RNS Number : 8210H

Quilter PLC

05 August 2019

Statement of Directors' responsibilities in respect of the interim financial statements

For the six month period ended 30 June 2019

Each of the Directors of Quilter plc confirms to the best of his or her knowledge and belief that:

· The condensed set of consolidated financial statements, which comprises the consolidated income statement and statement of comprehensive income, reconciliation of adjusted profit to profit after tax, consolidated statement of changes in equity, consolidated statement of financial position, consolidated statement of cash flows and the related explanatory notes, has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union.

· The interim management report includes a fair review of the information required by:

a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of consolidated financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the Group's 31 December 2018 annual report and accounts, that could do so.

As per provision C1 of the UK Corporate Governance Code, the results for the half year 2019 results taken as a whole, present a fair, balanced and understandable position of the Company's prospects.

Paul Feeney                                                                              Mark Satchel
Chief Executive Officer                                                               Chief Financial Officer
4 August 2019                                                                            4 August 2019

Independent review report to the members of Quilter plc

For the six month period ended 30 June 2019

Conclusion

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 which comprises the consolidated income statement and statement of comprehensive income, reconciliation of adjusted profit to profit after tax, consolidated statement of changes in equity, consolidated statement of financial position, the consolidated statement of cash flows and the related explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ('the DTR') of the UK's Financial Conduct Authority ('the UK FCA').

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

The impact of uncertainties due to the UK exiting the European Union on our review

Uncertainties related to the effects of Brexit are relevant to understanding our review of the condensed financial statements. Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty of outcomes, with the full range of possible effects unknown. An interim review cannot be expected to predict the unknowable factors or all possible future implications for a company and this is particularly the case in relation to Brexit.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Jonathan Mills

for and on behalf of KPMG LLP

Chartered Accountants

15 Canada Square

London

E14 5GL

4 August 2019

Consolidated income statement
For the six month period ended 30 June 2019
				£m
	Notes	Six months 2019¹	Six months 2018	Full year 2018
Revenue
Gross earned premiums		1	1	1
Premiums ceded to reinsurers		(1)	(1)	(1)
Net earned premiums		-	-	-
Fee income and other income from service activities	5(d)	450	475	954
Investment return		5,043	288	(2,712)
Other income		21	9	35
Total revenue		5,514	772	(1,723)
Expenses
Insurance contract claims and changes in liabilities		-	-	(1)
Change in investment contract liabilities	17(b)	(4,348)	(190)	2,499
Fee and commission expenses, and other acquisition costs		(190)	(209)	(398)
Change in third party interest in consolidated funds		(586)	3	369
Other operating and administrative expenses		(344)	(369)	(722)
Finance costs		(8)	(10)	(16)
Total expenses		(5,476)	(775)	1,731
Profit/(loss) before tax from continuing operations		38	(3)	8
Tax (expense)/credit attributable to policyholder returns		(78)	3	61
(Loss)/profit before tax attributable to equity holders		(40)	-	69
Income tax (expense)/credit	7(a)	(70)	5	81
Less: tax expense/(credit) attributable to policyholder returns		78	(3)	(61)
Tax credit attributable to equity holders		8	2	20
(Loss)/profit after tax from continuing operations		(32)	2	89
Profit after tax from discontinued operations	4(c)	15	340	399
(Loss)/profit after tax		(17)	342	488

Attributable to:
Equity holders of Quilter plc		(17)	342	488

Earnings per ordinary share on profit attributable to ordinary shareholders of Quilter plc
Basic
From continuing operations (pence)	8(b)	(1.7)	0.1	4.8
From discontinued operations (pence)	4(c)	0.8	18.6	21.8
Basic earnings per ordinary share (pence)	8(b)	(0.9)	18.7	26.6
Diluted
From continuing operations (pence)	8(b)	(1.7)	0.1	4.8
From discontinued operations (pence)	4(c)	0.8	18.6	21.7
Diluted earnings per ordinary share (pence)	8(b)	(0.9)	18.7	26.5

¹The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognised in retained earnings at the time of initial application.

Consolidated statement of comprehensive income
For the six month period ended 30 June 2019

				£m
	Note	Six months 2019	Six months 2018	Full year 2018
(Loss)/profit after tax		(17)	342	488
Other comprehensive income:
Items that may be reclassified subsequently to income statement		-	(1)	-
Total comprehensive (expense)/income		(17)	341	488

Attributable to:
Continuing operations		(32)	1	89
Discontinued operations	4(d)	15	340	399
Equity holders of Quilter plc		(17)	341	48

Reconciliation of adjusted profit to profit after tax
For the six month period ended 30 June 2019

										£m
			Six months 2019			Six months 2018			Full year 2018
	Notes	Continuing operations	Discontinued operations¹	Total	Continuing operations	Discontinued operations¹	Total	Continuing operations	Discontinued operations¹	Total
Advice and Wealth Management		50	-	50	47	26	73	102	26	128
Wealth Platforms		56	26	82	56	27	83	105	57	162
Head Office		(17)	-	(17)	(20)	-	(20)	(31)	-	(31)
Adjusted profit before tax	5(b)	89	26	115	83	53	136	176	83	259
Adjusted for the following:
Goodwill impairment and impact of acquisition accounting	6(a)	(26)	-	(26)	(28)	-	(28)	(50)	-	(50)
Profit on business disposals	4(b)	-	-	-	-	285	285	-	290	290
Business transformation costs	6(b)	(35)	-	(35)	(37)	-	(37)	(84)	-	(84)
Managed Separation costs	6(c)	(2)	-	(2)	(17)	-	(17)	(24)	-	(24)
Finance costs	6(d)	(5)	-	(5)	(8)	-	(8)	(13)	-	(13)
Policyholder tax adjustments	6(e)	(61)	(15)	(76)	7	8	15	64	37	101
Voluntary customer remediation provision	6(f)	-	6	6	-	-	-	-	-	-
Total adjusting items before tax		(129)	(9)	(138)	(83)	293	210	(107)	327	220
Profit/(Loss) before tax		(40)	17	(23)	-	346	346	69	410	479
Tax attributable to policyholder returns		78	59	137	(3)	(15)	(18)	(61)	(97)	(158)
Income tax (expense)/credit	7(b)	(70)	(61)	(131)	5	9	14	81	86	167
Profit/(Loss) after tax		(32)	15	(17)	2	340	342	89	399	488

Adjusted earnings per share
	Notes	Continuing operations	Discontinued operations¹	Total	Continuing operations	Discontinued operations¹	Total	Continuing operations	Discontinued operations¹	Total
Adjusted profit before tax		89	26	115	83	53	136	176	83	259
Shareholder tax on adjusted profit	7(c)	(13)	-	(13)	(9)	(6)	(15)	(13)	2	(11)
Adjusted profit after tax	8(b)	76	26	102	74	47	121	163	85	248
Basic weighted average number of ordinary shares (millions)	8(a)			1,834			1,830			1,832
Adjusted basic earnings per share (pence)	8(b)	4.1	1.5	5.6	4.0	2.6	6.6	8.9	4.6	13.5
Diluted weighted average number of ordinary shares (millions)	8(a)			1,852			1,830			1,839
Adjusted diluted earnings per share (pence)	8(b)	4.1	1.4	5.5	4.0	2.6	6.6	8.9	4.6	13.5

¹Discontinued operations for the six months and full year 2018 includes the results of Quilter Life Assurance ('QLA') and the Single Strategy business. Six months 2019 is QLA only. A breakdown of these businesses is included in the 'Review of Financial Performance'. For further details of the Group's segmentation see note 5.

Basis of preparation of adjusted profit

Adjusted profit is one of the Group's Alternative Performance Measures and reflects the Directors' view of the underlying performance of the Group. It is used for management decision making and internal performance management and is the profit measure presented in the Group's segmental reporting. Adjusted profit is a non-GAAP measure which adjusts the IFRS profit for specific agreed items as detailed in note 6.

Adjusted profit excludes significant costs or income that are non-operating or one-off in nature, which includes but is not limited to: the impact of acquisition accounting and any impairment of goodwill; any profit or loss on business acquisitions and disposals; costs related to business transformation; and interest costs on external borrowings. Adjusted profit also treats policyholder tax as a pre-tax charge (to offset against the related income collected from policyholders), though adjusted to remove the impact of non-operating tax items. Full details of the Group's adjusting items are described in note 6.

Adjusted earnings applied in the calculation of adjusted earnings per share is calculated based on adjusted profit after tax. The calculation of the adjusted weighted average number of shares includes own shares held in policyholders' funds.

The Board Audit Committee regularly reviews the use of adjusted profit to confirm that it remains an appropriate basis on which to analyse the operating performance of the business. The Committee assesses refinements to the policy on a case-by-case basis, and, where possible, the Group seeks to minimise such changes in order to maintain consistency over time.

The attached notes on pages 37 to 74 form an integral part of these condensed consolidated interim financial statements.

Consolidated statement of changes in equity
For the six month period ended 30 June 2019

								£m
30 June 2019	Notes	Share capital	Share premium	Merger reserve	Share-based payments reserve	Other reserves	Retained earnings	Total share- holders' equity
Shareholders' equity at beginning of the period		133	58	588	34	1	1,191	2,005
Adjustment on initial application of IFRS 16 (net of tax)¹		-	-	-	-	-	(5)	(5)
Balance at 1 January 2019		133	58	588	34	1	1,186	2,000
(Loss) for the period		-	-	-	-	-	(17)	(17)
Total comprehensive (expense)		-	-	-	-	-	(17)	(17)
Dividends	9	-	-	-	-	-	(61)	(61)
Movement in treasury shares		-	-	-	-	-	(1)	(1)
Equity share-based payment transactions²	16	-	-	-	5	-	8	13
Total transactions with the owners of the Company		-	-	-	5	-	(54)	(49)
Balance at 30 June 2019		133	58	588	39	1	1,115	1,934

30 June 2018	Notes	Share capital	Share premium	Merger reserve	Share-based payments reserve	Other reserves	Retained earnings	Total share- holders' equity
Balance at 1 January 2018		130	58	-	38	1	872	1,099
Profit for the period		-	-	-	-	-	342	342
Other comprehensive income/(expense)		-	-	-	1	-	(2)	(1)
Total comprehensive income		-	-	-	1	-	340	341
Acquisition of entities due to managed separation restructure³		-	-	591	-	-	-	591
Issue of share capital		3	-	(3)	-	-	-	-
Movement in treasury shares		-	-	-	-	-	1	1
Equity share-based payment transactions²	16	-	-	-	(2)	-	30	28
Change in participation in subsidiaries		-	-	-	(12)	-	12	-
Total transactions with the owners of the Company		3	-	588	(14)	-	43	620
Balance at 30 June 2018		133	58	588	25	1	1,255	2,060

31 December 2018	Notes	Share capital	Share premium	Merger reserve	Share-based payments reserve	Other reserves	Retained earnings	Total share- holders' equity
Balance at 1 January 2018		130	58	-	38	1	872	1,099
Profit for the period		-	-	-	-	-	488	488
Total comprehensive income		-	-	-	-	-	488	488
Dividends	9	-	-	-	-	-	(221)	(221)
Acquisition of entities due to managed separation restructure³		-	-	591	-	-	-	591
Issue of share capital		3	-	(3)	-	-	-	-
Movement in treasury shares		-	-	-	-	-	5	5
Equity share-based payment transactions²	16	-	-	-	7	-	35	42
Change in participation in subsidiaries		-	-	-	(12)	-	12	-
Aggregate tax effects of items recognised directly in equity		-	-	-	1	-	-	1
Total transactions with the owners of the Company		3	-	588	(4)	-	(169)	418
Balance at 31 December 2018		133	58	588	34	1	1,191	2,005

²Equity-settled share-based payment transactions includes £13 million of IFRS 2 costs (June 2018: £13 million; December 2018: £27 million) and an £8 million transfer to retained earnings representing share-based payment schemes that have fully vested (June 2018: £30 million; December 2018: £35 million). June and December 2018 also include £15 million previously recognised within liabilities transferred to equity, including cash awards that were converted to equity-settled awards.

³Acquisition of Skandia UK Ltd group of entities from Old Mutual plc, comprising of seven entities with a net asset value of £591 million. The transfer was effected by the issue of one share and with the balance giving rise to a merger reserve of £591 million in the consolidated statement of financial position. Further details of this transaction are included within the Group's 2018 Annual Report and Accounts ('ARA').

The attached notes on pages 37 to 74 form an integral part of these condensed consolidated interim financial statements.

Consolidated statement of financial position
At 30 June 2019

				£m
	Notes	30 June 2019¹	30 June 2018	31 December 2018
Assets
Goodwill and intangible assets	10	587	566	550
Property, plant and equipment²	11	89	17	17
Investments in associated undertakings		2	1	2
Deferred acquisition costs		-	12	11
Contract costs		477	575	551
Contract assets		45	45	44
Loans and advances		220	219	222
Financial investments	12	56,423	64,569	59,219
Reinsurers' share of policyholder liabilities	17	-	2,666	2,162
Deferred tax assets		32	19	38
Current tax receivable		16	3	47
Trade, other receivables and other assets		1,353	1,437	486
Derivative assets		24	33	46
Cash and cash equivalents	15	1,944	3,375	2,395
Assets of operations classified as held for sale	4(f)	12,317	-	-
Total assets		73,529	73,537	65,790

Equity and liabilities
Equity
Ordinary share capital		133	133	133
Ordinary share premium reserve		58	58	58
Merger reserve		588	588	588
Share-based payments reserve		39	25	34
Other reserves		1	1	1
Retained earnings		1,115	1,255	1,191
Total equity		1,934	2,060	2,005
Liabilities
Long-term business insurance policyholder liabilities	17	-	513	602
Investment contract liabilities	17	50,286	60,140	56,450
Third-party interests in consolidated funds		6,972	8,105	5,116
Provisions	18	45	115	94
Deferred tax liabilities		91	164	59
Current tax payable		4	12	5
Borrowings and lease liabilities²		280	197	197
Trade, other payables and other liabilities		1,720	1,937	999
Contract liabilities		192	235	226
Derivative liabilities		24	59	37
Liabilities of operations classified as held for sale	4(f)	11,981	-	-
Total liabilities		71,595	71,477	63,785
Total equity and liabilities		73,529	73,537	65,790

²Following the adoption of IFRS 16, the Group has presented right-of-use assets within Property, plant and equipment and lease liabilities within Borrowings and lease liabilities.

Approved by the Board on 4 August 2019.

Paul Feeney Mark Satchel

Chief Executive Officer Chief Financial Officer

The attached notes on pages 37 to 74 form an integral part of these condensed consolidated interim financial statements.

Consolidated statement of cash flows
For the six month period ended 30 June 2019

The cash flows presented in this statement cover all the Group's activities (continuing and discontinued operations and cash that is held for sale) and include flows from both policyholder and shareholder activities. All cash and cash equivalents are available for use by the Group except for cash and cash equivalents in consolidated funds.

				£m
	Notes	Six months 2019	Six months 2018²	Full year 2018
Cash flows from operating activities
Profit before tax from continuing operations		38	17	5
Profit before tax from discontinued operations	4(c)	76	311	316
Non-cash movements in profit before tax		(647)	637	584
Net changes in working capital		(92)	(603)	(669)
Taxation paid		(10)	(70)	(92)
Total net cash flows (used in)/from operating activities		(635)	292	144
Cash flows from investing activities
Net disposals/(acquisitions) of financial investments		707	227	(366)
Acquisition of property, plant and equipment		(4)	(2)	(7)
Acquisition of intangible assets		(4)	(2)	(4)
Acquisition of interests in subsidiaries		(69)	(2)	(5)
Cash added from acquisitions of subsidiaries		8	25	25
Net proceeds from the disposal of interests in subsidiaries		-	350	350
Total net cash from/(used in) investing activities		638	596	(7)
Cash flows from financing activities
Dividends paid to ordinary equity holders of the Company		(61)	-	(221)
Finance costs on external borrowings		(5)	(3)	(8)
Payment of lease liabilities¹		(8)	-	-
Proceeds from issue of subordinated and other debt		-	497	497
Subordinated and other debt repaid		-	(516)	(516)
Total net cash used in financing activities		(74)	(22)	(248)
Net increase in cash and cash equivalents		(71)	866	(111)
Cash and cash equivalents at beginning of the year		2,395	2,507	2,507
Effects of exchange rate changes on cash and cash equivalents		1	2	(1)
Cash and cash equivalents at end of the period	15	2,325	3,375	2,395

²A number of items within the six months 2018 comparatives have been reclassified to align with the presentation within the six months 2019 and full year 2018 cash flow statement. There was no impact on cash and cash equivalents resulting from these reclassifications.

Basis of preparation and significant accounting policies

For the six month period ended 30 June 2019

General Information

Quilter plc (the 'Company'), a public limited company incorporated and domiciled in the United Kingdom ('UK'), together with its subsidiary undertakings (collectively, the 'Group') offers investment and wealth management services, life assurance, long-term savings and financial advice through its subsidiaries and associates primarily in the UK with a presence in a number of cross-border markets.

The address of the registered office is Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ.

1: Basis of preparation

The results for the six months ended 30 June 2019 have been prepared in accordance with IAS 34 Interim Financial Reporting issued by the International Accounting Standards Board, as adopted by the European Union ('EU'), and are unaudited but have been reviewed by the Auditor, KPMG LLP. These condensed consolidated interim financial statements ('interim financial statements') of Quilter plc for the six months ended 30 June 2019 do not constitute statutory accounts as defined by section 434 of the Companies Act 2006. Comparative financial information for full year 2018 have been taken from the Group's 2018 Annual Report and Accounts ('ARA'), which has been filed with the Registrar of Companies and was prepared in accordance with IFRS, as endorsed by the EU. KPMG provided an unqualified report that did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

These interim financial statements do not include all of the information required for a complete set of International Financial Reporting Standards ('IFRS') compliant financial statements. Selected notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the publication of the Group's 2018 ARA. The Board believes that the Alternative Performance Measures ('APMs') provided, such as adjusted profit, are also useful for both management and investors. Any seasonal or cyclical factors, to the extent that they materially impact the Group's results, are described in the Financial Review.

This is the first set of the Group's financial statements where IFRS 16 Leases and IFRIC 23 Uncertainty over Income Tax Treatments have been applied. Any changes in significant accounting policies to reflect these new standards are explained in note 3. All other accounting policies for recognition, measurement, consolidation and presentation are as outlined in the Group's 2018 ARA. These interim financial statements have been prepared on a historical cost basis, except for the revaluation of certain financial instruments (see note 14 for further details), 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, taking into account its current financial position, the principal risks facing the business and the effectiveness of any mitigating strategies. As a result, the Directors believe that the Group is well placed to manage its business risks in the context of the current economic outlook and has sufficient financial resources to continue in business for a period of at least 12 months from the date of approval of these interim financial statements. Therefore, the Group continues to adopt the going concern basis in preparing the interim financial statements.

Critical accounting estimates and judgements

In preparing these interim financial statements, management has made estimates and judgements that affect the amounts of assets and liabilities, income and expense reported, as well as the application of the Group's accounting policies. The critical areas of accounting estimates and judgements are the same as those disclosed in the 2018 ARA, with the exception of new judgements and key sources of estimation uncertainty introduced through applying IFRS 16 for the first time, which are explained in more detail in note 3, and updated estimations applied to the measurement of the voluntary customer remediation provision as the programme has progressed, detailed in note 18: Provisions.

During the period, the Group has exercised its judgement in line with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations and has recognised the Quilter Life Assurance ('QLA') business as a discontinued operation, restating comparatives accordingly. QLA represents a separate major line of business, representing the Group's closed book of legacy business and comprising 16% of the Group's total assets at June 2019.

2: New standards, amendments to standards, and interpretations adopted by the Group

The Group adopted IFRS 16 Leases for the first time in 2019. The Group has applied the simplified transition approach and will not restate comparative amounts for the period prior to first adoption. The impact of adopting this new standard is outlined in note 3.

The Group adopted IFRIC 23 Uncertainty over Income Tax Treatments for the accounting period beginning on 1 January 2019. This interpretation sets out how to determine taxable profits/losses, tax bases, unused tax losses, unused tax credits and tax rates (collectively referred to as the 'accounting tax position') where there is uncertainty over treatment. All tax provisions for the Group continue to be calculated consistent with IAS 12 Income taxes and provisions in respect of any uncertain tax positions have been calculated consistent with IFRIC 23. No adjustments to tax balances have resulted from the adoption of IFRIC 23.

Other standards

In addition to IFRS 16 and IFRIC 23 there have been a number of amendments to the accounting standards issued by the IASB and endorsed by the EU that became mandatory during 2019. The Group has evaluated these changes and none have a significant impact on the interim financial statements.

3: Significant accounting policies

Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the Group's 2018 ARA.

In disclosing the QLA business within discontinued operations as explained in note 1, operating and administration expenses shown within discontinued operations represent the costs recorded within the accounts of those discontinued businesses in the relevant periods as recorded in the Group's results, and have not been adjusted or restated. See note 4(c) for further information.

Changes in significant accounting policies

The changes in accounting policies outlined below are also expected to be reflected in the Group's consolidated financial statements as at and for the year ending 31 December 2019.

IFRS 16 Leases

As outlined in note 2 above, the Group has adopted IFRS 16 Leases from 1 January 2019.

3: Significant accounting policies continued

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess where a contract conveys the right to control the use of an identified asset, the Group assesses whether:

• the contract involves the use of an identified asset which may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;

• the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

• the Group has the right to direct the use of the asset.

On transition to IFRS 16, the Group elected to apply the following practical expedients:

• apply a single discount rate to a portfolio of leases with similar characteristics;

• not recognise right-of-use assets and lease liabilities for contracts with a term of 12 months or less, or leases for low value items;

• use hindsight when determining the lease term if the contract contains options to extend or terminate the lease; and

• not reassess contracts originally deemed to not be a lease contract under IAS 17 Leases and IFRIC 4 Determining whether an arrangement contains a lease.

For lessee contracts, the right-of-use asset is initially measured at cost, which comprises the initial amount of lease liability, adjusted for any lease payments made at or before the commencement date, and any initial direct costs incurred. Adjustments are also made, where appropriate, for dilapidation requirements and lease incentives received such as rent free periods. The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the Group's incremental borrowing rate.

Subsequent to lease commencement, the Group measures the right-of-use asset using a cost model, whereby the asset is held at cost less accumulated depreciation and any accumulated impairment. Depreciation is charged to the income statement on a straight line basis to write down the cost of the right-of-use asset to its residual value over its estimated useful life which is dependent on the length of the lease. In addition, the carrying amount of the right-of-use asset may be adjusted for certain remeasurements of the lease liability. The lease liability is subsequently measured at amortised cost using the effective interest method and also reflects any lease modifications or reassessments.

The Group presents its right-of-use assets within 'Property, plant and equipment' and lease liabilities within 'Borrowings and lease liabilities' in the statement of financial position. The Group does not have any right-of-use assets that would meet the definition of investment property.

The Group currently has material lease commitments of varying durations for the rental of numerous office buildings. The future lease cash outflows within the Group are not exposed to variable lease payments, low value or short term leases, residual value guarantees, restrictions or covenants imposed by a lease contract or sale and leaseback transactions.

In the period prior to the adoption of IFRS 16, leases were accounted for under IAS 17 and classified as operating leases. Payments associated with operating leases were recognised in the income statement on a straight line basis over the term of the lease and not disclosed in the Group's statement of financial position.

Impacts on transition

On transition, the Group recognised right-of-use assets and lease liabilities, recognising the difference in retained earnings, with no impact to the income statement. Also on transition, rent free period equalisation and dilapidation provisions are included in the right-of-use assets and lease liabilities. Prior to IFRS 16, these provisions were recorded as separate items on the statement of financial position and so, on transition to IFRS 16, these provisions have been removed. The impact on transition is summarised below:

		£m
Right-of-use assets presented in Property, plant and equipment		74
Lease liabilities presented in Borrowings and lease liabilities		(88)
Rent free equalisation and dilapidation provision adjustment		8
Deferred tax adjustment		1
Adjustment to opening retained earnings		(5)

When measuring the lease liabilities, the Group discounted the lease payments using its incremental borrowing rate at 1 January 2019 which ranged from 1.7% to 3.7%. The Group's operating lease commitments where the Group is the lessee at 31 December 2018 were valued at £98 million under IAS 17. Upon adoption of IFRS 16 on 1 January 2019, this was recalculated to £88 million using the incremental borrowing rates above. The simplified transition approach creates deferred tax implications, so as the corporation tax deduction is spread over the length of the remaining leases, the deferred tax is unwound over the same period.

3: Significant accounting policies continued

Impacts for the period

In subsequent periods, the Group recognises depreciation charges on right-of-use assets and finance interest charges on lease liabilities in the income statement and, over the term of lease contracts, there is expected to be a broadly neutral impact to the income statement as the aggregate depreciation charges and finance interest charges replace office lease rental payments.

For the six months ended 30 June 2019 the Group recognised the following:

	£m
Right-of-use assets presented in property, plant and equipment at 1 January 2019	74
Acquisitions through business combinations	2
Depreciation charge for right-of-use assets for the period	(6)
Right-of-use assets presented in property, plant and equipment at 30 June 2019	70

Lease liability at 1 January 2019	88
Finance interest charge for the period	1
Lease liability reduction for the period	(7)
Lease liability at 30 June 2019	82

Lease liability to be settled within 12 months	13
Lease liability to be settled after 12 months	69
Lease liability at 30 June 2019	82

Notes to the condensed consolidated interim financial statements

For the six month period ended 30 June 2019

4: Acquisitions, discontinued operations and disposal groups held for sale

This note provides details of the Group's acquisitions and disposals of subsidiaries during the financial periods covered by these interim financial statements, together with details of any businesses held for sale during the six months ended 30 June 2019.

4(a) Business acquisitions

Business acquisitions completed during the period ended 30 June 2019

Charles Derby Group Limited acquisition:

On 14 February 2019, the Group acquired the Charles Derby Group ('CDG') of companies. CDG is a financial planning business based in the United Kingdom. The acquisition complements the growth of Quilter Private Client Advisers which serves upper affluent and high net worth customers. CDG has over 200 restricted advisers (as at 31 December 2018), and represents the next stage of Quilter's ambition to broaden out its national advice business.

Prior to acquisition, the Group had previously invested £2 million for a 10% stake in CDG. At December 2018, the business was valued at £34 million, resulting in a fair value gain of £1 million being recognised, representing the increase in the value on the 10% share in the business.

Immediately prior to acquisition, CDG undertook a share issue to other shareholders, which diluted the Group's stake to 6%, with a fair value of £2 million. The resulting fair value loss of £1 million (reducing the carrying value from £3 million to £2 million) has been recognised by the Group in other operating and administrative expenses in the consolidated income statement in 2019. On acquisition, the Group acquired the remaining share capital and associated voting rights.

The table below sets out the consolidated assets and liabilities acquired:


		£m
	Acquiree's carrying amount	Fair value
Assets
Intangible assets	1	14
Loans and advances	1	1
Cash and cash equivalents	1	1
Trade, other receivables and other assets	2	2
Total assets	5	18
Liabilities
Deferred tax liabilities	-	(2)
Trade, other payables and other liabilities	(9)	(9)
Total liabilities	(9)	(11)
Total net (liabilities)/assets acquired	(4)	7
Total cash consideration		31
Goodwill recognised		24

After an initial cash payment of £15 million at acquisition, a further payment of £5 million was made on 1 April 2019. Further contingent payments based on a percentage of the level of assets under administration at 2020 and 2022 are expected to be made. Management's best estimate of the net present value of these payments total £9 million. These amounts exclude the £2 million value of the 6% stake already held.

The purchase price has been allocated based on a provisional estimate of the fair value of assets acquired and liabilities assumed at the date of acquisition determined in accordance to IFRS 3 Business Combinations. The provisional allocation required significant use of assumptions regarding cash flows, profit margin and discount, attrition and growth rates. It is possible that the preliminary estimates may change as the purchase price allocations are finalised. The accounting must be finalised within 12 months of the acquisition date.

Based on the purchase price of £31 million and the fair value of net liabilities acquired of £5 million, the value of goodwill and intangible assets is £36 million. Intangible assets representing the value of customer advice contracts have been valued £14 million, less an associated deferred tax liability of £2 million, with an estimated useful life of 8 years over which the intangible and the associated tax provision will be amortised on a straight line basis. The balance of £24 million is recognised as goodwill in the statement of financial position.

The goodwill recognised is not expected to be deductible for tax purposes, and represents:

· Net client cash flow, and fee earning productivity of the acquired advisers

· Quality and experience of the existing executive team

· Creation of scale and increased service range to the National channel proposition

· Ability to generate growth in Registered Financial Planners and client numbers

The carrying value of tangible assets and liabilities in CDG's consolidated statement of financial position on acquisition date approximates the fair value of these items determined by the Group.

As part of the acquisition of CDG, a Long Term Incentive Plan scheme was set up with a maximum value of up to £10 million worth of shares. Vesting of awards is up to 50% after three years (31 December 2021), 25% after 4 years, and 25% after 5 years.

The fair value at grant date was £1.39 per share, with an estimated fair value of £7 million. The cost of the awards is expected to be £2 million per annum across years 1 - 3 and £1 million in year 4.

Transaction costs of £1 million relating to the acquisition have been recognised within other operating expenses in the Group's consolidated income statement. These costs are not included within adjusted profit.

4(a) Business acquisitions continued

No contingent liabilities have been acquired.

The post-acquisition results from the business have been consolidated since the date of acquisition, contributing £1 million of revenue and a loss of £2 million to the Group's consolidated loss after tax.

Lighthouse Group plc acquisition:

On 3 April 2019, the Group made a cash offer to acquire the entire share capital (and associated voting rights) of Lighthouse Group plc ('Lighthouse'), and the acquisition completed on 12 June 2019. This acquisition helps to position Quilter as the best place for trusted financial advice in the UK, bringing together Quilter's strengths in its new platform with Lighthouse's strength in its customer relationships and partnerships, covering more than 6 million affluent and mass affluent customers in the UK.

The 18 days post acquisition revenue and profits of Lighthouse are immaterial to the Group for the period and have not been consolidated into the Group results in the period ended 30 June 2019.

There were 139,864,270 shares in issue for which the offer was 33 pence per share, valuing the business at £46 million.

The Group held 3.99% of the issued share capital of Lighthouse prior to acquisition. This holding was valued at £2 million, based on the 33 pence per share offer.

Based on the purchase price of £46 million and fair value of net tangible assets acquired of £6 million, the value of goodwill and intangible assets is £40 million. Intangible assets representing the value of customer advice contracts have been valued at £15 million (£18 million gross, less an associated deferred tax liability of £(3) million), with an estimated useful life of 8 years over which the intangible and associated tax provision will be amortised on a straight line basis. The balance of £25 million is recognised as goodwill in the Group's statement of financial position.

The goodwill recognised is not expected to be deductible for tax purposes, and represents:

· Synergies arising from the alignment of the advisers into a restricted model

· Generation of additional net client cash flows into the integrated solutions offered through the wider Quilter Group

· Cost saving synergies arising through de-listing the business and integrating with Quilter Financial Planning

Expected transaction costs of £3 million relating to the acquisition will be recognised within other operating expenses in the Group's consolidated income statement, but not included within adjusted profit.

No contingent liabilities have been acquired.

The table below sets out the consolidated assets and liabilities acquired:


		£m
	Acquiree's carrying amount	Fair value
Assets
Intangible assets	5	18
Property, plant and equipment	2	2
Investments and securities	1	1
Cash and cash equivalents	7	7
Trade, other receivables and other assets	7	7
Total assets	22	35
Liabilities
Deferred tax liabilities	-	(3)
Trade, other payables and other liabilities	(11)	(11)
Total Liabilities	(11)	(14)
Total net assets acquired	11	21
Total cash consideration		46
Goodwill recognised		25

Acquisition of adviser businesses by Quilter Financial Planning ('QFP'))

During the period, the Group has continued its expansion of the Quilter Private Client Advisers ('QPCA') business, with the acquisition of 4 adviser businesses. The purchase price has been allocated based on the fair value of assets acquired and liabilities assumed at the date of acquisition determined in accordance to IFRS 3 Business combinations.

The aggregate estimated consideration payable was £6 million, of which £2 million was cash consideration and up to £4 million in contingent consideration. The amount of contingent consideration, which is expected to be paid in full (discounted to net present value), is dependent upon meeting certain performance targets, generally relating to the value of funds under management and levels of on-going fee income. No tangible net assets were acquired in these purchases. Total intangible assets of £3 million in respect of customer relationships and goodwill of £3 million have been recognised as a result of the acquisitions.

Impact of acquisitions on Group revenue and profit

If the above acquisitions had occurred on 1 January 2019, management estimates that the Group's consolidated revenues would have been £5,520 million, and consolidated post-tax loss for the period would have been £(22) million.

4(a) Business acquisitions continued

Business acquisitions completed during year ended 31 December 2018

Acquisition of Skandia UK Limited from Old Mutual plc

On 31 January 2018, the Group acquired the Skandia UK Limited group of entities from Old Mutual plc which comprises seven Old Mutual plc group entities with a net asset value ('NAV') of £591 million. The transfer was effected by the issue of a share and with the balance represented by a merger reserve. No debt was taken on as a result of this transaction. The most significant asset within these entities is a £566 million receivable which corresponds to an equivalent payable within the Group's statement of financial position. The net effect of this transaction for the Group is to replace a payable due to Old Mutual plc with equity.

Acquisition of adviser businesses by Quilter Financial Planning ('QFP')

During 2018 the Group completed the acquisition of fourteen adviser businesses as part of the expansion of the QPCA business. The total cash consideration paid was an initial £5 million with additional potential contingent consideration of £6 million which is expected to be paid in full (discounted to net present value for this and all other acquisitions listed below), dependent upon meeting certain performance targets generally relating to funds under management. Goodwill of £5 million, other intangible assets of £7 million and a deferred tax liability of £1 million were recognised as a result of the transaction. The contingent consideration was capitalised in the calculation of goodwill recognised.

4(b) Business disposals

Period ended 30 June 2019

There have been no disposals during the period ended 30 June 2019.

Year ended 31 December 2018

In December 2017, the Group announced that it had entered into an agreement to sell its Single Strategy Asset Management business ('Single Strategy business') to a special purpose vehicle ultimately owned by funds managed by TA Associates and certain members of the Single Strategy management team (together 'the Acquirer'). On 29 June 2018, the Group completed the sale for a total consideration of £583 million, comprising cash consideration of £540 million on completion, with an additional £7 million payable before 2022 as surplus capital associated with the separation from the Group is released in the business. The contingent consideration is not subject to performance conditions. The remaining proceeds of £36 million were received in cash as a pre-completion dividend on 15 June 2018. Economic ownership of the Single Strategy business passed to the Acquirer effective from 1 January 2018 with all profits and performance fees generated up until 31 December 2017 for the account of Quilter plc. The results of the Single Strategy business continued to be included as part of the Group up until the date of sale on the 29 June 2018. The Group recognised a post tax profit on disposal of the Single Strategy business of £292 million.

Profit on sale of operations
			£m
	Six months 2019	Six months 2018	Full year 2018
	Single Strategy business	Single Strategy business	Single Strategy business and Old Mutual Wealth Italy adjustment
Consideration received¹	-	546	546
Less: transaction costs on the sale of Single Strategy	-	(20)	(20)
Plus: release of accrued expenses in relation to OMW Italy S.p.A disposal	-	-	2
Net proceeds from sale	-	526	528
Carrying value of net assets disposed of	-	(241)	(238)
Profit on sale of operations before tax	-	285	290
Tax on disposals	-	5	4
Profit on sale of operations after tax	-	290	294
¹Consideration received in respect of the Single Strategy business includes £540 million of cash received together with the discounted contingent consideration of £6 million, and excludes the £36 million pre-completion dividend received in June 2018.

4(c) Discontinued operations - income statement

For the six months ended 30 June 2019, discontinued operations consist solely of Quilter Life Assurance ('QLA'). For the six months ended 30 June 2018 and year ended 31 December 2018, the Group's discontinued operations included QLA and the Single Strategy business (previously part of Old Mutual Global Investors).

				£m
	Note	Six months 2019	Six months 2018	Full year 2018
Revenue
Gross earned premiums		76	74	147
Premiums ceded to reinsurers		(43)	(43)	(87)
Net earned premiums		33	31	60
Fee income and other income from service activities	5(d)	45	191	242
Investment return		1,054	5	(771)
Other income		-	2	2
Total revenue		1,132	229	(467)
Expenses
Claims and benefits paid		(46)	(45)	(86)
Reinsurance recoveries		33	29	60
Net insurance claims and benefits incurred		(13)	(16)	(26)
Change in reinsurance assets and liabilities		78	20	103
Change in insurance contract liabilities		(91)	(22)	(109)
Change in investment contract liabilities	17(b)	(991)	(2)	737
Fee and commission expenses, and other acquisition costs		(23)	(59)	(84)
Other operating and administrative expenses		(16)	(104)	(130)
Finance costs		-	-	(1)
Total expenses		(1,056)	(183)	490
Profit on sale of operations before tax	4(b)	-	285	290
Profit before tax from discontinued operations		76	331	313
Tax (expense)/credit attributable to policyholder returns		(59)	15	97
Profit before tax attributable to equity holders		17	346	410
Income tax (expense)/credit	7(a)	(61)	9	86
Less: tax expense/(credit) attributable to policyholder returns		59	(15)	(97)
Tax (expense) attributable to equity holders		(2)	(6)	(11)
Profit after tax from discontinued operations		15	340	399
Attributable to:
Equity holders of Quilter plc		15	340	399
Earnings per ordinary share on profit attributable to ordinary shareholders of Quilter plc
Basic - from discontinued operations (pence)	8(b)	0.8	18.6	21.8
Diluted - from discontinued operations (pence)	8(b)	0.8	18.6	21.7

As explained in Note 3: Significant accounting policies, operating and administration expenses shown within discontinued operations represent costs recorded within the accounts of those discontinued businesses as recorded in the Group's results, stated without adjustment.

As a result of the disposal of the QLA business, a portion of the costs which have historically been charged to QLA from Group service entities will remain within the continuing operations of the Group. Whilst the Group will seek to minimise these costs through adjusting ongoing Group resource requirements, renegotiation of third party agreements and employing other commercial practices, a level of costs are expected to remain in the continuing operations of the Group over and above that experienced historically. This includes a share of Group central costs currently charged to QLA. Where appropriate and permitted by IAS 37 Provisions, Contingent Liabilities and Contingent Assets, these costs are expected to be recognised as onerous contracts and provisions established for those future costs on completion of the transaction.

The level of these costs, and the extent of onerous contract provisions to be established on disposal of the QLA business, is not yet clear. They will also be influenced in the 12-24 months post-completion of the transaction by the duration and extent of the transitional services agreement entered into with the acquirer, which will be agreed between signing and completion of the transaction. Accordingly, management will further consider the disclosure and classification of costs between continued and discontinued operations in the full year 2019 financial statements.

4(d) Discontinued operations - Statement of comprehensive income

			£m
	Six months 2019	Six months 2018	Full year 2018
Profit after tax from discontinued operations	15	340	399
Total other comprehensive income from discontinued operations, net of tax	-	-	-
Total comprehensive income from discontinued operations	15	340	399

4(e) Discontinued operations - Net cash flows

			£m
	Six months 2019	Six months 2018	Full year 2018
Total net cash flows from operating activities	(1,424)	(995)	(2,437)
Total net cash used in investing activities	1,381	1,117	2,529
Total net cash used in financing activities	(90)	(45)	(46)
Net increase in cash and cash equivalents	(133)	77	46

4(f) Assets and liabilities held for sale

Assets and liabilities of operations classified as held for sale at 30 June 2019 relate to the Quilter Life Assurance ('QLA') business. The operation has been classified as held for sale at 30 June 2019 as a result of the Group's active programme at that date to locate a potential acquirer for this business. The Group has subsequently announced the disposal of this business, as detailed in note 22. QLA was previously reported within the Wealth Platforms segment but, as a result of being classified as held for sale and representing a separate major line of business, is now presented as a discontinued operation for all periods shown in these interim financial statements.

				£m
	Note	30 June 2019	30 June 2018	31 December 2018
Assets classified as held for sale
Goodwill and intangible assets	10	30	-	-
Deferred acquisition costs		9	-	-
Contract costs		46	-	-
Financial investments		9,704	-	-
Reinsurers' share of policyholder liabilities	17	2,087	-	-
Current tax receivable		16	-	-
Trade, other receivables and other assets		44	-	-
Cash and cash equivalents	15	381	-	-
Total assets classified as held for sale		12,317	-	-

Liabilities classified as held for sale
Long-term business insurance policyholder liabilities	17	694	-	-
Investment contract liabilities	17	11,040	-	-
Provisions	18	20	-	-
Deferred tax liabilities		72	-	-
Current tax payable		3	-	-
Trade, other payables and other liabilities		125	-	-
Contract liabilities		27	-	-
Total liabilities classified as held for sale		11,981	-	-
Net assets classified as held for sale		336	-	-

5: Segmental information

5(a) Segmental presentation

The Group's operating segments comprise Advice and Wealth Management and Wealth Platforms, which is consistent with the way in which the Group is structured and managed. For all reporting periods, these segments have been classified as continuing operations in the income statement. Head Office includes certain revenues and central costs that are not allocated to the segments. There have been no changes to the basis of segmentation for the periods in these condensed consolidated interim financial statements.

Adjusted profit is a key Alternative Performance Measure ('APM') reported to the Group's management and Board. Management and the Board use additional APMs to assess the performance of each of the segments, including net client cash flows, assets under management and administration, revenue and operating margins.

Consistent with internal reporting, assets, liabilities, revenues and expenses that are not directly attributable to a particular segment are allocated between segments where appropriate. The Group accounts for inter-segment revenues and transfers as if the transactions were with third parties at current market prices. Intra-group recharges in respect of operating and administration expenses within businesses disclosed as discontinued operations are not adjusted for potential future changes to the level of those costs resulting from the disposal of those businesses.

The segmental information in this note reflects the adjusted and IFRS profit measures and the assets and liabilities for each operating segment as provided to management and the Board. Revenues are further segmented into the geographic location of our businesses in note 5(d).

Continuing operations:

Advice and Wealth Management

This segment comprises Quilter Investors, Quilter Cheviot and Quilter Financial Planning, which includes Quilter Private Client Advisers ('QPCA').

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.

Quilter Cheviot provides discretionary investment management in the United Kingdom with bespoke investment portfolios tailored to the individual needs of affluent and high-net worth customers, charities, companies and institutions through a network of branches in London and the regions. Investment management services are also provided by branches in the Channel Islands and the Republic of Ireland.

Quilter Financial Planning is a restricted and independent financial adviser network (including QPCA) 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.

Wealth Platforms

This segment comprises Quilter Wealth Solutions ('QWS') and Quilter International.

Quilter Wealth Solutions is a leading investment platform provider of advice-based wealth management products and services in the UK, which serves a largely affluent customer base through advised multi-channel distribution.

Quilter International is a cross-border business, focusing on high net worth and affluent local customers and expatriates in Asia, the Middle East, Europe and Latin America.

Head office

In addition to the 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 in the segmental statement of financial position.

Discontinued operations:

Quilter Life Assurance ('QLA'), previously part of the Wealth Platforms operating segment, has been classified as a discontinued operation following the Group's strategic review. As set out in note 22, the Group has entered into an agreement, which is subject to obtaining the necessary regulatory approval, to sell the business. Quilter Life Assurance is predominantly a closed book of business, made up of legacy life insurance products, including protection and institutional pension products. For the year ended 31 December 2018, the Single Strategy Asset Management business (disposed of on 29 June 2018) is also included as discontinued operations. See Note 4(b) for further details on this disposal. The results of these two businesses, and the profit on disposal (including £2 million in respect of the disposal of Old Mutual Italy S.p.A, disposed of on 9 January 2017), have been presented as discontinued operations. Comparative amounts for the six months ended 30 June 2018 and the year ended 31 December 2018 have been restated accordingly. See note 3 and note 4(c) for further information.

5: Segmental information continued

5(b)(i): Adjusted profit statement - segmental information for the six month period ended 30 June 2019

								£m
		Adjusted profit - Continuing operations				Reconciliation to IFRS
		Operating segments
	Notes	Advice and Wealth Management	Wealth Platforms	Head Office	Adjusted profit	Consolidation Adjustments¹	Adjusting items (Note 6)	IFRS Income Statement
Revenue
Gross earned premiums		-	1	-	1	-	-	1
Premiums ceded to reinsurers		-	(1)	-	(1)	-	-	(1)
Net earned premiums		-	-	-	-	-	-	-
Fee income and other income from service activities	5(d)	246	198	-	444	6	-	450
Investment return		5	4,373	2	4,380	663	-	5,043
Other income		2	66	3	71	(50)	-	21
Segmental revenue		253	4,637	5	4,895	619	-	5,514
Expenses
Change in investment contract liabilities		-	(4,348)	-	(4,348)	-	-	(4,348)
Fee and commission expenses, and other acquisition costs		(47)	(56)	-	(103)	(87)	-	(190)
Change in third party interest in consolidated funds		-	-	-	-	(586)	-	(586)
Other operating and administrative expenses		(154)	(159)	(22)	(335)	54	(63)	(344)
Finance costs		(2)	(1)	-	(3)	-	(5)	(8)
Segmental expenses		(203)	(4,564)	(22)	(4,789)	(619)	(68)	(5,476)
Adjusted profit/(loss) before all tax		50	73	(17)	106	-	(68)	38
Tax attributable to policyholders' returns		-	(17)	-	(17)	-	(61)	(78)
Adjusted profit/(loss) before tax attributable to equity holders		50	56	(17)	89	-	(129)	(40)
Reconciliation to IFRS:
Adjusted for non-operating items:
Goodwill impairment and impact of acquisition accounting	6(a)	(26)	-	-	(26)
Business transformation costs	6(b)	-	(30)	(5)	(35)
Managed Separation costs	6(c)	-	-	(2)	(2)
Finance costs	6(d)	-	-	(5)	(5)
Policyholder tax adjustments	6(e)	-	(61)	-	(61)
Adjusting items before tax		(26)	(91)	(12)	(129)
Profit/(Loss) before tax attributable to equity holders		24	(35)	(29)	(40)

¹Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

5: Segmental information continued

5(b)(ii): Adjusted profit statement - segmental information for the six months ended 30 June 2018

								£m
		Adjusted profit - Continuing operations				Reconciliation to IFRS
		Operating segments
	Notes	Advice and Wealth Management	Wealth Platforms	Head Office	Adjusted profit	Consolidation Adjustments¹	Adjusting items (Note 6)	IFRS Income Statement
Revenue
Gross earned premiums		-	1	-	1	-	-	1
Premiums ceded to reinsurers		-	(1)	-	(1)	-	-	(1)
Net earned premiums		-	-	-	-	-	-	-
Fee income and other income from service activities	5(d)	272	201	-	473	2	-	475
Investment return		4	202	1	207	81	-	288
Other income		-	62	3	65	(56)	-	9
Segmental revenue		276	465	4	745	27	-	772
Expenses
Change in investment contract liabilities		-	(190)	-	(190)	-	-	(190)
Fee and commission expenses, and other acquisition costs		(82)	(58)	-	(140)	(69)	-	(209)
Change in third party interest in consolidated funds		-	-	-	-	3	-	3
Other operating and administrative expenses		(145)	(157)	(24)	(326)	39	(82)	(369)
Finance costs		(2)	-	-	(2)	-	(8)	(10)
Segmental expenses		(229)	(405)	(24)	(658)	(27)	(90)	(775)
Adjusted profit/(loss) before all tax		47	60	(20)	87	-	(90)	(3)
Tax attributable to policyholder returns		-	(4)	-	(4)	-	7	3
Adjusted profit/(loss) before tax attributable to equity holders		47	56	(20)	83	-	(83)	-
Reconciliation to IFRS:
Adjusted for non-operating items:
Goodwill impairment and impact of acquisition accounting	6(a)	(28)	-	-	(28)
Business transformation costs	6(b)	(10)	(27)	-	(37)
Managed Separation costs	6(c)	-	-	(17)	(17)
Finance costs	6(d)	-	-	(8)	(8)
Policyholder tax adjustments	6(e)	-	7	-	7
Reallocation of central costs²		-	(2)	2	-
Adjusting items before tax		(38)	(22)	(23)	(83)
Profit/(loss) before tax attributable to equity holders		9	34	(43)	-

¹Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

²Reallocation of central costs reverses management reallocations included within adjusted profit to reconcile back to IFRS profit.

5: Segmental information continued

5(b)(iii): Adjusted profit statement - segmental information for the year ended 31 December 2018

								£m
		Adjusted profit - Continuing operations				Reconciliation to IFRS
		Operating segments
	Notes	Advice and Wealth Management	Wealth Platforms	Head Office	Adjusted profit	Consolidation Adjustments¹	Adjusting items (Note 6)	IFRS Income Statement
Revenue
Gross earned premiums		-	1	-	1	-	-	1
Premiums ceded to reinsurers		-	(1)	-	(1)	-	-	(1)
Net earned premiums		-	-	-	-	-	-	-
Fee income and other income from service activities	5(d)	547	402	-	949	5	-	954
Investment return		9	(2,478)	3	(2,466)	(246)	-	(2,712)
Other income		2	101	6	109	(74)	-	35
Segmental revenue		558	(1,975)	9	(1,408)	(315)	-	(1,723)
Expenses
Insurance contract claims and changes in liabilities		-	(1)	-	(1)	-	-	(1)
Change in investment contract liabilities		-	2,499	-	2,499	-	-	2,499
Fee and commission expenses, and other acquisition costs		(163)	(117)	-	(280)	(118)	-	(398)
Change in third party interest in consolidated funds		-	-	-	-	369	-	369
Other operating and administrative expenses		(290)	(298)	(40)	(628)	64	(158)	(722)
Finance costs		(3)	-	-	(3)	-	(13)	(16)
Segmental expenses		(456)	2,083	(40)	1,587	315	(171)	1,731
Adjusted profit/(loss) before all tax		102	108	(31)	179	-	(171)	8
Tax attributable to policyholder returns		-	(3)	-	(3)	-	64	61
Adjusted profit/(loss) before tax attributable to equity holders		102	105	(31)	176	-	(107)	69
Reconciliation to IFRS:
Adjusted for non-operating items:
Goodwill impairment and impact of acquisition accounting	6(a)	(49)	(1)	-	(50)
Business transformation costs	6(b)	(19)	(58)	(7)	(84)
Managed Separation costs	6(c)	-	(1)	(23)	(24)
Finance costs	6(d)	-	-	(13)	(13)
Policyholder tax adjustments	6(e)	-	64	-	64
Reallocation of central costs²		-	(2)	2	-
Adjusting items before tax		(68)	2	(41)	(107)
Profit/(Loss) before tax attributable to equity holders		34	107	(72)	69

¹Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

²Reallocation of central costs reverses management reallocations included within adjusted profit to reconcile back to IFRS profit.

5: Segmental information continued

5(c)(i): Statement of financial position - segmental information at 30 June 2019


							£m
	Notes	Advice & Wealth Management	Wealth Platforms	Head Office	Discontinued Operations	Consolidation Adjustments¹	Total
Assets
Goodwill and intangible assets	10	453	134	-	-	-	587
Property, plant and equipment	11	33	54	3	-	(1)	89
Investments in associated undertakings		-	-	2	-	-	2
Contract costs		-	477	-	-	-	477
Contract assets		45	-	-	-	-	45
Loans and advances		27	186	7	-	-	220
Financial investments	12	1	50,001	-	-	6,421	56,423
Reinsurers' share of policyholder liabilities	17	-	-	-	-	-	-
Deferred tax assets		8	15	9	-	-	32
Current tax receivable		-	16	-	-	-	16
Trade, other receivables and other assets		745	386	13	-	209	1,353
Derivative assets		-	-	-	-	24	24
Cash and cash equivalents	15	392	608	398	-	546	1,944
Assets of operations classified as held for sale	4(f)	-	-	-	12,324	(7)	12,317
Inter-segment funding - assets		-	12	-	-	(12)	-
Total assets		1,704	51,889	432	12,324	7,180	73,529

Liabilities
Investment contract liabilities	17	-	50,286	-	-	-	50,286
Third-party interests in consolidated funds		-	-	-	-	6,972	6,972
Provisions	18	19	20	6	-	-	45
Deferred tax liabilities		42	49	-	-	-	91
Current tax payable		11	4	(11)	-	-	4
Borrowings and lease liabilities²		28	50	203	-	(1)	280
Trade, other payables and other liabilities		895	599	23	-	203	1,720
Contract liabilities		1	191	-	-	-	192
Derivative liabilities		-	1	-	-	23	24
Liabilities of operations classified as held for sale	4(f)	-	-	-	11,988	(7)	11,981
Inter-segment funding - liabilities		-	-	12	-	(12)	-
Total liabilities		996	51,200	233	11,988	7,178	71,595
Total equity							1,934
Total equity and liabilities							73,529

¹Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

²The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognised in retained earnings at the time of initial application.

5: Segmental information continued

5(c)(ii): Statement of financial position - segmental information at 30 June 2018

							£m
	Notes	Advice & Wealth Management	Wealth Platforms	Head Office	Discontinued Operations	Consolidation Adjustments¹	Total
Assets
Goodwill and intangible assets	10	401	165	-	-	-	566
Property, plant and equipment	11	10	7	-	-	-	17
Investments in associated undertakings		-	-	1	-	-	1
Deferred acquisition costs		-	-	-	12	-	12
Contract costs		-	514	-	61	-	575
Contract assets		45	-	-	-	-	45
Loans and advances		22	190	7	-	-	219
Financial investments	12	5	46,401	2	11,334	6,827	64,569
Reinsurers' share of policyholder liabilities	17	-	-	-	2,666	-	2,666
Deferred tax assets		6	13	-	-	-	19
Current tax receivable		-	3	-	-	-	3
Trade, other receivables and other assets		370	207	4	121	735	1,437
Derivative assets		-	-	-	-	33	33
Cash and cash equivalents	15	365	595	618	543	1,254	3,375
Inter-segment funding - assets		-	12	-	-	(12)	-
Total assets		1,224	48,107	632	14,737	8,837	73,537

Liabilities
Long-term business insurance policyholder liabilities	17	-	-	-	513	-	513
Investment contract liabilities	17	-	46,654	-	13,486	-	60,140
Third-party interests in consolidated funds		-	-	-	-	8,105	8,105
Provisions	18	18	19	12	66	-	115
Deferred tax liabilities		42	38	-	84	-	164
Current tax payable/(receivable)		6	-	(11)	17	-	12
Borrowings		-	-	197	-	-	197
Trade, other payables and other liabilities		522	485	31	209	690	1,937
Contract Liabilities		1	198	-	36	-	235
Derivative liabilities		-	1	-	-	58	59
Inter-segment funding - liabilities		-	-	12	-	(12)	-
Total liabilities		589	47,395	241	14,411	8,841	71,477
Total equity							2,060
Total equity and liabilities							73,537

¹Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

The June 2018 segmental statement of financial position comparative has been re-presented and no longer includes a subtotal for continuing business. This change ensures that the elimination of inter-segment transactions can be reported at the Group level within consolidation adjustments.

5: Segmental information continued

5(c)(iii): Statement of financial position - segmental information at 31 December 2018

							£m
	Notes	Advice & Wealth Management	Wealth Platforms	Head Office	Discontinued Operations	Consolidation Adjustments¹	Total
Assets
Goodwill and intangible assets	10	386	164	-	-	-	550
Property, plant and equipment	11	10	7	-	-	-	17
Investments in associated undertakings		-	-	2	-	-	2
Deferred acquisition costs		-	-	-	11	-	11
Contract costs		-	498	-	53	-	551
Contract assets		44	-	-	-	-	44
Loans and advances		27	188	7	-	-	222
Financial investments	12	3	44,950	2	9,686	4,578	59,219
Reinsurers' share of policyholder liabilities	17	-	-	-	2,162	-	2,162
Deferred tax assets		7	22	9	-	-	38
Current tax receivable		-	23	1	23	-	47
Trade, other receivables and other assets		197	151	8	30	100	486
Derivative assets		-	-	-	-	46	46
Cash and cash equivalents	15	358	599	440	514	484	2,395
Inter-segment funding - assets		-	12	-	-	(12)	-
Total assets		1,032	46,614	469	12,479	5,196	65,790

Liabilities
Long-term business insurance policyholder liabilities	17	-	-	-	602	-	602
Investment contract liabilities	17	-	45,211	-	11,239	-	56,450
Third-party interests in consolidated funds		-	-	-	-	5,116	5,116
Provisions	18	26	20	9	39	-	94
Deferred tax liabilities		40	-	-	19	-	59
Current tax payable/(receivable)		9	5	(18)	9	-	5
Borrowings		-	-	197	-	-	197
Trade, other payables and other liabilities		340	425	20	158	56	999
Contract liabilities		1	194	-	31	-	226
Derivative liabilities		-	1	-	-	36	37
Inter-segment funding - liabilities		-	-	12	-	(12)	-
Total liabilities		416	45,856	220	12,097	5,196	63,785
Total equity							2,005
Total equity and liabilities							65,790

¹Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

The December 2018 segmental statement of financial position comparative has been re-presented and no longer includes a subtotal for continuing business. This change ensures that the elimination of inter-segment transactions can be reported at the Group level within consolidation adjustments.

5: Segmental information continued

5(d): Geographic segmental information

In the following table, revenue is shown based on the geographic location of our businesses.

	UK			International				£m
Six months 2019	Advice and Wealth Management	Wealth Platforms	Head Office	Wealth Platforms	Consolidation adjustments	Total continuing operations	Discontinued operations	Total Group
Gross earned premiums	-	-	-	1	-	1	76	77
Premiums ceded to reinsurers	-	-	-	(1)	-	(1)	(43)	(44)
Net earned premiums	-	-	-	-	-	-	33	33
Premium based fees	45	-	-	36	-	81	6	87
Fund based fees¹	201	86	-	51	-	338	33	371
Retrocessions received, intragroup	-	1	-	1	(2)	-	5	5
Fixed fees	-	1	-	14	-	15	1	16
Surrender charges	-	-	-	8	-	8	-	8
Other fee and commission income	-	-	-	-	8	8	-	8
Fee income and other income from service activities	246	88	-	110	6	450	45	495
Investment return	5	2,748	2	1,625	663	5,043	1,054	6,097
Other income	2	82	3	-	(66)	21	-	21
Total revenue	253	2,918	5	1,735	603	5,514	1,132	6,646

	UK			International				£m
Six months 2018	Advice and Wealth Management	Wealth Platforms	Head Office	Wealth Platforms	Consolidation adjustments	Total continuing operations	Discontinued operations	Total Group
Gross earned premiums	-	-	-	1	-	1	74	75
Premiums ceded to reinsurers	-	-	-	(1)	-	(1)	(43)	(44)
Net earned premiums	-	-	-	-	-	-	31	31
Premium based fees	43	-	-	38	-	81	8	89
Fund based fees¹	230	85	-	50	-	365	175	540
Retrocessions received, intragroup	-	2	-	3	(5)	-	7	7
Fixed fees	-	1	-	14	-	15	1	16
Surrender charges	-	-	-	9	-	9	-	9
Other fee and commission income	-	-	-	-	5	5	-	5
Fee income and other income from service activities	273	88	-	114	-	475	191	666
Investment return	4	204	1	(2)	81	288	5	293
Other income	-	79	3	4	(77)	9	2	11
Total revenue	277	371	4	116	4	772	229	1,001

	UK			International				£m
Full year 2018	Advice and Wealth Management	Wealth Platforms	Head Office	Wealth Platforms	Consolidation adjustments	Total continuing operations	Discontinued operations	Total Group
Gross earned premiums	-	-	-	1	-	1	147	148
Premiums ceded to reinsurers	-	-	-	(1)	-	(1)	(87)	(88)
Net earned premiums	-	-	-	-	-	-	60	60
Premium based fees	87	-	-	77	-	164	15	179
Fund based fees¹	460	169	-	102	-	731	210	941
Retrocessions received, intragroup	-	3	-	4	(7)	-	14	14
Fixed fees	-	2	-	28	-	30	2	32
Surrender charges	-	-	-	16	-	16	1	17
Other fee and commission income	-	-	-	-	13	13	-	13
Fee income and other income from service activities	547	174	-	227	6	954	242	1,196
Investment return	9	(1,562)	3	(916)	(246)	(2,712)	(771)	(3,483)
Other income	2	98	6	3	(74)	35	2	37
Total revenue	558	(1,290)	9	(686)	(314)	(1,723)	(467)	(2,190)
¹Income from fiduciary activities is included within fund based fees.

6: Adjusted profit and adjusting items

In determining adjusted profit before tax, certain adjustments are made to IFRS profit before tax to reflect the underlying performance of the Group.

6(a): Goodwill impairment and impact of acquisition accounting

The recognition of goodwill and other acquired intangibles is created on the acquisition of a business and represents the premium paid over the fair value of the Group's share of the identifiable asset and liabilities acquired at the date of acquisition (as recognised under IFRS 3). The Group excludes any impairment of goodwill from adjusted profit as well as the amortisation and impairment of acquired other intangible assets, any acquisition costs and finance costs related to the discounting of contingent consideration.

The effect of these adjustments to determine adjusted profit are summarised below. All adjustments are in respect of continuing operations.

				£m
	Note	Six months 2019	Six months 2018	Full year 2018
Amortisation of other acquired intangible assets	10(a)	22	21	41
Acquisition costs¹		3	6	5
Impairment of other intangible assets		-	-	1
Unwinding of discount on contingent consideration		1	1	3
Total goodwill impairment and impact of acquisition accounting		26	28	50

¹Acquisition costs include items such as transaction costs or deferred incentives arising on the acquisition of businesses.

6(b): Business transformation costs

Business transformation costs include three items: costs associated with the UK Platform Transformation Programme, build out costs incurred within Quilter Investors as a result of the sale of the Single Strategy business, and the Optimisation Programme costs. All items are in respect of continuing operations and are described in detail below. For the period ended 30 June 2019, these costs totalled £35 million (30 June 2018: £37 million, 31 December 2018: £84 million) in aggregate.

UK Platform Transformation Programme - 30 June 2019: £30 million, 30 June 2018: £27 million, 31 December 2018: £58 million

In partnership with FNZ, the Group expects to deliver all the existing functionality of the platform with increased levels of straight-through processing and enhanced functionality for new business and to migrate the in-force (UK Platform) business over time.

Quilter Investors' build out costs - 30 June 2019: £nil, 30 June 2018: £10 million, 31 December 2018: £19 million

In March 2016, Old Mutual plc announced its Managed Separation strategy that sought to unlock and create significant long-term value for shareholders. As part of this strategy, Quilter's Multi-Asset (now renamed as Quilter Investors) and Single Strategy teams were to develop as separate distinct businesses, and the Single Strategy business was sold to its management and TA Associates on 29 June 2018. As a result, the Group incurred £24 million of one-off costs in the year ended 31 December 2018, £5 million of which were included in profit on disposal within discontinued operations and £19 million is an adjusting item within continuing business.

Optimisation Programme costs - 30 June 2019: £5 million, 30 June 2018: £nil, 31 December 2018: £7 million

Following the Group's Managed Separation from Old Mutual plc in 2018, the Group has initiated an Optimisation Programme focused on driving operational efficiencies, incurring £5 million of one-off project costs in 2019.

6(c): Managed Separation costs

One-off costs related to the implementation of Managed Separation recognised in the IFRS income statement have been excluded from adjusted profit on the basis that they are not representative of the operating activity of the Group. These costs relate to preparing the Group to operate as a standalone business and the execution of various transactions required to implement its Managed Separation strategy. These costs are not expected to persist in the long term as they relate to a fundamental restructuring of the Group, which is not operational in nature, rather than more routine restructuring activity which would be seen as part of the usual course of business. The treatment and the disclosure of these costs as an adjusting item are also intended to make these costs more visible to the readers of the financial statements in the context of publicly disclosed estimates previously given in relation to these items. For the period ended 30 June 2019 these costs were £2 million (30 June 2018: £17 million, 31 December 2018: £24 million). The 2019 Managed Separation costs primarily relate to post-listing rebranding.

6(d): 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 the six months ended 30 June 2019 finance costs were £5 million (30 June 2018: £8 million, 31 December 2018: £13 million).

6(e): Policyholder tax adjustments

Adjustments to policyholder tax are made to remove distortions arising from market volatility that can, in turn, lead to volatility in the policyholder tax charge between periods. The recognition of the income received from policyholders (which is included within the Group's revenue) to fund the policyholder tax liability can vary in timing to the recognition of the corresponding tax expense, creating volatility to the Group's IFRS (loss)/profit before tax attributable to equity holders. For a further explanation of the impact of markets on the policyholder tax charge see note 7(a). Adjustments are also made to remove distortions from other non-operating adjusting items. For the period ended 30 June 2019 the total of policyholder tax adjustments to adjusted profit is £(76) million (30 June 2018: £15 million, 31 December 2018: £101 million) relating to both continuing and discontinued operations, as shown in note 7(c).

6(f): Voluntary customer remediation

During 2017, as part of its ongoing work to promote fair customer outcomes, the Group conducted product reviews consistent with the recommendations from the Financial Contact Authority's ('FCA') thematic feedback and the FCA's guidance FG16/8 Fair treatment of long-standing customers in the life insurance sector. Following these reviews a provision of £69 million was established.

During 2019 the components of the remaining provision have been reviewed and £6 million of the provision was released (as detailed in note 18: Provisions), wholly relating to discontinued operations.

7: Tax

7(a): Tax charged to the income statement
				£m
	Note	Six months 2019	Six months 2018	Full year 2018
Current tax
United Kingdom		15	1	(5)
International		2	2	3
Adjustments to current tax in respect of prior periods		-	-	(11)
Total current tax		17	3	(13)
Deferred tax
Origination and reversal of temporary differences		51	(6)	(61)
Effect on deferred tax of changes in tax rates		2	-	-
Adjustments to deferred tax in respect of prior periods		-	(2)	(7)
Total deferred tax		53	(8)	(68)
Total tax charged/(credited) to income statement - continuing operations		70	(5)	(81)
Total tax charged/(credited) to income statement - discontinued operations	4(c)	61	(9)	(86)
Total tax charged/(credited) to income statement		131	(14)	(167)

Attributable to policyholder returns - continuing operations		78	(3)	(61)
Attributable to equity holders - continuing operations		(8)	(2)	(20)
Total tax charged/(credited) to income statement - continuing operations		70	(5)	(81)
Attributable to policyholder returns - discontinued operations		59	(15)	(97)
Attributable to equity holders - discontinued operations		2	6	11
Total tax charged/(credited) to income statement - discontinued operations		61	(9)	(86)
Total tax charged/(credited) to income statement		131	(14)	(167)

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 equity holders' profits are shown separately in the income statement.

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 shareholders as tax attributable to equity holders.

The Group's income tax expense on continuing business was £70 million for the six months to 30 June 2019, compared to a credit of £81 million for the prior year. This income tax expense/(credit) can vary significantly period on period as a result of market volatility and the impact this has on policyholder tax. The recognition of the income received from policyholders (which is included within the Group's revenue) to fund the policyholder tax liability can vary in timing to the recognition of the corresponding policyholder tax expense, creating volatility to the Group's IFRS (loss)/profit before tax attributable to equity holders. An adjustment is made to adjusted profit to remove these distortions, as explained further in note 6(e).

Significant market volatility during the year ended 31 December 2018 led to large investment losses that have reversed in the first half of 2019, resulting in investment gains of £623 million on products subject to policyholder tax. The gain is a component of the total 'investment return' gain of £5,043 million shown in the income statement and £1,054 million shown in the discontinued operations income statement. The impact of the £623 million investment return gain, is the primary reason for the £137 million tax charge attributable to policyholder returns in respect of both continuing (£78 million) and discontinued (£59 million) business for the period ended 30 June 2019 (30 June 2018: £18 million credit, 31 December 2018 £158 million credit).

7(b): Reconciliation of total income tax expense

The income tax charged to profit or loss differs from the amount that would apply if all of the Group's profits from the different tax jurisdictions had been taxed at the UK standard corporation tax rate. The difference in the effective rate is explained below:


				£m
	Note	Six months 2019	Six months 2018	Full year 2018
Profit before tax from continuing operations		38	(3)	8
Tax at UK standard rate of 19% (2018: 19%)		7	-	1
Different tax rate or basis on overseas operations		(3)	(3)	(5)
Untaxed and low taxed income		(1)	(1)	(8)
Disallowable expenses		1	4	6
Adjustments to current tax in respect of prior years		-	-	(11)
Net movement on deferred tax assets not recognised		(1)	(2)	(11)
Effect on deferred tax of changes in tax rates		2	-	-
Adjustments to deferred tax in respect of prior years		-	(2)	(7)
Income tax attributable to policyholder returns		65	(1)	(46)
Total tax charged/(credited) to income statement - continuing operations		70	(5)	(81)
Total tax charged/(credited) to income statement - discontinued operations	4(c)	61	(9)	(86)
Total tax charged/(credited) to income statement		131	(14)	(167)

7(c): Reconciliation of income tax expense in the income statement to income tax on adjusted profit.

			£m
	Six months 2019	Six months 2018	Full year 2018
Income tax expense/(credit) on continuing operations	70	(5)	(81)
Tax on adjusting items
Goodwill impairment and impact of acquisition accounting	4	3	8
Business transformation costs	7	7	16
Managed Separation costs	-	2	2
Finance costs	1	2	2
Policyholder tax adjustments	(61)	7	64
Other shareholder tax adjustments	9	(3)	5
Tax on adjusting items - continuing operations	(40)	18	97
Tax attributable to policyholder returns - continuing operations	(17)	(4)	(3)
Tax charged on adjusted profit - continuing operations	13	9	13

Income tax expense/(credit) on discontinued operations	61	(9)	(86)
Tax on adjusting items
Policyholder tax adjustments	(15)	8	37
Profit on business disposals	-	5	4
Voluntary customer remediation provision	(1)	-	-
Other shareholder tax adjustments	(1)	(5)	(17)
Tax on adjusting items - discontinued operations	(17)	8	24
Tax attributable to policyholder returns - discontinued operations	(44)	7	60
Tax charged on adjusted profit - discontinued operations	-	6	(2)

Tax charged on total adjusted profit	13	15	11

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 EPS is a requirement of the Johannesburg Stock Exchange. The Group's EPS (for total business, continuing and discontinued operations) on these different bases are summarised below.

Basic EPS is calculated by dividing profit after tax attributable to ordinary equity shareholders of the parent by the weighted average number of Ordinary Shares in issue during the year. The weighted average number of shares excludes treasury shares, comprising Quilter plc shares held within Employee Benefit Trusts ('EBTs') to satisfy the Group's obligations under employee share awards, and Quilter plc shares held in consolidated funds. Treasury shares are deducted for the purpose of calculating both basic and diluted EPS.

Diluted EPS recognises the dilutive impact of shares awarded and options granted to employees under share-based payment arrangements, to the extent they have value, in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full period.

The Group is also required to calculate headline earnings per share ('HEPS) in accordance with the Johannesburg Stock Exchange Limited ('JSE') Listing Requirements, determined by reference to the South African Institute of Chartered Accountants' circular 02/2015 'Headline Earnings'. Disclosure of HEPS is not a requirement of IFRS, but it is a commonly used measure of earnings in South Africa.

					Pence
	Source of guidance	Notes	Six months 2019	Six months 2018	Full year 2018
Basic earnings per share	IFRS	8(b)	(0.9)	18.7	26.6
Diluted basic earnings per share	IFRS	8(b)	(0.9)	18.7	26.5
Adjusted basic earnings per share	Group policy	8(b)	5.6	6.6	13.5
Adjusted diluted earnings per share	Group policy	8(b)	5.5	6.6	13.5
Headline basic earnings per share (net of tax)	JSE Listing Requirements	8(c)	(0.9)	2.8	10.6
Headline diluted earnings per share (net of tax)	JSE Listing Requirements	8(c)	(0.9)	2.8	10.5

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 and headline profit):

			Millions
	Six months 2019	Six months 2018	Full year 2018
Weighted average number of Ordinary Shares	1,902	1,902	1,902
Treasury shares including those held in EBTs	(68)	(72)	(70)
Basic weighted average number of Ordinary Shares	1,834	1,830	1,832
Adjustment for dilutive share awards and options	18	-	7
Diluted weighted average number of Ordinary Shares	1,852	1,830	1,839

8(b): Basic and diluted EPS (IFRS and adjusted profit)

			£m
	Six months 2019	Six months 2018	Full year 2018
(Loss)/profit after tax from continuing operations	(32)	2	89
Adjusting items	129	83	107
Tax on adjusting items	40	(18)	(97)
Less: Policyholder tax adjustments	(61)	7	64
Adjusted profit after tax on continuing operations	76	74	163

Profit after tax from discontinued operations	15	340	399
Adjusting items	9	(293)	(327)
Tax on adjusting items	17	(8)	(24)
Less: Policyholder tax adjustments	(15)	8	37
Adjusted profit after tax on discontinued operations	26	47	85
Adjusted profit after tax	102	121	248

8(b): Basic and diluted EPS (IFRS and adjusted profit) continued

			Pence
	Six months 2019	Six months 2018	Full year 2018
Basic EPS from continuing operations	(1.7)	0.1	4.8
Basic EPS from discontinued operations	0.8	18.6	21.8
Basic EPS	(0.9)	18.7	26.6
Diluted EPS from continuing operations	(1.7)	0.1	4.8
Diluted EPS from discontinued operations	0.8	18.6	21.7
Diluted EPS	(0.9)	18.7	26.5
Adjusted basic EPS from continuing operations	4.1	4.0	8.9
Adjusted basic EPS from discontinued operations	1.5	2.6	4.6
Adjusted basic EPS	5.6	6.6	13.5
Adjusted diluted EPS from continuing operations	4.1	4.0	8.9
Adjusted diluted EPS from discontinued operations	1.4	2.6	4.6
Adjusted diluted EPS	5.5	6.6	13.5

8(c): Headline earnings per share
	+		+							£m
			Six months 2019			Six months 2018				Full year 2018
	Gross		Net of tax	Gross		Net of tax		Gross		Net of tax
Profit attributable to ordinary equity holders			(17)			342				488
Adjusting items:
Less: profit on business disposals	-		-	(285)		(290)		(290)		(294)
Headline earnings	-		(17)	(285)		52		(290)		194
Headline basic EPS (pence)			(0.9)			2.8				10.6
Headline diluted EPS (pence)			(0.9)			2.8				10.5

9: Dividends
									£m
		Payment date			Six months 2019		Six months 2018		Full year 2018
2018 Special interim dividend paid - 12.0p per ordinary share		21 September 2018			-		-		221
2018 Final dividend paid - 3.3p per ordinary share		20 May 2019			61		-		-
Dividends paid to ordinary shareholders					61		-		221

Final and interim dividends paid to ordinary shareholders are calculated using the number of shares in issue at the record date less own shares held in EBTs.

10: Goodwill and intangible assets

10(a): Summary of goodwill and intangible assets

				£m
	Goodwill	Software development costs	Other intangible assets	Total
Gross amount
1 January 2018	306	97	371	774
Acquisitions through business combinations	3	-	5	8
Transfer to non-current assets held for sale	(1)	-	-	(1)
Other movements¹	5	2	-	7
30 June 2018	313	99	376	788
Acquisitions through business combinations	2	-	4	6
Additions	-	4	-	4
Other movements	(1)	(3)	-	(4)
31 December 2018	314	100	380	794
Acquisitions through business combinations	52	-	36	88
Additions	-	4	-	4
Transfer to non-current assets held for sale	(30)	-	-	(30)
30 June 2019	336	104	416	856

Amortisation and impairment losses
1 January 2018	-	(92)	(108)	(200)
Amortisation charge for the period	-	(2)	(21)	(23)
Other movements	-	-	1	1
30 June 2018	-	(94)	(128)	(222)
Amortisation charge for the period	-	(2)	(20)	(22)
Impairment of other acquired intangibles	-	-	(1)	(1)
Other movements	-	1	-	1
31 December 2018	-	(95)	(149)	(244)
Amortisation charge for the period	-	(3)	(22)	(25)
30 June 2019	-	(98)	(171)	(269)

Carrying amount
30 June 2018	313	5	248	566
31 December 2018	314	5	231	550
30 June 2019	336	6	245	587

¹Goodwill increased by £4 million in 2018 due to a review of the Purchase Price Allocation ('PPA') calculation at 31 December 2017 year end relating to the Quilter Financial Planning acquisitions, resulting in a reclassification from other intangibles to goodwill.


10(b): Analysis of other intangible assets
			£m
	30 June 2019	30 June 2018	31 December 2018	Average estimated useful life	Average period remaining
Net carrying value
Distribution channels	26	32	28	8 years	4 years
Customer relationships	217	211	199	10 years	6 years
Brand	2	5	4	5 years	1 year
Total other intangible assets	245	248	231

Distribution channel assets are in relation to various Quilter Financial Planning businesses. Customer relationship assets are largely in relation to the Quilter Cheviot and Quilter Financial Planning businesses, the latter element increasing due to the 2019 acquisitions of Charles Derby Group and Lighthouse plc, both of which are provisional calculations and therefore the apportionment between goodwill and other intangibles is subject to change. The brand asset is in relation to the Quilter Cheviot business.

10: Goodwill and other intangibles continued

10(c): Allocation of goodwill to cash generating units ('CGUs') and impairment testing

			£m
	30 June 2019	30 June 2018	31 December 2018
Goodwill (net carrying amount)
Advice and Wealth Management	205	151	153
Wealth Platforms	131	162	161
Goodwill (as per the Statement of Financial Position)	336	313	314
Goodwill held for sale	30	-	-
Total goodwill	366	313	314

In accordance with the requirements of IAS 36 Impairment of Assets, goodwill in both the Advice and Wealth Management and Wealth Platforms CGUs is tested for impairment annually, or earlier if an indicator of impairment exists, by comparing the carrying value of the CGU to which the goodwill relates to the recoverable value of that CGU, being the higher of that CGU'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 net client cash flows ('NCCF'), significant falls in profit and an increase in the discount rate.

During the six months to 30 June 2019, there were no indicators of impairment for either the Advice and Wealth Management or Wealth Platforms CGUs. In this period, adjusted profit has increased by 5% from the prior period to £115 million, although NCCF has been weaker compared to the prior period due to lower gross sales. The IFRS profit after tax from continuing operations has declined from a profit of £2 million to a loss of £(32) million. However, due to significant headroom in the recoverable amount over the carrying value for both CGUs, the impact of the lower NCCF and IFRS loss from continuing operations in the current period are not considered material enough to be indicators of impairment.

As part of the assessment of assets held for sale as disclosed in note 4(f), an allocation of goodwill was made in relation to the QLA business. The £30 million transferred represents the share of the goodwill in the Wealth Platforms CGU applicable to QLA, based on its fair value relative to the fair values of the other businesses within that CGU.

11: Property, plant and equipment

				£m
	Right-of-use assets	Leasehold improvements	Plant and equipment	Total
Gross amount
1 January 2018	-	13	75	88
Additions	-	1	1	2
Disposals	-	-	(1)	(1)
Other movements	-	(1)	-	(1)
30 June 2018	-	13	75	88
Additions	-	1	4	5
Other movements	-	(1)	-	(1)
31 December 2018	-	13	79	92
Implementation of IFRS 16¹	74	(3)	-	71
Acquisitions through business combinations	1	1	2	4
Additions	-	-	4	4
Other movements²	1	1	3	5
30 June 2019	76	12	88	176

Amortisation and impairment losses
1 January 2018	-	(7)	(63)	(70)
Depreciation charge for the period	-	-	(3)	(3)
Disposals	-	-	1	1
Other movements	-	-	1	1
30 June 2018	-	(7)	(64)	(71)
Depreciation charge for the period	-	(1)	(4)	(5)
Disposals	-	-	1	1
31 December 2018	-	(8)	(67)	(75)
Implementation of IFRS 16	-	2	-	2
Acquisitions through business combinations	-	-	(1)	(1)
Depreciation charge for the period	(6)	-	(3)	(9)
Other movements	-	-	(4)	(4)
30 June 2019	(6)	(6)	(75)	(87)

Carrying amount
30 June 2018	-	6	11	17
31 December 2018	-	5	12	17
30 June 2019	70	6	13	89
¹The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognised in retained earnings at the time of initial application.
²During the year, fully amortised plant and equipment within the Quilter Financial Planning business have been reclassified from intangible assets to tangible assets.

12: Financial investments

The table below analyses the investments and securities that the Group invests in, either for its own proprietary behalf (shareholder funds) or on behalf of third parties (policyholder funds).

			£m
	30 June 2019	30 June 2018	31 December 2018
Government and government-guaranteed securities	1,055	1,562	1,175
Other debt securities, preference shares and debentures	2,449	2,524	2,095
Equity securities	12,339	13,944	10,006
Pooled investments	50,261	46,520	45,931
Short-term funds and securities treated as investments	25	19	12
Total financial investments	66,127	64,569	59,219
Less: financial investments classified as held for sale	(9,704)	-	-
Total financial investments net of held for sale	56,423	64,569	59,219

Recoverable within 12 months	65,987	64,403	59,044
Recoverable after 12 months	140	166	175
Total financial investments	66,127	64,569	59,219

13: Categories of financial instruments

The analysis of financial assets and liabilities into their 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.

All gains and losses on measuring the financial assets and liabilities at each reporting date are included in the determination of profit or loss for the period.

The methods and assumptions used in determining fair value are set out in note 14.

30 June 2019
					£m
Measurement basis	Fair value
	Mandatorily at FVTPL	Designated at FVTPL	Amortised cost	Non-financial assets and liabilities	Total
Assets
Investments in associated undertakings¹	-	-	-	2	2
Contract assets	-	-	45	-	45
Loans and advances	186	-	34	-	220
Financial investments	56,421	2	-	-	56,423
Trade, other receivables and other assets	-	-	1,309	44	1,353
Derivative financial instruments	24	-	-	-	24
Cash and cash equivalents	1,072	-	872	-	1,944
Total assets that include financial instruments	57,703	2	2,260	46	60,011
Total other non-financial assets	-	-	-	1,201	1,201
Total assets net of held for sale	57,703	2	2,260	1,247	61,212
Total assets classified as held for sale	11,421	137	86	673	12,317
Total assets	69,124	139	2,346	1,920	73,529

Liabilities
Investment contract liabilities	50,286	-	-	-	50,286
Third-party interest in consolidation of funds	6,972	-	-	-	6,972
Borrowings and lease liabilities²	-	-	280	-	280
Trade, other payables and other liabilities	-	-	1,587	133	1,720
Derivative financial instruments	24	-	-	-	24
Total liabilities that include financial instruments	57,282	-	1,867	133	59,282
Total other non-financial liabilities	-	-	-	332	332
Total liabilities net of held for sale	57,282	-	1,867	465	59,614
Total liabilities classified as held for sale	11,040	-	125	816	11,981
Total liabilities	68,322	-	1,992	1,281	71,595

¹Investments in associated undertakings classified as non-financial assets and liabilities are equity accounted.

²The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, comparative information is not restated.

13: Categories of financial instruments continued

30 June 2018
					£m
Measurement basis	Fair value
	Mandatorily at FVTPL	Designated at FVTPL	Amortised cost	Non-financial assets and liabilities	Total
Assets
Investments in associated undertaking¹	-	-	-	1	1
Contract assets	-	-	-	45	45
Loans and advances	190	-	29	-	219
Financial investments	64,399	170	-	-	64,569
Reinsurers' share of policyholder liabilities	2,263	-	-	403	2,666
Trade, other receivables and other assets	-	-	1,437	-	1,437
Derivative financial instruments	33	-	-	-	33
Cash and cash equivalents²	1,395	-	1,980	-	3,375
Total assets that include financial instruments	68,280	170	3,446	449	72,345
Total other non-financial assets	-	-	-	1,192	1,192
Total assets	68,280	170	3,446	1,641	73,537

Liabilities
Long-term business insurance policyholder liabilities	-	-	-	513	513
Investment contract liabilities	60,140	-	-	-	60,140
Third-party interest in consolidation of funds	8,105	-	-	-	8,105
Borrowings	-	-	197	-	197
Trade, other payables and other liabilities	-	-	1,937	-	1,937
Derivative financial instruments	59	-	-	-	59
Total liabilities that include financial instruments	68,304	-	2,134	513	70,951
Total other non-financial liabilities	-	-	-	526	526
Total liabilities	68,304	-	2,134	1,039	71,477

¹Investments in associated undertakings classified as non-financial assets and liabilities are equity accounted.

²As at 30 June 2018, money market collective investment funds have been reclassified from amortised cost to FVTPL Level 1 to aid comparability between periods.

31 December 2018
					£m
Measurement basis	Fair value
	Mandatorily at FVTPL	Designated at FVTPL	Amortised cost	Non-financial assets and liabilities	Total
Assets
Investments in associated undertakings¹	-	-	-	2	2
Contract assets	-	-	44	-	44
Loans and advances	189	-	33	-	222
Financial investments	59,052	167	-	-	59,219
Reinsurers' share of policyholder liabilities	1,671	-	-	491	2,162
Trade, other receivables and other assets	-	-	449	37	486
Derivative financial instruments	46	-	-	-	46
Cash and cash equivalents	1,361	-	1,034	-	2,395
Total assets that include financial instruments	62,319	167	1,560	530	64,576
Total other non-financial assets	-	-	-	1,214	1,214
Total assets	62,319	167	1,560	1,744	65,790

Liabilities
Long-term business insurance policyholder liabilities	-	-	-	602	602
Investment contract liabilities	56,450	-	-	-	56,450
Third-party interest in consolidation of funds	5,116	-	-	-	5,116
Borrowings	-	-	197	-	197
Trade, other payables and other liabilities	-	-	840	159	999
Derivative financial instruments	37	-	-	-	37
Total liabilities that include financial instruments	61,603	-	1,037	761	63,401
Total other non-financial liabilities	-	-	-	384	384
Total liabilities	61,603	-	1,037	1,145	63,785

¹Investments in associated undertakings classified as non-financial assets and liabilities are equity accounted.

14: 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 fair value hierarchy (see note 14(b)), prescribed under IFRS, provides an indication about the reliability of inputs used in determining fair value.

14(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 company shares the valuation is based on the latest available set of audited financial statements where available, or if more recent, a statement of valuation provided by the private company's management.

There have been no significant changes in the valuation techniques applied when valuing financial instruments. The general principles applied to those instruments measured at fair value are outlined below:

Reinsurers' share of policyholder liabilities

Reinsurers' share of policyholder liabilities are measured on a basis that is consistent with the measurement of the provisions held in respect of the related insurance contracts. Reinsurance contracts which cover financial risk are measured at fair value of the underlying assets.

Loans and advances

Loans and advances include loans to policyholders, loans to brokers, and other secured and unsecured loans. Loans and advances to policyholders of investment linked contracts are measured at fair value. All other loans are stated at their amortised cost.

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 are measured at observable market prices where available. In the absence of observable market prices, these investments and securities are fair valued utilising various approaches including discounted cash flows, the application of an earnings before interest, tax, depreciation and amortisation multiple or any other relevant technique.

Derivatives

The fair value of derivatives is determined with reference to the exchange traded prices of the specific instruments. In situations where the derivatives are traded over the counter the fair value of the instruments is determined by the utilisation of option pricing models.

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 interest in consolidated funds

Third-party interests in consolidated funds are measured at the attributable net asset value of each fund.

Borrowings and lease liabilities

Borrowings and lease liabilities funds are stated at amortised cost.

14: Fair value methodology continued

14(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 prices for identical instruments in active markets.	Listed equity securities, government securities and other listed debt securities and similar instruments that are actively traded, actively traded pooled investments, certain quoted derivative assets and liabilities, reinsurers' share of investment contract liabilities and investment contract liabilities directly linked to other Level 1 financial assets.
Level 2 - valuation techniques using observable inputs: financial assets and liabilities with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial assets and liabilities valued using models where all significant inputs are observable.	Unlisted equity and debt securities where the valuation is based on models involving no significant unobservable data. Over the counter (OTC) derivatives, certain privately placed debt instruments and third-party interests in consolidated funds.
Level 3 - valuation techniques using significant unobservable inputs: financial assets and liabilities valued using valuation techniques where one or more significant inputs are unobservable.	Unlisted equity and securities with significant unobservable inputs, securities where the market is not considered sufficiently active, including 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. However, 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 for 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. Consequently, the effect of uncertainty in determining unobservable inputs will generally be restricted to uncertainty about the overall fair value of the asset or liability being measured.

14(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 active, traded primary market ceases to exist for that financial instrument. A transfer between Level 2 and Level 3 occurs when the majority of the significant inputs used to determine 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 transfers of financial investments of £167 million from Level 1 to Level 2 during the year (30 June 2018: £15 million, 31 December 2018: £13 million). There were transfers of financial investments of £55 million from Level 2 to Level 1 during the year (30 June 2018: £76 million, 31 December 2018: £107 million). These movements are matched exactly by transfers of investment contract liabilities. See note 14(e) for the reconciliation of Level 3 financial instruments.

14(d): Financial assets and liabilities measured at fair value, classified according to fair value hierarchy

The tables below present a summary of the Group's financial assets and liabilities that are measured at fair value in the consolidated statement of financial position according to their IFRS 9 classification.

The majority of the Group's financial assets are measured using quoted market prices for identical instruments in active markets (Level 1) and there has been no significant change during the year.

The assets, together with the reinsurers' share of investment contract liabilities, are held to cover the liabilities for linked investment contracts (net of reinsurance). The difference between linked assets and linked liabilities is principally 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.

14: Fair value methodology continued

	30 June 2019		30 June 2018		31 December 2018
	£m	%	£m	%	£m	%
Financial assets measured at fair value
Level 1¹	55,561	80.2%	58,211	85.1%	52,060	83.4%
Level 2	12,281	17.7%	9,128	13.3%	9,272	14.8%
Level 3	1,421	2.1%	1,111	1.6%	1,154	1.8%
Total	69,263	100.0%	68,450	100.0%	62,486	100.0%
Financial liabilities measured at fair value
Level 1	59,498	87.1%	58,566	85.8%	54,944	89.2%
Level 2	7,403	10.8%	8,629	12.6%	5,508	8.9%
Level 3	1,421	2.1%	1,109	1.6%	1,151	1.9%
Total	68,322	100.0%	68,304	100.0%	61,603	100.0%

¹As at 30 June 2018 money market collective investment funds have been reclassified from amortised cost to FVTPL Level 1 to aid comparability between periods.

				£m
30 June 2019	Level 1	Level 2	Level 3	Total
Financial assets measured at fair value
Mandatorily (fair value through profit or loss)	44,024	12,259	1,420	57,703
Loans and advances	186	-	-	186
Financial investments	42,766	12,235	1,420	56,421
Cash and cash equivalents	1,072	-	-	1,072
Derivative financial instruments - assets	-	24	-	24

Designated (fair value through profit or loss)	2	-	-	2
Financial investments	2	-	-	2
Total assets net of held for sale	44,026	12,259	1,420	57,705
Total assets classified as held for sale	11,535	22	1	11,558
Total assets measured at fair value	55,561	12,281	1,421	69,263

Financial liabilities measured at fair value
Mandatorily (fair value through profit or loss)	48,481	7,381	1,420	57,282
Investment contract liabilities	48,481	385	1,420	50,286
Third-party interests in consolidated funds	-	6,972	-	6,972
Derivative financial instruments - liabilities	-	24	-	24
Total liabilities net of held for sale	48,481	7,381	1,420	57,282
Total liabilities classified as held for sale	11,017	22	1	11,040
Total liabilities measured at fair value	59,498	7,403	1,421	68,322
				£m
30 June 2018	Level 1	Level 2	Level 3	Total
Financial assets measured at fair value
Mandatorily (fair value through profit or loss)	58,041	9,128	1,111	68,280
Reinsurers' share of policyholder liabilities	2,263	-	-	2,263
Loans and advances	190	-	-	190
Financial investments	54,193	9,095	1,111	64,399
Cash and cash equivalents¹	1,395	-	-	1,395
Derivative financial instruments - assets	-	33	-	33

Designated (fair value through profit or loss)	170	-	-	170
Financial investments	170	-	-	170

Total assets measured at fair value	58,211	9,128	1,111	68,450
Financial liabilities measured at fair value
Mandatorily (fair value through profit or loss)	58,566	8,629	1,109	68,304
Investment contract liabilities	58,566	465	1,109	60,140
Third-party interests in consolidated funds	-	8,105	-	8,105
Derivative financial instruments - liabilities	-	59	-	59

Total liabilities measured at fair value	58,566	8,629	1,109	68,304

¹As at 30 June 2018 money market collective investment funds have been reclassified from amortised cost to FVTPL Level 1 to aid comparability between periods.

				£m
31 December 2018	Level 1	Level 2	Level 3	Total
Financial assets measured at fair value
Mandatorily (fair value through profit or loss)	51,893	9,272	1,154	62,319
Reinsurers' share of policyholder liabilities	1,671	-	-	1,671
Loans and advances	189	-	-	189
Financial investments	48,672	9,226	1,154	59,052
Cash and cash equivalents	1,361	-	-	1,361
Derivative financial instruments - assets	-	46	-	46

Designated (fair value through profit or loss)	167	-	-	167
Financial investments	167	-	-	167

Total assets measured at fair value	52,060	9,272	1,154	62,486
Financial liabilities measured at fair value
Mandatorily (fair value through profit or loss)	54,944	5,508	1,151	61,603
Investment contract liabilities	54,944	355	1,151	56,450
Third-party interests in consolidated funds	-	5,116	-	5,116
Derivative financial instruments - liabilities	-	37	-	37

Total liabilities measured at fair value	54,944	5,508	1,151	61,603

14(e): Level 3 fair value hierarchy disclosure

All of the assets that are classified as Level 3 are held within linked policyholder funds. This means that all of the investment risk associated with these assets is borne by policyholders and that 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.

In prior periods, included within the assets classified as Level 3 was a shareholder investment in an unlisted equity (30 June 2018: £2 million, 31 December 2018: £3 million); this was not matched by a corresponding liability and therefore any changes in market value were recognised in the Group's income statement. Following the acquisition of the Charles Derby Group during the period, the Group's investment is no longer held as a Level 3 financial investment, but instead as an investment in subsidiary which is eliminated on consolidation.

14: Fair value methodology continued

The table below reconciles the opening balance of Level 3 financial assets to the closing balance at each period end:

			£m
	30 June 2019	30 June 2018	31 December 2018
At beginning of the year	1,154	1,169	1,169
Total net fair value gains recognised in:
- profit or loss	68	20	54
Purchases	31	-	38
Sales	(3)	(2)	(25)
Transfers in	210	57	69
Transfers out	(36)	(133)	(151)
Foreign exchange and other	(3)	-	-
Total Level 3 financial assets	1,421	1,111	1,154
Unrealised fair value gains/(losses) relating to assets held at the year end recognised in:
- profit or loss	68	20	54

Amounts shown as sales arise principally from the sale of private company shares, unlisted pooled investments and from distributions received in respect of holdings in property funds.

Transfers into Level 3 assets for the current period total £210 million (30 June 2018: £57 million, 31 December 2018: £69 million). This is due to a combination of stale priced assets that were previously shown within Level 2 and for which price updates have not been received for more than six months, and an increase in suspended funds previously showed within Level 1. Transfers out of Level 3 assets in the current period comprise £36 million (30 June 2018: £133 million, 31 December 2018: £151 million) of stale priced assets that were not previously being repriced and that have been transferred into Level 2 as they are now actively priced.

The table below analyses the type of Level 3 financial assets held:

			£m
	30 June 2019	30 June 2018	31 December 2018
Pooled investments	245	87	86
Unlisted and stale price pooled investments	129	86	82
Suspended funds	116	1	4
Private equity investments	1,176	1,024	1,068
Total Level 3 financial assets	1,421	1,111	1,154

All of the liabilities that are classified as Level 3 are investment contract liabilities which exactly match against the Level 3 assets held in linked policyholder funds.

The table below reconciles the opening balance of Level 3 financial liabilities to the closing balance at each period end:

			£m
	30 June 2019	30 June 2018	31 December 2018
At beginning of the year	1,151	1,167	1,167
Total net fair value gains recognised in:
Profit or loss	68	20	53
Purchases	31	-	38
Sales	(3)	(2)	(25)
Transfers in	210	57	69
Transfers out	(36)	(133)	(151)
Total Level 3 financial liabilities	1,421	1,109	1,151
Unrealised fair value gains/(losses) relating to liabilities held at the period end recognised in:
Profit or loss	68	20	53

14: Fair value methodology continued

14(f): Effect of changes in significant unobservable assumptions to reasonable possible alternatives

Details of the valuation techniques applied to the different categories of financial instruments can be found in note 14(a) above, including the valuation techniques applied when significant unobservable assumptions are used to value Level 3 assets.

The majority of the Group's level 3 assets are held within private equity investments, where the valuation of these assets is performed on an asset-by-asset basis using a valuation methodology appropriate to the specific investment and in line with industry guidelines. Private equity investments are valued at the value disclosed in the latest available set of audited financial statements or, if more recent information is available, from investment managers or professional valuation experts at the value of the underlying assets of the private equity investment. For this reason, no reasonable alternative assumptions are applicable and management therefore perform a sensitivity of an aggregate 10% change in the value of the financial asset or liability (30 June 2018: 10%, 31 December 2018: 10%), representing a reasonable possible alternative judgement in the context of the current macro-economic environment in which the Group operates. It is therefore considered that the impact of this sensitivity will be in the range of £142 million to the reported fair value of level 3 assets, both favourable and unfavourable (30 June 2018: £111 million, 31 December 2018: £115 million). As described in note 14(e), changes in the value of Level 3 assets held within linked policyholder funds are exactly matched by corresponding changes in the value of liabilities due to policyholders and therefore have no impact on the Group's net asset value or profit or loss, except to the extent that it has an impact on management fees earned.

14(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. Their classification within the fair value hierarchy would be as follows:

Contract assets Level 3

Trade, other receivables, and other assets Level 3

Cash and cash equivalents Level 1

Trade, other payables, and other liabilities Level 3

Loans and advances are financial assets held at amortised cost and therefore not carried at fair value, with the exception of policyholder loans which are categorised as FVTPL. Loans and advances held at amortised cost and would be classified as Level 3 in the fair value hierarchy.

Borrowed funds are financial liabilities held at amortised cost and therefore not carried at fair value. Borrowed funds relate to subordinated liabilities and would be classified as Level 2 in the fair value hierarchy.

Lease liabilities valued under IFRS 16 are held at amortised cost and therefore not carried at fair value. They would be classified as Level 3 in the fair value hierarchy.

15: Analysis of cash and cash equivalents
			£m
	30 June 2019	30 June 2018	31 December 2018
Cash at bank	369	726	550
Money market funds	1,410	1,395	1,361
Cash and cash equivalents in consolidated funds	546	1,254	484
Total cash and cash equivalents per consolidated statement of cash flows	2,325	3,375	2,395
Less: cash within held for sale	(381)	-	-
Total cash and cash equivalents per statement of financial position	1,944	3,375	2,395

Except for cash and cash equivalents subject to consolidation of funds of £546 million (30 June 2018: £1,254 million, 31 December 2018: £484 million), management do not consider that there are any material amounts of cash and cash equivalents which are not available for use in the Group's day-to-day operations.

16: Share-based payments

During the six months ended 30 June 2019, the Group participated in a number of share-based payment arrangements. This note describes the nature of the plans and how the share options and awards are valued.

16(a): Description of share-based payment arrangements

The Group operates the following share-based payment schemes with awards over Quilter plc shares which came into force on 25 June 2018: the Quilter plc Performance Share Plan, the Quilter plc Share Reward Plan, the Quilter plc Share Incentive Plan, and the Quilter plc Sharesave Plan.

The Old Mutual Wealth Joint Share Ownership Plan, the Old Mutual Wealth Phantom Share Reward Plan and the Old Mutual plc Managed Separation Incentive Plan were awards over Old Mutual plc shares or, in the case of the Old Mutual Wealth Phantom Share Reward Plan, notional Old Mutual plc shares. These share-based payment schemes were transferred to awards over Quilter plc shares on 25 June 2018 and continue to the original vesting dates.

	Description of award					Vesting conditions
Scheme	Restricted shares	Conditional shares	Options	Other	Dividend entitlement¹	Contractual life (years)	Typical service (years)	Performance (measure)
Quilter plc Performance Share Plan - Share Options (Nil cost options)	-	-	ü	-	ü	Up to 10	3	AP EPS CAGR² and Relative Total Shareholder Return
Quilter plc Performance Share Plan - Conditional Shares	-	ü	-	-	ü	Not less than 3	3	Conduct, Risk & Compliance Underpins
Quilter plc Share Reward Plan - Conditional Shares	-	ü	-	-	ü	Typically 3	3	-
Quilter plc Share Incentive Plan - Restricted Shares	ü	-	-	-	ü	Not less than 3	2	-
Quilter plc Sharesave Plan³	-	-	ü	ü	-	3^1/2 - 5^1/2	3 & 5	-
Old Mutual Wealth Joint Share Ownership Plan - Jointly Owned/Restricted Shares⁴	ü	-	-	ü	ü	3	3	-
Old Mutual Wealth Phantom Share Reward Plan - Conditional Shares⁵	-	ü	-	-	ü	Typically 3	3	-
Old Mutual plc Managed Separation Incentive Plan - Share Options (Nil cost options)	-	-	ü	-	ü	Up to 10	-	Targets in respect of Managed Separation completion

¹Participants are entitled to actual dividends for the Joint Share Ownership Plan Restricted shares and the Share Incentive Plan. For all other schemes participants are entitled to dividend equivalents.

²Adjusted Profit compound annual growth rate ('CAGR').

³The Quilter plc Sharesave Plan is linked to a savings plan.

⁴The Joint Share Ownership Plan ('JSOP') was implemented for certain key employees of the Group in 2013, with the final grant of awards in 2016. It provided participants with an interest in the capital growth of the company by granting joint ownership of shares in Old Mutual Wealth Management Ltd (now Quilter plc) with an EBT, whereby the trust owned the principal value of the shares and the participants owned any growth in value during the vesting period. Upon the demerger and listing of Quilter plc, the trust exercised a call option to acquire the participants' interest in the shares based on the growth in value of the Company between grant and listing, in return for consideration shares in Quilter plc. The consideration shares for any awards that remain unvested are restricted until the normal vesting date, and attract dividends during that time.

⁵Awards granted under the Phantom Share Reward Plan prior to the demerger of Quilter plc were made over notional ordinary shares in Old Mutual plc that were settled in cash on the vesting date. Upon the demerger and listing of Quilter plc, all unvested notional share awards were converted to conditional awards over ordinary shares in Quilter plc, which will be settled in Quilter plc shares on the normal vesting dates.

16(b): Reconciliation of movements in options
The movement in options outstanding under the Performance Share Plan and Sharesave Plan arrangements during the period is detailed below:

		Six months		Six months		Full year
		2019		2018		2018
Options over shares (London Stock Exchange)	Number of options	Weighted average exercise price	Number of options	Weighted average exercise price	Number of options	Weighted average exercise price
Outstanding at beginning of the period	2,468,964	£0.00	7,622,956	£1.60	7,622,956	£1.60
Granted during the period	23,277,265	£0.73	2,824,136	£0.00	2,824,136	£0.00
Forfeited during the period	-	-	(2,083,686)	£1.60	(2,252,333)	£1.60
Exercised during the period	-	-	(5,533,303)	£1.60	(5,578,539)	£1.60
Expired during the period	-	-	(5,967)	£1.60	(5,967)	£1.60
Cancelled during the period	(72,960)	£1.25	-	-	(141,289)	£1.60
Outstanding at end of the period	25,673,269	£0.66	2,824,136	£0.00	2,468,964	£0.00
Exercisable at end of the period	-	-	-	-	-	-

16: Share-based payments continued

16(b): Reconciliation of movements in options continued

The weighted average fair value of options at the measurement date, for options granted during the six months ended 30 June 2019 is £0.71, and for both the six months ended 30 June 2018 and the year ended 31 December 2018 was £1.24.

The options outstanding at 30 June 2019 have exercise prices of £nil for the Quilter plc Performance Share Plan and £1.25 for the Quilter plc Sharesave Plan, with a weighted average remaining contractual life of 3.2 years. At 30 June 2018 and 31 December 2018 the exercise price was £nil, as they were all nil cost options, with a weighted average remaining contractual life of 2.7 years and 2.2 years respectively.

16(c): Measurements and assumptions

In determining the fair value of equity-settled share-based awards and the related charge to the income statement, the Group makes assumptions about future events and market conditions. Specifically, management makes estimates of the likely number of shares that will vest and the fair value of each award granted which is valued and 'locked in' at the grant date.

The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of fair value of share options granted is measured using either a Black-Scholes option pricing model or a Monte Carlo simulation.

The inputs used in the measurement of fair values at the grant date for awards granted during 2019 were as follows:

	Weighted average share price	Weighted average exercise price	Weighted average expected volatility	Weighted average expected life	Weighted average risk free interest rate	Weighted average expected dividend yield	Expected forfeitures per annum
Scheme	£	£		(years)
Quilter plc Performance Share Plan - Share Options (Nil cost options)	1.39	0.00	29.3%	3.39	0.7%	0.0%	4%
Quilter plc Performance Share Plan - Conditional Shares	1.39	0.00	29.3%	3.00	0.6%	0.0%	4%
Quilter plc Share Reward Plan - Conditional Shares	1.39	0.00	29.3%	2.04	0.6%	0.0%	4%
Quilter plc Sharesave Plan	1.42	1.25	28.1%	3.65	0.8%	3.0%	10%

16(d): Share grants

The following summarises the fair value of Restricted Shares and Conditional Shares granted by the Group during the period:

		Six months	Six months				Full year
		2019			2018				2018
Instruments granted during the period	Number granted	Weighted average fair value	Number granted		Weighted average fair value		Number granted		Weighted average fair value
Quilter plc Performance Share Plan - Conditional Shares	4,048,663	£1.39	2,256,591		£1.52		5,928,616		£1.41
Quilter plc Share Reward Plan - Conditional Shares	10,229,933	£1.39	-		-		-		-
Quilter plc Share Incentive Plan - Restricted Shares	-	-	5,199,510		£1.53		5,202,140		£1.53
Old Mutual Wealth Phantom Share Reward Plan - Conditional Shares	-	-	6,474,853		£1.52		6,474,853		£1.52

16(e): Financial impact
The total expense recognised for the period arising from equity compensation plans was as follows:
								£m
				Six months 2019		Six months 2018		Full year 2018
Expense arising from equity-settled share and share option plans - continuing operations				13		12		26
Expense arising from equity-settled share and share option plans - discontinued operations				-		1		1
Total expense arising from equity-settled share and share option plans				13		13		27
Expense arising from cash-settled share and share option plans - continuing operations				-		3		3
Total expense arising from share and share option plans				13		16		30

17: Insurance and investment contract liabilities

The following is a summary of the Group's insurance and investment contract provisions and related reinsurance assets.

																											£m
					30 June 2019									30 June 2018									31 December 2018
		Notes			Gross			Re-insurance			Net			Gross			Re-insurance			Net			Gross			Re-insurance	Net
Life assurance policyholder liabilities
Life assurance policyholder liabilities		17(a)			676			(556)			120			503			(395)			108			588			(478)	110
Outstanding claims					18			(14)			4			10			(8)			2			14			(13)	1
Less: liabilities transferred to held for sale					(694)			570			(124)			-			-			-			-			-	-
Insurance contract liabilities					-			-			-			513			(403)			110			602			(491)	111

Unit-linked investment contracts					61,326			(1,516)			59,810			60,140			(2,263)			57,877			56,450			(1,671)	54,779
Less: liabilities transferred to held for sale					(11,040)			1,516			(9,524)			-			-			-			-			-	-
Investment contract liabilities		17(b)			50,286			-			50,286			60,140			(2,263)			57,877			56,450			(1,671)	54,779
Total life assurance policyholder liabilities					50,286			-			50,286			60,653			(2,666)			57,987			57,052			(2,162)	54,890


17(a): Insurance contract liabilities

Movements in the amounts outstanding in respect of life assurance policyholder liabilities, other than outstanding claims, are set out below:

																												£m
				30 June 2019									30 June 2018									31 December 2018
	Note			Gross			Re-insurance			Net			Gross			Re-insurance			Net			Gross			Re-insurance			Net
Carrying amount at 1 January				588			(478)			110			480			(375)			105			480			(375)			105
Impact of new business				3			(6)			(3)			2			(6)			(4)			2			(10)			(8)
Impact of experience effects				18			(11)			7			19			(12)			7			38			(26)			12
Impact of assumption changes				67			(61)			6			2			(2)			-			69			(68)			1
Other movements				-			-			-			-			-			-			(1)			1			-
Movement shown in discontinued operations income statement¹	4(c)			88			(78)			10			23			(20)			3			108			(103)			5
Transfer to liabilities held for sale				(676)			556			(120)			-			-			-			-			-			-
Total insurance contract life assurance policyholder liabilities				-			-			-			503			(395)			108			588			(478)			110
¹Of the £88 million gross movement in the six months ended 30 June 2019, £91 million is included within change in insurance contract liabilities and £3 million is included within in gross earned premiums in relation to the release of a provision for unearned premiums.
17(b): Unit-linked investment contract liabilities

Movements in the amounts outstanding in respect of unit-linked and other investment contracts are set out below:

																											£m
			30 June 2019									30 June 2018									31 December 2018
			Gross			Re- insurance			Net			Gross			Re- insurance			Net			Gross			Re- insurance			Net
Carrying amount at 1 January			56,450			(1,671)			54,779			59,139			(2,525)			56,614			59,139			(2,525)			56,614
From continuing operations
Fair value movements			4,002			-			4,002			(106)			(3)			(109)			(3,109)			-			(3,109)
Investment income			346			-			346			299			-			299			610			-			610
Movements arising from investment return			4,348			-			4,348			193			(3)			190			(2,499)			-			(2,499)
From discontinued operations
Fair value movements			1,078			(159)			919			(99)			(1)			(100)			(1,010)			78			(932)
Investment income			72			-			72			102			-			102			195			-			195
Movements arising from investment return			1,150			(159)			991			3			(1)			2			(815)			78			(737)
Contributions received			2,747			315			3,062			4,047			266			4,313			7,117			774			7,891
Maturities			(86)			-			(86)			(100)			-			(100)			(183)			-			(183)
Withdrawals and surrenders			(3,189)			-			(3,189)			(2,894)			-			(2,894)			(6,091)			-			(6,091)
Claims and benefits			(98)			-			(98)			(116)			-			(116)			(234)			-			(234)
Reclassification from provisions			-			-			-			3			-			3			-			-			-
Transfer to held for sale			(11,040)			1,516			(9,524)			-			-			-			-			-			-
Other movements			(1)			(1)			(2)			(129)			-			(129)			(2)			2			-
Change in liability			(6,169)			1,671			(4,498)			1,007			262			1,269			(2,707)			854			(1,853)
Currency translation (gain)/loss			5			-			5			(6)			-			(6)			18			-			18
Total unit-linked investment contract policyholder liabilities			50,286			-			50,286			60,140			(2,263)			57,877			56,450			(1,671)			54,779

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 individual policyholders.

The maturity value of these financial liabilities is determined by the fair value of the linked assets at maturity date. There will be no difference between the carrying amount and the maturity amount at maturity date.

None of the reinsurers share of policyholder liabilities relating to investment contract liabilities were past due as at 30 June 2019 (30 June 2018: £nil, 31 December 2018: £nil).

18: Provisions

				£m
30 June 2019	Compensation provisions	Sale of Single Strategy business	Other	Total
Balance at beginning of the period	54	20	20	94
Adjustment on initial application of IFRS 16	-	-	(5)	(5)
Additions from business combinations	1	-	1	2
Charge to income statement	1	-	-	1
Utilised during the period	(15)	(5)	(1)	(21)
Unused amounts reversed	(6)	-	-	(6)
Transfer to held-for-sale	(19)	-	(1)	(20)
Balance at 30 June 2019	16	15	14	45

				£m
30 June 2018	Compensation provisions	Sale of Single Strategy business	Other	Total
Balance at beginning of the period	82	-	22	104
Charge to income statement	4	19	1	24
Utilised during the year	(4)	(2)	(2)	(8)
Unused amounts reversed	(1)	-	(1)	(2)
Foreign exchange and other movements	(3)	-	-	(3)
Balance at 30 June 2018	78	17	20	115




18: Provisions continued

				£m
31 December 2018	Compensation provisions	Sale of Single Strategy business	Other	Total
Balance at beginning of the year	82	-	22	104
Additions from business combinations	-	-	1	1
Charge to income statement	11	25	3	39
Utilised during the year	(31)	(5)	(5)	(41)
Unused amounts reversed	(4)	-	(1)	(5)
Reclassification within Statement of Financial Position	(4)	-	-	(4)
Balance at 31 December 2018	54	20	20	94

Compensation provisions

Compensation provisions totalled £16 million (30 June 2018: £78 million, 31 December 2018: £54 million).

Voluntary client remediation provision

During 2017, as part of its ongoing work to promote fair customer outcomes, the Group conducted product reviews consistent with the recommendations from the FCA's thematic feedback and the FCA's guidance FG16/8 Fair treatment of long-standing customers in the life insurance sector. Following these reviews, the Group decided to commence voluntary remediation to customers of certain legacy products, establishing a provision for £69 million. The redress relates to early encashment charges and contribution servicing charges made on pension products and, following the re-introduction of annual reviews, compensation payable to a subset of protection plan holders.

During 2018, £27 million was utilised against programme costs and pension remediation incurred. There was also a £4 million reclassification to 'liabilities for linked investment contracts', reflecting the capping of early encashment charges on live pension plans. At the end of 2018 there was £38 million of the provision remaining, including £6 million of programme costs.

During the first six months of 2019, the components of the remaining provision were reviewed as new and improved data emerged, together with improvements in estimation methodology and modelling, resulting in a £6 million release. A further £13 million was utilised during this period, leaving £19 million which has been transferred to held for sale liabilities at 30 June 2019.

Estimates and assumptions

Key estimates and assumptions in relation to the provision are:

· Timing of protection customer remediation; and

· The programme costs of carrying out the remediation activity.

The model used to calculate the costs of protection remediation assumes a generic annual investment return across the population of plans in scope. A sensitivity analysis has been calculated to determine the impact of adjusting the return rate.

The model assumes protection customers will be compensated within a certain timeframe. Delays to the programme and more specifically, in locating customers and resolving complicated plan arrangements, will increase the final cost of remediation.

The programme costs of conducting the remediation activity are highly variable and are subject to a number of uncertainties. In calculating the best estimate of these costs, consideration has been given to such matters as the identification of impacted customers, likelihood of the customer contesting the offer, the complexity of the calculations, the level of quality assurance and checking, the ease of contacting and communicating with customers and the level of customer interactions. The current remaining provision for programme costs has been calculated as falling within a range of approximately £6 million to £8 million.

Sensitivities relating to the assumptions and uncertainties are provided in the table below:

Assumption	Change in assumption/estimate	Consequential change in provision (£m)
Modelled investment return	+/- 2%	+/- 0.2
Timing of protection remediation	12 month delay	+ 1.6

Compensation provisions (other)

Other compensation provisions of £16 million include amounts relating to the cost of correcting deficiencies in policy administration systems, including restatements and clawbacks, any associated litigation costs and the related costs to compensate previous or existing policyholders. This provision represents management's best estimate of expected outcomes based upon previous experience. Due to the nature of the provision, the timing of the expected cash outflows is uncertain. Estimates are reviewed annually and adjusted as appropriate for new circumstances.

Sale of Single Strategy Asset Management business provision

In 2018, a restructuring provision was recognised as a result of the sale of the Single Strategy Asset Management business to enable the remaining Quilter Investors business to function as a standalone operation going forward. The provision includes those costs directly related to replacing and restoring the operational capability that previously underpinned and supported both parts of the asset management business. Key parts of this capability had either been disposed of or disrupted as a consequence of the sale. The provision established for restructuring was £19 million, of which £5 million was utilised during 2018. The carried forward restructuring provision at 31 December 2018 was £14 million. In the first six months of 2019, a further £5 million of the restructuring provision was utilised and therefore £9 million of the provision remains at the period end.

Additional provisions totalling £6 million were also made as a consequence of the sale of the Single Strategy Asset Management business. These were in relation to various sale related future commitments, the outcome of which was uncertain at the time of the sale and the most significant of which is in relation to the guarantee of revenues in future years. The carried forward additional provision at 31 December 2018 was £6 million. None of the additional sale-related provision has been utilised in 2019 and this therefore still stands at £6 million.

18: Provisions continued

Other provisions

Other provisions include amounts for the resolution of legal uncertainties and the settlement of other claims raised by contracting parties, property dilapidation provisions and indemnity commission provisions. Where material, provisions and accruals are discounted at discount rates specific to the risks inherent in the liability. The timing and final amounts of payments in respect of some of the provisions, particularly those in respect of litigation claims and similar actions against the Group, are uncertain and could result in adjustments to the amounts recorded. During 2019, provisions related to dilapidations were removed as part of the establishment of right of use assets and lease liabilities under IFRS 16 Leases.

19: Contingent liabilities

The Group, in the ordinary course of business, enters into transactions that expose it to tax, legal 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 18). 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 in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Tax

The Revenue authorities in the principal jurisdictions in which the Group operates routinely review historical transactions undertaken and tax law interpretations made by the Group. The Group is committed to conducting its tax affairs in accordance with the tax legislation of the jurisdictions in which they operate. All interpretations made by management 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 Revenue authorities. The 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 Board is satisfied that adequate provisions have been made to cater for the resolution of tax uncertainties and that the resources required to fund such potential settlements are sufficient.

Due to the level of estimation required in determining tax provisions, amounts eventually payable may differ from the provision recognised.

Complaints and disputes

The Group is committed to treating customers fairly and supporting its customers in meeting their lifetime goals. The Group does from time to time receive complaints and claims, and enters into commercial disputes with service providers, in the normal course of business. The costs, including legal costs, of these issues as they arise can be significant and, where appropriate, provisions have been established under IAS 37.

Contingent liabilities - acquisitions and disposals

The Group routinely monitors and reassesses contingent liabilities arising from matters such as litigation, warranties and indemnities relating to past acquisitions and disposals. These are not expected to result in any material provisions.

20: Capital and financial risk management

The principal risks and uncertainties of the Group and the management of these risks have not materially changed since the year ended 31 December 2018.

Details of the principal risks and uncertainties can be found in the Capital and Risk Management information in Note 40 of the Group's 2018 ARA, and the estimation techniques and uncertainties in the specific disclosures to which they relate.

21: Related party transactions

In the normal course of business, the Group enters into transactions with related parties. These are conducted on an arm's length basis and are not material to the Group's results. There were no transactions with related parties during the current and prior year which had a material effect on the results or financial position of the Group except for the repayment of intercompany indebtedness prior to separation from Old Mutual plc which was disclosed in the Group's 2018 ARA. Except for these intra-group loan repayments, the nature of the related party transactions of the Group has not changed over the course of the year.

22: Events after reporting date

Interim dividend

Subsequent to 30 June 2019, the Board has declared an interim dividend of 1.7 pence per ordinary share. This amounts to £31 million in total, and will be accounted for as an appropriation of retained earnings in the year ending 31 December 2019. The interim dividend will be paid on 20 September 2019 to shareholders on the UK and South African share registers.

Disposal of QLA business

Following the Group's recently announced strategic review in respect of Quilter Life Assurance ('QLA'), on 4 August 2019 the Group entered into an agreement to sell the business to ReAssure Group plc ('the Acquirer') for consideration of £425 million, anticipated to be settled by a cash payment of £395 million at completion and a pre-completion dividend, subject to QLA Board approval, of £30 million. In the event that the QLA Board does not approve this £30 million dividend, or approves a lower dividend amount, the Acquirer will increase the amount settled in cash at completion on a pound-for-pound basis up to £425 million. Sale consideration will be increased by an interest charge between 1 January 2019 and the earlier of the completion date (or, in the case of the dividend, the dividend payment date) and 31 December 2019. The Group expects to complete the sale, which is subject to receiving regulatory approval, by the end of 2019. Economic ownership of QLA will pass to the Acquirer from 1 January 2019 (with all profits earned up until 31 December 2018 for the account of Quilter plc), with the exception of a £90 million dividend paid to the Group in March 2019 and a further £40 million dividend payable by QLA, subject to QLA Board approval, to the Group anticipated during Q3 2019 prior to completion. No further deferred or contingent consideration is payable. The results of the QLA business will continue to be included within the Group's results until the completion date.

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