Wrap Text
Old Mutual plc announcement of new strategy and preliminary results for the year ended 31 December 2015
OLD MUTUAL PLC
ISIN CODE: GB00B77J0862
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
Statement of directors' responsibilities
in respect of the preliminary announcement of the Annual Report and the financial statements
The directors confirm that to the best of their knowledge:
- The results in this preliminary announcement have been taken from the Group's 2015 Annual Report and Accounts, which will be available on
the Company's website on 13 April 2016
- The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole, and
- The Annual Report includes a fair review of the development and performance of the business and the position of Old Mutual plc and the
undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Bruce Hemphill Ingrid Johnson
Group Chief Executive Group Finance Director
11 March 2016
Consolidated income statement
For the year ended 31 December 2015
GBPm
Year ended Year ended
31 December 31 December
Notes 2015 2014
Revenue
Gross earned premiums B2 3,589 3,209
Outward reinsurance (335) (308)
Net earned premiums 3,254 2,901
Investment return (non-banking) 3,795 6,304
Banking interest and similar income 3,320 3,057
Banking trading, investment and similar income 213 197
Fee and commission income, and income from service activities 3,027 2,894
Other income 86 125
Total revenue 13,695 15,478
Expenses
Claims and benefits (including change in insurance contract provisions) (3,450) (4,098)
Reinsurance recoveries 279 215
Net claims and benefits incurred (3,171) (3,883)
Change in investment contract liabilities (2,203) (3,544)
Credit impairment charges (307) (252)
Finance costs (49) (54)
Banking interest payable and similar expenses (1,924) (1,672)
Fee and commission expenses, and other acquisition costs (786) (863)
Change in third-party interest in consolidated funds (208) (322)
Other operating and administrative expenses (3,759) (3,548)
Total expenses (12,407) (14,138)
Share of associated undertakings' and joint ventures' profit after tax 67 26
Loss on disposal of subsidiaries, associated undertakings and strategic
investments C1(c) (36) (2)
Profit before tax 1,319 1,364
Income tax expense D1 (374) (462)
Profit from continuing operations after tax 945 902
Discontinued operations
Loss from discontinued operations after tax H1 (21) (50)
Profit after tax for the financial year 924 852
Attributable to
Equity holders of the parent 614 582
Non-controlling interests
Ordinary shares F2(a)(i) 291 252
Preferred securities F2(a)(ii) 19 18
Profit after tax for the financial year 924 852
Earnings per ordinary share
Basic earnings per share based on profit from continuing
operations (pence) 13.2 13.5
Basic earnings per share based on profit from discontinued
operations (pence) (0.5) (1.1)
Basic earnings per ordinary share (pence) C2(a) 12.7 12.4
Diluted basic earnings per share based on profit from continuing
operations (pence) 12.6 12.5
Diluted basic earnings per share based on profit from discontinued
operations (pence) (0.4) (1.0)
Diluted basic earnings per ordinary share (pence) C2(b) 12.2 11.5
Weighted average number of ordinary shares (millions) C2(a) 4,641 4,485
Consolidated statement of comprehensive income
For the year ended 31 December 2015
GBPm
Year ended Year ended
31 December 31 December
2015 2014
Profit after tax for the financial year 924 852
Other comprehensive income for the financial year
Items that will not be reclassified subsequently to profit or loss
Fair value movements
Property revaluation 18 28
Measurement movements on defined benefit plans 20 2
Income tax on items that will not be reclassified subsequently to profit or loss D1(c) (4) (7)
34 23
Items that may be reclassified subsequently to profit or loss
Fair value movements
Net investment hedge 13 (9)
Available-for-sale investments
Fair value (losses)/gains (7) 21
Recycled to profit or loss (5) (20)
Exchange difference recycled to profit or loss on disposal of business (71) (85)
Shadow accounting (10) (5)
Currency translation differences on translating foreign operations (1,106) (68)
Other movements (24) (18)
Income tax on items that may be reclassified subsequently to profit or loss D1(c) - (5)
(1,210) (189)
Total other comprehensive income for the financial year (1,176) (166)
Total comprehensive income for the financial year (252) 686
Attributable to
Equity holders of the parent (232) 434
Non-controlling interests
Ordinary shares (39) 234
Preferred securities 19 18
Total comprehensive income for the financial year (252) 686
Reconciliation of adjusted operating profit to profit after tax
For the year ended 31 December 2015
GBPm
Year ended Year ended
31 December 31 December
Notes 2015 2014
Core operations
Emerging Markets B3 615 617
Nedbank B3 754 770
Old Mutual Wealth B3 307 227
Institutional Asset Management B3 149 131
1,825 1,745
Finance costs (83) (78)
Long-term investment return on excess assets 21 24
Interest payable to non-core operations (4) (5)
Corporate costs (57) (55)
Other net shareholder expenses (39) (26)
Adjusted operating profit before tax B3 1,663 1,605
Adjusting items C1(a) (344) (301)
Discontinued and non-core operations B3 (31) 1
Profit before tax (net of policyholder tax) 1,288 1,305
Income tax attributable to policyholder returns 31 59
Profit before tax 1,319 1,364
Total tax expense D1(a) (374) (462)
Profit from continuing operations after tax 945 902
Loss from discontinued operations after tax H1 (21) (50)
Profit after tax for the financial year 924 852
Adjusted operating profit after tax attributable to ordinary equity holders of the parent
GBPm
Year ended Year ended
31 December 31 December
Notes 2015 2014
Adjusted operating profit before tax B3 1,663 1,605
Tax on adjusted operating profit D1(d) (403) (439)
Adjusted operating profit after tax 1,260 1,166
Non-controlling interests – ordinary shares F2(a)(iii) (310) (280)
Non-controlling interests – preferred securities F2(a)(ii) (19) (18)
Adjusted operating profit after tax attributable to ordinary equity
holders of the parent B3 931 868
Adjusted weighted average number of shares (millions) C2(a) 4,813 4,845
Adjusted operating earnings per share (pence) C2(c) 19.3 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, the 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 development of new Old Mutual Wealth platform capability and outsourcing of UK business administration. 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 and is
therefore 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 31 December 2015
GBPm
At At
31 December 31 December
Notes 2015 2014
Assets
Goodwill and other intangible assets F1 3,276 2,763
Mandatory reserve deposits with central banks 716 829
Property, plant and equipment 700 765
Investment property 1,233 1,678
Deferred tax assets 284 283
Investments in associated undertakings and joint ventures 514 518
Deferred acquisition costs 784 862
Reinsurers' share of policyholder liabilities 2,661 2,314
Loans and advances E1 30,965 34,857
Investments and securities 82,601 87,547
Current tax receivable 88 92
Trade, other receivables and other assets 2,007 2,362
Derivative financial instruments 3,076 1,227
Cash and cash equivalents 4,520 4,944
Assets held for sale H2 123 1,475
Total assets 133,548 142,516
Liabilities
Long-term business insurance policyholder liabilities 7,714 10,519
Investment contract liabilities 67,854 68,841
Property & casualty liabilities 341 319
Third-party interests in consolidated funds 4,661 5,986
Borrowed funds E2 3,524 3,044
Provisions and accruals 199 284
Deferred revenue 274 330
Deferred tax liabilities 417 454
Current tax payable 186 189
Trade, other payables and other liabilities 3,787 4,276
Amounts owed to bank depositors 32,328 36,243
Derivative financial instruments 3,317 1,201
Liabilities held for sale H2 12 1,285
Total liabilities 124,614 132,971
Net assets 8,934 9,545
Shareholders' equity
Equity attributable to equity holders of the parent 6,680 7,406
Non-controlling interests
Ordinary shares F2(b)(i) 1,982 1,867
Preferred securities F2(b)(ii) 272 272
Total non-controlling interests 2,254 2,139
Total equity 8,934 9,545
Consolidated statement of cash flows
For the year ended 31 December 2015
GBPm
Year ended Year ended
31 December 31 December
2015 2014
Cash flows from operating activities
Profit before tax 1,319 1,364
Non-cash movements in profit before tax 4,204 2,058
Net changes in working capital 566 739
Taxation paid (399) (402)
Net cash inflow from operating activities 5,690 3,759
Cash flows from investing activities
Net acquisitions of financial investments (4,868) (2,873)
Acquisition of investment properties (146) (48)
Dividends received from associated undertakings 7 5
Proceeds from disposal of investment properties 41 115
Acquisition of property, plant and equipment (151) (154)
Proceeds from disposal of property, plant and equipment 7 14
Acquisition of intangible assets (102) (76)
Acquisition of interests in subsidiaries, associated undertakings
Joint, ventures and strategic investments(1) (796) (429)
Disposal of a non-controlling interest in OM Asset Management plc 163 184
Proceeds from the disposal of interests in subsidiaries, associated
Undertakings, joint ventures and strategic investments 88 95
Net cash outflow from investing activities (5,757) (3,167)
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the Company (422) (394)
Non-controlling interests and preferred security interests (190) (177)
Interest paid (excluding banking interest paid) (51) (48)
Proceeds from issue of ordinary shares (including by subsidiaries
to non-controlling interests) 2 12
Net (acquisition)/disposal of treasury shares (19) 72
Sale of shares held by BEE trusts 175 -
Proceeds from issue of subordinated and other debt 1,615 584
Subordinated and other debt repaid (827) (290)
Net cash inflow/(outflow) from financing activities 283 (241)
Net increase in cash and cash equivalents 216 351
Effects of exchange rate changes on cash and cash equivalents (746) (193)
Cash and cash equivalents at beginning of the year 5,786 5,628
Cash and cash equivalents at end of the year 5,256 5,786
Consisting of
Cash and cash equivalents 4,520 4,944
Mandatory reserve deposits with central banks 716 829
Cash and cash equivalents included in assets held for sale 20 13
Total 5,256 5,786
(1) Of the acquisition of interests in subsidiaries, associated undertakings, joint ventures and strategic investments, GBP734 million relate to the acquisition of subsidiaries
as described in note G2. The remainder relates to the acquisition of associated undertakings, joint ventures and strategic investments.
Except for mandatory reserve deposits with central banks of GBP716 million (2014: GBP829 million) and GBP1,643 million (2014: GBP1,639 million) cash and
cash equivalents of managed funds that the Group consolidates, management do not consider that there are any material amounts of cash and
cash equivalents which are not available for use in the Group's day-to-day operations. Mandatory reserve deposits are, however, included in cash
and cash equivalents for the purposes of the statement of cash flows in line with market practice in South Africa.
Consolidated statement of changes in equity
For the year ended 31 December 2015
Millions
Number of
shares Available-
issued and Share Share Merger for-sale
Year ended 31 December 2015 Notes fully paid capital premium reserve reserve
Shareholders' equity at beginning of the year 4,907 561 856 1,342 48
Total comprehensive income for the financial year
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 (losses)/gains(1) - - - - -
Recycled to profit or loss - - - - (5)
Exchange differences recycled to profit or loss
on disposal of business(2) - - - - -
Shadow accounting - - - - -
Currency translation differences on translating foreign
operations(1) - - - - -
Other movements - - - - (3)
Income tax on items that may be reclassified
subsequently to profit or loss D1(c) - - - - -
Total comprehensive income for the financial year - - - - (8)
Transactions with the owners of the Company
Contributions and distributions
Dividends for the year C3 - - - - -
Tax relief on dividends paid - - - - -
Equity share-based payment transactions - - - - -
Proceeds from BEE transactions A2 - - 141 - -
Merger reserve released(3) - - - (90) -
Preferred securities repurchased - - - - -
Other movements in share capital 3 - 3 - -
Total contributions and distributions 3 - 144 (90) -
Changes in ownership
Shares issued for the acquisition of Quilter Cheviot 19 2 40 - -
Share of movement in associate reserves - - - - -
Disposal of a non-controlling interest in
OM Asset Management plc A2 - - - - -
Non-controlling interests in subsidiaries acquired G2(b) - - - - -
Change in participation in subsidiaries - - - - -
Total changes in ownership 19 2 40 - -
Total transactions with the owners of the Company 22 2 184 (90) -
Shareholders' equity at end of the year 4,929 563 1,040 1,252 40
(1) Included in other reserves is a loss of GBP7 million relating to Economic Transactional Bank (ETI) available-for-sale reserve. Currency translation differences on
translating foreign operations include GBP24 million relating to foreign exchange gains on translation of ETI.
(2) Following the disposal of Old Mutual Wealth's European businesses foreign currency translation reserves of GBP71 million were recycled to profit or loss. Refer to note
A2 for further information.
(3) On disposal of Old Mutual Wealth's European businesses merger reserves of GBP90 million were released directly to retained earnings. The merger reserve arose
from when businesses were acquired using ordinary shares of the entity and is non distributable. It is released to distributable upon subsequent realisation of value
for the businesses acquired. Refer to note A2 for further information.
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(4) securities of the parent interests equity
178 337 37 (1,370) 4,891 526 7,406 2,139 9,545
- - - - 590 24 614 310 924
18 - - - (5) - 13 5 18
- - - - 13 - 13 7 20
(3) - - - (1) - (4) - (4)
15 - - - 7 - 22 12 34
- - - 13 - - 13 - 13
- - (7) - 3 - (4) (3) (7)
- - - - - - (5) - (5)
- - - (71) - - (71) - (71)
(10) - - - - - (10) - (10)
- - - (780) - - (780) (326) (1,106)
1 - (3) - (6) - (11) (13) (24)
- - - - - - - - -
6 - (10) (838) 594 24 (232) (20) (252)
- - - - (422) (30) (452) (160) (612)
- - - - - 6 6 - 6
- 30 - - 5 - 35 4 39
- - - - 34 - 175 - 175
- - - - 90 - - - -
- - - - (11) (253) (264) - (264)
- - - - (19) - (16) - (16)
- 30 - - (323) (277) (516) (156) (672)
- - - - (42) - - - -
- - 3 - - - 3 - 3
- - - (35) 84 - 49 114 163
- - - - - - - 105 105
- - - - (30) - (30) 72 42
- - 3 (35) 12 - 22 291 313
- 30 3 (35) (311) (277) (494) 135 (359)
184 367 30 (2,243) 5,174 273 6,680 2,254 8,934
(4) Retained earnings were reduced in respect of own shares held in policyholder's funds, ESOP trusts, Black Economic Empowerment trusts and other undertakings at 31 December 2015 by
GBP243 million. (2014: GBP338 million).
Consolidated statement of changes in equity
For the year ended 31 December 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
Total comprehensive income for the financial year
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(1) - - - - (20)
Exchange differences recycled to profit or loss(1)
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)
Transactions with the owners of the Company
Contributions and distributions
Dividends for the year C3 - - - - -
Tax relief on dividends paid - - - - -
Equity share-based payment transactions - - - - -
Merger reserve released(1) - - - (375) -
Expiry of Skandia AB shareholder claims - - - - -
Other movements in share capital 10 1 11 - -
Total contributions and distributions 10 1 11 (375) -
Changes in ownership
Disposal of a non-controlling interest in
OM Asset Management plc - - - - -
Non-controlling interests in subsidiaries acquired - - - - -
Change in participation in subsidiaries - - - - -
Total changes in ownership - - - - -
Total transactions with owners of the Company 10 1 11 (375) -
Shareholders' equity at end of the year 4,907 561 856 1,342 48
(1) Following the disposal of Old Mutual Wealth's European businesses, as discussed in note A2, available-for-sale reserves of GBP20 million and foreign currency
translation reserves of GBP46 million have been recycled to profit or loss. In addition, merger reserves of GBP375 million relating to these businesses were 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
161 316 37 (1,234) 4,290 526 7,270 1,767 9,037
- - - - 557 25 582 270 852
- - - - - - - - -
28 - - - (5) - 23 5 28
- - - - 2 - 2 - 2
(6) - - - (1) - (7) - (7)
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
- - - - 375 - - - -
- - - - 11 - 11 - 11
- - - - 72 - 84 1 85
- 21 - - 61 (25) (306) (140) (446)
- - - - 52 - 52 163 215
- - - - - - - 53 53
- - - - (44) - (44) 44 -
- - - - 8 - 8 260 268
- 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 year ended 31 December 2015
A: Significant accounting policies
A1: Basis of preparation
The Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB) and as endorsed by the European Union (EU), and those parts of the
Companies Act 2006 applicable to those reporting under IFRS. The accounting policies adopted by the Group, unless otherwise stated, have been
applied consistently with those applied in the preparation of the Group's 2014 Annual Report and Accounts.
The Group financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value:
derivative financial instruments, financial assets and liabilities designated as fair value through profit or loss, or as available-for-sale, owner-
occupied property and investment property. Non-current assets and disposal groups held for sale are stated at the lower of the previous carrying
amount and the fair value less costs to sell.
The Group financial statements have been prepared on the going concern basis which the directors believe to be appropriate.
The financial statements contained herein do not constitute the Company's statutory accounts for the financial years ended 31 December 2015 and
31 December 2014 within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the financial year ended 31 December
2014 have been reported on by the Company's auditor and delivered to the Registrar of Companies. The statutory accounts for the financial year
ended 31 December 2015 will be delivered in due course. The report of the auditor for the financial year ended 31 December 2014 was (i)
unqualified, (ii) did not include a reference to any matters to which the auditor 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 year 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 profit or loss. Cumulative translation gains and losses up to 1 January 2004 were reset to zero.
The exchange rates used to translate the operating results, assets and liabilities of key foreign business segments to pounds sterling are:
Year ended Year ended
31 December 2015 31 December 2014
Statement of Statement of
Income financial Income financial
statement position statement position
(average rate) (closing rate) (average rate) (closing rate)
Rand 19.5223 22.8183 17.8712 17.9976
US dollars 1.5285 1.4734 1.6474 1.5581
Euro 1.3765 1.3560 1.2399 1.2877
A2: Significant corporate activity and business changes during the year
Acquisitions completed during the year
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 will be 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 other intangible assets of GBP288 million (GBP273 million customer relationships and GBP15 million brand) were recognised as
a result of the transaction.
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 an East 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. The purchase price per share did not vary between the
acquisition of the two tranches.
Goodwill of GBP150 million and other intangible assets of GBP20 million (GBP17 million brand and GBP3 million customer relationships) were recognised as a
result of the transaction.
Acquisition of an additional stake in Credit Guarantee Insurance Corporation of Africa Limited
On 1 October 2015, the Group acquired an additional 33.6% stake in Credit Guarantee Insurance Corporation of Africa Limited (CGIC) for GBP26 million.
The transaction increased the Group's total holding in CGIC to 86.1%. The transaction resulted in a decrease in equity attributable to the equity
holders of the parent of GBP15 million and a decrease in non-controlling interests of GBP11 million.
Acquisition of African Infrastructure Investment Managers (Pty) Limited
On 10 December 2015, the Group acquired an additional 50% stake in African Infrastructure Investment Managers (Pty) Limited (AIIM) for GBP16 million.
As the Group now has a controlling shareholding of 100%, the financial results and position of AIIM have been consolidated with effect from
10 December 2015.
The accounting related to the step up in ownership from 50% to 100%, which effectively involved a simultaneous sale of 50% of the business,
followed by an acquisition of the fair value of 100% of the business. Consequently a profit of GBP15 million was realised on the transaction. Consistent
with usual Group practice, this profit was recognised in the IFRS profit or loss, but excluded from AOP.
Work is currently being undertaken to determine the purchase price allocation of the fair value of 100% of the AIIM business. Provisional goodwill of
GBP25 million has been recognised on this transaction.
Disposals completed during the year
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 loss on disposal of GBP1 million. Merger reserves of GBP68 million relating to these businesses were released directly to equity.
Disposal of Skandia Switzerland
On 30 September 2015, the Group completed the sale of Skandia Leben AG, part of Old Mutual Wealth. The Group has recognised a loss on
disposal of GBP51 million. Merger reserves of GBP22 million relating to this business were released directly to equity.
Disposal of Old Mutual (Bermuda) Ltd (OMB) and certain related obligations to Beechwood Bermuda Limited
On 31 December 2015, the Group completed the sale of Old Mutual (Bermuda) Limited (OMB) to Beechwood Bermuda Limited (Beechwood). In
anticipation of the sale, OMB's remaining variable annuity guaranteed minimum accumulation benefits (GMAB obligations), which mature in 2017
and 2018, were reinsured to another of the Group's subsidiaries. A loss on this transaction of GBP0.4 million was recognised in profit or loss.
As part of the transaction, the Group has agreed to provide Beechwood with administration services for three years. Except for the GMAB
obligations referred to above, all other guarantees and responsibilities for the remaining policyholder administration were transferred to the buyer.
Refer to note G2 for further information.
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 GBP175 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 H1 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) further public share offering
On 22 June 2015, the Group disposed of a further 13.3 million OMAM shares for a consideration of $257 million (GBP163 million). A profit of GBP49 million
was recognised directly in equity reflecting the excess of the consideration over the share of net assets disposed of. Additional non-
controlling interests of GBP114 million were recognised in the statement of financial position.
Disposals announced, but not yet completed
Disposal of Rogge Global Partners PLC
On 8 February 2016, the Group announced that it has agreed to sell Rogge Global Partners PLC (Rogge) to Allianz Global Investors GmbH. The
transaction is expected to complete in the second quarter of 2016. The assets and liabilities of Rogge were classified as held for sale at
31 December 2015. Refer to note H2 for further information.
Financing activities during the year
Old Mutual plc (the Company)
On 3 November 2015, the Company issued GBP450 million Dated Tier 2 Subordinated Notes under its existing GBP5,000 million Euro Note Programme.
The notes have a maturity date of 3 November 2025 and pay interest semi-annually on 3 May and 3 November at a fixed rate of 7.88% per annum
up to and including the maturity date.
On 4 November 2015, being the First Call Date, the Company redeemed the outstanding EUR374 million (GBP253 million) Upper Tier 2 perpetual notes at
their nominal value, together with accrued and unpaid interest. A loss of GBP11 million on the repurchase was recognised directly in equity and
represents the difference between the historical cost and the settlement amount of these instruments.
Emerging Markets
On 19 March 2015, OMLAC(SA) issued R2,061 million (GBP90 million) of floating and fixed rate instruments, which have been classified as
subordinated debt. These instruments have maturity dates ranging from 2025 to 2030.
On 11 September 2015, OMLAC(SA) issued R2,479 million (GBP109 million) of floating and fixed rate instruments, which have been classified as
subordinated debt. These instruments have maturity dates ranging from 2015 to 2030.
On 27 October 2015, OMLAC(SA) redeemed R3 billion notes, together with interest accrued to this date. These notes were issued on 27 October
2005, under OMLAC(SA)'s Unsecured Subordinated Callable Note Programme dated 25 October 2005.
On 3 November 2015, OMLAC(SA) issued a R460 million (GBP20 million) fixed rate instrument, which have been classified as subordinated debt. The
final maturity date of this instrument is 19 March 2030.
All of the new instruments were issued through the existing ZAR Unsecured Subordinated Callable Note Programme.
Nedbank
Nedbank issued and redeemed debt instruments in the normal course of its funding program.
A3: Critical accounting estimates and judgements
In the preparation of these financial statements, the Group is required to make estimates and judgements that affect items reported in the
consolidated income statement, statement of financial position, other primary statements and related supporting notes.
Critical accounting estimates and judgements are those which involve the most complex or subjective 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. This requires assumptions and predictions of future events and actions. There have been no significant
methodology changes to the critical accounting estimates and judgements that the Group applied at 31 December 2014.
B: Segment information
B1: Basis of segmentation
Segment presentation
There have been no changes to the presentation of segment information for the year ended 31 December 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 year ended 31 December 2015, discontinued operations relate to the sale of US Life in 2011. For the year ended 31 December 2014,
discontinued operations related to the disposals of Nordic in 2012 and US Life in 2011. 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, reflect 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.
The Group is primarily engaged in the following business activities from which it generates revenue: 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
Year ended 31 December 2015 Markets Wealth Total
Life assurance – insurance contracts 1,469 154 1,623
Life assurance – investment contracts with discretionary
participation features 1,221 - 1,221
General insurance 745 - 745
Gross earned premiums 3,435 154 3,589
Life assurance – unit-linked and similar contracts and other investment
contracts recognised as deposits 4,039 7,988 12,027
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
Life assurance – unit-linked and similar contracts and other investment
contracts recognised as deposits 1,981 6,442 8,423
B3: Adjusted operating profit statement - segment information for the year ended 31 December 2015
Emerging
Notes Markets Nedbank
Revenue
Gross earned premiums B2 3,435 -
Outward reinsurance (253) -
Net earned premiums 3,182 -
Investment return (non-banking) 2,445 -
Banking interest and similar income 235 3,085
Banking trading, investment and similar income 5 208
Fee and commission income, and income from service activities 560 894
Other income 70 12
Total revenue 6,497 4,199
Expenses
Claims and benefits (including change in insurance contract provisions) (3,294) -
Reinsurance recoveries 184 -
Net claims and benefits incurred (3,110) -
Change in investment contract liabilities (1,142) -
Credit impairment charges (62) (245)
Finance costs (15) -
Banking interest payable and similar expenses (93) (1,833)
Fee and commission expenses, and other acquisition costs (323) (9)
Change in third-party interest in consolidated funds - -
Other operating and administrative expenses (1,121) (1,403)
Income tax attributable to policyholder returns (30) -
Total expenses (5,896) (3,490)
Share of associated undertakings' and joint ventures' profit after tax 14 45
Profit on disposal of subsidiaries, associated undertakings
and strategic investments C1(c) - -
Adjusted operating profit/(loss) before tax and non-controlling interests 615 754
Income tax expense D1 (173) (180)
Non-controlling interests (24) (272)
Adjusted operating profit/(loss) after tax and non-controlling interests 418 302
Adjusting items after tax and non-controlling interests C1(a) (56) 7
Profit/(loss) after tax from continuing operations 362 309
Loss from discontinued operations after tax H1 - -
Profit/(loss) after tax attributable to equity holders of the parent 362 309
GBPm
Institutional Adjusted Adjusting Discontinued IFRS
Old Mutual Asset Consolidation operating items and non-core Income
Wealth Management Other adjustments(1) profit (note C1) operations(2) statement
154 - - - 3,589 - - 3,589
(82) - - - (335) - - (335)
72 - - - 3,254 - - 3,254
1,158 - 17 283 3,903 (73) (35) 3,795
- - - - 3,320 - - 3,320
- - - - 213 - - 213
1,140 491 - (39) 3,046 (19) - 3,027
13 5 - (21) 79 - 7 86
2,383 496 17 223 13,815 (92) (28) 13,695
(169) - - - (3,463) - 13 (3,450)
95 - - - 279 - - 279
(74) - - - (3,184) - 13 (3,171)
(1,061) - - - (2,203) - - (2,203)
- - - - (307) - - (307)
- (2) (83) - (100) 51 - (49)
- - - - (1,926) 2 - (1,924)
(416) (6) (4) (57) (815) 32 (3) (786)
- - - (208) (208) - - (208)
(524) (347) (92) 42 (3,445) (301) (13) (3,759)
(1) - - - (31) 31 - -
(2,076) (355) (179) (223) (12,219) (185) (3) (12,407)
- 8 - - 67 - - 67
- - - - - (36) - (36)
307 149 (162) - 1,663 (313) (31) 1,319
(43) (30) 23 - (403) 29 - (374)
- (33) - - (329) 19 - (310)
264 86 (139) - 931 (265) (31) 635
(222) (20) 26 - (265) 265 - -
42 66 (113) - 666 - (31) 635
- - - - - - (21) (21)
42 66 (113) - 666 - (52) 614
(1) Consolidation adjustments comprise the consolidation of investment funds and inter-company eliminations.
(2) Non-core operations for the year ended 31 December 2015 relate to Old Mutual Bermuda and US Life. Old Mutual Bermuda loss after tax for the year ended
31 December 2015 was GBP31 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.
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) 3,455 -
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 539 919
Other income 94 33
Total revenue 6,917 4,083
Expenses
Claims and benefits (including change in insurance contract provisions) (3,713) -
Reinsurance recoveries 79 -
Net claims and benefits incurred (3,634) -
Change in investment contract liabilities (1,208) -
Credit impairment charges - (252)
Finance costs (3) -
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 (1,070) (1,434)
Income tax attributable to policyholder returns (36) -
Total expenses (6,311) (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
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 - 28 405 6,381 (91) 14 6,304
- - - - 3,057 - - 3,057
- - - - 197 - - 197
1,085 416 - (18) 2,941 (47) - 2,894
10 17 2 (38) 118 - 7 125
3,783 433 30 349 15,595 (138) 21 15,478
(385) - - 6 (4,092) - (6) (4,098)
136 - - - 215 - - 215
(249) - - 6 (3,877) - (6) (3,883)
(2,336) - - - (3,544) - - (3,544)
- - - - (252) - - (252)
- - (78) 3 (78) 24 - (54)
- - - - (1,670) (2) - (1,672)
(511) (4) - (76) (917) 58 (4) (863)
- - - (322) (322) - - (322)
(437) (304) (92) 40 (3,297) (241) (10) (3,548)
(23) - - - (59) 59 - -
(3,556) (308) (170) (349) (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
(1) Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the year ended 31 December 2014 was GBP1 million. Non-core operations
also include GBP31 million 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.
B4: Statement of financial position – segment information at 31 December 2015
Emerging
Notes Markets Nedbank
Assets
Goodwill and other intangible assets F1 415 378
Mandatory reserve deposits with central banks 5 711
Property, plant and equipment 275 385
Investment property 1,232 1
Deferred tax assets 47 10
Investments in associated undertakings and joint ventures 60 420
Deferred acquisition costs 87 -
Reinsurers' share of policyholder liabilities 150 4
Loans and advances E1 912 29,873
Investments and securities 24,983 5,777
Current tax receivable 14 46
Trade, other receivables and other assets 759 495
Derivative financial instruments 386 1,335
Cash and cash equivalents 1,088 1,001
Assets held for sale H2 84 -
Inter-segment funding - assets - -
Total assets 30,497 40,436
Liabilities
Long-term business insurance policyholder liabilities 7,262 159
Investment contract liabilities 16,943 482
Property & casualty liabilities 341 -
Third-party interests in consolidated funds - -
Borrowed funds E2 449 1,971
Provisions and accruals 143 -
Deferred revenue 20 -
Deferred tax liabilities 183 45
Current tax payable 73 18
Trade, other payables and other liabilities 2,006 1,036
Amounts owed to bank depositors 518 31,810
Derivative financial instruments 558 1,474
Liabilities held for sale H2 - -
Inter-segment funding - liabilities - -
Total liabilities 28,496 36,995
Net assets(1) 2,001 3,441
Equity
Equity attributable to equity holders of the parent 1,805 1,710
Non-controlling interests 196 1,731
Ordinary shares F2(b)(i) 196 1,459
Preferred securities F2(b)(ii) - 272
Total equity 2,001 3,441
(1) The net assets of Emerging Markets are stated after eliminating investments in Group equity and debt instruments of GBP167 million (2014: GBP227 million) held in
policyholder funds. These include investments in the Company's ordinary shares, subordinated liabilities and preferred securities issued by the Group's banking
subsidiary Nedbank Limited.
GBPm
Institutional
Old Mutual Asset Non-core Consolidation
Wealth Management Other operation adjustments(2) Total
1,620 863 - - - 3,276
- - - - - 716
19 21 - - - 700
- - - - - 1,233
8 218 - 1 - 284
1 23 10 - - 514
673 24 - - - 784
2,507 - - - - 2,661
180 - - - - 30,965
48,157 80 467 - 3,137 82,601
28 - - - - 88
618 119 102 16 (102) 2,007
- - 55 17 1,283 3,076
792 92 527 26 994 4,520
4 35 - - - 123
- - 860 80 (940) -
54,607 1,475 2,021 140 4,372 133,548
293 - - - - 7,714
50,344 - - 85 - 67,854
- - - - - 341
- - - - 4,661 4,661
- 61 1,098 - (55) 3,524
34 3 19 - - 199
254 - - - - 274
172 - 17 - - 417
13 59 23 - - 186
799 297 212 6 (569) 3,787
- - - - - 32,328
- 6 4 - 1,275 3,317
- 12 - - - 12
748 99 93 - (940) -
52,657 537 1,466 91 4,372 124,614
1,950 938 555 49 - 8,934
1,950 611 555 49 - 6,680
- 327 - - - 2,254
- 327 - - - 1,982
- - - - - 272
1,950 938 555 49 - 8,934
(2) Consolidation adjustments comprise the consolidation of investment funds and inter-company eliminations.
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 132 7
Loans and advances E1 909 33,773
Investments and securities 29,731 6,359
Current tax receivable 11 16
Trade, other receivables and other assets 650 708
Derivative financial instruments 255 865
Cash and cash equivalents 1,477 907
Assets held for sale 155 1
Inter-segment funding - assets - -
Total assets 35,437 44,799
Liabilities
Long-term business insurance policyholder liabilities 9,276 232
Investment contract liabilities 19,956 653
Property & casualty liabilities 319 -
Third-party interests in consolidated funds - -
Borrowed funds E2 420 1,980
Provisions and accruals 198 1
Deferred revenue 22 -
Deferred tax liabilities 203 42
Current tax payable 107 7
Trade, other payables and other liabilities 2,213 1,241
Amounts owed to bank depositors 385 35,858
Derivative financial instruments 302 860
Liabilities held for sale - -
Inter-segment funding - liabilities - -
Total liabilities 33,401 40,874
Net assets 2,036 3,925
Equity
Equity attributable to equity holders of the parent 1,927 2,069
Non-controlling interests 109 1,856
Ordinary shares F2(b)(i) 109 1,584
Preferred securities F2(b)(ii) - 272
Total equity 2,036 3,925
GBPm
Institutional
Old Mutual Asset Non-core Consolidation
Wealth Management Other operations adjustments 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 40 554 341 3,891 87,547
64 1 - - - 92
539 134 14 297 20 2,362
- - 71 8 28 1,227
689 130 696 25 1,020 4,944
1,319 - - - - 1,475
- - 343 192 (535) -
53,554 1,369 1,688 864 4,805 142,516
291 - - 720 - 10,519
48,188 - - 44 - 68,841
- - - - - 319
- - - - 5,986 5,986
- 114 677 - (147) 3,044
40 3 42 - - 284
308 - - - - 330
190 - 19 - - 454
35 3 37 - - 189
919 252 177 10 (536) 4,276
- - - - - 36,243
- - 1 1 37 1,201
1,285 - - - - 1,285
173 170 192 - (535) -
51,429 542 1,145 775 4,805 132,971
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
Year ended Year ended
31 December 31 December
Notes 2015 2014
(Expense)/income
Goodwill impairment and impact of acquisition accounting C1(b) (167) (128)
Net loss on disposal of subsidiaries, associated undertakings and
strategic investments C1(c) (36) (2)
Short-term fluctuations in investment return C1(d) (42) (49)
Investment return adjustment for Group equity and debt instruments held in
life funds C1(e) (31) (42)
Dividends declared to holders of perpetual preferred callable securities C1(f) 31 32
Institutional Asset Management equity plans C1(g) (9) (42)
Credit-related fair value gains/(losses) on Group debt instruments C1(h) 7 (10)
Old Mutual Wealth business transformation costs C1(i) (97) (60)
Total adjusting items (344) (301)
Tax on adjusting items 60 36
Non-controlling interest in adjusting items 19 28
Total adjusting items after tax and non-controlling interests (265) (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
Institutional
Emerging Old Mutual Asset
Year ended 31 December 2015 Markets Wealth Management Total
Impairment of goodwill and other intangible assets - - (23) (23)
Amortisation of acquired PVIF (7) (51) - (58)
Amortisation of acquired deferred costs and revenue - 13 - 13
Amortisation of other acquired intangible assets (13) (56) - (69)
Acquisition costs (4) (10) - (14)
Deferred consideration - (16) (16)
(24) (120) (23) (167)
GBPm
Institutional
Emerging Old Mutual Asset
Year ended 31 December 2014 Markets Wealth Management 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) Net profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments
The net profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments is analysed below:
GBPm
Year ended Year ended
31 December 31 December
2015 2014
Emerging Markets 15 66
Old Mutual Wealth (52) (70)
Institutional Asset Management 1 2
Net loss on disposal of subsidiaries, associated undertakings
and strategic investments (36) (2)
Emerging Markets
Current year transactions
On 10 December 2015, Old Mutual Investment Group, a subsidiary of the Group, acquired an additional 50% stake in African Infrastructure
Investment Managers (Pty) Ltd (AIIM). The accounting related to the step up in ownership from 50% to 100%, which effectively involved a
simultaneous sale of 50% of the business, followed by an acquisition of the fair value of 100% of the business. Consequently a profit of GBP15 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
AIIM at 10 December 2015. Refer to note G2(c) for more information.
Prior year 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.
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%, which 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 year transactions
On 2 February 2015, the Group completed the sale of Skandia Luxembourg and Skandia France. The Group has recognised a loss on disposal of
GBP1 million, which comprises a loss on disposing the net assets of the sold business of GBP31 million and a gain of GBP30 million recycled from foreign
currency translation reserve.
On 30 September 2015, the Group completed the sale of Skandia Leben AG. The Group has recognised a loss on disposal of GBP51 million, which
comprises a loss on disposing the net assets of the sold business of GBP91 million and a gain of GBP41 million recycled from foreign currency translation
reserve.
Prior year transactions
On 30 May 2014, the Group completed the disposal of Skandia Poland, part of Old Mutual Wealth. A loss on disposal of GBP21 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 and prior year transactions
During the year ended 31 December 2015, the Group received additional earn-out income of GBP1 million (year ended 31 December 2014: GBP2 million)
from earn-outs on Institutional Asset Management affiliates disposed of in prior years.
(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.
%
Year ended Year ended
31 December 31 December
Long-term investment rates 2015 2014
Emerging Markets
Mutual & Federal(1) 7.4 7.4
Old Mutual South Africa 8.0 8.0
Rest of Africa 8.5 8.0
Old Mutual Wealth 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
Year ended 31 December 2015 Markets Wealth Other Total
Actual shareholder investment return 88 8 12 108
Less: Long-term investment return 124 5 21 150
Short-term fluctuations in investment return (36) 3 (9) (42)
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 year ended 31 December 2015, the investment
return adjustment increased AOP by GBP31 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 GBP31 million for the year ended
31 December 2015 (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
31 December 2015, these instruments were revalued, the impact of which was a 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 year ended 31 December 2015, due to widening of credit
spreads, a net gain of GBP7 million was recognised (year ended 31 December 2014: net loss of GBP10 million).
(i) Development costs of the new Old Mutual Wealth UK platform
In 2013, Old Mutual Wealth UK business embarked on a significant programme to develop new platform capabilities and to outsource UK business
administration. This will involve replacing many aspects of the existing UK platform, and on completion certain elements of service provision will be
migrated to International Financial Data Services (IFDS) under a long-term outsourcing agreement. The cost of developing the new technology
typically cannot be capitalised, hence these costs and the costs of decommissioning existing technology and migrating of services to IFDS are
excluded from AOP. Only costs that are directly attributable to the programme are excluded. For the year ended 31 December 2015, these costs
totalled GBP97 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
Year ended Year ended
31 December 31 December
Source of guidance Notes 2015 2014
Basic earnings per share IFRS C2(a) 12.7 12.4
Diluted basic earnings per share IFRS C2(b) 12.2 11.5
Adjusted operating earnings per share Group policy C2(c) 19.3 17.9
Headline earnings per share (Gross of tax) JSE Listing Requirements C2(d) 13.9 12.3
Headline earnings per share (Net of tax) JSE Listing Requirements C2(d) 13.9 12.6
Diluted headline earnings per share (Gross of tax) JSE Listing Requirements C2(d) 13.3 11.4
Diluted headline earnings per share (Net of tax) JSE Listing Requirements C2(d) 13.3 11.6
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit for the financial year 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
Year ended Year ended
31 December 31 December
2015 2014
Profit for the financial year attributable to equity holders of the parent from continuing operations 635 632
Loss for the financial year attributable to equity holders of the parent from discontinued operations (21) (50)
Profit for the financial year attributable to equity holders of the parent 614 582
Dividends paid to holders of perpetual preferred callable securities, net of tax credits (24) (25)
Profit attributable to ordinary equity holders 590 557
Total dividends paid to holders of perpetual preferred callable securities of GBP24 million for the year ended 31 December 2015 (year ended
31 December 2014: GBP25 million) are stated net of tax credits of GBP6 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
Year ended Year ended
31 December 31 December
2015 2014
Weighted average number of ordinary shares in issue 4,924 4,901
Shares held in charitable foundations and trusts (13) (6)
Shares held in ESOP trusts (98) (50)
Adjusted weighted average number of ordinary shares 4,813 4,845
Shares held in life funds (81) (127)
Shares held in Black Economic Empowerment trusts (91) (233)
Weighted average number of ordinary shares used to calculate basic earnings per share 4,641 4,485
Basic earnings per ordinary share (pence) 12.7 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 year.
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:
Year ended Year ended
31 December 31 December
Notes 2015 2014
Profit attributable to ordinary equity holders (GBPm) 590 557
Dilution effect on profit relating to share options issued by subsidiaries (GBPm) (7) (10)
Diluted profit attributable to ordinary equity holders (GBPm) 583 547
Weighted average number of ordinary shares (millions) C2(a) 4,641 4,485
Adjustments for share options held by ESOP trusts (millions) 47 48
Adjustments for shares held in Black Economic Empowerment trusts (millions) 91 233
Weighted average number of ordinary shares used to calculate
diluted basic earnings per share (millions) 4,779 4,766
Diluted basic earnings per ordinary share (pence) 12.2 11.5
(c) Adjusted operating earnings per share
The following table presents a reconciliation of profit for the financial year to adjusted operating profit after tax attributable to ordinary equity holders
and summarises the calculation of adjusted operating earnings per share:
Year ended Year ended
31 December 31 December
Notes 2015 2014
Profit for the financial year attributable to equity holders of the parent 614 582
Adjusting items C1(a) 344 301
Tax on adjusting items (60) (36)
Non-core operations B3 31 (1)
Loss from discontinued operations H1 21 50
Non-controlling interest on adjusting items (19) (28)
Adjusted operating profit after tax attributable to ordinary equity holders (GBPm) 931 868
Adjusted weighted average number of ordinary shares used to calculate adjusted
operating earnings per share (millions) C2(a) 4,813 4,845
Adjusted operating earnings per share (pence) 19.3 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 02/2015 '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:
Year ended Year ended
31 December 2015 31 December 2014
Notes Gross Net Gross Net
Profit for the financial year attributable to equity holders of the parent 614 614 582 582
Dividends paid to holders of perpetual preferred callable securities (24) (24) (25) (25)
Profit attributable to ordinary equity holders 590 590 557 557
Adjustments:
Impairments of goodwill and other intangible assets 23 23 14 14
Loss on disposal of subsidiaries, associated
undertakings and strategic investments 36 35 2 14
Realised gains (net of impairments) on available-for-sale
financial assets (5) (5) (20) (20)
Headline earnings 644 643 553 565
Dilution effect on earnings relating to share options issued by subsidiaries (7) (7) (10) (10)
Diluted headline earnings (GBPm) 637 636 543 555
Weighted average number of ordinary shares (millions) C2(a) 4,641 4,641 4,485 4,485
Diluted weighted average number of ordinary shares (millions) C2(b) 4,779 4,779 4,766 4,766
Headline earnings per share (pence) 13.9 13.9 12.3 12.6
Diluted headline earnings per share (pence) 13.3 13.3 11.4 11.6
C3: Dividends
GBPm
Year Year
ended ended
31 December 31 December
2015 2014
2013 Final dividend paid – 6.00p per 11 3/7p share - 279
2014 Interim dividend paid – 2.45p per 11 3/7p share - 115
2014 Final dividend paid – 6.25p per 11 3/7p share 296 -
2015 Interim dividend paid – 2.65p per 11 3/7p share 126 -
Dividends to ordinary equity holders 422 394
Dividends paid to holders of perpetual preferred callable securities 30 32
Dividend payments for the year 452 426
The total dividend paid to ordinary equity holders is 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.
A second interim dividend of 6.25 pence (or its equivalent in other applicable currencies) per ordinary share in the Company has been declared by
the directors. The final dividend will be paid on 29 April 2016 to shareholders on the register at the close of business on 1 April 2016. The dividend
will absorb an estimated GBP297 million of shareholders' funds.
In March and November 2015, GBP17 million and GBP13 million respectively, were 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
This note analyses the income tax expense recognised in profit or loss for the year and the various factors that have contributed to the composition
of the charge.
Current tax
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date,
and any adjustment to tax payable in respect of previous years.
Deferred tax
Deferred taxation is provided using the temporary difference method. Temporary differences are differences between the carrying amounts of
assets and liabilities for financial reporting purposes and their tax base. The amount of deferred taxation provided is based on the expected manner
of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the reporting date in
the specific jurisdiction. Deferred taxation is charged to profit and loss except to the extent that it relates to a transaction that is recognised directly
in other comprehensive income, or a business combination that is an acquisition. The effect on deferred taxation of any changes in tax rates is
recognised in profit and loss, except to the extent that it relates to items previously charged or credited directly to other comprehensive income. A
deferred tax asset is recognised only to the extent that it is probable that future taxable income will be available, against which the unutilised tax
losses and deductible temporary differences can be used. Deferred tax assets are reduced to the extent that it is no longer probable that the related
tax benefits will be realised.
In certain circumstances, as permitted by accounting guidance, deferred tax balances are not recognised. In particular where the liability relates to
the initial recognition of goodwill, or transactions that are not a business combination and at the time of their occurrence affect neither accounting
nor taxable profit.
Critical accounting estimates and judgements – Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that
it relates to items recognised directly in other comprehensive income or equity, in which case it is recognised in other comprehensive income and
the statement of changes in equity respectively.
The Group is subject to income taxes in numerous jurisdictions and the calculation of the Group's tax charge and worldwide provisions for income
tax necessarily involves a degree of estimation and judgement. At any given time the Group typically has a number of open tax returns with
various tax authorities and engages in active dialogue to resolve this. Taxation provisions relating to these open items are recognised based on
the Group's estimate of the most likely outcome, after taking into account external advice where appropriate. Where the final tax outcome of these
matters is different from the amounts that were initially recorded such differences will impact profit or loss, current and deferred income tax assets
and liabilities in the period such determination is made.
(a) Analysis of total income tax expense
The total income tax expense for the year comprises:
GBPm
Year ended Year ended
31 December 31 December
2015 2014
Current tax
United Kingdom 33 19
Overseas tax
- South Africa 272 317
- Rest of Africa 19 19
- Europe 17 23
- Rest of the world 16 14
Withholding taxes 11 16
Adjustments to current tax in respect of prior years (1) 31
Total current tax 367 439
Deferred tax
Origination and reversal of temporary differences 23 43
Effect on deferred tax of changes in tax rates (8) -
Adjustments to deferred tax in respect of prior years (8) (20)
Total deferred tax 7 23
Total income tax expense 374 462
(b) Reconciliation of total income tax expense
The income tax expense charged to profit or loss differs from the income tax expense that would apply if all of the Group's profits from the different
tax jurisdictions had been taxed at the UK standard corporation tax rate. The difference in the effective rate is explained below:
GBPm
Year ended Year ended
31 December 31 December
2015 2014
Profit before tax 1,319 1,364
Tax at UK standard rate of 20.25% (2014: 21.5%) 267 293
Different tax rate or basis on overseas operations 118 95
Untaxed and low taxed income (82) (56)
Disallowable expenses 46 36
Adjustments to current tax in respect of prior years (1) 31
Net movement on deferred tax assets not recognised 7 27
Effect on deferred tax of changes in tax rates (8) -
Adjustments to deferred tax in respect of prior years (8) (20)
Withholding taxes 5 8
Income tax attributable to policyholder returns 25 46
Other 5 2
Total income tax expense 374 462
(c) Income tax relating to components of other comprehensive income
The total income tax expense relating to items recognised in other comprehensive income for the year comprises the following:
GBPm
Year ended Year ended
31 December 31 December
2015 2014
Measurement gains on defined benefit plans 1 1
Property revaluation 3 6
Income tax on items that will not be reclassified subsequently to profit or loss 4 7
Available-for-sale reserves - 5
Income tax on items that may be reclassified subsequently to profit or loss - 5
Income tax expense relating to components of other comprehensive income 4 12
(d) Reconciliation of income tax expense in the IFRS income statement to income tax on adjusted operating profit
GBPm
Year ended Year ended
31 December 31 December
2015 2014
Income tax expense 374 462
Tax on adjusting items
Goodwill impairment and impact of acquisition accounting 20 15
Loss/(profit) on disposal of subsidiaries, associates and strategic investments 1 (11)
Short-term fluctuations in investment return 22 6
Tax on dividends declared to holders of perpetual preferred callable securities recognised in equity (6) (7)
Institutional Asset Management equity plans 5 20
Old Mutual Wealth business transformation costs 18 13
Total tax on adjusting items 60 36
Income tax attributable to policyholders returns (31) (59)
Income tax on adjusted operating profit 403 439
E: Financial assets and liabilities
E1: Loans and advances
GBPm
At At
31 December 31 December
2015 2014(1)
Home loans 6,409 7,816
Commercial mortgages 6,098 6,870
Unsecured retail lending 1,558 1,880
Other term loans 3,961 4,775
Other loans to clients 5,663 4,856
Net finance leases and instalment debtors 4,377 5,236
Deposits placed under reverse purchase agreements 884 1,016
Overdrafts 751 929
Preference shares and debentures 907 1,006
Credit cards 616 745
Factoring accounts 234 277
Policyholder loans 241 248
Properties in possession 16 33
Remittances in transit 9 11
Trade, other bills and bankers' acceptances - 16
Gross loans and advances 31,724 35,714
Provisions for impairment (759) (857)
Specific provisions (529) (596)
Portfolio provision (230) (261)
Total net loans and advances 30,965 34,857
(1) The Group has grossed up GBP126 million relating to the prior year statement of financial position impairment provisions that were previously netted off against the
value of gross loans and advances.
E2: Borrowed funds
The Group raises funding in the normal course of business. The borrowed funds raised for the banking business support the lending and banking
operations of the Group. Other borrowed funds raised support the general funding needs of the Group and the expense has been recognised as
finance costs.
Summary of Borrowed Funds GBPm
Institutional At
Old Mutual Emerging Asset 31 December
Type of securities Notes plc Markets Nedbank Management 2015
Senior debt securities and term loans 112 198 1,331 - 1,641
Floating rate notes E2(a)(i) - - 571 - 571
Fixed rate notes E2(a)(ii) 112 - 760 - 872
Term loans E2(a)(iii) - 198 - - 198
Revolving credit facilities E2(b) - - - 61 61
Mortgage-backed securities E2(c) - - 97 - 97
Subordinated debt securities E2(d) 986 251 488 - 1,725
Total Borrowed funds 1,098 449 1,916 61 3,524
Other instruments treated as equity
for accounting purposes
GBP273 million perpetual preferred callable
securities at 6.38% 273 - - - 273
Total book value of Group debt(1) 1,371 449 1,916 61 3,797
(1) The nominal value of Group debt excluding banking is GBP1,710 million (2014: GBP1,512 million).
On 4 November 2015, being the First Call Date, the Company redeemed the outstanding EUR374 million (GBP253 million) Upper Tier 2 perpetual notes at
their nominal value, together with accrued and unpaid interest.
GBPm
Institutional At
Emerging Asset 31 December
Type of securities Notes Old Mutual plc Markets Nedbank Management 2014
Senior debt securities and term loans 112 125 1,139 - 1,376
Floating rate notes E2(a)(i) - - 563 - 563
Fixed rate notes E2(a)(ii) 112 - 576 - 688
Term loans E2(a)(iii) - 125 - - 125
Revolving credit facilities E2(b) - 72 - 114 186
Mortgage-backed securities E2(c) - - 52 - 52
Subordinated debt securities E2(d) 565 223 642 - 1,430
Total Borrowed funds 677 420 1,833 114 3,044
Other instruments treated as equity
for accounting purposes
GBP273 million perpetual preferred callable
securities at 6.38% 273 - - - 273
EUR374 million perpetual preferred callable
securities at 5.00% A2 253 - - - 253
Total book value of Group debt 1,203 420 1,833 114 3,570
Total borrowed funds can be further analysed between non-banking and banking as follows:
GBPm
At 31 December 2015 At 31 December 2014
Non- Non-
Type of securities banking Banking(1) Total banking Banking(1) Total
Senior debt securities and term loans 160 1,481 1,641 112 1,264 1,376
Revolving credit facilities 61 - 61 114 72 186
Mortgage-backed securities - 97 97 - 52 52
Subordinated debt securities 1,237 488 1,725 788 642 1,430
Total Borrowed funds 1,458 2,066 3,524 1,014 2,030 3,044
(1) Borrowed funds identified as Banking are those which are directly related to the lending and banking businesses in Nedbank and Emerging Markets.
Perpetual preferred callable securities of GBP273 million (2014: GBP526 million) are also classified as non-banking.
Maturity analysis
The table below is a maturity analysis of the liability cash flows based on contractual maturity dates for borrowed funds. Maturity analysis is
undiscounted and based on year-end exchange rates.
GBPm
Institutional At
Old Mutual Emerging Asset 31 December
plc Markets Nedbank Management 2015
Less than 1 year 196 50 - 2 248
Greater than 1 year and less than 5 years 302 135 - 66 503
Greater than 5 years 1,147 493 - - 1,640
Total non-banking 1,645 678 - 68 2,391
Less than 1 year - 15 614 - 629
Greater than 1 year and less than 5 years - 166 1,236 - 1,402
Greater than 5 years - 17 973 - 990
Total banking - 198 2,823 - 3,021
Total 1,645 876 2,823 68 5,412
GBPm
Institutional
Old Mutual Emerging Asset At 31 December
plc Markets Nedbank Management 2014
Less than 1 year 48 19 - 2 69
Greater than 1 year and less than 5 years 280 76 - 129 485
Greater than 5 years 560 266 - - 826
Total non-banking 888 361 - 131 1,380
Less than 1 year - 31 603 - 634
Greater than 1 year and less than 5 years - 220 1,518 - 1,738
Greater than 5 years - 7 295 - 302
Total banking - 258 2,416 - 2,674
Total 888 619 2,416 131 4,054
Interest rate profile
The interest rate profiles of the Group's borrowed funds are analysed as follows:
GBPm
Institutional At
Old Mutual Emerging Asset 31 December
plc Markets Nedbank Management 2015
Fixed rate 1,098 218 760 - 2,076
Floating rate - 231 1,156 61 1,448
Total 1,098 449 1,916 61 3,524
GBPm
Institutional At
Old Mutual Emerging Asset 31 December
plc Markets Nedbank Management 2014
Fixed rate 677 225 666 - 1,568
Floating rate - 195 1,167 114 1,476
Total 677 420 1,833 114 3,044
Currency exposure
The currency exposures of the Groups borrowed funds are analysed as follows:
GBPm
Institutional At
Old Mutual Emerging Asset 31 December
plc Markets Nedbank Management 2015
ZAR - 356 1,847 - 2,203
GBP 1,098 - - - 1,098
USD - 55 69 61 185
Other - 38 - - 38
Total 1,098 449 1,916 61 3,524
GBPm
Institutional At
Old Mutual Emerging Asset 31 December
plc Markets Nedbank Management 2014
ZAR - 379 1,769 - 2,148
GBP 677 - - - 677
USD - 32 64 114 210
Other - 9 - - 9
Total 677 420 1,833 114 3,044
Analysis of security types
(a) Senior debt securities and term loans
(i) Floating rate notes (net of Group holdings)
GBPm
At At
31 December 31 December
Maturity date 2015 2014
Banking - Nedbank Floating rate unsecured senior debt
R1,297 million at JIBAR + 1.00% Repaid - 72
R1,027 million at JIBAR + 1.75% Repaid - 57
R250 million at JIBAR + 1.00% Repaid - 14
R1,044 million at JIBAR + 2.20% Repaid - 59
R677 million at JIBAR + 1.25% March 2016 30 38
R3,056 million at JIBAR + 0.80% July 2016 135 169
R694 million at JIBAR + 0.75% November 2016 31 39
R405 million at JIBAR + 1.30% February 2017 18 23
R1,035 million at JIBAR + 0.85% March 2017 45 58
R806 million at JIBAR + 0.90% June 2017 35 45
R786 million at JIBAR + 1.30% August 2017 31 39
R241 million at JIBAR + 1.12% November 2017 11 14
R472 million at JIBAR + 1.25% February 2018 21 -
R1,427 million at JIBAR + 1.30% June 2018 63 -
R90 million at JIBAR + 1.45% February 2020 4 -
R80 million at JIBAR + 2.15% April 2020 4 5
R476 million at JIBAR + 1.55% November 2020 21 -
R650 million at JIBAR + 1.30% June 2021 29 36
R12 million at JIBAR + 1.55% February 2022 1 -
R1,980 million at JIBAR + 2.00% February 2025 88 -
R500 million at JIBAR + 2.10% April 2026 22 -
589 668
Less: floating rate notes held by other Group companies (18) (105)
Total floating rate notes 571 563
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
31 December 31 December
Maturity date 2015 2014
Non-banking - Old Mutual plc
GBP112 million at 7.125% October 2016 112 112
Total non-banking fixed rate unsecured senior debt 112 112
Banking - Nedbank Fixed rate unsecured senior debt
R478 million at 9.68% Repaid - 27
R3,244 million at 10.55% Repaid - 186
R1,137 million at 9.36% March 2016 51 65
R151 million at 6.91% July 2016 7 9
R1,273 million at 11.39% September 2019 60 77
R380 million at 9.26% June 2020 17 -
R1,888 million at 8.92% November 2020 83 106
R855 million at 9.38% March 2021 38 49
R500 million at 9.29% June 2021 22 28
R215 million at 8.79% February 2022 10 -
R280 million at 9.64% June 2022 12 -
R952 million at 10.07% November 2023 42 -
R391 million at 9.73% March 2024 18 22
R660 million at zero coupon October 2024 11 15
R2,607 million at 9.44% February 2025 118 -
R884 million at 10.685% November 2025 39 -
R800 million at 9.95% April 2026 36 -
R1,739 million at 10.36% June 2026 77 -
R2,000 million at JIBAR + 10.63% July 2027 92 -
R666 million at 10.935% November 2027 30 -
763 584
Less: Fixed rate notes held by other Group companies (3) (8)
Total banking fixed rate unsecured senior debt (net of Group holdings) 760 576
Total fixed rate notes 872 688
All fixed rate notes are non-qualifying for the purpose of regulatory tiers of capital.
(iii) Term loans
GBPm
At At
31 December 31 December
Maturity date 2015 2014
Emerging Markets floating rate loans
$7 million at 3 month LIBOR plus 7.50%(2) March 2016 5 -
$5 million at 3 month LIBOR plus 7.50%(2) March 2016 3 -
$5 million at 3 month LIBOR plus 7.50%(2) March 2016 3 -
R1,500 million at JIBAR + 2.95%(1) August 2017 70 84
R800 million at JIBAR + 2.75%(1) July 2018 35 -
KES451 million at KBRR + 3.87%(1) March 2019 3 -
Emerging Markets fixed rate loans
KES170 million at 14.00% to 14.75%(1) Repaid - 5
KES175 million at 11.70%(1) October 2016 - 1
KES1,000 million at 12.50%(2) January 2016 7 -
KES225 million at 11.70%(1) August 2017 1 2
KES2,000 million at 13.00%(2) July 2017 13 -
KES411 million at 11.50%(1) April 2020 3 -
KES1,183 million at 9.20%(1) September 2020 8 -
KES150 million at 5.00%(1) July 2022 1 1
$6 million at 8.10%(1) August 2017 3 4
$19 million at 8.10%(1) September 2017 9 12
$10 million at 8.10%(1) May 2020 5 7
$5 million at 11.00%(1) September 2022 3 3
$20 million at 8.75%(2) August 2022 11 -
KES466 million at 9.83%(1) July 2022 2 -
$5 million at 6.50%(2) June 2023 3 -
$5 million at 6.50%(2) June 2023 3 -
$10 million at 10.00%(1) December 2023 7 6
Total term loans and other loans 198 125
(1) Banking – The term loans above of GBP150 million are Emerging Markets banking term loans.
(2) Non-banking – The term loans above of GBP48 million are Emerging Markets non-banking term loans
(b) Revolving credit facilities
GBPm
At At
31 December 31 December
Maturity date 2015 2014
Non-banking - Institutional Asset Management
$90 million drawn of a $350 million facility at
$ LIBOR + 1.25% October 2019 61 114
Banking - Emerging Markets
R475 million (31 December 2014: R1,000 million) drawn of a
R1,200 million facility at 3 month JIBAR + 2.95% Repaid - 44
R500 million fully drawn at 3 month JIBAR + 3.10% Repaid - 28
- 72
Total revolving credit facilities 61 186
The Group has access to a GBP800 million (December 2014: GBP800 million) multi-currency revolving credit facility available to the Holding Company.
The Group extended the existing revolving credit facility in August 2015 for one year, resulting in a GBP727 million facility that matures in August 2020
and a GBP73 million facility that matures in August 2019. There is an optional further one year extension in August 2016. At 31 December 2015,
(31 December 2014), none of this facility was drawn.
In December 2015, Emerging Markets entered into a new R5,250 million (GBP230 million) revolving credit facility which matures in three years, with
the option to renew for a further year at maturity. At 31 December 2015 none of this facility was drawn.
(c) Mortgage-backed securities (net of Group holdings)
GBPm
At At
31 December 31 December
Tier Maturity date 2015 2014
Banking - Nedbank
R480 million (class A1) at JIBAR + 1.10% Tier 2 Repaid - 2
R161 million (class A2) at JIBAR + 1.25% Tier 2 October 2039 7 19
R900 million (class A3) at JIBAR + 1.54% Tier 2 October 2039 40 51
R110 million (class B) at JIBAR + 1.90% Tier 2 October 2039 5 6
R558 million at JIBAR +1.20% Tier 2 February 2042 24 -
R100 million at JIBAR +1.45% Tier 2 February 2042 4 -
R680 million at JIBAR +1.55% Tier 2 February 2042 30 -
R80 million at JIBAR +2.20% Tier 2 February 2042 4 -
R65 million at JIBAR + 3.00% Tier 2 February 2042 3 -
117 78
Less: Mortgage backed securities held by other Group companies (20) (26)
Total mortgage-backed securities 97 52
(d) Subordinated debt securities (net of Group holdings)
GBPm
At At
Maturity 31 December 31 December
Tier date 2015 2014
Banking - Nedbank
R1,265 million at JIBAR plus 4.75% Non-core Tier 1 Repaid - 74
R487 million at 15.05% Non-core Tier 1 Repaid - 32
R1,000 million at 10.54% Tier 2 Repaid - 58
$100 million at 3 month $ LIBOR Tier 2 (secondary) March 2022 69 64
R2,000 million at JIBAR + 0.47% Tier 2 July 2022 89 113
R1,800 million at JIBAR + 2.75% Tier 2 July 2023 80 102
R1,200 million at JIBAR + 2.55% Tier 2 November 2023 53 67
R450 million at JIBAR + 10.49% Tier 2 April 2024 20 26
R1,737 million at 3 month JIBAR + 2.55% Tier 2 April 2024 78 98
R300 million at JIBAR + 2.75% Tier 2 October 2024 13 17
R225 million at JIBAR +2.75% Tier 2 January 2025 10 -
R1,624 million at JIBAR + 3.5% Tier 2 July 2025 73 -
R407 million at JIBAR + 11.29% Tier 2 July 2025 19 -
504 651
Less: Banking subordinated debt securities held by other Group companies (16) (9)
Banking subordinated securities 488 642
Non-banking - Old Mutual plc
GBP500 million at 8.00% Lower Tier 2 June 2021 536 565
GBP450 million at 7.88%(1) Lower Tier 2 November 2025 450 -
Non-banking - Emerging Markets
R3,000 million at 8.92%(2) Lower Tier 2 Repaid - 167
R1,288 million at 3 month JIBAR + 2.25% Lower Tier 2 September 2025 57 -
R568 million at 10.90% Lower Tier 2 September 2027 23 -
R300 million at 9.26% Lower Tier 2 November 2024 12 17
R700 million at 3 month JIBAR + 2.20% Lower Tier 2 November 2024 31 39
R537 million at 3 month JIBAR + 2.30% Lower Tier 2 March 2025 24 -
R425 million at 9.76% Lower Tier 2 March 2025 17 -
R409 million at 10.32% Lower Tier 2 March 2027 16 -
R1,150 million at 10.96% Lower Tier 2 March 2030 46 -
R623 million at 11.35% Lower Tier 2 September 2030 25 -
251 223
Total subordinated debt securities 1,725 1,430
(1) On 3 November 2015, the Company issued GBP450 million Dated Tier 2 Subordinated Notes under its existing GBP5,000 million Euro Note Programme. The notes have a
maturity date of 3 November 2025 and pay interest semi-annually on 3 May and 3 November at a fixed rate of 7.88% per annum up to and including the maturity date.
(2) During the year on the first call date the Group redeemed the outstanding R3,000 million Lower Tier 2 subordinated debt at their nominal value, together with
accrued and unpaid interest.
All callable subordinated debt securities have a first call date five years before the maturity date.
F: Non-financial assets and liabilities
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 year ended 31 December 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 year 2,756 2,641 1,107 1,464 669 630 402 538 4,934 5,273
Acquisitions through business
combinations(1) 467 155 - 17 - 14 308 69 775 255
Purchase price adjustments(2) 22 - - - - - - - 22 -
Additions - - - - 72 72 9 4 81 76
Disposal of interests in subsidiaries (41) (86) (125) (335) (1) (22) (4) (192) (171) (635)
Disposals or retirements - - - - (8) (18) (1) - (9) (18)
Transfer to non-current assets
held for sale (29) - - (14) - (3) - - (29) (17)
Foreign exchange and other movements (46) 46 - (25) (134) (4) (4) (17) (184) -
Cost at end of the year 3,129 2,756 982 1,107 598 669 710 402 5,419 4,934
Amortisation and impairment losses
Balance at beginning of the year (624) (598) (792) (946) (449) (437) (306) (457) (2,171) (2,438)
Amortisation charge for the year - - (58) (70) (49) (46) (70) (54) (177) (170)
Impairment losses (23) (14) - - - - - - (23) (14)
Disposal of interests in subsidiaries - - 102 198 1 20 - 192 103 410
Disposals or retirements - - - - 7 17 1 - 8 17
Transfer to non-current assets
held for sale 29 - - 8 - 3 - - 29 11
Foreign exchange and other movements 1 (12) (3) 18 87 (6) 3 13 88 13
Accumulated amortisation and
impairment losses at end of
the year (617) (624) (751) (792) (403) (449) (372) (306) (2,143) (2,171)
Carrying amount
Balance at beginning of the year 2,132 2,043 315 518 220 193 96 81 2,763 2,835
Balance at end of the year 2,512 2,132 231 315 195 220 338 96 3,276 2,763
(1) Goodwill acquired through business combinations comprises GBP292 million in respect of the acquisition of Quilter Cheviot, GBP150 million in respect of the acquisition
of UAP Holdings Limited and GBP25 million in respect of the acquisition of African Infrastructure Investment Managers (Pty) Limited. Refer to note G2 for further
information.
(2) The purchase price adjustments to goodwill of GBP22 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 acquisitions of: Intrinsic Financial Services Limited, GBP7 million; Quilter Cheviot, GBP2 million; and Old Mutual Finance (Pty) Ltd, GBP13 million.
Segmental analysis of goodwill and other intangibles
The following table shows a segmental analysis of the carrying amounts of goodwill and other intangible assets, together with amortisation and
impairment charges, by operating segment:
GBPm
Goodwill and
intangible assets
(carrying amount) Amortisation Impairment
At 31 December 2015 2014 2015 2014 2015 2014
Emerging Markets 415 275 28 16 - -
Old Mutual Wealth 1,620 1,197 112 117 - 14
Nedbank 378 452 37 37 - -
Institutional Asset Management 863 839 - - 23 -
3,276 2,763 177 170 23 14
F2: Non-controlling interests
(a) Profit or loss
(i) Ordinary shares
The non-controlling interests share of profit for the financial year has been calculated on the basis of the Group's effective ownership of the
subsidiaries in which it does not own 100% of the ordinary equity. The principal subsidiaries where a non-controlling interest exists is Nedbank, the
Group's banking business in South Africa and OM Asset Management plc, the Group's asset management business. For the year ended 31
December 2015 the non-controlling interests attributable to ordinary shares was GBP291 million (2014: GBP252 million).
(ii) Preferred securities
GBPm
At At
31 December 31 December
2015 2014
Nedbank
R3,560 million non-cumulative preference shares 19 18
(iii) Non-controlling interests - adjusted operating profit
The following table reconciles non-controlling interests' share of profit for the financial year to non-controlling interests' share of adjusted operating
profit:
GBPm
Year ended Year ended
31 December 31 December
Reconciliation of non-controlling interests' share of profit for the financial year 2015 2014
The non-controlling interests share is analysed as follows:
Non-controlling interests – ordinary shares 291 252
Income attributable to Black Economic Empowerment trusts of listed subsidiaries 13 24
Attributable to Institutional Asset Management equity plans 4 2
Other items 2 2
Non-controlling interests share of adjusted operating profit 310 280
The Group uses an adjusted weighted average effective ownership interests when calculating the non-controllable interest applicable to the
adjusted operating profit of its Southern African banking businesses. These reflect the legal ownership of this business following the implementation for Black
Economic Empowerment (BEE) schemes in 2005. In accordance with IFRS accounting rules the shares issued for BEE purposes are deemed to
be, in substance, options. Therefore the effective ownership interest of the minorities reflected in arriving at profit after tax in the consolidated
income statement is lower than that applied in arriving at adjusted operating profit after tax. In 2015 the increase in adjusted operating profit attributable to
non-controlling interests as a result of this was GBP13 million (2014: GBP24 million).
(b) Statement of financial position
(i) Ordinary shares
GBPm
At At
31 December 31 December
Reconciliation of movements in non-controlling interests Notes 2015 2014
Balance at beginning of the year 1,867 1,502
Non-controlling interests' share of profit 291 252
Non-controlling interests' share of dividends paid (141) (127)
Disposal of interest in OM Asset Management plc A2 114 163
Acquisition of businesses G2(b) 105 53
Net disposal of interests 72 39
Foreign exchange and other movements (326) (15)
Balance at end of the year 1,982 1,867
(ii) Preferred securities
GBPm
At At
31 December 31 December
2015 2014
Nedbank
R3,560 million non-cumulative preference shares 272 272
R3,560 million R10 preference shares issued by Nedbank Limited (Nedbank), the Group's banking subsidiary. These shares are non-redeemable
and non-cumulative and pay a cash dividend equivalent to 83% of the prime overdraft interest rate of Nedbank. Preference shareholders are only
entitled to vote during periods when a dividend or any part of it remains unpaid after the due date for payment or when resolutions are proposed
that directly affect any rights attaching to the shares or the rights of the holders. Preference shareholders will be entitled to receive their dividends in
priority to any payment of dividends made in respect of any other class of Nedbank's shares.
Preferred securities at 31 December 2015 are held at the value of consideration received less unamortised issue costs and are stated net of
securities held by Group companies.
G: Other notes
G1: Contingent liabilities
GBPm
At At
31 December 31 December
2015 2014
Guarantees and assets pledged as collateral security 1,198 1,325
Secured lending 401 455
Irrevocable letters of credit 196 181
Other contingent liabilities 4 6
The Group has provided certain guarantees for specific client obligations, in return for which the Group has received a fee. The Group has
evaluated the extent of the possibility of the guarantees being called on and has provided appropriately.
The Group, through its South African banking business, has pledged debt securities and negotiable certificates of deposit amounting to GBP681 million
(2014: GBP767 million) as collateral for deposits received under re-purchase agreements. These amounts represent assets that have been transferred
but do not qualify for derecognition under IAS 39. These transactions are entered into under terms and conditions that are standard industry
practice to securities borrowing and lending activities.
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.
Nedbank litigation
There are a number of legal or potential claims against Nedbank Group Ltd and its subsidiary companies, the outcome of which cannot at present
be foreseen.
The largest of these potential actions is a claim for R773 million in the High Court against Nedbank Ltd (Nedbank) by Absa Bank Limited (Absa) in
connection with Pinnacle Point Group Ltd, where Absa is alleging that Nedbank had a legal duty of care to them in relation to single stock futures
transactions. Nedbank has filed an exception against the claim and the claim has been held in abeyance since April 2012 by mutual agreement.
Consumer protection
Old Mutual is committed to treating customers fairly and supporting its customers in meeting their lifetime goals and treating customers fairly is
central to how our businesses operate. We routinely engage with customers and regulators to ensure that we meet this commitment, but there is
the risk of regulatory intervention across various jurisdictions, giving rise to the potential for customer redress which can result in retrospective
changes to policyholder benefits, penalties or fines. The Group monitors the exposure to these actions and makes provision for the related costs as
appropriate.
On 2 March 2016, the Financial Conduct Authority (FCA) notified Old Mutual Wealth that one of its subsidiaries, Old Mutual Wealth Life Assurance
Limited, would be investigated by the Enforcement Division of the FCA. The appointment has arisen following an industry-wide thematic project on
"Fair treatment of long-standing customers of life insurers" by the FCA in 2014, which focused on our UK closed book of insurance products. The
appointment of investigators does not itself mean that the FCA has determined that rule breaches and/or other contraventions or offences have
occurred, and at this early stage it is not possible to assess the outcome and, by extension, whether the matter will have financial consequences for
Old Mutual Wealth.
G2: 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 cash 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. For the year ended 31 December 2015, Quilter Cheviot contributed GBP12 million in profit
after tax attributable to equity holders and GBP34 million in adjusted operating profit after tax.
(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 cash consideration of GBP152 million. The acquisition was made as part of the expansion of the Group's footprint in East Africa. The
transaction was financed by the Group from existing funds, without the issuance of any new debt or new 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. The purchase price per share did not
vary between the acquisition of the two tranches and there was no amount recognised in the profit or loss as a result of the step up acquisition. A
loss of GBP0.4 million 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 104 104
Other intangible assets 1 20
Investments & securities 90 90
Cash and cash equivalents 23 23
Trade, other receivables and other assets 66 54
Total assets 284 291
Liabilities
Long-term business policyholder liabilities (53) (54)
Property & casualty liabilities (33) (35)
Deferred tax liabilities (3) (3)
Current tax payable - (5)
Trade, other payables and other liabilities (87) (87)
Total liabilities (176) (184)
Total net assets acquired 108 107
Total value of the business 257
Cash consideration 152
Non-controlling interests recognised 105
Goodwill recognised 150
The purchase price has been allocated based on the fair value of assets acquired and liabilities 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 the
additional intangible assets identified and recognised are brand and customer lists.
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 valued 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 and casualty liabilities, have been recorded at their
estimated fair values.
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, GBP257 million, is greater than the fair value of the net assets acquired and resulted in goodwill of GBP150 million being
recorded in the statement of financial position of the Group.
Acquisition related expenses of GBP4 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 the Group policy.
(c) Acquisition of African Infrastructure Investment Managers (Pty) Ltd
On 10 December 2015, the Group acquired an additional 50% stake in African Infrastructure Investment Managers (Pty) Ltd (AIIM) for a cash
consideration of GBP16 million. As the Group now has a controlling shareholding of 100%, the financial results and position of AIIM have been
consolidated with effect from 10 December 2015.
The accounting related to the step up in ownership from 50% to 100% effectively involved a simultaneous sale of 50% of the business, followed by
an acquisition of the fair value of 100% of the business. Consequently a profit of GBP15 million was realised on the transaction. Consistent with usual
Group practice, this profit was recognised in the IFRS profit or loss, but excluded from AOP.
The total assets of GBP9 million were acquired and included other assets (GBP4 million), cash and cash equivalents (GBP3 million) and derivative assets
(GBP2 million). Total liabilities of GBP3 million were acquired and included other liabilities of GBP3 million. Goodwill of GBP25 million has been recognised on the
transaction.
Work is currently being undertaken to determine the purchase price allocation of the fair value of 100% of the AIIM business.
(d) Disposal of Old Mutual (Bermuda) Ltd (OMB) and certain related obligations to Beechwood Bermuda Limited
As described in note A2, the Group completed the sale of Old Mutual (Bermuda) Holdings Limited (OMBH) on 31 December 2015. The principal
assets and liabilities disposed were reinsurers' share of long-term policyholder liabilities (GBP85 million), investments and securities (GBP267 million),
other assets (GBP243 million), cash and cash equivalents (GBP68 million), long-term business policyholder liabilities (GBP647 million) and other liabilities (GBP6 million).
G3: Events after the reporting date
Disposal of Rogge Global Partners PLC
On 8 February 2016, the Group announced that it has agreed to sell Rogge Global Partners PLC (Rogge) to Allianz Global Investors GmbH. The
transaction is expected to complete in the second quarter of 2016. The assets and liabilities of Rogge have been classified as held for sale at 31
December 2015. Refer to note H2 for further information.
South African capital gains tax inclusion rates changes
On the 24th of February 2016, the Minister of Finance of the Republic of South Africa announced changes to tax legislation which may in future
impact the allocation of taxation between current and deferred tax.
UK Financial Conduct Authority notification of investigation
During 2014 the Financial Conduct Authority (FCA) conducted an industry-wide thematic project on "Fair treatment of long-standing customers of
life insurers". On 2 March 2016 the FCA notified the Old Mutual Wealth business that, as consequence of the review, an Old Mutual Wealth UK
subsidiary will be investigated by the FCA's Enforcement Division. Further detail is included in the contingent liabilities note G1.
Nedbank subscription for shares in African Bank Holdings Limited
In line with the subscription agreement, Nedbank will subscribe for shares in African Bank Holdings Limited for R10 million on 11 March 2016 and
for an additional R400 million on 30 March 2016, representing a 4.1% holding in African Bank Holdings Limited. This aligns with Nedbank's
commitment under the provisions of this agreement.
Results of the Strategic Review
Following the appointment of Bruce Hemphill as Group Chief Executive in November 2015 a strategic review of the Group was initiated. On 11
March 2016 the Group announced that, following the strategic review, it had been concluded that the long-term interests of the Group's
shareholders and other stakeholders will be best served by Old Mutual separating its four principal businesses (Emerging Markets, Nedbank, Old
Mutual Wealth and OM Asset Management plc) from each other. Following completion of the managed separation and at an appropriate point in
the future, the Group, in its current structure will no longer exist. The precise means by which this managed separation of the Group will be effected
is yet to be determined, and will involve significant ongoing regulatory and stakeholder engagement. The Group has a range of options open to it
and the feasibility, sequencing and timing of each element will be affected by a mixture of market, regulatory and other factors. We intend to update
shareholders later in 2016 to provide greater clarity on our preferred route for the managed separation. We expect that the managed separation will
be materially completed by the end of 2018.
As set out in the Corporate Governance section of this Annual Report and Accounts, the Board has considered the financial impacts of the
managed separation as part of the process of assessing the adequacy of the Group's capital and resources to support the desired outcome. This
assessment has supported the continued adoption of the going concern assumption when preparing these financial statements and the Board's
statement in relation to the Group's viability.
At the current time, given the precise means by which the managed separation of the Group will be effected is yet to be determined the financial
impacts cannot be evaluated in these financial statements.
H: Discontinued operations and disposal groups held for sale
H1: Discontinued operations
Income statement from discontinued operations
GBPm
Year ended Year ended
31 December 31 December
2015 2014
Loss before tax from discontinued operations - trading activities (expenses) - (35)
Loss on disposal (21) (19)
Loss before tax from discontinued operations (21) (54)
Income tax credit - 4
Loss after tax from discontinued operations(1) (21) (50)
(1) All of the loss after tax from discontinued operations is attributable to the equity holders of the parent.
The loss on disposal for the year ended 31 December 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. These amounts were paid in cash during
2015.
The loss before tax from discontinued operations for 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: Assets and liabilities held for sale
Assets held for sale of GBP123 million relate to Emerging Markets (GBP84 million), Institutional Asset Management (GBP35 million) and Old Mutual Wealth
(GBP4 million). Liabilities held for sale of GBP12 million relate to Institutional Asset Management.
Emerging Markets
Emerging Markets has classified GBP84 million (R1,923 million) of investment properties as held for sale. These transactions are expected to complete
in the next 12 months. The investment properties form part of the policyholder assets and therefore have no impact on profit or loss of the Group.
Institutional Asset Management
On 8 February 2016, the Group announced that it has agreed to sell Rogge Global Partners PLC (Rogge) to Allianz Global Investors GmbH. The
transaction is expected to complete in the second quarter of 2016. Due to the imminence of the disposal, total assets to the value of GBP35 million,
(including GBP20 million cash and cash equivalents and GBP10 million other assets), and total liabilities to the value of GBP12 million, have been classified
as held for sale at the reporting date. None of these amounts have been impaired in the financial statements.
Old Mutual Wealth
Old Mutual Wealth has classified property, plant and equipment of GBP4 million as held for sale.
Sponsor
Merrill Lynch South Africa (Pty) Ltd
Joint Sponsor
Nedbank Capital
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