Wrap Text
Interim results for the six months ended 30 June 2012
OLD MUTUAL PLC
ISIN CODE: GB00B77J0862
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
Index to the financial information
For the six months ended 30 June 2012
Statement of directors' responsibilities in respect of the interim financial statements 38
Interim review report for the six months ended 30 June 2012 to Old Mutual plc 39
Consolidated income statement 41
Consolidated statement of comprehensive income 42
Reconciliation of adjusted operating profit to profit after tax 43
Consolidated statement of financial position 44
Condensed consolidated statement of cash flows 45
Consolidated statement of changes in equity 46
Notes to the consolidated financial statements
A: Accounting policies 52
B: Segment information 54
C: Other key performance information 68
D: Other income statement notes 74
E: Borrowed funds 76
F: Discontinued and held for sale operations 79
G: Other notes 80
Adjusted Group MCEV by line of business 82
Adjusted operating Group MCEV 83
Commentary on key changes in the MCEV 30 June 2012 primary statements compared to 2011 83
Adjusted operating Group MCEV earnings per share 84
Group market consistent embedded value statement of earnings 85
Notes to the MCEV basis supplementary information
A: MCEV policies 87
B: Segment information 95
C: Other key performance information 111
D: Sensitivity tests 116
Statement of directors' responsibilities in respect of the interim financial
statements
For the six months ended 30 June 2012
We confirm that to the best of our knowledge:
· the consolidated financial information has been prepared in accordance with the recognition and measurement principles of International
Financial Reporting Standards adopted by the EU and in accordance with the requirements of IAS34 'Interim Financial Reporting'
· the MCEV supplementary information has been prepared in accordance with the Market Consistent Embedded Value Principles (Copyright (c)
Stichting CFO Forum Foundation 2008) issued in June 2008 and updated in October 2009 by the CFO Forum ('the Principles') and the basis
of preparation as set out on page 87.
· the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties
for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the
financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the
related party transactions described in the last annual report that could do so.
Julian Roberts Philip Broadley
Group Chief Executive Group Finance Director
8 August 2012 8 August 2012
Interim review report for the six months ended 30 June 2012 to Old
Mutual plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the interim financial report for the six months ended
30 June 2012 which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and the
related notes, set out on pages 41 to 81, which include the Reconciliation of Adjusted Operating Profit to Profit after Tax.
We have also been engaged by the company to review the Market Consistent Embedded Value (MCEV) basis supplementary information ('the
supplementary information'), set out on pages 82 to 117, for the six months ended 30 June 2012.
We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of financial statements or the supplementary information.
This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of
the Disclosure and Transparency Rules (the DTR) of the UK's Financial Services Authority (the UK FSA) and also to provide a review conclusion to
the company on the supplementary information. Our review of the condensed set of financial statements has been undertaken so that we might
state to the company those matters we are required to state to it in this report and for no other purpose. Our review of the supplementary
information has been undertaken so that we might state to the company those matters we have been engaged to state in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review
work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-
yearly financial report in accordance with the DTR of the UK FSA. The directors have accepted responsibility for preparing the supplementary
information contained in the interim financial report on an MCEV basis in accordance with the CFO Forum MCEV Principles as issued in June 2008
and updated in October 2009 ('the MCEV Principles').
As disclosed in note A, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed
set of financial statements included in this interim financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the EU.
The supplementary information has been prepared in accordance with the MCEV principles, using the methodology and assumptions as detailed in
the basis of preparation of the supplementary information. The supplementary information should be read in conjunction with the group's condensed
set of financial statements.
Our responsibility
Our responsibility is to express to the company a conclusion, based on our review, on the condensed set of financial statements and the
supplementary information in the interim financial report.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial
Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim
financial information and supplementary information consists of making enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim
financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU
and the DTR of the UK FSA.
Based on our review, nothing has come to our attention that causes us to believe that the supplementary information for the six months ended 30
June 2012 is not prepared, in all material respects, in accordance with the MCEV principles, using the methodology and assumptions as detailed in
the basis of preparation of the supplementary information.
Philip Smart
for and on behalf of KPMG Audit Plc
Chartered Accountants, 15 Canada Square, London, E14 5GL, 8 August 2012
Consolidated income statement
For the six months ended 30 June 2012
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
Notes 2012 2011(1) 2011
Revenue
Gross earned premiums B2 1,774 1,879 3,584
Outward reinsurance (155) (163) (325)
Net earned premiums 1,619 1,716 3,259
Investment return (non-banking) 3,353 1,221 (567)
Banking interest and similar income 1,780 1,881 3,669
Banking trading, investment and similar income 107 105 217
Fee and commission income, and income from service activities 1,513 1,500 3,035
Other income 70 89 171
Total revenues 8,442 6,512 9,784
Expenses
Claims and benefits (including change in insurance contract provisions) (2,326) (1,650) (3,331)
Reinsurance recoveries 125 104 123
Net claims and benefits incurred (2,201) (1,546) (3,208)
Change in investment contract liabilities (1,840) (430) 1,889
Losses on loans and advances (216) (251) (458)
Finance costs (90) (85) (58)
Banking interest payable and similar expenses (997) (1,093) (2,095)
Fee and commission expenses, and other acquisition costs (494) (468) (1,007)
Other operating and administrative expenses (1,837) (1,901) (3,852)
Goodwill impairment - - (264)
Change in third party interest in consolidated funds (64) (84) 2
Total expenses (7,739) (5,858) (9,051)
Share of associated undertakings and joint ventures' profit after tax 10 6 10
Profit on acquisition/disposal of subsidiaries, associated undertakings
and strategic investments C1(c) 20 249 251
Profit before tax 733 909 994
Income tax expense D1 (241) (178) (225)
Profit from continuing operations after tax 492 731 769
Discontinued operations
Profit from discontinued operations after tax F1 595 150 198
Profit after tax for the financial period 1,087 881 967
Attributable to
Equity holders of the parent 931 738 667
Non-controlling interests
Ordinary shares 126 112 238
Preferred securities 30 31 62
Profit after tax for the financial period 1,087 881 967
Earnings per share
Basic earnings per share based on profit from continuing operations (pence) 6.7 11.7 8.9
Basic earnings per share based on profit from discontinued operations (pence) 12.5 3.0 4.0
Basic earnings per ordinary share (pence) C3(a) 19.2 14.7 12.9
Diluted earnings per share based on profit from continuing operations (pence) 6.2 10.7 8.0
Diluted earnings per share based on profit from discontinued operations
(pence) 11.5 2.8 3.7
Diluted earnings per ordinary share (pence) C3(a) 17.7 13.5 11.7
Weighted average number of ordinary shares - millions 4,759 4,897 4,935
(1) The results for the six months ended 30 June 2011 have been restated to reflect Nordic as discontinued and non-core and include the African businesses not
previously consolidated (see note A2).
Consolidated statement of comprehensive income
For the six months ended 30 June 2012
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
Notes 2012 2011(1) 2011
Profit after tax for the financial period 1,087 881 967
Other comprehensive income for the financial period
Fair value gains/(losses)
Property revaluation (1) - 39
Net investment hedge 123 (25) 28
Available-for-sale investments
Fair value gains/(losses) 10 3 (1)
Recycled to the income statement (6) (5) (6)
Shadow accounting 1 - (22)
Currency translation differences/exchange differences on translating foreign
operations (203) (358) (1,240)
Other movements (1) (42) (49)
Income tax relating to components of other comprehensive income D1(c) 5 6 12
Total other comprehensive income for the financial period from
continuing operations (72) (421) (1,239)
Total other comprehensive income for the financial period from discontinued
operations (348) (78) (161)
Total other comprehensive income for the financial period (420) (499) (1,400)
Total comprehensive income for the financial period 667 382 (433)
Attributable to
Equity holders of the parent 546 340 (408)
Non-controlling interests
Ordinary shares 91 11 (87)
Preferred securities 30 31 62
Total comprehensive income for the financial period 667 382 (433)
(1) The result for the six months ended 30 June 2011 have been restated to reflect Nordic as discontinued and non-core and include the African businesses not previously
consolidated (see note A2).
Reconciliation of adjusted operating profit to profit after tax
For the six months ended 30 June 2012
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
Notes 2012 2011(1) 2011
Core operations
Long-Term Savings B3 384 414 793
Nedbank B3 406 359 755
Mutual and Federal B3 34 47 89
USAM B3 42 39 67
866 859 1,704
Finance costs (75) (60) (128)
Long term investment return on excess assets 25 18 37
Net interest payable to non-core operations (13) (9) (23)
Corporate costs (25) (28) (57)
Other net income/(expenses) 13 5 (18)
Adjusted operating profit before tax 791 785 1,515
Adjusting items C1(a) (145) 66 (329)
Non-core operations B3 53 34 (183)
Profit before tax (net of policyholder tax) 699 885 1,003
Income tax attributable to policyholder returns B3 34 24 (9)
Profit before tax 733 909 994
Total tax expense D1(a) (241) (178) (225)
Profit from continuing operations after tax 492 731 769
Profit from discontinued operations after tax F1(a) 595 150 198
Profit after tax for the financial period 1,087 881 967
Adjusted operating profit after tax attributable to ordinary equity holders of the parent
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
Notes 2012 2011(1) 2011(2)
Adjusted operating profit before tax 791 785 1,515
Tax on adjusted operating profit D1(d) (210) (189) (341)
Adjusted operating profit after tax 581 596 1,174
Non-controlling interests ordinary shares (135) (120) (257)
Non-controlling preferred securities (30) (31) (62)
Adjusted operating profit after tax attributable to ordinary equity holders
of the parent 416 445 855
Adjusted weighted average number of shares (millions) C3(b) 4,806 4,722 4,756
Adjusted operating earnings per share (pence) C3(b) 8.7 9.4 18.0
(1) The results for the six months ended 30 June 2011 have been restated to reflect Nordic as discontinued and non-core, the African businesses not previously
consolidated, and the seven for eight share consolidation (see note A2).
(2) The results for the year ended 31 December 2011 have been restated to reflect the seven for eight share consolidation (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 30 June 2012
GBPm
At At At
30 June 30 June 31 December
Notes 2012 2011(1) 2011
Assets
Goodwill and other intangible assets 3,252 4,833 3,358
Mandatory reserve deposits with central banks 964 1,073 951
Property, plant and equipment 925 1,008 925
Investment property 2,046 2,254 2,064
Deferred tax assets 313 403 339
Investments in associated undertakings and joint ventures 130 176 111
Deferred acquisition costs 1,324 1,565 1,351
Reinsurers' share of policyholder liabilities 1,204 1,230 989
Loans and advances 40,424 49,452 39,764
Investments and securities 83,285 106,973 81,253
Current tax receivable 183 151 138
Client indebtedness for acceptances 200 254 237
Trade, other receivables and other assets 3,431 4,152 3,348
Derivative financial instruments assets 2,209 1,770 1,795
Cash and cash equivalents 4,088 4,544 3,624
Non-current assets held for sale F2 1,178 6 22,138
Total assets 145,156 179,844 162,385
Liabilities
Long-term business policyholder liabilities 77,583 98,020 76,350
General insurance liabilities 343 386 325
Third-party interests in consolidated funds 2,571 4,711 1,893
Borrowed funds E1 3,536 4,497 3,656
Provisions 272 233 269
Deferred revenue 694 774 701
Deferred tax liabilities 457 850 504
Current tax payable 226 244 199
Trade, other payables and other liabilities 4,433 5,116 4,243
Liabilities under acceptances 200 254 237
Amounts owed to bank depositors 41,471 51,638 40,978
Derivative financial instruments liabilities 1,863 1,355 1,755
Non-current liabilities held for sale F2 1,132 - 20,417
Total liabilities 134,781 168,078 151,527
Net assets 10,375 11,766 10,858
Shareholders' equity
Equity attributable to equity holders of the parent 7,965 9,266 8,488
Non-controlling interests
Ordinary shares 1,692 1,783 1,652
Preferred securities 718 717 718
Total non-controlling interests 2,410 2,500 2,370
Total equity 10,375 11,766 10,858
(1) The results for the six months ended 30 June 2011 have been restated to reflect the consolidation of other African businesses (see note A2).
Condensed consolidated statement of cash flows
For the six months ended 30 June 2012
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2012 2011(1) 2011
Cash flows from operating activities - continuing operations
Profit before tax 733 909 994
Non-cash movements in profit before tax (271) (108) 1,372
Changes in working capital 247 220 (1,415)
Taxation paid (269) (180) (402)
Net cash inflow from operating activities - continuing operations 440 841 549
Cash flows from investing activities
Net (acquisitions)/disposals of financial investments (563) (966) 43
Acquisition of investment properties (21) (23) (57)
Proceeds from disposal of investment properties 17 2 6
Acquisition of property, plant and equipment (56) (54) (184)
Proceeds from disposal of property, plant and equipment 1 9 43
Acquisition of intangible assets (27) (29) (91)
Acquisition of interests in subsidiaries, associated undertakings and strategic
investments (4) 68 103
Disposal of interests in subsidiaries, associated undertakings and strategic
investments 1,772 (353) (329)
Net cash inflow/(outflow) from investing activities - continuing operations 1,119 (1,346) (466)
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the Company (1,093) (53) (97)
Non-controlling interests and preferred security interests (118) (106) (206)
Interest paid (excluding banking interest paid) (52) (36) (87)
Proceeds from issue of ordinary shares (including by subsidiaries to
non-controlling interests) - 4 10
Net acquisition of treasury shares (2) (18) (17)
Issue of subordinated and other debt 137 831 890
Subordinated and other debt repaid (245) (448) (905)
Net cash (outflow)/inflow from financing activities - continuing operations (1,373) 174 (412)
Net increase/(decrease) in cash and cash equivalents - continuing
operations 186 (331) (329)
Net (decrease)/increase in cash and cash equivalents - discontinued operations (129) 501 346
Effects of exchange rate changes on cash and cash equivalents (59) (185) (594)
Cash and cash equivalents at beginning of the period 5,055 5,632 5,632
Cash and cash equivalents at end of the period 5,053 5,617 5,055
Consisting of
Cash and cash equivalents in the statement of financial position 4,088 4,544 3,624
Mandatory reserve deposits with central banks 964 1,073 951
Cash and cash equivalents included in assets held for sale 1 - 480
Total 5,053 5,617 5,055
(1) The results for the six months ended 30 June 2011 have been restated to reflect Nordic as discontinued and non-core and include the African businesses not previously
consolidated (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 GBP964 million (30 June 2011: GBP1,073 million; 31 December 2011: GBP951
million) and cash and cash equivalents subject to consolidation of funds of GBP575 million (30 June 2011: GBP1,028 million; 31 December 2011:
GBP756 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 GBP2,275 million (30 June 2011: GBP2,421 million; 31
December 2011: GBP4,936 million), dividend income received of GBP280 million (30 June 2011: GBP256 million; 31 December 2011: GBP371
million) and interest paid (including banking interest) of GBP1,195 million (30 June 2011: GBP1,199 million; 31 December 2011: GBP2,143 million).
Consolidated statement of changes in equity
For the six months ended 30 June 2012
Millions GBPm
Number of
shares
issued and Share Share Merger Available-for-
Six months ended 30 June 2012 Notes fully paid capital premium reserve sale reserve
Shareholders' equity at beginning of the period 5,801 580 805 2,532 53
Profit after tax for the financial period - - - - -
Other comprehensive income
Fair value gains/(losses)
Property revaluation - - - - -
Net investment hedge(1) - - - - -
Available-for-sale investments
Fair value gains - - - - 14
Recycled to the income statement - - - - (6)
Exchange differences recycled to the income statement(1) F1(a) - - - - -
Shadow accounting - - - - 1
Currency translation differences/exchange differences on
translating foreign operations - - - - -
Other movements - - - - -
Income tax relating to components of other
comprehensive income D1(c) - - - - (1)
Total comprehensive income for the financial period - - - - 8
Dividends C4 - - - - -
Other movements in share capital and payment reserve 22 2 23 - -
Cancellation of treasury shares (239) (24) - - -
Share consolidation (697) - - - -
Merger reserve realised in the period - - - (815) -
Change in participation in subsidiaries - - - - -
Transactions with shareholders (914) (22) 23 (815) -
Shareholders' equity at end of the period 4,887 558 828 1,717 61
(1) Following the sale of the Nordic business on 21 March 2012, foreign exchange translation gains of GBP350 million relating to the Nordic operations, and foreign exchange
hedge losses of GBP102 million relating to net investment hedges in respect of the Nordic investment were recognised in the income statement. These amounts are included
in the GBP595 million profit on sale.
GBPm
Perpetual Attributable Total
Property Share-based preferred to equity non-
revaluation payments Other Translation Retained callable holders of controlling Total
reserve reserve reserves reserve earnings securities the parent interests equity
124 230 5 301 3,170 688 8,488 2,370 10,858
- - - - 914 17 931 156 1,087
(1) - - - - - (1) - (1)
- - - 123 - - 123 - 123
- - - - - - 14 - 14
- - - - - - (6) - (6)
- - - (350) - - (350) - (350)
- - - - - - 1 - 1
- - - (165) - - (165) (36) (201)
1 15 - (8) (13) - (5) 1 (4)
- - - - - 5 4 - 4
- 15 - (400) 901 22 546 121 667
- - - - (1,093) (22) (1,115) (96) (1,211)
- 23 - - (2) - 46 8 54
- - - - 24 - - - -
- - - - - - - - -
- - - - 815 - - - -
- - - - - - - 7 7
- 23 - - (256) (22) (1,069) (81) (1,150)
124 268 5 (99) 3,815 688 7,965 2,410 10,375
Consolidated statement of changes in equity
For the six months ended 30 June 2012
Millions GBPm
Number of
shares
issued and Share Share Merger Available- for-
Six months ended 30 June 2011(1) Notes fully paid capital premium reserve sale reserve
Shareholders' equity at beginning of the period 5,695 570 795 2,845 225
Profit after tax for the financial period - - - - -
Other comprehensive income
Fair value gains/(losses)
Net investment hedge - - - - -
Available-for-sale investments
Fair value gains - - - - 53
Recycled to the income statement - - - - (166)
Shadow accounting - - - - (43)
Currency translation differences/exchange differences on
translating foreign operations - - - - -
Other movements - - - - -
Income tax relating to components of other
comprehensive income D1(c) - - - - 3
Total comprehensive income for the financial period - - - - (153)
Dividends C4 - - - - -
Other movements in share capital and payment reserve 4 - 4 - -
Change in participation in other subsidiaries - - - - -
Reclassification of translation differences on non
controlling interests - - - - -
Shares issued in lieu of cash dividend 69 7 - - -
Transactions with shareholders 73 7 4 - -
Shareholders' equity at end of the period 5,768 577 799 2,845 72
(1) The results for the six months ended 30 June 2011 have been restated to reflect the consolidation of other African businesses (see note A2).
GBPm
Perpetual Total
Property Share-based preferred Attributable to non-
revaluation payments Other Translation Retained callable equity holders controlling Total
reserve reserve reserves reserve earnings securities of the parent interests equity
101 215 5 1,176 2,331 688 8,951 2,523 11,474
- - - - 722 16 738 143 881
- - - (25) - - (25) - (25)
- - - - - - 53 - 53
- (1) - 24 - - (143) - (143)
- - - - - - (43) - (43)
- - - (224) - - (224) (86) (310)
(1) (41) - - 17 - (25) (15) (40)
- - - - - 6 9 - 9
(1) (42) - (225) 739 22 340 42 382
- - - - (145) (22) (167) (84) (251)
- 21 - - (18) - 7 6 13
- - - - - - - 50 50
- - - 43 - - 43 (43) -
- - - - 85 - 92 6 98
- 21 - 43 (78) (22) (25) (65) (90)
100 194 5 994 2,992 688 9,266 2,500 11,766
Consolidated statement of changes in equity
For the six months ended 30 June 2012
Millions GBPm
Number of
shares
issued and Share Share Merger Available-for-
Year ended 31 December 2011 Notes fully paid capital premium reserve sale reserve
Shareholders' equity at beginning of the year 5,695 570 795 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 D1(c) - - - - 2
Total comprehensive income for the financial year - - - - (172)
Dividends C4 - - - - -
Other movements in share capital and payment reserve 7 - 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 99 10 - - -
Transactions with shareholders 106 10 10 (313) -
Shareholders' equity at end of the year 5,801 580 805 2,532 53
GBPm
Perpetual Total
Property Share-based preferred A Attributable to non-
revaluation payments Other Translation Retained callable e equity holders controlling Total
reserve reserve reserves reserve earnings securities of the parent interests equity
101 215 5 1,176 2,331 688 8,951 2,523 11,474
- - - - 635 32 667 300 967
30 - - - - - 30 9 39
- - - 28 - - 28 - 28
- - - - - - 51 (1) 50
- (1) - - - - (11) - (11)
- - - - - - (157) - (157)
- - - 24 - - 24 - 24
(7) - - - - - (65) - (65)
- - - (970) - - (970) (313) (1,283)
- (34) - - 15 - (19) (20) (39)
- - - - - 12 14 - 14
23 (35) - (918) 650 44 (408) (25) (433)
- - - - (221) (44) (265) (162) (427)
- 50 - - (17) - 43 16 59
- - - - 313 - - - -
- - - - - - - 61 61
- - - 43 - - 43 (43) -
- - - - 114 - 124 - 124
- 50 - 43 189 (44) (55) (128) (183)
124 230 5 301 3,170 688 8,488 2,370 10,858
Notes to the consolidated financial statements
For the six months ended 30 June 2012
A: Accounting policies
A1: Basis of preparation
The Group interim financial statements contained herein have been prepared in accordance with the recognition and measurement principles of
International Financial Reporting Standards adopted by the EU and in accordance with the requirements of IAS 34 'Interim Financial Reporting'.
The Group's results for the six months ended 30 June 2012 and the financial position at that date have been prepared using accounting policies
consistent with those applied in the preparation of the Group's 2011 Annual Report and Accounts.
The Group interim financial statements have been prepared on the going concern basis, which the directors believe appropriate. The Group
Finance Director's review includes further details about risks and uncertainties and discloses how the Group actively manages these risks, including
updates to the Group's exposure to Bermuda guarantees, the impact to the Group of regulatory changes and an overview of the Group's Capital
and liquidity position.
The comparative figures for the financial year ended 31 December 2011 are not the company's statutory accounts for that financial year. Those
accounts have been reported on by the company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i)
unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report,
and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
A2: Significant corporate activity and business changes
Disposal of Nordic
As previously reported the Group had agreed at 31 December 2011 to the disposal of its life assurance operations, asset management and banking
operations in Sweden, Denmark and Norway to Skandia Liv. Following final regulatory approval on 8 March 2012 and subsequent shareholder
approval the sale was completed on 21 March 2012. The sale represented the Group's exit from the life assurance market in the Nordic region and
therefore met the criteria of a discontinued operation. The comparative information in the Income Statement, Statement of Comprehensive Income,
Statement of Cash Flows and the related notes has been restated, where applicable, to reflect this. The assets and liabilities of Nordic were
classified as non-current assets and liabilities held for sale at 31 December 2011. At 30 June 2012 following the completion of the disposal there
are no assets and liabilities of Nordic remaining in the Statement of Financial Position. The position at 30 June 2011 reported Nordic on a line by
line basis. For the purposes of adjusted operating profit, Nordic is classified as a non-core operation and the comparative information for the six
months ended 30 June 2011 has been restated. Further details of the impact of discontinued operations are provided in note F1.
Special dividend and share consolidation
On 9 March 2012, the Group declared a special dividend of 18p per 10p ordinary share to all holders of those shares on the register at 20 April
2012 and the dividend was subsequently paid on 7 June 2012. A seven-for-eight share consolidation was effected on 23 April 2012 and from that
date only new ordinary shares of 113/7 pence have been in issue. For basic and diluted earnings per share, the weighted average number of shares
is adjusted with effect from 23 April 2012. For adjusted operating earnings per share the adjustment of the weighted average number of shares has
been made effective 1 January 2012. Consequently the comparative information in the adjusted operating earnings per share note for the six
months ended 30 June 2011 and the year ended 31 December 2011 has been restated accordingly.
Disposal of 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. The
assets and liabilities of the Finnish branch have been classified as non-current assets and liabilities held for sale in the Statement of Financial
Position at 30 June 2012, and 31 December 2011. The 30 June 2011 position reported the Finnish branch on a line by line basis. Details of the non-
current assets and liabilities held for sale are provided in note F2.
Consolidation of other African businesses
As reported in the Group's 2011 Annual Report and Accounts the Group's operations in Zimbabwe, Kenya, Malawi, Swaziland and Nigeria ('the
other African businesses'), were consolidated effective from 1 January 2011. The net asset value of the underlying businesses on 1 January 2011
was deemed to be the fair value of these operations on that date. As a result of the consolidation of these businesses, the Group recognised a gain
on 1 January 2011, which was disclosed as a profit on acquisition of subsidiaries. The comparatives for the six months ended 30 June 2011 have
been restated to include the results of the other African businesses.
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 agreed indigenous shareholding to be provided. At 30 June 2012 the Group had substantially completed
the transfer of the agreed indigenous shareholding to approved indigenisation and economic empowerment trusts, which are fully consolidated for
the purposes of IFRS reporting.
Reporting of Retail Europe within Wealth Management
On 24 January 2012 the Group announced that that it would combine its Wealth Management Continental Europe business (France and Italy) with
the Skandia Retail Europe business unit (Germany, Austria, Poland and Switzerland). As a result the businesses previously reported as the Retail
Europe segment are now reported within the Wealth Management segment for the six months ended 30 June 2012. The comparative information
for the six months ended 30 June 2011 and the year ended 31 December 2011 has been reclassified where applicable.
Integration of OMAM UK with Skandia Investment Group
On 26 April 2012 the Group announced the integration of Old Mutual Asset Management UK (OMAM UK) with Skandia Investment Group. OMAM
UK was previously reported within the US Asset Management segment and Skandia Investment Group is reported within the Wealth Management
segment. Consequently OMAM UK is included within the Wealth Management segment for the six months ended 30 June 2012.
Cancellation of treasury shares
On 13 January 2012 the Group announced that it had cancelled 239,434,888 Ordinary Shares of 10p each previously held in treasury.
A3: Critical accounting estimates and judgements
In the preparation of these financial statements, the Group is required to make estimates and judgements that affect items reported in the
consolidated income statement, statement of financial position, other primary statements and related supporting notes.
Critical accounting estimates and judgements are those which involve the most complex or subjective judgments or assessments, with estimates
based on knowledge of the current situation and circumstances and assumptions based on that knowledge and predictions of future events and
actions. There has been no significant change to the critical accounting estimates and judgements that the Group applied at 31 December 2011.
Notes to the consolidated financial statements
For the six months ended 30 June 2012
B: Segment information
B1: Basis of segmentation
Income statement segmentation
For all periods presented, Nordic has been classified as a discontinued operation and its results are non-core in determining the Group's adjusted
operating profits.
In all reported periods, Bermuda is disclosed as a continuing operation in the IFRS income statement, and is classified as non-core in determining
the Group's adjusted operating profit.
At 30 June 2012 all other businesses, including those held for sale are classified as continuing operations. US Life was classified as a discontinued
operation in comparative periods.
The results of OMAM UK (previously included within US Asset Management) and Retail Europe are included within the Wealth Management
segment for the six months ended 30 June 2012. Except for OMAM UK, the income statement segmental presentation for the six months ended 30
June 2011 and the year ended 31 December 2011 is consistent with the above.
Statement of financial position segmentation
At 30 June 2012 no assets and liabilities relating to Nordic remain. At 31 December 2011 the assets and liabilities of Nordic were classified as non-
current assets and liabilities held for sale. At 30 June 2011 the assets and liabilities of Nordic were disclosed on a line by line basis.
The segmental analysis of the statement of financial position at 30 June 2012, 30 June 2011 and 31 December 2011 discloses Bermuda as non-
core.
The assets and liabilities of the Finnish branch were classified as non-current assets and liabilities held for sale at 30 June 2012. At 30 June 2011
and 31 December, the assets and liabilities of the Finnish branch were reported on a line by line basis.
Segmental analysis
The Group's segmental results are analysed and reported on a basis consistent with the way that management and the Board of Directors assesses
performance and allocates resources. Information is presented to the Board on a consolidated basis in pounds sterling (the presentational currency) and
in local currency of each business.
The revenues generated in each reported segment can be seen in the analysis of profits and losses in note B3.The segmental information in notes
B3 and B4, reflects the adjusted and IFRS measures of profit and loss, assets and liabilities for each operating segment as 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.
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
supplementary information.
A reconciliation between the segment revenues and expenses and the Group's revenues and expenses is shown in note B3. 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.
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 lines of
business in each operating segment derives its revenues are as follows:
Core operations
Long-Term Savings
Emerging Markets 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)
B: Segment information continued
B2: Gross earned premiums
GBPm
Emerging Wealth Long-Term
Six months ended 30 June 2012 Markets M Management Savings M&F Bermuda Total
Life assurance insurance contracts 768 177 945 - - 945
with discretionary participation features 470 - 470 - - 470
General insurance - - - 359 - 359
Gross earned premiums 1,238 177 1,415 359 - 1,774
Life assurance other investment contracts
recognised as deposits 1,020 2,743 3,763 - - 3,763
GBPm
Emerging Wealth Long-Term
Six months ended 30 June 2011(1) Markets Management Savings M&F Bermuda Total
Life assurance insurance contracts 819 183 1,002 - - 1,002
Life assurance investment contracts
with discretionary participation features 502 - 502 - - 502
General insurance - - - 375 - 375
Gross earned premiums 1,321 183 1,504 375 - 1,879
Life assurance other investment contracts
recognised as deposits 1,030 3,318 4,348 - - 4,348
(1) The results for the six months ended 30 June 2011 have been restated to reflect Nordic as discontinued and non-core (see note A2).
GBPm
Emerging Wealth Long-Term
Year ended 31 December 2011 Markets M Management Savings M&F Bermuda Total
Life assurance insurance contracts 1,567 304 1,871 - 2 1,873
Life assurance investment contracts
with discretionary participation features 975 - 975 - - 975
General insurance - - - 736 - 736
Gross earned premiums 2,542 304 2,846 736 2 3,584
Life assurance other investment contracts
recognised as deposits 2,088 6,406 8,494 - - 8,494
Notes to the consolidated financial statements
For the six months ended 30 June 2012
B: Segment information continued
B3: Adjusted operating profit statement - segment information six months ended 30 June 2012
Long-Term Savings
Total
Emerging Wealth Long-Term
Notes Markets Management Savings
Revenue
Gross earned premiums 1,238 177 1,415
Outward reinsurance (41) (43) (84)
Net earned premiums 1,197 134 1,331
Investment return (non-banking) 2,017 1,246 3,263
Banking interest and similar income - - -
Banking trading, investment and similar income - - -
Fee and commission income, and income from service activities 201 597 798
Other income 35 14 49
Inter-segment revenues 33 2 35
Total revenues 3,483 1,993 5,476
Expenses
Claims and benefits (including change in insurance contract provisions) (1,958) (174) (2,132)
Reinsurance recoveries 49 34 83
Net claims and benefits incurred (1,909) (140) (2,049)
Change in investment contract liabilities (663) (1,177) (1,840)
Losses on loans and advances - - -
Finance costs (including interest and similar expenses) - - -
Banking interest payable and similar expenses - - -
Fee and commission expenses, and other acquisition costs (111) (335) (446)
Other operating and administrative expenses (497) (216) (713)
Change in third-party interest in consolidated funds - - -
Income tax attributable to policyholder returns (23) (11) (34)
Inter-segment expenses - (19) (19)
Total expenses (3,203) (1,898) (5,101)
Share of associated undertakings' and joint ventures' profit after tax 9 - 9
Profit on disposal of subsidiaries, associated undertakings and strategic
investments - - -
Adjusted operating profit/(loss) before tax and non-controlling
interests 289 95 384
Income tax expense (70) (13) (83)
Non-controlling interests (3) - (3)
Adjusted operating profit/(loss) after tax and non-controlling interests 216 82 298
Adjusting items net of tax and non-controlling interests C1(a) (72) (54) (126)
Profit/(loss) after tax from continuing operations 144 28 172
Profit from discontinued operations after tax - - -
Profit/(loss) after tax attributable to equity holders of the parent 144 28 172
(1) Non-core operations relates to Bermuda with the exception of GBP4 million of inter-segment revenue and the profit from discontinued operations after tax, with these
reflecting the results of Nordic which has been classified as discontinued operations as detailed in notes A2 and B1. Bermuda profit after tax for the six months ended 30
June 2012 was GBP49 million. Further details on the results of discontinued operations is provided in note F1.
GBPm
Adjusted Adjusting Discontinued IFRS
Consolidation operating items and non-core Income
Nedbank M&F USAM Other adjustments profit (note C1) operations(1) statement
- 359 - - - 1,774 - - 1,774
- (71) - - - (155) - - (155)
- 288 - - - 1,619 - - 1,619
- 23 1 53 80 3,420 (86) 19 3,353
1,780 - - - - 1,780 - - 1,780
107 - - - - 107 - - 107
533 12 209 - - 1,552 (39) - 1,513
13 - - - - 62 - 8 70
14 8 - 7 (81) (17) - 17 -
2,447 331 210 60 (1) 8,523 (125) 44 8,442
- (235) - - - (2,367) - 41 (2,326)
- 42 - - - 125 - - 125
- (193) - - - (2,242) - 41 (2,201)
- - - - - (1,840) - - (1,840)
(216) - - - - (216) - - (216)
- - - (75) - (75) (15) - (90)
(997) - - - - (997) - - (997)
- (53) (2) - (15) (516) 45 (23) (494)
(800) (41) (167) (36) (1) (1,758) (70) (9) (1,837)
- - - - (64) (64) - - (64)
- - - - - (34) 34 - -
(28) (10) - (24) 81 - - - -
(2,041) (297) (169) (135) 1 (7,742) (6) 9 (7,739)
- - 1 - - 10 - - 10
- - - - - - 20 - 20
406 34 42 (75) - 791 (111) 53 733
(113) (9) (6) 1 - (210) (31) - (241)
(139) (4) - (19) - (165) 9 - (156)
154 21 36 (93) - 416 (133) 53 336
8 (6) 5 (14) - (133) 133 - -
162 15 41 (107) - 283 - 53 336
- - - - - - - 595 595
162 15 41 (107) - 283 - 648 931
Notes to the consolidated financial statements
For the six months ended 30 June 2012
B: Segment information continued
B3: Adjusted operating profit statement segment information six months ended 30 June 2011
Long-Term Savings
Total
Emerging Wealth Long-Term
Notes Markets(1) Management Savings
Revenue
Gross earned premiums 1,321 183 1,504
Outward reinsurance (44) (44) (88)
Net earned premiums 1,277 139 1,416
Investment return (non-banking) 1,006 129 1,135
Banking interest and similar income - - -
Banking trading, investment and similar income - - -
Fee and commission income, and income from service activities 198 594 792
Other income 32 9 41
Inter-segment revenues 28 3 31
Total revenues 2,541 874 3,415
Expenses
Claims and benefits (including change in insurance contract provisions) (1,327) (147) (1,474)
Reinsurance recoveries 47 39 86
Net claims and benefits incurred (1,280) (108) (1,388)
Change in investment contract liabilities (324) (106) (430)
Losses on loans and advances - (1) (1)
Finance costs (including interest and similar expenses) - - -
Banking interest payable and similar expenses - - -
Fee and commission expenses, and other acquisition costs (103) (311) (414)
Other operating and administrative expenses (508) (216) (724)
Goodwill impairment - - -
Change in third-party interest in consolidated funds - - -
Income tax attributable to policyholder returns (28) 4 (24)
Inter-segment expenses (1) (21) (22)
Total expenses (2,244) (759) (3,003)
Share of associated undertakings' and joint ventures' profit after tax 2 - 2
Profit on disposal of subsidiaries, associated undertakings and strategic
investments - - -
Adjusted operating profit/(loss) before tax and non-controlling interests 299 115 414
Income tax expense (65) (20) (85)
Non-controlling interests - - -
Adjusted operating profit/(loss) after tax and non-controlling interests 234 95 329
Adjusting items net of tax and non-controlling interests C1(a) 208 (57) 151
Profit/(loss) after tax from continuing operations 442 38 480
Profit from discontinued operations after tax - - -
Profit/(loss) after tax attributable to equity holders of the parent 442 38 480
(1) Emerging Markets has been restated to reflect the African businesses not previously consolidated (see note A2).
(2) Non-core operations relates to Bermuda with the exception of GBP11 million and GBP4 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. More detail is provided in notes
A2 and B1. Bermuda profit after tax for the six months ended 30 June 2011 was GBP25 million. Further detail on the results of discontinued operations is provided in note
F1.
GBPm
Adjusted Adjusting Discontinued IFRS
Consolidation operating items and non-core Income
Nedbank M&F USAM Other adjustments profit (note C1) operations(2) statement
- 375 - - - 1,879 - - 1,879
- (75) - - - (163) - - (163)
- 300 - - - 1,716 - - 1,716
- 28 - 36 101 1,300 (86) 7 1,221
1,881 - - - - 1,881 - - 1,881
105 - - - - 105 - - 105
515 16 223 - - 1,546 (46) - 1,500
20 - 6 - 12 79 - 10 89
13 10 3 7 (86) (22) - 22 -
2,534 354 232 43 27 6,605 (132) 39 6,512
- (212) - - - (1,686) - 36 (1,650)
- 18 - - - 104 - - 104
- (194) - - - (1,582) - 36 (1,546)
- - - - - (430) - - (430)
(250) - - - - (251) - - (251)
- - - (60) - (60) (25) - (85)
(1,089) - - - - (1,089) (4) - (1,093)
(1) (55) (6) - (17) (493) 54 (29) (468)
(806) (46) (187) (39) (12) (1,814) (76) (11) (1,901)
- - - - - - - - -
- - - - (84) (84) - - (84)
- - - - - (24) 24 - -
(29) (12) - (22) 86 1 - (1) -
(2,175) (307) (193) (121) (27) (5,826) (27) (5) (5,858)
- - - 4 - 6 - - 6
- - - - - - 249 - 249
359 47 39 (74) - 785 90 34 909
(93) (11) (8) 8 - (189) 13 (2) (178)
(128) (4) - (19) - (151) 8 - (143)
138 32 31 (85) - 445 111 32 588
6 (8) (5) (33) - 111 (111) - -
144 24 26 (118) - 556 - 32 588
- - - - - - - 150 150
144 24 26 (118) - 556 - 182 738
Notes to the consolidated financial statements
For the six months ended 30 June 2012
B: Segment information continued
B3: Adjusted operating profit statement segment information year ended 31 December 2011
Long-Term Savings
Total
Emerging Wealth Long-Term
Notes Markets Management Savings
Revenue
Gross earned premiums 2,542 304 2,846
Outward reinsurance (88) (88) (176)
Net earned premiums 2,454 216 2,670
Investment return (non-banking) 2,626 (2,878) (252)
Banking interest and similar income - - -
Banking trading, investment and similar income - - -
Fee and commission income, and income from service activities 411 1,183 1,594
Other income 68 23 91
Inter-segment revenues 66 11 77
Total revenues 5,625 (1,445) 4,180
Expenses
Claims and benefits (including change in insurance contract provisions) (2,854) (102) (2,956)
Reinsurance recoveries 73 9 82
Net claims and benefits incurred (2,781) (93) (2,874)
Change in investment contract liabilities (925) 2,814 1,889
Losses on loans and advances - (1) (1)
Finance costs (including interest and similar expenses) - - -
Banking interest payable and similar expenses - - -
Fee and commission expenses, and other acquisition costs (223) (664) (887)
Other operating and administrative expenses (1,076) (404) (1,480)
Goodwill impairment - - -
Change in third-party interest in consolidated funds - - -
Income tax attributable to policyholder returns (53) 62 9
Inter-segment expenses (7) (46) (53)
Total expenses (5,065) 1,668 (3,397)
Share of associated undertakings' and joint ventures' profit after tax 10 - 10
Profit on disposal of subsidiaries, associated undertakings and strategic
investments - - -
Adjusted operating profit/(loss) before tax and non-controlling interests 570 223 793
Income tax expense (120) (26) (146)
Non-controlling interests (3) - (3)
Adjusted operating profit/(loss) after tax and non-controlling interests 447 197 644
Adjusting items net of tax and non-controlling interests C1(a) 126 (87) 39
Profit/(loss) after tax from continuing operations 573 110 683
Profit from discontinued operations after tax - - -
Profit/(loss) after tax attributable to equity holders of the parent 573 110 683
(1) 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. More detail is provided in notes
A2 and B1. Bermuda loss after tax for the year ended 31 December 2011 was GBP201 million. Further detail on the results of discontinued operations is provided in note
F1.
GBPm
Adjusted Adjusting Discontinued IFRS
Consolidation operating items and non-core Income
Nedbank M&F USAM Other adjustments profit (note C1) operations(1) statement
- 736 - - - 3,582 - 2 3,584
- (149) - - - (325) - - (325)
- 587 - - - 3,257 - 2 3,259
- 54 - 52 30 (116) (241) (210) (567)
3,669 - - - - 3,669 - - 3,669
217 - - - - 217 - - 217
1,051 34 447 - - 3,126 (91) - 3,035
50 - 10 - - 151 - 20 171
27 18 1 16 (185) (46) - 46 -
5,014 693 458 68 (155) 10,258 (332) (142) 9,784
- (422) - - - (3,378) - 47 (3,331)
- 41 - - - 123 - - 123
- (381) - - - (3,255) - 47 (3,208)
- - - - - 1,889 - - 1,889
(457) - - - - (458) - - (458)
- - - (128) - (128) 70 - (58)
(2,091) - - - - (2,091) (4) - (2,095)
(9) (109) (12) - (24) (1,041) 104 (70) (1,007)
(1,641) (95) (379) (81) (8) (3,684) (154) (14) (3,852)
- - - - - - (264) - (264)
- - - - 2 2 - - 2
- - - - - 9 (9) - -
(61) (19) - (48) 185 4 - (4) -
(4,259) (604) (391) (257) 155 (8,753) (257) (41) (9,051)
- - - - - 10 - - 10
- - - - - - 251 - 251
755 89 67 (189) - 1,515 (338) (183) 994
(188) (22) (8) 23 - (341) 117 (1) (225)
(269) (8) - (39) - (319) 19 - (300)
298 59 59 (205) - 855 (202) (184) 469
16 (24) (260) 27 - (202) 202 - -
314 35 (201) (178) - 653 - (184) 469
- - - - - - - 198 198
314 35 (201) (178) - 653 - 14 667
Notes to the consolidated financial statements
For the six months ended 30 June 2012
B: Segment information continued
B4: Statement of financial position segment information at 30 June 2012
GBPm
Total
Emerging Wealth Long-Term
Notes Markets Management Savings
Assets
Goodwill and other intangible assets 105 1,673 1,778
Mandatory reserve deposits with central banks - - -
Property, plant and equipment 390 14 404
Investment property 1,599 - 1,599
Deferred tax assets 74 63 137
Investments in associated undertakings and joint ventures 48 - 48
Deferred acquisition costs 111 1,160 1,271
Reinsurers' share of policyholder liabilities 52 1,028 1,080
Loans and advances 401 194 595
Investments and securities 30,412 42,427 72,839
Current tax receivable 21 84 105
Client indebtedness for acceptances - - -
Trade, other receivables and other assets 751 332 1,083
Derivative financial instruments assets 443 - 443
Cash and cash equivalents 516 553 1,069
Non-current assets held for sale F2 - 1,176 1,176
Inter-segment assets 432 116 548
Total assets 35,355 48,820 84,175
Liabilities
Life assurance policyholder liabilities 30,747 43,310 74,057
General insurance liabilities - - -
Third-party interests in consolidated funds - - -
Borrowed funds E1 234 - 234
Provisions 144 45 189
Deferred revenue 13 672 685
Deferred tax liabilities 158 195 353
Current tax payable 144 35 179
Trade, other payables and other liabilities 1,757 643 2,400
Liabilities under acceptances - - -
Amounts owed to bank depositors 93 - 93
Derivative financial instruments liabilities 306 (4) 302
Non-current liabilities held for sale F2 - 1,132 1,132
Inter-segment liabilities 73 460 533
Total liabilities 33,669 46,488 80,157
Net assets 1,686 2,332 4,018
Equity
Equity attributable to equity holders of the parent 1,686 2,332 4,018
Non-controlling interests - - -
Ordinary shares - - -
Preferred securities - - -
Total equity 1,686 2,332 4,018
GBPm
Non-core
Consolidation operations
Nedbank M&F USAM Other adjustments Bermuda Total
548 21 891 14 - - 3,252
964 - - - - - 964
487 22 11 1 - - 925
48 - - - 399 - 2,046
21 13 139 2 - 1 313
51 1 3 27 - - 130
- 15 7 - - 31 1,324
16 108 - - - - 1,204
39,828 1 - - - - 40,424
6,589 429 42 430 1,543 1,413 83,285
76 2 - - - - 183
200 - - - - - 200
902 82 115 45 429 775 3,431
1,137 - - 96 403 130 2,209
922 109 107 1,208 575 98 4,088
2 - - - - - 1,178
166 21 21 1,093 (2,379) 530 -
51,957 824 1,336 2,916 970 2,978 145,156
887 - - - - 2,639 77,583
- 343 - - - - 343
- - - - 2,571 - 2,571
2,281 - 11 1,010 - - 3,536
1 28 2 52 - - 272
1 8 - - - - 694
66 15 - 23 - - 457
4 - 1 42 - - 226
1,213 113 165 77 406 59 4,433
200 - - - - - 200
41,378 - - - - - 41,471
1,189 - - - 372 - 1,863
- - - - - - 1,132
441 2 566 836 (2,379) 1 -
47,661 509 745 2,040 970 2,699 134,781
4,296 315 591 876 - 279 10,375
2,381 294 563 430 - 279 7,965
1,915 21 28 446 - - 2,410
1,643 21 28 - - - 1,692
272 - - 446 - - 718
4,296 315 591 876 - 279 10,375
Notes to the consolidated financial statements
For the six months ended 30 June 2012
B: Segment information continued
B4: Statement of financial position segment information at 30 June 2011
GBPm
Total
Emerging Wealth Long-Term
Notes Markets(1) Management Savings
Assets
Goodwill and other intangible assets 125 1,942 2,067
Mandatory reserve deposits with central banks - - -
Property, plant and equipment 403 18 421
Investment property 1,884 - 1,884
Deferred tax assets 83 59 142
Investments in associated undertakings and joint ventures 24 - 24
Deferred acquisition costs 130 1,230 1,360
Reinsurers' share of policyholder liabilities 35 1,036 1,071
Loans and advances 454 195 649
Investments and securities 33,675 46,163 79,838
Current tax receivable 11 80 91
Client indebtedness for acceptances - - -
Trade, other receivables and other assets 994 403 1,397
Derivative financial instruments assets 527 - 527
Cash and cash equivalents 235 543 778
Non-current assets held for sale F2 - 5 5
Inter-segment assets 1,189 322 1,511
Total assets 39,769 51,996 91,765
Liabilities
Life assurance policyholder liabilities 34,407 47,019 81,426
General insurance liabilities - - -
Third-party interests in consolidated funds - - -
Borrowed funds E1 276 - 276
Provisions 160 54 214
Deferred revenue 19 743 762
Deferred tax liabilities 248 309 557
Current tax payable 104 60 164
Trade, other payables and other liabilities 1,913 669 2,582
Liabilities under acceptances - - -
Amounts owed to bank depositors 74 4 78
Derivative financial instruments liabilities 162 1 163
Non-current liabilities held for sale F2 - - -
Inter-segment liabilities 163 471 634
Total liabilities 37,526 49,330 86,856
Net assets 2,243 2,666 4,909
Equity
Equity attributable to equity holders of the parent 2,242 2,666 4,908
Non-controlling interests 1 - 1
Ordinary shares 1 - 1
Preferred securities - - -
Total equity 2,243 2,666 4,909
(1) Emerging markets has been restated to reflect the African businesses not previously consolidated (see note A2).
(2) Discontinued operations relate to Nordic and US Life (see note A2).
GBPm
Non-core
Consolidation operations Discontinued
Nedbank M&F USAM Other adjustments Bermuda operations(2) Total
604 28 1,140 13 - - 981 4,833
1,073 - - - - - - 1,073
537 24 13 2 - 1 10 1,008
19 - - - 351 - - 2,254
21 15 142 - - - 83 403
108 2 8 30 - - 4 176
1 17 12 - - 98 77 1,565
29 115 - - - - 15 1,230
43,221 2 - 59 - - 5,521 49,452
7,180 452 43 231 3,326 2,052 13,851 106,973
57 - - 2 - - 1 151
254 - - - - - - 254
697 90 149 39 660 959 161 4,152
763 - - 138 331 - 11 1,770
1,081 137 142 781 1,028 59 538 4,544
1 - - - - - - 6
227 25 2 982 (3,558) 604 207 -
55,873 907 1,651 2,277 2,138 3,773 21,460 179,844
848 - - - - 3,281 12,465 98,020
- 386 - - - - - 386
- - - - 4,711 - - 4,711
2,511 - 10 1,698 - - 2 4,497
(6) 30 2 39 - - (46) 233
- 10 - - - - 2 774
155 11 - 25 - - 102 850
5 2 4 33 - 1 35 244
1,204 125 179 110 660 19 237 5,116
254 - - - - - - 254
44,791 - - - - - 6,769 51,638
819 - - 38 325 1 9 1,355
- - - - - - - -
688 2 573 1,661 (3,558) - - -
51,269 566 768 3,604 2,138 3,302 19,575 168,078
4,604 341 883 (1,327) - 471 1,885 11,766
2,599 322 854 (1,773) - 471 1,885 9,266
2,005 19 29 446 - - - 2,500
1,734 19 29 - - - - 1,783
271 - - 446 - - - 717
4,604 341 883 (1,327) - 471 1,885 11,766
Notes to the consolidated financial statements
For the six months ended 30 June 2012
B: Segment information continued
B4: Statement of financial position segment information at 31 December 2011
GBPm
Total
Emerging Wealth Long-Term
Notes Markets Management Savings
Assets
Goodwill and other intangible assets 104 1,756 1,860
Mandatory reserve deposits with central banks - - -
Property, plant and equipment 374 16 390
Investment property 1,666 - 1,666
Deferred tax assets 81 65 146
Investments in associated undertakings and joint ventures 32 - 32
Deferred acquisition costs 113 1,164 1,277
Reinsurers' share of policyholder liabilities 31 844 875
Loans and advances 299 190 489
Investments and securities 30,064 41,508 71,572
Current tax receivable 10 70 80
Client indebtedness for acceptances - - -
Trade, other receivables and other assets 711 310 1,021
Derivative financial instruments assets 298 - 298
Cash and cash equivalents 339 516 855
Non-current assets held for sale F2 - 1,161 1,161
Inter-segment assets 1,025 138 1,163
Total assets 35,147 47,738 82,885
Liabilities
Life assurance policyholder liabilities 30,270 42,159 72,429
General insurance liabilities - - -
Third-party interests in consolidated funds - - -
Borrowed funds E1 239 - 239
Provisions 137 64 201
Deferred revenue 17 673 690
Deferred tax liabilities 185 189 374
Current tax payable 120 39 159
Trade, other payables and other liabilities 1,667 673 2,340
Liabilities under acceptances - - -
Amounts owed to bank depositors - - -
Derivative financial instruments liabilities 230 - 230
Non-current liabilities held for sale F2 - 1,120 1,120
Inter-segment liabilities 141 462 603
Total liabilities 33,006 45,379 78,385
Net assets 2,141 2,359 4,500
Equity
Equity attributable to equity holders of the parent 2,144 2,359 4,503
Non-controlling interests (3) - (3)
Ordinary shares (3) - (3)
Preferred securities - - -
Total equity 2,141 2,359 4,500
(1) Discontinued operations relate to Nordic and US Life (see note A2).
GBPm
Non-core
Consolidation operations Discontinued
Nedbank M&F USAM Other adjustments Bermuda operations(1) Total
557 23 904 13 - 1 - 3,358
951 - - - - - - 951
502 21 11 1 - - - 925
49 - - - 349 - - 2,064
21 14 165 (8) - 1 - 339
49 1 2 27 - - - 111
- 16 9 - - 49 - 1,351
16 98 - - - - - 989
39,274 1 - - - - - 39,764
6,403 416 41 216 874 1,731 - 81,253
56 2 - - - - - 138
237 - - - - - - 237
943 75 126 54 293 836 - 3,348
1,022 - - 86 388 1 - 1,795
1,071 113 197 467 756 165 - 3,624
1 - 16 - - - 20,960 22,138
206 23 21 1,136 (3,155) 566 40 -
51,358 803 1,492 1,992 (495) 3,350 21,000 162,385
815 - - - - 3,106 - 76,350
- 325 - - - - - 325
- - - - 1,893 - - 1,893
2,273 - 11 1,133 - - - 3,656
- 32 3 33 - - - 269
1 10 - - - - - 701
93 13 - 24 - - - 504
10 - (3) 32 - 1 - 199
1,123 108 219 96 348 9 - 4,243
237 - - - - - - 237
40,978 - - - - - - 40,978
1,103 - - 3 419 - - 1,755
- - 8 - - - 19,289 20,417
501 2 598 1,451 (3,155) - - -
47,134 490 836 2,772 (495) 3,116 19,289 151,527
4,224 313 656 (780) - 234 1,711 10,858
2,347 294 625 (1,226) - 234 1,711 8,488
1,877 19 31 446 - - - 2,370
1,605 19 31 - - - - 1,652
272 - - 446 - - - 718
4,224 313 656 (780) - 234 1,711 10,858
Notes to the consolidated financial statements
For the six months ended 30 June 2012
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 Wealth Total Long-
Six months ended 30 June 2012 Notes Markets Management Term Savings
Income/(expense)
Goodwill impairment and impact of acquisition accounting C1(b) (1) (62) (63)
strategic investments C1(c) - - -
Short-term fluctuations in investment return C1(d) (44) 1 (43)
funds C1(e) (37) - (37)
Dividends declared to holders of perpetual preferred callable securities C1(f) - - -
Credit-related fair value losses on Group debt instruments C1(h) - - -
Total adjusting items (82) (61) (143)
Tax on adjusting items D1(d) 6 7 13
Non-controlling interest in adjusting items 4 - 4
Total adjusting items after tax and non-controlling interests (72) (54) (126)
GBPm
Emerging Wealth Total Long-
Six months ended 30 June 2011¹ Notes Markets Management Term Savings
Income/(expense)
Goodwill impairment and impact of acquisition accounting C1(b) (1) (63) (64)
Profit on acquisition/disposal of subsidiaries, associated undertakings and
strategic investments C1(c) 249 - 249
Short-term fluctuations in investment return C1(d) (23) (14) (37)
Investment return adjustment for Group equity and debt instruments held in life
funds C1(e) (31) - (31)
Dividends declared to holders of perpetual preferred callable securities C1(f) - - -
Credit-related fair value gains/(losses) on Group debt instruments C1(h) - - -
Total adjusting items 194 (77) 117
Tax on adjusting items D1(d) 14 20 34
Non-controlling interest in adjusting items - - -
Total adjusting items after tax and non-controlling interests 208 (57) 151
(1) The results for the six months ended 30 June 2012 have been restated to reflect Nordic as discontinued and non-core and the African businesses not previously
consolidated (see note A2).
GBPm
Emerging Wealth Total Long-
Year ended 31 December 2011 Notes Markets Management Term Savings
Income/(expense)
Goodwill impairment and impact of acquisition accounting C1(b) (2) (127) (129)
Profit on acquisition/disposal of subsidiaries, associated undertakings and
strategic investments C1(c) 249 - 249
Short-term fluctuations in investment return C1(d) (98) (14) (112)
Investment return adjustment for Group equity and debt instruments held in life
funds C1(e) (71) - (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 (141) (63)
Tax on adjusting items D1(d) 43 54 97
Non-controlling interest in adjusting items 5 - 5
Total adjusting items after tax and non-controlling interests 126 (87) 39
GBPm
Nedbank M&F USAM Other Total
- - (1) - (64)
- - 20 - 20
- (6) - - (49)
- - - - (37)
- - - 22 22
- - - (37) (37)
- (6) 19 (15) (145)
- (1) (10) 1 3
8 1 (4) - 9
8 (6) 5 (14) (133)
GBPm
Nedbank M&F USAM Other Total
(3) - (2) - (69)
- - - - 249
- (11) - (6) (54)
- - - - (31)
- - - 22 22
(4) - - (47) (51)
(7) (11) (2) (31) 66
2 2 1 (2) 37
11 1 (4) - 8
6 (8) (5) (33) 111
GBPm
Nedbank M&F USAM Other Total
- - (272) - (401)
- - 2 - 251
- (28) - (31) (171)
- - - - (71)
- - - 44 44
- - (4) - (4)
(4) - - 27 23
(4) (28) (274) 40 (329)
1 3 20 (13) 108
19 1 (6) - 19
16 (24) (260) 27 (202)
Notes to the consolidated financial statements
For the six months ended 30 June 2012
C: Other key performance information continued
C1: Operating profit adjusting items continued
(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:
Emerging Wealth
Six months ended 30 June 2012 Markets Management Nedbank USAM Total
Amortisation of acquired PVIF - (43) - - (43)
Amortisation of acquired deferred costs and revenue - 6 - - 6
Amortisation of other acquired intangible assets (1) (25) - (1) (27)
(1) (62) - (1) (64)
GBPm
Emerging Wealth
Six months ended 30 June 2011(1) Markets Management Nedbank USAM Total
Amortisation of acquired PVIF - (46) - - (46)
Amortisation of acquired deferred costs and revenue - 8 - - 8
Amortisation of other acquired intangible assets (1) (25) (3) (2) (31)
(1) (63) (3) (2) (69)
(1) The results for the six months ended 30 June 2011 have been restated to reflect Nordic as discontinued and non-core (see note A2).
Emerging Wealth
Year ended 31 December 2011 Markets Management Nedbank USAM Total
Amortisation of acquired PVIF - (90) - - (90)
Amortisation of acquired deferred costs and revenue - 13 - - 13
Amortisation of other acquired intangible assets (2) (50) - (8) (60)
Goodwill impairment - - - (264) (264)
(2) (127) - (272) (401)
(c) Profit on acquisition/disposal of subsidiaries, associated undertakings and strategic investments
Profit on acquisition/disposal of subsidiaries, associated undertakings and strategic investments is analysed below:
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2012 2011(1) 2011
Emerging Markets - 249 249
Long-Term Savings - 249 249
USAM 20 - 2
Profit on acquisition/disposal of subsidiaries, associated undertakings
and strategic investments 20 249 251
(1) The results for the six months ended 30 June 2011 have been restated to reflect the African businesses not previously consolidated (see note A2).
On 13 April 2012 USAM disposed of Old Mutual Capital, Inc, a subsidiary, at a profit of GBP12 million. On 15 May 2012 USAM disposed of Dwight
Asset Management Company LLC, a fixed income affiliate, at a profit of GBP8 million.
In preparing the consolidated financial statements for the six months ended 30 June 2011 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 would be able to extract benefits from its Zimbabwean business it
was consolidated for the first time for the year ended 31 December 2011 together with operations in Kenya, Malawi, Swaziland and Nigeria. Further
detail has been provided in note A2.
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 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.
%
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
Long-term investment rates 2012 2011 2011
Emerging Markets 9.0 9.0 9.0
Wealth Management 1.5-2.1 2.0-2.1 2.0-2.1
M&F 8.6 9.0 9.0
Analysis of short-term fluctuations in investment return
GBPm
Emerging Wealth Total Long-
Six months ended 30 June 2012 Markets Management Term Savings M&F Other Total
Actual shareholder investment return 19 19 38 18 25 81
Less: Long-term investment return 63 18 81 24 25 130
Short-term fluctuations in investment return (44) 1 (43) (6) - (49)
GBPm
Emerging Wealth Total Long-
Six months ended 30 June 2011(1) Markets Management Term Savings M&F Other Total
Actual shareholder investment return 29 22 51 17 12 80
Less: Long-term investment return 52 36 88 28 18 134
Short-term fluctuations in investment return (23) (14) (37) (11) (6) (54)
GBPm
Emerging Wealth Total Long-
Year ended 31 December 2011 Markets Management Term Savings M&F Other Total
Actual shareholder investment return 14 66 80 26 6 112
Less: Long-term investment return 112 80 192 54 37 283
Short-term fluctuations in investment return (98) (14) (112) (28) (31) (171)
(1) The results for the six months ended 30 June 2011 have been restated to reflect Nordic as discontinued and non-core (see note A2).
(2) Wealth Management long term investment return includes GBP14 million (six months ended 30 June 2011 GBP28 million; year ended 31 December 2011 GBP65
million) in respect of income tax attributable to policyholder returns.
(e) Investment return adjustment for Group equity and debt instruments held in life funds
Adjusted operating profit includes investment returns on policyholder investments in Group equity and debt instruments held by the Group's life
funds. These include investments in the Company's ordinary shares, and the subordinated liabilities and ordinary securities of Nedbank. These
investment returns are eliminated within the consolidated income statement in arriving at profit before tax, but are included in adjusted operating
profit. In the six months ended 30 June 2012 the investment return adjustment increased adjusted operating profit by GBP37 million (six months
ended 30 June 2011: increase of GBP31 million; year ended 31 December 2011: increase GBP71 million).
(f) Dividends declared to holders of perpetual preferred callable securities
Dividends declared to the holders of the Group's perpetual preferred callable securities were GBP22 million for the six months ended 30 June 2012
(six months ended 30 June 2011: GBP22 million year ended 31 December 2011: 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 the six months ended 30 June 2012 was GBP4
million (six months ended 30 June 2011: GBPnil; year ended 31 December 2011: loss GBP6 million).
The Group has issued put options in equities in the affiliates to senior employees as part 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 30 June 2012 these instruments were
revalued, the impact of which was a profit of GBP4 million (six months ended 30 June 2011: GBPnil; year ended 31 December 2011: profit GBP10
million).
Notes to the consolidated financial statements
For the six months ended 30 June 2012
C: Other key performance information continued
C1: Operating profit adjusting items continued
(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 losses in the six months ended 30 June 2012 of
GBP37 million in Other operating segments and GBPnil in Nedbank (six months ended 30 June 2011: losses of GBP47 million and GBP4 million
respectively; year ended 31 December 2011: gains of GBP27 million and losses of GBP4 million respectively) 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
6 months ended 6 months ended Year ended
30 June 2012 30 June 2011 31 December 2011
Income Statement of Income Statement of Income Statement of
Statement financial Statement financial Statement financial
(average position (average position (average position
rate) (closing rate) rate) (closing rate) rate) (closing rate)
Rand 12.5247 12.8401 11.1428 10.8616 11.6445 12.5643
US dollars 1.5769 1.5682 1.6165 1.6067 1.6037 1.5553
Swedish kronor 10.8030 10.8604 10.3023 10.1564 10.4144 10.6801
Euro 1.2154 1.2396 1.1513 1.1073 1.1519 1.1970
C3: Earnings and earnings per share
(a) Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the profit for the financial period attributable to ordinary equity shareholders by the weighted
average number of ordinary shares in issue during the year excluding own shares held in policyholder funds, ESOP trusts, Black Economic Empowerment
trusts and other related undertakings.
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 1 December
2012 2011 restated 2011
Profit for the financial period attributable to equity holders of the parent from continuing
operations 336 588 469
Profit for the financial period attributable to equity holders of the parent from
discontinued operations 595 150 198
Profit for the financial period attributable to equity holders of the parent 931 738 667
Dividends declared to holders of perpetual preferred callable securities (17) (16) (32)
Profit attributable to ordinary equity holders 914 722 635
Total dividends declared to holders of perpetual preferred callable securities of GBP17 million in 2012 (30 June 2011: GBP16 million; 31 December
2011: GBP32 million) are stated net of tax credits of GBP5 million (30 June 2011: GBP6 million; 31 December 2011: GBP12 million).
Millions
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2012 2011 restated 2011
Weighted average number of ordinary shares in issue 5,303 5,470 5,502
Shares held in charitable foundations (6) (7) (6)
Shares held in ESOP trusts (66) (66) (61)
Adjusted weighted average number of ordinary shares 5,231 5,397 5,435
Shares held in life funds (193) (201) (201)
Shares held in Black Economic Empowerment trusts (279) (299) (299)
Weighted average number of ordinary shares 4,759 4,897 4,935
Basic earnings per ordinary share (pence) 19.2 14.7 12.9
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.
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2012 2011 restated 2011
Profit attributable to ordinary equity holders (GBPm) 914 722 635
Dilution effect on profit relating to share options issued by subsidiaries (GBPm) (2) (3) (8)
Diluted profit attributable to ordinary equity holders (GBPm) 912 719 627
Weighted average number of ordinary shares (millions) 4,759 4,897 4,935
Adjustments for share options held by ESOP trusts (millions) 106 149 133
Adjustments for shares held in Black Economic Empowerment trusts (millions) 279 299 299
5,144 5,345 5,367
Diluted earnings per ordinary share (pence) 17.7 13.5 11.7
(b) Adjusted operating earnings per ordinary share
The reconciliation of profit/(loss) for the financial period to adjusted operating profit after tax attributable to ordinary equity holders is as follows:
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2012 2011 restated 2011 restated
Profit for the financial period attributable to equity holders of the parent 931 738 667
Adjusting items 145 (66) 329
Tax on adjusting items (3) (37) (108)
Non-core operations (53) (32) 184
Profit from discontinued operations (595) (150) (198)
Non-controlling interest on adjusting items (9) (8) (19)
Adjusted operating profit after tax attributable to ordinary equity holders 416 445 855
Adjusted weighted average number of ordinary shares (millions) 4,806 4,722 4,756
Adjusted operating earnings per ordinary share (pence) 8.7 9.4 18.0
(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
6 months ended 6 months ended Year ended
30 June 2012 30 June 2011 restated 31 December 2011
Gross Net Gross Net Gross Net
Profit for the financial period attributable to
equity holders of the parent 931 931 738 738 667 667
Dividends declared to holders of perpetual preferred
callable securities (17) (17) (16) (16) (32) (32)
Profit attributable to ordinary equity holders 914 914 722 722 635 635
Adjustments:
Impairments of goodwill and intangible assets - - - - 264 264
(Profit)/loss on acquisition/disposal of subsidiaries,
associated undertakings and strategic investments (262) (256) 29 29 (222) (228)
Realised gains (including impairments) on available-for-
sale financial assets (6) (6) (167) (167) (144) (144)
Exchange differences realised on disposal (350) (350) 24 24 - -
Headline earnings 296 302 608 608 533 527
Weighted average number of ordinary shares 4,759 4,759 4,897 4,897 4,935 4,935
Diluted weighted average number of ordinary
shares 5,144 5,144 5,345 5,345 5,367 5,367
Headline earnings per share (pence) 6.2 6.3 12.4 12.4 10.8 10.7
Diluted headline earnings per share (pence) 5.7 5.8 11.3 11.3 9.8 9.7
Notes to the consolidated financial statements
For the six months ended 30 June 2012
C: Other key performance information continued
C4: Dividends
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2012 2011 2011
2010 Final dividend paid 2.9p per 10p share - 145 145
2011 Interim dividend paid 1.5p per 10p share - - 76
2011 Final dividend paid - 3.5p per 10p share 178 - -
Special dividend - 18.0p per 10p share 915 - -
Dividends to ordinary equity holders 1,093 145 221
Dividends declared to holders of perpetual preferred callable securities 22 22 44
Dividend payments for the period 1,115 167 265
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 2012 GBP22 million was declared and paid to holders of perpetual preferred callable securities (March 2011: GBP22 million; November
2011: GBP22 million).
Following the disposal of Nordic a special dividend of 18.0 pence per 10p share was recommended by the directors and a seven for eight share
consolidation proposed, with the consolidation approved at the Company's general meeting on 14 March 2012. The special dividend was paid on 7
June 2012. Further details of the disposal of the Nordic business unit have been provided in notes A2 and F1.
An interim dividend of 1.75 pence (or its equivalent in other applicable currencies) per ordinary share in the Company has been recommended by
the directors. This interim dividend will be paid on 30 November 2012 to shareholders on the register at the close of business on 26 October 2012.
The dividend will absorb an estimated GBP77 million of shareholders' funds. The Company is not planning to offer a scrip dividend alternative.
D: Other income statement notes
D1: Income tax expense
(a) Analysis of total income tax expense
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2012 2011 restated 2011
Current tax
United Kingdom tax 6 17 22
Overseas tax
South Africa 208 155 390
United States - 2 (2)
Europe 8 12 20
Secondary Tax on Companies (STC) 20 9 14
Prior year adjustments 2 (26) (7)
Total current tax 244 169 437
Deferred tax
Origination and reversal of temporary differences (3) 13 (204)
Changes in tax rates/bases - (5) (8)
Recognition of deferred tax assets - 1 -
Total deferred tax (3) 9 (212)
Total income tax expense 241 178 225
(b) Reconciliation of total income tax expense
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2012 2011 restated 2011
Profit before tax 733 909 994
Tax at standard rate of 24.5% (2011: 26.5%) 180 242 263
Different tax rate or basis on overseas operations 27 3 57
Untaxed and low taxed income (47) (98) (166)
Disallowable expenses 11 6 93
Net movement on deferred tax assets not recognised 22 21 5
Effect on deferred tax of changes in tax rates 2 (3) (8)
STC 18 14 19
Income tax attributable to policyholder returns 28 17 (28)
Other - (3) (10)
Prior period adjustments - (21) -
Total income tax expense 241 178 225
(c) Income tax relating to components of other comprehensive income
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2012 2011 2011
Preferred perpetual callable securities (5) (6) (12)
Income tax credit continuing operations (5) (6) (12)
Fair value gains 1 1 2
Shadow accounting - (4) (4)
Income tax expense/(credit) discontinued operations 1 (3) (2)
Income tax credit relating to components of other comprehensive
income (4) (9) (14)
(d) Income tax on adjusted operating profit
GBPm
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2012 2011 restated 2011
Income tax expense 241 178 225
Tax on adjusting items
Goodwill impairment and impact of acquisition accounting 13 17 35
Profit on disposal of subsidiaries, associated undertakings and strategic investments (8) - 6
Short-term fluctuations in investment return 7 25 75
Income tax attributable to policyholders returns (34) (24) 9
Tax on dividends declared to holders of perpetual preferred callable securities
recognised in equity (5) (6) (12)
Fair value gains and losses on Group debt instruments - 1 2
US Asset Management equity plans (2) - 2
Tax on dividends received in trusts (2) - -
Tax on non-core operations - (2) (1)
Income tax on adjusted operating profit 210 189 341
Notes to the consolidated financial statements
For the six months ended 30 June 2012
E: Borrowed funds
E1: Borrowed funds
GBPm
At At
Group 30 June Group 30 June
Excluding 2012 Excluding 2011
Nedbank Nedbank Group Nedbank Nedbank Group
Senior debt securities and term loans 507 1,427 1,934 539 1,464 2,003
Floating Rate Notes - 926 926 31 873 904
Fixed Rate Notes 507 501 1,008 506 591 1,097
Term loan and other loans - - - 2 - 2
Mortgage Backed Securities - 70 70 - 97 97
Subordinated debt securities (net of Group holdings) 747 785 1,532 1,447 950 2,397
Borrowed funds 1,254 2,282 3,536 1,986 2,511 4,497
Other issues treated as equity for accounting
purposes
US$750 million cumulative preference securities 458 458
EUR500 million perpetual preferred callable securities 338 338
GBP350 million perpetual preferred callable
securities 350 350
Total: Book value 2,400 3,132
Nominal value of the above 2,476 3,277
GBPm
At
31
Group December
Excluding 2011
Nedbank Nedbank Group
Senior debt securities and term loans 507 1,355 1,862
Floating Rate Notes - 844 844
Fixed Rate Notes 507 511 1,018
Mortgage Backed Securities - 77 77
Subordinated debt securities (net of Group holdings) 876 841 1,717
Borrowed funds 1,383 2,273 3,656
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 2,529
Nominal value of the above 2,666
Senior notes
(a) Floating Rate Notes
GBPm
At At At
30 June 30 June 31 December
2012 2011 2011 Maturity date
Nedbank
R1,690 million unsecured senior debt at 3 month JIBAR + 1.5% 81 147 119 September 2012
R1,044 million unsecured senior debt at JIBAR + 2.20% 82 97 84 September 2015
R1,750 million unsecured senior debt at inflation linked
(3.9% real yield) 158 176 158 March 2013
R98 million unsecured senior debt at inflation linked (3.8% real yield) 9 10 9 March 2013
R1,552 million unsecured senior debt at JIBAR + 1.48% 123 145 125 April 2013
R1,027 million unsecured senior debt at JIBAR + 1.75% 81 96 83 April 2015
R80 million unsecured senior debt at JIBAR + 2.15% 6 7 6 April 2020
R988 million unsecured senior debt at JIBAR + 1.05% 75 86 79 March 2014
R677 million unsecured senior debt at JIBAR + 1.25% 53 62 54 March 2016
R500 million unsecured senior debt at JIBAR + 1% 39 47 40 April 2014
R1,075 million unsecured senior debt at JIBAR + 0.94% 85 - 87 October 2014
R1,297 million unsecured senior debt at JIBAR + 1% 102 - - February 2015
R405 million unsecured senior debt at JIBAR + 1.3% 32 - - February 2017
926 873 844
Group excluding Nedbank
US$50 million at 3 month LIBOR plus 0.5% - 31 - Repaid
- 31 -
Total floating rate notes 926 904 844
All floating rate notes are non-qualifying for the purposes of regulatory tiers of capital.
(b) Fixed Rate Notes
GBPm
At At At
30 June 30 June 31 December
2012 2011 2011 Maturity date
Nedbank
R660 million unsecured senior debt at zero coupon 15 15 14 October 2024
R3,244 million unsecured senior debt at 10.55% 260 308 265 Se eptember 2015
R762 million unsecured senior debt at 11.39% 61 73 63 Se eptember 2019
R478 million unsecured senior debt at R157 + 1.75% 38 45 39 April 2015
R450 million unsecured senior debt at R206 + 1.28% 36 42 37 March 2014
R1,137 million unsecured senior debt at R157 + 1.5% 91 108 93 March 2016
501 591 511
Group excluding Nedbank
GBP500 million euro bond at 7.125% 496 496 496 October 2016
US$16.5 million secured senior debt at 5.23% 11 10 11 August 2014
507 506 507
Total fixed rate notes 1,008 1,097 1,018
All fixed rate notes are non-qualifying for the purposes of regulatory tiers of capital.
(c) Revolving credit facilities and irrevocable letters of credit
The Group has access to a GBP1,200 million five-year multi-currency revolving credit facility (agreed in April 2011). At 30 June 2012 GBPnil (30
June 2011: GBPnil, 31 December 2011: GBPnil) of this facility was utilised in the form of drawn debt and there is GBP168 million (30 June 2011:
GBP174 million, 31 December 2011: GBP160 million) in the form of an undrawn irrevocable letter of credit.
Notes to the consolidated financial statements
For the six months ended 30 June 2012
E: Borrowed funds
E1: Borrowed funds continued
(d) Mortgage backed securities - Nedbank
GBPm
At At At
30 June 30 June 31 December
2012 2011 2011 Tier Maturity date
Nedbank
R1.4 billion (class A2A) at 11.817% 60 85 67 Tier 2 November 2039
R98 million (class B note) at 12.067% 6 7 6 Tier 2 November 2039
R76 million (class 3 note) at 13.317% 4 5 4 Tier 2 November 2039
Total mortgage backed securities 70 97 77
(e) Subordinated debt securities (net of Group holdings)
GBPm
At At At
30 June 30 June 31 December
2012 2011 2011 Tier First call date Maturity date
Nedbank
R1.8 billion (9.84%) 150 175 153 Tier 2 September 2013 September 2018
R650 million (9.03%) - 63 54 Tier 2 - Repaid
R1.7 billion (8.9%) 143 165 144 Tier 2 February 2014 February 2019
R2.0 billion (3 month JIBAR plus 0.47%) 157 187 161 Tier 2 July 2017 July 2022
R500 million (3 month JIBAR plus 0.45%) 39 46 40 Tier 2 August 2012 August 2012
R1.0 billion (10.54%) 86 98 87 Tier 2 September 2015 September 2020
R500 million (3 month JIBAR plus 0.70%) 39 46 40 Tier 2 December 2012 December 2017
R120 million (10.38%) 10 11 10 Tier 2 December 2012 December 2017
R487 million (15.05%) 43 48 42 Tier 2 November 2018 November 2018
R1,265 million (JIBAR plus 4.75%) 100 118 102 Non-core Tier 1 November 2018 November 2018
R300 million (JIBAR + 2.5%) 12 14 12 Non-core Tier 1 December 2013 December 2013
Tier 2
US$100 million (3 month USD LIBOR) 64 63 65 Secondary March 2017 March 2022
843 1,034 910
Less: banking subordinated debt
securities held by other Group
companies (58) (84) (69)
Banking subordinated debt securities
(net of Group holdings) 785 950 841
Group excluding Nedbank
R3.0 billion (8.9% to October 2015, 3
month JIBAR plus 1.59% thereafter) 234 276 239 Lower Tier 2 October 2015 October 2020
EUR200 million (2010: EUR750 million) (4.5% to
January 2012 and 6 month EURIBOR plus
0.96 thereafter)(1) - 671 166 Lower Tier 2 - Repaid
GBP500 million (8.0%)(2) 513 500 471 Lower Tier 2 - June 2021
747 1,447 876
Total subordinated debt securities 1,532 2,397 1,717
(1) The principal and coupon on the bond were swapped at issue equally into Sterling and US dollars with coupons of 6 month GBP LIBOR plus 0.34% and 6 month USD
LIBOR plus 0.31% respectively. During 2011 a EUR550 million partial repayment, together with settlements of associated currency swaps, was made. On 18 January 2012
the remaining EUR200 million was repaid on the first call date.
(2) The principal and coupon on the bond were initially swapped into floating rate Swedish Kroner, at 3 month STIBOR plus 5.46%. Following the Nordic sale, GBP375
million of the coupon is now swapped into floating rate sterling at 6 month GBP LIBOR plus 4.15% and GBP125 million of principal and coupon is swapped into US
dollars at 6 month USD LIBOR plus 5.49%.
F: Discontinued operations and disposal groups held for sale
F1: 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. The disposal of Nordic was completed on 21 March 2012 following shareholder and
regulatory approval, and has been reported up until that date. The disposal of US Life was completed on 7 April 2011 following regulatory approval,
and has been reported up until that date. Further detail is provided in note A2.
(a) Income statement from discontinued operations
GBPm
6 months ended 6 months ended Year ended
30 June 2012 30 June 2011 31 December 2011
US US
Nordic Life Total Nordic US Life Total Nordic Life Total
Revenue 842 - 842 (57) 342 285 (421) 342 (79)
Expenses (831) - (831) 104 (330) (226) 541 (330) 211
Profit before tax from discontinued
operations 11 - 11 47 12 59 120 12 132
Profit/(loss) on disposal(1) 242 - 242 - (29) (29) - (29) (29)
Realised available-for-sale investment gains and
exchange differences on disposal(1) 350 - 350 - 133 133 - 133 133
Profit before tax 603 - 603 47 116 163 120 116 236
Income tax (charge)/credit (8) - (8) (27) 14 (13) (52) 14 (38)
Profit from discontinued operations after tax 595 - 595 20 130 150 68 130 198
1
Cumulative foreign exchange translation gains of GBP350 million previously included in equity translation reserves are realised on the disposal of the Nordic
business. Net investment currency hedge losses of GBP102 million also previously included in equity translation reserves have been included in the profit on disposal.
(b) Statement of comprehensive income from discontinued operations
GBPm
6 months ended 6 months ended Year ended
30 June 2012 30 June 2011 31 December 2011
US US
Nordic Life Total Nordic US Life Total Nordic Life Total
Profit from discontinued operations after tax 595 - 595 20 130 150 68 130 198
Other comprehensive income for the
financial period
Fair value gains/(losses)
Available-for-sale investments
Fair value gains 4 - 4 2 48 50 3 48 51
Recycled to the income statement - - - - (5) (5) - (5) (5)
Realised on disposal - - - - (157) (157) - (157) (157)
Exchange differences realised on disposal (350) - (350) - 24 24 - 24 24
Shadow accounting - - - - (43) (43) - (43) (43)
Currency translation differences/exchange
differences on translating foreign operations 2 - 2 49 - 49 (43) - (43)
Other movements (3) - (3) 1 - 1 10 - 10
Aggregate tax on transfers from equity (1) - (1) - 3 3 (1) 3 2
Total other comprehensive (loss)/income
from discontinued operations (348) - (348) 52 (130) (78) (31) (130) (161)
Total comprehensive income for the financial
period from discontinued operations 247 - 247 72 - 72 37 - 37
Attributable to
Equity holders of the parent 247 - 247 72 - 72 37 - 37
Notes to the consolidated financial statements
For the six months ended 30 June 2012
(c) Net cash flows from discontinued operations
GBPm
6 months ended 6 months ended Year ended
30 June 2012 30 June 2011 31 December 2011
US US
Nordic Life Total Nordic US Life Total Nordic Life Total
Operating activities (8) - (8) 1,229 2 1,231 1,609 2 1,611
Investing activities (121) - (121) (876) 146 (730) (1,411) 146 (1,265)
Net cash flows from discontinuing
operations (129) - (129) 353 148 501 198 148 346
F2: Disposal group held for sale
GBPm
Finnish
At 30 June 2012 Branch
Assets
Goodwill and other intangible assets 67
Deferred acquisition costs 43
Investments and securities 1,058
Other assets 3
Cash and balances with central banks 1
Total assets 1,172
Liabilities
Long-term business policyholder liabilities 1,057
Provisions 3
Deferred revenue 54
Deferred tax liabilities 15
Other liabilities 3
Total liabilities 1,132
In addition to the disposal groups held for sale, the Group had additional non-current assets held for sale of GBP6 million (June 2011: GBP6 million;
December 2011: GBP22 million) and non-current liabilities of GBPnil (June 2011: GBPnil; December 2011 GBP9 million)
(b) Equity attributable to equity holders of the parent directly associated with disposal group held for sale
GBPm
Finnish
At 30 June 2012 Branch
Retained earnings 40
40
At 31 December 2011 the assets and liabilities of the Group's Nordic business were shown as held for sale in the financial statements, being
GBP20,960 million and GBP19,289 million respectively. At 31 December 2011 the assets and liabilities of the Group's Finnish branch were also
shown as held for sale in the financial statements, being GBP1,156 million and GBP1,119 million respectively.
G: Other notes
G1: 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 intended to establish certain internal reinsurance arrangements, which were subject to regulatory approval. In the event that
regulatory approval is not forth coming, there is potential for a reduction to the purchase price, of up to a maximum of US$50 million. On 9 July
2012, Harbinger formally filed a legal claim against the Group for the payment of a purchase price adjustment of US$50 million. In view of the
ongoing uncertainty and the current assessment of this matter, the Group has not raised a provision against this exposure.
* On 3 August 2012, the Group received formal notification of a number of claims from Harbinger under the warranty terms included in the sale
agreement. This notification is consistent with the final date for submission of such claims of 6 August 2012. The Group has purchased
insurance protection in respect of such warranty claims and is in the process of assessing the merit of each claim.
* 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 $265 million letter of credit to back these redundant reserves. In the event that this letter of credit is drawn upon, Harbinger is
obligated to fully reimburse Old Mutual plc.
G2: Events after the reporting date
The Group routinely reviews events occurring after the reporting date but prior to the announcement date. Since 30 June 2012, the following events
have occurred:
(a) Debt repurchase
Following a tender issued by the Group on 19 July 2012, GBP388 million of the GBP500 million Senior Eurobond (7.125%) fixed rate note was
repurchased on 1 August 2012. The cost of the repurchase was GBP459 million.
(b) Recapitalisation of OM Bermuda
New Bermudan regulatory requirements were issued late in 2011, to be enacted for the 31 December 2011 filing. Following discussions with the
Bermudan monetary authority, the Group has clarified how the requirements are to be applied in order to implement these in the local filing which
was submitted on 31 July 2012. In order to address these, the Group allocated US$571 million of capital to its Bermuda business. Further details of
the impact of the regulatory changes and the capital allocated are included in the Finance Director's review.
Sponsor: Merrill Lynch South Africa Proprietary Limited
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