Interim Results - Part 3 (MCE
Old Mutual Market Consistent Embedded Value basis supplementary information
For the six months ended 30 June 2009
|
|
|
|
|
£m |
|||
|
Statement of earnings on a Group Market Consistent Embedded Value basis |
Notes |
6 months ended 30 June 2009 |
6 months |
Year ended 31 December |
|||
|
Long Term Savings Covered business |
|
488 |
612 |
578 |
|||
|
Asset management |
|
(7) |
37 |
42 |
|||
|
Banking |
|
8 |
14 |
23 |
|||
|
|
|
489 |
663 |
643 |
|||
|
Nedbank Banking |
|
211 |
337 |
575 |
|||
|
Mutual and Federal General insurance |
|
20 |
28 |
76 |
|||
|
US Asset Management Asset management |
|
30 |
70 |
97 |
|||
|
Bermuda Covered business |
|
85 |
(113) |
(254) |
|||
|
Other operating segments Finance costs |
|
(47) |
(71) |
(140) |
|||
|
Other shareholders' expenses |
|
(33) |
(12) |
(19) |
|||
|
Adjusted operating Group MCEV earnings before tax* |
|
755 |
902 |
978 |
|||
|
Adjusting items |
5 |
530 |
(343) |
(2,037) |
|||
|
Total Group MCEV earnings for the financial period before tax |
|
1,285 |
559 |
(1,059) |
|||
|
Income tax attributable to shareholders |
|
(143) |
(109) |
13 |
|||
|
Total Group MCEV earnings after tax for the financial period |
|
1,142 |
450 |
(1,046) |
|||
|
Total Group MCEV earnings for the financial period attributable to: |
|
|
|
|
|||
|
Equity holders of the parent |
|
1,047 |
316 |
(1,284) |
|||
|
Non-controlling interests Ordinary shares |
|
61 |
108 |
184 |
|||
|
Preferred securities |
|
34 |
26 |
54 |
|||
|
Total Group MCEV earnings after tax for the financial period |
|
1,142 |
450 |
(1,046) |
|||
|
Basic total Group MCEV earnings per ordinary share (pence) |
|
21.0 |
6.3 |
(25.7) |
|||
|
Weighted average number of shares - millions |
|
4,996 |
5,010 |
4,995 |
|||
* For long-term business and general insurance businesses, adjusted operating MCEV earnings is based on short-term and long-term investment returns respectively, 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 non-controlling interests in accordance with IFRS. For all businesses, adjusted operating MCEV earnings excludes goodwill impairment, the impact of acquisition accounting, put revaluations related to long-term incentive schemes, the impact of closure of unclaimed shares trusts, profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments, dividends declared to holders of perpetual preferred callable securities, and fair value (profits)/losses on certain Group debt movements.
|
Total Group MCEV earnings per share |
|
|
|
£m |
|
Notes |
6 months |
6 months |
Year ended 31 December |
|
|
Adjusted operating Group MCEV earnings after tax attributable to ordinary equity holders |
|
|
|
|
|
Adjusted operating Group MCEV earnings before tax |
|
755 |
902 |
978 |
|
Tax on adjusted operating Group MCEV earnings |
4(ii) |
(183) |
(227) |
(135) |
|
Adjusted operating Group MCEV earnings after tax |
|
572 |
675 |
843 |
|
Non-controlling interests |
|
|
|
|
|
Ordinary shares |
|
(70) |
(120) |
(214) |
|
Preferred securities |
|
(34) |
(26) |
(54) |
|
Adjusted operating Group MCEV earnings after tax attributable to ordinary equity holders |
|
468 |
529 |
575 |
|
|
|
|
|
|
|
Adjusted operating Group MCEV earnings per share* (pence) |
|
8.9 |
10.1 |
11.0 |
|
Adjusted weighted average number of shares - millions |
|
5,232 |
5,245 |
5,230 |
* Adjusted operating Group MCEV earnings per share is calculated on the same basis as adjusted operating Group MCEV earnings, but is stated after tax and non-controlling interests. It excludes income attributable to Black Economic Empowerment trusts of listed subsidiaries. The calculation of the adjusted weighted average number of shares includes own shares held in policyholders' funds and Black Economic Empowerment trusts.
|
£m |
|||||||
|
Reconciliation of movements in Group Market Consistent Embedded Value (Group MCEV) (after tax) |
6 months ended 30 June 2009 |
6 months ended 30 June 2008 |
|||||
|
|
Notes |
Covered business MCEV |
Non-covered business IFRS |
Total Group MCEV |
Covered business MCEV |
Non-covered business IFRS |
Total Group MCEV |
|
Opening Group MCEV |
|
4,183 |
1,079 |
5,262 |
6,349 |
1,010 |
7,359 |
|
Adjusted operating MCEV earnings |
|
466 |
2 |
468 |
357 |
172 |
529 |
|
Non-operating MCEV earnings |
|
590 |
(11) |
579 |
(327) |
114 |
(213) |
|
Total Group MCEV earnings |
|
1,056 |
(9) |
1,047 |
30 |
286 |
316 |
|
Other movements in net equity |
6 |
117 |
175 |
292 |
(641) |
(226) |
(867) |
|
Closing Group MCEV |
|
5,356 |
1,245 |
6,601 |
5,738 |
1,070 |
6,808 |
|
£m |
||||
|
|
Year ended 31 December 2008 |
|||
|
|
Notes |
Covered business MCEV |
Non-covered business IFRS |
Total Group MCEV |
|
Opening Group MCEV |
|
6,349 |
1,010 |
7,359 |
|
Adjusted operating MCEV earnings |
|
133 |
442 |
575 |
|
Non-operating MCEV earnings |
|
(2,270) |
411 |
(1,859) |
|
Total Group MCEV earnings |
|
(2,137) |
853 |
(1,284) |
|
Other movements in net equity |
6 |
(29) |
(784) |
(813) |
|
Closing Group MCEV |
|
4,183 |
1,079 |
5,262 |
Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
|
|
|
|
|
|
|
£m |
|
Components of Group Market Consistent Embedded Value (Group MCEV) |
Notes |
At |
|
At 2008 |
|
At 2008 |
|
Adjusted net worth attributable to ordinary equity holders of the parent |
|
3,860 |
|
3,100 |
|
3,462 |
|
Equity |
|
7,731 |
|
7,802 |
|
7,737 |
|
Adjustment to include long-term business on a statutory solvency basis: |
|
|
|
|
|
|
|
Long Term Savings |
7 |
(2,167) |
|
(2,987) |
|
(2,244) |
|
Bermuda |
7 |
(27) |
|
11 |
|
(217) |
|
Adjustment for market value of life funds' investments in Group equity and debt instruments held in life funds |
|
235 |
|
230 |
|
173 |
|
Adjustment to remove perpetual preferred callable securities and accrued dividends |
|
(688) |
|
(688) |
|
(688) |
|
Adjustment to exclude acquisition goodwill from the covered business: |
|
|
|
|
|
|
|
Long Term Savings |
7 |
(1,224) |
|
(1,268) |
|
(1,299) |
|
Value of in-force business |
|
2,741 |
|
3,708 |
|
1,800 |
|
Present value of future profits |
|
3,481 |
|
4,449 |
|
2,580 |
|
Additional time value of financial options and guarantees |
|
(127) |
|
(215) |
|
(261) |
|
Frictional costs |
|
(199) |
|
(190) |
|
(148) |
|
Cost of residual non-hedgeable risks |
|
(414) |
|
(336) |
|
(371) |
|
|
|
|
|
|
|
|
|
Group MCEV |
|
6,601 |
|
6,808 |
|
5,262 |
|
Group MCEV value per share (pence) |
|
125.1 |
|
129.1 |
|
99.7 |
|
Return on Group MCEV (RoEV) per annum |
|
14.8% |
|
14.6% |
|
7.8% |
|
Number of shares in issue at the end of the period less treasury shares - millions |
|
5,277 |
|
5,275 |
|
5,277 |
The adjustments to include long-term business on a statutory solvency basis reflect the difference between the net worth of each business on the statutory basis (as required by the local regulator) and their portion of the Group's consolidated equity shareholders' funds. In South Africa, these values exclude items that are eliminated or shown separately on consolidation (such as Nedbank, Mutual & Federal and intercompany loans). For some European territories the value excludes the write-off of deferred acquisition costs which remain part of adjusted net worth for MCEV purposes.
The RoEV is calculated as the adjusted operating Group MCEV earnings after tax and non-controlling interests of £468 million (year ended 31 December 2008: £575 million; six months ended 30 June 2008: £533 million) divided by the opening Group MCEV. The operating assumption changes of £26 million (year ended 31 December 2008: £(430) million; six months ended 30 June 2008: £20 million) and other operating variances of £128 million (year ended 31 December 2008: £55 million; six months ended 30 June 2008: £(38) million) are not annualised.
|
|
|
|
|
|
|
£m |
|
Components of Adjusted Group Market Consistent Embedded Value (Group MCEV) |
Notes |
At 2009 |
|
At |
|
At 2008 |
|
Group MCEV |
|
6,601 |
|
6,808 |
|
5,262 |
|
Pro forma adjustments to bring Group investments to market value |
|
|
|
|
|
|
|
Adjustment to bring listed subsidiaries to market value |
|
133 |
|
111 |
|
68 |
|
Nedbank |
|
78 |
|
25 |
|
41 |
|
Mutual and Federal |
|
55 |
|
86 |
|
27 |
|
Adjustment for value of own shares in ESOP schemes* |
|
57 |
|
83 |
|
63 |
|
Adjustment for present value of Black Economic Empowerment scheme deferred consideration |
|
194 |
|
158 |
|
169 |
|
Adjustment to bring external debt to market value |
|
604 |
|
241 |
|
645 |
|
Adjusted Group MCEV |
4(i) |
7,589 |
|
7,401 |
|
6,207 |
|
Adjusted Group MCEV per share (pence) |
|
143.8 |
|
140.3 |
|
117.6 |
|
Number of shares in issue at the end of the period less treasury shares - millions |
|
5,277 |
|
5,275 |
|
5,277 |
* Includes adjustment for value of excess own shares in employee share scheme trusts. The movement in value between 31 December 2008 and 30 June 2009 is due to a reduction in excess own shares following employee share grants in March 2009.
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
1 Basis of preparation
The Old Mutual Market Consistent Embedded Value methodology (referred to herein and in the supplementary statements on pages 83 to 120 as 'MCEV') adopts Market Consistent Embedded Value Principles (Copyright © Stichting CFO Forum Foundation 2008) issued in June 2008 by the CFO Forum ('the Principles') as the basis for the methodology used in preparing the supplementary information. The directors acknowledge their responsibility for the preparation of this supplementary information. The Principles have been fully complied with for all businesses for the six months ended 30 June 2009 and the position at that date, with the exception of the use of adjusted risk free reference rates due to current market conditions for US Life Onshore business ('US Life') and Old Mutual South Africa's (OMSA) Retail Affluent Immediate annuity business. From 31 December 2008 the Group has replaced the European Embedded Value ('EEV') basis with the MCEV basis for the covered business, with figures for the 6 months ended 30 June 2008 having been restated accordingly.
The Principles were designed during a period of relatively stable market conditions and in turbulent markets their application could lead to misleading results. In December 2008 the CFO Forum announced that they are reviewing the Principles and guidance of the application of these Principles to address the notion of market consistency in the current dislocated market conditions. The particular areas under review include implied volatilities, the cost of residual non-hedgeable risks, the use of swap rates as a proxy for risk free reference rates and the effect of liquidity premiums. In respect of the 30 June 2009 disclosure, Old Mutual has made an adjustment to the risk free reference rates used in determining the value of the US Life business and OMSA's Retail Affluent Immediate annuity business, to take account of the liquidity component of corporate bond spreads that is evident in the market as at that date. The Directors consider this adjustment to be necessary so as to maintain consistency with current market prices and therefore to ensure a meaningful basis of reporting the value of the Group's life and related businesses. Hence, Old Mutual plc does not comply with Principle 14 and Guideline 14.4, in respect of the 30 June 2009 disclosure for the US Life business and OMSA's Retail Affluent Immediate annuity business, which does not allow any adjustments to be made to the swap yield curve to allow for liquidity premiums. This approach will be reviewed for use in future reporting periods once the CFO Forum has completed its own review on the application of Principle 14. The 30 June 2009 MCEV disclosure in respect of all other business complies fully with the Principles.
This supplementary information provides details on the methodology, assumptions and results of the MCEV for the Old Mutual Group and includes conversion of comparative supplementary information for the 6 months ended 30 June 2008, previously prepared on the EEV basis, to an MCEV basis. Any changes in the methodology and assumptions made in presenting this supplementary information compared to those disclosed in the annual report and accounts 2008 are set out in notes 2 and 3. Further detailed commentary of the key changes from an EEV to MCEV methodology and the impact of the transition from EEV to MCEV reporting on results for the 6 months ended 30 June 2008 are provided in notes 12 to 18.
The segmental results for Europe include the Skandia Life companies in the United Kingdom, Nordic region, Europe and Latin America. The segmental results for OMSA include Namibia.
Throughout the supplementary information the following terminology is used to distinguish between the terms 'MCEV', 'Group MCEV' and 'adjusted Group MCEV':
● MCEV is a measure of the consolidated value of shareholders' interests in the covered business and consists of the sum of the shareholders' adjusted net worth in respect of the covered business and the value of the in-force covered business
● Group MCEV is a measure of the consolidated value of shareholders' interests in covered and non-covered business and therefore includes the value of all non-covered business at the unadjusted IFRS net asset value detailed in the primary financial statements
● The Adjusted Group MCEV, a measure used by the directors to assess the shareholders' interest in the value of the Group, includes the impact of marking all debt to market value, the market value of the Group's listed banking and general insurance subsidiaries as well as marking the value of deferred consideration due in respect of Black Economic Empowerment arrangements in South Africa ('the BEE schemes') to market.
2 Methodology
Coverage
Following the sale by OMSA of the remaining stake in Nedlife to Nedbank, Nedlife is excluded from covered business from 2009 onwards although it is still included in comparative results for prior periods.
Required capital
The table below shows the level of required capital expressed as a percentage of the minimum local regulatory capital requirements.
|
£m |
|||||
|
|
Total |
OMSA |
Europe |
US Life* |
Bermuda* |
|
30 June 2009 |
|
|
|
|
|
|
Required capital (a) |
2,302 |
1,105 |
395 |
523 |
279 |
|
Regulatory capital (b) |
1,293 |
850 |
233 |
210 |
- |
|
Ratio (a/b) |
1.8 |
1.3 |
1.7 |
2.5 |
n/a |
|
30 June 2008 |
|
|
|
|
|
|
Required capital (a) |
1,815 |
1,040 |
342 |
390 |
43 |
|
Regulatory capital (b) |
1,139 |
765 |
215 |
159 |
- |
|
Ratio (a/b) |
1.6 |
1.4 |
1.6 |
2.5 |
n/a |
|
31 December 2008 |
|
|
|
|
|
|
Required capital (a) |
2,025 |
1,070 |
371 |
550 |
34 |
|
Regulatory capital (b) |
1,259 |
819 |
229 |
211 |
- |
|
Ratio (a/b) |
1.6 |
1.3 |
1.6 |
2.6 |
n/a |
* The regulatory capital for US Life and Bermuda at 31 December 2008 has been restated from £245 million to £211 million.
Cost of residual non-hedgeable risks
The cost of residual non-hedgeable risks ('CNHR') is derived by projecting the economic capital held in respect of these non-hedgeable risks into the future and calculating the present value after applying a cost of 2% to this capital, at a business unit level, without allowing for group diversification benefits. The economic capital projected is based on the figure determined for the prior 6 month period; thus the December 2008 CNHR is based on the June 2008 economic capital, which was calculated with reference to EEV. The June 2009 CNHR is based on the December 2008 economic capital, which was based on MCEV for the first time. This has led to a step change in the calculation for all business units. The impact of this step change varies across business units, being smallest in OMSA, and largest in the Skandia business units. To the extent that this change affected operating earnings, the impact is shown under 'other operating variance'.
The table below shows the amounts of diversified economic capital held in respect of residual non-hedgeable risks.
|
£m |
|||||
|
|
Total |
OMSA |
Europe |
US Life* |
Bermuda* |
|
30 June 2009 |
2,569 |
503 |
1,007 |
549 |
510 |
|
30 June 2008 |
1,938 |
403 |
756 |
434 |
345 |
|
31 December 2008 |
2,207 |
457 |
720 |
513 |
517 |
* The total capital held in respect of non-hedgeable risks for US Life and Bermuda at 31 December 2008 has been restated from £826 million to £1,030 million
In addition to the change in the underlying basis used for assessing Economic Capital from an EEV to MCEV basis, the increase in capital held in respect of residual non-hedgeable risks for Europe from £720 million at 31 December 2008 to £1,007 million at 30 June 2009 is largely caused by an increase in the economic capital held for persistency risk in light of the turbulent economic market conditions.
Taxation
The value of in-force business (VIF) in respect of Royal Skandia at 30 June 2009 assumes that all future profits will be taxed in the UK, currently at 28%, on payment of dividends to Skandia UK. The UK Finance Act 2009, which introduces an exemption from tax on qualifying dividends, was substantively enacted on the 8th July 2009. This will permit removal of the allowance for tax on dividends which is expected to increase the VIF by approximately £166m, in the second half of 2009.
New business and renewals
The market consistent value of new business (VNB) is calculated using economic assumptions at the start of the reporting period, except for OMSA's Non-Profit Annuities and Fixed Bond products where point of sale assumptions are used.
3 Assumptions
Non-economic assumptions
The management expenses attributable to life assurance business have been analysed between expenses relating to the acquisition of new business, maintenance of in-force business (including investment management expenses) and development projects.
Unallocated Group holding company expenses have been included to the extent that they relate to the covered business. The future expenses attributable to life assurance business include 33 per cent of the Group holding company expenses, with 15 per cent allocated to Europe, 14 per cent allocated to OMSA, 4 per cent allocated to US Life and Bermuda (31 December 2008: 35 per cent of the Group holding company expenses, with 17 per cent allocated to Europe, 14 per cent allocated to OMSA, 4 per cent allocated to US Life and Bermuda; 30 June 2008: 36 per cent of the Group holding Company expenses, with 18 per cent allocated to Europe, 14 per cent allocated to OMSA, 4 per cent allocated to US Life and Bermuda ). The allocation of these expenses aligns to the proportion that the management expenses incurred by the business bears to the total management expenses incurred in the Group.
Legislative changes were introduced in Germany in 2008 specifying the proportion of miscellaneous profits to be shared with policyholders. According to the regulations, the revenue on in-force business can be reduced by various expense items, including those costs arising in respect of new business acquisition expenses in any year. From 31 December 2008 Skandia Leben in Germany performs modelling by setting best estimate assumptions for the amount to be shared with policyholders in future years after allowing for the acquisition expenses in relation to the new business expected to be written over the next three years.
Economic assumptions
Risk free reference rates and inflation
Following a review of a wide range of market data and literature, such as the Barrie & Hibbert calibration of US corporate bond spreads at 30 June 2009, it is the directors' view that a significant proportion of corporate bond spreads is attributable to a liquidity premium rather than credit and default risk and that returns in excess of swap rates can be achieved, rather than entire corporate bond spreads being lost to worsening default experience. For the US Life business and OMSA's Retail Affluent Immediate annuity business we considered the currency, credit quality and duration of our actual corporate bond portfolio and derived adjusted risk free reference rates at 30 June 2009 by adding 175bps of liquidity premium to swap rates used for setting investment return and discounting assumptions for the US LIfe business (31 December 2008: 300bps; 30 June 2008: 125bps) and adding 50bps of liquidity premium to swap rates used for setting investment return and discounting assumptions for OMSA's Retail Affluent Immediate annuity business (31 December 2008 and 30 June 2008: zero allowance). These adjustments reflect the liquidity premium component in corporate bond spreads over swap rates that we expect to earn on our portfolio. We believe that the differences between market yields on our US Life and OMSA's Retail Affluent bond portfolios and the adjusted risk free reference rates still provide adequate implied margins for defaults. No liquidity adjustment is applied for other geographies.
When the liquidity premium adjustment was calibrated and introduced for US Life business at 31 December 2008, similar research was not yet concluded for South Africa to estimate the quantum of the liquidity premiums inherent in South African corporate bond spreads. In addition, the impact of a liquidity premium adjustment on US Life business was far more material than for OMSA's Retail Affluent Immediate annuity business as the concentration of investments in the corporate bond market is far greater and the widening of corporate bond spreads has been more pronounced in the US compared to other geographies. Hence the application of any liquidity premium adjustment was initially focussed on the US and such an adjustment is introduced for OMSA at 30 June 2009 to have consistency of methodology.
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
The risk free reference spot yields (excluding any applicable liquidity adjustments) and expense inflation rates at various terms for each of the significant geographies are provided in the table below. The risk free reference spot yield curve has been derived from mid swap rates at the reporting date.
|
|
||||
|
Risk free reference spot yields |
1 year |
5 years |
10 years |
20 years |
|
30 June 2009 |
|
|
|
|
|
GBP |
2.0 |
3.7 |
4.0 |
2.9 |
|
EUR |
1.4 |
2.9 |
3.7 |
4.3 |
|
USD |
0.9 |
2.9 |
3.7 |
4.1 |
|
ZAR |
7.7 |
9.0 |
9.2 |
7.9 |
|
SEK |
1.0 |
2.9 |
3.9 |
4.2 |
|
30 June 2008 |
|
|
|
|
|
GBP |
6.3 |
6.1 |
5.7 |
5.2 |
|
EUR |
5.3 |
5.1 |
5.0 |
5.1 |
|
USD |
3.3 |
4.3 |
4.7 |
4.9 |
|
ZAR |
13.4 |
12.5 |
11.6 |
10.4 |
|
SEK |
5.5 |
5.5 |
5.3 |
5.1 |
|
31 December 2008 |
|
|
|
|
|
GBP |
2.0 |
3.1 |
3.4 |
3.5 |
|
EUR |
2.4 |
3.3 |
3.8 |
3.9 |
|
USD |
1.3 |
2.1 |
2.6 |
2.8 |
|
ZAR |
9.3 |
8.0 |
7.8 |
6.7 |
|
SEK |
1.8 |
2.9 |
3.2 |
3.2 |
|
|
||||
|
Expense inflation |
1 year |
5 years |
10 years |
20 years |
|
30 June 2009 |
|
|
|
|
|
GBP |
0.1 |
1.9 |
2.9 |
4.2 |
|
EUR |
2.3-3.0 |
2.3-3.0 |
2.3-3.0 |
2.3-3.0 |
|
USD |
3.0 |
3.0 |
3.0 |
3.0 |
|
ZAR |
5.9 |
7.2 |
7.4 |
6.2 |
|
SEK |
1.3 |
2.5 |
3.0 |
2.7 |
|
30 June 2008 |
|
|
|
|
|
GBP |
4.9 |
4.7 |
4.7 |
5.1 |
|
EUR |
2.5-3.5 |
2.5-3.5 |
2.5-3.5 |
2.5-3.5 |
|
USD |
3.0 |
3.0 |
3.0 |
3.0 |
|
ZAR |
9.3 |
10.0 |
9.5 |
8.6 |
|
SEK |
3.7 |
3.5 |
3.5 |
3.5 |
|
31 December 2008 |
|
|
|
|
|
GBP |
0.1 |
1.5 |
2.8 |
4.1 |
|
EUR |
2.0-3.0 |
2.0-3.0 |
2.0-3.0 |
2.0-3.0 |
|
USD |
3.0 |
3.0 |
3.0 |
3.0 |
|
ZAR |
6.1 |
5.4 |
5.5 |
4.6 |
|
SEK |
0.2 |
1.0 |
1.8 |
2.1 |
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
3 Assumptions continued
Volatilities
The at-the-money annualised asset volatility assumptions of the asset classes incorporated in the stochastic models are detailed below.
|
|
||||
|
ZAR volatilities * |
Option term |
|||
|
1 year |
5 years |
10 years |
20 years |
|
|
30 June 2009 |
|
|
|
|
|
1 year swap |
18.6 |
18.5 |
18.0 |
16.4 |
|
5 year swap |
17.3 |
17.6 |
17.3 |
15.7 |
|
10 year swap |
16.6 |
17.3 |
16.7 |
15.1 |
|
20 year swap |
16.8 |
17.3 |
16.1 |
14.0 |
|
Equity (total return index) |
27.4 |
26.3 |
26.5 |
27.4 |
|
Property (total return index) |
17.3 |
15.7 |
14.1 |
14.5 |
|
30 June 2008 |
|
|
|
|
|
1 year swap |
15.1 |
14.2 |
13.8 |
13.5 |
|
5 year swap |
15.1 |
14.1 |
13.7 |
13.3 |
|
10 year swap |
15.2 |
14.1 |
13.5 |
13.1 |
|
20 year swap |
15.5 |
14.1 |
13.3 |
12.6 |
|
Equity (total return index) |
24.9 |
24.1 |
24.3 |
25.9 |
|
Property (total return index) |
16.8 |
14.5 |
13.1 |
13.9 |
|
31 December 2008 |
|
|
|
|
|
1 year swap |
30.8 |
35.1 |
32.9 |
25.4 |
|
5 year swap |
32.9 |
33.6 |
30.2 |
22.5 |
|
10 year swap |
30.8 |
30.3 |
25.9 |
18.7 |
|
20 year swap |
26.9 |
25.1 |
19.8 |
13.9 |
|
Equity (total return index) |
37.6 |
31.6 |
29.2 |
28.1 |
|
Property (total return index) |
23.2 |
19.0 |
15.6 |
15.4 |
* Due to limited liquidity in the ZAR swaption and equity option market, the market consistent asset model as at 31 December 2008 has been calibrated by extrapolating swaption and equity option implied volatility data beyond terms of 2 years and 3 years respectively.
|
|
||||
|
USD volatilities |
Option term |
|||
|
1 year |
5 years |
10 years |
20 years |
|
|
30 June 2009 |
|
|
|
|
|
1 year swap |
61.3 |
27.8 |
20.8 |
16.1 |
|
5 year swap |
41.9 |
26.5 |
19.6 |
15.6 |
|
10 year swap |
37.8 |
25.0 |
19.3 |
15.0 |
|
20 year swap |
33.0 |
22.4 |
16.9 |
13.7 |
|
30 June 2008 |
|
|
|
|
|
1 year swap |
36.8 |
21.7 |
16.9 |
13.8 |
|
5 year swap |
28.7 |
20.2 |
16.2 |
13.5 |
|
10 year swap |
23.4 |
18.7 |
15.2 |
13.0 |
|
20 year swap |
19.9 |
16.7 |
13.8 |
11.5 |
|
31 December 2008* |
|
|
|
|
|
1 year swap |
44.9 |
23.9 |
18.3 |
16.1 |
|
5 year swap |
34.1 |
22.8 |
17.9 |
16.0 |
|
10 year swap |
27.7 |
21.2 |
17.1 |
15.4 |
|
20 year swap |
24.7 |
20.1 |
16.3 |
14.5 |
* Due to limited liquidity in the USD swap market, the market consistent asset model as at 31 December 2008 has been calibrated by reference to volatility data as at 30 September 2008.
|
|
|
||
|
International equity volatilities |
Option term |
||
|
1 year |
5 years |
10 years |
|
|
30 June 2009 |
|
|
|
|
SPX |
26 |
27 |
22 |
|
RTY |
33 |
39 |
29 |
|
TPX |
29 |
27 |
29 |
|
HSCEI |
39 |
34 |
38 |
|
TWY |
31 |
30 |
29 |
|
KOSP12 |
27 |
27 |
28 |
|
NIFTY |
32 |
27 |
30 |
|
SX5E |
30 |
26 |
27 |
|
UKX |
27 |
26 |
25 |
|
EEM |
35 |
31 |
37 |
|
USAgg |
5 |
5 |
5 |
|
EUAgg |
12 |
12 |
12 |
|
APAgg |
11 |
11 |
11 |
|
30 June 2008 |
|
|
|
|
SPX |
26 |
27 |
22 |
|
RTY |
33 |
39 |
29 |
|
TPX |
29 |
27 |
29 |
|
HSCEI |
39 |
34 |
38 |
|
TWSE |
31 |
30 |
29 |
|
KOSP12 |
27 |
27 |
28 |
|
NIFTY |
32 |
27 |
30 |
|
SX5E |
30 |
26 |
27 |
|
UKX |
27 |
26 |
25 |
|
31 December 2008 |
|
|
|
|
SPX |
38 |
35 |
27 |
|
RTY |
46 |
45 |
34 |
|
TPX |
41 |
39 |
31 |
|
HSCEI |
57 |
51 |
43 |
|
TWSE |
36 |
34 |
30 |
|
KOSP12 |
42 |
43 |
36 |
|
NIFTY |
39 |
33 |
31 |
|
SX5E |
38 |
37 |
31 |
|
UKX |
37 |
36 |
28 |
|
BCAI |
4 |
4 |
4 |
* These volatilities refer to price indices. Due to ongoing enhancements in the fund mapping process, the indices referenced will vary from period to period.
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
3 Assumptions continued
Tax
The effective tax rate for Europe was a range of 0 to 32 per cent (31 December 2008: 2 to 31 per cent; 30 June 2008: 3 to 30 per cent).
The effective tax rate for OMSA (excluding Namibia) and Namibia were 31 and 0 per cent respectively (31 December 2008: 33 and 0 per cent respectively; 30 June 2008: 34 and 0 per cent respectively), except for the investment return on capital for which the attributed tax was derived from the primary accounts.
For US Life the effective tax rate was 0 per cent (31 December 2008: 0 per cent; 30 June 2008: 0 per cent).
For Bermuda the effective tax rate was 0 per cent (31 December 2008: 1 per cent; 30 June 2008: 1 per cent).
4 (i) Adjusted Group Market Consistent Embedded Value presented per business line
|
|
|
|
|
|
£m |
|
|
At 30 June |
|
At 30 June |
|
At |
|
MCEV of the covered business |
5,356 |
|
5,738 |
|
4,183 |
|
Adjusted net worth* |
2,615 |
|
2,030 |
|
2,383 |
|
Value of in-force business** |
2,741 |
|
3,708 |
|
1,800 |
|
Adjusted net worth of the asset management businesses |
1,714 |
|
1,705 |
|
1,577 |
|
OMSA |
199 |
|
233 |
|
292 |
|
Europe |
200 |
|
175 |
|
98 |
|
US Asset Management |
1,315 |
|
1,297 |
|
1,187 |
|
Value of the banking business |
2,208 |
|
1,666 |
|
1,976 |
|
Europe (adjusted net worth) |
259 |
|
231 |
|
285 |
|
Nedbank (market value) |
1,949 |
|
1,435 |
|
1,691 |
|
Market value of the general insurance business Mutual and Federal |
272 |
|
268 |
|
219 |
|
Net other business (including Asia Pacific) |
(237) |
|
14 |
|
(161) |
|
Adjustment for present value of Black Economic Empowerment scheme deferred consideration |
194 |
|
158 |
|
169 |
|
Adjustment for value of own shares in ESOP schemes*** |
57 |
|
83 |
|
63 |
|
Perpetual preferred securities (US$ denominated) |
(292) |
|
(350) |
|
(203) |
|
Perpetual preferred callable securities |
(273) |
|
(585) |
|
(304) |
|
GBP denominated |
(125) |
|
(275) |
|
(174) |
|
Euro denominated |
(148) |
|
(310) |
|
(130) |
|
Debt |
(1,410) |
|
(1,296) |
|
(1,312) |
|
Rand denominated |
(213) |
|
(163) |
|
(213) |
|
USD denominated |
(248) |
|
(482) |
|
(537) |
|
GBP denominated |
(653) |
|
(323) |
|
(191) |
|
SEK denominated |
(190) |
|
(328) |
|
(252) |
|
Euro denominated |
(106) |
|
- |
|
(119) |
|
Adjusted Group MCEV |
7,589 |
|
7,401 |
|
6,207 |
* Adjusted net worth is after the elimination of inter-company loans.
** Net of non-controlling interests.
*** Includes adjustment for value of excess own shares in employee share scheme trusts. The movement in value between 31 December 2008 and 30 June 2009 is due to a reduction in excess own shares following employee share grants in March 2009.
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
4 (ii) Adjusted operating MCEV earnings for the covered business
|
£m |
|||||
|
|
Six months |
|
6 months |
|
Year ended |
|
Adjusted operating MCEV earnings before tax for the covered business* |
573 |
|
499 |
|
324 |
|
OMSA |
151 |
|
237 |
|
463 |
|
Europe |
40 |
|
381 |
|
505 |
|
US Life |
297 |
|
(6) |
|
(388) |
|
Bermuda |
85 |
|
(113) |
|
(256) |
|
Tax on adjusted operating MCEV earnings for the covered business |
107 |
|
142 |
|
191 |
|
OMSA |
41 |
|
61 |
|
116 |
|
Europe |
- |
|
90 |
|
117 |
|
US Life |
38 |
|
- |
|
(24) |
|
Bermuda |
28 |
|
(9) |
|
(18) |
|
Adjusted operating MCEV earnings after tax for the covered business |
466 |
|
357 |
|
133 |
|
OMSA |
110 |
|
176 |
|
347 |
|
Europe |
40 |
|
291 |
|
388 |
|
US Life |
259 |
|
(6) |
|
(364) |
|
Bermuda |
57 |
|
(104) |
|
(238) |
|
Tax on adjusted operating MCEV earnings comprises |
|
|
|
|
|
|
Tax on adjusted operating MCEV earnings for the covered business |
(107) |
|
(142) |
|
(191) |
|
Tax on adjusted operating MCEV earnings for other business |
(76) |
|
(85) |
|
56 |
|
Tax on adjusted operating MCEV earnings |
(183) |
|
(227) |
|
(135) |
* Adjusted operating MCEV earnings before tax are derived by grossing up each of the components of the earnings after tax at the expected tax rates.
4 (iii) Components of Market Consistent Embedded Value of the covered business
|
|
|
|
|
|
£m |
|
|
At |
|
At 30 June |
|
At 31 December |
|
MCEV of the covered business |
5,356 |
|
5,738 |
|
4,183 |
|
Adjusted net worth |
2,615 |
|
2,030 |
|
2,383 |
|
Value of in-force business |
2,741 |
|
3,708 |
|
1,800 |
|
OMSA Adjusted net worth* |
1,160 |
|
1,201 |
|
975 |
|
Free surplus |
55 |
|
161 |
|
(95) |
|
Required capital |
1,105 |
|
1,040 |
|
1,070 |
|
Value of in-force business |
1,050 |
|
967 |
|
1,088 |
|
Present value of future profits |
1,298 |
|
1,156 |
|
1,285 |
|
Additional time value of financial options and guarantees |
- |
|
- |
|
- |
|
Frictional costs** |
(156) |
|
(125) |
|
(117) |
|
Cost of non-hedgeable risks |
(92) |
|
(64) |
|
(80) |
|
Europe Adjusted net worth |
626 |
|
492 |
|
567 |
|
Free surplus |
231 |
|
150 |
|
196 |
|
Required capital |
395 |
|
342 |
|
371 |
|
Value of in-force business |
2,720 |
|
2,778 |
|
2,862 |
|
Present value of future profits |
2,939 |
|
2,951 |
|
3,041 |
|
Additional time value of financial options and guarantees |
(6) |
|
(2) |
|
(13) |
|
Frictional costs |
(35) |
|
(31) |
|
(28) |
|
Cost of non-hedgeable risks |
(178) |
|
(140) |
|
(138) |
|
US Life Adjusted net worth |
550 |
|
397 |
|
465 |
|
Free surplus |
27 |
|
7 |
|
(85) |
|
Required capital |
523 |
|
390 |
|
550 |
|
Value of in-force business |
(846) |
|
(41) |
|
(1,725) |
|
Present value of future profits |
(664) |
|
261 |
|
(1,448) |
|
Additional time value of financial options and guarantees |
(106) |
|
(204) |
|
(192) |
|
Frictional costs*** |
(3) |
|
(31) |
|
(2) |
|
Cost of residual non-hedgeable risks |
(73) |
|
(67) |
|
(83) |
|
Bermuda Adjusted net worth |
279 |
|
(60) |
|
376 |
|
Free surplus |
- |
|
(103) |
|
342 |
|
Required capital |
279 |
|
43 |
|
34 |
|
Value of in-force business |
(183) |
|
4 |
|
(425) |
|
Present value of future profits |
(92) |
|
81 |
|
(298) |
|
Additional time value of financial options and guarantees |
(15) |
|
(9) |
|
(57) |
|
Frictional costs*** |
(5) |
|
(3) |
|
(1) |
|
Cost of residual non-hedgeable risks |
(71) |
|
(65) |
|
(69) |
* The required capital in respect of OMSA is partially covered by the market value of the Group's investments in banking and general insurance in South Africa. On consolidation these investments are shown separately.
** For the OMSA business there has been a material change in the asset allocation of assets backing required capital from 31 December 2008 to 30 June 2009. As at 30 June 2009 the asset allocation is 75% cash/25% equity compared to 60% cash/40% equity at 31 December 2008. This resulted in an increase in frictional tax costs as interest bearing assets are subjected to higher tax rates than equities.
*** For US Life and Bermuda, the decrease in frictional costs from 30 June 2008 to 31 December 2008 reflects the changed tax position of the business between these two reporting dates on a market consistent basis. The fact that there are greater losses projected on an MCEV basis at 31 December 2008 compared to 30 June 2008 (mainly due to lower risk free reference rates) means that future income on the capital required to back the business is to a large extent not subject to tax as such future income can be offset against current projected losses.
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
4 (iv) Analysis of covered business MCEV earnings (after tax)
|
£m |
|||||
|
Total covered business |
6 months ended 30 June 2009 |
||||
|
Free surplus |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
|
Opening MCEV |
358 |
2,025 |
2,383 |
1,800 |
4,183 |
|
New business value |
(254) |
80 |
(174) |
244 |
70 |
|
Expected existing business contribution (reference rate) |
6 |
55 |
61 |
58 |
119 |
|
Expected existing business contribution (in excess of reference rate) |
4 |
2 |
6 |
199 |
205 |
|
Transfers from VIF and required capital to free surplus |
379 |
(90) |
289 |
(289) |
- |
|
Experience variances |
(11) |
5 |
(6) |
(76) |
(82) |
|
Assumption changes |
2 |
- |
2 |
24 |
26 |
|
Other operating variance |
(217) |
240 |
23 |
105 |
128 |
|
Operating MCEV earnings |
(91) |
292 |
201 |
265 |
466 |
|
Economic variances |
(91) |
32 |
(59) |
632 |
573 |
|
Other non-operating variance |
24 |
(6) |
18 |
(1) |
17 |
|
Total MCEV earnings |
(158) |
318 |
160 |
896 |
1,056 |
|
Closing adjustments |
113 |
(41) |
72 |
45 |
117 |
|
Capital and dividend flows |
110 |
- |
110 |
- |
110 |
|
Foreign exchange variance |
(21) |
(36) |
(57) |
70 |
13 |
|
MCEV of acquired/sold business |
24 |
(5) |
19 |
(25) |
(6) |
|
Closing MCEV |
313 |
2,302 |
2,615 |
2,741 |
5,356 |
|
Return on MCEV (RoEV) % per annum |
|
|
|
|
18.6% |
Return on MCEV for total covered business is calculated as the operating MCEV earnings after tax divided by opening MCEV in Sterling. The operating assumption changes and other operating variances are not annualised.
|
£m |
|||||||||
|
6 months ended 30 June 2008 |
Year ended 31 December 2008 |
||||||||
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
515 |
1,906 |
2,421 |
3,928 |
6,349 |
515 |
1,906 |
2,421 |
3,928 |
6,349 |
|
(290) |
92 |
(198) |
282 |
84 |
(608) |
172 |
(436) |
540 |
104 |
|
33 |
54 |
87 |
155 |
242 |
63 |
117 |
180 |
289 |
469 |
|
2 |
7 |
9 |
44 |
53 |
4 |
15 |
19 |
81 |
100 |
|
475 |
(92) |
383 |
(383) |
- |
939 |
(189) |
750 |
(750) |
- |
|
(56) |
(8) |
(64) |
60 |
(4) |
160 |
(75) |
85 |
(250) |
(165) |
|
(52) |
- |
(52) |
72 |
20 |
(55) |
- |
(55) |
(375) |
(430) |
|
(5) |
7 |
2 |
(40) |
(38) |
172 |
(156) |
16 |
39 |
55 |
|
107 |
60 |
167 |
190 |
357 |
675 |
(116) |
559 |
(426) |
133 |
|
49 |
(16) |
33 |
(383) |
(350) |
(722) |
5 |
(717) |
(1,485) |
(2,202) |
|
1 |
3 |
4 |
19 |
23 |
(111) |
43 |
(68) |
- |
(68) |
|
157 |
47 |
204 |
(174) |
30 |
(158) |
(68) |
(226) |
(1,911) |
(2,137) |
|
(457) |
(138) |
(595) |
(46) |
(641) |
1 |
187 |
188 |
(217) |
(29) |
|
(428) |
- |
(428) |
(2) |
(430) |
(22) |
- |
(22) |
- |
(22) |
|
(29) |
(138) |
(167) |
(44) |
(211) |
23 |
187 |
210 |
(217) |
(7) |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
215 |
1,815 |
2,030 |
3,708 |
5,738 |
358 |
2,025 |
2,383 |
1,800 |
4,183 |
|
|
|
|
|
11.5% |
|
|
|
|
2.1% |
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
4 (iv) Analysis of covered business MCEV earnings (after tax) continued
|
£m |
|||||
|
OMSA covered business |
6 months ended 30 June 2009 |
||||
|
Free surplus |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
|
Opening MCEV |
(95) |
1,070 |
975 |
1,088 |
2,063 |
|
New business value |
(50) |
40 |
(10) |
34 |
24 |
|
Expected existing business contribution (reference rate) |
(3) |
39 |
36 |
61 |
97 |
|
Expected existing business contribution (in excess of reference rate) |
- |
2 |
2 |
7 |
9 |
|
Transfers from VIF and required capital to free surplus |
151 |
(70) |
81 |
(81) |
- |
|
Experience variances |
(1) |
(15) |
(16) |
(23) |
(39) |
|
Assumption changes |
2 |
- |
2 |
(1) |
1 |
|
Other operating variance |
57 |
(35) |
22 |
(4) |
18 |
|
Operating MCEV earnings |
156 |
(39) |
117 |
(7) |
110 |
|
Economic variances |
14 |
1 |
15 |
(81) |
(66) |
|
Other non-operating variance |
- |
- |
- |
- |
- |
|
Total MCEV earnings |
170 |
(38) |
132 |
(88) |
44 |
|
Closing adjustments |
(20) |
73 |
53 |
50 |
103 |
|
Capital and dividend flows |
(50) |
- |
(50) |
- |
(50) |
|
Foreign exchange variance |
6 |
78 |
84 |
75 |
159 |
|
MCEV of acquired/sold business |
24 |
(5) |
19 |
(25) |
(6) |
|
Closing MCEV |
55 |
1,105 |
1,160 |
1,050 |
2,210 |
|
Return on MCEV (RoEV) % per annum |
|
|
|
|
9.8% |
* The MCEV for OMSA is presented after the adjustment for market value of life funds' investments in Group equity and debt instruments
The segment results of OMSA include both the life companies in South Africa and Namibia.
The negative experience variances were caused mainly by adverse persistency experience, adverse Group assurance claims experience and development project costs, which were partially offset by favourable Retail mortality and longevity experience.
There were no material operating assumption changes.
The other operating variances mainly relate to management actions (including a reduction of future cover increase on certain risk products in the Retail Mass segment to achieve better alignment between the cost of providing benefits and the value of the corresponding premium increase, offset by changing the shareholder asset allocation from 60% cash/40% equity to 75% cash/25% equity which resulted in an increase in frictional tax costs as interest bearing assets are subjected to higher tax rates than equities) and various methodology changes and error corrections.
The negative economic variances were caused mainly by economic assumption changes (mainly an increase in medium to long term swap yields and a decrease in volatilities) and the investment return on policyholder funds being less than assumed, partially offset by the investment return earned on shareholder funds being greater than assumed and the introduction of a liquidity premium for Retail Affluent annuity business.
The capital and dividend flows mainly consist of dividends paid offset by inter-company dividends received and the disposal of Nedlife.
Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in Rand. The operating assumption changes and other operating variances are not annualised.
4 (iv) Analysis of covered business MCEV earnings (after tax) continued
|
£m |
|||||||||
|
6 months ended 30 June 2008 |
Year ended 31 December 2008 |
||||||||
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
309 |
1,159 |
1,468 |
1,202 |
2,670 |
309 |
1,159 |
1,468 |
1,202 |
2,670 |
|
(44) |
32 |
(12) |
34 |
22 |
(84) |
72 |
(12) |
73 |
61 |
|
15 |
50 |
65 |
74 |
139 |
27 |
101 |
128 |
148 |
276 |
|
2 |
7 |
9 |
5 |
14 |
4 |
14 |
18 |
13 |
31 |
|
147 |
(66) |
81 |
(81) |
- |
296 |
(134) |
162 |
(162) |
- |
|
10 |
- |
10 |
(10) |
- |
16 |
(19) |
(3) |
(18) |
(21) |
|
3 |
- |
3 |
- |
3 |
22 |
- |
22 |
(19) |
3 |
|
2 |
- |
2 |
(4) |
(2) |
160 |
(156) |
4 |
(7) |
(3) |
|
135 |
23 |
158 |
18 |
176 |
441 |
(122) |
319 |
28 |
347 |
|
103 |
1 |
104 |
(121) |
(17) |
(154) |
51 |
(103) |
(139) |
(242) |
|
(3) |
3 |
- |
19 |
19 |
- |
- |
- |
18 |
18 |
|
235 |
27 |
262 |
(84) |
178 |
287 |
(71) |
216 |
(93) |
123 |
|
(383) |
(146) |
(529) |
(151) |
(680) |
(691) |
(18) |
(709) |
(21) |
(730) |
|
(348) |
- |
(348) |
- |
(348) |
(647) |
- |
(647) |
- |
(647) |
|
(35) |
(146) |
(181) |
(151) |
(332) |
(44) |
(18) |
(62) |
(21) |
(83) |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
161 |
1,040 |
1,201 |
967 |
2,168 |
(95) |
1,070 |
975 |
1,088 |
2,063 |
|
|
|
|
|
14.6% |
|
|
|
|
14.6% |
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
4 (iv) Analysis of covered business MCEV earnings (after tax) continued
|
£m |
|||||
|
Europe covered business |
6 months ended 30 June 2009 |
||||
|
Free surplus |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
|
Opening MCEV |
196 |
371 |
567 |
2,862 |
3,429 |
|
New business value |
(170) |
7 |
(163) |
202 |
39 |
|
Expected existing business contribution (reference rate) |
7 |
5 |
12 |
31 |
43 |
|
Expected existing business contribution (in excess of reference rate) |
- |
- |
- |
21 |
21 |
|
Transfers from VIF and required capital to free surplus |
209 |
11 |
220 |
(220) |
- |
|
Experience variances |
7 |
(5) |
2 |
(42) |
(40) |
|
Assumption changes |
- |
- |
- |
12 |
12 |
|
Other operating variance |
1 |
- |
1 |
(36) |
(35) |
|
Operating MCEV earnings |
54 |
18 |
72 |
(32) |
40 |
|
Economic variances |
(34) |
31 |
(3) |
52 |
49 |
|
Other non-operating variance |
24 |
(6) |
18 |
(1) |
17 |
|
Total MCEV earnings |
44 |
43 |
87 |
19 |
106 |
|
Closing adjustments |
(9) |
(19) |
(28) |
(161) |
(189) |
|
Capital and dividend flows |
8 |
- |
8 |
- |
8 |
|
Foreign exchange variance |
(17) |
(19) |
(36) |
(161) |
(197) |
|
Closing MCEV |
231 |
395 |
626 |
2,720 |
3,346 |
|
Return on MCEV (RoEV) % per annum |
|
|
|
|
3.0% |
The segmental results of Europe include Skandia Life companies in the United Kingdom, Nordic region, Europe and Latin America.
The 'expected existing business contribution (in excess of reference rate)' is not significant. This is reasonable for business comprised mostly of unit-linked products where most of the profits emanate from premium charges, acquisition charges and fund based fees. Such fees and charges are largely captured in the 'expected existing business contribution (reference rate)'.
The experience variances were largely caused by adverse persistency experience.
The operating assumption changes reflect increased recognition of fee income in the United Kingdom and in the Nordic region.
The other operating variances mainly reflect the impact of modelling and methodology changes which have increased the amount of capital allocated to non-hedgeable risks.
The economic variances are mainly due to the positive effect of market movements on funds under management in the Nordic region and continental Europe. This has been partially offset by the adverse exchange rate movements resulting in poor fund returns for UK business sold internationally.
The other non-operating variance mainly results from a release of reserves following the legal resolution of various legacy issues in the Nordic region.
The capital and dividend flows mainly represent dividends, repayment of loans and capital injections.
Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in Sterling. The operating assumption changes and other operating variances are not annualised.
4 (iv) Analysis of covered business MCEV earnings (after tax) continued
|
£m |
||||||||||
|
6 months ended 30 June 2008 |
Year ended 31 December 2008 |
|||||||||
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
|
125 |
323 |
448 |
2,769 |
3,217 |
125 |
323 |
448 |
2,769 |
3,217 |
|
|
(189) |
9 |
(180) |
250 |
70 |
(347) |
7 |
(340) |
449 |
109 |
|
|
17 |
(2) |
15 |
76 |
91 |
34 |
4 |
38 |
131 |
169 |
|
|
- |
- |
- |
29 |
29 |
- |
- |
- |
48 |
48 |
|
|
254 |
(2) |
252 |
(252) |
- |
515 |
(14) |
501 |
(501) |
- |
|
|
7 |
15 |
22 |
3 |
25 |
31 |
2 |
33 |
(26) |
7 |
|
|
- |
- |
- |
77 |
77 |
(3) |
- |
(3) |
69 |
66 |
|
|
(7) |
7 |
- |
(1) |
(1) |
12 |
- |
12 |
(23) |
(11) |
|
|
82 |
27 |
109 |
182 |
291 |
242 |
(1) |
241 |
147 |
388 |
|
|
14 |
(17) |
(3) |
(278) |
(281) |
(39) |
(46) |
(85) |
(299) |
(384) |
|
|
4 |
- |
4 |
- |
4 |
(111) |
43 |
(68) |
(18) |
(86) |
|
|
100 |
10 |
110 |
(96) |
14 |
92 |
(4) |
88 |
(170) |
(82) |
|
|
(75) |
9 |
(66) |
105 |
39 |
(21) |
52 |
31 |
263 |
294 |
|
|
(80) |
- |
(80) |
(2) |
(82) |
(26) |
- |
(26) |
- |
(26) |
|
|
5 |
9 |
14 |
107 |
121 |
5 |
52 |
57 |
263 |
320 |
|
|
150 |
342 |
492 |
2,778 |
3,270 |
196 |
371 |
567 |
2,862 |
3,429 |
|
|
|
|
|
|
15.7% |
|
|
|
|
12.1% |
|
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
4 (iv) Analysis of covered business MCEV earnings (after tax) continued
|
£m |
|||||
|
US Life covered business |
6 months ended 30 June 2009 |
||||
|
Free surplus |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
|
Opening MCEV |
(85) |
550 |
465 |
(1,725) |
(1,260) |
|
New business value |
(34) |
33 |
(1) |
8 |
7 |
|
Expected existing business contribution (reference rate) |
(1) |
11 |
10 |
(31) |
(21) |
|
Expected existing business contribution (in excess of reference rate) |
4 |
- |
4 |
150 |
154 |
|
Transfers from VIF and required capital to free surplus |
25 |
(29) |
(4) |
4 |
- |
|
Experience variances |
8 |
25 |
33 |
(3) |
30 |
|
Assumption changes |
- |
- |
- |
13 |
13 |
|
Other operating variance |
- |
- |
- |
76 |
76 |
|
Operating MCEV earnings |
2 |
40 |
42 |
217 |
259 |
|
Economic variances |
(41) |
- |
(41) |
534 |
493 |
|
Other non-operating variance |
- |
- |
- |
- |
- |
|
Total MCEV earnings |
(39) |
40 |
1 |
751 |
752 |
|
Closing adjustments |
151 |
(67) |
84 |
128 |
212 |
|
Capital and dividend flows |
152 |
- |
152 |
- |
152 |
|
Foreign exchange variance |
(1) |
(67) |
(68) |
128 |
60 |
|
Closing MCEV |
27 |
523 |
550 |
(846) |
(296) |
|
Return on MCEV (RoEV) % per annum |
|
|
|
|
34.9% |
The segment results of US Life include allowance for Old Mutual Reassurance (Ireland) Limited (OMRe), which provides reinsurance to the United States Life Companies.
The operating MCEV earnings were largely as a result of the expected existing business contribution (in excess reference rate). i.e. by the corporate bond spread that we expected to earn over and above the adjusted risk-free reference rate (inclusive of the liquidity premium adjustment).
The experience variances were largely caused by positive mortality variance and expense variance, partially offset by negative persistency experience.
The only operating assumption change was in respect of mortality assumptions on the Single Premium Immediate Annuity (SPIA) business, which were lightened slightly to align with IFRS assumptions.
The other operating variances include an amendment in the calculation of the time value of financial options and guarantees and changes to the methodology for calculating the non-hedgeable risk capital.
The economic variances were largely driven by the recovery in equity markets during the period and the increase in the US swap yield curve.
There were no other non-operating variances.
The capital and dividend flows were due to a capital injection made in February of this year.
Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in US Dollar. The operating assumption changes and other operating variances are not annualised.
|
£m |
|||||||||
|
6 months ended 30 June 2008 |
Year ended 31 December 2008 |
||||||||
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
60 |
391 |
451 |
(102) |
349 |
60 |
391 |
451 |
(102) |
349 |
|
(32) |
17 |
(15) |
10 |
(5) |
(136) |
83 |
(53) |
41 |
(12) |
|
1 |
6 |
7 |
2 |
9 |
1 |
11 |
12 |
2 |
14 |
|
- |
- |
- |
4 |
4 |
- |
1 |
1 |
9 |
10 |
|
64 |
(23) |
41 |
(41) |
- |
106 |
(39) |
67 |
(67) |
- |
|
(57) |
1 |
(56) |
42 |
(14) |
115 |
(41) |
74 |
(233) |
(159) |
|
- |
- |
- |
- |
- |
(6) |
- |
(6) |
(328) |
(334) |
|
- |
- |
- |
- |
- |
- |
- |
- |
117 |
117 |
|
(24) |
1 |
(23) |
17 |
(6) |
80 |
15 |
95 |
(459) |
(364) |
|
(29) |
|
(29) |
44 |
15 |
(267) |
- |
(267) |
(789) |
(1,056) |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
(53) |
1 |
(52) |
61 |
9 |
(187) |
15 |
(172) |
(1,248) |
(1,420) |
|
- |
(2) |
(2) |
|
(2) |
42 |
144 |
186 |
(375) |
(189) |
|
- |
- |
- |
- |
- |
55 |
- |
55 |
- |
55 |
|
- |
(2) |
(2) |
- |
(2) |
(13) |
144 |
131 |
(375) |
(244) |
|
7 |
390 |
397 |
(41) |
356 |
(85) |
550 |
465 |
(1,725) |
(1,260) |
|
|
|
|
|
(2.9)% |
|
|
|
|
(97.6)% |
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
4 (iv) Analysis of covered business MCEV earnings (after tax) continued
|
£m |
|||||
|
Bermuda covered business |
6 months ended 30 June 2009 |
||||
|
|
Free surplus |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
Opening MCEV |
342 |
34 |
376 |
(425) |
(49) |
|
New business value |
- |
- |
- |
- |
- |
|
Expected existing business contribution (reference rate) |
3 |
- |
3 |
(3) |
- |
|
Expected existing business contribution (in excess of reference rate) |
- |
- |
- |
21 |
21 |
|
Transfers from VIF and required capital to free surplus |
(6) |
(2) |
(8) |
8 |
- |
|
Experience variances |
(25) |
- |
(25) |
(8) |
(33) |
|
Assumption changes |
- |
- |
- |
- |
- |
|
Other operating variance |
(275) |
275 |
- |
69 |
69 |
|
Operating MCEV earnings |
(303) |
273 |
(30) |
87 |
57 |
|
Economic variances |
(30) |
- |
(30) |
127 |
97 |
|
Other non-operating variance |
- |
- |
- |
- |
- |
|
Total MCEV earnings |
(333) |
273 |
(60) |
214 |
154 |
|
Closing adjustments |
(9) |
(28) |
(37) |
28 |
(9) |
|
Capital and dividend flows |
- |
- |
- |
- |
- |
|
Foreign exchange variance |
(9) |
(28) |
(37) |
28 |
(9) |
|
Closing MCEV |
- |
279 |
279 |
(183) |
96 |
|
Return on MCEV (RoEV) % per annum |
|
|
|
|
92.8% |
The segment results of Bermuda include allowance for Old Mutual Reassurance (Ireland) Limited (OMRe), which provides reinsurance to Old Mutual (Bermuda) Limited.
The experience variances were largely caused by adverse persistency experience, and increase in the cost of non-hedgeable risks and a negative expense variance, partially offset by a reduction in the time value of financial options and guarantees.
There were no operating assumption changes.
The other operating variance includes a positive variance due to an amendment of a DAC write-down made in the previous reporting period, an amendment in the calculation of the time value of financial options and guarantees and changes to the methodology for calculation the non-hedgeable risk capital.
The economic variances were largely driven by the recovery in equity markets during the period and the increase in the US swap yield curve.
There were no other non-operating variances.
There were no capital and dividend flows.
Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in US Dollar. The operating assumption changes and other operating variances are not annualised.
|
£m |
|||||||||
|
6 months ended 30 June 2008 |
Year ended 31 December 2008 |
||||||||
|
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
Free |
Required capital |
Adjusted net worth |
Value of in-force |
MCEV |
|
21 |
33 |
54 |
59 |
113 |
21 |
33 |
54 |
59 |
113 |
|
(25) |
34 |
9 |
(12) |
(3) |
(41) |
10 |
(31) |
(23) |
(54) |
|
- |
- |
- |
3 |
3 |
1 |
1 |
2 |
8 |
10 |
|
- |
- |
- |
6 |
6 |
- |
- |
- |
11 |
11 |
|
10 |
(1) |
9 |
(9) |
- |
22 |
(2) |
20 |
(20) |
- |
|
(16) |
(24) |
(40) |
25 |
(15) |
(2) |
(17) |
(19) |
27 |
8 |
|
(55) |
- |
(55) |
(5) |
(60) |
(68) |
- |
(68) |
(97) |
(165) |
|
- |
- |
- |
(35) |
(35) |
- |
- |
- |
(48) |
(48) |
|
(86) |
9 |
(77) |
(27) |
(104) |
(88) |
(8) |
(96) |
(142) |
(238) |
|
(39) |
- |
(39) |
(28) |
(67) |
(262) |
- |
(262) |
(258) |
(520) |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
(125) |
9 |
(116) |
(55) |
(171) |
(350) |
(8) |
(358) |
(400) |
(758) |
|
1 |
1 |
2 |
- |
2 |
671 |
9 |
680 |
(84) |
596 |
|
- |
- |
- |
- |
- |
596 |
- |
596 |
- |
596 |
|
1 |
1 |
2 |
- |
2 |
75 |
9 |
84 |
(84) |
- |
|
(103) |
43 |
(60) |
4 |
(56) |
342 |
34 |
376 |
(425) |
(49) |
|
|
|
|
|
(97.5)% |
|
|
|
|
(195.3)% |
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
5 Adjustments applied in determining total Group MCEV earnings before tax
|
£m |
||||||
|
|
6 months ended 30 June 2009 |
6 months ended 30 June 2008 |
||||
|
Analysis of adjusting items |
Covered business MCEV |
Non-covered business IFRS |
Total |
Covered business MCEV |
Non-covered business IFRS |
Total |
|
Income/(expense) |
|
|
|
|
|
|
|
Goodwill impairment and amortisation of non-covered business acquired intangible assets and impact of acquisition accounting |
- |
(6) |
(6) |
- |
(5) |
(5) |
|
Economic variances |
538 |
(12) |
526 |
(492) |
(6) |
(498) |
|
Other non-operating variances |
16 |
- |
16 |
31 |
- |
31 |
|
Acquired/divested business |
- |
(41) |
(41) |
|
62 |
62 |
|
Closure of unclaimed share trust |
- |
- |
- |
- |
- |
- |
|
Dividends declared to holders of perpetual preferred callable securities |
- |
22 |
22 |
- |
22 |
22 |
|
Adjusting items relating to US Asset Management equity plans and non controlling holders |
- |
1 |
1 |
- |
5 |
5 |
|
Fair value gains on Group debt instruments |
- |
12 |
12 |
- |
40 |
40 |
|
Adjusting items |
554 |
(24) |
530 |
(461) |
118 |
(343) |
|
|
Year ended 31 December 2008 |
||
|
Analysis of adjusting items |
Covered business MCEV |
Non-covered business |
Total Group |
|
Income/(expense) |
|
|
|
|
Goodwill impairment and amortisation of non-covered business acquired intangible assets and impact of acquisition accounting |
- |
(12) |
(12) |
|
Economic variances |
(2,480) |
(72) |
(2,552) |
|
Other non-operating variances |
(79) |
- |
(79) |
|
Acquired/divested business |
- |
53 |
53 |
|
Closure of unclaimed share trust |
- |
- |
- |
|
Dividends declared to holders of perpetual preferred callable securities |
- |
43 |
43 |
|
Adjusting items relating to US Asset Management equity plans and non controlling holders |
- |
7 |
7 |
|
Fair value gains on Group debt instruments |
- |
503 |
503 |
|
Adjusting items |
(2,559) |
522 |
(2,037) |
6 Other movements in net equity impacting Group MCEV
|
£m |
||||||
|
|
6 months ended 30 June 2009 |
6 months ended 30 June 2008 |
||||
|
|
Covered business MCEV |
Non-covered business IFRS |
Total |
Covered business MCEV |
Non-covered business IFRS |
Total |
|
Fair value gains/(losses) |
- |
(2) |
(2) |
- |
(2) |
(2) |
|
Net investment hedge |
- |
2 |
2 |
- |
(5) |
(5) |
|
Currency translation differences/exchange differences on translating foreign operations |
13 |
22 |
35 |
(211) |
(207) |
(418) |
|
Aggregate tax effects of items taken directly to or transferred from equity |
- |
1 |
1 |
- |
6 |
6 |
|
Correction in transfers to the covered business* |
- |
316 |
316 |
- |
- |
- |
|
Other movements |
- |
(47) |
(47) |
- |
(49) |
(49) |
|
Net income recognised directly into equity |
13 |
292 |
305 |
(211) |
(257) |
(468) |
|
Dividend for the year |
104 |
(126) |
(22) |
(430) |
181 |
(249) |
|
Share buy back |
- |
- |
- |
- |
(174) |
(174) |
|
Net issues of ordinary share capital by the Company |
- |
- |
- |
- |
4 |
4 |
|
Exercise of share options |
- |
- |
- |
- |
3 |
3 |
|
Fair value of equity settled share options |
- |
9 |
9 |
- |
17 |
17 |
|
Other movements in net equity |
117 |
175 |
292 |
(641) |
(226) |
(867) |
* Amendment arising from allocation of assets between covered and non-covered business at December 2008.
|
|
Year ended 31 December 2008 |
||
|
|
Covered business MCEV |
Non-covered business IFRS |
Total |
|
Fair value gains/(losses) |
- |
- |
- |
|
Net investment hedge |
- |
(281) |
(281) |
|
Currency translation differences/exchange differences on translating foreign operations |
(7) |
59 |
52 |
|
Aggregate tax effects of items taken directly to or transferred from equity |
- |
(1) |
(1) |
|
Other movements |
- |
(49) |
(49) |
|
Net income recognised directly into equity |
(7) |
(272) |
(279) |
|
Dividend for the year |
(22) |
(373) |
(395) |
|
Share buy back |
- |
(175) |
(175) |
|
Net issues of ordinary share capital by the Company |
- |
5 |
5 |
|
Exercise of share options |
- |
5 |
5 |
|
Fair value of equity settled share options |
- |
26 |
26 |
|
Other movements in net equity |
(29) |
(784) |
(813) |
7 Reconciliation of MCEV adjusted net worth to IFRS net asset value for the covered business
The table below provides a reconciliation of the MCEV adjusted net worth (ANW) to the IFRS net asset value (NAV) for the covered business.
|
£m |
|||||
|
|
At 30 June 2009 |
||||
|
Total |
OMSA |
Europe |
US Life |
Bermuda |
|
|
IFRS net asset value* |
5,728 |
707 |
4,293 |
422 |
306 |
|
Adjustment to include long-term business on a statutory solvency basis |
(2,194) |
148 |
(2,443) |
128 |
(27) |
|
Adjustment for market value of life funds' investments in Group equity and debt instruments |
305 |
305 |
- |
- |
- |
|
Adjustments to exclude acquisition of goodwill from the covered business |
(1,224) |
- |
(1,224) |
- |
- |
|
MCEV adjusted net worth |
2,615 |
1,160 |
626 |
550 |
279 |
|
£m |
|||||
|
|
At 30 June 2008 |
||||
|
Total |
OMSA |
Europe |
US Life |
Bermuda |
|
|
IFRS net asset value* |
5,995 |
785 |
4,287 |
994 |
(71) |
|
Adjustment to include long-term business on a statutory solvency basis |
(2,976) |
137 |
(2,584) |
(540) |
11 |
|
Adjustment for market value of life funds' investments in Group equity and debt instruments |
279 |
279 |
- |
- |
- |
|
Adjustments to exclude acquisition of goodwill from the covered business |
(1,268) |
- |
(1,211) |
(57) |
- |
|
MCEV adjusted net worth |
2,030 |
1,201 |
492 |
397 |
(60) |
|
£m |
|||||
|
|
At 31 December 2008 |
||||
|
Total |
OMSA |
Europe |
US Life |
Bermuda |
|
|
IFRS net asset value* |
5,907 |
602 |
4,615 |
97 |
593 |
|
Adjustment to include long-term business on a statutory solvency basis |
(2,461) |
137 |
(2,749) |
368 |
(217) |
|
Adjustment for market value of life funds' investments in Group equity and debt instruments |
236 |
236 |
- |
- |
- |
|
Adjustments to exclude acquisition of goodwill from the covered business |
(1,299) |
- |
(1,299) |
- |
- |
|
MCEV adjusted net worth |
2,383 |
975 |
567 |
465 |
376 |
* IFRS net asset value is after elimination of inter-company loans.
The adjustment to include long-term business on a statutory solvency basis includes the following:
● The excess of the IFRS amount of the deferred acquisition cost (DAC) and value of business acquired (VOBA) assets over the statutory levels included in the VIF
● When projecting future profits on a statutory basis, the VIF includes the shareholders' value of unrealised capital gains. To the extent that assets in IFRS are valued at market and the market value is higher than the statutory book value, these profits have already been taken into account in the IFRS equity.
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
8 Value of new business (after tax)
The tables below set out the geographic analysis of the value of new business (VNB) after tax. New business profitability is measured by both the ratio of the VNB to the present value of new business premiums (PVNBP) as well as to the annual premium equivalent (APE), and shown under PVNBP margin and APE margin below. APE is calculated as recurring premiums plus 10 per cent of single premiums.
As mentioned earlier for the OMSA business, Nedlife is now excluded from covered business. A similar consideration applies to VNB and other new business measures such as PVNBP and APE in order to provide a better indication of future expected 'normalised' earnings. However note that in the tables below Nedlife is still incorporated in the comparative results for the 6 months ended 2008 and the year ended 31 December 2008.
|
|
|
|
£m |
|
|
6 months |
6 months |
Year ended 31 December |
|
Annualised recurring premiums |
|
|
|
|
OMSA |
104 |
104 |
223 |
|
Europe |
233 |
248 |
476 |
|
US Life |
9 |
18 |
33 |
|
Bermuda |
- |
- |
- |
|
|
346 |
370 |
732 |
|
Single premiums |
|
|
|
|
OMSA |
558 |
592 |
1,299 |
|
Europe |
2,030 |
2,808 |
5,001 |
|
US Life |
287 |
449 |
1,027 |
|
Bermuda |
15 |
1,127 |
1,448 |
|
|
2,890 |
4,976 |
8,775 |
|
PVNBP |
|
|
|
|
OMSA |
1,213 |
1,185 |
2,437 |
|
Europe |
3,111 |
3,962 |
7,131 |
|
US Life |
348 |
545 |
1,246 |
|
Bermuda |
15 |
1,126 |
1,448 |
|
|
4,687 |
6,818 |
12,262 |
|
PVNBP capitalisation factors* |
|
|
|
|
OMSA |
6.3 |
5.7 |
5.1 |
|
Europe |
4.6 |
4.7 |
4.5 |
|
US Life |
6.5 |
5.4 |
6.7 |
|
Bermuda |
- |
n/a |
n/a |
|
|
|
|
|
|
APE |
|
|
|
|
OMSA |
160 |
163 |
353 |
|
Europe |
436 |
529 |
977 |
|
US Life |
38 |
63 |
136 |
|
Bermuda |
2 |
113 |
145 |
|
|
636 |
868 |
1,611 |
|
VNB |
|
|
|
|
OMSA** |
24 |
22 |
61 |
|
Europe |
39 |
70 |
109 |
|
US Life |
7 |
(5) |
(12) |
|
Bermuda |
- |
(3) |
(54) |
|
|
70 |
84 |
104 |
8 Value of new business (after tax) continued
|
|
6 months |
6 months |
Year ended 31 December |
|
PVNBP margin*** |
|
|
|
|
OMSA |
2.0% |
1.9% |
2.5% |
|
Europe |
1.3% |
1.8% |
1.5% |
|
US Life |
2.1% |
(0.9)% |
(0.9)% |
|
|
1.5% |
1.2% |
0.8% |
|
APE margin**** |
|
|
|
|
OMSA |
15% |
14% |
17% |
|
Europe |
9% |
13% |
11% |
|
US Life |
19% |
(8)% |
(8)% |
|
|
11% |
10% |
6% |
* The PVNBP capitalisation factors are calculated as follows: (PVNBP - single premiums)/annualised recurring premiums.
** The comparative results excluding Nedlife are £17m for the 6 months ended 2008 and £52m the year ended 31 December 2008.
*** The comparative results excluding Nedlife are 1.6% for the 6 months ended 2008 and 2.3% the year ended 31 December 2008.
**** The comparative results excluding Nedlife are 13% for the 6 months ended 2008 and 16% the year ended 31 December 2008.
The value of new individual unit trust linked retirement annuities and pension fund asset management business written by the OMSA long-term business, which amounted to £172 million in the 6 months ended 30 June 2009 (year ended 31 December 2008: £458 million; 6 months ended 30 June 2008: £145 million), is excluded as the profits on this business arise in the asset management business. The value of new business also excludes premium increases arising from indexation arrangements in respect of existing business, as these are already included in the value of in-force business.
The value of new institutional investment platform pensions business written in the United Kingdom, the gross premium of which amounted to £83 million for the 6 months ended 30 June 2009 (year ended 31 December 2008: £239 million; 6 months ended 30 June 2008: £155 million), is excluded as this is more appropriately classified as mutual fund business.
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
9 Product analysis of new covered business premiums
|
|
|
|
|
|
|
|
|
£m |
|
OMSA |
6 months ended 30 June 2009 |
|
6 months ended 30 June 2008 |
|
Year ended 31 December 2008 |
|||
|
Recurring |
Single |
|
Recurring |
Single |
|
Recurring |
Single |
|
|
Total business |
104 |
558 |
|
104 |
592 |
|
223 |
1,299 |
|
Individual business |
92 |
278 |
|
96 |
333 |
|
209 |
622 |
|
Savings |
22 |
204 |
|
24 |
254 |
|
51 |
477 |
|
Protection |
23 |
- |
|
33 |
2 |
|
68 |
- |
|
Annuity |
- |
73 |
|
- |
76 |
|
- |
144 |
|
Retail mass market |
47 |
1 |
|
39 |
1 |
|
90 |
1 |
|
Group business |
12 |
280 |
|
8 |
259 |
|
14 |
677 |
|
Savings |
5 |
236 |
|
3 |
205 |
|
6 |
444 |
|
Protection |
7 |
- |
|
5 |
1 |
|
8 |
1 |
|
Annuity |
- |
44 |
|
- |
53 |
|
- |
232 |
|
Europe |
|
|
|
|
|
|
|
£m |
|
6 months ended 30 June 2009 |
|
6 months ended 30 June 2008 |
|
Year ended31 December 2008 |
||||
|
Recurring |
Single |
|
Recurring |
Single |
|
Recurring |
Single |
|
|
Total business |
233 |
2,030 |
|
248 |
2,808 |
|
476 |
5,001 |
|
Unit-linked assurance |
231 |
1,927 |
|
246 |
2,807 |
|
470 |
4,723 |
|
Life |
2 |
103 |
|
2 |
1 |
|
6 |
278 |
|
|
|
|
|
|
|
|
|
£m |
|
US Life |
6 months ended 30 June 2009 |
|
6 months ended 30 June 2008 |
|
Year ended31 December 2008 |
|||
|
Recurring |
Single |
|
Recurring |
Single |
|
Recurring |
Single |
|
|
Total business |
9 |
287 |
|
18 |
449 |
|
33 |
1,027 |
|
Fixed deferred annuity |
- |
27 |
|
- |
38 |
|
- |
228 |
|
Fixed indexed annuity |
- |
184 |
|
- |
336 |
|
- |
611 |
|
Variable annuity |
- |
1 |
|
- |
2 |
|
- |
6 |
|
Life |
9 |
16 |
|
18 |
8 |
|
33 |
43 |
|
Immediate annuity |
- |
59 |
|
- |
65 |
|
- |
139 |
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
10 Drivers of new business value*
|
|
||||
|
Total covered business** |
Year ended 30 June 2009 |
Year ended 31 December 2008 |
||
|
PVNBP Margin |
APE Margin |
PVNBP Margin |
APE Margin |
|
|
Margin at the end of comparative period |
1.2 |
9.9 |
1.7 |
13.5 |
|
Change in volume |
0.2 |
(1.0) |
0.1 |
0.2 |
|
Change in product mix |
- |
(0.8) |
(0.2) |
(1.8) |
|
Change in country mix |
- |
- |
- |
- |
|
Change in operating assumptions |
0.2 |
1.3 |
(0.3) |
(2.7) |
|
Change in economic assumptions |
0.1 |
1.8 |
(0.3) |
(2.6) |
|
Exchange rate movements |
(0.2) |
(0.1) |
(0.2) |
(0.5) |
|
Margin at the end of the period |
1.5 |
11.1 |
0.8 |
6.1 |
|
OMSA*** |
|
|
|
|
|
Margin at the end of comparative period |
1.6 |
13.5 |
2.4 |
16.8 |
|
Change in volume |
0.2 |
(0.4) |
0.2 |
1.7 |
|
Change in product mix |
(0.3) |
(1.3) |
(0.1) |
(0.6) |
|
Change in country mix |
- |
- |
- |
- |
|
Change in operating assumptions |
0.5 |
3.3 |
0.1 |
0.4 |
|
Change in economic assumptions |
- |
(0.2) |
(0.1) |
(1.0) |
|
Margin at the end of the period |
2.0 |
14.9 |
2.5 |
17.3 |
|
Europe*** |
|
|
|
|
|
Margin at the end of comparative period |
1.8 |
13.3 |
1.7 |
13.7 |
|
Change in volume |
(0.5) |
(5.0) |
- |
(1.0) |
|
Change in product mix |
(0.1) |
(0.7) |
- |
(0.2) |
|
Change in country mix |
- |
- |
- |
- |
|
Change in operating assumptions |
0.1 |
0.7 |
(0.1) |
(1.0) |
|
Change in economic assumptions |
- |
0.8 |
(0.1) |
(0.3) |
|
Margin at the end of the period |
1.3 |
9.1 |
1.5 |
11.2 |
|
US Life*** |
|
|
|
|
|
Margin at the end of comparative period |
(0.9) |
(7.9) |
(0.5) |
(4.2) |
|
Change in volume |
- |
- |
- |
- |
|
Change in product mix |
2.0 |
17.7 |
(0.4) |
(3.8) |
|
Change in country mix |
- |
- |
- |
- |
|
Change in operating assumptions |
- |
- |
1.9 |
17.4 |
|
Change in economic assumptions |
1.0 |
9.3 |
(1.9) |
(17.8) |
|
Margin at the end of the period |
2.1 |
19.1 |
(0.9) |
(8.4) |
* Prior year MCEV comparatives of drivers of new business value for 30 June 2008 are not available.
** The PVNBP and APE per cent margin changes are calculated in Sterling.
*** The PVNBP and APE per cent margin changes are calculated in local currency, and exclude Nedlife for the comparative six months ending 30 June 2008.
11 Sensitivity tests
The tables below show the sensitivity of the MCEV, value of in-force business at 30 June 2009 and the value of new business for the 6 months ended 30 June 2009 to changes in key assumptions.
For each sensitivity illustrated all other assumptions have been left unchanged except where they are directly affected by the revised conditions. Sensitivity scenarios therefore include consistent changes in cash flows directly affected by the changed assumption(s), for example future bonus participation in changed economic scenarios.
|
|
£m |
||
|
|
30 June 2009 |
||
|
Total covered business |
MCEV |
Value of in-force business |
Value of new business |
|
Central assumptions |
5,356 |
2,741 |
70 |
|
Effect of: |
|
|
|
|
Increasing all pre-tax investment and economic assumptions by 1 per cent, with credited rates and discount rates changing commensurately |
5,116 |
2,511 |
73 |
|
Decreasing all pre-tax investment and economic assumptions by 1 per cent, with credited rates and discount rates changing commensurately |
5,553 |
2,928 |
66 |
|
|
£m |
||
|
|
30 June 2009 |
||
|
OMSA |
MCEV |
Value of in-force business |
Value of new business |
|
Central assumptions |
2,210 |
1,050 |
24 |
|
Effect of: |
|
|
|
|
Increasing all pre-tax investment and economic assumptions by 1 per cent, with credited rates and discount rates changing commensurately |
2,173 |
1,012 |
23 |
|
Decreasing all pre-tax investment and economic assumptions by 1 per cent, with credited rates and discount rates changing commensurately |
2,241 |
1,083 |
23 |
|
Recognising the present value of an additional 50 per cent of liquidity spreads assumed on corporate bonds over the lifetime of the liabilities with credited rates and discount rates changing commensurately |
2,227 |
1,067 |
25 |
|
|
£m |
||
|
|
30 June 2009 |
||
|
Europe |
MCEV |
Value of in-force business |
Value of new business |
|
Central assumptions |
3,346 |
2,720 |
39 |
|
Effect of: |
|
|
|
|
Increasing all pre-tax investment and economic assumptions by 1 per cent, with credited rates and discount rates changing commensurately |
3,255 |
2,641 |
38 |
|
Decreasing all pre-tax investment and economic assumptions by 1 per cent, with credited rates and discount rates changing commensurately |
3,434 |
2,797 |
42 |
|
|
£m |
||
|
|
30 June 2009 |
||
|
US Life |
MCEV |
Value of in-force business |
Value of new business |
|
Central assumptions |
(296) |
(846) |
7 |
|
Effect of: |
|
|
|
|
Increasing all pre-tax investment and economic assumptions by 1 per cent, with credited rates and discount rates changing commensurately |
(419) |
(970) |
12 |
|
Decreasing all pre-tax investment and economic assumptions by 1 per cent, with credited rates and discount rates changing commensurately |
(208) |
(759) |
1 |
|
Recognising the present value of an additional 50 per cent of liquidity spreads assumed on corporate bonds over the lifetime of the liabilities with credited rates and discount rates changing commensurately |
71 |
(479) |
17 |
|
|
£m |
||
|
|
30 June 2009 |
||
|
Bermuda |
MCEV |
Value of in-force business |
Value of new business |
|
Central assumptions |
96 |
(183) |
- |
|
Effect of: |
|
|
|
|
Increasing all pre-tax investment and economic assumptions by 1 per cent, with credited rates and discount rates changing commensurately |
107 |
(172) |
- |
|
Decreasing all pre-tax investment and economic assumptions by 1 per cent, with credited rates and discount rates changing commensurately |
86 |
(193) |
- |
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
12 Key changes in MCEV methodology and assumptions
A summary of the key changes arising in the move from the EEV to MCEV reporting framework was set out in the annual report and accounts 2008.
13 Restatement of adjusted Group Embedded Value per share
The table below provides a restatement of the adjusted Group Embedded Value per share as at 30 June 2008 from an EEV to MCEV basis.
|
|
At 30 June 2008 |
|
Previously published adjusted Group EEV per share |
143.2p |
|
Change in Embedded Value of covered business as a consequence of the move to MCEV |
(7.8)p |
|
Adjustment to bring long-term business on a statutory solvency basis |
(0.1)p |
|
Marking the present value of future BEE scheme deferred consideration to market |
0.4p |
|
Adjustment to bring external debt to market value |
4.6p |
|
Total impact |
(2.9)p |
|
Adjusted Group MCEV per share |
140.3p |
|
Percentage impact |
(2.0)% |
The change in the adjusted Group Embedded Value per share from 143.2p on an EEV basis to 140.3p on an MCEV basis is caused mainly by the change in the Embedded Value of the covered business which is analysed in detail in note 15.
14 Restatement of adjusted Group MCEV operating earnings per share
The table below provides a restatement of the adjusted Group operating earnings per share for the 6 months ended 30 June 2008 from an EEV to MCEV basis.
|
|
6 months |
|
Previously published adjusted Group EEV operating earnings per share |
10.8p |
|
Change in operating earnings of covered business as a consequence of the move to MCEV |
(0.7)p |
|
Adjusted Group MCEV operating earnings per share |
10.1p |
|
Percentage impact |
(5.9)% |
The conversion from EEV to MCEV reporting has no impact on the operating earnings of our non-life business and hence the small change in the adjusted Group operating earnings per share from 10.8p on an EEV basis to 10.2p on an MCEV basis is caused entirely by the change in the operating earnings of the covered business which is analysed in more detail in note 18.
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
15 Restatement of Embedded Value of covered business
The tables below reconcile the Embedded Value of the covered business as at 30 June 2008 from the previously published EEV basis to the MCEV basis. The transition from the top-down real-world EEV approach to the bottom-up MCEV approach can be broken down into the following key steps:
a) Release of cost of required capital in published EEV - The cost of required capital under the previous EEV approach is released and this component of EEV is replaced by frictional costs (see step c) under the MCEV approach. This step increases the Embedded Value.
b) Economic assumption changes incorporate a combination of the following:
● Any risk margins in the single weighted average EEV discount rate for each of the geographies are removed and the EEV discount rates are replaced by term dependent risk free reference rates. This step increases the Embedded Value for profitable business as expected future profits are discounted at lower rates, and gives rise to a greater Embedded Value loss for loss making business, as a result of discounting losses at lower rates.
● Any risk margins in real-world EEV investment return assumptions are removed and the real-world EEV investment return assumptions are replaced by term dependent risk free reference rates and thereby removing any capitalisation of investment risk margins. This step decreases the Embedded Value as expected future investment returns are projected at lower rates
● Other related model refinements including updating all stochastic models to be market consistent. For the United States business such model refinements also include a revision of assumptions for dynamic policyholder behaviour within the stochastic models to allow for lower average returns from risk-neutral market consistent scenarios compared to the scenarios in the real-world stochastic model that was used under EEV.
c) Allowance for frictional costs - As mentioned in step (a) above, the cost of required capital under the previous EEV approach is released and replaced by an allowance for frictional costs under the MCEV approach. This step decreases the Embedded Value.
d) Explicit allowance for cost of residual non-hedgeable risks - Previously under the EEV approach an implicit allowance was permitted for such risks in the determination of the risk discount rate for each geography. This step decreases the Embedded Value.
|
In-force covered business |
£m |
||||
|
At 30 June 2008 |
|||||
|
Total |
OMSA |
Europe |
United |
||
|
Previously published EEV |
6,153 |
2,191 |
3,171 |
791 |
|
|
Release of cost of required capital in published EEV |
391 |
174 |
103 |
114 |
|
|
Economic assumption changes |
(279) |
(8) |
168 |
(439) |
|
|
Allowance for frictional costs |
(190) |
(125) |
(31) |
(34) |
|
|
Allowance for cost of residual non-hedgeable risks |
(337) |
(64) |
(141) |
(132) |
|
|
Total impact |
(415) |
(23) |
99 |
(491) |
|
|
MCEV |
5,738 |
2,168 |
3,270 |
300 |
|
|
Percentage impact |
(6.7)% |
(1.0)% |
3.2% |
(62.1)% |
|
* The results for United States include Bermuda.
15 Restatement of Embedded Value of covered business continued
The impact as at 30 June 2008 of moving from an EEV to an MCEV methodology is a reduction in Embedded Value of the covered business of 6.7 per cent from £6,153 million to £5,738 million. Most of the reduction in Embedded Value is attributable to the United States business which decreased by 62.1 per cent from £791 million to £300 million.
The frictional costs calculated under MCEV are significantly less than the cost of required capital under EEV which reflects the difference between the risk discount rate in each geography, inclusive of an explicit risk margin, and the expected post-tax investment return on the assets backing the required capital. Under MCEV risks are modelled explicitly and the risk margin in each geography is not required.
The impact of the transition from EEV to MCEV also varies by product type. Under EEV a weighted average risk discount rate was applied to all products within a specific geography whereas under MCEV separate explicit allowances are made for financial and non-financial risks for each product.
● Risk products, for example term assurance, generally increase in value under MCEV compared to EEV. Product profitability is mainly driven by non-financial pricing margins which are discounted at lower risk free reference rates under MCEV.
● The impact on savings products, for example unit-linked policies, is broadly neutral as the reduced assumed future investment returns which are set in relation to risk free reference rates are largely offset by the increase in value due to the lower discount rates (which are also set in relation to risk free reference rates) that are applied to future cash flows.
● Products with a high proportion of financial risk, for example spread-based contracts such as immediate annuities where profitability relies on achieving a return in excess of the risk free reference rates to support the pricing bases, tend to reduce in value under MCEV. No risk premiums in excess of the risk free reference rates are recognised under MCEV until realised in a particular year, when it emerges as a combination of expected existing business contribution and economic variance in that year. In contrast EEV recognises the capitalised expected profits from taking on financial risk, i.e. capitalises returns on more risky assets, without necessarily making appropriate adjustments at a per product level for the fact that the returns under these assets have a greater degree of inherent risk.
The underlying drivers of the impact of moving from an EEV to an MCEV methodology for each geography are consistent with those disclosed as part of the restatement of the Embedded Value of covered business as at 31 December 2006 and 31 December 2007 as set out in note 15 of the annual report and accounts 2008.
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
16 Comparison of components of Embedded Value on EEV and MCEV bases
The tables below provide a comparison of the components of Embedded Value of the covered business as at 30 June 2008 between the previously published EEV basis and the MCEV basis. The change in MCEV to a bottom-up evaluation of the risks inherent in the business requires a change in the presentation of the components underlying the MCEV.
|
£m |
|||||||
|
In-force covered business |
At 30 June 2008 |
||||||
|
Total |
|
OMSA |
|
Europe |
|
United States** |
|
|
Previously published EEV |
6,153 |
|
2,191 |
|
3,171 |
|
791 |
|
Adjusted net worth |
2,036 |
|
1,203 |
|
493 |
|
340 |
|
Free surplus |
220 |
|
163 |
|
151 |
|
(94) |
|
Required capital |
1,816 |
|
1,040 |
|
342 |
|
434 |
|
Value of in-force business |
4,117 |
|
988 |
|
2,678 |
|
451 |
|
Present value of future profits |
4,559 |
|
1,162 |
|
2,784 |
|
613 |
|
Additional time value of financial options and guarantees |
(50) |
|
- |
|
(2) |
|
(48) |
|
Cost of required capital |
(392) |
|
(174) |
|
(104) |
|
(114) |
|
|
|
|
|
|
|
|
|
|
MCEV |
5,738 |
|
2,168 |
|
3,270 |
|
300 |
|
Adjusted net worth |
2,030 |
|
1,201 |
|
492 |
|
337 |
|
Free surplus* |
215 |
|
161 |
|
150 |
|
(96) |
|
Required capital |
1,815 |
|
1,040 |
|
342 |
|
433 |
|
Value of in-force business |
3,708 |
|
967 |
|
2,778 |
|
(37) |
|
Present value of future profits |
4,449 |
|
1,156 |
|
2,951 |
|
342 |
|
Additional time value of financial options and guarantees |
(215) |
|
- |
|
(2) |
|
(213) |
|
Frictional costs |
(190) |
|
(125) |
|
(31) |
|
(34) |
|
Cost of residual non-hedgeable risks |
(336) |
|
(64) |
|
(140) |
|
(132) |
* For the OMSA business, the value of the asset related to the deferred CGT liability recognised in the adjusted net worth was recalculated on a market consistent basis.
** The results for United States include Bermuda.
17 Restatement of value of new business (after tax) of covered business
The table below reconciles the value of new business and new business margins for the 6 months ended 30 June 2008 from the previously published EEV basis to the MCEV basis. The same steps have been applied in the reconciliations as for the total in-force covered business as set out in note 15.
|
£m |
||||
|
|
6 months ended 30 June 2008 |
|||
|
Value of new business |
Total |
OMSA* |
Europe |
United States** |
|
Previously published VNB under EEV basis |
112 |
25 |
61 |
26 |
|
Release of cost of required capital in published EEV basis |
17 |
6 |
4 |
8 |
|
Economic assumption changes |
(16) |
(2) |
14 |
(28) |
|
Allowance for frictional costs |
(10) |
(4) |
(1) |
(5) |
|
Allowance for cost of residual non-hedgeable risks |
(19) |
(3) |
(8) |
(8) |
|
Total impact |
(28) |
(3) |
9 |
(33) |
|
VNB on MCEV basis |
84 |
22 |
70 |
(8) |
|
Percentage impact % |
(25.1)% |
(12.5)% |
14.8% |
(130.8)% |
|
|
|
|
|
|
|
EEV PVNBP |
6,668 |
1,150 |
3,857 |
1,661 |
|
EEV APE |
872 |
168 |
529 |
175 |
|
EEV PVNBP margin % |
1.7% |
2.2% |
1.6% |
1.6% |
|
EEV APE margin % |
13% |
15% |
12% |
15% |
|
|
|
|
|
|
|
MCEV PVNBP |
6,818 |
1,185 |
3,962 |
1,671 |
|
MCEV APE |
868 |
163 |
529 |
176 |
|
MCEV PVNBP margin % |
1.2% |
1.9% |
1.8% |
(0.5)% |
|
MCEV APE margin % |
10% |
14% |
13% |
(5)% |
* Note that OMSA healthcare administration business was included in the EEV basis, but is excluded on an MCEV basis.
** The results for United States include Bermuda.
The impact on VNB of the covered business written in the 6 months ended 30 June 2008 due to moving from an EEV to MCEV basis is a decrease of 25.1 per cent from £112 million to £84 million. Most of the reduction is attributable to the United States business where VNB decreased by 130.8 per cent from £26 million to (£8 million).
The EEV risk discount rate for each geography was calibrated for total in-force business and hence the EEV methodology did not make allowance for different levels of risk for different portfolios of asset and liability risks. The MCEV methodology makes a more granular allowance for the differences in the risk profile of different product lines and different generations of policies. The relative impacts on VNB of each of the steps outlined above therefore differ from the impacts on VIF as outlined in note 15 because the risk profiles of new business are different to the risk profiles of in-force business.
Also note that in calculating PVNBP, the projected premiums are discounted with risk free reference rates under MCEV rather the higher risk discount rate which is applicable in each geography under the previous EEV methodology. PVNBP under MCEV reporting is therefore greater than under EEV reporting with a corresponding decrease in PVNBP margins (assuming all other things including VNB being equal).
Notes to the Old Mutual Market Consistent Embedded Value basis supplementary information
For the 6 months ended 30 June 2009
18 Restatement of Return on Embedded Value of covered business
Return on Embedded Value (RoEV) for covered business is calculated as the operating earnings after tax divided by opening Embedded Value in local currency, with the operating assumption changes and other operating variances not being annualised for interim reporting. The table below provides summaries of the drivers in the change of RoEV for the 6 months ended 30 June 2008 from the previously published EEV basis to the MCEV basis.
|
In-force covered business |
6 months ended 30 June 2008 |
||||
|
OMSA % |
|
Europe |
|
United States** % |
|
|
Previously published RoEV% on an EEV basis |
13.5 |
|
14.5 |
|
1.3 |
|
MCEV RoEV% |
14.6 |
|
15.7 |
|
(25.2) |
|
Difference |
1.1 |
|
1.2 |
|
(23.9) |
|
Drivers of change for the covered business: |
|
|
|
|
|
|
New business value |
(0.2) |
|
0.4 |
|
(9.6) |
|
Expected existing business contribution |
2.4 |
|
0.4 |
|
5.0 |
|
Experience variances |
(0.5) |
|
0.6 |
|
(4.4) |
|
Assumption changes |
(0.5) |
|
(0.1) |
|
(7.4) |
|
Other operating variances* |
(0.1) |
|
(0.1) |
|
(7.5) |
* Changes and improvement to models and methodology are reflected as other operating variances under MCEV rather than being included as part of assumption changes as treated under EEV.
** The results for United States include Bermuda.
The impact on VNB as a result of moving from an EEV to MCEV basis has been outlined in note 17. Other key drivers of the change in RoEV for each geography are discussed below.
OMSA
The major reasons for the change in RoEV from an EEV to MCEV basis is the significantly higher expected existing business contribution. The expected existing business contribution under MCEV is now derived with reference to the one-year forward risk free reference rate at the start of the reporting period as opposed to the 10-year government bond yield curve. The downwards sloping swap yield curve in South Africa at 31 December 2007 therefore leads to a higher expected existing business contribution under MCEV in 2008.
Contrary to previous EEV treatment, the impact of changes in taxation under MCEV is excluded from operating earnings. Such reallocation of tax changes to non-operating variances is the major reason for the reduced contribution of assumption changes.
Europe
As mentioned above, the expected existing business contribution under MCEV is now derived with reference to the one-year forward risk free reference rate at the start of the reporting period as opposed to the 10-year government bond yield curve. Differences in these yields at the end of 2007 therefore lead to differences in the expected existing business contribution under MCEV.
United States
Projected cash flows are significantly different under EEV and MCEV and such differences are the major contributor to the change in RoEV.
The negative impact of model improvements and changes in methodology on an MCEV basis has been re-classified from assumption changes to other operating variances.
Going forward, rates of return on Embedded Value for the US should be higher than under EEV as the opening MCEV is starting from a much lower base value compared to EEV and, other things being equal, higher actual operating earnings will emerge than projected under MCEV at the valuation date as corporate bond credit spreads are expected to be realised and margins (such as the cost of residual non-hedgeable risks) are released.
Shareholder information
Listings and shares in issue
The Company's shares are listed on the London, Malawi, Namibian and Zimbabwe Stock Exchanges and on the JSE Limited (JSE). The primary listing is on the London Stock Exchange and the other listings are all secondary listings. The Company's shares may also be traded on the Xternal list of the Nordic Exchange in Stockholm. The ISIN number of the Company's shares is GB0007389926.
At 30 June 2009, the Company had 5,516,141,360 ordinary shares of 10p each in issue (30 June 2008: 5,514,580,342). 239,434,888 shares were held by the Company in treasury, at 30 June 2009 (30 June 2008: 239,434,888)
Websites
Further information on the Company can be found on the following websites:
This information is provided by RNS
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