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OML - Old Mutual Plc - Interim results for the six months ended 30 June 2011
Index to the financial information
For the six months ended 30 June 2011
Statement of directors` responsibilities in respect of the half-yearly
financial statements 34
Interim review report for the six months ended 30 June 2011 to Old Mutual
plc 35
Consolidated income statement 36
Consolidated statement of comprehensive income 38
Reconciliation of adjusted operating profit to profit after tax 39
Consolidated statement of financial position 40
Condensed consolidated statement of cash flows 41
Consolidated statement of changes in equity 42
Notes to the consolidated financial statements
A: Accounting policies 48
B: Segment information 48
C: Other key performance information 66
D: Other income statement notes 76
E: Borrowed funds 78
F: Other notes 81
G: Discontinued operations 82
Group Market Consistent Embedded Value statement of earnings 84
Adjusted operating Group MCEV earnings per share 85
Components of Group MCEV and adjusted Group MCEV information 86
Notes to the Old Mutual Market Consistent Embedded Value basis
supplementary information
A: MCEV policies 88
B: Segment information 95
C: Other key performance information 115
D: Other income statement notes 122
E: Sensitivity tests 124
Shareholder information 126
Statement of directors` responsibilities in respect of the half-yearly
financial statements
For the six months ended 30 June 2011
We confirm that to the best of our knowledge:
- the consolidated financial information has been prepared in accordance with
the recognition and measurement principles of International Financial Reporting
Standards adopted by the EU and in accordance with the requirements of IAS 34
`Interim Financial Reporting`
- the MCEV supplementary information has been prepared in accordance with the
Market Consistent Embedded Value Principles (Copyright Copyright Stichting CFO
Forum Foundation 2008) issued in June 2008 and updated in October 2009 by the
CFO Forum (`the Principles`) and the basis of preparation as set out on page 88.
- the interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the financial
year and their impact on the condensed set of financial statements; and a
description of the principal risks and uncertainties for the remaining six
months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
Julian Roberts Philip Broadley
Group Chief Executive Group Finance Director
5 August 2011 5 August 2011
Interim review report for the six months ended 30 June 2011 to
Old Mutual plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 June
2011 which comprises the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated statement of financial
position, the consolidated statement of changes in equity, the condensed
consolidated statement of cash flows and the related notes which include the
Reconciliation of Adjusted Operating Profit to Profit after Tax.
We have also been engaged by the Company to review the Market Consistent
Embedded Value (MCEV) basis supplementary information (`the supplementary
information`) for the six months ended 30 June 2011.
We have read the other information contained in the half-yearly financial report
and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements or the supplementary information.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Disclosure
and Transparency Rules (the DTR) of the UK`s Financial Services Authority (the
UK FSA) and also to provide a review conclusion to the Company on the
supplementary information. Our review of the condensed set of financial
statements has been undertaken so that we might state to the Company those
matters we are required to state to it in this report and for no other purpose.
Our review of the supplementary information has been undertaken so that we might
state to the Company those matters we have been engaged to state in this report
and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company for our review
work, for this report, or for the conclusions we have reached.
Directors` responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the DTR of the UK FSA. The directors have
accepted responsibility for preparing the supplementary information contained in
the half-yearly financial report on an MCEV basis in accordance with the CFO
Forum MCEV Principles as issued in June 2008 and updated in October 2009 (`the
MCEV Principles`).
As disclosed in note A, the annual financial statements of the Group are
prepared in accordance with IFRS as adopted by the EU. The condensed set of
financial statements included in this half-yearly financial report has been
prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the
EU.
The supplementary information has been prepared in accordance with the MCEV
principles, using the methodology and assumptions as detailed in the basis of
preparation of the supplementary information. The supplementary information
should be read in conjunction with the Group`s condensed set of financial
statements.
Our responsibility
Our responsibility, is to express to the Company a conclusion, based on our
review, on the condensed set of financial statements and the supplementary
information in the half-yearly financial report.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information and
supplementary information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK and
Ireland) and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 June 2011 is not prepared, in all material
respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK
FSA.
Based on our review, nothing has come to our attention that causes us to believe
that the supplementary information for the six months ended 30 June 2011 is not
prepared, in all material respects, in accordance with the MCEV principles,
using the methodology and assumptions as detailed in the basis of preparation of
the supplementary information.
Philip Smart
for and on behalf of KPMG Audit Plc
Chartered Accountants, 15 Canada Square, London, E14 5GL, 5 August 2011
Consolidated income statement
For the six months ended 30 June 2011
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
Notes 2011 2010* 2010
Revenue
Gross earned premiums B3 1,944 1,700 3,582
Outward reinsurance (167) (147) (305)
Net earned premiums 1,777 1,553 3,277
Investment return
(non-banking) 843 1,274 10,791
Banking interest and
similar income 1,994 2,005 4,082
Banking trading,
investment and
similar income 103 82 204
Fee and commission
income, and income
from service
activities 1,635 1,420 3,061
Other income 94 107 159
Total revenues 6,446 6,441 21,574
Expenses
Claims and benefits
(including change in
insurance contract
provisions) (1,701) (1,351) (5,039)
Reinsurance
recoveries 108 118 227
Net claims and
benefits incurred (1,593) (1,233) (4,812)
Change in investment
contract liabilities (13) (876) (6,899)
Losses on loans and
advances (253) (285) (552)
Finance costs (85) (127) (269)
Banking interest
payable and similar
expenses (1,154) (1,252) (2,519)
Fee and commission
expenses, and other
acquisition costs (496) (406) (963)
Other operating and
administrative
expenses (1,966) (1,736) (3,715)
Change in third
party interest in
consolidated funds (66) 28 (388)
Amortisation of PVIF
and other acquired
intangibles C1(b) (117) (145) (297)
Total expenses (5,743) (6,032) (20,414)
Share of associated
undertakings` profit
after tax 4 2 7
Loss on disposal of
subsidiaries,
associated
undertakings and
strategic
investments C1(c) - (22) (22)
Profit before tax 707 389 1,145
Income tax expense D1(a) (205) (129) (456)
Profit from
continuing
operations after tax 502 260 689
Discontinued
operations
Profit/(loss) from
discontinued
operations after tax G1 130 120 (713)
Profit/(loss) after
tax for the
financial period 632 380 (24)
Attributable to
Equity holders of
the parent 489 265 (282)
Non-controlling
interests
Ordinary shares 112 84 196
Preferred securities 31 31 62
Profit/(loss) after
tax for the
financial period 632 380 (24)
Earnings per share
Basic earnings per
share based on
profit from continuing
operations (pence) 7.0 2.6 8.2
Basic earnings per
share based on
profit/(loss) from
discontinued operations
(pence) 2.7 2.5 (14.7)
Basic earnings per
ordinary share (pence)C3(a) 9.7 5.1 (6.5)
Diluted earnings per
share based on
profit from continuing
operations (pence) 6.4 2.4 7.4
Diluted earnings per
share based on
profit/(loss) from
discontinued
operations 2.4 2.3 (13.5)
Diluted earnings per
ordinary share (pence) C3(a) 8.8 4.7 (6.1)
Weighted average
number of shares -
millions 4,897 4,849 4,859
* The results for the six months ended 30 June 2010 have been restated to
reflect US Life as a discontinued operation (see note A1).
Consolidated statement of comprehensive income
For the six months ended 30 June 2011
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2011 2010* 2010
Profit/(loss) after tax for
the financial period 632 380 (24)
Other comprehensive income for
the financial period
Fair value gains/(losses)
Property revaluation - 5 26
Net investment hedge (25) (34) (87)
Available-for-sale investments
Fair value gains 5 22 32
Recycled to the income statement (5) 1 -
Shadow accounting - (17) (15)
Currency translation
differences/exchange
differences on translating foreign
operations (296) 254 1,039
Other movements (40) 11 31
Income tax relating to
components of other
comprehensive income 6 6 13
Total other comprehensive
income for the financial
period from
continuing operations (355) 248 1,039
Total other comprehensive
income for the financial
period from discontinued
operations (130) 182 112
Total other comprehensive
income for the financial period (485) 430 1,151
Total comprehensive income for
the financial period 147 810 1,127
Attributable to
Equity holders of the parent 105 640 594
Non-controlling interests
Ordinary shares 11 139 428
Preferred securities 31 31 105
Total comprehensive income for
the financial period 147 810 1,127
* The results for the six months ended 30 June 2010 have been restated to
reflect US Life as a discontinued operation (see note A1).
Reconciliation of adjusted operating profit to profit after tax
For the six months ended 30 June 2011
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2011 2010* 2010
Notes
Core operations
Long Term Savings B2 474 447 897
Nedbank B2 359 266 601
M&F B2 47 33 103
USAM B2 47 40 87
927 786 1,688
Finance costs (60) (68) (128)
Long-term investment
return on excess assets 18 16 31
Net interest payable
to non-core operations (9) (9) (39)
Other shareholders`
expenses (31) (11) (71)
Adjusted operating
profit before tax 845 714 1,481
Adjusting items C1(a) (212) (260) (482)
Non-core operations 23 (65) (3)
Profit before tax
(net of policyholder tax) 656 389 996
Income tax
attributable to
policyholder returns B2 51 - 149
Profit before tax 707 389 1,145
Total income tax
expense D1(a) (205) (129) (456)
Profit from
continuing
operations after tax 502 260 689
Profit/(loss) from
discontinued
operations after tax G1 130 120 (713)
Profit/(loss) after
tax for the
financial period 632 380 (24)
Adjusted operating profit after tax attributable to ordinary equity holders of
the parent
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2011 2010* 2010
Notes
Adjusted operating
profit before tax 845 714 1,481
Tax on adjusted
operating profit D1(c) (191) (155) (347)
Adjusted operating
profit after tax 654 559 1,134
Non-controlling
interest - ordinary shares (120) (95) (217)
Non-controlling
interest - preferred securities (31) (31) (62)
Adjusted operating
profit after tax
attributable to
ordinary equity holders 503 433 855
Adjusted weighted
average number of
shares (millions) C3(b) 5,397 5,342 5,359
Adjusted operating
earnings per share
(pence) C3(b) 9.3 8.1 16.0
* The results for the six months ended 30 June 2010 have been restated to
reflect US Life as a discontinued operation (see note A1).
Basis of preparation
The reconciliation of adjusted operating profit has been prepared so as to
reflect the directors` view of the underlying long-term performance of the
Group. The statement reconciles adjusted operating profit to profit after tax as
reported under IFRS as adopted by the EU.
For core life assurance and general insurance businesses, adjusted operating
profit is based on a long-term investment return, including investment returns
on life funds` investments in Group equity and debt instruments, and is stated
net of income tax attributable to policyholder returns. For the US Asset
Management business it includes compensation costs in respect of certain long-
term incentive schemes defined as non-controlling interests in accordance with
IFRS. For all core businesses, adjusted operating profit excludes goodwill
impairment, the impact of acquisition accounting, revaluations of put options
related to long-term incentive schemes, profit/(loss) on disposal of
subsidiaries, associated undertakings and strategic investments, dividends
declared to holders of perpetual preferred callable securities, and fair value
profits/(losses) on certain Group debt instruments. Bermuda and US Life, which
are non-core, are not included in adjusted operating profit.
Adjusted operating earnings per ordinary share is calculated on the same basis
as adjusted operating profit. It is stated after tax attributable to adjusted
operating profit and non-controlling interests. It excludes income attributable
to Black Economic Empowerment trusts of listed subsidiaries. The calculation of
the adjusted weighted average number of shares includes own shares held in
policyholders` funds and Black Economic Empowerment trusts.
Consolidated statement of financial position
At 30 June 2011
GBPm
At At At
30 June 30 June 31 December
2011 2010 2010
Notes
Assets
Goodwill and other intangible assets 4,833 5,003 4,965
Mandatory reserve deposits with
central banks 1,073 985 1,079
Property, plant and equipment 962 871 1,015
Investment property 1,980 2,026 2,040
Deferred tax assets 396 668 416
Investments in associated
undertakings and joint ventures 176 145 162
Deferred acquisition costs 1,565 3,096 1,534
Reinsurers` share of life
assurance policyholder liabilities 1,114 1,325 982
Reinsurers` share of general
insurance liabilities 115 125 122
Loans and advances 49,417 45,071 51,778
Investments and securities 106,428 102,270 106,153
Current tax receivable 151 166 156
Client indebtedness for
acceptances 254 159 190
Trade, other receivables and
other assets 4,144 3,780 3,934
Derivative financial instruments
- assets 1,770 1,933 2,503
Cash and cash equivalents 4,526 3,267 4,132
Non-current assets held for sale 6 18 12,391
Total assets 178,910 170,908 193,552
Liabilities
Life assurance policyholder
liabilities 97,429 96,826 98,631
General insurance liabilities 386 389 397
Third party interests in
consolidated funds 4,711 2,860 3,584
Borrowed funds E1 4,497 3,928 4,204
Provisions 230 226 260
Deferred revenue 773 661 730
Deferred tax liabilities 830 930 858
Current tax payable 244 198 238
Trade, other payables and other
liabilities 5,106 4,899 5,661
Liabilities under acceptances 254 159 190
Amounts owed to bank depositors 51,564 47,116 53,236
Derivative financial instruments
- liabilities 1,355 1,460 1,870
Non-current liabilities held for sale - - 12,219
Total liabilities 167,379 159,652 182,078
Net assets 11,531 11,256 11,474
Shareholders` equity
Equity attributable to equity
holders of the parent 9,031 9,047 8,951
Non-controlling interests
Ordinary shares 1,783 1,492 1,763
Preferred securities 717 717 760
Total non-controlling interests 2,500 2,209 2,523
Total equity 11,531 11,256 11,474
Condensed consolidated statement of cash flows
For the six months ended 30 June 2011
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2011 2010* 2010
Cash flows from operating activities
Profit before tax 707 389 1,145
Non-cash movements in profit
before tax 631 1,081 (7,398)
Changes in working capital 918 1,506 10,229
Taxation paid (185) (187) (413)
Net cash inflow from operating
activities 2,071 2,789 3,563
Cash flows from investing activities
Net acquisitions of financial
investments (2,261) (2,560) (2,222)
Acquisition of investment properties (23) (224) (162)
Proceeds from disposal of
investment properties 2 19 272
Acquisition of property, plant
and equipment (54) (69) (152)
Proceeds from disposal of
property, plant and equipment 9 10 -
Acquisition of intangible assets (31) (30) (78)
Acquisition of interests in subsidiaries 46 (124) (75)
Net movement of interests in
subsidiaries, associated undertakings
and strategic investments
(including cash and cash
equivalents disposed of) (353) 2 (16)
Net cash outflow from
investing activities (2,665) (2,976) (2,433)
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the
Company (53) (62) (102)
Non-controlling interests and
preferred security interests (107) (99) (196)
Interest paid (excluding
banking interest paid) (36) (38) (79)
Proceeds from issue of
ordinary shares 4 4 5
Net purchase of treasury shares (18) (29) (25)
Issue of subordinated and other debt 831 584 492
Subordinated and other debt repaid (448) (41) (104)
Net cash inflow/(outflow) from
financing activities 173 319 (9)
Net (decrease)/increase in
cash and cash equivalents -
continuing operations (421) 132 1,121
Net increase/(decrease) in
cash and cash equivalents -
discontinued operations 148 (329) (104)
Effects of exchange rate
changes on cash and cash
equivalents (185) 128 376
Cash and cash equivalents at
beginning of the period 6,154 4,761 4,761
Cash and cash equivalents at
end of the period 5,696 4,692 6,154
Consisting of
Cash and cash equivalents in
the statement of financial position 4,526 3,267 4,132
Mandatory reserve deposits
with central banks 1,073 985 1,079
Short-term cash balances held
in policyholder funds 97 440 522
Cash and cash equivalents
included in assets held for sale - - 421
Total 5,696 4,692 6,154
* The results for the six months ended 30 June 2010 have been restated to
reflect US Life as a discontinued operation (see note A1).
Cash flows presented in this statement include all cash flows relating to
policyholders` funds for life assurance.
Except for mandatory reserve deposits with central banks, short-term cash
balances held in policyholder funds and cash and cash equivalents subject to
consolidation of funds, management do not consider that there are any material
amounts of cash and cash equivalents which are not available for use in the
Group`s day-to-day operations. Mandatory reserve deposits are, however, included
in cash and cash equivalents for the purposes of the cash flow statement in line
with market practice in South Africa.
Consolidated statement of changes in equity
For the six months ended 30 June 2011
GBPm
Millions
Number of Attributable to
shares issued equity holders
Six months ended 30 June 2011 Notes and fully paid of the parent
Shareholders` equity at beginning
of the period 5,695 8,951
Profit after tax for the
financial period - 489
Other comprehensive income
Fair value gains/(losses)
Net investment hedge - (25)
Available-for-sale investments -
Fair value gains - 53
Recycled to the income statement - (10)
Realised on disposal - (157)
Exchange differences realised on disposal - 24
Shadow accounting - (43)
Currency translation
differences/exchange differences on
translating foreign operations - (210)
Other movements - (25)
Income tax relating to components
of other comprehensive income - 9
Total comprehensive income for
the financial period - 105
Dividends for the period C4 - (167)
Net acquisition of treasury shares - (18)
Change in participation in subsidiaries - -
Reclassification of translation
differences on non-controlling interests - 43
Shares issued in lieu of cash dividend 69 92
Exercise of share options 4 3
Other issues of ordinary share
capital by the Company - 1
Change in share-based payments reserve - 21
Transactions with shareholders 73 (25)
Shareholders` equity at end of the period 5,768 9,031
Total
non-controlling Total
Six months ended 30 June 2011 interests equity
Shareholders` equity at beginning of the period 2,523 11,474
Profit after tax for the financial period 143 632
Other comprehensive income
Fair value gains/(losses)
Net investment hedge - (25)
Available-for-sale investments
Fair value gains - 53
Recycled to the income statement - (10)
Realised on disposal - (157)
Exchange differences realised on disposal - 24
Shadow accounting - (43)
Currency translation differences/exchange
differences on translating foreign operations (86) (296)
Other movements (15) (40)
Income tax relating to components of other
comprehensive income - 9
Total comprehensive income for the financial period 42 147
Dividends for the period (84) (251)
Net acquisition of treasury shares - (18)
Change in participation in subsidiaries 50 50
Reclassification of translation differences on
non-controlling interests (43) -
Shares issued in lieu of cash dividend 6 98
Exercise of share options - 3
Other issues of ordinary share capital by the
Company - 1
Change in share-based payments reserve 6 27
Transactions with shareholders (65) (90)
Shareholders` equity at end of the period 2,500 11,531
GBPm
Share Share Other
Six months ended 30 June 2011 capital premium reserves
Notes
Attributable to equity holders of
the parent at
beginning of the period 570 795 3,391
Profit for the financial period
attributable to
equity holders of the parent - - -
Other comprehensive income
Fair value gains/(losses)
Net investment hedge - - -
Available-for-sale investments
Fair value gains - - 53
Recycled to income statement - - (10)
Realised on disposal - (157)
Exchange differences realised on disposal - -
Shadow accounting - - (43)
Currency translation
differences/exchange
differences on translating foreign operations - - -
Other movements - - (42)
Income tax relating to components of other
comprehensive income - - 3
Total comprehensive income for the
financial period - - (196)
Dividends for the period C4 - - -
Net acquisition of treasury shares - - -
Reclassification of translation
differences on non-controlling interests - - -
Shares issued in lieu of cash dividends 7 -
Exercise of share options - 3 -
Other issues of ordinary share
capital by the Company - 1 -
Change in share-based payments reserve - - 21
Transactions with shareholders 7 4 21
Attributable to equity holders of
the parent at end of the period 577 799 3,216
Perpetual
preferred
Translation Retained callable
Six months ended 30 June 2011 reserve earnings securities Total
Attributable to equity
holders of the parent at
beginning of the period 1,176 2,331 688 8,951
Profit for the financial
period attributable to
equity holders of the parent - 473 16 489
Other comprehensive income
Fair value gains/(losses)
Net investment hedge (25) - - (25)
Available-for-sale investments
Fair value gains - - - 53
Recycled to income statement - - - (10)
Realised on disposal - - - (157)
Exchange differences
realised on disposal 24 - - 24
Shadow accounting - - - (43)
Currency translation
differences/exchange
differences on translating
foreign operations (210) - - (210)
Other movements - 17 - (25)
Income tax relating to
components of other
comprehensive income - - 6 9
Total comprehensive income
for the financial period (211) 490 22 105
Dividends for the period - (145) (22) (167)
Net acquisition of treasury shares - (18) - (18)
Reclassification of
translation differences on
non-controlling interests 43 - - 43
Shares issued in lieu of
cash dividends - 85 - 92
Exercise of share options - - - 3
Other issues of ordinary
share capital by the Company - - - 1
Change in share-based
payments reserve - - - 21
Transactions with shareholders 43 (78) (22) (25)
Attributable to equity
holders of the parent at
end of the period 1,008 2,743 688 9,031
GBPm
Other reserves attributable to Available- Property
equity holders of the parent Merger for-sale revaluation
reserve reserve reserve
At beginning of the period 2,845 225 101
Fair value gains/(losses)
Available-for-sale investments
Fair value gains - 53 -
Recycled to income statement - (166) -
Shadow accounting - (43) -
Other movements - - (1)
Income tax relating to components
of other comprehensive income - 3 -
Change in share-based payments reserve - - -
At end of the period 2,845 72 100
Other reserves attributable to Share-based
equity holders of the parent payments Other
reserve reserves Total
At beginning of the period 215 5 3,391
Fair value gains/(losses)
Available-for-sale investments
Fair value gains - - 53
Recycled to income statement (1) - (167)
Shadow accounting - - (43)
Other movements (41) - (42)
Income tax relating to components
of other comprehensive income - - 3
Change in share-based payments reserve 21 - 21
At end of the period 194 5 3,216
Retained earnings were reduced by GBP528 million at 30 June 2011 in respect of
own shares held in policyholders` funds, ESOP trusts, Black Economic Empowerment
trusts and other related undertakings.
GBPm
Millions
Number of Attributable to
shares issued equity holders
Six months ended 30 June 2010 Notes and fully paid of the parent
Shareholders` equity at beginning
of the period 5,518 8,464
Profit after tax for the
financial period - 265
Other comprehensive income
Fair value gains:
Property revaluation - 5
Net investment hedge - (34)
Available-for-sale investments
Fair value gains/(losses) - 473
Recycled to the income statement - (43)
Shadow accounting - (246)
Currency translation
differences/exchange differences
on translating foreign operations - 259
Other movements - 14
Income tax relating to components
of other comprehensive income - (53)
Total comprehensive income for
the financial period - 640
Dividends for the period C4 - (99)
Net acquisition of treasury shares - (29)
Acquisition of non-controlling
interest in Mutual & Federal F1 147 51
Change in participation in
subsidiaries F1 - -
Shares issued in lieu of cash dividend 14 15
Exercise of share options 2 3
Other issues of ordinary share
capital by the Company 1 1
Change in share-based payments reserve - 1
Transactions with shareholders 164 (57)
Shareholders` equity at end of the period 5,682 9,047
Total non-
controlling Total
Six months ended 30 June 2010 interest equity
Shareholders` equity at beginning of the period 2,247 10,711
Profit after tax for the financial period 115 380
Other comprehensive income
Fair value gains:
Property revaluation - 5
Net investment hedge - (34)
Available-for-sale investments
Fair value gains/(losses) (1) 472
Recycled to the income statement - (43)
Shadow accounting - (246)
Currency translation differences/exchange differences on
translating foreign operations 59 318
Other movements (3) 11
Income tax relating to components of other comprehensive income - (53)
Total comprehensive income for the financial period 170 810
Dividends for the period C4 (77) (176)
Net acquisition of treasury shares - (29)
Acquisition of non-controlling interest
in Mutual & Federal F1 (51) -
Change in participation in subsidiaries F1 (81) (81)
Shares issued in lieu of cash dividend - 15
Exercise of share options - 3
Other issues of ordinary share capital by the Company - 1
Change in share-based payments reserve 1 2
Transactions with shareholders (208) (265)
Shareholders` equity at end of the period 2,209 11,256
GBPm
Share Share Other
Six months ended 30 June 2010 Notes capital premium reserves
Attributable to equity holders of
the parent at beginning of the period 552 771 3,087
Profit for the financial period
attributable to equity
holders of the parent - - -
Other comprehensive income
Fair value gains/(losses)
Property revaluation - - 5
Net investment hedge - - -
Available-for-sale investments
Fair value gains - - 473
Recycled to income statement - - (43)
Shadow accounting - - (246)
Currency translation
differences/exchange differences on
translating foreign operations - - -
Other movements - - 7
Income tax relating to components
of other comprehensive income - - (59)
Total comprehensive income for the
financial period - - 137
Dividends for the period C4 - - -
Net acquisition of treasury shares - - -
Acquisition of non-controlling
interest in Mutual & Federal F1 15 - 129
Shares issued in lieu of cash
dividend F1 1 3 -
Exercise of share options - 3 -
Other issues of ordinary share
capital by the Company - 1 -
Change in share-based payments reserve - - 1
Transactions with shareholders 16 7 130
Attributable to equity holders of
the parent at end of the period 568 778 3,354
Perpetual
preferred
Translation Retained callable
Six months ended 30 June 2010 reserve earnings securities Total
Attributable to equity
holders of the parent at beginning
of the period 469 2,897 688 8,464
Profit for the financial
period attributable to equity
holders of the parent - 249 16 265
Other comprehensive income
Fair value gains/(losses)
Property revaluation - - - 5
Net investment hedge (34) - - (34)
Available-for-sale investments
Fair value gains - - - 473
Recycled to income statement - - - (43)
Shadow accounting - - - (246)
Currency translation
differences/exchange
differences on
translating foreign operations 259 - - 259
Other movements - 7 - 14
Income tax relating to
components of other
comprehensive income - - 6 (53)
Total comprehensive income
for the financial period 225 256 22 640
Dividends for the period - (77) (22) (99)
Net acquisition of treasury shares - (29) - (29)
Acquisition of non-controlling
interest in Mutual & Federal - (93) - 51
Shares issued in lieu of
cash dividend - 11 - 15
Exercise of share options - - - 3
Other issues of ordinary
share capital by the Company - - - 1
Change in share-based payments reserve - - - 1
Transactions with shareholders - (188) (22) (57)
Attributable to equity
holders of the parent at end
of the period 694 2,965 688 9,047
Other reserves attributable to equity holders of the parent
GBPm
Available- Property
Merger for-sale revaluation
reserve reserve reserve
At beginning of the period 2,716 82 87
Fair value gains/(losses)
Property revaluation - - 5
Available-for-sale investments
Fair value gains - 473 -
Recycled to income statement - (43) -
Shadow accounting - (241) (5)
Other movements - - (1)
Income tax relating to
components of other
comprehensive income - (59) -
Acquisition of non-controlling
interest in Mutual & Federal F1 129 - -
Change in share-based payments
reserve - - -
At end of the period 2,845 212 86
Share-
based
payments Other
reserve reserves Total
At beginning of the period 191 11 3,087
Fair value gains/(losses)
Property revaluation - - 5
Available-for-sale investments
Fair value gains - - 473
Recycled to income statement - - (43)
Shadow accounting - - (246)
Other movements 8 - 7
Income tax relating to components of other
comprehensive income - - (59)
Acquisition of non-controlling interest in
Mutual & Federal F1 - - 129
Change in share-based payments reserve 1 - 1
At end of the period 200 11 3,354
Retained earnings were reduced by GBP381 million at 30 June 2010 in respect of
own shares held in policyholders` funds, ESOP trusts, Black Economic Empowerment
trusts and other related undertakings.
GBPm
Millions
Number of Attributable to
shares issued equity holders
Year ended 31 December 2010 Notes and fully paid of the parent
Shareholders` equity at beginning
of the year 5,518 8,464
(Loss)/profit after tax for the
financial year - (282)
Other comprehensive income
Fair value gains/(losses)
Property revaluation - 21
Net investment hedge - (87)
Available-for-sale investments
Fair value gains - 562
Recycled to the income statement - (12)
Shadow accounting - (349)
Currency translation
differences/exchange differences
on translating foreign operations - 794
Other movements - 1
Income tax relating to components
of other comprehensive income - (54)
Total comprehensive income for
the financial year - 594
Dividends for the year C4 - (175)
Net acquisition of treasury shares - (25)
Acquisition of non-controlling
interest in Mutual & Federal F1 147 51
Change in participation in
subsidiaries F1 - -
Shares issued in lieu of cash
dividend 24 30
Exercise of share options 6 5
Other issues of ordinary share
capital by the Company - 3
Change in share-based payments reserve - 4
Transactions with shareholders 177 (107)
Shareholders` equity at end of the year 5,695 8,951
Total
non-controlling Total
Year ended 31 December 2010 interests equity
Shareholders` equity at beginning of the year 2,247 10,711
(Loss)/profit after tax for the financial year 258 (24)
Other comprehensive income
Fair value gains/(losses)
Property revaluation 5 26
Net investment hedge - (87)
Available-for-sale investments
Fair value gains - 562
Recycled to the income statement - (12)
Shadow accounting - (349)
Currency translation differences/exchange
differences on translating foreign operations 274 1,068
Other movements (4) (3)
Income tax relating to components of other
comprehensive income - (54)
Total comprehensive income for the financial year 533 1,127
Dividends for the year C4 (152) (327)
Net acquisition of treasury shares - (25)
Acquisition of non-controlling interest in Mutual & Federal F1 (51) -
Change in participation in subsidiaries F1 (57) (57)
Shares issued in lieu of cash dividend - 30
Exercise of share options - 5
Other issues of ordinary share capital by the Company - 3
Change in share-based payments reserve 3 7
Transactions with shareholders (257) (364)
Shareholders` equity at end of the year 2,523 11,474
GBPm
Share Share Other
Year ended 31 December 2010 Notes capital premium reserves
Attributable to equity holders of
the parent at beginning of the year 552 771 3,087
(Loss)/profit for the financial year
attributable to equity holders of the parent - - -
Other comprehensive income
Fair value gains/(losses)
Property revaluation - - 21
Net investment hedge - - -
Available-for-sale investments
Fair value gains - - 562
Recycled to income statement - - (12)
Shadow accounting - - (349)
Currency translation differences/exchange
differences on translating foreign operations - - -
Other movements - - 15
Income tax relating to components
of other comprehensive income - - (66)
Total comprehensive income for the
financial year - - 171
Dividends for the year C4 - - -
Net acquisition of treasury shares - - -
Acquisition of non-controlling
interest in Mutual & Federal F1 15 - 129
Shares issued in lieu of cash
dividends 2 17 -
Exercise of share options 1 4 -
Other issue of ordinary share
capital by the Company - 3 -
Change in share-based payments reserve - - 4
Transactions with shareholders 18 24 133
Attributable to equity holders of
the parent at end of the year 570 795 3,391
Perpetual
preferred
Translation Retained callable
Year ended 31 December 2010 reserve earnings securities Total
Attributable to equity
holders of the parent at
beginning of the year 469 2,897 688 8,464
(Loss)/profit for the
financial year
attributable to equity
holders of the parent - (314) 32 (282)
Other comprehensive income
Fair value gains/(losses)
Property revaluation - - - 21
Net investment hedge (87) - - (87)
Available-for-sale investments
Fair value gains - - - 562
Recycled to income statement - - - (12)
Shadow accounting - - - (349)
Currency translation
differences/exchange
differences on translating
foreign operations 794 - - 794
Other movements - (14) - 1
Income tax relating to
components of other
comprehensive income - - 12 (54)
Total comprehensive income
for the financial year 707 (328) 44 594
Dividends for the year C4 - (131) (44) (175)
Net acquisition of treasury shares - (25) - (25)
Acquisition of
non-controlling interest in
Mutual & Federal - (93) - 51
Shares issued in lieu of
cash dividends - 11 - 30
Exercise of share options - - - 5
Other issue of ordinary
share capital by the Company - - - 3
Change in share-based
payments reserve - - - 4
Transactions with shareholders - (238) (44) (107)
Attributable to equity
holders of the parent at
end of the year 1,176 2,331 688 8,951
Other reserves attributable to equity holders of the parent
GBPm
Available- Property
Merger for-sale revaluation
reserve reserve reserve
At beginning of the year 2,716 82 87
Fair value gains/(losses)
Property revaluation - - 21
Available-for-sale investments
Fair value gains - 562 -
Recycled to income statement - (12) -
Shadow accounting - (343) (6)
Other movements - 2 (1)
Income tax relating to
components of other
comprehensive income - (66) -
Acquisition of non-controlling
interest in Mutual & Federal F1 129 - -
Change in share-based payments reserve - - -
At end of the year 2,845 225 101
Share-
based
payments Other
reserve reserves Total
At beginning of the year 191 11 3,087
Fair value gains/(losses)
Property revaluation - - 21
Available-for-sale investments
Fair value gains - - 562
Recycled to income statement - - (12)
Shadow accounting - - (349)
Other movements 20 (6) 15
Income tax relating to components of other
comprehensive income - - (66)
Acquisition of non-controlling interest in
Mutual & Federal - - 129
Change in share-based payments reserve 4 - 4
At end of the year 215 5 3,391
Retained earnings were reduced by GBP478 million at 31 December 2010 in respect
of own shares held in policyholders` funds, ESOP trusts, Black Economic
Empowerment trusts and other related undertakings.
Notes to the consolidated financial statements
For the six months ended 30 June 2011
A Accounting policies
A1 Basis of preparation
The Group financial information contained herein has been prepared in accordance
with the recognition and measurement principles of International Financial
Reporting Standards adopted by the EU and in accordance with the requirements of
IAS 34 `Interim Financial Reporting`. The Group`s results for the six months
ended 30 June 2011 and the position at that date have been prepared using
accounting policies consistent with those applied in the preparation of the
Group`s 2010 Annual Report and Accounts.
The Group financial information has been prepared on the going concern basis
which the directors believe appropriate having tak en into consideration the
matters discussed in the Group Finance Director`s Review in the section headed
Risk and Uncertainties.
The comparative figures for the financial year ended 31 December 2010 are not
the Company`s statutory accounts for that financial year. Those accounts have
been reported on by the Company`s auditors and delivered to the Registrar of
Companies. The report of the auditors was (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a statement
under section 498(2) or (3) of the Companies Act 2006.
As previously reported the Group was in advanced stage negotiations at 31
December 2010 for the disposal of its life assurance operations in the United
States, which represented almost the entirety of the US Life operating segment.
Following US regulatory approval the disposal of US Life was completed on 7
April 2011. The sale represented the Group`s exit from the life assurance market
in the United States and therefore met the criteria of a discontinued operation.
Consequently the comparative information in the income statement, statement of
comprehensive income, statement of cash flows and the related notes has been
restated where applicable to reflect this. For the purposes of adjusted
operating profit, US Life is classified as a non-core operation for the six
months ended 30 June 2011. In preparing the comparative information for the six
months ended June 2011 this has required restatement of the published
comparatives. The statement of financial position at 30 June 2010 has not
required restatement as US Life was not considered held for sale at that point
in time. Comparative information for the year ended 31 December 2010 has not
required restatement as the US Life operations were already classified as non-
core and discontinued at the time of reporting full-year results for that
period. Details of the impact are provided in notes G1 and G2.
In preparing the consolidated financial statements for the six months ended 30
June 2011 the Emerging Markets business has included its Namibian business but
excluded all other African businesses on the basis of their size and political
uncertainties related to the ability to access economic benefits. This is
consistent with prior periods but will be reconsidered for the full year.
Nedbank and Mutual & Federal consolidate the results of all African businesses
under their control.
B Segment information
B1 Basis of segmentation
The Group`s core operations are Emerging Markets, Nordic, Retail Europe and
Wealth Management (collectively Long Term Savings), Nedbank, Mutual & Federal,
US Asset Management and Other (including the Group head office functions). The
Bermuda business is regarded as non-core. This is consistent with the manner in
which management and the Board of Directors considers information when making
operating decisions and is the basis on which resources are allocated and
performance assessed by management and the Board of Directors. It is consistent
with that reported in the previous financial year. This information is presented
to the Board in local currency but in preparing these financial statements has
been presented in pounds sterling, the presentation currency of the Group. As
detailed above US Life is classified as discontinued and as a result also non-
core with the comparative segment information restated accordingly, resulting in
a reduction in adjusted operating profit before tax and non-controlling
interests of GBP14 million for the six months ended 30 June 2011. The Group
generates revenue from four principal business activities: life assurance, asset
management, banking and general insurance. The types of products and services
from which each operating segment derives its revenues are as follows:
Core operations
Long Term Savings
- Emerging Markets - life assurance and asset management
- Nordic - life assurance, asset management and banking
- Retail Europe - life assurance and asset management
- Wealth Management - life assurance and asset management
Other core operations
- Nedbank - banking and asset management
- Mutual & Federal - general insurance
- US Asset Management - asset management
- Other - other operating segments and business activities
Non-core operations
Non-core operations comprise Bermuda and, up until completion of disposal, US
Life, with both businesses engaged in life assurance.
Consolidation adjustments
Adjusted operating profit is one of the key measures reported to the Group`s
management and Board of Directors for their consideration in the allocation of
resources to and the review of performance of the segments. The Group utilises
additional measures to assess the performance of each of the segments, in
particular the level of net client cash flow and funds under management.
Additional performance measures considered by management and the Board of
Directors in assessing the performance of the segments can be found in the
Market Consistent Embedded Value supplementary information.
Performance measures
In the analysis that follows, consolidation adjustments include the elimination
of inter-segment revenues, expenses, assets and liabilities together with the
impacts of the consolidation of the Group`s interest in unit trusts, mutual
funds and similar entities.
B2 Adjusted operating profit statement - segment information six months ended 30
June 2011
GBPm
Long Term Savings
Emerging Retail
Markets Nordic Europe
Revenue
Gross earned premiums 1,321 65 14
Outward reinsurance (44) (4) (4)
Net earned premiums 1,277 61 10
Investment return (non-banking) 1,006 (366) (55)
Banking interest and similar income - 113 -
Banking trading, investment and similar income - (2) -
Fee and commission income, and income from
service activities 198 135 101
Other income 32 4 1
Inter-segment revenues 28 11 3
Total revenues 2,541 (44) 60
Expenses
Claims and benefits (including change in
insurance contract provisions) (1,327) (51) (11)
Reinsurance recoveries 47 4 1
Net claims and benefits incurred (1,280) (47) (10)
Change in investment contract liabilities (324) 417 61
Losses on loans and advances - (2) (1)
Finance costs (including interest and similar
expenses) - - -
Banking interest payable and similar expenses - (61) -
Fee and commission expenses, and other
acquisition costs (103) (33) (43)
Other operating and administrative expenses (508) (141) (43)
Change in third party interest in consolidated
funds - - -
Amortisation of PVIF and other acquired intangibles - - -
Income tax attributable to policyholder returns (28) (27) -
Inter-segment expenses (1) - (2)
Total expenses (2,244) 106 (38)
Share of associated undertakings` profit/(loss)
after tax 2 (2) -
Loss on disposal of subsidiaries, associated
undertakings and strategic investments - - -
Adjusted operating profit/(loss) before tax and
non-controlling interests 299 60 22
Income tax (expense)/credit (65) (2) (7)
Non-controlling interests - - -
Adjusted operating profit/(loss) after tax and
non-controlling interests 234 58 15
Adjusting items net of tax and non-controlling
interests (41) (27) (15)
Profit/(loss) after tax from continuing operations 193 31 -
Profit from discontinued operations after tax - - -
Profit/(loss) after tax attributable to equity
holders of the parent 193 31 -
Total
Wealth Long Term
Management Savings
Revenue
Gross earned premiums 169 1,569
Outward reinsurance (40) (92)
Net earned premiums 129 1,477
Investment return (non-banking) 184 769
Banking interest and similar income - 113
Banking trading, investment and similar income - (2)
Fee and commission income, and income from service
activities 493 927
Other income 8 45
Inter-segment revenues 2 44
Total revenues 816 3,373
Expenses
Claims and benefits (including change in insurance
contract provisions) (136) (1,525)
Reinsurance recoveries 38 90
Net claims and benefits incurred (98) (1,435)
Change in investment contract liabilities (167) (13)
Losses on loans and advances - (3)
Finance costs (including interest and similar expenses) - -
Banking interest payable and similar expenses - (61)
Fee and commission expenses, and other acquisition costs (268) (447)
Other operating and administrative expenses (173) (865)
Change in third party interest in consolidated funds - -
Amortisation of PVIF and other acquired intangibles - -
Income tax attributable to policyholder returns 4 (51)
Inter-segment expenses (21) (24)
Total expenses (723) (2,899)
Share of associated undertakings` profit/(loss) after tax - -
Loss on disposal of subsidiaries, associated
undertakings and strategic investments - -
Adjusted operating profit/(loss) before tax and
non-controlling interests 93 474
Income tax (expense)/credit (13) (87)
Non-controlling interests - -
Adjusted operating profit/(loss) after tax and
non-controlling interests 80 387
Adjusting items net of tax and non-controlling interests (42) (125)
Profit/(loss) after tax from continuing operations 38 262
Profit from discontinued operations after tax - -
Profit/(loss) after tax attributable to equity holders
of the parent 38 262
B2 Adjusted operating profit statement - segment information six months ended 30
June 2010 (restated) continued
Consolidation
Nedbank M&F USAM Other adjustments
- 375 - - -
- (75) - - -
- 300 - - -
- 28 8 28 89
1,881 - - - -
105 - - - -
515 16 223 - -
20 - 6 - 13
13 10 3 7 (88)
2,534 354 240 35 14
- (212) - - -
- 18 - - -
- (194) - - -
- - - - -
(250) - - - -
- - - (60) -
(1,089) - - - -
(1) (55) (6) - (23)
(806) (46) (187) (39) (13)
- - - - (66)
- - - - -
- - - - -
(29) (12) - (22) 88
(2,175) (307) (193) (121) (14)
- - - 4 -
- - - - -
359 47 47 (82) -
(93) (11) (10) 10 -
(128) (4) - (19) -
138 32 37 (91) -
6 (8) (5) (33) -
144 24 32 (124) -
- - - - -
144 24 32 (124) -
Adjusted Adjusting
operating items Non-core IFRS Income
profit (Note C1) operations* statement
1,944 - - 1,944
(167) - - (167)
1,777 - - 1,777
922 (86) 7 843
1,994 - - 1,994
103 - - 103
1,681 (46) - 1,635
84 - 10 94
(11) - 11 -
6,550 (132) 28 6,446
(1,737) - 36 (1,701)
108 - - 108
(1,629) - 36 (1,593)
(13) - - (13)
(253) - - (253)
(60) (25) - (85)
(1,150) (4) - (1,154)
(532) 65 (29) (496)
(1,956) 1 (11) (1,966)
(66) - - (66)
- (117) - (117)
(51) 51 - -
1 - (1) -
(5,709) (29) (5) (5,743)
4 - - 4
- - - -
845 (161) 23 707
(191) (12) (2) (205)
(151) 8 - (143)
503 (165) 21 359
(165) 165 - -
338 - 21 359
- - 130 130
338 - 151 489
* Non-core operations relates to Bermuda with the exception of GBP(4) million of
inter-segment revenue and expenses and the profit from discontinued operations
after tax, with these reflecting the results of US Life which has been
classified as a discontinued operation as detailed in notes A1 and B1. Bermuda
profit after tax for the six months ended 30 June 2011 was GBP25 million.
Further detail on the results of discontinued operations is provided in note G1.
B2 Adjusted operating profit statement - segment information six months ended 30
June 2010 (restated)
GBPm
Long Term Savings
Emerging Retail
Markets Nordic Europe
Revenue
Gross earned premiums 1,111 61 13
Outward reinsurance (35) (3) (4)
Net earned premiums 1,076 58 9
Investment return (non-banking) 541 190 238
Banking interest and similar income - 79 (1)
Banking trading, investment and similar income - - -
Fee and commission income, and income from
service activities 180 114 99
Other income 20 9 -
Inter-segment revenues 32 9 2
Total revenues 1,849 459 347
Expenses
Claims and benefits (including change in
insurance contract provisions) (891) (41) (14)
Reinsurance recoveries 44 - 2
Net claims and benefits incurred (847) (41) (12)
Change in investment contract liabilities (201) (141) (231)
Losses on loans and advances - (2) (1)
Finance costs (including interest and similar
expenses) - - -
Banking interest payable and similar expenses - (36) -
Fee and commission expenses, and other
acquisition costs (99) (29) (37)
Other operating and administrative expenses (436) (128) (40)
Change in third party interest in consolidated funds - - -
Amortisation of PVIF and other acquired intangibles - - -
Income tax attributable to policyholder returns 8 (24) -
Inter-segment expenses (5) (1) (1)
Total expenses (1,580) (402) (322)
Share of associated undertakings` profit after tax - 1 -
Loss on disposal of subsidiaries, associated
undertakings and strategic investments - - -
Adjusted operating profit/(loss) before tax and
non-controlling interests 269 58 25
Income tax (expense)/credit (61) (13) (7)
Non-controlling interests - - -
Adjusted operating profit/(loss) after tax and
non-controlling interests 208 45 18
Adjusting items net of tax and non-controlling
interests (19) (39) (15)
Profit/(loss) after tax from continuing operations 189 6 3
Profit from discontinued operations after tax - - -
Profit/(loss) after tax attributable to equity
holders of the parent 189 6 3
Total Long
Wealth Term
Management Savings
Revenue
Gross earned premiums 163 1,348
Outward reinsurance (38) (80)
Net earned premiums 125 1,268
Investment return (non-banking) 358 1,327
Banking interest and similar income - 78
Banking trading, investment and similar income - -
Fee and commission income, and income from service
activities 433 826
Other income 6 35
Inter-segment revenues 3 46
Total revenues 925 3,580
Expenses
Claims and benefits (including change in insurance
contract provisions) (151) (1,097)
Reinsurance recoveries 38 84
Net claims and benefits incurred (113) (1,013)
Change in investment contract liabilities (303) (876)
Losses on loans and advances - (3)
Finance costs (including interest and similar expenses) - -
Banking interest payable and similar expenses - (36)
Fee and commission expenses, and other acquisition costs (223) (388)
Other operating and administrative expenses (186) (790)
Change in third party interest in consolidated funds - -
Amortisation of PVIF and other acquired intangibles - -
Income tax attributable to policyholder returns 16 -
Inter-segment expenses (21) (28)
Total expenses (830) (3,134)
Share of associated undertakings` profit after tax - 1
Loss on disposal of subsidiaries, associated
undertakings and strategic investments - -
Adjusted operating profit/(loss) before tax and
non-controlling interests 95 447
Income tax (expense)/credit (11) (92)
Non-controlling interests - -
Adjusted operating profit/(loss) after tax and
non-controlling interests 84 355
Adjusting items net of tax and non-controlling interests (45) (118)
Profit/(loss) after tax from continuing operations 39 237
Profit from discontinued operations after tax - -
Profit/(loss) after tax attributable to equity
holders of the parent 39 237
B2 Adjusted operating profit statement - segment information year ended 31
December 2010 continued
Consolidation
Nedbank M&F USAM Other adjustments
- 352 - - -
- (67) - - -
- 285 - - -
- 25 (2) 35 (2)
1,927 - - - -
82 - - - -
408 11 231 - (5)
50 1 6 - 4
10 12 2 16 (95)
2,477 334 237 51 (98)
- (233) - - -
- 34 - - -
- (199) - - -
- - - - -
(282) - - - -
- - - (68) -
(1,207) - - - -
(2) (53) (9) - (19)
(688) (42) (188) (33) (6)
- - - - 28
- - - - -
- - - - -
(32) (8) - (22) 95
(2,211) (302) (197) (123) 98
- 1 - - -
- - - - -
33 40 (72) -
266
(53) (8) (4) 2 -
(106) (1) - (19) -
107 24 36 (89) -
6 (19) (17) (75) -
113 5 19 (164) -
- - - - -
113 5 19 (164) -
Adjusted Adjusting
operating items Non-core IFRS Income
profit (Note C1) operations* statement
1,700 - - 1,700
(147) - - (147)
1,553 - - 1,553
1,383 (71) (38) 1,274
2,005 - - 2,005
82 - - 82
1,471 (51) - 1,420
96 - 11 107
(9) (2) 11 -
6,581 (124) (16) 6,441
(1,330) - (21) (1,351)
118 - - 118
(1,212) - (21) (1,233)
(876) - - (876)
(285) - - (285)
(68) (59) - (127)
(1,243) (9) - (1,252)
(471) 77 (12) (406)
(1,747) 22 (11) (1,736)
28 - - 28
- (145) - (145)
- - - -
5 - (5) -
(5,869) (114) (49) (6,032)
2 - - 2
- (22) - (22)
714 (260) (65) 389
(155) 26 - (129)
(126) 11 - (115)
433 (223) (65) 145
(223) 223 - -
210 - (65) 145
- - 120 120
210 - 55 265
* Non-core operations relates to Bermuda with the exception of GBP(11) million
of inter-segment revenue and expenses and the profit from discontinued
operations after tax, with these reflecting the results of US Life which has
been classified as a discontinued operation as detailed in notes A1 and B1.
Bermuda loss after tax for the six months ended 30 June 2010 was GBP(54)
million. Further detail on the results of discontinued operations is provided in
note G1.
B2 Adjusted operating profit statement - segment information year ended 31
December 2010
GBPm
Long Term Savings
Emerging Retail
Markets Nordic Europe
Revenue
Gross earned premiums 2,353 122 28
Outward reinsurance (72) (5) (8)
Net earned premiums 2,281 117 20
Investment return (non-banking) 4,072 1,144 392
Banking interest and similar income - 169 -
Banking trading, investment and similar income - 5 -
Fee and commission income, and income from
service activities 372 238 198
Other income 72 8 -
Inter-segment revenues 54 20 5
Total revenues 6,851 1,701 615
Expenses
Claims and benefits (including change in
insurance contract provisions) (3,943) (83) (25)
Reinsurance recoveries 83 5 5
Net claims and benefits incurred (3,860) (78) (20)
Change in investment contract liabilities (1,261) (1,066) (382)
Losses on loans and advances - (4) (1)
Finance costs (including interest and similar
expenses) - - -
Banking interest payable and similar expenses - (78) -
Fee and commission expenses, and other
acquisition costs (219) (62) (75)
Other operating and administrative expenses (941) (255) (84)
Change in third party interest in consolidated
funds - - -
Amortisation of PVIF and other acquired
intangibles - - -
Income tax attributable to policyholder returns (32) (48) -
Inter-segment expenses (2) (2) (2)
Total expenses (6,315) (1,593) (564)
Share of associated undertakings`
profit/(loss) after tax 3 2 -
Loss on disposal of subsidiaries, associated
undertakings and strategic investments - - -
Adjusted operating profit/(loss) before tax
and non-controlling interests 539 110 51
Income tax (expense)/credit (146) (20) (13)
Non-controlling interests (1) - -
Adjusted operating profit/(loss) after tax and
non-controlling interests 392 90 38
Adjusting items net of tax and non-controlling
interests (1) (87) (25)
Profit/(loss) after tax from continuing
operations 391 3 13
Loss from discontinued operations after tax - - -
Profit/(loss) after tax attributable to equity
holders of the parent 391 3 13
Total
Wealth Long Term
Management Savings
Revenue
Gross earned premiums 351 2,854
Outward reinsurance (79) (164)
Net earned premiums 272 2,690
Investment return (non-banking) 4,409 10,017
Banking interest and similar income - 169
Banking trading, investment and similar income - 5
Fee and commission income, and income from service
activities 912 1,720
Other income 11 91
Inter-segment revenues 12 91
Total revenues 5,616 14,783
Expenses
Claims and benefits (including change in insurance
contract provisions) (303) (4,354)
Reinsurance recoveries 75 168
Net claims and benefits incurred (228) (4,186)
Change in investment contract liabilities (4,190) (6,899)
Losses on loans and advances - (5)
Finance costs (including interest and similar expenses) - -
Banking interest payable and similar expenses - (78)
Fee and commission expenses, and other acquisition costs (500) (856)
Other operating and administrative expenses (390) (1,670)
Change in third party interest in consolidated funds - -
Amortisation of PVIF and other acquired intangibles - -
Income tax attributable to policyholder returns (69) (149)
Inter-segment expenses (43) (49)
Total expenses (5,420) (13,892)
Share of associated undertakings` profit/(loss) after tax 1 6
Loss on disposal of subsidiaries, associated
undertakings and strategic investments - -
Adjusted operating profit/(loss) before tax and
non-controlling interests 197 897
Income tax (expense)/credit (44) (223)
Non-controlling interests - (1)
Adjusted operating profit/(loss) after tax and
non-controlling interests 153 673
Adjusting items net of tax and non-controlling interests (140) (253)
Profit/(loss) after tax from continuing operations 13 420
Loss from discontinued operations after tax - -
Profit/(loss) after tax attributable to equity
holders of the parent 13 420
B2 Adjusted operating profit statement - segment information year ended 31
December 2010 continued
Consolidation
Nedbank M&F USAM Other adjustments
- 728 - - -
- (140) - - -
- 588 - - -
- 56 16 61 435
3,913 - - - -
199 - - - -
946 28 465 1 -
35 - 9 (1) 3
20 20 4 29 (207)
5,113 692 494 90 231
- (436) - - -
- 58 - - -
- (378) - - -
- - - - -
(548) - - 1 -
- - - (128) -
(2,422) - - - -
(3) (109) (23) - (36)
(1,485) (83) (384) (93) (14)
- - - - (388)
- - - - -
- - - - -
(54) (20) - (77) 207
(4,512) (590) (407) (297) (231)
- 1 - - -
- - - - -
601 103 87 (207) -
(128) (24) (17) 45 -
(232) (5) - (41) -
241 74 70 (203) -
10 (11) (20) (151) -
251 63 50 (354) -
- - - - -
251 63 50 (354) -
Adjusted Adjusting
operating items Non-core IFRS Income
profit (Note C1) operations* statement
3,582 - - 3,582
(304) - (1) (305)
3,278 - (1) 3,277
10,585 (93) 299 10,791
4,082 - - 4,082
204 - - 204
3,160 (99) - 3,061
137 - 22 159
(43) - 43 -
21,403 (192) 363 21,574
(4,790) - (249) (5,039)
226 - 1 227
(4,564) - (248) (4,812)
(6,899) - - (6,899)
(552) - - (552)
(128) (141) - (269)
(2,500) (19) - (2,519)
(1,027) 149 (85) (963)
(3,729) 40 (26) (3,715)
(388) - - (388)
- (297) - (297)
(149) 149 - -
7 - (7) -
(19,929) (119) (366) (20,414)
7 - - 7
- (22) - (22)
1,481 (333) (3) 1,145
(347) (113) 4 (456)
(279) 21 - (258)
855 (425) 1 431
(425) 425 - -
430 - 1 431
- - (713) (713)
430 - (712) (282)
* Non-core operations relates to Bermuda with the exception of GBP(21) million
of inter-segment revenue and expenses and the loss from discontinued operations
after tax, with these reflecting the results of US Life which has been
classified as a discontinued operation as detailed in notes A1 and B1. Bermuda
profit after tax for the year ended 31 December 2010 was GBP22 million. Further
detail on the results of discontinued operations is provided in note G1.
B3 Gross earned premiums
GBPm
Long Term Savings
Emerging Retail
Six months ended 30 June 2011 Markets Nordic Europe
Life assurance - insurance contracts 819 65 14
Life assurance - investment contracts with
discretionary participation features 502 - -
General insurance - - -
Gross earned premiums 1,321 65 14
Life assurance - other investment contracts
recognised as deposits 1,030 627 318
Total
Wealth Long Term
Six months ended 30 June 2011 Management Savings
Life assurance - insurance contracts 169 1,067
Life assurance - investment contracts with
discretionary participation features - 502
General insurance - -
Gross earned premiums 169 1,569
Life assurance - other investment contracts
recognised as deposits 3,000 4,975
Total -
Total core Non-core continuing
Nedbank M&F USAM operations operations operations
- - - 1,067 - 1,067
- - - 502 - 502
- 375 - 375 - 375
- 375 - 1,944 - 1,944
- - - 4,975 - 4,975
GBPm
Long Term Savings
Emerging Retail
Markets Nordic Europe
Six months ended 30 June 2010
Life assurance - insurance contracts 726 61 13
Life assurance - investment contracts with
discretionary participation features 385 - -
General insurance - - -
Gross earned premiums 1,111 61 13
Life assurance - other investment contracts
recognised as deposits 983 561 365
Total
Wealth Long Term
Management Savings
Six months ended 30 June 2010
Life assurance - insurance contracts 163 963
Life assurance - investment contracts with
discretionary participation features - 385
General insurance - -
Gross earned premiums 163 1,348
Life assurance - other investment contracts
recognised as deposits 3,489 5,398
Total -
continuing
Total core Non-core operations
Nedbank M&F USAM operations operations Restated
- - - 963 - 963
- - - 385 - 385
- 352 - 352 - 352
- 352 - 1,700 - 1,700
- - - 5,398 - 5,398
GBPm
Long Term Savings
Emerging Retail
Year ended 31 December 2010 Markets Nordic Europe
Life assurance - insurance contracts 1,498 122 28
Life assurance - investment contracts with
discretionary participation features 855 - -
General insurance - - -
Gross earned premiums 2,353 122 28
Life assurance - other investment contracts
recognised as deposits 1,829 1,040 656
Total
Wealth Long Term
Year ended 31 December 2010 Management Savings
Life assurance - insurance contracts 351 1,999
Life assurance - investment contracts with
discretionary participation features - 855
General insurance - -
Gross earned premiums 351 2,854
Life assurance - other investment contracts
recognised as deposits 6,287 9,812
Total -
Total core Non-core continuing
Nedbank M&F USAM operations operations operations
- - - 1,999 - 1,999
- - - 855 - 855
- 728 - 728 - 728
- 728 - 3,582 - 3,582
- - - 9,812 - 9,812
B4 Impairments of financial assets
GBPm
6 months 6 months Year
ended ended ended
30 June 2011 30 June 2010 31 December 2010
Nordic - 3 4
Total Long Term Savings - 3 4
Nedbank 22 282 547
Total 22 285 551
B5 Funds under management
GBPm
Long Term Savings
Emerging Retail
As at 30 June 2011 Markets Nordic Europe
Life assurance policyholder funds 29,570 11,923 4,529
Unit trusts and mutual funds 10,475 1,640 387
Third party client funds 10,757 - -
Total client funds under management 50,802 13,563 4,916
Shareholder funds 2,764 483 255
Total funds under management 53,566 14,046 5,171
Total
Wealth Long Term
As at 30 June 2011 Management Savings
Life assurance policyholder funds 41,062 87,084
Unit trusts and mutual funds 15,625 28,127
Third party client funds - 10,757
Total client funds under management 56,687 125,968
Shareholder funds 1,023 4,525
Total funds under management 57,710 130,493
Nedbank M&F USAM Total core Non-core
operations operations Total
868 - 3,444 91,396 2,459 93,855
5,697 - 4,813 38,637 - 38,637
3,977 - 153,104 167,838 - 167,838
10,542 - 161,361 297,871 2,459 300,330
- 200 228 4,953 - 4,953
10,542 200 161,589 302,824 2,459 305,283
GBPm
Long Term Savings
Emerging Retail
As at 30 June 2010 Markets Nordic Europe
Life assurance policyholder funds 25,636 9,509 3,731
Unit trusts and mutual funds 8,677 1,465 370
Third party client funds 9,469 - -
Total client funds under management 43,782 10,974 4,101
Shareholder funds 2,370 408 199
Total funds under management 46,152 11,382 4,300
Total
Wealth Long Term
As at 30 June 2010 Management Savings
Life assurance policyholder funds 35,636 74,512
Unit trusts and mutual funds 12,239 22,751
Third party client funds - 9,469
Total client funds under management 47,875 106,732
Shareholder funds 899 3,876
Total funds under management 48,774 110,608
Total core Non-core
Nedbank M&F USAM operations operations Total
711 - 7,667 82,890 9,935 92,825
4,341 - 3,992 31,084 - 31,084
3,973 - 150,706 164,148 - 164,148
9,025 - 162,365 278,122 9,935 288,057
- 171 192 4,239 - 4,239
9,025 171 162,557 282,361 9,935 292,296
GBPm
Long Term Savings
Emerging Retail
As at 31 December 2010 Markets Nordic Europe
Life assurance policyholder funds 31,750 11,722 4,317
Unit trusts and mutual funds 10,613 1,800 398
Third party client funds 11,732 - -
Total client funds under management 54,095 13,522 4,715
Shareholder funds 2,882 431 245
Total funds under management 56,977 13,953 4,960
Total
Wealth Long Term
As at 31 December 2010 Management Savings
Life assurance policyholder funds 40,401 88,190
Unit trusts and mutual funds 14,525 27,336
Third party client funds - 11,732
Total client funds under management 54,926 127,258
Shareholder funds 958 4,516
Total funds under management 55,884 131,774
Total core Non-core
Nedbank M&F USAM operations operations Total
846 - 3,846 92,882 13,489 106,371
5,713 - 4,974 38,023 - 38,023
4,164 - 157,555 173,451 - 173,451
10,723 - 166,375 304,356 13,489 317,845
- 210 226 4,952 - 4,952
10,723 210 166,601 309,308 13,489 322,797
B6 Statement of financial position - segment information at 30 June 2011
GBPm
Long Term Savings
Emerging Retail
At 30 June 2011 Markets Nordic Europe
Assets
Goodwill and other intangible assets 125 981 530
Mandatory reserve deposits with central banks - - -
Property, plant and equipment 357 10 4
Investment property 1,610 - -
Deferred tax assets 83 83 28
Investments in associated undertakings and
joint ventures 24 4 -
Deferred acquisition costs 130 77 345
Reinsurers` share of life assurance
policyholder liabilities 34 15 7
Reinsurers` share of general insurance
liabilities - - -
Loans and advances 419 5,521 1
Investments and securities 33,130 13,851 4,692
Current tax receivable 11 1 14
Client indebtedness for acceptances - - -
Trade, other receivables and other assets 986 161 66
Derivative financial instruments - assets 527 11 -
Cash and cash equivalents 217 538 88
Non-current assets held for sale - - -
Inter-segment assets 1,189 207 64
Total assets 38,842 21,460 5,839
Liabilities
Life assurance policyholder liabilities 33,816 12,465 4,692
General insurance liabilities - - -
Third-party interests in consolidated funds - - -
Borrowed funds 276 2 -
Provisions 157 (46) 5
Deferred revenue 18 2 225
Deferred tax liabilities 235 102 111
Current tax payable 104 35 19
Trade, other payables and other liabilities 1,903 237 76
Liabilities under acceptances - - -
Amounts owed to bank depositors - 6,769 -
Derivative financial instruments - liabilities 162 9 -
Inter-segment liabilities 163 - 3
Total liabilities 36,834 19,575 5,131
Net assets 2,008 1,885 708
Equity
Equity attributable to equity holders of the
parent 2,007 1,885 708
Non-controlling interests 1 - -
Non-controlling interests - ordinary shares 1 - -
Non-controlling interests - preference shares - - -
Total equity 2,008 1,885 708
Total
Wealth Long Term
At 30 June 2011 Management Savings
Assets
Goodwill and other intangible assets 1,412 3048
Mandatory reserve deposits with central banks - -
Property, plant and equipment 14 385
Investment property - 1,610
Deferred tax assets 31 225
Investments in associated undertakings and joint
ventures - 28
Deferred acquisition costs 885 1,437
Reinsurers` share of life assurance policyholder
liabilities 1,029 1,085
Reinsurers` share of general insurance liabilities - -
Loans and advances 194 6,135
Investments and securities 41,471 93,144
Current tax receivable 66 92
Client indebtedness for acceptances - -
Trade, other receivables and other assets 337 1,550
Derivative financial instruments - assets - 538
Cash and cash equivalents 455 1,298
Non-current assets held for sale 5 5
Inter-segment assets 258 1,718
Total assets 46,157 112,298
Liabilities
Life assurance policyholder liabilities 42,327 93,300
General insurance liabilities - -
Third-party interests in consolidated funds - -
Borrowed funds - 278
Provisions 49 165
Deferred revenue 518 763
Deferred tax liabilities 198 646
Current tax payable 41 199
Trade, other payables and other liabilities 593 2,809
Liabilities under acceptances - -
Amounts owed to bank depositors 4 6,773
Derivative financial instruments - liabilities 1 172
Inter-segment liabilities 468 634
Total liabilities 44,199 105,739
Net assets 1,958 6,559
Equity
Equity attributable to equity holders of the parent 1,958 6,558
Non-controlling interests - 1
Non-controlling interests - ordinary shares - 1
Non-controlling interests - preference shares - -
Total equity 1,958 6,559
Nedbank M&F USAM Bermuda
604 28 1,140 -
1,073 - - -
537 24 13 1
19 - - -
21 15 135 -
108 2 8 -
1 17 12 98
29 - - -
- 115 - -
43,221 2 - -
7,180 452 220 2,052
57 - - -
254 - - -
697 90 149 959
763 - - -
1,081 137 142 59
1 - - -
227 25 2 604
55,873 907 1,821 3,773
848 - - 3,281
- 386 - -
- - - -
2,511 - 10 -
(6) 30 2 -
- 10 - -
155 11 - -
5 2 4 1
1,204 125 179 19
254 - - -
44,791 - - -
819 - - 1
688 2 737 -
51,269 566 932 3,302
4,604 341 889 471
2,599 322 860 471
2,005 19 29 -
1,734 19 29 -
271 - - -
4,604 341 889 471
Consolidation
Other adjustments Total
13 - 4,833
- - 1,073
2 - 962
- 351 1,980
- - 396
30 - 176
- - 1,565
- - 1,114
- - 115
59 - 49,417
54 3,326 106,428
2 - 151
- - 254
39 660 4,144
138 331 1,770
781 1,028 4,526
- - 6
982 (3,558) -
2,100 2,138 178,910
- - 97,429
- - 386
- 4,711 4,711
1,698 - 4,497
39 - 230
- - 773
18 - 830
33 - 244
110 660 5,106
- - 254
- - 51,564
38 325 1,355
1,497 (3,558) -
3,433 2,138 167,379
(1,333) - 11,531
(1,779) - 9,031
446 - 2,500
- - 1,783
446 - 717
(1,333) - 11,531
B6 Statement of financial position - segment information at 30 June 2010
GBPm
Long Term Savings
Emerging Retail
At 30 June 2010 Markets Nordic Europe
Assets
Goodwill and other intangible assets 109 960 510
Mandatory reserve deposits with central banks - - -
Property, plant and equipment 345 11 3
Investment property 1,648 - -
Deferred tax assets 66 94 70
Investments in associated undertakings and
joint ventures 28 1 -
Deferred acquisition costs 126 56 261
Reinsurers` share of life assurance
policyholder liabilities 19 8 7
Reinsurers` share of general insurance
liabilities - - -
Loans and advances 285 4,444 1
Investments and securities 28,185 11,145 3,854
Current tax receivable 6 4 18
Client indebtedness for acceptances - - -
Trade, other receivables and other assets 727 164 55
Derivative financial instruments - assets 322 6 -
Cash and cash equivalents 384 374 73
Non-current assets held for sale - - -
Inter-segment assets 1,078 44 31
Total assets 33,328 17,311 4,883
Liabilities
Life assurance business policyholder liabilities 29,364 9,704 3,852
General insurance liabilities - - -
Third-party interests in consolidated funds - - -
Borrowed funds 283 2 -
Provisions 143 (14) 4
Deferred revenue 22 1 148
Deferred tax liabilities 203 109 172
Current tax payable 64 25 2
Trade, other payables and other liabilities 1,456 260 76
Liabilities under acceptances - - -
Amounts owed to bank depositors - 5,666 -
Derivative financial instruments - liabilities 109 14 4
Inter-segment liabilities 87 4 1
Total liabilities 31,731 15,771 4,259
Net assets 1,597 1,540 624
Equity
Equity attributable to equity holders of the
parent 1,593 1,540 624
Non-controlling interests 4 - -
Non-controlling interests - ordinary shares 4 - -
Non-controlling interests - preference shares - - -
Total equity 1,597 1,540 624
Total
Wealth Long Term
At 30 June 2010 Management Savings
Assets
Goodwill and other intangible assets 1,536 3,115
Mandatory reserve deposits with central banks - -
Property, plant and equipment 14 373
Investment property - 1,648
Deferred tax assets 24 254
Investments in associated undertakings and joint
ventures - 29
Deferred acquisition costs 828 1,271
Reinsurers` share of life assurance policyholder
liabilities 744 778
Reinsurers` share of general insurance liabilities - -
Loans and advances 165 4,895
Investments and securities 36,151 79,335
Current tax receivable 106 134
Client indebtedness for acceptances - -
Trade, other receivables and other assets 243 1,189
Derivative financial instruments - assets - 328
Cash and cash equivalents 223 1,054
Non-current assets held for sale 7 7
Inter-segment assets 250 1,403
Total assets 40,291 95,813
Liabilities
Life assurance business policyholder liabilities 36,531 79,451
General insurance liabilities - -
Third-party interests in consolidated funds - -
Borrowed funds - 285
Provisions 33 166
Deferred revenue 481 652
Deferred tax liabilities 138 622
Current tax payable 38 129
Trade, other payables and other liabilities 515 2,307
Liabilities under acceptances - -
Amounts owed to bank depositors - 5,666
Derivative financial instruments - liabilities - 127
Inter-segment liabilities 169 261
Total liabilities 37,905 89,666
Net assets 2,386 6,147
Equity
Equity attributable to equity holders of the parent 2,386 6,143
Non-controlling interests - 4
Non-controlling interests - ordinary shares - 4
Non-controlling interests - preference shares - -
Total equity 2,386 6,147
Nedbank M&F USAM Other
568 31 1,233 13
985 - - -
454 23 18 3
18 - - -
36 10 162 9
83 1 8 24
2 16 26 -
27 - - -
- 125 - -
40,117 2 - -
6,341 464 184 39
32 - - -
159 - - -
541 93 128 58
1,115 - - 89
704 90 160 299
- - 11 -
161 29 - 1,467
51,343 884 1,930 2,001
712 - - -
- 389 - -
- - - -
2,237 - - 1,406
(4) 25 3 36
1 8 - -
153 7 - 22
13 1 8 39
1,164 120 171 106
159 - - -
41,450 - - -
952 - - 50
496 - 1,324 1,483
47,333 550 1,506 3,142
4,010 334 424 (1,141)
2,296 321 392 (1,587)
1,714 13 32 446
1,443 13 32 -
271 - - 446
4,010 334 424 (1,141)
Consolidation
Bermuda US Life adjustments Total
1 42 - 5,003
- - - 985
- - - 871
- - 360 2,026
- 197 - 668
- - - 145
192 1,589 - 3,096
- 520 - 1,325
- - - 125
- 57 - 45,071
2,870 11,264 1,773 102,270
- - - 166
- - - 159
919 276 576 3,780
6 57 338 1,933
55 8 897 3,267
- - - 18
614 62 (3,736) -
4,657 14,072 208 170,908
4,224 12,439 - 96,826
- - - 389
- - 2,860 2,860
- - - 3,928
- - - 226
- - - 661
- 126 - 930
6 2 - 198
8 261 762 4,899
- - - 159
- - - 47,116
- 9 322 1,460
- 172 (3,736) -
4,238 13,009 208 159,652
419 1,063 - 11,256
419 1,063 - 9,047
- - - 2,209
- - - 1,492
- - - 717
419 1,063 - 11,256
B6 Statement of financial position - segment information at 31 December 2010
GBPm
Long Term Savings
Emerging Retail
At 31 December 2010 Markets Nordic Europe
Assets
Goodwill and other intangible assets 120 995 522
Mandatory reserve deposits with central banks - - -
Property, plant and equipment 396 12 3
Investment property 1,679 - -
Deferred tax assets 96 78 27
Investments in associated undertakings and
joint ventures 26 4 -
Deferred acquisition costs 139 66 316
Reinsurers` share of life assurance
policyholder liabilities 24 12 8
Reinsurers` share of general insurance
liabilities - - -
Loans and advances 343 5,216 1
Investments and securities 34,519 13,392 4,466
Current tax receivable 4 1 9
Client indebtedness for acceptances - - -
Trade, other receivables and other assets 854 191 58
Derivative financial instruments - assets 557 10 -
Cash and cash equivalents 1,141 198 93
Non-current assets held for sale - - -
Inter-segment assets 947 58 56
Total assets 40,845 20,233 5,559
Liabilities
Life assurance policyholder liabilities 35,676 12,248 4,460
General insurance liabilities - - -
Third-party interests in consolidated funds - - -
Borrowed funds 291 2 -
Provisions 158 (38) 4
Deferred revenue 22 1 197
Deferred tax liabilities 225 98 124
Current tax payable 123 12 4
Trade, other payables and other liabilities 2,246 259 94
Liabilities under acceptances - - -
Amounts owed to bank depositors - 5,957 -
Derivative financial instruments - liabilities 135 10 -
Non-current liabilities held for sale - - -
Inter-segment liabilities 123 1 4
Total liabilities 38,999 18,550 4,887
Net assets 1,846 1,683 672
Equity
Equity attributable to equity holders of the
parent 1,847 1,683 672
Non-controlling interests (1) - -
Non-controlling interests - ordinary shares (1) - -
Non-controlling interests - preference shares - - -
Total equity 1,846 1,683 672
Total
Wealth Long Term
At 31 December 2010 Management Savings
Assets
Goodwill and other intangible assets 1,463 3,100
Mandatory reserve deposits with central banks - -
Property, plant and equipment 16 427
Investment property - 1,679
Deferred tax assets 27 228
Investments in associated undertakings and joint
ventures 1 31
Deferred acquisition costs 855 1,376
Reinsurers` share of life assurance policyholder
liabilities 907 951
Reinsurers` share of general insurance liabilities - -
Loans and advances 185 5,745
Investments and securities 40,856 93,233
Current tax receivable 95 109
Client indebtedness for acceptances - -
Trade, other receivables and other assets 274 1,377
Derivative financial instruments - assets - 567
Cash and cash equivalents 336 1,768
Non-current assets held for sale 6 6
Inter-segment assets 294 1,355
Total assets 45,315 111,952
Liabilities
Life assurance policyholder liabilities 41,468 93,852
General insurance liabilities - -
Third-party interests in consolidated funds - -
Borrowed funds 1 294
Provisions 50 174
Deferred revenue 498 718
Deferred tax liabilities 224 671
Current tax payable 65 204
Trade, other payables and other liabilities 544 3,143
Liabilities under acceptances - -
Amounts owed to bank depositors - 5,957
Derivative financial instruments - liabilities - 145
Non-current liabilities held for sale - -
Inter-segment liabilities 99 227
Total liabilities 42,949 105,385
Net assets 2,366 6,567
Equity
Equity attributable to equity holders of the parent 2,366 6,568
Non-controlling interests - (1)
Non-controlling interests - ordinary shares - (1)
Non-controlling interests - preference shares - -
Total equity 2,366 6,567
Nedbank M&F USAM Other
637 33 1,181 14
1,079 - - -
546 25 16 1
19 - - 1
28 12 148 -
96 2 8 25
1 19 14 -
31 - - -
- 122 - -
46,032 1 - -
6,886 553 218 109
47 - - -
190 - - -
943 84 138 62
1,350 - - 109
841 131 171 458
1 - - -
202 23 4 975
58,929 1,005 1,898 1,754
846 - - -
- 397 - -
- - - -
2,456 - 11 1,443
(4) 40 3 47
1 11 - -
158 13 - 16
12 1 7 13
1,717 114 210 120
190 - - -
47,279 - - -
1,172 - - 102
- - - -
431 2 803 1,860
54,258 578 1,034 3,601
4,671 427 864 (1,847)
2,643 409 832 (2,293)
2,028 18 32 446
1,714 18 32 -
314 - - 446
4,671 427 864 (1,847)
Consolidation
Bermuda US Life adjustment Total
- - - 4,965
- - - 1,079
- - - 1,015
- - 341 2,040
- - - 416
- - - 162
124 - - 1,534
- - - 982
- - - 122
- - - 51,778
2,567 - 2,587 106,153
- - - 156
- - - 190
1,038 - 292 3,934
1 - 476 2,503
74 - 689 4,132
- 12,384 - 12,391
874 47 (3,480) -
4,678 12,431 905 193,552
3,933 - - 98,631
- - - 397
- - 3,584 3,584
- - - 4,204
- - - 260
- - - 730
- - - 858
1 - - 238
7 - 350 5,661
- - - 190
- - - 53,236
- - 451 1,870
- 12,219 - 12,219
- 157 (3,480) -
3,941 12,376 905 182,078
737 55 - 11,474
737 55 - 8,951
- - - 2,523
- - - 1,763
- - - 760
737 55 - 11,474
C Other key performance information
C1 Operating profit adjusting items
(a) Summary of adjusting items
In determining the adjusted operating profit of the Group certain adjustments
are made to profit before tax to reflect the directors` view of the underlying
long-term performance of the Group. The following table shows an analysis of
those adjustments from adjusted operating profit to profit before and after tax.
GBPm
Long Term Savings
Emerging Retail
Six months ended 30 June 2011 Notes Markets Nordic Europe
Income/(expense)
Goodwill impairment and impact of
acquisition accounting C1(b) (1) (29) (20)
Short-term fluctuations in investment
return C1(d) (23) - -
Investment return adjustment for
Group equity and debt
instruments held in life funds C1(e) (31) - -
Dividends declared to holders of
perpetual preferred callable
securities C1(f) - - -
Credit-related fair value adjustments
on Group debt instruments C1(h) - - -
Total adjusting items (55) (29) (20)
Tax on adjusting items 14 2 5
Non-controlling interest in adjusting
items - - -
Total adjusting items after tax and
non-controlling interests (41) (27) (15)
Wealth Long Term
Six months ended 30 June 2011 Management Savings
Income/(expense)
Goodwill impairment and impact of acquisition
accounting C1(b) (43) (93)
Short-term fluctuations in investment return C1(d) (14) (37)
Investment return adjustment for Group equity and debt
instruments held in life funds C1(e) - (31)
Dividends declared to holders of perpetual preferred
callable securities C1(f) - -
Credit-related fair value adjustments on Group debt
instruments - -
Total adjusting items (57) (161)
Tax on adjusting items 15 36
Non-controlling interest in adjusting items - -
Total adjusting items after tax and non-controlling
interests (42) (125)
Nedbank M&F USAM Other Total
C1(b) (3) - (2) - (98)
C1(d) - (11) - (6) (54)
C1(e) - - - - (31)
C1(f) - - - 22 22
C1(h) (4) - - (47) (51)
(7) (11) (2) (31) (212)
2 2 1 (2) 39
11 1 (4) - 8
6 (8) (5) (33) (165)
GBPm
Long Term Savings
Emerging Retail
Six months ended 30 June 2010* Notes Markets Nordic Europe
Income/(expense)
Goodwill impairment and impact of
acquisition accounting C1(b) (1) (40) (21)
Loss on disposal of subsidiaries,
associated undertakings and
strategic investments C1(c) - - -
Short-term fluctuations in investment
return C1(d) (39) - -
Investment return adjustment for
Group equity and debt
instruments held in life funds C1(e) 19 - -
Dividends declared to holders of
perpetual preferred callable
securities C1(f) - - -
US Asset Management equity plans and
non-controlling interests C1(g)
Credit-related fair value adjustments
on Group debt instruments - - -
C1(h) - - -
Total adjusting items (21) (40) (21)
Tax on adjusting items 2 1 6
Non-controlling interest in adjusting
items - - -
Total adjusting items after tax and
non-controlling interests (19) (39) (15)
Wealth Long Term
Six months ended 30 June 2010* Management Savings
Income/(expense)
Goodwill impairment and impact of acquisition
accounting C1(b) (38) (100)
Loss on disposal of subsidiaries, associated
undertakings and strategic investments C1(c) - -
Short-term fluctuations in investment return C1(d) (19) (58)
Investment return adjustment for Group equity and debt
instruments held in life funds C1(e) - 19
Dividends declared to holders of perpetual preferred
callable securities C1(f) - -
US Asset Management equity plans and non-controlling
interests C1(g) - -
Credit-related fair value adjustments on Group debt
instruments C1(h) - -
Total adjusting items (57) (139)
Tax on adjusting items 12 21
Non-controlling interest in adjusting items - -
Total adjusting items after tax and non-controlling
interests (45) (118)
Nedbank M&F USAM Other Total
C1(b) - - (1) - (101)
C1(c) (2) - (20) - (22)
C1(d) - (19) - (12) (89)
C1(e) - - - - 19
C1(f) - - - 22 22
C1(g) - - 1 - 1
C1(h) (9) - - (81) (90)
(11) (19) (20) (71) (260)
3 - 6 (4) 26
14 - (3) - 11
6 (19) (17) (75) (223)
* The results for the six months ended 30 June 2010 have been restated to
reflect US Life as a discontinued operation.
GBPm
Long Term Savings
Emerging
Year ended 31 December 2010 Notes Markets Nordic
Income/(expense)
Goodwill impairment and impact of acquisition
accounting C1(b) (2) (89)
Loss on disposal of subsidiaries, associated
undertakings and
strategic investments C1(c) - -
Short-term fluctuations in investment return C1(d) 1 (1)
Investment return adjustment for Group equity
and debt
instruments held in life funds C1(e) (10) -
Dividends declared to holders of perpetual
preferred callable
securities C1(f) - -
US Asset Management equity plans and
non-controlling interests C1(g) - -
Credit-related fair value adjustments on Group
debt instruments C1(h) - -
Total adjusting items (11) (90)
Tax on adjusting items 10 3
Non-controlling interest in adjusting items - -
Total adjusting items after tax and
non-controlling interests (1) (87)
Retail Wealth Long Term
Year ended 31 December 2010 Europe Management Savings
Income/(expense)
Goodwill impairment and impact of
acquisition accounting C1(b) (41) (74) (206)
Loss on disposal of subsidiaries,
associated undertakings and
strategic investments C1(c) - - -
Short-term fluctuations in investment
return C1(d) 1 (71) (70)
Investment return adjustment for Group
equity and debt
instruments held in life funds C1(e) - - (10)
Dividends declared to holders of perpetual
preferred callable securities C1(f) - - -
US Asset Management equity plans and
non-controlling interests C1(g) - - -
Credit-related fair value adjustments on
Group debt instruments C1(h) - - -
Total adjusting items (40) (145) (286)
Tax on adjusting items 15 5 33
Non-controlling interest in adjusting items - - -
Total adjusting items after tax and
non-controlling interests (25) (140) (253)
Nedbank M&F USAM Other Total
C1(b) (6) - (2) - (214)
C1(c) (1) - (21) - (22)
C1(d) - (7) - (6) (83)
C1(e) - - - - (10)
C1(f) - - - 44 44
C1(g) - - 6 - 6
C1(h) (20) - - (183) (203)
(27) (7) (17) (145) (482)
7 (4) 6 (6) 36
30 - (9) - 21
10 (11) (20) (151) (425)
(b) Goodwill impairment and impact of acquisition accounting
In applying acquisition accounting in accordance with IFRS deferred acquisition
costs and deferred revenue are not recognised. These are reversed in the
acquisition statement of financial position and replaced by goodwill, other
intangible assets and the value of the acquired present value of in- force
business (`acquired PVIF`). In determining its adjusted operating profit the
Group recognises deferred revenue and acquisition costs in relation to policies
sold by acquired businesses pre-acquisition, and excludes the impairment of
goodwill and the amortisation of acquired other intangibles and acquired PVIF.
Goodwill impairment and acquisition accounting adjustments to adjusted operating
profit are summarised below:
GBPm
Emerging Retail Wealth
Six months ended 30 June 2011 Markets Nordic Europe Management
Amortisation of acquired PVIF - (26) (10) (36)
Amortisation of acquired
deferred costs and revenue - 11 (3) 11
Amortisation of other acquired
intangible assets (1) (14) (7) (18)
(1) (29) (20) (43)
Six months ended 30 June 2011 Nedbank USAM Total
Amortisation of acquired PVIF - - (72)
Amortisation of acquired deferred costs and revenue - - 19
Amortisation of other acquired intangible assets (3) (2) (45)
(3) (2) (98)
GBPm
Emerging Retail Wealth
Six months ended 30 June 2010* Markets Nordic Europe Management
Amortisation of acquired PVIF - (57) (10) (38)
Amortisation of acquired
deferred costs and revenue - 13 (4) 14
Amortisation of other acquired
intangible assets (1) (13) (7) (18)
Change in acquisition date
provisions - 17 - 4
(1) (40) (21) (38)
Six months ended 30 June 2010* Nedbank USAM Total
Amortisation of acquired PVIF - - (105)
Amortisation of acquired deferred costs and revenue - - 23
Amortisation of other acquired intangible assets - (1) (40)
Change in acquisition date provisions - - 21
- (1) (101)
GBPm
Emerging Retail Wealth
Year ended 31 December 2010 Markets Nordic Europe Management
Amortisation of acquired PVIF - (116) (21) (77)
Amortisation of acquired
deferred costs and revenue - 23 (7) 34
Amortisation of other acquired
intangible assets (1) (26) (13) (35)
Change in acquisition date
provisions - 30 - 4
Goodwill impairment (1) - - -
(2) (89) (41) (74)
Year ended 31 December 2010 Nedbank USAM Total
Amortisation of acquired PVIF - - (214)
Amortisation of acquired deferred costs and revenue - - 50
Amortisation of other acquired intangible assets (6) (2) (83)
Change in acquisition date provisions - - 34
Goodwill impairment - - (1)
(6) (2) (214)
* The results for the six months ended 30 June 2010 have been restated to
reflect US Life as a discontinued operation.
(c) Loss on disposal of subsidiaries, associated undertakings and strategic
investments
The loss on the disposal of subsidiaries, associated undertakings and strategic
investments is analysed below.
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2011 2010 2010
Nedbank - (2) (1)
USAM - (20) (21)
Loss on disposal of
subsidiaries, associated
undertakings and strategic
investments - (22) (22)
(d) Long term investment return
Profit before tax includes actual investment returns earned on the shareholder
assets of the Group`s life assurance and general insurance businesses. Adjusted
operating profit is stated after recalculating shareholder asset investment
returns based on a long-term investment return rate. The difference between the
actual and the long-term investment returns are short-term fluctuations in
investment return.
Long-term rates of return are based on achieved real rates of return appropriate
to the underlying asset base, adjusted for current inflation expectations,
default assumptions, costs of investment management and consensus economic
investment forecasts, and are reviewed frequently, usually annually, for
appropriateness. These rates of return have been selected with a view to
ensuring that returns credited to adjusted operating profit are consistent with
the actual returns expected to be earned over the long term.
For Emerging Markets, the return is applied to an average value of investible
shareholders` assets, adjusted for net fund flows. For Nordic, Retail Europe,
and Wealth Management, the return is applied to average investible assets. For
M&F general insurance business, t he return is an average value of investible
assets supporting shareholders` funds and insurance liabilities, adjusted for
net fund flows.
(d) Long-term investment return continued
%
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
Long-term investment rates 2011 2010 2010
Emerging Markets 9.0 9.4 9.4
Nordic 1.7 1.8 1.8
Retail Europe 2.1 2.5 2.5
Wealth Management 2.0 2.0 2.0
M&F 9.0 9.4 9.4
Analysis of short-term fluctuations in investment return
GBPm
Emerging Retail Wealth
Six months ended 30 June 2011 Markets Nordic Europe Management
Long-term investment return 52 3 1 35
Less: Actual shareholder
investment return 29 3 1 21
Short-term fluctuations in
investment return 23 - - 14
Total Long
Six months ended 30 June 2011 Term Savings M&F Other Total
Long-term investment return 91 28 18 137
Less: Actual shareholder investment
return 54 17 12 83
Short-term fluctuations in investment
return 37 11 6 54
GBPm
Emerging Retail Wealth
Six months ended 30 June 2010** Markets Nordic Europe Management
Long-term investment return 52 - 1 61
Less: Actual shareholder
investment return 13 - 1 42
Short-term fluctuations in
investment return 39 - - 19
Total Long
Six months ended 30 June 2010** Term Savings M&F Other Total
Long-term investment return 114 27 16 157
Less: Actual shareholder investment
return 56 8 4 68
Short-term fluctuations in investment
return 58 19 12 89
GBPm
Emerging Retail Wealth
Year ended 31 December 2010 Markets Nordic Europe Management*
Long-term investment return 108 2 1 132
Less: Actual shareholder
investment return 109 1 2 61
Short-term fluctuations in
investment return (1) 1 (1) 71
Total Long
Year ended 31 December 2010 Term Savings M&F Other Total
Long-term investment return 243 56 31 330
Less: Actual shareholder investment
return 173 49 25 247
Short-term fluctuations in investment
return 70 7 6 83
* Wealth Management long-term investment return includes GBP28 million (six
months ended 30 June 2010: GBP56 million; year ended 31 December 2010:
GBP121 million) in respect of income tax attributable to policyholder
returns.
** The results for the six months ended 30 June 2010 have been restated to
reflect US Life as a discontinued operation.
(e) Investment return adjustment for Group equity and debt instruments held in
life funds
Adjusted operating profit includes investment returns on policyholder
investments in Group equity and debt instruments held by the Group`s life funds.
These include investments in the Company`s ordinary shares, and the subordinated
liabilities and ordinary securities of Nedbank. These investment returns are
eliminated within the consolidated income statement in arriving at profit before
tax, but are included in adjusted operating profit. In the six months ended 30
June 2011 the investment return adjustment increased adjusted operating profit
by GBP31 million (six months ended 30 June 2010: decrease of GBP19 million; year
ended 31 December 2010: increase of GBP10 million).
(f) Dividends declared to holders of perpetual preferred callable securities
Dividends declared to the holders of the Group`s perpetual preferred callable
securities were GBP22 million for the six months ended 30 June 2011 (six months
ended 30 June 2010: GBP22 million; year ended 31 December 2010: GBP44 million).
These are recognised in finance costs on an accruals basis for the purpose of
determining adjusted operating profit. In the IFRS financial statements this
cost is recognised in the consolidated statement of changes in equity.
(g) US Asset Management equity plans and non-controlling interests
US Asset Management has entered into a number of long term incentive
arrangements with its asset management affiliates.
In accordance with IFRS requirements the cost of these schemes is disclosed as
being attributable to non-controlling interests. However, this is treated as a
compensation expense in determining adjusted operating profit. The gain/loss
recognised in the six months ended 30 June 2011 was GBPnil (six months ended 30
June 2010: GBP1 million loss; year ended 31 December 2010: GBP9 million loss).
The Group has issued put options to employees as part of some of its US
affiliate incentive schemes. The impact of revaluing these instruments is
recognised in accordance with IFRS, but excluded from adjusted operating profit.
As at 30 June 2011 these instruments were revalued, the impact of which was
GBPnil (six months ended 30 June 2010: GBPnil; year ended 31 December 2010: GBP3
million).
(h) Credit-related fair value gains on Group debt instruments
The narrowing of credit spread of the Group`s debt instruments in the market
price has resulted in losses in the six months ended 30 June 2011 of GBP47
million (six months ended 30 June 2010: gains of GBP81 million; year ended 31
December 2010: losses of GBP183 million) on Other operating segments and losses
in the six months ended 30 June 2011 of GBP4 million (six months ended 30 June
2010: GBP9 million; year ended 3 1 December 2010: losses of GBP20 million) in
Nedbank being recorded in the Group`s income statement for those instruments
that are recorded at fair value.
In the directors` view, such movements are not reflective of the underlying
performance of the Group and will reverse over time. They have therefore been
excluded from adjusted operating profit.
C2 Foreign currencies
The principal exchange rates used to translate the operating results, assets and
liabilities of foreign operations to Sterling are:
Statement of
Income statement financial position
(average rate) (closing rate)
30 June 2011
Rand 11.1428 10.8616
US Dollars 1.6165 1.6067
Swedish Kronor 10.3023 10.1564
Euro 1.1513 1.1073
30 June 2010
Rand 11.4878 11.4531
US Dollars 1.5265 1.4963
Swedish Kronor 12.2744 11.6254
Euro 1.1487 1.2208
31 December 2010
Rand 11.3095 10.2796
US Dollars 1.5459 1.5530
Swedish Kronor 11.1364 10.4227
Euro 1.1650 1.1614
C3 Earnings and earnings per share
(a) Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the profit for the financial
period attributable to ordinary equity shareholders by the weighted average
number of ordinary shares in issue during the period excluding own shares held
in policyholder funds, ESOP trusts, Black Economic Empowerment trusts and other
related undertakings.
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2011 2010 2010
Profit for the financial
period attributable to equity
holders of the parent from
continuing operations 359 145 431
Profit/(loss) for the
financial period attributable
to equity holders of the
parent
from discontinued operations 130 120 (713)
Profit/(loss) for the
financial period attributable
to equity holders of the
parent 489 265 (282)
Dividends declared to holders
of perpetual preferred
callable securities (16) (16) (32)
Profit/(loss) attributable to
ordinary equity holders 473 249 (314)
Total dividends declared to holders of perpetual preferred callable securities
of GBP16 million for the six months ended 30 June 2011 (six months ended 30 June
2010: GBP22 million; year ended 31 December 2010: GBP44 million) are stated net
of tax credits of GBP6 million (six months ended 30 June 2010: GBP6 million;
year ended 31 December 2010: GBP12 million).
Millions
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2011 2010 2010
Weighted average number of
ordinary shares in issue 5,470 5,397 5,422
Shares held in charitable
foundations (7) (7) (7)
Shares held in ESOP trusts (66) (48) (56)
Adjusted weighted average
number of ordinary shares 5,397 5,342 5,359
Shares held in life funds (201) (206) (205)
Shares held in Black Economic
Empowerment trusts (299) (287) (295)
Weighted average number of
ordinary shares 4,897 4,849 4,859
Basic earnings per ordinary
share (pence) 9.7 5.1 (6.5)
Diluted earnings per share recognises the dilutive impact of share options held
in ESOP trusts and Black Economic Empowerment trusts which are currently in the
money in the calculation of the weighted average number of shares, as if the
relevant shares were in issue for the full period.
Millions
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2011 2010 2010
Weighted average number of
ordinary shares 4,897 4,849 4,859
Adjustments for share options
held by ESOP trusts 149 173 137
Adjustments for shares held in
Black Economic Empowerment
trusts 299 287 295
5,345 5,309 5,291
Diluted earnings per ordinary
share (pence) 8.8 4.7 (6.1)
C3 Earnings and earnings per share continued
(b) Adjusted operating earnings per ordinary share
Adjusted operating earnings per ordinary share is determined based on adjusted
operating profit. Adjusted operating profit represents the directors` view of
the underlying performance of the Group. For long-term and general insurance
business adjusted operating profit is based on a long-term investment return,
includes investment returns on life funds` investments in Group equity and debt
instruments and is stated net of income tax attributable to policyholder
returns. For the US Asset Management business it includes compensation costs in
respect of certain long-term incentive schemes defined as non-controlling
interests in accordance with IFRS. For all core businesses, adjusted operating
profit excludes goodwill impairment, the impact of acquisition accounting,
revaluations of put options related to long-term incentive schemes,
profit/(loss) on disposal of subsidiaries, associated undertakings and strategic
investments, dividends declared to holders of perpetual preferred callable
securities, and fair value profits/(losses) on certain Group debt instruments.
Bermuda and US Life, which are non-core, are not included in adjusting operating
profit.
The reconciliation of profit/(loss) for the financial period to adjusted
operating profit after tax attributable to ordinary equity holders is as
follows:
GBPm
6 months
6 months ended 30 June Year ended
ended 30 June 2010 31 December
2011 Restated 2010
Profit/(loss) for the
financial period attributable
to equity holders of the
parent 489 265 (282)
Adjusting items 212 260 482
Tax on adjusting items (39) (26) (36)
Non-core operations (21) 65 (1)
(Profit)/loss from
discontinued operations - US
Life (130) (120) 713
Non-controlling interest on
adjusting items (8) (11) (21)
Adjusted operating profit
after tax attributable to
ordinary equity holders 503 433 855
Adjusted weighted average
number of ordinary shares
(millions) 5,397 5,342 5,359
Adjusted operating earnings
per ordinary share (pence) 9.3 8.1 16.0
(c) Headline earnings per share
In accordance with the JSE Limited (JSE) Listings Requirements, the Group is
required to calculate a `headline earnings per share` (HEPS), determined by
reference to the South African Institute of Chartered Accountants` circular
8/2007 `Headline Earnings`. The table below sets out a reconciliation of basic
earnings per ordinary share and HEPS in accordance with that circular.
Disclosure of HEPS is not a requirement of International Financial Reporting
Standards.
GBPm
6 months
ended 30 June
2011
Gross Net
Profit/(loss) for the financial period attributable to equity
holders of the parent 489 489
Dividends declared to holders of perpetual preferred callable
securities (16) (16)
Profit/(loss) attributable to ordinary equity holders 473 473
Adjustments:
Impairments of goodwill and intangible assets - -
Impairment of discontinued operations - -
Loss on disposal of subsidiaries, associated undertakings and
strategic investments 29 29
Realised gains (including impairments) on available-for-sale
financial assets (167) (167)
Exchange differences realised on disposal 24 24
Headline earnings 359 359
Weighted average number of ordinary shares 4,897 4,897
Diluted weighted average number of ordinary shares 5,345 5,345
Headline earnings per share (pence) 7.3 7.3
Diluted headline earnings per share (pence) 6.7 6.7
6 months
ended 30 June
2010
Restated
Gross Net
Profit/(loss) for the financial period attributable to equity
holders of the
parent 265 265
Dividends declared to holders of perpetual preferred callable
securities (16) (16)
Profit/(loss) attributable to ordinary equity holders 249 249
Adjustments:
Impairments of goodwill and intangible assets - -
Impairment of discontinued operations - -
Loss on disposal of subsidiaries, associated undertakings and
strategic
investments 22 16
Realised gains (including impairments) on available-for-sale
financial assets (43) (43)
Exchange differences realised on disposal - -
Headline earnings 228 222
Weighted average number of ordinary shares 4,849 4,849
Diluted weighted average number of ordinary shares 5,309 5,309
Headline earnings per share (pence) 4.7 4.6
Diluted headline earnings per share (pence) 4.3 4.2
Year ended
31 December
2010
Gross Net
Profit/(loss) for the financial period attributable to equity
holders of the
parent (282) (282)
Dividends declared to holders of perpetual preferred callable
securities (32) (32)
Profit/(loss) attributable to ordinary equity holders (314) (314)
Adjustments:
Impairments of goodwill and intangible assets 20 20
Impairment of discontinued operations 827 827
Loss on disposal of subsidiaries, associated undertakings and
strategic
investments 22 17
Realised gains (including impairments) on available-for-sale
financial assets (12) (12)
Exchange differences realised on disposal - -
Headline earnings 543 543
Weighted average number of ordinary shares 4,859 4,859
Diluted weighted average number of ordinary shares 5,291 5,291
Headline earnings per share (pence) 11.2 11.1
Diluted headline earnings per share (pence) 10.1 10.0
C4 Dividends
Dividends paid were as follows:
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2011 2010 2010
2009 Final dividend paid -
1.5p per 10p share - 77 77
2010 Interim dividend paid -
1.1p per 10p share - - 54
2010 Final dividend paid -
2.9p per 10p share 145 - -
Dividends to ordinary equity
holders 145 77 131
Dividends declared to holders
of perpetual preferred
callable securities 22 22 44
Dividend payments for the
period 167 99 175
Dividends paid to ordinary equity holders, as above, are calculated using the
number of shares in issue at the record date, less treasury shares held in ESOP
trusts, life funds of Group companies, Black Economic Empowerment trusts and
related undertakings.
As a consequence of the exchange control arrangements in place in certain
African territories, dividends to ordinary equity holders on the branch
registers of those countries (or, in the case of Namibia, the Namibian section
of the principal register) are settled through Dividend Access Trusts
established for that purpose.
In March 2011 GBP22 million was declared and paid to holders of perpetual
preferred callable securities (March 2010: GBP22 million; November 2010: GBP22
million).
An interim dividend of 1.5 pence per 10p share has been declared by the
directors. The dividend will be paid on 30 November 2011 to shareholders on the
register at the close of business on 14 October 2011. The dividend will absorb
an estimated GBP74 million of shareholders` funds. The Company is planning to
offer a scrip dividend alternative for eligible shareholders.
D Other income statement notes
D1 Income tax expense
(a) Analysis of total income tax expense
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2011 2010 2010
Restated
Current tax
United Kingdom tax 17 16 23
Overseas tax
South Africa 155 128 346
United States 2 - (4)
Europe 41 25 61
Secondary Tax on Companies
(STC) 9 (2) 4
Prior year adjustments (26) - (1)
Total current tax 198 167 429
Deferred tax
Origination and reversal of
temporary differences 13 (50) (10)
Changes in tax rates/bases (4) - (4)
Write-down/recognition of
deferred tax assets (2) 12 41
Total deferred tax 7 (38) 27
Total income tax expense 205 129 456
D1 Income tax expense continued
(b) Reconciliation of total income tax expense
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2011 2010 2010
Restated
Profit before tax 707 389 1,145
Tax at standard rate of 26.5%
(2010: 28%) 188 111 321
Different tax rate or basis on
overseas operations 3 11 (22)
Untaxed and low taxed income (43) (66) (171)
Disallowable expenses 13 22 124
Net movement on deferred tax
assets not recognised 20 60 92
Effect on deferred tax of
changes in tax rates (3) - (7)
STC 14 (1) (3)
Income tax attributable to
policyholder returns 37 2 134
Other (3) (10) (12)
Prior year adjustments (21) - -
Total income tax expense 205 129 456
(c) Income tax on adjusted operating profit
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2011 2010 2010
Restated
Income tax expense 205 129 456
Tax on adjusting items
Impact of acquisition
accounting 18 14 35
Loss/profit on disposal of
subsidiaries, associated
undertakings and strategic
investments - 5 5
Short-term fluctuations in
investment return 26 11 3
Income tax attributable to
policyholders returns (51) - (149)
Tax on dividends declared to
holders of perpetual preferred
callable securities
recognised in equity (6) (6) (12)
Fair value gains and losses on
group debt instruments 1 3 5
Tax on non-core operations (2) (1) 4
Income tax on adjusted
operating profit 191 155 347
E Borrowed funds
E1 Borrowed funds
GBPm
Group At
excluding 30 June
Nedbank Nedbank 2011
Senior debt securities and term loans 539 1,464 2,003
Mortgage backed securities - 97 97
Subordinated debt securities (net of
Group holdings) 1,447 950 2,397
Borrowed funds 1,986 2,511 4,497
Other issues treated as equity for
accounting purposes
USD750 million cumulative preference
securities 458
EUR500 million perpetual preferred callable
securities 338
GBP350 million perpetual preferred
callable securities 350
Total: Book value 3,132
Nominal value of the above 3,277
GBPm
Group At
excluding 30 June
Nedbank Nedbank 2010
Senior debt securities and term loans 622 1,061 1,683
Mortgage backed securities - 114 114
Subordinated debt securities (net of
Group holdings) 1,069 1,062 2,131
Borrowed funds 1,691 2,237 3,928
Other issues treated as equity for
accounting purposes
USD750 million cumulative preference
securities 458
EUR500 million perpetual preferred
callable securities 338
GBP350 million perpetual preferred
callable securities 350
Total: Book value 2,837
Nominal value of the above 3,085
GBPm
Group At
excluding 31 December
Nedbank Nedbank 2010
Senior debt securities and term loans 550 1,186 1,736
Mortgage backed securities - 112 112
Subordinated debt securities (net of
Group holdings) 1,198 1,158 2,356
Borrowed funds 1,748 2,456 4,204
Other issues treated as equity for
accounting purposes
USD750 million cumulative preference
securities 458
EUR500 million perpetual preferred
callable securities 338
GBP350 million perpetual preferred
callable securities 350
Total: Book value 2,894
Nominal value of the above 3,045
E1 Borrowed funds continued
(a) Senior debt securities and term loans
GBPm
At At At
30 June 30 June 31 December
2011 2010 2010
Floating rate notes 1 927 737 806
Fixed rate notes 2 1,043 946 928
Revolving credit facility 3 - - -
Term loan and other loans 33 - 2
Total senior debt securities and term loan 2,003 1,683 1,736
Senior debt securities and term loans comprise:
1. Floating rate notes
Group excluding Nedbank
- R550 million repayable August 2010 at 3 month ZAR - JIBAR-SAFEX + 4.5% -
repaid.
- R100 million repayable February 2011 at 3 month ZAR - JIBAR-SAFEX + 4.5% -
repaid.
- US$50 million repayable September 2011 at 3 month LIBOR plus 0.50%.
- GBP3 million note repayable in December 2010, with holders having the option
to elect for early redemption every six months with coupon referenced against
six month LIBOR less 0.50% - repaid.
Nedbank
- R1,690 million unsecured senior debt repayable September 2012 at 3 month JIBAR
+ 1.5%.
- R1,044 million unsecured senior debt repayable September 2015 at JIBAR +
2.20%.
- R1,750 million unsecured senior debt repayable March 2013 inflation linked
(3.9% real yield).
- R98 million unsecured senior debt repayable March 2013 inflation linked (3.8%
real yield).
- R1,552 million unsecured senior debt repayable April 2013 JIBAR +1.48%.
- R1,027 million unsecured senior debt repayable April 2015 JIBAR +1.75%.
- R80 million unsecured senior debt repayable April 2020 JIBAR +2.15%.
- R837 million unsecured senior debt repayable March 2014 JIBAR +1.05%.
- R677 million unsecured senior debt repayable March 2016 JIBAR + 1.25%.
- R500 million unsecured senior debt repayable April 2014 JIBAR + 1.0%.
2. Fixed rate notes
Group excluding Nedbank
- GBP500 million Euro bond repayable October 2016 at 7.125%.
- USD16.5 million secured senior debt repayable August 2014 at 5.23%.
- EURO30 million Euro bond repayable July 2010, capital and interest swapped
into fixed rate US dollars at 5.28% - repaid.
- EUR10 million Euro bond repayable December 2010, capital and interest swapped
into floating rate US dollars at 3 month LIBOR + 0.95% - repaid.
Nedbank
- R130 million unsecured senior debt repayable October 2024 at zero coupon.
- R3,244 million unsecured senior debt repayable September 2015 at 10.55%.
- R762 million unsecured senior debt repayable September 2019 at 11.39%.
- R478 million unsecured senior debt repayable April 2015 at R157 + 1.75%.
- R450 million unsecured senior debt repayable March 2014 at R206 + 1.28%.
- R1,137 million unsecured senior debt repayable March 2016 at R157 + 1.5%.
The total fair value of the swap derivatives associated with the senior notes is
GBPnil (June 2010: GBP5 million; December 2010: GBPnil). The movement from the
prior year is caused by the close out of the Eurobond notes in 2010.
3. Revolving credit facilities and irrevocable letters of credit
In April 2011 the Group signed a new GBP1,200 million five-year multi-currency
revolving credit facility, replacing the GBP1,232 million facility due to mature
in September 2012.
At 30 June 2011 GBP174 million (June 2010: GBP517 million; December 2010: GBP499
million) of this facility was utilised, GBPnil (June 2010: GBPnil; December
2010: GBPnil) in the form of drawn debt and GBP174 million (June 2010: GBP517
million; December 2010: GBP499 million) in the form of irrevocable letters of
credit.
The Group has a SEK1,500 million revolving credit facility, which had a maturity
date of 1 July 2011 which has subsequently been extended, at the amount of
SEK1,000 million to 1 July 2012. At 30 June 2011 this facility was undrawn (June
2010 and December 2010: undrawn).
E1 Borrowed funds continued
(b) Mortgage backed securities - Nedbank
GBPm
At At At
30 June 30 June 31 December
2011 2010 2010
R291 million notes (class A1) repayable
18 November 2039 (11.467%) - 17 4
R1.4 billion notes (class A2A) repayable
18 November 2039 (11.817%) 85 87 96
R98 million notes (class B note) repayable
18 November 2039 (12.067%) 7 6 7
R76 million notes (class C note) repayable
18 November 2039 (13.317%) 5 4 5
97 114 112
(c) Subordinated debt securities
GBPm
At At At
30 June 30 June 31 December
2011 2010 2010
Nedbank
R1.5 billion repayable 24 April 2016
(7.85%)(1) - 132 148
R1.8 billion repayable 20 September 2018
(9.84%)(2) 175 160 186
R500 million repayable on 30 December 2010
(8.38%) - repaid(3) - 44 -
R650 million repayable 8 February 2017
(9.03%)(4) 63 58 67
R1.7 billion repayable 8 February 2019
(8.9%)(5) 165 147 171
R2.0 billion repayable 6 July 2022
(3 month JIBAR plus 0.47%)(6) 187 178 198
R500 million repayable 15 August 2017
(3 month JIBAR plus 0.45%)(7) 46 44 49
R1.0 billion repayable 17 September 2020
(10.54%)(8) 98 92 105
R500 million repayable 14 December 2017
(3 month JIBAR plus 0.70%)(9) 46 44 49
R120 million repayable 14 December 2017
(10.38%)(10) 11 11 12
R487 million repayable 20 November 2018
(15.05%)(11) 48 45 51
R1,265 million repayable 20 November 2018
(JIBAR plus 4.75%)(12) 118 112 125
R300 million repayable on 4 December 2013
(JIBAR + 2.5%)(13) 14 13 15
USD100 million repayable on 3 March 2022
(3 month USD LIBOR)(14) 63 67 65
1,034 1,147 1,241
Less: banking subordinated debt securities
held by other Group companies (84) (85) (83)
Banking subordinated debt securities (net
of Group holdings) 950 1,062 1,158
Group excluding Nedbank
R3.0 billion repayable 27 October 2020
(8.9%)(15) 276 262 293
GBP300 million repayable 21 January 2016
(5.0%) - repaid(16) - 273 296
R250 million preference shares repayable 9
June 2011 - repaid(17) - 22 -
EUR750 million repayable 18 January 2017
(4.5%)(18) 671 512 609
GBP500 million repayable 3 June 2021
(8.0%)(19) 500 - -
1,447 1,069 1,198
Total subordinated liabilities 2,397 2,131 2,356
E1 Borrowed funds continued
(c) Subordinated debt securities
The subordinated notes rank behind the claims against the Group depositors and
other unsecured, unsubordinated creditors. None of the Group`s subordinated
notes are secured.
1. Unsecured secondary callable note was issued 24 April 2006 with a call date
of 24 April 2011.
2. Unsecured secondary callable note was issued 20 September 2006 at R1.5
billion with a call date of 20 September 2013. On 18 May 2007 an additional
R0.3 billion was issued.
3. Unsecured callable Bonds issued 30 March 2006 - repaid.
4. Unsecured secondary callable note was issued 8 February 2007 with a call
date of 8 February 2012.
5. Unsecured secondary callable note was issued 8 February 2007 at R1.0
billion. On 19 March 2007 an additional R0.7 billion was issued.
6. Unsecured secondary capital callable note issued 6 July 2007 and has a call
date of 6 July 2017.
7. This bond issued on 15 August 2007 is an unsecured secondary capital
callable floating rate note with a call date 15 August 2012.
8. This bond issued on 17 September 2007 is an unsecured fixed rate note with a
term of 13 years (non-call 8 year).
9. This bond issued on 14 December 2007 is a 10 year (non-call 5 year) floating
rate note. After its call date on 14 December 2012 its terms become JIBAR
plus 1.70% until maturity.
10. This bond issued on 14 December 2007 is a 10 year (non-call 5 year) fixed
rate note. After its call date its terms become floating 3 month JIBAR plus
initial margin over mid swaps plus 1.0% until maturity.
11. This bond issued on 20 May 2008 is a perpetual (non-call 10 year) fixed
rate note with a call date on 20 November 2018.
12. This bond issued on 20 May 2008 is a perpetual (non-call 10 year) floating
rate note with a call date of 20 November 2018.
13. This bond issued on 4 December 2008 is a floating rate note with a call
date of 4 December 2013.
14. Dated Tier 2 notes issued 3 March 2009 with call date 3 March 2017.
15. These bonds have a maturity date of 27 October 2020 and pay a coupon of
8.92% to 27 October 2015 and 3 month JIBAR plus 1.59% thereafter. The Group
has the option to repay the bonds at par on 27 October 2015 and at 3 monthly
intervals thereafter.
16. These bonds, issued on 20 January 2006, have a maturity date of 21 January
2016 and pay a coupon of 5.0% to 21 January 2011 and 6 month LIBOR plus
1.13% thereafter. The coupon on the bonds was swapped into floating rate of
6 month STIBOR plus 0.50%. The Group had the option to repay the bonds at
par on 21 January 2011 and at 6 monthly intervals thereafter. These bonds
were redeemed at the first call date of 21 January 2011.
17. These preference shares were redeemable on 9 June 2011 and paid a variable
cumulative coupon of 61.0% of the Prime Rate as quoted by Nedbank Limited.
The Group had the option to redeem the shares at par at any time before the
final redemption date but after giving an agreed period of notice, with the
Group electing to redeem in 2010.
18. This bond, issued on 16 January 2007, has a maturity date of 18 January
2017 and pays a coupon of 4.5% to 17 January 2012 and 6 month EURIBOR plus
0.96% thereafter. The principal and coupon on the bond were swapped equally
into Sterling and US Dollars with coupons of 6 month LIBOR plus 0.34% and 6
month US LIBOR plus 0.31% respectively. The Group has the option to repay
the bonds at par on 17 January 2012 and at 6 monthly intervals thereafter.
The Group redeemed 550 million of the bond on 1 July 2011.
19. This bond, issued on 3 June 2011, has a maturity date of 3 June 2021 and
pays a coupon of 8%. The coupon on the bonds was swapped into floating rate
of quarterly STIBOR plus 5.46%. The currency swaps have a 5 year mandatory
break clause.
F Other notes
F1 Acquisition of non-controlling interests
Acquisition of non-controlling interest in Mutual & Federal
On 5 February 2010, the Group completed the acquisition of the remaining non-
controlling shareholdings in Mutual & Federal Insurance Company Limited,
following the fulfilment of all outstanding conditions precedent. On 8 February
2010, 147,313,449 new Old Mutual plc ordinary shares were issued in exchange for
Mutual & Federal shares and listed on the London Stock Exchange, of which
68,378,851 were issued to Black Economic Empowerment trusts and 78,934,598 to
other previous holders.
Other acquisitions
On 8 February 2010 Nedbank announced that it had obtained regulatory approval
for the acquisition of the remaining 49.9% indirect interest in Imperial Bank
Limited thereby satisfying all conditions precedent for the acquisition.
The purchase consideration was approximately GBP162 million (GBP155 million plus
a Johannesburg Interbank Agreed Rate (JIBAR) factor applied up to 5 February
2010) which was settled in four instalments out of existing cash resources of
Nedbank Limited. The total amount, which involved interest at the three-month
JIBAR, amounted to GBP165 million.
F2 Events after the reporting date
Following a market tender, on 1 July 2011 the Group redeemed 550 million of the
750 million subordinated debt security repayable 18 January 2017.
G Discontinued operations
G1 Discontinued operations
The results of the Group`s United States life business, US Life, are shown as a
discontinued operation in these financial statements. At 31 December 2010 the
Group had entered into an agreement to dispose of the controlling interest in US
Life to Harbinger OM LLC, an affiliate of Harbinger Capital Partners, and was
seeking to gain regulatory approval for the sale. Following regulatory approval
the disposal was completed on 7 April 2011.
Analysis of the results is given below.
(a) Income statement from discontinued operations
GBPm
Period from 6 months Year ended
1 January 2011 ended 30 June 31 December
to 7 April 2011 2010 2010
Revenue 342 758 1,608
Expenses (330) (704) (1,557)
Profit before tax from
discontinued operations 12 54 51
Impairment on remeasurement
to fair value less costs to
sell - - (827)
Loss on disposal (29) - -
Realised available-for-sale
investment gains and
exchange differences on
disposal 133 - -
Profit/(loss) before tax 116 54 (776)
Income tax credit 14 66 63
Profit/(loss) from
discontinued operations
after tax 130 120 (713)
(b) Statement of comprehensive income from discontinued operations
GBPm
Period from 6 months Year ended
1 January 2011 ended 30 June 31 December
to 7 April 2011 2010 2010
Profit/(loss) after tax for
the financial period 130 120 (713)
Other comprehensive income
for the financial period - -
Fair value (losses)/gains - -
Available-for-sale
investments
Fair value gains/(losses) 48 452 530
Recycled to the income
statement (5) (43) (12)
Realised on disposal (157) - -
Exchange differences on
disposal 24 - -
Shadow accounting (43) (229) (334)
Currency translation
differences/exchange
differences realised on
translating
foreign operations - 61 29
Other movements - - (34)
Aggregate tax on transfers
from equity 3 (59) (67)
Total other comprehensive
(loss)/income for the
financial period (130) 182 112
Total comprehensive
income/(loss) for the
financial period - 302 (601)
Attributable to
Equity holders of the parent - 302 (601)
Total comprehensive
income/(loss) for the
financial period - 302 (601)
c) Net cash flows from discontinued operations
GBPm
Period from 6 months Year ended
1 January 2011 ended 30 June 31 December
to 7 April 2011 2010 2010
Operating activities 2 (25) (167)
Investing activities 146 (304) 63
Net cash flows 148 (329) (104)
G2: Contingent liabilities in respect of the disposal of US Life
Following completion of the disposal of US Life to the Harbinger group
(`Harbinger`) on 7 April 2011, the Group has retained certain residual
commitments and contingent liabilities. These relate to sale warranties and
indemnities that are typical in transactions of this nature including in respect
of litigation (including class actions) and regulatory enforcement actions
arising from events occurring before completion. The specific conditions are in
effect for varying periods of time, the longest dated of these will expire on 31
December 2015. The main elements are summarised below:
- Harbinger intends to establish certain internal reinsurance arrangements which
are subject to regulatory approval. In the event that regulatory approval of the
full amount of reinsurance is not forthcoming there is potential for a reduction
in the purchase price, up to a maximum of US$50 million.
- US statutory regulations require reserving on a worst case scenario basis for
deferred annuity policies that permit free partial withdrawals (`CARVM
Reserves`). As such there is redundancy when comparing the worst case scenario
and the economic scenarios. These CARVM redundant reserves are currently
reinsured from US Life to Old Mutual Reassurance until no later than the end of
2015. Old Mutual plc provides a $280 million letter of credit to back these
redundant reserves. In the event that this letter of credit is drawn upon
Harbinger are obligated to fully reimburse Old Mutual plc.
- US statutory regulations require reserving on a worst case scenario basis in
respect of guarantees included in universal life and term assurance products
(`XXX and AXXX Reserves`). As such there is redundancy when comparing the worst
case scenario and the economic scenarios. These XXX and AXXX Reserves are
currently reinsured from US Life to their own reinsurance vehicle. Prior to
close Old Mutual arranged a $535 million third party letter of credit to back
the redundant component of these reserves. In the event that this letter of
credit is drawn upon Harbinger are obligated to fully reimburse the third party.
Old Mutual stands behind Harbinger`s commitments. In addition if redundant
reserving requirements change Old Mutual must provide further letter of credit
financing up to $200 million. Harbinger must replace all XXX and AXXX redundant
reserve financing and take Old Mutual fully off risk no later than the end of
2012. Harbinger has announced that it has entered into an agreement with Wilton
Re to reinsure this business and therefore meet its commitment to Old Mutual.
Date: 05/08/2011 08:01:50 Supplied by www.sharenet.co.za
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