abrdn plc

Full Year Results 2022

Part 7 of 8

8. Company financial statements

Company statement of financial position

As at 31 December 2022

		2022	2021
	Notes	£m	£m
Assets
Investments in subsidiaries	A	4,482	5,065
Investments in associates and joint ventures	B	196	206
Deferred tax assets	N	143	113
Loans to subsidiaries	C	110	70
Derivative financial assets	C	85	8
Equity securities and interests in pooled investment funds	C	709	1,187
Debt securities	C	211	227
Receivables and other financial assets	C	48	30
Other assets	F	48	83
Cash and cash equivalents	C	27	20
Total assets		6,059	7,009
Equity
Share capital	G	280	305
Shares held by trusts	H	(145)	(167)
Share premium reserve	G	640	640
Retained earnings	I
Brought forward retained earnings		3,301	2,631
(Loss)/profit for the year attributable to equity shareholders of abrdn plc1		(402)	990
Other movements in retained earnings		766	(320)
Total retained earnings		3,665	3,301
Other reserves	J	485	1,856
Equity attributable to equity shareholders of abrdn plc		4,925	5,935
Other equity	K	207	207
Total equity		5,132	6,142
Liabilities
Subordinated liabilities	L	621	644
Derivative financial liabilities	D	1	-
Other financial liabilities	L	272	177
Provisions	P	33	35
Other liabilities	P	-	11
Total liabilities		927	867
Total equity and liabilities		6,059	7,009

1.  The Company's total loss for the year was £391m (2021: profit of £990m) of which a profit of £11m was attributable to other equity holders (2021: £nil).

The financial statements on pages 265 to 278 were approved by the Board and signed on its behalf by the following Directors:                 

 

Sir Douglas Flint Chairman 28 February 2023

Stephanie Bruce Chief Financial Officer 28 February 2023

Company registered number: SC286832

The Notes on pages 268 to 278 are an integral part of these financial statements.

           

Company statement of changes in equity

For the year ended 31 December 2022

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity attributable to equity shareholders of abrdn plc	Other equity	Total equity
2022	Notes	£m	£m	£m	£m	£m	£m	£m	£m
1 January		305	(167)	640	3,301	1,856	5,935	207	6,142
Loss for the year		-	-	-	(402)	-	(402)	11	(391)
Other comprehensive income for the year		-	-	-	-	5	5	-	5
Total comprehensive income for the year		-	-	-	(402)	5	(397)	11	(386)
Interest paid on other equity	K	-	-	-	-	-	-	(11)	(11)
Dividends paid on ordinary shares	I	-	-	-	(307)	-	(307)	-	(307)
Share buyback	G	(25)	-	-	(302)	25	(302)	-	(302)
Cancellation of the capital redemption reserve	J	-	-	-	1,059	(1,059)	-	-	-
Reserves credit for employee share-based payment	J	-	-	-	-	24	24	-	24
Transfer to retained earnings for vested employee share-based payment	J	-	-	-	63	(63)	-	-	-
Transfer between reserves on disposal of subsidiaries	J	-	-	-	1	(1)	-	-	-
Transfer between reserves on impairment of subsidiaries	J	-	-	-	302	(302)	-	-	-
Shares acquired by employee trusts	H	-	(46)	-	-	-	(46)	-	(46)
Shares distributed by employee and other trusts and related dividend equivalents	H	-	68	-	(69)	-	(1)	-	(1)
Other movements	I	-	-	-	19	-	19	-	19
31 December		280	(145)	640	3,665	485	4,925	207	5,132

 

The Notes on pages 268 to 278 are an integral part of these financial statements.

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity attributable to equity shareholders of abrdn plc	Other equity	Total equity
2021	Notes	£m	£m	£m	£m	£m	£m	£m	£m
1 January		306	(161)	640	2,631	1,842	5,258	-	5,258
Profit for the year		-	-	-	990	-	990	-	990
Other comprehensive income for the year		-	-	-	-	6	6	-	6
Total comprehensive income for the year		-	-	-	990	6	996	-	996
Issue of other equity	K	-	-	-	-	-	-	207	207
Dividends paid on ordinary shares	I	-	-	-	(308)	-	(308)	-	(308)
Share buyback	G	(1)	-	-	-	1	-	-	-
Reserves credit for employee share-based payment	J	-	-	-	-	43	43	-	43
Transfer to retained earnings for vested employee share-based payment	J	-	-	-	36	(36)	-	-	-
Shares acquired by employee trusts	H	-	(52)	-	-	-	(52)	-	(52)
Shares distributed by employee and other trusts and related dividend equivalents	H	-	46	-	(48)	-	(2)	-	(2)
31 December		305	(167)	640	3,301	1,856	5,935	207	6,142

 

The Notes on pages 268 to 278 are an integral part of these financial statements.

Company accounting policies

(a)       Basis of preparation

These separate financial statements are presented as required by the Companies Act 2006. The Company meets the definition of a qualifying entity under Application of Financial Reporting Requirements 100 as issued by the Financial Reporting Council. Accordingly, the financial statements for period ended 31 December 2022 have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) as issued by the Financial Reporting Council.

The financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss (FVTPL).

As permitted by FRS 101, the Company has taken advantage of the following disclosure exemptions available under that standard:

-     A cash flow statement and related notes.

-     Capital management.

-     Effect of IFRSs issued but not effective.

-     Related party transactions with wholly owned subsidiaries.

As equivalent disclosures are given in the consolidated financial statements, we have also applied the disclosure exemptions for share based payments and financial instruments.

The principal accounting policies adopted are the same as those given in the consolidated financial statements, together with the Company specific policies set out below. These accounting policies have been consistently applied to all financial reporting periods presented in these financial statements.

The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its own income statement in these financial statements. The auditors' remuneration for audit and other services is disclosed in Note 7 to the consolidated financial statements. The Company has no employees.

(i)         Investment in subsidiaries, associates and joint ventures

The Company has certain subsidiaries which are investment vehicles such as open-ended investment companies, unit trusts and limited partnerships whose primary function is to generate capital or income growth through holding investments. This category of subsidiary is held at FVTPL since they are managed on a fair value basis.

Investments in subsidiaries (other than those measured at FVTPL), associates (other than those measured at FVTPL) and joint ventures are initially recognised at cost and subsequently held at cost less any impairment charge. An impairment charge is recognised when the carrying amount of the investment exceeds its recoverable amount. Any gain or loss on disposal of a subsidiary, associate or joint venture is recognised in profit for the year.

Distributions received of non-cash assets, including investments in subsidiaries, are recognised at fair value in the balance sheet and as dividends in specie in the income statement.

(ii)        Critical accounting estimates and judgements in applying accounting policies

The preparation of financial statements requires management to make estimates and assumptions and exercise judgements in applying the accounting policies that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses arising during the year. Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The areas where judgements have the most significant effect on the amounts recognised in the Company financial statements are as follows:

Financial statement area	Critical judgements in applying accounting policies	Related notes
Investments in subsidiaries held at cost	Given that the net assets attributable to shareholders of abrdn plc at 31 December 2022 were higher than the market capitalisation of the Company judgement was required to determine for which subsidiaries this was considered an indicator of impairment	Note A

The areas where assumptions and other sources of estimation uncertainty at the end of the reporting period have a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial year are as follows:

Financial statement area	Critical accounting estimates and assumptions	Related notes
Investments in subsidiaries held at cost	Determination of the recoverable amount	Note A

Notes to the Company financial statements

A.      Investments in subsidiaries    

		2022	2021
	Notes	£m	£m
Investments in subsidiaries measured at cost		4,312	3,737
Investments in subsidiaries measured at FVTPL	C	170	1,328
Investments in subsidiaries		4,482	5,065

 

		2022	2021
		£m	£m
At 1 January		5,065	4,013
Investment into existing subsidiaries measured at cost		139	210
Acquisition of subsidiaries at cost		1,380	-
Acquisition of subsidiaries via dividend in specie		-	4
Disposal of subsidiaries measured at cost		(18)	-
Impairment of subsidiaries measured at cost		(927)	(45)
Acquisition of subsidiaries at FVTPL		2	884
Disposal of subsidiaries at FVTPL		(1,158)	(2)
Gains/(losses) on subsidiaries at FVTPL		(1)	1
At 31 December		4,482	5,065

Details of the Company's subsidiaries are given in Note 45 of the Group financial statements.

(a)       Acquisitions

During 2022, the Company made the following acquisitions of subsidiaries measured at cost:

-     The Company acquired 100% of the issued share capital of Antler Holdco Limited (Antler), the parent company for the interactive investor (ii) group of companies for a cash consideration of £1,380.2m. Further details are provided in Note 1(b)(i) of the Group financial statements. The Company's consideration was lower than the £1,485m cash consideration recognised in the Group financial statements as it did not include funding of £118.8m provided to Antler to facilitate the acquisition of minority interests in Interactive Investor Limited (IIL) prior to the acquisition of Antler. The Company's consideration included transaction costs of £14m which were included in Restructuring and corporate transaction expenses in the Group Consolidated income statement.

-     The Company subsequently increased its investment in Antler by £139.2m through the purchase of 139,163,986 ordinary shares.  

-     The Company then acquired IIL via a dividend in specie from Antler and recognised IIL at an amount of £1,512m, with the carrying value of Antler reduced correspondingly to £7m and therefore no impact on investment in subsidiaries in the Company Statement of financial position. The dividend in specie was recognised at £nil in the Company's total comprehensive income for the year due to the reduction in the Antler carrying value.

During 2021, the Company made the following acquisitions of subsidiaries measured at cost:

-     The Company increased its investment in abrdn Financial Planning Limited (aFPL) through the purchase of 40,000,000 ordinary shares for a cash consideration of £40m.

-     The Company increased its investment in Aberdeen Asset Management PLC (now renamed abrdn Holdings Limited) by £165.3m through the purchase of 1,031,250 ordinary shares for a cash consideration of £3.3m, the purchase of 21,350,600 ordinary shares for a cash consideration of £68.3m, the purchase of 1,718,750 ordinary shares for a cash consideration of £5.5m and the purchase of 27,562,500 ordinary shares for a cash consideration of £88.2m.

-     The Company increased its investment in Aberdeen Corporate Services Limited through the purchase of 3,385 ordinary shares for a cash consideration of £3.4m.

-     The Company acquired Focus Business Solutions (FBS) via a dividend in specie from Focus Solutions Group Limited and recognised this subsidiary at an amount of £3.8m. The Company further increased its investment in FBS through the purchase of 150,000,000 ordinary shares for a cash consideration of £1.5m.

See Section (d) below for details on investments in subsidiaries at FVTPL.

(b)       Disposals

During 2022, the Company made the following disposals of subsidiaries measured at cost:

-     Standard Life Oversea Holding (SLOH) was liquidated. Prior to liquidation, the carrying value of the Company's interest in SLOH was £18m and the Company received final liquidation proceeds of £20m in the form of a distribution in specie of its intercompany balance due to SLOH. Refer Note J for details of the transfer from the merger reserve to retained earnings in relation to the disposal of SLOH.

(c)       Impairment

The Company's net assets attributable to shareholders of abrdn plc at 31 December 2022 of £4.9bn are higher than the Company's market capitalisation of £3.8bn. This, together with lower projected future asset management earnings, was considered to be an indicator of impairment of the Company's investment in its asset management subsidiaries, abrdn Holdings Limited (formerly named Aberdeen Asset Management PLC (aHL)) and abrdn Investments (Holdings) Limited (aIHL)). All other investments in subsidiaries (with the exception of aFPL and abrdn Client Management Limited (aCM) discussed below) were supported by financial assets, or other relevant analysis.

Asset management subsidiaries aHL and aIHL

The Company's investment in its subsidiaries, aHL and aIHL were impaired during 2022 by £847m (2021: £nil) and £51m (2021: £nil) respectively. The impairments primarily resulted from lower future revenue projections and further work being required to reduce Investments costs given this level of revenue. The lower future revenue projections primarily resulted from the impact of lower equity market levels during 2022 and forecast equity market falls in 2023 on assets under management, net outflows in 2022 particularly in the equity asset class and lower forecasts of net inflows in future periods reflecting both macroeconomic conditions and business performance, and the expected reduction in Phoenix revenue as a result of certain active equity and fixed income strategies moving to lower yielding passive quantitative strategies and related pricing changes. The impairment in aIHL also reflects the impact of dividends paid to abrdn plc of £286m during 2022 and fair value movements relating to the interest in HDFC Asset Management held by its subsidiary, abrdn Investment Management Limited.

The recoverable amount of aHL which is its fair value less costs of disposal (FVLCD) at 31 December 2022 was £1,258m. The approach and key assumptions in determining the FVLCD of both aHL and aIHL are primarily the same as used in the impairment review for asset management goodwill set out in Note 13 of the Group financial statements. The asset management group of cash generating units overseas business is performed by entities within the aHL group and the asset management group of cash generating units UK business is split between the aHL group and the aIHL group. The recoverable amount for aHL also includes the value of its subsidiaries, associates and joint ventures not included in the asset management group of cash generating units. These primarily include Finimize Limited (Finimize), Archax Holdings Limited and VMUTM. Details of the valuation of Finimize at 31 December 2022 is set out in Note 13 of the Group financial statements.

The recoverable amount of aIHL which is its FVLCD at 31 December 2022 was £988m. The recoverable amount for aIHL also includes the value of its subsidiaries not included in the asset management group of cash generating units. These primarily include abrdn Capital Limited (aCL). The valuation of aCL is based on FVLCD and is based on an estimated price from the current sale process (refer Note 21 of the Group financial statements). The recoverable amount also includes the fair value of the interest in HDFC Asset Management, which was £477m at 31 December 2022 based on the year end share price of this listed investment.

The recoverable amounts for aHL and aIHL are level 3 measurements as they are measured using inputs which are not based on observable market data.

Sensitivities of key assumptions

The business plan projections used to determine the future asset management earnings are based on macroeconomic forecasts including future equity market and interest rate levels, and forecast levels of net flows, fee revenue yields by asset class and expenses. For aIHL, fee revenue yield assumptions are adjusted to take into account an expected contraction in yield on Phoenix assets. Market assumptions assume equity market falls in 2023 with recovery during 2024 and 2025. The projections are therefore sensitive to these assumptions, and in particular future expected market levels. Given current macroeconomic uncertainties a 25% reduction in forecast asset management cash flows has been provided as a sensitivity.

A post tax discount rate sensitivity of 2% has been provided taking into account the impact of these market uncertainties on interest rates.

For aIHL a 25% reduction in the value of HDFC AMC has also been provided as a sensitivity given the inherent risk of equity market fluctuations.

The following table shows the consequence of these illustrative downside sensitivities of key assumptions on the carrying amount of the aHL and aIHL at 31 December 2022. As the year end carrying values are the recoverable amount any downside sensitivity will lead to a further future impairment loss.

				aHL £m	aIHL £m
25% reduction in future asset management cash flows				(273)	(64)
2% increase in post tax discount rate				(159)	(46)
25% reduction in the value of HDFC Asset Management (aIHL only)				N/A	(119)

For the year ended 31 December 2021, the recoverable amount of aHL was determined based on value in use and based on this assessment no impairment of aHL was required at 31 December 2021. The reason for the change in valuation approach in 2022 was that, at 31 December 2022, FVLCD was assessed by management as being higher than VIU. The VIU is significantly reduced by the IFRS requirement to add back certain staff and property expense savings to management's expectation of the level of future operating expenses, where these expense savings require provisions to be made in future years.

aFPL

The Company's investment in its subsidiary aFPL was impaired during 2022 by £25m (2021: £45m).

The recoverable amount of aFPL which is its FVLCD at 31 December 2022 was £85m (2021: £110m). The FVLCD considered a number of valuation approaches, with the primary approach being a multiples approach based on price to revenue and price to assets under advice (AUAdv). Multiples were based on recent transactions, adjusted to take into account profitability where appropriate, and were benchmarked against trading multiples for aFPL's peer companies. Revenue and AUAdv were based on 2022 results. The expected cost of disposal was based on past experience of previous transactions. This is a level 3 measurement as it is measured using inputs which are not based on observable market data. The impairment resulted from the impact of macroeconomic conditions, markets and level of 2022 profitability and outflows on valuation expectations for the business. As the year end carrying value is the recoverable amount any downside sensitivity will lead to a further future impairment loss. A 20% reduction in recurring revenue and AUAdv would result in a further impairment of £17m. A 20% reduction in market transaction multiples, adjusted to be appropriate to the abrdn financial planning business, would result in a further impairment of £17m.

The recoverable amount of aFPL at 31 December 2021 of £110m was also based on FVLCD which similarly considered a number of valuation approaches, with the primary approach being a multiples approach based on price to revenue and price to AUAdv.

aCM

The Company's investment in its subsidiary aCM was impaired during 2022 by £4m. The impairment resulted from the payment of a dividend from aCM to the Company. The carrying amount of the Company's investment in aCM is £nil (2021: £4m).

IIL

No impairment was recognised on the Company's investment in IIL in 2022 and there were no indicators of impairment at 31 December 2022.

The recoverable amount of IIL was determined at 31 December 2022 based on FVLCD and used the same approach and key assumptions as used in the impairment review for interactive investor goodwill set out in Note 13 of the Group financial statements. The basis for sensitivities of key assumptions is also set out in Note 13 of the Group financial statements. The impact of these illustrative sensitivities on the carrying amount of IIL at 31 December 2022 is as follows:

Impact on carrying amount at 31 December 2022		£m
20% reduction in forecast post tax adjusted earnings		(127)
25% reduction in market multiple		(210)

(d)       Investments in subsidiaries at FVTPL

Investments in subsidiaries at FVTPL, valued at £170m (2021: £1,328m), relate to holdings in funds over which the Company has control. This decrease primarily relates to lower holdings in a liquidity fund.

B.      Investments in associates and joint ventures

		2022	2021
		£m	£m
Investment in associates measured at cost		-	10
Investment in joint venture measured at cost		196	196
Investments in associates and joint ventures		196	206

(a)       Investment in associates

The Company has an interest of 25.3% (2021: 25.3%) in Tenet Group Limited (Tenet), a company incorporated in England and Wales which is measured at cost less impairment. During the year ended 31 December 2022, the Company increased its interest in Tenet by £3.8m. The Company also recognised an impairment of £14m in its interest during 2022. The impairment resulted from losses incurred by the business during the year and the impact of this level of profitability on valuation expectations. The carrying amount of the Company's investment in Tenet is £nil (2021: £10m).

During the year ended 31 December 2021, the Company judged its investment in Phoenix Group Holdings plc (Phoenix) was no longer classified as an associate. Further details are provided in Note 14 of the Group Financial Statements. The Company's 14.4% shareholding in Phoenix was therefore reclassified from an investment in associate measured at cost less impairment to equity securities and interests in pooled investment funds measured at fair value. The fair value on 22 February 2021 was £1,023m, which was higher than the previous carrying value as an associate of £1,010m. A reclassification gain of £13m was therefore recognised for the year ended 31 December 2021.

(b)       Investment in joint ventures

The Company has a 50% (2021: 50%) interest in Heng An Standard Life Insurance Company Limited (HASL), a company incorporated in China. Further details on this joint venture are provided in Note 14 of the Group financial statements.

C.      Financial investments

		Fair value through profit or loss		Derivative financial instruments used for hedging		Amortised cost		Total
		2022	2021	2022	2021	2022	2021	2022	2021
	Notes	£m	£m	£m	£m	£m	£m	£m	£m
Investments in subsidiaries measured at FVTPL	A	170	1,328	-	-	-	-	170	1,328
Loan to subsidiaries		-	-	-	-	110	70	110	70
Derivative financial assets	D	-	-	85	8	-	-	85	8
Equity securities and interests in pooled investment funds		709	1,187	-	-	-	-	709	1,187
Debt securities		1	1	-	-	210	226	211	227
Receivables and other financial assets	E	-	-	-	-	48	30	48	30
Cash and cash equivalents		-	-	-	-	27	20	27	20
Total		880	2,516	85	8	395	346	1,360	2,870

The amount of debt securities expected to be recovered or settled after more than 12 months is £1m (2021: £62m). The amount of loans to subsidiaries expected to be recovered or settled after more than 12 months is £110m (2021: £70m). The amount of equity securities and interests in pooled investment funds expected to be recovered or settled after more than 12 months is £25m (2021: £708m).

Under IFRS 9 the Company calculates expected credit losses (ECL) on financial assets which are measured at amortised cost (refer to Note 35 (c) of the Group financial statements), including loans to subsidiaries (which are unrated). At
31 December 2022 the Company does not hold financial assets at amortised cost that it regards as credit-impaired or for which it considers the probability of default would result in material expected credit losses. The expected credit losses recognised were less than £1m (2021: less than £1m). In making this assessment the Company has considered if any evidence is available to indicate the occurrence of an event which would result in a detrimental impact on the estimated future cash flows of these assets.

D.      Derivative financial instruments

The Company uses derivative financial instruments in order to reduce the risk from potential movements in foreign exchange rates.

	2022			2021
	Contract amount	Fair value assets	Fair value  liabilities	Contract amount	Fair value assets	Fair value  liabilities
	£m	£m	£m	£m	£m	£m
Cash flow hedges	623	85	-	554	8	-
Foreign exchange forwards	48	-	1	64	-	-
Derivative financial instruments	671	85	1	618	8	-

The derivative asset of £85m (2021: derivative asset of £8m) is expected to be settled after more than 12 months.

On 18 October 2017, the Company issued subordinated notes with a principal amount of US $750m. In order to manage the foreign exchange risk relating to the principal and coupons payable on these notes the Company entered into
a cross-currency swap which is designated as a hedge of future cash flows.

The maturity profile of the contractual undiscounted cash flows in relation to derivative financial instruments is as follows:

	Within 1 year		2-5 years		6-10 years		11-15 years		Total
	2022	2021	2022	2021	2022	2021	2022	2021	2022	2021
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Cash inflows
Cash flow hedges	26	24	106	94	637	589	-	-	769	707
Foreign exchange forwards	47	55	-	-	-	-	-	-	47	55
Total	73	79	106	94	637	589	-	-	816	762
Cash outflows
Cash flow hedges	(18)	(18)	(91)	(73)	(578)	(596)	-	-	(687)	(687)
Foreign exchange forwards	(48)	(55)	-	-	-	-	-	-	(48)	(55)
Total	(66)	(73)	(91)	(73)	(578)	(596)	-	-	(735)	(742)
Net derivative financial instruments cash flows	7	6	15	21	59	(7)	-	-	81	20

E.       Receivables and other financial assets

		2022	2021
		£m	£m
Amounts due from related parties		45	14
Other financial assets		3	16
Total receivables and other financial assets		48	30

The carrying amounts disclosed above reasonably approximate the fair values at the year end.

Receivables and other financial assets of £nil (2021: £nil) are expected to be recovered after more than 12 months.

F.       Other assets

	2022	2021
	£m	£m
Prepayments	43	56
Other	5	27
Other assets	48	83

The amount of Other assets which are expected to be recovered after more than 12 months is £20m (2021: £48m).

Prepayments of £43m (2021: £56m) relate to the Group's future purchase of certain products in the Phoenix Group's savings business offered through abrdn's Wrap platform together with the Phoenix Group's trustee investment plan business for UK pension scheme clients (refer Note 1(c)(iii) of the Group financial statements). Other includes £5m (2021: £27m) in respect of amounts due from related parties.

G.      Share capital and share premium

Details of the Company's share capital and share premium are given in Note 24 of the Group financial statements including details of the share buyback.

H.      Shares held by trusts

Shares held by trusts relates to shares in abrdn plc that are held by the abrdn Employee Benefit Trust (formerly named the Standard Life Aberdeen Employee Benefit Trust) (abrdn EBT) and Standard Life Employee Trust (ET). Further details of these trusts are provided in Note 25 of the Group financial statements.

I.        Retained earnings

Details of the dividends paid on the ordinary shares by the Company are provided in Note 12 of the Group financial statements. Note 12 also includes information regarding the final dividend proposed by the Directors for the year ended 31 December 2022.

Refer Note J for details of the transfers from the capital redemption reserve and the merger reserve to retained earnings during the year ended 31 December 2022.

Retained earnings includes a movement of £19m relating to the interactive investor employee benefit trust becoming part of the abrdn employee benefit trust sponsored by the Company.

J.       Movements in other reserves

The following tables show the movements in other reserves during the year:

	Merger reserve	Equity compensation reserve	Special reserve	Capital redemption reserve	Cash flow hedges	Total
2022	£m	£m	£m	£m	£m	£m
At 1 January	578	86	115	1,059	18	1,856
Fair value gains on cash flow hedges	-	-	-	-	85	85
Realised gains on cash flow hedges transferred to income statement	-	-	-	-	(78)	(78)
Share buyback	-	-	-	25	-	25
Cancellation of the capital redemption reserve	-	-	-	(1,059)	-	(1,059)
Reserves credit for employee share-based payments	-	24	-	-	-	24
Transfer to retained earnings for vested employee share-based payments	-	(63)	-	-	-	(63)
Transfer between reserves on disposal of subsidiaries	(1)	-	-	-	-	(1)
Transfer between reserves on impairment of subsidiaries	(302)	-	-	-	-	(302)
Tax effect of items that may be reclassified subsequently to profit or loss	-	-	-	-	(2)	(2)
At 31 December	275	47	115	25	23	485

 

	Merger reserve	Equity compensation reserve	Special reserve	Capital redemption reserve	Cash flow hedges	Total
2021	£m	£m	£m	£m	£m	£m
At 1 January	578	79	115	1,058	12	1,842
Fair value gains on cash flow hedges	-	-	-	-	19	19
Realised gains on cash flow hedges transferred to income statement	-	-	-	-	(10)	(10)
Share buyback	-	-	-	1	-	1
Reserves credit for employee share-based payments	-	43	-	-	-	43
Transfer to retained earnings for vested employee share-based payments	-	(36)	-	-	-	(36)
Tax effect of items that may be reclassified subsequently to profit or loss	-	-	-	-	(3)	(3)
At 31 December	578	86	115	1,059	18	1,856

Following the impairment loss recognised in 2022 on the Company's investments in aHL and aIHL (refer Note A), £302m (2021: £nil) was transferred from the merger reserve to retained earnings.

During 2022, £25m (2021: £1m) was recognised in the capital redemption reserve for the share buyback (refer Note 24 of the Group financial statements).

On 1 July 2022, the Company's capital redemption reserve at this date was cancelled in accordance with section 649 of the Companies Act 2006 resulting in a transfer of £1,059m to retained earnings.

K.      Other Equity

5.25 % Fixed Rate Reset Perpetual Subordinated Contingent Convertible Notes

During the year ended 31 December 2021, the Company issued £210m of 5.25% Fixed Rate Reset Perpetual Subordinated Contingent Convertible Notes (the Notes). The Notes were classified as other equity and initially recognised at £207m (the proceeds received less issuance costs of £3m). Refer Note 28 (a) of the Group financial statements for further details.

The profit for the year attributable to other equity was £11m (2021: £nil).

L.       Financial liabilities

		Designated as at fair value through profit or loss		Amortised cost		Total
		2022	2021	2022	2021	2022	2021
	Notes	£m	£m	£m	£m	£m	£m
Subordinated liabilities	M	-	-	621	644	621	644
Derivative financial liabilities	D	1	-	-	-	1	-
Other financial liabilities	O	14	9	258	168	272	177
Total		15	9	879	812	894	821

 

M.     Subordinated liabilities

	2022		2021
	Principal amount	Carrying value	Principal  amount	Carrying value
Subordinated notes:
4.25% US Dollar fixed rate due 30 June 2028	$750m	£621m	$750m	£552m
5.5% Sterling fixed rate due 4 December 2042	-	-	£92m	£92m
Total subordinated liabilities		£621m		£644m

The principal amount of the subordinated liabilities is expected to be settled after more than 12 months. There is no accrued interest on the subordinated liabilities at 31 December 2022 (2021: less than £1m).

The 5.5% Sterling fixed rate due 4 December 2042 subordinated notes were redeemed during the year ended 31 December 2022.

Further information on the subordinated liabilities including the terms and conditions and the redemption is given in Note 30 of the Group financial statements.

N.      Deferred tax assets and liabilities

		2022	2021
		£m	£m
Deferred tax assets		143	113

The amount of deferred tax assets expected to be recovered or settled after more than 12 months are £143m (2021: £113m).

Recognised deferred tax

		2022	2021
		£m	£m
Deferred tax assets comprise:
Losses carried forward		151	120
Unrealised losses on cash flow hedges		-	-
Gross deferred tax assets		151	120
Less: Offset against deferred tax liabilities		(8)	(7)
Deferred tax assets		143	113
Deferred tax liabilities comprise:
Unrealised gains on investments		-	1
Unrealised gains on cash flow hedges		8	6
Gross deferred tax liabilities		8	7
Less: Offset against deferred tax assets		(8)	(7)
Deferred tax liabilities		-	-
Net deferred tax asset at 31 December		143	113
Movements in net deferred tax assets comprise:
At 1 January		113	77
Amounts credited to profit or loss		32	39
Amounts charged to other comprehensive income		(2)	(3)
At 31 December		143	113

The deferred tax assets and liabilities recognised are in respect of unused tax losses and unrealised gains on cash flow hedges respectively and include the impact of the revaluation of these due to the future impact of the increase in the UK Corporation Tax rate to 25% from 1 April 2023. The deferred tax assets are recognised to the extent that it is probable that the losses will be capable of being offset against future taxable profits (refer Note 9(c)(i) of the Group financial statements).

There is no unrecognised deferred tax relating to temporary timing differences associated with investments in subsidiaries, branches and associates and interests in joint arrangements (2021: none).

Movements in deferred tax assets and liabilities

	Losses carried forward	Unrealised gains on investments	Unrealised gains or losses on cash flow hedges	Net deferred tax asset
	£m	£m	£m	£m
At 1 January 2022	120	(1)	(6)	113
Amounts credited to the income statement	31	1	-	32
Tax on cash flow hedge	-	-	(2)	(2)
At 31 December 2022	151	-	(8)	143

 

	Losses carried forward	Unrealised gains on investments	Unrealised gains or losses on cash flow hedges	Net deferred tax asset
	£m	£m	£m	£m
At 1 January 2021	80	(1)	(2)	77
Amounts credited to the income statement	40	-	-	40
Tax on cash flow hedge	-	-	(4)	(4)
At 31 December 2021	120	(1)	(6)	113

O.      Other financial liabilities

		2022	2021
		£m	£m
Outstanding purchase of investment securities		-	5
Amounts due to related parties		161	137
Collateral held in respect of derivative contracts		89	15
Contingent consideration liability		14	9
Other		8	11
Other financial liabilities		272	177

Other financial liabilities of £nil (2021: £5m) are expected to be settled after more than 12 months.

P.      Provisions and other liabilities

Of Provisions of £33m (2021: £35m), £nil are expected to be settled after more than 12 months (2021: £nil).

The provisions in both 2022 and 2021 relate to separation costs. Refer Note 34 of the Group financial statements for further information and details of the provisions.

Of Other liabilities at 31 December 2021 of £11m, £11m was expected to be settled within 12 months and was in respect of amounts due to related parties.

Q.      Contingent liabilities, contingent assets, indemnities and guarantees

(a)       Legal proceedings and regulations

The Company, like other financial organisations, is subject to legal proceedings and complaints in the normal course of its business. All such material matters are periodically reassessed, with the assistance of external professional advisers where appropriate, to determine the likelihood of the Company incurring a liability. Where it is concluded that it is more likely than not that a material outflow will be made a provision is established based on management's best estimate of the amount that will be payable. At 31 December 2022, there are no identified contingent liabilities expected to lead to a material exposure. 

(b)       Indemnities and guarantees

Under the trust deed in respect of the abrdn UK Group (SLSPS) plan, ACSL, the principal employer, must pay contributions to the pension plan as the trustees' actuary may certify necessary. The Company has guaranteed the obligations of ACSL in relation to this plan. In addition, the Company has guaranteed similar obligations in respect of certain other subsidiaries' UK and Ireland defined benefit pension plans.

None of these guarantees give rise to any liabilities at 31 December 2022 (2021: none).

R.      Related party transactions

(a)       Key management personnel

The Directors and key management personnel of the Company are considered to be the same as for the Group.

See Note 42 of the Group financial statements for further information.

9. Supplementary information

9.1     Alternative performance measures   APM

We assess our performance using a variety of measures that are not defined under IFRS and are therefore termed alternative performance measures (APMs). The APMs that we use may not be directly comparable with similarly named measures used by other companies. We have presented below reconciliations from these APMs to the most appropriate measure prepared in accordance with IFRS. All APMs should be read together with the consolidated income statement, consolidated statement of financial position and consolidated statement of cash flows, which are presented in the Group financial statements section of this report and related metrics. Adjusted operating profit excludes certain items which are likely to be recurring such as restructuring costs, amortisation of certain intangibles, dividends from significant listed investments and the share of profit or loss from joint ventures.

R Metric used for executive remuneration in 2023. See page 107 for more information.

Definition		Purpose
Adjusted operating profit   APM  R
Adjusted operating profit before tax is the Group's key APM. Adjusted operating profit includes the results of the Group's three growth vectors: Investments, Adviser and Personal, along with Corporate/strategic. It excludes the Group's adjusted net financing costs and investment return, and discontinued operations. Adjusted operating profit also excludes the impact of the following items: -     Restructuring costs and corporate transaction expenses. Restructuring includes the impact of major regulatory change. -     Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts. -     Profit or loss arising on the disposal of a subsidiary, joint venture or equity accounted associate. -     Change in fair value of/dividends from significant listed investments. -     Share of profit or loss from associates and joint ventures. -     Impairment loss/reversal of impairment loss recognised on investments in associates and joint ventures accounted for using the equity method. -     Fair value movements in contingent consideration. -     Items which are one-off and, due to their size or nature, are not indicative of the long-term operating performance of the Group. Further details are included in Note 11 of the Group financial statements.		Adjusted operating profit reporting provides further analysis of the results reported under IFRS and the Directors believe it helps to give shareholders a fuller understanding of the performance of the business by identifying and analysing adjusting items. Segment reporting used in management information is reported to the level of adjusted operating profit.
Net operating revenue   APM
Net operating revenue (previously named fee based revenue) includes revenue we generate from asset management charges (AMCs), platform charges, treasury income and other transactional charges. AMCs are earned on products such as mutual funds, and are calculated as a percentage fee based on the assets held. Investment risk on these products rests principally with the client, with our major indirect exposure to rising or falling markets coming from higher or lower AMCs. Net operating revenue is shown net of costs of sale, such as commissions and similar charges.   The revenue metric included within adjusted operating profit has been renamed from fee based revenue to net operating revenue. For 2022 this measure is aligned to net operating revenue as presented in the IFRS consolidated income statement. For 2021 this measure of segmental revenue excludes £28m of net operating revenue as presented in the IFRS consolidated income statement which was classified as adjusting items. See Note 3 of the Group financial statements for more information.		Net operating revenue is a component of adjusted operating profit and provides the basis for reporting of the revenue yield financial ratio. Net operating revenue is also used to calculate the cost/income ratio.
Adjusted operating expenses   APM
Adjusted operating expenses is a component of adjusted operating profit and relates to the day-to-day expenses of managing our business. Adjusted operating expenses excludes restructuring and corporate transaction expenses. Adjusted operating expenses also excludes amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts.		Adjusted operating expenses is a component of adjusted operating profit and is used to calculate the cost/income ratio.

 

 

Definition		Purpose
Adjusted profit before tax   APM
In addition to the results included in adjusted operating profit above, adjusted profit before tax includes adjusted net financing costs and investment return.		Adjusted profit before tax is a key input to the adjusted earnings per share measure.
Adjusted net financing costs and investment return  APM
Adjusted net financing costs and investment return relates to the return from the net assets of the shareholder business, net of costs of financing. This includes the net assets in defined benefit staff pension plans and net assets relating to the financing of subordinated liabilities.		Adjusted net financing costs and investment return is a component of adjusted profit before tax.
Cost/income ratio  APM
This is an efficiency measure that is calculated as adjusted operating expenses divided by net operating revenue in the period.		This ratio is used by management to assess efficiency and reported to the Board and executive leadership team.
Net operating revenue yield (bps)  APM
The net operating revenue yield (previously named fee revenue yield) is calculated as annualised net operating revenue (excluding performance fees, interactive investor and revenue for which there are no attributable assets) divided by monthly average fee based assets. interactive investor is excluded from the calculation of Personal and total net operating revenue yield as fees charged for this business are primarily from subscriptions and trading transactions.		The net operating revenue yield is a measure that illustrates the average margin being earned on the assets that we manage, administer or advise our clients on excluding interactive investor.
Adjusted diluted earnings per share   APM
Adjusted diluted earnings per share is calculated on adjusted profit after tax. The weighted average number of ordinary shares in issue is adjusted during the period to assume the conversion of all dilutive potential ordinary shares, such as share options granted to employees. Details on the calculation of adjusted diluted earnings per share are set out in Note 10 of the Group financial statements.		Earnings per share is a commonly used financial metric which can be used to measure the profitability and capital efficiency of a company over time. We also calculate adjusted diluted earnings per share to illustrate the impact of adjusting items on the metric. This ratio is used by management to assess performance and reported to the Board and executive leadership team.
Adjusted capital generation   APM
Adjusted capital generation is part of the analysis of movements in IFPR regulatory capital. Adjusted capital generation is calculated as adjusted profit after tax less returns relating to pension schemes in surplus and interest paid on other equity which do not benefit regulatory capital. It also includes dividends from associates, joint ventures and significant listed investments.		This measure aims to show how adjusted profit contributes to regulatory capital, and therefore provides insight into our ability to generate capital that is deployed to support value for shareholders.
Adjusted diluted capital generation per share  APM  R
Adjusted diluted capital generation per share is calculated as adjusted capital generation divided by the weighted average number of diluted ordinary shares outstanding.		This ratio is a measure used to assess performance for remuneration purposes.
Cash and liquid resources  APM
Cash and liquid resources are IFRS cash and cash equivalents (netted down for overdrafts), money market instruments and holdings in money market funds. It also includes surplus cash that has been invested in liquid assets such as high quality corporate bonds, gilts and pooled investment funds. Seed capital and co-investments are excluded. Cash collateral, cash held for charitable funds and cash held in employee benefit trusts are excluded from cash and liquid resources.		The purpose of this measure is to demonstrate how much cash and invested assets we hold and can be readily accessed.

9.1.1   Adjusted operating profit and adjusted profit

Reconciliation of adjusted operating profit and adjusted profit to IFRS profit by component

The components of adjusted operating profit are net operating revenue and adjusted operating expenses. These components provide a meaningful analysis of our adjusted results. The table below provides a reconciliation of movements between adjusted operating profit component measures and relevant IFRS terms.

A reconciliation of Adjusted operating expenses to the IFRS item Total administrative and other expenses, and a reconciliation of Adjusted net financing costs and investment return to the IFRS item Net gains on financial instruments and other income are provided in Note 2b(ii) of the Group financial statements. A reconciliation of Net operating revenue to the IFRS item Revenue from contracts with customers is provided in Note 3 of the Group financial statements.

IFRS term	IFRS	Presentation differences	Adjusting items	Adjusted profit		Adjusted profit term
2022	£m	£m	£m	£m
Net operating revenue	1,456	-	-	1,456		Net operating revenue
Total administrative and other expenses	(1,919)	(35)	761	(1,193)		Adjusted operating expenses1
	(463)	(35)	761	263		Adjusted operating profit
Net gains or losses on financial instruments and other income	(122)	8	104	(10)		Adjusted net financing costs and investment return
Finance costs	(29)	27	2	-		N/A
Profit on disposal of interests in associates	6	-	(6)	-		N/A
Share of profit or loss from associates and joint ventures	2	-	(2)	-		N/A
Impairment of interests in associates	(9)	-	9	-		N/A
Loss before tax	(615)	-	868	253		Adjusted profit before tax
Total tax credit	66	-	(88)	(22)		Tax on adjusted profit
Loss for the year	(549)	-	780	231		Adjusted profit after tax

1.  Adjusted operating expenses includes staff and other related costs of £612m compared with IFRS staff costs and other employee-related costs of £549m. The difference primarily relates to the inclusion of contractor, temporary agency staff and recruitment and training costs of £25m (IFRS basis: Reported within other administrative expenses) and losses on funds to hedge deferred bonus awards of £9m (IFRS basis: Reported within other net gains on financial instruments and other income) within staff and other related costs. IFRS staff costs and other employee-related costs includes the benefit from the net interest credit relating to the staff pension schemes of £29m (Adjusted profit basis: Reported within adjusted net financing costs and investment return).

 

IFRS term	IFRS	Presentation differences	Adjusting items	Adjusted profit		Adjusted profit term
2021	£m	£m	£m	£m
Net operating revenue	1,543	-	(28)	1,515		Net operating revenue
Total administrative and other expenses	(1,556)	(9)	373	(1,192)		Adjusted operating expenses
	(13)	(9)	345	323		Adjusted operating profit
Net gains on financial instruments and other income	(183)	(20)	203	-		Adjusted net financing costs and investment return
Finance costs	(30)	29	1	-		N/A
Profit on disposal of subsidiaries and other operations	127	-	(127)	-		N/A
Profit on disposal of interests in associates	1,236	-	(1,236)	-		N/A
Share of profit or loss from associates and joint ventures	(22)	-	22	-		N/A
Profit before tax	1,115	-	(792)	323		Adjusted profit before tax
Total tax expense	(120)	-	94	(26)		Tax on adjusted profit
Profit for the year	995	-	(698)	297		Adjusted profit after tax

Presentation differences primarily relate to amounts presented in a different line item of the consolidated income statement.

Analysis of adjusting items

The table below provides detail of the adjusting items made in the calculation of adjusted profit before tax:

	2022	2021
	£m	£m
Restructuring and corporate transaction expenses	(214)	(259)
Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts	(494)	(99)
Profit on disposal of subsidiaries and other operations	-	127
Profit on disposal of interests in associates	6	1,236
Change in fair value of significant listed investments	(187)	(298)
Dividends from significant listed investments	68	71
Share of profit or loss from associates and joint ventures	2	(22)
Impairment of interests in joint ventures	(9)	-
Other	(40)	36
Total adjusting items including results of associates and joint ventures	(868)	792

An explanation for why individual items are excluded from adjusted profit is set out below:

-       Restructuring and corporate transaction expenses are excluded from adjusted profit. Restructuring includes the impact of major regulatory change. By highlighting and excluding these costs we aim to give shareholders a fuller understanding of the performance of the business. Restructuring and corporate transaction expenses include costs relating to the integration of businesses acquired and our transformation programme. Other restructuring costs excluded from adjusted profit relate to projects which have a significant impact on the way the Group operates. Costs are only excluded from adjusted profit where they are outwith business as usual activities and the costs would not have been incurred had the restructuring project not taken place. For headcount related costs, where duplicate posts are identified as a result of an integration or transformation plan, the duplicated cost will be treated as a restructuring cost from the beginning of the process which eliminates the duplicate cost. The 2022 expenses mainly comprised of costs of £43m (2021: £35m) in respect of specific costs to effect savings in investments, investments re-platforming, and integration, £51m (2021: £64m) of other transformation costs such as finance and platform transformation, £66m (2021: £65m) of other headcount reduction related costs and property restructuring, £7m (2021: £27m) in respect of Phoenix separation costs, and £45m (2021: £35m) of corporate transaction costs primarily related to the acquisition of interactive investor. Platform transformation and Investment vector restructuring are significant multi-year programmes that are included in the restructuring expenses noted above, with further costs expected to be incurred in future periods. Total restructuring expenses (excluding corporate transaction costs) are expected to be £0.2bn in 2023, primarily relating to the Investments vector restructuring which is expected to complete in 2023. Restructuring expenses in 2023 will also include costs of c£0.05bn relating to Platform transformation which is expected to complete in 2024.

-       Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts is included as an adjusting item. This is consistent with peers and therefore excluding these items aids comparability. Highlighting this as an adjusting item aims to give a fuller understanding of these accounting impacts which arise where businesses have been acquired but do not arise where businesses have grown organically. Further details are provided in Note 13 of the Group financial statements.

-       Profit on disposal of subsidiaries and other operations in 2021 primarily related to the sales of Parmenion and Bonaccord. These items are excluded from adjusted profit as they are non-recurring in nature.

-       Profit on disposal of interests in associates of £6m (2021: £1,236m) relates to the sale of our stake in Origo Services Limited in May 2022. The 2021 figure included the one-off accounting gains following the reclassification of HDFC Asset Management (£897m) and Phoenix (£68m) from investment in associates accounted for using the equity method to equity securities measured at fair value and £271m from the sale of 5% of shares in HDFC Asset Management. Details are provided in Note 14 of the Group financial statements. These items are excluded from adjusted profit as they are volatile and the accounting gains are non-recurring in nature.

-       The change in fair value of significant listed investments was negative £187m (2021: negative £298m) and represents the impact of market movements on our holdings in HDFC Life (£38m reduction in value including impact of stake sale in September 2022), in Phoenix (£44m reduction in value including impact of stake sale in January 2022) and in HDFC Asset Management (£105m reduction in value including impact of stake sale in August 2022). Excluding fair value movements on significant listed investments for the purposes of adjusted profit is aligned with our treatment of gains on disposal for these holdings when they were classified as an associate, and reflects that the fair value movements are not indicative of the long-term operating performance of the Group.

-       Dividends from significant listed investments relates to our shareholdings in HDFC Life, Phoenix and HDFC Asset Management that were previously associates and were reclassified on 3 December 2020, 23 February 2021 and 29 September 2021 respectively. Following the reclassification, dividends received are now recognised as income within our financial statements. The £68m in 2022 relates to dividends received from Phoenix (£52m), HDFC Asset Management (£15m) and HDFC Life (£1m). Dividends from significant listed investments are included in adjusting items, as such dividends result in fair value movements.

-       Share of profit or loss from associates and joint ventures was a profit of £2m (2021: loss £22m). In 2022, this mainly comprises of the share of profit or loss from our holdings in HASL, Virgin Money UTM and Tenet. In 2021, prior to the reclassification noted above, share of profit or loss from associates and joint ventures also included Phoenix and HDFC Asset Management. Associate and joint venture results are excluded from adjusted profit to help in understanding the performance of our core business separately from these holdings.

-       The impairment of associates and joint ventures in 2022 of £9m relates to our associate holding in Tenet.

-       Details on items classified as 'Other' in the table above are provided in Note 11 of the Group financial statements. Other adjusting items in 2022 primarily relates to a single process execution event provision of £41m. 2022 also includes a net gain on fair value movements in contingent consideration of £35m primarily in relation to Tritax, fair value loss of £11m on a financial instrument liability related to a prior period acquisition, and a loss of £13m in relation to market losses on the investments held by the abrdn Financial Fairness Trust which is consolidated by the Group.

9.1.2   Cost/income ratio

 

	2022	2021
Adjusted operating expenses (£m)	(1,193)	(1,192)
Net operating revenue (£m)	1,456	1,515
Cost/income ratio (%)	82	79

9.1.3   Net operating revenue yield (bps)¹

	Average AUMA (£bn)			Net operating revenue (£m)1			Net operating revenue yield (bps) 1
	2022	2021		2022	2021		2022	2021
Institutional and Wholesale2	236.2	250.1		861	979		36.1	38.8
Insurance	169.5	205.0		179	206		10.5	10.0
Investments2	405.7	455.1		1,040	1,185		25.4	25.9
Adviser2	70.8	71.5		185	178		26.1	24.9
Personal Wealth2	13.5	14.0		87	92		59.2	61.0
Parmenion3	-	3.9		-	14		-	38.1
Eliminations	(11.8)	(11.3)		N/A	N/A		N/A	N/A
Net operating revenue yield1,2	478.2	533.2		1,312	1,469		27.1	27.3
interactive investor4				114	-
Performance fees				30	46
Net operating revenue1				1,456	1,515

Analysis of Institutional and Wholesale by asset class²

 

	Average AUM (£bn)			Net operating revenue (£m)			Net operating revenue yield (bps)
	2022	2021		2022	2021		2022	2021
Equities	57.3	69.5		357	449		62.5	64.5
Fixed income	41.2	46.6		115	132		27.9	28.3
Multi-asset	31.5	35.1		93	118		29.4	33.7
Private equity	12.4	11.2		52	58		42.2	51.8
Real assets	42.0	36.1		187	170		44.4	47.2
Alternatives	22.1	20.4		29	25		12.9	12.3
Quantitative	9.7	5.8		5	4		5.0	6.8
Liquidity	20.0	25.4		13	15		6.7	6.0
Institutional and Wholesale	236.2	250.1		851	971		36.1	38.8

1.  Previously fee based revenue/yield. The Group's measure of segmental revenue has been renamed from fee based revenue to net operating revenue, with a corresponding change in name of the yield measure.

2.  Institutional and Wholesale net operating revenue yield excludes revenue of £10m (2021: £8m) and Personal Wealth net operating revenue yield excludes revenue of £7m (2021: £7m) for which there are no attributable assets.

3.  Parmenion was included in the Corporate/strategic vector. The sale of Parmenion completed on 30 June 2021 and the net operating revenue yield reflects the position as at the date of disposal.

4.  interactive investor is excluded from the calculation of Personal and total net operating revenue yield as fees charged for this business are primarily from subscriptions and trading transactions.

9.1.4   Additional ii information

The results for ii are included in the Group's results following the completion of the acquisition on 27 May 2022. The adjusted operating profit for ii for the seven months to 31 December 2022 of £67m is included in our overall 2022 adjusted operating profit of £263m.

The tables below provide detail of the performance of ii for the 7 months ended 31 December 2022 and the full 12 months ended 31 December for 2022 and 2021 to provide a fuller understanding of the performance of this business. Adjusted operating profit has also been presented excluding losses relating to Share Limited to provide a more meaningful comparison to the go-forward position.

Analysis of ii profit	2022 7 months £m	2022 12 months £m	2021 12 months £m Excl Share1	2021 12 months £m Incl Share1
Net operating revenue	114	176	128	135
Adjusted operating expenses	(47)	(82)	(83)	(99)
Adjusted operating profit	67	94	45	36

The 2021 adjusted operating profit of £36m included losses relating to Share Limited of £9m while part of this business was wound down. Excluding losses from Share Limited, the 2021 adjusted operating profit was £45m. The 2022 impact was £nil.

Analysis of ii net operating revenue	2022 7 months £m	2022 12 months £m	2021 12 months £m Excl Share1	2021 12 months £m Incl Share1
Trading transactions	27	55	79	84
Subscription/account fees	32	56	48	50
Treasury income	58	71	9	9
Less: Cost of sales	(3)	(6)	(8)	(8)
Net operating revenue	114	176	128	135

1.  Losses were incurred in Share Limited and its subsidiaries (Share) as part of this business was wound down.

9.1.5   Adjusted capital generation

The table below provides a reconciliation of movements between adjusted profit after tax and adjusted capital generation. A reconciliation of adjusted profit after tax to IFRS loss for the year is included earlier in this section.

	2022	2021
	£m	£m
Adjusted profit after tax	231	297
Less net interest credit relating to the staff pension schemes	(29)	(17)
Less interest paid on other equity	(11)	-
Add dividends received from associates, joint ventures and significant listed investments	68	86
Adjusted capital generation	259	366

Net interest credit relating to the staff pension schemes

The net interest credit relating to the staff pension schemes is the contribution to adjusted profit before tax from defined benefit pension schemes which are in surplus.

Dividends received from associates, joint ventures and significant listed investments

An analysis is provided below:

	2022	2021
	£m	£m
Phoenix	52	69
HDFC Life	1	2
HDFC Asset Management	15	15
Dividends received from associates, joint ventures and significant listed investments	68	86

The table below provides detail of dividend coverage on an adjusted capital generation basis.

	2022	2021
Adjusted capital generation (£m)	259	366
Full year dividend (£m)	295	309
Dividend cover on an adjusted capital generation basis (times)	0.88	1.18

9.1.6   Adjusted diluted capital generation per share

A reconciliation of adjusted capital generation to adjusted profit after tax is included in 9.1.5 above.

	2022	2021
Adjusted capital generation (£m)	259	366
Weighted average number of diluted ordinary shares outstanding (millions)1 - Note 10	2,094	2,159
Adjusted diluted capital generation per share (pence)	12.4	17.0

1.  In accordance with IAS 33, no share options and awards have been treated as dilutive for the twelve months ended 31 December 2022 due to the loss attributable to equity holders of abrdn plc in that period. See Note 10 for further details.

9.1.7   Cash and liquid resources

The table below provides a reconciliation between IFRS cash and cash equivalents and cash and liquid resources. Seed capital and co-investments are excluded. Details of seed capital and co-investments are provided in Note 35 (b) in the Group financial statements.

	2022	2021
	£bn	£bn
Cash and cash equivalents per Note 22 of the Group financial statements	1.1	1.9
Bank overdrafts - Note 22	-	(0.1)
Debt securities excluding third party interests2 - Note35 (c)(i)	0.7	1.1
Corporate funds held in absolute return funds - Note35 (b)(i)(i)	0.1	0.2
Other3	(0.2)	-
Cash and liquid resources	1.7	3.1

2.  Excludes £76m (2021: £76m) relating to seeding.

3.  Cash collateral, cash held for charitable funds and cash held in employee benefit trusts are excluded from cash and liquid resources.

9.2     Investment performance

Definition			Purpose
Investment performance
Investment performance has been aggregated using a money weighted average of our assets under management which are outperforming their respective benchmark. The calculation of investment performance has been revised to use a closing AUM weighting basis. In prior periods investment performance was weighted based on AUM at the start of the performance period. 2021 comparatives have been restated. We believe that this approach provides a more representative view of current investment performance, given the significant changes to business mix over the investment timeframe, and provides investment performance data which is more comparable with peers. Calculations for investment performance are made gross of fees with the exception of those for which the stated comparator is net of fees. Benchmarks differ by fund and are defined in the relevant investment management agreement or prospectus, as appropriate. The investment performance calculation covers all funds that aim to outperform a benchmark, with certain assets excluded where this measure of performance is not appropriate or expected, such as private markets and execution only mandates, as well as replication tracker funds which aim to perform in line with a given index			As an asset managing business this measure demonstrates our ability to generate investment returns for our clients.

 

	1 year				3 years				5 years
% of AUM ahead of benchmark	2022	2021 restated1	2021 reported		2022	2021 restated1	2021 reported		2022	2021 restated1	2021 reported
Equities	30	37	36		63	74	72		65	65	61
Fixed income	65	58	59		72	79	82		79	81	87
Multi-asset	13	72	41		50	73	39		22	70	44
Real assets	57	86	83		63	58	52		52	62	50
Alternatives	88	87	87		100	98	98		100	98	98
Quantitative	17	99	98		27	15	44		29	42	68
Liquidity	84	89	88		97	92	87		97	92	84
Total	41	66	57		65	78	67		58	77	67

1.  The calculation of investment performance has been revised to use a closing AUM weighting basis. In prior periods investment performance was weighted based on AUM at the start of the performance period. 2021 comparatives have been restated. We believe that this approach provides a more representative view of current investment performance.

9.3     Assets under management and administration and flows

Definition		Purpose
AUMA
AUMA is a measure of the total assets we manage, administer or advise on behalf of our clients. It includes assets under management (AUM), assets under administration (AUA) and assets under advice (AUAdv). AUM is a measure of the total assets that we manage on behalf of individual and institutional clients. AUM also includes fee generating assets managed for corporate purposes. AUA is a measure of the total assets we administer for clients through platform products such as ISAs, SIPPs and general trading accounts. AUAdv is a measure of the total assets we advise our clients on, for which there is an ongoing charge.		The amount of funds that we manage, administer or advise directly impacts the level of net operating revenue that we receive.
Net flows
Net flows represent gross inflows less gross outflows or redemptions. Gross inflows are new funds from clients. Redemptions is the money withdrawn by clients during the period. Cash dividends which are retained on the ii platform are included in net flows for the ii business only. Cash dividends are included in market movements for other parts of the group including the Investments and Adviser platform businesses. We consider that this different approach is appropriate for the ii business as cash dividend payments which are retained result in additional income for ii, but are largely revenue neutral for the rest of the group.		The level of net flows that we generate directly impacts the level of net operating revenue that we receive.

9.3.1   Analysis of AUMA

	Opening AUMA at 1 Jan 2022	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions2	Closing AUMA at 31 Dec 2022
12 months ended 31 December 2022	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Institutional	174.0	20.1	(27.3)	(7.2)	(12.4)	7.5	161.9
Wholesale	79.1	16.4	(20.8)	(4.4)	(5.4)	-	69.3
Insurance	210.5	22.8	(52.2)	(29.4)	(28.7)	(7.5)	144.9
Investments	463.6	59.3	(100.3)	(41.0)	(46.5)	-	376.1
Adviser	76.2	6.6	(5.0)	1.6	(9.3)	-	68.5
interactive investor	-	4.1	(2.5)	1.6	(3.0)	55.4	54.0
Personal Wealth	14.4	1.5	(1.2)	0.3	(1.6)	-	13.1
Personal1	14.4	5.6	(3.7)	1.9	(4.6)	55.4	67.1
Eliminations1	(12.1)	(2.5)	2.1	(0.4)	1.7	(0.9)	(11.7)
Total AUMA	542.1	69.0	(106.9)	(37.9)	(58.7)	54.5	500.0

 

	Opening AUMA at 1 Jan 2021	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions3	Closing AUMA at 31 Dec 2021
12 months ended 31 December 2021	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Institutional	171.7	22.5	(25.4)	(2.9)	5.4	(0.2)	174.0
Wholesale	80.0	19.4	(21.6)	(2.2)	1.3	-	79.1
Insurance	205.2	21.5	(27.0)	(5.5)	10.8	-	210.5
Investments	456.9	63.4	(74.0)	(10.6)	17.5	(0.2)	463.6
Adviser	67.0	9.1	(5.2)	3.9	5.3	-	76.2
interactive investor	-	-	-	-	-	-	-
Personal Wealth	13.3	1.7	(1.1)	0.6	0.5	-	14.4
Personal1	13.3	1.7	(1.1)	0.6	0.5	-	14.4
Parmenion	8.1	0.7	(0.4)	0.3	0.3	(8.7)	-
Eliminations1	(10.7)	(2.6)	2.2	(0.4)	(1.0)	-	(12.1)
Total AUMA	534.6	72.3	(78.5)	(6.2)	22.6	(8.9)	542.1

1. Eliminations remove the double count reflected in Investments, Adviser and Personal. The Personal vector includes assets that are reflected in both the discretionary investment management and financial planning businesses. This double count is also removed within Eliminations.

2. Corporate actions in 2022 relate to the acquisition of interactive investor on 27 May 2022 and also reflect the transfer of retained LBG AUM of c£7.5bn from Insurance into Institutional (quantitatives), to better reflect how the relationship is being managed. The eliminations are to remove the double count for the assets that are reflected in both interactive investor and Investments.

3. Corporate actions in 2021 relate to the acquisition of a majority interest in Tritax on 1 April 2021 (£5.8bn) and the disposals of our domestic real estate business in the Nordics region on 31 May 2021 (£3.3bn) and Bonaccord/Hark on 30 September 2021 (£1.5bn). Corporate actions also include the impact of the decision to exit the Total Return Bond strategy of £1.2bn. The sale of Parmenion completed on 30 June 2021.

 

9.3.2   Quarterly net flows

	3 months to 31 Dec 22	3 months to 30 Sep 22	3 months to 30 Jun 22	3 months to 31 Mar 22	3 months to 31 Dec 21
15 months ended 31 December 2022	£bn	£bn	£bn	£bn	£bn
Institutional	2.2	(0.3)	(7.8)	(1.3)	2.5
Wholesale	(2.0)	(0.5)	-	(1.9)	(0.8)
Insurance	(6.3)	3.2	(4.6)	(21.7)	(0.4)
Investments	(6.1)	2.4	(12.4)	(24.9)	1.3
Adviser	-	0.2	0.5	0.9	1.1
interactive investor	0.6	0.8	0.2	-	-
Personal Wealth	0.2	-	-	0.1	-
Personal	0.8	0.8	0.2	0.1	-
Eliminations	(0.1)	-	(0.1)	(0.2)	(0.2)
Total net flows	(5.4)	3.4	(11.8)	(24.1)	2.2

9.4     Institutional and Wholesale AUM

Detailed asset class split

	Opening AUM at 1 Jan 2022	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions	Closing AUM at 31 Dec 2022
12 months ended 31 December 2022	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Developed markets equities	17.0	2.1	(3.4)	(1.3)	(4.6)	-	11.1
Emerging markets equities	16.4	1.9	(2.9)	(1.0)	(2.9)	-	12.5
Asia Pacific equities	25.3	2.5	(4.8)	(2.3)	(2.5)	-	20.5
Global equities	10.3	1.2	(1.6)	(0.4)	(1.7)	-	8.2
Total equities	69.0	7.7	(12.7)	(5.0)	(11.7)	-	52.3
Developed markets credit	28.3	3.8	(5.8)	(2.0)	(3.8)	-	22.5
Developed markets rates	2.9	0.3	(0.6)	(0.3)	(0.6)	-	2.0
Emerging markets fixed income	12.2	2.4	(2.4)	-	(0.9)	-	11.3
Private credit	2.4	0.2	(0.1)	0.1	(0.7)	-	1.8
Total fixed income	45.8	6.7	(8.9)	(2.2)	(6.0)	-	37.6
Absolute return	10.0	0.4	(1.9)	(1.5)	(2.8)	-	5.7
Diversified growth/income	0.5	0.1	(0.2)	(0.1)	(0.1)	-	0.3
MyFolio	17.7	1.7	(2.0)	(0.3)	(1.8)	-	15.6
Other multi-asset	7.8	1.7	(1.1)	0.6	(1.7)	-	6.7
Total multi-asset	36.0	3.9	(5.2)	(1.3)	(6.4)	-	28.3
Total private equity	12.3	0.5	(1.1)	(0.6)	0.6	-	12.3
UK real estate	19.9	0.4	(1.7)	(1.3)	0.7	-	19.3
European real estate	10.3	0.8	(0.4)	0.4	3.6	-	14.3
Global real estate	1.8	0.3	(0.3)	-	(0.2)	-	1.6
Real estate multi-manager	1.2	0.2	(0.2)	-	0.2	-	1.4
Infrastructure equity	6.2	0.4	(0.9)	(0.5)	0.4	-	6.1
Total real assets	39.4	2.1	(3.5)	(1.4)	4.7	-	42.7
Total alternatives	20.8	2.2	(1.6)	0.6	0.8	-	22.2
Total quantitative1	5.5	3.2	(1.7)	1.5	0.5	7.5	15.0
Total liquidity	24.3	10.2	(13.4)	(3.2)	(0.3)	-	20.8
Total1	253.1	36.5	(48.1)	(11.6)	(17.8)	7.5	231.2

1.  Corporate actions include the transfer of retained LBG AUM of c£7.5bn from Insurance into Institutional (quantitatives), to better reflect how the relationship is being managed.

	Opening AUM at 1 Jan 2021	Gross inflows	Redemptions	Net flows	Market and other movements	Corporate actions	Closing AUM at 31 Dec 2021
12 months ended 31 December 2021	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Developed markets equities	14.7	3.0	(3.6)	(0.6)	2.9	-	17.0
Emerging markets equities	19.0	2.0	(3.7)	(1.7)	(0.9)	-	16.4
Asia Pacific equities	26.6	4.8	(5.7)	(0.9)	(0.4)	-	25.3
Global equities	8.9	1.8	(1.6)	0.2	1.2	-	10.3
Total equities	69.2	11.6	(14.6)	(3.0)	2.8	-	69.0
Developed markets credit	32.2	5.9	(6.6)	(0.7)	(2.0)	(1.2)	28.3
Developed markets rates	2.8	0.6	(0.6)	-	0.1	-	2.9
Emerging markets fixed income	12.2	3.5	(3.1)	0.4	(0.4)	-	12.2
Private credit	1.0	1.5	-	1.5	0.8	(0.9)	2.4
Total fixed income	48.2	11.5	(10.3)	1.2	(1.5)	(2.1)	45.8
Absolute return	11.5	0.8	(2.0)	(1.2)	(0.3)	-	10.0
Diversified growth/income	0.6	0.1	(0.2)	(0.1)	-	-	0.5
MyFolio	15.6	2.1	(2.5)	(0.4)	2.5	-	17.7
Other multi-asset	10.0	1.2	(1.4)	(0.2)	(2.0)	-	7.8
Total multi-asset	37.7	4.2	(6.1)	(1.9)	0.2	-	36.0
Total private equity	10.9	1.5	(1.2)	0.3	1.7	(0.6)	12.3
UK real estate	9.2	0.9	(0.8)	0.1	4.8	5.8	19.9
European real estate	12.1	1.0	(0.4)	0.6	0.9	(3.3)	10.3
Global real estate	1.8	0.3	(0.4)	(0.1)	0.1	-	1.8
Real estate multi-manager	1.6	0.1	(0.1)	-	(0.4)	-	1.2
Infrastructure equity	5.3	1.0	(0.4)	0.6	0.3	-	6.2
Total real assets	30.0	3.3	(2.1)	1.2	5.7	2.5	39.4
Total alternatives	19.5	2.0	(1.9)	0.1	1.2	-	20.8
Total quantitative	6.4	1.2	(1.2)	-	(0.9)	-	5.5
Total liquidity	29.8	6.6	(9.6)	(3.0)	(2.5)	-	24.3
Total	251.7	41.9	(47.0)	(5.1)	6.7	(0.2)	253.1

9.5       Analysis of Insurance

	Opening AUM at 1 Jan 2022	Gross inflows	Redemptions	Net  flows	Market and other movements	Corporate actions	Closing AUM at 31 Dec 2022
12 months ended 31 December 2022	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Phoenix	175.5	22.5	(26.6)	(4.1)	(27.7)	-	143.7
Lloyds1	33.6	0.3	(25.5)	(25.2)	(0.9)	(7.5)	-
Other	1.4	-	(0.1)	(0.1)	(0.1)	-	1.2
Total1	210.5	22.8	(52.2)	(29.4)	(28.7)	(7.5)	144.9

 

	Opening AUM at 1 Jan 2021	Gross inflows	Redemptions	Net  flows	Market and other movements	Corporate actions	Closing AUM at 31 Dec 2021
12 months ended 31 December 2021	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Phoenix	171.5	17.1	(20.3)	(3.2)	7.2	-	175.5
Lloyds	31.8	4.4	(6.3)	(1.9)	3.7	-	33.6
Other	1.9	-	(0.4)	(0.4)	(0.1)	-	1.4
Total	205.2	21.5	(27.0)	(5.5)	10.8	-	210.5

1. Following completion of the LBG tranche withdrawals in H1 2022, the remaining retained LBG AUM of c£7.5bn was reallocated to quantitatives in Institutional and is included in corporate actions in the table above.

9.6     Investments AUM by geography

	31 Dec 2022			31 Dec 2021
	Institutional and Wholesale	Insurance	Total	Institutional and Wholesale	Insurance	Total
	£bn	£bn	£bn	£bn	£bn	£bn
UK	111.2	144.9	256.1	120.3	210.5	330.8
Europe, Middle East and Africa (EMEA)	57.5	-	57.5	62.5	-	62.5
Asia Pacific (APAC)	16.4	-	16.4	19.2	-	19.2
Americas	46.1	-	46.1	51.1	-	51.1
Total AUM	231.2	144.9	376.1	253.1	210.5	463.6