Old Mutual plc 2016 Preliminary Results - Part 2
Part 3 - Financial information
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Index to the financial information For the year ended 31 December 2016 |
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Statement of Directors' responsibilities in respect of the preliminary announcement of the Annual Report and the financial statements
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67 |
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Consolidated income statement
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68 |
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Consolidated statement of comprehensive income
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69 |
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Reconciliation of adjusted operating profit to profit after tax
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70 |
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Consolidated statement of financial position
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72 |
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Consolidated statement of cash flows
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73 |
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Consolidated statement of changes in equity
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74 |
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Notes to the consolidated financial statements
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A: Significant accounting policies
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78 |
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B: Segment information
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82 |
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C: Other key performance information
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92 |
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D: Other income statement notes
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99 |
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E: Analysis of financial assets and liabilities
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101 |
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F: Non-financial assets and liabilities
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109 |
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G: Other notes
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112 |
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H: Discontinued operations and disposal groups held for sale
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115 |
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Statement of Directors' responsibilities
in respect of the preliminary announcement of the Annual Report and the financial statements
The Directors confirm that to the best of their knowledge:
n The results in this preliminary announcement have been taken from the Group's 2016 Annual Report and Accounts, which will be available on the Company's website on 11 April 2017
n The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole, and
n The Annual Report includes a fair review of the development and performance of the business and the position of Old Mutual plc and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Bruce Hemphill Ingrid Johnson
Group Chief Executive Group Finance Director
8 March 2017
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Consolidated income statement |
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For the year ended 31 December 2016 |
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£m |
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Notes |
Year ended 31 December 2016
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Year ended 31 December 2015 (Restated)¹ |
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Revenue |
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Gross earned premiums |
B2 |
3,868 |
3,589 |
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Outward reinsurance |
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(398) |
(335) |
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Net earned premiums |
|
3,470 |
3,254 |
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Investment return (non-banking) |
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8,325 |
3,805 |
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Banking interest and similar income |
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3,906 |
3,320 |
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Banking trading, investment and similar income |
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255 |
213 |
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Fee and commission income, and income from service activities |
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2,636 |
2,536 |
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Other income |
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104 |
79 |
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Total revenue |
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18,696 |
13,207 |
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Expenses |
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Claims and benefits (including change in insurance contract provisions) |
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(3,682) |
(3,450) |
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Reinsurance recoveries |
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391 |
279 |
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Net claims and benefits incurred |
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(3,291) |
(3,171) |
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Change in investment contract liabilities |
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(6,216) |
(2,203) |
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Credit impairment charges |
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(272) |
(307) |
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Finance costs |
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(128) |
(47) |
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Banking interest payable and similar expenses |
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(2,401) |
(1,924) |
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Fee and commission expenses, and other acquisition costs |
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(745) |
(765) |
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Change in third-party interest in consolidated funds |
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(691) |
(226) |
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Other operating and administrative expenses |
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(3,741) |
(3,385) |
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Total expenses |
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(17,485) |
(12,028) |
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Share of associated undertakings' and joint ventures' profit after tax |
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4 |
59 |
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Profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments |
C1(c) |
1 |
(37) |
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Profit before tax |
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1,216 |
1,201 |
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Income tax expense |
D1 |
(475) |
(347) |
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Profit from continuing operations after tax |
|
741 |
854 |
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Discontinued operations |
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Profit from discontinued operations after tax |
H1(a) |
104 |
70 |
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Profit after tax for the financial year |
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845 |
924 |
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Attributable to |
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Equity holders of the parent |
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570 |
614 |
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Non-controlling interests |
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Ordinary shares |
F2(a)(i) |
253 |
291 |
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Preferred securities |
F2(a)(ii) |
22 |
19 |
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Profit after tax for the financial year |
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845 |
924 |
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Earnings per ordinary share |
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Basic earnings per share based on profit from continuing operations (pence) |
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10.4 |
11.7 |
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Basic earnings per share based on profit from discontinued operations (pence) |
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1.5 |
1.0 |
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Basic earnings per ordinary share (pence) |
C2(a) |
11.9 |
12.7 |
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Diluted basic earnings per share based on profit from continuing operations (pence) |
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10.1 |
11.2 |
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Diluted basic earnings per share based on profit from discontinued operations (pence) |
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1.5 |
1.0 |
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Diluted basic earnings per ordinary share (pence) |
C2(b) |
11.6 |
12.2 |
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Weighted average number of ordinary shares (millions) |
C2(a) |
4,686 |
4,641 |
1 The year ended 31 December 2015 has been restated to reflect Institutional Asset Management as a discontinued operation and the adjustment for the consolidation of
investment funds. Refer to notes A2 and H1 for more information.
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Consolidated statement of comprehensive income |
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For the year ended 31 December 2016 |
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£m |
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Notes |
Year ended 31 December 2016 |
Year ended 31 December 2015 (Restated)¹ |
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Profit after tax for the financial year |
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845 |
924 |
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Other comprehensive income for the financial year |
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Items that will not be reclassified subsequently to profit or loss |
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Fair value movements |
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Property revaluation |
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7 |
18 |
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Measurement (losses)/gains on defined benefit plans |
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(27) |
20 |
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Income tax on items that will not be reclassified subsequently to profit or loss |
D1(c) |
8 |
(4) |
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(12) |
34 |
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Items that may be reclassified subsequently to profit or loss |
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Fair value movements |
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Net investment hedge |
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(104) |
13 |
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Available-for-sale investments |
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Fair value losses |
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(5) |
(7) |
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Recycled to profit or loss |
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- |
(5) |
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Exchange difference recycled to profit or loss on disposal of foreign operations |
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- |
(71) |
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Shadow accounting |
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(7) |
(10) |
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Currency translation differences on translating foreign operations |
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1,904 |
(1,107) |
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Other movements |
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(23) |
(28) |
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Income tax on items that may be reclassified subsequently to profit or loss |
D1(c) |
8 |
- |
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1,773 |
(1,215) |
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Total other comprehensive income for the financial year from continuing operations |
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1,761 |
(1,181) |
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Total other comprehensive income for the financial year from discontinued operations |
H1(b) |
(3) |
5 |
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Total other comprehensive income for the financial year |
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1,758 |
(1,176) |
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Total comprehensive income for the financial year |
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2,603 |
(252) |
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Attributable to |
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Equity holders of the parent |
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1,803 |
(232) |
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Non-controlling interests |
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Ordinary shares |
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778 |
(39) |
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Preferred securities |
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22 |
19 |
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Total comprehensive income for the financial year |
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2,603 |
(252) |
1 The year ended 31 December 2015 has been restated to reflect Institutional Asset Management as a discontinued operation. Refer to note H1 for more information.
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Reconciliation of adjusted operating profit to profit after tax |
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For the year ended 31 December 2016 |
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£m |
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Notes |
Year ended 31 December 2016 |
Year ended 31 December 2015 |
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Core operations |
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Emerging Markets |
B3 |
619 |
615 |
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Nedbank |
B3 |
799 |
754 |
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Old Mutual Wealth |
B3 |
260 |
307 |
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Institutional Asset Management |
B3 |
141 |
149 |
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1,819 |
1,825 |
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Old Mutual plc finance costs |
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(88) |
(83) |
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Long-term investment return on excess assets |
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20 |
21 |
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Corporate costs |
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(60) |
(57) |
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Other net shareholder income/(expenses) |
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(24) |
(43) |
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Adjusted operating profit before tax |
B3 |
1,667 |
1,663 |
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Adjusting items |
C1(a) |
(457) |
(344) |
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Non-core operations |
B3 |
(5) |
(31) |
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Profit before tax (net of policyholder tax) |
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1,205 |
1,288 |
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Income tax attributable to policyholder returns |
|
144 |
31 |
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Profit before tax |
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1,349 |
1,319 |
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Total tax expense |
(504) |
(374) |
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Profit from continuing operations and Institutional Asset Management after tax |
|
845 |
945 |
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Loss from discontinued operations after tax |
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- |
(21) |
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Profit after tax for the financial year |
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845 |
924 |
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Adjusted operating profit after tax attributable to ordinary equity holders of the parent |
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£m |
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Notes |
Year ended 31 December 2016 |
Year ended 31 December 2015 |
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Adjusted operating profit before tax |
B3 |
1,667 |
1,663 |
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Tax on adjusted operating profit |
D1(d) |
(398) |
(403) |
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Adjusted operating profit after tax |
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1,269 |
1,260 |
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Non-controlling interests - ordinary shares |
F2(a)(iii) |
(319) |
(310) |
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Non-controlling interests - preferred securities |
F2(a)(ii) |
(22) |
(19) |
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Adjusted operating profit after tax attributable to ordinary equity holders of the parent |
B3 |
928 |
931 |
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Adjusted weighted average number of shares (millions) |
C2(a) |
4,773 |
4,813 |
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Adjusted operating earnings per share (pence) |
C2(c) |
19.4 |
19.3 |
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Reconciliation of profit from continuing operations after tax and profit from discontinued operations after tax |
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£m |
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Notes |
Year ended 31 December 2016 |
Year ended 31 December 2015 |
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Profit before tax as presented in the reconciliation of adjusted operating profit to profit after tax |
|
1,349 |
1,319 |
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Profit before tax from discontinued operations (included in adjusted operating profit) |
H1(a) |
(133) |
(118) |
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Profit before tax in the consolidated income statement |
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1,216 |
1,201 |
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Total tax expense as presented in the reconciliation of adjusted operating profit to profit after tax |
|
(504) |
(374) |
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Less income tax expense from discontinued operations (included in adjusted operating profit) |
H1(a) |
29 |
27 |
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Income tax expense |
D1(a) |
(475) |
(347) |
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Profit from continuing operations after tax |
|
741 |
854 |
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Loss from discontinued operations after tax as presented in the reconciliation of adjusted operating profit to profit after tax |
|
- |
(21) |
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Profit from discontinued operations after tax included in reconciliation of adjusted operating profit to profit after tax |
H1(a) |
104 |
91 |
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Profit from discontinued operations after tax |
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104 |
70 |
Basis of preparation of adjusted operating profit
Purpose of AOP
Adjusted operating profit (AOP) is an Alternative Profit Measure used alongside basic IFRS profit to assess underlying business performance. It is a non-IFRS measure of profitability that reflects the Directors' view of the underlying long-term performance of the Group. The calculation of AOP adjusts basic IFRS profit for a number of items as detailed in note C1.
AOP is one of the bases by which operational performance is monitored and managed, similarly it is one of a range of measures by which management performance is assessed. Further detail of the performance measures applied in determining management remuneration is available in the remuneration report of the 2016 Annual Report and Accounts.
The adjusting items applied in calculating AOP seek to remove the impact of strategic activities; short term valuation movements; IFRS accounting treatments that are not reflective of the operating activity; and non-operating items. Due to the long-term nature of the majority of the Group's business, management believes that AOP is an appropriate alternative basis by which to assess the underlying operating results of these businesses and the Group as a whole and that it enhances the comparability and understanding of the financial performance of the Group.
The Group Audit Committee regularly reviews the use of determining AOP to confirm that it remains an appropriate basis on which to analyse the operating performance of the businesses. The Committee assesses refinements to the policy on a case by case basis, however where possible the Group seeks to minimise such changes in order to maintain consistency over time.
Scope of businesses included in AOP
AOP excludes the results of non-core operations, Old Mutual Bermuda, as these are not reflective of the underlying long-term operating performance of the Group. Refer to note B1 for further information on the basis of segmentation.
For the year ended 31 December 2016, the results of operating segments that were classified as held for sale and discontinued operations for IFRS reporting have been included in the determination of AOP. This is a change in the AOP policy compared to policy applied in respect of previously disposed operating segments, such as US Life during 2010 and Nordic during 2011. As a result, the results of OMAM have been included in AOP. In the context of the current strategy, the Directors believe the inclusion of these results will assist with the comparability of year on year performance of the core operations as the Group implements its Managed Separation strategy.
Adjustments to profit
For all core businesses AOP includes a number of adjustments intended to remove the impact of strategic activities. These include the exclusion of the impairment of goodwill, the impact of accounting for intangible assets acquired in a business combination, costs related to completed acquisitions, and the profit or loss on disposal of subsidiaries (note C1(b) and C1(c)). The definition of adjusting items was refined during 2016 to exclude the impairment of investments in associated undertakings (note C1(b)). Management is of the opinion that these impairments of strategic investments are not reflective of the long-term underlying operating performance of the Group.
AOP is based on a long-term shareholder investment return core for the life assurance and property & casualty businesses, which eliminates the short- term volatility movements in the value of shareholder assets (note C1(d)). Other short-term valuation movements excluded from AOP include fair value profits or losses on Group debt instruments (note C1(h)) and the revaluations of put options related to long-term incentive schemes (note C1(g)).
The impacts of accounting treatments that are not reflective of the underlying operating performance of the business are excluded from the determination of AOP. These adjustments relate to the inclusion of dividends declared to holders of perpetual preferred callable securities (note C1(f)); and the inclusion of returns on investments held by life funds in Group equity and debt instruments (note C1(e)).
Costs related to the development of the new Old Mutual Wealth platform capability and outsourcing of UK business administration are excluded from AOP as management is of the view that this long-term investment in operational capability is a non-operating item (note C1(i)).
Adjusted Operating Profit per share
Adjusted operating earnings applied in the calculation of adjusted operating earnings per share is calculated based on AOP after tax and non-controlling interests. It adjusts to exclude 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.
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Consolidated statement of financial position |
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At 31 December 2016 |
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£m |
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Notes |
At 31 December 2016 |
At 31 December 2015 (Restated)¹ |
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Assets |
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|
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Goodwill and other intangible assets |
F1 |
2,471 |
3,276 |
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Mandatory reserve deposits with central banks |
|
1,111 |
716 |
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Property, plant and equipment |
|
892 |
700 |
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Investment property |
|
1,697 |
1,233 |
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Deferred tax assets |
|
96 |
284 |
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Investments in associated undertakings and joint ventures |
|
542 |
514 |
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Deferred acquisition costs |
|
756 |
784 |
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Reinsurers' share of policyholder liabilities |
|
3,115 |
2,661 |
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Loans and advances |
E1 |
43,108 |
30,965 |
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Investments and securities |
|
100,533 |
84,019 |
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Current tax receivable |
|
74 |
88 |
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Trade, other receivables and other assets |
|
2,416 |
1,947 |
|
Derivative financial instruments |
|
1,340 |
3,076 |
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Cash and cash equivalents |
|
4,847 |
4,411 |
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Assets held for sale |
H2 |
8,570 |
123 |
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Total assets |
|
171,568 |
134,797 |
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Liabilities |
|
|
|
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Long-term business insurance policyholder liabilities |
|
9,982 |
7,714 |
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Investment contract liabilities |
|
77,599 |
67,854 |
|
Property & casualty liabilities |
|
482 |
341 |
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Third-party interests in consolidated funds |
|
7,981 |
5,948 |
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Borrowed funds |
E2 |
4,694 |
3,524 |
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Provisions and accruals |
|
160 |
199 |
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Deferred revenue |
|
290 |
274 |
|
Deferred tax liabilities |
|
440 |
417 |
|
Current tax payable |
|
144 |
186 |
|
Trade, other payables and other liabilities |
|
5,112 |
3,749 |
|
Amounts owed to bank depositors |
|
45,309 |
32,328 |
|
Derivative financial instruments |
|
1,161 |
3,317 |
|
Liabilities held for sale |
H2 |
7,046 |
12 |
|
Total liabilities |
|
160,400 |
125,863 |
|
Net assets |
|
11,168 |
8,934 |
|
Shareholders' equity |
|
|
|
|
Equity attributable to equity holders of the parent |
|
8,054 |
6,680 |
|
Non-controlling interests |
|
|
|
|
Ordinary shares |
F2(b)(i) |
2,773 |
1,982 |
|
Preferred securities |
F2(b)(ii) |
341 |
272 |
|
Total non-controlling interests |
|
3,114 |
2,254 |
|
Total equity |
|
11,168 |
8,934 |
|
Consolidated statement of cash flows |
|
||
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For the year ended 31 December 2016 |
|
|
|
|
|
|
|
£m |
|
|
Note |
Year ended 31 December 2016 |
Year ended 31 December 2015 (Restated)¹ |
|
Cash flows from operating activities |
|
|
|
|
Profit before tax |
|
1,216 |
1,201 |
|
Non-cash movements in profit before tax |
|
3,620 |
4,157 |
|
Net changes in working capital |
|
416 |
695 |
|
Taxation paid |
|
(468) |
(389) |
|
Net cash inflow from operating activities - continuing operations |
|
4,784 |
5,664 |
|
Cash flows from investing activities |
|
|
|
|
Net acquisitions of financial investments |
|
(4,374) |
(5,006) |
|
Acquisition of investment properties |
|
(83) |
(146) |
|
Proceeds from disposal of investment properties |
|
8 |
41 |
|
Dividends received from associated undertakings |
|
9 |
2 |
|
Acquisition of property, plant and equipment |
|
(119) |
(142) |
|
Proceeds from disposal of property, plant and equipment |
|
6 |
7 |
|
Acquisition of intangible assets |
|
(141) |
(102) |
|
Acquisition of interests in subsidiaries, associated undertakings joint ventures and strategic investments2 |
|
(121) |
(796) |
|
Disposal of a non-controlling interest in OM Asset Management plc |
|
165 |
163 |
|
Proceeds from the disposal of interests in subsidiaries, associated undertakings joint ventures and strategic investments |
|
29 |
88 |
|
Net cash outflow from investing activities - continuing operations |
|
(4,621) |
(5,891) |
|
Cash flows from financing activities |
|
|
|
|
Dividends paid to |
|
|
|
|
Ordinary equity holders of the Company |
|
(426) |
(422) |
|
Non-controlling interests and preferred security interests |
|
(178) |
(183) |
|
Interest paid (excluding banking interest paid) |
|
(69) |
(51) |
|
Proceeds from issue of ordinary shares (including by subsidiaries to non-controlling interests) |
|
2 |
2 |
|
Net acquisition of treasury shares - ordinary shares |
|
(33) |
(19) |
|
Sale of shares held by BEE trusts |
|
- |
175 |
|
Proceeds from issue of preferred equity |
|
95 |
- |
|
Acquisition of treasury shares - preferred equity |
|
(26) |
- |
|
Proceeds from issue of subordinated and other debt |
|
809 |
1,595 |
|
Subordinated and other debt repaid |
|
(492) |
(750) |
|
Net cash (outflow)/inflow from financing activities - continuing operations |
|
(318) |
347 |
|
Net (decrease)/increase in cash and cash equivalents - continuing operations |
|
(155) |
120 |
|
Net increase/(decrease) in cash and cash equivalents - discontinued operations |
H1(c) |
45 |
(13) |
|
Effects of exchange rate changes on cash and cash equivalents |
|
1,018 |
(746) |
|
Cash and cash equivalents at beginning of the year |
|
5,147 |
5,786 |
|
Cash and cash equivalents at end of the year |
|
6,055 |
5,147 |
|
|
|
|
|
|
Consisting of |
|
|
|
|
Cash and cash equivalents |
|
4,847 |
4,411 |
|
Mandatory reserve deposits with central banks |
|
1,111 |
716 |
|
Cash and cash equivalents included in assets held for sale |
|
97 |
20 |
|
Total |
|
6,055 |
5,147 |
1 The year ended 31 December 2015 has been restated to reflect Institutional Asset Management as a discontinued operation and the adjustment for the consolidation of investment funds. Refer to notes A2 and H1 for more information.
2 Of the Acquisition of interests in subsidiaries, associated undertakings, joint ventures and strategic investments, £9 million relates to the acquisition of subsidiaries as described in note H2 except for the acquisition of Landmark Partners, £167m, which is included within Net increase in cash and cash equivalents - discontinued operations. The £9 million is calculated net of cash acquired. The remainder, £112 million, relates to the acquisition of associated undertakings, joint ventures and strategic investments.
Cash and cash equivalents in the cash flow statement above include mandatory reserve deposits, in line with market practice in South Africa. Except for mandatory reserve deposits with central banks of £1,111 million (December 2015: £716 million) and cash and cash equivalents subject to consolidation of funds of £976 million (December 2015: £1,534 million), management do not consider that there are any material amounts of cash and cash equivalents which are not available for use in the Group's day-to-day operations.
|
Consolidated statement of changes in equity |
|||||||
|
For the year ended 31 December 2016 |
|
|
|
|
|
|
|
|
|
|
Millions |
|
|
|||
|
Year months ended 31 December 2016 |
Note |
Number of shares issued and fully paid |
|
Share capital |
Share premium |
Merger reserve |
Available-for-sale reserve |
|
Shareholders' equity at beginning of the year |
|
4,929 |
|
563 |
1,040 |
1,252 |
40 |
|
Total comprehensive income for the financial year |
|
|
|
|
|
|
|
|
Profit after tax for the financial year |
|
- |
|
- |
- |
- |
- |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
Items that will not be reclassified subsequently to profit or loss |
|
|
|
|
|
|
|
|
Fair value gains/(losses) |
|
|
|
|
|
|
|
|
Property revaluation |
|
- |
|
- |
- |
- |
- |
|
Measurement loss on defined benefit plans |
|
- |
|
- |
- |
- |
- |
|
Income tax on items that will not be reclassified subsequently to profit or loss |
|
- |
|
- |
- |
- |
- |
|
|
|
- |
|
- |
- |
- |
- |
|
Items that may be reclassified subsequently to profit or loss |
|
|
|
|
|
|
|
|
Fair value gains/(losses) |
|
|
|
|
|
|
|
|
Net investment hedge |
|
- |
|
- |
- |
- |
- |
|
Available-for-sale investments |
|
|
|
|
|
|
|
|
Fair value (losses)/gains1 |
|
- |
|
- |
- |
- |
(5) |
|
Recycled to profit or loss |
|
- |
|
- |
- |
- |
- |
|
Shadow accounting |
|
- |
|
- |
- |
- |
- |
|
Currency translation differences on translating foreign operations1 |
|
- |
|
- |
- |
- |
- |
|
Other movements |
|
- |
|
- |
- |
- |
1 |
|
Income tax on items that may be reclassified subsequently to profit or loss |
|
- |
|
- |
- |
- |
2 |
|
Total comprehensive income for the financial year |
|
- |
|
- |
- |
- |
(2) |
|
Transactions with the owners of the Company |
|
|
|
|
|
|
|
|
Contributions and distributions |
|
|
|
|
|
|
|
|
Dividends for the year |
C3 |
- |
|
- |
- |
- |
- |
|
Tax relief on dividends paid |
|
- |
|
- |
- |
- |
- |
|
Equity share-based payment transactions |
|
- |
|
- |
- |
- |
- |
|
OM Asset Management plc shares buyback |
|
- |
|
- |
- |
- |
- |
|
Additional tier 1 capital instruments issued3 |
|
- |
|
- |
- |
- |
- |
|
Preferred securities repurchased4 |
|
- |
|
- |
- |
- |
- |
|
Other movements in share capital |
|
1 |
|
- |
2 |
- |
- |
|
Total contributions and distributions |
|
1 |
|
- |
2 |
- |
- |
|
Changes in ownership |
|
|
|
|
|
|
|
|
Share of movement in associate reserves |
|
- |
|
- |
- |
- |
- |
|
Acquisition of shareholding in Banco Unico, SA |
|
- |
|
- |
- |
- |
- |
|
Disposal of a non-controlling interest in OM Asset Management plc |
|
- |
|
- |
- |
- |
- |
|
Change in participation in subsidiaries |
|
- |
|
- |
- |
- |
- |
|
Total changes in ownership |
|
- |
|
- |
- |
- |
- |
|
Total transactions with the owners of the Company |
|
1 |
|
- |
2 |
- |
- |
|
Shareholders' equity at end of the year |
|
4,930 |
|
563 |
1,042 |
1,252 |
38 |
1 Included in other reserves is a gain of £1 million relating to Economic Transactional Bank (ETI) available-for-sale reserve.
2 Retained earnings were reduced in respect of own shares held in policyholder's funds, ESOP trusts, Black Economic Empowerment trusts and other undertakings at 31 December 2016 by £305 million. (2015: £243 million).
3 On 20 May 2016, Nedbank issued a R1,500 million new-style (Basel III-compliant) additional Tier 1 capital instrument at 3-month JIBAR + 7.0% with a call date of 21 May 2021. On 25 November 2016, Nedbank issued a R500 million new-style (Basel III-compliant) additional Tier 1 capital instrument at 3-month JIBAR + 6.3% with a call date of 26 November 2021. In line with regulations and subject to regulatory approval, these instruments are callable only at the option of the issuer on 21 May 2021 and any interest payment date thereafter.
4 During the year, preference shares with a carrying value of £26 million were purchased by a subsidiary of Nedbank and were classified as treasury shares.
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
£m |
|||||||||||
|
Property revaluation reserve |
Share-based payments reserve |
Other reserves1 |
Foreign currency translation reserve |
Retained earnings2 |
Perpetual preferred callable securities |
Attributable to equity holders of the parent |
Total non-controlling interests |
Total equity |
|||||||||||
|
184 |
367 |
30 |
(2,243) |
5,174 |
273 |
6,680 |
2,254 |
8,934 |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
- |
- |
- |
- |
556 |
14 |
570 |
275 |
845 |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
7 |
- |
- |
- |
(1) |
- |
6 |
1 |
7 |
|||||||||||
|
- |
- |
- |
- |
(18) |
- |
(18) |
(9) |
(27) |
|||||||||||
|
- |
- |
- |
- |
5 |
- |
5 |
3 |
8 |
|||||||||||
|
7 |
- |
- |
- |
(14) |
- |
(7) |
(5) |
(12) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
- |
- |
- |
(104) |
- |
- |
(104) |
- |
(104) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
- |
- |
- |
- |
2 |
- |
(3) |
(2) |
(5) |
|||||||||||
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
|||||||||||
|
(7) |
- |
- |
- |
- |
- |
(7) |
- |
(7) |
|||||||||||
|
- |
- |
- |
1,365 |
- |
- |
1,365 |
536 |
1,901 |
|||||||||||
|
(2) |
- |
(12) |
- |
(4) |
- |
(17) |
(6) |
(23) |
|||||||||||
|
- |
4 |
- |
- |
- |
- |
6 |
2 |
8 |
|||||||||||
|
(2) |
4 |
(12) |
1,261 |
540 |
14 |
1,803 |
800 |
2,603 |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
- |
- |
- |
- |
(426) |
(17) |
(443) |
(171) |
(614) |
|||||||||||
|
- |
- |
- |
- |
- |
3 |
3 |
- |
3 |
|||||||||||
|
- |
38 |
- |
- |
(4) |
- |
34 |
5 |
39 |
|||||||||||
|
- |
- |
- |
- |
(8) |
- |
(8) |
(3) |
(11) |
|||||||||||
|
- |
- |
- |
- |
- |
- |
- |
95 |
95 |
|||||||||||
|
- |
- |
- |
- |
- |
- |
- |
(26) |
(26) |
|||||||||||
|
- |
- |
- |
- |
(35) |
- |
(33) |
- |
(33) |
|||||||||||
|
- |
38 |
- |
- |
(473) |
(14) |
(447) |
(100) |
(547) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
- |
- |
(1) |
- |
- |
- |
(1) |
- |
(1) |
|||||||||||
|
- |
- |
- |
(1) |
(6) |
- |
(7) |
7 |
- |
|||||||||||
|
- |
- |
- |
(25) |
38 |
- |
13 |
153 |
166 |
|||||||||||
|
- |
- |
- |
- |
13 |
- |
13 |
- |
13 |
|||||||||||
|
- |
- |
(1) |
(26) |
45 |
- |
18 |
160 |
178 |
|||||||||||
|
- |
38 |
(1) |
(26) |
(428) |
(14) |
(429) |
60 |
(369) |
|||||||||||
|
182 |
409 |
17 |
(1,008) |
5,286 |
273 |
8,054 |
3,114 |
11,168 |
|||||||||||
|
Consolidated statement of changes in equity |
|
||||||||||||||||||
|
For the year ended 31 December 2016 |
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
Millions |
|
|
|
||||||||||||||
|
Year ended 31 December 2015 |
Notes |
Number of shares issued and fully paid |
|
Share capital |
Share premium |
Merger reserve |
Available- for-sale reserve |
|
|||||||||||
|
Shareholders' equity at beginning of the year |
|
4,907 |
|
561 |
856 |
1,342 |
48 |
|
|||||||||||
|
Total comprehensive income for the financial year |
|
|
|
|
|
|
|
|
|||||||||||
|
Profit after tax for the financial year |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|||||||||||
|
Items that will not be reclassified subsequently to profit or loss |
|
|
|
|
|
|
|
|
|||||||||||
|
Fair value gains |
|
|
|
|
|
|
|
|
|||||||||||
|
Property revaluation |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Measurement gains on defined benefit plans |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Income tax on items that will not be reclassified subsequently to profit or loss |
D1(c) |
- |
|
- |
- |
- |
- |
|
|||||||||||
|
|
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Items that may be reclassified subsequently to profit or loss |
|
|
|
|
|
|
|
|
|||||||||||
|
Fair value gains/(losses) |
|
|
|
|
|
|
|
|
|||||||||||
|
Net investment hedge |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Available-for-sale investments |
|
|
|
|
|
|
|
|
|||||||||||
|
Fair value gains |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Recycled to profit or loss |
|
- |
|
- |
- |
- |
(5) |
|
|||||||||||
|
Exchange differences recycled to profit or loss on disposal of business |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Shadow accounting |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Currency translation differences on translating foreign operations |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Other movements |
|
- |
|
- |
- |
- |
(3) |
|
|||||||||||
|
Total comprehensive income for the financial year |
|
- |
|
- |
- |
- |
(8) |
|
|||||||||||
|
Transactions with the owners of the Company |
|
|
|
|
|
|
|
|
|||||||||||
|
Contributions and distributions |
|
|
|
|
|
|
|
|
|||||||||||
|
Dividends for the year |
C3 |
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Tax relief on dividends paid |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Equity share-based payment transactions |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Proceeds from BEE transactions |
|
- |
|
- |
141 |
- |
- |
|
|||||||||||
|
Merger reserve released |
|
- |
|
- |
- |
(90) |
- |
|
|||||||||||
|
Preferred securities repurchased |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Other movements in share capital |
|
3 |
|
- |
3 |
- |
- |
|
|||||||||||
|
Total contributions and distributions |
|
3 |
|
- |
144 |
(90) |
- |
|
|||||||||||
|
Changes in ownership |
|
|
|
|
|
|
|
|
|||||||||||
|
Shares issued for the acquisition of Quilter Cheviott |
|
19 |
|
2 |
40 |
- |
- |
|
|||||||||||
|
Share in movement in associate reserve |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Disposal of a non-controlling interest in OM Asset Management plc |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Non-controlling interests in subsidiaries acquired |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Change in participation in subsidiaries |
|
- |
|
- |
- |
- |
- |
|
|||||||||||
|
Total changes in ownership |
|
19 |
|
2 |
40 |
- |
- |
|
|||||||||||
|
Total transactions with owners of the Company |
|
22 |
|
2 |
184 |
(90) |
- |
|
|||||||||||
|
Shareholders' equity at end of the year |
|
4,929 |
|
563 |
1,040 |
1,252 |
40 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
£m |
|
||||||||||
|
Property revaluation reserve |
Share-based payments reserve |
Other reserves |
Foreign currency translation reserve |
Retained earnings |
Perpetual preferred callable securities |
Attributable to equity holders of the parent |
Total non-controlling interests |
Total equity |
|
||||||||||
|
178 |
337 |
37 |
(1,370) |
4,891 |
526 |
7,406 |
2,139 |
9,545 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
- |
- |
- |
- |
590 |
24 |
614 |
310 |
924 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
18 |
- |
- |
- |
(5) |
- |
13 |
5 |
18 |
|
||||||||||
|
- |
- |
- |
- |
13 |
- |
13 |
7 |
20 |
|
||||||||||
|
(3) |
- |
- |
- |
(1) |
- |
(4) |
- |
(4) |
|
||||||||||
|
15 |
- |
- |
- |
7 |
- |
22 |
12 |
34 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
- |
- |
- |
13 |
- |
- |
13 |
- |
13 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
- |
- |
(7) |
- |
3 |
- |
(4) |
(3) |
(7) |
|
||||||||||
|
- |
- |
- |
- |
- |
- |
(5) |
- |
(5) |
|
||||||||||
|
- |
- |
- |
(71) |
- |
- |
(71) |
- |
(71) |
|
||||||||||
|
(10) |
- |
- |
- |
- |
- |
(10) |
- |
(10) |
|
||||||||||
|
- |
- |
- |
(780) |
- |
- |
(780) |
(326) |
(1,106) |
|
||||||||||
|
1 |
- |
(3) |
- |
(6) |
- |
(11) |
(13) |
(24) |
|
||||||||||
|
6 |
- |
(10) |
(838) |
594 |
24 |
(232) |
(20) |
(252) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
- |
- |
- |
- |
(422) |
(30) |
(452) |
(160) |
(612) |
|
||||||||||
|
- |
- |
- |
- |
- |
6 |
6 |
- |
6 |
|
||||||||||
|
- |
30 |
- |
- |
5 |
- |
35 |
4 |
39 |
|
||||||||||
|
- |
- |
- |
- |
34 |
- |
175 |
- |
175 |
|
||||||||||
|
- |
- |
- |
- |
90 |
- |
- |
- |
- |
|
||||||||||
|
- |
- |
- |
- |
(11) |
(253) |
(264) |
- |
(264) |
|
||||||||||
|
- |
- |
- |
- |
(19) |
- |
(16) |
- |
(16) |
|
||||||||||
|
- |
30 |
- |
- |
(323) |
(277) |
(516) |
(156) |
(672) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
- |
- |
- |
- |
(42) |
- |
- |
- |
- |
|
||||||||||
|
- |
- |
3 |
- |
- |
- |
3 |
- |
3 |
|
||||||||||
|
- |
- |
- |
(35) |
84 |
- |
49 |
114 |
163 |
|
||||||||||
|
- |
- |
- |
- |
- |
- |
- |
105 |
105 |
|
||||||||||
|
- |
- |
- |
- |
(30) |
- |
(30) |
72 |
42 |
|
||||||||||
|
- |
- |
3 |
(35) |
12 |
- |
22 |
291 |
313 |
|
||||||||||
|
- |
30 |
3 |
(35) |
(311) |
(277) |
(494) |
135 |
(359) |
|
||||||||||
|
184 |
367 |
30 |
(2,243) |
5,174 |
273 |
6,680 |
2,254 |
8,934 |
|
||||||||||
A: Significant accounting policies
A1: Basis of preparation
Old Mutual plc ('the Company' or 'plc') is a company incorporated in England and Wales and is the ultimate Parent Company of the Group companies. Plc Head Office collectively refers to the plc Parent Company and the other centre companies of the Group, which typically own and manage the Group's interests across the Group.
The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and as endorsed by the European Union (EU), and those parts of the Companies Act 2006 applicable to those reporting under IFRS. The accounting policies adopted by the Group, unless otherwise stated, have been applied consistently with those applied in the preparation of the Group's 2015 Annual Report and Accounts.
The Group financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments, financial assets and liabilities designated as fair value through profit or loss, or as available-for-sale, owner-occupied property and investment property. Non-current assets and disposal groups held for sale are stated at the lower of the carrying amount prior to disposal and the fair value less costs to sell.
The Group financial statements have been prepared on the going concern basis which the Directors believe to be appropriate.
The financial statements contained herein do not constitute the Company's statutory accounts for the financial years ended 31 December 2016 and 31 December 2015 within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the financial year ended 31 December 2015 have been reported on by the Company's auditor and delivered to the Registrar of Companies. The statutory accounts for the financial year ended 31 December 2016 will be delivered in due course. The report of the auditor for the financial year ended 31 December 2015 was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
Translation of foreign operations
The assets and liabilities of foreign operations are translated from their respective functional currencies into the Group's presentation currency using the year end exchange rates, and their income and expenses using the average exchange rates. Other than in respect of cumulative translation gains and losses up to 1 January 2004, cumulative unrealised gains or losses resulting from translation of functional currencies to the presentation currency are included as a separate component of shareholders' equity. To the extent that these gains and losses are effectively hedged, the cumulative effect of such gains and losses arising on the hedging instruments are also included in that component of shareholders' equity. Upon the disposal of subsidiaries the cumulative amount of exchange differences deferred in shareholders' equity, net of attributable amounts in relation to net investments, is recognised in profit or loss. Cumulative translation gains and losses up to 1 January 2004 were reset to zero.
The exchange rates used to translate the operating results, assets and liabilities of key foreign business segments to pounds sterling are:
|
|
Year ended 31 December 2016 |
Year ended 31 December 2015 |
||
|
|
Income statement (average rate) |
Statement of financial position (closing rate) |
Income statement (average rate) |
Statement of financial position (closing rate) |
|
Rand |
19.9305 |
16.9551 |
19.5223 |
22.8183 |
|
US dollars |
1.3558 |
1.2345 |
1.5285 |
1.4734 |
|
Euro |
1.2251 |
1.1705 |
1.3765 |
1.3560 |
A2: Significant corporate activity and business changes during the year
Acquisitions completed during the year
The Group completed the following significant acquisitions during the year:
Acquisition of a further stake in Banco Unico, SA
On 3 October 2016 the Group acquired a 10.9% share in Banco Unico, SA to reach a controlling 50% plus one share (2015: 38.3% share). The acquiree is a banking entity in Mozambique and the acquisition, in line with the Group's strategy of expanding into the rest of Africa, was made by purchasing Banco Unico, SA shares from a third party.
The accounting related to the step up in ownership from 38.3% to 50% plus one share is such that it effectively requires a simultaneous sale of 38.3% followed by an acquisition of the fair value of 50% plus one share of the business. Consequently a loss of £11 million, comprising a loss on step up acquisition and a release of foreign currency translation reserves, was realised on the transaction. Consistent with usual practice, this loss was recognised in the IFRS income statement but excluded from the determination of AOP. The financial results and position of Banco Unico, SA have been consolidated with effect from 3 October 2016.
The purchase price allocation has been completed and goodwill of £1 million and other intangible assets of £8 million have been recognised on this transaction.
Acquisition of Landmark Partners (Landmark)
On 18 August 2016, OM Asset Management plc (OMAM) completed the acquisition of a 60% equity interest in Landmark, a leading global secondary private equity, real estate and real asset investment firm for $242 million (£185 million) in cash with the potential for an additional payment of up to $225 million (£182 million) on or around 31 December 2018. As the potential additional payment is dependent on future service and other conditions, no amounts have been attributed to the consideration of the business. Certain key members of the management team of Landmark have retained the remaining 40% interest in the business as ownership units. Both the potential additional payment and the 40% ownership units held by management are recognised as share-based payment transactions due to service conditions and settlement features. These arrangements vest over varying increments from 31 December 2018 through 31 December 2024.
Goodwill of £111 million and other intangible assets of £63 million were recognised as a result of the transaction. Refer to note H2 for more information.
Acquisition of AAM Advisory (AAM)
On 16 March 2016, Old Mutual Wealth completed the acquisition of 100% of AAM, a Singapore based wealth advice company. The consideration payable was an initial SGD 14 million (£7 million) with additional potential deferred consideration of SGD 26 million (£13 million), which is subject to AAM meeting certain performance targets for the period from 2016 to 2018.
Goodwill of £4 million and other intangible assets of £3 million were recognised as a result of the transaction.
Old Mutual Private Client Advisors (PCA)
During the second half of 2016, Old Mutual Wealth (OMW) completed the acquisition of a number of PCA businesses. The total consideration payable was an initial £8 million with additional potential deferred consideration of £8 million, dependent upon meeting certain performance targets, generally relating to funds under management. Goodwill of £8 million and other intangible assets of £7 million were recognised as a result of the transactions.
Purchase of remaining stake in Credit Guarantee Insurance Company (CGIC)
On 1 March 2016, Emerging Markets acquired the remaining 13.9% of the shares in CGIC for R190 million (£10 million) resulting in CGIC becoming a wholly owned subsidiary. This transaction has resulted in a debit being directly recognised in reserves of R78 million (£4 million), which is the excess of the consideration paid and the proportionate share of the net assets of CGIC acquired.
During the third quarter of 2016, Emerging Markets accepted an offer from Atradius N.V. to dispose of 25% of CGIC for R494 million (£28 million). The transaction is subject to due diligence and regulatory approval and is expected to be finalised during 2017. The Group expects to recognise a gain on disposal of approximately R289 million (£15 million) directly in equity on completion of the sale of this minority stake.
Other activities during the year
The following two transactions are between Group entities and therefore it has no net impact on the Group financial statements:
Purchase of seed capital investments from Old Mutual plc
On 15 September 2016, OM Asset Management plc (OMAM) purchased approximately $40 million (£32 million) of seed investments from Old Mutual plc under the terms of the Seed Capital Management Agreement, as amended. OMAM intends to purchase all remaining seed capital investments covered by the Seed Capital Management Agreement around 30 June 2017
Amendment of the OMAM Deferred Tax Asset Deed (DTA)
On 13 June 2016, OMAM and OM Group (UK) Limited (OMGUK) entered into a Heads of Agreement amending the DTA to provide that the obligations of OMAM to make future payments to OMGUK under the DTA, which were originally scheduled to continue until 31 January 2020, would be amended as of 31 December 2016 resulting in a payment of the net present value of the future payments due to OMGUK valued as of 31 December 2016. This payment equals approximately $143 million (£115 million) and will be made over three instalments on each of 30 June 2017, 31 December 2017 and 30 June 2018. The agreement contains certain provisions allowing OMAM to claw back amounts paid in the event that deferred tax assets recognised by OMAM are not recovered by the OMAM business. These claw back arrangements create a potential commitment from OMGUK to OMAM which extends beyond the period of managed separation.
Disposals completed during the year
OM Asset Management plc share buyback and secondary public offering
On 19 December 2016, the Group announced the closing of the secondary public offering of 14.95 million of OM Asset Management plc (OMAM) at a price to the public of $14.25 per share.
Additionally, on 19 December 2016, OMAM repurchased 6 million ordinary shares directly from OM Group (UK) Limited (a wholly owned subsidiary of Old Mutual plc), at a price of $14.25 per share.
The Group realised $291 million (£235 million) gross proceeds, less the underwriting discount from these transactions. A profit of £13 million was recognised directly in equity, reflecting the excess of the consideration over the share of net assets disposed. Foreign currency translation reserves of £25 million were recognised directly in equity and additional non-controlling interest of £153 million was recognised in the statement of financial position.
Following the sale, the Group now owns 51.7% of OMAM. OMAM did not sell any shares in the offering and did not receive any proceeds from the offering.
Disposal of Rogge Global Partners Limited
On 31 May 2016, the Group completed the sale of its interest in Rogge Global Partners Limited (Rogge), a fixed income asset manager, to Allianz Global Investors GmbH. The sales proceeds received are subject to adjustment as amounts could either be clawed back or future amounts become payable based on Rogge's future performance. Final adjustments to the sales proceeds are expected to be resolved during Q4 2017. A profit on disposal of £10 million has been recognised, which reflects the Directors' current assessment of the likely final amount recoverable.
A: Significant accounting policies continued
A2: Significant corporate activity and business changes during the year continued
Disposals announced but not completed during the year
Disposal of Old Mutual Wealth Italy
On 9 January 2017, the Group completed the disposal of Old Mutual Wealth Italy, part of the Old Mutual Wealth business for a cash consideration of €278 million (£210 million net of costs) plus interest to completion.
For the year ended 31 December 2016, a goodwill impairment loss of £46 million has been recognised in profit or loss as the net asset value of the business disposed of exceeds the expected net proceeds. The related assets and liabilities were classified as held for sale at 31 December 2016. Refer to note H1 for further information.
Financing activities completed during the year
Nedbank
On 20 May 2016, Nedbank Limited issued a R1,500 million new-style (Basel III-compliant) additional Tier 1 capital instrument at 3 month JIBAR + 7.0% with a call date of 21 May 2021.
On 25 November 2016, Nedbank Limited issued a R500 million new-style (Basel III-compliant) additional Tier 1 capital instrument at 3 month JIBAR + 6.3% with a call date of 26 November 2021.
These additional Tier 1 capital instruments represent perpetual, subordinated instruments, with no redemption date. The instruments are redeemable subject to regulatory approval at the sole discretion of the issuer, Nedbank Limited from the applicable call date and following a regulatory event or following a tax event. The payment of interest is at the discretion of the issuer and interest payments are non-cumulative. In addition, if certain conditions are reached the regulator may prohibit Nedbank from making interest payments. Accordingly the instruments are classified as equity instruments and disclosed as non-controlling interest.
Nedbank further issued and redeemed debt instruments in the normal course of its funding program. Refer to note E2 for further information.
Financing activities announced but not yet completed
Old Mutual plc
On 3 February 2017, the Group repurchased all of the £273 million Tier 1 preferred perpetual callable securities and paid cash from the Groups' existing resources. A £29 million loss, including accrued interest and the costs of acquiring the instruments, will be recognised directly in equity in the 2017 financial statements.
Restatement of prior year comparative amounts
Overview
In preparing the Group financial statements for the year ended 31 December 2016, the 2015 financial statements have required adjustments for:
§ The classification of the Institutional Asset Management (IAM) operating segment as a discontinued operation, and
§ The identification of additional investment funds managed by Emerging Markets as being controlled by the Group.
These adjustments, in aggregate and individually, result in presentational changes to the financial statements, and neither of these adjustments affects the reported IFRS or AOP results or equity attributable to equity holders of the parent.
IAM classified as a discontinued operation in 2016 (IAM - discontinued operation)
For the year ended 31 December 2016, IAM has been classified as discontinued operation in the IFRS consolidated income statement and consolidated statement of cash flows, with comparative figures being restated. The assets and liabilities of IAM are classified as held for sale in the consolidated statement of financial position in the current year. This treatment is consistent with the requirements of IFRS, given the Group's stated strategic intentions and has been presented in accordance with the requirements of IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations'. Refer to note H1 for further information.
Consolidation of additional OMEM investment funds (Consol - Investment Funds)
During 2016, the Group has re-evaluated the criteria applied in determining whether investment funds should be consolidated under IFRS 10 'Consolidated Financial Statements' in the Group financial statements. This has resulted in the identification of additional investments funds that are required to be included in the consolidated financial statements. As a result, comparative information has been restated accordingly. The Group has not been able to determine the impact on the consolidated statement of financial position as at 1 January 2015 because the business has subsequently implemented an Investment Repository which has enabled the Group as at 31 December 2015 to identify more widely the investment funds that IFRS 10 regards as controlled. The prior year adjustment did not impact the net assets of the Group, the equity attributable to ordinary equity holders of the parent or any key performance indicators reported by the Group. If the Group were able to determine the impact on the consolidated statement of financial position at 1 January 2015, the material line items that would have been impacted are investments and securities, cash and cash equivalents and third party interest in consolidated funds. The impact on the income statement for 2015 has been obtained from the financial information available for the investment funds consolidated as at 31 December 2015. The income statement effect of any additional investment funds that have not been identified as at 1 January 2015 is likely to be immaterial.
Summary impact
The following table summarises the restatement impact, for both the classification of IAM as a discontinued operation and the identification of additional entities to be consolidated on the Group's financial statements:
|
|
|
|
|
£m |
|
|
|
Restatement |
|
|
|
|
2015 As Reported |
IAM - Discontinued Operations |
Consol - Investment Funds |
2015 As Restated |
|
Statement of financial position |
|
|
|
|
|
Assets |
|
|
|
|
|
Investments and securities |
82,601 |
- |
1,418 |
84,019 |
|
Trade, other receivables and other assets |
2,007 |
- |
(60) |
1,947 |
|
Cash and cash equivalents |
4,520 |
- |
(109) |
4,411 |
|
Total assets |
133,548 |
- |
1,249 |
134,797 |
|
Liabilities |
|
|
|
|
|
Third-party interests in consolidated funds |
4,661 |
- |
1,287 |
5,948 |
|
Trade, other payables and other liabilities |
3,787 |
- |
(38) |
3,749 |
|
Total liabilities |
124,614 |
- |
1,249 |
125,863 |
|
|
|
|
|
|
|
Income statement |
|
|
|
|
|
Revenue |
|
|
|
|
|
Investment Return (non-banking) |
3,795 |
2 |
8 |
3,805 |
|
Fee and commission income, and income from service activities |
3,027 |
(491) |
- |
2,536 |
|
Other income |
86 |
(8) |
1 |
79 |
|
Total revenue |
13,695 |
(497) |
9 |
13,207 |
|
Expenses |
|
|
|
|
|
Fee and commission expenses, and other acquisition costs |
(786) |
6 |
15 |
(765) |
|
Change in third-party interest in consolidated funds |
(208) |
- |
(18) |
(226) |
|
Finance cost |
(49) |
2 |
- |
(47) |
|
Other operating and administrative expenses |
(3,759) |
380 |
(6) |
(3,385) |
|
Total expenses |
(12,407) |
388 |
(9) |
(12,028) |
|
Share of associated undertakings profit after tax |
67 |
(8) |
- |
59 |
|
Profit on disposal of subs, associates and strategic investments |
(36) |
(1) |
- |
(37) |
|
Profit before tax |
1,319 |
(118) |
- |
1,201 |
|
Income tax expense |
(374) |
27 |
- |
(347) |
|
Profit from continuing operations after tax |
945 |
(91) |
- |
854 |
|
(Loss)/profit from discontinued operations after tax |
(21) |
91 |
- |
70 |
|
|
|
|
|
|
|
Statement of cash flows |
|
|
|
|
|
Net cash inflow from operating activities - continuing operations |
5,690 |
(48) |
22 |
5,664 |
|
Net cash outflow from investing activities - continuing operations |
(5,757) |
(3) |
(131) |
(5,891) |
|
Net cash inflow from financing activities - continuing operations |
283 |
64 |
- |
347 |
|
Net increase in cash and cash equivalents - discontinued operations |
- |
(13) |
- |
(13) |
A3: Critical accounting estimates and judgements
In the preparation of these financial statements, the Group is required to make estimates and judgements that affect items reported in the consolidated income statement, statement of financial position, other primary statements and related supporting notes.
Critical accounting estimates and judgements are those which involve the most complex or subjective judgements or assessments. Where applicable the Group applies estimation and assumption setting techniques that are aligned with relevant actuarial and accounting guidance based on knowledge of the current situation. This requires assumptions and predictions of future events and actions. There have been no significant methodology changes to the critical accounting estimates and judgements that the Group applied at 31 December 2015.
B: Segment information
B1: Basis of segmentation
Segment presentation
The Group's reported segments are Emerging Markets, Nedbank Old Mutual Wealth, Institutional Asset Management and plc Head Office, (which includes the plc Parent Company and the other centre companies of the Group, which typically own and manage the Group's interests). All these businesses, except Institutional Asset Management (IAM), have been classified as continuing operations in the IFRS income statement for all reporting periods. In determining the Group's adjusted operating profit (AOP), all these businesses have been classified as core operations for all reporting periods.
For the year ended 31 December 2016, Institutional Asset Management has been classified as discontinued operation in the IFRS consolidated income statement. Comparative profit and loss segment information has been restated accordingly. This treatment is consistent with the requirements of IFRS, given the Group's stated strategic intentions. The operating result of IAM includes Rogge Global Partners Limited up to the date of disposal on 31 May 2016 and the full year result of OM Asset Management plc (OMAM). Consistent with the Group's AOP policy as described in the Basis of preparation of adjusted operating profit on page 71, we will continued to recognise OMAM's operating result within the Group's AOP despite it being classified as a discontinued operation in the IFRS income statement and as held for sale in the statement of financial position.
For all reporting periods, Old Mutual Bermuda is classified as a continuing operation in the IFRS income statement, but as non-core in determining the Group's AOP. For the year ended 31 December 2016, following the repayment of the majority of outstanding notes, interest payable in respect of Bermuda loan notes issued to Old Mutual plc are also included within non-core operations and excluded from AOP as it is no longer considered material.
For the year ended 31 December 2015, other items disclosed as discontinued operations relate to payments in respect of the disposal of US Life in 2011. Further detail is included in note H1.
The Group's segmental results are analysed and reported on a basis consistent with the way that management and the Board of Directors of Old Mutual plc assesses performance of the underlying businesses and allocates resources. Information is presented to the Board on a consolidated basis in pounds sterling (the presentation currency) and in the functional currency of each business.
Adjusted operating profit is one of the key measures reported to the Group's management and Board of Directors for their consideration in the allocation of resources to, and the review of the performance of the segments. As appropriate to the business line, the Board reviews additional measures to assess the performance of each of the segments. These typically include sales, net client cash flows, funds under management, gross earned premiums, underwriting results, net interest income, non-interest revenue and credit losses.
Consistent with internal reporting, assets, liabilities, revenues and expenses that are not directly attributable to a particular segment are allocated between segments where appropriate and where there is a reasonable basis for doing so. The Group accounts for inter-segment revenues and transfers as if the transactions were with third parties at current market prices.
The revenues generated in each reported segment can be seen in the analysis of profits and losses in note B3. The segmental information in notes B3 and B4, reflects the adjusted and IFRS measures of profit or loss and the assets and liabilities for each operating segment as provided to management and the Board of Directors. There are no differences between the measurement of the assets and liabilities reflected in the primary statements and that reported for the segments.
The Group is primarily engaged in the following business activities from which it generates revenue: life assurance (premium income), asset management business (fee and commission income), banking (banking interest receivable and investment banking income) and property & casualty (premium income). Other revenue includes gains and losses on investment securities. An analysis of segment revenues and expenses and the Group's revenues and expenses is shown in note B3.
The principal lines of business from which each operating segment derives its revenues are as follows:
Core operations
Emerging Markets - life assurance, property & casualty, asset management and banking
Nedbank - banking, asset management and life assurance
Old Mutual Wealth - life assurance and asset management
Institutional Asset Management - asset management
Non-core operation
Old Mutual Bermuda - life assurance
B2: Gross earned premiums and deposits to investment contracts
|
|
|
|
£m |
|
Year ended 31 December 2016 |
Emerging Markets |
Old Mutual Wealth |
Total |
|
Life assurance - insurance contracts |
1,393 |
142 |
1,535 |
|
Life assurance - investment contracts with discretionary participation features |
1,525 |
- |
1,525 |
|
Property & casualty |
808 |
- |
808 |
|
Gross earned premiums |
3,726 |
142 |
3,868 |
|
Life assurance - unit-linked and similar contracts and other investment contracts recognised as deposits |
1,656 |
7,952 |
9,608 |
|
|
|
|
|
|
|
|
|
£m |
|
Year ended 31 December 2015 |
Emerging Markets |
Old Mutual Wealth |
Total |
|
Life assurance - insurance contracts |
1,469 |
154 |
1,623 |
|
Life assurance - investment contracts with discretionary participation features |
1,221 |
- |
1,221 |
|
Property & casualty |
745 |
- |
745 |
|
Gross earned premiums |
3,435 |
154 |
3,589 |
|
Life assurance - unit-linked and similar contracts and other investment contracts recognised as deposits |
2,020 |
7,988 |
10,008 |
B: Segment information continued
B3: Adjusted operating profit statement - segment information for the year ended 31 December 2016
|
|
||||
|
|
Notes |
|
Emerging Markets |
Nedbank |
|
Revenue |
|
|
|
|
|
Gross earned premiums |
B2 |
|
3,726 |
- |
|
Outward reinsurance |
|
|
(314) |
- |
|
Net earned premiums |
|
|
3,412 |
- |
|
Investment return (non-banking) |
|
|
1,814 |
- |
|
Banking interest and similar income |
|
|
229 |
3,677 |
|
Banking trading, investment and similar income |
|
|
14 |
241 |
|
Fee and commission income, and income from service activities |
|
|
588 |
922 |
|
Other income |
|
|
64 |
24 |
|
Total revenue3 |
|
|
6,121 |
4,864 |
|
Expenses |
|
|
|
|
|
Claims and benefits (including change in insurance contract provisions) |
|
|
(3,507) |
- |
|
Reinsurance recoveries |
|
|
222 |
- |
|
Net claims and benefits incurred |
|
|
(3,285) |
- |
|
Change in investment contract liabilities |
|
|
(545) |
- |
|
Credit impairment charges |
|
|
(44) |
(228) |
|
Finance costs |
|
|
(33) |
- |
|
Banking interest payable and similar expenses |
|
|
(90) |
(2,311) |
|
Fee and commission expenses, and other acquisition costs |
|
|
(350) |
(8) |
|
Change in third-party interest in consolidated funds |
|
|
- |
- |
|
Other operating and administrative expenses |
|
|
(1,115) |
(1,512) |
|
Income tax attributable to policyholder returns |
|
|
(50) |
- |
|
Total expenses |
|
|
(5,512) |
(4,059) |
|
Share of associated undertakings' and joint ventures' profits/(losses) after tax |
|
|
10 |
(6) |
|
Profit on disposal of subsidiaries, associated undertakings and strategic investments |
C1(c) |
|
- |
- |
|
Adjusted operating profit/(loss) before tax and non-controlling interests |
|
|
619 |
799 |
|
Income tax expense |
D1 |
|
(165) |
(199) |
|
Non-controlling interests |
|
|
(17) |
(288) |
|
Adjusted operating profit/(loss) after tax and non-controlling interests |
|
|
437 |
312 |
|
Adjusting items after tax and non-controlling interests |
C1(a) |
|
(93) |
(30) |
|
Profit/(loss) after tax from continuing operations |
|
|
344 |
282 |
|
Profit from discontinued operations after tax |
H1 |
|
- |
- |
|
Profit/(loss) after tax attributable to equity holders of the parent |
|
|
344 |
282 |
1 The plc Head Office segment includes the Old Mutual plc holding company and other centre companies.
2 Consolidation adjustments comprise the consolidation of investment funds and eliminations of inter-segment transactions.
3 Included within total revenue prior to consolidation adjustments are the following amounts derived from trading with other segments: Emerging Markets: £75 million (December 2015: £80 million); Nedbank: £9 million (December 2015: £3 million); Old Mutual Wealth: £2 million (December 2015: £3 million); Institutional Asset Management: £6 million (December 2015: £6 million); and non-core operations: £2 million (December 2015: £4 million).
4 Non-core operations for the year ended 31 December 2016 comprises Old Mutual Bermuda. Old Mutual Bermuda's loss for the year ended 31 December 2016 was £5 million.
5 Discontinued operations comprise the operating result of Institutional Asset Management (IAM) of £104 million that has been included in the determination of AOP. In the IFRS consolidated income statement, IAM has been classified as a discontinued operation. The discontinued operations column reflects the individual line items in the IFRS consolidated income statement that have been reclassified to discontinued operations. Refer to note B1 and H1 for further information.
|
|
|
|
|
|
|
|
|
£m |
|
Old Mutual Wealth |
Institutional Asset Management |
plc Head Office1 |
Consolidation adjustments2 |
Adjusted operating profit |
Adjusting items (note C1) |
Non-core operations4 |
Discontinued Operations5 |
IFRS Income statement |
|
|
|
|
|
|
|
|
|
|
|
142 |
- |
- |
- |
3,868 |
- |
- |
- |
3,868 |
|
(84) |
- |
- |
- |
(398) |
- |
- |
- |
(398) |
|
58 |
- |
- |
- |
3,470 |
- |
- |
- |
3,470 |
|
5,827 |
- |
54 |
712 |
8,407 |
(69) |
(13) |
- |
8,325 |
|
- |
- |
- |
- |
3,906 |
- |
- |
- |
3,906 |
|
- |
- |
- |
- |
255 |
- |
- |
- |
255 |
|
1,168 |
500 |
- |
(25) |
3,153 |
(17) |
- |
(500) |
2,636 |
|
11 |
1 |
- |
4 |
104 |
- |
- |
- |
104 |
|
7,064 |
501 |
54 |
691 |
19,295 |
(86) |
(13) |
(500) |
18,696 |
|
|
|
|
|
|
|
|
|
|
|
(199) |
- |
- |
- |
(3,706) |
- |
24 |
- |
(3,682) |
|
169 |
- |
- |
- |
391 |
- |
- |
- |
391 |
|
(30) |
- |
- |
- |
(3,315) |
- |
24 |
- |
(3,291) |
|
(5,671) |
- |
- |
- |
(6,216) |
- |
- |
- |
(6,216) |
|
- |
- |
- |
- |
(272) |
- |
- |
- |
(272) |
|
- |
(6) |
(88) |
- |
(127) |
(7) |
- |
6 |
(128) |
|
- |
- |
- |
- |
(2,401) |
- |
- |
- |
(2,401) |
|
(392) |
(9) |
- |
(19) |
(778) |
24 |
- |
9 |
(745) |
|
- |
- |
- |
(691) |
(691) |
- |
- |
- |
(691) |
|
(617) |
(356) |
(118) |
19 |
(3,699) |
(407) |
(16) |
381 |
(3,741) |
|
(94) |
- |
- |
- |
(144) |
144 |
- |
- |
- |
|
(6,804) |
(371) |
(206) |
(691) |
(17,643) |
(246) |
8 |
396 |
(17,485) |
|
- |
11 |
- |
- |
15 |
- |
- |
(11) |
4 |
|
- |
- |
- |
- |
- |
19 |
- |
(18) |
1 |
|
260 |
141 |
(152) |
- |
1,667 |
(313) |
(5) |
(133) |
1,216 |
|
(47) |
(36) |
49 |
- |
(398) |
(106) |
- |
29 |
(475) |
|
- |
(36) |
- |
- |
(341) |
66 |
- |
- |
(275) |
|
213 |
69 |
(103) |
- |
928 |
(353) |
(5) |
(104) |
466 |
|
(217) |
3 |
(16) |
- |
(353) |
353 |
- |
- |
- |
|
(4) |
72 |
(119) |
- |
575 |
- |
(5) |
(104) |
466 |
|
- |
- |
- |
- |
- |
- |
- |
104 |
104 |
|
(4) |
72 |
(119) |
- |
575 |
- |
(5) |
- |
570 |
B: Segment information continued
B3: Adjusted operating profit statement - segment information for the year ended 31 December 2015 (Restated)1
|
|
|
|
|
|
|
|
Notes |
|
Emerging Markets |
Nedbank |
|
Revenue |
|
|
|
|
|
Gross earned premiums |
B2 |
|
3,435 |
- |
|
Outward reinsurance |
|
|
(253) |
- |
|
Net earned premiums |
|
|
3,182 |
- |
|
Investment return (non-banking) |
|
|
2,445 |
- |
|
Banking interest and similar income |
|
|
235 |
3,085 |
|
Banking trading, investment and similar income |
|
|
5 |
208 |
|
Fee and commission income, and income from service activities |
|
|
560 |
894 |
|
Other income |
|
|
70 |
12 |
|
Total revenue |
|
|
6,497 |
4,199 |
|
Expenses |
|
|
|
|
|
Claims and benefits (including change in insurance contract provisions) |
|
|
(3,294) |
- |
|
Reinsurance recoveries |
|
|
184 |
- |
|
Net claims and benefits incurred |
|
|
(3,110) |
- |
|
Change in investment contract liabilities |
|
|
(1,142) |
- |
|
Credit impairment charges |
|
|
(62) |
(245) |
|
Finance costs |
|
|
(15) |
- |
|
Banking interest payable and similar expenses |
|
|
(93) |
(1,833) |
|
Fee and commission expenses, and other acquisition costs |
|
|
(323) |
(9) |
|
Change in third-party interest in consolidated funds |
|
|
- |
- |
|
Other operating and administrative expenses |
|
|
(1,121) |
(1,403) |
|
Income tax attributable to policyholder returns |
|
|
(30) |
- |
|
Total expenses |
|
|
(5,896) |
(3,490) |
|
Share of associated undertakings' and joint ventures' profits/(losses) after tax |
|
14 |
45 |
|
|
Loss on disposal of subsidiaries, associated undertakings and strategic investments |
C1(c) |
|
- |
- |
|
Adjusted operating profit/(loss) before tax and non-controlling interests |
|
|
615 |
754 |
|
Income tax expense |
D1 |
|
(173) |
(180) |
|
Non-controlling interests |
|
|
(24) |
(272) |
|
Adjusted operating profit/(loss) after tax and non-controlling interests |
|
|
418 |
302 |
|
Adjusting items after tax and non-controlling interests |
C1(a) |
|
(56) |
7 |
|
Profit/(loss) after tax from continuing operations |
|
|
362 |
309 |
|
Profit from discontinued operations after tax |
H1 |
|
- |
- |
|
Profit/(loss) after tax attributable to equity holders of the parent |
|
|
362 |
309 |
1 The year ended 31 December 2015 has been restated to reflect Institutional Asset Management as a discontinued operation and the adjustment for the consolidation of investment funds. Refer to notes A2 and H1 for more information.
2 The plc Head Office segment includes the Old Mutual plc holding company and other centre companies.
3 Consolidation adjustments comprise the consolidation of investment funds and eliminations of inter-segment transactions.
4 Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda's loss after tax for the year ended 31 December 2015 was £5 million.
5 Discontinued operations include the operating result of Institutional Asset Management of £91 million that has been classified as discontinued in the IFRS income statement as well as £21 million relating to the disposal of US Life in 2011. Refer to note H1 for further information.
|
|
|
|
|
|
|
|
|
£m |
|
Old Mutual Wealth |
Institutional Asset Management |
plc Head Office2 |
Consolidation adjustments3 |
Adjusted operating profit |
Adjusting items (note C1) |
Non-core operations4 |
Discontinued operations5 |
IFRS Income statement |
|
|
|
|
|
|
|
|
|
|
|
154 |
- |
- |
- |
3,589 |
- |
- |
- |
3,589 |
|
(82) |
- |
- |
- |
(335) |
- |
- |
- |
(335) |
|
72 |
- |
- |
- |
3,254 |
- |
- |
- |
3,254 |
|
1,158 |
- |
17 |
291 |
3,911 |
(73) |
(35) |
2 |
3,805 |
|
- |
- |
- |
- |
3,320 |
- |
- |
- |
3,320 |
|
- |
- |
- |
- |
213 |
- |
- |
- |
213 |
|
1,140 |
491 |
- |
(39) |
3,046 |
(19) |
- |
(491) |
2,536 |
|
13 |
5 |
- |
(20) |
80 |
- |
7 |
(8) |
79 |
|
2,383 |
496 |
17 |
232 |
13,824 |
(92) |
(28) |
(497) |
13,207 |
|
|
|
|
|
|
|
|
|
|
|
(169) |
- |
- |
- |
(3,463) |
- |
13 |
- |
(3,450) |
|
95 |
- |
- |
- |
279 |
- |
- |
- |
279 |
|
(74) |
- |
- |
- |
(3,184) |
- |
13 |
- |
(3,171) |
|
(1,061) |
- |
- |
- |
(2,203) |
- |
- |
- |
(2,203) |
|
- |
- |
- |
- |
(307) |
- |
- |
- |
(307) |
|
- |
(2) |
(83) |
- |
(100) |
51 |
- |
2 |
(47) |
|
- |
- |
- |
- |
(1,926) |
2 |
- |
- |
(1,924) |
|
(416) |
(6) |
(4) |
(42) |
(800) |
32 |
(3) |
6 |
(765) |
|
- |
- |
- |
(226) |
(226) |
- |
- |
- |
(226) |
|
(524) |
(347) |
(92) |
36 |
(3,451) |
(301) |
(13) |
380 |
(3,385) |
|
(1) |
- |
- |
- |
(31) |
31 |
- |
- |
- |
|
(2,076) |
(355) |
(179) |
(232) |
(12,228) |
(185) |
(3) |
388 |
(12,028) |
|
- |
8 |
- |
- |
67 |
- |
- |
(8) |
59 |
|
- |
- |
- |
- |
- |
(36) |
- |
(1) |
(37) |
|
307 |
149 |
(162) |
- |
1,663 |
(313) |
(31) |
(118) |
1,201 |
|
(43) |
(30) |
23 |
- |
(403) |
29 |
- |
27 |
(347) |
|
- |
(33) |
- |
- |
(329) |
19 |
- |
- |
(310) |
|
264 |
86 |
(139) |
- |
931 |
(265) |
(31) |
(91) |
544 |
|
(222) |
(20) |
26 |
- |
(265) |
265 |
- |
- |
- |
|
42 |
66 |
(113) |
- |
666 |
- |
(31) |
(91) |
544 |
|
- |
- |
- |
- |
- |
- |
- |
70 |
70 |
|
42 |
66 |
(113) |
- |
666 |
- |
(31) |
(21) |
614 |
B: Segment information continued
B4: Statement of financial position - segment information at 31 December 2016
|
|
|
|
|
|
|
|
Notes |
|
Emerging Markets1 |
Nedbank |
|
Assets |
|
|
|
|
|
Goodwill and other intangible assets |
F1 |
|
461 |
576 |
|
Mandatory reserve deposits with central banks |
|
|
8 |
1,103 |
|
Property, plant and equipment |
|
|
345 |
529 |
|
Investment property |
|
|
1,696 |
1 |
|
Deferred tax assets |
|
|
57 |
29 |
|
Investments in associated undertakings and joint ventures |
|
|
143 |
388 |
|
Deferred acquisition costs |
|
|
166 |
- |
|
Reinsurers' share of policyholder liabilities |
|
|
246 |
6 |
|
Loans and advances |
E1 |
|
1,210 |
41,703 |
|
Investments and securities |
|
|
33,699 |
8,844 |
|
Current tax receivable |
|
|
20 |
33 |
|
Trade, other receivables and other assets |
|
|
843 |
966 |
|
Derivative financial instruments |
|
|
228 |
1,040 |
|
Cash and cash equivalents |
|
|
1,820 |
1,556 |
|
Assets held for sale |
H2 |
|
116 |
17 |
|
Inter-segment funding - assets |
|
|
- |
- |
|
Total assets |
|
|
41,058 |
56,791 |
|
Liabilities |
|
|
|
|
|
Long-term business insurance policyholder liabilities |
|
|
9,310 |
172 |
|
Investment contract liabilities |
|
|
23,614 |
905 |
|
Property & casualty liabilities |
|
|
482 |
- |
|
Third-party interests in consolidated funds |
|
|
- |
- |
|
Borrowed funds |
E2 |
|
694 |
3,072 |
|
Provisions and accruals |
|
|
118 |
- |
|
Deferred revenue |
|
|
68 |
1 |
|
Deferred tax liabilities |
|
|
203 |
39 |
|
Current tax payable |
|
|
100 |
13 |
|
Trade, other payables and other liabilities |
|
|
2,860 |
2,081 |
|
Amounts owed to bank depositors |
|
|
643 |
44,915 |
|
Derivative financial instruments |
|
|
295 |
784 |
|
Liabilities held for sale |
H2 |
|
1 |
- |
|
Inter-segment funding - liabilities |
|
|
- |
- |
|
Total liabilities |
|
|
38,388 |
51,982 |
|
Net assets1 |
|
|
2,670 |
4,809 |
|
Equity |
|
|
|
|
|
Equity attributable to equity holders of the parent |
|
|
2,455 |
2,476 |
|
Non-controlling interests |
|
|
215 |
2,333 |
|
Ordinary shares |
F2(b)(i) |
|
215 |
1,992 |
|
Preferred securities |
F2(b)(ii) |
|
- |
341 |
|
|
|
|
|
|
|
Total equity |
|
|
2,670 |
4,809 |
1 The net assets of Emerging Markets exclude £235 million (December 2015: £167 million) of investments held by policyholder funds in Group equity and debt instruments. These investments are in the Company's ordinary shares and in the subordinated liabilities and preferred securities issued by Nedbank.
2 The plc Head Office segment includes the Old Mutual plc holding company and other centre companies.
3 Consolidation adjustments comprise the consolidation of investment funds and eliminations of inter-segment balances.
|
|
|
|
|
|
£m |
|
Old Mutual Wealth |
Institutional Asset Management |
plc Head Office2 |
Non-core operation |
Consolidation adjustments3 |
Total |
|
|
|
|
|
|
|
|
1,434 |
- |
- |
- |
- |
2,471 |
|
- |
- |
- |
- |
- |
1,111 |
|
18 |
- |
- |
- |
- |
892 |
|
- |
- |
- |
- |
- |
1,697 |
|
8 |
- |
- |
2 |
- |
96 |
|
1 |
- |
10 |
- |
- |
542 |
|
590 |
- |
- |
- |
- |
756 |
|
2,863 |
- |
- |
- |
- |
3,115 |
|
220 |
- |
- |
- |
(25) |
43,108 |
|
50,784 |
- |
309 |
53 |
6,844 |
100,533 |
|
21 |
- |
- |
- |
- |
74 |
|
590 |
- |
157 |
3 |
(143) |
2,416 |
|
- |
- |
31 |
27 |
14 |
1,340 |
|
769 |
- |
611 |
22 |
69 |
4,847 |
|
6,478 |
1,959 |
- |
- |
- |
8,570 |
|
- |
- |
874 |
58 |
(932) |
- |
|
63,776 |
1,959 |
1,992 |
165 |
5,827 |
171,568 |
|
|
|
|
|
|
|
|
416 |
- |
- |
84 |
- |
9,982 |
|
53,080 |
- |
- |
- |
- |
77,599 |
|
- |
- |
- |
- |
- |
482 |
|
- |
- |
- |
- |
7,981 |
7,981 |
|
- |
- |
1,017 |
- |
(89) |
4,694 |
|
29 |
- |
6 |
7 |
- |
160 |
|
221 |
- |
- |
- |
- |
290 |
|
193 |
- |
5 |
- |
- |
440 |
|
21 |
- |
10 |
- |
- |
144 |
|
865 |
- |
226 |
6 |
(926) |
5,112 |
|
- |
- |
- |
- |
(249) |
45,309 |
|
1 |
- |
39 |
- |
42 |
1,161 |
|
6,264 |
781 |
- |
- |
- |
7,046 |
|
789 |
85 |
58 |
- |
(932) |
- |
|
61,879 |
866 |
1,361 |
97 |
5,827 |
160,400 |
|
1,897 |
1,093 |
631 |
68 |
- |
11,168 |
|
|
|
|
|
|
|
|
1,897 |
527 |
631 |
68 |
- |
8,054 |
|
- |
566 |
- |
- |
- |
3,114 |
|
- |
566 |
- |
- |
- |
2,773 |
|
- |
- |
- |
- |
- |
341 |
|
|
|
|
|
|
|
|
1,897 |
1,093 |
631 |
68 |
- |
11,168 |
B: Segment information continued
B4: Statement of financial position - segment information at 31 December 2015 (Restated)1
|
|
|
|
|
|
|
|
Notes |
|
Emerging Markets |
Nedbank |
|
Assets |
|
|
|
|
|
Goodwill and other intangible assets |
F1 |
|
415 |
378 |
|
Mandatory reserve deposits with central banks |
|
|
5 |
711 |
|
Property, plant and equipment |
|
|
275 |
385 |
|
Investment property |
|
|
1,232 |
1 |
|
Deferred tax assets |
|
|
47 |
10 |
|
Investments in associated undertakings and joint ventures |
|
|
60 |
420 |
|
Deferred acquisition costs |
|
|
87 |
- |
|
Reinsurers' share of policyholder liabilities |
|
|
150 |
4 |
|
Loans and advances |
E1 |
|
912 |
29,873 |
|
Investments and securities |
|
|
24,983 |
5,777 |
|
Current tax receivable |
|
|
14 |
46 |
|
Trade, other receivables and other assets |
|
|
759 |
495 |
|
Derivative financial instruments |
|
|
386 |
1,335 |
|
Cash and cash equivalents |
|
|
1,088 |
1,001 |
|
Assets held for sale |
H2 |
|
84 |
- |
|
Inter-segment funding - assets |
|
|
- |
- |
|
Total assets |
|
|
30,497 |
40,436 |
|
Liabilities |
|
|
|
|
|
Long-term business insurance policyholder liabilities |
|
|
7,262 |
159 |
|
Investment contract liabilities |
|
|
16,943 |
482 |
|
Property & casualty liabilities |
|
|
341 |
- |
|
Third-party interests in consolidated funds |
|
|
- |
- |
|
Borrowed funds |
E2 |
|
449 |
1,971 |
|
Provisions and accruals |
|
|
143 |
- |
|
Deferred revenue |
|
|
20 |
- |
|
Deferred tax liabilities |
|
|
183 |
45 |
|
Current tax payable |
|
|
73 |
18 |
|
Trade, other payables and other liabilities |
|
|
2,006 |
1,036 |
|
Amounts owed to bank depositors |
|
|
518 |
31,810 |
|
Derivative financial instruments |
|
|
558 |
1,474 |
|
Liabilities held for sale |
H2 |
|
- |
- |
|
Inter-segment funding - liabilities |
|
|
- |
- |
|
Total liabilities |
|
|
28,496 |
36,995 |
|
Net assets |
|
|
2,001 |
3,441 |
|
Equity |
|
|
|
|
|
Equity attributable to equity holders of the parent |
|
|
1,805 |
1,710 |
|
Non-controlling interests |
|
|
196 |
1,731 |
|
Ordinary shares |
F2(b)(i) |
|
196 |
1,459 |
|
Preferred securities |
F2(b)(ii) |
|
- |
272 |
|
|
|
|
|
|
|
Total equity |
|
|
2,001 |
3,441 |
1 The comparative information for 2015 has been restated to reflect the adjustment for the consolidation of investment funds. Refer to note A2 for more information.
2 The plc Head Office segment includes the Old Mutual plc holding company and other centre companies.
|
|
|
|
|
|
£m |
|
Old Mutual Wealth |
Institutional Asset Management |
plc Head Office2 |
Non-core operations |
Consolidation adjustments |
Total |
|
|
|
|
|
|
|
|
1,620 |
863 |
- |
- |
- |
3,276 |
|
- |
- |
- |
- |
- |
716 |
|
19 |
21 |
- |
- |
- |
700 |
|
- |
- |
- |
- |
- |
1,233 |
|
8 |
218 |
- |
1 |
- |
284 |
|
1 |
23 |
10 |
- |
- |
514 |
|
673 |
24 |
- |
- |
- |
784 |
|
2,507 |
- |
- |
- |
- |
2,661 |
|
180 |
- |
- |
- |
- |
30,965 |
|
48,157 |
80 |
467 |
- |
4,555 |
84,019 |
|
28 |
- |
- |
- |
- |
88 |
|
618 |
119 |
102 |
16 |
(162) |
1,947 |
|
- |
- |
55 |
17 |
1,283 |
3,076 |
|
792 |
92 |
527 |
26 |
885 |
4,411 |
|
4 |
35 |
- |
- |
- |
123 |
|
- |
- |
860 |
80 |
(940) |
- |
|
54,607 |
1,475 |
2,021 |
140 |
5,621 |
134,797 |
|
|
|
|
|
|
|
|
293 |
- |
- |
- |
- |
7,714 |
|
50,344 |
- |
- |
85 |
- |
67,854 |
|
- |
- |
- |
- |
- |
341 |
|
- |
- |
- |
- |
5,948 |
5,948 |
|
- |
61 |
1,098 |
- |
(55) |
3,524 |
|
34 |
3 |
19 |
- |
- |
199 |
|
254 |
- |
- |
- |
- |
274 |
|
172 |
- |
17 |
- |
- |
417 |
|
13 |
59 |
23 |
- |
- |
186 |
|
799 |
297 |
212 |
6 |
(607) |
3,749 |
|
- |
- |
- |
- |
- |
32,328 |
|
- |
6 |
4 |
- |
1,275 |
3,317 |
|
- |
12 |
- |
- |
- |
12 |
|
748 |
99 |
93 |
- |
(940) |
- |
|
52,657 |
537 |
1,466 |
91 |
5,621 |
125,863 |
|
1,950 |
938 |
555 |
49 |
- |
8,934 |
|
|
|
|
|
|
|
|
1,950 |
611 |
555 |
49 |
- |
6,680 |
|
- |
327 |
- |
- |
- |
2,254 |
|
- |
327 |
- |
- |
- |
1,982 |
|
- |
- |
- |
- |
- |
272 |
|
|
|
|
|
|
|
|
1,950 |
938 |
555 |
49 |
- |
8,934 |
C: Other key performance information
C1: Operating profit adjusting items
(a) Summary of adjusting items for determination of adjusted operating profit (AOP)
In determining the AOP of the Group for core operations, certain adjustments are made to profit before tax to reflect the Directors' view of the underlying long-term performance of the Group. The following table shows an analysis of those adjustments from AOP to profit before and after tax.
|
|
|
£m |
|
|
|
Notes |
Year ended 31 December 2016 |
Year ended 31 December 2015 |
|
(Expense)/income |
|
|
|
|
Goodwill impairment and impact of acquisition accounting |
C1(b) |
(278) |
(167) |
|
Net profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments |
C1(c) |
19 |
(36) |
|
Short-term fluctuations in investment return |
C1(d) |
(26) |
(42) |
|
Investment return adjustment for Group equity and debt instruments held in life funds |
C1(e) |
(43) |
(31) |
|
Dividends declared to holders of perpetual preferred callable securities |
C1(f) |
17 |
31 |
|
Institutional Asset Management equity plans |
C1(g) |
(20) |
(9) |
|
Credit-related fair value (losses)/gains on Group debt instruments |
C1(h) |
(24) |
7 |
|
Old Mutual Wealth business transformation costs |
C1(i) |
(102) |
(97) |
|
Total adjusting items |
|
(457) |
(344) |
|
Tax on adjusting items |
D1(d) |
38 |
60 |
|
Non-controlling interest on adjusting items |
|
66 |
19 |
|
Total adjusting items after tax and non-controlling interests |
|
(353) |
(265) |
(b) Goodwill impairment and impact of acquisition accounting
The application of acquisition accounting results in, deferred acquisition costs and deferred revenue existing at the point of acquisition that are not recognised under IFRS. These are reversed on acquisition in the statement of financial position and replaced by goodwill and other intangible assets, including the value of the acquired present value of in-force business (acquired PVIF). In determining AOP, the Group recognises deferred revenue, acquisition costs and deferred revenue in relation to policies sold by acquired businesses prior to the acquisition date. The Group excludes the impairment of goodwill, the impairment of investments in associated undertakings, the amortisation and impairment of acquired other intangible assets, acquired PVIF and the movements in certain acquisition date provisions from the determination of AOP. Costs incurred on completed acquisitions are also excluded from AOP.
Certain deferred consideration recognised as compensation expenses under accounting rules is excluded from the determination of AOP where these payments meet the criteria that suggest they are capital in nature.
The net effect of these adjustments to determine AOP are summarised below:
|
|
|
|
|
|
|
£m |
|
Year months ended 31 December 2016 |
Emerging Markets |
Old Mutual Wealth |
Nedbank |
Institutional Asset Management |
plc Head Office |
Total |
|
Impairment of goodwill and other intangible assets |
(64) |
(46) |
- |
- |
- |
(110) |
|
Impairment of investment in associated undertakings |
- |
- |
(50) |
- |
- |
(50) |
|
Amortisation of acquired PVIF |
(4) |
(45) |
- |
- |
- |
(49) |
|
Amortisation of acquired deferred costs and revenue |
- |
8 |
- |
- |
- |
8 |
|
Amortisation of other acquired intangible assets |
(14) |
(38) |
- |
(2) |
- |
(54) |
|
Acquisition costs |
- |
(17) |
- |
(5) |
- |
(22) |
|
Deferred consideration and other acquisition date provisions |
6 |
- |
- |
- |
(7) |
(1) |
|
|
(76) |
(138) |
(50) |
(7) |
(7) |
(278) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
Year ended 31 December 2015 |
Emerging Markets |
Old Mutual Wealth |
Nedbank |
Institutional Asset Management |
plc Head Office |
Total |
|
Impairment of goodwill and other intangible assets |
- |
- |
- |
(23) |
- |
(23) |
|
Amortisation of acquired PVIF |
(7) |
(51) |
- |
- |
- |
(58) |
|
Amortisation of acquired deferred costs and revenue |
- |
13 |
- |
- |
- |
13 |
|
Amortisation of other acquired intangible assets |
(13) |
(56) |
- |
- |
- |
(69) |
|
Acquisition costs |
(4) |
(10) |
- |
- |
- |
(14) |
|
Deferred consideration and other acquisition date provisions |
- |
(16) |
- |
- |
- |
(16) |
|
|
(24) |
(120) |
- |
(23) |
- |
(167) |
The impairment of goodwill and other intangible assets and impairment of investment in associated undertakings relate to:
Emerging Markets
The goodwill impairment loss of £64 million relates to the Old Mutual Southern and East Africa (OMSEA) cash generating unit. Refer to note H1 in the 2016 Annual Report and Accounts for further information.
Old Mutual Wealth
On 9 January 2017, the Group completed the disposal of Old Mutual Wealth Italy. A goodwill impairment loss of £46 million has been recognised in profit or loss as the net asset value of the business disposed of exceeds the expected net proceeds. Refer to note A2 for further information.
Nedbank
A £50 million impairment loss has been recognised in relation to Nedbank's investment in Ecobank Transinternational Incorporated, an associated undertaking. Refer to note I2(b) in the 2016 Annual Report and Accounts for further information.
(c) Net profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments
The net profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments is analysed below:
|
|
|
|
£m |
|
|
Notes |
Year ended 31 December 2016 |
Year ended 31 December 2015 |
|
Emerging Markets |
|
3 |
15 |
|
Nedbank |
|
(12) |
- |
|
Old Mutual Wealth |
|
- |
(52) |
|
Old Mutual plc |
|
10 |
- |
|
Net profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments - continuing operations |
|
1 |
(37) |
|
Net profit on disposal of subsidiaries, associated undertakings and strategic investments - discontinued operations |
H1 |
18 |
1 |
|
Net profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments |
|
19 |
(36) |
Emerging Markets
Current period transaction
During the year, OMEM reduced or disposed of its holdings in a number of associated undertakings resulting in a net profit on disposal of £3 million.
Prior period transaction
On 10 December 2015, Old Mutual Investment Group, a subsidiary of the Group, acquired an additional 50% stake in African Infrastructure Investment Managers (Pty) Limited (AIIM). The accounting related to the step up in ownership from 50% to 100% effectively involved a simultaneous sale of 50% of the business, followed by an acquisition of the fair value of 100% of the business. The profit of £15 million realised in the financial year ended 31 December 2015 represents the difference between the fair value of the initial 50% and the carrying amount of the investment in AIIM at 10 December 2015.
Nedbank
Current period transaction
On 3 October 2016, Nedbank acquired an additional 10.9% stake in Banco Unico, SA. The accounting related to the step up in ownership from 38.3% to 50% plus one share is such that it effectively requires a simultaneous sale of 38.3% followed by an acquisition of the fair value of 50% plus one share of the business. Consequently a loss of £11 million, comprising of a loss on step up acquisition of the associate and a release of foreign currency translation reserves, was realised on the transaction. In addition, a loss of £1 million was recognised on conversion of preference shares to ordinary shares by ETI. Consistent with usual Group practice, these losses were recognised in profit or loss but excluded from the determination of AOP.
Old Mutual Wealth
Prior period transactions
On 2 February 2015, the Group completed the sale of Skandia Luxembourg and Skandia France. For the year ended 31 December 2015, the Group recognised a loss on disposal of £1 million, which comprised a loss on disposing the net assets of the sold business of £31 million and a gain of £30 million relating to amounts recycled from foreign currency translation reserve.
On 30 September 2015, the Group completed the sale of its Switzerland business, Skandia Leben AG. For the year ended 31 December 2015, the Group recognised a loss on disposal of £51 million which comprised a loss on disposing the net assets of the sold business of £91 million and a gain of £40 million relating to amounts recycled from foreign currency translation reserve
C: Other key performance information continued
C1: Operating profit adjusting items continued
(c) Net profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments continued
Institutional Asset Management
Current period transaction
On 31 May 2016, the Group completed the sale of its interest in Rogge Global Partners Limited (Rogge), a fixed income asset manager, to Allianz Global Investors GmbH. The sales proceeds received are subject to adjustment as amounts could either be clawed back or future amounts become payable based on Rogge's future performance. A profit on disposal of £10 million has been recognised in the current period reflecting the director's current assessment of the likely final amount recoverable.
Current and prior period transactions
During the year ended 31 December 2016, the Group received additional income of £8 million (year ended 31 December 2015: £1 million) from earn-outs on affiliates disposed in prior periods.
Old Mutual plc
Current period transactions
During the period, Old Mutual plc received £10 million from Skandia Liv in respect of various matters relating to the completion of the separation of the Skandia Nordic business from the Group.
(d) Short-term fluctuations in investment return
Profit before tax, as disclosed in the consolidated IFRS income statement, includes actual investment returns earned on the shareholder assets of the Group's life assurance and property & casualty businesses. AOP is stated after recalculating shareholder asset investment returns based on a long-term investment return rate. The difference between the actual and the long-term investment returns is referred to as the short-term fluctuation in investment return.
Long-term rates of investment return are based on achieved rates of return appropriate to the underlying asset base, adjusted for current inflation expectations, default assumptions, costs of investment management and consensus economic investment forecasts. The underlying rates are principally derived with reference to 10-year government bond rates, cash and money market rates and an explicit equity risk premium for South African businesses. The rates set out below reflect the apportionment of underlying investments in cash deposits, money market instruments and equity assets. Long-term rates of return are reviewed annually by the Board. The Board's review of the long-term rates of return seeks to ensure that the returns credited to AOP are consistent with the actual returns expected to be earned over the long-term.
For Emerging Markets, the return is applied to an average value of investible shareholders' assets, adjusted for net fund flows. For Old Mutual Wealth, the return is applied to average investible assets.
|
|
|
% |
|
Long-term investment rates |
Year ended 31 December 2016 |
Year ended 31 December 2015 |
|
Emerging Markets |
|
|
|
Mutual & Federal1 - (Cash: 90%; Equities: 10%) (2015: Cash: 90%; Equities: 10%) |
7.4 |
7.4 |
|
Old Mutual South Africa - (Cash: 75%; Equities: 25%) (2015: Cash: 75%; Equities: 25%) |
8.0 |
8.0 |
|
Rest of Africa - (Cash: 57%; Equities: 43%) (2015: Cash: 57%; Equities: 43%) |
8.5 |
8.5 |
|
Old Mutual Wealth - (Cash: 80%; Equities: 20%) (2015: Cash: 75%; Equities: 25%) |
1.0 |
1.0 |
1 The long-term investment rate for Mutual & Federal relates solely to its South African business.
Analysis of short-term fluctuations in investment return
|
|
£m |
|||
|
Year ended 31 December 2016 |
Emerging Markets |
Old Mutual Wealth |
plc Head Office |
Total |
|
Actual shareholder investment return |
111 |
7 |
9 |
127 |
|
Less: Long-term investment return |
127 |
6 |
20 |
153 |
|
Short-term fluctuations in investment return |
(16) |
1 |
(11) |
(26) |
|
|
|
|
|
|
|
|
£m |
|||
|
Year months ended 31 December 2015 |
Emerging Markets |
Old Mutual Wealth |
plc Head Office |
Total |
|
Actual shareholder investment return |
88 |
8 |
12 |
108 |
|
Less: Long-term investment return |
124 |
5 |
21 |
150 |
|
Short-term fluctuations in investment return |
(36) |
3 |
(9) |
(42) |
(e) Investment return adjustment for Group equity and debt instruments held in policyholder funds
AOP includes investment returns on policyholder investments in Group equity and debt instruments held by the Group's life funds. These include investments in the Company's ordinary shares and the subordinated liabilities and ordinary shares issued by the Group. These investment returns are eliminated within the consolidated income statement in arriving at profit before tax, but are included in AOP. This ensures consistency of treatment with the measures in the related policyholder liability. During the year ended 31 December 2016, the investment return adjustment increased AOP by £43 million (year ended 31 December 2015: £31 million).
(f) Dividends declared to holders of perpetual preferred callable securities
Dividends declared to the holders of the Group's perpetual preferred callable securities on an AOP basis were £17 million for the year ended 31 December 2016 (year ended 31 December 2015: £31 million). For the purpose of determining AOP, these are recognised in finance costs on an accrual basis. In accordance with IFRS, the total cash distribution is recognised directly in equity.
(g) Institutional Asset Management equity plans
Institutional Asset Management has a number of long-term incentive arrangements with senior employees in its asset management affiliates.
As part of the incentive schemes in the Institutional Asset Management business, the Group has granted put options over the equity of certain affiliates to senior affiliate employees. The impact of revaluing these instruments in accordance with IFRS, is excluded from AOP. At 31 December 2016, the impact of revaluing these instruments and the exclusion of acquisition related compensation expense with Landmark employees was a loss of £20 million (year ended 31 December 2015: loss of £9 million).
(h) Credit-related fair value losses on Group debt instruments
The widening of the credit spread on the Group's debt instruments can cause the market value of these instruments to decrease, resulting in gains being recognised in profit or loss. Conversely, if the credit spread narrows the market value of debt instruments will increase causing losses to be recognised in the consolidated income statement. In the Directors' view, such movements are not reflective of the underlying performance of the Group and will reverse over time until the date of maturity. Therefore they have been excluded from AOP. For the year ended 31 December 2016, due to the narrowing of credit spreads, a net loss of £24 million was recognised (year ended 31 December 2015: net gain of £7 million).
(i) Old Mutual Wealth business transformation costs
In 2013, Old Mutual Wealth UK business embarked on a significant programme to develop new platform capabilities and to outsource UK business administration. This will involve replacing many aspects of the existing UK platform, and on completion certain elements of service provision will be migrated to International Financial Data Services (IFDS) under a long-term outsourcing agreement. Management has determined that the cost of developing the new technology cannot be capitalised, hence these costs and the costs of decommissioning existing technology and migrating of services to IFDS are excluded from AOP. Only costs that are directly attributable to the programme are excluded from AOP as management is of the view that this long-term investment in operational capability is a non-operating item. For the year ended 31 December 2016, these costs totalled £102 million (year ended 31 December 2015: £97 million).
C2: Earnings and earnings per share
|
|
|
|
|
Pence |
|
|
Source of guidance |
Notes |
Year ended 31 December 2016 |
Year ended 31 December 2015 (Restated)¹ |
|
Basic earnings per share |
IFRS |
C2(a) |
11.9 |
12.7 |
|
Diluted basic earnings per share |
IFRS |
C2(b) |
11.6 |
12.2 |
|
Adjusted operating earnings per share |
Group policy |
C2(c) |
19.4 |
19.3 |
|
|
|
|
|
|
|
Headline earnings per share (Gross of tax) |
JSE Listing Requirements |
C2(d) |
14.8 |
13.9 |
|
Headline earnings per share (Net of tax) |
JSE Listing Requirements |
C2(d) |
14.9 |
13.9 |
|
|
|
|
|
|
|
Diluted headline earnings per share (Gross of tax) |
JSE Listing Requirements |
C2(d) |
14.5 |
13.3 |
|
Diluted headline earnings per share (Net of tax) |
JSE Listing Requirements |
C2(d) |
14.5 |
13.3 |
1 The year ended 31 December 2015 has been restated to reflect Institutional Asset Management as a discontinued operation. Refer to note H1 for more information.
C: Other key performance information continued
C2: Earnings and earnings per share continued
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit for the financial year attributable to ordinary equity shareholders of the parent by the weighted average number of ordinary shares in issue during the year excluding own shares held in policyholder funds, Employee Share Ownership Plan Trusts (ESOP), Black Economic Empowerment trusts and other related undertakings.
The table below reconciles the profit attributable to equity holders of the parent to profit attributable to ordinary equity holders:
|
|
|
|
£m |
|
|
Note |
Year ended 31 December 2016 |
Year ended 31 December 2015 (Restated)¹ |
|
Profit for the financial year attributable to equity holders of the parent from continuing operations |
|
498 |
569 |
|
Profit for the financial year attributable to equity holders of the parent from discontinued operations |
H1 |
72 |
45 |
|
Profit for the financial year attributable to equity holders of the parent |
|
570 |
614 |
|
Dividends paid to holders of perpetual preferred callable securities, net of tax credits |
|
(14) |
(24) |
|
Profit attributable to ordinary equity holders |
|
556 |
590 |
1 The year ended 31 December 2015 has been restated to reflect Institutional Asset Management as a discontinued operation. Refer to note H1 for more information.
Total dividends paid to holders of perpetual preferred callable securities of £14 million for the year ended 31 December 2016 (year ended 31 December 2015: £24 million) are stated net of tax credits of £3 million (year ended 31 December 2015: £6 million).
The table below summarises the calculation of the weighted average number of ordinary shares for the purposes of calculating basic earnings per share:
|
|
|
|
Millions |
|
|
|
Year ended 31 December 2016 |
Year ended 31 December 2015 (Restated)¹ |
|
Weighted average number of ordinary shares in issue |
|
4,929 |
4,924 |
|
Shares held in charitable foundations and trusts |
|
(21) |
(13) |
|
Shares held in ESOP and similar trusts |
|
(135) |
(98) |
|
Adjusted weighted average number of ordinary shares |
|
4,773 |
4,813 |
|
Shares held in life funds |
|
(80) |
(81) |
|
Shares held in Black Economic Empowerment trusts |
|
(7) |
(91) |
|
Weighted average number of ordinary shares used to calculate basic earnings per share |
|
4,686 |
4,641 |
|
|
|
|
|
|
Basic earnings per ordinary share (pence) |
|
11.9 |
12.7 |
1 Basic earnings per ordinary share (pence) for the year ended 31 December 2015 has been restated to reflect Institutional Asset Management as a discontinued operation. Refer to note H1 for more information.
(b) Diluted basic earnings per share
Diluted basic EPS recognises the dilutive impact of shares and options held in ESOP and similar trusts and Black Economic Empowerment trusts, to the extent they have value, in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full year.
The table below reconciles the profit attributable to ordinary equity holders to diluted profit attributable to ordinary equity holders and summarises the calculation of weighted average number of shares for the purpose of calculating diluted basic earnings per share:
|
|
Note |
Year ended 31 December 2016 |
Year ended 31 December 2015 |
|
Profit attributable to ordinary equity holders (£m) |
|
556 |
590 |
|
Dilution effect on profit relating to share options issued by subsidiaries (£m) |
|
(7) |
(7) |
|
Diluted profit attributable to ordinary equity holders (£m) |
|
549 |
583 |
|
Weighted average number of ordinary shares (millions) |
C2(a) |
4,686 |
4,641 |
|
Adjustments for share options held by ESOP and similar trusts (millions) |
|
59 |
47 |
|
Adjustments for shares held in Black Economic Empowerment trusts (millions) |
|
7 |
91 |
|
Weighted average number of ordinary shares used to calculate diluted basic earnings per share (millions) |
|
4,752 |
4,779 |
|
|
|
|
|
|
Diluted basic earnings per ordinary share (pence) |
|
11.6 |
12.2 |
(c) Adjusted operating earnings per share
The following table presents a reconciliation of profit for the financial year to adjusted operating profit after tax attributable to ordinary equity holders and summarises the calculation of adjusted operating earnings per share:
|
|
Notes |
Year ended 31 December 2016 |
Year ended 31 December 2015 |
|
Profit for the financial year attributable to equity holders of the parent |
|
570 |
614 |
|
Adjusting items |
C1(a) |
457 |
344 |
|
Tax on adjusting items |
C1(a) |
(38) |
(60) |
|
Non-core operations |
B3 |
5 |
31 |
|
Loss from discontinued operations |
H1(a) |
- |
21 |
|
Non-controlling interest on adjusting items |
|
(66) |
(19) |
|
Adjusted operating profit after tax attributable to ordinary equity holders (£m) |
|
928 |
931 |
|
Adjusted weighted average number of ordinary shares used to calculate adjusted operating earnings per share (millions) |
C2(a) |
4,773 |
4,813 |
|
|
|
|
|
|
Adjusted operating earnings per share (pence) |
|
19.4 |
19.3 |
C: Other key performance information continued
C2: Earnings and earnings per share continued
(d) Headline earnings per share
The Group is required to calculate headline earnings per share (HEPS) in accordance with the JSE Limited (JSE) Listing Requirements, determined by reference to the South African Institute of Chartered Accountants' circular 02/2015 'Headline Earnings'. The table below sets out a reconciliation of basic EPS and HEPS in accordance with that circular. Disclosure of HEPS is not a requirement of IFRS, but it is a commonly used measure of earnings in South Africa. The table below reconciles the profit for the financial year attributable to equity holders of the parent to headline earnings and summarises the calculation of basic HEPS:
|
|
|
Year ended 31 December 2016 |
Year ended 31 December 2015 (Restated)¹ |
||
|
|
Notes |
Gross |
Net |
Gross |
Net |
|
Profit for the financial year attributable to equity holders of the parent |
|
570 |
570 |
614 |
614 |
|
Dividends paid to holders of perpetual preferred callable securities |
|
(14) |
(14) |
(24) |
(24) |
|
Profit attributable to ordinary equity holders |
|
556 |
556 |
590 |
590 |
|
Adjustments: |
|
|
|
|
|
|
Impairments of goodwill and other intangible assets |
|
113 |
113 |
23 |
23 |
|
Impairment of investment in associated undertakings |
|
50 |
50 |
- |
- |
|
(Profit)/loss on disposal of subsidiaries, associated undertakings and strategic investments |
|
(19) |
(16) |
36 |
35 |
|
Realised gains (net of impairments) on available-for-sale financial assets |
|
(5) |
(5) |
(5) |
(5) |
|
Headline earnings |
|
695 |
698 |
644 |
643 |
|
Dilution effect on earnings relating to share options issued by subsidiaries |
|
(7) |
(7) |
(7) |
(7) |
|
Diluted headline earnings (£m) |
|
688 |
691 |
637 |
636 |
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares (millions) |
C2(a) |
4,686 |
4,686 |
4,641 |
4,641 |
|
Diluted weighted average number of ordinary shares (millions) |
C2(b) |
4,752 |
4,752 |
4,779 |
4,779 |
|
|
|
|
|
|
|
|
Headline earnings per share (pence) |
|
14.8 |
14.9 |
13.9 |
13.9 |
|
Diluted headline earnings per share (pence) |
|
14.5 |
14.5 |
13.3 |
13.3 |
1 The year ended 31 December 2015 has been restated to reflect Institutional Asset Management as a discontinued operation. Refer to note H1 for more information.
C3: Dividends
|
|
|
|
£m |
|
|
Ordinary dividend payment date |
Year ended 31 December 2016 |
Year ended 31 December 2015 |
|
2014 Final dividend paid - 6.25p per 11 3/7p ordinary share |
29 May 2015 |
- |
296 |
|
2015 Interim dividend paid - 2.65p per 11 3/7p ordinary share |
30 October 2015 |
- |
126 |
|
2015 Second interim dividend paid - 6.25p per 11 3/7p ordinary share |
26 April 2016 |
299 |
- |
|
2016 Interim dividend paid - 2.67p per 11 3/7p ordinary share |
28 October 2016 |
127 |
- |
|
Dividends to ordinary equity holders |
|
426 |
422 |
|
Dividends paid to holders of perpetual preferred callable securities |
|
17 |
30 |
|
Dividend payments for the year |
|
443 |
452 |
The total dividend paid to ordinary equity holders is calculated using the number of shares in issue at the record date less own shares held in ESOP trusts, life funds of Group entities, Black Economic Empowerment trusts and related undertakings.
As a consequence of the exchange control arrangements in place in certain African territories, dividends to ordinary equity holders on the branch registers of those countries (or, in the case of Namibia, the Namibian section of the principal register) are settled through Dividend Access Trusts established for that purpose.
A second interim dividend of 3.39 pence (or its equivalent in other applicable currencies) per ordinary share in the Company has been declared by the Directors. The second interim dividend will be paid on 28 April 2017 to shareholders on the register at the close of business on 31 March 2017. The dividend will absorb an estimated £162 million of shareholders' funds.
In March 2016, £17 million was declared and paid to holders of perpetual preferred callable securities (March 2015: £17 million and November 2015: £13 million).
D: Other income statement notes
D1: Income tax expense
This note analyses the income tax expense recognised in profit or loss for the year and the various factors that have contributed to the composition of the charge.
Current tax
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to income tax payable in respect of previous years.
Deferred tax
Deferred taxation is provided using the temporary difference method. Temporary differences are differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax base. The amount of deferred taxation provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the reporting date in the specific jurisdiction. Deferred taxation is charged to profit and loss except to the extent that it relates to a transaction that is recognised directly in other comprehensive income, or a business combination that is an acquisition. The effect on deferred taxation of any changes in tax rates is recognised in profit and loss, except to the extent that it relates to items previously charged or credited directly to other comprehensive income. A deferred tax asset is recognised only to the extent that it is probable that future taxable income will be available, against which the unutilised tax losses and deductible temporary differences can be used. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefits will be realised.
In certain circumstances, as permitted by accounting guidance, deferred tax balances are not recognised. In particular where the liability relates to the initial recognition of goodwill, or transactions that are not a business combination and at the time of their occurrence affect neither accounting nor taxable profit.
|
Critical accounting estimates and judgements - Income tax Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in other comprehensive income or equity, in which case it is recognised in other comprehensive income and the statement of changes in equity respectively. The Group is subject to income taxes in numerous jurisdictions and the calculation of the Group's tax charge and worldwide provisions for income tax necessarily involves a degree of estimation and judgement. At any given time the Group typically has a number of open tax returns with various tax authorities and engages in active dialogue to resolve this. Taxation provisions relating to these open items are recognised based on the Group's estimate of the most likely outcome, after taking into account external advice where appropriate. Where the final tax outcome of these matters is different from the amounts that were initially recorded such differences will impact profit or loss, current and deferred income tax assets and liabilities in the period such determination is made. |
(a) Analysis of total income tax expense
The total income tax expense for the year comprises:
|
|
|
£m |
|
|
Year ended 31 December 2016 |
Year ended 31 December 2015 (Restated)¹ |
|
Current tax |
|
|
|
United Kingdom |
56 |
31 |
|
Overseas tax |
|
|
|
- South Africa |
401 |
272 |
|
- Rest of Africa |
28 |
19 |
|
- Europe |
15 |
17 |
|
- Rest of the world |
10 |
9 |
|
Withholding taxes |
9 |
11 |
|
Adjustments to current tax in respect of prior years |
(20) |
(1) |
|
Total current tax |
499 |
358 |
|
Deferred tax |
|
|
|
Origination and reversal of temporary differences |
(43) |
- |
|
Effect on deferred tax of changes in tax rates |
21 |
(8) |
|
Adjustments to deferred tax in respect of prior years |
(2) |
(3) |
|
Total deferred tax |
(24) |
(11) |
|
Total income tax expense |
475 |
347 |
1 The year ended 31 December 2015 has been restated to reflect Institutional Asset Management as a discontinued operation. Refer to note H1 for more information.
D: Other income statement notes continued
D1: Income tax expense continued
(b) Reconciliation of total income tax expense
The income tax expense charged to profit or loss differs from the income tax expense that would apply if all of the Group's profits from the different tax jurisdictions had been taxed at the UK standard corporation tax rate. The difference in the effective rate is explained below:
|
|
|
£m |
|
|
Year ended 31 December 2016 |
Year ended 31 December 2015 (Restated)¹ |
|
Profit before tax |
1,216 |
1,201 |
|
Tax at UK standard rate of 20% (2015: 20.25%) |
243 |
243 |
|
Different tax rate or basis on overseas operations |
105 |
107 |
|
Untaxed and low taxed income |
(121) |
(76) |
|
Disallowable expenses |
103 |
42 |
|
Adjustments to current tax in respect of prior years |
(20) |
(1) |
|
Net movement on deferred tax assets not recognised |
30 |
8 |
|
Effect on deferred tax of changes in tax rates |
21 |
(8) |
|
Adjustments to deferred tax in respect of prior years |
(2) |
(3) |
|
Withholding taxes |
2 |
5 |
|
Income tax attributable to policyholder returns |
115 |
25 |
|
Other |
(1) |
5 |
|
Total income tax expense |
475 |
347 |
1 The year ended 31 December 2015 has been restated to reflect Institutional Asset Management as a discontinued operation. Refer to note H1 for more information.
(c) Income tax relating to components of other comprehensive income
The total income tax expense relating to items recognised in other comprehensive income for the year comprises of the following:
|
|
|
£m |
|
|
Year ended 31 December 2016 |
Year ended 31 December 2015 |
|
Measurement gains on defined benefit plans |
(8) |
1 |
|
Property revaluation |
- |
3 |
|
Income tax on items that will not be reclassified subsequently to profit or loss |
(8) |
4 |
|
Available-for-sale reserves |
(2) |
- |
|
Share-based payments |
(6) |
- |
|
Income tax on items that may be reclassified subsequently to profit or loss |
(8) |
- |
|
Income tax expense relating to components of other comprehensive income |
(16) |
4 |
(d) Reconciliation of income tax expense in the IFRS income statement to income tax on adjusted operating profit
|
|
|
£m |
|
|
Year ended 31 December 2016 |
Year ended 31 December 2015 |
|
Income tax expense - excluding discontinued operation |
475 |
347 |
|
Income tax expense - discontinued operation |
29 |
27 |
|
Tax on adjusting items |
|
|
|
Goodwill impairment and impact of acquisition accounting |
19 |
20 |
|
Profit on disposal of subsidiaries, associates and strategic investments |
(3) |
1 |
|
Short-term fluctuations in investment return |
- |
22 |
|
Tax on dividends declared to holders of perpetual preferred callable securities recognised in equity |
(3) |
(6) |
|
Institutional Asset Management equity plans |
6 |
5 |
|
Old Mutual Wealth business transformation costs |
19 |
18 |
|
Total tax on adjusting items |
38 |
60 |
|
Income tax attributable to policyholders returns |
(144) |
(31) |
|
Income tax on adjusted operating profit |
398 |
403 |
E: Analysis of financial assets and liabilities
E1: Loans and advances
The Group extends advances to individuals and to the corporate, commercial and public sectors. The majority of loans and advances are in respect of Nedbank which represents 97% (£ 41,703 million); (2015: 96% (£ 29,873 million)) of the carrying value of the Group's loans and advances. Nedbank assesses its loan portfolios for impairment at each financial reporting date and manages its exposure to loans and advances through a documented credit approval processes.
Emerging Markets has lending exposure, net of credit impairment provisions, of £1,210 million (2015: (£912 million) through its non-wholly owned subsidiaries in South Africa, Namibia, Kenya and Zimbabwe. Credit loss ratios are monitored at each individual business unit level.
|
|
|
|
£m |
|
|
|
At 31 December 2016 |
At 31 December 2015 |
|
Home loans |
|
8,772 |
6,409 |
|
Commercial mortgages |
|
9,085 |
6,098 |
|
Unsecured retail lending |
|
2,215 |
1,558 |
|
Other term loans |
|
6,068 |
3,961 |
|
Other loans to clients |
|
7,099 |
5,663 |
|
Net finance leases and instalment debtors |
|
6,221 |
4,377 |
|
Deposits placed under reverse purchase agreements |
|
923 |
884 |
|
Overdrafts |
|
1,182 |
751 |
|
Preference shares and debentures |
|
1,184 |
907 |
|
Credit cards |
|
877 |
616 |
|
Factoring accounts |
|
296 |
234 |
|
Policyholder loans |
|
278 |
241 |
|
Properties in possession |
|
15 |
16 |
|
Remittances in transit |
|
22 |
9 |
|
Gross loans and advances |
|
44,237 |
31,724 |
|
|
|
|
|
|
Provisions for impairment |
|
(1,129) |
(759) |
|
Specific provisions |
|
(820) |
(529) |
|
Portfolio provisions |
|
(309) |
(230) |
|
|
|
|
|
|
Total net loans and advances |
|
43,108 |
30,965 |
E: Analysis of financial assets and liabilities continued
E2: Borrowed funds
The Group raises funding in the normal course of business. The borrowed funds raised for the banking business support the lending and banking operations of the Group. Other borrowed funds raised support the general funding needs of the Group and the expense has been recognised as finance costs.
The table below presents an analysis of the Group's borrowed funds net of any holdings that are principally held by the policyholder funds.
|
Summary of Borrowed Funds |
|
|
|
|
|
£m |
|
Type of securities |
Notes |
Old Mutual plc |
Emerging Markets |
Nedbank |
Institutional Asset Management3 |
At 31 December 2016 |
|
Senior debt securities and term loans |
|
- |
287 |
2,088 |
- |
2,375 |
|
Floating rate notes |
E2(a)(i) |
- |
- |
1,046 |
- |
1,046 |
|
Fixed rate notes |
E2(a)(ii) |
- |
- |
1,042 |
- |
1,042 |
|
Term loans |
E2(a)(iii) |
- |
287 |
- |
- |
287 |
|
Revolving credit facilities |
E2(b) |
- |
34 |
- |
- |
34 |
|
Mortgage-backed securities |
E2(c) |
- |
- |
153 |
- |
153 |
|
Subordinated debt securities |
E2(d) |
1,017 |
348 |
767 |
- |
2,132 |
|
Total Borrowed funds |
|
1,017 |
669 |
3,008 |
- |
4,694 |
|
Other instruments treated as equity for accounting purposes |
|
|
|
|
|
|
|
£273 million perpetual preferred callable securities at 6.38%1 |
|
273 |
- |
- |
- |
273 |
|
Total book value of Group debt2 |
|
1,290 |
669 |
3,008 |
- |
4,967 |
1 Perpetual preferred callable securities of £273 million; (December 2015: £273 million) are classified as non-banking.
2 The nominal value of non-banking related "Group debt" is £1,685 million (December 2015: £1,710 million).
3 No borrowed funds are reflected in Institutional Asset Management at 31 December 2016 as it has been classified as held for sale. Refer to note H2 for more information.
|
|
|
|
|
|
|
£m |
|
Type of securities |
Notes |
Old Mutual plc |
Emerging Markets |
Nedbank |
Institutional Asset Management |
At 31 December 2015 |
|
Senior debt securities and term loans |
|
112 |
198 |
1,331 |
- |
1,641 |
|
Floating rate notes |
E2(a)(i) |
- |
- |
571 |
- |
571 |
|
Fixed rate notes |
E2(a)(ii) |
112 |
- |
760 |
- |
872 |
|
Term loans |
E2(a)(iii) |
- |
198 |
- |
- |
198 |
|
Revolving credit facilities |
E2(b) |
- |
- |
- |
61 |
61 |
|
Mortgage-backed securities |
E2(c) |
- |
- |
97 |
- |
97 |
|
Subordinated debt securities |
E2(d) |
986 |
251 |
488 |
- |
1,725 |
|
Total Borrowed funds |
|
1,098 |
449 |
1,916 |
61 |
3,524 |
|
Other instruments treated as equity for accounting purposes |
|
|
|
|
|
|
|
£273 million perpetual preferred callable securities at 6.38% |
|
273 |
- |
- |
- |
273 |
|
Total book value of Group debt |
|
1,371 |
449 |
1,916 |
61 |
3,797 |
Total borrowed funds can be further analysed between non-banking and banking as follows:
|
|
|
|
|
|
|
£m |
|
|
At 31 December 2016 |
At 31 December 2015 |
||||
|
Type of security |
Non- banking |
Banking1 |
Total |
Non- banking |
Banking1 |
Total |
|
Senior debt securities and term loans |
96 |
2,279 |
2,375 |
160 |
1,481 |
1,641 |
|
Revolving credit facilities |
16 |
18 |
34 |
61 |
- |
61 |
|
Mortgage-backed securities |
- |
153 |
153 |
- |
97 |
97 |
|
Subordinated debt securities |
1,365 |
767 |
2,132 |
1,237 |
488 |
1,725 |
|
Total Borrowed funds |
1,477 |
3,217 |
4,694 |
1,458 |
2,066 |
3,524 |
1 Borrowed funds identified as Banking are those which are directly related to the lending and banking businesses in Nedbank and Emerging Markets.
Maturity analysis
The table below is a maturity analysis of the liability cash flows based on contractual maturity dates for borrowed funds. Maturity analysis is undiscounted and based on year-end exchange rates.
|
|
|
|
|
|
|
£m |
|
|
|
Old Mutual plc |
Emerging Markets |
Nedbank |
Institutional Asset Management |
At 31 December 2016 |
|
Less than 1 year |
|
75 |
59 |
- |
- |
134 |
|
Greater than 1 year and less than 5 years |
|
782 |
235 |
- |
- |
1,017 |
|
Greater than 5 years |
|
592 |
614 |
- |
- |
1,206 |
|
Total non-banking |
|
1,449 |
908 |
- |
- |
2,357 |
|
Less than 1 year |
|
- |
115 |
370 |
- |
485 |
|
Greater than 1 year and less than 5 years |
|
- |
118 |
1,587 |
- |
1,705 |
|
Greater than 5 years |
|
- |
5 |
1,115 |
- |
1,120 |
|
Total banking |
|
- |
238 |
3,072 |
- |
3,310 |
|
Total |
|
1,449 |
1,146 |
3,072 |
- |
5,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
|
Old Mutual plc |
Emerging Markets |
Nedbank |
Institutional Asset Management |
At 31 December 2015 |
|
Less than 1 year |
|
196 |
50 |
- |
2 |
248 |
|
Greater than 1 year and less than 5 years |
|
302 |
135 |
- |
66 |
503 |
|
Greater than 5 years |
|
1,147 |
493 |
- |
- |
1,640 |
|
Total non-banking |
|
1,645 |
678 |
- |
68 |
2,391 |
|
Less than 1 year |
|
- |
15 |
614 |
- |
629 |
|
Greater than 1 year and less than 5 years |
|
- |
166 |
1,236 |
- |
1,402 |
|
Greater than 5 years |
|
- |
17 |
973 |
- |
990 |
|
Total banking |
|
- |
198 |
2,823 |
- |
3,021 |
|
Total |
|
1,645 |
876 |
2,823 |
68 |
5,412 |
Interest rate profile
The interest rate profiles of the Group's borrowed funds are analysed as follows:
|
|
|
|
|
|
|
£m |
|
|
|
Old Mutual plc1 |
Emerging Markets |
Nedbank |
Institutional Asset Management |
At 31 December 2016 |
|
Fixed rate |
|
1,017 |
278 |
1,042 |
- |
2,337 |
|
Floating rate |
|
- |
391 |
1,966 |
- |
2,357 |
|
Total |
|
1,017 |
669 |
3,008 |
- |
4,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
|
Old Mutual plc1 |
Emerging Markets |
Nedbank |
Institutional Asset Management |
At 31 December 2015 |
|
Fixed rate |
|
1,098 |
218 |
760 |
- |
2,076 |
|
Floating rate |
|
- |
231 |
1,156 |
61 |
1,448 |
|
Total |
|
1,098 |
449 |
1,916 |
61 |
3,524 |
1 Old Mutual plc has cross currency interest rate swaps related to £500 million Tier 2 debt. Old Mutual plc receives fixed interest and pays floating interest.
E: Analysis of financial assets and liabilities continued
E2: Borrowed funds continued
Currency exposure
The currency exposures of the Groups borrowed funds are analysed as follows:
|
|
|
|
|
|
|
£m |
|
|
|
Old Mutual plc |
Emerging Markets |
Nedbank |
Institutional Asset Management |
At 31 December 2016 |
|
ZAR |
|
- |
524 |
3,008 |
- |
3,532 |
|
GBP |
|
1,017 |
- |
- |
- |
1,017 |
|
USD |
|
- |
101 |
- |
- |
101 |
|
Other |
|
- |
44 |
- |
- |
44 |
|
Total |
|
1,017 |
669 |
3,008 |
- |
4,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
|
Old Mutual plc |
Emerging Markets |
Nedbank |
Institutional Asset Management |
At 31 December 2015 |
|
ZAR |
|
- |
356 |
1,847 |
- |
2,203 |
|
GBP |
|
1,098 |
- |
- |
- |
1,098 |
|
USD |
|
- |
55 |
69 |
61 |
185 |
|
Other |
|
- |
38 |
- |
- |
38 |
|
Total |
|
1,098 |
449 |
1,916 |
61 |
3,524 |
Analysis of security types
(a) Senior debt securities and term loans
(i) Floating rate notes (net of Group holdings)
|
|
|
|
£m |
|
|
Maturity date |
At 31 December 2016 |
At 31 December 2015 |
|
Banking - Nedbank Floating rate unsecured senior debt |
|
|
|
|
R677 million at JIBAR + 1.25% |
Repaid |
- |
30 |
|
R3,056 million at JIBAR + 0.80% |
Repaid |
- |
135 |
|
R694 million at JIBAR + 0.75% |
Repaid |
- |
31 |
|
R405 million at JIBAR + 1.30% |
February 2017 |
22 |
18 |
|
R1,035 million at JIBAR + 0.85% |
March 2017 |
61 |
45 |
|
R806 million at JIBAR + 0.90% |
June 2017 |
48 |
35 |
|
R786 million at JIBAR + 1.30% |
August 2017 |
27 |
31 |
|
R241 million at JIBAR + 1.12% |
November 2017 |
14 |
11 |
|
R472 million at JIBAR + 1.25% |
February 2018 |
28 |
21 |
|
R1,427 million at JIBAR + 1.30% |
June 2018 |
85 |
63 |
|
R1,427 million at JIBAR + 1.45% |
February 2019 |
85 |
- |
|
R1,472 million at JIBAR + 1.45% |
May 2019 |
149 |
- |
|
R612 million at JIBAR + 1.40% |
August 2019 |
37 |
- |
|
R90 million at JIBAR + 1.45% |
February 2020 |
5 |
4 |
|
R80 million at JIBAR + 2.15% |
April 2020 |
5 |
4 |
|
R476 million at JIBAR + 1.55% |
November 2020 |
28 |
21 |
|
R830 million at JIBAR + 1.80% |
February 2021 |
49 |
- |
|
R1,054 million at JIBAR + 1.80% |
May 2021 |
88 |
- |
|
R650 million at JIBAR + 1.30% |
June 2021 |
38 |
29 |
|
R287 million at JIBAR +1.75% |
August 2021 |
17 |
- |
|
R12 million at JIBAR + 1.55% |
February 2022 |
1 |
1 |
|
R270 million at JIBAR + 2.00% |
February 2023 |
16 |
- |
|
R528 million at JIBAR + 2.00% |
May 2023 |
32 |
- |
|
R1,980 million at JIBAR + 2.00% |
February 2025 |
118 |
88 |
|
R500 million at JIBAR + 2.10% |
April 2026 |
30 |
22 |
|
R750 million at JIBAR + 2.25% |
May 2026 |
45 |
- |
|
R302 million at JIBAR + 2.20% |
July 2026 |
18 |
- |
|
|
|
1,046 |
589 |
|
Less: floating rate notes held by other Group companies |
|
- |
(18) |
|
Total floating rate notes |
|
1,046 |
571 |
All floating rate unsecured senior debt are non-qualifying for the purposes of regulatory tiers of capital.
(ii) Fixed rate notes (net of Group holdings)
|
|
|
|
£m |
|
|
Maturity date |
At 31 December 2016 |
At 31 December 2015 |
|
Non-banking - Old Mutual plc |
|
|
|
|
£112 million at 7.13% |
Repaid |
- |
112 |
|
Total non-banking fixed rate unsecured senior debt |
|
- |
112 |
|
|
|
|
|
|
Banking - Nedbank Fixed rate unsecured senior debt |
|
|
|
|
R1,137 million at 9.36% |
Repaid |
- |
51 |
|
R151 million at 6.91% |
Repaid |
- |
7 |
|
R1,273 million at 11.39% |
September 2019 |
80 |
60 |
|
R380 million at 9.26% |
June 2020 |
23 |
17 |
|
R1,888 million at 8.92% |
November 2020 |
112 |
83 |
|
R855 million at 9.38% |
March 2021 |
52 |
38 |
|
R417 million at 10.68% |
May 2021 |
25 |
- |
|
R500 million at 9.29% |
June 2021 |
30 |
22 |
|
R215 million at 8.79% |
February 2022 |
13 |
10 |
|
R280 million at 9.64% |
June 2022 |
17 |
12 |
|
R250 million at 10.66% |
February 2023 |
15 |
- |
|
R334 million at 10.01% |
August 2023 |
21 |
- |
|
R952 million at 10.07% |
November 2023 |
57 |
42 |
|
R391 million at 9.73% |
March 2024 |
24 |
18 |
|
R660 million at zero coupon |
October 2024 |
18 |
11 |
|
R2,607 million at 9.44% |
February 2025 |
159 |
118 |
|
R884 million at 10.69% |
November 2025 |
53 |
39 |
|
R800 million at 9.95% |
April 2026 |
48 |
36 |
|
R360 million at 11.15% |
May 2026 |
22 |
- |
|
R1,739 million at 10.36% |
June 2026 |
103 |
77 |
|
R423 million at 10.50% |
July 2026 |
26 |
- |
|
R2,000 million at 10.63% |
July 2027 |
124 |
92 |
|
R666 million at 10.94% |
November 2027 |
40 |
30 |
|
|
|
1,062 |
763 |
|
Less: Fixed rate notes held by other Group companies |
|
(20) |
(3) |
|
Total banking fixed rate unsecured senior debt (net of Group holdings) |
|
1,042 |
760 |
|
Total fixed rate notes |
|
1,042 |
872 |
All fixed rate notes are non-qualifying for the purpose of regulatory tiers of capital.
E: Analysis of financial assets and liabilities continued
E2: Borrowed funds continued
(a) Senior debt securities and term loans continued
(iii) Term loans
|
|
|
|
£m |
|
|
Maturity date |
At 31 December 2016 |
At 31 December 2015 |
|
Emerging Markets Floating rate loans |
|
|
|
|
$7 million at 3 month LIBOR + 7.50%2 |
Repaid |
- |
5 |
|
$5 million at 3 month LIBOR + 7.50%2 |
Repaid |
- |
3 |
|
$5 million at 3 month LIBOR + 7.50%2 |
Repaid |
- |
3 |
|
KES451 million at KBRR + 3.87%1 |
Repaid |
- |
3 |
|
KES450 million rate at GOK 182 days TB + 2.50%1 |
May 2017 |
3 |
- |
|
R1,500 million at JIBAR + 2.95%1 |
June 2017 |
94 |
70 |
|
R800 million at JIBAR + 2.75%1 |
July 2018 |
47 |
35 |
|
KES75 million rate at KBRR + 3.78%1 |
November 2019 |
1 |
- |
|
$65 million at 3 month JIBAR + 2.80%2 |
December 2020 |
55 |
- |
|
KES954 million rate at KBRR + 3.78%1 |
August 2021 |
7 |
- |
|
$31 million at 3 month LIBOR plus 3.50%2 |
September 2021 |
25 |
- |
|
|
|
|
|
|
Emerging Markets Fixed rate loans |
|
|
|
|
KES1,000 million at 12.50%2 |
Repaid |
- |
7 |
|
KES225 million at 11.70%1 |
Repaid |
- |
1 |
|
KES150 million at 5.00%1 |
Repaid |
- |
1 |
|
KES2,000m at 13.00%2 |
July 2017 |
17 |
13 |
|
$2 million at 8.24%1 |
August 2017 |
2 |
3 |
|
$6 million at 8.72%1 |
September 2017 |
5 |
9 |
|
$3 million at 5.00%1 |
December 2017 |
2 |
- |
|
KES101 million at 13.00%1 |
June 2018 |
1 |
- |
|
KES102 million at 13.50%1 |
June 2018 |
1 |
- |
|
KES607 million at 12.50%1 |
December 2018 |
5 |
- |
|
KES411 million at 11.50%1 |
April 2020 |
3 |
3 |
|
KES474 million at 9.20%1 |
August 2020 |
4 |
8 |
|
$6 million at 8.31%1 |
May 2020 |
5 |
5 |
|
KES200 million at 5.00%1 |
July 2022 |
2 |
2 |
|
$15million at 8.75%2 |
August 2022 |
12 |
11 |
|
$3 million at 12.00%1 |
September 2022 |
3 |
3 |
|
$4 million at 6.50%2 |
June 2023 |
3 |
3 |
|
$4 million at 6.50%2 |
June 2023 |
3 |
3 |
|
$6 million at 6.50%2 |
June 2023 |
5 |
- |
|
$8 million at 10.00%1 |
December 2023 |
7 |
7 |
|
|
|
312 |
198 |
|
Less: Term loans held by other Group companies2 |
|
(25) |
- |
|
Total term loans and other loans |
|
287 |
198 |
|
|
|
|
|
|
Analysed as: |
|
|
|
|
1 Banking |
|
192 |
150 |
|
2 Non-banking |
|
120 |
48 |
|
Total term loans and other loans |
|
312 |
198 |
(b) Revolving credit facilities
|
|
|
|
£m |
|
|
Maturity date |
At 31 December 2016 |
At 31 December 2015 |
|
Non-banking |
|
|
|
|
Institutional Asset Management Fully undrawn $350 million facility at USD LIBOR + 1.25% (31 December 2015: $90 million) |
Oct 2019 |
- |
61 |
|
Emerging Markets R3,125 million facility at 3 month JIBAR + 1.60% |
Jan 2019 |
16 |
- |
|
|
|
|
|
|
Banking - Emerging Markets |
|
|
|
|
R1,200 million facility at 3 month JIBAR + 2.95% |
July 2018 |
18 |
- |
|
Total revolving credit facilities |
|
34 |
61 |
The Group has access to a £800 million (2015: £800 million) multi-currency revolving credit facility available to the Holding Company. £73 million facility matures in August 2019, a further £73 million of facility matures in August 2020 and the remaining £654 million of the facility matures in August 2021. At 31 December 2016 none of this facility was drawn.
In July 2015, Emerging Markets obtained access to a R1,200 million revolving credit facility which matures in July 2018. At 31 December 2016 R300 million (£18 million) of this facility was drawn (2015: Fully undrawn)
In December 2015, Emerging Markets obtained access to a R3,125 million revolving credit facility which matures in January 2019 with an option to renew for a further year. At 31 December 2016 R260 million (£16 million) of this facility was drawn (2015: Fully undrawn).
(c) Mortgage-backed securities (net of Group holdings)
|
|
|
|
|
£m |
|
|
Tier |
Maturity date |
At 31 December 2016 |
At 31 December 2015 |
|
Banking - Nedbank |
|
|
|
|
|
R161 million (class A2) at JIBAR + 1.25% |
Tier 2 |
Repaid |
- |
7 |
|
R900 million (class A3) at JIBAR + 1.54% |
Tier 2 |
October 2039 |
50 |
40 |
|
R110 million (class B) at JIBAR + 1.90% |
Tier 2 |
October 2039 |
7 |
5 |
|
R600 million JIBAR + 1.34% |
Tier 2 |
January 2028 |
30 |
- |
|
R300 million JIBAR + 1.54% |
Tier 2 |
January 2028 |
16 |
- |
|
R558 million at JIBAR + 1.20% |
Tier 2 |
February 2042 |
19 |
24 |
|
R100 million at JIBAR + 1.45% |
Tier 2 |
February 2042 |
6 |
4 |
|
R680 million at JIBAR + 1.55% |
Tier 2 |
February 2042 |
40 |
30 |
|
R80 million at JIBAR + 2.20% |
Tier 2 |
February 2042 |
5 |
4 |
|
R65 million at JIBAR + 3.00% |
Tier 2 |
February 2042 |
4 |
3 |
|
|
|
|
177 |
117 |
|
Less: Mortgage backed securities held by other Group companies |
(24) |
(20) |
||
|
Total mortgage-backed securities |
|
|
153 |
97 |
E: Analysis of assets and liabilities continued
E2: Borrowed funds continued
(d) Subordinated debt securities (net of Group holdings)
|
|
|
|
|
£m |
|
|
Tier |
Maturity date |
At 31 December 2016 |
At 31 December 2015 |
|
Banking - Nedbank |
|
|
|
|
|
$100 million at 3 month USD LIBOR |
Tier 2 (secondary) |
March 2022 |
81 |
69 |
|
R2,000 million at JIBAR + 0.47% |
Tier 2 |
July 2022 |
120 |
89 |
|
R1,800 million at JIBAR + 2.75% |
Tier 2 |
July 2023 |
108 |
80 |
|
R1,200 million at JIBAR + 2.55% |
Tier 2 |
November 2023 |
71 |
53 |
|
R450 million at JIBAR + 10.49% |
Tier 2 |
April 2024 |
27 |
20 |
|
R1,737 million at 3 month JIBAR + 2.55% |
Tier 2 |
April 2024 |
105 |
78 |
|
R300 million at JIBAR + 2.75% |
Tier 2 |
October 2024 |
18 |
13 |
|
R225 million at JIBAR +2.75% |
Tier 2 |
January 2025 |
14 |
10 |
|
R1,624 million at JIBAR + 3.5% |
Tier 2 |
July 2025 |
98 |
73 |
|
R407 million at 11.29% |
Tier 2 |
July 2025 |
25 |
19 |
|
R2,000 million at JIBAR + 4.00% |
Tier 2 |
September 2026 |
118 |
- |
|
|
|
785 |
504 |
|
|
Less: Banking subordinated debt securities held by other Group companies |
(18) |
(16) |
||
|
Banking subordinated securities |
|
767 |
488 |
|
|
|
|
|
|
|
|
Non-banking - Old Mutual plc |
|
|
|
|
|
£500 million at 8.00% |
Tier 2 |
June 2021 |
569 |
536 |
|
£450 million at 7.88% |
Tier 2 |
November 2025 |
448 |
450 |
|
|
|
|
1,017 |
986 |
|
|
|
|
|
|
|
Non-banking - Emerging Markets1 |
|
|
|
|
|
R300 million at 9.26% |
Tier 2 |
November 2024 |
17 |
12 |
|
R700 million at 3 month JIBAR + 2.20% |
Tier 2 |
November 2024 |
41 |
31 |
|
R537 million at 3 month JIBAR + 2.30% |
Tier 2 |
March 2025 |
32 |
24 |
|
R425 million at 9.76% |
Tier 2 |
March 2025 |
25 |
17 |
|
R1,288 million at 3 month JIBAR + 2.25% |
Tier 2 |
September 2025 |
76 |
57 |
|
R409 million at 10.32% |
Tier 2 |
March 2027 |
23 |
16 |
|
R568 million at 10.90% |
Tier 2 |
September 2027 |
33 |
23 |
|
R1,150 million at 10.96% |
Tier 2 |
March 2030 |
65 |
46 |
|
R623 million at 11.35% |
Tier 2 |
September 2030 |
36 |
25 |
|
|
|
|
348 |
251 |
|
Total subordinated debt securities |
|
2,132 |
1,725 |
|
1 All callable subordinated debt securities have a first call date five years before the maturity date.
F: Non-financial assets and liabilities
F1: Goodwill and other intangible assets
Analysis of goodwill and other intangible assets
This note shows the movements in cost, amortisation and impairment of goodwill and other intangible assets for the year ended 31 December 2016 and year ended 31 December 2015.
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
Goodwill |
Present value of acquired in-force business development costs |
Software development costs |
Other intangible assets |
Total |
|||||
|
|
2016 |
2015 |
2016 |
2015 |
2016 |
2015 |
2016 |
2015 |
2016 |
2015 |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of the year |
3,129 |
2,756 |
982 |
1,107 |
598 |
669 |
710 |
402 |
5,419 |
4,934 |
|
Acquisitions through business combinations1 |
124 |
467 |
- |
- |
1 |
- |
76 |
308 |
201 |
775 |
|
Purchase price adjustments2 |
(12) |
22 |
- |
- |
- |
- |
17 |
- |
5 |
22 |
|
Additions |
- |
- |
- |
- |
132 |
72 |
9 |
9 |
141 |
81 |
|
Disposal of interests in subsidiaries |
- |
(41) |
- |
(125) |
- |
(1) |
- |
(4) |
- |
(171) |
|
Disposals or retirements |
- |
- |
- |
- |
(12) |
(8) |
- |
(1) |
(12) |
(9) |
|
Transfer to assets held for sale3 |
(1,561) |
(29) |
(80) |
- |
- |
- |
(72) |
- |
(1,713) |
(29) |
|
Foreign exchange and other movements |
409 |
(46) |
12 |
- |
194 |
(134) |
32 |
(4) |
647 |
(184) |
|
Cost at end of the year |
2,089 |
3,129 |
914 |
982 |
913 |
598 |
772 |
710 |
4,688 |
5,419 |
|
Amortisation and impairment losses |
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of the year |
(617) |
(624) |
(751) |
(792) |
(403) |
(449) |
(372) |
(306) |
(2,143) |
(2,171) |
|
Amortisation charge for the year |
- |
- |
(49) |
(58) |
(51) |
(49) |
(55) |
(70) |
(155) |
(177) |
|
Impairment losses4 |
(110) |
(23) |
- |
- |
(3) |
- |
- |
- |
(113) |
(23) |
|
Disposal of interests in subsidiaries |
- |
- |
- |
102 |
- |
1 |
- |
- |
- |
103 |
|
Disposals or retirements |
- |
- |
- |
- |
10 |
7 |
- |
1 |
10 |
8 |
|
Transfer to assets held for sale3 |
337 |
29 |
77 |
- |
- |
- |
3 |
- |
417 |
29 |
|
Foreign exchange and other movements |
(81) |
1 |
(9) |
(3) |
(121) |
87 |
(22) |
3 |
(233) |
88 |
|
Accumulated amortisation and impairment losses at end of the year |
(471) |
(617) |
(732) |
(751) |
(568) |
(403) |
(446) |
(372) |
(2,217) |
(2,143) |
|
Carrying amount |
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of the year |
2,512 |
2,132 |
231 |
315 |
195 |
220 |
338 |
96 |
3,276 |
2,763 |
|
Balance at end of the year |
1,618 |
2,512 |
182 |
231 |
345 |
195 |
326 |
338 |
2,471 |
3,276 |
1 Goodwill acquired through business combinations for the year ended 31 December 2016 of £124 million relates to the acquisition of Landmark Partners (£111 million), AAM Advisory (£4 million), various acquisitions by the Old Mutual Private Client Advisors business (£8 million) and the acquisition of Banco Unico, SA (£1 million). Refer to note A2 for further information.
2 The purchase price adjustment for the year ended 31 December 2016 of £12 million relates to adjustments in connection with the acquisition of African Infrastructure Investment Managers (Pty) Limited that were identified by the Group in the 12 month period after acquisition and which comprises £17 million of other intangible assets identified subsequent to the initial calculation of goodwill less £5 million relating to an increase in the value of liabilities identified.
3 Amounts transferred to assets held for sale principally relate to the Institutional Asset Management (IAM) segment. Refer to note H2 for more details.
4 Of the impairment losses for the year ended 31 December 2016, £46 million relates to the disposal of Old Mutual Italy (note A2)), which completed on 9 January 2017, and £64 million relates to the Old Mutual Southern and Eastern Africa (OMSEA) Cash Generating Unit within Emerging Markets.
F: Non-financial assets and liabilities (continued)
F1: Goodwill and other intangible assets (continued)
Segmental analysis of goodwill and other intangibles
The following table shows a segmental analysis of the carrying amounts of goodwill and other intangible assets, together with amortisation and impairment charges, by operating segment at 30 June 2016 and 31 December 2015:
|
|
|
|
|
|
|
£m |
|
|
Goodwill and intangible assets (carrying amount) |
Amortisation |
Impairment |
|||
|
|
2016 |
2015 |
2016 |
2015 |
2016 |
2015 |
|
Emerging Markets |
461 |
415 |
25 |
28 |
67 |
- |
|
Old Mutual Wealth |
1,434 |
1,620 |
87 |
112 |
46 |
- |
|
Nedbank |
576 |
378 |
41 |
37 |
- |
- |
|
Institutional Asset Management1 |
- |
863 |
2 |
- |
- |
23 |
|
|
2,471 |
3,276 |
155 |
177 |
113 |
23 |
1 Goodwill for the Institutional Asset Management segment was transferred to assets held for sale in the Consolidated Statement of Financial Position. Refer to note H2 for further details.
F2: Non-controlling interests
(a) Profit or loss
(i) Ordinary shares
The non-controlling interests' share of profit for the financial year has been calculated on the basis of the Group's effective ownership of the subsidiaries in which it does not own 100% of the ordinary equity. The principal subsidiaries where a non-controlling interest exists is Nedbank, the Group's South African banking business and OM Asset Management plc, the Group's US asset management business. For the year ended 31 December 2016 the non-controlling interests attributable to ordinary shares was £253 million (2015: £291 million).
(ii) Preferred securities
|
|
|
£m |
|
|
At 31 December 2016 |
At 31 December 2015 |
|
Nedbank |
|
|
|
R3,222 million (2015: 3,560 million) non-cumulative preference shares |
18 |
19 |
|
R2,000 million (2015: nil) subordinated callable notes |
4 |
- |
|
|
22 |
19 |
(iii) Non-controlling interests - adjusted operating profit
The following table reconciles non-controlling interests' share of profit for the financial year to non-controlling interests' share of adjusted operating profit:
|
|
|
£m |
|
Reconciliation of non-controlling interests' share of profit for the financial year |
Year ended 31 December 2016 |
Year ended 31 December 2015 |
|
The non-controlling interests share is analysed as follows: |
|
|
|
Non-controlling interests - ordinary shares |
253 |
291 |
|
Impact of acquisition accounting |
53 |
- |
|
Income attributable to Black Economic Empowerment trusts of listed subsidiaries |
10 |
15 |
|
Attributable to Institutional Asset Management equity plans |
3 |
4 |
|
Non-controlling interests share of adjusted operating profit |
319 |
310 |
The Group uses an adjusted weighted average effective ownership interests when calculating the non-controllable interest applicable to the adjusted operating profit of its Southern African banking businesses. These reflect the legal ownership of this business following the implementation for Black Economic Empowerment (BEE) schemes in 2005. In accordance with IFRS accounting rules the shares issued for BEE purposes are deemed to be, in substance, options. Therefore the effective ownership interest of the minorities reflected in arriving at profit after tax in the consolidated income statement is lower than that applied in arriving at adjusted operating profit after tax. In 2016 the increase in adjusted operating profit attributable to non-controlling interests as a result of this was £10 million (2015: £15 million).
(b) Statement of financial position
(i) Ordinary shares
|
|
|
|
£m |
|
Reconciliation of movements in non-controlling interests |
|
At 31 December 2016 |
At 31 December 2015 |
|
Balance at beginning of the year |
|
1,982 |
1,867 |
|
Non-controlling interests' share of profit |
|
253 |
291 |
|
Non-controlling interests' share of dividends paid |
|
(149) |
(141) |
|
Disposal of interest in OM Asset Management plc |
|
153 |
114 |
|
Acquisition of businesses |
|
- |
105 |
|
Net disposal of interests |
|
- |
72 |
|
Foreign exchange and other movements |
|
534 |
(326) |
|
Balance at end of the year |
|
2,773 |
1,982 |
(ii) Preferred securities
|
|
|
£m |
|
|
At 31 December 2016 |
At 31 December 2015 |
|
Nedbank |
|
|
|
358.3 million (2015: 358.3 million) non-cumulative preference shares |
272 |
272 |
|
Repurchased by Nedbank subsidiaries |
(26) |
- |
|
|
246 |
272 |
|
R2,000 million Tier 1 perpetual subordinated instruments |
95 |
- |
|
Total |
341 |
272 |
Preferred securities are held at the value of consideration received less unamortised issue costs and are stated net of securities held by Group companies.
Non-cumulative preference shares
These preference shares were issued by Nedbank Limited (Nedbank), the Group's banking subsidiary.
Each preference share confers on the holder the right to capital of the company in the form of a cash dividend prior to payment of dividends to any other class of shareholder. The rate is limited to 83,33% of the prevailing prime rate on a deemed value of R10 and is never compounded.
If a preference dividend is not declared, the dividend will not accumulate and will never become payable by the company, whether in preference to payments to any other class of share or otherwise.
Each preference share confers on the holder the right to a return of capital on the winding-up of the company prior to any payment to any other class of share, but holders are not entitled to any further participation in the profits, assets or any surplus assets of the company in such circumstances.
Preference shareholders are only entitled to vote during periods when a dividend or any part of it remains unpaid after the due date for payment or when resolutions are proposed that directly affect any rights attaching to the shares or the rights of the holders.
During the year, preference shares with a carrying value of £26 million were purchased by a subsidiary of Nedbank and were classified as treasury shares.
Tier 1 perpetual subordinated instruments
On 20 May 2016, Nedbank Limited issued a R1,500 million new-style (Basel III-compliant) additional Tier 1 capital instrument at 3-month JIBAR + 7.0% with a call date of 21 May 2021.
On 25 November 2016, Nedbank Limited issued a R500 million new-style (Basel III-compliant) additional Tier 1 capital instrument at 3-month JIBAR + 6.3% with a call date of 26 November 2021.
These additional Tier 1 capital instruments represent perpetual, subordinated instruments, with no redemption date. The instruments are redeemable subject to regulatory approval at the sole discretion of the issuer, Nedbank Limited from the applicable call date and following a regulatory event or following a tax event. The payment of interest is at the discretion of the issuer and interest payments are non-cumulative. In addition, if certain conditions are reached the regulator may prohibit Nedbank from making interest payments. Accordingly the instruments are classified as equity instruments and disclosed as non-controlling interest.
G: Other notes
G1: Contingent liabilities
|
|
|
£m |
|
|
At 31 December 2016 |
At 31 December 2015 |
|
Guarantees and assets pledged as collateral security |
965 |
1,198 |
|
Secured lending |
806 |
401 |
|
Irrevocable letters of credit |
210 |
196 |
|
Other contingent liabilities |
10 |
4 |
The Group has provided certain guarantees for specific client obligations, in return for which the Group has received a fee. The Group has evaluated the extent of the possibility of the guarantees being called on and has provided appropriately.
The Group, through its South African banking business, has pledged debt securities and negotiable certificates of deposit amounting to £1,128 million (2015: £681 million) as collateral for deposits received under re-purchase agreements. These amounts represent assets that have been transferred but do not qualify for derecognition under IAS 39. These transactions are entered into under terms and conditions that are standard industry practice to securities borrowing and lending activities.
Contingent liabilities - tax
The Revenue authorities in the principal jurisdictions in which the Group operates (South Africa, the United Kingdom and the United States) routinely review historic transactions undertaken and tax law interpretations made by the Group. The Group is committed to conducting its tax affairs in accordance with the tax legislation of the jurisdictions in which they operate. All interpretations made by management are made with reference to the specific facts and circumstances of the transaction and the relevant legislation.
There are occasions where the Group's interpretation of tax law may be challenged by the Revenue authorities. The financial statements include provisions that reflect the Group's assessment of liabilities which might reasonably be expected to materialise as part of their review. The Board is satisfied that adequate provisions have been made to cater for the resolution of tax uncertainties and that the resources required to fund such potential settlements are sufficient.
Due to the level of estimation required in determining tax provisions amounts eventually payable may differ from the provision recognised.
Nedbank litigation
There are a number of legal or potential claims against Nedbank Group Ltd and its subsidiary companies, the outcome of which cannot at present be foreseen.
The largest potential claim relates to Pinnacle Point Group Limited, where ABSA Bank Limited (ABSA) has initiated an action in the High Court against Nedbank Limited (Nedbank) for the sum of R773 million, where ABSA alleges that Nedbank had a legal duty of care to it in relation to certain single stock futures transactions.
In a matter relating to the same events, New Port Finance Company (Pty) Ltd and Winifred Trust have sued ABSA for R405 million and R65 million respectively, alleging that ABSA had a duty of care towards them. During November 2016 ABSA joined Nedbank as a third party to that action claiming that, should ABSA be held liable, then ABSA would be entitled to claim a contribution from Nedbank.
Nedbank's counsel is of the view that Nedbank has a strong case to successfully resist both matters.
Consumer protection
Old Mutual is committed to treating customers fairly and supporting its customers in meeting their lifetime goals and treating customers fairly is central to how our businesses operate. We routinely engage with customers and regulators to ensure that we meet this commitment, but there is the risk of regulatory intervention across various jurisdictions, giving rise to the potential for customer redress which can result in retrospective changes to policyholder benefits, penalties or fines. The Group monitors the exposure to these actions and makes provision for the related costs as appropriate.
On 3 March 2016, the UK Financial Conduct Authority (FCA) issued a report detailing its findings of their industry-wide thematic review on the fair treatment of long-standing customers invested in closed-book products sold by the life insurance sector (Thematic Review) and announced that it was initiating an investigation into a number of firms, including Old Mutual Wealth Life Assurance Limited (OMWLA), a subsidiary of Old Mutual Wealth, in relation to potential breaches of the FCA's standards relevant to the matters covered by the Thematic Review. OWMLA is working with the FCA and is cooperating with its investigation, but as with any regulatory investigation of this nature it is difficult to predict when the investigation will be completed or its outcome and therefore no provision has been recognised in the financial statements for the year ended 31 December 2016.
Implications of the Managed Separation strategy
The Group routinely monitors and reassesses contingent liabilities arising from matters such as litigation, and warranties and indemnities relating to past acquisitions and disposals. The adoption of the Managed Separation strategy on 11 March 2016 does not affect the nature of such items, however it is possible that the Group may seek to resolve certain matters as part of the implementation of the Managed Separation strategy.
G2: Businesses acquired during the year
The Group continued to expand operations in Africa and the United Kingdom through the following completed acquisitions:
(a) Acquisition of Banco Unico, SA
On 3 October 2016 the Group acquired a 10.9% share in Banco Unico, SA to reach a controlling 50% plus one share (2015: 38.3% share). The acquiree is a banking entity in Mozambique and the acquisition, in line with the Group's strategy of expanding into the rest of Africa, was made by purchasing Banco Unico, SA shares from a third party.
The accounting related to the step up in ownership from 38.3% to 50% plus one share is such that it effectively requires a simultaneous sale of 38.3% followed by an acquisition of the fair value of 50% plus one share of the business. Consequently a loss of £11 million was realised on the transaction. Consistent with usual Group practice, this loss was recognised in profit or loss but excluded from the determination of AOP. As the Group now has a controlling interest of 50% plus one share, the financial results and position of Banco Unico, SA have been consolidated with effect from 3 October 2016.
The assets and liabilities acquired have been recorded at their fair values for purposes of the opening balance sheet and included in the consolidated accounts of the Group using the Group's accounting policies in accordance with IFRS.
The table below sets out the consolidated assets and liabilities acquired as a result of the acquisition of Banco Unico, SA:
|
|
|
£m |
|
|
Acquiree's carrying amount |
Fair value |
|
Assets |
|
|
|
Goodwill and other intangible assets |
- |
8 |
|
Property, plant and equipment |
6 |
6 |
|
Deferred tax assets |
3 |
3 |
|
Loans and advances |
188 |
188 |
|
Investments and securities |
8 |
8 |
|
Cash and cash equivalents |
30 |
30 |
|
Total assets |
235 |
243 |
|
Liabilities |
|
|
|
Borrowed funds |
(1) |
(1) |
|
Deferred tax liabilities |
- |
(2) |
|
Amounts owed to bank depositors |
(206) |
(206) |
|
Trade, other payables and other liabilities |
(6) |
(6) |
|
Total liabilities |
(213) |
(215) |
|
Total net assets acquired |
22 |
28 |
|
|
|
|
|
Acquisition-date fair value of consideration transferred |
|
29 |
|
Acquisition-date fair value of consideration held¹ |
|
12 |
|
Cash |
|
5 |
|
Share of non-controlling interests² |
|
14 |
|
Capitalised derivative financial instrument |
|
(2) |
|
|
|
|
|
Goodwill recognised |
|
1 |
1 A £1 million loss was recognised in non-trading and capital items as a result of remeasuring to fair value the equity interest in Banco Unico, SA held by the Group before the business combination. In addition, a £10 million foreign currency translation reserve loss was recognised in profit or loss on completion of the step-up acquisition. Refer to note A2 for further information.
2 The Group elected to measure non-controlling interests at the proportionate share of the fair value of net assets.
The goodwill recognised at acquisition is attributable to the delivery of cost and revenue synergies that could not be linked to identifiable intangible assets.
There were no contingent consideration arrangements and indemnification assets recognised on the acquisition.
£2 million profit from operations and £2 million profit for the year have been included in the consolidated income statement since the acquisition date.
G: Other notes continued
G2: Businesses acquired during the year (continued)
(b) Other acquisitions
AAM Advisory (AAM)
On 16 March 2016, Old Mutual Wealth completed the acquisition of 100% of AAM, a Singapore based wealth advice company. The consideration payable was an initial SGD 14 million (£7 million) with additional potential deferred consideration of SGD 26 million (£13 million), which is subject to AAM meeting certain performance targets for the period from 2016 to 2018. Goodwill of £4 million and other intangible assets of £3 million were recognised as a result of the transaction.
Old Mutual Private Client Advisors (PCA)
During the second half of 2016, Old Mutual Wealth (OMW) completed the acquisition of a number of advisor businesses as part of the expansion of its PCA business that was launched in October 2015. The aim is to develop an OMW branded, employed adviser business focused upon servicing upper affluent and high-net worth clients, offering a restricted advice proposition focused upon OMW's investment solutions and platform. The total consideration payable was an initial £8 million with additional potential deferred consideration of £8 million, dependent upon meeting certain performance targets, generally relating to funds under management. Goodwill of £8 million and other intangible assets of £7 million were recognised as a result of the transaction. The deferred consideration was included in the calculation of goodwill recognised.
Purchase of remaining stake in Credit Guarantee Insurance Company (CGIC)
On 1 March 2016 Emerging Markets acquired the remaining 13.9% of the shares in CGIC for R190 million (£10 million) taking its share to 100%. This transaction has resulted in a debit being directly recognised in reserves of R78 million (£4 million), which is the excess of the consideration paid and the proportionate share of the net assets of CGIC acquired.
(c) Acquisitions through businesses classified as held for sale
Acquisitions through businesses classified as held for sale are disclosed in note H2.
G3: Events after the reporting date
Old Mutual Wealth acquisition of Caerus Capital Group
On 28 February 2017, Old Mutual Wealth announced that it had reached a conditional agreement to acquire the financial adviser network, Caerus Capital Group (Caerus). The proposed acquisition is subject to a number of conditions, including shareholder agreement and regulatory approval. The transaction is expected to complete in Q2 2017.
The acquisition will complement Old Mutual Wealth's existing controlled distribution footprint in the UK, which includes Intrinsic, and Old Mutual Wealth Private Client Advisers, the branded national adviser firm established in 2015. Caerus has more than 300 advisers that are authorised and are responsible for more than £4 billion of assets under advice.
Old Mutual Wealth acquisition of Attivo Investment Management Limited
During 2016, the Group entered into a purchase agreement to acquire Attivo Investment Management Limited ("AIM") from Attivo Group Limited. The purchase has received regulatory approval, and is expected to be completed in the first quarter of 2017.
Repurchase of the outstanding Old Mutual plc perpetual preferred callable securities
On 3 February 2017 the Group repurchased all of the £273 million Tier 1 preferred perpetual callable securities and paid cash from the Groups' existing resources. A £29 million loss, including accrued interest and the costs of acquiring the instruments, will be recognised directly in equity in the 2017 financial statements.
Disposal of Old Mutual Wealth Italy
On 9 January 2017, the Group completed the disposal of Old Mutual Wealth Italy, part of the Old Mutual Wealth business for a cash consideration of €278 million (£210 million net of costs) plus interest to completion.
A goodwill impairment loss of £46 million has been recognised in profit or loss as the net asset value of the business disposed of exceeds the expected net proceeds. The related assets and liabilities were classified as held for sale at 31 December 2016. Refer to note H1 for further information.
H: Discontinued operations and disposal groups held for sale
H1: Discontinued operations
On 9 March 2016, the Group announced its managed separation strategy, which included the phased reduction of the majority stake in OM Asset Management plc (OMAM) and in addition, on 31 May 2016, the Group sold its interest in Rogge Global Partners Limited (Rogge). These two businesses comprised one of the Group's reported segments, International Asset Management (IAM). For the year ended 31 December 2016, IAM has been classified as a discontinued operation. Comparative profit and loss information has been restated accordingly. This treatment is consistent with the requirements of IFRS, given the Group's stated strategic intentions. In addition, as it is probable that the reduction of the holding in OMAM, such that the Group loses control, will occur within twelve months of the reporting date, the assets and liabilities of this business have been disclosed as held for sale. Details relating to the financial position of IAM is included in held for sale assets and liabilities and are disclosed in note H2.
During the year ended 31 December 2015, a loss on disposal of £21 million was incurred as a result of the settlement of litigation arising on the disposal of the US Life in 2011 following a court order in favour of the plaintiff.
|
(a) Income statement from discontinued operations |
||||||
|
|
|
|
|
|
|
£m |
|
|
Year ended 31 December 2016 |
Year ended 31 December 2015 |
||||
|
|
Institutional Asset Management |
US Life |
Total |
Institutional Asset Management |
US Life |
Total |
|
Revenue |
503 |
- |
503 |
497 |
- |
497 |
|
Expenses |
(399) |
- |
(399) |
(388) |
- |
(388) |
|
Share of associated undertakings' and joint ventures' profit after tax |
11 |
- |
11 |
8 |
- |
8 |
|
Profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments |
18 |
- |
18 |
1 |
(21) |
(20) |
|
Profit/(loss) before tax from discontinued operations |
133 |
- |
133 |
118 |
(21) |
97 |
|
Income tax expense |
(29) |
- |
(29) |
(27) |
- |
(27) |
|
Profit/(loss) after tax from discontinued operations |
104 |
- |
104 |
91 |
(21) |
70 |
|
Attributable to: |
|
|
|
|
|
|
|
Equity holders of the parent |
72 |
- |
72 |
66 |
(21) |
45 |
|
Non-controlling interests - ordinary shares |
32 |
- |
32 |
25 |
- |
25 |
|
|
104 |
- |
104 |
91 |
(21) |
70 |
|
|
|
|
|
|
|
|
|
(b) Statement of comprehensive income from discontinued operations |
||||||
|
|
|
|
|
|
|
£m |
|
|
Year ended 31 December 2016 |
Year ended 31 December 2015 |
||||
|
|
Institutional Asset Management |
US Life |
Total |
Institutional Asset Management |
US Life |
Total |
|
Profit/(loss) after tax from discontinued operations |
104 |
- |
104 |
91 |
(21) |
70 |
|
Items that may be reclassified subsequently to profit or loss |
|
|
|
|
|
|
|
Currency translation differences/exchange differences on translating foreign operations |
(3) |
- |
(3) |
1 |
- |
1 |
|
Other movements |
- |
- |
- |
4 |
- |
4 |
|
Total comprehensive income for the financial year from discontinued operations |
101 |
- |
101 |
96 |
(21) |
75 |
H: Discontinued operations and disposal groups held for sale (continued)
H1: Discontinued operations (continued)
|
(c) Net cash flows from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
Year ended 31 December 2016 |
Year ended 31 December 2015 |
||||
|
|
Institutional Asset Management |
US Life |
Total |
Institutional Asset Management |
US Life |
Total |
|
Operating activities |
14 |
- |
14 |
69 |
(21) |
48 |
|
Investing activities |
(172) |
- |
(172) |
3 |
- |
3 |
|
Financing activities 1 |
203 |
- |
203 |
(64) |
- |
(64) |
|
Net cash flows from discontinued operations |
45 |
- |
45 |
8 |
(21) |
(13) |
|
|
|
|
|
|
|
|
|
1 Excludes dividend and financing payments made to Old Mutual plc |
||||||
H2: Assets and liabilities held for sale
|
|
|
|
|
|
£m |
|
At 31 December 2016 |
Emerging Markets |
Nedbank |
Old Mutual Wealth |
Institutional Asset Management |
Total |
|
Assets |
|||||
|
Goodwill and other intangible assets |
- |
- |
78 |
1,216 |
1,294 |
|
Investment properties |
116 |
- |
- |
- |
116 |
|
Property, plant and equipment |
- |
17 |
4 |
32 |
53 |
|
Deferred tax assets |
- |
- |
3 |
247 |
250 |
|
Investments in associated undertaking and joint ventures |
- |
- |
- |
29 |
29 |
|
Deferred acquisition costs |
- |
- |
63 |
32 |
95 |
|
Investments and securities |
- |
- |
6,189 |
165 |
6,354 |
|
Other assets |
- |
- |
127 |
155 |
282 |
|
Cash and balances with central banks |
- |
- |
14 |
83 |
97 |
|
Total assets |
116 |
17 |
6,478 |
1,959 |
8,570 |
|
Liabilities |
|
|
|
|
|
|
Long-term business policyholder liabilities |
- |
- |
6,164 |
- |
6,164 |
|
Borrowed funds |
- |
- |
- |
319 |
319 |
|
Provisions |
- |
- |
3 |
3 |
6 |
|
Deferred revenue |
- |
- |
5 |
- |
5 |
|
Deferred tax liabilities |
- |
- |
21 |
4 |
25 |
|
Current tax payable |
- |
- |
- |
67 |
67 |
|
Other liabilities |
1 |
- |
71 |
388 |
460 |
|
Total liabilities |
1 |
- |
6,264 |
781 |
7,046 |
|
|
|
|
|
|
£m |
|
At 31 December 2015 |
Emerging Markets |
Nedbank |
Old Mutual Wealth |
Institutional Asset Management |
Total |
|
Assets |
|||||
|
Goodwill and other intangible assets |
- |
- |
- |
1 |
1 |
|
Investment properties |
84 |
- |
- |
- |
84 |
|
Property, plant and equipment |
- |
- |
4 |
1 |
5 |
|
Deferred acquisition costs |
- |
- |
- |
2 |
2 |
|
Other assets |
- |
- |
- |
11 |
11 |
|
Cash and balances with central banks |
- |
- |
- |
20 |
20 |
|
Total assets |
84 |
- |
4 |
35 |
123 |
|
Liabilities |
|
|
|
|
|
|
Other liabilities |
- |
- |
- |
12 |
12 |
|
Total liabilities |
- |
- |
- |
12 |
12 |
Institutional Asset Management
Current period transactions
On 9 March 2016, the Group announced its managed separation strategy, which included the phased reduction of the majority stake in OM Asset Management plc (OMAM). As such, the assets and liabilities of OMAM, part of the Institutional Asset Management segment, are classified as held for sale at 31 December 2016.
Further analysis of significant balances included in OMAM assets and liabilities held for sale are as follows:
(a) Goodwill and other intangible assets
As at 31 December 2016, the market value of the Group's investment in OMAM, based on its quoted share price, was £863 million, compared to a carrying value of £602 million. The Group has therefore concluded that the goodwill related to OMAM is not impaired.
(b) Deferred tax assets
In evaluating OMAM's ability to recover its deferred tax assets, management considers all available positive and negative evidence including the existence of cumulative income in the most recent financial years, changes in the business in which the OMAM operates, and the ability to forecast future taxable income. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence that is necessary and the more difficult it is to support a conclusion that a valuation allowance is not needed. OMAM has three years of cumulative earnings as of December 31, 2016, 2015, and 2014. As of December 31, 2016, management believes it is more likely than not that the balance of the deferred tax asset will be realised based on forecasted taxable income.
(c) Investments and securities
Investments and securities of £165 million comprise listed pooled investments of £64 million and unlisted pooled investments of £101 million.
The classification of investments and securities, in terms of the fair value hierarchy described in note E2 of the 2016 Annual Report and Accounts is follows:
|
|
|
|
|
£m |
|
At 31 December 2016 |
Total |
Level 1 |
Level 2 |
Level 3 |
|
Designated (fair value through profit or loss) |
|
|
|
|
|
Investments and securities |
165 |
70 |
28 |
67 |
Investments and securities classified as Level 3 relate to timber and real estate assets held by funds of OMAM. Accounting standards require consideration of the effect of reasonable possible alternative assumptions on the fair value of Level 3 financial assets and liabilities. A 10% change to the significant unobservable inputs of the Level 3 investments and securities above is in the range of £6 million favourable and £6 million unfavourable.
There have been no transfers between Level 1 and Level 2 or between Level 2 and Level 3 during the year.
Of the £67 million Level 3 investments and securities, OMAM disposed of a £41 million timber investment in January 2017.
(d) Borrowed funds
In July, 2016 OMAM announced underwritten public offerings of $400 million aggregate principal amount of senior notes, consisting of $275 million of senior notes due 2026 (the Institutional Notes), and $125 million of senior notes due 2031 (the Retail Notes). The Institutional Notes will bear interest at a fixed rate of 4.8% per year, payable on a semi-annual basis.
The Retail Notes will bear interest at a fixed rate of 5.1% per year, payable on a quarterly basis. The Retail Notes are callable at par as of 1 August 2019.
H: Discontinued operations and disposal groups held for sale continued
H2: Assets and liabilities held for sale continued
(e) Acquisition of Landmark Partners LLC (Landmark)
On 18 August 2016, the Group's US listed subsidiary, OM Asset Management plc (OMAM), acquired a 60% stake in the equity share capital of Landmark in exchange for cash consideration of $242 million (£185 million) in cash with the potential for an additional payment of up to $225 million (£182 million) on or around 31 December 2018. As this potential additional payment is dependent on future service and other conditions, no amounts have been attributed to the consideration of the business. Certain key members of the management team of Landmark have retained the remaining 40% interest in the business as ownership units. Both the potential additional payment and the 40% ownership units held by management are recognised as share-based payment transactions due to service conditions and settlement features. These arrangements vest over varying increments from 31 December 2018 through 31 December 2024. At the date of acquisition, the Group's stake in OMAM's equity was 66%.
Landmark is based in the United States of America and is a leading global secondary private equity and property investment firm. OMAM financed the acquisition through the proceeds of various note offerings, in particular $275 million of 4.8% senior notes due 27 July 2026 and $125 million of 5.1% senior notes due 1 August 2031.
Subsequent to the acquisition, the Group decided to dispose of its holding in OMAM and consequently the goodwill recognised on this acquisition was transferred from goodwill and other intangible assets to assets held for sale in the Consolidated Statement of Financial Position.
The results from the business have been consolidated since the date of the acquisition and the table below sets out the consolidated assets and liabilities acquired:
|
|
|
£m |
|
|
Acquiree's carrying amount |
Fair value |
|
Assets |
|
|
|
Intangible assets |
- |
65 |
|
Property, plant and equipment |
4 |
4 |
|
Cash and cash equivalents |
18 |
18 |
|
Trade, other receivables and other assets |
7 |
7 |
|
Total assets |
29 |
94 |
|
Liabilities |
|
|
|
Deferred revenue |
(7) |
(7) |
|
Trade, other payables and other liabilities |
(19) |
(13) |
|
Total liabilities |
(26) |
(20) |
|
Total net assets acquired |
3 |
74 |
|
|
|
|
|
Total cash consideration paid |
|
185 |
|
|
|
|
|
Goodwill recognised |
|
111 |
The purchase price has been allocated based on a provisional estimate of the fair value of assets acquired and liabilities assumed at the date of acquisition determined in accordance to IFRS 3 'Business Combinations'. The provisional allocation required significant assumptions and the use of external expertise and it is possible that the preliminary estimates may change materially as the purchase price allocations are finalised. The accounting must be finalised within 12 months of the acquisition date.
The carrying value of assets and liabilities in Landmark's consolidated statement of financial position at acquisition date approximated the fair value of these items determined by the Group, with the exception of identified intangible assets of £65 million and a reduction in other liabilities of £6 million. Of the £65 million identified intangibles assets, £64 million relates to the value attributable to contractual relationships existing at the acquisition date to provide asset management advisory services and the remaining £1m relates to the Landmark trade name. The value of the asset management contracts was determined using the excess earnings method in which the value is equal to the present value of the after-tax cash flows attributable to the intangible asset. The preliminary useful life for the asset management contacts has initially been estimated to be 13.4 years.
Goodwill is calculated as the difference between the fair value of the consideration paid and the net value assigned to the identified assets and liabilities acquired and are attributable to the delivery of cost and revenue synergies that cannot be linked to identifiable intangible assets. Under US tax law, the goodwill and other intangibles recognised as a result of this acquisition is expected to be deductible for tax purposes over a period of 15 years.
Transaction costs incurred of £5 million relating to the acquisition have been recognised within other operating expenses in the consolidated income statement, but excluded from the determination of adjusted operating profit. From the date of acquisition to 31 December 2016, Landmark contributed a loss of £16 million to the profit after tax attributable to equity holders of OMAM, which includes amortisation of intangible assets recorded in purchase accounting and compensation expense for the arrangements with employees of Landmark noted above.
Prior period transactions
At 31 December 2015, the Group classified total assets of £35 million (comprising £20 million cash and cash equivalents and £10 million other assets) and total liabilities of £12 million as held for sale in relation to the disposal of Rogge Global Partners plc. This transaction completed on 31 May 2016.
Emerging Markets
Current and prior period transactions
Emerging Markets has classified £116 million (2015: £84 million) of investment properties as held for sale. These transactions are expected to complete in the next 12 months. The investment properties form part of the policyholder assets and therefore have no impact on profit or loss of the Group.
Nedbank
Current period
Following an internal review of its own office space requirements, Nedbank has identified buildings with a carrying value of £17 million (2015: £nil) that are no longer required and which are currently being marketed for sale.
Old Mutual Wealth
Current period
On 9 August 2016, the Group announced that it had agreed to sell Old Mutual Wealth Italy, part of the Old Mutual Wealth business, to ERGO Italia (now renamed Phlavia Investimenti), subject to regulatory approval. From this date the business was disclosed as held for sale.
A goodwill impairment loss of £46 million has been recognised in profit or loss for the year ended 31 December 2016 as the net asset value of the business exceeded the net proceeds.
At 31 December 2016, the principal financial assets and liabilities included as held for sale were investments and securities of £6,189 million and investment contract liabilities of £6,164 million, all of which were classified as Level 1 in terms of the fair value hierarchy.
The sale completed on 9 January 2017.
Current and prior period
Old Mutual Wealth has also identified property, plant and equipment of £4 million (December 2016: £4 million) as held for sale.
This information is provided by RNS
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