SLA.L Regulatory News (SLA)

Standard Life Aberdeen plc

Half year results 2020

Part 1 of 3

7 August 2020

Contents

For a PDF version of the full half year results announcement, please click here:

http://www.rns-pdf.londonstockexchange.com/rns/4328V_1-2020-8-6.pdf

Standard Life Aberdeen plc's LEI Code is 0TMBS544NMO7GLCE7H90

The Half year results 2020 are published on the Group's website at www.standardlifeaberdeen.com/hyresults

Details of forward-looking statements can be found on the inside back cover.

Certain measures, such as fee based revenue, cost/income ratio and adjusted profit before tax are not defined under International Financial Reporting Standards (IFRS) and are therefore termed alternative performance measures (APMs). Further details on APMs are included in Supplementary information in Section 5.

All figures are shown on a Continuing operations basis unless otherwise stated.

This symbol indicates further information is available within this report or on the Group corporate website.

For more information visit our corporate website: www.standardlifeaberdeen.com

Resilience and financial strength in volatile markets

Keith Skeoch, Chief Executive, commented:

"Despite exceptional circumstances we have delivered a resilient performance. In the first half of 2020 redemptions have slowed and net inflows have improved, excluding expected LBG withdrawals. Investment performance has been robust and we continue to deliver on our synergy commitments.

"There is no question that the impact of COVID-19 has played a role on our results today, and across our industry, particularly in relation to lower revenue. Our foundations are firm, we have a strong balance sheet which enables us to both invest in our business and maintain our interim dividend of 7.3p. 

"We have a strong commitment to responsible investment, and a resolute belief in our purpose 'Together we invest for a better future'. This is reflected in our response to the pandemic, where we have focused on protecting the safety and wellbeing of our people, ensuring we can continue to deliver for our clients and customers, and supporting the communities in which we operate. Our people recognise this and it's reflected in the significant improvement we have seen in our culture over the last 12 months.

"This is my last set of results as Chief Executive of Standard Life Aberdeen, following 21 years with the business - a period where I have seen the business evolve from a mutual life and pensions company to a capital-light global investment house. I am pleased to hand over a business with strong foundations, an enviable capital position, talented people, enduring relationships and big ambitions."

Key points:

Financial

· Fee based revenue of £706m (H1 2019: £815m), 13% lower mainly reflecting 2019 outflows, client preferences changing asset mix in this environment, and Lloyds Banking Group (LBG) tranche withdrawals

· Adjusted operating expenses of £601m (H1 2019: £673m), reduced by 11% due to realisation of synergies and other efficiencies

· Adjusted profit before tax of £195m (H1 2019: £280m), 30% lower largely reflecting lower revenue

· IFRS loss before tax of £498m (H1 2019: £629m profit) reflecting impairment charges relating to goodwill and intangible assets partly offset by gains on sales of Indian investments (HDFC Life and HDFC Asset Management)

· Impact of COVID-19 on H1 2020 results was largely in relation to lower fee based revenue, impairment charges and c£10m savings on discretionary costs

· Strong balance sheet including surplus regulatory capital of £1.8bn, up compared with £1.7bn at FY 2019

· Maintained interim dividend at 7.3p (H1 2019: 7.3p)

Business

· Robust investment performance in volatile markets with 68% of AUM above benchmark over three years

· Net inflows of £0.1bn (excluding LBG tranche withdrawals of £24.9bn) (H1 2019: £15.9bn net outflows)

· Redemptions lower by 27% to £38.1bn (excluding LBG tranche withdrawals) (H1 2019: £52.3bn)

· Gross inflows up 5% at £38.2bn (H1 2019: £36.4bn)

· AUMA of £511.8bn after LBG tranche withdrawals (FY 2019: £544.6bn)

Operational resilience - COVID-19

· Over 95% of our colleagues working from home around the world

· Adopted innovative digital channels for client and customer engagement

· We did not access any UK government support schemes and none of our colleagues were furloughed. We honoured our early careers recruitment and no new redundancy programmes were initiated.

· We significantly increased our charitable support for local communities

Outlook

· COVID-19 and associated shutdowns of economic activity have precipitated significant negative growth shocks across the world

· Contraction phase of crisis comparatively short-lived and we anticipate an element of recovery as restrictions are lifted

· As an active asset manager we can play an important role in society during the recovery, meeting the evolving needs of clients as they plan their financial futures

· While revenue outlook remains challenging for the industry, we continue to focus on what we can control. We will continue to diversify our revenue and reshape our cost base to ensure it is future fit

· Although the future is unpredictable, we believe our mix of customers and channels, continued investment performance, enduring relationships, geographic spread and financial strength will enable us to continue to demonstrate resilience in periods of ongoing uncertainty

Media

A conference call for the media will take place at 8.00am (BST) on 7 August. Participants should dial UK 0800 640 6441/Other locations +44 (0) 203 936 2999 followed by passcode 362740.

Investors and analysts

A presentation for analysts and investors will take place via webcast at 9.00am (BST) on Friday 7 August 2020. To join the webcast go to www.standardlifeaberdeen.com. There is also the facility to join the presentation and subsequent Q&A session via a conference call. Participants should dial +44 (0) 203 936 2999 and use passcode 193750.

Enquiries:

* Calls may be monitored and/or recorded to protect both you and us and help with our training. Call charges will vary.

Notes:

1 Comparative as at 31 December 2019.

2 Percentage of AUM above benchmark. A full definition is included in the Glossary.

Chief Executive's statement

A purpose-led response to COVID-19

Many months on from when the world first heard of a coronavirus outbreak, I remain extremely proud of how colleagues across the world responded, adapted and continued to serve our clients, customers and communities over this very difficult period. From the start, we put the safety and wellbeing of our colleagues and their families first and by the time the pandemic was reaching its height across our regions, virtually all of our people had successfully transitioned to home working.

What has become apparent is that connectivity, communications and a common purpose and culture have been vital to the success of this transition. The resilience of our IT infrastructure and investment platforms has meant we have been able to deliver consistently for our clients and customers from a home environment. To keep our colleagues supported, connected and informed, we committed to maintaining transparent and regular communications, as well as providing an extensive suite of health and wellbeing support tools.

We have maintained our focus on serving our clients and customers globally, switching to digital channels to maintain relationships, provide continuing customer service, generate sales and win mandates. Realising the heightened impact the pandemic is having on the more vulnerable, we allocated funds and support to local communities most in need in our operational locations across the world.

We are now thinking ahead to how we can best support a sustainable and inclusive economic recovery. As active, long-term investors, we are fully committed to providing support, where appropriate, to the companies we invest in. Environmental, Social and Governance (ESG) is embedded in our investment processes. In response to the challenges presented by COVID-19 we issued a statement explaining our approach to responsible investment and stewardship in these unprecedented times. We have been supportive of companies that have looked after their employees as a priority and have been thoughtful where capital conservation or raising has been needed.

Our objective has been clear from the outset: to build further resilience into our operating model and to ensure greater agility so we can continue to deliver for clients and customers and continue to transform our business in a very different operating environment. 

The impact on the global economy has yet to be fully understood. There will clearly be a global recession and some countries will be harder hit than others and some will bounce back more quickly.

Our results clearly show that the main impact of the COVID-19 crisis on our business is through its impact on revenue; unlike many industries, COVID-19 does not impact the fundamental basis of our business. The need for individuals to save and invest for the future, pension funds to provide retirement income, institutions to invest and governments to borrow has not changed and in fact has become more acute. The need to diversify investment risk both geographically and in asset classes is more apparent than ever and our range of asset management capabilities is well matched to this need. The recent politicisation of global trade does not change the investment imperatives. The increased levels of government debt will make it more important than ever that individuals plan for their own future in a more uncertain time. The recent increase in UK personal savings reflects that this is widely understood. Building a culture of saving, and converting savings to investment, is challenging but vital and in the UK we are well positioned to play a leading role. Our existing capabilities in platforms and relationships with financial advisers and the potency and trust of the Standard Life brand for savings uniquely position us to guide customers through financial choices over their life. This difficult and uncertain environment is likely to last for some time and it will be a period when, more than ever, we need to reinforce our purpose - Together we invest for a better future.

We believe COVID-19 will accelerate the key global trends already underway in our industry and already factored into our strategy. We have a strong financial position, geographic and product diversity, and a common culture that positions us well to lean into the challenges and opportunities that this environment provides. 

The impact of the COVID-19 pandemic on our half year 2020 results has largely been to reduce fee based revenue, driven by the change in client preferences to less risk-based assets as a result of market volatility, and the fall in equity markets compared to the end of 2019, and on the value of goodwill and intangible assets resulting in impairment charges. There have also been savings of c£10m from lower discretionary costs in this period of COVID-19 restrictions. Our transformation programme remains on track.

We continue to make strong progress in the creation of a common culture. During this period, we rolled out our strategic blueprint to instil a common sense of purpose throughout the business despite the COVID-19 crisis. This roll out has been undertaken digitally and is backed up by the launch of a single intranet iSLA. The latest mood survey1, taken in mid-July, was very positive with 73% of the survey 'proud to work for Standard Life Aberdeen' and only 7% registering a negative response. These scores represent a dramatic improvement on the sentiment in the 2018 viewpoint survey when only 53% were proud to work for Standard Life Aberdeen. 

Resilience in volatile markets

We were encouraged that our investment performance remained robust in the first half of the year, with 68% of assets under management ahead of benchmark over three years. Despite the challenges of remote working we continued to innovate, launching18 new funds in the first half across a range of capabilities and winning new mandates. We were pleased to see that the number of strategies receiving positive ratings from investment consultants has increased to 51 in the first half from 43 three years ago. We continued to strengthen our ESG franchise, launching funds, winning mandates, and launching a responsible investment campaign in Europe.

1 Survey conducted July 2020 as part of return to workplace considerations.

While the financial markets remain volatile and there is still much uncertainty on the shape and timing of any eventual recovery, the response from our clients in the first half of the year has been measured. This is evidenced by the movement in flows over the period. Redemptions in the first half of £38.1bn, excluding expected Lloyds Banking Group (LBG) tranche withdrawals of £24.9bn, were the lowest seen since the merger. We saw total gross inflows of £38.2bn resulting in net inflows of £0.1bn, excluding the LBG tranche withdrawals. AUMA at 30 June 2020 was £511.8bn, lower than £544.6bn at year end 2019 largely reflecting the LBG tranche withdrawals. Across asset classes we saw a reaction to the uncertain environment and extreme volatility in markets with the shift in risk appetite leading to some reallocation to lower risk assets.

We determined at the start of the year that further enhancing our consumer savings and investment capability in the UK would be a priority for our Platforms and Wealth channel. This involves bringing together the current customer solutions into an integrated proposition and increasing the efficiency of our back office processes. We made progress in the first half launching more attractive pricing features for advisers and customers on our Wrap platform. Responding to the trend for digitalisation in financial products, we are in beta testing for our new 'Choices' app, an open banking engagement tool aimed at younger savers providing direct access to our savings products.

Focus on financial discipline

During these turbulent times, we continue to focus on what we can control. Fee based revenue was down 13% in the first half reflecting the impact of 2019 outflows, changes in asset class mix in the period, LBG tranche withdrawals and falls in markets since the end of 2019. However, we have achieved an improvement in adjusted operating expenses, with costs down 11% year on year. This was driven by synergies realised in the period, as well as other cost efficiencies and other savings due to the impact of COVID-19. We remain on track with our transformation programme and with the delivery of our stated target of £400m annual synergies, £350m by end of 2020 and an additional £50m during 2021.

The lower revenue resulted in adjusted profit of £195m being 30% lower than H1 2019. IFRS loss before tax was £498m due to goodwill and intangible asset impairment charges of £1,049m, primarily reflecting the impact of COVID-19 on financial markets and resulting revenue projections. This was partially offset by the gains on sales of our Indian investments of £651m.

Financial strength in volatile markets

We entered this period of uncertainty in a position of financial strength and during these unprecedented times we have continued to strengthen our position. In the first half we raised £709m in net cash proceeds through the further partial sales of our investments in HDFC Life and HDFC Asset Management. Total shareholder equity at 30 June 2020 is £5.8bn, including surplus regulatory capital of £1.8bn, up from £1.7bn in 2019. In addition, our listed investments had a market value of £3.4bn at 5 August 2020, £3.0bn of which is not recognised in our regulatory capital. This strong financial position is a result of careful stewardship of the balance sheet which has supported investment in the business to diversify revenue and increase efficiency, as well as delivering returns for shareholders. In the current volatile markets our financial strength brings us benefits and provides us with options.

The Board is committed to delivering a dividend that is sustainable over the medium term. At this point in time, our operating performance together with the strength and quality of our balance sheet have enabled the Board to maintain our interim dividend at 7.3p. We also plan to complete the existing £400m share buyback programme (which is 55% complete) during the second half of the year.

As the deterioration and uncertainty in economic conditions that have resulted from the global COVID-19 pandemic are now expected to continue for some time, as part of its normal planning cycle, the Board will be reviewing both the challenges and opportunities for our business in this environment with a view to evaluating our sustainable earnings profile over the medium term.

Outlook

The COVID-19 pandemic and associated shutdowns of economic activity have precipitated significant negative growth shocks across the world. However, the contraction phase of the crisis has also been comparatively short-lived and we anticipate an element of recovery as restrictions are lifted. Nevertheless, the long-term consequences of the crisis will be profound, including a longer-term loss of output, labour market scarring, lower real interest rates, and an altered balance between monetary and fiscal policy. In addition, the Brexit process remains in a transition period up to 31 December 2020 and remains a further source of uncertainty.

There are both challenges and opportunities arising in the current environment. As an active asset manager we can play an important role in society during the recovery, meeting the evolving needs of clients as they plan their financial futures. Through our Platforms and Wealth channel, we can help people plan for their financial futures through our savings and investment products. As active asset managers we can continue to meet the evolving needs of our clients across a broad range of asset classes, strategies and solutions. While the revenue outlook remains challenging for the industry, we will continue to focus on what we can control. We will continue to diversify our revenue and reshape our cost base to ensure it is future fit. Although the future is unpredictable, we believe that our mix of customers and channels, continued investment performance, enduring relationships, geographic spread and financial strength will enable us to continue to demonstrate resilience in periods of ongoing uncertainty.

Chief Executive succession

It was announced on 30 June that Stephen Bird would join the Board and take up the role of Chief Executive Designate on 1 July. Following a handover period, and subject to regulatory approvals, Stephen will succeed me as Group Chief Executive. It has been a real privilege to serve this great company and to have the opportunity to work with such talented people. Over the last 14 years, we have transformed the business from a UK life and pensions house into a global, capital-light investment and savings business. In recent times, we have laid strong foundations for the next stage of growth, built a strong capital position, improved investment performance, invested in our people and our talent, strengthened our leadership team, and made great strides in building a purpose-led culture. The Board has appointed a great successor who will be an excellent leader during the next stages of Standard Life Aberdeen's journey.

Keith Skeoch

Chief Executive

7 August 2020

Analysis of profit

Revenue

1 H1 2019 Fee revenue yield restated to include revenue and assets under advice relating to our 1825 advice business.

2 The sale of SL Asia to Heng An Standard Life (HASL) completed on 30 June 2020. See Note 4.2 in the Financial information section.

Fee based revenue reduced by 13% to £706m (H1 2019: £815m) mainly reflecting 2019 outflows, changes in client preferences to assets with lower fees, in particular the market shift to cash and liquidity in H1 2020 due to the impact of COVID-19 on global financial markets, and the impact of LBG tranche withdrawals. Despite the recent volatility in financial markets, the average daily MSCI World Index was 3% higher in H1 2020 compared to H1 2019, however the average daily FTSE All Share Index was 10% lower.

The revenue yield in Institutional and Wholesale decreased to 39.5bps (H1 2019: 43.4bps) as a result of the lower proportion of higher margin Equity and Multi-asset AUM and the higher proportion of Cash/Liquidity AUM. The lower margin also reflects the £5.5bn win of a lower margin US advisory mandate in Q4 2019.

Fee based revenue from strategic insurance partners reduced due to net outflows, in particular the c£50m impact from LBG reflecting the tranche withdrawals of £41.0bn in H2 2019 and £24.9bn in H1 2020.

The lower fee based revenue in Wrap and Elevate includes the impact of the Elevate reprice in 2019 and the impact of COVID-19 on average UK market levels, partly offset by continued net inflows.

Wealth fee based revenue increased largely due to the acquisition of Grant Thornton's wealth advisory business and BDO Northern Ireland's wealth management business in H2 2019. This was partly offset by the impact of lower UK markets in H1 2020.

Expenses

Adjusted operating expenses decreased by 11% to £601m (H1 2019: £673m) including the benefit of synergies of £34m which included lower staff and premises costs arising through the ongoing integration process. In addition we realised other efficiencies of £57m from transforming our business, through implementing new processes and infrastructure which also allow us to build efficiency in how we work, including c£10m of lower discretionary costs in this period of COVID-19 restrictions.

The cost/income ratio, which includes our share of associates' and joint ventures' profit, was 74% (H1 2019: 72%) reflecting principally the fall in revenue. Excluding our share of associates' and joint ventures' profit, the cost/income ratio was 85% (H1 2019: 83%).

At 30 June 2020, actions have been taken which will deliver £323m of annualised synergies, benefiting H1 2020 operating expenses by £137m (H1 2019: £103m) with further benefits expected in H2 2020 and 2021. Cost synergies have been realised from a reduction in staff costs, rationalisation of premises, and efficiencies in supplier spend, including procurement actions to avoid cost increases.

The related implementation costs, which are included in restructuring expenses, incurred to date are £482m, of which £46m were incurred in H1 2020 (H1 2019: £123m). We expect total implementation costs to remain in line with the previous estimate of £555m to deliver the £400m of annual synergies (£350m by end of 2020 and an additional £50m during 2021).

Capital management

Capital management generated a loss of £13m (H1 2019: profit £22m) due to investment losses of £17m (H1 2019: gains £18m) primarily reflecting negative market movements on seed capital and co-investment fund holdings from the impact of COVID-19 on global financial markets during H1 2020, compared to significant market gains in H1 2019. Net finance costs reduced to £6m (H1 2019: £10m) mainly due to the repurchase of £408m of subordinated debt in 2019. The net interest credit relating to the staff pension schemes reduced to £10m (H1 2019: £14m) reflecting a lower discount rate.

Asset management associates and joint ventures

Our share of adjusted profit reduced by 15% to £22m (H1 2019: £26m) due to our reduced shareholding in HDFC Asset Management following the sale of 3.02% of the shares in December 2019, and also the impact of adverse market conditions. Our percentage ownership of HDFC Asset Management at 30 June 2020 was 21.25% (H1 2019: 29.94%) following a further sale of 5.64% in June 2020 which generated net cash proceeds of £265m. Following this sale, HDFC Asset Management has now achieved the minimum public shareholding requirement in India.

Insurance associates and joint ventures

The share of adjusted profit from insurance associates and joint ventures reduced by 10% to £81m (H1 2019: £90m) mainly due to the reduction in our shareholding in HDFC Life to 10.27% (H1 2019: 23.02%) following the sales of 8.28% in H2 2019 and 4.46% in H1 2020, and the impact on HDFC Life of adverse market conditions. The combined sales of 4.46% in H1 2020 generated net cash proceeds of £444m.

Based on the closing share price at 5 August 2020, the approximate value of our shareholding in Phoenix was £1.0bn (based on our holding of 14.43% following the completion of its acquisition of ReAssure Group plc) and in HDFC Life £1.3bn. Combined with the value of our shareholding in HDFC Asset Management of £1.1bn, this gives a total value of our shareholdings in listed associates of approximately £3.4bn.

IFRS (loss)/profit before tax

The IFRS loss before tax of £498m (H1 2019: profit £629m) mainly reflected the impairments of goodwill and intangibles of £1,049m partially offset by profits on disposal of interests in associates of £651m.

Adjusting items

The profit on disposal of interests in associates of £651m relates to £388m from the sale of 4.46% of the shares in HDFC Life and £263m from the sale of 5.64% of the shares in HDFC Asset Management.

Restructuring and corporate transaction expenses were £147m (H1 2019: £198m) primarily reflecting ongoing transformation costs for integration, separation from Phoenix and implementing our simplified operating model. H1 2019 included £49m relating to the repurchase of subordinated debt. Total Phoenix separation costs accounted for to date amount to £204m and include £34m in H1 2020. Our estimate of the total of these one-off separation costs we expect to incur remains £310m.

The amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts increased to £1,175m (H1 2019: £144m) due to 2020 impairment charges of £1,049m. The impairment of goodwill of £915m relates to an impairment of asset management goodwill and resulted from the impact on reported revenue and future revenue projections of global equity market falls and a shift in asset mix towards lower margin assets. Both the fall in equity markets and the shift in asset mix were global market impacts primarily resulting from COVID-19. The asset management goodwill is now fully impaired. The impairment of customer relationship and investment management contract intangibles of £134m resulted from the impact of markets,net outflows and a fall in revenue yield on future earnings expectations. Further details are provided in Note 4.11 in the Financial information section.

The impairment of associates and joint ventures of £130m includes £85m reflecting the lower market value of our investment in Phoenix at 30 June 2020 following a reduction in the share price. There was also a £45m impairment relating to our joint venture with Virgin Money. Further details are provided in Note 4.12.

Investment return variances and economic assumption changes gain of £124m relates to our share of Phoenix adjusting items. Further details are provided in Note 4.9.

Tax expense

The total IFRS tax expense attributable to the profit for the period was £6m (H1 2019: credit £10m), including a tax credit attributable to adjusting items of £7m (H1 2019: credit £41m), resulting in an effective tax rate of negative 1% on the total IFRS losses(H1 2019: negative 2%). The difference to the UK corporation tax rate of 19% is mainly driven by the impairment of goodwill which is not deductible for tax purposes. This is partly offset by a lower effective tax rate on the Indian stake sales. The profit on disposal of HDFC Life shares is not subject to tax under India's tax rules and international treaties and the profit on the disposal of HDFC Asset Management shares was subject to tax in India at a lower rate than the UK rate of corporation tax.

The tax expense attributable to adjusted profit before tax totalled £32m (H1 2019: £58m), which includes £19m (H1 2019: £27m) representing equity holders' share of tax which is attributable to our share of the profits of associates and joint ventures. The effective tax rate on total adjusted profit is 16.4% (2019: 20.7%). This is lower than the 19% UK rate primarily due to the reversal of planned reductions in the rate of UK corporation tax. This has a beneficial effect in increasing the value of our deferred tax assets.

Earnings per share

Adjusted diluted earnings per share reduced by 21% to 7.0p (H1 2019: 8.9p). This reflects the 27% reduction in adjusted profit after tax partly offset by the benefit of 6% from the ongoing share buybacks.

Investment performance

1 The investment performance calculation covers all funds (including strategic insurance partners) that aim to outperform a benchmark, with certain assets excluded where this measure of performance is not appropriate or expected. Calculations for investment performance are made gross of fees except where the stated comparator is net of fees. Further details about the calculation of investment performance are included in the Glossary.

Three-year investment performance improved during the first half of 2020, with 68% (FY 2019: 60%) of assets under management ahead of benchmark. This reflects continued improvement in three-year performance within Equities and Multi-asset and ongoing strong performance in Alternatives, Fixed income and Cash/Liquidity.

Shorter-term equity performance over one year weakened primarily due to Emerging Markets equities. Most other Equity classes had improved performance, supporting the overall asset class performance over three years.

We are encouraged by the increase in strategies receiving positive ratings from investment consultants, bringing the total to 51 strategies (FY 2019: 46 strategies). The new ratings were in Equities, Fixed income, Private markets and Liability Driven Investment.

Assets under management and administration (AUMA) and flows

AUMA

2 H1 2019 has been restated to include opening assets under advice within market and other movements.

AUMA is lower than FY 2019 as a result of a further £24.9bn of LBG tranche withdrawals and the impact of COVID-19 on global financial markets. Institutional and Wholesale AUM increased to £233.6bn (FY 2019: £233.0bn) despite the challenging market conditions.

Gross and net flows

1 H1 2019 has been restated to include flows relating to 1825 assets under advice. Wealth includes £3.5bn of inflows from Virgin Money.

2 Net outflows excluding LBG do not include the tranche withdrawals relating to the settlement of arbitration with LBG.

3 Eliminations remove the double count of flows reflected in the asset management and platforms and wealth businesses.

Total net flows benefited from robust investment performance and ongoing innovation, improving to a net inflow of £0.1bn excluding LBG tranche withdrawals (H1 2019: net outflow of £15.9bn). Gross inflows increased by 5% mainly reflecting higher inflows into Cash/Liquidity. Redemptions (excluding LBG tranche withdrawals) reduced significantly to £38.1bn (H1 2019: £52.3bn).

Net outflows for Institutional and Wholesale reduced to £0.6bn (H1 2019: £15.5bn) reflecting the stronger gross inflows and a lower level of Equities and Multi-asset redemptions. Redemptions represented an annualised 22% (H1 2019: 29%) of opening assets.

Net outflows in Strategic insurance partners reflect redemptions from maturing insurance business in long-term run-off, partly offset by gross inflows. The remaining c£4bn of LBG tranche withdrawals are expected to be made by the end of Q1 2021.

The stable net inflows on Wrap and Elevate are encouraging given the impact of COVID-19 on market sentiment and financial markets. Wealth net inflows were lower than H1 2019 which benefited from £3.5bn of inflows from Virgin Money.

Capital and liquidity

Our strong capital position and balance sheet supports ongoing investment in the business and delivering shareholder returns.

Capital

IFRS net assets decreased to £5.8bn (FY 2019: £6.6bn) mainly due to the impairment of the asset management goodwill and intangible assets of £1,049m, and distributions to shareholders. These impacts were partly offset by profits generated from the gain on sale of shares in HDFC Life and HDFC Asset Management.

Intangible assets of £0.6bn (FY 2019: £1.7bn) primarily relate to customer relationships, technology and brands from acquired businesses. Further details are provided in Note 4.11.

The principal defined benefit staff pension scheme, which is closed to future accrual, continues to have a significant surplus of £1.4bn (FY 2019: £1.1bn). Further details are provided in Note 4.15.

We hold £237m (FY 2019: £275m) in newly established investment vehicles which the Group has seeded and co-investments of £78m (FY 2019: £84m). The Group sets limits for investing in seed capital and co-investment activity and regularly monitors exposures arising from these investments.

Within IFRS net assets of £5.8bn there are regulatory capital resources of £2.9bn. Capital requirements are £1.1bn giving surplus regulatory capital of £1.8bn. Further detail on the indicative surplus regulatory capital position is provided in Section 5 and an analysis of movements is set out below.

The £1.8bn indicative capital surplus above includes a deduction to allow for the interim dividend which will be paid in September 2020, and a deduction of £400m for the share buyback announced in February 2020.

Adjusted capital generation

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. Further information is provided in Section 5.

Adjusted capital generation reduced as a result of the lower revenue in H1 2020.

Dividends

The Board has declared an interim dividend for 2020 of 7.3p (H1 2019: 7.3p) per share which will be paid on 29 September 2020 to shareholders on the register at close of business on 21 August 2020. The dividend payment is expected to be £159m.

At 30 June 2020 Standard Life Aberdeen plc held £1.4bn of cash and liquid resources and £1.9bn of distributable reserves, which will be used to support the dividend.

Return of capital

On 7 February 2020 we announced a further share buyback of up to £400m and expect that it will complete in the second half of 2020. As at 6 August 2020, we have returned £220m, with 89m shares repurchased at an average price of £2.48 per share.

Cash and liquid resources

Cash and liquid resources remained robust at £2.8bn at 30 June 2020 (FY 2019: £2.7bn) with proceeds from the HDFC Life andHDFC Asset Management share sales more than offsetting the 2020 final dividend and share buyback. Cash and liquid resources includes cash and cash equivalents1 of £1.4bn (FY 2019: £1.3bn), short-term debt securities (Certificates of Deposit) of £0.9bn(FY 2019: £0.9bn), bonds of £0.3bn (FY 2019: £0.3bn) and holdings in pooled investment funds of £0.2bn (FY 2019: £0.2bn). £1.4bn (FY 2019: £1.4bn) of these cash and liquid resources were held in Standard Life Aberdeen plc.

1 Excludes cash held as collateral and in relation to unit linked business.

Net cash inflows

Net cash inflows from operating activities were £52m which includes outflows from restructuring costs, net of tax, of £89m.

Cash inflows from investing activities of £776m includes net proceeds of £444m from the sale of shares in HDFC Life and £265m from the sale of shares in HDFC Asset Management.

Cash outflows from financing activities of £572m primarily relate to the purchase of shares as part of the buyback programme of £172m and £320m for dividends paid in the period.

Principal risks and uncertainties

The principal risks that we believe the Group will be exposed to in the second half of 2020 are the same as those outlined in the Annual report and accounts 2019 comprising: Strategic risk; Financial risk; Conduct risk; Regulatory and legal risk; Process execution and trade errors; People; Technology; Business resilience and continuity; Fraud and financial crime; Change management; Supplier risk and Financial management process. As we are a people business, COVID-19 has accentuated that aspect of these principal risks.

Key developments in relation to our principal risks

As highlighted in the Chief Executive's statement, we have been managing the impacts of the global COVID-19 pandemic on our business. We undertook analysis into COVID-19 related risks to identify areas where mitigation was required. We have had to manage impacts across all of our Principal Risk categories with particular focus on underlying risks to our customers and clients, our people and our business operations. Over 95% of our colleagues have moved into a home working environment across all our global office locations. While we successfully established new ways of working in March, we have had to manage newly identified COVID-19 specific risks and take extra steps to mitigate them. We have closely monitored our activities and risks during every stage of the crisis and largely maintained client and customer service levels. The most acute challenge was managing the balance between customer service and colleague welfare in the Wrap platform front office which remained open albeit with slower service levels.

We are utilising a regular dashboard to monitor the main areas which COVID-19 has impacted on our operations, with links to the principal risks, as shown below:

Diagram removed for the purposes of this announcement. However it can be viewed in full in the pdf document

Short-term operational challenges continue within the business as we progress our transformation programme. Although progress is on track, risks are heightened due to the impacts of COVID-19. Actions are in place to support colleagues and we continue to ensure adequate accountability and ownership for the delivery of our integration and transformation programmes alongside our business as usual activities.

The Brexit process remains in a transition period up to 31 December 2020 and remains a source of uncertainty and risk. We are prepared to manage impacts of a no-deal scenario on our business but remain vigilant to wider impacts on the financial services industry and the UK economy as a whole. We are closely monitoring developments in relation to the negotiations for the UK's future relationship with the EU and actively engage with industry groups such as the Investment Association.

We continue to strengthen our suite of Board Risk Appetite metrics which we track against our Principal Risk categories. These metrics provide our Executives and the Board with clear sight of risks as they emerge and allow our business to identify management actions to mitigate them.