Annual Financial Report 2015

RNS Number : 0444V

Old Mutual PLC

13 April 2016

 

Old Mutual plc

Ref 267/16

13 April 2016

annual financial report 2015

Old Mutual plc (the "Company") has today published its Annual Financial Report for 2015.  Copies of the Annual Financial Report and the Strategic Report for 2015 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.oldmutual.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 ("AGM") will be held in the Presentation Suite, 2nd Floor, Millennium Bridge House, 2 Lambeth Hill, London EC4V 4GG on Tuesday, 28 June 2016 at 11.00 a.m. (UK time).  A further announcement will be made when the Notice of the AGM is published.

Today, Old Mutual plc also publishes its Positive Futures Plan, launched in 2015, which focuses on two areas where it can have the greatest influence on sustainable growth; namely enabling financial wellbeing and responsible investment.  Activities in these areas include scaling up financial education programmes and investing funds under management in the green economy and infrastructure.  For more details, read our 'Positive Futures Plan' and our 'How we add value to Africa report' at www.oldmutual.com/reportingcentre

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 11 March 2016 and is available on our website. 

"Risks

The Group's risk philosophy is to hold capital where the risks lie. We only take on risks that we can understand, price appropriately and have the skills to monitor and manage.

The risk landscape is changing rapidly, particularly in context of the persistent volatile, uncertain, complex and ambiguous (VUCA) macro-economic environment. In addition, our business is experiencing a period of change as we execute the managed separation. Our approach to risk management considers a mix of factors - capital, earnings, liquidity and reputation - whose relative weights and degree of granularity vary according to the business and the external environment. We make extensive use of multi-year scenario analysis to highlight creeping risks that may not be evident over a one-year horizon. The results of our analysis has shown that the Group's capital position is resilient in times of stress. Our businesses in the UK and US explicitly seek market risk as part of their business strategies and are exposed to secondary market risk arising from asset-based fees risk. Therefore, the VUCA environment and market downturns will impact these businesses. Within OM Asset Management (OMAM), the business is positioned to withstand market volatility to a certain degree, due to the affiliate profit-share model that provides structural variability to expenses.

The economic outlook for South Africa and more generally for emerging markets has weakened. This is due to a number of macro-economic reasons, including continuing concerns over China's economic growth and falling oil prices. In addition, ratings agencies have noted South Africa's lower GDP growth forecasts and political developments that threaten its commitment to fiscal discipline. This has substantially increased the risk of a sovereign downgrade to below-investment grade status by at least one major agency over the next year. As a result of this and wider political issues in the regions where we operate, we are more explicit on political risk in our principal risks for 2016.

The rand depreciated significantly over 2015, reaching historic lows against the dollar and sterling. This adversely impacts the translation of rand earnings (and balance sheet values) to sterling, and consequently impacts cash remittances from businesses and sterling dividend affordability. The rand remains volatile, with a high risk of further decline in the event of a sovereign downgrade - emphasising currency translation (in particular, its impacts on cash remittances from our businesses) as one of our principal risks.

Over the past few years the Group has been investing substantially - in growing the business through acquisitions, and in IT initiatives driven by our commitment to improve the customer experience and to respond to the breadth of regulatory change impacting all our businesses. Our focus now is on execution and delivery of strategy, as we integrate several key acquisitions and progress a significant number of large-scale change projects across the Group, in particular in Emerging Markets and Nedbank. Strategic execution risk therefore remains a primary concern. The costs and timing of the Old Mutual Wealth initiative for outsourcing technology and administration to IFDS have run substantially ahead of initial estimates. In response to a detailed independent review we have strengthened the governance of the project and increased oversight by both the Old Mutual Wealth and Old Mutual plc Boards. We have also shared key learnings from the review across businesses with similar initiatives.

As in previous years, it remains important to keep a close eye on the changing pattern of credit risk across the Group's businesses. Given the growth of our lending businesses in Emerging Markets and the relative immaturity of these businesses relative to other parts of the Group such as Nedbank, further development of credit risk oversight is a key priority. We are taking steps to strengthen governance and oversight to ensure that we build sufficient expertise to manage credit risk as we grow.

With the backdrop of highly volatile global conditions, regulatory, strategic change and where our businesses are in the investment cycle, we have revised our capital management and dividend policies, including setting of our Solvency II capital appetite. The new Group CEO has performed a strategic review which leads the Group towards a managed separation - four independent businesses operating in the capital markets and environment most appropriate to each of them. This brings a new chapter for the Group and adds to the strategic execution risks in the short to medium term. The Group's underlying risk philosophy of holding capital where the risks lie, combined with strong subsidiary Board governance processes, provides a stable basis from which to move to four independent businesses. Extensive work has been carried out to consider the risks from the new strategy, drawing on external advice on the various legal, regulatory and stakeholder issues as well as stress and scenario testing to evaluate the cash and capital implications. We will continue to adhere to the governance principles set out in the Group Operating Model during this transition, however the practical application will evolve to remain fit for purpose. For more information on our strategic direction, refer to the Strategy section on page 8.

Our principal risks have been determined by assessing the possible effects on our reputation, our stakeholders, our earnings, capital and liquidity, and the future sustainability of our business. They are summarised in the table below. They are closely monitored and overseen by Group management and reported to the Board on a regular basis.

Our business is also affected by a number of risks inherent to the products we offer and the industry we operate in, such as exposure to market levels, interest rates and insurance liability risk. These drive a significant proportion of our capital requirements and earnings volatility exposure. Given the nature of our product offering, market and environment risks are material: market movement impacts on our asset-based fees, generated from client-selected investments, and credit risk within Nedbank and Emerging Markets is correlated to the market conditions. You can read more information on our risk and capital management and risk profile in this section, after the principal risks and uncertainties. Additional risk information is disclosed in the consolidated financial statements, note F, on page 208.

1. Uncertain global economic conditions
How it impacts Old Mutual		2015 and beyond		Risk mitigation and management actions
Like all global financial services firms, the Group is exposed to global economic conditions. The main impact is on Group profitability. The current persistently volatile, uncertain, complex and ambiguous macroeconomic and geopolitical environments exacerbate this impact. The Group's US and UK businesses and Emerging Markets asset management businesses are explicitly seeking market risk as part of their business strategies. Volatile and uncertain global markets could therefore adversely affect earnings levels. Old Mutual Wealth, Old Mutual Investment Group (within Emerging Markets) and OMAM are exposed to secondary market risk through asset-based fee risk. Market risk also arises through guaranteed business in Emerging Markets and residual guarantees in Old Mutual Bermuda, as the sale of that business only related to the non-guarantee business. In our insurance and investment businesses, and especially in Emerging Markets, our earnings are at risk if our customers are unable to keep up premiums, cancel existing policies or withdraw their savings earlier than anticipated (collectively known as lapse risk). Additionally, our future profits  will be at risk if customers do not buy insurance policies from us or invest their savings with us at the levels we anticipate. In our banking and credit businesses, our earnings are at risk if counterparties fail to meet their contractual servicing of interest and principal. Uncertainty and deterioration in global economic conditions may affect the capacity of counterparties to meet these obligations. (Credit risk is further assessed as a principal risk on page 89.) Our exposure to South African sovereign debt and parastatals lies only within the South African businesses, in line with market and regulatory expectations.		The global economic outlook remains uncertain, impacting all of the Group's businesses. Volatility in global equity markets over 2015 and the early part of 2016 had a negative impact on asset growth and net client cash flows for Old Mutual Wealth and OMAM. While the South African economy shares in global economic conditions - and is therefore affected by the interest rate trajectory in the US, the slowdown in China and lower-for-longer oil prices - it is also impacted by domestic factors. During 2015, amidst a benign global economic recovery, South Africa's economic growth forecasts were revised downwards. Key factors were volatile emerging market economies, driven by weaker growth in China, and muted domestic prospects arising from weaker commodity prices and energy supply constraints. These contributed to a sovereign credit downgrade by Fitch in December. A prolonged period of low oil prices, cutting transport and food costs, could help to support disposable incomes and spending, and reduce inflationary pressures, despite rand weakness. However, this has been somewhat offset by drought-induced upward pressure on food prices. If the sovereign credit rating was further downgraded to below investment grade status, the impact on the Group's business outside South Africa would be limited. Within South Africa, the impact would come from the economic and market-related consequences, such as changes in interest rates, foreign exchange rates and international capital flows. Market interest rates, exchange rates and credit default spreads have priced in the impact of a 'soft' downgrade. However, the range of consequences is wide, meaning more severe impacts are possible.		We monitor multiple external economic factors and incorporate them into stress and scenario testing to understand our earnings, liquidity and capital resilience to severe macro-economic events. Within Emerging Markets, market risk arising from guaranteed products is actively managed by their Balance Sheet Management team. Guaranteed products in Old Mutual Bermuda are managed via various hedging programmes. For more detail on Old Mutual Bermuda's hedging programmes, please refer to page 227, note G of the consolidated financial statements. The key impact on Group from a South African sovereign rating downgrade is reduced remittances from the South African businesses and consequently the adjustment to dividends. During the heightened market volatility following the South African finance minister changes in December 2015 and China slowdown in early 2016, the Group's position was monitored on a daily basis and has remained within risk appetite. The deterioration in the rand, interest rates, credit spreads and other economic measures were within of the bounds of our scenario analysis. Our business plans are also regularly updated and include consideration of severe adverse scenarios. We are actively engaging with the South African government - see the following page on Political risk for more detail. We step up our activity to help clients during periods of volatility, with a focus on understanding individual customers' financial positions at the point of sale. Refer to the Business Review sections for case studies on how we partner with and help our customers. Our businesses manage premium collections and credit payments, while monitoring for early indicators of financial distress. We manage our cost base judiciously, while investing sustainably for the future.
2. Political risk
How it impacts Old Mutual	2015 and beyond		Risk mitigation and management actions
Changing government and public sentiment in the key countries where we operate could potentially influence external perceptions of the Group. Political risk may also present additional risks in the macro-economic environment. Given the significant portion of our business in South Africa, we are particularly exposed to political developments there. Exposures include the substantial business we receive from collective labour organisations in South Africa, which could be adversely impacted by a change in sentiment. The nature of a disruptive political event, and the possible consequences for our South African business, are particularly difficult to foresee, as are the triggers that might cause such an event. An event may affect any of our key cash flow, capital or liquidity metrics. See more on possible impacts in the Own Risk and Solvency Assessment section on page 94. Brexit' following the 2016 EU referendum impacts a small part of the UK heritage business in Old Mutual Wealth, which continues to manage EEA legacy business, but is not expected to be material. Old Mutual Global Investors and Quilter Cheviot might need to set up European Economic Area subsidiaries in order to continue to sell business in Europe. Though the economic implications of Brexit are uncertain, one possible consequence is sterling depreciation, which has already been observed in early 2016. If the rand strengthens relative to sterling as a result of Brexit, from a Group reporting perspective, this could mitigate rand depreciation from a South African sovereign rating downgrade. In Zimbabwe, the local government has begun re-engaging internationally with the IMF on its debt programme ($1.8 billion owed to the ECB and IMF) and will have repaid its debts by April 2016, diverting funding into Zimbabwe. A key concern for Old Mutual is our exposure to the government (<£200m as at December 2015) and its potential to default on its debt. The situation in Zimbabwe is exacerbated by current economic conditions and severe drought.	South African policymakers will continue to face challenging economic conditions, as well as the increasing prominence of opposition parties and a more difficult fiscal position. Political risk and uncertainty are likely to increase. Possible negative events that might affect Old Mutual are described below. In South Africa: Change to the regulations and taxation governing the products we sell or manage Change in the ownership of the businesses we invest in or do business with, impacting our customer base Restrictions on the ability of our South African business to remit profits to Group, impacting the affordability of shareholder dividends In the UK: The likelihood of a Brexit following the EU referendum in 2016 (set for 23 June) has increased, with polling suggesting a very close split between Britain remaining in or leaving the EU. This brings economic and legal uncertainty. In Zimbabwe: The risks on government debt, which are offset by the US dollar-denominated currency and assurances that the country will not be reverting to the Zimbabwe dollar. However, government policy moves on reverting to the local currency are uncertain The timing of the pensions commission inquiry and indigenisation law implementation is uncertain and may take time to fully conclude.		Old Mutual will continue to engage and work with relevant stakeholders to be alert to adverse political developments. The Boards of both our South African businesses and the Group continue to monitor and assess the impact of political risks. We are actively engaging with the South African government. This includes leading the engagement with government and South Africa's 'big businesses' across financial services, mining, industrial and telecommunications sectors, on ways to improve sentiment on South Africa's investment case and managing the sovereign ratings downgrade risk. These discussions fed into the 2016 State of the Nation Address and the 2016/17 Budget statement. In 2015 we commissioned independent political risk consultants to further analyse the medium- to long-term implications for the Group. Political risk scenarios have been included in business planning and in our Own Risk and Solvency Assessment process.

3. Currency translation risk, location of capital and sources of remittances
How it impacts Old Mutual	2015 and beyond	Risk mitigation and management actions
Our Group earnings, dividend and regulatory surplus capital are reported in sterling but c.70% of our earnings and surplus capital are denominated in South African rand. The translation of our rand earnings and balance sheet value will reflect exchange rate movements. Our capital is held where our risks are located and in the appropriate currency for those risks; so risk would only be realised if we were to require a transfer of surplus capital between regions during periods of stress. Due to exchange controls and terms of the demutualisation agreement, capital from South Africa is not fully freely transferable. For the stress scenarios we assess, the key impact on Group is through cash and dividends, as referred to in the principal risk 'Uncertain global economic conditions'. The Group's overall solvency position is further desensitised to currency movements by the Solvency II fungibility restrictions. Clarification on the treatment of surplus fungibility has been confirmed and non-EU surpluses may not be included in our Solvency II calculations.	In 2015 the rand depreciated by a further 28%, with an average rate of R19.51 against the pound. This followed depreciations of 4% in 2014 and 27% in 2013. It reflected the relative weakness of South Africa's economic outlook, political uncertainty and, in part, a declining appetite for emerging market currencies. We see macro-economic factors pointing to further rand weakness in the medium term. These include the continuing current account deficit and the possibility of further capital outflows from South Africa. For example, some external investors may sell their holdings of South African government bonds if global interest rates rise and/or the country's sovereign rating is further downgraded.	We hold our capital resources (including much of the Group's issued debt) to meet capital requirements in matched currencies, and service interest on debt with matching earnings and cash flows. We closely monitor the balance of cash flows earned in rand and other currencies, and our dividend policy helps to address this risk through its link to earnings. We use forward currency contracts to hedge expected rand and other currency cash flows over the year ahead, needed to make dividend and other payments in sterling. Regular stress and scenario testing helps us understand and monitor the resilience of our capital and capacity to pay dividends over the business plan horizon. The chosen scenarios include a decline in the rand, alongside further significant currency movements or restrictions (however remote) on the flow of funds from South Africa. Our modelling shows we are sufficiently capitalised in line with our philosophy of holding capital where the risks lie. However, to maintain the dividend cover required in our dividend policy in severe scenarios, a fall in the sterling value of rand-based earnings could result in significantly lower sterling-based dividends. The managed separation will ensure that each business will be able to access capital more easily from, and be more closely aligned to, its natural shareholder bases. This addresses challenges the Group has faced with translation of rand earnings, cash remittances and consequent impact on dividends amidst significant rand depreciation, and lack of transparency of underlying businesses capital strength in the Group's overall solvency position due to fungibility constraints.

4. Strategic execution risk and breadth of regulatory change across the Group
How it impacts Old Mutual	2015 and beyond	Risk mitigation and management actions
Currently, and for the foreseeable future, there is a high degree of execution risk across the Group. Regulatory changes affect the entire industry but the risks of integration of newly acquired business in Emerging Markets and Old Mutual Wealth as well as IT and business process transformations will be specific to our businesses. While many of these regulatory changes represent opportunities for our businesses, the cumulative impact could result in margin compression and increased operational risk during the transition. Emerging Markets is impacted by the Retirement Fund Reform and the Retail Distribution review in South Africa, which will mean significant transformation in the medium term. The National Credit Act will impact the unsecured lending business. Nedbank is affected by the substantial changes in banking regulation, in particular Basel III, that will be phased in by 2019, as well as increased focus on financial crime prevention and customer-related regulations such as the National Credit Act and FAIS. Twin Peaks regulation is likely to come into effect in 2017, potentially affecting both OMEM and Nedbank as domestic systemically important financial institutions. This will be followed by SAM regulatory capital requirements. For Old Mutual Wealth, there have been substantial changes to the UK pensions regime resulting in higher inflows and outflows across the industry and increased need for customers to have access to advice to understand the impact of the new choices available to them. New pensions freedoms became effective on 6 April 2015 and Old Mutual Wealth needs to continue to develop propositions to remain competitive. Many other regulatory developments and actions which continue to be managed as is appropriate. Within OMAM the key execution risks relate to development of its long-term strategy, which includes seeking new partnership opportunities.	As part of delivering the strategy for each of our businesses, we have agreed various acquisitions, partnerships and transformation programmes over the past two years. The challenge now is to execute the stated strategy within each of the businesses and deliver the intended benefits. In addition, the strategy of a managed separation announced in March 2016 will bring a new set of execution risks. Emerging Markets completed the acquisition of a majority holding in UAP in 2015. Emerging Markets' transformation initiative aims to invest in strategic IT-enabled business change, with priorities to improve customer and intermediary experience and deliver business-critical infrastructure. Preparations continue for the SAM regulatory requirements, initially expected to be implemented on 1 January 2016, but delayed until at least 1 January 2017. Nedbank intends to continue rationalising and simplifying core systems as part of its strategy, with significant IT programmes focused on regulatory change, compliance, strategic security, client experience, business processes and growth. We have established a programme for meeting Twin Peaks requirements. We will continue to work towards readiness of governance and risk structures, dovetailed with the managed separation programme. Old Mutual Wealth aims to transform itself into a simpler, vertically integrated business with updated IT systems. While the level of operational risk in Old Mutual Wealth is within our risk appetite, it remains high in the short term - pending the implementation of the outsourcing arrangement and business transformation programme with IFDS and the integration of Intrinsic and Quilter Cheviot. OMAM will endeavour to identify and seize new partnership opportunities as they arise, in line with its strategy of building long-term value for shareholders. It did not conclude any transactions in 2015.	The risks associated with managed separation have been subject to detailed external review covering business competitiveness, and the regulatory, legal and stakeholder risks relating to a managed separation. The managed separation execution is against the backdrop of challenging macro-economic conditions, as referred to previously. There has been extensive stress and scenario testing of the potential impact on cash, capital and earnings. An executive steering group and a bespoke Board oversight committee has been established to facilitate regular monitoring. The Group's Long-Term Incentive Plan is being revised to reflect the objectives and risks of the managed separation. We seek external input for material initiatives across our businesses requiring specialist skills. Within Emerging Markets, there is a structured programme for the integration of the business in Kenya following the UAP acquisition. In addition, oversight committees at both executive and Board levels have been established to oversee the IT and business transformation initiative. Nedbank has a mature Board-level governance framework for management of major IT change and this approach has been extended to cover the regulatory change programmes, including external reviews. In Old Mutual Wealth, on encountering delays and cost increases in the transformation programme, we commissioned a detailed independent review of the governance and risk frameworks which has resulted in replanning and onboarding of external programme managers to work through remedial actions. Lessons from this key change project have been shared across businesses with similar initiatives. Within OMAM, new partnership opportunities are reviewed and evaluated according to strict investment criteria and appropriate governance processes.

5. Credit risk and location of credit risk across the Group
How it impacts Old Mutual	2015 and beyond	Risk mitigation and management actions
One of our largest risks to Group earnings is our exposure to banking credit risk from lending and other financing activities through our ownership of Nedbank - and to a lesser but growing extent within Emerging Markets. Nedbank is a universal bank offering diversified product lines, across secured and unsecured lending. Our exposure through Nedbank is primarily a risk to earnings and remittances, as Nedbank's capital and liquidity requirements are both met from its own available resources. Within Emerging Markets, banking credit risk is expected to increase due to planned growth as part of the strategy to become an integrated financial services business. Banking credit risk arises in our unsecured lending business, Old Mutual Finance (OMF), Faulu, a Kenyan consumer finance business, and our building society in Zimbabwe known as CABS. Associated funding risk arises as funds flow from insurance to banking/lending businesses in Emerging Markets, which requires a robust liquidity management framework. Investment credit risk arises in Old Mutual Specialised Finance and the South African life business, predominantly through the management of assets backing annuity products. Credit risk outside Nedbank and Emerging Markets is relatively limited.	Our credit risk remains within appetite. However, the high levels of personal indebtedness and pressure on consumers in South Africa remain a challenge, as does the impact on corporate credit performance from continuing weakness in commodity prices. Short-term pressure on credit spreads is increasing on state-owned enterprises such as Eskom. However, the risk of default is low, given explicit South African government guarantees. The appetite for consumption of Group products depends on macro-economic factors that are outside our control, as discussed earlier in this section. Our lending credit exposure is concentrated in secured lending by Nedbank. Nedbank intends to grow its transactional banking franchise and balance its funding mix to reduce reliance on wholesale funding through its strategic portfolio tilt initiative. Unsecured lending growth is expected to remain slow. In line with Group strategy, credit risk increased in 2015 - across the Group, but mainly in Emerging Markets' growing lending and annuity businesses. Within Emerging Markets, OMF has achieved controlled growth in unsecured lending from a low base, applying stringent affordability requirements and strict credit criteria. However, in the context of the challenging macro-economic environment, there has been some deterioration in the average credit quality of loans and advances. Emerging Markets is planning further lending growth in Faulu, CABS, and OMF. This will be accompanied by strong credit risk and liquidity risk management together with risk oversight and governance."	Stress testing is carried out at Nedbank and Emerging Markets (and, by extension, Group) to understand exposure to credit events. Nedbank has defined risk limits and early warning thresholds for credit loss ratios, which are continuously monitored and remained within their target range throughout 2015. Nedbank also reviews the quality of credit portfolios to ensure impairment provisions are adequate. As the Emerging Markets portfolio has grown, we are in the process of strengthening our own expertise and the governance of credit risks. We have also sought external views on areas of greater risk, such as our exposures to unsecured lending. Further development of the credit risk and liquidity risk management framework will continue. For unsecured lending, OMF continues to focus on quality business through regular adjustment of affordability and credit scorecards and risk-based product metrics (loan term, size and interest rates), based on changing market conditions. Refer to the Nedbank and Emerging Markets detailed Business Review, found in the 2015 Preliminary Results statement, for more information on credit exposures.

"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 124 to 151.

(b) Key management personnel remuneration and other

		Year ended 31 December 2015		Year ended 31 December 2014
		Number of personnel	Value £'000	Number of personnel	Value £'000
Directors' fees		11	1,388	11	1,366
Remuneration			24,293		22,593
Cash remuneration		12	5,308	12	4,931
Short-term employee benefits		12	8,678	12	7,879
Long-term employee benefits		12	378	12	343
Share-based payments		12	9,929	11	9,440
			25,681		23,959

		Year ended 31 December 2015		Year ended 31 December 2014
Share options		Number of  personnel	Number of options/ shares '000s	Number of  personnel	Number of options/ shares '000s
Outstanding at beginning of the year		5	48	5	1,103
Leavers		1	(11)	-	-
New appointments		-	-	1	7
Granted during the year			29		22
Exercised during the year			(14)		(1,084)
Outstanding at end of the year		4	52	5	48

		Year ended 31 December 2015		Year ended 31 December 2014
Restricted shares		Number of  personnel	Number of options/ shares '000s	Number of  personnel	Number of options/ shares '000s
Outstanding at beginning of the year		9	13,753	9	20,618
Leavers		1	(3,538)	1	(4,230)
New appointments		1	2,056	1	787
Granted during the year			3,055		5,163
Exercised during the year			(944)		(418)
Vested during the year			(3,316)		(4,884)
Effect of share exchange in connection with the OM Asset Management plc IPO			-
Outstanding at end of the year		9	11,066	9	13,753

(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 31 December 2015		Year ended 31 December 2014
		Number of  Personnel	Number of options/ shares '000s	Number of  personnel	Number of options/ shares '000s
Current accounts
Balance at beginning of the year		5	2,435	4	2,535
Net movement during the year			(227)		(100)
Balance at end of the year		5	2,208	5	2,435
Credit cards
Balance at beginning of the year		4	29	2	24
Net movement during the year			(9)		5
Balance at end of the year		4	29	2	24
Mortgages
Balance at beginning of the year		5	465	1	143
Net movement during the year			(355)		322
Balance at end of the year		3	110	5	465
Property & casualty contracts
Total premium paid during the year		3	10	4	15
Claims paid during the year		-	-	2	7
Life insurance products
Total sum assured/value of investment at end of the year		10	23,258	10	25,739
Pensions, termination benefits paid
Value of pension plans as at end of the year		10	4,675	10	4,889

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 is 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 31  December 2015	At 31 December 2014
Balances due from subsidiaries	4,940	4,161
Balances due to subsidiaries	(4,368)	(4,367)
Balances due from other related parties - Fairbairn Trust Company Limited	2	2

Income statement information

At 31 December 2015								£m
	Year ended 31 December 2015					Year ended 31 December 2014
	Interest paid	Ordinary dividends received		Other amounts paid		Interest paid	Ordinary dividends received	Other amounts paid
Subsidiaries	60	321		(97)		23	632	(84)"

"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

11 March 2016"

Enquiries

External communications

Patrick Bowes                           UK        [phone]

Investor relations

Dominic Lagan                           UK        [phone]

Sizwe Ndlovu                             SA        [phone]

Media

William Baldwin-Charles                         [phone]

                                                            [phone]

Notes to Editors

Old Mutual provides investment, savings, insurance and banking services to 18.9 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.

In the year ended 31 December 2015, the Group reported adjusted operating profit before tax of £1.7 billion and had £304 billion of funds under management from core operations (excluding Rogge).

For further information on Old Mutual plc, please visit the corporate website at www.oldmutual.com 

 

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