Wrap Text
Annual Financial Report 2012 and Annual General Meeting 2013
OLD MUTUAL PLC
ISIN: GB0007389926
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
Old Mutual plc
NEWS RELEASE
Ref 34/13
4 April 2013
OLD MUTUAL PLC – ANNUAL FINANCIAL REPORT 2012 AND ANNUAL GENERAL MEETING
2013
Old Mutual plc (“Old Mutual” or the “Company”) has today published its Annual Financial Report for
2012. A copy of the Annual Financial Report, the Annual Review and Summary Financial Statements
for 2012, the Notice of the 2013 Annual General Meeting (“AGM”) and the Form of Proxy have been
submitted to the National Storage Mechanism and will shortly be available for inspection at
www.hemscott.com/nsm.do
Copies of the Annual Financial Report may also be obtained from Investor Relations, Old Mutual plc,
5th Floor, Millennium Bridge House, 2 Lambeth Hill, London EC4V 4GG or Old Mutual Square,
Isibaya Building, 2nd Floor, 93 Grayston Drive, Sandton 2196, South Africa.
The 2013 AGM will be held in the Presentation Suite, 2 Floor, Millennium Bridge House 2 Lambeth
Hill, London EC4V 4GG on 9 May 20 at 11.00 a.m.
The AGM will, as usual, be webcast so that shareholders who cannot readily attend the meeting in
London can, if they have access to a computer, observe the proceedings. A link to the webcast will
be available on the Company’s website at www.oldmutual.com on Thursday, 9 May 2013 from 10.45 a.m.
(UK time).
In compliance with the Company's obligations under DTR 6.3.5, additional information is set out below
which has been extracted in full unedited text from the Annual Financial Report. Accordingly, page
references and section numbers in the text below refer to page numbers and section numbers in the
Annual Financial Report. This information consists of a description of the risk factors and
uncertainties affecting the Company and details of related party transactions and should be read in
conjunction with the Company’s preliminary results announcement, which was released on 1 March
2013. The Annual Financial Report and the preliminary results announcement are available on
Old Mutual’s website at www.oldmutual.com
The Group’s current topical risks
The table below summarises the Group’s top five topical risks, which are currently at the top of our
agenda. These risks are closely monitored and overseen by Group, which gives regular updates to
the Board and Executive Risk Committees. Our business is also impacted by a number of inherent
risks, such as the exposure to market levels (which drives a significant proportion of our capital
requirement). Although market risk (policyholder) is material, a large portion is from the inherent risk
within our product offering, as we are exposed to the impact of market movements on asset asset-based
fees generated from client-selected investments. For further information on our inherent and
significant risks, please refer to our website www.oldmutual.com/reports2012.
Risk description 2012 and beyond Risk mitigation and
management action
1. Currency translation risk During 2012, South African While future dividend flow
and SA market risk Government debt was from subsidiaries is still
downgraded and the rand heavily impacted by rand risk,
The bulk of the Group’s capital depreciated significantly and this is partly mitigated by the
is held in South Africa to match is expected to remain volatile. proposed policy of linking
the risks faced by the business dividends to earnings.
there. In addition, a significant Bond yields reduced during
portion of our earnings comes the year, increasing the value In addition, the Group uses
from our South African of certain liabilities in the currency hedging to partially
businesses. South African business. In mitigate the risk of a
addition, Old Mutual depreciation in the value of
Earnings and surplus capital Emerging Markets’ IFRS rand receipts from the
are directly impacted by a earnings are sensitive to South African business.
depreciation in the rand. further falls in bond yields.
Partial hedging was
In addition to this, earnings Despite this, a positive implemented during 2012
from our South African climate for doing business to protect against further
business are exposed to remains in South Africa. The interest rate reductions.
market movements in the economic and demographic
South African market. trends provide a strong case
for investment and the
country has a high level of
fiscal discipline, with a strong
banking sector which is well
capitalised.
2. Credit risk across the Our credit risk remains We are currently enhancing
Group stable. However, there has the credit risk limit framework
been an increase in our to enable greater granularity
One of our largest single unsecured loan books in both and consistency of limits
quantifiable risks to the Group Nedbank and OMF in a across the Group. We are
is our exposure to banking market with weakened credit closely managing credit loss
credit risk through our characteristics amongst ratios, though these are
exposure to Nedbank. consumers. broadly within target range
and have improved in the
Despite tight controls and If low economic growth retail area.
processes, profits remain persist in South Africa, this
sensitive to relatively small may have an impact on Nedbank and OMF apply
movements in the credit loss impairment levels. However cautious underwriting criteria
ratios. this risk would be mitigated to compared to some of
some extent if lower interest their competitors, to the
Our exposure to Nedbank is rates persist. extent of constraining growth
primarily contagion risk to vis-à-vis peers.
earnings, as Nedbank’s capital
and liquidity requirements are
both met from its own resources.
There is also credit risk within
the South African Life business
through:
• Our unsecured lending joint
venture, called Old Mutual
Finance (OMF)
• Old Mutual Specialised
Finance (OMSFIN)
• The South African Life
business, predominantly
through the management
of assets backing annuity
products
• A building society in
Zimbabwe, although
the exposure is very small.
3. Old Mutual Wealth The level of operational risk The business plan seeks to
execution risk within Old Mutual Wealth is transform Old Mutual Wealth
increasing in the short term, into a simpler, unified
The key risk here is one of reflecting significant changes business with updated IT
execution due to the volume to the operating model and systems. The strategy,
and complexity of change staffing changes resulting in focusing mainly on the UK
rather than funding or capital reduced continuity. We are and International markets, is
constraints. increasing our focus on the to take on more fund
control environment and management and product
prompt escalation during this risk to increase margins.
period in order to mitigate the
risk. There has been significant There has been significant
investement in IT and change
While this is contrary to the governance over the past
Group’s stated strategy of year. More recently we have
reducing overall operational changed the operating model
risk, we have made an to place more execution
explicit exception as the responsibility at the Old
operational risk increase is Mutual Wealth business
temporary and is necessary level, with ongoing oversight
to address a larger strategic at Group level.
risk to the sustainability of the
Old Mutual Wealth business
model.
4. Expansion in Africa The level of investment in We perform due diligence
new territories is still relatively and careful groundwork
We are looking to expand our small; while nominally more before entering new
business further into the capital has been allocated to territories to ensure we fully
African continent. This could these territories, from an understand the risk that we
potentially increase execution, economic capital perspective are taking on. Where
reputational, legal and people they are not yet material to possible we consider
risk. Emerging Markets. The partnering with local
approach has been cautious, businesses rather than going
and volumes of business are in on our own.
low.
Where we have existing
operations, we monitor new
business levels and required
capital for these businesses
in order to identify higher than
expected growth.
5. Old Mutual Bermuda At the start of 2012, the The exposure to Old Mutual
exposures in relation to Bermuda has substantially
The residual risk relating to the Bermuda were our largest reduced and the residual
Bermuda business remains. single risk to capital and the exposure is now within risk
However, we have reduced only material area which was appetite. Although this is no
the exposure through reducing outside risk appetite. In longer the largest single risk
the equity volatility in the March 2012 we put in place to the Group, we continue to
business. an option-based hedging monitor the market exposure
programme to mitigate the in the business.
market risk for the five-year
top-ups. In addition,
significantly more policies
than expected have been
surrendered at or shortly after
the five-year point.
Related parties
The Group provides certain pension fund, insurance, banking and financial services to related parties.
These are conducted on an arm’s length basis and are not material to the Group’s results.
(a) Transactions with key management personnel, remuneration and other compensation
Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the Group, directly or indirectly, including any director
(whether executive or otherwise) of the Group. Details of the compensation paid to the Board of
directors as well as their shareholdings in the Company are disclosed in the Remuneration Report on
page 99 to 116.
(b) Key management personnel remuneration and other compensation
Year ended Year ended
31 December 2012 31 December 2011
Number of Value Number of Value
personnel £000s personnel £000s
Directors’ fees 10 1,418 12 1,638
Remuneration 24,140 25,176
Cash remuneration 18 5,837 17 5,969
Short-term employee benefits 18 6,779 17 8,751
Long-term employee benefits 18 781 16 1,308
Share-based payments 13 10,743 13 9,148
25,558 26,814
Year ended 31 December Year ended 31 December
2012 2011
Number of
options / Number of
Number of shares Number of options / shares
Share options personnel ‘000s personnel ‘000s
Outstanding at beginning of the year 11 11,482 13 14,499
New appointments 1 697 1 274
Granted during the year – 193
Exercised during the year (8,340) (2,079)
Lapsed during the year (2,095) (1,405)
Outstanding at end of the year 4 1,744 11 11,482
Year ended 31 December Year ended 31 December
2012 2011
Number of
options / Number of
Number of shares Number of options / shares
Restricted shares personnel ‘000s personnel ‘000s
Outstanding at beginning of the year 14 21,652 14 19,142
New appointments 4 2,041 2 1,580
Granted during the year 5,898 7,111
Exercised during the year (1,398) (2,911)
Vested during the year (4,617) (3,270)
Effect of share consolidation (1,248) –
Outstanding at end of the year 14 22,328 14 21,652
(c) Key management personnel transactions
Key management personnel and members of their close family have undertaken transactions with Old
Mutual plc and its subsidiaries, jointly controlled entities and associated undertakings in the normal
course of business, details of which are given below. For current accounts positive values indicate
assets of the individual whilst for credit cards and mortgages positive values indicate liabilities of the
individual.
Year ended Year ended
31 December 2012 31 December 2011
Number of Value Number of Value
personnel £000s personnel £000s
Current accounts
Balance at beginning of the year 5 324 8 672
Net movement during the year 880 (348)
Balance at end of the year 4 1,204 5 324
Credit cards
Balance at beginning of the year 5 26 5 29
Net movement during the year (8) (3)
Balance at end of the year 4 18 5 26
Mortgages
Balance at beginning of the year 4 621 5 1,791
Net movement during the year 44 (627)
Interest charged 31 49
Less repayments (522) (778)
Foreign exchange movements 45 186
Balance at end of the year 2 219 4 621
General insurance contracts
Total premium paid during the year 3 13 3 15
Claims paid during the year 1 3 1 1
Life insurance products
Total sum assured/value of investment at end of the year 12 18,524 10 16,029
Pensions, termination benefits paid
Termination benefits paid 4 2,736 3 1,625
Value of pension plans as at end of the year 10 4,379 10 5,700
Various members of key management personnel hold, and/or have at various times during the year
held, investments managed by asset management businesses of the Group. These include unit
trusts, mutual funds and hedge funds. None of the amounts concerned are material in the context of
the funds managed by the Group business concerned, and all of the investments have been made by
the individuals concerned either on terms which are the same as those available to external clients
generally or, where that is not the case, on the same preferential terms as were available to
employees of the business generally.
Enquiries
External communications
Patrick Bowes UK +44 (0)20 7002 7440
Investor relations
Dominic Lagan UK +44 (0)20 7002 7190
Kelly de Kock SA +27 (0)21 509 8709
Media
William Baldwin-Charles +44 (0)20 7002 7133
+44 (0)7834 524 833
Notes to Editors
Old Mutual provides life assurance, asset management, banking and general insurance to more than
14 million customers in Africa, the Americas, Asia and Europe. Originating in South Africa in 1845,
Old Mutual has been listed on the London and Johannesburg Stock Exchanges, among others, since
1999.
In the year ended 31 December 2012, the Group reported adjusted operating profit before tax of £1.6
billion (on an IFRS basis) and had £262 billion of funds under management from core operations.
For further information on Old Mutual plc, please visit the corporate website at www.oldmutual.com
Lead Sponsor:
Merrill Lynch South Africa (Pty) Ltd
Joint Sponsor:
Nedbank Capital
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