Financial Express (Holdings) Limited (“we”, “our”, “us” and derivatives) are committed to protecting and respecting your privacy. This Privacy Policy, together with our Terms of Use, sets out the basis on which any personal data that we collect from you, or that you provide to us, will be processed by us relating to your use of any of the below websites (“sites”).

  • FEAnalytics.com
  • FEInvest.net
  • FETransmission.com
  • Investegate.co.uk
  • Trustnet.hk
  • Trustnetoffshore.com
  • Trustnetmiddleeast.com

For the purposes of the Data Protection Act 1998, the data controller is Trustnet Limited of 2nd Floor, Golden House, 30 Great Pulteney Street, London, W1F 9NN. Our nominated representative for the purpose of this Act is Kirsty Witter.

WHAT INFORMATION DO WE COLLECT ABOUT YOU?

We collect information about you when you register with us or use any of our websites / services. Part of the registration process may include entering personal details & details of your investments.

We may collect information about your computer, including where available your operating system, browser version, domain name and IP address and details of the website that you came from, in order to improve this site.

You confirm that all information you supply is accurate.

COOKIES

In order to provide personalised services to and analyse site traffic, we may use a cookie file which is stored on your browser or the hard drive of your computer. Some of the cookies we use are essential for the sites to operate and may be used to deliver you different content, depending on the type of investor you are.

You can block cookies by activating the setting on your browser which allows you to refuse the setting of all or some cookies. However, if you use your browser settings to block all cookies (including essential cookies) you may not be able to access all or part of our sites. Unless you have adjusted your browser setting so that it will refuse cookies, our system will issue cookies as soon as you visit our sites.

HOW WE USE INFORMATION

We store and use information you provide as follows:

  • to present content effectively;
  • to provide you with information, products or services that you request from us or which may interest you, tailored to your specific interests, where you have consented to be contacted for such purposes;
  • to carry out our obligations arising from any contracts between you and us;
  • to enable you to participate in interactive features of our service, when you choose to do so;
  • to notify you about changes to our service;
  • to improve our content by tracking group information that describes the habits, usage, patterns and demographics of our customers.

We may also send you emails to provide information and keep you up to date with developments on our sites. It is our policy to have instructions on how to unsubscribe so that you will not receive any future e-mails. You can change your e-mail address at any time.

In order to provide support on the usage of our tools, our support team need access to all information provided in relation to the tool.

We will not disclose your name, email address or postal address or any data that could identify you to any third party without first receiving your permission.

However, you agree that we may disclose to any regulatory authority to which we are subject and to any investment exchange on which we may deal or to its related clearing house (or to investigators, inspectors or agents appointed by them), or to any person empowered to require such information by or under any legal enactment, any information they may request or require relating to you, or if relevant, any of your clients.

You agree that we may pass on information obtained under Money Laundering legislation as we consider necessary to comply with reporting requirements under such legislation.

ACCESS TO YOUR INFORMATION AND CORRECTION

We want to ensure that the personal information we hold about you is accurate and up to date. You may ask us to correct or remove information that is inaccurate.

You have the right under data protection legislation to access information held about you. If you wish to receive a copy of any personal information we hold, please write to us at 3rd Floor, Hollywood House, Church Street East, Woking, GU21 6HJ. Any access request may be subject to a fee of £10 to meet our costs in providing you with details of the information we hold about you.

WHERE WE STORE YOUR PERSONAL DATA

The data that we collect from you may be transferred to, and stored at, a destination outside the European Economic Area (“EEA”). It may be processed by staff operating outside the EEA who work for us or for one of our suppliers. Such staff may be engaged in, amongst other things, the provision of support services. By submitting your personal data, you agree to this transfer, storing and processing. We will take all steps reasonably necessary, including the use of encryption, to ensure that your data is treated securely and in accordance with this privacy policy.

Unfortunately, the transmission of information via the internet is not completely secure. Although we will do our best to protect your personal data, we cannot guarantee the security of your data transmitted to our sites; any transmission is at your own risk. You will not hold us responsible for any breach of security unless we have been negligent or in wilful default.

CHANGES TO OUR PRIVACY POLICY

Any changes we make to our privacy policy in the future will be posted on this page and, where appropriate, notified to you by e-mail.

OTHER WEBSITES

Our sites contain links to other websites. If you follow a link to any of these websites, please note that these websites have their own privacy policies and that we do not accept any responsibility or liability for these policies. Please check these policies before you submit any personal data to these websites.

CONTACT

If you want more information or have any questions or comments relating to our privacy policy please email [email protected] in the first instance.

 Information  X 
Enter a valid email address

Old Mutual PLC (OML)

  Print      Mail a friend       Annual reports

Friday 11 August, 2017

Old Mutual PLC

Old Mutual Interim Results 2017 - Part 3

RNS Number : 7208N
Old Mutual PLC
11 August 2017
 

Part 3 - Financial information

Index to the financial information

For the six months ended 30 June 2017


 

 


Statement of directors' responsibilities in respect of the interim financial statements for the six months ended 30 June 2017

 

60

Independent review report to Old Mutual plc for the six months ended 30 June 2017

 

61

Consolidated income statement

 

62

Consolidated statement of comprehensive income

 

63

Reconciliation of adjusted operating profit to profit after tax

 

64

Consolidated statement of financial position

 

66

Consolidated statement of cash flows

 

67

Consolidated statement of changes in equity

 

68

Notes to the consolidated financial statements

 



A: Significant accounting policies

 

74


B: Segment information

 

78


C: Other key performance information

 

92


D: Other income statement notes

 

100


E: Financial assets and liabilities

 

102


F: Analysis of financial assets and liabilities

114


G: Non-financial assets and liabilities

124


H: Other notes

 

126


I: Discontinued operations and disposal groups held for sale

 

128


























 


Statement of directors' responsibilities in respect of the interim financial statements

For the six months ended 30 June 2017

We confirm that to the best of our knowledge:

§  The Group interim financial statements contained herein are presented in accordance with the requirements of IAS 34 'Interim Financial Reporting' as adopted by the EU.

§  The interim management statement includes a fair review of the information required by:

(a)     DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b)     DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

 

 

Bruce Hemphill                                                                        Ingrid Johnson
Group Chief Executive                                                                Group Finance Director
10 August 2017                                                                          10 August 2017

 

 

 

 

 

Independent review report to Old Mutual plc

For the six months ended 30 June 2017

Conclusion

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity and the related explanatory notes, which includes the Statement of adjusted operating profit.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ('the DTR') of the UK's Financial Conduct Authority ('the UK FCA').

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion. 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. 

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU.  The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached. 

 

 

 

Jonathan Holt (Senior Statutory Auditor)

for and on behalf of KPMG LLP

Chartered Accountants
15 Canada Square
London E14 5GL
10 August 2017

Consolidated income statement



For the six months ended 30 June 2017









£m


Notes

Six months ended

30 June

2017

Six months

ended

30 June

 2016

(Restated)¹

Year

 ended

31 December

2016

Revenue




 

Gross earned premiums

B2

2,188

1,703

3,868

Outward reinsurance


(240)

(178)

(398)

Net earned premiums


1,948

1,525

3,470

Investment return (non-banking)


4,843

3,001

8,325

Banking interest and similar income


2,363

1,609

3,906

Banking trading, investment and similar income


144

100

255

Fee and commission income, and income from service activities


1,462

1,173

2,636

Other income


62

72

104

Total revenue


10,822

7,480

18,696

Expenses





Claims and benefits (including change in insurance contract provisions)


(2,317)

(1,960)

(3,682)

Reinsurance recoveries


217

209

391

Net claims and benefits incurred


(2,100)

(1,751)

(3,291)

Change in investment contract liabilities


(2,937)

(1,837)

(6,216)

Credit impairment charges


(120)

(116)

(272)

Finance costs


(71)

(37)

(128)

Banking interest payable and similar expenses


(1,438)

(924)

(2,401)

Fee and commission expenses, and other acquisition costs


(371)

(326)

(745)

Change in third-party interest in consolidated funds


(731)

(294)

(691)

Other operating and administrative expenses


(2,166)

(1,655)

(3,741)

Total expenses


(9,934)

(6,940)

(17,485)

Share of associated undertakings' and joint ventures' (loss)/profit after tax


(77)

(16)

4

Profit on disposal of subsidiaries, associated undertakings and

   strategic investments

C1(c)

129

10

1

Profit before tax


940

534

1,216

Income tax expense

D1

(284)

(163)

(475)

Profit from continuing operations after tax


656

371

741

Discontinued operations





Profit from discontinued operations after tax

I1

23

54

104

Profit after tax for the financial period


679

425

845






Attributable to





Equity holders of the parent


531

284

570

Non-controlling interests





  Ordinary shares


130

133

253

  Preferred securities


18

8

22

Profit after tax for the financial period


679

425

845






Earnings per ordinary share





Basic earnings per share - continuing operations (pence)


10.7

4.9

10.4

Basic earnings per share - discontinued operations (pence)


0.3

0.8

1.5

Basic earnings per ordinary share (pence)

C2(a)

11.0

5.7

11.9

Diluted basic earnings per share - continuing operations (pence)


10.5

4.8

10.1

Diluted basic earnings per share - discontinued operations (pence)


0.3

0.8

1.5

Diluted basic earnings per ordinary share (pence)

C2(b)

10.8

5.6

11.6






Weighted average number of ordinary shares (millions)

C2(a)

4,687

4,686

4,686

1        The six months ended 30 June 2016 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 I1 for more information.

Consolidated statement of comprehensive income

For the six months ended 30 June 2017









£m


Notes

Six months ended

 30 June

2017

Six months

ended

30 June

2016

(Restated)¹

Year

ended

 31 December

 2016

Profit after tax for the financial period


679

425

845

Other comprehensive income for the financial period





Items that will not be reclassified subsequently to profit or loss





Fair value movements





  Property revaluation


1

(1)

7

Measurement (losses)/gains on defined benefit plans


(42)

7

(27)

Shadow accounting


(2)

-

(7)

Income tax on items that will not be reclassified subsequently to profit or loss

D1(c)

(3)

6

8



(46)

12

(19)

Items that may be reclassified subsequently to profit or loss





Fair value movements





  Net investment hedge


188

(42)

(104)

  Available-for-sale investments





    Fair value gains/(losses)


7

7

(5)

Currency translation differences on translating foreign operations


(152)

963

1,904

Exchange differences and other reserves recycled

   to profit or loss on disposal of businesses


(149)

-

-

Other movements


(5)

(42)

(23)

Share of other comprehensive income of investments


17

-

(1)

Income tax on items that may be reclassified subsequently to profit or loss

D1(c)

-

-

8



(94)

886

1,779

Total other comprehensive income for the financial period from

   continuing operations


(140)

898

1,760

Total other comprehensive income for the financial period from discontinued

   operations


1

13

(3)

Total other comprehensive income for the financial period


(139)

911

1,757






Total comprehensive income for the financial period


540

1,336

2,602






Attributable to





Equity holders of the parent


421

933

1,802

Non-controlling interests





   Ordinary shares


101

395

778

   Preferred securities


18

8

22

Total comprehensive income for the financial period


540

1,336

2,602

1        The six months ended 30 June 2016 has been restated to reflect Institutional Asset Management as a discontinued operation. Refer to note I1 for more information.

 

Statement of adjusted operating profit

For the six months ended 30 June 2017









£m

Adjusted operating profit (AOP) after tax attributable to

   ordinary equity holders of the parent

Notes

Six months ended

30 June

2017

Six months

ended

 30 June

 2016

(Re-presented)¹

Year

ended

31 December

2016

(Re-presented)¹

Core operations





Emerging Markets

B3

362

270

639

Nedbank

B3

472

345

799

Old Mutual Wealth

B3

134

104

260



968

719

1,698

Institutional Asset Management

B3

64

58

141

plc Head Office





   Old Mutual plc finance costs


(35)

(45)

(88)

   Corporate costs (before recharges)


(30)

(42)

(79)

   Other net shareholder income/(expenses)


2

18

(5)

Adjusted operating profit before tax

B3

969

708

1,667

Tax on adjusted operating profit

D1(d)

(266)

(181)

(398)

Adjusted operating profit after tax


703

527

1,269

Non-controlling interests - ordinary shares


(179)

(137)

(319)

Non-controlling interests - preferred securities


(18)

(8)

(22)

Adjusted operating profit after tax attributable to ordinary equity holders of the parent


506

382

928

Adjusted weighted average number of shares (millions)

C2(a)

4,771

4,773

4,773

Adjusted operating earnings per share (pence)

C2(c)

10.6

8.0

19.4










£m

Reconciliation of adjusted operating profit to profit after tax attributable

   to the equity holders of the parent

Notes

Six months ended

30 June

2017

Six months

ended

 30 June

 2016

(Re-presented)¹

Year

ended

31 December

2016

(Re-presented)¹

Adjusted operating profit after tax attributable to ordinary equity holders of the parent


506

382

928

Adjusting items net of tax and non-controlling interest

C1(a)

(6)

(89)

(353)

Non-core operations

B3

31

(9)

(5)

Profit after tax attributable to the equity holders of the parent


531

284

570

1     Re-presentation of adjusted operating profit in the prior periods: The statement of adjusted operating profit for the six months ended 30 June 2016 and the year ended 31 December 2016 has been re-presented to be on a consistent basis with the six months ended 30 June 2017. During the current period, the results of Institutional Asset Management have been disclosed separately from core operations. The long-term investment return on excess assets (June 2017: £9 million; June 2016: £10 million; December 2016: £20 million), previously shown as a separate item within the AOP of plc Head Office is now included in AOP of Emerging Markets for all periods. Corporate costs are now presented before recharges to the businesses (June 2017: £4 million; June 2016: £12 million; December 2016: £19 million), the related recharge income for the plc Head Office is now included within Other net shareholder income/(expenses). These changes did not affect the total AOP of the Group as previously reported. All of these changes are intended to improve the transparency of the impact of managed separation on the operating result. Further explanation of these presentational changes can be found on page 65.

 

Basis of preparation of adjusted operating profit (AOP)

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 the basic IFRS profit for a number of items as detailed in note C1. 

AOP is one of the key performance indicators by which operational performance is monitored and managed, and it is one of a range of measures by which management performance and remuneration is assessed. Further detail of the performance measures applied in determining management remuneration is available in the remuneration report in pages 104 to 139 of the 2016 Annual Report and Accounts.

The adjusting items applied in calculating AOP seek to remove the impact of strategic activity, short-term valuation movements, IFRS accounting treatments, one-off managed separation costs, and costs related to the resolution of pre-existing plc Head Office 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, and 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. At the current time the only such operations are those of Old Mutual Bermuda. Old Mutual Bermuda is closed to new business and in run off and as such its activity is not envisaged to form part of the of the underlying long-term operating performance of the Group. Refer to note B1 for further information on the basis of segmentation.

The results of the Institutional Asset Management (IAM) business segment that are currently classified as held for sale and discontinued operations for IFRS reporting have been included in the determination of AOP. This reflects the continuing contribution of the business to the Group result, albeit at a lower level as the Group sells down its interest in the business. It also reflects the Group's continuing 20.1% interest in the business and its representation on the OM Asset Management plc Board. This differs from the AOP policy applied in respect of previously disposed operating segments, such as US Life during 2010 and Nordic during 2011. However, these previous disposals were all outright sales of the relevant business, whereas the Group continues to retain its interest in the IAM business. In the context of the current strategy for the business, the Directors believe the continued inclusion of the Institutional Asset Management results will assist with the comparability of year-on-year performance as the Group implements its managed separation strategy.

AOP presentation

AOP is presented on a consistent basis with the previous reporting, except for the following:

§ For the six months ended 30 June 2017, the results of Institutional Asset Management will be disclosed separately from core businesses in the statement of adjusted operating profit (AOP statement). This provides improved transparency of the results of the continuing businesses that will be listed in the execution of the managed separation strategy.

§ The long-term investment return on excess assets, previously shown as a separate item within the AOP of plc Head Office is now included in AOP of Emerging Markets for all periods. This is consistent with where the excess assets are managed and where returns will be recognised following managed separation.

§ Corporate costs are now presented before recharges to the businesses. The related recharge income received by the Old Mutual plc Head Office is now included within other net shareholder income/(expenses).

Comparative information has been re-presented to be consistent with the treatment of the items described above. These re-presentations of AOP do not alter the AOP result as previously reported.

Adjustments IFRS to profit

For all core businesses, AOP reflects a number of adjustments to IFRS profit 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, impairments of investments in associated undertakings and the profit or loss on disposal of subsidiaries (note C1(b) and C1(c)).

AOP is based on a long-term shareholder investment return 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 certain IFRS accounting treatments that are not deemed to be reflective of the underlying operating performance of the business are excluded from the determination of AOP. These include the inclusion of dividends declared to holders of perpetual preferred callable securities (note C1(f)), short-term fluctuations in investment return on shareholder assets (note C1(d)) and the inclusion of returns on investments held by life funds in Group equity and debt instruments (note C1(e)).

For the six months ended 30 June 2017, managed separation and business standalone costs recognised in the IFRS income statement have been excluded from the calculation of AOP on the basis that these items are one-off in nature and are not reflective of the underlying operating activity of the Group. These costs include the cost of winding down the plc Head Office, preparing the businesses for being standalone businesses and transaction advice. Comparative information has not been restated (June 2016: £5 million; December 2016: £31 million). Further disclosure on managed separation costs is included in note C1(i) of these financial statements.

For the six months ended 30 June 2017, income/(expenses) from resolution of pre-existing plc Head Office items recognised in the IFRS income statement have been excluded from the calculation of AOP on the basis that these items are one-off in nature and are not reflective of the underlying operating activity of the Group. Comparative information has not been restated (June 2016: £nil million; December 2016: £nil million). Further disclosure on the income/(expenses) from resolution of pre-existing plc Head Office items is included in note C1(j) of these financial statements.

Old Mutual Wealth business transformation costs related to the development of Old Mutual Wealth platform capability and outsourcing of UK business administration and continue to be excluded from AOP. These costs are excluded from AOP because management is of the view that this near term investment in operational capability is not reflective of the long-term cost. (note C1(k)).

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 is adjusted 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.

Consolidated statement of financial position

At 30 June 2017









£m


Notes

At

30 June

2017

At

30 June

2016

(Restated)¹

At

31 December

2016

Assets





Goodwill and other intangible assets

G1

2,430

3,342

2,471

Mandatory reserve deposits with central banks


1,159

866

1,111

Property, plant and equipment


860

794

892

Investment property


1,722

1,508

1,697

Deferred tax assets


70

311

96

Investments in associated undertakings and joint ventures


440

527

542

Deferred acquisition costs


749

729

756

Reinsurers' share of policyholder liabilities

F2

3,376

3,058

3,115

Loans and advances

F1

43,153

36,801

43,108

Investments and securities


107,960

89,572

100,533

Current tax receivable


56

136

74

Trade, other receivables and other assets


3,050

3,378

2,416

Derivative financial instruments


1,447

1,541

1,340

Cash and cash equivalents


5,175

4,002

4,847

Assets held for sale

I2

440

6,098

8,570

Total assets


172,087

152,663

171,568

Liabilities





Long-term business insurance policyholder liabilities

F2

9,794

9,183

9,982

Investment contract liabilities

F2

82,605

69,040

77,599

Property & casualty liabilities

F2

532

425

482

Third-party interests in consolidated funds


10,787

7,178

7,981

Borrowed funds

F3

4,847

4,231

4,694

Provisions and accruals


157

158

160

Deferred revenue


291

254

290

Deferred tax liabilities


470

408

440

Current tax payable


160

207

144

Trade, other payables and other liabilities


5,013

5,648

5,112

Amounts owed to bank depositors


45,250

38,607

45,309

Derivative financial instruments


1,489

1,584

1,161

Liabilities held for sale

I2

-

5,853

7,046

Total liabilities


161,395

142,776

160,400

Net assets


10,692

9,887

11,168

Shareholders' equity





Equity attributable to equity holders of the parent


8,033

7,258

8,054

Non-controlling interests





Ordinary shares


2,282

2,316

2,773

Preferred securities


377

313

341

Total non-controlling interests


2,659

2,629

3,114

Total equity


10,692

9,887

11,168

1        The comparative information for June 2016 has been restated to reflect the adjustment for the consolidation of investment funds. Refer to note A2 for more information.

 

The Group interim financial statements on pages 62 to 130 were approved by the Board of Directors on 10 August 2017.

 

 

 

 

Bruce Hemphill                    Ingrid Johnson

Group Chief Executive            Group Finance Director

Consolidated statement of cash flows


For the six months ended 30 June 2017









£m


Notes

Six months ended

30 June

2017

Six months

ended

30 June

2016

(Restated)¹

Year

ended

31 December

2016

Cash flows from operating activities





Profit before tax


940

534

1,216

Non-cash movements in profit before tax


2,781

2,280

3,620

Net changes in working capital


(859)

(167)

416

Taxation paid


(211)

(226)

(468)

Net cash inflow from operating activities - continuing operations


2,651

2,421

4,784

Cash flows from investing activities





Net acquisitions of financial investments


(2,330)

(2,861)

(4,374)

Acquisition of investment properties


(34)

(40)

(83)

Proceeds from disposal of investment properties


-

5

8

Dividends received from associated undertakings


3

8

9

Acquisition of property, plant and equipment


(57)

(48)

(119)

Proceeds from disposal of property, plant and equipment


3

1

6

Acquisition of intangible assets


(71)

(47)

(141)

Acquisition of interests in subsidiaries, associated undertakings, joint

   ventures and strategic investments2


(65)

(23)

(121)

Proceeds from the disposal of interests in subsidiaries, associated

   undertakings joint ventures and strategic investments3


525

10

194

Net cash outflow from investing activities - continuing operations


(2,026)

(2,995)

(4,621)

Cash flows from financing activities





Dividends paid to:





  Ordinary equity holders of the Company


(161)

(299)

(426)

  Non-controlling interests and preferred security interests


(129)

(90)

(178)

Interest paid (excluding banking interest paid)


(31)

(35)

(69)

Proceeds from issue of ordinary shares (including by subsidiaries to

   non-controlling interests)


3

1

2

Net sale/(acquisition) of treasury shares - ordinary shares


24

(37)

(33)

Redemption of perpetual preferred callable securities


(287)

-

-

Proceeds from issue of preferred equity


36

-

95

Acquisition of treasury shares - preferred equity


-

-

(26)

Proceeds from issue of subordinated and other debt


450

415

809

Subordinated and other debt repaid


(282)

(27)

(492)

Net cash outflow from financing activities - continuing operations


(377)

(72)

(318)

Net cash inflow/(outflow) - continuing operations


248

(646)

(155)

Net cash inflow/(outflow) - discontinued operations

I1(c)

48

(55)

45

Effects of exchange rate changes on cash and cash equivalents


(17)

439

1,018

Cash and cash equivalents at beginning of the year


6,055

5,147

5,147

Cash and cash equivalents at end of the period


6,334

4,885

6,055






Consisting of:





Cash and cash equivalents


5,175

4,002

4,847

Mandatory reserve deposits with central banks


1,159

866

1,111

Cash and cash equivalents included in assets held for sale


-

17

97

Total


6,334

4,885

6,055

1    The six months ended 30 June 2016 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 I1 for more information.

2    The acquisition of interests in subsidiaries, associated undertakings, joint ventures and strategic investments, is stated net of cash acquired on acquisition of the undertakings.

3    The proceeds from disposal of interests in associated undertakings, joint ventures and strategic investments is stated net of any cash held by undertakings at the date of sale.

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 £1,159 million (June 2016: £866 million; December 2016: £1,111 million) and cash and cash equivalents subject to consolidation of funds of £1,311 million (June 2016: £1,168 million; December 2016: £976 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 six months ended 30 June 2017










Millions



Six months ended 30 June 2017

Notes

Number of shares issued and fully paid


Share

capital

Share

premium

Merger

reserve

Available-for-sale reserve

Shareholders' equity at beginning of the period


4,930


563

1,042

1,252

38

Total comprehensive income for the financial period








Profit after tax for the financial period


-


-

-

-

-

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


-


-

-

-

-

Shadow accounting


-


-

-

-

-

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 gains1


-


-

-

-

-

    Recycled to profit or loss


-


-

-

-

-

Currency translation differences on translating foreign

  operations1


-


-

-

-

-

Exchange differences and other reserves recycled to profit or

   loss on disposal of business2


-


-

-

-

-

Other movements


-


-

-

-

-

Share of other comprehensive income of investments


-


-

-

-

-

Income tax on items that may be reclassified

  subsequently to profit or loss

D1(c)

-


-

-

-

-

Total comprehensive income for the financial period


-


-

-

-

-

Transactions with the owners of the Company








Contributions and distributions








Dividends for the period

C3

-


-

-

-

-

Tax relief on dividends paid


-


-

-

-

-

Equity share-based payment transactions


-


-

-

-

-

Transfer between reserves3


-


-

-

-

-

Proceeds from BEE transactions


-


-

13

-

-

Merger reserve released


-


-

-

(104)

-

Additional Tier 1 capital instruments issued4


-


-

-

-

-

Preferred securities repurchased


-


-

-

-

-

Other movements in share capital


2


-

3

-

-

Total contributions and distributions


2


-

16

(104)

-

Changes in ownership








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


2


-

16

(104)

-

Shareholders' equity at end of the period


4,932


563

1,058

1,148

38

1    Included in other reserves is a gain of £7 million relating to Ecobank Transnational Inc. (ETI) available-for-sale reserve. Currency translation differences on translating foreign operations include £14 million relating to foreign exchange losses on translation of ETI.

2    A net gain of £130 million was realised and recycled to profit and loss on the disposal of OM Asset Management plc (OMAM) consisting of £(21)million other reserves and £151 million foreign currency translation.  A gain of £19 million was realised from the recycling of foreign currency reserves relating to disposal of Old Mutual Wealth Italy.

3    Transfers between reserves comprise a transfer from the share-based payment reserve to retained earnings as a result of the disposal of OMAM (£61 million) and a transfer for fully vested share based-payments within plc Head Office (£47 million).

4    On 30 June 2017, Nedbank Limited issued R600 million additional Tier 1 capital instruments under its R10 billion Domestic Medium Term Note Programme which has been classified as equity. Interest is payable quarterly in arrears at a floating rate of 3-month JIBAR + 5.65%. Refer to note A2 for more information.



























£m

Property revaluation reserve

Share-based payments reserve

Other reserves1

Foreign currency

translation reserve

Retained earnings

Perpetual preferred callable securities

Attributable to equity holders  of the parent

Total

non-controlling interests

Total

equity

182

409

17

(1,008)

5,286

273

8,054

3,114

11,168










-

-

-

-

516

15

531

148

679




























1

-

-

-

-

-

1

-

1

-

-

-

-

(47)

-

(47)

5

(42)

(2)

-

-

-

-

-

(2)

-

(2)

-

-

-

-

(2)

-

(2)

(1)

(3)

(1)

-

-

-

(49)

-

(50)

4

(46)



















-

-

-

188

-

-

188

-

188










-

-

7

-

(2)

-

5

2

7

-

-

-

-

-

-

-

-

-

-

-

-

(96)

-

-

(96)

(56)

(152)

-

-

21

(170)

(9)

-

(158)

9

(149)

-

-

(1)

-

(7)

-

(8)

4

(4)

-

-

17

-

(8)

-

9

8

17

-

-

-

-

-

-

-

-

-

(1)

-

44

(78)

441

15

421

119

540



















-

-

-

-

(161)

(15)

(176)

(114)

(290)

-

-

-

-

-

-

-

-

-

-

(39)

-

-

4

-

(35)

(9)

(44)

-

(108)

-

-

108

-

-

-

-

-

-

-

-

-

-

13

-

13

-

-

-

-

104

-

-

-

-

-

-

-

-

-

-

-

36

36

-

-

-

-

(14)

(273)

(287)

-

(287)

16

-

-

-

(5)

-

14

-

14

16

(147)

-

-

36

(288)

(471)

(87)

(558)










-

-

-

-

-

-

-

(550)

(550)

-

-

-

-

29

-

29

63

92

-

-

-

-

29

-

29

(487)

(458)

16

(147)

-

-

65

(288)

(442)

(574)

(1,016)

197

262

61

(1,086)

5,792

-

8,033

2,659

10,692

 

Consolidated statement of changes in equity

For the six months ended 30 June 2016










Millions




Notes

Number of shares issued and fully paid


Share

capital

Share

premium

Merger

reserve

Available-

for-sale reserve

Shareholders' equity at beginning of the period


4,929


563

1,040

1,252

40

Total comprehensive income for the financial period








Profit after tax for the financial period


-


-

-

-

-

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


-


-

-

-

(2)

Currency translation differences on translating foreign

  operations


-


-

-

-

-

Other movements


-


-

-

-

-

Total comprehensive income for the financial period


-


-

-

-

(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


-


-

-

-

-

Old Mutual Asset Management plc share buyback


-


-

-

-

-

Tier 1 instruments issued


-


-

-

-

-

Preferred securities repurchased


-


-

-

-

-

Other movements in share capital


1


-

1

-

-

Total contributions and distributions


1


-

1

-

-

Changes in ownership








Change in participation in subsidiaries


-


-

-

-

-

Total changes in ownership


-


-

-

-

-

Total transactions with owners of the Company


1


-

1

-

-

Shareholders' equity at end of the period


4,930


563

1,041

1,252

38

 



























£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

184

367

30

(2,243)

5,174

273

6,680

2,254

8,934










-

-

-

-

268

16

284

141

425




























(1)

-

-

-

-

-

(1)

-

(1)

-

-

-

-

6

-

6

1

7

-

4

-

-

-

-

4

2

6

(1)

4

-

-

6

-

9

3

12



















-

-

-

(42)

-

-

(42)

-

(42)










-

-

10

-

(4)

-

4

3

7

-

-

-

694

-

-

694

268

962

(3)

-

(5)

-

(8)

-

(16)

(12)

(28)

(4)

4

5

652

262

16

933

403

1,336



















-

-

-

-

(299)

(17)

(316)

(78)

(394)

-

-

-

-

-

1

1

-

1

-

(6)

-

-

7

-

1

(5)

(4)

-

-

-

-

(8)

-

(8)

(3)

(11)

-

-

-

-

-

-

-

67

67

-

-

-

-

-

-

-

(26)

(26)

-

-

-

-

(37)

-

(36)

-

(36)

-

(6)

-

-

(337)

(16)

(358)

(45)

(403)










-

-

-

-

3

-

3

17

20

-

-

-

-

3

-

3

17

20

-

(6)

-

-

(334)

(16)

(355)

(28)

(383)

180

365

35

(1,591)

5,102

273

7,258

2,629

9,887

 

Consolidated statement of changes in equity

For the year ended 31 December 2016










Millions




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


4,929


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








  Property revaluation


-


-

-

-

-

  Measurement gains on defined benefit plans


-


-

-

-

-

Shadow accounting


-


-

-

-

-

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


-


-

-

-

(5)

    Recycled to profit or loss


-


-

-

-

-

Exchange differences recycled to profit or loss

   on disposal of business


-


-

-

-

-

Currency translation differences on translating foreign

  operations


-


-

-

-

-

Other movements


-


-

-

-

1

Share of other comprehensive income of investments


-


-

-

-

-

Income tax on items that may be reclassified

  subsequently to profit or loss

D1(c)

-


-

-

-

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 issued


-


-

-

-

-

Preferred securities repurchased


-


-

-

-

-

Other movements in share capital


1


-

2

-

-

Total contributions and distributions


1


-

2

-

-

Changes in ownership








Acquisition of shareholding in Banco Unico


-


-

-

-

-

Disposal of a non-controlling interest in

   OM Asset Management plc


-


-

-

-

-

Change in participation in subsidiaries


-


-

-

-

-

Total changes in ownership


-


-

-

-

-

Total transactions with owners of the Company


1


-

2

-

-

Shareholders' equity at end of the year


4,930


563

1,042

1,252

38

 



























£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

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)

(7)

-

-

-

-

-

(7)

-

(7)

-

-

-

-

5

-

5

3

8

-

-

-

-

(14)

-

(14)

(5)

(19)



















-

-

-

(104)

-

-

(104)

-

(104)










-

-

-

-

2

-

(3)

(2)

(5)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

1,365

-

-

1,365

536

1,901

(2)

-

(12)

-

(4)

-

(17)

(6)

(23)

-

-

(1)

-

-

-

(1)

-

(1)

-

4

-

-

-

-

6

2

8

(2)

4

(13)

1,261

540

14

1,802

800

2,602



















-

-

-

-

(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)

(6)

-

(7)

7

-

-

-

-

(25)

38

-

13

153

166

-

-

-

-

13

-

13

-

13

-

-

-

(26)

45

-

19

160

179

-

38

-

(26)

(428)

(14)

(428)

60

(368)

182

409

17

(1,008)

5,286

273

8,054

3,114

11,168

 


Notes to the consolidated financial statements

For the six months ended 30 June 2017

 

 

A: Significant accounting policies

A1: Basis of preparation

The Group interim financial statements contained herein are presented in accordance with the requirements of IAS 34 'Interim Financial Reporting' and are in compliance with IAS 34 as adopted by the EU. The Group's results for the six months ended 30 June 2017 and the financial position at that date have been prepared using accounting policies consistent with those applied in the preparation of the Group's 2016 Annual Report and Accounts. The results for the six months ended 30 June 2017 and the six months ended 30 June 2016, and the financial positions at these dates are unaudited. The results for the year ended 31 December 2016 and the financial position at this date are audited.

The Group interim financial statements have been prepared on the going concern basis, which the directors believe is appropriate. Part 2 - Detailed Business Review provides further details on the performance of the Group and the principal risks and uncertainties.

The comparative figures for the financial year ended 31 December 2016 represent the consolidated performance of the Group. They are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 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 pound sterling, the Group's presentation currency using the period 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 the income statement.

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


Six months ended

30 June 2017

Six months ended

30 June 2016

Year ended

31 December 2016


Income statement (average rate)

Statement of financial position (closing rate)

Income Statement (average rate)

Statement of financial position (closing rate)

Income statement (average rate)

Statement of financial

position

 (closing rate)

Rand

16.6431

16.9831

22.0983

19.4900

19.9305

16.9551

US dollars

1.2591

1.3008

1.4339

1.3268

1.3558

1.2345

Euro

1.1627

1.1398

1.2845

1.1982

1.2251

1.1705

New standards, interpretations and amendments adopted by the Group affecting the financial statements for the six months ended 30 June 2017

During the period, there were no new standards implemented that had a material effect on the financial statements of the Group.

A2: Significant corporate activity and business changes during the period

Acquisitions completed during the period

Caerus Capital Group Limited (Caerus)

On 1 June 2017, Old Mutual Wealth, completed the acquisition of 100% of the share capital of Caerus, a UK based adviser network that operates in a similar manner to Intrinsic and which has approximately £4 billion of funds under advice and 300 advisers.

The total consideration includes up to £3 million that has been deferred for two years and £6 million that has been deferred for three years. The deferred consideration has been included as part of the cost of the acquisition as there is no continuing employment condition applying to the sellers of the business. The deferred consideration payable is dependent on turnover targets post acquisition and is potentially reduced by the amount of any relevant claims arising from in-force business existing prior to the payment dates.

Goodwill of £11 million and other intangible assets of £10 million were recognised as a result of the acquisition.

Old Mutual Private Client Advisers (PCA)

During the six months ended 30 June 2017, Old Mutual Wealth completed the acquisition of five adviser businesses as part of the expansion of the PCA business that was launched in October 2015. Potential total consideration payable is £11 million, including up to £6 million which is deferred, dependent upon performance targets, generally relating to funds under management. The deferred consideration has been included as part of the cost of the acquisition. Total goodwill of £3 million and total other intangible assets of £8 million have been recognised as a result of these acquisitions.

Attivo Investment Management Limited (AIM)

On 29 March 2017, Old Mutual Wealth completed the acquisition of 100% of the share capital of AIM, a UK based investment management business offering a comprehensive investment management service. Other intangible assets of £9 million, relating to customer relationships, were recognised as a result of the acquisition. No goodwill was recognised on this transaction.

More information regarding these acquisitions can be found in note H2.



 

Disposals completed during the period

OM Asset Management plc (OMAM) share sales and share buyback

During the period, the following transactions involving the Group's ownership in OMAM shares were completed:

§  on 12 May 2017, OM Group (UK) Limited (OMGUK), a wholly owned subsidiary of Old Mutual plc, sold 11.4 million OMAM shares to HNA Capital US at a price of $15.30 per share;

§  on 19 May 2017, following the closing of a public offering, OMGUK sold 17.3 million OMAM shares at a price of $14.55 per share. Pursuant to this, on 14 June 2017, the underwriters of the public offer exercised their right to purchase 2.6 million shares at the same price less an underwriting discount;

§  on 19 May 2017, OMAM repurchased 5.0 million ordinary shares directly from OMGUK at a price of $14.55 per share.

As a consequence of the transactions described above, the Group's stake in OMAM's equity decreased from 51.7% to 20.1% and, in accordance with the criteria set out in IFRS 3 'Business Combinations', the Group no longer considered that it exercised control over the business form 19 May 2017. This resulted in OMAM being deconsolidated from the Group financial statements and instead being equity accounted for as an associated undertaking and classified as held for sale. At the point of deconsolidation, the residual holding in OMAM was revalued based on the market value prevailing at that time.

The total cash proceeds from these transactions, after underwriting and other transaction costs, were $531 million (£412 million). A profit on disposal of £108 million was realised as a result of the transactions in OMAM shares, comprising:

§ a loss of £134 million related to:

-  net proceeds of £412 million received less 51.7% of OMAM net asset value (£512 million);

-  foreign currency translation reserve gains of £151 million; and

-  net investment hedge and other reserve losses of £185 million.

§ a profit of £242 million was recognised on the fair value of the remaining 20.1% stake that is now equity accounted as an associated undertaking.

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 cash consideration of £210 million, net of costs. The profit on disposal was £24 million, comprising a gain of £5 million relating to the unwind of a forward currency contract used to hedge the value of the proceeds to be received and a gain of £19 million from the recycling of foreign currency reserves. Merger reserves of £104 million created on the original acquisition of Old Mutual Wealth Italy were transferred to retained earnings and became distributable. During 2016, an impairment of £46 million was incurred against the carrying value of Old Mutual Wealth Italy's goodwill to reflect the expected realisable value.

Sale of a minority stake in Credit Guarantee Insurance Company (CGIC)

On 1 April 2017, Emerging Markets completed the sale of 25% of CGIC to Atradius N.V. for R494 million (£29 million). A gain on disposal of R280 million (£17 million) was recognised directly in equity on completion of the sale.

Disposals announced during the period, but not yet completed

Sale of OM Asset Management plc (OMAM) shares to HNA Capital US

On 25 March 2017, the Group announced that, in addition to the 11.4 million shares sold on 12 May 2017, OMGUK had contracted to sell additional OMAM shares to HNA Capital US representing approximately 14.5% of OMAM's ordinary share capital. This transaction is subject to regulatory approval and is contracted to complete in the second half of 2017. After the sale, the Group's holding in OMAM's share capital is expected to be approximately 5.5% and accounted for as an investment at fair value through profit or loss.

Sale of Kotak Mahindra Old Mutual Life Insurance Limited (Kotak)

On 27 April 2017, the Group announced that it has agreed to sell its 26% stake in Kotak to its joint venture partner Kotak Mahindra Bank Limited. The net consideration is expected to be approximately INR 11,700 million (£138 million). The conclusion of the transaction will also terminate the joint venture arrangement, extinguishing the respective put and call option arrangements between the parties relating to a 23% stake in the joint venture. This transaction is subject to regulatory approval, which is expected to be received in the second half of 2017.

Financing activities completed during the period

Nedbank

On 30 June 2017, Nedbank Limited issued R600 million additional Tier 1 capital instruments under its R10 billion Domestic Medium Term Note Programme. Interest is payable quarterly in arrears at a floating rate of 3-month JIBAR + 5.65%. The first interest payment date is 1 October 2017 and the first call date in 1 July 2022.

Nedbank issued and redeemed further debt instruments in the normal course of its funding programme. Refer to note F3 for more information.

Old Mutual plc

On 3 February 2017, the Group repurchased all of the £273 million Tier 1 preferred perpetual callable securities using cash from the Group's existing resources. In addition to repaying the nominal value of the securities, £29 million was paid to holders of the securities for accrued interest and a premium in excess of nominal value. The premium was recognised directly in equity.

A: Significant accounting policies continued

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

Other activities during the period

Old Mutual plc Legacy Pension Schemes

On 13 June 2017, bulk annuity arrangements for two legacy defined benefit schemes, the Old Mutual Staff Pension Fund and the G&N Retirement Benefits Scheme, were agreed with Legal & General Assurance Society Limited. The agreements have resulted in the buy-in of the benefits of the two schemes, with the intention of moving to a full buy-out and wind-up of the schemes by Q4 2017. 

In order to effect the transaction, Old Mutual plc has made a one off contribution of £27 million into the two schemes, which together with the writing off the majority of the combined existing IAS 19 surplus for the schemes, resulted in a £51 million reduction in IFRS NAV recognised in measurement (losses)/gains on defined benefit plans in the consolidated statement of comprehensive income. Once the buy-out and winding up processes have been completed, Old Mutual plc will no longer be responsible for the administration or funding of these two schemes. Old Mutual plc had previously been contributing annually £7 million of cash to the two schemes.

Amendment of the OMAM Deferred Tax Asset Deed (DTA)

During 2014, OMAM entered into a Deferred Tax Asset Deed with Old Mutual plc, which was amended in June 2016. Under the terms of the Deferred Tax Asset Deed, as amended, the OMAM agreed to make a payment equal to the net present value of the future payments due to Old Mutual plc valued as of December 31, 2016. This payment of $143 million (£115 million) is being made over three instalments, the first of which amounted to $46 million (£59 million) and was paid on June 30, 2017, with the remaining two instalments to be paid on December 31, 2017 and June 30, 2018. The continuation of certain protections provided by Old Mutual plc related to the realised tax benefit resulting from OMAM's use of deferred tax assets remains unaffected.

Restatement of IFRS financial statement prior year comparative amounts

Overview

In preparing the Group financial statements for the six months ended 30 June 2017, the IFRS financial statements for the six months ended 30 June 2016 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.

The comparative information for the year ended 31 December 2016 is unchanged from that previously disclosed. 

IAM classified as a discontinued operation in 2016 (IAM - Discontinued operations)

The six months ended 30 June 2016 has been restated to reflect IAM as a discontinued operation. This is consistent with the disclosure adopted for the year ended 31 December 2016. During the six months ended 30 June 2017, IAM continued to be classified as a discontinued operation in the IFRS consolidated income statement and consolidated statement of cash flows for the period from 1 January 2017 to 19 May 2017, at which date the Group ceased to consolidate the business following the sale of its controlling interest.

Consolidation of additional Emerging Markets investment funds (Consolidation of investment funds)

During 2016, the Group 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 resulted in the identification of additional investment funds that are required to be included in the consolidated financial statements. As a result, comparative information in respect of the full year 2016 financial statements required restatement and similarly in the six months ended 30 June 2016 the prior year comparative information have been restated accordingly. These restatements had no impact on the net assets of the Group, the equity attributable to ordinary equity holders of the parent, profit after tax or any key performance indicators reported by the Group.

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



June 2016

As Reported

IAM - Discontinued operations

Consolidation of  investment funds

June 2016

As Restated

Statement of financial position





Assets





Investments and securities

88,996

-

576

89,572

Trade, other receivables and other assets

3,368

-

10

3,378

Cash and cash equivalents

3,978

-

24

4,002

Total assets

152,053

-

610

152,663

Liabilities





Third-party interests in consolidated funds

6,585

-

593

7,178

Trade, other payables and other liabilities

5,631

-

17

5,648

Total liabilities

142,166

-

610

142,776






Income statement





Revenue





Investment Return (non-banking)

2,947

-

54

3,001

Fee and commission income, and income from service activities

1,395

(222)

-

1,173

Total revenue

7,648

(222)

54

7,480

Expenses





Finance costs

(38)

1

-

(37)

Fee and commission expenses, and other acquisition costs

(330)

4

-

(326)

Change in third-party interest in consolidated funds

(244)

-

(50)

(294)

Other operating and administrative expenses

(1,813)

162

(4)

(1,655)

Total expenses

(7,053)

167

(54)

(6,940)

Share of associated undertakings' and joint ventures' losses after tax

(11)

(5)

-

(16)

Profit on disposal of subsidiaries, associated undertakings and strategic

   investments

24

(14)

-

10

Profit before tax

608

(74)

-

534

Income tax expense

(183)

20

-

(163)

Profit from continuing operations after tax

425

(54)

-

371

Profit from discontinued operations after tax

-

54

-

54






Statement of cash flows





Net cash inflow from operating activities - continuing operations

2,315

49

57

2,421

Net cash outflow from investing activities - continuing operations

(3,072)

1

76

(2,995)

Net cash outflow from financing activities - continuing operations

(77)

5

-

(72)

Net cash (outflow)/inflow - continuing operations

(834)

55

133

(646)

Net cash outflow - discontinued operations

-

(55)

-

(55)

A3: Critical accounting estimates and judgements

In the preparation of these condensed financial statements, the Group is required to make estimates and judgements that affect items reported in the consolidated income statement, statement of financial position, and 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 and require assumptions and predictions of future events and actions. During the period, there have been no other significant changes to the areas of critical accounting estimates and judgements that the Group applied at 31 December 2016.

The key areas of the Group's business that typically require such estimates and the relevant accounting policies and notes are set out in the following notes of the 2016 Annual Report and Accounts:

Area

Policy note

More detail

 

Loans and advances

G1

G1

 

Insurance and investment contracts

G6

G6

 

Goodwill and other intangible assets

H1

H1

 

Consolidation

I1

I3

 

Tax

D1

D1/H7

 

B: Segment information

B1: Basis of segmentation

Segment presentation

The Group's reported segments are Emerging Markets, Nedbank, Old Mutual Wealth, Institutional Asset Management (IAM) 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 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.

During the period, the Group further sold down its stake in OM Asset Management plc (OMAM) from 51.7% to 20.1%. As a consequence, the Group no longer considered that it exercised control over the business. From 19 May 2017, OMAM was deconsolidated from the Group financial statements. Refer to note A2 for more information.

The IAM operating segment for the six months ended 30 June 2017 therefore includes the consolidated operating results of OMAM for the period from 1 January 2017 to 19 May 2017. During this period, IAM has been classified as a discontinued operation in the IFRS consolidated income statement. This is consistent with the classification at 31 December 2016 and with the requirements of IFRS, given the Group's stated strategic intentions to sell down IAM. Comparative profit and loss segment information for the six months ended 30 June 2016 has been similarly restated.

The Group's remaining investment in OMAM has been equity accounted as an associated undertaking from 19 May 2017 and the equity accounted earnings for the period from 19 May 2017 to 30 June 2017 are included in the IAM operating segment in the share of associated undertakings' and joint ventures' (losses)/profits after tax line. From 19 May 2017, IAM is no longer classified as a discontinued operation. At 30 June 2017, the equity accounted investment in OMAM has been classified as assets held for sale in the consolidated statement of financial position and is included within the plc Head Office operating segment in the statement of financial position - segment information.

The operating result of IAM for the six months ended 30 June 2016 and the year ended 31 December 2016 also includes Rogge Global Partners Limited up to the date of disposal on 31 May 2016.

Consistent with the Group's AOP policy as described in the basis of preparation of adjusted operating profit on pages 64 and 65, we will continue 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. The long-term investment return on excess assets, previously shown within plc Head Office segment is now included in AOP of the Emerging Markets segment for all periods. This is consistent with where the excess assets are managed and will be managed in the future.

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 six months ended 30 June 2017, 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.

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, continuing businesses:

§    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

Core operations, discontinued businesses:

§    Institutional Asset Management - asset management

Non-core operations, continuing businesses:

§    Old Mutual Bermuda - life assurance

 

B2: Gross earned premiums and deposits to investment contracts



£m

Six months ended 30 June 2017

Emerging Markets

Old Mutual Wealth

Total 

Life assurance - insurance contracts

792

74

866

Life assurance - investment contracts with discretionary participation features

842

-

842

Property & casualty

480

-

480

Gross earned premiums

2,114

74

2,188








£m

Six months ended 30 June 2016

Emerging Markets

Old Mutual Wealth

Total 

Life assurance - insurance contracts

595

70

665

Life assurance - investment contracts with discretionary participation features

672

-

672

Property & casualty

366

-

366

Gross earned premiums

1,633

70

1,703








£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

 

B: Segment information continued

B3: Adjusted operating profit statement - segment information for the six months ended 30 June 2017


Notes


Emerging Markets

Nedbank

Revenue





Gross earned premiums

B2


2,114

-

Outward reinsurance



(196)

-

Net earned premiums



1,918

-

Investment return (non-banking)



1,698

-

Banking interest and similar income



123

2,240

Banking trading, investment and similar income



7

137

Fee and commission income, and income from service activities



356

552

Other income



51

19

Total revenue3



4,153

2,948

Expenses





Claims and benefits (including change in insurance contract provisions)



(2,308)

-

Reinsurance recoveries



165

-

Net claims and benefits incurred



(2,143)

-

Change in investment contract liabilities



(630)

-

Credit impairment charges



(24)

(96)

Finance costs



(21)

-

Banking interest payable and similar expenses



(41)

(1,397)

Fee and commission expenses, and other acquisition costs



(202)

(8)

Change in third-party interest in consolidated funds



-

-

Other operating and administrative expenses



(687)

(912)

Income tax attributable to policyholder returns



(29)

-

Total expenses



(3,777)

(2,413)

Share of associated undertakings' and joint ventures' (losses)/profits after tax



(14)

(63)

Profit on disposal of subsidiaries, associated undertakings and strategic

   investments

C1(c)


-

-

Adjusted operating profit before tax and non-controlling interests



362

472

Income tax expense

D1


(103)

(131)

Non-controlling interests



(11)

(166)

Adjusted operating profit after tax and non-controlling interests



248

175

Adjusting items after tax and non-controlling interests

C1(a)


(18)

1

Profit/(loss) after tax from continuing operations



230

176

Profit from discontinued operations after tax

I1


-

-

Profit after tax attributable to equity holders of the parent



230

176

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 inter-segment trading: Emerging Markets: £47 million (June 2016: £30 million; December 2016: £75 million); Nedbank: £7 million (June 2016: £4 million; December 2016: £9 million); Old Mutual Wealth: £1 million (June 2016: £1 million; December 2016: £2 million); Institutional Asset Management: £2 million (June 2016: £6 million; December 2016: £6 million); and non-core operations: £nil million (June 2016: £1 million; December 2016: £nil million).

4        Non-core operations for the six months ended 30 June 2017 comprises Old Mutual Bermuda.

5        Discontinued operations relate to the Institutional Asset Management (IAM) segment.









£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










74

-

-

-

2,188

-

-

-

2,188

(44)

-

-

-

(240)

-

-

-

(240)

30

-

-

-

1,948

-

-

-

1,948

2,354

6

6

766

4,830

42

(23)

(6)

4,843

-

-

-

-

2,363

-

-

-

2,363

-

-

-

-

144

-

-

-

144

567

207

-

(7)

1,675

(6)

-

(207)

1,462

5

-

-

(13)

62

-

-

-

62

2,956

213

6

746

11,022

36

(23)

(213)

10,822










(60)

-

-

-

(2,368)

-

51

-

(2,317)

52

-

-

-

217

-

-

-

217

(8)

-

-

-

(2,151)

-

51

-

(2,100)

(2,307)

-

-

-

(2,937)

-

-

-

(2,937)

-

-

-

-

(120)

-

-

-

(120)

-

(6)

(35)

-

(62)

(15)

-

6

(71)

-

-

-

-

(1,438)

-

-

-

(1,438)

(141)

(5)

-

(30)

(386)

10

-

5

(371)

-

-

-

(731)

(731)

-

-

-

(731)

(337)

(147)

(34)

15

(2,102)

(243)

3

176

(2,166)

(29)

-

-

-

(58)

58

-

-

-

(2,822)

(158)

(69)

(746)

(9,985)

(190)

54

187

(9,934)

-

9

-

-

(68)

(6)

-

(3)

(77)

-

-

-

-

-

129

-

-

129

134

64

(63)

-

969

(31)

31

(29)

940

(22)

(18)

8

-

(266)

(24)

-

6

(284)

-

(20)

-

-

(197)

49

-

-

(148)

112

26

(55)

-

506

(6)

31

(23)

508

(70)

(14)

95

-

(6)

6

-

-

-

42

12

40

-

500

-

31

(23)

508

-

-

-

-

-

-

-

23

23

42

12

40

-

500

-

31

-

531

 

B: Segment information continued

B3: Adjusted operating profit statement - segment information for the six months ended 30 June 2016 (Restated)1



Notes


Emerging Markets

Nedbank

Revenue





Gross earned premiums

B2


1,633

-

Outward reinsurance



(136)

-

Net earned premiums



1,497

-

Investment return (non-banking)



1,203

-

Banking interest and similar income



108

1,501

Banking trading, investment and similar income



4

96

Fee and commission income, and income from service activities



261

410

Other income



52

12

Total revenue



3,125

2,019

Expenses





Claims and benefits (including change in insurance contract provisions)



(1,819)

-

Reinsurance recoveries



95

-

Net claims and benefits incurred



(1,724)

-

Change in investment contract liabilities



(386)

-

Credit impairment charges



(16)

(100)

Finance costs



(16)

-

Banking interest payable and similar expenses



(29)

(895)

Fee and commission expenses, and other acquisition costs



(136)

(4)

Change in third-party interest in consolidated funds



-

-

Other operating and administrative expenses



(533)

(655)

Income tax attributable to policyholder returns



(19)

-

Total expenses



(2,859)

(1,654)

Share of associated undertakings' and joint ventures' profits/(losses) after tax



4

(20)

Profit on disposal of subsidiaries, associated undertakings and strategic investments

C1(c)


-

-

Adjusted operating profit/(loss) before tax and non-controlling interests



270

345

Income tax expense

D1


(75)

(88)

Non-controlling interests



(6)

(123)

Adjusted operating profit/(loss) after tax and non-controlling interests



189

134

Adjusting items after tax and non-controlling interests

C1(a)


(25)

2

Profit/(loss) after tax from continuing operations



164

136

Loss from discontinued operations after tax

I1


-

-