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Interim results for the half year ended 30 June 2015 - Part II
Old Mutual
ISIN CODE: GB00B77J0862
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSURE CODE: OLOML
Old Mutual plc Interim results for the half year ended 30 June 2015
Index to the financial information for the six months ended 30 June 2015
Statement of directors’ responsibilities in respect of the interim financial statements for the six months ended 30 June 2015
Independent review report to Old Mutual plc for the six months ended 30 June 2015
Consolidated income statement
Consolidated statement of comprehensive income
Reconciliation of adjusted operating profit to profit after tax
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
A: Significant accounting policies
B: Segment information
C: Other key performance information
D: Other income statement notes
E: Financial assets and liabilities
F: Other statement of financial position notes
G: Other notes
H: Discontinued operations and disposal groups held for sale 107Statement of directors' responsibilities in respect of the interim financial statements
Statement of directors’ responsibilities in respect of the interim financial statements
For the six months ended 30 June 2015
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
6 August 2015 6 August 2015
Independent review report to Old Mutual plc
For the six months ended 30 June 2015
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months
ended 30 June 2015 which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Financial Position, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity 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 half-yearly 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 half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-
yearly financial report in accordance with the DTR of the UK FCA.
The 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 half-yearly 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 half-yearly 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 half-yearly
financial report for the six months ended 30 June 2015 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
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London E14 5GL
6 August 2015
Consolidated income statement
For the six months ended 30 June 2015
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2015 2014 2014
Revenue
Gross earned premiums B2 1,589 1,618 3,209
Outward reinsurance (151) (154) (308)
Net earned premiums 1,438 1,464 2,901
Investment return (non-banking) 3,186 3,529 6,304
Banking interest and similar income 1,691 1,415 3,057
Banking trading, investment and similar income 110 83 197
Fee and commission income, and income from service activities 1,537 1,413 2,894
Other income 70 54 125
Total revenue 8,032 7,958 15,478
Expenses
Claims and benefits (including change in insurance contract provisions) (1,738) (2,260) (4,098)
Reinsurance recoveries 120 66 215
Net claims and benefits incurred (1,618) (2,194) (3,883)
Change in investment contract liabilities (2,035) (1,845) (3,544)
Impairment losses on loans and advances (134) (130) (252)
Finance costs (45) (64) (54)
Banking interest payable and similar expenses (962) (770) (1,672)
Fee and commission expenses, and other acquisition costs (459) (437) (863)
Change in third-party interest in consolidated funds (207) (194) (322)
Other operating and administrative expenses (1,928) (1,760) (3,548)
Total expenses (7,388) (7,394) (14,138)
Share of associated undertakings' and joint ventures' profit after tax 37 10 26
Profit/(loss) on disposal of subsidiaries, associated undertakings and strategic
investments C1(c) 2 (10) (2)
Profit before tax 683 564 1,364
Income tax expense D1 (243) (218) (462)
Profit from continuing operations after tax 440 346 902
Discontinued operations
Loss from discontinued operations after tax H1 (21) (10) (50)
Profit after tax for the financial period 419 336 852
Attributable to
Equity holders of the parent 260 213 582
Non-controlling interests
Ordinary shares 149 114 252
Preferred securities 10 9 18
Profit after tax for the financial period 419 336 852
Earnings per share
Basic earnings per share based on profit from continuing
operations (pence) 5.9 4.7 13.5
Basic earnings per share based on profit from discontinued
operations (pence) (0.5) (0.2) (1.1)
Basic earnings per ordinary share (pence) C2(a) 5.4 4.5 12.4
Diluted basic earnings per share based on profit from continuing
operations (pence) 5.4 4.3 12.5
Diluted basic earnings per share based on profit from discontinued
operations (pence) (0.4) (0.2) (1.0)
Diluted basic earnings per ordinary share (pence) C2(b) 5.0 4.1 11.5
Weighted average number of ordinary shares (millions) C2(a) 4,598 4,462 4,485
Consolidated statement of comprehensive income
For the six months ended 30 June 2015
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
Profit after tax for the financial period 419 336 852
Other comprehensive income for the financial period
Items that will not be reclassified subsequently to profit or loss
Fair value movements
Property revaluation (2) 6 22
Measurement movements on defined benefit plans 8 1 2
Income tax on items that will not be reclassified subsequently to profit or loss D1(c) - - (1)
6 7 23
Items that may be reclassified subsequently to profit or loss
Fair value movements
Net investment hedge 6 14 (9)
Available-for-sale investments
Fair value (losses)/gains (9) 15 21
Recycled to profit or loss - - (20)
Exchange difference recycled to profit or loss on disposal of business (30) (1) (85)
Shadow accounting - - (5)
Currency translation differences on translating foreign operations (442) (269) (68)
Other movements (13) 2 (18)
Income tax on items that may be reclassified subsequently to profit or loss D1(c) - (3) (5)
(488) (242) (189)
Total other comprehensive income for the financial period (482) (235) (166)
Total comprehensive income for the financial period (63) 101 686
Attributable to
Equity holders of the parent (86) 36 434
Non-controlling interests
Ordinary shares 13 56 234
Preferred securities 10 9 18
Total comprehensive income for the financial period (63) 101 686
Reconciliation of adjusted operating profit to profit after tax
For the six months ended 30 June 2015
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2015 2014 2014
Core operations
Emerging Markets B3 333 291 617
Nedbank B3 404 361 770
Old Mutual Wealth B3 151 120 227
Institutional Asset Management B3 83 54 131
971 826 1,745
Finance costs B3 (42) (41) (78)
Long-term investment return on excess assets 11 13 24
Interest payable to non-core operations (2) (2) (5)
Corporate costs (24) (25) (55)
Other net shareholder expenses (10) (10) (26)
Adjusted operating profit before tax B3 904 761 1,605
Adjusting items C1(a) (260) (255) (301)
Non-core operations B3 4 14 1
Profit before tax (net of policyholder tax) 648 520 1,305
Income tax attributable to policyholder returns D1(d) 35 44 59
Profit before tax 683 564 1,364
Total tax expense D1(a) (243) (218) (462)
Profit from continuing operations after tax 440 346 902
Loss from discontinued operations after tax H1 (21) (10) (50)
Profit after tax for the financial period 419 336 852
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 2015 2014 2014
Adjusted operating profit before tax B3 904 761 1,605
Tax on adjusted operating profit D1(d) (235) (202) (439)
Adjusted operating profit after tax 669 559 1,166
Non-controlling interests – ordinary shares (157) (126) (280)
Non-controlling interests – preferred securities (10) (9) (18)
Adjusted operating profit after tax attributable to ordinary equity
holders of the parent B3 502 424 868
Adjusted weighted average number of shares (millions) C2(c) 4,855 4,840 4,845
Adjusted operating earnings per share (pence) C2(c) 10.3 8.8 17.9
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 IFRS profit measures for the specific items detailed in note C1 and, as such, it is a non-IFRS 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 & 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 completed 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, cost of hedging equity 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 is treated as a non-core operation 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 2015
GBPm
At At At
30 June 30 June 31 December
Notes 2015 2014 2014
Assets
Goodwill and other intangible assets F1 3,344 2,500 2,763
Mandatory reserve deposits with central banks 808 767 829
Property, plant and equipment 726 730 765
Investment property 1,318 1,778 1,678
Deferred tax assets 247 247 283
Investments in associated undertakings and joint ventures 470 201 518
Deferred acquisition costs 804 909 862
Reinsurers' share of policyholder liabilities E3 2,394 1,987 2,314
Loans and advances E2 34,655 33,727 34,857
Investments and securities 87,033 86,198 87,547
Current tax receivable 95 101 92
Trade, other receivables and other assets 2,938 2,780 2,362
Derivative financial instruments 1,161 1,104 1,227
Cash and cash equivalents 5,034 4,289 4,944
Non-current assets held for sale H2 1,114 4,473 1,475
Total assets 142,141 141,791 142,516
Liabilities
Long-term business insurance policyholder liabilities E3 9,851 11,737 10,519
Investment contract liabilities E3 68,786 66,355 68,841
Property & casualty liabilities E3 394 319 319
Third-party interests in consolidated funds 5,678 6,456 5,986
Borrowed funds E4 3,566 2,783 3,044
Provisions and accruals 228 198 284
Deferred revenue 291 367 330
Deferred tax liabilities 476 424 454
Current tax payable 169 205 189
Trade, other payables and other liabilities 5,173 4,068 4,276
Amounts owed to bank depositors 36,000 34,540 36,243
Derivative financial instruments 1,161 1,174 1,201
Non-current liabilities held for sale H2 833 4,294 1,285
Total liabilities 132,606 132,920 132,971
Net assets 9,535 8,871 9,545
Shareholders' equity
Equity attributable to equity holders of the parent 7,188 7,062 7,406
Non-controlling interests
Ordinary shares 2,075 1,536 1,867
Preferred securities 272 273 272
Total non-controlling interests 2,347 1,809 2,139
Total equity 9,535 8,871 9,545
Consolidated statement of cash flows
For the six months ended 30 June 2015
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
Cash flows from operating activities
Profit before tax 683 564 1,364
Non-cash movements in profit before tax 1,134 806 2,058
Net changes in working capital 866 (370) 739
Taxation paid (252) (175) (402)
Net cash inflow from operating activities 2,431 825 3,759
Cash flows from investing activities
Net acquisitions of financial investments (1,787) (824) (2,873)
Acquisition of investment properties (37) (31) (48)
Proceeds from disposal of investment properties 4 39 115
Acquisition of property, plant and equipment (35) (65) (154)
Proceeds from disposal of property, plant and equipment 3 5 14
Acquisition of intangible assets (40) (29) (76)
Acquisition of interests in subsidiaries, associated undertakings
joint ventures and strategic investments (625) (58) (429)
Proceeds from the disposal of interests in subsidiaries, associated
undertakings joint ventures and strategic investments 9 48 95
Net cash outflow from investing activities (2,508) (915) (3,356)
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the Company (296) (279) (394)
Non-controlling interests and preferred security interests (108) (90) (177)
Dividends received from associated undertakings 3 4 5
Interest paid (excluding banking interest paid) (24) (24) (48)
Proceeds from issue of ordinary shares (including by subsidiaries
to non-controlling interests) 2 9 12
Net acquisition of treasury shares (12) 38 72
Disposal of a non-controlling interest in OM Asset Management plc 163 - 184
Sale of shares held by BEE trusts 172 - -
Proceeds from issue of subordinated and other debt 880 357 584
Subordinated and other debt repaid (349) (196) (290)
Net cash inflow/(outflow) from financing activities 431 (181) (52)
Net increase/(decrease) in cash and cash equivalents 354 (271) 351
Effects of exchange rate changes on cash and cash equivalents (270) (234) (193)
Cash and cash equivalents at beginning of the period 5,786 5,628 5,628
Cash and cash equivalents at end of the period 5,870 5,123 5,786
Consisting of
Cash and cash equivalents 5,034 4,289 4,944
Mandatory reserve deposits with central banks 808 767 829
Cash and cash equivalents included in assets held for sale 28 67 13
Total 5,870 5,123 5,786
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 GBP808 million (30 June 2014: GBP767 million; 31 December 2014: GBP829 million) and cash
and cash equivalents subject to consolidation of funds of GBP1,372 million (30 June 2014: GBP1,733 million; 31 December 2014: GBP1,639 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 2015
Millions
Number of
shares Available-
issued and Share Share Merger for-sale
Six months ended 30 June 2015 Notes fully paid capital premium reserve reserve
Shareholders' equity at beginning of the period 4,907 561 856 1,342 48
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)/gains(1) - - - - -
Exchange differences recycled to profit or loss
on disposal of business(2) - - - - -
Currency translation differences on translating foreign
operations(1) - - - - -
Other movements - - - - -
Income tax on items that may be reclassified
subsequently to profit or loss D1(c) - - - - -
Total comprehensive income for the financial period - - - - -
Dividends for the period C3 - - - - -
Tax relief on dividends paid - - - - -
Equity share-based payment transactions - - - - -
Other movements in share capital 2 - 2 - -
Shares issued for the acquisition of Quilter Cheviot 19 2 40 - -
Share of movement in associate reserves - - - - -
Proceeds from BEE transactions A2 - - 141 - -
Merger reserve released(3) - - - (68) -
Disposal of a non-controlling interest in
OM Asset Management plc A2 - - - - -
Non-controlling interests in subsidiaries acquired G3(b) - - - - -
Change in participation in subsidiaries - - - - -
Transactions with shareholders 21 2 183 (68) -
Shareholders' equity at end of the period 4,928 563 1,039 1,274 48
(1) Included in other reserves is a loss of GBP9 million relating to Economic Transactional Bank (ETI) available-for-sale reserve. Currency translation differences on
translating foreign operations include GBP61 million relating to foreign exchange losses on translation of ETI.
(2) Following the disposal of Old Mutual Wealth's European businesses foreign currency translation reserves of GBP30 million have been recycled to profit or loss. Foreign
currency translation reserves of GBP35 million have been recycled directly to retained earnings following the OM Asset Management plc public offering. Refer to note
A2 for further information.
(3) On disposal of Old Mutual Wealth's European businesses, merger reserves of GBP68 million have been released directly to retained earnings.
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
178 337 37 (1,370) 4,891 526 7,406 2,139 9,545
- - - - 246 14 260 159 419
(2) - - - - - (2) - (2)
- - - - 6 - 6 2 8
- - - - - - - - -
(2) - - - 6 - 4 2 6
- - - 6 - - 6 - 6
- - (9) - 4 - (5) (4) (9)
- - - (65) 35 - (30) - (30)
- - - (306) - - (306) (136) (442)
- - - - (15) - (15) 2 (13)
- - - - - - - - -
(2) - (9) (365) 276 14 (86) 23 (63)
- - - - (296) (17) (313) (91) (404)
- - - - - 3 3 - 3
- (15) - - (3) - (18) (4) (22)
- - - - (14) - (12) - (12)
- - - - (42) - - - -
- - 10 - - - 10 - 10
- - - - 31 - 172 - 172
- - - - 68 - - - -
- - - - 48 - 48 114 162
- - - - - - - 98 98
- - - - (22) - (22) 68 46
- (15) 10 - (230) (14) (132) 185 53
176 322 38 (1,735) 4,937 526 7,188 2,347 9,535
Consolidated statement of changes in equity
For the six months ended 30 June 2015
Millions
Number of
shares
issued and Share Share Merger Available-for-
Six months ended 30 June 2014 Notes fully paid capital premium reserve sale 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 losses - - - - 14
Exchange differences recycled to profit or loss - - - - -
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 - - - - -
Tax relief on dividends paid - - - - -
Equity share-based payment transactions - - - - -
Other movements in share capital 8 1 8 - -
Expiry of Skandia AB shareholder claims - - - - -
Merger reserve realised in the period - - - (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
- - - - - - - - -
6 - - - 1 - 7 - 7
- - - 14 - - 14 - 14
- - - - - - 14 1 15
- - - (1) - - (1) - (1)
- - - (211) - - (211) (58) (269)
- - 3 - - - 3 (1) 2
- - - - - - (3) - (3)
6 - 3 (198) 200 14 36 65 101
- - - - (279) (17) (296) (73) (369)
- - - - - 3 3 - 3
- 5 - - 1 - 6 (3) 3
- - - - 38 - 47 (1) 46
- - - - 12 - 12 - 12
- - - - 116 - - - -
- - - - (16) - (16) 54 38
- 5 - - (128) (14) (244) (23) (267)
167 321 40 (1,432) 4,362 526 7,062 1,809 8,871
Consolidated statement of changes in equity
For the six months ended 30 June 2015
Millions
Number of
shares
issued and Share Share Merger Available-for-
Year ended 31 December 2014 Notes fully paid capital premium reserve sale reserve
Shareholders' equity at beginning of the year 4,897 560 845 1,717 52
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 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 - - - - 21
Recycled to profit or loss - - - - (20)
Exchange differences recycled to profit or loss
on disposal of business - - - - -
Shadow accounting - - - - -
Currency translation differences on translating foreign
operations - - - - -
Other movements - - - - -
Income tax on items that may be reclassified
subsequently to profit or loss D1(c) - - - - (5)
Total comprehensive income for the financial year - - - - (4)
Dividends for the year C3 - - - - -
Tax relief on dividends paid - - - - -
Equity share-based payment transactions - - - - -
Other movements in share capital 10 1 11 - -
Expiry of Skandia AB shareholder claims - - - - -
Merger reserve released - - - (375) -
Disposal of a non-controlling interest in
OM Asset Management plc A2 - - - - -
Non-controlling interests in subsidiaries acquired A2 - - - - -
Change in participation in subsidiaries - - - - -
Transactions with shareholders 10 1 11 (375) -
Shareholders' equity at end of the year 4,907 561 856 1,342 48
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
- - - - 557 25 582 270 852
22 - - - (5) - 17 5 22
- - - - 2 - 2 - 2
- - - - (1) - (1) - (1)
22 - - - (4) - 18 5 23
- - - (9) - - (9) - (9)
- - - - - - 21 - 21
- - - - - - (20) - (20)
- - - (85) - - (85) - (85)
(5) - - - - - (5) - (5)
- - - (45) - - (45) (23) (68)
- - - 3 (21) - (18) - (18)
- - - - - - (5) - (5)
17 - - (136) 532 25 434 252 686
- - - - (394) (32) (426) (145) (571)
- - - - - 7 7 - 7
- 21 - - (3) - 18 4 22
- - - - 72 - 84 1 85
- - - - 11 - 11 - 11
- - - - 375 - - - -
- - - - 52 - 52 163 215
- - - - - - - 53 53
- - - - (44) - (44) 44 -
- 21 - - 69 (25) (298) 120 (178)
178 337 37 (1,370) 4,891 526 7,406 2,139 9,545
Notes to the consolidated financial statements
For the six months ended 30 June 2015
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 IAS 34 as adopted by the EU. The Group's results for the six months ended 30 June 2015 and the financial position at
that date have been prepared using accounting policies consistent with those applied in the preparation of the Group's 2014 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 - Financial
Performance 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 2014 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 2015 30 June 2014 31 December 2014
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 18.1583 19.1081 17.8499 18.1755 17.8712 17.9976
US dollars 1.5240 1.5725 1.6690 1.7102 1.6474 1.5581
Euro 1.3640 1.4099 1.2174 1.2492 1.2399 1.2877
New standards, interpretations and amendments adopted by the Group affecting the financial statements for the six months ended 30 June 2015
During the period, there were no new standards implemented that had a material effect on the financial statements of the Group.
A2: Significant corporate activity and business changes during the period
Acquisitions completed during the period
Acquisition of Quilter Cheviot
On 25 February 2015, the Group completed the acquisition of 100% of Quilter Cheviot, a leading UK-based discretionary investment manager for a
total consideration of GBP585 million, comprising of GBP543 million cash and GBP42 million of deferred consideration that was settled in Old Mutual
plc shares. An additional GBP23 million was paid to the seller to compensate for the increase in the net asset value of Quilter Cheviot between the
date at which the acquisition was agreed and the completion of the transaction. The purchase consideration for the acquisition of Quilter Cheviot was
the total cash paid of GBP566 million.
Goodwill of GBP292 million and intangible assets of GBP288 million (GBP273 million customer relationships and GBP15 million brand) have been
recognised as a result of the transaction. Refer to note G3(a) for further information.
Acquisition of UAP Holdings Limited
On 24 June 2015 the Group obtained control of UAP Holdings Limited (UAP) through the acquisition, in two tranches, of a 60.7% ownership interest
in UAP for GBP152 million. UAP is a Kenyan pan-African financial services group that mainly operates in East Africa.
An initial stake of 23.3% was acquired on 1 February 2015, while the remaining 37.3% stake was acquired on 24 June 2015. The results and
movements in reserves were equity accounted from 1 February 2015 to the date that control was obtained. Subsequently, from 24 June 2015, the
financial results and financial position were consolidated in the Group financial statements.
Due to the date of obtaining control being close to the date of the interim financial statements, the purchase price has been allocated based on a
provisional estimate of the fair value of assets acquired and liabilities assumed at the date of acquisition. Goodwill and other intangible assets of
GBP161 million have been recognised. The additional intangible assets identified, but not yet recognised, include brand, customer lists and present
value of in-force business. Refer to note G3(b) for further information.
Disposals completed during the period
Disposal of Skandia Luxembourg and Skandia France
On 2 February 2015, the Group completed the sale of Skandia Luxembourg and Skandia France, part of Old Mutual Wealth. The Group has recognised
a profit on disposal of GBP1 million. Merger reserves of GBP68 million relating to these businesses have been released directly to equity.
Disposals announced but not completed during the period
Disposal of Skandia Switzerland
On 29 May 2015, the Group announced that terms have been agreed to sell Skandia Leben AG, part of Old Mutual Wealth. The transaction is subject
to regulatory approval and is expected to complete in the second half of 2015.
The net asset value of goodwill and intangible assets of the business has been written down to reflect the fair value of the business on expected
proceeds from the sale, less costs associated with the sale. As a result, an impairment loss before tax of GBP94 million has been recognised in profit
or loss. This comprises impairments of goodwill (GBP41 million), present value of acquired in-force business (GBP28 million) and net deferred
acquisition costs and deferred revenue (GBP25 million).
Unwinding of Black Economic Empowerment (BEE) Schemes
The majority of the Group's South African BEE schemes, established in 2005, have unwound during 2015. The total value of cash that the Group
businesses have received in relation to this is GBP172 million. The BEE schemes comprise business partner and community schemes in Nedbank
and Emerging Markets (OMEM).
All the schemes involved the granting of shares to various BEE vehicles in 2005. In 2015, participants' access to these shares has become unrestricted
following the settlement of funding provided to them by Group companies and the meeting of vesting criteria in the first six months of 2015. The
notional funding associated with the OMEM schemes was settled with proceeds from the sale of shares by the trusts. The notional funding associated
with the Nedbank schemes has been settled by calling back sufficient shares to settle the amount due to Nedbank.
Shares held by the BEE schemes were previously classified as treasury shares, but are now recognised as issued for Group financial reporting
purposes.
OM Asset Management plc (OMAM) public share offering
On 22 June 2015 the Group disposed of 13.3 million OMAM shares for a consideration of $257 million (GBP163 million). A profit of GBP48 million
was recognised directly in equity reflecting the excess of the consideration over the share of net assets disposed of. In addition foreign currency
translation reserves of GBP35 million have been transferred to retained earnings. Additional non-controlling interests of GBP114 million have been
recognised in the statement of financial position.
Financing activities during the period
Emerging Markets
On 19 March 2015, following the successful completion of a bond auction, which took place on 16 March 2015, OMLAC(SA) has issued R2,061 million
(GBP106 million) of floating rate and fixed instruments, which have been classified as subordinated debt. These are SII/SAM compliant hybrid
instruments and have maturity dates ranging from 2025 to 2030. The instruments were issued through the existing ZAR Unsecured Subordinated
Callable Note Programme.
Nedbank
Nedbank has issued and redeemed debt instruments in the normal course of the bank's funding program.
A3: Critical accounting estimates and judgements
In the preparation of these condensed 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 2014 Annual Report and Accounts on page 136 and were described in further detail in the Report of the Chairman
of the Group Audit Committee on page 84. The Group has applied significant judgement in performing the purchase price allocation for acquisitions
in the period. During the period, there have been no other significant changes to the areas of critical accounting estimates and judgements that the
Group applied at 31 December 2014.
The Annual Report and Accounts is available in the Investor Relations section of the Group's website at www.oldmutual.com.
Notes to the consolidated financial statements
For the six months ended 30 June 2015
B: Segment information
B1: Basis of segmentation
Segment presentation
There have been no changes to the presentation of segment information for the six months ended 30 June 2015.
The Group's reported segments are Emerging Markets, Nedbank, Old Mutual Wealth and Institutional Asset Management. The Other segment
includes central activities. For all reporting periods, these businesses have been classified as continuing operations in the IFRS income statement
and as core operations in determining the Group's adjusted operating profit (AOP).
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 AOP.
For the six months ended 30 June 2015, discontinued operations relate to the sale of US Life in 2011. For the six months ended 30 June 2014,
discontinued operations related to the disposal of Nordic in 2012. For the year ended 31 December 2014, discontinued operations related to the
disposals of Nordic and US Life. Refer to note H1 for further information.
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 sales, net client cash flows, funds under management, gross earned
premiums, underwriting results, net interest income and non-interest revenue and credit losses.
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 or 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 investment banking income) and property & casualty (premium
income). Other revenue includes gains and losses on investment securities. An analysis of segment revenues and expenses and the Group's revenues
and expenses is shown in note B3.
The principal lines of business from which each operating segment derives its revenues are as follows:
Core operations
Emerging Markets – life assurance, property & casualty, asset management and banking
Nedbank – banking, asset management and life assurance
Old Mutual Wealth – life assurance and asset management
Institutional Asset Management – asset management
Non-core operations
Old Mutual Bermuda – life assurance
B2: Gross earned premiums and deposits to investment contracts
GBPm
Emerging Old Mutual
Six months ended 30 June 2015 Markets Wealth Total
Life assurance – insurance contracts 634 71 705
Life assurance – investment contracts with discretionary
participation features 540 - 540
General insurance 344 - 344
Gross earned premiums 1,518 71 1,589
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
Year ended 31 December 2014 Markets Wealth Total
Life assurance – insurance contracts 1,299 280 1,579
Life assurance – investment contracts with discretionary
participation features 961 - 961
General insurance 669 - 669
Gross earned premiums 2,929 280 3,209
Notes to the consolidated financial statements
For the six months ended 30 June 2015
B: Segment information continued
B3: Adjusted operating profit statement - segment information for the six months ended 30 June 2015
Emerging
Notes Markets Nedbank
Revenue
Gross earned premiums B2 1,518 -
Outward reinsurance (109) -
Net earned premiums 1,409 -
Investment return (non-banking) 1,518 -
Banking interest and similar income 122 1,569
Banking trading, investment and similar income 5 105
Fee and commission income, and income from service activities 261 455
Other income 45 10
Inter-segment revenues 48 5
Total revenue 3,408 2,144
Expenses
Claims and benefits (including change in insurance contract provisions) (1,688) -
Reinsurance recoveries 82 -
Net claims and benefits incurred (1,606) -
Change in investment contract liabilities (668) -
Losses on loans and advances (7) (127)
Finance costs (6) -
Banking interest payable and similar expenses (55) (910)
Fee and commission expenses, and other acquisition costs (162) (4)
Change in third-party interest in consolidated funds - -
Other operating and administrative expenses (560) (697)
Income tax attributable to policyholder returns (16) -
Inter-segment expenses (5) (26)
Total expenses (3,085) (1,764)
Share of associated undertakings' and joint ventures' profit after tax 10 24
Profit on disposal of subsidiaries, associated undertakings
and strategic investments C1(c) - -
Adjusted operating profit/(loss) before tax and non-controlling interests 333 404
Income tax expense D1 (95) (100)
Non-controlling interests (12) (143)
Adjusted operating profit/(loss) after tax and non-controlling interests 226 161
Adjusting items after tax and non-controlling interests C1(a) (49) 6
Profit/(loss) after tax from continuing operations 177 167
Loss from discontinued operations after tax H1 - -
Profit/(loss) after tax attributable to equity holders of the parent 177 167
(1) Non-core operations for the six months ended 30 June 2015 relate to Old Mutual Bermuda and US Life. Old Mutual Bermuda profit after tax for the six months ended 30
June 2015 was GBP4 million. Expenses of GBP21 million were incurred in relation to the disposal of US Life in 2011. Further information on discontinued operations is
provided in note H1.
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
71 - - - 1,589 - - 1,589
(42) - - - (151) - - (151)
29 - - - 1,438 - - 1,438
1,408 - 4 280 3,210 (41) 17 3,186
- - - - 1,691 - - 1,691
- - - - 110 - - 110
570 263 - 1 1,550 (13) - 1,537
9 4 - - 68 - 2 70
1 - - (56) (2) - 2 -
2,017 267 4 225 8,065 (54) 21 8,032
(41) - - - (1,729) - (9) (1,738)
38 - - - 120 - - 120
(3) - - - (1,609) - (9) (1,618)
(1,367) - - - (2,035) - - (2,035)
- - - - (134) - - (134)
- (1) (42) - (49) 4 - (45)
- - - - (965) 3 - (962)
(269) (3) - (63) (501) 44 (2) (459)
- - - (207) (207) - - (207)
(187) (182) (26) (11) (1,663) (259) (6) (1,928)
(19) - - - (35) 35 - -
(21) (1) (3) 56 - - - -
(1,866) (187) (71) (225) (7,198) (173) (17) (7,388)
- 3 - - 37 - - 37
- - - - - 2 - 2
151 83 (67) - 904 (225) 4 683
(19) (25) 4 - (235) (8) - (243)
- (12) - - (167) 8 - (159)
132 46 (63) - 502 (225) 4 281
(174) 2 (10) - (225) 225 - -
(42) 48 (73) - 277 - 4 281
- - - - - - (21) (21)
(42) 48 (73) - 277 - (17) 260
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 - -
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
Profit 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 after tax and non-controlling interests C1(a) 2 8
Profit/(loss) after tax from continuing operations 204 148
Loss from discontinued operations after tax H1 - -
Profit/(loss) after tax attributable to equity holders of the parent 204 148
(1) Non-core operations for the six months ended 30 June 2014 related to Old Mutual Bermuda and Nordic. Old Mutual Bermuda profit after tax for the six months ended
30 June 2014 was GBP14 million. Divestment expenses of GBP10 million incurred in relation to the Nordic business sold in 2012 are also included. Further information
on discontinued operations is provided in note H1.
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 year ended 31 December 2014
Emerging
Notes Markets Nedbank
Revenue
Gross earned premiums B2 2,929 -
Outward reinsurance (223) -
Net earned premiums 2,706 -
Investment return (non-banking) 3,422 -
Banking interest and similar income 116 2,941
Banking trading, investment and similar income 7 190
Fee and commission income, and income from service activities 506 919
Other income 80 22
Inter-segment revenues 86 11
Total revenue 6,923 4,083
Expenses
Claims and benefits (including change in insurance contract provisions) (3,707) -
Reinsurance recoveries 79 -
Net claims and benefits incurred (3,628) -
Change in investment contract liabilities (1,208) -
Losses on loans and advances - (252)
Finance costs - -
Banking interest payable and similar expenses (42) (1,628)
Fee and commission expenses, and other acquisition costs (318) (8)
Change in third-party interest in consolidated funds - -
Other operating and administrative expenses (1,074) (1,387)
Income tax attributable to policyholder returns (36) -
Inter-segment expenses (11) (47)
Total expenses (6,317) (3,322)
Share of associated undertakings' and joint ventures' profit after tax 11 9
Loss on disposal of subsidiaries, associated undertakings
and strategic investments C1(c) - -
Adjusted operating profit/(loss) before tax and non-controlling interests 617 770
Income tax expense D1 (189) (195)
Non-controlling interests (18) (274)
Adjusted operating profit/(loss) after tax and non-controlling interests 410 301
Adjusting items after tax and non-controlling interests C1(a) (15) 14
Profit/(loss) after tax from continuing operations 395 315
Profit from discontinued operations after tax H1 - -
Profit/(loss) after tax attributable to equity holders of the parent 395 315
(1) Non-core operations for the year ended 31 December 2014 related to the Old Mutual Bermuda, Nordic and US Life businesses. Old Mutual Bermuda profit after tax for
the year ended 31 December 2014 was GBP1 million. Non-core operations also included GBP31 million cost relating to the disposal of Nordic in 2012 and GBP19 million
relating to the disposal of US Life in 2011. Further information on discontinued operations is provided in note H1.
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
280 - - - 3,209 - - 3,209
(85) - - - (308) - - (308)
195 - - - 2,901 - - 2,901
2,493 - 28 438 6,381 (91) 14 6,304
- - - - 3,057 - - 3,057
- - - - 197 - - 197
1,085 422 - 9 2,941 (47) - 2,894
8 11 - 1 122 - 3 125
2 - 2 (105) (4) - 4 -
3,783 433 30 343 15,595 (138) 21 15,478
(385) - - - (4,092) - (6) (4,098)
136 - - - 215 - - 215
(249) - - - (3,877) - (6) (3,883)
(2,336) - - - (3,544) - - (3,544)
- - - - (252) - - (252)
- - (78) - (78) 24 - (54)
- - - - (1,670) (2) - (1,672)
(479) (4) - (108) (917) 58 (4) (863)
- - - (322) (322) - - (322)
(429) (303) (86) (18) (3,297) (241) (10) (3,548)
(23) - - - (59) 59 - -
(40) (1) (6) 105 - - - -
(3,556) (308) (170) (343) (14,016) (102) (20) (14,138)
- 6 - - 26 - - 26
- - - - - (2) - (2)
227 131 (140) - 1,605 (242) 1 1,364
(48) (29) 22 - (439) (23) - (462)
- (6) - - (298) 28 - (270)
179 96 (118) - 868 (237) 1 632
(216) (19) (1) - (237) 237 - -
(37) 77 (119) - 631 - 1 632
- - - - - - (50) (50)
(37) 77 (119) - 631 - (49) 582
B4: Statement of financial position – segment information at 30 June 2015
Emerging
Notes Markets Nedbank
Assets
Goodwill and other intangible assets F1 408 437
Mandatory reserve deposits with central banks 4 804
Property, plant and equipment 294 394
Investment property 1,302 16
Deferred tax assets 56 16
Investments in associated undertakings and joint ventures 64 373
Deferred acquisition costs 99 -
Reinsurers' share of policyholder liabilities E3 163 5
Loans and advances E2 909 33,572
Investments and securities 28,500 6,447
Current tax receivable 16 24
Trade, other receivables and other assets 724 440
Derivative financial instruments 247 750
Cash and cash equivalents 848 1,512
Non-current assets held for sale H2 212 -
Inter-segment assets 679 405
Total assets 34,525 45,195
Liabilities
Long-term business insurance policyholder liabilities E3 8,746 211
Investment contract liabilities E3 19,159 638
Property & casualty liabilities E3 394 -
Third-party interests in consolidated funds - -
Borrowed funds E4 489 2,305
Provisions and accruals 167 1
Deferred revenue 19 1
Deferred tax liabilities 204 33
Current tax payable 91 13
Trade, other payables and other liabilities 1,906 1,223
Amounts owed to bank depositors 429 35,571
Derivative financial instruments 353 768
Non-current liabilities held for sale H2 - -
Inter-segment liabilities 493 647
Total liabilities 32,450 41,411
Net assets 2,075 3,784
Equity
Equity attributable to equity holders of the parent 1,866 1,942
Non-controlling interests 209 1,842
Ordinary shares 209 1,570
Preferred securities - 272
Total equity 2,075 3,784
GBPm
Institutional
Old Mutual Asset Consolidation Non-core
Wealth Management Other adjustments operations Total
1,668 831 - - - 3,344
- - - - - 808
20 18 - - - 726
- - - - - 1,318
7 167 - - 1 247
- 23 10 - - 470
686 19 - - - 804
2,226 - - - - 2,394
174 - - - - 34,655
47,176 45 397 4,175 293 87,033
55 - - - - 95
702 117 30 650 275 2,938
- - 67 79 18 1,161
751 129 401 1,372 21 5,034
902 - - - - 1,114
72 - 942 (2,265) 167 -
54,439 1,349 1,847 4,011 775 142,141
258 - - - 636 9,851
48,953 - - - 36 68,786
- - - - - 394
- - - 5,678 - 5,678
- 92 680 - - 3,566
35 2 23 - - 228
271 - - - - 291
221 - 18 - - 476
23 12 30 - - 169
1,160 268 48 558 10 5,173
- - - - - 36,000
- - - 40 - 1,161
833 - - - - 833
757 102 266 (2,265) - -
52,511 476 1,065 4,011 682 132,606
1,928 873 782 - 93 9,535
1,928 577 782 - 93 7,188
- 296 - - - 2,347
- 296 - - - 2,075
- - - - - 272
1,928 873 782 - 93 9,535
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 E3 128 11
Loans and advances E2 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 - 1
Inter-segment assets 628 269
Total assets 34,019 42,962
Liabilities
Long-term business insurance policyholder liabilities E3 9,303 212
Investment contract liabilities E3 19,135 677
Property & casualty liabilities E3 319 -
Third-party interests in consolidated funds - -
Borrowed funds E4 196 1,899
Provisions 145 1
Deferred revenue 15 -
Deferred tax liabilities 184 35
Current tax payable 125 6
Trade, other payables and other liabilities 1,803 798
Amounts owed to bank depositors 310 34,230
Derivative financial instruments 338 798
Non-current liabilities held for sale - -
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 41,791
1,485 - - - 737 11,737
46,496 - - - 47 66,355
- - - - - 319
- - - 6,456 - 6,456
- 1 687 - - 2,783
24 2 26 - - 198
352 - - - - 367
184 - 21 - - 424
23 3 48 - - 205
774 212 46 427 8 4,068
- - - - - 34,540
- - - 38 - 1,174
4,294 - - - - 4,294
314 581 357 (2,212) - -
53,946 799 1,185 4,709 792 32,920
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 31 December 2014
Emerging
Notes Markets Nedbank
Assets
Goodwill and other intangible assets F1 275 452
Mandatory reserve deposits with central banks - 829
Property, plant and equipment 304 432
Investment property 1,290 7
Deferred tax assets 87 17
Investments in associated undertakings and joint ventures 61 426
Deferred acquisition costs 100 -
Reinsurers' share of policyholder liabilities E3 132 7
Loans and advances E2 909 33,773
Investments and securities 29,584 6,359
Current tax receivable 11 16
Trade, other receivables and other assets 622 585
Derivative financial instruments 239 849
Cash and cash equivalents 1,024 741
Non-current assets held for sale 155 1
Inter-segment assets 644 305
Total assets 35,437 44,799
Liabilities
Long-term business insurance policyholder liabilities E3 9,276 232
Investment contract liabilities E3 19,956 653
Property & casualty liabilities E3 319 -
Third-party interests in consolidated funds - -
Borrowed funds E4 420 1,833
Provisions and accruals 198 1
Deferred revenue 22 -
Deferred tax liabilities 203 42
Current tax payable 107 7
Trade, other payables and other liabilities 1,845 790
Amounts owed to bank depositors 385 35,858
Derivative financial instruments 286 843
Non-current liabilities held for sale - -
Inter-segment liabilities 384 615
Total liabilities 33,401 40,874
Net assets 2,036 3,925
Equity
Equity attributable to equity holders of the parent 1,929 2,067
Non-controlling interests 107 1,858
Ordinary shares 107 1,586
Preferred securities - 272
Total equity 2,036 3,925
GBPm
Institutional
Old Mutual Asset Consolidation Non-core
Wealth Management Other adjustments operations Total
1,197 839 - - - 2,763
- - - - - 829
13 16 - - - 765
- - - 381 - 1,678
6 172 - - 1 283
- 21 10 - - 518
746 16 - - - 862
2,175 - - - - 2,314
175 - - - - 34,857
46,631 40 554 4,038 341 87,547
64 1 - - - 92
385 134 36 302 298 2,362
- - 71 60 8 1,227
689 130 696 1,639 25 4,944
1,319 - - - - 1,475
154 - 321 (1,615) 191 -
53,554 1,369 1,688 4,805 864 142,516
291 - - - 720 10,519
48,188 - - - 44 68,841
- - - - - 319
- - - 5,986 - 5,986
- 114 677 - - 3,044
40 3 42 - - 284
308 - - - - 330
190 - 19 - - 454
35 3 37 - - 189
913 278 76 364 10 4,276
- - - - - 36,243
- - 1 70 1 1,201
1,285 - - - - 1,285
179 144 293 (1,615) - -
51,429 542 1,145 4,805 775 132,971
2,125 827 543 - 89 9,545
2,125 653 543 - 89 7,406
- 174 - - - 2,139
- 174 - - - 1,867
- - - - - 272
2,125 827 543 - 89 9,545
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 2015 2014 2014
(Expense)/income
Goodwill impairment and impact of acquisition accounting C1(b) (171) (181) (128)
Profit/(loss) on disposal of subsidiaries, associated undertakings and
strategic investments C1(c) 2 (10) (2)
Short-term fluctuations in investment return C1(d) (15) (15) (49)
Investment return adjustment for Group equity and debt instruments held in
life funds C1(e) (26) 2 (42)
Dividends declared to holders of perpetual preferred callable securities C1(f) 15 16 32
Institutional Asset Management equity plans C1(g) (6) (9) (42)
Credit-related fair value losses on Group debt instruments C1(h) (19) (39) (10)
Restructuring costs C1(i) (40) (19) (60)
Total adjusting items (260) (255) (301)
Tax on adjusting items 27 28 36
Non-controlling interest in adjusting items 8 12 28
Total adjusting items after tax and non-controlling interests (225) (215) (237)
(b) Goodwill impairment and impact of acquisition accounting
When applying acquisition accounting, deferred acquisition costs and deferred revenue 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, the amortisation
and impairment of acquired other intangibles and acquired PVIF as well as the movements in certain acquisition date provisions. Costs incurred on
completed 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 2015 Markets Wealth Total
Impairment of goodwill and other intangible assets - (94) (94)
Amortisation of acquired PVIF (5) (27) (32)
Amortisation of acquired deferred costs and revenue - 7 7
Amortisation of other acquired intangible assets (7) (26) (33)
Acquisition costs (3) (9) (12)
Deferred consideration - (7) (7)
(15) (156) (171)
GBPm
Emerging Old Mutual
Six months ended 30 June 2014 Markets Wealth Total
Impairment of goodwill and other intangible assets - (125) (125)
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)
(1) (180) (181)
GBPm
Emerging Old Mutual
Year ended 31 December 2014 Markets Wealth Total
Impairment of goodwill and other intangible assets - (14) (14)
Amortisation of acquired PVIF (3) (67) (70)
Amortisation of acquired deferred costs and revenue - 11 11
Amortisation of other acquired intangible assets (7) (47) (54)
Change in acquisition date provisions - (1) (1)
(10) (118) (128)
(c) Profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments
Profit/(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
2015 2014 2014
Emerging Markets - 4 66
Old Mutual Wealth 1 (15) (70)
Institutional Asset Management 1 1 2
Profit/(loss) on disposal of subsidiaries, associated undertakings
and strategic investments 2 (10) (2)
Emerging Markets
Prior period transactions
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 when the transaction became unconditional. A profit of GBP4 million was
recognised in profit or loss for the period.
On 1 September 2014, the Group completed the acquisition of an additional 25% stake in Old Mutual Finance (Pty) Ltd. The accounting related to the
step up in ownership from 50% to 75% effectively involved a simultaneous sale of 50% of the business, followed by an acquisition of the fair value of
75% of the business. Consequently a profit of GBP62 million was realised on the transaction, calculated as the difference between the fair value of
the initial 50% and the carrying amount of the investment in Old Mutual Finance (Pty) Ltd at 1 September 2014.
Old Mutual Wealth
Current period transactions
On 2 February 2015, the Group completed the sale of Skandia Luxembourg and Skandia France, part of Old Mutual Wealth. The Group has recognised
a profit on disposal of GBP1 million, which comprises a loss on disposing the net assets of the sold business of GBP29 million and a gain of
GBP30 million recycled from foreign currency translation reserve.
Prior period transactions
On 30 May 2014, the Group completed the disposal of Skandia Poland, part of Old Mutual Wealth. For the year ended 31 December 2014, a loss on
disposal of GBP21 million was recognised in profit or loss. For the six months ended 30 June 2014, a provisional loss of GBP15 million was recognised
in profit or loss.
On 1 October 2014, the Group completed the disposal of Skandia Austria and Skandia Germany. A loss on disposal of GBP43 million was recognised
in profit or loss.
On 6 November 2014, the Group completed the disposal of Skandia Liechtenstein. A loss on disposal of GBP6 million was recognised in profit or loss.
Institutional Asset Management
Current period transactions
During the six months ended 30 June 2015, the Group received additional earn-out income of GBP1 million (six months ended 30 June 2014: GBPnil;
year ended 31 December 2014: GBP2 million) from earn-outs on affiliates disposed of in prior periods.
Prior period transactions
During the six months ended 30 June 2014, the Group released a GBP1 million accrual relating to the disposal of Echo Point which was effective
during the year ended 31 December 2013.
(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 property & casualty 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 annually by the Board 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 2015 2014 2014
Emerging Markets
Mutual & Federal(1) 7.4 7.4 7.4
Old Mutual South Africa 8.0 8.0 8.0
Rest of Africa 8.5 8.0 8.0
Old Mutual Wealth 1.0 1.0 1.0
(1) The long-term investments rate of Mutual & Federal relates to the South African businesses only.
Analysis of short-term fluctuations in investment return
GBPm
Emerging Old Mutual
Six months ended 30 June 2015 Markets Wealth Other Total
Actual shareholder investment return 57 (2) 8 63
Less: Long-term investment return 64 3 11 78
Short-term fluctuations in investment return (7) (5) (3) (15)
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
Year ended 31 December 2014 Markets Wealth Other Total
Actual shareholder investment return 64 23 16 103
Less: Long-term investment return 123 5 24 152
Short-term fluctuations in investment return (59) 18 (8) (49)
(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 the Group. 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 2015, the investment
return adjustment increased AOP by GBP26 million (six months ended 30 June 2014: decrease of GBP2 million; year ended 31 December 2014:
increase of GBP42 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 GBP15 million for the six months ended
30 June 2015 (six months ended 30 June 2014: GBP16 million; year ended 31 December 2014: GBP32 million). For the purpose of determining AOP,
these are recognised in finance costs on an accrual 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.
As part of the incentive schemes in the Institutional Asset Management business, the Group has granted put options over the equity of certain affiliates
to senior affiliate employees. The impact of revaluing these instruments is recognised in accordance with IFRS, but excluded from AOP. At 30 June 2015,
these instruments were revalued, the impact of which was a loss of GBP6 million (six months ended 30 June 2014: loss of GBP9 million: year ended 31
December 2014: loss of GBP42 million).
(h) Credit-related fair value losses on Group debt instruments
The widening of the credit spread on the Group's debt instruments can cause the market value of these instruments to decrease, resulting in gains
being recognised in profit or loss. Conversely, if the credit spread narrows the market value of debt instruments will increase 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 2015, due to narrowing of credit
spreads, a net loss of GBP19 million was recognised (six months ended 30 June 2014: net loss of GBP39 million; year ended 31 December 2014:
net loss of GBP10 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 are directly attributable to internal project costs and totalled GBP40 million for the six months
ended 30 June 2015 (six months ended 30 June 2014: GBP19 million; year ended 31 December 2014: GBP60 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 2015 2014 2014
Basic earnings per share IFRS C2(a) 5.4 4.5 12.4
Diluted basic earnings per share IFRS C2(b) 5.0 4.1 11.5
Adjusted operating earnings per share Group policy C2(c) 10.3 8.8 17.9
Headline earnings per share (Gross of tax) JSE Listing Requirements C2(d) 7.4 7.5 12.3
Headline earnings per share (Net of tax) JSE Listing Requirements C2(d) 7.4 7.6 12.6
Diluted headline earnings per share (Gross of tax) JSE Listing Requirements C2(d) 6.9 6.9 11.4
Diluted headline earnings per share (Net of tax) JSE Listing Requirements C2(d) 6.9 7.0 11.6
(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
2015 2014 2014
Profit for the financial period attributable to equity holders of the parent
from continuing operations 281 223 632
Loss for the financial period attributable to equity holders of the parent
from discontinued operations (21) (10) (50)
Profit for the financial period attributable to equity holders of the parent 260 213 582
Dividends paid to holders of perpetual preferred callable securities,
net of tax credits (14) (14) (25)
Profit attributable to ordinary equity holders 246 199 557
Total dividends paid to holders of perpetual preferred callable securities of GBP14 million for the six months ended 30 June 2015 (six months ended
30 June 2014: GBP14 million; year ended 31 December 2014: GBP25 million) are stated net of tax credits of GBP3 million (six months ended 30
June 2014 GBP3 million; year ended 31 December 2014: GBP7 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 2015 2014 2014
Weighted average number of ordinary shares in issue 4,920 4,897 4,901
Shares held in charitable foundations (6) (6) (6)
Shares held in ESOP trusts (59) (51) (50)
Adjusted weighted average number of ordinary shares C2(c) 4,855 4,840 4,845
Shares held in life funds (80) (141) (127)
Shares held in Black Economic Empowerment trusts (177) (237) (233)
Weighted average number of ordinary shares used to calculate basic
earnings per share 4,598 4,462 4,485
Basic earnings per ordinary share (pence) 5.4 4.5 12.4
(b) Diluted basic earnings per share
Diluted basic EPS recognises the dilutive impact of shares and 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 table below reconciles 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 2015 2014 2014
Profit attributable to ordinary equity holders (GBPm) 246 199 557
Dilution effect on profit relating to share options issued by subsidiaries (GBPm) (5) (4) (10)
Diluted profit attributable to ordinary equity holders (GBPm) 241 195 547
Weighted average number of ordinary shares (millions) C2(a) 4,598 4,462 4,485
Adjustments for share options held by ESOP trusts (millions) 36 59 48
Adjustments for shares held in Black Economic Empowerment trusts (millions) 177 237 233
Weighted average number of ordinary shares used to calculate
diluted basic earnings per share (millions) 4,811 4,758 4,766
Diluted basic earnings per ordinary share (pence) 5.0 4.1 11.5
(c) Adjusted operating earnings per share
The following table presents a reconciliation of profit for the financial period 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 2015 2014 2014
Profit for the financial period attributable to equity holders of the parent 260 213 582
Adjusting items C1(a) 260 255 301
Tax on adjusting items (27) (28) (36)
Non-core operations B3 (4) (14) (1)
Loss from discontinued operations H1 21 10 50
Non-controlling interest on adjusting items (8) (12) (28)
Adjusted operating profit after tax attributable to ordinary equity
holders (GBPm) 502 424 868
Adjusted weighted average number of ordinary shares used to
calculate adjusted operating earnings per share (millions) C2(a) 4,855 4,840 4,845
Adjusted operating earnings per share (pence) 10.3 8.8 17.9
(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:
Six months ended Six months ended Year ended
30 June 2015 30 June 2014 31 December 2014
Notes Gross Net Gross Net Gross Net
Profit for the financial period attributable to equity
holders of the parent 260 260 213 213 582 582
Dividends paid to holders of perpetual preferred callable
securities (14) (14) (14) (14) (25) (25)
Profit attributable to ordinary equity holders 246 246 199 199 557 557
Adjustments:
Impairments of goodwill and other intangible assets 94 94 125 125 14 14
(Profit)/loss on disposal of subsidiaries, associated
undertakings and strategic investments (2) (2) 10 15 2 14
Realised gains (net of impairments) on available-for-sale
financial assets - - - - (20) (20)
Headline earnings 338 338 334 339 553 565
Dilution effect on earnings relating to share options
issued by subsidiaries (5) (5) (4) (4) (10) (10)
Diluted headline earnings (GBPm) 333 333 330 335 543 555
Weighted average number of ordinary
shares (millions) C2(a) 4,598 4,598 4,462 4,462 4,485 4,485
Diluted weighted average number of ordinary
shares (millions) C2(b) 4,811 4,811 4,758 4,758 4,766 4,766
Headline earnings per share (pence) 7.4 7.4 7.5 7.6 12.3 12.6
Diluted headline earnings per share (pence) 6.9 6.9 6.9 7.0 11.4 11.6
C3: Dividends
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
2013 Final dividend paid – 6.00p per 11 3/7p share - - 279
2014 Interim dividend paid – 2.45p per 11 3/7p share - 279 115
2014 Final dividend paid – 6.25p per 11 3/7p share 296 - -
Dividends to ordinary equity holders 296 279 394
Dividends paid to holders of perpetual preferred callable securities 17 17 32
Dividend payments for the period 313 296 426
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 2.65 pence (or its equivalent in other applicable currencies) per ordinary share in the Company has been recommended by the
directors in relation to the six months ended 30 June 2015. The interim dividend will be paid on 30 October 2015 to shareholders on the registers at
the close of business on 25 September 2015. The Company is not offering a scrip dividend alternative.
In March 2015, GBP17 million was declared and paid to holders of perpetual preferred callable securities (March 2014: GBP17 million, November
2014: GBP15 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
2015 2014 2014
Current tax
United Kingdom 24 7 19
Overseas tax
- Africa 166 180 336
- Europe 9 4 32
- Rest of the world 18 - 5
Withholding taxes 5 4 16
Adjustments to current tax in respect of prior years - 4 31
Total current tax 222 199 439
Deferred tax
Origination and reversal of temporary differences 21 17 43
Adjustments to deferred tax in respect of prior years - 2 (20)
Total deferred tax 21 19 23
Total income tax expense 243 218 462
(b) Reconciliation of total income tax expense
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
Profit before tax 683 564 1,364
Tax at UK standard rate of 20.25% (2014: 21.5%) 138 121 293
Different tax rate or basis on overseas operations 60 41 95
Untaxed and low taxed income (30) (29) (56)
Disallowable expenses 42 38 67
Net movement on deferred tax assets not recognised 3 13 7
Withholding taxes 2 2 8
Income tax attributable to policyholder returns 28 35 46
Other - (3) 2
Total income tax expense 243 218 462
(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
2015 2014 2014
Measurement gains on defined benefit plans - - 1
Income tax on items that will not be reclassified subsequently to profit or loss - - 1
Income tax on items that may be reclassified subsequently to profit or loss - 3 5
Income tax expense relating to components of other comprehensive
income - 3 6
(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
2015 2014 2014
Income tax expense 243 218 462
Tax on adjusting items
Goodwill impairment and impact of acquisition accounting 17 26 15
(Profit)/loss on disposal of subsidiaries, associates and strategic investments - (5) (11)
Short-term fluctuations in investment return (2) 2 6
Tax on dividends declared to holders of perpetual preferred callable securities
recognised in equity (3) (3) (7)
Institutional Asset Management equity plans 7 3 20
Restructuring costs 8 5 13
Total tax on adjusting items 27 28 36
Income tax attributable to policyholders returns (35) (44) (59)
Income tax on adjusted operating profit 235 202 439
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), derivative financial instruments, 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. Note E1 in the 2014 Annual Report and Accounts contains more detail on financial instruments.
(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.
At 30 June 2015 GBPm
Measurement basis Fair value Amortised cost
(note E1(b))
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 808 - - - - 808 - -
Investments in associated
undertakings and joint ventures(1) 470 - 54 - - - - 416
Reinsurers' share of policyholder
liabilities 2,394 - 2,082 - - 5 - 307
Loans and advances 34,655 2,017 3,425 2 - 29,211 - -
Investments and securities 87,033 953 82,866 647 2,512 55 - -
Trade, other receivables and
other assets 2,938 71 288 - - 1,565 - 1,014
Derivative financial instruments 1,161 1,161 - - - - - -
Cash and cash equivalents 5,034 - - - - 5,034 - -
Total assets that include financial
instruments 134,493 4,202 88,715 649 2,512 36,678 - 1,737
Total other non-financial assets 7,648 - - - - - - 7,648
Total assets 142,141 4,202 88,715 649 2,512 36,678 - 9,385
Liabilities
Long-term business insurance
policyholder liabilities 9,851 - - - - - - 9,851
Investment contract liabilities 68,786 - 60,905 - - - - 7,881
Third-party interest in
consolidation of funds 5,678 - 5,678 - - - - -
Borrowed funds 3,566 - 802 - - - 2,764 -
Trade, other payables and
other liabilities 5,173 704 430 - - - 2,395 1,644
Amounts owed to bank depositors 36,000 4,565 2,585 - - - 28,850 -
Derivative financial instruments 1,161 1,161 - - - - - -
Total liabilities that include
financial instruments 130,215 6,430 70,400 - - - 34,009 19,376
Total other non-financial liabilities 2,391 - - - - - - 2,391
Total liabilities 132,606 6,430 70,400 - - - 34,009 21,767
(1) Investments in associated undertakings and joint ventures classified as non-financial assets and liabilities are equity accounted.
30 June 2014 GBPm
Fair value Amortised cost
Measurement basis (note E1(b))
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 767 - - - - 767 - -
Investments in associated
undertakings and joint ventures(1) 201 - 51 - - - - 150
Reinsurers' share of policyholder
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 - -
Trade, other receivables and
other assets 2,780 129 325 - - 1,753 - 573
Derivative financial instruments 1,104 1,104 - - - - - -
Cash and cash equivalents 4,289 - - - - 4,289 - -
Total assets that include financial
instruments 131,053 4,705 88,836 681 1,116 34,787 - 928
Total other non-financial assets 10,738 - - - - - - 10,738
Total assets 141,791 4,705 88,836 681 1,116 34,787 - 11,666
Liabilities
Long-term business insurance
policyholder liabilities 11,737 - - - - - - 11,737
Investment contract liabilities 66,355 - 58,732 - - - - 7,623
Third-party interest in
consolidation of funds 6,456 - 6,456 - - - - -
Borrowed funds 2,783 - 686 - - - 2,097 -
Trade, other payables and
other liabilities 4,068 199 272 - - - 2,535 1,062
Amounts owed to bank depositors 34,540 3,724 3,463 - - - 27,353 -
Derivative financial instruments 1,174 1,174 - - - - - -
Total liabilities that include
financial instruments 127,113 5,097 69,609 - - - 31,985 20,422
Total other non-financial liabilities 5,807 - - - - - - 5,807
Total liabilities 132,920 5,097 69,609 - - - 31,985 26,229
(1) Investments in associated undertakings and joint ventures classified as non-financial assets and liabilities are equity accounted.
At 31 December 2014 GBPm
Measurement basis Fair value Amortised cost
(note E1(b))
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 829 - - - - 829 - -
Investments in associated
undertakings and joint ventures(1) 518 - 50 - - - - 468
Reinsurers' share of policyholder
liabilities 2,314 - 2,027 - - 12 - 275
Loans and advances 34,857 1,497 3,523 2 - 29,835 - -
Investments and securities 87,547 839 83,568 754 2,325 61 - -
Trade, other receivables and
other assets 2,362 117 310 - - 1,260 - 675
Derivative financial instruments 1,227 1,227 - - - - - -
Cash and cash equivalents 4,944 - - - - 4,944 - -
Total assets that include financial
instruments 134,598 3,680 89,478 756 2,325 36,941 - 1,418
Total other non-financial assets 7,918 - - - - - - 7,918
Total assets 142,516 3,680 89,478 756 2,325 36,941 - 9,336
Liabilities
Long-term business policyholder
liabilities 10,519 - - - - - - 10,519
Investment contract liabilities 68,841 - 60,904 - - - - 7,937
Third-party interest in
consolidation of funds 5,986 - 5,986 - - - - -
Borrowed funds 3,044 - 734 - - - 2,310 -
Trade, other payables and
other liabilities 4,276 251 341 - - - 2,217 1,467
Amounts owed to bank depositors 36,243 4,290 2,199 - - - 29,754 -
Derivative financial instruments 1,201 1,201 - - - - - -
Total liabilities that include
financial
instruments 130,110 5,742 70,164 - - - 34,281 19,923
Total other non-financial liabilities 2,861 - - - - - - 2,861
Total liabilities 132,971 5,742 70,164 - - - 34,281 22,784
(1) Investments in associated undertakings and joint ventures classified as non-financial assets and liabilities are equity accounted.
(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'.
GBPm
At 30 June 2015 Total Level 1 Level 2 Level 3
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss) 4,202 239 3,945 18
Loans and advances 2,017 - 2,017 -
Investments and securities 953 167 786 -
Other financial assets 71 71 - -
Derivative financial instruments – assets 1,161 1 1,142 18
Designated (fair value through profit or loss) 88,715 77,806 9,524 1,385
Investments in associated undertakings and joint ventures 54 - - 54
Reinsurers' share of policyholder liabilities 2,082 2,082 - -
Loans and advances 3,425 175 3,248 2
Investments and securities 82,866 75,261 6,276 1,329
Other financial assets 288 288 - -
Available-for-sale financial assets (fair value through equity) 649 127 522 -
Loans and advances 2 2 - -
Investments and securities 647 125 522 -
Total assets measured at fair value 93,566 78,172 13,991 1,403
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss) 6,430 690 5,739 1
Other liabilities 704 686 18 -
Amounts owed to bank depositors 4,565 - 4,565 -
Derivative financial instruments – liabilities 1,161 4 1,156 1
Designated (fair value through profit or loss) 70,400 46,277 23,522 601
Investment contract liabilities(1) 60,905 45,507 14,797 601
Third-party interests in consolidated funds 5,678 - 5,678 -
Borrowed funds 802 726 76 -
Other liabilities 430 44 386 -
Amounts owed to bank depositors 2,585 - 2,585 -
Total liabilities measured at fair value 76,830 46,967 29,261 602
(1) Investment contract liabilities amount excludes GBP7,881 million discretionary participating investment contracts. These contracts are classified as non-financial liabilities
and are not analysed according to their fair value hierarchy as permitted by IFRS 7 'Financial Instruments: Disclosures'.
GBPm
At 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) 88,836 74,992 12,174 1,670
Investments in associated undertakings and joint ventures 51 - - 51
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 94,222 75,516 17,027 1,679
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) 69,609 45,265 23,540 804
Investment contract liabilities(1) 58,732 44,611 13,317 804
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 74,706 45,461 28,441 804
(1) Investment contract liabilities amount excludes GBP7,623 million discretionary participating investment contracts. These contracts are classified as non-financial liabilities
and are not analysed according to their fair value hierarchy as permitted by IFRS 7 'Financial Instruments: Disclosures'.
GBPm
At 31 December 2014 Total Level 1 Level 2 Level 3
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss) 3,680 373 3,299 8
Loans and advances 1,497 - 1,497 -
Investments and securities 839 254 585 -
Other financial assets 117 117 - -
Derivative financial instruments – assets 1,227 2 1,217 8
Designated (fair value through profit or loss) 89,478 73,554 14,320 1,604
Investments in associated undertakings and joint ventures 50 - - 50
Reinsurers' share of policyholder liabilities 2,027 2,027 - -
Loans and advances 3,523 177 3,344 2
Investments and securities 83,568 71,040 10,976 1,552
Other financial assets 310 310 - -
Available-for-sale financial assets (fair value through equity) 756 137 618 1
Loans and advances 2 2 - -
Investments and securities 754 135 618 1
Total assets measured at fair value 93,914 74,064 18,237 1,613
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss) 5,742 245 5,497 -
Other liabilities 251 243 8 -
Amounts owed to bank depositors 4,290 - 4,290 -
Derivative financial instruments – liabilities 1,201 2 1,199 -
Designated (fair value through profit or loss) 70,164 44,274 25,136 754
Investment contract liabilities(1) 60,904 43,571 16,579 754
Third-party interests in consolidated funds 5,986 - 5,986 -
Borrowed funds 734 653 81 -
Other liabilities 341 50 291 -
Amounts owed to bank depositors 2,199 - 2,199 -
Total liabilities measured at fair value 75,906 44,519 30,633 754
(1) Investment contract liabilities amount excludes GBP7,937 million discretionary participating investment contracts. These contracts are classified as non-financial liabilities
and are not analysed according to their fair value hierarchy as permitted by IFRS 7 'Financial Instruments: Disclosures'.
(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
2014 Annual Report and Accounts. There have been no significant changes to the valuation techniques applied.
There have been no significant transfers between Level 1 and 2 financial instruments during the period.
Financial assets and liabilities carried at amortised cost have fair values that are similar to their carrying amounts. Such assets and liabilities primarily
comprise variable-rate financial assets and liabilities that re-price as interest rates change, short-term deposits or current assets. Note E1(p)(i) in the
2014 Annual Report and Accounts provides further information.
The following is taken into account when evaluating the fair value of financial instruments:
- Assessing whether instruments are trading with sufficient frequency and volume, that they can be considered liquid
- The inclusion of a measure of the counterparties non-performance risk in the fair-value measurement of loans and advances, which involves the
modelling of dynamic credit spreads
- The inclusion of credit valuation adjustment (CVA) and debit valuation adjustment (DVA) in the fair-value measurement of derivative instruments,
with particular emphasis on DVA and
- The inclusion of own credit risk in the calculation of the fair value of financial liabilities.
(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 Level 3 financial assets and to closing balances at the end of the period:
GBPm
Held-for- Designated fair value through profit or loss Available-for- Total
trading sale
Investments in
associated
undertakings
and joint Loans and Investments Investments
Six months ended 30 June 2015 Derivatives ventures advances and securities and securities
Level 3 financial assets
At beginning of the period 8 50 2 1,552 1 1,613
Total net fair value gains recognised
in the profit or loss for the period - 2 - 2 - 4
Purchases and issues 11 5 - 143 - 159
Sales and settlements - - - (309) (1) (310)
Transfers in - - - 48 - 48
Transfers out - - - (59) - (59)
Foreign exchange and other (1) (3) - (48) - (52)
Total level 3 financial assets 18 54 2 1,329 - 1,403
Fair value gains/(losses) relating to
assets held at 30 June 2015
recognised in profit or loss - 2 - (14) - (12)
GBPm
Designated
fair value
through
profit or loss
Held-for- - Investment
trading - contract
Six months ended 30 June 2015 Derivatives liabilities Total
Level 3 financial liabilities
At beginning of the period - 754 754
Total net fair value gains recognised in profit or loss for the period - (38) (38)
Purchases and issues - 65 65
Sales and settlements - (228) (228)
Transfers in 1 48 49
Total level 3 financial liabilities 1 601 602
Fair value gains relating to liabilities
held at 30 June 2015 recognised
in profit or loss - (38) (38)
GBPm
Held-for-trading Designated at fair value through Available- Total
profit or loss for-sale
Investments in
associated
Investments undertakings
and and joint Loans and Investments Investments
Six months ended 30 June 2014 securities Derivatives ventures advances and securities and securities
Level 3 financial assets
At beginning of the period 3 8 49 2 1,708 2 1,772
Total net fair value (losses)/gains
recognised in 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) - 2 - (37) - (36)
Total level 3 financial assets 1 7 51 2 1,617 1 1,679
Fair value gains relating to assets
held at 30 June 2014 recognised
in profit or loss - - - - 9 - 9
GBPm
Investment
contract
Six months ended 30 June 2014 liabilities
Level 3 financial liabilities (Designated fair value through profit or loss)
At beginning of the period 932
Total net fair value gains recognised in profit or loss for the period (49)
Purchases and issues 1
Sales and settlements (126)
Transfers in 50
Foreign exchange and other (4)
Total level 3 financial liabilities 804
Fair value gains relating to assets held at
30 June 2014 recognised in
profit or loss (49)
GBPm
Held-for-trading Designated at fair value through Available- Total
profit or loss for-sale
Investments in
associated
Investments undertakings
and and joint Loans and Investments Investments
Year ended 31 December 2014 securities Derivatives ventures advances and securities and securities
Level 3 financial assets
At beginning of the period 3 8 49 2 1,708 2 1,772
Total net fair value (losses)/gains
recognised in the profit or loss
for the period - (1) - - 53 - 52
Purchases and issues - - (1) - 136 - 135
Sales and settlements (3) - - - (319) (1) (323)
Transfers in - - - - 54 - 54
Transfers out - - - - (36) - (36)
Foreign exchange and other - 1 2 - (44) - (41)
Total level 3 financial assets - 8 50 2 1,552 1 1,613
Fair value (losses)/gains relating
to assets held at 31 December
2014
recognised in profit or loss - (1) - - 22 - 21
GBPm
Investment
contract
Year ended 31 December 2014 liabilities
Level 3 financial liabilities (Designated fair value through profit or loss)
At beginning of the period 932
Total net gains recognised in profit or loss for the period (47)
Purchases and issues 8
Sales and settlements (137)
Foreign exchange and other (2)
Total level 3 financial liabilities 754
Fair value gains relating to liabilities
held at 31 December 2014
recognised in profit or loss (47)
(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 the
impact 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 and investment in associated undertakings and joint ventures,
the valuations are assessed on an asset-by-asset basis using a valuation methodology appropriate to the specific investment (both industry and type
of 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 summarises the significant inputs to value instruments categorised as Level 3 hierarchy and their sensitivity to changes in the inputs
used.
Fair value measurement
sensitivity to
unobservable
Fair value Range of inputs
At 30 June 2015 estimates for At 30 June 2015
Types of financial Significant unobservable
instruments GBPm Valuation techniques unobservable input inputs GBPm
Assets
Investments in 54 Discounted cash flows Valuation multiples -9% to +9% Favourable: 4
associated (June 2014: 51) (DCF) (June 2014: 7)
undertakings and (December 2014: 50) Price earnings ratios (December 2014: 7)
joint ventures
Unfavourable: 5
(June 2014: 7)
(December 2014: 7)
Investments and 1,329 Discounted cash flows Valuation multiples Nedbank: Favourable: 211
securities (June 2014: 1,619) (DCF) Correlations -12% to +12% (June 2014: 203)
(December 2014: 1,553) EBITDA multiple Volatilities Emerging Markets: (December 2014: 202)
Price earnings ratios Credit spreads -10% to +10%
Adjusted net asset Dividend growth rates OMAM: Unfavourable: 208
values supplied by Internal rates of return, -10% to +10% (June 2014: 199)
fund managers cost of capital (December 2014: 190)
Inflation rates
Market adjusted price
(infrequently traded
shares)
Loans and 2 Discounted cash flows Correlations -12% to 12% Favourable: GBPnil
advances (June 2014: 2) (DCF) Volatilities (June 2014: GBPnil)
(December 2014: 2) Credit spreads (December 2014: GBPnil)
Unfavourable: GBPnil
(June 2014: GBPnil)
(December 2014: GBPnil)
Derivatives 18 Option pricing model Interest rates -10% to 10% Favourable: 6
(June 2014: 7) Volatilities (June 2014: 7)
(December 2014: 8) (December 2014: 6)
Unfavourable: GBPnil
(June 2014: GBPnil)
(December 2014: GBPnil)
Liabilities
Investment contract 601 Adjusted net asset Interest rates -10% to 10% Favourable: 55
liabilities (June 2014: 804) values supplied by Volatilities (June 2014: 70)
(December 2014: 754) fund managers (December 2014: 70)
Option pricing model
Unfavourable: 65
(June 2014: 84)
(December 2014: 80)
The impact of reasonable possible alternative assumptions on other comprehensive income was GBPnil in all periods.
E2: Loans and advances
The table below provides detail of the categories of the Group's loans and advances. The Group extends advances to individuals, corporate,
commercial and public sector. Advances made to individuals are mostly in the form of mortgages, instalment credit, overdrafts, personal loans and
credit card borrowings. Further detail on loans and advances can be found in note E3 of the 2014 Annual Report and Accounts.
GBPm
At At At
30 June 30 June 31 December
2015 2014 2014
Home loans 7,461 7,476 7,909
Commercial mortgages 6,901 6,332 6,870
Term loans 6,231 5,398 6,436
Other loans to clients 5,625 6,013 4,856
Net finance leases and instalment debtors 5,053 4,857 5,236
Deposits placed under reverse purchase agreements 1,043 1,202 1,016
Overdrafts 891 848 929
Preference shares and debentures 889 994 1,006
Credit cards 741 685 745
Factoring accounts 267 255 277
Policyholder loans 243 232 248
Properties in possession 30 31 33
Remittances in transit 15 19 11
Trade, other bills and bankers' acceptances - 17 16
Gross loans and advances 35,390 34,359 35,588
Provisions for impairment (735) (632) (731)
Specific provisions (505) (409) (494)
Portfolio provision (230) (223) (237)
Total net loans and advances 34,655 33,727 34,857
E3: Insurance and investment contracts
The tables below provide a summary of the Group's long-term business insurance policyholder liabilities and investment contract liabilities. Details
of insurance contract accounting for the Group can be found in note E8 of the 2014 Annual Report and Accounts.
GBPm
At 30 June 2015 At 30 June 2014
Gross Reinsurance Net Gross Reinsurance Net
Life assurance policyholder liabilities
Long-term business insurance policyholder
liabilities 9,851 (201) 9,650 11,737 (117) 11,620
Life assurance policyholder liabilities 9,730 (191) 9,539 11,593 (104) 11,489
Outstanding claims 121 (10) 111 144 (13) 131
Investment contract liabilities 68,786 (2,079) 66,707 66,355 (1,767) 64,588
Unit-linked investment contracts and similar contracts 60,186 (2,079) 58,107 57,954 (1,767) 56,187
Other investment contracts 719 - 719 778 - 778
Discretionary participating investment contracts 7,881 - 7,881 7,623 - 7,623
Total life assurance policyholder liabilities 78,637 (2,280) 76,357 78,092 (1,884) 76,208
Property & casualty liabilities
Claims incurred but not reported 62 (12) 50 45 (9) 36
Unearned premiums 120 (40) 80 88 (39) 49
Outstanding claims 212 (62) 150 186 (55) 131
Total property & casualty liabilities 394 (114) 280 319 (103) 216
Total policyholder liabilities 79,031 (2,394) 76,637 78,411 (1,987) 76,424
GBPm
At 31 December 2014
Gross Reinsurance Net
Life assurance policyholder liabilities
Long-term business insurance policyholder
liabilities 10,519 (172) 10,347
Life assurance policyholder liabilities 10,369 (154) 10,215
Outstanding claims 150 (18) 132
Investment contract liabilities 68,841 (2,026) 66,815
Unit-linked investment contracts and similar contracts 60,158 (2,026) 58,132
Other investment contracts 746 - 746
Discretionary participating investment contracts 7,937 - 7,937
Total life assurance policyholder liabilities 79,360 (2,198) 77,162
Property & casualty liabilities
Claims incurred but not reported 47 (10) 37
Unearned premiums 96 (45) 51
Outstanding claims 176 (61) 115
Total property & casualty liabilities 319 (116) 203
Total policyholder liabilities 79,679 (2,314) 77,365
The reinsurers' share of policyholder liabilities relating to investment contracts is where the direct management of assets are ceded to a third party
through a reinsurance arrangement. Due to the nature of the arrangement, there is no transfer of insurance risk.
E4: Borrowed funds
The table below presents an analysis of the Group's borrowed funds net of any holdings that are principally held by policyholder funds.
GBPm
At At
Non- 30 June Non- 30 June
Notes banking Banking(1) 2015 banking Banking(1) 2014
Senior debt securities and term loans 112 1,683 1,795 113 1,271 1,384
Floating rate notes E4(a)(i) - 722 722 - 708 708
Fixed rate notes E4(a(ii) 112 838 950 113 532 645
Term loans E4(a)(iii) - 123 123 - 31 31
Revolving credit facilities E4(b) 92 51 143 - - -
Mortgage-backed securities E4(c) - 119 119 - 57 57
Subordinated debt securities E4(d) 883 626 1,509 740 602 1,342
Borrowed funds 1,087 2,479 3,566 853 1,930 2,783
Other instruments treated as equity for accounting purposes
EUR374 million perpetual preferred
callable securities at 5.00%(2) 253 253
GBP273 million perpetual preferred
callable securities at 6.38%(3) 273 273
Total: Book value 1,613 1,379
Nominal value of the above 1,560 1,350
GBPm
At
Non- 31 December
Notes banking Banking(1) 2014
Senior debt securities and term loans 112 1,264 1,376
Floating rate notes E4(a)(i) - 563 563
Fixed rate notes E4(a(ii) 112 576 688
Term loans E4(a)(iii) - 125 125
Revolving credit facilities E4(b) 114 72 186
Mortgage-backed securities E4(c) - 52 52
Subordinated debt securities E4(d) 788 642 1,430
Borrowed funds 1,014 2,030 3,044
Other instruments treated as equity for accounting purposes
EUR374 million perpetual preferred
callable securities at 5.00%(2) 253
GBP273 million perpetual preferred
callable securities as 6.38%(3) 273
Total: Book value 1,540
Nominal value of the above 1,512
(1) Borrowed funds identified as Banking are those which are directly related to the lending businesses in Emerging Markets and Nedbank.
(2) The EUR374 million perpetual preferred callable securities are redeemable at the discretion of the Group at their principal amount from 4 November 2015.
(3) The GBP273 million perpetual preferred callable securities are redeemable at the discretion of the Group at their principal amount from 24 March 2020.
(a) Senior debt securities and term loans
(i) Floating rate notes (net of Group holdings)
GBPm
At At At
30 June 30 June 31 December
Maturity date 2015 2014 2014
Banking - Floating rate unsecured senior debt
R1,075 million at JIBAR + 0.94% Repaid - 60 -
R1,297 million at JIBAR + 1.00% Repaid - 73 72
R1,027 million at JIBAR + 1.75% Repaid - 57 57
R250 million at JIBAR + 1.00% August 2015 13 14 14
R1,044 million at JIBAR + 2.20% September 2015 55 58 59
R677 million at JIBAR + 1.25% March 2016 35 37 38
R3,056 million at JIBAR + 0.8% July 2016 161 170 169
R694 million at JIBAR + 0.75% November 2016 37 38 39
R405 million at JIBAR + 1.30% February 2017 21 22 23
R1,035 million at JIBAR + 0.85% March 2017 54 57 58
R786 million at JIBAR + 1.30% August 2017 37 38 39
R806 million at JIBAR + 0.9% June 2017 42 44 45
R241 million at JIBAR + 1.12% November 2017 13 - 14
R472 million at JIBAR + 1.25% February 2018 25 - -
R1,427 million at JIBAR + 1.30% June 2018 75 - -
R90 million at JIBAR + 1.45% February 2020 5 - -
R80 million at JIBAR + 2.15% April 2020 4 4 5
R650 million at JIBAR + 1.30% June 2021 34 36 36
R12 million at JIBAR + 1.55% February 2022 1 - -
R1,980 million at JIBAR + 2.00% February 2025 105 - -
R500 million at JIBAR + 2.10% April 2026 27 - -
744 708 668
Less: floating rate notes held by other Group companies (22) - (105)
Total floating rate notes 722 708 563
All floating rate unsecured senior debt are non-qualifying for the purposes of regulatory tiers of capital.
(ii) Fixed rate notes (net of Group holdings)
GBPm
At At At
30 June 30 June 31 December
Maturity date 2015 2014 2014
Banking - Fixed rate unsecured senior debt
R478 million at 9.68% Repaid - 27 27
R3,244 million at 10.55% September 2015 175 184 186
R1,137 million at 9.36% March 2016 61 64 65
R151 million at 6.91% July 2016 8 9 9
R1,273 million at 11.39% September 2019 72 77 77
R380 million at 9.26% June 2020 20 - -
R1,888 million at 8.92% November 2020 100 105 106
R855 million at 9.38% March 2021 46 48 49
R500 million at 9.29% June 2021 26 28 28
R215 million at 8.79% February 2022 12 - -
R280 million at 9.64% June 2022 15 - -
R391 million at 9.73% March 2024 21 22 22
R660 million at zero coupon October 2024 14 13 15
R2607 million at 9.44% February 2025 141 - -
R800 million at 9.95% April 2026 43 - -
R1,739 million at 10.36% June 2026 92 - -
846 577 584
Less: Fixed rate notes held by other Group companies (8) (45) (8)
Banking fixed rate unsecured senior debt (net of Group
holdings) 838 532 576
Non-banking
$2 million secured senior debt at 5.23% Repaid - 1 -
GBP112 million eurobond at 7.125% October 2016 112 112 112
112 113 112
Total fixed rate notes 950 645 688
All fixed rate notes are non-qualifying for the purpose of regulatory tiers of capital.
(iii) Term loans
GBPm
At At At
30 June 30 June 31 December
Maturity date 2015 2014 2014
Banking - Floating rate loans
KES550 million at KBRR + 4.87% October 2015 4 4 4
R1,500 million at JIBAR + 2.95% August 2017 84 - 84
KES500 million at KBRR + 3.87% March 2019 3 - -
Banking - Fixed rate loans
$20 million at 9.50% Repaid - 3 -
KES466 million at 9.83% Repaid - 4 -
$6 million at 8.10% August 2017 3 - 4
$19 million at 8.10% September 2017 10 - 12
$10 million at 8.30% May 2020 6 6 7
$5 million at 11.00% September 2022 3 3 3
$10 million at 10.00% December 2023 6 6 6
KES170 million at 14.00% to 14.75% October 2015 1 1 1
KES175 million at 11.70% October 2016 1 1 1
KES225 million at 11.70% August 2017 1 2 2
KES200 million at 5.00% July 2022 1 1 1
Total term loans and other loans 123 31 125
These term loans are used to fund the lending operations of the Emerging Markets banking businesses.
(b) Revolving credit facilities
GBPm
At At At
30 June 30 June 31 December
Maturity date 2015 2014 2014
Banking
R475 million (31 December 2014: R1,000 million) drawn of a
R1,200 million facility at 3 month JIBAR + 2.95% August 2017 25 - 44
R500 million fully drawn at 3 month JIBAR + 3.10% October 2019 26 - 28
51 - 72
Non-banking
$145 million drawn of a $350 million facility at
USD LIBOR + 1.25% October 2019 92 - 114
Total revolving credit facilities 143 - 186
The Group has access to a GBP800 million (June 2014: GBP800 million, December 2014: GBP800 million) five-year multi-currency revolving credit
facility which matures in August 2019, with an optional further one year extension at both the first and second year anniversary. At 30 June 2015, 31
December 2014 and 30 June 2014, none of this facility was drawn and there were no irrevocable letters of credit in issue against this facility.
In March 2015, the Group obtained access to a R5,250 million (GBP275 million) revolving credit facility which matures in March 2016. At 30 June
2015 none of this facility was drawn and there were no irrevocable letters of credit in issue against this facility.
(c) Mortgage-backed securities (net of Group holdings)
GBPm
At At At
30 June 30 June 31 December
Tier Maturity date 2015 2014 2014
Banking
R480 million (class A1) at JIBAR + 1.10% Tier 2 Repaid - 7 2
R336 million (class A2) at JIBAR + 1.25% Tier 2 October 2039 14 19 19
R900 million (class A3) at JIBAR + 1.54% Tier 2 October 2039 48 50 51
R110 million (class B) at JIBAR + 1.90% Tier 2 October 2039 6 6 6
R650 million at JIBAR +1.20% Tier 2 February 2042 27 - -
R400 million at JIBAR +1.45% Tier 2 February 2042 5 - -
R680 million at JIBAR +1.55% Tier 2 February 2042 36 - -
R80 million at JIBAR +2.20% Tier 2 February 2042 4 - -
R65 million at JIBAR + 3.00% Tier 2 February 2042 3 - -
143 82 78
Less: Mortgage backed securities held by other Group companies (24) (25) (26)
Total mortgage-backed securities 119 57 52
(d) Subordinated debt securities (net of Group holdings)
GBPm
At At At
Maturity 30 June 30 June 31 December
Tier date 2015 2014 2014
Banking
R1,265 million at JIBAR + 4.75%(1) Tier 2 Repaid - 70 74
R487 million at 15.05%1 Tier 2 Repaid - 32 32
R1,000 million at 10.54% Non-core Tier 1 September 2020 54 58 58
$100 million at 3 month USD LIBOR Non-core Tier 1 March 2022 64 59 64
R2,000 million at JIBAR + 0.47% Tier 2 July 2022 106 112 113
R1,800 million at JIBAR + 2.75% Tier 2 Secondary July 2023 96 101 102
R1,200 million at JIBAR + 2.55% Tier 2 November 2023 63 67 67
R450 million at 10.49% Tier 2 April 2024 24 25 26
R1,737 million at 3 month JIBAR + 2.55% Tier 2 April 2024 93 97 98
R300 million at JIBAR + 2.75% Tier 2 April 2024 16 - 17
R225 million at JIBAR +2.75% Tier 2 January 2025 12 - -
R1,624 million at JIBAR + 3.50% Tier 2 July 2025 85 - -
R407 million at 11.29% Tier 2 July 2025 21 - -
634 621 651
Less: Banking subordinated debt securities held by other Group companies (8) (19) (9)
Banking subordinated securities 626 602 642
Non-banking
R3,000 million at 8.92% Lower Tier 2 October 2020 157 165 167
GBP500 million at 8.00% Lower Tier 2 June 2021 568 575 565
R300 million at 9.26% Lower Tier 2 November 2024 15 - 17
R700 million at 3 month JIBAR + 2.20% Lower Tier 2 November 2024 37 - 39
R537 million at 3 Month JIBAR + 2.30%(2) Lower Tier 2 March 2025 28 - -
R425 million at 9.76%(2) Lower Tier 2 March 2025 22 - -
R409 million at 10.32%(2) Lower Tier 2 March 2027 21 - -
R690 million at 10.96%(2) Lower Tier 2 March 2030 35 - -
883 740 788
Total subordinated debt securities 1,509 1,342 1,430
(1) The first call date of the R1,265 million and R487 million subordinated debt securities is November 2018. All other callable subordinated debt securities have a first
call date five years before the maturity date.
(2) On 19 March 2015, OMLAC(SA) has issued a mixture of floating rate and fixed instruments with several maturities through its existing local SA programme. Accordingly,
the JSE Limited has granted a listing to OMLAC(SA) on the South African Interest Rate Market with effect from 19 March 2015 under its Unsecured Subordinated
Callable Note Programme dated 4 September 2014. Refer to note A2 for further information.
Nedbank has issued and redeemed debt instruments in the normal course of the bank's funding program.
F: Other statement of financial position notes
F1: Goodwill and other intangible assets
Analysis of goodwill and other intangible assets
This note shows the movements in cost, amortisation and impairment of goodwill and other intangible assets for the six months ended 30 June
2015 and year ended 31 December 2014.
GBPm
Present value of
acquired in-force
business Software Other
development development intangible
Goodwill costs costs assets Total
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Cost
Balance at beginning of the period 2,756 2,641 1,107 1,464 669 630 402 538 4,934 5,273
Acquisitions through business
combinations(1) 453 155 - 17 - 14 288 69 741 255
Purchase price adjustment(2) 7 - - - - - - - 7 -
Additions - - - - 38 72 2 4 40 76
Disposal of interests in subsidiaries - (86) - (335) - (22) - (192) - (635)
Disposals or retirements - - - - (6) (18) - - (6) (18)
Transfer to non-current assets
held for sale - - (131) (14) (1) (3) - - (132) (17)
Foreign exchange and other movements (42) 46 5 (25) (42) (4) - (17) (79) -
Balance at beginning of the period 3,174 2,756 981 1,107 658 669 692 402 5,505 4,934
Amortisation and impairment losses
Balance at beginning of the period (624) (598) (792) (946) (449) (437) (306) (457) (2,171) (2,438)
Amortisation charge for the period - - (32) (70) (25) (46) (33) (54) (90) (170)
Impairment losses(3) (41) (14) (28) - - - - - (69) (14)
Disposal of interests in subsidiaries - - - 198 - 20 - 192 - 410
Disposals or retirements - - - - 6 17 - - 6 17
Transfer to non-current assets
held for sale - - 131 8 1 3 - - 132 11
Foreign exchange and other movements 7 (12) (1) 18 25 (6) - 13 31 13
Accumulated amortisation and
impairment losses at end of
the period (658) (624) (722) (792) (442) (449) (339) (306) (2,161) (2,171)
Carrying amount
Balance at beginning of the period 2,132 2,043 315 518 220 193 96 81 2,763 2,835
Balance at end of the period 2,516 2,132 259 315 216 220 353 96 3,344 2,763
(1) Goodwill acquired through business combinations comprise GBP292 million in respect of the acquisition of Quilter Cheviot and GBP161 million in respect of the
acquisition of UAP Holdings Limited. Refer to note G3 for further information.
(2) The purchase price adjustment to goodwill of GBP7 million is the result of an increase in the value of liabilities identified by the Group in the 12 month period following
the completion of the acquisition of Intrinsic Financial Services Limited on 1 July 2014.
(3) The impairments of goodwill (GBP41 million) and present value of in-force business (GBP28 million) relates to the write-down in the value of Skandia Switzerland prior
to its expected disposal in the second half of 2015. Refer to note H2 for further information.
G: Other notes
G1: Related parties
The nature of the related party transactions of the Group has not changed from those referred to in the 2014 Annual Report and Accounts.
There were no transactions with related parties during the six months ended 30 June 2015 that had a material effect on the results or the financial
position of the Group.
G2: Contingent liabilities and commitments
Contingent liabilities – tax
The Revenue authorities in the principal jurisdictions in which the Group operates (South Africa, the United Kingdom and the United States) routinely
review historic transactions undertaken and tax law interpretations made by the Group. The Group is committed to conducting its tax affairs in
accordance with the tax legislation of the jurisdictions in which they operate. All interpretations made by management are made with reference to the
specific facts and circumstances of the transaction and the relevant legislation.
There are occasions where the Group's interpretation of tax law may be challenged by the Revenue authorities. The financial statements include
provisions that reflect the Group's assessment of liabilities which might reasonably be expected to materialise as part of their review. The Board is
satisfied that adequate provisions have been made to cater for the resolution of tax uncertainties and that the resources required to fund such potential
settlements are sufficient.
Due to the level of estimation required in determining tax provisions, amounts eventually payable may differ from the provision recognised.
South Africa
During the course of 2015, discussions have been ongoing with the South African Revenue Services (SARS) in relation to the tax treatment of
investments supporting Fixed Bond products sold by OMLAC(SA) between 2004 and 2013. SARS has submitted an assessment for amounts due.
OMLAC(SA) has appealed the assessments and discussions regarding the merits of the OMLAC(SA) treatment of these items are continuing with
SARS.
Expected future transactions
As part of its corporate development, the Group may undertake acquisitions and disposals. In certain transactions the Group may obtain options to
acquire additional stakes at market value. The Group has previously entered into a combination of put and call options to acquire an additional 23%
stake in its Indian life joint venture from the current holding of 26%, which would be settled at the fair value of the stake if and when exercised.
G3: Businesses acquired during the year
(a) Acquisition of Quilter Cheviot
On 25 February 2015, the Group acquired the Quilter Cheviot group of companies. The Quilter Cheviot group is based in the United Kingdom and is
a discretionary investment manager specialising in the high net worth and affluent segment of the industry. The results from the business have been
consolidated since the date of acquisition.
The table below sets out the consolidated assets and liabilities acquired as a result of the acquisition of Quilter Cheviot:
GBPm
Acquiree's
carrying
amount Fair value
Assets
Intangible assets - 288
Property, plant and equipment 8 8
Deferred tax asset 1 1
Current tax receivable 3 3
Cash and cash equivalents 69 69
Trade, other receivables and other assets 128 128
Total assets 209 497
Liabilities
Deferred tax liabilities - (58)
Provisions and accruals (50) (53)
Current tax payable (5) (5)
Trade, other payables and other liabilities (107) (107)
Total liabilities (162) (223)
Total net assets acquired 47 274
Total consideration paid 566
Goodwill recognised 292
The purchase price has been allocated based on a provisional estimate of the fair value of assets acquired and liabilities assumed at the date of
acquisition determined in accordance to IFRS 3 'Business Combinations'. The provisional allocation required significant assumptions and the use of
external expertise and it is possible that the preliminary estimates may change materially as the purchase price allocations are finalised. The
accounting must be finalised within 12 months of the acquisition date.
The carrying value of assets and liabilities in Quilter Cheviot's consolidated statement of financial position on acquisition date approximates the fair
value of these items determined by the Group, with the exception of identified intangible assets of GBP288 million, additional provisions of GBP3
million and an additional deferred tax liability of GBP58 million. The intangible assets recognised relate to customer distribution channels (GBP273
million) and to the Quilter Cheviot brand (GBP15 million). The value of the intangible assets was determined by applying cash flows to standard
industry valuations models. Goodwill is attributable to the delivery of significant cost and revenue synergies that cannot be linked to identifiable
intangible assets. This goodwill is not expected to be deductible for tax purposes.
Of the acquired receivables, GBP121 million represent short dated receivables that arise from the normal course of business and represent the gross
cash flows that are expected to be received over a period of three months. No contingent liability has been recognised on acquisition.
In addition to the GBP566 million cash consideration paid, 19.3 million Old Mutual plc ordinary shares of 11 3/7p with a value on issue of GBP42
million were placed into an employee benefit trust. 50% of these shares will be released to the participants after three years and the other 50% after
four years, on the fulfilment of conditions relating to the maintenance of the level of funds under management. These expenses will be recognised in
the profit or loss over the vesting periods of three and four years and will be excluded from the determination of AOP.
Transaction costs incurred of GBP9 million relating to the acquisition have been recognised within other operating expenses in the consolidated
income statement, but not included within adjusted operating profit. The Group has included GBP5 million in net profit attributable to equity holders
since the effective date of acquisition and GBP17 million in adjusted operating profit.
(b) Acquisition of UAP Holdings Limited
On 24 June 2015, Old Mutual acquired an aggregate stake of 60.7% in UAP Holdings Limited ('UAP'), a Kenyan Pan-African financial services group
for an aggregate consideration of GBP152 million. The reason for the acquisition was the expansion of the Group's footprint in East Africa. The
transaction was financed by the Group through existing funds, without the issuance of any new debt or own shares.
An initial stake of 23.3% was acquired on 1 February 2015, while the remaining 37.3% stake was acquired on 24 June 2015. The results and
movements in reserves were equity accounted from 1 February 2015 to the date that control was obtained. There was no amount recognised in the
profit or loss as a result of the step up acquisition. A loss of GBP0.4m has been equity accounted in the consolidated income statement for the period
from 1 February 2015 to 24 June 2015. Subsequently, from 24 June 2015, the financial results and financial position were consolidated in the Group
financial statements.
The assets and liabilities acquired have been recorded at their fair values for purposes of the opening balance sheet and included in the consolidated
accounts of the Group using the Group's accounting policies in accordance with IFRS.
The table below sets out the consolidated assets and liabilities acquired as a result of the acquisition of UAP Holdings Limited:
GBPm
Acquiree's
carrying
amount Fair value
Assets
Investment property 103 103
Investments & securities 89 89
Cash and cash equivalents 24 24
Trade, other receivables and other assets 65 54
Total assets 281 270
Liabilities
Long-term business policyholder liabilities (84) (90)
Property & casualty liabilities (37) (37)
Provisions and accruals (3) (3)
Deferred tax liabilities (3) (3)
Current tax payable - (4)
Trade, other payables and other liabilities (44) (44)
Total liabilities (171) (181)
Total net assets acquired 110 89
Total value of the business 250
Consideration 152
Non-controlling interests recognised 98
Goodwill and other intangible assets recognised 161
The purchase price has been allocated based on a provisional estimate of the fair value of assets acquired and liabilities assumed at the date of
acquisition determined in accordance to IFRS 3 'Business Combinations'. The purchase price allocation required significant assumptions and the
use of external expertise and it is possible that the preliminary estimates may change materially when this is finalised. The identification and
measurement of intangible assets has commenced, however, due to the date of control being obtained being close to the date of the interim financial
statements there has been no further allocation between goodwill and other intangible assets. The additional intangible assets identified, but not yet
recognised, include brand, customer lists and present value of in-force business development cost.
The fair value of investment properties has been determined by independent valuers appointed by UAP on the basis of open market value using
current prices. Investment and securities have been fair value based on the market value of the assets and/or an analysis of the contractual cash
flows. Other assets and liabilities, including long-term policyholder liabilities and property & casualty liabilities, have been recorded at their estimated
fair value.
The fair value of the non-controlling interests in UAP has been determined in accordance with the Group policy and is in proportion to the fair value
paid by the Group.
The Group has measured the fair value of the separately recognisable identifiable assets acquired and the liabilities assumed as of the acquisition
date. The value of UAP, GBP250 million, was greater than the provisional fair value of the net assets acquired and resulted in goodwill and other
intangible assets of GBP161 million being recorded in the statement of financial position of the Group. The value of goodwill and other intangible
assets will change as the work on the purchase price allocation is completed.
Acquisition related expenses of GBP3 million are included in other operating and administrative line in the consolidated income statement but has
been reversed out of adjusted operating profit in line with Group policy.
G4: Events after the reporting date
On 6 August 2015, the Group announced that it acquired an additional 33.6% stake in Credit Guarantee Insurance Corporation of Africa Limited
(CGIC), subject to regulatory approval.
The transaction will increase the Group's total holding in CGIC to 86.1%. The acquisition of the additional 33.6% is expected to be completed in the
second half of 2015.
H: Discontinued operations and disposal groups held for sale
H1: Discontinued operations
Income statement from discontinued operations
GBPm
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
Loss before tax from discontinued operations - trading activities (expenses) - (11) (35)
Loss on disposal (21) - (19)
Loss before tax from discontinued operations (21) (11) (54)
Income tax credit - 1 4
Loss after tax from discontinued operations (21) (10) (50)
The loss on disposal for the six months ended 30 June 2015 and year ended 31 December 2014 related to the settlement of litigation arising on the
disposal of US Life in 2011, following a court ruling in favour of the plaintiff on the main matter in dispute.
The loss before tax from discontinued operations for the six months ended 30 June 2014 and the year ended 31 December 2014 related to the
disposal of Nordic in 2012. The Group continued to incur costs directly related to the sale of these businesses relating to the transition of IT and other
services back to the Group. Nordic previously provided these services to the wider Group.
H2: Non-current assets and liabilities held for sale
Non-current assets held for sale of GBP1,114 million relate to Old Mutual Wealth (GBP902 million) and Emerging Markets (GBP212 million). Non-
current liabilities held for sale of GBP833 million relate to Old Mutual Wealth.
Old Mutual Wealth
On 29 May 2015, the Group announced that terms have been agreed to dispose of Skandia Leben AG. At 30 June 2015, the total value of the assets
and liabilities reclassified as held for sale in the statement of financial position were GBP898 million (including GBP851 million investments and
securities) and GBP833 million (including GBP805 million long-term policyholder liabilities) respectively. Impairment losses after tax of GBP83 million
have been recognised in the period as a result of the transaction. The transaction is subject to regulatory approval and is expected to complete in the
second half of 2015. In addition to the above, Old Mutual Wealth has classified property, plant and equipment of GBP4 million as held for sale.
Emerging Markets
At 30 June 2015, Emerging Markets classified GBP212 million of investment properties as held for sale. These transactions are subject to regulatory
approval and are expected to complete in the second half of 2015. The investment properties form part of the policyholder assets and therefore have
no impact on profit or loss of the Group.
Sponsor:
Merrill Lynch South Africa (Pty) Ltd
Date: 06/08/2015 08:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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