akg financial strength assessment report · axa self investor and elevate platforms in 2015, 2014,...

ISSUED 10 APRIL 2018

PLATFORM SECTOR Elevate

FINANCIAL

STRENGTH

ASSESSMENT

Elevate P L A T F O R M S E C T O R

© AKG Financial Analytics Ltd 2 10 April 2018

Com

pan

y A

nal

ysis

Guid

e

ABOUT THIS FINANCIAL STRENGTH ASSESSMENT

This AKG report and the analysis and ratings contained within it provide assessment of financial strength and associated

considerations. Financial Strength is focused on the ability of a company to deliver ongoing operational capability in the

interest of its customers and in line with their fairly held expectations. AKG’s perspective in the assessment of financial

strength is wholly that of a customer of a product or service. From that foundation, this analysis is specifically designed to

inform financial advisers and assist in their required understanding of a company’s operational financial strength.

Given the underlying customer perspective, the financial strength of companies needs to be focused at an operational

level, specifically on the company that is effecting the product or service that a customer is selecting. This is important,

because from the customer’s perspective it is that company that needs to survive in a form that maintains the requisite

operational characteristics to meet their fairly held requirements. And it is thus at this level that the selection needs of the

customers’ advisers must be met. This contrasts to credit rating, which will be undertaken at group or parent company

level where investment or debt placement etc. is made.

Further details on how analysis is undertaken is provided at the end of this report and may also be obtained from AKG.

TABLE OF CONTENTS

Rating & Assessment Commentary ........................................................................................................................................................................... 3

Ratings ................................................................................................................................................................................................................................................... 3

Summary .............................................................................................................................................................................................................................................. 3

Commentary ..................................................................................................................................................................................................................................... 3

Group & Parental Context ............................................................................................................................................................................................ 6

Background ......................................................................................................................................................................................................................................... 6

Group Structure (simplified) ..................................................................................................................................................................................................... 7

Company Analysis: Elevate Portfolio Services Ltd ............................................................................................................................................... 8

Basic Information ............................................................................................................................................................................................................................. 8

Operations ......................................................................................................................................................................................................................................... 9

Strategy .............................................................................................................................................................................................................................................. 10

Key Company Financial Data ................................................................................................................................................................................................. 11

Guide ................................................................................................................................................................................................................................... 14

Introduction .................................................................................................................................................................................................................................... 14

Rating Definitions ......................................................................................................................................................................................................................... 14

About AKG ..................................................................................................................................................................................................................................... 16

CONTACT INFORMATION

AKG Financial Analytics Ltd, Anderton House, 92 South Street, Dorking, Surrey, RH4 2EW Tel: +44 (0) 1306 876439 Email: [email protected] Web: www.akg.co.uk



Rat

ing

& A

sses

smen

t C

om

men

tary

G

roup &

Par

enta

l Conte

xt

Com

pan

y A

nal

ysis

Guid

e

Rating & Assessment Commentary

RATINGS

Overall Financial Strength

B+

PLATFORM SECTOR VERY STRONG

ELEVATE PORTFOLIO SERVICES LTD

Supporting Ratings

Service Image &

Strategy

Business

Performance

Elevate Portfolio Services Ltd ��

SUMMARY

• The acquisition and inclusion of Elevate have been successfully delivered and represent an underlining of the

organisation's strategy

• Elevate Portfolio Services Ltd is now part of a strong group, which has a longstanding track record of activity and

support for the UK intermediated sector

• Standard Life Wrap and Elevate set to remain as separate propositions, with Standard Life Wrap aimed at the more

sophisticated investment-led end of the platform market and Elevate targeting the broader financial planning market

• Platforms appear to remain a core part of the overall proposition of the enlarged group and have been emphasised

as core to what will be retained following completion of the proposed sale of the insurance businesses to, and

strategic partnership with, Phoenix (announced February 2018)

• August 2017 saw the merger of Standard Life plc and Aberdeen Asset Management plc, forming Standard Life

Aberdeen plc

• The parental support required to fund the development of the company at the current time remains in place under

new ownership

COMMENTARY

Financial Strength Ratings

Elevate Portfolio Services Ltd

Standard Life had shown a commitment to platforms, by virtue of significant financial resource allocation and management

focus which had been consistent in recent years, and has been further underlined and augmented by the acquisition of

Elevate. ‘Accelerate’, for example, a £30m investment programme of platform developments for 2016, delivered a range

of enhancements and support, ensuring that Standard Life Wrap was ready for Pension Freedoms.

The financial strength of the platform operation is closely linked to that of the wider group from which it now draws its

ongoing development capital and for which it provides a core integrated component. Now as part of a larger group,

Standard Life Aberdeen, this commitment to continue investing in the appropriate technology, wider infrastructure and

capital, in line with the original business plan for the short to medium term, remains.



Rat

ing

& A

sses

smen

t C

om

men

tary

G

roup &

Par

enta

l Conte

xt

Com

pan

y A

nal

ysis

Guid

e

Elevate Portfolio Services Ltd (EPSL) has in the past received significant parental support and investment from AXA in

order to sustain its platform development (£11.5m, £7.1m, £10.3m & £12.7m was invested in the development of the

AXA Self Investor and Elevate platforms in 2015, 2014, 2013 and 2012 respectively). There are now plans in place for

this support to be provided by its new owner, with £22m provided at acquisition.

AKG regards EPSL now as an important component of a group whose capital position has remained relatively resilient to

volatile market movements, maintaining a good level of overall surplus capital.

The platform operation appears to have benefited from this and developed a significant 'trusted business partner'

proposition for advisers operating post-RDR.

Service Rating There is a focus on making life easier for advisers in terms of using Elevate in conjunction with core business processes

and systems and the business, both under its AXA ownership and now within the Standard Life Aberdeen group, appears

to have delivered on this aspiration.

Service has always been a key part of the Elevate offering and whilst there was undoubtedly a risk to this due to the

transition to the new ownership and the inherent degree of disruption and perceived uncertainty this can bring, there

does not seem to have been any significant detriment.

Going forward both the Elevate brand and the Standard Life Aberdeen environment place effective and high quality service

as core to their offering.

Image & Strategy Rating The group has a long pedigree in the UK Long Term Savings market and is committed to its platform proposition, viewing

its platform as key to growth in its UK retail business, given the ongoing demand and adoption for such infrastructure to

sit at the core of adviser businesses and meet regulatory requirements effectively.

Organic growth for the platform continues both in terms of adviser firms using the platform and AuA. However, the

acquisition of the Elevate platform adds significantly further scale and cost effectiveness to the overall platform footprint

with, for example, thought leadership investment created on a wider basis and then leveraged across both Wrap and

Elevate brands.

The group believes that its brand and distribution reach together with increasing diversification and global reach will be

key factors in its future success.

In terms of scalability and capacity in the UK, the group suggests that its platform offering, which now includes the Elevate

component, can support an unlimited number of clients and advisers, e.g. that it has been designed (and tested) with both

horizontal and vertical capacity and scalability, built into the infrastructure. It has shown versatility, for instance, with the

RBS partnership where Standard Life Aberdeen powers RBS’s non-advisory, direct-to-consumer online platform.

The platform businesses remain firmly in the centre of the group's broader proposition and are fundamentally, culturally

and financially supported by their parent, which itself continues to perform strongly. The platform operation is maintaining

a good reputation alongside other positive performers in the intermediary markets post-RDR, and is expected to continue

to be a major presence. In addition, it sees adjacent opportunities in the Private Client (DFM/DIM accessible) and

workplace (corporate) markets.

The evolving integration and positioning of the Elevate platform will be the key element of the operation's strategy in the

near term.

UK strategy also includes the acquisition and development of its own advisory capability, under the 1825 brand, as part of

an approach that looks to leverage capabilities across an increased number of integrated routes to market and increasingly

acquire, grow and retain customers across these.

The investment management business continues a strong association with the Ryder Cup golf competition, through its

position as Worldwide Sponsor, partnering in both the UK and USA.



Rat

ing

& A

sses

smen

t C

om

men

tary

G

roup &

Par

enta

l Conte

xt

Com

pan

y A

nal

ysis

Guid

e

From a pension freedoms perspective, AXA Wealth was developing Elevate in order that it could provide retirement

income related support and solutions for adviser users. Importantly the roll out of improvements continues as the business

transitions to its new ownership and integration.

Standard Life Aberdeen has stated that the acquisition of Elevate 'builds on our existing strong organic growth in the UK

pensions and savings market and is fully aligned to the group’s strategic objective of building a simplified and diversified

world class investment company. It will deliver a number of benefits:

• Bringing together two leading adviser platform businesses. The transaction will create a unified business with

additional scale, expertise and resources to support the rapidly growing demand from high quality financial advice

businesses across the UK

• Broadening access to market leading products and services

• Combining the distribution reach and capabilities of both Standard Life Wrap and Elevate. This acquisition expands

the nationwide coverage and enhances its ability to attract and support the growth of the UK’s most progressive

advice businesses

• Driving performance and growth. The integration of the two platforms’ operations, leveraging their FNZ common

platform services, will generate value.'

Business Performance Rating 2016 saw EPSL continue to make progress, with assets under administration increasing and losses reducing. The most

significant event for the company, however, was its sale to Standard Life plc.

Indeed, since this acquisition, the Elevate business has accelerated in terms of assets from its existing distribution partners.

Platforms were an integral part of the overall Standard Life offering, this being embellished by the acquisition of Elevate,

and this position is set to continue following the merger at parental level, which is expected to provide further growth

opportunities for what is now Standard Life Aberdeen.



Com

pan

y A

nal

ysis

Guid

e R

atin

g &

Ass

essm

ent

Com

men

tary

G

roup &

Par

enta

l Conte

xt

Group & Parental Context

BACKGROUND

Standard Life Aberdeen plc was formed in August 2017 from the merger of Standard Life plc and Aberdeen Asset

Management plc and is a UK based financial services group focused on providing long-term savings and investment

solutions on a global basis. It operates in the UK, Europe, North America, Asia and Australia through brands which include

Aberdeen Standard Investments, Standard Life and Standard Life Wealth as well as some joint venture brands. It has

around 4.5m customers worldwide, and a further 25m through its joint venture in China (Heng An Standard Life) and

Associate in India (HDFC Life and HDFC Asset Management Company Ltd - HDFC AMC).

The Life Insurance Company of Scotland was founded in Edinburgh in 1825. It was renamed as The Standard Life

Assurance Company (SLAC) in 1832 and reincorporated as a mutual assurance company in 1925. Standard Life

Investments was established in 1998 and Standard Life entered the offshore market with the launch of the Dublin based

subsidiary, Standard Life International Ltd in January 2006. Following the demutualisation of The Standard Life Assurance

Company (SLAC) and the flotation of Standard Life plc on the London Stock Exchange on 10 July 2006, Standard Life

Assurance Ltd (SLAL) operates in the UK alongside its now considerably smaller subsidiary, Standard Life Pension Funds

Ltd (SLPF). Under the terms of the proposed deal with Phoenix (as at February 2018), however, these life businesses will

be sold out from the group.

The Standard Life Wrap is provided by Standard Life Savings Ltd. Other key businesses are Aberdeen Standard

Investments, the group's fund management arm, which also acquired Ignis Asset Management from Phoenix in July 2014,

and Standard Life Wealth Ltd (SLW), the discretionary fund manager, which acquired the private client business of Newton

Management Ltd (NML) in September 2013. Standard Life's Canadian business was sold to Manulife in January 2015. In

May 2015, Standard Life acquired Pearson Jones from Skipton Building Society. This was then rebranded as 1825 and now

operates as a restricted national advice service. Standard Life has subsequently announced the acquisitions of regional

financial planning businesses The Munro Partnership, Baigrie Davies and Jones Sheridan to further bolster the 1825

proposition. In November 2016, the platform provider, AXA Portfolio Services Ltd - renamed as Elevate Portfolio Services

Ltd (EPSL) and the focus of this report, was acquired from AXA.

Aberdeen Asset Management was founded in 1983 and listed in 1991. In 2005, it acquired the UK and US institutional

businesses of Deutsche Asset Management, including a unit linked group pension vehicle, renamed as Aberdeen Asset

Management Life and Pensions Ltd. Certain parts of Credit Suisse's Global Investors fund management business were

acquired in July 2009 and Aberdeen Asset Management also acquired parts of RBS Asset Management in 2010. April 2014

saw the acquisition of Scottish Widows Investment Partnership (SWIP). In January 2016, the purchase of the platform

provider Parmenion Capital Partners LLP, along with its online advice business sister company, Self Directed Holdings Ltd,

was completed.

The merged group reports a stable Solvency II position.

In February 2018, Scottish Widows and Lloyds Banking Group’s Wealth businesses announced that they were reviewing

their asset management arrangements and that they had therefore given notice to Standard Life Aberdeen plc to terminate

their partnership agreements with Aberdeen Asset Management plc. This includes long-term contracts for the

management of over £100bn of assets.

In February 2018, Standard Life Aberdeen plc also announced the sale of its insurance business and an enhanced long-

term strategic partnership with Phoenix Group. At the same time, it confirmed that it would retain its adviser platforms

(Wrap, Elevate and Parmenion).



Com

pan

y A

nal

ysis

Guid

e R

atin

g &

Ass

essm

ent

Com

men

tary

G

roup &

Par

enta

l Conte

xt

GROUP STRUCTURE (SIMPLIF IED)

Elevate Portfolio Services Ltd P L A T F O R M S E C T O R


Com

pan

y A

nal

ysis

Guid

e R

atin

g &

Ass

essm

ent

Com

men

tary

G

roup &

Par

enta

l Conte

xt

Company Analysis: Elevate Portfolio Services Ltd

BASIC INFORMATION

Ownership & Control

Standard Life Aberdeen plc

Year Established

2007

Country of Registration

UK

Head Office

Winterthur Way, Basingstoke, Hampshire, RG21 6SZ

Contact

Tel: 0345 600 2399 Email: [email protected] Web: www.elevateplatform.co.uk

Key Personnel

Role Name

Group Co-Chief Executive Officer N K Skeoch

Group Co-Chief Executive Officer M Gilbert

Group Chief Financial Officer B Rattray

Group Chief Investment Officer R Paris

Group Chief People Officer K Christie

Group Chief Operations Officer and Joint Head of Integration C Walklin

Joint Head of Integration A Laing

Chief Executive Officer, Pensions and Savings and EPSL F A O'Dwyer

Chief Executive Officer, Standard Life Wealth R A Charnock

Director of Propositions E Reynolds

Managing Director, Customer Services J G McGuigan

Head of Adviser & Wealth Management Propositions D Tiller

Head of Financial Planning and Performance A Warner

Customer Operations Director S Fennessy

Head of Risk, Control & Regulatory Services S MacLennan

Director of UK Distribution N Butwell

Company Background

In January 2007, AXA established a strategy to develop and deliver a platform and services proposition for the UK market

place, and this resulted in the launch of Elevate as a 'full' platform proposition in February 2010, provided by AXA Portfolio

Services Ltd, now renamed as Elevate Portfolio Service Ltd (EPSL). October 2016 saw the company acquired by Standard

Life Savings Ltd (SLSL).

The company's principal activities are the provision of Elevate and associated services and the management of ISA and

Pension scheme business.



Com

pan

y A

nal

ysis

Guid

e R

atin

g &

Ass

essm

ent

Com

men

tary

G

roup &

Par

enta

l Conte

xt

EPSL had previously also provided AXA Self Investor, an investment platform, offering a 'non-advised' direct investment

solution and now discontinued and Family Sun Trust, which was transferred to Phoenix.

OPERATIONS

Governance System and Structure

EPSL is a subsidiary of SLSL and each has its own Board with non-executive Directors and Risk Committees. They have a

mirror structure with the same Directors sitting on each Board and both currently report into the SLAL Board which

reports into the Group Board.

The Group Board states that it adheres to the highest standards of corporate governance and ethical behaviour in directing

the Group’s affairs and in its accountability to shareholders.

The directors believe that these commitments are key to understanding and managing the business effectively, providing

engaged leadership, and delivering shareholder value over the longer term. The Group Board takes the quality of its

performance seriously and strives to improve performance through annual reviews and continuing self-assessment. As well

as its key activities to oversee the composition of the Group Board and its effectiveness, during 2016 it:

• Reviewed and revised the composition of the boards of its principal subsidiaries, currently Standard Life Assurance

Ltd (SLAL) and Standard Life Investments (Holdings) Ltd (SLIH)

• Established the Investment Committee to support the Group Board in its oversight role.

Risk Management

Risk management is carried out within the Group's Enterprise Risk Management (ERM) framework with responsibilities

allocated to individuals within the businesses. The platform sits within the UK business of the Group. The structure within

the UK business is channel focused (Adviser, Workplace and Customer) and so responsibility for the platform sits with

the Corporate, Retail & Wholesale Managing Director, providing a single point of responsibility and accountability within

the platform, consistent with governance in other channels. The Asset Administration Business Centre (AABC) sits at the

heart of its investment governance, providing the process delivery control model and oversight.

The main risks facing EPSL are market, credit, liquidity, operational and conduct.

EPSL operates a 3 lines of defence (3LD) model. Within the 1st line the Asset Administration Business Centre (AABC)

provides the process delivery control model and oversight with 3 main focuses:

• Operational Processes - performance & oversight of operational process to agreed SLAs including the day-to-day

outsourced investment transaction and custody processing

• Platform Performance - oversight of platform performance, platform functionality, speed and availability

• Risk & Control Environment - managing any issues, breaches and emerging risks in the investment operation.

Administration

There is a focus on making life easier for advisers in terms of using Elevate in conjunction with core business processes

and systems. Development of Elevate’s integration capability with back office systems and other systems providers including

iress, Intelliflo and Distribution Technology continues. A proprietary tool, the Retirement LifePlanning calculator, has been

launched to support advisers with retirement income planning discussions with clients. New investment reporting

functionality in the form of Portfolioscan has been launched for advisers. In addition to development work the business is

also working on a series of enhancements to ‘day-to-day’ functionality within Elevate as a result of feedback from the AXA

Wealth Advisory Board, whose membership includes key account stakeholders. These improvements continued in the

run up to the completion of the acquisition by Standard Life and beyond.



Com

pan

y A

nal

ysis

Guid

e R

atin

g &

Ass

essm

ent

Com

men

tary

G

roup &

Par

enta

l Conte

xt

Benchmarks

Elevate has been recognised by the industry numerous times in recent years and it has a Defaqto 5 Star Platform Rating.

It was awarded Best Platform Provider (AUA up to £15bn) and Best Platform for Adviser Service at the UK Platform

Awards 2016.

Standard Life Wrap has been recognised for its service in respect of the platform with a Defaqto Gold Service Rating in

2016 and 2017. Whilst Standard Life Wrap was rated at Silver in 2018, Elevate was awarded a Gold Rating.

Outsourcing

FNZ (UK) Ltd (FNZ), the UK element of an international platform technology business, is the primary provider of

technology for the platform. FNZ has also provided technology for the Standard Life Wrap proposition for several years.

FNZ custody services are used for mutual funds, and Winterflood Business Services (WBS) for direct investments.

STRATEGY

Market Positioning

The platform remains in a growth phase, and there is a business plan in force, now backed by Standard Life Aberdeen,

aimed at turning the company into a profitable business, which includes capital injections to fund short term losses and

one-off development/integration costs.

Distribution through financial advisers has to date utilised distribution teams split across three areas/disciplines: New

Business Sales Managers (NBSMs), Business Development Managers (BDMs - supported by Platform Relationship

Managers) and Strategic Partnerships - led by the Head of IFA Distribution. There are four NBSMs in place responsible

for seeking out new accounts. The BDM team, which is responsible for developing relationships with retail financial advisers

across the country, consists of four Regional Managers each with seven BDMs reporting to them. In the run up to the

completion of its acquisition and any integration to follow thereafter this structure broadly continues.

Standard Life Aberdeen has stated that Elevate will currently continue as a distinct platform proposition. Since acquisition

further work has been undertaken to maintain and extend this differentiation between the Standard Life Wrap and Elevate

platform propositions.

Further branding work to underscore this element of differentiation is to be anticipated, as the wider business looks to

position the two platforms within a single digital approach.

Proposition

In simple terms this defines the respective propositions as:

• Elevate: open access delivery to financial planners amongst their increased volume of affluent clients matching a

simple technology led service.

• Standard Life Wrap: to focus on Wealth Advisory and Private Client markets increasingly addressing the complexity

amongst a HNW client base underpinned by technology.

Elevate provides:

• a comprehensive range of funds that includes an extensive collection of discounted share classes

• a range of tools and numerous useful resources

• extended range of over 400 super clean funds from leading fund managers including Aberdeen Standard

Investments

• a variety of features that aim to make investing simpler from transparent charging to two-way integration and

adviser service

• a range of different tax wrappers that can be managed all in one place.



Com

pan

y A

nal

ysis

Guid

e R

atin

g &

Ass

essm

ent

Com

men

tary

G

roup &

Par

enta

l Conte

xt

The Elevate wrap is an adviser platform that supports an advised approach, providing access to a whole market range of

investments and pension solutions. Options for discretionary fund managers to manage client assets are available. Linked

accounts are also offered, reducing combined charges between family members.

Financial Express (FinEx) provides fund performance data. WBS provides an online securities trading facility. Managed

model portfolios are offered from a wide range of investment managers. Free access is given to a proprietary cashflow

planning tool, the Retirement LifePlanning calculator, which has also been launched to support advisers with retirement

income planning discussions with clients.

KEY COMPANY FINANCIAL DATA

Last 3 reporting periods up to 31 December 2016

Capital Resources Disclosures

2014

£m

2015

£m

2016

£m

Available capital resources 43.2 40.0

Capital resources

requirement (CRR) 9.2 9.2

Excess capital resources 34.0 30.8

CRR coverage ratio (%) 470 435

Pillar 3 disclosures are now at a Standard Life Savings Group level, which includes both SLSL and its subsidiary EPSL. Total

capital resources on this basis are reported at £152.6m against a resource requirement on a Pillar 1 basis of £25.6m, giving

a healthy CRR coverage ratio of 596% as at 31 December 2016.

Standard Life Aberdeen plc reported a Solvency II surplus of £3.8bn and £3.6bn on an investor and a regulatory review

respectively as at 31 December 2017 [31 December 2016: £3.3bn and £3.1bn]. The associated coverage ratios were

225% and 197% [31 December 2016: 214% and 177%].

Statement of Financial Position

2014

£m

2015

£m

2016

£m

Assets 51.4 44.3 65.2

Current liabilities (6.6) (3.2) (10.6)

Long-term liabilities (1.6) (1.1) (2.3)

Net assets 43.2 40.0 52.3

Statement of Changes in Equity

2014

£m

2015

£m

2016

£m

Equity at start of period 41.2 43.2 40.0

Movement due to:

Share capital and premium 15.0 5.0 22.0

Retained earnings (13.1) (8.2) (9.7)

Other 0.0 0.0 0.0

Equity at end of period 43.2 40.0 52.3

SLSL injected £22m of capital into the company at acquisition so as to maintain a satisfactory regulatory capital and

cashflow position. The company now has a net current asset position of £54.6m and a net asset position of £52.3m [2015:

£41.1m and £40.0m respectively].

Further capital injections are anticipated to fund short term losses and one-off development/integration costs as the

company develops. The company had received capital injections totalling £171.5m from its prior owner over the 8 years

up to the end of 2015, against losses after tax of around £140m for the same period.



Com

pan

y A

nal

ysis

Guid

e R

atin

g &

Ass

essm

ent

Com

men

tary

G

roup &

Par

enta

l Conte

xt

Income Statement

2014

£m

2015

£m

2016

£m

Revenue 27.0 32.0 33.0

Other operating income 3.3 2.9 0.4

Operating expenses (49.2) (50.0) (43.9)

Operating profit (loss) (18.9) (15.1) (10.5)

Other gains (losses) 0.5 0.2 0.4

Profit (loss) before taxation (17.2) (14.9) (10.1)

Taxation 3.7 6.7 0.3

Profit (loss) after taxation (13.4) (8.2) (9.7)

Other comprehensive

income 0.0 0.0 0.0

Dividends 0.0 0.0 0.0

Retained profit (loss) (13.4) (8.2) (9.7)

Financial Ratios

2014

%

2015

%

2016

%

Operating margin (70) (47) (32)

Pre-tax profit margin (63) (46) (31)

Employee costs as a % of

revenue

Whilst total revenue, principally representing platform fees, increased by 3% from £32.0m to £33.0m in 2016, this included

£2.5m [2016: nil] from discontinued operations in 2015. Revenue from continuing operations increased by 12% from

£29.5m to £33.0m. Other operating income reduced from £2.9m to £0.4m. With expenses reducing by 12% from £50.0m

(including £2.4m relating to discontinued operations) to £43.9m, the pre-tax operating loss reduced from £15.1m to

£10.5m.

Discontinued operations relates to Retirement Wealth Account and Family Sun Trust, which were transferred to other

AXA entities in 2016.

Standard Life Aberdeen plc's adjusted profit before tax, which excludes impacts arising from short-term fluctuations in

investment return and economic assumption changes in the group’s wholly owned insurance entities, reduced slightly from

£1,054m to £1,039m on a pro forma basis in 2017. The group paid ordinary dividends totalling £469m in 2017 [2016:

£370m].

Statement of Cash Flows

2014

£m

2015

£m

2016

£m

Net cash generated from

operating activities

Net cash used in investing

activities

Net cash used in financing

activities

Net increase (decrease) in

cash and cash equivalents 3.1 (4.9) 34.0

Cash and cash equivalents

at end of period 29.7 24.7 58.7

Assets under Administration (AuA)

2014

£m

2015

£m

2016

£m

Assets at start of period 9,200.0 10,500.0

Inflows 1,951.0 2,194.0

Outflows (598.0) (902.0)

Net market and other

movement

Assets at end of period 9,200.0 10,500.0 11,300.0

Growth rate (%) 23 14 8

Net inflows as % of opening

AuA 1 14

The company is exempt from providing a Statement of Cash Flows as a subsidiary of a parent that produces a consolidated

cashflow for the group. Cash increased from £24.7m to £58.7m, mainly due to the capital injection.

Elevate's Assets under Administration (AuA) increased by 8% from £10.5bn to £11.3bn in 2016.



Com

pan

y A

nal

ysis

Guid

e R

atin

g &

Ass

essm

ent

Com

men

tary

G

roup &

Par

enta

l Conte

xt

The Elevate and Standard Life Wrap deal creates one of the UK's largest and fastest growing adviser platform businesses

with combined AuA of over £44bn, supporting 3,000 adviser businesses, a total of 360,000 customers and combined new

asset inflows of £4.8bn in 2016. AuA, including Standard Life Wrap, Elevate and FundZone, increased to £54.0bn as at 31

December 2017, with net inflows of £5.4bn in 2017 [2016: £4.2bn], helped by pension freedoms and DB to DC switches.

As at 31 December 2017, Standard Life Aberdeen had assets under management and administration of £654.9bn [31

December 2016: £647.6bn], Aberdeen Standard Investments having £575.7bn under management, of which £179.6bn

were third party assets [31 December 2016: £580.6bn and £181.3bn respectively].



Com

pan

y A

nal

ysis

Guid

e R

atin

g &

Ass

essm

ent

Com

men

tary

G

roup &

Par

enta

l Conte

xt

Guide

INTRODUCTION

For over 20 years AKG has particularly focused on the financial strength requirements of financial advisers, who when

acting on behalf of their clients, need to ascertain a company's ability to deliver sustained provision.

From this customer perspective, the financial strength of companies needs to be focused at an operational level, specifically

on the company that is effecting the product or service that a customer is selecting. This is important, because from the

customer’s perspective it is that company (not some higher corporate entity) that needs to survive in a form that maintains

the requisite operational characteristics to meet their fairly held requirements. And it is thus at this level that the selection

needs of the customers’ advisers must be met.

It is also important to understand the sector approach (comparative peer groups) that is adopted in financial strength

assessment and rating process.

At AKG, this is again driven by the end customer perspective and the fact that assessment is designed solely for this

purpose, i.e. as a component in helping customers’ advisers to select between comparable companies competing to deliver

relevant products or services.

AKG’s focus and approach has remained consistent over the years since it commenced assessment and rating support for

the market. However, coverage, format and presentation has rightly evolved over this period, in line with the needs and

expectations of assessment and rating users in the market. And AKG considers further changes on a continual basis.

Further details including an explanation of what is included in the assessment reports and coverage can be found online

at http://www.akg.co.uk/information/reports/company-profiles.

AKG’s process for assessment and rating is to use a balanced scorecard of measures and comparative information, relevant

to the companies contained within each peer group. This is gathered via Public Information only for non-participatory

assessments and public information plus company interactions with companies for participatory assessments. Further

details on AKG’s process can be found at http://www.akg.co.uk/information/reports.

This includes further information on the different participatory and non-participatory basis and for companies wishing to

learn more about participatory assessment AKG is pleased to outline this and welcomes contact.

This is a participatory assessment.

RATING DEFINITIONS

Overall Financial Strength Rating

The objective is to provide a simple indication of the general financial strength of a company from the perspective of those

financial advisers who when acting on behalf of their clients need to ascertain a company's ability to deliver sustained

operational provision of products or services.

The overall rating inherently reflects the mix of business within the company, since different types of customer or

policyholder have different requirements and expectations, and the company may have particular strengths and

weaknesses in respect of its key product or service areas. However, it also takes account of comparison across the sector

in which it is assessed.

The rating takes into account those of the following criteria which are relevant (depending upon the company's mix of

business in-force): capital and asset position, expense position and profitability any specifically onerous element such as

with profits realistic balance sheet position, structure (and size) of funds within the company, parental strength (and likely

attitude towards supporting the company), operational capability, management strength and capability, strategic position



Com

pan

y A

nal

ysis

Guid

e R

atin

g &

Ass

essm

ent

Com

men

tary

G

roup &

Par

enta

l Conte

xt

and rationale, brand and image, typical fund performance achievements or product / service features, its operating

environment and ability to withstand external forces.

Rating Scale A B+ B B- C D �

Superior Very Strong Strong Satisfactory Weak Very Weak Not applicable

Service Rating

The objective is to assess the quality of the organisation's service to the intermediary market in respect of the brand

concerned.

Criteria taken into account include: performance in surveys, awards and benchmarking exercises (external and internal),

the organisation's philosophy, service charters, the extent of investments designed to improve service, and feedback from

intermediaries.

Rating Scale ��

Excellent Very Good Good Adequate Poor Not Rated

Image & Strategy Rating

The objective is to assess the effectiveness of the means by which the organisation currently positions itself to distribute

its products for the brand concerned and the plans it has to maintain and/or develop its position.

Criteria taken into account include: overall trends in the company’s market share position, brand visibility and reputation,

feedback from intermediaries and industry commentators, and AKG’s view of the company’s general strategy.

Rating Scale ��


Business Performance Rating

This review is an assessment of how the company and the brand has fared against its peers, and how it is perceived

externally. Effectively this is how it has performed recently in the market. Whilst it will include performance indicators

from the most recent available statutory reporting (report and accounts and SFCRs in the case of insurance companies,

for example) it will also draw on other recent key performance elements before and after such disclosure, up to the point

at which the assessment is undertaken.

Criteria taken into account include: increase/decrease in market shares, expense containment, publicity good or bad, press

or market commentary, regulatory fines, and competitive position.

Rating Scale ��




Com

pan

y A

nal

ysis

Guid

e R

atin

g &

Ass

essm

ent

Com

men

tary

G

roup &

Par

enta

l Conte

xt

ABOUT AKG

AKG is an independent organisation. Originally established as an actuarial consultancy AKG has, for over 20 years,

specialised in the provision of assessment, ratings, information and market assistance to the financial services industry.

As the market has evolved over this period, the range of entities considered by AKG has expanded. Consequently, AKG

has brought additional skill sets into its operations. This has meant the inclusion of accounting, corporate finance, IT and

market intelligence experience, alongside actuarial resources, to deliver an expanded professional capability.

Today AKG’s core purpose is in the provision of financial analysis and review services to support the wider financial services

sector and its customers.

© AKG Financial Analytics Ltd (AKG) 2018

This report is issued as at a certain date, and it remains AKG's current assessment with current ratings until it is superseded by a subsequently issued

report or subsequently issued ratings (at which point the newly issued report or ratings should be used), or until AKG ceases to make such a report

or ratings available.

The report contains assessment based on available information at the date as shown on the report’s cover and in its page footer. This includes prior

regulatory data which may have an earlier date associated with it, but the report also takes into account all relevant events and information, available

to and considered by AKG, which have occurred prior to this stated cover and footer date. Events and information subsequent to this date are not

covered within it, but AKG continually monitors and reviews such events and information and where individually or in aggregate such events or

information give rise to rating revision an updated report under an updated date is issued as soon as possible.

All rights reserved. This report is protected by copyright. This report and the data/information contained herein is provided on a single site multi

user basis. It may therefore be utilised by a number of individuals within a location. If provided in paper form this may be as part of a physical library

arrangement, but copying is prohibited under copyright. If provided in electronic form, this may be by means of a shared server environment, but

copying or installation onto more than one computer is prohibited under copyright. Printing from electronic form is permitted for own (single

location) use only and multiple printing for onward distribution is prohibited under copyright. Further distribution and uses of the report, either in its

entirety or part thereof, may be permitted by separate agreement, under licence. Please contact AKG in this regard or with any questions:

[email protected], Tel +44 (0) 1306 876439. AKG has made every effort to ensure the accuracy of the content of this report and to ensure that the

information contained is as current as possible at the date of issue, but AKG (inclusive of its directors, officers, staff and shareholders and any affiliated

third parties) cannot accept any liability to any party in respect of, or resulting from, errors or omissions. AKG information, comments and opinion,

as expressed in the form of its analysis and ratings, do not establish or seek to establish suitability in any individual regard and AKG does not provide,

explicitly or implicitly, through this report and its content, or any other assessment, rating or commentary, any form of investment advice or fiduciary

service.

AKG Financial Analytics Ltd Anderton House, 92 South Street, Dorking, Surrey RH4 2EW Tel: +44 (0) 1306 876439 Email: [email protected] Web: www.akg.co.uk © AKG Financial Analytics Ltd 2018

akg financial strength assessment report · axa self investor and elevate platforms in 2015, 2014,...

Documents