Wrap Text
Old Mutual plc Interim Results for the half year ended 30 June 2013
Old Mutual
ISIN CODE: GB00B77J0862
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSURE CODE: OLOML
Statement of directors' responsibilities in respect of the interim financial
statements
For the six months ended 30 June 2013
We confirm that to the best of our knowledge:
- The Group interim financial statements contained herein are presented in accordance with the requirements of IAS 34 'Interim Financial
Reporting' and are in compliance with International Financial Reporting Standards (IFRS) as adopted by the EU.
- The MCEV supplementary information has been prepared in accordance with the Market Consistent Embedded Value Principles (Copyright ©
Stichting CFO Forum Foundation 2008) issued in June 2008 and updated in October 2009 by the CFO Forum ('the Principles') and the basis
of preparation as set out on page 98.
- 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
7 August 2013 7 August 2013
Interim review report to the members of Old Mutual plc
For the six months ended 30 June 2013
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 2013 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and the related
notes, set out on pages 58 to 91, 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 92 to 116, for the six months ended 30 June 2013.
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 Conduct Authority (the UK FCA) 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 FCA. 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 Group interim financial statements contained herein are presented in accordance with the requirements of IAS 34
'Interim Financial Reporting' and are in compliance with IFRS 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 on the condensed set of financial statements and the supplementary information in the
interim financial report, based on our review.
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 2013 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU
and the DTR of the UK FCA.
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 2013 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 (Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
7 August 2013
Consolidated income statement
For the six months ended 30 June 2013
GBPm
Six months Year
Six months ended ended
ended 30 June 31 December
30 June 2012 2012
Notes 2013 Restated(1) Restated(1)
Revenue
Gross earned premiums B2 1,995 1,774 3,725
Outward reinsurance (162) (155) (322)
Net earned premiums 1,833 1,619 3,403
Investment return (non-banking) 4,489 3,479 9,880
Banking interest and similar income 1,573 1,780 3,431
Banking trading, investment and similar income 110 107 214
Fee and commission income, and income from service activities 1,576 1,482 3,039
Other income 60 70 125
Total revenue 9,641 8,537 20,092
Expenses
Claims and benefits (including change in insurance contract provisions) (2,295) (2,326) (5,612)
Reinsurance recoveries 118 125 221
Net claims and benefits incurred (2,177) (2,201) (5,391)
Change in investment contract liabilities (3,000) (1,840) (5,361)
Losses on loans and advances (234) (216) (400)
Finance costs (23) (90) (214)
Banking interest payable and similar expenses (832) (997) (1,887)
Fee and commission expenses, and other acquisition costs (538) (509) (1,064)
Change in third-party interest in consolidated funds (271) (171) (651)
Other operating and administrative expenses (1,770) (1,819) (3,715)
Total expenses (8,845) (7,843) (18,683)
Share of associated undertakings' and joint ventures' profit after tax 10 14 32
(Loss)/profit on disposal of subsidiaries, associated undertakings
and strategic investments C1(c) (1) 20 (56)
Profit before tax 805 728 1,385
Income tax expense D1 (250) (241) (471)
Profit from continuing operations after tax 555 487 914
Discontinued operations
(Loss)/profit from discontinued operations after tax G1 (8) 595 564
Profit after tax for the financial period 547 1,082 1,478
Attributable to
Equity holders of the parent 414 930 1,172
Non-controlling interests
Ordinary shares 124 122 256
Preferred securities 9 30 50
Profit after tax for the financial period 547 1,082 1,478
Earnings per share
Basic earnings per share based on profit from continuing operations (pence) 9.1 6.7 12.6
Basic earnings per share based on (loss)/profit from discontinued
operations (pence) (0.2) 12.5 12.3
Basic earnings per ordinary share (pence) C2(a) 8.9 19.2 24.9
Diluted earnings per share based on profit from continuing operations (pence) 8.5 6.2 11.6
Diluted earnings per share based on (loss)/profit from discontinued
operations (pence) (0.2) 11.5 11.5
Diluted earnings per ordinary share (pence) C2(a) 8.3 17.7 23.1
Weighted average number of ordinary shares (millions) C2(a) 4,436 4,759 4,587
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
Consolidated statement of comprehensive income
For the six months ended 30 June 2013
GBPm
Six months Year
Six months ended ended
ended 30 June 31 December
30 June 2012 2012
Notes 2013 Restated(1) Restated(1)
Profit after tax for the financial period 547 1,082 1,478
Other comprehensive income for the financial period
Items that will not be reclassified subsequently to profit or loss
Fair value gains/(losses)
Property revaluation (3) (1) 20
Actuarial gains on defined benefit plans 2 4 8
Income tax on items that will not be reclassified subsequently
to profit or loss D1(c) 4 3 6
3 6 34
Items that may be reclassified subsequently to profit and loss
Fair value gains
Net investment hedge 9 123 160
Available-for-sale investments
Fair value (losses)/gains (7) 10 30
Recycled to the income statement (8) (6) (21)
Shadow accounting - 1 6
Currency translation differences on translating foreign operations (346) (203) (641)
Other movements (8) (1) (46)
Income tax on items that may be reclassified subsequently
to profit and loss D1(c) 1 - (5)
(359) (76) (517)
Total other comprehensive income for the financial period from
continuing operations (356) (70) (483)
Total other comprehensive income for the financial period from
discontinued operations² - (348) (348)
Total other comprehensive income for the financial period (356) (418) (831)
Total comprehensive income for the financial period 191 664 647
Attributable to
Equity holders of the parent 192 543 471
Non-controlling interests
Ordinary shares (10) 91 126
Preferred securities 9 30 50
Total comprehensive income for the financial period 191 664 647
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
(2) Total other comprehensive income for the financial period from discontinued operations for the six months ended 30 June 2012 and the year ended 31 December
2012 includes GBP350 million cumulative foreign exchange translation gains, previously included in foreign currency translation reserves, that were realised on the
disposal of Nordic.
Reconciliation of adjusted operating profit to profit after tax
For the six months ended 30 June 2013
GBPm
Six months Year
Six months ended ended
ended 30 June 31 December
30 June 2012 2012
Notes 2013 Restated(1) Restated(1)
Core operations
Emerging Markets B3 290 292 611
Old Mutual Wealth B3 108 95 195
Property & Casualty B3 10 31 37
Nedbank B3 387 405 825
USAM B3 54 42 91
849 865 1,759
Finance costs (46) (75) (130)
Long-term investment return on excess assets 25 25 54
Net interest payable to non-core operations (6) (13) (18)
Corporate costs (21) (25) (53)
Other net expenses - 13 -
Adjusted operating profit before tax 801 790 1,612
Adjusting items C1(a) (69) (149) (467)
Non-core operations B3 2 53 165
Profit before tax (net of policyholder tax) 734 694 1,310
Income tax attributable to policyholder returns B3 71 34 75
Profit before tax 805 728 1,385
Total tax expense D1(a) (250) (241) (471)
Profit from continuing operations after tax 555 487 914
(Loss)/profit from discontinued operations after tax G1(a) (8) 595 564
Profit after tax for the financial period 547 1,082 1,478
Adjusted operating profit after tax attributable to ordinary equity holders of the parent
GBPm
Six months Year
Six months ended ended
ended 30 June 31 December
30 June 2012 2012
Notes 2013 Restated(1) Restated(1)
Adjusted operating profit before tax 801 790 1,612
Tax on adjusted operating profit D1(d) (207) (210) (440)
Adjusted operating profit after tax 594 580 1,172
Non-controlling interests ordinary shares (137) (135) (281)
Non-controlling interests preferred securities (9) (30) (50)
Adjusted operating profit after tax attributable to ordinary equity
holders of the parent 448 415 841
Adjusted weighted average number of shares (millions) C2(b) 4,835 4,806 4,818
Adjusted operating earnings per share (pence) C2(b) 9.3 8.6 17.5
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
Basis of preparation of adjusted operating profit
Adjusted operating profit (AOP) reflects the directors' view of the underlying long-term performance of the Group. AOP is a measure of profitability
which adjusts the standard IFRS profit measures for the specific items detailed in note C1 and, as such, it is a non-GAAP measure. This
reconciliation explains the differences between adjusted operating profit and profit after tax as reported under IFRS.
For core life assurance and general insurance businesses, AOP 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 all core
businesses, AOP 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. Old Mutual Bermuda and
Nordic are treated as non-core operations in the AOP disclosure. Non-core operations are not included in AOP. Nordic is also disclosed as
discontinued operations for IFRS reporting. Refer to note B1 for further information on the basis of segmentation.
Adjusted operating earnings per share is calculated on the same basis as AOP. It is stated after tax attributable to AOP 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.
For the six months ended 30 June 2012 and the year ended 31 December 2012, the weighted average number of shares used in the calculation of
basic and diluted earnings per share was adjusted for the seven-for-eight share consolidation that was affected on 23 April 2012. For adjusted
operating earnings per share, the adjustment of the weighted average number of shares has been made effective from 1 January 2012. This
adjustment had the effect of presenting adjusted earnings per share on a more consistent basis, but resulted in a difference between the adjusted
weighted average number of shares for IFRS and AOP for the comparative periods.
Consolidated statement of financial position
At 30 June 2013
GBPm
At At
At 30 June 31 December
30 June 2012 2012
Notes 2013 Restated(1) Restated(1)
Assets
Goodwill and other intangible assets 3,056 3,252 3,056
Mandatory reserve deposits with central banks 760 964 921
Property, plant and equipment 794 924 847
Investment property 1,911 2,049 1,947
Deferred tax assets 334 317 345
Investments in associated undertakings and joint ventures 130 142 152
Deferred acquisition costs 1,264 1,324 1,288
Reinsurers' share of policyholder liabilities 1,629 1,204 1,406
Loans and advances 37,240 40,624 38,495
Investments and securities 89,093 84,833 88,513
Current tax receivable 109 183 103
Trade, other receivables and other assets 2,955 3,552 2,930
Derivative financial instruments 1,417 2,210 1,780
Cash and cash equivalents 5,035 5,282 5,061
Non-current assets held for sale 5 1,178 42
Total assets 145,732 148,038 146,886
Liabilities
Long-term business policyholder liabilities 81,443 77,583 80,188
General insurance liabilities 350 343 346
Third-party interests in consolidated funds 5,479 5,390 6,116
Borrowed funds E2 2,563 3,536 3,050
Provisions 252 294 281
Deferred revenue 664 694 689
Deferred tax liabilities 435 457 404
Current tax payable 250 226 287
Trade, other payables and other liabilities 5,031 4,496 4,848
Amounts owed to bank depositors 38,009 41,671 39,499
Derivative financial instruments 1,623 1,863 1,402
Non-current liabilities held for sale - 1,132 3
Total liabilities 136,099 137,685 137,113
Net assets 9,633 10,353 9,773
Shareholders' equity
Equity attributable to equity holders of the parent 7,729 7,947 7,816
Non-controlling interests
Ordinary shares 1,632 1,688 1,684
Preferred securities 272 718 273
Total non-controlling interests 1,904 2,406 1,957
Total equity 9,633 10,353 9,773
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
Consolidated statement of cash flows
For the six months ended 30 June 2013
GBPm
Six months Year
Six months ended ended
ended 30 June 31 December
30 June 2012 2012
2013 Restated(1) Restated(1)
Cash flows from operating activities
Profit before tax 805 728 1,385
Non-cash movements in profit before tax 620 (271) 249
Changes in working capital 228 254 1,046
Taxation paid (225) (269) (295)
Net cash inflow from operating activities 1,428 442 2,385
Cash flows from investing activities
Net acquisitions of financial investments (590) (574) (1,449)
Acquisition of investment properties (7) (21) (55)
Proceeds from disposal of investment properties 9 17 67
Acquisition of property, plant and equipment (50) (56) (120)
Proceeds from disposal of property, plant and equipment 6 1 7
Acquisition of intangible assets (31) (27) (72)
Acquisition of interests in subsidiaries, associated undertakings and strategic
investments (31) (4) (23)
Disposal of interests in subsidiaries, associated undertakings and strategic
investments 12 1,772 1,883
Net cash (outflow)/inflow from investing activities (682) 1,108 238
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the Company (238) (1,093) (1,172)
Non-controlling interests and preferred security interests (95) (118) (211)
Dividends received from associated undertakings 12 - -
Interest paid (excluding banking interest paid) (26) (52) (85)
Proceeds from issue of ordinary shares (including by subsidiaries to
non-controlling interests) 9 - 35
Net (acquisition)/disposal of treasury shares (29) (2) 19
Issue of subordinated and other debt - 137 290
Subordinated and other debt repaid (262) (245) (1,293)
Net cash outflow from financing activities (629) (1,373) (2,417)
Net increase in cash and cash equivalents 117 177 206
Net decrease in cash and cash equivalents - discontinued operations - (129) (129)
Effects of exchange rate changes on cash and cash equivalents (304) (86) (380)
Cash and cash equivalents at beginning of the year 5,982 6,285 6,285
Cash and cash equivalents at end of the year 5,795 6,247 5,982
Consisting of
Cash and cash equivalents in the statement of financial position 5,035 5,282 5,061
Mandatory reserve deposits with central banks 760 964 921
Cash and cash equivalents included in assets held for sale - 1 -
Total 5,795 6,247 5,982
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
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 GBP760 million (30 June 2012: GBP964 million; 31 December 2012: GBP921 million)
and cash and cash equivalents subject to consolidation of funds of GBP1,757 million (30 June 2012: GBP1,778 million; 31 December 2012:
GBP1,893 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.
Consolidated statement of changes in equity
For the six months ended 30 June 2013
Millions
Number of
shares Available-
issued and Share Share Merger for-sale
Six months ended 30 June 2013 Notes fully paid capital premium reserve reserve
Shareholders' equity at beginning of the period 4,892 559 835 1,717 65
Impact of changes in accounting policies (note A1) - - - - -
Restated shareholders' equity at beginning of the
period 4,892 559 835 1,717 65
Profit after tax for the financial period - - - - -
Other comprehensive income
Items that will not be reclassified subsequently to
profit or loss
Property revaluation - - - - -
Actuarial gains on defined benefit plans - - - - -
subsequently to profit or loss - - - - -
- - - - -
Items that may be reclassified subsequently to profit
or loss
Net investment hedge - - - - -
Fair value losses - - - - (7)
Recycled to the income statement - - - - (8)
operations - - - - -
Other movements - - - - -
subsequently to profit or loss D1(c) - - - - 1
Total comprehensive income for the financial period - - - - (14)
Dividends for the year C3 - - - - -
payment reserve 4 - 8 - -
Change in participation in subsidiaries - - - - -
Transactions with shareholders 4 - 8 - -
Shareholders' equity at end of the period 4,896 559 843 1,717 51
GBPm
Foreign Perpetual Total
Property Share-based currency 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
144 268 33 (378) 3,908 682 7,833 1,965 9,798
- - - - (17) - (17) (8) (25)
144 268 33 (378) 3,891 682 7,816 1,957 9,773
- - - - 397 17 414 133 547
(3) - - - - - (3) - (3)
- - - - 2 - 2 - 2
- - - - (1) 5 4 - 4
(3) - - - 1 5 3 - 3
- - - 9 - - 9 - 9
- - - - - - (7) - (7)
- - - - - - (8) - (8)
- - - (221) - - (221) (125) (346)
- (10) 1 - 10 - 1 (9) (8)
- - - - - - 1 - 1
(3) (10) 1 (212) 408 22 192 (1) 191
- - - - (238) (22) (260) (73) (333)
- 2 - - (29) - (19) (3) (22)
- - - - - - - 24 24
- 2 - - (267) (22) (279) (52) (331)
141 260 34 (590) 4,032 682 7,729 1,904 9,633
Consolidated statement of changes in equity
For the six months ended 30 June 2013
Millions
Number of
shares
issued and Share Share Merger Available-for-
Six months ended 30 June 2012 Restated(1) Notes fully paid capital premium reserve sale reserve
Shareholders' equity at beginning of the period 5,801 580 805 2,532 53
Impact of changes in accounting policies (note A1) - - - - -
Restated shareholders' equity at beginning of the
period 5,801 580 805 2,532 53
Profit after tax for the financial period - - - - -
Other comprehensive income
Items that will not be reclassified subsequently
to profit or loss
Fair value gains/(losses)
Property revaluation - - - - -
Actuarial gains on defined benefit plans - - - - -
Income tax on items that will not be reclassified
subsequently to profit or loss - - - - -
- - - - -
Items that may be reclassified subsequently
to profit or loss
Fair value gains/(losses)
Net investment hedge - - - - -
Available-for-sale investments
Fair value gains - - - - 14
Recycled to the income statement - - - - (6)
Exchange differences recycled to the income statement - - - - -
Shadow accounting - - - - 1
Currency translation differences on translating foreign
operations - - - - -
Other movements - - - - -
Income tax on items that may be reclassified
subsequently to profit or loss D1(c) - - - - (1)
Total comprehensive income for the financial period - - - - 8
Dividends C3 - - - - -
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) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
GBPm
Foreign Perpetual Total
Property Share-based currency 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
124 230 5 301 3,170 688 8,488 2,370 10,858
- - - - (20) - (20) - (20)
124 230 5 301 3,150 688 8,468 2,370 10,838
- - - - 913 17 930 152 1,082
(1) - - - - - (1) - (1)
- - - - 4 - 4 - 4
- - - - (2) 5 3 - 3
(1) - - - 2 5 6 - 6
- - - 123 - - 123 - 123
- - - - - - 14 - 14
- - - - - - (6) - (6)
- - - (350) - - (350) - (350)
- - - - - - 1 - 1
- - - (165) 1 - (164) (36) (200)
1 15 - (8) (13) - (5) 1 (4)
- - - - - - (1) - (1)
- 15 - (400) 903 22 548 117 665
- - - - (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) 3,797 688 7,947 2,406 10,353
Consolidated statement of changes in equity
For the six months ended 30 June 2013
Millions
Number of
shares
issued and Share Share Merger Available-for-
Year ended 31 December 2012 Restated(1) Notes fully paid capital premium reserve sale reserve
Shareholders' equity at beginning of the period 5,801 580 805 2,532 53
Impact of changes in accounting policies (note A1) - - - - -
Restated shareholders' equity at beginning of the
period 5,801 580 805 2,532 53
Profit after tax for the financial year - - - - -
Other comprehensive income
Items that will not be reclassified subsequently
to profit and loss
Fair value gains
Property revaluation - - - - -
Actuarial gain on defined benefit plans - - - - -
Income tax on items that will not be reclassified
subsequently to profit or loss - - - - -
- - - - -
Items that may be reclassified subsequently
to profit or loss
Fair value gains/(losses)
Net investment hedge - - - - -
Available-for-sale investments
Fair value gains - - - - 33
Recycled to the income statement - - - - (21)
Exchange differences recycled to the income statement - - - - -
Shadow accounting - - - - 6
Currency translation differences on translating foreign
operations - - - - -
Other movements - - - - -
Income tax on items that may be reclassified
subsequently to profit or loss D1(c) - - - - (6)
Total comprehensive income for the financial year - - - - 12
Dividends for the year C3 - - - - -
Other movements in share capital and share-based
payment reserve 27 3 30 - -
Cancellation of treasury shares (239) (24) - - -
Share consolidation (697) - - - -
Preferred securities purchased - - - - -
Merger reserve realised in the year - - - (815) -
Change in participation in subsidiaries - - - - -
Transactions with shareholders (909) (21) 30 (815) -
Shareholders' equity at end of the year 4,892 559 835 1,717 65
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
GBPm
Foreign Perpetual Total
Property Share-based currency 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
124 230 5 301 3,170 688 8,488 2,370 10,858
- - - - (20) - (20) - (20)
124 230 5 301 3,150 688 8,468 2,370 10,838
- - - - 1,140 32 1,172 306 1,478
19 - - - - - 19 1 20
- - - - 8 - 8 - 8
- - - - (4) 10 6 - 6
19 - - - 4 10 33 1 34
- - - 160 - - 160 - 160
- - - - - - 33 1 34
- - - - - - (21) - (21)
- - - (350) - - (350) - (350)
- - - - - - 6 - 6
- - - (489) - - (489) (150) (639)
1 (24) 4 - (40) - (59) 10 (49)
- - - - - - (6) - (6)
20 (24) 4 (679) 1,104 42 479 168 647
- - - - (1,172) (42) (1,214) (169) (1,383)
- 62 - - 7 - 102 13 115
- - 24 - - - - - -
- - - - - - - - -
- - - - (13) (6) (19) (445) (464)
- - - - 815 - - - -
- - - - - - - 20 20
- 62 24 - (363) (48) (1,131) (581) (1,712)
144 268 33 (378) 3,891 682 7,816 1,957 9,773
Notes to the consolidated financial statements
For the six months ended 30 June 2013
A: Significant accounting policies
A1: Basis of preparation
The Group interim financial statements contained herein are presented in accordance with the requirements of IAS 34 'Interim Financial Reporting'
and are in compliance with International Financial Reporting Standards (IFRS) adopted by the EU. The Group's results for the six months ended 30
June 2013 and the financial position at that date have been prepared using accounting policies consistent with those applied in the preparation of
the Group's 2012 Annual Report and Accounts, except for the adoption of new standards and interpretations effective for the period commencing 1
January 2013. The financial information has been restated where required.
The Group interim financial statements have been prepared on the going concern basis, which the directors believe appropriate. Part 2 of the
Interim Review document includes more details on the financial performance of the business. It also sets out further details about risks and
uncertainties and discloses how the Group actively manages these risks, 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 2012 represent the consolidated performance of the Group. They are not the
Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the
Registrar of Companies. The report of the auditor 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.
Translation of foreign operations
The assets and liabilities of foreign operations are translated from their respective functional currencies into the Group's presentation currency using
the period end exchange rates, and their income and expenses using the average exchange rates. Other than in respect of cumulative translation
gains and losses up to 1 January 2004, cumulative unrealised gains or losses resulting from translation of functional currencies to the presentation
currency are included as a separate component of shareholders' equity. To the extent that these gains and losses are effectively hedged, the
cumulative effect of such gains and losses arising on the hedging instruments are also included in that component of shareholders' equity. Upon the
disposal of subsidiaries the cumulative amount of exchange differences deferred in shareholders' equity, net of attributable amounts in relation to
net investments, is recognised in the income statement.
The principal exchange rates used to translate the operating results, assets and liabilities of key foreign business segments to pounds sterling are:
Six months ended Six months ended Year ended
30 June 2013 30 June 2012 31 December 2012
Statement of Statement of Statement of
Income financial Income financial Income financial
Statement position Statement position statement position
(average rate) (closing rate) (average rate) (closing rate) (average rate) (closing rate)
Rand 14.2269 15.0827 12.5247 12.8401 13.0123 13.7696
US dollars 1.5448 1.5185 1.5769 1.5682 1.5850 1.6242
Euro 1.1763 1.1676 1.2154 1.2396 1.2326 1.2307
New standards, interpretations and amendments adopted by the Group affecting the financial statements for the period ended 30 June
2013
Several new accounting standards are applicable to the Group for the year ending 31 December 2013, and where required those standards have
been applied in preparing the financial statements for the six months ended 30 June 2013, with restatement of the comparative information for the
six months ended 30 June 2012 and the year ended 31 December 2012 as required. The standards that were relevant in the six months ended 30
June 2013 and have required restatement include amendments to IAS 1 'Presentation of Financial Statements', IAS 19 (Revised 2011) 'Employee
Benefits', IFRS 10 'Consolidated Financial Statements' and IFRS 11 'Joint Arrangements'.
Several other new standards and amendments apply for the first time in 2013. However, they do not impact the interim consolidated financial
statements of the Group and they are also not expected to have a material impact on future reporting periods as they are disclosure standards.
These include IFRS 7 'Financial Instruments: Disclosures (Amended 2011), IFRS 12 'Disclosure of Interest in Other Entities' and IFRS 13 'Fair
Value Measurement'.
The following standards were adopted by the Group and had an impact on the interim financial statements:
Amendments to IAS 1 'Presentation of Items of Other Comprehensive Income'
The amendments to IAS 1 require that an entity present separately the items of other comprehensive income (OCI) that may be reclassified to profit
or loss in the future, from those that will never be reclassified to profit or loss. The amendment affected presentation only and had no impact on the
shareholders' equity or profit.
IAS 19 'Employee Benefits' (Revised 2011)
The Group has adopted IAS 19 'Employee Benefits' (Revised 2011) with a date of initial application of 1 January 2013.
The key amendments are:
- The corridor method has been removed and all actuarial gains and losses are required to be recognised in OCI rather than in profit or loss
Expected returns on plan assets are no longer recognised in profit or loss. Instead, interest is recognised on the net defined benefit liability or
asset in profit or loss, calculated using the discount rate used to measure the defined benefit obligation.
- Past service costs arising from plan amendments or curtailment are now recognised in profit or loss at the earlier of when the amendment
occurs or when the related restructuring or termination cost are recognised. The option to amortise such cost over future years has also been
eliminated.
- Administration costs, other than costs of managing plan assets, are recognised in the profit and loss when the service is provided.
The change in accounting policy has been applied retrospectively and as a result, the comparative information for the six months ended 30 June
2012 and the year ended 31 December 2012 have been restated accordingly.
The major impact of the adoption of the standard was an increase in operating and administrative expenses and a net increase in other
comprehensive income. The overall impact on the Group was a decrease in equity, an increase in the assets and an increase in the liabilities of the
Group. The standard affects the accounting for certain defined pension schemes in Emerging Markets, Nedbank and Old Mutual plc.
The transitional adjustment, applied to the opening statement of financial position, as at 1 January 2013, had an effect of decreasing equity by
GBP17 million, increasing total assets by GBP5 million and increasing total liabilities by GBP22 million.
IFRS 10 'Consolidated Financial Statements' and IAS 27 'Separate Financial Statements'
The Group has early adopted IFRS 10 'Consolidated Financial Statements' with a date of initial application of 1 January 2013.
IFRS 10 introduces a single control model that applies to all entities, including special purpose entities. IFRS 10 replaces the parts of IAS 27
'Consolidated and Separate Financial Statements' that dealt with consolidated financial statements and SIC-12 'Consolidation Special Purpose
Entities'. IFRS 10 changes the definition of control such that an investor controls an investee when it has power over the investee, when it is
exposed, or has rights, to variable returns from its involvement with the investee and when it has the ability to use its power over the investee to
affect those returns. To meet the definition of control in IFRS 10, all three of these criteria must be met.
The implementation of this standard did not have a significant financial impact on the Group's assessment of its interests in investment funds, but it
did increase the number of investment funds consolidated. The principal effect was a gross up of the consolidated statement of financial position for
the difference between the value of the newly consolidated assets and liabilities and the carrying value of the Group's interest, and the equal and
opposite liability for the interests of external parties in these investment funds.
The transitional adjustment, applied to the opening statement of financial position, as at 1 January 2013 had an effect of decreasing non-controlling
interest attributable to ordinary shareholders by GBP8 million, increasing total assets by GBP3,384 million and increasing total liabilities by
GBP3,392 million.
The Group has only considered the consolidation suite of standards for interests that existed at 1 January 2013. The change in accounting policy
has been applied retrospectively and as a result, the comparative information for the six months ended 30 June 2012 and the year ended 31
December 2012 have been restated accordingly.
The following standard was adopted by the Group but had no material impact on the interim financial statements:
IFRS 11 'Joint Arrangements' and IAS 28 'Investment in Associates and Joint Ventures'
The Group has early adopted IFRS 11 'Joint Arrangements' with a date of initial application of 1 January 2013.
IFRS 11 replaces IAS 31 'Interests in Joint Ventures' and SIC-13 'Jointly-controlled entities' and removes the option to account for joint
arrangements using proportionate consolidation. Jointly-controlled entities that meet the definition of a joint arrangement under IFRS 11 must now
be accounted for using the equity method.
Effect of the adoption of IAS 19 (Revised) and IFRS 10
The following tables summarise the impact of the restatements in the financial statements and the line items affected:
GBPm
Adjustments Adjustments
As previously for adoption for adoption
Six months ended 30 June 2012 reported of IAS 19 of IFRS 10 As restated
Consolidated income statement
Profit after tax from continuing operations 492 (1) (4) 487
Profit after tax for the financial period 1,087 (1) (4) 1,082
Non-controlling interests - ordinary shares 156 - (4) 152
Consolidated statement of comprehensive income
Total other comprehensive income for the financial period (420) 2 - (418)
Total comprehensive income for the financial period 667 1 (4) 664
Reconciliation of adjusted operating profit to profit after tax
Adjusting items (145) - (4) (149)
Adjusted operating profit after tax attributable to equity holders of
the parent 416 (1) - 415
Consolidated statement of financial position
Total Assets 145,156 4 2,878 148,038
Total Liabilities 134,781 22 2,882 137,685
Equity attributable to ordinary shareholders of the parent 7,965 (18) - 7,947
Non-controlling interests - ordinary shares 2,410 - (4) 2,406
Consolidated statement of cash flows
Cash and cash equivalents at beginning of the year 5,055 - 1,230 6,285
Cash and cash equivalents at end of the year 5,053 - 1,194 6,247
Cash and cash equivalents in the statement of financial position 4,088 - 1,194 5,282
GBPm
Adjustments Adjustments
As previously for adoption of for adoption
Year ended 31 December 2012 reported IAS 19 IFRS 10 As restated
Consolidated income statement
Profit after tax from continuing operations 923 (1) (8) 914
Profit after tax for the financial year 1,487 (1) (8) 1,478
Non-controlling interests - ordinary shares 314 - (8) 306
Consolidated statement of comprehensive income
Total other comprehensive income for the financial period (835) 4 - (831)
Total comprehensive income for the financial period 652 3 (8) 647
Reconciliation of adjusted operating profit to profit after tax
Adjusting items (459) - (8) (467)
Adjusted operating profit after tax attributable to equity holders of
the parent 842 (1) - 841
Consolidated statement of financial position
Total Assets 143,497 5 3,384 146,886
Total Liabilities 133,699 22 3,392 137,113
Equity attributable to ordinary shareholders of the parent 7,833 (17) - 7,816
Non-controlling interests - ordinary shares 1,965 - (8) 1,957
Consolidated statement of cash flows
Cash and cash equivalents at beginning of the year 5,055 - 1,230 6,285
Cash and cash equivalents at end of the year 4,784 - 1,198 5,982
Cash and cash equivalents in the statement of financial position 3,863 - 1,198 5,061
Refer to note C2 for the effect on basic and diluted earnings per share
New standards, interpretations and amendments adopted by the Group not affecting the financial statements for the period ended 30 June
2013
The following standards had no financial impact on the interim result of the Group due to the nature of the standards, and will be disclosed
in the year end financial statements:
IFRS 7 'Financial Instruments: Disclosures' (effective 1 January 2013)
The amendment to IFRS 7 requires that an entity disclose additional information for financial instruments that are subject to master netting or other
similar agreements.
IFRS 12 'Disclosure of Interests in Other Entities'
IFRS 12 sets out the requirements for disclosures relating to an entity's interests in subsidiaries, joint arrangements, associates and structured
entities. The standard disclosures include all of the disclosures that were previously part of IAS 27 'Consolidated and Separate Financial
Statements', IAS 28 'Investment in Associates and Joint Ventures' and IAS 31 'Interests in Joint Ventures'.
IFRS 13 'Fair Value Measurement'
IFRS 13 replaces existing guidance on fair value measurement in different IFRS with a single definition of fair value, a framework for measuring
fair values and disclosures about fair value measurements. The Group has applied fair value measurements on a consistent basis across all
reporting periods and, as a result, the implementation of IFRS 13 did not materially impact the fair value measurements carried out by the
Group.
All of the disclosure requirements will be included in the year end financial statements. Only the disclosures required by IAS 34 'Interim
Financial Reporting' have been included in the interim financial statements.
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
A detailed list of the Group's accounting policies can be found at www.oldmutual.com. The contents of the website are not subject to external
audit.
A2: Significant corporate activity and business changes during the period
Acquisition of Oceanic's Nigerian general insurance business
On 22 February 2012, the Group announced that it has made an offer to acquire the majority stake in Oceanic Life, the life assurance operations of
the former Oceanic Bank in Nigeria which was acquired by Ecobank Transitional Incorporated. The Group consolidated the financial results of
Oceanic for the six months ended 30 June 2013 from 1 January 2013.
Acquisition of AIVA Business Platforms (AIVA)
On 19 November 2012, the Group announced that it has acquired the majority stake in AIVA, a business platform and distribution business based in
Uruguay and spanning the Latin American region. All the relevant regulatory approvals where received and the Group consolidated the financial
results of AIVA for the six months ended 30 June 2013 from 2 January 2013.
Acquisition of Provident Life Assurance Company Limited (Provident)
On 3 June 2013, the Group announced that it will expand its African presence through the acquisition of a majority stake in Provident, the fifth
largest life company in Ghana. The transaction is conditional on relevant regulatory approvals and is expected to complete by the end of 2013.
Acquisition of Banco Unico
On 3 May 2013, the Group announced that Nedbank has entered into an agreement for a stepped acquisition of Banco Unico, located in
Mozambique. The transaction is not yet effective as all the conditions precedent has not been met. It is expected to be complete by the end of 2013
and will be accounted for on completion.
A3: Critical accounting estimates and judgements
In the preparation of these interim financial statements, the Group is required to make estimates and judgements that affect items reported in the
consolidated income statement, statement of financial position, and other primary statements and related supporting notes.
Critical accounting estimates and judgements are those which involve the most complex or subjective judgements or assessments. Where
applicable, the Group applies estimation and assumption setting techniques that are aligned with relevant actuarial and accounting guidance based
on knowledge of the current situation and require assumptions and predictions of future events and actions.
The only change to the critical accounting estimates and judgements that the Group applied during the six months ended 30 June 2013 has been in
respect of consolidation of certain entities in accordance with the requirements of IFRS 10.
The Group acts as a fund manager to a number of investment funds. In determining whether the Group controls such a fund, it will focus on an
assessment of the aggregate economic interests of the Group (comprising any carried interests and expected management fees) and the investor's
rights to remove the fund manager. The Group assesses, on an annual basis, such interests to determine if the fund will be consolidated.
B: Segment information
B1: Basis of segmentation
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 the functional currency of each business.
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.
A reconciliation between the segment revenues and expenses and the Group's revenues and expenses is shown in note B3. Consistent with internal
reporting, assets, liabilities, revenues and expenses that are not directly attributable to a particular segment are allocated between segments where
appropriate and where there is a reasonable basis for doing so. The Group accounts for inter-segment revenues and transfers as if the transactions
were with third parties at current market prices. Given the nature of the operations, there are no major customers within any of the segments.
The 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 and the 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.
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 from which each operating segment derives its revenues are as follows:
Core operations
Emerging Markets life assurance and asset management
Old Mutual Wealth life assurance and asset management
Property & Casualty general insurance
Nedbank banking and asset management
US Asset Management asset management
Non-core operations
Old Mutual Bermuda life assurance
Segment presentation
In the short-term insurance review section of the 2012 Annual Report and Accounts, it was announced that, in future, all of the Group's Property
and Casualty activities would be reported as a single segment. Consequently, the M&F segment has been renamed as Property & Casualty. This
will now include M&F, 100% of iWyze, previously reported as a 50% joint venture between Emerging Markets and M&F, and the general insurance
businesses in Namibia and Botswana. The name change has been applied to all reporting periods. Comparative information for the six months
ended 30 June 2012 and the year ended 31 December 2012 have been restated accordingly.
In addition to the above, the Long-term Savings segment has been removed from the adjusted operating profit statement segment information
and the statement of financial position - segment information as previously reflected in notes B3 and B4. This segment was merely a sub total of the
Emerging Markets and Old Mutual Wealth Segments. This presentational change has been applied to all reporting periods.
The reported segments are now Emerging Markets, Old Mutual Wealth, Property & Casualty, Nedbank and US Asset Management. The Other
segment includes Group head office. Old Mutual Bermuda is the principal component of the non-core operations. For all reporting periods, Old
Mutual Bermuda has been classified as a continuing operation in the IFRS income statement, but as non-core in determining the Group's adjusted
operating profit.
The Group continues to incur costs related to the sale of its Nordic business in 2012. These costs relate to the transition of IT and other support
services that were previously provided by the disposed business to the wider Group, back to the Group. These costs are included in the expenses
related to the discontinued operations in the interim financial statements for the six months ended 30 June 2013. Further information on the results
of discontinued operations is provided in note G1.
In the comparative periods, Nordic has been classified as a discontinued operation in the IFRS consolidated income statement and its results as
non-core in determining the Group's adjusted operating profit.
All other businesses have been classified as continuing operations for all reporting periods.
B2: Gross earned premiums and deposits to investment contracts
GBPm
Emerging Old Mutual Property &
Six months ended 30 June 2013 Markets Wealth Casualty Total
Life assurance insurance contracts 967 175 - 1,142
with discretionary participation features 476 - - 476
General insurance - - 377 377
Gross earned premiums 1,443 175 377 1,995
GBPm
Emerging Old Mutual Property &
Six months ended 30 June 2012 Markets Wealth Casualty Total
Life assurance insurance contracts 768 177 - 945
Life assurance investment contracts
with discretionary participation features 470 - - 470
General insurance - - 359 359
Gross earned premiums 1,238 177 359 1,774
GBPm
Emerging Old Mutual Property &
Year ended 31 December 2012 Markets Wealth Casualty Total
Life assurance insurance contracts 1,673 362 - 2,035
Life assurance investment contracts
with discretionary participation features 970 - - 970
General insurance - - 720 720
Gross earned premiums 2,643 362 720 3,725
B3: Adjusted operating profit statement - segment information for the six months ended 30 June 2013
Emerging Old Mutual Property &
Markets Wealth Casualty
Revenue
Gross earned premiums B2 1,443 175 377
Outward reinsurance (41) (43) (78)
Net earned premiums 1,402 132 299
Investment return (non-banking) 1,974 2,195 17
Banking interest and similar income - - -
Banking trading, investment and similar income - - -
Fee and commission income, and income from service activities 262 608 14
Other income 23 13 -
Inter-segment revenues 30 - 8
Total revenues 3,691 2,948 338
Expenses
Claims and benefits (including change in insurance contract provisions) (1,886) (148) (282)
Reinsurance recoveries 32 25 61
Net claims and benefits incurred (1,854) (123) (221)
Change in investment contract liabilities (888) (2,112) -
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 (117) (340) (59)
Other expenses (524) (205) (39)
Change in third-party interest in consolidated funds - - -
Income tax attributable to policyholder returns (22) (49) -
Inter-segment expenses (1) (11) (11)
Total expenses (3,406) (2,840) (330)
Share of associated undertakings' and joint ventures' profit after tax 5 - 2
and strategic investments C1(c) - - -
Adjusted operating profit/(loss) before tax and non-controlling
interests 290 108 10
Income tax expense D1 (76) (20) (2)
Non-controlling interests (9) - (3)
Adjusted operating profit/(loss) after tax and non-controlling
interests 205 88 5
Adjusting items net of tax and non-controlling interests C1(a) - (54) (4)
Profit/(loss) after tax from continuing operations 205 34 1
Loss from discontinued operations after tax G1 - - -
Profit/(loss) after tax attributable to equity holders of the parent 205 34 1
(1) Non-core operations relates to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the six months ended 30 June 2013 was GBP2 million. Non-core
operations also includes GBP8 million of divestment cost which relates to the Nordic business sold in 2012. Further information on discontinued operations is provided
in note G1.
GBPm
Adjusting Discontinued IFRS
Consolidation Adjusted items and non-core Income
Nedbank USAM Other adjustments operating profit (note C1) operations(1) statement
- - - - 1,995 - - 1,995
- - - - (162) - - (162)
- - - - 1,833 - - 1,833
- - 34 304 4,524 (17) (18) 4,489
1,573 - - - 1,573 - - 1,573
110 - - - 110 - - 110
537 185 - 4 1,610 (34) - 1,576
18 2 - - 56 - 4 60
7 - 5 (56) (6) - 6 -
2,245 187 39 252 9,700 (51) (8) 9,641
- - - - (2,316) - 21 (2,295)
- - - - 118 - - 118
- - - - (2,198) - 21 (2,177)
- - - - (3,000) - - (3,000)
(234) - - - (234) - - (234)
- - (46) - (46) 23 - (23)
(832) - - - (832) - - (832)
(25) (2) - (32) (575) 40 (3) (538)
(740) (134) (35) (5) (1,682) (80) (8) (1,770)
- - - (271) (271) - - (271)
- - - - (71) 71 - -
(27) - (6) 56 - - - -
(1,858) (136) (87) (252) (8,909) 54 10 (8,845)
- 3 - - 10 - - 10
- - - - - (1) - (1)
387 54 (48) - 801 2 2 805
(100) (13) 4 - (207) (43) - (250)
(134) - - - (146) 13 - (133)
153 41 (44) - 448 (28) 2 422
4 (9) 35 - (28) 28 - -
157 32 (9) - 420 - 2 422
- - - - - - (8) (8)
157 32 (9) - 420 - (6) 414
B3: Adjusted operating profit statement - segment information for the six months ended 30 June 2012 Restated(1)
Emerging Old Mutual Property &
Markets Wealth Casualty
Revenue
Gross earned premiums B2 1,238 177 359
Outward reinsurance (41) (43) (71)
Net earned premiums 1,197 134 288
Investment return (non-banking) 2,017 1,246 23
Banking interest and similar income - - -
Banking trading, investment and similar income - - -
Fee and commission income, and income from service activities 201 597 12
Other income 35 14 -
Inter-segment revenues 33 2 8
Total revenues 3,483 1,993 331
Expenses
Claims and benefits (including change in insurance contract provisions) (1,958) (174) (235)
Reinsurance recoveries 49 34 42
Net claims and benefits incurred (1,909) (140) (193)
Change in investment contract liabilities (663) (1,177) -
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) (53)
Other expenses (494) (216) (44)
Change in third-party interest in consolidated funds - - -
Income tax attributable to policyholder returns (23) (11) -
Inter-segment expenses - (19) (10)
Total expenses (3,200) (1,898) (300)
Share of associated undertakings' and joint ventures' profit after tax 9 - -
Profit on disposal of subsidiaries, associated undertakings
and strategic investments C1(c) - - -
Adjusted operating profit/(loss) before tax and non-controlling interests 292 95 31
Income tax expense D1 (70) (13) (9)
Non-controlling interests (3) - (4)
Adjusted operating profit/(loss) after tax and non-controlling interests 219 82 18
Adjusting items net of tax and non-controlling interests C1(a) (72) (54) (6)
Profit/(loss) after tax from continuing operations 147 28 12
Profit from discontinued operations after tax G1 - - -
Profit/(loss) after tax attributable to equity holders of the parent 147 28 12
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
(2) Non-core operations principally relates to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the year ended 31 December 2012 was GBP49 million. It also
includes GBP4 million of inter-segment revenue, and the after tax results of the Group's discontinued operations. Further information on discontinued operations is
provided in note G1.
GBPm
Adjusted Adjusting Discontinued IFRS
Consolidation operating items and non-core Income
Nedbank USAM Other adjustments profit (note C1) operations(2) statement
- - - - 1,774 - - 1,774
- - - - (155) - - (155)
- - - - 1,619 - - 1,619
- 1 53 206 3,546 (86) 19 3,479
1,780 - - - 1,780 - - 1,780
107 - - - 107 - - 107
533 178 - - 1,521 (39) - 1,482
13 - - - 62 - 8 70
14 - 7 (81) (17) - 17 -
2,447 179 60 125 8,618 (125) 44 8,537
- - - - (2,367) - 41 (2,326)
- - - - 125 - - 125
- - - - (2,242) - 41 (2,201)
- - - - (1,840) - - (1,840)
(216) - - - (216) - - (216)
- - (75) - (75) (15) - (90)
(997) - - - (997) - - (997)
- (2) - (30) (531) 45 (23) (509)
(801) (140) (36) (5) (1,736) (74) (9) (1,819)
- - - (171) (171) - - (171)
- - - - (34) 34 - -
(28) - (24) 81 - - - -
(2,042) (142) (135) (125) (7,842) (10) 9 (7,843)
- 5 - - 14 - - 14
- - - - - 20 - 20
405 42 (75) - 790 (115) 53 728
(113) (6) 1 - (210) (31) - (241)
(139) - (19) - (165) 13 - (152)
153 36 (93) - 415 (133) 53 335
8 5 (14) - (133) 133 - -
161 41 (107) - 282 - 53 335
- - - - - - 595 595
161 41 (107) - 282 - 648 930
B3: Adjusted operating profit statement - segment information for the year ended 31 December 2012 Restated(1)
Emerging Old Mutual Property &
Markets Wealth Casualty
Revenue
Gross earned premiums B2 2,643 362 720
Outward reinsurance (82) (87) (153)
Net earned premiums 2,561 275 567
Investment return (non-banking) 5,288 3,806 44
Banking interest and similar income - - -
Banking trading, investment and similar income - - -
Fee and commission income, and income from service activities 440 1,199 26
Other income 61 26 1
Inter-segment revenues 83 3 18
Total revenues 8,433 5,309 656
Expenses
Claims and benefits (including change in insurance contract provisions) (4,813) (387) (485)
Reinsurance recoveries 89 59 73
Net claims and benefits incurred (4,724) (328) (412)
Change in investment contract liabilities (1,756) (3,605) -
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 (227) (677) (113)
Other expenses (1,066) (446) (82)
Change in third-party interest in consolidated funds - - -
Income tax attributable to policyholder returns (49) (26) -
Inter-segment expenses (20) (32) (14)
Total expenses (7,842) (5,114) (621)
Share of associated undertakings' and joint ventures' profit after tax 20 - 2
Loss on disposal of subsidiaries, associated undertakings
and strategic investments C1(c) - - -
Adjusted operating profit/(loss) before tax and non-controlling interests 611 195 37
Income tax expense D1 (164) (43) (9)
Non-controlling interests (9) - (8)
Adjusted operating profit/(loss) after tax and non-controlling interests 438 152 20
Adjusting items net of tax and non-controlling interests C1(a) (153) (134) (15)
Profit/(loss) after tax from continuing operations 285 18 5
Profit from discontinued operations after tax G1 - - -
Profit/(loss) after tax attributable to equity holders of the parent 285 18 5
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
(2) Non-core operations principally relates to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the year ended 31 December 2012 was GBP161 million. It also
includes GBP4 million of inter-segment revenue, and the after tax results of the Group's discontinued operations. Further information on discontinued operations is
provided in note G1.
GBPm
Adjusted Adjusting Discontinued IFRS
Consolidation operating items and non-core Income
Nedbank USAM Other adjustments profit (note C1) operations(2) statement
- - - - 3,725 - - 3,725
- - - - (322) - - (322)
- - - - 3,403 - - 3,403
- 1 75 722 9,936 (191) 135 9,880
3,431 - - - 3,431 - - 3,431
214 - - - 214 - - 214
1,084 360 - 6 3,115 (76) - 3,039
23 1 - (1) 111 - 14 125
21 - 7 (156) (24) - 24 -
4,773 362 82 571 20,186 (267) 173 20,092
- - - - (5,685) - 73 (5,612)
- - - - 221 - - 221
- - - - (5,464) - 73 (5,391)
- - - - (5,361) - - (5,361)
(400) - - - (400) - - (400)
- - (130) - (130) (84) - (214)
(1,886) - - - (1,886) (1) - (1,887)
- (5) - (67) (1,089) 88 (63) (1,064)
(1,604) (276) (67) (9) (3,550) (147) (18) (3,715)
- - - (651) (651) - - (651)
- - - - (75) 75 - -
(58) - (32) 156 - - - -
(3,948) (281) (229) (571) (18,606) (69) (8) (18,683)
- 10 - - 32 - - 32
- - - - - (56) - (56)
825 91 (147) - 1,612 (392) 165 1,385
(221) (15) 12 - (440) (31) - (471)
(287) - (27) - (331) 25 - (306)
317 76 (162) - 841 (398) 165 608
16 (10) (102) - (398) 398 - -
333 66 (264) - 443 - 165 608
- - - - - - 564 564
333 66 (264) - 443 - 729 1,172
B4: Statement of financial position segment information at 30 June 2013
Emerging Old Mutual Property &
Notes Markets Wealth Casualty
Assets
Goodwill and other intangible assets 121 1,556 13
Mandatory reserve deposits with central banks - - -
Property, plant and equipment 323 13 21
Investment property 1,555 - -
Deferred tax assets 83 32 13
Investments in associated undertakings and joint ventures 63 - 2
Deferred acquisition costs 94 1,145 16
Reinsurers' share of policyholder liabilities 53 1,459 105
Loans and advances 240 188 -
Investments and securities 30,260 48,306 330
Current tax receivable 10 64 5
Trade, other receivables and other assets 687 480 107
Derivative financial instruments 358 - -
Cash and cash equivalents 915 633 123
Non-current assets held for sale - 4 -
Inter-segment assets 456 75 23
Total assets 35,218 53,955 758
Liabilities
Life assurance policyholder liabilities 29,826 49,520 -
General insurance liabilities - - 350
Third-party interests in consolidated funds - - -
Borrowed funds E2 199 - -
Provisions 99 51 26
Deferred revenue 9 646 8
Deferred tax liabilities 135 234 22
Current tax payable 161 40 -
Trade, other payables and other liabilities 2,348 764 121
Amounts owed to bank depositors 83 - -
Derivative financial instruments 401 - -
Non-current liabilities held for sale - - -
Inter-segment liabilities 244 631 -
Total liabilities 33,505 51,886 527
Net assets 1,713 2,069 231
Equity
Equity attributable to equity holders of the parent 1,683 2,069 209
Non-controlling interests 30 - 22
Ordinary shares 30 - 22
Preferred securities - - -
Total equity 1,713 2,069 231
GBPm
Consolidation Non-core
Nedbank USAM Other adjustments operations Total
494 872 - - - 3,056
760 - - - - 760
424 12 1 - - 794
14 - - 342 - 1,911
21 181 2 - 2 334
35 13 17 - - 130
- 9 - - - 1,264
12 - - - - 1,629
36,812 - - - - 37,240
5,839 36 426 3,323 573 89,093
30 - - - - 109
623 103 37 501 417 2,955
862 - 56 133 8 1,417
1,113 104 259 1,757 131 5,035
1 - - - - 5
142 22 1,390 (2,772) 664 -
47,182 1,352 2,188 3,284 1,795 145,732
906 - - - 1,191 81,443
- - - - - 350
- - - 5,479 - 5,479
1,726 11 627 - - 2,563
39 3 34 - - 252
1 - - - - 664
28 - 16 - - 435
8 2 39 - - 250
1,016 203 71 472 36 5,031
37,926 - - - - 38,009
1,112 - 4 105 1 1,623
- - - - - -
451 548 898 (2,772) - -
43,213 767 1,689 3,284 1,228 136,099
3,969 585 499 - 567 9,633
2,140 562 499 - 567 7,729
1,829 23 - - - 1,904
1,557 23 - - - 1,632
272 - - - - 272
3,969 585 499 - 567 9,633
B4: Statement of financial position segment information at 30 June 2012 Restated(1)
Emerging Old Mutual Property &
Notes Markets Wealth Casualty
Assets
Goodwill and other intangible assets 105 1,673 21
Mandatory reserve deposits with central banks - - -
Property, plant and equipment 390 14 22
Investment property 1,599 - -
Deferred tax assets 74 63 13
Investments in associated undertakings and joint ventures 48 - 1
Deferred acquisition costs 111 1,160 15
Reinsurers' share of policyholder liabilities 52 1,028 108
Loans and advances 401 194 1
Investments and securities 30,412 42,427 429
Current tax receivable 21 84 2
Trade, other receivables and other assets 751 332 82
Derivative financial instruments 443 - -
Cash and cash equivalents 516 553 109
Non-current assets held for sale - 1,176 -
Inter-segment assets 432 116 21
Total assets 35,355 48,820 824
Liabilities
Life assurance policyholder liabilities 30,747 43,310 -
General insurance liabilities - - 343
Third-party interests in consolidated funds - - -
Borrowed funds E2 234 - -
Provisions 125 45 28
Deferred revenue 13 672 8
Deferred tax liabilities 163 195 15
Current tax payable 144 35 -
Trade, other payables and other liabilities 1,757 643 113
Amounts owed to bank depositors 93 - -
Derivative financial instruments 306 (4) -
Non-current liabilities held for sale - 1,132 -
Inter-segment liabilities 73 460 2
Total liabilities 33,655 46,488 509
Net assets 1,700 2,332 315
Equity
Equity attributable to equity holders of the parent 1,700 2,332 294
Non-controlling interests - - 21
Ordinary shares - - 21
Preferred securities - - -
Total equity 1,700 2,332 315
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
Consolidation Non-core
Nedbank USAM Other adjustments operations Total
548 891 14 - - 3,252
964 - - - - 964
487 10 1 - - 924
48 - - 402 - 2,049
25 139 2 - 1 317
51 15 27 - - 142
- 7 - - 31 1,324
16 - - - - 1,204
40,028 - - - - 40,624
6,589 42 430 3,091 1,413 84,833
76 - - - - 183
902 101 45 564 775 3,552
1,137 - 96 404 130 2,210
922 98 1,208 1,778 98 5,282
2 - - - - 1,178
166 21 1,093 (2,379) 530 -
51,961 1,324 2,916 3,860 2,978 148,038
887 - - - 2,639 77,583
- - - - - 343
- - - 5,390 - 5,390
2,281 11 1,010 - - 3,536
33 2 61 - - 294
1 - - - - 694
61 - 23 - - 457
4 1 42 - - 226
1,213 157 77 477 59 4,496
41,578 - - - - 41,671
1,189 - - 372 - 1,863
- - - - - 1,132
441 566 836 (2,379) 1 -
47,688 737 2,049 3,860 2,699 137,685
4,273 587 867 - 279 10,353
2,358 563 421 - 279 7,947
1,915 24 446 - - 2,406
1,643 24 - - - 1,688
272 - 446 - - 718
4,273 587 867 - 279 10,353
B4: Statement of financial position segment information at 31 December 2012 Restated(1)
Emerging Old Mutual Property &
Notes Markets Wealth Casualty
Assets
Goodwill and other intangible assets 98 1,594 14
Mandatory reserve deposits with central banks - - -
Property, plant and equipment 336 13 20
Investment property 1,588 - -
Deferred tax assets 82 44 20
Investments in associated undertakings and joint ventures 57 - 2
Deferred acquisition costs 103 1,159 18
Reinsurers' share of policyholder liabilities 55 1,236 100
Loans and advances 142 180 -
Investments and securities 31,157 45,402 397
Current tax receivable 16 64 5
Trade, other receivables and other assets 697 333 92
Derivative financial instruments 612 - -
Cash and cash equivalents 816 576 109
Non-current assets held for sale - 5 -
Inter-segment assets 562 101 43
Total assets 36,321 50,707 820
Liabilities
Life assurance policyholder liabilities 31,124 46,455 -
General insurance liabilities - - 346
Third-party interests in consolidated funds - - -
Borrowed funds E2 218 - -
Provisions 120 54 30
Deferred revenue 11 667 10
Deferred tax liabilities 130 189 21
Current tax payable 198 39 -
Trade, other payables and other liabilities 2,221 669 127
Amounts owed to bank depositors 86 - -
Derivative financial instruments 377 - -
Non-current liabilities held for sale - - -
Inter-segment liabilities 216 587 2
Total liabilities 34,701 48,660 536
Net assets 1,620 2,047 284
Equity
Equity attributable to equity holders of the parent 1,606 2,047 261
Non-controlling interests 14 - 23
Ordinary shares 14 - 23
Preferred securities - - -
Total equity 1,620 2,047 284
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
Consolidation Non-core
Nedbank USAM Other adjustments operations Total
534 816 - - - 3,056
921 - - - - 921
465 12 1 - - 847
15 - - 344 - 1,947
34 162 2 - 1 345
49 18 26 - - 152
- 8 - - - 1,288
15 - - - - 1,406
38,173 - - - - 38,495
6,303 37 368 3,897 952 88,513
18 - - - - 103
674 105 62 372 595 2,930
1,003 - 97 50 18 1,780
1,049 115 379 1,892 125 5,061
37 - - - - 42
111 21 1,366 (2,877) 673 -
49,401 1,294 2,301 3,678 2,364 146,886
907 - - - 1,702 80,188
- - - - - 346
- - - 6,116 - 6,116
2,163 10 659 - - 3,050
36 1 40 - - 281
1 - - - - 689
40 - 24 - - 404
9 6 34 - 1 287
1,076 193 70 400 92 4,848
39,413 - - - - 39,499
977 - 8 39 1 1,402
3 - - - - 3
596 554 922 (2,877) - -
45,221 764 1,757 3,678 1,796 137,113
4,180 530 544 - 568 9,773
2,283 507 544 - 568 7,816
1,897 23 - - - 1,957
1,624 23 - - - 1,684
273 - - - - 273
4,180 530 544 - 568 9,773
C: Other key performance information
C1: Operating profit adjusting items
(a) Summary of adjusting items for determination of AOP
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
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2013 2012 2012
Income/(expense)
Goodwill impairment and impact of acquisition accounting C1(b) (57) (64) (123)
(Loss)/profit on disposal of subsidiaries, associated undertakings
and strategic investments C1(c) (1) 20 (56)
Short-term fluctuations in investment return C1(d) 16 (49) (78)
Investment return adjustment for Group equity and debt instruments
held in life funds C1(e) (33) (37) (113)
Dividends declared to holders of perpetual preferred callable securities C1(f) 22 22 42
US Asset Management equity plans C1(g) (17) (4) (13)
Credit-related fair value losses on Group debt instruments C1(h) 1 (37) (126)
Total adjusting items (69) (149) (467)
Tax on adjusting items 28 3 44
Non-controlling interest in adjusting items 13 13 25
Total adjusting items after tax and non-controlling interests (28) (133) (398)
(b) Goodwill impairment and impact of acquisition accounting
When applying acquisition accounting, deferred acquisition costs and deferred revenues existing at the point of acquisition are not recognised under
IFRS. 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 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. The effect of these adjustments to
determine adjusted operating profit are summarised below:
GBPm
Emerging Old Mutual
Six months ended 30 June 2013 Markets Wealth USAM Total
Amortisation of acquired PVIF - (38) - (38)
Amortisation of acquired deferred costs and revenue - 6 - 6
Amortisation of other acquired intangible assets (1) (23) - (24)
Goodwill impairment (1) - - (1)
(2) (55) - (57)
GBPm
Emerging Old Mutual
Six months ended 30 June 2012 Markets Wealth 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 Old Mutual
Year ended 31 December 2012 Markets Wealth USAM Total
Amortisation of acquired PVIF - (84) - (84)
Amortisation of acquired deferred costs and revenue - 12 - 12
Amortisation of other acquired intangible assets (2) (48) (1) (51)
(2) (120) (1) (123)
(c) (Loss)/profit on disposal of subsidiaries, associated undertakings and strategic investments
(Loss)/profit on disposal of subsidiaries, associated undertakings and strategic investments is analysed below:
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
USAM (1) 20 (16)
Emerging Markets - - (15)
Old Mutual Wealth - - (25)
(Loss)/profit on disposal of subsidiaries, associated undertakings and
strategic investments (1) 20 (56)
On 2 January 2013, USAM completed the previously announced transactions to sell five of its affiliates. For the six months ended 30 June 2013, a
loss of GBP1 million was recognised in relation to these transactions.
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 GBP7 million. On 11 October 2012, the Group announced that it had
finalised agreements to sell five USAM affiliates at a loss of GBP32 million. A GBP3 million loss was also recognised during the year ended 31
December 2012 in relation to disposals of other USAM subsidiaries in previous periods.
On 20 November 2012, the Emerging Markets segment recognised a profit of GBP3 million on the acquisition of a strategic investment Curo Fund
Services (Pty) Ltd.
During the year ended 31 December 2012, the Group incurred expenses of GBP18 million as initial costs regarding Zimbabwean Indigenisation and
Economic Empowerment Schemes. These costs are directly related to the acquisition of the Zimbabwean business.
On 31 August 2012, Old Mutual Wealth completed the sale of its Finnish branch at a loss of GBP27 million. A profit of GBP2 million was recognised
on the sale of Skandia Services AG (Switzerland) on 30 June 2012.
(d) Short-term fluctuations in investment return
Profit before tax, as disclosed in the consolidated IFRS income statement, 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 is referred to as the
short-term fluctuation 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 underlying rates are principally derived
with reference to 10-year government bond rates, cash and money market rates and an explicit equity risk premium for South African businesses.
The rates set out below reflect the proposed weighting of investments in underlying cash, money market and equity assets. Long-term rates of
return are reviewed frequently by the Board, usually annually, for appropriateness. The review of the long-term rates of return seeks to ensure that
the 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 Old Mutual
Wealth, the return is applied to average investible assets. For Property & Casualty, the return is an average value of investible assets supporting
shareholders' funds and insurance liabilities, adjusted for net fund flows.
%
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Long-term investment rates 2013 2012 2012
Emerging Markets 8.0 9.0 9.0
Old Mutual Wealth 1.0 1.5 1.5
Property & Casualty 7.4 8.6 8.6
Analysis of short-term fluctuations in investment return
GBPm
Emerging Old Mutual Property &
Six months ended 30 June 2013 Markets Wealth(1) Casualty Other Total
Actual shareholder investment return 88 24 12 18 142
Less: Long-term investment return 55 29 17 25 126
Short-term fluctuations in investment return 33 (5) (5) (7) 16
GBPm
Emerging Old Mutual Property &
Six months ended 30 June 2012 Markets Wealth(1) Casualty Other Total
Actual shareholder investment return 19 19 18 25 81
Less: Long-term investment return 63 18 24 25 130
Short-term fluctuations in investment return (44) 1 (6) - (49)
GBPm
Emerging Old Mutual Property &
Year ended 31 December 2012 Markets Wealth(1) Casualty Other Total
Actual shareholder investment return 81 65 34 34 214
Less: Long-term investment return 124 67 47 54 292
Short-term fluctuations in investment return (43) (2) (13) (20) (78)
(1) Old Mutual Wealth long-term investment return includes GBP26 million (six months ended 30 June 2012: GBP14 million; year ended 31 December 2012: GBP59
million) in respect of income tax attributable to policyholder returns.
(e) Investment return adjustment for Group equity and debt instruments held in policyholder 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 issued by Nedbank.
These investment returns are eliminated within the consolidated income statement in arriving at profit before tax in the IFRS income statement, but
are included in adjusted operating profit. During the six months ended 30 June 2013, the investment return adjustment increased adjusted operating
profit by GBP33 million (six months ended 30 June 2012: increase of GBP37 million; year ended 31 December 2012: increase of GBP113 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 2013
(six months ended 30 June 2012: GBP22 million; year ended 31 December 2012: GBP42 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 distribution is recognised directly in
equity.
(g) US Asset Management equity plans
US Asset Management has a number of long-term incentive arrangements with senior employees in its asset management affiliates.
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 2013, these instruments were
revalued, the impact of which was a profit of GBP17 million (six months ended 30 June 2012: profit of GBP4 million; year ended 31 December 2012:
profit of GBP13 million).
(h) Credit-related fair value gains and losses on Group debt instruments
The widening of credit spread for the Group debt instruments causes the market value of debt to decrease. This results in gains being recognised in
the Group consolidated income statement, compared with losses if the credit spread narrows and the market value of debt instruments rises. This
resulted in net gains of GBP1 million for the six months ended 30 June 2013 (GBP37 million loss for the six months ended 30 June 2012; GBP55
million loss for the year ended 31 December 2012).
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.
On 1 August 2012, the Group redeemed GBP388 million of the GBP500 million senior bond due in 2016 at a cash consideration of GBP459 million.
The GBP71 million excess over the nominal value reflected the market value of the instrument prior to expiration.
C2: 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
Six months Year
Six months ended ended
ended 30 June 31 December
30 June 2012 2012
2013 Restated(1) Restated(1)
Profit for the financial period attributable to equity holders of the parent from
continuing operations 422 335 608
(Loss)/profit for the financial period attributable to equity holders of the parent from
discontinued operations (8) 595 564
Profit for the financial period attributable to equity holders of the parent 414 930 1,172
Dividends paid to holders of perpetual preferred callable securities (17) (17) (32)
Profit attributable to ordinary equity holders 397 913 1,140
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
Total dividends paid to holders of perpetual preferred callable securities of GBP17 million for the six months ended 30 June 2013 (six months ended
30 June 2012: GBP17 million; year ended 31 December 2012: GBP32 million) are stated net of tax credits of GBP5 million (six months ended 30
June 2012: GBP5 million; year ended 31 December 2012: GBP10 million).
Millions
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Weighted average number of ordinary shares in issue 4,894 5,303 5,096
Shares held in charitable foundations (6) (6) (6)
Shares held in ESOP trusts (53) (66) (61)
Adjusted weighted average number of ordinary shares 4,835 5,231 5,029
Shares held in life funds (160) (193) (181)
Shares held in Black Economic Empowerment trusts (239) (279) (261)
Weighted average number of ordinary shares 4,436 4,759 4,587
Basic earnings per ordinary share (pence)(1) 8.9 19.2 24.9
(1) Restatement for the impact of changes in policies did not result in changes to basic earnings per share for the six months ended 30 June 2012 and the year ended 31
December 2012.
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.
Six months Year
Six months ended ended
ended 30 June 31 December
30 June 2012 2012
2013 Restated(1) Restated(1)
Profit attributable to ordinary equity holders (GBPm) 397 913 1,140
Dilution effect on profit relating to share options issued by subsidiaries (GBPm) (4) (4) (10)
Diluted profit attributable to ordinary equity holders (GBPm) 393 909 1,130
Weighted average number of ordinary shares (millions) 4,436 4,759 4,587
Adjustments for share options held by ESOP trusts (millions) 46 106 53
Adjustments for shares held in Black Economic Empowerment trusts (millions) 239 279 261
4,721 5,144 4,901
Diluted earnings per ordinary share (pence)(2) 8.3 17.7 23.1
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
(2) Restatement for the impact of changes in policies did not result in changes to diluted earnings per share for the six months ended 30 June 2012 and the year ended
31 December 2012.
(b) Adjusted operating earnings per ordinary share
The reconciliation of profit for the financial period to adjusted operating profit after tax attributable to ordinary equity holders is as follows:
GBPm
Six months Year
Six months ended ended
ended 30 June 31 December
30 June 2012 2012
2013 Restated(1) Restated(1)
Profit for the financial period attributable to equity holders of the parent 414 930 1,172
Adjusting items 69 149 467
Tax on adjusting items (28) (3) (44)
Non-core operations (2) (53) (165)
Profit from discontinued operations 8 (595) (564)
Non-controlling interest on adjusting items (13) (13) (25)
Adjusted operating profit after tax attributable to ordinary equity holders 448 415 841
Adjusted weighted average number of ordinary shares (millions)(2) 4,835 4,806 4,818
Adjusted operating earnings per ordinary share (pence) 9.3 8.6 17.5
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
(2) For the six months ended 30 June 2012 and the year ended 31 December 2012, the weighted average number of shares used in the calculation of basic and diluted
earnings per share was adjusted for the seven-for-eight share consolidation that was affected on 23 April 2012. For adjusted operating earnings per share, the
adjustment of the weighted average number of shares has been made effective from 1 January 2012. This adjustment had the effect of presenting adjusted earnings
per share on a more consistent basis, but resulted in a difference between the adjusted weighted average number of shares for IFRS and AOP for the comparative
periods.
(c) Headline earnings per share
The Group is required to calculate a 'headline earnings per share' (HEPS) in accordance with the JSE Limited (JSE) Listing Requirements,
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, but
it is a commonly used measure of earnings in South Africa.
GBPm
Six months ended Year ended
Six months ended 30 June 2012 31 December 2012
30 June 2013 Restated(1) Restated(1)
Gross Net Gross Net Gross Net
Profit for the financial period attributable to
equity holders of the parent 414 414 930 930 1,172 1,172
Dividends declared to holders of perpetual preferred
callable securities (17) (17) (17) (17) (32) (32)
Profit attributable to ordinary equity holders 397 397 913 913 1,140 1,140
Adjustments:
Impairments of goodwill and intangible assets 1 1 - - - -
Loss/(profit) on disposal of subsidiaries,
associated undertakings and strategic investments 1 (14) (262) (256) (183) (173)
Realised gains (net of impairments) on available-for-
sale financial assets (8) (8) (6) (6) (21) (21)
Exchange differences realised on disposal - - (350) (350) (350) (350)
Headline earnings 391 376 295 301 586 596
Weighted average number of ordinary shares 4,436 4,436 4,759 4,759 4,587 4,587
Diluted weighted average number of ordinary
shares 4,721 4,721 5,144 5,144 4,901 4,901
Headline earnings per share (pence) 8.8 8.5 6.2 6.3 12.8 13.0
Diluted headline earnings per share (pence) 8.3 8.0 5.7 5.9 12.0 12.2
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
C3: Dividends
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
2011 Final dividend paid - 3.5p per 10p share - 178 178
Special dividend - 18.0p per 10p share - 915 915
2012 Interim dividend paid 1.75p per 11 3/7p share - - 79
2012 Final dividend paid 5.25p per 11 3/7p share 238 - -
Dividends to ordinary equity holders 238 1,093 1,172
Dividends declared to holders of perpetual preferred callable securities 22 22 42
Dividend payments for the period 260 1,115 1,214
Final and interim dividends paid to ordinary equity holders are calculated using the number of shares in issue at the record date less treasury
shares held in ESOP trusts, life funds of Group entities, 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.
An interim dividend of 2.1 pence (or its equivalent in other applicable currencies) per ordinary share in the Company has been recommended by the
directors. The interim dividend will be paid on 31 October 2013 to shareholders on the register at the close of business on 27 September 2013. The
dividend will absorb an estimated GBP93 million of shareholders' funds. The Company is not planning to offer a scrip dividend alternative.
In March 2013, GBP22 million was declared and paid to holders of perpetual preferred callable securities (March 2012: GBP22 million; November
2012: GBP20 million).
D: Other income statement notes
D1: Income tax expense
(a) Analysis of total income tax expense
GBPm
Six months Year
Six months ended ended
ended 30 June 31 December
30 June 2012 2012
2013 Restated(1) Restated(1)
Current tax
United Kingdom 9 6 18
Overseas tax
- Africa 198 208 512
- United States - - 4
- Europe 10 8 30
Secondary tax on companies (STC) - 20 23
Adjustment to current tax in respect of prior years (19) 2 5
Total current tax 198 244 592
Deferred tax
Origination and reversal of temporary differences 40 (3) (121)
Changes in tax rates/bases - - 2
Recognition of deferred tax assets - - (2)
Adjustments to deferred tax in respect of prior years 12 - -
Total deferred tax 52 (3) (121)
Total income tax expense 250 241 471
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
(b) Reconciliation of total income tax expense
GBPm
Six months Year
Six months ended ended
ended 30 June 31 December
30 June 2012 2012
2013 Restated(1) Restated(1)
Profit before tax 805 728 1,385
Tax at UK standard rate of 23.25% (2012: 24.5%) 187 178 339
Different tax rate or basis on overseas operations 33 27 19
Untaxed and low taxed income (31) (45) (57)
Disallowable expenses (4) 11 48
Net movement on deferred tax assets not recognised 13 22 48
Effect on deferred tax of changes in tax rates - 2 2
STC - 18 20
Income tax attributable to policyholder returns 49 28 59
Other 3 - (7)
Total income tax expense 250 241 471
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
(c) Income tax relating to components of other comprehensive income
GBPm
Six months Year
Six months ended ended
ended 30 June 31 December
30 June 2012 2012
2013 Restated(1) Restated(1)
Preferred perpetual callable securities (5) (5) (10)
Actuarial gains on defined benefit plans 1 2 4
Income tax on items that will not be reclassified subsequently to profit or loss (4) (3) (6)
Income tax on items that may be reclassified subsequently to profit or loss (1) - 5
Income tax credit continuing operations (5) (3) (1)
Income tax expense on fair value movements discontinued operations - 1 1
Income tax credit relating to components of other comprehensive
income (5) (2) -
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
(d) Reconciliation of income tax expense in the IFRS income statement to income tax on adjusted operating profit
GBPm
Six months Year
Six months ended ended
ended 30 June 31 December
30 June 2012 2012
2013 Restated(1) Restated(1)
Income tax expense 250 241 471
Goodwill impairment and impact of acquisition accounting 6 13 51
Profit on disposal of subsidiaries, associates and strategic investments 15 (8) (10)
Short-term fluctuations in investment return 3 7 7
Income tax attributable to policyholders returns (71) (34) (75)
Tax on dividends declared to holders of perpetual preferred callable securities
recognised in equity (5) (5) (10)
US Asset Management equity plans 9 (2) 6
Tax on dividends received in trusts - (2) -
Income tax on adjusted operating profit 207 210 440
(1) Prior periods have been restated for the impact of changes in accounting policies. Refer to note A1 for further details.
E: Financial assets and liabilities
E1: Group statement of financial position
The Group is exposed to financial risk through its financial assets (investments and loans), financial liabilities (investment contracts, customer
deposits and borrowings), reinsurance assets and insurance liabilities. The key focus of financial risk management for the Group is ensuring that
the proceeds from its financial assets are sufficient to fund the obligations arising from its insurance and banking operations. The most important
components of financial risk are credit risk, market risk (arising from changes in equity, and bond prices, interest and foreign exchange rates), and
liquidity risk.
Categories of financial instruments
The analysis of assets and liabilities into their categories as defined in IAS 39 'Financial Instruments: Recognition and Measurement' is set out in
the following table. Assets and liabilities of a non-financial nature, or financial assets and liabilities that are specifically excluded from the scope of
IAS 39, are reflected in the non-financial assets and liabilities category.
GBPm
Fair value through
income statement
Available- Financial Non-
for-sale Held-to- liabilities financial
Held-for- financial maturity Loans and amortised assets and
At 30 June 2013 Total trading Designated assets investments receivables cost liabilities
Assets
Mandatory reserve deposits with
central banks 760 - - - - 760 - -
liabilities 1,629 - 1,386 - - 19 - 224
Loans and advances 37,240 2,467 3,778 2 - 30,993 - -
Investments and securities 89,093 1,237 85,115 811 1,550 380 - -
other assets 2,955 176 393 - - 1,882 - 504
Derivative financial instruments 1,417 1,417 - - - - - -
Cash and cash equivalents 5,035 - - - - 5,035 - -
Total financial assets 138,129 5,297 90,672 813 1,550 39,069 - 728
Total non-financial assets 7,603 - - - - - - 7,603
Total assets 145,732 5,297 90,672 813 1,550 39,069 - 8,331
Liabilities
liabilities 81,443 - 61,876 - - 209 - 19,358
of funds 5,479 - 5,479 - - - - -
Borrowed funds 2,563 - 880 - - - 1,683 -
other liabilities 5,031 416 472 - - 211 2,778 1,154
Amounts owed to bank depositors 38,009 3,661 5,032 - - - 29,316 -
Derivative financial instruments 1,623 1,623 - - - - - -
Total financial liabilities 134,148 5,700 73,739 - - 420 33,777 20,512
Total non-financial liabilities 1,951 - - - - - - 1,951
Total liabilities 136,099 5,700 73,739 - - 420 33,777 22,463
Fair value hierarchy
The table below analyses the financial assets and liabilities according to fair value hierarchy:
GBPm
At 30 June 2013 Total Level 1 Level 2 Level 3
Financial assets measured at fair value
Held-for-trading (fair value through income statement) 5,297 474 4,811 12
Loans and advances 2,467 - 2,467 -
Investments and securities 1,237 294 936 7
Other financial assets 176 176 - -
Derivative financial instruments assets 1,417 4 1,408 5
Designated (fair value through income statement) 90,672 72,482 16,966 1,224
Reinsurers' share of policyholder liabilities 1,386 1,386 - -
Loans and advances 3,778 2 3,772 4
Investments and securities 85,115 70,703 13,192 1,220
Other financial assets 393 391 2 -
Available-for-sale financial assets 813 371 439 3
Loans and advances 2 2 - -
Investments and securities 811 369 439 3
Total assets measured at fair value 96,782 73,327 22,216 1,239
Financial liabilities measured at fair value
Held-for-trading (fair value through income statement) 5,700 412 5,288 -
Other liabilities 416 408 8 -
Amounts owed to bank depositors 3,661 - 3,661 -
Derivative financial instruments liabilities 1,623 4 1,619 -
Designated (fair value through income statement) 73,739 44,675 28,529 535
Life assurance policyholder liabilities 61,876 43,806 17,535 535
Third-party interests in consolidated funds 5,479 - 5,479 -
Borrowed funds 880 865 15 -
Other liabilities 472 4 468 -
Amounts owed to bank depositors 5,032 - 5,032 -
Total liabilities measured at fair value 79,439 45,087 33,817 535
GBPm
At 31 December 2012 Total Level 1 Level 2 Level 3
Financial assets measured at fair value
Held-for-trading (fair value through income statement) 5,459 639 4,816 4
Designated (fair value through income statement) 87,813 68,059 18,694 1,060
Available-for-sale financial assets 902 335 565 2
Total assets measured at fair value 94,174 69,033 24,075 1,066
Financial liabilities measured at fair value
Held-for-trading (fair value through income statement) 5,925 462 5,463 -
Designated (fair value through income statement) 68,895 42,788 25,627 480
Total liabilities measured at fair value 74,820 43,250 31,090 480
The best evidence of fair value is a quoted price in an active market. In the event that the market for a financial asset or liability is not active, or
quoted prices cannot be obtained without undue effort, another valuation technique is used.
The judgement as to whether a market is active may include, for example, consideration of factors such as the magnitude and frequency of trading
activity, the availability of prices and the size of bid/offer spreads. In inactive markets, obtaining assurance that the transaction price provides
evidence of fair value or determining the adjustments to transaction prices that are necessary to measure the fair value of the asset or liability
requires additional work during the valuation process.
The majority of valuation techniques employ only observable data and so the reliability of the fair value measurement is high. However, certain
financial assets and liabilities are valued on the basis of valuation techniques that feature one or more significant inputs that are unobservable and,
for them, the derivation of fair value is more judgemental. A financial asset or liability in its entirety is classified as valued using significant
unobservable inputs if a significant proportion of that asset or liability's carrying amount is driven by unobservable inputs. In this context,
'unobservable' means that there is little or no current market data available for which to determine the price at which an arm's length transaction
would be likely to occur. It generally does not mean that there is no market data available at all upon which to base a determination of fair value.
Furthermore, in some cases the majority of the fair value derived from a valuation technique with significant unobservable data may be attributable
to observable inputs. Consequently, the effect of uncertainty in determining unobservable inputs will generally be restricted to uncertainty about the
overall fair value of the asset or liability being measured. Details of the Group's valuation techniques can be found in Note E1(p) of the Annual
Report. There have been no significant changes to the valuation techniques applied.
The transfers into Level 3 largely relate to instances where inputs to the valuation for certain financial assets and liabilities obtained from pricing
service providers are no longer observable. There were no significant transfers between Level 1 and Level 2 during the year.
The table below shows the movement in Level 3 assets measured at fair value:
GBPm
Designated Designated
fair value fair value
through through
Held-for- income income Available-for-
trading - Held- statement - statement - sale -
Investments for-trading - Loans and Investments Investments
Six months ended 30 June 2013 and securities Derivatives advances and securities and securities Total
Level 3 financial assets
At beginning of the year 4 - 9 1,051 2 1,066
the income statement for the period 4 - (5) 54 - 53
comprehensive income - - - 1 - 1
Purchases and issues - 5 - 24 - 29
Sales and settlements (1) - - (21) - (22)
Transfers in - - - 151 1 152
Transfers out - - - - - -
Foreign exchange and other - - - (40) - (40)
Total level 3 financial assets 7 5 4 1,220 3 1,239
Gains relating to assets heald
at 30 June 2013 recognised in:
- income statement - - - 52 - 52
- other comprehensive income - - - - - -
The table below shows the movement in Level 3 liabilities measured at fair value:
GBPm
Designated fair
value through
income
statement -
Life assurance
policyholder
liabilities
(investment
Six months ended 30 June 2013 contracts)
Level 3 financial liabilities
At beginning of the year 480
Total net losses recognised in the income statement for the period 72
Purchases and issues 1
Sales and settlements (104)
Transfers in 77
Foreign exchange and other 9
Total level 3 financial liabilities 535
- income statement 74
- other comprehensive income -
Effect of changes in significant unobservable assumptions to reasonable possible alternatives
Favourable and unfavourable changes are determined on the basis of changes in the value of the financial asset or liability as a result of varying the
levels of the unobservable parameter using statistical techniques. When parameters are not amenable to statistical analysis, quantification of
uncertainty is judgemental.
When the fair value of a financial asset or liability is affected by more than one unobservable assumption, the figures shown reflect the most
favourable or most unfavourable change from varying the assumptions individually.
In respect of private equity investments, the valuations are assessed on an asset-by-asset basis using a valuation methodology appropriate to the
specific investment, in line with industry guidelines. In many of the methodologies, the principal assumption is the valuation multiple to be applied to
the main financial indicators including, for example, multiples for comparable listed companies and discounts for marketability.
For asset-backed securities whose prices are unobservable, models are used to generate the expected value of the asset, incorporating benchmark
information on factors such as prepayment patterns, default rates, loss severities and the historical performance of the underlying assets. The
models used are calibrated by using securities for which external market information is available.
For structured notes and other derivatives, principal assumptions concern the future volatility of asset values and the future correlation between
asset values. These principle assumptions include credit volatilities and correlations used in the valuation of the structured credit derivatives. For
such unobservable assumptions, estimates are based on available market data, which may include the use of a proxy method to derive a volatility
or correlation from comparable assets for which market data is more readily available, and examination of historical levels.
Alternative assumptions
Accounting standards require consideration of the effect of reasonable possible alternative assumptions on the fair value of Level 3 financial assets
and liabilities.
Alternative assumptions are assessed in terms of possible favourable and unfavourable changes in the key market inputs for the major types of
Level 3 financial assets and liabilities, ranging from, for example, a 10% change in the price earnings multiple for equity securities, to a 25% change
in the discount rates applied to debt securities and volatility assumptions in derivative contracts. Changes in business risk inputs such as lapses and
non-performance risk were also considered.
The table below shows the income statement effect of reasonable possible alternative assumptions on the fair value of Level 3 financial assets and
liabilities:
GBPm
Reflected in
income statement
Favourable Unfavourable
Six months ended 30 June 2013 changes changes
Level 3 financial assets
Designated (fair value through income statement) 123 120
Loans and advances 1 1
Investments and securities 122 119
Total Level 3 financial assets 123 120
Level 3 financial liabilities
Designated (fair value through income statement) 20 48
Life assurance policyholder liabilities (investment contracts) 20 48
Total Level 3 financial liabilities 20 48
The impact of reasonable possible alternative assumptions on other comprehensive income was GBPnil in all periods.
E: Financial assets and liabilities
E2: Borrowed funds
GBPm
At At
Group 30 June Group 30 June
excluding 2013 excluding 2012
Notes Nedbank Nedbank Group Nedbank Nedbank Group
Senior debt securities and term loans 123 994 1,117 507 1,427 1,934
Floating rate notes E2(a) - 525 525 - 926 926
Fixed rate notes E2(b) 123 469 592 507 501 1,008
Mortgage-backed securities E2(d) - 114 114 - 70 70
Subordinated debt securities (net of
Group holdings) E2(e) 714 618 1,332 747 785 1,532
Borrowed funds 837 1,726 2,563 1,254 2,282 3,536
Other Group instruments treated as
equity for accounting purposes
US$750 million cumulative
preference securities - 458
EUR495 million perpetual preferred
callable securities 334 338
GBP348 million perpetual preferred
callable securities 348 350
Total: Book value 1,519 2,400
Nominal value of the above 1,594 2,476
GBPm
At
Group 31 December
excluding 2012
Nedbank Nedbank Group
Senior debt securities and term loans 122 1,363 1,485
Floating rate notes E2(a) - 849 849
Fixed rate notes E2(b) 122 514 636
Mortgage-backed securities E2(d) - 131 131
Subordinated debt securities (net of
Group holdings) E2(e) 765 669 1,434
Borrowed funds 887 2,163 3,050
Other Group instruments treated as
equity for accounting purposes
US$750 million cumulative
preference securities -
EUR495 million perpetual preferred
callable securities 334
GBP348 million perpetual preferred
callable securities 348
Total: Book value 1,569
Nominal value of the above 1,590
Senior notes
(a) Floating rate notes
GBPm
At At At
30 June 30 June 31 December
Maturity date 2013 2012 2012
Nedbank - Floating rate unsecured senior debt
R98 million at inflation linked (3.80% real yield) Repaid - 9 8
R1,750 million at inflation linked (3.90% real yield) Repaid - 158 151
R1,690 million at JIBAR + 1.50% Repaid - 81 -
R1,552 million at JIBAR + 1.48% Repaid - 123 114
R988 million at JIBAR + 1.05% March 2014 64 75 71
R500 million at JIBAR + 1.00% April 2014 30 39 33
R1,075 million at JIBAR + 0.94% October 2014 72 85 79
R1,297 million at JIBAR + 1.00% February 2015 87 102 95
R1,027 million at JIBAR + 1.75% April 2015 69 81 76
R250 million at JIBAR + 1.00% August 2015 17 - 18
R1,044 million at JIBAR + 2.20% September 2015 70 82 76
R677 million at JIBAR + 1.25% March 2016 45 53 49
R405 million at JIBAR + 1.30% February 2017 27 32 30
R786 million at JIBAR + 1.31% August 2017 39 - 43
R80 million at JIBAR + 2.15% April 2020 5 6 6
Total floating rate notes 525 926 849
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
Maturity date 2013 2012 2012
Nedbank - Fixed rate unsecured senior debt
R450 million at 8.39% March 2014 30 36 33
R478 million at 9.68% April 2015 32 38 35
R3,244 million at 10.55% September 2015 222 260 242
R1,137 million at 9.36% March 2016 77 91 85
R1,273 million at 11.39% September 2019 93 61 102
R660 million at zero coupon October 2024 15 15 17
469 501 514
Group excluding Nedbank
GBP112 million eurobond at 7.125% October 2016 112 496 112
US$16 million secured senior debt at 5.23% August 2014 11 11 10
123 507 122
Total fixed rate notes 592 1,008 636
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 2013, 30 June 2012
and 31 December 2012, none of this facility was drawn down and there were no irrevocable letters of credit in issue against this facility.
(d) Mortgage-backed securities - Nedbank
GBPm
At At At
30 June 30 June 31 December
Tier Maturity date 2013 2012 2012
Nedbank
R1.4 billion (class A2A) at 11.817% Tier 2 Repaid - 60 -
R98 million (class B note) at 12.067% Tier 2 Repaid - 6 -
R76 million (class C note) at 13.317% Tier 2 Repaid - 4 -
R480 million (class A1) at JIBAR + 1.10% Tier 2 25 October 2039 24 - 32
R336 million (class A2) at JIBAR + 1.25% Tier 2 25 October 2039 23 - 25
R900 million (class A3) at JIBAR + 1.54% Tier 2 25 October 2039 60 - 66
R110 million (class B) at JIBAR + 1.90% Tier 2 25 October 2039 7 - 8
Total mortgage-backed securities 114 70 131
(e) Subordinated debt securities (net of Group holdings)
GBPm
At At At
30 June 30 June 31 December
Tier First call date Maturity date 2013 2012 2012
Nedbank
R500 million at 3 month JIBAR + 0.45% Tier 2 Repaid Repaid - 39 -
R500 million at 3 month JIBAR + 0.70% Tier 2 Repaid Repaid - 39 -
R120 million at 10.38% Tier 2 Repaid Repaid - 10 -
R300 million at 3 month JIBAR + 2.50% Tier 2 December 2013 December 2013 10 12 11
R1.8 billion at 9.84% Tier 2 September 2013 September 2018 124 150 137
R1,265 million at JIBAR + 4.75% Non-core Tier 1 November 2018 November 2018 85 100 93
R487 million at 15.05% Non-core Tier 1 November 2018 November 2018 37 43 43
R1.7 billion at 8.90% Tier 2 February 2014 February 2019 118 143 132
R1.0 billion at 10.54% Tier 2 September 2015 September 2020 72 86 81
R2.0 billion at JIBAR + 0.47% Tier 2 July 2017 July 2022 134 157 146
US$100 million at 3 month USD LIBOR Tier 2 Secondary March 2017 March 2022 66 64 62
646 843 705
Less: banking subordinated debt
securities held by other
Group companies (28) (58) (36)
Banking subordinated securities (net of
Group holdings) 618 785 669
Group excluding Nedbank
R3.0 billion at 8.92% to October 2015,
3 month JIBAR + 1.59% thereafter) Lower Tier 2 October 2015 October 2020 199 234 218
GBP500 million at 8.00% Lower Tier 2 - June 2021 515 513 547
714 747 765
Total subordinated debt securities 1,332 1,532 1,434
F: Other Notes
F1: Events after the reporting date
Acquisition of Faulu Kenya DTM LTD (Faulu)
On 3 July 2013, the Group announced that it is to enter into a strategic partnership with Faulu through the acquisition of a controlling stake in the
business. The transaction is conditional on the relevant regulatory approvals being obtained and is expected to complete by the end of 2013.
Acquisition of SELAH (Skandia Europe & Latin America Holdings) by Old Mutual South Africa (OMSA) from Old Mutual plc (parent company).
The Financial Services Board has provisionally given approval for the acquisition of SELAH by OMSA from Old Mutual plc and the transaction was
completed on 12 July 2013. This resulted in increasing the cash holdings of the parent company by GBP120 million.
Repatriation of Old Mutual Bermuda capital
In July 2013, Old Mutual Bermuda received formal written approval from the Bermuda Monitory Authority (BMA) to repatriate $450 million via
cancellation of OM Group (UK) Limited Loan Notes.
New debt issued by Nedbank
In July 2013, Nedbank successfully issued a total of R1.8 billion new-style, fully loss-absorbent, Basel lll compliant, tier 2 subordinated-debt capital
to replace the GBP119 million debt that matures in September 2013. Furthermore, R3.2 billion of three-year senior unsecured debt was also issued.
G: Discontinued operations and disposal groups held for sale
G1: Discontinued operations
Discontinued operations relate to the results of the Group's Swedish, Danish and Norwegian life businesses, collectively Nordic. The disposal of
Nordic was completed on 21 March 2012 following shareholder and regulatory approval and was reported up until that date. The Group continues to
incur costs that are directly related to the sale of Nordic. These costs relate to the transition of IT and other services, previously provided by Nordic
to the wider Group, back to the Group. These costs are included in the expenses related to the discontinued operations.
(a) Income statement from discontinued operations (Nordic)
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Revenue - 842 842
Expenses (9) (831) (866)
(Loss)/profit before tax from discontinued operations (9) 11 (24)
Profit on disposal - 242 239
Realised available-for-sale investment gains and exchange
differences on disposal - 350 350
(Loss)/profit before tax (9) 603 565
Income tax credit/(charge) 1 (8) (1)
(Loss)/profit from discontinued operations after tax (8) 595 564
G2: Contingent liabilities in respect of the disposal of US Life
Following its disposal in April 2011 of US Life to the Harbinger group (Harbinger), the Group has retained certain residual commitments and
contingent liabilities relating to that business. These arise from sale warranties and indemnities that are typical in transactions of this nature,
including in respect of certain litigation (including class actions) and regulatory enforcement actions arising from events that occurred before
completion of the sale. The residual commitments are in effect for varying periods of time.
The sale agreement contemplated that Harbinger would establish certain internal reinsurance arrangements after completion, which were subject to
regulatory approval. If such regulatory approval was not forthcoming, there was potential for a reduction in the purchase price of US Life of up to a
maximum of US$50 million. In July 2012, Harbinger filed a lawsuit against the Group, claiming payment of a purchase price adjustment of US$50
million. The Group has filed its defence and is vigorously defending this claim. In view of the ongoing uncertainty and the Group's current
assessment of this claim, the Group has not raised a provision against this exposure.
Sponsor:
Merrill Lynch South Africa (Pty) Ltd
Date: 07/08/2013 08:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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