Wrap Text
OML - Old Mutual Plc - Preliminary results for the year ended 31 December 2010
(Part 2: Continued)
OLD MUTUAL PLC
ISIN: GB0007389926
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
Statement of directors` responsibilities in respect of the preliminary
announcement of the Annual Report and the financial statements
We confirm that to the best of our knowledge:
- The financial statements, prepared in accordance with the applicable set of
accounting standards, gives a true and fair view of the assets, liabilities,
financial position and profit of the Group and the undertakings included in the
consolidation taken as a whole;
- The Group Finance Director`s review and the Business review include a fair
view of the development and performance of the business and the position of the
Group and the undertakings included in the consolidation taken as a whole,
together with a description of the important events, principal risks and
uncertainties that they face.
Julian Roberts Philip Broadley
Group Chief Executive Group Finance Director
8 March 2011 8 March 2011
Consolidated income statement
For the year ended 31 December 2010
GBPm
Year ended Year ended
Notes 31 December 31 December
2010 2009*
Revenue
Gross earned premiums B3 3,582 3,020
Outward reinsurance (305) (267)
Net earned premiums 3,277 2,753
Investment return (non-banking) 10,791 11,112
Banking interest and similar income 4,082 3,989
Banking trading, investment and similar income 204 168
Fee and commission income, and income
from service activities 3,061 2,422
Other income 159 196
Total revenues 21,574 20,640
Expenses
Claims and benefits (including change in
insurance contract provisions) (5,039) (3,786)
Reinsurance recoveries 227 200
Net claims and benefits incurred (4,812) (3,586)
Change in investment contract liabilities (6,899) (8,345)
Losses on loans and advances (552) (511)
Finance costs (269) (322)
Banking interest payable and similar expenses (2,519) (2,627)
Fee and commission expenses, and other
acquisition costs (963) (728)
Other operating and administrative
expenses (3,714) (3,072)
Goodwill impairment C1(b) (1) (266)
Change in third-party interest in
consolidated funds (388) (470)
Amortisation of PVIF and other acquired
intangibles C1(b) (297) (312)
Total expenses (20,414) (20,239)
Share of associated undertakings` and
joint ventures` profit/(loss) after tax 7 2
Loss on disposal of subsidiaries,
associated undertakings and strategic
investments C1(c) (22) (50)
Profit before tax 1,145 353
Income tax (expense)/credit D1(a) (456) (400)
Profit/(loss) from continuing operations
after tax 689 (47)
Discontinued operations
Loss from discontinued operations after
tax H1 (713) (71)
Loss after tax for the financial year (24) (118)
Attributable to
Equity holders of the parent (282) (340)
Non-controlling interests
Ordinary shares F2(a) 196 158
Preferred securities F2(a) 62 64
Loss after tax for the financial year (24) (118)
Earnings per share
Basic earnings per share based on profit
from continuing operations (pence) 8.2 (6.3)
Basic earnings per share based on loss
from discontinued operations (14.7) (1.5)
Basic earnings per ordinary share (pence)C3(a) (6.5) (7.8)
Diluted earnings per share based on
profit from continuing operations (pence) 7.4 (6.3)
Diluted earnings per share based on loss
from discontinued operations (13.5) (1.5)
Diluted earnings per ordinary share
(pence) C3(a) (6.1) (7.8)
Weighted average number of shares -
millions C3(a) 4,859 4,758
* The year ended 31 December 2009 has been restated to reflect US Life as
discontinued (see note A1).
Consolidated statement of comprehensive income
For the year ended 31 December 2010
GBPm
Year ended Year ended
Notes 31 December 31 December
2010 2009*
Profit/(loss) after tax for the
financial year (24) (118)
Other comprehensive income for the
financial year
Fair value (losses)/gains
Property revaluation 26 (10)
Net investment hedge (87) (41)
Available-for-sale investments
Fair value gains/(losses) 32 112
Recycled to the income statement - 13
Shadow accounting (15) 36
Currency translation
differences/exchange differences on
translating foreign operations 1,039 334
Other movements 31 21
Income tax relating to components of
other comprehensive income D1(c) 13 13
Total other comprehensive income for the
financial year from continuing operations 1,039 478
Total other comprehensive income for the
financial year from discontinued operations 112 750
Total other comprehensive income for the
financial year 1,151 1,228
Total comprehensive income for the
financial year 1,127 1,110
Attributable to
Equity holders of the parent 594 709
Non-controlling interests
Ordinary shares 428 334
Preferred securities 105 67
Total comprehensive income for the
financial year 1,127 1,110
* The year ended 31 December 2009 has been restated to reflect US Life as
discontinued (see note A1).
Reconciliation of adjusted operating profit to profit after tax
For the year ended 31 December 2010
GBPm
Year ended Year ended
Notes 31 December 31 December
2010 2009*
Core operations
Long-Term Savings B2 897 636
Nedbank B2 601 470
M&F B2 103 70
USAM B2 87 83
1,688 1,259
Finance costs (128) (104)
Long-Term investment return on excess
assets 31 91
Interest payable to non-core operations
- Bermuda (55) (40)
Interest receivable from non-core
operations - US Life 16 12
Other shareholders` expenses (71) (85)
Adjusted operating profit 1,481 1,133
Adjusting items C1(a) (482) (973)
Non-core operations B2 (3) 1
Profit before tax (net of policyholder
tax) 996 161
Income tax attributable to policyholder
returns B2 149 192
Profit before tax 1,145 353
Total income tax (expense)/credit D1(a) (456) (400)
Profit/(loss) from continuing operations
after tax 689 (47)
Loss from discontinued operations after
tax H1 (713) (71)
Loss after tax for the financial year (24) (118)
Adjusted operating profit after tax attributable to ordinary equity holders of
the parent
GBPm
Year ended Year ended
Notes 31 December 31 December
2010 2009*
Adjusted operating profit 1,481 1,133
Tax on adjusted operating profit D1(d) (347) (283)
Adjusted operating profit after tax 1,134 850
Non-controlling interests - ordinary
shares F2(a) (217) (181)
Non-controlling interests - preferred
securities F2(a) (62) (64)
Adjusted operating profit after tax
attributable to ordinary equity holders
of the parent 855 605
Adjusted weighted average number of
shares - (millions) C3(b) 5,359 5,229
Adjusted operating earnings per share -
(pence) C3(b) 16.0 11.6
* The year ended 31 December 2009 has been restated to reflect US Life as
discontinued (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 movements. 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 31 December 2010
GBPm
At At
Notes 31 December 31 December 2009
2010
Assets
Goodwill and other intangible assets 4,965 5,159
Mandatory reserve deposits with
central banks 1,079 882
Property, plant and equipment 1,015 828
Investment property 2,040 1,759
Deferred tax assets 416 570
Investments in associated
undertakings and joint ventures 162 135
Deferred acquisition costs 1,534 3,138
Reinsurers` share of life assurance
policyholder liabilities 982 1,296
Reinsurers` share of general
insurance liabilities 122 120
Deposits held with reinsurers 2 146
Loans and advances 51,778 42,393
Investments and securities 106,153 98,461
Current tax receivable 156 169
Client indebtedness for acceptances 190 170
Trade, other receivables and other
assets 3,932 3,051
Derivative financial instruments -
assets 2,503 2,546
Cash and cash equivalents 4,132 2,982
Non-current assets held for sale H2 12,391 1
Total assets 193,552 163,806
Liabilities
Life assurance policyholder
liabilities 98,631 93,876
General insurance liabilities 397 372
Third-party interests in
consolidated funds 3,584 2,906
Borrowed funds E1 4,204 3,309
Provisions F1 260 263
Deferred revenue 730 654
Deferred tax liabilities 858 905
Current tax payable 238 210
Trade, other payables and other
liabilities 5,661 4,305
Liabilities under acceptances 190 170
Amounts owed to bank depositors 53,236 44,135
Derivative financial instruments -
liabilities 1,870 1,990
Non-current liabilities held for
sale H2 12,219 -
Total liabilities 182,078 153,095
Net assets 11,474 10,711
Shareholders` equity
Equity attributable to equity
holders of the parent 8,951 8,464
Non-controlling interests
Ordinary shares F2(b) 1,763 1,537
Preferred securities F2(b) 760 710
Total non-controlling interests 2,523 2,247
Total equity 11,474 10,711
Consolidated statement of cash flows
For the year ended 31 December 2010
GBPm
Year ended 31 Year ended
December 2010 31 December
2009*
Cash flows from operating activities -
continuing operations
Profit before tax 1,145 353
Capital (gains)/losses included in investment income (8,837) (9,988)
Profit/(loss) on disposal of property, plant and
equipment (2) 1
Depreciation of property, plant and equipment 103 85
Amortisation and impairment of goodwill and
other intangible assets 378 628
Impairment of loans and receivables 552 770
Share-based payment expense 13 21
Share of associated undertakings` (profit)/loss
after tax (7) (2)
Loss/(profit) arising on disposal of
subsidiaries, associated undertakings and
strategic investments 22 50
Other non-cash amounts in profit 380 (408)
Non-cash movements in profit before tax (7,398) (8,843)
Reinsurers` share of life assurance policyholder
liabilities (155) (129)
Reinsurers` share of general insurance
liabilities 17 (5)
Deferred acquisition costs (11) 31
Loans and advances (3,484) (6,590)
Insurance liabilities 374 (277)
Investment contracts 10,326 13,200
Amounts owed to bank depositors 2,345 5,964
Other operating assets and liabilities 817 (2,069)
Changes in working capital 10,229 10,125
Taxation paid (413) (367)
3,563 1,268
Net cash inflow from operating activities -
continuing operations
Cash flows from investing activities
Net acquisitions of financial investments (2,222) (2,821)
Acquisition of investment properties (162) (82)
Proceeds from disposal of investment properties 272 57
Acquisition of property, plant and equipment (152) (138)
Proceeds from disposal of property, plant and
equipment - 29
Acquisition of intangible assets (78) (43)
Acquisition of interests in subsidiaries (75) (5)
Capital funding of discontinued operations - (136)
Disposal of interests in subsidiaries,
associated undertakings and strategic
investments (16) 40
(2,433) (3,099)
Net cash outflow from investing activities -
continuing operations
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the Company (102) -
Non-controlling interests and preferred security
interests (196) (190)
Interest paid (excluding banking interest paid) (79) (57)
Proceeds from issue of ordinary shares
(including by subsidiaries to non-controlling
interests) 5 100
Net acquisition/sale of treasury shares (25) 38
Shares repurchased in buyback programme - -
Issue of subordinated and other debt 492 1,049
Subordinated and other debt repaid (104) (441)
Net cash inflow/(outflow) from financing
activities - continuing operations (9) 499
GBPm
Year ended 31 Year ended 31
December 2010 December 2009*
Net increase/(decrease) in cash and cash
equivalents - continuing operations 1,121 (1,332)
Net increase / (decrease) in cash and cash
equivalents - discontinued operations (104) (47)
Effects of exchange rate changes on cash and
cash equivalents 376 160
Cash and cash equivalents at beginning of the
year 4,761 5,980
Cash and cash equivalents at end of the year 6,154 4,761
Consisting of
Coins and bank notes 328 263
Money at call and short notice 3,526 2,412
Balances with central banks (other than
mandatory reserve deposits) 278 307
Cash and cash equivalents in the statement of
financial position 4,132 2,982
Mandatory reserve deposits with central banks 1,079 882
Short-term cash balances held in policyholder
funds 522 897
Cash and cash equivalents included in assets
held for sale 421 -
Total 6,154 4,761
Other supplementary cash flow disclosures
Interest income received (including banking
interest) 5,391 5,394
Dividend income received 383 335
Interest paid (including banking interest) 2,262 2,544
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 of GBP1 079 million
(2009: GBP882 million), short-term cash balances held in policyholder funds of
GBP522 million (2009: GBP897 million) and cash and cash equivalents subject to
consolidation of funds of GBP689 million (2009: GBP717 million), 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.
* The year ended 31 December 2009 has been restated to reflect US Life as
discontinued (see note A1).
Consolidated statement of changes in equity
For the year ended 31 December 2010
Millions GBPm
Attributable to
Number of shares equity holders of
Notes issued and fully paid the parent
For the year ended 31
December 2010
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 D1(c) - (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 F2 147 51
Change in participation
in other subsidiaries F2 - -
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 Total
Notes non-controlling equity
interests
For the year ended 31 December 2010
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 D1(c) - (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 F2 (51) -
Change in participation in other subsidiaries F2 (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
Notes capital premium reserves
For the year ended 31 December 2010
Attributable to equity holders of
the parent at beginning of the 552 771 3,087
year
Profit/(loss) 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 F2 15 - 129
Shares issued in lieu of cash
dividends 2 17 -
Exercise of share options 1 4 -
Other issues 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
Translation Retained Perpetual Total
reserve earnings preferred
Notes callable
securities
For the year ended 31
December 2010
Attributable to equity
holders of the parent at
beginning of the 469 2,897 688 8,464
year
Profit/(loss) for the
financial year attributable
to equity - (314) 32 (282)
holders of the parent
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 794 - - 794
translating foreign
operations
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 F2 - (93) - 51
Shares issued in lieu of
cash dividends - 11 - 30
Exercise of share options - - - 5
Other issues 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
GBPm
Merger Available for Property
Notes reserve sale reserve revaluation
reserve
Other reserves attributable
to equity holders of the
parent
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
M&F F2 129 - -
Change in share-based
payments reserve - - -
At end of the year 2,845 225 101
Share-based Other Total
Notes payments reserves
reserve
At beginning of the year 191 11 3,087
Other reserves attributable to equity
holders of the parent
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
M&F - - 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.
Consolidated statement of changes in equity
For the year ended 31 December 2010 continued
Millions GBPm
Year ended 31 December 2009 Number of shares Attributable to
Notes issued and fully paid equity holders
of the parent
Shareholders` equity at
beginning of the year 5,516 7,737
(Loss)/profit after tax
for the financial year - (340)
Other comprehensive income
Fair value gains/(losses)
Property revaluation - (12)
Net investment hedge - (41)
Available-for-sale
investments
Fair value gains - 1,087
Recycled to the income
statement - 239
Shadow accounting - 27
Currency translation
differences/exchange
differences on translating
foreign operations - 124
Other movements - 22
Income tax relating to
components of other
comprehensive income D1(c) - (397)
Total comprehensive income
for the financial year - 709
Dividends for the year C4 - (45)
Net sale of treasury shares - 39
Issue of ordinary share
capital by the Company - 2
Change in participation in
subsidiaries - -
Exercise of share options 2 3
Change in share-based
payments reserve - 19
Transactions with
shareholders 2 18
Shareholders` equity at
end of the year 5,518 8,464
Year ended 31 December 2009 Total Total
non-controlling equity
Notes interests
Shareholders` equity at beginning of the year 1,840 9,577
(Loss)/profit after tax for the financial year 222 (118)
Other comprehensive income
Fair value gains/(losses)
Property revaluation 2 (10)
Net investment hedge - (41)
Available-for-sale investments
Fair value gains - 1,087
Recycled to the income statement - 239
Shadow accounting - 27
Currency translation differences/exchange
differences on translating foreign operations 178 302
Other movements (1) 21
Income tax relating to components of other
comprehensive income D1(c) - (397)
Total comprehensive income for the financial year 401 1,110
Dividends for the year C4 (145) (190)
Net sale of treasury shares - 39
Issue of ordinary share capital by the Company - 2
Change in participation in subsidiaries 150 150
Exercise of share options - 3
Change in share-based payments reserve 1 20
Transactions with shareholders 6 24
Shareholders` equity at end of the year 2,247 10,711
GBPm
Share capital Share Other
Year ended 31 December 2009 Notes premium reserves
Attributable to equity
holders of the parent at
beginning of 552 766 2,130
the year
(Loss)/profit for the
financial year attributable
to equity - - -
holders of the parent
Other comprehensive income
Fair value gains/(losses)
Property revaluation - - (12)
Net investment hedge - - -
Available-for-sale investments
Fair value gains - - 1,087
Recycled to income statement - - 239
Shadow accounting - - 27
Currency translation
differences/exchange
differences on - - -
translating foreign operations
Other movements - - 7
Income tax relating to
components of other
comprehensive - - (410)
income
Total comprehensive income
for the financial year - - 938
Dividends for the year C4 - - -
Net sale of treasury shares - - -
Issue of ordinary share
capital by the Company - 2 -
Exercise of share options - 3 -
Change in share-based
payments reserve - - 19
Transactions with shareholders - 5 19
Attributable to equity
holders of the parent at end
of the 552 771 3,087
year
Notes Translation Retained Perpetual Total
Year ended 31 December 2009 reserve earnings preferred
callable
securities
Attributable to equity
holders of the parent at
beginning of 386 3,215 688 7,737
the year
(Loss)/profit for the
financial year attributable
to equity - (372) 32 (340)
holders of the parent
Other comprehensive income
Fair value gains/(losses)
Property revaluation - - - (12)
Net investment hedge (41) - - (41)
Available-for-sale
investments
Fair value gains - - - 1,087
Recycled to income statement - - - 239
Shadow accounting - - - 27
Currency translation
differences/exchange
differences on 124 - - 124
translating foreign
operations
Other movements - 15 - 22
Income tax relating to
components of other
comprehensive - - 13 (397)
income
Total comprehensive income
for the financial year 83 (357) 45 709
Dividends for the year C4 - - (45) (45)
Net sale of treasury shares - 39 - 39
Issue of ordinary share
capital by the Company - - - 2
Exercise of share options - - - 3
Change in share-based
payments reserve - - - 19
Transactions with
shareholders - 39 (45) 18
Attributable to equity
holders of the parent at end
of the ye 469 2,897 688 8,464
GBPm
Merger Available for Property
Notes reserve sale reserve revaluation
Other reserves attributable to reserve
equity holders of the parent
At beginning of the year 2,716 (844) 85
Fair value gains/(losses)
Property revaluation - - (12)
Available-for-sale investments
Fair value gains - 1,087 -
Recycled to income statement - 239 -
Shadow accounting - 9 18
Other movements - 1 (4)
Income tax relating to components of
other comprehensive income - (410) -
Change in share-based payments
reserve - - -
At end of the year 2,716 82 87
Share-based Other Total
payments reserves
reserve
Other reserves attributable to equity
holders of the parent
At beginning of the year 171 2 2,130
Fair value gains/(losses)
Property revaluation - - (12)
Available-for-sale investments
Fair value gains - - 1,087
Recycled to income statement - - 239
Shadow accounting - - 27
Other movements 1 9 7
Income tax relating to components of other
comprehensive income - - (410)
Change in share-based payments reserve 19 - 19
At end of the year 191 11 3,087
Retained earnings were reduced by GBP379 million at 31 December 2009 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 year ended 31 December 2010
A: Accounting policies
Basis of preparation
The consolidated financial information contained herein has been prepared in
accordance with the recognition and measurement principles of International
financial Reporting Standards adopted by the EU. The Group`s results for the
year ended 31 December 2010 and the position at that date have been prepared
using accounting policies consistent with those applied in the preparation of
the Group`s 2009 Annual Report and Accounts.
The consolidated financial statements have been prepared on the going concern
basis which the directors believe to be appropriate.
At 31 December 2010 the Group was in advanced stage negotiations for the
disposal of its life assurance operations in the United States, which represent
almost the entirety of the US Life operating segment. As a result of this, the
assets and liabilities of the US Life disposal group have been classified as
held for sale in the statement of financial position for the current year in
accordance with IFRS 5. This sale will represent the Group`s exit from the life
assurance market in the United States and therefore meets 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 has been reclassified as a non-
core operation for the year ended 31 December 2010 with the comparative
information restated accordingly.
The financial information set out herein does not constitute the Company`s
statutory accounts for the years ended 31 December 2010 or 2009. Statutory
accounts for 2009 have been delivered to the Registrar of Companies, and those
for 2010 will be delivered in due course. The auditors have reported on those
accounts; their reports were (i) unqualified, (ii) did not include references to
any matters to which the auditors draw attention by way of emphasis without
qualifying their reports, and (iii) did not contain statements under section
498(2) or (3) of the Companies Act 2006.
Segment reporting
The Group`s results are analysed and reported consistent with the way that
management and the Board of Directors considers information when making
operating decisions and the basis on which resources are allocated and
performance assessed by management and the Board of Directors, covering both
core and non-core operations. The core operating segments are Emerging Markets,
Nordic, Retail Europe and Wealth Management (collectively being Long-Term
Savings) plus Nedbank, Mutual & Federal (M&F), US Asset Management and Other
operations (which includes the Group head office functions). The non-core
operating segment includes US Life and the Bermuda segments. The above reported
segments have been revised during the year to reflect the reclassification of US
Life as non-core, with the comparative information having been revised to report
on a consistent basis to the amended structure.
There are four principal business activities from which the Group generates
revenues. These are life assurance (premium income), asset management business
(fee and commission income), banking (banking interest receivable) and general
insurance (premium income). The revenues generated in each reported segment can
be seen in the analysis of profits and losses in note B.
The information reflected in note B reflects the measures of profit and loss,
assets and liabilities for each operating segment as regularly provided to
management and the Board of Directors. There are no differences between the
measurement of the assets and liabilities reflected in the primary statements
and that reported for the segments. A reconciliation between the segment
revenues and expenses and the Group`s revenues and expenses is shown in note B.
In line with internal reporting, assets, liabilities, revenues or expenses that
are not directly attributable to a particular segment are allocated between
segments where appropriate and where there is a reasonable basis for doing so.
The Group accounts for inter-segment revenues and transfers as if the
transactions were with third parties at current market prices. Given the nature
of the operations, there are no major customers within any of the segments.
Reclassifications of comparative segment information have been made to align
segment information to the Group`s revised management reporting structure
described above. There was no impact on net profit or net assets.
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 operating segment is regarded as non-core. This is consistent with the
revised way that 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,
being in line with that reported in the previous financial year. This
information is presented to the Board in local currency however this note is
presented in pounds sterling, the presentation currency of the Group. As
detailed above US Life has been reclassified as discontinued and as a result
also non- core with the comparative segment information restated accordingly,
with this resulting in a reduction in adjusted operating profit before tax and
non-controlling interest of GBP49 million for the year ended 31 December 2009.
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
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
Nedbank - banking and asset management
Mutual & Federal - general insurance
US Asset Management - asset management
Other - other operating segments and business activities
Non-core operations
Bermuda - life assurance
US Life - life assurance
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 flows 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 basis supplementary information.
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 year ended 31
December 2010
Long-Term Savings
Emerging Nordic Retail
Markets 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)
Goodwill impairment - - -
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`
and joint ventures` 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
Tax expense (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
Wealth Total Long
Management Term 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)
Goodwill impairment - -
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` and joint
ventures` 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
Tax expense (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
Of the total revenues, excluding intercompany revenues, GBP5,143 million was
generated in the UK (2009: GBP5,544 million), GBP2,937 million in rest of Euorpe
(2009: GBP3,938 million), GBP12,575 million in South Africa (2009: GBP10,084
million), GBP829 million in United States (2009: GBP993 million) and GBP90
million relates to other operating segments (2009: GBP81 million).
B2: Adjusted operating profit statement - segment information year ended 31
December 2010 continued
Nedbank M&F USAM Other Consolidation
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) -
74 70 (203) -
241
10 (11) (20) (151) -
251 63 50 (354) -
- - - - -
251 63 50 (354) -
GBPm
Adjusted Adjusting Non-core IFRS Income
operating profit items operations* statement
(Note C1)
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) 41 (26) (3,714)
- (1) - (1)
(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 GBP19 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 2010 was GBP22 million. Further detail on the
results of discontinued operations is provided in note H1.
B2: Adjusted operating profit statement - segment information year ended 31
December 2009 (restated) Long-Term Savings
Emerging Nordic Retail Europe
Markets
Revenue
Gross earned premiums 1,946 109 31
Outward reinsurance (56) (5) (8)
Net earned premiums 1,890 104 23
Investment return (non-banking) 2,636 2,035 564
Banking interest and similar income - 157 -
Banking trading, investment and
similar income - - -
Fee and commission income, and
income from service activities 305 190 189
Other income 65 6 -
Inter-segment revenues 55 32 10
Total revenues 4,951 2,524 786
Expenses
Claims and benefits (including
change in insurance contract
provisions) (2,551) (72) (37)
Reinsurance recoveries 76 2 5
Net claims and benefits incurred (2,475) (70) (32)
Change in investment contract
liabilities (1,040) (1,972) (554)
Losses on loans and advances - (5) (1)
Finance costs (including interest
and similar expenses) - - -
Banking interest payable and
similar expenses - (70) -
Fee and commission expenses, and
other acquisition costs (184) (53) (79)
Other operating and administrative
expenses (768) (215) (96)
Goodwill impairment - - -
Change in third-party interest in
consolidated funds - - -
Amortisation of PVIF and other
acquired intangibles - - -
Income tax attributable to
policyholder returns (37) (39) -
Inter-segment expenses (5) (38) (2)
Total expenses (4,509) (2,462) (764)
Share of associated undertakings`
and joint ventures` profit/(loss)
after tax 4 - -
Profit on disposal of subsidiaries,
associated undertakings and
strategic investments - - -
Adjusted operating profit/(loss)
before tax and non-controlling
interests 446 62 22
Tax expense (130) 9 (8)
Non-controlling interests (2) - -
Adjusted operating profit/(loss)
after tax and non-controlling
interests 314 71 14
Adjusting items net of tax and
non-controlling interests (200) (4) (228)
Profit/(loss) after tax from
continuing operations 114 67 (214)
Loss from discontinued operations
after tax - - -
Profit/(loss) after tax
attributable to equity holders of
the parent 114 67 (214)
Wealth Total Long
Management Term Savings
Revenue
Gross earned premiums 315 2,401
Outward reinsurance (81) (150)
Net earned premiums 234 2,251
Investment return (non-banking) 4,997 10,232
Banking interest and similar income - 157
Banking trading, investment and similar income - -
Fee and commission income, and income from service
activities 746 1,430
Other income 24 95
Inter-segment revenues 27 124
Total revenues 6,028 14,289
Expenses
Claims and benefits (including change in insurance
contract provisions) (255) (2,915)
Reinsurance recoveries 46 129
Net claims and benefits incurred (209) (2,786)
Change in investment contract liabilities (4,775) (8,341)
Losses on loans and advances - (6)
Finance costs (including interest and similar
expenses) - -
Banking interest payable and similar expenses - (70)
Fee and commission expenses, and other acquisition
costs (394) (710)
Other operating and administrative expenses (380) (1,459)
Goodwill impairment - -
Change in third-party interest in consolidated
funds - -
Amortisation of PVIF and other acquired intangibles - -
Income tax attributable to policyholder returns (116) (192)
Inter-segment expenses (48) (93)
Total expenses (5,922) (13,657)
Share of associated undertakings` and joint
ventures` profit/(loss) after tax - 4
Profit on disposal of subsidiaries, associated
undertakings and strategic investments - -
Adjusted operating profit/(loss) before tax and
non-controlling interests 106 636
Tax expense (20) (149)
Non-controlling interests - (2)
Adjusted operating profit/(loss) after tax and
non-controlling interests 86 485
Adjusting items net of tax and non-controlling
interests (225) (657)
Profit/(loss) after tax from continuing operations (139) (172)
Loss from discontinued operations after tax - -
Profit/(loss) after tax attributable to equity
holders of the parent (139) (172)
B2: Adjusted operating profit statement - segment information year ended 31
December 2009 (restated) continued GBPm
Nedbank M&F USAM Other Consolidation
adjustments
- 612 - - -
- (117) - - -
- 495 - - -
- 58 13 91 509
3,832 - - - -
168 - - - -
663 22 429 - (6)
70 1 7 - 1
31 29 6 30 (251)
4,764 605 455 121 253
- (412) - - -
- 72 - - -
- (340) - - -
- - - - -
(505) - - - -
- - - (104) -
(2,557) - - - -
(2) (106) (18) - (12)
(1,167) (64) (354) (84) (22)
- - - - -
- - - - (470)
- - - - -
- - - - -
(65) (25) - (55) 251
(4,296) (535) (372) (243) (253)
- - (4) -
2
- - - -
-
70 83 (126) -
470
(96) (15) (19) (4) -
(193) (16) - (34) -
39 64 (164) -
181
15 - (3) (241) -
196 39 61 (405) -
- - - - -
196 39 61 (405) -
Adjusted Adjusting Non-core IFRS Income
operating profit items operations * statement
(Note C1)
3,013 - 7 3,020
(267) - - (267)
2,746 - 7 2,753
10,903 (275) 484 11,112
3,989 - - 3,989
168 - - 168
2,538 (116) - 2,422
174 - 22 196
(31) - 31 -
20,487 (391) 544 20,640
(3,327) - (459) (3,786)
201 - (1) 200
(3,126) - (460) (3,586)
(8,341) - (4) (8,345)
(511) - - (511)
(104) (218) - (322)
(2,627) - - (2,627)
(848) 167 (47) (728)
(3,150) 97 (19) (3,072)
- (266) - (266)
(470) - - (470)
- (312) - (312)
(192) 192 - -
13 - (13) -
(19,356) (340) (543) (20,239)
2 - - 2
- (50) - (50)
1,133 (781) 1 353
(283) (128) 11 (400)
(245) 23 - (222)
605 (886) 12 (269)
(886) 886 - -
(281) - 12 (269)
- - (71) (71)
(281) - (59) (340)
* Non-core operations relates to Bermuda with the exception of GBP(21) million
of Inter-segment revenues 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 2009 was GBP33 million. Further detail on the results of discontinued
operations is provided in note H1.
B3: Gross earned premiums
Year ended 31 December 2010 Long-Term Savings
Emerging Markets Nordic
Retail
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
Wealth Total Long
Management Term
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
Long-Term Savings
Emerging Markets Nordic Retail
Year ended 31 December 2009
Europe
Life assurance - insurance
contracts 1,287 109 31
Life assurance - investment
contracts with discretionary
participation features 659 - -
General insurance - - -
Gross earned premiums 1,946 109 31
Life assurance - other
investment contracts
recognised as deposits 2,726 1,199 733
Wealth Total
Year ended 31 December 2009
Management Long-Term
Savings
Life assurance - insurance contracts 315 1,742
Life assurance - investment contracts with
discretionary participation features - 659
General insurance - -
Gross earned premiums 315 2,401
Life assurance - other investment contracts
recognised as deposits 4,906 9,564
B4: Impairments of financial assets
GBPm
Year ended Year ended 31
31 December 2010 December 2009
Nordic 4 5
Total Long-Term Savings 4 5
Nedbank 547 504
Bermuda - 13
Total 551 522
B5: Funds under management
GBPm
Emerging Markets Nordic Retail
As at 31 December 2010
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 Long
Wealth Term Savings
Management
As at 31 December 2010
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
Emerging Markets Nordic Retail
Europe
As at 31 December 2009
Life assurance policyholder funds 25,454 9,221 3,569
Unit trusts and mutual funds 7,686 1,428 391
Third-party client funds 8,229 - -
Total client funds under management 41,369 10,649 3,960
Shareholder funds 2,130 360 210
Total funds under management 43,499 11,009 4,170
Total Long
Wealth Term Savings
Management
As at 31 December 2009
Life assurance policyholder funds 34,721 72,965
Unit trusts and mutual funds 11,308 20,813
Third-party client funds - 8,229
Total client funds under management 46,029 102,007
Shareholder funds 830 3,530
Total funds under management 46,859 105,537
Nedbank M&F USAM
- - -
- - -
- 728 -
- 728 -
- - -
GBPm
Non-core operations Total
Total core operations
1,999 - 1,999
855 - 855
728 - 728
3,582 - 3,582
9,812 - 9,812
Nedbank M&F USAM
- - -
- - -
- 612 -
- 612 -
- - -
Total core operations Non-core operations Total
Restated
1,742 7 1,749
659 - 659
612 - 612
3,013 7 3,020
9,564 8 9,572
B5: Funds under management
Nedbank M&F USAM
846 - 3,846
5,713 - 4,974
4,164 - 157,555
10,723 - 166,375
- 210 226
10,723 210 166,601
GBPm
Total core operations Non-core operations Total
92,882 13,489 106,371
38,023 - 38,023
173,451 - 173,451
304,356 13,489 317,845
4,952 - 4,952
309,308 13,489 322,797
Nedbank M&F USAM
658 - 6,789
3,775 - 4,095
3,800 - 150,423
8,233 - 161,307
- 162 169
8,233 162 161,476
GBPm
Total core operations Total
Non-core operations
80,412 9,602 90,014
28,683 - 28,683
162,452 - 162,452
271,547 9,602 281,149
3,861 - 3,861
275,408 9,602 285,010
B6: Statement of financial position - segment information year ended 31 December
2010 Long-Term Savings
Nordic Retail
At 31 December 2010 Emerging Europe
Markets
Assets
Goodwill and other intangible assets 120 995 522
Goodwill 101 243 198
Present value of acquired in-force business - 568 246
Software development 11 4 3
Other intangibles 8 180 75
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
Insurance contracts 1 14 7
Investment contracts 118 52 306
Asset management 20 - 3
Reinsurers` share of life assurance
policyholder liabilities 24 12 8
Insurance contracts 24 1 2
Unit-linked investment contracts and similar
contracts - 8 -
Outstanding claims - 3 6
Reinsurers` share of general insurance
liabilities - - -
Deposits held with reinsurers - - -
Loans and advances 343 5,216 1
Policyholder loans 63 - 1
Other loans and advances 280 5,216 -
Investments and securities 34,519 13,392 4,466
Government and government-guaranteed securities 4,704 167 74
Listed other debt securities, preference shares
and debentures 2,324 2,798 46
Unlisted other debt securities, preference
shares and debentures 4,209 - 20
Listed equity securities 10,991 - 7
Unlisted equity securities 1,945 4 -
Listed pooled investments 672 408 3
Unlisted pooled investments 7,936 10,015 4,316
Short-term funds and securities treated as
investments 1,704 - -
Other securities 34 - -
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
Wealth Total Long
At 31 December 2010 Management Term
Savings
Assets
Goodwill and other intangible assets 1,463 3,100
Goodwill 655 1,197
Present value of acquired in-force business 593 1,407
Software development 20 38
Other intangibles 195 458
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
Insurance contracts 47 69
Investment contracts 711 1,187
Asset management 97 120
Reinsurers` share of life assurance policyholder
liabilities 907 951
Insurance contracts 83 110
Unit-linked investment contracts and similar
contracts 813 821
Outstanding claims 11 20
Reinsurers` share of general insurance liabilities - -
Deposits held with reinsurers - -
Loans and advances 185 5,745
Policyholder loans 185 249
Other loans and advances - 5,496
Investments and securities 40,856 93,233
Government and government-guaranteed securities 272 5,217
Listed other debt securities, preference shares and
debentures - 5,168
Unlisted other debt securities, preference shares
and debentures 140 4,369
Listed equity securities - 10,998
Unlisted equity securities - 1,949
Listed pooled investments 1,779 2,862
Unlisted pooled investments 37,671 59,938
Short-term funds and securities treated as
investments 994 2,698
Other securities - 34
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
Nedbank M&F USAM Other
637 33 1,181 14
453 13 1,155 13
- - - -
184 20 - 1
- - 26 -
1,079 - - -
546 25 16 1
19 - - 1
28 12 148 -
96 2 8 25
1 19 14 -
- 19 - -
- - - -
1 - 14 -
31 - - -
31 - - -
- - - -
- - - -
- 122 - -
- 2 - -
46,032 1 - -
- - - -
46,032 1 - -
6,886 553 218 109
1,997 - - -
3,730 2 - 52
- 4 - -
52 119 - -
241 8 - -
866 43 179 1
- - 39 3
- 377 - 19
- - - 34
47 - - -
190 - - -
943 82 138 62
1,350 - - 109
841 131 171 458
1 - - -
202 23 4 975
58,929 1,005 1,898 1,754
GBPm
Bermuda US Life Total
Consolidation
adjustments
- - - 4,965
- - - 2,831
- - - 1,407
- - - 243
- - - 484
- - - 1,079
- - - 1,015
- - 341 2,040
- - - 416
- - - 162
124 - - 1,534
124 - - 212
- - - 1,187
- - - 135
- - - 982
- - - 141
- - - 821
- - - 20
- - - 122
- - - 2
- - - 51,778
- - - 249
- - - 51,529
2,567 - 2,587 106,153
17 - 2,044 9,275
323 - 2,081 11,356
201 - - 4,574
- - 12,033 23,202
5 - 48 2,251
1,919 - 2,721 8,591
- - (16,528) 43,452
102 - 156 3,352
- - 32 100
- - - 156
- - - 190
1,038 - 292 3,932
1 - 476 2,503
74 - 689 4,132
- 12,384 - 12,391
874 47 (3,480) -
4,678 12,431 905 193,552
Nordic
At 31 December 2010 Notes
Emerging
Markets
Liabilities
Life assurance policyholder liabilities 35,676 12,248
Insurance contracts 14,122 45
Unit-linked investment contracts and similar
contracts 12,789 12,094
Other investment contracts 137 -
Discretionary participating investment contracts 8,249 -
Outstanding claims 379 109
General insurance liabilities - -
Third-party interests in consolidated funds - -
Borrowed funds E1 291 2
Senior debt securities - 2
Mortgage backed securities - -
Subordinated debt securities 291 -
Provisions F1 158 (38)
Deferred revenue 22 1
Life assurance 17 1
Asset management 5 -
General insurance - -
Deferred tax liabilities 225 98
Current tax payable 123 12
Trade, other payables and other liabilities 2,246 259
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
Total liabilities 38,999 18,550
Net assets 1,846 1,683
Equity
Equity attributable to equity holders of the
parent 1,847 1,683
Non-controlling interests (1) -
Non-controlling interests - ordinary shares F2(b) (1) -
Non-controlling interests - preference shares F2(b) - -
Total equity 1,846 1,683
Long-Term Savings
Retail Europe Wealth Total Long
Management Term Savings
At 31 December 2010
Liabilities
Life assurance policyholder
liabilities 4,460 41,468 93,852
Insurance contracts 130 1,109 15,406
Unit-linked investment
contracts and similar
contracts 4,308 40,347 69,538
Other investment contracts - - 137
Discretionary participating
investment contracts - - 8,249
Outstanding claims 22 12 522
General insurance liabilities - - -
Third-party interests in
consolidated funds - - -
Borrowed funds - 1 294
Senior debt securities - - 2
Mortgage backed securities - - -
Subordinated debt securities - 1 292
Provisions 4 50 174
Deferred revenue 197 498 718
Life assurance 194 408 620
Asset management 3 90 98
General insurance - - -
Deferred tax liabilities 124 224 671
Current tax payable 4 65 204
Trade, other payables and
other liabilities 94 544 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 4 99 227
Total liabilities 4,887 42,949 105,385
Net assets 672 2,366 6,567
Equity
Equity attributable to
equity holders of the parent 672 2,366 6,568
Non-controlling interests - - (1)
Non-controlling interests -
ordinary shares - - (1)
Non-controlling interests -
preference shares - - -
Total equity 672 2,366 6,567
Nedbank M&F USAM Other
846 - - -
136 - - -
- - - -
710 - - -
- - - -
- - - -
- 397 - -
- - - -
2,456 - 11 1,443
1,186 - 11 537
112 - - -
1,158 - - 906
(4) 40 3 47
1 11 - -
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)
GBPm
Bermuda US Life Total
Consolidation
adjustments
3,933 - - 98,631
3,635 - - 19,177
- - - 69,538
298 - - 1,145
- - - 8,249
- - - 522
- - - 397
- - 3,584 3,584
- - - 4,204
- - - 1,736
- - - 112
- - - 2,356
- - - 260
- - - 730
- - - 621
- - - 98
- - - 11
- - - 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
The net assets of Emerging Markets are stated after eliminating investments in
Group equity and debt instruments of GBP340 million (2009: GBP340 million) held
in policyholder funds. These include investments in the Company`s ordinary
shares and subordinated liabilities and preferred securities issued by the
Group`s banking subsidiary Nedbank Limited. All Emerging Markets debt relates to
life assurance. All other debt relates to other shareholders` net assets.
B6: Statement of financial position - segment information year ended 31 December
2009
Long-Term Savings
Emerging Nordic Retail Europe
At 31 December 2009
Markets
Assets
Goodwill and other intangible assets 106 1,035 563
Goodwill 91 219 204
Present value of acquired in-force
business - 624 265
Software development 6 1 3
Other intangibles 9 191 91
Mandatory reserve deposits with
central banks - - -
Property, plant and equipment 336 7 4
Investment property 1,518 - -
Deferred tax assets 54 108 17
Investments in associated
undertakings and joint ventures 20 2 -
Deferred acquisition costs 123 49 275
Insurance contracts - 2 -
Investment contracts 107 47 271
Asset management 16 - 4
Reinsurers` share of life assurance
policyholder liabilities 11 10 6
Insurance contracts 11 7 4
Unit-linked investment contracts and
similar contracts - - -
Outstanding claims - 3 2
Reinsurers` share of general
insurance liabilities - - -
Deposits held with reinsurers - 108 -
Loans and advances 340 4,209 2
Policyholder loans 58 2 2
Other loans and advances 282 4,207 -
Investments and securities 27,603 10,836 3,693
Government and government-guaranteed
securities 3,586 150 60
Listed other debt securities,
preference shares and debentures 1,825 1,453 53
Unlisted other debt securities,
preference shares and debentures 2,989 - 2
Listed equity securities 8,854 1 10
Unlisted equity securities 1,223 15 -
Listed pooled investments 457 547 -
Unlisted pooled investments 6,123 8,670 3,568
Short-term funds and securities
treated as investments 2,543 - -
Other securities 3 - -
Current tax receivable 4 4 16
Client indebtedness for acceptances - - -
Trade, other receivables and other
assets 630 155 58
Derivative financial instruments -
assets 327 9 -
Cash and cash equivalents 189 344 81
Non-current assets held for sale - - -
Inter-segment assets 1,352 59 23
Total assets 32,613 16,935 4,738
Wealth Total Long
Management Term Savings
At 31 December 2009
Assets
Goodwill and other intangible assets 1,602 3,306
Goodwill 656 1,170
Present value of acquired in-force business 671 1,560
Software development 35 45
Other intangibles 240 531
Mandatory reserve deposits with central banks - -
Property, plant and equipment 19 366
Investment property 2 1,520
Deferred tax assets 23 202
Investments in associated undertakings and joint
ventures - 22
Deferred acquisition costs 778 1,225
Insurance contracts 50 52
Investment contracts 654 1,079
Asset management 74 94
Reinsurers` share of life assurance policyholder
liabilities 772 799
Insurance contracts 45 67
Unit-linked investment contracts and similar
contracts 717 717
Outstanding claims 10 15
Reinsurers` share of general insurance liabilities - -
Deposits held with reinsurers - 108
Loans and advances 148 4,699
Policyholder loans 148 210
Other loans and advances - 4,489
Investments and securities 35,120 77,252
Government and government-guaranteed securities 251 4,047
Listed other debt securities, preference shares
and debentures - 3,331
Unlisted other debt securities, preference shares
and debentures 104 3,095
Listed equity securities - 8,865
Unlisted equity securities - 1,238
Listed pooled investments 437 1,441
Unlisted pooled investments 34,327 52,688
Short-term funds and securities treated as
investments 1 2,544
Other securities - 3
Current tax receivable 86 110
Client indebtedness for acceptances - -
Trade, other receivables and other assets 232 1,075
Derivative financial instruments - assets - 336
Cash and cash equivalents 278 892
Non-current assets held for sale - -
Inter-segment assets 277 1,711
Total assets 39,337 93,623
Nedbank M&F USAM Other
543 30 1,171 13
393 11 1,142 13
- - - -
150 19 1 -
- - 28 -
882 - - -
417 23 19 2
18 - - -
24 6 147 8
82 - 7 24
2 17 29 -
- 17 - -
- - - -
2 - 29 -
22 - - -
22 - - -
- - - -
- - - -
- 120 - -
- 3 - -
37,638 2 - -
- - - -
37,638 2 - -
5,501 425 162 43
2,044 - - -
2,532 2 - -
- 4 - -
41 87 - -
209 6 - -
675 41 122 -
- - 40 -
- 285 - -
- - - 43
51 - - 8
170 - - -
432 96 126 111
1,067 - - 154
660 79 173 425
1 - - -
148 48 1 1,363
47,658 849 1,835 2,151
GBPm
Bermuda Consolidation Total
adjustments
US Life
2 94 - 5,159
- - - 2,729
- 89 - 1,649
2 5 - 222
- - - 559
- - - 882
- 1 - 828
- - 221 1,759
- 183 - 570
- - - 135
194 1,671 - 3,138
194 1,671 - 1,934
- - - 1,079
- - - 125
- 475 - 1,296
- 450 - 539
- - - 717
- 25 - 40
- - - 120
- 35 - 146
- 54 - 42,393
- 53 - 263
- 1 - 42,130
2,942 10,045 2,091 98,461
- 302 1,775 8,168
461 6,766 1,729 14,821
167 2,439 - 5,705
- - 9,503 18,496
37 - - 1,490
2,059 3 1,400 5,741
- 16 (12,678) 40,066
218 519 293 3,859
- - 69 115
- - - 169
- - - 170
878 213 120 3,051
- 187 802 2,546
32 4 717 2,982
- - - 1
564 74 (3,909) -
4,612 13,036 42 163,806
Long-Term Savings
At 31 December 2009 Emerging Nordic Retail Europe
Notes Markets
Liabilities
Life assurance
policyholder liabilities 28,655 9,514 3,689
Insurance contracts 11,783 74 121
Unit-linked investment
contracts and similar
contracts 9,838 9,335 3,560
Other investment contracts 115 - -
Discretionary
participating investment
contracts 6,639 - -
Outstanding claims 280 105 8
General insurance
liabilities - - -
Third-party interests in
consolidated funds - - -
Borrowed funds E1 272 26 -
Senior debt securities - 26 -
Mortgage backed securities - - -
Subordinated debt
securities 272 - -
Provisions F1 147 11 8
Deferred revenue 23 5 160
Life assurance 16 5 155
Asset management 7 - 5
General insurance - - -
Deferred tax liabilities 200 113 124
Current tax payable 70 20 2
Trade, other payables and
other liabilities 1,512 203 79
Liabilities under
acceptances - - -
Amounts owed to bank
depositors - 5,448 -
Derivative financial
instruments - liabilities 141 22 -
Non-current liabilities
held for sale - - -
Intersegment liabilities 51 37 -
Total liabilities 31,071 15,399 4,062
Net assets 1,542 1,536 676
Equity
Equity attributable to
equity holders of the
parent 1,540 1,536 676
Non-controlling interests 2 - -
Non-controlling interests
- ordinary shares F2(b) 2 - -
Non-controlling interests
- preference shares F2(b) - - -
Total equity 1,542 1,536 676
Total
Wealth Long
Management Term Savings
At 31 December 2009
Liabilities
Life assurance policyholder liabilities 35,554 77,412
Insurance contracts 901 12,879
Unit-linked investment contracts and similar
contracts 34,639 57,372
Other investment contracts - 115
Discretionary participating investment contracts - 6,639
Outstanding claims 14 407
General insurance liabilities - -
Third-party interests in consolidated funds - -
Borrowed funds E1 - 298
Senior debt securities - 26
Mortgage backed securities - -
Subordinated debt securities - 272
Provisions F1 33 199
Deferred revenue 456 644
Life assurance 379 555
Asset management 77 89
General insurance - -
Deferred tax liabilities 167 604
Current tax payable 37 129
Trade, other payables and other liabilities 550 2,344
Liabilities under acceptances - -
Amounts owed to bank depositors - 5,448
Derivative financial instruments - liabilities - 163
Non-current liabilities held for sale - -
Intersegment liabilities 181 269
Total liabilities 36,978 87,510
Net assets 2,359 6,113
Equity
Equity attributable to equity holders of the parent 2,359 6,111
Non-controlling interests - 2
Non-controlling interests - ordinary shares - 2
Non-controlling interests - preference shares - -
Total equity 2,359 6,113
Nedbank M&F USAM Other
661 - - -
95 - - -
- - - -
566 - - -
- - - -
- - - -
- 372 - -
- - - -
1,614 - - 1,397
484 - - 636
118 - - -
1,012 - - 761
1 21 2 40
1 9 - -
1 - - -
- - - -
- 9 - -
148 2 - 25
21 - 10 45
897 118 221 120
170 - - -
38,687 - - -
969 - - 59
- - - -
697 - 1,202 1,571
43,866 522 1,435 3,257
3,792 327 400 (1,106)
2,084 265 371 (1,552)
1,708 62 29 446
1,444 62 29 -
264 - - 446
3,792 327 400 (1,106)
GBPm
Bermuda US Life Total
Consolidation
adjustments
4,178 11,625 - 93,876
3,788 10,787 - 27,549
- - - 57,372
390 788 - 1,859
- - - 6,639
- 50 - 457
- - - 372
- - 2,906 2,906
- - - 3,309
- - - 1,146
- - - 118
- - - 2,045
- - - 263
- - - 654
- - - 556
- - - 89
- - - 9
- 126 - 905
5 - - 210
(9) 359 255 4,305
- - - 170
- - - 44,135
- 9 790 1,990
- - - -
- 170 (3,909) -
4,174 12,289 42 153,095
438 747 - 10,711
438 747 - 8,464
- - - 2,247
- - - 1,537
- - - 710
438 747 - 10,711
C: Other key performance information
C1: Operating profit adjusting items
(a) Summary of adjusting items
In determining the adjusted operating profit of the Group for core operations
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
Notes
Year ended 31 December 2010
Emerging Nordic
Markets
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 losses on Group
debt instruments C1(h) - -
Total adjusting items (11) (90)
Tax on adjusting items D1(d) 10 3
Non-controlling interest in adjusting itemsF11(a)(iii) - -
Total adjusting items after tax and
non-controlling interests (1) (87)
Year ended 31 December 2010 Long-Term Savings
Retail Wealth Long-Term
Notes 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
losses on Group debt
instruments C1(h) - - -
Total adjusting items (40) (145) (286)
Tax on adjusting items D1(d) 15 5 33
Non-controlling interest in
adjusting items - - -
Total adjusting items after tax
and non-controlling interests F11(a)(iii) (25) (140) (253)
GBPm
Notes
Year ended 31 December 2009*
Emerging Nordic
Markets
Income/(expense)
Goodwill impairment and impact of
acquisition accounting C1(b) (1) (12)
(Loss)/profit on disposal of subsidiaries,
associated undertakings and strategic
investments C1(c) (51) -
Short-term fluctuations in investment return C1(d) (38) (1)
Investment return adjustment for Group
equity and debt instruments held in life
funds C1(e) (109) -
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 gains on Group
debt instruments C1(h) - -
Total adjusting items (199) (13)
Tax on adjusting items D1(d) (1) 9
Non-controlling interest in adjusting items F2(a)(iii) - -
Total adjusting items after tax and
non-controlling interests (200) (4)
Year ended 31 December 2009* Long-Term Savings
Retail Wealth Long-Term
Europe Management Savings
Income/(expense)
Goodwill impairment and impact
of acquisition accounting (243) (167) (423)
(Loss)/profit on disposal of
subsidiaries, associated
undertakings and strategic
investments - (7) (58)
Short-term fluctuations in
investment return 1 (88) (126)
Investment return adjustment
for Group equity and debt
instruments held in life funds - - (109)
Dividends declared to holders
of perpetual preferred callable
securities - - -
US Asset Management equity
plans and non-controlling
interests - - -
Credit-related fair value gains
on Group debt instruments - - -
Total adjusting items (242) (262) (716)
Tax on adjusting items 14 37 59
Non-controlling interest in
adjusting items - - -
Total adjusting items after tax
and non-controlling interests (228) (225) (657)
* The year ended 31 December 2009 has been restated to reflect US Life as non-
core and discontinued.
GBPm
Nedbank M&F USAM Other
Total
(6) - (2) - (214)
(1) - (21) - (22)
- (7) - (6) (83)
- - - - (10)
- - - 44 44
- - 6 - 6
(20) - - (183) (203)
(27) (7) (17) (145) (482)
7 (4) 6 (6) 36
30 - (9) - 21
10 (11) (20) (151) (425)
GBPm
Nedbank M&F USAM Other Total
Restated
(4) - (2) - (429)
- - 1 7 (50)
- (10) - (30) (166)
- - - - (109)
- - - 45 45
- - (1) - (1)
- - - (263) (263)
(4) (10) (2) (241) (973)
- 3 2 64
19 7 (3) - 23
15 - (3) (241) (886)
(b) Goodwill impairment and impact of acquisition accounting
Acquisition date deferred acquisition costs and deferred revenues 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 and the movements in certain
acquisition date provisions.
Goodwill impairment and acquisition accounting adjustments to adjusted operating
profit are summarised below:
Year ended 31 December 2010
Emerging Nordic Retail Wealth
Markets 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)
Year ended 31 December 2009*
Emerging Nordic Retail Wealth
Markets Europe Management
Amortisation of acquired PVIF - (106) (37) (86)
Amortisation of acquired
deferred costs and revenue 1 21 (5) 34
Amortisation of other acquired
intangible assets (2) (25) (14) (36)
Change in acquisition date
provisions - 98 - -
Goodwill impairment - - (187) (79)
(1) (12) (243) (167)
Nedbank USAM Total
Restated
Amortisation of acquired PVIF - - (229)
Amortisation of acquired deferred costs and
revenue - - 51
Amortisation of other acquired intangible assets (4) (2) (83)
Change in acquisition date provisions - - 98
Goodwill impairment - - (266)
(4) (2) (429)
* The year ended 31 December 2009 has been restated to reflect US Life as non-
core and discontinued.
(c) (Loss)/profit on disposal of subsidiaries, associated undertakings and
strategic investments On 27 August 2010 USAM disposed of a subsidiary at a loss
of GBP21 million.
In August 2008, an agreement with ABN AMRO Asset Management Asia and their
parent company, Fortis Bank was entered into to acquire the 49% stake that
Fortis held in AATEDA, a major Chinese asset management joint venture for EUR165
million. On 27 May 2009 the termination of this agreement with ABN AMRO Asset
Management Asia and Fortis Bank was announced, with an exit fee of GBP41 million
which has been accounted for as a loss on disposal.
(Loss)/profits on the disposal of subsidiaries, associated undertakings and
strategic investments are analysed below:
GBPm
Year ended Year ended
31 December 31 December
2010 2009
Emerging Markets - (51)
Wealth Management - (7)
Total Long-Term Savings - (58)
Nedbank (1) -
USAM (21) 1
Other - 7
(Loss)/profit on disposal of subsidiaries,
associated undertakings and strategic investments (22) (50)
(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, the return is an average value of investible assets
supporting shareholders` funds and insurance liabilities, adjusted for net fund
flows.
%
Year ended Year ended
Long-term investment rates 31 December 31 December
2010 2009
Emerging Markets 9.4 13.3
Nordic 1.8 1.8
Retail Europe 2.5 2.8
Wealth Management 2.0 5.0
M&F 9.4 13.3
Analysis of short-term fluctuations in investment return
Year ended 31 December 2010 Emerging Nordic Retail Wealth
Markets 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
GBPm
Year ended 31 December 2010 Total M&F Other Total
Long-Term
Savings
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
Emerging Nordic Retail Europe Wealth
Year ended 31 December
2009** Markets Management*
Long-term investment
return 126 1 1 109
Less: Actual
shareholder investment
return 88 - 2 21
Short-term
fluctuations in
investment return 38 1 (1) 88
GBPm
Year ended 31 December
2009** Total M&F Other Total
Long-Term Restated
Savings
Long-term investment
return 237 60 91 388
Less: Actual
shareholder investment
return 111 50 61 222
Short-term
fluctuations in
investment return 126 10 30 166
* Wealth Management long-term investment return includes of GBP121 million
(2009: GBP96m) in respect of income tax attributable to policyholder returns.
** The year ended 31 December 2009 has been restated to reflect US Life as non-
core and discontinued.
(e) Investment return adjustment for Group equity and debt instrument 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 2010 the investment return adjustment increased adjusted operating profit
by GBP10 million (2009: increase of GBP109 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 GBP44 million in the year ended 31 December 2010 (2009: GBP45
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 equity.
(g) US Asset Management equity plans and non-controlling interests
US Asset Management has a number of long-term incentive arrangements with senior
employees in 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 loss
recognised in 2010 was GBP6 million (2009: gain GBP1 million).
The Group has issued put options to senior 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 31 December 2010 these instruments were revalued, the impact of which was
GBP3 million (2009: GBP4 million).
(h) Credit-related fair value gains and losses on Group debt instruments
The narrowing of credit spread of the Group`s debt instruments in the market
price has resulted in losses of GBP183 million (2009: losses due to narrowing of
GBP263 million) on Other operating segments and GBP20 million (2009: GBP nil) 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 key foreign business segments to Sterling are:
Income Statement of
statement financial position
(average rate) (closing rate)
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
31 December 2009
Rand 13.1746 11.9172
US Dollars 1.5655 1.6148
Swedish Kronor 11.9743 11.5562
Euro 1.1227 1.1268
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
year attributable to ordinary equity shareholders by the weighted average number
of ordinary shares in issue during the year excluding own shares held in
policyholder funds, ESOP trusts, Black Economic Empowerment trusts and other
related undertakings.
GBPm
Year ended Year ended
31 December 31 December
2010 2009
Profit/(loss) for the financial year attributable
to equity holders of the parent from continuing
operations 431 (269)
Loss for the financial year attributable to equity
holders of the parent from discontinued operations (713) (71)
Loss for the financial year attributable to equity
holders of the parent (282) (340)
Dividends declared to holders of perpetual
preferred callable securities (32) (32)
Loss attributable to ordinary equity holders (314) (372)
Total dividends declared to holders of perpetual preferred callable securities
of GBP44 million in 2010 (2009: GBP45 million) are stated net of tax credits of
GBP12 million (2009: GBP13 million).
Millions
Year ended Year ended
31 December 31 December
2010 2009
Weighted average number of ordinary shares in issue 5,422 5,277
Shares held in charitable foundations (7) (7)
Shares held in ESOP trusts (56) (41)
Adjusted weighted average number of ordinary shares 5,359 5,229
Shares held in life funds (205) (236)
Shares held in Black Economic Empowerment trusts (295) (235)
Weighted average number of ordinary shares 4,859 4,758
Basic earnings per ordinary share (pence) (6.5) (7.8)
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
Year ended Year ended
31 December 31 December
2010 2009
Weighted average number of ordinary shares 4,859 4,758
Adjustments for share options held by ESOP trusts 137 -
Adjustments for shares held in Black Economic
Empowerment trusts 295 -
5,291 4,758
Diluted earnings per ordinary share (pence) (6.1) (7.8)
No adjustments to the weighted average number of ordinary shares have been
effected for 2009 in order to calculate the diluted earnings per ordinary share
as any adjustments would be antidilutive.
(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 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 businesses, adjusted operating profit
excludes goodwill impairment, the impact of acquisition accounting, revaluations
of put options related to long-term incentive schemes, the impact of closure of
unclaimed shares trusts, profit/(loss) on disposal of subsidiaries, associated
undertakings and strategic investments, dividends declared to holders of
perpetual preferred callable securities, income/(expense) from closure of
unclaimed shares trusts and fair value gains/(losses) on Group debt instruments.
The reconciliation of profit for the financial year to adjusted operating profit
after tax attributable to ordinary equity holders is as follows:
GBPm
Year ended Year ended
31 December 31 December
2010 2009
Restated
Loss for the financial year attributable to equity
holders of the parent (282) (340)
Adjusting items 482 973
Tax on adjusting items (36) (64)
Non-core operations (1) (12)
Loss from discontinued operations - US Life 713 71
Non-controlling interest on adjusting items (21) (23)
Adjusted operating profit after tax attributable
to ordinary equity holders 855 605
Adjusted weighted average number of ordinary
shares - (millions) 5,359 5,229
Adjusted operating earnings per ordinary share -
(pence) 16.0 11.6
(c) Headline earnings per share
In accordance with the JSE Limited (JSE) listing 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.
Year ended
31 December 2010
Gross Net
Loss for the financial year attributable to equity holders of
the parent (282) (282)
Dividends declared to holders of perpetual preferred callable
securities (32) (32)
Loss attributable to ordinary equity holders (314) (314)
Adjustments:
Impairments of goodwill and intangible assets 20 20
Impairment of discontinued operations 827 827
Loss/(profit) on disposal of subsidiaries, associated
undertakings and strategic investments 22 17
Realised gains/losses (including impairments) on
available-for-sale financial assets (12) (12)
Headline earnings 543 538
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
GBPm
Year ended
31 December 2009
Restated
Gross Net
Loss for the financial year attributable to equity holders
of the parent (340) (340)
Dividends declared to holders of perpetual preferred
callable securities (32) (32)
Loss attributable to ordinary equity holders (372) (372)
Adjustments:
Impairments of goodwill and intangible assets 266 266
Impairment of discontinued operations - -
Loss/(profit) on disposal of subsidiaries, associated
undertakings and strategic investments 50 53
Realised gains/losses (including impairments) on
available-for-sale financial assets 239 239
Headline earnings 183 186
Weighted average number of ordinary shares 4,758 4,758
Diluted weighted average number of ordinary shares 5,109 5,109
Headline earnings per share (pence) 3.8 3.9
Diluted headline earnings per share (pence) 3.6 3.6
C4: Dividends
Dividends paid were as follows:
GBPm
Year ended Year ended
31 December 31 December
2010 2009
2009 Final dividend paid - 1.5p per 10p share 77 -
2010 Interim dividend paid - 1.1p per 10p share 54 -
Dividends to ordinary equity holders 131 -
Dividends declared to holders of perpetual
preferred callable securities 44 45
Dividend payments for the year 175 45
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 and November 2010, GBP22 million and GBP22 million respectively were
declared and paid to holders of perpetual preferred callable securities (March
2009: GBP22 million and November 2009: GBP23 million).
A final dividend of 2.9 pence per 10p share has been recommended by the
directors. Subject to shareholders` approval, the dividend will be paid on 31
May 2011 to shareholders on the register at the close of business on 15 April
2011. The dividend will absorb an estimated GBP142 million of shareholders`
funds before taking into account any election for the scrip dividend
alternative. The Company is planning to offer a scrip dividend alternative for
eligible shareholders.
D: Other income statement notes
D1: Income tax expense/(credit)
(a) Analysis of total income tax expense/(credit)
GBPm
Year ended Year ended
31 December 31 December
2010 2009
Restated
Current tax
United Kingdom tax
Corporation tax 23 46
Overseas tax
South Africa 346 257
United States (4) (7)
Europe 61 49
Secondary Tax on Companies (STC) 4 13
Prior year adjustments (1) 14
Total current tax 429 372
Deferred tax
Origination and reversal of temporary differences (10) 105
Changes in tax rates/bases (4) -
Write down/recognition of deferred tax assets 41 (77)
Total deferred tax 27 28
Total income tax expense/(credit) 456 400
(b) Reconciliation of total income tax
expense/(credit)
GBPm
Year ended Year ended
31 December 31 December
2010 2009
Restated
Profit before tax 1,145 353
Tax at standard rate of 28% (2009: 28%) 321 99
Different tax rate or basis on overseas operations (22) (2)
Untaxed and low taxed income (171) (83)
Disallowable expenses 124 180
Net movement on deferred tax assets not recognised 92 69
Effect on deferred tax of changes in tax rates (7) (2)
STC (3) 19
Income tax attributable to policyholder returns 134 142
Other (12) (22)
Total income tax expense/(credit) 456 400
(c) Income tax relating to components of other
comprehensive income
GBPm
Year ended Year ended
31 December 31 December
2010 2009
Restated
Preferred perpetual callable securities (12) (13)
Other (1) -
Income tax expense/(credit) - continuing
operations (13) (13)
Fair value gains/(losses) 181 428
Shadow accounting (114) (18)
Income tax expense/(credit) - discontinued
operations 67 410
Income tax expense/(credit) relating to
components of other
comprehensive income 54 397
(d) Income tax on adjusted operating profit
GBPm
Year ended Year ended
31 December 31 December
2010 2009
Restated
Income tax expense/(credit) 456 400
Tax on adjusting items
Impact of acquisition accounting 35 40
Profit on disposal of subsidiaries, associated
undertakings and strategic investments 5 (2)
Short-term fluctuations in investment return 3 39
Income tax attributable to policyholders returns (149) (192)
Tax on dividends declared to holders of perpetual
preferred callable securities recognised in equity (12) (13)
Fair value gains and losses on group debt
instruments 5 -
Tax on non-core operations 4 11
Income tax on adjusted operating profit 347 283
E1: Borrowed funds
Group Nedbank At
excluding 31 December
Notes Nedbank 2010
Senior debt securities and
term loans E1(a) 550 1,186 1,736
Mortgage backed securities E1(b) - 112 112
Subordinated debt securities
(net of Group holdings) E1(c) 1,198 1,158 2,356
Borrowed funds 1,748 2,456 4,204
Other issues treated as equity
for accounting purposes
US$750 million cumulative
preference F2(b) 458
securities
EUR500 million perpetual
preferred callable securities F2(b) 338
GBP350 million perpetual
preferred callable securities F2(b) 350
Total: Book value 2,894
Nominal value of the above 3,045
GBPm
Group Nedbank At
excluding 31 December
Nedbank 2009
Senior debt securities and term loans 662 484 1,146
Mortgage backed securities - 119 119
Subordinated debt securities (net of
Group holdings) 1,034 1,010 2,044
Borrowed funds 1,696 1,613 3,309
Other issues treated as equity for
accounting purposes
US$750 million cumulative preference 458
securities
EUR500 million perpetual preferred callable
securities 338
GBP350 million perpetual preferred
callable securities 350
Total: Book value 2,842
Nominal value of the above 3,162
The table below is a maturity analysis of liability cash flows based on
contractual maturity dates for borrowed funds. Maturity analysis is undiscounted
and based on year end exchange rates.
Group Nedbank At
excluding 31 December
Nedbank 2010
Less than 1 year 498 323 821
Greater than 1 year and less than 5 years 921 2,164 3,085
Greater than 5 years 880 722 1,602
Total 2,299 3,209 5,508
GBPm
Group Nedbank At
excluding 31 December
Nedbank 2009
Less than 1 year 219 156 375
Greater than 1 year and less than 5 years 1,413 1,226 2,639
Greater than 5 years 899 1,033 1,932
Total 2,531 2,415 4,946
(a) Senior debt securities and term loans
Group Nedbank At
excluding 31 December
Nedbank 2010
Floating rate notes1 86 720 806
Fixed rate notes2 462 466 928
Revolving credit facility3 - - -
Term loan and other loans 2 - 2
Total senior debt securities and term
loan 550 1,186 1,736
GBPm
Group Nedbank At
excluding 31 December
Nedbank 2009
Floating rate notes1 114 265 379
Fixed rate notes2 548 219 767
Revolving credit facility3 - - -
Term loan and other loans - - -
Total senior debt securities and term
loan 662 484 1,146
Senior debt securities and term loan comprise:
1. Floating rate notes
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%.
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$50 million repayable September 2011 at 3 month LIBOR plus 0.50%.
- EUR22 million repayable January 2010 at 3 month EURIBOR plus 0.35%. - repaid
- SEK50 million repayable March 2010 at 3 month STIBOR plus 0.38% - repaid.
- GBP3 million note repayable in December 2010, with holders having the option
to elect for early redemption every six months with
coupon referenced against six month LIBOR less 0.50% - repaid.
2. Fixed rate notes
Nedbank
- R130 million unsecured senior debt repayable October 2024 at zero coupon.
- R3,244 million unsecured senior debt repayable September 2015 at 10.55%.
- R762 million unsecured senior debt repayable September 2019 at 11.39%.
- R478 million unsecured senior debt repayable April 2015 at R157 +1.75%.
Group excluding Nedbank
- GBP500 million euro bond repayable October 2016 at 7.125%.
- US$ 16.5 million secured senior debt repayable August 2014 at 5.23%.
- EUR30 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.
- EUR20 million euro bond repayable August 2013, capital and interest swapped
into floating rate US dollars at 3 month LIBOR + 1.30% - repaid.
The total fair value of the swap derivatives associated with the Senior notes is
GBPnil (2009: GBP12 million). These are recognised as assets and are included
within note E5.
3. Revolving credit facilities and irrevocable letters of credit
The Group has a GBP1,250 million five-year multi-currency revolving credit
facility, which had an original maturity date of September 2010. On 18 August
2007 syndicate banks agreed to extend the maturity date of GBP1,232 million of
the facility until September 2012. At 31 December 2010 GBP499 million (2009:
GBP480 million) of this facility was utilised, GBPnil (2009: GBPnil) in the form
of drawn debt and GBP499 million (2009: GBP480 million) in the form of
irrevocable letters of credit.
The Group has committed standby facilities totalling GBP275 million, which were
put in place in December 2010 and have a latest maturity date of 29 June 2012.
The Group has a SEK1,500 million revolving credit facility, which has a maturity
date of 1 July 2011. At 31 December 2010 this facility was undrawn (2009:
undrawn).
(b) Mortgage backed securities - Nedbank
GBPm
At At
31 December 31 December
2010 2009
R291 million notes (class A1) repayable 18
November 2039 (11.467%) 4 25
R1.4 billion notes (class A2A) repayable 18
November 2039 (11.817%) 96 84
R98 million notes (class B note) repayable 18
November 2039 (12.067%) 7 6
R76 million notes (class C note) repayable 18
November 2039 (13.317%) 5 4
112 119
(c) Subordinated debt securities GBPm
At At
31 December 31 December
2010 2009
Nedbank
R1.5 billion repayable 24 April 2016 (7.85%)(1) 148 126
R1.8 billion repayable 20 September 2018 (9.84%)(2) 186 149
R500 million repayable on 30 December 2010 (8.38%)(3) - 41
R650 million repayable 8 February 2017 (9.03%)(4) 67 55
R1.7 billion repayable 8 February 2019 (8.9%)(5) 171 138
R2.0 billion repayable 6 July 2022 (3 month JIBAR
plus 0.47%)(6) 198 171
R500 million repayable 15 August 2012 (3 month
JIBAR plus 0.45%)(7) 49 42
R1.0 billion repayable 17 September 2020 (10.54%)(8) 105 84
R500 million repayable 14 December 2017 (3 month
JIBAR plus 0.70%)(9) 49 42
R120 million repayable 14 December 2017 (10.38%)(10) 12 10
R487 million repayable 20 November 2018 (15.05%)(1) 51 41
R1,265 million repayable 20 November 2018 (JIBAR
plus 4.75%)(12) 125 108
R300 million repayable on 4 December 2013 (JIBAR +
2.5%)(13) 15 13
US$100 million repayable on 3 March 2022 (3 month
USD LIBOR)(14) 65 62
1,241 1,082
Less: banking subordinated debt securities held by
other Group companies (83) (72)
Banking subordinated debt securities (net of Group
holdings) 1,158 1,010
Group excluding Nedbank
R3.0 billion repayable 27 October 2015 (8.9%)(15) 293 252
GBP300 million repayable 21 January 2016 (5.0%)(16) 296 252
R250 million preference shares repayable 9 June
2011(17) - repaid - 21
EUR750 million repayable 18 January 2017 (4.5%)(18) 609 509
1,198 1,034
Total subordinated liabilities 2,356 2,044
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.
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 2 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, had a maturity date of 21 January
2016 and paid 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
after the balance sheet date, 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.
F1: Provisions
GBPm
At At
31 December 31 December
2010 2009
Surplus property 16 20
Client compensation 39 30
Warranties on sale of business 3 17
Liability for long service leave 57 49
Restructuring 15 5
Provision for donations 89 84
Other provisions 92 90
311 295
Post employment benefits (51) (32)
Total 260 263
GBPm
Surplus Client Warranties Liability
property compensation on sale of for long
business service
leave
Year ended 31 December
2010
Balance at beginning of
the year 20 30 17 49
Unused amounts reversed - - (10) -
Unwind of discount - - - -
Charge to income
statement - 7 - 28
Utilised during the year (4) (9) - (27)
Foreign exchange and
other movements - 11 (4) 7
Balance at end of the
year 16 39 3 57
Restruct- Provision for Other Total
uring donations
Year ended 31 December 2010
Balance at beginning of the
year 5 84 90 295
Unused amounts reversed - - (19) (29)
Unwind of discount - - - -
Charge to income statement 9 - 25 69
Utilised during the year - - (5) (45)
Foreign exchange and other
movements 1 5 1 21
Balance at end of the year 15 89 92 311
GBPm
Surplus Client Warranties Liability
property compensation on sale of for long
business service
leave
Year ended 31 December
2009
Balance at beginning of
the year 23 27 111 38
Unused amounts reversed - (2) (54) -
Unwind of discount 1 - - -
Charge to income
statement 3 (3) - 24
Utilised during the year (7) (2) (26) (20)
Foreign exchange and
other movements - 10 (14) 7
Balance at end of the year 20 30 17 49
Restruct- Provision for Other Total
Year ended 31 December 2009 uring donations
Balance at beginning of the year - 80 201 480
Unused amounts reversed - - (52) (108)
Unwind of discount - - - 1
Charge to income statement 5 - 8 37
Utilised during the year - - (65) (120)
Foreign exchange and other
movements - 4 (2) 5
Balance at end of the year 5 84 90 295
2010 provisions in relation to surplus property amounted to GBP16 million (2009:
GBP20 million). These relate to the onerous costs of vacant properties leased
by the Group of which GBP16 million (2009: GBP13 million) is estimated to be
payable after more than one year.
Provisions in relation to client compensation were GBP39 million (2009: GBP30
million), primarily relating to possible mis-selling of guarantee contracts in
Wealth Management. GBP1 million (2009: GBP5 million) is estimated to be payable
after more than one year.
Provisions in relation to warranties on the sale of businesses amounted to GBP3
million (2009: GBP17 million). GBP3 million (2009: GBP9 million) is estimated
to be payable after more than one year.
The liability for long service leave of GBP57 million (2009: GBP49 million)
relates to provision for staff payments for long serving employees, all of which
estimated to be payable in less than one year.
Provisions in relation to restructuring were GBP15 million (2009: GBP5 million),
primarily in respect of consolidation and related office relocation for Wealth
Management. GBP11 million (2009: GBP3 million) is estimated to be payable after
more than one year.
The provision for donations is held by Emerging Markets. It relates to the
payment of charitable donations in future periods to which the Group is
committed, out of the funds made available on the closure of the Group`s
unclaimed shares trusts, which were set up as part of the demutualisation in
1999 and closed in 2006 of which GBP70 million (2009: GBP84 million) is
estimated to be payable after more than one year.
Other provisions includes provisions for tax on long-term staff benefits and
legal fees.
Where material, provisions are discounted at discount rates specific to the
risks inherent in the liability. The timing and final amounts of payments in
respect of some of the provisions, particularly those in respect of litigation
claims and similar actions against the Group, are uncertain and could result in
adjustments to the amounts recorded. Of the total provisions recorded above,
GBP163 million (2009: GBP188 million) is estimated to be payable after more
than one year.
F2: Non-controlling interests
(a) Income statement
(i) Ordinary shares
The non-controlling interests charge to profit for the financial year has been
calculated on the basis of the Group`s effective ownership of the subsidiaries
in which it does not own 100% of the ordinary equity. The principal subsidiaries
where a non-controlling interest exists are the Group`s banking business in
South Africa and, prior to the acquisition of the non-controlling interest in
Mutual & Federal in February 2010 (see F2(b)), the general insurance business in
South Africa. For the year ended 31 December 2010 the non-controlling interests
attributable to ordinary shares was GBP196 million (2009: GBP158 million).
(ii) Preferred securities
GBPm
At At
31 December 31 December
2010 2009
R2,000 million non-cumulative preference shares 14 16
R773 million non-cumulative preference shares 5 6
R300 million non-cumulative preference shares 2 2
US$750 million cumulative preferred securities 38 38
R364 million non-cumulative preference shares 3 2
Non-controlling interests - preferred securities 62 64
(iii) Non-controlling interests - adjusted operating profit
The following table reconciles non-controlling interests` share of profit for
the financial year to non-controlling interests` share of adjusted operating
profit:
GBPm
Year ended Year ended
31 December 31 December
2009
Reconciliation of non-controlling interests share
of profit for the financial year
The non-controlling interests charge is analysed
as follows:
Non-controlling interests - ordinary shares 196 158
Goodwill impairment and impact of acquisition
accounting 2 1
Short-term fluctuations in investment return - 2
Income attributable to Black Economic Empowerment
trusts of listed subsidiaries 22 23
Fair value gains on group debt instruments 6 -
Income attributable to US Asset Management
non-controlling interests (9) (3)
Non-controlling interests share of adjusted
operating profit 217 181
The Group uses revised weighted average effective ownership interests when
calculating the non-controllable interest applicable to the adjusted operating
profit of its South Africa banking and, prior to the acquisition of the
non-controlling interest in February 2010, general insurance businesses.
This reflects the legal ownership of these businesses following the
implementation for Black Economic Empowerment (BEE) schemes in 2005. In
accordance with IFRS accounting rules the shares issued for BEE purposes
are deemed to be, in substance, options. Therefore the effective ownership
interest of the minorities reflected in arriving at profit after tax in the
consolidated income statement is lower than that applied in arriving at
adjusted operating profit after tax. In 2010 the increase in adjusted
operating profit attributable to non-controlling interests as a result of
this was GBP22 million (2009: GBP23 million).
(b) Statement of financial position
(i) Ordinary shares
GBPm
Reconciliation of movements in non-controlling
interests
Year to Year to
31 December 31 December
2010 2009
Balance at beginning of the year 1,537 1,147
Non-controlling interests` share of profit 196 158
Non-controlling interests` share of dividends paid (88) (80)
Net acquisition of interests (116) 63
Foreign exchange and other movements 234 249
Balance at end of the year 1,763 1,537
Acquisition on 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 issues 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 is being settled in four instalments out of existing cash resources
of Nedbank Limited. The total amount, which will included interest at the
three/month JIBAR, amounted to GBP165 million.
(ii) Preferred securities
GBPm
At At
31 December 31 December
2010 2009
R2,000 million non-cumulative preference shares1 140 140
R773 million non-cumulative preference shares2 71 71
R300 million non-cumulative preference shares3 12 12
US$750 million cumulative preferred securities4 458 458
R364 million non-cumulative preference shares5 25 25
R363 million non-cumulative preference shares6 17 17
R92 million non-cumulative preference status7 50 -
773 723
Unamortised issue costs (13) (13)
Total in issue at 31 December 760 710
Preferred securities are held at historic value of consideration received less
unamortised issue costs.
1. 200 million R10 preference shares issued by Nedbank Limited (Nedbank), the
Group`s banking subsidiary. These shares are non-redeemable and non- cumulative
and pay a cash dividend equivalent to 75% of the prime overdraft interest rate
of Nedbank. Preference shareholders are only entitled to vote during periods
when a dividend or any part of it remains unpaid after the due date for payment
or when resolutions are proposed that directly affect any rights attaching to
the shares or the rights of the holders. Preference shareholders will be
entitled to receive their dividends in priority to any payment of dividends
made in respect of any other class of Nedbank`s shares.
2. 77.3 million R10 preference shares issued at R10.68 per share by Nedbank
on the same terms as the securities described in (1) above.
3. 30 million R10 preference shares issued on 22 June 2006 by Imperial Bank
Limited a subsidiary of Nedbank Limited, on the same terms as the securities
described in (1) above.
4. US$750 million Guaranteed Cumulative Perpetual Preference Securities issued
on 19 May 2003 by Old Mutual Capital Funding L.P., a subsidiary of the Group.
Subject to certain limitations, holders of these securities are entitled to
receive preferential cash distributions at a fixed rate of 8.0% per annum
payable in arrears on a quarterly basis. The Group may defer payment of
distributions at its sole discretion, but such an act may restrict Old Mutual
plc from paying dividends on its ordinary shares for a period of 12 months.
Arrears of distributions are payable quarterly cumulatively only on redemption
of the securities or at the Group`s option. The securities are perpetual, but
may be redeemed at the discretion of the Group from 22 December 2008. The costs
of issue have been amortised over the period to 22 December 2008.
5. 35 million R10 preference shares issued in 16 April 2007 at R10.27 per share
by Nedbank on the same terms as the securities described in (1) above.
6. 36.3 million R10 preference shares issued by Nedbank in seven instalments
between September 09 and December 09 on the same terms as the securities
described in (1) above.
7. 9.2 million R10 preference shares issued by Nedbank on 11 March 2010 on the
same terms as the securities in note 1 above.
G: Other notes
G1: Contingent liabilities
GBPm
At At
31 December 31 December
2010 2009
Guarantees and assets pledged as collateral
security 2,883 2,375
Irrevocable letters of credit 207 605
Secured lending 775 555
Other contingent liabilities 55 49
The Group has pledged debt securities amounting to GBP1,379 million (2009:
GBP1,253 million) as collateral for deposits received under repurchase
agreements. These amounts represent assets that have been transferred but do not
qualify for derecognition under IAS 39.These transactions are entered into under
terms and conditions that are standard industry practice to securities borrowing
and lending activities.
Nedbank structured financing
Historically a number of the Group`s South African banking businesses entered
into structured finance transactions with third parties using the tax base of
these companies. Pursuant to the terms of the majority of these transactions,
the underlying third-party has contractually agreed to accept the risk of any
tax being imposed by the South African Revenue Service (SARS), although the
obligation to pay in the first instance rests with the Group`s companies. It
is only in limited cases where, for example, the credit quality of a client
becomes doubtful, or where the client has specifically contracted out of the
repricing of additional taxes, that the recovery from a client could be less
than the liability that could arise on assessment, in which case provisions are
made. SARS has examined the tax aspects of some of these types of structures
and SARS could assess these structures in a manner different to that initially
envisaged by the contracting parties. As a result Group companies could be
obliged to pay additional amounts to SARS and recover these from clients under
the applicable contractual arrangements.
Nedbank litigation
There are a number of legal or potential claims against Nedbank and its
subsidiary companies, the outcome of which cannot at present be foreseen. The
largest of these potential actions is a claim in the High Court for R1.3 billion
against Nedbank by certain shareholders in Pinnacle Point Group Limited,
alleging that Nedbank had a legal duty of care to them arising from a share
swap transaction. Nedbank and its legal advisers are of the opinion that the
claim is without merit and it will be defended vigorously.
Nedbank Securitisations
The Group through Nedbank is party to securitisation transactions involving
GreenHouse Funding (Pty) Limited ("GreenHouse"), a residential mortgage backed
securitisation programme, Octane ABS 1 (Pty) Limited ("Octane"), a
securitisation programme of auto loans advanced by a subsidiary of Nedbank,
and Synthesis Funding Limited ("Synthesis"), an asset backed commercial paper
mortgage programme.
Synthesis primarily invests in long-term rated bonds and offers capital market
funding to South African corporates. These assets are funded through the
issuance of short-dated investment-grade commercial paper to institutional
investors. All the commercial paper issued by Synthesis Funding Limited is
assigned the highest short-term RSA local-currency credit rating by both Fitch
and Moody`s, and is listed on the Bond Exchange of South Africa (BESA).
Under GreenHouse Series 1, R2 billion of residential mortgages originated by
Nedbank Retail was securitised. The commercial paper issued by GreenHouse has
been assigned credit ratings by both Fitch and Moody`s and is listed on the
JSE. The homeloans of GreenHouse continue to be recognised in the statement
of financial position of the Group, due to the significant risks and rewards
associated with the homeloans not being transferred to the external investors.
In January 2010 the arrears levels in GreenHouse breached the Arrear Trigger
level. As a result, the Stop Purchase Event remains in effect resulting in no
further home loans (other than servicing redraws - ie access facilities on
existing GreenHouse loans) being acquired for as long as the arrears level
remains above the Arrear Trigger level. As a consequence, all capital repayments
were directed to noteholders.
Octane is a securitisation programme of auto loans originated by a subsidiary
of Nedbank. The inaugural transaction entailed the securitisation of R2 billion
of motor vehicle loans under Octane Series 1. The commercial paper issued by
Octane Series 1 has been assigned credit ratings by Fitch and is listed on the
JSE. The auto loans of Octane continue to be recognised on the statement of
financial position of the Group due to the significant risks and rewards
associated with the autoloans not being transferred to the external investors.
During 2010 the transaction continued to repay investors in the normal course,
as envisaged in the transaction documents.
The following table shows the carrying amount of securitised assets, stated
at the amount of the Group`s continuing involvement where appropriate, together
with the associated liabilities, for each category of asset in the statement
of financial position:* GBPm
Carrying amount of Associated liabilities
assets
Year ended 31 December 2010
Loans and advances to customers
Residential mortgage loans 165 171
Motor vehicle financing ** 59 78
Other Financial Assets
Corporate and bank paper 155 -
Other securities 327 -
Commercial paper - 484
Total 706 733
Carrying amount of Associated liabilities
assets
Year ended 31 December 2009
Loans and advances to customers
Residential mortgage loans 166 169
Motor vehicle financing ** 122 134
Other Financial Assets
Corporate and bank paper 145 -
Other securities 338 -
Commercial paper - 484
Total 771 787
This table presents the gross balances within the securitisation schemes and
does not reflect any eliminations of intercompany and cash balances held by
the various securitisation vehicles.
' The value of any derivative instruments taken out to hedge any financial
' asset or liability, is adjusted against such instrument in this disclosure.
** Comparative information relating to motor vehicle financing has been restated
to only disclose auto loans relating to the Octane transaction. This approach
ensures consistency with the disclosure provided for Greenhouse and Synthesis.
The effect of this restatement is a GBP21 million decrease in the carrying
amount of motor vehicle financing assets.
G2: Events after the reporting date
On 21 January 2011 the Group redeemed the GBP300 million Tier 2 bond repayable
21 January, taking the option to redeem at the first call date.
H: Discontinued operations and held for sale operations
H1: 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 is
seeking to gain regulatory approval for the sale. The disposal is expected to be
completed at or around the end of the first quarter of 2011.
US Life has been classified as a discontinued operation in these financial
statements. Analysis of the results of discontinued operations is given below.
(a) Income statement from discontinued operations
GBPm
Year ended Year ended
31 December 2010 31 December
2009
Revenue 1,608 1,208
Expenses (1,557) (1,314)
Profit/(loss) before tax from discontinued
operations 51 (106)
Loss on remeasurement to fair value less
costs to sell (827) -
Loss before tax (776) (106)
Tax credit 63 35
Loss from discontinued operations after tax (713) (71)
(b) Statement of comprehensive income from discontinued operations
GBPm
Year ended Year ended
31 December 31 December
2010 2009
(Loss)/profit after tax for the financial year (713) (71)
Other comprehensive income for the financial year
Fair value (losses)/gains
Available-for-sale investments
Fair value gains/(losses) 530 975
Recycled to the income statement (12) 227
Shadow accounting (334) (9)
Currency translation differences/exchange
differences on translating foreign operations 29 (68)
Other movements (34) -
Income tax relating to components of other
comprehensive income (67) (410)
Total other comprehensive income for the financial
year 112 715
Total comprehensive (loss)/income for the
financial year (601) 644
Attributable to
Equity holders of the parent (601) 644
Total comprehensive (loss)/income for the
financial year (601) 644
(c) Net cash flows from discontinued operations
GBPm
Year ended Year ended
31 December 31 December
2010 2009
Operating activities (167) (191)
Investing activities 63 144
Net cash flows (104) (47)
H2: Disposal group held for sale
The assets and liabilities of the Group`s United States life business, US Life,
are shown as held for sale in these financial statements. The Group has entered
into an agreement to dispose of the controlling interest in US Life to Harbinger
OM LLC, an affiliate of Harbinger Capital Partners, and is seeking to gain
regulatory approval for the sale.
On reclassification of the assets and liabilities of US Life to held for sale
the fair value based on agreed terms with Harbinger less expected costs to sell
was assessed and an impairment charge was taken to write down the net assets to
this amount.
(a) Statement of financial position
Assets directly associated with disposal group held for sale
GBPm
At
31 December
2010
Deferred tax assets 78
Deferred acquisition costs 551
Reinsurers` share of long-term business policyholder
liabilities 506
Deposits held with reinsurers 36
Loans and advances 57
Investments and securities 10,794
Trade, other receivables and other assets 209
Derivative financial instruments - assets 127
Cash and cash equivalents 26
12,384
Liabilities directly associated with disposal group held for
sale
GBPm
At
31 December 2010
Long-term business policyholder liabilities 11,975
Deferred tax liabilities 22
Trade, other payables and other liabilities 222
12,219
Included within Investments and securities is GBP395 million of short term
cash balances.
In addition to the disposal group held for sale, namely US Life, the Group had
additional non-current assets held for sale of GBP7 million (2009: GBP1
million).
(b) Equity attributable to equity holders of the parent directly associated with
disposal group held for sale
GBPm
At
31 December 2010
Retained earnings 36
Available-for-sale reserve 18
Share-based payments reserve 1
55
08 March 2011
Sponsor:
Merrill Lynch South Africa (Pty) Limited
Date: 08/03/2011 09:09:01 Supplied by www.sharenet.co.za
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