Interim Results 2011 Part 3 (MCEV)
Group Market Consistent Embedded Value statement of earnings
For the six months ended 30 June 2011
|
|
|
|
£m |
|
|
|
Notes |
6 months ended 30 June 2011 |
6 months ended 30 June 2010 |
Year ended 31 December 2010 |
|
Long Term Savings |
|
|
|
|
|
Covered business |
|
436 |
369 |
705 |
|
Asset management and other business |
|
84 |
64 |
127 |
|
Banking |
|
8 |
8 |
16 |
|
|
|
528 |
441 |
848 |
|
Nedbank |
|
|
|
|
|
Banking |
|
359 |
266 |
601 |
|
Mutual & Federal |
|
|
|
|
|
General insurance |
|
47 |
33 |
103 |
|
US Asset Management |
|
|
|
|
|
Asset management |
|
47 |
40 |
87 |
|
Other operating segments |
|
|
|
|
|
Finance costs* |
|
(74) |
(86) |
(183) |
|
Other shareholders' expenses** |
|
(24) |
(5) |
(57) |
|
Adjusted operating Group MCEV earnings before tax from core operations |
|
883 |
689 |
1,399 |
|
Adjusted operating Group MCEV earnings before tax from Bermuda non-core operations |
|
11 |
30 |
(28) |
|
Adjusted operating Group MCEV earnings before tax from continuing operations*** |
|
894 |
719 |
1,371 |
|
Adjusting items from continuing operations |
C3 |
(98) |
(105) |
499 |
|
Total Group MCEV earnings before tax from continuing operations |
|
796 |
614 |
1,870 |
|
Income tax attributable to shareholders |
|
(196) |
(161) |
(410) |
|
Total Group MCEV earnings after tax from continuing operations |
|
600 |
453 |
1,460 |
|
Total Group MCEV earnings after tax from US Life discontinued operations**** |
A4 |
- |
(35) |
227 |
|
Total Group MCEV earnings after tax for the financial period |
|
600 |
418 |
1,687 |
|
|
|
|
|
|
|
Total Group MCEV earnings for the financial period attributable to: |
|
|
|
|
|
Equity holders of the parent |
|
457 |
303 |
1,429 |
|
Non-controlling interests |
|
|
|
|
|
Ordinary shares |
|
112 |
84 |
196 |
|
Preferred securities |
|
31 |
31 |
62 |
|
Total Group MCEV earnings after tax for the financial period |
|
600 |
418 |
1,687 |
|
Basic total Group MCEV earnings per ordinary share (pence) |
|
9.0 |
6.0 |
28.2 |
|
Weighted average number of shares - millions |
|
5,098 |
5,057 |
5,064 |
* This includes interest payable from Old Mutual plc to non-core operations of £13 million for the six months ended 30 June 2011 (six months ended 30 June 2010: £18 million; year ended 31 December 2010: £55 million).
** Other shareholder expenses in MCEV £(24) million differ from IFRS £(31) million as a result of the allocation of central costs of £(7) million allocated to the covered business and provisioned in the VIF (IFRS: £(11) million at 30 June 2010 and £(71) million at 31 December 2010; allocation of central costs: £(6) million at 30 June 2010 and £(14) million at 31 December 2010).
*** For long-term business and general insurance businesses, adjusted operating Group MCEV earnings are based on long-term and short-term investment returns respectively, include investment returns on life fund investments in Group equity and debt instruments, and are stated net of income tax attributable to policyholder returns. For the US Asset Management business it includes compensation costs in respect of certain long-term incentive schemes defined as non-controlling interests in accordance with IFRS. For all businesses, adjusted operating MCEV earnings exclude goodwill impairment, the impact of acquisition accounting, put revaluations related to long-term incentive schemes, the impact of closure of unclaimed shares trusts, profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments, dividends declared to holders of perpetual preferred callable securities, and fair value (profits)/losses on certain Group debt movements.
**** This is composed of earnings before tax of £48 million, adjusting items of £180 million and tax of £(1) million for the year ended 31 December 2010 (earnings before tax of £129 million, adjusting items of £(286) million and tax of £122 million for the six months ended 30 June 2010). Further detail relating to adjusting items can be found in section C3.
Adjusted operating Group MCEV earnings per share
For the six months ended 30 June 2011
|
Six months ended 30 June 2011 |
£m |
||||
|
|
Notes |
Core continuing operations |
Non-core continuing operations |
Discontinued operations |
Total |
|
Adjusted operating Group MCEV earnings before tax |
|
883 |
11 |
- |
894 |
|
Tax on adjusted operating Group MCEV earnings |
B2 |
(212) |
(2) |
|
(214) |
|
Adjusted operating Group MCEV earnings after tax |
|
671 |
9 |
- |
680 |
|
Non-controlling interests |
|
|
|
|
|
|
Ordinary shares |
|
(120) |
- |
- |
(120) |
|
Preferred securities |
|
(31) |
- |
- |
(31) |
|
Adjusted operating MCEV earnings after tax attributable to equity holders |
|
520 |
9 |
- |
529 |
|
Adjusted operating Group MCEV earnings per share* |
|
9.6 |
0.2 |
- |
9.8 |
|
Adjusted weighted average number of shares - millions |
|
|
|
|
5,397 |
|
Six months ended 30 June 2010 |
£m |
||||
|
|
Notes |
Core continuing operations |
Non-core continuing operations |
Discontinued operations |
Total |
|
Adjusted operating Group MCEV earnings before tax |
|
689 |
30 |
129 |
848 |
|
Tax on adjusted operating Group MCEV earnings |
B2 |
(153) |
- |
(2) |
(155) |
|
Adjusted operating Group MCEV earnings after tax |
|
536 |
30 |
127 |
693 |
|
Non-controlling interests |
|
|
|
|
|
|
Ordinary shares |
|
(95) |
- |
- |
(95) |
|
Preferred securities |
|
(31) |
- |
- |
(31) |
|
Adjusted operating MCEV earnings after tax attributable to equity holders |
|
410 |
30 |
127 |
567 |
|
Adjusted operating Group MCEV earnings per share* |
|
7.7 |
0.5 |
2.4 |
10.6 |
|
Adjusted weighted average number of shares - millions |
|
|
|
|
5,343 |
|
Year ended 31 December 2010 |
£m |
||||
|
|
Notes |
Core continuing operations |
Non-core continuing operations |
Discontinued operations |
Total |
|
Adjusted operating Group MCEV earnings before tax |
|
1,399 |
(28) |
48 |
1,419 |
|
Tax on adjusted operating Group MCEV earnings |
B2 |
(313) |
4 |
(1) |
(310) |
|
Adjusted operating Group MCEV earnings after tax |
|
1,086 |
(24) |
47 |
1,109 |
|
Non-controlling interests |
|
|
|
|
|
|
Ordinary shares |
|
(217) |
- |
- |
(217) |
|
Preferred securities |
|
(62) |
- |
- |
(62) |
|
Adjusted operating MCEV earnings after tax attributable to equity holders |
|
807 |
(24) |
47 |
830 |
|
Adjusted operating Group MCEV earnings per share* |
|
15.0 |
(0.4) |
0.9 |
15.5 |
|
Adjusted weighted average number of shares - millions |
|
|
|
|
5,359 |
* Adjusted operating Group MCEV earnings per share is calculated on the same basis as adjusted operating Group MCEV earnings, but is stated after tax 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.
Components of Group MCEV and adjusted Group MCEV
For the six months ended 30 June 2011
|
Components of Group MCEV |
|
|
|
£m |
|
|
Notes |
At 30 June 2011 |
At 30 June |
At 31 December 2010 |
|
Adjusted net worth attributable to ordinary equity holders of the parent |
|
5,431 |
4,845 |
5,737 |
|
Equity |
|
9,031 |
9,047 |
8,951 |
|
Adjustment to include long-term business on a statutory solvency basis*: |
|
|
|
|
|
Long Term Savings |
C5 |
(2,167) |
(2,147) |
(2,053) |
|
Bermuda |
C5 |
(34) |
(13) |
(29) |
|
US Life |
C5 |
- |
(619) |
260 |
|
Adjustment for market value of life funds' investments in Group equity and debt instruments held in life funds |
|
314 |
244 |
306 |
|
Adjustment to remove perpetual preferred callable securities and accrued dividends |
|
(688) |
(688) |
(688) |
|
Adjustment to exclude acquisition goodwill from the covered business: |
|
|
|
|
|
Long Term Savings |
C5 |
(1,025) |
(979) |
(1,010) |
|
Value of in-force business |
|
4,850 |
3,208 |
4,164 |
|
Present value of future profits |
|
5,602 |
4,269 |
5,256 |
|
Additional time value of financial options and guarantees |
|
(163) |
(456) |
(433) |
|
Frictional costs |
|
(268) |
(235) |
(276) |
|
Cost of residual non-hedgeable risks |
|
(321) |
(370) |
(383) |
|
Group MCEV |
|
10,281 |
8,053 |
9,901 |
|
Group MCEV value per share (pence) |
|
186.0 |
148.0 |
181.5 |
|
Return on Group MCEV (ROEV) per annum from core operations |
|
10.7% |
10.7% |
10.6% |
|
Return on Group MCEV (ROEV) per annum from continuing non-core operations |
|
0.3% |
0.5% |
(0.3)% |
|
Return on Group MCEV (ROEV) per annum from discontinued operations |
|
0.0% |
3.5% |
0.6% |
|
Return on Group MCEV (ROEV**) per annum |
|
11.0% |
14.7% |
10.9% |
|
Number of shares in issue at the end of the financial period less treasury shares - millions |
|
5,529 |
5,442 |
5,456 |
* The adjustments to include long-term business on a statutory solvency basis reflect the difference between the net worth of each business on the statutory basis (as required by the local regulator) and their portion of the Group's consolidated equity shareholder funds. In South Africa, these values exclude items that are eliminated or shown separately on consolidation (such as Nedbank and inter-company loans). For some European countries the value reflected in the adjustment to include long-term business on a statutory solvency basis includes the value of the deferred acquisition cost asset, which is part of the equity.
** The ROEV is calculated as the adjusted operating Group MCEV earnings after tax and non-controlling interests of £529 million (six months ended 30 June 2010: £567 million; year ended 31 December 2010: £830 million) divided by the opening Group MCEV. The operating assumption changes of £(4) million (six months ended 30 June 2010: £0 million) and other operating variances of £(30) million (six months ended 30 June 2010: £12 million) are not annualised.
Components of Group MCEV and adjusted Group MCEV
For the six months ended 30 June 2011
|
Components of adjusted Group MCEV |
£m |
|||
|
|
Notes |
At 30 June |
At 30 June |
At 31 December |
|
Group MCEV |
|
10,281 |
8,053 |
9,901 |
|
Pro forma adjustments to bring Group investments to market value |
|
|
|
|
|
Adjustment to bring listed subsidiary (Nedbank) to market value |
|
969 |
495 |
715 |
|
Adjustment for value of own shares in ESOP schemes* |
|
113 |
73 |
85 |
|
Adjustment for present value of Black Economic Empowerment scheme deferred consideration** |
|
299 |
241 |
266 |
|
Adjustment to bring external debt to market value |
|
(57) |
206 |
63 |
|
Adjusted Group MCEV |
B1 |
11,605 |
9,068 |
11,030 |
|
Adjusted Group MCEV per share (pence) |
|
209.9 |
166.6 |
202.2 |
|
Number of shares in issue at the end of the financial period less treasury shares - millions |
|
5,529 |
5,442 |
5,456 |
* Includes adjustment for value of excess own shares in employee share scheme trusts. The movement in value between 31 December 2010 and 30 June 2011 is the net effect of the increase in the Old Mutual plc share price, the reduction in excess own shares following employee share grants in March 2011 and the reduction in overall shares held due to exercises of rights to take delivery of, or net settle, share grants during the financial period. The affect of the acquisition of the minority interest in Mutual & Federal during 2010 has been included in this adjustment for the first time at 30 June 2011.
** The affect of the acquisition of the minority interest in Mutual & Federal during 2010 has been included in this adjustment for the first time at 30 June 2011.
|
Reconciliation of movements in Group MCEV (after tax) |
£m |
|||||||
|
|
|
6 months ended 30 June 2011 |
6 months ended 30 June 2010 |
|||||
|
|
Notes |
Covered business MCEV |
Non-covered business IFRS |
Total Group MCEV |
Covered business MCEV |
Non-covered business IFRS |
Total Group MCEV |
|
|
Opening Group MCEV |
|
7,515 |
2,386 |
9,901 |
6,027 |
1,602 |
7,629 |
|
|
Adjusted operating MCEV earnings |
|
354 |
175 |
529 |
452 |
115 |
567 |
|
|
Non-operating MCEV earnings |
|
(27) |
(44) |
(71) |
(164) |
(101) |
(265) |
|
|
Total Group MCEV earnings |
|
327 |
131 |
458 |
288 |
14 |
302 |
|
|
Other movements in IFRS net equity |
C4 |
37 |
(115) |
(78) |
(141) |
263 |
122 |
|
|
Closing Group MCEV |
|
7,879 |
2,402 |
10,281 |
6,174 |
1,879 |
8,053 |
|
|
|
|
£m |
||
|
|
|
Year ended 31 December 2010 |
||
|
|
Notes |
Covered business MCEV |
Non-covered business IFRS |
Total Group MCEV |
|
Opening Group MCEV |
|
6,027 |
1,602 |
7,629 |
|
Adjusted operating MCEV earnings |
|
590 |
240 |
830 |
|
Non-operating MCEV earnings |
|
786 |
(187) |
599 |
|
Total Group MCEV earnings |
|
1,376 |
53 |
1,429 |
|
Other movements in IFRS net equity |
C4 |
112 |
731 |
843 |
|
Closing Group MCEV |
|
7,515 |
2,386 |
9,901 |
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011
A MCEV policies
A1 Basis of preparation
The Market Consistent Embedded Value methodology (referred to herein and in the supplementary statements on pages 84 to 125 as 'MCEV') adopts the Market Consistent Embedded Value Principles (Copyright © Stichting CFO Forum Foundation 2008) issued in June 2008 and updated in October 2009 by the CFO Forum ('the Principles') as the basis for the methodology used in preparing the supplementary information.
The CFO Forum announced changes to the MCEV Principles in October 2009 to reflect inter alia the inclusion of a liquidity premium. These changes affirm that the risk free reference rate to be applied under MCEV should include both the swap yield curve appropriate to the currency of the cash flows and a liquidity premium where appropriate. The CFO Forum is undertaking further work to develop more detailed application guidance.
The Principles have been fully complied with for all businesses as at 30 June 2011. Any changes in the methodology and assumptions made in presenting this supplementary information compared to those disclosed in the annual report and accounts 2010 are set out in notes A2 and A3.
Throughout the supplementary information the following terminology is used to distinguish between the terms 'MCEV', 'Group MCEV' and 'adjusted Group MCEV':
· MCEV is a measure of the consolidated value of shareholders' interests in the covered business and consists of the sum of the shareholders' adjusted net worth in respect of the covered business and the value of the in-force covered business.
· Group MCEV is a measure of the consolidated value of shareholders' interests in covered and non-covered business. Non-covered business is valued at the IFRS net asset value detailed in the primary financial statements adjusted to eliminate inter-company loans.
· The adjusted Group MCEV, a measure used by management to assess the shareholders' interest in the value of the Group, includes the impact of marking all debt to market value, the market value of the Group's listed banking subsidiary, marking the value of deferred consideration due in respect of Black Economic Empowerment arrangements in South Africa ('the BEE schemes') to market, as well as including the market value of excess own shares held in ESOP schemes and the US Life sale proceeds.
A2 Methodology
Required capital
Required capital is the market value of assets that is attributed to support the covered business, over and above that required to back statutory liabilities for covered business, whose distribution to shareholders is restricted. The following capital measures are considered in determining the required capital held for covered business so that it reflects the level of capital considered by the directors to be appropriate to manage the business:
· Economic capital;
· Regulatory capital (ie the level of solvency capital which the local regulators require);
· Capital required by rating agencies in order to maintain the desired credit rating; and
· Any other required capital definition to meet internal management objectives.
Economic capital for the covered business is based upon Old Mutual's own internal assessment of risks inherent in the underlying business. It measures capital requirements on an economic statement of financial position, with MCEV as the available capital, consistent with a 99.93% confidence level over a one-year time horizon.
The table below shows the level of required capital expressed as a percentage of the minimum local regulatory capital requirements.
|
|
£m |
||||||||
|
|
At 30 June 2011 |
At 30 June 2010 |
At 31 December 2010 |
||||||
|
|
Required capital (a) |
Regulatory capital (b) |
Ratio (a/b) |
Required capital (a) |
Regulatory capital (b) |
Ratio (a/b) |
Required capital (a) |
Regulatory capital (b) |
Ratio (a/b) |
|
Emerging Markets |
1,456 |
1,118 |
1.3 |
1,318 |
1,011 |
1.3 |
1,498 |
1,153 |
1.3 |
|
Nordic |
141 |
140 |
1.0 |
109 |
95 |
1.1 |
135 |
135 |
1.0 |
|
Retail Europe* |
65 |
88 |
0.7 |
38 |
52 |
0.7 |
62 |
85 |
0.7 |
|
Wealth Management** |
271 |
164 |
1.7 |
246 |
142 |
1.7 |
278 |
162 |
1.7 |
|
US Life |
n/a |
n/a |
n/a |
491 |
204 |
2.4 |
468 |
196 |
2.4 |
|
Bermuda*** |
407 |
- |
n/a |
341 |
- |
n/a |
403 |
- |
n/a |
|
Total |
2,340 |
1,510 |
1.5 |
2,543 |
1,504 |
1.7 |
2,844 |
1,731 |
1.6 |
* Local regulators within many of the Retail Europe countries allow intangible assets to be included as admissible regulatory capital. In such cases the required capital reported for MCEV is net of these items, although each of the countries continues to be sufficiently capitalised on the local solvency basis. Skandia Leben in Germany is permitted under local regulations to include the unallocated policyholder profit sharing liability as admissible capital.
** The required capital for Wealth Management has been restated at 30 June 2010 to reflect a modelling refinement.
*** The Bermudan regulator allows intangible assets to be included as admissible regulatory capital.
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011
Cost of residual non-hedgeable risks
The cost of residual non-hedgeable risks ('CNHR') is calculated using a cost of capital approach, ie it is determined as the present value of capital charges for all future non-hedgeable risk capital requirements until the liabilities have run off. The capital charge in each year is the product of the projected expected non-hedgeable risk capital held after allowance for some diversification benefits and the cost of capital charge.
The table below shows the amounts of diversified economic capital held in respect of residual non-hedgeable risks.
|
Capital held in respect of non-hedgeable risks |
£m |
||
|
|
At |
At |
At |
|
Emerging Markets |
765 |
643 |
751 |
|
Nordic |
325 |
315 |
362 |
|
Retail Europe |
174 |
128 |
115 |
|
Wealth Management |
654 |
553 |
622 |
|
US Life |
n/a |
703 |
678 |
|
Bermuda |
331 |
285 |
274 |
|
Total |
2,249 |
2,627 |
2,802 |
A weighted average cost of capital rate of 2.0% has been applied to residual symmetric and asymmetric non-hedgeable capital at a business unit level over the life of the contracts. This translates into an equivalent cost of capital rate of approximately 2.6% being applied to the Group diversified capital required in respect of such non-hedgeable risks.
Taxation
There was previously uncertainty around both the basis and effective date for possible taxation of fee income earned from fund managers by Swedish insurance companies and the expenses that can be relieved against such income. On 10 June 2011 the Supreme Administrative Court in Sweden delivered the final verdict stating that fund rebates are not taxable for corporate income tax purposes. We will therefore continue to treat fee income from our Swedish unit-linked business as being exempt from corporation tax within our MCEV.
The Emergency Budget of 22 June 2010 announced a reduction in the UK corporation tax rate by 1% per year for four years from the financial year beginning April 2011, ultimately bringing the corporation tax rate down to 24%. The first reduction to 27% was included within the 31 December 2010 MCEV results. The Budget of 23 March 2011 announced an additional 1% reduction to be enacted during 2011, bringing the ultimate tax rate down to 23%. The 30 June 2011 MCEV results therefore reflect this 1% reduction and have been calculated using an ongoing UK corporation tax rate of 26%. The estimated positive impact on the VIF in respect of Wealth Management at 30 June 2011, assuming that all the annual reductions in the tax rate will be enacted, is £24 million, of which the impact of the remaining reduction from 26% down to 23% is estimated to be an MCEV profit of £14m. However, only £6 million is allowed for at 30 June 2011 as an assumption change relating to the tax rate reduction from 27% to 26% (£4 million was allowed for at 31 December 2010 as an assumption change relating to the first tax reduction to 27%). Further allowance will be made once future annual reductions are enacted.
A new dividend withholding tax system (replacing the current Secondary Tax on Companies (STC) system) will be introduced in South Africa effective from 1 April 2012. For 30 June 2011, we continued to use the current STC basis within the MCEV. The current view is that no allowance will be made in future for the impact of the new withholding tax in the MCEV, as the actual level of taxation will depend on the legal nature of each shareholder. It is estimated that the Emerging Markets MCEV will increase by approximately R1.5 billion (£138 million) while the value of new business for the six months to June 2011 will increase by approximately R40 million (£4 million). The impact on the Group MCEV is still to be determined, as withholding tax may reduce this benefit at Group level.
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
A3 Assumptions
Non-economic assumptions
The management expenses attributable to life assurance business have been allocated to expenses relating to the acquisition of new business, maintenance of in-force business (including investment management expenses) and development projects.
Unallocated Group holding company expenses have been included to the extent that they relate to the covered business. The table below shows the future expenses attributable to the long-term business. The allocation of these expenses aligns to the proportion that the management expenses incurred by the covered businesses to the total management expenses incurred in the Group.
|
Group holding Company expenses attributable to long-term business |
% |
||
|
|
At |
At |
At |
|
Emerging Markets |
17 |
16 |
17 |
|
Nordic |
4 |
4 |
4 |
|
Retail Europe |
3 |
2 |
3 |
|
Wealth Management |
5 |
8 |
6 |
|
US Life |
- |
- |
2 |
|
Total |
29 |
30 |
32 |
Economic assumptions
Risk free reference rates and inflation
At 30 June 2011, no adjustments are made to swap yields to allow for liquidity premiums or credit risk premiums, apart from a liquidity premium adjustment to OMLAC(SA)'s Immediate Annuity business and Fixed Bond business. A liquidity premium adjustment has been applied to OMLAC(SA)'s Fixed Bond business at 30 June 2011 because OMLAC(SA) holds a portfolio of non-government bonds which have a market yield in excess of the risk free rate and the duration of the asset portfolio and the liability duration are a good match (meaning the asset portfolio is held to maturity). Cash flows on this product are also predictable and the company has adequate liquidity to withstand a substantial increase in lapses at all durations without having to sell bonds which further strengthens the case for applying a liquidity premium.
It is the directors' view that a proportion of non-government bond spreads at 30 June 2011 is attributable to a liquidity premium rather than only to credit and default allowances and that returns in excess of swap rates can be achieved, rather than entire spreads being lost to worsening default experience. For OMLAC(SA)'s Immediate Annuity business the currency, credit quality and duration of the actual bond portfolios were considered and adjusted risk free reference rates were derived at 30 June 2011 by adding 55bps of liquidity premium for this business (30 June 2010: 50bps; 31 December 2010: 45bps) to the swap rates used for setting investment return and discounting assumptions. For OMLAC(SA)'s Fixed Bond products 60 bps of liquidity premium was added to the swap rates. These adjustments reflect the liquidity premium component in non-government bond spreads over swap rates that is expected to be earned on the portfolios. In deriving the liquidity premia at 30 June 2011, we have reviewed emerging Solvency II matching premium guidance and a comparison of the yields of similar durations on South African government bonds and bonds issues by state-owned enterprises. At those durations where swap yields are not available, e.g. due to lack of a sufficiently liquid or deep swap market, the swap curve is extended using appropriate interpolation or extrapolation techniques.
The risk free reference spot yields (excluding any applicable liquidity adjustments) and expense inflation rates at various terms for each of the significant regions are provided in the table below. The risk free reference spot yield curve has been derived from mid swap rates at the reporting date.
|
Risk free reference spot yields (excluding any applicable liquidity adjustments) |
|
|
% |
|||
|
|
GBP* |
EUR |
USD* |
ZAR |
SEK |
|
|
At 30 June 2011 |
|
|
|
|
|
|
|
1 year |
0.9 |
2.0 |
0.4 |
6.2 |
2.8 |
|
|
5 years |
2.4 |
2.8 |
2.1 |
8.0 |
3.3 |
|
|
10 years |
3.5 |
3.4 |
3.5 |
8.6 |
3.6 |
|
|
20 years |
4.0 |
3.9 |
4.3 |
8.2 |
3.8 |
|
|
|
|
|
|
|
|
|
|
At 30 June 2010 |
|
|
|
|
|
|
|
1 year |
0.9 |
1.2 |
0.7 |
6.7 |
1.3 |
|
|
5 years |
2.3 |
2.1 |
2.1 |
8.0 |
2.3 |
|
|
10 years |
3.3 |
2.9 |
3.2 |
8.6 |
3.1 |
|
|
20 years |
3.8 |
3.4 |
3.9 |
8.2 |
3.6 |
|
|
|
|
|
|
|
|
|
|
At 31 December 2010 |
|
|
|
|
|
|
|
1 year |
0.9 |
1.3 |
0.4 |
5.6 |
2.3 |
|
|
5 years |
2.7 |
2.5 |
2.2 |
7.4 |
3.3 |
|
|
10 years |
3.6 |
3.3 |
3.5 |
8.2 |
3.7 |
|
|
20 years |
4.0 |
3.7 |
4.3 |
8.1 |
4.0 |
|
* For prior reporting periods, the risk free spot yields disclosed for GBP were on a 1-year forward basis, and the risk free spot yields disclosed for USD were on a semi-annual par basis. The assumptions at 30 June 2011, as well as the comparatives for prior periods, are now shown as annualised spot yields, consistent with other regions.
|
Expense inflation |
|
|
|
|
% |
|
|
GBP |
EUR |
USD |
ZAR |
SEK |
|
At 30 June 2011 |
|
|
|
|
|
|
1 year |
3.0 |
2.5 |
3.0 |
5.7 |
2.3 |
|
5 years |
3.9 |
2.5 |
3.0 |
7.0 |
2.9 |
|
10 years |
4.3 |
2.5 |
3.0 |
7.5 |
3.2 |
|
20 years |
4.8 |
2.5 |
3.0 |
7.1 |
3.1 |
|
|
|
|
|
|
|
|
At 30 June 2010 |
|
|
|
|
|
|
1 year |
3.3 |
2.5 |
3.0 |
6.2 |
1.5 |
|
5 years |
3.5 |
2.5 |
3.0 |
6.3 |
2.3 |
|
10 years |
4.0 |
2.5 |
3.0 |
6.7 |
2.6 |
|
20 years |
4.5 |
2.5 |
3.0 |
6.4 |
2.9 |
|
|
|
|
|
|
|
|
At 31 December 2010 |
|
|
|
|
|
|
1 year |
3.0 |
2.5 |
3.0 |
5.0 |
2.2 |
|
5 years |
4.3 |
2.5 |
3.0 |
6.4 |
3.0 |
|
10 years |
5.3 |
2.5 |
3.0 |
7.2 |
3.2 |
|
20 years |
5.1 |
2.5 |
3.0 |
7.0 |
3.3 |
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
Volatilities
The at-the-money annualised asset volatility assumptions of the asset classes incorporated in the stochastic models are detailed below.
|
ZAR volatilities* |
|
|
|
|
|
% |
|
Option term |
1 year swap |
5 year swap |
10 year swap |
20 year swap |
Equity |
Property |
|
At 30 June 2011 |
|
|
|
|
|
|
|
1 year |
18.3 |
16.8 |
15.9 |
15.5 |
23.0 |
16.0 |
|
5 years |
16.7 |
16.0 |
15.6 |
15.2 |
26.0 |
16.0 |
|
10 years |
16.2 |
15.8 |
15.4 |
14.7 |
27.4 |
16.0 |
|
20 years |
14.5 |
14.1 |
13.5 |
12.5 |
28.3 |
15.6 |
|
|
|
|
|
|
|
|
|
At 30 June 2010 |
|
|
|
|
|
|
|
1 year |
15.6 |
13.9 |
12.9 |
12.4 |
28.4 |
16.9 |
|
5 years |
14.5 |
13.7 |
13.2 |
12.8 |
26.3 |
14.8 |
|
10 years |
13.6 |
13.2 |
12.8 |
12.3 |
26.6 |
14.3 |
|
20 years |
12.8 |
12.2 |
11.7 |
10.9 |
26.9 |
14.2 |
|
|
|
|
|
|
|
|
|
At 31 December 2010 |
|
|
|
|
|
|
|
1 year |
18.7 |
16.9 |
15.8 |
15.1 |
23.4 |
16.0 |
|
5 years |
16.4 |
15.5 |
14.9 |
14.4 |
25.5 |
15.7 |
|
10 years |
15.6 |
15.0 |
14.5 |
13.9 |
27.0 |
15.9 |
|
20 years |
13.8 |
13.3 |
12.8 |
11.9 |
27.8 |
15.4 |
* Due to limited liquidity in the ZAR swaption and equity option market, the market consistent asset model has been calibrated by extrapolating swaption and equity option implied volatility data beyond terms of 2 years and 3 years respectively.
|
USD volatilities* |
|
|
|
% |
|
Option term |
1 year swap |
5 year swap |
10 year swap |
20 year swap |
|
At 30 June 2011 |
|
|
|
|
|
1 year |
72.3 |
43.3 |
33.8 |
26.4 |
|
5 years |
25.0 |
23.4 |
21.4 |
18.0 |
|
10 years |
20.1 |
20.3 |
18.7 |
15.5 |
|
20 years |
17.2 |
17.8 |
16.1 |
14.1 |
|
|
|
|
|
|
|
At 30 June 2010 |
|
|
|
|
|
1 year |
37.5 |
34.6 |
32.3 |
29.0 |
|
5 years |
28.5 |
27.3 |
25.7 |
23.4 |
|
10 years |
22.4 |
21.3 |
20.2 |
18.5 |
|
20 years |
18.8 |
17.8 |
16.8 |
15.3 |
|
|
|
|
|
|
|
At 31 December 2010 |
|
|
|
|
|
1 year |
37.8 |
34.3 |
31.2 |
27.7 |
|
5 years |
26.2 |
24.7 |
23.0 |
20.9 |
|
10 years |
20.0 |
18.8 |
17.7 |
16.1 |
|
20 years |
16.8 |
15.7 |
14.7 |
13.1 |
* In prior reporting periods USD volatilities were based on market quoted information. The assumptions at 30 June 2011, as well as the comparatives for prior periods, are now shown as modelled volatilities, consistent with the disclosure of interest rate volatilities in South Africa.
|
International equity volatilities (applicable to Old Mutual Bermuda)* |
% |
|||||||||
|
Option term |
SPX |
RTY |
EWZ |
TPX |
HSCEI |
TWY |
KOSP12 |
NIFTY |
SX5E |
UKX |
|
At 30 June 2011 |
|
|
|
|
|
|
|
|
|
|
|
1 year |
20.8 |
n/a |
27.6 |
25.8 |
24.8 |
20.3 |
21.4 |
21.1 |
23.01 |
20.6 |
|
5 years |
23.4 |
n/a |
28.0 |
26.7 |
27.2 |
23.2 |
22.7 |
25.1 |
23.7 |
23.2 |
|
10 years |
23.4 |
n/a |
28.0 |
26.7 |
27.2 |
23.2 |
22.7 |
25.1 |
23.7 |
23.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2010 |
|
|
|
|
|
|
|
|
|
|
|
1 year |
29.0 |
37.2 |
n/a |
29.1 |
31.0 |
24.3 |
23.1 |
21.9 |
29.7 |
27.3 |
|
5 years |
28.0 |
39.0 |
n/a |
29.3 |
31.8 |
27.3 |
23.7 |
23.5 |
27.9 |
26.9 |
|
10 years |
28.0 |
39.0 |
n/a |
29.3 |
31.8 |
27.3 |
23.7 |
23.5 |
27.9 |
26.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2010 |
|
|
|
|
|
|
|
|
|
|
|
1 year |
21.5 |
28.1 |
n/a |
26.7 |
27.8 |
21.5 |
21.4 |
22.0 |
24.3 |
21.5 |
|
5 years |
23.6 |
32.6 |
n/a |
28.3 |
32.3 |
25.5 |
24.0 |
26.6 |
25.2 |
24.2 |
|
10 years |
23.6 |
32.6 |
n/a |
28.3 |
32.3 |
25.5 |
24.0 |
26.6 |
25.2 |
24.2 |
|
International equity volatilities (applicable to Old Mutual Bermuda)* |
% |
|||
|
Option term |
EEM |
USAgg |
EUAgg |
APAgg |
|
At 30 June 2011 |
|
|
|
|
|
1 year |
26.4 |
5.4 |
12.9 |
12.5 |
|
5 years |
28.0 |
5.4 |
12.9 |
12.5 |
|
10 years |
28.0 |
5.4 |
12.9 |
12.5 |
|
|
|
|
|
|
|
At 30 June 2010 |
|
|
|
|
|
1 year |
35.2 |
5.5 |
13.0 |
12.6 |
|
5 years |
32.4 |
5.5 |
13.0 |
12.6 |
|
10 years |
32.4 |
5.5 |
13.0 |
12.6 |
|
|
|
|
|
|
|
At 31 December 2010 |
|
|
|
|
|
1 year |
27.4 |
5.5 |
13.0 |
12.6 |
|
5 years |
27.7 |
5.5 |
13.0 |
12.6 |
|
10 years |
27.7 |
5.5 |
13.0 |
12.6 |
* Long-term option implied volatility has been calibrated assuming a flat volatility term structure beyond 5 years due to limited data availability for some indices. The assumptions at 30 June 2011, as well as the comparatives for prior periods, are shown as the annualised volatilities applicable over the entire option term specified, consistent with the disclosure of volatilities for other regions. These volatilities, as represented by their Bloomberg codes, refer to the price indices. Due to ongoing enhancements in the fund mapping process, the indices referenced may vary from period to period. In the first half of 2011, a decision was made to remove the Russell 2000 Index (RTY) and add the MSCI Brazil Index (EWZ) which provides exposure to Latin America.
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
Expected asset returns in excess of the risk free reference rates
Equity and property risk premiums incorporate both historical relationships and the directors' view of future projected returns in each region over the analysis period. Pre-tax real-world economic assumptions are determined as follows:
· The equity risk premium is 3.5% for Africa and 3% for Europe .
· The cash return equals the one year risk free reference rate for all regions.
· The corporate bond return is based on actual corporate bond spreads on the reporting date less an allowance for defaults.
· The property risk premium is 1.5% in Africa and 2% in Europe.
Tax
The weighted average effective tax rates that apply to the cash flow projections at 30 June 2011 are set out below:
· OMLAC(SA) - 33% (30 June 2010: 34%; 31 December 2010: 33%)
· Namibia - 0% (30 June 2010: 0%; 31 December 2010: 0%)
· Nordic - 4% (30 June 2010: 0%; 31 December 2010: 4%)
· Retail Europe - 27% (30 June 2010: 27%; 31 December 2010: 27%)
· Wealth Management* - 11% (30 June 2010: 11%; 31 December 2010: 11%)
· Bermuda - 0% (30 June 2010: 0%; 31 December 2010: 0%)
* The weighted average effective tax rate for Wealth Management at 30 June 2010 has been restated from 13% to 11% to reflect a calculation correction.
A4 Disposal of US Life
On 6 August 2010, the Company announced that it had entered into an agreement to sell the assets and liabilities of its US Life insurance business to Harbinger Capital Partners for the sum of £215 million ($350 million) subject to regulatory approval. The sale was completed, following regulatory approval, on 7 April 2011. This transaction has resulted in an uplift of £451 million to the adjusted Group MCEV, as analysed below.
|
Adjusted Group MCEV uplift from sale of US Life |
£m |
|
Headline purchase price |
215 |
|
Advisor fees and costs |
(17) |
|
US Life sale proceeds |
198 |
|
Retention of OM Re |
71 |
|
Total proceeds from US Life disposal* |
269 |
|
Removal of US Life MCEV** |
182 |
|
Adjusted Group MCEV uplift |
451 |
* The total proceeds from the sale of US Life are included within the adjusted net worth attributable to the ordinary equity holders of the parent
** The MCEV results for US Life include allowance for Old Mutual Reassurance (Ireland) Limited (OM Re)
The total earnings over the period are equal to the MCEV uplift, however we have not attributed these earnings to specific line items in the analysis of MCEV earnings.
B Segment information
B1 Adjusted Group MCEV presented per business line
|
|
|
£m |
|
|
|
At 30 June 2011 |
At 30 June 2010 |
At |
|
MCEV of the core covered business |
7,579 |
6,393 |
7,417 |
|
Adjusted net worth* |
2,622 |
2,031 |
2,414 |
|
Value of in-force business |
4,957 |
4,362 |
5,003 |
|
MCEV of the Bermuda non-core covered business |
300 |
168 |
287 |
|
Adjusted net worth |
407 |
341 |
403 |
|
Value of in-force business |
(107) |
(173) |
(116) |
|
MCEV of the US Life discontinued covered business |
- |
(387) |
(189) |
|
Adjusted net worth |
- |
594 |
534 |
|
Value of in-force business |
- |
(981) |
(723) |
|
|
|
|
|
|
Adjusted net worth of asset management and other businesses |
1,983 |
1,968 |
1,950 |
|
Emerging Markets |
333 |
250 |
289 |
|
Nordic** |
(36) |
32 |
4 |
|
Retail Europe |
15 |
13 |
14 |
|
Wealth Management |
178 |
157 |
171 |
|
US Asset Management |
1,493 |
1,516 |
1,472 |
|
|
|
|
|
|
Value of the banking business |
3,831 |
2,998 |
3,603 |
|
Nordic (adjusted net worth) |
347 |
292 |
328 |
|
Nedbank (market value) |
3,484 |
2,706 |
3,275 |
|
Value of the general insurance business |
|
|
|
|
Mutual & Federal |
322 |
321 |
409 |
|
|
|
|
|
|
Net other business |
373 |
(88) |
31 |
|
Adjustment for present value of Black Economic Empowerment scheme deferred consideration |
299 |
241 |
266 |
|
Adjustment for value of own shares in ESOP schemes*** |
113 |
73 |
85 |
|
|
|
|
|
|
Perpetual preferred securities (US$ denominated) |
(464) |
(435) |
(449) |
|
Perpetual preferred callable securities |
(690) |
(487) |
(598) |
|
GBP denominated |
(299) |
(236) |
(270) |
|
Euro denominated |
(391) |
(251) |
(328) |
|
Debt |
(2,041) |
(1,697) |
(1,782) |
|
Rand denominated |
(277) |
(309) |
(304) |
|
USD denominated |
(376) |
(323) |
(337) |
|
GBP denominated |
(886) |
(790) |
(842) |
|
SEK denominated |
(500) |
(273) |
(297) |
|
Euro denominated |
(2) |
(2) |
(2) |
|
Adjusted Group MCEV |
11,605 |
9,068 |
11,030 |
* Adjusted net worth is after the elimination of inter-company loans.
** Includes the adjusted net worth of Nordic holding companies that are classified as non-covered business, net of the holding companies' investment in Group subsidiaries.
*** Includes adjustment for value of excess own shares in employee share scheme trusts. The movement in value between 31 December 2010 and 30 June 2011 is the net effect of the decrease in the Old Mutual plc share price, the reduction in excess own shares following employee share grants in March 2010 and the reduction in overall shares held due to exercises of rights to take delivery of, or net settle, share grants during the financial period. The affect of the acquisition of the minority interest in Mutual & Federal during 2010 has been included in this adjustment for the first time at 30 June 2011.
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
B2 Adjusted operating MCEV earnings for the covered business
|
|
|
£m |
|
|
|
6 months ended 30 June 2011 |
6 months ended 30 June 2010 |
Year ended 31 December 2010 |
|
Adjusted operating MCEV earnings before tax for the covered business |
|
|
|
|
Long Term Savings |
436 |
369 |
705 |
|
Emerging Markets |
241 |
182 |
443 |
|
Nordic |
78 |
79 |
65 |
|
Retail Europe |
- |
31 |
68 |
|
Wealth Management |
117 |
77 |
129 |
|
US Life |
- |
129 |
48 |
|
Bermuda |
11 |
30 |
(28) |
|
|
447 |
528 |
725 |
|
|
|
|
|
|
Tax on adjusted operating MCEV earnings for the covered business |
|
|
|
|
Long Term Savings |
(91) |
(74) |
(138) |
|
Emerging Markets |
(53) |
(38) |
(99) |
|
Nordic |
(15) |
(16) |
(20) |
|
Retail Europe |
(6) |
(7) |
(2) |
|
Wealth Management |
(17) |
(13) |
(17) |
|
US Life |
- |
(2) |
(1) |
|
Bermuda |
(2) |
- |
4 |
|
|
(93) |
(76) |
(135) |
|
|
|
|
|
|
Adjusted operating MCEV earnings after tax for the covered business |
|
|
|
|
Long Term Savings |
345 |
295 |
567 |
|
Emerging Markets |
188 |
144 |
344 |
|
Nordic |
63 |
63 |
45 |
|
Retail Europe |
(6) |
24 |
66 |
|
Wealth Management |
100 |
64 |
112 |
|
US Life |
- |
127 |
47 |
|
Bermuda |
9 |
30 |
(24) |
|
|
354 |
452 |
590 |
|
|
|
|
|
|
Tax on adjusted operating MCEV earnings comprises |
|
|
|
|
Tax on adjusted operating MCEV earnings for the covered business |
(93) |
(76) |
(135) |
|
Tax on adjusted operating MCEV earnings for other business |
(121) |
(79) |
(175) |
|
Tax on adjusted operating MCEV earnings |
(214) |
(155) |
(310) |
B3 Components of MCEV of the covered business
|
|
|
£m |
|
|
|
At |
At |
At |
|
MCEV of the covered business |
7,879 |
6,174 |
7,515 |
|
Adjusted net worth |
3,029 |
2,966 |
3,351 |
|
Value of in-force business |
4,850 |
3,208 |
4,164 |
|
|
|
|
|
|
Long Term Savings |
|
|
|
|
Adjusted net worth |
2,622 |
2,031 |
2,414 |
|
Free surplus |
689 |
351 |
441 |
|
Required capital |
1,933 |
1,680 |
1,973 |
|
Value of in-force business |
4,957 |
4,362 |
5,003 |
|
Present value of future profits |
5,523 |
4,840 |
5,557 |
|
Additional time value of financial options and guarantees |
(8) |
(11) |
(12) |
|
Frictional costs |
(266) |
(223) |
(267) |
|
Cost of residual non-hedgeable risks |
(292) |
(244) |
(275) |
|
|
|
|
|
|
Consisting of: |
|
|
|
|
Emerging Markets |
|
|
|
|
Adjusted net worth* |
1,926 |
1,415 |
1,804 |
|
Free surplus |
470 |
97 |
306 |
|
Required capital |
1,456 |
1,318 |
1,498 |
|
Value of in-force business |
1,440 |
1,231 |
1,509 |
|
Present value of future profits |
1,778 |
1,525 |
1,849 |
|
Additional time value of financial options and guarantees |
- |
- |
- |
|
Frictional costs |
(238) |
(204) |
(240) |
|
Cost of residual non-hedgeable risks |
(100) |
(90) |
(100) |
|
Nordic |
|
|
|
|
Adjusted net worth |
200 |
143 |
186 |
|
Free surplus |
59 |
34 |
51 |
|
Required capital |
141 |
109 |
135 |
|
Value of in-force business |
1,301 |
1,154 |
1,318 |
|
Present value of future profits |
1,377 |
1,210 |
1,397 |
|
Additional time value of financial options and guarantees |
- |
- |
- |
|
Frictional costs |
(6) |
(5) |
(6) |
|
Cost of residual non-hedgeable risks |
(70) |
(51) |
(73) |
|
Retail Europe |
|
|
|
|
Adjusted net worth |
119 |
84 |
103 |
|
Free surplus |
54 |
46 |
41 |
|
Required capital |
65 |
38 |
62 |
|
Value of in-force business |
530 |
451 |
520 |
|
Present value of future profits |
595 |
504 |
573 |
|
Additional time value of financial options and guarantees |
(6) |
(10) |
(10) |
|
Frictional costs |
(12) |
(6) |
(11) |
|
Cost of residual non-hedgeable risks |
(47) |
(37) |
(32) |
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
B3 Components of MCEV of the covered business continued
|
|
|
£m |
|
|
|
At |
At |
At |
|
Wealth Management |
|
|
|
|
Adjusted net worth |
377 |
389 |
321 |
|
Free surplus |
106 |
174 |
43 |
|
Required capital |
271 |
215 |
278 |
|
Value of in-force business |
1,686 |
1,526 |
1,656 |
|
Present value of future profits |
1,773 |
1,601 |
1,738 |
|
Additional time value of financial options and guarantees |
(2) |
(1) |
(2) |
|
Frictional costs |
(10) |
(8) |
(10) |
|
Cost of residual non-hedgeable risks |
(75) |
(66) |
(70) |
|
|
|
|
|
|
US Life (Discontinued and non-core) |
|
|
|
|
Adjusted net worth |
- |
594 |
534 |
|
Free surplus |
- |
103 |
66 |
|
Required capital |
- |
491 |
468 |
|
Value of in-force business |
- |
(981) |
(723) |
|
Present value of future profits |
- |
(648) |
(446) |
|
Additional time value of financial options and guarantees |
- |
(228) |
(186) |
|
Frictional costs |
- |
(9) |
(7) |
|
Cost of residual non-hedgeable risks |
- |
(96) |
(84) |
|
Bermuda (Non-core) |
|
|
|
|
Adjusted net worth |
407 |
341 |
403 |
|
Free surplus |
- |
- |
- |
|
Required capital |
407 |
341 |
403 |
|
Value of in-force business |
(107) |
(173) |
(116) |
|
Present value of future profits |
79 |
77 |
145 |
|
Additional time value of financial options and guarantees |
(155) |
(217) |
(235) |
|
Frictional costs |
(2) |
(3) |
(2) |
|
Cost of residual non-hedgeable risks |
(29) |
(30) |
(24) |
|
|
|
|
|
* The required capital in respect of OMSA is partially covered by the market value of the Group's investments in banking and general insurance in South Africa. On consolidation these investments are shown separately.
B4 Analysis of covered business MCEV earnings (after tax) continued
|
£m |
|||||
|
Long Term Savings (LTS) |
6 months ended 30 June 2011 |
||||
|
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
Opening MCEV |
441 |
1,973 |
2,414 |
5,003 |
7,417 |
|
New business value |
(231) |
82 |
(149) |
257 |
108 |
|
Expected existing business contribution (reference rate) |
7 |
35 |
42 |
89 |
131 |
|
Expected existing business contribution (in excess of reference rate) |
3 |
6 |
9 |
36 |
45 |
|
Transfers from VIF and required capital to free surplus |
462 |
(91) |
371 |
(371) |
- |
|
Experience variances |
18 |
13 |
31 |
57 |
88 |
|
Assumption changes |
1 |
- |
1 |
(3) |
(2) |
|
Other operating variance |
11 |
(8) |
3 |
(28) |
(25) |
|
Operating MCEV earnings |
271 |
37 |
308 |
37 |
345 |
|
Economic variances |
42 |
(8) |
34 |
(81) |
(47) |
|
Other non-operating variance |
- |
- |
- |
6 |
6 |
|
Total MCEV earnings |
313 |
29 |
342 |
(38) |
304 |
|
Closing adjustments |
(65) |
(69) |
(134) |
(8) |
(142) |
|
Capital and dividend flows |
(56) |
- |
(56) |
- |
(56) |
|
Foreign exchange variance |
(9) |
(69) |
(78) |
(8) |
(86) |
|
Closing MCEV |
689 |
1,933 |
2,622 |
4,957 |
7,579 |
|
Return on MCEV (ROEV) % per annum |
|
|
|
|
9.7% |
Return on MCEV is calculated as the operating MCEV earnings after tax divided by opening MCEV in sterling. The operating assumption changes and other operating variances are not annualised.
|
|
£m |
||||
|
Long Term Savings (LTS)* |
Year ended 31 December 2011 |
||||
|
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
Expected existing business contribution (reference rate) |
16 |
65 |
81 |
173 |
254 |
|
Expected existing business contribution (in excess of reference rate) |
8 |
11 |
19 |
72 |
91 |
|
|
|
|
|
|
|
* The expected return for the year ended 31 December 2011 has been restated to reflect the change in the expected real world cash return to equal the risk free rate over the analysis period (as opposed to the risk free reference rate less a deduction).
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
|
£m |
|||||||||
|
6 months ended 30 June 2010 |
Year ended 31 December 2010 |
||||||||
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
380 |
1,574 |
1,954 |
4,193 |
6,147 |
380 |
1,574 |
1,954 |
4,193 |
6,147 |
|
(227) |
76 |
(151) |
247 |
96 |
(419) |
160 |
(259) |
459 |
200 |
|
8 |
38 |
46 |
83 |
129 |
8 |
77 |
85 |
168 |
253 |
|
- |
(2) |
(2) |
29 |
27 |
7 |
(3) |
4 |
59 |
63 |
|
435 |
(106) |
329 |
(329) |
- |
802 |
(184) |
618 |
(618) |
- |
|
(18) |
31 |
13 |
23 |
36 |
(16) |
28 |
12 |
43 |
55 |
|
- |
2 |
2 |
(6) |
(4) |
23 |
2 |
25 |
(25) |
- |
|
(43) |
5 |
(38) |
49 |
11 |
(93) |
37 |
(56) |
52 |
(4) |
|
155 |
44 |
199 |
96 |
295 |
312 |
117 |
429 |
138 |
567 |
|
(20) |
20 |
- |
73 |
73 |
100 |
41 |
141 |
342 |
483 |
|
(1) |
- |
(1) |
1 |
- |
(7) |
25 |
18 |
- |
18 |
|
134 |
64 |
198 |
170 |
368 |
405 |
183 |
588 |
480 |
1,068 |
|
(163) |
42 |
(121) |
(1) |
(122) |
(344) |
216 |
(128) |
330 |
202 |
|
(157) |
(6) |
(163) |
(1) |
(164) |
(383) |
- |
(383) |
- |
(383) |
|
(6) |
48 |
42 |
- |
42 |
39 |
216 |
255 |
330 |
585 |
|
351 |
1,680 |
2,031 |
4,362 |
6,393 |
441 |
1,973 |
2,414 |
5,003 |
7,417 |
|
|
|
|
|
9.5% |
|
|
|
|
9.2% |
B4 Analysis of covered business MCEV earnings (after tax) continued
|
£m |
|||||
|
Emerging Markets* |
6 months ended 30 June 2011 |
||||
|
|
Free surplus |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
Opening MCEV |
306 |
1,498 |
1,804 |
1,509 |
3,313 |
|
New business value |
(93) |
66 |
(27) |
65 |
38 |
|
Expected existing business contribution (reference rate) |
6 |
31 |
37 |
54 |
91 |
|
Expected existing business contribution (in excess of reference rate) |
1 |
6 |
7 |
9 |
16 |
|
Transfers from VIF and required capital to free surplus |
193 |
(75) |
118 |
(118) |
- |
|
Experience variances |
35 |
6 |
41 |
33 |
74 |
|
Assumption changes |
- |
- |
- |
- |
- |
|
Other operating variance |
(21) |
(2) |
(23) |
(8) |
(31) |
|
Operating MCEV earnings |
121 |
32 |
153 |
35 |
188 |
|
Economic variances |
29 |
4 |
33 |
(25) |
8 |
|
Other non-operating variance |
4 |
- |
4 |
- |
4 |
|
Total MCEV earnings |
154 |
36 |
190 |
10 |
200 |
|
Closing adjustments |
10 |
(78) |
(68) |
(79) |
(147) |
|
Capital and dividend flows |
25 |
- |
25 |
- |
25 |
|
Foreign exchange variance |
(15) |
(78) |
(93) |
(79) |
(172) |
|
Closing MCEV |
470 |
1,456 |
1,926 |
1,440 |
3,366 |
|
Return on MCEV (ROEV) % per annum |
|
|
|
|
13.3% |
* The MCEV for Emerging Markets is presented after the adjustment for market value of life fund investments in Group equity and debt instruments.
|
|
£m |
||||
|
Emerging Markets** |
Year ended 31 December 2011 |
||||
|
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
Expected existing business contribution (reference rate) |
12 |
60 |
72 |
106 |
178 |
|
Expected existing business contribution (in excess of reference rate) |
2 |
11 |
13 |
18 |
31 |
** The expected return for the year ended 31 December 2011 has been restated to reflect the change in the expected real world cash return to equal the risk free rate over the analysis period (as opposed to the risk free reference rate less a 2% deduction).
The positive experience variances are attributable to favourable mortality, expense and persistency experience. These are at unusually high levels and are therefore not expected to continue at the same rate and may even reduce.
The negative other operating variance mainly consists of a management decision to strengthen the investment guarantee reserve to allow for dynamic policyholder behaviour in the Corporate Segment.
The small positive impact of economic assumption changes is made up of a number of largely offsetting items. The positive adjusted net worth amount is due to favourable investment variances on immediate annuity portfolios and a higher than assumed after tax investment return on shareholder funds. The negative amount within value of in-force is mainly due to lower than assumed investment returns earned on policyholder funds (due predominantly to flat equity markets) and to the impact of a small increase in swap yields for terms up to 20 years.
The capital and dividend flows mainly consist of dividends paid more than offset by inter-company dividends received.
Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in rand (including conversion of results for Mexico to rand). The operating assumption changes and other operating variances are not annualised.
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
|
£m |
|||||||||
|
6 months ended 30 June 2010 |
Year ended 31 December 2010 |
||||||||
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
80 |
1,225 |
1,305 |
1,158 |
2,463 |
80 |
1,225 |
1,305 |
1,158 |
2,463 |
|
(74) |
59 |
(15) |
53 |
38 |
(159) |
134 |
(25) |
111 |
86 |
|
4 |
35 |
39 |
59 |
98 |
6 |
73 |
79 |
124 |
203 |
|
- |
(2) |
(2) |
8 |
6 |
- |
(3) |
(3) |
16 |
13 |
|
183 |
(83) |
100 |
(100) |
- |
356 |
(166) |
190 |
(190) |
- |
|
4 |
13 |
17 |
2 |
19 |
11 |
14 |
25 |
10 |
35 |
|
- |
- |
- |
- |
- |
19 |
- |
19 |
18 |
37 |
|
1 |
- |
1 |
(18) |
(17) |
(6) |
(2) |
(8) |
(22) |
(30) |
|
118 |
22 |
140 |
4 |
144 |
227 |
50 |
277 |
67 |
344 |
|
(45) |
22 |
(23) |
22 |
(1) |
57 |
21 |
78 |
84 |
162 |
|
- |
- |
- |
- |
- |
4 |
- |
4 |
1 |
5 |
|
73 |
44 |
117 |
26 |
143 |
288 |
71 |
359 |
152 |
511 |
|
(56) |
49 |
(7) |
47 |
40 |
(62) |
202 |
140 |
199 |
339 |
|
(61) |
- |
(61) |
- |
(61) |
(93) |
- |
(93) |
- |
(93) |
|
5 |
49 |
54 |
47 |
101 |
31 |
202 |
233 |
199 |
432 |
|
97 |
1,318 |
1,415 |
1,231 |
2,646 |
306 |
1,498 |
1,804 |
1,509 |
3,313 |
|
|
|
|
|
11.9% |
|
|
|
|
13.2% |
B4 Analysis of covered business MCEV earnings (after tax) continued
|
£m |
|||||
|
Nordic |
6 months ended 30 June 2011 |
||||
|
|
Free surplus |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
Opening MCEV |
51 |
135 |
186 |
1,318 |
1,504 |
|
New business value |
(29) |
4 |
(25) |
53 |
28 |
|
Expected existing business contribution (reference rate) |
2 |
1 |
3 |
18 |
21 |
|
Expected existing business contribution (in excess of reference rate) |
- |
- |
- |
16 |
16 |
|
Transfers from VIF and required capital to free surplus |
65 |
- |
65 |
(65) |
- |
|
Experience variances |
1 |
3 |
4 |
(4) |
- |
|
Assumption changes |
- |
- |
- |
- |
- |
|
Other operating variance |
- |
- |
- |
(2) |
(2) |
|
Operating MCEV earnings |
39 |
8 |
47 |
16 |
63 |
|
Economic variances |
3 |
(6) |
(3) |
(68) |
(71) |
|
Other non-operating variance |
(4) |
- |
(4) |
- |
(4) |
|
Total MCEV earnings |
38 |
2 |
40 |
(52) |
(12) |
|
Closing adjustments |
(30) |
4 |
(26) |
35 |
9 |
|
Capital and dividend flows |
(31) |
- |
(31) |
- |
(31) |
|
Foreign exchange variance |
1 |
4 |
5 |
35 |
40 |
|
Closing MCEV |
59 |
141 |
200 |
1,301 |
1,501 |
|
Return on MCEV (ROEV) % per annum |
|
|
|
|
8.4% |
|
|
£m |
||||
|
Nordic* |
Year ended 31 December 2011 |
||||
|
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
Expected existing business contribution (reference rate) |
3 |
2 |
5 |
34 |
39 |
|
Expected existing business contribution (in excess of reference rate) |
- |
- |
- |
30 |
30 |
* The expected return for the year ended 31 December 2011 has been restated to reflect the change in the expected real world cash return to equal the risk free rate over the analysis period (as opposed to the risk free reference rate less a deduction).
The experience variances are primarily driven by restructuring costs, and seasonal persistency losses, offset by positive rebate experience and other miscellaneous items.
The other operating variance was mainly due to a positive effect from a reduction in CNHR, offset by a negative impact due to a change in the modelling treatment of Group holding Company expenses.
The negative other non-operating variance was caused by impairment losses on shares in the China Guodian business held by Nordic.
The economic variances were mainly due to the negative effect of market movements on funds under management.
The capital and dividend flows mainly represent dividends, repayment of loans and capital injections.
The foreign exchange variance is mainly due to favourable exchange rate movements on translation as a result of the Swedish krona appreciating against sterling.
Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in Swedish krona. The operating assumption changes and other operating variances are not annualised.
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
|
£m |
|||||||||
|
6 months ended 30 June 2010 |
Year ended 31 December 2010 |
||||||||
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
91 |
104 |
195 |
1,114 |
1,309 |
91 |
104 |
195 |
1,114 |
1,309 |
|
(24) |
3 |
(21) |
46 |
25 |
(49) |
6 |
(43) |
84 |
41 |
|
1 |
- |
1 |
8 |
9 |
- |
1 |
1 |
14 |
15 |
|
- |
- |
- |
13 |
13 |
- |
- |
- |
26 |
26 |
|
55 |
(4) |
51 |
(51) |
- |
103 |
- |
103 |
(103) |
- |
|
10 |
6 |
16 |
1 |
17 |
30 |
(5) |
25 |
(1) |
24 |
|
- |
- |
- |
(4) |
(4) |
- |
- |
- |
(55) |
(55) |
|
(39) |
- |
(39) |
42 |
3 |
(44) |
4 |
(40) |
34 |
(6) |
|
3 |
5 |
8 |
55 |
63 |
40 |
6 |
46 |
(1) |
45 |
|
5 |
- |
5 |
(2) |
3 |
(4) |
12 |
8 |
86 |
94 |
|
- |
- |
- |
- |
- |
17 |
- |
17 |
- |
17 |
|
8 |
5 |
13 |
53 |
66 |
53 |
18 |
71 |
85 |
156 |
|
(65) |
- |
(65) |
(13) |
(78) |
(93) |
13 |
(80) |
119 |
39 |
|
(59) |
- |
(59) |
- |
(59) |
(100) |
- |
(100) |
- |
(100) |
|
(6) |
- |
(6) |
(13) |
(19) |
7 |
13 |
20 |
119 |
139 |
|
34 |
109 |
143 |
1,154 |
1,297 |
51 |
135 |
186 |
1,318 |
1,504 |
|
|
|
|
|
9.5% |
|
|
|
|
3.3% |
B4 Analysis of covered business MCEV earnings (after tax) continued
|
£m |
|||||
|
Retail Europe |
6 months ended 30 June 2011 |
||||
|
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
Opening MCEV |
41 |
62 |
103 |
520 |
623 |
|
New business value |
(38) |
- |
(38) |
41 |
3 |
|
Expected existing business contribution (reference rate) |
- |
- |
- |
5 |
5 |
|
Expected existing business contribution (in excess of reference rate) |
- |
- |
- |
2 |
2 |
|
Transfers from VIF and required capital to free surplus |
46 |
1 |
47 |
(47) |
- |
|
Experience variances |
(1) |
2 |
1 |
(2) |
(1) |
|
Assumption changes |
- |
- |
- |
(2) |
(2) |
|
Other operating variance |
- |
- |
- |
(13) |
(13) |
|
Operating MCEV earnings |
7 |
3 |
10 |
(16) |
(6) |
|
Economic variances |
2 |
(2) |
- |
(3) |
(3) |
|
Other non-operating variance |
- |
- |
- |
- |
- |
|
Total MCEV earnings |
9 |
1 |
10 |
(19) |
(9) |
|
Closing adjustments |
4 |
2 |
6 |
29 |
35 |
|
Capital and dividend flows |
- |
- |
- |
- |
- |
|
Foreign exchange variance |
4 |
2 |
6 |
29 |
35 |
|
Closing MCEV |
54 |
65 |
119 |
530 |
649 |
|
Return on MCEV (ROEV) % per annum |
|
|
|
|
0.6% |
|
|
£m |
||||
|
Retail Europe* |
Year ended 31 December 2011 |
||||
|
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
Expected existing business contribution (reference rate) |
- |
1 |
1 |
9 |
10 |
|
Expected existing business contribution (in excess of reference rate) |
- |
- |
- |
5 |
5 |
* The expected return for the year ended 31 December 2011 has been restated to reflect the change in the expected real world cash return to equal the risk free rate over the analysis period (as opposed to the risk free reference rate less a deduction).
There were no material experience variances or operating assumption changes.
The other operating variance was mainly due to a change in the methodology used to calculate the capital underlying the cost of non-hedgeable risks.
The economic variances were mainly due to the negative effect of market movements on funds under management, partly offset by a reduction in the cost of guarantees in Germany due to higher euro swap rates.
There were no material other non-operating variances or capital and dividend flows.
The foreign exchange variance is mainly due to favourable exchange rate movements on translation as a result of the euro appreciating against sterling.
Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in euro. The operating assumption changes and other operating variances are not annualised.
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
|
£m |
|||||||||
|
6 months ended 30 June 2010 |
Year ended 31 December 2010 |
||||||||
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
46 |
32 |
78 |
453 |
531 |
46 |
32 |
78 |
453 |
531 |
|
(33) |
- |
(33) |
35 |
2 |
(69) |
1 |
(68) |
75 |
7 |
|
- |
- |
- |
5 |
5 |
1 |
- |
1 |
8 |
9 |
|
- |
- |
- |
2 |
2 |
- |
- |
- |
3 |
3 |
|
51 |
1 |
52 |
(52) |
- |
97 |
2 |
99 |
(99) |
- |
|
(6) |
1 |
(5) |
- |
(5) |
5 |
(1) |
4 |
1 |
5 |
|
2 |
- |
2 |
(2) |
- |
- |
- |
- |
11 |
11 |
|
(5) |
5 |
- |
20 |
20 |
(9) |
- |
(9) |
40 |
31 |
|
9 |
7 |
16 |
8 |
24 |
25 |
2 |
27 |
39 |
66 |
|
1 |
1 |
2 |
11 |
13 |
1 |
2 |
3 |
19 |
22 |
|
(1) |
- |
(1) |
1 |
- |
(26) |
25 |
(1) |
(5) |
(6) |
|
9 |
8 |
17 |
20 |
37 |
- |
29 |
29 |
53 |
82 |
|
(9) |
(2) |
(11) |
(22) |
(33) |
(5) |
1 |
(4) |
14 |
10 |
|
(7) |
- |
(7) |
- |
(7) |
(6) |
- |
(6) |
- |
(6) |
|
(2) |
(2) |
(4) |
(22) |
(26) |
1 |
1 |
2 |
14 |
16 |
|
46 |
38 |
84 |
451 |
535 |
41 |
62 |
103 |
520 |
623 |
|
|
|
|
|
5.1% |
|
|
|
|
12.8% |
B4 Analysis of covered business MCEV earnings (after tax) continued
|
£m |
||||||
|
Wealth Management |
6 months ended 30 June 2011 |
|
||||
|
|
Free surplus |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
|
Opening MCEV |
43 |
278 |
321 |
1,656 |
1,977 |
|
|
New business value |
(71) |
12 |
(59) |
98 |
39 |
|
|
Expected existing business contribution (reference rate) |
(1) |
3 |
2 |
12 |
14 |
|
|
Expected existing business contribution (in excess of reference rate) |
2 |
- |
2 |
9 |
11 |
|
|
Transfers from VIF and required capital to free surplus |
158 |
(17) |
141 |
(141) |
- |
|
|
Experience variances |
(17) |
2 |
(15) |
30 |
15 |
|
|
Assumption changes |
1 |
- |
1 |
(1) |
- |
|
|
Other operating variance |
32 |
(6) |
26 |
(5) |
21 |
|
|
Operating MCEV earnings |
104 |
(6) |
98 |
2 |
100 |
|
|
Economic variances |
8 |
(4) |
4 |
15 |
19 |
|
|
Other non-operating variance |
- |
- |
- |
6 |
6 |
|
|
Total MCEV earnings |
112 |
(10) |
102 |
23 |
125 |
|
|
Closing adjustments |
(49) |
3 |
(46) |
7 |
(39) |
|
|
Capital and dividend flows |
(50) |
- |
(50) |
- |
(50) |
|
|
Foreign exchange variance |
1 |
3 |
4 |
7 |
11 |
|
|
Closing MCEV |
106 |
271 |
377 |
1,686 |
2,063 |
|
|
Return on MCEV (ROEV) % per annum |
|
|
|
|
9.0% |
|
|
|
£m |
||||
|
Wealth Management* |
Year ended 31 December 2011 |
||||
|
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
Expected existing business contribution (reference rate) |
1 |
2 |
3 |
24 |
27 |
|
Expected existing business contribution (in excess of reference rate) |
6 |
- |
6 |
17 |
23 |
* The expected return for the year ended 31 December 2011 has been restated to reflect the change in the expected real world cash return to equal the risk free rate over the analysis period (as opposed to the risk free reference rate less a deduction).
Experience variances were caused by positive persistency experience, where the anticipated impacts of the Retail Distribution Review have not yet emerged. In addition there has been higher than expected fee income across all divisions, partly offset by adverse expense experience.
There were no material operating assumption changes.
The other operating variance was mainly due to the impact of modelling improvements for the Platform business following a migration of valuation models.
The economic variances were caused by marginally lower swap yields.
The other non-operating variance is due to the additional 1% reduction in UK corporation tax enacted in April.
The capital and dividend flows mainly represent dividends, repayments of loans and capital injections.
The foreign exchange variance is driven by the strengthened euro and swiss franc against sterling.
Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in sterling. The operating assumption changes and other operating variances are not annualised.
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
|
£m |
|||||||||
|
6 months ended 30 June 2010 |
Year ended 31 December 2010 |
||||||||
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
163 |
213 |
376 |
1,468 |
1,844 |
163 |
213 |
376 |
1,468 |
1,844 |
|
(96) |
14 |
(82) |
113 |
31 |
(142) |
19 |
(123) |
189 |
66 |
|
3 |
3 |
6 |
11 |
17 |
1 |
3 |
4 |
22 |
26 |
|
- |
- |
- |
6 |
6 |
7 |
- |
7 |
14 |
21 |
|
146 |
(20) |
126 |
(126) |
- |
246 |
(20) |
226 |
(226) |
- |
|
(26) |
11 |
(15) |
20 |
5 |
(62) |
20 |
(42) |
33 |
(9) |
|
(2) |
2 |
- |
- |
- |
4 |
2 |
6 |
1 |
7 |
|
- |
- |
- |
5 |
5 |
(34) |
35 |
1 |
- |
1 |
|
25 |
10 |
35 |
29 |
64 |
20 |
59 |
79 |
33 |
112 |
|
19 |
(3) |
16 |
42 |
58 |
46 |
6 |
52 |
153 |
205 |
|
- |
- |
- |
- |
- |
(2) |
- |
(2) |
4 |
2 |
|
44 |
7 |
51 |
71 |
122 |
64 |
65 |
129 |
190 |
319 |
|
(33) |
(5) |
(38) |
(13) |
(51) |
(184) |
- |
(184) |
(2) |
(186) |
|
(30) |
(6) |
(36) |
(1) |
(37) |
(184) |
- |
(184) |
- |
(184) |
|
(3) |
1 |
(2) |
(12) |
(14) |
- |
- |
- |
(2) |
(2) |
|
174 |
215 |
389 |
1,526 |
1,915 |
43 |
278 |
321 |
1,656 |
1,977 |
|
|
|
|
|
6.7% |
|
|
|
|
6.1% |
B4 Analysis of covered business MCEV earnings (after tax) continued
|
£m |
|||||
|
US Life |
6 months ended 30 June 2011 |
||||
|
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
Opening MCEV |
66 |
468 |
534 |
(723) |
(189) |
|
New business value |
- |
- |
- |
- |
- |
|
Expected existing business contribution (reference rate) |
- |
- |
- |
- |
- |
|
Expected existing business contribution (in excess of reference rate) |
- |
- |
- |
- |
- |
|
Transfers from VIF and required capital to free surplus |
- |
- |
- |
- |
- |
|
Experience variances |
- |
- |
- |
- |
- |
|
Assumption changes |
- |
- |
- |
- |
- |
|
Other operating variance |
- |
- |
- |
- |
- |
|
Operating MCEV earnings |
- |
- |
- |
- |
- |
|
Economic variances |
- |
- |
- |
- |
- |
|
Other non-operating variance |
- |
- |
- |
- |
- |
|
Total MCEV earnings |
- |
- |
- |
- |
- |
|
Closing adjustments |
(66) |
(468) |
(534) |
723 |
189 |
|
Capital and dividend flows |
- |
- |
- |
- |
- |
|
Foreign exchange variance |
(2) |
(19) |
(21) |
28 |
7 |
|
MCEV of acquired/sold business |
(64) |
(449) |
(513) |
695 |
182 |
|
Closing MCEV |
- |
- |
- |
- |
- |
|
Return on MCEV (ROEV) % per annum |
|
|
|
|
0.0% |
For 30 June 2011 reporting period, Old Mutual Reassurance (Ireland) Limited (OMRe), which provides reinsurance to the United States Life Companies, is included within the OM plc results. For all comparative periods, the results for US Life include allowance for OMRe.
The sale of the US Life insurance business to Harbinger Capital Partners was completed, following regulatory approval, on 7 April 2011. This transaction has resulted in an uplift of £451 million to the adjusted Group MCEV, based on the 31 December 2010 value for US Life. Further details relating to the MCEV impact of this transaction are noted in A4.
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
B4 Analysis of covered business MCEV earnings (after tax) continued
|
£m |
|||||||||
|
6 months ended 30 June 2010 |
Year ended 31 December 2010 |
||||||||
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
36 |
462 |
498 |
(816) |
(318) |
36 |
462 |
498 |
(816) |
(318) |
|
(36) |
48 |
12 |
(16) |
(4) |
(66) |
66 |
- |
(28) |
(28) |
|
- |
4 |
4 |
6 |
10 |
1 |
9 |
10 |
15 |
25 |
|
- |
- |
- |
36 |
36 |
- |
- |
- |
80 |
80 |
|
41 |
(23) |
18 |
(18) |
- |
81 |
(47) |
34 |
(34) |
- |
|
80 |
(24) |
56 |
43 |
99 |
33 |
(23) |
10 |
30 |
40 |
|
- |
- |
- |
2 |
2 |
(6) |
- |
(6) |
(57) |
(63) |
|
- |
- |
- |
(16) |
(16) |
- |
- |
- |
(7) |
(7) |
|
85 |
5 |
90 |
37 |
127 |
43 |
5 |
48 |
(1) |
47 |
|
(15) |
(12) |
(27) |
(135) |
(162) |
71 |
(18) |
53 |
127 |
180 |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
70 |
(7) |
63 |
(98) |
(35) |
114 |
(13) |
101 |
126 |
227 |
|
(3) |
36 |
33 |
(67) |
(34) |
(84) |
19 |
(65) |
(33) |
(98) |
|
(8) |
- |
(8) |
- |
(8) |
(85) |
- |
(85) |
- |
(85) |
|
5 |
36 |
41 |
(67) |
(26) |
1 |
19 |
20 |
(33) |
(13) |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
103 |
491 |
594 |
(981) |
(387) |
66 |
468 |
534 |
(723) |
(189) |
|
|
|
|
|
79.7% |
|
|
|
|
14.1% |
B4 Analysis of covered business MCEV earnings (after tax) continued
|
£m |
|||||
|
Bermuda |
6 months ended 30 June 2011 |
||||
|
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
Opening MCEV |
- |
403 |
403 |
(116) |
287 |
|
New business value |
- |
- |
- |
- |
- |
|
Expected existing business contribution (reference rate) |
- |
1 |
1 |
3 |
4 |
|
Expected existing business contribution (in excess of reference rate) |
- |
12 |
12 |
8 |
20 |
|
Transfers from VIF and required capital to free surplus |
34 |
(28) |
6 |
(6) |
- |
|
Experience variances |
1 |
- |
1 |
(9) |
(8) |
|
Assumption changes |
1 |
- |
1 |
(3) |
(2) |
|
Other operating variance |
(32) |
32 |
- |
(5) |
(5) |
|
Operating MCEV earnings |
4 |
17 |
21 |
(12) |
9 |
|
Economic variances |
(4) |
- |
(4) |
18 |
14 |
|
Other non-operating variance |
- |
- |
- |
- |
- |
|
Total MCEV earnings |
- |
17 |
17 |
6 |
23 |
|
Closing adjustments |
- |
(13) |
(13) |
3 |
(10) |
|
Capital and dividend flows |
- |
- |
- |
- |
- |
|
Foreign exchange variance |
- |
(13) |
(13) |
3 |
(10) |
|
Closing MCEV |
- |
407 |
407 |
(107) |
300 |
|
Return on MCEV (ROEV) % per annum |
|
|
|
|
9.4% |
|
|
£m |
||||
|
Bermuda |
Year ended 31 December 2011 |
||||
|
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
Expected existing business contribution (reference rate) |
- |
2 |
2 |
6 |
8 |
|
Expected existing business contribution (in excess of reference rate) |
- |
24 |
24 |
16 |
40 |
The experience variances include a high number of Variable Annuity UGO contract surrenders as a result of a surrender fee waiver offer given to clients, where GMAB reserve releases (ANW impact) were mostly offset by lost future fee income (VIF impact). ANW experience variances also consist of an expense overrun and Branch Level Interest Tax for 2010 and 2011.
There were no material operating assumption changes.
The other operating variance was mainly due to bond portfolio and fixed annuity modelling changes, as well changes to capital requirements used in the calculation of CNHR.
The economic variances were largely due to favourable portfolio movements during the reporting period producing a positive Variable Annuity economic result and gains on the corporate bond portfolio.
Return on MCEV was calculated as the operating MCEV earnings after tax divided by the opening MCEV in US dollars. The operating assumption changes and other operating variances are not annualised.
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
|
£m |
|||||||||
|
6 months ended 30 June 2010 |
Year ended 31 December 2010 |
||||||||
|
Free |
Required Capital |
Adjusted net worth |
Value of in-force |
MCEV |
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
- |
363 |
363 |
(165) |
198 |
- |
363 |
363 |
(165) |
198 |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
1 |
1 |
5 |
6 |
- |
3 |
3 |
9 |
12 |
|
- |
16 |
16 |
16 |
32 |
- |
30 |
30 |
35 |
65 |
|
6 |
(22) |
(16) |
16 |
- |
16 |
(45) |
(29) |
29 |
- |
|
(8) |
- |
(8) |
(19) |
(27) |
(18) |
1 |
(17) |
(2) |
(19) |
|
2 |
- |
2 |
- |
2 |
(19) |
- |
(19) |
(16) |
(35) |
|
70 |
(44) |
26 |
(9) |
17 |
(32) |
37 |
5 |
(52) |
(47) |
|
70 |
(49) |
21 |
9 |
30 |
(53) |
26 |
(27) |
3 |
(24) |
|
(70) |
- |
(70) |
(5) |
(75) |
53 |
- |
53 |
52 |
105 |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
(49) |
(49) |
4 |
(45) |
- |
26 |
26 |
55 |
81 |
|
- |
27 |
27 |
(12) |
15 |
- |
14 |
14 |
(6) |
8 |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
27 |
27 |
(12) |
15 |
- |
14 |
14 |
(6) |
8 |
|
- |
341 |
341 |
(173) |
168 |
- |
403 |
403 |
(116) |
287 |
|
|
|
|
|
19.5% |
|
|
|
|
(11.4)% |
B4 Analysis of covered business MCEV earnings (after tax)
|
Total covered business |
£m |
|||||
|
|
6 months ended 30 June 2011 |
|
||||
|
|
Free surplus |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
|
Opening MCEV |
507 |
2,844 |
3,351 |
4,164 |
7,515 |
|
|
New business value |
(231) |
82 |
(149) |
257 |
108 |
|
|
Expected existing business contribution (reference rate) |
7 |
36 |
43 |
92 |
135 |
|
|
Expected existing business contribution (in excess of reference rate) |
3 |
18 |
21 |
44 |
65 |
|
|
Transfers from VIF and required capital to free surplus |
496 |
(119) |
377 |
(377) |
- |
|
|
Experience variances |
19 |
13 |
32 |
48 |
80 |
|
|
Assumption changes |
2 |
- |
2 |
(6) |
(4) |
|
|
Other operating variance |
(21) |
24 |
3 |
(33) |
(30) |
|
|
Operating MCEV earnings |
275 |
54 |
329 |
25 |
354 |
|
|
Economic variances |
38 |
(8) |
30 |
(63) |
(33) |
|
|
Other non-operating variance |
- |
- |
- |
6 |
6 |
|
|
Total MCEV earnings |
313 |
46 |
359 |
(32) |
327 |
|
|
Closing adjustments |
(131) |
(550) |
(681) |
718 |
37 |
|
|
Capital and dividend flows |
(56) |
- |
(56) |
- |
(56) |
|
|
Foreign exchange variance |
(11) |
(101) |
(112) |
23 |
(89) |
|
|
MCEV of acquired/sold business |
(64) |
(449) |
(513) |
695 |
182 |
|
|
Closing MCEV |
689 |
2,340 |
3,029 |
4,850 |
7,879 |
|
|
Return on MCEV (ROEV) % per annum |
|
|
|
|
9.9% |
|
Return on MCEV for total covered business is calculated as the operating MCEV earnings after tax divided by opening MCEV in sterling. The operating assumption changes and other operating variances are not annualised.
|
|
£m |
||||
|
Total covered business* |
Year ended 31 December 2011 |
||||
|
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
Expected existing business contribution (reference rate) |
16 |
67 |
83 |
179 |
262 |
|
Expected existing business contribution (in excess of reference rate) |
8 |
35 |
43 |
88 |
131 |
* The expected return for the year ended 31 December 2011 has been restated to reflect the change in the expected real world cash return to equal the risk free rate over the analysis period (as opposed to the risk free reference rate less a deduction), and to exclude any contribution from US Life.
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
|
|
£m |
||||||||
|
6 months ended 30 June 2010 |
Year ended 31 December 2010 |
||||||||
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
416 |
2,399 |
2,815 |
3,212 |
6,027 |
416 |
2,399 |
2,815 |
3,212 |
6,027 |
|
(263) |
124 |
(139) |
231 |
92 |
(485) |
226 |
(259) |
431 |
172 |
|
8 |
43 |
51 |
94 |
145 |
9 |
89 |
98 |
192 |
290 |
|
- |
14 |
14 |
81 |
95 |
7 |
27 |
34 |
174 |
208 |
|
482 |
(151) |
331 |
(331) |
- |
899 |
(276) |
623 |
(623) |
- |
|
54 |
7 |
61 |
47 |
108 |
(1) |
6 |
5 |
71 |
76 |
|
2 |
2 |
4 |
(4) |
- |
(2) |
2 |
- |
(98) |
(98) |
|
27 |
(39) |
(12) |
24 |
12 |
(125) |
74 |
(51) |
(7) |
(58) |
|
310 |
- |
310 |
142 |
452 |
302 |
148 |
450 |
140 |
590 |
|
(105) |
8 |
(97) |
(67) |
(164) |
224 |
23 |
247 |
521 |
768 |
|
(1) |
- |
(1) |
1 |
- |
(7) |
25 |
18 |
- |
18 |
|
204 |
8 |
212 |
76 |
288 |
519 |
196 |
715 |
661 |
1,376 |
|
(166) |
105 |
(61) |
(80) |
(141) |
(428) |
249 |
(179) |
291 |
112 |
|
(165) |
(6) |
(171) |
(1) |
(172) |
(468) |
- |
(468) |
- |
(468) |
|
(1) |
111 |
110 |
(79) |
31 |
40 |
249 |
289 |
291 |
580 |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
454 |
2,512 |
2,966 |
3,208 |
6,174 |
507 |
2,844 |
3,351 |
4,164 |
7,515 |
|
|
|
|
|
14.8% |
|
|
|
|
9.8% |
C Other key performance information
C1 Value of new business (after tax)
The tables below set out the regional analysis of the value of new business ('VNB') after tax. New business profitability is measured by both the ratio of the VNB to the present value of new business premiums ('PVNBP') as well as to the annual premium equivalent ('APE'), and shown under PVNBP margin and APE margin below. APE is calculated as recurring premiums plus 10% of single premiums. Bermuda is excluded from the tables below as it is closed to new business.
|
|
|
|
£m |
|
|
6 months ended 30 June 2011 |
6 months ended 30 June 2010 |
Year ended 31 December 2010 |
|
Annualised recurring premiums |
|
|
|
|
Long Term Savings |
375 |
339 |
698 |
|
Emerging Markets |
176 |
143 |
325 |
|
Nordic |
83 |
74 |
144 |
|
Retail Europe |
33 |
29 |
63 |
|
Wealth Management |
83 |
93 |
166 |
|
US Life |
- |
5 |
10 |
|
|
375 |
344 |
708 |
|
Single premiums |
|
|
|
|
Long Term Savings |
3,875 |
4,296 |
7,932 |
|
Emerging Markets |
797 |
803 |
1,611 |
|
Nordic |
420 |
284 |
573 |
|
Retail Europe |
34 |
34 |
63 |
|
Wealth Management |
2,624 |
3,175 |
5,685 |
|
US Life |
- |
400 |
824 |
|
|
3,875 |
4,696 |
8,756 |
|
PVNBP |
|
|
|
|
Long Term Savings |
5,645 |
5,968 |
11,266 |
|
Emerging Markets |
1,656 |
1,561 |
3,269 |
|
Nordic |
736 |
553 |
1,104 |
|
Retail Europe |
276 |
243 |
513 |
|
Wealth Management |
2,977 |
3,611 |
6,380 |
|
US Life |
- |
432 |
889 |
|
|
5,645 |
6,400 |
12,155 |
|
PVNBP capitalisation factors* |
|
|
|
|
Long Term Savings |
4.7 |
4.9 |
4.8 |
|
Emerging Markets |
4.9 |
5.3 |
5.1 |
|
Nordic |
3.8 |
3.6 |
3.7 |
|
Retail Europe |
7.4 |
7.2 |
7.2 |
|
Wealth Management |
4.2 |
4.6 |
4.2 |
|
US Life |
- |
6.6 |
6.6 |
* The PVNBP capitalisation factors are calculated as follows: (PVNBP - single premiums)/annualised recurring premiums.
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
C1 Value of new business (after tax) continued
|
|
|
|
£m |
|
|
6 months ended 30 June 2011 |
6 months ended 30 June 2010 |
Year ended 31 December 2010 |
|
APE |
|
|
|
|
Long Term Savings |
763 |
769 |
1,491 |
|
Emerging Markets |
255 |
223 |
487 |
|
Nordic |
126 |
102 |
201 |
|
Retail Europe |
36 |
32 |
69 |
|
Wealth Management |
346 |
412 |
734 |
|
US Life |
n/a |
45 |
92 |
|
|
763 |
814 |
1,583 |
|
VNB |
|
|
|
|
Long Term Savings |
108 |
96 |
200 |
|
Emerging Markets |
38 |
38 |
86 |
|
Nordic |
28 |
25 |
41 |
|
Retail Europe |
3 |
2 |
7 |
|
Wealth Management |
39 |
31 |
66 |
|
US Life* |
n/a |
(4) |
(28) |
|
|
108 |
92 |
172 |
|
PVNBP margin |
|
|
|
|
Long Term Savings |
1.9% |
1.6% |
1.8% |
|
Emerging Markets |
2.3% |
2.5% |
2.6% |
|
Nordic |
3.9% |
4.6% |
3.7% |
|
Retail Europe |
1.0% |
0.7% |
1.4% |
|
Wealth Management |
1.3% |
0.9% |
1.0% |
|
US Life |
n/a |
(0.9)% |
(3.2)% |
|
|
1.9% |
1.4% |
1.4% |
|
APE margin |
|
|
|
|
Long Term Savings |
14% |
13% |
13% |
|
Emerging Markets |
15% |
17% |
18% |
|
Nordic |
23% |
25% |
21% |
|
Retail Europe |
8% |
6% |
11% |
|
Wealth Management |
11% |
8% |
9% |
|
US Life |
n/a |
(9)% |
(31)% |
|
|
14% |
11% |
11% |
* The US Life VNB is negative when calculated on an MCEV basis, due to the reliance on spread in the pricing basis, and the low risk free swap curve.
C1 Value of new business (after tax) continued
The value of new individual unit trust linked retirement annuities and pension fund asset management business written by the Emerging Markets long-term business is excluded as the profits on this business arise in the asset management business. The value of new business also excludes premium increases arising from indexation arrangements in respect of existing business, as these are already included in the value of in-force business.
The value of new institutional investment platform pensions business written in Wealth Management is excluded as this is more appropriately classified as unit trust business.
|
|
|
|
£m |
|
Gross premium excluded from value of new business |
6 months ended 30 June 2011 |
6 months ended 30 June 2010 |
Year ended 31 December 2010 |
|
Emerging Markets |
465 |
386 |
723 |
|
Wealth Management |
229 |
75 |
304 |
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
C2 Product analysis of new covered business premiums
|
£m |
||||||||
|
|
6 months ended 30 June 2011 |
|
6 months ended 30 June 2010 |
|
Year ended 31 December 2010 |
|||
|
Emerging Markets |
Recurring |
Single |
|
Recurring |
Single |
|
Recurring |
Single |
|
Total business |
176 |
797 |
|
143 |
803 |
|
325 |
1,611 |
|
Individual business |
157 |
440 |
|
120 |
486 |
|
284 |
889 |
|
Savings |
35 |
352 |
|
29 |
387 |
|
69 |
713 |
|
Protection |
33 |
- |
|
31 |
- |
|
70 |
- |
|
Annuity |
- |
87 |
|
- |
98 |
|
- |
176 |
|
Mass Foundation Cluster* |
89 |
1 |
|
60 |
1 |
|
145 |
- |
|
Group business |
19 |
357 |
|
23 |
317 |
|
41 |
722 |
|
Savings |
11 |
250 |
|
9 |
257 |
|
20 |
585 |
|
Protection |
8 |
- |
|
14 |
- |
|
21 |
1 |
|
Annuity |
- |
107 |
|
- |
60 |
|
- |
136 |
* Previously described as Retail Mass Market.
|
£m |
||||||||
|
|
6 months ended 30 June 2011 |
|
6 months ended 30 June 2010 |
|
Year ended 31 December 2010 |
|||
|
Nordic |
Recurring |
Single |
|
Recurring |
Single |
|
Recurring |
Single |
|
Unit-linked and life assurance |
83 |
420 |
|
74 |
284 |
|
144 |
573 |
|
£m |
||||||||
|
|
6 months ended 30 June 2011 |
|
6 months ended 30 June 2010 |
|
Year ended 31 December 2010 |
|||
|
Retail Europe |
Recurring |
Single |
|
Recurring |
Single |
|
Recurring |
Single |
|
Unit-linked and life assurance |
33 |
34 |
|
29 |
34 |
|
63 |
63 |
|
£m |
||||||||
|
|
6 months ended 30 June 2011 |
|
6 months ended 30 June 2010 |
|
Year ended 31 December 2010 |
|||
|
Wealth Management |
Recurring |
Single |
|
Recurring |
Single |
|
Recurring |
Single |
|
Unit-linked and life assurance |
83 |
2,624 |
|
93 |
3,175 |
|
166 |
5,685 |
|
£m |
||||||||
|
|
6 months ended 30 June 2011 |
|
6 months ended 30 June 2010 |
|
Year ended 31 December 2010 |
|||
|
US Life |
Recurring |
Single |
|
Recurring |
Single |
|
Recurring |
Single |
|
Total business |
- |
- |
|
5 |
400 |
|
10 |
824 |
|
Fixed deferred annuity |
- |
- |
|
- |
79 |
|
- |
163 |
|
Fixed indexed annuity |
- |
- |
|
- |
234 |
|
- |
502 |
|
Variable annuity |
- |
- |
|
- |
- |
|
- |
- |
|
Life |
- |
- |
|
5 |
1 |
|
10 |
1 |
|
Immediate annuity |
- |
- |
|
- |
86 |
|
- |
158 |
The table above does not include the contribution from the mutual fund business. This is detailed in the Business Review section.
C3 Adjustments applied in determining total Group MCEV earnings before tax
|
|
£m |
|||||
|
|
6 months ended 30 June 2011 |
6 months ended 30 June 2010 |
||||
|
Analysis of adjusting items |
Covered business MCEV |
Non-covered business IFRS |
Total Group MCEV |
Covered business MCEV |
Non-covered business IFRS |
Total Group MCEV |
|
Income/(expense) |
|
|
|
|
|
|
|
Goodwill impairment and amortisation of non-covered business acquired intangible assets and impact of acquisition accounting |
- |
(11) |
(11) |
- |
(7) |
(7) |
|
Economic variances |
(49) |
(11) |
(60) |
(277) |
(20) |
(297) |
|
Other non-operating variances |
1 |
- |
1 |
2 |
- |
2 |
|
Acquired/divested business |
- |
- |
- |
- |
(22) |
(22) |
|
Closure of unclaimed share trust |
- |
- |
- |
- |
- |
- |
|
Dividends declared to holders of perpetual preferred callable securities |
- |
22 |
22 |
- |
21 |
21 |
|
Adjusting items relating to US Asset Management equity plans and non-controlling interests |
- |
- |
- |
- |
2 |
2 |
|
Fair value gains on Group debt instruments |
- |
(50) |
(50) |
- |
(90) |
(90) |
|
Adjusting items |
(48) |
(50) |
(98) |
(275) |
(116) |
(391) |
|
Adjusting items from continuing operations |
(48) |
(50) |
(98) |
11 |
(116) |
(105) |
|
Adjusting items from discontinued operations |
- |
- |
- |
(286) |
- |
(286) |
|
Total MCEV adjusting items |
(48) |
(50) |
(98) |
(275) |
(116) |
(391) |
|
|
£m |
||
|
|
Year ended 31 December 2010 |
||
|
Analysis of adjusting items |
Covered business MCEV |
Non-covered business IFRS |
Total Group MCEV |
|
Income/(expense) |
|
|
|
|
Goodwill impairment and amortisation of non-covered business acquired intangible assets and impact of acquisition accounting |
- |
(20) |
(20) |
|
Economic variances |
864 |
(7) |
857 |
|
Other non-operating variances |
17 |
- |
17 |
|
Acquired/divested business |
- |
(22) |
(22) |
|
Closure of unclaimed share trust |
- |
- |
- |
|
Dividends declared to holders of perpetual preferred callable securities |
- |
44 |
44 |
|
Adjusting items relating to US Asset Management equity plans and non-controlling interests |
- |
6 |
6 |
|
Fair value gains on Group debt instruments |
- |
(203) |
(203) |
|
Adjusting items |
881 |
(202) |
679 |
|
Adjusting items from continuing operations |
701 |
(202) |
499 |
|
Adjusting items from discontinued operations |
180 |
- |
180 |
|
Total MCEV adjusting items |
881 |
(202) |
679 |
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
C4 Other movements in IFRS net equity impacting Group MCEV
|
|
£m |
|||||
|
|
6 months ended 30 June 2011 |
6 months ended 30 June 2010 |
||||
|
|
Covered business MCEV |
Non-covered business IFRS |
Total Group MCEV |
Covered business MCEV |
Non-covered business IFRS |
Total Group MCEV |
|
Fair value gains/(losses) |
- |
1 |
1 |
- |
(5) |
(5) |
|
Net investment hedge |
- |
(25) |
(25) |
- |
(34) |
(34) |
|
Currency translation differences/exchange differences on translating foreign operations |
(89) |
(194) |
(283) |
31 |
200 |
231 |
|
Aggregate tax effects of items taken directly to or transferred from equity |
- |
6 |
6 |
- |
6 |
6 |
|
Other movements* |
182 |
18 |
200 |
- |
(28) |
(28) |
|
Net income recognised directly into equity |
93 |
(194) |
(101) |
31 |
139 |
170 |
|
Capital and dividend flows for the year |
(56) |
(19) |
(75) |
(172) |
73 |
(99) |
|
Net sale of treasury shares |
- |
(18) |
(18) |
- |
(20) |
(20) |
|
Net issues of ordinary share capital by the Company |
- |
91 |
91 |
- |
160 |
160 |
|
Acquisition of non-controlling interest in Mutual & Federal |
- |
- |
- |
- |
(93) |
(93) |
|
Exercise of share options |
- |
4 |
4 |
- |
3 |
3 |
|
Change in share based payment reserve |
- |
21 |
21 |
- |
1 |
1 |
|
Other movements in net equity |
37 |
(115) |
78 |
(141) |
263 |
122 |
* This relates to the reversal of the US Life MCEV on the covered business.
|
|
£m |
|
||
|
|
Year ended 31 December 2010 |
|||
|
|
Covered business MCEV |
Non-covered business IFRS |
Total Group MCEV |
|
|
Fair value gains/(losses) |
- |
8 |
8 |
|
|
Net investment hedge |
- |
(86) |
(86) |
|
|
Currency translation differences/exchange differences on translating foreign operations |
580 |
448 |
1,028 |
|
|
Aggregate tax effects of items taken directly to or transferred from equity |
- |
14 |
14 |
|
|
Other movements |
- |
(24) |
(24) |
|
|
Net income recognised directly into equity |
580 |
360 |
940 |
|
|
Capital and dividend flows for the year |
(468) |
322 |
(146) |
|
|
Net sales of treasury shares |
- |
(28) |
(28) |
|
|
Net issues of ordinary share capital by the Company |
- |
162 |
162 |
|
|
Acquisition of non-controlling interest in Mutual & Federal |
- |
(93) |
(93) |
|
|
Exercise of share options |
- |
4 |
4 |
|
|
Change in share based payment reserve |
- |
4 |
4 |
|
|
Other movements in net equity |
112 |
731 |
843 |
|
C5 Reconciliation of MCEV adjusted net worth to IFRS net asset value for the covered business
The table below provides a reconciliation of the MCEV adjusted net worth ('ANW') to the IFRS net asset value ('NAV') for the covered business.
|
£m |
||||||||
|
At 30 June 2011 |
Total |
Long Term Savings |
Emerging Markets |
Nordic |
Retail |
Wealth Management |
US Life |
Bermuda |
|
IFRS net asset value* |
5,859 |
5,418 |
1,339 |
1,423 |
664 |
1,992 |
- |
441 |
|
Adjustment to include long-term business on a statutory solvency basis |
(2,201) |
(2,167) |
199 |
(1,012) |
(338) |
(1,016) |
- |
(34) |
|
Inclusion of Group equity and debt instruments held in life funds |
396 |
396 |
396 |
- |
- |
- |
- |
- |
|
Goodwill |
(1,025) |
(1,025) |
(8) |
(211) |
(207) |
(599) |
- |
- |
|
Adjusted net worth attributable to ordinary equity holders of the parent |
3,029 |
2,622 |
1,926 |
200 |
119 |
377 |
- |
407 |
|
£m |
||||||||
|
At 30 June 2010 |
Total |
Long Term Savings |
Emerging Markets |
Nordic |
Retail |
Wealth Management |
US Life |
Bermuda |
|
IFRS net asset value* |
6,394 |
4,827 |
932 |
1,147 |
586 |
2,162 |
1,213 |
354 |
|
Adjustment to include long-term business on a statutory solvency basis |
(2,779) |
(2,147) |
161 |
(818) |
(314) |
(1,176) |
(619) |
(13) |
|
Inclusion of Group equity and debt instruments held in life funds |
330 |
330 |
330 |
- |
- |
- |
- |
- |
|
Goodwill |
(979) |
(979) |
(8) |
(186) |
(188) |
(597) |
- |
- |
|
Adjusted net worth attributable to ordinary equity holders of the parent |
2,966 |
2,031 |
1,415 |
143 |
84 |
389 |
594 |
341 |
|
£m |
||||||||
|
At 31 December 2010 |
Total |
Long Term Savings |
Emerging Markets |
Nordic |
Retail |
Wealth Management |
US Life |
Bermuda |
|
IFRS net asset value* |
5,794 |
5,088 |
1,216 |
1,243 |
632 |
1,997 |
274 |
432 |
|
Adjustment to include long-term business on a statutory solvency basis |
(1,822) |
(2,053) |
207 |
(851) |
(331) |
(1,078) |
260 |
(29) |
|
Inclusion of Group equity and debt instruments held in life funds |
389 |
389 |
389 |
- |
- |
- |
- |
- |
|
Goodwill |
(1,010) |
(1,010) |
(8) |
(206) |
(198) |
(598) |
- |
- |
|
Adjusted net worth attributable to ordinary equity holders of the parent |
3,351 |
2,414 |
1,804 |
186 |
103 |
321 |
534 |
403 |
* IFRS net asset value is after elimination of inter-company loans.
The adjustment to include long-term business on a statutory solvency basis includes the following:
· The excess of the IFRS amount of the deferred acquisition cost ('DAC') and value of business acquired ('VOBA') assets over the statutory levels included in the VIF.
· When projecting future profits on a statutory basis, the VIF includes the shareholders' value of unrealised capital gains. To the extent that assets in IFRS are valued at market and the market value is higher than the statutory book value, these profits have already been taken into account in the IFRS equity.
· For the US Life business, the reversal of the IFRS impairment for discontinued operations which is included in the IFRS net asset value, as this is not recognised on a statutory solvency basis.
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
D Other income statement notes
D1 Drivers of new business value for covered business
|
PVNBP Margin |
|
% |
|
Long Term Savings (excludes US Life)* |
12 months ended 30 June 2011 |
12 months ended 31 December 2010 |
|
Margin at the end of comparative period |
1.6 |
1.6 |
|
Change in volume |
0.2 |
(0.1) |
|
Change in product mix |
- |
0.2 |
|
Change in country mix |
- |
- |
|
Change in operating assumptions |
- |
0.1 |
|
Change in economic assumptions |
0.2 |
(0.1) |
|
Change in tax/regulation |
(0.1) |
- |
|
Exchange rate movements |
- |
0.1 |
|
Margin at the end of the period |
1.9 |
1.8 |
|
Emerging Markets** |
|
|
|
Margin at the end of comparative period |
2.5 |
2.3 |
|
Change in volume |
0.2 |
0.1 |
|
Change in product mix |
(0.2) |
0.4 |
|
Change in country mix |
- |
- |
|
Change in operating assumptions |
(0.1) |
(0.1) |
|
Change in economic assumptions |
0.4 |
(0.1) |
|
Change in tax/regulation |
(0.5) |
- |
|
Margin at the end of the period |
2.3 |
2.6 |
|
Nordic*** |
|
|
|
Margin at the end of comparative period |
4.6 |
3.8 |
|
Change in volume |
(0.1) |
(0.1) |
|
Change in product mix |
(0.1) |
0.6 |
|
Change in country mix |
- |
- |
|
Change in operating assumptions |
(0.5) |
(0.4) |
|
Change in economic assumptions |
- |
(0.2) |
|
Margin at the end of the period |
3.9 |
3.7 |
|
Retail Europe**** |
|
|
|
Margin at the end of comparative period |
0.7 |
(1.0) |
|
Change in volume |
- |
1.6 |
|
Change in product mix |
0.5 |
(0.2) |
|
Change in country mix |
(0.1) |
- |
|
Change in operating assumptions |
(0.1) |
0.9 |
|
Change in economic assumptions |
- |
0.1 |
|
Margin at the end of the period |
1.0 |
1.4 |
|
Wealth Management* |
|
|
|
Margin at the end of comparative period |
0.9 |
1.0 |
|
Change in volume |
- |
(0.1) |
|
Change in product mix |
0.2 |
(0.1) |
|
Change in country mix |
- |
- |
|
Change in operating assumptions |
0.1 |
0.2 |
|
Change in economic assumptions |
0.1 |
- |
|
Margin at the end of the period |
1.3 |
1.0 |
D1 Drivers of new business value for covered business continued
|
|
|
% |
|
US Life***** |
12 months ended 30 June 2011 |
12 months ended 31 December 2010 |
|
Margin at the end of comparative period |
- |
2.2 |
|
Change in volume |
- |
(0.1) |
|
Change in product mix |
- |
(0.9) |
|
Change in country mix |
- |
- |
|
Change in operating assumptions |
- |
(0.6) |
|
Change in economic assumptions |
- |
(3.8) |
|
Margin at the end of the period |
- |
(3.2) |
|
|
|
|
|
Total covered business* |
|
|
|
Margin at the end of comparative period |
1.6 |
1.6 |
|
Change in volume |
0.2 |
(0.1) |
|
Change in product mix |
- |
0.1 |
|
Change in country mix |
- |
- |
|
Change in operating assumptions |
- |
0.1 |
|
Change in economic assumptions |
0.2 |
(0.4) |
|
Change in tax/regulation |
(0.1) |
- |
|
Exchange rate movements |
- |
0.1 |
|
Margin at the end of the period |
1.9 |
1.4 |
* The PVNBP margin changes are calculated in sterling.
** The PVNBP margin changes are calculated in rand.
*** The PVNBP margin changes are calculated in krona.
**** The PVNBP margin changes are calculated in euro.
***** The PVNBP margin changes are calculated in dollars.
Notes to the MCEV basis supplementary information
For the six months ended 30 June 2011 continued
E1 Sensitivity tests
The tables below show the sensitivity of the MCEV and value of in-force business at 30 June 2011 and the value of new business for the six months ended 30 June 2011 to changes in key assumptions.
For each sensitivity illustrated all other assumptions have been left unchanged except where they are directly affected by the revised conditions. Sensitivity scenarios therefore include consistent changes in cash flows directly affected by the changed assumption(s), for example future bonus participation in changed economic scenarios.
|
|
At 30 June 2011 |
£m |
|
|
Long Term Savings |
MCEV |
Value of in-force business |
Value of new business |
|
Central assumptions |
7,579 |
4,957 |
108 |
|
Effect of: |
|
|
|
|
Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately |
7,418 |
4,810 |
98 |
|
Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately |
7,752 |
5,112 |
118 |
|
Recognising the present value of an additional 10bps of liquidity spreads assumed on corporate bonds over the lifetime of the liabilities, with credited rates and discount rates changing commensurately |
7,889 |
4,860 |
109 |
|
|
At 30 June 2011 |
£m |
|
|
Emerging Markets |
MCEV |
Value of in-force business |
Value of new business |
|
Central assumptions |
3,366 |
1,440 |
38 |
|
Effect of: |
|
|
|
|
Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately |
3,308 |
1,381 |
34 |
|
Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately |
3,426 |
1,501 |
41 |
|
Recognising the present value of an additional 10bps of liquidity spreads assumed on corporate bonds over the lifetime of the liabilities, with credited rates and discount rates changing commensurately |
3,376 |
1,450 |
39 |
|
|
At 30 June 2011 |
£m |
|
|
Nordic |
MCEV |
Value of in-force business |
Value of new business |
|
Central assumptions |
1,501 |
1,301 |
28 |
|
Effect of: |
|
|
|
|
Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately |
1,474 |
1,274 |
28 |
|
Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately |
1,532 |
1,332 |
29 |
|
|
At 30 June 2011 |
£m |
|
|
Retail Europe |
MCEV |
Value of in-force business |
Value of new business |
|
Central assumptions |
649 |
530 |
3 |
|
Effect of: |
|
|
|
|
Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately |
630 |
512 |
1 |
|
Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately |
664 |
544 |
4 |
E1 Sensitivity tests continued
|
|
At 30 June 2011 |
£m |
||
|
Wealth Management |
MCEV |
Value of in-force business |
Value of new business |
|
|
Central assumptions |
2,063 |
1,686 |
39 |
|
|
Effect of: |
|
|
|
|
|
Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately |
2,006 |
1,643 |
35 |
|
|
Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately |
2,130 |
1,735 |
44 |
|
|
|
At 30 June 2011 |
£m |
||
|
Bermuda |
MCEV |
Value of in-force business |
Value of new business |
|
|
Central assumptions |
300 |
(107) |
- |
|
|
Effect of: |
|
|
|
|
|
Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately |
351 |
(111) |
- |
|
|
Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately |
257 |
(98) |
- |
|
|
|
At 30 June 2011 |
£m |
|
|
Total covered business |
MCEV |
Value of in-force business |
Value of new business |
|
Central assumptions |
7,879 |
4,850 |
108 |
|
Effect of: |
|
|
|
|
Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately |
7,769 |
4,699 |
98 |
|
Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately |
8,009 |
5,014 |
118 |
|
Recognising the present value of an additional 10bps of liquidity spreads assumed on corporate bonds over the lifetime of the liabilities, with credited rates and discount rates changing commensurately |
7,889 |
4,860 |
109 |
Shareholder information
Listings and shares in issue
The Company's shares are listed on the London, Malawi, Namibian and Zimbabwe Stock Exchanges and on the JSE Limited (JSE). The primary listing is on the London Stock Exchange and the other listings are all secondary listings. The ISIN number of the Company's shares is GB0007389926.
Websites
Further information on the Company can be found on the following websites:
www.oldmutual.com
www.oldmutual.co.za
This information is provided by RNS
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