Interim Results Part 2
Financial Information
Index to the financial Information
Statement of directors responsibilities in respect of the half-yearly financial statements 32
Independent review report by KPMG Audit Plc to Old Mutual plc 33
Consolidated income statement 34
Adjusted operating profit 35
Consolidated balance sheet 36
Condensed consolidated cash flow statement 37
Consolidated statement of changes in equity 38
Notes to the consolidated financial statements
1 Basis of preparation 44
2 Foreign currencies 45
3 Segment information 45
4 Operating profit adjusting items 54
5 Income tax expense 60
6 Earnings and earnings per share 61
7 Dividends 63
8 Discontinued operations, assets and liabilities held-for-sale 63
9 Borrowed funds 65
10 Commitments and contingent liabilities 67
11 Post balance sheet events 67
European embedded value basis supplementary information
Income statement on a European embedded value basis 68
Notes to the European embedded value basis supplementary information
1 Basis of preparation 70
2 Adjustments applied in determining adjusted operation profit 70
3 Reconciliation of movements in Group embedded value 70
4 Components of Group embedded value 71
5 Components of adjusted Group embedded value 71
6 Reconciliation of Group embedded value of the covered business to the
adjusted Group embedded value 72
7 Components of embedded value of the covered business 73
8 Analysis of covered business embedded value results (after tax) 74
9 Value of new business (after tax) 82
10 Product analysis of new covered business premiums 83
11 Drivers of new business 84
12 Assumptions 86
13 Sensitivity tests 90
Statement of directors' responsibilities in respect of the half-yearly financial statements
For the six months ended 30 June 2008
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;
• the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
Jim Sutcliffe Jonathan Nicholls
Chief Executive Group Finance Director
6 August 2008 6 August 2008
Independent review report by KPMG Audit Plc to Old Mutual plc
For the six months ended 30 June 2008
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the Consolidated income statement, the Adjusted operating profit, the Consolidated balance sheet, the Condensed consolidated cash flow statement, the Consolidated statement of changes in equity and the related explanatory notes and to review the European embedded value basis supplementary information for the six months ended 30 June 2008 as set out on pages 68 to 90 ('the Supplementary Information').
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements or the Supplementary Information.
This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Services Authority ('the UK FSA') and also to provide a review conclusion to the company on the Supplementary Information. Our review of the condensed set of financial statements has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. Our review of the Supplementary Information has been undertaken so that we might state to the company those matters we have been engaged to state in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA. The directors have accepted responsibility for preparing the Supplementary Information contained in the half-yearly financial report in accordance with the European Embedded Value Principles issued in May 2004 by the European CFO Forum and supplemented by the Additional Guidance on European Embedded Value Disclosures issued in October 2005 (together the 'EEV Principles') and for determining the methodology and assumptions used in the application of those principles.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
The Supplementary Information has been prepared in accordance with the EEV Principles, using the methodology and assumptions set out in notes 1 and 12 to the Supplementary Information. The Supplementary Information should be read in conjunction with the group's condensed financial statements which are set out on pages 34 to 67.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements and the Supplementary Information in the half-yearly financial report based on our review.
Scope of review
We conducted our reviews in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information and Supplementary Information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.
Based on our review, nothing has come to our attention that causes us to believe that the Supplementary Information for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with the EEV Principles, using the methodology and assumptions set out in notes 1 and 12 to the Supplementary Information.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
8 Salisbury Square
London EC4Y 8BB
6 August 2008
|
Consolidated income statement Notes |
|
£m |
||
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 |
Year ended 31 December 2007 |
||
|
Revenue |
|
|
|
|
|
Gross earned premiums |
3(iii) |
2,560 |
2,202 |
4,941 |
|
Outward reinsurance |
|
(119) |
(105) |
(201) |
|
Net earned premiums |
|
2,441 |
2,097 |
4,740 |
|
Investment return (non-banking) |
|
(4,092) |
5,298 |
6,071 |
|
Banking interest and similar income |
|
1,894 |
1,450 |
3,190 |
|
Banking trading, investment and similar income |
|
70 |
90 |
170 |
|
Fee and commission income, and income from service activities |
|
1,181 |
1,148 |
2,457 |
|
Other income |
|
185 |
106 |
212 |
|
Share of associated undertakings' (loss)/profit after tax |
|
(2) |
2 |
(1) |
|
Profit on disposal of subsidiaries, associated undertakings and strategic investments |
4(i) |
62 |
7 |
25 |
|
Total revenues |
|
1,739 |
10,198 |
16,864 |
|
Expenses |
|
|
|
|
|
Claims and benefits (including change in insurance contract provisions) |
|
(1,802) |
(3,475) |
(6,612) |
|
Reinsurance recoveries |
|
111 |
84 |
184 |
|
Net claims and benefits incurred |
|
(1,691) |
(3,391) |
(6,428) |
|
Change in investment contract liabilities |
|
3,842 |
(2,877) |
(2,618) |
|
Losses on loans and advances |
|
(126) |
(74) |
(157) |
|
Finance costs |
|
(9) |
(47) |
(50) |
|
Banking interest payable and similar expenses |
|
(1,302) |
(928) |
(2,053) |
|
Fee and commission expense, and other acquisition costs |
|
(331) |
(358) |
(650) |
|
Other operating and administrative expenses |
|
(1,321) |
(1,269) |
(2,724) |
|
Change in third party interest in consolidated funds |
|
210 |
(220) |
(156) |
|
Amortisation of PVIF and other acquired intangibles |
|
(176) |
(183) |
(360) |
|
Total expenses |
|
(904) |
(9,347) |
(15,196) |
|
Profit before tax |
|
835 |
851 |
1,668 |
|
Total income tax expense |
5(i) |
(163) |
(276) |
(479) |
|
Profit from continuing operations after tax |
|
672 |
575 |
1,189 |
|
Profit from discontinued operations after tax |
8(i) |
13 |
36 |
57 |
|
Profit after tax for the financial period |
|
685 |
611 |
1,246 |
|
Profit for the financial period attributable to: |
|
|
|
|
|
Equity holders of the parent |
6(ii) |
549 |
483 |
972 |
|
Minority interests |
|
|
|
|
|
Ordinary shares |
|
110 |
104 |
224 |
|
Preferred securities |
|
26 |
24 |
50 |
|
Profit after tax for the financial period |
|
685 |
611 |
1,246 |
|
Earnings per share |
|
||||
|
Based on profit from continuing operations (pence) |
|
11.0 |
9.0 |
18.3 |
|
|
Based on profit from discontinued operations (pence) |
|
0.2 |
0.6 |
0.9 |
|
|
Basic earnings per ordinary share (pence) |
6(i) |
11.2 |
9.6 |
19.2 |
|
|
Based on profit from continuing operations (pence) |
|
10.3 |
8.5 |
17.3 |
|
|
Based on profit from discontinued operations (pence) |
|
0.2 |
0.5 |
0.8 |
|
|
Diluted earnings per ordinary share (pence) |
6(i) |
10.5 |
9.0 |
18.1 |
|
|
Weighted average number of shares - millions |
6(i) |
4,771 |
4,880 |
4,894 |
|
Adjusted operating profit
For the six months ended 30 June 2008
Reconciliation of adjusted operating profit to profit after tax
|
Notes
|
£m
|
|||
|
6 months
ended 30 June 2008
|
6 months
ended 30 June 2007 Restated |
Year ended
31 December 2007
|
||
|
South Africa
|
3(ii)
|
617
|
572
|
1,165
|
|
United States
|
3(ii)
|
76
|
106
|
260
|
|
Europe
|
3(ii)
|
148
|
129
|
268
|
|
Other
|
3(ii)
|
(8)
|
2
|
2
|
|
|
|
833
|
809
|
1,695
|
|
Finance costs
|
|
(71)
|
(69)
|
(119)
|
|
Other shareholders’ expenses
|
|
(17)
|
(19)
|
(41)
|
|
Adjusted operating profit* before tax
|
|
745
|
721
|
1,535
|
|
Adjusting items
|
4(i)
|
156
|
24
|
73
|
|
Profit for the financial period before tax (excluding policyholder tax)
|
|
901
|
745
|
1,608
|
|
Total income tax expense
|
5(i)
|
(163)
|
(276)
|
(479)
|
|
Income tax attributable to policyholder returns
|
|
(66)
|
106
|
60
|
|
Profit from continuing operations after tax
|
|
672
|
575
|
1,189
|
|
Profit from discontinued operations after tax
|
8(i)
|
13
|
36
|
57
|
|
Profit after tax for the financial period
|
|
685
|
611
|
1,246
|
Adjusted operating profit after tax attributable to ordinary equity holders
|
Notes |
£m |
||||
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 |
Year ended 31 December 2007 |
|||
|
Adjusted operating profit* before tax |
|
745 |
721 |
1,535 |
|
|
Tax on adjusted operating profit |
5(iii) |
(215) |
(167) |
(390) |
|
|
Adjusted operating profit* after tax from continuing operations |
|
530 |
554 |
1,145 |
|
|
|
|
|
|
|
|
|
Adjusted operating profit* after tax from continuing operations |
|
530 |
554 |
1,145 |
|
|
Adjusted operating profit* after tax from discontinued operations |
8(iii) |
23 |
26 |
61 |
|
|
Adjusted operating profit* after tax |
|
553 |
580 |
1,206 |
|
|
|
|
|
|
|
|
|
Minority interest - ordinary shares |
|
(122) |
(114) |
(242) |
|
|
Minority interest - preferred securities |
|
(26) |
(24) |
(50) |
|
|
Adjusted operating profit* after tax attributable to ordinary equity holders |
|
405 |
442 |
914 |
|
|
Adjusted weighted average number of ordinary shares - (millions) |
6(ii) |
5,245 |
5,407 |
5,411 |
|
Based on adjusted operating profit from continuing operations** (pence) |
6(ii) |
7.4 |
7.8 |
16.1 |
|
Based on adjusted operating profit from discontinued operations** (pence) |
6(ii) |
0.3 |
0.4 |
0.8 |
|
Adjusted operating earnings per share** (pence) |
6(ii) |
7.7 |
8.2 |
16.9 |
* For long-term business and general insurance businesses, adjusted operating profit is based on a long-term investment return, includes investment returns on life funds' investments in Group equity and debt instruments, and is 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 minority interests in accordance with IFRS. For all businesses, adjusted operating profit excludes goodwill impairment, the impact of acquisition accounting, revaluations of put options 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.
** Adjusted operating earnings per ordinary share is calculated on the same basis as adjusted operating profit. It is stated after tax attributable to adjusted operating profit and minority interests. It excludes income attributable to Black Economic Empowerment trusts of listed subsidiaries. The calculation of the adjusted weighted average number of shares includes own shares held in policyholders' funds and Black Economic Empowerment trusts.
|
Consolidated balance sheet At 30 June 2008 Notes |
£m |
||||
|
At 30 June 2008 |
At 2007 |
|
|||
|
Assets |
|
|
|
|
|
|
Goodwill and other intangible assets |
|
5,453 |
5,340 |
5,459 |
|
|
Mandatory reserve deposits with central banks |
|
610 |
546 |
615 |
|
|
Property, plant and equipment |
|
549 |
493 |
608 |
|
|
Investment property |
|
1,265 |
1,361 |
1,479 |
|
|
Deferred tax assets |
|
764 |
574 |
683 |
|
|
Investments in associated undertakings and joint ventures |
|
69 |
100 |
81 |
|
|
Deferred acquisition costs |
|
2,728 |
1,908 |
2,253 |
|
|
Reinsurers' share of long-term business policyholder liabilities |
|
1,411 |
1,368 |
1,394 |
|
|
Reinsurers' share of general insurance liabilities |
|
- |
63 |
- |
|
|
Deposits held with reinsurers |
|
898 |
344 |
806 |
|
|
Loans and advances |
|
29,890 |
27,545 |
30,687 |
|
|
Investments and securities |
|
83,789 |
87,297 |
89,627 |
|
|
Current tax receivable |
|
47 |
103 |
83 |
|
|
Client indebtedness for acceptances |
|
201 |
188 |
165 |
|
|
Other assets |
|
2,531 |
3,460 |
2,181 |
|
|
Derivative financial instruments - assets |
|
3,149 |
758 |
1,527 |
|
|
Cash and cash equivalents |
|
3,129 |
3,438 |
3,469 |
|
|
Non-current assets held-for-sale |
8(v) |
566 |
573 |
1,617 |
|
|
Total assets |
|
137,049 |
135,459 |
142,734 |
|
|
Liabilities |
|
|
|
|
|
|
Long-term business policyholder liabilities |
|
78,954 |
79,963 |
84,251 |
|
|
General insurance liabilities |
|
- |
288 |
- |
|
|
Third party interests in consolidation of funds |
|
2,674 |
3,589 |
3,547 |
|
|
Borrowed funds |
9 |
2,236 |
2,301 |
2,353 |
|
|
Provisions |
|
429 |
519 |
499 |
|
|
Deferred revenue |
|
521 |
381 |
462 |
|
|
Deferred tax liabilities |
|
1,389 |
1,443 |
1,413 |
|
|
Current tax payable |
|
206 |
220 |
320 |
|
|
Other liabilities |
|
5,622 |
7,710 |
6,180 |
|
|
Liabilities under acceptances |
|
201 |
188 |
165 |
|
|
Amounts owed to bank depositors |
|
32,033 |
28,382 |
31,817 |
|
|
Derivative financial instruments - liabilities |
|
3,062 |
981 |
1,716 |
|
|
Non-current liabilities held-for-sale |
8(vi) |
368 |
553 |
414 |
|
|
Total liabilities |
|
127,695 |
126,518 |
133,137 |
|
|
Net assets |
|
9,354 |
8,941 |
9,597 |
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
|
Equity attributable to equity holders of the parent |
|
7,802 |
7,359 |
7,961 |
|
|
Minority interests |
|
|
|
|
|
|
Ordinary shares |
|
849 |
879 |
933 |
|
|
Preferred securities |
|
703 |
703 |
703 |
|
|
Total minority interests |
|
1,552 |
1,582 |
1,636 |
|
|
Total equity |
|
9,354 |
8,941 |
9,597 |
|
|
|
|
|
|
£m |
|
Condensed consolidated cash flow statement For the six months ended 30 June 2008 |
Notes |
6 months ended 30 June 2008 |
6 months ended |
Year ended |
|
Cash flows from operating activities |
|
|
|
|
|
Profit before tax from continuing operations |
|
835 |
851 |
1,668 |
|
Profit before tax from discontinued operations |
8(i) |
18 |
47 |
82 |
|
Total profit before tax |
|
853 |
898 |
1,750 |
|
Non-cash movements in profit before tax |
|
1,083 |
(1,400) |
(1,155) |
|
Changes in working capital |
|
811 |
2,646 |
4,368 |
|
Taxation paid |
|
(262) |
(303) |
(563) |
|
Net cash inflow from operating activities |
|
2,485 |
1,841 |
4,400 |
|
Cash flows from investing activities |
|
|
|
|
|
Acquisition of financial investments |
|
(2,388) |
(1,786) |
(3,896) |
|
(Acquisition)/disposal of investment properties |
|
(19) |
15 |
(26) |
|
Net acquisition of property, plant & equipment |
|
(64) |
(50) |
(186) |
|
Net acquisition of intangible assets |
|
(2) |
(34) |
(67) |
|
Acquisition of interests in subsidiaries |
|
(65) |
(175) |
(278) |
|
Disposal of interests in subsidiaries, associated undertakings and strategic |
|
1,133 |
1 |
106 |
|
Net cash outflow from investing activities |
|
(1,405) |
(2,029) |
(4,347) |
|
Cash flows from financing activities |
|
|
|
|
|
Dividends paid to: |
|
|
|
|
|
Equity holders of the Company |
7 |
(227) |
(218) |
(333) |
|
Equity minority interests and preferred security interests |
|
(109) |
(92) |
(205) |
|
Interest payable (excluding banking interest payable) |
|
(61) |
(25) |
(83) |
|
Net proceeds from issue of ordinary shares (including by subsidiaries to minority |
|
(226) |
199 |
42 |
|
Net receipts from unclaimed shares trust |
|
- |
90 |
95 |
|
Issue of subordinated debt |
|
76 |
430 |
699 |
|
Other debt repaid |
|
(13) |
(277) |
(356) |
|
Net cash (outflow)/inflow from financing activities |
|
(560) |
107 |
(141) |
|
Net (decrease)/increase in cash and cash equivalents |
520 |
(81) |
(88) |
|
|
Effects of exchange rate changes on cash and cash equivalents |
(235) |
(45) |
50 |
|
|
Cash and cash equivalents at beginning of the period |
3,596 |
3,634 |
3,634 |
|
|
Cash and cash equivalents at end of the period |
3,881 |
3,508 |
3,596 |
|
|
Consisting of: |
|
|
|
|
|
Cash and cash equivalents |
3,129 |
3,438 |
3,469 |
|
|
Mandatory reserve deposits with central banks |
610 |
546 |
615 |
|
|
Other cash equivalents |
1,084 |
671 |
808 |
|
|
Cash and cash equivalents subject to consolidation of funds |
(942) |
(1,147) |
(1,296) |
|
|
Total |
3,881 |
3,508 |
3,596 |
|
Cash flows presented in this statement include all cash flows relating to policyholders' funds for the long-term business.
Cash and cash equivalents subject to consolidation of funds are not included in the cash flow as they relate to the minority holding in the funds.
Management do not consider that there are material amounts of cash and cash equivalents which are not available for use by the Group.
|
Consolidated statement of changes in equity For the six months ended 30 June 2008 Six months ended 30 June 2008 |
|
Millions |
|
|
|
£m |
|
Notes |
Number of |
|
Attributable to equity holders of the parent |
Total minority interest |
Total equity |
|
|
Equity holders' funds at beginning of the period |
|
5,510 |
|
7,961 |
1,636 |
9,597 |
|
Change in equity arising in the period |
|
|
|
|
|
|
|
Fair value gains/(losses): |
|
|
|
|
|
|
|
Property revaluation |
|
- |
|
6 |
- |
6 |
|
Available for sale investments: |
|
|
|
|
|
|
|
Fair value losses |
|
- |
|
(528) |
- |
(528) |
|
Recycled to income statement |
|
- |
|
85 |
- |
85 |
|
Shadow accounting |
|
- |
|
227 |
- |
227 |
|
Currency translation differences/exchange differences on translating |
|
- |
|
(145) |
(119) |
(264) |
|
Other movements |
|
- |
|
(16) |
2 |
(14) |
|
Aggregate tax effect of items taken directly to or transferred from equity |
|
- |
|
67 |
- |
67 |
|
Net income recognised directly in equity |
|
- |
|
(304) |
(117) |
(421) |
|
Profit for the period |
|
- |
|
549 |
136 |
685 |
|
Total recognised income and expense for the period |
|
- |
|
245 |
19 |
264 |
|
Dividends for the period |
7 |
- |
|
(249) |
(87) |
(336) |
|
Net purchase of treasury shares |
|
- |
|
(5) |
- |
(5) |
|
Shares repurchased in the buyback programme |
|
- |
|
(174) |
- |
(174) |
|
Issue of ordinary share capital by the Company |
|
- |
|
4 |
- |
4 |
|
Change in participation in subsidiaries |
|
- |
|
- |
(16) |
(16) |
|
Exercise of share options |
|
4 |
|
3 |
- |
3 |
|
Fair value of equity settled share options |
|
- |
|
17 |
- |
17 |
|
Equity holders' funds at end of the period |
|
5,514 |
|
7,802 |
1,552 |
9,354 |
|
Six months ended 30 June 2008 |
|
£m |
|||||||
|
Notes |
Share capital |
Share premium |
Other reserves |
Translation reserve |
Retained earnings |
Perpetual preferred callable securities |
Total |
||
|
Attributable to equity holders of the parent |
|||||||||
|
at beginning of the period |
|
551 |
757 |
2,908 |
(304) |
3,361 |
688 |
7,961 |
|
|
Changes in equity arising in the period: |
|||||||||
|
Fair value gains/(losses): |
|||||||||
|
Property revaluation |
|
- |
- |
6 |
- |
- |
- |
6 |
|
|
Available for sale investments: |
|
|
|
|
|
|
|
|
|
|
Fair value losses |
|
- |
- |
(528) |
- |
- |
- |
(528) |
|
|
Recycled to income statement |
|
- |
- |
85 |
- |
- |
- |
85 |
|
|
Shadow accounting |
|
- |
- |
227 |
- |
- |
- |
227 |
|
|
Currency translation differences/exchange differences |
|||||||||
|
on translating foreign operations |
|
- |
- |
- |
(145) |
- |
- |
(145) |
|
|
Other movements |
|
- |
2 |
(9) |
- |
(9) |
- |
(16) |
|
|
Aggregate tax effect of items taken directly to |
|||||||||
|
or transferred from equity |
|
- |
- |
61 |
- |
6 |
- |
67 |
|
|
Net income recognised directly in equity |
|
- |
2 |
(158) |
(145) |
(3) |
- |
(304) |
|
|
Profit for the period |
|
- |
- |
- |
- |
549 |
- |
549 |
|
|
Total recognised income and expense for the period |
|
- |
2 |
(158) |
(145) |
546 |
- |
245 |
|
|
Dividends for the period |
7 |
- |
- |
- |
- |
(249) |
- |
(249) |
|
|
Net purchase of treasury shares |
|
- |
- |
- |
- |
(5) |
- |
(5) |
|
|
Shares repurchased in the buyback programme |
|
- |
- |
- |
- |
(174) |
- |
(174) |
|
|
Issue of ordinary share capital by the Company |
|
- |
4 |
- |
- |
- |
- |
4 |
|
|
Exercise of share options |
|
- |
3 |
- |
- |
- |
- |
3 |
|
|
Fair value of equity settled share options |
|
- |
- |
17 |
- |
- |
- |
17 |
|
|
Attributable to equity holders of the |
|||||||||
|
parent at end of the period |
|
551 |
766 |
2,767 |
(449) |
3,479 |
688 |
7,802 |
|
|
Other reserves |
£m |
||||||||
|
At 30 June 2008 |
|||||||||
|
Merger reserve |
2,716 |
||||||||
|
Available for sale reserve |
(180) |
||||||||
|
Property revaluation reserve |
75 |
||||||||
|
Share-based payments reserve |
156 |
||||||||
|
Attributable to equity holders of the parent at end of the period |
2,767 |
||||||||
Retained earnings have been reduced by £550 million at 30 June 2008 in respect of own shares held in policyholders' funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings. Included in the dividend for the period is £22 million of dividends declared to holders of perpetual preferred callable securities. Included within other reserves is the merger reserve for the additional share consideration made in respect of the Skandia acquisition, being the difference between the market value of the shares on the date of issue and the nominal value included as share capital.
|
Six months ended 30 June 2007 |
Notes |
Millions |
|
|
|
£m |
|
Number of |
|
Attributable to |
|
|
||
|
shares issued |
|
equity holders of |
Total minority |
Total |
||
|
and fully paid |
|
the parent |
interest |
equity |
||
|
|
|
|
|
|
|
|
|
Equity holders' funds at beginning of the period |
|
5,501 |
|
7,237 |
1,526 |
8,763 |
|
Change in equity arising in the period |
|
|
|
|
|
|
|
Fair value gains/(losses): |
|
|
|
|
|
|
|
Property revaluation |
|
- |
|
5 |
- |
5 |
|
Net investment hedge |
|
- |
|
31 |
- |
31 |
|
Available for sale investments |
|
|
|
|
|
|
|
Fair value losses |
|
- |
|
(177) |
- |
(177) |
|
Shadow accounting |
|
- |
|
93 |
- |
93 |
|
Currency translation differences/exchange differences on translating |
|
- |
|
(162) |
(33) |
(195) |
|
Other movements |
|
- |
|
(16) |
(4) |
(20) |
|
Aggregate tax effect of items taken directly to or transferred from equity |
|
- |
|
29 |
- |
29 |
|
Net expense recognised directly in equity |
|
- |
|
(197) |
(37) |
(234) |
|
Profit for the period |
|
- |
|
483 |
128 |
611 |
|
Total recognised income and expense for the period |
|
- |
|
286 |
91 |
377 |
|
Dividends for the period |
7 |
- |
|
(240) |
(70) |
(310) |
|
Net sale of treasury shares |
|
- |
|
55 |
- |
55 |
|
Change in participation in subsidiaries |
|
- |
|
- |
35 |
35 |
|
Exercise of share options |
|
4 |
|
3 |
- |
3 |
|
Fair value of equity settled share options |
|
- |
|
18 |
- |
18 |
|
Equity holders' funds at end of the period |
|
5,505 |
|
7,359 |
1,582 |
8,941 |
|
Six months ended 30 June 2007 |
|
|
|
|
|
|
|
£m |
|
|
|
|
|
|
|
Perpetual |
|
|
|
|
|
|
|
|
|
preferred |
|
|
|
Notes |
Share |
Share |
Other |
Translation |
Retained |
callable |
|
|
|
capital |
premium |
reserves |
reserve |
earnings |
securities |
Total |
||
|
|
|
|
|
|
|
|
|
|
|
Attributable to equity holders of the parent at |
|
550 |
746 |
2,901 |
(421) |
2,773 |
688 |
7,237 |
|
Changes in equity arising in the period: |
|
|
|
|
|
|
|
|
|
Fair value gains/(losses): |
|
|
|
|
|
|
|
|
|
Property revaluation |
|
- |
- |
5 |
- |
- |
- |
5 |
|
Net investment hedge |
|
- |
- |
- |
31 |
- |
- |
31 |
|
Available for sale investments |
|
|
|
|
|
|
|
|
|
Fair value losses |
|
- |
- |
(177) |
- |
- |
- |
(177) |
|
Shadow accounting |
|
- |
- |
93 |
- |
- |
- |
93 |
|
Currency translation differences/exchange differences |
|
- |
- |
- |
(162) |
- |
- |
(162) |
|
Other movements |
|
- |
- |
(12) |
- |
(4) |
- |
(16) |
|
Aggregate tax effect of items taken directly to or |
|
- |
- |
27 |
(5) |
7 |
- |
29 |
|
Net expense recognised directly in equity |
|
- |
- |
(64) |
(136) |
3 |
- |
(197) |
|
Profit for the period |
|
- |
- |
- |
- |
483 |
- |
483 |
|
Total recognised income and expense for the period |
|
- |
- |
(64) |
(136) |
486 |
- |
286 |
|
|
|
|
|
|
|
|
|
|
|
Dividends for the period |
7 |
- |
- |
- |
- |
(240) |
- |
(240) |
|
Net sale of treasury shares |
|
- |
- |
- |
- |
55 |
- |
55 |
|
Exercise of share options |
|
- |
3 |
- |
- |
- |
- |
3 |
|
Fair value of equity settled share options |
|
- |
- |
18 |
- |
- |
- |
18 |
|
Attributable to equity holders of the parent at end of the period |
|
550 |
749 |
2,855 |
(557) |
3,074 |
688 |
7,359 |
|
Other reserves |
|
|
|
|
|
|
|
|
£m |
|
|
|
|
|
|
|
|
|
At |
|
|
|
|
|
|
|
|
|
|
30 June |
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
Merger reserve |
|
|
|
|
|
|
|
|
2,716 |
|
Available for sale reserve |
|
|
|
|
|
|
|
|
(33) |
|
Investment property revaluation reserve |
|
|
|
|
|
|
|
|
48 |
|
Share-based payments reserve |
|
|
|
|
|
|
|
|
124 |
|
Attributable to equity holders of the parent at end of the period |
|
|
|
|
|
2,855 |
|||
Retained earnings have been reduced by £649 million at 30 June 2007 in respect of own shares held in policyholders' funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings. Included in the dividend for the period is £22 million of dividends declared to holders of perpetual preferred callable securities. Included within other reserves is the merger reserve for the additional share consideration made in respect of the Skandia acquisition, being the difference between the market value of the shares on the date of issue and the nominal value included as share capital.
|
Year ended 31 December 2007 |
|
Millions |
|
|
|
£m |
|
Notes |
Number of |
|
Attributable to equity holders of the parent |
Total minority interest |
Total equity |
|
|
Equity holders' funds at beginning of the year |
|
5,501 |
|
7,237 |
1,526 |
8,763 |
|
Change in equity arising in the year |
|
|
|
|
|
|
|
Fair value gains/(losses): |
|
|
|
|
|
|
|
Property revaluation |
|
- |
|
95 |
1 |
96 |
|
Net investment hedge |
|
- |
|
(13) |
- |
(13) |
|
Available for sale investments: |
|
|
|
|
|
|
|
Fair value losses |
|
- |
|
(197) |
- |
(197) |
|
Recycled to income statement |
|
- |
|
36 |
- |
36 |
|
Shadow accounting |
|
- |
|
25 |
- |
25 |
|
Currency translation differences/exchange differences on translating |
|
- |
|
129 |
4 |
133 |
|
Other movements |
|
- |
|
(4) |
- |
(4) |
|
Aggregate tax effect of items taken directly to or transferred from equity |
|
- |
|
34 |
- |
34 |
|
Net income recognised directly in equity |
|
- |
|
105 |
5 |
110 |
|
Profit for the year |
|
- |
|
972 |
274 |
1,246 |
|
Total recognised income and expense for the year |
|
- |
|
1,077 |
279 |
1,356 |
|
Dividends for the year |
7 |
- |
|
(373) |
(165) |
(538) |
|
Net sale of treasury shares |
|
- |
|
149 |
- |
149 |
|
Shares repurchased in the buyback programme |
|
- |
|
(177) |
- |
(177) |
|
Issue of ordinary share capital by the Company |
|
- |
|
3 |
- |
3 |
|
Change in participation in subsidiaries |
|
- |
|
- |
(4) |
(4) |
|
Exercise of share options |
|
9 |
|
9 |
- |
9 |
|
Fair value of equity settled share options |
|
- |
|
36 |
- |
36 |
|
Equity holders' funds at end of the year |
|
5,510 |
|
7,961 |
1,636 |
9,597 |
|
Year ended 31 December 2007 |
|
£m |
||||||||
|
Notes |
Share Capital |
Share premium |
Other reserves |
Translation reserve |
Retained earnings |
Perpetual preferred callable securities |
Total |
|||
|
Attributable to equity holders of the parent |
||||||||||
|
at beginning of the year |
|
550 |
746 |
2,901 |
(421) |
2,773 |
688 |
7,237 |
||
|
Changes in equity arising in the year: |
||||||||||
|
Fair value gains/(losses): |
||||||||||
|
Property revaluation |
|
- |
- |
95 |
- |
- |
- |
95 |
||
|
Net investment hedge |
|
- |
- |
- |
(13) |
- |
- |
(13) |
||
|
Available for sale investments: |
|
|
|
|
|
|
|
|
||
|
Fair value losses |
|
- |
- |
(197) |
- |
- |
- |
(197) |
||
|
Recycled to income statement |
|
- |
- |
36 |
- |
- |
- |
36 |
||
|
Shadow accounting |
|
- |
- |
25 |
- |
- |
- |
25 |
||
|
Currency translation differences/exchange differences |
||||||||||
|
on translating foreign operations |
|
- |
- |
- |
129 |
- |
- |
129 |
||
|
Other movements |
|
- |
- |
(10) |
(2) |
8 |
- |
(4) |
||
|
Aggregate tax effect of items taken directly to |
||||||||||
|
or transferred from equity |
|
- |
- |
22 |
3 |
9 |
- |
34 |
||
|
Net income recognised directly in equity |
|
- |
- |
(29) |
117 |
17 |
- |
105 |
||
|
Profit for the year |
|
- |
- |
- |
- |
972 |
- |
972 |
||
|
Total recognised income and expense for the year |
|
- |
- |
(29) |
117 |
989 |
- |
1,077 |
||
|
Dividends for the year |
7 |
- |
- |
- |
- |
(373) |
- |
(373) |
||
|
Net sale of treasury shares |
|
- |
- |
- |
- |
149 |
- |
149 |
||
|
Shares repurchased in the buyback programme |
|
- |
- |
- |
- |
(177) |
- |
(177) |
||
|
Issue of ordinary share capital by the Company |
|
- |
3 |
- |
- |
- |
- |
3 |
||
|
Exercise of share options |
|
1 |
8 |
- |
- |
- |
- |
9 |
||
|
Fair value of equity settled share options |
|
- |
- |
36 |
- |
- |
- |
36 |
||
|
Attributable to equity holders of the |
||||||||||
|
parent at end of the year |
|
551 |
757 |
2,908 |
(304) |
3,361 |
688 |
7,961 |
||
|
Other reserves |
£m |
|||||||||
|
At 31 December 2007 |
||||||||||
|
Merger reserve |
2,716 |
|||||||||
|
Available for sale reserve |
(30) |
|||||||||
|
Property revaluation reserve |
75 |
|||||||||
|
Share-based payments reserve |
147 |
|||||||||
|
Attributable to equity holders of the parent at end of the year |
2,908 |
|||||||||
Retained earnings have been reduced by £588 million at 31 December 2007 in respect of own shares held in policyholders' funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings. Included in the dividend for the year is £40 million of dividends declared to holders of perpetual preferred callable securities. Included within other reserves is the merger reserve for the additional share consideration made in respect of the Skandia acquisition, being the difference between the market value of the shares on the date of issue and the nominal value included as share capital.
Notes to the consolidated financial statements
For the six months ended 30 June 2008
1 Basis of preparation
Old Mutual plc ('the Company') is a company incorporated in England and Wales.
These interim consolidated financial statements comprise the results of the Company and its subsidiaries (together referred to as the 'Group') and equity account the Group's interest in associates and jointly controlled entities.
These interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) IAS 34 Interim Financial Reporting. They do not include all of the information required for a full set of consolidated financial statements.
These consolidated interim financial statements were approved by the Board of Directors on 6 August 2008.
The accounting policies applied by the Group in these consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2007, presented in accordance with IFRS as adopted by the EU.
The interim consolidated financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments, financial instruments classified as fair valued through the income statement or as available for sale, owner-occupied property and investment property. Non-current assets and disposal groups held-for-sale are stated at the lower of previous carrying amount and fair value less costs to sell.
The results for the six months ended 30 June 2008 and 2007 are unaudited, but have been reviewed by the Auditors whose report is presented on page 33. The comparative figures for the financial year ended 31 December 2007 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. Consequently these interim financial statements should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2007.
Revised and new reporting standards
The Group had previously chosen to adopt IFRS 8 'Operating Segments' in preparing its financial statements for the year ended 31 December 2007.
Estimates
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
In preparing these consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2007.
Further commentary on management's reassessment of estimates made during the six months ended 30 June 2008 is provided in the Business Review
Financial and insurance risk management
The Group's financial and insurance risk management objectives and policies are consistent with that disclosed in the consolidated financial statements as at and for the year ended 31 December 2007.
Restatement of comparative information
The Group has made certain restatements of comparative information to reflect Mutual & Federal as a discontinued operation and to reflect changes in presentation of the income statement and balance sheet line items that were made in the Group's annual report for the year ended 31 December 2007 following the adoption of IFRS 7 'Financial Instruments: Disclosures'. Reclassifications have also been made to income and expense items to more appropriately reflect the nature of these items.
2 Foreign currencies
The principal exchange rates used to translate the operating results, assets and liabilities of key foreign business operations to Sterling are:
|
|
Income statement (average rate) |
Balance sheet (closing rate) |
|
30 June 2008 |
|
|
|
Rand |
15.1008 |
15.5673 |
|
US Dollars |
1.9746 |
1.9908 |
|
Swedish Krona |
12.1128 |
12.0009 |
|
Euro |
1.2903 |
1.2651 |
|
30 June 2007 |
|
|
|
Rand |
14.1123 |
14.1677 |
|
US Dollars |
1.9703 |
2.0071 |
|
Swedish Krona |
13.6668 |
13.7266 |
|
Euro |
1.4820 |
1.4826 |
|
31 December 2007 |
|
|
|
Rand |
14.1109 |
13.6043 |
|
US Dollars |
2.0014 |
1.9827 |
|
Swedish Krona |
13.5253 |
12.8320 |
|
Euro |
1.4602 |
1.3596 |
3 Segment information
(i) Basis of segmentation
The Group's results are analysed across four geographic segments. This is consistent with the way the Group manages the business. The four geographic segments, based on the Group's management structure, are South Africa, United States, Europe and Other. Within the geographic segments, the Group generates revenue from four principal lines of business: long-term business, asset management, banking and general insurance. For IFRS purposes, the general insurance line of business has been discontinued during the 2007 financial year, however for the purposes of reporting adjusted operating profit, the result of the general insurance line of business is included in the following analyses.
The income statement information that follows is based on the Group's geographical management structure with revenue and expenses allocated to the lines of business. This follows the same format as the Consolidated income statement and is reconciled to Adjusted Operating Profit which is one of the key measures reported to the Group's chief operating decision makers for their consideration in the allocation of resources to and the review of performance of the segments. The Group utilises additional measures to assess the performance of each of the segments. These measures are also presented and include an analysis of gross earned premiums and funds under management.
The basis of segmentation and the basis of measurement of segment profit or loss applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2007.
3 Segment information continued
(ii) Income statement - segment information six months ended 30 June 2008
|
|
South Africa |
United States |
|||
|
Long-term business |
Asset management |
Banking |
Long-term business |
Asset management |
|
|
Revenue |
|
|
|
|
|
|
Gross earned premiums |
790 |
- |
- |
1,644 |
- |
|
Outward reinsurance |
(24) |
- |
- |
(51) |
- |
|
Net earned premiums |
766 |
- |
- |
1,593 |
- |
|
Investment return (non-banking) |
29 |
58 |
|
(223) |
10 |
|
Banking interest and similar income |
- |
- |
1,765 |
- |
- |
|
Banking trading, investment and similar income |
- |
- |
68 |
- |
- |
|
Fee and commission income, and income from service activities |
53 |
77 |
227 |
- |
250 |
|
Other income |
36 |
26 |
60 |
23 |
8 |
|
Share of associated undertakings' profit/(loss) after tax |
4 |
- |
3 |
- |
- |
|
Profit/(loss) on disposal of subsidiaries, associated undertakings and |
(13) |
- |
1 |
- |
(1) |
|
Inter-segment revenues |
86 |
14 |
8 |
- |
4 |
|
Total revenue |
961 |
175 |
2,132 |
1,393 |
271 |
|
Expenses |
|
|
|
|
|
|
Claims and benefits (including change in insurance contract provisions) |
(288) |
- |
- |
(1,446) |
- |
|
Reinsurance recoveries |
35 |
- |
- |
54 |
- |
|
Net claims and benefits incurred |
(253) |
- |
- |
(1,392) |
- |
|
Change in investment contract liabilities |
44 |
- |
- |
3 |
- |
|
Losses on loans and advances |
- |
- |
(125) |
- |
- |
|
Finance costs |
- |
- |
- |
- |
- |
|
Banking interest payable and similar expenses |
- |
- |
(1,213) |
- |
- |
|
Fee and commission expense, and other acquisition costs |
(71) |
1 |
- |
(40) |
(5) |
|
Other operating and administrative expenses |
(199) |
(64) |
(449) |
(35) |
(192) |
|
Change in third party interest in consolidated funds |
- |
- |
- |
- |
- |
|
Amortisation of PVIF and other acquired intangibles |
- |
- |
- |
(13) |
- |
|
Inter-segment expenses |
(22) |
(57) |
(24) |
(5) |
- |
|
Total expenses |
(501) |
(120) |
(1,811) |
(1,482) |
(197) |
|
Profit/(loss) before tax |
460 |
55 |
321 |
(89) |
74 |
|
Adjusting items |
(214) |
- |
(1) |
95 |
(4) |
|
Income tax attributable to policyholder returns |
(4) |
- |
- |
- |
- |
|
Adjusted operating profit/(loss) before tax |
242 |
55 |
320 |
6 |
70 |
3 Segment information continued
(ii) Income statement - segment information six months ended 30 June 2008 continued
|
Europe |
Other |
Group |
|
|
£m |
|||
|
Long-term business |
Asset management |
Banking |
Asset management |
Corporate |
Inter-segment (revenues)/ expenses |
Total continuing operations |
Discontinued operations |
Total |
|
|
|
|
|
|
|
|
|
|
|
126 |
- |
- |
- |
- |
- |
2,560 |
301 |
2,861 |
|
(44) |
- |
- |
- |
- |
- |
(119) |
(45) |
(164) |
|
82 |
- |
- |
- |
- |
- |
2,441 |
256 |
2,697 |
|
(3,797) |
8 |
- |
- |
7 |
(184) |
(4,092) |
18 |
(4,074) |
|
- |
- |
129 |
- |
- |
- |
1,894 |
- |
1,894 |
|
- |
- |
2 |
- |
- |
- |
70 |
- |
70 |
|
375 |
166 |
13 |
19 |
- |
1 |
1,181 |
- |
1,181 |
|
14 |
3 |
4 |
- |
- |
16 |
190 |
- |
190 |
|
- |
- |
- |
(3) |
(6) |
- |
(2) |
- |
(2) |
|
- |
17 |
58 |
- |
- |
- |
62 |
- |
62 |
|
111 |
11 |
8 |
- |
7 |
(254) |
(5) |
5 |
- |
|
(3,215) |
205 |
214 |
16 |
8 |
(421) |
1,739 |
279 |
2,018 |
|
|
|
|
|
|
|
|
|
|
|
(68) |
- |
- |
- |
- |
- |
(1,802) |
(221) |
(2,023) |
|
22 |
- |
- |
- |
- |
- |
111 |
38 |
149 |
|
(46) |
- |
- |
- |
- |
- |
(1,691) |
(183) |
(1,874) |
|
3,795 |
- |
- |
- |
- |
- |
3,842 |
- |
3,842 |
|
- |
- |
(1) |
- |
- |
- |
(126) |
- |
(126) |
|
- |
- |
- |
- |
(9) |
- |
(9) |
- |
(9) |
|
- |
- |
(89) |
- |
- |
- |
(1,302) |
- |
(1,302) |
|
(120) |
(51) |
- |
(6) |
- |
(39) |
(331) |
(50) |
(381) |
|
(249) |
(61) |
(33) |
(17) |
(22) |
(4) |
(1,325) |
(24) |
(1,349) |
|
- |
- |
- |
- |
- |
210 |
210 |
- |
210 |
|
(158) |
(2) |
(3) |
- |
- |
- |
(176) |
- |
(176) |
|
(49) |
(69) |
(20) |
(1) |
(3) |
254 |
4 |
(4) |
- |
|
3,173 |
(183) |
(146) |
(24) |
(34) |
421 |
(904) |
(261) |
(1,165) |
|
(42) |
22 |
68 |
(8) |
(26) |
- |
835 |
18 |
853 |
|
100 |
(15) |
(55) |
- |
(62) |
- |
(156) |
10 |
(146) |
|
70 |
- |
- |
- |
- |
- |
66 |
- |
66 |
|
128 |
7 |
13 |
(8) |
(88) |
- |
745 |
28 |
773 |
3 Segment information continued
(ii) Income statement - segment information six months ended 30 June 2007
|
|
South Africa |
United States |
|||
|
Long-term business |
Asset management |
Banking |
Long-term business |
Asset management |
|
|
Revenue |
|
|
|
|
|
|
Gross earned premiums |
730 |
- |
- |
1,355 |
- |
|
Outward reinsurance |
(20) |
- |
- |
(50) |
- |
|
Net earned premiums |
710 |
- |
- |
1,305 |
- |
|
Investment return (non-banking) |
2,216 |
29 |
- |
340 |
3 |
|
Banking interest and similar income |
- |
- |
1,352 |
- |
- |
|
Banking trading, investment and similar income |
- |
- |
71 |
- |
- |
|
Fee and commission income, and income from service activities |
52 |
83 |
218 |
- |
250 |
|
Other income |
37 |
30 |
24 |
(1) |
13 |
|
Share of associated undertakings' profit/(loss) after tax |
7 |
- |
7 |
- |
- |
|
Profit on disposal of subsidiaries, associated undertakings and |
- |
1 |
- |
- |
6 |
|
Inter-segment revenues |
61 |
15 |
22 |
- |
6 |
|
Total revenue |
3,083 |
158 |
1,694 |
1,644 |
278 |
|
Expenses |
|
|
|
|
|
|
Claims and benefits (including change in insurance contract provisions) |
(1,865) |
- |
- |
(1,558) |
- |
|
Reinsurance recoveries |
16 |
- |
- |
58 |
- |
|
Net claims and benefits incurred |
(1,849) |
- |
- |
(1,500) |
- |
|
Change in investment contract liabilities |
(534) |
- |
- |
- |
- |
|
Losses on loans and advances |
- |
- |
(73) |
- |
- |
|
Finance costs |
- |
- |
- |
- |
- |
|
Banking interest payable and similar expenses |
- |
- |
(869) |
- |
- |
|
Fee and commission expense, and other acquisition costs |
(71) |
(2) |
- |
(96) |
(5) |
|
Other operating and administrative expenses |
(192) |
(61) |
(430) |
(28) |
(191) |
|
Change in third party interest in consolidated funds |
- |
- |
- |
- |
- |
|
Goodwill impairment |
- |
- |
- |
- |
- |
|
Amortisation of PVIF and other acquired intangibles |
- |
- |
- |
(18) |
- |
|
Inter-segment expenses |
(19) |
(40) |
(34) |
(7) |
- |
|
Total expenses |
(2,665) |
(103) |
(1,406) |
(1,649) |
(196) |
|
Profit/(loss) before tax |
418 |
55 |
288 |
(5) |
82 |
|
Adjusting items |
(127) |
(1) |
- |
35 |
(6) |
|
Income tax attributable to policyholder returns |
(61) |
- |
- |
- |
- |
|
Adjusted operating profit/(loss) before tax |
230 |
54 |
288 |
30 |
76 |
3 Segment information continued
(ii) Income statement - segment information 6 months ended 30 June 2007 continued
|
Europe |
Other |
Group |
|
|
£m |
|||
|
Long-term business |
Asset management |
Banking |
Asset management |
Corporate |
Inter-segment (revenues)/ expenses |
Total |
Discontinued operations |
Total |
|
|
|
|
|
|
|
|
|
|
|
117 |
- |
- |
- |
- |
- |
2,202 |
302 |
2,504 |
|
(35) |
- |
- |
- |
- |
- |
(105) |
(48) |
(153) |
|
82 |
- |
- |
- |
- |
- |
2,097 |
254 |
2,351 |
|
2,427 |
1 |
- |
- |
7 |
275 |
5,298 |
39 |
5,337 |
|
- |
- |
98 |
- |
- |
- |
1,450 |
- |
1,450 |
|
- |
- |
19 |
- |
- |
- |
90 |
- |
90 |
|
344 |
168 |
13 |
20 |
- |
- |
1,148 |
- |
1,148 |
|
10 |
4 |
1 |
1 |
4 |
1 |
124 |
- |
124 |
|
- |
- |
- |
(1) |
(11) |
- |
2 |
- |
2 |
|
- |
- |
- |
- |
- |
- |
7 |
- |
7 |
|
64 |
6 |
10 |
1 |
5 |
(208) |
(18) |
18 |
- |
|
2,927 |
179 |
141 |
21 |
5 |
68 |
10,198 |
311 |
10,509 |
|
|
|
|
|
|
|
|
|
|
|
(52) |
- |
- |
- |
- |
- |
(3,475) |
(206) |
(3,681) |
|
10 |
- |
- |
- |
- |
- |
84 |
36 |
120 |
|
(42) |
- |
- |
- |
- |
- |
(3,391) |
(170) |
(3,561) |
|
(2,343) |
- |
- |
- |
- |
- |
(2,877) |
- |
(2,877) |
|
- |
- |
(1) |
- |
- |
- |
(74) |
- |
(74) |
|
- |
- |
- |
- |
(47) |
- |
(47) |
- |
(47) |
|
- |
- |
(59) |
- |
- |
- |
(928) |
- |
(928) |
|
(92) |
(47) |
- |
(5) |
- |
(40) |
(358) |
(49) |
(407) |
|
(217) |
(70) |
(37) |
(13) |
(33) |
(16) |
(1,288) |
(25) |
(1,313) |
|
- |
- |
- |
- |
- |
(220) |
(220) |
- |
(220) |
|
- |
- |
- |
- |
- |
- |
- |
(1) |
(1) |
|
(161) |
(2) |
(2) |
- |
- |
- |
(183) |
- |
(183) |
|
- |
(51) |
(34) |
(1) |
(3) |
208 |
19 |
(19) |
- |
|
(2,855) |
(170) |
(133) |
(19) |
(83) |
(68) |
(9,347) |
(264) |
(9,611) |
|
72 |
9 |
8 |
2 |
(78) |
- |
851 |
47 |
898 |
|
82 |
3 |
- |
- |
(10) |
- |
(24) |
(11) |
(35) |
|
(45) |
- |
- |
- |
- |
- |
(106) |
- |
(106) |
|
109 |
12 |
8 |
2 |
(88) |
- |
721 |
36 |
757 |
3 Segment information continued
(ii) Income statement - segment information year ended 31 December 2007
|
|
South Africa |
United States |
|||
|
Long-term business |
Asset management |
Banking |
Long-term business |
Asset management |
|
|
Revenue |
|
|
|
|
|
|
Gross earned premiums |
1,563 |
- |
- |
3,148 |
- |
|
Outward reinsurance |
(41) |
- |
- |
(88) |
- |
|
Net earned premiums |
1,522 |
- |
- |
3,060 |
- |
|
Investment return (non-banking) |
3,203 |
89 |
- |
528 |
13 |
|
Banking interest and similar income |
- |
- |
2,979 |
- |
- |
|
Banking trading, investment and similar income |
- |
- |
167 |
- |
- |
|
Fee and commission income, and income from service activities |
108 |
161 |
474 |
- |
570 |
|
Other income |
77 |
36 |
52 |
9 |
12 |
|
Share of associated undertakings' profit/(loss) after tax |
11 |
- |
8 |
- |
- |
|
Profit on disposal of subsidiaries, associated undertakings and strategic investments |
- |
- |
1 |
- |
8 |
|
Inter-segment revenues |
144 |
49 |
39 |
- |
12 |
|
Total revenue |
5,065 |
335 |
3,720 |
3,597 |
615 |
|
Expenses |
|
|
|
|
|
|
Claims and benefits (including change in insurance contract provisions) |
(2,981) |
- |
- |
(3,480) |
- |
|
Reinsurance recoveries |
39 |
- |
- |
95 |
- |
|
Net claims and benefits incurred |
(2,942) |
- |
- |
(3,385) |
- |
|
Change in investment contract liabilities |
(767) |
- |
- |
- |
- |
|
Losses on loans and advances |
- |
- |
(154) |
- |
- |
|
Finance costs |
- |
- |
- |
- |
- |
|
Banking interest payable and similar expenses |
- |
- |
(1,928) |
- |
- |
|
Fee and commission expense, and other acquisition costs |
(153) |
- |
- |
(102) |
(10) |
|
Other operating and administrative expenses |
(410) |
(153) |
(940) |
(54) |
(424) |
|
Change in third party interest in consolidated funds |
- |
- |
- |
- |
- |
|
Goodwill impairment |
- |
- |
- |
- |
- |
|
Amortisation of PVIF and other acquired intangibles |
- |
- |
- |
(24) |
- |
|
Inter-segment expenses |
(63) |
(84) |
(75) |
(13) |
- |
|
Total expenses |
(4,335) |
(237) |
(3,097) |
(3,578) |
(434) |
|
Profit/(loss) before tax |
730 |
98 |
623 |
19 |
181 |
|
Adjusting items |
(222) |
- |
(1) |
79 |
(19) |
|
Income tax attributable to policyholder returns |
(63) |
- |
- |
- |
- |
|
Adjusted operating profit/(loss) before tax |
445 |
98 |
622 |
98 |
162 |
3 Segment information continued
(ii) Income statement - segment information year ended 31 December 2007 continued
|
Europe |
Other |
Group |
|
|
£m |
|||
|
Long-term business |
Asset management |
Banking |
Asset management |
Corporate |
Inter-segment (revenues)/ expenses |
Total continuing operations |
Discontinued operations |
Total |
|
|
|
|
|
|
|
|
|
|
|
230 |
- |
- |
- |
- |
- |
4,941 |
625 |
5,566 |
|
(72) |
- |
- |
- |
- |
- |
(201) |
(92) |
(293) |
|
158 |
- |
- |
- |
- |
- |
4,740 |
533 |
5,273 |
|
2,019 |
- |
- |
- |
8 |
211 |
6,071 |
56 |
6,127 |
|
- |
- |
211 |
- |
- |
- |
3,190 |
- |
3,190 |
|
- |
- |
3 |
- |
- |
- |
170 |
- |
170 |
|
730 |
345 |
27 |
42 |
- |
- |
2,457 |
- |
2,457 |
|
8 |
23 |
2 |
3 |
- |
23 |
245 |
- |
245 |
|
- |
- |
- |
(3) |
(17) |
- |
(1) |
- |
(1) |
|
- |
- |
16 |
- |
- |
- |
25 |
- |
25 |
|
178 |
27 |
13 |
2 |
15 |
(512) |
(33) |
33 |
- |
|
3,093 |
395 |
272 |
44 |
6 |
(278) |
16,864 |
622 |
17,486 |
|
|
|
|
|
|
|
|
|
|
|
(151) |
- |
- |
- |
- |
- |
(6,612) |
(390) |
(7,002) |
|
50 |
- |
- |
- |
- |
- |
184 |
52 |
236 |
|
(101) |
- |
- |
- |
- |
- |
(6,428) |
(338) |
(6,766) |
|
(1,851) |
- |
- |
- |
- |
- |
(2,618) |
- |
(2,618) |
|
- |
- |
(3) |
- |
- |
- |
(157) |
- |
(157) |
|
- |
- |
- |
- |
(50) |
- |
(50) |
- |
(50) |
|
- |
- |
(125) |
- |
- |
- |
(2,053) |
- |
(2,053) |
|
(201) |
(103) |
- |
(11) |
- |
(70) |
(650) |
(110) |
(760) |
|
(468) |
(137) |
(80) |
(30) |
(56) |
(8) |
(2,760) |
(53) |
(2,813) |
|
- |
- |
- |
- |
- |
(156) |
(156) |
- |
(156) |
|
- |
- |
- |
- |
- |
- |
- |
(3) |
(3) |
|
(326) |
(5) |
(5) |
- |
- |
- |
(360) |
- |
(360) |
|
(73) |
(132) |
(32) |
(1) |
(3) |
512 |
36 |
(36) |
- |
|
(3,020) |
(377) |
(245) |
(42) |
(109) |
278 |
(15,196) |
(540) |
(15,736) |
|
73 |
18 |
27 |
2 |
(103) |
- |
1,668 |
82 |
1,750 |
|
152 |
8 |
(13) |
- |
(57) |
- |
(73) |
7 |
(66) |
|
3 |
- |
- |
- |
- |
- |
(60) |
- |
(60) |
|
228 |
26 |
14 |
2 |
(160) |
- |
1,535 |
89 |
1,624 |
3 Segment information continued
(iii) Gross earned premiums
|
Six months ended 30 June 2008 |
£m |
||||
|
South Africa |
United States |
Europe |
Other |
Total |
|
|
Long-term business - insurance contracts |
526 |
1,644 |
126 |
- |
2,296 |
|
Long-term business - investment contracts with |
|
|
|
|
|
|
discretionary participation features |
264 |
- |
- |
- |
264 |
|
Gross earned premiums |
790 |
1,644 |
126 |
- |
2,560 |
|
Long-term business - other investment contracts recognised as deposits |
597 |
116 |
3,938 |
- |
4,651 |
|
Six months ended 30 June 2007 |
£m |
||||
|
South Africa |
United States |
Europe |
Other |
Total |
|
|
Long-term business - insurance contracts |
518 |
1,355 |
117 |
- |
1,990 |
|
Long-term business - investment contracts with |
|
|
|
|
|
|
discretionary participation features |
212 |
- |
- |
- |
212 |
|
Gross earned premiums |
730 |
1,355 |
117 |
- |
2,202 |
|
Long-term business - other investment contracts recognised as deposits |
556 |
83 |
4,431 |
- |
5,070 |
|
Year ended 31 December 2007 |
£m |
||||
|
South Africa |
United States |
Europe |
Other |
Total |
|
|
Long-term business - insurance contracts |
1,048 |
3,148 |
230 |
- |
4,426 |
|
Long-term business - investment contracts with |
|
|
|
|
|
|
discretionary participation features |
515 |
- |
- |
- |
515 |
|
Gross earned premiums |
1,563 |
3,148 |
230 |
- |
4,941 |
|
Long-term business - other investment contracts recognised as deposits |
1,315 |
177 |
8,450 |
- |
9,942 |
3 Segment information continued
(iv) Funds under management
|
At 30 June 2008 |
£m |
||||
|
South Africa |
United States |
Europe |
Other |
Total |
|
|
Long-term business policyholder funds |
18,808 |
13,937 |
42,665 |
167 |
75,577 |
|
Unit trusts and mutual funds |
5,639 |
4,878 |
13,249 |
2,346 |
26,112 |
|
Third party client funds |
9,317 |
141,613 |
- |
3,453 |
154,383 |
|
Total client funds under management |
33,764 |
160,428 |
55,914 |
5,966 |
256,072 |
|
Shareholder funds |
1,838 |
176 |
1,348 |
- |
3,362 |
|
Total funds under management |
35,602 |
160,604 |
57,262 |
5,966 |
259,434 |
|
At 30 June 2007 |
£m |
||||
|
South Africa |
United States |
Europe |
Other |
Total |
|
|
Long-term business policyholder funds |
20,195 |
14,056 |
42,496 |
72 |
76,819 |
|
Unit trusts and mutual funds |
5,782 |
5,577 |
11,703 |
2,468 |
25,530 |
|
Third party client funds |
12,480 |
138,470 |
1,926 |
4,064 |
156,940 |
|
Total client funds under management |
38,457 |
158,103 |
56,125 |
6,604 |
259,289 |
|
Shareholder funds |
2,167 |
233 |
1,437 |
- |
3,837 |
|
Total funds under management |
40,624 |
158,336 |
57,562 |
6,604 |
263,126 |
|
At 31 December 2007 |
£m |
||||
|
South Africa |
United States |
Europe |
Other |
Total |
|
|
Long-term business policyholder funds |
22,469 |
14,822 |
44,674 |
122 |
82,087 |
|
Unit trusts and mutual funds |
6,693 |
5,260 |
14,416 |
2,535 |
28,904 |
|
Third party client funds |
10,517 |
149,850 |
- |
3,833 |
164,200 |
|
Total client funds under management |
39,679 |
169,932 |
59,090 |
6,490 |
275,191 |
|
Shareholder funds |
2,042 |
191 |
1,454 |
- |
3,687 |
|
Total funds under management |
41,721 |
170,123 |
60,544 |
6,490 |
278,878 |
4 Operating profit adjusting items
(i) Summary of adjusting items
In determining the adjusted operating profit of the Group adjustments are made to profit before tax to reflect the directors' view of the underlying long-term performance of the Group. These items are summarised below:
|
|
|
|
|
|
|
£m |
|
Six months ended 30 June 2008 |
Notes |
South Africa |
United States |
Europe |
Corporate |
Total |
|
Income/(expense) |
|
|
|
|
|
|
|
Goodwill impairment and impact of acquisition accounting |
4(ii) |
- |
(13) |
(114) |
- |
(127) |
|
Profit/(loss) on disposal of subsidiaries, associated undertakings and strategic |
4(iii) |
(12) |
(1) |
75 |
- |
62 |
|
Short-term fluctuations in investment return |
4(iv) |
77 |
(82) |
9 |
- |
4 |
|
Investment return adjustment for Group equity and debt instruments held in life |
4(v) |
150 |
- |
- |
- |
150 |
|
Dividends declared to holders of perpetual preferred callable securities |
4(vi) |
- |
- |
- |
22 |
22 |
|
US Asset Management equity plans and minority holders |
4(viii) |
- |
5 |
- |
- |
5 |
|
Fair value gains on Group debt instruments |
4(ix) |
- |
- |
- |
40 |
40 |
|
Total adjusting items |
|
215 |
(91) |
(30) |
62 |
156 |
|
Tax on adjusting items |
5(iii) |
(8) |
(7) |
18 |
(17) |
(14) |
|
Minority interest in adjusting items |
|
13 |
(5) |
- |
- |
8 |
|
Total adjusting items after tax and minority interests |
|
220 |
(103) |
(12) |
45 |
150 |
|
|
|
|
|
|
|
£m |
|
Six months ended 30 June 2007 |
Notes |
South Africa |
United States |
Europe |
Corporate |
Total |
|
Income/(expense) |
|
|
|
|
|
|
|
Goodwill impairment and impact of acquisition accounting |
4(ii) |
- |
(18) |
(92) |
- |
(110) |
|
Profit on disposal of subsidiaries, associated undertakings and strategic |
4(iii) |
1 |
6 |
- |
- |
7 |
|
Short-term fluctuations in investment return |
4(iv) |
125 |
(17) |
7 |
- |
115 |
|
Investment return adjustment for Group equity and debt instruments held in life |
4(v) |
2 |
- |
- |
- |
2 |
|
Dividends declared to holders of perpetual preferred callable securities |
4(vi) |
- |
- |
- |
22 |
22 |
|
Closure of unclaimed shares trusts |
4(vii) |
- |
- |
- |
(12) |
(12) |
|
Total adjusting items |
|
128 |
(29) |
(85) |
10 |
24 |
|
Tax on adjusting items |
5(iii) |
(23) |
10 |
17 |
(7) |
(3) |
|
Minority interest in adjusting items |
|
11 |
- |
- |
- |
11 |
|
Total adjusting items after tax and minority interests |
|
116 |
(19) |
(68) |
3 |
32 |
4 Operating profit adjusting items continued
(i) Summary of adjusting items continued
|
|
|
|
|
|
|
£m |
|
Year ended 31 December 2007 |
Notes |
South Africa |
United States |
Europe |
Corporate |
Total |
|
Income/(expense) |
|
|
|
|
|
|
|
Goodwill impairment and impact of acquisition accounting |
4(ii) |
- |
(24) |
(218) |
- |
(242) |
|
Profit on disposal of subsidiaries, associated undertakings and strategic |
4(iii) |
1 |
8 |
16 |
- |
25 |
|
Short-term fluctuations in investment return |
4(iv) |
195 |
(55) |
55 |
- |
195 |
|
Investment return adjustment for Group equity and debt instruments held in life |
4(v) |
14 |
- |
- |
- |
14 |
|
Dividends declared to holders of perpetual preferred callable securities |
4(vi) |
- |
- |
- |
40 |
40 |
|
Closure of unclaimed shares trusts |
4(vii) |
13 |
- |
- |
(12) |
1 |
|
US Asset Management equity plans and minority holders |
4(viii) |
- |
11 |
- |
- |
11 |
|
Fair value gains on Group debt instruments |
4(ix) |
- |
- |
- |
29 |
29 |
|
Total adjusting items |
|
223 |
(60) |
(147) |
57 |
73 |
|
Tax on adjusting items |
5(iii) |
(101) |
30 |
51 |
(9) |
(29) |
|
Minority interest in adjusting items |
|
23 |
(11) |
- |
- |
12 |
|
Total adjusting items after tax and minority interests |
|
145 |
(41) |
(96) |
48 |
56 |
(ii) Goodwill impairment and impact of acquisition accounting
In applying acquisition accounting in accordance with IFRS deferred acquisition costs and deferred revenue are not recognised. These are reversed in the acquisition balance sheet and replaced by goodwill, other intangible assets and the value of the acquired present value of in-force business ('acquired PVIF'). In determining its adjusted operating profit the Group recognises deferred revenue and acquisition costs in relation to policies sold by acquired businesses pre-acquisition, and excludes the impairment of goodwill and the amortisation of acquired other intangibles and acquired PVIF.
Goodwill impairment and acquisition accounting adjustments to adjusted operating profit are summarised below:
|
|
|
|
|
|
|
£m |
|
Six months ended 30 June 2008 |
|
South Africa |
United States |
Europe |
Corporate |
Total |
|
Amortisation of acquired PVIF |
|
|
|
|
|
|
|
Long-term business |
|
- |
13 |
126 |
- |
139 |
|
Amortisation of acquired deferred costs and revenue |
|
|
|
|
|
|
|
Long-term business |
|
- |
- |
(45) |
- |
(45) |
|
Amortisation of other acquired intangible assets |
|
|
|
|
|
|
|
Long-term business |
|
- |
- |
32 |
- |
32 |
|
Asset management |
|
- |
- |
2 |
- |
2 |
|
Banking |
|
- |
- |
3 |
- |
3 |
|
Release of acquisition balance sheet provisions |
|
|
|
|
|
|
|
Long-term business |
|
- |
- |
(4) |
- |
(4) |
|
|
|
- |
13 |
114 |
- |
127 |
4 Operating profit adjusting items continued
(ii) Goodwill impairment and impact of acquisition accounting continued
|
|
|
|
|
|
|
£m |
|
Six months ended 30 June 2007 |
|
South Africa |
United States |
Europe |
Corporate |
Total |
|
Amortisation of acquired PVIF |
|
|
|
|
|
|
|
Long-term business |
|
- |
18 |
132 |
- |
150 |
|
Amortisation of acquired deferred costs and revenue |
|
|
|
|
|
|
|
Long-term business |
|
- |
- |
(65) |
- |
(65) |
|
Asset management |
|
- |
- |
3 |
- |
3 |
|
Amortisation of other acquired intangible assets |
|
|
|
|
|
|
|
Long-term business |
|
- |
- |
29 |
- |
29 |
|
Asset management |
|
- |
- |
2 |
- |
2 |
|
Banking |
|
- |
- |
2 |
- |
2 |
|
Release of acquisition balance sheet provisions |
|
|
|
|
|
|
|
Long-term business |
|
- |
- |
(7) |
- |
(7) |
|
Asset management |
|
- |
- |
(2) |
- |
(2) |
|
Banking |
|
- |
- |
(2) |
- |
(2) |
|
|
|
- |
18 |
92 |
- |
110 |
|
|
|
|
|
|
|
£m |
|
Year ended 31 December 2007 |
|
South Africa |
United States |
Europe |
Corporate |
Total |
|
Amortisation of acquired PVIF |
|
|
|
|
|
|
|
Long-term business |
|
- |
24 |
266 |
- |
290 |
|
Amortisation of acquired deferred costs and revenue |
|
|
|
|
|
|
|
Long-term business |
|
- |
- |
(112) |
- |
(112) |
|
Asset management |
|
- |
- |
6 |
- |
6 |
|
Amortisation of other acquired intangible assets |
|
|
|
|
|
|
|
Long-term business |
|
- |
- |
60 |
- |
60 |
|
Asset management |
|
- |
- |
5 |
- |
5 |
|
Banking |
|
- |
- |
5 |
- |
5 |
|
Release of acquisition balance sheet provisions |
|
|
|
|
|
|
|
Long-term business |
|
- |
- |
(7) |
- |
(7) |
|
Asset management |
|
- |
- |
(3) |
- |
(3) |
|
Banking |
|
- |
- |
(2) |
- |
(2) |
|
|
|
- |
24 |
218 |
- |
242 |
4 Operating profit adjusting items continued
(iii) Profit on disposal of subsidiaries, associated undertakings and strategic investments
On 11 June 2008, the Group completed the disposal of its controlling shareholding in Palladyne, a European asset management business, resulting in a profit on disposal of £17 million.
Part of the Europe banking business, Skandia's Nordic vehicle finance operation, SkandiaBanken Bilfinans, was sold during the six months ended 30 June 2008, resulting in a profit on disposal of £58 million.
During 2007 the Europe banking subsidiary sold its Danish operation. An accounting profit on sale of £16 million was recognised. The US Asset Management business disposed of its interests in certain affiliate asset managers, resulting in a profit on disposal of £8 million in 2007.
The Group has closed its project to develop a direct financial services capability in South Africa due to adverse market conditions. Costs relating to the closure amounting to £13 million have been excluded from the adjusted operating profit.
Profits on the disposal of subsidiaries, associated undertakings and strategic investments are analysed below:
|
|
|
|
|
|
|
£m |
|
Six months ended 30 June 2008 |
|
South Africa |
United States |
Europe |
Corporate |
Total |
|
Long-term business |
|
(13) |
- |
- |
- |
(13) |
|
Asset management |
|
- |
(1) |
17 |
- |
16 |
|
Banking |
|
1 |
- |
58 |
- |
59 |
|
|
|
|
|
|
|
£m |
|
Six months ended 30 June 2007 |
|
South Africa |
United States |
Europe |
Corporate |
Total |
|
Long-term business |
|
1 |
6 |
- |
- |
7 |
|
|
|
|
|
|
|
£m |
|
Year ended 31 December 2007 |
|
South Africa |
United States |
Europe |
Corporate |
Total |
|
Long-term business |
|
- |
8 |
- |
- |
8 |
|
Banking |
|
1 |
- |
16 |
- |
17 |
(iv) Long-term investment return
Profit before tax includes actual investment returns earned on the shareholder assets of the Group. Adjusted operating profit is stated after recalculating shareholder asset investment returns based on a long-term investment return rate. The difference between the actual and the long-term investment returns are short-term fluctuations in investment return.
Long-term rates of return are based on achieved real rates of return appropriate to the underlying asset base, adjusted for current inflation expectations and consensus economic investment forecasts, and are reviewed frequently, usually annually, for appropriateness. These rates of return have been selected with a view to ensuring that returns credited to adjusted operating profit are consistent with the actual returns expected to be earned over the long-term.
For the South Africa long-term business, the return is applied to an average value of investible shareholders' assets. For US and Europe long-term businesses, the return is applied to average investible assets.
For all businesses mis-matches attributed to the timing of the recognition of policyholder tax and related receipts from policyholders are eliminated with reference to the historic net gains/(losses) in respect of this item.
|
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 |
Year ended 31 December 2007 |
|
South Africa long-term business |
16.6% |
15.6% |
15.6% |
|
United States long-term business |
5.9% |
6.0% |
5.7% |
|
Europe long-term business |
4.8% |
4.8% |
4.9% |
4 Operating profit adjusting items continued
(iv) Long-term investment return continued
Analysis of short-term fluctuations in investment return
|
|
|
|
|
|
|
£m |
|
Six months ended 30 June 2008 |
|
South Africa |
United States |
Europe |
Corporate |
Total |
|
Long-term business |
|
|
|
|
|
|
|
Actual investment return attributable to shareholders |
|
197 |
90 |
14 |
- |
301 |
|
Less: long-term investment return |
|
(120) |
(172) |
(5) |
- |
(297) |
|
Total short-term fluctuations in investment return |
|
77 |
(82) |
9 |
- |
4 |
|
|
|
|
|
|
|
£m |
|
Six months ended 30 June 2007 |
|
South Africa |
United States |
Europe |
Corporate |
Total |
|
Long-term business |
|
|
|
|
|
|
|
Actual investment return attributable to shareholders |
|
229 |
309 |
10 |
- |
548 |
|
Less: long-term investment return |
|
(104) |
(326) |
(3) |
- |
(433) |
|
Total short-term fluctuations in investment return |
|
125 |
(17) |
7 |
- |
115 |
|
|
|
|
|
|
|
£m |
|
Year ended 31 December 2007 |
|
South Africa |
United States |
Europe |
Corporate |
Total |
|
Long-term business |
|
|
|
|
|
|
|
Actual investment return attributable to shareholders |
|
416 |
527 |
61 |
- |
1,004 |
|
Less: long-term investment return |
|
(221) |
(582) |
(6) |
- |
(809) |
|
Total short-term fluctuations in investment return |
|
195 |
(55) |
55 |
- |
195 |
The actual investment return attributable to shareholders for the US long-term business reflects total investment income, as a distinction is not drawn between shareholder and policyholder funds.
(v) Investment return adjustment for Group equity and debt instruments held in life funds
Adjusted operating profit includes investment returns on policyholder investments in Group equity and debt instruments by the Group's life funds. These include investments in the Company's ordinary shares, and the subordinated liabilities and ordinary securities of the Group's South Africa banking subsidiary. These investment returns are eliminated within the consolidated income statement in arriving at profit before tax, but are included in adjusted operating profit. For the six months ended 30 June 2008 the investment return adjustment decreased adjusted operating profit by £150 million (six months ended 30 June 2007: decrease of £2 million, year ended 31 December 2007: decrease of £14 million).
(vi) Dividends declared to holders of perpetual preferred callable securities
Dividends declared to the holders of the Group's perpetual preferred callable securities were £22 million for the six months ended 30 June 2008 (six months ended 30 June 2007: £22 million, year ended 31 December 2007: £40 million). These are recognised in finance costs on an accruals basis for the purpose of determining adjusted operating profit. In the IFRS financial statements this cost is recognised in equity.
4 Operating profit adjusting items continued
(vii) Closure of unclaimed shares trusts
During 2006 Old Mutual announced the closure of the Old Mutual South Africa Unclaimed Shares Trust (UST) and similar trusts set up in Namibia, Zimbabwe, Malawi and Bermuda. Proceeds of sale of the Old Mutual plc shares held by those trusts were remitted to Old Mutual plc in 2006 and 2007. Old Mutual intends to use substantially all of the proceeds realised to discharge late claims in cash for a further period of three years (to 31 August 2009), to fund good causes in the jurisdictions of the trust concerned or to enhance benefits for certain specific groups of policyholders of the Group's South African and Namibian life businesses. Provisions are held in this regard.
During 2007 payments of the proceeds were made by the trusts to Old Mutual plc. These payments resulted in the realisation of foreign exchange losses of £14 million in the year ended 31 December 2007. Furthermore, as a result of remeasurement of certain provisions for obligations, an amount of £13 million was released in the year ended 31 December 2007. Consistent with the treatment of the original sales proceeds and costs in 2006, these amounts were excluded from adjusted operating profit. During 2008 the capital gains payable by the unclaimed share trusts were settled.
(viii) US Asset Management equity plans and minority interests
During 2007, US Asset Management entered into a number of new long-term incentive arrangements with certain of its asset management affiliates.
In accordance with IFRS requirements the cost of these schemes is disclosed as being attributable to minority interests. However, this is treated as a compensation expense in determining adjusted operating profit. The amount recognised in relation to this for the six months ended 30 June 2008 was £5 million (six months ended 30 June 2007: nil, year ended 31 December 2007: £11 million).
The Group has issued put options to employees as part of some of its US affiliate incentive schemes. The impact of revaluing these instruments is recognised in accordance with IFRS, but excluded from adjusted operating profit. As at 30 June 2008 these instruments were revalued, the impact of which was less than £1 million (six months ended 30 June 2007: less than £1 million, year ended 31 December 2007: less than £1 million).
(ix) Fair value gains/losses on Group debt instruments
The significant widening of credit spreads since the second half of 2007 has led to a reduction in the market price of the Group's debt instruments. This decline in market price has resulted in a gain of £40 million (six months ended 30 June 2007: nil, year ended 31 December 2007: £29 million gain) being recorded in the Group's income statement for those instruments that are recorded at fair value.
In the directors' view, these gains are not reflective of the underlying performance of the Group and will reverse over time. The gains/losses have therefore been excluded from adjusted operating profit.
5 Income tax expense
|
(i) Analysis of total income tax expense |
|
|
£m |
|
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 Restated |
Year ended |
|
Current tax |
|
|
|
|
United Kingdom tax - Corporation tax |
96 |
56 |
436 |
|
- Double tax relief |
(93) |
(28) |
(399) |
|
Overseas tax - South Africa |
129 |
117 |
379 |
|
- United States |
(7) |
7 |
26 |
|
- Europe |
39 |
30 |
73 |
|
Secondary Tax on Companies (STC) |
4 |
5 |
65 |
|
Prior year adjustments |
18 |
2 |
(25) |
|
Total current tax |
186 |
189 |
555 |
|
Deferred tax |
|
|
|
|
Origination of temporary differences |
(45) |
97 |
(58) |
|
Changes in tax rates/bases |
(5) |
(11) |
(13) |
|
Write down/(recognition) of deferred tax assets |
27 |
1 |
(5) |
|
Total deferred tax |
(23) |
87 |
(76) |
|
Total income tax expense |
163 |
276 |
479 |
|
(ii) Reconciliation of total income tax expense |
|
|
£m |
|
|
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 Restated |
Year ended |
|
|
Profit before tax |
835 |
851 |
1,668 |
|
|
Tax at standard average rate of 28.5% (2007: 30%) |
238 |
255 |
500 |
|
|
Different tax rate or basis on overseas operations |
8 |
(7) |
(20) |
|
|
Untaxed and low taxed income |
(128) |
(69) |
(154) |
|
|
Disallowable expenses |
23 |
17 |
88 |
|
|
Net movement on deferred tax assets not recognised |
34 |
(5) |
(38) |
|
|
Effect on deferred tax of changes in tax rates |
(5) |
(10) |
(18) |
|
|
STC |
41 |
11 |
47 |
|
|
Income tax attributable to policyholder returns |
(46) |
81 |
51 |
|
|
Other |
(2) |
3 |
23 |
|
|
Total income tax expense |
163 |
276 |
479 |
|
|
(iii) Income tax on adjusted operating profit |
|
|
£m |
|
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 Restated |
Year ended |
||
|
Total income tax expense |
163 |
276 |
479 |
|
|
Tax on adjusting items |
|
|
|
|
|
Impact of acquisition accounting |
20 |
22 |
65 |
|
|
Profit on disposal of subsidiaries, associated undertakings and strategic investments |
1 |
- |
(10) |
|
|
Short-term fluctuations in investment return |
(18) |
(18) |
(40) |
|
|
Income tax attributable to policyholders returns |
66 |
(106) |
(60) |
|
|
STC on dividends paid |
- |
- |
(35) |
|
|
Tax on dividends declared to holders of perpetual preferred callable securities recognised in equity |
(6) |
(7) |
(9) |
|
|
Fair value gains on group debt instruments |
(11) |
- |
- |
|
|
Income tax on adjusted operating profit |
215 |
167 |
390 |
|
6 Earnings and earnings per share
(i) Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the profit for the financial period attributable to ordinary equity shareholders by the weighted average number of ordinary shares in issue during the period excluding own shares held in policyholder funds, ESOP trusts, Black Economic Empowerment trusts and other related undertakings.
|
|
|
|
£m |
|
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 |
Year ended 31 December 2007 |
|
Profit for the financial period attributable to equity holders of the parent from continuing |
539 |
456 |
929 |
|
Profit for the financial period attributable to equity holders of the parent from discontinued |
10 |
27 |
43 |
|
Profit for the financial period attributable to equity holders of the parent |
549 |
483 |
972 |
|
Dividends declared to holders of perpetual preferred callable securities |
(16) |
(15) |
(31) |
|
Profit attributable to ordinary equity holders |
533 |
468 |
941 |
Total dividends declared to holders of perpetual preferred callable securities of £22 million (six months ended 30 June 2007: £22 million, year ended 31 December 2007: £40 million) for the six months ended 30 June 2008 are stated net of tax credits of £6 million (six months ended 30 June 2007: £7 million, year ended 31 December 2007: £9 million).
|
|
|
|
£m |
|
|
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 |
Year ended 31 December 2007 |
|
|
Weighted average number of ordinary shares in issue |
5,311 |
5,503 |
5,492 |
|
|
Shares held in charitable foundations |
(21) |
(20) |
(20) |
|
|
Shares held in ESOP trusts |
(45) |
(76) |
(61) |
|
|
Adjusted weighted average number of ordinary shares |
5,245 |
5,407 |
5,411 |
|
|
Shares held in life funds |
(239) |
(292) |
(282) |
|
|
Shares held in Black Economic Empowerment trusts |
(235) |
(235) |
(235) |
|
|
Weighted average number of ordinary shares |
4,771 |
4,880 |
4,894 |
|
|
Basic earnings per ordinary share from continuing operations (pence) |
11.0 |
9.0 |
18.3 |
|
|
Basic earnings per ordinary share from discontinued operations (pence) |
0.2 |
0.6 |
0.9 |
|
|
Basic earnings per ordinary share (pence) |
11.2 |
9.6 |
19.2 |
|
Diluted earnings per share recognises the dilutive impact of share options held in ESOP trusts and Black Economic Empowerment trusts which are currently in the money in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full period.
|
|
|
|
Millions
|
|
|
|
6 months ended
30 June
2008
|
6 months ended
30 June
2007
|
Year ended
31 December 2007
|
|
|
Weighted average number of ordinary shares
|
4,771
|
4,880
|
4,894
|
|
|
Adjustments for share options held by ESOP trusts
|
51
|
69
|
63
|
|
|
Adjustments for shares held in Black Economic Empowerment trusts
|
235
|
235
|
235
|
|
|
|
5,057
|
5,184
|
5,192
|
|
|
Diluted earnings per ordinary share from continuing operations (pence)
|
10.3
|
8.5
|
17.3
|
|
|
Diluted earnings per ordinary share from discontinued operations (pence)
|
0.2
|
0.5
|
0.8
|
|
|
Diluted earnings per ordinary share (pence)
|
10.5
|
9.0
|
18.1
|
|
6 Earnings and earnings per share continued
(ii) Adjusted operating earnings per ordinary share
Adjusted operating earnings per ordinary share is determined based on adjusted operating profit. Adjusted operating profit represents the directors' view of the underlying long-term performance of the Group. For long-term and general insurance business adjusted operating profit is based on a long-term investment return. It includes investment returns on life funds' investments in Group equity and debt instruments and is 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 minority interests in accordance with IFRS. For all businesses, adjusted operating profit excludes goodwill impairment, the impact of acquisition accounting, revaluations of put options 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, income/(expense) from closure of unclaimed shares trusts and fair value gains on Group debt instruments.
The reconciliation of profit for the financial period to adjusted operating profit after tax attributable to ordinary equity holders is as follows:
|
£m |
||||
|
|
|
Continuing |
Discontinued |
|
|
Six months ended 30 June 2008 |
|
operations |
operations |
Total |
|
Profit for the financial period attributable to equity holders of the parent |
|
539 |
10 |
549 |
|
Adjusting items |
|
(156) |
10 |
(146) |
|
Tax on adjusting items |
|
14 |
- |
14 |
|
Minority interest on adjusting items |
|
(8) |
(4) |
(12) |
|
Adjusted operating profit after tax attributable to ordinary equity holders |
|
389 |
16 |
405 |
|
Adjusted weighted average number of ordinary shares (millions) |
|
|
|
5,245 |
|
Adjusted operating earnings per ordinary share (pence) |
|
7.4 |
0.3 |
7.7 |
|
|
|
|
|
£m |
|
Six months ended 30 June 2007 |
|
Continuing |
Discontinued |
|
|
|
operations |
operations |
Total |
|
|
Profit for the financial period attributable to equity holders of the parent |
|
456 |
27 |
483 |
|
Adjusting items |
|
(24) |
(11) |
(35) |
|
Tax on adjusting items |
|
3 |
1 |
4 |
|
Minority interest on adjusting items |
|
(11) |
1 |
(10) |
|
Adjusted operating profit after tax attributable to ordinary equity holders |
|
424 |
18 |
442 |
|
Adjusted weighted average number of ordinary shares (millions) |
|
|
|
5,407 |
|
Adjusted operating earnings per ordinary share (pence) |
|
7.8 |
0.4 |
8.2 |
|
£m |
||||
|
|
|
Continuing |
Discontinued |
|
|
Year ended 31 December 2007 |
|
operations |
operations |
Total |
|
Profit for the financial year attributable to equity holders of the parent |
|
929 |
43 |
972 |
|
Adjusting items |
|
(73) |
7 |
(66) |
|
Tax on adjusting items |
|
29 |
(3) |
26 |
|
Minority interest on adjusting items |
|
(12) |
(6) |
(18) |
|
Adjusted operating profit after tax attributable to ordinary equity holders |
|
873 |
41 |
914 |
|
Adjusted weighted average number of ordinary shares (millions) |
|
|
|
5,411 |
|
Adjusted operating earnings per ordinary share (pence) |
|
16.1 |
0.8 |
16.9 |
7 Dividends
Dividends declared and paid were as follows:
|
|
|
|
|
£m |
|
|
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 |
Year ended 31 December 2007 |
|
2006 Final dividend paid - 4.15p per 10p share |
|
- |
218 |
218 |
|
2007 Interim dividend paid - 2.3p per 10p share |
|
- |
- |
115 |
|
2007 Final dividend paid - 4.55p per 10p share |
|
227 |
- |
- |
|
Dividends to ordinary equity holders |
|
227 |
218 |
333 |
|
Dividends declared to holders of perpetual preferred callable securities |
|
22 |
22 |
40 |
|
Dividend payments for the period |
|
249 |
240 |
373 |
Dividends paid to ordinary equity holders, as above, are calculated using the number of shares in issue at the record date, less treasury shares held in ESOP trusts, life funds of Group companies, Black Economic Empowerment trusts and related undertakings.
As a consequence of the exchange control arrangements in place in certain African territories, dividends to ordinary equity holders on the branch registers of those countries (or, in the case of Namibia, the Namibian section of the principal register) are settled through Dividend Access Trusts established for that purpose.
The directors have declared a 2008 interim dividend of 2.45p per share (2007 interim: 2.3p per share), which will be paid on 28 November 2008 to all ordinary equity holders on the register at the close of business on 7 November 2008, being the record date for the dividend. In accordance with IFRS requirements, no provision has been recognised in respect of this dividend.
In March 2008, £22 million was declared and paid to holders of perpetual preferred callable securities (March 2007: £22 million, November 2007: £18 million).
8 Discontinued operations, assets and liabilities held-for-sale
Discontinued operations
The results of the Group's South Africa general insurance business, Mutual & Federal, are shown as a discontinued operation in these interim financial statements. The Group is actively seeking a buyer for Mutual & Federal which is expected to result in the sale of a controlling interest in Mutual & Federal.
An analysis of the results of Mutual & Federal is shown in the segmental income statement in note 3 to the Group financial statements. Further analysis of the results of discontinued operations is given below.
(i) Reconciliation of adjusted operating profit from discontinued operations to profit after tax from discontinued operations
|
|
|
|
£m |
|
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 |
Year ended 31 December 2007 |
|
Adjusted operating profit from discontinued operations |
28 |
36 |
89 |
|
Adjusting items from discontinued operations |
(10) |
11 |
(7) |
|
Profit for the financial year before tax from discontinued operations |
18 |
47 |
82 |
|
Income tax expense on discontinued operations |
(5) |
(11) |
(25) |
|
Profit for the financial period after tax on discontinued operations |
13 |
36 |
57 |
(ii) Adjusting items from discontinued operations
|
|
|
|
£m |
|
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 |
Year ended 31 December 2007 |
|
Goodwill impairment and impact of acquisition accounting |
- |
(1) |
(3) |
|
Short-term fluctuations in investment return |
(10) |
12 |
(4) |
|
Total adjusting items from discontinued operations |
(10) |
11 |
(7) |
|
Tax on adjusting items |
- |
(1) |
3 |
|
Minority interest in adjusting items |
4 |
(1) |
6 |
|
Adjusting items from discontinued operations after tax and minority interests |
(6) |
9 |
2 |
8 Discontinued operations, assets and liabilities held-for-sale continued
(iii) Adjusted operating profit from discontinued operations attributable to ordinary equity holders
|
|
|
|
£m |
|
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 |
Year ended 31 December 2007 |
|
Adjusted operating profit from discontinued operations |
28 |
36 |
89 |
|
Tax on adjusted operating profit from discontinued operations |
(5) |
(10) |
(28) |
|
Adjusted operating profit after tax from discontinued operations |
23 |
26 |
61 |
|
Minority interests - ordinary shares |
(7) |
(8) |
(20) |
|
Adjusted operating profit after tax from discontinued operations attributable to ordinary equity holders |
16 |
18 |
41 |
(iv) Net cash flows from discontinued operations
|
|
|
|
£m |
|
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 |
Year ended 31 December 2007 |
|
Operating activities |
15 |
67 |
66 |
|
Investing activities |
(10) |
(48) |
(28) |
|
Financing activities |
7 |
(32) |
(61) |
|
Net cash inflow/(outflow) |
12 |
(13) |
(23) |
(v) Non-current assets held-for-sale
|
|
|
|
£m |
|
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 |
Year ended 31 December 2007 |
|
Loans and advances |
3 |
365 |
994 |
|
Investments and securities |
327 |
144 |
359 |
|
Other assets |
197 |
39 |
232 |
|
Derivative financial instruments |
- |
3 |
- |
|
Cash and cash equivalents |
39 |
22 |
32 |
|
|
566 |
573 |
1,617 |
(vi) Non-current liabilities held-for-sale
|
|
|
|
£m |
|
|
6 months ended 30 June 2008 |
6 months ended 30 June 2007 |
Year ended 31 December 2007 |
|
General insurance liabilities |
291 |
- |
299 |
|
Amounts owed to other depositors |
- |
502 |
- |
|
Other liabilities |
77 |
51 |
115 |
|
|
368 |
553 |
414 |
Europe vehicle finance business
Skandia's Nordic vehicle finance operation, SkandiaBanken Bilfinans, was sold to DnB NOR during the six months ended 30 June 2008. As at 31 December 2007 the assets and liabilities were classified as held-for-sale.
South Africa general insurance business
The assets and liabilities of Mutual & Federal have been shown as non-current assets and liabilities held-for-sale as at 30 June 2008 and 31 December 2007.
9 Borrowed funds
|
|
|
|
|
£m |
|
Notes |
At 30 June 2008 |
At 30 June 2007 Restated |
At 31 December 2007 |
|
|
Senior debt securities and term loans |
9(i) |
449 |
570 |
461 |
|
Mortgage backed securities |
9(ii) |
91 |
- |
103 |
|
Subordinated debt securities |
9(iii) |
1,696 |
1,731 |
1,789 |
|
Borrowed funds |
|
2,236 |
2,301 |
2,353 |
.
(i) Senior debt securities and term loans
|
|
|
|
£m |
|
At 30 June 2008 |
At 30 June 2007 Restated |
At 31 December 2007 |
|
|
Floating rate notes1 |
75 |
147 |
151 |
|
Fixed rate notes2 |
46 |
57 |
44 |
|
Revolving credit facility3 |
192 |
249 |
161 |
|
Term loan and other loans |
23 |
11 |
26 |
|
Investment fund borrowings |
113 |
106 |
79 |
|
Total senior debt securities and term loans |
449 |
570 |
461 |
Senior debt securities and term loans comprise:
1 Floating rate notes:
- £12 million note repayable in December 2010, with holders having the option to elect for early redemption every 6 months with coupon referenced against 6 month LIBOR less 0.50%.
- US$150 million repayable September 2014 at 3 month LIBOR plus 0.63%, repaid 9 June 2008.
- US$50 million repayable September 2011 at 3 month LIBOR plus 0.50%.
- US$10 million repayable September 2009 at 3 month LIBOR plus 0.35%.
- SEK100 million repayable March 2009 at 3 month STIBOR plus 0.20%.
- €22 million repayable January 2010 at 3 month EURIBOR plus 0.35%.
- SEK50 million repayable March 2010 at 3 month STIBOR plus 0.38%.
2 Fixed rate notes:
- €30 million Euro bond repayable July 2010, capital and interest swapped into fixed rate US Dollars at 5.28%.
- €10 million Euro bond repayable December 2010, capital and interest swapped into floating rate US Dollars at 3 month LIBOR plus 0.95%.
- €20 million Euro bond repayable August 2013, capital and interest swapped into floating rate US Dollars at 3 month LIBOR plus 1.30%.
The total fair value of the swap derivatives associated with the Senior Notes is £11 million (six months ended 30 June 2007: £5 million, year ended 31 December 2007: £8 million).
3 Revolving credit facility
The Group has a £1,250 million five year multi-currency revolving credit facility, which had an original maturity date of September 2010. On 18 August 2007 syndicate banks agreed to extend the maturity date of £1,232 million until September 2012. At 30 June 2008 £443 million (six months ended 30 June 2007: £424 million, year ended 31 December 2007: £413 million) of this facility was utilised, £192 million (six months ended 30 June 2007: £249 million, year ended 31 December 2007: £161million) in the form of drawn debt and £264 million (six months ended 30 June 2007: £175 million, year ended 31 December 2007: £252m) in the form of irrevocable letters of credit.
(ii) Mortgage backed securities
|
|
|
|
£m |
|
|
At 30 June 2008 |
At 30 June 2007 |
At 31 December 2007 |
|
R291 million notes (class A1) repayable 18 November 2039 (11.467%)1 |
19 |
- |
21 |
|
R1.4 billion notes (class A2A) repayable 18 November 2039 (11.817%)1 |
64 |
- |
73 |
|
R98 million notes (class B note) repayable 18 November 2039 (12.067%)1 |
5 |
- |
5 |
|
R76 million notes (class C note) repayable 18 November 2039 (12.317%)1 |
3 |
- |
4 |
|
|
91 |
- |
103 |
1 Issued on 10 December 2007 by the Group's South African banking business and are callable on 18 November 2012.
9 Borrowed funds continued
(iii) Subordinated debt securities
|
|
|
|
£m |
|
At 30 June 2008 |
At 30 June 2007 |
At 31 December 2007 |
|
|
Banking |
|
|
|
|
US$18 million repayable 31 August 2009 (6 month LIBOR less 1.5%)1 |
9 |
9 |
9 |
|
R4.0 billion repayable 9 July 2012 (13.0%) - Repaid |
- |
300 |
- |
|
R1.5 billion repayable 24 April 2016 (7.85%)2 |
86 |
100 |
103 |
|
R1.8 billion repayable 20 September 2018 (9.84%)3 |
107 |
131 |
135 |
|
R515 million repayable on 4 December 2008 (13.5%)4 |
33 |
38 |
39 |
|
R500 million repayable on 30 December 2010 (8.38%)5 |
28 |
34 |
34 |
|
R650 million repayable 8 February 2017 (9.03%)6 |
39 |
46 |
47 |
|
R1.7 billion repayable 8 February 2019 (8.9%)7 |
98 |
119 |
123 |
|
R2.0 billion repayable 6 July 2022 (3 month JIBAR plus 0.47%)8 |
132 |
- |
151 |
|
R500 million repayable 15 August 2017 (3 month JIBAR plus 0.45%)9 |
33 |
- |
37 |
|
R1.0 billion repayable 17 September 2015 (10.54%)10 |
61 |
- |
77 |
|
R500 million repayable 14 December 2017 (3 month JIBAR plus 0.70%)11 |
32 |
- |
37 |
|
R120 million repayable 14 December 2017 (10.38%)12 |
7 |
- |
9 |
|
R487 million repayable 20 November 2018 (15.05%)13 |
30 |
- |
- |
|
R700 million repayable 20 November 2018 (JIBAR plus 4.75%)14 |
46 |
- |
- |
|
|
741 |
777 |
801 |
|
Other |
|
|
|
|
R3.0 billion repayable 27 October 2020 (8.9%)15 |
193 |
212 |
220 |
|
£300 million repayable 21 January 2016 (5.0%)16 |
273 |
286 |
291 |
|
R250 million preference shares repayable 9 June 201117 |
16 |
18 |
18 |
|
€750 million repayable 18 January 2017 (4.5%)18 |
522 |
492 |
519 |
|
|
1,004 |
1,008 |
1,048 |
|
|
|
|
|
|
Less: banking subordinated debt securities held by other Group companies |
(49) |
(54) |
(60) |
|
Total subordinated liabilities |
1,696 |
1,731 |
1,789 |
The subordinated notes rank behind the claims against the Group depositors and other unsecured, unsubordinated creditors. None of the Group's subordinated notes are secured.
1 This instrument is matched either by advances to clients or covered against exchange rate fluctuations
2 Unsecured secondary callable note was issued 24 April 2005 with a call date of 24 April 2011
3 Unsecured secondary callable note was issued 20 September 2006 at R1.5bn with a call date of 20 September 2013. On 18 May 2007 an additional R0.3bn was issued.
4 Unsecured callable bonds issued 10 June 2002
5 Unsecured callable bonds issued 30 March 2006
6 Unsecured secondary callable note was issued 8 February 2007 with a call date of 8 February 2012
7 Unsecured secondary callable note was issued 8 February 2007 at R1.0bn. On 19 March 2007 an additional R0.7bn was issued.
8 Unsecured secondary capital callable note issued 6 July 2007 and has a call date of 6 July 2017
9 This bond issued on 15 August 2007 is an unsecured secondary capital callable floating rate note with a call date 15 August 2012
10 This bond issued on 17 September 2007 is an unsecured fixed rate note with a term of 13 years (non-call 8).
11 This bond issued on 14 December 2007 is a 10 year (non-call 5) floating rate note. After its call date on 14 December 2012 its terms become JIBAR plus 1.70%
until maturity.
12 This bond issued on 14 December 2007 is a 10 year (non-call 5) fixed rate note. After its call date its terms become floating 3 month JIBAR plus initial margin over
mid swaps plus 1.0% until maturity.
13 This bond issued on 20 May 2008 is a perpetual (non-call 10 year) fixed rate note with a call date on 20 November 2018
14 This bond issue on 20 May 2008 is a perpetual (non-call 10 year) floating rate note with a call date of 20 November 2018
15 These bonds have a maturity date of 27 October 2020 and pay a coupon of 8.92% to 27 October 2015 and 3 month JIBAR plus 1.59% thereafter. The Group has
the option to repay the bonds at par on 27 October 2015 and at 3 monthly intervals thereafter.
16 These bonds, issued on 20 January 2006, have a maturity date of 21 January 2016 and pay a coupon of 5.0% to 21 January 2011 and 6 month LIBOR plus
1.13% thereafter. The coupon on the bonds was swapped into floating rate of 6 month STIBOR+0.50%. The Group has the option to repay the bonds at par on 21
January 2011 and at 6 monthly intervals thereafter.
17 These preference shares are redeemable on 9 June 2011 and pay a variable cumulative coupon of 61.0% of the Prime Rate as quoted by Nedbank Limited. The
Group has the option to redeem the shares at par at any time before the final redemption date but after giving an agreed period of notice.
18 This bond, issued on 16 January 2007, has a maturity date of 18 January 2017 and pays a coupon of 4.5 per cent to 17 January 2012 and six month EURIBOR plus 0.96 per cent thereafter. The principal and coupon on the bond was swapped equally into Sterling and US Dollars with coupons of six month LIBOR plus 0.3425 per cent and six month US LIBOR plus 0.3095 per cent respectively. The Group has the option to repay the bonds at par on 17 January 2012 and at six monthly intervals thereafter.
10 Commitments and contingent liabilities
|
|
|
|
£m |
|
|
At |
At |
At |
|
|
30 June |
30 June |
31 December |
|
|
2008 |
2007 |
2007 |
|
Guarantees and assets pledged as collateral security |
1,315 |
1,361 |
1,489 |
|
Irrevocable letters of credit |
286 |
398 |
426 |
|
Secured lending |
1,038 |
804 |
1,052 |
|
Other contingent liabilities |
151 |
296 |
136 |
Nedbank structured financing
Historically a number of the Group's South Africa banking businesses entered into structured finance transactions with third parties using the tax base of these companies. Pursuant to the terms of the majority of these transactions, the underlying third party has contractually agreed to accept the risk of any tax being imposed by the South African Revenue Service (SARS), although the obligation to pay in the first instance rests with the Group's companies. It is only in limited cases where, for example, the credit quality of a client becomes doubtful, or where the client has specifically contracted out of the re-pricing of additional taxes, that the recovery from a client could be less than the liability that could arise on assessment, in which case provisions are made. SARS has examined the tax aspects of some of these types of structures and SARS could assess these structures in a manner different to that initially envisaged by the contracting parties. As a result Group companies could be obliged to pay additional amounts to SARS and recover these from clients under the applicable contractual arrangements.
Skandia Liv
Livfösäkringsaktiebolaget Skandia (publ) (Skandia Liv) has submitted claims to Skandia relating to compensation for alleged prohibited profit distributions. These distributions relate to the sale of Skandia Liv's asset management business by Skandia to Den Norske Bank in 2002. The dispute is in arbitration, a ruling is expected in the latter part of 2008.
American Skandia
The sale of American Skandia to Prudential Financial contained customary representations and warranties. The indemnity in respect of this is limited to US$1 billion. Investigations by various US regulators have given rise to potential settlements and claims in relation to market timing. American Skandia's exposure to market timing is part of a wider investigation of the US industry. The exposure is covered by the aforementioned indemnity which also covers the matter of American Skandia's failure to administer the annuitisation provisions contained in certain contracts. This was an administrative error made by the American Skandia business between 1996 and 2003.
The exposures referred to above as Skandia Liv and American Skandia have been provided for in the acquisition accounting.
11 Post balance sheet events
On 1 July 2008, Rogge Global Partners acquired ING Ghent which has funds under management of $1.5 billion.
This information is provided by RNS
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