Wrap Text
Old Mutual plc interim results for the half year ended 30 June 2014 - Part II
Old Mutual
ISIN CODE: GB00B77J0862
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSURE CODE: OLOML
Index to the financial information
For the six months ended 30 June 2014
Statement of directors' responsibilities in respect of the interim financial statements for the six months ended 30 June 2014 40
Independent review report to the members of Old Mutual plc for the six months ended 30 June 2014 41
Consolidated income statement 42
Consolidated statement of comprehensive income 43
Reconciliation of adjusted operating profit to profit after tax 44
Consolidated statement of financial position 46
Consolidated statement of cash flows 47
Consolidated statement of changes in equity 48
Notes to the consolidated financial statements
A: Significant accounting policies 54
B: Segment information 56
C: Other key performance information 70
D: Other income statement notes 76
E: Financial assets and liabilities 78
F: Other notes 90
G: Discontinued operations and disposal groups held for sale 91
MCEV information 92
Statement of directors' responsibilities in respect of the interim financial
statements
For the six months ended 30 June 2014
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' as adopted by the EU.
- The interim management statement 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 Ingrid Johnson
Group Chief Executive Group Finance Director
7 August 2014 7 August 2014
Independent review report to the members of Old Mutual plc
For the six months ended 30 June 2014
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 2014 which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated
Balance Sheet, the Consolidated Statement of Cash Flows and the related explanatory notes, which include the reconciliation of adjusted operating
profit to profit after tax.
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.
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”). Our review 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. 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 interim
financial report in accordance with the DTR of the UK FCA.
The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial
statements included in this interim financial report has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements 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 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 2014 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU
and the DTR of the UK FCA.
Philip Smart (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
7 August 2014
Consolidated income statement
For the six months ended 30 June 2014
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2014 2013 2013
Revenue
Gross earned premiums B2 1,618 1,995 3,701
Outward reinsurance (154) (162) (317)
Net earned premiums 1,464 1,833 3,384
Investment return (non-banking) 3,529 4,489 9,986
Banking interest and similar income 1,415 1,573 3,050
Banking trading, investment and similar income 83 110 195
Fee and commission income, and income from service activities 1,413 1,576 3,095
Other income 54 60 100
Total revenue 7,958 9,641 19,810
Expenses
Claims and benefits (including change in insurance contract provisions) (2,260) (2,295) (5,410)
Reinsurance recoveries 66 118 246
Net claims and benefits incurred (2,194) (2,177) (5,164)
Change in investment contract liabilities (1,845) (3,000) (5,873)
Losses on loans and advances (130) (234) (368)
Finance costs (64) (23) (81)
Banking interest payable and similar expenses (770) (832) (1,616)
Fee and commission expenses, and other acquisition costs (437) (538) (976)
Change in third-party interest in consolidated funds (194) (271) (564)
Other operating and administrative expenses (1,760) (1,770) (3,653)
Total expenses (7,394) (8,845) (18,295)
Share of associated undertakings' and joint ventures' profit after tax 10 10 21
Loss on disposal of subsidiaries, associated undertakings and strategic
investments C1(c) (10) (1) (4)
Profit before tax 564 805 1,532
Income tax expense D1 (218) (250) (552)
Profit from continuing operations after tax 346 555 980
Discontinued operations
(Loss)/profit from discontinued operations after tax G1 (10) (8) 3
Profit after tax for the financial period 336 547 983
Attributable to
Equity holders of the parent 213 414 705
Non-controlling interests
Ordinary shares 114 124 259
Preferred securities 9 9 19
Profit after tax for the financial period 336 547 983
Earnings per share
Basic earnings per share based on profit from continuing
operations (pence) 4.7 9.1 14.9
Basic earnings per share based on profit from discontinued
operations (pence) (0.2) (0.2) 0.1
Basic earnings per ordinary share (pence) C2(a) 4.5 8.9 15.0
Diluted basic earnings per share based on profit from continuing
operations (pence) 4.3 8.5 13.8
Diluted basic earnings per share based on profit from discontinued
operations (pence) (0.2) (0.2) 0.1
Diluted basic earnings per ordinary share (pence) C2(b) 4.1 8.3 13.9
Weighted average number of ordinary shares (millions) C2(a) 4,462 4,436 4,442
Consolidated statement of comprehensive income
For the six months ended 30 June 2014
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2014 2013 2013
Profit after tax for the financial period 336 547 983
Other comprehensive income for the financial period
Items that will not be reclassified subsequently to profit or loss
Fair value gains/(losses)
Property revaluation 6 (3) 23
Measurement gains on defined benefit plans 1 2 70
Income tax on items that will not be reclassified subsequently to profit or loss D1(c) 3 4 (12)
10 3 81
Items that may be reclassified subsequently to profit or loss
Fair value gains/(losses)
Net investment hedge 14 9 43
Available-for-sale investments
Fair value gains/(losses) 15 (7) (5)
Recycled to profit or loss - (8) (9)
Exchange difference recycled to profit or loss on disposal of business (1) - -
Currency translation differences on translating foreign operations (269) (346) (1,257)
Other movements 2 4 9
Income tax on items that may be reclassified subsequently to profit or loss D1(c) (3) 1 2
(242) (347) (1,217)
Total other comprehensive income for the financial period from
continuing operations (232) (344) (1,136)
Total other comprehensive income for the financial period (232) (344) (1,136)
Total comprehensive income for the financial period 104 203 (153)
Attributable to
Equity holders of the parent 39 202 (96)
Non-controlling interests
Ordinary shares 56 (8) (76)
Preferred securities 9 9 19
Total comprehensive income for the financial period 104 203 (153)
Reconciliation of adjusted operating profit to profit after tax
For the six months ended 30 June 2014
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2014 2013 2013
Core operations
Emerging Markets B3 291 300 594
Nedbank B3 361 387 797
Old Mutual Wealth B3 120 108 217
Institutional Asset Management B3 54 54 111
826 849 1,719
Finance costs B3 (41) (46) (92)
Long-term investment return on excess assets 13 25 43
Net interest payable to non-core operations (2) (6) (11)
Corporate costs (25) (21) (54)
Other net (costs)/income (10) - 7
Adjusted operating profit before tax B3 761 801 1,612
Adjusting items C1(a) (255) (69) (286)
Non-core operations B3 14 2 32
Profit before tax (net of policyholder tax) 520 734 1,358
Income tax attributable to policyholder returns D1(d) 44 71 174
Profit before tax 564 805 1,532
Total tax expense D1(a) (218) (250) (552)
Profit from continuing operations after tax 346 555 980
(Loss)/profit from discontinued operations after tax G1 (10) (8) 3
Profit after tax for the financial period 336 547 983
Adjusted operating profit after tax attributable to ordinary equity holders of the parent
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2014 2013 2013
Adjusted operating profit before tax B3 761 801 1,612
Tax on adjusted operating profit D1(d) (202) (207) (424)
Adjusted operating profit after tax 559 594 1,188
Non-controlling interests - ordinary shares B3 (126) (137) (279)
Non-controlling interests - preferred securities B3 (9) (9) (19)
Adjusted operating profit after tax attributable to ordinary equity
holders of the parent B3 424 448 890
Adjusted weighted average number of shares (millions) C2(c) 4,840 4,835 4,836
Adjusted operating earnings per share (pence)
C2(c) 8.8 9.3 18.4
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. The
reconciliation set out above explains the differences between AOP and profit after tax as reported under IFRS.
For core life assurance and property and casualty businesses, AOP is based on a long-term investment return, including returns on investments
held by life funds 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 accounting for intangibles acquired in a business combination and costs related to successful
acquisitions, revaluations of put options related to long-term incentive schemes, profit/(loss) on acquisition/disposal of subsidiaries, associated
undertakings and strategic investments, fair value profits/(losses) on certain Group debt instruments and costs related to the fundamental
restructuring of continuing businesses. AOP includes dividends declared to holders of perpetual preferred callable securities. Old Mutual Bermuda
and Nordic are treated as non-core and discontinued operations respectively in the AOP disclosure. As such they are not included in AOP. 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.
Consolidated statement of financial position
At 30 June 2014
GBPm
30 June 30 June 31 December
Notes 2014 2013 2013
Assets
Goodwill and other intangible assets 2,500 3,056 2,835
Mandatory reserve deposits with central banks 767 760 759
Property, plant and equipment 730 794 722
Investment property 1,778 1,911 1,811
Deferred tax assets 247 334 303
Investments in associated undertakings and joint ventures 201 130 168
Deferred acquisition costs 909 1,264 1,211
Reinsurers' share of policyholder liabilities 1,987 1,629 1,875
Loans and advances 33,727 37,418 33,583
Investments and securities 86,198 88,915 88,220
Current tax receivable 101 109 128
Trade, other receivables and other assets 2,780 2,955 2,583
Derivative financial instruments 1,104 1,417 1,259
Cash and cash equivalents 4,289 5,035 4,869
Non-current assets held for sale G2 4,473 5 5
Total assets 141,791 145,732 140,331
Liabilities
Long-term business policyholder liabilities 78,092 81,443 81,141
General insurance liabilities 319 350 332
Third-party interests in consolidated funds 6,456 5,479 5,478
Borrowed funds E2 2,752 2,563 2,629
Provisions 198 207 195
Deferred revenue 367 664 628
Deferred tax liabilities 424 435 491
Current tax payable 205 250 237
Trade, other payables and other liabilities 4,099 5,076 4,315
Amounts owed to bank depositors 34,540 38,009 34,370
Derivative financial instruments 1,174 1,623 1,478
Non-current liabilities held for sale G2 4,294 - -
Total liabilities 132,920 136,099 131,294
Net assets 8,871 9,633 9,037
Shareholders' equity
Equity attributable to equity holders of the parent 7,062 7,729 7,270
Non-controlling interests
Ordinary shares 1,536 1,632 1,502
Preferred securities 273 272 265
Total non-controlling interests 1,809 1,904 1,767
Total equity 8,871 9,633 9,037
Consolidated statement of cash flows
For the six months ended 30 June 2014
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Cash flows from operating activities
Profit before tax 564 805 1,532
Non-cash movements in profit before tax 806 620 1,423
Net changes in working capital (370) 228 447
Taxation paid (175) (225) (458)
Net cash inflow from operating activities 825 1,428 2,944
Cash flows from investing activities
Net acquisitions of financial investments (824) (590) (1,658)
Acquisition of investment properties (31) (7) (47)
Proceeds from disposal of investment properties 39 9 22
Acquisition of property, plant and equipment (65) (50) (113)
Proceeds from disposal of property, plant and equipment 5 6 6
Acquisition of intangible assets (29) (31) (86)
Acquisition of interests in subsidiaries, associated undertakings
joint ventures and strategic investments (58) (31) (119)
Disposal of interests in subsidiaries, associated undertakings
joint ventures and strategic investments 48 12 8
Net cash outflow from investing activities (915) (682) (1,987)
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the Company (279) (238) (336)
Non-controlling interests and preferred security interests (90) (95) (183)
Dividends received from associated undertakings 4 12 13
Interest paid (excluding banking interest paid) (24) (26) (51)
Proceeds from issue of ordinary shares (including by subsidiaries
to non-controlling interests) 9 9 11
Net disposal/(acquisition) of treasury shares 38 (29) 55
Issue of subordinated and other debt 357 - 586
Subordinated and other debt repaid (196) (262) (578)
Net cash outflow from financing activities (181) (629) (483)
Net (decrease)/increase in cash and cash equivalents (271) 117 474
Effects of exchange rate changes on cash and cash equivalents (234) (304) (828)
Cash and cash equivalents at beginning of the year 5,628 5,982 5,982
Cash and cash equivalents at end of the period 5,123 5,795 5,628
Consisting of
Cash and cash equivalents 4,289 5,035 4,869
Mandatory reserve deposits with central banks 767 760 759
Cash and cash equivalents included in assets held for sale 67 - -
Total 5,123 5,795 5,628
Cash and cash equivalents in the cash flow statement above include Mandatory reserve deposits, in line with market practice in South Africa.
Except for mandatory reserve deposits with central banks of GBP767 million (30 June 2013: GBP760 million; 31 December 2013: GBP759 million)
and cash and cash equivalents subject to consolidation of funds of GBP1,733 million (30 June 2013: GBP1,757 million; 31 December 2013:
GBP1,667 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.
Consolidated statement of changes in equity
For the six months ended 30 June 2014
Millions
Number of
shares Available-
issued and Share Share Merger for-sale
Six months ended 30 June 2014 Notes fully paid capital premium reserve reserve
Shareholders' equity at beginning of the period 4,897 560 845 1,717 52
Profit after tax for the financial period - - - - -
Other comprehensive income
Items that will not be reclassified subsequently to
profit or loss
Fair value gains
Property revaluation - - - - -
Measurement gains on defined benefit plans - - - - -
Income tax on items that will not be reclassified
subsequently to profit or loss D1(c) - - - - -
- - - - -
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
Exchange differences recycled to profit or loss
on disposal of business - - - - -
Currency translation differences on translating foreign
operations - - - - -
Other movements - - - - -
Income tax on items that may be reclassified
subsequently to profit or loss D1(c) - - - - (3)
Total comprehensive income for the financial period - - - - 11
Dividends for the period C3 - - - - -
Equity share-based payment transactions - - - - -
Other movements in share capital 8 1 8 - -
Expiry of Skandia AB shareholder claims - - - - -
Merger reserve released - - - (116) -
Change in participation in subsidiaries - - - - -
Transactions with shareholders 8 1 8 (116) -
Shareholders' equity at end of the period
4,905 561 853 1,601 63
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
161 316 37 (1,234) 4,290 526 7,270 1,767 9,037
- - - - 199 14 213 123 336
6 - - - - - 6 - 6
- - - - 1 - 1 - 1
- - - - - 3 3 - 3
6 - - - 1 3 10 - 10
- - - 14 - - 14 - 14
- - - - - - 14 1 15
- - - (1) - - (1) - (1)
- - - (211) - - (211) (58) (269)
- - 3 - - - 3 (1) 2
- - - - - - (3) - (3)
6 - 3 (198) 200 17 39 65 104
- - - - (279) (17) (296) (73) (369)
- 5 - - 1 - 6 (3) 3
- - - - 38 - 47 (1) 46
- - - - 12 - 12 - 12
- - - - 116 - - - -
- - - - (16) - (16) 54 38
- 5 - - (128) (17) (247) (23) (270)
167 321 40 (1,432) 4,362 526 7,062 1,809 8,871
Millions
Number of
shares
issued and Share Share Merger Available-for-
Six months ended 30 June 2013 Notes fully paid capital premium reserve sale reserve
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
Fair value gains
Property revaluation - - - - -
Measurement gains on defined benefit plans - - - - -
Income tax on items that will not be reclassified
subsequently to profit or loss D1(c) - - - - -
- - - - -
Items that may be reclassified subsequently to profit
or loss
Fair value gains/(losses)
Net investment hedge - - - - -
Available-for-sale investments
Fair value losses - - - - (7)
Recycled to profit or loss - - - - (8)
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 - - - - (14)
Dividends for the period C3 - - - - -
Equity share-based payment transactions - - - - -
Other movements in share capital 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) 3,891 682 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)
- - 1 - 10 - 11 (7) 4
- - - - - - 1 - 1
(3) - 1 (212) 408 22 202 1 203
- - - - (238) (22) (260) (73) (333)
- (8) - - - - (8) (2) (10)
- - - - (29) - (21) (3) (24)
- - - - - - - 24 24
- (8) - - (267) (22) (289) (54) (343)
141 260 34 (590) 4,032 682 7,729 1,904 9,633
Millions
Number of
shares
issued and Share Share Merger Available-for-
Year ended 31 December 2013 Notes fully paid capital premium reserve sale reserve
Shareholders' equity at beginning of the year 4,892 559 835 1,717 65
Profit after tax for the financial year - - - - -
Other comprehensive income
Items that will not be reclassified subsequently
to profit or loss
Fair value gains
Property revaluation - - - - -
Measurement gain on defined benefit plans - - - - -
Income tax on items that will not be reclassified
subsequently to profit or loss D1(c) - - - - -
- - - - -
Items that may be reclassified subsequently
to profit or loss
Fair value gains/(losses)
Net investment hedge - - - - -
Available-for-sale investments
Fair value gains - - - - (6)
Recycled to profit or loss - - - - (9)
Currency translation differences on translating foreign
operations - - - - -
Other movements - - - - -
Income tax on items that may be reclassified
subsequently to profit or loss D1(c) - - - - 2
Total comprehensive income for the financial year - - - - (13)
Dividends for the year C3 - - - - -
Equity share-based payment transactions - - - - -
Other movements in share capital 5 1 10 - -
Preferred securities purchased - - - - -
Change in participation in subsidiaries - - - - -
Transactions with shareholders 5 1 10 - -
Shareholders' equity at end of the year
4,897 560 845 1,717 52
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) 3,891 682 7,816 1,957 9,773
- - - - 668 37 705 278 983
17 - - - - - 17 6 23
- - - - 52 - 52 18 70
- - - - (14) 10 (4) (8) (12)
17 - - - 38 10 65 16 81
- - - 43 - - 43 - 43
- - - - - - (6) 1 (5)
- - - - - - (9) - (9)
- - - (899) - - (899) (358) (1,257)
- - 4 - (1) - 3 6 9
- - - - - - 2 - 2
17 - 4 (856) 705 47 (96) (57) (153)
- - - - (336) (47) (383) (136) (519)
- 48 - - 13 - 61 (17) 44
- - - - 55 - 66 3 69
- - - - (21) (156) (177) - (177)
- - - - (17) - (17) 17 -
- 48 - - (306) (203) (450) (133) (583)
161 316 37 (1,234) 4,290 526 7,270 1,767 9,037
Notes to the consolidated financial statements
For the six months ended 30 June 2014
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 2014 and the financial position at that date have been prepared using accounting policies consistent with those applied in the preparation of
the Group's 2013 Annual Report and Accounts.
The Group interim financial statements have been prepared on the going concern basis, which the directors believe is appropriate. Part 2 of the
Interim Management Statement provides further details on the performance of the Group and the principal risks and uncertainties.
The comparative figures for the financial year ended 31 December 2013 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 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 2014 30 June 2013 31 December 2013
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 17.8499 18.1755 14.2269 15.0827 15.0959 17.4284
US dollars 1.6690 1.7102 1.5448 1.5185 1.5650 1.6566
Euro 1.2174 1.2492 1.1763 1.1676 1.1782 1.2014
New standards, interpretations and amendments adopted by the Group affecting the financial statements for the six months ended
30 June 2014
The new standards that were adopted in the current period were the amendments to IAS 32 'Financial Instruments: Presentation (Offsetting)' and
IFRIC 21 'Levies'. Neither standard had a material effect on the financial statements of the Group.
A2: Significant corporate activity and business changes during the period
Transactions completed during the interim reporting period
Acquisition of Faulu Kenya DTM LTD
On 1 April 2014, the Group completed the acquisition of a controlling stake in the micro-lender Faulu Kenya DTM LTD for GBP17 million, with
goodwill of GBP3 million being recognised.
Disposal of Skandia Poland
On 30 May 2014, the Group completed the disposal of Skandia Poland, part of Old Mutual Wealth. A loss on disposal of GBP15 million has been
recognised in profit of loss.
Acquisition of a significant interest in Banco Unico
On 12 June 2014, the Group announced that it had completed the acquisition of a 36.4% stake in Bank Unico for US$24 million. Bank Unico is
equity accounted as a joint venture in these financial statements.
Transactions agreed but not yet completed
Disposal of Skandia Austria and Skandia Germany
On 27 March 2014, the Group announced that terms had been agreed to sell two of its Old Mutual Wealth businesses, Skandia Austria and Skandia
Germany. This transaction is subject to regulatory approvals and consequently the assets and liabilities of these businesses have been classified as
held for sale in the statement of financial position. Refer to note G2 for further information.
Terms have been agreed to sell Skandia Liechtenstein, also part of Old Mutual Wealth. The transaction is subject to regulatory approval and the
fulfilment of certain closing conditions.
The net asset value of goodwill and intangible assets of these businesses has been written down to the net realisable value given expected losses
on disposal. As a result, an impairment loss of GBP125 million has been recognised in profit or loss.
The disposal of these businesses is expected to be completed during the second half of the year.
Acquisition of Intrinsic Financial Services Limited
On 1 July 2014, the Group announced the completion of the acquisition of Intrinsic Financial Services, one of the largest networks of financial
advisers in the UK. Additionally, the Group announced that it intends to acquire the remaining 50% stake of Cirilium, the core investment proposition
for Intrinsic's restricted financial advisers.
Acquisition of Old Mutual Finance (Pty) Ltd
Subject to regulatory approval, the Group is expected to complete the acquisition of a further stake in Old Mutual Finance (Pty) Ltd from Business
Doctors in the second half of the year. Old Mutual Finance (Pty) Ltd is currently accounted for as joint venture and will be consolidated when the
additional stake is acquired.
Financing activities
On 10 July 2014, Nedbank Group Limited announced its intention to issue new preference shares which will be utilised to raise funding for
Nedbank's business activities in general.
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 principal areas where estimates
and judgement is typically required were set out in the Annual Report and Accounts on page 144 and were described in further detail in the Report
of the Chairman of the Group Audit Committee on page 97. During the period, there have been no significant changes to the areas of critical
accounting estimates and judgements that the Group applied at 31 December 2013.
The Annual Report and Accounts is available in the Investor Relations section of the Group's website at www.oldmutual.com.
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 of Old Mutual
plc assesses performance of the underlying businesses and allocates resources. Information is presented to the Board on a consolidated basis in pounds
sterling (the presentation currency) and in the functional currency of each business.
Adjusted operating profit (AOP) 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. As appropriate to the business line, the Board reviews additional
measures to assess the performance of each of the segments. These typically include net client cash flows, funds under management, gross
earned premiums, underwriting results, net interest income and non-interest revenue and credit losses.
A reconciliation between 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 trading activities between 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 primary business activities from which the Group generates revenue. These are life assurance (premium income), asset
management business (fee and commission income), banking (banking interest receivable) and property and casualty (premium income). The
principal lines of business from which each operating segment derives its revenues are as follows:
Core operations
Emerging Markets - life assurance, property and casualty, asset management and banking
Nedbank - banking and asset management
Old Mutual Wealth - life assurance and asset management
Institutional Asset Management - asset management
Non-core operations
Old Mutual Bermuda - life assurance
Segment presentation
The results of the property and casualty business were previously disclosed separately. However, following changes in management oversight,
these have been included in the Emerging Markets segment with effect from 1 January 2014. This change has been applied to all periods
presented and comparative information has been re-presented accordingly.
The USAM segment has been renamed to Institutional Asset Management.
There have been no other changes to the presentation of segment information.
The Group's reported segments are now Emerging Markets, Nedbank, Old Mutual Wealth and Institutional Asset Management. The Other segment
includes Group Head Office. For all reporting periods, Old Mutual Bermuda is classified as a continuing operation in the IFRS income statement, but
as non-core in determining the Group's adjusted operating profit.
As set out in the 2013 Annual Report and Accounts, the Group continues to incur costs related to the sale of its Nordic business in 2012. These
costs largely relate to the transition of IT information and support services that were previously provided by the Nordic business to the wider Group
back to the Group. These costs are included in the expenses related to the discontinued operations in the IFRS consolidated income statement for
the six months ended 30 June 2014 and as non-core for determining the Group's AOP for the six months ended 30 June 2014. Further information
on the results of discontinued operations is provided in note G1.
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
Six months ended 30 June 2014 Markets Wealth Total
Life assurance - insurance contracts 678 155 833
Life assurance - investment contracts with discretionary
participation features 454 - 454
General insurance 331 - 331
Gross earned premiums 1,463 155 1,618
GBPm
Emerging Old Mutual
Six months ended 30 June 2013 Markets Wealth Total
Life assurance - insurance contracts 967 175 1,142
Life assurance - investment contracts with discretionary participation features 476 - 476
General insurance 377 - 377
Gross earned premiums 1,820 175 1,995
GBPm
Emerging Old Mutual
Year ended 31 December 2013 Markets Wealth Total
Life assurance - insurance contracts 1,616 336 1,952
Life assurance - investment contracts with discretionary
participation features 1,025 - 1,025
General insurance 724 - 724
Gross earned premiums 3,365 336 3,701
B3: Adjusted operating profit statement - segment information for the six months ended 30 June 2014
Emerging
Notes Markets Nedbank
Revenue
Gross earned premiums B2 1,463 -
Outward reinsurance (111) -
Net earned premiums 1,352 -
Investment return (non-banking) 2,101 -
Banking interest and similar income - 1,415
Banking trading, investment and similar income - 83
Fee and commission income, and income from service activities 243 438
Other income 41 6
Inter-segment revenues 41 5
Total revenue 3,778 1,947
Expenses
Claims and benefits (including change in insurance contract provisions) (2,056) -
Reinsurance recoveries 21 -
Net claims and benefits incurred (2,035) -
Change in investment contract liabilities (766) -
Losses on loans and advances - (130)
Finance costs (including interest and similar expenses) - -
Banking interest payable and similar expenses - (770)
Fee and commission expenses, and other acquisition costs (150) (4)
Change in third-party interest in consolidated funds - -
Other operating and administrative expenses (501) (660)
Income tax attributable to policyholder returns (38) -
Inter-segment expenses (4) (23)
Total expenses (3,494) (1,587)
Share of associated undertakings' and joint ventures' profit after tax 7 1
Loss on disposal of subsidiaries, associated undertakings
and strategic investments C1(c) - -
Adjusted operating profit/(loss) before tax and non-controlling
interests 291 361
Income tax expense D1 (83) (92)
Non-controlling interests (6) (129)
Adjusted operating profit/(loss) after tax and non-controlling
interests 202 140
Adjusting items net of tax and non-controlling interests C1(a) 2 8
Profit/(loss) after tax from continuing operations 204 148
Loss from discontinued operations after tax G1 - -
Profit/(loss) after tax attributable to equity holders of the parent 204 148
(1) Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the six months ended 30 June 2014 was GBP14 million. Non-core
operations also include GBP10 million divestment costs incurred relation to the Nordic business sold in 2012. Further information on discontinued operations is
provided in note G1.
GBPm
Institutional Adjusted Adjusting Discontinued IFRS
Old Mutual Asset Consolidation operating items and non-core Income
Wealth Management Other adjustments profit (note C1) operations(1) statement
155 - - - 1,618 - - 1,618
(43) - - - (154) - - (154)
112 - - - 1,464 - - 1,464
1,160 - 17 240 3,518 (13) 24 3,529
- - - - 1,415 - - 1,415
- - - - 83 - - 83
563 193 - 4 1,441 (28) - 1,413
4 1 - 1 53 - 1 54
1 - - (49) (2) - 2 -
1,840 194 17 196 7,972 (41) 27 7,958
(198) - - - (2,254) - (6) (2,260)
45 - - - 66 - - 66
(153) - - - (2,188) - (6) (2,194)
(1,079) - - - (1,845) - - (1,845)
- - - - (130) - - (130)
- - (41) - (41) (23) - (64)
- - - - (770) - - (770)
(270) (2) - (42) (468) 33 (2) (437)
- - - (194) (194) - - (194)
(192) (140) (39) (9) (1,541) (214) (5) (1,760)
(6) - - - (44) 44 - -
(20) - (2) 49 - - - -
(1,720) (142) (82) (196) (7,221) (160) (13) (7,394)
- 2 - - 10 - - 10
- - - - - (10) - (10)
120 54 (65) - 761 (211) 14 564
(19) (12) 4 - (202) (16) - (218)
- - - - (135) 12 - (123)
101 42 (61) - 424 (215) 14 223
(182) (7) (36) - (215) 215 - -
(81) 35 (97) - 209 - 14 223
- - - - - - (10) (10)
(81) 35 (97) - 209 - 4 213
B3: Adjusted operating profit statement - segment information for the six months ended 30 June 2013
Emerging
Notes Markets Nedbank
Revenue
Gross earned premiums B2 1,820 -
Outward reinsurance (119) -
Net earned premiums 1,701 -
Investment return (non-banking) 1,991 -
Banking interest and similar income - 1,573
Banking trading, investment and similar income - 110
Fee and commission income, and income from service activities 276 537
Other income 23 18
Inter-segment revenues 38 7
Total revenue 4,029 2,245
Expenses
Claims and benefits (including change in insurance contract provisions) (2,168) -
Reinsurance recoveries 93 -
Net claims and benefits incurred (2,075) -
Change in investment contract liabilities (888) -
Losses on loans and advances - (234)
Finance costs (including interest and similar expenses) - -
Banking interest payable and similar expenses - (832)
Fee and commission expenses, and other acquisition costs (176) (25)
Change in third-party interest in consolidated funds - -
Other operating and administrative expenses (563) (740)
Income tax attributable to policyholder returns (22) -
Inter-segment expenses (12) (27)
Total expenses (3,736) (1,858)
Share of associated undertakings' and joint ventures' profit after tax 7 -
Loss on disposal of subsidiaries, associated undertakings
and strategic investments C1(c) - -
Adjusted operating profit/(loss) before tax and non-controlling interests 300 387
Income tax expense D1 (78) (100)
Non-controlling interests (12) (134)
Adjusted operating profit/(loss) after tax and non-controlling interests 210 153
Adjusting items net of tax and non-controlling interests C1(a) (4) 4
Profit/(loss) after tax from continuing operations 206 157
Loss from discontinued operations after tax G1 - -
Profit/(loss) after tax attributable to equity holders of the parent 206 157
(1) Non-core operations relate 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 include GBP8 million divestment costs incurred relation to the Nordic business sold in 2012. Further information on discontinued operations is provided
in note G1.
GBPm
Institutional Adjusted Adjusting Discontinued IFRS
Old Mutual Asset Consolidation operating items and non-core Income
Wealth Management Other adjustments profit (note C1) operations(1) statement
175 - - - 1,995 - - 1,995
(43) - - - (162) - - (162)
132 - - - 1,833 - - 1,833
2,195 - 34 304 4,524 (17) (18) 4,489
- - - - 1,573 - - 1,573
- - - - 110 - - 110
608 185 - 4 1,610 (34) - 1,576
13 2 - - 56 - 4 60
- - 5 (56) (6) - 6 -
2,948 187 39 252 9,700 (51) (8) 9,641
(148) - - - (2,316) - 21 (2,295)
25 - - - 118 - - 118
(123) - - - (2,198) - 21 (2,177)
(2,112) - - - (3,000) - - (3,000)
- - - - (234) - - (234)
- - (46) - (46) 23 - (23)
- - - - (832) - - (832)
(340) (2) - (32) (575) 40 (3) (538)
- - - (271) (271) - - (271)
(205) (134) (35) (5) (1,682) (80) (8) (1,770)
(49) - - - (71) 71 - -
(11) - (6) 56 - - - -
(2,840) (136) (87) (252) (8,909) 54 10 (8,845)
- 3 - - 10 - - 10
- - - - - (1) - (1)
108 54 (48) - 801 2 2 805
(20) (13) 4 - (207) (43) - (250)
- - - - (146) 13 - (133)
88 41 (44) - 448 (28) 2 422
(54) (9) 35 - (28) 28 - -
34 32 (9) - 420 - 2 422
- - - - - - (8) (8)
34 32 (9) - 420 - (6) 414
B3: Adjusted operating profit statement - segment information for the year ended 31 December 2013
Emerging
Notes Markets Nedbank
Revenue
Gross earned premiums B2 3,365 -
Outward reinsurance (230) -
Net earned premiums 3,135 -
Investment return (non-banking) 5,184 -
Banking interest and similar income - 3,050
Banking trading, investment and similar income - 195
Fee and commission income, and income from service activities 552 1,048
Other income 39 31
Inter-segment revenues 61 11
Total revenue 8,971 4,335
Expenses
Claims and benefits (including change in insurance contract provisions) (5,061) -
Reinsurance recoveries 201 -
Net claims and benefits incurred (4,860) -
Change in investment contract liabilities (1,952) -
Losses on loans and advances - (368)
Finance costs (including interest and similar expenses) - -
Banking interest payable and similar expenses - (1,616)
Fee and commission expenses, and other acquisition costs (341) (12)
Change in third-party interest in consolidated funds - -
Other operating and administrative expenses (1,165) (1,495)
Income tax attributable to policyholder returns (62) -
Inter-segment expenses (11) (49)
Total expenses (8,391) (3,540)
Share of associated undertakings' and joint ventures' profit after tax 14 2
Loss on disposal of subsidiaries, associated undertakings
and strategic investments C1(c) - -
Adjusted operating profit/(loss) before tax and non-controlling interests 594 797
Income tax expense D1 (155) (200)
Non-controlling interests (16) (282)
Adjusted operating profit/(loss) after tax and non-controlling interests 423 315
Adjusting items net of tax and non-controlling interests C1(a) (84) 12
Profit/(loss) after tax from continuing operations 339 327
Profit from discontinued operations after tax G1 - -
Profit/(loss) after tax attributable to equity holders of the parent 339 327
(1) Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the year ended 31 December 2013 was GBP32 million. Non-core
operations also include a net gain of GBP3 million divestment cost and additional proceeds received in relation to the Nordic business sold in 2012. Further information
on discontinued operations is provided in note G1.
GBPm
Institutional Adjusted Adjusting Discontinued IFRS
Old Mutual Asset Consolidation operating items and non-core Income
Wealth Management Other adjustments profit (note C1) operations(1) statement
336 - - - 3,701 - - 3,701
(87) - - - (317) - - (317)
249 - - - 3,384 - - 3,384
4,159 - 68 634 10,045 (94) 35 9,986
- - - - 3,050 - - 3,050
- - - - 195 - - 195
1,173 381 - 8 3,162 (67) - 3,095
21 3 (2) 2 94 - 6 100
1 - 8 (92) (11) - 11 -
5,603 384 74 552 19,919 (161) 52 19,810
(347) - - - (5,408) - (2) (5,410)
45 - - - 246 - - 246
(302) - - - (5,162) - (2) (5,164)
(3,921) - - - (5,873) - - (5,873)
- - - - (368) - - (368)
- - (92) - (92) 11 - (81)
- - - - (1,616) - - (1,616)
(622) (4) - (70) (1,049) 78 (5) (976)
- - - (564) (564) - - (564)
(408) (274) (78) (10) (3,430) (210) (13) (3,653)
(112) - - - (174) 174 - -
(21) - (11) 92 - - - -
(5,386) (278) (181) (552) (18,328) 53 (20) (18,295)
- 5 - - 21 - - 21
- - - - - (4) - (4)
217 111 (107) - 1,612 (112) 32 1,532
(40) (27) (2) - (424) (128) - (552)
- - - - (298) 20 - (278)
177 84 (109) - 890 (220) 32 702
(139) (30) 21 - (220) 220 - -
38 54 (88) - 670 - 32 702
- - - - - - 3 3
38 54 (88) - 670 - 35 705
B4: Statement of financial position – segment information at 30 June 2014
Emerging
Notes Markets Nedbank
Assets
Goodwill and other intangible assets 134 434
Mandatory reserve deposits with central banks - 767
Property, plant and equipment 313 388
Investment property 1,409 7
Deferred tax assets 73 12
Investments in associated undertakings and joint ventures 92 79
Deferred acquisition costs 107 -
Reinsurers’ share of policyholder liabilities 128 11
Loans and advances 339 33,212
Investments and securities 28,856 5,588
Current tax receivable 17 13
Trade, other receivables and other assets 729 709
Derivative financial instruments 266 719
Cash and cash equivalents 928 753
Non-current assets held for sale G2 - 1
Inter-segment assets 628 269
Total assets 34,019 42,962
Liabilities
Life assurance policyholder liabilities 28,438 889
General insurance liabilities 319 -
Third-party interests in consolidated funds - -
Borrowed funds E2 165 1,899
Provisions 145 1
Deferred revenue 15 -
Deferred tax liabilities 184 35
Current tax payable 125 6
Trade, other payables and other liabilities 1,834 798
Amounts owed to bank depositors 310 34,230
Derivative financial instruments 338 798
Non-current liabilities held for sale G2 - -
Inter-segment liabilities 347 613
Total liabilities 32,220 39,269
Net assets 1,799 3,693
Equity
Equity attributable to equity holders of the parent 1,747 1,934
Non-controlling interests 52 1,759
Ordinary shares 52 1,486
Preferred securities - 273
Total equity 1,799 3,693
GBPm
Institutional
Old Mutual Asset Consolidation Non-core
Wealth Management Other adjustments operations Total
1,168 764 - - - 2,500
- - - - - 767
15 14 - - - 730
- - - 362 - 1,778
4 157 - - 1 247
- 20 10 - - 201
791 11 - - - 909
1,848 - - - - 1,987
176 - - - - 33,727
46,367 37 554 4,399 397 86,198
71 - - - - 101
503 114 24 387 314 2,780
- - 72 40 7 1,104
621 79 146 1,733 29 4,289
4,472 - - - - 4,473
129 19 901 (2,212) 266 -
56,165 1,215 1,707 4,709 1,014 141,791
47,981 - - - 784 78,092
- - - - - 319
- - - 6,456 - 6,456
- 1 687 - - 2,752
24 2 26 - - 198
352 - - - - 367
184 - 21 - - 424
23 3 48 - - 205
774 212 46 427 8 4,099
- - - - - 34,540
- - - 38 - 1,174
4,294 - - - - 4,294
314 581 357 (2,212) - -
53,946 799 1,185 4,709 792 132,920
2,219 416 522 - 222 8,871
2,219 418 522 - 222 7,062
- (2) - - - 1,809
- (2) - - - 1,536
- - - - - 273
2,219 416 522 - 222 8,871
B4: Statement of financial position – segment information at 30 June 2013
Notes Markets Nedbank
Assets
Goodwill and other intangible assets 134 494
Mandatory reserve deposits with central banks - 760
Property, plant and equipment 344 424
Investment property 1,555 14
Deferred tax assets 96 21
Investments in associated undertakings and joint ventures 65 35
Deferred acquisition costs 110 -
Reinsurers’ share of policyholder liabilities 158 12
Loans and advances 418 36,812
Investments and securities 30,412 5,839
Current tax receivable 15 30
Trade, other receivables and other assets 794 623
Derivative financial instruments 358 862
Cash and cash equivalents 1,038 1,113
Non-current assets held for sale - 1
Inter-segment assets 466 142
Total assets 35,963 47,182
Liabilities
Life assurance policyholder liabilities 29,826 906
General insurance liabilities 350 -
Third-party interests in consolidated funds - -
Borrowed funds E2 199 1,726
Provisions 125 (6)
Deferred revenue 17 1
Deferred tax liabilities 157 28
Current tax payable 161 8
Trade, other payables and other liabilities 2,469 1,061
Amounts owed to bank depositors 83 37,926
Derivative financial instruments 401 1,112
Non-current liabilities held for sale - -
Inter-segment liabilities 231 451
Total liabilities 34,019 43,213
Net assets 1,944 3,969
Equity
Equity attributable to equity holders of the parent 1,892 2,140
Non-controlling interests 52 1,829
Ordinary shares 52 1,557
Preferred securities - 272
Total equity 1,944 3,969
Institutional GBPm
Old Mutual Asset Consolidation Non-core
Wealth Management Other adjustments operations Total
1,556 872 - - - 3,056
- - - - - 760
13 12 1 - - 794
- - - 342 - 1,911
32 181 2 - 2 334
- 13 17 - - 130
1,145 9 - - - 1,264
1,459 - - - - 1,629
188 - - - - 37,418
48,306 36 426 3,323 573 88,915
64 - - - - 109
480 103 37 501 417 2,955
- - 56 133 8 1,417
633 104 259 1,757 131 5,035
4 - - - - 5
75 22 1,390 (2,759) 664 -
53,955 1,352 2,188 3,297 1,795 145,732
49,520 - - - 1,191 81,443
- - - - - 350
- - - 5,479 - 5,479
- 11 627 - - 2,563
51 3 34 - - 207
646 - - - - 664
234 - 16 - - 435
40 2 39 - - 250
764 203 71 472 36 5,076
- - - - - 38,009
- - 4 105 1 1,623
- - - - - -
631 548 898 (2,759) - -
51,886 767 1,689 3,297 1,228 136,099
2,069 585 499 - 567 9,633
2,069 562 499 - 567 7,729
- 23 - - - 1,904
- 23 - - - 1,632
- - - - - 272
2,069 585 499 - 567 9,633
B4: Statement of financial position – segment information at 31 December 2013
Emerging
Notes Markets Nedbank
Assets
Goodwill and other intangible assets 134 446
Mandatory reserve deposits with central banks - 759
Property, plant and equipment 303 391
Investment property 1,443 11
Deferred tax assets 104 11
Investments in associated undertakings and joint ventures 76 63
Deferred acquisition costs 107 -
Reinsurers’ share of policyholder liabilities 174 11
Loans and advances 255 33,145
Investments and securities 28,592 5,387
Current tax receivable 12 32
Trade, other receivables and other assets 713 585
Derivative financial instruments 349 791
Cash and cash equivalents 702 1,196
Non-current assets held for sale - -
Inter-segment assets 635 77
Total assets 33,599 42,905
Liabilities
Life assurance policyholder liabilities 28,043 852
General insurance liabilities 332 -
Third-party interests in consolidated funds - -
Borrowed funds E2 172 1,813
Provisions 133 (1)
Deferred revenue 18 -
Deferred tax liabilities 182 34
Current tax payable 125 17
Trade, other payables and other liabilities 1,947 873
Amounts owed to bank depositors 280 34,083
Derivative financial instruments 466 974
Non-current liabilities held for sale - -
Inter-segment liabilities 197 567
Total liabilities 31,895 39,212
Net assets 1,704 3,693
Equity
Equity attributable to equity holders of the parent 1,654 1,976
Non-controlling interests 50 1,717
Ordinary shares 50 1,452
Preferred securities - 265
Total equity 1,704 3,693
Institutional GBPm
Old Mutual Asset Consolidation Non-core
Wealth Management Other adjustments operations Total
1,461 794 - - - 2,835
- - - - - 759
12 15 1 - - 722
- - - 357 - 1,811
20 167 - - 1 303
- 19 10 - - 168
1,094 10 - - - 1,211
1,690 - - - - 1,875
183 - - - - 33,583
49,868 33 378 3,502 460 88,220
84 - - - - 128
426 113 43 351 352 2,583
- - 62 49 8 1,259
687 117 457 1,667 43 4,869
5 - - - - 5
93 21 976 (2,083) 281 -
55,623 1,289 1,927 3,843 1,145 140,331
51,327 - - - 919 81,141
- - - - - 332
- - - 5,478 - 5,478
- 2 642 - - 2,629
32 2 29 - - 195
610 - - - - 628
254 - 21 - - 491
52 3 40 - - 237
786 248 40 412 9 4,315
7 - - - - 34,370
- - - 36 2 1,478
- - - - - -
312 487 520 (2,083) - -
53,380 742 1,292 3,843 930 131,294
2,243 547 635 - 215 9,037
2,243 547 635 - 215 7,270
- - - - - 1,767
- - - - - 1,502
- - - - - 265
2,243 547 635 - 215 9,037
C: Other key performance information
C1: Operating profit adjusting items
(a) Summary of adjusting items for determination of adjusted operating profit (AOP)
In determining the AOP 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 AOP to profit before and after tax.
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2014 2013 2013
(Expense)/income
Goodwill impairment and impact of acquisition accounting C1(b) (181) (57) (141)
Loss on disposal of subsidiaries, associated undertakings and
strategic investments C1(c) (10) (1) (4)
Short-term fluctuations in investment return C1(d) (15) 16 6
Investment return adjustment for Group equity and debt instruments held in
life funds C1(e) 2 (33) (100)
Dividends declared to holders of perpetual preferred callable securities C1(f) 16 22 42
Institutional Asset Management equity plans C1(g) (9) (17) (38)
Credit-related fair value (losses)/gains on Group debt instruments C1(h) (39) 1 (31)
Restructuring costs C1(i) (19) - (20)
Total adjusting items (255) (69) (286)
Tax on adjusting items D1(d) 28 28 46
Non-controlling interest in adjusting items 12 13 20
Total adjusting items after tax and non-controlling interests (215) (28) (220)
(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 on acquisition in the 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 AOP, the Group recognises deferred revenue and acquisition costs and
deferred revenue in relation to policies sold by acquired businesses pre-acquisition. The Group excludes the impairment of goodwill and the
amortisation and impairment of acquired other intangibles and acquired PVIF and the movements in certain acquisition date provisions. Costs
incurred on successful acquisitions are also excluded from AOP. If the intangible assets recognised as a result of a business combination are
subsequently impaired, this is excluded from AOP. The effect of these adjustments to determine AOP are summarised below:
GBPm
Emerging Old Mutual
Six months ended 30 June 2014 Markets Wealth Total
Amortisation of acquired PVIF - (37) (37)
Amortisation of acquired deferred costs and revenue - 5 5
Amortisation of other acquired intangible assets (1) (22) (23)
Change in acquisition date provisions - (1) (1)
Impairment of goodwill and other intangible assets - (125) (125)
(1) (180) (181)
Impairment of goodwill and other intangible assets of GBP125 million relates to the write down of goodwill and intangible assets as a result of the
prospective sales of Skandia Germany, Skandia Austria and Skandia Liechtenstein.
GBPm
Emerging Old Mutual
Six months ended 30 June 2013 Markets Wealth 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)
Impairment of goodwill and other intangible assets (1) - (1)
(2) (55) (57)
GBPm
Emerging Old Mutual
Year ended 31 December 2013 Markets Wealth Total
Amortisation of acquired PVIF - (76) (76)
Amortisation of acquired deferred costs and revenue - 11 11
Amortisation of other acquired intangible assets (2) (46) (48)
Impairment of goodwill and other intangible assets (8) (20) (28)
(10) (131) (141)
(c) Loss on disposal of subsidiaries, associated undertakings and strategic investments
Loss 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
2014 2013 2013
Emerging Markets 4 - -
Old Mutual Wealth (15) - -
Institutional Asset Management 1 (1) (4)
Loss on disposal of subsidiaries, associated undertakings
and strategic investments (10) (1) (4)
Emerging Markets
On 30 April 2014, following the termination of the management agreement with SA Corporate Real Estate Fund, a JSE listed real estate trust, the
Group agreed to sell and transfer the business to the new manager once the transaction becomes unconditional. A profit of GBP4 million has been
recognised on this transaction.
Old Mutual Wealth
On 30 May 2014, the Group completed the disposal of Skandia Poland, part of Old Mutual Wealth. A loss on disposal of GBP15 million has been
recognised in the income statement.
Institutional Asset Management
The Group released a GBP1 million accrual relating to the disposal of Echo Point which was effective during the year ended 31 December 2013.
The Group had previously recognised a loss on disposal of GBP3 million.
On 2 January 2013, the Group completed the sale of five of its affiliates and recognised a loss of GBP1 million.
(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. AOP 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 apportionment of underlying investments in cash deposits, money market instruments 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 AOP 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.
%
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Long-term investment rates 2014 2013 2013
Emerging Markets 7.4 - 8.0 7.4 - 8.0 7.4 - 8.0
Old Mutual Wealth 1.0 1.0 1.0
Analysis of short-term fluctuations in investment return
GBPm
Emerging Old Mutual
Six months ended 30 June 2014 Markets Wealth Other Total
Actual shareholder investment return 44 8 10 62
Less: Long-term investment return 61 3 13 77
Short-term fluctuations in investment return (17) 5 (3) (15)
GBPm
Emerging Old Mutual
Six months ended 30 June 2013 Markets Wealth Other Total
Actual shareholder investment return 100 24 18 142
Less: Long-term investment return 72 29 25 126
Short-term fluctuations in investment return 28 (5) (7) 16
GBPm
Emerging Old Mutual
Year ended 31 December 2013 Markets Wealth Other Total
Actual shareholder investment return 160 22 34 216
Less: Long-term investment return 137 30 43 210
Short-term fluctuations in investment return 23 (8) (9) 6
(e) Investment return adjustment for Group equity and debt instruments held in policyholder funds
AOP 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 shares 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 AOP. This
ensures consistency of treatment with the measures in the related policyholder liability. During the six months ended 30 June 2014, the investment
return adjustment decreased AOP by GBP2 million (six months ended 30 June 2013: increase of GBP33 million; year ended 31 December 2013:
increase of GBP100 million).
(f) Dividends declared to holders of perpetual preferred callable securities
Dividends declared to the holders of the Group’s perpetual preferred callable securities on an AOP basis were GBP16 million for the six months
ended 30 June 2014 (six months ended 30 June 2013: GBP22 million; year ended 31 December 2013: GBP42 million). For the purpose of
determining AOP, these are recognised in finance costs on an accruals basis. In accordance with IFRS, the total cash distribution is recognised
directly in equity.
(g) Institutional Asset Management equity plans
Institutional Asset Management has a number of long-term incentive arrangements with senior employees in its asset management affiliates.
The Group has issued put options over the equity of certain affiliates to senior affiliate employees as part of its US affiliate incentive schemes. The
impact of revaluing these instruments is recognised in accordance with IFRS, but excluded from AOP. At 30 June 2014, these instruments were revalued,
the impact of which was a loss of GBP9 million (six months ended 30 June 2013: loss of GBP17 million; year ended 31 December 2013: loss of GBP38
million).
(h) Credit-related fair value (losses)/gains on Group debt instruments
The widening of the credit spread on the Group’s debt instruments causes the market value of these instruments to decrease, resulting in gains
being recognised in the consolidated income statement. Conversely, if the credit spread narrows the market value of debt instruments increases
causing losses to be recognised in the consolidated income statement. In the directors’ view, such movements are not reflective of the underlying
performance of the Group and will reverse over time. Therefore they have been excluded from AOP. For the six months ended 30 June 2014, due
to narrowing of credit spreads, a net loss of GBP39 million was recognised (six months ended 30 June 2013: net gain of GBP1 million; year ended
31 December 2013: net loss of GBP31 million).
(i) Old Mutual Wealth restructuring expenditure
The Old Mutual Wealth business embarked on a significant programme of operational change in 2013. This will fundamentally restructure the way
in which its UK platform business operates. Over the next two years, it will migrate certain elements of service provision to International Financial
Data Services (IFDS). Costs related to decommissioning of existing technology and service provision and the migration of service to IFDS are
excluded from AOP. These costs comprise payments to IFDS and directly attributable internal project costs and totalled GBP19 million for the six
months ended 30 June 2014 (six months ended 30 June 2013: GBPnil; year ended 31 December 2013: GBP20 million).
C2: Earnings and earnings per share
The Group calculates earnings per share (EPS) on a number of different bases as appropriate to prevailing international, UK and South African
practices and guidance. IFRS requires the calculation of basic and diluted EPS. Adjusted operating EPS reflects earnings per share that is
consistent with the Group’s alternative profit measure. JSE Limited (JSE) listing requirements also require the Group to calculate headline EPS. The
Group’s EPS on these different bases are summarised below:
Pence
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Source of guidance Notes 2014 2013 2013
Basic earnings per share IFRS C2(a) 4.5 8.9 15.0
Diluted basic earnings per share IFRS C2(b) 4.1 8.3 13.9
Adjusted operating earnings per share Group policy C2(c) 8.8 9.3 18.4
Headline earnings per share (Gross of tax) JSE Listing Requirements C2(d) 7.5 8.8 15.6
Headline earnings per share (Net of tax) JSE Listing Requirements C2(d) 7.6 8.5 15.2
Diluted headline earnings per share (Gross of tax) JSE Listing Requirements C2(d) 6.9 8.2 14.4
Diluted headline earnings per share (Net of tax) JSE Listing Requirements C2(d) 7.0 7.9 14.1
(a) Basic 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, Employee Share Ownership Plan Trusts
(ESOP), Black Economic Empowerment trusts and other related undertakings.
The table below reconciles the profit attributable to equity holders of the parent to profit attributable to ordinary equity holders:
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Profit for the financial period attributable to equity holders of the parent
from continuing operations 223 422 702
(Loss)/profit for the financial period attributable to equity holders of the parent
from discontinued operations (10) (8) 3
Profit for the financial period attributable to equity holders of the parent 213 414 705
Dividends paid to holders of perpetual preferred callable securities,
net of tax credits (14) (17) (37)
Profit attributable to ordinary equity holders 199 397 668
Total dividends paid to holders of perpetual preferred callable securities of GBP14 million for the six months ended 30 June 2014 (six months ended
30 June 2013: GBP17 million; year ended 31 December 2013: GBP37 million) are stated net of tax credits of GBP3 million (six months ended 30
June 2013: GBP5 million; year ended 31 December 2013: GBP10 million).
The table below summarises the calculation of the weighted average number of ordinary shares for the purposes of calculating basic earnings per
share:
Millions
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2014 2013 2013
Weighted average number of ordinary shares in issue 4,897 4,894 4,897
Shares held in charitable foundations (6) (6) (6)
Shares held in ESOP trusts (51) (53) (55)
Adjusted weighted average number of ordinary shares C2(c) 4,840 4,835 4,836
Shares held in life funds (141) (160) (155)
Shares held in Black Economic Empowerment trusts (237) (239) (239)
Weighted average number of ordinary shares used to calculate basic
earnings per share 4,462 4,436 4,442
Basic earnings per ordinary share (pence) 4.5 8.9 15.0
(b) Diluted basic earnings per share
Diluted basic EPS recognises the dilutive impact of share options held in ESOP trusts and Black Economic Empowerment trusts, to the extent they
have value, in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full period.
The tables below reconcile the profit attributable to ordinary equity holders to diluted profit attributable to ordinary equity holders and summarises
the calculation of weighted average number of shares for the purpose of calculating diluted basic earnings per share:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2014 2013 2013
Profit attributable to ordinary equity holders (GBPm) 199 397 668
Dilution effect on profit relating to share options issued by subsidiaries (GBPm) (4) (4) (10)
Diluted profit attributable to ordinary equity holders (GBPm) 195 393 658
Weighted average number of ordinary shares (millions) C2(a) 4,462 4,436 4,442
Adjustments for share options held by ESOP trusts (millions) 59 46 45
Adjustments for shares held in Black Economic Empowerment trusts (millions) 237 239 239
Weighted average number of ordinary shares used to calculate
diluted basic earnings per share (millions) 4,758 4,721 4,726
Diluted basic earnings per ordinary share (pence) 4.1 8.3 13.9
(c) Adjusted operating earnings per share
The following table presents a reconciliation of profit for the financial year to adjusted operating profit after tax attributable to ordinary equity holders
and summarises the calculation of adjusted operating earnings per share:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2014 2013 2013
Profit for the financial period attributable to equity holders of the parent 213 414 705
Adjusting items 255 69 286
Tax on adjusting items (28) (28) (46)
Non-core operations (14) (2) (32)
Profit from discontinued operations 10 8 (3)
Non-controlling interest on adjusting items (12) (13) (20)
Adjusted operating profit after tax attributable to ordinary equity
holders (GBPm) 424 448 890
Adjusted weighted average number of ordinary shares used to
calculate adjusted operating earnings per share (millions) C2(a) 4,840 4,835 4,836
Adjusted operating earnings per share (pence) 8.8 9.3 18.4
(d) Headline earnings per share
The Group is required to calculate 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 02/2013 (Revised) 'Headline Earnings'. The table below sets out a
reconciliation of basic EPS 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. The table below reconciles the profit for the financial year attributable to equity holders of the parent to
headline earnings and summarises the calculation of basic HEPS:
GBPm
Six months ended Six months ended Year ended
30 June 2014 30 June 2013 31 December 2013
Notes Gross Net Gross Net Gross Net
Profit for the financial period attributable to equity
holders of the parent 213 213 414 414 705 705
Dividends paid to holders of perpetual preferred callable
securities (14) (14) (17) (17) (37) (37)
Profit attributable to ordinary equity holders 199 199 397 397 668 668
Adjustments:
Impairments of goodwill and intangible assets 125 125 1 1 28 28
Loss/(profit) on disposal of subsidiaries, associated
undertakings and strategic investments 10 15 1 (14) 4 (12)
Realised gains (net of impairments) on available-for-sale
financial assets - - (8) (8) (8) (8)
Headline earnings 334 339 391 376 692 676
Dilution effect on earnings relating to share options
issued by subsidiaries (GBPm) (4) (4) (4) (4) (10) (10)
Diluted headline earnings 330 335 387 372 682 666
Weighted average number of ordinary
shares (millions) C2(a) 4,462 4,462 4,436 4,436 4,442 4,442
Diluted weighted average number of ordinary
shares (millions) C2(b) 4,758 4,758 4,721 4,721 4,726 4,726
Headline earnings per share (pence) 7.5 7.6 8.8 8.5 15.6 15.2
Diluted headline earnings per share (pence) 6.9 7.0 8.2 7.9 14.4 14.1
C3: Dividends
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
2012 Final dividend paid – 5.25p per 11 3/7p share - 238 238
2013 Interim dividend paid – 2.10p per 11 3/7p share - - 98
2013 Final dividend paid – 6.00p per 11 3/7p share 279 - -
Dividends to ordinary equity holders 279 238 336
Dividends paid to holders of perpetual preferred callable securities 17 22 47
Dividend payments for the period 296 260 383
Final and interim dividends paid to ordinary equity holders are calculated using the number of shares in issue at the record date less own 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 2.45 pence (or its equivalent in other applicable currencies) per ordinary share in the Company has been recommended by
the directors in relation to the year ending 31 December 2014. The interim dividend will be paid on 31 October 2014 to shareholders on the register
at the close of business on 17 September 2014 for the Malawi register, 18 September 2014 for the South African register, 19 September for the
Zimbabwe and Namibian registers and 23 September 2014 for the UK register. The Company is not offering a scrip dividend alternative.
In March 2014, GBP17 million was declared and paid to holders of perpetual preferred callable securities (March 2013: GBP22 million, November
2013: GBP25 million).
D: Other income statement notes
D1: Income tax expense
(a) Analysis of total income tax expense
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Current tax
United Kingdom 7 9 (3)
Overseas tax
- Africa 180 198 407
- Europe 4 10 19
- Rest of the world - - 7
Withholding taxes 4 - 16
Adjustments to current tax in respect of prior years 4 (19) (25)
Total current tax 199 198 421
Deferred tax
Origination and reversal of temporary differences 17 40 142
Effect on deferred tax of changes in tax rates - - (15)
Recognition of deferred tax assets - - 1
Adjustments to deferred tax in respect of prior years 2 12 3
Total deferred tax 19 52 131
Total income tax expense 218 250 552
(b) Reconciliation of total income tax expense
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Profit before tax 564 805 1,532
Tax at UK standard rate of 21.5% (2013: 23.25%) 121 187 356
Different tax rate or basis on overseas operations 41 33 57
Untaxed and low taxed income (29) (31) (76)
Disallowable expenses 38 (4) 35
Net movement on deferred tax assets not recognised 13 13 31
Effect on deferred tax of changes in tax rates - - (15)
Withholding taxes 2 - 10
Income tax attributable to policyholder returns 35 49 133
Tax on Group equity held in life funds - - 21
Other (3) 3 -
Total income tax expense 218 250 552
(c) Income tax relating to components of other comprehensive income
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Preferred perpetual callable securities (3) (5) (10)
Measurement gains on defined benefit plans - 1 22
Income tax on items that will not be reclassified subsequently to profit or loss (3) (4) 12
Income tax on items that may be reclassified subsequently to profit or loss 3 (1) (2)
Income tax (credit)/expense – continuing operations - (5) 10
Income tax (credit)/expense relating to components of other comprehensive
income - (5) 10
(d) Reconciliation of income tax expense in the IFRS income statement to income tax on adjusted operating profit
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Income tax expense 218 250 552
Tax on adjusting items
Goodwill impairment and impact of acquisition accounting 26 6 26
(Loss)/profit on disposal of subsidiaries, associates and strategic investments (5) 15 16
Short-term fluctuations in investment return 2 3 (2)
Tax on dividends declared to holders of perpetual preferred callable securities
recognised in equity (3) (5) (10)
Institutional Asset Management equity plans 3 9 11
Restructuring costs 5 - 5
Total tax on adjusting items 28 28 46
Income tax attributable to policyholders returns (44) (71) (174)
Income tax on adjusted operating profit 202 207 424
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.
(a) 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.
30 June 2014 GBPm
Measurement basis Fair value Amortised cost
Non-
Available- Financial financial
for-sale Held-to- liabilities assets
Held-for- financial maturity Loans and amortised and
Total trading Designated assets investments receivables cost liabilities
Assets
Mandatory reserve deposits with
central banks 767 - - - - 767 - -
liabilities 1,987 - 1,765 - - 17 - 205
Loans and advances 33,727 2,476 3,377 3 - 27,871 - -
Investments and securities 86,198 996 83,318 678 1,116 90 - -
other assets 2,780 129 325 - - 1,753 - 573
Derivative financial instruments 1,104 1,104 - - - - - -
Cash and cash equivalents 4,289 - - - - 4,289 - -
instruments 130,852 4,705 88,785 681 1,116 34,787 - 778
Total non-financial assets 10,939 - - - - - - 10,939
Total assets 141,791 4,705 88,785 681 1,116 34,787 - 11,717
Liabilities
liabilities 78,092 - 60,412 - - - - 17,680
consolidation of funds 6,456 - 6,456 - - - - -
Borrowed funds 2,752 - 686 - - - 2,066 -
other liabilities 4,099 199 272 - - - 2,566 1,062
Amounts owed to bank depositors 34,540 3,724 3,463 - - - 27,353 -
Derivative financial instruments 1,174 1,174 - - - - - -
financial instruments 127,113 5,097 71,289 - - - 31,985 18,742
Total non-financial liabilities 5,807 - - - - - - 5,807
Total liabilities 132,920 5,097 71,289 - - - 31,985 24,549
30 June 2013 GBPm
Measurement basis Fair value Amortised cost
Available- Financial Non-
for-sale Held-to- liabilities financial
Held-for- financial maturity Loans and amortised assets and
Total trading Designated assets investments receivables cost liabilities
Assets
Mandatory reserve deposits with
central banks 760 - - - - 760 - -
Reinsurers’ share of policyholder
liabilities 1,629 - 1,386 - - 19 - 224
Loans and advances 37,418 2,467 3,778 2 - 31,171 - -
Investments and securities 88,915 1,237 84,937 811 1,550 380 - -
Trade, other receivables and
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 assets that include financial
instruments 138,129 5,297 90,494 813 1,550 39,247 - 728
Total non-financial assets 7,603 - - - - - - 7,603
Total assets 145,732 5,297 90,494 813 1,550 39,247 - 8,331
Liabilities
Life assurance policyholder
liabilities 81,443 - 61,876 - - 209 - 19,358
Third-party interest in
consolidation of funds 5,479 - 5,479 - - - - -
Borrowed funds 2,563 - 880 - - - 1,683 -
Trade, other payables and
other liabilities 5,076 416 472 - - 211 2,778 1,199
Amounts owed to bank depositors 38,009 3,661 5,032 - - - 29,316 -
Derivative financial instruments 1,623 1,623 - - - - - -
financial instruments 134,193 5,700 73,739 - - 420 33,777 20,557
Total non-financial liabilities 1,906 - - - - - - 1,906
Total liabilities 136,099 5,700 73,739 - - 420 33,777 22,463
31 December 2013 GBPm
Measurement basis Fair value Amortised cost
Available- Financial Non-
for-sale Held-to- liabilities financial
Held-for- financial maturity Loans and amortised assets and
Total trading Designated assets investments receivables cost liabilities
Assets
Mandatory reserve deposits with
central banks 759 - - - - 759 - -
Reinsurers’ share of policyholder
liabilities 1,875 - 1,624 - - 16 - 235
Loans and advances 33,583 2,147 3,668 4 - 27,764 - -
Investments and securities 88,220 971 84,873 807 1,461 108 - -
Trade, other receivables and
other assets 2,583 193 347 - - 1,447 - 596
Derivative financial instruments 1,259 1,259 - - - - - -
Cash and cash equivalents 4,869 - - - - 4,869 - -
Total assets that include financial
instruments 133,148 4,570 90,512 811 1,461 34,963 - 831
Total non-financial assets 7,183 - - - - - - 7,183
Total assets 140,331 4,570 90,512 811 1,461 34,963 - 8,014
Liabilities
Life assurance policyholder
liabilities 81,141 - 63,187 - - - - 17,954
Third-party interest in
consolidation of funds 5,478 - 5,478 - - - - -
Borrowed funds 2,629 - 747 - - - 1,882 -
Trade, other payables and
other liabilities 4,315 263 294 - - - 2,413 1,345
Amounts owed to bank depositors 34,370 3,303 5,179 - - - 25,888 -
Derivative financial instruments 1,478 1,478 - - - - - -
financial instruments 129,411 5,044 74,885 - - - 30,183 19,299
Total non-financial liabilities 1,883 - - - - - - 1,883
Total liabilities 131,294 5,044 74,885 - - - 30,183 21,182
(b) Fair value hierarchy
The table below presents the Group’s financial assets and liabilities that are measured at fair value in the consolidated statement of financial
position according to their IAS 39 classification, as set out in note E1(a), and in terms of the fair value hierarchy as required by IFRS 7 'Financial
Instruments: Disclosures’.
The table below analyses the financial assets and liabilities according to fair value hierarchy:
GBPm
30 June 2014 Total Level 1 Level 2 Level 3
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss) 4,705 329 4,368 8
Loans and advances 2,476 - 2,476 -
Investments and securities 996 196 799 1
Other financial assets 129 129 - -
Derivative financial instruments – assets 1,104 4 1,093 7
Designated (fair value through profit or loss) 88,785 74,992 12,174 1,619
Reinsurers’ share of policyholder liabilities 1,765 1,765 - -
Loans and advances 3,377 1 3,374 2
Investments and securities 83,318 72,901 8,800 1,617
Other financial assets 325 325 - -
Available-for-sale financial assets (fair value through equity) 681 195 485 1
Loans and advances 3 3 - -
Investments and securities 678 192 485 1
Total assets measured at fair value 94,171 75,516 17,027 1,628
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss) 5,097 196 4,901 -
Other liabilities 199 190 9 -
Amounts owed to bank depositors 3,724 - 3,724 -
Derivative financial instruments – liabilities 1,174 6 1,168 -
Designated (fair value through profit or loss) 71,289 46,733 23,752 804
Life assurance policyholder liabilities 60,412 46,079 13,529 804
Third-party interests in consolidated funds 6,456 - 6,456 -
Borrowed funds 686 606 80 -
Other liabilities 272 48 224 -
Amounts owed to bank depositors 3,463 - 3,463 -
Total liabilities measured at fair value 76,386 46,929 28,653 804
GBPm
30 June 2013 Total Level 1 Level 2 Level 3
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss) 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 profit or loss) 90,494 72,482 16,788 1,224
Reinsurers’ share of policyholder liabilities 1,386 1,386 - -
Loans and advances 3,778 2 3,772 4
Investments and securities 84,937 70,703 13,014 1,220
Other financial assets 393 391 2 -
Available-for-sale financial assets (fair value through equity) 813 371 439 3
Loans and advances 2 2 - -
Investments and securities 811 369 439 3
Total assets measured at fair value 96,604 73,327 22,038 1,239
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss) 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 profit or loss) 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
31 December 2013 Total Level 1 Level 2 Level 3
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss) 4,570 493 4,066 11
Loans and advances 2,147 - 2,147 -
Investments and securities 971 295 673 3
Other financial assets 193 193 - -
Derivative financial instruments – assets 1,259 5 1,246 8
Designated (fair value through profit or loss) 90,512 76,822 11,980 1,710
Reinsurers’ share of policyholder liabilities 1,624 1,624 - -
Loans and advances 3,668 1 3,665 2
Investments and securities 84,873 74,850 8,315 1,708
Other financial assets 347 347 - -
Available-for-sale financial assets (fair value through equity) 811 348 461 2
Loans and advances 4 4 - -
Investments and securities 807 344 461 2
Total assets measured at fair value 95,893 77,663 16,507 1,723
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss) 5,044 265 4,779 -
Other liabilities 263 256 7 -
Amounts owed to bank depositors 3,303 - 3,303 -
Derivative financial instruments – liabilities 1,478 9 1,469 -
Designated (fair value through profit or loss) 74,885 48,237 25,716 932
Life assurance policyholder liabilities 63,187 47,538 14,717 932
Third-party interests in consolidated funds 5,478 - 5,478 -
Borrowed funds 747 663 84 -
Other liabilities 294 36 258 -
Amounts owed to bank depositors 5,179 - 5,179 -
Total liabilities measured at fair value 79,929 48,502 30,495 932
(c) Determination of fair value
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(q) (iii) of the 2013 Annual Report. There have been no significant changes to the valuation techniques applied.
(d) Movements in financial instruments measured at Level 3 in terms of the hierarchy
The fair values of Level 3 financial instruments are based on valuation techniques that rely largely on unobservable market inputs and require a
significant level of judgement. As such, the fair values of Level 3 financial instruments are often less reliable than Level 1 and Level 2 financial
instruments. Movements in the fair values of Level 3 instruments are generally due to movements in key assumptions and macroeconomic factors.
The tables below reconcile the opening balances of financial assets and liabilities measured in terms of Level 3 fair value to closing balances at the
end of the period:
GBPm
Designated Designated
fair value fair value
Held-for- through profit through profit Available-for-
trading - Held- or loss - or loss - sale -
Investments for-trading - Loans and Investments Investments
Six months ended 30 June 2014 and securities Derivatives advances and securities and securities Total
Level 3 financial assets
At beginning of the year 3 8 2 1,708 2 1,723
the profit or loss for the period (1) (1) - 20 - 18
Purchases and issues - - - 73 - 73
Sales and settlements - - - (188) (1) (189)
Transfers in - - - 57 - 57
Transfers out - - - (16) - (16)
Foreign exchange and other (1) - - (37) - (38)
Total level 3 financial assets 1 7 2 1,617 1 1,628
30 June 2014 recognised in:
- profit or loss - - - 9 - 9
GBPm
Designated fair
value through
profit or loss -
Life assurance
policyholder
liabilities
(investment
Six months ended 30 June 2014 contracts) Total
Level 3 financial liabilities
At beginning of the year 932 932
Total net gains recognised in profit or loss for the period (49) (49)
Purchases and issues 1 1
Sales and settlements (126) (126)
Transfers in 50 50
Transfers out - -
Foreign exchange and other (4) (4)
Total level 3 financial liabilities 804 804
- profit or loss (49) (49)
GBPm
Designated fair Designated fair
value through value through Available-for-
Held-for-trading Held- profit or loss - profit or loss - 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
Total net gains/(losses) recognised in
the profit or loss for the period 4 - (5) 54 - 53
Total gains recognised in other
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 held at
30 June 2013 recognised in:
- profit or loss - - - 52 - 52
GBPm
Designated fair
value through
profit or loss -
Life assurance
policyholder
liabilities
(investment
Six months ended 30 June 2013 contracts) Total
Level 3 financial liabilities
At beginning of the year 480 480
Total net losses recognised in profit or loss for the period 72 72
Purchases and issues 1 1
Sales and settlements (104) (104)
Transfers in 77 77
Foreign exchange and other 9 9
Total level 3 financial liabilities 535 535
Losses relating to liabilities held at
30 June 2013 recognised in:
- profit or loss 74 74
GBPm
Designated fair Designated fair
value through value through Available-for-
Held-for-trading Held- profit or loss - profit or loss - sale -
- Investments for-trading - Loans and Investments Investments
Year ended 31 December 2013 and securities Derivatives advances and securities and securities Total
Level 3 financial assets
At beginning of the year 4 - 9 1,122 2 1,137
Total net gains/(losses) recognised in
the profit or loss for the period 1 - - 65 - 66
Purchases and issues - 9 - 290 - 299
Sales and settlements (1) - (6) (77) - (84)
Transfers in - - - 464 - 464
Transfers out - - - (21) - (21)
Foreign exchange and other (1) (1) (1) (135) - (138)
Total level 3 financial assets 3 8 2 1,708 2 1,723
Gains relating to assets held at
31 December 2013 recognised in:
- profit or loss - - - 55 - 55
GBPm
Designated fair
value through
profit or loss -
Life assurance
policyholder
liabilities
(investment
Year ended 31 December 2013 contracts) Total
Level 3 financial liabilities
At beginning of the year 480 480
Total net gains recognised in profit or loss for the period (8) (8)
Purchases and issues 106 106
Sales and settlements (114) (114)
Transfers in 464 464
Transfers out - -
Foreign exchange and other 4 4
Total level 3 financial liabilities 932 932
Losses relating to liabilities held at
30 June 2013 recognised in:
- profit or loss (12) (12)
(e) 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 which are included as investment securities, 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.
(f) 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
30 June 2014 30 June 2013 31 December 2013
Favourable Unfavourable Favourable Unfavourable Favourable Unfavourable
Reflected in profit or loss changes changes changes changes changes changes
Level 3 financial assets
Designated (fair value through profit or loss) 210 199 123 120 218 198
Loans and advances - - 1 1 - -
Investments and securities 203 199 122 119 212 198
Derivative financial instruments 7 - - - 6 -
Total Level 3 financial assets 210 199 123 120 218 198
Level 3 financial liabilities
Designated (fair value through profit or loss) 70 84 20 48 85 74
Life assurance policyholder liabilities
(investment contracts) 70 84 20 48 85 74
Total Level 3 financial liabilities 70 84 20 48 85 74
The impact of reasonable possible alternative assumptions on other comprehensive income was GBPnil in all periods.
E2: Borrowed funds
GBPm
Group 30 June Group 30 June
excluding 2014 excluding 2013
Notes Nedbank Nedbank Group Nedbank Nedbank Group
Senior debt securities and term loans 113 1,240 1,353 123 994 1,117
Floating rate notes E2(a) - 708 708 - 525 525
Fixed rate notes E2(b) 113 532 645 123 469 592
Mortgage-backed securities E2(d) - 57 57 - 114 114
Subordinated debt securities E2(e) 740 602 1,342 714 618 1,332
Borrowed funds 853 1,899 2,752 837 1,726 2,563
Other instruments treated as equity
for accounting purposes
€374 million perpetual preferred
callable securities at 5.00% 253 334
GBP273 million perpetual preferred
callable securities as 6.40% 273 348
Total: Book value 1,379 1,519
Nominal value of the above 1,350 1,594
GBPm
Group 31 December
excluding 2013
Nedbank Nedbank Group
Senior debt securities and term loans 113 1,151 1,264
Floating rate notes E2(a) - 673 673
Fixed rate notes E2(b) 113 478 591
Mortgage-backed securities E2(d) - 65 65
Subordinated debt securities E2(e) 703 597 1,300
Borrowed funds 816 1,813 2,629
Other Group instruments treated as
equity for accounting purposes
€374 million perpetual preferred
callable securities at 5.00% 253
GBP273 million perpetual preferred
callable securities as 6.40% 273
Total: Book value 1,342
Nominal value of the above 1,370
Senior debt securities and term loans
(a) Floating rate notes
GBPm
30 June 30 June 31 December
Maturity date 2014 2013 2013
Nedbank - Floating rate unsecured senior debt
R988 million at JIBAR + 1.05% Repaid - 64 50
R500 million at JIBAR + 1.00% Repaid - 30 26
R1,075 million at JIBAR + 0.94% October 2014 60 72 62
R1,297 million at JIBAR + 1.00% February 2015 73 87 75
R1,027 million at JIBAR + 1.75% April 2015 57 69 60
R250 million at JIBAR + 1.00% August 2015 14 17 14
R1,044 million at JIBAR + 2.20% September 2015 58 70 61
R677 million at JIBAR + 1.25% March 2016 37 45 39
R3,056 million at JIBAR + 0.8% July 2016 170 - 176
R694 million at JIBAR + 0.75% November 2016 38 - 40
R405 million at JIBAR + 1.30% February 2017 22 27 23
R1,035 million at JIBAR + 0.85% March 2017 57 - -
R786 million at JIBAR + 1.30% August 2017 38 39 42
R806 million at JIBAR + 0.9% June 2017 44 - -
R80 million at JIBAR + 2.15% April 2020 4 5 5
R650 million at JIBAR + 1.3% June 2021 36 - -
Total floating rate notes 708 525 673
All floating rate notes are non-qualifying for the purposes of regulatory tiers of capital.
(b) Fixed rate notes (net of Group holdings)
GBPm
30 June 30 June 31 December
Maturity date 2014 2013 2013
Nedbank - Fixed rate unsecured senior debt
R450 million at 8.39% Repaid - 30 26
R478 million at 9.68% April 2015 27 32 28
R3,244 million at 10.55% September 2015 184 222 192
R1,137 million at 9.36% March 2016 64 77 67
R151 million at 6.91% July 2016 9 - 9
R1,273 million at 11.39% September 2019 77 93 80
R1,888 million at 8.92% November 2020 105 - 109
R855 million at 9.38% March 2021 48 - -
R500 million at 9.29% June 2021 28 - -
R391 million at 9.73% March 2024 22 - -
R660 million at zero coupon October 2024 13 15 14
577 469 525
Less: Fixed rate notes held by other Group companies (45) - (47)
Banking fixed rate unsecured senior debt (net of Group holdings) 532 469 478
Group excluding Nedbank
$2 million secured senior debt at 5.23% July 2014 1 11 1
GBP112 million eurobond at 7.125% October 2016 112 112 112
113 123 113
Total fixed rate notes 645 592 591
All fixed rate notes are non-qualifying for the purpose of regulatory tiers of capital.
(c) Revolving credit facilities and irrevocable letters of credit
The Group has access to a GBP800 million (June 2013: GBP1,200 million, December 2013: GBP800 million) five-year multi-currency revolving
credit facility which matures in April 2016. At 30 June 2014, 31 December 2013 and 30 June 2013, none of this facility was drawn and there were
no irrevocable letters of credit in issue against this facility.
(d) Mortgage-backed securities (net of Group holdings)
GBPm
30 June 30 June 31 December
Tier Maturity date 2014 2013 2013
Nedbank
R480 million (class A1) at JIBAR + 1.10% Tier 2 25 October 2039 7 24 13
R336 million (class A2) at JIBAR + 1.25% Tier 2 25 October 2039 19 23 20
R900 million (class A3) at JIBAR + 1.54% Tier 2 25 October 2039 50 60 52
R110 million (class B) at JIBAR + 1.90% Tier 2 25 October 2039 6 7 6
82 114 91
Less: Mortgage backed securities held by other Group companies (25) - (26)
Total mortgage-backed securities 57 114 65
(e) Subordinated debt securities (net of Group holdings)
GBPm
First call Maturity 30 June 30 June 31 December
Tier date date 2014 2013 2013
Nedbank
R300 million at JIBAR + 2.50% Tier 2 Repaid Repaid - 10 -
R1,800 million at 9.84% Tier 2 Repaid Repaid - 124 -
R1,700 million at 8.90% Tier 2 Repaid Repaid - 118 101
R1,265 million at JIBAR + 4.75% Non-core Tier 1 November 2018 November 2018 70 85 74
R487 million at 15.05% Non-core Tier 1 November 2018 November 2018 32 37 32
R1,000 million at 10.54% Tier 2 September 2015 September 2020 58 72 62
$100 million at 3 month USD LIBOR Tier 2 Secondary March 2017 March 2022 59 66 60
R2,000 million at JIBAR + 0.47% Tier 2 July 2017 July 2022 112 134 116
R1,800 million at JIBAR + 2.75% Tier 2 July 2018 July 2023 101 - 105
R1,200 million at JIBAR + 2.55% Tier 2 November 2018 November 2023 67 - 69
R450 million at 10.49% Tier 2 April 2019 April 2024 25 - -
R1,737 million at 3 month JIBAR + 2.55% Tier 2 April 2019 April 2024 97 - -
621 646 619
Less: Banking subordinated debt securities held by other Group companies (19) (28) (22)
Banking subordinated securities (net of Group holdings) 602 618 597
Group excluding Nedbank
R3,000 million at 8.92% until October
2015 and 3 month JIBAR + 1.59%
thereafter Lower Tier 2 October 2015 October 2020 165 199 172
GBP500 million at 8.00% Lower Tier 2 - June 2021 575 515 531
740 714 703
Total subordinated debt securities 1,342 1,332 1,300
F: Other notes
F1: Related parties
The nature of the related party transactions of the Group has not changed from those referred to in the 2013 Annual Report and Accounts.
There were no transactions with related parties during the six months ended 30 June 2014, that had a material effect on the results or the financial
position of the Group.
F2: Events after the reporting date
On 1 July 2014, the Group announced the completion of the acquisition of Intrinsic Financial Services, one of the largest networks of financial
advisers in the UK. The acquisition was announced on 28 February 2014 and is part of Old Mutual Wealth's strategy of building an integrated
customer proposition comprising financial advice, asset management and tax efficient products. Additionally, the Group announced that it intends to
acquire the remaining 50% stake of Cirilium, the core investment proposition for Intrinsic’s restricted financial advisers.
On 4 July 2014, Old Mutual Bermuda received formal written approval from the Bermuda Monitory Authority (BMA) to repatriate $160 million via
cancellation of OM Group (UK) Limited loan notes.
On 10 July 2014, Nedbank Group Limited announced its intention to issue new preference shares. These preference shares will be utilised to raise
funding for Nedbank’s’ business activities in general.
Terms have been agreed to sell Skandia Liechtenstein, part of Old Mutual Wealth. The transaction is subject to regulatory approval and the
fulfilment of certain closing conditions and is expected to complete during the second half of the year.
F3: Contingent liabilities
Contingent liabilities - tax
The Group is regularly in discussion with the respective tax authorities in each of the jurisdictions where the Group is active. The Group applies its
judgement to determine if a provision for future tax uncertainties should be recognised based on detailed reviews of any potential exposure to tax
authorities and the assessment of the most probable outcome of the tax uncertainty. As these provisions are based on estimates and rely on
judgements made by the Group, the actual amount of future taxes paid by the Group could be different to the amounts provided.
G: Discontinued operations and disposal groups held for sale
G1: Discontinued operations
Amounts disclosed in relation to discontinued operations relate to the sale, in 2012, 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 the Nordic
business was consolidated and 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.
Income statement from discontinued operations (Nordic)
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Revenue - - -
Expenses (11) (9) (26)
Loss before tax from discontinued operations - trading activities (11) (9) (26)
Profit on disposal - - 27
(Loss)/profit before tax from discontinued operations (11) (9) 1
Income tax credit 1 1 2
(Loss)/profit after tax from discontinued operations (10) (8) 3
G2: Disposal groups held for sale
On 27 March 2014, the Group announced that terms had been agreed to sell two of its Old Mutual Wealth businesses, Skandia Austria and Skandia
Germany. This transaction is subject to regulatory approvals and consequently the assets and liabilities of these businesses have been classified as
held for sale in the statement of financial position. At 30 June 2014, the total value of the assets and liabilities reclassified as held for sale in the
statement of financial position were GBP4,468 million and GBP4,294 million respectively. The disposal of these businesses is expected to be
completed during the second half of the year.
The Group had additional non-current assets held for sale of GBP5 million (30 June 2013: GBP5 million; 31 December 2013: GBP5 million).
G3: 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 $50 million. In July 2012, Harbinger filed a lawsuit against the Group, claiming payment of a purchase price adjustment of $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
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