Final Results (part 2)
Old Mutual PLC
25 February 2002
PART 2
OLD MUTUAL PLC
Results for the year ended 31 December 2001 (contd)
The financial information in this document does not constitute the Company's
statutory accounts for the year ended 31 December 2001 but is derived from those
accounts. Statutory accounts for 2000 have been delivered to the Registrar of
Companies, and those for 2001 will be delivered following the Company's Annual
General Meeting. The auditors have reported on those accounts: their reports
were unqualified and did not contain statements under Section 237 (2) or (3) of
the Companies Act 1985.
Summary Consolidated Profit and Loss Account
Notes £m Rm
Year to Year to Year to Year to
31 Dec 31 Dec 31 Dec 31 Dec
2001 2000 2001 2000
Operating profit
South Africa
Operating profit 249 250 3,085 2,630
Long term investment return 148 215 1,830 2,262
Life business 397 465 4,915 4,892
Asset management 37 46 458 484
Banking 290 269 3,593 2,829
General insurance 46 44 570 463
770 824 9,536 8,668
United States
Life business - acquired during the year 13 - 161 -
Asset management 116 44 1,437 462
129 44 1,598 462
United Kingdom and Rest of World
Life (2) 13 (25) 137
Asset management (3) 34 (38) 359
Banking 79 58 979 611
74 105 916 1,107
7 Other shareholders' income / (expenses) (29) (34) (359) (357)
Debt service costs (67) (28) (830) (295)
7 Write-down of strategic investments (21) - (260) -
2 Operating profit based on a long term investment return before 856 911 10,601 9,585
goodwill amortisation and impairment, write-down of investment
in Dimension Data Holdings plc and short term fluctuations in
investment return
Goodwill amortisation (132) (54) (1,636) (568)
Goodwill impairment (500) - (6,196) -
8 Write-down of investment in Dimension Data Holdings plc (269) - (3,334) -
Short term fluctuations in investment return 126 (180) 1,561 (1,894)
Operating profit on ordinary activities before tax and 81 677 996 7,123
non-operating items
8 Non-operating items - 356 - 3,746
Profit on ordinary activities before tax 81 1,033 996 10,869
10(a) Tax on profit on ordinary activities (278) (186) (3,445) (1,958)
(Loss) / profit on ordinary activities after tax (197) 847 (2,449) 8,911
Minority interests (26) (341) (322) (3,588)
(Loss) / profit for the financial year (223) 506 (2,771) 5,323
Dividends paid and proposed (172) (163) (2,606) (1,714)
Retained (loss) / profit for the financial year (395) 343 (5,377) 3,609
Earnings per share p c
Year to Year to Year to Year to
31 Dec 31 Dec 31 Dec 31 Dec
2001 2000 2001 2000
1(b) Operating earnings per share after tax and minority
interests based on a long term investment return before
goodwill amortisation and impairment, write-down of
investment in Dimension Data Holdings plc and short term
fluctuations in investment return 13.2 17.0 163.4 179.4
1(b) Basic earnings per share (6.3) 15.0 (77.9) 157.8
Diluted earnings per share (6.3) 14.9 (77.9) 156.6
Dividend per share 4.8 4.7 72.7* 49.5
*Indicative only - the actual amount of the dividend per share in Rand
will be determined by reference to the exchange rate prevailing on 4 April
2002 and announced by the company on 5 April 2002.
Consolidated Balance Sheet
Notes £m Rm
At At At At
31 Dec 31 Dec 31 Dec 31 Dec
Analysis of total assets 2001 2000 2001 2000
Intangible assets
12 Goodwill 1,580 2,279 27,537 25,786
Insurance and other assets
Investments
Land and buildings 586 831 10,213 9,403
Other financial investments 16,714 15,173 291,301 171,680
17,300 16,004 301,514 181,083
Assets held to cover linked liabilities 4,415 5,602 76,947 63,386
21,715 21,606 378,461 244,469
Reinsurers' share of technical provisions
Long term business provision 421 118 7,337 1,335
Claims outstanding 33 19 575 215
Provision for unearned premiums 9 7 157 79
463 144 8,069 1,629
Debtors
Debtors arising from direct insurance operations 147 268 2,562 3,032
Debtors arising from reinsurance operations 6 6 105 68
Other debtors 8,024 3,616 139,847 40,914
8,177 3,890 142,514 44,014
Other assets
Tangible fixed assets 102 101 1,778 1,143
Cash at bank and in hand 475 458 8,279 5,182
Present value of acquired in-force business 325 - 5,664 -
Other assets 393 429 6,849 4,854
1,295 988 22,570 11,179
Prepayments and accrued income
Accrued interest and rent 99 193 1,725 2,184
Deferred acquisition costs 66 - 1,150 -
Other prepayments and accrued income 100 39 1,743 441
265 232 4,618 2,625
Total insurance and other assets 31,915 26,860 556,232 303,916
Banking assets
Cash and balances at central banks 630 1,138 10,980 12,876
Treasury bills and other eligible bills 653 657 11,372 7,433
Loans and advances to banks 649 1,218 11,313 13,781
Loans and advances to customers 7,797 11,404 135,884 129,033
Debt securities 725 924 12,648 10,455
Equity securities 225 624 3,921 7,061
Interest in associated undertakings 118 207 2,057 2,343
Tangible fixed assets 111 93 1,935 1,052
Land and buildings 80 102 1,392 1,154
Other assets 62 547 1,080 6,189
Prepayments and accrued income 259 373 4,517 4,220
Total banking assets 11,309 17,287 197,099 195,597
Total assets 44,804 46,426 780,868 525,299
Consolidated Balance Sheet
Note £m Rm
At At At At
31 Dec 31 Dec 31 Dec 31 Dec
Analysis of total liabilities 2001 2000 2001 2000
Capital and reserves
Called up share capital 374 355 6,517 4,017
Share premium account 516 511 8,993 5,782
Merger reserve 184 - 3,205 -
Profit and loss account 1,396 2,752 24,330 31,138
Equity shareholders' funds 2,470 3,618 43,045 40,937
Minority interests 565 1,013 9,847 11,458
Subordinated liabilities 22 39 383 442
Insurance and other liabilities
Technical provisions
Long term business provision 14,154 13,048 246,684 147,636
Claims outstanding 272 323 4,741 3,654
Provision for unearned premiums 54 62 941 702
14,480 13,433 252,366 151,992
Technical provisions for linked liabilities 4,415 5,602 76,947 63,386
Provisions for other risks and charges 341 220 5,944 2,490
Creditors
Creditors arising from direct insurance operations 401 275 6,989 3,112
Creditors arising from reinsurance operations 7 4 122 44
Other creditors including tax and social security 10,078 5,367 175,646 60,727
10,486 5,646 182,757 63,883
13 Amounts owed to credit institutions 897 1,224 15,633 13,850
14 Convertible loan stock 439 - 7,651 -
Accruals and deferred income 234 230 4,079 2,602
31,292 26,355 545,377 298,203
Total insurance and other liabilities
Banking liabilities
Deposits by banks 1,862 1,873 32,454 21,193
Customer accounts 6,802 10,737 118,550 121,487
Debt securities in issue 986 1,417 17,183 16,033
Other liabilities 501 1,195 8,729 13,521
Provisions for liabilities and charges 84 114 1,471 1,290
Subordinated liabilities 220 65 3,829 735
Total banking liabilities 10,455 15,401 182,216 174,259
Total liabilities 44,804 46,426 780,868 525,299
Movements in Consolidated Equity Shareholders' Funds
£m Rm
Year to Year to Year to Year to
31 Dec 31 Dec 31 Dec 31 Dec
2001 2000 2001 2000
(Loss) / profit for the financial year (223) 506 (2,771) 5,323
Foreign exchange movements (964) (415) 4,846 477
Total recognised (losses) / gains for the year (1,187) 91 2,075 5,800
Dividends paid and proposed (172) (163) (2,606) (1,714)
Retained (loss) / profit for the financial year (1,359) (72) (531) 4,086
Issue of new capital in respect of acquisition of Fidelity & Guaranty 206 - 2,578 -
Life
Shares issued under option schemes 2 - 24 -
Issue of new capital in respect of re-equitisation of Pilgrim Baxter &
Associates and Other affiliates - 153 - 1,691
Proceeds from sale of shares previously held to satisfy claims and 3 24 37 253
errors on demutualisation
Net (reduction) / addition to equity shareholders' funds (1,148) 105 2,108 6,030
Equity shareholders' funds at the beginning of the year 3,618 3,513 40,937 34,907
Equity shareholders' funds at the end of the year 2,470 3,618 43,045 40,937
Consolidated Cash Flow Statement
£m Rm
Year to Year to Year to Year to
31 Dec 31 Dec 31 Dec 31 Dec
2001 2000 2001 2000
Net cash inflow from operating activities 864 975 10,708 10,259
Net cash outflow from returns on investments and servicing of finance (183) (72) (2,268) (753)
Total tax paid (269) (156) (3,334) (1,642)
Net cash outflow from capital expenditure and financial investment (152) (295) (1,884) (3,104)
Net cash outflow from acquisitions and disposals (316) (1,718) (3,916) (18,076)
Equity dividends paid (167) (122) (2,070) (1,284)
Net cash inflow from financing activities 676 1,027 8,377 10,801
Net cash inflow / (outflow) of the Group excluding long term business 453 (361) 5,613 (3,799)
Cash flows relating to insurance activities were invested as follows:
Increase in cash holdings 63 142 781 1,494
Increase / (decrease) in net portfolio investments 543 (1,008) 6,729 (10,605)
606 (866) 7,510 (9,111)
Cash flows relating to banking activities were invested as follows:
(Decrease) / increase in cash and balances at central banks (153) 505 (1,897) 5,312
Net cash inflow / (outflow) of the Group excluding long term business 453 (361) 5,613 (3,799)
Reconciliation of operating profit to operating cash flow
Profit from insurance and other activities 7 374 85 3,936
Profit from banking activities 74 303 918 3,187
Profit on ordinary activities before tax 81 677 1,003 7,123
Unrealised investment (gains) / losses (103) 184 (1,276) 1,936
Insurance and other non cash flow items 947 (430) 11,735 (4,526)
Banking non cash flow items 91 (140) 1,128 (1,473)
Net cash (outflow) / inflow from other banking activities (152) 684 (1,882) 7,199
Net cash flow from operating activities 864 975 10,708 10,259
1(a) Reconciliation of profit on ordinary activities after tax and minority
interests to operating earnings
£m Rm
Year to Year to Year to Year to
31 Dec 31 Dec 31 Dec 31 Dec
2001 2000 2001 2000
(Loss) / profit on ordinary activities after (223) 506 (2,771) 5,323
tax and minority interests
Goodwill amortisation net of minority 120 42 1,487 442
interests
Goodwill impairment 500 - 6,196 -
Write-down of Dimension Data Holdings plc net 144 - 1,788 -
of tax and minority interests
Short term fluctuations in investment returns (73) 205 (905) 2,158
net of tax and minority interests
Non-operating items net of tax and minority - (178) - (1,873)
interests
Operating earnings after tax and minority interests based on
a long term investment return before goodwill amortisation
and impairment, write-down of investment in Dimension Data
Holdings plc and short term fluctuations in investment 468 575 5,795 6,050
return
1(b) Reconciliation of basic earnings per share to operating earnings per share
p c
Year to Year to Year to Year to
31 Dec 31 Dec 31 Dec 31 Dec
2001 2000 2001 2000
Basic earnings per share (6.3) 15.0 (77.9) 157.8
Goodwill amortisation net of minority 3.4 1.2 41.9 13.1
interests
Goodwill impairment 14.1 - 174.5 -
Write-down of Dimension Data Holdings plc net 4.1 - 50.3 -
of tax and minority interests
Short term fluctuations in investment returns (2.1) 6.1 (25.4) 64.0
net of tax and minority interests
Non-operating items net of tax and minority - (5.3) - (55.5)
interests
Operating earnings per share after tax and minority 13.2 17.0 163.4 179.4
interests based on a long term investment return before
goodwill amortisation and impairment, write-down of
investment in Dimension Data Holdings plc and short term
fluctuations in investment return
Weighted average number of shares - millions 3,550 3,373 3,550 3,373
1(c) Exchange rates $/£ R/£
Year to Year to Year to Year to
31 Dec 31 Dec 31 Dec 31 Dec
2001 2000 2001 2000
Profit and loss account (average rate) 1.4405 1.5159 12.3923 10.5213
Balance sheet (closing rate) 1.4542 1.4937 17.4286 11.3148
2 Summary of operating profit
£m Rm
South United UK & South United UK &
Rest Rest
of of
Africa States World Total Africa States World Total
Year to 31 December 2001
Life assurance (3(c)) 397 13 (2) 408 4,915 161 (25) 5,051
Asset management (4(a)) 37 116 (3) 150 458 1,437 (38) 1,857
Banking (5) 290 - 79 369 3,593 - 979 4,572
General insurance business (6) 46 - - 46 570 - - 570
Other shareholders' income / (expenses) 12 - (41) (29) 149 - (508) (359)
(7)
Debt service costs - (3) (64) (67) - (37) (793) (830)
Write-down of strategic investments (7) - - (21) (21) - - (260) (260)
Operating profit based on a long term 782 126 (52) 856 9,685 1,561 (645) 10,601
investment return before goodwill
amortisation and impairment, write-down
of investment in Dimension Data
Holdings plc and short term
fluctuations in investment return
Year to 31 December 2000
Life assurance 465 - 13 478 4,892 - 137 5,029
Asset management 46 44 34 124 484 462 359 1,305
Banking 269 - 58 327 2,829 - 611 3,440
General insurance business 44 - - 44 463 - - 463
Other shareholders' income / (expenses) 17 - (51) (34) 179 - (536) (357)
Debt service costs - - (28) (28) - - (295) (295)
Operating profit based on a long term 841 44 26 911 8,847 462 276 9,585
investment return before goodwill
amortisation, non-operating items and
short term fluctuations in investment
return
All United States life assurance activities were acquired during the year ended
31 December 2001.
3(a) Life assurance: gross premiums written
£m Rm
South United UK & South United UK &
Rest Rest
of of
Africa States World Total Africa States World Total
Year to 31 December 2001
Individual business
Single 854 578 97 1,529 10,583 7,163 1,202 18,948
Recurring 757 78 87 922 9,381 967 1,078 11,426
1,611 656 184 2,451 19,964 8,130 2,280 30,374
Group business
Single 598 - 13 611 7,411 - 161 7,572
Recurring 280 - 29 309 3,470 - 359 3,829
878 - 42 920 10,881 - 520 11,401
Total gross premiums 2,489 656 226 3,371 30,845 8,130 2,800 41,775
Year to 31 December 2000
Individual business
Single (restated) 1,053 - 189 1,242 11,078 - 1,988 13,066
Recurring 893 - 109 1,002 9,396 - 1,147 10,543
1,946 - 298 2,244 20,474 - 3,135 23,609
Group business
Single 630 - 30 660 6,628 - 316 6,944
Recurring 294 - 57 351 3,093 - 600 3,693
924 - 87 1,011 9,721 - 916 10,637
Total gross premiums 2,870 - 385 3,255 30,195 - 4,051 34,246
South African individual new business single premiums include flexi and
conventional maturity transfers of £155 million (R1,923 million) (2000: £150
million (R1,577 million)) and guaranteed capital fund transfers of £61 million
(R761 million) (2000: £140 million (R1,473 million)) to Investment Frontiers not
previously reported in new business premium income.
3(b) Life assurance: new business premiums
£m Rm
South United UK & South United UK &
Rest Rest
of of
Africa States World Total Africa States World Total
Year to 31 December 2001
Statutory new business premiums
Individual business
Single 854 578 97 1,529 10,583 7,163 1,202 18,948
Recurring 159 26 11 196 1,970 322 136 2,428
1,013 604 108 1,725 12,553 7,485 1,338 21,376
Group business
Single 598 - 13 611 7,411 - 161 7,572
Recurring 20 - 1 21 248 - 12 260
618 - 14 632 7,659 - 173 7,832
Total new business premiums 1,631 604 122 2,357 20,212 7,485 1,511 29,208
Annual premium equivalent 324 84 23 431 4,017 1,038 284 5,339
Year to 31 December 2000
Statutory new business premiums
Individual business
Single (restated) 1,053 - 189 1,242 11,078 - 1,988 13,066
Recurring 179 - 20 199 1,883 - 210 2,093
1,232 - 209 1,441 12,961 - 2,198 15,159
Group business
Single 630 - 30 660 6,628 - 316 6,944
Recurring 48 - 1 49 505 - 11 516
678 - 31 709 7,133 - 327 7,460
Total new business premiums 1,910 - 240 2,150 20,094 - 2,525 22,619
Annual premium equivalent 395 - 43 438 4,159 - 451 4,610
Notes
(i) Annual premium equivalent is defined as one tenth of single premiums plus
recurring premiums.
(ii) South African individual new business single premiums include flexi and
conventional maturity transfers of £155 million (R1,923 million) (2000: £150
million (R1,577 million)) and guaranteed capital fund transfers of £61 million
(R761 million) (2000: £140 million (R1,473 million)) to Investment Frontiers not
previously reported in new business premium income.
3(c) Analysis of life assurance operating profit
£m Rm
South United UK & South United UK &
Rest Rest
of of
Africa States World Total Africa States World Total
Year to 31 December 2001
Individual business 174 13 (8) 179 2,152 161 (99) 2,214
Group business 75 - 1 76 933 - 12 945
Life assurance technical result 249 13 (7) 255 3,085 161 (87) 3,159
Long term investment return 148 - 5 153 1,830 - 62 1,892
Life assurance operating profit 397 13 (2) 408 4,915 161 (25) 5,051
before goodwill amortisation
Year to 31 December 2000
Individual business 165 - 4 169 1,736 - 42 1,778
Group business 85 - 3 88 894 - 32 926
Life assurance technical result 250 - 7 257 2,630 - 74 2,704
Long term investment return 215 - 6 221 2,262 - 63 2,325
Life assurance operating profit
before goodwill amortisation 465 - 13 478 4,892 - 137 5,029
The results of Fidelity & Guaranty Life are included in the profit and loss
account from 1 July 2001 and are disclosed net of restructuring costs of £9
million (R113 million).
The start up costs of £19 million (R231 million) associated with the Group's UK
life assurance business, Selestia, are included in the life assurance technical
result. Excluding these start up costs, the UK and Rest of World life assurance
operating profit before goodwill amortisation would have been a positive £17
million (R206 million).
4(a) Analysis of asset management operating profit
£m Rm
South UK & South UK &
Rest Rest
United of United of
Africa States World Total Africa States World Total
Year to 31 December 2001
Fund management worldwide 28 116 6 150 346 1,437 74 1,857
United States - 116 - 116 - 1,437 - 1,437
Old Mutual Asset Managers (US) - 38 - 38 - 471 - 471
Pilgrim Baxter - 29 - 29 - 359 - 359
Other Old Mutual (US) affiliates - 49 - 49 - 607 - 607
Rest of the world 28 - 6 34 346 - 74 420
Old Mutual Asset Managers (South 16 - - 16 198 - - 198
Africa)
Old Mutual Asset Managers (except - - 6 6 - - 74 74
South Africa)
Old Mutual Unit Trusts 11 - - 11 136 - - 136
Other 1 - - 1 12 - - 12
Private client UK - gross profit - - 2 2 - - 25 25
- integration costs - - (12) (12) - - (149) (149)
Other financial services 9 - 1 10 112 - 12 124
Asset management operating profit 37 116 (3) 150 458 1,437 (38) 1,857
before goodwill amortisation and
impairment
Year to 31 December 2000
Fund management worldwide 39 44 14 97 410 462 148 1,020
United States - 44 - 44 - 462 - 462
Old Mutual Asset Managers (US) - 15 - 15 - 157 - 157
Pilgrim Baxter - 11 - 11 - 116 - 116
Other Old Mutual (US) affiliates - 18 - 18 - 189 - 189
Rest of the world 39 - 14 53 410 - 148 558
Old Mutual Asset Managers (South 19 - - 19 199 - - 199
Africa)
Old Mutual Asset Managers (except - - 14 14 - - 148 148
South Africa)
Old Mutual Unit Trusts 16 - - 16 169 - - 169
Other 4 - - 4 42 - - 42
Private client UK - gross profit - - 26 26 - - 274 274
- integration costs - - (14) (14) - - (147) (147)
Other financial services 7 - 8 15 74 - 84 158
Asset management operating profit 46 44 34 124 484 462 359 1,305
before goodwill amortisation
The operating profit of £49 million (R607 million) (2000: £18 million (R189
million)) of Other Old Mutual (US) affiliates comprises £22 million (R273
million) (2000: £8 million (R84 million)) relating to Old Mutual Strategic
Affiliates and £27 million (R334 million) (2000: £10 million (R105 million))
relating to Old Mutual Financial Affiliates.
4(b) Analysis of asset management revenue and operating profit
£m Rm
Old Mutual (US) Holdings OMAM Pilgrim Other Old Total OMAM Pilgrim Other Old Total
(US) Baxter Mutual (US) (US) Baxter Mutual (US)
Affiliates Affiliates
Year to 31 December 2001
Revenue 147 85 219 451 1,822 1,053 2,713 5,588
Expenses (109) (56) (170) (335) (1,351) (694) (2,106) (4,151)
Asset management operating profit 38 29 49 116 471 359 607 1,437
before goodwill amortisation and
impairment
Year to 31 December 2000
Revenue 41 29 58 128 431 305 610 1,346
Expenses (26) (18) (40) (84) (274) (189) (421) (884)
Asset management operating profit 15 11 18 44 157 116 189 462
before goodwill amortisation
The results of Old Mutual (US) Holdings are included in the Group's fund
management worldwide result, from the date of acquisition, for the last three
months of 2000.
5 Analysis of banking operating profit
£m Rm
South UK & South UK &
Rest Rest
of of
Africa World Total Africa World Total
Year to 31 December 2001
Net interest income 386 43 429 4,783 533 5,316
Non-interest revenue (including exceptional revenue of 413 55 468 5,118 681 5,799
£36 million (R441 million))
Total operating income 799 98 897 9,901 1,214 11,115
Specific and general provisions (including exceptional (118) - (118) (1,462) - (1,462)
provision of £32 million (R400 million))
Net income 681 98 779 8,439 1,214 9,653
Operating expenses (399) (26) (425) (4,945) (322) (5,267)
Operating profit before share of associated 282 72 354 3,494 892 4,386
undertakings' profit, goodwill amortisation and
write-down of investment in Dimension Data Holdings
plc
Share of associated undertakings' profit 8 7 15 99 87 186
Operating profit before goodwill amortisation and 290 79 369 3,593 979 4,572
write-down of investment in Dimension Data Holdings
plc
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 goodwill amortisation and
share of associated undertakings' profit and 261 42 303 2,745 442 3,187
non-operating items
Share of associated undertakings' profit 8 16 24 84 169 253
Operating profit before goodwill amortisation and
non-operating items 269 58 327 2,829 611 3,440
6 Analysis of general insurance result by class of business
£m Rm
Premiums Claims Premiums Claims
written net incurred net Operating written net incurred net Operating
of of result of of result
reinsurance reinsurance reinsurance reinsurance
Year to 31 December 2001
Motor 164 130 - 2,032 1,611 2
Fire 56 36 - 694 446 1
Accident 126 88 2 1,561 1,091 24
Other 5 2 3 62 25 35
351 256 5 4,349 3,173 62
Long term investment return - - 41 - - 508
351 256 46 4,349 3,173 570
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 investment return - - 44 - - 463
305 226 44 3,209 2,378 463
7 Other shareholders' income / (expenses) and write-down of strategic investments
£m Rm
Year to Year to Year to Year to
31 Dec 31 Dec 31 Dec 31 Dec
2001 2000 2001 2000
Long term investment return credited to operating result 12 17 149 179
Net corporate expenses (41) (51) (508) (536)
Other shareholders' income / (expenses) (29) (34) (359) (357)
Write-down of strategic investments (21) - (260) -
Following a review of the Group's portfolio of strategic investments during the
year, a write-down of £21 million (R260 million) was made.
8 Investment in Dimension Data Holdings plc
Profit attributable to shareholders is stated after crediting / (charging) the
following items:
£m Rm
Year to Year to Year to Year to
31 Dec 31 Dec 31 Dec 31 Dec
2001 2000 2001 2000
Loss on holding in Dimension Data Holdings plc before tax and (269) - (3,334) -
minority interests
Gain on restructuring of Dimension Data Holdings plc and other - 356 - 3,746
interests before tax and minority interests
Tax (14) (5) (171) (52)
(Loss) / gain on holding in / restructuring of Dimension Data (283) 351 (3,505) 3,694
Holdings plc and other interests before minority interests
Minority interests 139 (173) 1,717 (1,821)
(Loss) / gain on holding in / restructuring of Dimension Data (144) 178 (1,788) 1,873
Holdings plc and other interests after tax and minority interests
During 2000, a non-operating gain was recognised following the exchange of
Nedcor Limited's 25.1% interest in Dimension Data International Limited for the
current holding of 8.2% in Dimension Data Holdings plc. In light of market
movements during 2001, an exceptional impairment in the carrying value of the
Group's investment in Dimension Data Holdings plc has been recognised,
reflecting a market value of R14.50 per share at 31 December 2001. Although
both events are exceptional in the context of their significance to the Group,
the current year loss will form part of banking operating profit in the
statutory financial statements, while the prior year gain was classified as non-
operating in accordance with Financial Reporting Standard 3.
9 Funds under management
£m Rm
South United UK & South United UK &
Rest of Rest of
Africa States World Total Africa States World Total
At 31 December 2001
Investments including assets held 11,519 4,497 5,699 21,715 200,760 78,376 99,325 378,461
to cover linked liabilities
Unit trusts
Fund management worldwide
Old Mutual Asset Managers 670 - 360 1,030 11,677 - 6,274 17,951
Private client UK - - 1,051 1,051 - - 18,317 18,317
Other financial services - - 159 159 - - 2,771 2,771
670 - 1,570 2,240 11,677 - 27,362 39,039
Third party
Fund management worldwide
Old Mutual Asset Managers 2,783 - 401 3,184 48,504 - 6,989 55,493
Old Mutual Asset Managers (US) - 48,884 - 48,884 - 851,979 - 851,979
Pilgrim Baxter - 8,675 - 8,675 - 151,193 - 151,193
Old Mutual Strategic Affiliates - 20,110 5,336 25,446 - 350,489 92,999 443,488
2,783 77,669 5,737 86,189 48,504 1,353,661 99,988 1,502,153
Private client UK - - 16,347 16,347 - - 284,905 284,905
Other financial services 12 - 363 375 209 - 6,327 6,536
2,795 77,669 22,447 102,911 48,713 1,353,661 391,220 1,793,594
Fund management worldwide
Old Mutual Financial Affiliates - 13,485 2,745 16,230 - 235,025 47,841 282,866
2,795 91,154 25,192 119,141 48,713 1,588,686 439,061 2,076,460
Total funds under management 14,984 95,651 32,461 143,096 261,150 1,667,062 565,748 2,493,960
At 31 December 2000
Investments including assets held
to cover linked liabilities 14,913 - 6,693 21,606 168,739 - 75,730 244,469
Unit trusts
Fund 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
Fund management worldwide
Old Mutual Asset Managers 4,101 - 379 4,480 46,402 - 4,288 50,690
Old Mutual Asset Managers (US) - 50,153 - 50,153 - 567,471 - 567,471
Pilgrim Baxter - 11,735 - 11,735 - 132,779 - 132,779
Old Mutual Strategic Affiliates - 18,412 6,179 24,591 - 208,328 69,914 278,242
4,101 80,300 6,558 90,959 46,402 908,578 74,202 1,029,182
Private client UK - - 19,619 19,619 - - 221,985 221,985
Other financial services 15 - 420 435 170 - 4,752 4,922
4,116 80,300 26,597 111,013 46,572 908,578 300,939 1,256,089
Fund management worldwide
Old Mutual Financial Affiliates - 29,190 3,442 32,632 - 330,278 38,945 369,223
4,116 109,490 30,039 143,645 46,572 1,238,856 339,884 1,625,312
Total funds under management 20,295 109,490 38,963 168,748 229,636 1,238,856 440,857 1,909,349
10(a) Tax on profit on ordinary activities
£m Rm
Year to Year to Year to Year to
31 Dec 31 Dec 31 Dec 31 Dec
2001 2000 2001 2000
United Kingdom corporation tax 15 19 186 200
Overseas tax 125 180 1,549 1,894
Secondary tax on companies 23 32 285 338
Deferred tax 112 (76) 1,388 (800)
Prior period adjustment 3 31 37 326
Tax for the year 278 186 3,445 1,958
The tax charge is analysed as follows:
Operating profit 209 191 2,591 2,010
Short term fluctuations 55 - 683 -
Investment in Dimension Data Holdings plc 14 - 171 -
Non-operating gain on restructuring of Dimension Data Holdings plc - (5) - (52)
278 186 3,445 1,958
10(b) Reconciliation of tax charge to UK rate
£m Rm
Tax at UK rate of 30.0 per cent. (2000: 30.0 per cent.) on profit 24 310 299 3,262
on ordinary activities before tax
Untaxed and low taxed income (including tax exempt investment (118) (204) (1,462) (2,146)
return)
Disallowable expenditure 377 16 4,672 166
Secondary tax on companies 23 32 285 338
Other (28) 32 (349) 338
Reported tax charge 278 186 3,445 1,958
11 Acquisitions
(i) Fidelity & Guaranty Life
With effect from 1 July 2001, the Group acquired 100% of the net assets of
Fidelity & Guaranty Life Insurance Company, a US based, fixed annuity and life
assurance specialist. The total consideration of $635 million (£431 million,
R5,711 million) was financed through the issue of 190,356,631 new 10p ordinary
shares valued at $300 million (£203 million, R2,690 million) and cash of $335
million (£228 million, R3,021 million). Costs directly associated with the
acquisition of $28 million (£19 million, R237 million) are included in the cash
consideration.
As part of the agreement to acquire Fidelity & Guaranty, the Group has
undertaken to pay additional consideration, either by way of cash or by the
issue of shares, if the value of the new shares issued is less than $300 million
on 28 September 2002. This additional consideration is subject to a maximum of
$40 million. If the value of the new shares is greater than $330 million on 28
September 2002 the seller is obliged to repay the difference. No provisions or
assets have been recognised in lieu of these potential acquisition costs
adjustments. These possible adjustments to consideration would result in an
adjustment to goodwill.
In accordance with section 131 of the Companies Act 1985, the premium of £184
million (R3,205 million) arising on the shares issued as consideration has been
credited to a merger reserve on consolidation.
£m Rm
Fair value table Book Fair value Fair Fair
value on adjustments value to value to
acquisition Group Group
Investments 3,954 (8) 3,946 52,285
Deferred acquisition costs 343 (343) - -
Present value of acquired in-force business - 337 337 4,465
Other assets 495 (31) 464 6,148
Technical provisions (4,074) (34) (4,108) (54,431)
Other liabilities (279) 4 (275) (3,644)
Net assets of acquired business 439 (75) 364 4,823
Consideration satisfied by:
Cash 228 3,021
Ordinary shares 203 2,690
Total consideration 431 5,711
Goodwill arising on acquisition 67 888
(ii) Americom
In March 2001, the Group acquired 100% of the net assets of Unified Life Assurance Company, a life assurance
company licensed to do business in 43 states of the USA, for a final consideration of $23 million (£16
million, R181 million). This operation commenced business in May 2001 and now operates under the name of
Americom Life and Annuity Insurance Company.
The fair value of assets acquired was $12 million (£9 million, R102 million), giving rise to goodwill on
acquisition of $11 million (£7 million, R79 million).
(iii) Imperial Bank and Gerrard Private Bank
On 1 January 2001 the Group's listed banking subsidiary, Nedcor Limited, acquired 50.1% of the net assets of
Imperial Bank, and on 1 June 2001 it acquired 100% of the net assets of Fleming Offshore Banking. During the
year Fleming Offshore Banking was renamed Gerrard Private Bank Limited.
The total consideration for these acquisitions was £104 million (R1,182 million).
£m Rm
Fair value table Book and Book and
fair value fair value
to Group to Group
Investments 3 34
Other assets 1,002 11,380
Liabilities (970) (11,017)
Net assets of acquired businesses 35 397
Consideration paid 104 1,182
Goodwill arising on the transactions 69 785
(iv) Other additions
Other acquisitions made by Group companies during the year gave rise to additional goodwill of approximately
£31 million (R370 million).
The fair values of all net assets acquired are stated on a provisional basis.
12 Goodwill
£m Rm
At At At At
31 Dec 31 Dec 31 Dec 31 Dec
2001 2000 2001 2000
At beginning of year 2,279 164 25,786 1,629
Additions arising on acquisitions in the period 174 2,162 2,122 22,747
Disposals in the period (10) - (174) -
Impairment loss (500) - (8,714) -
Reversal of Pilgrim Baxter & Associates option cost (241) - (4,200) -
Adjustment in respect of prior year acquisitions 2 - 25 -
Amortisation for the year (113) (33) (1,400) (347)
Foreign exchange and other movements (11) (14) 14,092 1,757
At end of year 1,580 2,279 27,537 25,786
Analysed between:
Life assurance 76 - 1,325 -
Asset management 1,412 2,215 24,609 25,062
Banking 82 55 1,429 622
General insurance 10 9 174 102
1,580 2,279 27,537 25,786
The impairment loss arose from a review, in accordance with Financial Reporting
Standard 11, of the carrying value of the Group's recently acquired UK private
client and US asset management businesses. As a result of this exercise, the
Group has now reduced the carrying value of its unamortised goodwill by £500
million (R8,714 million) reflecting the impact of declining equity markets.
In accordance with Financial Reporting Standard 7, adjustments have been made to
the goodwill of £1,795 million (R19,147 million) that arose on the acquisition
in September 2000 of Old Mutual (US) Holdings. The reduction to goodwill of £241
million (R4,200 million), net of tax, reflects the expiry on 31 December 2001 of
the Group's option to purchase the remaining revenue share from Pilgrim Baxter.
The increase of £2 million (R25 million) reflects the latest estimate of the
consideration paid in respect of the purchase of revenue shares of certain
affiliates combined with the effect of disposing of affiliates held for resale
at values in excess of the original estimated carrying amount. The ultimate
costs of purchasing these revenue shares will remain uncertain as they are
dependent upon future events and hence are subject to adjustment in future
years.
The goodwill amortisation charge for the period of £132 million (R1,636 million)
(2000: £54 million (R568 million)) comprises £113 million (R1,400 million)
(2000: £33 million (R347 million)) disclosed above and £19 million (R236
million) (2000: £21 million (R221 million)) included in interests in associated
undertakings.
13 Amounts owed to credit institutions
£m Rm
At 31 December 2001
Bank overdrafts repayable on demand 1 17
Bank and other loans:
Repayable within one year:
Syndicated revolving credit facilities 294 5,124
Floating rate notes 16 279
Commercial paper 112 1,952
Other 62 1,080
484 8,435
Repayable between one and two years:
Term loans 30 523
Repayable between two and five years:
Syndicated revolving credit facilities 376 6,553
Term loans 6 105
382 6,658
897 15,633
At 31 December 2000
Bank overdrafts 22 249
Bank loans 544 6,156
Other loans 658 7,445
1,224 13,850
Repayable:
Within one year 332 3,757
Between one and two years 565 6,393
Between two and five years 327 3,700
1,224 13,850
14 Convertible loan stock
On 2 May 2001 Old Mutual Finance (Cayman Islands) Limited, a 100% owned
subsidiary of the Group, issued $650 million 3.625 per cent. Convertible Bonds,
which are guaranteed by and convertible into the ordinary shares of Old Mutual
plc, at a conversion price of 190p per share at an exchange rate of one US
dollar to 69.52p sterling.
The bonds are repayable on 2 May 2005 with the bond holders having the option to
elect for redemption on 2 May 2003.
The proceeds of the issue were used to repay senior debt which had previously
financed the acquisition of Old Mutual (US) Holdings. The year end balance of
£439 million (R7,651 million) includes approximately £8 million (R139 million)
of unamortised issue costs.
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