REG - Phoenix Grp Hldgs - Phoenix Group Holdings - 2016 Annual Results <Origin Href="QuoteRef">PHNX.L</Origin> - Part 10
20/03/2017 07:07
- Part 10: For the preceding part double click ID:nRST8776Zi
accordance with our engagement letter dated 10 March
2016. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to
state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Report on matters prescribed by our engagement letter
In our opinion:
- the information given in the Strategic Report and the Directors' Report for the financial year for which the
financial statements are prepared is consistent with the financial statements;
- the information given in the Corporate Governance Statement set out on pages 47 to 57 with respect to internal
control and risk management systems in relation to financial reporting processes is consistent with the financial
statements; and
- the part of the Directors' remuneration report that has been described as audited has been properly prepared in
accordance with the basis of preparation as described therein.
Matters on which we are required to report by exception
ISAs (UK and Ireland) reporting We are required to report to you if, in our opinion, financial and non-financial information in the Annual Report and Accounts is: - materially inconsistent with the We have no exceptions to report.
information in the audited financial statements; or - apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in
the course of performing our audit; or - otherwise misleading. In particular, we are required to report whether we have identified any inconsistencies between our
knowledge acquired in the course of performing the audit and the Directors' statement that they consider the Annual Report and Accounts taken as a whole is fair, balanced
and understandable and provides the information necessary for shareholders to assess the entity's performance, business model and strategy; and whether the Annual Report
and Accounts appropriately addresses those matters that we communicated to the audit committee that we consider should have been disclosed.
Listing rules review requirements We are required to review:- the Directors' statement in relation to going concern, set out on page 87, and the longer-term viability, set out on page 39; and- the part We have no exceptions to report.
of the Corporate Governance Statement relating to the Company's compliance with the provisions of the UK Corporate Governance Code specified for our review.
Engagement letter reporting We are required to report to you if, in our opinion: adequate accounting records have not been kept (including returns from those branches which have not been); orthe We have no exceptions to report.
financial statements are not in agreement with the accounting records and returns; orwe have not received all the information and explanations which we require for the
audit.
Statement on the Directors' assessment of the principal risks that would threaten the solvency or liquidity of the entity
ISAs (UK and Ireland) reporting We are required to give a statement as to whether we have anything material to add or to draw attention to in relation to:- the Directors' confirmation in the Annual We have nothing material to add or to draw attention to.
Report and Accounts that they have carried out a robust assessment of the principal risks facing the entity, including those that would threaten its business model,
future performance, solvency or liquidity;- the disclosures in the Annual Report and Accounts that describe those risks and explain how they are being managed or
mitigated;- the Directors' statement in the Annual Report and Accounts about whether they considered it appropriate to adopt the going concern basis of accounting in
preparing them, and their identification of any material uncertainties to the entity's ability to continue to do so over a period of at least twelve months from the date
of approval of the financial statements; and- the Directors' explanation in the Annual Report and Accounts as to how they have assessed the prospects of the entity, over
what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the entity
will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention
to any necessary qualifications or assumptions.
ERNST & YOUNG LLP
LONDON
17 MARCH 2017
Notes:
1. The maintenance and integrity of the Phoenix Group Holdings website is the responsibility of the Directors; the work
carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the financial statements since they were initially presented on
the website.
2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2016
Notes 2016 2015
£m £m
Gross premiums written 999 902
Less: premiums ceded to reinsurers F3 (75) (1,376)
Net premiums written 924 (474)
Fees 88 95
Net investment income C1 6,361 1,064
Total revenue, net of reinsurance payable 7,373 685
Gain on transfer of business I1.1 52 -
Other operating income 20 7
Net income 7,445 692
Policyholder claims (3,726) (3,931)
Less: reinsurance recoveries 456 326
Change in insurance contract liabilities (1,970) 2,959
Change in reinsurers' share of insurance contract liabilities (281) 1,003
Transfer from unallocated surplus F2 4 84
Net policyholder claims and benefits incurred (5,517) 441
Change in investment contract liabilities (1,194) (232)
Acquisition costs (9) (7)
Change in present value of future profits G7 (11) (6)
Amortisation and impairment of acquired in-force business G7 (76) (148)
Amortisation of other intangibles G7 (14) (15)
Administrative expenses C2 (506) (430)
Net income attributable to unitholders (66) (7)
Total operating expenses (7,393) (404)
Profit before finance costs and tax 52 288
Finance costs C4 (122) (136)
(Loss)/profit for the year before tax (70) 152
Tax (charge)/credit attributable to policyholders' returns C5 (58) 33
(Loss)/profit before the tax attributable to owners (128) 185
Tax (charge)/credit C5 (30) 97
Add: tax attributable to policyholders' returns C5 58 (33)
Tax credit attributable to owners C5 28 64
(Loss)/profit for the year attributable to owners (100) 249
Attributable to:
Owners of the parent (101) 201
Non-controlling interests D3 1 48
(100) 249
Earnings per ordinary share
Basic (pence per share) B3.1 (34.3)p 76.1p*
Diluted (pence per share) B3.2 (34.3)p 76.0p*
* Restated following rights issue.
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2016
Notes 2016 2015
£m £m
(Loss)/profit for the year (100) 249
Other comprehensive income:
Items that are or may be reclassified to profit or loss:
Reclassification adjustments relating to foreign collective investment schemes disposed - (10)
of in the period
Items that will not be reclassified to profit or loss:
Owner-occupied property revaluation gains G8 - 4
Remeasurements of net defined benefit asset/liability G6 219 11
Tax charge relating to other comprehensive income items C5 (1) (5)
Total other comprehensive income for the year 218 -
Total comprehensive income for the year 118 249
Attributable to:
Owners of the parent 117 201
Non-controlling interests D3 1 48
118 249
PRO FORMA RECONCILIATION OF GROUP OPERATING PROFIT TO RESULT ATTRIBUTABLE
TO OWNERS
For the year ended 31 December 2016
Notes 2016 2015
£m £m
Operating profit
Phoenix Life 357 336
Group costs (6) (12)
Total operating profit 351 324
Investment return variances and economic assumption changes on long-term business B2.2 (207) 13
Variance on owners' funds B2.3 (5) (12)
Amortisation of acquired in-force business (68) (75)
Amortisation of other intangibles B1.2 (14) (15)
Other non-operating items (95) 49
(Loss)/profit before finance costs attributable to owners (38) 284
Finance costs attributable to owners B1.2 (90) (99)
(Loss)/profit before the tax attributable to owners (128) 185
Tax credit attributable to owners 28 64
(Loss)/profit for the year attributable to owners (100) 249
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
As at 31 December 2016
Notes 2016 2015
£m £m
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital D1 - -
Share premium 1,643 861
Shares held by the employee benefit trust D2 (7) (5)
Foreign currency translation reserve 96 96
Owner-occupied property revaluation reserve 4 4
Retained earnings 1,597 1,478
Total equity attributable to owners of the parent 3,333 2,434
Non-controlling interests D3 - 570
Total equity 3,333 3,004
Liabilities
Pension scheme liability G6 680 -
Insurance contract liabilities
Liabilities under insurance contracts F1 45,807 39,983
Unallocated surplus F2 879 877
46,686 40,860
Financial liabilities
Investment contracts 27,332 7,905
Borrowings E5 2,036 1,998
Deposits received from reinsurers 392 378
Derivatives E3 1,567 1,360
Net asset value attributable to unitholders 1,040 5,120
Obligations for repayment of collateral received 1,623 725
E1 33,990 17,486
Provisions G1 109 28
Deferred tax G2 378 354
Reinsurance payables 21 19
Payables related to direct insurance contracts G3 484 364
Current tax G2 12 7
Accruals and deferred income G4 204 128
Other payables G5 102 677
Liabilities classified as held for sale I1 - 1,587
Total liabilities 82,666 61,510
Total equity and liabilities 85,999 64,514
Notes 2016 2015
£m £m
ASSETS
Pension scheme asset G6 225 506
Intangible assets
Goodwill 57 39
Acquired in-force business 1,407 1,265
Other intangibles 214 219
G7 1,678 1,523
Property, plant and equipment G8 25 19
Investment property G9 646 1,942
Financial assets
Loans and receivables 1,232 577
Derivatives E3 3,003 1,498
Equities 17,759 12,351
Investment in associate 525 -
Fixed and variable rate income securities 29,290 31,814
Collective investment schemes 18,432 3,826
Reinsurers' share of investment contract liabilities 6,808 -
E1 77,049 50,066
Insurance assets
Reinsurers' share of insurance contract liabilities F1 3,744 3,954
Reinsurance receivables 37 29
Insurance contract receivables 11 9
3,792 3,992
Current tax G2 44 47
Prepayments and accrued income 361 335
Other receivables G10 513 474
Cash and cash equivalents G11 1,666 3,940
Assets classified as held for sale I1 - 1,670
Total assets 85,999 64,514
STATEMENT OF CONSOLIDATED CASH FLOWS
For the year ended 31 December 2016
Notes 2016 2015
£m £m
Cash flows from operating activities
Cash utilised by operations I3 (1,845) (576)
Taxation paid (52) (110)
Net cash flows from operating activities (1,897) (686)
Cash flows from investing activities
Acquisition of AXA subsidiaries, net of cash acquired H2.1 (343) -
Acquisition of Abbey Life subsidiaries, net of cash acquired H2.2 (886) -
Net cash flows from investing activities (1,229) -
Cash flows from financing activities
Proceeds from issuing ordinary shares, net of associated commission and expenses D1 908 2
Proceeds from issuing shares in subsidiaries to non-controlling interests D3 - 35
Ordinary share dividends paid B4 (126) (120)
Coupon paid on Perpetual Reset Capital Securities (1) (20)
Cash settlement of Perpetual Reset Capital Securities D3 (6) (3)
Fees associated with the issuance of subordinated notes - (3)
Fees associated with the amendment of existing bank facility (3) -
Dividends paid to non-controlling interests D3 - (23)
Repayment of policyholder borrowings (38) (118)
Repayment of shareholder borrowings (882) (190)
Proceeds from new policyholder borrowings, net of associated expenses - 99
Proceeds from new shareholder borrowings, net of associated expenses 1,079 -
Interest paid on policyholder borrowings (6) (15)
Interest paid on shareholder borrowings (73) (85)
Net cash flows from financing activities 852 (441)
Net decrease in cash and cash equivalents (2,274) (1,127)
Cash and cash equivalents at the beginning of the year 3,940 5,067
Cash and cash equivalents at the end of the year G11 1,666 3,940
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
For the year ended 31 December 2016
Share capital Share premium Shares held Foreign currency translation reserve Owner-occupied property revaluation reserve Retained earnings Total Non-controlling interests (note D3) Total
(note D1) £m by the employee benefit trust £m £m £m £m £m £m
£m (note D2)
£m
At 1 January 2016 - 861 (5) 96 4 1,478 2,434 570 3,004
(Loss)/profit for the year - - - - (101) (101) 1 (100)
Other comprehensive income - - - - - 218 218 - 218
for the year
Total comprehensive income - - - - - 117 117 1 118
for the year
Issue of ordinary share capital, - 908 - - - - 908 - 908
net of associated commissions
and expenses
Dividends paid on ordinary shares - (126) - - - - (126) - (126)
Coupon paid to non-controlling interests, net of tax relief - - - - - - - (1) (1)
Credit to equity for equity-settled share-based payments - - - - - 7 7 - 7
Redemption of non-controlling interests - - - - - - - (6) (6)
Elimination of non-controlling interest following loss of control - - - - - - - (564) (564)
Shares distributed by the employee benefit trust - - 5 - - (5) - - -
Shares acquired by the employee benefit trust - - (7) - - - (7) - (7)
At 31 December 2016 - 1,643 (7) 96 4 1,597 3,333 - 3,333
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
For the year ended 31 December 2015
Share Share premium Shares held Foreign currency translation reserve Owner-occupied property revaluation reserve Retained earnings Total Non-controlling interests (note D3) Total
capital £m by the employee benefit trust £m £m £m £m £m £m
(note D1) (note D2)
£m £m
At 1 January 2015 - 979 (8) 103 - 1,291 2,365 913 3,278
Profit for the year - - - 3 - 198 201 48 249
Other comprehensive - - - (10) 4 6 - - -
(expense)/ income for the year
Total comprehensive - - - (7) 4 204 201 48 249
(expense)/income for the year
Issue of ordinary share capital, - 2 - - - - 2 - 2
net of associated commissions and expenses
Dividends paid on ordinary shares - (120) - - - - (120) - (120)
Dividends paid to non-controlling interests - - - - - - - (23) (23)
Coupon paid to non-controlling interests, net of tax relief - - - - - - - (15) (15)
Credit to equity for equity-settled share-based payments - - - - - 4 4 - 4
Shares in subsidiaries subscribed for by non-controlling interests - - - - - - - 35 35
Exchange of non-controlling interests for subordinated notes - - - - - - - (388) (388)
Loss on exchange of - - - - - (12) (12) - (12)
non-controlling interests
Shares distributed by employee benefit trust - - 9 - - (9) - - -
Shares acquired by employee benefit trust - - (6) - - - (6) - (6)
At 31 December 2015 - 861 (5) 96 4 1,478 2,434 570 3,004
Phoenix Group Holdings is subject to Cayman Islands Companies Law. Under Cayman Islands Companies Law distributions can be
made out of profits or share premium subject, in each case, to a solvency test. The solvency test is broadly consistent
with the Group's going concern assessment criteria.
Retained earnings comprise the owners' interest in the post-acquisition retained earnings of the subsidiary companies and
the retained earnings of the Company. Distribution of retained earnings held within the long-term business funds and
surplus assets held within the owners' funds of the life companies is subject to retaining sufficient funds to protect
policyholders' interests.
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
A1. Basis of preparation
The consolidated financial statements for the year ended 31 December 2016 comprise the financial statements of Phoenix
Group Holdings ('the Company') and its subsidiaries (together referred to as 'the Group').
The consolidated financial statements have been prepared on a going concern basis and on a historical cost basis except for
investment property, owner-occupied property and those financial assets, financial liabilities and insurance and investment
contracts with discretionary participation features ('DPF') that have been measured at fair value.
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
('IFRSs') as issued by the International Accounting Standards Board ('IASB'). The financial statements are presented in
sterling (£) 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 IFRS or interpretation, as specifically disclosed in the accounting
policies of the Group.
Basis of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries, 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:
- 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. Further details about the consolidation of subsidiaries, including collective
investment schemes, is included in note H1.
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's entities are measured using the currency of the primary
economic environment in which the entity operates (the 'functional currency'). The consolidated financial statements are
presented in sterling, which is the Group's 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:
- assets and liabilities are translated at the closing rate at the period end;
- income, expenses and cash flows denominated in foreign currencies are translated at average exchange rates; and
- 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 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.
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. 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 about 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's 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, impairment tests for intangible assets,
income tax assets and liabilities, and pension scheme assets and liabilities. The determination of operating profit,
identification and valuation of intangible assets and the deconsolidation of a property investment company all require
management to make judgements, details of which 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.
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. Where possible, financial assets and liabilities are valued on the basis of listed market prices by reference to quoted
market bid prices for assets and offer prices for liabilities. These are categorised as Level 1 financial instruments and
do not involve estimates. If prices are not readily determinable, fair value is determined using valuation techniques
including pricing models, discounted cash flow techniques or broker quotes. Financial instruments valued where valuation
techniques based on observable market data at the period end are categorised as Level 2 financial instruments. Financial
instruments valued using valuation techniques 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.
A3.3 Impairment of intangible assets
Intangible assets are subject to regular impairment reviews as detailed in the accounting policy in note G7. Impairments
are measured as the difference between the carrying value of a particular asset and its recoverable amount. Impairments are
recognised in the consolidated income statement in the period in which they occur. Further details of judgements made in
testing intangible assets for impairment are included in note G7.
A3.4 Income tax assets and liabilities
Deferred tax assets are recognised to the extent that they are regarded as recoverable, that is to the extent that, on the
basis of all the available evidence, it can be regarded as more likely than not that there will be suitable taxable profits
against which the losses can be relieved. Forecasts of future profitability are made which by their nature involve
management's judgement.
The UK taxation regime applies separate rules to trading and capital profits and losses. The distinction between temporary
differences that arise from items of either a capital or trading nature may affect the recognition of deferred tax assets.
The determination of tax provisions included in current tax liabilities involves the use of estimates and judgements.
The accounting policy for income taxes (both current and deferred) is discussed in more detail in the accounting policy in
notes C5 and G2.
A3.5 Pension scheme assets and liabilities
The valuation of pension scheme assets and liabilities is determined using actuarial valuations that include a number of
assumptions. As defined benefit pension schemes are long-term in nature, such assumptions are subject to significant
uncertainty. Details of the key assumptions used are shown in note G6.
A3.6 Operating profit
Operating profit is the Group's non-GAAP measure of performance. The Group is required to make judgements as to the
appropriate longer-term rates of investment return for the determination of operating profit, as detailed in note B2, and
as to what constitutes an operating or non-operating item in accordance with the accounting policy detailed in note B1.2.
A3.7 Acquisitions
The identification and valuation of identifiable intangible assets, such as acquired in-force business or brand
intangibles, arising from the Group's acquisitions requires the Group to make a number of judgements and estimates. Further
details of the judgements made are included in notes G7 'Intangible assets' and H2 'Acquisitions and disposals'.
A3.8 Loss of control of investment in UK Commercial Property Trust Limited ('UKCPT')
UKCPT is a property investment company which the Group deconsolidated during the year. Judgement was applied in determining
that the Group no longer controlled its investment in UKCPT. The Group's investment in UKCPT is now classified as an
associate and held at fair value. Further details of the judgement made are included in note H3.
A4. Adoption of new accounting pronouncements in 2016
The consolidated financial statements for the year ended 31 December 2016, set out on pages 99 to 192, were authorised by
the Board of Directors for issue on 17 March 2017.
In preparing the consolidated financial statements, the Group has adopted the following amendments effective from 1 January
2016:
- Annual Improvements to IFRS 2012 - 2014 cycle. The adoption of these amendments had no impact on the disclosures or
amount recognised in the consolidated financial statements.
- Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38). The
accounting policy for the amortisation of acquired in-force business arising on investment contracts without DPF has been
updated as a result of the application of these amendments. This change has been applied prospectively from 1 January 2016.
See note G7 for further details.
- Disclosure initiative (Amendments to IAS 1). The adoption of these amendments had no impact on the disclosures or
amount recognised in the consolidated financial statements.
A5. New accounting pronouncements not yet effective
The IASB has issued the following new or amended standards and interpretations which apply from the dates shown. The Group
has decided not to early adopt any of these standards, interpretations or amendments where this is permitted.
- Disclosure initiative (Amendments to IAS 7) (2017). The amendments require disclosures that enable users of the
financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising
from cash flow and non-cash changes.
- Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12) (2017).
- IFRS 9 Financial Instruments (2018). 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. The Group expects to continue to value the majority of its financial assets at fair value through
profit or loss on initial recognition, so as to eliminate or reduce any potential accounting mismatch. The Group expects to
take advantage of the temporary exemption granted to insurers in IFRS 4 Insurance Contracts from applying IFRS 9 until 1
January 2021 as a result of meeting the exemption criteria. A number of disclosures will be made as a result of applying
this temporary exemption. The expected impact of applying IFRS 9 remains subject to completion of a detailed review.
- IFRS 15 Revenue from Contracts with Customers (2018). IFRS 15 establishes a single comprehensive framework for
determining whether, how and when revenue is recognised. The standard does not apply to insurance contracts and the
financial instruments within the scope of IAS 39. The Group anticipates that the application of IFRS 15 in 2018 will have
limited impact on the measurement and presentation of amounts reported in the Group's financial statements.
- IFRS 16 Leases (2019). IFRS 16 will replace IAS 17 Leases. The new standard removes the classification of leases as
either operating or finance leases for the lessee, thereby treating all leases as finance leases. This will result in the
recognition of a right-to-use asset and a lease liability for all of the Group's previously classified operating leases.
Short-term leases (less than 12 months) and leases of low-value assets are exempt from the requirements. The Group
anticipates that the application of IFRS 16 in the future will have limited impact on amounts reported in the Group's
financial statements as the Group has a limited number of operating leases (see note I6).
- Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2) (2018).
Where not specifically stated, the impact on the Group of adopting the above standards, amendments and interpretations is
subject to evaluation.
B. Earnings Performance
B1. Segmental analysis
The Group defines and presents operating segments 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 and comprised of
the Phoenix Life and Abbey Life operating segments during the reporting period. No segmental result has been shown for the
Abbey Life segment as the subsidiary was acquired on 30 December 2016.
Segmental performance is evaluated based on profit or loss which, in certain respects, is presented differently from profit
or loss in the consolidated financial statements. Revenues or expenses that are not directly attributable to a particular
segment are allocated between segments where there is a reasonable basis for doing so.
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.
Segmental results include those transfers between business segments which are then eliminated on consolidation.
Predominantly all revenues from external customers are sourced in the UK. No revenue transaction with a single customer
external to the Group amounts to greater than 10% of the Group's revenue.
Predominantly all non-current assets are located in the UK. There are no differences between the measurement of the assets
and liabilities reflected in the primary statements and that reported for the segments.
B1.1 Segmental result
2016
Phoenix Unallocated Group Total
Life £m £m
£m
Net premiums written 924 - 924
Fees 88 - 88
Net investment income 6,357 4 6,361
Gain on transfer of business 52 - 52
Other operating income 20 - 20
Net income 7,441 4 7,445
Net policyholder claims and benefits incurred (5,517) - (5,517)
Amortisation:
Amortisation of acquired in-force business (76) - (76)
Amortisation of other intangibles (14) - (14)
(90) - (90)
Other expenses (1,680) (106) (1,786)
Total expenses (7,287) (106) (7,393)
Profit/(loss) before finance costs and tax 154 (102) 52
Finance costs (56) (66) (122)
Profit/(loss) before tax 98 (168) (70)
Tax attributable to policyholders' returns (58)
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