Old Mutual 2015 Preliminary Results - Part 2

RNS Number : 7713R

Old Mutual PLC

11 March 2016

 

Part 3 - Financial information

Index to the financial information For the year ended 31 December 2015
Statement of directors' responsibilities in respect of the preliminary announcement of the Annual Report and the financial statements		62
Consolidated income statement		63
Consolidated statement of comprehensive income		64
Reconciliation of adjusted operating profit to profit after tax		65
Consolidated statement of financial position		66
Consolidated statement of cash flows		67
Consolidated statement of changes in equity		68
Notes to the consolidated financial statements
	A: Significant accounting policies	72
	B: Segment information	74
	C: Other key performance information	84
	D: Other income statement notes	90
	E: Financial assets and liabilities	92
	F: Non-financial assets and liabilities	100
	G: Other notes	103
	H: Discontinued operations and disposal groups held for sale	107

Statement of directors' responsibilities

in respect of the preliminary announcement of the Annual Report and the financial statements

The directors confirm that to the best of their knowledge:

n The results in this preliminary announcement have been taken from the Group's 2015 Annual Report and Accounts, which will be available on the Company's website on 13 April 2016

n 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 Group and the undertakings included in the consolidation taken as a whole, and

n The Annual 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.

Bruce Hemphill                                        Ingrid Johnson
Group Chief Executive                            Group Finance Director

11 March 2016

Consolidated income statement
For the year ended 31 December 2015
			£m
	Notes	Year ended 31 December 2015	Year ended 31 December 2014
Revenue
Gross earned premiums	B2	3,589	3,209
Outward reinsurance		(335)	(308)
Net earned premiums		3,254	2,901
Investment return (non-banking)		3,795	6,304
Banking interest and similar income		3,320	3,057
Banking trading, investment and similar income		213	197
Fee and commission income, and income from service activities		3,027	2,894
Other income		86	125
Total revenue		13,695	15,478
Expenses
Claims and benefits (including change in insurance contract provisions)		(3,450)	(4,098)
Reinsurance recoveries		279	215
Net claims and benefits incurred		(3,171)	(3,883)
Change in investment contract liabilities		(2,203)	(3,544)
Credit impairment charges		(307)	(252)
Finance costs		(49)	(54)
Banking interest payable and similar expenses		(1,924)	(1,672)
Fee and commission expenses, and other acquisition costs		(786)	(863)
Change in third-party interest in consolidated funds		(208)	(322)
Other operating and administrative expenses		(3,759)	(3,548)
Total expenses		(12,407)	(14,138)
Share of associated undertakings' and joint ventures' profit after tax		67	26
Loss on disposal of subsidiaries, associated undertakings and strategic    investments	C1(c)	(36)	(2)
Profit before tax		1,319	1,364
Income tax expense	D1	(374)	(462)
Profit from continuing operations after tax		945	902
Discontinued operations
Loss from discontinued operations after tax	H1	(21)	(50)
Profit after tax for the financial year		924	852
Attributable to
Equity holders of the parent		614	582
Non-controlling interests
Ordinary shares	F2(a)(i)	291	252
Preferred securities	F2(a)(ii)	19	18
Profit after tax for the financial year		924	852
Earnings per ordinary share
Basic earnings per share based on profit from continuing    operations (pence)		13.2	13.5
Basic earnings per share based on profit from discontinued    operations (pence)		(0.5)	(1.1)
Basic earnings per ordinary share (pence)	C2(a)	12.7	12.4
Diluted basic earnings per share based on profit from continuing    operations (pence)		12.6	12.5
Diluted basic earnings per share based on profit from discontinued    operations (pence)		(0.4)	(1.0)
Diluted basic earnings per ordinary share (pence)	C2(b)	12.2	11.5
Weighted average number of ordinary shares (millions)	C2(a)	4,641	4,485
Consolidated statement of comprehensive income
For the year ended 31 December 2015
				£m
			Year ended  31 December 2015	Year ended  31 December  2014
Profit after tax for the financial year			924	852
Other comprehensive income for the financial year
Items that will not be reclassified subsequently to profit or loss
Fair value movements
Property revaluation			18	28
Measurement movements on defined benefit plans			20	2
Income tax on items that will not be reclassified subsequently to profit or loss		D1(c)	(4)	(7)
			34	23
Items that may be reclassified subsequently to profit or loss
Fair value movements
Net investment hedge			13	(9)
Available-for-sale investments
Fair value (losses)/gains			(7)	21
Recycled to profit or loss			(5)	(20)
Exchange difference recycled to profit or loss on disposal of business			(71)	(85)
Shadow accounting			(10)	(5)
Currency translation differences on translating foreign operations			(1,106)	(68)
Other movements			(24)	(18)
Income tax on items that may be reclassified subsequently to profit or loss		D1(c)	-	(5)
			(1,210)	(189)
Total other comprehensive income for the financial year			(1,176)	(166)
Total comprehensive income for the financial year			(252)	686
Attributable to
Equity holders of the parent			(232)	434
Non-controlling interests
Ordinary shares			(39)	234
Preferred securities			19	18
Total comprehensive income for the financial year			(252)	686
Reconciliation of adjusted operating profit to profit after tax
For the year ended 31 December 2015
				£m
		Notes	Year ended 31 December 2015	Year ended 31 December 2014
Core operations
Emerging Markets		B3	615	617
Nedbank		B3	754	770
Old Mutual Wealth		B3	307	227
Institutional Asset Management		B3	149	131
			1,825	1,745
Finance costs			(83)	(78)
Long-term investment return on excess assets			21	24
Interest payable to non-core operations			(4)	(5)
Corporate costs			(57)	(55)
Other net shareholder expenses			(39)	(26)
Adjusted operating profit before tax		B3	1,663	1,605
Adjusting items		C1(a)	(344)	(301)
Discontinued and non-core operations		B3	(31)	1
Profit before tax (net of policyholder tax)			1,288	1,305
Income tax attributable to policyholder returns			31	59
Profit before tax			1,319	1,364
Total tax expense		D1(a)	(374)	(462)
Profit from continuing operations after tax			945	902
Loss from discontinued operations after tax		H1	(21)	(50)
Profit after tax for the financial year			924	852
Adjusted operating profit after tax attributable to ordinary equity holders of the parent
				£m
		Notes	Year ended 31 December 2015	Year ended 31 December 2014
Adjusted operating profit before tax		B3	1,663	1,605
Tax on adjusted operating profit		D1(d)	(403)	(439)
Adjusted operating profit after tax			1,260	1,166
Non-controlling interests - ordinary shares		F2(a)(iii)	(310)	(280)
Non-controlling interests - preferred securities		F2(a)(ii)	(19)	(18)
Adjusted operating profit after tax attributable to ordinary equity    holders of the parent		B3	931	868
Adjusted weighted average number of shares (millions)		C2(a)	4,813	4,845
Adjusted operating earnings per share (pence)		C2(c)	19.3	17.9

Basis of preparation of adjusted operating profit

Adjusted operating profit (AOP) reflects the directors' view of the underlying long-term performance of the Group. AOP is a measure of profitability which adjusts the IFRS profit measures for the specific items detailed in note C1 and, as such, it is a non-IFRS measure. The reconciliation set out above explains the differences between AOP and profit after tax as reported under IFRS.

For core life assurance and property & casualty businesses, AOP is based on a long-term investment return, including returns on investments held by life funds in Group equity and debt instruments, and is stated net of income tax attributable to policyholder returns. For all core businesses, AOP excludes goodwill impairment, the impact of accounting for intangibles acquired in a business combination, the costs related to completed acquisitions, revaluations of put options related to long-term incentive schemes, profit/(loss) on acquisition/disposal of subsidiaries, associated undertakings and strategic investments, fair value profits/(losses) on certain Group debt instruments, cost of hedging equity instruments and costs related to the development of new Old Mutual Wealth platform capability and outsourcing of UK business administration. AOP includes dividends declared to holders of perpetual preferred callable securities. Old Mutual Bermuda is treated as a non-core operation in the AOP disclosure and is therefore not included in AOP. Refer to note B1 for further information on the basis of segmentation.

Adjusted operating earnings per share is calculated on the same basis as AOP. It is stated after tax attributable to AOP and non-controlling interests. It excludes income attributable to Black Economic Empowerment trusts of listed subsidiaries. The calculation of the adjusted weighted average number of shares includes own shares held in policyholders' funds and Black Economic Empowerment trusts.

Consolidated statement of financial position
At 31 December 2015
			£m
	Notes	At 31 December 2015	At 31 December 2014
Assets
Goodwill and other intangible assets	F1	3,276	2,763
Mandatory reserve deposits with central banks		716	829
Property, plant and equipment		700	765
Investment property		1,233	1,678
Deferred tax assets		284	283
Investments in associated undertakings and joint ventures		514	518
Deferred acquisition costs		784	862
Reinsurers' share of policyholder liabilities		2,661	2,314
Loans and advances	E1	30,965	34,857
Investments and securities		82,601	87,547
Current tax receivable		88	92
Trade, other receivables and other assets		2,007	2,362
Derivative financial instruments		3,076	1,227
Cash and cash equivalents		4,520	4,944
Assets held for sale	H2	123	1,475
Total assets		133,548	142,516
Liabilities
Long-term business insurance policyholder liabilities		7,714	10,519
Investment contract liabilities		67,854	68,841
Property & casualty liabilities		341	319
Third-party interests in consolidated funds		4,661	5,986
Borrowed funds	E2	3,524	3,044
Provisions and accruals		199	284
Deferred revenue		274	330
Deferred tax liabilities		417	454
Current tax payable		186	189
Trade, other payables and other liabilities		3,787	4,276
Amounts owed to bank depositors		32,328	36,243
Derivative financial instruments		3,317	1,201
Liabilities held for sale	H2	12	1,285
Total liabilities		124,614	132,971
Net assets		8,934	9,545
Shareholders' equity
Equity attributable to equity holders of the parent		6,680	7,406
Non-controlling interests
Ordinary shares	F2(b)(i)	1,982	1,867
Preferred securities	F2(b)(ii)	272	272
Total non-controlling interests		2,254	2,139
Total equity		8,934	9,545
Consolidated statement of cash flows
For the year ended 31 December 2015
			£m
		Year ended 31 December 2015	Year ended 31 December 2014
Cash flows from operating activities
Profit before tax		1,319	1,364
Non-cash movements in profit before tax		4,204	2,058
Net changes in working capital		566	739
Taxation paid		(399)	(402)
Net cash inflow from operating activities		5,690	3,759
Cash flows from investing activities
Net acquisitions of financial investments		(4,868)	(2,873)
Acquisition of investment properties		(146)	(48)
Dividends received from associated undertakings		7	5
Proceeds from disposal of investment properties		41	115
Acquisition of property, plant and equipment		(151)	(154)
Proceeds from disposal of property, plant and equipment		7	14
Acquisition of intangible assets		(102)	(76)
Acquisition of interests in subsidiaries, associated undertakings    Joint, ventures and strategic investments1		(796)	(429)
Disposal of a non-controlling interest in OM Asset Management plc		163	184
Proceeds from the disposal of interests in subsidiaries, associated    Undertakings, joint ventures and strategic investments		88	95
Net cash outflow from investing activities		(5,757)	(3,167)
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the Company		(422)	(394)
Non-controlling interests and preferred security interests		(190)	(177)
Interest paid (excluding banking interest paid)		(51)	(48)
Proceeds from issue of ordinary shares (including by subsidiaries    to non-controlling interests)		2	12
Net (acquisition)/disposal of treasury shares		(19)	72
Sale of shares held by BEE trusts		175	-
Proceeds from issue of subordinated and other debt		1,615	584
Subordinated and other debt repaid		(827)	(290)
Net cash inflow/(outflow) from financing activities		283	(241)
Net increase in cash and cash equivalents		216	351
Effects of exchange rate changes on cash and cash equivalents		(746)	(193)
Cash and cash equivalents at beginning of the year		5,786	5,628
Cash and cash equivalents at end of the year		5,256	5,786
Consisting of
Cash and cash equivalents		4,520	4,944
Mandatory reserve deposits with central banks		716	829
Cash and cash equivalents included in assets held for sale		20	13
Total		5,256	5,786

¹        Of the acquisition of interests in subsidiaries, associated undertakings, joint ventures and strategic investments, £734 million relate to the acquisition of subsidiaries as described in note G2. The remainder relates to the acquisition of associated undertakings, joint ventures and strategic investments.

Except for mandatory reserve deposits with central banks of £716 million (2014: £829 million) and £1,643 million (2014: £1,639 million) cash and cash equivalents of managed funds that the Group consolidates, management do not consider that there are any material amounts of cash and cash equivalents which are not available for use in the Group's day-to-day operations. Mandatory reserve deposits are, however, included in cash and cash equivalents for the purposes of the statement of cash flows in line with market practice in South Africa.

Consolidated statement of changes in equity
For the year ended 31 December 2015
		Millions
Year ended 31 December 2015	Notes	Number of shares issued and fully paid		Share capital	Share premium	Merger reserve	Available-for-sale reserve
Shareholders' equity at beginning of the year		4,907		561	856	1,342	48
Total comprehensive income for the financial year
Profit after tax for the financial year		-		-	-	-	-
Other comprehensive income
Items that will not be reclassified subsequently to   profit or loss
Fair value gains
Property revaluation		-		-	-	-	-
Measurement gains on defined benefit plans		-		-	-	-	-
Income tax on items that will not be reclassified   subsequently to profit or loss	D1(c)	-		-	-	-	-
		-		-	-	-	-
Items that may be reclassified subsequently to profit   or loss
Fair value gains/(losses)
Net investment hedge		-		-	-	-	-
Available-for-sale investments
Fair value (losses)/gains1		-		-	-	-	-
Recycled to profit or loss		-		-	-	-	(5)
Exchange differences recycled to profit or loss    on disposal of business2		-		-	-	-	-
Shadow accounting		-		-	-	-	-
Currency translation differences on translating foreign   operations1		-		-	-	-	-
Other movements		-		-	-	-	(3)
Income tax on items that may be reclassified   subsequently to profit or loss	D1(c)	-		-	-	-	-
Total comprehensive income for the financial year		-		-	-	-	(8)
Transactions with the owners of the Company
Contributions and distributions
Dividends for the year	C3	-		-	-	-	-
Tax relief on dividends paid		-		-	-	-	-
Equity share-based payment transactions		-		-	-	-	-
Proceeds from BEE transactions	A2	-		-	141	-	-
Merger reserve released3		-		-	-	(90)	-
Preferred securities repurchased		-		-	-	-	-
Other movements in share capital		3		-	3	-	-
Total contributions and distributions		3		-	144	(90)	-
Changes in ownership
Shares issued for the acquisition of Quilter Cheviot		19		2	40	-	-
Share of movement in associate reserves		-		-	-	-	-
Disposal of a non-controlling interest in    OM Asset Management plc	A2	-		-	-	-	-
Non-controlling interests in subsidiaries acquired	G2(b)	-		-	-	-	-
Change in participation in subsidiaries		-		-	-	-	-
Total changes in ownership		19		2	40	-	-
Total transactions with the owners of the Company		22		2	184	(90)	-
Shareholders' equity at end of the year		4,929		563	1,040	1,252	40

¹        Included in other reserves is a loss of £7 million relating to Economic Transactional Bank (ETI) available-for-sale reserve. Currency translation differences on translating foreign operations include £24 million relating to foreign exchange gains on translation of ETI.

²        Following the disposal of Old Mutual Wealth's European businesses foreign currency translation reserves of £71 million were recycled to profit or loss. Refer to note A2 for further information.

³        On disposal of Old Mutual Wealth's European businesses merger reserves of £90 million were released directly to retained earnings. The merger reserve arose from when businesses were acquired using ordinary shares of the entity and is non distributable. It is released to distributable upon subsequent realisation of value for the businesses acquired. Refer to note A2 for further information.

								£m
Property revaluation reserve	Share-based payments reserve	Other reserves	Foreign currency translation reserve	Retained earnings4	Perpetual preferred callable securities	Attributable to equity holders  of the parent	Total non-controlling interests	Total equity
178	337	37	(1,370)	4,891	526	7,406	2,139	9,545
-	-	-	-	590	24	614	310	924
18	-	-	-	(5)	-	13	5	18
-	-	-	-	13	-	13	7	20
(3)	-	-	-	(1)	-	(4)	-	(4)
15	-	-	-	7	-	22	12	34
-	-	-	13	-	-	13	-	13
-	-	(7)	-	3	-	(4)	(3)	(7)
-	-	-	-	-	-	(5)	-	(5)
-	-	-	(71)	-	-	(71)	-	(71)
(10)	-	-	-	-	-	(10)	-	(10)
-	-	-	(780)	-	-	(780)	(326)	(1,106)
1	-	(3)	-	(6)	-	(11)	(13)	(24)
-	-	-	-	-	-	-	-	-
6	-	(10)	(838)	594	24	(232)	(20)	(252)
-	-	-	-	(422)	(30)	(452)	(160)	(612)
-	-	-	-	-	6	6	-	6
-	30	-	-	5	-	35	4	39
-	-	-	-	34	-	175	-	175
-	-	-	-	90	-	-	-	-
-	-	-	-	(11)	(253)	(264)	-	(264)
-	-	-	-	(19)	-	(16)	-	(16)
-	30	-	-	(323)	(277)	(516)	(156)	(672)
-	-	-	-	(42)	-	-	-	-
-	-	3	-	-	-	3	-	3
-	-	-	(35)	84	-	49	114	163
-	-	-	-	-	-	-	105	105
-	-	-	-	(30)	-	(30)	72	42
-	-	3	(35)	12	-	22	291	313
-	30	3	(35)	(311)	(277)	(494)	135	(359)
184	367	30	(2,243)	5,174	273	6,680	2,254	8,934

⁴        Retained earnings were reduced in respect of own shares held in policyholder's funds, ESOP trusts, Black Economic Empowerment trusts and other undertakings at 31 December 2015 by £243 million. (2014: £338 million).

Consolidated statement of changes in equity
For the year ended 31 December 2015
		Millions
Year ended 31 December 2014	Notes	Number of shares issued and fully paid		Share capital	Share premium	Merger reserve	Available-for-sale reserve
Shareholders' equity at beginning of the year		4,897		560	845	1,717	52
Total comprehensive income for the financial year
Profit after tax for the financial year		-		-	-	-	-
Other comprehensive income
Items that will not be reclassified subsequently to   profit or loss
Fair value gains
Property revaluation		-		-	-	-	-
Measurement gains on defined benefit plans		-		-	-	-	-
Income tax on items that will not be reclassified   subsequently to profit or loss	D1(c)	-		-	-	-	-
		-		-	-	-	-
Items that may be reclassified subsequently to profit   or loss
Fair value gains/(losses)
Net investment hedge		-		-	-	-	-
Available-for-sale investments
Fair value gains		-		-	-	-	21
Recycled to profit or loss1		-		-	-	-	(20)
Exchange differences recycled to profit or loss1    on disposal of business		-		-	-	-	-
Shadow accounting		-		-	-	-	-
Currency translation differences on translating foreign   operations		-		-	-	-	-
Other movements		-		-	-	-	-
Income tax on items that may be reclassified   subsequently to profit or loss	D1(c)	-		-	-	-	(5)
Total comprehensive income for the financial year		-		-	-	-	(4)
Transactions with the owners of the Company
Contributions and distributions
Dividends for the year	C3	-		-	-	-	-
Tax relief on dividends paid		-		-	-	-	-
Equity share-based payment transactions		-		-	-	-	-
Merger reserve released1		-		-	-	(375)	-
Expiry of Skandia AB shareholder claims		-		-	-	-	-
Other movements in share capital		10		1	11	-	-
Total contributions and distributions		10		1	11	(375)	-
Changes in ownership
Disposal of a non-controlling interest in    OM Asset Management plc		-		-	-	-	-
Non-controlling interests in subsidiaries acquired		-		-	-	-	-
Change in participation in subsidiaries		-		-	-	-	-
Total changes in ownership		-		-	-	-	-
Total transactions with owners of the Company		10		1	11	(375)	-
Shareholders' equity at end of the year		4,907		561	856	1,342	48

¹        Following the disposal of Old Mutual Wealth's European businesses, as discussed in note A2, available-for-sale reserves of £20 million and foreign currency translation reserves of £46 million have been recycled to profit or loss. In addition, merger reserves of £375 million relating to these businesses were released directly to retained earnings.

								£m
Property revaluation reserve	Share-based payments reserve	Other reserves	Foreign currency translation reserve	Retained earnings	Perpetual preferred callable securities	Attributable to equity holders  of the parent	Total non-controlling interests	Total equity
161	316	37	(1,234)	4,290	526	7,270	1,767	9,037
-	-	-	-	557	25	582	270	852
-	-	-	-	-	-	-	-	-
28	-	-	-	(5)	-	23	5	28
-	-	-	-	2	-	2	-	2
(6)	-	-	-	(1)	-	(7)	-	(7)
22	-	-	-	(4)	-	18	5	23
-	-	-	(9)	-	-	(9)	-	(9)
-	-	-	-	-	-	21	-	21
-	-	-	-	-	-	(20)	-	(20)
-	-	-	(85)	-	-	(85)	-	(85)
(5)	-	-	-	-	-	(5)	-	(5)
-	-	-	(45)	-	-	(45)	(23)	(68)
-	-	-	3	(21)	-	(18)	-	(18)
-	-	-	-	-	-	(5)	-	(5)
17	-	-	(136)	532	25	434	252	686
-	-	-	-	(394)	(32)	(426)	(145)	(571)
-	-	-	-	-	7	7	-	7
-	21	-	-	(3)	-	18	4	22
-	-	-	-	375	-	-	-	-
-	-	-	-	11	-	11	-	11
-	-	-	-	72	-	84	1	85
-	21	-	-	61	(25)	(306)	(140)	(446)
-	-	-	-	52	-	52	163	215
-	-	-	-	-	-	-	53	53
-	-	-	-	(44)	-	(44)	44	-
-	-	-	-	8	-	8	260	268
-	21	-	-	69	(25)	(298)	120	(178)
178	337	37	(1,370)	4,891	526	7,406	2,139	9,545

        Notes to the consolidated financial statements

                For the year ended 31 December 2015

A: Significant accounting policies

A1: Basis of preparation

The Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and as endorsed by the European Union (EU), and those parts of the Companies Act 2006 applicable to those reporting under IFRS. The accounting policies adopted by the Group, unless otherwise stated, have been applied consistently with those applied in the preparation of the Group's 2014 Annual Report and Accounts.

The Group financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments, financial assets and liabilities designated as fair value through profit or loss, or as available-for-sale, owner-occupied property and investment property. Non-current assets and disposal groups held for sale are stated at the lower of the previous carrying amount and the fair value less costs to sell.

The Group financial statements have been prepared on the going concern basis which the directors believe to be appropriate.

The financial statements contained herein do not constitute the Company's statutory accounts for the financial years ended 31 December 2015 and 31 December 2014 within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the financial year ended 31 December 2014 have been reported on by the Company's auditor and delivered to the Registrar of Companies. The statutory accounts for the financial year ended 31 December 2015 will be delivered in due course. The report of the auditor for the financial year ended 31 December 2014 was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Translation of foreign operations

The assets and liabilities of foreign operations are translated from their respective functional currencies into the Group's presentation currency using the year end exchange rates, and their income and expenses using the average exchange rates. Other than in respect of cumulative translation gains and losses up to 1 January 2004, cumulative unrealised gains or losses resulting from translation of functional currencies to the presentation currency are included as a separate component of shareholders' equity. To the extent that these gains and losses are effectively hedged, the cumulative effect of such gains and losses arising on the hedging instruments are also included in that component of shareholders' equity. Upon the disposal of subsidiaries the cumulative amount of exchange differences deferred in shareholders' equity, net of attributable amounts in relation to net investments, is recognised in profit or loss. Cumulative translation gains and losses up to 1 January 2004 were reset to zero.

The exchange rates used to translate the operating results, assets and liabilities of key foreign business segments to pounds sterling are:

	Year ended 31 December 2015		Year ended 31 December 2014
	Income statement (average rate)	Statement of financial position (closing rate)	Income statement (average rate)	Statement of financial position  (closing rate)
Rand	19.5223	22.8183	17.8712	17.9976
US dollars	1.5285	1.4734	1.6474	1.5581
Euro	1.3765	1.3560	1.2399	1.2877

A2: Significant corporate activity and business changes during the year

Acquisitions completed during the year

Acquisition of Quilter Cheviot

On 25 February 2015, the Group completed the acquisition of 100% of Quilter Cheviot, a leading UK-based discretionary investment manager for a total consideration of £585 million, comprising of £543 million cash and £42 million of deferred consideration that will be settled in Old Mutual plc shares.  An additional £23 million was paid to the seller to compensate for the increase in the net asset value of Quilter Cheviot between the date at which the acquisition was agreed and the completion of the transaction. The purchase consideration for the acquisition of Quilter Cheviot was the total cash paid of £566 million.

Goodwill of £292 million and other intangible assets of £288 million (£273 million customer relationships and £15 million brand) were recognised as a result of the transaction.

Acquisition of UAP Holdings Limited

On 24 June 2015, the Group obtained control of UAP Holdings Limited (UAP) through the acquisition, in two tranches, of a 60.7% ownership interest in UAP for £152 million. UAP is an East African financial services group that mainly operates in East Africa.

An initial stake of 23.3% was acquired on 1 February 2015, while the remaining 37.3% stake was acquired on 24 June 2015. The results and movements in reserves were equity accounted from 1 February 2015 to the date that control was obtained. Subsequently, from 24 June 2015, the financial results and financial position were consolidated in the Group financial statements. The purchase price per share did not vary between the acquisition of the two tranches.

Goodwill of £150 million and other intangible assets of £20 million (£17 million brand and £3 million customer relationships) were recognised as a result of the transaction.

Acquisition of an additional stake in Credit Guarantee Insurance Corporation of Africa Limited

On 1 October 2015, the Group acquired an additional 33.6% stake in Credit Guarantee Insurance Corporation of Africa Limited (CGIC) for £26 million.

The transaction increased the Group's total holding in CGIC to 86.1%. The transaction resulted in a decrease in equity attributable to the equity holders of the parent of £15 million and a decrease in non-controlling interests of £11 million.

Acquisition of African Infrastructure Investment Managers (Pty) Limited

On 10 December 2015, the Group acquired an additional 50% stake in African Infrastructure Investment Managers (Pty) Limited (AIIM) for £16 million. As the Group now has a controlling shareholding of 100%, the financial results and position of AIIM have been consolidated with effect from 10 December 2015.

The accounting related to the step up in ownership from 50% to 100%, which effectively involved a simultaneous sale of 50% of the business, followed by an acquisition of the fair value of 100% of the business. Consequently a profit of £15 million was realised on the transaction. Consistent with usual Group practice, this profit was recognised in the IFRS profit or loss, but excluded from AOP.

Work is currently being undertaken to determine the purchase price allocation of the fair value of 100% of the AIIM business. Provisional goodwill of £25 million has been recognised on this transaction.

Disposals completed during the year

Disposal of Skandia Luxembourg and Skandia France

On 2 February 2015, the Group completed the sale of Skandia Luxembourg and Skandia France, part of Old Mutual Wealth. The Group has recognised a loss on disposal of £1 million. Merger reserves of £68 million relating to these businesses were released directly to equity.

Disposal of Skandia Switzerland

On 30 September 2015, the Group completed the sale of Skandia Leben AG, part of Old Mutual Wealth. The Group has recognised a loss on disposal of £51 million. Merger reserves of £22 million relating to this business were released directly to equity.

Disposal of Old Mutual (Bermuda) Ltd (OMB) and certain related obligations to Beechwood Bermuda Limited

On 31 December 2015, the Group completed the sale of Old Mutual (Bermuda) Limited (OMB) to Beechwood Bermuda Limited (Beechwood). In anticipation of the sale, OMB's remaining variable annuity guaranteed minimum accumulation benefits (GMAB obligations), which mature in 2017 and 2018, were reinsured to another of the Group's subsidiaries. A loss on this transaction of £0.4 million was recognised in profit or loss.

As part of the transaction, the Group has agreed to provide Beechwood with administration services for three years.  Except for the GMAB obligations referred to above, all other guarantees and responsibilities for the remaining policyholder administration were transferred to the buyer.  Refer to note G2 for further information.

Unwinding of Black Economic Empowerment (BEE) Schemes

The majority of the Group's South African BEE schemes, established in 2005, have unwound during 2015. The total value of cash that the Group businesses have received in relation to this is £175 million. The BEE schemes comprise business partner and community schemes in Nedbank and Emerging Markets (OMEM).

All the schemes involved the granting of shares to various BEE vehicles in 2005. In 2015, participants' access to these shares has become unrestricted following the settlement of funding provided to them by Group companies and the meeting of vesting criteria in H1 2015. The notional funding associated with the OMEM schemes was settled with proceeds from the sale of shares by the trusts. The notional funding associated with the Nedbank schemes has been settled by calling back sufficient shares to settle the amount due to Nedbank.

Shares held by the BEE schemes were previously classified as treasury shares, but are now recognised as issued for Group financial reporting purposes.

OM Asset Management plc (OMAM) further public share offering

On 22 June 2015, the Group disposed of a further 13.3 million OMAM shares for a consideration of $257 million (£163 million). A profit of £49 million was recognised directly in equity reflecting the excess of the consideration over the share of net assets disposed of. Additional non-controlling interests of £114 million were recognised in the statement of financial position.

Disposals announced, but not yet completed

Disposal of Rogge Global Partners PLC

On 8 February 2016, the Group announced that it has agreed to sell Rogge Global Partners PLC (Rogge) to Allianz Global Investors GmbH. The transaction is expected to complete in the second quarter of 2016. The assets and liabilities of Rogge were classified as held for sale at 31 December 2015. Refer to note H2 for further information.

A: Significant accounting policies continued

A2: Significant corporate activity and business changes during the year continued

Financing activities during the year

Old Mutual plc (the Company)

On 3 November 2015, the Company issued £450 million Dated Tier 2 Subordinated Notes under its existing £5,000 million Euro Note Programme. The notes have a maturity date of 3 November 2025 and pay interest semi-annually on 3 May and 3 November at a fixed rate of 7.88% per annum up to and including the maturity date.

On 4 November 2015, being the First Call Date, the Company redeemed the outstanding €374 million (£253 million) Upper Tier 2 perpetual notes at their nominal value, together with accrued and unpaid interest. A loss of £11 million on the repurchase was recognised directly in equity and represents the difference between the historical cost and the settlement amount of these instruments.

Emerging Markets

On 19 March 2015, OMLAC(SA) issued R2,061 million (£90 million) of floating and fixed rate instruments, which have been classified as subordinated debt. These instruments have maturity dates ranging from 2025 to 2030.

On 11 September 2015, OMLAC(SA) issued R2,479 million (£109 million) of floating and fixed rate instruments, which have been classified as subordinated debt. These instruments have maturity dates ranging from 2015 to 2030.

On 27 October 2015, OMLAC(SA) redeemed R3 billion notes, together with interest accrued to this date. These notes were issued on 27 October 2005, under OMLAC(SA)'s Unsecured Subordinated Callable Note Programme dated 25 October 2005.

On 3 November 2015, OMLAC(SA) issued a R460 million (£20 million) fixed rate instrument, which have been classified as subordinated debt. The final maturity date of this instrument is 19 March 2030.

All of the new instruments were issued through the existing Zar Unsecured Subordinated Callable Note Programme.

Nedbank

Nedbank issued and redeemed debt instruments in the normal course of its funding program.

A3: Critical accounting estimates and judgements

In the preparation of these financial statements, the Group is required to make estimates and judgements that affect items reported in the consolidated income statement, statement of financial position, other primary statements and related supporting notes.

Critical accounting estimates and judgements are those which involve the most complex or subjective judgements or assessments. Where applicable the Group applies estimation and assumption setting techniques that are aligned with relevant actuarial and accounting guidance based on knowledge of the current situation.  This requires assumptions and predictions of future events and actions. There have been no significant methodology changes to the critical accounting estimates and judgements that the Group applied at 31 December 2014.

B: Segment information

B1: Basis of segmentation

Segment presentation

There have been no changes to the presentation of segment information for the year ended 31 December 2015.

The Group's reported segments are Emerging Markets, Nedbank, Old Mutual Wealth and Institutional Asset Management.  The Other segment includes central activities. For all reporting periods, these businesses have been classified as continuing operations in the IFRS income statement and as core operations in determining the Group's adjusted operating profit (AOP).

For all reporting periods, Old Mutual Bermuda is classified as a continuing operation in the IFRS income statement, but as non-core in determining the Group's AOP.

For the year ended 31 December 2015, discontinued operations relate to the sale of US Life in 2011. For the year ended 31 December 2014, discontinued operations related to the disposals of Nordic in 2012 and US Life in 2011. Refer to note H1 for further information.

The Group's segmental results are analysed and reported on a basis consistent with the way that management and the Board of directors of Old Mutual plc assesses performance of the underlying businesses and allocates resources. Information is presented to the Board on a consolidated basis in pounds sterling (the presentation currency) and in the functional currency of each business.

Adjusted operating profit (AOP) is one of the key measures reported to the Group's management and Board of directors for their consideration in the allocation of resources to and the review of performance of the segments. As appropriate to the business line, the Board reviews additional measures to assess the performance of each of the segments. These typically include sales, net client cash flows, funds under management, gross earned premiums, underwriting results, net interest income and non-interest revenue and credit losses.

Consistent with internal reporting, assets, liabilities, revenues and expenses that are not directly attributable to a particular segment are allocated between segments where appropriate and where there is a reasonable basis for doing so. The Group accounts for inter-segment revenues and transfers as if the transactions were with third parties at current market prices. Given the nature of the operations, there are no major trading activities between the segments.

The revenues generated in each reported segment can be seen in the analysis of profits and losses in note B3. The segmental information in notes B3 and B4, reflect the adjusted and IFRS measures of profit or loss and the assets and liabilities for each operating segment as provided to management and the Board of directors. There are no differences between the measurement of the assets and liabilities reflected in the primary statements and that reported for the segments.

The Group is primarily engaged in the following business activities from which it generates revenue: life assurance (premium income), asset management business (fee and commission income), banking (banking interest receivable and investment banking income) and property & casualty (premium income). Other revenue includes gains and losses on investment securities. An analysis of segment revenues and expenses and the Group's revenues and expenses is shown in note B3.

The principal lines of business from which each operating segment derives its revenues are as follows:

Core operations

Emerging Markets - life assurance, property & casualty, asset management and banking

Nedbank - banking, asset management and life assurance

Old Mutual Wealth - life assurance and asset management

Institutional Asset Management - asset management

Non-core operations

Old Mutual Bermuda - life assurance

B2: Gross earned premiums and deposits to investment contracts

			£m
Year ended 31 December 2015	Emerging Markets	Old Mutual Wealth	Total
Life assurance - insurance contracts	1,469	154	1,623
Life assurance - investment contracts with discretionary    participation features	1,221	-	1,221
General insurance	745	-	745
Gross earned premiums	3,435	154	3,589
Life assurance - unit-linked and similar contracts and other investment    contracts recognised as deposits	4,039	7,988	12,027
			£m
Year ended 31 December 2014	Emerging Markets	Old Mutual Wealth	Total
Life assurance - insurance contracts	1,299	280	1,579
Life assurance - investment contracts with discretionary    participation features	961	-	961
General insurance	669	-	669
Gross earned premiums	2,929	280	3,209
Life assurance - unit-linked and similar contracts and other investment    contracts recognised as deposits	1,981	6,442	8,423

B: Segment information continued

B3: Adjusted operating profit statement - segment information for the year ended 31 December 2015

	Notes		Emerging Markets	Nedbank
Revenue
Gross earned premiums	B2		3,435	-
Outward reinsurance			(253)	-
Net earned premiums			3,182	-
Investment return (non-banking)			2,445	-
Banking interest and similar income			235	3,085
Banking trading, investment and similar income			5	208
Fee and commission income, and income from service activities			560	894
Other income			70	12
Total revenue			6,497	4,199
Expenses
Claims and benefits (including change in insurance contract provisions)			(3,294)	-
Reinsurance recoveries			184	-
Net claims and benefits incurred			(3,110)	-
Change in investment contract liabilities			(1,142)	-
Credit impairment charges			(62)	(245)
Finance costs			(15)	-
Banking interest payable and similar expenses			(93)	(1,833)
Fee and commission expenses, and other acquisition costs			(323)	(9)
Change in third-party interest in consolidated funds			-	-
Other operating and administrative expenses			(1,121)	(1,403)
Income tax attributable to policyholder returns			(30)	-
Total expenses			(5,896)	(3,490)
Share of associated undertakings' and joint ventures' profit after tax			14	45
Profit on disposal of subsidiaries, associated undertakings   and strategic investments	C1(c)		-	-
Adjusted operating profit/(loss) before tax and non-controlling interests			615	754
Income tax expense	D1		(173)	(180)
Non-controlling interests			(24)	(272)
Adjusted operating profit/(loss) after tax and non-controlling interests			418	302
Adjusting items after tax and non-controlling interests	C1(a)		(56)	7
Profit/(loss) after tax from continuing operations			362	309
Loss from discontinued operations after tax	H1		-	-
Profit/(loss) after tax attributable to equity holders of the parent			362	309

¹        Consolidation adjustments comprise the consolidation of investment funds and inter-company eliminations.

²        Non-core operations for the year ended 31 December 2015 relate to Old Mutual Bermuda and US Life. Old Mutual Bermuda loss after tax for the year ended 31 December 2015 was £31 million. Expenses of £21 million were incurred in relation to the disposal of US Life in 2011. Further information on discontinued operations is provided in note H1.

							£m
Old Mutual Wealth	Institutional Asset Management	Other	Consolidation adjustments1	Adjusted operating profit	Adjusting items  (note C1)	Discontinued and non-core operations2	IFRS Income statement
154	-	-	-	3,589	-	-	3,589
(82)	-	-	-	(335)	-	-	(335)
72	-	-	-	3,254	-	-	3,254
1,158	-	17	283	3,903	(73)	(35)	3,795
-	-	-	-	3,320	-	-	3,320
-	-	-	-	213	-	-	213
1,140	491	-	(39)	3,046	(19)	-	3,027
13	5	-	(21)	79	-	7	86
2,383	496	17	223	13,815	(92)	(28)	13,695
(169)	-	-	-	(3,463)	-	13	(3,450)
95	-	-	-	279	-	-	279
(74)	-	-	-	(3,184)	-	13	(3,171)
(1,061)	-	-	-	(2,203)	-	-	(2,203)
-	-	-	-	(307)	-	-	(307)
-	(2)	(83)	-	(100)	51	-	(49)
-	-	-	-	(1,926)	2	-	(1,924)
(416)	(6)	(4)	(57)	(815)	32	(3)	(786)
-	-	-	(208)	(208)	-	-	(208)
(524)	(347)	(92)	42	(3,445)	(301)	(13)	(3,759)
(1)	-	-	-	(31)	31	-	-
(2,076)	(355)	(179)	(223)	(12,219)	(185)	(3)	(12,407)
-	8	-	-	67	-	-	67
-	-	-	-	-	(36)	-	(36)
307	149	(162)	-	1,663	(313)	(31)	1,319
(43)	(30)	23	-	(403)	29	-	(374)
-	(33)	-	-	(329)	19	-	(310)
264	86	(139)	-	931	(265)	(31)	635
(222)	(20)	26	-	(265)	265	-	-
42	66	(113)	-	666	-	(31)	635
-	-	-	-	-	-	(21)	(21)
42	66	(113)	-	666	-	(52)	614

B: Segment information continued

B3: Adjusted operating profit statement - segment information for the year ended 31 December 2014

	Notes		Emerging Markets	Nedbank
Revenue
Gross earned premiums	B2		2,929	-
Outward reinsurance			(223)	-
Net earned premiums			2,706	-
Investment return (non-banking)			3,455	-
Banking interest and similar income			116	2,941
Banking trading, investment and similar income			7	190
Fee and commission income, and income from service activities			539	919
Other income			94	33
Total revenue			6,917	4,083
Expenses
Claims and benefits (including change in insurance contract provisions)			(3,713)	-
Reinsurance recoveries			79	-
Net claims and benefits incurred			(3,634)	-
Change in investment contract liabilities			(1,208)	-
Credit impairment charges			-	(252)
Finance costs			(3)	-
Banking interest payable and similar expenses			(42)	(1,628)
Fee and commission expenses, and other acquisition costs			(318)	(8)
Change in third-party interest in consolidated funds			-	-
Other operating and administrative expenses			(1,070)	(1,434)
Income tax attributable to policyholder returns			(36)	-
Total expenses			(6,311)	(3,322)
Share of associated undertakings' and joint ventures' profit after tax			11	9
Loss on disposal of subsidiaries, associated undertakings   and strategic investments	C1(c)		-	-
Adjusted operating profit/(loss) before tax and non-controlling interests			617	770
Income tax expense	D1		(189)	(195)
Non-controlling interests			(18)	(274)
Adjusted operating profit/(loss) after tax and non-controlling interests			410	301
Adjusting items after tax and non-controlling interests	C1(a)		(15)	14
Profit/(loss) after tax from continuing operations			395	315
Profit from discontinued operations after tax	H1		-	-
Profit/(loss) after tax attributable to equity holders of the parent			395	315

¹   Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the year ended 31 December 2014 was £1 million. Non-core operations also include £31 million relating to the disposal of Nordic in 2012 and £19 million relating to the disposal of US Life in 2011. Further information on discontinued operations is provided in note H1.

							£m
Old Mutual Wealth	Institutional Asset Management	Other	Consolidation adjustments	Adjusted operating profit	Adjusting items (note C1)	Discontinued and non-core operations¹	IFRS Income statement
280	-	-	-	3,209	-	-	3,209
(85)	-	-	-	(308)	-	-	(308)
195	-	-	-	2,901	-	-	2,901
2,493	-	28	405	6,381	(91)	14	6,304
-	-	-	-	3,057	-	-	3,057
-	-	-	-	197	-	-	197
1,085	416	-	(18)	2,941	(47)	-	2,894
10	17	2	(38)	118	-	7	125
3,783	433	30	349	15,595	(138)	21	15,478
(385)	-	-	6	(4,092)	-	(6)	(4,098)
136	-	-	-	215	-	-	215
(249)	-	-	6	(3,877)	-	(6)	(3,883)
(2,336)	-	-	-	(3,544)	-	-	(3,544)
-	-	-	-	(252)	-	-	(252)
-	-	(78)	3	(78)	24	-	(54)
-	-	-	-	(1,670)	(2)	-	(1,672)
(511)	(4)	-	(76)	(917)	58	(4)	(863)
-	-	-	(322)	(322)	-	-	(322)
(437)	(304)	(92)	40	(3,297)	(241)	(10)	(3,548)
(23)	-	-	-	(59)	59	-	-
(3,556)	(308)	(170)	(349)	(14,016)	(102)	(20)	(14,138)
-	6	-	-	26	-	-	26
-	-	-	-	-	(2)	-	(2)
227	131	(140)	-	1,605	(242)	1	1,364
(48)	(29)	22	-	(439)	(23)	-	(462)
-	(6)	-	-	(298)	28	-	(270)
179	96	(118)	-	868	(237)	1	632
(216)	(19)	(1)	-	(237)	237	-	-
(37)	77	(119)	-	631	-	1	632
-	-	-	-	-	-	(50)	(50)
(37)	77	(119)	-	631	-	(49)	582

B: Segment information continued

B4: Statement of financial position - segment information at 31 December 2015

	Notes		Emerging Markets	Nedbank
Assets
Goodwill and other intangible assets	F1		415	378
Mandatory reserve deposits with central banks			5	711
Property, plant and equipment			275	385
Investment property			1,232	1
Deferred tax assets			47	10
Investments in associated undertakings and joint ventures			60	420
Deferred acquisition costs			87	-
Reinsurers' share of policyholder liabilities			150	4
Loans and advances	E1		912	29,873
Investments and securities			24,983	5,777
Current tax receivable			14	46
Trade, other receivables and other assets			759	495
Derivative financial instruments			386	1,335
Cash and cash equivalents			1,088	1,001
Assets held for sale	H2		84	-
Inter-segment funding - assets			-	-
Total assets			30,497	40,436
Liabilities
Long-term business insurance policyholder liabilities			7,262	159
Investment contract liabilities			16,943	482
Property & casualty liabilities			341	-
Third-party interests in consolidated funds			-	-
Borrowed funds	E2		449	1,971
Provisions and accruals			143	-
Deferred revenue			20	-
Deferred tax liabilities			183	45
Current tax payable			73	18
Trade, other payables and other liabilities			2,006	1,036
Amounts owed to bank depositors			518	31,810
Derivative financial instruments			558	1,474
Liabilities held for sale	H2		-	-
Inter-segment funding - liabilities			-	-
Total liabilities			28,496	36,995
Net assets1			2,001	3,441
Equity
Equity attributable to equity holders of the parent			1,805	1,710
Non-controlling interests			196	1,731
Ordinary shares	F2(b)(i)		196	1,459
Preferred securities	F2(b)(ii)		-	272
Total equity			2,001	3,441

¹        The net assets of Emerging Markets are stated after eliminating investments in Group equity and debt instruments of £167 million (2014: £227 million) held in policyholder funds. These include investments in the Company's ordinary shares, subordinated liabilities and preferred securities issued by the Group's banking subsidiary Nedbank Limited.

²        Consolidation adjustments comprise the consolidation of investment funds and inter-company eliminations.

					£m
Old Mutual Wealth	Institutional Asset Management	Other	Non-core operation	Consolidation adjustments2	Total
1,620	863	-	-	-	3,276
-	-	-	-	-	716
19	21	-	-	-	700
-	-	-	-	-	1,233
8	218	-	1	-	284
1	23	10	-	-	514
673	24	-	-	-	784
2,507	-	-	-	-	2,661
180	-	-	-	-	30,965
48,157	80	467	-	3,137	82,601
28	-	-	-	-	88
618	119	102	16	(102)	2,007
-	-	55	17	1,283	3,076
792	92	527	26	994	4,520
4	35	-	-	-	123
-	-	860	80	(940)	-
54,607	1,475	2,021	140	4,372	133,548
293	-	-	-	-	7,714
50,344	-	-	85	-	67,854
-	-	-	-	-	341
-	-	-	-	4,661	4,661
-	61	1,098	-	(55)	3,524
34	3	19	-	-	199
254	-	-	-	-	274
172	-	17	-	-	417
13	59	23	-	-	186
799	297	212	6	(569)	3,787
-	-	-	-	-	32,328
-	6	4	-	1,275	3,317
-	12	-	-	-	12
748	99	93	-	(940)	-
52,657	537	1,466	91	4,372	124,614
1,950	938	555	49	-	8,934
1,950	611	555	49	-	6,680
-	327	-	-	-	2,254
-	327	-	-	-	1,982
-	-	-	-	-	272
1,950	938	555	49	-	8,934

B: Segment information continued

B4: Statement of financial position - segment information at 31 December 2014

	Notes		Emerging Markets	Nedbank
Assets
Goodwill and other intangible assets	F1		275	452
Mandatory reserve deposits with central banks			-	829
Property, plant and equipment			304	432
Investment property			1,290	7
Deferred tax assets			87	17
Investments in associated undertakings and joint ventures			61	426
Deferred acquisition costs			100	-
Reinsurers' share of policyholder liabilities			132	7
Loans and advances	E1		909	33,773
Investments and securities			29,731	6,359
Current tax receivable			11	16
Trade, other receivables and other assets			650	708
Derivative financial instruments			255	865
Cash and cash equivalents			1,477	907
Assets held for sale			155	1
Inter-segment funding - assets			-	-
Total assets			35,437	44,799
Liabilities
Long-term business insurance policyholder liabilities			9,276	232
Investment contract liabilities			19,956	653
Property & casualty liabilities			319	-
Third-party interests in consolidated funds			-	-
Borrowed funds	E2		420	1,980
Provisions and accruals			198	1
Deferred revenue			22	-
Deferred tax liabilities			203	42
Current tax payable			107	7
Trade, other payables and other liabilities			2,213	1,241
Amounts owed to bank depositors			385	35,858
Derivative financial instruments			302	860
Liabilities held for sale			-	-
Inter-segment funding - liabilities			-	-
Total liabilities			33,401	40,874
Net assets			2,036	3,925
Equity
Equity attributable to equity holders of the parent			1,927	2,069
Non-controlling interests			109	1,856
Ordinary shares	F2(b)(i)		109	1,584
Preferred securities	F2(b)(ii)		-	272
Total equity			2,036	3,925

					£m
Old Mutual Wealth	Institutional Asset Management	Other	Non-core operations	Consolidation adjustments	Total
1,197	839	-	-	-	2,763
-	-	-	-	-	829
13	16	-	-	-	765
-	-	-	-	381	1,678
6	172	-	1	-	283
-	21	10	-	-	518
746	16	-	-	-	862
2,175	-	-	-	-	2,314
175	-	-	-	-	34,857
46,631	40	554	341	3,891	87,547
64	1	-	-	-	92
539	134	14	297	20	2,362
-	-	71	8	28	1,227
689	130	696	25	1,020	4,944
1,319	-	-	-	-	1,475
-	-	343	192	(535)	-
53,554	1,369	1,688	864	4,805	142,516
291	-	-	720	-	10,519
48,188	-	-	44	-	68,841
-	-	-	-	-	319
-	-	-	-	5,986	5,986
-	114	677	-	(147)	3,044
40	3	42	-	-	284
308	-	-	-	-	330
190	-	19	-	-	454
35	3	37	-	-	189
919	252	177	10	(536)	4,276
-	-	-	-	-	36,243
-	-	1	1	37	1,201
1,285	-	-	-	-	1,285
173	170	192	-	(535)	-
51,429	542	1,145	775	4,805	132,971
2,125	827	543	89	-	9,545
2,125	653	543	89	-	7,406
-	174	-	-	-	2,139
-	174	-	-	-	1,867
-	-	-	-	-	272
2,125	827	543	89	-	9,545

C: Other key performance information 

C1: Operating profit adjusting items

(a) Summary of adjusting items for determination of adjusted operating profit (AOP)

In determining the AOP of the Group for core operations, certain adjustments are made to profit before tax to reflect the directors' view of the underlying long-term performance of the Group. The following table shows an analysis of those adjustments from AOP to profit before and after tax.

		£m
	Notes	Year ended 31 December 2015	Year ended 31 December 2014
(Expense)/income
Goodwill impairment and impact of acquisition accounting	C1(b)	(167)	(128)
Net loss on disposal of subsidiaries, associated undertakings and    strategic investments	C1(c)	(36)	(2)
Short-term fluctuations in investment return	C1(d)	(42)	(49)
Investment return adjustment for Group equity and debt instruments held in    life funds	C1(e)	(31)	(42)
Dividends declared to holders of perpetual preferred callable securities	C1(f)	31	32
Institutional Asset Management equity plans	C1(g)	(9)	(42)
Credit-related fair value gains/(losses) on Group debt instruments	C1(h)	7	(10)
Old Mutual Wealth business transformation costs	C1(i)	(97)	(60)
Total adjusting items		(344)	(301)
Tax on adjusting items		60	36
Non-controlling interest in adjusting items		19	28
Total adjusting items after tax and non-controlling interests		(265)	(237)

(b) Goodwill impairment and impact of acquisition accounting

When applying acquisition accounting, deferred acquisition costs and deferred revenue existing at the point of acquisition are not recognised under IFRS. These are reversed on acquisition in the statement of financial position and replaced by goodwill, other intangible assets and the value of the acquired present value of in-force business (acquired PVIF). In determining AOP, the Group recognises deferred revenue and acquisition costs and deferred revenue in relation to policies sold by acquired businesses pre-acquisition. The Group excludes the impairment of goodwill, the amortisation and impairment of acquired other intangibles and acquired PVIF as well as the movements in certain acquisition date provisions. Costs incurred on completed acquisitions are also excluded from AOP. If the intangible assets recognised as a result of a business combination are subsequently impaired, this is excluded from AOP. The effect of these adjustments to determine AOP are summarised below:

					£m
Year ended 31 December 2015		Emerging Markets	Old Mutual Wealth	Institutional Asset Management	Total
Impairment of goodwill and other intangible assets		-	-	(23)	(23)
Amortisation of acquired PVIF		(7)	(51)	-	(58)
Amortisation of acquired deferred costs and revenue		-	13	-	13
Amortisation of other acquired intangible assets		(13)	(56)	-	(69)
Acquisition costs		(4)	(10)	-	(14)
Deferred consideration		-	(16)		(16)
		(24)	(120)	(23)	(167)
					£m
Year ended 31 December 2014		Emerging Markets	Old Mutual Wealth	Institutional Asset Management	Total
Impairment of goodwill and other intangible assets		-	(14)	-	(14)
Amortisation of acquired PVIF		(3)	(67)	-	(70)
Amortisation of acquired deferred costs and revenue		-	11	-	11
Amortisation of other acquired intangible assets		(7)	(47)	-	(54)
Change in acquisition date provisions		-	(1)	-	(1)
		(10)	(118)	-	(128)

(c) Net profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments

The net profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments is analysed below:

		£m
	Year ended 31 December 2015	Year ended 31 December 2014
Emerging Markets	15	66
Old Mutual Wealth	(52)	(70)
Institutional Asset Management	1	2
Net loss on disposal of subsidiaries, associated undertakings    and strategic investments	(36)	(2)

Emerging Markets

Current year transactions

On 10 December 2015, Old Mutual Investment Group, a subsidiary of the Group, acquired an additional 50% stake in African Infrastructure Investment Managers (Pty) Ltd (AIIM). The accounting related to the step up in ownership from 50% to 100%, which effectively involved a simultaneous sale of 50% of the business, followed by an acquisition of the fair value of 100% of the business. Consequently a profit of £15 million was realised on the transaction, calculated as the difference between the fair value of the initial 50% and the carrying amount of the investment in AIIM at 10 December 2015. Refer to note G2(c) for more information.

Prior year transactions

On 30 April 2014, following the termination of the management agreement with SA Corporate Real Estate Fund, a JSE listed real estate trust, the Group agreed to sell and transfer the business to the new manager when the transaction became unconditional. A profit of £4 million was recognised in profit or loss.

On 1 September 2014, the Group completed the acquisition of an additional 25% stake in Old Mutual Finance (Pty) Ltd. The accounting related to the step up in ownership from 50% to 75%, which effectively involved a simultaneous sale of 50% of the business, followed by an acquisition of the fair value of 75% of the business. Consequently a profit of £62 million was realised on the transaction, calculated as the difference between the fair value of the initial 50% and the carrying amount of the investment in Old Mutual Finance (Pty) Ltd at 1 September 2014.

Old Mutual Wealth

Current year transactions

On 2 February 2015, the Group completed the sale of Skandia Luxembourg and Skandia France. The Group has recognised a loss on disposal of £1 million, which comprises a loss on disposing the net assets of the sold business of £31 million and a gain of £30 million recycled from foreign currency translation reserve.

On 30 September 2015, the Group completed the sale of Skandia Leben AG. The Group has recognised a loss on disposal of £51 million, which comprises a loss on disposing the net assets of the sold business of £91 million and a gain of £41 million recycled from foreign currency translation reserve.

Prior year transactions

On 30 May 2014, the Group completed the disposal of Skandia Poland, part of Old Mutual Wealth. A loss on disposal of £21 million was recognised in profit or loss.

On 1 October 2014, the Group completed the disposal of Skandia Austria and Skandia Germany. A loss on disposal of £43 million was recognised in profit or loss.

On 6 November 2014, the Group completed the disposal of Skandia Liechtenstein. A loss on disposal of £6 million was recognised in profit or loss.

Institutional Asset Management

Current and prior year transactions

During the year ended 31 December 2015, the Group received additional earn-out income of £1 million (year ended 31 December 2014: £2 million) from earn-outs on Institutional Asset Management affiliates disposed of in prior years.

C: Other key performance information continued

C1: Operating profit adjusting items continued

(d) Short-term fluctuations in investment return

Profit before tax, as disclosed in the consolidated IFRS income statement, includes actual investment returns earned on the shareholder assets of the Group's life assurance and property & casualty businesses. AOP is stated after recalculating shareholder asset investment returns based on a long-term investment return rate. The difference between the actual and the long-term investment returns is referred to as the short-term fluctuation in investment return.

Long-term rates of return are based on achieved rates of return appropriate to the underlying asset base, adjusted for current inflation expectations, default assumptions, costs of investment management and consensus economic investment forecasts. The underlying rates are principally derived with reference to 10-year government bond rates, cash and money market rates and an explicit equity risk premium for South African businesses. The rates set out below reflect the apportionment of underlying investments in cash deposits, money market instruments and equity assets. Long-term rates of return are reviewed annually by the Board for appropriateness. The review of the long-term rates of return seeks to ensure that the returns credited to AOP are consistent with the actual returns expected to be earned over the long-term.

For Emerging Markets, the return is applied to an average value of investible shareholders' assets, adjusted for net fund flows. For Old Mutual Wealth, the return is applied to average investible assets.

		%
Long-term investment rates	Year  ended 31 December 2015	Year ended 31 December 2014
Emerging Markets
Mutual & Federal1	7.4	7.4
Old Mutual South Africa	8.0	8.0
Rest of Africa	8.5	8.0
Old Mutual Wealth	1.0	1.0

¹   The long-term investments rate of Mutual & Federal relates to the South African businesses only.

Analysis of short-term fluctuations in investment return

	£m
Year ended 31 December 2015	Emerging Markets	Old Mutual Wealth	Other	Total
Actual shareholder investment return	88	8	12	108
Less: Long-term investment return	124	5	21	150
Short-term fluctuations in investment return	(36)	3	(9)	(42)
	£m
Year ended 31 December 2014	Emerging Markets	Old Mutual Wealth	Other	Total
Actual shareholder investment return	64	23	16	103
Less: Long-term investment return	123	5	24	152
Short-term fluctuations in investment return	(59)	18	(8)	(49)

(e) Investment return adjustment for Group equity and debt instruments held in policyholder funds

AOP includes investment returns on policyholder investments in Group equity and debt instruments held by the Group's life funds. These include investments in the Company's ordinary shares and the subordinated liabilities and ordinary shares issued by the Group. These investment returns are eliminated within the consolidated income statement in arriving at profit before tax in the IFRS income statement, but are included in AOP. This ensures consistency of treatment with the measures in the related policyholder liability. During the year ended 31 December 2015, the investment return adjustment increased AOP by £31 million (year ended 31 December 2014: increase of £42 million).

(f) Dividends declared to holders of perpetual preferred callable securities

Dividends declared to the holders of the Group's perpetual preferred callable securities on an AOP basis were £31 million for the year ended 31 December 2015 (year ended 31 December 2014: £32 million). For the purpose of determining AOP, these are recognised in finance costs on an accrual basis. In accordance with IFRS, the total cash distribution is recognised directly in equity.

(g) Institutional Asset Management equity plans

Institutional Asset Management has a number of long-term incentive arrangements with senior employees in its asset management affiliates.

As part of the incentive schemes in the Institutional Asset Management business, the Group has granted put options over the equity of certain affiliates to senior affiliate employees. The impact of revaluing these instruments is recognised in accordance with IFRS, but excluded from AOP. At 31 December 2015, these instruments were revalued, the impact of which was a loss of £9 million (year ended 31 December 2014: loss of £42 million).

(h) Credit-related fair value losses on Group debt instruments

The widening of the credit spread on the Group's debt instruments can cause the market value of these instruments to decrease, resulting in gains being recognised in profit or loss. Conversely, if the credit spread narrows the market value of debt instruments will increase causing losses to be recognised in the consolidated income statement. In the directors' view, such movements are not reflective of the underlying performance of the Group and will reverse over time. Therefore they have been excluded from AOP.  For the year ended 31 December 2015, due to widening of credit spreads, a net gain of £7 million was recognised (year ended 31 December 2014: net loss of £10 million).

(i) Development costs of the new Old Mutual Wealth UK platform

In 2013, Old Mutual Wealth UK business embarked on a significant programme to develop new platform capabilities and to outsource UK business administration. This will involve replacing many aspects of the existing UK platform, and on completion certain elements of service provision will be migrated to International Financial Data Services (IFDS) under a long-term outsourcing agreement. The cost of developing the new technology typically cannot be capitalised, hence these costs and the costs of decommissioning existing technology and migrating of services to IFDS are excluded from AOP. Only costs that are directly attributable to the programme are excluded. For the year ended 31 December 2015, these costs totalled £97 million (year ended 31 December 2014: £60 million).

C2: Earnings and earnings per share

The Group calculates earnings per share (EPS) on a number of different bases as appropriate to prevailing international, UK and South African practices and guidance. IFRS requires the calculation of basic and diluted EPS. Adjusted operating EPS reflects earnings per share that is consistent with the Group's alternative profit measure. JSE Limited (JSE) listing requirements also require the Group to calculate headline EPS. The Group's EPS on these different bases are summarised below:

				Pence
	Source of guidance	Notes	Year ended 31 December 2015	Year ended 31 December 2014
Basic earnings per share	IFRS	C2(a)	12.7	12.4
Diluted basic earnings per share	IFRS	C2(b)	12.2	11.5
Adjusted operating earnings per share	Group policy	C2(c)	19.3	17.9
Headline earnings per share (Gross of tax)	JSE Listing Requirements	C2(d)	13.9	12.3
Headline earnings per share (Net of tax)	JSE Listing Requirements	C2(d)	13.9	12.6
Diluted headline earnings per share (Gross of tax)	JSE Listing Requirements	C2(d)	13.3	11.4
Diluted headline earnings per share (Net of tax)	JSE Listing Requirements	C2(d)	13.3	11.6

(a) Basic earnings per share

Basic earnings per share is calculated by dividing the profit for the financial year attributable to ordinary equity shareholders by the weighted average number of ordinary shares in issue during the year excluding own shares held in policyholder funds, Employee Share Ownership Plan Trusts (ESOP), Black Economic Empowerment Trusts and other related undertakings.

The table below reconciles the profit attributable to equity holders of the parent to profit attributable to ordinary equity holders:

			£m
		Year ended 31 December 2015	Year ended 31 December 2014
Profit for the financial year attributable to equity holders of the parent from continuing operations		635	632
Loss for the financial year attributable to equity holders of the parent from discontinued operations		(21)	(50)
Profit for the financial year attributable to equity holders of the parent		614	582
Dividends paid to holders of perpetual preferred callable securities, net of tax credits		(24)	(25)
Profit attributable to ordinary equity holders		590	557

Total dividends paid to holders of perpetual preferred callable securities of £24 million for the year ended 31 December 2015 (year ended 31 December 2014: £25 million) are stated net of tax credits of £6 million (year ended 31 December 2014: £7 million).

C: Other key performance information continued

C2: Earnings and earnings per share continued

The table below summarises the calculation of the weighted average number of ordinary shares for the purposes of calculating basic earnings per share:

			Millions
		Year ended 31 December 2015	Year ended 31 December 2014
Weighted average number of ordinary shares in issue		4,924	4,901
Shares held in charitable foundations and trusts		(13)	(6)
Shares held in ESOP trusts		(98)	(50)
Adjusted weighted average number of ordinary shares		4,813	4,845
Shares held in life funds		(81)	(127)
Shares held in Black Economic Empowerment trusts		(91)	(233)
Weighted average number of ordinary shares used to calculate basic earnings per share		4,641	4,485
Basic earnings per ordinary share (pence)		12.7	12.4

(b) Diluted basic earnings per share

Diluted basic EPS recognises the dilutive impact of shares and options held in ESOP trusts and Black Economic Empowerment trusts, to the extent they have value, in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full year.

The table below reconciles the profit attributable to ordinary equity holders to diluted profit attributable to ordinary equity holders and summarises the calculation of weighted average number of shares for the purpose of calculating diluted basic earnings per share:

	Notes	Year ended 31 December 2015	Year ended 31 December 2014
Profit attributable to ordinary equity holders (£m)		590	557
Dilution effect on profit relating to share options issued by subsidiaries (£m)		(7)	(10)
Diluted profit attributable to ordinary equity holders (£m)		583	547
Weighted average number of ordinary shares (millions)	C2(a)	4,641	4,485
Adjustments for share options held by ESOP trusts (millions)		47	48
Adjustments for shares held in Black Economic Empowerment trusts (millions)		91	233
Weighted average number of ordinary shares used to calculate    diluted basic earnings per share (millions)		4,779	4,766
Diluted basic earnings per ordinary share (pence)		12.2	11.5

(c) Adjusted operating earnings per share

The following table presents a reconciliation of profit for the financial year to adjusted operating profit after tax attributable to ordinary equity holders and summarises the calculation of adjusted operating earnings per share:

	Notes	Year ended 31 December 2015	Year ended 31 December 2014
Profit for the financial year attributable to equity holders of the parent		614	582
Adjusting items	C1(a)	344	301
Tax on adjusting items		(60)	(36)
Non-core operations	B3	31	(1)
Loss from discontinued operations	H1	21	50
Non-controlling interest on adjusting items		(19)	(28)
Adjusted operating profit after tax attributable to ordinary equity holders (£m)		931	868
Adjusted weighted average number of ordinary shares used to calculate adjusted    operating earnings per share (millions)	C2(a)	4,813	4,845
Adjusted operating earnings per share (pence)		19.3	17.9

(d) Headline earnings per share

The Group is required to calculate headline earnings per share (HEPS) in accordance with the JSE Limited (JSE) Listing Requirements, determined by reference to the South African Institute of Chartered Accountants' circular 02/2015 'Headline Earnings'. The table below sets out a reconciliation of basic EPS and HEPS in accordance with that circular. Disclosure of HEPS is not a requirement of IFRS, but it is a commonly used measure of earnings in South Africa. The table below reconciles the profit for the financial year attributable to equity holders of the parent to headline earnings and summarises the calculation of basic HEPS:

		Year ended 31 December 2015		Year ended 31 December 2014
	Notes	Gross	Net	Gross	Net
Profit for the financial year attributable to equity holders of the parent		614	614	582	582
Dividends paid to holders of perpetual preferred callable securities		(24)	(24)	(25)	(25)
Profit attributable to ordinary equity holders		590	590	557	557
Adjustments:
Impairments of goodwill and other intangible assets		23	23	14	14
Loss on disposal of subsidiaries, associated    undertakings and strategic investments		36	35	2	14
Realised gains (net of impairments) on available-for-sale    financial assets		(5)	(5)	(20)	(20)
Headline earnings		644	643	553	565
Dilution effect on earnings relating to share options issued by subsidiaries		(7)	(7)	(10)	(10)
Diluted headline earnings  (£m)		637	636	543	555
Weighted average number of ordinary shares (millions)	C2(a)	4,641	4,641	4,485	4,485
Diluted weighted average number of ordinary shares (millions)	C2(b)	4,779	4,779	4,766	4,766
Headline earnings per share (pence)		13.9	13.9	12.3	12.6
Diluted headline earnings per share (pence)		13.3	13.3	11.4	11.6

C3: Dividends

		£m
	Year ended 31 December 2015	Year ended 31 December 2014
2013 Final dividend paid - 6.00p per 11 3/7p share	-	279
2014 Interim dividend paid - 2.45p per 11 3/7p share	-	115
2014 Final dividend paid - 6.25p per 11 3/7p share	296	-
2015 Interim dividend paid - 2.65p per 11 3/7p share	126	-
Dividends to ordinary equity holders	422	394
Dividends paid to holders of perpetual preferred callable securities	30	32
Dividend payments for the year	452	426

The total dividend paid to ordinary equity holders is calculated using the number of shares in issue at the record date less own shares held in ESOP trusts, life funds of Group entities, Black Economic Empowerment trusts and related undertakings.

As a consequence of the exchange control arrangements in place in certain African territories, dividends to ordinary equity holders on the branch registers of those countries (or, in the case of Namibia, the Namibian section of the principal register) are settled through Dividend Access Trusts established for that purpose.

A second interim dividend of 6.25 pence (or its equivalent in other applicable currencies) per ordinary share in the Company has been declared by the directors. The final dividend will be paid on 29 April 2016 to shareholders on the register at the close of business on 1 April 2016. The dividend will absorb an estimated £297 million of shareholders' funds.

In March and November 2015, £17 million and £13 million respectively, were declared and paid to holders of perpetual preferred callable securities (March 2014: £17 million, November 2014: £15 million).

D: Other income statement notes 

D1: Income tax expense

This note analyses the income tax expense recognised in profit or loss for the year and the various factors that have contributed to the composition of the charge.

Current tax

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax

Deferred taxation is provided using the temporary difference method. Temporary differences are differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax base. The amount of deferred taxation provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the reporting date in the specific jurisdiction. Deferred taxation is charged to profit and loss except to the extent that it relates to a transaction that is recognised directly in other comprehensive income, or a business combination that is an acquisition. The effect on deferred taxation of any changes in tax rates is recognised in profit and loss, except to the extent that it relates to items previously charged or credited directly to other comprehensive income. A deferred tax asset is recognised only to the extent that it is probable that future taxable income will be available, against which the unutilised tax losses and deductible temporary differences can be used. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefits will be realised.

In certain circumstances, as permitted by accounting guidance, deferred tax balances are not recognised. In particular where the liability relates to the initial recognition of goodwill, or transactions that are not a business combination and at the time of their occurrence affect neither accounting nor taxable profit.

Critical accounting estimates and judgements - Income tax Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in other comprehensive income or equity, in which case it is recognised in other comprehensive income and the statement of changes in equity respectively. The Group is subject to income taxes in numerous jurisdictions and the calculation of the Group's tax charge and worldwide provisions for income tax necessarily involves a degree of estimation and judgement. At any given time the Group typically has a number of open tax returns with various tax authorities and engages in active dialogue to resolve this. Taxation provisions relating to these open items are recognised based on the Group's estimate of the most likely outcome, after taking into account external advice where appropriate. Where the final tax outcome of these matters is different from the amounts that were initially recorded such differences will impact profit or loss, current and deferred income tax assets and liabilities in the period such determination is made.

(a) Analysis of total income tax expense

The total income tax expense for the year comprises:

		£m
	Year ended 31 December  2015	Year ended 31 December 2014
Current tax
United Kingdom	33	19
Overseas tax
- South Africa	272	317
- Rest of Africa	19	19
- Europe	17	23
- Rest of the world	16	14
Withholding taxes	11	16
Adjustments to current tax in respect of prior years	(1)	31
Total current tax	367	439
Deferred tax
Origination and reversal of temporary differences	23	43
Effect on deferred tax of changes in tax rates	(8)	-
Adjustments to deferred tax in respect of prior years	(8)	(20)
Total deferred tax	7	23
Total income tax expense	374	462

(b) Reconciliation of total income tax expense

The income tax expense charged to profit or loss differs from the income tax expense that would apply if all of the Group's profits from the different tax jurisdictions had been taxed at the UK standard corporation tax rate. The difference in the effective rate is explained below:

		£m
	Year ended 31 December 2015	Year ended 31 December 2014
Profit before tax	1,319	1,364
Tax at UK standard rate of 20.25% (2014: 21.5%)	267	293
Different tax rate or basis on overseas operations	118	95
Untaxed and low taxed income	(82)	(56)
Disallowable expenses	46	36
Adjustments to current tax in respect of prior years	(1)	31
Net movement on deferred tax assets not recognised	7	27
Effect on deferred tax of changes in tax rates	(8)	-
Adjustments to deferred tax in respect of prior years	(8)	(20)
Withholding taxes	5	8
Income tax attributable to policyholder returns	25	46
Other	5	2
Total income tax expense	374	462

(c) Income tax relating to components of other comprehensive income

The total income tax expense relating to items recognised in other comprehensive income for the year comprises the following:

		£m
	Year ended 31 December 2015	Year ended 31 December 2014
Measurement gains on defined benefit plans	1	1
Property revaluation	3	6
Income tax on items that will not be reclassified subsequently to profit or loss	4	7
Available-for-sale reserves	-	5
Income tax on items that may be reclassified subsequently to profit or loss	-	5
Income tax expense relating to components of other comprehensive income	4	12

(d) Reconciliation of income tax expense in the IFRS income statement to income tax on adjusted operating profit

		£m
	Year ended 31 December 2015	Year ended 31 December 2014
Income tax expense	374	462
Tax on adjusting items
Goodwill impairment and impact of acquisition accounting	20	15
Loss/(profit) on disposal of subsidiaries, associates and strategic investments	1	(11)
Short-term fluctuations in investment return	22	6
Tax on dividends declared to holders of perpetual preferred callable securities recognised in equity	(6)	(7)
Institutional Asset Management equity plans	5	20
Old Mutual Wealth business transformation costs	18	13
Total tax on adjusting items	60	36
Income tax attributable to policyholders returns	(31)	(59)
Income tax on adjusted operating profit	403	439

E: Financial assets and liabilities

E1: Loans and advances

			£m
		At 31 December 2015	At 31 December 2014¹
Home loans		6,409	7,816
Commercial mortgages		6,098	6,870
Unsecured retail lending		1,558	1,880
Other term loans		3,961	4,775
Other loans to clients		5,663	4,856
Net finance leases and instalment debtors		4,377	5,236
Deposits placed under reverse purchase agreements		884	1,016
Overdrafts		751	929
Preference shares and debentures		907	1,006
Credit cards		616	745
Factoring accounts		234	277
Policyholder loans		241	248
Properties in possession		16	33
Remittances in transit		9	11
Trade, other bills and bankers' acceptances		-	16
Gross loans and advances		31,724	35,714
Provisions for impairment		(759)	(857)
Specific provisions		(529)	(596)
Portfolio provision		(230)	(261)
Total net loans and advances		30,965	34,857

¹        The Group has grossed up £126 million relating to the prior year statement of financial position impairment provisions that were previously netted off against the value of gross loans and advances.

E2: Borrowed funds

The Group raises funding in the normal course of business. The borrowed funds raised for the banking business support the lending and banking operations of the Group. Other borrowed funds raised support the general funding needs of the Group and the expense has been recognised as finance costs.

Summary of Borrowed Funds						£m
Type of securities	Notes	Old Mutual plc	Emerging Markets	Nedbank	Institutional Asset Management	At 31 December 2015
Senior debt securities and term loans		112	198	1,331	-	1,641
Floating rate notes	E2(a)(i)	-	-	571	-	571
Fixed rate notes	E2(a)(ii)	112	-	760	-	872
Term loans	E2(a)(iii)	-	198	-	-	198
Revolving credit facilities	E2(b)	-	-	-	61	61
Mortgage-backed securities	E2(c)	-	-	97	-	97
Subordinated debt securities	E2(d)	986	251	488	-	1,725
Total Borrowed funds		1,098	449	1,916	61	3,524
Other instruments treated as equity    for accounting purposes
£273 million perpetual preferred callable    securities at 6.38%		273	-	-	-	273
Total book value of Group debt1		1,371	449	1,916	61	3,797

¹        The nominal value of Group debt excluding banking is £1,710 million (2014: £1,512 million).

On 4 November 2015, being the First Call Date, the Company redeemed the outstanding €374 million (£253 million) Upper Tier 2 perpetual notes at their nominal value, together with accrued and unpaid interest.

						£m
Type of securities	Notes	Old Mutual plc	Emerging Markets	Nedbank	Institutional Asset Management	At 31 December 2014
Senior debt securities and term loans		112	125	1,139	-	1,376
Floating rate notes	E2(a)(i)	-	-	563	-	563
Fixed rate notes	E2(a)(ii)	112	-	576	-	688
Term loans	E2(a)(iii)	-	125	-	-	125
Revolving credit facilities	E2(b)	-	72	-	114	186
Mortgage-backed securities	E2(c)	-	-	52	-	52
Subordinated debt securities	E2(d)	565	223	642	-	1,430
Total Borrowed funds		677	420	1,833	114	3,044
Other instruments treated as equity    for accounting purposes
£273 million perpetual preferred callable    securities at 6.38%		273	-	-	-	273
€374 million perpetual preferred callable    securities at 5.00%	A2	253	-	-	-	253
Total book value of Group debt		1,203	420	1,833	114	3,570
Total borrowed funds can be further analysed between non-banking and banking as follows:
						£m
	At 31 December 2015			At 31 December 2014
Type of securities	Non- banking	Banking1	Total	Non- banking	Banking1	Total
Senior debt securities and term loans	160	1,481	1,641	112	1,264	1,376
Revolving credit facilities	61	-	61	114	72	186
Mortgage-backed securities	-	97	97	-	52	52
Subordinated debt securities	1,237	488	1,725	788	642	1,430
Total Borrowed funds	1,458	2,066	3,524	1,014	2,030	3,044
1     Borrowed funds identified as Banking are those which are directly related to the lending and banking businesses in Nedbank and Emerging Markets.
Perpetual preferred callable securities of £273 million (2014: £526 million) are also classified as non-banking.

E: Financial assets and liabilities continued

E2: Borrowed funds continued

Maturity analysis

The table below is a maturity analysis of the liability cash flows based on contractual maturity dates for borrowed funds. Maturity analysis is undiscounted and based on year-end exchange rates.

						£m
		Old Mutual plc	Emerging Markets	Nedbank	Institutional Asset Management	At 31 December 2015
Less than 1 year		196	50	-	2	248
Greater than 1 year and less than 5 years		302	135	-	66	503
Greater than 5 years		1,147	493	-	-	1,640
Total non-banking		1,645	678	-	68	2,391
Less than 1 year		-	15	614	-	629
Greater than 1 year and less than 5 years		-	166	1,236	-	1,402
Greater than 5 years		-	17	973	-	990
Total banking		-	198	2,823	-	3,021
Total		1,645	876	2,823	68	5,412
						£m
		Old Mutual plc	Emerging Markets	Nedbank	Institutional Asset Management	At 31 December 2014
Less than 1 year		48	19	-	2	69
Greater than 1 year and less than 5 years		280	76	-	129	485
Greater than 5 years		560	266	-	-	826
Total non-banking		888	361	-	131	1,380
Less than 1 year		-	31	603	-	634
Greater than 1 year and less than 5 years		-	220	1,518	-	1,738
Greater than 5 years		-	7	295	-	302
Total banking		-	258	2,416	-	2,674
Total		888	619	2,416	131	4,054

Interest rate profile

The interest rate profiles of the Group's borrowed funds are analysed as follows:

						£m
		Old Mutual plc	Emerging Markets	Nedbank	Institutional Asset Management	At 31 December 2015
Fixed rate		1,098	218	760	-	2,076
Floating rate		-	231	1,156	61	1,448
Total		1,098	449	1,916	61	3,524
						£m
		Old Mutual plc	Emerging Markets	Nedbank	Institutional Asset Management	At 31 December 2014
Fixed rate		677	225	666	-	1,568
Floating rate		-	195	1,167	114	1,476
Total		677	420	1,833	114	3,044

Currency exposure

The currency exposures of the Groups borrowed funds are analysed as follows:

						£m
		Old Mutual plc	Emerging Markets	Nedbank	Institutional Asset Management	At 31 December 2015
ZAR		-	356	1,847	-	2,203
GBP		1,098	-	-	-	1,098
USD		-	55	69	61	185
Other		-	38	-	-	38
Total		1,098	449	1,916	61	3,524
						£m
		Old Mutual plc	Emerging Markets	Nedbank	Institutional Asset Management	At 31 December 2014
ZAR		-	379	1,769	-	2,148
GBP		677	-	-	-	677
USD		-	32	64	114	210
Other		-	9	-	-	9
Total		677	420	1,833	114	3,044

Analysis of security types

(a) Senior debt securities and term loans

(i) Floating rate notes (net of Group holdings)

			£m
	Maturity date	At 31 December 2015	At 31 December 2014
Banking - Nedbank Floating rate unsecured senior debt
R1,297 million at JIBAR + 1.00%	Repaid	-	72
R1,027 million at JIBAR + 1.75%	Repaid	-	57
R250 million at JIBAR + 1.00%	Repaid	-	14
R1,044 million at JIBAR + 2.20%	Repaid	-	59
R677 million at JIBAR + 1.25%	March 2016	30	38
R3,056 million at JIBAR + 0.80%	July 2016	135	169
R694 million at JIBAR + 0.75%	November 2016	31	39
R405 million at JIBAR + 1.30%	February 2017	18	23
R1,035 million at JIBAR + 0.85%	March 2017	45	58
R806 million at JIBAR + 0.90%	June 2017	35	45
R786 million at JIBAR + 1.30%	August 2017	31	39
R241 million at JIBAR + 1.12%	November 2017	11	14
R472 million at JIBAR + 1.25%	February 2018	21	-
R1,427 million at JIBAR + 1.30%	June 2018	63	-
R90 million at JIBAR + 1.45%	February 2020	4	-
R80 million at JIBAR + 2.15%	April 2020	4	5
R476 million at JIBAR + 1.55%	November 2020	21	-
R650 million at JIBAR + 1.30%	June 2021	29	36
R12 million at JIBAR + 1.55%	February 2022	1	-
R1,980 million at JIBAR + 2.00%	February 2025	88	-
R500 million at JIBAR + 2.10%	April 2026	22	-
		589	668
Less: floating rate notes held by other Group companies		(18)	(105)
Total floating rate notes		571	563

All floating rate unsecured senior debt are non-qualifying for the purposes of regulatory tiers of capital.

E: Financial assets and liabilities continued

E2: Borrowed funds continued

(a) Senior debt securities and term loans continued

(ii) Fixed rate notes (net of Group holdings)

			£m
	Maturity date	At 31 December 2015	At 31 December 2014
Non-banking - Old Mutual plc
£112 million at 7.125%	October 2016	112	112
Total non-banking fixed rate unsecured senior debt		112	112
Banking - Nedbank Fixed rate unsecured senior debt
R478 million at 9.68%	Repaid	-	27
R3,244 million at 10.55%	Repaid	-	186
R1,137 million at 9.36%	March 2016	51	65
R151 million at 6.91%	July 2016	7	9
R1,273 million at 11.39%	September 2019	60	77
R380 million at 9.26%	June 2020	17	-
R1,888 million at 8.92%	November 2020	83	106
R855 million at 9.38%	March 2021	38	49
R500 million at 9.29%	June 2021	22	28
R215 million at 8.79%	February 2022	10	-
R280 million at 9.64%	June 2022	12	-
R952 million at 10.07%	November 2023	42	-
R391 million at 9.73%	March 2024	18	22
R660 million at zero coupon	October 2024	11	15
R2,607 million at 9.44%	February 2025	118	-
R884 million at 10.685%	November 2025	39	-
R800 million at 9.95%	April 2026	36	-
R1,739 million at 10.36%	June 2026	77	-
R2,000 million at JIBAR + 10.63%	July 2027	92	-
R666 million at 10.935%	November 2027	30	-
		763	584
Less: Fixed rate notes held by other Group companies		(3)	(8)
Total banking fixed rate unsecured senior debt (net of Group holdings)		760	576
Total fixed rate notes		872	688

All fixed rate notes are non-qualifying for the purpose of regulatory tiers of capital.

(iii) Term loans

			£m
	Maturity date	At 31 December 2015	At 31 December 2014
Emerging Markets floating rate loans
$7 million at 3 month LIBOR plus 7.50%2	March 2016	5	-
$5 million at 3 month LIBOR plus 7.50%2	March 2016	3	-
$5 million at 3 month LIBOR plus 7.50%2	March 2016	3	-
R1,500 million at JIBAR + 2.95%1	August 2017	70	84
R800 million at JIBAR + 2.75%1	July 2018	35	-
KES451 million at KBRR + 3.87%1	March 2019	3	-
Emerging Markets fixed rate loans
KES170 million at 14.00% to 14.75%1	Repaid	-	5
KES175 million at 11.70%1	October 2016	-	1
KES1,000 million at 12.50%2	January 2016	7	-
KES225 million at 11.70%1	August 2017	1	2
KES2,000 million at 13.00%2	July 2017	13	-
KES411 million at 11.50%1	April 2020	3	-
KES1,183 million at 9.20%1	September 2020	8	-
KES150 million at 5.00%1	July 2022	1	1
$6 million at 8.10%1	August 2017	3	4
$19 million at 8.10%1	September 2017	9	12
$10 million at 8.10%1	May 2020	5	7
$5 million at 11.00%1	September 2022	3	3
$20 million at 8.75%2	August 2022	11	-
KES466 million at 9.83%1	July 2022	2	-
$5 million at 6.50%2	June 2023	3	-
$5 million at 6.50%2	June 2023	3	-
$10 million at 10.00%1	December 2023	7	6
Total term loans and other loans		198	125

¹   Banking - The term loans above of £150 million are Emerging Markets banking term loans.

²   Non-banking - The term loans above of £48 million are Emerging Markets non-banking term loans

E: Assets and liabilities continued

E2: Borrowed funds continued

(b) Revolving credit facilities

			£m
	Maturity date	At 31 December 2015	At 31 December 2014
Non-banking - Institutional Asset Management
$90 million drawn of a $350 million facility at    $ LIBOR + 1.25%	October 2019	61	114
Banking - Emerging Markets
R475 million (31 December 2014: R1,000 million) drawn of a    R1,200 million facility at 3 month JIBAR + 2.95%	Repaid	-	44
R500 million fully drawn at 3 month JIBAR + 3.10%	Repaid	-	28
		-	72
Total revolving credit facilities		61	186

The Group has access to a £800 million (December 2014: £800 million) multi-currency revolving credit facility available to the Holding Company. The Group extended the existing revolving credit facility in August 2015 for one year, resulting in a £727 million facility that matures in August 2020 and a £73 million facility that matures in August 2019. There is an optional further one year extension in August 2016. At 31 December 2015, (31 December 2014), none of this facility was drawn.

In December 2015, Emerging Markets entered into a new R5,250 million (£230 million) revolving credit facility which matures in three years, with the option to renew for a further year at maturity. At 31 December 2015 none of this facility was drawn.

(c) Mortgage-backed securities (net of Group holdings)

				£m
	Tier	Maturity date	At 31 December 2015	At 31 December 2014
Banking - Nedbank
R480 million (class A1) at JIBAR + 1.10%	Tier 2	Repaid	-	2
R161 million (class A2) at JIBAR + 1.25%	Tier 2	October 2039	7	19
R900 million (class A3) at JIBAR + 1.54%	Tier 2	October 2039	40	51
R110 million (class B) at JIBAR + 1.90%	Tier 2	October 2039	5	6
R558 million at JIBAR +1.20%	Tier 2	February 2042	24	-
R100 million at JIBAR +1.45%	Tier 2	February 2042	4	-
R680 million at JIBAR +1.55%	Tier 2	February 2042	30	-
R80 million at JIBAR +2.20%	Tier 2	February 2042	4	-
R65 million at JIBAR + 3.00%	Tier 2	February 2042	3	-
			117	78
Less: Mortgage backed securities held by other Group companies			(20)	(26)
Total mortgage-backed securities			97	52

(d) Subordinated debt securities (net of Group holdings)

				£m
	Tier	Maturity date	At 31 December 2015	At 31 December 2014
Banking - Nedbank
R1,265 million at JIBAR plus 4.75%	Non-core Tier 1	Repaid	-	74
R487 million at 15.05%	Non-core Tier 1	Repaid	-	32
R1,000 million at 10.54%	Tier 2	Repaid	-	58
$100 million at 3 month $ LIBOR	Tier 2 (secondary)	March 2022	69	64
R2,000 million at JIBAR + 0.47%	Tier 2	July 2022	89	113
R1,800 million at JIBAR + 2.75%	Tier 2	July 2023	80	102
R1,200 million at JIBAR + 2.55%	Tier 2	November 2023	53	67
R450 million at JIBAR + 10.49%	Tier 2	April 2024	20	26
R1,737 million at 3 month JIBAR + 2.55%	Tier 2	April 2024	78	98
R300 million at JIBAR + 2.75%	Tier 2	October 2024	13	17
R225 million at JIBAR +2.75%	Tier 2	January 2025	10	-
R1,624 million at JIBAR + 3.5%	Tier 2	July 2025	73	-
R407 million at JIBAR + 11.29%	Tier 2	July 2025	19	-
			504	651
Less: Banking subordinated debt securities held by other Group companies			(16)	(9)
Banking subordinated securities			488	642
Non-banking - Old Mutual plc
£500 million at 8.00%	Lower Tier 2	June 2021	536	565
£450 million at 7.88%1	Lower Tier 2	November 2025	450	-
Non-banking - Emerging Markets
R3,000 million at 8.92%2	Lower Tier 2	Repaid	-	167
R1,288 million at 3 month JIBAR + 2.25%	Lower Tier 2	September 2025	57	-
R568 million at 10.90%	Lower Tier 2	September 2027	23	-
R300 million at 9.26%	Lower Tier 2	November 2024	12	17
R700 million at 3 month JIBAR + 2.20%	Lower Tier 2	November 2024	31	39
R537 million at 3 month JIBAR  + 2.30%	Lower Tier 2	March 2025	24	-
R425 million at 9.76%	Lower Tier 2	March 2025	17	-
R409 million at 10.32%	Lower Tier 2	March 2027	16	-
R1,150 million at 10.96%	Lower Tier 2	March 2030	46	-
R623 million at 11.35%	Lower Tier 2	September 2030	25	-
			251	223
Total subordinated debt securities			1,725	1,430

¹        On 3 November 2015, the Company issued £450 million Dated Tier 2 Subordinated Notes under its existing £5,000 million Euro Note Programme. The notes have a maturity date of 3 November 2025 and pay interest semi-annually on 3 May and 3 November at a fixed rate of 7.88% per annum up to and including the maturity date.

²        During the year on the first call date the Group redeemed the outstanding R3,000 million Lower Tier 2 subordinated debt at their nominal value, together with accrued and unpaid interest.

All callable subordinated debt securities have a first call date five years before the maturity date.

F: Non-financial assets and liabilities

F1: Goodwill and other intangible assets

Analysis of goodwill and other intangible assets

This note shows the movements in cost, amortisation and impairment of goodwill and other intangible assets for the year ended 31 December 2015 and year ended 31 December 2014.

										£m
	Goodwill		Present value of acquired in-force business development costs		Software development costs		Other intangible assets		Total
	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014
Cost
Balance at beginning of the year	2,756	2,641	1,107	1,464	669	630	402	538	4,934	5,273
Acquisitions through business    combinations1	467	155	-	17	-	14	308	69	775	255
Purchase price adjustments2	22	-	-	-	-	-	-	-	22	-
Additions	-	-	-	-	72	72	9	4	81	76
Disposal of interests in subsidiaries	(41)	(86)	(125)	(335)	(1)	(22)	(4)	(192)	(171)	(635)
Disposals or retirements	-	-	-	-	(8)	(18)	(1)	-	(9)	(18)
Transfer to non-current assets    held for sale	(29)	-	-	(14)	-	(3)	-	-	(29)	(17)
Foreign exchange and other movements	(46)	46	-	(25)	(134)	(4)	(4)	(17)	(184)	-
Cost at end of the year	3,129	2,756	982	1,107	598	669	710	402	5,419	4,934
Amortisation and impairment losses
Balance at beginning of the year	(624)	(598)	(792)	(946)	(449)	(437)	(306)	(457)	(2,171)	(2,438)
Amortisation charge for the year	-	-	(58)	(70)	(49)	(46)	(70)	(54)	(177)	(170)
Impairment losses	(23)	(14)	-	-	-	-	-	-	(23)	(14)
Disposal of interests in subsidiaries	-	-	102	198	1	20	-	192	103	410
Disposals or retirements	-	-	-	-	7	17	1	-	8	17
Transfer to non-current assets    held for sale	29	-	-	8	-	3	-	-	29	11
Foreign exchange and other movements	1	(12)	(3)	18	87	(6)	3	13	88	13
Accumulated amortisation and    impairment losses at end of    the year	(617)	(624)	(751)	(792)	(403)	(449)	(372)	(306)	(2,143)	(2,171)
Carrying amount
Balance at beginning of the year	2,132	2,043	315	518	220	193	96	81	2,763	2,835
Balance at end of the year	2,512	2,132	231	315	195	220	338	96	3,276	2,763

¹          Goodwill acquired through business combinations comprises £292 million in respect of the acquisition of Quilter Cheviot, £150 million in respect of the acquisition of UAP Holdings Limited and £25 million in respect of the acquisition of African Infrastructure Investment Managers (Pty) Limited. Refer to note G2 for further information.

²          The purchase price adjustments to goodwill of £22 million is the result of an increase in the value of liabilities identified by the Group in the 12 month period following the completion of the acquisitions of: Intrinsic Financial Services Limited, £7 million; Quilter Cheviot, £2 million; and Old Mutual Finance (Pty) Ltd, £13 million.

Segmental analysis of goodwill and other intangibles

The following table shows a segmental analysis of the carrying amounts of goodwill and other intangible assets, together with amortisation and impairment charges, by operating segment:

						£m
	Goodwill and intangible assets (carrying amount)		Amortisation		Impairment
At 31 December	2015	2014	2015	2014	2015	2014
Emerging Markets	415	275	28	16	-	-
Old Mutual Wealth	1,620	1,197	112	117	-	14
Nedbank	378	452	37	37	-	-
Institutional Asset Management	863	839	-	-	23	-
	3,276	2,763	177	170	23	14

F2: Non-controlling interests

(a) Profit or loss

(i) Ordinary shares

The non-controlling interests share of profit for the financial year has been calculated on the basis of the Group's effective ownership of the subsidiaries in which it does not own 100% of the ordinary equity. The principal subsidiaries where a non-controlling interest exists is Nedbank, the Group's banking business in South Africa and OM Asset Management plc, the Group's asset management business. For the year ended 31 December 2015 the non-controlling interests attributable to ordinary shares was £291 million (2014: £252 million).

(ii) Preferred securities

		£m
	At 31 December 2015	At 31 December 2014
Nedbank
R3,560 million non-cumulative preference shares	19	18

(iii) Non-controlling interests - adjusted operating profit

The following table reconciles non-controlling interests' share of profit for the financial year to non-controlling interests' share of adjusted operating profit:

		£m
Reconciliation of non-controlling interests' share of profit for the financial year	Year ended 31 December 2015	Year ended 31 December 2014
The non-controlling interests share is analysed as follows:
Non-controlling interests - ordinary shares	291	252
Income attributable to Black Economic Empowerment trusts of listed subsidiaries	13	24
Attributable to Institutional Asset Management equity plans	4	2
Other items	2	2
Non-controlling interests share of adjusted operating profit	310	280

The Group uses an adjusted weighted average effective ownership interests when calculating the non-controllable interest applicable to the adjusted operating profit of its Southern African banking businesses. These reflect the legal ownership of this business following the implementation for Black Economic Empowerment (BEE) schemes in 2005. In accordance with IFRS accounting rules the shares issued for BEE purposes are deemed to be, in substance, options. Therefore the effective ownership interest of the minorities reflected in arriving at profit after tax in the consolidated income statement is lower than that applied in arriving at adjusted operating profit after tax. In 2015 the increase in adjusted operating profit attributable to non-controlling interests as a result of this was £13 million (2014: £24 million).

F: Non-financial assets and liabilities continued

F2: Non-controlling interests continued

(b) Statement of financial position

(i) Ordinary shares

			£m
Reconciliation of movements in non-controlling interests	Notes	At 31 December 2015	At 31 December 2014
Balance at beginning of the year		1,867	1,502
Non-controlling interests' share of profit		291	252
Non-controlling interests' share of dividends paid		(141)	(127)
Disposal of interest in OM Asset Management plc	A2	114	163
Acquisition of businesses	G2(b)	105	53
Net disposal of interests		72	39
Foreign exchange and other movements		(326)	(15)
Balance at end of the year		1,982	1,867

(ii) Preferred securities

		£m
	At 31 December 2015	At 31 December 2014
Nedbank
R3,560 million non-cumulative preference shares	272	272

R3,560 million R10 preference shares issued by Nedbank Limited (Nedbank), the Group's banking subsidiary. These shares are non-redeemable and non-cumulative and pay a cash dividend equivalent to 83% of the prime overdraft interest rate of Nedbank. Preference shareholders are only entitled to vote during periods when a dividend or any part of it remains unpaid after the due date for payment or when resolutions are proposed that directly affect any rights attaching to the shares or the rights of the holders. Preference shareholders will be entitled to receive their dividends in priority to any payment of dividends made in respect of any other class of Nedbank's shares.

Preferred securities at 31 December 2015 are held at the value of consideration received less unamortised issue costs and are stated net of securities held by Group companies.

G: Other notes

G1: Contingent liabilities

		£m
	At 31 December 2015	At 31 December 2014
Guarantees and assets pledged as collateral security	1,198	1,325
Secured lending	401	455
Irrevocable letters of credit	196	181
Other contingent liabilities	4	6

The Group has provided certain guarantees for specific client obligations, in return for which the Group has received a fee. The Group has evaluated the extent of the possibility of the guarantees being called on and has provided appropriately.

The Group, through its South African banking business, has pledged debt securities and negotiable certificates of deposit amounting to £681 million (2014: £767 million) as collateral for deposits received under re-purchase agreements. These amounts represent assets that have been transferred but do not qualify for derecognition under IAS 39. These transactions are entered into under terms and conditions that are standard industry practice to securities borrowing and lending activities.

Contingent liabilities - tax

The Revenue authorities in the principal jurisdictions in which the Group operates (South Africa, the United Kingdom and the United States) routinely review historic transactions undertaken and tax law interpretations made by the Group. The Group is committed to conducting its tax affairs in accordance with the tax legislation of the jurisdictions in which they operate. All interpretations made by management are made with reference to the specific facts and circumstances of the transaction and the relevant legislation.

There are occasions where the Group's interpretation of tax law may be challenged by the Revenue authorities. The financial statements include provisions that reflect the Group's assessment of liabilities which might reasonably be expected to materialise as part of their review. The Board is satisfied that adequate provisions have been made to cater for the resolution of tax uncertainties and that the resources required to fund such potential settlements are sufficient.

Due to the level of estimation required in determining tax provisions amounts eventually payable may differ from the provision recognised.

Nedbank litigation

There are a number of legal or potential claims against Nedbank Group Ltd and its subsidiary companies, the outcome of which cannot at present be foreseen.

The largest of these potential actions is a claim for R773 million in the High Court against Nedbank Ltd (Nedbank) by Absa Bank Limited (Absa) in connection with Pinnacle Point Group Ltd, where Absa is alleging that Nedbank had a legal duty of care to them in relation to single stock futures transactions. Nedbank has filed an exception against the claim and the claim has been held in abeyance since April 2012 by mutual agreement.

Consumer protection

Old Mutual is committed to treating customers fairly and supporting its customers in meeting their lifetime goals and treating customers fairly is central to how our businesses operate.  We routinely engage with customers and regulators to ensure that we meet this commitment, but there is the risk of regulatory intervention across various jurisdictions, giving rise to the potential for customer redress which can result in retrospective changes to policyholder benefits, penalties or fines.  The Group monitors the exposure to these actions and makes provision for the related costs as appropriate.

On 2 March 2016, the Financial Conduct Authority (FCA) notified Old Mutual Wealth that one of its subsidiaries, Old Mutual Wealth Life Assurance Limited, would be investigated by the Enforcement Division of the FCA. The appointment has arisen following an industry-wide thematic project on "Fair treatment of long-standing customers of life insurers" by the FCA in 2014, which focused on our UK closed book of insurance products. The appointment of investigators does not itself mean that the FCA has determined that rule breaches and/or other contraventions or offences have occurred, and at this early stage it is not possible to assess the outcome and, by extension, whether the matter will have financial consequences for Old Mutual Wealth.

G: Other notes continued

G2: Businesses acquired during the year

(a) Acquisition of Quilter Cheviot

On 25 February 2015, the Group acquired the Quilter Cheviot group of companies. The Quilter Cheviot group is based in the United Kingdom and is a discretionary investment manager specialising in the high net worth and affluent segment of the industry. The results from the business have been consolidated since the date of acquisition.

The table below sets out the consolidated assets and liabilities acquired as a result of the acquisition of Quilter Cheviot:

		£m
	Acquiree's carrying amount	Fair value
Assets
Intangible assets	-	288
Property, plant and equipment	8	8
Deferred tax asset	1	1
Current tax receivable	3	3
Cash and cash equivalents	69	69
Trade, other receivables and other assets	128	128
Total assets	209	497
Liabilities
Deferred tax liabilities	-	(58)
Provisions and accruals	(50)	(53)
Current tax payable	(5)	(5)
Trade, other payables and other liabilities	(107)	(107)
Total liabilities	(162)	(223)
Total net assets acquired	47	274
Total cash consideration paid		566
Goodwill recognised		292

The purchase price has been allocated based on a provisional estimate of the fair value of assets acquired and liabilities assumed at the date of acquisition determined in accordance to IFRS 3 'Business Combinations'. The provisional allocation required significant assumptions and the use of external expertise and it is possible that the preliminary estimates may change materially as the purchase price allocations are finalised. The accounting must be finalised within 12 months of the acquisition date.

The carrying value of assets and liabilities in Quilter Cheviot's consolidated statement of financial position on acquisition date approximates the fair value of these items determined by the Group, with the exception of identified intangible assets of £288 million, additional provisions of £3 million and an additional deferred tax liability of £58 million. The intangible assets recognised relate to customer distribution channels (£273 million) and to the Quilter Cheviot brand (£15 million). The value of the intangible assets was determined by applying cash flows to standard industry valuations models.  Goodwill is attributable to the delivery of significant cost and revenue synergies that cannot be linked to identifiable intangible assets. This goodwill is not expected to be deductible for tax purposes.

Of the acquired receivables, £121 million represent short dated receivables that arise from the normal course of business and represent the gross cash flows that are expected to be received over a period of three months. No contingent liability has been recognised on acquisition.

In addition to the £566 million cash consideration paid, 19.3 million Old Mutual plc ordinary shares of 11 3/7p with a value on issue of £42 million were placed into an employee benefit trust. 50% of these shares will be released to the participants after three years and the other 50% after four years, on the fulfilment of conditions relating to the maintenance of the level of funds under management. These expenses will be recognised in the profit or loss over the vesting periods of three and four years and will be excluded from the determination of AOP.

Transaction costs incurred of £9 million relating to the acquisition have been recognised within other operating expenses in the consolidated income statement, but not included within adjusted operating profit. For the year ended 31 December 2015, Quilter Cheviot contributed £12 million in profit after tax attributable to equity holders and £34 million in adjusted operating profit after tax.

(b) Acquisition of UAP Holdings Limited

On 24 June 2015, Old Mutual acquired an aggregate stake of 60.7% in UAP Holdings Limited (UAP), a Kenyan Pan-African financial services group for an aggregate cash consideration of £152 million. The acquisition was made as part of the expansion of the Group's footprint in East Africa. The transaction was financed by the Group from existing funds, without the issuance of any new debt or new shares.

An initial stake of 23.3% was acquired on 1 February 2015, while the remaining 37.3% stake was acquired on 24 June 2015. The results and movements in reserves were equity accounted from 1 February 2015 to the date that control was obtained. The purchase price per share did not vary between the acquisition of the two tranches and there was no amount recognised in the profit or loss as a result of the step up acquisition. A loss of £0.4 million has been equity accounted in the consolidated income statement for the period from 1 February 2015 to 24 June 2015. Subsequently, from 24 June 2015, the financial results and financial position were consolidated in the Group financial statements.

The assets and liabilities acquired have been recorded at their fair values for purposes of the opening balance sheet and included in the consolidated accounts of the Group using the Group's accounting policies in accordance with IFRS.

The table below sets out the consolidated assets and liabilities acquired as a result of the acquisition of UAP Holdings Limited:

		£m
	Acquiree's carrying amount	Fair value
Assets
Investment property	104	104
Other intangible assets	1	20
Investments & securities	90	90
Cash and cash equivalents	23	23
Trade, other receivables and other assets	66	54
Total assets	284	291
Liabilities
Long-term business policyholder liabilities	(53)	(54)
Property & casualty liabilities	(33)	(35)
Deferred tax liabilities	(3)	(3)
Current tax payable	-	(5)
Trade, other payables and other liabilities	(87)	(87)
Total liabilities	(176)	(184)
Total net assets acquired	108	107
Total value of the business		257
Cash consideration		152
Non-controlling interests recognised		105
Goodwill recognised		150

The purchase price has been allocated based on the fair value of assets acquired and liabilities at the date of acquisition determined in accordance to IFRS 3 'Business Combinations'. The purchase price allocation required significant assumptions and the use of external expertise and the additional intangible assets identified and recognised are brand and customer lists.

The fair value of investment properties has been determined by independent valuers appointed by UAP on the basis of open market value using current prices. Investment and securities have been fair valued based on the market value of the assets and/or an analysis of the contractual cash flows. Other assets and liabilities, including long-term policyholder liabilities and property and casualty liabilities, have been recorded at their estimated fair values.

The fair value of the non-controlling interests in UAP has been determined in accordance with the Group policy and is in proportion to the fair value paid by the Group.

The Group has measured the fair value of the separately recognisable identifiable assets acquired and the liabilities assumed as of the acquisition date.  The value of UAP, £257 million, is greater than the fair value of the net assets acquired and resulted in goodwill of £150 million being recorded in the statement of financial position of the Group.

Acquisition related expenses of £4 million are included in other operating and administrative line in the consolidated income statement but has been reversed out of adjusted operating profit in line with the Group policy.

G: Other notes continued

G2: Businesses acquired during the year continued

(c) Acquisition of African Infrastructure Investment Managers (Pty) Ltd

On 10 December 2015, the Group acquired an additional 50% stake in African Infrastructure Investment Managers (Pty) Ltd (AIIM) for a cash consideration of £16 million. As the Group now has a controlling shareholding of 100%, the financial results and position of AIIM have been consolidated with effect from 10 December 2015.

The accounting related to the step up in ownership from 50% to 100% effectively involved a simultaneous sale of 50% of the business, followed by an acquisition of the fair value of 100% of the business. Consequently a profit of £15 million was realised on the transaction. Consistent with usual Group practice, this profit was recognised in the IFRS profit or loss, but excluded from AOP.

The total assets of £9 million were acquired and included other assets (£4 million), cash and cash equivalents (£3 million) and derivative assets (£2 million). Total liabilities of £3 million were acquired and included other liabilities of £3 million. Goodwill of £25 million has been recognised on the transaction.

Work is currently being undertaken to determine the purchase price allocation of the fair value of 100% of the AIIM business.

(d) Disposal of Old Mutual (Bermuda) Ltd (OMB) and certain related obligations to Beechwood Bermuda Limited

As described in note A2, the Group completed the sale of Old Mutual (Bermuda) Holdings Limited (OMBH) on 31 December 2015. The principal assets and liabilities disposed were reinsurers' share of long-term policyholder liabilities (£85 million), investments and securities (£267 million), other assets (£243 million), cash and cash equivalents (£68 million), long-term business policyholder liabilities (£647 million) and other liabilities (£6 million).

G3: Events after the reporting date

Disposal of Rogge Global Partners PLC

On 8 February 2016, the Group announced that it has agreed to sell Rogge Global Partners PLC (Rogge) to Allianz Global Investors GmbH. The transaction is expected to complete in the second quarter of 2016. The assets and liabilities of Rogge have been classified as held for sale at 31 December 2015. Refer to note H2 for further information.

South African capital gains tax inclusion rates changes

On the 24th of February 2016, the Minister of Finance of the Republic of South Africa announced changes to tax legislation which may in future impact the allocation of taxation between current and deferred tax.

UK Financial Conduct Authority notification of investigation

During 2014 the Financial Conduct Authority (FCA) conducted an industry-wide thematic project on "Fair treatment of long-standing customers of life insurers". On 2 March 2016 the FCA notified the Old Mutual Wealth business that, as consequence of the review, an Old Mutual Wealth UK subsidiary will be investigated by the FCA's Enforcement Division.  Further detail is included in the contingent liabilities note G1.

Nedbank subscription for shares in African Bank Holdings Limited

In line with the subscription agreement, Nedbank will subscribe for shares in African Bank Holdings Limited for R10 million on 11 March 2016 and for an additional R400 million on 30 March 2016, representing a 4.1% holding in African Bank Holdings Limited. This aligns with Nedbank's commitment under the provisions of this agreement.

Results of the Strategic Review

Following the appointment of Bruce Hemphill as Group Chief Executive in November 2015 a strategic review of the Group was initiated.  On 11 March 2016 the Group announced that, following the strategic review, it had been concluded that the long-term interests of the Group's shareholders and other stakeholders will be best served by Old Mutual separating its four principal businesses (Emerging Markets, Nedbank, Old Mutual Wealth and OM Asset Management plc) from each other.  Following completion of the managed separation and at an appropriate point in the future, the Group, in its current structure will no longer exist.  The precise means by which this managed separation of the Group will be effected is yet to be determined, and will involve significant ongoing regulatory and stakeholder engagement.  The Group has a range of options open to it and the feasibility, sequencing and timing of each element will be affected by a mixture of market, regulatory and other factors. We intend to update shareholders later in 2016 to provide greater clarity on our preferred route for the managed separation.  We expect that the managed separation will be materially completed by the end of 2018.

As set out in the Corporate Governance section of this Annual Report and Accounts, the Board has considered the financial impacts of the managed separation as part of the process of assessing the adequacy of the Group's capital and resources to support the desired outcome. This assessment has supported the continued adoption of the going concern assumption when preparing these financial statements and the Board's statement in relation to the Group's viability.

At the current time, given the precise means by which the managed separation of the Group will be effected is yet to be determined the financial impacts cannot be evaluated in these financial statements.

H: Discontinued operations and disposal groups held for sale

H1: Discontinued operations

Income statement from discontinued operations
		£m
	Year ended 31 December  2015	Year ended 31 December 2014
Loss before tax from discontinued operations - trading activities (expenses)	-	(35)
Loss on disposal	(21)	(19)
Loss before tax from discontinued operations	(21)	(54)
Income tax credit	-	4
Loss after tax from discontinued operations1	(21)	(50)

¹        All of the loss after tax from discontinued operations is attributable to the equity holders of the parent.

The loss on disposal for the year ended 31 December 2015 and year ended 31 December 2014 related to the settlement of litigation arising on the disposal of US Life in 2011, following a court ruling in favour of the plaintiff on the main matter in dispute. These amounts were paid in cash during 2015.

The loss before tax from discontinued operations for the year ended 31 December 2014 related to the disposal of Nordic in 2012. The Group continued to incur costs directly related to the sale of these businesses relating to the transition of IT and other services back to the Group. Nordic previously provided these services to the wider Group.

H2: Assets and liabilities held for sale

Assets held for sale of £123 million relate to Emerging Markets (£84 million), Institutional Asset Management (£35 million) and Old Mutual Wealth (£4 million). Liabilities held for sale of £12 million relate to Institutional Asset Management.

Emerging Markets

Emerging Markets has classified £84 million (R1,923 million) of investment properties as held for sale. These transactions are expected to complete in the next 12 months. The investment properties form part of the policyholder assets and therefore have no impact on profit or loss of the Group.

Institutional Asset Management

On 8 February 2016, the Group announced that it has agreed to sell Rogge Global Partners PLC (Rogge) to Allianz Global Investors GmbH. The transaction is expected to complete in the second quarter of 2016. Due to the imminence of the disposal, total assets to the value of £35 million, (including £20 million cash and cash equivalents and £10 million other assets), and total liabilities to the value of £12 million, have been classified as held for sale at the reporting date. None of these amounts have been impaired in the financial statements.

Old Mutual Wealth

Old Mutual Wealth has classified property, plant and equipment of £4 million as held for sale.

 

END

 

 

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