Interim Results - Part 2

Old Mutual PLC 5 September 2000 Part 2 OLD MUTUAL PLC Notes to the financial statements for the six months ended 30 June 2000 1 Basis of preparation The results for the six months to 30 June 2000 and the balance sheet at that date have been prepared using accounting policies consistent with those used in the Group 1999 Annual Report. These accounting policies are in accordance with the Statement of Recommended Practice on 'Accounting for Insurance Business' issued by the Association of British Insurers in December 1998 ('ABI SORP'). The results for the six months ended 30 June 2000 and 1999 are unaudited, but have been reviewed by the auditors whose report is presented on page 7. The auditors have reported on the statutory accounts for the year ended 31 December 1999 and the accounts have been delivered to the Registrar of Companies. The auditors' report in respect of the year ended 31 December 1999 was unqualified and did not contain a statement under section 237 (2) or (3) of the UK Companies Act 1985. These financial statements do not constitute statutory accounts as described in section 240 of the UK Companies Act 1985. 2 Foreign currencies The information contained in these financial statements is expressed in both Sterling and South African Rand. This is in order both to meet the legal requirements of Schedule 9a of the UK Companies Act 1985 and to provide the users of the accounts in South Africa with illustrative information. Rates of exchange used to translate Rand-based amounts into Sterling were: 6 months to 6 months to Year to 30 June 30 June 31 December 2000 1999 1999 Profit and loss account 10.3330 9.8305 9.8588 (average rate) Balance sheet (closing 10.2767 9.5075 9.9364 rate) OLD MUTUAL PLC Notes to the financial statements for the six months ended 30 June 2000 (cont'd) 3 Operating earnings and earnings per share In order to facilitate the evaluation of performance over the period reported, the Group has presented additional earnings per share information derived from operating profits based on a long term investment return and before goodwill amortisation ('operating earnings'). A table reconciling operating earnings to profit on ordinary activities after tax and minority interests is included below. £m Rm 6 6 Year too 6 6 Year to months months 301 months months 31 to to Decemberr to to December 30 30 1999 30 30 June June June June 1999 2000 1999 2000 1999 Reconciliation of basic earnings per share Profit on ordinary 39 601 1,066 405 5,916 10,510 activities after tax and minority interests Goodwill amortisation 10 3 5 103 25 49 Short term 252 (419) (667) 2,602 (4,119) (6,576) fluctuations net of minority interest Non-operating items - (6) (19) - (58) (187) net of minority interest Operating earnings 301 179 385 3,110 1,764 3,796 p Basic earnings per 1.2 share 20.0 34.1 12.0 199.0 336.2 Goodwill amortisation 0.3 0.1 0.1 3.1 0.8 1.1 Short term fluctuations net of 7.5 (13.9) (21.3) 77.3 (137.8)(210.0) minority interest Non-operating items net of minority - (0.2) (0.6) - (2.0) (5.9) interest Operating earnings per share 9.0 6.0 12.3 92.4 60.0 121.4 Number of shares millions Shares in issue at 1 January 2000 3,444 and 30 June 2000 Basic earnings per share is calculated by reference to the profit on ordinary activities after tax and minorities of £39 million (R405 million) for the six months ended 30 June 2000 (June 1999: £601million (R5,916 million), December 1999: £1,066 million (R10,510 million)) and a weighted average number of shares in issue of 3,365 million (June 1999: 2,971 million, December 1999: 3,127 million). This is calculated after taking into account shares purchased during the year by Employee Share Ownership Plans (ESOPs), which waived their rights to dividends. The diluted earnings per share calculation reflects the impact of shares in ESOP Trusts, which upon vesting will have an anticipated dilution effect of 22 million (June 1999: 39 million, December 1999: 13 million) shares. Old Mutual plc shares held in policyholders' funds (316 million) are included in the weighted average number of shares reflecting the policyholders' economic interest. 4 Dividend £m Rm 6 6 Year to 6 6 Year to months months 31 December months months 31December to to to to 30 30 30 30 June June 1999 June June 1999 2000 1999 2000 1999 Equity: ordinary Interim dividend proposed: 1.6p per 55 - 69 565 - 680 10p share (December 1999: 2p per 10p share) Provision has been made in the Group financial statements for an interim dividend of 1.6p per share calculated using the number of shares in issue at 30 June 2000 of 3,444 million less 88 million shares in Employee Share Ownership Plans, which have waived their rights to dividends. As stated in the Group's prospectus, no interim dividend was declared in 1999. As a consequence of the exchange control arrangements in place in South Africa and other relevant African territories, dividends to shareholders on the branch registers in these countries (or in the case of Namibia, the Namibian section of the principal register) are settled through Dividend Access Trusts established for that purpose. 5 Analysis of operating profit 5a Analysis of life assurance operating profit £m Rm 6 6 6 6 months months Year months months Year to 30 to 30 to 31 to 30 to 30 to 31 June June December June June December 2000 1999 1999 2000 1999 1999 Individual 87 72 170 899 706 1,676 business Group business 48 35 69 496 339 680 Continuing 135 107 239 1,395 1,045 2,356 operations Discontinued - (54) (50) - (526) (493) operations Life assurance operating profit 135 53 189 1,395 519 1,863 Long term investment 114 91 187 1,178 899 1,844 return (note 5e) Life assurance operating profit 249 144 376 2,573 1,418 3,707 5b Banking operating profit £m Rm 6 6 Year to 6 6 Year to months months 31 months months 31 to 30 to 30 December to 30 to 30 December June June 1999 June June 1999 2000 1999 2000 1999 Net interest 227 221 444 2,344 2,172 4,378 income Non-interest 194 161 330 2,004 1,585 3,254 revenue Total operating 421 382 774 4,348 3,757 7,632 income Specific and general (51) (79) (163) (527) (777) (1,607) provision Net Income 370 303 611 3,821 2,980 6,025 Operating (223) (210) (414) (2,304) (2,063) (4,081) expenses Operating profit before income from associated 147 93 197 1,517 917 1,944 undertakings Income from associated 9 5 13 93 51 128 undertaking's profit Banking operating profit on ordinary 156 98 210 1,610 968 2,072 activities before tax 5c Asset management operating profit £m Rm 6 6 Year to 6 6 Year to months months 31 months months 31 30 30 December 30 30 December June June June June 1999 2000 1999 1999 2000 1999 Asset management 28 18 45 289 177 444 worldwide Private client 2 6 3 21 57 29 Other financial 6 - - 62 - - services Asset management operating profit 36 24 48 372 234 473 5d Analysis of premiums and underwriting result by class of business £m Rm Premiums Premiums written Underwriting written Underwriting net result net result ofreinsurance of reinsurance Six months to 30 June 2000 Motor 60 (3) 628 (27) Fire 59 (3) 609 (28) Accident 9 3 89 28 Other 6 - 61 (4) Total 134 (3) 1,387 (31) Six months to 30 June 1999 Motor 58 (1) 573 (10) Fire 27 1 262 10 Accident 44 (6) 432 (56) Other 2 1 20 5 Total 131 (5) 1,287 (51) Year to 31 December 1999 Motor 123 (1) 1,213 (7) Fire 40 1 394 8 Accident 86 3 848 30 Other 9 - 89 (1) Total 258 3 2,544 30 General insurance operating profit consists of the underwriting result reported above and the long term investment return disclosed in note 5e. 5e Long term investment return In accordance with requirements of the ABI SORP, profit on ordinary activities is stated after allocating an investment return earned by insurance businesses based on a long term investment return. This long term investment return is based on achieved real rates of return adjusted for current inflation expectations, and consensus economic and investment forecasts. For life assurance business, the return is applied to an average value of investible shareholders' assets, adjusted for net fund flows. For general insurance businesses, the return is applied to an average value of investible assets supporting shareholders' funds and insurance liabilities, adjusted for net fund flows. Short term fluctuations in investment return represent the difference between actual return and the long term investment return. The long term investment rate of return used in South Africa is 14 per cent (1999: 14 per cent). The directors are of the opinion that this rate of return is prudent and has been selected with a view to ensuring that returns credited to operating earnings are not inconsistent with the actual returns expected to be earned over the long term. Analysis of operating profit based on a long term investment return £m Rm 6 6 Year to 6 6 Year to months months 31 December months months 31 30 30 30 30 December June June 1999 June June 1999 2000 1999 2000 1999 Life assurance Actual investment return (129) 402 730 (1,331) 3,961 7,197 attributable to shareholders Short term fluctuations in (243) 311 543 (2,509) 3,062 5,353 investment return Long term investment return 114 91 187 1,178 899 1,844 credited to operating results Life assurance operating profit 135 53 189 1,395 519 1,863 on ordinary activities Life assurance operating profit based on a long 249 144 376 2,573 1,418 3,707 term investment return General insurance Actual investment return (1) 150 230 (9) 1,474 2,268 attributable to shareholders Short term fluctuations in (27) 118 174 (278) 1,158 1,716 investment return Long term investment return 26 32 56 269 316 552 credited to operating results General insurance operating profit (3) (5) 3 (31) (51) 30 on ordinary activities General insurance operating profit based on a long 23 27 59 238 265 582 term investment return Other shareholders' income/(expenses) Actual investment return (3) 83 82 (31) 811 808 attributable to shareholders Short term fluctuations in (12) 48 61 (124) 468 601 investment return Long term investment return 9 35 21 93 343 207 credited to operating results Corporate expenses (16) (45) (53) (165) (443) (523) Other shareholders' (7) (10) (32) (72) (100) (316) income/(expenses) Total short term fluctuations in (282) 477 778 (2,911) (4,688) (7,670) investment return 6 Segmental analysis 6a Long term business - gross premiums written £m Rm South Rest of Total South Rest Total Africa world Africa of world Single premiums Six months to 30 June 2000 Individual business 405 84 489 4,187 866 5,053 Group business 297 17 314 3,068 178 3,246 Total continuing 702 101 803 7,255 1,044 8,299 operations Single premiums Six months to 30 June 1999 Individual business 339 90 429 3,333 892 4,225 Group business 312 7 319 3,069 70 3,139 Total continuing 651 97 748 6,402 962 7,364 operations Discontinued - 3 3 - 28 28 operations Total 651 100 751 6,402 990 7,392 Single premiums Year to 31 December 1999 Individual business 738 181 919 7,278 1,784 9,062 Group business 912 21 933 8,991 207 9,198 Total continuing 1,650 202 1852 16,269 1,991 18,260 operations Discontinued - 6 6 - 59 59 operations Total 1,650 208 1858 16,269 2,050 18,319 Recurring premiums Six months to 30 June 2000 Individual business 461 52 513 4,764 537 5,301 Group business 158 26 184 1,634 270 1,904 Total continuing 619 78 697 6,398 807 7,205 operations Recurring premiums Six months to 30 June 1999 Individual business 468 56 524 4,596 555 5,151 Group business 166 24 190 1,630 234 1,864 Total continuing 634 80 714 6,226 789 7,015 operations Discontinued - 10 10 - 100 100 operations Total 634 90 724 6,226 889 7,115 Recurring premiums Year to 31 December 1999 Individual business 932 116 1,048 9,190 1,143 10,333 Group business 347 54 401 3,421 532 3,953 Total continuing 1,279 170 1,449 12,611 1,675 14,286 operations Discontinued - 27 27 - 266 266 operations Total 1,279 197 1,476 12,611 1,941 14,552 6b Long term business - new business premiums £m Rm South Rest Total South Rest Total Africa of Africa of world world Continuing operations Single premiums Six months to 30 June 2000 Individual business 405 84 489 4,187 866 5,053 Group business 297 17 314 3,068 178 3,246 Total 702 101 803 7,255 1,044 8,299 Single premiums Six months to 30 June 1999 Individual business 339 90 429 3,333 892 4,225 Group business 312 7 319 3,069 70 3,139 Total 651 97 748 6,402 962 7,364 Single premiums Year to 31 December 1999 Individual business 738 181 919 7,278 1,784 9,062 Group business 912 21 933 8,991 207 9,198 Total 1,650 202 1,852 16,269 1,991 18,260 Recurring premiums Six months to 30 June 2000 Individual business 87 10 97 899 103 1,002 Group business 22 1 23 226 10 236 Total 109 11 120 1,125 113 1,238 Recurring premiums Six months to 30 June 1999 Individual business 96 8 104 946 81 1,027 Group business 3 2 5 29 19 48 Total 99 10 109 975 100 1,075 Recurring premiums Year to 31 December 1999 Individual business 182 29 211 1,794 286 2,080 Group business 22 7 29 217 69 286 Total 204 36 240 2,011 355 2,366 Equivalent annual premium - six months to 30 June 2000 Individual business 128 18 146 1,318 190 1,508 Group business 52 3 55 534 28 562 Total 180 21 201 1,852 218 2,070 Equivalent annual premium - six months to 30 June 1999 Individual business 130 17 147 1,279 173 1,452 Group business 34 3 37 336 26 362 Total 164 20 184 1,615 199 1,814 Equivalent annual premium - year to 31 December 1999 Individual business 256 47 303 2,521 465 2,986 Group business 113 9 122 1,116 90 1,206 Total 369 56 425 3,637 555 4,192 A reconciliation to new business premiums on an embedded value basis is set out on page 29 of the Embedded value information. 6cGeographic analysis of funds under management £m Rm South Rest Total South Rest Total Africa of Africa of world world 30 June 2000 Investments including assets held to cover 16,138 6,226 22,364 165,846 63,983 229,829 linked liabilities Unit trusts Asset management worldwide 2,053 588 2,641 21,098 6,043 27,141 Private client - 1,221 1,221 - 12,548 12,548 Nedcor Investment Bank 866 129 995 8,900 1,326 10,226 Asset Managers 2,919 1,938 4,857 29,998 19,917 49,915 Third party Asset management worldwide 4,444 379 4,823 45,670 3,895 49,565 Private client - 20,384 20,384 - 209,481 209,481 Nedcor Investment Bank 2,022 301 2,323 20,780 3,093 23,873 Asset Managers Other financial services 15 342 357 154 3,515 3,669 6,481 21,406 27,887 66,604 219,984 286,588 Total funds under 25,538 29,570 55,108 262,448 303,884 566,332 management 31 December 1999 Investments including assets held to cover 16,998 6,999 23,997 168,897 69,545 238,442 linked liabilities Unit trusts Asset management worldwide 1,941 745 2,686 19,287 7,403 26,690 Private client - 1,111 1,111 - 11,039 11,039 Nedcor Investment Bank 757 278 1,035 7,522 2,762 10,284 Asset Managers 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 - 8,538 8,538 - 84,837 84,837 Nedcor Investment Bank 2,360 35 2,395 23,450 348 23,798 Asset Managers Other financial services 11 - 11 113 - 113 7,068 8,972 16,040 70,231 89,150 159,381 Total funds under 26,764 18,105 44,869 265,937 179,899 445,836 management 7 Non-operating items Profit in ordinary activities after tax and minorities is stated after (charging)/crediting the following non-recurring items £m Rm 6 6 Year to 6 6 Year months months 31 months months to 31 to 30 to December to 30 to 30 December June 30 1999 June June 2000 June 2000 1999 1999 1999 Profit on sale of - 20 20 - 193 197 NedTravel Profit on flotation of Nedcor - - 46 - - 453 Investment Bank Profit on sale of UK life assurance - - 15 - - 148 operations Provision for costs associated with the - (4) (4) - (39) (39) withdrawal of the Group from its UK life assurance operations Profit on sale of - 16 77 - 154 759 businesses Cost of free share - - (23) - - (227) selling service offered to policyholders on demutualisation Non-operating items - 16 54 - 154 532 after tax and before minorities Minority interests - (10) (35) - (96) (345) Non-operating items - 6 19 - 58 187 after tax and minorities 8 Taxation on profit on ordinary activities £m Rm 6 6 Year to 6 6 Year to months months 31 months months 31 to 30 to 30 December to 30 to 30 December June June 1999 June June 1999 2000 1999 2000 2000 United Kingdom 11 - 12 114 3 118 corporation tax Overseas tax 73 51 153 754 496 1,509 Tax on profit on 84 51 165 868 499 1,627 ordinary activities Tax on profits earned in the United Kingdom has been provided based on a rate of 30%. Tax on overseas sourced profits has been calculated using effective rates of taxation appropriate to each country. 9 Acquisitions and disposals 9a Acquisitions During the six months, the Group acquired £158 millions of net assets of the Gerrard Group for a net consideration of £529 million. The resultant goodwill of £371 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 Gerrard Group using acquisition accounting principles, whereby its results are included in the consolidated profit and loss account from the date of acquisition, namely 31 March 2000. An analysis of provisional net assets acquired and the fair value of the Gerrard Group is as follows: £m Rm Insurance Banking Total Insurance Banking Total and and other other Tangible fixed 17 - 17 174 3 177 assets Investments 917 - 917 9,546 - 9,546 Debtors 2,445 - 2,445 25,458 - 25,458 Treasury bills and - 87,142 87,142 other eligible - 8,371 8,371 bills Loans and advances - 11,054 11,054 - 115,072 115,072 to banks and customers Interest in - 15 15 - 156 156 associated undertakings Other assets - 189 189 - 1,967 1,967 Prepayments and - 8 8 - 83 83 accrued income Cash at bank and in 131 4 135 1,364 42 1,406 hand Creditors and (3,405) - (3,405) (35,446) - (35,446) provisions Deposits by banks - (19,119) (19,119) - (199,026)(199,026) and customers Other liabilities - (469) (469) - (4,889) (4,889) Net assets 105 53 158 1,096 550 1,646 Net consideration 529 5,507 paid Goodwill arising on 371 3,861 acquisition of the Gerrard Group The Group also acquired associated undertakings in The Internet Solution, Comparex and Linx for a total consideration of £129 million (R1,333 million) during the reporting period. Provisional net assets acquired amounted to £15 million (R165 million). Goodwill arising on acquisition of £114 million (R1,168 million), has been capitalised and is being amortised over its estimated useful life of twenty years. In July 2000 Old Mutual South Africa acquired a further state in The Internet Solution for a consideration of £32 million (R330 million). 9b Disposals There were no disposals during the half year ended June 2000. In December 1999, the Group sold its UK life assurance company, Old Mutual Life Assurance Company Ltd (OMLA), to the Century Group. The results of OMLA for the prior periods ended 30 June 1999 and 31 December 1999 have been disclosed as discontinued operations in the Group's consolidated profit and loss account. 10 Intangible Assets £m Rm At At At At At At 30 31 30 30 31 30 June December June June December June 2000 1999 1999 2000 1999 1999 Goodwill At beginning of 164 100 100 1,629 981 981 period Additions arising 485 63 - 5,031 627 - on acquisitions in the period (note 9) Adjustments in (3) 8 - (31) 78 - respect of prior year acquisition Amortisation for (10) (5) (3) (103) (49) (25) year Exchange movements (2) (2) 1 (11) (8) (25) At end of period 634 164 98 6,515 1,629 931 The prior year acquisition adjustment is in respect of revalued surplus stock positions in Albert E Sharp Holdings plc. 11 Post balance sheet events Cancellation of share price premium account Approval of the UK High Court was granted on 5 July 2000 to cancel an amount equal to £500 million standing to the credit of the share premium account of the Company. The effect of this will be to increase distributable reserves of the Company by £500 million. The order confirming the reduction was registered with the Registrar of Companies and became effective on 7 July 2000. Acquisitions On 16 June 2000, the Group signed a definitive merger agreement with United Asset Management Corporation (UAM), a United States holding company that managed $188 billion (£124 billion) of assets through affiliated companies at 31 May 2000. This transaction has not yet been completed. The consideration for the purchase of the equity of UAM is expected to amount to $1.46 billion (£963 million). UAM also has $769 million (£507 million) of net debt, all or most of which the Group will be required to refinance after completion of the acquisition. When completed, the acquisition of UAM is currently expected to increase funds under management by the Group to approximately $275 billion (£191 billion). On 30 June 2000, the Group's 51% owned general insurance subsidiary, Mutual & Federal Insurance Company Limited, entered into an agreement to acquire the entire issued share capital of CGU Holdings Limited, under which it received irrevocable commitments to accept such an offer from CGU International Holdings Limited and Metropolitan Life Limited, which together hold 79% of the total share capital of CGU Holdings Limited. 12 Reconciliation of operating profit to net operating cashflows £m Rm 6 6 Year to 6 6 Year to months months 31 months months 31 to 30 to 30 December to 30 to 30 December June June 1999 June June 1999 2000 1999 2000 1999 Profit from 9 675 1,278 97 6,634 12,599 insurance and other activities Profit from 156 98 210 1,610 968 2,072 banking activities Profit on 165 773 1,488 1,707 7,602 14,671 ordinary activities before tax Unrealised 197 (440) (416) 2,040 (4,324) (4,101) investment (losses)/gains Insurance and 108 (66) (367) 1,104 (659) (3,618) other activities non cashflow items Banking non 38 98 303 390 962 2,986 cashflow items Net cashflow (303) (369) (256) (3,128) (3,623) (2,524) from other banking activities Net cash outflow 205 (4) 752 2,113 (42) 7,414 from operating activities MORE TO FOLLOW

Companies

Old Mutual Limited NPV (DI) (OMU)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today