REG - Quilter PLC - Quilter plc - Full Year 2024 Results - Part 2
05/03/2025 07:15
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RNS Number : 3586Z Quilter PLC 05 March 2025
Statement of Directors' responsibilities
in respect of the preliminary announcement of the Annual Report and the
financial statements
The Directors confirm that, to the best of their knowledge:
· The results in this preliminary announcement have been taken from
the Group's 2024 Annual Report, which will be available on the Company's
website on 20 March 2025; and
· The financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Group
Signed on behalf of the Board
Steven
Levin
Mark Satchel
Chief Executive Officer Chief
Financial Officer
5 March 2025
Consolidated statement of comprehensive income
For the year ended 31 December 2024
£m
Year ended Year ended
Notes 31 December 31 December 2023
2024
Income
Fee income and other income from service activities 544 542
Investment return 4,877 4,075
Other income 28 9
Total income 5,449 4,626
Expenses
Change in investment contract liabilities 15 (4,065) (3,313)
Fee and commission expenses and other acquisition costs (49) (49)
Change in third-party interests in consolidated funds (587) (579)
Other operating and administrative expenses (691) (575)
Finance costs (21) (22)
Total expenses (5,413) (4,538)
Impairment of investments in associates (1) -
Profit before tax 35 88
Income tax expense attributable to policyholder returns 7(a) (95) (76)
(Loss)/profit before tax attributable to shareholder returns (60) 12
Income tax expense 7(a) (69) (46)
Less: income tax expense attributable to policyholder returns 95 76
Income tax credit attributable to shareholder returns 7(a) 26 30
(Loss)/profit after tax attributable to the owners of the Company (34) 42
Other comprehensive expense
Exchange losses on translation of foreign operations (1) -
Total comprehensive income (35) 42
Earnings per Ordinary Share
Basic earnings per Ordinary Share (pence) 8 (2.5) 3.1
Diluted earnings per Ordinary Share (pence) 8 (2.5) 3.1
All income and expenses relate to continuing operations.
Consolidated statement of financial position
At 31 December 2024
£m
Notes 31 December 31 December
2024 2023
Assets
Goodwill and intangible assets 9 339 372
Property, plant and equipment 91 91
Investment property 9 10
Investments in associates 16 2
Contract costs 24 16
Loans and advances 56 38
Financial investments 10 59,360 50,329
Deferred tax assets 115 91
Current tax receivable 45 33
Trade, other receivables and other assets 418 447
Derivative assets 26 57
Cash and cash equivalents 13 1,949 1,859
Total assets 62,448 53,345
Equity and liabilities
Equity
Ordinary Share capital 14 115 115
Ordinary Share premium reserve 58 58
Capital redemption reserve 346 346
Share-based payments reserve 42 42
Other reserves (1) -
Retained earnings 863 958
Total equity 1,423 1,519
Liabilities
Investment contract liabilities 15 51,758 43,396
Third-party interests in consolidated funds 8,225 7,444
Provisions 16 111 46
Deferred tax liabilities 96 64
Current tax payable 1 2
Borrowings and lease liabilities 275 279
Trade, other payables and other liabilities 506 570
Derivative liabilities 53 25
Total liabilities 61,025 51,826
Total equity and liabilities 62,448 53,345
Approved by the Board of Directors and authorised for issue on 5 March 2025
and signed on its behalf by:
Steven Levin Mark Satchel
Chief Executive Officer Chief Financial Officer
Consolidated statement of changes in equity
For the year ended 31 December 2024
£m
Year ended 31 December 2024 Ordinary Ordinary Share Capital redemption reserve Share-based payments reserve Other reserves Retained earnings Total
Share premium reserve share-
capital holders'
equity
Balance at 1 January 2024 115 58 346 42 - 958 1,519
Loss after tax attributable to the owners of the Company - - - - - (34) (34)
Other comprehensive expense - - - - (1) - (1)
Total comprehensive income - - - - (1) (34) (35)
Dividends - - - - - (73) (73)
Exchange rate movements (ZAR/GBP)(1) - - - - - (1) (1)
Movement in own shares - - - - - (6) (6)
Equity-settled share-based payment transactions - - - (4) - 18 14
Aggregate tax effects of items recognised directly in equity - - - 4 - 1 5
Total transactions with the owners of the Company - - - - - (61) (61)
Balance at 31 December 2024 115 58 346 42 (1) 863 1,423
£m
Year ended 31 December 2023 Ordinary Ordinary Share Capital redemption reserve Share-based payments reserve Other reserves Retained earnings Total
Share premium reserve share-
capital holders'
equity
Balance at 1 January 2023 115 58 346 41 (1) 989 1,548
Total comprehensive income(2) - - - - - 42 42
Dividends - - - - - (65) (65)
Exchange rate movements (ZAR/GBP)(1) - - - - - 2 2
Acquisition of own shares(3) - - - - - (14) (14)
Movement in own shares - - - - - (13) (13)
Equity-settled share-based payment transactions - - - - - 18 18
Aggregate tax effects of items recognised directly in equity - - - 1 - - 1
Total transactions with the owners of the Company - - - 1 - (72) (71)
Transfer to retained earnings - - - - 1 (1) -
Balance at 31 December 2023 115 58 346 42 - 958 1,519
(1)For shares registered on the Johannesburg Stock Exchange, the amounts of
proposed dividends are set in South African Rand on the relevant Market
Announcement date which is prior to the date of payment. The impact of
exchange rate movements between these dates is recognised directly in equity.
The Group held cash in South African Rand equal to the expected cash outflows
and therefore was economically hedged for these payments.
(2)The total comprehensive income in 2023 was equal to profit after tax
attributable to the owners of the Company.
(3)In November 2023, as a result of an Odd-lot Offer, Quilter plc purchased
15,798,423 of its own Ordinary Shares for £14 million. Those shares were
gifted to the Employee Benefit Trust and subsequently held as treasury shares.
Consolidated statement of cash flows
For the year ended 31 December 2024
The cash flows presented in this statement cover all the Group's activities
and include flows from both policyholder and shareholder activities. All cash
and cash equivalents are available for general use by the Group for the
purposes of the disclosures required under IAS 7 Statement of Cash Flows
except for cash and cash equivalents in consolidated funds (as shown in note
13).
£m
Notes Year ended Year ended
31 December 31 December
2024 2023
Cash flows from operating activities
Cash flows from operating activities 4,654 2,137
Taxation paid (69) (26)
Total net cash flows from operating activities 13(b) 4,585 2,111
Cash flows from investing activities
Net purchases and sales of financial investments (4,360) (1,908)
Purchase of property, plant and equipment (8) (1)
Proceeds from sale of property, plant and equipment held for sale - 1
Acquisition of subsidiary (6) -
Acquisition of shares in associates (14) (1)
Total net cash flows from investing activities (4,388) (1,909)
Cash flows from financing activities
Dividends paid to the owners of the Company (73) (65)
Exchange rate movements passed to shareholders(1) (1) 2
Finance costs on borrowings(2) (18) (18)
Payment of interest on lease liabilities(2) (2) (3)
Payment of principal of lease liabilities (8) (9)
Quilter plc shares acquired under the Odd-lot Offer(3) - (14)
Quilter plc shares acquired for use within the Group's employee share scheme (6) (15)
Proceeds from the issue of subordinated debt - 199
Subordinated debt repaid - (200)
Total net cash flows from financing activities 13(c) (108) (123)
Net increase in cash and cash equivalents 89 79
Cash and cash equivalents at the beginning of the year 1,859 1,782
Effect of exchange rate changes on cash and cash equivalents 1 (2)
Cash and cash equivalents at the end of the year 13(a) 1,949 1,859
(1)The exchange rate movements passed to shareholders relate to foreign
exchange gains or losses that have arisen on dividend payments to JSE
shareholders. Further details are included within the consolidated statement
of changes in equity.
(2)The total interest paid during the year includes finance costs on
borrowings and payment of interest on lease liabilities.
(3)Further information relating to the Odd-lot Offer is included within the
consolidated statement of changes in equity.
( )
Notes to the condensed consolidated financial statements
For the year ended 31 December 2024
General information
Quilter plc (the "Company"), a public limited company incorporated in England
and Wales and domiciled in the United Kingdom ("UK"), together with its
subsidiaries (collectively, the "Group") offers investment and wealth
management services, long-term savings and financial advice primarily in the
UK. Quilter plc is listed with a primary listing on the London Stock Exchange
and a secondary listing on the Johannesburg Stock Exchange ("JSE").
The Company's registration number is 06404270. The address of the registered
office is Senator House, 85 Queen Victoria Street, London, EC4V 4AB.
1: Basis of preparation
The results in this preliminary announcement have been taken from the Group's
2024 Annual report which will be available on the Company's website on 20
March 2025. These condensed consolidated financial statements of Quilter plc
for the year ended 31 December 2024 have been prepared in accordance with
UK-adopted International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards.
These condensed consolidated financial statements have been prepared on a
historical cost basis, except for the revaluation of certain financial
instruments which are held at fair value, and are presented in pounds
sterling, which is the currency of the primary economic environment in which
the Group operates.
Going concern
The Directors have considered the resilience of the Group, its current
financial position, the principal risks facing the business and the
effectiveness of any mitigating strategies which are or could be applied. This
included an assessment of capital and liquidity over a three-year planning
period covering 2025 to 2027. This assessment incorporated a number of stress
tests covering a broad range of scenarios, including economic and market
shocks of up to 40% falls in equity markets, mass lapse events, new business
growth scenarios and severe business interruption, equivalent to 1‑in‑50
and 1‑in‑200 year events. The assessment also considered the potential
implications of the Skilled Person Review which could include the potential
payment of remediation and associated administrative costs (see note 16). As
part of the going concern assessment, the Group took into consideration the
current position of the UK and global economy. The Group also considered how
climate-related risks and opportunities affect operations, investment
activities, advice and distribution, and their impact on specific projects and
initiatives, estimates and judgements. Based on the assessment, the Directors
believe that both the Group and Quilter plc have sufficient financial
resources to continue in business for a period of at least 12 months from the
date of approval of these financial statements and continue to adopt the going
concern basis in preparing the Group and Parent Company financial statements.
Further information is contained in the viability statement and going concern
section of the Annual Report.
Liquidity analysis of the statement of financial position
The Group's statement of financial position is in order of liquidity. For each
asset and liability line item, those amounts expected to be recovered or
settled more than 12 months after the reporting date are disclosed separately
in the notes to the consolidated financial statements.
Critical accounting estimates and judgements
The preparation of financial statements requires management to exercise
judgement in applying the Group's material accounting policies and make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements. The Board Audit Committee
reviews these areas of judgement and estimates, and the appropriateness of
material accounting policies adopted in the preparation of these financial
statements.
Critical accounting judgements
The Group's critical accounting judgements are those made when applying its
material accounting policies and that have the greatest effect on the net
profit and net assets recognised in the Group's financial statements.
Ongoing Advice Review
In the preliminary results announcement on 6 March 2024, the Group committed
to undertake a review of historical data and practices across the Appointed
Representative firms in the Quilter Financial Planning network in relation to
the provision of ongoing advice. Following discussion with the FCA, a Skilled
Person was appointed in June 2024 to assess and provide a view to the FCA on
whether the delivery of ongoing advice services by Appointed Representative
firms in the Quilter Financial Planning network has been compliant with
applicable regulatory requirements during the period from 1 January 2017 to 31
December 2023. Although the Skilled Person Review has not yet completed, it is
well advanced, and the final report is expected to be submitted to the FCA in
the second quarter of 2025. Subject to further discussions with the FCA that
will occur following the Skilled Person Review, it is currently expected that
some form of customer remediation will likely be required. Based on the
results of the Skilled Person Review to date together with other evidence
available, including consideration of the announcement made by the FCA on 24
February 2025 titled "Ongoing financial advice services", the Group has
recognised a provision for a reasonable estimate of the costs of a potential
customer remediation exercise, including both redress and administrative
costs, based upon current assumptions as to a plausible customer remediation
approach that may be followed. See notes 16 and 17 for further details of the
provision and contingent liability (including assumptions made and
uncertainties arising). The significant judgements are:
· the precise period to be included within the scope of a potential
remediation exercise; and
· the proportion of customers, determined by reference to cohorts
shown by the Skilled Person's sample to be at the highest likelihood of having
not received the expected level of service from their adviser, to be involved
within the scope of a potential remediation exercise.
Critical accounting estimates
The Group's critical accounting estimates involve the most complex or
subjective assessments and assumptions, which have a significant risk of
resulting in material adjustment to the net carrying amounts of assets and
liabilities until those amounts are settled. Management uses its knowledge of
current facts and circumstances and applies estimation and assumption setting
techniques, that are aligned with relevant actuarial and accounting standards
and guidance, to make predictions about future actions and events. Actual
results may differ materially from those estimates.
Ongoing Advice Review
As set out above, based on the results to date of the Skilled Person Review
together with other evidence available, the Group considers that a customer
remediation exercise in relation to ongoing advice will likely be required to
consider cases where the customer has been charged for ongoing advice
services, and the adviser is unable to satisfactorily evidence the provision
of those services. The Group currently expects to finalise the Skilled Person
Review and undertake discussions with the FCA during the second quarter of
2025, to consider the form and methodology of this potential customer
remediation exercise. Any such remediation exercise is currently expected to
involve the population of customers who are at the highest likelihood of
having not received the expected level of service from their adviser, based
upon the results of the Skilled Person Review. Given that a customer
remediation exercise will likely be required, the Group has considered the
estimated costs. This includes estimates for refunds of fees previously
charged and interest payable and the cost of the remediation exercise. While
there are a number of outstanding contingencies and variables the Group has
determined that a reasonable estimate can be made based on the information
currently available and, as a result has recognised a provision (see notes 16
and 17). Following the initial draft results of the statistically reliable
representative cohort of customers undertaken by the Skilled Person, an
initial quantification of the potential financial impact of the approach to be
followed can be reasonably estimated. In determining this provision,
consideration has been given to a wide range of assumptions, drawing on data
from the Skilled Person's results to date, previous experience of past
business reviews, and the views of external specialists familiar with similar
remediation exercises. The significant estimates in the calculation of the
provision are:
· extrapolation of the proportion of the Skilled Person's
statistically significant sample where satisfactory evidence of servicing was
not found, to the entire population of ongoing advice customers;
· response rate for customers invited to engage in the potential
remediation exercise; and
· administrative costs to perform a potential remediation exercise,
including costs associated with customer engagement and case reviews, which
have been determined based upon experience from previous past business reviews
performed by the Group, and assumptions on the number of customers who may be
subject to the review process.
Measurement of deferred tax
The annual business planning process estimates future taxable profits based on
estimated levels of assets under management and administration ("AuMA"), which
are subject to a large number of factors including global stock market
movements, related movements in foreign exchange rates, net client cash flows
and estimates of expenses and other charges. The Business Plan, adjusted for
known and estimated tax adjusting items, is used to determine the extent to
which deferred tax assets are recognised. The Group assesses the
recoverability of shareholder deferred tax assets based on estimated taxable
profits over a five-year horizon and assesses policyholder deferred tax assets
based on estimated investment growth over the medium term. To the extent that
profit estimates extend beyond the normal three-year planning cycle, average
profits over the final two years of the plan are used. This approach is
considered reasonable based on historical profitability. Future profit
projections show the majority of deferred tax assets being utilised over the
next three years. Management has reassessed the sensitivity of the
recoverability of deferred tax assets based on the latest forecast cash flows.
Other principal estimates
The Group's assessment of goodwill and intangible assets for impairment uses
the latest cash flow forecasts from the Group's three-year Business Plan.
These forecasts include estimates relating to equity market levels and growth
in AuMA in future periods, together with levels of new business growth, net
client cash flows, revenue margins, and future expenses and discount rates
(see note 9). These forecasts take account of climate-‑related risks and
other responsible business considerations. Management does not consider that
the use of these estimates has a significant risk of causing a material
adjustment to the carrying amount of the assets within the next financial
year.
2: New standards, amendments to standards, and interpretations adopted by the
Group
The amendments to accounting standards in the table below became applicable
for the current reporting period, with no material impact on the Group's
results, financial position or disclosures or on those of the Parent Company.
Adopted by the Group from Amendments to standards
1 January 2024 Amendments to IAS 1 Presentation of Financial Statements - classification of
liabilities as current and non-current
1 January 2024 Amendments to IAS 1 Presentation of Financial Statements - non-current
liabilities with covenants
1 January 2024 Amendments to IFRS 16 Leases - Sale and leaseback transactions
1 January 2024 Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures - Supplier Finance Arrangements
3: Significant changes in the year
Ongoing Advice Review
In the preliminary results announcement on 6 March 2024, the Group committed
to undertake a review of historical data and practices across the Appointed
Representative firms in the Quilter Financial Planning network in relation to
the provision of ongoing advice. Following discussion with the FCA, a Skilled
Person was appointed in June 2024 to assess and provide a view to the FCA on
whether the delivery of ongoing advice services by Appointed Representative
firms in the Quilter Financial Planning network has been compliant with
applicable regulatory requirements during the period from 1 January 2017 to 31
December 2023. Although the Skilled Person Review has not yet completed, it is
relatively well progressed. Subject to further engagement with the FCA that
will occur following the Skilled Person Review, it is currently expected that
some form of customer remediation will likely be required. Based on the
results of the Skilled Person Review to date together with other evidence
available, the Group has recognised a provision for a reasonable estimate of
the costs of such a customer remediation exercise, including both redress and
administrative costs, based upon current assumptions as to a plausible
customer remediation approach that may be followed. See notes 16 and 17 for
further details of the provision and contingent liability.
Acquisitions
The Group made two acquisitions in the year, 100% of the share capital of
NuWealth Limited and 35% of the share capital of Beals Mortgage and Financial
Services Limited. Further details are given in note 4.
4: Business combinations, acquisitions and disposals
The Group made two acquisitions during the year. There were no material
acquisitions in the prior year.
On 5 September 2024, Quilter acquired 100% of the share capital of NuWealth
Limited for a total consideration of £6 million. NuWealth Limited provides a
savings and investment app that offers its users savings tools, high-interest
accounts and access to stocks, fractional shares and exchange traded funds. An
intangible asset of £5 million was recognised on acquisition (see note 9)
related to the software acquired.
On 29 October 2024, the Group acquired 35.0% of the share capital of Beals
Mortgage and Financial Services Limited, and 9.4% of the share capital of its
subsidiary, Clinton Kennard Associates Ltd for the total of £13 million. The
Group has carried out an assessment of control and influence and concluded
that it has significant influence but not control of each of these entities.
It will therefore account for each of these holdings as an investment in
associate and account for its share of the profits or losses of these
companies using the equity method of accounting. Subject to certain terms
being met, the Group intends to acquire the remaining share capital of each
company over the next five years.
There have been no material disposals of businesses during 2023 and 2024.
5: Alternative performance measures
5(a): Adjusted profit before tax and reconciliation to (loss)/profit after
tax
Basis of preparation of adjusted profit before tax
Adjusted profit before tax is one of the Group's alternative performance
measures ("APMs") and represents the Group's IFRS results, adjusted for
specific items that management considers to be outside of the Group's normal
operations or one-off in nature, as detailed in note 5(b). Adjusted profit
before tax does not provide a complete picture of the Group's financial
performance, which is disclosed in the statement of comprehensive income, but
is instead intended to provide additional comparability and understanding of
the financial results.
£m
Notes Year ended Year ended
31 December 31 December
2024 2023
Affluent 148 124
High Net Worth 48 41
Head Office - 2
Adjusted profit before tax 6(b) 196 167
Adjusting items:
Impact of acquisition and disposal-related accounting 5(b)(i) (40) (39)
Business transformation costs 5(b)(ii) (26) (28)
Skilled Person Review 5(b)(iii) (10) -
Customer remediation exercise 5(b)(iv) (76) -
Other customer remediation 5(b)(v) 3 (6)
Exchange rate movements (ZAR/GBP) 5(b)(vi) 1 (2)
Policyholder tax adjustments 5(b)(vii) (90) (62)
Other adjusting items 5(b)(viii) - 1
Finance costs 5(b)(ix) (18) (19)
Total adjusting items before tax (256) (155)
(Loss)/profit before tax attributable to shareholder returns (60) 12
Income tax attributable to policyholder returns 7 95 76
IFRS profit before tax 35 88
Income tax expense 7 (69) (46)
IFRS (loss)/profit after tax (34) 42
5(b): Adjusting items
The adjustments made to the Group's IFRS profit before tax to calculate
adjusted profit before tax are detailed below.
5(b)(i): Impact of acquisition and disposal-related accounting
The Group excludes any impairment of goodwill from adjusted profit as well as
the amortisation and impairment of acquired intangible assets, finance costs
related to the discounting of contingent consideration and incidental items
relating to past disposals.
The effect of these adjustments to determine adjusted profit are summarised
below.
£m
Year ended Year ended
31 December 31 December
2024 2023
Amortisation of acquired intangible assets 38 38
Impairment of acquired intangible assets(1) - 1
Amortisation of acquired adviser schemes 2 -
Total impact of acquisition and disposal-related accounting 40 39
(1)The impairment of acquired intangible assets in 2023 resulted from the
impairment of specific client books held within the Affluent operating segment
as the Group could no longer support the carrying value.
5(b)(ii): Business transformation costs
In 2024, business transformation costs totalled £26 million (2023: £28
million), the principal components of which are described below:
Business Simplification costs - 2024: £24 million, 2023: £25 million
During 2024, the Group spent £24 million on delivering Simplification
initiatives (2023: £25 million). The implementation costs to deliver the
remaining £15 million of annualised run-rate savings for the programme are
estimated to be £40 million.
Investment in business costs - 2024: £2 million, 2023: £1 million
Investment in business costs of £2 million (2023: £1 million) were incurred
as the Group continues to enable and support advisers and clients and improve
productivity through better utilisation of technology.
Business separation costs following the sale of Quilter International - 2024:
£nil, 2023: £2 million
The Group sold Quilter International to Utmost Group in 2021 and entered into
a Transitional Service Agreement with the acquirer. The cost to the Group of
running the Transitional Service Agreement, which ended in November 2023, was
£nil for 2024 (2023: £2 million).
5(b)(iii): Skilled Person Review
Skilled Person Review costs of £10 million (2023: £nil) include the
estimated external cost and direct cost of internal resources to support and
perform the Skilled Person Review of historical data and practices across the
Quilter Financial Planning network of Appointed Representative firms. This
cost is excluded from adjusted profit as management considers it to be outside
of the Group's normal operations and one-off in nature.
5(b)(iv): Customer remediation exercise
Customer remediation exercise costs of £76 million (2023: £nil) include the
estimated redress payable to customers, comprising a refund of ongoing advice
charges and interest payable for customers impacted, and administrative costs,
which represent the costs to perform a potential customer remediation exercise
across the Quilter Financial Planning network of Appointed Representative
firms (see note 16). This cost is excluded from adjusted profit as management
considers it to be outside of the Group's normal operations and one-off in
nature.
5(b)(v): Other customer remediation
Lighthouse pension transfer advice provision - 2024: £3 million credit, 2023:
£6 million cost
For 2023, the customer remediation expense of £6 million reflected £4
million of legal, consulting and other costs and a £2 million provision
increase related to non-British Steel Pension Scheme redress payments. This
was the result of the Group-managed past business review of defined benefit to
defined contribution ("DB to DC") pension transfer advice suitability by an
independent expert. For 2024, the provision for redress decreased by £3
million as a result of the redress calculations performed for customers being
lower than forecast in 2023 due to the changes in assumptions used to perform
the calculations and market movements of the pension scheme values during
2024. Further details of the provision are provided in note 16.
5(b)(vi): Exchange rate movements (ZAR/GBP)
In 2024, income of £1 million was recognised (2023: £2 million expense) due
to foreign exchange movements on cash held in South African Rand in
preparation for payments of dividends to shareholders. Cash was converted to
South African Rand upon announcement of the dividend payments to provide an
economic hedge for the Group. The foreign exchange movements are fully offset
by an equal amount taken directly to retained earnings.
5(b)(vii): Policyholder tax adjustments
In 2024, the total amount of policyholder tax adjustments to adjusted profit
is a credit of £90 million (2023: £62 million credit). Adjustments to
policyholder tax are made to remove distortions arising from market volatility
that can, in turn, lead to volatility in the policyholder tax adjustments
between periods. The recognition of the income received from policyholders to
fund the policyholder tax liability (which is included within the Group's
income) can vary in timing to the recognition of the corresponding tax
expense, creating volatility in the Group's IFRS profit or loss before tax.
During 2024, the Group made changes to the Group's unit pricing policy
relating to policyholder tax charges which will reduce the value of these
timing differences in future periods. These changes, together with current
year market movements, have resulted in the unwind of most of the opening
timing difference.
5(b)(viii): Other adjusting items
In 2024, there were no other adjusting items. In 2023, £1 million of income
was received in relation to the settlement offer for the indemnification asset
that was impaired in 2022.
5(b)(ix): Finance costs
The nature of much of the Group's operations means that, for management's
decision-making and internal performance management, the effects of interest
costs on external borrowings are removed when calculating adjusted profit. For
2024, finance costs were £18 million (2023: £19 million).
5(c): Reconciliation of IFRS income and expenses to "Total net revenue" and
"Operating expenses" within adjusted profit
This reconciliation shows how each line of the Group's IFRS income and
expenses are allocated to the Group's APMs: Net management fees, Other
revenue, Investment revenue, Total net revenue and Operating expenses which
form the Group's adjusted profit before tax. The total column in the table
below, down to "Profit before tax attributable to shareholder returns",
reconciles to each line of the consolidated statement of comprehensive income.
Allocations are determined by management and aim to show the Group's sources
of profit (net of relevant directly attributable expenses). These allocations
remain consistent from year to year to ensure comparability, unless otherwise
stated.
£m
Year ended 31 December 2024 Net mgmt. fees(1) Other revenue(1) Investment revenue(1) Total net revenue(1) Operating expenses(1) Adjusted profit before tax Consol. of funds(2) Total
Income
Fee income and other income from service activities 541 87 - 628 - 628 (84) 544
Investment return(3) 57 4,037 78 4,172 - 4,172 705 4,877
Other income - 3 - 3 21 24 4 28
Total income 598 4,127 78 4,803 21 4,824 625 5,449
Expenses
Change in investment contract liabilities(3) (26) (4,032) (7) (4,065) - (4,065) - (4,065)
Fee and commission expenses and other acquisition costs (50) 3 - (47) (1) (48) (1) (49)
Change in third-party interests in consolidated funds - - - - - - (587) (587)
Other operating and administrative expenses (15) - - (15) (639) (654) (37) (691)
Finance costs - - - - (21) (21) - (21)
Total expenses (91) (4,029) (7) (4,127) (661) (4,788) (625) (5,413)
Impairment of investments in associates - - - - (1) (1) - (1)
Profit before tax 507 98 71 676 (641) 35 - 35
Income tax expense attributable to policyholder returns (95) - - (95) - (95) - (95)
Loss before tax attributable to shareholder returns 412 98 71 581 (641) (60) - (60)
Adjusting items:
Impact of acquisition and disposal-related accounting - - - - 40 40
Business transformation costs - - - - 26 26
Skilled Person Review - - - - 10 10
Customer remediation exercise - - - - 76 76
Other customer remediation - - - - (3) (3)
Exchange rate movements (ZAR/GBP) - (1) - (1) - (1)
Policyholder tax adjustments 90 - - 90 - 90
Finance costs - - - - 18 18
Adjusting items 90 (1) - 89 167 256
Adjusted profit before tax 502 97 71 670 (474) 196
( 1)The APMs "Net management fees", "Other revenue", "Investment revenue",
"Total net revenue" and "Operating expenses" are commented on within the
Financial review.
(2)Consolidation of funds shows the grossing up impact to the Group's income
and expenses as a result of the consolidation of funds requirements. This
grossing up is excluded from the Group's adjusted profit.
(3)Reported within net management fees, investment return of £57 million
represents £36 million interest income on investments held for the benefit of
policyholders and £21 million net interest income on client money balances.
Change in investment contract liabilities of £26 million represents the
amount of interest income paid to policyholders. The net balance of £31
million represents interest income on customer balances retained by the Group
for 2024. The £78 million investment return less £7 million change in
investment contract liabilities paid to customers on transactional cash
balances, as reported within investment revenue, represents £71 million of
interest income on shareholder cash and cash equivalents.
£m
Year ended 31 December 2023 Net mgmt. fees(1) Other revenue(1) Investment revenue(1) Total net revenue(1) Operating expenses(1) Adjusted profit before tax Consol. of funds(2) Total
Income
Fee income and other income from service activities 527 86 - 613 - 613 (71) 542
Investment return(3) 48 3,285 68 3,401 - 3,401 674 4,075
Other income - - - - 9 9 - 9
Total income 575 3,371 68 4,014 9 4,023 603 4,626
Expenses
Change in investment contract liabilities(3) (25) (3,282) (6) (3,313) - (3,313) - (3,313)
Fee and commission expenses, and other acquisition costs (46) - - (46) - (46) (3) (49)
Change in third-party interests in consolidated funds - - - - - - (579) (579)
Other operating and administrative expenses (13) (5) - (18) (536) (554) (21) (575)
Finance costs - - - - (22) (22) - (22)
Total expenses (84) (3,287) (6) (3,377) (558) (3,935) (603) (4,538)
Profit before tax 491 84 62 637 (549) 88 - 88
Tax credit attributable to policyholder returns (76) - - (76) - (76) - (76)
Profit before tax attributable to shareholder returns 415 84 62 561 (549) 12 - 12
Adjusting items:
Impact of acquisition and disposal-related accounting - - - - 39 39
Business transformation costs - - - - 28 28
Other customer remediation - - - - 6 6
Exchange rate movements (ZAR/GBP) - 2 - 2 - 2
Policyholder tax adjustments 62 - - 62 - 62
Other adjusting items - - - - (1) (1)
Finance costs - - - - 19 19
Adjusting items 62 2 - 64 91 155
Adjusted profit before tax 477 86 62 625 (458) 167
(1)The APMs "Net management fees", "Other revenue", "Investment revenue",
"Total net revenue" and "Operating expenses" are commented on within the
Financial review.
(2)Consolidation of funds shows the grossing up impact to the Group's profit
or loss as a result of the consolidation of funds requirements. This grossing
up is excluded from the Group's adjusted profit.
(3)Reported within net management fees, investment return of £48 million
represents £30 million interest income on investments held for the benefit of
policyholders and £18 million net interest income on client money balances.
Change in investment contract liabilities of £25 million represents the
amount of interest income paid to policyholders. The net balance of £23
million represents interest income on customer balances retained by the Group
for 2023. The £68 million investment return less £6 million change in
investment contract liabilities paid to customers on transactional cash
balances, as reported within investment revenue, represents £62 million of
net interest income on shareholder cash and cash equivalents.
6: Segment information
6(a): Segment presentation
The Group has two operating segments: High Net Worth and Affluent. The
segments used for reporting purposes are consistent with the structure and
management of the Group. Head Office includes certain revenues and central
costs that are not allocated to the segments.
Adjusted profit before tax is an APM reported to the Group's management and
the Board of Quilter plc. The segment information in this note reflects the
adjusted and IFRS profit measures for each operating segment as provided to
management and the Board. Management and the Board use additional performance
indicators to assess the performance of each of the segments, including net
client cash flows, assets under management and administration, total net
revenue and operating margin. Income is analysed in further detail for each
operating segment in note 6(b).
Consistent with internal reporting, income and expenses that are not directly
attributable to a particular segment are allocated between segments where
appropriate. The Group accounts for inter-segment income and transfers as if
the transactions were with third parties at current market prices.
High Net Worth
This segment comprises Quilter Cheviot and Quilter Cheviot Financial Planning.
Quilter Cheviot provides discretionary investment management, predominantly in
the United Kingdom, with bespoke investment portfolios tailored to the
individual needs of high‑net‑worth clients, charities, companies and
institutions through a network of branches in London and the regions.
Investment management services are also provided by operations in the Channel
Islands and Ireland.
Quilter Cheviot Financial Planning provides financial advice for protection,
mortgages, savings, investments and pensions predominantly to
high‑net‑worth clients.
Affluent
This segment comprises Quilter Investment Platform, Quilter Investors, Quilter
Financial Planning and NuWealth.
Quilter Investment Platform is a leading investment platform provider of
advice-based wealth management products and services in the UK, which serves
an affluent client base through advised multi-channel distribution.
Quilter Investors is a leading provider of investment solutions in the UK
multi-asset market. It develops and manages investment solutions in the form
of funds for the Group and third-party clients. It has several fund ranges
which vary in breadth of underlying asset class. The investment management of
the Quilter investors fund range has been delegated to Quilter Investment
Platform from 1 January 2025.
Quilter Financial Planning is a restricted and independent financial adviser
network providing mortgage and financial planning advice and financial
solutions for both individuals and businesses through a network of
intermediaries. It operates across all markets, from wealth management and
retirement planning advice through to dealing with property wealth and
personal and business protection needs.
NuWealth is a developer of a fintech platform through which customers can
build investment portfolios. The NuWealth platform provides access to savings
and investments and is particularly beneficial for people starting to invest
who are looking for additional help and guidance, with the option to work with
a financial adviser later in their investment journey.
Head Office
In addition to the Group's two operating segments, Head Office comprises the
investment return on centrally held assets, central support function expenses,
central core structural borrowings and certain tax balances.
6(b): Adjusted profit statement - segment information
The table below presents the Group's operations split by operating segment,
reconciling IFRS profit or loss to adjusted profit before tax. The Total
column reconciles to the consolidated statement of comprehensive income.
£m
Operating segments
Year ended 31 December 2024 Notes Affluent High Head Office Consolidation adjustments(1) Total
Net
Worth
Income
Premium-based fees 70 19 - - 89
Fund-based fees 343 184 - (83) 444
Fixed fees 1 - - - 1
Other fee and commission income 10 - - - 10
Fee income and other income from service activities 424 203 - (83) 544
Investment return(2) 4,131 21 31 694 4,877
Other income 98 2 1 (73) 28
Segment income 4,653 226 32 538 5,449
Expenses
Change in investment contract liabilities(2) (4,065) - - - (4,065)
Fee and commission expenses and other acquisition costs (49) - - - (49)
Change in third-party interests in consolidated funds - - - (587) (587)
Other operating and administrative expenses (484) (217) (29) 39 (691)
Finance costs (2) - (29) 10 (21)
Segment expenses (4,600) (217) (58) (538) (5,413)
Impairment of investments in associates - - (1) - (1)
Profit/(loss) before tax 53 9 (27) - 35
Income tax expense attributable to policyholder returns (95) - - - (95)
(Loss)/profit before tax attributable to shareholder returns (42) 9 (27) - (60)
Adjusting items:
Impact of acquisition and disposal-related accounting 5(b)(i) 9 31 - - 40
Business transformation costs 5(b)(ii) 8 8 10 - 26
Skilled Person Review 5(b)(iii) 10 - - - 10
Customer remediation exercise 5(b)(iv) 76 - - - 76
Other customer remediation 5(b)(v) (3) - - - (3)
Exchange rate movements (ZAR/GBP) 5(b)(vi) - - (1) - (1)
Policyholder tax adjustments 5(b)(vii) 90 - - - 90
Finance costs 5(b)(ix) - - 18 - 18
Adjusting items before tax 190 39 27 - 256
Adjusted profit before tax 148 48 - - 196
(1)Consolidation adjustments comprise the elimination of inter-segment
transactions and the consolidation of investment funds.
(2)Investment return and change in investment contract liabilities includes
net £31 million of interest income on customer cash and cash equivalents
retained by the Group. Investment return total also includes £71 million of
interest income on shareholder cash and cash equivalents.
£m
Operating segments
Year ended 31 December 2023 Notes Affluent High Head Office Consolidation adjustments(1) Total
Net Worth
Income
Premium-based fees 66 20 - - 86
Fund-based fees 336 172 - (71) 437
Fixed fees 1 - - - 1
Other fee and commission income 18 - - - 18
Fee income and other income from service activities 421 192 - (71) 542
Investment return(2) 3,361 19 28 667 4,075
Other income 88 1 - (80) 9
Segment income 3,870 212 28 516 4,626
Expenses
Change in investment contract liabilities(2) (3,313) - - - (3,313)
Fee and commission expenses, and other acquisition costs (47) - - (2) (49)
Change in third-party interests in consolidated funds - - - (579) (579)
Other operating and administrative expenses (387) (205) (41) 58 (575)
Finance costs (3) - (26) 7 (22)
Segment expenses (3,750) (205) (67) (516) (4,538)
Profit/(loss) before tax 120 7 (39) - 88
Tax credit attributable to policyholder returns (76) - - - (76)
Profit/(loss) before tax attributable to shareholder returns 44 7 (39) - 12
Adjusting items:
Impact of acquisition and disposal-related accounting 5(b)(i) 7 32 - - 39
Business transformation costs 5(b)(ii) 5 3 20 - 28
Other customer remediation 5(b)(v) 6 - - - 6
Exchange rate movements (ZAR/GBP) 5(b)(vi) - - 2 - 2
Policyholder tax adjustments 5(b)(vii) 62 - - - 62
Other adjusting items 5(b)(viii) - (1) - - (1)
Finance costs 5(b)(ix) - - 19 - 19
Adjusting items before tax 80 34 41 - 155
Adjusted profit before tax 124 41 2 - 167
(1)Consolidation adjustments comprise the elimination of inter-segment
transactions and the consolidation of investment funds.
(2)Investment return and change in investment contract liabilities includes
net £23 million of interest income on customer cash and cash equivalents
retained by the Group. Investment return total also includes £62 million of
interest income on shareholder cash and cash equivalents.
7: Tax
7(a): Tax charged
£m
Year ended Year ended
31 December 31 December
2024 2023
Current tax
United Kingdom 67 2
Overseas tax 1 -
Adjustments to current tax in respect of prior periods (10) -
Total current tax charge 58 2
Deferred tax
Origination and reversal of temporary differences 3 52
Effect on deferred tax of changes in tax rates - (3)
Adjustments to deferred tax in respect of prior periods 8 (5)
Total deferred tax charge 11 44
Total tax charged 69 46
Attributable to policyholder returns 95 76
Attributable to shareholder returns (26) (30)
Total tax charged 69 46
Policyholder tax
Certain products are subject to tax on policyholders' investment returns. This
"policyholder tax" is an element of total tax expense. To make the tax expense
more meaningful, tax attributable to policyholder returns and tax attributable
to shareholder returns are shown separately in the consolidated statement of
comprehensive income.
The tax attributable to policyholder returns is the amount payable in the year
plus the movement of amounts expected to be payable in future years. The
remainder of the tax expense is attributed to shareholder returns.
The Group's income tax charge was £69 million in 2024 (2023: £46 million tax
charge). The income tax charge can vary significantly year-on-year as a result
of market volatility and the impact this has on policyholder tax.
The recognition of the income received from policyholders to fund the
policyholder tax liability (which is included within the Group's income) has
historically been volatile due to timing differences between the recognition
of policy deductions and credits and the corresponding policyholder tax
expense, resulting in the need for significant adjustments to the adjusted
profit to remove these distortions. The Group has made changes to the Group's
unit pricing policy during 2024 relating to policyholder tax charges which
will reduce future volatility in these timing differences. These changes are
expected to reduce the value of adjustments made to future periods adjusted
profit, set out in note 5(b)(vii).
Market movements for the year ended 31 December 2024 resulted in investment
gains of £342 million on products subject to policyholder tax. The gain is a
component of the total "investment return" gain of £4,877 million shown in
the consolidated statement of comprehensive income. The tax impact of the
£342 million investment return gain is a significant element of the £95
million tax charge attributable to policyholder returns in 2024 (2023: £76
million charge).
First time recognition of deferred tax assets on tax losses
Within the £11 million total deferred tax charge, the Group has recognised
£10 million shareholder deferred tax credit in respect of previously
unrecognised losses.
Pillar II taxes
Pillar II legislation has been substantively enacted in the UK, introducing a
Pillar II minimum effective tax rate of 15%. The legislation implements a
Multinational Top-up Tax ("MTT") and a Domestic Top-up Tax ("DTT"), effective
for the Group's financial year beginning 1 January 2024. The Group has applied
the exemption under IAS 12.4A and accordingly will not recognise or disclose
information about deferred tax assets and liabilities related to Pillar II
income taxes.
The assessment of the exposure to Pillar II income taxes has shown that the
majority of the Group's profits arise in countries with tax rates above 15%.
The position in respect of these rules in each of the Group's main territories
is summarised below.
UK
The Group has assessed that its Pillar II UK effective tax rate exceeds the
15% minimum rate and therefore there is no additional liability in relation to
the UK.
The scope of the MTT means that a top-up tax charge may also arise in the UK
on profits earned in countries with lower tax rates in which the Group
operates, subject to a local qualifying domestic minimum tax. The Group's main
non-UK operations are in Jersey and Ireland. Ireland has enacted a qualifying
domestic minimum tax (see below), and accordingly no additional tax charge is
due in the UK on Irish operations. Jersey is expected to introduce a
qualifying domestic minimum tax in 2025. The Group's effective tax rate in
Jersey is 10% and therefore a MTT liability of £0.1 million in relation to
Jersey profits arises in the UK during 2024. This does not have a material
impact on the Group's tax charge.
Jersey, Guernsey and the Isle of Man
The three Crown Dependencies have enacted or are due to enact legislation to
introduce a domestic minimum tax with effect from 1 January 2025. The Group
does not therefore expect to pay an additional local tax in these countries
during 2024. The Group expects to pay a MTT in the UK in respect of any 2024
taxable profits arising in these countries (see above).
Ireland
Ireland has introduced a qualifying domestic minimum tax. This has been
substantively enacted, effective for the Group's financial year beginning 1
January 2024. The Group's effective tax rate in Ireland is 19% and therefore
no additional tax arises in Ireland in 2024.
Other
The Group has assessed there are no material Pillar II tax charge in any other
countries in which it had a presence during 2024.
7(b): Reconciliation of total income tax expense
The income tax credited or charged to profit or loss differs from the amount
that would apply if all of the Group's profits from all the countries in which
the Group operates had been taxed at the UK standard Corporation Tax rate. The
difference in the effective rate is explained below:
£m
Year ended Year ended
31 December 31 December
2024 2023
Profit before tax 35 88
Tax at UK standard rate of 25% (2023: 23.5%) 9 21
Untaxed and low taxed income (1) (1)
Expenses not deductible for tax purposes 1 2
Adjustments to current tax in respect of prior years (10) -
Net movements on unrecognised deferred tax assets (10) (29)
Effect of changes in tax rates on deferred tax - (3)
Adjustments to deferred tax in respect of prior periods 8 (5)
Income tax attributable to policyholder returns (net of tax relief) 72 61
Total tax charged to profit or loss 69 46
7(c): Reconciliation of IFRS income tax credit or expense to income tax on
adjusted profit
£m
Note Year ended Year ended
31 December 31 December
2024 2023
Income tax expense(1) 69 46
Tax on adjusting items
Impact of acquisition and disposal-related accounting 10 9
Business transformation costs 7 7
Skilled Person Review 2 -
Customer remediation exercise 19 -
Other customer remediation (1) 1
Finance costs 4 4
Exchange rate movements (ZAR/GBP) - 1
Tax adjusting items
Policyholder tax adjustments 5(b)(vii) (90) (62)
Other shareholder tax adjustments(2) 33 46
Tax on adjusting items (16) 6
Less: tax attributable to policyholder returns within adjusted profit(3) (5) (14)
Tax charged on total adjusted profit 48 38
(1)Includes both tax attributable to policyholder and shareholder returns, in
compliance with IFRS.
(2)Other shareholder tax adjustments comprise the reallocation of adjustments
from policyholder tax as explained in note 5(b)(vii) and shareholder tax
adjustments for one‑off items in line with the Group's adjusted profit
policy.
(3)Adjusted profit treats policyholder tax as a pre-tax expense (this includes
policyholder tax under IFRS and the policyholder tax adjustments) and is
therefore removed from the tax charge on adjusted profit.
8: Earnings per share
The Group calculates earnings per share ("EPS") on a number of different
bases. IFRS requires the calculation of basic and diluted EPS. Adjusted EPS
reflects earnings that are consistent with the Group's adjusted profit measure
and Headline earnings per share ("HEPS") is a requirement of the Johannesburg
Stock Exchange.
8(a): Weighted average number of Ordinary Shares
The table below summarises the calculation of the weighted average number of Ordinary Shares for the purposes of calculating basic and diluted earnings per share for each profit measure (IFRS, adjusted profit and Headline earnings).
Million
Year ended Year ended
31 December 31 December
2024 2023
Weighted average number of Ordinary Shares 1,404 1,404
Own shares including those held in consolidated funds and employee benefit (60) (54)
trusts
Basic weighted average number of Ordinary Shares 1,344 1,350
Adjustment for dilutive share awards and options 48 24
Diluted weighted average number of Ordinary Shares 1,392 1,374
8(b): Basic and diluted EPS (IFRS and adjusted profit)
£m
Notes Year ended Year ended
31 December 31 December
2024 2023
(Loss)/profit after tax (34) 42
Total adjusting items before tax 5(a) 256 155
Tax on adjusting items 7(c) 16 (6)
Less: policyholder tax adjustments 7(c) (90) (62)
Adjusted profit after tax 148 129
Pence
Post-tax profit Year ended Year ended
measure used 31 December 31 December
2024 2023
Basic EPS IFRS profit (2.5) 3.1
Diluted EPS(1) IFRS profit (2.5) 3.1
Adjusted basic EPS Adjusted profit 11.0 9.6
Adjusted diluted EPS Adjusted profit 10.6 9.4
(1)The adjustment for share awards and options would be antidilutive and as
such has not been included in the calculation of diluted EPS in accordance
with the requirements of IFRS.
8(c): Headline earnings per share
+ + £m
Year ended 31 December 2024 Year ended 31 December 2023
Gross Net of tax Gross Net of tax
(Loss)/profit (34) 42
Adjusted for:
- add back of impairment of investments in associates 1 1 - -
- add back of impairment loss on intangible assets - - 1 1
Headline earnings (33) 43
Headline basic EPS (pence) (2.5) 3.2
Headline diluted EPS (pence)(1) (2.5) 3.1
(1)The adjustment for share awards and options would be antidilutive and as
such has not been included in the calculation of diluted HEPS in accordance
with the requirements of The South African Institute of Chartered Accountants
Circular 1/2023.
9: Goodwill and intangible assets
9(a): Analysis of goodwill and intangible assets
The table below shows the movements in cost and amortisation of goodwill and
intangible assets.
£m
Goodwill Other intangible assets Software Total
Gross amount
1 January 2023 306 425 30 761
Disposals - - (21) (21)
31 December 2023 306 425 9 740
Acquisitions through business combinations(1) 1 - 7 8
31 December 2024 307 425 16 748
Accumulated amortisation and impairment losses
1 January 2023 - (324) (24) (348)
Amortisation charge for the year - (38) (2) (40)
Disposals - - 21 21
Impairment of other intangibles - (1) - (1)
31 December 2023 - (363) (5) (368)
Acquisitions through business combinations(1) - - (1) (1)
Amortisation charge for the year - (38) (2) (40)
31 December 2024 - (401) (8) (409)
Carrying amount
31 December 2023 306 62 4 372
31 December 2024 307 24 8 339
(1)Relates to the acquisition of NuWealth Limited as explained in note 4.
Total gross amount includes £1 million goodwill and £7 million software,
which consists of £2 million of NuWealth's net assets and £5 million
recognised by the Group on acquisition of the business. Total accumulated
amortisation of £1 million relates to software in NuWealth's net assets.
9(b): Analysis of other intangible assets and software
31 December 2024 31 December 2023 Average estimated useful life Average period remaining
£m £m
Net carrying value
Other intangible assets
Distribution channels - Quilter Financial Planning 1 2 8 years < 1 year
Customer relationships
Quilter Cheviot 4 32 10 years < 1 year
Quilter Financial Planning 12 17 8 years 2 years
Quilter Cheviot Financial Planning 7 10 8 years 2 years
Other - 1 7 years -
24 62
Software
NuWealth 6 - 5 years 5 years
Quilter Financial Planning 2 4 5 years 1 year
8 4
Total other intangible assets and software 32 66
9(c): Allocation of goodwill to cash-generating units ("CGUs") and
consideration of the need for an impairment review
Goodwill is monitored by management at the level of the Group's two operating
segments: Affluent and High Net Worth. Both operating segments represent a
group of CGUs.
£m
31 December 31 December
2024 2023
Goodwill (net carrying amount)
Affluent 224 223
High Net Worth 83 83
Total goodwill 307 306
Consideration of the need for an impairment review
Goodwill in both the Affluent and High Net Worth CGU groups is tested for
impairment annually, or earlier if an indicator of impairment exists, by
comparing the carrying value of the CGU group to which the goodwill relates to
the recoverable value of that CGU group, being the higher of that CGU group's
value-in-use or fair value less costs to sell. If applicable, an impairment
charge is recognised when the recoverable amount is less than the carrying
value. Goodwill impairment indicators include sudden stock market falls, the
absence of positive Net Client Cash Flows ("NCCF"), significant falls in
profits and significant increases in the discount rate.
The goodwill balance has been tested for impairment at 31 December 2024 and
continues to demonstrate a surplus of the recoverable amount over the carrying
value of the CGUs. As a result, no impairment is required.
The following table shows the percentage change required in each key
assumption before the carrying value would exceed the recoverable amount,
assuming all other variables remain the same. This highlights that further
adverse movements in the key assumptions used in the CGU value-in-use
calculation would be required before an impairment would need to be
recognised.
Affluent High Net Worth
Reduction in forecast cash flows 65% 81%
Percentage point increase in the discount rate 42% 48%
Forecast cash flows are impacted by movements in underlying assumptions,
including equity market levels, revenue margins and NCCF. The Group considers
that forecast cash flows are most sensitive to movements in equity markets
because they have a direct impact on the level of the Group's fee income.
The principal sensitivity within equity market level assumptions relates to
the estimated growth in equity market indices included in the three-year cash
flow forecasts. Management forecasts equity market growth for each business
using estimated asset-specific growth rates that are supported by internal
research, historical performance, Bank of England forecasts and other external
estimates.
The Group has considered and assessed reasonably possible changes for other
key assumptions and has not identified any other instances that could cause
the carrying amount of CGUs to exceed its recoverable amount.
Value-in-use methodology
The cash flows used to determine the value in use of the groups of CGUs are
based on the most recent management approved three-year profit forecasts,
which are contained in the Group's Business Plan. These profit forecasts
incorporate anticipated equity market growth on the Group's future cash flows
and take into account climate-related risks and opportunities affecting
operations, investments, advice and distribution, and their impact on specific
projects and initiatives, estimates and judgements. After the three-year
forecast period, the growth rate used to determine the terminal value of the
groups of CGUs in the annual assessment was 2.0% (31 December 2023: 2.0%).
The Group uses a single cost of capital (post tax) of 9.0% (31 December 2023:
10.0%) to discount expected future cash flows across its two groups of CGUs.
The single cost of capital is based on the Group's consideration of the level
of risk that each group of CGUs represents. Capital is provided to the Group
predominantly by shareholders with a relatively small amount of debt
financing.
10: Financial investments
The table below analyses the investments and securities that the Group invests
in, either on its own proprietary behalf (shareholder funds) or on behalf of
third parties (policyholder funds).
£m
31 December 31 December
2024 2023
Government and government-guaranteed securities 171 202
Other debt securities, preference shares and debentures 2,644 2,175
Equity securities 11,034 8,488
Pooled investments 45,510 39,462
Short-term funds and securities treated as investments - 1
Other 1 1
Total financial investments 59,360 50,329
The financial investments are recoverable within 12 months, apart from £6
million (2023: £nil) which is recoverable after 12 months. The financial
investments recoverability profile is based on the intention with which the
financial assets are held. The assets held on behalf of policyholders cover
the liabilities for linked investment contracts, all of which can be withdrawn
by policyholders on demand.
11: Categories of financial instruments
The analysis of financial assets and liabilities into categories as defined in
IFRS 9 Financial Instruments is set out in the following tables. Assets and
liabilities of a non-financial nature, or financial assets and liabilities
that are specifically excluded from the scope of IFRS 9, are reflected in the
non‑financial assets and liabilities category.
For information about the methods and assumptions used in determining fair
value, refer to note 12. The Group's exposure to various risks associated with
financial instruments is discussed in note 18.
31 December 2024
£m
Measurement basis Fair value
Mandatorily at FVTPL Designated at FVTPL Amortised cost Non-financial assets and liabilities Total
Assets
Loans and advances - - 56 - 56
Financial investments 59,359 1 - - 59,360
Trade, other receivables and other assets - - 370 48 418
Derivative assets 26 - - - 26
Cash and cash equivalents 1,215 - 734 - 1,949
Total assets that include financial instruments 60,600 1 1,160 48 61,809
Total other non-financial assets - - - 639 639
Total assets 60,600 1 1,160 687 62,448
Liabilities
Investment contract liabilities - 51,758 - - 51,758
Third-party interests in consolidated funds 8,225 - - - 8,225
Borrowings and lease liabilities - - 275 - 275
Trade, other payables and other liabilities - 1 399 106 506
Derivative liabilities 53 - - - 53
Total liabilities that include financial instruments 8,278 51,759 674 106 60,817
Total other non-financial liabilities - - - 208 208
Total liabilities 8,278 51,759 674 314 61,025
31 December 2023
£m
Measurement basis Fair value
Mandatorily at FVTPL Designated at FVTPL Amortised cost Non-financial assets and liabilities Total
Assets
Loans and advances - - 38 - 38
Financial investments 50,329 - - - 50,329
Trade, other receivables and other assets - - 404 43 447
Derivative assets 57 - - - 57
Cash and cash equivalents 1,091 - 768 - 1,859
Total assets that include financial instruments 51,477 - 1,210 43 52,730
Total other non-financial assets - - - 615 615
Total assets 51,477 - 1,210 658 53,345
Liabilities
Investment contract liabilities - 43,396 - - 43,396
Third-party interests in consolidated funds 7,444 - - - 7,444
Borrowings and lease liabilities - - 279 - 279
Trade, other payables and other liabilities 1 - 476 93 570
Derivative liabilities 25 - - - 25
Total liabilities that include financial instruments 7,470 43,396 755 93 51,714
Total other non-financial liabilities - - - 112 112
Total liabilities 7,470 43,396 755 205 51,826
12: Fair value methodology
This section explains the judgements and estimates made in determining the
fair values of financial instruments that are recognised and measured at fair
value in the financial statements. Classifying financial instruments into the
three levels of the fair value hierarchy (see note 12(b)) provides an
indication of the reliability of inputs used in determining fair value.
12(a): Determination of fair value
The fair value of financial instruments that are actively traded in organised
financial markets is determined by reference to quoted market exit prices for
assets and offer prices for liabilities, at the close of business on the
reporting date, without any deduction for transaction costs:
· for units in unit trusts and shares in open-ended investment
companies, fair value is determined by reference to published quoted prices
representing exit values in an active market;
· for equity and debt securities not actively traded in organised
markets and where the price cannot be retrieved, the fair value is determined
by reference to similar instruments for which market observable prices exist;
· for assets that have been suspended from trading on an active
market, the last published price is used. Many suspended assets are still
regularly priced. At the reporting date, all suspended assets are assessed for
impairment; and
· where the assets are private equity investments or within
consolidated investment funds, the valuation is based on the latest available
set of audited financial statements, or if more recent is available, reports
from Investment Managers or professional valuation experts on the value of the
underlying assets of the private equity investment or fund.
There have been no significant changes in the valuation techniques applied
when valuing financial instruments. Where assets are valued by the Group, the
general principles applied to those instruments measured at fair value are
outlined below:
Financial investments
Financial investments include government and government-guaranteed securities,
listed and unlisted debt securities, preference shares and debentures, listed
and unlisted equity securities, listed and unlisted pooled investments (see
below), short-term funds and securities treated as investments and certain
other securities.
Pooled investments represent the Group's holdings of shares/units in
open-ended investment companies, unit trusts, mutual funds and similar
investment vehicles. Pooled investments are recognised at fair value. The fair
values of pooled investments are based on widely published prices that are
regularly updated.
Other financial investments that are measured at fair value use observable
market prices where available. In the absence of observable market prices,
these investments and securities are fair valued using various approaches
including valuations based on discounted cash flows and earnings before
interest, tax, depreciation and amortisation multiples.
Derivatives
The fair value of derivatives is determined with reference to the
exchange-traded prices of the specific instruments. The fair value of
over-the-counter forward foreign exchange contracts is determined by reference
to the relevant exchange rates.
Investment contract liabilities
The fair value of the investment contract liabilities is determined with
reference to the underlying funds that are held by the Group.
Third-party interests in consolidated funds
Third-party interests in consolidated funds are measured at the attributable
net asset value of each fund.
12(b): Fair value hierarchy
Fair values are determined according to the following hierarchy:
Description of hierarchy Types of instruments classified in the respective levels
Level 1 - quoted market prices: financial assets and liabilities with quoted Listed equity securities, government securities and other listed debt
prices for identical instruments in active markets. securities and similar instruments that are actively traded, actively traded
pooled investments, certain quoted derivative assets and liabilities and
investment contract liabilities directly linked to Level 1 financial assets.
Level 2 - valuation techniques using observable inputs: financial assets and Unlisted equity and debt securities where the valuation is based on models
liabilities with quoted prices for similar instruments in active markets or involving no significant unobservable data.
quoted prices for identical or similar instruments in inactive markets and
financial assets and liabilities valued using models where all significant Over-the-counter derivatives, certain privately placed debt instruments and
inputs are observable. third-party interests in consolidated funds which meet the definition of Level
2 financial instruments.
Level 3 - valuation techniques using significant unobservable inputs: Unlisted equity and securities with significant unobservable inputs,
financial assets and liabilities valued using valuation techniques where one securities where the market is not considered sufficiently active, including
or more significant inputs are unobservable. certain inactive pooled investments.
The judgement as to whether a market is active may include, for example,
consideration of factors such as the magnitude and frequency of trading
activity, the availability of prices and the size of bid/offer spreads. In
inactive markets, obtaining assurance that the transaction price provides
evidence of fair value or determining the adjustments to transaction prices
that are necessary to measure the fair value of the asset or liability
requires additional work during the valuation process.
The majority of valuation techniques employ only observable data and so the
reliability of the fair value measurement is high. Certain financial assets
and liabilities are valued on the basis of valuation techniques that feature
one or more significant inputs that are unobservable and, for them, the
derivation of fair value is more judgemental. A financial asset or liability
in its entirety is classified as valued using significant unobservable inputs
if a significant proportion of that asset or liability's carrying amount is
driven by unobservable inputs.
In this context, 'unobservable' means that there is little or no current
market data available from which to determine the price at which an arm's
length transaction would be likely to occur. It generally does not mean that
there is no market data available at all upon which to base a determination of
fair value. Furthermore, in some cases the majority of the fair value derived
from a valuation technique with significant unobservable data may be
attributable to observable inputs.
12(c): Transfer between fair value hierarchies
The Group deems a transfer to have occurred between Level 1 and Level 2 or
Level 3 when an actively traded primary market ceases to exist for that
financial instrument. A transfer between Level 2 and Level 3 occurs when one
or more of the significant inputs used to determine the fair value of the
instrument become unobservable. Transfers from Levels 3 or 2 to Level 1 are
also possible when assets become actively priced.
There were no transfers of financial investments between Level 1 and Level 2
during the year to 31 December 2024 (31 December 2023: £nil).
See note 12(e) for the reconciliation of Level 3 financial instruments.
12(d): Financial assets and liabilities measured at fair value, classified according to the fair value hierarchy
The majority of the Group's financial assets are measured using quoted market
prices for identical instruments in active markets (Level 1) and there have
been no significant changes during the year.
The linked assets are held to cover the liabilities for linked investment
contracts. The difference between the value of linked assets and that of
linked liabilities is mainly due to short-term timing differences between
policyholder premiums being received and invested in advance of policies being
issued, and tax liabilities within funds which are reflected within the
Group's tax liabilities.
Differences between assets and liabilities within the respective levels of the
fair value hierarchy also arise due to the mix of underlying assets and
liabilities within consolidated funds. In addition, third-party interests in
consolidated funds are classified as Level 2.
The tables below analyse the Group's financial assets and liabilities measured
at fair value by the fair value hierarchy described in note 12(b).
£m
31 December 2024 Level 1 Level 2 Level 3 Total
Financial investments 49,052 10,292 16 59,360
Cash and cash equivalents 1,215 - - 1,215
Derivative assets - 26 - 26
Total financial assets measured at fair value through profit or loss 50,267 10,318 16 60,601
Third-party interests in consolidated funds - 8,225 - 8,225
Derivative liabilities - 53 - 53
Investment contract liabilities 51,745 - 13 51,758
Other liabilities - 1 - 1
Total financial liabilities measured at fair value through profit or loss 51,745 8,279 13 60,037
£m
31 December 2023 Level 1 Level 2 Level 3 Total
Financial investments 41,691 8,605 33 50,329
Cash and cash equivalents 1,091 - - 1,091
Derivative assets - 57 - 57
Total financial assets measured at fair value through profit or loss 42,782 8,662 33 51,477
Third-party interests in consolidated funds - 7,444 - 7,444
Derivative liabilities - 25 - 25
Investment contract liabilities 43,372 - 24 43,396
Other liabilities - 1 - 1
Total financial liabilities measured at fair value through profit or loss 43,372 7,470 24 50,866
12(e): Level 3 fair value hierarchy disclosure
The majority of the assets classified as Level 3 are held within linked
policyholder funds. Where this is the case, all of the investment risk
associated with these assets is borne by policyholders and the value of these
assets is exactly matched by a corresponding liability due to policyholders.
The Group bears no risk from a change in the market value of these assets
except to the extent that it has an impact on management fees earned.
Level 3 assets also include investments within consolidated funds attributable
to the third-party interest in those funds. The Group bears no risk from a
change in the market value of these assets except to the extent that it has an
impact on management fees earned. Any changes in market value are matched by a
corresponding Level 2 liability within third-party interests in consolidated
funds.
The table below reconciles the opening balance of Level 3 financial assets to
the closing balance at each year end:
£m
2024 2023
At beginning of the year 33 29
Fair value gains/(losses) credited/(charged) to profit or loss(1) 4 (1)
Sales (17) (1)
Transfers in 8 27
Transfers out (12) (21)
Total Level 3 financial assets at the end of the year 16 33
Unrealised fair value (losses)/gains recognised in profit or loss relating to (3) 2
assets held at the year end
(1)Included in Investment return.
All of the assets that are classified as Level 3 are suspended funds for 2023
and 2024.
Transfers into Level 3 assets in the current year total £8 million (2023:
£27 million). This is mainly due to funds from Level 1 being suspended and
moved to Level 3. Suspended funds are valued based on external valuation
reports received from fund managers. Transfers out of Level 3 assets in the
current year of £12 million (2023: £21 million) result from a transfer to
Level 1 assets relating to assets that are now being actively repriced (that
were previously stale) and where fund suspensions have been lifted.
The table below reconciles the opening balance of Level 3 financial
liabilities to the closing balance at each year end:
£m
2024 2023
At beginning of the year 24 25
Fair value gains credited to profit or loss(1) (2) -
Transfers in - 20
Transfers out (9) (21)
Total Level 3 financial liabilities at the end of the year 13 24
Unrealised fair value losses recognised in profit or loss relating to (2) -
liabilities at the year end
(1)Included in Investment return.
12(f): Effect of changes in significant unobservable assumptions to reasonable
alternatives
Details of the valuation techniques applied to the different categories of
financial instruments can be found in note 12(a) above, including the
valuation techniques applied when significant unobservable assumptions are
used to value Level 3 assets.
For Level 3 assets and liabilities, no reasonable alternative assumptions are
applicable and the Group therefore performs a sensitivity test of an aggregate
10% (2023: 10%), which is a reasonably possible change in the value of the
financial asset or liability. It is therefore considered that the impact of
this sensitivity will be in the range of £2 million (2023: £3 million) to
the reported fair value of Level 3 assets, and £1 million (2023: £3 million)
to the reported fair value of Level 3 liabilities, both favourable and
unfavourable.
12(g): Fair value hierarchy for assets and liabilities not measured at fair
value
Certain financial instruments of the Group are not carried at fair value. The
carrying values of these are considered reasonable approximations of their
respective fair values as they are either short term in nature or are repriced
to current market rates at frequent intervals.
13: Cash and cash equivalents
13(a): Analysis of cash and cash equivalents
£m
31 December 31 December
2024 2023
Cash at bank 369 444
Money market funds 1,215 1,091
Cash and cash equivalents in consolidated funds 365 324
Total cash and cash equivalents per statement of cash flows 1,949 1,859
The Group's management does not consider that the cash and cash equivalents
balance arising due to consolidation of funds of £365 million (2023: £324
million) is available for use in the Group's day-to-day operations. The
remainder of the Group's cash and cash equivalents balance of £1,584 million
(2023: £1,535 million) is considered to be available for general use by the
Group for the purposes of the disclosures required under IAS 7 Statement of
Cash Flows. This balance includes policyholder cash as well as cash and cash
equivalents held by regulated subsidiaries to meet their capital and liquidity
requirements.
13(b): Analysis of net cash flows from operating activities:
£m
Notes Year ended Year ended
31 December 31 December
2024 2023
Cash flows from operating activities
Profit before tax 35 88
Adjustments for
Depreciation of property, plant and equipment 11 12
Depreciation of investment property 1 -
Movement on contract costs (8) (6)
Amortisation and impairment of intangibles 40 41
Fair value and other movements in financial assets (3,891) (3,200)
Fair value movements in investment contract liabilities 15 3,153 2,528
Other changes in investment contract liabilities 5,209 2,682
Other movements 41 47
4,556 2,104
Net changes in working capital
Decrease/(increase) in derivatives position 59 (12)
Increase in loans and advances (18) (4)
Increase/(decrease) in provisions 16 65 (23)
Movement in other assets and other liabilities (43) (16)
63 (55)
Taxation paid (69) (26)
Net cash flows from operating activities 4,585 2,111
14: Ordinary Share capital
At 31 December 2023 and 31 December 2024, the Company's equity capital
comprises 1,404,105,498 Ordinary Shares of 8 1/6 pence each with an aggregated
nominal value of £114,668,616. All Ordinary Shares have been called up and
fully paid.
All Ordinary Shares issued carry equal voting rights. The holders of the
Company's Ordinary Shares are entitled to receive dividends as declared and
are entitled to one vote per share at shareholder meetings of the Company.
15: Investment contract liabilities
The following table provides a summary of the Group's investment contract
liabilities:
£m
2024 2023
Carrying amount at 1 January 43,396 38,186
Fair value movements 3,153 2,528
Investment income 912 785
Movements arising from investment return 4,065 3,313
Contributions received 8,222 5,358
Withdrawals and surrenders (3,661) (3,212)
Claims and benefits (260) (245)
Other movements (4) (4)
Change in liability 8,362 5,210
Investment contract liabilities at end of the year 51,758 43,396
For unit-linked investment contracts, movements in asset values are offset by
corresponding changes in liabilities, limiting the net impact on profit.
The benefits offered under the unit-linked investment contracts are based on
the risk appetite of policyholders and the return on their selected
investments and collective fund investments, whose underlying investments
include equities, debt securities, property and derivatives. This investment
mix is unique to each individual policyholder.
For unit-linked business, the unit liabilities are determined as the value of
units credited to policyholders. Since these liabilities are determined on a
retrospective basis, no assumptions for future experience are required.
Assumptions for future experience are required for unit-linked business in
assessing whether the total of the contract costs asset and contract liability
is greater than the present value of future profits expected to arise on the
relevant blocks of business (the "recoverability test"). If this is the case,
then the contract costs asset is restricted to the recoverable amount. For
linked contracts, the assumptions are on a best estimate basis.
16: Provisions
£m
Year ended 31 December 2024 Customer remediation exercise provision Compensation Sale of subsidiaries provision Property provisions Clawback and other provisions Total
provisions
Balance at beginning of the year - 17 3 10 16 46
Charge to profit or loss 76 10 - - 4 90
Used during the year - (5) (2) (2) (6) (15)
Unused amounts reversed - (8) - (1) (1) (10)
Balance at 31 December 2024 76 14 1 7 13 111
£m
Year ended 31 December 2023 Customer remediation exercise provision Compensation Sale of subsidiaries provision Property provisions Clawback and other provisions Total
provisions
Balance at beginning of the year - 23 15 12 19 69
Charge to profit or loss - 17 - - 6 23
Used during the year - (14) (12) (2) (8) (36)
Unused amounts reversed - (9) - - (1) (10)
Balance at 31 December 2023 - 17 3 10 16 46
Customer remediation exercise provision
Based on the results to date of the Skilled Person Review, which is not yet
complete, together with other evidence available, the Group considers that a
customer remediation exercise in relation to ongoing advice will likely be
required. As such, a present obligation exists and a provision of £76 million
has been recognised at 31 December 2024 (31 December 2023: £nil) relating to
potential remediation following the review of the delivery of ongoing advice
services by the Appointed Representative firms in the Quilter Financial
Planning network. A reasonable estimate of the provision has been determined
based upon a potential customer remediation exercise, whereby the population
of customers who are at the highest likelihood of having not received the
expected level of service from their adviser would be identified. These
customers would be invited to join the Review if they believe that they have
not received ongoing advice and if they wish to have their situation reviewed
by Quilter. Appropriate and proportionate redress would be paid to impacted
customers. Following the initial draft results of the statistically reliable
representative cohort of customers undertaken by the Skilled Person, together
with other available evidence, the Group has determined a reasonable estimate
of a provision for potential cost to settle the obligation based upon this
approach, considering uncertainties and based upon key assumptions. The draft
results from the Skilled Person Review have been extrapolated from their
sample to the population of all customers who paid an ongoing advice charge
between 2018 and 2023 (inclusive of both years). An independent expert has
reviewed the results of the Skilled Person Review on a sample basis to
determine, based on the available evidence, the cases where the expected level
of service from their adviser may not have been received, and these results
have been considered in determining the provision. An estimate of the response
rate of customers to join the Review, and of the associated administrative
costs, has been determined based upon experience from previous past business
reviews performed by the Group, and assumptions on the number of customers who
may be subject to the review process.
The provision recognised, based upon the approach described above, includes an
estimate of the refund of ongoing advice charges for customers impacted,
interest payable to customers at rates in line with the Financial Ombudsman
Service interest rates, and administrative costs, both internal and external,
to perform the potential customer remediation exercise. Customer redress is
expected to be calculated and paid to relevant customers over a two-year
period to December 2026. Of the total £76 million provision outstanding, £33
million is estimated to be payable within one year. Where amounts are
estimated to be payable after 12 months, these payments have been discounted
to their present value. The discount rate used is not a significant estimate
given the short time period over which payments are expected to be made.
The following table presents the potential change to the provision balance at
31 December 2024 as a result of movements in the key assumptions:
£m
31 December 2024
Increase Decrease
Percentage point change in proportion of population where satisfactory service 16 (16)
evidence is unavailable of 10%
Percentage point change in response rate of 10% 14 (14)
Change in administrative costs of 10% 3 (3)
Significant uncertainty exists regarding the scope and method of a potential
remediation exercise, which will be informed by the final results of the
Skilled Person Review and follow further discussions with the FCA, including
the customer cohorts to be involved within the Review and the customer and
Appointed Representative firm contact strategies, the proportion of the
population of customers charged a fee where satisfactory evidence of servicing
is unavailable, the response rate of customers contacted and the
administrative costs. The financial impact could be materially higher or lower
than the amount of the provision.
Separate to the Skilled Person Review and the related provision for the
potential customer remediation exercise, where the Group's regular adviser
oversight controls have determined, based on the available evidence, that a
customer may not have received the servicing that they have paid for, or where
the Group has received complaints from customers regarding ongoing servicing,
this has been investigated, and, where appropriate, remediation has been
undertaken and recognised as a normal business as usual expense.
Compensation provisions
At 31 December 2024, compensation provisions total £14 million (31 December
2023: £17 million). The net reduction of £3 million during the year consists
of additional charges to profit or loss of £10 million, compensation and
professional fees payments of £5 million and £8 million release of unused
amounts following further review work completed during the year. Compensation
provisions comprise the following:
Lighthouse pension transfer advice provision of £1 million (31 December 2023:
£6 million)
A further review of a sample of Lighthouse DB to DC pension transfer advice
cases not relating to the British Steel Pension Scheme is being conducted by
an independent expert to identify any cases of unsuitable DB to DC pension
transfer advice. The review is being conducted under a Group managed past
business review process, and the sample has been selected on a risk-based
approach. The review of this sample has identified some additional cases where
customer redress is required. Until the review of the relevant sample has been
completed, uncertainty exists as to the number of cases where this will be
required and the value of total redress which may be payable. A provision for
redress relating to the review of this further sample of cases was increased
at 31 December 2023, based upon the suitability review of cases, and the
anticipated number of cases required to be reviewed. Payments of £1 million
were made to customers during 2023. Anticipated costs associated with the
redress activity of £2 million were included within the provision at 31
December 2023.
During 2024, redress payments of £1 million were made to customers, £1
million of professional fees were paid, and £3 million of the provision
related to customer redress was unused and reversed, as a result of the
redress calculations performed for customers being lower than forecast at 31
December 2023, due to changes in the assumptions used to perform the
calculations and market movements of the pension scheme values during 2024.
Given that the review is nearing completion, the Group's estimate of the
remaining liability is expected to be utilised in full and settled within the
next 12 months.
Compensation provisions (other) of £13 million (31 December 2023: £11
million)
Other compensation provisions of £13 million include amounts relating to
internally conducted past business reviews, the cost of correcting
deficiencies in policy administration systems, including redress, any
associated litigation costs and the related costs to compensate current and
former policyholders and customers. This provision represents management's
best estimate of expected outcomes based upon past experience, and a review of
the details of each case. Due to the nature of the provision, the timing of
the expected cash outflows is uncertain. The best estimate of the timing of
outflows is that the majority of the balance is expected to be settled within
12 months.
A provision of £7 million, included within the balance, has been recognised
at 31 December 2024 (31 December 2023: £nil) relating to internally conducted
past business reviews of ongoing servicing within Quilter Financial Planning,
as part of the Group's normal business operations. The estimate of the
provision has been determined for the current status of the past business
reviews and redress estimated based upon an initial analysis of adviser
servicing records. Customer redress is expected to be calculated and paid to
relevant customers during 2025.
A provision of £2 million, included within the balance, has been recognised
at 31 December 2024 (31 December 2023: £3 million) relating to potentially
unsuitable DB to DC pension transfer advice provided by adviser businesses
other than Lighthouse. The estimate of the provision has been updated for the
current status of the past business reviews and redress estimated based upon
the Group's experience of past business reviews. Customer redress is expected
to be calculated and paid to relevant customers during the first half of 2025.
The Group estimates a reasonably possible change of +/- £4 million from the
£13 million balance, based upon a review of the cases and the range of
potential outcomes for the customer redress payments.
Sale of subsidiaries provision
The sale of subsidiaries provision totals £1 million at 31 December 2024 (31
December 2023: £3 million), and includes the following:
Provisions arising on the sale of Quilter International of £nil (31 December
2023: £2 million)
Quilter International was sold in November 2021, resulting in provisions
totalling £17 million being established in respect of costs related to the
disposal including the costs of business separation and data migration
activities.
The costs of business separation arise from the process required to separate
Quilter International's infrastructure, which was complex and covered a wide
range of areas including people, IT systems, data, contracts and facilities. A
programme team was established to ensure the transition of these areas to the
acquirer. These provisions were based on external quotations and estimates,
together with estimates of the incremental time and resource costs required to
achieve the separation, which was expected to occur over a two-to-three-year
period from the date of the sale.
The most significant element of the provision was the cost of migration of IT
systems and data to the acquirer. Calculation of the provision was based on
management's best estimate of the work required, the time it was expected to
take, the number and skills of the staff required and their cost, and the cost
of related external IT services to support the work. In reaching these
judgements and estimates, management made use of its past experience of
previous IT migrations following business disposals.
During the year, £2 million (31 December 2023: £9 million) of the provision
related to decommissioning works has been used, and the project has been
completed.
Provision for tax warranty claim £1 million (31 December 2023: £1 million)
This provision is for warranty claims relating to the sale of former
subsidiaries. The amount is expected to be realised within one year.
Property provisions
Property provisions total £7 million (31 December 2023: £10 million).
Property provisions represent the discounted value of expected future costs of
reinstating leased property to its original condition at the end of the lease
term, and any onerous commitments which may arise in cases where a leased
property is no longer fully used by the Group. The estimate is based upon
property location, size of property and an estimate of the cost per square
foot. Property provisions are used or released when the reinstatement
obligations are satisfied. The associated asset for the property provisions
relating to the cost of reinstating property is included within Property,
plant and equipment.
Of the £7 million provision outstanding, £1 million (31 December 2023: £3
million) is estimated to be payable within one year. The majority of the
balance relates to leased properties which have a lease term maturity of more
than five years.
Clawback and other provisions
Clawback and other provisions total £13 million (31 December 2023: £16
million) and include amounts for the resolution of legal uncertainties and the
settlement of other claims raised by contracting parties and indemnity
commission provisions. Where the impact of discounting is material, provisions
are discounted at discount rates specific to the risks inherent in the
liability. The timing and final amounts of payments, particularly those in
respect of litigation claims and similar actions against the Group, are
uncertain and could result in adjustments to the amounts recorded.
Included within the balance at 31 December 2024 is £10 million (31 December
2023: £12 million) of clawback provisions in respect of potential refunds due
to product providers on indemnity commission within the Quilter Financial
Planning business. This provision, which is estimated and charged as a
reduction of revenue at the point of sale of each policy, is based upon
assumptions determined from historical experience of the proportion of
policyholders cancelling their policies, which requires Quilter to refund a
portion of commission previously received to the product provider. Reductions
to the provision result from the payment of cash to product providers as
refunds or the recognition of revenue where a portion of the indemnity
commission is assessed as no longer payable. The provision has been assessed
at the reporting date and adjusted for the latest cancellation information
available. At 31 December 2024, an associated balance of £6 million
recoverable from brokers is included within Trade, other receivables and other
assets (31 December 2023: £8 million).
The Group estimates a reasonably possible change of +/- £3 million, based
upon the potential range of outcomes for the proportion of cancelled policies
within the clawback provision, and a detailed review of the other provisions.
Of the total £13 million provision outstanding, £6 million is estimated to
be payable within one year (31 December 2023: £7 million).
17: Contingent liabilities
The Group, in the ordinary course of business, enters into transactions that
expose it to tax, legal, regulatory and business risks. The Group recognises a
provision when it has a present obligation as a result of past events, it is
probable that a transfer of economic benefits will be required to settle the
obligation and a reliable estimate of the amount can be made (see note 16).
Possible obligations and known liabilities where no reliable estimate can be
made, or it is considered improbable that an outflow would result, are
reported as contingent liabilities.
The Group routinely monitors and assesses contingent liabilities arising from
matters such as business reviews, litigation, warranties and indemnities
relating to past acquisitions and disposals.
Tax
The Group is committed to conducting its tax affairs in accordance with the
tax legislation of the countries in which it operates and this includes
compliance with legislation related to levies, sales taxes and payroll
deductions.
The tax authorities in the countries in which the Group operates routinely
review historical transactions undertaken and tax law interpretations made by
the Group. All interpretations made by the Group are made with reference to
the specific facts and circumstances of the transaction and the relevant
legislation.
There are occasions where the Group's interpretation of tax law may be
challenged by the tax authorities. The consolidated financial statements
include provisions that reflect the Group's assessment of liabilities which
might reasonably be expected to materialise as part of their review. The Group
is satisfied that adequate provisions have been made to allow for the
resolution of tax uncertainties.
Due to the level of estimation required in determining tax provisions, amounts
eventually payable may differ from the provision recognised.
DB to DC pension transfer advice redress
As set out in note 16, a sample of Lighthouse DB to DC pension transfer advice
cases not relating to the British Steel Pension Scheme is being reviewed under
a Group-managed past business review process. Until the review has finalised,
which is expected during the first half of 2025, uncertainty exists as to the
value of total redress that will be payable.
Customers have the legal right to challenge the outcome of the review in
respect of their case via a complaint to the Financial Ombudsman Service. The
review is being undertaken by a party who is independent from the Group and
has run a robust process overseen by the FCA. The Financial Ombudsman Service
may uphold further challenges, which may lead to further redress payable by
the Group.
It is possible that further material costs of redress may be incurred in
relation to past business reviews. Further customer redress costs may also be
incurred for other potential unsuitable DB to DC pension transfer advice
provided across the Group.
Any further redress costs, and any differences between the provision and the
final payment to be made for any unsuitable DB to DC pension transfer cases,
will be recognised as an expense or credit in profit or loss.
Complaints, disputes and regulations
The Group is committed to treating customers fairly and remains focused on
delivering good outcomes for customers to support them in meeting their
lifetime goals. During the normal course of business, from time to time, the
Group receives complaints and claims from customers including, but not limited
to, complaints to the Financial Ombudsman Service and legal proceedings,
enters into commercial disputes with service providers and other parties, and
is subject to discussions and reviews with regulators. The costs, including
legal costs, of these issues as they arise can be significant and, where
appropriate, provisions have been established.
Ongoing Advice Review
As disclosed in note 16, the Group has recognised a provision for a reasonable
estimate of the cost of a potential customer remediation exercise in relation
to ongoing advice. However, until the results of the Skilled Person Review are
finalised and further discussions with the FCA are progressed, there is
significant uncertainty as to the nature, scope and form of any potential
future customer remediation exercise. This includes consideration of the
customer cohorts to be involved within a potential customer remediation
exercise, and the customer and Appointed Representative firm contact
strategies.
In addition, where redress payments are made to customers, the Group has the
ability to seek appropriate reimbursement from the relevant Appointed
Representative firms who have been unable to demonstrate that the ongoing
advice service paid by the client was provided. Should the Group make payments
to customers, recompense to the Group can be sought from the relevant
Appointed Representative firm who has benefited from the majority of the
revenue recognised over the period of the servicing agreement. Any
reimbursement would not be recognised as an asset until such time as
recoverability became virtually certain, and would only be disclosed, but not
recognised, as a contingent asset if and when a cash inflow becomes probable.
18: Capital and financial risk management
18(a): Capital management
The Group manages its capital with a focus on capital efficiency and effective
risk management. The capital management objectives are to maintain the Group's
ability to continue as a going concern while supporting the optimisation of
return relative to the risks. The Group ensures that it can meet its expected
capital and financing needs at all times having regard to the Group's Business
Plans, forecasts, strategic initiatives and the regulatory requirements
applicable to Group entities.
The Group's overall capital risk appetite is set with reference to the
requirements of the relevant stakeholders and seeks to:
· maintain sufficient, but not excessive, financial strength to
support stakeholder requirements;
· optimise debt to equity structure to enhance shareholder returns;
and
· retain financial flexibility by maintaining liquidity including
unutilised committed credit lines.
The primary sources of capital used by the Group are equity shareholders'
funds of £1,423 million (2023: £1,519 million) and subordinated debt which
was issued at £200 million in January 2023. Alternative resources are
utilised where appropriate. Risk appetite has been defined for the level of
capital, liquidity and debt within the Group. The risk appetite includes
long-term targets, early warning thresholds and risk appetite limits. The
dividend policy sets out the target dividend level in relation to profits.
The regulatory capital for the Group is assessed under UK Solvency II
requirements.
18(a)(i): Regulatory capital (unaudited)
The Group is subject to UK Solvency II group supervision by the Prudential
Regulation Authority. The Group is required to measure and monitor its capital
resources under the UK Solvency II regulatory regime. The UK Solvency II
regime replaced Solvency II with effect from 31 December 2024 reporting.
Comparative figures for regulatory capital for 2023 are presented on a
Solvency II basis.
The Group's UK life insurance undertaking is included in the Group solvency
calculation on a UK Solvency II basis. Other regulated entities are included
in the Group solvency calculation according to the relevant sectoral rules.
The Group's UK Solvency II surplus is the amount by which the Group's capital
on a UK Solvency II basis (own funds) exceeds the UK Solvency II capital
requirement (solvency capital requirement or "SCR").
The Group's UK Solvency II surplus is £851 million at 31 December 2024 (2023:
£972 million), representing an SCR coverage ratio of 219% (2023: 271%)
calculated under the standard formula. The UK Solvency II regulatory position
at 31 December 2024 allows for the impact of the recommended Final Dividend
payment of £57 million (2023: £50 million).
The UK Solvency II position as at 31 December 2024 (unaudited estimate) and 31
December 2023 is presented below:
£m
31 December 31 December
2024(1) 2023(2)
Own funds 1,566 1,540
Solvency capital requirement 715 568
UK Solvency II surplus 851 972
UK Solvency II coverage ratio 219% 271%
(1)Filing of annual regulatory reporting forms due by 27 May 2025.
(2)As reported in the Group Solvency and Financial Condition Report for the
year ended 31 December 2023.
The Group's own funds include the Quilter plc issued subordinated debt
security which qualifies as capital under UK Solvency II. The composition of
own funds by tier is presented in the table below.
£m
Group own funds 31 December 31 December
2024 2023
Tier 1(1) 1,366 1,336
Tier 2(2) 200 204
Total Group UK Solvency II own funds 1,566 1,540
(1)All Tier 1 capital is unrestricted for tiering purposes.
(2)Comprises a UK Solvency II compliant subordinated debt security in the form
of a Tier 2 bond, which was issued at £200 million in January 2023.
The Group's UK life insurance undertaking is also subject to UK Solvency II at
entity level. Other regulated entities in the Group are subject to the locally
applicable entity-level capital requirements in the countries in which they
operate. In addition, the Group's asset management and advice businesses are
subject to group supervision by the FCA under the UK Investment Firms
Prudential Regime ("IFPR").
During 2024, the capital requirements for the Group and its regulated
subsidiaries were reported and monitored through regular Group Financial Risk
Management Committee meetings. Throughout 2024, the Group has complied with
the regulatory requirements that apply at a consolidated level and Quilter's
insurance undertakings and investment firms have complied with the regulatory
capital requirements that apply at entity level.
18(a)(ii): Loan covenants
Under the terms of the revolving credit facility agreement, the Group is
required to comply with the following financial covenant: the ratio of total
net borrowings to consolidated equity shareholders' funds shall not exceed
0.5.
£m
31 December 31 December
2024 2023
Total external borrowings of the Company 198 198
Less: cash and cash equivalents of the Company (135) (110)
Total net external borrowings of the Company 63 88
Total shareholders' equity of the Group 1,423 1,519
Tier 2 bond 198 198
Total Group equity (including Tier 2 bond) 1,621 1,717
Ratio of Company net external borrowings to Group equity 0.039 0.051
The Group has complied with the covenant since the facility was originally
created in 2018.
18(a)(iii): Own Risk and Solvency Assessment ("ORSA") and Internal Capital
Adequacy and Risk Assessment ("ICARA")
The Group ORSA process is an ongoing cycle of risk and capital management
processes which provides an overall assessment of the current and future risk
profile of the Group and demonstrates the relationship between business
strategy, risk appetite, risk profile and solvency needs. These assessments
support strategic planning and risk-based decision making.
The underlying ORSA processes cover the Group and consider how risks and
solvency needs may evolve over the planning period. The ORSA includes stress
and scenario tests, which are performed to assess the financial and
operational resilience of the Group.
The Group ORSA report is produced annually. This summarises the analysis,
insights and conclusions from the underlying risk and capital management
processes in respect of the Group. The ORSA report is submitted to the PRA as
part of the normal supervisory process and may be supplemented by ad hoc
assessments where there is a material change in the risk profile of the Group
outside the usual reporting cycle.
In addition to the Group ORSA process, an entity-level ORSA process is
performed for Quilter Life & Pensions Limited, with its results included
in the Group ORSA report.
The Group ICARA process is an ongoing cycle of risk and capital management
processes, similar to the ORSA process. The Group ICARA process is performed
for the prudential consolidation of Quilter's investment and advice firms
under IFPR requirements. The ICARA process is also performed at an entity
level for Quilter's UK investment firms, which are Quilter Investment Platform
Limited, Quilter Investors Limited, Quilter Cheviot Limited and NuWealth
Limited.
The Group ICARA report is produced annually. This summarises the analysis,
insights and conclusions from the underlying risk and capital management
processes in respect of Quilter's IFPR prudential consolidation group.
The conclusions of the ORSA and ICARA processes are reviewed by management and
the Board throughout the year.
18(b): Credit risk
Overall exposure to credit risk
Credit risk is the risk of adverse movements in credit spreads (relative to
the reference yield curve), credit ratings or default rates leading to a
deterioration in the level or volatility of assets, liabilities or financial
instruments resulting in loss of earnings or reduced solvency. This includes
counterparty default risk, counterparty concentration risk and spread risk.
The Group has established a Credit Risk Framework that includes a Credit Risk
Policy and Credit Risk Appetite Statement. This framework applies to all
activities where the Group is exposed to credit risk, either directly or
indirectly, ensuring appropriate identification, measurement, management,
monitoring and reporting of the Group's credit risk exposures.
The credit risk arising from all exposures is mitigated by ensuring that the
Group only enters into relationships with appropriately robust counterparties,
adhering to the Group Credit Risk Policy. For each asset, consideration is
given as to:
· the credit rating of the counterparty, which is used to derive
the probability of default;
· the loss given default;
· the potential recovery which may be made in the event of default;
· the extent of any collateral that the Group has in respect of the
exposures; and
· any second order risks that may arise where the Group has
collateral against the credit risk exposure.
The credit risk exposures of the Group are monitored regularly to ensure that
counterparties remain creditworthy, that there is appropriate diversification
of counterparties and that exposures are within approved limits. At the end of
2024, the Group's material credit exposures were to financial institutions
(primarily through the investment of shareholder funds), corporate entities
(including external fund managers) and individuals (primarily through fund
management trade settlement activities).
There is no direct exposure to non-UK sovereign debt within the shareholder
investments. The Group has no significant concentrations of credit risk
exposure.
Other credit risks
The Group is exposed to financial adviser counterparty risk through a number
of loans that it makes to its financial advisers and the payment of upfront
commission on the sale of certain types of business. The risk of default by
financial advisers is managed through monthly monitoring of loan and
commission debt balances.
The Group is also exposed to the risk of default by fund management groups in
respect of settlements. This risk is managed through the due diligence process
which is completed before entering into any relationship with a fund group.
Amounts due to and from fund groups are monitored for prompt settlement and
appropriate action is taken where settlement is not timely.
Legal contracts are maintained where the Group enters into credit transactions
with a counterparty.
Impact of credit risk on fair value
Due to the limited exposure that the Group has to credit risk, credit risk
does not have a material impact on the fair value movement of financial
instruments for the year under review. The fair value movements on these
instruments are mainly due to changes in market conditions.
Maximum exposure to credit risk
The Group's maximum exposure to credit risk does not differ from the carrying
value disclosed in the relevant notes to the consolidated financial
statements.
Loans and advances subject to 12-month expected credit losses are £56 million
(2023: £38 million) and other receivables subject to lifetime expected credit
losses are £268 million (2023: £297 million). Those balances represent the
pool of counterparties that do not require a rating. These counterparties
individually generate no material credit exposure and this pool is highly
diversified, monitored and subject to limits.
Exposure arising from financial instruments not recognised on the statement of
financial position is measured as the maximum amount that the Group would have
to pay, which may be significantly greater than the amount that would be
recognised as a liability. The Group does not have any significant exposure
arising from items not recognised on the statement of financial position.
The table below represents the Group's exposure to credit risk from cash and
cash equivalents.
£m
Credit rating relating to cash and cash equivalents
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