Share capital (note 16) £m Share premium £m Other reserves £m Foreign currency translation reserve £m Retained earnings £m Total £m At 1 January 2014 – 1,095 – 89 257 1,441
Total comprehensive income for the year attributable to owners – – – – 125 125
Issue of ordinary share capital, net of associated commissions and
expenses – 1 – – – 1
Dividends paid on ordinary shares (note 14) – (120) – – – (120)
Credit to equity for equity-settled share-based payments (note O) – – – – 7 7
At 31 December 2014 – 976 – 89 389 1,454
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
Share capital (note 16) £m Share premium £m Other reserves £m Foreign currency translation reserve £m Retained earnings £m Total £m At 1 January 2013 – 982 5 89 154 1,230
Total comprehensive income for the year attributable to owners – – – – 92 92
Issue of ordinary share capital, net of associated commissions
and expenses – 233 – – – 233
Dividends paid on ordinary shares (note 14) – (120) – – – (120)
Credit to equity for equity-settled share-based payments (note O) – – – – 6 6
Expired contingent rights – – (5) – 5 –
At 31 December 2013 – 1,095 – 89 257 1,441
Phoenix Group Holdings is subject to Cayman Islands Companies Law. Under Cayman Islands Companies Law distributions can be made
out of profits or share premium subject, in each, to a solvency test. The solvency test is broadly consistent with the Group’s going concern assessment criteria.
The notes identified alphabetically on pages 194 to 199 are an integral part of these Company financial statements. Where items also appear in the consolidated financial statements, reference is made to the notes (identified numerically) on pages 104 to 189.
A. ACCOUNTING POLICIES
(a) BASIS OF PREPARATION
The financial statements have been prepared on an historical cost basis except for those financial assets and financial liabilities that have been measured at fair value.
Statement of Compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as issued by the International Accounting Standards Board (‘IASB’). The basis of preparation for the Company financial statements has been amended from IFRSs adopted for use in the European Union to IFRSs issued by the IASB, effective from 1 January 2014. There has been no impact on the Company financial statements as a result of this change. The financial statements are presented in sterling (£) rounded to the nearest million unless otherwise stated.
Assets and liabilities are offset and the net amount reported in the statement of financial position only when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle
the liabilities simultaneously.
Income and expenses are not offset in the statement of
comprehensive income unless required or permitted by an IFRS or interpretation, as specifically disclosed in the accounting policies of
the Company.
(b) ACCOUNTING POLICIES
The accounting policies in the separate financial statements are the same as those presented in notes 1(b) to 1(ee) to the consolidated
financial statements on pages 105 to 113, except for the policy noted below. There has been no impact on the Company financial
statements as a result of the change in accounting policies detailed
in note 3 of the consolidated financial statements.
(i) Investments in Group entities
Investments in Group entities are carried in the statement of financial
position at cost less impairment.
The Company assesses at each reporting date whether an investment is impaired. The Company first assesses whether
objective evidence of impairment exists. Evidence of impairment
needs to be significant or prolonged to determine that objective evidence of impairment exists. If objective evidence of impairment exists, the Company calculates the amount of impairment as the difference between the recoverable amount of the Group entity and its carrying value and recognises the amount as an expense in the income statement.
The recoverable amount is determined based on the cash flow projections of the underlying entities.
The assessment of whether an investment in a Group entity is impaired is considered to be a critical accounting judgement for the Company.
B. FINANCIAL INFORMATION
In preparing the financial statements the Company has adopted the standards, interpretations and amendments effective 1 January 2014 which have been issued by the IASB as detailed in note 2 of
the consolidated financial statements, none of which have had a
significant impact on the Company’s financial statements. Details of standards, interpretations and amendments to be adopted in future periods are also detailed in note 2.
C. SEGMENTAL ANALYSIS
The Company has one reportable segment, comprising its investment in and loans to/from Group entities. Its revenue principally comprises the dividend and interest income derived from these investments and loans. Information relating to this segment is included in the Company’s primary financial statements on pages 191 to 193. Predominantly, all revenues from external customers is sourced
in the UK.
Predominantly, all assets are located in the UK.
PARENT COMPANY ACCOUNTS
D. NET INVESTMENT INCOME
2014
£m 2013 £m
Investment income
Dividend income from other Group entities 94 58
Interest income from other Group entities 48 49
142 107
Fair value gains/(losses)
Derivatives 5 (2)
Net investment income 147 105
E. ADMINISTRATIVE EXPENSES 2014 £m 2013 £m Employee costs1 1 2 Professional fees 7 7 Office costs 1 1
Write down of loans due from other Group entities 10 –
Other 3 3
22 13
1 In addition to the Non-Executive Directors, one employee was employed by Phoenix Group Holdings during the period (2013: one). Other Group employees are employed by other Group entities.
F. BORROWINGS
Carrying value Fair value 2014
£m 2013 £m 2014 £m 2013 £m
Loan due to Impala Holdings Limited 3 3 3 3
Amount due for settlement after 12 months 3 3
All borrowings are due to Group entities and are measured at amortised cost using the effective interest method.
On 16 July 2010, the Company was granted a loan from Impala Holdings Limited of £3 million. The loan accrues interest at six-month LIBOR plus 3.25% (2013: 2%) which is capitalised semi-annually on 7 April and 7 October. The loan has a maturity date of 31 December 2016. Interest of £0.1 million (2013: £0.1 million) was accrued during the year. The balance outstanding at 31 December 2014 was £3 million (2013: £3 million). All borrowings are categorised as Level 3 financial instruments. The fair value of borrowings with no external market is determined by internally developed discounted cash flow models using a risk adjusted discount rate corroborated with external market data where possible.
G. DERIVATIVES
Carrying value Fair value 2014
£m 2013 £m 2014 £m 2013 £m
Warrants over shares in Phoenix Group Holdings – 5 – 5
Amount due for settlement after 12 months – 5
The Company has in issue warrants over its ordinary shares. Details of these warrants are included in note 24.2 to the consolidated
financial statements.
Warrants are categorised as Level 2 financial instruments. Details of the factors considered in determination of the fair value are included
in note 34.2.1 to the consolidated financial statements. H. ACCRUALS AND DEFERRED INCOME
2014
£m 2013 £m
Accruals and deferred income – 5
Amount due for settlement after 12 months – –
I. INVESTMENTS IN GROUP ENTITIES
2014 £m 2013 £m Cost At 1 January 1,308 1,018 Additions 9 290 At 31 December 1,317 1,308 Impairment
At 1 January and 31 December – –
Carrying amount at 31 December 1,317 1,308
On 25 April 2014, the Company received a £9 million dividend (2013: £8 million) from Opal Reassurance Limited in the form of preference shares in the company.
On 27 February 2013, the Company made capital contributions of £116 million to each of PGH (TC1) Limited and PGH (TC2) Limited. On 6 December 2013, the Company made capital contributions of £25 million to each of PGH (LCA) Limited and PGH (LCB) Limited.
For a list of principal Group entities, refer to note 45 of the consolidated financial statements. The entities directly held by Phoenix Group Holdings are highlighted separately by an asterisk.
PARENT COMPANY ACCOUNTS
CONTINUED
J. COLLECTIVE INVESTMENT SCHEMES
Carrying value Fair value 2014
£m 2013 £m 2014 £m 2013 £m
Investment in collective investment schemes 5 6 5 6
Amount due for settlement after 12 months – –
All investments are categorised as Level 1 financial instruments. Details of the factors considered in determination of the fair value are included
in note 34.2.1 to the consolidated financial statements. K. LOANS AND RECEIVABLES
Carrying value Fair value 2014
£m 2013 £m 2014 £m 2013 £m
Loans due from PGH (LCA) Limited and PGH (LCB) Limited 164 148 257 246
Loans due from PGH (MC1) Limited and PGH (MC2) Limited 99 84 194 186
Loans due from other Group Entities 7 12 7 1
270 244 458 433
Amount due for settlement after 12 months 270 244
All loans and receivables balances are due from Group entities and are measured at amortised cost using the effective interest method. The fair value of these loans and receivables are also disclosed.
On 22 March 2010, the Company subscribed for £325 million of Eurobonds which were issued equally by PGH (LCA) Limited and PGH (LCB) Limited. On 23 March 2010, the Eurobonds were listed on the Channel Islands Stock Exchange. Interest accrues on these Eurobonds at a
rate of LIBOR plus a margin of 2.5% and the final maturity date to 30 June 2025. The Eurobonds were initially recognised at fair value and
are accreted to par over the period to 2025. At 31 December, £160 million was due (2013: £144 million).
On 12 December 2011, the Company, PGH (LCA) Limited and PGH (LCB) Limited, became party to a joint £77 million loan agreement to formalise an inter-company balance which had arisen in 2009 relating to fees payable to a syndicate of external banks. The loan accrues interest at a rate of LIBOR plus a margin of 1.25% and matures on 30 June 2016. Interest of £0.1 million was capitalised during the year (2013: £0.2 million) and £nil was repaid (2013: £29 million). At 31 December 2014, £4 million was due (2013: £4 million).
On 22 March 2010, the Company subscribed for £250 million of Eurobonds which were issued equally by PGH (MC1) Limited and PGH (MC2) Limited. On 23 March 2010, the Eurobonds were listed on the Channel Islands Stock Exchange. Interest accrues on these Eurobonds at a
rate of LIBOR plus a margin of 2.5% and the final maturity date to 30 June 2025. The Eurobonds were initially recognised at fair value and
are accreted to par over the period to 2025. At 31 December, £99 million was due (2013: £84 million).
On 22 April 2010, Pearl Group Holdings (No.1) Limited issued a balancing instrument under which notes with a principal of £75 million were issued to PGH. The notes have no fixed maturity date and are included in the Company’s financial statements at a nil value. PGH paid no consideration for the notes and has waived its right to receive a coupon on the notes.
On 16 July 2010, the Company entered into an interest free facility arrangement with Phoenix Group Holdings’ Employee Benefit (‘EBT’). In 2014, £6 million was drawn down against this facility (2013: £11 million). The loan is recoverable until the awards held by the EBT vest to the participants, at which point the loan is reviewed for impairment. Any impairments are determined by comparing the carrying value to the estimated recoverable amount of the loan. Following the vesting of awards in 2014, the value of the EBT loan of £10 million has been written off.
No other loans are considered to be past due or impaired.
For the purposes of the additional fair value disclosures for assets recognised at amortised costs, all loans and receivables are categorised as Level 3 financial instruments. The fair value of loans and receivables with no external market is determined by internally developed discounted
cash flow models using a risk adjusted discount rate corroborated with external market data where possible.
L. CASH AND CASH EQUIVALENTS
2014
£m 2013 £m
Bank and cash balances – 1
Short-term deposits (including demand and time deposits) 3 8
3 9
M. CASH FLOWS FROM OPERATING ACTIVITIES
2014
£m 2013 £m
Profit for the year before tax 125 92
Adjustments to reconcile profit for the year to cash flows from operating activities
Interest income from other Group entities (48) (49)
Fair value gains/(losses) on derivatives (5) 2
Dividends received (94) (58)
Write down of loans to Group entities 10 –
Share-based payment charge 7 6
Net decrease/(increase) in investment assets 26 (6)
Net (increase)/decrease in working capital (6) 88
Cash generated by operations 15 75
N. CAPITAL AND RISK MANAGEMENT
The Company’s capital comprises share capital and all reserves. At 31 December 2014, total capital was £1,454 million (2013: £1,441 million). The movement in capital in the year comprises the total comprehensive income for the year attributable to owners of £125 million
(2013: £92 million), proceeds from the issue of ordinary share capital, net of associated commission and expenses, of £1 million
(2013: £233 million), payment of dividends of £120 million (2013: £120 million) and a credit to equity for equity-settled share-based payments
of £7 million (2013: £6 million).
There are no externally imposed capital requirements on the Company. The Company’s capital is monitored by the Directors and managed
on an ongoing basis via a monthly close process to ensure that it remains positive at all times.
Details of the Group risk management policies are outlined in note 40 to the consolidated financial statements.
The primary operation of the Company is to act as the listed company for the Group. The Company’s other assets and liabilities mainly consist
of receivables and borrowings from and to other Group entities. The principal risks and uncertainties facing the Company are:
– interest rate risk, since the movement in interest rates will impact the value of interest receivable and payable by the Company; – liquidity risk, exposure to liquidity risk as a result of normal business activities, specifically the risk arising from an inability to meet
short-term cash flow requirements; and
– credit risk, arising from the default of the counterparty to a particular financial asset and is significantly reduced as assets are primarily
inter-company receivables from other group entities.
The Company’s exposure to all these risks is monitored by the Directors, who agree policies for managing each of these risks on an ongoing basis.