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OML - Old Mutual plc - Index to the financial information for the year ended

Release Date: 09/03/2012 09:01
Code(s): OML
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OML - Old Mutual plc - Index to the financial information for the year ended 31 December 2011 OLD MUTUAL plc Issuer code: OLOML JSE Share code: OML NSX share code: OLM ISIN: GB0007389926 Old Mutual plc Index to the financial information For the year ended 31 December 2011 Statement of directors` responsibilities in respect of the preliminary announcement of the Annual Report and the financial statements Consolidated income statement Consolidated statement of comprehensive income Reconciliation of adjusted operating profit to profit after tax Consolidated statement of financial position Condensed consolidated statement of cash flows Consolidated statement of changes in equity A1: Accounting policies A2: Significant corporate activity and business changes B: Segment information C: Other key performance information D: Other income statement notes E: Borrowed funds F: Other statement of financial position notes G: Other notes H: Discontinued operations and held for sale operations 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 9 March 2012 9 March 2012 CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2011 GBPm Year ended Year ended 31 December 31 December Notes 2011 2010*
Revenue Gross earned premiums B3 3,584 3,460 Outward reinsurance (325) (300) Net earned premiums 3,259 3,160 Investment return (non-banking) (567) 9,553 Banking interest and similar income 3,669 3,913 Banking trading, investment and similar income 217 199 Fee and commission income, and income from service activities 3,035 2,823 Other income 171 149 Total revenues 9,784 19,797 Expenses Claims and benefits (including change in insurance contract provisions) (3,331) (4,956) Reinsurance recoveries 123 222 Net claims and benefits incurred (3,208) (4,734) Change in investment contract liabilities 1,889 (5,833) Losses on loans and advances (458) (548) Finance costs (58) (269) Banking interest payable and similar expenses (2,095) (2,441) Fee and commission expenses, and other acquisition costs (1,007) (917) Other operating and administrative expenses (3,852) (3,643) Goodwill impairment C1(b) (264) (1) Change in third-party interest in consolidated funds 2 (299) Total expenses (9,051) (18,685) Share of associated undertakings and joint ventures` profit after tax 10 5 Profit/(loss) on acquisition/disposal of subsidiaries, associated undertakings and strategic investments C1(c) 251 (22) Profit before tax 994 1,095 Income tax expense D1(a) (225) (391) Profit from continuing operations after tax 769 704 Discontinued operations Profit/(loss) from discontinued operations after tax H1(a) 198 (728) Profit/(loss) after tax for the financial year 967 (24) Attributable to Equity holders of the parent 667 (282) Non-controlling interests Ordinary shares F2(a) 238 196 Preferred securities F2(a) 62 62 Profit/(loss) after tax for the financial year 967 (24) Earnings per share Basic earnings per share based on profit from continuing operations (pence) 8.9 8.5 Basic earnings per share based on profit/(loss) from discontinued operations (pence) 4.0 (15.0) Basic earnings per ordinary share (pence) C3(a) 12.9 (6.5) Diluted earnings per share based on profit from continuing operations (pence) 8.0 7.7 Diluted earnings per share based on profit/(loss) from discontinued operations (pence) 3.7 (13.8) Diluted earnings per ordinary share (pence) C3(a) 11.7 (6.1) Weighted average number of shares - millions C3(a) 4,935 4,859 * The year ended 31 December 2010 has been restated to reflect Nordic as discontinued (see note A2). CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2011 GBPm
Year ended Year ended 31 December 31 December Notes 2011 2010* Profit/(loss) after tax for the financial year 967 (24) Other comprehensive income for the financial year Fair value gain/(losses) Property revaluation 39 26 Net investment hedge 28 (87) Available-for-sale investments Fair value (losses)/gains (1) 37 Recycled to the income statement (6) - Shadow accounting (22) (15) Currency translation differences/exchange differences on translating foreign operations (1,240) 882 Other movements (49) 17 Income tax relating to components of other comprehensive income D1(c) 12 13 Total other comprehensive income for the financial year from continuing operations (1,239) 873 Total other comprehensive income for the financial year from discontinued operations H1(b) (161) 278 Total other comprehensive income for the financial year (1,400) 1,151 Total comprehensive income for the financial year (433) 1,127 Attributable to Equity holders of the parent (408) 594 Non-controlling interests Ordinary shares (87) 428 Preferred securities 62 105 Total comprehensive income for the financial year (433) 1,127 * The year ended 31 December 2010 has been restated to reflect Nordic as discontinued (see note A2). RECONCILIATION OF ADJUSTED OPERATING PROFIT TO PROFIT AFTER TAX For the year ended 31 December 2011 GBPm Year ended Year ended
31 December 31 December Notes 2011 2010* Core operations Long-Term Savings B2 793 787 Nedbank B2 755 601 Mutual and Federal B2 89 103 USAM B2 67 72 1,704 1,563
Finance costs (128) (128) Long term investment return on excess assets 37 31 Net interest payable to non-core operations (23) (39) Corporate costs (57) (60) Other net (expenses)/income (18) 4 Adjusted operating profit before tax 1,515 1,371 Adjusting items C1(a) (329) (392) Non-core operations B2 (183) 15 Profit before tax (net of policyholder tax) 1,003 994 Income tax attributable to policyholder returns B2 (9) 101 Profit before tax 994 1,095 Total tax expense D1(a) (225) (391) Profit from continuing operations after tax 769 704 Profit/(loss) from discontinued operations after tax H1(a) 198 (728) Profit/(loss) after tax for the financial year 967 (24) Adjusted operating profit after tax attributable to ordinary equity holders of the parent GBPm Year ended Year ended 31 December 31 December 2011 2010*
Notes Adjusted operating profit before tax 1,515 1,371 Tax on adjusted operating profit D1(d) (341) (327) Adjusted operating profit after tax 1,174 1,044 Non-controlling interests - ordinary shares F2(a) (257) (217) Non-controlling - preferred securities F2(a) (62) (62) Adjusted operating profit after tax attributable to ordinary equity holders of the parent 855 765 Adjusted weighted average number of shares (millions) C3(a) 5,435 5,359 Adjusted operating earnings per share (pence) C3(b) 15.7 14.3 * The year ended 31 December 2010 has been restated to reflect Nordic as discontinued and non-core (see note A2). 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 acquisition/disposal of subsidiaries, associated undertakings and strategic investments, and fair value profits/(losses) on certain Group debt movements but includes dividends declared to holders of perpetual preferred callable securities. Bermuda, which is non-core, and Nordic and US Life, which are discontinued and non-core, are not included in adjusted operating profit. Adjusted operating earnings per 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 2011 GBPm
At At 31 December 31 December Notes 2011 2010 Assets Goodwill and other intangible assets 3,358 4,965 Mandatory reserve deposits with central banks 951 1,079 Property, plant and equipment 925 1,015 Investment property 2,064 2,040 Deferred tax assets 339 416 Investments in associated undertakings and joint ventures 111 162 Deferred acquisition costs 1,351 1,534 Reinsurers` share of policyholder liabilities 989 1,104 Loans and advances 39,764 51,778 Investments and securities 81,253 106,153 Current tax receivable 138 156 Client indebtedness for acceptances 237 190 Trade, other receivables and other assets 3,348 3,934 Derivative financial instruments - assets 1,795 2,503 Cash and cash equivalents 3,624 4,132 Non-current assets held for sale H2 22,138 12,391 Total assets 162,385 193,552 Liabilities Life assurance policyholder liabilities 76,350 98,631 General insurance liabilities 325 397 Third-party interests in consolidated funds 1,893 3,584 Borrowed funds E1 3,656 4,204 Provisions F1 269 260 Deferred revenue 701 730 Deferred tax liabilities 504 858 Current tax payable 199 238 Trade, other payables and other liabilities 4,243 5,661 Liabilities under acceptances 237 190 Amounts owed to bank depositors 40,978 53,236 Derivative financial instruments - liabilities 1,755 1,870 Non-current liabilities held for sale H2 20,417 12,219 Total liabilities 151,527 182,078 Net assets 10,858 11,474 Shareholders` equity Equity attributable to equity holders of the parent 8,488 8,951 Non-controlling interests Ordinary shares F2(b) 1,652 1,763 Preferred securities F2(b) 718 760 Total non-controlling interests 2,370 2,523 Total equity 10,858 11,474 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2011 GBPm Year ended Year ended 31 December 31 December 2011 2010*
Cash flows from operating activities - continuing operations Profit before tax 994 1,095 Non-cash movements in profit before tax 1,372 (515) Changes in working capital (1,415) 3,195 Taxation paid (402) (356) Net cash inflow from operating activities - continuing operations 549 3,419 Cash flows from investing activities Net disposals/(acquisitions) of financial investments 43 (2,349) Acquisition of investment properties (57) (162) Proceeds from disposal of investment properties 6 272 Acquisition of property, plant and equipment (184) (145) Proceeds from disposal of property, plant and equipment 43 - Acquisition of intangible assets (91) (76) Acquisition of interests in subsidiaries, associated undertakings and strategic investments 103 (75) Disposal of interests in subsidiaries, associated undertakings and strategic investments (329) (16) Net cash outflow from investing activities - continuing operations (466) (2,551) Cash flows from financing activities Dividends paid to Ordinary equity holders of the Company (97) (102) Non-controlling interests and preferred security interests (206) (196) Interest paid (excluding banking interest paid) (87) (79) Proceeds from issue of ordinary shares (including by subsidiaries to non-controlling interests) 10 5 Net acquisition of treasury shares (17) (25) Issue of subordinated and other debt 890 492 Subordinated and other debt repaid (905) (104) Net cash outflow from financing activities - continuing operations (412) (9) Net (decrease)/increase in cash and cash equivalents - continuing operations (329) 859 Net increase/(decrease) in cash and cash equivalents - discontinued operations 346 (364) Effects of exchange rate changes on cash and cash equivalents (594) 376 Cash and cash equivalents at beginning of the year 5,632 4,761 Cash and cash equivalents at end of the year 5,055 5,632 Consisting of Cash and cash equivalents in the statement of financial position 3,624 4,132 Mandatory reserve deposits with central banks 951 1,079 Cash and cash equivalents included in assets held for sale 480 421 Total 5,055 5,632 * The year ended 31 December 2010 has been restated to reflect Nordic as discontinued (see note A2). 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 GBP951 million (2010: GBP1,079 million) and cash and cash equivalents subject to consolidation of funds of GBP756 million (2010: GBP689 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. Included within the above is interest income received (including banking interest) of GBP4,936 million (2010: GBP5,196 million), dividend income received of GBP371 million (2010: GBP360 million) and interest paid (including banking interest) of GBP2,143 million (2010: GBP2,198 million). CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2011 Millions GBPm Number of shares issued Share
Year ended 31 December 2011 Notes and fully paid capital Shareholders` equity at beginning of the year 5,695 570 Profit after tax for the financial year - - Other comprehensive income Fair value gains/(losses) Property revaluation - - Net investment hedge - - Available-for-sale investments Fair value gains - - Recycled to the income statement - - Realised on disposal - - Exchange differences realised on disposal - - Shadow accounting - - Currency translation differences/exchange differences on translating foreign operations - - Other movements - - Income tax relating to components of other comprehensive income D1(c) - - Total comprehensive income for the financial year - - Dividends for the year C4 - - Other movements in share capital and payment reserve 7 - Merger reserve realised in the year - - Change in participation in subsidiaries F2 - - Reclassification of translation differences on non controlling interests - - Shares issued in lieu of cash dividend 99 10 Transactions with shareholders 106 10 Shareholders` equity at end of the year 5,801 580 GBPm Available-
Share Merger for-sale Year ended 31 December 2011 premium reserve reserve Shareholders` equity at beginning of the year 795 2,845 225 Profit after tax for the financial year - - - Other comprehensive income Fair value gains/(losses) Property revaluation - - - Net investment hedge - - - Available-for-sale investments Fair value gains - - 51 Recycled to the income statement - - (10) Realised on disposal - - (157) Exchange differences realised on disposal - - - Shadow accounting - - (58) Currency translation differences/exchange differences on translating foreign operations - - - Other movements - - - Income tax relating to components of other comprehensive income - - 2 Total comprehensive income for the financial year - - (172) Dividends for the year - - - Other movements in share capital and payment reserve 10 - - Merger reserve realised in the year - (313) Change in participation in subsidiaries - - - Reclassification of translation differences on non controlling interests - - - Shares issued in lieu of cash dividend - - - Transactions with shareholders 10 (313) - Shareholders` equity at end of the year 805 2,532 53 Millions GBPm Number of shares issued Share
Notes and fully paid capital Year ended 31 December 2010 Shareholders` equity at beginning of the year 5,518 552 Loss after tax for the financial year - - Other comprehensive income Fair value gains/(losses) Property revaluation - - Net investment hedge - - Available-for-sale investments Fair value gains - - Recycled to the income statement - - Shadow accounting - - Currency translation differences/exchange differences on translating foreign operations - - Other movements - - Income tax relating to components of other comprehensive income D1(c) - - Total comprehensive income for the financial year - - Dividends for the year C4 - - Other movements in share capital and payment reserve 6 1 Acquisition of non-controlling interest in Mutual & Federal F2 147 15 Change in participation in other subsidiaries F2 - - Shares issued in lieu of cash dividend 24 2 Transactions with shareholders 177 18 Shareholders` equity at end of the year 5,695 570 GBPm
Available- Share Merger for-sale premium reserve reserve Year ended 31 December 2010 Shareholders` equity at beginning of the year 771 2,716 82 Loss after tax for the financial year - - - Other comprehensive income Fair value gains/(losses) Property revaluation - - - Net investment hedge - - - Available-for-sale investments Fair value gains - - 562 Recycled to the income statement - - (12) Shadow accounting - - (343) Currency translation differences/exchange differences on translating foreign operations - - - Other movements - - 2 Income tax relating to components of other comprehensive income - - (66) Total comprehensive income for the financial year - - 143 Dividends for the year - - - Other movements in share capital and payment reserve 7 - - Acquisition of non-controlling interest in Mutual & Federal - 129 - Change in participation in other subsidiaries - - - Shares issued in lieu of cash dividend 17 - - Transactions with shareholders 24 129 - Shareholders` equity at end of the year 795 2,845 225 Property Share-based GBPm revaluation payments Other Translation Retained reserve reserve reserves reserve earnings 101 215 5 1,176 2,331 - - - - 635 30 - - - - - - - 28 -
- - - - - - (1) - - - - - - - - - - - 24 -
(7) - - - - - - - (970) - - (34) - - 15 - - - - -
23 (35) - (918) 650 - - - - (221) - 50 - - (17) - - - - 313
- - - - - - - - 43 - - - - - 114 - 50 - 43 189
124 230 5 301 3,170 Perpetual Attributable Total GBPm preferred to equity non- callable holders of controlling Total securities the parent interests equity 688 8,951 2,523 11,474 32 667 300 967 - 30 9 39 - 28 - 28 - 51 (1) 50 - (11) - (11) - (157) - (157) - 24 - 24 - (65) - (65) - (970) (313) (1,283) - (19) (20) (39) 12 14 - 14 44 (408) (25) (433) (44) (265) (162) (427) - 43 16 59 - - - - - - 61 61 - 43 (43) - - 124 - 124 (44) (55) (128) (183) 688 8,488 2,370 10,858 Property Share-based GBPM revaluation payments Other Translation Retained reserve reserve reserves reserve earnings 87 191 11 469 2,897 - - - - (314) 21 - - - - - - - (87) - - - - - - - - - - - (6) - - - - - - - 794 - (1) 20 (6) - (14) - - - - - 14 20 (6) 707 (328) - (131) - 4 - - (25) - - - - (93) - - - - -
- - - - 11 - 4 - - (238) 101 215 5 1,176 2,331 GBPm
Perpetual Total preferred Attributable to non- callable equity holders controlling Total securities of the parent interests equity 688 8,464 2,247 10,711 32 (282) 258 (24) - 21 5 26 - (87) - (87) - 562 - 562 - (12) - (12) - (349) - (349) - 794 274 1,068 - 1 (4) (3) 12 (54) - (54) 44 594 533 1,127 (44) (175) (152) (327) - (13) 3 (10) - 51 (51) - - - (57) (57) - 30 - 30 (44) (107) (257) (364) 688 8,951 2,523 11,474 Retained earnings were reduced in respect of own shares held in policyholders` funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings at 31 December 2011 by GBP501 million (2010: GBP478 million). NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2011 A1: 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 2011 and the position at that date have been prepared using accounting policies consistent with those applied in the preparation of the Group`s 2010 Annual Report and Accounts. The consolidated financial statements have been prepared on the going concern basis which the directors believe to be appropriate. The financial information set out herein does not constitute the Company`s statutory accounts for the years ended 31 December 2011 or 2010. Statutory accounts for 2010 have been delivered to the Registrar of Companies, and those for 2011 will be delivered in due course. The auditor has reported on those accounts; the reports were (i) unqualified, (ii) did not include references to any matters to which the auditor draws attention by way of emphasis without qualifying the reports, and (iii) did not contain statements under section 498(2) or (3) of the Companies Act 2006. A2: Significant corporate activity and business changes Disposal of US Life As previously reported at 31 December 2010 the Group was in advanced stage negotiations for the disposal of its life assurance operations in the United States, which represented almost the entirety of the US Life operating segment. Following US regulatory approval the disposal of US Life was completed on 7 April 2011. The sale represented the Group`s exit from the life assurance market in the United States and therefore met the criteria of a discontinued operation. For the purposes of adjusted operating profit US Life has been classified as a discontinued and non-core operation and consequently is not included. Skandia Liv and the disposal of Nordic In line with previous periods the consolidated financial statements do not include the company Livforsakringsaktiebolaget Skandia (Skandia Liv) and its subsidiaries. Skandia Liv`s business is a mutual life assurance company that is highly regulated within a strict legal framework for mutual life assurance companies in Sweden, particularly in relation to its relationship with its holding company. The Group does not have the power to control Skandia Liv in such a way as to access the benefits usually associated with share ownership due to the legal and regulatory restrictions. Those benefits accrue to the policyholders of Skandia Liv. Consequently, Skandia Liv is not consolidated. The shares in Skandia Liv are accounted for in accordance with the accounting policies for equity financial instruments. As announced on 15 December 2011, the Group has agreed to sell the Nordic business unit comprising the life assurance, asset management and banking operations in Sweden, Denmark and Norway to Skandia Liv. As a result the assets and liabilities of the Nordic 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 result in the Group`s exit from the life assurance, asset management and banking operations in the Nordic region 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 have been restated where applicable to reflect this. For the purposes of adjusted operating profit, Nordic has been reclassified as a discontinued and non-core operation for the year ended 31 December 2011 with the comparative restated accordingly. Disposal of the Finnish branch in Wealth Management On 21 December 2011 the Group announced that it had agreed terms to sell the Finnish branch of Wealth Management to OP-Pohjola osk. As a result of this the assets and liabilities of the Finnish branch have been classified as held for sale in the statement of financial position for the current year. Further details of the impact for discontinued operations and disposal groups are provided in notes H1 and H2. In addition, certain comparative information has been revised in accordance with changes to presentation made in the current year. Consolidation of other African businesses In preparing the consolidated financial statements for the year ended 31 December 2010 the Emerging Markets segment included its South African and Namibian businesses but excluded all other African businesses. This was consistent with prior periods. Nedbank and Mutual & Federal consolidated the results of all African businesses under their control. Following a period of greater political and currency stability in Zimbabwe and an expectation that the Group will be able to extract benefits from its Zimbabwean business the Group re-evaluated its ability to control this business within the meaning of accounting standards. As a result the Group`s Zimbabwean business has been consolidated for the first time together with operations in Kenya, Malawi, Swaziland and Nigeria (collectively the other African businesses), with this being effective from 1 January 2011. The acquisition has been accounted for at the net asset value of the underlying businesses on 1 January 2011, being the fair value of the Group`s investment in these operations for the assets and liabilities acquired. Deemed consideration for the acquisition is the fair value of the Group`s investment immediately prior to control. The result was a gain for the Group in these businesses that is accounted for as a profit on acquisition in the year. This profit has been excluded from adjusted operating profit. On initial recognition the assets directly associated with other African businesses consisted of GBP290 million of investment property, GBP576 million of investments and securities and GBP115 million of other assets, with liabilities at this time being GBP624 million of policyholder liabilities and GBP108 million of other liabilities. The trading results of the other African businesses for the year ending 31 December 2011 have been included in the Group`s income statement and adjusted operating profit. In anticipation of the indigenisation of the Zimbabwe business a non-controlling interest adjustment has been included for this operation in respect of adjusted operating profit to reflect the most likely expected indigenous shareholding to be provided. At 31 December 2011 the Group retained a 100% holding in the ordinary shares of Zimbabwe and consequently the operation has been consolidated as a wholly owned subsidiary for the purposes of IFRS reporting. B: Segment information B1: Basis of segmentation The Group`s results are analysed and reported on a basis 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, 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 in note A2, Nordic has been reclassified as discontinued and as a result also non- core, with the comparative segment information restated accordingly, resulting in a reduction in adjusted operating profit before tax and non-controlling interests of GBP110 million for the year ended 31 December 2010. 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 B2. The information 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 B2. 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. The types of products and services from which each operating segment derives its revenues are as follows: Core operations Long Term Savings Emerging Markets - life assurance and asset management Retail Europe - life assurance and asset management Wealth Management - life assurance and asset management Other core operations Nedbank - banking and asset management Mutual & Federal - general insurance US Asset Management - asset management Other - other operating segments and business activities Discontinued and non-core operations Bermuda - life assurance (non-core) Nordic - life assurance, asset management and banking (discontinued and non- core) US Life - life assurance (discontinued and non-core) Income statement segmentation For the IFRS income statement Nordic and US Life have been classified as discontinued operations. All other businesses including Bermuda are classified as continuing. The profits of the Nordic, US Life and Bermuda businesses are excluded in determining adjusting operating profit in both periods, on the basis that they are either discontinued (Nordic and US Life) or non-core (Bermuda). Statement of financial position segmentation The segmental analysis of the statement of financial position at both 31 December 2011 and 31 December 2010 discloses Bermuda as non-core, consistent with the treatment of the business for AOP purposes. Nordic is disclosed as discontinued in the statement of financial position consistent with the income statement classification. The agreement to dispose of Nordic announced on 15 December 2011 resulted in the assets and liabilities of the business being classified as held for sale at 31 December 2011. For the corresponding period Nordic has been reported on a line by line basis. US Life is disclosed as discontinued at 31 December 2010, being classified as held for sale. The disposal of US Life was completed on 7 April 2011. 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 2011 Long-Term Savings Emerging Retail Markets Europe Revenue Gross earned premiums 2,542 30 Outward reinsurance (88) (8) Net earned premiums 2,454 22 Investment return (non-banking) 2,626 (214) Banking interest and similar income - - Banking trading, investment and similar income - - Fee and commission income, and income from service activities 411 201 Other income 68 2 Inter-segment revenues 66 5 Total revenues 5,625 16 Expenses Claims and benefits (including change in insurance contract provisions) (2,854) (20) Reinsurance recoveries 73 3 Net claims and benefits incurred (2,781) (17) Change in investment contract liabilities (925) 226 Losses on loans and advances - (1) Finance costs (including interest and similar expenses) - - Banking interest payable and similar expenses - - Fee and commission expenses, and other acquisition costs (223) (84) Other operating and administrative expenses (1,076) (93) Goodwill impairment - - Change in third-party interest in consolidated funds - - Income tax attributable to policyholder returns (53) - Inter-segment expenses (7) (3) Total expenses (5,065) 28 Share of associated undertakings` and joint ventures` profit after tax 10 - Profit on disposal of subsidiaries, associated undertakings and strategic investments - - Adjusted operating profit/(loss) before tax and non-controlling interests 570 44 Income tax expense (120) (11) Non-controlling interests (3) - Adjusted operating profit/(loss) after tax and non-controlling interests 447 33 Adjusting items net of tax and non-controlling interests 126 (30) Profit/(loss) after tax from continuing operations 573 3 Profit from discontinued operations after tax - - Profit/(loss) after tax attributable to equity holders of the parent 573 3 Total Wealth Long-Term
Management Savings Revenue Gross earned premiums 274 2,846 Outward reinsurance (80) (176) Net earned premiums 194 2,670 Investment return (non-banking) (2,664) (252) Banking interest and similar income - - Banking trading, investment and similar income - - Fee and commission income, and income from service activities 982 1,594 Other income 21 91 Inter-segment revenues 6 77 Total revenues (1,461) 4,180 Expenses Claims and benefits (including change in insurance contract provisions) (82) (2,956) Reinsurance recoveries 6 82 Net claims and benefits incurred (76) (2,874) Change in investment contract liabilities 2,588 1,889 Losses on loans and advances - (1) Finance costs (including interest and similar expenses) - - Banking interest payable and similar expenses - - Fee and commission expenses, and other acquisition costs (580) (887) Other operating and administrative expenses (311) (1,480) Goodwill impairment - - Change in third-party interest in consolidated funds - - Income tax attributable to policyholder returns 62 9 Inter-segment expenses (43) (53) Total expenses 1,640 (3,397) Share of associated undertakings` and joint ventures` profit after tax - 10 Profit on disposal of subsidiaries, associated undertakings and strategic investments - - Adjusted operating profit/(loss) before tax and non-controlling interests 179 793 Income tax expense (15) (146) Non-controlling interests - (3) Adjusted operating profit/(loss) after tax and non-controlling interests 164 644 Adjusting items net of tax and non-controlling interests (57) 39 Profit/(loss) after tax from continuing operations 107 683 Profit from discontinued operations after tax - - Profit/(loss) after tax attributable to equity holders of the parent 107 683 Of the total revenues, excluding intercompany revenues, (GBP1,492) million was generated in the UK (2010: GBP5,143 million), (GBP81) million in rest of Europe (2010: GBP1,160 million), GBP11,007 million in Southern Africa (2010: GBP12,575 million), GBP270 million in United States (2010: GBP829 million) and GBP80 million relates to other operating segments (2010: GBP90 million). *Non-core operations relates to Bermuda with the exception of GBP22 million and GBP5 million of inter-segment revenue and expenses and the profit from discontinued operations after tax, with these reflecting the results of Nordic and US Life both of which have been classified as discontinued operations as detailed in notes A2 and B1. Bermuda loss after tax for 2011 was GBP201 million. Further detail on the results of discontinued operations is provided in note H1. GBPm
Consolidation Nedbank M&F USAM Other adjustments - 736 - - - - (149) - - - - 587 - - - - 54 - 52 30 3,669 - - - - 217 - - - - 1,051 34 447 - - 50 - 10 - - 27 18 1 16 (185) 5,014 693 458 68 (155) - (422) - - - - 41 - - - - (381) - - - - - - - - (457) - - - - - - - (128) - (2,091) - - - - (9) (109) (12) - (24) (1,641) (95) (379) (81) (8) - - - - - - - - - 2 - - - - - (61) (19) - (48) 185 (4,259) (604) (391) (257) 155 - - - - - - - - - - 755 89 67 (189) - (188) (22) (8) 23 - (269) (8) - (39) - 298 59 59 (205) - 16 (24) (260) 27 - 314 35 (201) (178) - - - - - - 314 35 (201) (178) - GBPm Adjusted Adjusting Discontinued IFRS operating items and non-core Income profit (note C1) operations* statement 3,582 - 2 3,584 (325) - - (325) 3,257 - 2 3,259 (116) (241) (210) (567) 3,669 - - 3,669 217 - - 217 3,126 (91) - 3,035 151 - 20 171 (46) - 46 - 10,258 (332) (142) 9,784 (3,378) - 47 (3,331) 123 - - 123 (3,255) - 47 (3,208) 1,889 - - 1,889 (458) - - (458) (128) 70 - (58) (2,091) (4) - (2,095) (1,041) 104 (70) (1,007) (3,684) (154) (14) (3,852) - (264) - (264) 2 - - 2 9 (9) - - 4 (4) - (8,753) (257) (41) (9,051) 10 - - 10 - 251 - 251 1,515 (338) (183) 994 (341) 117 (1) (225) (319) 19 - (300) 855 (202) (184) 469 (202) 202 - - 653 - (184) 469 - - 198 198 653 - 14 667 B2: Adjusted operating profit statement - segment information year ended 31 December 2010 (restated) Long-Term Savings Emerging Markets Retail Europe Revenue Gross earned premiums 2,353 28 Outward reinsurance (72) (8) Net earned premiums 2,281 20 Investment return (non-banking) 4,072 392 Banking interest and similar income - - Banking trading, investment and similar income - - Fee and commission income, and income from service activities 372 198 Other income 72 - Inter-segment revenues 54 5 Total revenues 6,851 615 Expenses Claims and benefits (including change in insurance contract provisions) (3,943) (25) Reinsurance recoveries 83 5 Net claims and benefits incurred (3,860) (20) Change in investment contract liabilities (1,261) (382) Losses on loans and advances - (1) Finance costs (including interest and similar expenses) - - Banking interest payable and similar expenses - - Fee and commission expenses, and other acquisition costs (219) (75) Other operating and administrative expenses (941) (84) Goodwill impairment - - Change in third-party interest in consolidated funds - - Income tax attributable to policyholder returns (32) - Inter-segment expenses (2) (2) Total expenses (6,315) (564) Share of associated undertakings` and joint ventures` profit after tax 3 - Loss on disposal of subsidiaries, associated undertakings and strategic investments - - Adjusted operating profit/(loss) before tax and non-controlling interests 539 51 Income tax expense (146) (13) Non-controlling interests (1) - Adjusted operating profit/(loss) after tax and non-controlling interests 392 38 Adjusting items net of tax and non-controlling interests (1) (25) Profit/(loss) after tax from continuing operations 391 13 Loss from discontinued operations after tax - - Profit/(loss) after tax attributable to equity holders of the parent 391 13 Total Wealth Long-Term
Management Savings Revenue Gross earned premiums 351 2,732 Outward reinsurance (79) (159) Net earned premiums 272 2,573 Investment return (non-banking) 4,409 8,873 Banking interest and similar income - - Banking trading, investment and similar income - - Fee and commission income, and income from service activities 912 1,482 Other income 11 83 Inter-segment revenues 12 71 Total revenues 5,616 13,082 Expenses Claims and benefits (including change in insurance contract provisions) (303) (4,271) Reinsurance recoveries 75 163 Net claims and benefits incurred (228) (4,108) Change in investment contract liabilities (4,190) (5,833) Losses on loans and advances - (1) Finance costs (including interest and similar expenses) - - Banking interest payable and similar expenses - - Fee and commission expenses, and other acquisition costs (500) (794) Other operating and administrative expenses (390) (1,415) Goodwill impairment - - Change in third-party interest in consolidated funds - - Income tax attributable to policyholder returns (69) (101) Inter-segment expenses (43) (47) Total expenses (5,420) (12,299) Share of associated undertakings` and joint ventures` profit after tax 1 4 Loss on disposal of subsidiaries, associated undertakings and strategic investments - - Adjusted operating profit/(loss) before tax and non-controlling interests 197 787 Income tax expense (44) (203) Non-controlling interests - (1) Adjusted operating profit/(loss) after tax and non-controlling interests 153 583 Adjusting items net of tax and non-controlling interests (140) (166) Profit/(loss) after tax from continuing operations 13 417 Loss from discontinued operations after tax - - Profit/(loss) after tax attributable to equity holders of the parent 13 417 *Non-core operations relates to Bermuda with the exception of GBP18 million and GBP21 million of inter-segment revenue and expenses and the loss from discontinued operations after tax, with these reflecting the results of Nordic and US Life both of which have been classified as discontinued operations as detailed in notes A2 and B1. Bermuda profit after tax for 2010 was GBP22 million. Further detail on the results of discontinued operations is provided in note H1. GBPm
Adjusted Consolidation operating Nedbank M&F USAM Other adjustments profit - 728 - - - 3,460 - (140) - - - (299) - 588 - - - 3,161 - 56 1 76 340 9,346 3,913 - - - - 3,913 199 - - - - 199 946 28 465 1 - 2,922 35 - 9 (1) 1 127 20 20 4 29 (207) (63) 5,113 692 479 105 134 19,605 - (436) - - - (4,707) - 58 - - - 221 - (378) - - - (4,486) - - - - - (5,833) (548) - - 1 - (548) - - - (128) - (128) (2,422) - - - - (2,422) (3) (109) (23) - (29) (958) (1,485) (83) (384) (93) (13) (3,473) - - - - - - - - - (299) (299) - - - - - (101) (54) (20) - (77) 207 9 (4,512) (590) (407) (297) (134) (18,239) - 1 - - - 5 - - - - - - 601 103 72 (192) - 1,371 (128) (24) (13) 41 - (327) (232) (5) - (41) - (279) 241 74 59 (192) - 765 10 (11) (20) (151) - (338) 251 63 39 (343) - 427 - - - - - - 251 63 39 (343) - 427 GBPm Adjusting Discontinued IFRS items (note and non-core Income C1) operations* statement - - 3,460 - (1) (300) - (1) 3,160 (92) 299 9,553 - - 3,913 - - 199 (99) - 2,823 - 22 149 - 63 - (191) 383 19,797 - (249) (4,956) - 1 222 - (248) (4,734) - - (5,833) - - (548) (141) - (269) (19) - (2,441) 126 (85) (917) (144) (26) (3,643) (1) - (1) - - (299) 101 - - - (9) - (78) (368) (18,685) - - 5 (22) - (22) (291) 15 1,095 (68) 4 (391) 21 - (258) (338) 19 446 338 - - - 19 446 - (728) (728) - (709) (282) B3: Gross earned premiums GBPM Emerging Retail Wealth Long-Term Year ended 31 December 2011 Markets Europe Management Savings Life assurance - insurance contracts 1,567 30 274 1,871 Life assurance - investment contracts with discretionary participation features 975 - - 975 General insurance - - - - Gross earned premiums 2,542 30 274 2,846 Life assurance - other investment contracts recognised as deposits 2,088 666 5,740 8,494 GBPm Year ended 31 December 2011 M&F Bermuda Total Life assurance - insurance contracts - 2 1,873 Life assurance - investment contracts with discretionary participation features - - 975 General insurance 736 - 736 Gross earned premiums 736 2 3,584 Life assurance - other investment contracts recognised as deposits - - 8,494 GBPm Emerging Retail Wealth Long-Term
Markets Europe Management Savings Year ended 31 December 2010 Life assurance - insurance contracts 1,498 28 351 1,877 Life assurance - investment contracts with discretionary participation features 855 - - 855 General insurance - - - - Gross earned premiums 2,353 28 351 2,732 Life assurance - other investment contracts recognised as deposits 1,829 656 6,287 8,772 GBPm Total M&F Bermuda Restated Year ended 31 December 2010 Life assurance - insurance contracts - - 1,877 Life assurance - investment contracts with discretionary participation features - - 855 General insurance 728 - 728 Gross earned premiums 728 - 3,460 Life assurance - other investment contracts recognised as deposits - - 8,772 B4: Statement of financial position - segment information year ended 31 December 2011 GBPm Emerging At 31 December 2011 Notes Markets Retail Europe Assets Goodwill and other intangible assets 104 474 Mandatory reserve deposits with central banks - - Property, plant and equipment 374 3 Investment property 1,666 - Deferred tax assets 81 22 Investments in associated undertakings and joint ventures 32 - Deferred acquisition costs 113 334 Reinsurers` share of policyholder liabilities 31 8 Loans and advances 299 1 Investments and securities 30,064 4,188 Current tax receivable 10 9 Client indebtedness for acceptances - - Trade, other receivables and other assets 711 56 Derivative financial instruments - assets 298 - Cash and cash equivalents 339 108 Non-current assets held for sale H2(a) - - Inter-segment assets 1,025 52 Total assets 35,147 5,255 Liabilities Life assurance policyholder liabilities 30,270 4,201 General insurance liabilities - - Third-party interests in consolidated funds - - Borrowed funds E1 239 - Provisions F1 137 4 Deferred revenue 17 219 Deferred tax liabilities 185 102 Current tax payable 120 16 Trade, other payables and other liabilities 1,667 77 Liabilities under acceptances - - Amounts owed to bank depositors - - Derivative financial instruments - liabilities 230 - Non-current liabilities held for sale H2(a) - - Inter-segment liabilities 141 1 Total liabilities 33,006 4,620 Net assets 2,141 635 Equity Equity attributable to equity holders of the parent 2,144 635 Non-controlling interests (3) - Ordinary shares F2(b) (3) - Preferred securities F2(b) - - Total equity 2,141 635 GBPm Total Wealth Long-Term
At 31 December 2011 Management Savings Assets Goodwill and other intangible assets 1,282 1,860 Mandatory reserve deposits with central banks - - Property, plant and equipment 13 390 Investment property - 1,666 Deferred tax assets 43 146 Investments in associated undertakings and joint ventures - 32 Deferred acquisition costs 830 1,277 Reinsurers` share of policyholder liabilities 836 875 Loans and advances 189 489 Investments and securities 37,320 71,572 Current tax receivable 61 80 Client indebtedness for acceptances - - Trade, other receivables and other assets 254 1,021 Derivative financial instruments - assets - 298 Cash and cash equivalents 408 855 Non-current assets held for sale 1,161 1,161 Inter-segment assets 86 1,163 Total assets 42,483 82,885 Liabilities Life assurance policyholder liabilities 37,958 72,429 General insurance liabilities - - Third-party interests in consolidated funds - - Borrowed funds - 239 Provisions 60 201 Deferred revenue 454 690 Deferred tax liabilities 87 374 Current tax payable 23 159 Trade, other payables and other liabilities 596 2,340 Liabilities under acceptances - - Amounts owed to bank depositors - - Derivative financial instruments - liabilities - 230 Non-current liabilities held for sale 1,120 1,120 Inter-segment liabilities 461 603 Total liabilities 40,759 78,385 Net assets 1,724 4,500 Equity Equity attributable to equity holders of the parent 1,724 4,503 Non-controlling interests - (3) Ordinary shares - (3) Preferred securities - - Total equity 1,724 4,500 GBPm Consolidation Nedbank M&F USAM Other adjustments 557 23 904 13 - 951 - - - 502 21 11 1 - 49 - - - 349 21 14 165 (8) - 49 1 2 27 - - 16 9 - - 16 98 - - - 39,274 1 - - - 6,403 416 41 216 874 56 2 - - - 237 - - - - 943 75 126 54 293 1,022 - - 86 388 1,071 113 197 467 756 1 - 16 - - 206 23 21 1,136 (3,155) 51,358 803 1,492 1,992 (495) 815 - - - - - 325 - - - - - - - 1,893 2,273 - 11 1,133 - - 32 3 33 - 1 10 - - - 93 13 - 24 - 10 - (3) 32 - 1,123 108 219 96 348 237 - - - - 40,978 - - - - 1,103 - - 3 419 - - 8 - - 501 2 598 1,451 (3,155) 47,134 490 836 2,772 (495) 4,224 313 656 (780) - 2,347 294 625 (1,226) - 1,877 19 31 446 - 1,605 19 31 - - 272 - - 446 - 4,224 313 656 (780) - GBPm Non-core operations - Discontinued Bermuda operations* Total 1 - 3,358 - - 951
- - 925 - - 2,064 1 - 339 - - 111
49 - 1,351 - - 989 - - 39,764 1,731 - 81,253 - - 138 - - 237 836 - 3,348 1 - 1,795
165 - 3,624 - 20,960 22,138 566 40 - 3,350 21,000 162,385 3,106 - 76,350 - - 325 - - 1,893 - - 3,656
- - 269 - - 701 - - 504 1 - 199
9 - 4,243 - - 237 - - 40,978 - - 1,755
- 19,289 20,417 - - - 3,116 19,289 151,527 234 1,711 10,858
234 1,711 8,488 - - 2,370 - 1,652 - 718
234 1,711 10,858 * Discontinued operations relates to Nordic. Further detail is provided in note H2. The net assets of Emerging Markets are stated after eliminating investments in Group equity and debt instruments of GBP368 million (2010: GBP399 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. B4: Statement of financial position - segment information year ended 31 December 2010 Emerging At 31 December 2010 Notes Markets Retail Europe Assets Goodwill and other intangible assets 120 522 Mandatory reserve deposits with central banks - - Property, plant and equipment 396 3 Investment property 1,679 - Deferred tax assets 96 27 Investments in associated undertakings and joint ventures 26 - Deferred acquisition costs 139 316 Reinsurers` share of policyholder liabilities 24 8 Loans and advances 343 1 Investments and securities 34,519 4,466 Current tax receivable 4 9 Client indebtedness for acceptances - - Trade, other receivables and other assets 854 58 Derivative financial instruments - assets 557 - Cash and cash equivalents 1,141 93 Non-current assets held for sale - - Inter-segment assets 947 56 Total assets 40,845 5,559 Liabilities Life assurance policyholder liabilities 35,676 4,460 General insurance liabilities - - Third-party interests in consolidated funds - - Borrowed funds E1 291 - Provisions F1 158 4 Deferred revenue 22 197 Deferred tax liabilities 225 124 Current tax payable 123 4 Trade, other payables and other liabilities 2,246 94 Liabilities under acceptances - - Amounts owed to bank depositors - - Derivative financial instruments - liabilities 135 - Non-current liabilities held for sale - - Inter-segment liabilities 123 4 Total liabilities 38,999 4,887 Net assets 1,846 672 Equity Equity attributable to equity holders of the parent 1,847 672 Non-controlling interests (1) - Ordinary shares F2(b) (1) - Preferred securities F2(b) - - Total equity 1,846 672 Total Wealth Long-Term
At 31 December 2010 Management Savings Assets Goodwill and other intangible assets 1,463 2,105 Mandatory reserve deposits with central banks - - Property, plant and equipment 16 415 Investment property - 1,679 Deferred tax assets 27 150 Investments in associated undertakings and joint ventures 1 27 Deferred acquisition costs 855 1,310 Reinsurers` share of policyholder liabilities 907 939 Loans and advances 185 529 Investments and securities 40,856 79,841 Current tax receivable 95 108 Client indebtedness for acceptances - - Trade, other receivables and other assets 274 1,186 Derivative financial instruments - assets - 557 Cash and cash equivalents 336 1,570 Non-current assets held for sale 6 6 Inter-segment assets 294 1,297 Total assets 45,315 91,719 Liabilities Life assurance policyholder liabilities 41,468 81,604 General insurance liabilities - - Third-party interests in consolidated funds - - Borrowed funds 1 292 Provisions 50 212 Deferred revenue 498 717 Deferred tax liabilities 224 573 Current tax payable 65 192 Trade, other payables and other liabilities 544 2,884 Liabilities under acceptances - - Amounts owed to bank depositors - - Derivative financial instruments - liabilities - 135 Non-current liabilities held for sale - - Inter-segment liabilities 99 226 Total liabilities 42,949 86,835 Net assets 2,366 4,884 Equity Equity attributable to equity holders of the parent 2,366 4,885 Non-controlling interests - (1) Ordinary shares - (1) Preferred securities - - Total equity 2,366 4,884 GBPm Consolidation Nedbank M&F USAM Other adjustments 637 33 1,181 14 - 1,079 - - - - 546 25 16 1 - 19 - - 1 341 28 12 156 (8) - 96 2 8 25 - 1 19 14 - - 31 122 - - - 46,032 1 - - - 6,886 553 42 285 2,587 47 - - - - 190 - - - - 943 84 138 62 292 1,350 - - 109 476 841 131 171 458 689 1 - - - - 202 23 4 975 (3,480) 58,929 1,005 1,730 1,922 905 846 - - - - - 397 - - - - - - - 3,584 2,456 - 11 1,443 - (4) 40 3 47 - 1 11 - - - 158 13 - 16 - 12 1 7 13 - 1,717 114 210 120 350 190 - - - - 47,279 - - - - 1,172 - - 102 451 - - - - - 431 2 646 2,017 (3,480) 54,258 578 877 3,758 905 4,671 427 853 (1,836) - 2,643 409 821 (2,282) - 2,028 18 32 446 - 1,714 18 32 - - 314 - - 446 - 4,671 427 853 (1,836) - GBPm Non-core operations - Discontinued Bermuda operations* Total - 995 4,965 - - 1,079
- 12 1,015 - - 2,040 - 78 416 - 4 162
124 66 1,534 - 12 1,104 - 5,216 51,778 2,567 13,392 106,153 - 1 156 - - 190 1,038 191 3,934 1 10 2,503
74 198 4,132 - 12,384 12,391 874 105 - 4,678 32,664 193,552 3,933 12,248 98,631 - - 397 - - 3,584 - 2 4,204
- (38) 260 - 1 730 - 98 858 1 12 238
7 259 5,661 - - 190 - 5,957 53,236 - 10 1,870
- 12,219 12,219 - 158 - 3,941 30,926 182,078 737 1,738 11,474 737 1,738 8,951 - - 2,523 - - 1,763 - - 760
737 1,738 11,474 * Discontinued operations relates to Nordic with the exception of non-current assets and liabilities held for sale which are in respect of US Life. Further detail is provided in note H2. 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 Emerging Retail Year ended 31 December 2011 Notes Markets Europe Income/(expense) Goodwill impairment and impact of acquisition accounting C1(b) (2) (40) Profit on acquisition/disposal of subsidiaries, associated undertakings and strategic investments C1(c) 249 - Short-term fluctuations in investment return C1(d) (98) (1) Investment return adjustment for Group equity and debt instruments held in life funds C1(e) (71) - 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/(losses) on Group debt instruments C1(h) - - Total adjusting items 78 (41) Tax on adjusting items D1(d) 43 11 Non-controlling interest in adjusting items F2(a)(iii) 5 - Total adjusting items after tax and non-controlling interests 126 (30) GBPm Total Wealth Long-Term Year ended 31 December 2011 Management Savings Income/(expense) Goodwill impairment and impact of acquisition accounting (87) (129) Profit on acquisition/disposal of subsidiaries, associated undertakings and strategic investments - 249 Short-term fluctuations in investment return (13) (112) Investment return adjustment for Group equity and debt instruments held in life funds - (71) Dividends declared to holders of perpetual preferred callable securities - - US Asset Management equity plans and non-controlling interests - - Credit-related fair value gains/(losses) on Group debt instruments - - Total adjusting items (100) (63) Tax on adjusting items 43 97 Non-controlling interest in adjusting items - 5 Total adjusting items after tax and non-controlling interests (57) 39 GBPm Emerging Retail Year ended 31 December 2010* Notes Markets Europe Income/(expense) Goodwill impairment and impact of acquisition accounting C1(b) (2) (41) 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) (40) Tax on adjusting items D1(d) 10 15 Non-controlling interest in adjusting items F2(a)(iii) - - Total adjusting items after tax and non-controlling interests (1) (25) GBPm Total Wealth Long-Term
Year ended 31 December 2010* Management Savings Income/(expense) Goodwill impairment and impact of acquisition accounting (74) (117) Loss on disposal of subsidiaries, associated undertakings and strategic investments - - Short-term fluctuations in investment return (71) (69) Investment return adjustment for Group equity and debt instruments held in life funds - (10) Dividends declared to holders of perpetual preferred callable securities - - US Asset Management equity plans and non-controlling interests - - Credit-related fair value losses on Group debt instruments - - Total adjusting items (145) (196) Tax on adjusting items 5 30 Non-controlling interest in adjusting items - - Total adjusting items after tax and non-controlling interests (140) (166) * The year ended 31 December 2010 has been restated to reflect Nordic as non- core and discontinued. GBPm Long-
Term Year ended 31 December 2011 Notes Savings Nedbank Income/(expense) Goodwill impairment and impact of acquisition accounting C1(b) (129) - Profit on acquisition/disposal of subsidiaries, associated undertakings and strategic investments C1(c) 249 - Short-term fluctuations in investment return C1(d) (112) - Investment return adjustment for Group equity and debt instruments held in life funds C1(e) (71) - 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/(losses) on Group debt instruments C1(h) - (4) Total adjusting items (63) (4) Tax on adjusting items D1(d) 97 1 Non-controlling interest in adjusting items F2(a)(iii) 5 19 Total adjusting items after tax and non-controlling interests 39 16 GBPm Year ended 31 December 2011 M&F USAM Other Total Income/(expense) Goodwill impairment and impact of acquisition accounting - (272) - (401) Profit on acquisition/disposal of subsidiaries, associated undertakings and strategic investments - 2 - 251 Short-term fluctuations in investment return(28) - (31) (171) Investment return adjustment for Group equity and debt instruments held in life funds - - - (71) Dividends declared to holders of perpetual preferred callable securities - - 44 44 US Asset Management equity plans and non-controlling interests - (4) - (4) Credit-related fair value gains/(losses) on Group debt instruments - - 27 23 Total adjusting items (28) (274) 40 (329) Tax on adjusting items 3 20 (13) 108 Non-controlling interest in adjusting items 1 (6) - 19 Total adjusting items after tax and non-controlling interests (24) (260) 27 (202) GBPm Long- Term Year ended 31 December 2010* Notes Savings Nedbank M&F Income/(expense) Goodwill impairment and impact of acquisition accounting C1(b) (117) (6) - Loss on disposal of subsidiaries, associated undertakings and strategic investments C1(c) - (1) - Short-term fluctuations in investment return C1(d) (69) - (7) 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) - (20) - Total adjusting items (196) (27) (7) Tax on adjusting items D1(d) 30 7 (4) Non-controlling interest in adjusting items F2(a)(iii) - 30 - Total adjusting items after tax and non-controlling interests (166) 10 (11) GBPm Year ended 31 December 2010* USAM Other Total Income/(expense) Goodwill impairment and impact of acquisition accounting (2) - (125) Loss on disposal of subsidiaries, associated undertakings and strategic investments (21) - (22) Short-term fluctuations in investment return - (6) (82) Investment return adjustment for Group equity and debt instruments held in life funds - - (10) Dividends declared to holders of perpetual preferred callable securities - 44 44 US Asset Management equity plans and non-controlling interests 6 - 6 Credit-related fair value losses on Group debt instruments - (183) (203) Total adjusting items (17) (145) (392) Tax on adjusting items 6 (6) 33 Non-controlling interest in adjusting items (9) - 21 Total adjusting items after tax and non-controlling interests (20) (151) (338) * The year ended 31 December 2010 has been restated to reflect Nordic as non- core and discontinued. (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: GBPm
Emerging Retail Wealth Year ended 31 December 2011 Markets Europe Management Amortisation of acquired PVIF - (20) (70) Amortisation of acquired deferred costs and revenue - (7) 20 Amortisation of other acquired intangible assets (2) (13) (37) Change in acquisition date provisions - - - Goodwill impairment - - - (2) (40) (87) GBPm Year ended 31 December 2011 Nedbank USAM Total Amortisation of acquired PVIF - - (90) Amortisation of acquired deferred costs and revenue - - 13 Amortisation of other acquired intangible assets - (8) (60) Change in acquisition date provisions - - - Goodwill impairment - (264) (264) - (272) (401)
GBPm Emerging Retail Wealth Year ended 31 December 2010* Markets Europe Management Amortisation of acquired PVIF - (21) (77) Amortisation of acquired deferred costs and revenue - (7) 34 Amortisation of other acquired intangible assets (1) (13) (35) Change in acquisition date provisions - - 4 Goodwill impairment (1) - - (2) (41) (74) GBPm
Year ended 31 December 2010* Nedbank USAM Total Amortisation of acquired PVIF - - (98) Amortisation of acquired deferred costs and revenue - - 27 Amortisation of other acquired intangible assets (6) (2) (57) Change in acquisition date provisions - - 4 Goodwill impairment - - (1) (6) (2) (125) * The year ended 31 December 2010 has been restated to reflect Nordic as discontinued and non-core. (c) Profit/(loss) on acquisition/disposal of subsidiaries, associated undertakings and strategic investments Profit/(loss) on the acquisition/disposal of subsidiaries, associated undertakings and strategic investments is analysed below: GBPm
Year ended Year ended 31 December 31 December 2011 2010 Emerging Markets 249 - Long-Term Savings 249 - Nedbank - (1) USAM 2 (21) Profit/(loss) on acquisition/disposal of subsidiaries, associated undertakings and strategic investments 251 (22) In preparing the consolidated financial statements for the year ended 31 December 2010 the Emerging Markets segment included the South African and Namibian businesses but excluded all other African businesses. This was consistent with prior periods. Following a period of greater political and currency stability in Zimbabwe and an expectation that the Group will be able to extract benefits from its Zimbabwean business it has been consolidated for the first time together with operations in Kenya, Malawi, Swaziland and Nigeria. Further detail has been provided in note A2. On 30 December 2011 USAM disposed of Lincluden Management Ltd, a subsidiary, at a profit of GBP2 million. On 27 August 2010 USAM disposed of Thomson, Horstmann & Bryant, a subsidiary, for a loss of GBP21 million. (d) Short-term fluctuations in 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 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. The long-term rates of return 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 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
31 December 31 December Long-term investment rates 2011 2010 Emerging Markets 9.0 9.4 Retail Europe 2.1 2.5 Wealth Management 2.0 2.0 M&F 9.0 9.4 Analysis of short-term fluctuations in investment return GBPm
Emerging Retail Wealth Year ended 31 December 2011 Markets Europe Management* Actual shareholder investment return 14 1 65 Less: Long-term investment return 112 2 78 Short-term fluctuations in investment return (98) (1) (13) GBPm Total Long-Term
Year ended 31 December 2011 Savings M&F Other Total Actual shareholder investment return 80 26 6 112 Less: Long-term investment return 192 54 37 283 Short-term fluctuations in investment return (112) (28) (31) (171) GBPm Total Emerging Retail Wealth Long-Term
Year ended 31 December 2010** Markets Europe Management* Savings Actual shareholder investment return 109 2 61 172 Less: Long-term investment return 108 1 132 241 Short-term fluctuations in investment return 1 1 (71) (69) GBPm
Year ended 31 December 2010** M&F Other Total Actual shareholder investment return 49 25 246 Less: Long-term investment return 56 31 328 Short-term fluctuations in investment return (7) (6) (82) * Wealth Management long-term investment return includes GBP65 million (2010: GBP121 million) in respect of income tax attributable to policyholder returns. ** The year ended 31 December 2010 has been restated to reflect Nordic as discontinued and non-core. (e) Investment return adjustment for Group equity and debt instruments held in life funds Adjusted operating profit includes investment returns on policyholder investments in Group equity and debt instruments held by the Group`s life funds. These include investments in the Company`s ordinary shares, and the subordinated liabilities and ordinary securities of Nedbank. These investment returns are eliminated within the consolidated income statement in arriving at profit before tax, but are included in adjusted operating profit. In 2011 the investment return adjustment increased adjusted operating profit by GBP71 million (2010: increase of GBP10 million). (f) Dividends declared to holders of perpetual preferred callable securities Dividends declared to the holders of the Group`s perpetual preferred callable securities were GBP44 million in the year ended 31 December 2011 (2010: GBP44 million). These are recognised in finance costs on an accruals basis for the purpose of determining adjusted operating profit. In the IFRS financial statements this cost is recognised in 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 2011 was GBP6 million (2010: loss GBP9 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. At 31 December 2011 these instruments were revalued, the impact of which was a profit of GBP10 million (2010: profit GBP3 million). (h) Credit-related fair value gains and losses on Group debt instruments The widening of credit spread of the Group`s debt instruments in the market price has resulted in gains of GBP27 million (2010: losses due to narrowing of GBP183 million) on Other operating segments and losses of GBP4 million (2010: losses of GBP20 million) in Nedbank being recorded in the Group`s income statement for those instruments that are recorded at fair value. In the directors` view, such movements are not reflective of the underlying performance of the Group and will reverse over time. They have therefore been excluded from adjusted operating profit. C2: Foreign currencies The principal exchange rates used to translate the operating results, assets and liabilities of key foreign business segments to pounds sterling are: Year ended 31 December 2011 Statement of Income financial
statement position (average rate) (closing rate) Rand 11.6445 12.5643 US dollars 1.6037 1.5553 Swedish kronor 10.4144 10.6801 Euro 1.1519 1.1970 Year ended 31 December 2010
Statement of Income financial statement position (average rate) (closing rate)
Rand 11.3095 10.2796 US dollars 1.5459 1.5530 Swedish kronor 11.1364 10.4227 Euro 1.1650 1.1614 C3: Earnings and earnings per share (a) Basic and diluted earnings per share Basic earnings per share is calculated by dividing the profit for the financial 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 2011 2010 Restated
Profit for the financial year attributable to equity holders of the parent from continuing operations 469 446 Profit/(loss) for the financial year attributable to equity holders of the parent from discontinued operations 198 (728) Profit/(loss) for the financial year attributable to equity holders of the parent 667 (282) Dividends declared to holders of perpetual preferred callable securities (32) (32) Profit/(loss) attributable to ordinary equity holders 635 (314) Total dividends declared to holders of perpetual preferred callable securities of GBP44 million in 2011 (2010: GBP44 million) are stated net of tax credits of GBP12 million (2010: GBP12 million). Millions
Year ended Year ended 31 December 31 December 2011 2010 Weighted average number of ordinary shares in issue 5,502 5,422 Shares held in charitable foundations (6) (7) Shares held in ESOP trusts (61) (56) Adjusted weighted average number of ordinary shares 5,435 5,359 Shares held in life funds (201) (205) Shares held in Black Economic Empowerment trusts (299) (295) Weighted average number of ordinary shares 4,935 4,859 Basic earnings per ordinary share (pence) 12.9 (6.5) Diluted earnings per share recognises the dilutive impact of share options held in ESOP trusts and Black Economic Empowerment trusts which are currently in the money in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full period. Year ended Year ended
31 December 31 December 2011 2010 Profit/(loss) attributable to ordinary equity holders (GBPm) 635 (314) Dilution effect on profit/(loss) relating to share options issued by subsidiaries (GBPm) (8) (8) Diluted profit/(loss) attributable to ordinary equity holders (GBPm) 627 (322) Weighted average number of ordinary shares (millions) 4,935 4,859 Adjustments for share options held by ESOP trusts (millions) 133 137 Adjustments for shares held in Black Economic Empowerment trusts (millions) 299 295 Diluted earnings per ordinary share (pence) 5,367 5,291 11.7 (6.1)
(b) Adjusted operating earnings per ordinary share The reconciliation of profit/(loss) 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 2011 2010
Restated Profit/(loss) for the financial year attributable to equity holders of the parent 667 (282) Adjusting items 329 392 Tax on adjusting items (108) (33) Non-core operations 184 (19) (Profit)/loss from discontinued operations (198) 728 Non-controlling interest on adjusting items (19) (21) Adjusted operating profit after tax attributable to ordinary equity holders 855 765 Adjusted weighted average number of ordinary shares (millions) 5,435 5,359 Adjusted operating earnings per ordinary share (pence) 15.7 14.3 (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 3/2009 `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 IFRS. GBPm Year ended 31 December 2011
Gross Net Profit/(loss) for the financial year attributable to equity holders of the parent 667 667 Dividends declared to holders of perpetual preferred callable securities (32) (32) Profit/(loss) attributable to ordinary equity holders 635 635 Adjustments: Impairments of goodwill and intangible assets 264 264 Impairment of discontinued operations - - (Profit)/loss on acquisition/disposal of subsidiaries, associated undertakings and strategic investments (222) (228) Realised gains (including impairments) on available-for-sale financial assets (144) (144) Headline earnings 533 527 Weighted average number of ordinary shares 4,935 4,935 Diluted weighted average number of ordinary shares 5,367 5,367 Headline earnings per share (pence) 10.8 10.7 Diluted headline earnings per share (pence) 9.8 9.7 GBPm
Year ended 31 December 2010 Gross Net Profit/(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) Profit/(loss) attributable to ordinary equity holders (314) (314) Adjustments: Impairments of goodwill and intangible assets 20 20 Impairment of discontinued operations 827 827 (Profit)/loss on acquisition/disposal of subsidiaries, associated undertakings and strategic investments 22 17 Realised gains (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 C4: Dividends Dividends paid were as follows: GBPm Year ended Year ended
31 December 31 December 2011 2010 2009 Final dividend paid - 1.5p per 10p share - 77 2010 Interim dividend paid - 1.1p per 10p share - 54 2010 Final dividend paid - 2.9p per 10p share 145 - 2011 Interim dividend paid - 1.5p per 10p share 76 - Dividends to ordinary equity holders 221 131 Dividends declared to holders of perpetual preferred callable securities 44 44 Dividend payments for the year 265 175 Dividends paid to ordinary equity holders, as above, are calculated using the number of shares in issue at the record date, less treasury shares held in ESOP trusts, life funds of Group companies, Black Economic Empowerment trusts and related undertakings. As a consequence of the exchange control arrangements in place in certain African territories, dividends to ordinary equity holders on the branch registers of those countries (or, in the case of Namibia, the Namibian section of the principal register) are settled through Dividend Access Trusts established for that purpose. In March and November 2011, GBP22 million and GBP22 million respectively were declared and paid to holders of perpetual preferred callable securities (March 2010: GBP22 million and November 2010: GBP22 million). A final dividend of 3.5 pence per 10p share has been recommended by the directors. Subject to shareholders` approval, the dividend will be paid on 7 June 2012 to shareholders on the register at the close of business on 20 April 2012. The dividend will absorb an estimated GBP175 million of shareholders` funds. The Company is not planning to offer a scrip dividend alternative. In addition the Company announced on 3 February 2012 that as part of the proposed sale of the Nordic business unit a special dividend of 18.0 pence per 10p share has been recommended by the directors. The special dividend will be paid on 7 June 2012 to shareholders on the register at the close of business on 20 April 2012 subject to both shareholder approval of the Nordic disposal and the related share consolidation and completion of the Nordic disposal. The special dividend will absorb an estimated GBP1.0 billion of shareholders` funds. Further details of the disposal of the Nordic business unit have been provided in notes A2, H1 and H2. D: Other income statement notes D1: Income tax expense (a) Analysis of total income tax expense GBPm
Year ended Year ended 31 December 31 December 2011 2010 Restated
Current tax United Kingdom tax 22 23 Overseas tax South Africa 390 346 United States (2) (4) Europe 20 10 Secondary Tax on Companies (STC) 14 4 Prior year adjustments (7) (1) Total current tax 437 378 Deferred tax Origination and reversal of temporary differences (204) 10 Changes in tax rates/bases (8) (4) Recognition of deferred tax assets - 7 Total deferred tax (212) 13 Total income tax expense 225 391 (b) Reconciliation of total income tax expense GBPm Year ended Year ended 31 December 31 December 2011 2010
Restated Profit before tax 994 1,095 Tax at standard rate of 26.5% (2010: 28%) 263 307 Different tax rate or basis on overseas operations 57 (19) Untaxed and low taxed income (166) (146) Disallowable expenses 93 90 Net movement on deferred tax assets not recognised 5 85 Effect on deferred tax of changes in tax rates (8) (7) STC 19 (3) Income tax attributable to policyholder returns (28) 96 Other (10) (12) Total income tax expense 225 391 (c) Income tax relating to components of other comprehensive income GBPm Year ended Year ended 31 December 31 December
2011 2010 Restated Preferred perpetual callable securities (12) (12) Other - (1) Income tax credit - continuing operations (12) (13) Fair value gains 2 181 Shadow accounting (4) (114) Income tax (credit)/expense - discontinued operations (2) 67 Income tax (credit)/expense relating to components of other comprehensive income (14) 54 (d) Income tax on adjusted operating profit GBPm Year ended Year ended 31 December 31 December 2011 2010
Restated Income tax expense 225 391 Tax on adjusting items Impact of acquisition accounting 35 31 Profit on disposal of subsidiaries, associated undertakings and strategic investments 6 5 Short-term fluctuations in investment return 75 4 Income tax attributable to policyholders returns 9 (101) Tax on dividends declared to holders of perpetual preferred callable securities recognised in equity (12) (12) Fair value gains and losses on Group debt instruments 2 5 US Asset Management equity plans 2 - Tax on non-core operations (1) 4 Income tax on adjusted operating profit 341 327 E: Financial assets and liabilities E1: Borrowed funds GBPm At Group 31 December
excluding 2011 Notes Nedbank Nedbank Group Senior debt securities and term loans 507 1,355 1,862 Floating rate notes E1(a) - 844 844 Fixed rate notes E1(b) 507 511 1,018 Revolving credit facility E1(c) - - - Term loan and other loans - - - Mortgage backed securities E1(d) - 77 77 Subordinated debt securities (net of Group holdings) 876 841 1,717 Borrowed funds E1(e) 1,383 2,273 3,656 Other issues treated as equity for accounting purposes US$750 million cumulative preference F2(b) securities (ii) 458 EUR500 million perpetual preferred callable securities 338 GBP350 million perpetual preferred callable securities 350 Total: Book value 2,529 Nominal value of the above 2,666 GBPm
At Group 31 December excluding 2010 Nedbank Nedbank Group
Senior debt securities and term loans 550 1,186 1,736 Floating rate notes 32 720 752 Fixed rate notes 516 466 982 Revolving credit facility - - - Term loan and other loans 2 - 2 Mortgage backed securities - 112 112 Subordinated debt securities (net of Group holdings) 1,198 1,158 2,356 Borrowed funds 1,748 2,456 4,204 Other issues treated as equity for accounting purposes US$750 million cumulative preference securities 458 EUR500 million perpetual preferred callable securities 338 GBP350 million perpetual preferred callable securities 350 Total: Book value 2,894 Nominal value of the above 3,045 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. GBPm At
Group 31 December excluding 2011 Nedbank Nedbank Group Less than 1 year 272 512 784 Greater than 1 year and less than 5 years 898 1,936 2,834 Greater than 5 years 998 556 1,554 Total 2,168 3,004 5,172 GBPm
At Group 31 December excluding 2010 Nedbank Nedbank Group
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 Senior notes (a) Floating rate notes GBPm At At
31 December 31 December 2011 Maturity date 2010 Nedbank R1,690 million unsecured senior debt at 3 month JIBAR + 1.5% 119 166 September 2012 R1,044 million unsecured senior debt at 3 month JIBAR + 2.20% 84 102 September 2015 R1,750 million unsecured senior debt inflation linked (3.9% real yield) 158 180 March 2013 R98 million unsecured senior debt inflation linked (3.8% real yield) 9 10 March 2013 R1,552 million unsecured senior debt at 3 month JIBAR + 1.48% 125 153 April 2013 R1,027 million unsecured senior debt at 3 month JIBAR + 1.75% 83 101 April 2015 R80 million unsecured senior debt JIBAR + 2.15% 6 8 April 2020 R837 million unsecured senior debt at 3 month JIBAR + 1.05% 79 - March 2014 R677 million unsecured senior debt at 3 month JIBAR + 1.25% 54 - March 2016 R500 million unsecured senior debt at 3 month JIBAR + 1% 40 - April 2014 R1,075 million unsecured senior debt at 3 month JIBAR + 0.94% 87 - October 2014 844 720 Group excluding Nedbank US $50 million at 3 month LIBOR plus 0.50% - 32 Repaid - 32 Total floating rate notes 844 752 All floating rate notes are non-qualifying for the purposes of regulatory tiers of capital. (b) Fixed rate notes GBPm At At 31 December 31 December
2011 2010 Maturity date Nedbank R130 million unsecured senior debt at zero coupon 14 16 October 2024 R3,244 million unsecured senior debt at 10.55% 265 326 September 2015 R762 million unsecured senior debt at 11.39% 63 77 September 2019 R478 million unsecured senior debt at R157 + 1.75% 39 47 April 2015 R450 million unsecured senior debt at R206 + 1.28% 37 - March 2014 R1,137 million unsecured senior debt at R157 + 1.5% 93 - March 2016 511 466 Group excluding Nedbank GBP500 million euro bond at 7.125% 496 496 October 2016 US $16.5 million secured senior debt at 5.23% 11 11 August 2014 R100 million floating rate note repayable February 2011 (3 months ZAR-JIBAR- SAFEX plus 4.5%) - 9 Repaid 507 516 Total fixed rate notes 1,018 982 All fixed rate notes are non-qualifying for the purposes of regulatory tiers of capital. (c) Revolving credit facilities and irrevocable letters of credit In April 2011 the Group signed a new GBP1,200 million five-year multi-currency revolving credit facility, replacing the GBP1,232 million facility due to mature in September 2012. At 31 December 2011 GBP160 million (2010: GBP499 million) of this facility was utilised, GBPnil (2010: GBPnil) in the form of drawn debt and GBP160 million (2010: GBP499 million) in the form of irrevocable letters of credit. The Group had a SEK1,500 million revolving credit facility with a maturity date of 1 July 2011 which was subsequently extended on similar terms to 1 July 2012 and revised to SEK1,000 million. At 31 December 2011 this facility was undrawn (31 December 2010: undrawn). On 22 February 2012 the facility was terminated. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2011 continued E: Financial assets and liabilities continued E1: Borrowed funds continued (d) Mortgage backed securities - Nedbank GBPm At At 31 December 31 December
2011 2010 Tier Maturity date Nedbank R291 million notes (class A1) at 11.467% - 4 Tier 2 Repaid R1.4 billion notes (class A2A) at 11.817% 67 96 Tier 2 November 2039 R98 million notes (class B note) at 12.067% 6 7 Tier 2 November 2039 R76 million notes (class C note) at 13.317% 4 5 Tier 2 November 2039 Total mortgage backed securities 77 112 (e) Subordinated debt securities (net of Group holdings) GBPm
At At 31 December 31 December 2011 2010 Tier Nedbank R1.5 billion (7.85%) - 148 Tier 2 R1.8 billion (9.84%) 153 186 Tier 2 R650 million (9.03%) 54 67 Tier 2 R1.7 billion (8.9%) 144 171 Tier 2 R2.0 billion (3 month JIBAR plus 0.47%) 161 198 Tier 2 R500 million (3 month JIBAR plus 0.45%) 40 49 Tier 2 R1.0 billion (10.54%) 87 105 Tier 2 R500 million (3 month JIBAR plus 0.70%) 40 49 Tier 2 R120 million (10.38%) 10 12 Tier 2 R487 million (15.05%) 42 51 Tier 2 R1,265 million (JIBAR plus 4.75%) 102 125 Non-core Tier 1 R300 million (JIBAR + 2.5%) 12 15 Non-core Tier 1 US$100 million (3 month USD LIBOR) 65 65 Tier 2 Secondary 910 1,241 Less: banking subordinated debt securities held by other Group companies (69) (83) Banking subordinated debt securities (net of Group holdings) 841 1,158 Group excluding Nedbank R3.0 billion (8.9% to October 2015, 3 month JIBAR plus 1.59% thereafter) 239 293 Lower Tier 2 GBP300 million (5.0%) - 296 Lower Tier 2 EUR200 million (2010: EUR750 million) (4.5% to January 2012 and 6 month EURIBOR plus 0.96% thereafter)* 166 609 Lower Tier 2 GBP500 million 8.0%** 471 - Lower Tier 2 876 1,198 Total subordinated debt securities 1,717 2,356 First call date Maturity date
Nedbank R1.5 billion (7.85%) - Repaid R1.8 billion (9.84%) September 2013 September 2018 R650 million (9.03%) February 2012 February 2017 R1.7 billion (8.9%) February 2014 February 2019 R2.0 billion (3 month JIBAR plus 0.47%) July 2017 July 2022 R500 million (3 month JIBAR plus 0.45%) August 2012 August 2017 R1.0 billion (10.54%) September 2015 September 2020 R500 million (3 month JIBAR plus 0.70%) December 2012 December 2017 R120 million (10.38%) December 2012 December 2017 R487 million (15.05%) November 2018 November 2018 R1,265 million (JIBAR plus 4.75%) November 2018 November 2018 R300 million (JIBAR + 2.5%) December 2013 December 2013 US$100 million (3 month USD LIBOR) March 2017 March 2022 Less: banking subordinated debt securities held by other Group companies Banking subordinated debt securities (net of Group holdings) Group excluding Nedbank R3.0 billion (8.9% to October 2015, 3 month JIBAR plus 1.59% thereafter) October 2015 October 2020 GBP300 million (5.0%) January 2011 Repaid EUR200 million (2010: EUR750 million) (4.5% to January 2012 and 6 month EURIBOR plus 0.96% thereafter)* January 2012 January 2017 GBP500 million 8.0%** - June 2021 Total subordinated debt securities * 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. During the year a EUR550 million partial repayment, together with settlements of associated currency swaps, was made. On 18 January 2012 the remaining EUR200 million was repaid. ** The principal and coupon on the bonds was swapped into floating rate of quarterly STIBOR plus 5.46%. The currency swaps have a five year mandatory break clause. F: Other statement of financial position notes F1: Provisions GBPm Liability for Client long service
Year ended 31 December 2011 compensation leave Restructuring Balance at beginning of the year 39 57 34 Unused amounts reversed - (1) - Charge to income statement - 33 11 Utilised during the year (3) (30) (7) Foreign exchange and other movements 7 (8) (1) Transfer to non-current assets held for sale - (4) - 43 47 37 Post employment benefits Balance at end of the year 43 47 37 Provision for Year ended 31 December 2011 donations Other Total Balance at beginning of the year 89 92 311 Unused amounts reversed - (14) (15) Charge to income statement - 14 58 Utilised during the year - (3) (43) Foreign exchange and other movements (11) (18) (31) Transfer to non-current assets held for sale - (9) (13) 78 62 267 Post employment benefits 2 2 Balance at end of the year 78 64 269 GBPm Liability for Client long service Year ended 31 December 2010 compensation leave Restructuring Balance at beginning of the year 30 49 42 Unused amounts reversed - - (10) Charge to income statement 7 28 9 Utilised during the year (9) (27) (4) Foreign exchange and other movements 11 7 (3) 39 57 34
Post employment benefits Balance at end of the year 39 57 34 Provision for Year ended 31 December 2010 donations Other Total Balance at beginning of the year 84 90 295 Unused amounts reversed - (19) (29) Charge to income statement - 25 69 Utilised during the year - (5) (45) Foreign exchange and other movements 5 1 21 89 92 311 Post employment benefits (51) (51) Balance at end of the year 89 41 260 Provisions in relation to client compensation were GBP43 million (2010: GBP39 million), primarily relating to possible mis-selling of guarantee contracts in Wealth Management. GBP1 million (2010: GBP1 million) is estimated to be payable after more than one year. The liability for long service leave of GBP47 million (2010: GBP57 million) relates to provision for staff payments for long serving employees, all of which is estimated to be payable in less than one year. Provisions in relation to restructuring were GBP37 million (2010: GBP34 million), primarily in respect of consolidation and related office relocation for elements of Wealth Management. GBP21 million (2010: GBP30 million) is estimated to be payable after more than one year. The provision for donations is held by Long-Term Savings in respect of South African operations, relating to the payment of charitable donations in future periods to which the Group is committed to use these funds. The funds were 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, with GBP78 million (2010: GBP70 million) estimated to be payable after more than one year. Other provisions include provisions for 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, GBP129 million (2010: GBP163 million) is estimated to be payable after more than one year. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2011 continued F: Other statement of financial position notes continued F2: Non-controlling interests (a) Income statement (i) Ordinary shares The non-controlling interests share of 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 2011 the non-controlling interests attributable to ordinary shares was GBP238 million (2010: GBP196 million). (ii) Preferred securities GBPm
Year ended Year ended 31 December 31 December 2011 2010 R2,000 million non-cumulative preference shares 14 14 R773 million non-cumulative preference shares 5 5 R355 million non-cumulative preference shares 2 2 US$750 million cumulative preferred securities 37 38 R363 million non-cumulative preference shares 3 3 R92 million non-cumulative preference shares 1 - Non-controlling interests - preferred securities 62 62 (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 Reconciliation of non-controlling interests` share of profit for the financial year 2011 2010 The non-controlling interests share is analysed as follows: Non-controlling interests - ordinary shares 238 196 Goodwill impairment and impact of acquisition accounting - 2 Short-term fluctuations in investment return 1 - Income attributable to Black Economic Empowerment trusts of listed subsidiaries 22 22 Fair value gains on Group debt instruments 1 6 Income attributable to US Asset Management non-controlling interests (5) (9) Non-controlling interests share of adjusted operating profit 257 217 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 2011 the increase in adjusted operating profit attributable to non-controlling interests as a result of this was GBP22 million (2010: GBP22 million). F2: Non-controlling interests (b) Statement of financial position (i) Ordinary shares GBPm At At 31 December 31 December Reconciliation of movements in non-controlling interests 2011 2010 Balance at beginning of the year 1,763 1,537 Non-controlling interests` share of profit 238 196 Non-controlling interests` share of dividends paid (100) (88) Net disposal/(acquisition) of interests 61 (116) Foreign exchange and other movements (310) 234 Balance at end of the year 1,652 1,763 Acquisition of non-controlling interest in Mutual & Federal On 5 February 2010, the Group completed the acquisition of the remaining non- controlling shareholdings in Mutual & Federal Insurance Company Limited, following the fulfilment of all outstanding conditions precedent. On 8 February 2010, 147,313,449 new Old Mutual plc ordinary shares were issued in exchange for Mutual & Federal shares and listed on the London Stock Exchange, of which 68,378,851 were issued to Black Economic Empowerment trusts and 78,934,598 to other previous holders. Other acquisitions On 8 February 2010 Nedbank announced that it had obtained regulatory approval for the acquisition of the remaining 49.9% indirect interest in Imperial Bank Limited thereby satisfying all conditions precedent for the acquisition. The purchase consideration was approximately GBP162 million (GBP155 million plus a Johannesburg Interbank Agreed Rate (JIBAR) f actor applied up to 5 February 2010) which was settled in four instalments out of existing cash resources of Nedbank Limited. The total amount, which included interest at the three month JIBAR, amounted to GBP165 million. (ii) Preferred securities GBPm At At 31 December 31 December
2011 2010 R2,000 million non-cumulative preference shares(1) 140 140 R773 million non-cumulative preference shares(2) 71 71 US$750 million cumulative preferred securities(3) 458 458 R355 million non-cumulative preference shares(4) 25 25 R363 million non-cumulative preference shares(5) 29 29 R92 million non-cumulative preference shares(6) 8 50 731 773
Unamortised issue costs (13) (13) Total in issue at 31 December 718 760 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. 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. 4. 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. 5. 36.3 million R10 preference shares issued by Nedbank in seven instalments between September 2009 and December 2009 on the same terms as the securities described in (1) above. 6. 9.2 million R10 preference shares issued by Nedbank on 11 March 2010 on the same terms as the securities described in (1) above. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2011 continued G: Other notes G1: Contingent liabilities GBPm At At 31 December 31 December 2011 2010
Guarantees and assets pledged as collateral security 2,251 2,883 Irrevocable letters of credit 193 207 Secured lending 515 775 Other contingent liabilities 72 55 The Group has pledged debt securities amounting to GBP1,196 million (2010: GBP1,379 million) as collateral for deposits received under re- purchase 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. Contingent liabilities - tax The Revenue authorities in the principle jurisdictions in which the Group operates (South Africa and the United Kingdom) are reviewing certain historic transactions undertaken and tax law interpretations made by the Group. More generally the Group is also experiencing increased review by fiscal authorities of routine matters. Whilst provisions are made for liabilities which might reasonably be expected to materialise, and whether or not legal proceedings will be required to resolve them, the outcome is uncertain at this stage. Nedbank structured financing Historically the Group`s South African banking business 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. 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 re- pricing 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 the Group 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. During 2011 further actions were instituted against Nedbank by other stakeholders relating to this same issue. Nedbank and its legal advisers remain of the opinion that the claims are extremely ambitious and that the claimants will have great difficulty succeeding. Nedbank Securitisations The Group through Nedbank uses securitisation primarily as a funding diversification tool and to add flexibility in mitigating structural liquidity risk. Nedbank currently has two active traditional securitisation transactions: * Synthesis Funding Limited (Synthesis), an asset-backed commercial paper (ABCP) programme launched in 2004; and * GreenHouse Funding (Pty) Limited, Series 1 (GreenHouse), a residential mortgage-backed securitisation programme launched in December 2007. During October 2011 Octane ABS 1(Pty) Limited (Octane), a securitisation of motor vehicle loans launched in 2007, exercised its clean up call option. The remaining portfolio of securitised motor vehicle loans were acquired by Nedbank at fair value and the proceeds used by Octane to fully redeem all outstanding notes. 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 is assigned the highest short-term RSA local-currency credit rating by Fitch, and is listed on JSE Limited. Under GreenHouse Series 1, R2 billion of residential mortgages originated by Nedbank were securitised. The commercial paper issued by GreenHouse has been assigned credit ratings by both Fitch and Moody`s and is listed on JSE Limited. Fitch placed the GreenHouse commercial paper on rating watch negative as a result of changes it is effecting to its rating criteria for South African residential mortgage backed securities transactions. This process is ongoing. As the GreenHouse transaction was undertaken for funding and liquidity purposes, only the senior notes were placed with third party investors and the junior notes and subordinated loans to the special purpose entity were retained by Nedbank. The assets transferred to the special purpose entity have continued to be recognised as financial assets. GreenHouse continues to direct all capital repayments it receives on the residential mortgage portfolio to noteholders as a result of the stop purchase activated by a breach of the arrear trigger in 2010. The GreenHouse commercial paper is scheduled to be redeemed in November 2012. G1: Contingent liabilities continued Nedbank Securitisations continued 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 assets At At 31 December 31 December
2011 2010 Loans and advances to customers Residential mortgage loans 116 165 Motor vehicle financing - 59 Other financial assets Corporate and bank paper 116 155 Other securities 199 327 Commercial paper - - 431 706 GBPm Associated liabilities At At
31 December 31 December 2011 2010 Loans and advances to customers Residential mortgage loans 132 171 Motor vehicle financing - 78 Other financial assets Corporate and bank paper - - Other securities - - Commercial paper 320 484 452 733 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. G2: Events after the reporting date On 18 January 2012 the Group redeemed the remaining EUR200 million of the EUR750 million Lower Tier 2 Bond which had not been repaid during 2011. On 3 February 2012, the Group issued a circular in respect of the proposed disposal of the Nordic business unit. Additional details have been provided in notes A2, H1 and H2. On 7 February 2012 the Group announced that it had sold Dwight Asset Management subject to certain conditions. On 22 February 2012 the Group announced that a preliminary non-binding offer had been accepted by Ecobank Transnational Incorporated for the acquisition of Oceanic Life. In March 2012 Bermuda enhanced its hedging strategy by implementing an option based hedging arrangement. On 8 March 2012 final regulatory approval was received in respect of the disposal of the Nordic business unit. H: Discontinued operations and held for sale operations H1: Discontinued operations The results of the Group`s Swedish, Danish and Norwegian life businesses, collectively Nordic, and United States life business, US Life, are shown as discontinued operations in these financial statements. At 31 December 2011 the Group had entered into an agreement to dispose of the controlling interest in Nordic to Skandia Liv, which remains subject to shareholder approval for the sale. The disposal of US Life was completed on 7 April 2011 following regulatory approval, and has been reported up until that date. Analysis of the results is given below. (a) Income statement from discontinued operations GBPm Nordic US Life
For the year ended 31 December 2011 2010 2011 2010 Revenue (421) 1,779 342 1,608 Expenses 541 (1,729) (330) (1,557) Profit before tax from discontinued operations 120 50 12 51 Impairment on remeasurement to fair value less costs to sell - - - (827) Loss on disposal - - (29) - Realised available-for-sale investment gains and exchange differences on disposal - - 133 - Profit/(loss) before tax 120 50 116 (776) Income tax (charge)/credit (52) (65) 14 63 Profit/(loss) from discontinued operations after tax 68 (15) 130 (713) GBPm
Total For the year ended 31 December 2011 2010 Revenue (79) 3,387 Expenses 211 (3,286) Profit before tax from discontinued operations 132 101 Impairment on remeasurement to fair value less costs to sell - (827) Loss on disposal (29) - Realised available-for-sale investment gains and exchange differences on disposal 133 - Profit/(loss) before tax 236 (726) Income tax (charge)/credit (38) (2) Profit/(loss) from discontinued operations after tax 198 (728) (b) Statement of comprehensive income from discontinued operations GBPm Nordic US Life For the year ended 31 December 2011 2010 2011 2010 Profit/(loss) after tax for the financial year 68 (15) 130 (713) Other comprehensive income for the financial year Fair value gains/(losses) Available-for-sale investments Fair value gains/(losses) 3 (5) 48 530 Recycled to the income statement - - (5) (12) Realised on disposal - - (157) - Exchange differences realised on disposal - - 24 - Shadow accounting - - (43) (334) Currency translation differences/exchange differences on translating foreign operations (43) 157 - 29 Other movements 10 14 - (34) Aggregate tax on transfers from equity (1) - 3 (67) Total other comprehensive (loss)/income for the financial year (31) 166 (130) 112 Total comprehensive income/(loss) for the financial year 37 151 - (601) Attributable to Equity holders of the parent 37 151 - (601) GBPm Total
For the year ended 31 December 2011 2010 Profit/(loss) after tax for the financial year 198 (728) Other comprehensive income for the financial year Fair value gains/(losses) Available-for-sale investments Fair value gains/(losses) 51 525 Recycled to the income statement (5) (12) Realised on disposal (157) - Exchange differences realised on disposal 24 - Shadow accounting (43) (334) Currency translation differences/exchange differences on translating foreign operations (43) 186 Other movements 10 (20) Aggregate tax on transfers from equity 2 (67) Total other comprehensive (loss)/income for the financial year (161) 278 Total comprehensive income/(loss) for the financial year 37 (450) Attributable to Equity holders of the parent 37 (450) (c) Net cash flows from discontinued operations GBPm
Nordic US Life For the year ended 31 December 2011 2010 2011 2010 Operating activities 1,609 144 2 (167) Investing activities (1,411) (404) 146 63 Net cash flows from discontinuing operations 198 (260) 148 (104) GBPm Total
For the year ended 31 December 2011 2010 Operating activities 1,611 (23) Investing activities (1,265) (341) Net cash flows from discontinuing operations 346 (364) H2: Disposal groups held for sale The assets and liabilities of the Group`s Nordic business, Skandia Insurance Company Ltd (publ) (Nordic), comprising Old Mutual`s long-term savings and banking operations in Sweden, Denmark and Norway operating under the Skandia brand, are shown as held for sale in these financial statements. The Group has entered into an agreement to dispose of the controlling interest in Nordic to Skandia Liv which remains subject to shareholder approval for the sale. On 8 March 2012 final regulatory approval was received. Further detail has been provided in note A2. In addition to the above the Group has agreed to sell the Finnish branch of Skandia Life Assurance Company Ltd, a part of Wealth Management, to OP-Pohjola osk and as a result of this the assets and liabilities of the Finnish branch have been classified as held for sale. (a) Statement of financial position Assets directly associated with disposal groups held for sale GBPm
Finnish At 31 December 2011 Nordic branch Total Assets Goodwill and other intangible assets 901 72 973 Property, plant and equipment 10 - 10 Deferred tax assets 87 - 87 Investments in associated undertakings and joint ventures 5 - 5 Deferred acquisition costs 75 45 120 Reinsurers` share of life assurance policyholder liabilities 17 - 17 Loans and advances 5,194 - 5,194 Investments and securities 14,127 1,034 15,161 Current tax receivable 3 - 3 Trade, other receivables and other assets 240 1 241 Derivative financial instruments - assets 10 - 10 Cash and cash equivalents 291 4 295 Total assets 20,960 1,156 22,116 Liabilities Life assurance policyholder liabilities 10,889 1,034 11,923 Third-party interests in consolidated funds 1,383 - 1,383 Borrowed funds 2 - 2 Provisions (54) - (54) Deferred revenue 1 55 56 Deferred tax liabilities 103 26 129 Current tax payable 9 - 9 Trade, other payables and other liabilities 388 4 392 Amounts owed to bank depositors 6,552 - 6,552 Derivative financial instruments - liabilities 16 - 16 Total liabilities 19,289 1,119 20,408 Of the financial assets and liabilities included within disposal groups held for sale, namely the Nordic business and the Finnish branch, all are level one or level two in respect of the fair value hierarchy. In addition to the disposal groups held for sale, the Group had additional non-current assets held for sale of GBP22 million (2010: GBP7 million) and non-current liabilities of GBP9 million (2010: GBPnil). Included within investments and securities is GBP185 million of short term cash balances. (b) Equity attributable to equity holders of the parent directly associated with disposal groups held for sale GBPm Finnish At 31 December 2011 Nordic branch Total Retained earnings 1,667 37 1,704 Available-for-sale investment reserve 2 - 2 Share-based payment reserve 2 - 2 1,671 37 1,708 At 31 December 2010 the assets and liabilities of the Group`s United States life business, US Life, were shown as held for sale in the financial statements, being GBP12,384 million and GBP12,219 million respectively. The disposal of US Life was completed on 7 April 2011 following US regulatory approval. At the time of disposal the assets directly associated with US Life consisted of GBP10,518 million of investments and securities and GBP1,412 million of other assets, with liabilities at this time being GBP11,494 million of long-term policyholder liabilities and GBP235 million of other liabilities. Included within investments and liabilities was GBP565 million of short term cash balances. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2011 continued H: Discontinued operations and held for sale operations continued H3: Contingent liabilities in respect of the disposal of US Life Following completion of the disposal of US Life to the Harbinger group (`Harbinger`) on 7 April 2011, the Group has retained certain residual commitments and contingent liabilities. These relate to sale warranties and indemnities that are typical in transactions of this nature including in respect of litigation (including class actions) and regulatory enforcement actions arising from events occurring before completion. The specific conditions are in effect for varying periods of time, the longest dated of these will expire on 31 December 2015. The main elements are summarised below: - Harbinger intends to establish certain internal reinsurance arrangements which are subject to regulatory approval. In the event that regulatory approval of the full amount of reinsurance is not forthcoming there is potential for a reduction in the purchase price, up to a maximum of US$50 million. - US statutory regulations require reserving on a worst case scenario basis for deferred annuity policies that permit free partial withdrawals (`CARVM Reserves`). As such there is redundancy when comparing the worst case scenario and the economic scenarios. These CARVM redundant reserves are currently reinsured from US Life to Old Mutual Reassurance until no later than the end of 2015. Old Mutual plc provides a $255 million letter of credit to back these redundant reserves. In the event that this letter of credit is drawn upon Harbinger are obligated to fully reimburse Old Mutual plc. Date: 09/03/2012 09:01:03 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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