108 | FINANCIAL STATEMENTS | Notes to the Consolidated Financial Statements


36. Financial risk management continued The CRD requires the Group to conduct an Internal Capital Adequacy Assessment Process (ICAAP), referred to as Pillar 2 capital requirements. The objective of this process is to ensure that companies have adequate capital to enable them to manage risks not deemed to be adequately covered under the Pillar 1 minimum requirements. This is a forward-looking exercise which includes stress-testing key risks, considering how the company would cope with a significant market down turn for example, and an assessment of the Group’s ability to mitigate the risks.


All of the Group’s regulated entities maintained surpluses of regulatory capital throughout 2010 and 2011.


37. The extent of risks arising from financial instruments Note 36 presents details of the Group’s direct or indirect exposure to financial risks arising from financial instruments and the Group’s objectives, policies and processes for measuring and managing risk and the management of the Group’s capital. This note provides numerical analyses of the Group’s direct exposure to such financial risk, including relevant sensitivity analysis, at each reporting date.


The disclosures in this note exclude any policyholder unit-linked assets and liabilities in respect of F&C MPF, as the risks and rewards rest primarily with the policyholders.


(a) Credit risk


(i) Maximum exposure to credit risk The carrying amount of financial assets represents the Group’s maximum exposure to credit risk. The maximum exposure of each class of financial asset is:


31 December 31 December 2011 £m


2010 £m


Financial assets at fair value through profit or loss: Financial investments


Stock of units and shares


Available for sale financial assets: Financial investments


Loans and receivables: Trade debtors


Accrued income


OEIC and unit trust debtors Other debtors


Amounts owed by Achmea Group*


Amounts owed by TRC related party entities Amounts owned by F&C REIT related party entities


Cash and cash equivalents – shareholders


6.6 0.9


1.7


13.3 29.0 29.5 4.8 –


0.6 0.1


196.9 283.4


* As the Achmea Group ceased to be a related party during 2011, the balances are now included within other debtors at 31 December 2011.


The accrued income balance is higher than the average monthly balance during the year. This is primarily due to the level of performance fees recognised at 31 December 2011 and 31 December 2010.


The quantum of OEIC and unit trust debtors fluctuates significantly during the year; the balance is dependent upon the timing and values of creations and liquidations of units or shares.


9.9 0.1


3.5


21.5 38.9 81.2 10.8 1.4 0.7 0.1


178.8 346.9


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