REG - Phoenix Grp Hldgs - 2014 Interim Results <Origin Href="QuoteRef">PHNX.L</Origin> - Part 3
29/10/2014 14:21
- Part 3: For the preceding part double click ID:nRSU6799Pb
16(28) 268(51)
Tax charge attributable to owners from continuing operationsTax credit attributable to owners from discontinued operations 6.13.1 231(49)9 (12)(2)6 217(26)16
Profit/(loss) for the period attributable to owners 191 (8) 207
Condensed statement of consolidated financial position
As at 30 June 2014
Notes 30 Jun 2014 30 Jun 2013 31 Dec 2013
£m Restated Restated
£m £m
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital 9 - - -
Share premium 1,038 1,156 1,097
Shares held by employee benefit trust and Group entities (14) (14) (13)
Foreign currency translation reserve 85 98 93
Retained earnings 951 566 732
Total equity attributable to owners of the parent 2,060 1,806 1,909
Non-controlling interests 10 825 711 778
Total equity 2,885 2,517 2,687
Liabilities
Pension scheme liability 11 98 192 137
Insurance contract liabilities
Liabilities under insurance contracts 12 42,657 43,587 42,729
Unallocated surplus 989 931 970
43,646 44,518 43,699
Financial liabilities
Investment contracts 8,508 8,327 8,578
Borrowings 13 2,285 2,527 2,359
Deposits received from reinsurers 384 412 385
Derivatives 1,616 2,783 2,161
Net asset value attributable to unitholders 5,431 5,767 5,744
Obligations for repayment of collateral received 5,324 9,344 7,284
14.1 23,548 29,160 26,511
Provisions 26 58 53
Deferred tax 335 364 373
Reinsurance payables 12 12 12
Payables related to direct insurance contracts 402 414 395
Current tax 149 73 107
Accruals and deferred income 92 129 139
Other payables 1,514 2,468 307
Liabilities classified as held for sale 3.2 111 5,121 49
Total liabilities 69,933 82,509 71,782
Total equity and liabilities 72,818 85,026 74,469
Notes 30 Jun 2014 30 Jun 2013 31 Dec 2013
£m Restated Restated
£m £m
ASSETS
Pension scheme asset 11 276 139 160
Intangible assets
Goodwill 39 96 96
Acquired in-force business 1,458 1,564 1,511
Customer relationships and other intangibles 225 376 368
Present value of future profits 24 29 32
1,746 2,065 2,007
Property, plant and equipment 15 23 23
Investment property 1,683 1,657 1,603
Financial assets
Loans and receivables 1,560 2,271 1,977
Derivatives 1,349 2,674 1,966
Equities 13,869 13,539 13,913
Investment in joint ventures 118 104 125
Fixed and variable rate income securities 35,643 38,529 35,460
Collective investment schemes 2,438 4,088 3,767
14.1 54,977 61,205 57,208
Insurance assets
Reinsurers' share of insurance contract liabilities 2,854 2,724 2,851
Reinsurance receivables 35 28 34
Insurance contract receivables 10 9 12
2,899 2,761 2,897
Current tax 7 7 6
Prepayments and accrued income 421 488 462
Other receivables 1,737 2,379 743
Cash and cash equivalents 8,692 9,334 9,294
Assets classified as held for sale 3.2 365 4,968 66
Total assets 72,818 85,026 74,469
Condensed statement of consolidated cash flows
For the half year ended 30 June 2014
Notes Half year Half year Year
ended ended ended
30 Jun 2014 30 Jun 2013 31 Dec 2013
£m Restated Restated
£m £m
Cash flows from operating activities
Cash (utilised)/generated by operations (310) 765 1,023
Taxation paid (30) (4) (11)
Net cash flows from operating activities (340) 761 1,012
Cash flows from investing activities
Proceeds from disposal of business 3.3 21 - -
Cash flows from financing activities
Proceeds from issuing ordinary shares, net of associated commission and expenses - 233 233
Proceeds from issuing shares in subsidiaries to non-controlling interests 33 - 37
Ordinary share dividends paid 8 (60) (60) (120)
Coupon on Perpetual Reset Capital Securities paid (26) (26) (26)
Dividends paid to non-controlling interests 10 (12) (12) (25)
Arrangement and structuring fees associated with the re-terming of the Impala loan facility - (21) (21)
Repayment of policyholder borrowings (15) (11) (33)
Repayment of shareholder borrowings (83) (533) (694)
Interest paid on policyholder borrowings (4) (4) (18)
Interest paid on shareholder borrowings (48) (78) (136)
Net cash flows from financing activities (215) (512) (803)
Net (decrease)/increase in cash and cash equivalents (534) 249 209
Cash and cash equivalents at the beginning of the period 9,294 9,085 9,085
Cash and cash equivalents at the end of the period 8,760 9,334 9,294
Cash flows relating to discontinued operations are disclosed in note 3.1
Condensed statement of consolidated changes in equity
For the half year ended 30 June 2014
Share capital Share premium Shares Foreign currency translation reserve Retained earnings Total Non-controlling interests (note 10) Total
(note 9) £m held by employee benefit trust and Group entities £m £m £m £m £m
£m £m
At 1 January 2014 - 1,097 (13) 93 732 1,909 778 2,687
Profit for the period - - - - 144 144 47 191
Other comprehensive (expense)/income for the period - - - (8) 79 71 - 71
Total comprehensive (expense)/income for the period - - - (8) 223 215 47 262
Dividends paid on ordinary shares (note 8) - (60) - - - (60) - (60)
Dividends paid on shares held by the employee benefit trust and Group entities - 1 - - - 1 - 1
Dividends paid to non-controlling interests - - - - - - (12) (12)
Coupon paid to non-controlling interests, net of tax relief - - - - - - (21) (21)
Credit to equity for equity-settled share-based payments - - - - 3 3 - 3
Shares subscribed for by non-controlling interests - - - - - - 33 33
Shares distributed by employee benefit trust - - 7 - (7) - - -
Shares acquired by employee benefit trust - - (8) - - (8) - (8)
At 30 June 2014 - 1,038 (14) 85 951 2,060 825 2,885
Condensed statement of consolidated changes in equity
For the half year ended 30 June 2014
Share capital Share premium Other Shares Foreign currency translation reserve Retained earnings Total Non- Total
(note 9) £m reserves held by employee benefit £m £m £m controlling interests £m
£m £m trust and Group (note 10)
entities £m
£m
At 1 January 2013 - 982 5 (10) 85 596 1,658 724 2,382
(Loss)/profit for the period - - - - - (27) (27) 19 (8)
Other comprehensive income/(expense) for the period - - - - 13 (9) 4 - 4
Total comprehensive income/(expense) for the period - - - - 13 (36) (23) 19 (4)
Issue of ordinary share capital, net of associated commissions and expenses - 233 - - - - 233 - 233
Dividends paid on ordinary shares (note 8) - (60) - - - - (60) - (60)
Dividends paid on shares held by the employee benefit trust and Group entities - 1 - - - - 1 - 1
Dividends paid to non-controlling interests - - - - - - - (12) (12)
Coupon paid to non-controlling interests, net of tax relief - - - - - - - (20) (20)
Credit to equity for equity-settled share-based payments - - - - - 3 3 - 3
Shares distributed by employee benefit trust - - - 2 - (2) - - -
Shares acquired by employee benefit trust - - - (6) - - (6) - (6)
Expired contingent rights - - (5) - - 5 - - -
At 30 June 2013 - 1,156 - (14) 98 566 1,806 711 2,517
Condensed statement of consolidated changes in equity
For the half year ended 30 June 2014
Share capital Share premium Other Shares Foreign currency translation reserve Retained earnings Total Non- Total
(note 9) £m reserves held by employee benefit £m £m £m controlling interests £m
£m £m trust and Group (note 10)
entities £m
£m
At 1 January 2013 - 982 5 (10) 85 596 1,658 724 2,382
Profit for the period - - - - - 145 145 62 207
Other comprehensive income/ (expense) for the period - - - - 8 (12) (4) - (4)
Total comprehensive income for the period - - - - 8 133 141 62 203
Issue of ordinary share capital, net of associated commissions and expenses - 233 - - - - 233 - 233
Dividends paid on ordinary shares - (120) - - - - (120) - (120)
Dividends paid on shares held by the employee benefit trust and Group entities - 2 - - - - 2 - 2
Dividends paid to non-controlling interests - - - - - - - (25) (25)
Coupon paid to non-controlling interests, net of tax relief - - - - - - - (20) (20)
Credit to equity for equity-settled share-based payments - - - - - 6 6 - 6
Shares in subsidiaries subscribed for by non-controlling interests - - - - - - - 37 37
Shares distributed by employee benefit trust - - - 8 - (8) - - -
Shares acquired by employee benefit trust - - - (11) - - (11) - (11)
Expired contingent rights - - (5) - - 5 - - -
At 31 December 2013 - 1,097 - (13) 93 732 1,909 778 2,687
Notes to the condensed consolidated interim financial statements
1. Basis of preparation
The condensed consolidated interim financial statements ('the interim financial statements') for the half year ended 30
June 2014 comprise the interim financial statements of Phoenix Group Holdings ('the Company') and its subsidiaries
(together referred to as 'the Group') as set out on pages 22 to 55 and were authorised by the Board of Directors for issue
on 20 August 2014. The interim financial statements are unaudited but have been reviewed by the auditors, Ernst & Young LLP
and their review report appears on page 21.
The interim financial statements have been prepared, effective from 1 January 2014, in accordance with the International
Financial Reporting Standards ('IFRSs') as issued by the International Accounting Standards Board ('IASB'). The interim
financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the IASB and in
accordance with the accounting policies set out in the 2013 consolidated financial statements except for the following:
− the basis of preparation for the Group's consolidated financial statements has been amended from IFRSs adopted for use
in the European Union to IFRSs issued by the IASB, effective from 1 January 2014;
− the adoption of IFRS 10 Consolidated Financial statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests
in Other Entities, and IAS 28 Investments in Associates and Joint Ventures (Revised). As a result of adopting the new basis
of preparation in 2014, these standards have an initial application date of 1 January 2013; and
− the adoption of other new accounting standards, interpretations and amendments effective as of 1 January 2014 which are
referred to below.
The interim financial statements do not include all the information and disclosures required in the 2013 consolidated
financial statements, and should be read in conjunction with the Group's 2013 Annual Report and Accounts.
The adoption of IFRS 10 and IFRS 11 with an initial application date of 1 January 2013, requires the restatement of
previous financial statements. The impact of IFRS 10 on the interim financial statements is explained in note 2. The
adoption of IFRS 11 results in the presentation of a property investment structure as an investment in joint ventures
within financial assets (previously disclosed as an equity investment). As a result of the Group's accounting policy to
value interests in joint ventures at fair value through profit or loss there has been no change in the measurement basis.
The application of IFRS 12 will result in additional disclosures in the 2014 annual consolidated financial statements.
In preparing the interim financial statements the Group has adopted the following standards, interpretations and amendments
effective from 1 January 2014:
− Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27). These amendments provide an exception to the
consolidation requirement for entities that meet the definition of an investment entity under IFRS 10 Consolidated
Financial Statements. The exception to consolidation requires investment entities to account for subsidiaries at fair value
through profit or loss.
− Offsetting Financial Assets and Financial Liabilities - Amendments for IAS 32. These amendments clarify the meaning of
'currently has a legally enforceable right to set-off' and the criteria for non-simultaneous settlement mechanisms of
clearing houses to qualify for offsetting.
− Novation of Derivatives and Continuation of Hedge Accounting - Amendments to IAS 39. These amendments provide relief
from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain
criteria.
− Receivable Amount Disclosures for Non-Financial Assets. These amendments remove the unintended consequences of IFRS 13
Fair Value Measurement on the disclosures required under IAS 36 Impairment of Assets. In addition, these amendments require
disclosure of the recoverable amounts for the assets or cash-generating units for which an impairment loss has been
recognised or reversed during the period.
These standards, interpretations or amendments have been applied for the first time in 2014 and do not impact the 2014
interim financial statements. There is also not expected to be a significant impact on the 2014 consolidated financial
statements.
After making enquiries, the Directors have a reasonable expectation that the Company and the Group as a whole have adequate
resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the
going concern basis in preparing the interim financial statements.
2. Changes in accounting policies
The accounting policies adopted in the preparation of the interim financial statements are consistent with those followed
in the preparation of the 2013 consolidated financial statements except for the adoption of IFRS 10 Consolidated Financial
Statements.
As a result of the Group changing its basis of preparation to IFRSs issued by the IASB, the effective date of application
of IFRS 10 by the Group is now 1 January 2013.
IFRS 10 replaces the parts of the previously existing IAS 27 Consolidated and Separate Financial Statements that dealt with
consolidated financial statements and SIC-12 Consolidation - Special Purpose Entities, and establishes a single control
model that applies to all entities including special purpose entities. IFRS 10 changes the definition of control such that
an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over the investee.
Subsidiary undertakings are those entities over which the Group has control. The Group controls an investee if and only if
the Group has all the following:
− Power over the investee;
− Exposure, or rights, to variable returns from its involvement with the investee; and
− 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
re-assesses 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.
The Group is invested in a number of collective investment schemes which in turn invest in a range of financial assets. The
Group's percentage ownership in these collective investment schemes can fluctuate according to the Group's and third party
participation in them. When assessing the control over these collective investment schemes the Group considers the scope of
its decision making authority including its ability to direct the relevant activities of the fund, powers of veto and
exposure to variability of returns. The Group also assesses substantive removal rights that may affect the Group's ability
to direct the relevant activities.
The following table summarises the financial effects on the condensed consolidated income statement, condensed statement of
consolidated financial position and condensed statement of consolidated cash flows on implementation of the new accounting
policy:
Year ended Half year
31 Dec 2013 ended
£m 30 Jun 2013
£m
Condensed consolidated income statement
Net investment income 80 44
Other operating income (1) -
Administrative expenses (1) (2)
Net income attributable to unitholders (79) (42)
Finance costs 1 -
Profit for the period - -
Condensed statement of consolidated financial position
Total assets:
Derivatives 18 4
Equities 2,602 2,336
Investment in joint ventures 125 104
Fixed and variable rate income securities 198 301
Collective investment schemes (2,623) (2,317)
Cash and cash equivalents 70 71
Other assets 6 14
Total assets 396 513
Total liabilities:
Derivatives 5 5
Net asset value attributable to unitholders 435 498
Other payables (44) 10
Total liabilities 396 513
Year ended Half Year
31 Dec 2013 ended
£m 30 Jun 2013
£m
Condensed statement of consolidated cash flows
Cash (utilised)/generated by operations 13 14
The change in accounting policy had no impact on net assets or on earnings per share as at 31 December 2013 or 30 June
2013.
3. Discontinued operations and assets and liabilities held for sale
This note provides details of the discontinued operations of Ignis Asset Management, assets and liabilities held for sale
at the period end and the disposal of a general insurance subsidiary undertaking.
3.1 Discontinued operations
On 25 March 2014, the Group and Standard Life Investments (Holdings) Limited ('Standard Life Investments') signed a
disposal agreement under which Standard Life Investments agreed to acquire the entire issued share capital of Ignis Asset
Management in return for gross cash consideration of £390 million. The divestment was completed on 1 July 2014. The
business has been included in the Ignis Asset Management operating segment at 30 June 2014. The results of Ignis Asset
Management are as follows:
Half year Half year Year
ended ended ended
30 Jun 2014 30 Jun 2013 31 Dec 2013
£m £m £m
Fees 26 19 48
Net investment income (6) - 7
Total revenue 20 19 55
Amortisation of customer relationships - (2) (3)
Administrative expenses (47) (45) (103)
Total operating expenses (47) (47) (106)
Loss before tax (27) (28) (51)
Tax credit attributable to owners 9 6 16
Loss after tax for the period from a discontinued operation (18) (22) (35)
The loss before tax for the period from a discontinued operation excludes intra-group fee income of £38 million (half year
ended 30 June 2013: £43 million; year ended 31 December 2013: £102 million). This intra-group fee income represents the
difference between the loss before tax for the period from discontinued operations and the Ignis Asset Management segmental
result before tax attributable to owners result shown in note 4.1.
The loss for the period from discontinued operations was entirely attributable to the owners of the parent.
The net cash flows generated/(utilised) by Ignis Asset Management are as follows:
Half year Half year Year
ended ended ended
30 Jun 2014 30 Jun 2013 31 Dec 2013
£m £m £m
Cash flows from operating activities 31 11 17
Cash flows from financing activities (29) - (14)
Net cash inflow 2 11 3
Loss per share
Basic loss per share from discontinued operations (note 7.1) (8.2)p (10.1)p (17.1)p
Diluted loss per share from discontinued operations (note 7.2) (8.2)p (10.1)p (17.1)p
3.2 Assets and liabilities of operations classified as held for sale
The balances transferred to assets and liabilities classified as held for sale in the statement of consolidated financial
position as at 30 June 2014 relate to Ignis Asset Management (see 3.1 above). The balances as at 31 December 2013 related
to BA(GI) Limited ('BAGI') (see 3.3 below) and the balances as at 30 June 2013 related to the Part VII transfer of a
portfolio of wholly reinsured annuity liabilities to Guardian Assurance Limited ('Guardian') which completed in September
2013 and BAGI.
Carrying amount Carrying Carrying
30 Jun 2014 amount amount
£m 30 Jun 2013 31 Dec 2013
£m £m
Assets classified as held for sale:
Goodwill 57 19 -
Acquired in-force business - 138 -
Customer relationships and other intangibles 136 - -
Financial assets 37 55 55
Reinsurer's share of insurance contract liabilities - 4,747 -
Property, plant and equipment 8 - -
Cash and cash equivalents 68 - -
Other assets 59 9 11
365 4,968 66
Liabilities classified as held for sale:
Liabilities under insurance contracts - 5,050 -
Deferred tax liabilities 27 23 -
Payables related to direct insurance contracts - 47 48
Provisions 23 - -
Other liabilities 61 1 1
111 5,121 49
3.3 Disposal of BAGI
The Group completed the sale of its entire interest in BAGI to National Indemnity Company on 18 March 2014 for cash
consideration of £21 million. The carrying value of the net assets transferred was £17 million, resulting in a pre-tax gain
of £4 million. Assets and liabilities classified as held for sale as at 30 June 2013 and 31 December 2013 are no longer
included in the consolidated statement of financial position.
3.4 Annuity liabilities transfer
The Group entered into a reinsurance agreement, effective 1 July 2012, to reinsure certain portfolios of the Group's
annuity liabilities to Guardian in exchange for the transfer of financial assets of £5.1 billion. The business was
transferred to Guardian on 30 September 2013 using a scheme under Part VII of the Financial Services and Markets Act 2000
approved by the High Court on 12 September 2013.
As part of the Part VII transfer, the Group paid £78 million consideration to Guardian in connection with the ongoing
servicing of the transferred policies. Net liabilities disposed of were £143 million and the Group recognised a gain on
transfer of £65 million, comprising £42 million within gain on transfer of business and £23 million within tax
(charge)/credit attributable to owners in the consolidated income statement for the year ending 31 December 2013.
4. Segmental analysis
The Group defines and presents operating segments based on the information which is provided to the Board.
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 and had two
operating segments during the reporting period as follows:
− Phoenix Life - this segment manages a range of whole life, term assurance and pension products; and
− Ignis Asset Management - this segment provides investment management services to the life companies within the Group and
to third parties, covering both retail and institutional investors. This segment has been disposed of effective 1 July 2014
(see note 3).
Segment performance is evaluated based on profit or loss which, in certain respects, is presented differently from profit
or loss in the consolidated financial statements. Group financing (including finance costs) and owners' taxes are managed
on a Group basis and are not allocated to individual operating segments.
Inter-segment transactions are set on an arm's length basis in a manner similar to transactions with third parties. Segment
results include those transfers between business segments which are then eliminated on consolidation.
4.1 Segmental result
Half year ended 30 June 2014
Phoenix Life Ignis Asset Management Unallocated Eliminations Discontinued operation Total
£m £m Group £m eliminations £m
£m £m
Net premiums written from:
External customers 482 - - - - 482
Fees from:
External customers 59 26 - - (26) 59
Other segment - 38 - (38) - -
59 64 - (38) (26) 59
Net investment income:
Recurring 2,035 - 6 - - 2,041
Non-recurring - (6) 2 - 6 2
2,035 (6) 8 - 6 2,043
Other operating income:
Recurring 5 - - - - 5
Gain on transfer of business:
Non-recurring - - 4 - - 4
Net income 2,581 58 12 (38) (20) 2,593
Net policyholder claims and benefits incurred:
Recurring (1,730) - - - - (1,730)
Depreciation and amortisation:
Depreciation of property, plant and equipment - - - - - -
Amortisation of acquired in-force business (53) - - - - (53)
Amortisation of customer relationships (7) - - - - (7)
(60) - - - - (60)
Other operating expenses:
Recurring (464) (47) (14) 38 47 (440)
Non-recurring (57) - 66 - - 9
(521) (47) 52 38 47 (431)
Total operating expenses (2,311) (47) 52 38 47 (2,221)
Profit before finance costs and tax 270 11 64 - 27 372
Finance costs (34) - (48) - - (82)
Profit before tax 236 11 16 - 27 290
Tax attributable to policyholders' returns (32) - - - - (32)
Segmental result before the tax attributable to owners 204 11 16 - 27 258
Half year ended 30 June 2013 Restated
Phoenix Life Ignis Asset Management Unallocated Eliminations Discontinued operation Total
£m £m Group £m eliminations £m
£m £m
Net premiums written from:
External customers 635 - - - - 635
Fees from:
External customers 67 19 - - (19) 67
Other segment - 43 - (43) - -
67 62 - (43) (19) 67
Net investment income:
Recurring 942 - - - - 942
Other operating income:
Recurring 4 - - - - 4
Net income 1,648 62 - (43) (19) 1,648
Net policyholder claims and benefits incurred:
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