Quilter : Solvency and Financial Condition Report 2023

Quilter plc Group Solvency and Financial Condition Report 2023

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Quilter plc Group Solvency and Financial Condition Report 2023

Solvency and Financial Condition Report overview

Solvency and Financial Condition Report overview

The Solvency and Financial Condition Report ("SFCR") provides detailed information on the Quilter plc Group's capital position on a Solvency II basis. This report also includes detailed entity-level information on the Group's UK insurance undertaking: Quilter Life & Pensions Limited ("QLPL").

The structure of this SFCR is aligned with the requirements of the Solvency II rules:

1. Business and performance: Describes the nature of our business and legal structure and how the business performed during the year ended 31 December 2023, with a specific focus on insurance activities.
2. System of governance: Describes the governance model that has been established at Board level and how this is cascaded to key functions within the business. The section also outlines our approach to risk management and internal controls.
3. Risk profile: Describes the risks faced by Quilter plc and subsidiary businesses including underwriting risk, market risk and credit risk, with specific information provided on the profile of regulatory capital held for the insurance businesses.
4. Valuation for solvency purposes: Describes the consolidation approach and methods used to determine the regulatory balance sheet, including the calculation of insurance technical provisions for the consolidated insurance Group.
5. Capital management: Describes the components of available own funds that are eligible to cover regulatory capital requirements and provides information on the composition of regulatory capital and how regulatory capital requirements are calculated.

The Quantitative Reporting Templates ("QRTs") included in the appendices to this report include additional information relevant to the capital position of the Group and QLPL in a standardised format.

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Quilter plc Group Solvency and Financial Condition Report 2023

Audit opinion

Report of the external independent auditors to the Directors of Quilter plc ('the Company') pursuant to Rule 4.1 (2) of the External Audit Part of the PRA Rulebook applicable to Solvency II firms

Report on the Audit of the relevant elements of the Single Group-Wide Solvency and Financial Condition Report

Opinion

Except as stated below, we have audited the following documents prepared by the Company as at 31 December 2023:

• The 'Valuation for solvency purposes' and 'Capital Management' sections of the Single Group-Wide Solvency and Financial Condition Report of the Company as at 31 December 2023, ('the Narrative Disclosures subject to audit');
• Group templates S.02.01.02, S.23.01.22, S.25.01.22 and S.32.01.22 ('the Group Templates subject to audit'); and
• Solo templates S.02.01.02, S.12.01.02, S.23.01.01, S.25.01.21 and S.28.01.01 in respect of Quilter Life & Pensions Limited ('the Solo Templates subject to audit')

The Narrative Disclosures subject to audit, the Group Templates subject to audit and the Solo Templates subject to audit are collectively referred to as the 'relevant elements of the Single Group-Wide Solvency and Financial Condition Report'.

We are not required to audit, nor have we audited, and as a consequence do not express an opinion on the Other Information which comprises:

• The 'Summary', 'Business and performance', 'System of governance' and 'Risk profile' elements of the Single Group-Wide Solvency and Financial Condition Report;
• Group template S.05.01.02 and Solo template S.05.01.02;
• The written acknowledgement by management of their responsibilities, including for the preparation of the Single Group-Wide Solvency and Financial Condition Report ('the Responsibility Statement'); and
• Information which pertains to an undertaking that is not a Solvency II undertaking and has been prepared in accordance with PRA rules other than those implementing the Solvency II Directive or UK law other than the Solvency II regulations ('the sectoral information') as identified in the Appendix to this report.

To the extent the information subject to audit in the relevant elements of the Single Group-Wide Solvency and Financial Condition Report includes amounts that are totals, sub-totals or calculations derived from the Other Information, we have relied without verification on the Other Information.

In our opinion, the information subject to audit in the relevant elements of the Single Group-Wide Solvency and Financial Condition Report of the Company as at 31 December 2023 is prepared, in all material respects, in accordance with the financial reporting provisions of the PRA Rules and Solvency II regulations on which they are based, as modified by relevant supervisory modifications.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) including ISA (UK) 800 and ISA (UK) 805, and applicable law. Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the relevant elements of the Single Group-Wide Solvency and Financial Condition Report section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the Single Group-Wide Solvency and Financial Condition Report in the UK, including the FRC's Ethical Standard as applied to public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

Our evaluation of the Directors' assessment of the Company's ability to continue to adopt the going concern basis of accounting included:

• We obtained the Directors' updated going concern assessment and challenged the rationale for assumptions on growth of assets under management/administration and asset returns using our knowledge of Quilter plc's (the "Group's") business performance, and corroborating to external market evidence where available. Our assessment included reviewing management's stress testing and scenario analyses.
• We obtained management's estimated Solvency capital position and evaluated this for consistency of available information and against management's own target capital ratios. We found that the Group maintained internal targets for its Group Solvency Capital Requirement (SCR) ratio, and is forecast to remain compliant with all external regulatory capital requirements for the period covered by the going concern assessment.
• We confirmed compliance with the debt covenants of the Groups' borrowings, and the forecast continued compliance for the duration of the period covered by the going concern assessment.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from the date on which the Single Group-Wide Solvency and Financial Condition Report is authorised for issue.

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Quilter plc Group Solvency and Financial Condition Report 2023

Audit opinion

In auditing the Single Group-Wide Solvency and Financial Condition Report, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the Single Group-Wide Solvency and Financial Condition Report is appropriate.

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Company's ability to continue as a going concern.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

Emphasis of Matter - Basis of Accounting

We draw attention to the 'Valuation for solvency purposes', 'Capital Management' and A.1.2 Basis of preparation of the Single Group- Wide Solvency and Financial Condition Report, which describe the basis of accounting. The Single Group-Wide Solvency and Financial Condition Report is prepared in compliance with the financial reporting provisions of the PRA Rules and Solvency II regulations, and therefore in accordance with a special purpose financial reporting framework. The Single Group-Wide Solvency and Financial Condition Report is required to be published, and intended users include but are not limited to the Prudential Regulation Authority. As a result, the Single Group-Wide Solvency and Financial Condition Report may not be suitable for another purpose. Our opinion is not modified in respect of this matter.

Other Information

The Directors are responsible for the Other Information.

Our opinion on the relevant elements of the Single Group-Wide Solvency and Financial Condition Report does not cover the Other Information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the Single Group-Wide Solvency and Financial Condition Report, our responsibility is to read the Other Information and, in doing so, consider whether the Other Information is materially inconsistent with the relevant elements of the Single Group-Wide Solvency and Financial Condition Report, or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the relevant elements of the Single Group-Wide Solvency and Financial Condition Report or a material misstatement of the Other Information. If, based on the work we have performed, we conclude that there is a material misstatement of this Other Information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Directors for the Single Group-Wide Solvency and Financial Condition Report

The Directors are responsible for the preparation of the Single Group-Wide Solvency and Financial Condition Report in accordance with the financial reporting provisions of the PRA rules and Solvency II regulations which have been modified by the modifications made by the PRA under section 138A of FSMA, the PRA Rules and Solvency II regulations on which they are based, as detailed below:

Modifications:

• Permission to publish a Single Group-wide SFCR
• Permission to exclude Quilter Insurance Company Limited from the scope of Solvency II group supervision.

The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of a Single Group-Wide Solvency and Financial Condition Report that is free from material misstatement, whether due to fraud or error.

Auditors' Responsibilities for the Audit of the relevant elements of the Single Group-Wide Solvency and Financial Condition Report

It is our responsibility to form an independent opinion as to whether the information subject to audit in the relevant elements of the Single Group-Wide Solvency and Financial Condition Report is prepared, in all material respects, in accordance with the financial reporting provisions of the PRA Rules and Solvency II regulations on which they are based.

Our objectives are to obtain reasonable assurance about whether the relevant elements of the Single Group-Wide Solvency and Financial Condition Report are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but it is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decision making or the judgement of the users taken on the basis of the Single Group-Wide Solvency and Financial Condition Report.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

Based on our understanding of the Company/industry, we identified that the principal risks of non-compliance with laws and regulations related to breaches of UK regulatory principles, such as those governed by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) and unsuitable or prohibited business practices, and we considered the extent to which non- compliance might have a material effect on the Single Group-Wide Solvency and Financial Condition Report. We also considered those laws and regulations that have a direct impact on the Single Group-Wide Solvency and Financial Condition Report such as the

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Quilter plc Group Solvency and Financial Condition Report 2023

Audit opinion

PRA rulebook applicable to Solvency II firms. We evaluated management's incentives and opportunities for fraudulent manipulation of the Single Group-Wide Solvency and Financial Condition Report (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to own funds, and management bias in accounting estimates and judgmental areas for example the technical provisions and Solvency Capital Requirement. Audit procedures performed included:

• Discussions with the Board, management, internal audit, management involved in the risk and compliance functions and the Group's legal function, including consideration of known or suspected instances of non-compliance with laws and regulation and fraud.
• Reviewing correspondence between the Group and the PRA, the FCA and HMRC in relation to compliance with laws and regulations.
• Assessment of matters reported on the Group's whistleblowing register including the quality and results of management's investigation of such matters.
• Reviewing Board minutes as well as relevant meeting minutes, including those of the Board Audit Committee, Board Remuneration Committee, and the Board Risk Committee.
• Reviewing data regarding policyholder complaints, the Group's register of litigation and claims, internal audit reports, and compliance reports in so far as they related to non-compliance with laws and regulations and fraud.
• Challenging assumptions made by management in accounting estimates and judgements, in particular in relation to the technical provisions recognised.
• Identifying and testing journal entries, in particular any journal entries posted in adjusting the IFRS balance sheet to calculate the Solvency II balance sheet, which may be indicative of the overstatement or manipulation of own funds.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non- compliance with laws and regulations that are not closely related to events and transactions reflected in the Single Group-Wide Solvency and Financial Condition Report. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

A further description of our responsibilities for the audit is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors' report.

Use of this report

This report, including the opinion, has been prepared for the Board of Directors of the Company in accordance with External Audit rule

2.1 of the Solvency II firms Sector of the PRA Rulebook and for no other purpose. We do not, in providing this report, accept or assume responsibility for any other purpose or to any other party save where expressly agreed by our prior consent in writing.

Report on Other Legal and Regulatory Requirements

Sectoral Information

In our opinion, in accordance with Rule 4.2 of the External Audit Part of the PRA Rulebook, the sectoral information has been properly compiled in accordance with the PRA rules and UK law relating to that undertaking from information provided by members of the group and the relevant insurance group undertaking.

Other Information

In accordance with Rule 4.1 (3) of the External Audit Part of the PRA Rulebook for Solvency II firms we are also required to consider whether the Other Information is materially inconsistent with our knowledge obtained in the audit of the Company's statutory financial statements. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

The engagement partner on the audit resulting in this independent auditors' report is Mark Pugh.

PricewaterhouseCoopers LLP

Chartered Accountants

7 More London Place, London

28 March 2024

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Quilter plc Group Solvency and Financial Condition Report 2023

Audit opinion

Appendix - relevant elements of the Single Group-Wide Solvency and Financial Condition Report that are not subject to audit

The relevant elements of the Single Group-Wide Solvency and Financial Condition Report that are not subject to audit comprise:

• The following elements of Group template S.23.01.22
• • Rows R0410 to R0440 - Own funds of other financial sectors
• The following elements of Group template S.25.01.22
• • Rows R0500 to R0530 - Capital requirement for other financial sectors (Non-insurance capital requirements) (forming part of the sectoral information)
• Elements of the Narrative Disclosures subject to audit identified as 'unaudited'.

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Quilter plc Group Solvency and Financial Condition Report 2023

Statement of Directors' responsibilities

Quilter plc Group

Statement of Directors' responsibilities

Year ended 31 December 2023

We acknowledge our responsibility for preparing the Group Solvency and Financial Condition Report of Quilter plc in all material respects in accordance with the Prudential Regulation Authority Rulebook and the Solvency II Regulations.

The Boards are satisfied that to the best of their knowledge and belief:

• the SFCR has been properly prepared in all material respects in accordance with the PRA rules and Solvency II Regulations; and
• throughout the financial year in question, the Group and Quilter Life & Pensions Limited have complied in all material respects with the requirements of the PRA rules and the Solvency II Regulations as applicable; and
• it is reasonable to believe that, at the date of the publication of the SFCR, the Group and Quilter Life & Pensions Limited have continued to comply, and will continue to comply in future in all material respects with the requirements of the PRA rules and the Solvency II Regulations as applicable to the Group and Quilter Life & Pensions Limited.

The Solvency and Financial Condition Report was approved by the Board of Directors of Quilter plc and the information disclosed in this SFCR for Quilter Life & Pensions Limited was approved by the Board of that Company on 28 March 2024 and signed on behalf of their Boards by:

Mark Satchel

Chief Financial Officer

28 March 2024

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Quilter plc Group Solvency and Financial Condition Report 2023

Summary

Summary

About Quilter

Quilter plc (the "Company"), a public limited company incorporated in England and Wales and domiciled in the United Kingdom ("UK"), together with its subsidiaries (collectively, the "Group") offers investment and wealth management services, long-term savings and financial advice primarily in the UK.

About this report

This Group SFCR has been prepared in line with the requirements of Solvency II legislation, to help Quilter's customers and other stakeholders to understand the nature of the business, how the business is managed, and its capital position.

This is a single Group SFCR that incorporates consolidated information at the level of the Group, and company-level information for its UK insurance subsidiary: Quilter Life & Pensions Limited. This report is prepared in accordance with a rulebook modification (Direction reference: 00005438) granted by the Prudential Regulation Authority. At 31 December 2023, the Group had one other insurance subsidiary: Quilter Insurance Company Limited. Quilter Insurance Company Limited is based in the Isle of Man, is not subject to Solvency II at company level and is not included in the scope of Group supervision due to a PRA waiver (Direction reference: 00002784).

The Group SFCRs for previous years remain available on the Quilter plc website: plc.quilter.com.

Business and performance

Section A of this report contains information on the Group's structure, operations and financial performance during 2023.

The Group's strategy is focused on achieving good customer outcomes, and growing our business proposition, delivering these from an efficient operating base all of which are managed within a prudent risk framework.

Adjusted profit is an alternative performance measure used by Quilter as a measure of the Group's profitability after excluding certain one-off items that is used for management decision making and internal performance management. Adjusted profit before tax for 2023 increased by 25% to £167 million (2022: £134 million), reflecting higher investment returns on shareholder funds together with strong cost management.

System of governance

The system of governance is the Group's overall framework of policies, standards and practices which is in place to meet the requirements of sound risk-based management. The framework is set out in the Group Governance Manual which is reviewed on an annual basis, or whenever there is a material change in the business which requires a change to the system of governance.

Risk profile

The Quilter plc Board has carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity, as well as those risks that are non-financial in nature. The principal risks are set out in the Quilter plc 2023 Annual Report.

The Group has adopted the Standard Formula specified in Solvency II legislation to assess the capital risks within Quilter. The Group uses the Standard Formula to calculate the Group solvency capital requirement, reflecting the Group's capital risk profile covering life underwriting, market, credit and operational risks.

Capital risk profile

Based on the Standard Formula, the Group had a solvency capital requirement of £568 million at 31 December 2023 (2022: £631 million). This figure includes an element related to the capital requirements of non-insurance entities.

The chart below sets out the capital risk components for the Quilter insurance business.

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