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OLD MUTUAL PLC - Annual Financial Report 2016 and Annual General Meeting 2017

Release Date: 11/04/2017 12:00
Code(s): OML     PDF:  
Wrap Text
Annual Financial Report 2016 and Annual General Meeting 2017

    OLD MUTUAL PLC
    ISIN CODE: GB00B77J0862
    JSE SHARE CODE: OML
    NSX SHARE CODE: OLM
    ISSUER CODE: OLOMOL
    Old Mutual plc


    Ref 75/17
    11 April 2017

    ANNUAL FINANCIAL REPORT 2016 AND ANNUAL GENERAL MEETING 2017

    Old Mutual plc (the “Company”) has today published its Annual Financial Report for 2016. Copies of the Annual
    Financial Report, the Strategic Report for 2016, the shareholder circular containing Notice of the 2017 Annual
    General Meeting (AGM) and the Form of Proxy for the AGM have been submitted to the National Storage
    Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do. These documents will also
    be available later today on the Company’s own website at www.oldmutualplc.com. Copies of the Annual
    Financial Report may also be obtained from Investor Relations, Old Mutual plc, 5th Floor, Millennium Bridge
    House, 2 Lambeth Hill, London EC4V 4GG or Old Mutual Square, Isibaya Building, 2nd Floor, 93 Grayston Drive,
    Sandton 2196, South Africa.

    The Company’s Annual General Meeting will be held in the Presentation Suite, 2nd Floor, Millennium Bridge
    House, 2 Lambeth Hill, London EC4V 4GG on Thursday, 25 May 2017 at 11.00 a.m. (UK time). As in prior years,
    the AGM will be webcast via the Company’s website www.oldmutualplc.com.

    The Company notes a correction to the stated 2014 LTIP outcome on page 123 of the Annual Financial Report. In
    the disclosure of the strategic objective of “Effective risk management and run-off of the Old Mutual Bermuda
    business” the liabilities at the end of 2016 are incorrectly stated as c. $1.0bn. The liabilities should be presented
    as c. $0.1bn.

    Today Old Mutual plc also publishes its Positive Futures Plan. This year the Plan focuses on how our businesses
    will continue to deliver on the Plan post managed separation. For more information on how we will continue our
    support for socio-economic transformation in societies please read the report www.oldmutualplc.com/annual-
    report-2016.

    In compliance with the Company's obligations under DTR 6.3.5, additional information is set out below which has
    been extracted in full unedited text from the Annual Financial Report. Accordingly, page references and section
    numbers in the text below refer to page numbers and section numbers in the Annual Financial Report. This
    extracted information should be read in conjunction with the Company’s preliminary results announcement, which
    was released on 9 March 2017 and is available on our website.

    “Risks

    The managed separation strategy represents an inflection point in the Group’s history. Its objective is to unlock
    value for Old Mutual shareholders by placing four strong and well-capitalised businesses into the hands of
    shareholders most suited to owning it and who are able to support their individual growth agenda. The plc’s
    responsibility is to execute this strategy and to wind itself down in an orderly fashion. The plc intends to carry this
    out with limited market dependencies, while maintaining strong management controls over the underlying
    operations and mitigating risks as they crystallise.

    Since the managed separation announcement in March 2016, the governance model has been revamped: the
    Group’s ‘strategic controller’ model has evolved to an ‘active portfolio manager’ model where the plc evaluates
    each of the Group’s businesses as an asset, with a view to realising maximum value through the managed
    separation. The primary principle is that the businesses will be assessed individually: we will no longer seek
    diversification benefits or synergies. The active portfolio manager model means a significant amount of
    responsibility for meeting local capital and liquidity requirements has been delegated to the respective business
    Boards as part of their move towards separation. However, as long as we remain a Group, the plc Board retains
    overall responsibility as well as specific responsibility for plc-level risks and liability management.

    For as long as we remain a group the principal risks we face remain broadly consistent with those described in
    the 2015 Annual Report, albeit with different emphasis on some risks and new risks for the plc. In our UK and
    American businesses, the risks to capital are small but the risks to earnings are very much dependent upon
    market conditions, given their reliance on asset-based fees. This contrasts with our African businesses, where
    macro conditions, particularly in South Africa, create risks to earnings, liquidity and local capital within the lending
    and insurance operations.

    Global macroeconomic risk in all our markets continues to be a key focus for the Group and for financial services
    firms in general. The downside risk to the market buoyancy following the shift in risk sentiment after the US
    presidential election is that global equity markets may be overpriced and may correct in the near future. This
    exposes markets to the risk of overestimating the extent of stimulus measures expected from the Trump
    administration. Developing markets will continue to be sensitive to the US interest rate cycle and the possibility of
    a US protectionist agenda towards China, which may result in a souring of sentiment and a sell-off of emerging
    market assets.

    Intertwined with this is the growing focus on political risk and the impact of political risk on markets. In South
    Africa, a sovereign credit downgrade to below investment grade status was averted in 2016 but remains a
    significant risk. In the UK markets are likely to remain volatile, as the long-term economic impacts of Brexit come
    to light; uncertainty and lower growth prospects could impact investor confidence.

    Both macroeconomic and political risks are regularly assessed in group-wide stress and scenario testing. Given
    the guaranteed products and annuity business within OMEM, as well as the accompanying hedging programmes
    that could result in collateral calls and liquidity requirements, this will continue to be a focus over 2017. We have
    significantly reduced market risk in Old Mutual Bermuda (OMB) through new hedging programmes, although
    some residual risk remains, until the policies mature in 2018.

    While the clear aims of managed separation have reduced ‘strategic vision’ risk, strategic execution risk has
    increased. The strategy will address the prevailing risks presented by the our structure – namely currency
    translation risk (translation of predominantly rand earnings to sterling), hard currency requirements (availability of
    sterling flows to service sterling-denominated debt and plc Head Office costs) and fungibility restrictions (the
    inability to recognise significant rand surplus in the Group’s regulatory Solvency II resources).

    Plc Head Office is responsible for the execution of the managed separation; this has substantially changed its
    focus to evaluating the different separation routes and potential corporate finance activities balancing value, cost,
    time and risk. The businesses are strengthening their standalone governance and risk management capabilities.
    The plc will need to manage legacy risks over a shorter timeframe than would otherwise have been the case and
    ensure the plc is wound down in an orderly manner – projects are in place to address both areas.

    We perceive regulatory risk to be higher, given the level of ‘thematic’ review activity in the UK and the delays in
    implementing key regulations such as the Twin Peaks regime in South Africa.

    Growth objectives in OMEM imply increasing credit risk, in particular within retail lending credit risk. Significant
    initiatives in 2016 have improved credit and liquidity governance frameworks. These improvements give us
    comfort that appropriate oversight capability is in place and will continue to develop as we move towards
    separation.
    The operating businesses still require ongoing investment to achieve the desired maturity of capabilities and
    positioning within their chosen markets.

    Finally, the scale of organisational change we are undergoing means we are particularly cognisant of culture and
    people risk in the businesses and the plc. We will continue to manage our people and culture carefully as we all
    work towards the common goals set out for managed separation.

    Sue Kean
    Group Chief Risk Officer


    Principal risks and uncertainties
    In 2016 our key principal risks have been updated to reflect the risks and opportunities of the managed separation
    strategy. They have been determined by assessing the possible effects and challenges of unlocking the value in
    each of the four individual businesses, and the impacts this could have on our reputation, stakeholders, earnings,
    and capital and liquidity positions. These risks are summarised in the table below and are closely monitored and
    overseen by plc management and regularly reported to the plc Board.

    As long as we remain a Group, the key principal risks facing our businesses will remain in line with those reported
    in 2015, with the managed separation placing a different emphasis on each risk. However, the managed
    separation has substantially changed the plc’s risks (see page 78).

    Our businesses are affected by a number of risks inherent to the products they offer and the industries they
    operate in, such as exposure to market levels, interest rates, credit and liquidity as a consequence of insurance
    liability risk. These drive a significant proportion of our capital requirements and earnings volatility exposure as
    well as requirements for cash and liquidity buffers. Given the nature of our product offering, market and
    environment risks are material: market movement impacts on asset-based fees generated from client-selected
    investments and credit risk within Nedbank and OMEM is correlated to market conditions.

    Our principal risks are detailed below. Additional risk information per business is in their business review sections.


    Current impact                                                               Risk mitigation and
    and risk outlook                                                             management actions
    1. Global macroeconomic conditions


    The current persistently volatile, uncertain, complex and ambiguous          We regularly monitor multiple external economic
    macroeconomic environments could impact consolidated Group                   factors and incorporate them into group-wide stress
    profitability, as with all financial services firms.                         and scenario testing to understand our earnings,
                                                                                 liquidity and capital resilience to severe
    OMAM, OMW and OMEM’s asset management businesses explicitly                  macroeconomic events.
    seek market risk as part of their business strategies and are exposed to
    asset-based fee risk. Market risk also arises through guaranteed             In 2016 we undertook specific scenario testing on
    business in OMEM and residual guarantees in OMB.                             the possible economic impacts of a South African
                                                                                 sovereign downgrade, Brexit and a Trump
    In our insurance and investment businesses, and especially in OMEM,          presidential election victory; these incorporated
    our earnings are at risk if our customers exit our products at a different   a range of possible outcomes and enabled us to
    time to our expectations or where business volumes are lower.                identity mitigating actions. The businesses also
                                                                                 perform testing on their own plans.
    In our lending businesses, earnings are at risk if counterparties fail to
    meet their interest and principal obligations, impacted by global            In light of the managed separation strategy, we
    economic conditions. Our exposure to South African sovereign debt lies       have updated the plc’s financial risk appetite metrics
    only within the local businesses.                                            to focus on central liquidity resources, capital and
                                                                                 earnings volatility; these are updated dynamically
    From a systemic risk point of view, Old Mutual Group Holdings (holding       and projected over the managed separation period.
    company above Old Mutual and Nedbank) has significant country risk
    exposure to South Africa.                                                    Within OMEM, market and liquidity risks arising from
                                                                                 guaranteed products, and the hedges in place to
    Looking forward                                                              manage them, are actively managed by the Balance
    The long-term economic impacts of Brexit are unknown. The immediate          Sheet Management team. Guaranteed products in
    impact of the weakening pound against the South African rand and US          OMB are managed through various hedging
    dollar during 2016 has been favourable but the Group’s currency              programmes.
    translation risk remains. However, uncertainty and lower growth have
    adversely affected net client cash flows in OMW.                             Asset-based fee risk is managed by offering
                                                                                 customers a comprehensive range of internally
    Initial market reaction to Trump’s presidential election victory has seen    managed investment solutions and by diversifying
    markets rally and suggests anticipation of higher US growth, a stronger      our product offering.
    dollar and increasing interest rates. However, there is a risk that
    expected stimulus measures may already be priced-in, and that these
    expectations may be disappointed.

    In South Africa, a sovereign credit downgrade to below investment
    grade status was averted in 2016. But this risk remains in 2017, due to
    the challenging growth outlook and political risk. US interest rate hikes,
    putting pressure on South Africa’s own inflation and interest rates, and
    persistent drought add further headwinds.

    We are exposed to the risk of a short-term spike in interest rates
    following a South African sovereign downgrade, which could result in
    temporary liquidity strain arising from hedging collateral calls in OMEM.

    In the UK, the process of formally applying to leave the EU under Article
    50 could lead to market uncertainty that impacts sentiment and
    confidence in the savings industry.


    Current impact                                                                    Risk mitigation and
    and risk outlook                                                                  management actions
    The implementation of the managed separation is not market-
    dependent, but volatile markets could impact the value realised: timing
    of activities is being carefully managed to ensure value creation.




    2. Political risk

    Changing government policy and public sentiment in the key countries              Old Mutual will continue to engage and
    where we operate could potentially influence external perceptions of the          work with relevant stakeholders to be alert to
    Group, regulations and taxation governing our products, business                  political developments. The Boards of both our
    ownership (impacting our customer base) and fungibility restrictions              South African businesses and the Group continue
    (particularly in South Africa). Political risk also creates additional risks in   to monitor and assess the impact of political risks.
    the macroeconomic environment (see page 74).
                                                                                      We are actively engaging with the South African
    Political risk became particularly acute in 2016, as a Brexit vote in the         government. This includes leading the engagement
    UK and a Trump presidential election victory in the US defied the odds            with government and South Africa’s ‘big businesses’
    and market expectations.                                                          across financial services, mining, industrial and
                                                                                      telecommunications sectors, on ways to improve
    Given the significant portion of our business in South Africa, we are             sentiment on South Africa’s investment case and
    particularly exposed to political developments there. Exposures include           managing the sovereign ratings downgrade risk.
    the business we receive from collective labour organisations and public           This positive engagement was widely viewed as
    sector workers, which presents the risk of mass exits from our products           helping to avoid a sovereign downgrade in 2016.
    following a change in sentiment.
                                                                                      Political risks are explicitly incorporated into our
    In Zimbabwe, President Mugabe is adhering to the Indigenisation Act.              stress and scenario testing. The scenario testing
    Liquidity issues for the country continue, leading to the issuance of bond        mentioned above, on the impacts of Brexit and
    notes by the government in 2016. Social unrest persists, exacerbated              a Trump presidency, included specific testing
    by the lingering effects of drought. In OMEM, the consequence of this is          on the political risk implications for our managed
    increased growth in the Central African Building Society (CABS)                   separation. We plan to further enhance our
    as people look to a quality provider; however, there is continuing risk           testing over 2017.
    over how the ongoing situation in Zimbabwe could affect the value of
    CABS.

    Looking forward
    The effects of Brexit and Trump’s presidency election victory are yet
    to be fully appreciated. With many large Eurozone country elections
    in 2017, it remains to be seen whether the so-called populist trend will
    continue.

    The South African political arena is expected to remain polarised,
    with significant leadership and transition uncertainty ahead of the
    2017 African National Congress (ANC) conference and 2019 national
    elections.

    In Zimbabwe, given continuing economic crises and social unrest, 2017
    is expected to bring further challenges. Tensions are likely to continue
    to escalate between President Mugabe, opposition parties and his own
    party membership.


    Current impact                                                              Risk mitigation and
    and risk outlook                                                            management actions
    3. Strategic execution risk


    For the foreseeable future, there is a high degree of execution risk        A formal managed separation programme and
    across the Group. In addition to the implementation of the managed          governance structure have been established across
    separation, we have major change programmes within the businesses,          the Group, and where required external specialist
    including the OMW and OMEM IT and business transformation                   resources and advisers have been brought on
    programmes. ‘Strategic vision’ risk has been reduced by the clear aims      board. There is regular interaction with key
    set out for the managed separation.                                         stakeholders including the various regulators.

    Regulatory change across the Group remains high and affects the             Each of the four businesses has its own managed
    entire industry; many of these regulatory changes represent                 separation projects in place to ensure they
    opportunities for our businesses. The cumulative impact could result in     strengthen and enhance their governance
    margin compression, resource strain and increased operational risk          structures and activities previously undertaken or
    during transition. Cyber risk remains a key challenge for the industry,     supplemented by the plc.
    with attacks becoming increasingly sophisticated.
                                                                                Recommendations from external advisers on
    In 2016 we created the building blocks for the managed separation. We       OMEM and OMW’s IT programme have been
    undertook extensive planning and stress and scenario testing regarding      reviewed by their Boards and are being
    the different routes by which we could achieve the managed separation,      implemented. OMW’s programme has been
    taking into account potential impacts on key stakeholders and our cash,     replanned with enhanced governance structures.
    capital and earnings positions. We have identified our current plans
    which were formulated following extensive engagement with our key           Specific managed separation-related risks are
    stakeholders and technical advisers, and these discussions continue. It     detailed below page 78.
    should be noted that the managed separation of a diverse multinational
    group is a highly complex matter. Thus, our initial plans remain subject    Further information on mitigating actions within
    to change, implementing the managed separation will require a balance       the businesses can be found in each business
    to be struck between the key criteria of value, cost, time and risk. As     review section.
    activities transfer from Old Mutual plc there will be a need to ensure
    increased skills and resource capacity within the businesses.

    Further information on specific challenges within individual businesses
    can be found in the business review sections.

    Looking forward
    In 2016, regulatory focus in the UK and EU has largely been on
    implementation, with Solvency II, the Prudential Regulation Authority
    (PRA) Senior Insurance Managers Regime and the Market Abuse
    Regulation coming into effect. In South Africa, 2016 was a year of
    postponements to the introduction of key regulation including
    Twin Peaks.

    Regulatory focus in 2017 is expected to be on the implementation
    of existing regulation rather than introducing a large amount of new
    reforms. In the UK this is due to need for regulatory stability given the
    uncertainty presented by Brexit and, in the US, the Trump
    administration is expected to follow a deregulatory agenda.


    4. Credit risk


    One of the largest risks to Group earnings is our exposure to banking       Credit risk received significant focus in 2016.
    credit risk from lending and other financing activities through our         We undertook reviews to ensure that individual
    ownership of Nedbank – and to a lesser but growing extent within            businesses’ credit risk management and
    OMEM.                                                                       governance frameworks are elevated to best
                                                                                market practice levels, to ensure an appropriate
    Nedbank is a universal bank offering diversified product lines across       balance of risk and return.
    secured and unsecured lending. Our exposure through Nedbank is
    primarily a risk to earnings and remittances, as Nedbank’s capital and      We carry out stress testing at Nedbank and
    liquidity requirements are both met from its own available resources.       OMEM (and, by extension, Group) to understand
    Nedbank also has a credit exposure in Nigeria through its strategic         exposure to credit events.
    investment in ETI.
                                                                                Nedbank has defined risk limits and early
    Within OMEM, banking credit risk is increasing due to planned growth        warning thresholds for credit loss ratios. These
    as part of the strategy to become an integrated financial services          were continuously monitored and remained within
    business. Banking credit risk and associated funding risk arises in our     their target range throughout 2016. Nedbank
    unsecured lending businesses. Investment credit risk arises in Old          also reviews the quality of credit portfolios to
    Mutual Specialised Finance and the South African life business,             ensure impairment provisions are adequate.
    predominantly through the management of assets backing annuity
    products.                                                                   As the OMEM’s portfolio has grown, the business
                                                                                is strengthening its own expertise and governance
    Credit risk outside and concentration risk between Nedbank and              of credit and liquidity risks. We have also sought
    OMEM is relatively limited.                                                 external views on areas of greater risk, such
                                                                                as our exposures to unsecured lending and
    Looking forward                                                             wholesale lending. Further development of
    Our credit risk remains within appetite. However, the high levels of        the credit risk and liquidity risk management
    personal indebtedness and pressure on consumers in South Africa             framework will continue.
    remain a challenge: the businesses continue to monitor this risk closely
    against their credit risk appetite limits.                                  For more information on credit risk in Nedbank
                                                                                and OMEM see their business review sections.
    As discussed earlier, appetite for the businesses’ products depends on
    macroeconomic factors that are outside our control.

    In line with Group strategy, credit risk increased in 2016, mainly within
    OMEM’s growing lending and annuity businesses.


    5. Currency translation risk, location of capital and sources of remittances


    Our Group earnings, dividend and surplus capital are reported in               The managed separation seeks to allow
    sterling but most of our earnings and surplus capital are denominated in       each business to have the appropriate capital
    South African rand. The translation of our rand earnings and balance           management to succeed independently and to
    sheet value reflects exchange rate movements, and the managed                  be more closely aligned to its natural shareholder
    separation will address this risk.                                             base. Capital requirements will be met in matched
                                                                                   currencies, and interest on debt with matching
    Our intention under the managed separation is to continue our phased           earnings and cash flows.
    reduction of our stake in OMAM. This will increase our short-term US
    dollar currency translation risk.                                              For 2017 dividend paid in currencies other
                                                                                   than sterling will be converted at the average
    Our capital is held where our risks are located and in the appropriate         effective exchange rate after taking into account
    currency for those risks; so while risk can manifest in a business and         hedging activities and timing of remittances for
    reduce that business’s capital it would not have an impact on plc.             the relevant period.

    Due to exchange controls and terms of the demutualisation agreement,           We continue to use forward currency contracts
    capital from South Africa is not fully freely transferable.                    to hedge expected rand cashflows needed
                                                                                   to make dividend payments. This will remain
    The Group’s overall solvency position is perversely impacted by                under review in light of the uncertainties of the
    currency movements, as the Solvency II fungibility restrictions                managed separation.
    mathematically reduce our solvency ratio as the rand strengthens.
                                                                                   Regular stress and scenario testing helps us
    In 2016 the rand strengthened against the pound by 26% over the year,          understand and monitor the resilience of our
    due mainly to sterling’s weakness after the Brexit vote. This followed         capital and liquidity over the business plan
    three years of rand depreciation: 28% in 2015, 4% in 2014 and 27% in           horizon. Our modelling shows we are sufficiently
    2013. The size of movements in the past few years provides an                  capitalised in line with our philosophy of holding
    indication of the rand’s relatively high volatility.                           capital where the risks lie.

    Looking forward
    The impact on the rand of Donald Trump’s administration is unclear.
    Higher infrastructure spending could boost South Africa’s mining
    industry and general commodity demand. On the other hand,
    protectionism and hostility towards China could result in emerging
    market sentiment souring and a risk asset sell-off.

    Continuing political uncertainty and the threat of a sovereign downgrade
    could weaken the rand and increase volatility.


    Management of separation-related risks.
    Plc Head Office is responsible for the execution of the managed separation; this has substantially changed its
    focus to evaluating the different separation routes and potential corporate finance activities. We need to ensure
    that:

    -   Managed separation will balance the key criteria of value, cost, time and risk
        The different managed separation paths have been assessed in terms of the value, time, cost and risks while
        minimising market dependency and maintaining flexibility. Detailed stress and scenario testing is undertaken
        on the options and reassessed at each iteration.

    -   The four businesses are sufficiently well-capacitated to stand alone
        Each business’s ability to stand alone has been evaluated. Detailed planning of actions to fill any gaps
        identified has included the setting up of transition processes of skills and capabilities from the plc to the
        individual businesses. Completion of these actions is being monitored centrally. The transition processes
        cover the management of capital and liquidity adequacy and the capability of the risk functions.

    -   We continue to meet our governance and regulatory obligations
        We have redefined our governance structure to give clarity on the new decision-making structures and due to
        the increased level of corporate activity being undertaken we have enhanced our market abuse framework.

    -   The plc Head Office is wound down in an orderly manner
        Plc has its own restructuring project, including the transition of required activities into the businesses. Legacy
        items such as the pension scheme and the insurance captive have dedicated resource to ensure they are
        effectively closed-out. The managed separation has increased people risk across the Group; this is
        being managed at both Group and local level.”


    “Related parties
    The Group provides certain pension fund, insurance, banking and financial services to related parties. These are
    conducted on an arm’s length basis and are not material to the Group’s results.

    (a) Transactions with key management personnel, remuneration and other compensation

    Key management personnel are those persons having authority and responsibility for planning, directing and
    controlling the activities of the Group, directly or indirectly, including any Director (whether executive or otherwise)
    of the Group. Details of the compensation paid to the Board of Directors as well as their shareholdings in the
    Company are disclosed in the Remuneration Report on pages 104 to 139.


    (b)   Key management personnel remuneration and other compensation

                                                              Year ended             Year ended
                                                              31 December 2016       31 December 2015
                                                              Number of              Number of
                                                              personnel     £’000    personnel   £’000
    Directors’ fees                                           11            1,584    11          1,388
    Remuneration                                                            25,133               24,293
      Cash remuneration                                       14            6,228    12          5,308
      Short-term employee benefits                            14            9,828    12          8,678
      Long-term employee benefits                             14            280      12          378
      Share-based payments                                    11            8,797    12          9,929


                                                                            26,717               25,681


    Share options                                                 Year ended           Year ended
                                                                  31 December 2016     31 December   2015
                                                                              Number
                                                                              of                     Number of
                                                                              options/               options/
                                                              Number of       shares    Number of    shares
                                                              personnel       ’000s     personnel    ’000s
    Outstanding at beginning of the year                      4               52        5             48
    Leavers                                                   –               –         1            (11)
    Granted during the year                                                   6                       29
    Exercised during the year                                                 –                      (14)
    Outstanding at end of the year                            4               58        4             52


    For the year ended 31 December 2016
    J: Other notes continued
    J3: Related parties continued
    (c) Key management personnel remuneration and other compensation continued

    Restricted shares                                            Year ended                  Year ended
                                                                 31 December 2016            31 December 2015
                                                                                Number of                 Number of
                                                                                 options/                  options/
                                                                 Number of      shares       Number of    shares
                                                                 personnel      ’000s        personnel    ’000s
    Outstanding at beginning of the year                         9              11,066       9            13,753
    Leavers                                                      2              (2,974)      1            (3,538)
    New appointments                                             2              5,215        1            2,056
    Granted during the year                                                     11,566                    3,055
    Exercised during the year                                                   (206)                     (944)
    Vested during the year                                                      (1,225)                   (3,316)
    Outstanding at end of the year                               9              23,442       9            11,066


    (c) Key management personnel transactions
    Key management personnel and members of their close family have undertaken transactions with Old Mutual plc
    and its subsidiaries, joint ventures and associated undertakings in the normal course of business, details of which
    are given below. For current accounts positive values indicate assets of the individual whilst for credit cards and
    mortgages positive values indicate liabilities of the individual.

                                                                        Year ended               Year ended
                                                                        31 December 2016         31 December 2015
                                                                        Number
                                                                        of                       Number of
                                                                        personnel £000s          personnel £000s
    Current accounts
    Balance at beginning of the year                                    5            2,208       5          2,435
    Net movement during the year                                                     743                    (227)
    Balance at end of the year                                          4            2,951       5          2,208
    Credit cards
    Balance at beginning of the year                                    5            20          4          29
    Net movement during the year                                                     10                     (9)
    Balance at end of the year                                          4            30          5          20
    Mortgages
    Balance at beginning of the year                                    3            110         5          465
    Net movement during the year                                                     11                     (355)
    Balance at end of the year                                          1            121         3          110
    Property & casualty contracts
    Total premium paid during the year                                  1            6           3          10


    Life insurance products
    Total sum assured/value of investment at end of the year            9           23,325     10         23,258
    Pensions, termination benefits paid
    Value of pension plans as at end of the year                        9           3,339      10         4,675


    Various members of key management personnel hold or have at various times during the year held, investments
    managed by asset management businesses of the Group. These include unit trusts, mutual funds and hedge
    funds. None of the amounts concerned are material in the context of the funds managed by the Group business
    concerned, and all of the investments have been made by the individuals concerned either on terms which are
    the same as those available to external clients generally or, where that is not the case, on the same preferential
    terms as were available to employees of the business generally.”

    “Related parties

    Old Mutual plc enters into transactions with its subsidiaries in the normal course of business. These are
    principally related to funding of the Group’s businesses and head office functions. Details of loans, including
    balances due from/to the Company, are set out below. Disclosures in respect of the key management personnel
    of the Company are included in the Group’s related parties disclosures in note J3.

    There are no transactions entered into by the Company with associated undertakings.

                                                                                                          £m
                                                                                               At         At
                                                                                               31         31
                                                                                               December   December
                                                                                               2016       2015
    Balances due from subsidiaries                                                             4,070      4,940
    Balances due to subsidiaries                                                               (3,908)    (4,368)
    Balances due from other related parties – Nedgroup Trust Limited                           16         2


    Income statement information
    At 31 December                                                                                           £m
                                                    Year ended  31 December 2016      Year ended  31 December 2015
                                                                Ordinary   Other                  Ordinary    Other
                                                    Interest    dividends  amounts    Interest    dividends   amounts
                                                    received    received   paid       received    received    paid
    Subsidiaries                                    74          95         (108)      60          321         (97)”

    “Responsibility statement of the Directors in respect of the annual financial report

    We confirm that to the best of our knowledge:

    -   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 Company and the undertakings
        included in the consolidation taken as a whole, and
    -   The strategic 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.

    We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and
    provides the information necessary for shareholders to assess the Group’s position and performance, business
    model and strategy.


    Bruce Hemphill                                             Ingrid Johnson
    Group Chief Executive                                      Group Finance Director

    8 March 2017”


    Enquiries
    External communications
    Patrick Bowes                          UK     +44 20 7002 7440
    Investor relations
    Dominic Lagan                          UK     +44 20 7002 7190
    Sizwe Ndlovu                           SA     +27 11 217 1163

    Media
    William Baldwin-Charles                       +44 20 7002 7133
                                                  +44 7834 524833


    Notes to Editors
    Old Mutual provides investment, savings, insurance and banking services to 19.4 million customers in Africa, the Americas,
    Asia and Europe. Originating in South Africa in 1845, Old Mutual has been listed on the London and Johannesburg Stock
    Exchanges, among others, since 1999.

    Old Mutual is executing its strategy of managed separation, which will entail separating its four businesses into standalone
    entities. The four businesses are:

    Old Mutual Emerging Markets: an attractive business with a dominant position in South Africa, well-placed to capitalise on
    sub-Saharan African growth as a diversified financial services provider with strong operations in key East and West African
    markets.

    Nedbank: one of South Africa’s four largest banks with very strong corporate, commercial and property finance franchises,
    and a growth opportunity in the retail market, as well as pan-African optionality through its stake in Ecobank Transnational Inc
    (ETI).

    Old Mutual Wealth: a leading, integrated wealth management business, focused on the UK upper and middle market, with
    strong prospects in a rapidly growing £3 trillion market.
    OM Asset Management: an institutionally focussed, multi-boutique asset management business, delivering strong, diversified
    growth in attractive asset classes through organic initiatives and acquisitions.

    For the year ended 31 December 2016, Old Mutual reported an adjusted operating profit before tax of £1.7 billion and had
    £395 billion of funds under management. For further information on Old Mutual plc and the underlying businesses, please visit
    the corporate website at www.oldmutualplc.com

    Sponsor:
    Merrill Lynch South Africa (Pty) Ltd

    Joint Sponsor:
    Nedbank Corporate and Investment Banking


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