Interim Results 2010 - Part 3

RNS Number : 6449Q

Old Mutual PLC

06 August 2010

 



Group Market Consistent Embedded Value statement of earnings

For the 6 months ended 30 June 2010

			£m
	Notes	6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended 31 December 2009
Long Term Savings
Covered business		498	488	554
Asset management		64	(7)	26
Banking		8	8	16
		570	489	596
Nedbank
Banking		266	211	470
Mutual and Federal
General insurance		33	20	70
US Asset Management
Asset management		40	30	83
Other operating segments
Finance costs*		(86)	(68)	(144)
Other shareholders' expenses		(5)	(33)	(69)
Adjusted operating Group MCEV earnings before tax from core operations		818	649	1,006
Bermuda non-core operations
Long-term business		30	106	8
Adjusted operating Group MCEV earnings before tax**		848	755	1,014
Adjusting items	C1	(391)	509	913
Total Group MCEV earnings before tax for the financial period		457	1,264	1,927
Income tax attributable to shareholders		(39)	(143)	(145)
Total Group MCEV earnings after tax for the financial period		418	1,121	1,782
Total Group MCEV earnings for the financial period attributable to:
Equity holders of the parent		302	1,026	1,562
Non-controlling interests
Ordinary shares		85	61	156
Preferred securities		31	34	64
Total Group MCEV earnings after tax for the financial period		418	1,121	1,782
Basic total Group MCEV earnings per ordinary share (pence)		6.0	20.5	31.3
Weighted average number of shares - millions		5,057	4,996	4,994

*       This includes interest payable from Old Mutual plc to non-core operations of £18 million for the six months ended 30 June 2010 (six months ended 30 June 2009: £21million; year ended 31 December 2010: £40 million). Part of the interest earned by Bermuda from the loan note with Old Mutual plc has been reclassified for the 6 months ended 30 June 2009 from non-operating to operating earnings to be consistent with the treatment applied for the year ended 31 December 2009 and the 6 months ended 30 June 2010.

**     For long-term business and general insurance businesses, adjusted operating Group MCEV earnings are based on short-term and long-term investment returns respectively, include investment returns on life fund investments in Group equity and debt instruments, and are stated net of income tax attributable to policyholder returns. For the US Asset Management business it includes compensation costs in respect of certain long-term incentive schemes defined as non-controlling interests in accordance with IFRS. For all businesses, adjusted operating MCEV earnings exclude goodwill impairment, the impact of acquisition accounting, put revaluations related to long-term incentive schemes, the impact of closure of unclaimed shares trusts, profit/(loss) on disposal of subsidiaries, associated undertakings and strategic investments, dividends declared to holders of perpetual preferred callable securities, and fair value (profits)/losses on certain Group debt movements.

Adjusted operating Group MCEV earnings per share

For the 6 months ended 30 June 2010

			£m
	Notes	6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended 31 December 2009
Adjusted operating Group MCEV earnings before tax		848	755	1,014
Tax on adjusted operating Group MCEV earnings	B2	(155)	(183)	(209)
Adjusted operating Group MCEV earnings after tax		693	572	805
Non-controlling interests
Ordinary shares		(95)	(70)	(179)
Preferred securities		(31)	(34)	(64)
Adjusted operating Group MCEV earnings after tax attributable to ordinary equity holders		567	468	562
Adjusted operating Group MCEV earnings from core operations		537	390	581
Adjusted operating Group MCEV earnings from non-core operations		30	78	(19)
Adjusted operating Group MCEV earnings per share from core operations		10.0	7.5	11.1
Adjusted operating Group MCEV earnings per share from non-core operations		0.6	1.4	(0.4)
Adjusted operating Group MCEV earnings per share* (pence)		10.6	8.9	10.7
Adjusted weighted average number of shares - millions		5,343	5,232	5,229

*       Adjusted operating Group MCEV earnings per share is calculated on the same basis as adjusted operating Group MCEV earnings and is stated after tax and non-controlling interests. It excludes income attributable to Black Economic Empowerment trusts of listed subsidiaries. The calculation of the adjusted weighted average number of shares includes own shares held in policyholders' funds and Black Economic Empowerment trusts.

Components of Group MCEV and adjusted Group MCEV

For the 6 months ended 30 June 2010

Components of Group MCEV				£m
	Notes	At 30 June 2010	At 30 June 2009	At 31 December 2009
Adjusted net worth attributable to ordinary equity holders of the parent		4,845	3,860	4,417
Equity		9,047	7,731	8,464
Adjustment to include long-term business on a statutory solvency basis:
Long Term Savings	C3	(2,766)	(2,167)	(2,626)
Bermuda	C3	(13)	(27)	(6)
Adjustment for market value of life funds' investments in Group equity and debt instruments held in life funds		244	235	268
Adjustment to remove perpetual preferred callable securities and accrued dividends		(688)	(688)	(688)
Adjustment to exclude acquisition goodwill from the covered business:
Long Term Savings	C3	(979)	(1,224)	(995)
Value of in-force business		3,208	2,741	3,212
Present value of future profits		4,269	3,481	4,255
Additional time value of financial options and guarantees		(456)	(127)	(416)
Frictional costs		(235)	(199)	(221)
Cost of residual non-hedgeable risks		(370)	(414)	(406)
Group MCEV		8,053	6,601	7,629
Group MCEV value per share (pence)		148.0	125.1	144.5
Return on Group MCEV (RoEV) per annum from core operations		14.2%	13.1%	11.1%
Return on Group MCEV (RoEV) per annum from non-core operations		0.5%	1.7%	(0.4)%
Return on Group MCEV (RoEV) per annum		14.7%	14.8%	10.7%
Number of shares in issue at the end of the financial period less treasury shares - millions		5,442	5,277	5,279

The adjustments to include long-term business on a statutory solvency basis reflect the difference between the net worth of each business on the statutory basis (as required by the local regulator) and their portion of the Group's consolidated equity shareholder funds. In South Africa, these values exclude items that are eliminated or shown separately on consolidation (such as Nedbank and inter-company loans). For some European countries the value reflected in the adjustment to include long-term business on a statutory solvency basis includes the value of the deferred acquisition cost asset, which is part of the equity.

The RoEV is calculated as the adjusted operating Group MCEV earnings after tax and non-controlling interests of £567 million (6 months ended 30 June 2009: £468 million; year ended 31 December 2009: £562 million) divided by the opening Group MCEV. The operating assumption changes of £0 million (6 months ended 30 June 2009: £26 million) and other operating variances of £12 million (6 months ended 30 June 2009: £128 million) are not annualised.

Components of Group MCEV and adjusted Group MCEV

For the 6 months ended 30 June 2010

Components of adjusted Group MCEV	£m
	Notes	At 30June 2010	At 30 June 2009	At 31 December 2009
Group MCEV		8,053	6,601	7,629
Pro forma adjustments to bring Group investments to market value
Adjustment to bring listed subsidiaries to market value		495	133	805
Nedbank		495	78	623
Mutual & Federal		-	55	182
Adjustment for value of own shares in ESOP schemes*		73	57	71
Adjustment for present value of Black Economic Empowerment scheme deferred consideration		241	194	221
Adjustment to bring external debt to market value		206	604	302
Adjusted Group MCEV	B1	9,068	7,589	9,028
Adjusted Group MCEV per share (pence)		166.6	143.8	171.0
Number of shares in issue at the end of the financial period less treasury shares - millions		5,442	5,277	5,279

*       Includes adjustment for value of excess own shares in employee share scheme trusts. The movement in value between 31 December 2009 and 30 June 2010 is the net effect of the decrease in the Old Mutual plc share price, the reduction in excess own shares following employee share grants in March 2010 and the reduction in overall shares held due to exercises of rights to take delivery of, or net settle, share grants during the financial period.

Reconciliation of movements in Group MCEV (after tax)								£m
		6 months ended 30 June 2010			6 months ended 30 June 2009
	Notes	Covered business MCEV	Non-covered business IFRS	Total Group MCEV	Covered business MCEV	Non-covered business IFRS	Total Group MCEV
Opening Group MCEV		6,027	1,602	7,629	4,183	1,079	5,262
Adjusted operating MCEV earnings		452	115	567	487	(19)	468
Non-operating MCEV earnings		(164)	(101)	(265)	569	(11)	558
Total Group MCEV earnings		288	14	302	1,056	(30)	1,026
Other movements in IFRS net equity	C2	(141)	263	122	117	196	313
Closing Group MCEV		6,174	1,879	8,053	5,356	1,245	6,601

		£m
		Year ended 31 December 2009
	Notes	Covered business MCEV	Non-covered business IFRS	Total Group MCEV
Opening Group MCEV		4,183	1,079	5,262
Adjusted operating MCEV earnings		492	70	562
Non-operating MCEV earnings		1,191	(191)	1,000
Total Group MCEV earnings		1,683	(121)	1,562
Other movements in IFRS net equity	C2	161	644	805
Closing Group MCEV		6,027	1,602	7,629

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010

A MCEV policies

A1 Basis of preparation

The Market Consistent Embedded Value methodology (referred to herein and in the supplementary statements on pages 81 to 122 as 'MCEV') adopts the Market Consistent Embedded Value Principles (Copyright © Stichting CFO Forum Foundation 2008) issued in June 2008 and updated in October 2009 by the CFO Forum ('the Principles') as the basis for the methodology used in preparing the supplementary information.

The CFO Forum announced changes to the MCEV Principles in October 2009 to reflect inter alia the inclusion of a liquidity premium. These changes affirm that the risk free reference rate to be applied under MCEV should include both the swap yield curve appropriate to the currency of the cash flows and a liquidity premium where appropriate. The CFO Forum is undertaking further work to develop more detailed application guidance.

The Principles have been fully complied with for all businesses as at 30 June 2010. Any changes in the methodology and assumptions made in presenting this supplementary information compared to those disclosed in the annual report and accounts 2009 are set out in notes A2 and A3.

Throughout the supplementary information the following terminology is used to distinguish between the terms 'MCEV', 'Group MCEV' and 'adjusted Group MCEV':

·      MCEV is a measure of the consolidated value of shareholders' interests in the covered business and consists of the sum of the shareholders' adjusted net worth in respect of the covered business and the value of the in-force covered business.

·      Group MCEV is a measure of the consolidated value of shareholders' interests in covered and non-covered business. Non-covered business is valued at the IFRS net asset value detailed in the primary financial statements adjusted to eliminate inter-company loans.

·      The adjusted Group MCEV, a measure used by management to assess the shareholders' interest in the value of the Group, includes the impact of marking all debt to market value, the market value of the Group's listed banking subsidiary, marking the value of deferred consideration due in respect of Black Economic Empowerment arrangements in South Africa ('the BEE schemes') to market, as well as including the market value of excess own shares held in ESOP schemes.

A2 Methodology

Required capital

Required capital is the market value of assets that is attributed to support the covered business, over and above that required to back statutory liabilities for covered business, whose distribution to shareholders is restricted. The following capital measures are considered in determining the required capital held for covered business so that it reflects the level of capital considered by the directors to be appropriate to manage the business:

·      Economic capital;

·      Regulatory capital (ie the level of solvency capital which the local regulators require);

·      Capital required by rating agencies in respect of the North American business in order to maintain the desired credit rating; and

·      Any other required capital definition to meet internal management objectives.

Economic capital for the covered business is based upon Old Mutual's own internal assessment of risks inherent in the underlying business. It measures capital requirements on an economic statement of financial position, with MCEV as the available capital, consistent with a 99.93% confidence level over a one-year time horizon.

The table below shows the level of required capital expressed as a percentage of the minimum local regulatory capital requirements.

	£m
	At 30 June 2010			At 30 June 2009			At 31 December 2009
	Required capital (a)	Regulatory capital (b)	Ratio (a/b)	Required capital (a)	Regulatory capital (b)	Ratio (a/b)	Required capital (a)	Regulatory capital (b)	Ratio (a/b)
Emerging Markets	1,318	1,011	1.3	1,110	852	1.3	1,225	930	1.3
Nordic	109	95	1.1	120	71	1.7	104	92	1.1
Retail Europe*	38	52	0.7	57	43	1.3	32	52	0.6
Wealth Management**	215	142	1.5	213	131	1.6	213	143	1.5
US Life	491	204	2.4	523	210	2.5	462	193	2.4
Bermuda***	341	-	n/a	279	-	n/a	363	-	n/a
Total	2,512	1,504	1.7	2,302	1,307	1.8	2,399	1,410	1.7

*       Local regulators within many of the Retail Europe countries allow intangible assets to be included as admissible regulatory capital. In such cases the required capital reported for MCEV is net of these items, although each of the countries continues to be sufficiently capitalised on the local solvency basis. Skandia Leben in Germany is permitted under local regulations to include the unallocated policyholder profit sharing liability as admissible capital.

**     The regulatory capital requirement for Wealth Management has been restated at 30 June 2009 and 31 December 2009 to exclude the impact of a policyholder tax credit in Italy, which may be used to offset the capital requirement.

***    The Bermudan regulator allows intangible assets to be included as admissible regulatory capital.

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

 

Cost of residual non-hedgeable risks

The cost of residual non-hedgeable risks ('CNHR') is calculated using a cost of capital approach, ie it is determined as the present value of capital charges for all future non-hedgeable risk capital requirements until the liabilities have run off. The capital charge in each year is the product of the projected expected non-hedgeable risk capital held after allowance for some diversification benefits and the cost of capital charge.

The table below shows the amounts of diversified economic capital held in respect of residual non-hedgeable risks.

Capital held in respect of non-hedgeable risks	£m
	At 30 June 2010	At 30 June 2009	At 31 December 2009
Emerging Markets	643	503	606
Nordic	315	295	333
Retail Europe	128	150	143
Wealth Management*	553	562	563
US Life	703	549	661
Bermuda**	285	510	619
Total	2,627	2,569	2,925

*       The capital held in respect of non-hedgeable risks for Weath Management at 31 December 2009 has been restated from £640 million to £563 million due to calculation refinements.

**     The capital held in respect of non-hedgeable risks for Bermuda has reduced from 31 December 2009 to 30 June 2010 as a result of the change in the allowance for hedging basis risk, that is now made in the determination of reserves for guaranteed benefits, as well as other calculation refinements.

A weighted average cost of capital charge of 2.0% has been applied to residual non-hedgeable capital at a business unit level over the life of the contracts. This translates into an equivalent cost of capital charge of approximately 2.7% being applied to the Group diversified capital required in respect of such non-hedgeable risks.

Taxation

There is currently uncertainty around both the basis and effective date for possible taxation of fee income earned from fund managers by Swedish insurance companies and the expenses that can be relieved against such income. At present we continue to treat fee income from our Swedish unit-linked business as being exempt from corporation tax within our MCEV.

The Emergency Budget of 22 June 2010 announced a reduction in the UK corporation tax rate by 1% per year for four years from April 2011, ultimately bringing the corporation tax rate down to 24%.  The MCEV results at 30 June 2010 have been calculated using an ongoing UK corporation tax rate of 28% and each reduction in the tax rate will be included in future results as and when they are enacted. The estimated positive impact on the value of in-force business ('VIF') in respect of Wealth Management at 30 June 2010, assuming that all the annual reductions in the tax rate will be enacted, is £17 million.

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010

A3 Assumptions

Non-economic assumptions

The management expenses attributable to life assurance business have been allocated to expenses relating to the acquisition of new business, maintenance of in-force business (including investment management expenses) and development projects.

Unallocated Group holding Company expenses have been included to the extent that they relate to the covered business. The table below shows the future expenses attributable to long-term business.  The allocation of these expenses aligns to the proportion that the management expenses incurred by the business bears to the total management expenses incurred in the Group.

Group holding Company expenses attributable to long-term business	%
	At 30 June 2010	At 30 June 2009	At 31 December 2009
Emerging Markets	16	14	16
Nordic	4	4	4
Retail Europe	2	3	3
Wealth Management	8	8	8
US Life	-	4	2
Bermuda	-	-	-
Total	30	33	33

Economic assumptions

Risk free reference rates and inflation

A wide range of liquidity market data and literature was reviewed at 30 June 2010, such as the Barrie+Hibbert calibration of US corporate bond spreads using a structural Merton-style model applied to actual corporate bonds held in the portfolio and a comparison of the yields of similar durations on South African government bonds and bonds issued by state-owned enterprises. It is the directors' view that a significant proportion of corporate bond spreads at 30 June 2010 is attributable to liquidity premium allowances rather than credit and default allowances and that returns in excess of swap rates can be achieved, rather than entire corporate bond spreads being lost to worsening default experience. For the US Life business and OMLAC(SA)'s Retail Affluent Immediate Annuity business the currency, credit quality and duration of the actual corporate bond portfolios were considered and adjusted risk free reference rates were derived at 30 June 2010 by adding 75bps of liquidity premium for the US Life business (30 June 2009: 175bps; 31 December 2009: 100bps) and adding 50bps of liquidity premium for OMLAC(SA)'s Retail Affluent Immediate Annuity business (30 June 2009: 50bps; 31 December 2009: 50bps) to the swap rates used for setting investment return and discounting assumptions. These adjustments reflect the liquidity premium component in corporate bond spreads over swap rates that is expected to be earned on the portfolios. Old Mutual believes that the differences between market yields on US Life's and OMLAC(SA)'s Retail Affluent bond portfolios and the adjusted risk free reference rates still provide substantial implied margins for default.

The risk free reference spot yields (excluding any applicable liquidity adjustments) and expense inflation rates at various terms for each of the significant regions are provided in the table below. The risk free reference spot yield curve has been derived from mid swap rates at the reporting date.

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

Risk free reference spot yields (excluding any applicable liquidity adjustments)						%
At 30 June 2010	GBP	EUR		USD	ZAR	SEK
1 year	0.9	1.2		0.7	6.7	1.3
5 years	3.8	2.1		2.1	8.0	2.3
10 years	4.4	2.9		3.0	8.6	3.1
20 years	3.9	3.4		3.6	8.2	3.6
At 30 June 2009
1 year	2.0	1.4		0.9	7.7	1.0
5 years	3.7	2.9		2.9	9.0	2.9
10 years	4.0	3.7		3.7	9.2	3.9
20 years	2.9	4.3		4.1	7.9	4.2
At 31 December 2009
1 year	0.9	1.3		0.7	7.3	0.8
5 years	4.7	2.8		3.0	8.9	2.9
10 years	4.8	3.6		3.5	9.2	3.7
20 years	4.0	4.1		4.0	8.2	4.1

Expense inflation					%
At 30 June 2010	GBP	EUR	USD	ZAR	SEK
1 year	3.3	1.0-3.3	3.0	6.2	1.5
5 years	3.5	1.0-3.3	3.0	6.3	2.3
10 years	4.0	1.0-3.3	3.0	6.7	2.6
20 years	4.5	1.0-3.3	3.0	6.4	2.9
At 30 June 2009
1 year	0.1	2.3-3.0	3.0	5.9	1.3
5 years	1.9	2.3-3.0	3.0	7.2	2.5
10 years	2.9	2.3-3.0	3.0	7.4	3.0
20 years	4.2	2.3-3.0	3.0	6.2	2.7
At 31 December 2009
1 year	3.3	2.5-3.0	3.0	6.4	1.1
5 years	3.8	2.5-3.0	3.0	7.5	2.6
10 years	4.4	2.5-3.0	3.0	7.7	2.8
20 years	4.8	2.5-3.0	3.0	6.7	3.0

 

 

Volatilities

The at-the-money annualised asset volatility assumptions of the asset classes incorporated in the stochastic models are detailed below.

ZAR volatilities*						%
Option term	1 year swap	5 year swap	10 year swap	20 year swap	Equity (total return index)	Property (total return index)
At 30 June 2010
1 year	15.6	13.9	12.9	12.4	28.4	16.9
5 years	14.5	13.7	13.2	12.8	26.3	14.8
10 years	13.6	13.2	12.8	12.3	26.6	14.3
20 years	12.8	12.2	11.7	10.9	26.9	14.2
At 30 June 2009
1 year	18.6	17.3	16.6	16.8	27.4	17.3
5 years	18.5	17.6	17.3	17.3	26.3	15.7
10 years	18.0	17.3	16.7	16.1	26.5	14.1
20 years	16.4	15.7	15.1	14.0	27.4	14.5
At 31 December 2009
1 year	18.3	16.2	15.1	14.8	27.4	17.1
5 years	16.9	15.8	15.3	15.1	25.5	14.8
10 years	15.7	15.2	14.7	14.1	26.2	14.1
20 years	14.5	13.8	13.1	12.0	27.0	14.2

*       Due to limited liquidity in the ZAR swaption and equity option market, the market consistent asset model has been calibrated by extrapolating swaption and equity option implied volatility data beyond terms of 2 years and 3 years respectively.

USD volatilities				%
Option term	1 year swap	5 year swap	10 year swap	20 year swap
At 30 June 2010
1 year	71.0	39.6	32.3	27.2
5 years	29.1	26.5	24.1	22.0
10 years	23.3	21.4	20.5	18.7
20 years	19.4	17.9	17.2	16.0
At 30 June 2009
1 year	61.3	41.9	37.8	33.0
5 years	27.8	26.5	25.0	22.4
10 years	20.8	19.6	19.3	16.9
20 years	16.1	15.6	15.0	13.7
At 31 December 2009
1 year	62.3	36.8	30.1	25.9
5 years	26.9	24.7	22.6	20.6
10 years	18.6	18.3	17.9	16.3
20 years	15.6	14.6	14.3	12.8

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

International equity volatilities (applicable to Old Mutual Bermuda)*							%
Option term	SPX	RTY	TPX	HSCEI	TWY	KOSP12	NIFTY	SX5E	UKX
At 30 June 2010
1 year	29.0	37.2	29.1	31.0	24.3	23.1	21.9	29.7	27.3
5 years	28.0	39.0	29.3	31.8	27.3	23.7	23.5	27.9	26.9
10 years	28.0	39.0	29.3	31.8	27.3	23.7	23.5	27.9	26.9
At 30 June 2009
1 year	25.9	33.0	29.4	39.3	30.6	27.0	31.6	29.5	27.0
5 years	26.5	36.1	27.5	36.4	30.0	26.8	29.0	27.7	26.5
10 years	23.1	30.6	25.8	35.2	29.3	27.9	29.4	26.8	25.6
At 31 December 2009
1 year	22.1	28.6	28.3	33.5	22.9	23.3	26.5	24.7	23.1
5 years	24.4	32.9	29.4	34.2	26.4	24.2	26.4	25.4	24.1
10 years	25.0	32.6	29.0	37.4	27.5	30.0	31.2	27.4	25.9

International equity volatilities (applicable to Old Mutual Bermuda)*					%
Option term	EEM	USAgg	EUAgg	APAgg
At 30 June 2010
1 year	35.2	5.5	13.0	12.6
5 years	32.4	5.5	13.0	12.6
10 years	32.4	5.5	13.0	12.6
At 30 June 2009
1 year	35.5	4.5	11.5	10.8
5 years	32.8	4.5	11.5	10.8
10 years	35.9	4.5	11.5	10.8
At 31 December 2009
1 year	31.6	4.5	12.0	11.6
5 years	30.8	4.5	12.0	11.6
10 years	36.7	4.5	12.0	11.6

*       In prior reporting periods, the volatilities disclosed for Bermuda were on a 1-year forward basis for most indices. The assumptions at 30 June 2010, as well as the comparatives for prior reporting periods, are now shown as the annualised volatilities applicable over the entire option term specified, consistent with the disclosure of volatilities for other regions. These volatilities, as represented by their Bloomberg codes, refer to price indices. Due to ongoing enhancements in the fund mapping process, the indices referenced may vary from period to period.

 

 

 

 

Tax

The weighted average effective tax rates that apply to the cash flow projections at 30 June 2010 are set out below:

·      OMLAC(SA) - 34% (30 June 2009: 31%; 31 December 2009: 33%)

·      Namibia - 0% (30 June 2009: 0%; 31 December 2009: 0%)

·      Nordic - 0% (30 June 2009: 0%; 31 December 2009: 4%)

·      Retail Europe - 27% (30 June 2009: 29%; 31 December 2009: 28%)

·      Wealth Management - 13% (30 June 2009: 18%; 31 December 2009: 13%)

·      US Life* - 0% (30 June 2009: 0%; 31 December 2009: 0%)*

·      Bermuda* - 0% (30 June 2009: 0%; 31 December 2009: 0%)*

*       The weighted average effective tax rates for US Life and Bermuda at 31 December 2009 have been restated to 0% from 5% and 10% respectively due to a calculation correction.

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B Segment information

B1 Adjusted Group MCEV presented per business line

		£m
	At 30 June 2010	At 30 June 2009	At 31 December 2009
MCEV of the covered business	6,174	5,356	6,027
Adjusted net worth*	2,966	2,615	2,815
Value of in-force business	3,208	2,741	3,212
Adjusted net worth of the asset management businesses	1,968	1,712	1,716
Emerging Markets	250	290	216
Nordic**	32	(130)	(75)
Retail Europe	13	11	12
Wealth Management	157	226	152
US Asset Management	1,516	1,315	1,411
Value of the banking business	2,998	2,208	2,948
Nordic (adjusted net worth)	292	259	314
Nedbank (market value)	2,706	1,949	2,634
Value of the general insurance business
Mutual & Federal***	321	272	448
Net other business	(88)	(235)	123
Adjustment for present value of Black Economic Empowerment scheme deferred consideration	241	194	221
Adjustment for value of own shares in ESOP schemes****	73	57	71
Perpetual preferred securities (US$ denominated)	(435)	(292)	(385)
Perpetual preferred callable securities	(487)	(273)	(477)
GBP denominated	(236)	(125)	(224)
Euro denominated	(251)	(148)	(253)
Debt	(1,697)	(1,410)	(1,664)
Rand denominated	(309)	(213)	(290)
USD denominated	(323)	(248)	(338)
GBP denominated	(790)	(653)	(759)
SEK denominated	(273)	(190)	(256)
Euro denominated	(2)	(106)	(21)
Adjusted Group MCEV	9,068	7,589	9,028

*       Adjusted net worth is after the elimination of inter-company loans.

**     Includes the adjusted net worth of Nordic holding companies that are classified as non-covered business, net of the holding companies investment in Group subsidiaries.

***    Reflected at IFRS net asset value at 30 June 2010 and at market value for 30 June 2009 and 30 December 2009 as a result of the acquisition of the remaining non-controlling interest in Mutual & Federal.

****   Includes adjustment for value of excess own shares in employee share scheme trusts. The movement in value between 31 December 2009 and 30 June 2010 is the net effect of the decrease in the Old Mutual plc share price, the reduction in excess own shares following employee share grants in March 2010 and the reduction in overall shares held due to exercises of rights to take delivery of, or net settle, share grants during the financial period.

 

 

 

B2 Adjusted operating MCEV earnings for the covered business

		£m
	6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended 31 December 2009
Adjusted operating MCEV earnings before tax for the covered business	528	594	562
Long Term Savings	498	488	554
Emerging Markets	182	151	272
Nordic	79	42	78
Retail Europe	31	(17)	(58)
Wealth Management	77	15	(40)
US Life	129	297	302
Bermuda	30	106	8
Tax on adjusted operating MCEV earnings for the covered business	(76)	(107)	(70)
Long Term Savings	(76)	(79)	(43)
Emerging Markets	(38)	(41)	(60)
Nordic	(16)	-	3
Retail Europe	(7)	2	14
Wealth Management	(13)	(2)	36
US Life	(2)	(38)	(36)
Bermuda	-	(28)	(27)
Adjusted operating MCEV earnings after tax for the covered business	452	487	492
Long Term Savings	422	409	511
Emerging Markets	144	110	212
Nordic	63	42	81
Retail Europe	24	(15)	(44)
Wealth Management	64	13	(4)
US Life	127	259	266
Bermuda	30	78	(19)
Tax on adjusted operating MCEV earnings comprises
Tax on adjusted operating MCEV earnings for the covered business	(76)	(107)	(70)
Tax on adjusted operating MCEV earnings for other business	(79)	(76)	(139)
Tax on adjusted operating MCEV earnings	(155)	(183)	(209)

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

 

B3 Components of MCEV of the covered business

		£m
	At 30 June 2010	At 30 June 2009	At 31 December 2009
MCEV of the covered business	6,174	5,356	6,027
Adjusted net worth	2,966	2,615	2,815
Value of in-force business	3,208	2,741	3,212
Long Term Savings
Adjusted net worth	2,625	2,336	2,452
Free surplus	454	313	416
Required capital	2,171	2,023	2,036
Value of in-force business	3,381	2,924	3,377
Present value of future profits	4,192	3,573	4,156
Additional time value of financial options and guarantees	(239)	(112)	(220)
Frictional costs	(232)	(194)	(217)
Cost of residual non-hedgeable risks	(340)	(343)	(342)
Emerging Markets
Adjusted net worth	1,415	1,170	1,305
Free surplus	97	60	80
Required capital	1,318	1,110	1,225
Value of in-force business	1,231	1,054	1,158
Present value of future profits	1,525	1,302	1,424
Additional time value of financial options and guarantees	-	-	-
Frictional costs	(204)	(156)	(181)
Cost of residual non-hedgeable risks	(90)	(92)	(85)
Nordic
Adjusted net worth	143	180	195
Free surplus	34	60	91
Required capital	109	120	104
Value of in-force business	1,154	917	1,114
Present value of future profits	1,210	992	1,196
Additional time value of financial options and guarantees	-	-	-
Frictional costs	(5)	(9)	(11)
Cost of residual non-hedgeable risks	(51)	(66)	(71)
Retail Europe
Adjusted net worth	84	95	78
Free surplus	46	38	46
Required capital	38	57	32
Value of in-force business	451	441	453
Present value of future profits	504	505	507
Additional time value of financial options and guarantees	(10)	(5)	(6)
Frictional costs	(6)	(12)	(7)
Cost of residual non-hedgeable risks	(37)	(47)	(41)

 

 

 

B3 Components of MCEV of the covered business continued

		£m
	At 30 June 2010	At 30 June 2009	At 31 December 2009
Wealth management
Adjusted net worth	389	341	376
Free surplus	174	128	163
Required capital	215	213	213
Value of in-force business	1,526	1,358	1,468
Present value of future profits	1,601	1,438	1,540
Additional time value of financial options and guarantees	(1)	(1)	(1)
Frictional costs	(8)	(14)	(12)
Cost of residual non-hedgeable risks	(66)	(65)	(59)
US Life
Adjusted net worth	594	550	498
Free surplus	103	27	36
Required capital	491	523	462
Value of in-force business	(981)	(846)	(816)
Present value of future profits	(648)	(664)	(511)
Additional time value of financial options and guarantees	(228)	(106)	(213)
Frictional costs	(9)	(3)	(6)
Cost of residual non-hedgeable risks	(96)	(73)	(86)
Bermuda
Adjusted net worth	341	279	363
Free surplus	-	-	-
Required capital	341	279	363
Value of in-force business	(173)	(183)	(165)
Present value of future profits	77	(92)	99
Additional time value of financial options and guarantees	(217)	(15)	(196)
Frictional costs	(3)	(5)	(4)
Cost of residual non-hedgeable risks	(30)	(71)	(64)

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax)

Total covered business	£m
	6 months ended 30 June 2010
	Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
Opening MCEV	416	2,399	2,815	3,212	6,027
New business value	(263)	124	(139)	231	92
Expected existing business contribution (reference rate)	8	43	51	94	145
Expected existing business contribution (in excess of reference rate)	-	14	14	81	95
Transfers from VIF and required capital to free surplus	482	(151)	331	(331)	-
Experience variances	54	7	61	47	108
Assumption changes	2	2	4	(4)	-
Other operating variance	27	(39)	(12)	24	12
Operating MCEV earnings	310	-	310	142	452
Economic variances	(105)	8	(97)	(67)	(164)
Other non-operating variance	(1)	-	(1)	1	-
Total MCEV earnings	204	8	212	76	288
Closing adjustments	(166)	105	(61)	(80)	(141)
Capital and dividend flows	(165)	(6)	(171)	(1)	(172)
Foreign exchange variance	(1)	111	110	(79)	31
MCEV of acquired/sold business	-	-	-	-	-
Closing MCEV	454	2,512	2,966	3,208	6,174
Return on MCEV (RoEV) % per annum					14.8%

Return on MCEV for total covered business is calculated as the operating MCEV earnings after tax divided by opening MCEV in sterling.  The operating assumption changes and other operating variances are not annualised.

 

 

 

					£m
6 months ended 30 June 2009					Year ended 31 December 2009
Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV	Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
358	2,025	2,383	1,800	4,183	358	2,025	2,383	1,800	4,183
(254)	80	(174)	244	70	(473)	170	(303)	470	167
6	55	61	58	119	7	114	121	142	263
25	2	27	199	226	32	6	38	355	393
379	(90)	289	(289)	-	813	(244)	569	(569)	-
(11)	5	(6)	(76)	(82)	54	(111)	(57)	(120)	(177)
2	-	2	24	26	(3)	(22)	(25)	(258)	(283)
(217)	240	23	105	128	(191)	301	110	19	129
(70)	292	222	265	487	239	214	453	39	492
(112)	32	(80)	632	552	(29)	93	64	940	1,004
24	(6)	18	(1)	17	39	(20)	19	168	187
(158)	318	160	896	1,056	249	287	536	1,147	1,683
113	(41)	72	45	117	(191)	87	(104)	265	161
110	-	110	-	110	(189)	(1)	(190)	-	(190)
(21)	(36)	(57)	70	13	(15)	85	70	289	359
24	(5)	19	(25)	(6)	13	3	16	(24)	(8)
313	2,302	2,615	2,741	5,356	416	2,399	2,815	3,212	6,027
				19.6%					11.8%

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax) continued

	£m
Long Term Savings (LTS)		6 months ended 30 June 2010
		Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
Opening MCEV		416	2,036	2,452	3,377	5,829
New business value		(263)	124	(139)	231	92
Expected existing business contribution (reference rate)		8	42	50	89	139
Expected existing business contribution (in excess of reference rate)		-	(2)	(2)	65	63
Transfers from VIF and required capital to free surplus		476	(129)	347	(347)	-
Experience variances		62	7	69	66	135
Assumption changes		-	2	2	(4)	(2)
Other operating variance		(43)	5	(38)	33	(5)
Operating MCEV earnings		240	49	289	133	422
Economic variances		(35)	8	(27)	(62)	(89)
Other non-operating variance		(1)	-	(1)	1	-
Total MCEV earnings		204	57	261	72	333
Closing adjustments		(166)	78	(88)	(68)	(156)
Capital and dividend flows		(165)	(6)	(171)	(1)	(172)
Foreign exchange variance		(1)	84	83	(67)	16
MCEV of acquired/sold business		-	-	-	-	-
Closing MCEV		454	2,171	2,625	3,381	6,006
Return on MCEV (RoEV) % per annum						14.6%

Return on MCEV is calculated as the operating MCEV earnings after tax divided by opening MCEV in sterling. The operating assumption changes and other operating variances are not annualised.

 

 

 

£m
6 months ended 30 June 2009					Year ended 31 December 2009
Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV	Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
16	1,991	2,007	2,225	4,232	16	1,991	2,007	2,225	4,232
(254)	80	(174)	244	70	(473)	170	(303)	470	167
3	55	58	61	119	2	113	115	146	261
4	2	6	178	184	(1)	6	5	316	321
385	(88)	297	(297)	-	818	(240)	578	(578)	-
14	5	19	(68)	(49)	126	(111)	15	(99)	(84)
2	-	2	24	26	33	(22)	11	(212)	(201)
58	(35)	23	36	59	154	(44)	110	(63)	47
212	19	231	178	409	659	(128)	531	(20)	511
(61)	32	(29)	505	476	(131)	93	(38)	773	735
24	(6)	18	(1)	17	39	(20)	19	168	187
175	45	220	682	902	567	(55)	512	921	1,433
122	(13)	109	17	126	(167)	100	(67)	231	164
110	-	110	-	110	(189)	(1)	(190)	-	(190)
(12)	(8)	(20)	42	22	9	98	107	255	362
24	(5)	19	(25)	(6)	13	3	16	(24)	(8)
313	2,023	2,336	2,924	5,260	416	2,036	2,452	3,377	5,829
				17.3%					12.1%

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax) continued

	£m
Emerging Markets*		6 months ended 30 June 2010
		Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
Opening MCEV		80	1,225	1,305	1,158	2,463
New business value		(74)	59	(15)	53	38
Expected existing business contribution (reference rate)		4	35	39	59	98
Expected existing business contribution (in excess of reference rate)		-	(2)	(2)	8	6
Transfers from VIF and required capital to free surplus		183	(83)	100	(100)	-
Experience variances		4	13	17	2	19
Assumption changes		-	-	-	-	-
Other operating variance		1	-	1	(18)	(17)
Operating MCEV earnings		118	22	140	4	144
Economic variances		(45)	22	(23)	22	(1)
Other non-operating variance		-	-	-	-	-
Total MCEV earnings		73	44	117	26	143
Closing adjustments		(56)	49	(7)	47	40
Capital and dividend flows		(61)	-	(61)	-	(61)
Foreign exchange variance		5	49	54	47	101
MCEV of acquired/sold business		-	-	-	-	-
Closing MCEV		97	1,318	1,415	1,231	2,646
Return on MCEV (RoEV) % per annum						11.9%

*       The MCEV for Emerging Markets is presented after the adjustment for market value of life fund investments in Group equity and debt instruments.

The positive experience variances are mainly attributable to favourable persistency experience, as well as smaller positive contributions from expense and mortality experience.

The negative other operating variance was caused by various methodology changes and error corrections.

The small impact from economic variances was a combination of large negative investment variances, mainly caused by a decline in equity markets over the first half of 2010, and a positive effect from economic assumptions changes, mainly caused by the change in the shape of the swap yield curve.

The capital and dividend flows mainly consist of the purchase of additional Nedbank shares.

Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in rand (including conversion of results for Mexico to rand). The operating assumption changes and other operating variances are not annualised.

 

 

 

£m
6 months ended 30 June 2009					Year ended 31 December 2009
Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV	Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
(92)	1,075	983	1,090	2,073	(92)	1,075	983	1,090	2,073
(52)	40	(12)	35	23	(136)	110	(26)	91	65
(3)	39	36	61	97	(7)	85	78	129	207
-	2	2	7	9	-	5	5	16	21
151	(70)	81	(81)	-	314	(146)	168	(168)	-
(1)	(15)	(16)	(22)	(38)	(9)	(9)	(18)	(35)	(53)
2	-	2	(1)	1	40	(29)	11	(90)	(79)
57	(35)	22	(4)	18	46	(27)	19	32	51
154	(39)	115	(5)	110	248	(11)	237	(25)	212
14	1	15	(81)	(66)	54	1	55	(39)	16
(1)	-	(1)	-	(1)	-	-	-	-	-
167	(38)	129	(86)	43	302	(10)	292	(64)	228
(15)	73	58	50	108	(130)	160	30	132	162
(44)	-	(44)	-	(44)	(146)	(3)	(149)	-	(149)
5	78	83	75	158	3	160	163	156	319
24	(5)	19	(25)	(6)	13	3	16	(24)	(8)
60	1,110	1,170	1,054	2,224	80	1,225	1,305	1,158	2,463
				9.7%					9.8%

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010

B4 Analysis of covered business MCEV earnings (after tax) continued

	£m
Nordic		6 months ended 30 June 2010
		Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
Opening MCEV		91	104	195	1,114	1,309
New business value		(24)	3	(21)	46	25
Expected existing business contribution (reference rate)		1	-	1	8	9
Expected existing business contribution (in excess of reference rate)		-	-	-	13	13
Transfers from VIF and required capital to free surplus		55	(4)	51	(51)	-
Experience variances		10	6	16	1	17
Assumption changes		-	-	-	(4)	(4)
Other operating variance		(39)	-	(39)	42	3
Operating MCEV earnings		3	5	8	55	63
Economic variances		5	-	5	(2)	3
Other non-operating variance		-	-	-	-	-
Total MCEV earnings		8	5	13	53	66
Closing adjustments		(65)	-	(65)	(13)	(78)
Capital and dividend flows		(59)	-	(59)	-	(59)
Foreign exchange variance		(6)	-	(6)	(13)	(19)
Closing MCEV		34	109	143	1,154	1,297
Return on MCEV (RoEV) % per annum						9.5%

The positive experience variances were largely caused by profit made on the sale of a private equity investment and higher than expected fee income. There were no one-off expense variances.

Operating assumption changes were made to recognise adjustments to pricing on the Waiver of Premium business.

The other operating variance was mainly due to modelling corrections related to the cost of non-hedgeable risk and modelling refinements to deferred tax assets.

The economic variances were mainly due to the positive effect of market movements on funds under management.

The capital and dividend flows mainly represent dividends, repayment of loans, internal re-classification and capital injections.

Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in Swedish krona. The operating assumption changes and other operating variances are not annualised.

 

 

 

£m
6 months ended 30 June 2009					Year ended 31 December 2009
Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV	Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
58	105	163	882	1,045	58	105	163	882	1,045
(28)	3	(25)	46	21	(57)	6	(51)	95	44
1	-	1	9	10	4	-	4	18	22
-	-	-	7	7	-	-	-	14	14
14	17	31	(31)	-	81	(17)	64	(64)	-
13	(2)	11	2	13	28	(7)	21	10	31
-	-	-	1	1	3	-	3	(30)	(27)
-	-	-	(10)	(10)	-	-	-	(3)	(3)
-	18	18	24	42	59	(18)	41	40	81
(7)	8	1	102	103	(5)	17	12	192	204
21	-	21	1	22	18	-	18	1	19
14	26	40	127	167	72	(1)	71	233	304
(12)	(11)	(23)	(92)	(115)	(39)	-	(39)	(1)	(40)
(6)	-	(6)	-	(6)	(37)	-	(37)	-	(37)
(6)	(11)	(17)	(92)	(109)	(2)	-	(2)	(1)	(3)
60	120	180	917	1,097	91	104	195	1,114	1,309
				9.4%					8.1%

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax) continued

	£m
Retail Europe		6 months ended 30 June 2010
		Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
Opening MCEV		46	32	78	453	531
New business value		(33)	-	(33)	35	2
Expected existing business contribution (reference rate)		-	-	-	5	5
Expected existing business contribution (in excess of reference rate)		-	-	-	2	2
Transfers from VIF and required capital to free surplus		51	1	52	(52)	-
Experience variances		(6)	1	(5)	-	(5)
Assumption changes		2	-	2	(2)	-
Other operating variance		(5)	5	-	20	20
Operating MCEV earnings		9	7	16	8	24
Economic variances		1	1	2	11	13
Other non-operating variance		(1)	-	(1)	1	-
Total MCEV earnings		9	8	17	20	37
Closing adjustments		(9)	(2)	(11)	(22)	(33)
Capital and dividend flows		(7)	-	(7)	-	(7)
Foreign exchange variance		(2)	(2)	(4)	(22)	(26)
Closing MCEV		46	38	84	451	535
Return on MCEV (RoEV) % per annum						5.1%

The 'expected existing business contribution (in excess of reference rate)' is not significant. This is reasonable for business comprised mostly of unit-linked products where most of the profits emanate from premium charges, acquisition charges and fund based fees. Such fees and charges are largely captured in the 'expected existing business contribution (reference rate)'.

Experience variances were mainly due to higher than anticipated profit sharing on participating contracts in Germany, partly offset by positive mortality and morbidity experience and higher than expected fee income across all Retail Europe countries. There were no one-off expense variances.

There were no material operating assumption changes.

The other operating variance was mainly due to enhanced modelling of the Waiver of Premium business in Switzerland.

The economic variances were mainly due to the positive effect of market movements on funds under management as well as the beneficial impact of lower swap rates across the region.

There were no material other non-operating variances.

The capital and dividend flows mainly represent dividends, repayment of loans and capital injections.

Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in euro. The operating assumption changes and other operating variances are not annualised.

 

 

 

£m
6 months ended 30 June 2009					Year ended 31 December 2009
Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV	Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
15	64	79	517	596	15	64	79	517	596
(37)	1	(36)	33	(3)	(74)	1	(73)	68	(5)
1	-	1	5	6	1	-	1	10	11
-	-	-	1	1	-	-	-	3	3
53	-	53	(53)	0	97	7	104	(104)	-
(8)	1	(7)	(2)	(9)	(20)	1	(19)	(4)	(23)
-	-	-	0	-	-	-	-	(26)	(26)
-	-	-	(10)	(10)	18	(19)	(1)	(3)	(4)
9	2	11	(26)	(15)	22	(10)	12	(56)	(44)
1	1	2	11	13	(1)	4	3	26	29
1	(3)	(2)	-	(2)	20	(20)	-	3	3
11	-	11	(15)	(4)	41	(26)	15	(27)	(12)
12	(7)	5	(61)	(56)	(10)	(6)	(16)	(37)	(53)
17	-	17	-	17	(10)	(3)	(13)	-	(13)
(5)	(7)	(12)	(61)	(73)	-	(3)	(3)	(37)	(40)
38	57	95	441	536	46	32	78	453	531
				(3.6)%					(7.9)%

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax) continued

	£m
Wealth Management		6 months ended 30 June 2010
		Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
Opening MCEV		163	213	376	1,468	1,844
New business value		(96)	14	(82)	113	31
Expected existing business contribution (reference rate)		3	3	6	11	17
Expected existing business contribution (in excess of reference rate)		-	-	-	6	6
Transfers from VIF and required capital to free surplus		146	(20)	126	(126)	-
Experience variances		(26)	11	(15)	20	5
Assumption changes		(2)	2	-	-	-
Other operating variance		-	-	-	5	5
Operating MCEV earnings		25	10	35	29	64
Economic variances		19	(3)	16	42	58
Other non-operating variance		-	-	-	-	-
Total MCEV earnings		44	7	51	71	122
Closing adjustments		(33)	(5)	(38)	(13)	(51)
Capital and dividend flows		(30)	(6)	(36)	(1)	(37)
Foreign exchange variance		(3)	1	(2)	(12)	(14)
Closing MCEV		174	215	389	1,526	1,915
Return on MCEV (RoEV) % per annum						6.7%

The 'expected existing business contribution (in excess of reference rate)' is not significant. This is reasonable for business comprised mostly of unit-linked products where most of the profits emanate from premium charges, acquisition charges and fund based fees. Such fees and charges are largely captured in the 'expected existing business contribution (reference rate)'.

Experience variances were caused by positive persistency experience and higher than expected fee income across all divisions, partly offset by adverse expense experience.

There were no material operating assumption changes.

The other operating variance was mainly due to the impact of modelling and methodology changes.

The economic variances were caused by lower swap yields and favourable exchange rate movements.

The capital and dividend flows mainly represent dividends, repayments of loans and capital injections.

Return on MCEV is the operating MCEV earnings after tax divided by opening MCEV in sterling. The operating assumption changes and other operating variances are not annualised.

 

 

 

£m
6 months ended 30 June 2009					Year ended 31 December 2009
Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV	Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
120	197	317	1,461	1,778	120	197	317	1,461	1,778
(103)	3	(100)	122	22	(171)	12	(159)	208	49
5	5	10	17	27	7	7	14	34	48
-	-	-	13	13	(1)	-	(1)	26	25
142	(6)	136	(136)	-	274	(30)	244	(244)	-
2	(4)	(2)	(43)	(45)	(10)	7	(3)	(35)	(38)
-	-	-	11	11	(10)	7	(3)	(96)	(99)
1	-	1	(16)	(15)	90	2	92	(81)	11
47	(2)	45	(32)	13	179	5	184	(188)	(4)
(28)	22	(6)	(61)	(67)	2	12	14	38	52
3	(3)	-	(2)	(2)	1	-	1	164	165
22	17	39	(95)	(56)	182	17	199	14	213
(14)	(1)	(15)	(8)	(23)	(139)	(1)	(140)	(7)	(147)
(9)	-	(9)	-	(9)	(142)	5	(137)	-	(137)
(5)	(1)	(6)	(8)	(14)	3	(6)	(3)	(7)	(10)
128	213	341	1,358	1,699	163	213	376	1,468	1,844
				1.7%					(0.3)%

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax) continued

	£m
US Life		6 months ended 30 June 2010
		Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
Opening MCEV		36	462	498	(816)	(318)
New business value		(36)	48	12	(16)	(4)
Expected existing business contribution (reference rate)		-	4	4	6	10
Expected existing business contribution (in excess of reference rate)		-	-	-	36	36
Transfers from VIF and required capital to free surplus		41	(23)	18	(18)	-
Experience variances		80	(24)	56	43	99
Assumption changes		-	-	-	2	2
Other operating variance		-	-	-	(16)	(16)
Operating MCEV earnings		85	5	90	37	127
Economic variances		(15)	(12)	(27)	(135)	(162)
Other non-operating variance		-	-	-	-	-
Total MCEV earnings		70	(7)	63	(98)	(35)
Closing adjustments		(3)	36	33	(67)	(34)
Capital and dividend flows		(8)	-	(8)	-	(8)
Foreign exchange variance		5	36	41	(67)	(26)
Closing MCEV		103	491	594	(981)	(387)
Return on MCEV (RoEV) % per annum						79.7%

The results for US Life include allowance for Old Mutual Reassurance (Ireland) Limited (OMRe), which provides reinsurance to the United States Life Companies.

The 'expected existing business contribution (in excess of reference rate)' is calculated using the corporate bond spread that is expected to be earned over and above the adjusted risk free reference rate (inclusive of the liquidity premium adjustment). The expected existing business contribution for US Life is weighted towards the latter half of each reporting period because product crediting rates are set in advance of the reporting period and therefore there is less flexibility to improve earnings by varying crediting rates in the first half of the reporting period than in the second half.

The experience variances were largely caused by positive persistency experience.  There were no material experience variance items that were one-off in nature.

There were no material operating assumption changes.

The other operating variance was mainly due to modelling changes and error corrections.

The economic variances were mainly due to the reduction in the assumed liquidity premium from 100bps to 75bps and an increase in interest rate volatilities, partially offset by gains in the underlying investment portfolio.

The capital and dividend flows reflect interest payments on the capital injection made in 2009.

Return on MCEV was calculated as the operating MCEV earnings after tax divided by the absolute value of the opening MCEV in US dollars. The operating assumption changes and other operating variances are not annualised.

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax) continued

£m
6 months ended 30 June 2009					Year ended 31 December 2009
Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV	Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
(85)	550	465	(1,725)	(1,260)	(85)	550	465	(1,725)	(1,260)
(34)	33	(1)	8	7	(35)	41	6	8	14
(1)	11	10	(31)	(21)	(3)	21	18	(45)	(27)
4	-	4	150	154	-	1	1	257	258
25	(29)	(4)	4	-	52	(54)	(2)	2	-
8	25	33	(3)	30	137	(103)	34	(35)	(1)
-	-	-	13	13	-	-	-	30	30
-	-	-	76	76	-	-	-	(8)	(8)
2	40	42	217	259	151	(94)	57	209	266
(41)	-	(41)	534	493	(181)	59	(122)	556	434
-	-	-	-	-	-	-	-	-	-
(39)	40	1	751	752	(30)	(35)	(65)	765	700
151	(67)	84	128	212	151	(53)	98	144	242
152	-	152	-	152	146	-	146	-	146
(1)	(67)	(68)	128	60	5	(53)	(48)	144	96
27	523	550	(846)	(296)	36	462	498	(816)	(318)
				34.9%					22.7%

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

B4 Analysis of covered business MCEV earnings (after tax) continued

	£m
Bermuda		6 months ended 30 June 2010
		Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
Opening MCEV		-	363	363	(165)	198
New business value		-	-	-	-	-
Expected existing business contribution (reference rate)		-	1	1	5	6
Expected existing business contribution (in excess of reference rate)		-	16	16	16	32
Transfers from VIF and required capital to free surplus		6	(22)	(16)	16	-
Experience variances		(8)	-	(8)	(19)	(27)
Assumption changes		2	-	2	-	2
Other operating variance		70	(44)	26	(9)	17
Operating MCEV earnings		70	(49)	21	9	30
Economic variances		(70)	-	(70)	(5)	(75)
Other non-operating variance		-	-	-	-	-
Total MCEV earnings		-	(49)	(49)	4	(45)
Closing adjustments		-	27	27	(12)	15
Capital and dividend flows		-	-	-	-	-
Foreign exchange variance		-	27	27	(12)	15
Closing MCEV		-	341	341	(173)	168
Return on MCEV (RoEV) % per annum						19.5%

The experience variances include adverse persistency experience, with less surrenders than expected on Variable Annuity contracts with heavily in-the-money guarantees. There were no material experience variance items that were one-off in nature.

There were no material operating assumption changes.  

The other operating variance was mainly due to modelling changes and error corrections.

The economic variances were largely due to the adverse equity market performances during the reporting period and the decrease in the US swap yield curve.

Return on MCEV was calculated as the operating MCEV earnings after tax divided by the absolute value of the opening MCEV in US dollars. The operating assumption changes and other operating variances are not annualised.

 

 

 

£m
6 months ended 30 June 2009					Year ended 31 December 2009
Free surplus	Required Capital	Adjusted net worth	Value of in-force	MCEV	Free surplus	Required capital	Adjusted net worth	Value of in-force	MCEV
342	34	376	(425)	(49)	342	34	376	(425)	(49)
-	-	-	-	-	-	-	-	-	-
3	-	3	(3)	-	5	1	6	(4)	2
21	-	21	21	42	33	-	33	39	72
(6)	(2)	(8)	8	-	(5)	(4)	(9)	9	-
(25)	-	(25)	(8)	(33)	(72)	-	(72)	(21)	(93)
-	-	-	-	-	(36)	-	(36)	(46)	(82)
(275)	275	-	69	69	(345)	345	-	82	82
(282)	273	(9)	87	78	(420)	342	(78)	59	(19)
(51)	-	(51)	127	76	102	-	102	167	269
-	-	-	-	-	-	-	-	-	-
(333)	273	(60)	214	154	(318)	342	24	226	250
(9)	(28)	(37)	28	(9)	(24)	(13)	(37)	34	(3)
-	-	-	-	-	-	-	-	-	-
(9)	(28)	(37)	28	(9)	(24)	(13)	(37)	34	(3)
-	279	279	(183)	96	-	363	363	(165)	198
				182.1%					(41.0)%

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

C Other key performance information

C1 Adjustments applied in determining total Group MCEV earnings before tax

	£m
	6 months ended 30 June 2010			6 months ended 30 June 2009
Analysis of adjusting items	Covered business MCEV	Non-covered business IFRS	Total Group MCEV	Covered business MCEV	Non-covered business IFRS	Total Group MCEV
Income/(expense)
Goodwill impairment and amortisation of non-covered business acquired intangible assets and impact of acquisition accounting	-	(7)	(7)	-	(6)	(6)
Economic variances	(277)	(20)	(297)	517	(12)	505
Other non-operating variances	2	-	2	16	-	16
Acquired/divested business	-	(22)	(22)	-	(41)	(41)
Closure of unclaimed share trust	-	-	-	-	-	-
Dividends declared to holders of perpetual preferred callable securities	-	21	21	-	22	22
Adjusting items relating to US Asset Management equity plans and non-controlling interests	-	2	2	-	1	1
Fair value gains on Group debt instruments	-	(90)	(90)	-	12	12
Adjusting items	(275)	(116)	(391)	533	(24)	509

	£m
	Year ended 31 December 2009
Analysis of adjusting items	Covered business MCEV	Non-covered business IFRS	Total Group MCEV
Income/(expense)
Goodwill impairment and amortisation of non-covered business acquired intangible assets and impact of acquisition accounting	-	65	65
Economic variances	1,108	(10)	1,098
Other non-operating variances	18	-	18
Acquired/divested business	-	(48)	(48)
Closure of unclaimed share trust	-	-	-
Dividends declared to holders of perpetual preferred callable securities	-	45	45
Adjusting items relating to US Asset Management equity plans and non-controlling interests	-	(1)	(1)
Fair value gains on Group debt instruments	-	(264)	(264)
Adjusting items	1,126	(213)	913

 

 

C2 Other movements in IFRS net equity impacting Group MCEV

	£m
	6 months ended 30 June 2010			6 months ended 30 June 2009
	Covered business MCEV	Non-covered business IFRS	Total Group MCEV	Covered business MCEV	Non-covered business IFRS	Total Group MCEV
Fair value gains/(losses)	-	(5)	(5)	-	(2)	(2)
Net investment hedge	-	(34)	(34)	-	2	2
Currency translation differences/exchange differences on translating foreign operations	31	200	231	13	22	35
Aggregate tax effects of items taken directly to or transferred from equity	-	6	6	-	1	1
Correction to transfers*	-	-	-	-	316	316
Other movements	-	(28)	(28)	-	(26)	(26)
Net income recognised directly into equity	31	139	170	13	313	326
Capital and dividend flows for the year	(172)	73	(99)	104	(126)	(22)
Net sale of treasury shares	-	(20)	(20)	-	-	-
Net issues of ordinary share capital by the Company	-	160	160	-	-	-
Acquisition of non-controlling interest in Mutual & Federal	-	(93)	(93)	-	-	-
Exercise of share options	-	3	3	-	-	-
Change in share based payment reserve	-	1	1	-	9	9
Other movements in net equity	(141)	263	122	117	196	313

	£m
	Year ended 31 December 2009
	Covered business MCEV	Non-covered business IFRS	Total Group MCEV
Fair value gains/(losses)	-	2	2
Net investment hedge	-	(41)	(41)
Currency translation differences/exchange differences on translating foreign operations	359	197	556
Aggregate tax effects of items taken directly to or transferred from equity	-	13	13
Correction to transfers*	-	316	316
Other movements	(8)	(7)	(15)
Net income recognised directly into equity	351	480	831
Capital and dividend flows for the year	(190)	145	(45)
Net sales of treasury shares	-	-	-
Net issues of ordinary share capital by the Company	-	2	2
Acquisition of non-controlling interest in Mutual & Federal	-	-	-
Exercise of share options	-	3	3
Change in share based payment reserve	-	14	14
Other movements in net equity	161	644	805

*       Refinement arising from allocation of assets between covered and non-covered business at December 2008.

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

C3 Reconciliation of MCEV adjusted net worth to IFRS net asset value for the covered business

The table below provides a reconciliation of the MCEV adjusted net worth ('ANW') to the IFRS net asset value ('NAV') for the covered business.

£m
At 30 June 2010	Total	Long Term Savings	Emerging Markets	Nordic	Retail Europe	Wealth Management	US Life	Bermuda
IFRS net asset value*	6,394	6,040	932	1,147	586	2,162	1,213	354
Adjustment to include long-term business on a statutory solvency basis	(2,779)	(2,766)	161	(818)	(314)	(1,176)	(619)	(13)
Inclusion of Group equity and debt instruments held in life funds	330	330	330	-	-	-	-	-
Goodwill	(979)	(979)	(8)	(186)	(188)	(597)	-	-
Adjusted net worth attributable to ordinary equity holders of the parent	2,966	2,625	1,415	143	84	389	594	341

£m
At 30 June 2009	Total	Long Term Savings	Emerging Markets	Nordic	Retail Europe	Wealth Management	US Life	Bermuda
IFRS net asset value*	5,728	5,422	721	1,166	818	2,295	422	306
Adjustment to include long-term business on a statutory solvency basis	(2,194)	(2,167)	152	(817)	(349)	(1,281)	128	(27)
Inclusion of Group equity and debt instruments held in life funds	305	305	305	-	-	-	-	-
Goodwill	(1,224)	(1,224)	(8)	(169)	(374)	(673)	-	-
Adjusted net worth attributable to ordinary equity holders of the parent	2,615	2,336	1,170	180	95	341	550	279

£m
At 31 December 2009	Total	Long Term Savings	Emerging Markets	Nordic	Retail Europe	Wealth Management	US Life	Bermuda
IFRS net asset value*	6,103	5,734	821	1,222	664	2,141	886	369
Adjustment to include long-term business on a statutory solvency basis	(2,632)	(2,626)	153	(841)	(382)	(1,168)	(388)	(6)
Inclusion of Group equity and debt instruments held in life funds	339	339	339	-	-	-	-	-
Goodwill	(995)	(995)	(8)	(186)	(204)	(597)	-	-
Adjusted net worth attributable to ordinary equity holders of the parent	2,815	2,452	1,305	195	78	376	498	363

*       IFRS net asset value is after elimination of inter-company loans.

The adjustment to include long-term business on a statutory solvency basis includes the following:

·      The excess of the IFRS amount of the deferred acquisition cost ('DAC') and value of business acquired ('VOBA') assets over the statutory levels included in the VIF.

·      When projecting future profits on a statutory basis, the VIF includes the shareholders' value of unrealised capital gains. To the extent that assets in IFRS are valued at market and the market value is higher than the statutory book value, these profits have already been taken into account in the IFRS equity.

 

 

C4 Value of new business (after tax)

The tables below set out the regional analysis of the value of new business ('VNB') after tax. New business profitability is measured by both the ratio of the VNB to the present value of new business premiums ('PVNBP') as well as to the annual premium equivalent ('APE'), and shown under PVNBP margin and APE margin below. APE is calculated as recurring premiums plus 10% of single premiums.

			£m
	6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended 31 December 2009
Annualised recurring premiums
Long Term Savings (LTS)	344	346	699
Emerging Markets	143	104	249
Nordic	74	108	183
Retail Europe	29	28	62
Wealth Management	93	97	191
US Life	5	9	14
Bermuda	-	-	-
	344	346	699
Single premiums
Long Term Savings (LTS)	4,696	2,875	6,806
Emerging Markets	803	569	1,437
Nordic	284	276	527
Retail Europe	34	25	53
Wealth Management	3,175	1,718	4,240
US Life	400	287	549
Bermuda	-	15	15
	4,696	2,890	6,821
PVNBP
Long Term Savings (LTS)	6,400	4,672	10,202
Emerging Markets	1,561	1,231	2,834
Nordic	553	634	1,150
Retail Europe	243	228	537
Wealth Management	3,611	2,231	5,042
US Life	432	348	639
Bermuda	-	15	15
	6,400	4,687	10,217
PVNBP capitalisation factors*
Long Term Savings (LTS)	5.0	5.2	4.9
Emerging Markets	5.3	6.4	5.6
Nordic	3.6	3.4	3.4
Retail Europe	7.2	7.3	7.8
Wealth Management	4.6	5.3	4.2
US Life	6.6	6.5	6.6
Bermuda	n/a	n/a	n/a

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

C4 Value of new business (after tax) continued

			£m
	6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended 31 December 2009
APE
Long Term Savings (LTS)	814	634	1,380
Emerging Markets	223	165	393
Nordic	102	134	235
Retail Europe	32	30	67
Wealth Management	412	267	617
US Life	45	38	68
Bermuda	-	2	1
	814	636	1,381
VNB
Long Term Savings (LTS)	92	70	167
Emerging Markets	38	23	65
Nordic	25	21	44
Retail Europe	2	(3)	(5)
Wealth Management	31	22	49
US Life	(4)	7	14
Bermuda	-	-	-
	92	70	167
PVNBP margin
Long Term Savings (LTS)	1.4%	1.5%	1.6%
Emerging Markets	2.5%	1.9%	2.3%
Nordic	4.6%	3.3%	3.8%
Retail Europe	0.7%	(1.5)%	(1.0)%
Wealth Management	0.9%	1.0%	1.0%
US Life	(0.9)%	2.1%	2.2%
	1.4%	1.5%	1.6%
APE margin
Long Term Savings (LTS)	11%	11%	12%
Emerging Markets	17%	14%	16%
Nordic	25%	16%	19%
Retail Europe	6%	(11)%	(8)%
Wealth Management	8%	8%	8%
US Life	(9)%	19%	20%
	11%	11%	12%

*       The PVNBP capitalisation factors are calculated as follows: (PVNBP - single premiums)/annualised recurring premiums

 

 

C4 Value of new business (after tax) continued

The value of new individual unit trust linked retirement annuities and pension fund asset management business written by the Emerging Markets long-term business is excluded as the profits on this business arise in the asset management business. The value of new business also excludes premium increases arising from indexation arrangements in respect of existing business, as these are already included in the value of in-force business.

The value of new institutional investment platform pensions business written in Wealth Management is excluded as this is more appropriately classified as unit trust business.

			£m
Gross premium excluded from value of new business	6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended 31 December 2009
Emerging Markets	386	172	1,625
Wealth Management	75	83	153

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

C5 Product analysis of new covered business premiums

£m
	6 months ended 30 June 2010			6 months ended 30 June 2009			Year ended 31 December 2009
Emerging Markets	Recurring	Single		Recurring	Single		Recurring	Single
Total business	143	803		104	569		249	1,437
Individual business	120	486		92	289		220	716
Savings	29	387		22	215		50	560
Protection	31	-		23	-		56	-
Annuity	-	98		-	73		-	155
Retail mass market	60	1		47	1		114	1
Group business	23	317		12	280		29	721
Savings	9	257		5	236		13	564
Protection	14	-		7	-		16	-
Annuity	-	60		-	44		-	157

£m
	6 months ended 30 June 2010			6 months ended 30 June 2009			Year ended 31 December 2009
Nordic	Recurring	Single		Recurring	Single		Recurring	Single
Unit-linked and life assurance	74	284		108	276		183	527

£m
	6 months ended 30 June 2010			6 months ended 30 June 2009			Year ended 31 December 2009
Retail Europe	Recurring	Single		Recurring	Single		Recurring	Single
Unit-linked and life assurance	29	34		28	25		62	53

£m
	6 months ended 30 June 2010			6 months ended 30 June 2009			Year ended 31 December 2009
Wealth Management	Recurring	Single		Recurring	Single		Recurring	Single
Unit-linked and life assurance	93	3,175		97	1,718		191	4,240

£m
	6 months ended 30 June 2010			6 months ended 30 June 2009			Year ended 31 December 2009
US Life	Recurring	Single		Recurring	Single		Recurring	Single
Total business	5	400		9	287		14	549
Fixed deferred annuity	-	79		-	27		-	30
Fixed indexed annuity	-	234		-	184		-	383
Variable annuity	-	-		-	1		-	-
Life	5	1		9	16		14	13
Immediate annuity	-	86		-	59		-	123

 

 

D Other income statement notes

D1 Drivers of new business value for covered business

PVNBP Margin		%
Total covered business	6 months ended 30 June 2010	Year ended 31 December 2009
Margin at the end of comparative period	1.5	0.8
Change in volume	(0.2)	0.8
Change in product mix	0.5	-
Change in country mix	-	-
Change in operating assumptions	(0.1)	0.1
Change in economic assumptions	(0.3)	-
Change in tax/regulation	-	0.1
Exchange rate movements	-	(0.2)
Margin at the end of the period	1.4	1.6
Long Term Savings
Margin at the end of comparative period	1.5	1.5
Change in volume	(0.2)	(0.1)
Change in product mix	0.5	-
Change in country mix	-	-
Change in operating assumptions	(0.1)	0.1
Change in economic assumptions	(0.3)	-
Change in tax/regulation	-	0.1
Exchange rate movements	-	-
Margin at the end of the period	1.4	1.6
Emerging Markets
Margin at the end of comparative period	1.9	2.2
Change in volume	0.2	(0.1)
Change in product mix	0.4	(0.2)
Change in country mix	-	-
Change in operating assumptions	0.1	0.4
Change in economic assumptions	(0.1)	-
Margin at the end of the period	2.5	2.3
Nordic
Margin at the end of comparative period	3.3	3.3
Change in volume	(0.1)	(0.1)
Change in product mix	1.4	-
Change in country mix	-	-
Change in operating assumptions	0.1	0.4
Change in economic assumptions	(0.1)	0.2
Margin at the end of the period	4.6	3.8

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

D1 Drivers of new business value for covered business continued

		%
Total covered business	6 months ended 30 June 2010	Year ended 31 December 2009
Retail Europe
Margin at the end of comparative period	(1.5)	1.8
Change in volume	1.7	(2.1)
Change in product mix	0.1	(0.8)
Change in country mix	-	(0.1)
Change in operating assumptions	0.3	0.5
Change in economic assumptions	0.1	(0.3)
Margin at the end of the period	0.7	(1.0)
Wealth Management
Margin at the end of comparative period	1.0	1.2
Change in volume	-	(0.2)
Change in product mix	-	-
Change in country mix	-	-
Change in operating assumptions	(0.2)	(0.2)
Change in economic assumptions	-	-
Change in tax/regulation	0.1	0.2
Margin at the end of the period	0.9	1.0
US Life
Margin at the end of comparative period	2.1	(0.9)
Change in volume	(0.3)	-
Change in product mix	1.1	1.5
Change in country mix	-	-
Change in operating assumptions	(0.2)	-
Change in economic assumptions	(3.6)	1.6
Margin at the end of the period	(0.9)	2.2

 

 

E1 Sensitivity tests

The tables below show the sensitivity of the MCEV and value of in-force business at 30 June 2010 and the value of new business for the 6 months ended 30 June 2010 to changes in key assumptions.

For each sensitivity illustrated all other assumptions have been left unchanged except where they are directly affected by the revised conditions. Sensitivity scenarios therefore include consistent changes in cash flows directly affected by the changed assumption(s), for example future bonus participation in changed economic scenarios.

	At 30 June 2010		£m
Total covered business	MCEV	Value of in-force business	Value of new business
Central assumptions	6,174	3,208	92
Effect of:
Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately	5,898	2,858	94
Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately	6,447	3,553	81
Recognising the present value of an additional 10bps of liquidity spreads assumed on corporate bonds over the lifetime of the liabilities, with credited rates and discount rates changing commensurately	6,215	3,249	94

	At 30 June 2010			£m
Emerging Markets	MCEV	Value of in-force business	Value of new business
Central assumptions	2,646	1,231	38
Effect of:
Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately	2,593	1,176	35
Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately	2,693	1,279	41
Recognising the present value of an additional 10bps of liquidity spreads assumed on corporate bonds over the lifetime of the liabilities, with credited rates and discount rates changing commensurately	2,654	1,239	39

	At 30 June 2010			£m
Nordic	MCEV	Value of in-force business	Value of new business
Central assumptions	1,297	1,154	25
Effect of:
Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately	1,273	1,131	24
Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately	1,324	1,181	26

Notes to the MCEV basis supplementary information

For the 6 months ended 30 June 2010 continued

E1 Sensitivity tests continued

	At 30 June 2010		£m
Retail Europe	MCEV	Value of in-force business	Value of new business
Central assumptions	535	451	2
Effect of:
Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately	520	436	1
Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately	550	466	3

	At 30 June 2010		£m
Wealth management	MCEV	Value of in-force business	Value of new business
Central assumptions	1,915	1,526	31
Effect of:
Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately	1,892	1,519	30
Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately	1,938	1,530	32

	At 30 June 2010			£m
US Life	MCEV	Value of in-force business	Value of new business
Central assumptions	(387)	(981)	(4)
Effect of:
Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately	(626)	(1,220)	4
Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately	(149)	(743)	(21)
Recognising the present value of an additional 10bps of liquidity spreads assumed on corporate bonds over the lifetime of the liabilities, with credited rates and discount rates changing commensurately	(354)	(948)	(3)
Recognising the present value of an additional 50% of liquidity spreads assumed on corporate bonds over the lifetime of the liabilities, with credited rates and discount rates changing commensurately	(236)	(830)	2

	At 30 June 2010			£m
Bermuda	MCEV	Value of in-force business	Value of new business
Central assumptions	168	(173)	-
Effect of:
Increasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately	246	(184)	-
Decreasing all pre-tax investment and economic assumptions by 1%, with credited rates and discount rates changing commensurately	91	(160)	-

Shareholder information

Listings and shares in issue

The Company's shares are listed on the London, Malawi, Namibian and Zimbabwe Stock Exchanges and on the JSE Limited (JSE). The primary listing is on the London Stock Exchange and the other listings are all secondary listings. The Company's secondary listing on the Stockholm Stock Exchange ended on 7 September 2007, but the Company's shares may still be traded on the Xternal list of the Nordic Exchange in Stockholm. The ISIN number of the Company's shares is GB0007389926.

Websites

Further information on the Company can be found on the following websites:
www.oldmutual.com
www.oldmutual.co.za

 

END

 

 

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