REG - Phoenix Grp Hldgs - Phoenix Group Holdings - 2016 Annual Results <Origin Href="QuoteRef">PHNX.L</Origin> - Part 17
20/03/2017 07:07
- Part 17: For the preceding part double click ID:nRST8776Zp
Glasgow10 Ordinary shares 100.00%
SPL (Holdings) Limited (investment holding company) Glasgow10 Ordinary shares 100.00%
Alcobendas Entrust Limited (investment company) Wythall1 Ordinary shares 100.00%
Scottish Mutual Pension Funds Investment Limited (trustee company) Glasgow10 Ordinary shares 100.00%
Britannic Group Services Limited (dormant company) Wythall1 Ordinary shares 100.00%
Phoenix Pensions Trustee Services Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl (Covent Garden) Limited (dormant company) Wythall1 Ordinary shares 100.00%
NPI Limited (dormant company) Wythall1 Ordinary shares 100.00%
NPI (Westgate) Limited (dormant company) Wythall1 Ordinary shares 100.00%
NPI (Printworks) Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl (Barwell 2) Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl (Chiswick House) Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl (Printworks) Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl (Stockley Park) Limited (dormant company) Wythall1 Ordinary shares 100.00%
London Life Trustees Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl Trustees Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl Group Secretariat Services Limited (dormant company) Wythall1 Ordinary shares 100.00%
Phoenix Life Pension Trust Limited (dormant company) Wythall1 Ordinary shares 100.00%
Century Trustee Services Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl AL Limited (dormant company) Glasgow10 Ordinary shares 100.00%
Phoenix Pensions Limited (dormant company) Wythall1 Ordinary shares 100.00%
Bradford Insurance Company Limited (dormant company) Wythall1 Ordinary shares 100.00%
Clearfol Investment Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl PLP Limited (dormant company) Wythall1 Ordinary shares 100.00%
SL Liverpool plc (dormant company) Wythall1 Ordinary shares 100.00%
SPL (Holdings 1) Limited (non-trading company) Glasgow10 Ordinary shares 100.00%
Zilmer Limited (dormant company) Wythall1 Ordinary shares 100.00%
Alba Life Trustees Limited (non-trading company) Glasgow10 Ordinary shares 100.00%
Scottish Mutual Customer Care Limited (dormant company) Wythall1 Ordinary shares 100.00%
BA (FURBS) Limited (dormant company) Wythall1 Ordinary shares 100.00%
PG Dormant No. 1 Limited (dormant company) Wythall1 Ordinary shares 100.00%
Phoenix Annuities Limited (dormant company) Wythall1 Ordinary shares 100.00%
Phoenix Pension Scheme (Trustees) Limited Wythall1 Ordinary shares 100.00%
Evergreen Trustee Limited (dormant company) Wythall1 Ordinary shares 100.00%
Corunna Limited (dormant company) Glasgow12 Ordinary shares 100.00%
Pearl ULA Limited (dormant company) Wythall1 Ordinary shares 100.00%
Scottish Mutual Nominees Limited (dormant company) Glasgow12 Ordinary shares 100.00%
National Provident Institution (dormant company) Wythall1 Unlimited without shares N/A
Phoenix & London Assurance Limited (dormant company) Wythall1 Ordinary shares 100.00%
Cityfourinc (dormant company) Wythall1 Ordinary shares 100.00%
Phoenix Life Insurance Services Limited (dormant company) Wythall1 Ordinary shares 100.00%
PG Dormant No 2 Holdings (holding company) Republic of Ireland8 Ordinary shares 100.00%
London Life Limited (non-trading company) Wythall1 Ordinary shares 100.00%
Pearl RLG Limited (dormant company) Wythall1 Ordinary shares 100.00%
The London Life Association Limited (dormant company) Wythall1 Limited by guarantee N/A
Pearl BULA Limited (dormant company) Wythall1 Ordinary shares 100.00%
The Scottish Mutual Assurance Society (dormant company) Glasgow10 Limited by guarantee N/A
The Phoenix Life SCP Institution (dormant company) Glasgow10 Limited by guarantee N/A
Alba LAS Pensions Management Limited (dormant company) Glasgow10 Ordinary shares 100.00%
Pearl (Martineau Phase 2) Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl MG Birmingham Limited (dormant company) Wythall1 Ordinary shares 100.00%
The Pearl Martineau Galleries Limited Partnership (dormant company) Wythall1 Limited Partnership 100.00%
Pearl (Martineau Phase 1) Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl MP Birmingham Limited (dormant company) Wythall1 Ordinary shares 100.00%
The Pearl Martineau Limited Partnership (dormant company) Wythall1 Limited Partnership 100.00%
Pearl (Moor House 1) Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl (Moor House 2) Limited (dormant company) Wythall1 Ordinary shares 100.00%
Pearl (Moor House) Limited (dormant company) Wythall1 Ordinary shares 100.00%
Phoenix ER1 Limited (finance company) Wythall1 Ordinary shares 100.00%
Phoenix ER2 Limited (dormant company) Wythall1 Ordinary shares 100.00%
CH Management Limited (investment company) Bushey13 Ordinary shares 100.00%
Henderson Multi-Manager Investment Fund - Henderson Diversified Growth UK Fund London14 OEIC, sub fund 79.85%
Henderson Institutional Credit Fund London14 Authorised unit trust 99.96%
Henderson Global Funds - Henderson Institutional Overseas Bond Fund London14 OEIC, sub fund 98.40%
Henderson Institutional Mainstream UK Equity Trust London14 Authorised unit trust 100.00%
Henderson Strategic Investment Funds - Henderson Institutional European Index Opportunities Fund London14 OEIC, sub fund 77.93%
Henderson Strategic Investment Funds - Henderson Institutional Japan Index Opportunities Fund London14 OEIC, sub fund 66.21%
Henderson Strategic Investment Funds - Henderson Institutional North American Index Opportunities Fund London14 OEIC, sub fund 85.20%
Henderson Strategic Investment Funds - Henderson Institutional Asia Pacific Ex Japan Index Opportunities Fund London14 OEIC, sub fund 72.32%
Henderson Institutional UK Equity Tracker Trust London14 Authorised unit trust 100.00%
Henderson Institutional Short Duration Bond Fund London14 Authorised unit trust 80.20%
PUTM Bothwell Floating Rate ABS Fund Wythall1 Authorised unit trust 100.00%
PUTM Bothwell Global Credit Fund Wythall1 Authorised unit trust 99.99%
PUTM Bothwell Fixed ABS Sterling Hedged Fund Wythall1 Authorised unit trust 100.00%
PUTM Bothwell Asia Pacific (Excluding Japan) Fund Wythall1 Authorised unit trust 99.27%
PUTM Bothwell Emerging Market Debt Unconstrained Fund Wythall1 Authorised unit trust 100.00%
PUTM Bothwell Emerging Markets Equity Fund Wythall1 Authorised unit trust 99.88%
PUTM Bothwell European Credit Fund Wythall1 Authorised unit trust 85.51%
PUTM Bothwell Europe Fund Wythall1 Authorised unit trust 98.23%
PUTM Bothwell Credit Financial Sterling Hedged Fund Wythall1 Authorised unit trust 100.00%
PUTM Bothwell Global Bond Fund Wythall1 Authorised unit trust 99.73%
PUTM Bothwell Global Equity Fund Wythall1 Authorised unit trust 97.46%
PUTM Bothwell Index-Linked Sterling Hedged Fund Wythall1 Authorised unit trust 100.00%
PUTM Bothwell Japan Tracker Fund Wythall1 Authorised unit trust 99.45%
PUTM Bothwell Long Gilt Sterling Hedged Fund Wythall1 Authorised unit trust 100.00%
PUTM Bothwell North America Fund Wythall1 Authorised unit trust 99.27%
PUTM Bothwell Credit Non Financial Sterling Hedged Fund Wythall1 Authorised unit trust 100.00%
PUTM Bothwell UK Equity Smaller Companies Fund Wythall1 Authorised unit trust 99.65%
PUTM Bothwell Sterling Government Bond Fund Wythall1 Authorised unit trust 98.88%
PUTM Bothwell Euro Sovereign Fund Wythall1 Authorised unit trust 100.00%
PUTM Bothwell Sterling Credit Fund Wythall1 Authorised unit trust 97.66%
PUTM Bothwell Tactical Asset Allocation Fund Wythall1 Authorised unit trust 100.00%
PUTM Bothwell UK Equity 350 Fund Wythall1 Authorised unit trust 99.52%
PUTM Bothwell UK Equity Income Fund Wythall1 Authorised unit trust 100.00%
PUTM Bothwell Sub-Sovereign Bond Fund Wythall1 Authorised unit trust 100.00%
PUTM UK All-Share Index Unit Trust Wythall1 Authorised unit trust 99.97%
PUTM Cautious Unit Trust Wythall1 Authorised unit trust 99.04%
PUTM European Unit Trust Wythall1 Authorised unit trust 99.49%
PUTM Far Eastern Unit Trust Wythall1 Authorised unit trust 99.74%
PUTM International Growth Unit Trust Wythall1 Authorised unit trust 99.47%
PUTM North American Unit Trust Wythall1 Authorised unit trust 99.07%
PUTM Opportunity Unit Trust Wythall1 Authorised unit trust 100.00%
PUTM UK Stock Market Fund (Series 3) Wythall1 Authorised unit trust 100.00%
PUTM UK Stock Market Fund Wythall1 Authorised unit trust 100.00%
PUTM UK Equity Unit Trust Wythall1 Authorised unit trust 99.85%
PUTM Growth Unit Trust Wythall1 Authorised unit trust 100.00%
Ignis Liquidity Fund plc - Sterling Short Duration Cash Fund Republic of Ireland8 OEIC, sub fund 94.74%
Ignis Strategic Solutions Funds plc - Fundamental Strategies Fund Republic of Ireland8 OEIC, sub fund 100.00%
Ignis Strategic Solutions Funds plc - Systematic Strategies Fund Republic of Ireland8 OEIC, sub fund 100.00%
Ignis Private Equity Fund LP Cayman Islands15 Limited Partnership 100.00%
Ignis Strategic Credit Fund LP Cayman Islands15 Limited Partnership 100.00%
BlackRock LBG DC 'A' Fund London16 Authorised unit trust 96.30%
AB SICAV I - Global Factor Portfolio (SF1) Luxembourg17 OEIC, sub fund 52.90%
AXA Fixed Interest Investment ICVC - Sterling Strategic Bond Fund London18 OEIC, sub fund 57.80%
Aberdeen Financial Equity Fund A Inc London19 OEIC, sub fund 85.61%
Aberdeen Capital Trust London19 Authorised unit trust 99.48%
Associates:
UK Commercial Property Trust Limited (property investment company) Guernsey20 Ordinary shares 47.87%
UK Commercial Property Estates Holdings Limited (property investment company) Guernsey20 Ordinary shares 47.87%
UK Commercial Property Holdings Limited (property investment company) Guernsey20 Ordinary shares 47.87%
UK Commercial Property Estates Limited (property investment company) Guernsey20 Ordinary shares 47.87%
UK Commercial Property Nominee Limited (property investment company) Guernsey20 Ordinary shares 47.87%
UK Commercial Property GP Limited Guernsey20 Ordinary shares 47.87%
UKCPT Limited Partnership Guernsey20 Limited Partnership 47.87%
UK Commercial Property Finance Holdings Limited Guernsey20 Limited Partnership 47.87%
Brixton Radlett Property Limited UK21 Limited Partnership 47.87%
Castle Hill Asset Management LLC USA9 Ordinary shares 40.00%
Significant holdings:
Henderson Global Funds - World Select Fund London14 OEIC, sub fund 29.66%
Henderson Global Care Funds - Henderson Institutional Global Care Managed Fund London14 OEIC, sub fund 62.79%
Henderson Institutional High Alpha UK Equity Fund London14 Authorised unit trust 34.72%
Henderson UK & Europe Funds - Henderson Institutional UK Gilt Fund London14 OEIC, sub fund 69.89%
Henderson Institutional UK Index Opportunities Fund London14 Authorised unit trust 73.19%
Ignis Liquidity Fund plc - Sterling Liquidity Fund Dublin8 OEIC, sub fund 45.59%
Standard Life UK Real Estate Income Feeder Fund Edinburgh22 OEIC, sub fund 37.57%
1 Wythall Green Way, Wythall, Birmingham, B47 6WG
2 Marsh Management Services (Dublin) Limited, DS-28 Adelaide Road, Dublin 2, Republic of Ireland
3 The shares of this subsidiary undertaking are held by a trust. The Group has assessed that it exercises overall
control in respect of this subsidiary undertaking
4 These subsidiary undertakings are directly owned by Phoenix Group Holdings
5 The Argus Building, 12 Wesley Street, Hamilton, Bermuda
6 Arthur Cox Building, Earlsfort Terrace, Dublin 2, Dublin, Republic of Ireland
7 Juxon House, 100 St Paul's Churchyard, London, EC4M 8BU
8 25-28 North Wall Quay, IFSC, Dublin 1, Republic of Ireland
9 c/o Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, USA
10 301 St Vincent Street, Glasgow, Strathclyde, G2 5HN
11 32 Commercial Street, St Helier, Jersey, JE2 3RU
12 50 Bothwell Street, Glasgow, G2 6HR
13 19 Middle Furlong, Bushey, England, WD23 3SZ
14 201 Bishopsgate, London, EC2M 3AE
15 Ugland House, Grand Cayman, Cayman Islands, KY1-1104
16 12 Throgmorton Avenue, London, EC2N 2DL
17 2-4, Rue Eugène Ruppert, Luxembourg, L-2453
18 7 Newgate Street, London, EC1A 7NX
19 1 Bread Street, London, EC4M 9HH
20 Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 3QL
21 100 Barbirolli Square, Manchester, M2 3AB
22 1 George Street, Edinburgh, EH2 2LL
The following joint venture and subsidiary were fully disposed of during the period. The subsidiary was deconsolidated from
the date of disposal:
- Pearl Breakfast Unit Trust (Jersey Property Unit Trust) (Joint Venture)
- Castle Hill Enhanced Floating Rate Opportunities Limited
The following subsidiaries were reclassified as significant holdings due to the loss of effective control by the Group
during the period:
- Henderson Institutional UK Enhanced Equity Trust
- Ignis Liquidity Fund plc - Sterling Liquidity Fund
The deconsolidation of the Ignis Liquidity Fund plc - Sterling Liquidity Fund has had a significant impact on the following
line items in the statement of consolidated financial position:
- increase in the value of collective investment schemes;
- decrease in the value of net asset value attributable to unitholders; and
- decrease in value of fixed and variable rate income securities.
The following UKCPT companies were reclassified as associates due to a loss of effective control (see note H3) in the
period:
- UK Commercial Property Trust Limited
- UK Commercial Property Estates Holdings Limited
- UK Commercial Property Holdings Limited
- UK Commercial Property Estates Limited
- UK Commercial Property Nominee Limited
- UK Commercial Property GP Limited
- UKCPT Limited Partnership
- UK Commercial Property Finance Holdings Limited
- Brixton Radlett Property Limited
The Group no longer has significant holdings in the following undertakings:
- Ignis Liquidity Fund plc - Euro Liquidity Fund
- Henderson Global Funds - Institutional Emerging Markets Fund
Details of subsidiaries acquired during the period are included in note H2.
I. Other notes
I1. ASSETS AND LIABILITIES held for sale
The balances as at 31 December 2015 relate to the Part VII transfer of a portfolio of annuity liabilities to ReAssure
Limited and the agreement to sell the Group's interest in an investment property joint venture held by Pearl Breakfast Unit
Trust.
2016 2015
£m £m
Assets classified as held for sale:
Reinsurers' share of insurance contract liabilities - 1,521
Investment in joint venture - 149
- 1,670
Liabilities classified as held for sale:
Liabilities under insurance contracts - 1,587
- 1,587
I1.1 Annuity liabilities transfer
On 31 July 2014, the Group entered into a reinsurance agreement, effective from 1 January 2014 to reinsure certain
portfolios of the Group's annuity liabilities to ReAssure Life Limited (formerly Guardian Assurance Limited) in exchange
for the transfer of financial assets of £1.7 billion. The annuity in-payment liabilities were held in the Group's
with-profit funds. On 30 December 2016, the reinsurance agreement was replaced by a formal scheme under Part VII of the
Financial Services and Market Act 2000 to transfer the annuity liabilities to ReAssure Limited, a fellow subsidiary of
ReAssure Life Limited. Assets and liabilities classified as held for sale in 2015 were extinguished at the time of
transfer. The carrying value of liabilities and assets transferred and the resulting gain are set out below:
£m
Liabilities
Liabilities under insurance contracts 1,652
Assets
Reinsurers' share of insurance contract liabilities 1,582
Net liabilities transferred 70
Consideration (18)
Gain on transfer of business 52
As the portfolio of annuities was previously held in unsupported with-profit funds, the gain is offset by an equivalent
increase in policyholder liabilities and there is no net impact on the Group's result for the period.
At 31 December 2015, under the terms of this reinsurance agreement, ReAssure Life Limited held assets in a collateral
account over which the Group had a fixed charge as disclosed in note F3.2.
I1.2 Sale of Pearl Breakfast Unit Trust
At 31 December 2015 the Group invested in an investment property joint venture which was held by the Pearl Breakfast Unit
Trust. In 2015 the Group committed to selling the Pearl Breakfast Unit Trust (and consequently its investment in the joint
venture) and on 25 February 2016 the units in the Pearl Breakfast Unit Trust were sold at their fair value to Tesco
Property Holdings (No.2) Limited and Tesco Property Holdings Limited. As part of the sale agreement Tesco plc also
purchased the Group's investment in Tesco Property Partner (GP) Limited. No gain or loss arose on this disposal.
I2. Share-based payment
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 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's 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.
I2.1 Share-based payment expense
The expense recognised for employee services receivable during the year is as follows:
2016 2015
£m £m
Expense arising from equity-settled share-based payment transactions 7 4
I2.2 Share-based payment schemes in issue
Long-Term Incentive Plan ('LTIP')
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 2013, 2014 and 2015 LTIP awards are subject to performance
conditions tied to the Company's financial performance over a three-year period in respect of growth in MCEV (up to 31
December 2015), growth in Own Funds (from 1 January 2016), cumulative cash generation and total shareholder return ('TSR').
The 2016 LTIP award is subject to performance conditions tied to the Company's performance in respect of cumulative cash
generation and TSR.
For all LTIP awards made from 2015 onwards, a holding period applies so that any LTIP awards 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.
2016 LTIP awards were granted on 30 March 2016 and 2 June 2016. The number of shares for all outstanding LTIP awards has
been increased to take into account the impact of the Group's rights issue (see note D1). This adjustment has been based on
the Theoretical Ex-Rights Price. The 2013 LTIP awards vested during the year. The 2014 award will vest on 26 March 2017,
the 2015 award will vest on 28 September 2018 and the 2016 awards will vest on 30 March 2019 and 2 June 2019.
The fair value of these awards is estimated at the share price at the grant date, taking into account the terms and
conditions upon which the instruments were granted. The fair value is adjusted in respect of the TSR performance condition
which is deemed to be a 'market condition'.
Sharesave scheme
The sharesave scheme allows participating employees to save up to £250 each month over a period of either three or five
years. This amount was increased to £500 each month with respect to the sharesave schemes from 2014 onwards.
Under the sharesave arrangement, participants remaining in the Group's 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 discount to the share price on
the date of grant. Employees leaving the Group for certain reasons are able to use their savings to purchase shares if they
leave less than six months before the end of their three or five year periods.
The fair value of the awards 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 2011 and 2012 sharesave awards were increased during 2013, and the exercise prices updated, as a result of the equity
raising on 21 February 2013. All sharesave awards were increased in November 2016 following the Group's rights issue (see
note D1). The exercise price of these awards was also amended as a result of this issue. The 2016 sharesave awards were
granted on 25 April 2016.
The following information was relevant in the determination of the fair value of the 2012 to 2016 sharesave awards in the
year:
2016 2015 2014 2013 2012
sharesave sharesave sharesave sharesave sharesave
Share price (p) 889.0 843.0 674.0 630.0 524.5
Exercise price (£) (revised) 6.39 6.29 5.13 4.76 3.96
Expected life (years) 3.25 and 3.25 and 5.25 3.25 and 5.25 3.25 and 5.25 3.25 and 5.25
5.25
Risk-free rate (%) - based on UK government gilts commensurate with the expected term of the award 0.6 (for 3.25 year scheme) and 1.0 (for 5.25 year scheme) 0.8 (for 3.25 year scheme) and 1.2 (for 5.25 year scheme) 1.3 (for 3.25 year scheme) and 1.9 (for 5.25 year scheme) 0.4 (for 3.25 year scheme) and 0.8 (for 5.25 year scheme) 0.6 (for 3.25 year scheme) and 1.1 (for 5.25 year scheme)
Expected volatility (%) based on the Company's share price volatility to date 30.0 30.0 30.0 30.0 30.0
Dividend yield (%) 6.0 6.3 7.9 8.5 8.0
Deferred bonus share scheme ('DBSS')
Each year, part of the annual incentive for certain executives is deferred into Phoenix Group Holdings' shares. This grant
of shares is conditional on the employee remaining in employment with the Group for a period of three years. For DBSS
awards made in 2015 and for those to be made in subsequent years, the three year deferral period will run to the dealing
day following the three year anniversary of the announcement of the annual results. Dividends will accrue for DBSS awards
over the three year deferral period. The 2016 DBSS was granted on 30 March 2016 and 2 June 2016 and is expected to vest on
24 March 2019. The number of shares for all outstanding DBSS awards has been increased to take into account the impact of
the Group's rights issue (see note D1). This adjustment has been based on the Theoretical Ex-Rights Price. The 2013 DBSS
awards vested during the year. The 2014 awards are expected to vest on 28 March 2017 and the 2015 awards are expected to
vest on 19 March 2018.
The fair value of these awards is estimated at the share price at the grant date, taking into account the terms and
conditions upon which the options were granted.
I2.3 Movements in the year
The following tables illustrate the number of, and movements in, share options during the year:
Number of share options 2016
LTIP Sharesave DBSS
Outstanding at the beginning of the year 2,694,173 832,680 529,084
Granted during the year1 1,438,958 388,143 279,239
Forfeited during the year - (8,533) -
Cancelled during the year - (15,456) -
Exercised during the year (663,710) (159,678) (175,205)
Outstanding at the end of the year 3,469,421 1,037,156 633,118
1 Includes 861,845 share options granted following the Group's rights issue
Number of share options 2015
LTIP Sharesave DBSS
Outstanding at the beginning of the year 3,153,621 987,518 482,249
Granted during the year 867,817 253,757 171,441
Forfeited during the year (248,865) (43,738) (28,732)
Cancelled during the year - (21,585) -
Exercised during the year (993,902) (343,272) (95,874)
Waived during the year (84,498) - -
Outstanding at the end of the year 2,694,173 832,680 529,084
The weighted average fair value of options granted during the year was £6.11 (2015: £6.93).
The weighted average share price at the date of exercise for the rewards exercised is £7.69 (2015: £8.36).
The weighted average remaining contractual life for the rewards outstanding as at 31 December 2016 is 1.3 years (2015: 1.6
years).
I3. Cash flows from operating activities
The following analysis gives further detail behind the 'cash utilised by operations' figure in the statement of
consolidated cash flows.
2016 2015
£m £m
(Loss)/profit for the period before tax (70) 152
Non-cash movements in profit for the year before tax
Fair value (gains)/losses on:
Investment property (26) (140)
Financial assets (4,548) 1,125
Change in fair value of borrowings 34 48
Amortisation and impairment of intangible assets 90 163
Change in present value of future profits 11 6
Change in unallocated surplus (4) (84)
Share-based payment charge 7 4
Interest expense on borrowings 122 136
Net interest (income) on Group defined benefit pension scheme asset/liability (21) (17)
Other cost of pension schemes 5 3
(Increase)/decrease in investment assets (650) 2,468
Decrease/(increase) in reinsurance assets 345 (1,134)
Increase/(decrease) in insurance contract and investment contract liabilities 2,489 (3,487)
Increase/(decrease) in deposits received from reinsurers 14 (30)
Increase/(decrease) in obligation for repayment of collateral received 898 (229)
Net (increase)/decrease in working capital (541) 440
Cash utilised by operations (1,845) (576)
I4. Capital management
This note sets out the Group's approach to managing capital, provides a description of what the Group manages as capital
and explains the regulatory requirements and capital policies of the Group and its life companies.
Risk and capital management objectives
The risk management objectives and policies of the Group are based on the requirement to protect the Group's regulatory
capital position, thereby safeguarding policyholders' 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, fixed
and variable rate income 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 risk management disclosures in the IFRS consolidated financial statements set out the major risks that the Group
businesses are exposed to and describe the Group's approach to managing these. The section on financial risk is included in
note E6, the section on insurance risk is included in note F4 and the sections on risk and capital management objectives
and other risks are included below. The Group's risk management framework is described in the Risk Management section on
pages 34 to 39 of the Annual Report and Accounts.
Other risks
Customer risk
Customer risk is the risk of reductions in earnings and/or value, through inappropriate or poor customer treatment
(including poor advice).
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.
Capital management framework
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