingent liability. Legal proceedings In the normal course of business, the Group is exposed to certain legal issues, which can involve litigation and arbitration. At the period end, the Group has a number of contingent liabilities in this regard, none of which are considered by the Directors to be material. I7. Events after the reporting period The financial statements are adjusted to reflect significant events that have a material effect on the financial results and that have occurred between the period end and the date when the financial statements are authorised for issue, provided they give evidence of conditions that existed at the period end. Events that are indicative of conditions that arise after the period end that do not result in an adjustment to the financial statements are disclosed. On 4 August 2022, the Company announced the proposed acquisition of the entire issued share capital of SLF of Canada UK Limited from the Sun Life Assurance Company of Canada, part of the Sun Life Financial Inc. Group. Regulatory approval for the acquisition was received from the Prudential Regulation Authority on 3 March 2023 and in accordance with the share purchase agreement is expected to complete in April 2023. Total cash consideration of \u00a3248 million is payable to the Sun Life Assurance Company of Canada upon completion, subject to certain adjustments. On 7 February 2023, the Group announced its plan to extend the existing strategic partnership with TCS and Diligenta and intention to move all policies administered on the ReAssure ALPHA platform to the TCS BaNCS platform. This move is expected to have an immaterial impact on the financial statements. The expense assumptions used to determine the relevant liabilities to policyholders at 31 December 2022 reflect the impact of the move to TCS BaNCS and the associated implementation costs. On 10 March 2023, the Board recommended a final dividend of 26.0p per share for the year ended 31 December 2022 (2021: 24.8p). Payment of the final dividend is subject to shareholder approval at the AGM. The cost of this dividend has not been recognised as a liability in the consolidated financial statements for 2022 and will be charged to the statement of consolidated changes in equity in 2023. A Barbour A Briggs R Thakrar S Bruce K Green H Iioka K Murray J Pollock B Richards M Semple N Shott K Sorenson 10 March 2023 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfNotesAndOtherExplanatoryInformationExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-544": {
"value": "A. Significant accounting policies
A1. Basis of preparation
The consolidated financial statements for the year ended 31 December 2022 set out on pages 168 to 289 comprise the financial statements of Phoenix
Group Holdings plc (\u2018the Company\u2019) and its subsidiaries (together referred to as \u2018the Group\u2019), and were authorised by the Board of Directors for issue on
10 March 2023.
The consolidated financial statements have been prepared under the historical cost convention except for investment property, owner-occupied
property and those financial assets and financial liabilities (including derivative instruments) that have been measured at fair value.
The consolidated financial statements are presented in sterling (\u00a3) rounded to the nearest million except where otherwise stated.
Assets and liabilities are offset and the net amount reported in the statement of consolidated financial position only when there is a legally enforceable
right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liability simultaneously. Income
and expenses are not offset in the consolidated income statement unless required or permitted by an International Financial Reporting Standard (\u2018IFRS\u2019) or
interpretation, as specifically disclosed in the accounting policies of the Group.
Statement of compliance
The consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards (\u2018IASs\u2019).
Basis of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings, including collective investment
schemes, where the Group exercises overall control. In accordance with the principles set out in IFRS 10
Consolidated Financial Statements
, the Group
controls an investee if and only if the Group has all the following:
\u2022 power over the investee;
\u2022 exposure, or rights, to variable returns from its involvement with the investee; and
\u2022 the ability to use its power over the investee to affect its returns.
The Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including relevant activities, substantive
and protective rights, voting rights and purpose and design of an investee. The Group reassesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three elements of control. Further details about the consolidation of subsidiaries,
including collective investment schemes, are included in note H1.
Going concern
The consolidated financial statements have been prepared on a going concern basis. In assessing whether the Group is a going concern the Directors
have taken into account the guidance issued by the Financial Reporting Council (\u2018FRC\u2019). The considerations and approach are consistent with the
provisions of the FRC\u2019s Guidance on risk Management, Internal control and Related Financial and Business Reporting issued in September 2014.
Further details of the going concern assessment for the period to 31 March 2024 are included in the Directors\u2019 Report on page 149.
The Directors have, at the time of approving the consolidated financial statements, a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the period covered by the assessment.
A2. Accounting policies
The principal accounting policies have been consistently applied in these consolidated financial statements. Where an accounting policy can be directly
attributed to a specific note to the consolidated financial statements, the policy is presented within that note, with a view to enabling greater
understanding of the results and financial position of the Group. All other significant accounting policies are disclosed below.
A2.1. Foreign currency transactions
Items included in the financial statements of each of the Group\u2019s entities are measured using the currency of the primary economic environment in which
the entity operates (the \u2018functional currency\u2019). The consolidated financial statements are presented in sterling, which is the Group\u2019s presentation currency.
The results and financial position of all Group companies that have a functional currency different from the presentation currency are translated into the
presentation currency as follows:
\u2022 assets and liabilities are translated at the closing rate at the period end;
\u2022 income, expenses and cash flows denominated in foreign currencies are translated at average exchange rates; and
\u2022 all resulting exchange differences are recognised through the statement of consolidated comprehensive income.
Foreign currency transactions are translated into the functional currency of the transacting Group entity using exchange rates prevailing at the date of the
translation. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies are recognised in the consolidated income statement.
Translation differences on debt securities and other monetary financial assets measured at fair value through profit or loss are included in foreign exchange
gains and losses. Translation differences on non-monetary items at fair value through profit or loss are reported as part of the fair value gain or loss.
A. Significant accounting policies continued
A2.2. Other operating income
Other operating income includes income from all other operating activities which are incidental to the principal activities of the Group.
A3. Critical accounting estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and
reported amounts of assets and liabilities, income and expenses. Disclosures of judgements made by management in applying the Group\u2019s accounting
policies include those that have the most significant effect on the amounts that are recognised in the consolidated financial statements. Disclosures of
estimates and associated assumptions include those that have a significant risk of resulting in a material change to the carrying value of assets and liabilities
within the next year. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of the judgements as to the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates.
Critical accounting estimates are those which involve the most complex or subjective judgements or assessments. The areas of the Group\u2019s business that
typically require such estimates are the measurement of insurance and investment contract liabilities, determination of the fair value of financial assets and
liabilities, valuation of pension scheme assets and liabilities and valuation of intangibles on initial recognition.
The application of critical accounting judgements that could have the most significant effect on the recognised amounts include classification of contracts
to be accounted for as insurance or investment contracts, recognition of pension surplus, the determination of adjusted operating profit, the recognition
of an investment as an associate and determination of control with regards to underlying entities. Details of all critical accounting estimates and
judgements are included below.
A3.1 Insurance and investment contract liabilities
Insurance and investment contract liability accounting is discussed in more detail in the accounting policies in note F1 with further detail of the key
assumptions made in determining insurance and investment contract liabilities included in note F4. Economic assumptions are set taking into account
market conditions as at the valuation date. Non-economic assumptions, such as future expenses, longevity and mortality are set based on past experience,
market practice, regulations and expectations about future trends.
The valuation of insurance contract liabilities is sensitive to the assumptions which have been applied in their calculation. Details of sensitivities arising from
significant non-economic assumptions are detailed on page 235 in note F4.
Classification of contracts as insurance is based upon an assessment of the significance of insurance risk transferred to the Group. Insurance contracts
are defined by IFRS 4 as those containing significant insurance risk if, and only if, an insured event could cause an insurer to make significant additional
payments in any scenario, excluding scenarios that lack commercial substance, at the inception of the contract.
A3.2 Fair value of financial assets and liabilities
Financial assets and liabilities are measured at fair value and accounted for as set out in the accounting policies in note E1. Financial instruments valued
where valuation techniques are based on observable market data at the period end are categorised as Level 2 financial instruments. Financial instruments
valued where valuation techniques are based on non-observable inputs are categorised as Level 3 financial instruments. Level 2 and Level 3 financial
instruments therefore involve the use of estimates.
Further details of the estimates made are included in note E2. In relation to the Level 3 financial instruments, sensitivity analysis is performed in respect
of the key assumptions used in the valuation of these financial instruments. The details of this sensitivity analysis are included in note E2.3.
A3.3 Pension scheme obligations
The valuation of pension scheme obligations is determined using actuarial valuations that depend upon a number of assumptions, including discount rate,
inflation and longevity. External actuarial advice is taken with regard to setting the financial assumptions to be used in the valuation. As defined benefit
pension schemes are long-term in nature, such assumptions can be subject to significant uncertainty.
Further details of these estimates and the sensitivity of the defined benefit obligation to key assumptions are provided in note G1.
A3.4 Recognition of pension scheme surplus
A pension scheme surplus can only be recognised to the extent that the sponsoring employer can utilise the asset through a refu
nd of surplus or a
reduction in contributions. A refund is available to the Group where it has an unconditional right to a refund on a gradual settlement of liabilities over
time until all members have left the scheme. A review of the Trust Deeds of the Group\u2019s pension schemes that recognise a surplus has highlighted that
the Scheme Trustees are not considered to have the unilateral power to trigger a wind-up of the Scheme and the Trustees\u2019 consent is not needed for the
sponsoring company to trigger a wind-up. Where the last beneficiary died or left the scheme, the sponsoring company could close the Scheme and force
the Trustees to trigger a wind-up by withholding its consent to continue the Scheme on a closed basis. This view is supported by external legal opinion and
is considered to support the recognition of a surplus. Management has determined that the scheme administrator would be subject to a 35% tax charge on
a refund and therefore any surplus is reduced by this amount. Further details of the Group\u2019s pension schemes are provided in note G1.
A3.5 Adjusted operating profit Adjusted operating profit is the Group\u2019s non-GAAP measure of performance and provides stakeholders with a comparable measure of the underlying performance of the Group. The Group is required to make judgements as to the appropriate longer-term rates of investment return for the determination of adjusted operating profit based on risk-free yields at the start of the financial year, as detailed in note B2, and as to whether items are included within adjusted operating profit or excluded as an adjustment to adjusted operating profit in accordance with the accounting policy detailed in note B1. Items excluded from adjusted operating profit are referred to as \u2018non-operating items\u2019. A3.6 Control and consolidation The Group has invested in a number of collective investment schemes and other types of investment where judgement is applied in determining whether the Group controls the activities of these entities. These entities are typically structured in such a way that owning the majority of the voting rights is not the conclusive factor in the determination of control in line with the requirements of IFRS 10 Consolidated Financial Statements. The control assessment therefore involves a number of further considerations such as whether the Group has a unilateral power of veto in general meetings and whether the existence of other agreements restrict the Group from being able to influence the activities. Further details of these judgements are given in note H1. A3.7 How Climate risk affects our accounting judgments and estimates In preparation of these financial statements, the Group has considered the impact of climate change across a number of areas, predominantly in respect of the valuation of financial instruments, insurance and investment contract liabilities and goodwill and other intangible assets. Many of the effects arising from climate change will be longer term in nature, with an inherent level of uncertainty, and have been assessed as having a limited effect on accounting judgments and estimates for the current period. The majority of the Group\u2019s financial assets are held at fair value and use quoted market prices or observable market inputs in their valuation. The use of quoted market prices and market inputs to determine fair value reflects current information and market sentiment regarding the effect of climate risk. For the valuation of level 3 financial instruments, there are no material unobservable inputs in relation to climate risk. Note E6 provides further risk management disclosures in relation to financial risks including sensitivities in relation to credit and market risk. In addition, further details on managing the related climate change risks are provided in the Task Force for Climate-related Financial Disclosures (\u2018TCFD\u2019) on page 48 of the Annual Report and Accounts. Insurance and investment contract liabilities use economic assumptions taking into account market conditions at the valuation date as well as non- economic assumptions such as future expenses, longevity and mortality which are set based on past experience, market practice, regulations and expectations about future trends. Due to the level of annuities written by the Group, it is particularly exposed to longevity risk. At 31 December 2022 there are no adjustments made to the longevity assumptions to specifically allow for the impact of climate change on annuitant mortality. Further details as to how assumptions are set and of the sensitivity of the Group\u2019s results to annuitant longevity and other key insurance risks are set out in note F4. The assessment of impairment for goodwill and intangible assets is based on value in use calculations. Value in use represents the value of future cash flows and uses the Group\u2019s three year annual operating plan and the expectation of long-term economic growth beyond this period. The three year annual operating plan reflects management\u2019s current expectations on competitiveness and profitability, and reflects the expected impacts of the process of moving towards a low-carbon economy. Note G2 provides further details on goodwill and other intangible assets and on impairment testing performed. A4. Adoption of new accounting pronouncements in 2022 In preparing the consolidated financial statements, the Group has adopted the following amendments effective from 1 January 2022: \u2022 Onerous Contracts \u2013 Cost of Fulfilling a Contract (Amendments to IAS 37): The amendments clarify that when performing an onerous contracts assessment both incremental costs to fulfil a contract and an allocation of other direct costs should be included when determining whether that contract is onerous. \u2022 Reference to the Conceptual Framework (Amendments to IFRS 3): In addition to updating references to the conceptual framework within IFRS 3, the amendments also add a requirement for obligations within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets to determine whether at the acquisition date a present obligation exists as a result of past events. \u2022 Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16): The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced before that asset is available for use. Such sales proceeds and related costs are recognised in profit or loss; and \u2022 Annual Improvements (2018\u20132020 Cycle): \u2013 Subsidiary as a First-time Adopter (Amendments to IFRS 1); \u2013 Fees in the \u201810 per cent\u2019 Test for De-recognition of Financial Liabilities (Amendments to IFRS 9); \u2013 Lease Incentives (Amendments to IFRS 16); and \u2013 Taxation in Fair Value Measurements (Amendments to IAS 41). None of the above amendments to standards are considered to have a material effect on these consolidated financial statements. A. Significant accounting policies continued A5. New accounting pronouncements not yet effective The IASB has issued the following standards or amended standards which apply from the dates shown. The Group has decided not to early adopt any of these standards or amendments where this is permitted. IFRS 17 Insurance Contracts (1 January 2023) IFRS 17 was issued by the International Standards Board in May 2017 and amended in June 2020. The standard was endorsed by the UK Endorsement Board in May 2022. IFRS 17 is effective from 1 January 2023. IFRS 17 will replace IFRS 4 the current insurance contracts standard and it is expected to significantly change the way the Group measures and reports its insurance contracts. The overall objective of the new standard is to provide an accounting model for insurance contracts that is more useful and consistent for users. In June 2022, the IFRS Interpretations Committee (\u2018IFRIC\u2019) provided its final agenda decision on the \u2018Transfer of Insurance Coverage under a Group of Annuity Contracts \u2013 IFRS 17\u2019, a non-objection from the International Accounting Standards Board was provided in July 2022. The methodology for coverage units determined by the Group and set out in the \u2018Coverage units\u2019 section below is compliant with this IFRIC final agenda decision. Identifying contracts in scope of IFRS 17 IFRS 17 applies to insurance contracts (including reinsurance contracts) an entity issues, reinsurance contracts an entity holds and investment contracts with discretionary participation features an entity issues provided it also issues insurance contracts. The scope of IFRS 17 for the Group is materially consistent with that of IFRS 4. Investment contracts without discretionary participation features (\u2018DPF\u2019) will be measured under IFRS 9. The following requirements apply to reinsurance contracts unless stated otherwise. IFRS 17 sets out criteria for when an investment component is distinct and may be separated from the host insurance contract. Following the application of these criteria the Group has concluded for the majority of its hybrid investment contracts with DPF within the scope of IFRS 17, the unit-linked component does not meet the definition of a distinct investment component so will no longer be accounted for as a financial instrument and will fall within the scope of IFRS 17. Hybrid investment contracts with DPF are those contracts which allow policyholders to invest in both with-profit and unit-linked fund options within a single contract. Level of aggregation IFRS 17 requires that contracts are divided into groups for the purposes of recognition and measurement. Portfolios of contracts are identified by grouping together contracts which have similar risks and are managed together. These groups are then further divided into cohorts based on their expected profitability. Contracts which are onerous at inception cannot be grouped with contracts which are profitable at inception. Contracts which are issued more than one year apart are not permitted to be included within the same cohort, although there is some relief from this requirement for business in-force at the date of transition under the transitional arrangements. Measurement The standard introduces three measurement approaches, of which two, the general model and the variable fee approach, are applicable to the Group\u2019s business. The main features of these models are the measurement of an insurance contract as the present value of expected future cash flows including acquisition costs, plus an explicit risk adjustment, remeasured at each reporting period using current assumptions, and a contractual service margin (\u2018CSM\u2019). Reinsurance contracts held are measured using the general model, irrespective of the measurement model applied to the underlying contracts reinsured. The risk adjustment represents the compensation the Group requires for bearing the uncertainty about the amount and timing of cash flows that arise from non-financial risk as the obligations under the insurance contract are fulfilled. The CSM represents the unearned profit of a group of insurance contracts and is recognised in profit or loss as the insurance and/or investment service is provided to the customer using coverage units. Coverage units are a measurement of the quantum of service provided across the life of the contract and are used to measure the service provided in the reporting period and release a corresponding amount of profit to the consolidated income statement. If a group of contracts becomes loss-making after inception the loss is recognised immediately in the consolidated income statement. This treatment of profits and losses in respect of services is broadly consistent with the principles of IFRS 15 and IAS 37 applicable to other industries. For reinsurance contracts held, the CSM represents the net gain or net loss of the contract and is recognised in profit or loss as the service is provided using coverage units. Under the general model the CSM is adjusted for non-economic assumption changes relating to future periods. For certain contracts with participating features the variable fee approach is applied, this allows changes in economic assumptions and experience to adjust the CSM as well as non-economic assumptions, reflecting the variable nature of the entity\u2019s earnings driven by investment returns. Significant judgements and estimates
Contract boundaries
Under IFRS 17, the measurement of a group of contracts includes all future cash flows within the boundary of each contract in the group. Cash flows
are within the boundary if they arise from substantive rights and obligations that exist during the reporting period in which the Group can compel
the policyholder to pay premiums or in which the Group has a substantive obligation to provide services to the policyholder.
The adoption of IFRS 17 results in three main areas where contract boundaries differ from current practice:
\u2022 Some unit-linked and with-profit contracts contain a guaranteed annuity option, which allows the policyholder to convert the maturity benefit to an
immediate annuity at a predetermined rate. The Group currently places a value on the guaranteed annuity option at maturity, but does not include
within its measurement the cash flows associated with immediate annuity until the option is exercised. Under IFRS 17, the cash flows related to the
immediate annuity will fall within the boundary of the contract as the Group does not have the practical ability to reprice the contract on maturity.
\u2022 The Group has issued renewable term assurance policies with varying terms. Where the Group has the practical ability to reassess the risks of the
policyholders at individual contract or portfolio level the contract boundary ends at the earliest renewal date and the renewal will be treated as a new
contract. Where the Group does not have the practical ability to reassess the risk, future renewals of these contracts on their guaranteed terms will be
within the contract boundary.
\u2022 Some of the Group\u2019s reinsurance contracts cover underlying contracts issued on a risk-attaching basis and provide unilateral rights to both the Group
and the reinsurer to terminate the attachment of new contracts at any time by giving notice within a specified time period, for example three months.
Currently the cash flows included in the measurement of reinsurance contracts considers only the underlying contracts ceded at the valuation date.
However, under IFRS 17, the contract boundary includes underlying contracts expected to be issued and ceded during the period from the valuation
date to the end of the reinsurance notice period.
Discount rates
The Group will determine risk-free discount rates using the current market prices of interest rate swaps in each currency where the market is deep, liquid
and transparent. The Group primarily writes contracts denominated in Pounds Sterling and Euros. The yield curve will be interpolated between the last
available market data point and an ultimate forward rate, which reflects long-term real interest rate and inflation expectations.
The discount rates for annuity business will be determined by a \u2018top-down\u2019 approach using a reference portfolio of assets to determine an uplift to be
applied to the risk-free discount rate curve.
The discount rates for unit-linked business and with-profit business will be determined by a \u2018bottom-up\u2019 approach, using a risk-free discount rate curve
adjusted to reflect the characteristics of the liabilities such as illiquidity.
With-profit inherited estate
The Group has a number of with-profit funds where surpluses are shared between the policyholders and the shareholders. All such funds are closed to
new business. These funds typically have an inherited estate, being a surplus of assets over those needed to meet the liabilities of current policyholders.
As these funds are closed to new business the surplus will be allocated to existing policyholders and the Group has determined it appropriate to allocate
the expected future payments from the inherited estate to specific groups of contracts within the measurement of the best estimate cash flows. This results
in the shareholders share of the inherited estate being recognised through the CSM. At transition, to the extent that services have been provided in previous
periods, an element of the inherited estate will be recognised in Retained Earnings, with the remainder recognised within the C
SM and released to the
consolidated income statement in future periods in line with coverage units. The adoption of IFRS 17 will not change the point at which the shareholder
will become entitled to receive its share of the inherited estate, which will continue to be at the point where bonuses are declared to policyholders.
Risk adjustment
The risk adjustment for non-financial risk will reflect the compensation that the Group requires for bearing non-financial risk. The Group will apply a
confidence level technique. The risk adjustment will be allocated to groups of contracts based on an analysis of the risk profiles of the groups, reflecting
the effects of the diversification benefits between Group entities. The Group will determine the risk adjustment using a one year time horizon, consistent
with the time horizon used for Solvency II, the key metric underlying how the Group is managed.
To determine the risk adjustment for reinsurance contracts, the Group will apply its approach both gross and net of reinsurance and determine the amount
of risk being transferred to the reinsurer as the difference between the two results.
A. Significant accounting policies continued
A5. New accounting pronouncements not yet effective continued
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Significant judgements and estimates
Coverage units
The CSM of a group of contracts is recognised in profit or loss to reflect services provided in the period. The number of coverage units is updated at each
valuation date and reflects the quantity of services provided by the contracts within a group considering both quantity of benefits provided and the length
of the expected coverage period.
The Group will determine the quantity of benefits, and therefore the coverage units as follows:
Type of business Coverage unit (quantity of benefits)
Term life Sum assured in-force
Endowment Sum assured in-force
Whole of life Sum assured in-force
Other protection products Sum assured in-force
Immediate annuity Annuity payments in each period
Unit linked Annual Management Charge plus insurance charges
Conventional with-profit (\u2018CWP\u2019) & Unitised with-profit (\u2018UWP\u2019) Maximum of the guaranteed benefit and asset share
Reinsurance contracts held will use coverage units consistent with the underlying policies reinsured.
Transition
IFRS 17 requires the standard to be applied retrospectively. Where this is assessed as impracticable the standard allows the application of a modified
retrospective approach or a fair value approach to determine the contractual service margin.
The primary books of business that will be measured using the fully retrospective approach are:
\u2022 External Bulk Purchase Annuities written since 2018, and their associated reinsurance contracts. Bulk Purchase Annuities, and their associated
reinsurance contracts, related to the Group\u2019s pension schemes will continue to be eliminated on consolidation and the liabilities of the scheme reported
under IAS 19.
\u2022 Annuity and conventional non-profit business acquired as part of the purchase of the ReAssure business in 2020, with the date of inception of these
contracts being the acquisition date.
\u2022 New business within the scope of IFRS 17 written by the Group\u2019s SunLife business from 2018, and the Group\u2019s remaining new business from 1 January 2021.
The remainder of the Group\u2019s business will be transitioned using the fair value approach.
Key factors considered in determining whether the fully retrospective approach is impracticable include:
\u2022 The ability to obtain assumptions and data at the required level of granularity, without the introduction of material use of hindsight, particularly in
relation to contracts within acquired businesses and where the Group\u2019s financial reporting metrics did not require such information.
\u2022 The availability and usability of historic data given the significant integration work performed by the Group on both its policy administration and
actuarial modelling systems where re-platforming from legacy systems onto a unified platform has been carried out.
\u2022 The significant level of regulatory change experienced by the insurance industry, such as Solvency II, which impacts on the level of change undergone
by both legacy and current policy administration and actuarial modelling systems.
Fair value approach
The fair value approach determines the CSM (or loss component) at 1 January 2022 as the difference between the fair value of a group of contracts
and the present value of expected future cash flows including acquisition costs, plus an explicit risk adjustment.
The fair value determined by the Group will use cash flows with contract boundaries consistent with IFRS 17 requirements and be broadly consistent
with those used to determine the IFRS 17 liabilities. The measurement of the fair value of contracts will include items taken into consideration by a market
participant but which are not included in the IFRS 17 measurement of contracts, such as a risk premium to reflect a market participant\u2019s view of uncertainty
inherent in the contract cash flows being valued and a profit margin.
For groups of contracts measured using the fair value approach, the cohorts will contain contracts issued more than one year apart.
Presentation and disclosure
The introduction of IFRS 17 will simplify the presentation of the statement of financial position. It requires the presentation of groups of insurance
(or reinsurance) contracts that are in an asset position separately from those in a liability position. All rights and obligations arising from a portfolio
of contracts will be presented within the insurance or reinsurance contract balance, as such, balances such as payables related to direct insurance
contracts and reinsurance receivables will no longer be presented separately.
The presentation of the consolidated income statement will change more significantly with IFRS 17 setting out how components of the profitability
of contracts are disaggregated into an insurance service result and insurance finance income/expense. The insurance service result reflects the
consideration earned in exchange for the provision of services in relation to the group of IFRS 17 contracts issued. The insurance financial income/expense
reflects changes in the carrying amount of the group of insurance contracts that relate to financial risks. It comprises the effect of the time value of money
as well as the effect of financial risks and changes in financial risks.
IFRS 17 also requires extensive disclosures, both quantitative and qualitative, in relation to:
\u2022 Amounts recognised in the financial statements, including reconciliations showing how the net carrying amounts of contracts changed during the period;
\u2022 Significant judgements and changes in these judgements; and
\u2022 The nature and extent of risks that arise from contracts within the scope of IFRS 17.
Impact assessment
The total profit recognised over the lifetime of contracts within the scope of IFRS 17 will not change from the total profit recognised under IFRS 4 and will
continue to be recognised in profit and loss. The pattern of profit emergence under IFRS 17 will primarily be driven by the timing of the recognition of the
risk adjustment and CSM. The risk adjustment is released to profit and loss as the related risk expires and the CSM is released as services are provided.
The estimated impact of adopting IFRS 17 as at 1 January 2022 is total equity attributable to owners of the parent remains broadly neutral when compared
with the reported value at 1 January 2022 of \u00a35.8 billion, and a CSM (net of reinsurance) of at least \u00a32.0 billion is established.
The broadly neutral impact to total equity attributable to owners of the parent is a result of a number of offsetting factors. This includes the following
factors which have a positive impact on equity:
\u2022 By moving to an IFRS 17 best estimate of future cash flows, prudent margins currently recognised on insurance contract liabilities under IFRS 4 are released.
\u2022 Under IFRS 4, an unallocated surplus liability is held in respect of future transfers to shareholders from the Group\u2019s with-profit funds. On application of
IFRS 17, shareholder earnings on with-profit and unit-linked business are recognised by reflecting only cash flows due to policyholders within the best
estimate of liabilities.
The reduction in best estimate liabilities arising from the above factors is offset by the following items, which reduce equity:
\u2022 The recognition of a risk adjustment and CSM.
\u2022 The derecognition of the separate acquired value of in-force business (AVIF) asset associated with insurance contracts previously recognised under IFRS 4.
The impact provided above is preliminary as not all transition work has been finalised at the date of issuing these consolidated financial statements.
The actual impact of adopting IFRS 17 on 1 January 2023 with a transition date of 1 January 2022 may change as the Group continues to embed and refine
the new systems, processes and controls required. This impact assessment has been estimated under an interim control environment with models that
continue to undergo validation. The implementation of the end state control environment will continue as the Group introduces business as usual controls
throughout 2023. The new accounting policies, assumptions, judgements and estimations employed in producing IFRS 17 results are subject to change
until the Group finalises its first IFRS 17 financial statements for 2023 reporting.
At the date of issuing these consolidated financial statements, the Group continues its preparation of the year end 31 December 2022 comparative
financial information applying IFRS 17. As a result it was not practicable to reliably quantify the impact of IFRS 17 on the results for the year ended
31 December 2022.
Implementation project status
The Group\u2019s implementation project continued throughout 2022 with a focus on continuing to develop and embed the operational capabilities required
to implement IFRS 17 including data, systems and business processes, and determining the transition balance sheet as at 1 January 2022. The focus for 2023
is on finalising the transition balance sheet and the 2022 comparatives required for 2023 reporting, and implementation of the end state control environment.
A. Significant accounting policies continued A5. New accounting pronouncements not yet effective continued IFRS 9 Financial Instruments (1 January 2023) Under IFRS 9, all financial assets will be measured either at amortised cost or fair value and the basis of classification will depend on the business model and the contractual cash flow characteristics of the financial assets. In relation to the impairment of financial assets, IFRS 9 requires the use of an expected credit loss model, as opposed to the incurred credit loss model required under IAS 39 Financial Instruments: Recognition and Measurement. The expected credit loss model will require the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In addition, the general hedge accounting requirements have been updated under IFRS 9 to better reflect risk management activities of the Group. The Group has to date taken advantage of the temporary exemption granted to insurers in IFRS 4 Insurance Contracts from applying IFRS 9 until 1 January 2023 as a result of meeting the exemption criteria as at 31 December 2015. As at this date the Group\u2019s activities were considered to be predominantly connected with insurance as the percentage of the total carrying amount of its liabilities connected with insurance relative to the total carrying amount of all its liabilities was greater than 90%. Following the acquisition of the ReAssure businesses on 22 July 2020, this assessment was re-performed and the Group\u2019s activities were still considered to be predominantly connected with insurance. IFRS 9 will be implemented at the same time as the new insurance contracts standard (IFRS 17 Insurance Contracts) effective from 1 January 2023. During the year, the Group completed its assessment of the impacts of adopting IFRS 9. The classification of the Group\u2019s financial assets has been reviewed and it has been determined that financial assets backing insurance liabilities will continue to be measured at fair value through profit or loss (\u2018FVTPL\u2019). The business model assessment concluded that these assets are actively managed and evaluated on a fair value basis and as such would be mandatorily classified at FVTPL. It is not expected that use of the fair value option, as permitted by IFRS 9, to designate assets as FVTPL to avoid an accounting mismatch will be required. The new standard replaces the incurred loss model with an expected credit loss model for financial assets measured at amortised cost or at FVOCI. The proportion of financial assets classified at amortised cost is relatively small as a proportion of the total and due to the credit risk profile of these assets being investment grade, the expected credit loss on these assets is not expected to be material and therefore there will be limited financial impact on the Group. The Group will be adopting the revised general hedge accounting requirements of IFRS 9. The existing hedging relationships for which hedge accounting is currently adopted (Tier 1/Tier 2 notes and cross currency swaps) will continue to be accounted for as cash flow hedges. The effectiveness testing processes will be revised to include qualitative testing on a prospective basis. A number of additional disclosures will be required by IFRS 7 Financial Instruments: Disclosures as a result of implementing IFRS 9. Additional disclosures have been made in note E1.2 to the consolidated financial statements to provide information to allow comparison with entities who have already adopted IFRS 9. DDiisscclloossuurree ooff AAccccoouunnttiinngg PPoolliicciieess ((AAmmeennddmmeennttss ttoo IIAASS 11 PPrresenntatiioonn oof Finaanncciaal SStaatemenntss aanndd IIFFRRSS PPrraaccttiiccee SSttaatteemmeenntt 22 MMaakkiinngg MMaterriialliity Juudgemmennts)) ((11 JJaannuuaarryy 22002233)) The amendments are intended to assist entities in deciding which accounting policies to disclose in their financial statements and requires an entity to disclose \u2018material accounting policy information\u2019 instead of its \u2018significant accounting policies\u2019. Accounting policy information is material if, when considered together with other information included in an entity\u2019s financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The IASB has also developed guidance and examples to explain and demonstrate the application of the \u2018four-step materiality process\u2019 described in IFRS Practice Statement 2. The amendments to IFRS Practice Statement 2 do not contain an effective date or transition requirements. These amendments are not expected to have any impact on the Group. DDeeffiinniittiioonn ooff AAccccoouunnttiinngg EEssttiimmaatteess ((AAmmeennddmmeennttss ttoo IIAASS 88 Accoountinng PPolliicies,, CChanges in AAccccountting Esstimates aanndd Errors)) ((11 JJaannuuaarryy 22002233)) The amendments replace the definition of a \u2018change in accounting estimates\u2019 with a definition of \u2018accounting estimates\u2019. Under the new definition, accounting estimates are \u2018monetary amounts in financial statements that are subject to measurement uncertainty\u2019. The Board has retained the concept of changes in accounting estimates in the Standard by including a number of clarifications. These amendments are not expected to have any impact on the Group. DDeeffeerrrreedd TTaaxx rreellaatteedd ttoo AAsssseettss aanndd LLiiaabbiilliittiieess aarriissiinngg ffrroomm aa SSiinnggllee TTrraannssaaccttiioonn ((AAmmeennddmmeennttss ttoo IIAASS 1122 IInncome TTaaxes)) ((11 JJaannuuaarryy 22002233)) The amendments narrow the scope of the recognition exemption in paragraphs 15 and 24 of IAS 12 so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The IASB expects that the amendments will reduce diversity in reporting and align the accounting for deferred tax on such transactions with the general principle in IAS 12 of recognising deferred tax for temporary differences. There will potentially be some additional disclosures required in relation to the Group\u2019s leasing arrangements as a result of implementing these amendments. CCllaassssiiffiiccaattiioonn ooff LLiiaabbiilliittiieess aass CCuurrrreenntt aanndd NNoonn--ccuurrrreenntt ((AAmmeennddmmeennttss ttoo IIAASS 11 Presentation of Fiinnanncciiall Statemmentss)) ((11 JJaannuuaarryy 22002244)) The amendments clarify rather than change existing requirements and aim to assist entities in determining whether debt and other liabilities with an uncertain settlement date should be classed as current or non-current. It is currently not expected that there will be any reclassifications as a result of this clarification. L e e a a s s e e L L i i a a b b i i l l i i t t y y i i n n a a S S a a l l e e a a n n d d L L e e a a s s e e b b a a c c k k ( ( A A m m e e n n d d m m e e n n t t s s t t o o I I F F R R S S 1 1 6 6 L Le a ases ) ) ( ( 1 1 J J a a n n u u a a r r y y 2 2 0 0 2 2 4 4 ) ) The amendments relate to how a seller-lessee accounts for variable lease payments that arise in a sale and leaseback transaction. On initial recognition, the seller-lessee is required to include variable lease payments when measuring a lease liability arising from a sale-and-leaseback transaction. After initial recognition, they are required to apply the general requirements for subsequent accounting of the lease liability such that no gain or loss relating to the retained right of use is recognised. Seller-lessees are required to reassess and potentially restate sale-and-leaseback transactions entered into since the implementation. These amendments are not expected to have any impact on the Group. S S a a l l e e o o r r C C o o n n t t r r i i b b u u t t i i o o n n o o f f A A s s s s e e t t s s b b e e t t w w e e e e n n a a n n I I n n v v e e s s t t o o r r a a n n d d i i t t s s A A s s s s o o c c i i a a t t e e o o r r J J o o i i n n t t V V e e n n t t u u r r e e ( ( A A m m e e n n d d m m e e n n t t s s t t o o I I F F R R S S 1 1 0 0 a a n n d d I I A A S S 2 2 8 8 ) ) ( ( E E f f f f e e c c t t i i v v e e d d a a t t e e d d e e f f e e r r r r e e d d ) ) The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. These amendments are not expected to have any impact on the Group. On 31 January 2020, the UK left the EU and effective from 1 January 2021, the European Commission no longer endorses IFRSs for use in the UK. UK legislation provides that all IFRSs that had been endorsed by the EU on or before the 31 December 2020 became UK-adopted international accounting standards. New or amended IFRSs are now endorsed by the UK Endorsement Board following delegation of powers to endorse and adopt IFRSs for the UK by the Secretary of State in May 2021. The following amendments to standards listed above have been endorsed for use in the UK by the UK Endorsement Board: \u2022 IFRS 17 Insurance Contracts; \u2022 Amendments to IFRS 17; \u2022 Initial Application of IFRS 17 and IFRS 9 \u2013 Comparative Information; \u2022 Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2); \u2022 Definition of Accounting Estimates (Amendments to IAS 8); and \u2022 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12). The amendments to IFRS 9 Financial Instruments formed part of the EU-adopted IFRSs which were adopted by the UK on 1 January 2021 and have previously been endorsed by the EU. A6. Significant transactions The Group classifies disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of the disposal group, excluding finance costs and income tax expense. Assets and liabilities classified as held for sale are presented separately in the statement of consolidated financial position. A6.1 Agreement with abrdn plc On 23 February 2021, the Group entered into a new agreement with abrdn plc to simplify the arrangements of their Strategic Partnership, enabling the Group to control its own distribution, marketing and brands, and focusing the Strategic Partnership on using abrdn plc\u2019s asset management services in support of Phoenix\u2019s growth strategy. Under the terms of the transaction, the Group will sell its UK investment and platform-related products, comprising Wrap Self Invested Personal Pension (\u2018Wrap SIPP\u2019), Onshore Bond and UK Trustee Investment Plan (\u2018TIP\u2019) to abrdn plc and, effective from 1 January 2021, transferred the economic benefit of this business to abrdn plc. The Group also acquired ownership of the Standard Life brand and as part of this acquisition, the relevant marketing, distribution and data team members transferred to the Group. As a result, the Client Service and Proposition Agreement (\u2018CSPA\u2019), entered into between the two groups following the acquisition of the Standard Life businesses in 2018, was dissolved and the CSPA intangible asset was fully impaired. In addition, Phoenix and abrdn plc resolved all legacy issues in relation to the Transitional Service Agreement (\u2018TSA\u2019) entered into at the time of the acquisition of the Standard Life businesses and the CSPA. The Group received cash consideration for the overall transaction of \u00a3115 million, \u00a362 million of which was deferred as detailed below. On completion of the agreement the Group recognised a net gain on the transaction of \u00a389 million, net of tax of \u00a321 million, which was recognised in the consolidated income statement. The sale of the Wrap SIPP, Onshore Bond and TIP business currently within Standard Life Assurance Limited, will be effected through a Part VII transfer targeted for completion in 2024. The economic risk and rewards for this business transferred to abrdn plc effective from 1 January 2021 via a profit transfer arrangement. Consideration received of \u00a362 million in respect of this business was deferred until completion of the Part VII and the payments to abrdn plc in respect of the profit transfer arrangement are being offset against the deferred consideration balance. The balances in the statement of consolidated financial position relating to the Wrap SIPP, Onshore Bond and TIP business have been classified as a disposal group held for sale. The total proceeds of disposal are not expected to exceed the carrying value of the related net assets and accordingly the disposal group has been measured at fair value less costs to sell. At the date of the transaction an impairment loss of \u00a359 million was recognised upon classification of the business as held for sale in respect of the acquired in-force business (\u2018AVIF\u2019). A further impairment charge of \u00a317 million has been recognised in the year (2021: \u00a38 million). The major classes of assets and liabilities classified as held for sale are as follows: A6. Significant transactions continued
A6.1 Agreement with abrdn plc continued
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Acquired in-force business
37 54
Investment property
2,506 3,309
Financial assets
4,629 6,507
Cash and cash equivalents
33 76
Assets classified as held for sale
7,205 9,946
Assets in consolidated funds
1
1,147 1,788
Total assets of the disposal group
8,352 11,734
Investment contract liabilities
(8,312) (11,676)
Other financial liabilities
(4) (4)
Provisions
\u2013 (2)
Deferred tax liabilities
(7) (10)
Accruals and deferred income
(37) (54)
Liabilities classified as held for sale
(8,360) (11,746)
1 Included in assets of the disposal group are assets in consolidated funds, which are held to back investment contract liabilities of the Wrap SIPP, Onshore bond and TIP business and are
disclosed within financial assets in the consolidated statement of financial position. The Group controls these funds at 31 December 2022 and therefore consolidates 100% of the assets
with any non-controlling interest recognised as net asset value attributable to unitholders.
A6.2 Disposal of Ark Life
On 1 November 2021, the Group completed the sale of its entire interest in Ark Life Assurance Company DAC (\u2018Ark Life\u2019) to Irish Life Group Limited for
gross cash consideration of \u20ac230 million (\u00a3198 million). The carrying value of the net assets disposed of was \u00a3201 million which is after an impairment loss
of \u00a318 million in respect of AVIF that was recognised upon classification of the business as held for sale.
31 December
2021
\u00a3m
Cash consideration received 198
Less: transaction costs
(6)
Net Consideration received 192
Net assets disposed of
1
(201)
Foreign currency translation reserve recycled to the consolidated income statement (14)
Loss on disposal (23)
1 Includes cash and cash equivalents of \u00a39 million.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
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"fact-545": {
"value": "A1. Basis of preparation The consolidated financial statements for the year ended 31 December 2022 set out on pages 168 to 289 comprise the financial statements of Phoenix Group Holdings plc (\u2018the Company\u2019) and its subsidiaries (together referred to as \u2018the Group\u2019), and were authorised by the Board of Directors for issue on 10 March 2023. The consolidated financial statements have been prepared under the historical cost convention except for investment property, owner-occupied property and those financial assets and financial liabilities (including derivative instruments) that have been measured at fair value. The consolidated financial statements are presented in sterling (\u00a3) rounded to the nearest million except where otherwise stated. Assets and liabilities are offset and the net amount reported in the statement of consolidated financial position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liability simultaneously. Income and expenses are not offset in the consolidated income statement unless required or permitted by an International Financial Reporting Standard (\u2018IFRS\u2019) or interpretation, as specifically disclosed in the accounting policies of the Group. Statement of compliance The consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards (\u2018IASs\u2019). Basis of consolidation The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings, including collective investment schemes, where the Group exercises overall control. In accordance with the principles set out in IFRS 10 Consolidated Financial Statements, the Group controls an investee if and only if the Group has all the following: \u2022 power over the investee; \u2022 exposure, or rights, to variable returns from its involvement with the investee; and \u2022 the ability to use its power over the investee to affect its returns. The Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including relevant activities, substantive and protective rights, voting rights and purpose and design of an investee. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Further details about the consolidation of subsidiaries, including collective investment schemes, are included in note H1. Going concern The consolidated financial statements have been prepared on a going concern basis. In assessing whether the Group is a going concern the Directors have taken into account the guidance issued by the Financial Reporting Council (\u2018FRC\u2019). The considerations and approach are consistent with the provisions of the FRC\u2019s Guidance on risk Management, Internal control and Related Financial and Business Reporting issued in September 2014. Further details of the going concern assessment for the period to 31 March 2024 are included in the Directors\u2019 Report on page 149. The Directors have, at the time of approving the consolidated financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the period covered by the assessment. ",
"dimensions": {
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"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-3": {
"value": "Phoenix Group Holdings plc",
"dimensions": {
"concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-604": {
"value": "Statement of compliance The consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards (\u2018IASs\u2019). ",
"dimensions": {
"concept": "ifrs-full:StatementOfIFRSCompliance",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-605": {
"value": "Basis of consolidation The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings, including collective investment schemes, where the Group exercises overall control. In accordance with the principles set out in IFRS 10 Consolidated Financial Statements, the Group controls an investee if and only if the Group has all the following: \u2022 power over the investee; \u2022 exposure, or rights, to variable returns from its involvement with the investee; and \u2022 the ability to use its power over the investee to affect its returns. The Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including relevant activities, substantive and protective rights, voting rights and purpose and design of an investee. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Further details about the consolidation of subsidiaries, including collective investment schemes, are included in note H1. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-606": {
"value": "Going concern The consolidated financial statements have been prepared on a going concern basis. In assessing whether the Group is a going concern the Directors have taken into account the guidance issued by the Financial Reporting Council (\u2018FRC\u2019). The considerations and approach are consistent with the provisions of the FRC\u2019s Guidance on risk Management, Internal control and Related Financial and Business Reporting issued in September 2014. Further details of the going concern assessment for the period to 31 March 2024 are included in the Directors\u2019 Report on page 149. The Directors have, at the time of approving the consolidated financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the period covered by the assessment. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGoingConcernExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-546": {
"value": "A2.1. Foreign currency transactions Items included in the financial statements of each of the Group\u2019s entities are measured using the currency of the primary economic environment in which the entity operates (the \u2018functional currency\u2019). The consolidated financial statements are presented in sterling, which is the Group\u2019s presentation currency. The results and financial position of all Group companies that have a functional currency different from the presentation currency are translated into the presentation currency as follows: \u2022 assets and liabilities are translated at the closing rate at the period end; \u2022 income, expenses and cash flows denominated in foreign currencies are translated at average exchange rates; and \u2022 all resulting exchange differences are recognised through the statement of consolidated comprehensive income. Foreign currency transactions are translated into the functional currency of the transacting Group entity using exchange rates prevailing at the date of the translation. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated income statement. Translation differences on debt securities and other monetary financial assets measured at fair value through profit or loss are included in foreign exchange gains and losses. Translation differences on non-monetary items at fair value through profit or loss are reported as part of the fair value gain or loss",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-607": {
"value": "Items included in the financial statements of each of the Group\u2019s entities are measured using the currency of the primary economic environment in which the entity operates (the \u2018functional currency\u2019). The consolidated financial statements are presented in sterling, which is the Group\u2019s presentation currency. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
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"fact-547": {
"value": "A3. Critical accounting estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Disclosures of judgements made by management in applying the Group\u2019s accounting policies include those that have the most significant effect on the amounts that are recognised in the consolidated financial statements. Disclosures of estimates and associated assumptions include those that have a significant risk of resulting in a material change to the carrying value of assets and liabilities within the next year. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of the judgements as to the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Critical accounting estimates are those which involve the most complex or subjective judgements or assessments. The areas of the Group\u2019s business that typically require such estimates are the measurement of insurance and investment contract liabilities, determination of the fair value of financial assets and liabilities, valuation of pension scheme assets and liabilities and valuation of intangibles on initial recognition. The application of critical accounting judgements that could have the most significant effect on the recognised amounts include classification of contracts to be accounted for as insurance or investment contracts, recognition of pension surplus, the determination of adjusted operating profit, the recognition of an investment as an associate and determination of control with regards to underlying entities. Details of all critical accounting estimates and judgements are included below. A3.1 Insurance and investment contract liabilities Insurance and investment contract liability accounting is discussed in more detail in the accounting policies in note F1 with further detail of the key assumptions made in determining insurance and investment contract liabilities included in note F4. Economic assumptions are set taking into account market conditions as at the valuation date. Non-economic assumptions, such as future expenses, longevity and mortality are set based on past experience, market practice, regulations and expectations about future trends. The valuation of insurance contract liabilities is sensitive to the assumptions which have been applied in their calculation. Details of sensitivities arising from significant non-economic assumptions are detailed on page 235 in note F4. Classification of contracts as insurance is based upon an assessment of the significance of insurance risk transferred to the Group. Insurance contracts are defined by IFRS 4 as those containing significant insurance risk if, and only if, an insured event could cause an insurer to make significant additional payments in any scenario, excluding scenarios that lack commercial substance, at the inception of the contract. A3.2 Fair value of financial assets and liabilities Financial assets and liabilities are measured at fair value and accounted for as set out in the accounting policies in note E1. Financial instruments valued where valuation techniques are based on observable market data at the period end are categorised as Level 2 financial instruments. Financial instruments valued where valuation techniques are based on non-observable inputs are categorised as Level 3 financial instruments. Level 2 and Level 3 financial instruments therefore involve the use of estimates. Further details of the estimates made are included in note E2. In relation to the Level 3 financial instruments, sensitivity analysis is performed in respect of the key assumptions used in the valuation of these financial instruments. The details of this sensitivity analysis are included in note E2.3. A3.3 Pension scheme obligations The valuation of pension scheme obligations is determined using actuarial valuations that depend upon a number of assumptions, including discount rate, inflation and longevity. External actuarial advice is taken with regard to setting the financial assumptions to be used in the valuation. As defined benefit pension schemes are long-term in nature, such assumptions can be subject to significant uncertainty. Further details of these estimates and the sensitivity of the defined benefit obligation to key assumptions are provided in note G1. A3.4 Recognition of pension scheme surplus A pension scheme surplus can only be recognised to the extent that the sponsoring employer can utilise the asset through a refund of surplus or a reduction in contributions. A refund is available to the Group where it has an unconditional right to a refund on a gradual settlement of liabilities over time until all members have left the scheme. A review of the Trust Deeds of the Group\u2019s pension schemes that recognise a surplus has highlighted that the Scheme Trustees are not considered to have the unilateral power to trigger a wind-up of the Scheme and the Trustees\u2019 consent is not needed for the sponsoring company to trigger a wind-up. Where the last beneficiary died or left the scheme, the sponsoring company could close the Scheme and force the Trustees to trigger a wind-up by withholding its consent to continue the Scheme on a closed basis. This view is supported by external legal opinion and is considered to support the recognition of a surplus. Management has determined that the scheme administrator would be subject to a 35% tax charge on a refund and therefore any surplus is reduced by this amount. Further details of the Group\u2019s pension schemes are provided in note G1. A3.5 Adjusted operating profit Adjusted operating profit is the Group\u2019s non-GAAP measure of performance and provides stakeholders with a comparable measure of the underlying performance of the Group. The Group is required to make judgements as to the appropriate longer-term rates of investment return for the determination of adjusted operating profit based on risk-free yields at the start of the financial year, as detailed in note B2, and as to whether items are included within adjusted operating profit or excluded as an adjustment to adjusted operating profit in accordance with the accounting policy detailed in note B1. Items excluded from adjusted operating profit are referred to as \u2018non-operating items\u2019. A3.6 Control and consolidation The Group has invested in a number of collective investment schemes and other types of investment where judgement is applied in determining whether the Group controls the activities of these entities. These entities are typically structured in such a way that owning the majority of the voting rights is not the conclusive factor in the determination of control in line with the requirements of IFRS 10 Consolidated Financial Statements. The control assessment therefore involves a number of further considerations such as whether the Group has a unilateral power of veto in general meetings and whether the existence of other agreements restrict the Group from being able to influence the activities. Further details of these judgements are given in note H1. A3.7 How Climate risk affects our accounting judgments and estimates In preparation of these financial statements, the Group has considered the impact of climate change across a number of areas, predominantly in respect of the valuation of financial instruments, insurance and investment contract liabilities and goodwill and other intangible assets. Many of the effects arising from climate change will be longer term in nature, with an inherent level of uncertainty, and have been assessed as having a limited effect on accounting judgments and estimates for the current period. The majority of the Group\u2019s financial assets are held at fair value and use quoted market prices or observable market inputs in their valuation. The use of quoted market prices and market inputs to determine fair value reflects current information and market sentiment regarding the effect of climate risk. For the valuation of level 3 financial instruments, there are no material unobservable inputs in relation to climate risk. Note E6 provides further risk management disclosures in relation to financial risks including sensitivities in relation to credit and market risk. In addition, further details on managing the related climate change risks are provided in the Task Force for Climate-related Financial Disclosures (\u2018TCFD\u2019) on page 48 of the Annual Report and Accounts. Insurance and investment contract liabilities use economic assumptions taking into account market conditions at the valuation date as well as non- economic assumptions such as future expenses, longevity and mortality which are set based on past experience, market practice, regulations and expectations about future trends. Due to the level of annuities written by the Group, it is particularly exposed to longevity risk. At 31 December 2022 there are no adjustments made to the longevity assumptions to specifically allow for the impact of climate change on annuitant mortality. Further details as to how assumptions are set and of the sensitivity of the Group\u2019s results to annuitant longevity and other key insurance risks are set out in note F4. The assessment of impairment for goodwill and intangible assets is based on value in use calculations. Value in use represents the value of future cash flows and uses the Group\u2019s three year annual operating plan and the expectation of long-term economic growth beyond this period. The three year annual operating plan reflects management\u2019s current expectations on competitiveness and profitability, and reflects the expected impacts of the process of moving towards a low-carbon economy. Note G2 provides further details on goodwill and other intangible assets and on impairment testing performed. ",
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"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"fact-548": {
"value": "A4. Adoption of new accounting pronouncements in 2022 In preparing the consolidated financial statements, the Group has adopted the following amendments effective from 1 January 2022: \u2022 Onerous Contracts \u2013 Cost of Fulfilling a Contract (Amendments to IAS 37): The amendments clarify that when performing an onerous contracts assessment both incremental costs to fulfil a contract and an allocation of other direct costs should be included when determining whether that contract is onerous. \u2022 Reference to the Conceptual Framework (Amendments to IFRS 3): In addition to updating references to the conceptual framework within IFRS 3, the amendments also add a requirement for obligations within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets to determine whether at the acquisition date a present obligation exists as a result of past events. \u2022 Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16): The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced before that asset is available for use. Such sales proceeds and related costs are recognised in profit or loss; and \u2022 Annual Improvements (2018\u20132020 Cycle): \u2013 Subsidiary as a First-time Adopter (Amendments to IFRS 1); \u2013 Fees in the \u201810 per cent\u2019 Test for De-recognition of Financial Liabilities (Amendments to IFRS 9); \u2013 Lease Incentives (Amendments to IFRS 16); and \u2013 Taxation in Fair Value Measurements (Amendments to IAS 41). None of the above amendments to standards are considered to have a material effect on these consolidated financial statements. A5. New accounting pronouncements not yet effective The IASB has issued the following standards or amended standards which apply from the dates shown. The Group has decided not to early adopt any of these standards or amendments where this is permitted. IFRS 17 Insurance Contracts (1 January 2023) IFRS 17 was issued by the International Standards Board in May 2017 and amended in June 2020. The standard was endorsed by the UK Endorsement Board in May 2022. IFRS 17 is effective from 1 January 2023. IFRS 17 will replace IFRS 4 the current insurance contracts standard and it is expected to significantly change the way the Group measures and reports its insurance contracts. The overall objective of the new standard is to provide an accounting model for insurance contracts that is more useful and consistent for users. In June 2022, the IFRS Interpretations Committee (\u2018IFRIC\u2019) provided its final agenda decision on the \u2018Transfer of Insurance Coverage under a Group of Annuity Contracts \u2013 IFRS 17\u2019, a non-objection from the International Accounting Standards Board was provided in July 2022. The methodology for coverage units determined by the Group and set out in the \u2018Coverage units\u2019 section below is compliant with this IFRIC final agenda decision. Identifying contracts in scope of IFRS 17 IFRS 17 applies to insurance contracts (including reinsurance contracts) an entity issues, reinsurance contracts an entity holds and investment contracts with discretionary participation features an entity issues provided it also issues insurance contracts. The scope of IFRS 17 for the Group is materially consistent with that of IFRS 4. Investment contracts without discretionary participation features (\u2018DPF\u2019) will be measured under IFRS 9. The following requirements apply to reinsurance contracts unless stated otherwise. IFRS 17 sets out criteria for when an investment component is distinct and may be separated from the host insurance contract. Following the application of these criteria the Group has concluded for the majority of its hybrid investment contracts with DPF within the scope of IFRS 17, the unit-linked component does not meet the definition of a distinct investment component so will no longer be accounted for as a financial instrument and will fall within the scope of IFRS 17. Hybrid investment contracts with DPF are those contracts which allow policyholders to invest in both with-profit and unit-linked fund options within a single contract. Level of aggregation IFRS 17 requires that contracts are divided into groups for the purposes of recognition and measurement. Portfolios of contracts are identified by grouping together contracts which have similar risks and are managed together. These groups are then further divided into cohorts based on their expected profitability. Contracts which are onerous at inception cannot be grouped with contracts which are profitable at inception. Contracts which are issued more than one year apart are not permitted to be included within the same cohort, although there is some relief from this requirement for business in-force at the date of transition under the transitional arrangements. Measurement The standard introduces three measurement approaches, of which two, the general model and the variable fee approach, are applicable to the Group\u2019s business. The main features of these models are the measurement of an insurance contract as the present value of expected future cash flows including acquisition costs, plus an explicit risk adjustment, remeasured at each reporting period using current assumptions, and a contractual service margin (\u2018CSM\u2019). Reinsurance contracts held are measured using the general model, irrespective of the measurement model applied to the underlying contracts reinsured. The risk adjustment represents the compensation the Group requires for bearing the uncertainty about the amount and timing of cash flows that arise from non-financial risk as the obligations under the insurance contract are fulfilled. The CSM represents the unearned profit of a group of insurance contracts and is recognised in profit or loss as the insurance and/or investment service is provided to the customer using coverage units. Coverage units are a measurement of the quantum of service provided across the life of the contract and are used to measure the service provided in the reporting period and release a corresponding amount of profit to the consolidated income statement. If a group of contracts becomes loss-making after inception the loss is recognised immediately in the consolidated income statement. This treatment of profits and losses in respect of services is broadly consistent with the principles of IFRS 15 and IAS 37 applicable to other industries. For reinsurance contracts held, the CSM represents the net gain or net loss of the contract and is recognised in profit or loss as the service is provided using coverage units. Under the general model the CSM is adjusted for non-economic assumption changes relating to future periods. For certain contracts with participating features the variable fee approach is applied, this allows changes in economic assumptions and experience to adjust the CSM as well as non-economic assumptions, reflecting the variable nature of the entity\u2019s earnings driven by investment returns. Contract boundaries Under IFRS 17, the measurement of a group of contracts includes all future cash flows within the boundary of each contract in the group. Cash flows are within the boundary if they arise from substantive rights and obligations that exist during the reporting period in which the Group can compel the policyholder to pay premiums or in which the Group has a substantive obligation to provide services to the policyholder. The adoption of IFRS 17 results in three main areas where contract boundaries differ from current practice: \u2022 Some unit-linked and with-profit contracts contain a guaranteed annuity option, which allows the policyholder to convert the maturity benefit to an immediate annuity at a predetermined rate. The Group currently places a value on the guaranteed annuity option at maturity, but does not include within its measurement the cash flows associated with immediate annuity until the option is exercised. Under IFRS 17, the cash flows related to the immediate annuity will fall within the boundary of the contract as the Group does not have the practical ability to reprice the contract on maturity. \u2022 The Group has issued renewable term assurance policies with varying terms. Where the Group has the practical ability to reassess the risks of the policyholders at individual contract or portfolio level the contract boundary ends at the earliest renewal date and the renewal will be treated as a new contract. Where the Group does not have the practical ability to reassess the risk, future renewals of these contracts on their guaranteed terms will be within the contract boundary. \u2022 Some of the Group\u2019s reinsurance contracts cover underlying contracts issued on a risk-attaching basis and provide unilateral rights to both the Group and the reinsurer to terminate the attachment of new contracts at any time by giving notice within a specified time period, for example three months. Currently the cash flows included in the measurement of reinsurance contracts considers only the underlying contracts ceded at the valuation date. However, under IFRS 17, the contract boundary includes underlying contracts expected to be issued and ceded during the period from the valuation date to the end of the reinsurance notice period. Discount rates The Group will determine risk-free discount rates using the current market prices of interest rate swaps in each currency where the market is deep, liquid and transparent. The Group primarily writes contracts denominated in Pounds Sterling and Euros. The yield curve will be interpolated between the last available market data point and an ultimate forward rate, which reflects long-term real interest rate and inflation expectations. The discount rates for annuity business will be determined by a \u2018top-down\u2019 approach using a reference portfolio of assets to determine an uplift to be applied to the risk-free discount rate curve. The discount rates for unit-linked business and with-profit business will be determined by a \u2018bottom-up\u2019 approach, using a risk-free discount rate curve adjusted to reflect the characteristics of the liabilities such as illiquidity. With-profit inherited estate The Group has a number of with-profit funds where surpluses are shared between the policyholders and the shareholders. All such funds are closed to new business. These funds typically have an inherited estate, being a surplus of assets over those needed to meet the liabilities of current policyholders. As these funds are closed to new business the surplus will be allocated to existing policyholders and the Group has determined it appropriate to allocate the expected future payments from the inherited estate to specific groups of contracts within the measurement of the best estimate cash flows. This results in the shareholders share of the inherited estate being recognised through the CSM. At transition, to the extent that services have been provided in previous periods, an element of the inherited estate will be recognised in Retained Earnings, with the remainder recognised within the CSM and released to the consolidated income statement in future periods in line with coverage units. The adoption of IFRS 17 will not change the point at which the shareholder will become entitled to receive its share of the inherited estate, which will continue to be at the point where bonuses are declared to policyholders. Risk adjustment The risk adjustment for non-financial risk will reflect the compensation that the Group requires for bearing non-financial risk. The Group will apply a confidence level technique. The risk adjustment will be allocated to groups of contracts based on an analysis of the risk profiles of the groups, reflecting the effects of the diversification benefits between Group entities. The Group will determine the risk adjustment using a one year time horizon, consistent with the time horizon used for Solvency II, the key metric underlying how the Group is managed. To determine the risk adjustment for reinsurance contracts, the Group will apply its approach both gross and net of reinsurance and determine the amount of risk being transferred to the reinsurer as the difference between the two results. A5. New accounting pronouncements not yet effective continued I I F F R R S S 1 1 7 7 I I n n s s u u r r a a n n c c e e C C o o n n t t r r a a c c t t s s ( ( 1 1 J J a a n n u u a a r r y y 2 2 0 0 2 2 3 3 ) ) continued Significant judgements and estimates Coverage units The CSM of a group of contracts is recognised in profit or loss to reflect services provided in the period. The number of coverage units is updated at each valuation date and reflects the quantity of services provided by the contracts within a group considering both quantity of benefits provided and the length of the expected coverage period. The Group will determine the quantity of benefits, and therefore the coverage units as follows: Type of business Coverage unit (quantity of benefits) Term life Sum assured in-force Endowment Sum assured in-force Whole of life Sum assured in-force Other protection products Sum assured in-force Immediate annuity Annuity payments in each period Unit linked Annual Management Charge plus insurance charges Conventional with-profit (\u2018CWP\u2019) & Unitised with-profit (\u2018UWP\u2019) Maximum of the guaranteed benefit and asset share Reinsurance contracts held will use coverage units consistent with the underlying policies reinsured. Transition IFRS 17 requires the standard to be applied retrospectively. Where this is assessed as impracticable the standard allows the application of a modified retrospective approach or a fair value approach to determine the contractual service margin. The primary books of business that will be measured using the fully retrospective approach are: \u2022 External Bulk Purchase Annuities written since 2018, and their associated reinsurance contracts. Bulk Purchase Annuities, and their associated reinsurance contracts, related to the Group\u2019s pension schemes will continue to be eliminated on consolidation and the liabilities of the scheme reported under IAS 19. \u2022 Annuity and conventional non-profit business acquired as part of the purchase of the ReAssure business in 2020, with the date of inception of these contracts being the acquisition date. \u2022 New business within the scope of IFRS 17 written by the Group\u2019s SunLife business from 2018, and the Group\u2019s remaining new business from 1 January 2021. The remainder of the Group\u2019s business will be transitioned using the fair value approach. Key factors considered in determining whether the fully retrospective approach is impracticable include: \u2022 The ability to obtain assumptions and data at the required level of granularity, without the introduction of material use of hindsight, particularly in relation to contracts within acquired businesses and where the Group\u2019s financial reporting metrics did not require such information. \u2022 The availability and usability of historic data given the significant integration work performed by the Group on both its policy administration and actuarial modelling systems where re-platforming from legacy systems onto a unified platform has been carried out. \u2022 The significant level of regulatory change experienced by the insurance industry, such as Solvency II, which impacts on the level of change undergone by both legacy and current policy administration and actuarial modelling systems. Fair value approach The fair value approach determines the CSM (or loss component) at 1 January 2022 as the difference between the fair value of a group of contracts and the present value of expected future cash flows including acquisition costs, plus an explicit risk adjustment. The fair value determined by the Group will use cash flows with contract boundaries consistent with IFRS 17 requirements and be broadly consistent with those used to determine the IFRS 17 liabilities. The measurement of the fair value of contracts will include items taken into consideration by a market participant but which are not included in the IFRS 17 measurement of contracts, such as a risk premium to reflect a market participant\u2019s view of uncertainty inherent in the contract cash flows being valued and a profit margin. For groups of contracts measured using the fair value approach, the cohorts will contain contracts issued more than one year apart. Presentation and disclosure The introduction of IFRS 17 will simplify the presentation of the statement of financial position. It requires the presentation of groups of insurance (or reinsurance) contracts that are in an asset position separately from those in a liability position. All rights and obligations arising from a portfolio of contracts will be presented within the insurance or reinsurance contract balance, as such, balances such as payables related to direct insurance contracts and reinsurance receivables will no longer be presented separately. The presentation of the consolidated income statement will change more significantly with IFRS 17 setting out how components of the profitability of contracts are disaggregated into an insurance service result and insurance finance income/expense. The insurance service result reflects the consideration earned in exchange for the provision of services in relation to the group of IFRS 17 contracts issued. The insurance financial income/expense reflects changes in the carrying amount of the group of insurance contracts that relate to financial risks. It comprises the effect of the time value of money as well as the effect of financial risks and changes in financial risks. IFRS 17 also requires extensive disclosures, both quantitative and qualitative, in relation to: \u2022 Amounts recognised in the financial statements, including reconciliations showing how the net carrying amounts of contracts changed during the period; \u2022 Significant judgements and changes in these judgements; and \u2022 The nature and extent of risks that arise from contracts within the scope of IFRS 17. Impact assessment The total profit recognised over the lifetime of contracts within the scope of IFRS 17 will not change from the total profit recognised under IFRS 4 and will continue to be recognised in profit and loss. The pattern of profit emergence under IFRS 17 will primarily be driven by the timing of the recognition of the risk adjustment and CSM. The risk adjustment is released to profit and loss as the related risk expires and the CSM is released as services are provided. The estimated impact of adopting IFRS 17 as at 1 January 2022 is total equity attributable to owners of the parent remains broadly neutral when compared with the reported value at 1 January 2022 of \u00a35.8 billion, and a CSM (net of reinsurance) of at least \u00a32.0 billion is established. The broadly neutral impact to total equity attributable to owners of the parent is a result of a number of offsetting factors. This includes the following factors which have a positive impact on equity: \u2022 By moving to an IFRS 17 best estimate of future cash flows, prudent margins currently recognised on insurance contract liabilities under IFRS 4 are released. \u2022 Under IFRS 4, an unallocated surplus liability is held in respect of future transfers to shareholders from the Group\u2019s with-profit funds. On application of IFRS 17, shareholder earnings on with-profit and unit-linked business are recognised by reflecting only cash flows due to policyholders within the best estimate of liabilities. The reduction in best estimate liabilities arising from the above factors is offset by the following items, which reduce equity: \u2022 The recognition of a risk adjustment and CSM. \u2022 The derecognition of the separate acquired value of in-force business (AVIF) asset associated with insurance contracts previously recognised under IFRS 4. The impact provided above is preliminary as not all transition work has been finalised at the date of issuing these consolidated financial statements. The actual impact of adopting IFRS 17 on 1 January 2023 with a transition date of 1 January 2022 may change as the Group continues to embed and refine the new systems, processes and controls required. This impact assessment has been estimated under an interim control environment with models that continue to undergo validation. The implementation of the end state control environment will continue as the Group introduces business as usual controls throughout 2023. The new accounting policies, assumptions, judgements and estimations employed in producing IFRS 17 results are subject to change until the Group finalises its first IFRS 17 financial statements for 2023 reporting. At the date of issuing these consolidated financial statements, the Group continues its preparation of the year end 31 December 2022 comparative financial information applying IFRS 17. As a result it was not practicable to reliably quantify the impact of IFRS 17 on the results for the year ended 31 December 2022. Implementation project status The Group\u2019s implementation project continued throughout 2022 with a focus on continuing to develop and embed the operational capabilities required to implement IFRS 17 including data, systems and business processes, and determining the transition balance sheet as at 1 January 2022. The focus for 2023 is on finalising the transition balance sheet and the 2022 comparatives required for 2023 reporting, and implementation of the end state control environment. A5. New accounting pronouncements not yet effective continued IFRS 9 Financial Instruments (1 January 2023) Under IFRS 9, all financial assets will be measured either at amortised cost or fair value and the basis of classification will depend on the business model and the contractual cash flow characteristics of the financial assets. In relation to the impairment of financial assets, IFRS 9 requires the use of an expected credit loss model, as opposed to the incurred credit loss model required under IAS 39 Financial Instruments: Recognition and Measurement. The expected credit loss model will require the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In addition, the general hedge accounting requirements have been updated under IFRS 9 to better reflect risk management activities of the Group. The Group has to date taken advantage of the temporary exemption granted to insurers in IFRS 4 Insurance Contracts from applying IFRS 9 until 1 January 2023 as a result of meeting the exemption criteria as at 31 December 2015. As at this date the Group\u2019s activities were considered to be predominantly connected with insurance as the percentage of the total carrying amount of its liabilities connected with insurance relative to the total carrying amount of all its liabilities was greater than 90%. Following the acquisition of the ReAssure businesses on 22 July 2020, this assessment was re-performed and the Group\u2019s activities were still considered to be predominantly connected with insurance. IFRS 9 will be implemented at the same time as the new insurance contracts standard (IFRS 17 Insurance Contracts) effective from 1 January 2023. During the year, the Group completed its assessment of the impacts of adopting IFRS 9. The classification of the Group\u2019s financial assets has been reviewed and it has been determined that financial assets backing insurance liabilities will continue to be measured at fair value through profit or loss (\u2018FVTPL\u2019). The business model assessment concluded that these assets are actively managed and evaluated on a fair value basis and as such would be mandatorily classified at FVTPL. It is not expected that use of the fair value option, as permitted by IFRS 9, to designate assets as FVTPL to avoid an accounting mismatch will be required. The new standard replaces the incurred loss model with an expected credit loss model for financial assets measured at amortised cost or at FVOCI. The proportion of financial assets classified at amortised cost is relatively small as a proportion of the total and due to the credit risk profile of these assets being investment grade, the expected credit loss on these assets is not expected to be material and therefore there will be limited financial impact on the Group. The Group will be adopting the revised general hedge accounting requirements of IFRS 9. The existing hedging relationships for which hedge accounting is currently adopted (Tier 1/Tier 2 notes and cross currency swaps) will continue to be accounted for as cash flow hedges. The effectiveness testing processes will be revised to include qualitative testing on a prospective basis. A number of additional disclosures will be required by IFRS 7 Financial Instruments: Disclosures as a result of implementing IFRS 9. Additional disclosures have been made in note E1.2 to the consolidated financial statements to provide information to allow comparison with entities who have already adopted IFRS 9. DDiisscclloossuurree ooff AAccccoouunnttiinngg PPoolliicciieess ((AAmmeennddmmeennttss ttoo IIAASS 11 PPrresenntatiioonn oof Finaanncciaal SStaatemenntss aanndd IIFFRRSS PPrraaccttiiccee SSttaatteemmeenntt 22 MMaakkiinngg MMaterriialliity Juudgemmennts)) ((11 JJaannuuaarryy 22002233)) The amendments are intended to assist entities in deciding which accounting policies to disclose in their financial statements and requires an entity to disclose \u2018material accounting policy information\u2019 instead of its \u2018significant accounting policies\u2019. Accounting policy information is material if, when considered together with other information included in an entity\u2019s financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The IASB has also developed guidance and examples to explain and demonstrate the application of the \u2018four-step materiality process\u2019 described in IFRS Practice Statement 2. The amendments to IFRS Practice Statement 2 do not contain an effective date or transition requirements. These amendments are not expected to have any impact on the Group. DDeeffiinniittiioonn ooff AAccccoouunnttiinngg EEssttiimmaatteess ((AAmmeennddmmeennttss ttoo IIAASS 88 Accoountinng PPolliicies,, CChanges in AAccccountting Esstimates aanndd Errors)) ((11 JJaannuuaarryy 22002233)) The amendments replace the definition of a \u2018change in accounting estimates\u2019 with a definition of \u2018accounting estimates\u2019. Under the new definition, accounting estimates are \u2018monetary amounts in financial statements that are subject to measurement uncertainty\u2019. The Board has retained the concept of changes in accounting estimates in the Standard by including a number of clarifications. These amendments are not expected to have any impact on the Group. DDeeffeerrrreedd TTaaxx rreellaatteedd ttoo AAsssseettss aanndd LLiiaabbiilliittiieess aarriissiinngg ffrroomm aa SSiinnggllee TTrraannssaaccttiioonn ((AAmmeennddmmeennttss ttoo IIAASS 1122 IInncome TTaaxes)) ((11 JJaannuuaarryy 22002233)) The amendments narrow the scope of the recognition exemption in paragraphs 15 and 24 of IAS 12 so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The IASB expects that the amendments will reduce diversity in reporting and align the accounting for deferred tax on such transactions with the general principle in IAS 12 of recognising deferred tax for temporary differences. There will potentially be some additional disclosures required in relation to the Group\u2019s leasing arrangements as a result of implementing these amendments. CCllaassssiiffiiccaattiioonn ooff LLiiaabbiilliittiieess aass CCuurrrreenntt aanndd NNoonn--ccuurrrreenntt ((AAmmeennddmmeennttss ttoo IIAASS 11 Presentation of Fiinnanncciiall Statemmentss)) ((11 JJaannuuaarryy 22002244)) The amendments clarify rather than change existing requirements and aim to assist entities in determining whether debt and other liabilities with an uncertain settlement date should be classed as current or non-current. It is currently not expected that there will be any reclassifications as a result of this clarification. L e e a a s s e e L L i i a a b b i i l l i i t t y y i i n n a a S S a a l l e e a a n n d d L L e e a a s s e e b b a a c c k k ( ( A A m m e e n n d d m m e e n n t t s s t t o o I I F F R R S S 1 1 6 6 L Le a ases ) ) ( ( 1 1 J J a a n n u u a a r r y y 2 2 0 0 2 2 4 4 ) ) The amendments relate to how a seller-lessee accounts for variable lease payments that arise in a sale and leaseback transaction. On initial recognition, the seller-lessee is required to include variable lease payments when measuring a lease liability arising from a sale-and-leaseback transaction. After initial recognition, they are required to apply the general requirements for subsequent accounting of the lease liability such that no gain or loss relating to the retained right of use is recognised. Seller-lessees are required to reassess and potentially restate sale-and-leaseback transactions entered into since the implementation. These amendments are not expected to have any impact on the Group. S S a a l l e e o o r r C C o o n n t t r r i i b b u u t t i i o o n n o o f f A A s s s s e e t t s s b b e e t t w w e e e e n n a a n n I I n n v v e e s s t t o o r r a a n n d d i i t t s s A A s s s s o o c c i i a a t t e e o o r r J J o o i i n n t t V V e e n n t t u u r r e e ( ( A A m m e e n n d d m m e e n n t t s s t t o o I I F F R R S S 1 1 0 0 a a n n d d I I A A S S 2 2 8 8 ) ) ( ( E E f f f f e e c c t t i i v v e e d d a a t t e e d d e e f f e e r r r r e e d d ) ) The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. These amendments are not expected to have any impact on the Group. On 31 January 2020, the UK left the EU and effective from 1 January 2021, the European Commission no longer endorses IFRSs for use in the UK. UK legislation provides that all IFRSs that had been endorsed by the EU on or before the 31 December 2020 became UK-adopted international accounting standards. New or amended IFRSs are now endorsed by the UK Endorsement Board following delegation of powers to endorse and adopt IFRSs for the UK by the Secretary of State in May 2021. The following amendments to standards listed above have been endorsed for use in the UK by the UK Endorsement Board: \u2022 IFRS 17 Insurance Contracts; \u2022 Amendments to IFRS 17; \u2022 Initial Application of IFRS 17 and IFRS 9 \u2013 Comparative Information; \u2022 Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2); \u2022 Definition of Accounting Estimates (Amendments to IAS 8); and \u2022 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12). The amendments to IFRS 9 Financial Instruments formed part of the EU-adopted IFRSs which were adopted by the UK on 1 January 2021 and have previously been endorsed by the EU. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-608": {
"value": "A4. Adoption of new accounting pronouncements in 2022 In preparing the consolidated financial statements, the Group has adopted the following amendments effective from 1 January 2022: \u2022 Onerous Contracts \u2013 Cost of Fulfilling a Contract (Amendments to IAS 37): The amendments clarify that when performing an onerous contracts assessment both incremental costs to fulfil a contract and an allocation of other direct costs should be included when determining whether that contract is onerous. \u2022 Reference to the Conceptual Framework (Amendments to IFRS 3): In addition to updating references to the conceptual framework within IFRS 3, the amendments also add a requirement for obligations within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets to determine whether at the acquisition date a present obligation exists as a result of past events. \u2022 Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16): The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced before that asset is available for use. Such sales proceeds and related costs are recognised in profit or loss; and \u2022 Annual Improvements (2018\u20132020 Cycle): \u2013 Subsidiary as a First-time Adopter (Amendments to IFRS 1); \u2013 Fees in the \u201810 per cent\u2019 Test for De-recognition of Financial Liabilities (Amendments to IFRS 9); \u2013 Lease Incentives (Amendments to IFRS 16); and \u2013 Taxation in Fair Value Measurements (Amendments to IAS 41). None of the above amendments to standards are considered to have a material effect on these consolidated financial statements. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfExpectedImpactOfInitialApplicationOfNewStandardsOrInterpretations",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-609": {
"value": "A5. New accounting pronouncements not yet effective The IASB has issued the following standards or amended standards which apply from the dates shown. The Group has decided not to early adopt any of these standards or amendments where this is permitted. IFRS 17 Insurance Contracts (1 January 2023) IFRS 17 was issued by the International Standards Board in May 2017 and amended in June 2020. The standard was endorsed by the UK Endorsement Board in May 2022. IFRS 17 is effective from 1 January 2023. IFRS 17 will replace IFRS 4 the current insurance contracts standard and it is expected to significantly change the way the Group measures and reports its insurance contracts. The overall objective of the new standard is to provide an accounting model for insurance contracts that is more useful and consistent for users. In June 2022, the IFRS Interpretations Committee (\u2018IFRIC\u2019) provided its final agenda decision on the \u2018Transfer of Insurance Coverage under a Group of Annuity Contracts \u2013 IFRS 17\u2019, a non-objection from the International Accounting Standards Board was provided in July 2022. The methodology for coverage units determined by the Group and set out in the \u2018Coverage units\u2019 section below is compliant with this IFRIC final agenda decision. Identifying contracts in scope of IFRS 17 IFRS 17 applies to insurance contracts (including reinsurance contracts) an entity issues, reinsurance contracts an entity holds and investment contracts with discretionary participation features an entity issues provided it also issues insurance contracts. The scope of IFRS 17 for the Group is materially consistent with that of IFRS 4. Investment contracts without discretionary participation features (\u2018DPF\u2019) will be measured under IFRS 9. The following requirements apply to reinsurance contracts unless stated otherwise. IFRS 17 sets out criteria for when an investment component is distinct and may be separated from the host insurance contract. Following the application of these criteria the Group has concluded for the majority of its hybrid investment contracts with DPF within the scope of IFRS 17, the unit-linked component does not meet the definition of a distinct investment component so will no longer be accounted for as a financial instrument and will fall within the scope of IFRS 17. Hybrid investment contracts with DPF are those contracts which allow policyholders to invest in both with-profit and unit-linked fund options within a single contract. Level of aggregation IFRS 17 requires that contracts are divided into groups for the purposes of recognition and measurement. Portfolios of contracts are identified by grouping together contracts which have similar risks and are managed together. These groups are then further divided into cohorts based on their expected profitability. Contracts which are onerous at inception cannot be grouped with contracts which are profitable at inception. Contracts which are issued more than one year apart are not permitted to be included within the same cohort, although there is some relief from this requirement for business in-force at the date of transition under the transitional arrangements. Measurement The standard introduces three measurement approaches, of which two, the general model and the variable fee approach, are applicable to the Group\u2019s business. The main features of these models are the measurement of an insurance contract as the present value of expected future cash flows including acquisition costs, plus an explicit risk adjustment, remeasured at each reporting period using current assumptions, and a contractual service margin (\u2018CSM\u2019). Reinsurance contracts held are measured using the general model, irrespective of the measurement model applied to the underlying contracts reinsured. The risk adjustment represents the compensation the Group requires for bearing the uncertainty about the amount and timing of cash flows that arise from non-financial risk as the obligations under the insurance contract are fulfilled. The CSM represents the unearned profit of a group of insurance contracts and is recognised in profit or loss as the insurance and/or investment service is provided to the customer using coverage units. Coverage units are a measurement of the quantum of service provided across the life of the contract and are used to measure the service provided in the reporting period and release a corresponding amount of profit to the consolidated income statement. If a group of contracts becomes loss-making after inception the loss is recognised immediately in the consolidated income statement. This treatment of profits and losses in respect of services is broadly consistent with the principles of IFRS 15 and IAS 37 applicable to other industries. For reinsurance contracts held, the CSM represents the net gain or net loss of the contract and is recognised in profit or loss as the service is provided using coverage units. Under the general model the CSM is adjusted for non-economic assumption changes relating to future periods. For certain contracts with participating features the variable fee approach is applied, this allows changes in economic assumptions and experience to adjust the CSM as well as non-economic assumptions, reflecting the variable nature of the entity\u2019s earnings driven by investment returns. Significant judgements and estimates Contract boundaries Under IFRS 17, the measurement of a group of contracts includes all future cash flows within the boundary of each contract in the group. Cash flows are within the boundary if they arise from substantive rights and obligations that exist during the reporting period in which the Group can compel the policyholder to pay premiums or in which the Group has a substantive obligation to provide services to the policyholder. The adoption of IFRS 17 results in three main areas where contract boundaries differ from current practice: \u2022 Some unit-linked and with-profit contracts contain a guaranteed annuity option, which allows the policyholder to convert the maturity benefit to an immediate annuity at a predetermined rate. The Group currently places a value on the guaranteed annuity option at maturity, but does not include within its measurement the cash flows associated with immediate annuity until the option is exercised. Under IFRS 17, the cash flows related to the immediate annuity will fall within the boundary of the contract as the Group does not have the practical ability to reprice the contract on maturity. \u2022 The Group has issued renewable term assurance policies with varying terms. Where the Group has the practical ability to reassess the risks of the policyholders at individual contract or portfolio level the contract boundary ends at the earliest renewal date and the renewal will be treated as a new contract. Where the Group does not have the practical ability to reassess the risk, future renewals of these contracts on their guaranteed terms will be within the contract boundary. \u2022 Some of the Group\u2019s reinsurance contracts cover underlying contracts issued on a risk-attaching basis and provide unilateral rights to both the Group and the reinsurer to terminate the attachment of new contracts at any time by giving notice within a specified time period, for example three months. Currently the cash flows included in the measurement of reinsurance contracts considers only the underlying contracts ceded at the valuation date. However, under IFRS 17, the contract boundary includes underlying contracts expected to be issued and ceded during the period from the valuation date to the end of the reinsurance notice period. Discount rates The Group will determine risk-free discount rates using the current market prices of interest rate swaps in each currency where the market is deep, liquid and transparent. The Group primarily writes contracts denominated in Pounds Sterling and Euros. The yield curve will be interpolated between the last available market data point and an ultimate forward rate, which reflects long-term real interest rate and inflation expectations. The discount rates for annuity business will be determined by a \u2018top-down\u2019 approach using a reference portfolio of assets to determine an uplift to be applied to the risk-free discount rate curve. The discount rates for unit-linked business and with-profit business will be determined by a \u2018bottom-up\u2019 approach, using a risk-free discount rate curve adjusted to reflect the characteristics of the liabilities such as illiquidity. With-profit inherited estate The Group has a number of with-profit funds where surpluses are shared between the policyholders and the shareholders. All such funds are closed to new business. These funds typically have an inherited estate, being a surplus of assets over those needed to meet the liabilities of current policyholders. As these funds are closed to new business the surplus will be allocated to existing policyholders and the Group has determined it appropriate to allocate the expected future payments from the inherited estate to specific groups of contracts within the measurement of the best estimate cash flows. This results in the shareholders share of the inherited estate being recognised through the CSM. At transition, to the extent that services have been provided in previous periods, an element of the inherited estate will be recognised in Retained Earnings, with the remainder recognised within the CSM and released to the consolidated income statement in future periods in line with coverage units. The adoption of IFRS 17 will not change the point at which the shareholder will become entitled to receive its share of the inherited estate, which will continue to be at the point where bonuses are declared to policyholders. Risk adjustment The risk adjustment for non-financial risk will reflect the compensation that the Group requires for bearing non-financial risk. The Group will apply a confidence level technique. The risk adjustment will be allocated to groups of contracts based on an analysis of the risk profiles of the groups, reflecting the effects of the diversification benefits between Group entities. The Group will determine the risk adjustment using a one year time horizon, consistent with the time horizon used for Solvency II, the key metric underlying how the Group is managed. To determine the risk adjustment for reinsurance contracts, the Group will apply its approach both gross and net of reinsurance and determine the amount of risk being transferred to the reinsurer as the difference between the two results. A5. New accounting pronouncements not yet effective continued I I F F R R S S 1 1 7 7 I I n n s s u u r r a a n n c c e e C C o o n n t t r r a a c c t t s s ( ( 1 1 J J a a n n u u a a r r y y 2 2 0 0 2 2 3 3 ) ) continued Significant judgements and estimates Coverage units The CSM of a group of contracts is recognised in profit or loss to reflect services provided in the period. The number of coverage units is updated at each valuation date and reflects the quantity of services provided by the contracts within a group considering both quantity of benefits provided and the length of the expected coverage period. The Group will determine the quantity of benefits, and therefore the coverage units as follows: Type of business Coverage unit (quantity of benefits) Term life Sum assured in-force Endowment Sum assured in-force Whole of life Sum assured in-force Other protection products Sum assured in-force Immediate annuity Annuity payments in each period Unit linked Annual Management Charge plus insurance charges Conventional with-profit (\u2018CWP\u2019) & Unitised with-profit (\u2018UWP\u2019) Maximum of the guaranteed benefit and asset share Reinsurance contracts held will use coverage units consistent with the underlying policies reinsured. Transition IFRS 17 requires the standard to be applied retrospectively. Where this is assessed as impracticable the standard allows the application of a modified retrospective approach or a fair value approach to determine the contractual service margin. The primary books of business that will be measured using the fully retrospective approach are: \u2022 External Bulk Purchase Annuities written since 2018, and their associated reinsurance contracts. Bulk Purchase Annuities, and their associated reinsurance contracts, related to the Group\u2019s pension schemes will continue to be eliminated on consolidation and the liabilities of the scheme reported under IAS 19. \u2022 Annuity and conventional non-profit business acquired as part of the purchase of the ReAssure business in 2020, with the date of inception of these contracts being the acquisition date. \u2022 New business within the scope of IFRS 17 written by the Group\u2019s SunLife business from 2018, and the Group\u2019s remaining new business from 1 January 2021. The remainder of the Group\u2019s business will be transitioned using the fair value approach. Key factors considered in determining whether the fully retrospective approach is impracticable include: \u2022 The ability to obtain assumptions and data at the required level of granularity, without the introduction of material use of hindsight, particularly in relation to contracts within acquired businesses and where the Group\u2019s financial reporting metrics did not require such information. \u2022 The availability and usability of historic data given the significant integration work performed by the Group on both its policy administration and actuarial modelling systems where re-platforming from legacy systems onto a unified platform has been carried out. \u2022 The significant level of regulatory change experienced by the insurance industry, such as Solvency II, which impacts on the level of change undergone by both legacy and current policy administration and actuarial modelling systems. Fair value approach The fair value approach determines the CSM (or loss component) at 1 January 2022 as the difference between the fair value of a group of contracts and the present value of expected future cash flows including acquisition costs, plus an explicit risk adjustment. The fair value determined by the Group will use cash flows with contract boundaries consistent with IFRS 17 requirements and be broadly consistent with those used to determine the IFRS 17 liabilities. The measurement of the fair value of contracts will include items taken into consideration by a market participant but which are not included in the IFRS 17 measurement of contracts, such as a risk premium to reflect a market participant\u2019s view of uncertainty inherent in the contract cash flows being valued and a profit margin. For groups of contracts measured using the fair value approach, the cohorts will contain contracts issued more than one year apart. Presentation and disclosure The introduction of IFRS 17 will simplify the presentation of the statement of financial position. It requires the presentation of groups of insurance (or reinsurance) contracts that are in an asset position separately from those in a liability position. All rights and obligations arising from a portfolio of contracts will be presented within the insurance or reinsurance contract balance, as such, balances such as payables related to direct insurance contracts and reinsurance receivables will no longer be presented separately. The presentation of the consolidated income statement will change more significantly with IFRS 17 setting out how components of the profitability of contracts are disaggregated into an insurance service result and insurance finance income/expense. The insurance service result reflects the consideration earned in exchange for the provision of services in relation to the group of IFRS 17 contracts issued. The insurance financial income/expense reflects changes in the carrying amount of the group of insurance contracts that relate to financial risks. It comprises the effect of the time value of money as well as the effect of financial risks and changes in financial risks. IFRS 17 also requires extensive disclosures, both quantitative and qualitative, in relation to: \u2022 Amounts recognised in the financial statements, including reconciliations showing how the net carrying amounts of contracts changed during the period; \u2022 Significant judgements and changes in these judgements; and \u2022 The nature and extent of risks that arise from contracts within the scope of IFRS 17. Impact assessment The total profit recognised over the lifetime of contracts within the scope of IFRS 17 will not change from the total profit recognised under IFRS 4 and will continue to be recognised in profit and loss. The pattern of profit emergence under IFRS 17 will primarily be driven by the timing of the recognition of the risk adjustment and CSM. The risk adjustment is released to profit and loss as the related risk expires and the CSM is released as services are provided. The estimated impact of adopting IFRS 17 as at 1 January 2022 is total equity attributable to owners of the parent remains broadly neutral when compared with the reported value at 1 January 2022 of \u00a35.8 billion, and a CSM (net of reinsurance) of at least \u00a32.0 billion is established. The broadly neutral impact to total equity attributable to owners of the parent is a result of a number of offsetting factors. This includes the following factors which have a positive impact on equity: \u2022 By moving to an IFRS 17 best estimate of future cash flows, prudent margins currently recognised on insurance contract liabilities under IFRS 4 are released. \u2022 Under IFRS 4, an unallocated surplus liability is held in respect of future transfers to shareholders from the Group\u2019s with-profit funds. On application of IFRS 17, shareholder earnings on with-profit and unit-linked business are recognised by reflecting only cash flows due to policyholders within the best estimate of liabilities. The reduction in best estimate liabilities arising from the above factors is offset by the following items, which reduce equity: \u2022 The recognition of a risk adjustment and CSM. \u2022 The derecognition of the separate acquired value of in-force business (AVIF) asset associated with insurance contracts previously recognised under IFRS 4. The impact provided above is preliminary as not all transition work has been finalised at the date of issuing these consolidated financial statements. The actual impact of adopting IFRS 17 on 1 January 2023 with a transition date of 1 January 2022 may change as the Group continues to embed and refine the new systems, processes and controls required. This impact assessment has been estimated under an interim control environment with models that continue to undergo validation. The implementation of the end state control environment will continue as the Group introduces business as usual controls throughout 2023. The new accounting policies, assumptions, judgements and estimations employed in producing IFRS 17 results are subject to change until the Group finalises its first IFRS 17 financial statements for 2023 reporting. At the date of issuing these consolidated financial statements, the Group continues its preparation of the year end 31 December 2022 comparative financial information applying IFRS 17. As a result it was not practicable to reliably quantify the impact of IFRS 17 on the results for the year ended 31 December 2022. Implementation project status The Group\u2019s implementation project continued throughout 2022 with a focus on continuing to develop and embed the operational capabilities required to implement IFRS 17 including data, systems and business processes, and determining the transition balance sheet as at 1 January 2022. The focus for 2023 is on finalising the transition balance sheet and the 2022 comparatives required for 2023 reporting, and implementation of the end state control environment. A5. New accounting pronouncements not yet effective continued IFRS 9 Financial Instruments (1 January 2023) Under IFRS 9, all financial assets will be measured either at amortised cost or fair value and the basis of classification will depend on the business model and the contractual cash flow characteristics of the financial assets. In relation to the impairment of financial assets, IFRS 9 requires the use of an expected credit loss model, as opposed to the incurred credit loss model required under IAS 39 Financial Instruments: Recognition and Measurement. The expected credit loss model will require the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In addition, the general hedge accounting requirements have been updated under IFRS 9 to better reflect risk management activities of the Group. The Group has to date taken advantage of the temporary exemption granted to insurers in IFRS 4 Insurance Contracts from applying IFRS 9 until 1 January 2023 as a result of meeting the exemption criteria as at 31 December 2015. As at this date the Group\u2019s activities were considered to be predominantly connected with insurance as the percentage of the total carrying amount of its liabilities connected with insurance relative to the total carrying amount of all its liabilities was greater than 90%. Following the acquisition of the ReAssure businesses on 22 July 2020, this assessment was re-performed and the Group\u2019s activities were still considered to be predominantly connected with insurance. IFRS 9 will be implemented at the same time as the new insurance contracts standard (IFRS 17 Insurance Contracts) effective from 1 January 2023. During the year, the Group completed its assessment of the impacts of adopting IFRS 9. The classification of the Group\u2019s financial assets has been reviewed and it has been determined that financial assets backing insurance liabilities will continue to be measured at fair value through profit or loss (\u2018FVTPL\u2019). The business model assessment concluded that these assets are actively managed and evaluated on a fair value basis and as such would be mandatorily classified at FVTPL. It is not expected that use of the fair value option, as permitted by IFRS 9, to designate assets as FVTPL to avoid an accounting mismatch will be required. The new standard replaces the incurred loss model with an expected credit loss model for financial assets measured at amortised cost or at FVOCI. The proportion of financial assets classified at amortised cost is relatively small as a proportion of the total and due to the credit risk profile of these assets being investment grade, the expected credit loss on these assets is not expected to be material and therefore there will be limited financial impact on the Group. The Group will be adopting the revised general hedge accounting requirements of IFRS 9. The existing hedging relationships for which hedge accounting is currently adopted (Tier 1/Tier 2 notes and cross currency swaps) will continue to be accounted for as cash flow hedges. The effectiveness testing processes will be revised to include qualitative testing on a prospective basis. A number of additional disclosures will be required by IFRS 7 Financial Instruments: Disclosures as a result of implementing IFRS 9. Additional disclosures have been made in note E1.2 to the consolidated financial statements to provide information to allow comparison with entities who have already adopted IFRS 9. DDiisscclloossuurree ooff AAccccoouunnttiinngg PPoolliicciieess ((AAmmeennddmmeennttss ttoo IIAASS 11 PPrresenntatiioonn oof Finaanncciaal SStaatemenntss aanndd IIFFRRSS PPrraaccttiiccee SSttaatteemmeenntt 22 MMaakkiinngg MMaterriialliity Juudgemmennts)) ((11 JJaannuuaarryy 22002233)) The amendments are intended to assist entities in deciding which accounting policies to disclose in their financial statements and requires an entity to disclose \u2018material accounting policy information\u2019 instead of its \u2018significant accounting policies\u2019. Accounting policy information is material if, when considered together with other information included in an entity\u2019s financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The IASB has also developed guidance and examples to explain and demonstrate the application of the \u2018four-step materiality process\u2019 described in IFRS Practice Statement 2. The amendments to IFRS Practice Statement 2 do not contain an effective date or transition requirements. These amendments are not expected to have any impact on the Group. DDeeffiinniittiioonn ooff AAccccoouunnttiinngg EEssttiimmaatteess ((AAmmeennddmmeennttss ttoo IIAASS 88 Accoountinng PPolliicies,, CChanges in AAccccountting Esstimates aanndd Errors)) ((11 JJaannuuaarryy 22002233)) The amendments replace the definition of a \u2018change in accounting estimates\u2019 with a definition of \u2018accounting estimates\u2019. Under the new definition, accounting estimates are \u2018monetary amounts in financial statements that are subject to measurement uncertainty\u2019. The Board has retained the concept of changes in accounting estimates in the Standard by including a number of clarifications. These amendments are not expected to have any impact on the Group. DDeeffeerrrreedd TTaaxx rreellaatteedd ttoo AAsssseettss aanndd LLiiaabbiilliittiieess aarriissiinngg ffrroomm aa SSiinnggllee TTrraannssaaccttiioonn ((AAmmeennddmmeennttss ttoo IIAASS 1122 IInncome TTaaxes)) ((11 JJaannuuaarryy 22002233)) The amendments narrow the scope of the recognition exemption in paragraphs 15 and 24 of IAS 12 so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The IASB expects that the amendments will reduce diversity in reporting and align the accounting for deferred tax on such transactions with the general principle in IAS 12 of recognising deferred tax for temporary differences. There will potentially be some additional disclosures required in relation to the Group\u2019s leasing arrangements as a result of implementing these amendments. CCllaassssiiffiiccaattiioonn ooff LLiiaabbiilliittiieess aass CCuurrrreenntt aanndd NNoonn--ccuurrrreenntt ((AAmmeennddmmeennttss ttoo IIAASS 11 Presentation of Fiinnanncciiall Statemmentss)) ((11 JJaannuuaarryy 22002244)) The amendments clarify rather than change existing requirements and aim to assist entities in determining whether debt and other liabilities with an uncertain settlement date should be classed as current or non-current. It is currently not expected that there will be any reclassifications as a result of this clarification. e
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The amendments relate to how a seller-lessee accounts for variable lease payments that arise in a sale and leaseback transaction. On initial recognition,
the seller-lessee is required to include variable lease payments when measuring a lease liability arising from a sale-and-leaseback transaction. After initial
recognition, they are required to apply the general requirements for subsequent accounting of the lease liability such that no gain or loss relating to the
retained right of use is recognised. Seller-lessees are required to reassess and potentially restate sale-and-leaseback transactions entered into since the
implementation. These amendments are not expected to have any impact on the Group.
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The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an
associate or joint venture. These amendments are not expected to have any impact on the Group.
On 31 January 2020, the UK left the EU and effective from 1 January 2021, the European Commission no longer endorses IFRSs for use in the UK. UK
legislation provides that all IFRSs that had been endorsed by the EU on or before the 31 December 2020 became UK-adopted international accounting
standards. New or amended IFRSs are now endorsed by the UK Endorsement Board following delegation of powers to endorse and adopt IFRSs for the
UK by the Secretary of State in May 2021.
The following amendments to standards listed above have been endorsed for use in the UK by the UK Endorsement Board:
\u2022 IFRS 17 Insurance Contracts;
\u2022 Amendments to IFRS 17;
\u2022 Initial Application of IFRS 17 and IFRS 9 \u2013 Comparative Information;
\u2022 Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
\u2022 Definition of Accounting Estimates (Amendments to IAS 8); and
\u2022 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).
The amendments to IFRS 9 Financial Instruments formed part of the EU-adopted IFRSs which were adopted by the UK on 1 January 2021 and have
previously been endorsed by the EU.
",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfNewAccountingPronouncementsNotYetEffective",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-549": {
"value": "A6. Significant transactions The Group classifies disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of the disposal group, excluding finance costs and income tax expense. Assets and liabilities classified as held for sale are presented separately in the statement of consolidated financial position. A6.1 Agreement with abrdn plc On 23 February 2021, the Group entered into a new agreement with abrdn plc to simplify the arrangements of their Strategic Partnership, enabling the Group to control its own distribution, marketing and brands, and focusing the Strategic Partnership on using abrdn plc\u2019s asset management services in support of Phoenix\u2019s growth strategy. Under the terms of the transaction, the Group will sell its UK investment and platform-related products, comprising Wrap Self Invested Personal Pension (\u2018Wrap SIPP\u2019), Onshore Bond and UK Trustee Investment Plan (\u2018TIP\u2019) to abrdn plc and, effective from 1 January 2021, transferred the economic benefit of this business to abrdn plc. The Group also acquired ownership of the Standard Life brand and as part of this acquisition, the relevant marketing, distribution and data team members transferred to the Group. As a result, the Client Service and Proposition Agreement (\u2018CSPA\u2019), entered into between the two groups following the acquisition of the Standard Life businesses in 2018, was dissolved and the CSPA intangible asset was fully impaired. In addition, Phoenix and abrdn plc resolved all legacy issues in relation to the Transitional Service Agreement (\u2018TSA\u2019) entered into at the time of the acquisition of the Standard Life businesses and the CSPA. The Group received cash consideration for the overall transaction of \u00a3115 million, \u00a362 million of which was deferred as detailed below. On completion of the agreement the Group recognised a net gain on the transaction of \u00a389 million, net of tax of \u00a321 million, which was recognised in the consolidated income statement. The sale of the Wrap SIPP, Onshore Bond and TIP business currently within Standard Life Assurance Limited, will be effected through a Part VII transfer targeted for completion in 2024. The economic risk and rewards for this business transferred to abrdn plc effective from 1 January 2021 via a profit transfer arrangement. Consideration received of \u00a362 million in respect of this business was deferred until completion of the Part VII and the payments to abrdn plc in respect of the profit transfer arrangement are being offset against the deferred consideration balance. The balances in the statement of consolidated financial position relating to the Wrap SIPP, Onshore Bond and TIP business have been classified as a disposal group held for sale. The total proceeds of disposal are not expected to exceed the carrying value of the related net assets and accordingly the disposal group has been measured at fair value less costs to sell. At the date of the transaction an impairment loss of \u00a359 million was recognised upon classification of the business as held for sale in respect of the acquired in-force business (\u2018AVIF\u2019). A further impairment charge of \u00a317 million has been recognised in the year (2021: \u00a38 million). The major classes of assets and liabilities classified as held for sale are as follows: A6. Significant transactions continued A6.1 Agreement with abrdn plc continued 31 December 2022 \u00a3m 31 December 2021 \u00a3m Acquired in-force business 37 54 Investment property 2,506 3,309 Financial assets 4,629 6,507 Cash and cash equivalents 33 76 Assets classified as held for sale 7,205 9,946 Assets in consolidated funds 1 1,147 1,788 Total assets of the disposal group 8,352 11,734 Investment contract liabilities (8,312) (11,676) Other financial liabilities (4) (4) Provisions \u2013 (2) Deferred tax liabilities (7) (10) Accruals and deferred income (37) (54) Liabilities classified as held for sale (8,360) (11,746) 1 Included in assets of the disposal group are assets in consolidated funds, which are held to back investment contract liabilities of the Wrap SIPP, Onshore bond and TIP business and are disclosed within financial assets in the consolidated statement of financial position. The Group controls these funds at 31 December 2022 and therefore consolidates 100% of the assets with any non-controlling interest recognised as net asset value attributable to unitholders. A6.2 Disposal of Ark Life On 1 November 2021, the Group completed the sale of its entire interest in Ark Life Assurance Company DAC (\u2018Ark Life\u2019) to Irish Life Group Limited for gross cash consideration of \u20ac230 million (\u00a3198 million). The carrying value of the net assets disposed of was \u00a3201 million which is after an impairment loss of \u00a318 million in respect of AVIF that was recognised upon classification of the business as held for sale. 31 December 2021 \u00a3m Cash consideration received 198 Less: transaction costs (6) Net Consideration received 192 Net assets disposed of 1 (201) Foreign currency translation reserve recycled to the consolidated income statement (14) Loss on disposal (23) 1 Includes cash and cash equivalents of \u00a39 million. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-550": {
"value": "B. Earnings performance
B1. Segmental analysis
The Group defines and presents operating segments in accordance with IFRS 8 \u2018
Operating Segment
\u2019 which requires such segments to be based on
the information which is provided to the Board, and therefore segmental information in this note is presented on a different basis from profit or loss in
the consolidated financial statements.
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including
revenues and expenses relating to transactions with other components of the Group.
For management purposes, the Group is organised into business units based on their products and services. The Group has four reportable segments
comprising UK Heritage, UK Open, Europe and Management Services. For reporting purposes, business units are aggregated where they share similar
economic characteristics including the nature of products and services, types of customers and the nature of the regulatory environment. No such
aggregation has been required in the current year.
The UK Heritage segment contains UK businesses which no longer actively sell products to policyholders and which therefore run-off gradually over
time. These businesses will accept incremental premiums on in-force policies.
The UK Open segment includes new and in-force life insurance and investment policies in respect of products that the Group continues to actively market
to new and existing policyholders. This includes products such as workplace pensions and Self-Invested Personal Pensions (\u2018SIPPs\u2019) distributed through the
Group\u2019s Strategic Partnership with abrdn plc, products sold under the SunLife brand, and annuities, including Bulk Purchase Annuity contracts.
The Europe segment includes business written in Ireland and Germany. This includes products that are actively being marketed to new policyholders,
and legacy in-force products that are no longer being sold to new customers.
The Management Services segment comprises income from the life and holding companies in accordance with the respective management service
agreements less fees related to the outsourcing of services and other operating costs.
Unallocated Group includes consolidation adjustments and Group financing (including finance costs) which are managed on a Group basis and are
not allocated to individual operating segments.
Inter-segment transactions are set on an arm\u2019s length basis in a manner similar to transactions with third parties. Segmental results include those transfers
between business segments which are then eliminated on consolidation.
The business of Ark Life, which was disposed of in November 2021 (see note A6.2), was allocated to the UK Heritage operating segment. The Wrap SIPP,
Onshore Bond and TIP business that has been classified as a disposal group held for sale (see note A6.1) is allocated to the UK Open operating segment.
Segmental measure of performance: Adjusted operating profit
The Group uses a non-GAAP measure of performance, being adjusted operating profit, to evaluate segment performance. Adjusted operating profit is
considered to provide a comparable measure of the underlying performance of the business as it excludes the impact of short-term economic volatility
and other one-off items. This measure incorporates an expected return, including a longer-term return on financial investments backing shareholder and
policyholder funds over the period, with consistent allowance for the corresponding expected movement in liabilities. Annuity new business profits are
included in adjusted operating profit using valuation assumptions consistent with the pricing of the business (including the Group\u2019s expected longer-
term asset allocation backing the business).
Adjusted operating profit includes the effect of variances in experience for non-economic items, such as mortality and expenses, and the effect
of changes in non-economic assumptions. It also incorporates the impacts of significant management actions where such actions are consistent
with the Group\u2019s core operating activities (for example, actuarial modelling enhancements and data reviews). Adjusted operating profit is reported
net of policyholder finance charges and policyholder tax.
B. Earnings performance continued B1. Segmental analysis continued Adjusted operating profit excludes the impact of the following items: \u2022 the difference between the actual and expected experience for economic items and the impacts of changes in economic assumptions on the valuation of liabilities (see notes B2.1 and B2.2); \u2022 amortisation and impairments of intangible assets (net of policyholder tax); \u2022 finance costs attributable to owners; \u2022 gains or losses on the acquisition or disposal of subsidiaries (net of related costs); \u2022 the financial impacts of mandatory regulatory change; \u2022 the profit or loss attributable to non-controlling interests; \u2022 integration, restructuring or other significant one-off projects; and \u2022 any other items which, in the Directors\u2019 view, should be excluded from adjusted operating profit by virtue of their nature or incidence to enable a full understanding of the Group\u2019s financial performance. This is typically the case where the nature of the item is not reflective of the underlying performance of the operating companies. Items excluded from adjusted operating profit are referred to as \u2018non-operating items\u2019. Whilst the excluded items are important to an assessment of the consolidated financial performance of the Group, management considers that the presentation of the adjusted operating profit metric provides useful information for assessing the performance of the Group\u2019s operating segments on an ongoing basis. The IFRS results are significantly impacted by the amortisation of intangible balances arising on acquisition, the one-off costs of integration activities and the costs of servicing debt used to finance acquisition activity, which are not indicative of the underlying operational performance of the Group\u2019s segments. Furthermore, the hedging strategy of the Group is calibrated to protect the Solvency II capital position and cash generation capability of the operating companies, as opposed to the IFRS financial position. This can create additional volatility in the IFRS result which is excluded from the adjusted operating profit metric. Certain of the Group\u2019s pension schemes have executed buy-in transactions with a Group life company (see note G1 for further details) and these arrangements can create volatility in the IFRS result which is excluded from adjusted operating profit. Investment return variances and economic assumption changes includes impacts arising as a result of economic movements in the value of financial assets backing Group employee pension schemes. The related movement in the defined benefit pension obligation is recognised in \u2018Other Comprehensive Income\u2019. The Group therefore considers that adjusted operating profit provides a good indicator of the ability of the Group\u2019s operating companies to generate cash available for the servicing of the Group\u2019s debts and for distribution to shareholders. Accordingly, the measure is more closely aligned with the business model of the Group and how performance is managed by those charged with governance. B1.1 Segmental result Notes 2022 \u00a3m 2021 \u00a3m Adjusted operating profit UK Heritage 601 537 UK Open 731 701 Europe 30 87 Management Services (48) (24) Unallocated Group (69) (71) Total segmental adjusted operating profit 1,245 1,230 Investment return variances and economic assumption changes on long-term business and owners' funds B2.2 (2,673) (1,125) Amortisation and impairment of acquired in-force business (501) (572) Amortisation and impairment of other intangibles and goodwill G2 (21) (67) Other non-operating items (179) (65) Finance costs on borrowing attributable to owners (199) (217) Loss before the tax attributable to owners of the parent (2,328) (816) Profit before tax attributable to non-controlling interests 67 128 Loss before the tax attributable to owners (2,261) (688) Other non-operating items in respect of 2022 include: \u2022 a \u00a3329 million benefit attributable to harmonising the calibration of prudential margins included within liabilities under insurance contracts in the ReAssure life companies with the rest of the Group; \u2022 \u00a3187 million related to the increase in expected costs associated with the delivery of the Group Target Operating Model for IT and Operations, following a strategic decision to re-phase the programme, together with the costs of migrating policyholder administration onto the TCS platform for certain legacy portfolios of business; \u2022 \u00a376 million of costs associated with the implementation of IFRS 17, which will be effective from 1 January 2023; \u2022 \u00a337 million costs associated with a strategic initiative to enhance capabilities which will support the move towards the Group\u2019s strategic asset allocation alongside growth delivered through bulk purchase annuity transactions; \u2022 costs of \u00a331 million associated with the ongoing ReAssure integration programme; \u2022 \u00a315 million of past service costs in relation to a Group pension scheme. Further details are included in note G1.1; \u2022 \u00a315 million of costs associated with finance transformation activities, including the migration to cloud-based systems; \u2022 \u00a314 million related to a support package to help colleagues navigate cost of living challenges, which included giving all colleagues, except the most senior staff, a one-off net of tax payment of \u00a31,000 in August 2022; \u2022 \u00a312 million costs associated with the forthcoming acquisition of SLF of Canada UK Limited; \u2022 \u00a373 million of other corporate project costs; and \u2022 net other one-off items totalling a cost of \u00a348 million. Other non-operating items in respect of 2021 include: \u2022 net \u00a3110 million gain arising on the transaction with abrdn plc, which included the sale of the Group\u2019s UK investment and platform related products and the acquisition by the Group of the Standard Life brand (see note A6.1 for further details); \u2022 a loss on disposal of \u00a323 million arising on the sale of Ark Life Assurance Company DAC (\u2018Ark Life\u2019) (see note A6.2 for further details); \u2022 \u00a335 million related to the increase in provision for costs associated with the delivery of the Group Target Operating Model for IT and Operations; \u2022 \u00a345 million of costs associated with the ongoing ReAssure integration programme, costs of \u00a327 million associated with the integration of the Old Mutual Wealth business acquired by ReAssure Group plc in December 2019 and costs of \u00a312 million associated with the integration of the acquired L&G mature savings business; \u2022 an \u00a383 million policyholder tax benefit recognised following the favourable conclusion of discussions with HMRC in respect of certain excess management expenses associated with the L&G mature savings business transferred to the Group in 2020; \u2022 \u00a358 million of costs associated with the implementation of IFRS 17, which will be effective from 1 January 2023; \u2022 \u00a344 million of other corporate project costs; and \u2022 net other one-off items totalling a cost of \u00a314 million. Further details of the investment return variances and economic assumption changes on long-term business, and the variance on owners\u2019 funds are included in note B2. B1.2 Segmental revenue
2022
UK Heritage
\u00a3m
UK Open
\u00a3m
Europe
\u00a3m
Management
Services
\u00a3m
Unallocated
Group
\u00a3m
Total
\u00a3m
Revenue from external customers:
Gross premiums written
802 5,038 1,254 \u2013 \u2013 7,094
Less: premiums ceded to reinsurers (267) (1,440) (20) \u2013 \u2013 (1,727)
Net premiums written
535 3,598 1,234 \u2013 \u2013 5,367
Fees and commissions 590 298 63 \u2013 \u2013 951
Income from other segments
\u2013 \u2013 \u2013 1,432 (1,432) \u2013
Total segmental revenue
1,125 3,896 1,297 1,432 (1,432) 6,318
2021
UK Heritage
\u00a3m
UK Open
\u00a3m
Europe
\u00a3m
Management
Services
\u00a3m
Unallocated
Group
\u00a3m
Total
\u00a3m
Revenue from external customers:
Gross premiums written
880 5,034 1,541 \u2013 \u2013 7,455
Less: premiums ceded to reinsurers
(284) (1,739) (56) \u2013 \u2013 (2,079)
Net premiums written
596 3,295 1,485 \u2013 \u2013 5,376
Fees and commissions 634 297 70 \u2013 \u2013 1,001
Income from other segments
\u2013 \u2013 \u2013 1,146 (1,146) \u2013
Total segmental revenue
1,230 3,592 1,555 1,146 (1,146) 6,377
Of the revenue from external customers presented in the table above, \u00a35,417 million (2021: \u00a35,448 million) is attributable to customers in the United
Kingdom (\u2018UK\u2019) and \u00a3901 million (2021: \u00a3929 million) to the rest of the world. The Europe operating segment comprises business written in Ireland and
Germany to customers in both Europe and the UK.
During the year ended 31 December 2022, the Group generated revenue of \u00a31,070 million with a single customer under a bulk purchase annuity transaction.
This was a single premium transaction that is not expected to recur. The revenue with this external customer is included in the UK Open segment.
During the year ended 31 December 2021, the Group generated revenue of \u00a31,706 million and \u00a31,791 million respectively with single customers under bulk
purchase annuity transactions. These were single premium transactions that are not expected to recur. The revenue with these external customers has
been included in the UK Open segment.
The Group has total non-current assets (other than financial assets, deferred tax assets, pension schemes and rights arising under insurance contracts)
of \u00a33,721 million (2021: \u00a35,245 million) located in the UK and \u00a3352 million (2021: \u00a3410 million) located in the rest of the world.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-646": {
"value": "The Group defines and presents operating segments in accordance with IFRS 8 \u2018Operating Segment s \u2019 which requires such segments to be based on the information which is provided to the Board, and therefore segmental information in this note is presented on a different basis from profit or loss in the consolidated financial statements. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses relating to transactions with other components of the Group. For management purposes, the Group is organised into business units based on their products and services. The Group has four reportable segments comprising UK Heritage, UK Open, Europe and Management Services. For reporting purposes, business units are aggregated where they share similar economic characteristics including the nature of products and services, types of customers and the nature of the regulatory environment. No such aggregation has been required in the current year. The UK Heritage segment contains UK businesses which no longer actively sell products to policyholders and which therefore run-off gradually over time. These businesses will accept incremental premiums on in-force policies. The UK Open segment includes new and in-force life insurance and investment policies in respect of products that the Group continues to actively market to new and existing policyholders. This includes products such as workplace pensions and Self-Invested Personal Pensions (\u2018SIPPs\u2019) distributed through the Group\u2019s Strategic Partnership with abrdn plc, products sold under the SunLife brand, and annuities, including Bulk Purchase Annuity contracts. The Europe segment includes business written in Ireland and Germany. This includes products that are actively being marketed to new policyholders, and legacy in-force products that are no longer being sold to new customers. The Management Services segment comprises income from the life and holding companies in accordance with the respective management service agreements less fees related to the outsourcing of services and other operating costs. Unallocated Group includes consolidation adjustments and Group financing (including finance costs) which are managed on a Group basis and are not allocated to individual operating segments. Inter-segment transactions are set on an arm\u2019s length basis in a manner similar to transactions with third parties. Segmental results include those transfers between business segments which are then eliminated on consolidation. The business of Ark Life, which was disposed of in November 2021 (see note A6.2), was allocated to the UK Heritage operating segment. The Wrap SIPP, Onshore Bond and TIP business that has been classified as a disposal group held for sale (see note A6.1) is allocated to the UK Open operating segment. Segmental measure of performance: Adjusted operating profit The Group uses a non-GAAP measure of performance, being adjusted operating profit, to evaluate segment performance. Adjusted operating profit is considered to provide a comparable measure of the underlying performance of the business as it excludes the impact of short-term economic volatility and other one-off items. This measure incorporates an expected return, including a longer-term return on financial investments backing shareholder and policyholder funds over the period, with consistent allowance for the corresponding expected movement in liabilities. Annuity new business profits are included in adjusted operating profit using valuation assumptions consistent with the pricing of the business (including the Group\u2019s expected longer- term asset allocation backing the business). Adjusted operating profit includes the effect of variances in experience for non-economic items, such as mortality and expenses, and the effect of changes in non-economic assumptions. It also incorporates the impacts of significant management actions where such actions are consistent with the Group\u2019s core operating activities (for example, actuarial modelling enhancements and data reviews). Adjusted operating profit is reported net of policyholder finance charges and policyholder tax. Adjusted operating profit excludes the impact of the following items: \u2022 the difference between the actual and expected experience for economic items and the impacts of changes in economic assumptions on the valuation of liabilities (see notes B2.1 and B2.2); \u2022 amortisation and impairments of intangible assets (net of policyholder tax); \u2022 finance costs attributable to owners; \u2022 gains or losses on the acquisition or disposal of subsidiaries (net of related costs); \u2022 the financial impacts of mandatory regulatory change; \u2022 the profit or loss attributable to non-controlling interests; \u2022 integration, restructuring or other significant one-off projects; and \u2022 any other items which, in the Directors\u2019 view, should be excluded from adjusted operating profit by virtue of their nature or incidence to enable a full understanding of the Group\u2019s financial performance. This is typically the case where the nature of the item is not reflective of the underlying performance of the operating companies. Items excluded from adjusted operating profit are referred to as \u2018non-operating items\u2019. Whilst the excluded items are important to an assessment of the consolidated financial performance of the Group, management considers that the presentation of the adjusted operating profit metric provides useful information for assessing the performance of the Group\u2019s operating segments on an ongoing basis. The IFRS results are significantly impacted by the amortisation of intangible balances arising on acquisition, the one-off costs of integration activities and the costs of servicing debt used to finance acquisition activity, which are not indicative of the underlying operational performance of the Group\u2019s segments. Furthermore, the hedging strategy of the Group is calibrated to protect the Solvency II capital position and cash generation capability of the operating companies, as opposed to the IFRS financial position. This can create additional volatility in the IFRS result which is excluded from the adjusted operating profit metric. Certain of the Group\u2019s pension schemes have executed buy-in transactions with a Group life company (see note G1 for further details) and these arrangements can create volatility in the IFRS result which is excluded from adjusted operating profit. Investment return variances and economic assumption changes includes impacts arising as a result of economic movements in the value of financial assets backing Group employee pension schemes. The related movement in the defined benefit pension obligation is recognised in \u2018Other Comprehensive Income\u2019. The Group therefore considers that adjusted operating profit provides a good indicator of the ability of the Group\u2019s operating companies to generate cash available for the servicing of the Group\u2019s debts and for distribution to shareholders. Accordingly, the measure is more closely aligned with the business model of the Group and how performance is managed by those charged with governance. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-551": {
"value": "B2. Investment return variances and economic assumption changes The long-term nature of much of the Group\u2019s operations means that, for internal performance management, the effects of short-term economic volatility are treated as non-operating items. The Group focuses instead on an adjusted operating profit measure that incorporates an expected return on investments supporting its long-term business. The accounting policy adopted in the calculation of adjusted operating profit is detailed in note B1. The methodology for the determination of the expected investment return is explained below together with an analysis of investment return variances and economic assumption changes recognised outside of adjusted operating profit. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForInvestmentReturnVariancesAndEconomicAssumptionChanges",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-552": {
"value": "B2.1 Calculation of the long-term investment return The expected return on investments for both owner and policyholder funds is based on opening economic assumptions applied to the funds under management at the beginning of the reporting period. Expected investment return assumptions are derived actively, based on market yields on risk-free fixed interest assets at the start of each financial year. The long-term risk-free rate used as a basis for deriving the long-term investment return is set by reference to the swap curve at the 15-year duration plus 36bps at the start of the year (2021: 10bps). A risk premium of 334bps is added to the risk-free yield for equities (2021: 349bps), 244bps for properties (2021: 249bps) and 59bps for corporate bonds (2021: 55bps). The overall increase in expected returns for these assets primarily reflects the increase in the risk-free rate experienced in 2021. The principal assumptions underlying the calculation of the long-term investment return are: 2022 % 2021 % Equities 4.6 4.1 Properties 3.7 3.1 Corporate bonds 1.9 1.2 ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfCalculationOfTheLongTermInvestmentReturn",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-553": {
"value": "B2.2 Life assurance business Adjusted operating profit for life assurance business is based on expected investment returns on financial investments backing owners\u2019 and policyholder funds over the reporting period, with consistent allowance for the corresponding expected movements in liabilities. Adjusted operating profit includes the effect of variance in experience for non-economic items, for example mortality, persistency and expenses, and the effect of changes in non-economic assumptions. Changes due to economic items, for example market value movements and interest rate changes, which give rise to variances between actual and expected investment returns, and the impact of changes in economic assumptions on liabilities, are disclosed separately outside adjusted operating profit. The movement in liabilities included in adjusted operating profit reflects both the change in liabilities due to the expected return on investments and the impact of experience variances and assumption changes for non-economic items. The effect of differences between actual and expected economic experience on liabilities, and changes to economic assumptions used to value liabilities, are taken outside adjusted operating profit. For many types of long-term business, including unit-linked and with-profit funds, movements in asset values are offset by corresponding changes in liabilities, limiting the net impact on profit. For other long-term business, the profit impact of economic volatility depends on the degree of matching of assets and liabilities, and exposure to financial options and guarantees. For non-long-term business including owners\u2019 funds, the total investment income, including fair value gains, is analysed between a calculated longer-term return and short-term fluctuations. The investment return variances and economic assumption changes excluded from adjusted operating profit are as follows: 2022 \u00a3m 2021 \u00a3m Investment return variances and economic assumption changes on long-term business and owners' funds (2,673) (1,125) The net adverse investment return variances and economic assumption changes on long-term business and owners\u2019 funds of \u00a32,673 million in 2022 (2021: adverse \u00a31,125 million) reflect IFRS losses arising as a result of rising yields and inflation, and a widening of credit spreads. The impact of equity, interest rate and inflation movements on future profits in relation to with-profit bonuses and unit linked charges is hedged in order to benefit the regulatory capital position rather than the IFRS net assets. The impact of market movements on the value of the related hedging instruments is reflected in the IFRS results, but the corresponding change in the value of future profits or Solvency Capital Requirements is not. Such items are actively valued under Solvency II requirements but are either not recognised on an IFRS basis or are not revalued unless there is evidence of impairment (e.g. AVIF). This leads to volatility in the Group\u2019s IFRS results. Losses have been experienced on hedging positions held by the life companies principally as a result of rising yields and increasing inflation in the year. Continued strategic asset allocation initiatives undertaken by the Group, including investment in higher yielding assets, together with gains arising on equity hedges as markets fell over the period, provided a partial offset to the adverse variances experienced. Investment return variances and economic assumption changes also includes net losses in the value of assets backing Group employee pension schemes. This arises where those liabilities have been subject to insurance policies with Group entities (see note G1). The related decrease in the defined benefit pension obligation is recognised in other comprehensive income . ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfLifeAssuranceBusiness",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-554": {
"value": "B3. Earnings per share The Group calculates its basic earnings per share based on the present shares in issue using the earnings attributable to ordinary equity holders of the parent, divided by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share are calculated based on the potential future shares in issue assuming the conversion of all potentially dilutive ordinary shares. The weighted average number of ordinary shares in issue is adjusted to assume conversion of dilutive share awards granted to employees. The basic and diluted earnings per share calculations are also presented based on the Group's adjusted operating earnings net of financing costs. Adjusted operating profit is a non-GAAP performance measure that is considered to provide a comparable measure of the underlying performance of the business as it excludes the impact of short-term economic volatility and other one-off items. The result attributable to ordinary equity holders of the parent for the purposes of determining earnings per share has been calculated as set out below. 2022 Adjusted Operating profit \u00a3m Financing costs \u00a3m Adjusted operating earnings net of financing costs \u00a3m Other non-operating items \u00a3m Total \u00a3m Profit/(loss) before the tax attributable to owners 1,245 (199) 1,046 (3,307) (2,261) Tax (charge)/credit attributable to owners (253) 42 (211) 710 499 Profit/(loss) for the year attributable to owners 992 (157) 835 (2,597) (1,762) Coupon paid on Tier 1 notes, net of tax relief \u2013 (22) (22) \u2013 (22) Deduct: Share of result attributable to non-controlling interests \u2013 \u2013 \u2013 (67) (67) Profit/(loss) for the year attributable to ordinary equity holders of the parent 992 (179) 813 (2,664) (1,851) 2021 Adjusted Operating profit \u00a3m Financing costs \u00a3m Adjusted operating earnings net of financing costs \u00a3m Other non-operating items \u00a3m Total \u00a3m Profit/(loss) before the tax attributable to owners 1,230 (217) 1,013 (1,701) (688) Tax (charge)/credit attributable to owners (243) 44 (199) 178 (21) Profit/(loss) for the year attributable to owners 987 (173) 814 (1,523) (709) Coupon paid on Tier 1 notes, net of tax relief \u2013 (23) (23) \u2013 (23) Deduct: Share of result attributable to non-controlling interests \u2013 \u2013 \u2013 (128) (128) Profit/(loss) for the year attributable to ordinary equity holders of the parent 987 (196) 791 (1,651) (860)The weighted average number of ordinary shares outstanding during the period is calculated as follows: 2022 Number million 2021 Number million Issued ordinary shares at beginning of the year 1,000 999 Effect of non-contingently issuable shares in respect of Group's long-term incentive plan 1 \u2013 Own shares held by the employee benefit trust (2) (1) Weighted average number of ordinary shares 999 998 The diluted weighted average number of ordinary shares outstanding during the period is 1,001 million (2021: 1,001 million). The Group\u2019s long-term incentive plan, deferred bonus share scheme and sharesave schemes increased the weighted average number of shares on a diluted basis by 1,841,988 shares for the year ended 31 December 2022 (2021: 2,702,934 shares). As losses have an anti-dilutive effect, none of the share-based awards had a dilutive effect in the calculation of basic earnings per share for either of the years ended 31 December 2021 or 31 December 2022. Earnings per share disclosures are as follows: 2022 pence 2021 pence Basic earnings per share (185.2) (86.4) Diluted earnings per share (185.2) (86.4) Basic adjusted operating earnings net of financing costs per share 81.5 79.2 Diluted adjusted operating earnings net of financing costs per share 81.3 79.0 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-647": {
"value": "The Group calculates its basic earnings per share based on the present shares in issue using the earnings attributable to ordinary equity holders of the parent, divided by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share are calculated based on the potential future shares in issue assuming the conversion of all potentially dilutive ordinary shares. The weighted average number of ordinary shares in issue is adjusted to assume conversion of dilutive share awards granted to employees. The basic and diluted earnings per share calculations are also presented based on the Group's adjusted operating earnings net of financing costs. Adjusted operating profit is a non-GAAP performance measure that is considered to provide a comparable measure of the underlying performance of the business as it excludes the impact of short-term economic volatility and other one-off items. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-555": {
"value": "B4. Dividends Final dividends on ordinary shares are recognised as a liability and deducted from equity when they are approved by the Group\u2019s owners. Interim dividends are deducted from equity when they are paid. Dividends for the year that are approved after the reporting period are dealt with as an event after the reporting period. Declared dividends are those that are appropriately authorised and are no longer at the discretion of the entity. 2022 \u00a3m 2021 \u00a3m Dividends declared and paid in the year 496 482 On 11 March 2022, the Board recommended a final dividend of 24.8p per share in respect of the year ended 31 December 2021. The dividend was approved at the Group\u2019s Annual General Meeting, which was held on 5 May 2022. The dividend amounted to \u00a3248 million and was paid on 9 May 2022. On 12 August 2022, the Board declared an interim dividend of 24.8p per share for the half year ended 30 June 2022. The dividend amounted to \u00a3248 million and was paid on 12 September 2022. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDividendsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-648": {
"value": "Final dividends on ordinary shares are recognised as a liability and deducted from equity when they are approved by the Group\u2019s owners. Interim dividends are deducted from equity when they are paid. Dividends for the year that are approved after the reporting period are dealt with as an event after the reporting period. Declared dividends are those that are appropriately authorised and are no longer at the discretion of the entity. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDividendsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-610": {
"value": "C. Other income statement notes C1. Fees and commissions Fees related to the provision of investment management services and administration services are recognised as services are provided. Front end fees, which are charged at the inception of service contracts, are deferred as a liability and recognised over the life of the contract. No significant judgements are required in determining the timing or amount of fee income or the costs incurred to obtain or fulfil a contract. The table below disaggregates fees and commissions by segment. 2022 UK Heritage \u00a3m UK Open \u00a3m Europe \u00a3m Total \u00a3m Fee income from investment contracts without DPF 561 293 72 926 Initial fees deferred during the year \u2013 \u2013 (9) (9) Revenue from investment contracts without DPF 561 293 63 917 Other revenue from contracts with customers 29 5 \u2013 34 Fees and commissions 590 298 63 951 2021 UK Heritage \u00a3m UK Open \u00a3m Europe \u00a3m Total \u00a3m Fee income from investment contracts without DPF 606 291 81 978 Initial fees deferred during the year \u2013 \u2013 (11) (11) Revenue from investment contracts without DPF 606 291 70 967 Other revenue from contracts with customers 28 6 \u2013 34 Fees and commissions 634 297 70 1,001 Remaining performance obligations The practical expedient under IFRS 15 has been applied and remaining performance obligations are not disclosed as the Group has the right to consideration from customers in amounts that correspond with the performance completed to date. Specifically management charges become due over time in proportion to the Group\u2019s provision of investment management services. In the period no amortisation or impairment losses from contracts with customers were recognised in the statement of comprehensive income. C2. Net investment income Net investment income comprises interest, dividends, rents receivable, net interest income/(expense) on the Group defined benefit pension scheme asset/(liability), fair value gains and losses on financial assets (except for reinsurers\u2019 share of investment contract liabilities without DPF, see note E1), financial liabilities and investment property at fair value and impairment losses on loans and receivables. Interest income is recognised in the consolidated income statement as it accrues using the effective interest method. Dividend income is recognised in the consolidated income statement on the date the right to receive payment is established, which in the case of listed securities is the ex-dividend date. Rental income from investment property is recognised in the consolidated income statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income. Fair value gains and losses on financial assets and financial liabilities designated at fair value through profit or loss are recognised in the consolidated income statement. Fair value gains and losses includes both realised and unrealised gains and losses. 2022 \u00a3m 2021 \u00a3m Investment income Interest income on financial assets at amortised cost 21 1 Interest income on financial assets designated at FVTPL on initial recognition 2,888 2,647 Dividend income 5,409 4,384 Rental income 343 365 Net interest expense on Group defined benefit pension scheme (liability)/asset (64) (37) 8,597 7,360 Fair value gains/(losses) Financial assets and financial liabilities at FVTPL: Designated upon initial recognition (38,676) 12,354 Held for trading \u2013 derivatives (6,707) (2,908) Investment property (1,363) 1,195 (46,746) 10,641 Net investment income (38,149) 18,001 C3. Administrative expenses Administrative expenses Administrative expenses are recognised in the consolidated income statement as incurred. Deferred acquisition costs For insurance and investment contracts with DPF, acquisition costs which include both incremental acquisition costs and other direct costs of acquiring and processing new business, are deferred. For investment contracts without DPF, incremental costs directly attributable to securing rights to receive fees for asset management services sold with unit linked investment contracts are deferred. Trail or renewal commission on investment contracts without DPF where the Group does not have an unconditional legal right to avoid payment is deferred at inception of the contract and an offsetting liability for contingent commission is established. Deferred acquisition costs are amortised over the life of the contracts as the related revenue is recognised. After initial recognition, deferred acquisition costs are reviewed by category of business and are written off to the extent that they are no longer considered to be recoverable. 2022 \u00a3m 2021 \u00a3m Employee costs 611 531 Outsourcer expenses 247 209 Professional fees 441 321 Commission expenses 145 178 Office and IT costs 172 150 Investment management expenses and transaction costs 569 528 Direct costs of collective investment schemes 25 28 Depreciation 19 18 Pension past service costs 15 \u2013 Pension administrative expenses 7 6 Advertising and sponsorship 63 58 Movement in reinsurance payables 1 93 - Other 26 59 2,433 2,086 Acquisition costs deferred during the year (32) (38) Amortisation of deferred acquisition costs 11 8 Total administrative expenses 2,412 2,056 Employee costs comprise: 2022 \u00a3m 2021 \u00a3m Wages and salaries 554 483 Social security contributions 57 48 611 531 2022 Number 2021 Number Average number of persons employed 8,165 7,885 1 Reflects an increase of \u00a393 million (2021: \u00a3nil) in the amounts payable to reinsurers in respect of certain product features of the Group\u2019s German business. There is a corresponding reduction in the gross liabilities under insurance contracts. C4. Auditor\u2019s remuneration During the year the Group obtained the following services from its auditor at costs as detailed in the table below. 2022 \u00a3m 2021 \u00a3m Audit of the consolidated financial statements 4.8 1.8 Audit of the Company\u2019s subsidiaries 10.7 9.8 15.5 11.6 Audit-related assurance services 2.4 2.3 Total fee for assurance services 17.9 13.9 Total auditor\u2019s remuneration 17.9 13.9 No services were provided by the Company\u2019s auditors to the Group\u2019s pension schemes in either 2022 or 2021. The increase in the audit fee during 2022 principally reflects the additional work undertaken in connection with the transition to IFRS 17. Audit related assurance services includes fees payable for services where the reporting is required by law or regulation to be provided by the auditor, such as reporting on regulatory returns. It also includes fees payable in respect of reviews of interim financial information and services where the work is integrated with the audit itself. There were no other non-audit services provided during the year (2021: \u00a3nil). Further information on auditor\u2019s remuneration and the assessment of the independence of the external auditor is set out in the Audit Committee report on pages 96 to 101. C5. Finance costs Interest payable is recognised in the consolidated income statement as it accrues and is calculated using the effective interest method. 2022 \u00a3m 2021 \u00a3m Interest expense On financial liabilities at amortised cost 227 239 On leases 3 3 230 242 Attributable to: \u2022 policyholders 3 2 \u2022 owners 227 240 230 242 C6. Tax charge Income tax comprises current and deferred tax. Income tax is recognised in the consolidated income statement except to the extent that it relates to items recognised in the statement of consolidated comprehensive income or the statement of consolidated changes in equity, in which case it is recognised in these statements. Current tax is the expected tax payable on the taxable income for the year, using tax rates and laws enacted or substantively enacted at the date of the statement of consolidated financial position together with adjustments to tax payable in respect of previous years. The tax charge is analysed between tax that is payable in respect of policyholders\u2019 returns and tax that is payable on owners\u2019 returns. This allocation is calculated based on an assessment of the effective rate of tax that is applicable to owners for the year. C6.1 Current year tax charge 2022 \u00a3m 2021 \u00a3m Current tax: UK corporation tax 36 (9) Overseas tax 85 114 121 105 Adjustment in respect of prior years (23) (66) Total current tax charge 98 39 Deferred tax: Origination and reversal of temporary differences (1,067) 120 Change in the rate of UK corporation tax (123) 147 Adjustments in respect of prior years 14 (27) Total deferred tax (credit)/charge (1,176) 240 Total tax (credit)/charge (1,078) 279 Attributable to: \u2022 policyholders (579) 258 \u2022 owners (499) 21 Total tax (credit)/charge (1,078) 279 The Group, as a proxy for policyholders in the UK, is required to pay taxes on investment income and gains each year. Accordingly, the tax credit or expense attributable to UK life assurance policyholder earnings is included in income tax expense. The tax credit attributable to policyholder earnings was \u00a3579 million (2021: \u00a3258 million charge). The 2022 current tax prior year adjustment relates principally to a tax dispute with HMRC in relation to the tax treatment of an asset formerly held by Guardian Assurance Limited (before the business was transferred to ReAssure Limited). This was resolved in the period in favour of the Group. The 2021 current tax liability included an accrual for the total tax under dispute. The matter was heard before the First Tier Tribunal in May 2022 and the Court found in favour of ReAssure Limited. HMRC are not appealing against this decision and so the accrual for the potential tax liability has been released. C6.2 Tax charged to other comprehensive income 2022 \u00a3m 2021 \u00a3m Current tax charge \u2013 1 Deferred tax charge on defined benefit schemes 280 137 280 138 C6.3 Tax (credited)/charged to equity 2022 \u00a3m 2021 \u00a3m Current tax credit on Tier 1 Notes (7) (6) Deferred tax charge/(credit) on share schemes 2 (1) Total tax credit (5) (7) C6.4 Reconciliation of tax charge 2022 \u00a3m 2021 \u00a3m Loss for the year before tax (2,840) (430) Policyholder tax credit/(charge) 579 (258) Loss before the tax attributable to owners (2,261) (688) Tax credit at standard UK rate of 19% (2021: 19%) 1 (429) (131) Non-taxable income (4) (10) Disallowable expenses 2 19 Prior year tax credit for shareholders 2 (17) (7) Movement on acquired in-force amortisation at less than 19% (2021: 19%) 26 34 Profits taxed at rates other than 19% (2021: 19%) 3 18 (22) Derecognition/(recognition) of previously recognised/(unrecognised) deferred tax assets 4 14 (13) Deferred tax rate change 5 (119) 147 Current year losses not valued 6 16 1 Other 7 (6) 3 Owners\u2019 tax (credit)/charge (499) 21 Policyholder tax (credit)/charge (579) 258 Total tax (credit)/charge for the year (1,078) 279 1 The Phoenix operating segments are predominantly in the UK. The reconciliation of tax charge has therefore, been completed by reference to the standard rate of UK tax 2 The prior year tax credit relates to true-ups from the 2021 tax reporting provisions in various entities within the Group and the resolution of the ReAssure Limited tax dispute with HMRC, described above 3 Profits taxed at rates other than 19% relates to overseas profits, consolidated fund investments and UK life company profits subject to marginal shareholder tax rates 4 Relates primarily to reduction in the future value of capital losses in ReAssure Limited, arising from further policyholder losses accrued in the period 5 Deferred tax rate change relates primarily to movements in deferred tax liabilities on non-refundable pension scheme surplus which are expected to unwind, and deferred tax assets on losses expected to be relieved, at rates in excess of the current year rate of 19% 6 Relates primarily to tax losses in Standard Life International DAC, in relation to which a deferred tax asset cannot be recognised 7 Principally relates to UK tax relief available in relation to foreign withholding tax incurred ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfOtherIncomeStatementNotes",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-556": {
"value": "C. Other income statement notes C1. Fees and commissions Fees related to the provision of investment management services and administration services are recognised as services are provided. Front end fees, which are charged at the inception of service contracts, are deferred as a liability and recognised over the life of the contract. No significant judgements are required in determining the timing or amount of fee income or the costs incurred to obtain or fulfil a contract. The table below disaggregates fees and commissions by segment. 2022 UK Heritage \u00a3m UK Open \u00a3m Europe \u00a3m Total \u00a3m Fee income from investment contracts without DPF 561 293 72 926 Initial fees deferred during the year \u2013 \u2013 (9) (9) Revenue from investment contracts without DPF 561 293 63 917 Other revenue from contracts with customers 29 5 \u2013 34 Fees and commissions 590 298 63 951 2021 UK Heritage \u00a3m UK Open \u00a3m Europe \u00a3m Total \u00a3m Fee income from investment contracts without DPF 606 291 81 978 Initial fees deferred during the year \u2013 \u2013 (11) (11) Revenue from investment contracts without DPF 606 291 70 967 Other revenue from contracts with customers 28 6 \u2013 34 Fees and commissions 634 297 70 1,001 Remaining performance obligations The practical expedient under IFRS 15 has been applied and remaining performance obligations are not disclosed as the Group has the right to consideration from customers in amounts that correspond with the performance completed to date. Specifically management charges become due over time in proportion to the Group\u2019s provision of investment management services. In the period no amortisation or impairment losses from contracts with customers were recognised in the statement of comprehensive income. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFeeAndCommissionIncomeExpenseExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-649": {
"value": "Fees related to the provision of investment management services and administration services are recognised as services are provided. Front end fees, which are charged at the inception of service contracts, are deferred as a liability and recognised over the life of the contract. No significant judgements are required in determining the timing or amount of fee income or the costs incurred to obtain or fulfil a contract. The table below disaggregates fees and commissions by segment. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFeeAndCommissionIncomeAndExpenseExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-557": {
"value": "C2. Net investment income Net investment income comprises interest, dividends, rents receivable, net interest income/(expense) on the Group defined benefit pension scheme asset/(liability), fair value gains and losses on financial assets (except for reinsurers\u2019 share of investment contract liabilities without DPF, see note E1), financial liabilities and investment property at fair value and impairment losses on loans and receivables. Interest income is recognised in the consolidated income statement as it accrues using the effective interest method. Dividend income is recognised in the consolidated income statement on the date the right to receive payment is established, which in the case of listed securities is the ex-dividend date. Rental income from investment property is recognised in the consolidated income statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income. Fair value gains and losses on financial assets and financial liabilities designated at fair value through profit or loss are recognised in the consolidated income statement. Fair value gains and losses includes both realised and unrealised gains and losses. 2022 \u00a3m 2021 \u00a3m Investment income Interest income on financial assets at amortised cost 21 1 Interest income on financial assets designated at FVTPL on initial recognition 2,888 2,647 Dividend income 5,409 4,384 Rental income 343 365 Net interest expense on Group defined benefit pension scheme (liability)/asset (64) (37) 8,597 7,360 Fair value gains/(losses) Financial assets and financial liabilities at FVTPL: Designated upon initial recognition (38,676) 12,354 Held for trading \u2013 derivatives (6,707) (2,908) Investment property (1,363) 1,195 (46,746) 10,641 Net investment income (38,149) 18,001 ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfNetInvestmentIncome",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-650": {
"value": "Net investment income comprises interest, dividends, rents receivable, net interest income/(expense) on the Group defined benefit pension scheme asset/(liability), fair value gains and losses on financial assets (except for reinsurers\u2019 share of investment contract liabilities without DPF, see note E1), financial liabilities and investment property at fair value and impairment losses on loans and receivables. Interest income is recognised in the consolidated income statement as it accrues using the effective interest method. Dividend income is recognised in the consolidated income statement on the date the right to receive payment is established, which in the case of listed securities is the ex-dividend date. Rental income from investment property is recognised in the consolidated income statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income. Fair value gains and losses on financial assets and financial liabilities designated at fair value through profit or loss are recognised in the consolidated income statement. Fair value gains and losses includes both realised and unrealised gains and losses. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForNetInvestmentIncome",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-558": {
"value": "C3. Administrative expenses Administrative expenses Administrative expenses are recognised in the consolidated income statement as incurred. Deferred acquisition costs For insurance and investment contracts with DPF, acquisition costs which include both incremental acquisition costs and other direct costs of acquiring and processing new business, are deferred. For investment contracts without DPF, incremental costs directly attributable to securing rights to receive fees for asset management services sold with unit linked investment contracts are deferred. Trail or renewal commission on investment contracts without DPF where the Group does not have an unconditional legal right to avoid payment is deferred at inception of the contract and an offsetting liability for contingent commission is established. Deferred acquisition costs are amortised over the life of the contracts as the related revenue is recognised. After initial recognition, deferred acquisition costs are reviewed by category of business and are written off to the extent that they are no longer considered to be recoverable. 2022 \u00a3m 2021 \u00a3m Employee costs 611 531 Outsourcer expenses 247 209 Professional fees 441 321 Commission expenses 145 178 Office and IT costs 172 150 Investment management expenses and transaction costs 569 528 Direct costs of collective investment schemes 25 28 Depreciation 19 18 Pension past service costs 15 \u2013 Pension administrative expenses 7 6 Advertising and sponsorship 63 58 Movement in reinsurance payables 1 93 - Other 26 59 2,433 2,086 Acquisition costs deferred during the year (32) (38) Amortisation of deferred acquisition costs 11 8 Total administrative expenses 2,412 2,056 Employee costs comprise: 2022 \u00a3m 2021 \u00a3m Wages and salaries 554 483 Social security contributions 57 48 611 531 2022 Number 2021 Number Average number of persons employed 8,165 7,885 1 Reflects an increase of \u00a393 million (2021: \u00a3nil) in the amounts payable to reinsurers in respect of certain product features of the Group\u2019s German business. There is a corresponding reduction in the gross liabilities under insurance contracts.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGeneralAndAdministrativeExpenseExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-651": {
"value": "Administrative expenses Administrative expenses are recognised in the consolidated income statement as incurred. Deferred acquisition costs For insurance and investment contracts with DPF, acquisition costs which include both incremental acquisition costs and other direct costs of acquiring and processing new business, are deferred. For investment contracts without DPF, incremental costs directly attributable to securing rights to receive fees for asset management services sold with unit linked investment contracts are deferred. Trail or renewal commission on investment contracts without DPF where the Group does not have an unconditional legal right to avoid payment is deferred at inception of the contract and an offsetting liability for contingent commission is established. Deferred acquisition costs are amortised over the life of the contracts as the related revenue is recognised. After initial recognition, deferred acquisition costs are reviewed by category of business and are written off to the extent that they are no longer considered to be recoverable. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForAdministrativeExpenses",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-559": {
"value": "C4. Auditor\u2019s remuneration During the year the Group obtained the following services from its auditor at costs as detailed in the table below. 2022 \u00a3m 2021 \u00a3m Audit of the consolidated financial statements 4.8 1.8 Audit of the Company\u2019s subsidiaries 10.7 9.8 15.5 11.6 Audit-related assurance services 2.4 2.3 Total fee for assurance services 17.9 13.9 Total auditor\u2019s remuneration 17.9 13.9 No services were provided by the Company\u2019s auditors to the Group\u2019s pension schemes in either 2022 or 2021. The increase in the audit fee during 2022 principally reflects the additional work undertaken in connection with the transition to IFRS 17. Audit related assurance services includes fees payable for services where the reporting is required by law or regulation to be provided by the auditor, such as reporting on regulatory returns. It also includes fees payable in respect of reviews of interim financial information and services where the work is integrated with the audit itself. There were no other non-audit services provided during the year (2021: \u00a3nil). Further information on auditor\u2019s remuneration and the assessment of the independence of the external auditor is set out in the Audit Committee report on pages 96 to 101. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-560": {
"value": "C5. Finance costs Interest payable is recognised in the consolidated income statement as it accrues and is calculated using the effective interest method. 2022 \u00a3m 2021 \u00a3m Interest expense On financial liabilities at amortised cost 227 239 On leases 3 3 230 242 Attributable to: \u2022 policyholders 3 2 \u2022 owners 227 240 230 242 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceCostExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-652": {
"value": "Interest payable is recognised in the consolidated income statement as it accrues and is calculated using the effective interest method. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceCostsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-561": {
"value": "C6. Tax charge Income tax comprises current and deferred tax. Income tax is recognised in the consolidated income statement except to the extent that it relates to items recognised in the statement of consolidated comprehensive income or the statement of consolidated changes in equity, in which case it is recognised in these statements. Current tax is the expected tax payable on the taxable income for the year, using tax rates and laws enacted or substantively enacted at the date of the statement of consolidated financial position together with adjustments to tax payable in respect of previous years. The tax charge is analysed between tax that is payable in respect of policyholders\u2019 returns and tax that is payable on owners\u2019 returns. This allocation is calculated based on an assessment of the effective rate of tax that is applicable to owners for the year. C6.1 Current year tax charge 2022 \u00a3m 2021 \u00a3m Current tax: UK corporation tax 36 (9) Overseas tax 85 114 121 105 Adjustment in respect of prior years (23) (66) Total current tax charge 98 39 Deferred tax: Origination and reversal of temporary differences (1,067) 120 Change in the rate of UK corporation tax (123) 147 Adjustments in respect of prior years 14 (27) Total deferred tax (credit)/charge (1,176) 240 Total tax (credit)/charge (1,078) 279 Attributable to: \u2022 policyholders (579) 258 \u2022 owners (499) 21 Total tax (credit)/charge (1,078) 279 The Group, as a proxy for policyholders in the UK, is required to pay taxes on investment income and gains each year. Accordingly, the tax credit or expense attributable to UK life assurance policyholder earnings is included in income tax expense. The tax credit attributable to policyholder earnings was \u00a3579 million (2021: \u00a3258 million charge). The 2022 current tax prior year adjustment relates principally to a tax dispute with HMRC in relation to the tax treatment of an asset formerly held by Guardian Assurance Limited (before the business was transferred to ReAssure Limited). This was resolved in the period in favour of the Group. The 2021 current tax liability included an accrual for the total tax under dispute. The matter was heard before the First Tier Tribunal in May 2022 and the Court found in favour of ReAssure Limited. HMRC are not appealing against this decision and so the accrual for the potential tax liability has been released. C6.2 Tax charged to other comprehensive income 2022 \u00a3m 2021 \u00a3m Current tax charge \u2013 1 Deferred tax charge on defined benefit schemes 280 137 280 138 C6.3 Tax (credited)/charged to equity 2022 \u00a3m 2021 \u00a3m Current tax credit on Tier 1 Notes (7) (6) Deferred tax charge/(credit) on share schemes 2 (1) Total tax credit (5) (7) C6.4 Reconciliation of tax charge 2022 \u00a3m 2021 \u00a3m Loss for the year before tax (2,840) (430) Policyholder tax credit/(charge) 579 (258) Loss before the tax attributable to owners (2,261) (688) Tax credit at standard UK rate of 19% (2021: 19%) 1 (429) (131) Non-taxable income (4) (10) Disallowable expenses 2 19 Prior year tax credit for shareholders 2 (17) (7) Movement on acquired in-force amortisation at less than 19% (2021: 19%) 26 34 Profits taxed at rates other than 19% (2021: 19%) 3 18 (22) Derecognition/(recognition) of previously recognised/(unrecognised) deferred tax assets 4 14 (13) Deferred tax rate change 5 (119) 147 Current year losses not valued 6 16 1 Other 7 (6) 3 Owners\u2019 tax (credit)/charge (499) 21 Policyholder tax (credit)/charge (579) 258 Total tax (credit)/charge for the year (1,078) 279 1 The Phoenix operating segments are predominantly in the UK. The reconciliation of tax charge has therefore, been completed by reference to the standard rate of UK tax 2 The prior year tax credit relates to true-ups from the 2021 tax reporting provisions in various entities within the Group and the resolution of the ReAssure Limited tax dispute with HMRC, described above 3 Profits taxed at rates other than 19% relates to overseas profits, consolidated fund investments and UK life company profits subject to marginal shareholder tax rates 4 Relates primarily to reduction in the future value of capital losses in ReAssure Limited, arising from further policyholder losses accrued in the period 5 Deferred tax rate change relates primarily to movements in deferred tax liabilities on non-refundable pension scheme surplus which are expected to unwind, and deferred tax assets on losses expected to be relieved, at rates in excess of the current year rate of 19% 6 Relates primarily to tax losses in Standard Life International DAC, in relation to which a deferred tax asset cannot be recognised 7 Principally relates to UK tax relief available in relation to foreign withholding tax incurred ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-653": {
"value": "Income tax comprises current and deferred tax. Income tax is recognised in the consolidated income statement except to the extent that it relates to items recognised in the statement of consolidated comprehensive income or the statement of consolidated changes in equity, in which case it is recognised in these statements. Current tax is the expected tax payable on the taxable income for the year, using tax rates and laws enacted or substantively enacted at the date of the statement of consolidated financial position together with adjustments to tax payable in respect of previous years. The tax charge is analysed between tax that is payable in respect of policyholders\u2019 returns and tax that is payable on owners\u2019 returns. This allocation is calculated based on an assessment of the effective rate of tax that is applicable to owners for the year. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-635": {
"value": "Deferred tax: Origination and reversal of temporary differences (1,067) 120 Change in the rate of UK corporation tax (123) 147 Adjustments in respect of prior years 14 (27) Total deferred tax (credit)/charge (1,176) 240 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-611": {
"value": "D. Equity D1. Share capital The Group has issued ordinary shares which are classified as equity. Incremental external costs that are directly attributable to the issue of these shares are recognised in equity, net of tax. 2022 \u00a3m 2021 \u00a3m Issued and fully paid: 1,000.4 million ordinary shares of \u00a30.10 each (2021: 999.5 million) 100 100 The holders of ordinary shares are entitled to one vote per share on matters to be voted on by owners and to receive such dividends, if any, as may be declared by the Board of Directors in its discretion out of legally available profits. Movements in issued share capital during the year: 2022 Number 2022 \u00a3 2021 Number 2021 \u00a3 Shares in issue at 1 January 999,536,058 99,953,605 999,232,144 99,923,214 Ordinary shares issued in the year 816,419 81,642 303,914 30,391 Shares in issue at 31 December 1,000,352,477 100,035,247 999,536,058 99,953,605 During the year, 816,419 shares (2021: 303,914) were issued at a premium \u00a34 million (2021: \u00a32 million) in order to satisfy obligations to employees under the Group\u2019s sharesave schemes (see note I1). The balance in the merger reserve arose upon the issuance of equity shares in 2020 as part consideration for the acquisition of the entire share capital of ReAssure Group plc. The Group has applied the relief in section 612 of the Companies Act 2006 to present the difference between the consideration received and the nominal value of the shares issued of \u00a31,819 million in a merger reserve as opposed to in share premium. D2. Shares held by the employee benefit trust Where the Phoenix Group Employee Benefit Trust (\u2018EBT\u2019) acquires shares in the Company or obtains rights to purchase its shares, the consideration paid (including any attributable transaction costs, net of tax) is shown as a deduction from owners\u2019 equity. Gains and losses on sales of shares held by the EBT are charged or credited to the own shares account in equity. The EBT holds shares to satisfy awards granted to employees under the Group\u2019s share-based payment schemes. 2022 \u00a3m 2021 \u00a3m At 1 January 12 6 Shares acquired by the EBT 13 16 Shares awarded to employees by the EBT (12) (10) At 31 December 13 12 During the year 1,764,660 (2021: 1,490,492) shares were awarded to employees by the EBT and 1,970,764 (2021: 2,423,407) shares were purchased. The number of shares held by the EBT at 31 December 2022 was 2,092,022 (2021: 1,885,918). The Company provided the EBT with an interest-free facility arrangement to enable it to purchase the shares. D3 Other reserves The other reserves comprise the owner-occupied property revaluation reserve and the cash flow hedging reserve. Owner-occupied property revaluation reserve This reserve comprises the revaluation surplus arising on revaluation of owner-occupied property. When a revaluation loss arises on a previously revalued asset it should be deducted first against the previous revaluation gain. Any excess impairment will then be recorded as an impairment expense in the consolidated income statement. Cash flow hedging reserve Where a cash flow hedging relationship exists, the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the consolidated income statement, and is reported in net investment income. Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time is recycled to profit or loss over the period the hedged item impacts profit or loss. Further details of the Group\u2019s hedge accounting policy are included in note E1. 2022 Owner-occupied property revaluation reserve \u00a3m Cash flow hedging reserve \u00a3m Total other reserves \u00a3m At 1 January 2022 5 51 56 Other comprehensive expense for the year (5) (5) (10) At 31 December 2022 \u2013 46 46 2021 Owner-occupied property revaluation reserve \u00a3m Cash flow hedging reserve \u00a3m Total other reserves \u00a3m At 1 January 2021 5 43 48 Other comprehensive income for the year \u2013 8 8 At 31 December 2021 5 51 56 In June 2021, the Group entered into four cross currency swaps which were designated as hedging instruments in order to effect cash flow hedges of the Group\u2019s Euro and US Dollar denominated borrowings. Hedge accounting has been adopted effective from the date of designation of the hedging relationship. D4. Tier 1 notes The Fixed Rate Reset Perpetual Restricted Tier 1 Contingent Convertible Notes (\u2018Tier 1 Notes\u2019) meet the definition of equity and accordingly are shown as a separate category within equity at the proceeds of issue. The coupons on the instruments are recognised as distributions on the date of payment and are charged directly to the statement of consolidated changes in equity. 2022 \u00a3m 2021 \u00a3m Tier 1 Notes 494 494 On 26 April 2018, Old PGH (the Group\u2019s ultimate parent company up to December 2018) issued \u00a3500 million of Tier 1 Notes, the proceeds of which were used to fund a portion of the cash consideration for the acquisition of the Standard Life Assurance businesses. The Tier 1 Notes bear interest on their principal amount at a fixed rate of 5.75% per annum up to the \u2018First Call Date\u2019 of 26 April 2028. Thereafter the fixed rate of interest will be reset on the First Call Date and on each fifth anniversary of this date by reference to a 5-year gilt yield plus a margin of 4.169%. Interest is payable on the Tier 1 Notes semi- annually in arrears on 26 October and 26 April. The coupon paid in the year was \u00a329 million (2021: \u00a329 million). At the issue date, the Tier 1 Notes were unsecured and subordinated obligations of Old PGH. On 12 December 2018, the Company was substituted in place of Old PGH as issuer. The Tier 1 Notes have no fixed maturity date and interest is payable only at the sole and absolute discretion of the Company; accordingly the Tier 1 Notes meet the definition of equity for financial reporting purposes and are disclosed as such in the consolidated financial statements. If an interest payment is not made, it is cancelled and it shall not accumulate or be payable at any time thereafter. The Tier 1 Notes may be redeemed at par on the First Call Date or on any interest payment date thereafter at the option of the Company and also in other limited circumstances. If such redemption occurs prior to the fifth anniversary of the Issue Date, such redemption must be funded out of the proceeds of a new issuance of, or exchanged into, Tier 1 Own Funds of the same or a higher quality than the Tier 1 Notes. In respect of any redemption or purchase of the Tier 1 Notes, such redemption or purchase is subject to the receipt of permission to do so from the PRA. On 27 October 2020, the terms of the Tier 1 Notes were amended and the consequence of a trigger event, linked to the Solvency II capital position, was changed. Previously, the Tier 1 Notes were subject to a permanent write-down in value to zero. The amended terms require that the Tier 1 Notes would automatically be subject to conversion to ordinary shares of the Company at the conversion price of \u00a31,000 per share, subject to adjustment in accordance with the terms and conditions of the notes and all accrued and unpaid interest would be cancelled. Following any such conversion there would be no reinstatement of any part of the principal amount of, or interest on, the Tier 1 Notes at any time. D5. Non-controlling interests Non-controlling interests are stated at the share of net assets attributed to the non-controlling interest holder at the time of acquisition, adjusted for the relevant share of subsequent changes in equity . APEOT 2022 \u00a3m APEOT 2021 \u00a3m At 1 January 460 341 Profit for the year 67 128 Dividends paid (10) (9) Increase in non-controlling interests 15 \u2013 At 31 December 532 460 The non-controlling interests of \u00a3532 million (2021: \u00a3460 million) reflects third party ownership of abrdn Private Equity Opportunities Trust plc (\u2018APEOT\u2019) determined at the proportionate value of the third party interest in the underlying assets and liabilities. APEOT is a UK Investment Trust listed and traded on the London Stock Exchange. As at 31 December 2022, the Group held 53.6% (2021: 55.2%) of the issued share capital of APEOT. The Group\u2019s interest in APEOT is held in the with-profit and unit-linked funds of the Group\u2019s life companies. Therefore, the shareholder exposure to the results of APEOT is limited to the impact of those results on the shareholder share of distributed profits of the relevant fund. Summary financial information showing the interest that non-controlling interests have in the Group\u2019s activities and cash flows is shown below: APEOT 2022 \u00a3m 2021 \u00a3m Statement of financial position: Financial assets 554 452 Other assets 12 19 Total assets 566 471 Total liabilities 34 11 Income statement: Net income 74 134 Profit after tax 67 128 Comprehensive income 67 128 Cash flows: Net (decrease)/increase in cash and cash equivalents (7) 10 ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfItemsInEquity",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-562": {
"value": "D1. Share capital The Group has issued ordinary shares which are classified as equity. Incremental external costs that are directly attributable to the issue of these shares are recognised in equity, net of tax. 2022 \u00a3m 2021 \u00a3m Issued and fully paid: 1,000.4 million ordinary shares of \u00a30.10 each (2021: 999.5 million) 100 100 The holders of ordinary shares are entitled to one vote per share on matters to be voted on by owners and to receive such dividends, if any, as may be declared by the Board of Directors in its discretion out of legally available profits. Movements in issued share capital during the year: 2022 Number 2022 \u00a3 2021 Number 2021 \u00a3 Shares in issue at 1 January 999,536,058 99,953,605 999,232,144 99,923,214 Ordinary shares issued in the year 816,419 81,642 303,914 30,391 Shares in issue at 31 December 1,000,352,477 100,035,247 999,536,058 99,953,605 During the year, 816,419 shares (2021: 303,914) were issued at a premium \u00a34 million (2021: \u00a32 million) in order to satisfy obligations to employees under the Group\u2019s sharesave schemes (see note I1). The balance in the merger reserve arose upon the issuance of equity shares in 2020 as part consideration for the acquisition of the entire share capital of ReAssure Group plc. The Group has applied the relief in section 612 of the Companies Act 2006 to present the difference between the consideration received and the nominal value of the shares issued of \u00a31,819 million in a merger reserve as opposed to in share premium. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-654": {
"value": "The Group has issued ordinary shares which are classified as equity. Incremental external costs that are directly attributable to the issue of these shares are recognised in equity, net of tax. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIssuedCapitalExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-563": {
"value": "D2. Shares held by the employee benefit trust Where the Phoenix Group Employee Benefit Trust (\u2018EBT\u2019) acquires shares in the Company or obtains rights to purchase its shares, the consideration paid (including any attributable transaction costs, net of tax) is shown as a deduction from owners\u2019 equity. Gains and losses on sales of shares held by the EBT are charged or credited to the own shares account in equity. The EBT holds shares to satisfy awards granted to employees under the Group\u2019s share-based payment schemes. 2022 \u00a3m 2021 \u00a3m At 1 January 12 6 Shares acquired by the EBT 13 16 Shares awarded to employees by the EBT (12) (10) At 31 December 13 12 During the year 1,764,660 (2021: 1,490,492) shares were awarded to employees by the EBT and 1,970,764 (2021: 2,423,407) shares were purchased. The number of shares held by the EBT at 31 December 2022 was 2,092,022 (2021: 1,885,918). The Company provided the EBT with an interest-free facility arrangement to enable it to purchase the shares. ",
"dimensions": {
"concept": "phoenixgroupholdings:disclosureOfSharesHeldByTheEmployeeBenefitTrust",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-655": {
"value": "Where the Phoenix Group Employee Benefit Trust (\u2018EBT\u2019) acquires shares in the Company or obtains rights to purchase its shares, the consideration paid (including any attributable transaction costs, net of tax) is shown as a deduction from owners\u2019 equity. Gains and losses on sales of shares held by the EBT are charged or credited to the own shares account in equity. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForSharesHelfByTheEmployeeBenefitTrust",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-564": {
"value": "D3 Other reserves The other reserves comprise the owner-occupied property revaluation reserve and the cash flow hedging reserve. Owner-occupied property revaluation reserve This reserve comprises the revaluation surplus arising on revaluation of owner-occupied property. When a revaluation loss arises on a previously revalued asset it should be deducted first against the previous revaluation gain. Any excess impairment will then be recorded as an impairment expense in the consolidated income statement. Cash flow hedging reserve Where a cash flow hedging relationship exists, the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the consolidated income statement, and is reported in net investment income. Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time is recycled to profit or loss over the period the hedged item impacts profit or loss. Further details of the Group\u2019s hedge accounting policy are included in note E1. 2022 Owner-occupied property revaluation reserve \u00a3m Cash flow hedging reserve \u00a3m Total other reserves \u00a3m At 1 January 2022 5 51 56 Other comprehensive expense for the year (5) (5) (10) At 31 December 2022 \u2013 46 46 2021 Owner-occupied property revaluation reserve \u00a3m Cash flow hedging reserve \u00a3m Total other reserves \u00a3m At 1 January 2021 5 43 48 Other comprehensive income for the year \u2013 8 8 At 31 December 2021 5 51 56 In June 2021, the Group entered into four cross currency swaps which were designated as hedging instruments in order to effect cash flow hedges of the Group\u2019s Euro and US Dollar denominated borrowings. Hedge accounting has been adopted effective from the date of designation of the hedging relationship. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-656": {
"value": "The other reserves comprise the owner-occupied property revaluation reserve and the cash flow hedging reserve. Owner-occupied property revaluation reserve This reserve comprises the revaluation surplus arising on revaluation of owner-occupied property. When a revaluation loss arises on a previously revalued asset it should be deducted first against the previous revaluation gain. Any excess impairment will then be recorded as an impairment expense in the consolidated income statement. Cash flow hedging reserve Where a cash flow hedging relationship exists, the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the consolidated income statement, and is reported in net investment income. Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time is recycled to profit or loss over the period the hedged item impacts profit or loss. Further details of the Group\u2019s hedge accounting policy are included in note E1. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForOtherReserves",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-565": {
"value": "D4. Tier 1 notes The Fixed Rate Reset Perpetual Restricted Tier 1 Contingent Convertible Notes (\u2018Tier 1 Notes\u2019) meet the definition of equity and accordingly are shown as a separate category within equity at the proceeds of issue. The coupons on the instruments are recognised as distributions on the date of payment and are charged directly to the statement of consolidated changes in equity. 2022 \u00a3m 2021 \u00a3m Tier 1 Notes 494 494 On 26 April 2018, Old PGH (the Group\u2019s ultimate parent company up to December 2018) issued \u00a3500 million of Tier 1 Notes, the proceeds of which were used to fund a portion of the cash consideration for the acquisition of the Standard Life Assurance businesses. The Tier 1 Notes bear interest on their principal amount at a fixed rate of 5.75% per annum up to the \u2018First Call Date\u2019 of 26 April 2028. Thereafter the fixed rate of interest will be reset on the First Call Date and on each fifth anniversary of this date by reference to a 5-year gilt yield plus a margin of 4.169%. Interest is payable on the Tier 1 Notes semi- annually in arrears on 26 October and 26 April. The coupon paid in the year was \u00a329 million (2021: \u00a329 million). At the issue date, the Tier 1 Notes were unsecured and subordinated obligations of Old PGH. On 12 December 2018, the Company was substituted in place of Old PGH as issuer. The Tier 1 Notes have no fixed maturity date and interest is payable only at the sole and absolute discretion of the Company; accordingly the Tier 1 Notes meet the definition of equity for financial reporting purposes and are disclosed as such in the consolidated financial statements. If an interest payment is not made, it is cancelled and it shall not accumulate or be payable at any time thereafter. The Tier 1 Notes may be redeemed at par on the First Call Date or on any interest payment date thereafter at the option of the Company and also in other limited circumstances. If such redemption occurs prior to the fifth anniversary of the Issue Date, such redemption must be funded out of the proceeds of a new issuance of, or exchanged into, Tier 1 Own Funds of the same or a higher quality than the Tier 1 Notes. In respect of any redemption or purchase of the Tier 1 Notes, such redemption or purchase is subject to the receipt of permission to do so from the PRA. On 27 October 2020, the terms of the Tier 1 Notes were amended and the consequence of a trigger event, linked to the Solvency II capital position, was changed. Previously, the Tier 1 Notes were subject to a permanent write-down in value to zero. The amended terms require that the Tier 1 Notes would automatically be subject to conversion to ordinary shares of the Company at the conversion price of \u00a31,000 per share, subject to adjustment in accordance with the terms and conditions of the notes and all accrued and unpaid interest would be cancelled. Following any such conversion there would be no reinstatement of any part of the principal amount of, or interest on, the Tier 1 Notes at any time. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfTier1Notes",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-657": {
"value": "The Fixed Rate Reset Perpetual Restricted Tier 1 Contingent Convertible Notes (\u2018Tier 1 Notes\u2019) meet the definition of equity and accordingly are shown as a separate category within equity at the proceeds of issue. The coupons on the instruments are recognised as distributions on the date of payment and are charged directly to the statement of consolidated changes in equity. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForTier1Notes",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-566": {
"value": "D5. Non-controlling interests Non-controlling interests are stated at the share of net assets attributed to the non-controlling interest holder at the time of acquisition, adjusted for the relevant share of subsequent changes in equity . APEOT 2022 \u00a3m APEOT 2021 \u00a3m At 1 January 460 341 Profit for the year 67 128 Dividends paid (10) (9) Increase in non-controlling interests 15 \u2013 At 31 December 532 460 The non-controlling interests of \u00a3532 million (2021: \u00a3460 million) reflects third party ownership of abrdn Private Equity Opportunities Trust plc (\u2018APEOT\u2019) determined at the proportionate value of the third party interest in the underlying assets and liabilities. APEOT is a UK Investment Trust listed and traded on the London Stock Exchange. As at 31 December 2022, the Group held 53.6% (2021: 55.2%) of the issued share capital of APEOT. The Group\u2019s interest in APEOT is held in the with-profit and unit-linked funds of the Group\u2019s life companies. Therefore, the shareholder exposure to the results of APEOT is limited to the impact of those results on the shareholder share of distributed profits of the relevant fund. Summary financial information showing the interest that non-controlling interests have in the Group\u2019s activities and cash flows is shown below: APEOT 2022 \u00a3m 2021 \u00a3m Statement of financial position: Financial assets 554 452 Other assets 12 19 Total assets 566 471 Total liabilities 34 11 Income statement: Net income 74 134 Profit after tax 67 128 Comprehensive income 67 128 Cash flows: Net (decrease)/increase in cash and cash equivalents (7) 10 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfNoncontrollingInterestsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-658": {
"value": "Non-controlling interests are stated at the share of net assets attributed to the non-controlling interest holder at the time of acquisition, adjusted for the relevant share of subsequent changes in equity ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForTransactionsWithNoncontrollingInterestsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-636": {
"value": "E. Financial assets & liabilities E1. Fair values Financial assets Purchases and sales of financial assets are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. Loans and deposits are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and only include assets where a security has not been issued. These loans and deposits are initially recognised at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributable to the acquisition are also included in the cost of the investment. Subsequent to initial recognition, these investments are carried at amortised cost, using the effective interest method. Derivative financial instruments are largely classified as held for trading. They are recognised initially at fair value and subsequently are remeasured to fair value. The gain or loss on remeasurement to fair value is recognised in the consolidated income statement. Derivative financial instruments are not classified as held for trading where they are designated and effective as a hedging instrument. For such instruments, the timing of the recognition of any gain or loss that arises on remeasurement to fair value in profit or loss depends on the nature of the hedge relationship. Equities, debt securities and collective investment schemes are designated at FVTPL and accordingly are stated in the statement of consolidated financial position at fair value. They are designated at FVTPL because this is reflective of the manner in which the financial assets are managed and reduces a measurement inconsistency that would otherwise arise with regard to the insurance liabilities that the assets are backing. The Group has treaties in place with third party insurance companies to provide reinsurance in respect of liabilities that are linked to the performance of funds maintained by those companies. The contracts in question do not transfer significant insurance risk and therefore are classified as financial instruments and are valued at fair value through profit and loss. These contracts are disclosed under Reinsurers\u2019 share of investment contract liabilities in the statement of consolidated financial position. Impairment of financial assets The Group assesses at each period end whether a financial asset or group of financial assets held at amortised cost are impaired. The Group first assesses whether objective evidence of impairment exists. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognised, are not included in the collective assessment of impairment. Fair value estimation The fair values of financial instruments traded in active markets such as publicly traded securities and derivatives are based on quoted market prices at the period end. The quoted market price used for financial assets is the applicable bid price on the period end date. The fair value of investments that are not traded in an active market is determined using valuation techniques such as broker quotes, pricing models or discounted cash flow techniques. Where pricing models are used, inputs are based on market related data at the period end. Where discounted cash flow techniques are used, estimated future cash flows are based on contractual cash flows using current market conditions and market calibrated discount rates and interest rate assumptions for similar instruments. For units in unit trusts and shares in open-ended investment companies, fair value is determined by reference to published bid-values. The fair value of receivables and floating rate and overnight deposits with credit institutions is their carrying value. The fair value of fixed interest-bearing deposits is estimated using discounted cash flow techniques. Associates Investments in associates that are held for investment purposes are accounted for under IAS 39 Financial Instruments: Recognition and Measurement as permitted by IAS 28 Investments in Associates and Joint Ventures. These are measured at fair value through profit or loss. There are no investments in associates which are of a strategic nature. Derecognition of financial assets A financial asset (or part of a group of similar financial assets) is derecognised where: \u2022 the rights to receive cash flows from the asset have expired; \u2022 the Company retains the right to receive cash flows from the assets, but has assumed an obligation to pay them in full without material delay to a third party under a \u2018pass-through\u2019 arrangement; or \u2022 the Company has transferred its rights to receive cash flows from the asset and has either transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Financial liabilities On initial recognition, financial liabilities are recognised when due and measured at the fair value of the consideration received less directly attributable transaction costs (with the exception of liabilities at FVTPL for which all transaction costs are expensed). Subsequent to initial recognition, financial liabilities (except for liabilities under investment contracts without DPF and other liabilities designated at FVTPL) are measured at amortised cost using the effective interest method. Financial liabilities are designated upon initial recognition at FVTPL and where doing so results in more meaningful information because either: \u2022 it eliminates or significantly reduces accounting mismatches that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or \u2022 a group of financial assets, financial liabilities or both is managed and its performance is evaluated and managed on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the investments is provided internally on that basis to the Group\u2019s key management personnel. Investment contracts without DPF Contracts under which the transfer of insurance risk to the Group from the policyholder is not significant are classified as investment contracts and accounted for as financial liabilities. Receipts and payments on investment contracts without DPF are accounted for using deposit accounting, under which the amounts collected and paid out are recognised in the statement of consolidated financial position as an adjustment to the liability to the policyholder. The valuation of liabilities on unit-linked contracts are held at the fair value of the related assets and liabilities. The liability is the sum of the unit-linked liabilities plus an additional amount to cover the present value of the excess of future policy costs over future charges. Movements in the fair value of investment contracts without DPF and reinsurers\u2019 share of investment contract liabilities are included in the \u2018change in investment contract liabilities\u2019 in the consolidated income statement. Investment contract policyholders are charged for policy administration services, investment management services, surrenders and other contract fees. These fees are recognised as revenue over the period in which the related services are performed. If the fees are for services provided in future periods, then they are deferred and recognised over those periods. \u2018Front end\u2019 fees are charged on some non-participating investment contracts. Where the non-participating investment contract is measured at fair value, such fees which relate to the provision of investment management services are deferred and recognised as the services are provided. Deposits received from reinsurers It is the Group\u2019s practice to obtain collateral to cover certain reinsurance transactions, usually in the form of cash or marketable securities. Where cash collateral is available to the Group for investment purposes, it is recognised as a \u2018financial asset\u2019 and the collateral repayable is recognised as \u2018deposits received from reinsurers\u2019 in the statement of consolidated financial position. The \u2018deposits received from reinsurers\u2019 are measured at amortised cost. Net asset value attributable to unitholders The net asset value attributable to unitholders represents the non-controlling interest in collective investment schemes which are consolidated by the Group. This interest is classified at FVTPL and measured at fair value, which is equal to the bid value of the number of units of the collective investment scheme not owned by the Group. Obligations for repayment of collateral received It is the Group\u2019s practice to obtain collateral in stock lending and derivative transactions, usually in the form of cash or marketable securities. Where cash collateral received is available to the Group for investment purposes, it is recognised as a \u2018financial asset\u2019 and the collateral repayable is recognised as \u2018obligations for repayment of collateral received\u2019 in the statement of consolidated financial position. The \u2018obligations for repayment of collateral received\u2019 are measured at amortised cost, which in the case of cash is equivalent to the fair value of the consideration received. Further details of the Group\u2019s collateral arrangements are included in note E4. Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability is discharged, instead of or cancelled or expires. Offsetting financial assets and financial liabilities Financial assets and liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. When financial assets and liabilities are offset any related interest income and expense is offset in the income statement. Hedge accounting The Group designates certain derivatives as hedging instruments in order to effect cash flow hedges. At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk. Where a cash flow hedging relationship exists, the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in net investment income. Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time is recycled to profit or loss over the period the hedged item impacts profit or loss. E1.1 Fair values analysis The table below sets out a comparison of the carrying amounts and fair values of financial instruments as at 31 December 2022: Carrying value 2022 Total \u00a3m Amounts due for settlement after 12 months \u00a3m Fair value \u00a3m Financial assets Financial assets at fair value through profit or loss: Held for trading \u2013 derivatives 4,071 3,353 4,071 Designated upon initial recognition: Equities 1 76,780 \u2013 76,780 Investment in associate (see note H2) 1 329 \u2013 329 Debt securities 84,710 70,115 84,710 Collective investment schemes 1 78,353 \u2013 78,353 Reinsurers' share of investment contract liabilities 1 9,088 \u2013 9,088 Financial assets measured at amortised cost: Loans and deposits 279 99 279 Total financial assets 253,610 253,610 Less amounts classified as financial assets held for sale (see note A6.1) 2 (4,629) (4,629) Total financial assets less financial assets classified as held for sale 248,981 248,981 Carrying value 2022 Total \u00a3m Amounts due for settlement after 12 months \u00a3m Fair value \u00a3m Financial liabilities Financial liabilities at fair value through profit or loss: Held for trading \u2013 derivatives 5,879 5,118 5,879 Designated upon initial recognition: Borrowings 64 64 64 Net asset value attributable to unitholders 1 2,978 \u2013 2,978 Investment contract liabilities 1 152,157 \u2013 152,157 Financial liabilities measured at amortised cost: Borrowings 3,916 3,648 3,644 Deposits received from reinsurers 2,598 2,221 2,598 Obligations for repayment of collateral received 1,706 \u2013 1,706 Total financial liabilities 169,298 169,026 Less amounts classified as financial liabilities held for sale (see note A6.1) 3 (8,316) (8,316) Total financial liabilities less financial liabilities held for sale 160,982 160,710 1 These assets and liabilities have no specified settlement date. 2 Amounts classified as financial assets held for sale include derivatives of \u00a33 million, equities of \u00a343 million, debt securities of \u00a31,594 million, collective investment schemes of \u00a32,964 million and reinsurers\u2019 share of investment contract liabilities of \u00a325 million. 3 Amounts classified as financial liabilities held for sale include derivative liabilities of \u00a34 million and investment contract liabilities of \u00a38,312 million. Carrying value 2021 Total \u00a3m Amounts due for settlement after 12 months \u00a3m Fair value \u00a3m Financial assets Financial assets at fair value through profit or loss: Held for trading \u2013 derivatives 4,571 3,208 4,571 Designated upon initial recognition: Equities 1 87,059 \u2013 87,059 Investment in associate (see note H2) 1 431 \u2013 431 Debt securities 106,990 88,965 106,990 Collective investment schemes 1 90,164 \u2013 90,164 Reinsurers' share of investment contract liabilities 1 10,009 \u2013 10,009 Financial assets measured at amortised cost: Loans and deposits 475 48 475 Total financial assets 299,699 299,699 Less amounts classified as financial assets held for sale (see note A6.1) 2 (6,507) (6,507) Total financial assets less financial assets classified as held for sale 293,192 293,192 Carrying value Total \u00a3m Amounts due for settlement after 12 months \u00a3m Total \u00a3m Financial liabilities Financial liabilities at fair value through profit or loss: Held for trading \u2013 derivatives 1,252 989 1,252 Designated upon initial recognition: Borrowings 70 70 70 Net asset value attributable to unitholders 1 3,568 \u2013 3,568 Investment contract liabilities 1 172,093 \u2013 172,093 Financial liabilities measured at amortised cost: Borrowings 4,155 3,688 4,564 Deposits received from reinsurers 3,569 3,150 3,569 Obligations for repayment of collateral received 3,442 \u2013 3,442 Total financial liabilities 188,149 188,558 Less amounts classified as financial liabilities held for sale 3 (11,680) (11,680) Total financial liabilities less financial liabilities held for sale 176,469 176,878 1 These assets and liabilities have no specified settlement date. 2 Amounts classified as financial assets held for sale include derivatives of \u00a34 million, equities of \u00a378 million, debt securities of \u00a32,229 million, collective investment schemes of \u00a34,169 million and reinsurers\u2019 share of investment contract liabilities of \u00a327 million. 3 Amounts classified as financial liabilities held for sale include derivative liabilities of \u00a34 million and investment contract liabilities of \u00a311,676 million. E1.2 IFRS 9 temporary exemption disclosures
Following application of the temporary exemption granted to insurers in IFRS 4
Insurance Contracts
from applying IFRS 9
Financial Instruments
(see note A5) the table below separately identifies financial assets with contractual cash flows that are solely payments of principal and interest (\u2018SPPI\u2019)
(excluding those held for trading or managed on a fair value basis) and all other financial assets, measured at fair value through profit or loss.
2022
\u00a3m
2021
\u00a3m
Financial assets with contractual cash flows that are SPPI excluding those held for trading or managed on a fair value basis:
Loans and deposits
279 475
Cash and cash equivalents
1
8,839 9,112
Accrued income
330 282
Other receivables
2
4,478 1,697
All other financial assets that are measured at fair value through profit or loss
3
248,702 292,717
1 Cash and cash equivalents excludes assets classified as held for sale of \u00a333 million (2021: \u00a376 million).
2 Other receivables excludes deferred acquisition costs.
3 The change in fair value during 2022 of all other financial assets that are measured at fair value through profit or loss is a \u00a3 43,834 million loss (2021: \u00a35,881 million loss). The balance
excludes \u00a34,629 million (2021: \u00a36,507 million) of financial assets that are measured at fair value through profit or loss classified as held for sale.
An analysis of credit ratings of financial assets with contractual cash flows that are SPPI, excluding those held for trading or managed on a fair value basis,
is provided below:
2022 AAA AA A BBB
BB and
below Non-rated
1
Unit-linked Total
Less
amounts
classified as
held for sale Total
Carrying value
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Loans and deposits
\u2013 4 \u2013 \u2013 \u2013 204 71 279 \u2013 279
Cash and cash equivalents
339 1,160 5,749 63 \u2013 5 1,556 8,872 (33) 8,839
Accrued income
\u2013 \u2013 \u2013 \u2013 \u2013 330 \u2013 330 \u2013 330
Other receivables
\u2013 \u2013 \u2013 \u2013 \u2013 4,478 \u2013 4,478 \u2013 4,478
339 1,164 5,749 63 \u2013 5,017 1,627 13,959 (33) 13,926
2021 AAA AA A BBB
BB and
below Non-rated1 Unit-linked Total
Less
amounts
classified as
held for sale Total
Carrying value \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Loans and deposits
\u2013 6 \u2013 \u2013 \u2013 414 55 475 \u2013 475
Cash and cash equivalents
382 1,686 5,161 181 \u2013 3 1,775 9,188 (76) 9,112
Accrued income
\u2013 \u2013 \u2013 \u2013 \u2013 282 \u2013 282 \u2013 282
Other receivables
\u2013 \u2013 \u2013 \u2013 \u2013 1,697 \u2013 1,697 \u2013 1,697
382 1,692 5,161 181 \u2013 2,396 1,830 11,642 (76) 11,566
1 The Group has assessed its non-rated assets as having a low credit risk.
E2. Fair value hierarchy E2.1 Determination of fair value and fair value hierarchy of financial instruments Level 1 financial instruments The fair value of financial instruments traded in active markets (such as exchange traded securities and derivatives) is based on quoted market prices at the period end provided by recognised pricing services. Market depth and bid-ask spreads are used to corroborate whether an active market exists for an instrument. Greater depth and narrower bid-ask spread indicate higher liquidity in the instrument and are classed as Level 1 inputs. For collective investment schemes and reinsurers\u2019 share of investment contract liabilities, fair value is by reference to published bid prices. Level 2 financial instruments Financial instruments traded in active markets with less depth or wider bid-ask spreads which do not meet the classification as Level 1 inputs, are classified as Level 2. The fair values of financial instruments not traded in active markets are determined using broker quotes or valuation techniques with observable market inputs. Financial instruments valued using broker quotes are classified as Level 2, only where there is a sufficient range of available quotes. The fair value of over the counter derivatives is estimated using pricing models or discounted cash flow techniques. Collective investment schemes where the underlying assets are not priced using active market prices are determined to be Level 2 instruments. Where pricing models are used, inputs are based on market related data at the period end. Where discounted cash flows are used, estimated future cash flows are based on management\u2019s best estimates and the discount rate used is a market related rate for a similar instrument. The fair value of investment contract liabilities reflects the fair value of the underlying assets and liabilities in the funds plus an additional amount to cover the present value of the excess of future policy costs over future charges. The liabilities are consequently determined to be Level 2 instruments. Level 3 financial instruments The Group\u2019s financial instruments determined by valuation techniques using non-observable market inputs are based on a combination of independent third party evidence and internally developed models. In relation to investments in hedge funds and private equity investments, non-observable third party evidence in the form of net asset valuation statements is used as the basis for the valuation. Adjustments may be made to the net asset valuation where other evidence, for example recent sales of the underlying investments in the fund, indicates this is required. Securities that are valued using broker quotes which could not be corroborated across a sufficient range of quotes are considered as Level 3. For a small number of investment vehicles and debt securities, standard valuation models are used, as due to their nature and complexity they have no external market. Inputs into such models are based on observable market data where applicable. The fair value of loans, derivatives and some borrowings with no external market is determined by internally developed discounted cash flow models using appropriate assumptions corroborated with external market data where possible. For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) during each reporting period. Fair value hierarchy information for non-financial assets measured at fair value is included in note G3 for owner-occupied property and in note G4 for investment property. E2.2 Fair value hierarchy of financial instruments
The tables below separately identify financial instruments carried at fair value from those measured on another basis but for which fair value is disclosed.
2022
Level 1
\u00a3m
Level 2
\u00a3m
Level 3
\u00a3m
Total fair value
\u00a3m
Financial assets measured at fair value
Derivatives
165 3,754 152 4,071
Financial assets designated at FVTPL upon initial recognition:
Equities
74,464 124 2,192 76,780
Investment in associate
329 \u2013 \u2013 329
Debt securities
48,151 25,094 11,465 84,710
Collective investment schemes
75,962 2,079 312 78,353
Reinsurers' share of investment contract liabilities
9,088 \u2013 \u2013 9,088
207,994 27,297 13,969 249,260
Total financial assets measured at fair value
208,159 31,051 14,121 253,331
Less amounts classified as held for sale
(3,661) (179) (789) (4,629)
Total financial assets measured at fair value, excluding amounts classified as held for sale
204,498 30,872 13,332 248,702
Financial assets for which fair values are disclosed
Loans and deposits at amortised cost
\u2013 272 7 279
204,498 31,144 13,339 248,981
2022
Level 1
\u00a3m
Level 2
\u00a3m
Level 3
\u00a3m
Total fair value
\u00a3m
Financial liabilities measured at fair value
Derivatives
98 5,538 243 5,879
Financial liabilities designated at FVTPL upon initial recognition:
Borrowings
\u2013 \u2013 64 64
Net asset value attributable to unit-holders
2,978 \u2013 \u2013 2,978
Investment contract liabilities
\u2013 152,157 \u2013 152,157
2,978 152,157 64 155,199
Total financial liabilities measured at fair value
3,076 157,695 307 161,078
Less amounts classified as held for sale
\u2013 (8,316) \u2013 (8,316)
Total financial liabilities measured at fair value, excluding amounts classified as held for sale
3,076 149,379 307 152,762
Financial liabilities for which fair values are disclosed
Borrowings at amortised cost
\u2013 3,644 \u2013 3,644
Deposits received from reinsurers
\u2013 2,542 56 2,598
Obligations for repayment of collateral received
\u2013 1,706 \u2013 1,706
Total financial liabilities for which fair values are disclosed
\u2013 7,892 56 7,948
3,076 157,271 363 160,710
2021
Level 1
\u00a3m
Level 2
\u00a3m
Level 3
\u00a3m
Total fair value
\u00a3m
Financial assets measured at fair value
Derivatives
161 4,173 237 4,571
Financial assets designated at FVTPL upon initial recognition:
Equities
85,108 52 1,899 87,059
Investment in associate
431 \u2013 \u2013 431
Debt securities
57,992 36,546 12,452 106,990
Collective investment schemes
86,244 3,634 286 90,164
Reinsurers' share of investment contract liabilities
10,009 \u2013 \u2013 10,009
239,784 40,232 14,637 294,653
Total financial assets measured at fair value
239,945 44,405 14,874 299,224
Less amounts classified as held for sale (see note A6.1)
(5,194) (421) (892) (6,507)
Total financial assets measured at fair value, excluding amounts classified as held for sale
234,751 43,984 13,982 292,717
Financial assets for which fair values are disclosed
Loans and deposits at amortised cost
\u2013 464 11 475
234,751 44,448 13,993 293,192
2021
Level 1
\u00a3m
Level 2
\u00a3m
Level 3
\u00a3m
Total fair value
\u00a3m
Financial liabilities measured at fair value
Derivatives
155 972 125 1,252
Financial liabilities designated at FVTPL upon initial recognition:
Borrowings
\u2013 \u2013 70 70
Net asset value attributable to unitholders
3,568 \u2013 \u2013 3,568
Investment contract liabilities \u2013 172,093 \u2013 172,093
3,568 172,093 70 175,731
Total financial liabilities measured at fair value
3,723 173,065 195 176,983
Less amounts classified as held for sale (see note A6.1) \u2013 (11,680) \u2013 (11,680)
Total financial liabilities measured at fair value, excluding amounts classified as held for sale
3,723 161,385 195 165,303
Financial liabilities for which fair values are disclosed
Borrowings at amortised cost \u2013 4,564 \u2013 4,564
Deposits received from reinsurers
\u2013 3,484 85 3,569
Obligations for repayment of collateral received
\u2013 3,442 \u2013 3,442
Total financial liabilities for which fair values are disclosed \u2013 11,490 85 11,575
3,723 172,875 280 176,878
E2.3 Significant inputs and input values for Level 3 financial instruments
Key unobservable input value
Description Valuation technique Significant inputs
2022 2021
Equities Single broker
1
and net
asset value
2
Single broker
indicative price
N/A N/A
Debt securities (see E2.3.1 for further details)
Loans guaranteed by export credit agencies &
supranationals
DCF model
3
Credit spread 111bps
(weighted average)
53bps
(weighted average)
Private corporate credit
DCF model
3
Credit spread 169bps
(weighted average)
129bps
(weighted average)
Infrastructure loans
DCF model
3
Credit spread 220bps
(weighted average)
207bps
(weighted average)
Loans to housing associations
DCF model
3
Credit spread 164bps
(weighted average)
128bps
(weighted average)
Local authority loans
DCF model
3
Credit spread 137bps
(weighted average)
105 bps
(weighted average)
Equity Release Mortgage loans (\u2018ERM\u2019)
DCF model and Black-
Scholes model
4
Spread
260bps over the IFRS
reference curve
170bps over the IFRS
reference curve
House price inflation +75bps adjustment
to RPI
+75bps adjustment
to RPI
House prices \u00a3304,088 (average) \u00a3291,599 (average)
Mortality Average life expectancy
of a male and female
currently aged 75 is 14.5
years and 15.9 years
respectively
Average life expectancy
of a male and female
currently aged 76 is 13.7
years and 15.0 years
respectively
Voluntary redemption
rate
150bps to 700bps 150bps to 700bps
Commercial real estate loans DCF model
3
Credit spread 253bps
(weighted average)
228bps
(weighted average)
Income strips
5
Income capitalisation Credit spread
661bps 487bps
Collective investment schemes Net asset value
statements
2
N/A
N/A N/A
Borrowings
Property reversions loans (see note E5) Internally developed
model
Mortality rate 130% IFL92C15
(Female)
6
130% IFL92C15
(Female)
6
130% IML92C15
(Male)
6
130% IML92C15
(Male)
6
House price inflation 3 year RPI rate
plus 75bps
3 year RPI rate
plus 75bps
Discount rate 3 year swap rate plus
170bps
3 year swap rate plus
170bps
Deferred possession
rate
370bps 370bps
Derivative assets and liabilities
Forward private placements, infrastructure
and local authority loans
7
DCF model
3
Credit spread 145bps
(weighted average)
110bps
(weighted average)
Longevity swaps
8
DCF model
3
Swap curve swap curve + 36bps swap curve + 36bps
Equity Release Income Plan total return swap
9
DCF model
3
Credit spread 500bps 500bps
1 Broker indicative prices: Although such valuations are sensitive to estimates, it is believed that changing one or more of the assumptions to reasonably possible alternative assumptions
would not change the fair value significantly.
2 Net asset value statements: Net asset statements are provided by independent third parties, and therefore no significant non-observable input or sensitivity information has been prepared
for those instruments valued on this basis.
3 Discounted cash flow (\u2018DCF\u2019) model: Except where otherwise stated, the discount rate used is based on a risk-free curve and a credit spread. The risk-free rate is taken from an appropriate
gilt of comparable duration. The spread is derived from a basket of comparable securities.
4 ERM loans: The loans are valued using a DCF model and a Black-Scholes model for valuation of the No-Negative Equity Guarantee (\u2018NNEG\u2019). The NNEG caps the loan repayment in the
event of death or entry into long-term care to be no greater than the sales proceeds from the property. The future cash flows are estimated based on assumed levels of mortality derived
from published mortality tables, entry into long-term care rates and voluntary redemption rates. Cash flows include an allowance for the expected cost of providing a NNEG assessed
under a real world approach using a closed form model including an assumed level of property value volatility. For the NNEG assessment, property values are indexed from the latest
property valuation point and then assumed to grow in line with an RPI based assumption. Cash flows are discounted using a risk free curve plus a spread, where the spread is based on
recent originations, with margins to allow for the different risk profiles of ERM loans.
5 Income strips are transactions where an owner-occupier of a property has sold a freehold or long leasehold interest to the Group, and has signed a long lease (typically 30-45 years) or a
ground lease (typically 45-175 years) and retains the right to repurchase the property at the end of the lease for a nominal sum (usually \u00a31). The income strips are valued using an income
capitalisation approach, where the annual rental income is capitalised using an appropriate yield. The yield is determined by considering recent transactions involving similar income strips .
E2.3 Significant inputs and input values for Level 3 financial instruments continued 6 IFL92C15 and IML92C15 relate to immediate annuitant female and male lives and refer to the 92 series mortality tables produced by the Continuous Mortality Investigation (\u2018CMI\u2019). 7 Derivative liabilities include forward investments of \u00a3146 million (2021: \u00a37 million derivative assets) which include a commitment to acquire or provide funding for fixed rate debt instruments at specified future dates. 8 Included within derivative assets and liabilities are longevity swap contracts with corporate pension schemes with a fair value of \u00a3152 million (2021: \u00a3230 million) and \u00a334 million (2021: \u00a349 million) respectively. 9 Included within derivative liabilities is the Equity Release Income Plan (\u2018ERIP\u2019) total return swap with a value of \u00a363 million (2021: \u00a367 million), under which a share of the disposal proceeds arising on a portfolio of property reversions is payable to a third party (see note E.3.3 for further details). E2.3.1 Debt securities Analysis of Level 3 debt securities 2022 \u00a3m 2021 restated 1 \u00a3m Unquoted corporate bonds: Loans guaranteed by export credit agencies & supranationals 402 219 Private corporate credit 1,422 1,488 Infrastructure loans \u2013 project finance 882 967 Infrastructure loans \u2013 corporate 1,175 1,074 Loans to housing associations 691 1,022 Local authority loans 596 917 Equity release mortgages 3,934 4,214 Commercial real estate loans 1,104 1,317 Income strips 786 886 Bridging loans to private equity funds 462 339 Other 11 9 Total Level 3 debt securities 11,465 12,452 Less amounts classified as held for sale (786) (892) Total Level 3 debt securities excluding amounts classified as held for sale 10,679 11,560 1 At 31 December 2021 \u00a31,632 million of private corporate credit assets have been reclassified as loans guaranteed by export credit agencies & supranationals (\u00a360 million), infrastructure loans (\u00a3550 million) and loans to housing associations (\u00a31,022 million) Sensitivities of level 3 financial instruments
2022
\u00a3m
2021
\u00a3m
Debt securities \u2013 Loans guaranteed by export credit agencies & supranationals
65bps increase in spread (9) (9)
65bps decrease in spread
11 10
Debt securities \u2013 Private corporate credit
65bps increase in spread (98) (124)
65bps decrease in spread
112 143
Debt securities \u2013 Infrastructure loans
65bps increase in spread (103) (124)
65bps decrease in spread
107 128
Debt securities \u2013 Loans to housing associations
65bps increase in spread (54) (102)
65bps decrease in spread
58 112
Debt securities \u2013 Local authority loans
65bps increase in spread (51) (109)
65bps decrease in spread
55 121
Debt securities \u2013 ERM loans
100bps increase in spread (329) (443)
100bps decrease in spread
370 512
5% increase in mortality
13 (10)
5% decrease in mortality (14) 9
15% increase in voluntary redemption rate
49 (22)
15% decrease in voluntary redemption rate
(52) 23
1% increase in house price inflation 27 26
1% decrease in house price inflation
(42) (43)
10% increase in house prices
22 13
10% decrease in house prices (38) (23)
Debt securities \u2013 CRELs
65bps increase in spread
(18) (24)
65bps decrease in spread 19 24
Debt securities \u2013 Income strips
35bps increase in spread
(76) (94)
35bps decrease in spread 88 121
Derivatives \u2013 Forward private placements, infrastructure and local authority loans1
65bps increase in spread
(30) (25)
65bps decrease in spread 31 27
Derivatives \u2013 Longevity swap contracts
100bps increase in swap curve
(17) (28)
100bps decrease in swap curve 21 35
Derivatives \u2013 Equity Release Income Plan total return swap
100bps increase in spread
(2) (2)
100bps decrease in spread 2 2
For the property reversions loans and bridging loans to equity funds, there are no reasonably possible movements in unobservable input values which
would result in a significant movement in the fair value of the financial instruments.
For those assets valued using net asset value statements (equities and collective investment schemes) no sensitivity information has been prepared as the
net asset statements are provided by independent third parties.
E2.4 Transfers of financial instruments between Level 1 and Level 2 2022 From Level 1 to Level 2 \u00a3m From Level 2 to Level 1 \u00a3m Financial assets measured at fair value Derivatives 48 \u2013 Financial assets designated at FVTPL upon initial recognition: Equities 73 5 Debt securities 1,478 1,267 Collective investment schemes 28 \u2013 1,579 1,272 Total financial assets measured at fair value 1,627 1,272 2021 From Level 1 to Level 2 \u00a3m From Level 2 to Level 1 \u00a3m Financial assets measured at fair value Derivatives 51 \u2013 Financial assets designated at FVTPL upon initial recognition: Equities 33 17 Debt securities 1,742 1,006 Collective investment schemes 32 42 1,807 1,065 Total financial assets measured at fair value 1,858 1,065 Consistent with the prior year, all the Group\u2019s Level 1 and Level 2 assets have been valued using standard market pricing sources. The application of the Group\u2019s fair value hierarchy classification methodology at an individual security level, in particular observations with regard to measures of market depth and bid-ask spreads, resulted in an overall net movement of debt securities from Level 1 to Level 2 in both the current and prior period. E2.5 Movement in Level 3 financial instruments measured at fair value 2022 At 1 January 2022 \u00a3m Net (losses)/ gains in income statement \u00a3m Purchases \u00a3m Sales \u00a3m Transfers from Level 1 and Level 2 \u00a3m Transfers to Level 1 and Level 2 \u00a3m At 31 December 2022 1 \u00a3m Unrealised (losses)/ gains on assets held at end of period \u00a3m Financial assets Derivatives 237 (85) \u2013 \u2013 \u2013 \u2013 152 (85) Financial assets designated at FVTPL upon initial recognition: Equities 1,899 177 438 (369) 47 \u2013 2,192 12 Debt securities 12,452 (3,544) 6,838 (4,277) 2 (6) 11,465 (3,595) Collective investment schemes 286 (79) 108 (3) - \u2013 312 (73) 14,637 (3,446) 7,384 (4,649) 49 (6) 13,969 (3,656) Total financial assets 14,874 (3,531) 7,384 (4,649) 49 (6) 14,121 (3,741) 1 Total financial assets of \u00a314,121 million includes \u00a3789 million of assets classified as held for sale. 2022
At 1
January
2022
\u00a3m
Net losses in
income
statement
\u00a3m
Purchases
\u00a3m
Sales/
repayments
\u00a3m
Transfers from
Level 1 and
Level 2
\u00a3m
Transfers to
Level 1 and
Level 2
\u00a3m
At 31
December
2022
\u00a3m
Unrealised
losses on
liabilities held
at end of
period
\u00a3m
Financial liabilities
Derivatives 125 130 \u2013 (12) \u2013 \u2013 243 123
Financial liabilities designated
at FVTPL upon initial
recognition:
Borrowings
70 9 \u2013 (15) \u2013 \u2013 64 9
Total financial liabilities 195 139 \u2013 (27) \u2013 \u2013 307 132
2021
At 1
January
2021
\u00a3m
Net
(losses)/gains in
income
statement
\u00a3m
Purchases
\u00a3m
Sales
\u00a3m
Transfers
from
Level 1
and Level 2
\u00a3m
Transfers to
Level 1 and
Level 2
\u00a3m
At 31
December
2021
1
\u00a3m
Unrealised
(losses)/gains
on assets held
at end of period
\u00a3m
Financial assets
Derivatives
198 (74) 113 \u2013 \u2013 \u2013 237 (82)
Financial assets designated at
FVTPL upon initial recognition:
Equities
1,563 436 269 (368) (1) 1,899 278
Debt securities
10,164 88 6,394 (4,210) 26 (10) 12,452 115
Collective investment
schemes
401 (70) 34 (94) 15 \u2013 286 22
12,128 454 6,697 (4,672) 41 (11) 14,637 415
Total financial assets
12,326 380 6,810 (4,672) 41 (11) 14,874 333
1 Total financial assets of \u00a314,874 million includes \u00a3892 million classified as held for sale.
2021
At 1
January
2021
\u00a3m
Net
(gains)/losses in
income
statement
\u00a3m
Purchases
\u00a3m
Sales/
Repayments
\u00a3m
Transfers from
Level 1 and
Level 2
\u00a3m
Transfers to
Level 1 and
Level 2
\u00a3m
At 31
December
2021
1
\u00a3m
Unrealised
(gains)losses on
liabilities held at
end of period
\u00a3m
Financial liabilities
Derivatives
162 (19) \u2013 (18) \u2013 \u2013 125 (29)
Financial liabilities designated at
FVTPL upon initial recognition:
Borrowings
84 4 \u2013 (18) \u2013 \u2013 70 5
Total financial liabilities
246 (15) \u2013 (36) \u2013 \u2013 195 (24)
Gains and losses on Level 3 financial instruments are included in net investment income in the consolidated income statement. There were no gains or
losses recognised in other comprehensive income in either the current or comparative period.
E3. Derivatives The Group purchases derivative financial instruments principally in connection with the management of its insurance contract and investment contract liabilities based on the principles of reduction of risk and efficient portfolio management. The Group does not typically hold derivatives for the purpose of selling or repurchasing in the near term or with the objective of generating a profit from short-term fluctuations in price or margin. The Group also holds derivatives to hedge financial liabilities denominated in foreign currency. Derivative financial instruments are largely classified as held for trading. Such instruments are recognised initially at fair value and are subsequently remeasured to fair value. The gain or loss on remeasurement to fair value is recognised in the consolidated income statement. Derivative financial instruments are not classified as held for trading where they are designated as a hedging instrument and where the resultant hedge is assessed as effective. For such instruments, any gain or loss that arises on remeasurement to fair value is initially recognised in other comprehensive income and is recycled to profit or loss as the hedged item impacts the profit or loss. See note E1 for further details of the Group\u2019s hedging accounting policy. E3.1 Summary The fair values of derivative financial instruments are as follows: Assets 2022 \u00a3m Liabilities 2022 \u00a3m Assets 2021 \u00a3m Liabilities 2021 \u00a3m Forward currency 327 221 180 58 Credit default swaps 4 18 63 39 Contracts for difference 3 3 8 2 Interest rate swaps 2,281 4,313 1,509 506 Total return bond swaps \u2013 \u2013 3 \u2013 Swaptions 187 46 1,722 11 Inflation swaps 295 104 232 98 Equity options 334 147 408 254 Stock index futures 162 36 41 122 Fixed income futures 95 231 46 33 Longevity swap contracts 152 34 230 49 Currency futures 4 8 7 1 Cross-currency swaps 227 653 122 12 Equity Release Income Plan total return swap \u2013 63 \u2013 67 Other \u2013 2 \u2013 \u2013 4,071 5,879 4,571 1,252 Less amounts classified as held for sale (3) (4) (4) (4) 4,068 5,875 4,567 1,248 E3.2 Longevity swap contracts The Group has in place longevity swap arrangements with corporate pension schemes which do not meet the definition of insurance contracts under the Group\u2019s accounting policies. Under these arrangements the majority of the longevity risk has been passed to third parties. Derivative assets of \u00a3152 million and derivative liabilities of \u00a334 million have been recognised as at 31 December 2022 (2021: \u00a3230 million and \u00a349 million respectively). E3.3 Equity Release Income Plan ('ERIP') total return swap ERIP contracts are an equity release product under which the Group holds a reversionary interest in the residential property of policyholders who have been provided with a lifetime annuity in return for the legal title to their property (see note G4). The Group is party to an ERIP total return swap under which a share of the future generated cash flows arising under the ERIP contracts is payable to a third party. Over time, as the property reversions are realised, the relevant share of disposal proceeds is transferred to a third party who also holds a beneficial interest in these residential properties. The carrying amount of the derivative liability is the present value of all future cash flows due to the third party under the total return swap. The Group receives and pledges collateral in the form of cash or non-cash assets in respect of stock lending transactions, derivative contracts and
reinsurance arrangements in order to reduce the credit risk of these transactions. The amount and type of collateral required where the Group receives
collateral depends on an assessment of the credit risk of the counterparty, but is usually in the form of cash and marketable securities.
Collateral received in the form of cash, where the Group has contractual rights to receive the cash flows generated and is available to the Group for
investment purposes, is recognised as a financial asset in the statement of consolidated financial position with a corresponding financial liability for its
repayment. Non-cash collateral received is not recognised in the statement of consolidated financial position, unless the counterparty defaults on its
obligations under the relevant agreement.
Non-cash collateral pledged where the Group retains the contractual rights to receive the cash flows generated is not derecognised from the statement
of consolidated financial position, unless the Group defaults on its obligations under the relevant agreement. Cash collateral pledged, where the
counterparty has contractual rights to receive the cash flows generated, is derecognised from the statement of consolidated financial position and
a corresponding receivable is recognised for its return.
E4.1 Financial instrument collateral arrangements
The Group has no financial assets and financial liabilities that have been offset in the statement of consolidated financial position as at 31 December 2022
(2021: none).
The table below contains disclosures related to financial assets and financial liabilities recognised in the statement of consolidated financial position that
are subject to enforceable master netting arrangements or similar agreements. Such agreements do not meet the criteria for offsetting in the statement
of consolidated financial position as the Group has no current legally enforceable right to offset recognised financial instruments. Furthermore, certain
related assets received as collateral under the netting arrangements will not be recognised in the statement of consolidated financial position as the
Group does not have permission to sell or re-pledge, except in the case of default. Details of the Group\u2019s collateral arrangements in respect of these
recognised assets and liabilities are provided below.
Related amounts not offset
2022
Gross and net
amounts of
recognised
financial assets
\u00a3m
Financial instruments
and cash collateral
received
\u00a3m
Derivative
liabilities
\u00a3m
Net
amount
\u00a3m
Financial assets
OTC derivatives
3,747 1,055 2,293 399
Exchange traded derivatives
324 193 28 103
Stock lending
1,451 1,451 \u2013 \u2013
Total
5,522 2,699 2,321 502
Related amounts not offset
Gross and net
amounts of
recognised
financial liabilities
\u00a3m
Financial instruments
and cash collateral
pledged
\u00a3m
Derivative
assets
\u00a3m
Net
Amount
\u00a3m
Financial liabilities
OTC derivatives
5,606 2,206 2,293 1,107
Exchange traded derivatives
273 36 28 209
Total
5,879 2,242 2,321 1,316
Related amounts not offset
2021
Gross and net
amounts of
recognised
financial assets
\u00a3m
Financial instruments
and cash collateral
received
\u00a3m
Derivative
liabilities
\u00a3m
Net
amount
\u00a3m
Financial assets
OTC derivatives
4,394 3,600 487 307
Exchange traded derivatives
177 5 6 166
Stock lending
1,587 1,587 \u2013 \u2013
Total
6,158 5,192 493 473
Related amounts not offset
Gross and net
amounts of
recognised
financial liabilities
\u00a3m
Financial instruments
and cash collateral
pledged
\u00a3m
Derivative
assets
\u00a3m
Net
amount
\u00a3m
Financial liabilities
OTC derivatives
1,096 319 487 290
Exchange traded derivatives
156 24 6 126
Total
1,252 343 493 416
E4.2 Derivative collateral arrangements
Assets accepted
It is the Group\u2019s practice to obtain collateral to mitigate the counterparty risk related to over-the-counter (\u2018OTC\u2019) derivatives usually in the form of cash or
marketable financial instruments.
The fair value of financial assets accepted as collateral for OTC derivatives but not recognised in the statement of consolidated financial position amounts
to \u00a3471 million (2021: \u00a3945 million).
The amounts recognised as financial assets and liabilities from cash collateral received at 31 December 2022 are set out below.
OTC derivatives
2022
\u00a3m
2021
\u00a3m
Financial assets
1,513 3,442
Financial liabilities
(1,513) (3,442)
The maximum exposure to credit risk in respect of OTC derivative assets is \u00a33,747 million (2021: \u00a34,394 million) of which credit risk of \u00a33,348 million
(2021: \u00a34,087 million) is mitigated by use of collateral arrangements (which are settled net after taking account of any OTC derivative liabilities owed
to the counterparty).
Credit risk on exchange traded derivative assets of \u00a3324 million (2021: \u00a3177 million) is mitigated through regular margining and the protection offered
by the exchange.
Assets pledged
The Group pledges collateral in respect of its OTC derivative liabilities. The value of assets pledged at 31 December 2022 in respect of OTC derivative
liabilities of \u00a35,606 million (2021: \u00a31,096 million) amounted to \u00a33,228 million (2021: \u00a3942 million).
E4.3 Stock lending collateral arrangements
The Group lends listed financial assets held in its investment portfolio to other institutions.
The Group conducts stock lending only with well-established, reputable institutions in accordance with established market conventions. The financial
assets do not qualify for derecognition as the Group retains all the risks and rewards of the transferred assets except for the voting rights.
It is the Group\u2019s practice to obtain collateral in stock lending transactions, usually in the form of cash or marketable financial instruments.
The fair value of financial assets accepted as such collateral but not recognised in the statement of consolidated financial position amounts to \u00a31,586 million
(2021: \u00a31,749 million).
The maximum exposure to credit risk in respect of stock lending transactions is \u00a31,451 million (2021: \u00a31,587 million) of which credit risk of \u00a31,451 million
(2021: \u00a31,587 million) is mitigated through the use of collateral arrangements.
E4.4 Other collateral arrangements
Details of collateral received to mitigate the counterparty risk arising from the Group\u2019s reinsurance transactions is given in note F3.
Collateral has also been pledged and charges have been granted in respect of certain Group borrowings. The details of these arrangements are set out
in note E5.
E5. Borrowings
The Group classifies the majority of its interest bearing borrowings as financial liabilities carried at amortised cost and these are recognised initially at fair
value less any attributable transaction costs. The difference between initial cost and the redemption value is amortised through the consolidated income
statement over the period of the borrowing using the effective interest method.
Certain borrowings are designated upon initial recognition at fair value through profit or loss and measured at fair value where doing so provides more
meaningful information due to the reasons stated in the financial liabilities accounting policy (see note E1). Transaction costs relating to borrowings
designated upon initial recognition at fair value through profit or loss are expensed as incurred.
Borrowings are classified as either policyholder or shareholder borrowings. Policyholder borrowings are those borrowings where there is either no or
limited shareholder exposure, for example, borrowings attributable to the Group\u2019s with-profit operations.
E5.1 Analysis of borrowings
Carrying value Fair value
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
\u00a3300 million multi-currency revolving credit facility (note a)
62 17 62 17
Property reversions loan (note b) 64 70 64 70
Total policyholder borrowings
126 87 126 87
\u00a3428 million Tier 2 subordinated notes (note c) 427 427 429 498
\u00a3450 million Tier 3 subordinated notes (note d)
\u2013 450 \u2013 457
US $500 million Tier 2 notes (note e)
413 368 390 408
\u20ac500 million Tier 2 bonds (note f) 439 416 416 490
US $750 million Contingent Convertible Tier 1 notes (note g)
618 551 580 581
\u00a3500 million Tier 2 notes (note h)
487 485 445 593
US $500 million Fixed Rate Reset Tier 2 notes (note i) 412 368 382 389
\u00a3500 million 5.867% Tier 2 subordinated notes (note j)
543 550 465 598
\u00a3250 million Fixed Rate Reset Callable Tier 2 subordinated notes (note k)
259 266 244 269
\u00a3250 million 4.016% Tier 3 subordinated notes (note l) 256 257 231 264
Total shareholder borrowings
3,854 4,138 3,582 4,547
Total borrowings 3,980 4,225 3,708 4,634
Amount due for settlement after 12 months
3,918 3,758
a. abrdn Private Equity Opportunities Trust plc (\u2019APEOT\u2019) has in place a syndicated multi-currency revolving credit facility, of which \u00a361 million (2021: \u00a317 million)
had been drawn down as at 31 December 2022. During the year, the amount of the facility was increased from \u00a3200 million to \u00a3300 million and its term maturity
was extended by one year to December 2025. Interest accrues on this facility at a margin over the reference rate of the currency drawn.
b. The Property Reversions loan from Santander UK plc (\u2018Santander\u2019) was recognised in the consolidated financial statements at fair value. It relates to
the sale of Extra-Income Plan policies that Santander finances to the value of the associated property reversions. As part of the arrangement Santander
receive an amount calculated by reference to the movement in the Halifax House Price Index and the Group is required to indemnify Santander against
profits or losses arising from mortality or surrender experience which differs from the basis used to calculate the reversion amount. During 2022,
repayments totalling \u00a315 million were made (2021: \u00a318 million). Note G4 contains details of the assets that support this loan.
c. On 23 January 2015, PGH Capital plc (\u2018PGHC\u2019) issued \u00a3428 million of subordinated notes due 2025 at a coupon of 6.625%. Fees associated with these notes of \u00a33 million were deferred and are being amortised over the life of the notes in the statement of consolidated financial position. Upon exchange \u00a332 million of these notes were held by Group companies. During 2017, the internal holdings were sold to third parties, thereby increasing external borrowings by \u00a332 million. On 20 March 2017, Old PGH (the Group\u2019s ultimate parent company up to December 2018) was substituted in place of PGHC as issuer of the \u00a3428 million subordinated notes and then on 12 December 2018 the Company was substituted in place of Old PGH as issuer. E5.1 Analysis of borrowings continued d. On 20 July 2022, the Group redeemed its \u00a3450 million Tier 3 subordinated notes in full at their principal amount, together with interest accrued to the repayment date. e. On 6 July 2017, Old PGH issued US $500 million Tier 2 bonds due 2027 with a coupon of 5.375%. Fees associated with these notes of \u00a32 million were deferred and are being amortised over the life of the notes. On 12 December 2018 the Company was substituted in place of Old PGH as issuer. f. On 24 September 2018, Old PGH issued \u20ac500 million Tier 2 notes due 2029 with a coupon of 4.375%. Fees associated with these notes of \u00a37 million were deferred and are being amortised over the life of the notes. On 12 December 2018 the Company was substituted in place of Old PGH as issuer. g. On 29 January 2020, the Company issued US $750 million fixed rate reset perpetual restricted Tier 1 contingent convertible notes (the \u2018Contingent Convertible Tier 1 Notes\u2019) which are unsecured and subordinated. The Contingent Convertible Tier 1 Notes have no fixed maturity date and interest is payable only at the sole and absolute discretion of the Company. The Contingent Convertible Tier 1 Notes bear interest on their principal amount at a fixed rate of 5.625% per annum up to the \u2018First Reset Date\u2019 of 26 April 2025. Thereafter the fixed rate of interest will be reset on the First Reset Date and on each fifth anniversary of this date by reference to the sum of the yield of the Constant Maturity Treasury (\u2018CMT\u2019) rate (based on the prevailing five year US Treasury yield) plus a margin of 4.035%, being the initial credit spread used in pricing the notes. Interest is payable on the Contingent Convertible Tier 1 Notes semi-annually in arrears on 26 April and 26 October. If an interest payment is not made it is cancelled and it shall not accumulate or be payable at any time thereafter. The terms of the Contingent Convertible Tier 1 Notes contain a contingent settlement provision which is linked to the occurrence of a \u2018Capital Disqualification Event\u2019. Such an event is deemed to have taken place where, as a result of a change to the Solvency II regulations, the Contingent Convertible Tier 1 Notes are fully excluded from counting as own funds. On the occurrence of such an event and where the Company has chosen not to use its corresponding right to redeem the notes the Company shall no longer be able to exercise its discretion to cancel any interest payments due on such Contingent Convertible Tier 1 Notes on any interest payment date following the occurrence of this event. Accordingly the Contingent Convertible Tier 1 Notes are considered to meet the definition of a financial liability for financial reporting purposes. The Contingent Convertible Tier 1 Notes may be redeemed at par on the First Reset Date or on any interest payment date thereafter at the option of the Company and also in other limited circumstances. If such redemption occurs prior to the fifth anniversary of the Issue Date such redemption must be funded out of the proceeds of a new issuance of, or exchanged into, Tier 1 Own Funds of the same or a higher quality than the Contingent Convertible Tier 1 Notes. In respect of any redemption or purchase of the Contingent Convertible Tier 1 Notes, such redemption or purchase is subject to the receipt of permission to do so from the PRA. Furthermore, on occurrence of a trigger event, linked to the Solvency II capital position and as documented in the terms of the Contingent Convertible Tier 1 Notes, the Contingent Convertible Tier 1 Notes will automatically be subject to conversion to ordinary shares of the Company at the conversion price of US $1,000 per share, subject to adjustment in accordance with the terms and conditions of the notes and all accrued and unpaid interest will be cancelled. Following such conversion there shall be no reinstatement of any part of the principal amount of, or interest on, the Contingent Convertible Tier 1 Notes at any time. h. On 28 April 2020, the Company issued \u00a3500 million fixed rate Tier 2 Notes (the \u2018Tier 2 Notes\u2019) which are unsecured and subordinated. The Tier 2 Notes have a maturity date of 28 April 2031 and include an issuer par call right for the three month period prior to maturity. The Ti er 2 Notes bear interest on the principal amount at a fixed rate of 5.625% per annum payable annually in arrears on 28 April each year. i. On 4 June 2020, the Company issued US $500 million fixed rate reset callable Tier 2 notes (the \u2018Fixed Rate Reset Tier 2 Notes\u2019) which are unsecured and subordinated. The Fixed Rate Reset Tier 2 notes have a maturity date of 4 September 2031 with an optional issuer par call right on any day in the three month period up to and including 4 September 2026. The Fixed Rate Reset Tier 2 Notes bear interest on the principal amount at a fixed rate of 4.75% per annum up to the interest rate reset date of 4 September 2026. If the Fixed Rate Reset Tier 2 Notes are not redeemed before that date, the interest rate resets to the sum of the applicable CMT rate (based on the prevailing five year US Treasury yield) plus a margin of 4.276%, being the initial credit spread used in pricing the notes. Interest is payable on the Fixed Rate Reset Tier 2 Notes semi-annually in arrears on 4 March and 4 September each year. j. On 22 July 2020, as part of the acquisition of ReAssure Group plc, the Group assumed the \u00a3500 million 5.867% Tier 2 subordinated notes. On the same date, the Company was substituted in place of ReAssure Group plc as issuer of the notes. The \u00a3500 million 5.867% Tier 2 subordinated notes have a maturity date of 13 June 2029 and were initially recognised at their fair value as at the date of acquisition of \u00a3559 million. The fair value adjustment will be amortised over the remaining life of the notes. Interest is payable semi-annually in arrears on 13 June and 13 December. k. On 22 July 2020, as part of the acquisition of ReAssure Group plc, the Group assumed the \u00a3250 million fixed rate reset callable Tier 2 subordinated notes. On the same date, the Company was substituted in place of ReAssure Group plc as issuer of the notes. The \u00a3250 million fixed rate reset callable Tier 2 subordinated notes have a maturity date of 13 June 2029 and were initially recognised at their fair value as at the date of acquisition of \u00a3275 million. The fair value adjustment will be amortised over the remaining life of the notes. The notes include an issuer par call right exercisable on 13 June 2024. Interest is payable semi-annually in arrears on 13 June and 13 December. These notes initially bear interest at a rate of 5.766% on the principal amount and the rate of interest will reset on 13 June 2024, and on each interest payment date thereafter, to a margin of 5.17% plus the yield of a UK Treasury Bill of similar term. l. On 22 July 2020, as part of the acquisition of ReAssure Group plc, the Group assumed the \u00a3250 million 4.016% Tier 3 subordinated notes. On the same date, the Company was substituted in place of ReAssure Group plc as issuer of the notes. The \u00a3250 million 4.016% Tier 3 subordinated notes have a maturity date of 13 June 2026 and were initially recognised at their fair value as at the date of acquisition of \u00a3259 million. The fair value adjustment is being amortised over the remaining life of the notes. Interest is payable semi-annually in arrears on 13 June and 13 December. m. The Group has in place a \u00a31.25 billion unsecured revolving credit facility (the \u2018revolving facility\u2019), maturing in June 2026. The facility accrues interest at a margin over SONIA that is based on credit rating. The facility remains undrawn as at 31 December 2022. E5.2 Reconciliation of liabilities arising from financing activities The table below details changes in the Group\u2019s liabilities arising from financing activities, including both cash and non-cash changes (with the exception of lease liabilities, which have been included in note G10). Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group\u2019s consolidated statement of cash flows as cash flows from financing activities. Cash movements Non-cash movements At 1 January 2022 \u00a3m New borrowings, net of costs \u00a3m Repayments \u00a3m Changes in fair value \u00a3m Movement in foreign exchange \u00a3m Other movements 1 \u00a3m At 31 December 2022 \u00a3m APEOT multi-currency revolving credit facility 17 61 (17) \u2013 1 \u2013 62 Property Reversions loan 70 \u2013 (15) 9 \u2013 \u2013 64 \u00a3428 million Tier 2 subordinated notes 427 \u2013 \u2013 \u2013 \u2013 \u2013 427 \u00a3450 million Tier 3 subordinated notes 450 \u2013 (450) \u2013 \u2013 \u2013 \u2013 US $500 million Tier 2 bonds 368 \u2013 \u2013 \u2013 45 \u2013 413 \u20ac500 million Tier 2 notes 416 \u2013 \u2013 \u2013 22 1 439 US $750 million Contingent Convertible Tier 1 notes 551 \u2013 \u2013 \u2013 66 1 618 \u00a3500 million Tier 2 notes 485 \u2013 \u2013 \u2013 \u2013 2 487 US $500 million Fixed Rate Reset Tier 2 notes 368 \u2013 \u2013 \u2013 44 \u2013 412 \u00a3500 million 5.867% Tier 2 subordinated notes 550 \u2013 \u2013 \u2013 \u2013 (7) 543 \u00a3250 million Fixed Rate Reset Callable Tier 2 subordinated notes 266 \u2013 \u2013 \u2013 \u2013 (7) 259 \u00a3250 million 4.016% Tier 3 subordinated notes 257 \u2013 \u2013 \u2013 \u2013 (1) 256 Derivative assets 2 (48) \u2013 \u2013 (177) \u2013 \u2013 (225) Derivative liabilities 2 5 \u2013 \u2013 (5) \u2013 \u2013 \u2013 4,182 61 (482) (173) 178 (11) 3,755 1 Comprises amortisation under the effective interest method applied to borrowings held at amortised cost. No interest was capitalised in the year. 2 Cross currency swaps to hedge against adverse currency movements in respect of Group\u2019s Euro and US Dollar denominated borrowings Cash movements Non-cash movements
At 1 January
2021
\u00a3m
New borrowings,
net of costs
\u00a3m
Repayments
\u00a3m
Changes in fair
value
\u00a3m
Movement in
foreign exchange
\u00a3m
Other
movements
1
\u00a3m
At 31 December
2021
\u00a3m
APEOT multi-currency revolving credit
facility
\u2013 17 \u2013 \u2013 \u2013 \u2013 17
Property Reversions loan
84 \u2013 (18) 4 \u2013 \u2013 70
\u00a3200 million 7.25% unsecured subordinated
loan
200 \u2013 (200) \u2013 \u2013 \u2013 \u2013
\u00a3300 million senior unsecured bond
122 \u2013 (122) \u2013 \u2013 \u2013 \u2013
\u00a3428 million Tier 2 subordinated notes
426 \u2013 \u2013 \u2013 \u2013 1 427
\u00a3450 million Tier 3 subordinated notes
449 \u2013 \u2013 \u2013 \u2013 1 450
US $500 million Tier 2 bonds
364 \u2013 \u2013 \u2013 4 \u2013 368
\u20ac500 million Tier 2 notes
442 \u2013 \u2013 \u2013 (26) \u2013 416
US $750 million Contingent Convertible
Tier 1 notes
545 \u2013 \u2013 \u2013 5 1 551
\u00a3500 million Tier 2 notes
484 \u2013 \u2013 \u2013 \u2013 1 485
US $500 million Fixed Rate Reset Tier 2 notes
364 \u2013 \u2013 \u2013 4 \u2013 368
\u00a3500 million 5.867% Tier 2 subordinated notes
556 \u2013 \u2013 \u2013 \u2013 (6) 550
\u00a3250 million Fixed Rate Reset Callable Tier 2
subordinated notes
272 \u2013 \u2013 \u2013 \u2013 (6) 266
\u00a3250 million 4.016% Tier 3 subordinated
notes
259 \u2013 \u2013 \u2013 \u2013 (2) 257
Derivative assets\u00b2
\u2013 \u2013 \u2013 (48) \u2013 \u2013 (48)
Derivative liabilities\u00b2
\u2013 \u2013 \u2013 5 \u2013 \u2013 5
4,567 17 (340) (39) (13) (10) 4,182
1 Comprises amortisation under the effective interest method applied to borrowings held at amortised cost.
2 Cross currency swaps to hedge against adverse currency movements in respect of Group\u2019s Euro and US Dollar denominated borrowings.
E6. Risk management \u2013 financial and other risks
This note forms one part of the risk management disclosures in the consolidated financial statements. An overview of the Group\u2019s approach to risk
management is outlined in note I3 and the Group\u2019s management of insurance risk is detailed in note F4.
E6.1 Financial risk and the Asset Liability Management (\u2018ALM\u2019) framework
The use of financial instruments naturally exposes the Group to the risks associated with them, chiefly market risk, credit risk and financial soundness risk.
Responsibility for agreeing the financial risk profile rests with the Board of each life company, as advised by investment managers, internal committees
and the actuarial function. In setting the risk profile, the board of each life company will receive advice from the Chief Investment Officer, the relevant
With-Profit Actuary and the relevant actuarial function holder/Chief Actuary as to the potential implications of that risk profile with regard to the
probability of both realistic insolvency and of failing to meet the regulatory Minimum Capital Requirement. The Chief Actuary will also advise the extent
to which the investment risk taken is consistent with the Group\u2019s commitment to deliver fair customer outcomes.
Derivatives are used in many of the Group\u2019s funds, within policy guidelines agreed by the board of each life company and overseen by investment
committees of the boards of each life company supported by management oversight committees. Derivatives are primarily used for risk hedging purposes
or for efficient portfolio management, including the activities of the Group\u2019s Treasury function.
More detail on the Group\u2019s exposure to financial risk is provided in note E6.2 below.
The Group is also exposed to insurance risk arising from its Life, Pensions and Savings business. Life insurance risk in the Group arises through its exposure
to longevity, persistency, mortality and to other variances between assumed and actual experience. These variances can be in factors such as
administrative expenses and new business pricing. More detail on the Group\u2019s exposure to insurance risk is provided in note F4.
The Group\u2019s overall exposure to market and credit risk is monitored by appropriate committees, which agree policies for managing each type of risk on
an ongoing basis, in line with the investment strategy developed to achieve investment returns in excess of amounts due in respect of insurance contracts.
The effectiveness of the Group\u2019s ALM framework relies on the matching of assets and liabilities arising from insurance and investment contracts, taking
into account the types of benefits payable to policyholders under each type of contract. Separate portfolios of assets are maintained for with-profit
business funds which include all of the Group\u2019s participating business), non-linked non-profit funds and unit-linked funds.
LIBOR transition
In 2021, the Group largely completed its transition from LIBOR to the replacement Risk Free Rates. The programme completed a systematic process to
identify and address balance sheet exposures with LIBOR dependencies. All derivative exposures and the majority of non-derivative asset exposures were
successfully transitioned over the course of the programme in 2021. Insurance contract liabilities and related items transitioned to the SONIA Solvency II
curve published by the PRA with an adjustment of 36bps. The remaining residual exposures as at 31 December 2021 related to indirect exposures in a small
proportion of liquid and illiquid credit assets, and a direct exposure of \u00a355 million in relation to two illiquid credit assets referencing Sterling LIBOR. These
residual exposures have largely been transitioned during the year and at 31 December 2022 a small amount of indirect illiquid credit exposure remains.
This relates to two loans where LIBOR is only relevant on a prepayment. The Group does not anticipate a prepayment and this issue does not affect the fair
value of the loans.
E6.2 Financial risk analysis
Transactions in financial instruments result in the Group assuming financial risks. These include credit risk, market risk and financial soundness risk. Each of
these are described below, together with a summary of how the Group manages the risk, along with sensitivity analysis where appropriate. The sensitivity
analysis does not take into account the impact in the Group\u2019s pension schemes, including any impact arising as a result of the elimination of intra-group
buy-in transactions between the life companies and the Group\u2019s pension schemes. It also does not include second order impacts of market movements,
for example, where a market movement may give rise to potential indicators of impairment for the Group\u2019s intangible balances.
Climate Risk
The Group is exposed to financial risks (in particular market and credit risk) related to the transition to a low carbon economy, and the physical impacts
resulting from climate change which could result in long-term market, credit, insurance, reputation, proposition and operational implications. As such,
this risk is treated as a cross-cutting risk in the Group\u2019s Risk Universe.
Identification of climate related risks has been embedded into the Group\u2019s Risk Management Framework. Significant progress has been made in recent
years in developing a risk metrics and targets framework, and establishing appropriate governance and risk management processes. The Group has
adopted a proactive approach towards combatting climate change, with key net-zero targets. Further details on these targets and on managing the
related climate change risks are provided in the Climate Report and Task Force for Climate-related Financial Disclosures (\u2018TCFD\u2019) within the Annual
Report and Accounts.
E6.2.1 Credit risk
Credit risk is defined as the risk of reductions in earnings and/or value, through financial or reputational loss, as a result of the default of a counterparty or
an associate of such a counterparty to a financial transaction (i.e. failure to honour their financial obligations, or failing to perform them in a timely manner),
whether on or off balance sheet.
There are two principal sources of credit risk for the Group:
\u2022 credit risk which results from direct investment activities, including investments in debt securities, derivatives counterparties, collective investment
schemes, hedge funds and the placing of cash deposits; and
\u2022 credit risk which results indirectly from activities undertaken in the normal course of business. Such activities include premium payments, outsourcing
contracts, reinsurance agreements, exposure from material suppliers and the lending of securities.
The amount disclosed in the statement of consolidated financial position in respect of all financial assets, together with rights secured under off balance
sheet collateral arrangements, but excluding the minority interest in consolidated collective investment schemes and those asse
ts that back policyholder
liabilities, represents the Group\u2019s maximum exposure to credit risk. The credit risk borne by the shareholder on with-profit policies is dependent on the
extent to which the underlying insurance fund is relying on shareholder support.
The impact of non-government debt securities and, inter alia, the change in market credit spreads during the year is fully reflected in the values shown in
these consolidated financial statements. Credit spreads are the excess of corporate bond yields over gilt yields to reflect the higher level of risk. Similarly,
the value of derivatives that the Group holds takes into account fully the changes in swap rates.
There is an exposure to spread changes affecting the prices of corporate bonds and derivatives. This exposure applies to supported with-profit funds
(where risks and rewards fall wholly to shareholders), non-profit funds and shareholders\u2019 funds.
The Group holds \u00a315,814 million (2021: \u00a321,668 million) of corporate bonds which are used to back annuity liabilities in non-profit funds. These annuity
liabilities include an aggregate credit default provision of \u00a3796 million (2021: \u00a31,036 million) to fund against the risk of default.
A 100bps widening of credit spreads, with all other variables held constant and no change in assumed expected defaults, would result in an increase in the
profit after tax in respect of a full financial year, and in equity, of \u00a323 million (2021: \u00a328 million).
A 100bps narrowing of credit spreads, with all other variables held constant and no change in assumed expected defaults, would result in a decrease in the
profit after tax in respect of a full financial year, and in equity, of \u00a336 million (2021: \u00a337 million).
Credit risk is managed by the monitoring of aggregate Group exposures to individual counterparties and by appropriate credit risk diversification. The Group manages the level of credit risk it accepts through credit risk tolerances and limits (including asset class, industry and geography limits). Additional controls for illiquid asset concentration risk are set out via specific risk limits within the risk appetite framework. Credit risk on derivatives and securities lending is mitigated through the use of collateral with appropriate haircuts. Credit quality of assets
An indication of the Group\u2019s exposure to credit risk is the quality of the investments and counterparties with which it transacts. The following table
provides information regarding the aggregate credit exposure split by credit rating.
2022
AAA
\u00a3m
AA
\u00a3m
A
\u00a3m
BBB
\u00a3m
BB and
below
\u00a3m
Non-rated
\u00a3m
Unit-
linked
\u00a3m
Total
\u00a3m
Less
amounts
classified
as held for
sale
\u00a3m
Total
\u00a3m
Loans and deposits
\u2013 4 \u2013 \u2013 \u2013 204 71 279 \u2013 279
Derivatives
\u2013 1,500 1,060 28 \u2013 1,370 113 4,071 (3) 4,068
Debt securities
1,2
6,834 26,095 19,045 16,238 1,929 7,182 7,387 84,710 (1,594) 83,116
Reinsurers\u2019 share of insurance contract
liabilities
\u2013 4,920 1,148 \u2013 \u2013 74 \u2013 6,142 \u2013 6,142
Reinsurers\u2019 share of investment contract
liabilities
\u2013 \u2013 \u2013 \u2013 \u2013 \u2013 9,088 9,088 (25) 9,063
Cash and cash equivalents
339 1,160 5,749 63 \u2013 5 1,556 8,872 (33) 8,839
7,173 33,679 27,002 16,329 1,929 8,835 18,215 113,162 (1,655) 111,507
1 For financial assets that do not have credit ratings assigned by external ratings agencies, the Group assigns internal ratings for use in management and monitoring of credit risk. \u00a3149 million of
AAA, \u00a31,083 million of AA, \u00a31,742 million of A, \u00a32,766 million of BBB and \u00a3367 million of BB and below debt securities are internally rated. If a financial asset is neither rated by an external agency
nor internally rated, it is classified as \u2018non-rated\u2019.
2 Non-rated debt securities includes equity release mortgages with a value of \u00a33,934 million (further details are set out in note E2.3) and non-rated bonds.
2021
AAA
\u00a3m
AA
\u00a3m
A
\u00a3m
BBB
\u00a3m
BB and
below
\u00a3m
Non-rated
\u00a3m
Unit-linked
\u00a3m
Total
\u00a3m
Less
amounts
classified
as held for
sale
\u00a3m
Total
\u00a3m
Loans and deposits
\u2013 6 \u2013 \u2013 \u2013 414 55 475 \u2013 475
Derivatives
\u2013 965 1,737 388 \u2013 1,343 138 4,571 (4) 4,567
Debt securities
1,2
9,097 40,142 22,782 16,290 3,292 6,788 8,599 106,990 (2,229) 104,761
Reinsurers\u2019 share of insurance contract
liabilities
\u2013 4,963 3,539 37 \u2013 48 \u2013 8,587 \u2013 8,587
Reinsurers\u2019 share of investment contract
liabilities
\u2013 \u2013 \u2013 \u2013 \u2013 \u2013 10,009 10,009 (27) 9,982
Cash and cash equivalents
382 1,686 5,161 181 \u2013 3 1,775 9,188 (76) 9,112
9,479 47,762 33,219 16,896 3,292 8,596 20,576 139,820 (2,336) 137,484
1 For financial assets that do not have credit ratings assigned by external ratings agencies, the Group assigns internal ratings for use in management and monitoring of credit risk. \u00a3110 million
of AAA, \u00a31,110 million of AA, \u00a32,556 million of A, \u00a32,480 million of BBB and \u00a3518 million of BB and below debt securities are internally rated. If a financial asset is neither rated by an
external agency nor internally rated, it is classified as \u2018non-rated\u2019.
2 Non-rated debt securities includes equity release mortgages with a value of \u00a34,214 million (further details are set out in note E2.3) and non-rated bonds.
Credit ratings have not been disclosed in the above tables for the assets of the unit-linked funds since the shareholder is not directly exposed
to credit risks from these assets. Included in unit-linked funds are assets which are held as reinsured external fund links. Under certain circumstances,
the shareholder may be exposed to losses relating to the default of the reinsured external fund link.
Credit ratings have not been disclosed in the above tables for holdings in unconsolidated collective investment schemes and investments in associates.
The credit quality of the underlying debt securities within these vehicles is managed by the safeguards built into the investment mandates for these vehicles.
The Group maintains accurate and consistent risk ratings across its asset portfolio. This enables management to focus on the applicable risks and
to compare credit exposures across all lines of business, geographical regions and products. The rating system is supported by a variety of financial
analytics combined with market information to provide the main inputs for the measurement of counterparty risk. All risk ratings are tailored to the various
categories of assets and are assessed and updated regularly.
The Group operates an I nternal Credit Rating Committee, a Rating Committee and a Portfolio Credit Committee to monitor and perform oversight of internal credit ratings for externally rated and internally rated assets. A variety of methods are used to validate the appropriateness of credit assessments from external institutions and fund managers. Internally rated assets do not have a public rating from an external credit assessment institution. Instead internal credit ratings are used by the Group which are provided by fund managers or for certain assets (in particular, equity release mortgages and illiquid assets) are determined by the Life Companies. The Committees review the policies, processes and practices to ensure the appropriateness of the internal ratings, and to ensure they are in line with regulatory requirements. Throughout 2022, the Group has taken de-risking action to increase the overall credit quality of its asset portfolio and mitigate the impact of future downgrades on risk capital. Further details are included in the Risk Management section of the Strategic Report. The Group has increased exposure to an array of illiquid credit assets such as equity release mortgages, local authority loans, social housing, infrastructure and commercial real estate loans with the aim of achieving greater diversification and investment returns, consistent with the Strategic Asset Allocation approved by the Board. A further indicator of the quality of the Group\u2019s financial assets is the extent to which they are neither past due nor impaired. All of the amounts in the table above for the current and prior year are neither past due nor impaired. Additional life company asset disclosures are included on page 307 and include information on the Group\u2019s market exposure analysed by credit rating, sector and country of exposure for the shareholder debt portfolio. In light of the continuing conflict in Russia-Ukraine, this includes the shareholders\u2019 credit exposure to Russia and Ukraine. The Group shareholder exposure to Russia and Ukraine was \u00a3nil at 31 December 2022 (31 December 2021: \u00a323 million). Concentration of credit risk Concentration of credit risk might exist where the Group has significant exposure to an individual counterparty or a group of counterparties with similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic and other conditions. The Group has most of its counterparty risk within its life business and is monitored by the Group Counterparty Credit Risk Framework contained within the Group Credit Risk Policy. It is further provided for in investment management agreements, overlaid by regulatory requirements and the monitoring of aggregate counterparty exposures across the Group against additional Group counterparty limits. Counterparty risk in respect of OTC derivative counterparties is monitored using a Potential Future Exposure (\u2018PFE\u2019) value metric. The Group is also exposed to concentration risk with outsource partners. This is due to the nature of the outsourced services market. The Group operates a policy to manage outsourcer service counterparty exposures and the impact from default is reviewed regularly by executive committees and measured through stress and scenario testing. Reinsurance The Group is exposed to credit risk as a result of insurance risk transfer contracts with reinsurers. The Group\u2019s policy is to place reinsurance only with highly rated counterparties (minimum rating requirement of A-). The Group restricts concentration with individual external reinsurers by specifying limits on ceding and minimum conditions for acceptance and retention of reinsurers. In recent years the Group has made progress in increasing the number of reinsurers it transacts with, however, an element of concentration remains due to the nature of the reinsurance market and the restricted range of reinsurers available. The Group manages its exposure to reinsurance credit risk through the operation of a credit policy, collateralisation, and regular monitoring of exposures at the Reinsurance Management Committee. Collateral The credit risk of the Group is mitigated, in certain circumstances, by entering into collateral agreements. The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of type s of collateral and the valuation parameters. Collateral is mainly obtained in respect of stock lending, certain reinsurance arrangements and to provide security against the daily mark to model value of derivative financial instruments. Management monitors the market value of the collateral received, requests additional collateral when needed, and performs an impairment valuation when impairment indicators exist and the asset is not fully secured and is not carried at fair value. See note E4 for further information on collateral arrangements. E6.2 Financial risk analysis continued E6.2.2 Market risk Market risk is defined as the risk of reductions in earnings and/or value, through financial or reputational loss, from unfavourable market movements. The risk typically arises from exposure to equity, property and fixed income asset classes and the impact of changes in interest rates, inflation rates and currency exchange rates. The Group is mainly exposed to market risk as a result of: \u2022 the mismatch between liability profiles and the related asset investment portfolios; \u2022 the investment of surplus assets including shareholder reserves yet to be distributed, surplus assets within the with-profit funds and assets held to meet regulatory capital and solvency requirements; and \u2022 the income flow of management charges derived from the value of invested assets of the business. The Group manages the levels of market risk that it accepts through the operation of a market risk policy using a number of controls and techniques including: \u2022 Defined lists of permitted securities and/or application of investment constraints and portfolio limits; \u2022 Clearly defined investment benchmarks for policyholder and shareholder funds; \u2022 Stochastic and deterministic asset/liability modelling; \u2022 Active use of derivatives to improve the matching characteristics of assets and liabilities and to reduce the risk exposure of a portfolio; and \u2022 Setting risk limits for main market risks and managing exposures against these appetites. All operations comply with regulatory requirements relating to the taking of market risk. Assets in the shareholder funds are managed against benchmarks that ensure they are diversified across a range of asset classes, instruments and geographies that are appropriate to the liabilities of the funds or are held to match the cash flows anticipated to arise in the business. A combination of limits by name of issuer, sector, geographical region and credit rating are used where relevant to reduce concentration risk among the assets held. The assets of the participating business are principally managed to support the liabilities of the participating business and are appropriately diversified by both asset class and geography, considering: \u2022 The economic liability and how this varies with market conditions; \u2022 The need to invest assets supporting participating business in a manner consistent with the participating policyholders\u2019 reasonable expectations and Principles and Practices of Financial Management (\u2018PPFM\u2019); and \u2022 The need to ensure that regulatory and capital requirements are met. In practice, an element of market risk arises as a consequence of the need to balance these considerations, for example, in certain instances participating policyholders may expect that equity market risk will be taken on their behalf, and derivative instruments may be used to manage these risks. Markets remain volatile particularly given geopolitical tensions, increased inflation, and action by central banks to reduce inflationary pressures on economies whilst balancing the need to aid post pandemic recovery. This is noted in the Strategic Report principal risk section. Interest rate and inflation risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate relative to the respective liability due to the impact of changes in market interest rates on the value of interest-bearing assets and on the value of future guarantees provided under certain contracts of insurance. The paragraphs in this section also apply to inflation risk, but references to fixed rate assets and liabilities would be replaced with index-linked assets and liabilities. The Group is required to manage its interest rate exposures in line with qualitative risk appetite statements, quantitative risk metrics and any additional hedging benchmarks. Interest rate risk is managed by matching assets and liabilities where practicable and by entering into derivative arrangements for hedging purposes where appropriate. This is particularly the case for the non-participating funds and supported participating funds. For unsupported participating business, some element of investment mismatching is permitted where it is consistent with the principles of treating customers fairly. The with-profit funds of the Group provide capital to allow such mismatching to be effected. In practice, the life companies of the Group maintain an appropriate mix of fixed and variable rate instruments according to the underlying insurance or investment contracts and will review this at regular intervals to ensure that overall exposure is kept within the risk profile agreed for each particular fund. This also requires the maturity profile of these assets to be managed in line with the liabilities to policyholders. The sensitivity analysis for interest rate and inflation risk indicates how changes in the fair value or future cash flows of a financial instrument arising from changes in market interest and inflation rates at the reporting date result in a change in profit after tax and in equity. It takes into account the effect of such changes in market interest and inflation rates on all assets and liabilities that contribute to the Group\u2019s reported profit after tax and in equity. Changes in the value of the Group\u2019s holdings in swaptions as the result of time decay or changes to interest rate volatility are not captured in the sensitivity analysis. With-profit business and non-participating business within the with-profit funds are exposed to interest rate risk as guaranteed liabilities are valued relative
to market interest rates and investments include fixed interest securities and derivatives. For unsupported with-profit business the profit or loss arising from
mismatches between such assets and liabilities is largely offset by increased or reduced discretionary policyholder benefits dependent on the existence of
policyholder guarantees. The contribution of unsupported participating business to the Group result is largely limited to the shareholders\u2019 share of the
declared annual bonus. The contribution of the supported participating business to the Group result is determined by the shareholders\u2019 interest in any
change in value in the capital advanced to the with-profit funds.
In the non-participating funds, policy liabilities\u2019 sensitivity to interest rates are matched primarily with debt securities and hedging if necessary to match
duration, with the result that sensitivity to changes in interest rates is very low. The Group\u2019s exposure to interest rates principally arises from the Group\u2019s
hedging strategy to protect the regulatory capital position, which results in an adverse impact on profit on an increase in interest rates.
The Group is exposed to inflation risk through certain contracts, such as annuities, which may provide for future benefits to be paid taking account of
changes in the level of experienced and implied inflation, and also through the Group\u2019s cost base. The Group seeks to manage inflation risk within the ALM
framework through the holding of derivatives, such as inflation swaps, or physical positions in relevant assets, such as index-linked gilts, where appropriate.
Due to the correlation between interest rates and inflation, a combined sensitivity has been presented.
An increase of 1% in interest rates and 0.6% in the rate of inflation, with all other variables held constant, would result in a decrease in profits after tax
in respect of a full financial year, and in equity, of \u00a325 million (2021: \u00a3364 million).
A decrease of 1% in interest rates and 0.6% in the rate of inflation, with all other variables held constant, would result in an increase in profits after tax
in respect of a full financial year, and in equity, of \u00a3128 million (2021: \u00a3415 million).
Equity and property risk
The Group is exposed to the risk of reductions in the valuation of equities (or changes in the volatility) or property investments which could result in
reductions in asset values and losses for policyholders or shareholders. In this context, equity assets should be taken to include shares, equity derivatives,
equity collectives and unlisted equities. Property assets include direct property investment, shares in property companies, property collectives and
structured property assets.
The portfolio of marketable equity securities and property investments which is carried in the statement of consolidated financial position at fair value,
has exposure to price risk. The Group\u2019s objective in holding these assets is to earn higher long-term returns by investing in a diverse portfolio of equities
and properties. Portfolio characteristics are analysed regularly and price risks are actively managed in line with investment mandates. The Group\u2019s
holdings are diversified across industries and concentrations in any one company or industry are limited.
Equity and property price risk is primarily borne in respect of assets held in with-profit funds, unit-linked funds or equity release mortgages in the
non-profit funds. For unit-linked funds this risk is borne by policyholders and asset movements directly impact unit prices and hence policy values.
For with-profit funds policyholders\u2019 future bonuses will be impacted by the investment returns achieved and hence the price risk, whilst the Group also
has exposure to the value of guarantees provided to with-profit policyholders. In addition some equity investments are held in respect of shareholders\u2019
funds. For the non-profit fund property price risk from equity release mortgages is borne by the Group with the aim of achieving greater diversification
and investment returns, consistent with the Strategic Asset Allocation approved by the Board. The Group as a whole is exposed to price risk fluctuations
impacting the income flow of management charges from the invested assets of all funds; this is primarily managed through the us
e of derivatives.
Equity and property price risk is managed through the agreement and monitoring of financial risk profiles that are appropriate for each of the Group\u2019s life
funds in respect of maintaining adequate regulatory capital and treating customers fairly. This is largely achieved through asset class diversification and
within the Group\u2019s ALM framework through the holding of derivatives or physical positions in relevant assets where appropriate.
The shareholders\u2019 exposure to equity risk principally arises from the Group\u2019s hedging strategy to protect the regulatory capital position, which results
in an adverse impact on profit on an increase in equity prices.
The sensitivity analysis for equity and property price risk illustrates how a change in the fair value of equities and properties affects the Group result.
It takes into account the effect of such changes in equity and property prices on all assets and liabilities that contribute to the Group\u2019s reported profit
after tax and in equity (but excludes the impact on the Group\u2019s pension schemes).
A 10% decrease in equity prices, with all other variables held constant, would result in an increase in profits after tax in respect of a full financial year,
and in equity, of \u00a3324 million (2021: \u00a3294 million).
A 10% increase in equity prices, with all other variables held constant, would result in a decrease in profits after tax in respect of a full financial year,
and in equity, of \u00a3269 million (2021: \u00a3263 million).
A 10% decrease in property prices, with all other variables held constant, would result in a decrease in profits after tax in respect of a full financial year, and in equity, of \u00a311 million (2021: \u00a36 million). A 10% increase in property prices, with all other variables held constant, would result in an increase in profits after tax in respect of a full financial year,
and in equity, of \u00a310 million (2021: \u00a34 million).
The sensitivity to changes in equity prices is primarily driven by the Group\u2019s equity hedging arrangements over the value of future management charges
that are linked to asset values.
Currency risk
Currency risk is the risk that changes in the value of currencies could lead to reductions in asset values which may result in losses for policyholders and
shareholders. With the exception of Standard Life International business sold in Germany and the Republic of Ireland and some historic business written
in the Republic of Ireland, the Group\u2019s principal transactions are carried out in sterling. The assets for these books of business are generally held in the
same currency denomination as their liabilities, therefore, any foreign currency mismatch is largely mitigated. Consequently, the foreign currency risk
relating to this business mainly arises when the assets and liabilities are translated into sterling.
The Group\u2019s financial assets are primarily denominated in the same currencies as its insurance and investment liabilities. Thus, the main foreign exchange
risk arises from recognised assets and liabilities denominated in currencies other than those in which insurance and investment liabilities are expected to
be settled and, indirectly, from the non-UK earnings of UK companies.
Some of the Group\u2019s with-profit funds have an exposure to overseas assets which is not driven by liability considerations. The purpose of this exposure is
to reduce overall risk whilst maximising returns by diversification. This exposure is limited and managed through investment mandates which are subject to
the oversight of the investment committees of the boards of each life company. Fluctuations in exchange rates from certain holdings in overseas assets are
hedged against currency risks.
During 2021, the Group entered into four hedging relationships to hedge the currency risk on its Euro and US dollar denominated hybrid debt (US $500 million
Tier 2 bonds, \u20ac500 million Tier 2 notes, US $750 million contingent convertible Tier 1 notes and US $500 million Fixed Rate Reset Tier 2 notes as set out in note
E5) through cross currency rate swaps.
E6.2.3 Financial soundness risk
Financial soundness risk is a broad risk category encompassing capital management risk, tax risk and liquidity and funding risk.
Capital management risk is defined as the failure of the Group, or one of its separately regulated subsidiaries, to maintain sufficient capital to provide
appropriate security for policyholders and meet all regulatory capital requirements whilst not retaining unnecessary capital. The Group has exposure to
capital management risk through the requirements of the Solvency II capital regime, as implemented by the PRA, to calculate regulatory capital adequacy
at a Group level. The Group\u2019s UK life subsidiaries have exposure to capital management risk through the Solvency II regulatory capital requirements
mandated by the PRA at the solo level. The Group\u2019s approach to managing capital management risk is described in detail in note I3.
Tax risk
Tax risk is defined as the risk of reductions in earnings and/or value, through financial or reputational loss, due to an unforeseen tax cost, or by the
inappropriate reporting and disclosure of information in relation to taxation. Tax risk can be caused by:
\u2022 the Group, or one of its subsidiaries, making a material error in its tax reporting;
\u2022 incorrect calculation of tax provisions;
\u2022 failure to implement the optimum financial arrangements to underpin a commercial transaction; and
\u2022 incorrect operation of policyholder tax requirements.
Tax risk is managed by maintaining an appropriately-staffed tax team who have the qualifications and experience to make judgements on tax issues,
augmented by advice from external specialists where required. In addition, the Group has a formal tax risk policy, which sets o
ut its risk appetite in relation
to specific aspects of tax risk, and which details the controls the Group has in place to manage those risks.
Liquidity risk Liquidity risk is defined as failure to maintain adequate levels of financial resources to meet obligations as they fall due. Funding risk relates to the potential inability to raise additional capital or liquidity when required in order to maintain the resilience of the balance sheet. The Group has exposure to liquidity risk as a result of servicing its external debt and equity investors, and from the operating requirements of its subsidiaries. The Group\u2019s subsidiaries have exposure to liquidity risk as a result of normal business activities, specifically the risk arising from an inability to meet short-term cash flow requirements and to meet obligations to policy liabilities. The Board of Phoenix Group Holdings plc has defined a number of governance objectives and principles and the liquidity risk frameworks of each subsidiary are designed to ensure that: \u2022 liquidity risk is managed in a manner consistent with the subsidiary company boards\u2019 strategic objectives, risk appetite and PPFM; \u2022 cash flows are appropriately managed and the reputation of the Group is safeguarded; and \u2022 appropriate information on liquidity risk is available to those making decisions. The Group\u2019s liquidity risk management strategy is based on a risk appetite of less than a 1 in 200 chance of having insufficient liquid or tangible assets to meet financial obligations as they fall due and is supported by: \u2022 holding appropriate assets to meet liquidity buffers; \u2022 holding high quality liquid assets to support day to day operations; \u2022 an effective stress testing framework to ensure survival horizons are met under different plausible scenarios; \u2022 effective liquidity portfolio management; and \u2022 liquidity risk contingency planning. The Group\u2019s funding strategy aims to maintain the appropriate level of debt and equity in order to support the Group\u2019s organic and inorganic growth ambitions, while maintaining sufficient headroom for hybrid capital under Solvency II rules. Liquidity forecasts showing headroom against liquidity buffers are prepared regularly to predict required liquidity levels over both the short and medium- term allowing management to respond appropriately to changes in circumstances. In the event of a liquidity shortfall, this would be managed in line with the Group\u2019s Contingency Liquidity Plan where the latest available contingency management actions would be considered. In extreme circumstances, the Group could be exposed to liquidity risk in its unit-linked funds. This could occur where a high volume of surrenders coincides with a tightening of liquidity in a unit-linked fund to the point where assets of that fund have to be sold to meet those withdrawals. Where the fund affected consists of less liquid assets such as property, it can take several months to complete a sale and this would impede the proper operation of the fund. In these situations, the Group considers its risk to be low since there are steps that can be taken first within the funds themselves both to ensure the fair treatment of all investors in those funds and to protect the Group\u2019s own risk exposure. The vast majority of the Group\u2019s derivative contracts are traded OTC and have a two-day collateral settlement period. The Group\u2019s derivative contracts are monitored daily, via an end-of-day valuation process, to assess the need for additional funds to cover margin or collateral calls. Some of the Group\u2019s commercial property investments, cash and cash equivalents are held through collective investment schemes. The collective investment schemes have the power to restrict and/or suspend withdrawals, which would, in turn, affect liquidity. The following table provides a maturity analysis showing the remaining contractual maturities of the Group\u2019s undiscounted financial liabilities and
associated interest. Liabilities under insurance contract contractual maturities are included based on the estimated timing of the amounts recognised
in the statement of consolidated financial position in accordance with the requirements of IFRS 4
Insurance Contracts
:
2022
1 year or less
or on
demand
\u00a3m
1\u20135 years
\u00a3m
Greater than
5 years
\u00a3m
No fixed term
\u00a3m
Total
\u00a3m
Less amounts
classified as
held for sale
(see note
A6.1)
\u00a3m
Total
\u00a3m
Liabilities under insurance contracts
12,898 29,818 59,300 \u2013 102,016 \u2013 102,016
Investment contracts
152,157 \u2013 \u2013 \u2013 152,157 (8,312) 143,845
Borrowings
1
268 1,326 2,357 64 4,015 \u2013 4,015
Deposits received from reinsurers
1
377 687 1,626 \u2013 2,690 \u2013 2,690
Derivatives
1
757 794 9,335 \u2013 10,886 (4) 10,882
Net asset value attributable to unitholders
2,978 \u2013 \u2013 \u2013 2,978 \u2013 2,978
Obligations for repayment of collateral received
1,706 \u2013 \u2013 \u2013 1,706 \u2013 1,706
Reinsurance payables
95 20 130 \u2013 245 \u2013 245
Payables related to direct insurance contracts
1,964 \u2013 \u2013 \u2013 1,964 \u2013 1,964
Lease liabilities
1
11 37 95 \u2013 143 \u2013 143
Accruals and deferred income
549 42 12 \u2013 603 (37) 566
Other payables
965 \u2013 \u2013 \u2013 965 \u2013 965
2021
1 year or less
or on
demand
\u00a3m
1\u20135 years
\u00a3m
Greater than
5 years
\u00a3m
No fixed term
\u00a3m
Total
\u00a3m
Less amounts
classified as
held for sale
(see note
A6.1)
\u00a3m
Total
\u00a3m
Liabilities under insurance contracts
14,319 36,061 78,484 \u2013 128,864 \u2013 128,864
Investment contracts
172,093 \u2013 \u2013 \u2013 172,093 (11,676) 160,417
Borrowings
1
664 1,380 2,772 70 4,886 \u2013 4,886
Deposits received from reinsurers
1
419 834 2,355 \u2013 3,608 \u2013 3,608
Derivatives
1
259 517 583 \u2013 1,359 (4) 1,355
Net asset value attributable to unitholders
3,568 \u2013 \u2013 \u2013 3,568 \u2013 3,568
Obligations for repayment of collateral received
3,442 \u2013 \u2013 \u2013 3,442 \u2013 3,442
Reinsurance payables
80 13 50 \u2013 143 \u2013 143
Payables related to direct insurance contracts
1,864 \u2013 \u2013 \u2013 1,864 \u2013 1,864
Lease liabilities
1
11 59 72 \u2013 142 \u2013 142
Accruals and deferred income
548 59 7 7 621 (54) 567
Other payables
721 \u2013 \u2013 \u2013 721 \u2013 721
1 These financial liabilities are disclosed at their undiscounted value and therefore differ from amounts included in the statement of consolidated financial position which discloses
the discounted value.
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. Although these liabilities are payable on demand, and are therefore included in the contractual maturity analysis as due within one year,
the Group does not expect all these amounts to be paid out within one year of the reporting date.
A significant proportion of the Group\u2019s financial assets are held in gilts, cash, supranationals and investment grade securities which the Group considers
sufficient to meet the liabilities as they fall due. The vast majority of these investments are readily realisable immediately since most of them are quoted
in an active market.
The Group has a set of established policies and processes to manage its exposure to liquidity risk, including impacts arising from the economic
environment, business developments and funding changes. Where liquidity risk is heightened, such as during the market volatility following the UK mini-
budget, triggers are in place to enhance the frequency of liquidity monitoring and to implement available contingency actions to ensure sufficient liquidity
is maintained.
E6.2.4 Strategic risk
Strategic risks threaten the achievement of the Group strategy through poor strategic decision-making, implementation or response to changing
circumstances. The Group recognises that core strategic activity brings with it exposure to strategic risk. However, the Group seeks to proactively review,
manage and control these exposures.
The Group\u2019s strategy and business plan are exposed to external events that could prevent or impact the achievement of the strategy; events relating to
how the strategy and business plan are executed; and events that arise as a consequence of following the specific strategy chosen. The identification and
assessment of strategic risks is an integrated part of the Risk Management Framework. Strategic risk should be considered in parallel with the Risk Universe
as each of the risks within the Risk Universe can impact the Group\u2019s strategy.
A Strategic Risk Policy is maintained and reported against regularly, with a particular focus on risk management, stakeholder management, corporate
activity and overall reporting against the Group\u2019s strategic ambitions.
E6.2.5 Operational risk
Operational risk is the risk of reductions in earnings and/or value, through financial or reputational loss, from inadequate or failed internal processes
and systems, or from people related or external events. Operational risk arises due to failures in one or more of the following aspects of our business:
\u2022 indirect exposures through outsourcing service providers and suppliers;
\u2022 direct exposures through internal practices, actions or omissions;
\u2022 external threats from individuals or groups focused on malicious or criminal activities, or on external events occurring which are not within the Group\u2019s
control; and
\u2022 negligence, mal-practice or failure of employees, or suppliers to follow good practice in delivering operational processes and practices.
It is accepted that it is neither possible, appropriate nor cost effective to eliminate operational risks from the business as operational risk is inherent in any
operating environment particularly given the regulatory framework under which the Group operates. As such the Group will tolerate a degree of
operational risk subject to appropriate and proportionate levels of control around the identification, management and reporting of such risks. A set of
operational risk policies are maintained that set out the nature of the operational risk exposure and minimum control standards in place to control the risk.
The Group also has a set of operational risk policies that set out the nature of the risk exposure and minimum control standards in place to control the risk.
E6.2.6 Customer risk
Customer risk is the risk of financial failure, reputational loss, loss of earnings and/or value through inappropriate or poor customer treatment (including
poor advice). It can arise as a result of:
\u2022 Customer Treatment: Failings in the design and execution of the support and service interactions with customers leads to poor customer outcomes.
\u2022 Customer Transformation: The design, governance and oversight of Strategic Customer Transformation Activity in retained functions and service
providers, fails to deliver on reasonable customer expectations, taking account of the Phoenix Group customer treatment risk appetites and
regulatory requirements.
\u2022 Product and Propositions: Products/propositions are not designed and managed appropriates leading to poor customer outcomes.
\u2022 Sales and Distribution: Inappropriate (unclear, unfair or misleading) financial promotions, sales practices and/or distribution agreements resulting
in poor customer outcomes.
The Group\u2019s Conduct Risk Appetite, sets the boundaries within which the Group expect customer outcomes to be managed. In addition, the Group
Conduct Strategy, which overarches our Risk Universe and all risk policies is designed to detect where our customers are at risk of poor outcome, minimise
conduct risks, and respond with timely and appropriate mitigating actions.
The Group also has a suite of customer polices which set out the key customer risks and control objectives in place to mitigate them. The customer risks
for the Group are regularly reported to management oversight committees.
",
"dimensions": {
"concept": "phoenixgroupholdings:DislcosureOfFinancialAssetsAndFinancialLiabilities",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-567": {
"value": "E1. Fair values
Financial assets
Purchases and sales of financial assets are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset.
Loans and deposits are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and only include
assets where a security has not been issued. These loans and deposits are initially recognised at cost, being the fair value of the consideration paid for
the acquisition of the investment. All transaction costs directly attributable to the acquisition are also included in the cost of the investment. Subsequent
to initial recognition, these investments are carried at amortised cost, using the effective interest method.
Derivative financial instruments are largely classified as held for trading. They are recognised initially at fair value and subsequently are remeasured to
fair value. The gain or loss on remeasurement to fair value is recognised in the consolidated income statement. Derivative financial instruments are not
classified as held for trading where they are designated and effective as a hedging instrument. For such instruments, the timing of the recognition of
any gain or loss that arises on remeasurement to fair value in profit or loss depends on the nature of the hedge relationship.
Equities, debt securities and collective investment schemes are designated at FVTPL and accordingly are stated in the statement of consolidated
financial position at fair value. They are designated at FVTPL because this is reflective of the manner in which the financial assets are managed and
reduces a measurement inconsistency that would otherwise arise with regard to the insurance liabilities that the assets are backing.
The Group has treaties in place with third party insurance companies to provide reinsurance in respect of liabilities that are linked to the performance
of funds maintained by those companies. The contracts in question do not transfer significant insurance risk and therefore are classified as financial
instruments and are valued at fair value through profit and loss. These contracts are disclosed under Reinsurers\u2019 share of investment contract liabilities
in the statement of consolidated financial position.
Impairment of financial assets
The Group assesses at each period end whether a financial asset or group of financial assets held at amortised cost are impaired. The Group first
assesses whether objective evidence of impairment exists. If it is determined that no objective evidence of impairment exists for an individually assessed
financial asset, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively
assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognised, are not
included in the collective assessment of impairment.
Fair value estimation
The fair values of financial instruments traded in active markets such as publicly traded securities and derivatives are based on quoted market prices at
the period end. The quoted market price used for financial assets is the applicable bid price on the period end date. The fair value of investments that
are not traded in an active market is determined using valuation techniques such as broker quotes, pricing models or discounted cash flow techniques.
Where pricing models are used, inputs are based on market related data at the period end. Where discounted cash flow techniques are used, estimated
future cash flows are based on contractual cash flows using current market conditions and market calibrated discount rates and interest rate assumptions
for similar instruments.
For units in unit trusts and shares in open-ended investment companies, fair value is determined by reference to published bid-values. The fair value
of receivables and floating rate and overnight deposits with credit institutions is their carrying value. The fair value of fixed interest-bearing deposits
is estimated using discounted cash flow techniques.
Associates
Investments in associates that are held for investment purposes are accounted for under IAS 39
Financial Instruments: Recognition and Measurement
as
permitted by IAS 28
Investments in Associates and Joint Ventures
. These are measured at fair value through profit or loss. There are no investments in
associates which are of a strategic nature.
Derecognition of financial assets
A financial asset (or part of a group of similar financial assets) is derecognised where:
\u2022 the rights to receive cash flows from the asset have expired;
\u2022 the Company retains the right to receive cash flows from the assets, but has assumed an obligation to pay them in full without material delay to a third
party under a \u2018pass-through\u2019 arrangement; or
\u2022 the Company has transferred its rights to receive cash flows from the asset and has either transferred substantially all the risks and rewards of the
asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Financial liabilities
On initial recognition, financial liabilities are recognised when due and measured at the fair value of the consideration received less directly attributable
transaction costs (with the exception of liabilities at FVTPL for which all transaction costs are expensed).
Subsequent to initial recognition, financial liabilities (except for liabilities under investment contracts without DPF and other liabilities designated at
FVTPL) are measured at amortised cost using the effective interest method.
Financial liabilities are designated upon initial recognition at FVTPL and where doing so results in more meaningful information because either:
\u2022 it eliminates or significantly reduces accounting mismatches that would otherwise arise from measuring assets or liabilities or recognising the gains
and losses on them on different bases; or
\u2022 a group of financial assets, financial liabilities or both is managed and its performance is evaluated and managed on a fair value basis, in accordance
with a documented risk management or investment strategy, and information about the investments is provided internally on that basis to the Group\u2019s
key management personnel.
Investment contracts without DPF
Contracts under which the transfer of insurance risk to the Group from the policyholder is not significant are classified as investment contracts and
accounted for as financial liabilities.
Receipts and payments on investment contracts without DPF are accounted for using deposit accounting, under which the amounts collected and paid
out are recognised in the statement of consolidated financial position as an adjustment to the liability to the policyholder.
The valuation of liabilities on unit-linked contracts are held at the fair value of the related assets and liabilities. The liability is the sum of the unit-linked
liabilities plus an additional amount to cover the present value of the excess of future policy costs over future charges.
Movements in the fair value of investment contracts without DPF and reinsurers\u2019 share of investment contract liabilities are included in the \u2018change in
investment contract liabilities\u2019 in the consolidated income statement.
Investment contract policyholders are charged for policy administration services, investment management services, surrenders and other contract fees.
These fees are recognised as revenue over the period in which the related services are performed. If the fees are for services provided in future periods,
then they are deferred and recognised over those periods. \u2018Front end\u2019 fees are charged on some non-participating investment contracts. Where the
non-participating investment contract is measured at fair value, such fees which relate to the provision of investment management services are deferred
and recognised as the services are provided.
Deposits received from reinsurers
It is the Group\u2019s practice to obtain collateral to cover certain reinsurance transactions, usually in the form of cash or marketable securities. Where cash
collateral is available to the Group for investment purposes, it is recognised as a \u2018financial asset\u2019 and the collateral repayable is recognised as \u2018deposits
received from reinsurers\u2019 in the statement of consolidated financial position. The \u2018deposits received from reinsurers\u2019 are measured at amortised cost.
Net asset value attributable to unitholders
The net asset value attributable to unitholders represents the non-controlling interest in collective investment schemes which are consolidated by the
Group. This interest is classified at FVTPL and measured at fair value, which is equal to the bid value of the number of units of the collective investment
scheme not owned by the Group.
Obligations for repayment of collateral received
It is the Group\u2019s practice to obtain collateral in stock lending and derivative transactions, usually in the form of cash or marketable securities. Where cash
collateral received is available to the Group for investment purposes, it is recognised as a \u2018financial asset\u2019 and the collateral repayable is recognised as
\u2018obligations for repayment of collateral received\u2019 in the statement of consolidated financial position. The \u2018obligations for repayment of collateral
received\u2019 are measured at amortised cost, which in the case of cash is equivalent to the fair value of the consideration received. Further details of the
Group\u2019s collateral arrangements are included in note E4.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, instead of or cancelled or expires.
Offsetting financial assets and financial liabilities
Financial assets and liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right
to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. When
financial assets and liabilities are offset any related interest income and expense is offset in the income statement.
Hedge accounting
The Group designates certain derivatives as hedging instruments in order to effect cash flow hedges. At the inception of the hedge relationship,
the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy
for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the
hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.
Where a cash flow hedging relationship exists, the effective portion of changes in the fair value of derivatives that are designated and qualify as cash
flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating
to the ineffective portion is recognised immediately in profit or loss, and is included in net investment income.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the
hedged item affects profit or loss, in the same line as the recognised hedged item.
Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated,
or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated
in equity at that time is recycled to profit or loss over the period the hedged item impacts profit or loss.
E1.1 Fair values analysis
The table below sets out a comparison of the carrying amounts and fair values of financial instruments as at 31 December 2022:
Carrying value
2022
Total
\u00a3m
Amounts due for
settlement after
12 months
\u00a3m
Fair value
\u00a3m
Financial assets
Financial assets at fair value through profit or loss:
Held for trading \u2013 derivatives
4,071 3,353 4,071
Designated upon initial recognition:
Equities
1
76,780 \u2013 76,780
Investment in associate
(see note H2)
1
329 \u2013 329
Debt securities
84,710 70,115 84,710
Collective investment schemes
1
78,353 \u2013 78,353
Reinsurers' share of investment contract liabilities
1
9,088 \u2013 9,088
Financial assets measured at amortised cost:
Loans and deposits
279 99 279
Total financial assets
253,610 253,610
Less amounts classified as financial assets held for sale (see note A6.1)
2
(4,629) (4,629)
Total financial assets less financial assets classified as held for sale
248,981 248,981
Carrying value
2022
Total
\u00a3m
Amounts due for
settlement after
12 months
\u00a3m
Fair value
\u00a3m
Financial liabilities
Financial liabilities at fair value through profit or loss:
Held for trading \u2013 derivatives
5,879 5,118 5,879
Designated upon initial recognition:
Borrowings
64 64 64
Net asset value attributable to unitholders
1
2,978 \u2013 2,978
Investment contract liabilities
1
152,157 \u2013 152,157
Financial liabilities measured at amortised cost:
Borrowings
3,916 3,648 3,644
Deposits received from reinsurers
2,598 2,221 2,598
Obligations for repayment of collateral received
1,706 \u2013 1,706
Total financial liabilities
169,298 169,026
Less amounts classified as financial liabilities held for sale (see note A6.1)
3
(8,316) (8,316)
Total financial liabilities less financial liabilities held for sale
160,982 160,710
1 These assets and liabilities have no specified settlement date.
2 Amounts classified as financial assets held for sale include derivatives of \u00a33 million, equities of \u00a343 million, debt securities of \u00a31,594 million, collective investment schemes of \u00a32,964 million
and reinsurers\u2019 share of investment contract liabilities of \u00a325 million.
3 Amounts classified as financial liabilities held for sale include derivative liabilities of \u00a34 million and investment contract liabilities of \u00a38,312 million.
Carrying value
2021
Total
\u00a3m
Amounts due for
settlement after 12
months
\u00a3m
Fair value
\u00a3m
Financial assets
Financial assets at fair value through profit or loss:
Held for trading \u2013 derivatives
4,571 3,208 4,571
Designated upon initial recognition:
Equities
1
87,059 \u2013 87,059
Investment in associate
(see note H2)
1
431 \u2013 431
Debt securities
106,990 88,965 106,990
Collective investment schemes
1
90,164 \u2013 90,164
Reinsurers' share of investment contract liabilities
1
10,009 \u2013 10,009
Financial assets measured at amortised cost:
Loans and deposits
475 48 475
Total financial assets
299,699 299,699
Less amounts classified as financial assets held for sale (see note A6.1)
2
(6,507) (6,507)
Total financial assets less financial assets classified as held for sale
293,192 293,192
Carrying value
Total
\u00a3m
Amounts due for
settlement after 12
months
\u00a3m
Total
\u00a3m
Financial liabilities
Financial liabilities at fair value through profit or loss:
Held for trading \u2013 derivatives
1,252 989 1,252
Designated upon initial recognition:
Borrowings
70 70 70
Net asset value attributable to unitholders
1
3,568 \u2013 3,568
Investment contract liabilities
1
172,093 \u2013 172,093
Financial liabilities measured at amortised cost:
Borrowings
4,155 3,688 4,564
Deposits received from reinsurers
3,569 3,150 3,569
Obligations for repayment of collateral received
3,442 \u2013 3,442
Total financial liabilities
188,149 188,558
Less amounts classified as financial liabilities held for sale
3
(11,680) (11,680)
Total financial liabilities less financial liabilities held for sale
176,469 176,878
1 These assets and liabilities have no specified settlement date.
2 Amounts classified as financial assets held for sale include derivatives of \u00a34 million, equities of \u00a378 million, debt securities of \u00a32,229 million, collective investment schemes of \u00a34,169 million
and reinsurers\u2019 share of investment contract liabilities of \u00a327 million.
3 Amounts classified as financial liabilities held for sale include derivative liabilities of \u00a34 million and investment contract liabilities of \u00a311,676 million.
E2. Fair value hierarchy E2.1 Determination of fair value and fair value hierarchy of financial instruments Level 1 financial instruments The fair value of financial instruments traded in active markets (such as exchange traded securities and derivatives) is based on quoted market prices at the period end provided by recognised pricing services. Market depth and bid-ask spreads are used to corroborate whether an active market exists for an instrument. Greater depth and narrower bid-ask spread indicate higher liquidity in the instrument and are classed as Level 1 inputs. For collective investment schemes and reinsurers\u2019 share of investment contract liabilities, fair value is by reference to published bid prices. Level 2 financial instruments Financial instruments traded in active markets with less depth or wider bid-ask spreads which do not meet the classification as Level 1 inputs, are classified as Level 2. The fair values of financial instruments not traded in active markets are determined using broker quotes or valuation techniques with observable market inputs. Financial instruments valued using broker quotes are classified as Level 2, only where there is a sufficient range of available quotes. The fair value of over the counter derivatives is estimated using pricing models or discounted cash flow techniques. Collective investment schemes where the underlying assets are not priced using active market prices are determined to be Level 2 instruments. Where pricing models are used, inputs are based on market related data at the period end. Where discounted cash flows are used, estimated future cash flows are based on management\u2019s best estimates and the discount rate used is a market related rate for a similar instrument. The fair value of investment contract liabilities reflects the fair value of the underlying assets and liabilities in the funds plus an additional amount to cover the present value of the excess of future policy costs over future charges. The liabilities are consequently determined to be Level 2 instruments. Level 3 financial instruments The Group\u2019s financial instruments determined by valuation techniques using non-observable market inputs are based on a combination of independent third party evidence and internally developed models. In relation to investments in hedge funds and private equity investments, non-observable third party evidence in the form of net asset valuation statements is used as the basis for the valuation. Adjustments may be made to the net asset valuation where other evidence, for example recent sales of the underlying investments in the fund, indicates this is required. Securities that are valued using broker quotes which could not be corroborated across a sufficient range of quotes are considered as Level 3. For a small number of investment vehicles and debt securities, standard valuation models are used, as due to their nature and complexity they have no external market. Inputs into such models are based on observable market data where applicable. The fair value of loans, derivatives and some borrowings with no external market is determined by internally developed discounted cash flow models using appropriate assumptions corroborated with external market data where possible. For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) during each reporting period. Fair value hierarchy information for non-financial assets measured at fair value is included in note G3 for owner-occupied property and in note G4 for investment property. E2.2 Fair value hierarchy of financial instruments The tables below separately identify financial instruments carried at fair value from those measured on another basis but for which fair value is disclosed. 2022 Level 1 \u00a3m Level 2 \u00a3m Level 3 \u00a3m Total fair value \u00a3m Financial assets measured at fair value Derivatives 165 3,754 152 4,071 Financial assets designated at FVTPL upon initial recognition: Equities 74,464 124 2,192 76,780 Investment in associate 329 \u2013 \u2013 329 Debt securities 48,151 25,094 11,465 84,710 Collective investment schemes 75,962 2,079 312 78,353 Reinsurers' share of investment contract liabilities 9,088 \u2013 \u2013 9,088 207,994 27,297 13,969 249,260 Total financial assets measured at fair value 208,159 31,051 14,121 253,331 Less amounts classified as held for sale (3,661) (179) (789) (4,629) Total financial assets measured at fair value, excluding amounts classified as held for sale 204,498 30,872 13,332 248,702 Financial assets for which fair values are disclosed Loans and deposits at amortised cost \u2013 272 7 279 204,498 31,144 13,339 248,981 2022 Level 1 \u00a3m Level 2 \u00a3m Level 3 \u00a3m Total fair value \u00a3m Financial liabilities measured at fair value Derivatives 98 5,538 243 5,879 Financial liabilities designated at FVTPL upon initial recognition: Borrowings \u2013 \u2013 64 64 Net asset value attributable to unit-holders 2,978 \u2013 \u2013 2,978 Investment contract liabilities \u2013 152,157 \u2013 152,157 2,978 152,157 64 155,199 Total financial liabilities measured at fair value 3,076 157,695 307 161,078 Less amounts classified as held for sale \u2013 (8,316) \u2013 (8,316) Total financial liabilities measured at fair value, excluding amounts classified as held for sale 3,076 149,379 307 152,762 Financial liabilities for which fair values are disclosed Borrowings at amortised cost \u2013 3,644 \u2013 3,644 Deposits received from reinsurers \u2013 2,542 56 2,598 Obligations for repayment of collateral received \u2013 1,706 \u2013 1,706 Total financial liabilities for which fair values are disclosed \u2013 7,892 56 7,948 3,076 157,271 363 160,710 2021 Level 1 \u00a3m Level 2 \u00a3m Level 3 \u00a3m Total fair value \u00a3m Financial assets measured at fair value Derivatives 161 4,173 237 4,571 Financial assets designated at FVTPL upon initial recognition: Equities 85,108 52 1,899 87,059 Investment in associate 431 \u2013 \u2013 431 Debt securities 57,992 36,546 12,452 106,990 Collective investment schemes 86,244 3,634 286 90,164 Reinsurers' share of investment contract liabilities 10,009 \u2013 \u2013 10,009 239,784 40,232 14,637 294,653 Total financial assets measured at fair value 239,945 44,405 14,874 299,224 Less amounts classified as held for sale (see note A6.1) (5,194) (421) (892) (6,507) Total financial assets measured at fair value, excluding amounts classified as held for sale 234,751 43,984 13,982 292,717 Financial assets for which fair values are disclosed Loans and deposits at amortised cost \u2013 464 11 475 234,751 44,448 13,993 293,192 2021 Level 1 \u00a3m Level 2 \u00a3m Level 3 \u00a3m Total fair value \u00a3m Financial liabilities measured at fair value Derivatives 155 972 125 1,252 Financial liabilities designated at FVTPL upon initial recognition: Borrowings \u2013 \u2013 70 70 Net asset value attributable to unitholders 3,568 \u2013 \u2013 3,568 Investment contract liabilities \u2013 172,093 \u2013 172,093 3,568 172,093 70 175,731 Total financial liabilities measured at fair value 3,723 173,065 195 176,983 Less amounts classified as held for sale (see note A6.1) \u2013 (11,680) \u2013 (11,680) Total financial liabilities measured at fair value, excluding amounts classified as held for sale 3,723 161,385 195 165,303 Financial liabilities for which fair values are disclosed Borrowings at amortised cost \u2013 4,564 \u2013 4,564 Deposits received from reinsurers \u2013 3,484 85 3,569 Obligations for repayment of collateral received \u2013 3,442 \u2013 3,442 Total financial liabilities for which fair values are disclosed \u2013 11,490 85 11,575 3,723 172,875 280 176,878 E2.3 Significant inputs and input values for Level 3 financial instruments Key unobservable input value Description Valuation technique Significant inputs 2022 2021 Equities Single broker 1 and net asset value 2 Single broker indicative price N/A N/A Debt securities (see E2.3.1 for further details) Loans guaranteed by export credit agencies & supranationals DCF model 3 Credit spread 111bps (weighted average) 53bps (weighted average) Private corporate credit DCF model 3 Credit spread 169bps (weighted average) 129bps (weighted average) Infrastructure loans DCF model 3 Credit spread 220bps (weighted average) 207bps (weighted average) Loans to housing associations DCF model 3 Credit spread 164bps (weighted average) 128bps (weighted average) Local authority loans DCF model 3 Credit spread 137bps (weighted average) 105 bps (weighted average) Equity Release Mortgage loans (\u2018ERM\u2019) DCF model and Black- Scholes model 4 Spread 260bps over the IFRS reference curve 170bps over the IFRS reference curve House price inflation +75bps adjustment to RPI +75bps adjustment to RPI House prices \u00a3304,088 (average) \u00a3291,599 (average) Mortality Average life expectancy of a male and female currently aged 75 is 14.5 years and 15.9 years respectively Average life expectancy of a male and female currently aged 76 is 13.7 years and 15.0 years respectively Voluntary redemption rate 150bps to 700bps 150bps to 700bps Commercial real estate loans DCF model 3 Credit spread 253bps (weighted average) 228bps (weighted average) Income strips 5 Income capitalisation Credit spread 661bps 487bps Collective investment schemes Net asset value statements 2 N/A N/A N/A Borrowings Property reversions loans (see note E5) Internally developed model Mortality rate 130% IFL92C15 (Female) 6 130% IFL92C15 (Female) 6 130% IML92C15 (Male) 6 130% IML92C15 (Male) 6 House price inflation 3 year RPI rate plus 75bps 3 year RPI rate plus 75bps Discount rate 3 year swap rate plus 170bps 3 year swap rate plus 170bps Deferred possession rate 370bps 370bps Derivative assets and liabilities Forward private placements, infrastructure and local authority loans 7 DCF model 3 Credit spread 145bps (weighted average) 110bps (weighted average) Longevity swaps 8 DCF model 3 Swap curve swap curve + 36bps swap curve + 36bps Equity Release Income Plan total return swap 9 DCF model 3 Credit spread 500bps 500bps 1 Broker indicative prices: Although such valuations are sensitive to estimates, it is believed that changing one or more of the assumptions to reasonably possible alternative assumptions would not change the fair value significantly. 2 Net asset value statements: Net asset statements are provided by independent third parties, and therefore no significant non-observable input or sensitivity information has been prepared for those instruments valued on this basis. 3 Discounted cash flow (\u2018DCF\u2019) model: Except where otherwise stated, the discount rate used is based on a risk-free curve and a credit spread. The risk-free rate is taken from an appropriate gilt of comparable duration. The spread is derived from a basket of comparable securities. 4 ERM loans: The loans are valued using a DCF model and a Black-Scholes model for valuation of the No-Negative Equity Guarantee (\u2018NNEG\u2019). The NNEG caps the loan repayment in the event of death or entry into long-term care to be no greater than the sales proceeds from the property. The future cash flows are estimated based on assumed levels of mortality derived from published mortality tables, entry into long-term care rates and voluntary redemption rates. Cash flows include an allowance for the expected cost of providing a NNEG assessed under a real world approach using a closed form model including an assumed level of property value volatility. For the NNEG assessment, property values are indexed from the latest property valuation point and then assumed to grow in line with an RPI based assumption. Cash flows are discounted using a risk free curve plus a spread, where the spread is based on recent originations, with margins to allow for the different risk profiles of ERM loans. 5 Income strips are transactions where an owner-occupier of a property has sold a freehold or long leasehold interest to the Group, and has signed a long lease (typically 30-45 years) or a ground lease (typically 45-175 years) and retains the right to repurchase the property at the end of the lease for a nominal sum (usually \u00a31). The income strips are valued using an income capitalisation approach, where the annual rental income is capitalised using an appropriate yield. The yield is determined by considering recent transactions involving similar income strips . E2.3 Significant inputs and input values for Level 3 financial instruments continued 6 IFL92C15 and IML92C15 relate to immediate annuitant female and male lives and refer to the 92 series mortality tables produced by the Continuous Mortality Investigation (\u2018CMI\u2019). 7 Derivative liabilities include forward investments of \u00a3146 million (2021: \u00a37 million derivative assets) which include a commitment to acquire or provide funding for fixed rate debt instruments at specified future dates. 8 Included within derivative assets and liabilities are longevity swap contracts with corporate pension schemes with a fair value of \u00a3152 million (2021: \u00a3230 million) and \u00a334 million (2021: \u00a349 million) respectively. 9 Included within derivative liabilities is the Equity Release Income Plan (\u2018ERIP\u2019) total return swap with a value of \u00a363 million (2021: \u00a367 million), under which a share of the disposal proceeds arising on a portfolio of property reversions is payable to a third party (see note E.3.3 for further details). E2.3.1 Debt securities Analysis of Level 3 debt securities 2022 \u00a3m 2021 restated 1 \u00a3m Unquoted corporate bonds: Loans guaranteed by export credit agencies & supranationals 402 219 Private corporate credit 1,422 1,488 Infrastructure loans \u2013 project finance 882 967 Infrastructure loans \u2013 corporate 1,175 1,074 Loans to housing associations 691 1,022 Local authority loans 596 917 Equity release mortgages 3,934 4,214 Commercial real estate loans 1,104 1,317 Income strips 786 886 Bridging loans to private equity funds 462 339 Other 11 9 Total Level 3 debt securities 11,465 12,452 Less amounts classified as held for sale (786) (892) Total Level 3 debt securities excluding amounts classified as held for sale 10,679 11,560 1 At 31 December 2021 \u00a31,632 million of private corporate credit assets have been reclassified as loans guaranteed by export credit agencies & supranationals (\u00a360 million), infrastructure loans (\u00a3550 million) and loans to housing associations (\u00a31,022 million) . Sensitivities of level 3 financial instruments 2022 \u00a3m 2021 \u00a3m Debt securities \u2013 Loans guaranteed by export credit agencies & supranationals 65bps increase in spread (9) (9) 65bps decrease in spread 11 10 Debt securities \u2013 Private corporate credit 65bps increase in spread (98) (124) 65bps decrease in spread 112 143 Debt securities \u2013 Infrastructure loans 65bps increase in spread (103) (124) 65bps decrease in spread 107 128 Debt securities \u2013 Loans to housing associations 65bps increase in spread (54) (102) 65bps decrease in spread 58 112 Debt securities \u2013 Local authority loans 65bps increase in spread (51) (109) 65bps decrease in spread 55 121 Debt securities \u2013 ERM loans 100bps increase in spread (329) (443) 100bps decrease in spread 370 512 5% increase in mortality 13 (10) 5% decrease in mortality (14) 9 15% increase in voluntary redemption rate 49 (22) 15% decrease in voluntary redemption rate (52) 23 1% increase in house price inflation 27 26 1% decrease in house price inflation (42) (43) 10% increase in house prices 22 13 10% decrease in house prices (38) (23) Debt securities \u2013 CRELs 65bps increase in spread (18) (24) 65bps decrease in spread 19 24 Debt securities \u2013 Income strips 35bps increase in spread (76) (94) 35bps decrease in spread 88 121 Derivatives \u2013 Forward private placements, infrastructure and local authority loans1 65bps increase in spread (30) (25) 65bps decrease in spread 31 27 Derivatives \u2013 Longevity swap contracts 100bps increase in swap curve (17) (28) 100bps decrease in swap curve 21 35 Derivatives \u2013 Equity Release Income Plan total return swap 100bps increase in spread (2) (2) 100bps decrease in spread 2 2 For the property reversions loans and bridging loans to equity funds, there are no reasonably possible movements in unobservable input values which would result in a significant movement in the fair value of the financial instruments. For those assets valued using net asset value statements (equities and collective investment schemes) no sensitivity information has been prepared as the net asset statements are provided by independent third parties. E2.4 Transfers of financial instruments between Level 1 and Level 2 2022 From Level 1 to Level 2 \u00a3m From Level 2 to Level 1 \u00a3m Financial assets measured at fair value Derivatives 48 \u2013 Financial assets designated at FVTPL upon initial recognition: Equities 73 5 Debt securities 1,478 1,267 Collective investment schemes 28 \u2013 1,579 1,272 Total financial assets measured at fair value 1,627 1,272 2021 From Level 1 to Level 2 \u00a3m From Level 2 to Level 1 \u00a3m Financial assets measured at fair value Derivatives 51 \u2013 Financial assets designated at FVTPL upon initial recognition: Equities 33 17 Debt securities 1,742 1,006 Collective investment schemes 32 42 1,807 1,065 Total financial assets measured at fair value 1,858 1,065 Consistent with the prior year, all the Group\u2019s Level 1 and Level 2 assets have been valued using standard market pricing sources. The application of the Group\u2019s fair value hierarchy classification methodology at an individual security level, in particular observations with regard to measures of market depth and bid-ask spreads, resulted in an overall net movement of debt securities from Level 1 to Level 2 in both the current and prior period. E2.5 Movement in Level 3 financial instruments measured at fair value 2022 At 1 January 2022 \u00a3m Net (losses)/ gains in income statement \u00a3m Purchases \u00a3m Sales \u00a3m Transfers from Level 1 and Level 2 \u00a3m Transfers to Level 1 and Level 2 \u00a3m At 31 December 2022 1 \u00a3m Unrealised (losses)/ gains on assets held at end of period \u00a3m Financial assets Derivatives 237 (85) \u2013 \u2013 \u2013 \u2013 152 (85) Financial assets designated at FVTPL upon initial recognition: Equities 1,899 177 438 (369) 47 \u2013 2,192 12 Debt securities 12,452 (3,544) 6,838 (4,277) 2 (6) 11,465 (3,595) Collective investment schemes 286 (79) 108 (3) - \u2013 312 (73) 14,637 (3,446) 7,384 (4,649) 49 (6) 13,969 (3,656) Total financial assets 14,874 (3,531) 7,384 (4,649) 49 (6) 14,121 (3,741) 1 Total financial assets of \u00a314,121 million includes \u00a3789 million of assets classified as held for sale. 2022 At 1 January 2022 \u00a3m Net losses in income statement \u00a3m Purchases \u00a3m Sales/ repayments \u00a3m Transfers from Level 1 and Level 2 \u00a3m Transfers to Level 1 and Level 2 \u00a3m At 31 December 2022 \u00a3m Unrealised losses on liabilities held at end of period \u00a3m Financial liabilities Derivatives 125 130 \u2013 (12) \u2013 \u2013 243 123 Financial liabilities designated at FVTPL upon initial recognition: Borrowings 70 9 \u2013 (15) \u2013 \u2013 64 9 Total financial liabilities 195 139 \u2013 (27) \u2013 \u2013 307 132 2021 At 1 January 2021 \u00a3m Net (losses)/gains in income statement \u00a3m Purchases \u00a3m Sales \u00a3m Transfers from Level 1 and Level 2 \u00a3m Transfers to Level 1 and Level 2 \u00a3m At 31 December 2021 1 \u00a3m Unrealised (losses)/gains on assets held at end of period \u00a3m Financial assets Derivatives 198 (74) 113 \u2013 \u2013 \u2013 237 (82) Financial assets designated at FVTPL upon initial recognition: Equities 1,563 436 269 (368) (1) 1,899 278 Debt securities 10,164 88 6,394 (4,210) 26 (10) 12,452 115 Collective investment schemes 401 (70) 34 (94) 15 \u2013 286 22 12,128 454 6,697 (4,672) 41 (11) 14,637 415 Total financial assets 12,326 380 6,810 (4,672) 41 (11) 14,874 333 1 Total financial assets of \u00a314,874 million includes \u00a3892 million classified as held for sale. 2021 At 1 January 2021 \u00a3m Net (gains)/losses in income statement \u00a3m Purchases \u00a3m Sales/ Repayments \u00a3m Transfers from Level 1 and Level 2 \u00a3m Transfers to Level 1 and Level 2 \u00a3m At 31 December 2021 1 \u00a3m Unrealised (gains)losses on liabilities held at end of period \u00a3m Financial liabilities Derivatives 162 (19) \u2013 (18) \u2013 \u2013 125 (29) Financial liabilities designated at FVTPL upon initial recognition: Borrowings 84 4 \u2013 (18) \u2013 \u2013 70 5 Total financial liabilities 246 (15) \u2013 (36) \u2013 \u2013 195 (24) Gains and losses on Level 3 financial instruments are included in net investment income in the consolidated income statement. There were no gains or losses recognised in other comprehensive income in either the current or comparative period. ",
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"concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory",
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"fact-681": {
"value": "Financial assets Purchases and sales of financial assets are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. Loans and deposits are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and only include assets where a security has not been issued. These loans and deposits are initially recognised at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributable to the acquisition are also included in the cost of the investment. Subsequent to initial recognition, these investments are carried at amortised cost, using the effective interest method. Derivative financial instruments are largely classified as held for trading. They are recognised initially at fair value and subsequently are remeasured to fair value. The gain or loss on remeasurement to fair value is recognised in the consolidated income statement. Derivative financial instruments are not classified as held for trading where they are designated and effective as a hedging instrument. For such instruments, the timing of the recognition of any gain or loss that arises on remeasurement to fair value in profit or loss depends on the nature of the hedge relationship. Equities, debt securities and collective investment schemes are designated at FVTPL and accordingly are stated in the statement of consolidated financial position at fair value. They are designated at FVTPL because this is reflective of the manner in which the financial assets are managed and reduces a measurement inconsistency that would otherwise arise with regard to the insurance liabilities that the assets are backing. The Group has treaties in place with third party insurance companies to provide reinsurance in respect of liabilities that are linked to the performance of funds maintained by those companies. The contracts in question do not transfer significant insurance risk and therefore are classified as financial instruments and are valued at fair value through profit and loss. These contracts are disclosed under Reinsurers\u2019 share of investment contract liabilities in the statement of consolidated financial position. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
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"fact-659": {
"value": "Financial assets Purchases and sales of financial assets are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. Loans and deposits are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and only include assets where a security has not been issued. These loans and deposits are initially recognised at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributable to the acquisition are also included in the cost of the investment. Subsequent to initial recognition, these investments are carried at amortised cost, using the effective interest method. Derivative financial instruments are largely classified as held for trading. They are recognised initially at fair value and subsequently are remeasured to fair value. The gain or loss on remeasurement to fair value is recognised in the consolidated income statement. Derivative financial instruments are not classified as held for trading where they are designated and effective as a hedging instrument. For such instruments, the timing of the recognition of any gain or loss that arises on remeasurement to fair value in profit or loss depends on the nature of the hedge relationship. Equities, debt securities and collective investment schemes are designated at FVTPL and accordingly are stated in the statement of consolidated financial position at fair value. They are designated at FVTPL because this is reflective of the manner in which the financial assets are managed and reduces a measurement inconsistency that would otherwise arise with regard to the insurance liabilities that the assets are backing. The Group has treaties in place with third party insurance companies to provide reinsurance in respect of liabilities that are linked to the performance of funds maintained by those companies. The contracts in question do not transfer significant insurance risk and therefore are classified as financial instruments and are valued at fair value through profit and loss. These contracts are disclosed under Reinsurers\u2019 share of investment contract liabilities in the statement of consolidated financial position. Impairment of financial assets The Group assesses at each period end whether a financial asset or group of financial assets held at amortised cost are impaired. The Group first assesses whether objective evidence of impairment exists. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognised, are not included in the collective assessment of impairment. Fair value estimation The fair values of financial instruments traded in active markets such as publicly traded securities and derivatives are based on quoted market prices at the period end. The quoted market price used for financial assets is the applicable bid price on the period end date. The fair value of investments that are not traded in an active market is determined using valuation techniques such as broker quotes, pricing models or discounted cash flow techniques. Where pricing models are used, inputs are based on market related data at the period end. Where discounted cash flow techniques are used, estimated future cash flows are based on contractual cash flows using current market conditions and market calibrated discount rates and interest rate assumptions for similar instruments. For units in unit trusts and shares in open-ended investment companies, fair value is determined by reference to published bid-values. The fair value of receivables and floating rate and overnight deposits with credit institutions is their carrying value. The fair value of fixed interest-bearing deposits is estimated using discounted cash flow techniques. Associates Investments in associates that are held for investment purposes are accounted for under IAS 39 Financial Instruments: Recognition and Measurement as permitted by IAS 28 Investments in Associates and Joint Ventures. These are measured at fair value through profit or loss. There are no investments in associates which are of a strategic nature. Derecognition of financial assets A financial asset (or part of a group of similar financial assets) is derecognised where: \u2022 the rights to receive cash flows from the asset have expired; \u2022 the Company retains the right to receive cash flows from the assets, but has assumed an obligation to pay them in full without material delay to a third party under a \u2018pass-through\u2019 arrangement; or \u2022 the Company has transferred its rights to receive cash flows from the asset and has either transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Financial liabilities On initial recognition, financial liabilities are recognised when due and measured at the fair value of the consideration received less directly attributable transaction costs (with the exception of liabilities at FVTPL for which all transaction costs are expensed). Subsequent to initial recognition, financial liabilities (except for liabilities under investment contracts without DPF and other liabilities designated at FVTPL) are measured at amortised cost using the effective interest method. Financial liabilities are designated upon initial recognition at FVTPL and where doing so results in more meaningful information because either: \u2022 it eliminates or significantly reduces accounting mismatches that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or \u2022 a group of financial assets, financial liabilities or both is managed and its performance is evaluated and managed on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the investments is provided internally on that basis to the Group\u2019s key management personnel. Investment contracts without DPF Contracts under which the transfer of insurance risk to the Group from the policyholder is not significant are classified as investment contracts and accounted for as financial liabilities. Receipts and payments on investment contracts without DPF are accounted for using deposit accounting, under which the amounts collected and paid out are recognised in the statement of consolidated financial position as an adjustment to the liability to the policyholder. The valuation of liabilities on unit-linked contracts are held at the fair value of the related assets and liabilities. The liability is the sum of the unit-linked liabilities plus an additional amount to cover the present value of the excess of future policy costs over future charges. Movements in the fair value of investment contracts without DPF and reinsurers\u2019 share of investment contract liabilities are included in the \u2018change in investment contract liabilities\u2019 in the consolidated income statement. Investment contract policyholders are charged for policy administration services, investment management services, surrenders and other contract fees. These fees are recognised as revenue over the period in which the related services are performed. If the fees are for services provided in future periods, then they are deferred and recognised over those periods. \u2018Front end\u2019 fees are charged on some non-participating investment contracts. Where the non-participating investment contract is measured at fair value, such fees which relate to the provision of investment management services are deferred and recognised as the services are provided. Deposits received from reinsurers It is the Group\u2019s practice to obtain collateral to cover certain reinsurance transactions, usually in the form of cash or marketable securities. Where cash collateral is available to the Group for investment purposes, it is recognised as a \u2018financial asset\u2019 and the collateral repayable is recognised as \u2018deposits received from reinsurers\u2019 in the statement of consolidated financial position. The \u2018deposits received from reinsurers\u2019 are measured at amortised cost. Net asset value attributable to unitholders The net asset value attributable to unitholders represents the non-controlling interest in collective investment schemes which are consolidated by the Group. This interest is classified at FVTPL and measured at fair value, which is equal to the bid value of the number of units of the collective investment scheme not owned by the Group. Obligations for repayment of collateral received It is the Group\u2019s practice to obtain collateral in stock lending and derivative transactions, usually in the form of cash or marketable securities. Where cash collateral received is available to the Group for investment purposes, it is recognised as a \u2018financial asset\u2019 and the collateral repayable is recognised as \u2018obligations for repayment of collateral received\u2019 in the statement of consolidated financial position. The \u2018obligations for repayment of collateral received\u2019 are measured at amortised cost, which in the case of cash is equivalent to the fair value of the consideration received. Further details of the Group\u2019s collateral arrangements are included in note E4. Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability is discharged, instead of or cancelled or expires. Offsetting financial assets and financial liabilities Financial assets and liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. When financial assets and liabilities are offset any related interest income and expense is offset in the income statement. Hedge accounting The Group designates certain derivatives as hedging instruments in order to effect cash flow hedges. At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk. Where a cash flow hedging relationship exists, the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in net investment income. Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time is recycled to profit or loss over the period the hedged item impacts profit or loss. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-682": {
"value": "Impairment of financial assets The Group assesses at each period end whether a financial asset or group of financial assets held at amortised cost are impaired. The Group first assesses whether objective evidence of impairment exists. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognised, are not included in the collective assessment of impairment. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfFinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-683": {
"value": "Fair value estimation The fair values of financial instruments traded in active markets such as publicly traded securities and derivatives are based on quoted market prices at the period end. The quoted market price used for financial assets is the applicable bid price on the period end date. The fair value of investments that are not traded in an active market is determined using valuation techniques such as broker quotes, pricing models or discounted cash flow techniques. Where pricing models are used, inputs are based on market related data at the period end. Where discounted cash flow techniques are used, estimated future cash flows are based on contractual cash flows using current market conditions and market calibrated discount rates and interest rate assumptions for similar instruments. For units in unit trusts and shares in open-ended investment companies, fair value is determined by reference to published bid-values. The fair value of receivables and floating rate and overnight deposits with credit institutions is their carrying value. The fair value of fixed interest-bearing deposits is estimated using discounted cash flow techniques. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-684": {
"value": "Associates Investments in associates that are held for investment purposes are accounted for under IAS 39 Financial Instruments: Recognition and Measurement as permitted by IAS 28 Investments in Associates and Joint Ventures. These are measured at fair value through profit or loss. There are no investments in associates which are of a strategic nature. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-685": {
"value": "Derecognition of financial assets A financial asset (or part of a group of similar financial assets) is derecognised where: \u2022 the rights to receive cash flows from the asset have expired; \u2022 the Company retains the right to receive cash flows from the assets, but has assumed an obligation to pay them in full without material delay to a third party under a \u2018pass-through\u2019 arrangement; or \u2022 the Company has transferred its rights to receive cash flows from the asset and has either transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability is discharged, instead of or cancelled or expires. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerecognitionOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-686": {
"value": "Financial liabilities On initial recognition, financial liabilities are recognised when due and measured at the fair value of the consideration received less directly attributable transaction costs (with the exception of liabilities at FVTPL for which all transaction costs are expensed). Subsequent to initial recognition, financial liabilities (except for liabilities under investment contracts without DPF and other liabilities designated at FVTPL) are measured at amortised cost using the effective interest method. Financial liabilities are designated upon initial recognition at FVTPL and where doing so results in more meaningful information because either: \u2022 it eliminates or significantly reduces accounting mismatches that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or \u2022 a group of financial assets, financial liabilities or both is managed and its performance is evaluated and managed on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the investments is provided internally on that basis to the Group\u2019s key management personnel. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-687": {
"value": "Investment contracts without DPF Contracts under which the transfer of insurance risk to the Group from the policyholder is not significant are classified as investment contracts and accounted for as financial liabilities. Receipts and payments on investment contracts without DPF are accounted for using deposit accounting, under which the amounts collected and paid out are recognised in the statement of consolidated financial position as an adjustment to the liability to the policyholder. The valuation of liabilities on unit-linked contracts are held at the fair value of the related assets and liabilities. The liability is the sum of the unit-linked liabilities plus an additional amount to cover the present value of the excess of future policy costs over future charges. Movements in the fair value of investment contracts without DPF and reinsurers\u2019 share of investment contract liabilities are included in the \u2018change in investment contract liabilities\u2019 in the consolidated income statement. Investment contract policyholders are charged for policy administration services, investment management services, surrenders and other contract fees. These fees are recognised as revenue over the period in which the related services are performed. If the fees are for services provided in future periods, then they are deferred and recognised over those periods. \u2018Front end\u2019 fees are charged on some non-participating investment contracts. Where the non-participating investment contract is measured at fair value, such fees which relate to the provision of investment management services are deferred and recognised as the services are provided. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForFairValueOfInvestmentContractsWithoutDPF",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-688": {
"value": "Deposits received from reinsurers It is the Group\u2019s practice to obtain collateral to cover certain reinsurance transactions, usually in the form of cash or marketable securities. Where cash collateral is available to the Group for investment purposes, it is recognised as a \u2018financial asset\u2019 and the collateral repayable is recognised as \u2018deposits received from reinsurers\u2019 in the statement of consolidated financial position. The \u2018deposits received from reinsurers\u2019 are measured at amortised cost. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForFairValueOfDepositsReceivedFromReinsurers",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-689": {
"value": "Net asset value attributable to unitholders The net asset value attributable to unitholders represents the non-controlling interest in collective investment schemes which are consolidated by the Group. This interest is classified at FVTPL and measured at fair value, which is equal to the bid value of the number of units of the collective investment scheme not owned by the Group. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForFairValueOfNetAssetsAttributableToUnitHolders",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-690": {
"value": "Obligations for repayment of collateral received It is the Group\u2019s practice to obtain collateral in stock lending and derivative transactions, usually in the form of cash or marketable securities. Where cash collateral received is available to the Group for investment purposes, it is recognised as a \u2018financial asset\u2019 and the collateral repayable is recognised as \u2018obligations for repayment of collateral received\u2019 in the statement of consolidated financial position. The \u2018obligations for repayment of collateral received\u2019 are measured at amortised cost, which in the case of cash is equivalent to the fair value of the consideration received. Further details of the Group\u2019s collateral arrangements are included in note E4. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForFairValueOfObligationsForRepaymentOfCollateralReceived",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-691": {
"value": "Offsetting financial assets and financial liabilities Financial assets and liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. When financial assets and liabilities are offset any related interest income and expense is offset in the income statement. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForOffsettingOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-692": {
"value": "Hedge accounting The Group designates certain derivatives as hedging instruments in order to effect cash flow hedges. At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk. Where a cash flow hedging relationship exists, the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in net investment income. Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time is recycled to profit or loss over the period the hedged item impacts profit or loss. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-568": {
"value": "E1.2 IFRS 9 temporary exemption disclosures Following application of the temporary exemption granted to insurers in IFRS 4 Insurance Contracts from applying IFRS 9 Financial Instruments (see note A5) the table below separately identifies financial assets with contractual cash flows that are solely payments of principal and interest (\u2018SPPI\u2019) (excluding those held for trading or managed on a fair value basis) and all other financial assets, measured at fair value through profit or loss. 2022 \u00a3m 2021 \u00a3m Financial assets with contractual cash flows that are SPPI excluding those held for trading or managed on a fair value basis: Loans and deposits 279 475 Cash and cash equivalents 1 8,839 9,112 Accrued income 330 282 Other receivables 2 4,478 1,697 All other financial assets that are measured at fair value through profit or loss 3 248,702 292,717 1 Cash and cash equivalents excludes assets classified as held for sale of \u00a333 million (2021: \u00a376 million). 2 Other receivables excludes deferred acquisition costs. 3 The change in fair value during 2022 of all other financial assets that are measured at fair value through profit or loss is a \u00a3 43,834 million loss (2021: \u00a35,881 million loss). The balance excludes \u00a34,629 million (2021: \u00a36,507 million) of financial assets that are measured at fair value through profit or loss classified as held for sale. An analysis of credit ratings of financial assets with contractual cash flows that are SPPI, excluding those held for trading or managed on a fair value basis, is provided below: 2022 AAA AA A BBB BB and below Non-rated 1 Unit-linked Total Less amounts classified as held for sale Total Carrying value \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Loans and deposits \u2013 4 \u2013 \u2013 \u2013 204 71 279 \u2013 279 Cash and cash equivalents 339 1,160 5,749 63 \u2013 5 1,556 8,872 (33) 8,839 Accrued income \u2013 \u2013 \u2013 \u2013 \u2013 330 \u2013 330 \u2013 330 Other receivables \u2013 \u2013 \u2013 \u2013 \u2013 4,478 \u2013 4,478 \u2013 4,478 339 1,164 5,749 63 \u2013 5,017 1,627 13,959 (33) 13,926 2021 AAA AA A BBB BB and below Non-rated1 Unit-linked Total Less amounts classified as held for sale Total Carrying value \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Loans and deposits \u2013 6 \u2013 \u2013 \u2013 414 55 475 \u2013 475 Cash and cash equivalents 382 1,686 5,161 181 \u2013 3 1,775 9,188 (76) 9,112 Accrued income \u2013 \u2013 \u2013 \u2013 \u2013 282 \u2013 282 \u2013 282 Other receivables \u2013 \u2013 \u2013 \u2013 \u2013 1,697 \u2013 1,697 \u2013 1,697 382 1,692 5,161 181 \u2013 2,396 1,830 11,642 (76) 11,566 1 The Group has assessed its non-rated assets as having a low credit risk. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfIFRS9TemporaryExemptionToInsurers",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-569": {
"value": "E3. Derivatives The Group purchases derivative financial instruments principally in connection with the management of its insurance contract and investment contract liabilities based on the principles of reduction of risk and efficient portfolio management. The Group does not typically hold derivatives for the purpose of selling or repurchasing in the near term or with the objective of generating a profit from short-term fluctuations in price or margin. The Group also holds derivatives to hedge financial liabilities denominated in foreign currency. Derivative financial instruments are largely classified as held for trading. Such instruments are recognised initially at fair value and are subsequently remeasured to fair value. The gain or loss on remeasurement to fair value is recognised in the consolidated income statement. Derivative financial instruments are not classified as held for trading where they are designated as a hedging instrument and where the resultant hedge is assessed as effective. For such instruments, any gain or loss that arises on remeasurement to fair value is initially recognised in other comprehensive income and is recycled to profit or loss as the hedged item impacts the profit or loss. See note E1 for further details of the Group\u2019s hedging accounting policy. E3.1 Summary The fair values of derivative financial instruments are as follows: Assets 2022 \u00a3m Liabilities 2022 \u00a3m Assets 2021 \u00a3m Liabilities 2021 \u00a3m Forward currency 327 221 180 58 Credit default swaps 4 18 63 39 Contracts for difference 3 3 8 2 Interest rate swaps 2,281 4,313 1,509 506 Total return bond swaps \u2013 \u2013 3 \u2013 Swaptions 187 46 1,722 11 Inflation swaps 295 104 232 98 Equity options 334 147 408 254 Stock index futures 162 36 41 122 Fixed income futures 95 231 46 33 Longevity swap contracts 152 34 230 49 Currency futures 4 8 7 1 Cross-currency swaps 227 653 122 12 Equity Release Income Plan total return swap \u2013 63 \u2013 67 Other \u2013 2 \u2013 \u2013 4,071 5,879 4,571 1,252 Less amounts classified as held for sale (3) (4) (4) (4) 4,068 5,875 4,567 1,248 E3.2 Longevity swap contracts The Group has in place longevity swap arrangements with corporate pension schemes which do not meet the definition of insurance contracts under the Group\u2019s accounting policies. Under these arrangements the majority of the longevity risk has been passed to third parties. Derivative assets of \u00a3152 million and derivative liabilities of \u00a334 million have been recognised as at 31 December 2022 (2021: \u00a3230 million and \u00a349 million respectively). E3.3 Equity Release Income Plan ('ERIP') total return swap ERIP contracts are an equity release product under which the Group holds a reversionary interest in the residential property of policyholders who have been provided with a lifetime annuity in return for the legal title to their property (see note G4). The Group is party to an ERIP total return swap under which a share of the future generated cash flows arising under the ERIP contracts is payable to a third party. Over time, as the property reversions are realised, the relevant share of disposal proceeds is transferred to a third party who also holds a beneficial interest in these residential properties. The carrying amount of the derivative liability is the present value of all future cash flows due to the third party under the total return swap. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-660": {
"value": "The Group purchases derivative financial instruments principally in connection with the management of its insurance contract and investment contract liabilities based on the principles of reduction of risk and efficient portfolio management. The Group does not typically hold derivatives for the purpose of selling or repurchasing in the near term or with the objective of generating a profit from short-term fluctuations in price or margin. The Group also holds derivatives to hedge financial liabilities denominated in foreign currency. Derivative financial instruments are largely classified as held for trading. Such instruments are recognised initially at fair value and are subsequently remeasured to fair value. The gain or loss on remeasurement to fair value is recognised in the consolidated income statement. Derivative financial instruments are not classified as held for trading where they are designated as a hedging instrument and where the resultant hedge is assessed as effective. For such instruments, any gain or loss that arises on remeasurement to fair value is initially recognised in other comprehensive income and is recycled to profit or loss as the hedged item impacts the profit or loss. See note E1 for further details of the Group\u2019s hedging accounting policy. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-570": {
"value": "The Group receives and pledges collateral in the form of cash or non-cash assets in respect of stock lending transactions, derivative contracts and reinsurance arrangements in order to reduce the credit risk of these transactions. The amount and type of collateral required where the Group receives collateral depends on an assessment of the credit risk of the counterparty, but is usually in the form of cash and marketable securities. Collateral received in the form of cash, where the Group has contractual rights to receive the cash flows generated and is available to the Group for investment purposes, is recognised as a financial asset in the statement of consolidated financial position with a corresponding financial liability for its repayment. Non-cash collateral received is not recognised in the statement of consolidated financial position, unless the counterparty defaults on its obligations under the relevant agreement. Non-cash collateral pledged where the Group retains the contractual rights to receive the cash flows generated is not derecognised from the statement of consolidated financial position, unless the Group defaults on its obligations under the relevant agreement. Cash collateral pledged, where the counterparty has contractual rights to receive the cash flows generated, is derecognised from the statement of consolidated financial position and a corresponding receivable is recognised for its return. E4.1 Financial instrument collateral arrangements The Group has no financial assets and financial liabilities that have been offset in the statement of consolidated financial position as at 31 December 2022 (2021: none). The table below contains disclosures related to financial assets and financial liabilities recognised in the statement of consolidated financial position that are subject to enforceable master netting arrangements or similar agreements. Such agreements do not meet the criteria for offsetting in the statement of consolidated financial position as the Group has no current legally enforceable right to offset recognised financial instruments. Furthermore, certain related assets received as collateral under the netting arrangements will not be recognised in the statement of consolidated financial position as the Group does not have permission to sell or re-pledge, except in the case of default. Details of the Group\u2019s collateral arrangements in respect of these recognised assets and liabilities are provided below. Related amounts not offset 2022 Gross and net amounts of recognised financial assets \u00a3m Financial instruments and cash collateral received \u00a3m Derivative liabilities \u00a3m Net amount \u00a3m Financial assets OTC derivatives 3,747 1,055 2,293 399 Exchange traded derivatives 324 193 28 103 Stock lending 1,451 1,451 \u2013 \u2013 Total 5,522 2,699 2,321 502 Related amounts not offset Gross and net amounts of recognised financial liabilities \u00a3m Financial instruments and cash collateral pledged \u00a3m Derivative assets \u00a3m Net Amount \u00a3m Financial liabilities OTC derivatives 5,606 2,206 2,293 1,107 Exchange traded derivatives 273 36 28 209 Total 5,879 2,242 2,321 1,316 Related amounts not offset 2021 Gross and net amounts of recognised financial assets \u00a3m Financial instruments and cash collateral received \u00a3m Derivative liabilities \u00a3m Net amount \u00a3m Financial assets OTC derivatives 4,394 3,600 487 307 Exchange traded derivatives 177 5 6 166 Stock lending 1,587 1,587 \u2013 \u2013 Total 6,158 5,192 493 473 Related amounts not offset Gross and net amounts of recognised financial liabilities \u00a3m Financial instruments and cash collateral pledged \u00a3m Derivative assets \u00a3m Net amount \u00a3m Financial liabilities OTC derivatives 1,096 319 487 290 Exchange traded derivatives 156 24 6 126 Total 1,252 343 493 416 E4.2 Derivative collateral arrangements Assets accepted It is the Group\u2019s practice to obtain collateral to mitigate the counterparty risk related to over-the-counter (\u2018OTC\u2019) derivatives usually in the form of cash or marketable financial instruments. The fair value of financial assets accepted as collateral for OTC derivatives but not recognised in the statement of consolidated financial position amounts to \u00a3471 million (2021: \u00a3945 million). The amounts recognised as financial assets and liabilities from cash collateral received at 31 December 2022 are set out below. OTC derivatives 2022 \u00a3m 2021 \u00a3m Financial assets 1,513 3,442 Financial liabilities (1,513) (3,442) The maximum exposure to credit risk in respect of OTC derivative assets is \u00a33,747 million (2021: \u00a34,394 million) of which credit risk of \u00a33,348 million (2021: \u00a34,087 million) is mitigated by use of collateral arrangements (which are settled net after taking account of any OTC derivative liabilities owed to the counterparty). Credit risk on exchange traded derivative assets of \u00a3324 million (2021: \u00a3177 million) is mitigated through regular margining and the protection offered by the exchange. Assets pledged The Group pledges collateral in respect of its OTC derivative liabilities. The value of assets pledged at 31 December 2022 in respect of OTC derivative liabilities of \u00a35,606 million (2021: \u00a31,096 million) amounted to \u00a33,228 million (2021: \u00a3942 million). E4.3 Stock lending collateral arrangements The Group lends listed financial assets held in its investment portfolio to other institutions. The Group conducts stock lending only with well-established, reputable institutions in accordance with established market conventions. The financial assets do not qualify for derecognition as the Group retains all the risks and rewards of the transferred assets except for the voting rights. It is the Group\u2019s practice to obtain collateral in stock lending transactions, usually in the form of cash or marketable financial instruments. The fair value of financial assets accepted as such collateral but not recognised in the statement of consolidated financial position amounts to \u00a31,586 million (2021: \u00a31,749 million). The maximum exposure to credit risk in respect of stock lending transactions is \u00a31,451 million (2021: \u00a31,587 million) of which credit risk of \u00a31,451 million (2021: \u00a31,587 million) is mitigated through the use of collateral arrangements. E4.4 Other collateral arrangements Details of collateral received to mitigate the counterparty risk arising from the Group\u2019s reinsurance transactions is given in note F3. Collateral has also been pledged and charges have been granted in respect of certain Group borrowings. The details of these arrangements are set out in note E5. ",
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"value": "The Group receives and pledges collateral in the form of cash or non-cash assets in respect of stock lending transactions, derivative contracts and reinsurance arrangements in order to reduce the credit risk of these transactions. The amount and type of collateral required where the Group receives collateral depends on an assessment of the credit risk of the counterparty, but is usually in the form of cash and marketable securities. Collateral received in the form of cash, where the Group has contractual rights to receive the cash flows generated and is available to the Group for investment purposes, is recognised as a financial asset in the statement of consolidated financial position with a corresponding financial liability for its repayment. Non-cash collateral received is not recognised in the statement of consolidated financial position, unless the counterparty defaults on its obligations under the relevant agreement. Non-cash collateral pledged where the Group retains the contractual rights to receive the cash flows generated is not derecognised from the statement of consolidated financial position, unless the Group defaults on its obligations under the relevant agreement. Cash collateral pledged, where the counterparty has contractual rights to receive the cash flows generated, is derecognised from the statement of consolidated financial position and a corresponding receivable is recognised for its return. ",
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"value": "E5. Borrowings The Group classifies the majority of its interest bearing borrowings as financial liabilities carried at amortised cost and these are recognised initially at fair value less any attributable transaction costs. The difference between initial cost and the redemption value is amortised through the consolidated income statement over the period of the borrowing using the effective interest method. Certain borrowings are designated upon initial recognition at fair value through profit or loss and measured at fair value where doing so provides more meaningful information due to the reasons stated in the financial liabilities accounting policy (see note E1). Transaction costs relating to borrowings designated upon initial recognition at fair value through profit or loss are expensed as incurred. Borrowings are classified as either policyholder or shareholder borrowings. Policyholder borrowings are those borrowings where there is either no or limited shareholder exposure, for example, borrowings attributable to the Group\u2019s with-profit operations. E5.1 Analysis of borrowings Carrying value Fair value 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m \u00a3300 million multi-currency revolving credit facility (note a) 62 17 62 17 Property reversions loan (note b) 64 70 64 70 Total policyholder borrowings 126 87 126 87 \u00a3428 million Tier 2 subordinated notes (note c) 427 427 429 498 \u00a3450 million Tier 3 subordinated notes (note d) \u2013 450 \u2013 457 US $500 million Tier 2 notes (note e) 413 368 390 408 \u20ac500 million Tier 2 bonds (note f) 439 416 416 490 US $750 million Contingent Convertible Tier 1 notes (note g) 618 551 580 581 \u00a3500 million Tier 2 notes (note h) 487 485 445 593 US $500 million Fixed Rate Reset Tier 2 notes (note i) 412 368 382 389 \u00a3500 million 5.867% Tier 2 subordinated notes (note j) 543 550 465 598 \u00a3250 million Fixed Rate Reset Callable Tier 2 subordinated notes (note k) 259 266 244 269 \u00a3250 million 4.016% Tier 3 subordinated notes (note l) 256 257 231 264 Total shareholder borrowings 3,854 4,138 3,582 4,547 Total borrowings 3,980 4,225 3,708 4,634 Amount due for settlement after 12 months 3,918 3,758 a. abrdn Private Equity Opportunities Trust plc (\u2019APEOT\u2019) has in place a syndicated multi-currency revolving credit facility, of which \u00a361 million (2021: \u00a317 million) had been drawn down as at 31 December 2022. During the year, the amount of the facility was increased from \u00a3200 million to \u00a3300 million and its term maturity was extended by one year to December 2025. Interest accrues on this facility at a margin over the reference rate of the currency drawn. b. The Property Reversions loan from Santander UK plc (\u2018Santander\u2019) was recognised in the consolidated financial statements at fair value. It relates to the sale of Extra-Income Plan policies that Santander finances to the value of the associated property reversions. As part of the arrangement Santander receive an amount calculated by reference to the movement in the Halifax House Price Index and the Group is required to indemnify Santander against profits or losses arising from mortality or surrender experience which differs from the basis used to calculate the reversion amount. During 2022, repayments totalling \u00a315 million were made (2021: \u00a318 million). Note G4 contains details of the assets that support this loan. c. On 23 January 2015, PGH Capital plc (\u2018PGHC\u2019) issued \u00a3428 million of subordinated notes due 2025 at a coupon of 6.625%. Fees associated with these notes of \u00a33 million were deferred and are being amortised over the life of the notes in the statement of consolidated financial position. Upon exchange \u00a332 million of these notes were held by Group companies. During 2017, the internal holdings were sold to third parties, thereby increasing external borrowings by \u00a332 million. On 20 March 2017, Old PGH (the Group\u2019s ultimate parent company up to December 2018) was substituted in place of PGHC as issuer of the \u00a3428 million subordinated notes and then on 12 December 2018 the Company was substituted in place of Old PGH as issuer. d. On 20 July 2022, the Group redeemed its \u00a3450 million Tier 3 subordinated notes in full at their principal amount, together with interest accrued to the repayment date. e. On 6 July 2017, Old PGH issued US $500 million Tier 2 bonds due 2027 with a coupon of 5.375%. Fees associated with these notes of \u00a32 million were deferred and are being amortised over the life of the notes. On 12 December 2018 the Company was substituted in place of Old PGH as issuer. f. On 24 September 2018, Old PGH issued \u20ac500 million Tier 2 notes due 2029 with a coupon of 4.375%. Fees associated with these notes of \u00a37 million were deferred and are being amortised over the life of the notes. On 12 December 2018 the Company was substituted in place of Old PGH as issuer. g. On 29 January 2020, the Company issued US $750 million fixed rate reset perpetual restricted Tier 1 contingent convertible notes (the \u2018Contingent Convertible Tier 1 Notes\u2019) which are unsecured and subordinated. The Contingent Convertible Tier 1 Notes have no fixed maturity date and interest is payable only at the sole and absolute discretion of the Company. The Contingent Convertible Tier 1 Notes bear interest on their principal amount at a fixed rate of 5.625% per annum up to the \u2018First Reset Date\u2019 of 26 April 2025. Thereafter the fixed rate of interest will be reset on the First Reset Date and on each fifth anniversary of this date by reference to the sum of the yield of the Constant Maturity Treasury (\u2018CMT\u2019) rate (based on the prevailing five year US Treasury yield) plus a margin of 4.035%, being the initial credit spread used in pricing the notes. Interest is payable on the Contingent Convertible Tier 1 Notes semi-annually in arrears on 26 April and 26 October. If an interest payment is not made it is cancelled and it shall not accumulate or be payable at any time thereafter. The terms of the Contingent Convertible Tier 1 Notes contain a contingent settlement provision which is linked to the occurrence of a \u2018Capital Disqualification Event\u2019. Such an event is deemed to have taken place where, as a result of a change to the Solvency II regulations, the Contingent Convertible Tier 1 Notes are fully excluded from counting as own funds. On the occurrence of such an event and where the Company has chosen not to use its corresponding right to redeem the notes the Company shall no longer be able to exercise its discretion to cancel any interest payments due on such Contingent Convertible Tier 1 Notes on any interest payment date following the occurrence of this event. Accordingly the Contingent Convertible Tier 1 Notes are considered to meet the definition of a financial liability for financial reporting purposes. The Contingent Convertible Tier 1 Notes may be redeemed at par on the First Reset Date or on any interest payment date thereafter at the option of the Company and also in other limited circumstances. If such redemption occurs prior to the fifth anniversary of the Issue Date such redemption must be funded out of the proceeds of a new issuance of, or exchanged into, Tier 1 Own Funds of the same or a higher quality than the Contingent Convertible Tier 1 Notes. In respect of any redemption or purchase of the Contingent Convertible Tier 1 Notes, such redemption or purchase is subject to the receipt of permission to do so from the PRA. Furthermore, on occurrence of a trigger event, linked to the Solvency II capital position and as documented in the terms of the Contingent Convertible Tier 1 Notes, the Contingent Convertible Tier 1 Notes will automatically be subject to conversion to ordinary shares of the Company at the conversion price of US $1,000 per share, subject to adjustment in accordance with the terms and conditions of the notes and all accrued and unpaid interest will be cancelled. Following such conversion there shall be no reinstatement of any part of the principal amount of, or interest on, the Contingent Convertible Tier 1 Notes at any time. h. On 28 April 2020, the Company issued \u00a3500 million fixed rate Tier 2 Notes (the \u2018Tier 2 Notes\u2019) which are unsecured and subordinated. The Tier 2 Notes have a maturity date of 28 April 2031 and include an issuer par call right for the three month period prior to maturity. The Ti er 2 Notes bear interest on the principal amount at a fixed rate of 5.625% per annum payable annually in arrears on 28 April each year. i. On 4 June 2020, the Company issued US $500 million fixed rate reset callable Tier 2 notes (the \u2018Fixed Rate Reset Tier 2 Notes\u2019) which are unsecured and subordinated. The Fixed Rate Reset Tier 2 notes have a maturity date of 4 September 2031 with an optional issuer par call right on any day in the three month period up to and including 4 September 2026. The Fixed Rate Reset Tier 2 Notes bear interest on the principal amount at a fixed rate of 4.75% per annum up to the interest rate reset date of 4 September 2026. If the Fixed Rate Reset Tier 2 Notes are not redeemed before that date, the interest rate resets to the sum of the applicable CMT rate (based on the prevailing five year US Treasury yield) plus a margin of 4.276%, being the initial credit spread used in pricing the notes. Interest is payable on the Fixed Rate Reset Tier 2 Notes semi-annually in arrears on 4 March and 4 September each year. j. On 22 July 2020, as part of the acquisition of ReAssure Group plc, the Group assumed the \u00a3500 million 5.867% Tier 2 subordinated notes. On the same date, the Company was substituted in place of ReAssure Group plc as issuer of the notes. The \u00a3500 million 5.867% Tier 2 subordinated notes have a maturity date of 13 June 2029 and were initially recognised at their fair value as at the date of acquisition of \u00a3559 million. The fair value adjustment will be amortised over the remaining life of the notes. Interest is payable semi-annually in arrears on 13 June and 13 December. k. On 22 July 2020, as part of the acquisition of ReAssure Group plc, the Group assumed the \u00a3250 million fixed rate reset callable Tier 2 subordinated notes. On the same date, the Company was substituted in place of ReAssure Group plc as issuer of the notes. The \u00a3250 million fixed rate reset callable Tier 2 subordinated notes have a maturity date of 13 June 2029 and were initially recognised at their fair value as at the date of acquisition of \u00a3275 million. The fair value adjustment will be amortised over the remaining life of the notes. The notes include an issuer par call right exercisable on 13 June 2024. Interest is payable semi-annually in arrears on 13 June and 13 December. These notes initially bear interest at a rate of 5.766% on the principal amount and the rate of interest will reset on 13 June 2024, and on each interest payment date thereafter, to a margin of 5.17% plus the yield of a UK Treasury Bill of similar term. l. On 22 July 2020, as part of the acquisition of ReAssure Group plc, the Group assumed the \u00a3250 million 4.016% Tier 3 subordinated notes. On the same date, the Company was substituted in place of ReAssure Group plc as issuer of the notes. The \u00a3250 million 4.016% Tier 3 subordinated notes have a maturity date of 13 June 2026 and were initially recognised at their fair value as at the date of acquisition of \u00a3259 million. The fair value adjustment is being amortised over the remaining life of the notes. Interest is payable semi-annually in arrears on 13 June and 13 December. m. The Group has in place a \u00a31.25 billion unsecured revolving credit facility (the \u2018revolving facility\u2019), maturing in June 2026. The facility accrues interest at a margin over SONIA that is based on credit rating. The facility remains undrawn as at 31 December 2022. E5.2 Reconciliation of liabilities arising from financing activities The table below details changes in the Group\u2019s liabilities arising from financing activities, including both cash and non-cash changes (with the exception of lease liabilities, which have been included in note G10). Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group\u2019s consolidated statement of cash flows as cash flows from financing activities. Cash movements Non-cash movements At 1 January 2022 \u00a3m New borrowings, net of costs \u00a3m Repayments \u00a3m Changes in fair value \u00a3m Movement in foreign exchange \u00a3m Other movements 1 \u00a3m At 31 December 2022 \u00a3m APEOT multi-currency revolving credit facility 17 61 (17) \u2013 1 \u2013 62 Property Reversions loan 70 \u2013 (15) 9 \u2013 \u2013 64 \u00a3428 million Tier 2 subordinated notes 427 \u2013 \u2013 \u2013 \u2013 \u2013 427 \u00a3450 million Tier 3 subordinated notes 450 \u2013 (450) \u2013 \u2013 \u2013 \u2013 US $500 million Tier 2 bonds 368 \u2013 \u2013 \u2013 45 \u2013 413 \u20ac500 million Tier 2 notes 416 \u2013 \u2013 \u2013 22 1 439 US $750 million Contingent Convertible Tier 1 notes 551 \u2013 \u2013 \u2013 66 1 618 \u00a3500 million Tier 2 notes 485 \u2013 \u2013 \u2013 \u2013 2 487 US $500 million Fixed Rate Reset Tier 2 notes 368 \u2013 \u2013 \u2013 44 \u2013 412 \u00a3500 million 5.867% Tier 2 subordinated notes 550 \u2013 \u2013 \u2013 \u2013 (7) 543 \u00a3250 million Fixed Rate Reset Callable Tier 2 subordinated notes 266 \u2013 \u2013 \u2013 \u2013 (7) 259 \u00a3250 million 4.016% Tier 3 subordinated notes 257 \u2013 \u2013 \u2013 \u2013 (1) 256 Derivative assets 2 (48) \u2013 \u2013 (177) \u2013 \u2013 (225) Derivative liabilities 2 5 \u2013 \u2013 (5) \u2013 \u2013 \u2013 4,182 61 (482) (173) 178 (11) 3,755 1 Comprises amortisation under the effective interest method applied to borrowings held at amortised cost. No interest was capitalised in the year. 2 Cross currency swaps to hedge against adverse currency movements in respect of Group\u2019s Euro and US Dollar denominated borrowings . Cash movements Non-cash movements At 1 January 2021 \u00a3m New borrowings, net of costs \u00a3m Repayments \u00a3m Changes in fair value \u00a3m Movement in foreign exchange \u00a3m Other movements 1 \u00a3m At 31 December 2021 \u00a3m APEOT multi-currency revolving credit facility \u2013 17 \u2013 \u2013 \u2013 \u2013 17 Property Reversions loan 84 \u2013 (18) 4 \u2013 \u2013 70 \u00a3200 million 7.25% unsecured subordinated loan 200 \u2013 (200) \u2013 \u2013 \u2013 \u2013 \u00a3300 million senior unsecured bond 122 \u2013 (122) \u2013 \u2013 \u2013 \u2013 \u00a3428 million Tier 2 subordinated notes 426 \u2013 \u2013 \u2013 \u2013 1 427 \u00a3450 million Tier 3 subordinated notes 449 \u2013 \u2013 \u2013 \u2013 1 450 US $500 million Tier 2 bonds 364 \u2013 \u2013 \u2013 4 \u2013 368 \u20ac500 million Tier 2 notes 442 \u2013 \u2013 \u2013 (26) \u2013 416 US $750 million Contingent Convertible Tier 1 notes 545 \u2013 \u2013 \u2013 5 1 551 \u00a3500 million Tier 2 notes 484 \u2013 \u2013 \u2013 \u2013 1 485 US $500 million Fixed Rate Reset Tier 2 notes 364 \u2013 \u2013 \u2013 4 \u2013 368 \u00a3500 million 5.867% Tier 2 subordinated notes 556 \u2013 \u2013 \u2013 \u2013 (6) 550 \u00a3250 million Fixed Rate Reset Callable Tier 2 subordinated notes 272 \u2013 \u2013 \u2013 \u2013 (6) 266 \u00a3250 million 4.016% Tier 3 subordinated notes 259 \u2013 \u2013 \u2013 \u2013 (2) 257 Derivative assets\u00b2 \u2013 \u2013 \u2013 (48) \u2013 \u2013 (48) Derivative liabilities\u00b2 \u2013 \u2013 \u2013 5 \u2013 \u2013 5 4,567 17 (340) (39) (13) (10) 4,182 1 Comprises amortisation under the effective interest method applied to borrowings held at amortised cost. 2 Cross currency swaps to hedge against adverse currency movements in respect of Group\u2019s Euro and US Dollar denominated borrowings. ",
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"value": "The Group classifies the majority of its interest bearing borrowings as financial liabilities carried at amortised cost and these are recognised initially at fair value less any attributable transaction costs. The difference between initial cost and the redemption value is amortised through the consolidated income statement over the period of the borrowing using the effective interest method. Certain borrowings are designated upon initial recognition at fair value through profit or loss and measured at fair value where doing so provides more meaningful information due to the reasons stated in the financial liabilities accounting policy (see note E1). Transaction costs relating to borrowings designated upon initial recognition at fair value through profit or loss are expensed as incurred. Borrowings are classified as either policyholder or shareholder borrowings. Policyholder borrowings are those borrowings where there is either no or limited shareholder exposure, for example, borrowings attributable to the Group\u2019s with-profit operations. ",
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"value": "E6. Risk management \u2013 financial and other risks This note forms one part of the risk management disclosures in the consolidated financial statements. An overview of the Group\u2019s approach to risk management is outlined in note I3 and the Group\u2019s management of insurance risk is detailed in note F4. E6.1 Financial risk and the Asset Liability Management (\u2018ALM\u2019) framework The use of financial instruments naturally exposes the Group to the risks associated with them, chiefly market risk, credit risk and financial soundness risk. Responsibility for agreeing the financial risk profile rests with the Board of each life company, as advised by investment managers, internal committees and the actuarial function. In setting the risk profile, the board of each life company will receive advice from the Chief Investment Officer, the relevant With-Profit Actuary and the relevant actuarial function holder/Chief Actuary as to the potential implications of that risk profile with regard to the probability of both realistic insolvency and of failing to meet the regulatory Minimum Capital Requirement. The Chief Actuary will also advise the extent to which the investment risk taken is consistent with the Group\u2019s commitment to deliver fair customer outcomes. Derivatives are used in many of the Group\u2019s funds, within policy guidelines agreed by the board of each life company and overseen by investment committees of the boards of each life company supported by management oversight committees. Derivatives are primarily used for risk hedging purposes or for efficient portfolio management, including the activities of the Group\u2019s Treasury function. More detail on the Group\u2019s exposure to financial risk is provided in note E6.2 below. The Group is also exposed to insurance risk arising from its Life, Pensions and Savings business. Life insurance risk in the Group arises through its exposure to longevity, persistency, mortality and to other variances between assumed and actual experience. These variances can be in factors such as administrative expenses and new business pricing. More detail on the Group\u2019s exposure to insurance risk is provided in note F4. The Group\u2019s overall exposure to market and credit risk is monitored by appropriate committees, which agree policies for managing each type of risk on an ongoing basis, in line with the investment strategy developed to achieve investment returns in excess of amounts due in respect of insurance contracts. The effectiveness of the Group\u2019s ALM framework relies on the matching of assets and liabilities arising from insurance and investment contracts, taking into account the types of benefits payable to policyholders under each type of contract. Separate portfolios of assets are maintained for with-profit business funds which include all of the Group\u2019s participating business), non-linked non-profit funds and unit-linked funds. LIBOR transition In 2021, the Group largely completed its transition from LIBOR to the replacement Risk Free Rates. The programme completed a systematic process to identify and address balance sheet exposures with LIBOR dependencies. All derivative exposures and the majority of non-derivative asset exposures were successfully transitioned over the course of the programme in 2021. Insurance contract liabilities and related items transitioned to the SONIA Solvency II curve published by the PRA with an adjustment of 36bps. The remaining residual exposures as at 31 December 2021 related to indirect exposures in a small proportion of liquid and illiquid credit assets, and a direct exposure of \u00a355 million in relation to two illiquid credit assets referencing Sterling LIBOR. These residual exposures have largely been transitioned during the year and at 31 December 2022 a small amount of indirect illiquid credit exposure remains. This relates to two loans where LIBOR is only relevant on a prepayment. The Group does not anticipate a prepayment and this issue does not affect the fair value of the loans. E6.2 Financial risk analysis Transactions in financial instruments result in the Group assuming financial risks. These include credit risk, market risk and financial soundness risk. Each of these are described below, together with a summary of how the Group manages the risk, along with sensitivity analysis where appropriate. The sensitivity analysis does not take into account the impact in the Group\u2019s pension schemes, including any impact arising as a result of the elimination of intra-group buy-in transactions between the life companies and the Group\u2019s pension schemes. It also does not include second order impacts of market movements, for example, where a market movement may give rise to potential indicators of impairment for the Group\u2019s intangible balances. Climate Risk The Group is exposed to financial risks (in particular market and credit risk) related to the transition to a low carbon economy, and the physical impacts resulting from climate change which could result in long-term market, credit, insurance, reputation, proposition and operational implications. As such, this risk is treated as a cross-cutting risk in the Group\u2019s Risk Universe. Identification of climate related risks has been embedded into the Group\u2019s Risk Management Framework. Significant progress has been made in recent years in developing a risk metrics and targets framework, and establishing appropriate governance and risk management processes. The Group has adopted a proactive approach towards combatting climate change, with key net-zero targets. Further details on these targets and on managing the related climate change risks are provided in the Climate Report and Task Force for Climate-related Financial Disclosures (\u2018TCFD\u2019) within the Annual Report and Accounts. E6.2.1 Credit risk Credit risk is defined as the risk of reductions in earnings and/or value, through financial or reputational loss, as a result of the default of a counterparty or an associate of such a counterparty to a financial transaction (i.e. failure to honour their financial obligations, or failing to perform them in a timely manner), whether on or off balance sheet. There are two principal sources of credit risk for the Group: \u2022 credit risk which results from direct investment activities, including investments in debt securities, derivatives counterparties, collective investment schemes, hedge funds and the placing of cash deposits; and \u2022 credit risk which results indirectly from activities undertaken in the normal course of business. Such activities include premium payments, outsourcing contracts, reinsurance agreements, exposure from material suppliers and the lending of securities. The amount disclosed in the statement of consolidated financial position in respect of all financial assets, together with rights secured under off balance sheet collateral arrangements, but excluding the minority interest in consolidated collective investment schemes and those asse ts that back policyholder liabilities, represents the Group\u2019s maximum exposure to credit risk. The credit risk borne by the shareholder on with-profit policies is dependent on the extent to which the underlying insurance fund is relying on shareholder support. The impact of non-government debt securities and, inter alia, the change in market credit spreads during the year is fully reflected in the values shown in these consolidated financial statements. Credit spreads are the excess of corporate bond yields over gilt yields to reflect the higher level of risk. Similarly, the value of derivatives that the Group holds takes into account fully the changes in swap rates. There is an exposure to spread changes affecting the prices of corporate bonds and derivatives. This exposure applies to supported with-profit funds (where risks and rewards fall wholly to shareholders), non-profit funds and shareholders\u2019 funds. The Group holds \u00a315,814 million (2021: \u00a321,668 million) of corporate bonds which are used to back annuity liabilities in non-profit funds. These annuity liabilities include an aggregate credit default provision of \u00a3796 million (2021: \u00a31,036 million) to fund against the risk of default. A 100bps widening of credit spreads, with all other variables held constant and no change in assumed expected defaults, would result in an increase in the profit after tax in respect of a full financial year, and in equity, of \u00a323 million (2021: \u00a328 million). A 100bps narrowing of credit spreads, with all other variables held constant and no change in assumed expected defaults, would result in a decrease in the profit after tax in respect of a full financial year, and in equity, of \u00a336 million (2021: \u00a337 million). Credit risk is managed by the monitoring of aggregate Group exposures to individual counterparties and by appropriate credit risk diversification. The Group manages the level of credit risk it accepts through credit risk tolerances and limits (including asset class, industry and geography limits). Additional controls for illiquid asset concentration risk are set out via specific risk limits within the risk appetite framework. Credit risk on derivatives and securities lending is mitigated through the use of collateral with appropriate haircuts. Credit quality of assets An indication of the Group\u2019s exposure to credit risk is the quality of the investments and counterparties with which it transacts. The following table provides information regarding the aggregate credit exposure split by credit rating. 2022 AAA \u00a3m AA \u00a3m A \u00a3m BBB \u00a3m BB and below \u00a3m Non-rated \u00a3m Unit- linked \u00a3m Total \u00a3m Less amounts classified as held for sale \u00a3m Total \u00a3m Loans and deposits \u2013 4 \u2013 \u2013 \u2013 204 71 279 \u2013 279 Derivatives \u2013 1,500 1,060 28 \u2013 1,370 113 4,071 (3) 4,068 Debt securities 1,2 6,834 26,095 19,045 16,238 1,929 7,182 7,387 84,710 (1,594) 83,116 Reinsurers\u2019 share of insurance contract liabilities \u2013 4,920 1,148 \u2013 \u2013 74 \u2013 6,142 \u2013 6,142 Reinsurers\u2019 share of investment contract liabilities \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 9,088 9,088 (25) 9,063 Cash and cash equivalents 339 1,160 5,749 63 \u2013 5 1,556 8,872 (33) 8,839 7,173 33,679 27,002 16,329 1,929 8,835 18,215 113,162 (1,655) 111,507 1 For financial assets that do not have credit ratings assigned by external ratings agencies, the Group assigns internal ratings for use in management and monitoring of credit risk. \u00a3149 million of AAA, \u00a31,083 million of AA, \u00a31,742 million of A, \u00a32,766 million of BBB and \u00a3367 million of BB and below debt securities are internally rated. If a financial asset is neither rated by an external agency nor internally rated, it is classified as \u2018non-rated\u2019. 2 Non-rated debt securities includes equity release mortgages with a value of \u00a33,934 million (further details are set out in note E2.3) and non-rated bonds. 2021 AAA \u00a3m AA \u00a3m A \u00a3m BBB \u00a3m BB and below \u00a3m Non-rated \u00a3m Unit-linked \u00a3m Total \u00a3m Less amounts classified as held for sale \u00a3m Total \u00a3m Loans and deposits \u2013 6 \u2013 \u2013 \u2013 414 55 475 \u2013 475 Derivatives \u2013 965 1,737 388 \u2013 1,343 138 4,571 (4) 4,567 Debt securities 1,2 9,097 40,142 22,782 16,290 3,292 6,788 8,599 106,990 (2,229) 104,761 Reinsurers\u2019 share of insurance contract liabilities \u2013 4,963 3,539 37 \u2013 48 \u2013 8,587 \u2013 8,587 Reinsurers\u2019 share of investment contract liabilities \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 10,009 10,009 (27) 9,982 Cash and cash equivalents 382 1,686 5,161 181 \u2013 3 1,775 9,188 (76) 9,112 9,479 47,762 33,219 16,896 3,292 8,596 20,576 139,820 (2,336) 137,484 1 For financial assets that do not have credit ratings assigned by external ratings agencies, the Group assigns internal ratings for use in management and monitoring of credit risk. \u00a3110 million of AAA, \u00a31,110 million of AA, \u00a32,556 million of A, \u00a32,480 million of BBB and \u00a3518 million of BB and below debt securities are internally rated. If a financial asset is neither rated by an external agency nor internally rated, it is classified as \u2018non-rated\u2019. 2 Non-rated debt securities includes equity release mortgages with a value of \u00a34,214 million (further details are set out in note E2.3) and non-rated bonds. Credit ratings have not been disclosed in the above tables for the assets of the unit-linked funds since the shareholder is not directly exposed to credit risks from these assets. Included in unit-linked funds are assets which are held as reinsured external fund links. Under certain circumstances, the shareholder may be exposed to losses relating to the default of the reinsured external fund link. Credit ratings have not been disclosed in the above tables for holdings in unconsolidated collective investment schemes and investments in associates. The credit quality of the underlying debt securities within these vehicles is managed by the safeguards built into the investment mandates for these vehicles. The Group maintains accurate and consistent risk ratings across its asset portfolio. This enables management to focus on the applicable risks and to compare credit exposures across all lines of business, geographical regions and products. The rating system is supported by a variety of financial analytics combined with market information to provide the main inputs for the measurement of counterparty risk. All risk ratings are tailored to the various categories of assets and are assessed and updated regularly. nternal Credit Rating Committee, a Rating Committee and a Portfolio Credit Committee to monitor and perform oversight of internal credit ratings for externally rated and internally rated assets. A variety of methods are used to validate the appropriateness of credit assessments from external institutions and fund managers. Internally rated assets do not have a public rating from an external credit assessment institution. Instead internal credit ratings are used by the Group which are provided by fund managers or for certain assets (in particular, equity release mortgages and illiquid assets) are determined by the Life Companies. The Committees review the policies, processes and practices to ensure the appropriateness of the internal ratings, and to ensure they are in line with regulatory requirements. Throughout 2022, the Group has taken de-risking action to increase the overall credit quality of its asset portfolio and mitigate the impact of future downgrades on risk capital. Further details are included in the Risk Management section of the Strategic Report. The Group has increased exposure to an array of illiquid credit assets such as equity release mortgages, local authority loans, social housing, infrastructure and commercial real estate loans with the aim of achieving greater diversification and investment returns, consistent with the Strategic Asset Allocation approved by the Board. A further indicator of the quality of the Group\u2019s financial assets is the extent to which they are neither past due nor impaired. All of the amounts in the table above for the current and prior year are neither past due nor impaired. Additional life company asset disclosures are included on page 307 and include information on the Group\u2019s market exposure analysed by credit rating, sector and country of exposure for the shareholder debt portfolio. In light of the continuing conflict in Russia-Ukraine, this includes the shareholders\u2019 credit exposure to Russia and Ukraine. The Group shareholder exposure to Russia and Ukraine was \u00a3nil at 31 December 2022 (31 December 2021: \u00a323 million). Concentration of credit risk Concentration of credit risk might exist where the Group has significant exposure to an individual counterparty or a group of counterparties with similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic and other conditions. The Group has most of its counterparty risk within its life business and is monitored by the Group Counterparty Credit Risk Framework contained within the Group Credit Risk Policy. It is further provided for in investment management agreements, overlaid by regulatory requirements and the monitoring of aggregate counterparty exposures across the Group against additional Group counterparty limits. Counterparty risk in respect of OTC derivative counterparties is monitored using a Potential Future Exposure (\u2018PFE\u2019) value metric. The Group is also exposed to concentration risk with outsource partners. This is due to the nature of the outsourced services market. The Group operates a policy to manage outsourcer service counterparty exposures and the impact from default is reviewed regularly by executive committees and measured through stress and scenario testing. Reinsurance The Group is exposed to credit risk as a result of insurance risk transfer contracts with reinsurers. The Group\u2019s policy is to place reinsurance only with highly rated counterparties (minimum rating requirement of A-). The Group restricts concentration with individual external reinsurers by specifying limits on ceding and minimum conditions for acceptance and retention of reinsurers. In recent years the Group has made progress in increasing the number of reinsurers it transacts with, however, an element of concentration remains due to the nature of the reinsurance market and the restricted range of reinsurers available. The Group manages its exposure to reinsurance credit risk through the operation of a credit policy, collateralisation, and regular monitoring of exposures at the Reinsurance Management Committee. Collateral The credit risk of the Group is mitigated, in certain circumstances, by entering into collateral agreements. The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of type s of collateral and the valuation parameters. Collateral is mainly obtained in respect of stock lending, certain reinsurance arrangements and to provide security against the daily mark to model value of derivative financial instruments. Management monitors the market value of the collateral received, requests additional collateral when needed, and performs an impairment valuation when impairment indicators exist and the asset is not fully secured and is not carried at fair value. See note E4 for further information on collateral arrangements. E6.2 Financial risk analysis continued E6.2.2 Market risk Market risk is defined as the risk of reductions in earnings and/or value, through financial or reputational loss, from unfavourable market movements. The risk typically arises from exposure to equity, property and fixed income asset classes and the impact of changes in interest rates, inflation rates and currency exchange rates. The Group is mainly exposed to market risk as a result of: \u2022 the mismatch between liability profiles and the related asset investment portfolios; \u2022 the investment of surplus assets including shareholder reserves yet to be distributed, surplus assets within the with-profit funds and assets held to meet regulatory capital and solvency requirements; and \u2022 the income flow of management charges derived from the value of invested assets of the business. The Group manages the levels of market risk that it accepts through the operation of a market risk policy using a number of controls and techniques including: \u2022 Defined lists of permitted securities and/or application of investment constraints and portfolio limits; \u2022 Clearly defined investment benchmarks for policyholder and shareholder funds; \u2022 Stochastic and deterministic asset/liability modelling; \u2022 Active use of derivatives to improve the matching characteristics of assets and liabilities and to reduce the risk exposure of a portfolio; and \u2022 Setting risk limits for main market risks and managing exposures against these appetites. All operations comply with regulatory requirements relating to the taking of market risk. Assets in the shareholder funds are managed against benchmarks that ensure they are diversified across a range of asset classes, instruments and geographies that are appropriate to the liabilities of the funds or are held to match the cash flows anticipated to arise in the business. A combination of limits by name of issuer, sector, geographical region and credit rating are used where relevant to reduce concentration risk among the assets held. The assets of the participating business are principally managed to support the liabilities of the participating business and are appropriately diversified by both asset class and geography, considering: \u2022 The economic liability and how this varies with market conditions; \u2022 The need to invest assets supporting participating business in a manner consistent with the participating policyholders\u2019 reasonable expectations and Principles and Practices of Financial Management (\u2018PPFM\u2019); and \u2022 The need to ensure that regulatory and capital requirements are met. In practice, an element of market risk arises as a consequence of the need to balance these considerations, for example, in certain instances participating policyholders may expect that equity market risk will be taken on their behalf, and derivative instruments may be used to manage these risks. Markets remain volatile particularly given geopolitical tensions, increased inflation, and action by central banks to reduce inflationary pressures on economies whilst balancing the need to aid post pandemic recovery. This is noted in the Strategic Report principal risk section. Interest rate and inflation risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate relative to the respective liability due to the impact of changes in market interest rates on the value of interest-bearing assets and on the value of future guarantees provided under certain contracts of insurance. The paragraphs in this section also apply to inflation risk, but references to fixed rate assets and liabilities would be replaced with index-linked assets and liabilities. The Group is required to manage its interest rate exposures in line with qualitative risk appetite statements, quantitative risk metrics and any additional hedging benchmarks. Interest rate risk is managed by matching assets and liabilities where practicable and by entering into derivative arrangements for hedging purposes where appropriate. This is particularly the case for the non-participating funds and supported participating funds. For unsupported participating business, some element of investment mismatching is permitted where it is consistent with the principles of treating customers fairly. The with-profit funds of the Group provide capital to allow such mismatching to be effected. In practice, the life companies of the Group maintain an appropriate mix of fixed and variable rate instruments according to the underlying insurance or investment contracts and will review this at regular intervals to ensure that overall exposure is kept within the risk profile agreed for each particular fund. This also requires the maturity profile of these assets to be managed in line with the liabilities to policyholders. The sensitivity analysis for interest rate and inflation risk indicates how changes in the fair value or future cash flows of a financial instrument arising from changes in market interest and inflation rates at the reporting date result in a change in profit after tax and in equity. It takes into account the effect of such changes in market interest and inflation rates on all assets and liabilities that contribute to the Group\u2019s reported profit after tax and in equity. Changes in the value of the Group\u2019s holdings in swaptions as the result of time decay or changes to interest rate volatility are not captured in the sensitivity analysis. With-profit business and non-participating business within the with-profit funds are exposed to interest rate risk as guaranteed liabilities are valued relative to market interest rates and investments include fixed interest securities and derivatives. For unsupported with-profit business the profit or loss arising from mismatches between such assets and liabilities is largely offset by increased or reduced discretionary policyholder benefits dependent on the existence of policyholder guarantees. The contribution of unsupported participating business to the Group result is largely limited to the shareholders\u2019 share of the declared annual bonus. The contribution of the supported participating business to the Group result is determined by the shareholders\u2019 interest in any change in value in the capital advanced to the with-profit funds. In the non-participating funds, policy liabilities\u2019 sensitivity to interest rates are matched primarily with debt securities and hedging if necessary to match duration, with the result that sensitivity to changes in interest rates is very low. The Group\u2019s exposure to interest rates principally arises from the Group\u2019s hedging strategy to protect the regulatory capital position, which results in an adverse impact on profit on an increase in interest rates. The Group is exposed to inflation risk through certain contracts, such as annuities, which may provide for future benefits to be paid taking account of changes in the level of experienced and implied inflation, and also through the Group\u2019s cost base. The Group seeks to manage inflation risk within the ALM framework through the holding of derivatives, such as inflation swaps, or physical positions in relevant assets, such as index-linked gilts, where appropriate. Due to the correlation between interest rates and inflation, a combined sensitivity has been presented. An increase of 1% in interest rates and 0.6% in the rate of inflation, with all other variables held constant, would result in a decrease in profits after tax in respect of a full financial year, and in equity, of \u00a325 million (2021: \u00a3364 million). A decrease of 1% in interest rates and 0.6% in the rate of inflation, with all other variables held constant, would result in an increase in profits after tax in respect of a full financial year, and in equity, of \u00a3128 million (2021: \u00a3415 million). Equity and property risk The Group is exposed to the risk of reductions in the valuation of equities (or changes in the volatility) or property investments which could result in reductions in asset values and losses for policyholders or shareholders. In this context, equity assets should be taken to include shares, equity derivatives, equity collectives and unlisted equities. Property assets include direct property investment, shares in property companies, property collectives and structured property assets. The portfolio of marketable equity securities and property investments which is carried in the statement of consolidated financial position at fair value, has exposure to price risk. The Group\u2019s objective in holding these assets is to earn higher long-term returns by investing in a diverse portfolio of equities and properties. Portfolio characteristics are analysed regularly and price risks are actively managed in line with investment mandates. The Group\u2019s holdings are diversified across industries and concentrations in any one company or industry are limited. Equity and property price risk is primarily borne in respect of assets held in with-profit funds, unit-linked funds or equity release mortgages in the non-profit funds. For unit-linked funds this risk is borne by policyholders and asset movements directly impact unit prices and hence policy values. For with-profit funds policyholders\u2019 future bonuses will be impacted by the investment returns achieved and hence the price risk, whilst the Group also has exposure to the value of guarantees provided to with-profit policyholders. In addition some equity investments are held in respect of shareholders\u2019 funds. For the non-profit fund property price risk from equity release mortgages is borne by the Group with the aim of achieving greater diversification and investment returns, consistent with the Strategic Asset Allocation approved by the Board. The Group as a whole is exposed to price risk fluctuations impacting the income flow of management charges from the invested assets of all funds; this is primarily managed through the use of derivatives. Equity and property price risk is managed through the agreement and monitoring of financial risk profiles that are appropriate for each of the Group\u2019s life funds in respect of maintaining adequate regulatory capital and treating customers fairly. This is largely achieved through asset class diversification and within the Group\u2019s ALM framework through the holding of derivatives or physical positions in relevant assets where appropriate. The shareholders\u2019 exposure to equity risk principally arises from the Group\u2019s hedging strategy to protect the regulatory capital position, which results in an adverse impact on profit on an increase in equity prices. The sensitivity analysis for equity and property price risk illustrates how a change in the fair value of equities and properties affects the Group result. It takes into account the effect of such changes in equity and property prices on all assets and liabilities that contribute to the Group\u2019s reported profit after tax and in equity (but excludes the impact on the Group\u2019s pension schemes). A 10% decrease in equity prices, with all other variables held constant, would result in an increase in profits after tax in respect of a full financial year, and in equity, of \u00a3324 million (2021: \u00a3294 million). A 10% increase in equity prices, with all other variables held constant, would result in a decrease in profits after tax in respect of a full financial year, and in equity, of \u00a3269 million (2021: \u00a3263 million). A 10% decrease in property prices, with all other variables held constant, would result in a decrease in profits after tax in respect of a full financial year, and in equity, of \u00a311 million (2021: \u00a36 million). A 10% increase in property prices, with all other variables held constant, would result in an increase in profits after tax in respect of a full financial year, and in equity, of \u00a310 million (2021: \u00a34 million). The sensitivity to changes in equity prices is primarily driven by the Group\u2019s equity hedging arrangements over the value of future management charges that are linked to asset values. Currency risk Currency risk is the risk that changes in the value of currencies could lead to reductions in asset values which may result in losses for policyholders and shareholders. With the exception of Standard Life International business sold in Germany and the Republic of Ireland and some historic business written in the Republic of Ireland, the Group\u2019s principal transactions are carried out in sterling. The assets for these books of business are generally held in the same currency denomination as their liabilities, therefore, any foreign currency mismatch is largely mitigated. Consequently, the foreign currency risk relating to this business mainly arises when the assets and liabilities are translated into sterling. The Group\u2019s financial assets are primarily denominated in the same currencies as its insurance and investment liabilities. Thus, the main foreign exchange risk arises from recognised assets and liabilities denominated in currencies other than those in which insurance and investment liabilities are expected to be settled and, indirectly, from the non-UK earnings of UK companies. Some of the Group\u2019s with-profit funds have an exposure to overseas assets which is not driven by liability considerations. The purpose of this exposure is to reduce overall risk whilst maximising returns by diversification. This exposure is limited and managed through investment mandates which are subject to the oversight of the investment committees of the boards of each life company. Fluctuations in exchange rates from certain holdings in overseas assets are hedged against currency risks. During 2021, the Group entered into four hedging relationships to hedge the currency risk on its Euro and US dollar denominated hybrid debt (US $500 million Tier 2 bonds, \u20ac500 million Tier 2 notes, US $750 million contingent convertible Tier 1 notes and US $500 million Fixed Rate Reset Tier 2 notes as set out in note E5) through cross currency rate swaps. E6.2.3 Financial soundness risk Financial soundness risk is a broad risk category encompassing capital management risk, tax risk and liquidity and funding risk. Capital management risk is defined as the failure of the Group, or one of its separately regulated subsidiaries, to maintain sufficient capital to provide appropriate security for policyholders and meet all regulatory capital requirements whilst not retaining unnecessary capital. The Group has exposure to capital management risk through the requirements of the Solvency II capital regime, as implemented by the PRA, to calculate regulatory capital adequacy at a Group level. The Group\u2019s UK life subsidiaries have exposure to capital management risk through the Solvency II regulatory capital requirements mandated by the PRA at the solo level. The Group\u2019s approach to managing capital management risk is described in detail in note I3. Tax risk Tax risk is defined as the risk of reductions in earnings and/or value, through financial or reputational loss, due to an unforeseen tax cost, or by the inappropriate reporting and disclosure of information in relation to taxation. Tax risk can be caused by: \u2022 the Group, or one of its subsidiaries, making a material error in its tax reporting; \u2022 incorrect calculation of tax provisions; \u2022 failure to implement the optimum financial arrangements to underpin a commercial transaction; and \u2022 incorrect operation of policyholder tax requirements. Tax risk is managed by maintaining an appropriately-staffed tax team who have the qualifications and experience to make judgements on tax issues, augmented by advice from external specialists where required. In addition, the Group has a formal tax risk policy, which sets o ut its risk appetite in relation to specific aspects of tax risk, and which details the controls the Group has in place to manage those risks. Liquidity risk Liquidity risk is defined as failure to maintain adequate levels of financial resources to meet obligations as they fall due. Funding risk relates to the potential inability to raise additional capital or liquidity when required in order to maintain the resilience of the balance sheet. The Group has exposure to liquidity risk as a result of servicing its external debt and equity investors, and from the operating requirements of its subsidiaries. The Group\u2019s subsidiaries have exposure to liquidity risk as a result of normal business activities, specifically the risk arising from an inability to meet short-term cash flow requirements and to meet obligations to policy liabilities. The Board of Phoenix Group Holdings plc has defined a number of governance objectives and principles and the liquidity risk frameworks of each subsidiary are designed to ensure that: \u2022 liquidity risk is managed in a manner consistent with the subsidiary company boards\u2019 strategic objectives, risk appetite and PPFM; \u2022 cash flows are appropriately managed and the reputation of the Group is safeguarded; and \u2022 appropriate information on liquidity risk is available to those making decisions. The Group\u2019s liquidity risk management strategy is based on a risk appetite of less than a 1 in 200 chance of having insufficient liquid or tangible assets to meet financial obligations as they fall due and is supported by: \u2022 holding appropriate assets to meet liquidity buffers; \u2022 holding high quality liquid assets to support day to day operations; \u2022 an effective stress testing framework to ensure survival horizons are met under different plausible scenarios; \u2022 effective liquidity portfolio management; and \u2022 liquidity risk contingency planning. The Group\u2019s funding strategy aims to maintain the appropriate level of debt and equity in order to support the Group\u2019s organic and inorganic growth ambitions, while maintaining sufficient headroom for hybrid capital under Solvency II rules. Liquidity forecasts showing headroom against liquidity buffers are prepared regularly to predict required liquidity levels over both the short and medium- term allowing management to respond appropriately to changes in circumstances. In the event of a liquidity shortfall, this would be managed in line with the Group\u2019s Contingency Liquidity Plan where the latest available contingency management actions would be considered. In extreme circumstances, the Group could be exposed to liquidity risk in its unit-linked funds. This could occur where a high volume of surrenders coincides with a tightening of liquidity in a unit-linked fund to the point where assets of that fund have to be sold to meet those withdrawals. Where the fund affected consists of less liquid assets such as property, it can take several months to complete a sale and this would impede the proper operation of the fund. In these situations, the Group considers its risk to be low since there are steps that can be taken first within the funds themselves both to ensure the fair treatment of all investors in those funds and to protect the Group\u2019s own risk exposure. The vast majority of the Group\u2019s derivative contracts are traded OTC and have a two-day collateral settlement period. The Group\u2019s derivative contracts are monitored daily, via an end-of-day valuation process, to assess the need for additional funds to cover margin or collateral calls. Some of the Group\u2019s commercial property investments, cash and cash equivalents are held through collective investment schemes. The collective investment schemes have the power to restrict and/or suspend withdrawals, which would, in turn, affect liquidity. The following table provides a maturity analysis showing the remaining contractual maturities of the Group\u2019s undiscounted financial liabilities and associated interest. Liabilities under insurance contract contractual maturities are included based on the estimated timing of the amounts recognised in the statement of consolidated financial position in accordance with the requirements of IFRS 4 Insurance Contracts: 2022 1 year or less or on demand \u00a3m 1\u20135 years \u00a3m Greater than 5 years \u00a3m No fixed term \u00a3m Total \u00a3m Less amounts classified as held for sale (see note A6.1) \u00a3m Total \u00a3m Liabilities under insurance contracts 12,898 29,818 59,300 \u2013 102,016 \u2013 102,016 Investment contracts 152,157 \u2013 \u2013 \u2013 152,157 (8,312) 143,845 Borrowings 1 268 1,326 2,357 64 4,015 \u2013 4,015 Deposits received from reinsurers 1 377 687 1,626 \u2013 2,690 \u2013 2,690 Derivatives 1 757 794 9,335 \u2013 10,886 (4) 10,882 Net asset value attributable to unitholders 2,978 \u2013 \u2013 \u2013 2,978 \u2013 2,978 Obligations for repayment of collateral received 1,706 \u2013 \u2013 \u2013 1,706 \u2013 1,706 Reinsurance payables 95 20 130 \u2013 245 \u2013 245 Payables related to direct insurance contracts 1,964 \u2013 \u2013 \u2013 1,964 \u2013 1,964 Lease liabilities 1 11 37 95 \u2013 143 \u2013 143 Accruals and deferred income 549 42 12 \u2013 603 (37) 566 Other payables 965 \u2013 \u2013 \u2013 965 \u2013 965 2021 1 year or less or on demand \u00a3m 1\u20135 years \u00a3m Greater than 5 years \u00a3m No fixed term \u00a3m Total \u00a3m Less amounts classified as held for sale (see note A6.1) \u00a3m Total \u00a3m Liabilities under insurance contracts 14,319 36,061 78,484 \u2013 128,864 \u2013 128,864 Investment contracts 172,093 \u2013 \u2013 \u2013 172,093 (11,676) 160,417 Borrowings 1 664 1,380 2,772 70 4,886 \u2013 4,886 Deposits received from reinsurers 1 419 834 2,355 \u2013 3,608 \u2013 3,608 Derivatives 1 259 517 583 \u2013 1,359 (4) 1,355 Net asset value attributable to unitholders 3,568 \u2013 \u2013 \u2013 3,568 \u2013 3,568 Obligations for repayment of collateral received 3,442 \u2013 \u2013 \u2013 3,442 \u2013 3,442 Reinsurance payables 80 13 50 \u2013 143 \u2013 143 Payables related to direct insurance contracts 1,864 \u2013 \u2013 \u2013 1,864 \u2013 1,864 Lease liabilities 1 11 59 72 \u2013 142 \u2013 142 Accruals and deferred income 548 59 7 7 621 (54) 567 Other payables 721 \u2013 \u2013 \u2013 721 \u2013 721 1 These financial liabilities are disclosed at their undiscounted value and therefore differ from amounts included in the statement of consolidated financial position which discloses the discounted value. 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. Although these liabilities are payable on demand, and are therefore included in the contractual maturity analysis as due within one year, the Group does not expect all these amounts to be paid out within one year of the reporting date. A significant proportion of the Group\u2019s financial assets are held in gilts, cash, supranationals and investment grade securities which the Group considers sufficient to meet the liabilities as they fall due. The vast majority of these investments are readily realisable immediately since most of them are quoted in an active market. The Group has a set of established policies and processes to manage its exposure to liquidity risk, including impacts arising from the economic environment, business developments and funding changes. Where liquidity risk is heightened, such as during the market volatility following the UK mini- budget, triggers are in place to enhance the frequency of liquidity monitoring and to implement available contingency actions to ensure sufficient liquidity is maintained. E6.2.4 Strategic risk Strategic risks threaten the achievement of the Group strategy through poor strategic decision-making, implementation or response to changing circumstances. The Group recognises that core strategic activity brings with it exposure to strategic risk. However, the Group seeks to proactively review, manage and control these exposures. The Group\u2019s strategy and business plan are exposed to external events that could prevent or impact the achievement of the strategy; events relating to how the strategy and business plan are executed; and events that arise as a consequence of following the specific strategy chosen. The identification and assessment of strategic risks is an integrated part of the Risk Management Framework. Strategic risk should be considered in parallel with the Risk Universe as each of the risks within the Risk Universe can impact the Group\u2019s strategy. A Strategic Risk Policy is maintained and reported against regularly, with a particular focus on risk management, stakeholder management, corporate activity and overall reporting against the Group\u2019s strategic ambitions. E6.2.5 Operational risk Operational risk is the risk of reductions in earnings and/or value, through financial or reputational loss, from inadequate or failed internal processes and systems, or from people related or external events. Operational risk arises due to failures in one or more of the following aspects of our business: \u2022 indirect exposures through outsourcing service providers and suppliers; \u2022 direct exposures through internal practices, actions or omissions; \u2022 external threats from individuals or groups focused on malicious or criminal activities, or on external events occurring which are not within the Group\u2019s control; and \u2022 negligence, mal-practice or failure of employees, or suppliers to follow good practice in delivering operational processes and practices. It is accepted that it is neither possible, appropriate nor cost effective to eliminate operational risks from the business as operational risk is inherent in any operating environment particularly given the regulatory framework under which the Group operates. As such the Group will tolerate a degree of operational risk subject to appropriate and proportionate levels of control around the identification, management and reporting of such risks. A set of operational risk policies are maintained that set out the nature of the operational risk exposure and minimum control standards in place to control the risk. The Group also has a set of operational risk policies that set out the nature of the risk exposure and minimum control standards in place to control the risk. E6.2.6 Customer risk Customer risk is the risk of financial failure, reputational loss, loss of earnings and/or value through inappropriate or poor customer treatment (including poor advice). It can arise as a result of: \u2022 Customer Treatment: Failings in the design and execution of the support and service interactions with customers leads to poor customer outcomes. \u2022 Customer Transformation: The design, governance and oversight of Strategic Customer Transformation Activity in retained functions and service providers, fails to deliver on reasonable customer expectations, taking account of the Phoenix Group customer treatment risk appetites and regulatory requirements. \u2022 Product and Propositions: Products/propositions are not designed and managed appropriates leading to poor customer outcomes. \u2022 Sales and Distribution: Inappropriate (unclear, unfair or misleading) financial promotions, sales practices and/or distribution agreements resulting in poor customer outcomes. The Group\u2019s Conduct Risk Appetite, sets the boundaries within which the Group expect customer outcomes to be managed. In addition, the Group Conduct Strategy, which overarches our Risk Universe and all risk policies is designed to detect where our customers are at risk of poor outcome, minimise conduct risks, and respond with timely and appropriate mitigating actions. The Group also has a suite of customer polices which set out the key customer risks and control objectives in place to mitigate them. The customer risks for the Group are regularly reported to management oversight committees.",
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"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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},
"fact-612": {
"value": "E6.2.1 Credit risk Credit risk is defined as the risk of reductions in earnings and/or value, through financial or reputational loss, as a result of the default of a counterparty or an associate of such a counterparty to a financial transaction (i.e. failure to honour their financial obligations, or failing to perform them in a timely manner), whether on or off balance sheet. There are two principal sources of credit risk for the Group: \u2022 credit risk which results from direct investment activities, including investments in debt securities, derivatives counterparties, collective investment schemes, hedge funds and the placing of cash deposits; and \u2022 credit risk which results indirectly from activities undertaken in the normal course of business. Such activities include premium payments, outsourcing contracts, reinsurance agreements, exposure from material suppliers and the lending of securities. The amount disclosed in the statement of consolidated financial position in respect of all financial assets, together with rights secured under off balance sheet collateral arrangements, but excluding the minority interest in consolidated collective investment schemes and those asse ts that back policyholder liabilities, represents the Group\u2019s maximum exposure to credit risk. The credit risk borne by the shareholder on with-profit policies is dependent on the extent to which the underlying insurance fund is relying on shareholder support. The impact of non-government debt securities and, inter alia, the change in market credit spreads during the year is fully reflected in the values shown in these consolidated financial statements. Credit spreads are the excess of corporate bond yields over gilt yields to reflect the higher level of risk. Similarly, the value of derivatives that the Group holds takes into account fully the changes in swap rates. There is an exposure to spread changes affecting the prices of corporate bonds and derivatives. This exposure applies to supported with-profit funds (where risks and rewards fall wholly to shareholders), non-profit funds and shareholders\u2019 funds. The Group holds \u00a315,814 million (2021: \u00a321,668 million) of corporate bonds which are used to back annuity liabilities in non-profit funds. These annuity liabilities include an aggregate credit default provision of \u00a3796 million (2021: \u00a31,036 million) to fund against the risk of default. A 100bps widening of credit spreads, with all other variables held constant and no change in assumed expected defaults, would result in an increase in the profit after tax in respect of a full financial year, and in equity, of \u00a323 million (2021: \u00a328 million). A 100bps narrowing of credit spreads, with all other variables held constant and no change in assumed expected defaults, would result in a decrease in the profit after tax in respect of a full financial year, and in equity, of \u00a336 million (2021: \u00a337 million). Credit risk is managed by the monitoring of aggregate Group exposures to individual counterparties and by appropriate credit risk diversification. The Group manages the level of credit risk it accepts through credit risk tolerances and limits (including asset class, industry and geography limits). Additional controls for illiquid asset concentration risk are set out via specific risk limits within the risk appetite framework. Credit risk on derivatives and securities lending is mitigated through the use of collateral with appropriate haircuts. Credit quality of assets An indication of the Group\u2019s exposure to credit risk is the quality of the investments and counterparties with which it transacts. The following table provides information regarding the aggregate credit exposure split by credit rating. 2022 AAA \u00a3m AA \u00a3m A \u00a3m BBB \u00a3m BB and below \u00a3m Non-rated \u00a3m Unit- linked \u00a3m Total \u00a3m Less amounts classified as held for sale \u00a3m Total \u00a3m Loans and deposits \u2013 4 \u2013 \u2013 \u2013 204 71 279 \u2013 279 Derivatives \u2013 1,500 1,060 28 \u2013 1,370 113 4,071 (3) 4,068 Debt securities 1,2 6,834 26,095 19,045 16,238 1,929 7,182 7,387 84,710 (1,594) 83,116 Reinsurers\u2019 share of insurance contract liabilities \u2013 4,920 1,148 \u2013 \u2013 74 \u2013 6,142 \u2013 6,142 Reinsurers\u2019 share of investment contract liabilities \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 9,088 9,088 (25) 9,063 Cash and cash equivalents 339 1,160 5,749 63 \u2013 5 1,556 8,872 (33) 8,839 7,173 33,679 27,002 16,329 1,929 8,835 18,215 113,162 (1,655) 111,507 1 For financial assets that do not have credit ratings assigned by external ratings agencies, the Group assigns internal ratings for use in management and monitoring of credit risk. \u00a3149 million of AAA, \u00a31,083 million of AA, \u00a31,742 million of A, \u00a32,766 million of BBB and \u00a3367 million of BB and below debt securities are internally rated. If a financial asset is neither rated by an external agency nor internally rated, it is classified as \u2018non-rated\u2019. 2 Non-rated debt securities includes equity release mortgages with a value of \u00a33,934 million (further details are set out in note E2.3) and non-rated bonds. 2021 AAA \u00a3m AA \u00a3m A \u00a3m BBB \u00a3m BB and below \u00a3m Non-rated \u00a3m Unit-linked \u00a3m Total \u00a3m Less amounts classified as held for sale \u00a3m Total \u00a3m Loans and deposits \u2013 6 \u2013 \u2013 \u2013 414 55 475 \u2013 475 Derivatives \u2013 965 1,737 388 \u2013 1,343 138 4,571 (4) 4,567 Debt securities 1,2 9,097 40,142 22,782 16,290 3,292 6,788 8,599 106,990 (2,229) 104,761 Reinsurers\u2019 share of insurance contract liabilities \u2013 4,963 3,539 37 \u2013 48 \u2013 8,587 \u2013 8,587 Reinsurers\u2019 share of investment contract liabilities \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 10,009 10,009 (27) 9,982 Cash and cash equivalents 382 1,686 5,161 181 \u2013 3 1,775 9,188 (76) 9,112 9,479 47,762 33,219 16,896 3,292 8,596 20,576 139,820 (2,336) 137,484 1 For financial assets that do not have credit ratings assigned by external ratings agencies, the Group assigns internal ratings for use in management and monitoring of credit risk. \u00a3110 million of AAA, \u00a31,110 million of AA, \u00a32,556 million of A, \u00a32,480 million of BBB and \u00a3518 million of BB and below debt securities are internally rated. If a financial asset is neither rated by an external agency nor internally rated, it is classified as \u2018non-rated\u2019. 2 Non-rated debt securities includes equity release mortgages with a value of \u00a34,214 million (further details are set out in note E2.3) and non-rated bonds. Credit ratings have not been disclosed in the above tables for the assets of the unit-linked funds since the shareholder is not directly exposed to credit risks from these assets. Included in unit-linked funds are assets which are held as reinsured external fund links. Under certain circumstances, the shareholder may be exposed to losses relating to the default of the reinsured external fund link. Credit ratings have not been disclosed in the above tables for holdings in unconsolidated collective investment schemes and investments in associates. The credit quality of the underlying debt securities within these vehicles is managed by the safeguards built into the investment mandates for these vehicles. The Group maintains accurate and consistent risk ratings across its asset portfolio. This enables management to focus on the applicable risks and to compare credit exposures across all lines of business, geographical regions and products. The rating system is supported by a variety of financial analytics combined with market information to provide the main inputs for the measurement of counterparty risk. All risk ratings are tailored to the various categories of assets and are assessed and updated regularly. nternal Credit Rating Committee, a Rating Committee and a Portfolio Credit Committee to monitor and perform oversight of internal credit ratings for externally rated and internally rated assets. A variety of methods are used to validate the appropriateness of credit assessments from external institutions and fund managers. Internally rated assets do not have a public rating from an external credit assessment institution. Instead internal credit ratings are used by the Group which are provided by fund managers or for certain assets (in particular, equity release mortgages and illiquid assets) are determined by the Life Companies. The Committees review the policies, processes and practices to ensure the appropriateness of the internal ratings, and to ensure they are in line with regulatory requirements. Throughout 2022, the Group has taken de-risking action to increase the overall credit quality of its asset portfolio and mitigate the impact of future downgrades on risk capital. Further details are included in the Risk Management section of the Strategic Report. The Group has increased exposure to an array of illiquid credit assets such as equity release mortgages, local authority loans, social housing, infrastructure and commercial real estate loans with the aim of achieving greater diversification and investment returns, consistent with the Strategic Asset Allocation approved by the Board. A further indicator of the quality of the Group\u2019s financial assets is the extent to which they are neither past due nor impaired. All of the amounts in the table above for the current and prior year are neither past due nor impaired. Additional life company asset disclosures are included on page 307 and include information on the Group\u2019s market exposure analysed by credit rating, sector and country of exposure for the shareholder debt portfolio. In light of the continuing conflict in Russia-Ukraine, this includes the shareholders\u2019 credit exposure to Russia and Ukraine. The Group shareholder exposure to Russia and Ukraine was \u00a3nil at 31 December 2022 (31 December 2021: \u00a323 million). Concentration of credit risk Concentration of credit risk might exist where the Group has significant exposure to an individual counterparty or a group of counterparties with similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic and other conditions. The Group has most of its counterparty risk within its life business and is monitored by the Group Counterparty Credit Risk Framework contained within the Group Credit Risk Policy. It is further provided for in investment management agreements, overlaid by regulatory requirements and the monitoring of aggregate counterparty exposures across the Group against additional Group counterparty limits. Counterparty risk in respect of OTC derivative counterparties is monitored using a Potential Future Exposure (\u2018PFE\u2019) value metric. The Group is also exposed to concentration risk with outsource partners. This is due to the nature of the outsourced services market. The Group operates a policy to manage outsourcer service counterparty exposures and the impact from default is reviewed regularly by executive committees and measured through stress and scenario testing. Reinsurance The Group is exposed to credit risk as a result of insurance risk transfer contracts with reinsurers. The Group\u2019s policy is to place reinsurance only with highly rated counterparties (minimum rating requirement of A-). The Group restricts concentration with individual external reinsurers by specifying limits on ceding and minimum conditions for acceptance and retention of reinsurers. In recent years the Group has made progress in increasing the number of reinsurers it transacts with, however, an element of concentration remains due to the nature of the reinsurance market and the restricted range of reinsurers available. The Group manages its exposure to reinsurance credit risk through the operation of a credit policy, collateralisation, and regular monitoring of exposures at the Reinsurance Management Committee. Collateral The credit risk of the Group is mitigated, in certain circumstances, by entering into collateral agreements. The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of type s of collateral and the valuation parameters. Collateral is mainly obtained in respect of stock lending, certain reinsurance arrangements and to provide security against the daily mark to model value of derivative financial instruments. Management monitors the market value of the collateral received, requests additional collateral when needed, and performs an impairment valuation when impairment indicators exist and the asset is not fully secured and is not carried at fair value. See note E4 for further information on collateral arrangements. ",
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"fact-613": {
"value": "E6.2 Financial risk analysis continued E6.2.2 Market risk Market risk is defined as the risk of reductions in earnings and/or value, through financial or reputational loss, from unfavourable market movements. The risk typically arises from exposure to equity, property and fixed income asset classes and the impact of changes in interest rates, inflation rates and currency exchange rates. The Group is mainly exposed to market risk as a result of: \u2022 the mismatch between liability profiles and the related asset investment portfolios; \u2022 the investment of surplus assets including shareholder reserves yet to be distributed, surplus assets within the with-profit funds and assets held to meet regulatory capital and solvency requirements; and \u2022 the income flow of management charges derived from the value of invested assets of the business. The Group manages the levels of market risk that it accepts through the operation of a market risk policy using a number of controls and techniques including: \u2022 Defined lists of permitted securities and/or application of investment constraints and portfolio limits; \u2022 Clearly defined investment benchmarks for policyholder and shareholder funds; \u2022 Stochastic and deterministic asset/liability modelling; \u2022 Active use of derivatives to improve the matching characteristics of assets and liabilities and to reduce the risk exposure of a portfolio; and \u2022 Setting risk limits for main market risks and managing exposures against these appetites. All operations comply with regulatory requirements relating to the taking of market risk. Assets in the shareholder funds are managed against benchmarks that ensure they are diversified across a range of asset classes, instruments and geographies that are appropriate to the liabilities of the funds or are held to match the cash flows anticipated to arise in the business. A combination of limits by name of issuer, sector, geographical region and credit rating are used where relevant to reduce concentration risk among the assets held. The assets of the participating business are principally managed to support the liabilities of the participating business and are appropriately diversified by both asset class and geography, considering: \u2022 The economic liability and how this varies with market conditions; \u2022 The need to invest assets supporting participating business in a manner consistent with the participating policyholders\u2019 reasonable expectations and Principles and Practices of Financial Management (\u2018PPFM\u2019); and \u2022 The need to ensure that regulatory and capital requirements are met. In practice, an element of market risk arises as a consequence of the need to balance these considerations, for example, in certain instances participating policyholders may expect that equity market risk will be taken on their behalf, and derivative instruments may be used to manage these risks. Markets remain volatile particularly given geopolitical tensions, increased inflation, and action by central banks to reduce inflationary pressures on economies whilst balancing the need to aid post pandemic recovery. This is noted in the Strategic Report principal risk section. Interest rate and inflation risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate relative to the respective liability due to the impact of changes in market interest rates on the value of interest-bearing assets and on the value of future guarantees provided under certain contracts of insurance. The paragraphs in this section also apply to inflation risk, but references to fixed rate assets and liabilities would be replaced with index-linked assets and liabilities. The Group is required to manage its interest rate exposures in line with qualitative risk appetite statements, quantitative risk metrics and any additional hedging benchmarks. Interest rate risk is managed by matching assets and liabilities where practicable and by entering into derivative arrangements for hedging purposes where appropriate. This is particularly the case for the non-participating funds and supported participating funds. For unsupported participating business, some element of investment mismatching is permitted where it is consistent with the principles of treating customers fairly. The with-profit funds of the Group provide capital to allow such mismatching to be effected. In practice, the life companies of the Group maintain an appropriate mix of fixed and variable rate instruments according to the underlying insurance or investment contracts and will review this at regular intervals to ensure that overall exposure is kept within the risk profile agreed for each particular fund. This also requires the maturity profile of these assets to be managed in line with the liabilities to policyholders. The sensitivity analysis for interest rate and inflation risk indicates how changes in the fair value or future cash flows of a financial instrument arising from changes in market interest and inflation rates at the reporting date result in a change in profit after tax and in equity. It takes into account the effect of such changes in market interest and inflation rates on all assets and liabilities that contribute to the Group\u2019s reported profit after tax and in equity. Changes in the value of the Group\u2019s holdings in swaptions as the result of time decay or changes to interest rate volatility are not captured in the sensitivity analysis. With-profit business and non-participating business within the with-profit funds are exposed to interest rate risk as guaranteed liabilities are valued relative to market interest rates and investments include fixed interest securities and derivatives. For unsupported with-profit business the profit or loss arising from mismatches between such assets and liabilities is largely offset by increased or reduced discretionary policyholder benefits dependent on the existence of policyholder guarantees. The contribution of unsupported participating business to the Group result is largely limited to the shareholders\u2019 share of the declared annual bonus. The contribution of the supported participating business to the Group result is determined by the shareholders\u2019 interest in any change in value in the capital advanced to the with-profit funds. In the non-participating funds, policy liabilities\u2019 sensitivity to interest rates are matched primarily with debt securities and hedging if necessary to match duration, with the result that sensitivity to changes in interest rates is very low. The Group\u2019s exposure to interest rates principally arises from the Group\u2019s hedging strategy to protect the regulatory capital position, which results in an adverse impact on profit on an increase in interest rates. The Group is exposed to inflation risk through certain contracts, such as annuities, which may provide for future benefits to be paid taking account of changes in the level of experienced and implied inflation, and also through the Group\u2019s cost base. The Group seeks to manage inflation risk within the ALM framework through the holding of derivatives, such as inflation swaps, or physical positions in relevant assets, such as index-linked gilts, where appropriate. Due to the correlation between interest rates and inflation, a combined sensitivity has been presented. An increase of 1% in interest rates and 0.6% in the rate of inflation, with all other variables held constant, would result in a decrease in profits after tax in respect of a full financial year, and in equity, of \u00a325 million (2021: \u00a3364 million). A decrease of 1% in interest rates and 0.6% in the rate of inflation, with all other variables held constant, would result in an increase in profits after tax in respect of a full financial year, and in equity, of \u00a3128 million (2021: \u00a3415 million). Equity and property risk The Group is exposed to the risk of reductions in the valuation of equities (or changes in the volatility) or property investments which could result in reductions in asset values and losses for policyholders or shareholders. In this context, equity assets should be taken to include shares, equity derivatives, equity collectives and unlisted equities. Property assets include direct property investment, shares in property companies, property collectives and structured property assets. The portfolio of marketable equity securities and property investments which is carried in the statement of consolidated financial position at fair value, has exposure to price risk. The Group\u2019s objective in holding these assets is to earn higher long-term returns by investing in a diverse portfolio of equities and properties. Portfolio characteristics are analysed regularly and price risks are actively managed in line with investment mandates. The Group\u2019s holdings are diversified across industries and concentrations in any one company or industry are limited. Equity and property price risk is primarily borne in respect of assets held in with-profit funds, unit-linked funds or equity release mortgages in the non-profit funds. For unit-linked funds this risk is borne by policyholders and asset movements directly impact unit prices and hence policy values. For with-profit funds policyholders\u2019 future bonuses will be impacted by the investment returns achieved and hence the price risk, whilst the Group also has exposure to the value of guarantees provided to with-profit policyholders. In addition some equity investments are held in respect of shareholders\u2019 funds. For the non-profit fund property price risk from equity release mortgages is borne by the Group with the aim of achieving greater diversification and investment returns, consistent with the Strategic Asset Allocation approved by the Board. The Group as a whole is exposed to price risk fluctuations impacting the income flow of management charges from the invested assets of all funds; this is primarily managed through the use of derivatives. Equity and property price risk is managed through the agreement and monitoring of financial risk profiles that are appropriate for each of the Group\u2019s life funds in respect of maintaining adequate regulatory capital and treating customers fairly. This is largely achieved through asset class diversification and within the Group\u2019s ALM framework through the holding of derivatives or physical positions in relevant assets where appropriate. The shareholders\u2019 exposure to equity risk principally arises from the Group\u2019s hedging strategy to protect the regulatory capital position, which results in an adverse impact on profit on an increase in equity prices. The sensitivity analysis for equity and property price risk illustrates how a change in the fair value of equities and properties affects the Group result. It takes into account the effect of such changes in equity and property prices on all assets and liabilities that contribute to the Group\u2019s reported profit after tax and in equity (but excludes the impact on the Group\u2019s pension schemes). A 10% decrease in equity prices, with all other variables held constant, would result in an increase in profits after tax in respect of a full financial year, and in equity, of \u00a3324 million (2021: \u00a3294 million). A 10% increase in equity prices, with all other variables held constant, would result in a decrease in profits after tax in respect of a full financial year, and in equity, of \u00a3269 million (2021: \u00a3263 million). A 10% decrease in property prices, with all other variables held constant, would result in a decrease in profits after tax in respect of a full financial year, and in equity, of \u00a311 million (2021: \u00a36 million). A 10% increase in property prices, with all other variables held constant, would result in an increase in profits after tax in respect of a full financial year, and in equity, of \u00a310 million (2021: \u00a34 million). The sensitivity to changes in equity prices is primarily driven by the Group\u2019s equity hedging arrangements over the value of future management charges that are linked to asset values. Currency risk Currency risk is the risk that changes in the value of currencies could lead to reductions in asset values which may result in losses for policyholders and shareholders. With the exception of Standard Life International business sold in Germany and the Republic of Ireland and some historic business written in the Republic of Ireland, the Group\u2019s principal transactions are carried out in sterling. The assets for these books of business are generally held in the same currency denomination as their liabilities, therefore, any foreign currency mismatch is largely mitigated. Consequently, the foreign currency risk relating to this business mainly arises when the assets and liabilities are translated into sterling. The Group\u2019s financial assets are primarily denominated in the same currencies as its insurance and investment liabilities. Thus, the main foreign exchange risk arises from recognised assets and liabilities denominated in currencies other than those in which insurance and investment liabilities are expected to be settled and, indirectly, from the non-UK earnings of UK companies. Some of the Group\u2019s with-profit funds have an exposure to overseas assets which is not driven by liability considerations. The purpose of this exposure is to reduce overall risk whilst maximising returns by diversification. This exposure is limited and managed through investment mandates which are subject to the oversight of the investment committees of the boards of each life company. Fluctuations in exchange rates from certain holdings in overseas assets are hedged against currency risks. During 2021, the Group entered into four hedging relationships to hedge the currency risk on its Euro and US dollar denominated hybrid debt (US $500 million Tier 2 bonds, \u20ac500 million Tier 2 notes, US $750 million contingent convertible Tier 1 notes and US $500 million Fixed Rate Reset Tier 2 notes as set out in note E5) through cross currency rate swaps. ",
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"fact-614": {
"value": "Liquidity risk Liquidity risk is defined as failure to maintain adequate levels of financial resources to meet obligations as they fall due. Funding risk relates to the potential inability to raise additional capital or liquidity when required in order to maintain the resilience of the balance sheet. The Group has exposure to liquidity risk as a result of servicing its external debt and equity investors, and from the operating requirements of its subsidiaries. The Group\u2019s subsidiaries have exposure to liquidity risk as a result of normal business activities, specifically the risk arising from an inability to meet short-term cash flow requirements and to meet obligations to policy liabilities. The Board of Phoenix Group Holdings plc has defined a number of governance objectives and principles and the liquidity risk frameworks of each subsidiary are designed to ensure that: \u2022 liquidity risk is managed in a manner consistent with the subsidiary company boards\u2019 strategic objectives, risk appetite and PPFM; \u2022 cash flows are appropriately managed and the reputation of the Group is safeguarded; and \u2022 appropriate information on liquidity risk is available to those making decisions. The Group\u2019s liquidity risk management strategy is based on a risk appetite of less than a 1 in 200 chance of having insufficient liquid or tangible assets to meet financial obligations as they fall due and is supported by: \u2022 holding appropriate assets to meet liquidity buffers; \u2022 holding high quality liquid assets to support day to day operations; \u2022 an effective stress testing framework to ensure survival horizons are met under different plausible scenarios; \u2022 effective liquidity portfolio management; and \u2022 liquidity risk contingency planning. The Group\u2019s funding strategy aims to maintain the appropriate level of debt and equity in order to support the Group\u2019s organic and inorganic growth ambitions, while maintaining sufficient headroom for hybrid capital under Solvency II rules. Liquidity forecasts showing headroom against liquidity buffers are prepared regularly to predict required liquidity levels over both the short and medium- term allowing management to respond appropriately to changes in circumstances. In the event of a liquidity shortfall, this would be managed in line with the Group\u2019s Contingency Liquidity Plan where the latest available contingency management actions would be considered. In extreme circumstances, the Group could be exposed to liquidity risk in its unit-linked funds. This could occur where a high volume of surrenders coincides with a tightening of liquidity in a unit-linked fund to the point where assets of that fund have to be sold to meet those withdrawals. Where the fund affected consists of less liquid assets such as property, it can take several months to complete a sale and this would impede the proper operation of the fund. In these situations, the Group considers its risk to be low since there are steps that can be taken first within the funds themselves both to ensure the fair treatment of all investors in those funds and to protect the Group\u2019s own risk exposure. The vast majority of the Group\u2019s derivative contracts are traded OTC and have a two-day collateral settlement period. The Group\u2019s derivative contracts are monitored daily, via an end-of-day valuation process, to assess the need for additional funds to cover margin or collateral calls. Some of the Group\u2019s commercial property investments, cash and cash equivalents are held through collective investment schemes. The collective investment schemes have the power to restrict and/or suspend withdrawals, which would, in turn, affect liquidity. The following table provides a maturity analysis showing the remaining contractual maturities of the Group\u2019s undiscounted financial liabilities and associated interest. Liabilities under insurance contract contractual maturities are included based on the estimated timing of the amounts recognised in the statement of consolidated financial position in accordance with the requirements of IFRS 4 Insurance Contracts: 2022 1 year or less or on demand \u00a3m 1\u20135 years \u00a3m Greater than 5 years \u00a3m No fixed term \u00a3m Total \u00a3m Less amounts classified as held for sale (see note A6.1) \u00a3m Total \u00a3m Liabilities under insurance contracts 12,898 29,818 59,300 \u2013 102,016 \u2013 102,016 Investment contracts 152,157 \u2013 \u2013 \u2013 152,157 (8,312) 143,845 Borrowings 1 268 1,326 2,357 64 4,015 \u2013 4,015 Deposits received from reinsurers 1 377 687 1,626 \u2013 2,690 \u2013 2,690 Derivatives 1 757 794 9,335 \u2013 10,886 (4) 10,882 Net asset value attributable to unitholders 2,978 \u2013 \u2013 \u2013 2,978 \u2013 2,978 Obligations for repayment of collateral received 1,706 \u2013 \u2013 \u2013 1,706 \u2013 1,706 Reinsurance payables 95 20 130 \u2013 245 \u2013 245 Payables related to direct insurance contracts 1,964 \u2013 \u2013 \u2013 1,964 \u2013 1,964 Lease liabilities 1 11 37 95 \u2013 143 \u2013 143 Accruals and deferred income 549 42 12 \u2013 603 (37) 566 Other payables 965 \u2013 \u2013 \u2013 965 \u2013 965 2021 1 year or less or on demand \u00a3m 1\u20135 years \u00a3m Greater than 5 years \u00a3m No fixed term \u00a3m Total \u00a3m Less amounts classified as held for sale (see note A6.1) \u00a3m Total \u00a3m Liabilities under insurance contracts 14,319 36,061 78,484 \u2013 128,864 \u2013 128,864 Investment contracts 172,093 \u2013 \u2013 \u2013 172,093 (11,676) 160,417 Borrowings 1 664 1,380 2,772 70 4,886 \u2013 4,886 Deposits received from reinsurers 1 419 834 2,355 \u2013 3,608 \u2013 3,608 Derivatives 1 259 517 583 \u2013 1,359 (4) 1,355 Net asset value attributable to unitholders 3,568 \u2013 \u2013 \u2013 3,568 \u2013 3,568 Obligations for repayment of collateral received 3,442 \u2013 \u2013 \u2013 3,442 \u2013 3,442 Reinsurance payables 80 13 50 \u2013 143 \u2013 143 Payables related to direct insurance contracts 1,864 \u2013 \u2013 \u2013 1,864 \u2013 1,864 Lease liabilities 1 11 59 72 \u2013 142 \u2013 142 Accruals and deferred income 548 59 7 7 621 (54) 567 Other payables 721 \u2013 \u2013 \u2013 721 \u2013 721 1 These financial liabilities are disclosed at their undiscounted value and therefore differ from amounts included in the statement of consolidated financial position which discloses the discounted value. 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. Although these liabilities are payable on demand, and are therefore included in the contractual maturity analysis as due within one year, the Group does not expect all these amounts to be paid out within one year of the reporting date. A significant proportion of the Group\u2019s financial assets are held in gilts, cash, supranationals and investment grade securities which the Group considers sufficient to meet the liabilities as they fall due. The vast majority of these investments are readily realisable immediately since most of them are quoted in an active market. The Group has a set of established policies and processes to manage its exposure to liquidity risk, including impacts arising from the economic environment, business developments and funding changes. Where liquidity risk is heightened, such as during the market volatility following the UK mini- budget, triggers are in place to enhance the frequency of liquidity monitoring and to implement available contingency actions to ensure sufficient liquidity is maintained. ",
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"fact-617": {
"value": "E6.2.4 Strategic risk Strategic risks threaten the achievement of the Group strategy through poor strategic decision-making, implementation or response to changing circumstances. The Group recognises that core strategic activity brings with it exposure to strategic risk. However, the Group seeks to proactively review, manage and control these exposures. The Group\u2019s strategy and business plan are exposed to external events that could prevent or impact the achievement of the strategy; events relating to how the strategy and business plan are executed; and events that arise as a consequence of following the specific strategy chosen. The identification and assessment of strategic risks is an integrated part of the Risk Management Framework. Strategic risk should be considered in parallel with the Risk Universe as each of the risks within the Risk Universe can impact the Group\u2019s strategy. A Strategic Risk Policy is maintained and reported against regularly, with a particular focus on risk management, stakeholder management, corporate activity and overall reporting against the Group\u2019s strategic ambitions. ",
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},
"fact-615": {
"value": "E6.2.5 Operational risk Operational risk is the risk of reductions in earnings and/or value, through financial or reputational loss, from inadequate or failed internal processes and systems, or from people related or external events. Operational risk arises due to failures in one or more of the following aspects of our business: \u2022 indirect exposures through outsourcing service providers and suppliers; \u2022 direct exposures through internal practices, actions or omissions; \u2022 external threats from individuals or groups focused on malicious or criminal activities, or on external events occurring which are not within the Group\u2019s control; and \u2022 negligence, mal-practice or failure of employees, or suppliers to follow good practice in delivering operational processes and practices. It is accepted that it is neither possible, appropriate nor cost effective to eliminate operational risks from the business as operational risk is inherent in any operating environment particularly given the regulatory framework under which the Group operates. As such the Group will tolerate a degree of operational risk subject to appropriate and proportionate levels of control around the identification, management and reporting of such risks. A set of operational risk policies are maintained that set out the nature of the operational risk exposure and minimum control standards in place to control the risk. The Group also has a set of operational risk policies that set out the nature of the risk exposure and minimum control standards in place to control the risk.",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfOperationalRisk",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-616": {
"value": "E6.2.6 Customer risk Customer risk is the risk of financial failure, reputational loss, loss of earnings and/or value through inappropriate or poor customer treatment (including poor advice). It can arise as a result of: \u2022 Customer Treatment: Failings in the design and execution of the support and service interactions with customers leads to poor customer outcomes. \u2022 Customer Transformation: The design, governance and oversight of Strategic Customer Transformation Activity in retained functions and service providers, fails to deliver on reasonable customer expectations, taking account of the Phoenix Group customer treatment risk appetites and regulatory requirements. \u2022 Product and Propositions: Products/propositions are not designed and managed appropriates leading to poor customer outcomes. \u2022 Sales and Distribution: Inappropriate (unclear, unfair or misleading) financial promotions, sales practices and/or distribution agreements resulting in poor customer outcomes. The Group\u2019s Conduct Risk Appetite, sets the boundaries within which the Group expect customer outcomes to be managed. In addition, the Group Conduct Strategy, which overarches our Risk Universe and all risk policies is designed to detect where our customers are at risk of poor outcome, minimise conduct risks, and respond with timely and appropriate mitigating actions. The Group also has a suite of customer polices which set out the key customer risks and control objectives in place to mitigate them. The customer risks for the Group are regularly reported to management oversight committees.",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfCustomerRisk",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-573": {
"value": "F. Insurance contracts, investment contracts with DPF and reinsurance F1. Liabilities under insurance contracts Classification of contracts Contracts are classified as insurance contracts where the Group accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain event adversely affects the policyholder. Contracts under which the transfer of insurance risk to the Group from the policyholder is not significant are classified as investment contracts or derivatives and accounted for as financial liabilities (see notes E1 and E3 respectively). Some insurance and investment contracts contain a Discretionary Participation Feature (\u2018DPF\u2019). This feature entitles the policyholder to additional discretionary benefits as a supplement to guaranteed benefits. Investment contracts with a DPF are recognised, measured and presented as insurance contracts. Contracts with reinsurers are assessed to determine whether they contain significant insurance risks. Contracts that do not give rise to a significant transfer of insurance risk to the reinsurer are classified as financial instruments and are valued at fair value through profit or loss. Insurance contracts and investment contracts with DPF Insurance liabilities Insurance contract liabilities for non-participating business, other than unit-linked insurance contracts, are calculated on the basis of current data and assumptions, using either a net premium or gross premium method. Where a gross premium method is used, the liability includes allowance for prudent lapses. Negative policy values are allowed for on individual policies: \u2022 where there are no guaranteed surrender values; or \u2022 in the periods where guaranteed surrender values do not apply even though guaranteed surrender values are applicable after a specified period of time. For unit-linked insurance contract liabilities the provision is based on the fund value, together with an allowance for any excess of future expenses over charges, where appropriate. For participating business, the liabilities under insurance contracts and investment contracts with DPF are calculated in accordance with the following methodology: \u2022 liabilities to policyholders arising from the with-profit business are stated at the amount of the realistic value of the liabilities, adjusted to exclude the owners\u2019 share of projected future bonuses; \u2022 acquisition costs are not deferred; and \u2022 reinsurance recoveries are measured on a basis that is consistent with the valuation of the liability to policyholders to which the reinsurance applies. The With-Profit Benefit Reserve (\u2018WPBR\u2019) for an individual contract is determined by either a retrospective calculation of \u2018accumulated asset share\u2019 approach or by way of a prospective \u2018bonus reserve valuation\u2019 method. The cost of future policy related liabilities is determined using a market consistent approach, mainly based on a stochastic model calibrated to market conditions at the end of the reporting period. Non-market related assumptions (for example, persistency, mortality and expenses) are based on experience adjusted to take into account of future trends. The realistic liability for any contract is equal to the sum of the WPBR and the cost of future policy-related liabilities. The cost of future policy-related liabilities includes the unallocated surplus attributable to policyholders in relation to closed with-profit funds. Where policyholders have valuable guarantees, options or promises in respect of the with-profit business, these costs are generally valued using a stochastic model. In calculating the realistic liabilities, account is taken of the future management actions consistent with those set out in the Principles and Practices of Financial Management (\u2018PPFM\u2019). Standard Life Assurance Limited (\u2018SLAL\u2019), a wholly owned subsidiary of the Group, includes the Heritage With Profits Fund (\u2018HWPF\u2019). In 2006, the Standard Life Assurance Company demutualised. The demutualisation was governed by its Scheme of Demutualisation (\u2018the Scheme\u2019). Under the Scheme substantially all of the assets and liabilities of the Standard Life Assurance Company were transferred to SLAL. The Scheme provides that certain defined cash flows (recourse cash flows) arising in the HWPF on specified blocks of UK and Ireland business, both participating and non-participating, may be transferred out of that fund when they emerge, being transferred to the Shareholder Fund (\u2018SHF\u2019) or the Proprietary Business Fund (\u2018PBF\u2019) of SLAL, and thus accrue to the ultimate benefit of equity holders of the Company. Under the Scheme, such transfers are subject to certain constraints in order to protect policyholders. The Scheme also provides for additional expenses to be charged by the PBF to the HWPF in respect of German branch business in SLAL. Under the realistic valuation, the discounted value of expected future cash flows on participating contracts not reflected in the WPBR is included in the cost of future policy related liabilities (as a reduction where future cash flows are expected to be positive). The discounted value of expected future cash flows on non-participating contracts not reflected in the measure of non-participating liabilities is recognised as a separate asset (where future cashflows are expected to be positive). The Scheme requirement to transfer future recourse cash flows out of the HWPF is recognised as an addition to the cost of future policy related liabilities. The discounted value of expected future cash flows on non-participating contracts can be apportioned between those included in the recourse cash flows and those retained in the HWPF for the benefit of policyholders. Applying the policy noted above for the HWPF: \u2022 The value of participating investment contract liabilities on the consolidated statement of financial position is reduced by future expected (net positive) cash flows arising on participating contracts. \u2022 Future expected cash flows on non-participating contracts are not recognised as an asset of the HWPF on the consolidated statement of financial position. However, future expected cash flows on non-participating contracts that are not recourse cash flows under the Scheme are used to reduce the value of participating insurance and participating investment contract liabilities on the consolidated statement of financial position. Present value of future profits on non-participating business in the with-profit funds For UK with-profit life funds, an amount may be recognised for the present value of future profits (\u2018PVFP\u2019) on non-participating business written in a with-profit fund where the determination of the realistic value of liabilities in that with-profit fund takes account, directly or indirectly, of this value. Where the value of future profits can be shown to be due to policyholders, this amount is recognised as a reduction in the liability rather than as an intangible asset. This is then apportioned between the amounts that have been taken into account in the measurement of liabilities and other amounts which are shown as an adjustment to the unallocated surplus. Where it is not possible to apportion the future profits on this non-participating business to policyholders, the PVFP on this business is recognised as an intangible asset and changes in its value are recorded as a separate item in the consolidated income statement. The value of the PVFP is determined in a manner consistent with the realistic measurement of liabilities. In particular, the methodology and assumptions involve adjustments to reflect risk and uncertainty, are based on current estimates of future experience and current market yields and allow for market consistent valuation of any guarantees or options within the contracts. The value is also adjusted to remove the value of capital backing the non-profit business if this is included in the realistic calculation of PVFP. The principal assumptions used to calculate the PVFP are the same as those used in calculating the insurance contract liabilities given in note F4. Embedded derivatives Embedded derivatives, including options to surrender insurance contracts, that meet the definition of insurance contracts or are closely related to the host insurance contract, are not separately measured. All other embedded derivatives are separated from the host contract and measured at fair value through profit or loss. Liability adequacy At each reporting date, liability adequacy tests are performed to assess whether the insurance contract and investment contract with DPF liabilities are adequate. Current best estimates of future cash flows are compared to the carrying value of the liabilities. Any deficiency is charged to the consolidated income statement. The Group\u2019s accounting policies for insurance contracts meet the minimum specified requirements for liability adequacy testing under IFRS 4 Insurance Contracts, as they allow for current estimates of all contractual cash flows and of related cash flows such as claims handling costs. Cash flows resulting from embedded options and guarantees are also allowed for, with any deficiency being recognised in the consolidated income statement. Reinsurance Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsured policy. Reinsurance ceded The Group cedes insurance risk in the normal course of business. Reinsurance assets represent balances due from reinsurance providers. Reinsurers\u2019 share of insurance contract liabilities is dependent on expected claims and benefits arising under the related reinsured policies. Reinsurance assets are reviewed for impairment at each reporting date, or more frequently, when an indication of impairment arises during the reporting period. Impairment occurs when there is objective evidence, as a result of an event that occurred after initial recognition of the reinsurance asset, that the Group may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurer. The impairment loss is recognised in the consolidated income statement. The reinsurers\u2019 share of investment contract liabilities is measured on a basis that is consistent with the valuation of the liability to policyholders to which the reinsurance applies. Reinsurance premiums payable in respect of certain reinsured individual and group pensions annuity contracts are payable by quarterly instalments and are accounted for on a payable basis. Due to the period of time over which reinsurance premiums are payable under these arrangements, the reinsurance premiums and related payables are discounted to present values using a pre-tax risk-free rate of return. The unwinding of the discount is included as a charge within the consolidated income statement. Further details of net income under arrangements with reinsurers are given in note F3.3. Reinsurance accepted The Group accepts insurance risk under reinsurance contracts. Amounts paid to cedants at the inception of reinsurance contracts in respect of future profits on certain blocks of business are recognised as a reinsurance asset. Changes in the value of the reinsurance assets created from the acceptance of reinsurance are recognised as an expense in the consolidated income statement, consistent with the expected emergence of the economic benefits from the underlying blocks of business. At each reporting date, the Group assesses whether there are any indications of impairment. When indications of impairment exist, an impairment test is carried out by comparing the carrying value of the asset with the estimate of the recoverable amount. When the recoverable amount is less than the carrying value, an impairment charge is recognised as an expense in the consolidated income statement. Reassurance assets are also considered in the liability adequacy test for each reporting period. Consolidated income statement recognition Gross premiums In respect of insurance contracts and investment contracts with DPF, premiums are accounted for on a receivable basis and exclude any taxes or duties based on premiums. Funds at retirement under individual pension contracts converted to annuities with the Group are, for accounting purposes, included in both claims incurred and premiums within gross premiums written. Reinsurance premiums Outward reinsurance premiums are accounted for on a payable basis. Reinsurance premiums include amounts receivable as refunds of premiums in cases where the Group cancels arrangements for the reinsurance of risk to another reinsurer. Gross benefits and claims Claims on insurance contracts and investment contracts with DPF reflect the cost of all claims arising during the period, including policyholder bonuses allocated in anticipation of a bonus declaration. Claims payable on maturity are recognised when the claim becomes due for payment and claims payable on death are recognised on notification. Surrenders are accounted for at the earlier of the payment date or when the policy ceases to be included within insurance contract liabilities. Where claims are payable and the contract remains in-force, the claim instalment is accounted for when due for payment. Claims payable include the costs of settlement. Reinsurance claims are recognised when the related gross insurance claim is recognised according to the terms of the relevant contract. Gains or losses on purchasing reinsurance are recognised in the consolidated income statement at the date of purchase and are not amortised. They are the difference between the premiums ceded to reinsurers and the related change in the reinsurers\u2019 share of insurance contract liabilities. The table below shows a summary of the liabilities under insurance contracts and the related reinsurers\u2019 share included within assets in the statement of consolidated financial position. Gross liabilities 2022 \u00a3m Reinsurers\u2019 share 2022 \u00a3m Gross liabilities 2021 \u00a3m Reinsurers\u2019 share 2021 \u00a3m Life assurance business: Insurance contracts 77,499 6,142 99,169 8,587 Investment contracts with DPF 24,517 \u2013 29,695 \u2013 102,016 6,142 128,864 8,587 Amounts due for settlement after 12 months 89,117 5,194 114,545 7,472 Gross liabilities 2022 \u00a3m Reinsurers\u2019 share 2022 \u00a3m Gross liabilities 2021 \u00a3m Reinsurers\u2019 share 2021 \u00a3m At 1 January 128,864 8,587 133,907 9,542 Premiums 7,094 1,727 7,455 2,079 Claims (9,392) (1,693) (9,656) (1,597) Foreign exchange adjustments 797 5 (1,168) (48) Disposal of Ark Life \u2013 \u2013 (799) (730) Other changes in liabilities 1 (25,347) (2,484) (875) (659) At 31 December 102,016 6,142 128,864 8,587 1 Other changes in liabilities principally comprise changes in economic and non-economic assumptions and experience. F2. Unallocated surplus The unallocated surplus comprises the excess of the assets over the policyholder liabilities of the with-profit business of the Group\u2019s life operations. For the Group\u2019s with-profit funds this represents amounts which have yet to be allocated to owners since the unallocated surplus attributable to policyholders has been included within liabilities under insurance contracts. If the realistic value of liabilities to policyholders exceeds the value of the assets in the with-profit fund, the unallocated surplus is valued at \u00a3nil. In relation to the HWPF, amounts are considered to be allocated to shareholders when they emerge as recourse cash flows within the HWPF. \u2022 The unallocated surplus of the HWPF comprises the value of future recourse cash flows in participating contracts (but not the value of future cash flows on non-participating contracts), the value of future additional expenses to be charged on German branch business and the effect of any measurement differences between the realistic value and the IFRS accounting policy value of all assets and liabilities other than participating contract liabilities recognised in the HWPF. \u2022 The recourse cash flows are recognised as they emerge as an addition to shareholders\u2019 profits if positive or as a deduction if negative. As the additional expenses are charged in respect of the German branch business they are recognised as an addition to equity holders\u2019 profits. 2022 \u00a3m 2021 \u00a3m At 1 January 1,801 1,768 Transfer to consolidated income statement (378) (106) Foreign exchange movements (79) 139 At 31 December 1,344 1,801 ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfInsuranceContractsAndRelatedAssetsLiabilitiesIncomeAndExpense",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-618": {
"value": "F1. Liabilities under insurance contracts Classification of contracts Contracts are classified as insurance contracts where the Group accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain event adversely affects the policyholder. Contracts under which the transfer of insurance risk to the Group from the policyholder is not significant are classified as investment contracts or derivatives and accounted for as financial liabilities (see notes E1 and E3 respectively). Some insurance and investment contracts contain a Discretionary Participation Feature (\u2018DPF\u2019). This feature entitles the policyholder to additional discretionary benefits as a supplement to guaranteed benefits. Investment contracts with a DPF are recognised, measured and presented as insurance contracts. Contracts with reinsurers are assessed to determine whether they contain significant insurance risks. Contracts that do not give rise to a significant transfer of insurance risk to the reinsurer are classified as financial instruments and are valued at fair value through profit or loss. Insurance contracts and investment contracts with DPF Insurance liabilities Insurance contract liabilities for non-participating business, other than unit-linked insurance contracts, are calculated on the basis of current data and assumptions, using either a net premium or gross premium method. Where a gross premium method is used, the liability includes allowance for prudent lapses. Negative policy values are allowed for on individual policies: \u2022 where there are no guaranteed surrender values; or \u2022 in the periods where guaranteed surrender values do not apply even though guaranteed surrender values are applicable after a specified period of time. For unit-linked insurance contract liabilities the provision is based on the fund value, together with an allowance for any excess of future expenses over charges, where appropriate. For participating business, the liabilities under insurance contracts and investment contracts with DPF are calculated in accordance with the following methodology: \u2022 liabilities to policyholders arising from the with-profit business are stated at the amount of the realistic value of the liabilities, adjusted to exclude the owners\u2019 share of projected future bonuses; \u2022 acquisition costs are not deferred; and \u2022 reinsurance recoveries are measured on a basis that is consistent with the valuation of the liability to policyholders to which the reinsurance applies. The With-Profit Benefit Reserve (\u2018WPBR\u2019) for an individual contract is determined by either a retrospective calculation of \u2018accumulated asset share\u2019 approach or by way of a prospective \u2018bonus reserve valuation\u2019 method. The cost of future policy related liabilities is determined using a market consistent approach, mainly based on a stochastic model calibrated to market conditions at the end of the reporting period. Non-market related assumptions (for example, persistency, mortality and expenses) are based on experience adjusted to take into account of future trends. The realistic liability for any contract is equal to the sum of the WPBR and the cost of future policy-related liabilities. The cost of future policy-related liabilities includes the unallocated surplus attributable to policyholders in relation to closed with-profit funds. Where policyholders have valuable guarantees, options or promises in respect of the with-profit business, these costs are generally valued using a stochastic model. In calculating the realistic liabilities, account is taken of the future management actions consistent with those set out in the Principles and Practices of Financial Management (\u2018PPFM\u2019). Standard Life Assurance Limited (\u2018SLAL\u2019), a wholly owned subsidiary of the Group, includes the Heritage With Profits Fund (\u2018HWPF\u2019). In 2006, the Standard Life Assurance Company demutualised. The demutualisation was governed by its Scheme of Demutualisation (\u2018the Scheme\u2019). Under the Scheme substantially all of the assets and liabilities of the Standard Life Assurance Company were transferred to SLAL. The Scheme provides that certain defined cash flows (recourse cash flows) arising in the HWPF on specified blocks of UK and Ireland business, both participating and non-participating, may be transferred out of that fund when they emerge, being transferred to the Shareholder Fund (\u2018SHF\u2019) or the Proprietary Business Fund (\u2018PBF\u2019) of SLAL, and thus accrue to the ultimate benefit of equity holders of the Company. Under the Scheme, such transfers are subject to certain constraints in order to protect policyholders. The Scheme also provides for additional expenses to be charged by the PBF to the HWPF in respect of German branch business in SLAL. Under the realistic valuation, the discounted value of expected future cash flows on participating contracts not reflected in the WPBR is included in the cost of future policy related liabilities (as a reduction where future cash flows are expected to be positive). The discounted value of expected future cash flows on non-participating contracts not reflected in the measure of non-participating liabilities is recognised as a separate asset (where future cash flows are expected to be positive). The Scheme requirement to transfer future recourse cash flows out of the HWPF is recognised as an addition to the cost of future policy related liabilities. The discounted value of expected future cash flows on non-participating contracts can be apportioned between those included in the recourse cash flows and those retained in the HWPF for the benefit of policyholders. Applying the policy noted above for the HWPF: \u2022 The value of participating investment contract liabilities on the consolidated statement of financial position is reduced by future expected (net positive) cash flows arising on participating contracts. \u2022 Future expected cash flows on non-participating contracts are not recognised as an asset of the HWPF on the consolidated statement of financial position. However, future expected cash flows on non-participating contracts that are not recourse cash flows under the Scheme are used to reduce the value of participating insurance and participating investment contract liabilities on the consolidated statement of financial position. Present value of future profits on non-participating business in the with-profit funds For UK with-profit life funds, an amount may be recognised for the present value of future profits (\u2018PVFP\u2019) on non-participating business written in a with-profit fund where the determination of the realistic value of liabilities in that with-profit fund takes account, directly or indirectly, of this value. Where the value of future profits can be shown to be due to policyholders, this amount is recognised as a reduction in the liability rather than as an intangible asset. This is then apportioned between the amounts that have been taken into account in the measurement of liabilities and other amounts which are shown as an adjustment to the unallocated surplus. Where it is not possible to apportion the future profits on this non-participating business to policyholders, the PVFP on this business is recognised as an intangible asset and changes in its value are recorded as a separate item in the consolidated income statement. The value of the PVFP is determined in a manner consistent with the realistic measurement of liabilities. In particular, the methodology and assumptions involve adjustments to reflect risk and uncertainty, are based on current estimates of future experience and current market yields and allow for market consistent valuation of any guarantees or options within the contracts. The value is also adjusted to remove the value of capital backing the non-profit business if this is included in the realistic calculation of PVFP. The principal assumptions used to calculate the PVFP are the same as those used in calculating the insurance contract liabilities given in note F4. Embedded derivatives Embedded derivatives, including options to surrender insurance contracts, that meet the definition of insurance contracts or are closely related to the host insurance contract, are not separately measured. All other embedded derivatives are separated from the host contract and measured at fair value through profit or loss. Liability adequacy At each reporting date, liability adequacy tests are performed to assess whether the insurance contract and investment contract with DPF liabilities are adequate. Current best estimates of future cash flows are compared to the carrying value of the liabilities. Any deficiency is charged to the consolidated income statement. The Group\u2019s accounting policies for insurance contracts meet the minimum specified requirements for liability adequacy testing under IFRS 4 Insurance Contracts, as they allow for current estimates of all contractual cash flows and of related cash flows such as claims handling costs. Cash flows resulting from embedded options and guarantees are also allowed for, with any deficiency being recognised in the consolidated income statement. Reinsurance Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsured policy. Reinsurance ceded The Group cedes insurance risk in the normal course of business. Reinsurance assets represent balances due from reinsurance providers. Reinsurers\u2019 share of insurance contract liabilities is dependent on expected claims and benefits arising under the related reinsured policies. Reinsurance assets are reviewed for impairment at each reporting date, or more frequently, when an indication of impairment arises during the reporting period. Impairment occurs when there is objective evidence, as a result of an event that occurred after initial recognition of the reinsurance asset, that the Group may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurer. The impairment loss is recognised in the consolidated income statement. The reinsurers\u2019 share of investment contract liabilities is measured on a basis that is consistent with the valuation of the liability to policyholders to which the reinsurance applies. Reinsurance premiums payable in respect of certain reinsured individual and group pensions annuity contracts are payable by quarterly instalments and are accounted for on a payable basis. Due to the period of time over which reinsurance premiums are payable under these arrangements, the reinsurance premiums and related payables are discounted to present values using a pre-tax risk-free rate of return. The unwinding of the discount is included as a charge within the consolidated income statement. Further details of net income under arrangements with reinsurers are given in note F3.3. Reinsurance accepted The Group accepts insurance risk under reinsurance contracts. Amounts paid to cedants at the inception of reinsurance contracts in respect of future profits on certain blocks of business are recognised as a reinsurance asset. Changes in the value of the reinsurance assets created from the acceptance of reinsurance are recognised as an expense in the consolidated income statement, consistent with the expected emergence of the economic benefits from the underlying blocks of business. At each reporting date, the Group assesses whether there are any indications of impairment. When indications of impairment exist, an impairment test is carried out by comparing the carrying value of the asset with the estimate of the recoverable amount. When the recoverable amount is less than the carrying value, an impairment charge is recognised as an expense in the consolidated income statement. Reassurance assets are also considered in the liability adequacy test for each reporting period. Consolidated income statement recognition Gross premiums In respect of insurance contracts and investment contracts with DPF, premiums are accounted for on a receivable basis and exclude any taxes or duties based on premiums. Funds at retirement under individual pension contracts converted to annuities with the Group are, for accounting purposes, included in both claims incurred and premiums within gross premiums written. Reinsurance premiums Outward reinsurance premiums are accounted for on a payable basis. Reinsurance premiums include amounts receivable as refunds of premiums in cases where the Group cancels arrangements for the reinsurance of risk to another reinsurer. Gross benefits and claims Claims on insurance contracts and investment contracts with DPF reflect the cost of all claims arising during the period, including policyholder bonuses allocated in anticipation of a bonus declaration. Claims payable on maturity are recognised when the claim becomes due for payment and claims payable on death are recognised on notification. Surrenders are accounted for at the earlier of the payment date or when the policy ceases to be included within insurance contract liabilities. Where claims are payable and the contract remains in-force, the claim instalment is accounted for when due for payment. Claims payable include the costs of settlement. Reinsurance claims are recognised when the related gross insurance claim is recognised according to the terms of the relevant contract. Gains or losses on purchasing reinsurance are recognised in the consolidated income statement at the date of purchase and are not amortised. They are the difference between the premiums ceded to reinsurers and the related change in the reinsurers\u2019 share of insurance contract liabilities. The table below shows a summary of the liabilities under insurance contracts and the related reinsurers\u2019 share included within assets in the statement of consolidated financial position. Gross liabilities 2022 \u00a3m Reinsurers\u2019 share 2022 \u00a3m Gross liabilities 2021 \u00a3m Reinsurers\u2019 share 2021 \u00a3m Life assurance business: Insurance contracts 77,499 6,142 99,169 8,587 Investment contracts with DPF 24,517 \u2013 29,695 \u2013 102,016 6,142 128,864 8,587 Amounts due for settlement after 12 months 89,117 5,194 114,545 7,472 Gross liabilities 2022 \u00a3m Reinsurers\u2019 share 2022 \u00a3m Gross liabilities 2021 \u00a3m Reinsurers\u2019 share 2021 \u00a3m At 1 January 128,864 8,587 133,907 9,542 Premiums 7,094 1,727 7,455 2,079 Claims (9,392) (1,693) (9,656) (1,597) Foreign exchange adjustments 797 5 (1,168) (48) Disposal of Ark Life \u2013 \u2013 (799) (730) Other changes in liabilities 1 (25,347) (2,484) (875) (659) At 31 December 102,016 6,142 128,864 8,587 1 Other changes in liabilities principally comprise changes in economic and non-economic assumptions and experience. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfInsuranceContractsLiabilities",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-663": {
"value": "Classification of contracts Contracts are classified as insurance contracts where the Group accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain event adversely affects the policyholder. Contracts under which the transfer of insurance risk to the Group from the policyholder is not significant are classified as investment contracts or derivatives and accounted for as financial liabilities (see notes E1 and E3 respectively). Some insurance and investment contracts contain a Discretionary Participation Feature (\u2018DPF\u2019). This feature entitles the policyholder to additional discretionary benefits as a supplement to guaranteed benefits. Investment contracts with a DPF are recognised, measured and presented as insurance contracts. Contracts with reinsurers are assessed to determine whether they contain significant insurance risks. Contracts that do not give rise to a significant transfer of insurance risk to the reinsurer are classified as financial instruments and are valued at fair value through profit or loss. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForTheClassificationOfContracts",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-664": {
"value": "Insurance contracts and investment contracts with DPF Insurance liabilities Insurance contract liabilities for non-participating business, other than unit-linked insurance contracts, are calculated on the basis of current data and assumptions, using either a net premium or gross premium method. Where a gross premium method is used, the liability includes allowance for prudent lapses. Negative policy values are allowed for on individual policies: \u2022 where there are no guaranteed surrender values; or \u2022 in the periods where guaranteed surrender values do not apply even though guaranteed surrender values are applicable after a specified period of time. For unit-linked insurance contract liabilities the provision is based on the fund value, together with an allowance for any excess of future expenses over charges, where appropriate. For participating business, the liabilities under insurance contracts and investment contracts with DPF are calculated in accordance with the following methodology: \u2022 liabilities to policyholders arising from the with-profit business are stated at the amount of the realistic value of the liabilities, adjusted to exclude the owners\u2019 share of projected future bonuses; \u2022 acquisition costs are not deferred; and \u2022 reinsurance recoveries are measured on a basis that is consistent with the valuation of the liability to policyholders to which the reinsurance applies. The With-Profit Benefit Reserve (\u2018WPBR\u2019) for an individual contract is determined by either a retrospective calculation of \u2018accumulated asset share\u2019 approach or by way of a prospective \u2018bonus reserve valuation\u2019 method. The cost of future policy related liabilities is determined using a market consistent approach, mainly based on a stochastic model calibrated to market conditions at the end of the reporting period. Non-market related assumptions (for example, persistency, mortality and expenses) are based on experience adjusted to take into account of future trends. The realistic liability for any contract is equal to the sum of the WPBR and the cost of future policy-related liabilities. The cost of future policy-related liabilities includes the unallocated surplus attributable to policyholders in relation to closed with-profit funds. Where policyholders have valuable guarantees, options or promises in respect of the with-profit business, these costs are generally valued using a stochastic model. In calculating the realistic liabilities, account is taken of the future management actions consistent with those set out in the Principles and Practices of Financial Management (\u2018PPFM\u2019). Standard Life Assurance Limited (\u2018SLAL\u2019), a wholly owned subsidiary of the Group, includes the Heritage With Profits Fund (\u2018HWPF\u2019). In 2006, the Standard Life Assurance Company demutualised. The demutualisation was governed by its Scheme of Demutualisation (\u2018the Scheme\u2019). Under the Scheme substantially all of the assets and liabilities of the Standard Life Assurance Company were transferred to SLAL. The Scheme provides that certain defined cash flows (recourse cash flows) arising in the HWPF on specified blocks of UK and Ireland business, both participating and non-participating, may be transferred out of that fund when they emerge, being transferred to the Shareholder Fund (\u2018SHF\u2019) or the Proprietary Business Fund (\u2018PBF\u2019) of SLAL, and thus accrue to the ultimate benefit of equity holders of the Company. Under the Scheme, such transfers are subject to certain constraints in order to protect policyholders. The Scheme also provides for additional expenses to be charged by the PBF to the HWPF in respect of German branch business in SLAL. Under the realistic valuation, the discounted value of expected future cash flows on participating contracts not reflected in the WPBR is included in the cost of future policy related liabilities (as a reduction where future cash flows are expected to be positive). The discounted value of expected future cash flows on non-participating contracts not reflected in the measure of non-participating liabilities is recognised as a separate asset (where future cash flows are expected to be positive). The Scheme requirement to transfer future recourse cash flows out of the HWPF is recognised as an addition to the cost of future policy related liabilities. The discounted value of expected future cash flows on non-participating contracts can be apportioned between those included in the recourse cash flows and those retained in the HWPF for the benefit of policyholders. Applying the policy noted above for the HWPF: \u2022 The value of participating investment contract liabilities on the consolidated statement of financial position is reduced by future expected (net positive) cash flows arising on participating contracts. \u2022 Future expected cash flows on non-participating contracts are not recognised as an asset of the HWPF on the consolidated statement of financial position. However, future expected cash flows on non-participating contracts that are not recourse cash flows under the Scheme are used to reduce the value of participating insurance and participating investment contract liabilities on the consolidated statement of financial position. Present value of future profits on non-participating business in the with-profit funds For UK with-profit life funds, an amount may be recognised for the present value of future profits (\u2018PVFP\u2019) on non-participating business written in a with-profit fund where the determination of the realistic value of liabilities in that with-profit fund takes account, directly or indirectly, of this value. Where the value of future profits can be shown to be due to policyholders, this amount is recognised as a reduction in the liability rather than as an intangible asset. This is then apportioned between the amounts that have been taken into account in the measurement of liabilities and other amounts which are shown as an adjustment to the unallocated surplus. Where it is not possible to apportion the future profits on this non-participating business to policyholders, the PVFP on this business is recognised as an intangible asset and changes in its value are recorded as a separate item in the consolidated income statement. The value of the PVFP is determined in a manner consistent with the realistic measurement of liabilities. In particular, the methodology and assumptions involve adjustments to reflect risk and uncertainty, are based on current estimates of future experience and current market yields and allow for market consistent valuation of any guarantees or options within the contracts. The value is also adjusted to remove the value of capital backing the non-profit business if this is included in the realistic calculation of PVFP. The principal assumptions used to calculate the PVFP are the same as those used in calculating the insurance contract liabilities given in note F4. Embedded derivatives Embedded derivatives, including options to surrender insurance contracts, that meet the definition of insurance contracts or are closely related to the host insurance contract, are not separately measured. All other embedded derivatives are separated from the host contract and measured at fair value through profit or loss. Liability adequacy At each reporting date, liability adequacy tests are performed to assess whether the insurance contract and investment contract with DPF liabilities are adequate. Current best estimates of future cash flows are compared to the carrying value of the liabilities. Any deficiency is charged to the consolidated income statement. The Group\u2019s accounting policies for insurance contracts meet the minimum specified requirements for liability adequacy testing under IFRS 4 Insurance Contracts, as they allow for current estimates of all contractual cash flows and of related cash flows such as claims handling costs. Cash flows resulting from embedded options and guarantees are also allowed for, with any deficiency being recognised in the consolidated income statement. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForInsuranceContractsAndInvestmentContractsWithDPF",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-665": {
"value": "Reinsurance Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsured policy. Reinsurance ceded The Group cedes insurance risk in the normal course of business. Reinsurance assets represent balances due from reinsurance providers. Reinsurers\u2019 share of insurance contract liabilities is dependent on expected claims and benefits arising under the related reinsured policies. Reinsurance assets are reviewed for impairment at each reporting date, or more frequently, when an indication of impairment arises during the reporting period. Impairment occurs when there is objective evidence, as a result of an event that occurred after initial recognition of the reinsurance asset, that the Group may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurer. The impairment loss is recognised in the consolidated income statement. The reinsurers\u2019 share of investment contract liabilities is measured on a basis that is consistent with the valuation of the liability to policyholders to which the reinsurance applies. Reinsurance premiums payable in respect of certain reinsured individual and group pensions annuity contracts are payable by quarterly instalments and are accounted for on a payable basis. Due to the period of time over which reinsurance premiums are payable under these arrangements, the reinsurance premiums and related payables are discounted to present values using a pre-tax risk-free rate of return. The unwinding of the discount is included as a charge within the consolidated income statement. Further details of net income under arrangements with reinsurers are given in note F3.3. Reinsurance accepted The Group accepts insurance risk under reinsurance contracts. Amounts paid to cedants at the inception of reinsurance contracts in respect of future profits on certain blocks of business are recognised as a reinsurance asset. Changes in the value of the reinsurance assets created from the acceptance of reinsurance are recognised as an expense in the consolidated income statement, consistent with the expected emergence of the economic benefits from the underlying blocks of business. At each reporting date, the Group assesses whether there are any indications of impairment. When indications of impairment exist, an impairment test is carried out by comparing the carrying value of the asset with the estimate of the recoverable amount. When the recoverable amount is less than the carrying value, an impairment charge is recognised as an expense in the consolidated income statement. Reassurance assets are also considered in the liability adequacy test for each reporting period. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForReinsurance",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-666": {
"value": "Consolidated income statement recognition Gross premiums In respect of insurance contracts and investment contracts with DPF, premiums are accounted for on a receivable basis and exclude any taxes or duties based on premiums. Funds at retirement under individual pension contracts converted to annuities with the Group are, for accounting purposes, included in both claims incurred and premiums within gross premiums written. Reinsurance premiums Outward reinsurance premiums are accounted for on a payable basis. Reinsurance premiums include amounts receivable as refunds of premiums in cases where the Group cancels arrangements for the reinsurance of risk to another reinsurer. Gross benefits and claims Claims on insurance contracts and investment contracts with DPF reflect the cost of all claims arising during the period, including policyholder bonuses allocated in anticipation of a bonus declaration. Claims payable on maturity are recognised when the claim becomes due for payment and claims payable on death are recognised on notification. Surrenders are accounted for at the earlier of the payment date or when the policy ceases to be included within insurance contract liabilities. Where claims are payable and the contract remains in-force, the claim instalment is accounted for when due for payment. Claims payable include the costs of settlement. Reinsurance claims are recognised when the related gross insurance claim is recognised according to the terms of the relevant contract. Gains or losses on purchasing reinsurance are recognised in the consolidated income statement at the date of purchase and are not amortised. They are the difference between the premiums ceded to reinsurers and the related change in the reinsurers\u2019 share of insurance contract liabilities. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForTheRecognitionOfPremiumsBenefitsAndClaimsInTheIncomeStatement",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-619": {
"value": "F2. Unallocated surplus The unallocated surplus comprises the excess of the assets over the policyholder liabilities of the with-profit business of the Group\u2019s life operations. For the Group\u2019s with-profit funds this represents amounts which have yet to be allocated to owners since the unallocated surplus attributable to policyholders has been included within liabilities under insurance contracts. If the realistic value of liabilities to policyholders exceeds the value of the assets in the with-profit fund, the unallocated surplus is valued at \u00a3nil. In relation to the HWPF, amounts are considered to be allocated to shareholders when they emerge as recourse cash flows within the HWPF. \u2022 The unallocated surplus of the HWPF comprises the value of future recourse cash flows in participating contracts (but not the value of future cash flows on non-participating contracts), the value of future additional expenses to be charged on German branch business and the effect of any measurement differences between the realistic value and the IFRS accounting policy value of all assets and liabilities other than participating contract liabilities recognised in the HWPF. \u2022 The recourse cash flows are recognised as they emerge as an addition to shareholders\u2019 profits if positive or as a deduction if negative. As the additional expenses are charged in respect of the German branch business they are recognised as an addition to equity holders\u2019 profits. 2022 \u00a3m 2021 \u00a3m At 1 January 1,801 1,768 Transfer to consolidated income statement (378) (106) Foreign exchange movements (79) 139 At 31 December 1,344 1,801 ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfUnallocatedSurplus",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-574": {
"value": "F3. Reinsurance This section includes disclosures in relation to reinsurance. Further disclosures and accounting policies relating to reinsurance are included in note F1. F3.1 Premiums ceded to reinsurers Premiums ceded to reinsurers during the period were \u00a31,727 million (2021: \u00a32,079 million). F3.2 Collateral arrangements It is the Group\u2019s practice to obtain collateral to mitigate the counterparty risk related to reinsurance transactions usually in the form of cash or marketable financial instruments. Where the Group receives collateral in the form of marketable financial instruments which it is not permitted to sell or re-pledge except in the case of default, it is not recognised in the statement of consolidated financial position. The fair value of financial assets accepted as collateral for reinsurance transactions but not recognised in the statement of consolidated financial position amounts to \u00a34,002 million (2021: \u00a34,882 million). Where the Group receives collateral on reinsurance transactions in the form of cash it is recognised in the statement of consolidated financial position along with a corresponding liability to repay the amount of collateral received, disclosed as \u2018Deposits received from reinsurers\u2019. Where there is interest payable on such collateral, it is recognised within \u2018Net income under arrangements with reinsurers\u2019 (see note F3.3). The amounts recognised as financial assets and liabilities from cash collateral received at 31 December 2022 are set out below. Reinsurance transactions 2022 \u00a3m 2021 \u00a3m Financial assets 267 373 Financial liabilities 267 373 F3.3 Net income under arrangements with reinsurers The Group has reinsured the longevity and investment risk related to a portfolio of annuity contracts held within the HWPF. At inception of the reinsurance contract the reinsurer was required to deposit an amount equal to the reinsurance premium with the Group. The amount recognised in the statement of consolidated financial position in respect of this deposit is \u00a32.3 billion as at 31 December 2022 (31 December 2021: \u00a33.2 billion). Interest is payable to the reinsurer on the deposit at a floating rate. The Group maintains a ring fenced pool of assets to back this deposit liability. Annuity payments under the reinsured contracts are made by the Group from the ring fenced assets and the deposit liability is reduced by the amount of these payments. Periodically the Group is required to pay to the reinsurer or receive from the reinsurer Premium Adjustments defined as the difference between the fair value of the ring fenced assets and the deposit amount, such that the deposit amount equals the fair value of the ring fenced assets. This has the effect of ensuring that the investment risk on the ring fenced pool of assets falls on the reinsurer. The investment return on the ring fenced assets included within net investment return in the consolidated income statement is equal to an equivalent amount recognised in net income under arrangements with reinsurers. 2022 \u00a3m 2021 \u00a3m Interest payable on deposits from reinsurers (46) (11) Premium adjustments 473 33 Net income under arrangements with reinsurers 427 22 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfReinsuranceExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-620": {
"value": "F3.1 Premiums ceded to reinsurers Premiums ceded to reinsurers during the period were \u00a31,727 million (2021: \u00a32,079 million). ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfPremiumsCededToReinsurers",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-621": {
"value": "F3.2 Collateral arrangements It is the Group\u2019s practice to obtain collateral to mitigate the counterparty risk related to reinsurance transactions usually in the form of cash or marketable financial instruments. Where the Group receives collateral in the form of marketable financial instruments which it is not permitted to sell or re-pledge except in the case of default, it is not recognised in the statement of consolidated financial position. The fair value of financial assets accepted as collateral for reinsurance transactions but not recognised in the statement of consolidated financial position amounts to \u00a34,002 million (2021: \u00a34,882 million). Where the Group receives collateral on reinsurance transactions in the form of cash it is recognised in the statement of consolidated financial position along with a corresponding liability to repay the amount of collateral received, disclosed as \u2018Deposits received from reinsurers\u2019. Where there is interest payable on such collateral, it is recognised within \u2018Net income under arrangements with reinsurers\u2019 (see note F3.3). The amounts recognised as financial assets and liabilities from cash collateral received at 31 December 2022 are set out below. Reinsurance transactions 2022 \u00a3m 2021 \u00a3m Financial assets 267 373 Financial liabilities 267 373 ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfCollateralArrangements",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-622": {
"value": "F3.3 Net income under arrangements with reinsurers The Group has reinsured the longevity and investment risk related to a portfolio of annuity contracts held within the HWPF. At inception of the reinsurance contract the reinsurer was required to deposit an amount equal to the reinsurance premium with the Group. The amount recognised in the statement of consolidated financial position in respect of this deposit is \u00a32.3 billion as at 31 December 2022 (31 December 2021: \u00a33.2 billion). Interest is payable to the reinsurer on the deposit at a floating rate. The Group maintains a ring fenced pool of assets to back this deposit liability. Annuity payments under the reinsured contracts are made by the Group from the ring fenced assets and the deposit liability is reduced by the amount of these payments. Periodically the Group is required to pay to the reinsurer or receive from the reinsurer Premium Adjustments defined as the difference between the fair value of the ring fenced assets and the deposit amount, such that the deposit amount equals the fair value of the ring fenced assets. This has the effect of ensuring that the investment risk on the ring fenced pool of assets falls on the reinsurer. The investment return on the ring fenced assets included within net investment return in the consolidated income statement is equal to an equivalent amount recognised in net income under arrangements with reinsurers. 2022 \u00a3m 2021 \u00a3m Interest payable on deposits from reinsurers (46) (11) Premium adjustments 473 33 Net income under arrangements with reinsurers 427 22",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfNetIncomeUnderArrangementsWithReinsurers",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-575": {
"value": "F4. Risk management \u2013 insurance risk This note forms one part of the risk management disclosures in the consolidated financial statements. An overview of the Group\u2019s approach to risk management is outlined in note I3 and the Group\u2019s management of financial and other risks is detailed in note E6. Insurance risk refers to the risk of reductions in earnings and/or value, through financial or reputational loss, due to fluctuations in the timing, frequency and severity of insured/underwritten events and to fluctuations in the timing and amount of claim settlements. This includes fluctuations in profits due to customer behaviour. The Life businesses are exposed to the following elements of insurance risk: Mortality higher than expected death claims on assurance products or lower than expected improvements in mortality; Longevity lower than expected number of deaths experienced on annuity products or greater than expected improvements in annuitant mortality; Morbidity/Disability higher than expected number of inceptions on critical illness or income protection policies and lower than expected termination rates on income protection policies; Expenses unexpected timing or value of expenses incurred; Persistency adverse movement in surrender rates, premium paying rates, premium indexation rates, cash withdrawal/drawdown rates, GAO surrender rates, GAO take-up rates, policyholder retirement dates, propensity to commute benefits, transfer out rates or the occurrence of a mass lapse event leading to losses; New business pricing inappropriate pricing of new business that is not in line with the underlying risk factors for that business. Objectives and policies for mitigating insurance risk Insurance risks are managed by monitoring risk exposure against pre-defined appetite limits. If a risk is moving out of appetite, the Group can choose to mitigate it via reinsurance in the case of longevity, mortality and morbidity risks, or by taking other risk reducing actions. This is supported by additional methods to assess and monitor insurance risk exposures for both individual types of risks insured and overall risks. These methods include internal risk measurement models, experience analyses, external data comparisons, sensitivity analyses, scenario analyses and stress testing. Assumptions that are deemed to be financially significant are reviewed at least annually for pricing and reporting purposes. The profitability of the run-off of the Heritage business within the Group depends, to a significant extent, on the values of claims paid in the future relative to the assets accumulated to the date of claim. Typically, over the lifetime of a contract, premiums and investment returns exceed claim costs in the early years and it is necessary to set aside these amounts to meet future obligations. The amount of such future obligations is assessed on actuarial principles by reference to assumptions about the development of financial and insurance risks. It is therefore necessary for the Directors of each life company to make decisions, based on actuarial advice, which ensure an appropriate accumulation of assets relative to liabilities. These decisions include investment policy, bonus policy and, where discretion exists, the level of payments on early termination. For the Group\u2019s Open business, longevity risk exposures continue to increase as a result of the Bulk Purchase Annuity deals it has successfully acquired, however the vast majority of these exposures are reinsured to third parties. New business growth driven by product segments such as Workplace unit- linked pensions exposes the Group to persistency and expense risks. There remains uncertainty around future demographic experience as a result of COVID-19, where little weight has been given to experience for most products over the pandemic given its anomalous nature, in addition to the implications arising from the cost of living crisis, as outlined in page 66 \u2013 Principal Risks and Uncertainties section of the Annual Report and Accounts. Demographic experience and the latest views on future trends continue to be considered in regular assumption reviews although, for most products, experience over the COVID-19 pandemic has still been given little weight given its anomalous nature. Sensitivities Insurance liabilities are sensitive to changes in risk variables, such as prevailing market interest rates, currency rates and equity prices, since these variations alter the value of the financial assets held to meet obligations arising from insurance contracts and changes in investment conditions also have an impact on the value of insurance liabilities themselves. Additionally, insurance liabilities are sensitive to the assumptions which have been applied in their calculation, such as mortality and lapse rates. Sometimes allowance must also be made for the effect on future assumptions of management or policyholder actions in certain economic scenarios. This could lead to changes in assumed asset mix or future bonus rates. The most significant non economic sensitivities arise from mortality, longevity and lapse risk. A decrease of 5% in assurance mortality, with all other variables held constant, would result in an increase in the profit after tax in respect of a full year, and an increase in equity of \u00a360 million (2021: \u00a370 million). An increase of 5% in assurance mortality, with all other variables held constant, would result in a decrease in the profit after tax in respect of a full year, and a decrease in equity of \u00a361 million (2021: \u00a370 million). A decrease of 5% in annuitant longevity, with all other variables held constant, would result in an increase in the profit after tax in respect of a full year, and an increase in equity of 296 million (2021: \u00a3517 million). An increase of 5% in annuitant longevity, with all other variables held constant, would result in a decrease in the profit after tax in respect of a full year, and a decrease in equity of \u00a3290 million (2021: \u00a3530 million). A decrease of 10% in lapse rates, with all other variables held constant, would result in a decrease in the profit after tax in respect of a full year, and a decrease in equity of \u00a347 million (2021: \u00a327 million). An increase of 10% in lapse rates, with all other variables held constant, would result in an increase in the profit after tax in respect of a full year, and an increase in equity of \u00a348 million (2021: \u00a327 million). F4.1 Assumptions For participating business which is with-profit business (insurance and investment contracts with DPF), the insurance contract liability is calculated on a realistic basis, adjusted to exclude the shareholders\u2019 share of future bonuses and the associated tax liability. This is a market consistent valuation, which involves placing a value on liabilities similar to the market value of assets with similar cash flow patterns. The non-participating insurance contract liabilities are determined using either a net premium or gross premium valuation method. The assumptions used to determine the liabilities, under these valuation methods are updated at each reporting date to reflect recent experience. Material judgement is required in calculating these liabilities and, in particular, in the choice of assumptions about which there is uncertainty over future experience. The principal assumptions are as follows: Discount rates The Group discounts participating and non-participating insurance contract liabilities at a risk-free rate derived from the swap yield curve, plus an illiquidity premium of 36bps (2021: 36bps). For certain non-participating insurance contract liabilities (e.g. annuities), the Group makes a further explicit adjustment to the risk-free rate to reflect illiquidity in respect of the assets backing those liabilities. Expenses Insurance contract liabilities include an allowance for the best estimate of future expenses associated with the administration of in-force policies. This requires the allocation of the Group\u2019s future expenses between those that relate to the administration of in-force policies, those attributable to the acquisition of new business and other costs, such as corporate costs. There is a level of judgement applied in the analysis that supports this allocation. Additionally, judgement is applied in the determination of the projected costs of the Group, in particular where those projections include the impact of transition and integration activity. Expenses are assumed to increase at either the rate of increase in the Retail Price Index (\u2018RPI\u2019), or a rate derived from the UK inflation swaps curve, plus fixed margins in accordance with the various management service agreements (\u2018MSAs\u2019) the Group has in place with outsource partners. For with-profit business the rate of RPI inflation is determined within each stochastic scenario. For other business it is based on the Bank of England inflation spot curve. For MSAs with contractual increases set by reference to national average earnings inflation, this is approximated as RPI inflation or RPI inflation plus 1%. In instances in which inflation risk is not mitigated, a further margin for adverse deviations may then be added to the rate of expense inflation. Mortality and longevity rates Mortality rates are based on company experience and published tables, adjusted appropriately to take account of changes in the underlying population mortality since the table was published, company experience and forecast changes in future mortality. Where appropriate, a margin is added to assurance mortality rates to allow for adverse future deviations. Annuitant mortality rates are adjusted to make allowance for future improvements in pensioner longevity. Lapse and surrender rates (persistency) The assumed rates for surrender and voluntary premium discontinuance depend on the length of time a policy has been in force and the relevant company experience. Surrender or voluntary premium discontinuances are only assumed for realistic basis funds. Withdrawal rates used in the valuation of with-profit policies are based on observed experience and adjusted when it is considered that future policyholder behaviour will be influenced by different considerations than in the past. In particular, it is assumed that withdrawal rates for unitised with-profit contracts will be higher on policy anniversaries on which Market Value Adjustments do not apply. Discretionary participating bonus rate For realistic basis funds, the regular bonus rates assumed in each scenario are determined in accordance with each company\u2019s PPFM. Final bonuses are assumed at a level such that maturity payments will equal asset shares subject to smoothing rules set out in the PPFM and the value of guaranteed benefits. Policyholder options and guarantees Some of the Group\u2019s products give potentially valuable guarantees, or give options to change policy benefits which can be exercised at the policyholders\u2019 discretion. These products are described below. Most with-profit contracts give a guaranteed minimum payment on a specified date or range of dates or on death if before that date or dates. For pensions contracts, the specified date is the policyholder\u2019s chosen retirement date or a range of dates around that date. For endowment contracts, it is the maturity date of the contract. For with-profit bonds it is often a specified anniversary of commencement, in some cases with further dates thereafter. Annual bonuses when added to with-profit contracts usually increase the guaranteed amount. There are guaranteed surrender values on a small number of older contracts. Some pensions contracts include guaranteed annuity options. The total amount provided in the with-profit and non-profit funds in respect of the future costs of guaranteed annuity options are \u00a3905 million (2021: \u00a31,968 million) and \u00a359 million (2021: \u00a3111 million) respectively. In common with other life companies in the UK which have written pension transfer and opt-out business, the Group has set up provisions for the review and possible redress relating to personal pension policies. These provisions, which have been calculated from data derived from detailed file reviews of specific cases and using a certainty equivalent approach, which give a result very similar to a market consistent valuation, are included in liabilities arising under insurance contracts. The total amount provided in the with-profit funds and non-profit funds in respect of the review and possible redress relating to pension policies, including associated costs, are \u00a3197 million (2021: \u00a3349 million) and \u00a32 million (2021: \u00a36 million) respectively. With-profit deferred annuities participate in profits only up to the date of retirement. At retirement, a guaranteed cash option allows the policyholder to commute the annuity benefit into cash on guaranteed terms. Demographic prudence margin For non-participating insurance contract liabilities, the Group sets assumptions at management\u2019s best estimates and recognises an explicit margin for demographic risks. For participating business in realistic basis funds, the assumptions about future demographic trends represent \u2018best estimates\u2019. Assumption changes During the year a number of changes were made to assumptions to reflect changes in expected experience or to reflect transition activity. The impact of material changes during the year was as follows: (Decrease)/increase in insurance liabilities 2022 \u00a3m (Decrease)/increase in insurance liabilities 2021 \u00a3m Change in longevity assumptions (135) (272) Change in persistency assumptions 9 (12) Change in mortality assumptions 5 (7) Change in expenses assumptions 200 275 Change in other assumptions (376) \u2013 2022: The \u00a3135 million positive impact of changes in longevity assumptions reflects updates to base and improvement assumptions to reflect latest experience analyses and the most recent Continuous Mortality Investigation 2021 projection tables. The \u00a39 million and \u00a35 million negative impact of changes in persistency and mortality assumptions respectively reflects the results of the latest experience investigations. The \u00a3200 million negative impact from changes in expense assumptions includes an increase in reserves of \u00a377 million in respect of the anticipated costs associated with the implementation of IFRS 17 and \u00a3102 million in respect of the delivery of the Group Target Operating Model for IT and Operations. To the extent that the recognition criteria have been met, the Group has also recognised accounting provisions in respect of the anticipated costs of restructuring activity (see note G7 for further details). Other assumptions includes a \u00a3329 million positive impact of harmonising the calibration of prudential margins included within liabilities under insurance contracts in the ReAssure life companies with the rest of the Group and a \u00a347 million positive impact from updating the married rates assumption in respect of reversionary annuities. 2021: The \u00a3272 million positive impact of changes in longevity assumptions reflects updates to base and improvement assumptions to reflect latest experience analyses and the most recent Continuous Mortality Investigation 2020 projection tables. The \u00a312 million and \u00a37 million positive impact of changes in persistency and mortality assumptions respectively reflects the results of the latest experience investigations. The \u00a3275 million negative impact of changes in expense assumptions principally reflects the impact of investment in the Group\u2019s growth agenda on the maintenance cost base, including the development of capabilities within the Group\u2019s Open business, asset management capabilities and within certain Group functions. The increase in reserves also reflects provision for the anticipated costs associated with the implementation of IFRS 17 and delivery of the Group Target Operating Model for IT and Operations. F4.2 Managing product risk The following sections give an assessment of the risks associated with the Group\u2019s main life assurance products and the ways in which the Group manages those risks. Gross 1 Reinsurance 2022 Insurance contracts \u00a3m Investment contracts with DPF \u00a3m Insurance contracts \u00a3m Investment contracts with DPF \u00a3m With-profit funds: Pensions: Deferred annuities \u2013 with guarantees 5,627 36 413 \u2013 Deferred annuities \u2013 without guarantees 1,445 289 \u2013 \u2013 Immediate annuities 4,968 \u2013 2,881 \u2013 Unitised with-profit 10,438 22,337 \u2013 \u2013 Total pensions 22,478 22,662 3,294 \u2013 Life: Immediate annuities 261 \u2013 1 \u2013 Unitised with-profit 7,687 930 \u2013 \u2013 Life with-profit 1,681 \u2013 9 \u2013 Total life 9,629 930 10 \u2013 Other 1,020 (1) 159 \u2013 Non-profit funds: Deferred annuities \u2013 with guarantees 310 \u2013 \u2013 \u2013 Deferred annuities \u2013 without guarantees 2,851 \u2013 156 \u2013 Immediate annuities 27,279 \u2013 2,137 \u2013 Protection 1,018 \u2013 439 \u2013 Unit-linked 13,096 921 28 \u2013 Other (182) 5 (81) \u2013 77,499 24,517 6,142 \u2013 1 \u00a311,753 million (2021: \u00a39,864 million) of liabilities are subject to longevity swap arrangements Gross Reinsurance 2021 Insurance contracts \u00a3m Investment contracts with DPF \u00a3m Insurance contracts \u00a3m Investment contracts with DPF \u00a3m With-profit funds: Pensions: Deferred annuities \u2013 with guarantees 8,746 53 728 \u2013 Deferred annuities \u2013 without guarantees 1,753 341 \u2013 \u2013 Immediate annuities 6,506 \u2013 3,787 \u2013 Unitised with-profit 13,344 27,078 \u2013 \u2013 Total pensions 30,349 27,472 4,515 \u2013 Life: Immediate annuities 348 \u2013 1 \u2013 Unitised with-profit 9,364 1,137 \u2013 \u2013 Life with-profit 2,166 \u2013 6 \u2013 Total life 11,878 1,137 7 \u2013 Other 1,245 (1) 192 \u2013 Non-profit funds: Deferred annuities \u2013 with guarantees 555 \u2013 \u2013 Deferred annuities \u2013 without guarantees 983 \u2013 158 \u2013 Immediate annuities 37,329 \u2013 2,885 \u2013 Protection 2,076 \u2013 876 \u2013 Unit-linked 14,891 1,084 22 \u2013 Other (137) 3 (68) \u2013 99,169 29,695 8,587 \u2013 With-profit fund (unitised and traditional) The Group operates a number of with-profit funds in which the with-profit policyholders benefit from a discretionary annual bonus (guaranteed once added in most cases) and a discretionary final bonus. Non-participating business is also written in some of the with-profit funds and some of the funds may include immediate annuities and deferred annuities with Guaranteed Annuity Rates (\u2018GAR\u2019). The investment strategy of each fund differs, but is broadly to invest in a mixture of fixed interest investments and equities and/or property and other asset classes in such proportions as is appropriate to the investment risk exposure of the fund and its capital resources. The Group has significant discretion regarding investment policy, bonus policy and early termination values. The process for exercising discretion in the management of the with-profit funds is set out in the PPFM for each with-profit fund and is overseen by with-profit committees. Advice is also taken from the with-profit actuary of each with-profit fund. Compliance with the PPFM is reviewed annually and reported to the PRA, Financial Conduct Authority (\u2018FCA\u2019) and policyholders. The bonuses are designed to distribute to policyholders a fair share of the return on the assets in the with-profit funds together with other elements of the experience of the fund. The shareholders of the Group are entitled to receive one-ninth of the cost of bonuses declared for some funds and \u00a3nil for others. For the HWPF, under the Scheme, shareholders are entitled to receive certain defined cash flows arising on specified blocks of UK and Irish business. Unitised and traditional with-profit policies are exposed to equivalent risks, the main difference being that unitised with-profit policies purchase notional units in a with-profit fund whereas traditional with-profit policies do not. Benefit payments for unitised policies are then dependent on unit prices at the time of a claim, although charges may be applied. A unitised with-profit fund price is typically guaranteed not to fall and increases in line with any discretionary bonus payments over the course of one year. Deferred annuities Deferred annuity policies are written to provide either a cash benefit at retirement, which the policyholder can use to buy an annuity on the terms then applicable, or an annuity payable from retirement. The policies contain an element of guarantee expressed in the form that the contract is written in, i.e. to provide cash or an annuity. Deferred annuity policies written to provide a cash benefit may also contain an option to convert the cash benefit to an annuity benefit on guaranteed terms; these are known as GAR policies. Deferred annuity policies written to provide an annuity benefit may also contain an option to convert the annuity benefit into cash benefits on guaranteed terms; these are known as Guaranteed Cash Option (\u2018GCO\u2019) policies. In addition, certain unit prices in the HWPF are guaranteed not to decrease. Whilst there has been an increase in interest rates recently, long-term rates remain relatively low compared to historical levels and life expectancy has increased more rapidly than originally anticipated. The guaranteed terms on GAR policies are more favourable than the annuity rates currently available in the market available for cash benefits. The guaranteed terms on GCO policies are currently not valuable. Deferred annuity policies which are written to provide annuity benefits are managed in a similar manner to immediate annuities and are exposed to the same risks. The option provisions on GAR policies are particularly sensitive to downward movements in interest rates, increasing life expectancy and the proportion of customers exercising their option. Adverse movements in these factors could lead to a requirement to increase reserves which could adversely impact profit and potentially require additional capital. In order to address the interest rate risk (but not the risk of increasing life expectancy or changing customer behaviour with regard to exercise of the option), insurance subsidiaries within the Group have purchased derivatives that provide protection against an increase in liabilities and have thus reduced the sensitivity of profit to movements in interest rates (see note E6.2.2). The Group seeks to manage this risk in accordance with both the terms of the issued policies and the interests of customers, and has obtained external advice supporting the manner in which it operates the long-term funds in this respect. Immediate annuities This type of annuity is purchased with a single premium at the outset, and is paid to the policyholder for the remainder of their lifetime. Payments may also continue for the benefit of a surviving spouse or partner after the annuitant\u2019s death. Annuities may be level, or escalate at a fixed rate, or may escalate in line with a price index and may be payable for a minimum period irrespective of whether the policyholder remains alive. The main risks associated with this product are longevity and investment risks. Longevity risk arises where the annuities are paid for the lifetime of the policyholder, and is managed through the initial pricing of the annuity and through reinsurance (appropriately collateralised) or transfer of existing liabilities. Annuities may also be a partial \u2018natural hedge\u2019 against losses incurred in protection business in the event of increased mortality (and vice versa) although the extent to which this occurs will depend on the similarity of the demographic profile of each book of business. In addition, the Group has in place longevity swaps that provide downside protection over longevity risk. The pricing assumption for mortality risk is based on both historic internal information and externally-generated information on mortality experience, including allowances for future mortality improvements. Pricing will also include a contingency margin for adverse deviations in assumptions. Market and credit risk is influenced by the extent to which the cash flows under the contracts have been matched by suitable assets which is managed under the ALM framework. Asset/liability modelling is used to monitor this position on a regular basis. Protection These contracts are typically secured by the payment of a regular premium payable for a period of years providing benefits payable on certain events occurring within the period. The benefits may be a single lump sum or a series of payments and may be payable on death, serious illness or sickness. The main risk associated with this product is the claims experience and this risk is managed through the initial pricing of the policy (based on actuarial principles), the use of reinsurance and a clear process for administering claims. Market and credit risk is influenced by the extent to which the cash flows under the contracts have been matched by suitable assets which is managed under the ALM framework. Asset/liability modelling is used to monitor this position on a regular basis. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfRiskManagementInsuranceRisk",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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},
"fact-623": {
"value": "Objectives and policies for mitigating insurance risk Insurance risks are managed by monitoring risk exposure against pre-defined appetite limits. If a risk is moving out of appetite, the Group can choose to mitigate it via reinsurance in the case of longevity, mortality and morbidity risks, or by taking other risk reducing actions. This is supported by additional methods to assess and monitor insurance risk exposures for both individual types of risks insured and overall risks. These methods include internal risk measurement models, experience analyses, external data comparisons, sensitivity analyses, scenario analyses and stress testing. Assumptions that are deemed to be financially significant are reviewed at least annually for pricing and reporting purposes. The profitability of the run-off of the Heritage business within the Group depends, to a significant extent, on the values of claims paid in the future relative to the assets accumulated to the date of claim. Typically, over the lifetime of a contract, premiums and investment returns exceed claim costs in the early years and it is necessary to set aside these amounts to meet future obligations. The amount of such future obligations is assessed on actuarial principles by reference to assumptions about the development of financial and insurance risks. It is therefore necessary for the Directors of each life company to make decisions, based on actuarial advice, which ensure an appropriate accumulation of assets relative to liabilities. These decisions include investment policy, bonus policy and, where discretion exists, the level of payments on early termination. For the Group\u2019s Open business, longevity risk exposures continue to increase as a result of the Bulk Purchase Annuity deals it has successfully acquired, however the vast majority of these exposures are reinsured to third parties. New business growth driven by product segments such as Workplace unit- linked pensions exposes the Group to persistency and expense risks. There remains uncertainty around future demographic experience as a result of COVID-19, where little weight has been given to experience for most products over the pandemic given its anomalous nature, in addition to the implications arising from the cost of living crisis, as outlined in page 66 \u2013 Principal Risks and Uncertainties section of the Annual Report and Accounts. Demographic experience and the latest views on future trends continue to be considered in regular assumption reviews although, for most products, experience over the COVID-19 pandemic has still been given little weight given its anomalous nature.",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfObjectivesAndPoliciesForMitigatingInsuranceRisk",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-624": {
"value": "Sensitivities Insurance liabilities are sensitive to changes in risk variables, such as prevailing market interest rates, currency rates and equity prices, since these variations alter the value of the financial assets held to meet obligations arising from insurance contracts and changes in investment conditions also have an impact on the value of insurance liabilities themselves. Additionally, insurance liabilities are sensitive to the assumptions which have been applied in their calculation, such as mortality and lapse rates. Sometimes allowance must also be made for the effect on future assumptions of management or policyholder actions in certain economic scenarios. This could lead to changes in assumed asset mix or future bonus rates. The most significant non economic sensitivities arise from mortality, longevity and lapse risk. A decrease of 5% in assurance mortality, with all other variables held constant, would result in an increase in the profit after tax in respect of a full year, and an increase in equity of \u00a360 million (2021: \u00a370 million). An increase of 5% in assurance mortality, with all other variables held constant, would result in a decrease in the profit after tax in respect of a full year, and a decrease in equity of \u00a361 million (2021: \u00a370 million). A decrease of 5% in annuitant longevity, with all other variables held constant, would result in an increase in the profit after tax in respect of a full year, and an increase in equity of 296 million (2021: \u00a3517 million). An increase of 5% in annuitant longevity, with all other variables held constant, would result in a decrease in the profit after tax in respect of a full year, and a decrease in equity of \u00a3290 million (2021: \u00a3530 million). A decrease of 10% in lapse rates, with all other variables held constant, would result in a decrease in the profit after tax in respect of a full year, and a decrease in equity of \u00a347 million (2021: \u00a327 million). An increase of 10% in lapse rates, with all other variables held constant, would result in an increase in the profit after tax in respect of a full year, and an increase in equity of \u00a348 million (2021: \u00a327 million). ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfSensitivitiesInsuranceRisk",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"fact-625": {
"value": "F4.1 Assumptions For participating business which is with-profit business (insurance and investment contracts with DPF), the insurance contract liability is calculated on a realistic basis, adjusted to exclude the shareholders\u2019 share of future bonuses and the associated tax liability. This is a market consistent valuation, which involves placing a value on liabilities similar to the market value of assets with similar cash flow patterns. The non-participating insurance contract liabilities are determined using either a net premium or gross premium valuation method. The assumptions used to determine the liabilities, under these valuation methods are updated at each reporting date to reflect recent experience. Material judgement is required in calculating these liabilities and, in particular, in the choice of assumptions about which there is uncertainty over future experience. The principal assumptions are as follows: Discount rates The Group discounts participating and non-participating insurance contract liabilities at a risk-free rate derived from the swap yield curve, plus an illiquidity premium of 36bps (2021: 36bps). For certain non-participating insurance contract liabilities (e.g. annuities), the Group makes a further explicit adjustment to the risk-free rate to reflect illiquidity in respect of the assets backing those liabilities. Expenses Insurance contract liabilities include an allowance for the best estimate of future expenses associated with the administration of in-force policies. This requires the allocation of the Group\u2019s future expenses between those that relate to the administration of in-force policies, those attributable to the acquisition of new business and other costs, such as corporate costs. There is a level of judgement applied in the analysis that supports this allocation. Additionally, judgement is applied in the determination of the projected costs of the Group, in particular where those projections include the impact of transition and integration activity. Expenses are assumed to increase at either the rate of increase in the Retail Price Index (\u2018RPI\u2019), or a rate derived from the UK inflation swaps curve, plus fixed margins in accordance with the various management service agreements (\u2018MSAs\u2019) the Group has in place with outsource partners. For with-profit business the rate of RPI inflation is determined within each stochastic scenario. For other business it is based on the Bank of England inflation spot curve. For MSAs with contractual increases set by reference to national average earnings inflation, this is approximated as RPI inflation or RPI inflation plus 1%. In instances in which inflation risk is not mitigated, a further margin for adverse deviations may then be added to the rate of expense inflation. Mortality and longevity rates Mortality rates are based on company experience and published tables, adjusted appropriately to take account of changes in the underlying population mortality since the table was published, company experience and forecast changes in future mortality. Where appropriate, a margin is added to assurance mortality rates to allow for adverse future deviations. Annuitant mortality rates are adjusted to make allowance for future improvements in pensioner longevity. Lapse and surrender rates (persistency) The assumed rates for surrender and voluntary premium discontinuance depend on the length of time a policy has been in force and the relevant company experience. Surrender or voluntary premium discontinuances are only assumed for realistic basis funds. Withdrawal rates used in the valuation of with-profit policies are based on observed experience and adjusted when it is considered that future policyholder behaviour will be influenced by different considerations than in the past. In particular, it is assumed that withdrawal rates for unitised with-profit contracts will be higher on policy anniversaries on which Market Value Adjustments do not apply. Discretionary participating bonus rate For realistic basis funds, the regular bonus rates assumed in each scenario are determined in accordance with each company\u2019s PPFM. Final bonuses are assumed at a level such that maturity payments will equal asset shares subject to smoothing rules set out in the PPFM and the value of guaranteed benefits. Policyholder options and guarantees Some of the Group\u2019s products give potentially valuable guarantees, or give options to change policy benefits which can be exercised at the policyholders\u2019 discretion. These products are described below. Most with-profit contracts give a guaranteed minimum payment on a specified date or range of dates or on death if before that date or dates. For pensions contracts, the specified date is the policyholder\u2019s chosen retirement date or a range of dates around that date. For endowment contracts, it is the maturity date of the contract. For with-profit bonds it is often a specified anniversary of commencement, in some cases with further dates thereafter. Annual bonuses when added to with-profit contracts usually increase the guaranteed amount. There are guaranteed surrender values on a small number of older contracts. Some pensions contracts include guaranteed annuity options. The total amount provided in the with-profit and non-profit funds in respect of the future costs of guaranteed annuity options are \u00a3905 million (2021: \u00a31,968 million) and \u00a359 million (2021: \u00a3111 million) respectively. In common with other life companies in the UK which have written pension transfer and opt-out business, the Group has set up provisions for the review and possible redress relating to personal pension policies. These provisions, which have been calculated from data derived from detailed file reviews of specific cases and using a certainty equivalent approach, which give a result very similar to a market consistent valuation, are included in liabilities arising under insurance contracts. The total amount provided in the with-profit funds and non-profit funds in respect of the review and possible redress relating to pension policies, including associated costs, are \u00a3197 million (2021: \u00a3349 million) and \u00a32 million (2021: \u00a36 million) respectively. With-profit deferred annuities participate in profits only up to the date of retirement. At retirement, a guaranteed cash option allows the policyholder to commute the annuity benefit into cash on guaranteed terms. Demographic prudence margin For non-participating insurance contract liabilities, the Group sets assumptions at management\u2019s best estimates and recognises an explicit margin for demographic risks. For participating business in realistic basis funds, the assumptions about future demographic trends represent \u2018best estimates\u2019. Assumption changes During the year a number of changes were made to assumptions to reflect changes in expected experience or to reflect transition activity. The impact of material changes during the year was as follows: (Decrease)/increase in insurance liabilities 2022 \u00a3m (Decrease)/increase in insurance liabilities 2021 \u00a3m Change in longevity assumptions (135) (272) Change in persistency assumptions 9 (12) Change in mortality assumptions 5 (7) Change in expenses assumptions 200 275 Change in other assumptions (376) \u2013 2022: The \u00a3135 million positive impact of changes in longevity assumptions reflects updates to base and improvement assumptions to reflect latest experience analyses and the most recent Continuous Mortality Investigation 2021 projection tables. The \u00a39 million and \u00a35 million negative impact of changes in persistency and mortality assumptions respectively reflects the results of the latest experience investigations. The \u00a3200 million negative impact from changes in expense assumptions includes an increase in reserves of \u00a377 million in respect of the anticipated costs associated with the implementation of IFRS 17 and \u00a3102 million in respect of the delivery of the Group Target Operating Model for IT and Operations. To the extent that the recognition criteria have been met, the Group has also recognised accounting provisions in respect of the anticipated costs of restructuring activity (see note G7 for further details). Other assumptions includes a \u00a3329 million positive impact of harmonising the calibration of prudential margins included within liabilities under insurance contracts in the ReAssure life companies with the rest of the Group and a \u00a347 million positive impact from updating the married rates assumption in respect of reversionary annuities. 2021: The \u00a3272 million positive impact of changes in longevity assumptions reflects updates to base and improvement assumptions to reflect latest experience analyses and the most recent Continuous Mortality Investigation 2020 projection tables. The \u00a312 million and \u00a37 million positive impact of changes in persistency and mortality assumptions respectively reflects the results of the latest experience investigations. The \u00a3275 million negative impact of changes in expense assumptions principally reflects the impact of investment in the Group\u2019s growth agenda on the maintenance cost base, including the development of capabilities within the Group\u2019s Open business, asset management capabilities and within certain Group functions. The increase in reserves also reflects provision for the anticipated costs associated with the implementation of IFRS 17 and delivery of the Group Target Operating Model for IT and Operations. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfAssumptionsInsuranceContractLiabilities",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-637": {
"value": "Discount rates The Group discounts participating and non-participating insurance contract liabilities at a risk-free rate derived from the swap yield curve, plus an illiquidity premium of 36bps (2021: 36bps). For certain non-participating insurance contract liabilities (e.g. annuities), the Group makes a further explicit adjustment to the risk-free rate to reflect illiquidity in respect of the assets backing those liabilities. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfAssumptionsDiscountRates",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-638": {
"value": "Expenses Insurance contract liabilities include an allowance for the best estimate of future expenses associated with the administration of in-force policies. This requires the allocation of the Group\u2019s future expenses between those that relate to the administration of in-force policies, those attributable to the acquisition of new business and other costs, such as corporate costs. There is a level of judgement applied in the analysis that supports this allocation. Additionally, judgement is applied in the determination of the projected costs of the Group, in particular where those projections include the impact of transition and integration activity. Expenses are assumed to increase at either the rate of increase in the Retail Price Index (\u2018RPI\u2019), or a rate derived from the UK inflation swaps curve, plus fixed margins in accordance with the various management service agreements (\u2018MSAs\u2019) the Group has in place with outsource partners. For with-profit business the rate of RPI inflation is determined within each stochastic scenario. For other business it is based on the Bank of England inflation spot curve. For MSAs with contractual increases set by reference to national average earnings inflation, this is approximated as RPI inflation or RPI inflation plus 1%. In instances in which inflation risk is not mitigated, a further margin for adverse deviations may then be added to the rate of expense inflation. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfAssumptionsExpenses",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-639": {
"value": "Mortality and longevity rates Mortality rates are based on company experience and published tables, adjusted appropriately to take account of changes in the underlying population mortality since the table was published, company experience and forecast changes in future mortality. Where appropriate, a margin is added to assurance mortality rates to allow for adverse future deviations. Annuitant mortality rates are adjusted to make allowance for future improvements in pensioner longevity. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfAssumptionsMortalityAndLongevityRates",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-640": {
"value": "Lapse and surrender rates (persistency) The assumed rates for surrender and voluntary premium discontinuance depend on the length of time a policy has been in force and the relevant company experience. Surrender or voluntary premium discontinuances are only assumed for realistic basis funds. Withdrawal rates used in the valuation of with-profit policies are based on observed experience and adjusted when it is considered that future policyholder behaviour will be influenced by different considerations than in the past. In particular, it is assumed that withdrawal rates for unitised with-profit contracts will be higher on policy anniversaries on which Market Value Adjustments do not apply. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfAssumptionsLapseAndSurrenderRates",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-641": {
"value": "Discretionary participating bonus rate For realistic basis funds, the regular bonus rates assumed in each scenario are determined in accordance with each company\u2019s PPFM. Final bonuses are assumed at a level such that maturity payments will equal asset shares subject to smoothing rules set out in the PPFM and the value of guaranteed benefits. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfAssumptionsDiscretionaryParticipatingBonusRate",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-642": {
"value": "Policyholder options and guarantees Some of the Group\u2019s products give potentially valuable guarantees, or give options to change policy benefits which can be exercised at the policyholders\u2019 discretion. These products are described below. Most with-profit contracts give a guaranteed minimum payment on a specified date or range of dates or on death if before that date or dates. For pensions contracts, the specified date is the policyholder\u2019s chosen retirement date or a range of dates around that date. For endowment contracts, it is the maturity date of the contract. For with-profit bonds it is often a specified anniversary of commencement, in some cases with further dates thereafter. Annual bonuses when added to with-profit contracts usually increase the guaranteed amount. There are guaranteed surrender values on a small number of older contracts. Some pensions contracts include guaranteed annuity options. The total amount provided in the with-profit and non-profit funds in respect of the future costs of guaranteed annuity options are \u00a3905 million (2021: \u00a31,968 million) and \u00a359 million (2021: \u00a3111 million) respectively. In common with other life companies in the UK which have written pension transfer and opt-out business, the Group has set up provisions for the review and possible redress relating to personal pension policies. These provisions, which have been calculated from data derived from detailed file reviews of specific cases and using a certainty equivalent approach, which give a result very similar to a market consistent valuation, are included in liabilities arising under insurance contracts. The total amount provided in the with-profit funds and non-profit funds in respect of the review and possible redress relating to pension policies, including associated costs, are \u00a3197 million (2021: \u00a3349 million) and \u00a32 million (2021: \u00a36 million) respectively. With-profit deferred annuities participate in profits only up to the date of retirement. At retirement, a guaranteed cash option allows the policyholder to commute the annuity benefit into cash on guaranteed terms. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfAssumptionsPolicyholderOptionsAndGuarantees",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-643": {
"value": "Demographic prudence margin For non-participating insurance contract liabilities, the Group sets assumptions at management\u2019s best estimates and recognises an explicit margin for demographic risks. For participating business in realistic basis funds, the assumptions about future demographic trends represent \u2018best estimates\u2019. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfAssumptionsDemographicPrudenceMargin",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-644": {
"value": "Assumption changes During the year a number of changes were made to assumptions to reflect changes in expected experience or to reflect transition activity. The impact of material changes during the year was as follows: (Decrease)/increase in insurance liabilities 2022 \u00a3m (Decrease)/increase in insurance liabilities 2021 \u00a3m Change in longevity assumptions (135) (272) Change in persistency assumptions 9 (12) Change in mortality assumptions 5 (7) Change in expenses assumptions 200 275 Change in other assumptions (376) \u2013 2022: The \u00a3135 million positive impact of changes in longevity assumptions reflects updates to base and improvement assumptions to reflect latest experience analyses and the most recent Continuous Mortality Investigation 2021 projection tables. The \u00a39 million and \u00a35 million negative impact of changes in persistency and mortality assumptions respectively reflects the results of the latest experience investigations. The \u00a3200 million negative impact from changes in expense assumptions includes an increase in reserves of \u00a377 million in respect of the anticipated costs associated with the implementation of IFRS 17 and \u00a3102 million in respect of the delivery of the Group Target Operating Model for IT and Operations. To the extent that the recognition criteria have been met, the Group has also recognised accounting provisions in respect of the anticipated costs of restructuring activity (see note G7 for further details). Other assumptions includes a \u00a3329 million positive impact of harmonising the calibration of prudential margins included within liabilities under insurance contracts in the ReAssure life companies with the rest of the Group and a \u00a347 million positive impact from updating the married rates assumption in respect of reversionary annuities. 2021: The \u00a3272 million positive impact of changes in longevity assumptions reflects updates to base and improvement assumptions to reflect latest experience analyses and the most recent Continuous Mortality Investigation 2020 projection tables. The \u00a312 million and \u00a37 million positive impact of changes in persistency and mortality assumptions respectively reflects the results of the latest experience investigations. The \u00a3275 million negative impact of changes in expense assumptions principally reflects the impact of investment in the Group\u2019s growth agenda on the maintenance cost base, including the development of capabilities within the Group\u2019s Open business, asset management capabilities and within certain Group functions. The increase in reserves also reflects provision for the anticipated costs associated with the implementation of IFRS 17 and delivery of the Group Target Operating Model for IT and Operations.",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfAssumptionsAssumptionChanges",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-626": {
"value": "F4.2 Managing product risk The following sections give an assessment of the risks associated with the Group\u2019s main life assurance products and the ways in which the Group manages those risks. Gross 1 Reinsurance 2022 Insurance contracts \u00a3m Investment contracts with DPF \u00a3m Insurance contracts \u00a3m Investment contracts with DPF \u00a3m With-profit funds: Pensions: Deferred annuities \u2013 with guarantees 5,627 36 413 \u2013 Deferred annuities \u2013 without guarantees 1,445 289 \u2013 \u2013 Immediate annuities 4,968 \u2013 2,881 \u2013 Unitised with-profit 10,438 22,337 \u2013 \u2013 Total pensions 22,478 22,662 3,294 \u2013 Life: Immediate annuities 261 \u2013 1 \u2013 Unitised with-profit 7,687 930 \u2013 \u2013 Life with-profit 1,681 \u2013 9 \u2013 Total life 9,629 930 10 \u2013 Other 1,020 (1) 159 \u2013 Non-profit funds: Deferred annuities \u2013 with guarantees 310 \u2013 \u2013 \u2013 Deferred annuities \u2013 without guarantees 2,851 \u2013 156 \u2013 Immediate annuities 27,279 \u2013 2,137 \u2013 Protection 1,018 \u2013 439 \u2013 Unit-linked 13,096 921 28 \u2013 Other (182) 5 (81) \u2013 77,499 24,517 6,142 \u2013 1 \u00a311,753 million (2021: \u00a39,864 million) of liabilities are subject to longevity swap arrangements .F4. Risk management \u2013 insurance risk continued F4.2 Managing product risk continued Gross Reinsurance 2021 Insurance contracts \u00a3m Investment contracts with DPF \u00a3m Insurance contracts \u00a3m Investment contracts with DPF \u00a3m With-profit funds: Pensions: Deferred annuities \u2013 with guarantees 8,746 53 728 \u2013 Deferred annuities \u2013 without guarantees 1,753 341 \u2013 \u2013 Immediate annuities 6,506 \u2013 3,787 \u2013 Unitised with-profit 13,344 27,078 \u2013 \u2013 Total pensions 30,349 27,472 4,515 \u2013 Life: Immediate annuities 348 \u2013 1 \u2013 Unitised with-profit 9,364 1,137 \u2013 \u2013 Life with-profit 2,166 \u2013 6 \u2013 Total life 11,878 1,137 7 \u2013 Other 1,245 (1) 192 \u2013 Non-profit funds: Deferred annuities \u2013 with guarantees 555 \u2013 \u2013 Deferred annuities \u2013 without guarantees 983 \u2013 158 \u2013 Immediate annuities 37,329 \u2013 2,885 \u2013 Protection 2,076 \u2013 876 \u2013 Unit-linked 14,891 1,084 22 \u2013 Other (137) 3 (68) \u2013 99,169 29,695 8,587 \u2013 ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfProductRiskManagement",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-627": {
"value": "With-profit fund (unitised and traditional) The Group operates a number of with-profit funds in which the with-profit policyholders benefit from a discretionary annual bonus (guaranteed once added in most cases) and a discretionary final bonus. Non-participating business is also written in some of the with-profit funds and some of the funds may include immediate annuities and deferred annuities with Guaranteed Annuity Rates (\u2018GAR\u2019). The investment strategy of each fund differs, but is broadly to invest in a mixture of fixed interest investments and equities and/or property and other asset classes in such proportions as is appropriate to the investment risk exposure of the fund and its capital resources. The Group has significant discretion regarding investment policy, bonus policy and early termination values. The process for exercising discretion in the management of the with-profit funds is set out in the PPFM for each with-profit fund and is overseen by with-profit committees. Advice is also taken from the with-profit actuary of each with-profit fund. Compliance with the PPFM is reviewed annually and reported to the PRA, Financial Conduct Authority (\u2018FCA\u2019) and policyholders. The bonuses are designed to distribute to policyholders a fair share of the return on the assets in the with-profit funds together with other elements of the experience of the fund. The shareholders of the Group are entitled to receive one-ninth of the cost of bonuses declared for some funds and \u00a3nil for others. For the HWPF, under the Scheme, shareholders are entitled to receive certain defined cash flows arising on specified blocks of UK and Irish business. Unitised and traditional with-profit policies are exposed to equivalent risks, the main difference being that unitised with-profit policies purchase notional units in a with-profit fund whereas traditional with-profit policies do not. Benefit payments for unitised policies are then dependent on unit prices at the time of a claim, although charges may be applied. A unitised with-profit fund price is typically guaranteed not to fall and increases in line with any discretionary bonus payments over the course of one year. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfProductRiskManagementWithProfitFund",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-630": {
"value": "Deferred annuities Deferred annuity policies are written to provide either a cash benefit at retirement, which the policyholder can use to buy an annuity on the terms then applicable, or an annuity payable from retirement. The policies contain an element of guarantee expressed in the form that the contract is written in, i.e. to provide cash or an annuity. Deferred annuity policies written to provide a cash benefit may also contain an option to convert the cash benefit to an annuity benefit on guaranteed terms; these are known as GAR policies. Deferred annuity policies written to provide an annuity benefit may also contain an option to convert the annuity benefit into cash benefits on guaranteed terms; these are known as Guaranteed Cash Option (\u2018GCO\u2019) policies. In addition, certain unit prices in the HWPF are guaranteed not to decrease. Whilst there has been an increase in interest rates recently, long-term rates remain relatively low compared to historical levels and life expectancy has increased more rapidly than originally anticipated. The guaranteed terms on GAR policies are more favourable than the annuity rates currently available in the market available for cash benefits. The guaranteed terms on GCO policies are currently not valuable. Deferred annuity policies which are written to provide annuity benefits are managed in a similar manner to immediate annuities and are exposed to the same risks. The option provisions on GAR policies are particularly sensitive to downward movements in interest rates, increasing life expectancy and the proportion of customers exercising their option. Adverse movements in these factors could lead to a requirement to increase reserves which could adversely impact profit and potentially require additional capital. In order to address the interest rate risk (but not the risk of increasing life expectancy or changing customer behaviour with regard to exercise of the option), insurance subsidiaries within the Group have purchased derivatives that provide protection against an increase in liabilities and have thus reduced the sensitivity of profit to movements in interest rates (see note E6.2.2). The Group seeks to manage this risk in accordance with both the terms of the issued policies and the interests of customers, and has obtained external advice supporting the manner in which it operates the long-term funds in this respect. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfProductRiskManagementDeferredAnnuities",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-628": {
"value": "Immediate annuities This type of annuity is purchased with a single premium at the outset, and is paid to the policyholder for the remainder of their lifetime. Payments may also continue for the benefit of a surviving spouse or partner after the annuitant\u2019s death. Annuities may be level, or escalate at a fixed rate, or may escalate in line with a price index and may be payable for a minimum period irrespective of whether the policyholder remains alive. The main risks associated with this product are longevity and investment risks. Longevity risk arises where the annuities are paid for the lifetime of the policyholder, and is managed through the initial pricing of the annuity and through reinsurance (appropriately collateralised) or transfer of existing liabilities. Annuities may also be a partial \u2018natural hedge\u2019 against losses incurred in protection business in the event of increased mortality (and vice versa) although the extent to which this occurs will depend on the similarity of the demographic profile of each book of business. In addition, the Group has in place longevity swaps that provide downside protection over longevity risk. The pricing assumption for mortality risk is based on both historic internal information and externally-generated information on mortality experience, including allowances for future mortality improvements. Pricing will also include a contingency margin for adverse deviations in assumptions. Market and credit risk is influenced by the extent to which the cash flows under the contracts have been matched by suitable assets which is managed under the ALM framework. Asset/liability modelling is used to monitor this position on a regular basis. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfProductRiskManagementImmediateAnnuities",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-629": {
"value": "Protection These contracts are typically secured by the payment of a regular premium payable for a period of years providing benefits payable on certain events occurring within the period. The benefits may be a single lump sum or a series of payments and may be payable on death, serious illness or sickness. The main risk associated with this product is the claims experience and this risk is managed through the initial pricing of the policy (based on actuarial principles), the use of reinsurance and a clear process for administering claims. Market and credit risk is influenced by the extent to which the cash flows under the contracts have been matched by suitable assets which is managed under the ALM framework. Asset/liability modelling is used to monitor this position on a regular basis. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfProductRiskManagementProtection",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-645": {
"value": "G. Other statement of consolidated financial position notes G1. Pension schemes Defined contribution pension schemes Obligations for contributions to defined contribution pension schemes are recognised as an expense in the consolidated income statement as incurred. Defined benefit pension schemes The net surplus or deficit (the economic surplus or deficit) in respect of the defined benefit pension schemes is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior years; that benefit is discounted to determine its present value and the fair value of any scheme assets is deducted. The economic surplus or deficit is subsequently adjusted to eliminate on consolidation the carrying value of insurance policies issued by Group entities to the defined benefit pension schemes (the reported surplus or deficit). A corresponding adjustment is made to the carrying values of insurance contract liabilities and investment contract liabilities. As required by IFRIC 14, IAS 19 \u2013\u2018The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction\u2019, to the extent that the economic surplus (prior to the elimination of the insurance policies issued by Group entities) will be available as a refund, the economic surplus is stated after a provision for tax that would be borne by the scheme administrators when the refund is made. The Group recognises a pension surplus on the basis that it is entitled to the surplus of each scheme in the event of a gradual settlement of the liabilities, due to its ability to order a winding up of the Trust. Additionally under IFRIC 14 pension funding contributions are considered to be a minimum funding requirement and, to the extent that the contributions payable will not be available to the Group after they are paid into the Scheme, a liability is recognised when the obligation arises. The net pension scheme asset/liability represents the economic surplus net of all adjustments noted above. The Group determines the net interest expense or income on the net pension scheme asset/liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the opening net pension scheme asset/liability. The discount rate is the yield at the period end on AA credit rated bonds that have maturity dates approximating to the terms of the Group\u2019s obligations. The calculation is performed by a qualified actuary using the projected unit credit method. The movement in the net pension scheme asset/liability is analysed between the service cost, past service cost, curtailments and settlements (all recognised within administrative expenses in the consolidated income statement), the net interest cost on the net pension scheme asset/liability, including any reimbursement assets (recognised within net investment income in the consolidated income statement), remeasurements of the net pension scheme asset/liability (recognised in other comprehensive income) and employer contributions. This note describes the Group\u2019s four main defined benefit pension schemes for its employees, the Pearl Group Staff Pension Scheme (\u2018Pearl Scheme\u2019), the PGL Pension Scheme, the Abbey Life Staff Pension Scheme (\u2018Abbey Life Scheme\u2019) and the ReAssure Staff Pension Scheme (\u2018ReAssure Scheme\u2019) and explains how the pension scheme asset/liability is calculated. An analysis of the pension scheme (liability)/asset for each pension scheme is set out in the table below and also includes the net pension scheme liability
in respect of the Group operated unfunded unapproved retirement benefit scheme (\u2018ReAssure Private Retirement Trust\u2019):
2022
\u00a3m
2021
\u00a3m
Pearl Group Staff Pension Scheme
Economic surplus
46 263
Adjustment for insurance policies eliminated on consolidation
(1,501) (1,680)
Net economic deficit
(1,455) (1,417)
Provision for tax on that part of the economic surplus available as a refund on a winding-up of the Scheme
\u2013 (92)
Net pension scheme liability, as reported
(1,455) (1,509)
Reimbursement right in respect of reinsurance, as reported
205 212
Add: value attributed to assets held by PLL within financial assets
1
1,576 1,896
Adjusted net pension scheme asset
326 599
PGL Pension Scheme
Economic surplus
23 26
Adjustment for insurance policies eliminated on consolidation
(1,079) (1,618)
Net pension scheme liability, as reported
(1,056) (1,592)
Add: assets held by PLL within financial assets
1
1,246 2,084
Adjusted net pension scheme asset
190 492
Abbey Life Staff Pension Scheme
Economic (deficit)/surplus
(5) 12
Provision for tax on that part of the economic surplus available as a refund on a winding-up of the Scheme
\u2013 (4)
Minimum funding requirement obligation
(3) (7)
Net pension scheme (liability)/asset
(8) 1
ReAssure Staff Pension Scheme
Economic surplus
22 54
Provision for tax on that part of the economic surplus available as a refund on a winding-up of the Scheme
(8) (19)
Net pension scheme asset
14 35
ReAssure Private Retirement Trust
Net pension scheme liability
(1) (2)
1 The Pearl Scheme and the PGL Pension Scheme have both executed buy-in transactions with a Group life company and subsequently assets supporting the Group's actuarial liabilities
are recognised on a line by line basis within financial assets in the statement of consolidated financial position. Further details are included in notes G1.1 and G1.2 below.
In the current and prior periods an adjusted net pension scheme asset has been presented in relation to both these pension schemes. The value of the assets held by PLL within financial
assets in respect of the PGL Pension Scheme buy-ins is equal to the assets posted to a ring-fenced collateral account. For the Pearl Scheme the assets held by PLL supporting the buy-ins
are not ring-fenced and the value has been determined as the value of the insurance contract liability within the PLL financial statements less the value of the associated reinsurance asset. .
Movements in these financial assets are reflected in the consolidated income statement within Net investment income, however as noted in the accounting policy, the movement in the net
pension scheme liability (as shown in notes G1.1 and G1.2) is primarily reflected in other comprehensive income.
Risks The Group\u2019s defined benefit schemes typically expose the Group to a number of risks, the most significant of which are: Asset volatility \u2013 the value of the schemes\u2019 assets will vary as market conditions change and as such is subject to considerable volatility. The liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform this yield, this will create a deficit. The majority of the assets are held within a liability driven investment strategy which is linked to the funding basis of the schemes (set with reference to government bond yields). As such, to the extent that movements in corporate bond yields are out of line with movements in government bond yields, volatility will arise. Inflation risk \u2013 a significant proportion of the schemes\u2019 benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities (although in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). The majority of the assets are held within a liability driven investment strategy which allows for movements in inflation, meaning that changes in inflation should not materially affect the surplus. Life expectancy \u2013 the majority of the schemes\u2019 obligations are to provide benefits for the life of the member therefore increases in life expectancy will result in an increase in the liabilities. For the Pearl and PGL schemes, this is partially offset by the buy in policies that move in line with the liabilities. These buy in policies are eliminated on consolidation (see sections G1.1 and G1.2 for further details). Information on each of the Group\u2019s pension schemes is set out below. G1.1 Pearl Group Staff Pension Scheme Scheme details The Pearl Scheme comprises a final salary section, a money purchase section and a hybrid section (a mix of final salary and money purchase). The Pearl Scheme is closed to new members and has no active members. Defined benefit scheme The Pearl Scheme is established under, and governed by, the trust deeds and rules and has been funded by payment of contributions to a separately administered trust fund. A Group company, Pearl Group Holdings No.2 Limited (\u2018PGH2\u2019), is the principal employer of the Pearl Scheme. The principal employer meets the administration expenses of the Pearl Scheme. The Pearl Scheme is administered by a separate trustee company, P.A.T. (Pensions) Limited, which is separate from the Company. The trustee company is comprised of four representatives from the Group, three member nominated representatives and one independent trustee in accordance with the trustee company\u2019s articles of association. The trustee is required by law to act in the interest of all relevant beneficiaries and is responsible for the investment policy with regard to the assets. To the extent that an economic surplus will be available as a refund, the economic surplus is stated after a provision for tax that would be borne by the scheme administrators when the refund is made. The valuation has been based on an assessment of the liabilities of the Pearl Scheme as at 31 December 2022, undertaken by independent qualified actuaries. The present values of the defined benefit obligation and the related interest costs have been measured using the projected unit credit method. A triennial funding valuation of the Pearl Scheme as at 30 June 2021 was completed in 2022 by a qualified actuary. This showed a surplus as at 30 June 2021 of \u00a367 million, on the agreed technical provisions basis. The funding and IFRS accounting bases of valuation can give rise to different results for a number of reasons. The funding basis of valuation is based on general principles of prudence whereas the accounting valuation is based on best estimates. Discount rates are gilt-based for the funding valuation whereas the rate used for IFRS valuation purposes is based on a yield curve for high quality AA-rated corporate bonds. In addition the values are prepared at different dates which will result in differences arising from changes in market conditions and employer contributions made in the subsequent period. Pension Scheme Commitment Agreement and buy-in transactions On 17 November 2020, the Pearl Scheme entered into a Commitment Agreement with PGH2 to complete a series of buy-ins. At the same time, the Pearl Scheme completed the first buy-in with Phoenix Life Limited (\u2018PLL\u2019) covering 25% of the Scheme\u2019s pensioner and deferred member liabilities, transferring the associated risks, including longevity improvement risk, to PLL effective from 30 September 2020. Two further buy-in transactions were completed in July 2021 and October 2021 covering 35% and 15% respectively of the Scheme\u2019s pensioner and deferred member liabilities and the final buy-in transaction was completed in November 2022. Risks, including longevity improvement risk, were transferred to PLL effective from 28 May 2021 and 31 August 2021 and 30 September 2022 respectively. Upon completion of each buy-in transaction the Scheme transferred the following plan assets to PLL: \u2022 In November 2020, \u00a3731 million of plan assets were transferred to PLL in satisfaction of the premium of \u00a3735 million and was net of a \u00a34 million payment by PLL to the Scheme in respect of members\u2019 benefits for October and November 2020; \u2022 In July 2021, \u00a31,049 million of plan assets were transferred to PLL in satisfaction of the premium and a further \u00a312 million cash payment was paid by the Scheme in August 2021. PLL paid \u00a35 million to the Scheme in respect of members\u2019 benefits for June and July 2021; and \u2022 In October 2021, \u00a3433 million of plan assets were transferred to PLL in satisfaction of the premium of \u00a3435 million and was net of a \u00a32 million payment by PLL to the Scheme in respect of members\u2019 benefits for September and October 2021. A further \u00a31 million cash payment in respect of the premium was paid by the Scheme in December 2021. \u2022 In November 2022, \u00a3556 million of plan assets were transferred to PLL in satisfaction of the premium of \u00a3560 million and was net of a \u00a34 million payment by PLL to the Scheme in respect of members\u2019 benefits for October and November 2022. The assets transferred to PLL are recognised in the relevant line within financial assets in the consolidated statement of financial position. The economic effect of the buy-in transactions in the Scheme is to replace the plan assets transferred with a single line insurance policy reimbursement right asset which is subsequently eliminated on consolidation. The value of this insurance policy at 31 December 2022 was \u00a31,501 million (2021: \u00a31,680 million) which includes an amount owed by PLL of \u00a32 million (2021: \u00a312 million). The Commitment agreement contained provisions under which payments by PGH2 to the Scheme were required in the event that the Group did not meet the minimum buy-in completion schedule the details of which are as follows: \u2022 Gilts Deficit Recovery Contributions: Contributions calculated as amounts required to reach full funding on a gilts-basis by 30 June 2027. Following the completion of the recent buy-in transactions, the Group has no further obligation to pay these contributions; and \u2022 Contingent Contributions: These represented a new form of security for the trustee. The amount of these contributions was initially capped at \u00a3200 million, with the cap running off in line with completion of the buy-ins. Following the completion of the recent buy-in transactions the cap is now \u00a3nil (2021: \u00a350 million). The new agreement also introduced a new form of security provided by PGH2 to the trustee. The share charges over certain Group entities were replaced by a new surety bond arrangement, whereby two external third-party insurers, each provided \u00a3100 million of cover payable to the Scheme following certain trigger events. This cover provided by the surety bond guarantee was fully released upon completion of the final buy-in transaction in November 2022. No contributions were paid to the Pearl Scheme in either the current or prior periods. PGH2 continues to meet the administrative and non-investment running expenses of the Scheme as set out in the schedule of contributions. During the year, the Company reached an agreement for the removal of a trustee discretion to pay some pension increases in excess of the 5% cap. The trustee has agreed to give up this discretion in exchange for a single 1.6% uplift for current pensions in payment effective from 1 April 2022 and a 1.3% future increase to eligible benefits of both pension and deferred members. The financial impact of the 1.6% uplift has been to recognise an increase in the defined benefit obligation of \u00a315 million and a past service cost in the consolidated income statement. Reimbursement right asset in respect of Reinsurance arrangement In March 2022, PLL entered into a quota share reinsurance arrangement with an external insurer to reinsure a further 27% of the risks transferred to PLL as part of the third buy-in transaction with the Pearl Scheme. A total of approximately 91% of these liabilities have now been reinsured. A premium of \u00a3104 million was paid by PLL to the reinsurer. As PLL expects to use the claims received to pay for its obligations under the insurance contract between it and the Pearl scheme (i.e. to settle the defined benefit obligation) the reinsurance arrangement is considered to be a non-qualifying insurance policy and is classified as a reimbursement right. The reinsurance arrangement is expected to match a proportion of the defined benefit obligation of the Pearl Scheme therefore the valuation of the reimbursement right is consistent with the valuation of the associated defined benefit obligation. The value of the reimbursement right asset amounted to \u00a3205 million (31 December 2021: \u00a3212 million). Summary of amounts recognised in the consolidated financial statements The amounts recognised in the consolidated financial statements are as follows: 2022 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Pension Scheme Liability \u00a3m Reimbursement right \u00a3m At 1 January 807 (2,224) (92) (1,509) 212 Interest income/(expense) 16 (52) (2) (38) 4 Past service cost \u2013 (15) \u2013 (15) \u2013 Included in profit or loss 16 (67) (2) (53) 4 Remeasurements: Return on plan assets excluding amounts included in interest income (208) \u2013 \u2013 (208) (101) Gain from changes in demographic assumptions \u2013 3 \u2013 3 \u2013 Gain from changes in financial assumptions \u2013 805 \u2013 805 \u2013 Experience loss \u2013 (116) \u2013 (116) \u2013 Change in provision for tax on economic surplus available as a refund \u2013 \u2013 94 94 \u2013 Included in other comprehensive income (208) 692 94 578 (101) Income received from insurance policies 89 \u2013 \u2013 89 \u2013 Benefit payments (98) 98 \u2013 \u2013 (14) Assets transferred as premium for Scheme buy-in (560) \u2013 \u2013 (560) \u2013 Assets transferred as premium for reinsurance arrangement 104 At 31 December 46 (1,501) \u2013 (1,455) 205 2021 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Pension Scheme Liability \u00a3m Reimbursement right asset \u00a3m At 1 January 2,315 (2,384) (185) (254) \u2013 Interest income/(expense) 24 (33) (2) (11) \u2013 Included in profit or loss 24 (33) (2) (11) \u2013 Remeasurements: Return on plan assets excluding amounts included in interest income 27 \u2013 \u2013 27 (49) Gain from changes in demographic assumptions \u2013 22 \u2013 22 \u2013 Loss from changes in financial assumptions \u2013 89 \u2013 89 \u2013 Experience gain \u2013 (26) \u2013 (26) \u2013 Change in provision for tax on economic surplus available as a refund \u2013 - 95 95 \u2013 Included in other comprehensive income 27 85 95 207 (49) Income received from insurance policies 46 \u2013 \u2013 46 \u2013 Benefit payments (108) 108 \u2013 \u2013 \u2013 Assets transferred as premium for Scheme buy-in (1,497) \u2013 \u2013 (1,497) \u2013 Assets transferred as premium for reinsurance arrangement \u2013 \u2013 \u2013 \u2013 261 At 31 December 807 (2,224) (92) (1,509) 212 Scheme assets The distribution of the scheme assets at the end of the year was as follows: 2022 2021 Total \u00a3m Of which not quoted in an active market \u00a3m Total \u00a3m Of which not quoted in an active market \u00a3m Hedging portfolio \u2013 \u2013 438 23 Other debt securities \u2013 \u2013 349 - Properties 5 5 104 104 Private equities 4 4 4 4 Hedge funds 3 3 4 4 Cash and other 34 \u2013 67 \u2013 Obligations for repayment of stock lending collateral received \u2013 \u2013 (159) \u2013 Reported scheme assets 46 12 807 135 Add back: Insurance policies eliminated on consolidation 1,501 1,501 1,680 1,680 Economic value of assets 1,547 1,513 2,487 1,815 Defined benefit obligation The calculation of the defined benefit obligation can be allocated to the scheme\u2019s members as follows: \u2022 Deferred scheme members: 40% (2021: 40%); and \u2022 Pensioners: 60% (2021: 60%) The weighted average duration of the defined benefit obligation at 31 December 2022 is 13.5 years (2021: 16 years). Principal assumptions The principal financial assumptions of the Pearl Scheme are set out in the table below: 2022 % 2021 % Rate of increase for pensions in payment (5% per annum or RPI if lower) 3.05 3.20 Rate of increase for deferred pensions (CPI) 2.70 2.70 Discount rate 4.95 2.00 Inflation \u2013 RPI 3.30 3.30 Inflation \u2013 CPI 2.70 2.70 The discount rate and inflation rate assumptions have been determined by considering the shape of the appropriate yield curves and the duration of the Pearl Scheme\u2019s liabilities. This method determines an equivalent single rate for each of the discount and inflation rates, which is derived from the profile of projected benefit payments. The post-retirement mortality assumptions are in line with a scheme-specific table which was derived from the actual mortality experience in recent years based on the SAPS standard tables for males and for females based on year of use. Future longevity improvements from 1 January 2021 are based on amended CMI 2021 Core Projections (2021: From 1 January 2021 based on amended CMI 2020 Core Projections) and a long-term rate of improvement of 1.5% (2021: 1.7%) per annum for males and 1.2% (2021: 1.2%) per annum for females. Under these assumptions, the average life expectancy from retirement for a member currently aged 40 retiring at age 60 is 29.2 years and 30.5 years for male and female members respectively (2021: 29.8 years and 30.6 years respectively). A quantitative sensitivity analysis for significant actuarial assumptions is shown below: 2022 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 1,501 (40) 42 26 (25) 37 (37) 2021 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 2,224 (87) 93 70 (68) 80 (80) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension asset recognised within the statement of consolidated financial position. G1.2 PGL Pension Scheme The PGL Pension Scheme comprises a final salary section and a defined contribution section. Scheme details Defined contribution scheme On 1 July 2020 the Group closed the defined contribution section of the PGL Scheme and ceased making contributions from this date. Defined benefit scheme The defined benefit section of the PGL Pension Scheme is a final salary arrangement which is closed to new entrants and has no active members. The PGL Scheme is administered by a separate trustee company, PGL Pension Trustee Ltd. The trustee company is comprised of two representatives from the Group, three member nominated representatives and one independent trustee in accordance with the trustee company\u2019s articles of association. The trustee is required by law to act in the interest of all relevant beneficiaries and is responsible for the day to day administration of the benefits. The valuation has been based on an assessment of the liabilities of the PGL Pension Scheme as at 31 December 2022, undertaken by independent qualified actuaries. To the extent that an economic surplus will be available as a refund, the economic surplus is stated after a provision for tax that would be borne by the scheme administrators when the refund is made. A triennial funding valuation of the PGL Pension Scheme as at 30 June 2021 was completed in 2022 by a qualified actuary and finalised in January 2023. This showed a surplus as at 30 June 2021 of \u00a32 million. The IFRS valuation cash flows reflect the latest available data and are not limited to being updated following the completion of each funding valuation. There are no further committed contributions to pay in respect of the defined benefit section of the Scheme. Insurance policies with Group entities In March 2019, the PGL Pension Scheme entered into a \u2018buy-in\u2019 agreement with PLL which covered the remaining pensioner and deferred members of the Scheme not covered by the first such agreement concluded in December 2016. The plan assets transferred to PLL as premium are held in a collateral account and are recognised in the relevant line within financial assets in the statement of consolidated financial position. The economic effect of these transactions in the Scheme is to replace the plan assets transferred with a single line insurance policy reimbursement asset which is eliminated on consolidation along with the relevant insurance contract liabilities in PLL. The value of the insurance policies with Group entities at 31 December 2022 is \u00a31,079 million (2021: \u00a31,618 million). Summary of amounts recognised in the consolidated financial statements The amounts recognised in the consolidated financial statements are as follows: 2022 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Total \u00a3m At 1 January 31 (1,623) (1,592) Interest income/(expense) 1 (32) (31) Administrative expenses (4) \u2013 (4) Included in profit or loss (3) (32) (35) Remeasurements: Return on plan assets excluding amounts included in interest income (1) \u2013 (1) Gain from changes in demographic assumptions \u2013 5 5 Gain from changes in financial assumptions \u2013 531 531 Experience loss \u2013 (36) (36) Included in other comprehensive income (1) 500 499 Income received from insurance policies 72 \u2013 72 Benefit payments (72) 72 \u2013 At 31 December 27 (1,083) (1,056) 2021 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Total \u00a3m At 1 January 35 (1,754) (1,719) Interest expense \u2013 (25) (25) Administrative expenses (4) \u2013 (4) Included in profit or loss (4) (25) (29) Remeasurements: Gain from changes in demographic assumptions \u2013 16 16 Gain from changes in financial assumptions \u2013 70 70 Experience loss \u2013 (3) (3) Included in other comprehensive income \u2013 83 83 Income received from insurance policies 73 \u2013 73 Benefit payments (73) 73 \u2013 At 31 December 31 (1,623) (1,592) Scheme assets
The distribution of the scheme assets at the end of the year was as follows:
2022 2021
Total
\u00a3m
Of which not
quoted in an
active market
\u00a3m
Total
\u00a3m
Of which not
quoted in an
active market
\u00a3m
Cash and other
27
\u2013
31
\u2013
Reported scheme assets
27
\u2013
31
\u2013
Add back:
Insurance policies eliminated on consolidation
1,079 1,079 1,618 1,610
Economic value of assets
1,106 1,079 1,649 1,610
Defined benefit obligation
The calculation of the defined benefit obligation can be allocated to the scheme\u2019s members as follows:
\u2022 Deferred scheme members: 36% (2021: 36%); and
\u2022 Pensioners: 64% (2021: 64%)
The weighted average duration of the defined benefit obligation at 31 December 2022 is 13.5 years (2021: 16 years).
Principal assumptions
The principal financial assumptions of the PGL Pension Scheme are set out in the table below:
2022
%
2021
%
Rate of increase for pensions in payment (7.5% per annum or RPI if lower)
3.30 3.30
Rate of increase for deferred pensions (CPI)
2.70 2.70
Discount rate
4.95 2.00
Inflation \u2013 RPI
3.30 3.30
Inflation \u2013 CPI
2.70 2.70
The discount rate and inflation assumptions have been determined by considering the shape of the appropriate yield curves and the duration of the PGL
Pension Scheme liabilities. This method determines an equivalent single rate for each of the discount and inflation rates, which is derived from the profile
of projected benefit payments.
The post-retirement mortality assumptions are in line with 86%/94% of S1P Light base tables for males and females. Future longevity improvements from
1 January 2021 are based on amended CMI 2021 Core Projections (2021: From 1 January 2021 based on amended CMI 2020 Core Projections) with
a long-term rate of improvement of 1.5% (2021: 1.7%) per annum for males and 1.2% (2021: 1.2%) per annum for females. Under these assumptions, the
average life expectancy from retirement for a member currently aged 40 retiring at age 62 is 27.7 years (2021: 28.0 years) and 29.1 years (2021: 28.9 years)
for male and female members respectively.
A quantitative sensitivity analysis for significant actuarial assumptions is shown below:
2022
Assumptions
Base Discount rate RPI Life expectancy
Sensitivity level
25bps
increase
25bps
decrease
25bps
increase
25bps
decrease
1 year
increase
1 year
decrease
Impact on the defined benefit obligation (\u00a3m)
1,083
(31) 33
23 (22)
30 (30)
2021
Assumptions Base Discount rate RPI Life expectancy
Sensitivity level
25bps
increase
25bps
decrease
25bps
increase
25bps
decrease
1 year
increase
1 year
decrease
Impact on the defined benefit obligation (\u00a3m)
1,623
(62) 66
54 (52)
60 (60)
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and
changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions
the same method has been applied as when calculating the pension liability recognised within the statement of consolidated financial position.
G1.3 Abbey Life Staff Pension Scheme Scheme details On 30 June 2017, the Abbey Life Scheme was transferred from Abbey Life to Pearl Life Holdings Limited (\u2018PeLHL\u2019), a fellow subsidiary. PeLHL assumed the scheme covenant together with all obligations of the scheme following implementation of the transfer. The Abbey Life Scheme is a registered occupational pension scheme, set up under trust, and legally separate from the employer PeLHL. The scheme is administered by Abbey Life Trust Securities Limited (the 'trustee'), a corporate trustee. There are three trustee directors, one of whom is nominated by the Abbey Life Scheme members and two of whom are appointed by PeLHL. The trustee is responsible for administering the scheme in accordance with the trust deed and rules and pensions laws and regulations. The Abbey Life Scheme is closed to new entrants and has no active members. The valuation has been based on an assessment of the liabilities of the Abbey Life Scheme as at 31 December 2022 undertaken by independent qualified actuaries. The present values of the defined benefit obligation and the related interest costs have been measured using the projected unit credit method. Funding The last funding valuation of the Abbey Life Scheme was carried out by a qualified actuary as at 31 March 2021 and showed a deficit of \u00a386 million. Following completion of the funding valuation a recovery plan was agreed between the Group and the trustee of the Abbey Life Scheme for PeLHL to pay monthly contributions of \u00a3400,000 into the Scheme until 31 July 2025 to eliminate the funding shortfall. A new schedule of contributions was agreed effective from November 2021, for PeLHL to pay the following amounts in respect of deficit contributions in addition to the amounts payable under the recovery plan: \u2022 fixed monthly contributions of \u00a3400,000 payable from 1 August 2025 to 30 June 2026; \u2022 monthly contributions in respect of administration expenses of \u00a3106,295 payable up to 31 March 2022, then increasing annually in line with the Retail Prices Index assumption to 30 June 2028; and \u2022 annual payments of \u00a34 million into the New 2016 Charged Account by 31 July each year, with the next payment being made by 31 July 2022, and the last payment due by 31 July 2025. The charged accounts are Escrow accounts which were created in 2010 to provide the trustees with additional security in light of the funding deficit. The amounts held in the charged accounts do not form part of Abbey Life Scheme assets. Under the terms of the 2013 Funding Agreement the funding position of the Scheme was assessed as at 31 March 2021 and this assessment revealed a shortfall, calculated in accordance with the terms of the New 2013 Funding Agreement, which exceeded the amount held in the New 2013 Charged Account. As such, the entire balance of \u00a342 million was paid from the New 2013 Charged Account to the Abbey Life Scheme in December 2021. Under the terms of the New 2016 Funding Agreement the funding position of the Abbey Life Scheme will be assessed as at 31 March 2027. A payment will be made from the New 2016 Charged Account to the Scheme if the results of the assessment reveal a shortfall calculated in accordance with the terms of the New 2016 Funding Agreement. The amount of the payment will be the lower of the amount of the shortfall and the amount held in the New 2016 Charged Account. An additional liability of \u00a33 million (2021: \u00a37 million) has been recognised reflecting a charge on any refund of the resultant IAS 19 surplus that arises after adjustment for discounted future contributions of \u00a315 million (2021: \u00a321 million) in accordance with the minimum funding requirement. A deferred tax asset of \u00a3nil (2021: \u00a34 million) has also been recognised to reflect tax relief at a rate of 19% that is expected to be available on the contributions once paid into the Scheme. Summary of amounts recognised in the consolidated financial statements The amounts recognised in the consolidated financial statements are as follows: 2022 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Minimum funding requirement obligation \u00a3m Total \u00a3m At 1 January 330 (318) (4) (7) 1 Interest income/(expense) 7 (6) \u2013 \u2013 1 Administration expenses (2) \u2013 \u2013 \u2013 (2) Included in profit or loss 5 (6) \u2013 \u2013 (1) Remeasurements: Return on plan assets excluding amounts included in interest income (123) \u2013 \u2013 \u2013 (123) Experience loss \u2013 (9) \u2013 \u2013 (9) Gain from changes in financial assumptions \u2013 110 \u2013 \u2013 110 Change in minimum funding requirement obligation \u2013 \u2013 \u2013 4 4 Change in provision for tax on economic surplus available as a refund \u2013 \u2013 4 \u2013 4 Included in other comprehensive income (123) 101 4 4 (14) Employer's contributions 6 \u2013 \u2013 \u2013 6 Benefit payments (12) 12 \u2013 \u2013 \u2013 At 31 December 206 (211) \u2013 (3) (8) 2021 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Minimum funding requirement obligation \u00a3m Total \u00a3m At 1 January 280 (341) \u2013 \u2013 (61) \u2013 \u2013 Interest income/(expense) 4 (5) \u2013 \u2013 (1) Administrative expenses (1) \u2013 \u2013 \u2013 (1) Included in profit or loss 3 (5) \u2013 \u2013 (2) Return on plan assets excluding amounts included in interest income 11 \u2013 \u2013 \u2013 11 Experience Loss \u2013 (5) \u2013 \u2013 (5) Gain from changes in demographic assumptions \u2013 6 \u2013 \u2013 6 Loss from changes in financial assumptions \u2013 15 \u2013 \u2013 15 Change in minimum funding requirement obligation \u2013 \u2013 \u2013 (7) (7) Change in provision for tax on economic surplus available as a refund \u2013 \u2013 (4) \u2013 (4) Included in other comprehensive income 11 16 (4) (7) 16 Employer's contributions 48 \u2013 \u2013 \u2013 48 Benefit payments (12) 12 \u2013 \u2013 \u2013 At 31 December 330 (318) (4) (7) 1 Scheme assets The distribution of the scheme assets at the end of the year was as follows: 2022 2021 Total \u00a3m Of which not quoted in an active market \u00a3m Total \u00a3m Of which not quoted in an active market \u00a3m Diversified income fund 44 \u2013 139 \u2013 Fixed interest government bonds 86 \u2013 68 \u2013 Corporate bonds 87 \u2013 118 \u2013 Derivatives (15) (15) 1 1 Cash and cash equivalents 4 \u2013 4 \u2013 Pension scheme assets 206 (15) 330 1 Defined benefit obligation The calculation of the defined benefit obligation can be allocated to the Abbey Life Scheme\u2019s members as follows: \u2022 Deferred scheme members: 44% (2021: 44%); and \u2022 Pensioners: 56% (2021: 56%). The weighted average duration of the defined benefit obligation at 31 December 2022 is 13.5 years (2021: 16 years). Principal assumptions The principal financial assumptions of the Abbey Life Scheme are set out in the table below: 2022 % 2021 % Rate of increase for pensions in payment (5% per annum or RPI if lower) 3.05 3.20 Rate of increase for deferred pensions (CPI subject to caps) 2.70 2.70 Discount rate 4.95 2.00 Inflation \u2013 RPI 3.30 3.30 Inflation \u2013 CPI 2.70 2.70 The discount rate and inflation assumptions have been determined by considering the shape of the appropriate yield curves and the duration of the Abbey Life Scheme liabilities. This method determines an equivalent single rate for each of the discount and inflation rates, which is derived from the profile of projected benefit payments. The post-retirement mortality assumptions are in line with a scheme-specific table which was derived from the actual mortality experience in recent years, performed as part of the actuarial funding valuation as at 31 March 2021, using the SAPS S3 \u2018Light\u2019 tables for males and for females based on year of use. Future longevity improvements from 1 January 2021 are based on amended CMI 2021 Core Projections (2021: From 1 January 2021 based on amended CMI 2020 Core Projections) and a long-term rate of improvement of 1.5% (2021: 1.7%) per annum for males and 1.2% (2021: 1.2%) per annum for females. Under these assumptions the average life expectancy from retirement for a member currently aged 45 retiring at age 65 is 24.8 years and 25.9 years for male and female members respectively (2021: 24.9 years and 25.7 years respectively). A quantitative sensitivity analysis for significant actuarial assumptions is shown below:
2022
Assumptions
Base Discount rate RPI Life expectancy
Sensitivity level
25bps
increase
25bps
decrease
25bps
increase
25bps
decrease
1 year
increase
1 year
decrease
Impact on the defined benefit obligation (\u00a3m)
211
(7) 7
4 (4)
7 (7)
2021
Assumptions Base Discount rate RPI Life expectancy
Sensitivity level
25bps
increase
25bps
decrease
25bps
increase
25bps
decrease
1 year
increase
1 year
decrease
Impact on the defined benefit obligation (\u00a3m)
318
(12) 13
8 (9)
12 (12)
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and
changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions
the same method has been applied as when calculating the pension liability recognised within the statement of consolidated financial position.
G1.4 ReAssure Life Staff Pension Scheme
Scheme details
The ReAssure Scheme was consolidated within the Group financial statements following the acquisition of the ReAssure businesses on 22 July 2020.
The ReAssure Scheme is a registered occupational pension scheme, set up under trust, and legally separate from the employer ReAssure Midco Limited
(\u2018RML\u2019). The scheme is administered by ReAssure Pension Trustees Limited, a corporate trustee. There are six trustee directors, two of whom are nominated
by the ReAssure Scheme members and four of whom are appointed by RML. The trustee is responsible for administering the scheme in accordance with
the trust deed and rules and pensions laws and regulations. The ReAssure Scheme is closed to new entrants and to future accrual for active members.
The valuation has been based on an assessment of the liabilities of the ReAssure Scheme as at 31 December 2021 undertaken by independent qualified
actuaries. The present values of the defined benefit obligation and the related interest costs have been measured using the projected unit credit method.
Funding
The last funding valuation of the ReAssure Scheme was carried out by a qualified actuary as at 31 December 2020 and showed a deficit of \u00a377 million.
Following the completion of the 2020 valuation a recovery plan was agreed in September 2021 between the trustee and RML in order to make good the
deficit. RML has agreed to pay contributions of \u00a317.7 million into the existing Custody Account spread over four annual payments of \u00a34.425 million
payable on 1 April 2022, 1 April 2023, 1 April 2024 and 1 April 2025. It is anticipated that these payments will be sufficient to cover the difference between
the funding shortfall and the balance of the Custody Account at 31 December 2020 and to remove any remaining deficit at 31 December 2025.
The amounts held in this account do not form part of the Scheme\u2019s plan assets and are instead are held in the Custody Account and are included within
financial assets in the statement of consolidated financial position.
The Group agrees to cover those expenses incurred by the ReAssure Scheme and the cost of the death-in-service benefits for those members of the
scheme entitled to those benefits. Payments of \u00a32 million (2021:\u00a31 million) have been made during the year to cover these costs.
Summary of amounts recognised in the consolidated financial statements The amounts recognised in the consolidated financial statements are as follows: 2022 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Total \u00a3m At 1 January 492 (438) (19) 35 Interest income/(expense) 9 (9) \u2013 \u2013 Administrative expenses (1) \u2013 \u2013 (1) Included in profit or loss 8 (9) \u2013 (1) Remeasurements: Return on plan assets excluding amounts included in interest income (203) \u2013 \u2013 (203) Gain from changes in financial assumptions \u2013 188 \u2013 188 Experience loss \u2013 (19) \u2013 (19) Change in provision for tax on economic surplus available as a refund \u2013 \u2013 11 11 Included in other comprehensive income (203) 169 11 (23) Employer's contributions 3 \u2013 \u2013 3 Benefit payments (12) 12 \u2013 \u2013 At 31 December 288 (266) (8) 14 2021 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Total \u00a3m At 1 January 477 (461) (5) 11 Interest income/(expense) 6 (6) \u2013 \u2013 Administrative expenses (1) - \u2013 (1) Included in profit or loss 5 (6) \u2013 (1) Remeasurements: Return on plan assets excluding amounts included in interest income 19 \u2013 \u2013 19 Gain from changes in demographic assumptions \u2013 1 \u2013 1 Gain from changes in financial assumptions \u2013 20 \u2013 20 Experience loss \u2013 (2) \u2013 (2) Change in provision for tax on economic surplus available as a refund \u2013 \u2013 (14) (14) Included in other comprehensive income 19 19 (14) 24 Employer's contributions 1 \u2013 \u2013 1 Benefit payments (10) 10 \u2013 \u2013 At 31 December 492 (438) (19) 35 G1.4 ReAssure Life Staff Pension Scheme continued
Scheme assets
The distribution of the scheme assets at the end of the year was as follows:
2022 2021
Total
\u00a3m
Of which not
quoted in an
active market
\u00a3m
Total
\u00a3m
Of which not
quoted in an
active market
\u00a3m
Equities
31
\u2013
62
\u2013
Government bonds
121
\u2013
151
\u2013
Corporate bonds
83
\u2013
173
\u2013
Managed funds
\u2013
\u2013
60
\u2013
Other quoted securities
45
\u2013
43
\u2013
Cash and cash equivalents
8
\u2013
3
\u2013
Pension scheme assets
288
\u2013
492
\u2013
Defined benefit obligation
The calculation of the defined benefit obligation can be allocated to the ReAssure Scheme\u2019s members as follows:
\u2022 Deferred scheme members: 66% (2021: 66%); and
\u2022 Pensioners: 34% (2021: 34%).
The weighted average duration of the defined benefit obligation at 31 December 2022 is 17 years (2021: 21 years).
Principal assumptions
The principal assumptions of the ReAssure Scheme are set out in the table below:
2022
%
2021
%
Rate of increase for pensions in payment (5% per annum or RPI if lower)
3.05 3.20
Rate of increase for deferred pensions
2.70 2.70
Rate of increase in salaries
3.70 3.70
Discount rate
4.95 2.00
Inflation \u2013 RPI
3.30 3.30
Inflation \u2013 CPI
2.70 2.70
The discount rate and inflation assumptions have been determined by considering the shape of the appropriate yield curves and the duration of the
ReAssure Scheme liabilities. This method determines an equivalent single rate for each of the discount and inflation rates, which is derived from the profile
of projected benefit payments.
The post-retirement mortality assumptions are in line with SAPS Series 3 light base tables with a 102% (2021: 102%) multiplier for males and a 95%
(2021: 95%) multiplier for females, with CMI 2019 projections in line with a 1.5% pa long term trend up to and including 31 December 2020. Future
longevity improvements from 1 January 2021 onwards are in line with amended CMI 2021 Core Projections (2021: From 1 January 2021 in line with
amended CMI 2020 Core Projections) with a long-term trend of 1.5% pa (2021: 1.7%) for males and 1.2% (2021: 1.2%) for females.
Under these assumptions the average life expectancy from retirement for a member currently aged 45 retiring at age 60 is 30.0 years and 31.6 years
for male and female members respectively (2021: 30.1 years and 31.4 years for male and female members respectively).
A quantitative sensitivity analysis for significant actuarial assumptions is shown below: 2022 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 266 (10) 11 8 (8) 7 (7) 2021 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 438 (21) 23 18 (17) 18 (17) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension liability recognised within the statement of consolidated financial position. G2. Intangible assets Goodwill Business combinations are accounted for by applying the acquisition method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is measured on initial recognition at cost. Following initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is not amortised but is tested for impairment annually or when there is evidence of possible impairment. For impairment testing, goodwill is allocated to relevant cash generating units. Goodwill is impaired when the recoverable amount is less than the carrying value. In certain acquisitions an excess of the acquirer\u2019s interest in the net fair value of the acquiree\u2019s identifiable assets, liabilities, contingent liabilities and non- controlling interests over cost may arise. Where this occurs, the surplus of the fair value of net assets acquired over the fair value of the consideration is recognised in the consolidated income statement. Acquired in-force business Insurance and investment contracts with DPF acquired in business combinations and portfolio transfers are measured at fair value at the time of acquisition. The difference between the fair value of the contractual rights acquired and obligations assumed and the liability measured in accordance with the Group\u2019s accounting policies for such contracts is recognised as acquired in-force business. This acquired in-force business is amortised over the estimated life of the contracts on a basis which recognises the emergence of the economic benefits. The value of acquired in-force business related to investment contracts without DPF is recognised at its fair value and is amortised on a diminishing balance basis. An impairment review is performed whenever there is an indication of impairment. When the recoverable amount is less than the carrying value, an impairment loss is recognised in the consolidated income statement. Acquired in-force business is also considered in the liability adequacy test for each reporting period. The acquired in-force business is allocated to relevant cash generating units for the purposes of impairment testing. Customer relationships The customer relationship intangible asset includes vesting pension premiums and is measured on initial recognition at cost. The cost of this intangible asset acquired in a business combination is the fair value as at the date of acquisition. Following initial recognition, the customer relationship intangible asset is carried at cost less any accumulated amortisation and any accumulated impairment losses. The intangible asset is amortised on a straight-line basis over its useful economic life and assessed for impairment whenever there is an indication that the recoverable amount of the intangible asset is less than its carrying value. The customer relationship intangible asset is allocated to relevant cash generating units for the purposes of impairment testing. Brands and other contractual arrangements Brands and other contractual arrangements are measured on initial recognition at cost. The cost of an intangible asset acquired in a business combination is the fair value as at the date of the acquisition. The cost of an intangible asset acquired in exchange for a non-monetary asset is measured at fair value as at the date of the transaction. Following initial recognition, the brand and other contractual arrangement intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of brands and other contractual arrangements over their estimated useful lives. They are tested for impairment whenever there is evidence of possible impairment. For impairment testing, they are allocated to the relevant cash generating unit. Brands and other contractual arrangements are impaired when the recoverable amount is less than the carrying value. Other intangibles 2022 Goodwill \u00a3m Acquired in- force business \u00a3m Customer relationships \u00a3m Brands and other \u00a3m Total other intangibles \u00a3m Total \u00a3m Cost or valuation at 1 January and 31 December 57 7,007 297 131 428 7,492 Amortisation and impairment At 1 January (47) (2,630) (183) (13) (196) (2,873) Amortisation charge for the year \u2013 (488) (15) (6) (21) (509) Impairment charge for the year \u2013 (17) \u2013 \u2013 \u2013 (17) At 31 December (47) (3,135) (198) (19) (217) (3,399) Carrying amount 10 3,872 99 112 211 4,093 Less amounts classified as held for sale (see note A6.1) \u2013 (37) \u2013 \u2013 \u2013 (37) Carrying amount at 31 December 10 3,835 99 112 211 4,056 Amount recoverable after 12 months 10 3,382 84 106 190 3,582 Other intangibles 2021 Goodwill \u00a3m Acquired in- force business \u00a3m Customer relationships \u00a3m Brands and other \u00a3m Total other intangibles \u00a3m Total \u00a3m Cost or valuation At 1 January 57 7,028 297 56 353 7,438 Acquisition of ReAssure businesses \u2013 \u2013 \u2013 111 111 111 Disposal of Ark Life \u2013 (21) \u2013 \u2013 \u2013 (21) Termination of Client Services Proposition Agreement \u2013 \u2013 \u2013 (36) (36) (36) At 31 December 57 7,007 297 131 428 7,492 Amortisation and impairment At 1 January \u2013 (2,015) (168) (14) (182) (2,197) Amortisation charge for the year \u2013 (537) (15) (5) (20) (557) Impairment charge for the year 1 (47) (99) \u2013 \u2013 \u2013 (146) Disposal of Ark Life \u2013 21 \u2013 \u2013 \u2013 21 Termination of Client Services Proposition Agreement \u2013 \u2013 \u2013 6 6 6 At 31 December (47) (2,630) (183) (13) (196) (2,873) Carrying amount 10 4,377 114 118 232 4,619 Less amounts classified as held for sale (see note A6.1) \u2013 (54) \u2013 \u2013 \u2013 (54) Carrying amount at 31 December 10 4,323 114 118 232 4,565 Amount recoverable after 12 months 10 3,834 99 112 211 4,055 1 An impairment charge of \u00a359 million in acquired in-force business has been included within the \u2018gain on completion of abrdn plc transaction\u2019 in the consolidated income statement, see note G2.2 for further details . G2.1 Goodwill The carrying value of goodwill has been tested for impairment at the year end and the results of this exercise are detailed below. Goodwill with a carrying value of \u00a310 million (2021: \u00a310 million) was recognised on the acquisition of AXA Wealth during 2016 and has been allocated to the UK Open segment. This represents the value of the workforce assumed and the potential for future value creation, which relates to the ability to invest in and grow the SunLife brand. Value in use has been determined as the present value of certain future cash flows associated with that business. The cash flows used in the calculation are consistent with those adopted by management in the Group\u2019s operating plan, and for the period 2028 and beyond, assume a zero growth rate. The underlying assumptions of these projections include market share, customer numbers, commission rates and expense inflation. The cash flows have been valued at a risk adjusted discount rate of 14% (2021: 11%) that makes prudent allowance for the risk that future cash flows may differ from that assumed. This test demonstrated that value in use was greater than carrying value. Given the magnitude of the excess of the value in use over carrying value, management does not believe that a reasonably foreseeable change in key assumptions would cause the carrying value to exceed value in use. Goodwill with a cost of \u00a347 million attributed to the Management Services segment was fully impaired during the year ended 31 December 2021. The Management Services segment generated income solely from the services provided to other operating segments within the Group. As a result of planned investment in the Group\u2019s growth agenda, including the development of capabilities of the Open segment and certain Group functions, it was anticipated that the Management Services segment would generate short-term losses in the period until service agreements could be renegotiated. Together with the effect of the expected run-off of the relevant Phoenix Life insurance business, these anticipated short-term losses resulted in an assessment of the recoverable amount of the goodwill to be \u00a3nil as at 31 December 2021 and consequently a \u00a347 million impairment charge was recognised. Value in use was determined as the present value of certain future cash flows associated with this business. The cash flows used in this calculation were valued using a risk adjusted discount rate of 9.5% and were consistent with those adopted by management in the Group's three year operating plan and, for the period 2027 and beyond, reflected the anticipated run-off of the Phoenix Life insurance business. The underlying assumptions of these projections include management\u2019s best estimates with regards to longevity, persistency, expenses, mortality and morbidity, determined on the basis as described in note F4.1. G2.2 Acquired in-force business Acquired in-force business (\u2018AVIF\u2019) on insurance contracts and investment contracts with DPF represents the difference between the fair value of the contractual rights under these contracts and the liability measured in accordance with the Group\u2019s accounting policies for such contracts. This intangible is being amortised in accordance with the run-off of the book of business. AVIF on investment contracts without DPF is amortised in line with emergence of economic benefits. AVIF balances are assessed for impairment where an indicator of impairment has been identified. The following paragraphs set out the impairment indicators identified and the results of the impairment tests carried out. On 23 February 2021, the Group entered into an agreement with abrdn plc to simplify the arrangements of their Strategic Partnership (see note A6.1 for further details). Under the terms of the transaction, the Group will sell its UK investment and platform related products, comprising Wrap SIPP, Onshore bond and UK TIP to abrdn plc and this will be effected through a Part VII transfer. The balances in the statement of consolidated financial position relating to this business were classified as a disposal group held for sale in February 2021. The total proceeds of disposal for this business are not expected to exceed the carrying value of the related net assets and accordingly the disposal group has been recognised at fair value less costs to sell. The value of the AVIF at 23 February 2021 was \u00a3122 million and an impairment charge of \u00a359 million was recognised in 2021 on classification of the AVIF balance as held for sale. This charge was included within the \u2018gain on completion of abrdn plc transaction\u2019 in the consolidated income statement. A further impairment of \u00a317 million has been recognised during the year (2021: \u00a38 million). The AVIF balance classified as held for sale is not being amortised. In June 2021, following the Group Board\u2019s approval to dispose of Ark Life Assurance Company DAC, the entity was initially classified as a disposal group held for sale. The proceeds of disposal were not expected to exceed the carrying value of the related net assets and accordingly the disposal group was measured at fair value less costs to sell. In 2021, an impairment charge of \u00a318 million was recognised in respect of the AVIF upon classification of the business as held for sale and recognised within \u2018amortisation and impairment of acquired in-force business\u2019 in the consolidated income statement. In 2021, updates to the reserving methodology in respect of certain blocks of European insurance contracts resulted in a release of reserves of \u00a320 million. This release of reserves was considered to be an indicator of impairment in relation to a component of the AVIF recognised on acquisition of the Standard Life Assurance businesses as it represented an acceleration of the recognition of profits that had been capitalised within the AVIF. Accordingly, an impairment test was performed. The value in use of the AVIF was determined using present value techniques applied to the best estimate cash flows expected to arise from the relevant policies that were in-force at the date of initial recognition of the AVIF, adjusted to reflect an internal view of the required compensation for bearing the uncertainty associated with those cash flows. The key underlying assumptions were management\u2019s best estimates with regards to persistency and expenses, which were determined on the basis as described in note F4.1. It was determined that the carrying value exceeded value in use by \u00a314 million and consequently an impairment charge was recognised. The resultant net carrying value of this component of the Standard Life Assurance AVIF at 31 December 2021 was \u00a349 million. G2.3 Customer relationships The customer relationships intangible at 31 December 2022 relates to vesting pension premiums which captures the new business arising from policies in-force at the acquisition date, specifically top-ups made to existing policies and annuities vested from matured pension policies. The total value of this customer relationship intangible at acquisition was \u00a3297 million and has been allocated to the UK Heritage segment. This intangible is being amortised over a 20 year period, and had a remaining useful life as at 31 December 2022 of 6.9 years (2021: 7.9 years). G2.4 Brands and other intangibles An intangible asset is recognised at cost on acquisition of the AXA Wealth and represents the value attributable to the SunLife brand as at 1 November 2016. The intangible asset was valued on a \u2018multi-period excess earnings\u2019 basis and was recognised at a cost of \u00a320 million. Impairment testing was performed in a combined test with the AXA goodwill (see section G2.1). The value in use continues to exceed its carrying value. This brand intangible is being amortised over a 10 year period. The carrying value of the AXA Wealth brand as at 31 December 2022 is \u00a38 million. Following the acquisition of the Standard Life Assurance businesses in 2018 an intangible asset was recognised in respect of the Client Services and Proposition Agreement (\u2018CSPA\u2019) with abrdn plc and represented the value of the Group\u2019s contractual rights to use the Standard Life brand. The CSPA formalised the Strategic Partnership between the two companies and established the contractual terms by which abrdn plc was previously to continue to market and distribute certain products to be manufactured by Group companies. On 23 February 2021, the Group entered into an agreement to acquire ownership of the Standard Life brand as part of the transaction with abrdn plc, which transferred to the Group in May 2021. The Standard Life brand was initially recognised at a value of \u00a3111 million which represented the fair value attributable to the brand as at the transaction date. The intangible asset was valued on a \u2018multi-period excess earnings\u2019 basis and is being amortised over a period of 30 years. The carrying value of the Standard Life brand as at 31 December 2022 is \u00a3104 million. As part of the transaction with abrdn plc, the CSPA was significantly amended prior to being dissolved. As a consequence, the CSPA intangible included within \u2018other intangibles\u2019 was derecognised. At that time, its carrying value was \u00a330 million and this was included in the calculation of the \u2018gain on completion of abrdn plc transaction\u2019 recognised in the consolidated income statement in the year ended 31 December 2021. G3. Property, plant and equipment Owner-occupied property is stated at its revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and impairment. Owner-occupied property is depreciated over its estimated useful life, which is taken as 20 \u2013 50 years. Land is not depreciated. Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the owner-occupied property and the net amount is restated to the revalued amount of the asset. Gains and losses on owner-occupied property are recognised in other comprehensive income. The right-of-use assets are initially measured at cost, and subsequently at cost less any accumulated depreciation and impairments, and adjusted for certain remeasurements of the lease liability. The right-of-use assets are depreciated over the remaining lease term which is between 1 and 11 years (2021: 1 and 11 years). Equipment consists primarily of computer equipment and fittings. Equipment is stated at historical cost less deprecation. Where acquired in a business combination, historical cost equates to the fair value at the acquisition date. Depreciation on equipment is charged to the consolidated income statement over its estimated useful life of between 2 and 15 years. 2022
Owner-occupied
properties
\u00a3m
Right-o
-use assets
\u2013 property
\u00a3m
Right-o
-use assets
\u2013 equipment
\u00a3m
Equipment
\u00a3m
Total
\u00a3m
Cost or valuation
At 1 January
29 94 2 59 184
Additions
9 3 \u2013 8 20
Revaluation losses
(6) \u2013 \u2013 \u2013 (6)
Disposals
\u2013 (1) \u2013 (2) (3)
At 31 December
32 96 2 65 195
Depreciation
At 1 January
\u2013
(24) (1) (29) (54)
Depreciation
\u2013
(9) \u2013 (10) (19)
Disposals
\u2013
1 \u2013 2 3
At 31 December \u2013
(32) (1) (37) (70)
Carrying amount at 31 December
32 64 1 28 125
2021
Owner-occupied
properties
\u00a3m
Right-of-use assets
\u2013 property
\u00a3m
Right-of-use assets
\u2013 equipment
\u00a3m
Equipment
\u00a3m
Total
\u00a3m
Cost or valuation
At 1 January
33 78 2 54 167
Additions
1 22
\u2013
12 35
Remeasurement of Right-of-use assets
\u2013 3
\u2013
\u2013 3
Disposals
(5) (9)
\u2013
(7) (21)
At 31 December
29 94 2 59 184
Depreciation
At 1 January \u2013
(23) \u2013 (25) (48)
Depreciation
\u2013
(9) (1) (8) (18)
Disposals \u2013
8 \u2013 4 12
At 31 December \u2013
(24) (1) (29) (54)
Carrying amount at 31 December
29 70 1 30 130
Owner-occupied properties have been valued by accredited independent valuers at 31 December 2022 on an open market basis in accordance with
the Royal Institution of Chartered Surveyors\u2019 requirements, which is deemed to equate to fair value. The fair value measurement for the properties of
\u00a332 million (2021: \u00a329 million) has been categorised as Level 3 based on the non-observable inputs to the valuation technique used. Unrealised loss for
the current year is \u00a36 million (2021: \u00a3nil).
G3. Property, plant and equipment
The fair value of the owner-occupied properties was derived using the investment method supported by comparable evidence. The significant non-
observable inputs used in the valuations are the expected rental values per square foot and the capitalisation rates.
The fair value of the owner-occupied properties valuation would increase (decrease) if the expected rental values per square foot were to be higher
(lower) and the capitalisation rates were to be lower (higher).
G4. Investment property
Investment property, including right-of-use asset, is initially recognised at cost, including any directly attributable transaction costs. Subsequently
investment property is measured at fair value. Fair value is the price that would be received to sell a property in an orderly transaction between market
participants at the measurement date. Fair value is determined without any deduction for transaction costs that may be incurred on sale or disposal.
Gains and losses arising from the change in fair value are recognised as income or an expense in the statement of comprehensive income.
Investment property includes right-of-use assets, where the Group acts as lessee. Leases, where a significant portion of the risks and rewards of ownership are
retained by the lessor, are classified as operating leases. Where investment property is leased out by the Group, rental income from these operating leases
is recognised as income in the consolidated income statement on a straight-line basis over the period of the lease.
2022
\u00a3m
2021
\u00a3m
At 1 January
8,592 7,128
Additions
104 819
Improvements
27 22
Disposals
(1,141) (550)
Remeasurement of right-of-use asset
2 (1)
Movement in foreign exchange
12 (22)
(Losses)/gains on adjustments to fair value (recognised in consolidated income statement)
(1,363) 1,196
6,233 8,592
Less amounts classified as held for sale (see note A6.1)
(2,506) (3,309)
At 31 December
3,727 5,283
Unrealised (losses)/gains on properties held at end of year
(1,582) 529
As at 31 December 2022, a property portfolio including amounts classified held for sale of \u00a36,070 million (2021: \u00a38,412 million) is held by the life
companies in a mix of commercial sectors, spread geographically throughout the UK and Europe.
Investment properties also includes \u00a362 million (2021: \u00a373 million) of property reversions arising from sales of the NPI Extra Income Plan (see note E5 for
further details) and \u00a380 million (2021: \u00a386 million) from the Group\u2019s interest in the residential property of policyholders who have previously entered into
an Equity Release Income Plan (\u2018ERIP\u2019) policy.
Certain investment properties held by the life companies possess a ground rent obligation which gives rise to both a right-of-use asset and a lease liability.
The right-of-use asset associated with the ground rent obligation is valued at fair value and is included within the total investment property valuation.
The value of the ground rent right-of-use asset as at 31 December 2022 was \u00a321 million (2021: \u00a321 million). The remeasurement gives rise to an increase of
\u00a32 million (2021: reduction of \u00a31 million). There were \u00a32 million additions (2021: \u00a34 million) and \u00a34 million disposals (2021: \u00a3nil) of ground rent right-of-use
assets during the period.
Commercial investment property is measured at fair value by independent property valuers having appropriate recognised professional qualifications
and recent experiences in the location and category of the property being valued. The valuations are carried out in accordance with the Royal Institute
of Chartered Surveyors (\u2018RICS\u2019) guidelines with expected income and capitalisation rate as the key non-observable inputs.
The NPI residential property reversions, an interest in customers\u2019 properties which the Group will realise upon their death, are valued using a discounted
cash flow model based on the Group\u2019s proportion of the current open market value, and discounted for the expected lifetime of the policyholder derived
from published mortality tables. The open market value is measured by independent local property surveyors having appropriate recognised professional
qualifications with reference to the assumed condition of the property and local market conditions. The individual properties are valued triennially and
indexed using regional house price indices to the year end date. The discount rate is a risk-free rate appropriate for the duration of the asset, adjusted for
the deferred possession rate of 3.7% (2021: 3.7%). Assumptions are also made in the valuation for future movements in property prices, based on a risk free
rate. The residential property reversions have been substantially refinanced under the arrangements with Santander as described in note E5.
The ERIP residential property reversions, an interest in the residential property of policyholders who have previously entered into an ERIP policy and been
provided with a lifetime annuity in return for the legal title to their property, are valued using unobservable inputs and management\u2019s best estimates. As the
inward cash flows on these properties will not be received until the lifetime lease is no longer in force, which is usually upon the death of the policyholder,
these interests are valued on a reversionary basis which is a discounted current open market value.
The open market values of the properties are independently revalued every two years by members of the Royal Institution of Chartered Surveyors and in the intervening period are adjusted by reference to the Nationwide Building Society regional indices of house prices. The discount period is based on the best estimates of the likely date the property will become available for sale and the discount rate applied is determined by the general partner as its best estimate of the appropriate discount rate. The mortality assumption is based on the PMLO8HAWP table for males and the PFLO8HAWP table for females, adjusted to reflect the historic experience of the business concerned. The mortality rates are projected using future mortality improvements from the CMI Mortality Projection Model. No explicit allowance is made for house price inflation in the year through to their realisation. Therefore, the key assumptions used in the valuation of the reversionary interests are the interest discount rate and the mortality assumption. The interest discount rate was 5% (2021: 5%). The fair value measurement of the investment properties has been categorised as Level 3 based on the inputs to the valuation techniques used. The following table shows the valuation techniques used in measuring the fair value of the investment properties, the significant non-observable inputs used, the inter- relationship between the key non-observable inputs and the fair value measurement of the investment properties: Description Valuation techniques Significant non-observable inputs Weighted average 2022 Weighted average 2021 Commercial Investment Property RICS valuation Expected income per sq. ft. \u00a322.41 \u00a321.36 Estimated rental value per hotel room \u00a37,043 \u00a38,534 Estimated rental value per parking space \u00a31,115 \u00a31,097 Capitalisation rate 5.01% 4.65% The estimated fair value of commercial properties would increase (decrease) if: \u2022 the expected income were to be higher (lower); or \u2022 the capitalisation rate were to be lower (higher). The estimated fair value of the NPI residential property reversions would increase (decrease) if: \u2022 the deferred possession rate were to be lower (higher); \u2022 the mortality rate were to be higher (lower). The estimated fair value of the ERIP residential property reversions would increase (decrease) if: \u2022 the discount rate were to be lower (higher); \u2022 the mortality rate were to be higher (lower). Direct operating expenses (offset against rental income in the consolidated income statement) in respect of investment properties that generated rental income during the year amounted to \u00a327 million (2021: \u00a341 million). The direct operating expenses arising from investment property that did not generate rental income during the year amounted to \u00a35 million (2021: \u00a31 million). Future minimum lease rental receivables in respect of non-cancellable operating leases on investment properties were as follows: 2022 \u00a3m 2021 \u00a3m Not later than 1 year 356 323 Later than 1 year and not later than 5 years 1,131 1,032 Later than 5 years 3,345 3,128 G5. Other receivables Other receivables are recognised when due and measured on initial recognition at the fair value of the amount receivable. Subsequent to initial recognition, these receivables are measured at amortised cost using the effective interest rate method. 2022 \u00a3m 2021 \u00a3m Investment broker balances 312 249 Cash collateral pledged and initial margins posted 3,698 958 Property related receivables 145 177 Deferred acquisition costs 133 108 Other debtors 323 313 4,611 1,805 Amount recoverable after 12 months 122 100G6. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term deposits with an original maturity term of three months or less at the date of placement.
Bank overdrafts that are repayable on demand and form an integral part of the Group\u2019s cash management are deducted from cash and cash equivalents
for the purpose of the statement of consolidated cash flows.
2022
\u00a3m
2021
\u00a3m
Bank and cash balances
2,716 5,246
Short-term deposits (including notice accounts and term deposits)
6,156 3,942
8,872 9,188
Less amounts classified as held for sale
(33) (76)
At 31 December
8,839 9,112
Deposits are subject to a combination of fixed and variable interest rates. The carrying amounts approximate to fair value at the period end. Cash and cash
equivalents in long-term business operations and consolidated collective investment schemes of \u00a38,597 million (2021: \u00a38,707 million) are primarily held for
the benefit of policyholders and so are not generally available for use by the owners.
G7. Provisions
A provision is recognised when the Group has a present legal or constructive obligation, as a result of a past event, which is likely to result in an outflow of
resources and where a reliable estimate of the amount of the obligation can be made. If the effect is material, the provision is determined by discounting
the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks
specific to the liability.
A provision is recognised for onerous contracts when the expected benefits to be derived from the contracts are less than the related unavoidable costs.
The unavoidable costs reflect the net cost of exiting the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising
from failure to fulfil it.
Where it is expected that a part of the expenditure required to settle a provision will be reimbursed by a third party the reimbursement is recognised
when, and only when, it is virtually certain that the reimbursement will be received. This reimbursement is recognised as a separate asset within other
receivables and will not exceed the amount of the provision.
Restructuring provisions
2022
Leasehold
properties
\u00a3m
Staff
related
\u00a3m
Known
incidents
\u00a3m
Input VAT
recovery
provision
\u00a3m
Operational
tax provision
\u00a3m
Transition and
Transformation
provision
\u00a3m
Transfer of
policy
administration
provision
\u00a3m
ReAssure
provision
\u00a3m
Other
1
\u00a3m
Total
1
\u00a3m
At 1 January
8 9 46 17 12 92 35 2 14 235
Additions in the year
1
\u2013
25
\u2013 \u2013
33 13 \u2013 11 83
Utilised during the year \u2013 \u2013
(8)
\u2013 \u2013
(28) (15) (2) (13) (66)
Released during the year
\u2013
(2) (15)
\u2013 \u2013 \u2013 \u2013 \u2013
(1) (18)
At 31 December
9 7 48 17 12 97 33 \u2013 11 234
1 Other and total provisions excludes amounts classified as held for sale as at 31 December 2022 of \u00a3nil (2021: \u00a32 million).
Leasehold properties
The leasehold properties provision includes a \u00a37 million (2021: \u00a37 million) dilapidations provision in respect of obligations under operating leases and
\u00a32 million (2021: \u00a31 million) in respect of the excess of lease rentals and other payments on properties that are currently vacant or are expected to become
vacant, over the amounts to be recovered from subletting these properties.
Staff related
Staff related provisions include provisions for unfunded pensions of \u00a34 million (2021: \u00a35 million), and private medical and other insurance costs for former
employees of \u00a33 million (2021: \u00a34 million).
Known incidents
The known incidents provision was created for historical data quality, administration systems problems and process deficiencies on the policy
administration, financial reconciliations and operational finance aspects of business outsourced. These balances represent the best estimates of costs
payable to customers. Additional information has been given below in respect of the more significant balances within this provision.
During 2021, a \u00a315 million provision was recognised in relation to errors in final encashment calculations for With Profits Trustee Investment Plans. During
2022, this provision was increased to \u00a329 million following a review of the calculations which have now been finalised and agreed. An \u00a311 million provision
was also recognised in April 2021 following identification that certain customers who have a Protected Pension Age or a Protected Tax Free Lump Sum
may not have had their benefits settled correctly. During 2022, this provision reduced to \u00a37 million following the release of \u00a34 million after further
investigation deemed that one population of customers were no longer impacted. These provisions will be utilised within 2 to 5 years.
In 2020, following completion of the Part VII transfer of the Legal & General business, a \u00a312 million provision was recognised in respect of amounts owed to
customers due to various system and processing errors resulting in incorrect rules having been applied to policies. During the year, \u00a33 million (2021: \u00a32 million),
of the remaining \u00a39 million provision was utilised and a further \u00a34 million (2021: \u00a31 million) was released. It is expected that the remaining balance of
\u00a32 million (2021: \u00a39 million) will be fully utilised within one year.
The remaining provisions of \u00a310 million as at 31 December 2022 (2021: \u00a310 million) are expected to be utilised within one to five years. As at 31 December 2022,
there are no significant uncertainties which could give rise to a material change to the value of the provisions held for current known incidents.
Input VAT recovery provision
The provision of \u00a317 million (2021: \u00a317 million) reflects the potential outcome of on-going negotiations with HMRC in relation to the changes to the Partial
Exemption Special Method (\u2018PESM\u2019) necessitated by the addition of the Standard Life entities to the Phoenix VAT Group. The provision reflects the fact
that whilst Phoenix considers its proposal for the recovery of VAT on costs incurred by Standard Life Assets & Employee Services Limited (\u2018SLAESL\u2019) to
be fair and reasonable, the revised PESM remains to be agreed and HMRC may take a different view. The current provision reflects the Group\u2019s maximum
exposure as at the reporting date, and was increased by \u00a3nil million (2021: \u00a32 million) in the year. It is currently expected that the provision will be utilised
within one to two years.
Operational tax provision
The operational tax provision relates to potential tax penalties payable to HMRC following failure to notify certain customers of changes to their lifetime
allowance usage. The Group is currently in discussion with HMRC in respect of these items and the provision represents the Group\u2019s best estimate of the
maximum exposure as at the reporting date. The balance at 31 December 2022 of \u00a312 million (2021: \u00a312 million) is expected to be utilised within one to
two years.
Restructuring provisions
Transition and Transformation provision
Following the acquisition of the Standard Life Assurance businesses in August 2018, the Group established a transition and transformation programme
which aims to deliver the integration of the Group\u2019s operating models via a series of phases. During 2019, the Group announced its intention to extend
its strategic partnership with TCS to provide customer servicing, to develop a digital platform and for migration of existing Standard Life policies to this
platform by 2022 which raised a valid expectation of the impacts in those likely to be affected.
An initial provision of \u00a3159 million was established in 2019 and included migration costs, severance costs and other expenses. Migration costs are
considered a direct expenditure necessarily entailed by the restructuring and represent an obligation arising from arrangements entered into with TCS
during 2019. No costs have been provided for that relate to the ongoing servicing of policies. Migration costs payable to TCS are subject to limited
uncertainty as they are fixed under the terms of the agreement entered into. There was an increase in costs during 2022 following on from a strategic
decision to re-phase the programme. The severance costs are subject to uncertainty and will be impacted by the number of staff that transfer to TCS,
and the average salaries and number of years\u2019 service of those affected. A 10% increase in the number of staff subject to redundancy, based on an average
length of service and salary, would increase the provision by \u00a34 million.
During the year, the provision was increased by \u00a333 million (2021: \u00a3nil) and a further \u00a328 million (2021: \u00a317 million) was utilised. The remaining \u00a397 million
(2021: \u00a392 million) is expected to be utilised within one to three years.
Transfer of policy administration
A significant proportion of the Group\u2019s policy administration is outsourced to Diligenta Limited (\u2018Diligenta\u2019), a UK-based subsidiary of Tata Consultancy Services
(\u2018TCS\u2019). Diligenta provide life and pension business process services to a large number of the Group\u2019s policyholders. During 2018, the Group announced its
intention to move to a single outsourcer platform and to transfer a further \u00a32 million of the Group\u2019s legacy policies to Diligenta by 31 December 2021.
An initial provision of \u00a376 million was recognised in 2018 for the expected cost of the platform migration and for severance and other costs associated with
exiting from the current arrangements. Migration costs are considered a direct expenditure necessarily entailed by the restructuring and represent an
obligation arising from arrangements entered into with TCS during 2018. No costs have been provided for that relate to the ongoing servicing of policies.
The migration elements of the provision are subject to limited uncertainty as a consequence of the signed agreements that are in place. There is a higher
degree of uncertainty in relation to the severance and associated exit costs which will be impacted by the number of staff that ultimately transfer to
Diligenta. A 10% increase in the level of severance and exit costs would increase the provision by \u00a31 million. During the year the provision was increased by
\u00a313 million (2021: \u00a39 million) and a further \u00a315 million (2021: \u00a39 million) was utilised. The remaining provision of \u00a333 million (2021: \u00a335 million) is expected to
be utilised within two years.
ReAssure restructuring provision
During 2020 a \u00a37 million restructuring provision was established in respect of ReAssure Life Limited (\u2018RLL\u2019) to cover severance costs. The remaining
provision of \u00a32 million was fully utilised during the year.
Other provisions
Other provisions includes \u00a34 million (2021: \u00a34 million) of obligations arising under a gift voucher scheme operated by the SunLife business and a
commission clawback provision which represents the expected future clawback of commission income earned by the SunLife business as a result
of assumed lapses of policies or associated benefits.
The remaining other provisions of \u00a37 million (2021: \u00a310 million) consist of a number of small balances all of which are less than \u00a32 million in value.
Discounting
The impact of discounting on all provisions during the year from the either the passage of time or from a change in the discount rate is not material.
G8. Tax assets and liabilities
Deferred tax is provided for on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. Deferred tax is not provided in respect of temporary differences arising from the initial recognition of goodwill
and the initial recognition of assets or liabilities in a transaction that is not a business combination and that, at the time of the transaction, affects neither
accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount
of assets and liabilities, using tax rates and laws enacted or substantively enacted at the period end.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.
Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
2022
\u00a3m
2021
\u00a3m
Current tax:
Current tax receivable
519 419
Current tax payable
(34) (19)
Deferred tax:
Deferred tax assets
158 \u2013
Deferred tax liabilities
(660) (1,399)
Movement in deferred tax liabilities
2022
1 January
\u00a3m
Recognised
in
consolidated
income
statement
\u00a3m
Recognised
in other
comprehensive
income
\u00a3m
Other
movements
\u00a3m
Less amounts
classified as
held for sale
\u00a3m
31 December
\u00a3m
Trading losses
109 81 \u2013 8 \u2013 198
Capital losses
32 (8) \u2013 \u2013 \u2013 24
Expenses and deferred acquisition costs carried forward
57 315 \u2013 (1) \u2013 371
Provisions and other temporary differences
135 (10) \u2013 (2) \u2013 123
Non refundable pension scheme surplus
(255) 391 (287) \u2013 \u2013 (151)
Committed future pension contributions
\u2013 5 4 \u2013 \u2013 9
Accelerated capital allowances
16 1 \u2013 \u2013 \u2013 17
Intangibles
35 (5) \u2013 2 \u2013 32
Acquired in-force business
(878) 68 \u2013 \u2013 (3) (813)
Customer relationships
(57) 4 \u2013 \u2013 \u2013 (53)
Unrealised gains
(593) 333 1 (2) \u2013 (261)
IFRS transitional adjustments
(5) 5 \u2013 \u2013 \u2013 \u2013
Other
5 (4) \u2013 1 \u2013 2
(1,399) 1,176 (282) 6 (3) (502)
2021
1 January
\u00a3m
Recognised
in consolidated
income
statement
\u00a3m
Recognised
in other
comprehensive
income
\u00a3m
Other
movements
\u00a3m
Less amounts
classified as
held for sale
\u00a3m
31 December
\u00a3m
Trading losses
30 80 \u2013 (1) \u2013 109
Capital losses
36 (4) \u2013 \u2013 \u2013 32
Expenses and deferred acquisition costs carried forward
42 15 \u2013 \u2013 \u2013 57
Provisions and other temporary differences
129 5 \u2013 1 \u2013 135
Non refundable pension scheme surplus
(128) 13 (140) \u2013 \u2013 (255)
Pension scheme deficit
13 (16) 3 \u2013 \u2013 -
Accelerated capital allowances
8 8 \u2013 \u2013 \u2013 16
Intangibles
39 (2) \u2013 (2) \u2013 35
Acquired in-force business
(798) (90) \u2013 \u2013 10 (878)
Customer relationships
(33) (24) \u2013 \u2013 \u2013 (57)
Unrealised gains
(365) (230) \u2013 2 \u2013 (593)
IFRS transitional adjustments
(10) 5 \u2013 - \u2013 (5)
Other
1 \u2013 \u2013 4 \u2013 5
(1,036) (240) (137) 4 10 (1,399)
The standard rate of UK Corporation tax for the year ended 31 December 2022 is 19% (year ended 31 December 2021: 19%).
An increase from the current 19% UK corporation tax rate to 25%, effective from 1 April 2023, was announced in the Budget on 3 March 2021, and
substantively enacted on 24 May 2021. Accordingly, shareholder deferred tax assets and liabilities, where provided, are reflected at rates between 19%
and 25% depending on the expected timing of the reversal of the relevant temporary difference. Deferred income tax assets are recognised for tax losses
carried forward only to the extent that realisation of the related tax benefit is probable.
2022
\u00a3m
2021
\u00a3m
Deferred tax assets have not been recognised in respect of:
Tax losses carried forward
73 55
Excess expenses and deferred acquisition costs
112 9
Intangibles
11 9
Deferred tax assets not recognised on capital losses
1
40 29
Other
6 \u2013
1 These can only be recognised against future capital gains and have no expiry date.
The Group also has \u00a3456 million (2021: \u00a3109 million) of BLAGAB (life business) trading losses carried forward as at 31 December 2022 across across ReAssure Limited, Phoenix Life Limited and Phoenix Life Assurance Limited. \u00a3291 million of gross losses are projected to be utilised within these entities, however no value has been attributed to these deferred tax assets given the interaction with other deductible temporary differences (2021: \u00a3109 million of gross losses were projected to be utilised and deferred tax assets of \u00a35 million were recognised). Deferred tax assets have not been recognised in respect of the remaining \u00a3165 million (2021: \u00a3nil) losses due to the uncertainty of future BLAGAB trading profits arising against which the losses could be offset (at entity level). Deferred tax assets valued at \u00a37 million have been recognised in respect of \u00a3156 million (2021: \u00a3nil) arising from the interaction with other deductible timing differences on consolidation. There is a technical matter which is currently being discussed with HMRC in relation to the L&G insurance business transfer to ReAssure Limited. These discussions are not sufficiently progressed at this stage for recognition of any potential tax benefit arising. A tax dispute with HMRC in relation to the tax treatment of an asset formerly held by Guardian Assurance Limited (before the business was transferred to ReAssure Limited) was resolved in the period in favour of the Group. The 2021 current tax liability included an accrual for the total tax under dispute on the basis that there was sufficient risk that the tax treatment of the Group would not then be accepted. In 2022 this tax liability was released. The Group in conjunction with a number of other companies has challenged HMRC\u2019s position on the corporation tax treatment of overseas portfolio dividends from companies resident in the EU (\u2018EU dividends') using a Group Litigation Order (\u2018GLO\u2019). The issue relates to whether the UK tax rules, which taxed EU dividends received prior to 1 July 2009, was contrary to EU law given that dividends received from UK companies were exempt from tax. In 2009 UK tax law was changed with both overseas and UK dividends being treated as exempt from corporation tax. In July 2018, the Supreme Court concluded in favour of the tax payer and a tax benefit of \u00a313 million was recognised at the end of 2018 in relation to enhanced double tax relief claims which the Group is entitled to in accordance with the Court judgement. As a result of the insurance business transfer from Legal and General Assurance Society during 2020, the tax refund for the benefit of the Group\u2019s with-profit and unit linked funds increased to \u00a345 million and \u00a323 million respectively. In the case of the with-profit funds there was an increase in unallocated surplus and for the unit linked funds there was a corresponding increase in investment contract liabilities as a result of the recognition of the tax asset. In January 2020, HMRC issued a communication to taxpayers who are affected by the dividend GLO but are not direct participants of it, setting out HMRC\u2019s intended approach to settling enquiries into the amount of double tax relief available for statutory protective or other claims. The Group has been discussing the claims with HMRC during the course of 2022, but due to the significant number of cases and years affected, no amounts have as yet been repaid. The level of tax refund expected is currently unchanged as at the end of 2022. Some companies of the Group were late joiners or not members of the GLO but have made statutory protective tax claims totalling circa \u00a314 million for the benefit of unit linked life funds based on the Supreme Court decision. HMRC has challenged the validity of such claims and is currently considering further tax litigation in this area against other third parties. Some progress through the courts has been made in the course of 2022, but it is expected that the litigation will continue to run. Due to the uncertainty around the potential success of the claims a tax asset has not been recognised in respect of these claims. G9. Payables related to direct insurance contracts Payables related to direct insurance contracts primarily include outstanding claims provisions. Outstanding claims under insurance and investment contracts with DPF are valued using a best estimate method under IFRS 4 Insurance Contracts. Outstanding claims under investment contracts without DPF are measured at full settlement value in accordance with IAS 39 Financial Instruments: Recognition and Measurement. 2022 \u00a3m 2021 \u00a3m Payables related to direct insurance contracts 1,964 1,864 G10. Lease liabilities
The operating lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
using the Group\u2019s incremental borrowing rate as the interest rate implicit in the lease cannot be readily determined. For ground rent leases classified as
finance leases, the incremental borrowing rate of investment funds holding the associated investment properties is used as the discount rate. The lease
liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a
change in future lease payments arising from, for example, rent reviews or from changes in the assessment of whether a termination option is reasonably
certain not to be exercised. The Group has applied judgement to determine the lease term for some lease contracts with break clauses.
2022
\u00a3m
2021
\u00a3m
At 1 January
99 84
Leases incepted during the year
6 27
Termination of leases following the disposal of associated investment properties
(4) (1)
Interest expense
3 3
Lease payments
(14) (16)
Remeasurement of leases
2 2
At 31 December
92 99
Amount due within twelve months
11 10
Amount due after twelve months
81 89
Details of the related right-of-use assets are included in notes G3 and G4.
G11. Accruals and deferred income
This note analyses the Group\u2019s accruals and deferred income at the end of the year.
2022
\u00a3m
2021
\u00a3m
Accruals
498 498
Deferred income
105 123
Accruals and deferred income including amounts classified as held for sale
603 621
Less amounts classified as held for sale
(37) (54)
At 31 December
566 567
Amount due for settlement after 12 months
35 26
Deferred income includes consideration deferred as a result of the abrdn transaction pending the Part VII transfer (including amounts offset as a result of
the profit share).
G12. Other payables
Other payables are recognised when due and are measured on initial recognition at the fair value of the consideration payable. Subsequent to initial
recognition, these payables are measured at amortised cost using the effective interest rate method.
2022
\u00a3m
2021
\u00a3m
Investment broker balances
513 228
Property related payables
53 73
Investment management fees
48 77
Other payables
351 343
965 721
Amount due for settlement after 12 months
\u2013 \u2013
",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfOtherStatementOfConsolidatedFinancialPositionNoteAreas",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-576": {
"value": "G. Other statement of consolidated financial position notes G1. Pension schemes Defined contribution pension schemes Obligations for contributions to defined contribution pension schemes are recognised as an expense in the consolidated income statement as incurred. Defined benefit pension schemes The net surplus or deficit (the economic surplus or deficit) in respect of the defined benefit pension schemes is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior years; that benefit is discounted to determine its present value and the fair value of any scheme assets is deducted. The economic surplus or deficit is subsequently adjusted to eliminate on consolidation the carrying value of insurance policies issued by Group entities to the defined benefit pension schemes (the reported surplus or deficit). A corresponding adjustment is made to the carrying values of insurance contract liabilities and investment contract liabilities. As required by IFRIC 14, IAS 19 \u2013\u2018The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction\u2019, to the extent that the economic surplus (prior to the elimination of the insurance policies issued by Group entities) will be available as a refund, the economic surplus is stated after a provision for tax that would be borne by the scheme administrators when the refund is made. The Group recognises a pension surplus on the basis that it is entitled to the surplus of each scheme in the event of a gradual settlement of the liabilities, due to its ability to order a winding up of the Trust. Additionally under IFRIC 14 pension funding contributions are considered to be a minimum funding requirement and, to the extent that the contributions payable will not be available to the Group after they are paid into the Scheme, a liability is recognised when the obligation arises. The net pension scheme asset/liability represents the economic surplus net of all adjustments noted above. The Group determines the net interest expense or income on the net pension scheme asset/liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the opening net pension scheme asset/liability. The discount rate is the yield at the period end on AA credit rated bonds that have maturity dates approximating to the terms of the Group\u2019s obligations. The calculation is performed by a qualified actuary using the projected unit credit method. The movement in the net pension scheme asset/liability is analysed between the service cost, past service cost, curtailments and settlements (all recognised within administrative expenses in the consolidated income statement), the net interest cost on the net pension scheme asset/liability, including any reimbursement assets (recognised within net investment income in the consolidated income statement), remeasurements of the net pension scheme asset/liability (recognised in other comprehensive income) and employer contributions. This note describes the Group\u2019s four main defined benefit pension schemes for its employees, the Pearl Group Staff Pension Scheme (\u2018Pearl Scheme\u2019), the PGL Pension Scheme, the Abbey Life Staff Pension Scheme (\u2018Abbey Life Scheme\u2019) and the ReAssure Staff Pension Scheme (\u2018ReAssure Scheme\u2019) and explains how the pension scheme asset/liability is calculated. An analysis of the pension scheme (liability)/asset for each pension scheme is set out in the table below and also includes the net pension scheme liability in respect of the Group operated unfunded unapproved retirement benefit scheme (\u2018ReAssure Private Retirement Trust\u2019): 2022 \u00a3m 2021 \u00a3m Pearl Group Staff Pension Scheme Economic surplus 46 263 Adjustment for insurance policies eliminated on consolidation (1,501) (1,680) Net economic deficit (1,455) (1,417) Provision for tax on that part of the economic surplus available as a refund on a winding-up of the Scheme \u2013 (92) Net pension scheme liability, as reported (1,455) (1,509) Reimbursement right in respect of reinsurance, as reported 205 212 Add: value attributed to assets held by PLL within financial assets 1 1,576 1,896 Adjusted net pension scheme asset 326 599 PGL Pension Scheme Economic surplus 23 26 Adjustment for insurance policies eliminated on consolidation (1,079) (1,618) Net pension scheme liability, as reported (1,056) (1,592) Add: assets held by PLL within financial assets 1 1,246 2,084 Adjusted net pension scheme asset 190 492 Abbey Life Staff Pension Scheme Economic (deficit)/surplus (5) 12 Provision for tax on that part of the economic surplus available as a refund on a winding-up of the Scheme \u2013 (4) Minimum funding requirement obligation (3) (7) Net pension scheme (liability)/asset (8) 1 ReAssure Staff Pension Scheme Economic surplus 22 54 Provision for tax on that part of the economic surplus available as a refund on a winding-up of the Scheme (8) (19) Net pension scheme asset 14 35 ReAssure Private Retirement Trust Net pension scheme liability (1) (2) 1 The Pearl Scheme and the PGL Pension Scheme have both executed buy-in transactions with a Group life company and subsequently assets supporting the Group's actuarial liabilities are recognised on a line by line basis within financial assets in the statement of consolidated financial position. Further details are included in notes G1.1 and G1.2 below. In the current and prior periods an adjusted net pension scheme asset has been presented in relation to both these pension schemes. The value of the assets held by PLL within financial assets in respect of the PGL Pension Scheme buy-ins is equal to the assets posted to a ring-fenced collateral account. For the Pearl Scheme the assets held by PLL supporting the buy-ins are not ring-fenced and the value has been determined as the value of the insurance contract liability within the PLL financial statements less the value of the associated reinsurance asset. . Movements in these financial assets are reflected in the consolidated income statement within Net investment income, however as noted in the accounting policy, the movement in the net pension scheme liability (as shown in notes G1.1 and G1.2) is primarily reflected in other comprehensive incomeRisks The Group\u2019s defined benefit schemes typically expose the Group to a number of risks, the most significant of which are: Asset volatility \u2013 the value of the schemes\u2019 assets will vary as market conditions change and as such is subject to considerable volatility. The liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform this yield, this will create a deficit. The majority of the assets are held within a liability driven investment strategy which is linked to the funding basis of the schemes (set with reference to government bond yields). As such, to the extent that movements in corporate bond yields are out of line with movements in government bond yields, volatility will arise. Inflation risk \u2013 a significant proportion of the schemes\u2019 benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities (although in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). The majority of the assets are held within a liability driven investment strategy which allows for movements in inflation, meaning that changes in inflation should not materially affect the surplus. Life expectancy \u2013 the majority of the schemes\u2019 obligations are to provide benefits for the life of the member therefore increases in life expectancy will result in an increase in the liabilities. For the Pearl and PGL schemes, this is partially offset by the buy in policies that move in line with the liabilities. These buy in policies are eliminated on consolidation (see sections G1.1 and G1.2 for further details). Information on each of the Group\u2019s pension schemes is set out below. G1.1 Pearl Group Staff Pension Scheme Scheme details The Pearl Scheme comprises a final salary section, a money purchase section and a hybrid section (a mix of final salary and money purchase). The Pearl Scheme is closed to new members and has no active members. Defined benefit scheme The Pearl Scheme is established under, and governed by, the trust deeds and rules and has been funded by payment of contributions to a separately administered trust fund. A Group company, Pearl Group Holdings No.2 Limited (\u2018PGH2\u2019), is the principal employer of the Pearl Scheme. The principal employer meets the administration expenses of the Pearl Scheme. The Pearl Scheme is administered by a separate trustee company, P.A.T. (Pensions) Limited, which is separate from the Company. The trustee company is comprised of four representatives from the Group, three member nominated representatives and one independent trustee in accordance with the trustee company\u2019s articles of association. The trustee is required by law to act in the interest of all relevant beneficiaries and is responsible for the investment policy with regard to the assets. To the extent that an economic surplus will be available as a refund, the economic surplus is stated after a provision for tax that would be borne by the scheme administrators when the refund is made. The valuation has been based on an assessment of the liabilities of the Pearl Scheme as at 31 December 2022, undertaken by independent qualified actuaries. The present values of the defined benefit obligation and the related interest costs have been measured using the projected unit credit method. A triennial funding valuation of the Pearl Scheme as at 30 June 2021 was completed in 2022 by a qualified actuary. This showed a surplus as at 30 June 2021 of \u00a367 million, on the agreed technical provisions basis. The funding and IFRS accounting bases of valuation can give rise to different results for a number of reasons. The funding basis of valuation is based on general principles of prudence whereas the accounting valuation is based on best estimates. Discount rates are gilt-based for the funding valuation whereas the rate used for IFRS valuation purposes is based on a yield curve for high quality AA-rated corporate bonds. In addition the values are prepared at different dates which will result in differences arising from changes in market conditions and employer contributions made in the subsequent period. Pension Scheme Commitment Agreement and buy-in transactions On 17 November 2020, the Pearl Scheme entered into a Commitment Agreement with PGH2 to complete a series of buy-ins. At the same time, the Pearl Scheme completed the first buy-in with Phoenix Life Limited (\u2018PLL\u2019) covering 25% of the Scheme\u2019s pensioner and deferred member liabilities, transferring the associated risks, including longevity improvement risk, to PLL effective from 30 September 2020. Two further buy-in transactions were completed in July 2021 and October 2021 covering 35% and 15% respectively of the Scheme\u2019s pensioner and deferred member liabilities and the final buy-in transaction was completed in November 2022. Risks, including longevity improvement risk, were transferred to PLL effective from 28 May 2021 and 31 August 2021 and 30 September 2022 respectively. Upon completion of each buy-in transaction the Scheme transferred the following plan assets to PLL: \u2022 In November 2020, \u00a3731 million of plan assets were transferred to PLL in satisfaction of the premium of \u00a3735 million and was net of a \u00a34 million payment by PLL to the Scheme in respect of members\u2019 benefits for October and November 2020; \u2022 In July 2021, \u00a31,049 million of plan assets were transferred to PLL in satisfaction of the premium and a further \u00a312 million cash payment was paid by the Scheme in August 2021. PLL paid \u00a35 million to the Scheme in respect of members\u2019 benefits for June and July 2021; and \u2022 In October 2021, \u00a3433 million of plan assets were transferred to PLL in satisfaction of the premium of \u00a3435 million and was net of a \u00a32 million payment by PLL to the Scheme in respect of members\u2019 benefits for September and October 2021. A further \u00a31 million cash payment in respect of the premium was paid by the Scheme in December 2021. \u2022 In November 2022, \u00a3556 million of plan assets were transferred to PLL in satisfaction of the premium of \u00a3560 million and was net of a \u00a34 million payment by PLL to the Scheme in respect of members\u2019 benefits for October and November 2022. The assets transferred to PLL are recognised in the relevant line within financial assets in the consolidated statement of financial position. The economic effect of the buy-in transactions in the Scheme is to replace the plan assets transferred with a single line insurance policy reimbursement right asset which is subsequently eliminated on consolidation. The value of this insurance policy at 31 December 2022 was \u00a31,501 million (2021: \u00a31,680 million) which includes an amount owed by PLL of \u00a32 million (2021: \u00a312 million). The Commitment agreement contained provisions under which payments by PGH2 to the Scheme were required in the event that the Group did not meet the minimum buy-in completion schedule the details of which are as follows: \u2022 Gilts Deficit Recovery Contributions: Contributions calculated as amounts required to reach full funding on a gilts-basis by 30 June 2027. Following the completion of the recent buy-in transactions, the Group has no further obligation to pay these contributions; and \u2022 Contingent Contributions: These represented a new form of security for the trustee. The amount of these contributions was initially capped at \u00a3200 million, with the cap running off in line with completion of the buy-ins. Following the completion of the recent buy-in transactions the cap is now \u00a3nil (2021: \u00a350 million). The new agreement also introduced a new form of security provided by PGH2 to the trustee. The share charges over certain Group entities were replaced by a new surety bond arrangement, whereby two external third-party insurers, each provided \u00a3100 million of cover payable to the Scheme following certain trigger events. This cover provided by the surety bond guarantee was fully released upon completion of the final buy-in transaction in November 2022. No contributions were paid to the Pearl Scheme in either the current or prior periods. PGH2 continues to meet the administrative and non-investment running expenses of the Scheme as set out in the schedule of contributions. During the year, the Company reached an agreement for the removal of a trustee discretion to pay some pension increases in excess of the 5% cap. The trustee has agreed to give up this discretion in exchange for a single 1.6% uplift for current pensions in payment effective from 1 April 2022 and a 1.3% future increase to eligible benefits of both pension and deferred members. The financial impact of the 1.6% uplift has been to recognise an increase in the defined benefit obligation of \u00a315 million and a past service cost in the consolidated income statement. Reimbursement right asset in respect of Reinsurance arrangement In March 2022, PLL entered into a quota share reinsurance arrangement with an external insurer to reinsure a further 27% of the risks transferred to PLL as part of the third buy-in transaction with the Pearl Scheme. A total of approximately 91% of these liabilities have now been reinsured. A premium of \u00a3104 million was paid by PLL to the reinsurer. As PLL expects to use the claims received to pay for its obligations under the insurance contract between it and the Pearl scheme (i.e. to settle the defined benefit obligation) the reinsurance arrangement is considered to be a non-qualifying insurance policy and is classified as a reimbursement right. The reinsurance arrangement is expected to match a proportion of the defined benefit obligation of the Pearl Scheme therefore the valuation of the reimbursement right is consistent with the valuation of the associated defined benefit obligation. The value of the reimbursement right asset amounted to \u00a3205 million (31 December 2021: \u00a3212 million). Summary of amounts recognised in the consolidated financial statements The amounts recognised in the consolidated financial statements are as follows: 2022 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Pension Scheme Liability \u00a3m Reimbursement right \u00a3m At 1 January 807 (2,224) (92) (1,509) 212 Interest income/(expense) 16 (52) (2) (38) 4 Past service cost \u2013 (15) \u2013 (15) \u2013 Included in profit or loss 16 (67) (2) (53) 4 Remeasurements: Return on plan assets excluding amounts included in interest income (208) \u2013 \u2013 (208) (101) Gain from changes in demographic assumptions \u2013 3 \u2013 3 \u2013 Gain from changes in financial assumptions \u2013 805 \u2013 805 \u2013 Experience loss \u2013 (116) \u2013 (116) \u2013 Change in provision for tax on economic surplus available as a refund \u2013 \u2013 94 94 \u2013 Included in other comprehensive income (208) 692 94 578 (101) Income received from insurance policies 89 \u2013 \u2013 89 \u2013 Benefit payments (98) 98 \u2013 \u2013 (14) Assets transferred as premium for Scheme buy-in (560) \u2013 \u2013 (560) \u2013 Assets transferred as premium for reinsurance arrangement 104 At 31 December 46 (1,501) \u2013 (1,455) 205 2021 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Pension Scheme Liability \u00a3m Reimbursement right asset \u00a3m At 1 January 2,315 (2,384) (185) (254) \u2013 Interest income/(expense) 24 (33) (2) (11) \u2013 Included in profit or loss 24 (33) (2) (11) \u2013 Remeasurements: Return on plan assets excluding amounts included in interest income 27 \u2013 \u2013 27 (49) Gain from changes in demographic assumptions \u2013 22 \u2013 22 \u2013 Loss from changes in financial assumptions \u2013 89 \u2013 89 \u2013 Experience gain \u2013 (26) \u2013 (26) \u2013 Change in provision for tax on economic surplus available as a refund \u2013 - 95 95 \u2013 Included in other comprehensive income 27 85 95 207 (49) Income received from insurance policies 46 \u2013 \u2013 46 \u2013 Benefit payments (108) 108 \u2013 \u2013 \u2013 Assets transferred as premium for Scheme buy-in (1,497) \u2013 \u2013 (1,497) \u2013 Assets transferred as premium for reinsurance arrangement \u2013 \u2013 \u2013 \u2013 261 At 31 December 807 (2,224) (92) (1,509) 212 Scheme assets The distribution of the scheme assets at the end of the year was as follows: 2022 2021 Total \u00a3m Of which not quoted in an active market \u00a3m Total \u00a3m Of which not quoted in an active market \u00a3m Hedging portfolio \u2013 \u2013 438 23 Other debt securities \u2013 \u2013 349 - Properties 5 5 104 104 Private equities 4 4 4 4 Hedge funds 3 3 4 4 Cash and other 34 \u2013 67 \u2013 Obligations for repayment of stock lending collateral received \u2013 \u2013 (159) \u2013 Reported scheme assets 46 12 807 135 Add back: Insurance policies eliminated on consolidation 1,501 1,501 1,680 1,680 Economic value of assets 1,547 1,513 2,487 1,815 Defined benefit obligation The calculation of the defined benefit obligation can be allocated to the scheme\u2019s members as follows: \u2022 Deferred scheme members: 40% (2021: 40%); and \u2022 Pensioners: 60% (2021: 60%) The weighted average duration of the defined benefit obligation at 31 December 2022 is 13.5 years (2021: 16 years). Principal assumptions The principal financial assumptions of the Pearl Scheme are set out in the table below: 2022 % 2021 % Rate of increase for pensions in payment (5% per annum or RPI if lower) 3.05 3.20 Rate of increase for deferred pensions (CPI) 2.70 2.70 Discount rate 4.95 2.00 Inflation \u2013 RPI 3.30 3.30 Inflation \u2013 CPI 2.70 2.70 The discount rate and inflation rate assumptions have been determined by considering the shape of the appropriate yield curves and the duration of the Pearl Scheme\u2019s liabilities. This method determines an equivalent single rate for each of the discount and inflation rates, which is derived from the profile of projected benefit payments. The post-retirement mortality assumptions are in line with a scheme-specific table which was derived from the actual mortality experience in recent years based on the SAPS standard tables for males and for females based on year of use. Future longevity improvements from 1 January 2021 are based on amended CMI 2021 Core Projections (2021: From 1 January 2021 based on amended CMI 2020 Core Projections) and a long-term rate of improvement of 1.5% (2021: 1.7%) per annum for males and 1.2% (2021: 1.2%) per annum for females. Under these assumptions, the average life expectancy from retirement for a member currently aged 40 retiring at age 60 is 29.2 years and 30.5 years for male and female members respectively (2021: 29.8 years and 30.6 years respectively). A quantitative sensitivity analysis for significant actuarial assumptions is shown below: 2022 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 1,501 (40) 42 26 (25) 37 (37) 2021 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 2,224 (87) 93 70 (68) 80 (80) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension asset recognised within the statement of consolidated financial position. G1.2 PGL Pension Scheme The PGL Pension Scheme comprises a final salary section and a defined contribution section. Scheme details Defined contribution scheme On 1 July 2020 the Group closed the defined contribution section of the PGL Scheme and ceased making contributions from this date. Defined benefit scheme The defined benefit section of the PGL Pension Scheme is a final salary arrangement which is closed to new entrants and has no active members. The PGL Scheme is administered by a separate trustee company, PGL Pension Trustee Ltd. The trustee company is comprised of two representatives from the Group, three member nominated representatives and one independent trustee in accordance with the trustee company\u2019s articles of association. The trustee is required by law to act in the interest of all relevant beneficiaries and is responsible for the day to day administration of the benefits. The valuation has been based on an assessment of the liabilities of the PGL Pension Scheme as at 31 December 2022, undertaken by independent qualified actuaries. To the extent that an economic surplus will be available as a refund, the economic surplus is stated after a provision for tax that would be borne by the scheme administrators when the refund is made. A triennial funding valuation of the PGL Pension Scheme as at 30 June 2021 was completed in 2022 by a qualified actuary and finalised in January 2023. This showed a surplus as at 30 June 2021 of \u00a32 million. The IFRS valuation cash flows reflect the latest available data and are not limited to being updated following the completion of each funding valuation. There are no further committed contributions to pay in respect of the defined benefit section of the Scheme. Insurance policies with Group entities In March 2019, the PGL Pension Scheme entered into a \u2018buy-in\u2019 agreement with PLL which covered the remaining pensioner and deferred members of the Scheme not covered by the first such agreement concluded in December 2016. The plan assets transferred to PLL as premium are held in a collateral account and are recognised in the relevant line within financial assets in the statement of consolidated financial position. The economic effect of these transactions in the Scheme is to replace the plan assets transferred with a single line insurance policy reimbursement asset which is eliminated on consolidation along with the relevant insurance contract liabilities in PLL. The value of the insurance policies with Group entities at 31 December 2022 is \u00a31,079 million (2021: \u00a31,618 million). Summary of amounts recognised in the consolidated financial statements The amounts recognised in the consolidated financial statements are as follows: 2022 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Total \u00a3m At 1 January 31 (1,623) (1,592) Interest income/(expense) 1 (32) (31) Administrative expenses (4) \u2013 (4) Included in profit or loss (3) (32) (35) Remeasurements: Return on plan assets excluding amounts included in interest income (1) \u2013 (1) Gain from changes in demographic assumptions \u2013 5 5 Gain from changes in financial assumptions \u2013 531 531 Experience loss \u2013 (36) (36) Included in other comprehensive income (1) 500 499 Income received from insurance policies 72 \u2013 72 Benefit payments (72) 72 \u2013 At 31 December 27 (1,083) (1,056) 2021 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Total \u00a3m At 1 January 35 (1,754) (1,719) Interest expense \u2013 (25) (25) Administrative expenses (4) \u2013 (4) Included in profit or loss (4) (25) (29) Remeasurements: Gain from changes in demographic assumptions \u2013 16 16 Gain from changes in financial assumptions \u2013 70 70 Experience loss \u2013 (3) (3) Included in other comprehensive income \u2013 83 83 Income received from insurance policies 73 \u2013 73 Benefit payments (73) 73 \u2013 At 31 December 31 (1,623) (1,592) Scheme assets The distribution of the scheme assets at the end of the year was as follows: 2022 2021 Total \u00a3m Of which not quoted in an active market \u00a3m Total \u00a3m Of which not quoted in an active market \u00a3m Cash and other 27 \u2013 31 \u2013 Reported scheme assets 27 \u2013 31 \u2013 Add back: Insurance policies eliminated on consolidation 1,079 1,079 1,618 1,610 Economic value of assets 1,106 1,079 1,649 1,610 Defined benefit obligation The calculation of the defined benefit obligation can be allocated to the scheme\u2019s members as follows: \u2022 Deferred scheme members: 36% (2021: 36%); and \u2022 Pensioners: 64% (2021: 64%) The weighted average duration of the defined benefit obligation at 31 December 2022 is 13.5 years (2021: 16 years). Principal assumptions The principal financial assumptions of the PGL Pension Scheme are set out in the table below: 2022 % 2021 % Rate of increase for pensions in payment (7.5% per annum or RPI if lower) 3.30 3.30 Rate of increase for deferred pensions (CPI) 2.70 2.70 Discount rate 4.95 2.00 Inflation \u2013 RPI 3.30 3.30 Inflation \u2013 CPI 2.70 2.70 The discount rate and inflation assumptions have been determined by considering the shape of the appropriate yield curves and the duration of the PGL Pension Scheme liabilities. This method determines an equivalent single rate for each of the discount and inflation rates, which is derived from the profile of projected benefit payments. The post-retirement mortality assumptions are in line with 86%/94% of S1P Light base tables for males and females. Future longevity improvements from 1 January 2021 are based on amended CMI 2021 Core Projections (2021: From 1 January 2021 based on amended CMI 2020 Core Projections) with a long-term rate of improvement of 1.5% (2021: 1.7%) per annum for males and 1.2% (2021: 1.2%) per annum for females. Under these assumptions, the average life expectancy from retirement for a member currently aged 40 retiring at age 62 is 27.7 years (2021: 28.0 years) and 29.1 years (2021: 28.9 years) for male and female members respectively. A quantitative sensitivity analysis for significant actuarial assumptions is shown below: 2022 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 1,083 (31) 33 23 (22) 30 (30) 2021 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 1,623 (62) 66 54 (52) 60 (60) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension liability recognised within the statement of consolidated financial position. G1.3 Abbey Life Staff Pension Scheme Scheme details On 30 June 2017, the Abbey Life Scheme was transferred from Abbey Life to Pearl Life Holdings Limited (\u2018PeLHL\u2019), a fellow subsidiary. PeLHL assumed the scheme covenant together with all obligations of the scheme following implementation of the transfer. The Abbey Life Scheme is a registered occupational pension scheme, set up under trust, and legally separate from the employer PeLHL. The scheme is administered by Abbey Life Trust Securities Limited (the 'trustee'), a corporate trustee. There are three trustee directors, one of whom is nominated by the Abbey Life Scheme members and two of whom are appointed by PeLHL. The trustee is responsible for administering the scheme in accordance with the trust deed and rules and pensions laws and regulations. The Abbey Life Scheme is closed to new entrants and has no active members. The valuation has been based on an assessment of the liabilities of the Abbey Life Scheme as at 31 December 2022 undertaken by independent qualified actuaries. The present values of the defined benefit obligation and the related interest costs have been measured using the projected unit credit method. Funding The last funding valuation of the Abbey Life Scheme was carried out by a qualified actuary as at 31 March 2021 and showed a deficit of \u00a386 million. Following completion of the funding valuation a recovery plan was agreed between the Group and the trustee of the Abbey Life Scheme for PeLHL to pay monthly contributions of \u00a3400,000 into the Scheme until 31 July 2025 to eliminate the funding shortfall. A new schedule of contributions was agreed effective from November 2021, for PeLHL to pay the following amounts in respect of deficit contributions in addition to the amounts payable under the recovery plan: \u2022 fixed monthly contributions of \u00a3400,000 payable from 1 August 2025 to 30 June 2026; \u2022 monthly contributions in respect of administration expenses of \u00a3106,295 payable up to 31 March 2022, then increasing annually in line with the Retail Prices Index assumption to 30 June 2028; and \u2022 annual payments of \u00a34 million into the New 2016 Charged Account by 31 July each year, with the next payment being made by 31 July 2022, and the last payment due by 31 July 2025. The charged accounts are Escrow accounts which were created in 2010 to provide the trustees with additional security in light of the funding deficit. The amounts held in the charged accounts do not form part of Abbey Life Scheme assets. Under the terms of the 2013 Funding Agreement the funding position of the Scheme was assessed as at 31 March 2021 and this assessment revealed a shortfall, calculated in accordance with the terms of the New 2013 Funding Agreement, which exceeded the amount held in the New 2013 Charged Account. As such, the entire balance of \u00a342 million was paid from the New 2013 Charged Account to the Abbey Life Scheme in December 2021. Under the terms of the New 2016 Funding Agreement the funding position of the Abbey Life Scheme will be assessed as at 31 March 2027. A payment will be made from the New 2016 Charged Account to the Scheme if the results of the assessment reveal a shortfall calculated in accordance with the terms of the New 2016 Funding Agreement. The amount of the payment will be the lower of the amount of the shortfall and the amount held in the New 2016 Charged Account. An additional liability of \u00a33 million (2021: \u00a37 million) has been recognised reflecting a charge on any refund of the resultant IAS 19 surplus that arises after adjustment for discounted future contributions of \u00a315 million (2021: \u00a321 million) in accordance with the minimum funding requirement. A deferred tax asset of \u00a3nil (2021: \u00a34 million) has also been recognised to reflect tax relief at a rate of 19% that is expected to be available on the contributions once paid into the Scheme. Summary of amounts recognised in the consolidated financial statements The amounts recognised in the consolidated financial statements are as follows: 2022 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Minimum funding requirement obligation \u00a3m Total \u00a3m At 1 January 330 (318) (4) (7) 1 Interest income/(expense) 7 (6) \u2013 \u2013 1 Administration expenses (2) \u2013 \u2013 \u2013 (2) Included in profit or loss 5 (6) \u2013 \u2013 (1) Remeasurements: Return on plan assets excluding amounts included in interest income (123) \u2013 \u2013 \u2013 (123) Experience loss \u2013 (9) \u2013 \u2013 (9) Gain from changes in financial assumptions \u2013 110 \u2013 \u2013 110 Change in minimum funding requirement obligation \u2013 \u2013 \u2013 4 4 Change in provision for tax on economic surplus available as a refund \u2013 \u2013 4 \u2013 4 Included in other comprehensive income (123) 101 4 4 (14) Employer's contributions 6 \u2013 \u2013 \u2013 6 Benefit payments (12) 12 \u2013 \u2013 \u2013 At 31 December 206 (211) \u2013 (3) (8) 2021 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Minimum funding requirement obligation \u00a3m Total \u00a3m At 1 January 280 (341) \u2013 \u2013 (61) \u2013 \u2013 Interest income/(expense) 4 (5) \u2013 \u2013 (1) Administrative expenses (1) \u2013 \u2013 \u2013 (1) Included in profit or loss 3 (5) \u2013 \u2013 (2) Return on plan assets excluding amounts included in interest income 11 \u2013 \u2013 \u2013 11 Experience Loss \u2013 (5) \u2013 \u2013 (5) Gain from changes in demographic assumptions \u2013 6 \u2013 \u2013 6 Loss from changes in financial assumptions \u2013 15 \u2013 \u2013 15 Change in minimum funding requirement obligation \u2013 \u2013 \u2013 (7) (7) Change in provision for tax on economic surplus available as a refund \u2013 \u2013 (4) \u2013 (4) Included in other comprehensive income 11 16 (4) (7) 16 Employer's contributions 48 \u2013 \u2013 \u2013 48 Benefit payments (12) 12 \u2013 \u2013 \u2013 At 31 December 330 (318) (4) (7) 1 Scheme assets The distribution of the scheme assets at the end of the year was as follows: 2022 2021 Total \u00a3m Of which not quoted in an active market \u00a3m Total \u00a3m Of which not quoted in an active market \u00a3m Diversified income fund 44 \u2013 139 \u2013 Fixed interest government bonds 86 \u2013 68 \u2013 Corporate bonds 87 \u2013 118 \u2013 Derivatives (15) (15) 1 1 Cash and cash equivalents 4 \u2013 4 \u2013 Pension scheme assets 206 (15) 330 1 Defined benefit obligation The calculation of the defined benefit obligation can be allocated to the Abbey Life Scheme\u2019s members as follows: \u2022 Deferred scheme members: 44% (2021: 44%); and \u2022 Pensioners: 56% (2021: 56%). The weighted average duration of the defined benefit obligation at 31 December 2022 is 13.5 years (2021: 16 years). Principal assumptions The principal financial assumptions of the Abbey Life Scheme are set out in the table below: 2022 % 2021 % Rate of increase for pensions in payment (5% per annum or RPI if lower) 3.05 3.20 Rate of increase for deferred pensions (CPI subject to caps) 2.70 2.70 Discount rate 4.95 2.00 Inflation \u2013 RPI 3.30 3.30 Inflation \u2013 CPI 2.70 2.70 The discount rate and inflation assumptions have been determined by considering the shape of the appropriate yield curves and the duration of the Abbey Life Scheme liabilities. This method determines an equivalent single rate for each of the discount and inflation rates, which is derived from the profile of projected benefit payments. The post-retirement mortality assumptions are in line with a scheme-specific table which was derived from the actual mortality experience in recent years, performed as part of the actuarial funding valuation as at 31 March 2021, using the SAPS S3 \u2018Light\u2019 tables for males and for females based on year of use. Future longevity improvements from 1 January 2021 are based on amended CMI 2021 Core Projections (2021: From 1 January 2021 based on amended CMI 2020 Core Projections) and a long-term rate of improvement of 1.5% (2021: 1.7%) per annum for males and 1.2% (2021: 1.2%) per annum for females. Under these assumptions the average life expectancy from retirement for a member currently aged 45 retiring at age 65 is 24.8 years and 25.9 years for male and female members respectively (2021: 24.9 years and 25.7 years respectively). A quantitative sensitivity analysis for significant actuarial assumptions is shown below: 2022 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 211 (7) 7 4 (4) 7 (7) 2021 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 318 (12) 13 8 (9) 12 (12) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension liability recognised within the statement of consolidated financial position. G1.4 ReAssure Life Staff Pension Scheme Scheme details The ReAssure Scheme was consolidated within the Group financial statements following the acquisition of the ReAssure businesses on 22 July 2020. The ReAssure Scheme is a registered occupational pension scheme, set up under trust, and legally separate from the employer ReAssure Midco Limited (\u2018RML\u2019). The scheme is administered by ReAssure Pension Trustees Limited, a corporate trustee. There are six trustee directors, two of whom are nominated by the ReAssure Scheme members and four of whom are appointed by RML. The trustee is responsible for administering the scheme in accordance with the trust deed and rules and pensions laws and regulations. The ReAssure Scheme is closed to new entrants and to future accrual for active members. The valuation has been based on an assessment of the liabilities of the ReAssure Scheme as at 31 December 2021 undertaken by independent qualified actuaries. The present values of the defined benefit obligation and the related interest costs have been measured using the projected unit credit method. Funding The last funding valuation of the ReAssure Scheme was carried out by a qualified actuary as at 31 December 2020 and showed a deficit of \u00a377 million. Following the completion of the 2020 valuation a recovery plan was agreed in September 2021 between the trustee and RML in order to make good the deficit. RML has agreed to pay contributions of \u00a317.7 million into the existing Custody Account spread over four annual payments of \u00a34.425 million payable on 1 April 2022, 1 April 2023, 1 April 2024 and 1 April 2025. It is anticipated that these payments will be sufficient to cover the difference between the funding shortfall and the balance of the Custody Account at 31 December 2020 and to remove any remaining deficit at 31 December 2025. The amounts held in this account do not form part of the Scheme\u2019s plan assets and are instead are held in the Custody Account and are included within financial assets in the statement of consolidated financial position. The Group agrees to cover those expenses incurred by the ReAssure Scheme and the cost of the death-in-service benefits for those members of the scheme entitled to those benefits. Payments of \u00a32 million (2021:\u00a31 million) have been made during the year to cover these costs.Summary of amounts recognised in the consolidated financial statements The amounts recognised in the consolidated financial statements are as follows: 2022 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Total \u00a3m At 1 January 492 (438) (19) 35 Interest income/(expense) 9 (9) \u2013 \u2013 Administrative expenses (1) \u2013 \u2013 (1) Included in profit or loss 8 (9) \u2013 (1) Remeasurements: Return on plan assets excluding amounts included in interest income (203) \u2013 \u2013 (203) Gain from changes in financial assumptions \u2013 188 \u2013 188 Experience loss \u2013 (19) \u2013 (19) Change in provision for tax on economic surplus available as a refund \u2013 \u2013 11 11 Included in other comprehensive income (203) 169 11 (23) Employer's contributions 3 \u2013 \u2013 3 Benefit payments (12) 12 \u2013 \u2013 At 31 December 288 (266) (8) 14 2021 Fair value of scheme assets \u00a3m Defined benefit obligation \u00a3m Provision for tax on the economic surplus available as a refund \u00a3m Total \u00a3m At 1 January 477 (461) (5) 11 Interest income/(expense) 6 (6) \u2013 \u2013 Administrative expenses (1) - \u2013 (1) Included in profit or loss 5 (6) \u2013 (1) Remeasurements: Return on plan assets excluding amounts included in interest income 19 \u2013 \u2013 19 Gain from changes in demographic assumptions \u2013 1 \u2013 1 Gain from changes in financial assumptions \u2013 20 \u2013 20 Experience loss \u2013 (2) \u2013 (2) Change in provision for tax on economic surplus available as a refund \u2013 \u2013 (14) (14) Included in other comprehensive income 19 19 (14) 24 Employer's contributions 1 \u2013 \u2013 1 Benefit payments (10) 10 \u2013 \u2013 At 31 December 492 (438) (19) 35 G1.4 ReAssure Life Staff Pension Scheme continued Scheme assets The distribution of the scheme assets at the end of the year was as follows: 2022 2021 Total \u00a3m Of which not quoted in an active market \u00a3m Total \u00a3m Of which not quoted in an active market \u00a3m Equities 31 \u2013 62 \u2013 Government bonds 121 \u2013 151 \u2013 Corporate bonds 83 \u2013 173 \u2013 Managed funds \u2013 \u2013 60 \u2013 Other quoted securities 45 \u2013 43 \u2013 Cash and cash equivalents 8 \u2013 3 \u2013 Pension scheme assets 288 \u2013 492 \u2013 Defined benefit obligation The calculation of the defined benefit obligation can be allocated to the ReAssure Scheme\u2019s members as follows: \u2022 Deferred scheme members: 66% (2021: 66%); and \u2022 Pensioners: 34% (2021: 34%). The weighted average duration of the defined benefit obligation at 31 December 2022 is 17 years (2021: 21 years). Principal assumptions The principal assumptions of the ReAssure Scheme are set out in the table below: 2022 % 2021 % Rate of increase for pensions in payment (5% per annum or RPI if lower) 3.05 3.20 Rate of increase for deferred pensions 2.70 2.70 Rate of increase in salaries 3.70 3.70 Discount rate 4.95 2.00 Inflation \u2013 RPI 3.30 3.30 Inflation \u2013 CPI 2.70 2.70 The discount rate and inflation assumptions have been determined by considering the shape of the appropriate yield curves and the duration of the ReAssure Scheme liabilities. This method determines an equivalent single rate for each of the discount and inflation rates, which is derived from the profile of projected benefit payments. The post-retirement mortality assumptions are in line with SAPS Series 3 light base tables with a 102% (2021: 102%) multiplier for males and a 95% (2021: 95%) multiplier for females, with CMI 2019 projections in line with a 1.5% pa long term trend up to and including 31 December 2020. Future longevity improvements from 1 January 2021 onwards are in line with amended CMI 2021 Core Projections (2021: From 1 January 2021 in line with amended CMI 2020 Core Projections) with a long-term trend of 1.5% pa (2021: 1.7%) for males and 1.2% (2021: 1.2%) for females. Under these assumptions the average life expectancy from retirement for a member currently aged 45 retiring at age 60 is 30.0 years and 31.6 years for male and female members respectively (2021: 30.1 years and 31.4 years for male and female members respectively). A quantitative sensitivity analysis for significant actuarial assumptions is shown below: 2022 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 266 (10) 11 8 (8) 7 (7) 2021 Assumptions Base Discount rate RPI Life expectancy Sensitivity level 25bps increase 25bps decrease 25bps increase 25bps decrease 1 year increase 1 year decrease Impact on the defined benefit obligation (\u00a3m) 438 (21) 23 18 (17) 18 (17) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension liability recognised within the statement of consolidated financial position. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-667": {
"value": "Defined contribution pension schemes Obligations for contributions to defined contribution pension schemes are recognised as an expense in the consolidated income statement as incurred. Defined benefit pension schemes The net surplus or deficit (the economic surplus or deficit) in respect of the defined benefit pension schemes is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior years; that benefit is discounted to determine its present value and the fair value of any scheme assets is deducted. The economic surplus or deficit is subsequently adjusted to eliminate on consolidation the carrying value of insurance policies issued by Group entities to the defined benefit pension schemes (the reported surplus or deficit). A corresponding adjustment is made to the carrying values of insurance contract liabilities and investment contract liabilities. As required by IFRIC 14, IAS 19 \u2013\u2018The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction\u2019, to the extent that the economic surplus (prior to the elimination of the insurance policies issued by Group entities) will be available as a refund, the economic surplus is stated after a provision for tax that would be borne by the scheme administrators when the refund is made. The Group recognises a pension surplus on the basis that it is entitled to the surplus of each scheme in the event of a gradual settlement of the liabilities, due to its ability to order a winding up of the Trust. Additionally under IFRIC 14 pension funding contributions are considered to be a minimum funding requirement and, to the extent that the contributions payable will not be available to the Group after they are paid into the Scheme, a liability is recognised when the obligation arises. The net pension scheme asset/liability represents the economic surplus net of all adjustments noted above. The Group determines the net interest expense or income on the net pension scheme asset/liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the opening net pension scheme asset/liability. The discount rate is the yield at the period end on AA credit rated bonds that have maturity dates approximating to the terms of the Group\u2019s obligations. The calculation is performed by a qualified actuary using the projected unit credit method. The movement in the net pension scheme asset/liability is analysed between the service cost, past service cost, curtailments and settlements (all recognised within administrative expenses in the consolidated income statement), the net interest cost on the net pension scheme asset/liability, including any reimbursement assets (recognised within net investment income in the consolidated income statement), remeasurements of the net pension scheme asset/liability (recognised in other comprehensive income) and employer contributions. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-577": {
"value": "G2. Intangible assets Goodwill Business combinations are accounted for by applying the acquisition method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is measured on initial recognition at cost. Following initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is not amortised but is tested for impairment annually or when there is evidence of possible impairment. For impairment testing, goodwill is allocated to relevant cash generating units. Goodwill is impaired when the recoverable amount is less than the carrying value. In certain acquisitions an excess of the acquirer\u2019s interest in the net fair value of the acquiree\u2019s identifiable assets, liabilities, contingent liabilities and non- controlling interests over cost may arise. Where this occurs, the surplus of the fair value of net assets acquired over the fair value of the consideration is recognised in the consolidated income statement. Acquired in-force business Insurance and investment contracts with DPF acquired in business combinations and portfolio transfers are measured at fair value at the time of acquisition. The difference between the fair value of the contractual rights acquired and obligations assumed and the liability measured in accordance with the Group\u2019s accounting policies for such contracts is recognised as acquired in-force business. This acquired in-force business is amortised over the estimated life of the contracts on a basis which recognises the emergence of the economic benefits. The value of acquired in-force business related to investment contracts without DPF is recognised at its fair value and is amortised on a diminishing balance basis. An impairment review is performed whenever there is an indication of impairment. When the recoverable amount is less than the carrying value, an impairment loss is recognised in the consolidated income statement. Acquired in-force business is also considered in the liability adequacy test for each reporting period. The acquired in-force business is allocated to relevant cash generating units for the purposes of impairment testing. Customer relationships The customer relationship intangible asset includes vesting pension premiums and is measured on initial recognition at cost. The cost of this intangible asset acquired in a business combination is the fair value as at the date of acquisition. Following initial recognition, the customer relationship intangible asset is carried at cost less any accumulated amortisation and any accumulated impairment losses. The intangible asset is amortised on a straight-line basis over its useful economic life and assessed for impairment whenever there is an indication that the recoverable amount of the intangible asset is less than its carrying value. The customer relationship intangible asset is allocated to relevant cash generating units for the purposes of impairment testing. Brands and other contractual arrangements Brands and other contractual arrangements are measured on initial recognition at cost. The cost of an intangible asset acquired in a business combination is the fair value as at the date of the acquisition. The cost of an intangible asset acquired in exchange for a non-monetary asset is measured at fair value as at the date of the transaction. Following initial recognition, the brand and other contractual arrangement intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of brands and other contractual arrangements over their estimated useful lives. They are tested for impairment whenever there is evidence of possible impairment. For impairment testing, they are allocated to the relevant cash generating unit. Brands and other contractual arrangements are impaired when the recoverable amount is less than the carrying value. Other intangibles 2022 Goodwill \u00a3m Acquired in- force business \u00a3m Customer relationships \u00a3m Brands and other \u00a3m Total other intangibles \u00a3m Total \u00a3m Cost or valuation at 1 January and 31 December 57 7,007 297 131 428 7,492 Amortisation and impairment At 1 January (47) (2,630) (183) (13) (196) (2,873) Amortisation charge for the year \u2013 (488) (15) (6) (21) (509) Impairment charge for the year \u2013 (17) \u2013 \u2013 \u2013 (17) At 31 December (47) (3,135) (198) (19) (217) (3,399) Carrying amount 10 3,872 99 112 211 4,093 Less amounts classified as held for sale (see note A6.1) \u2013 (37) \u2013 \u2013 \u2013 (37) Carrying amount at 31 December 10 3,835 99 112 211 4,056 Amount recoverable after 12 months 10 3,382 84 106 190 3,582 Other intangibles 2021 Goodwill \u00a3m Acquired in- force business \u00a3m Customer relationships \u00a3m Brands and other \u00a3m Total other intangibles \u00a3m Total \u00a3m Cost or valuation At 1 January 57 7,028 297 56 353 7,438 Acquisition of ReAssure businesses \u2013 \u2013 \u2013 111 111 111 Disposal of Ark Life \u2013 (21) \u2013 \u2013 \u2013 (21) Termination of Client Services Proposition Agreement \u2013 \u2013 \u2013 (36) (36) (36) At 31 December 57 7,007 297 131 428 7,492 Amortisation and impairment At 1 January \u2013 (2,015) (168) (14) (182) (2,197) Amortisation charge for the year \u2013 (537) (15) (5) (20) (557) Impairment charge for the year 1 (47) (99) \u2013 \u2013 \u2013 (146) Disposal of Ark Life \u2013 21 \u2013 \u2013 \u2013 21 Termination of Client Services Proposition Agreement \u2013 \u2013 \u2013 6 6 6 At 31 December (47) (2,630) (183) (13) (196) (2,873) Carrying amount 10 4,377 114 118 232 4,619 Less amounts classified as held for sale (see note A6.1) \u2013 (54) \u2013 \u2013 \u2013 (54) Carrying amount at 31 December 10 4,323 114 118 232 4,565 Amount recoverable after 12 months 10 3,834 99 112 211 4,055 1 An impairment charge of \u00a359 million in acquired in-force business has been included within the \u2018gain on completion of abrdn plc transaction\u2019 in the consolidated income statement, see note G2.2 for further details G2.1 Goodwill The carrying value of goodwill has been tested for impairment at the year end and the results of this exercise are detailed below. Goodwill with a carrying value of \u00a310 million (2021: \u00a310 million) was recognised on the acquisition of AXA Wealth during 2016 and has been allocated to the UK Open segment. This represents the value of the workforce assumed and the potential for future value creation, which relates to the ability to invest in and grow the SunLife brand. Value in use has been determined as the present value of certain future cash flows associated with that business. The cash flows used in the calculation are consistent with those adopted by management in the Group\u2019s operating plan, and for the period 2028 and beyond, assume a zero growth rate. The underlying assumptions of these projections include market share, customer numbers, commission rates and expense inflation. The cash flows have been valued at a risk adjusted discount rate of 14% (2021: 11%) that makes prudent allowance for the risk that future cash flows may differ from that assumed. This test demonstrated that value in use was greater than carrying value. Given the magnitude of the excess of the value in use over carrying value, management does not believe that a reasonably foreseeable change in key assumptions would cause the carrying value to exceed value in use. Goodwill with a cost of \u00a347 million attributed to the Management Services segment was fully impaired during the year ended 31 December 2021. The Management Services segment generated income solely from the services provided to other operating segments within the Group. As a result of planned investment in the Group\u2019s growth agenda, including the development of capabilities of the Open segment and certain Group functions, it was anticipated that the Management Services segment would generate short-term losses in the period until service agreements could be renegotiated. Together with the effect of the expected run-off of the relevant Phoenix Life insurance business, these anticipated short-term losses resulted in an assessment of the recoverable amount of the goodwill to be \u00a3nil as at 31 December 2021 and consequently a \u00a347 million impairment charge was recognised. Value in use was determined as the present value of certain future cash flows associated with this business. The cash flows used in this calculation were valued using a risk adjusted discount rate of 9.5% and were consistent with those adopted by management in the Group's three year operating plan and, for the period 2027 and beyond, reflected the anticipated run-off of the Phoenix Life insurance business. The underlying assumptions of these projections include management\u2019s best estimates with regards to longevity, persistency, expenses, mortality and morbidity, determined on the basis as described in note F4.1. G2.2 Acquired in-force business Acquired in-force business (\u2018AVIF\u2019) on insurance contracts and investment contracts with DPF represents the difference between the fair value of the contractual rights under these contracts and the liability measured in accordance with the Group\u2019s accounting policies for such contracts. This intangible is being amortised in accordance with the run-off of the book of business. AVIF on investment contracts without DPF is amortised in line with emergence of economic benefits. AVIF balances are assessed for impairment where an indicator of impairment has been identified. The following paragraphs set out the impairment indicators identified and the results of the impairment tests carried out. On 23 February 2021, the Group entered into an agreement with abrdn plc to simplify the arrangements of their Strategic Partnership (see note A6.1 for further details). Under the terms of the transaction, the Group will sell its UK investment and platform related products, comprising Wrap SIPP, Onshore bond and UK TIP to abrdn plc and this will be effected through a Part VII transfer. The balances in the statement of consolidated financial position relating to this business were classified as a disposal group held for sale in February 2021. The total proceeds of disposal for this business are not expected to exceed the carrying value of the related net assets and accordingly the disposal group has been recognised at fair value less costs to sell. The value of the AVIF at 23 February 2021 was \u00a3122 million and an impairment charge of \u00a359 million was recognised in 2021 on classification of the AVIF balance as held for sale. This charge was included within the \u2018gain on completion of abrdn plc transaction\u2019 in the consolidated income statement. A further impairment of \u00a317 million has been recognised during the year (2021: \u00a38 million). The AVIF balance classified as held for sale is not being amortised. In June 2021, following the Group Board\u2019s approval to dispose of Ark Life Assurance Company DAC, the entity was initially classified as a disposal group held for sale. The proceeds of disposal were not expected to exceed the carrying value of the related net assets and accordingly the disposal group was measured at fair value less costs to sell. In 2021, an impairment charge of \u00a318 million was recognised in respect of the AVIF upon classification of the business as held for sale and recognised within \u2018amortisation and impairment of acquired in-force business\u2019 in the consolidated income statement. In 2021, updates to the reserving methodology in respect of certain blocks of European insurance contracts resulted in a release of reserves of \u00a320 million. This release of reserves was considered to be an indicator of impairment in relation to a component of the AVIF recognised on acquisition of the Standard Life Assurance businesses as it represented an acceleration of the recognition of profits that had been capitalised within the AVIF. Accordingly, an impairment test was performed. The value in use of the AVIF was determined using present value techniques applied to the best estimate cash flows expected to arise from the relevant policies that were in-force at the date of initial recognition of the AVIF, adjusted to reflect an internal view of the required compensation for bearing the uncertainty associated with those cash flows. The key underlying assumptions were management\u2019s best estimates with regards to persistency and expenses, which were determined on the basis as described in note F4.1. It was determined that the carrying value exceeded value in use by \u00a314 million and consequently an impairment charge was recognised. The resultant net carrying value of this component of the Standard Life Assurance AVIF at 31 December 2021 was \u00a349 million. G2.3 Customer relationships The customer relationships intangible at 31 December 2022 relates to vesting pension premiums which captures the new business arising from policies in-force at the acquisition date, specifically top-ups made to existing policies and annuities vested from matured pension policies. The total value of this customer relationship intangible at acquisition was \u00a3297 million and has been allocated to the UK Heritage segment. This intangible is being amortised over a 20 year period, and had a remaining useful life as at 31 December 2022 of 6.9 years (2021: 7.9 years). G2.4 Brands and other intangibles An intangible asset is recognised at cost on acquisition of the AXA Wealth and represents the value attributable to the SunLife brand as at 1 November 2016. The intangible asset was valued on a \u2018multi-period excess earnings\u2019 basis and was recognised at a cost of \u00a320 million. Impairment testing was performed in a combined test with the AXA goodwill (see section G2.1). The value in use continues to exceed its carrying value. This brand intangible is being amortised over a 10 year period. The carrying value of the AXA Wealth brand as at 31 December 2022 is \u00a38 million. Following the acquisition of the Standard Life Assurance businesses in 2018 an intangible asset was recognised in respect of the Client Services and Proposition Agreement (\u2018CSPA\u2019) with abrdn plc and represented the value of the Group\u2019s contractual rights to use the Standard Life brand. The CSPA formalised the Strategic Partnership between the two companies and established the contractual terms by which abrdn plc was previously to continue to market and distribute certain products to be manufactured by Group companies. On 23 February 2021, the Group entered into an agreement to acquire ownership of the Standard Life brand as part of the transaction with abrdn plc, which transferred to the Group in May 2021. The Standard Life brand was initially recognised at a value of \u00a3111 million which represented the fair value attributable to the brand as at the transaction date. The intangible asset was valued on a \u2018multi-period excess earnings\u2019 basis and is being amortised over a period of 30 years. The carrying value of the Standard Life brand as at 31 December 2022 is \u00a3104 million. As part of the transaction with abrdn plc, the CSPA was significantly amended prior to being dissolved. As a consequence, the CSPA intangible included within \u2018other intangibles\u2019 was derecognised. At that time, its carrying value was \u00a330 million and this was included in the calculation of the \u2018gain on completion of abrdn plc transaction\u2019 recognised in the consolidated income statement in the year ended 31 December 2021. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-631": {
"value": "Goodwill Business combinations are accounted for by applying the acquisition method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is measured on initial recognition at cost. Following initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is not amortised but is tested for impairment annually or when there is evidence of possible impairment. For impairment testing, goodwill is allocated to relevant cash generating units. Goodwill is impaired when the recoverable amount is less than the carrying value. In certain acquisitions an excess of the acquirer\u2019s interest in the net fair value of the acquiree\u2019s identifiable assets, liabilities, contingent liabilities and non- controlling interests over cost may arise. Where this occurs, the surplus of the fair value of net assets acquired over the fair value of the consideration is recognised in the consolidated income statement. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-693": {
"value": "Goodwill Business combinations are accounted for by applying the acquisition method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is measured on initial recognition at cost. Following initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is not amortised but is tested for impairment annually or when there is evidence of possible impairment. For impairment testing, goodwill is allocated to relevant cash generating units. Goodwill is impaired when the recoverable amount is less than the carrying value. In certain acquisitions an excess of the acquirer\u2019s interest in the net fair value of the acquiree\u2019s identifiable assets, liabilities, contingent liabilities and non- controlling interests over cost may arise. Where this occurs, the surplus of the fair value of net assets acquired over the fair value of the consideration is recognised in the consolidated income statement. Acquired in-force business Insurance and investment contracts with DPF acquired in business combinations and portfolio transfers are measured at fair value at the time of acquisition. The difference between the fair value of the contractual rights acquired and obligations assumed and the liability measured in accordance with the Group\u2019s accounting policies for such contracts is recognised as acquired in-force business. This acquired in-force business is amortised over the estimated life of the contracts on a basis which recognises the emergence of the economic benefits. The value of acquired in-force business related to investment contracts without DPF is recognised at its fair value and is amortised on a diminishing balance basis. An impairment review is performed whenever there is an indication of impairment. When the recoverable amount is less than the carrying value, an impairment loss is recognised in the consolidated income statement. Acquired in-force business is also considered in the liability adequacy test for each reporting period. The acquired in-force business is allocated to relevant cash generating units for the purposes of impairment testing. Customer relationships The customer relationship intangible asset includes vesting pension premiums and is measured on initial recognition at cost. The cost of this intangible asset acquired in a business combination is the fair value as at the date of acquisition. Following initial recognition, the customer relationship intangible asset is carried at cost less any accumulated amortisation and any accumulated impairment losses. The intangible asset is amortised on a straight-line basis over its useful economic life and assessed for impairment whenever there is an indication that the recoverable amount of the intangible asset is less than its carrying value. The customer relationship intangible asset is allocated to relevant cash generating units for the purposes of impairment testing. Brands and other contractual arrangements Brands and other contractual arrangements are measured on initial recognition at cost. The cost of an intangible asset acquired in a business combination is the fair value as at the date of the acquisition. The cost of an intangible asset acquired in exchange for a non-monetary asset is measured at fair value as at the date of the transaction. Following initial recognition, the brand and other contractual arrangement intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of brands and other contractual arrangements over their estimated useful lives. They are tested for impairment whenever there is evidence of possible impairment. For impairment testing, they are allocated to the relevant cash generating unit. Brands and other contractual arrangements are impaired when the recoverable amount is less than the carrying value. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-668": {
"value": "Goodwill Business combinations are accounted for by applying the acquisition method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is measured on initial recognition at cost. Following initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is not amortised but is tested for impairment annually or when there is evidence of possible impairment. For impairment testing, goodwill is allocated to relevant cash generating units. Goodwill is impaired when the recoverable amount is less than the carrying value. In certain acquisitions an excess of the acquirer\u2019s interest in the net fair value of the acquiree\u2019s identifiable assets, liabilities, contingent liabilities and non- controlling interests over cost may arise. Where this occurs, the surplus of the fair value of net assets acquired over the fair value of the consideration is recognised in the consolidated income statement. Acquired in-force business Insurance and investment contracts with DPF acquired in business combinations and portfolio transfers are measured at fair value at the time of acquisition. The difference between the fair value of the contractual rights acquired and obligations assumed and the liability measured in accordance with the Group\u2019s accounting policies for such contracts is recognised as acquired in-force business. This acquired in-force business is amortised over the estimated life of the contracts on a basis which recognises the emergence of the economic benefits. The value of acquired in-force business related to investment contracts without DPF is recognised at its fair value and is amortised on a diminishing balance basis. An impairment review is performed whenever there is an indication of impairment. When the recoverable amount is less than the carrying value, an impairment loss is recognised in the consolidated income statement. Acquired in-force business is also considered in the liability adequacy test for each reporting period. The acquired in-force business is allocated to relevant cash generating units for the purposes of impairment testing. Customer relationships The customer relationship intangible asset includes vesting pension premiums and is measured on initial recognition at cost. The cost of this intangible asset acquired in a business combination is the fair value as at the date of acquisition. Following initial recognition, the customer relationship intangible asset is carried at cost less any accumulated amortisation and any accumulated impairment losses. The intangible asset is amortised on a straight-line basis over its useful economic life and assessed for impairment whenever there is an indication that the recoverable amount of the intangible asset is less than its carrying value. The customer relationship intangible asset is allocated to relevant cash generating units for the purposes of impairment testing. Brands and other contractual arrangements Brands and other contractual arrangements are measured on initial recognition at cost. The cost of an intangible asset acquired in a business combination is the fair value as at the date of the acquisition. The cost of an intangible asset acquired in exchange for a non-monetary asset is measured at fair value as at the date of the transaction. Following initial recognition, the brand and other contractual arrangement intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of brands and other contractual arrangements over their estimated useful lives. They are tested for impairment whenever there is evidence of possible impairment. For impairment testing, they are allocated to the relevant cash generating unit. Brands and other contractual arrangements are impaired when the recoverable amount is less than the carrying value. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-632": {
"value": "G2.1 Goodwill The carrying value of goodwill has been tested for impairment at the year end and the results of this exercise are detailed below. Goodwill with a carrying value of \u00a310 million (2021: \u00a310 million) was recognised on the acquisition of AXA Wealth during 2016 and has been allocated to the UK Open segment. This represents the value of the workforce assumed and the potential for future value creation, which relates to the ability to invest in and grow the SunLife brand. Value in use has been determined as the present value of certain future cash flows associated with that business. The cash flows used in the calculation are consistent with those adopted by management in the Group\u2019s operating plan, and for the period 2028 and beyond, assume a zero growth rate. The underlying assumptions of these projections include market share, customer numbers, commission rates and expense inflation. The cash flows have been valued at a risk adjusted discount rate of 14% (2021: 11%) that makes prudent allowance for the risk that future cash flows may differ from that assumed. This test demonstrated that value in use was greater than carrying value. Given the magnitude of the excess of the value in use over carrying value, management does not believe that a reasonably foreseeable change in key assumptions would cause the carrying value to exceed value in use. Goodwill with a cost of \u00a347 million attributed to the Management Services segment was fully impaired during the year ended 31 December 2021. The Management Services segment generated income solely from the services provided to other operating segments within the Group. As a result of planned investment in the Group\u2019s growth agenda, including the development of capabilities of the Open segment and certain Group functions, it was anticipated that the Management Services segment would generate short-term losses in the period until service agreements could be renegotiated. Together with the effect of the expected run-off of the relevant Phoenix Life insurance business, these anticipated short-term losses resulted in an assessment of the recoverable amount of the goodwill to be \u00a3nil as at 31 December 2021 and consequently a \u00a347 million impairment charge was recognised. Value in use was determined as the present value of certain future cash flows associated with this business. The cash flows used in this calculation were valued using a risk adjusted discount rate of 9.5% and were consistent with those adopted by management in the Group's three year operating plan and, for the period 2027 and beyond, reflected the anticipated run-off of the Phoenix Life insurance business. The underlying assumptions of these projections include management\u2019s best estimates with regards to longevity, persistency, expenses, mortality and morbidity, determined on the basis as described in note F4.1. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGoodwillExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-633": {
"value": "G2.2 Acquired in-force business Acquired in-force business (\u2018AVIF\u2019) on insurance contracts and investment contracts with DPF represents the difference between the fair value of the contractual rights under these contracts and the liability measured in accordance with the Group\u2019s accounting policies for such contracts. This intangible is being amortised in accordance with the run-off of the book of business. AVIF on investment contracts without DPF is amortised in line with emergence of economic benefits. AVIF balances are assessed for impairment where an indicator of impairment has been identified. The following paragraphs set out the impairment indicators identified and the results of the impairment tests carried out. On 23 February 2021, the Group entered into an agreement with abrdn plc to simplify the arrangements of their Strategic Partnership (see note A6.1 for further details). Under the terms of the transaction, the Group will sell its UK investment and platform related products, comprising Wrap SIPP, Onshore bond and UK TIP to abrdn plc and this will be effected through a Part VII transfer. The balances in the statement of consolidated financial position relating to this business were classified as a disposal group held for sale in February 2021. The total proceeds of disposal for this business are not expected to exceed the carrying value of the related net assets and accordingly the disposal group has been recognised at fair value less costs to sell. The value of the AVIF at 23 February 2021 was \u00a3122 million and an impairment charge of \u00a359 million was recognised in 2021 on classification of the AVIF balance as held for sale. This charge was included within the \u2018gain on completion of abrdn plc transaction\u2019 in the consolidated income statement. A further impairment of \u00a317 million has been recognised during the year (2021: \u00a38 million). The AVIF balance classified as held for sale is not being amortised. In June 2021, following the Group Board\u2019s approval to dispose of Ark Life Assurance Company DAC, the entity was initially classified as a disposal group held for sale. The proceeds of disposal were not expected to exceed the carrying value of the related net assets and accordingly the disposal group was measured at fair value less costs to sell. In 2021, an impairment charge of \u00a318 million was recognised in respect of the AVIF upon classification of the business as held for sale and recognised within \u2018amortisation and impairment of acquired in-force business\u2019 in the consolidated income statement. In 2021, updates to the reserving methodology in respect of certain blocks of European insurance contracts resulted in a release of reserves of \u00a320 million. This release of reserves was considered to be an indicator of impairment in relation to a component of the AVIF recognised on acquisition of the Standard Life Assurance businesses as it represented an acceleration of the recognition of profits that had been capitalised within the AVIF. Accordingly, an impairment test was performed. The value in use of the AVIF was determined using present value techniques applied to the best estimate cash flows expected to arise from the relevant policies that were in-force at the date of initial recognition of the AVIF, adjusted to reflect an internal view of the required compensation for bearing the uncertainty associated with those cash flows. The key underlying assumptions were management\u2019s best estimates with regards to persistency and expenses, which were determined on the basis as described in note F4.1. It was determined that the carrying value exceeded value in use by \u00a314 million and consequently an impairment charge was recognised. The resultant net carrying value of this component of the Standard Life Assurance AVIF at 31 December 2021 was \u00a349 million. G2.3 Customer relationships The customer relationships intangible at 31 December 2022 relates to vesting pension premiums which captures the new business arising from policies in-force at the acquisition date, specifically top-ups made to existing policies and annuities vested from matured pension policies. The total value of this customer relationship intangible at acquisition was \u00a3297 million and has been allocated to the UK Heritage segment. This intangible is being amortised over a 20 year period, and had a remaining useful life as at 31 December 2022 of 6.9 years (2021: 7.9 years). G2.4 Brands and other intangibles An intangible asset is recognised at cost on acquisition of the AXA Wealth and represents the value attributable to the SunLife brand as at 1 November 2016. The intangible asset was valued on a \u2018multi-period excess earnings\u2019 basis and was recognised at a cost of \u00a320 million. Impairment testing was performed in a combined test with the AXA goodwill (see section G2.1). The value in use continues to exceed its carrying value. This brand intangible is being amortised over a 10 year period. The carrying value of the AXA Wealth brand as at 31 December 2022 is \u00a38 million. Following the acquisition of the Standard Life Assurance businesses in 2018 an intangible asset was recognised in respect of the Client Services and Proposition Agreement (\u2018CSPA\u2019) with abrdn plc and represented the value of the Group\u2019s contractual rights to use the Standard Life brand. The CSPA formalised the Strategic Partnership between the two companies and established the contractual terms by which abrdn plc was previously to continue to market and distribute certain products to be manufactured by Group companies. On 23 February 2021, the Group entered into an agreement to acquire ownership of the Standard Life brand as part of the transaction with abrdn plc, which transferred to the Group in May 2021. The Standard Life brand was initially recognised at a value of \u00a3111 million which represented the fair value attributable to the brand as at the transaction date. The intangible asset was valued on a \u2018multi-period excess earnings\u2019 basis and is being amortised over a period of 30 years. The carrying value of the Standard Life brand as at 31 December 2022 is \u00a3104 million. As part of the transaction with abrdn plc, the CSPA was significantly amended prior to being dissolved. As a consequence, the CSPA intangible included within \u2018other intangibles\u2019 was derecognised. At that time, its carrying value was \u00a330 million and this was included in the calculation of the \u2018gain on completion of abrdn plc transaction\u2019 recognised in the consolidated income statement in the year ended 31 December 2021. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-578": {
"value": "G3. Property, plant and equipment Owner-occupied property is stated at its revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and impairment. Owner-occupied property is depreciated over its estimated useful life, which is taken as 20 \u2013 50 years. Land is not depreciated. Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the owner-occupied property and the net amount is restated to the revalued amount of the asset. Gains and losses on owner-occupied property are recognised in other comprehensive income. The right-of-use assets are initially measured at cost, and subsequently at cost less any accumulated depreciation and impairments, and adjusted for certain remeasurements of the lease liability. The right-of-use assets are depreciated over the remaining lease term which is between 1 and 11 years (2021: 1 and 11 years). Equipment consists primarily of computer equipment and fittings. Equipment is stated at historical cost less deprecation. Where acquired in a business combination, historical cost equates to the fair value at the acquisition date. Depreciation on equipment is charged to the consolidated income statement over its estimated useful life of between 2 and 15 years. 2022 Owner-occupied properties \u00a3m Right-o f -use assets \u2013 property \u00a3m Right-o f -use assets \u2013 equipment \u00a3m Equipment \u00a3m Total \u00a3m Cost or valuation At 1 January 29 94 2 59 184 Additions 9 3 \u2013 8 20 Revaluation losses (6) \u2013 \u2013 \u2013 (6) Disposals \u2013 (1) \u2013 (2) (3) At 31 December 32 96 2 65 195 Depreciation At 1 January \u2013 (24) (1) (29) (54) Depreciation \u2013 (9) \u2013 (10) (19) Disposals \u2013 1 \u2013 2 3 At 31 December \u2013 (32) (1) (37) (70) Carrying amount at 31 December 32 64 1 28 125 2021 Owner-occupied properties \u00a3m Right-of-use assets \u2013 property \u00a3m Right-of-use assets \u2013 equipment \u00a3m Equipment \u00a3m Total \u00a3m Cost or valuation At 1 January 33 78 2 54 167 Additions 1 22 \u2013 12 35 Remeasurement of Right-of-use assets \u2013 3 \u2013 \u2013 3 Disposals (5) (9) \u2013 (7) (21) At 31 December 29 94 2 59 184 Depreciation At 1 January \u2013 (23) \u2013 (25) (48) Depreciation \u2013 (9) (1) (8) (18) Disposals \u2013 8 \u2013 4 12 At 31 December \u2013 (24) (1) (29) (54) Carrying amount at 31 December 29 70 1 30 130 Owner-occupied properties have been valued by accredited independent valuers at 31 December 2022 on an open market basis in accordance with the Royal Institution of Chartered Surveyors\u2019 requirements, which is deemed to equate to fair value. The fair value measurement for the properties of \u00a332 million (2021: \u00a329 million) has been categorised as Level 3 based on the non-observable inputs to the valuation technique used. Unrealised loss for the current year is \u00a36 million (2021: \u00a3nil). G3. Property, plant and equipment The fair value of the owner-occupied properties was derived using the investment method supported by comparable evidence. The significant non- observable inputs used in the valuations are the expected rental values per square foot and the capitalisation rates. The fair value of the owner-occupied properties valuation would increase (decrease) if the expected rental values per square foot were to be higher (lower) and the capitalisation rates were to be lower (higher). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-669": {
"value": "Owner-occupied property is stated at its revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and impairment. Owner-occupied property is depreciated over its estimated useful life, which is taken as 20 \u2013 50 years. Land is not depreciated. Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the owner-occupied property and the net amount is restated to the revalued amount of the asset. Gains and losses on owner-occupied property are recognised in other comprehensive income. The right-of-use assets are initially measured at cost, and subsequently at cost less any accumulated depreciation and impairments, and adjusted for certain remeasurements of the lease liability. The right-of-use assets are depreciated over the remaining lease term which is between 1 and 11 years (2021: 1 and 11 years). Equipment consists primarily of computer equipment and fittings. Equipment is stated at historical cost less deprecation. Where acquired in a business combination, historical cost equates to the fair value at the acquisition date. Depreciation on equipment is charged to the consolidated income statement over its estimated useful life of between 2 and 15 years. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-579": {
"value": "G4. Investment property Investment property, including right-of-use asset, is initially recognised at cost, including any directly attributable transaction costs. Subsequently investment property is measured at fair value. Fair value is the price that would be received to sell a property in an orderly transaction between market participants at the measurement date. Fair value is determined without any deduction for transaction costs that may be incurred on sale or disposal. Gains and losses arising from the change in fair value are recognised as income or an expense in the statement of comprehensive income. Investment property includes right-of-use assets, where the Group acts as lessee. Leases, where a significant portion of the risks and rewards of ownership are retained by the lessor, are classified as operating leases. Where investment property is leased out by the Group, rental income from these operating leases is recognised as income in the consolidated income statement on a straight-line basis over the period of the lease. 2022 \u00a3m 2021 \u00a3m At 1 January 8,592 7,128 Additions 104 819 Improvements 27 22 Disposals (1,141) (550) Remeasurement of right-of-use asset 2 (1) Movement in foreign exchange 12 (22) (Losses)/gains on adjustments to fair value (recognised in consolidated income statement) (1,363) 1,196 6,233 8,592 Less amounts classified as held for sale (see note A6.1) (2,506) (3,309) At 31 December 3,727 5,283 Unrealised (losses)/gains on properties held at end of year (1,582) 529 As at 31 December 2022, a property portfolio including amounts classified held for sale of \u00a36,070 million (2021: \u00a38,412 million) is held by the life companies in a mix of commercial sectors, spread geographically throughout the UK and Europe. Investment properties also includes \u00a362 million (2021: \u00a373 million) of property reversions arising from sales of the NPI Extra Income Plan (see note E5 for further details) and \u00a380 million (2021: \u00a386 million) from the Group\u2019s interest in the residential property of policyholders who have previously entered into an Equity Release Income Plan (\u2018ERIP\u2019) policy. Certain investment properties held by the life companies possess a ground rent obligation which gives rise to both a right-of-use asset and a lease liability. The right-of-use asset associated with the ground rent obligation is valued at fair value and is included within the total investment property valuation. The value of the ground rent right-of-use asset as at 31 December 2022 was \u00a321 million (2021: \u00a321 million). The remeasurement gives rise to an increase of \u00a32 million (2021: reduction of \u00a31 million). There were \u00a32 million additions (2021: \u00a34 million) and \u00a34 million disposals (2021: \u00a3nil) of ground rent right-of-use assets during the period. Commercial investment property is measured at fair value by independent property valuers having appropriate recognised professional qualifications and recent experiences in the location and category of the property being valued. The valuations are carried out in accordance with the Royal Institute of Chartered Surveyors (\u2018RICS\u2019) guidelines with expected income and capitalisation rate as the key non-observable inputs. The NPI residential property reversions, an interest in customers\u2019 properties which the Group will realise upon their death, are valued using a discounted cash flow model based on the Group\u2019s proportion of the current open market value, and discounted for the expected lifetime of the policyholder derived from published mortality tables. The open market value is measured by independent local property surveyors having appropriate recognised professional qualifications with reference to the assumed condition of the property and local market conditions. The individual properties are valued triennially and indexed using regional house price indices to the year end date. The discount rate is a risk-free rate appropriate for the duration of the asset, adjusted for the deferred possession rate of 3.7% (2021: 3.7%). Assumptions are also made in the valuation for future movements in property prices, based on a risk free rate. The residential property reversions have been substantially refinanced under the arrangements with Santander as described in note E5. The ERIP residential property reversions, an interest in the residential property of policyholders who have previously entered into an ERIP policy and been provided with a lifetime annuity in return for the legal title to their property, are valued using unobservable inputs and management\u2019s best estimates. As the inward cash flows on these properties will not be received until the lifetime lease is no longer in force, which is usually upon the death of the policyholder, these interests are valued on a reversionary basis which is a discounted current open market value. The open market values of the properties are independently revalued every two years by members of the Royal Institution of Chartered Surveyors and in the intervening period are adjusted by reference to the Nationwide Building Society regional indices of house prices. The discount period is based on the best estimates of the likely date the property will become available for sale and the discount rate applied is determined by the general partner as its best estimate of the appropriate discount rate. The mortality assumption is based on the PMLO8HAWP table for males and the PFLO8HAWP table for females, adjusted to reflect the historic experience of the business concerned. The mortality rates are projected using future mortality improvements from the CMI Mortality Projection Model. No explicit allowance is made for house price inflation in the year through to their realisation. Therefore, the key assumptions used in the valuation of the reversionary interests are the interest discount rate and the mortality assumption. The interest discount rate was 5% (2021: 5%). The fair value measurement of the investment properties has been categorised as Level 3 based on the inputs to the valuation techniques used. The following table shows the valuation techniques used in measuring the fair value of the investment properties, the significant non-observable inputs used, the inter- relationship between the key non-observable inputs and the fair value measurement of the investment properties: Description Valuation techniques Significant non-observable inputs Weighted average 2022 Weighted average 2021 Commercial Investment Property RICS valuation Expected income per sq. ft. \u00a322.41 \u00a321.36 Estimated rental value per hotel room \u00a37,043 \u00a38,534 Estimated rental value per parking space \u00a31,115 \u00a31,097 Capitalisation rate 5.01% 4.65% The estimated fair value of commercial properties would increase (decrease) if: \u2022 the expected income were to be higher (lower); or \u2022 the capitalisation rate were to be lower (higher). The estimated fair value of the NPI residential property reversions would increase (decrease) if: \u2022 the deferred possession rate were to be lower (higher); \u2022 the mortality rate were to be higher (lower). The estimated fair value of the ERIP residential property reversions would increase (decrease) if: \u2022 the discount rate were to be lower (higher); \u2022 the mortality rate were to be higher (lower). Direct operating expenses (offset against rental income in the consolidated income statement) in respect of investment properties that generated rental income during the year amounted to \u00a327 million (2021: \u00a341 million). The direct operating expenses arising from investment property that did not generate rental income during the year amounted to \u00a35 million (2021: \u00a31 million). Future minimum lease rental receivables in respect of non-cancellable operating leases on investment properties were as follows: 2022 \u00a3m 2021 \u00a3m Not later than 1 year 356 323 Later than 1 year and not later than 5 years 1,131 1,032 Later than 5 years 3,345 3,128 ",
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"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-670": {
"value": "nvestment property, including right-of-use asset, is initially recognised at cost, including any directly attributable transaction costs. Subsequently investment property is measured at fair value. Fair value is the price that would be received to sell a property in an orderly transaction between market participants at the measurement date. Fair value is determined without any deduction for transaction costs that may be incurred on sale or disposal. Gains and losses arising from the change in fair value are recognised as income or an expense in the statement of comprehensive income. Investment property includes right-of-use assets, where the Group acts as lessee. Leases, where a significant portion of the risks and rewards of ownership are retained by the lessor, are classified as operating leases. Where investment property is leased out by the Group, rental income from these operating leases is recognised as income in the consolidated income statement on a straight-line basis over the period of the lease. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentPropertyExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-580": {
"value": "G5. Other receivables Other receivables are recognised when due and measured on initial recognition at the fair value of the amount receivable. Subsequent to initial recognition, these receivables are measured at amortised cost using the effective interest rate method. 2022 \u00a3m 2021 \u00a3m Investment broker balances 312 249 Cash collateral pledged and initial margins posted 3,698 958 Property related receivables 145 177 Deferred acquisition costs 133 108 Other debtors 323 313 4,611 1,805 Amount recoverable after 12 months 122 100 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-671": {
"value": "Other receivables are recognised when due and measured on initial recognition at the fair value of the amount receivable. Subsequent to initial recognition, these receivables are measured at amortised cost using the effective interest rate method. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-581": {
"value": "G6. Cash and cash equivalents Cash and cash equivalents comprise cash balances and short-term deposits with an original maturity term of three months or less at the date of placement. Bank overdrafts that are repayable on demand and form an integral part of the Group\u2019s cash management are deducted from cash and cash equivalents for the purpose of the statement of consolidated cash flows. 2022 \u00a3m 2021 \u00a3m Bank and cash balances 2,716 5,246 Short-term deposits (including notice accounts and term deposits) 6,156 3,942 8,872 9,188 Less amounts classified as held for sale (33) (76) At 31 December 8,839 9,112 Deposits are subject to a combination of fixed and variable interest rates. The carrying amounts approximate to fair value at the period end. Cash and cash equivalents in long-term business operations and consolidated collective investment schemes of \u00a38,597 million (2021: \u00a38,707 million) are primarily held for the benefit of policyholders and so are not generally available for use by the owners. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-672": {
"value": "Cash and cash equivalents comprise cash balances and short-term deposits with an original maturity term of three months or less at the date of placement. Bank overdrafts that are repayable on demand and form an integral part of the Group\u2019s cash management are deducted from cash and cash equivalents for the purpose of the statement of consolidated cash flows. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-582": {
"value": "G7. Provisions A provision is recognised when the Group has a present legal or constructive obligation, as a result of a past event, which is likely to result in an outflow of resources and where a reliable estimate of the amount of the obligation can be made. If the effect is material, the provision is determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. A provision is recognised for onerous contracts when the expected benefits to be derived from the contracts are less than the related unavoidable costs. The unavoidable costs reflect the net cost of exiting the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. Where it is expected that a part of the expenditure required to settle a provision will be reimbursed by a third party the reimbursement is recognised when, and only when, it is virtually certain that the reimbursement will be received. This reimbursement is recognised as a separate asset within other receivables and will not exceed the amount of the provision. Restructuring provisions 2022 Leasehold properties \u00a3m Staff related \u00a3m Known incidents \u00a3m Input VAT recovery provision \u00a3m Operational tax provision \u00a3m Transition and Transformation provision \u00a3m Transfer of policy administration provision \u00a3m ReAssure provision \u00a3m Other 1 \u00a3m Total 1 \u00a3m At 1 January 8 9 46 17 12 92 35 2 14 235 Additions in the year 1 \u2013 25 \u2013 \u2013 33 13 \u2013 11 83 Utilised during the year \u2013 \u2013 (8) \u2013 \u2013 (28) (15) (2) (13) (66) Released during the year \u2013 (2) (15) \u2013 \u2013 \u2013 \u2013 \u2013 (1) (18) At 31 December 9 7 48 17 12 97 33 \u2013 11 234 1 Other and total provisions excludes amounts classified as held for sale as at 31 December 2022 of \u00a3nil (2021: \u00a32 million). Leasehold properties The leasehold properties provision includes a \u00a37 million (2021: \u00a37 million) dilapidations provision in respect of obligations under operating leases and \u00a32 million (2021: \u00a31 million) in respect of the excess of lease rentals and other payments on properties that are currently vacant or are expected to become vacant, over the amounts to be recovered from subletting these properties. Staff related Staff related provisions include provisions for unfunded pensions of \u00a34 million (2021: \u00a35 million), and private medical and other insurance costs for former employees of \u00a33 million (2021: \u00a34 million). Known incidents The known incidents provision was created for historical data quality, administration systems problems and process deficiencies on the policy administration, financial reconciliations and operational finance aspects of business outsourced. These balances represent the best estimates of costs payable to customers. Additional information has been given below in respect of the more significant balances within this provision. During 2021, a \u00a315 million provision was recognised in relation to errors in final encashment calculations for With Profits Trustee Investment Plans. During 2022, this provision was increased to \u00a329 million following a review of the calculations which have now been finalised and agreed. An \u00a311 million provision was also recognised in April 2021 following identification that certain customers who have a Protected Pension Age or a Protected Tax Free Lump Sum may not have had their benefits settled correctly. During 2022, this provision reduced to \u00a37 million following the release of \u00a34 million after further investigation deemed that one population of customers were no longer impacted. These provisions will be utilised within 2 to 5 years. In 2020, following completion of the Part VII transfer of the Legal & General business, a \u00a312 million provision was recognised in respect of amounts owed to customers due to various system and processing errors resulting in incorrect rules having been applied to policies. During the year, \u00a33 million (2021: \u00a32 million), of the remaining \u00a39 million provision was utilised and a further \u00a34 million (2021: \u00a31 million) was released. It is expected that the remaining balance of \u00a32 million (2021: \u00a39 million) will be fully utilised within one year. The remaining provisions of \u00a310 million as at 31 December 2022 (2021: \u00a310 million) are expected to be utilised within one to five years. As at 31 December 2022, there are no significant uncertainties which could give rise to a material change to the value of the provisions held for current known incidents. Input VAT recovery provision The provision of \u00a317 million (2021: \u00a317 million) reflects the potential outcome of on-going negotiations with HMRC in relation to the changes to the Partial Exemption Special Method (\u2018PESM\u2019) necessitated by the addition of the Standard Life entities to the Phoenix VAT Group. The provision reflects the fact that whilst Phoenix considers its proposal for the recovery of VAT on costs incurred by Standard Life Assets & Employee Services Limited (\u2018SLAESL\u2019) to be fair and reasonable, the revised PESM remains to be agreed and HMRC may take a different view. The current provision reflects the Group\u2019s maximum exposure as at the reporting date, and was increased by \u00a3nil million (2021: \u00a32 million) in the year. It is currently expected that the provision will be utilised within one to two years. Operational tax provision The operational tax provision relates to potential tax penalties payable to HMRC following failure to notify certain customers of changes to their lifetime allowance usage. The Group is currently in discussion with HMRC in respect of these items and the provision represents the Group\u2019s best estimate of the maximum exposure as at the reporting date. The balance at 31 December 2022 of \u00a312 million (2021: \u00a312 million) is expected to be utilised within one to two years. Restructuring provisions Transition and Transformation provision Following the acquisition of the Standard Life Assurance businesses in August 2018, the Group established a transition and transformation programme which aims to deliver the integration of the Group\u2019s operating models via a series of phases. During 2019, the Group announced its intention to extend its strategic partnership with TCS to provide customer servicing, to develop a digital platform and for migration of existing Standard Life policies to this platform by 2022 which raised a valid expectation of the impacts in those likely to be affected. An initial provision of \u00a3159 million was established in 2019 and included migration costs, severance costs and other expenses. Migration costs are considered a direct expenditure necessarily entailed by the restructuring and represent an obligation arising from arrangements entered into with TCS during 2019. No costs have been provided for that relate to the ongoing servicing of policies. Migration costs payable to TCS are subject to limited uncertainty as they are fixed under the terms of the agreement entered into. There was an increase in costs during 2022 following on from a strategic decision to re-phase the programme. The severance costs are subject to uncertainty and will be impacted by the number of staff that transfer to TCS, and the average salaries and number of years\u2019 service of those affected. A 10% increase in the number of staff subject to redundancy, based on an average length of service and salary, would increase the provision by \u00a34 million. During the year, the provision was increased by \u00a333 million (2021: \u00a3nil) and a further \u00a328 million (2021: \u00a317 million) was utilised. The remaining \u00a397 million (2021: \u00a392 million) is expected to be utilised within one to three years. Transfer of policy administration A significant proportion of the Group\u2019s policy administration is outsourced to Diligenta Limited (\u2018Diligenta\u2019), a UK-based subsidiary of Tata Consultancy Services (\u2018TCS\u2019). Diligenta provide life and pension business process services to a large number of the Group\u2019s policyholders. During 2018, the Group announced its intention to move to a single outsourcer platform and to transfer a further \u00a32 million of the Group\u2019s legacy policies to Diligenta by 31 December 2021. An initial provision of \u00a376 million was recognised in 2018 for the expected cost of the platform migration and for severance and other costs associated with exiting from the current arrangements. Migration costs are considered a direct expenditure necessarily entailed by the restructuring and represent an obligation arising from arrangements entered into with TCS during 2018. No costs have been provided for that relate to the ongoing servicing of policies. The migration elements of the provision are subject to limited uncertainty as a consequence of the signed agreements that are in place. There is a higher degree of uncertainty in relation to the severance and associated exit costs which will be impacted by the number of staff that ultimately transfer to Diligenta. A 10% increase in the level of severance and exit costs would increase the provision by \u00a31 million. During the year the provision was increased by \u00a313 million (2021: \u00a39 million) and a further \u00a315 million (2021: \u00a39 million) was utilised. The remaining provision of \u00a333 million (2021: \u00a335 million) is expected to be utilised within two years. ReAssure restructuring provision During 2020 a \u00a37 million restructuring provision was established in respect of ReAssure Life Limited (\u2018RLL\u2019) to cover severance costs. The remaining provision of \u00a32 million was fully utilised during the year. Other provisions Other provisions includes \u00a34 million (2021: \u00a34 million) of obligations arising under a gift voucher scheme operated by the SunLife business and a commission clawback provision which represents the expected future clawback of commission income earned by the SunLife business as a result of assumed lapses of policies or associated benefits. The remaining other provisions of \u00a37 million (2021: \u00a310 million) consist of a number of small balances all of which are less than \u00a32 million in value. Discounting The impact of discounting on all provisions during the year from the either the passage of time or from a change in the discount rate is not material. ",
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"concept": "ifrs-full:DisclosureOfProvisionsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
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"fact-673": {
"value": "A provision is recognised when the Group has a present legal or constructive obligation, as a result of a past event, which is likely to result in an outflow of resources and where a reliable estimate of the amount of the obligation can be made. If the effect is material, the provision is determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. A provision is recognised for onerous contracts when the expected benefits to be derived from the contracts are less than the related unavoidable costs. The unavoidable costs reflect the net cost of exiting the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. Where it is expected that a part of the expenditure required to settle a provision will be reimbursed by a third party the reimbursement is recognised when, and only when, it is virtually certain that the reimbursement will be received. This reimbursement is recognised as a separate asset within other receivables and will not exceed the amount of the provision. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-583": {
"value": "G8. Tax assets and liabilities Deferred tax is provided for on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not provided in respect of temporary differences arising from the initial recognition of goodwill and the initial recognition of assets or liabilities in a transaction that is not a business combination and that, at the time of the transaction, affects neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates and laws enacted or substantively enacted at the period end. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 2022 \u00a3m 2021 \u00a3m Current tax: Current tax receivable 519 419 Current tax payable (34) (19) Deferred tax: Deferred tax assets 158 \u2013 Deferred tax liabilities (660) (1,399) Movement in deferred tax liabilities 2022 1 January \u00a3m Recognised in consolidated income statement \u00a3m Recognised in other comprehensive income \u00a3m Other movements \u00a3m Less amounts classified as held for sale \u00a3m 31 December \u00a3m Trading losses 109 81 \u2013 8 \u2013 198 Capital losses 32 (8) \u2013 \u2013 \u2013 24 Expenses and deferred acquisition costs carried forward 57 315 \u2013 (1) \u2013 371 Provisions and other temporary differences 135 (10) \u2013 (2) \u2013 123 Non refundable pension scheme surplus (255) 391 (287) \u2013 \u2013 (151) Committed future pension contributions \u2013 5 4 \u2013 \u2013 9 Accelerated capital allowances 16 1 \u2013 \u2013 \u2013 17 Intangibles 35 (5) \u2013 2 \u2013 32 Acquired in-force business (878) 68 \u2013 \u2013 (3) (813) Customer relationships (57) 4 \u2013 \u2013 \u2013 (53) Unrealised gains (593) 333 1 (2) \u2013 (261) IFRS transitional adjustments (5) 5 \u2013 \u2013 \u2013 \u2013 Other 5 (4) \u2013 1 \u2013 2 (1,399) 1,176 (282) 6 (3) (502) 2021 1 January \u00a3m Recognised in consolidated income statement \u00a3m Recognised in other comprehensive income \u00a3m Other movements \u00a3m Less amounts classified as held for sale \u00a3m 31 December \u00a3m Trading losses 30 80 \u2013 (1) \u2013 109 Capital losses 36 (4) \u2013 \u2013 \u2013 32 Expenses and deferred acquisition costs carried forward 42 15 \u2013 \u2013 \u2013 57 Provisions and other temporary differences 129 5 \u2013 1 \u2013 135 Non refundable pension scheme surplus (128) 13 (140) \u2013 \u2013 (255) Pension scheme deficit 13 (16) 3 \u2013 \u2013 - Accelerated capital allowances 8 8 \u2013 \u2013 \u2013 16 Intangibles 39 (2) \u2013 (2) \u2013 35 Acquired in-force business (798) (90) \u2013 \u2013 10 (878) Customer relationships (33) (24) \u2013 \u2013 \u2013 (57) Unrealised gains (365) (230) \u2013 2 \u2013 (593) IFRS transitional adjustments (10) 5 \u2013 - \u2013 (5) Other 1 \u2013 \u2013 4 \u2013 5 (1,036) (240) (137) 4 10 (1,399) The standard rate of UK Corporation tax for the year ended 31 December 2022 is 19% (year ended 31 December 2021: 19%). An increase from the current 19% UK corporation tax rate to 25%, effective from 1 April 2023, was announced in the Budget on 3 March 2021, and substantively enacted on 24 May 2021. Accordingly, shareholder deferred tax assets and liabilities, where provided, are reflected at rates between 19% and 25% depending on the expected timing of the reversal of the relevant temporary difference. Deferred income tax assets are recognised for tax losses carried forward only to the extent that realisation of the related tax benefit is probable. 2022 \u00a3m 2021 \u00a3m Deferred tax assets have not been recognised in respect of: Tax losses carried forward 73 55 Excess expenses and deferred acquisition costs 112 9 Intangibles 11 9 Deferred tax assets not recognised on capital losses 1 40 29 Other 6 \u2013 1 These can only be recognised against future capital gains and have no expiry date. The Group also has \u00a3456 million (2021: \u00a3109 million) of BLAGAB (life business) trading losses carried forward as at 31 December 2022 across across ReAssure Limited, Phoenix Life Limited and Phoenix Life Assurance Limited. \u00a3291 million of gross losses are projected to be utilised within these entities, however no value has been attributed to these deferred tax assets given the interaction with other deductible temporary differences (2021: \u00a3109 million of gross losses were projected to be utilised and deferred tax assets of \u00a35 million were recognised). Deferred tax assets have not been recognised in respect of the remaining \u00a3165 million (2021: \u00a3nil) losses due to the uncertainty of future BLAGAB trading profits arising against which the losses could be offset (at entity level). Deferred tax assets valued at \u00a37 million have been recognised in respect of \u00a3156 million (2021: \u00a3nil) arising from the interaction with other deductible timing differences on consolidation. There is a technical matter which is currently being discussed with HMRC in relation to the L&G insurance business transfer to ReAssure Limited. These discussions are not sufficiently progressed at this stage for recognition of any potential tax benefit arising. A tax dispute with HMRC in relation to the tax treatment of an asset formerly held by Guardian Assurance Limited (before the business was transferred to ReAssure Limited) was resolved in the period in favour of the Group. The 2021 current tax liability included an accrual for the total tax under dispute on the basis that there was sufficient risk that the tax treatment of the Group would not then be accepted. In 2022 this tax liability was released. The Group in conjunction with a number of other companies has challenged HMRC\u2019s position on the corporation tax treatment of overseas portfolio dividends from companies resident in the EU (\u2018EU dividends') using a Group Litigation Order (\u2018GLO\u2019). The issue relates to whether the UK tax rules, which taxed EU dividends received prior to 1 July 2009, was contrary to EU law given that dividends received from UK companies were exempt from tax. In 2009 UK tax law was changed with both overseas and UK dividends being treated as exempt from corporation tax. In July 2018, the Supreme Court concluded in favour of the tax payer and a tax benefit of \u00a313 million was recognised at the end of 2018 in relation to enhanced double tax relief claims which the Group is entitled to in accordance with the Court judgement. As a result of the insurance business transfer from Legal and General Assurance Society during 2020, the tax refund for the benefit of the Group\u2019s with-profit and unit linked funds increased to \u00a345 million and \u00a323 million respectively. In the case of the with-profit funds there was an increase in unallocated surplus and for the unit linked funds there was a corresponding increase in investment contract liabilities as a result of the recognition of the tax asset. In January 2020, HMRC issued a communication to taxpayers who are affected by the dividend GLO but are not direct participants of it, setting out HMRC\u2019s intended approach to settling enquiries into the amount of double tax relief available for statutory protective or other claims. The Group has been discussing the claims with HMRC during the course of 2022, but due to the significant number of cases and years affected, no amounts have as yet been repaid. The level of tax refund expected is currently unchanged as at the end of 2022. Some companies of the Group were late joiners or not members of the GLO but have made statutory protective tax claims totalling circa \u00a314 million for the benefit of unit linked life funds based on the Supreme Court decision. HMRC has challenged the validity of such claims and is currently considering further tax litigation in this area against other third parties. Some progress through the courts has been made in the course of 2022, but it is expected that the litigation will continue to run. Due to the uncertainty around the potential success of the claims a tax asset has not been recognised in respect of these claims. ",
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"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-674": {
"value": "Deferred tax is provided for on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not provided in respect of temporary differences arising from the initial recognition of goodwill and the initial recognition of assets or liabilities in a transaction that is not a business combination and that, at the time of the transaction, affects neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates and laws enacted or substantively enacted at the period end. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForTaxAssetsAndLiabilities",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-634": {
"value": "G9. Payables related to direct insurance contracts Payables related to direct insurance contracts primarily include outstanding claims provisions. Outstanding claims under insurance and investment contracts with DPF are valued using a best estimate method under IFRS 4 Insurance Contracts. Outstanding claims under investment contracts without DPF are measured at full settlement value in accordance with IAS 39 Financial Instruments: Recognition and Measurement. 2022 \u00a3m 2021 \u00a3m Payables related to direct insurance contracts 1,964 1,864 ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfPayablesRelatedToDirectInsuranceContracts",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-584": {
"value": "Payables related to direct insurance contracts primarily include outstanding claims provisions. Outstanding claims under insurance and investment contracts with DPF are valued using a best estimate method under IFRS 4 Insurance Contracts. Outstanding claims under investment contracts without DPF are measured at full settlement value in accordance with IAS 39 Financial Instruments: Recognition and Measurement. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForPayablesRelatedToDirectInsuranceContracts",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-675": {
"value": "Payables related to direct insurance contracts primarily include outstanding claims provisions. Outstanding claims under insurance and investment contracts with DPF are valued using a best estimate method under IFRS 4 Insurance Contracts. Outstanding claims under investment contracts without DPF are measured at full settlement value in accordance with IAS 39 Financial Instruments: Recognition and Measurement. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-585": {
"value": "G10. Lease liabilities The operating lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Group\u2019s incremental borrowing rate as the interest rate implicit in the lease cannot be readily determined. For ground rent leases classified as finance leases, the incremental borrowing rate of investment funds holding the associated investment properties is used as the discount rate. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from, for example, rent reviews or from changes in the assessment of whether a termination option is reasonably certain not to be exercised. The Group has applied judgement to determine the lease term for some lease contracts with break clauses. 2022 \u00a3m 2021 \u00a3m At 1 January 99 84 Leases incepted during the year 6 27 Termination of leases following the disposal of associated investment properties (4) (1) Interest expense 3 3 Lease payments (14) (16) Remeasurement of leases 2 2 At 31 December 92 99 Amount due within twelve months 11 10 Amount due after twelve months 81 89 Details of the related right-of-use assets are included in notes G3 and G4. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfLeasesExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-676": {
"value": "The operating lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Group\u2019s incremental borrowing rate as the interest rate implicit in the lease cannot be readily determined. For ground rent leases classified as finance leases, the incremental borrowing rate of investment funds holding the associated investment properties is used as the discount rate. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from, for example, rent reviews or from changes in the assessment of whether a termination option is reasonably certain not to be exercised. The Group has applied judgement to determine the lease term for some lease contracts with break clauses. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-586": {
"value": "G11. Accruals and deferred income This note analyses the Group\u2019s accruals and deferred income at the end of the year. 2022 \u00a3m 2021 \u00a3m Accruals 498 498 Deferred income 105 123 Accruals and deferred income including amounts classified as held for sale 603 621 Less amounts classified as held for sale (37) (54) At 31 December 566 567 Amount due for settlement after 12 months 35 26 Deferred income includes consideration deferred as a result of the abrdn transaction pending the Part VII transfer (including amounts offset as a result of the profit share).",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfAccrualsAndDeferredIncome",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-677": {
"value": "This note analyses the Group\u2019s accruals and deferred income at the end of the year. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForAccrualsAndDeferredIncome",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-587": {
"value": "G12. Other payables Other payables are recognised when due and are measured on initial recognition at the fair value of the consideration payable. Subsequent to initial recognition, these payables are measured at amortised cost using the effective interest rate method. 2022 \u00a3m 2021 \u00a3m Investment broker balances 513 228 Property related payables 53 73 Investment management fees 48 77 Other payables 351 343 965 721 Amount due for settlement after 12 months \u2013 \u2013",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfOtherPayables",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-678": {
"value": "Other payables are recognised when due and are measured on initial recognition at the fair value of the consideration payable. Subsequent to initial recognition, these payables are measured at amortised cost using the effective interest rate method. ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForOtherPayables",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-588": {
"value": "H. Interests in subsidiaries and associates H1. Subsidiaries Subsidiaries are consolidated from the date that effective control is obtained by the Group (see basis of consolidation in note A1) and are excluded from consolidation from the date they cease to be subsidiary undertakings. For subsidiaries disposed of during the year, any difference between the net proceeds, plus the fair value of any retained interest, and the carrying amount of the subsidiary including non-controlling interests, is recognised in the consolidated income statement. The Group uses the acquisition method to account for the acquisition of subsidiaries. The cost of an acquisition is measured at the fair value of the consideration. Any excess of the cost of acquisition over the fair value of the net assets acquired is recognised as goodwill. In certain acquisitions an excess of the acquirer\u2019s interest in the net fair value of the acquiree\u2019s identifiable assets, liabilities, contingent liabilities and non-controlling interests over cost may arise. Where this occurs, the surplus of the fair value of net assets acquired over the fair value of the consideration is recognised in the consolidated income statement. Directly attributable acquisition costs are included within administrative expenses, except for acquisitions undertaken prior to 2010 when they are included within the cost of the acquisition. Costs directly related to the issuing of debt or equity securities are included within the initial carrying amount of debt or equity securities where these are not carried at fair value. Intra-group balances and income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. The Group has invested in a number of collective investment schemes such as Open-ended Investment Companies (\u2018OEICs\u2019), unit trusts, Soci\u00e9t\u00e9 d\u2019Investissement \u00e0 Capital Variable (\u2018SICAVs\u2019), investment trusts and private equity funds. These invest mainly in equities, bonds, property and cash and cash equivalents. The Group\u2019s percentage ownership in these collective investment schemes can fluctuate according to the level of Group and third party participation in the structures. When assessing control over collective investment schemes, the Group considers those factors described under the \u2018Basis of consolidation\u2019 in note A1. In particular, the Group considers the scope of its decision-making authority, including the existence of substantive rights (such as power of veto, liquidation rights and the right to remove the fund manager) that give it the ability to direct the relevant activities of the investee. The assessment of whether rights are substantive rights, and the circumstances under which the Group has the practical ability to exercise them, requires the exercise of judgement. This assessment includes a qualitative consideration of the rights held by the Group that are attached to its holdings in the collective investment schemes, rights that arise from contractual arrangements between the Group and the entity or fund manager and the rights held by third parties. In addition, consideration is made of whether the Group has de facto power, for example, where third party investments in the collective investment schemes are widely dispersed. Where Group companies are deemed to control such collective investment schemes they are consolidated in the Group financial statements, with the interests of external third parties recognised as a liability (see the accounting policy for \u2018Net asset value attributable to unitholders\u2019 in note E1 for further details). Certain of the collective investment schemes have non-coterminous period ends and are consolidated on the basis of additional financial statements prepared to the period end. Portfolio transfers When completing an acquisition, the Group first considers whether the acquisition meets the definition of a business combination under IFRS 3 Business Combinations. IFRS 3, and the use of acquisition accounting, does not apply in circumstances where the acquisition of an asset or a group of assets does not constitute a business, and is instead a portfolio of assets and liabilities. In such cases, the Group\u2019s policy is to recognise and measure the assets acquired and liabilities assumed in accordance with the Group's accounting policies for those assets and liabilities. The difference between the consideration and the net assets or liabilities acquired is recognised in the consolidated income statement. H1.1 Significant restrictions The ability of subsidiaries to transfer funds to the Group in the form of cash dividends or to repay loans and advances is subject to local laws, regulations and solvency requirements. Each UK life company and the Group must retain sufficient capital at all times to meet the regulatory capital requirements mandated by or otherwise agreed with the relevant national supervisory authority. Further information on the capital requirements applicable to Group entities are set out in the Capital Management note (I3). Under UK company law, dividends can only be paid if a UK company has distributable reserves sufficient to cover the dividend. In addition, contractual requirements may place restrictions on the transfer of funds as follows: \u2022 Pearl Life Holdings Limited (\u2018PeLHL\u2019) is required to make payments of contributions into charged accounts on behalf of the Abbey Life Scheme. These amounts do not form part of the pension scheme assets and at 31 December 2022, PeLHL held \u00a39 million (2021: \u00a311 million) within debt securities and \u00a318 million (2021: \u00a314 million) within cash and cash equivalents in respect of these charged accounts. In December 2021, following completion of the 31 March 2021 funding valuation \u00a342 million of assets were transferred from the charged accounts to the Abbey Life Pension Scheme. Further details of when the remaining amounts may become payable to the pensions scheme are included in note G1.3. \u2022 ReAssure Midco Limited (\u2018RML\u2019) is required to make payments of contributions into a ring-fenced account on behalf of the ReAssure Staff Pension Scheme. These amounts do not form part of the pension scheme assets and at 31 December 2022, RML held \u00a340 million (2021: \u00a357 million) within debt securities and \u00a3nil (2021: \u00a31 million) within cash and cash equivalents in respect of this account. Further details of when these amounts may become payable to the pensions scheme are included in note G1.4. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-679": {
"value": "Subsidiaries are consolidated from the date that effective control is obtained by the Group (see basis of consolidation in note A1) and are excluded from consolidation from the date they cease to be subsidiary undertakings. For subsidiaries disposed of during the year, any difference between the net proceeds, plus the fair value of any retained interest, and the carrying amount of the subsidiary including non-controlling interests, is recognised in the consolidated income statement. The Group uses the acquisition method to account for the acquisition of subsidiaries. The cost of an acquisition is measured at the fair value of the consideration. Any excess of the cost of acquisition over the fair value of the net assets acquired is recognised as goodwill. In certain acquisitions an excess of the acquirer\u2019s interest in the net fair value of the acquiree\u2019s identifiable assets, liabilities, contingent liabilities and non-controlling interests over cost may arise. Where this occurs, the surplus of the fair value of net assets acquired over the fair value of the consideration is recognised in the consolidated income statement. Directly attributable acquisition costs are included within administrative expenses, except for acquisitions undertaken prior to 2010 when they are included within the cost of the acquisition. Costs directly related to the issuing of debt or equity securities are included within the initial carrying amount of debt or equity securities where these are not carried at fair value. Intra-group balances and income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. The Group has invested in a number of collective investment schemes such as Open-ended Investment Companies (\u2018OEICs\u2019), unit trusts, Soci\u00e9t\u00e9 d\u2019Investissement \u00e0 Capital Variable (\u2018SICAVs\u2019), investment trusts and private equity funds. These invest mainly in equities, bonds, property and cash and cash equivalents. The Group\u2019s percentage ownership in these collective investment schemes can fluctuate according to the level of Group and third party participation in the structures. When assessing control over collective investment schemes, the Group considers those factors described under the \u2018Basis of consolidation\u2019 in note A1. In particular, the Group considers the scope of its decision-making authority, including the existence of substantive rights (such as power of veto, liquidation rights and the right to remove the fund manager) that give it the ability to direct the relevant activities of the investee. The assessment of whether rights are substantive rights, and the circumstances under which the Group has the practical ability to exercise them, requires the exercise of judgement. This assessment includes a qualitative consideration of the rights held by the Group that are attached to its holdings in the collective investment schemes, rights that arise from contractual arrangements between the Group and the entity or fund manager and the rights held by third parties. In addition, consideration is made of whether the Group has de facto power, for example, where third party investments in the collective investment schemes are widely dispersed. Where Group companies are deemed to control such collective investment schemes they are consolidated in the Group financial statements, with the interests of external third parties recognised as a liability (see the accounting policy for \u2018Net asset value attributable to unitholders\u2019 in note E1 for further details). Certain of the collective investment schemes have non-coterminous period ends and are consolidated on the basis of additional financial statements prepared to the period end. Portfolio transfers When completing an acquisition, the Group first considers whether the acquisition meets the definition of a business combination under IFRS 3 Business Combinations. IFRS 3, and the use of acquisition accounting, does not apply in circumstances where the acquisition of an asset or a group of assets does not constitute a business, and is instead a portfolio of assets and liabilities. In such cases, the Group\u2019s policy is to recognise and measure the assets acquired and liabilities assumed in accordance with the Group's accounting policies for those assets and liabilities. The difference between the consideration and the net assets or liabilities acquired is recognised in the consolidated income statement. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-589": {
"value": "H2. Associates: investment in UK Commercial Property REIT (\u2018UKCPR\u2019) UKCPR is a property investment company which is domiciled in Guernsey and is admitted to the official list of the UK Listing Authority and to trading on the London Stock Exchange. The Group\u2019s interest in UKCPR is held in the with-profit funds of the Group\u2019s life companies. Therefore, the shareholder exposure to fair value movements in the Group\u2019s investment in UKCPR is limited to the impact of those movements on the shareholder share of distributed profits of the relevant fund. As at 31 December 2022, the Group held 44.6% (2021: 44.5%) of the issued share capital of UKCPR and the value of this investment, measured at fair value and included within financial assets, was \u00a3329 million (2021: \u00a3431 million). Management has concluded that the Group did not control UKCPR in either the current or comparative periods. The Group does not hold a unilateral power of veto in general meetings and voting is subject to certain restrictions in accordance with the terms of an existing relationship agreement it has with UKCPR. Summary consolidated financial information (at 100%) for UKCPR group is shown below: 2022 \u00a3m 2021 \u00a3m Non-current assets 1,276 1,508 Current assets 83 90 Non-current liabilities (291) (248) Current liabilities (32) (25) 1,036 1,325 Revenue 71 58 (Loss)/profit for the year after tax (222) 236 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-590": {
"value": "H3. Structured entities A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only, and the relevant activities are directed by means of contractual arrangements. A structured entity often has some or all of the following features or attributes: (a) restricted activities; (b) a narrow and well-defined objective, such as to provide investment opportunities for investors by passing on risks and rewards associated with the assets of the structured entity to investors; (c) insufficient equity to permit the structured entity to finance its activities without subordinated financial support; and (d) financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches). The Group has determined that all of its investments in collective investment schemes are structured entities. In addition, a number of debt security structures and private equity funds have been identified as structured entities. The Group has assessed that it has interests in both consolidated and unconsolidated structured entities as shown below: \u2022 Unit trusts; \u2022 OEICs; \u2022 SICAVs; \u2022 Private Equity Funds; \u2022 Asset backed securities; \u2022 Collateralised Debt Obligations (\u2018CDOs\u2019); \u2022 Other debt structures; and \u2022 Phoenix Group Employee Benefit Trust (\u2018EBT\u2019). The Group\u2019s holdings in the investments listed above are susceptible to market price risk arising from uncertainties about future values. Holdings in investment funds are subject to the terms and conditions of the respective fund\u2019s prospectus and the Group holds redeemable shares or units in each of the funds. The funds are managed by internal and external fund managers who apply various investment strategies to accomplish their respective investment objectives. All of the funds are managed by fund managers who are compensated by the respective funds for their services. Such compensation generally consists of an asset-based fee and a performance-based incentive fee and is reflected in the valuation of each fund. ",
"dimensions": {
"concept": "phoenixgroupholdings:DisclosureOfStructuredEntities",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-680": {
"value": "A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only, and the relevant activities are directed by means of contractual arrangements. A structured entity often has some or all of the following features or attributes: (a) restricted activities; (b) a narrow and well-defined objective, such as to provide investment opportunities for investors by passing on risks and rewards associated with the assets of the structured entity to investors; (c) insufficient equity to permit the structured entity to finance its activities without subordinated financial support; and (d) financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches). ",
"dimensions": {
"concept": "phoenixgroupholdings:DescriptionOfAccountingPolicyForStructuredEntities",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-591": {
"value": "H3.1 Interests in consolidated structured entities The Group has determined that where it has control over funds, these investments are consolidated structured entities. The EBT is a consolidated structured entity that holds shares to satisfy awards granted to employees under the Group\u2019s share-based payment schemes. During the year, the Group granted further loans to the EBT of \u00a313 million (2021: \u00a316 million). As at the reporting date, the Group has no intention to provide financial or other support to any other consolidated structured entity. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInformationAboutConsolidatedStructuredEntitiesExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-592": {
"value": "H3.2 Interests in unconsolidated structured entities The Group has interests in unconsolidated structured entities. These investments are held as financial assets in the Group\u2019s consolidated statement of financial position held at fair value through profit or loss. Any change in fair value is included in the consolidated income statement in \u2018net investment income\u2019. Dividend and interest income is received from these investments. A summary of the Group\u2019s interest in unconsolidated structured entities is included below. These are shown according to the financial asset categorisatio n in the consolidated statement of financial position. 2022 Carrying value of financial assets \u00a3m 2021 Carrying value of financial assets \u00a3m Equities 968 871 Collective investment schemes 75,389 85,995 Debt securities 8,062 10,991 84,419 97,857 The Group\u2019s maximum exposure to loss with regard to the interests presented above is the carrying amount of the Group\u2019s investments. Once the Group has disposed of its shares or units in a fund, it ceases to be exposed to any risk from that fund. The Group\u2019s holdings in the above unconsolidated structured entities are largely less than 50% and as such the size of these structured entities are likely to be significantly higher than their carrying value. Details of commitments to subscribe to private equity funds and other unlisted assets are included in note I5. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfUnconsolidatedStructuredEntitiesExplanatory",
"language": "en",
"entity": "scheme:2138001P49OLAEU33T68",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-593": {
"value": "H4. Group entities
The table below sets out the Group's subsidiaries (including consolidated collective investment schemes), associates and significant holdings in
undertakings (including undertakings in which the holding amounts to 20% or more of the nominal value of the shares or units and they are not classified
as a subsidiary or associate).
Registered address
of incorporated
entities
If unincorporated,
address of
principal place of
business
Type of investment
(including class of
shares held)
% of shares/
units held
Subsidiaries:
Phoenix Life Limited (life assurance company)
Wythall
2
Ordinary Shares 100.00%
Phoenix Life Assurance Limited (life assurance company)
Wythall
2
Ordinary Shares 100.00%
Standard Life Assurance Limited (life assurance company \u2013 directly owned by
the Company)
Edinburgh
3
Ordinary Shares 100.00%
Standard Life International Designated Activity Company (life assurance
company \u2013 directly owned by the Company)
Dublin
4
Ordinary Shares 100.00%
Standard Life Pension Funds Limited (life assurance company) Edinburgh
3
Limited by
Guarantee
100.00%
ReAssure Life Limited (life assurance company)
Telford
5
Ordinary Shares 100.00%
ReAssure Limited (life assurance company) Telford
5
Ordinary Shares 100.00%
Pearl Group Management Services Limited (management services company)
Wythall
2
Ordinary Shares 100.00%
Pearl Group Services Limited (management services company) Wythall
2
Ordinary Shares 100.00%
Standard Life Assets and Employee Services Limited (management services
company)
Edinburgh
3
Ordinary Shares 100.00%
ReAssure Companies Services Limited (management services company)
1
Telford
5
Ordinary Shares 100.00%
PGMS (Ireland) Limited (management services company)
Dublin
6
Ordinary Shares 100.00%
ReAssure UK Services Limited (management services company)
Telford
5
Ordinary Shares 100.00%
PA (GI) Limited (non-trading company)
Wythall
2
Ordinary Shares 100.00%
103 Wardour Street Retail Investment Company Limited (investment company)
Telford
5
Ordinary Shares 100.00%
3 St Andrew Square Apartments Limited (property management company)
Edinburgh
7
Ordinary Shares 100.00%
28 Riberia de Loira SL
Madrid
64
Ordinary Shares 100.00%
Abbey Life Assurance Company Limited (non-trading company)
1
Wythall
2
Ordinary Shares 100.00%
Abbey Life Trust Securities Limited (pension trustee company)
Wythall
2
Ordinary Shares 100.00%
Abbey Life Trustee Services Limited (dormant company)
1
Wythall
2
Ordinary Shares 100.00%
Alba LAS Pensions Management Limited (dormant company)
1
Glasgow
8
Ordinary Shares 100.00%
Alba Life Trustees Limited (non-trading company)
Edinburgh
3
Ordinary Shares 100.00%
Axial Fundamental Strategies (US Investments) LLC (investment company)
Delaware
9
Limited Liability
Company
100.00%
BA (FURBS) Limited (dormant company)
Wythall
2
Ordinary Shares 100.00%
BL Telford Limited (dormant company)
1
Telford
5
Ordinary Shares 100.00%
Britannic Finance Limited (finance and insurance services company)
1
Wythall
2
Ordinary Shares 100.00%
Britannic Group Services Limited (dormant company)
Wythall
2
Ordinary Shares 100.00%
Britannic Money Investment Services Limited (investment advice company)
1
Wythall
2
Ordinary Shares 100.00%
Century Trustee Services Limited (dormant company)
1
Wythall
2
Ordinary Shares 100.00%
CH Management Limited (investment company)
Delaware
10
Ordinary Shares 100.00%
Cityfourinc (dormant company)
1
Wythall
2
Unlimited with
Shares
100.00%
ERIP General Partner Limited (General Partner to ERIP Limited Partnership)
Telford
5
Ordinary Shares 80.00%
ERIP Limited Partnership (Limited Partnership)
Telford
5
Ordinary Shares 100.00%
G Assurance & Pensions Services Limited (non-trading company)
1
Telford
5
Ordinary Shares 100.00%
G Financial Services Limited (dormant company)
1
Telford
5
Ordinary Shares 100.00%
G Life H Limited (holding company)
1
Telford
5
Ordinary Shares 100.00%
G Park Management Company Limited (property management company)
London
11
Ordinary Shares 100.00%
G Trustees Limited (trustee company)
Telford
5
Ordinary Shares 100.00%
Gallions Reach Shopping Park (Nominee) Limited (dormant company)
London
11
Ordinary Shares 100.00%
Gresham Life Assurance Society Limited (dormant company)
1
Telford
5
Ordinary Shares 100.00%
Iceni Nominees (No. 2) Limited (dormant company)
London
11
Ordinary Shares 100.00%
IH (Jersey) Limited (dormant company)
Jersey
12
Ordinary Shares 100.00%
Impala Holdings Limited (holding company)
Wythall
2
Ordinary Shares 100.00%
Registered address of incorporated entities If unincorporated, address of principal place of business Type of investment (including class of shares held) % of shares/ units held Impala Loan Company 1 Limited (dormant company) Edinburgh 3 Ordinary Shares 100.00% Inesia SA (investment company) Luxembourg 13 Ordinary Shares 100.00% Inhoco 3107 Limited (dormant company) London 11 Ordinary Shares 100.00% London Life Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% London Life Trustees Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Namulas Pension Trustees Limited (dormant company) Telford 5 Ordinary Shares 100.00% National Provident Institution (dormant company) 1 Wythall 2 Unlimited without Shares 100.00% National Provident Life Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% NM Life Trustees Limited (dormant company) Telford 5 Ordinary Shares 100.00% NM Pensions Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% NP Life Holdings Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% NPI (Printworks) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% NPI (Westgate) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix (Barwell 2) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix (Chiswick House) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl (Covent Garden) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl (Martineau Phase 1) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl (Martineau Phase 2) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix (Moor House 1) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix (Moor House 2) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl (Moor House) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix (Printworks) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix (Stockley Park) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl (WP) Investments LLC (investment company) Delaware 9 Limited Liability Company 100.00% Pearl AL Limited (dormant company) 1 Glasgow 8 Ordinary Shares 100.00% Pearl Assurance Group Holdings Limited (investment company) 1 Wythall 2 Ordinary Shares 100.00% Pearl Customer Care Limited (financial services company) 1 Wythall 2 Ordinary Shares 100.00% Pearl Group Holdings (No. 1) Limited (finance company) London 14 Ordinary Shares 100.00% Pearl Group Holdings (No. 2) Limited (holding company) Wythall 2 Ordinary Shares 100.00% Pearl Group Secretariat Services Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl Life Holdings Limited (holding company) Wythall 2 Ordinary Shares 100.00% Phoenix Group Management Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl MP Birmingham Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl RLG Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Pearl Trustees Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix ULA Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% PG Dormant (No 4) Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% PG Dormant (No 5) Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% PG Dormant (No 6) Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix Group Management Services Limited (dormant company) London 14 Ordinary Shares 100.00% Phoenix Holdings (Bermuda) Limited (non-trading company) Bermuda 63 Ordinary Shares 100.00% Phoenix Group Holdings (Bermuda) Limited (non-trading company) Bermuda 63 Ordinary Shares 100.00% Phoenix Management Services (Bermuda) Limited (non-trading company) Bermuda 63 Ordinary Shares 100.00% Phoenix Management Services Holdings (Bermuda) Limited (non-trading company) Bermuda 63 Ordinary Shares 100.00% Phoenix Re Limited Bermuda 63 Ordinary Shares 100.00% Standard Life Mortgages Limited Wythall 2 Ordinary Shares 100.00% Clyde Gateway Management Company Limited Edinburgh 7 Ordinary Shares 100.00% PGMS (Glasgow) Limited (investment company) 1 Edinburgh 3 Ordinary Shares 100.00% Registered address of incorporated entities If unincorporated, address of principal place of business Type of investment (including class of shares held) % of shares/ units held PGMS (Ireland) Holdings Unlimited Company (holding company) Dublin 6 Unlimited with Shares 100.00% PGS 2 Limited (investment company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix & London Assurance Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix Advisers Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix AW Limited (dormant company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix Customer Care Limited (financial services company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix ER1 Limited (finance company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix ER2 Limited (finance company) Wythall 2 Ordinary Shares 100.00% Phoenix ER3 Limited (finance company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix ER4 Limited (finance company) Wythall 2 Ordinary Shares 100.00% Phoenix ER5 Limited (finance company) Wythall 2 Ordinary Shares 100.00% Phoenix ER6 Limited (finance company) Wythall 2 Ordinary Shares 100.00% Phoenix Group Capital Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix Group Holdings (non-trading company) Cayman Islands 18 Private Company 100.00% Phoenix Life Assurance Europe DAC Dublin 19 Ordinary Shares 100.00% Phoenix Life Holdings Limited (holding company \u2013 directly owned by the Company) Wythall 2 Ordinary Shares 100.00% Phoenix Pension Scheme (Trustees) Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix Pensions Trustee Services Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix SCP Limited (dormant company) Wythall 2 Ordinary Shares 100.00% Phoenix SCP Pensions Trustees Limited (trustee company) Wythall 2 Ordinary Shares 100.00% Phoenix SCP Trustees Limited (trustee company) Edinburgh 3 Ordinary Shares 100.00% Phoenix SL Direct Limited (non-trading company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix SPV1 Limited (investment company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix SPV2 Limited (investment company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix SPV3 Limited (investment company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix SPV4 Limited (investment company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix Unit Trust Managers Limited (unit trust manager) Wythall 2 Ordinary Shares 100.00% Phoenix Wealth Holdings Limited (holding company) 1 Wythall 2 Ordinary Shares 100.00% Phoenix Wealth Services Limited (financial services company) Wythall 2 Ordinary Shares 100.00% Phoenix Wealth Trustee Services Limited (trustee company) Wythall 2 Ordinary Shares 100.00% ReAssure FS Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% ReAssure FSH UK Limited (holding company) 1 Telford 5 Ordinary Shares 100.00% ReAssure Group plc (holding company - directly owned by the Company) Telford 5 Ordinary Shares 100.00% ReAssure Life Pension Trustees Limited (dormant company) Telford 5 Ordinary Shares 100.00% ReAssure LL Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% ReAssure Midco Limited (holding company) Telford 5 Ordinary Shares 100.00% ReAssure Nominees Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% ReAssure Pension Trustees Limited (dormant company) Telford 5 Ordinary Shares 100.00% ReAssure PM Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% ReAssure Trustees Limited (dormant company) Telford 5 Ordinary Shares 100.00% ReAssure Two Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% ReAssure UK Life Assurance Company Limited (dormant company) 1 Telford 5 Ordinary Shares 100.00% Scottish Mutual Assurance Limited (dormant company) 1 Edinburgh 3 Ordinary Shares 100.00% Scottish Mutual Nominees Limited (dormant company) 1 Edinburgh 3 Ordinary Shares 100.00% Scottish Mutual Pension Funds Investment Limited (trustee company) Edinburgh 3 Ordinary Shares 100.00% SL (NEWCO) Limited (dormant company) Edinburgh 3 Ordinary Shares 100.00% SL Liverpool plc (dormant company) 1 Wythall 2 Public Limited Company 100.00% SLA Belgium No.1 SA (investment company) Brussels 20 Soci\u00e9t\u00e9 Anonyme 100.00% Registered address
of incorporated
entities
If unincorporated,
address of
principal place of
business
Type of investment
(including class of
shares held)
% of shares/
units held
SLA Netherlands No.1 B.V. (investment company) Amsterdam
21
Ordinary Shares 100.00%
SLACOM (No. 10) Limited (dormant company)
Edinburgh
3
Ordinary Shares 100.00%
SLACOM (No. 8) Limited (dormant company) Edinburgh
3
Ordinary Shares 100.00%
SLACOM (No. 9) Limited (dormant company)
Edinburgh
3
Ordinary Shares 100.00%
SLIF Property Investment GP Limited (General Partner to SLIF Property
Investment)
Edinburgh
7
Ordinary Shares 100.00%
Pilangen Logistik AB (investment company) Stockholm
22
Ordinary Shares 100.00%
Pilangen Logistik I AB (investment company)
Stockholm
22
Ordinary Shares 100.00%
SLA Denmark No.1 ApS (investment company) Copenhagen
23
Ordinary Shares 100.00%
SLA Denmark No.2 ApS (investment company)
Copenhagen
23
Ordinary Shares 100.00%
SLA Germany No.1 S.\u00e0.r.l. (investment company) Luxembourg
24
Ordinary Shares 100.00%
SLA Germany No.2 S.\u00e0.r.l. (investment company)
Luxembourg
24
Ordinary Shares 100.00%
SLA Germany No.3 S.\u00e0.r.l. (investment company) Luxembourg
24
Ordinary Shares 100.00%
SLA Ireland No.1 S.\u00e0.r.l. (investment company)
Luxembourg
24
Ordinary Shares 100.00%
Standard Life Assurance (HWPF) Luxembourg S.\u00e0.r.l. (investment company) Luxembourg
24
Ordinary Shares 100.00%
Standard Life Agency Services Limited (dormant company)
Edinburgh
3
Ordinary Shares 100.00%
Standard Life Investment Funds Limited (dormant company) Edinburgh
3
Ordinary Shares 100.00%
Standard Life Lifetime Mortgages Limited (mortgage provider company)
Edinburgh
3
Ordinary Shares 100.00%
Standard Life Master Trust Co. Limited (dormant company) Wythall
2
Ordinary Shares 100.00%
Standard Life Private Equity Trust plc (investment company)
Edinburgh
7
Ordinary Shares 56.01%
Standard Life Property Company Limited (dormant company) Edinburgh
3
Ordinary Shares 100.00%
Standard Life Trustee Company Limited (trustee company)
Edinburgh
3
Ordinary Shares 100.00%
SunLife Limited (financial services distribution company) Wythall
2
Ordinary Shares 100.00%
The Heritable Securities and Mortgage Investment Association Ltd (dormant
company)
Edinburgh
3
Ordinary Shares 100.00%
The London Life Association Limited (dormant company)
Wythall
2
Limited by
Guarantee
100.00%
The Pathe Building Management Company Limited (dormant company)
1
Telford
5
Ordinary Shares 100.00%
The Phoenix Life SCP Institution (dormant company)
1
Edinburgh
3
Limited by
Guarantee
100.00%
The Scottish Mutual Assurance Society (dormant company)
1
Glasgow
8
Limited by
Guarantee
100.00%
The Standard Life Assurance Company of Europe B.V. (financial holding
company)
Amsterdam
21
Ordinary Shares 100.00%
Vebnet (Holdings) Limited (holding company)
1
Wythall
2
Ordinary Shares 100.00%
Vebnet Limited (services company)
1
Wythall
2
Ordinary Shares 100.00%
Welbrent Property Investment Company Limited (dormant company) London
11
Ordinary Shares 100.00%
PC Management Limited (property management company)
Dublin
25
Ordinary Shares 69.00%
Phoenix Group Employee Benefit Trust Jersey
26
Trust 100.00%
330 Avenida de Aragon SL (property management company)
Madrid
27
Ordinary Shares 100.00%
SLIF Property Investment LP Edinburgh
7
Limited
Partnership
100.00%
Pearl Private Equity LP
Edinburgh
7
Limited
Partnership
100.00%
Pearl Strategic Credit LP Edinburgh
7
Limited
Partnership
100.00%
European Strategic Partners LP
Edinburgh
7
Limited
Partnership
72.70%
ASI Phoenix Global Private Equity III LP Edinburgh
7
Limited
Partnership
100.00%
Janus Henderson Institutional Short Duration Bond Fund
London
29
Unit Trust 100.00%
Janus Henderson Institutional Mainstream UK Equity Trust London
29
Unit Trust 100.00%
Registered address of incorporated entities If unincorporated, address of principal place of business Type of investment (including class of shares held) % of shares/ units held Janus Henderson Institutional UK Equity Tracker Trust London 29 Unit Trust 100.00% Janus Henderson Institutional High Alpha UK Equity Fund London 29 Unit Trust 85.82% Janus Henderson Global Funds - Janus Henderson Institutional Overseas Bond Fund London 29 OEIC, sub fund 97.93% Janus Henderson Strategic Investment Funds - Janus Henderson Institutional North American Index Opportunities Fund London 29 OEIC, sub fund 83.06% Janus Henderson Strategic Investment Funds - Janus Henderson Institutional Asia Pacific ex Japan Index Opportunities Fund London 29 OEIC, sub fund 85.70% Janus Henderson Strategic Investment Funds - Janus Henderson Institutional Japan Index Opportunities Fund London 29 OEIC, sub fund 79.82% PUTM Far Eastern Unit Trust Wythall 2 Unit Trust 99.63% PUTM UK Stock Market Fund Wythall 2 Unit Trust 100.00% PUTM UK Stock Market Fund (Series 3) Wythall 2 Unit Trust 100.00% PUTM UK All-Share Index Unit Trust Wythall 2 Unit Trust 99.89% PUTM UK Equity Unit Trust Wythall 2 Unit Trust 99.91% PUTM Bothwell Asia Pacific (Excluding Japan) Fund Wythall 2 Unit Trust 99.63% PUTM Bothwell Emerging Market Debt Unconstrained Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell European Credit Fund Wythall 2 Unit Trust 99.58% PUTM Bothwell Global Bond Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Global Credit Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Floating Rate ABS Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Index-Linked Sterling Hedged Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Long Gilt Sterling Hedged Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Emerging Markets Equity Fund Wythall 2 Unit Trust 99.95% PUTM Bothwell Sterling Government Bond Fund Wythall 2 Unit Trust 99.61% PUTM Bothwell Euro Sovereign Fund Wythall 2 Unit Trust 82.16% PUTM Bothwell Sterling Credit Fund Wythall 2 Unit Trust 99.94% PUTM Bothwell Tactical Asset Allocation Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell UK All Share Listed Equity Fund Wythall 2 Unit Trust 99.63% PUTM ACS UK All Share Listed Equity Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Uk Equity Income Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Sub-Sovereign A Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Short Duration Credit Fund Wythall 2 Unit Trust 100.00% PUTM Bothwell Ultra Short Duration Fund Wythall 2 Unit Trust 100.00% PUTM ACS Lothian North American Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS Lothian European Ex UK Fund Wythall 2 Unit Trust 100.00% PUTM ACS Lothian UK Listed Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS European ex UK Fund Wythall 2 Unit Trust 100.00% PUTM ACS Japan Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS Lothian UK Gilt Fund Wythall 2 Unit Trust 100.00% PUTM ACS Sustainable Index Asia Pacific ex Japan Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS Sustainable Index European Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS Emerging Market Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS Sustainable Index Japan Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS Sustainable Index US Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS Sustainable Index UK Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS North American 2 Fund Wythall 2 Unit Trust 100.00% PUTM ACS Sustainable Index Emerging Markets Equity Fund Wythall 2 Unit Trust 100.00% PUTM ACS UK Smaller Companies Fund Wythall 2 Unit Trust 100.00% PUTM ACS North American Fund Wythall 2 Unit Trust 100.00% abrdn Strategic Bond Fund Edinburgh\u2077 Unit Trust 89.91% abrdn European Trust II Edinburgh\u2077 Unit Trust 100.00% Registered address
of incorporated
entities
If unincorporated,
address of
principal place of
business
Type of investment
(including class of
shares held)
% of shares/
units held
abrdn Emerging Markets Income Equity Fund Edinburgh\u2077 OEIC, sub fund 78.04%
abrdn Emerging Markets Equity Fund
Edinburgh\u2077 OEIC, sub fund 96.86%
abrdn Europe ex UK Ethical Equity Fund Edinburgh\u2077 OEIC, sub fund 80.53%
abrdn European Trust
Edinburgh\u2077 Unit Trust 96.78%
abrdn Japan Trust Edinburgh\u2077 Unit Trust 80.67%
abrdn North American Trust
Edinburgh\u2077 Unit Trust 99.63%
abrdn Pacific Basin Trust Edinburgh\u2077 Unit Trust 98.39%
abrdn Short Dated UK Government Bond Trust
Edinburgh\u2077 Unit Trust 99.96%
abrdn UK Government Bond Trust Edinburgh\u2077 Unit Trust 99.91%
abrdn UK Corporate Bond Trust
Edinburgh\u2077 Unit Trust 99.89%
abrdn Active Plus Bond Trust Edinburgh\u2077 Unit Trust 100.00%
abrdn International Trust
Edinburgh\u2077 Unit Trust 99.86%
abrdn UK Equity General Trust Edinburgh\u2077 Unit Trust 99.94%
abrdn Short Dated Corporate Bond Fund
Edinburgh\u2077 OEIC, sub fund 80.55%
abrdn MyFolio Managed I Fund Edinburgh\u2077 OEIC, sub fund 75.49%
abrdn MyFolio Managed II Fund
Edinburgh\u2077 OEIC, sub fund 75.37%
abrdn MyFolio Managed III Fund Edinburgh\u2077 OEIC, sub fund 83.05%
abrdn MyFolio Managed V Fund
Edinburgh\u2077 OEIC, sub fund 75.09%
abrdn Dynamic Multi Asset Growth Fund Edinburgh\u2077 OEIC, sub fund 95.47%
abrdn American Income Equity Fund
Edinburgh\u2077 OEIC, sub fund 74.41%
abrdn Standard SICAV II Absolute Return Global Bond Strategies Fund Luxembourg
30
SICAV, sub fund 74.22%
abrdn Standard SICAV II European Equities Fund
Luxembourg
30
SICAV, sub fund 99.30%
abrdn Standard SICAV II Global Equities Fund Luxembourg
30
SICAV, sub fund 88.67%
abrdn Standard SICAV II European Government All Stocks Fund
Luxembourg
30
SICAV, sub fund 100.00%
abrdn Standard SICAV II Japanese Equities Fund Luxembourg
30
SICAV, sub fund 97.45%
abrdn Standard SICAV II Global High Yield Bond Fund
Luxembourg
30
SICAV, sub fund 54.53%
abrdn Standard SICAV II Global REIT Focus Fund Luxembourg
30
SICAV, sub fund 93.22%
abrdn Standard SICAV II China Equities Fund
Luxembourg
30
SICAV, sub fund 68.15%
abrdn Standard SICAV II Global Emerging Markets Local CCY Debt Fund Luxembourg
30
SICAV, sub fund 83.14%
abrdn Standard SICAV II Emerging Market Debt Fund
Luxembourg
30
SICAV, sub fund 97.87%
ASIMT American Equity Unconstrained Fund Edinburgh
7
Unit Trust 78.87%
ASIMT Japan Fund
Edinburgh
7
Unit Trust 78.81%
ASIMT Global REIT Fund Edinburgh
7
Unit Trust 81.32%
ASIMT Sterling Intermediate Credit Fund Launch Fund
Edinburgh
7
Unit Trust 89.33%
abrdn Liquidity Fund (Lux) - Seabury Sterling Liquidity 3 Fund Luxembourg
31
UCITS, sub fund 100.00%
abrdn Standard Liquidity Fund (Lux) - Seabury Sterling Liquidity 2 Fund
Luxembourg
31
UCITS, sub fund 99.99%
abrdn Standard Liquidity Fund (Lux) - Seabury Euro Liquidity 1 Fund Luxembourg\u00b3\u00b9 UCITS, sub fund 99.99%
Ignis Private Equity Fund LP
Cayman Islands
18
Limited
Partnership
100.00%
Ignis Strategic Credit Fund LP Cayman Islands
18
Limited
Partnership
100.00%
ASI Phoenix Fund Financing SCSp (PLFF)
Luxembourg
31
Special Limited
Partnership
100.00%
North American Strategic Partners 2008 L.P. Delaware
9
Limited
Partnership
100.00%
Registered address of incorporated entities If unincorporated, address of principal place of business Type of investment (including class of shares held) % of shares/ units held North American Strategic Partners (Feeder) 2008 Limited Partnership Edinburgh 7 Limited Partnership 100.00% Crawley Unit Trust Jersey 32 Unit Trust 100.00% Ignis Strategic Solutions Funds plc - Fundamental Strategies Fund Dublin 33 OEIC, sub fund 96.83% Ignis Strategic Solutions Funds plc - Systematic Strategies Fund Dublin 33 OEIC, sub fund 100.00% HSBC Investment Funds - Balanced Fund London 34 OEIC, sub fund 82.18% IFSL AMR OEIC - IFSL AMR Diversified Portfolio Bolton 35 OEIC, sub fund 71.78% iShares 350 UK Equity Index Fund UK London 36 OEIC, sub fund 94.08% Legal & General European Equity Income Fund London 37 Unit Trust 85.74% Legal & General Growth Trust London 37 Unit Trust 75.60% abrdn Sustainable Index World Equity Fund Edinburgh 7 Unit Trust 100.00% abrdn Sustainable Index UK Equity Fund Edinburgh 7 Unit Trust 77.28% CF Macquaries Global Infrastructure Securities Fund London 38 OEIC, sub fund 70.77% Quilter Investors Global Equity Index Fund London 39 OEIC, sub fund 76.55% Quilter Investors UK Equity Index Fund London 39 OEIC, sub fund 84.30% Associates: UK Commercial Property REIT Limited (property investment company) Guernsey 41 Ordinary Shares UK Commercial Property Estates Holdings Limited (property investment company) Guernsey 41 Ordinary Shares UKCPT Limited Partnership (dormant company) London 42 Limited Partnership 44.46% UK Commercial Property Finance Holdings Limited (property investment company) Guernsey 41 Ordinary Shares UK Commercial Property Estates (Reading) Limited (dormant company) London 42 Ordinary Shares Duke Distribution Centres S.\u00e0.r.l. (investment company) Luxembourg 44 Ordinary Shares Duke Offices & Developments S.\u00e0.r.l. (investment company) Luxembourg 44 Ordinary Shares Significant holdings: Janus Henderson Institutional Global Responsible Managed Fund London 29 OEIC, sub fund 33.39% Janus Henderson Institutional UK Index Opportunities Fund London 29 OEIC, sub fund 56.15% Standard Life Capital Infrastructure I LP Edinburgh 7 Limited Partnership 48.00% abrdn (SLI) Corporate Bond Fund Edinburgh 7 OEIC, sub fund 40.46% abrdn Emerging Markets Local Currency Bond Tracker Fund Edinburgh 7 OEIC, sub fund 44.51% abrdn Global Absolute Return Strategies Retail Acc Edinburgh 7 Unit Trust 62.31% abrdn Dynamic Distribution Fund Edinburgh 7 Unit Trust 63.43% AB SICAV I - Diversified Yield Plus Portfolio Luxembourg 30 SICAV, sub fund 36.98% Standard Life Investments UK Real Estate Accumulation Feeder Fund Edinburgh 7 Unit Trust 53.89% abrdn Global Smaller Company Fund Edinburgh 7 Unit Trust 24.07% abrdn Global Focused Equity Fund Edinburgh 7 OEIC, sub fund 46.66% abrdn UK High Income Equity Fund Edinburgh 7 OEIC, sub fund 49.91% abrdn High Yield Bond Fund Edinburgh 7 OEIC, sub fund 21.64% abrdn UK Opportunities Equity Fund Edinburgh 7 OEIC, sub fund 55.59% abrdn Investment Grade Corporate Bond Fund Edinburgh 7 OEIC, sub fund 44.22% abrdn UK Smaller Companies Fund Edinburgh 7 OEIC, sub fund 30.76% abrdn Short Duration Global Inflation-Linked Bond Fund Edinburgh 7 OEIC, sub fund 37.23% abrdn UK Unconstrained Equity Fund Edinburgh 7 OEIC, sub fund 53.54% abrdn Ethical Corporate Bond Fund Edinburgh 7 OEIC, sub fund 56.62% abrdn Global Real Estate Fund Edinburgh 7 Unit Trust 40.27% abrdn MyFolio Market I Fund Edinburgh 7 OEIC, sub fund 43.39% abrdn MyFolio Market II Fund Edinburgh 7 OEIC, sub fund 47.20% abrdn MyFolio Market III Fund Edinburgh 7 OEIC, sub fund 54.17% Registered address
of incorporated
entities
If unincorporated,
address of
principal place of
business
Type of investment
(including class of
shares held)
% of shares/
units held
abrdn MyFolio Market IV Fund
Edinburgh
7
OEIC, sub fund 51.88%
abrdn MyFolio Market V Fund
Edinburgh
7
OEIC, sub fund 60.81%
abrdn MyFolio Multi-Manager II Fund
Edinburgh
7
OEIC, sub fund 54.75%
abrdn MyFolio Multi-Manager III Fund
Edinburgh
7
OEIC, sub fund 65.02%
abrdn MyFolio Multi-Manager IV Fund
Edinburgh
7
OEIC, sub fund 57.29%
abrdn MyFolio Multi-Manager V Fund
Edinburgh
7
OEIC, sub fund 60.59%
abrdn MyFolio Managed IV Fund
Edinburgh
7
OEIC, sub fund 67.78%
abrdn Standard SICAV II European Smaller Companies Fund
Luxembourg
30
SICAV, sub fund 28.68%
abrdn Standard SICAV II European Corporate Bond Fund
Luxembourg
30
SICAV, sub fund 33.26%
abrdn Standard SICAV II Global Absolute Return Strategies Fund
Luxembourg
30
SICAV, sub fund 49.38%
abrdn Standard SICAV II Global Corporate Bond Fund
Luxembourg
30
SICAV, sub fund 73.15%
abrdn American Unconstrained Equity Fund
Edinburgh
7
OEIC, sub fund 26.01%
abrdn Liquidity Fund (Lux) Euro Fund
Luxembourg
31
UCITS, sub fund 28.60%
abrdn Europe ex UK Income Equity Fund
Edinburgh
7
OEIC, sub fund 21.51%
abrdn UK Income Unconstrained Equity Fund
Edinburgh
7
OEIC, sub fund 58.73%
Amundi Index Solutions - Amundi MSCI Emerging Ex China ESG Leaders Select
Luxembourg
40
SICAV, sub fund 61.30%
Brent Cross Partnership
London
43
Limited
Partnership
23.83%
Gallions Reach Shopping Park Unit Trust
Jersey
32
Unit Trust 100.00%
Standard Life Investments UK Shopping Centre Trust
Jersey
46
Unit Trust 40.13%
Gallions Reach Shopping Park Limited Partnership
London
11
Unit Trust 100.00%
Standard Life Investments Brent Cross LP
Edinburgh
7
Unit Trust 40.13%
AXA Fixed Interest Investment ICVC - Sterling Strategic Bond Fund
London
47
UCITS, sub fund 28.91%
AQR Global Risk Premium UCITS Fund
USA
49
UCITS, sub fund 96.48%
Threadneedle Investment Funds ICVC - American Select Fund
London
50
OEIC, sub fund 20.99%
Vanguard Investment Series plc - Vanguard Global Short-Term Corporate Bond
Index Fund
Dublin
51
UCITS, sub fund 23.83%
Vanguard Investment Series plc - Vanguard U.K. Short-Term Investment Grade
Bond Index Fund
Dublin
51
UCITS, sub fund 45.15%
Vanguard Common Contractual Fund - Vanguard U.S. Equity Index Common
Contractual Fund
Dublin
51
UCITS, sub fund 92.82%
Vanguard Investment Series plc - Vanguard Global Corporate Bond Index Fund
Dublin
51
UCITS, sub fund 22.42%
Vanguard Investments Common Contractual Fund - Vanguard FTST Developed
World ex UK Common Contractual Fund
Dublin
51
UCITS, sub fund 98.17%
MI Somerset Global Emerging Markets Fund
London
53
OEIC, sub fund 64.46%
abrdn Emerging Markets Equity Enhanced Index Fund Edinburgh
7
OEIC, sub fund 20.36%
Amundi UCITS Funds - Amundi Global Multi-Factor Equity Fund
Luxembourg
40
UCITS, sub fund 61.34%
abrdn SICAV I - Emerging Markets Low Volatility Equity Portfolio Luxembourg
30
SICAV, sub fund 87.52%
abrdn SICAV I - GDP Weighted Global Government Bond Fund
Luxembourg
31
SICAV, sub fund 84.51%
abrdn SICAV I - Global Bond Fund Luxembourg
31
SICAV, sub fund 91.69%
abrdn SICAV I - Global Government Bond Fund
Luxembourg
31
SICAV, sub fund 37.28%
Fidelity Multi Asset Open Adventurous Fund Surrey
54
OEIC, sub fund 55.92%
Goldman Sachs SICAV - Emerging Markets Total Return Bond Portfolio
Luxembourg
55
SICAV, sub fund 87.04%
Janus Henderson Diversified Growth Fund London
29
OEIC, sub fund 68.80%
L&G Emerging Markets Bond Fund
Luxembourg
57
SICAV, sub fund 39.41%
Legal & General European Trust London
37
Unit Trust 50.34%
L&G Multi-Asset Target Return Fund
Luxembourg
57
SICAV, sub fund 39.62%
Legal & General Emerging Markets Government Bond USD Index Fund London
37
Unit Trust 26.58%
Legal & General High Income Trust
London
37
Unit Trust 42.68%
L&G Euro High Alpha Corporate Bond Fund Luxembourg
57
SICAV, sub fund 21.28%
Legal & General UK Smaller Companies Trust
London
37
Unit Trust 30.59%
Registered address of incorporated entities If unincorporated, address of principal place of business Type of investment (including class of shares held) % of shares/ units held LGIM Sterling Liquidity Plus Fund Dublin 51 UCITS, sub fund 43.41% Marks and Spencer Worldwide Managed Fund London 34 Unit Trust 36.28% Quilter Investors China Equity Fund London 39 OEIC, sub fund 21.88% Quilter Investors Ethical Equity Fund London 39 Unit Trust 50.02% Quilter Investors Global Equity Growth Fund London 39 OEIC, sub fund 46.52% Vanguard Investments Common Contractual Fund - Vanguard FTSE Developed Europe ex UK Common Contractual Fund Dublin 51 UCITS, sub fund 96.34% Vanguard Investments Common Contractual Fund - Vanguard FTSE Developed World Common Contractual Fund Dublin 51 UCITS, sub fund 44.19% Baillie Gifford UK & Balanced Funds ICVC - Baillie Gifford UK and Worldwide Equity Fund Edinburgh 59 OEIC, sub fund 24.88% Baillie Gifford Investment Funds II ICVC - Baillie Gifford UK Equity Core Fund Edinburgh 59 OEIC, sub fund 36.11% abrdn Short Dated Sterling Corporate Bond Tracker Fund Edinburgh 7 OEIC, sub fund 41.08% abrdn Global Inflation-Linked Bond Tracker Fund Edinburgh 7 OEIC, sub fund 49.65% abrdn Multi-Asset Fund Edinburgh 7 OEIC, sub fund 28.45% abrdn SICAV I - Diversified Income Fund Luxembourg 31 SICAV, sub fund 34.44% abrdn Diversified Growth Fund London 11 Unit Trust 24.69% Amundi Index Solutions - Amundi MSCI China ESG Leaders Select Luxembourg 40 SICAV, sub fund 43.46% Amundi Index Solutions - Amundi Global Corp SRI 1-5Y Luxembourg 40 SICAV, sub fund 37.32% BNY Mellon Multi-Asset Global Balanced Fund London 60 UCITS, sub fund 26.37% Aberdeen Japan Equity Fund Edinburgh 7 OEIC, sub fund 24.48% abrdn European Equity Tracker Fund Edinburgh 7 OEIC, sub fund 20.75% abrdn UK Responsible Equity Fund Edinburgh 7 OEIC, sub fund 33.71% Performance Retail Unit Trust Jersey 62 Unit Trust 50.10% Vanguard Investments Common Contractual Fund - Vanguard FTSE Developed Europe ex UK Common Contractual Fund Dublin 51 UCITS, sub fund 96.34% Vanguard Investments Common Contractual Fund - Vanguard FTSE Developed World Common Contractual Fund Dublin 51 UCITS, sub fund 44.19% 1 These subsidiaries have been granted audit exemption by parental guarantee by virtue of s.479A of the Companies Act 2006. 2 1 Wythall Green Way, Wythall, Birmingham, West Midlands, B47 6WG, United Kingdom 3 Standard Life House, 30 Lothian Road, Edinburgh, EH1 2DH, United Kingdom 4 90 St. Stephen\u2019s Green, Dublin, D2, Ireland 5 Windsor House, Telford Centre, Telford, Shropshire, TF3 4NB, United Kingdom 6 Goodbody Secretarial Limited, International Financial Services Centre, 25/28 North Wall Quay, Dublin 1, Ireland 7 1 George Street, Edinburgh, EH2 2LL, United Kingdom 8 301 St Vincent Street, Glasgow, G2 5HN, United Kingdom 9 Corporation Service Company, 2711 Centerville Rd Suite 400, Wilmington, DE 19808, United States 10 Suite 202, 103 Foulk Road, Wilmington, Delaware, 19803, United States 11 Bow Bells House, 1 Bread Street, London, EC4M 9HH, United Kingdom 12 22-24 New Street, St Pauls Gate, 4th Floor, JE1 4TR, Jersey 13 8 Boulevard Royal, L-2449, Luxembourg, Luxembourg 14 20 Old Bailey, London, England, EC4M 7AN, United Kingdom 15 30 Finsbury Square, London, EC2A 1AG, United Kingdom 16 33 Finsbury Square, London, EC2A 1AG, United Kingdom 17 Arthur Cox Building, 10 Earlsfort Terrace, Dublin 2, Dublin, Ireland 18 Ugland House, Grand Cayman, KY1-1104, Cayman Islands 19 25/28 North Wall Quay, Dublin 1, Dublin, Ireland 20 Avenue Louise 326, bte 33 1050 Brussels, Belgium 21 Telestone 8, Teleport, Naritaweg 165, 1043 BW, Amsterdam, Netherlands 22 Citco (Sweden) Ab, Stureplan 4c, 4 Tr, 114 35 Stockholm, Sweden 23 c/o Citco (Denmark) ApS, Holbergsgade 14, 2 .tv, 1057 K\u00f8benhavn K Denmark 24 6B, rue Gabriel Lippmann, Parc d\u2019Activit\u00e9 Syrdall 2, L-5365 M\u00fcnsbach, Luxembourg 25 5th Floor Beaux Lane House, Mercer Street Lower, Dublin 2, Dublin, Ireland 26 32 Commercial Street, St Helier, Jersey, Channel Islands, JE2 3RU, Jersey 27 Avenida de Aragon 330 \u2013 Building 5, 3rd Floor, Parque Empresarial Las Mercedes, 28022 \u2013 Madrid, Spain 28 The Pearl Centre, Lynch Wood, Peterborough, PE2 6FY, United Kingdom 29 201 Bishopsgate, London, EC2M 3AE, United Kingdom 30 88 2-4, Rue Eug\u00e8ne Ruppert, L-2453 Luxembourg, Luxembourg 31 35a Avenue J.F. Kennedy, L-1855, Luxembour32 Ogier House, The Esplanade, St Helier, JE4 9WG, Jersey
33 32 Molesworth Street, Dublin 2, Dublin, D02 Y512, Ireland
34 8 Canada Square, London, E14 5HQ, United Kingdom
35 Marlborough House, 59 Chorley New Road, Bolton, BL1 4QP, United Kingdom
36 12 Throgmorton Avenue, London EC2N 2DL, United Kingdom
37 One Coleman Street, London, EC2R 5AA, United Kingdom
38 6th Floor, 65 Gresham Street, London, EC2V 7NQ, United Kingdom
39 Senator House, 85 Queen Victoria Street, London, EC4V 4AB, United Kingdom
40 5, All\u00e9e Scheffer, L-2520 Luxembourg, Luxembourg
41 Trafalgar Court, Les Banques, St Peter Port, GY1 3QL, Guernsey
42 1 More London Place, London, SE1 2AF, United Kingdom
43 Kings Place, 90 York Way, London, N1 9GE, United Kingdom
44 1, All\u00e9e Scheffer, L-2520 Luxembourg, Luxembourg
45 2 Snowhill, Birmingham, B4 6WR, United Kingdom
46 Elizabeth House, 9 Castle Street, St Helier, JE4 2QP, Jersey
47 155 Bishopsgate, London, EX2M 3JX, United Kingdom
48 22 Bishopsgate, London, EC2N 4BQ, United Kingdom
49 Aqr Capital Management LLC, Greenwich, 06830, United States
50 Cannon Place, 78 Cannon Street, London, EC4N 6AG, United Kingdom
51 70 Sir John Rogerson\u2019s Quay, Dublin 2, Ireland
52 4th Floor, The Walbrook Building, 25 Walbrook, London, EC4N 8AF, United Kingdom
53 Manning House, 22 Carlisle Place, London, SWIP 1JA, United Kingdom
54 Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey, KT20 6RP, United Kingdom
55 49, Avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg
56 Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire, RG9 1HH, United Kingdom
57 10, Ch\u00e2teau d\u2019Eau, L-3364 Leudelange, Grand Duchy of Luxembourg
58 1st Floor, 2 Ballsbridge Park, Ballsbridge, Dublin, D04 YW83, Ireland
59 Calton Square, 1 Greenside Row, Edinburgh, EH1 3AN, United Kingdom
60 160 Queen Victoria Street, London, EC4V 4LA, United Kingdom
61 Grove House, Green Street, St Helier, JE1 2ST, Jersey
62 44-47 Esplanade, St Helier, JE4 9WG, Jersey
63 Canon's Court, 22 Victoria Street, Hamilton, HM12, Bermuda
64 Calle Nanclares de Oca, 1B, 28022 Madrid
The following subsidiaries were dissolved during the period. The subsidiaries were deconsolidated from the date of dissolution:
\u2022 PGH (LC1) Limited
\u2022 PGH (LC2) Limited
\u2022 PGH (LCA) Limited
\u2022 PGH (LCB) Limited
\u2022 PGH (MC1) Limited
\u2022 PGH (MC2) Limited
\u2022 PGH (TC1) Limited
\u2022 PGH (TC2) Limited
\u2022 PGH Capital PLC
\u2022 PUTM Bothwell Japan Tracker Fund
\u2022 PUTM Bothwell North America Fund
The following subsidiaries were either fully disposed of or the Group was no longer deemed to control the entity. The subsidiaries were deconsolidated
from either the date of disposal or from the date when the Group was deemed to no longer control the subsidiary:
\u2022 Aberdeen Standard SICAV II European Equity Unconstrained Fund
\u2022 Aberdeen Standard SICAV III Global Short Duration Corporate Bond Fund
\u2022 Aberdeen Standard SICAV II Global Bond Fund
\u2022 Aberdeen Standard SICAV II Global Emerging Markets Unconstrained Fund
\u2022 Aberdeen Standard Liquidity Fund (Lux) Sterling Fund
\u2022 Aberdeen Standard SICAV III Dynamic Multi Asset Growth Fund
\u2022 ASI Europe ex UK Growth Equity Fund
\u2022 ASI Global Real Estate Share Fund
\u2022 ASI MyFolio Multi-Manager I Fund
\u2022 ASI Phoenix Venture Capital Partners LP
\u2022 ASI (Standard Life) Global Equity Trust II
\u2022 ASI (Standard Life) Multi-Asset Trust
\u2022 Legal & General Dynamic Bond Fund
\u2022 Northampton General Partner Limited
\u2022 The Pearl Martineau Galleries Limited Partnership
\u2022 The Pearl Martineau Limited Partnership
\u2022 Quilter Investors Diversified Portfolio Fund
\u2022
Quilter Investors UK Equity Large-Cap Value Fund
The following associates were dissolved during the period. The investment in associate was derecognised from the date of dissolution:
\u2022 Brixton Radlett Property Limited
\u2022 Moor House General Partner Limited
\u2022 UK Commercial Property Estates Limited
\u2022 UK Commercial Property GP Limited
\u2022 UK Commercial Property Holdings Limited
\u2022 UK Commercial Property Nominee Limited
The Group no longer has significant holdings in the following undertakings:
\u2022 Aberdeen Standard Global SICAV III Global Equity Impact Fund
\u2022 Aberdeen Standard UK Retail Park Trust
\u2022 AXA Global High Income Fund
\u2022 Blackrock ICS Sterling Government Liquidity Fund
\u2022 Castlepoint LP
\u2022 Central Saint Giles Unit Trust
\u2022 HSBC ETFs PLC \u2013 HSBC FTSE EPRA NAREIT Developed UCITS ETF
\u2022 L&G Absolute Return Bond Plus Fund
\u2022 Legal & General Asian Income Trust
\u2022 Legal & General Emerging Markets Government Bond (Local Currency) Index Fund
\u2022 Legal & General UK Equity Income Fund
\u2022 Legal & General European Index Trust
\u2022 Legal & General Global Real Estate Dividend Index Fund
\u2022 Legal & General Real Capital Builder Fund
\u2022 Legal & General UK Special Situations Trust
\u2022 Invesco US Equity Fund
\u2022 Quilter Investors Bond 2 Fund
\u2022 Quilter Investors Cirilium Moderate Blend Portfolio Fund
\u2022 Vanguard FTSE U.K. All Share Index Unit Trust
\u2022 Vanguard Investment Series plc \u2013 Vanguard U.K. Investment Grade Bond Index Fund
",
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"fact-594": {
"value": "I1. Share-based payments Equity-settled share-based payments to employees and others providing services are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions. Further details regarding the determination of the fair value of equity- settled share-based transactions are set out below. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group\u2019s estimate of equity instruments that will eventually vest. At each period end, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the consolidated income statement such that the cumulative expense reflects the revised estimate with a corresponding adjustment to equity. ",
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"fact-595": {
"value": "I1.1 Share-based payment expense The expense recognised for employee services receivable during the year is as follows: 2022 \u00a3m 2021 \u00a3m Expense arising from equity-settled share-based payment transactions 16 14 I1.2 Share-based payment schemes Long-Term Incentive Plan (\u2018LTIP\u2019) The Group implemented a Long-Term Incentive Plan to retain and motivate its senior management group. The awards under this plan are in the form of nil-cost options to acquire an allocated number of ordinary shares. Assuming no good leavers or other events which would trigger early vesting rights, the 2020, 2021 and 2022 LTIP awards are subject to performance conditions tied to the Group\u2019s performance in respect of net operating cash receipts, return on shareholder value, persistency and total shareholder return (\u2018TSR\u2019). The 2022 LTIP also included a performance condition tied to the Group\u2019s performance on decarbonisation. See page 134 of the Directors\u2019 Remuneration Report for further details of the performance conditions. For all LTIP awards, a holding period applies so that any LTIP awards to Executive Committee members for which the performance vesting requirements are satisfied will not be released for a further two years from the third anniversary of the original award date. Dividends will accrue on LTIP awards until the end of the holding period. There are no cash settlement alternatives. 2022 LTIP awards were granted on 18 March 2022 and are expected to vest on 18 March 2025. The 2019 LTIP awards vested on 11 March 2022. The 2020 awards will vest on 13 March 2023 and the 2021 awards will vest on 12 March 2024. The number of shares for all outstanding LTIP awards was increased in July 2018 to take account of the impact of the 2018 Group rights issue. The fair value of these awards is estimated at the average share price in the three days preceding the date of grant, taking into account the terms and conditions upon which the instruments were granted. The fair value of the LTIP awards is adjusted in respect of the TSR performance condition which is deemed to be a \u2018market condition\u2019. The fair value of the 2020, 2021 and 2022 TSR elements of the LTIP awards has been calculated using a Monte Carlo model. The inputs to this model are shown below: 2022 TSR performance condition 2021 TSR performance condition 2020 TSR performance condition Share price (p) 639 738.6 586.3 Expected term (years) 2.8 3.0 3.0 Expected volatility (%) 31 30 20 Risk-free interest rate (%) 1.21 0.14 0.28 Expected dividend yield (%) Dividends are received by holders of the awards therefore no adjustment to fair value is required On 19 August 2022 and 17 August 2021, LTIP awards were granted to certain senior management employees. The vesting periods and performance conditions for these awards are linked to the core 2021 and 2022 LTIP awards respectively. On 18 March 2022 and 19 August 2022 LTIP Buy-out awards were granted to certain senior management employees. There are discreet vesting periods for these awards and these grants of shares are conditional on the employees remaining in employment with the Group for the vesting period. Similar awards were also issued on 12 March 2021 and 17 August 2021. On 14 August 2020, LTIP awards were granted to certain senior management employees. The vesting periods and performance conditions for these awards are linked to the Group\u2019s core 2018, 2019 and 2020 LTIP awards. Each year, the Group issues a Chair\u2019s share award under the terms of the LTIP which is granted to a small number of employees in recognition of their outstanding contribution in the previous year. The awards are granted on the same dates as the core 2020, 2021 and 2022 LTIP awards. These grants of shares are conditional on the employees remaining in employment with the Group for the vesting period and achieving an established minimum good/good performance grading. Good leavers will be able to, at the discretion of the Remuneration Committee, exercise their full award at vesting. Deferred Bonus Share Scheme (\u2018DBSS\u2019) Each year, part of the annual incentive for certain executives is deferred into shares of the Company. The grant of these shares is conditional on the employee remaining in employment with the Group for a period of three years from the date of grant. Good leavers will be able to, at the discretion of the Remuneration Committee, exercise their full award at vesting. Dividends will accrue for DBSS awards over the three year deferral period. The number of shares for all outstanding DBSS awards was increased in July 2018 to take account of the impact of the 2018 Group rights issue. The 2022 DBSS was granted on 18 March 2022 and is expected to vest on 18 March 2025. The 2019 DBSS awards vested on 11 March 2022. The 2020 awards are expected to vest on 13 March 2023 and the 2021 awards are expected to vest on 12 March 2024. The fair value of these awards is estimated at the average share price in the three days preceding the date of the grant, taking into account the terms and conditions upon which the options were granted. Sharesave scheme The Sharesave scheme allows participating employees to save up to \u00a3500 each month across all active UK scheme and up to \u20ac500 per month for the Irish scheme over a period of either three or five years. The 2022 UK Sharesave options were granted on 15 April 2022. Irish Sharesave options are no longer granted. Under the Sharesave arrangement, participants remaining in the Group\u2019s employment at the end of the three or five year saving period are entitled to use their savings to purchase shares at an exercise price at a 20% discounted exercise price which is calculated using a three-day average share price immediately before invitations are issued to employees. Employees leaving the Group for certain reasons are able to use their savings to purchase shares if they leave prior to the end of their three or five year period. In 2018, following the scheme of arrangement, participants in the Sharesave plans at this time exchanged their options over shares in the previous parent company for equivalent options over PGH plc ordinary shares. All Sharesave options were increased in July 2018 following the Group\u2019s rights issues and the exercise price of these awards was also amended as a result of these issuesI1.2 Share-based payment schemes continued The fair value of the options has been determined using a Black-Scholes valuation model. Key assumptions within this valuation model include expected share price volatility and expected dividend yield. The following information was relevant in the determination of the fair value of the 2018 to 2022 UK Sharesave options: 2022 sharesave 2021 sharesave 2020 sharesave 2019 sharesave 2018 sharesave Share price (\u00a3) 6.142 7.486 5.664 6.800 7.685 Exercise price (\u00a3) (Revised) 5.090 5.890 4.970 5.610 5.629 Expected life (years) 3.25 and 5.25 3.25 and 5.25 3.25 and 5.25 3.25 and 5.25 3.25 and 5.25 Risk-free rate (%) \u2013 based on UK government gilts commensurate with the expected term of the award 2.0 (for 3.25 year scheme) and 1.9 (for 5.25 year scheme) 0.5 (for 3.25 year scheme) and 0.7 (for 5.25 year scheme) 0.5 (for 3.25 year scheme) and 0.5 (for 5.25 year scheme) 1.0 (for 3.25 year scheme) and 1.1 (for 5.25 year scheme) 1.0 (for 3.25 year scheme) and 1.1 (for 5.25 year scheme) Expected volatility (%) based on the Company\u2019s share price volatility to date 30.0 30.0 30.0 30.0 30.0 Dividend yield (%) 8 6.3 8.2 6.8 6.5 The information for determining the fair value of the 2021 Irish Sharesave options differed from that included in the table above as follows: \u2013 Share price (\u20ac): 8.618 \u2013 Exercise price (\u20ac): 6.880 \u2013 Risk-free rate (%): (0.4) (for 3.25 year scheme) and (0.3) (for 5.25 year scheme) \u2013 No Sharesave awards were granted to Irish employees during 2022. Share Incentive Plan The Group operates two Share Incentive Plans (\u2018SIP\u2019) open to UK and Irish employees which allows participating employees to purchase \u2018Partnership shares\u2019 in the Company through monthly contributions. In respect of the UK SIP, the contributions are limited to the lower of \u00a3150 per month and 10% gross monthly salary. In 2019 the matching element of the UK SIP was amended to give the employee one \u2018Matching share\u2019 for each \u2018Partnership share\u2019 purchased limited to \u00a350. Contributions above \u00a350 are not matched. The Irish SIP, which was launched in 2019, gives the employee 1.4 \u2018Matching shares\u2019 for each \u2018Partnership share\u2019 purchased. For this plan monthly contributions are limited to the lower of \u20ac40 per month and 7.5% of gross monthly salary. The fair value of the Matching shares granted is estimated as the share price at date of grant, taking into account terms and conditions upon which the instruments were granted. At 31 December 2022, 543,995 matching shares (excluding unrestricted shares) were conditionally awarded to employees (2021: 391,658). I1.3 Movements in the year The following tables illustrate the number of, and movements in, LTIP, Sharesave and DBSS share options during the year: Number of share options 2022 LTIP Sharesave DBSS Outstanding at the beginning of the year, including dividend shares 7,613,036 4,750,822 1,551,935 Granted during the year 3,350,169 1,827,291 1,121,085 Forfeited during the year (523,125) (252,992) (4,917) Cancelled during the year \u2013 (506,796) \u2013 Exercised during the year (1,328,703) (816,419) (443,747) Dividends on vested awards 275,858 \u2013 77,445 Outstanding at the end of the year 9,387,235 5,001,906 2,301,801 Number of share options 2021 LTIP Sharesave DBSS Outstanding at the beginning of the year 5,488,995 3,569,159 1,267,852 Granted during the year 2,984,144 1,729,022 601,944 Forfeited/cancelled during the year (290,064) (240,130) (5,236) Exercised during the year (882,043) (307,229) (314,267) Outstanding at the end of the year, excluding dividend shares \u2013 as previously reported 7,301,032 4,750,822 1,550,293 Outstanding dividend shares 312,004 \u2013 1,642 Outstanding at the end of the year, including dividend shares 7,613,036 4,750,822 1,551,935 1 The comparative disclosures for the LTIP and DBSS awards were previously reported excluding dividend shares that had been allocated at the vesting date. These dividend shares are now included within the movement analysis for the year ended 31 December 2022 The weighted average fair value of options granted during the year was \u00a34.34 (2021: \u00a34.98). The weighted average share price at the date of exercise for the rewards exercised is \u00a36.13 (2021: \u00a37.06). The weighted average remaining contractual life for the awards outstanding as at 31 December 2022 is 5.7 years (2021: 5.5 years). ",
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"fact-596": {
"value": "Operating cash flows include purchases and sales of investment property and financial investments as the purchases are funded from cash flows associated with the origination of insurance and investment contracts, net of payments of related benefits and claims. The following analysis gives further detail behind the \u2018cash (utilised)/generated by operations\u2019 figure in the statement of consolidated cash flows. ",
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},
"fact-597": {
"value": "Notes 2022 \u00a3m 2021 \u00a3m Loss for the year before tax (2,840) (430) Adjustments for non-cash movements in loss before tax for the year: Gain on completion of abrdn plc transaction A6.1 \u2013 (110) Loss on disposal of Ark Life, excluding transaction costs A6.2 \u2013 17 Fair value losses/(gains) on: Investment property G4 1,363 (1,195) Financial assets and derivative liabilities 45,197 (9,436) Change in fair value of borrowings E5.2 186 (9) Amortisation and impairment of intangible assets G2 526 644 Change in unallocated surplus F2 (378) (106) Share-based payment charge I1.1 16 14 Finance costs C5 230 242 Net interest expense on Group defined benefit pension scheme liability/asset G1 64 37 Pension past service costs G1 15 \u2013 Other costs of pension schemes G1 7 6 Movement in assets and liabilities relating to operations: Decrease in investment assets 3,934 6,738 Decrease/(increase) in reinsurance assets 3,449 (227) Decrease in assets classified as held for sale 2,741 286 (Decrease)/increase in insurance contract and investment contract liabilities (44,351) 6,354 Decrease in deposits received from reinsurers (971) (521) Decrease in obligation for repayment of collateral received (1,740) (1,762) Decrease in liabilities classified as held for sale (3,386) (264) Net increase in working capital (3,034) (1,100) Other cash movements relating to operations: Contributions to defined benefit pension schemes G1 (9) (49) Cash generated/(utilised) by operations 1,019 (871) ",
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"fact-598": {
"value": "I3. Capital management The Group\u2019s capital management is based on the Solvency II framework. This involves a valuation in line with Solvency II principles of the Group\u2019s Own Funds and risk-based assessment of the Group\u2019s Solvency Capital Requirement (\u2018SCR\u2019). This note sets out the Group\u2019s approach to managing capital and provides an analysis of Own Funds and SCR. ",
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"fact-599": {
"value": "Risk and capital management objectives The risk management objectives and policies of the Group are based on the requirement to protect the Group\u2019s regulatory capital position, thereby safeguarding policyholders\u2019 guaranteed benefits whilst also ensuring the Group can meet its various cash flow requirements. Subject to this, the Group seeks to use available capital to achieve increased returns, balancing risk and reward, to generate additional value for policyholders and shareholders. In pursuing these objectives, the Group deploys financial and other assets and incurs insurance contract liabilities and financial and other liabilities. Financial and other assets principally comprise investments in equity securities, debt securities, collective investment schemes, property, derivatives, reinsurance, trade and other receivables, and banking deposits. Financial liabilities principally comprise investment contracts, borrowings for financing purposes, derivative liabilities and net asset value attributable to unit holders. The Group\u2019s risk management framework is described in the risk management commentary on pages 52 to 67 of the Annual Report and Accounts and the risk universe component of this framework summarises the comprehensive set of risks to which the Group is exposed. The major risks (\u2018Level 1\u2019 risks) that the Group\u2019s businesses are exposed to and the Group\u2019s approach to managing those risks are outlined in the following notes: \u2022 Note E6: Credit risk, market risk, financial soundness risk, strategic risk, customer risk and operational risk; and \u2022 Note F4: Insurance risk. The section on risk and capital management objectives is included below. Capital Management Framework The Group\u2019s Capital Management Framework is designed to achieve the following objectives: \u2022 to provide appropriate security for policyholders and meet all regulatory capital requirements under the Solvency II regime while not retaining unnecessary excess capital; \u2022 to ensure sufficient liquidity to meet obligations to policyholders and other creditors; \u2022 to optimise the Fitch Ratings financial leverage to maintain an investment grade credit rating; and \u2022 to maintain a dividend policy to pay an ordinary dividend that is sustainable and grows over time. The framework comprises a suite of capital management policies that govern the allocation of capital throughout the Group to achieve the framework objectives under a range of stress conditions. The policy suite is defined with reference to policyholder security, creditor obligations, owner dividend policy and regulatory capital requirements. Group capital Group capital is managed on a Solvency II basis. Under the Solvency II framework, the primary sources of capital managed by the Group comprises the Group\u2019s Own Funds as measured under the Solvency II principles adjusted to exclude surplus funds attributable to the Group\u2019s unsupported with-profit funds and unsupported pension schemes. A Solvency II capital assessment involves valuation in line with Solvency II principles of the Group's Own Funds and a risk-based assessment of the Group's Solvency Capital Requirement ('SCR'). Solvency II surplus is the excess of Own Funds over the SCR. The Group aims to maintain a Solvency II surplus at least equal to its Board-approved capital policy, which reflects Board risk appetite for meeting prevailing solvency requirements. The capital policy of each Life Company is set and monitored by each Life Company Board. These policies ensure there is sufficient capital within each Life Company to meet regulatory capital requirements under a range of stress conditions. The capital policy of each Life Company varies according to the risk profile and financial strength of the company. The capital policy of each Group Holding Company is designed to ensure that there is sufficient liquidity to meet creditor obligations through the combination of cash buffers and cash flows from the Group\u2019s operating companies. Own Funds and SCR Basic Own Funds represents the excess of assets over liabilities from the Solvency II balance sheet adjusted to add back any relevant subordinated liabilities that meet the criteria to be treated as capital items. The Basic Own Funds are classified into three Tiers based on permanency and loss absorbency (Tier 1 being the highest quality and Tier 3 the lowest). The Group\u2019s Own Funds are assessed for their eligibility to cover the Group SCR with reference to both the quality of capital and its availability and transferability. Surplus funds in with-profit funds of the Life companies and in the pension schemes are restricted and can only be included in Eligible Own Funds up to the value of the SCR they are used to support. Eligible Own Funds to cover the SCR are obtained after applying the prescribed Tiering limits and availability restrictions to the Basic Own Funds. The SCR is calibrated so that the likelihood of a loss exceeding the SCR is less than 0.5% over one year. This ensures that capital is sufficient to withstand a broadly \u20181 in 200 year event\u2019. The Group operates an Internal Model to calculate Group SCR, all Group companies are within the scope of the internal model, with the exception of acquired ReAssure businesses and the Irish life entity, Standard Life International Designated Activity Company, which determines their capital requirements in accordance with the Standard Formula. Group capital resources \u2013 unaudited The Group capital resources are based on the Group's Eligible Own Funds adjusted to remove amounts pertaining to unsupported with-profit funds and Group pension schemes: Unaudited 2022 \u00a3bn 2021 \u00a3bn PGH plc Eligible Own Funds 11.1 14.8 Remove Own Funds pertaining to unsupported with-profit funds and pension schemes (1.8) (2.9) Group capital resources 9.3 11.9 Solvency II surplus \u2013 unaudited An analysis of the PGH plc Solvency II surplus as at 31 December 2022 is provided in the business review section on page 34 to 35. During 2022, both Eligible Own Funds and SCR have decreased principally as a consequence of rising interest rates. This has resulted in a decrease in the present value of certain risks included within the SCR along with a corresponding fall in the value of Own Funds in accordance with the Group\u2019s hedging strategy that aims to protect the value of the Solvency II surplus. The Group has complied with all externally imposed capital requirements during the year. ",
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"value": "I4. Related party transactions In the ordinary course of business, the Group and its subsidiaries carry out transactions with related parties, as defined by IAS 24 Related party disclosures , which comprise a Group pension scheme, an associate and key management personnel I4.1 Related party transactions On 23 February 2021, the Group entered into a new agreement with abrdn plc to simplify the arrangements of their Strategic Partnership (see note A6.1 for further details). As part of the acquisition of the brand, the relevant marketing, distribution and data team members transferred to the Group. Consequently, the Client Service and Proposition Agreement (\u2018CSPA\u2019) entered into between the two groups following the acquisition of the Standard Life businesses in 2018, was significantly amended prior to being dissolved. As a consequence of this transaction, it has been assessed that abrdn plc no longer has significant influence over the Group and as a result is no longer considered to be a related party of the Group from the date that the Group entered into the new agreement. During the year, the Group entered into the following related party transactions with a Group pension scheme and an associate: Transactions 2022 1 \u00a3m Transactions 2021 1 \u00a3m Pearl Group Staff Pension Scheme Payment of administrative expenses (4) (4) UK Commercial Property REIT Dividend income 29 17 abrdn plc 2 Investment management fees N/A (20) Fees under Transitional Services Arrangement and material outsource agreements N/A (4) 1 There were no outstanding balances with related parties as at 31 December 2021 and 31 December 2022. 2 Transactions with abrdn plc only include those that took place prior to 23 February 2021. Balances outstanding as at the date abrdn plc ceased to be a related party of the Group were all settled prior to 31 December 2021. I4.2 Transactions with key management personnel The total compensation of key management personnel, being those having authority and responsibility for planning, directing and controlling the activities of the Group, including the Executive and Non-Executive Directors, are as follows: 2022 \u00a3m 2021 \u00a3m Salary and other short-term benefits 5 5 Equity compensation plans 3 3 Details of the shareholdings and emoluments of individual Directors are provided in the Remuneration report on pages 110 to 146. During the year to 31 December 2022 key management personnel and their close family members contributed \u00a3183,933 (2021: \u00a3291,546) to Pensions and Savings products sold by the Group. At 31 December 2022, the total value of key management personnel\u2019s investments in Group Pensions and Savings products was \u00a3525,781 (2021: \u00a33,443,658). ",
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"fact-601": {
"value": "I5. Commitments This note analyses the Group\u2019s other commitments. 2022 \u00a3m 2021 \u00a3m To subscribe to private equity funds and other unlisted assets 1,132 710 To purchase, construct or develop investment property and income strips 62 206 For repairs, maintenance or enhancements of investment property 13 12 ",
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"value": "I6. Contingent liabilities Where the Group has a possible future obligation as a result of a past event, or a present legal or constructive obligation but it is not probable that there will be an outflow of resources to settle the obligation or the amount cannot be reliably estimated, this is disclosed as a contingent liability. Legal proceedings In the normal course of business, the Group is exposed to certain legal issues, which can involve litigation and arbitration. At the period end, the Group has a number of contingent liabilities in this regard, none of which are considered by the Directors to be material. ",
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"value": "I7. Events after the reporting period The financial statements are adjusted to reflect significant events that have a material effect on the financial results and that have occurred between the period end and the date when the financial statements are authorised for issue, provided they give evidence of conditions that existed at the period end. Events that are indicative of conditions that arise after the period end that do not result in an adjustment to the financial statements are disclosed. On 4 August 2022, the Company announced the proposed acquisition of the entire issued share capital of SLF of Canada UK Limited from the Sun Life Assurance Company of Canada, part of the Sun Life Financial Inc. Group. Regulatory approval for the acquisition was received from the Prudential Regulation Authority on 3 March 2023 and in accordance with the share purchase agreement is expected to complete in April 2023. Total cash consideration of \u00a3248 million is payable to the Sun Life Assurance Company of Canada upon completion, subject to certain adjustments. On 7 February 2023, the Group announced its plan to extend the existing strategic partnership with TCS and Diligenta and intention to move all policies administered on the ReAssure ALPHA platform to the TCS BaNCS platform. This move is expected to have an immaterial impact on the financial statements. The expense assumptions used to determine the relevant liabilities to policyholders at 31 December 2022 reflect the impact of the move to TCS BaNCS and the associated implementation costs. On 10 March 2023, the Board recommended a final dividend of 26.0p per share for the year ended 31 December 2022 (2021: 24.8p). Payment of the final dividend is subject to shareholder approval at the AGM. The cost of this dividend has not been recognised as a liability in the consolidated financial statements for 2022 and will be charged to the statement of consolidated changes in equity in 2023. ",
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"value": "plc",
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"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"value": "20 Old Bailey London England EC4M 7AN",
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