Final Results - Part 2
Old Mutual PLC
6 March 2001
PART 2
Summary Consolidated Profit and Loss Account
£m Rm
Year Year Year Year
to to to to
31 31 31 31
Dec Dec Dec Dec
Existing Acquired 2000 1999 2000 1999
Operations operations Total Total Total Total
Operating profit
Life assurance
Continuing operations 478 478 426 5,029 4,200
Discontinued operations (50) - (493)
Banking 325 2 327 210 3,440 2,072
Asset management 67 57 124 48 1,305 473
General insurance business 44 44 59 463 582
Other shareholders' income / (36) (26) (62) (32) (652) (316)
(expenses)
Operating profit based on a long 878 33 911 661 9,585 6,518
term investment return
(Note 1)
Goodwill amortisation (54) (5) (568) (49)
Short term fluctuations in (180) 778 (1,894) 7,670
investment returns
Non-operating items 356 54 3,746 532
Profit on ordinary activities 1,033 1,488 10,869 14,671
before tax
Tax on profit on ordinary (186) (165) (1,958)(1,627)
activities
Profit on ordinary activities 847 1,323 8,911 13,044
after tax
Minority interests (341) (257) (3,588)(2,534)
Profit on ordinary activities 506 1,066 5,323 10,510
after tax and minority interests
Dividends paid and proposed (163) (69) (1,714) (680)
Retained profit for the 343 997 3,609 9,830
financial year
Note 1
Operating profit based on a long term investment return is stated before
goodwill amortisation, short term fluctuations in investment return,
non-operating items, taxation and minority interests. All references to '
operating profit' within the Chairman's Statement, Business and Financial
Review refer to this definition.
Earnings per share p c
Basic earnings per share 15.0 34.1 157.8 336.2
Diluted earnings per share 14.9 33.9 156.6 334.2
Operating earnings per share (based on a long term 17.0 12.3 179.4 121.4
investment return before amortisation of goodwill)
Dividend per share 4.7 2.0 49.5 19.7
Weighted average number of shares- millions 3,373 3,127 3,373 3,127
Exchange Rates US$/£ US$/£ R/£ R/£
Year to Year to Year to Year to
31 Dec 31 Dec 31 Dec 31 Dec
2000 1999 2000 1999
Profit and Loss Account (average rate) 1.5159 1.6153 10.5213 9.8588
Balance Sheet (closing rate) 1.4937 1.6176 11.3148 9.9364
£m Rm
Gross premiums written South Rest Total South Rest Total
of of
Africa world Africa world
Year to 31 December 2000
Single 1,393 219 1,612 14,656 2,304 16,960
Recurring 1,187 166 1,353 12,489 1,747 14,236
2,580 385 2,965 27,145 4,051 31,196
Year to 31 December 1999
Single 1,650 208 1,858 16,269 2,050 18,319
Recurring 1,279 197 1,476 12,611 1,941 14,552
2,929 405 3,334 28,880 3,991 32,871
£m Rm
New business premiums written South Rest Total South Rest Total
of of
Africa world Africa world
Year to 31 December 2000
Statutory new business premiums
Single 1,393 219 1,612 14,656 2,304 16,960
Recurring 227 21 248 2,388 221 2,609
1,620 240 1,860 17,044 2,525 19,569
Annual premium equivalent 366 43 409 3,854 451 4,305
Year to 31 December 1999
Statutory new business premiums -
continuing operations
Single 1,650 202 1,852 16,269 1,991 18,260
Recurring 204 36 240 2,011 355 2,366
1,854 238 2092 18,280 2,346 20,626
Annual premium equivalent 369 56 425 3,637 555 4,192
Note
I) Annual premium equivalent is defined as one tenth of
single premiums plus recurring premiums.
£m Rm
Analysis of life operating profit South Rest Total South Rest Total
of of
Africa world Africa world
Year to 31 December 2000
Individual business 165 4 169 1,736 42 1,778
Group business 85 3 88 894 32 926
Continuing operations 250 7 257 2,630 74 2,704
Discontinued operations - - - - - -
Life assurance technical result 250 7 257 2,630 74 2,704
Long term investment return 209 6 215 2,199 63 2,262
Intragroup interest 6 - 6 63 - 63
Life assurance operating profit 465 13 478 4,892 137 5,029
Year to 31 December 1999
Individual business 168 2 170 1,656 20 1,676
Group business 67 2 69 661 19 680
Continuing operations 235 4 239 2,317 39 2,356
Discontinued operations - (50) (50) - (493) (493)
Life assurance technical result 235 (46) 189 2,317 (454)1,863
Long term investment return 167 20 187 1,647 197 1,844
Life assurance operating profit 402 (26) 376 3,964 (257)3,707
£m Rm
Analysis of banking operating profit South Rest Total South Rest Total
of of
Africa world Africa world
Year to 31 December 2000
Net interest income 421 43 464 4,430 452 4,882
Non-interest revenue 382 25 407 4,019 263 4,282
Total operating income 803 68 871 8,449 715 9,164
Specific and general provisions (90) (4) (94) (947) (42) (989)
Net income 713 64 777 7,502 673 8,175
Operating expenses (452) (22) (474) (4,757) (231)(4,988)
Operating profit before share of 261 42 303 2,745 442 3,187
associated undertakings' operating
profit
Share of associated undertakings' profit 24 - 24 253 - 253
Banking operating profit on ordinary 285 42 327 2,998 442 3,440
activities before tax
Year to 31 December 1999
Net interest income 422 22 444 4,162 216 4,378
Non-interest revenue 317 13 330 3,125 129 3,254
Total operating income 739 35 774 7,287 345 7,632
Specific and general provisions (162) (1) (163) (1,597) (10)(1,607)
Net income 577 34 611 5,690 335 6,025
Operating expenses (400) (14) (414) (3,943) (138)(4,081)
Operating profit before share of 177 20 197 1,747 197 1,944
associated undertakings' operating
profit
Share of associated undertakings' profit 13 - 13 128 - 128
Banking operating profit on ordinary 190 20 210 1,875 197 2,072
activities before tax
£m Rm
Existing Acquired Existing Acquired
Analysis of asset operations operations Total operations operations Total
management operating
profit
Year to 31 December
2000
Operating Income 251 245 496 2,641 2,578 5,219
Asset management 53 44 97 557 463 1,020
worldwide
Private client UK - 7 19 26 74 200 274
gross profit
- integration costs - (14) (14) - (147) (147)
Other financial 7 8 15 74 84 158
services
Asset management 67 57 124 705 600 1,305
operating profit
Year to 31 December
1999
Operating Income 192 - 192 2,020 - 2,020
Asset management 45 - 45 444 - 444
worldwide
Private client UK 3 - 3 29 - 29
Asset management 48 - 48 473 - 473
operating profit
Operating income comprises principally gross fees and commissions earned from
asset management activities.
£m Rm
Analysis Premiums Claims Underwriting Premiums Claims Underwriting
of general result result
insurance written net incurred written net incurred
result by of net of of net of
class of reinsurance reinsurance reinsurance reinsurance
business
Year to 31
December
2000
Motor 141 113 (3) 1,484 1,189 (32)
Fire 131 96 - 1,378 1,010 -
Accident 11 5 2 116 53 21
Other 22 12 1 231 126 11
305 226 - 3,209 2,378 -
Long term - - 44 - - 463
investment
return
Operating 305 226 44 3,209 2,378 463
profit
Analysed
between:
Existing 267 198 44 2,809 2,062 463
operations
Acquired 38 28 - 400 295 -
operations
305 226 44 3,209 2,357 463
Year to 31
December
1999
Motor 123 98 (1) 1,213 967 (7)
Fire 40 70 1 394 690 8
Accident 86 26 3 848 256 30
Other 9 5 - 89 49 (1)
258 199 3 2,544 1,962 30
Long term - - 56 - - 552
investment
return
Operating 258 199 59 2,544 1,962 582
profit
£m Rm
South Rest Total South Rest Total
of of
Funds under management Africa world Africa world
31 December 2000
Investments including
assets held to 14,913 6,693 21,606 168,739 75,730 244,469
cover linked liabilities
Unit trusts
Asset management worldwide
Old Mutual Asset Managers 1,266 779 2,045 14,325 8,814 23,139
Private client UK - 1,252 1,252 - 14,166 14,166
Other financial services - 200 200 - 2,263 2,263
1,266 2,231 3,497 14,325 25,243 39,568
Third party
Asset management worldwide
Old Mutual Asset Managers 4,101 379 4,480 46,402 4,288 50,690
United Asset Management - 119,111 119,111 - 1,347,715 1,347,715
4,101 119,490 123,591 46,402 1,352,003 1,398,405
Private client UK - 19,619 19,619 - 221,985 221,985
Other financial services 15 420 435 170 4,752 4,922
4,116 139,529 143,645 46,572 1,578,740 1,625,312
Total funds under management 20,295 148,453 168,748 229,634 1,679,713 1,909,349
31 December 1999
Investments including assets
held to 16,998 6,999 23,997 168,897 69,545 238,442
cover linked liabilities
Unit trusts
Asset management worldwide 1,941 745 2,686 19,287 7,403 26,690
Private client UK - 1,111 1,111 - 11,039 11,039
Nedcor Investment Bank
Asset Managers 757 278 1,035 7,522 2,762 10,284
2,698 2,134 4,832 26,809 21,204 48,013
Third party
Asset management worldwide 4,697 399 5,096 46,668 3,965 50,633
Private client UK - 8,538 8,538 - 84,837 84,837
Nedcor Investment Bank
Asset Managers 2,360 35 2,395 23,450 348 23,798
Other financial services 11 - 11 113 - 113
7,068 8,972 16,040 70,231 89,150 159,381
Total funds under management 26,764 18,105 44,869 265,937 179,899 445,836
Note:
Following the sale of Nedcor Investment Bank Asset Managers to Franklin
Templeton in July, the associated funds under management have been excluded at
31 December 2000.
£m Rm
Year Year Year Year
to to to to
31 31 31 31
Dec Dec Dec Dec
Taxation on profit on ordinary activities 2000 1999 2000 1999
United Kingdom Corporation tax 19 12 200 118
Overseas tax 180 95 1,893 937
Secondary tax on companies 32 - 338 -
Deferred tax (76) 58 (800) 572
Prior period adjustment 31 - 326 -
Tax on profit on ordinary activities 186 165 1,957 1,627
Reconciliation of tax charge to UK rate £m Rm
Tax at UK rate of 30.0 per cent. (1999: 30.25 per cent.) 310 450 3,261 4,436
on profit on ordinary activities before tax
Untaxed income (principally tax exempt investment (204)(252)(2,146)(2,484)
return)
Disallowable expenditure 16 (25) 166 (246)
Secondary tax on companies 32 - 338 -
Other 32 (8) 338 (79)
Tax charge 186 165 1,957 1,627
Reconciliation of profit on ordinary activities after tax £m Rm
and minority interests to operating earnings1
Profit on ordinary activities after tax and minority 506 1,066 5,323 10,510
interests
Goodwill amortisation net of minority interests 42 5 442 49
Short term fluctuations in investment returns net of 205 (667)2,158 (6,576)
minority interest
Non-operating items net of taxation and minority (178) (19)(1,873) (187)
interests
Operating earnings (based on a long term investment 575 385 6,050 3,796
return)
Reconciliation of basic earnings per share to operating £m Rm
earnings per share1
Basic earnings per share 15.0 34.1 157.8 336.2
Goodwill amortisation net of minority interests 1.2 0.1 13.1 1.1
Short term fluctuations in investment returns net of 6.1 (21.3) 64.0(210.0)
minority interests
Non-operating items net of taxation and minority (5.3) (0.6)(55.5) (5.9)
interests
Operating earnings per share (based on a long term 17.0 12.3 179.4 121.4
investment return)
Operating earnings (based on a long term investment return) is stated before
goodwill amortisation, short term fluctuations in investment return and
non-operating items. The comparative operating earnings per share of 12.3 pence
has been restated to exclude goodwill amortised in the year ended 31 December
1999.
Acquisitions
United Asset Management Corporation
On 5 October 2000, the Group acquired the net assets of United Asset
Management Corporation for a cash consideration of £1,351 million. In December
2000, the Group restructured its revenue sharing interests in Pilgrim Baxter
(PBA) and OMAM(US) affiliates to enable participation in the earnings of those
firms. The fair value adjustments detailed below relate the reclassification
of intangible assets to goodwill on consolidation, the recognition of a
deferred taxation asset in respect of future tax benefits expected to arise
from re-equitisation payments made to affiliates and intangible asset
amortisation, and a revaluation of businesses required for resale.
The resultant goodwill of £1,795 million has been capitalised and is being
amortised over its estimated useful life of twenty years. The Group has
accounted for the purchase of the United Asset Management Corporation using
acquisition accounting principles, whereby its results are included in the
consolidation profit and loss account from the date of acquisition.
£m
Book value on acquisition Fair value Fair value to
adjustments Group
Intangible assets 534 (534) -
Investments 32 - 32
Debtors 103 - 103
Tangible fixed 18 - 18
assets
Prepayments and 7 - 7
accrued income
Cash at bank and 133 - 133
in hand
Other assets 10 - 10
Deferred tax 30 194 224
asset
Subordinated (34) - (34)
liabilities
Creditors (246) - (246)
Amounts owed to (287) - (287)
credit
institutions
Net assets of 300 (340) (40)
retained
businesses
Net assets of 46 198 244
businesses
acquired for
resale
Net assets of the 346 (142) 204
acquired business
Net consideration
paid:
- Original 1,351
consideration
- Purchase of
revenue shares
PBA initial 160
payments
PBA option 285
PBA phantom 116
stock plan
OMAM(US) 87
affiliates
Total net 1,999
consideration
Goodwill arising 1,795
A reconciliation of goodwill from 31 December 1999 to 31 December 2000, is
presented below.
£m
Balance as at 31 164
December 1999
Goodwill arising 1,795
on the UAM
acquisition
Goodwill arising 357
on the Gerrard
acquisition
Other 17
Goodwill (54)
amortisation
Balance as at 31 2,279
December 2000
Consolidated Balance Sheet
£m Rm
At At At At
31 Dec 31 Dec 31 Dec 31 Dec
Analysis of total assets 2000 1999 2000 1999
Intangible assets
Goodwill 2,279 164 25,786 1,629
Insurance and other assets
Land and buildings 831 914 9,403 9,081
Other financial investments 15,173 17,167 171,680 170,577
16,004 18,081 181,083 179,658
Assets held to cover linked liabilities 5,602 5,916 63,386 58,784
21,606 23,997 244,469 238,442
Reinsurers' share of technical provisions
Long term business provision 118 140 1,335 1,391
Claims outstanding 19 16 215 159
Provision for unearned premiums 7 5 79 50
144 161 1,629 1,600
Debtors 3,890 524 44,014 5,207
Other assets 530 133 5,997 1,322
Cash at bank and in hand 458 443 5,182 4,402
Prepayments and accrued income 232 317 2,625 3,150
5,110 1,417 57,818 14,081
Total insurance and other assets 26,860 25,575 303,916 254,123
Banking assets
Cash and balances at central banks 1,138 760 12,876 7,552
Treasury bills and other eligible bills 657 744 7,433 7,393
Loans and advances to banks 1,218 613 13,781 6,091
Loans and advances to customers 11,404 9,704 129,033 96,423
Debt securities 924 629 10,455 6,250
Equity securities 624 145 7,061 1,441
Interest in associated undertakings 207 179 2,343 1,779
Tangible fixed assets 93 98 1,052 974
Land and buildings 102 89 1,154 884
Other assets 547 88 6,189 874
Prepayments and accrued income 373 168 4,220 1,669
Total banking assets 17,287 13,217 195,597 131,330
Total assets 46,426 38,956 525,299 387,082
Consolidated Balance Sheet
£m Rm
At At At At
31 Dec 31 Dec 31 Dec 31 Dec
Analysis of total capital and liabilities 2000 1999 2000 1999
Capital and reserves
Called up share capital 355 344 4,017 3,418
Share premium account 511 868 5,782 8,625
Profit and loss account 2,752 2,301 31,138 22,864
Equity shareholders' funds 3,618 3,513 40,937 34,907
Minority interests 1,013 857 11,458 8,515
Subordinated liabilities 39 - 442 -
Insurance and other liabilities
Technical provisions
Long term business provision 13,048 14,767 147,636 146,731
Claims outstanding 323 319 3,654 3,170
Provision for unearned premiums 62 43 702 427
13,433 15,129 151,992 150,328
Technical provisions for linked liabilities 5,602 5,916 63,385 58,784
Provisions for other risks and charges 220 317 2,490 3,150
Creditors 5,646 997 63,884 9,907
Amounts owed to credit institutions 1,224 96 13,850 953
Accruals and deferred income 230 43 2,602 427
Total insurance and other liabilities 26,355 22,498 298,203 223,549
Banking liabilities
Deposits by banks 1,873 798 21,193 7,929
Customer accounts 10,737 9,343 121,487 92,836
Debt securities in issue 1,417 1,194 16,033 11,864
Other liabilities 1,195 609 13,521 6,048
Provisions for liabilities and charges 114 76 1,290 755
Subordinated liabilities 65 68 735 679
Total banking liabilities 15,401 12,088 174,259 120,111
Total liabilities 46,426 38,956 525,299 387,082
Movement in Consolidated Equity Shareholders' Funds
£m Rm
Year Year Year
to to to
31 31 31 31
Dec Dec Dec Dec
2000 1999 2000 1999
Profit for the financial year 506 1,066 5,323 10,510
Foreign exchange movements (415) (35) 465 241
Total recognised gains and losses for the year 91 1,031 5,788 10,751
Dividends paid and proposed (163) (69)(1,714) (680)
(72) 962 4,074 10,071
Issue of new capital in respect of re-equitisation of 153 - 1,691 -
Pilgrim Baxter & Associates and other affiliates
Proceeds from sale of shares previously held to satisfy 24 - 265 -
claims and errors on demutualisation
Issue of new capital on policyholder self-investment - 404 - 3,954
Issue of new capital on listing - 559 - 5,355
Net addition to equity shareholders' funds 105 1,925 6,030 19,380
Equity shareholders' funds at the beginning of
the year 3,513 1,588 34,907 15,527
Equity shareholders' funds at the end of the year 3,618 3,513 40,937 34,907
Consolidated Cash Flow Statement
£m Rm.
Year Year Year Year
to to to to
31 Dec 31 Dec 31 Dec 31 Dec
2000 1999 2000 1999
Total Total Total Total
Operating activities
Net cash inflow from insurance operating 128 495 1,346 4,880
activities
Net cash inflow from banking operating activities 847 257 8,913 2,534
Net cash inflow before financing activities 975 752 10,259 7,414
Net cash outflow from returns on investments and (72) (124) (753) (1,223)
servicing of finance
Total taxation paid (156) (70) (1,642) (690)
Net cash outflow from capital expenditure and (295) (84) (3,104) (828)
financial investment
Net cash (outflow)/inflow from acquisitions and (1,718) 66 (18.076) 650
disposals
Equity dividend paid (122) - (1,284) -
Net cash flow before financing activities (1,388) 540 (14,600) 5,323
Net cash inflow from financing activities 1,027 547 10,801 5,391
Net cash flow of the Group excluding long term (361)1,087 (3,799) 10,714
business
Cash flows relating to insurance activities were
invested as follows:
Increase in cash holdings (142) 122 (1,494) 1,202
Net portfolio investments (1,008) 732 (10,605) 7,215
(866) 854 (9,111) 8,417
Cash flows relating to banking activities were
invested as follows:
Increase in cash and balances at central banks 505 233 5,312 2,297
Net cash flow of the Group excluding long term (361) 1,087 (3,799) 10,714
business
The cash flows presented in this statement relate to shareholder and general
business transactions only.
Embedded Value information
£m £m Rm Rm
At At At At
31 31 31 31
Dec Dec Dec Dec
2000 1999 2000 1999
Adjusted Net Worth 4,730 4,608 53,517 45,791
Equity Shareholders' funds 3,618 3,513 40,937 34,907
Excess of market value of listed subsidiaries
over their 1,132 1,114 12,805 11,069
net asset value
Adjustment to include OMI Life subsidiaries on a (20) (19) (225) (185)
statutory solvency basis
Value of in-force business 823 806 9,314 8,003
Value of in-force business before cost of solvency 886 884 10,028 8,781
capital
Cost of solvency capital (63) (78) (714) (778)
Embedded Value 5,553 5,414 62,831 53,794
Value of in force analysis
South Africa 706 687 7,988 6,830
Individual Business 451 448 5,098 4,455
Group Business 255 239 2,890 2,375
Rest of World 117 119 1,326 1,173
Value in-force business 823 806 9,314 8,003
Embedded Value Profits
£m £m Rm Rm
Year Year Year Year
to to to to
31 31 31 31
Dec Dec Dec Dec
2000 1999 2000 1999
Embedded Value at end of year 5,553 5,414 62,831 53,794
Embedded Value at beginning of year 5,414 3,086 53,794 30,174
Increase in embedded value 139 2,328 9,037 23,620
Less capital raised (153) (963)(1,691) (9,309)
Proceeds from sale of shares previously held
to satisfy (24) (265)
claims and errors on demutualisation
Self investment transaction - (404) - (3,954)
New capital raised (153) (559) (1,691)(5,355)
Plus dividends proposed 163 69 1,714 680
Embedded value profits 125 1,434 8,795 14,991
Profits from new business 74 75 782 741
Point of sale 68 69 718 678
Expected return to end of year 6 6 64 63
Expected return 144 160 1,514 1,581
Experience variances 28 13 289 129
Experience assumption changes 72 757
Profits before investment and exceptional items 318 248 3,342 2,451
Investment variances (14) 99 (143) 972
Investment assumption changes 10 101
Investment return on adjusted net worth 484 1,331 5,092 13,118
Exceptional items - (185) - (1,826)
Impact of 2000 SA tax change - (121) - (1,190)
Sale of UK life operation - (12) - (118)
Additional pensions mis-selling provisions - (52) - (518)
Exchange rate movements (673) (59) 403 276
Embedded value profits 125 1,434 8,795 14,991
Value of new business
12 months to 31 Dec 2000 12 months to 31 Dec 2000
Recurring Single APE VNB Recurring Premiums Single APE VNB
Premiums Premiums Premiums
£m £m £m £m Margin Rm Rm Rm Rm
South 179 1,097 289 67 23% 1,886 11,542 3,040 708
Africa
Individual 131 805 212 38 18% 1,384 8,465 2,230 399
business
Group 48 292 77 29 38% 502 3,077 810 309
business
Rest of 20 211 41 5 13% 212 2,216 434 56
World
Total (pro 199 1,308 330 72 22% 2,098 13,758 3,474 764
forma)
SA Group - 78 8 2 22% - 818 82 18
(free
shares)*
TOTAL 199 1,386 338 74 22% 2,098 14,576 3,556 782
12 months to 31 Dec 1999 12 months to 31 Dec 1999
Recurring Single APE VNB Recurring Single APE VNB
Premiums Premims Premiums Premiums
£m £m £m £m Margin Rm Rm Rm Rm
South 162 1,043 266 55 21% 1,597 10,280 2,625 546
Africa
Individual 141 697 211 28 13% 1,390 6,873 2,077 277
business
(new tax
basis)
Group 21 346 55 27 49% 207 3,407 548 269
business
(excl.
free
shares)
Rest of 36 172 53 7 13% 355 1,696 525 70
World
Total (pro 198 1,215 319 62 20% 1,952 11,976 3,150 616
forma -
new tax
basis)
SA - - - 8 - - - - 73
Individual
(tax
change)
SA Group - 175 18 5 30% - 1,727 172 52
(free
shares)*
TOTAL (old 198 1,390 337 75 22% 1,952 13,703 3,322 741
tax basis)
* Proceeds from free shares issued to retirement funds on demutualisation, and
re-invested with Old Mutual.
Assumptions
* The pre-tax investment and economic assumptions used for South African
business were as follows:
South Africa 31 Dec 31 Dec
2000 1999
Fixed Interest Return 13.0% 14.0%
Equity & Property Return 16.0% 17.0%
Inflation 9.0% 10.0%
Risk Discount Rate 17.0% 18.0%
* Rates of future bonuses have been set at levels consistent with the
investment return assumptions.
* For the in-force business, projected company taxation is based on the
current tax basis that applies to South African life assurers, and
includes full allowance for secondary tax on companies that may be payable
in South Africa. No account has been taken of possible capital gains tax
that may be payable in South Africa in future.
* The assumed future mortality, morbidity and voluntary discontinuance
rates have been based as far as possible on analyses of recent operating
experience. Allowance has been made where appropriate for the effect of
expected AIDS-related claims.
* The management expenses attributable to life assurance business have
been analysed between expenses relating to the acquisition of new business
and the maintenance of business in force. Assumed future expenses were
based on levels experienced up to 31 December 2000. The future expenses
attributable to life assurance business do not include group holding
company expenses.
* Future investment expenses were based on the current scales of fees
payable by the life assurance companies to the asset management
subsidiaries. To the extent that these fees include profit margins for the
asset management subsidiaries, these margins have not been included in the
value of in-force business or the value of new business.
* The effect of increases in premiums over the period for policies
in-force as at 31 December 2000 and 31 December 1999 has been included in
the value of in-force business only where such increases are associated
with indexation arrangements. Other increases in premiums of existing
policies are included in the value of new business.
* Experience assumptions have been changed to reflect revised expectations
of future experience and to include certain margins not previously valued.
In particular, Group Schemes mortality assumptions were revised, Employee
Benefits expense and retention assumptions were revised, and some sources
of Individual Life profit not previously valued have now been valued.
* Conversions between Rands and Sterling were carried out at the following
exchange rates:
Exchange rates Rand /
Sterling
At 31 Dec 2000 11.3148
At 31 December 1999 9.9364
12 months to 31 December 2000 (average) 10.5213
12 months to 31 December 1999 (average) 9.8588
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